UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Soliciting Material Pursuant to §240.14a-12 |
BOSTON PROPERTIES, INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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April 1, 20166, 2018
Dear Fellow Stockholder:
You are cordially invited to attend the 20162018 annual meeting of stockholders of Boston Properties, Inc. The annual meeting will be held on Tuesday,Wednesday, May 17, 201623, 2018 at 10:9:00 a.m., EasternPacific Time, at Lotte New York Palace Hotel, 455 Madison Avenue, 5th Floor, New York, New York.Salesforce Tower, 415 Mission Street, Lobby Level, San Francisco, California.
The proxy statement, with the accompanying formal notice of the meeting, describes the matters expected to be acted upon at the meeting. We urge you to review these materials carefully and to use this opportunity to take part in the affairs of Boston Properties by voting on the matters described in the proxy statement. Following the formal portion of the meeting, we will provide a brief report on the operations of our company and our directors and management team will be available to answer appropriate questions from stockholders.
Your vote is important. Your proxy or voting instruction card includes specific information regarding the several ways to vote your shares. We hope thatencourage you will be able to attend the meeting. Whether or notvote as soon as possible, even if you plan to attend the meeting, pleasemeeting. You may vote as soon as possible. Instructions on how to vote are contained inover the proxy statement.internet, by telephone or by mail.
Thank you for your continued support of Boston Properties.
Sincerely,
Mortimer B. ZuckermanOwen D. Thomas
Chairman of the BoardChief Executive Officer
Boston Properties, Inc. | 800 Boylston Street Suite 1900 Boston, MA 02199-8103 |
Notice of 20162018 Annual Meeting of Stockholders
Date: | ||||
Time: | ||||
Place: | ||||
Record Date: | ||||
Items of Business: | 1. | To elect the eleven nominees for director named in the proxy statement, each to serve for aone-year term and until their respective successors are duly elected and qualified. | ||
2. | To hold | |||
3. | To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, | |||
4. | To consider and act upon any other matters that are properly brought by or at the direction of the Board of Directors before the annual meeting and at any adjournments or postponements thereof. | |||
Proxy Voting: | If you do not plan to attend the meeting and vote your shares of common stock in person, we urge you to vote your shares as instructed in the proxy statement. If you received a copy of the proxy card by mail, you may sign, date and mail the proxy card in the postage-paid envelope provided.
If your shares of common stock are held by a broker, bank or other nominee, please follow the instructions you receive from your broker, bank or other nominee to have your shares of common stock voted. | |||
Any proxy may be revoked at any time prior to its exercise at the annual meeting. |
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on May 17, 2016.23, 2018.The proxy statement and our 20152017 annual report to stockholders are available atwww.edocumentview.com/bxp.
By Order of the Board of Directors
FRANK D. BURT, ESQ.
Secretary
April 1, 20166, 2018
This summary highlights information contained elsewhere in the proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
STOCKHOLDER VOTING MATTERS
Voting Matter | Board’s Voting Recommendation | Page Reference for more Information | ||||||||
| Election of Directors | FOR each nominee | ||||||||
| Non-binding, Advisory Vote on Named Executive Officer Compensation | FOR | ||||||||
| Ratification of Independent Registered Public Accounting Firm | FOR |
CORPORATE GOVERNANCE HIGHLIGHTSDIRECTOR SUCCESSION
Board Leadership Transition; Chairman Emeritus
Following a deliberate and structured process, our Board of Directors will undergo an orderly transition of its leadership at the 2016 annual meeting of stockholders. Mr. Mortimer B. Zuckerman, who co-founded Boston Properties in 1970 and has served as the Chairman of the Board of Directors since our initial public offering in June 1997, will not be standing for re-election at the annual meeting. In addition, Mr. Ivan G. Seidenberg, who has served as our initial lead independent director and was instrumental in assisting in the leadership transition process of our Board of Directors, will also not be standing for re-election to our Board of Directors. Immediately following the 2016 annual meeting, Mr. Joel I. Klein will serve as our lead independent director and will assume leadership responsibilities for our Board of Directors together with Mr. Owen D. Thomas, our Chief Executive Officer.
In light of the extraordinary contributions that Mr. Zuckerman has made to Boston Properties over his career and in recognition of his long and dedicated service as Chairman of the Board, our Board of Directors has conferred the honorary title of Chairman Emeritus upon Mr. Zuckerman effective upon the completion of his term as a director. Our Board expects that, as Chairman Emeritus, Mr. Zuckerman will continue to attend meetings of our Board of Directors and provide advice and counsel to our Board despite no longer formally serving as a director or officer of Boston Properties.
New Director Nominees; Director Succession
Led by our Nominating and Corporate Governance Committee, our Board of Directors remains focused on ensuring a smooth transition if and when directors decide to retire or otherwise leave our Board and ensuring that the composition of our Board is systematically refreshed so that, taken as a whole, the Board has the desired mix of skills, experience, reputation and diversity relevant to our strategic direction and operating environment, as well as the knowledge, ability and independence to continue to deliver a high standard of governance expected by investors. For more information on this process, see“Corporate Governance Principles and Board Matters – The Board of Directors – Composition of the Board of Directors; Director Succession PlanningPlanning”” beginning on page 41 of the proxy statement.
After concluding the first phaseIn our proxy statement for our 2016 annual meeting of stockholders, we stated that our Board of Directors anticipates that changes to its composition would likely occur gradually over several years. Consistent with this statement, in 2016 our Board nominated and our stockholders elected two new directors (Ms. Karen E. Dykstra and Mr. Bruce W. Duncan). Continuing with this process, our Board of Directors is delighted to nominate twoa new candidatescandidate – former United States Senator Kelly A. Ayotte – for election to our Board of Directors at the 20162018 annual meeting – Ms. Karen E. Dykstraof stockholders. Alan J. Patricof, a director of Boston Properties since 1997, is not standing forre-election. The Board of Directors extends its gratitude and Mr. Bruce W. Duncan.appreciation to him for his dedication and countless contributions to Boston Properties.
Ms. DykstraSenator Ayotte brings significant legal experience and experience in government and public affairs, as well as leadership and strategic operational, financialplanning skills, having represented New Hampshire in the United States Senate and, oversight experience having most recently servedprior to her election to the Senate, as AOL, Inc.’s Chief Financial and Administrative Officer. Ms. Dykstra also brings important insight on the technology industry, which we expect will grow its overall share of leased space in our portfolio. SheNew Hampshire’s first female Attorney General. Senator Ayotte currently serves on the Board of Directors of Gartner, Inc., an independent provider of research and analysis on information technology, computer hardware, software, communications and related technology industries, and she was recently appointed to the Board of
Directors of VMware,Caterpillar Inc., a company that provides cloudglobal manufacturer of construction, mining and virtualization softwareindustrial equipment, and services. Finally, our BoardNews Corporation, a global diversified media and information services company. She also serves on the advisory boards of Directors has determined that Ms. Dykstra qualifies as an audit committee financial expert if she is appointed to serve on our audit committee in the future.
Mr. Duncan brings to Boston Properties more than 30 years of diverse real estate executive managementMicrosoft Corporation, Blink Health LLC, Chubb Insurance, Revision Military and investment experience, including as a chief executive officer and a director. Mr. Duncan currently serves as the Chief Executive Officer and President of First Industrial Realty Trust, Inc., a leading owner and operator of industrial real estate and provider of supply chain solutions to multinational corporations and regional customers, and he is the Chairman of the Board of Starwood Hotels & Resorts Worldwide, Inc. Among other prior positions, Mr. Duncan served as President and Chief Executive Officer of Equity Residential, one of the largest publicly traded apartment REITs in the United States, and he served as President and Chief Executive Officer of Cadillac Fairview Corporation, one of North America’s largest owners and developers of retail and office properties. Our Board of Directors has also determined that Mr. Duncan qualifies as an audit committee financial expert if he is appointed to serve on our audit committee in the future.Cirtronics Corporation.
For more information on Ms. Dykstra and Mr. Duncan,Senator Ayotte, see“Proposal 1: Election of Directors – Information Regarding the Nominees and Executive OfficersOfficers”” beginning on page 16.15 of the proxy statement.
BOARD NOMINEES
Following the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors has nominated the following eleven (11) candidates for election as directors at the 2018 annual meeting of stockholders.
Committee Membership | ||||||||||||||||||||||||||||
Name and Principal Occupation | Age | Independent | Director Since | Audit | Compensation | Nominating and Corporate Governance | Investment | |||||||||||||||||||||
Kelly A. Ayotte | ||||||||||||||||||||||||||||
Former United States Senator for the State of New Hampshire | 49 | ✓ | — | |||||||||||||||||||||||||
Bruce W. Duncan(1) | ||||||||||||||||||||||||||||
Chairman and former Chief Executive Officer of First Industrial Realty Trust, Inc. | 66 | ✓ | 2016 | ● | ||||||||||||||||||||||||
Karen E. Dykstra(1) | ||||||||||||||||||||||||||||
Former Chief Financial and Administrative Officer of AOL, Inc. | 59 | ✓ | 2016 | ● | ||||||||||||||||||||||||
Carol B. Einiger | ||||||||||||||||||||||||||||
Senior Advisor, Roundtable Investment Partners LLC | 68 | ✓ | 2004 | Chair | ||||||||||||||||||||||||
Dr. Jacob A. Frenkel | ||||||||||||||||||||||||||||
Chairman of JPMorgan Chase International | 75 | ✓ | 2010 | Chair | ||||||||||||||||||||||||
Joel I. Klein(2) | ||||||||||||||||||||||||||||
Chief Policy and Strategy Officer of Oscar Insurance Corporation | 71 | ✓ | 2013 | ● | ||||||||||||||||||||||||
Douglas T. Linde | ||||||||||||||||||||||||||||
President of Boston Properties, Inc. | 54 | 2010 | ● | |||||||||||||||||||||||||
Matthew J. Lustig | ||||||||||||||||||||||||||||
Head of North America Investment Banking and Head of Real Estate & Lodging at Lazard Fréres & Co. | 57 | ✓ | 2011 | ● | ||||||||||||||||||||||||
Owen D. Thomas | ||||||||||||||||||||||||||||
Chief Executive Officer of Boston Properties, Inc. | 56 | 2013 | ● | |||||||||||||||||||||||||
Martin Turchin | ||||||||||||||||||||||||||||
Non-Executive Vice Chairman of CBRE Group, Inc. | 76 | ✓ | 1997 | ● | ||||||||||||||||||||||||
David A. Twardock(1) | ||||||||||||||||||||||||||||
Former President of Prudential Mortgage Capital Company, LLC | 60 | ✓ | 2003 | Chair | ● |
(1) | Our Board of Directors determined that each of Ms. Dykstra and Mr. Twardock qualifies as an “audit committee financial expert” as that term is defined in the rules of the SEC. Our Board of Directors has also determined that Mr. Duncan qualifies as an audit committee financial expert if he is appointed to serve on our audit committee in the future. |
(2) | Mr. Klein serves as our lead independent director. |
SNAPSHOT OF BOARD COMPOSITION
The table
Presented below is a snapshot of the expected composition of our Board of Directors immediately following the 20162018 annual meeting, assuming the election of allthe eleven (11) nominees named in the proxy statement. For comparison purposes, the tablewe have also presentspresented comparable metrics for the constituents of the S&P 500 Index, of which Boston Properties is a member. (Data for the S&P 500 Index is based on theSpencer Stuart Board Index 2015.2017.)
Boston Properties | S&P 500 Average | |||||||
Total Number of Directors | 11 | 10.8 | ||||||
Percentage of Independent Directors | 82% | 84% | ||||||
Average Age of Independent Directors | 67.0 | 63.1 | ||||||
Average Tenure of Directors (years) | 7.9 | 8.5 | ||||||
CEO also Serves as Chairman | No | 52% | ||||||
Lead Independent Director | Yes | 98%1 | ||||||
Number of Female Directors | 2 | 2.1 | ||||||
Percentage of Designated Audit Committee Financial Experts | 36%2 | 23%2 |
BXP % of independent directors: 82% S&P 500% of independent directors: 85% S&P 500 average# of independent directors: 9.2 S&P 500 average # female directors: 2.4 BXP #female directors: 3 BXP average age of all directors: 63.5 years BXP average age of independent directors: 65.2 years S&P 500 average age of independent directors: 63.1 years BXP average tenure: 8.0 years S&P 500 average tenure: 8.7 years Independence Independent Other directors Gender Diversity Male Female Age # of Directors 40s 50s 60s 70s Tenure # of Directors 0-5 years 5-10 years >10 years 5 4 3 2 1 0
SNAPSHOT OF GOVERNANCE AND COMPENSATION POLICIES
The table below
Below presents a snapshot of othercertain key governance and compensation policies.
✓ | ||||
Annual Election of All Directors |
✓ | ||||
Majority Voting for Directors |
✓ | ||||
Regular Executive Sessions of Independent Directors |
✓ | Lead Independent Director |
✓ | CEO Does Not Serve as Chairman |
✓ | ||
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✓ | ||||
Annual Board and Committee Self-Evaluations |
✓ | ||||
Disclosure of Policy on Company Political Spending |
✓ | ||||
Code of Business Conduct and Ethics for Employees and Directors |
✓ | ||||
Stock Ownership Requirements for Executives |
✓ | ||||
Stock Ownership Requirements for Directors |
✓ | ||||
Anti-Hedging, Anti-Short-Sale and Anti-Pledging Policies |
✓ | ||||
Compensation Clawback Policy |
✓ | ||||
“Double-Trigger” Vesting for Time-Based Equity Awards |
✓ | ||||
No Future TaxGross-Up Provisions |
✓ | ||||
We Do Not Target Compensation above Market Median |
Proxy Statement
1 | ||||
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS | ||||
2 | ||||
7 | ||||
7 | ||||
PROPOSAL 1: ELECTION OF DIRECTORS | ||||
PRINCIPAL AND MANAGEMENT STOCKHOLDERS | ||||
COMPENSATION DISCUSSION AND ANALYSIS | ||||
34 | ||||
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51 | ||||
Benchmarking Peer Group and Compensation Advisor’s | ||||
54 | ||||
COMPENSATION COMMITTEE REPORT |
COMPENSATION OF EXECUTIVE OFFICERS | ||||
77 | ||||
COMPENSATION OF DIRECTORS | ||||
PROPOSAL 2: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION | ||||
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||
AUDIT COMMITTEE REPORT | ||||
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS | ||||
INFORMATION ABOUT THE ANNUAL MEETING | 88 | |||
Why did I receive a notice of Internet availability of the proxy materials? | 88 | |||
88 | ||||
88 | ||||
88 | ||||
88 | ||||
89 | ||||
89 | ||||
90 | ||||
How can I access Boston Properties’ proxy materials electronically? | 90 | |||
90 | ||||
OTHER MATTERS | ||||
Stockholder Nominations for Director and Proposals for the | ||||
APPENDIX A | A-1 | |||
A-1 | ||||
A-2 | ||||
A-3 | ||||
A-5 |
April 1, 2016
This proxy statement is being made available to stockholders of Boston Properties, Inc. (“we,” “us,” “our,” “Boston Properties” or the “Company”) on or about April 1, 20166, 2018 via the Internet or by delivering printed copies by mail, and is furnished in connection with the solicitation of proxies by the Board of Directors of Boston Properties, Inc. for use at the 2016our 2018 annual meeting of stockholders of Boston Properties, Inc. to be held on Tuesday,Wednesday, May 17, 201623, 2018 at 10:9:00 a.m., EasternPacific Time, at Lotte New York Palace Hotel, 455 Madison Avenue, 5th Floor, New York, New York,Salesforce Tower, 415 Mission Street, Lobby Level, San Francisco, California, and at any adjournments or postponements thereof.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials?
As permitted by rules adopted by the Securities and Exchange Commission (“SEC”), we are making this proxy statement and our 2015 annual report, including a copy of our annual report on Form 10-K and financial statements for the year ended December 31, 2015, available to our stockholders electronically via the Internet. On or about April 1, 2016, we began mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this proxy statement and our annual report online, as well as instructions on how to vote. Also on or about April 1, 2016, we began mailing printed copies of these proxy materials to stockholders that have requested printed copies. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The Notice also instructs you on how you may vote via the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. Our 2015 annual report is not part of the proxy solicitation material.
What is the purpose of the annual meeting?
At the annual meeting, stockholders will be asked to vote upon the matters set forth in the accompanying notice of annual meeting, including the election of directors, an advisory resolution on named executive officer compensation and the ratification of the appointment of our independent registered public accounting firm.
If you were a stockholder of record as of the close of business on March 23, 2016, which is referred to in this proxy statement as the “record date,” you are entitled to receive notice of the annual meeting and to vote the shares of common stock that you held as of the close of business on the record date. Each stockholder is entitled to one vote for each share of common stock held by such stockholder on the record date.
BOSTON PROPERTIES, INC. |2016 Proxy Statement 1
All stockholders of record of shares of common stock of Boston Properties, Inc. at the close of business on the record date, or their designated proxies, are authorized to attend the annual meeting. Each stockholder and proxy will be asked to present a valid government-issued photo identification, such as a driver’s license or passport, before being admitted. If you are not a stockholder of record but you hold your shares in “street name” (i.e., your shares are held in an account maintained by a bank, broker or other nominee), then you should provide proof of beneficial ownership as of the record date, such as an account statement reflecting your stock ownership as of the record date, a copy of the voting instruction card provided by your broker, bank or other nominee, or other similar evidence of ownership. We reserve the right to determine the validity of any purported proof of beneficial ownership. If you do not have proof of ownership, you may not be admitted to the annual meeting. Cameras, recording devices and other electronic devices will not be permitted, and attendees may be subject to security inspections and other security precautions. You may obtain directions to the annual meeting on our website athttp://www.bostonproperties.com/proxy.
The presence, in person or by proxy, of holders of at least a majority of the total number of outstanding shares of common stock entitled to vote is necessary to constitute a quorum for the transaction of business at the annual meeting. As of the record date, there were 153,601,568 shares of common stock outstanding and entitled to vote at the annual meeting. Each share of common stock outstanding on the record date is entitled to one vote on each matter properly submitted at the annual meeting and, with respect to the election of directors, one vote for each director to be elected. Abstentions or “broker non-votes” (i.e., shares represented at the meeting held by brokers, as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to which, on one or more but not all matters, the broker does not have discretionary voting power to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction of business at the annual meeting.
Voting in Person at the Meeting
If you are a stockholder of record and attend the annual meeting, you may vote in person at the meeting. If your shares of common stock are held in street name and you wish to vote in person at the meeting, you will need to obtain a “legal proxy” from the broker, bank or other nominee that holds your shares of common stock of record.
Voting by Proxy for Shares Registered Directly in the Name of the Stockholder
If you hold your shares of common stock in your own name as a holder of record with our transfer agent, Computershare Trust Company, N.A., you may instruct the proxy holders named in the proxy card how to vote your shares of common stock in one of the following ways:
If you vote via the Internet, you do not need to return your proxy card.
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2 BOSTON PROPERTIES, INC. |2016 Proxy Statement
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If you vote by telephone, you do not need to return your proxy card.
Voting by Proxy for Shares Registered in Street Name
If your shares of common stock are held in street name, then you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of common stock voted.
Will other matters be voted on at the annual meeting?
We are not currently aware of any other matters to be presented at the annual meeting other than those described in this proxy statement. If any other matters not described in the proxy statement are properly presented at the meeting, any proxies received by us will be voted in the discretion of the proxy holders.
May I revoke my proxy instructions?
You may revoke your proxy at any time before it has been exercised by:
If you are a stockholder of record as of the record date attending the annual meeting you may vote in person whether or not a proxy has been previously given, but your presence (without further action) at the annual meeting will not constitute revocation of a previously given proxy.
If you and other residents at your mailing address own shares of common stock in street name, your broker, bank or other nominee may have sent you a notice that your household will receive only one annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement. This procedure, known as “householding,” is intended to reduce the volume of duplicate information stockholders receive and also reduce our printing and postage costs. Under applicable law, if you consented or were deemed to have consented, your broker, bank or other nominee may send one copy of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement to your address for all residents that own shares of common stock in street name. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee. If you are receiving multiple copies of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement, you may be able to request householding by contacting your broker, bank or other nominee.
BOSTON PROPERTIES, INC. |2016 Proxy Statement 3
If you wish to request extra copies free of charge of our annual report or proxy statement, please send your request to Investor Relations, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103; call us with your request at (617) 236-3322; or visit our website athttp://www.bostonproperties.com.
How can I access Boston Properties’ proxy materials electronically?
This proxy statement and our 2015 annual report are available athttp://www.edocumentview.com/bxp. Instead of receiving copies of our future annual reports, proxy statements, proxy cards and, when applicable, Notices of Internet Availability of Proxy Materials, by mail, we encourage you to elect to receive an email that will provide electronic links to our proxy materials and also will give you an electronic link to the proxy voting site. Choosing to receive your future proxy materials online will save us the cost of producing and mailing the proxy materials or Notices of Internet Availability of Proxy Materials to you and help conserve natural resources. You may sign up for electronic delivery by visitinghttp://www.bostonproperties.com/proxy.
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
The Board of DirectorsTHE BOARD OF DIRECTORS
Composition of the Board of Directors; Director Succession PlanningDirectors
Boston Properties is currently governed by an eleven-member Board of Directors. The current members of our Board of Directors are Mortimer B. Zuckerman,Bruce W. Duncan, Karen E. Dykstra, Carol B. Einiger, Dr. Jacob A. Frenkel, Joel I. Klein, Douglas T. Linde, Matthew J. Lustig, Alan J. Patricof, Ivan G. Seidenberg, Owen D. Thomas, Martin Turchin and David A. Twardock. At the 20162018 annual meeting of stockholders, directors will be elected to hold office for aone-year term expiring at the 20172019 annual meeting of stockholders or until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Any director appointed to our Board of Directors to fill a vacancy will hold office for a term expiring at the next annual meeting of stockholders following such appointment.
Meetings
Our Board of Directors met seven times during 2017. Each incumbent director attended at least 75% of the aggregate of (1) the total number of meetings of our Board of Directors in 2017 held during the period for which he or she has been a director and (2) the total number of meetings in 2017 of all committees of our Board of Directors on which the director served during the periods that he or she served. Directors are expected to attend annual meetings of our stockholders in person unless doing so is impracticable due to unavoidable conflicts. All directors attended the 2017 annual meeting of stockholders.
Directors who qualify as“non-management” within the meaning of the rules of the New York Stock Exchange (“NYSE”) meet on a regular basis in executive sessions without management participation. The executive sessions occur after each regularly scheduled meeting of the entire Board and at such other times that thenon-management directors deem appropriate, and they are chaired by our lead independent director. Each director has the right to call an executive session. Currently, all of ournon-management directors are independent.
Director Succession Planning
Led by our Nominating and Corporate Governance Committee (the “NCG Committee”), our Board of Directors remains focused on ensuring a smooth transition if and when directors decide to retire or otherwise leave our Board and ensuring that the composition of our Board is systematically refreshed so that, taken as a whole, the Board has the desired mix of skills, experience, reputation and diversity relevant to our strategic direction and operating environment, as well as the knowledge, ability and independence to continue to deliver a high standard of governance expected by investors.
Our Board of Directors recognizes the importance of continuity and that refreshment should not be effectuated all at once. Accordingly, the Board anticipates that changes to its composition would likely occur gradually over several years. Among other aspects of the process, our Board of Directors:
BOSTON PROPERTIES, INC. |2018 Proxy Statement 1
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Ø | identifying and evaluating potential director candidates; |
Ø | creating an even playing field between candidates identified regardless of the source; |
Ø | using the criteria, evaluations and references to prioritize candidates for consideration, regardless of the source; and |
Ø | assisting the Board in attracting and nominating candidates. |
Our Board of Directors recognizes the importance of continuity and evaluating potential director candidates;
4 BOSTON PROPERTIES, INC. |2016 Proxy Statement
After concluding the first phase of Mr. Bruce W. Duncan). Continuing with this process, the NCG Committee recommended to our Board of Directors for nomination, and our Board of Directors nominated, twoa new candidatescandidate for election to our Board of Directors at the 20162018 annual meeting of stockholders – Karen E. Dykstra and Bruce W. Duncan. Ms. Dykstra and Mr. Duncan wereformer U.S. Senator Kelly A. Ayotte. Senator Ayotte was initially recommended for consideration by Spencer Stuart.Joel I. Klein, our lead independent director.
Upon the recommendation of our NCG Committee, our Board of Directors also nominated the following incumbent directors for election to our Board of Directors at the 20162018 annual meeting of stockholders: Bruce W. Duncan, Karen E. Dykstra, Carol B. Einiger, Jacob A. Frenkel, Joel I. Klein, Douglas T. Linde, Matthew J. Lustig, Alan J. Patricof, Owen D. Thomas, Martin Turchin and David A. Twardock. Messrs. Zuckerman and Seidenberg willAlan J. Patricof is not be standing forre-election to our Board of Directors at the 20162018 annual meeting of stockholders.
Chairman EmeritusLeadership Structure
In lightSince the 2016 annual meeting of the extraordinary contributions that Mr.stockholders, at which time Mortimer B. Zuckerman has made to the Company over his careerceased serving as a director and in recognition of his long and dedicated service as Chairman of the Board, our Board of Directors has conferred upon him the honorary title of Chairman Emeritus, upon Mr. Zuckerman effective upon the completion of his term as a director. As Chairman Emeritus, Mr. Zuckerman may attend meetings of theour Board of Directors and may provide advice and counsel to the Board of Directors, but he will not behas operated without a director of the Company or have any duties or obligations to the Company or any power or authority to act on behalf of the Company.
Leadership Structure
Our Board of Directors currently separates the roles of the Chairman of the Board and Chief Executive Officer and, as described in more detail below under “– Lead Independent Director,” has a lead independent director.Board. Currently, Mr. Zuckerman serves as non-executive Chairman of the Board, Mr. Thomas serves as Chief Executive Officer and Mr. SeidenbergKlein serves as our lead independent director. Mr. Zuckerman, who co-founded Boston Propertiesdirector, as described in 1970, has served as the Chairman of the more detail below under “–Board of Directors since our initial public offering in June 1997 and served as an executive officer through December 31, 2014.Leadership – Lead Independent Director.” Our Board of Directors determined that this structure wasis appropriate because it (1) allowed us to retain the continued benefits of the experience and knowledge of Mr. Zuckerman following his transition out of the role of Chief Executive Officer in 2013, (2) assisted in the transition process, (3) continued to allowallows for the efficient and effective handling of the responsibilities of our Board of Directors with a key leading role played by our Chief Executive Officer, who is most directly responsible for developing and executing our strategic direction, and (4) helped(2) helps ensure strong independent oversight by our Board of Directors through the role played by our lead independent director.
Our Board of Directors encourages strong communication among all of our independent directors the Chairman of the Board and the Chief Executive Officer and believes that it is able to effectively provide independent oversight of our business and affairs, including risks facing the Company, without an independent Chairman, through our lead independent director, the independent committees of our Board of Directors, the overall composition of our Board of Directors and contributions of all of our independent directors and other corporate governance processes in place.
Following the 2016 annual meeting of stockholders, our Board of Directors intends to operate without a formally elected Chairman of the Board as a result of Mr. Zuckerman’s transition to Chairman Emeritus. As a result, following the 2016 annual meeting of stockholders, unless
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Unless and until our Board of Directors elects a Chairman of the Board, to succeed Mr. Zuckerman, our lead independent director will preside at all meetings of our Board of Directors and the other functional responsibilities of the Chairman of the Board will be divided between our lead independent director and the Chief Executive Officer.
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Lead Independent Director
We have a lead independent director who is selected annually by the vote of a majority of our independent directors. Currently, Mr. SeidenbergKlein serves as our lead independent director and we expect that Mr. Klein willour independent directors have selected him to continue to serve as our lead independent director following the 20162018 annual meeting of stockholders. Our lead independent director has well-defined, substantive responsibilities that include, among others that may be assigned from time to time:
Following
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Our Board of Directors has the 2016 annual meetingfollowing four committees: (1) Audit, (2) Compensation, (3) Nominating and Corporate Governance (“NCG”) and (4) Investment. Each of stockholders, unlessthe Audit Committee, Compensation Committee and untilNCG Committee operates pursuant to a charter that was approved by our Board of Directors elects a Chairmanand that is reviewed and reassessed at least annually. A copy of each of these charters is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance.” Our Board of Directors may from time to time establish other special or standing committees to facilitate the management of Boston Properties or to discharge specific duties delegated to the committee by the full Board of Directors.
The membership and the function of each of the Audit Committee, Compensation Committee, NCG Committee and Investment Committee, and the number of meetings each held during 2017 are described below.
Audit Committee | ||
Members: David A. Twardock (Chair)† Karen E. Dykstra† Alan J. Patricof† Martin Turchin Number of Meetings in 2017: 8 † Our Board of Directors determined that each of Ms. Dykstra and Messrs. Patricof and Twardock qualifies as an “audit committee financial expert” as that term is defined in the rules of the SEC. | The Audit Committee, among other functions: • has the sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm; • reviews with our independent registered public accounting firm the scope and results of the audit engagement; • approves professional services provided by our independent registered public accounting firm; • reviews the independence of our independent registered public accounting firm; • oversees the planning and conduct of our annual risk assessment; • evaluates the Company’s internal audit function and reviews the internal audit plan; and • may perform such other oversight functions as may be requested by our Board of Directors from time to time. Each member of the Audit Committee is “independent” as that term is defined in the rules of the Securities and Exchange Commission (‘SEC”) and the NYSE. For additional disclosures regarding the Audit Committee, including the Audit Committee Report, see“Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm” beginning on page 84. |
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Compensation Committee | ||
Members: Carol B. Einiger (Chair) Bruce W. Duncan David A. Twardock Number of Meetings in 2017: 13 | The Compensation Committee’s responsibilities include, among other duties, the responsibility to: • review and approve the corporate goals and objectives relevant to the compensation of the Chief Executive Officer and certain designated senior executive officers; • evaluate the performance of the Chief Executive Officer and designated senior executive officers in light of such goals and objectives and determine and approve compensation of these officers based on such evaluation; • review and approve the compensation of other executive officers; • review and approve grants and awards under all incentive-based compensation plans and equity-based plans; • review and make recommendations to the full Board of Directors regarding the compensation ofnon-employee directors; and • perform other functions and duties deemed appropriate by our Board of Directors. None of the members of the Compensation Committee is an employee of Boston Properties and each of them is an independent director under the NYSE rules. The Compensation Committee makes all compensation decisions for all executive officers. With respect to compensation decisions relating to executive officers other than the Chief Executive Officer, the Compensation Committee takes into consideration recommendations made by the Chief Executive Officer and/or the President. Decisions regarding thenon-equity compensation of other officers and employees are made by the Chief Executive Officer and the President and reviewed with the Compensation Committee. The Compensation Committee reviews and approves all equity awards for all employees although it has delegated limited authority to the Chief Executive Officer to make equity grants to employees who are not executive officers. In 2017, the Compensation Committee engaged FPL Associates L.P. (“FPL”) to assist the committee in determining the amount and form of executive compensation. Information concerning the nature and scope of FPL’s assignments and related disclosures is included under “Compensation Discussion and Analysis” beginning on page 30. We have concluded that the work of FPL did not raise any conflict of interest. The Compensation Committee Report is included in this proxy statement on page 60. |
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Nominating and Corporate Governance Committee | ||
Members: Jacob A. Frenkel (Chair) Joel I. Klein Matthew J. Lustig Alan J. Patricof Number of Meetings in 2017: 3 | The NCG Committee is responsible for, among other functions: • identifying individuals qualified to become Board members, consistent with criteria established by the NCG Committee, and recommending to the Board director nominees for election at each annual meeting of stockholders; • establishing a policy with regard to the consideration by the NCG Committee of director candidates recommended by securityholders; • establishing procedures to be followed by securityholders submitting such recommendations and establishing a process for identifying and evaluating nominees for the Board of Directors, including nominees recommended by securityholders; and • performing such other functions as may be requested by our Board of Directors from time to time. The NCG Committee is also responsible for developing and annually reviewing and recommending to the Board of Directors a set of corporate governance guidelines. These Corporate Governance Guidelines provide that the NCG Committee, together with our Chief Executive Officer, is responsible for coordinating succession planning by the Board of Directors. A copy of the Corporate Governance Guidelines is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Governance Guidelines.” Each member of the NCG Committee is an independent director under the NYSE rules. |
Investment Committee | ||
Members: Owen D. Thomas Douglas T. Linde Number of Meetings in 2017: The Investment Committee held numerous informal meetings and took action by written consent ten times during 2017. | The Investment Committee may approve: • acquisitions, dispositions, developments and redevelopments in amounts not to exceed $150 million per transaction; and • financings where the gross proceeds less the amount of existing financing being repaid (if any) do not exceed $150 million (in cases of transactions undertaken by joint venture entities, the amount of the transaction is based upon Boston Properties Limited Partnership’s total direct and indirect ownership percentage). The Investment Committee’s authority to approve acquisitions, dispositions, financings, developments and redevelopments is limited to an aggregate of $250 million per fiscal quarter. Any transactions approved by the Investment Committee will be reported to our Board of Directors at its next regularly scheduled meeting. |
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
BOARD’S ROLE IN RISK OVERSIGHT
Our Board of Directors plays an important role in the risk oversight of Boston Properties. Our Board of Directors is involved in risk oversight through direct decision-making authority with respect to succeed Mr. Zuckerman,significant matters and the oversight of management by our leadBoard of Directors and its committees. In particular, our Board of Directors administers its risk oversight function through (1) the review and discussion of regular periodic reports to our Board of Directors and its committees on topics relating to the risks that Boston Properties faces, including, among others, market conditions, tenant concentrations and credit worthiness, leasing activity and expirations, the status of current and anticipated development projects, compliance with debt covenants, management of debt maturities, access to debt and equity capital markets, existing and potential legal claims against Boston Properties, cyber attacks and intrusions, and various other matters relating to Boston Properties’ business, (2) the required approval by our Board of Directors (or a committee thereof) of significant transactions and other decisions, including, among others, acquisitions and dispositions of properties, development projects, new borrowings and the appointment and retention of Boston Properties’ senior management, (3) the direct oversight of specific areas of Boston Properties’ business by the Audit, Compensation and NCG Committees, and (4) regular periodic reports from Boston Properties’ independent director will preside at all meetingsregistered public accounting firm and other outside consultants regarding various areas of potential risk, including, among others, those relating to the qualification of Boston Properties as a real estate investment trust (“REIT”) for tax purposes and Boston Properties’ internal control over financial reporting. Our Board of Directors also relies on management to bring significant matters impacting Boston Properties to its attention.
Pursuant to the Audit Committee’s charter, the Audit Committee is specifically responsible for discussing the guidelines and policies that govern the process by which Boston Properties’ exposure to risk is assessed and managed by management. As part of this process, the Audit Committee oversees the planning and conduct of an annual risk assessment that is designed to identify and analyze risks to achieving Boston Properties’ business objectives. The results of the risk assessment are then discussedwith management and used to develop Boston Properties’ annual internal audit plan. In addition, as one component of Boston Properties’ anti-fraud program, Boston Properties, under the supervision of the Audit Committee, established a hotline that is available for the anonymous and confidential submission of complaints relating to any matter to encourage the reporting of questionable activities directly to our senior management and the Audit Committee (see“– Communications with the Board” below).
Because of the role of our Board of Directors in the risk oversight of Boston Properties, our Board of Directors believes that any leadership structure that it adopts must allow it to effectively oversee the management of the risks relating to Boston Properties’ operations. Our Board of Directors recognizes that there are different leadership structures that could allow it to effectively oversee the management of the risks relating to Boston Properties’ operations, and serve aswhile our Board believes its current leadership structure enables it to effectively manage such risks, it was not the primary reason our Board of Directors selected its current leadership structure over other potential alternatives. See the discussion under the heading “–Board Leadership – Leadership Structure” above for a liaison between the Chief Executive Officer and the independent directors.discussion of why our Board of Directors has determined that its current leadership structure is appropriate.
Director IndependenceDIRECTOR INDEPENDENCE
Under the rules of the New York Stock Exchange (the “NYSE”),NYSE, a majority of the Board of Directors must qualify as “independent directors.” To qualify as an “independent director,” the Board of Directors must affirmatively determine that the director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). Our Board of Directors established categorical standards to assist it in making the required independence determinations.
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Under these categorical standards, any relationship with us shall be deemed not material if:
1. | The relationship does not preclude a finding of independence under Sections 303A.02(b) |
2. | The relationship does not involve any of the following, whether currently existing or occurring since the end of the last fiscal year or during the past three fiscal years: |
(a) | a director being an executive officer of, or owning, or having owned, of record or beneficially in excess of ten percent (10%) equity interest in, any business or professional entity that has made during any of such fiscal years, or proposes to make during the Company’s current fiscal year, payments to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company for property or services in excess of five percent (5%) of: (i) the Company’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year), or (ii) the other entity’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year); |
(b) | a director being an executive officer of, or owning, or having owned, of record or beneficially in excess of ten percent (10%) equity interest in, any business or professional entity to which the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company has made during any of such fiscal years, or proposes to make during the Company’s current fiscal year, payments for property or services in excess of five percent (5%) of: (i) the Company’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year), or (ii) the other entity’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year); |
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(c) | a director or an immediate family member of the director being an officer, director or trustee of a charitable organization where the annual discretionary charitable contributions of the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in any single year to the charitable organization exceeded the greater of $1 million or two percent (2%) of that organization’s consolidated gross revenues for the fiscal year; |
(d) | a director or an immediate family member of a director being indebted to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in an amount in excess of $120,000; |
(e) | a director being an executive officer, partner or greater than 10% equity owner of an entity, or being a trustee or a substantial beneficiary of a trust or estate, indebted to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in an amount in excess of the greater of $120,000 or 5% of such entity’s total consolidated assets, or to whom the Company or an entity controlled by an executive officer of the Company is indebted (other than with respect to (i) any publicly traded debt securities of the Company or such entity or(ii) non-recourse loans secured by real estate where both the lender and the Company or such entity intend for the lender to transfer all right to, and control over, the loan within 12 months and the documentation includes customary provisions for loans targeted at the commercial mortgage backed securities (CMBS) or collateralized debt obligation (CDO) markets) in an amount in excess of 5% of the Company’s or such entity’s total consolidated assets; |
(f) | a transaction or currently proposed transaction (other than relating to the ownership of securities), which involved or involves the direct or indirect payment in a single year of in excess of $120,000 from the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company to a director or an immediate family member of a director; |
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
(g) | a director or an immediate family member of a director being an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of an entity that has aco-investment or is a joint venture partner with the Company where the amount of the entity’s equity investment in any single year exceeds the greater of $1 million or 2% of the total consolidated assets of the entity; or |
(h) | a director or an immediate family member of a director being an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of an entity (other than the Company) in which an executive officer of the Company or an entity controlled by an executive officer of the Company is an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of the entity. |
For purposes of these standards, “immediate family” member has the same meaning as in the NYSE Disqualifying Rules.
Relationships not specifically deemed not material by the above categorical standards may, in the Board’s judgment, be deemed not to be material.
The Board of Directors concluded that Mses. Ayotte, Dykstra and Einiger and Messrs. Duncan, Frenkel, Klein, Lustig, Patricof, Twardock and Turchin qualify as independent directors under NYSE rules because none of them (1) havehas any relationships that would disqualify him or her from being considered independent under the minimum objective standards contained in the NYSE rules or (2) havehas any relationships other than those deemed to be immaterial under the categorical standards adopted by the Board of Directors.
In determining that Dr. Frenkel qualified as an independent director for purposes of his service on the Compensation Committee, the Board considered Dr. Frenkel’s position as the Chairman of JPMorgan
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Chase International. Affiliates of JPMorgan Chase International, including JPMorgan Chase & Co., are commercial lenders to the Company and tenants in the Company’s properties and have acted as underwriters or sales agents for securities offerings of the Company. The Board’s conclusion that Dr. Frenkel is independent was based on the following information, which in the view of the Board demonstrates the relativelyde minimis nature of these transactions as they relate to Dr. Frenkel’s independence: (1) the Company’s long-standing relationships with JPMorgan Chase & Co. and its affiliates predate Dr. Frenkel’s appointment to our Board of Directors and his employment with JPMorgan Chase International; (2) Dr. Frenkel receives no benefit, directly or indirectly, with regard to these transactions; (3) Dr. Frenkel does not have any direct or indirect decision making authority or any other role, in any capacity, relating to these transactions; and (4) these transactions were arms’ length transactions undertaken in the ordinary course of business.
In determining that Mr. Twardock qualified as an independent director for purposes of his service on the Compensation Committee, the Board considered Mr. Twardock’s recent election tomembership on the Board of Directors of Morgan Stanley Bank, N.A. and noted that he is anon-employee director. Morgan Stanley Bank, N.A. and/or its affiliates are commercial lenders to the Company and tenants in the Company’s properties and have acted as underwriters or sales agents for securities offerings of the Company. The Board’s conclusion that Mr. Twardock is independent was based on the following information, which in the view of the Board demonstrates the relativelyde minimis nature of these transactions as they relate to Mr. Twardock’s independence: (1) the Company’s long-standing relationships with Morgan Stanley Bank, N.A. and its affiliates predate Mr. Twardock’s appointment to Morgan Stanley Bank, N.A.’s board and our Board of Directors; (2) as anon-employee director of Morgan Stanley Bank, N.A., Mr. Twardock receives no personal benefit, directly or indirectly, with regard to these transactions; (3) Mr. Twardock does not have any direct or indirect decision making authority or any other role, in any capacity, relating to these transactions; and (4) these transactions were arms’ length transactions undertaken in the ordinary course of business.
Risk Oversight
OurIn determining that Mr. Duncan qualified as an independent director for purposes of his service on the Compensation Committee, the Board considered Mr. Duncan’s membership on the Board of Directors playsof Marriott International, Inc. and noted that he is anon-employee director. The Company’s joint venture with The Bernstein Companies is party to a lease agreement with an important roleaffiliate of Marriott International, Inc. In addition, Marriott International, Inc. manages the Company’s hotel property in Cambridge, MA. The Board’s conclusion that Mr. Duncan is independent was based on the following information, which in the risk oversightview of Boston Properties. Ourthe Board demonstrates the relatively de minimis nature of Directors is involved in risk oversight through direct decision-making authority with respectthese transactions as they relate to significant matters and the oversight of management by our Board of Directors and its committees. In particular, our Board of Directors administers its risk oversight function throughMr. Duncan’s independence: (1) the review and discussionCompany’s long-standing relationship with Marriott International, Inc. predates Mr. Duncan’s appointment to Marriott’s board by more than 30 years (Mr. Duncan joined the Marriott International, Inc. board in September 23, 2016 following Marriott’s acquisition of regular periodic reports to our BoardStarwood Hotel & Resorts Worldwide, Inc.); (2) as anon-employee director of Directors and its committees on topics relatingMarriott International, Inc., Mr. Duncan receives no personal benefit, directly or indirectly, with regard to the risks that Boston Properties faces, including, among others, market conditions, tenant concentrations and credit worthiness, leasing activity and expirations, the status of current and anticipated development projects, compliance with debt covenants, management of debt maturities, access to debt and equity capital markets, existing and potential legal claims against Boston Properties and various other matters relating to Boston Properties’ business, (2) the required approval by our Board of Directors (or a committee thereof) of significant transactions and other decisions, including, among others, acquisitions and dispositions of properties, development projects, new borrowings and the appointment and retention of Boston Properties’ senior management, (3) the direct oversight of specific areas of Boston Properties’ business by the Audit, Compensation and Nominating and Corporate Governance Committees, and (4) regular periodic reports from Boston Properties’ independent registered public accounting firm and other outside consultants regarding various areas of potential risk, including, among others, those relating to the qualification of Boston Properties as a real estate investment trust (“REIT”) for tax purposes and Boston Properties’ internal control over financial reporting. Our Board of Directors also relies on management to bring significant matters impacting Boston Properties to its attention.
Pursuant to the Audit Committee’s charter, the Audit Committee is specifically responsible for discussing the guidelines and policies that govern the process by which Boston Properties’ exposure to risk is assessed and managed by management. As part of this process, the Audit Committee oversees the planning and conduct of an annual risk assessment that is designed to identify and analyze risks to achieving Boston Properties’ business objectives. The results of the risk assessment are then discussed
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with management and used to develop Boston Properties’ annual internal audit plan. In addition, as one component of Boston Properties’ anti-fraud program, Boston Properties, under the supervision of the Audit Committee, established a hotline that is available for the anonymous and confidential submission of complaints relating to any matter to encourage the reporting of questionable activities directly to our senior management and the Audit Committee.
Because of the role of our Board of Directors in the risk oversight of Boston Properties, our Board of Directors believes that any leadership structure that it adopts must allow it to effectively oversee the management of the risks relating to Boston Properties’ operations. Our Board of Directors recognizes that there are different leadership structures that could allow it to effectively oversee the management of the risks relating to Boston Properties’ operations, and while our Board believes its current leadership structure enables it to effectively manage such risks, it was not the primary reason our Board of Directors selected its current leadership structure over other potential alternatives. See the discussion under the heading “Leadership Structure” above for a discussion of why our Board of Directors has determined that its current leadership structure is appropriate.
Meetings
Our Board of Directors met seven times during 2015. Each incumbent director attended at least 75% of the aggregate of (1) the total number of meetings of our Board of Directors held during the period for which he or she has been a director and (2) the total number of meetings of all committees of our Board of Directors on which the director served during the periods that he or she served. Directors are expected to attend annual meetings of our stockholders in person unless doing so is impracticable due to unavoidable conflicts. Ten of the eleven directors then serving attended the 2015 annual meeting of stockholders.
Directors who qualify as “non-management” within the meaning of the NYSE rules meet on a regular basis in executive sessions without management participation. The executive sessions occur after each regularly scheduled meeting of the entire Board and at such other times that the non-management directors deem appropriate. Each director has the right to call an executive session. In addition, at least once per year, an executive session is held with only independent directors present and is chaired by our lead independent director.
Our Board of Directors has the following three committees: (1) Audit, (2) Compensation and (3) Nominating and Corporate Governance. The membership and the function of eachsuccess of these committees and the number of meetings each held during 2015 are described below.
Audit | Compensation | Nominating and Corporate Governance | ||||
Carol B. Einiger | ü | |||||
Dr. Jacob A. Frenkel | ü | Chair | ||||
Joel I. Klein | ü | ü | ||||
Alan J. Patricof(1) | Chair | ü | ||||
David A. Twardock(1) | ü | Chair | ||||
Number of meetings held during 2015 | 8 | 6 | 3 |
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Audit CommitteeCORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Our Board of Directors has established an Audit Committee consisting of Messrs. Patricof (Chair), Klein and Twardock. The Audit Committee operates pursuant
decision making authority or any other role, in any capacity, relating to a charter that was approved by our Board of Directors and that is reviewed and reassessed at least annually. The Audit Committee, among other functions, (1) has the sole authority to appoint, retain, terminate and determine the compensation of our independent accountants, (2) reviews with our independent registered public accounting firm the scope and results of the audit engagement, (3) approves professional services provided by our independent registered public accounting firmthese transactions; and (4) reviews the independence of our independent accountants. Each member of the Audit Committee is “independent” as that term is definedthese transactions were arms’ length transactions undertaken in the rulesordinary course of the SEC and the applicable NYSE rules. For additional disclosures regarding the Audit Committee, including the Audit Committee Report, see“Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm” beginning on page 72.
Compensation Committee
Our Board of Directors has established a Compensation Committee consisting of Messrs. Twardock (Chair) and Frenkel and Ms. Einiger. None of the members of the Compensation Committee is an employee of Boston Properties and each of them is an independent director under the NYSE rules.
The Compensation Committee operates pursuant to a charter that was approved by our Board of Directors and that is reviewed and reassessed at least annually. The Compensation Committee’s responsibilities include, among other duties, the responsibility to (1) review and approve the corporate goals and objectives relevant to the compensation of the Chief Executive Officer and certain designated senior executive officers, (2) evaluate the performance of the Chief Executive Officer and designated senior executive officers in light of such goals and objectives and determine and approve compensation of such officers based on such evaluation, (3) review and approve the compensation of other executive officers, (4) review and approve grants and awards under all incentive-based compensation plans and equity-based plans and (5) perform other functions or duties deemed appropriate by our Board of Directors.
The Compensation Committee makes all compensation decisions for all executive officers. With respect to compensation decisions relating to executive officers other than the Chief Executive Officer, the Compensation Committee takes into consideration recommendations made by the Chief Executive Officer and the President. Decisions regarding the non-equity compensation of other officers and employees are made by the Chief Executive Officer and the President. The Compensation Committee reviews and approves all equity awards for all other officers and employees although it has delegated limited authority to the Chief Executive Officer to make equity grants to employees who are not executive officers. In 2015 the Compensation Committee engaged FPL Associates L.P. (“FPL”) to assist the committee in determining the amount and form of executive compensation. Information concerning the nature and scope of FPL’s assignments and related disclosures is included under“Compensation Discussion and Analysis” beginning on page 29. We have concluded that the work of FPL did not raise any conflict of interest. The Compensation Committee also reviews and makes recommendations to the full Board of Directors regarding the compensation of non-employee directors.
The Compensation Committee Report is included in this proxy statement on page 54.
Nominating and Corporate Governance Committee
Our Board of Directors has established an NCG Committee consisting of Messrs. Frenkel (Chair), Klein and Patricof, each of whom is an independent director under the NYSE rules. The NCG Committee operates pursuant to a charter that was approved by our Board of Directors and that is reviewed and reassessed at least annually. Under its charter, the NCG Committee is responsible for developing and annually reviewing and recommending to the Board of Directors a set of corporate governance
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guidelines. These corporate governance guidelines provide that the NCG Committee, together with our Chairman and our Chief Executive Officer, is responsible for coordinating succession planning by the Board of Directors. The NCG Committee, among other functions specified in its charter, is also responsible for identifying individuals qualified to become Board members, consistent with criteria established by the NCG Committee, and recommending to the Board director nominees for election at each annual meeting of stockholders. In addition, the NCG Committee is responsible for establishing a policy with regard to the consideration by the NCG Committee of director candidates recommended by securityholders, establishing procedures to be followed by securityholders submitting such recommendations and establishing a process for identifying and evaluating nominees for the Board of Directors, including nominees recommended by securityholders.
Committee Charters
A copy of each of our Audit Committee, Compensation Committee and NCG Committee Charters is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance.”
Other Committees
Our Board of Directors also has (1) a Special Transactions Committee, the current members of which are Messrs. Thomas and Linde, which may approve acquisitions, dispositions, financings and refinancings involving amounts less than $25 million and may approve refinancings in amounts greater than $25 million if the existing debt is increasing by less than $25 million, and (2) a Significant Transactions Committee, the current members of which are Messrs. Zuckerman, Thomas, Linde and Lustig, which may approve acquisitions, dispositions, financings and refinancings involving amounts equal to or greater than $25 million but less than $200 million and may approve refinancings in amounts greater than $200 million if the existing debt is increasing by less than $200 million. To be effective, approval by the Significant Transactions Committee requires that the independent director serving on the committee approve the transaction. The Special Transactions Committee held numerous informal meetings and took action by written consent five times during 2015. The Significant Transactions Committee held no meetings during 2015.
Our Board of Directors may from time to time establish other special or standing committees to facilitate the management of Boston Properties or to discharge specific duties delegated to the committee by the full Board of Directors.business.
Consideration of Director NomineesCONSIDERATION OF DIRECTOR NOMINEES
Securityholder Recommendations
The NCG Committee’s current policy is to review and consider any director candidates who have been recommended by securityholders in compliance with the procedures established from time to time by the NCG Committee. All securityholder recommendations for director candidates must be submitted to our Secretary at Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, MAMassachusetts 02199-8103, who will forward all recommendations to the NCG Committee. We did not receive any securityholder recommendations for director candidates for election at the 20162018 annual meeting in compliance with the procedures set forth below. All securityholder recommendations for director candidates for election at the 20172019 annual meeting of stockholders must be submitted to our Secretary on or before December 2, 20167, 2018 and must include the following information:
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Board Membership Criteria
The NCG Committee has established criteria for NCG Committee-recommended director nominees. These criteria include the following specific, minimum qualifications that the NCG Committee believes must be met by an NCG Committee-recommended nominee for a position on the Board:
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
In addition to the minimum qualifications for each nominee set forth above, the NCG Committee will recommend director candidates to the full Board for nomination, or present director candidates to the full Board for consideration, to help ensure that:
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Finally, in addition to any other standards the NCG Committee may deem appropriate from time to time for the overall structure and composition of the Board, the NCG Committee may consider the following factors when recommending director candidates to the full Board for nomination, or presenting director candidates to the full Board for consideration:
Identifying and Evaluating Nominees
The NCG Committee may solicit recommendations for director nominees from any or all of the following sources:non-management directors, the Chief Executive Officer, other executive officers, third-party search firms or any other source it deems appropriate.
The NCG Committee will review and evaluate the qualifications of any proposed director candidate that it is considering or has been recommended to it by a securityholder in compliance with the NCG Committee’s procedures for that purpose, and conduct inquiries it deems appropriate into the background of these proposed director candidates. In identifying and evaluating proposed director candidates, the NCG Committee may consider, in addition to the minimum qualifications for NCG Committee-recommended director nominees, all facts and circumstances that it deems appropriate or advisable, including, among other things, the skills of the proposed director candidate, his or her depth and breadth of business experience, his or her independence and the needs of our Board. Neither the NCG Committee nor the Board has a specific policy with regard to the consideration of diversity in identifying director nominees, although both may consider diversity when identifying and evaluating proposed director candidates. As noted above, the NCG Committee, when recommending director candidates to the full Board for nomination, may consider whether a director candidate, if elected, assists in achieving a mix of Board members that represents a diversity of background and experience. Other than circumstances in which we may be legally required by contract or otherwise to provide third parties with the ability to nominate directors, the NCG Committee will evaluate all proposed director candidates that it considers or who have been properly recommended to it by a securityholder based on the same criteria and in substantially the same manner, with no regard to the source of the initial recommendation of the proposed director candidate.
BOSTON PROPERTIES, INC. |2018 Proxy Statement 11
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Proxy Access By-Law ProvisionsPROXY ACCESSBY-LAW PROVISIONS
On February 24, 2015, we amended our OurBy-laws to adopt include a proxy access right for stockholders, pursuant to which a stockholder, or group of no more than five stockholders, meeting specified eligibility requirements, may include director nominees in our proxy materials for annual meetings of our stockholders. In order to be eligible to utilize these proxy access provisions, a stockholder, or group of stockholders, must, among other requirements:
BOSTON PROPERTIES, INC. |2016 Proxy Statement 13
For purposes of the foregoing requirements, issued and outstanding common units, other than those owned by us, Boston Properties Limited Partnership (the “Operating Partnership”) or any of their directly or indirectly wholly owned subsidiaries and excluding issued and outstanding long term incentive units, will be treated as issued and outstanding shares of common stock.
Additionally, all director nominees submitted through these provisions must be independent and meet specified additional criteria, and stockholders will not be entitled to utilize this proxy access right at an annual meeting if we receive notice through our traditional advanced noticeby-law provisions that a stockholder intends to nominate a director at such meeting. The maximum number of director nominees that may be submitted pursuant to these provisions may not exceed 25% of the number of directors then in office.
The foregoing proxy access right is subject to additional eligibility, procedural and disclosure requirements set forth in ourBy-laws.
Corporate Governance Guidelines
Our Board of Directors adopted Corporate Governance Guidelines, a copy of which is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Governance Guidelines.”
CODE OF BUSINESS CONDUCT AND ETHICS AND OTHER POLICIES
Code of Business Conduct and Ethics
Our Board of Directors adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), which governs business decisions made and actions taken by our directors, officers and employees. A copy of this Code of Ethics is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Code of Conduct and Ethics.” We intend to disclose on this website any amendment to, or waiver of, any provision of this Code of Ethics applicable to our directors and executive officers that would otherwise be required to be disclosed under the rules of the SEC or the NYSE rules.
Corporate Governance Guidelines
Our Board of Directors adopted Corporate Governance Guidelines, a copy of which is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Governance Guidelines.”
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Policy on Company Political Spending
Our Board of Directors adopted a Policy on Company Political Spending, a copy of which is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance” and subheading “Policy on Political Spending.”
Communications with the BoardCOMMUNICATIONS WITH THE BOARD
Stockholders and other interested parties who wish to communicate with any of our directors or the Board of Directors as a group, may do so by writing to them at Name(s) of Director(s)/Board of Directors of Boston Properties, Inc., c/o Compliance Officer, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, MAMassachusetts 02199-8103.
Stockholders and other interested parties who wish to contact the Audit Committee to report complaints or concerns regarding accounting, internal accounting controls or auditing matters, may do so by:
• | following any of the “Procedures for Submission of Complaints under the Audit Committee Complaint Procedures” that are attached as Exhibit 1 to our Code of Ethics (see “– Code of Business Conduct and Ethics and Other Policies – Code of Business Conduct and Ethics” above), or |
You are welcome to make any such reports anonymously, but we prefer that you identify yourself so that we may contact you for additional information if necessary or appropriate.
Stockholders and other interested parties who wish to communicate with ournon-management directors as a group, may do so by writing toNon-Management Directors of Boston Properties, Inc., c/o Compliance Officer, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, MAMassachusetts 02199-8103.
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We recommend that all correspondence be sent via certified U.S. mail, return receipt requested. All correspondence received by the Compliance Officer will be forwarded by the Compliance Officer promptly to the addressee(s).
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PROPOSAL 1: ELECTION OF DIRECTORS
At the annual meeting, directors shall be elected to hold office for aone-year term expiring at the 20172019 annual meeting of stockholders or until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Following the recommendation of the NCG Committee, our Board of Directors has nominated Mr.Kelly A. Ayotte, Bruce W. Duncan, Ms. Karen E. Dykstra, Ms. Carol B. Einiger, Dr. Jacob A. Frenkel, Mr. Joel I. Klein, Mr. Douglas T. Linde, Mr. Matthew J. Lustig, Mr. Alan J. Patricof, Mr. Owen D. Thomas, Mr. Martin Turchin, and Mr. David A. Twardock for election. Each nominee, other than Mr. Duncan and Ms. Dykstra,Senator Ayotte, is currently serving as a director of Boston Properties. In making its recommendations, the NCG Committee considered a number of factors, including its criteria for Board membership, which include the minimum qualifications that must be possessed by a director candidate in order to be nominated for a position on our Board. Our Board of Directors anticipates that, if elected, the nominees will serve as directors. However, if any person nominated by our Board of Directors is unable to serve or for good cause will not serve, the proxies will be voted for the election of such other person as our Board of Directors may recommend.
OurBy-laws provide for a majority voting standard. This means that, in an uncontested election, nominees for director are elected if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. The majority voting standard would not apply in contested elections, which, generally, will include any situation in which Boston Properties receives a notice that a stockholder has nominated a person for election to our Board of Directors at a meeting of stockholders that is not withdrawn on or before the tenth day before Boston Properties first mails its notice for such meeting to the stockholders.
The majority voting standard will apply to the election of directors at the 20162018 annual meeting of stockholders. Accordingly, nominees for director will be elected if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. Brokernon-votes, if any, and abstentions will not be treated as votes cast.
Our Board of Directors has also adopted a resignation policy, included in our Corporate Governance Guidelines, under which a director who fails to receive the required number of votes forre-election will tender his or her resignation to our Board of Directors for its consideration. The NCG Committee will act on an expedited basis to determine whether it is advisable to accept the director’s resignation and will submit the recommendation for prompt consideration by our Board of Directors. Our Board of Directors will act on the tendered resignation within 90 days following certification of the stockholder vote and will promptly and publicly disclose its decision. The director whose resignation is under consideration will abstain from participating in any decision regarding his or her resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of stockholders and until the director’s successor is duly elected and qualified or until the director’s earlier resignation or removal. The NCG Committee and our Board of Directors may consider any factors they deem relevant in deciding whether to accept a director’s resignation.
The Board of Directors unanimously recommends a voteFOReach of its nominees, Kelly A. Ayotte, Bruce W. Duncan, Karen E. Dykstra, Carol B. Einiger, Dr. Jacob A. Frenkel, Joel I. Klein, Douglas T. Linde, Matthew J. Lustig, Alan J. Patricof, Owen D. Thomas, Martin Turchin and David A. Twardock. Properly authorized proxies solicited by the Board of Directors will be votedFOReach of the nominees unless instructions to the contrary are given.
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PROPOSAL 1: ELECTION OF DIRECTORS
Information Regarding the Nominees and Executive OfficersINFORMATION REGARDING THE NOMINEES AND EXECUTIVE OFFICERS
The following biographical descriptions set forth certain information with respect to the nominees for election as directors at the annual meeting and the executive officers who are not directors, based on information furnished to Boston Properties by each nominee and executive officer. Each executive officer holds office until the regular meeting of the Board of Directors following the next annual meeting of stockholders and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal.
The biographical description below for each nominee includes the specific experience, qualifications, attributes and skills that led to the conclusion by our Board of Directors that such person should serve as a director of Boston Properties.
Nominees for Election
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Independent | Senator Ayotte has significant legal experience and experience in government and public affairs, as well as leadership and strategic planning skills. Senator Ayotte represented New Hampshire in the United States Senate from 2011-2016, where she chaired the Armed Services Subcommittee on Readiness and the Commerce Subcommittee on Aviation Operations. She also served on the Budget, Homeland Security and Governmental Affairs, Small Business and Entrepreneurship, and Aging Committees. Senator Ayotte served as the “Sherpa” for Justice Neil Gorsuch, leading the effort to secure his confirmation to the United States Supreme Court. From 2004-2009, Senator Ayotte served as New Hampshire’s first female Attorney General having been appointed to that position by Republican Governor Craig Benson and reappointed twice by Democratic Governor John Lynch. Prior to that, she served as the Deputy Attorney General, Chief of the Homicide Prosecution Unit and as Legal Counsel to Governor Craig Benson. She began her career as a law clerk to the New Hampshire Supreme Court and as an associate at the McLane Middleton law firm. Senator Ayotte serves on the boards of Caterpillar Inc., News Corporation, BAE Systems and Bloom Energy Corporation and the advisory boards of Microsoft Corporation, Blink Health LLC, Chubb Insurance, Revision Military and Cirtronics Corporation. She is a Senior Advisor for Citizens for Responsible Energy Solutions. She also serves on thenon-profit boards of the One Campaign, the International Republican Institute, the McCain Institute and Veterans Count of New Hampshire. In 2017, Senator Ayotte was a joint visiting fellow at the Harvard Institute of Politics and the Belfer Center for Science and International Affairs. She is a visiting fellow at the University of Chicago’s Institute of Politics and the Perkins Bass Distinguished Visitor at Dartmouth College. She also is a member of the Aspen Institute’s Economic Strategy and Homeland Security groups. Senator Ayotte graduated with honors from the Pennsylvania State University and earned a Juris Doctor degree from the Villanova University School of Law. |
Mr. Duncan has more than 30 years of diverse real estate management and investment experience, including as a chief executive officer and a director of other publicly traded companies.
Mr. Duncan has been President, Chief Executive Officer and a director of First Industrial Realty Trust Inc., a REIT that engages in the ownership, management, acquisition, sale, development and redevelopment of industrial real estate properties, since January 2009 and was appointed Chairman of its Board of Directors in January 2016. Since September 2013, Mr. Duncan has also served as a director of the T. Rowe Price Mutual Funds. In addition, Mr. Duncan currently serves as Chairman of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), a leading worldwide hotel and leisure company, a position he has held since May 2005. From April 2007 to September 2007, Mr. Duncan served as Chief Executive Officer of Starwood on an interim basis. Mr. Duncan has served as a director of Starwood since 1999 and currently serves on its Corporate Governance and Nominating Committee. Mr. Duncan also served as a Trustee of Starwood Hotels & Resorts, a real estate investment trust and former subsidiary of Starwood, from 1995 to 2006. He also was a senior advisor to Kohlberg Kravis & Roberts & Co., a global investment firm, from July 2008 until January 2009. He was a private investor from January 2006 to January 2009. From March 2002 to December 2005, Mr. Duncan held various positions at Equity Residential (“EQR”), one of the largest publicly traded apartment REITs in the United States. In particular, from May 2005 to December 2005, Mr. Duncan was Chief Executive Officer and a Trustee of EQR, from January 2003 to May 2005, he was President, Chief Executive Officer and a Trustee of EQR and from March 2002 to December 2002 he was President and a Trustee of EQR. From December 1995 until March 2000, Mr. Duncan served as Chairman, President and Chief Executive Officer of Cadillac Fairview Corporation, one of North America’s largest owners and developers of retail and office properties. From January 1992 to October 1994, Mr. Duncan was President and Co-Chief Executive Officer of JMB Institutional Realty Corporation providing advice and management for investments in real estate by tax-exempt investors and from 1978 to 1992, he worked for JMB Realty Corporation where he served in various capacities, culminating as Executive Vice President and a member of the Board of Directors. Mr. Duncan currently serves on the Advisory Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) and as Trustee of RUSH University Medical Center in Chicago, and he previously served on the Executive Committees of the Board of the Canadian Institute for Public Real Estate Companies (CIPREC) and the National Multi-Housing Council (NMHC). He also previously served on the Board of Directors of The Rouse Company, a diversified commercial real estate firm, and as a Trustee of the International Council of Shopping Centers (ICSC). He received a BA in Economics from Kenyon College and an MBA in Finance from the University of Chicago. He is 64 years old.BOSTON PROPERTIES, INC. |2018 Proxy Statement 15
PROPOSAL 1: ELECTION OF DIRECTORS
Bruce W. Duncan | ||
Director since May 17, 2016 Independent Board Committees: Compensation | Mr. Duncan has more than 30 years of diverse real estate management and investment experience, including as a chief executive officer and a director of other publicly traded companies. Mr. Duncan serves as Chairman of the Board of Directors of First Industrial Realty Trust, Inc. (“First Industrial”), a REIT that engages in the ownership, management, acquisition, sale, development and redevelopment of industrial real estate properties. Mr. Duncan has served as a director of First Industrial since January 2009 and as its Chairman of the Board since January 2016. He previously served as President and Chief Executive Officer of First Industrial from January 2009 until he stepped down as President in September 2016 and retired as Chief Executive Officer in November 2016. Previously, he served as Chairman of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), a leading worldwide hotel and leisure company, from May 2005 until its acquisition by Marriott International, Inc. in September 2016. Mr. Duncan currently serves as a director of Marriott International, Inc., the world’s largest hotel company. Since September 2013, Mr. Duncan has also served as a director of the T. Rowe Price Mutual Funds. From April 2007 to September 2007, Mr. Duncan served as Chief Executive Officer of Starwood on an interim basis. Mr. Duncan served as a director of Starwood since 1999 and served on its Corporate Governance and Nominating Committee. Mr. Duncan also served as a Trustee of Starwood Hotels & Resorts, a real estate investment trust and former subsidiary of Starwood, from 1995 to 2006. He also was a senior advisor to Kohlberg Kravis & Roberts & Co., a global investment firm, from July 2008 until January 2009. He was a private investor from January 2006 to January 2009. From March 2002 to December 2005, Mr. Duncan held various positions at Equity Residential (“EQR”), one of the largest publicly traded apartment REITs in the United States. In particular, from May 2005 to December 2005, Mr. Duncan was Chief Executive Officer and a Trustee of EQR, from January 2003 to May 2005, he was President, Chief Executive Officer and a Trustee of EQR and from March 2002 to December 2002 he was President and a Trustee of EQR. From December 1995 until March 2000, Mr. Duncan served as Chairman, President and Chief Executive Officer of Cadillac Fairview Corporation, one of North America’s largest owners and developers of retail and office properties. Mr. Duncan is a Life Trustee of Rush University Medical Center in Chicago, and is on the Board of Governors of the Investment Company Institute (ICI) and is on the Governing Board of the Independent Directors Council (IDC). He previously served on the Advisory Board of Governors of Nareit, the Executive Committees of the Board of the Canadian Institute for Public Real Estate Companies (CIPREC) and the National Multi-Housing Council (NMHC). He also previously served on the Board of Directors of The Rouse Company, a diversified commercial real estate firm, and as a Trustee of the International Council of Shopping Centers (ICSC). He received a BA in Economics from Kenyon College and an MBA in Finance from the University of Chicago. | |
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PROPOSAL 1: ELECTION OF DIRECTORS |
Ms. Dykstra has extensive strategic, management, financial, accounting and oversight experience, particularly with companies in the technology sector.
Ms. Dykstra served as Chief Financial and Administrative Officer of AOL, Inc., a global media technology company, from November 2013 until July 2015 and as Chief Financial Officer of AOL, Inc. from September 2012 until November 2013. From January 2007 until December 2010, Ms. Dykstra was a Partner of Plainfield Asset Management LLC (“Plainfield”), and she served as Chief Operating Officer and Chief Financial Officer of Plainfield Direct Inc., Plainfield’s business development company, from May 2006 to 2010, and as a director from 2007 to 2010. Prior to joining Plainfield, she spent over 25 years with Automatic Data Processing, Inc., serving most recently as Chief Financial Officer from January 2003 to May 2006, and as Vice President – Finance, Corporate Controller and in other capacities. Ms. Dykstra currently serves on the Board of Directors of Gartner Inc. and VMware, Inc. Ms. Dykstra is a former director of Crane Co. and AOL, Inc. She received a BA in Accounting from Rider University and an MBA from Fairleigh Dickinson University. She is 57 years old.
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Director since May |
Ms. Einiger has 40 years of experience as an investment banker and investment advisor, during which time she has gained significant expertise in the operation of public and private debt and equity capital markets and the evaluation of investment opportunities.
Ms. Einiger is President of Post Rock Advisors, LLC, a private investment advisory firm established in 2005. She began her investment career in 1971 at Goldman, Sachs & Co. and worked at The First Boston Corporation from 1973 to 1988, becoming Managing Director and Head of the Capital Markets Department; from 1988 to 1989 as Visiting Professor and Executive-in-Residence at Columbia Business School; and from 1989 to 1992 as Managing Director at Wasserstein Perella & Co. From 1992 to 1996, Ms. Einiger served as Chief Financial Officer and then Acting President of the Edna McConnell Clark Foundation. From 1996 to 2005, she served as Chief Investment Officer of The Rockefeller University, where she was responsible for the management of the University’s endowment. Ms. Einiger is a director and member of the Investment Committee of UJA-Federation of New York, a member of the Investment Committee of The JPB Foundation, and a member of the Board of Overseers of Columbia Business School. She previously served on the Boards of Trustees and Investment Committees of the University of Pennsylvania, the Lasker Foundation and the Horace Mann School; as Vice Chair of the Investment Committee of The Museum of Modern Art; as a Director of Credit Suisse First Boston (USA) and The New York Stem Cell Foundation; and on the Advisory Board of Blackstone Alternative Asset Management. Ms. Einiger is the recipient of numerous awards, including the Alumni Award of Merit of the University of Pennsylvania, the Columbia Business School Distinguished Alumna Award, the AJC National Human Relations Award, the Anti-Defamation League Woman of Achievement Award and the Catalyst Award for Corporate Leadership. She received her BA from the University of Pennsylvania and her MBA with honors from Columbia Business School. She is 66 years old.17, 2016
Independent Board Committees: Audit | Ms. Dykstra has extensive strategic, management, financial, accounting and oversight experience, particularly with companies in the technology sector. Ms. Dykstra served as Chief Financial and Administrative Officer of AOL, Inc., a global media technology company, from November 2013 until July 2015 and as Chief Financial Officer of AOL, Inc. from September 2012 until November 2013. From January 2007 until December 2010, Ms. Dykstra was a Partner of Plainfield Asset Management LLC (“Plainfield”), and she served as Chief Operating Officer and Chief Financial Officer of Plainfield Direct Inc., Plainfield’s business development company, from May 2006 to 2010, and as a director from 2007 to 2010. Prior to joining Plainfield, she spent over 25 years with Automatic Data Processing, Inc., serving most recently as Chief Financial Officer from January 2003 to May 2006, and as Vice President – Finance, Corporate Controller and in other capacities. Ms. Dykstra currently serves on the Board of Directors of Gartner, Inc. and VMware, Inc. Ms. Dykstra is a former director of Crane Co. and AOL, Inc. She received a BA in Accounting from Rider University and an MBA from Fairleigh Dickinson University. |
Dr. Frenkel has worked for more than 40 years in the financial industry, government and academia, during which time he has gained significant knowledge of global macroeconomics and experience advising large financial institutions.
Dr. Frenkel has been the Chairman of JPMorgan Chase International, the international unit of JPMorgan Chase & Co., since December 2009. Since November 2009, Dr. Frenkel has served as a director of Loews Corporation, one of the largest diversified holding companies in the United States. Dr. Frenkel is Chairman of the Board of Trustees of the Group of Thirty (G-30), a private, nonprofit, consultative group on international economic and monetary affairs. He has been a member of this group since 1988
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and served as Chairman and Chief Executive Officer from 2000 to 2011. He previously served as Vice Chairman of American International Group, Inc. from 2004 to 2009. He was with Merrill Lynch Inc. between 2000 and 2004 and served as Chairman of Merrill Lynch International. Prior to that, he served for two terms as Governor of the Bank of Israel from 1991 to 2000. Dr. Frenkel was also Chairman of the Board of Governors of the Inter-American Development Bank, Vice Chairman of the Board of Governors of the European Bank for Reconstruction and Development and Economic Counselor and Director of Research at the International Monetary Fund. Dr. Frenkel also held numerous academic positions. Between 1971 and 1987, he was at the University of Chicago where he served as the David Rockefeller Professor of International Economics. He received a BA in Economics and Political Science from Hebrew University in Israel and an MA and Ph.D. in Economics from the University of Chicago. Dr. Frenkel is a laureate of the 2002 Israel Prize in Economics and the recipient of several honorary doctoral degrees and other decorations and awards. He is 73 years old.PROPOSAL 1: ELECTION OF DIRECTORS
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Director since |
Mr. Klein has worked for more than 40 years in private industry and government during which time he has gained significant experience in senior policy making and executive roles, as well as a broad range of legal matters.
Mr. Klein is the Chief Policy and Strategy Officer of Oscar Insurance Corporation, a health insurance company. In addition, he has been a Director of News Corporation since January 2011 where he was also Executive Vice President, Office of the Chairman of News Corporation and Chief Executive Officer of Amplify, the education division of News Corporation, from January 2011 through December 2015. From 2002 through 2010, Mr. Klein was Chancellor of the New York City Department of Education where he oversaw a system of over 1,600 schools with 1.1 million students, 136,000 employees and a $22 billion budget. He was the U.S. Chairman and Chief Executive Officer of Bertelsmann, Inc. and Chief U.S. Liaison Officer to Bertelsmann AG, a media company, from 2001 to 2002. Mr. Klein also served with the Clinton administration in a number of roles, including Assistant U.S. Attorney General in charge of the Antitrust Division of the U.S. Department of Justice from 1997 until 2000 and Deputy White House Counsel to President Clinton from 1993 to 1995. Mr. Klein entered the Clinton administration after 20 years of public and private legal work in Washington, D.C. Mr. Klein received a BA with honors from Columbia University and a JD with honors from Harvard Law School. He has also received honorary degrees from ten colleges and universities. He is 69 years old.
May 5, 2004
Independent Board Committees:Compensation (Chair) | Ms. Einiger has more than 40 years of experience as an investment banker and investment advisor, during which time she has gained significant expertise in the operation of public and private debt and equity capital markets and the evaluation of investment opportunities. Ms. Einiger is Senior Advisor of Roundtable Investment Partners LLC, a private investment advisory firm, a position she has held since January |
Mr. Linde serves as President of Boston Properties, Inc. Prior to his appointment to this position in May 2007, he served as Executive Vice President since January 2005 and he also served as Chief Financial Officer and Treasurer from 2000 until November 2007. He joined Boston Properties in January 1997 as Vice President of Acquisitions and New Business to help identify and execute acquisitions and to develop new business opportunities and was promoted to Senior Vice President for Financial and Capital Markets in October 1998. Prior to joining Boston Properties, Mr. Linde served from 1993 to 1997 as President of Capstone Investments, a Boston real estate investment company. From 1989 to 1993, he served as Project Manager and Assistant to the Chief Financial Officer of Wright Runstad and Company, a private real estate developer in Seattle, WA. He began his career in the real estate industry with Salomon Brothers’ Real Estate Finance Group. Mr. Linde is a member of the Board of Directors of Beth Israel Deaconess Medical Center. He is a member of the Real Estate Roundtable and serves as a director of the Boston Municipal Research Bureau and Jobs for Massachusetts. Mr. Linde also serves on the Urban Studies and Planning Visiting Committee at MIT and is a member of the Wesleyan University Board of Trustees. Mr. Linde received a BA from Wesleyan University in 1985 and an MBA from Harvard Business School in 1989. He is 52 years old.
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PROPOSAL 1: ELECTION OF DIRECTORS |
Mr. Lustig has worked for more than 30 years in the real estate industry, during which time he has gained extensive experience providing strategic and financial advice and transaction execution to clients, and investing in real estate companies and assets as a principal.
Mr. Lustig is Managing Partner of North America Investment Banking and Head of Real Estate & Lodging at Lazard Frères & Co. (“Lazard”), the investment bank. He is responsible for managing Lazard’s broad investment banking businesses in North America, as well as running its Real Estate and Lodging industry group. In recent years, he has played an active role in more than $300 billion of advisory assignments and transactions involving leading real estate and lodging companies in the public and private markets. Mr. Lustig separately served as Chief Executive Officer of the real estate investment business of Lazard and its successors, and oversaw multiple funds with over $2.5 billion of equity capital invested in real estate operating companies. Mr. Lustig is a member of the Board of Directors at Ventas, Inc. and served as the Chairman of Atria Senior Living Group, Inc., which was acquired by Ventas in May 2011. He has also served as a director of several other public and private fund portfolio companies. Mr. Lustig is a member of the Real Estate Roundtable, and he serves on the boards of Pension Real Estate Association, Larson Leadership Initiative at the Urban Land Institute, and the Real Estate centers at the business schools of Wharton/UPenn and Columbia University. He is also a member of the Council on Foreign Relations and serves on the Board of Visitors at the School of Foreign Service at Georgetown University from which he graduated with a BSFS. He is 55 years old.
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Director since February 24, 2010 Independent Board Committees: NCG (Chair) |
Mr. Patricof has more than 40 years of experience leading venture capital firms, during which time he has completed several billion dollars of investments in a diverse range of companies and gained significant expertise evaluating investment opportunities and overseeing the management development and operations of portfolio companies.
Mr. Patricof is Managing Director of Greycroft LLC, a venture capital firm he formed in 2006, which has more than $400 million under management. Prior to that, he was Chairman of Apax Partners, Inc. (formerly Patricof & Co. Ventures, Inc.), a venture capital company that he founded in 1969, which is now one of the world’s leading private equity firms with approximately $40 billion under management or advice. He is a member of the Board of Overseers of the Columbia Business School and was recently appointed by President Obama to the President’s Council on Global Development. Mr. Patricof received a BS in Finance from Ohio State University and an MBA from Columbia Business School. He is 81 years old.
Dr. Frenkel has worked for more than 40 years in the financial industry, government and academia, during which time he has gained significant knowledge of global macroeconomics and experience advising large financial institutions.
Dr. Frenkel has been the Chairman of JPMorgan Chase International, the international unit of JPMorgan Chase & Co., since December 2009. Since November 2009, Dr. Frenkel has served as a director of Loews Corporation, one of the largest diversified holding companies in the United States. Dr. Frenkel is Chairman of the Board of Trustees of the Group of Thirty | a private, nonprofit, consultative group on international economic and monetary affairs. He has been a member of this group since 1988 and served as Chairman and Chief Executive Officer from 2000 to 2011. He previously served as Vice Chairman of American International Group, Inc. from 2004 to 2009. He was with Merrill Lynch Inc. between 2000 and 2004 and served as Chairman of Merrill Lynch International. Prior to that, he served for two terms as Governor of the Bank of Israel from 1991 to 2000. Dr. Frenkel was also Chairman of the Board of Governors of the Inter-American Development Bank, Vice Chairman of the Board of Governors of the European Bank for Reconstruction and Development and Economic Counselor and Director | of Research at the International Monetary Fund. Dr. Frenkel also held numerous academic positions. Between 1971 and 1987, he was at the University of Chicago where he served as the David Rockefeller Professor of International Economics. He received a BA in Economics and Political Science from Hebrew University in Israel and an MA and Ph.D. in Economics from the University of Chicago. Dr. Frenkel is a laureate of the 2002 Israel Prize in Economics and the recipient of several honorary doctoral degrees and other decorations and awards. |
Mr. Thomas has served as our Chief Executive Officer since April 2, 2013. We have agreed that, while Mr. Thomas remains Chief Executive Officer, he will be nominated for re-election to the Board of Directors each year. Mr. Thomas served as Chairman of the Board of Directors of Lehman Brothers Holdings Inc. (“LBHI”) from March 2012 until March 2013 and continues to serve as a member of the Board of Directors of LBHI. From 1987 until 2011, Mr. Thomas held various positions at Morgan Stanley, including Chief Executive Officer of Morgan Stanley Asia Ltd., President of Morgan Stanley Investment Management, Head of Morgan Stanley Real Estate and Managing Director. Mr. Thomas was also a member of Morgan Stanley’s Management Committee from 2005 to 2011. He is a Director of the University of Virginia Investment Management Company, a Trustee and a Director of the Urban Land Institute, a member of the Executive Board of NAREIT and the former Chairman of the Pension Real Estate Association. He received a BS in Mechanical Engineering from the University of Virginia and an MBA from Harvard Business School. He is 54 years old.
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PROPOSAL 1: ELECTION OF DIRECTORS |
Mr. Turchin has more than 40 years of experience as a commercial real estate broker, consultant and advisor and has been involved in some of the largest real estate transactions in the United States. During his career, he has orchestrated more than 50 million square feet of real estate transactions.
Mr. Turchin serves as non-executive Vice Chairman of CBRE Group, Inc., the world’s largest real estate services company. From 1985 until its merger with CBRE Group, Inc. in July 2003, Mr. Turchin served as Vice-Chairman of Insignia/ESG, Inc., a subsidiary of Insignia Financial Group, which was one of the nation’s largest commercial real estate brokerage, consulting and management firms. Prior to joining Insignia/ESG, Inc., he spent 14 years with Kenneth E. Laub & Company, Inc. where he was involved in real estate acquisition, financing, leasing and consulting. He is a three-time recipient of the Real Estate Board of New York’s “Most Ingenious Deal of the Year Award” and a two-time recipient of the “Robert T. Lawrence Award.” Mr. Turchin serves on the Board of Directors of Aerojet Rocketdyne Holdings, Inc. and as Chairman of Easton Development Company, LLC, a subsidiary of Aerojet Rocketdyne Holdings, Inc. He holds a BS from City College of the University of New York and a JD from St. John’s Law School. He is 74 years old.
Joel I. Klein | ||
Director since January 24, 2013 Lead Independent Director Board Committees: NCG | Mr. Klein has worked for more than 40 years in private industry and government during which time he has gained significant experience in senior policy making and executive roles, as well as a broad range of legal matters. Mr. Klein is the Chief Policy and Strategy Officer of Oscar Insurance Corporation, a health insurance company. In addition, he has been a Director of News Corporation since January 2011 where he was also Executive Vice President, Office of the Chairman of News Corporation and Chief Executive Officer of Amplify, the education division of News Corporation, from January 2011 through December 2015. From 2002 through 2010, Mr. Klein was Chancellor of the New York City Department of Education where he oversaw a system of over 1,600 schools with 1.1 million students, 136,000 employees and a $22 billion budget. He was the U.S. Chairman and Chief Executive Officer of Bertelsmann, Inc. and Chief U.S. Liaison Officer to Bertelsmann AG, a media company, from 2001 to 2002. Mr. Klein also served with the Clinton administration in a number of roles, including Assistant U.S. Attorney General in charge of the Antitrust Division of the U.S. Department of Justice from 1997 until 2000 and Deputy White House Counsel to President Clinton from 1993 to 1995. Mr. Klein entered the Clinton administration after 20 years of public and private legal work in Washington, D.C. Mr. Klein received a BA with honors from Columbia University and a JD with honors from Harvard Law School. He has also received honorary degrees from ten colleges and universities. |
Douglas T. Linde | ||
Director since January 21, 2010 Board Committees: Investment | Mr. Linde serves as President of Boston Properties, Inc. Prior to his appointment to this position in May 2007, he served as Executive Vice President since January 2005 and he also served as Chief Financial Officer and Treasurer from 2000 until November 2007. He joined Boston Properties in January 1997 as Vice President of Acquisitions and New Business to help identify and execute acquisitions and to develop new business opportunities and was promoted to Senior Vice President for Financial and Capital Markets in October 1998. Prior to joining Boston Properties, Mr. Linde served from 1993 to 1997 as President of Capstone Investments, a Boston real estate investment company. From 1989 to 1993, he served as Project Manager and Assistant to the Chief Financial Officer of Wright Runstad and Company, a private real estate developer in Seattle, WA. He began his career in the real estate industry with Salomon Brothers’ Real Estate Finance Group. Mr. Linde is a Director Emeritus of the Board of Directors of Beth Israel Deaconess Medical Center (“BIDMC”) andco-chairs the BIDMC capital campaign. He is a member of the Real Estate Roundtable and serves as a director of the Boston Municipal Research Bureau and Jobs for Massachusetts. Mr. Linde also serves on the Urban Studies and Planning Visiting Committee at MIT and is a member of the Wesleyan University Board of Trustees. Mr. Linde received a BA from Wesleyan University and an MBA from Harvard Business School. |
20 BOSTON PROPERTIES, INC. |2018 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
Matthew J. Lustig | ||
Director since January 20, 2011 Independent Board Committees: NCG | Mr. Lustig has worked for more than 30 years in the real estate industry, during which time he has gained extensive experience providing strategic and financial advice and transaction execution to clients, and investing in real estate companies and assets as a principal. Mr. Lustig has been Head of North America Investment Banking at Lazard Frères & Co. (“Lazard”), the investment bank, since 2012, and he is also Head of Real Estate & Lodging at Lazard, a position he has held for more than 20 years. He is responsible for managing Lazard’s broad investment banking businesses in North America, as well as serving clients and running its Real Estate and Lodging industry group. In recent years, he has played an active role in more than $300 billion of advisory assignments and transactions involving leading real estate and lodging companies in the public and private markets. Mr. Lustig separately served previously as Chief Executive Officer of the real estate investment business of Lazard and its successors, and oversaw multiple funds with over $2.5 billion of equity capital invested in REITS and real estate operating companies. Mr. Lustig is a member of the Board of Directors at Ventas, Inc. and had served as the Chairman of Atria Senior Living Group, Inc., which was acquired by Ventas in May 2011. He has also served as a director of several other public and private fund portfolio REITs and companies. Mr. Lustig is a member of the Real Estate Roundtable, the Urban Land Institute, and the Pension Real Estate Association (former Board and Executive Committee member) as well as the Real Estate centers at the business schools of Wharton/UPenn (Vice Chairman of the Advisory Board) and Columbia University. He is also a member of the Council on Foreign Relations and serves on the Board of Advisors at the School of Foreign Service at Georgetown University from which he graduated with a BSFS. |
Owen D. Thomas | ||
Director since April 2, 2013 Board Committees: Investment | Mr. Thomas has served as our Chief Executive Officer since April 2, 2013. Mr. Thomas served as Chairman of the Board of Directors of Lehman Brothers Holdings Inc. (“LBHI”) from March 2012 until March 2013 and continues to serve as a member of the Board of Directors of LBHI. From 1987 until 2011, Mr. Thomas held various positions at Morgan Stanley, including Chief Executive Officer of Morgan Stanley Asia Ltd., President of Morgan Stanley Investment Management, Head of Morgan Stanley Real Estate and Managing Director. Mr. Thomas was also a member of Morgan Stanley’s Management Committee from 2005 to 2011. He is a Director of the University of Virginia Investment Management Company, a Trustee of the Urban Land Institute, a director of the Urban Land Institute Foundation, an officer and a member of the Executive Board of Nareit, a director of the Real Estate Roundtable and the former Chairman of the Pension Real Estate Association. He received a BS in Mechanical Engineering from the University of Virginia and an MBA from Harvard Business School. |
BOSTON PROPERTIES, INC. |2018 Proxy Statement 21
PROPOSAL 1: ELECTION OF DIRECTORS
Martin Turchin | ||
Director since June 23, 1997 Independent Board Committees: Audit | Mr. Turchin has more than 40 years of experience as a commercial real estate broker, consultant and advisor and has been involved in some of the largest real estate transactions in the United States. During his career, he has orchestrated more than 50 million square feet of real estate transactions. Mr. Turchin serves asnon-executive Vice Chairman of CBRE Group, Inc., the world’s largest real estate services company. From 1985 until its merger with CBRE Group, Inc. in July 2003, Mr. Turchin served as Vice-Chairman of Insignia/ESG, Inc., a subsidiary of Insignia Financial Group, which was one of the nation’s largest commercial real estate brokerage, consulting and management firms. Prior to joining Insignia/ESG, Inc., he spent 14 years with Kenneth E. Laub & Company, Inc. where he was involved in real estate acquisition, financing, leasing and consulting. He is a three-time recipient of the Real Estate Board of New York’s “Most Ingenious Deal of the Year Award” and atwo-time recipient of the “Robert T. Lawrence Award.” Mr. Turchin serves on the Board of Directors of Aerojet Rocketdyne Holdings, Inc. and as Chairman of Easton Development Company, LLC, a subsidiary of Aerojet Rocketdyne Holdings, Inc. He holds a BS from City College of the University of New York and a JD from St. John’s Law School. |
David A. Twardock | |||
Director since May 7, 2003 Independent Board Committees: Audit (Chair) and Compensation | Mr. Twardock has more than 30 years of experience in the real estate finance industry, during which time he has overseen the lending and asset management of billions of dollars of commercial mortgages and other real estate debt financing and the management and disposition of billions of dollars of real estate equity. From December 1998 to March 2013, Mr. Twardock was the President of Prudential Mortgage Capital Company, LLC, the real estate finance affiliate of Prudential Financial, Inc., which had more than $70 billion in assets under management and administration as of December 31, 2012 and annually lent billions of dollars in real estate debt financing. Since 1982, Mr. Twardock has held numerous positions relating to real estate equity and debt with Prudential, including his position from 1996 to November 1998 as Senior Managing Director | of Prudential Realty Group. Mr. Twardock is a member of the Board of Directors of Morgan Stanley Bank, N.A. and serves on the advisory committee of Blue Vista Capital Management and LBA Realty. Mr. Twardock is a member of the Urban Land Institute and the Economics Club of Chicago. Mr. Twardock previously served as a director of the Real Estate Roundtable and Chairman of the Real Estate Roundtable Capital Markets Committee. He received a BS in Civil Engineering from the University of Illinois and an MBA in Finance and Behavioral Science from the University of Chicago. |
Mr. Twardock has more than 30 years of experience in the real estate finance industry, during which time he has overseen the lending and asset management of billions of dollars of commercial mortgages and other real estate debt financing and the management and disposition of billions of dollars of real estate equity.
From December 1998 to March 2013, Mr. Twardock was the President of Prudential Mortgage Capital Company, LLC, the real estate finance affiliate of Prudential Financial, Inc., which had more than $70 billion in assets under management and administration as of December 31, 2012 and annually lends billions of dollars in real estate debt financing. Since 1982, Mr. Twardock has held numerous positions relating to real estate equity and debt with Prudential, including his position from 1996 to November 1998 as Senior Managing Director of Prudential Realty Group. Mr. Twardock is a member of the Board of Directors of Morgan Stanley Bank, N.A. and serves on the advisory committee of Blue Vista Capital Management and LBA Realty. Mr. Twardock is a member of the Urban Land Institute and the Economics Club of Chicago. Mr. Twardock previously served as a director of the Real Estate Roundtable and Chairman of the Real Estate Roundtable Capital Markets Committee. He received a BS in Civil Engineering from the University of Illinois and an MBA in Finance and Behavioral Science from the University of Chicago. He is 58 years old.22 BOSTON PROPERTIES, INC. |2018 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
Executive Officers who are not Directors
Raymond A. Ritchey |
Mr. Ritchey serves as Senior Executive Vice President. Prior to his appointment to this position in January 2016, Mr. Ritchey served as Executive Vice President, Head of our Washington, D.C. Office and National Director of Acquisitions and Development since April 1998 and Senior Vice President andCo-Manager of our Washington, D.C. office. Mr. Ritchey is responsible for all business development, leasing and marketing as well as new opportunity origination in the Washington, D.C. area. He also directly oversees similar activities on a national basis. Mr. Ritchey joined us in 1980, leading our expansion to become one of the dominant real estate firms in the Washington, D.C. metropolitan area. For four years prior to joining us, Mr. Ritchey was one of the leading commercial real estate brokers in the Washington, D.C. area with Coldwell Banker. Mr. Ritchey is the President of the Board of Spanish Education Development (SED) Center; a member of the Federal City Council; a member of The Economic Club of Washington; Founding member of the National Association of Industrial and Office Properties (NAIOP), Northern Virginia; Chair of the JDRF Real Estate Games; and an active volunteer with numerous civic, charitable, and real estate industry organizations. A sampling of Mr. Ritchey’s professional honors include: ULI Lifetime Achievement Award; Man of the Year, CREW; Brendan McCarthy Award, GWCAR; Good Scout of the Year, Boy Scouts; Trendsetter of the Year, Transwestern; Developer of the Year (numerous organizations); Junior Achievement Man of the Year. He is a 1972 graduate of the U.S. Naval Academy and a 1973 graduate of the U.S. Naval Post Graduate School in Monterey, California. He is 6567 years old.
20 BOSTON PROPERTIES, INC. |2016 Proxy Statement
Michael E. LaBelle |
Mr. LaBelle serves as Executive Vice President, Chief Financial Officer and Treasurer. Prior to his appointment to this position in January 2016, Mr. LaBelle served as Senior Vice President, Chief Financial Officer and Treasurer since November 2007 and he also served as Senior Vice President, Finance from February 2005 to November 2007. In his current role, Mr. LaBelle oversees the finance, accounting, tax, information systems, internal audit and investor relations departments and is also responsible for capital raising, treasury management, credit underwriting, financial strategy and planning. Prior to joining us in March 2000, Mr. LaBelle held the position of Vice President & Relationship Manager with Fleet National Bank for nine years with the responsibility of financing large-scale commercial real estate developments. He started his career as an Associate National Bank Examiner with the Office of the Comptroller of the Currency in New York City specializing in commercial real estate debt portfolio analysis and valuation in commercial banks located throughout theMid-Atlantic and Northeastern United States. Mr. LaBelle is on the National Advisory Board for the University of Colorado Real Estate Center. Mr. LaBelle holds a BS degree in Economics from the University of Colorado. He is 5153 years old.
Peter D. Johnston |
Mr. Johnston serves as Executive Vice President, Washington, D.C. Region. Prior to his appointment to this position in January 2016, Mr. Johnston served as Senior Vice President and Regional Manager of our Washington, D.C. office. He is in charge of all operations including project development, leasing, construction, property management and administrative activities for our Washington, D.C. office, with a staff of approximately 184181 people. Mr. Johnston joined the Company in 1987. In 1989 he was promoted to Project Manager, with subsequent promotions in 1991 to Vice President and in 1997 to Senior Vice President. In 2003 he was appointed head of the development team in the Washington, D.C. Region and held this position until his promotion in September 2005 to the position of Regional Manager. Mr. Johnston has been directly responsible for more than foureight million square feet of new development and renovation projects. He is a past member of the board of directors of the Northern Virginia Chapter of the National Association of Industrial and Office Properties (NAIOP).NAIOP. Mr. Johnston received a BA in Business Administration from Roanoke College, an MA in 1982 from Hollins College and an MBA in 1987 from the University of Virginia. He is 5759 years old.
Bryan J. Koop |
Mr. Koop serves as Executive Vice President, Boston Region. Prior to his appointment to this position in January 2016, Mr. Koop served as Senior Vice President and Regional Manager of our Boston office.office since 1999. Mr. Koop is responsible for overseeing the operation of our existing regional
BOSTON PROPERTIES, INC. |2018 Proxy Statement 23
PROPOSAL 1: ELECTION OF DIRECTORS
portfolio in the Boston area, which includes the Prudential Center and Kendall Center. He is also responsible for developing new business opportunities in the area. Prior to joining us in 1999, Mr. Koop served at Trammell Crow Company from 1982 to 1999 where his career covered high-rise office building leasing and the development of commercial office buildings and shopping centers. From 1993 to 1999, his position was Managing Director and Regional Leader for Trammell Crow Company’s New England region, which included all commercial office and shopping center operations. Mr. Koop is a member of the Board of Directors for the Massachusetts Chapter of NAIOP, the Boston Green Ribbon Commission and the Kendall Square Association and previously served as chairman of the Back Bay Association. Mr. Koop received a BBA in 1980 and an MBA in 1982 from Texas Christian University. He is 5759 years old.
BOSTON PROPERTIES, INC. Robert E. Pester|2016 Proxy Statement 21
Mr. Pester serves as Executive Vice President, San Francisco Region. Prior to his appointment to this position in January 2016, Mr. Pester served as Senior Vice President and Regional Manager of our San Francisco office. Mr. Pester is responsible for all of our activities on the West Coast.office since 1998. Mr. Pester is responsible for overseeing existing operations in San Francisco and our other Bay Area properties on the Peninsula and in Silicon Valley, and developing new business opportunities in the area. Prior to joining us in 1998, he served as Executive Vice President and Chief Investment Officer of Bedford Property Investors, a real estate investment trust in Lafayette, CA, where he led the acquisitions and development program. Prior to 1994, he was President of Bedford Property Development, a private West Coast development concern that held more than $2 billion in real estate assets. From 1980 to 1989, he was a leading commercial real estate broker with Cushman & Wakefield in northern California, where he last served as Vice President. He is a 1979 graduate of the University of California at Santa Barbara with a BA in Economics and Political Science. He is 5961 years old.
John F. Powers |
Mr. Powers serves as Executive Vice President, New York Region. He oversees all aspects of our New York and Princeton, New Jersey activities, including development, acquisitions, leasing and building operations. Prior to joining us on January 2, 2014 as Senior Vice President and Regional Manager of our New York office, he served from 2004 as Chairman of CBRE, Inc. for the New YorkTri-State Region overseeing the strategic direction of CBRE’sTri-State operations. He joined the Edward S. Gordon Company, which was subsequently merged into CBRE, in 1986 after working 8eight years at Swiss Bank Corp (now UBS). At ESG, he developed and managed the Consulting Division into a strong and integral part of the firm’s service delivery platform, which facilitated its sustained leadership in the Manhattan office leasing market. He also brokered millions of square feet of transactions, representing both tenants and landlords, led numerous strategic consulting assignments for large corporate occupiers and advised on manyground-up developments. He is a frequent speaker on commercial real estate in New York valued for his insight linking economic trends and conditions to their eventual impact on the office market. He received a BA in Mathematics from St. Anselm College, in 1968, an MA in Economics from the University of Massachusetts in 1974 and an MBA from the University of Massachusetts in 1978.Massachusetts. He also studied international economics at the Graduate Institute of International Studies, Geneva. He is 6971 years old.
Frank D. Burt |
Mr. Burt serves as Senior Vice President, General Counsel and Secretary, positions he has held since 2003. He is responsible for overseeing the legal and risk management departments. Mr. Burt has served in various capacities since he joined us in 1986, and he represented us in the acquisition of the Prudential Center in Boston and the Embarcadero Center in San Francisco, as well as in the development activities at the Prudential Center. He previously worked in the real estate department at Nutter, McClennen & Fish in Boston. Mr. Burt is a member of the American College of Real Estate Lawyers and the Boston Bar Association and a speaker for the American College of Real Estate Lawyers, the Association of Corporate Counsel, Massachusetts Continuing Legal Education, NAIOP and NAREIT.Nareit. Mr. Burt received a BA, magna cum laude, from Brown University and a JD, cum laude, from the University of Pennsylvania Law School. He is 5759 years old.
2224 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS Michael R. Walsh |
Ms. Silverstein serves as Senior Vice President, and Controller. SheChief Accounting Officer. He is responsible for overseeing financial reporting, property accounting and tax compliance and is also responsible for providing transactional support on capital markets activity. Prior to herhis appointment to this position in JanuaryMay 2016, Ms. Silverstein served as Vice President and Controller since June 2014 and prior to that she served as Vice President, Internal Audit from 2006 to 2014. Ms. Silverstein also served as the Company’s Director of Internal Audit from 2002 to 2006 and Director of Financial Reporting from 1997 to 2002. Prior to joining the Company, Ms. Silverstein was a Business Assurance Manager for Coopers & Lybrand LLP where she managed the annual audit and quarterly review services for clients in the real estate, higher education and manufacturing industries. Ms. Silverstein holds a BS in Management, with a concentration in accounting, from Tulane University and was a licensed certified public accountant. She is 46 years old.
Co-Founder and Chairman Emeritus-to-be
Mr. Zuckerman serves as non-executive Chairman of Boston Properties, Inc. and has been a director since our initial public offering on June 23, 1997. Mr. ZuckermanWalsh served as Executive ChairmanVice President, Chief Financial Officer and Treasurer of Paramount Group, Inc. (“Paramount”), a real estate investment trust focused on Class A office properties in New York City, Washington, D.C. and San Francisco, from April 2, 2013 until December 31, 2014 and as Chief Executive Officer from January 10, 2010 until April 2, 2013. The Board has conferredMarch 2015 to March 2016. Before joining Paramount, Mr. Walsh was the honorary title of Chairman Emeritus upon Mr. Zuckerman effective upon the completion of his term as a director at the 2016 annual meeting of stockholders.
Mr. Zuckerman co-founded Boston Properties in 1970 after spending seven years at Cabot, Cabot & Forbes where he rose to the position of Senior Vice President, Finance and Chief Financial Officer.Capital Markets at Boston Properties where he served in various capacities since 1986. While at Boston Properties, he was most recently responsible for overseeing its accounting, financial reporting, financial analysis and tax functions and participated extensively in investor relations matters. Mr. Walsh received a BS, magna cum laude, from Eastern Nazarene College. He is also Chairman and Editor-in-Chief of U.S. News & World Report and Chairman and Publisher of the New York Daily News. He serves as a trustee of Memorial Sloan-Kettering Cancer Center and he is a member of the Bank of America Global Wealth & Investment Management Committee, the Council on Foreign Relations, the Washington Institute for Near East Studies, the CUNY Graduate School of Journalism, the International Institute of Strategic Studies and the Bipartisan Policy Center. He is also Vice Chair and Treasurer of the International Peace Institute. Mr. Zuckerman is a sponsor of the Kennedy School of Government at Harvard University. He is a former Associate Professor of City and Regional Planning at the Harvard Graduate School of Design, a former lecturer of City and Regional Planning at Yale University, a past president of the Board of Trustees of the Dana Farber Cancer Institute in Boston, a former Chairman of the Principal’s International Advisory Board of McGill University and the Conference of Presidents of Major American Jewish Organizations, a former trustee of New York University and the Institute for Advanced Studies at Princeton and served as President of the America-Israel Friendship League. Mr. Zuckerman was awarded the Commandeur De L’Ordre des Arts et des Lettres by the government of France, the Lifetime Achievement Award from Guild Hall, the Gold Medal from the American Institute of Architecture in New York, the Sy Syms Humanitarian award from Yeshiva University and a Queen Elizabeth II Diamond Jubilee Medal from the Canadian government. Mr. Zuckerman is a graduate of McGill University in Montreal where he received an undergraduate degree with first class honors in 1957 and a degree in law in 1961. He received an MBA with distinction from the Wharton School, University of Pennsylvania in 1961 and an LLM from Harvard University in 1962. He has also received seven honorary degrees. He is 7851 years old.
BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 2325
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The table below shows the amount of common stock of Boston Properties, Inc. and units of partnership interest in our Operating Partnership beneficially owned as of February 1, 20162018 by:
On February 1, 2016,2018, there were:
(1) |
(2) |
(3) |
(4) |
24 BOSTON PROPERTIES, INC. |2016 Proxy Statement
All references in this proxy statement to LTIP units include long term incentive units of partnership interest in the Operating Partnership issued in the form of 2012 OPP awards and exclude LTIP units issued in the form ofpursuant to 2015 MYLTIP awards.awards, 2016 MYLTIP awards and 2017 MYLTIP awards because their three-year performance periods had not ended by February 1, 2018. LTIP units issued in the form ofpursuant to 2015 MYLTIP awards, 2016 MYLTIP awards and 2017 MYLTIP awards are collectively referred to herein as “Performance Awards.” None of our directors or NEOs beneficially owns preferred units or shares of our preferred stock.
Common Stock | Common Stock and Units | |||||||||||||||
Name and Address of Beneficial Owner* | Number of Shares Beneficially Owned(1) | Percent of Common | Number of Shares and Units Beneficially Owned(1) | Percent of Common Stock and Units(3) | ||||||||||||
Directors, Nominees for Director and Named Executive Officers | ||||||||||||||||
Mortimer B. Zuckerman(4) | 925,221 | ** | 9,229,685 | 5.38% | ||||||||||||
Bruce W. Duncan | — | ** | — | ** | ||||||||||||
Karen E. Dykstra | — | ** | — | ** | ||||||||||||
Carol B. Einiger(5) | 14,212 | ** | 17,222 | ** | ||||||||||||
Jacob A. Frenkel(6) | — | ** | 5,382 | ** | ||||||||||||
Joel I. Klein(7) | 3,311 | ** | 5,411 | ** | ||||||||||||
Douglas T. Linde(8) | 274,277 | ** | 382,023 | ** | ||||||||||||
Matthew J. Lustig(9) | 3,645 | ** | 8,603 | ** | ||||||||||||
Alan J. Patricof(10) | 33,168 | ** | 36,178 | ** | ||||||||||||
Ivan G. Seidenberg(11) | 10,247 | ** | 10,247 | ** | ||||||||||||
Owen D. Thomas(12) | 49,828 | ** | 104,368 | ** | ||||||||||||
Martin Turchin(13) | 24,749 | ** | 26,253 | ** | ||||||||||||
David A. Twardock(14) | 26,796 | ** | 26,796 | ** | ||||||||||||
Raymond A. Ritchey(15) | 96,802 | ** | 442,114 | ** | ||||||||||||
Michael E. LaBelle(16) | 19,277 | ** | 74,066 | ** | ||||||||||||
Bryan J. Koop(17) | 35,126 | ** | 76,413 | ** | ||||||||||||
All directors and executive officers as a group (21 persons)(18) | 1,599,693 | 1.04% | 10,597,541 | 6.17% | ||||||||||||
5% Holders | ||||||||||||||||
The Vanguard Group(19) | 20,519,791 | 13.36% | 20,519,791 | 11.96% | ||||||||||||
BlackRock, Inc.(20) | 13,952,089 | 9.08% | 13,952,089 | 8.14% | ||||||||||||
Vanguard Specialized Funds – Vanguard REIT Index Fund(21) | 11,059,332 | 7.20% | 11,059,332 | 6.45% | ||||||||||||
State Street Corporation(22) | 8,830,494 | 5.75% | 8,830,494 | 5.15% | ||||||||||||
FMR LLC(23) Abigail P. Johnson | 8,746,215 | 5.70% | 8,746,215 | 5.10% |
26 BOSTON PROPERTIES, INC. |2018 Proxy Statement
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
Common Stock | Common Stock and Units | |||||||||||||||
Name and Address of Beneficial Owner* | Number of Shares Beneficially Owned(1) | Percent of Common Stock(2) | Number of Shares and Units Beneficially Owned(1) | Percent of Common Stock and Units(3) | ||||||||||||
Directors, Nominees for Director and Named Executive Officers | ||||||||||||||||
Kelly A. Ayotte | — | ** | — | ** | ||||||||||||
Bruce W. Duncan(4) | — | ** | 2,063 | ** | ||||||||||||
Karen E. Dykstra(5) | 3,477 | ** | 4,002 | ** | ||||||||||||
Carol B. Einiger(6) | 16,563 | ** | 21,636 | ** | ||||||||||||
Jacob A. Frenkel(7) | 1,013 | ** | 7,445 | ** | ||||||||||||
Joel I. Klein(8) | 4,068 | ** | 8,231 | ** | ||||||||||||
Douglas T. Linde(9) | 289,287 | ** | 428,612 | ** | ||||||||||||
Matthew J. Lustig(10) | 5,116 | ** | 12,137 | ** | ||||||||||||
Alan J. Patricof(11) | 36,268 | ** | 41,341 | ** | ||||||||||||
Owen D. Thomas(12) | 63,399 | ** | 171,280 | ** | ||||||||||||
Martin Turchin(13) | 25,622 | ** | 27,633 | ** | ||||||||||||
David A. Twardock(14) | 30,746 | ** | 30,746 | ** | ||||||||||||
Raymond A. Ritchey(15) | 96,802 | ** | 415,256 | ** | ||||||||||||
Michael E. LaBelle(16) | 26,452 | ** | 96,943 | ** | ||||||||||||
Bryan J. Koop(17) | 21,535 | ** | 80,837 | ** | ||||||||||||
All directors and executive officers as a group (19 persons)(18) | 698,442 | ** | 1,512,469 | ** | ||||||||||||
5% Holders | ||||||||||||||||
The Vanguard Group(19) | 22,607,980 | 14.65% | 22,607,980 | 13.14% | ||||||||||||
BlackRock, Inc.(20) | 15,489,489 | 10.04% | 15,489,489 | 9.00% | ||||||||||||
Vanguard Specialized Funds – Vanguard REIT Index Fund(21) | 10,390,045 | 6.73% | 10,390,045 | 6.04% | ||||||||||||
State Street Corporation(22) | 8,652,221 | 5.61% | 8,652,221 | 5.03% | ||||||||||||
FMR LLC(23) Abigail P. Johnson | 8,393,936 | 5.44% | 8,393,936 | 4.88% | ||||||||||||
Norges Bank (The Central Bank of Norway)(24) | 8,153,590 | 5.28% | 8,153,590 | 4.74% |
* | Unless otherwise indicated, the address is c/o Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, |
** | Less than 1%. |
(1) | The number of shares of common stock “beneficially owned” by each |
BOSTON PROPERTIES, INC. |2016 Proxy Statement 25
shares included in the “Number of Shares Beneficially Owned” column plus the number of shares of common stock for which common units and LTIP units may be redeemed (assuming, in the case of LTIP units, that they have first been converted into common units). Pursuant to the limited partnership agreement of the Operating Partnership, the holders of the common units and LTIP units (assuming conversion in full into |
BOSTON PROPERTIES, INC. |2018 Proxy Statement 27
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
common units, as applicable) have the right to redeem such units for cash or, at our option, shares of common stock, subject to certain conditions. |
(2) | The total number of shares outstanding used in calculating this percentage assumes (a) the exercise of all options to acquire shares of common stock that are exercisable on or within 60 days after February 1, |
(3) | The total number of shares outstanding used in calculating this percentage assumes (a) that all common units and LTIP units are presented (assuming conversion in full into common units, if applicable) to the Operating Partnership for redemption and are acquired by Boston Properties for shares of common stock, (b) does not separately include outstanding common units held by Boston Properties, as these common units are already reflected in the denominator by the inclusion of all outstanding shares of common stock, (c) the exercise of all options to acquire shares of common stock that are exercisable on or within 60 days after February 1, |
(4) | Represents 2,063 LTIP units (of which 1,050 LTIP units are subject to vesting). |
(5) | Includes |
(6) |
Represents |
(7) | Represents 1,013 shares of common stock. Also includes, only under the “Number of Shares and Units Beneficially Owned” column, 6,432 LTIP units (of which 1,050 LTIP units are subject to vesting). |
(8) | Represents 4,068 deferred stock units. Also includes, only under the “Number of Shares and Units Beneficially Owned” column, 4,163 LTIP units (of which 1,050 LTIP units are subject to vesting). |
(9) | Includes |
Represents |
Represents |
(12) | Includes 9,117 shares of common stock held directly and |
26 BOSTON PROPERTIES, INC. |2016 Proxy Statement
(13) | Includes |
(14) | Includes |
(15) | Represents 96,802 shares of common stock underlying exercisable stock options. |
28 BOSTON PROPERTIES, INC. |2018 Proxy Statement
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
trustee, and |
(16) | Includes |
(17) | Includes |
(18) | Includes an aggregate of |
(19) | Information regarding The Vanguard Group (“Vanguard”) is based solely on a Schedule 13G/A filed by Vanguard with the SEC on February |
(20) | Information regarding BlackRock, Inc. (“BlackRock”) is based solely on a Schedule 13G/A filed by BlackRock with the SEC on |
(21) | Information regarding Vanguard Specialized Funds – Vanguard REIT Index Fund (“Vanguard REIT”) is based solely on a Schedule 13G/A filed by Vanguard REIT with the SEC on February |
(22) | Information regarding State Street Corporation (“State Street”) is based solely on a Schedule 13G filed by State Street with the SEC on February |
(23) | Information regarding FMR LLC and Abigail P. Johnson is based solely on a Schedule 13G/A filed jointly by FMR LLC and Abigail P. Johnson with the SEC on February |
BOSTON PROPERTIES, INC. |2016 Proxy Statement 27
(24) | Information regarding Norges Bank (The Central Bank of Norway) (“Norges Bank”) is based solely on a Schedule 13G filed by Norges Bank with the SEC on January 5, 2018. Norges Bank’s address is Bankplassen 2, PO Box 1179 Sentrum, NO 0107 Oslo, Norway. The Schedule 13G indicates that Norges Bank has sole voting and dispositive power with respect to all of the shares of common stock. |
SectionSECTION 16(a) Beneficial Ownership Reporting ComplianceBENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the executive officers and directors of Boston Properties, and persons who own more than ten percent of a registered class of Boston Properties’ equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish Boston Properties with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us and written representations that no other reports were required during the fiscal year ended December 31, 2015,2017, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than ten percent beneficial owners were timely satisfied.
28BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 29
COMPENSATION DISCUSSION AND ANALYSIS
In this “Compensation Discussion and Analysis,” or “CD&A,” when we referreferences to (1) the “Committee” mean the Compensation Committee of the Board of Directors of Boston Properties, Inc. and (2) “executive compensation” we mean primarily the Compensation Committee’s decisions regarding the compensation of our named executive officers (“NEOs”). Our NEOs for 20152017 were Messrs. Thomas, Linde, Ritchey, LaBelle and Koop.
I. | EXECUTIVE SUMMARY |
Communication with StockholdersIntroduction
As we have done in prior years, we engaged in extensive dialogue with representatives of more than 20 stockholders, representing more than 50% of the total number of outstanding shares of our common stock, regarding matters to be voted on at the 2015 annual meeting, including the “Say-on-Pay” proposal. We appreciate hearing and understanding the views of our stockholders and believe it helps the Company better align our executive compensation with general market expectations and the practices of our peers.
We are pleasedone of the largest owners, managers and developers of office properties in the United States, concentrated in Boston, New York, San Francisco, Washington, D.C. and Los Angeles. We have a demonstrated history of creating long-term shareholder value in large part because we take on complex, technically challenging development projects, leveraging the skills of our management team to successfully develop and reposition properties that other organizations may not have the capacity or resources to pursue. Some of our most successful development projects have taken longer than a decade to acquire, construct andlease-up to stabilization. In addition, we seek to sign long-term leases with creditworthy tenants, and we generally seek long-term fixed-rate financing in order to lock in our interest expense and proactively manage our debt maturities. We recognize that our business is thus long-term in nature, and our success requires that we receivedmake business decisions with a focus on our long-term objectives, even if they have short-term negative implications.
As a result, our Committee strives to make compensation decisions that reward management for executing our strategy and promoting the best interests of the Company and its stockholders over the long term. Our market focus and strategy for creating long-term value for investors differ from many of our competitors in the office REIT segment, which makes direct comparisons in performance and compensation difficult. We therefore do not rely on a strict formulaic framework for measuring performance against short-term goals to determine compensation awards for a particular year, but instead aim for a balanced quantitative and qualitative approach, as outlined below, that our Committee believes is appropriate to ensure our continued success.
Process for Determining Executive Compensation
Following strong stockholder support in 2017 on our“Say-on-Pay” advisory vote, and the 2015 “Say-on-Pay” vote,overall positive feedback we received in our communications with more than 86% ofinvestors throughout the votes cast in favor of the resolution. The Compensationyear, our Committee views these results as an indication of our stockholders’ strong support of our compensation programs and validation of the Compensation Committee’s responsivenesscontinues to investor concerns. Accordingly, the Compensation Committee maintaineduse the same principal elements of ourgeneral process when setting executive compensation, programs for setting 2015 compensation.which includes:
Alignment of Pay with Performance
• | using the median (50th percentile) of a peer group of 16 REITs that are constituents of the S&P 500 Index (the “Benchmarking Peer Group”) as the beginning reference point and as an indicator of competitive market trends; |
At
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I. EXECUTIVE SUMMARY
Like other REITs that are included infurther align management’s objectives with the S&P 500 Index, in lightinterests of our size relative to four of the five REITs that we consider direct competitors, we look to a larger, more diverse peer group of publicly traded real estate companies for benchmarking executive compensation. The sixteen companies in this peer group are comparable to us in terms of total capitalization, which is the most relevant indicator of the complexity of managing assets, capital, operations and talent for a company like ours, irrespective of property focus. See “– Benchmarking Peer Group and Compensation Advisor’s Assessment” beginning on page 44. We use the median (50th percentile) of this larger peer group as the beginning reference point, and the Compensation Committee then adjusts executive pay based on corporate and individual performance relative to the pre-determined goals.
We continue to believe that combining a quantitative and a qualitative assessment of performance against pre-established goals allows the Compensation Committee to strike the appropriate balance in measuring performance, by giving proper emphasis to objective results while also considering subjective factors, if and when applicable. We do not rely on a strict formulaic framework for measuring performance against short-term goals to determine compensation awards for a particular year. However, once total compensation is determined, the structure of our long-term incentive program utilizes a formulaic system to determine how much performance-based equity is ultimately earned at the conclusion of a forward looking three-year measurement period.
The Compensation Committee believes that this performance-based executive compensation program,combining a quantitative and a qualitative assessment againstpre-established goals allows it to:
• | evaluate management’s performance annually while taking into account our focus on value creation over the long-term and the difficulty of making comparisons to peers with shorter-term objectives (see “–III. Assessing Performance – Focus on Long-Term Value Creation”); |
Investor Outreach and Results of variable pay2017“Say-on-Pay” Advisory Vote
The following is a snapshot of our investor outreach and “at-risk” equity awards linkedthe results of our recentSay-on-Pay votes:
In addition to our usual investor outreach, our Board invitedbuy-side and sell-side representatives to make presentations to our Board on the Company’s future total stockholder return (“TSR”),REIT capital markets, investing in REITs generally, and fund flows, as described below, is well-aligned withwell as to provide commentary on our stockholders’ interestsCompany and in line with peer companies.
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COMPENSATION DISCUSSION AND ANALYSIS
2017 Performance Highlights
In addition to management meeting or exceeding the set of corporate goals established at the beginning of the year, as detailed in “Variable Pay Mix– III. Assessing Performance –2017 Corporate Goals” below, highlights of our 2017 performance include the following:
Ø | completed approximately 6.4 million square feet of leasing, including 2.5 million square feet for development properties; | |||
Ø | commenced development of six projects in 2017 totaling approximately 2.7 million square feet and committed to three additional development projects for an aggregate of 1.7 million square feet; | |||
Ø | increased diluted FFO per share by 3.2% from $6.03 to $6.22, which includes the unbudgeted loss from early extinguishment of debt of approximately $13.9 million, or $0.08 per share, resulting from the early redemption of our 3.700% unsecured senior notes due 2018; excluding this loss, our FFO per share increased by 4.5%; | |||
Ø | increased our regular quarterly dividend by $0.05 per share, or 6.7%, in the fourth quarter; | |||
Ø | reduced our overall borrowing costs, including an approximately $38.4 million decrease in interest expense, and extended our debt maturities by refinancing $850 million of 3.700% unsecured senior notes that were scheduled to mature in November 2018 with the proceeds from the issuance of $850 million of 3.200% unsecured senior notes maturing in January 2025; | |||
Ø | generated a total shareholder return (“TSR”) of 5.9% compared to 5.3% for the Cohen & Steers Realty Majors Index (“C&S Realty Index”) and 3.2% for the FTSE NAREIT Office Index (the “NAREIT Office Index”) (as adjusted); and | |||
Ø | ranked #2 among U.S. Office REITs in the 2017 Global Real Estate Sustainability Benchmark assessment and in the top 5% of global participants (with 88 out of 100 overall points) earning a “Green Star” recognition for the sixth consecutive year. |
Highlights of 2017 Compensation Decisions
The vast majorityCommittee concluded that the Company, led by its management team, had a strong year in 2017, noting, in particular, our achievements in leasing, execution of the key NOI drivers, development economics and development starts. (See “–III. Assessing Performance– 2017 Corporate Goals.”) In light of the objective and subjective assessments of performance relative to the corporate goals, performance against our executiveOffice Peers and individual performance, and reported and realized NEO compensation, is variable pay, in the form of long-term incentive (“LTI”) equity awards and annual cash bonuses. For 2015,Committee determined to award 2017 total compensation for the variable component was 92.3% for our CEO and 88.1% for all other NEOs, as a group. This mix allows the Compensation Committee to strongly motivate and reward good performance and penalize poor performance.
Majoritygroup, at a level that reflects an increase of Compensation in “At-Risk” Performance-Based Equity Awards
In 2014,approximately 11% over 2016 total compensation, which based on feedbackadvice from investors, we made significant changesFPL, the Committee expects will result in the mixtotal compensation awarded to our NEOs ranking slightly above the median of our Benchmarking Peer Group.
As part of its benchmarking review, FPL analyzed the allocation between performance-based and time-based LTIs and, for 2017, the Committee determined that it would be advisable to migrate over time to
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I. EXECUTIVE SUMMARY
an allocation of LTI equity awards for the NEOs that is closer to our NEOs to build an even stronger pay-for-performance alignment with our stockholders by shifting significantly towards “at-risk,”the 50% - 50% mix of performance-based and time-based LTI equity awards that is widely accepted in the ultimate value of which dependsmarket and prevalent among our peers. The precise allocation will vary among different NEOs and from year to year based on the Company’s future TSR. For 2015, the ratios of performance-based equity awards to time-based equity awards were (1) 75.0% performance-based and 25.0% time-based for our CEO and (2) approximately 66.4% performance-based and 33.6% time-based for all other NEOs as a group. See “circumstances. (See “––V. Alignment of Pay with Performance” beginning on page 42.
For performance-based equity awards the Compensation Committee relies on a rigorous program that uses relative TSR over three-year measurement periods as the main metric. This component of executive compensation aligns a significant portion of what our management actually earns over time with the Company’s multi-year TSR performance compared to two different indices, the Cohen & Steers Realty Majors Index (“C&S Realty Index”) (50%) and the FTSE NAREIT Office Index (the “NAREIT Office Index”) (as adjusted, 50%)49). See “– Total Stockholder Return Drives Actual Earned Pay” beginning on page 37.
2015 Executive Compensation Decisions
The Compensation Committee concluded that the management team performed very well against its 2015 goals, with particular emphasis on the following:following are highlights of 2017 compensation:
See “– Assessing our Performance – 2015 Corporate Goals” beginning on page 33 for a detailed listing and assessment of performance with respect to each goal.
Based on this assessment, the Compensation Committee decided that 2015 total compensation for the NEOs, as a group, should be set at a level that falls in the second quartile of the peer group we use for benchmarking executive compensation. For each NEO, the Compensation Committee approved the appropriate level and mix of pay based on his role, responsibilities and performance.
Separately, for 2015, the Compensation Committee took note of evolving roles within our senior executive team following the successful completion of a multi-year succession plan, particularly with respect to Messrs. Thomas and LaBelle, as discussed in detail under “– Alignment of Pay with Performance” beginning on page 42.
2017 Pay Highlights | ||||||
CEO: | ||||||
0% | 92% | 71% | 53% | |||
Change in base salary between 2016 - 2018 | Amount of pay that is variable and not guaranteed | Amount paid in equity with remaining 29% paid in cash | Amount ofTSR-based performance equity | |||
All NEOs (as a group): | ||||||
0% | 90% | 64% | 50% | |||
Change in base salaries between 2016 - 2018 | Amount of pay that is variable and not guaranteed | Amount paid in equity with remaining 36% paid in cash | Amount ofTSR-based performance equity |
30BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 33
COMPENSATION DISCUSSION AND ANALYSIS
II. | COMPENSATION GOVERNANCE |
Key FeaturesThe objectives of our Executive Compensation
We believe that our executive compensation program appropriately attracts, motivatesare to attract, retain and helps retainreward executives who canhave the motivation, experience and skills to lead the Company and continue our long-term track record of profitability, growth and TSR. The following are the key features of our executive compensation program:
WHAT WE DO | ||
We use the median | ||
The vast majority of total compensation (for 2017, more than 90%) is | ||
We align our | ||
We enhance executive officer retention with time-based, multi-year vesting schedules for equity incentive awards granted for prior-year performance. | ||
We have “double-trigger” vesting for time-based equity incentive awards following a change of control. | ||
We have a clawback policy that allows for the recovery of previously paid incentive compensation in the event of a financial restatement. | ||
We have stock ownership guidelines for our executives and directors. | ||
We engage an independent compensation consultant to advise the |
WHAT WE DON’T DO | ||
Ð | We do not directly target compensation above the market median (50th percentile) of | |
Ð | We do not provide our CEO, and, since 2014, we have not and will not in the future provide any new executive with tax gross-ups with respect to payments made in connection with a change of control. | |
Ð | We do not allow hedging or pledging of Company securities. | |
Ð | We do not encourage unnecessary or excessive risk taking as a result of our compensation policies; incentive compensation is not based on a single performance metric and we do not have guaranteed minimum payouts. | |
Ð | We do not allow for repricing of stock options. | |
Ð | We do not rely on a strict formulaic framework for measuring annual performance against goals to determine compensation. |
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III. | ASSESSING PERFORMANCE |
Business Strategy
The core elements of our business strategy are:
Focus on Long-Term Value Creation
Execution of our strategy spans multiple markets with different economic drivers over long periods. Development projects, which are particularly important to our strategy, take time to identify, acquire, permit, construct, lease and stabilize. This strategy of creating value for investors is multifaceted and differs from that of many of our competitors in the office REIT segment, which makes direct comparisons difficult and underlies our less formulaic approach to assessing performance, as contrasted with a purely quantitative “actual versus target” framework.
We manage every aspect of our business with a focus on the long-term, including, among others, developments, redevelopments, leasing, balance sheet management and our employees. To cite one recent example among many, we opened and commenced recognizing revenue at our Salesforce Tower development project in San Francisco in the fourth quarter of 2017. Salesforce Tower is an approximately 1,400,000 square foot office skyscraper in the South of Market district of downtown San Francisco, and as of December 31, 2017, it was 97% leased. Standing 1,070 feet high, it is now the tallest building in the San Francisco skyline and, according to the Council on Tall Buildings, the second-tallest building west of the Mississippi River. Our involvement in the project began with the formation of a joint venture with Hines in 2012 at which time we acquired a 50% interest in the project, and then in 2013 we acquired most of Hines’ remaining interest to become 95% owners of the project. The construction of the building was challenging due in large part to its proximity to the Transbay Transit Center and its location on a land fill near San Francisco’s original waterfront, requiring an advanced design modeled to withstand the strongest earthquakes. Salesforce Tower also features10-feet high clear glass windows, 100% fresh outside air indoors, 5th floor access to a5.4-acre Salesforce Park to be built and the largeston-site water recycling system in a commercial high-rise building in the United States. We expect the income from Salesforce Tower to have a significant impact on our results of
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COMPENSATION DISCUSSION AND ANALYSIS
Assessing Our PerformanceIII. ASSESSING PERFORMANCE
The core elements
operations in 2019, which will be seven years since our initial involvement (Hines has been involved in the project since 2007), and we expect it to generate acash-on-cash yield of more than 7% upon stabilization. Other successful development projects have taken even longer. For example, it took more than 20 years to acquire, design, permit, construct andlease-up to stabilization 888 Boylston Street in Boston.
Redevelopment and repositioning of existing properties is also an important component of maintaining and enhancing the overall quality and long-term value of our strategy are:
Because executionportfolio. However, redevelopment and repositioning activity often has a short-term dilutive impact. When we remove from service all or a portion of a property for redevelopment or repositioning, we typically recognize less rental revenue while the space is vacant. For example, our repositioning activity at 159 East 53rd Street in New York City required that we terminate the leases of some tenants, which required payments to some of the tenants. Among other things, this strategy spans multiple markets with different economic drivers over multiple years, particularly for development projects that take time for permitting, constructioncan have a material negative impact on our same property results. However, we absorb the short-term negative impact because we believe investing in our assets to maintain and stabilization,enhance the quality of our portfolio is in the best interest of shareholders. In addition to maintaining a full-service real estate platform and providing superior service to our tenants, our focus on long-term performance also involves management of liquidity, leverage ratios, interest-rate risk, capital commitments and debt maturities to reduce the impact of capital market volatility and because roles among management evolve over time,provide us with the flexibility to take advantage of opportunities as they arise.
For all these reasons, we look at performance not only for the latest year and on a year-over-year basis, but also more broadly than inwith a year-over-year framework,view to managing compensation to appropriately incentivize, compensate and manage individual compensation accordingly.retain our executives.
The CompensationDirect Peer Competitors
In addition to assessing our performance against ourpre-established internal goals, the Committee also reviews our performance against pre-established corporate goals, but also,the same metrics for the five Office Peers listed below (with their total capitalizations as we began doing last year, against a backdrop of performance for five office REITs that we consider direct competitors, whichDecember 31, 2017 shown in parentheses) because they operate in markets and/or have assets similar to ours:ours. Boston Properties’ total capitalization as of the same date was $34.5 billion (see “– VII. Benchmarking Peer Group and Compensation Advisor’s Role”).
Performance Metrics
We focus on key drivers of value creation likesuch as leasing, development activity, new investments, growth in FFO per share, same property NOI growth, leasing/occupancy, acquisitions/dispositions and balance sheet management. While the Compensation Committee is aware that different companies may calculate relevant performance metrics differently, the Compensation Committee finds it useful to compare our performance to what these other office REITs disclose for similar measures, even though information is not always directly comparable among companies.
The Committee believes that internal and external data are important tools in the design and implementation of optimal compensation programs and that benchmarking against peers provides the Committee with a market check of its compensation awards. Different sections of this CD&A discuss in
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III. ASSESSING PERFORMANCE
detail the data on which the Committee relied to make sure that different elements of compensation align with our performance. In addition, the Committee utilizes its collective experiences and judgment when establishing the appropriate types and amounts of compensation.
Finally, because management roles change over time, both for individuals and within the executive team as a whole, the Committee considers each individual’s personal contributions to our organization, as well as his skill sets, qualifications and experience. We value and seek to reward performance that develops talent at all levels of our organization, promotes our culture of excellence, enhances our reputation and extends our track record of profitability and growth. For example, in 2017, the Committee took note of Mr. Thomas’ being recognized in 2017 as the #1 CEO in the REIT sector by sell-side analysts in an annual survey conducted by2015Institutional Investor, and continued to bring his total compensation closer to the median for CEOs within the Benchmarking Peer Group. The Committee also recognized Mr. LaBelle’s continued effectiveness in managing our balance sheet and his being recognized in 2017 for the third year in a row as the #1 CFO overall in the REIT sector, and #2 bybuy-side analysts and sell-side analysts, in an annual survey conducted byInstitutional Investor.
2017 Corporate Goals
In early 2015,2017, the Compensation Committee established for management a rigorous set of rigorous strategic, operational, capital and management goals.goals that the Committee believed challenged management to perform for our investors. Whenever possible, the Compensation Committee bases its overall assessment as to whether a goal was “exceeded,” “met” or “not met” on both quantitative and qualitative factors. We believe that doing so allows the Compensation Committee to strike the right balance, by giving proper emphasis to objective results while also considering subjective factors, if and when applicable. Wefactors. For the reasons discussed under “–Assessing Performance” above, we do not rely on a strict formulaic framework for measuring annual performance against goals to determine compensation for a variety of reasons, including:compensation. The Committee believes that:
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COMPENSATION DISCUSSION AND ANALYSIS
III. ASSESSING PERFORMANCE
The summary table below lists each goalthe principal operational, capital and management goals for 2017 and the Compensation Committee’s overall assessment of management’s performance with respect to each. Although the goal, followed by a detailed analysis ofCommittee did not ascribe quantitative weights to the various goals, the goals in each goal:category are listed such that those deemed most important are listed first.
Overall Assessment | ||
| ||
Leasing | Exceeded | |
| Met | |
Growth in Diluted FFO per Share | Met | |
Growth in Same Property NOI | Met | |
Growth in Same Property NOI – Cash | Met | |
General and Administrative Expense | Met | |
Capital Goals: | ||
Development Economics | Met | |
Development Starts | Exceeded | |
| Met | |
| Met | |
Balance Sheet Management/Financings | Exceeded | |
| Not Met | |
| ||
| Not Met | |
| Met | |
Management Goals: | ||
| Exceeded | |
|
Operational Goals
G&A Expense
Capital Expenditures
Non-Office Revenue
Ø | Leasing |
Why it is important: We generate revenue and cash primarily by leasing our operating and development properties. When making leasing decisions, we consider, among other things, the creditworthiness of the tenant, the term 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 expenses, real estate taxes, vacancy and expected future demand for the space, the impact of any expansion rights and general economic factors.
Quantitative Assessment:Following our successful leasing activity in 2016, we set an even more aggressive leasing goal for 2017 of 5.7 million square feet (of which 3.7 million square feet were in ourin-service portfolio and 2.0 million square feet were in our development properties). We exceeded the goal by leasing a total of 6.4 million square feet, or 14.5% of the total square footage in ourin-service portfolio. A total of 3.9 million square feet was in ourin-service portfolio and 2.5 million square feet was in our development portfolio. Both the total number of square feet leased and the total as a percentage of ourin-service portfolio were greater than all five of our Office Peers.
We also met our goals of achieving 90% - 91% occupancy for ourin-service portfolio and proactively managing future lease rollover. We accomplished this goal despite our decision to take some properties out of service for redevelopment, which had a short-term dilutive impact on our
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III. ASSESSING PERFORMANCE
in-service portfolio occupancy rate and rental revenue, but is consistent with our long-term strategy. Our occupancy as of December 31, 2017 was less than four of the five Office Peers. We also completed a significant amount of early lease renewals and extensions, most notably in New York City.
Qualitative Assessment: Following the record amount of leasing we achieved in 2016, we set an aggressive leasing goal for 2017, which management not only achieved, but surpassed by an additional 0.7 million square feet.
Overall Assessment: Goal exceeded.
Ø |
Quantitative AssessmentWhy it is important::Our stated goal wascurrent strategy to start fourdrive future growth is to invest primarily in higher yielding new developments with significantpre-leasing commitments and in redevelopment opportunities, rather than lower yielding acquisitions of stabilized assets for which demand and pricing remain aggressive. Consistent with this strategy, beginning in 2015 we removed all or portions of some of our properties from service for redevelopment or repositioning, despite the near-term dilutive impact. In light of the significant amount of development and redevelopment projects, totaling approximately 1,334,000 square feet and a development budgetthe loss of occupancy and the dilutive impact of removing properties from service, management outlined for investors our plan to achieve incremental growth of approximately $486 million. We surpassed this$352 million (including $242 million from development properties and $110 million from other key assets) in our share of annualized net operating income by 2020. The Key NOI Drivers goal is the manner by starting six projects totaling approximately 1,921,000 square feet and a development budget of approximately $755 million.which the Committee assesses progress against the “bridge” in the years leading up to 2020.
Our 2015 development starts represented 3.4% of gross asset value, a larger percentage than four out ofQuantitative Assessment: In addition to the five office REITs thatoverall leasing goal discussed above, we consider our direct competitors.
Qualitative Assessment:Our development pipeline consists ofset specific goals to lease an aggregate of approximately 4.51.2 million square feet includingof space at eight office projects, which are 58% pre-leased,assets and two residential projects. We also have one redevelopment property under construction totaling 73,000 square feet and a development budget of $24.5 million.renew our lease with Aramis (Estée Lauder) at 767 Fifth Avenue (the General Motors Building) in 2017. As of December 31, 2015, our $1.5 billion in budgeted development costs remaining to be funded were2017, we had signed leases for approximately equal to our cash balance. In addition, we have nine development sites with entitlements for a total of approximately 5.11.5 million square feet, with another 29,000 square feet under letters of intent, and signed a lease renewal and subsequent lease expansion with Aramis for an aggregate of 300,000 square feet. In addition, as well as various additionalof December 31, 2017, we hadpre-leased 81% of the space in the development opportunitiesprojects underlying our goal, representing an aggregate of approximately 6.2 million square feet.
Qualitative Assessment: In light of the successful leasing progress noted above, the Committee concluded that are not yet entitled, that we expect to drive future growth.management successfully executed our strategy in 2017 and met this goal.
Overall Assessment: Goal met.
Ø | Growth in Diluted FFO per Share |
Overall AssessmentWhy it is important:: Goal exceeded. FFO is anon-GAAP
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COMPENSATION DISCUSSION AND ANALYSIS
Quantitative Assessment: Our stated goal was to deliver six development projects totaling approximately 968,000 square feet and a development budget of approximately $638 million. For purposes of this goal, we consider a project to be delivered upon stabilization, which is the earlier of 85% occupancy or the cessation of capitalization of interest. We delivered five projects totaling approximately 602,000 square feet and a development budget of approximately $269.5 million; these properties were 78% leased as of December 31, 2015. Upon fully stabilized leasing, we expect our development projects to deliver a weighted-average unleveraged cash-on-cash return of approximately 7.8%.
Our 2015 development deliveries represented 1.2% of gross asset value, a larger percentage than four out of the five office REITs that we consider our direct competitors.
Qualitative Assessment: In addition to the five projects delivered during the year, a sixth project, 601 Massachusetts Avenue, a 478,000 square foot office building in Washington, D.C., was (1) partially placed in-service in the third quarter of 2015, (2) 81% leased as of December 31, 2015 and (3) 90% leased as of January 29, 2016.
As discussed above, we expect these projects to deliver a weighted-average unleveraged cash-on-cash return of approximately 7.8%, which is significantly greater than our target return for office developments of 7.0%.
We continued to execute our robust development strategy. Between 2011 and 2015 we delivered $3.1 billion of new development and as of December 31, 2015, we had a development pipeline of approximately $2.6 billion, compared to $2.5 billion at the beginning of 2014. This evidences the successful replenishment of our growth pipeline after delivering over $1.7 billion of new development in 2014 and 2015 alone.
Overall Assessment: Goal met. Given management’s progress in leasing 601 Massachusetts Avenue prior to year-end 2015, the leasing status of that project as of January 29, 2016, and the better-than-target projected yields from our developments overall, the Compensation Committee concluded that this overall assessment was appropriate.III. ASSESSING PERFORMANCE
|
Quantitative Assessment:: Our stated goal was to exceed the midpoint of our diluted FFO guidance range of $5.28$6.05 to $5.43, which was set based on assumptions underlying our 2015 earnings guidance.$6.23 (excluding the impact of any acquisitions and dispositions). This target range equated to 0.4%1.2% to 3.2%4.2% projected growth over 2014. 2016.
Our actual 20152017 diluted FFO per share was $5.36, but after adjusting for$6.22, which includes the impactunbudgeted loss on FFOextinguishment of itemsdebt of $0.08 per share resulting from the early redemption in December 2017 of $850 million of 3.700% unsecured senior notes that were not contemplated atscheduled to mature in November 2018. Excluding the time we established the goal,loss, our diluted FFO per share would have been $5.49,$6.30, or 2.4%$0.07 greater than the goal and $0.06 greater than the tophigh end of the targetguidance range set at the beginning of the year.
Our 3.2% year-over-year percentage growth in diluted FFO per share (as adjusted) was above twogreater than three of the four office REITs that we consider our direct competitors; the fifth went public in 2015 and did not report this data.five Office Peers. (Refer to pages 96 through 100 of our Annual Report on Form10-K for information relating to the calculation of FFO and diluted FFO.)
Qualitative AssessmentAssessment:: During Management successfully executed our strategy in 2017 and delivered performance that exceeded the year our Board and management completed acquisitions and dispositions and the defeasance of a $640.5 million mortgage loan secured by 100 & 200 Clarendon Street in Boston, Massachusetts, the impacts of which were not factored in the original diluted FFO per share goal. The defeasance alone resulted in a loss from early extinguishment of debt of approximately $22.0 million, or $0.13 per share.
Overall Assessment:: Goal exceeded.
34 BOSTON PROPERTIES, INC. |2016 Proxy Statement
Ø | Growth in Same Property NOI |
Why it is important: Same Property NOI reflects the combined impact of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective on the performance of our Same Property portfolio across fiscal periods which are not immediately apparent from net income.
Quantitative Assessment:Assessment: Our stated goal for year-over-year growth in same property NOI on a GAAP basis, including our share of Same Property NOI from unconsolidated joint ventures, but excluding(excluding termination income,income) was a decrease of 1.0%.2.0% - 3.5% increase. We exceededmet the goal with a decrease of 0.4%.
Our2.5% increase. The growth in same property GAAPour share of Same Property NOI (excluding termination income) was below all four office REITs that we consider our direct competitors that reported 2015 GAAP NOI on a same property basis; the fifth went public in 2015 and did not report this data. (Refer to our Annual Report on Form 10-K for information relating to the calculation of NOI.)
Qualitative Assessment: Our same property GAAP NOI performance in 2015 was primarily the result of faster lease up of vacant space in New York City and the early renewal of several significant leases at higher rental rates at Embarcadero Center in San Francisco, California, that favorably impacted our straight-line rental revenue.
Overall Assessment: Goal exceeded.
Quantitative Assessment: Our stated goal for growth in same property NOI on a cash basis was a 0.2% increase. We had a decline of 1.0%.
Our growth in same property cash NOI was below three of the four office REITs that we consider our direct competitors and that reported 2015 cash NOI on a same property basis; the fifth went public in 2015 and did not report this data. (Refer to our Annual Report on Form 10-K for information relating to the calculation of NOI.)
Qualitative Assessment: Our same property cash NOI performance in 2015 was materially impacted bygreater than two transactions that we pursued proactively and executed with a view to enhancing our long-term growth despite a short-term trade-off in terms of same property cash NOI. First, we elected to terminate early our lease with FAO Schwarz at 767 Fifth Avenue in New York City to accommodate an expansion by an existing tenant and ultimately accelerate our ability to achieve a positive mark-to-market on the rent for this space. This termination reduced our same property cash NOI by 0.6% in 2015. Second, we amended our ground lease with the Massachusetts Department of Transportation at 100 Clarendon Street in Boston, Massachusetts, to extend the lease from 45 years to 99 years and to obtain the option to purchase certain air rights above and adjacent to the property for future developments in return for payments of approximately $37 million, which are expected to be expended over the next three years with no payments thereafter. In 2015, we paid approximately $5 million under this arrangement, resulting in an approximately 0.4% decline in our same property cash NOI.
Overall Assessment: Goal not met. Although the Compensation Committee gave credit to management for focusing on long-term growth despite the adverse impact of the aforementioned 767 Fifth Avenue and 100 Clarendon Street transactions on same property cash NOI, the Compensation Committee concluded that this overall assessment was appropriate.
Leverage. Our stated goal is to maintain liquidity and leverage ratios within our target operating ranges, so as to be able to fund capital commitments and future opportunities as they arise, and to reduce our average borrowing costs. We improved our balance sheet by reducing our leverage ratios to the lowest levels in recent history. Between December 31, 2014 and December 31, 2015, our adjusted net debt to combined EBITDA ratio decreased from 6.0x to 5.8x and our total adjusted debt to total adjusted market capitalization decreased from 29.0% to 27.6%, while our fixed charge coverage ratio increased from 2.3x in 2014 to 2.4x in 2015. As of year-end, we had lower leverage as a percentage of enterprise value than four of the five office REITs that we consider our direct competitors.Office Peers. (Refer to Appendix A to this proxy statement for reconciliations and other information regarding our adjusted net debt to combined EBITDA ratios asshare of Same Property NOI (excluding termination income) for the fiscal years ended December 31, 20152017 and 2014, respectively).2016, respectively.)
Qualitative Assessment: Management successfully executed our strategy in 2017 and delivered performance that met the goal.
Overall Assessment: Goal met.
Ø | Growth in Same Property NOI – Cash |
Why it is important: Same Property NOI – Cash allows investors to compare the performance of our Same Property portfolio across periods without taking into account the effects of straight-lining rent, fair value lease revenue, straight-lined ground rent expense and certain lease transaction costs that qualify as rent inducements.
Quantitative Assessment: Our goal for year-over-year growth in our share of Same Property NOI (excluding termination income) – Cash was a 2.0% - 4.0% increase. Our year-over-year growth was 1.5%, which was below four of the five Office Peers. (Refer to Appendix A to this proxy statement for reconciliations and other information regarding our share of Same Property NOI (excluding termination income) – Cash for the fiscal years ended December 31, 2017 and 2016, respectively.)
Qualitative Assessment: During 2017, we voluntarily entered into early lease terminations with a number of tenants that effectively resulted in the conversion of all or a portion of the remaining contractual rental revenue to termination income, which we exclude from our calculation of NOI. This shift in rental revenue to termination income resulted in growth that was short of the stated goal. Early lease terminations are not unique events, but we agreed to the terminations because
40 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
III. ASSESSING PERFORMANCE
on a net present value basis, the termination income plus anticipated replacement rental revenue (and, in some cases, any anticipated additional term) was greater than the rental revenue under the leases. The Committee believes these decisions were in the best long-term interests of our investors and thus concluded that management successfully executed our strategy in 2017 and met the goal.
Overall Assessment: Goal met.
Ø | General and Administrative Expense |
Why it is important:To understand our expense base, of which executive compensation is a meaningful line item, our Committee assesses our management of G&A expense by determining its percentage of total revenue.
Quantitative Assessment: Our goal was to manage G&A expense (excluding transaction expenses) to approximately $108 - $114 million. Our actual 2017 G&A expense was approximately $113.7 million (an 8.3% increase from 2016), which represents approximately 4.4% of our total revenue for 2017. We also managed our G&A expense to a smaller percentage of total revenue than all five Office Peers.
Overall Assessment: Goal met.
Capital Goals
Ø | Development Economics |
Why it is important: The success of our development projects and realization of our plans for growth depend on the stabilized unleveraged cash yields we generate.
Quantitative Assessment: One of our goals was to deliver the 888 Boylston Street development project and the Reservoir Place North redevelopment project on or below budget, which was an aggregate of $290 million, producing favorable yields. The actual costs for both projects totaled $290 million. Thecash-on-cash return for 888 Boylston Street was approximately 9.3% on a stabilized basis, exceeding management’s anticipated yield of 8.5%. Reservoir Place North, a 73,000 square foot redevelopment has not yet been leased. Upon stabilization, we expect 888 Boylston Street and Reservoir Place North to deliver a weighted-average, unleveragedcash-on-cash return of approximately 9.1%, which is more than 200 basis points greater than our target return for office developments.
Qualitative Assessment: In executing our strategy, management believes that, in general, the best use of our capital at this time is investing in new development activity and our ability to deliver development projects with unleveraged initial cash yields of approximately 7% is a product of our execution. In this current market, existing leased assets are selling at cap rates in the 4% range, so our development investments have significant projected imbedded value creation and are projected to drive our earnings growth over the next few years. Although Reservoir Place North, a relatively small space, remains unleased, the Committee concluded that management successfully executed our strategy in 2017 with the successful delivery of 888 Boylston Street and management therefore met the goal.
Overall Assessment: Goal met.
Ø | Development Starts |
Why it is important: Development starts are a useful indicator of future external growth, and they help us assess our ability to identify, underwrite and acquire new land parcels and air rights, secure lead tenants, obtain financing and/or joint venture partners, and commence construction of the building.
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COMPENSATION DISCUSSION AND ANALYSIS
Debt MaturitiesQuantitative Assessment:. We remain focused Our goal was to start development at 145 Broadway in Cambridge, Massachusetts, a 475,000 square foot development with a budget of $375 million. In addition to meeting the goal by commencing development at 145 Broadway, we started five other developments in 2017, easily exceeding our goal. Specifically, we commenced development at:
When delivered, we expect these properties will total approximately 2.7 million square feet, which bore interest at a fixed rateis more than five times the goal set for 2017. As of 5.68% per annum and was scheduled to mature on January 6,December 31, 2017, our consolidated debt maturities through the end of 2017 consist of five mortgage/mezzanine loans totaling approximately $2.9 billion (of which our share is approximately $2.3 billion). The defeasance set the table for our successful issuance in January 2016 of $1.0 billion aggregate principal amount of 3.650% senior unsecured notes due 2026. To further reduce our exposure to interest rate risk upon future refinancings, we entered into forward-starting interest rate swap contracts that fix the 10-year swap rate athad a weighted-average of 2.51% on notional amounts aggregating $1.0 billion.94%pre-leased for the four office development projects that commenced. Our development starts have an aggregate development budget (our share) of approximately $1.4 billion and represent approximately 6.1% of gross asset value, both of which are greater than all five Office Peers.
Qualitative Assessment: We expect that development will remain a key component of our strategy. Our development activity remains active with many newpre-leased projects either committed to or under pursuit. Committed to, but not yet commenced developments in the pipeline include 2100 Pennsylvania Avenue in Washington, DC, 17Fifty Presidents Street in Reston, Virginia, and Reston Gateway in Reston, Virginia, together representing 1.7 million square feet and approximately $1.2 billion in investment. As of December 31, 2017, we had approximately 6.2 million square feet under construction and redevelopment, including eight office and retail projects with a development budget (our share) of approximately $2.6 billion, and four residential projects with a development budget of approximately $792 million. In addition, we have a total of approximately 1.7 million square feet in our entitled future development pipeline, and an estimated 10.1 million square feet of future development projects in the entitlement process.
Overall Assessment:: Goal exceeded.
Ø |
Why it is important: Development deliveries measure our ability to execute our development pipeline on time and within budget.
Quantitative Assessment:: We had an aggressive 2015 leasing Our goal of 5.9 million square feet. We leased 5.2 million square feet.
Our 2015 leasing represented 11.0% of our in service portfolio by square footage, a smaller percentage than three out of the five office REITs that we consider our direct competitors, but generally in line with the median of such peers.
Qualitative Assessment: Our leasing performance does not include leases for 425,000was to deliver two development projects totaling approximately 438,000 square feet at 100 Federalwith an aggregate development budget of approximately $309 million, which represents 1.3% of gross asset value. We met the goal by fully placingin-service 888 Boylston Street in Boston, Massachusetts, and 106,000totaling approximately 417,000 square feet at Salesforce Towera total cost of approximately $265 million, and delivering Reservoir Place North, a 73,000 square foot redevelopment in San Francisco, California, that were substantially complete in the fourth quarter but, due to timing considerationsWaltham, Massachusetts at a total cost of the prospective tenants, were not signed until January 2016$25 million, for a total of 490,000 square feet and February 2016, respectively.
Overall Assessment: Goal not met.
Onean aggregate cost of our stated goals was to enhance direct communications with investors. During 2015, management improved analytics leading to an enhanced road show strategy, completed various non-deal roadshows, targeted non-REIT dedicated and underweight dedicated investors, and added a formal guidance page to our earnings package.
Overall Assessment: Goal met.
Quantitative Assessment:$290 million. Our in-service occupancy at the end of 2015 was 91.4%, which was ahead2017 development deliveries met our stated goal of 90.8%.
Our occupancy as of December 31, 2015 was less than three out of the five office REITs that we consider our direct competitors.
Qualitative Assessment: One of our goals is to increase the percentage of space leased to tenants in the technology, life sciences creative sectors such as advertising and media. Since January 1, 2014, our exposure to these tenants has increased from 14.3% to 18.4%.
Overall Assessment: Goal exceeded.
Quantitative Assessment: Our stated goal was $750 million in asset dispositions. During 2015, we sold approximately $743 million of assets, with our share of that total being $584 million.
Our 2015 dispositions represented 2.6%1.3% of gross asset value, a smallergreater percentage than three outfour of the five Office Peers.
Qualitative Assessment: Taken as a whole, management delivered 490,000 square feet of development space in 2017, which was 52,000 square feet, or 12%, greater than the goal. Upon stabilization, we expect 888 Boylston Street and Reservoir Place North to deliver a weighted-average, unleveragedcash-on-cash return of approximately 8.7%, which is greater than our target return for office REITs that we consider our direct competitors.
3642 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
Qualitative Assessment: Although our level of disposition activity fell below the original target, this reflected an approved shift away from this goal in light of the successful management of our other goals. As 2015 progressed, our focus on asset sales shifted from a strategic decision to sell assets at attractive prices and redeploy the proceeds into higher yielding development projects to more limited sales of non-core assets or assets with lower growth profiles. With sufficient cash balances to fully fund our development projects, we concluded that additional asset sales were not necessary.COMPENSATION DISCUSSION AND ANALYSIS
III. ASSESSING PERFORMANCE
Overall AssessmentAssessment:: Goal met.
Ø |
Why it is important: Active participation in new investments sustains our market-leading position and growth prospects, and new partnerships validate our strong reputation as a preeminent owner and developer.
Quantitative Assessment:Our stated goal wasgoals were to reduce G&A expense (excludingmake select acquisitions depending on market conditions, with a focus on opportunities in the Los Angeles market, and complete three new investments from a list of potential transactions that we were pursuing at the beginning of 2017. In 2017, market conditions in the private real estate equity market declined as office sale transaction expenses)volume decreased by 25% by the end of 2017 when compared to approximately $96 million, or a reduction of 2.9% from 2014. Our actual 2015 G&A expense was $96.3 million (a 2.7% reduction from 2014), which represents approximately 3.9% of our total revenue for 2015. We manage G&A expense2016. Due to a significantly lower percentage of revenue than all fivethese conditions, we did not complete any of the office REITs that we consider our direct competitors.
Overall Assessment: Goal met.
We managed capital expenditures according to plan, completing 2015 capital projects for a total of $71 million as compared to a budget of $100 million. This represented substantial growth (14.2%) over 2014. Given our focus on maintaining occupancy and achieving premium rental rates over the long-term, minimizing capital expenditures is not necessarily aspecified acquisitions included in this goal in and2017, but will continue to evaluate opportunities as they arise. For 2017, three of itself. Asthe five Office Peers invested a greater percentage of gross asset value percentage than we did.
Despite the market conditions, we made two new key investments in 2017: a 740,000 square foot building at 7750 Wisconsin Avenue in Bethesda, Maryland, which is fully leased to Marriott International to serve as its headquarters, and a 634,000 square foot development at 6595 Springfield Center Drive in Springfield, Virginia, fully leased by the TSA to serve as its headquarters. These two developments total approximately $525 million (our share) in new investment.
Qualitative Assessment: We remain committed to growing our capital expenditures program was generallypresence and portfolio in lineLos Angeles and, in 2017, underwrote numerous opportunities in the market. However, due to pricing challenges, we decided not to proceed with threethem. We have been executing on our strategy to develop office properties at higher yields rather than acquire assets at lower yields as evidenced by thepre-leased projects launched in 2017 with anticipated unlevered initial cash yields of approximately 7%. Management remains disciplined in its underwriting of opportunities and will continue to do so as we look to grow. In addition to securing the five office REITs that we consider our direct competitors, but significantly less than the other two.Marriott and TSA investments, management has committed to approximately 1.7 million square feet and $1.2 billion in new investment.
Overall AssessmentAssessment:: Goal met.
Ø |
Why it is important: A strong balance sheet and superior access to capital help us minimize debt finance costs, enable us to act quickly on opportunistic investments and better manage our debt maturities to reduce the impact of capital market volatility.
Quantitative AssessmentAssessment:: One In 2017, management excelled in its execution of our stated goalsstrategy to manage near-term debt maturities and maintain a conservative balance sheet. In April 2017, we amended and restated our credit facility, which increased the total commitment to an aggregate of $2.0 billion, reduced the variable interest rates and extended the maturity from July 2018 to April 2022. Included in the refinancing was to increase our revenue from non-office assets by expanding our residential and retail offerings. Non-office revenue was approximately $288the addition of a $500 million delayed-draw term loan facility. Also, in December 2017, we completed a public offering of $850 million in 2014 and approximately $274aggregate principal amount of 3.200% unsecured senior notes due 2025, the proceeds of which were used to redeem $850 million in 2015.
Qualitative Assessment: Theaggregate principal amount of our 3.700% unsecured senior notes scheduled to mature in November 2018. This had the effect of reducing our borrowing costs and extending our debt maturities. Taken as whole, our financing activities in 2017 resulted in a decrease in non-office revenue in 2015 was primarily dueinterest expense of approximately $38.4 million compared to 2016 and extended the terminationweighted-average maturity of a lease by FAO Schwarz at 767 Fifth Avenue in New York City and alsoour debt to the planned redevelopment of the retail component at 601 Lexington Avenue in New York City and the food court and flagship arcade6.4 years from 5.0 years at the Prudential Center in Boston, Massachusetts, which necessitated terminating leases with retail tenants. Consistent with our long-term strategy, we made these decisions to enhance the revenue from, and long-term valueend of these assets despite the adverse short-term impact on meeting the goal of increasing non-office revenue in 2015. We believe that we are well-positioned to grow our non-office revenue in future years as a result of these decisions and the commencement of development activities at our new residential properties in Reston, Virginia and Cambridge, Massachusetts.
Overall Assessment: Goal met. Given that management appropriately focused on promoting long-term growth of our revenue from retail tenants despite the short-term negative impact on meeting this goal, the Compensation Committee concluded that this overall assessment was appropriate.
Total Stockholder Return Drives Actual Earned Pay
Our TSR drives a significant portion of what our executives actually earn over time, while, as discussed above, management’s performance against strategic, operational, capital and management goals drives the Compensation Committee’s annual compensation decisions. To align executive compensation with the Company’s TSR performance, the Compensation Committee relies on LTI awards under a rigorous performance–based program (our Multi-Year Long-Term Incentive Program, or “MYLTIP”).
BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 3743
COMPENSATION DISCUSSION AND ANALYSIS
III. ASSESSING PERFORMANCE
In addition, we completed significant financings for two of our joint venture properties. In June 2017, an entity in which we own a 60% interest completed a refinancing of a mortgage secured by interests in 767 Fifth Avenue (The General Motors Building), resulting in a $2.3 billion mortgage bearing interest at a fixed interest rate of 3.43% per annum and maturing in June 2027. This represented the largest loan secured by a single asset in United States history. Also, in July 2017, the entity in which we own a 50% interest in Colorado Center obtained a mortgage loan for $550 million. The mortgage loan bears interest at a fixed rate of 3.56% per annum and matures in August 2027.
Qualitative Assessment: In 2017, we completed an aggregate of $5.9 billion in debt financing and refinancing activity, preserving a strong balance sheet to maintain consistent access to capital and the flexibility to make opportunistic investments. The Committee concluded that management executed our strategy with great success in 2017 and exceeded the goal.
Overall Assessment: Goal exceeded.
Ø | Dispositions |
Why it is important: The disposition ofnon-core assets allows us to better leverage the properties in our portfolio. In addition, older buildings require relatively greater operating costs and capital expenditures than new buildings, so we believe a consistent review of our portfolio and the future growth opportunities of the properties therein is an important component of our overall strategy.
Quantitative Assessment: Our goal was $200 million in asset dispositions, depending on market conditions. During 2017, we completed $31 million in sales ofnon-core assets. We recognized a total gain of approximately $6.6 million. Our 2017 percentage of gross asset value from dispositions was lower than four of the five Office Peers.
Qualitative Assessment: Our disposition activity in 2017 was relatively low and is a result of our strategy to sell onlynon-core assets or assets with lower growth profiles. It is also important to note that as of December 31, 2017, we were also under contract or had signed letters of intent to sell two assets totaling $149 million, one of which closed in early January 2018.
Overall Assessment: Goal not met.
Ø | Entitlement |
Why it is important: Obtaining the necessary entitlements and permits is an essential component to the execution of our development and redevelopment pipelines.
Quantitative Assessment: Our goals were to (1) obtain the remaining entitlements and/or complete the development plans for five projects and (2) advance the development plans for five projects. We obtained the necessary entitlements for the three of the five projects, including the Reston Eastgate land parcel in Reston, Virginia that was sold in 2017, we commenced development of a402-unit residential building and supporting retail space at the MacArthur Station residences in Oakland, California, and we completed the development plan for 501 K Street in Washington, DC. In addition, we advanced our development plans at each of the five properties that comprised the goal. Among other things, we entered into lease agreements with tenants, but had not yet commenced development, at 2100 Pennsylvania Avenue in Washington, DC, 17Fifty Presidents Street in Reston, Virginia, and Reston Gateway in Reston, Virginia, together representing 1.7 million square feet and $1.2 billion in investment.
Qualitative Assessment: Although management made significant progress in 2017, there are elements of our business that are not within our control that prevented us from completing a number of the projects outlined at the beginning of 2017. While we remain focused on obtaining
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COMPENSATION DISCUSSION AND ANALYSIS
III. ASSESSING PERFORMANCE
these entitlements so that we have more control over the timing of when to commence construction of these projects, the Committee concluded that management did not meet this goal.
Overall Assessment: Goal not met.
Ø | Redevelopment |
Why it is important: Redevelopment of existing properties is important in maintaining the overall high quality of our assets, and repositioning can better position specific properties for competition.
Qualitative Assessment: Our goal was to make progress on four of our properties identified as redevelopment opportunities. We’ve finalized plans for two of the properties. The other two properties are slated for lobby renovations with one project underway and the other awaiting local city approval.
Overall Assessment: Goal met.
Management Goals
Ø | Investor Relations |
Why it is important: A complex, long-term strategy like ours requires regular interaction with thebuy-side and sell-side analysts, as well as significant investors in our stock, particularly because it differs from that of many of our peers in the office sector. Producing clear and concise presentations for investors in a variety of forums helps us differentiate Boston Properties in the REIT sector.
Qualitative Assessment: During 2017, management continued to enhance our investor communications strategy, including conducting threenon-deal road-shows, two of which were outside of the United States, with a particular focus onnon-REIT dedicated and underweight investors. In October 2017, we held an investor conference attended by over 200 industry professionals from which we received positive feedback.
Overall Assessment: Goal exceeded.
BOSTON PROPERTIES, INC. |2018 Proxy Statement 45
COMPENSATION DISCUSSION AND ANALYSIS
IV. | PERFORMANCE-BASED EQUITY AWARDS; THREE-YEAR TSR DRIVES ACTUAL EARNED PAY |
Multi-Year Long-Term Incentive Program (MYLTIP)
Management’s performance against operational, capital and management goals drives the Committee’s annual compensation awards. What our NEOs actually earn is driven to a significant extent by our TSR through LTI awards under a rigorous performance-based program (our Multi-Year Long-Term Incentive Program, or “MYLTIP”). MYLTIP awards incorporate a formulaic link to our relative TSR over three-year overlapping measurement periods.
Because we are the largest dedicated office REIT, our performance is most closely correlated with both the larger U.S. REITs and office-focused companies. Therefore, consistent with the 2017 MYLTIP, structurethe 2018 MYLTIP design is built on a comparison of our TSR against (1) the C&S Realty Index, which reflects many of the largest andbest-in-class REITs, and (2) the NAREIT Office Index (which includes Boston Properties and is adjusted to include Vornado Realty Trust because it is one of the five Office Peers despite being categorized as a diversified REIT by FTSE NAREIT), which contains all other listed office REITs. MYLTIP awards include modifiers that potentially penalize management for low absolute TSR and reward management for high absolute TSR over the entire measurement period. If our annualized TSR is less than 0%, earned awards will be reduced by 20% from what they would be based on relative TSR alone. If our annualized TSR is more than 12%, then awards will be earned at the “threshold” (50% of target value) level even if, based on relative TSR alone, awards would be earned at a lower level.One-half of any earned awards vest at the end of the performance measurement period. The remainingone-half is subject to one additional year of time-based vesting. Vesting is accelerated under certain circumstances. (See “– IX. Other Compensation Policies – Double-Trigger Acceleration of Vesting of Equity Awards upon a Change of Control” beginning on page 54.)
For 2018 MYLTIP awards, levels of payout opportunity range from zero to 200% of target value, on a straight-line basis, depending on relative TSR performance compared to each of the C&S Realty Index and the NAREIT Office Index (adjusted to exclude us, because we account for a significant percentage of the index by market capitalization). For 2015, we significantly outperformed both the NAREIT Office Index (2.1% versus 0.3%) and four of the five office REITs that we consider our direct competitors. We underperformed the C&S Realty Index (2.1% versus 6.4%), principally(as adjusted) as a result of REITs in the apartment and self-storage sectors recording very strong performance for the year.
Although they are not among the metrics used for MYLTIP awards, the Compensation Committee also receives information regarding the MSCI U.S. REIT Index (commonly referred to as the “RMS Index”), because it is a broad index for the domestic REIT sector, and the S&P 500 Index, because we are included in that index and it is a benchmark for many institutional investors. Our 2015 TSR was less than the TSR of the RMS Index and greater than the TSR of the S&P 500 Index.follows:
Our MYLTIP uses levels of opportunity – threshold, target and high (plus for 2013 and 2014 MYLTIP awards, exceptional) performance.
The Compensation Committee believes that the MYLTIP’sMYLTIP design is relatively simple, reflects a high degree of rigor and provides executivesmanagement with quantifiable incentives.incentives that (i) span an appropriate, symmetrical range of relative TSR performance aligned with historical volatility in the REIT sector compared to our actual performance, (ii) will keep our management motivated over the entire three-year measurement period and (iii) reward management within a rigorouspay-for-performance philosophy. Based on advice from FPL, the Compensation Committee also believes that the MYLTIP’sMYLTIP design is competitive as compared with current market practice in the REIT industry for similar plans and provides an appropriate risk-rewardtrade-off.
3846 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
Performance-based vestingCOMPENSATION DISCUSSION AND ANALYSIS
IV. PERFORMANCE-BASED EQUITY AWARDS; THREE-YEAR TSR DRIVES ACTUAL EARNED PAY
Status of MYLTIP awards for 2015Awards
The following summarizes the performance will be measured on the basisperiods and outcomes of our annualized, compounded TSR over2013-2015 MYLTIP plans, all of which have ended, and the three years ending February 9, 2019 relative to the annualized, compounded total returninterim valuations as of (1) the C&S Realty Index (50%) and (2) the NAREIT Office Index (as adjusted, 50%) as follows:December 31, 2017 for our 2016-2017 MYLTIP plans, in each case, based on calculations prepared by our valuation expert.
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| Percentages shown are estimates as of December 31, 2017, based on interim valuations performed by a valuation expert (which could change up or down over the balance of the respective measurement periods). |
As it was for MYLTIP awards granted prior to 2016, the TSR of the NAREIT Office Index will be adjusted to exclude the Company because we represent such a significant portion of the index. In addition, for the first time for 2016 MYLTIP awards, the TSR of the NAREIT Office Index will be adjusted to include Vornado Realty Trust because it is one of the five office REITs that we consider our direct competitors despite being categorized as a diversified REIT by FTSE. The MYLTIP design includes absolute TSR modifiers that reduce the level of earned awards by 20% if our annualized TSR is less than 0%, and cause awards to be earned at 0.5x of target if our annualized TSR is more than 12%, even if based on relative TSR alone no awards would be earned.
FPL advised the Compensation Committee that many REITs use percentile rankings against indices for measuring relative TSR performance in their plans, instead of a fixed basis point differential as we do, with the typical payout levels being as follows: “threshold” at the 25th percentile, “target” at the 50th percentile and “high” at the 75th percentile. The Compensation Committee asked FPL to test how the two plan designs would have compared over the past ten years using a blend of the C&S Realty Index (50%) and the NAREIT Office Index (50%).
BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 3947
COMPENSATION DISCUSSION AND ANALYSIS
Reported vs. Realized Pay
The table below showsCommittee is cognizant that eacha direct correlation does not exist between the successful execution of our long-term strategy, as demonstrated year after year through the achievement of goals set for management, and our TSR, particularly on a relative basis. This is particularly true when TSR is compared over a limited period of time. For example, for the most recent 2015 MYLTIP program, Mr. Thomas earned $950,039, or 22% of the tiers in our MYLTIP structure requirestarget value for those awards, and all NEOs as a more challenging levelgroup earned $2,634,349, or 22% of performance than if we utilized the typical percentile-based plan structure, when back-tested over the last ten years using average historical datatarget value for overlapping three-year measurement periods (as calculated by FPL):
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those awards. The following graph shows howfor our CEO (1) the reported value of the MYLTIP awards as of the respective grant dates, (2) the maximum payout opportunity that could have been earned under each plan based primarily on relative TSR performance, and (3) the actual realized pay for the 2013-2015 MYLTIP awards for which the measurement periods have ended, as well as interim valuations as of December 31, 2017 for the 2016 MYLTIP’s payout scale compares to the same back-testing data:and 2017 MYLTIP awards:
2013 MYLTIP | 2014 MYLTIP | 2015 MYLTIP | Total (2013-2015) | 2016 MYLTIP | 2017 MYLTIP | |||||||||||||||||||
Reported Pay | $ | 1,125,000 | $ | 2,826,563 | $ | 4,145,625 | $ | 8,097,188 | $ | 5,000,000 | $ | 5,150,000 | ||||||||||||
Target Value | $ | 2,045,454 | $ | 2,884,247 | $ | 4,318,359 | $ | 9,248,060 | $ | 5,681,818 | $ | 6,204,819 | ||||||||||||
Maximum Payout Opportunity | $ | 6,136,362 | $ | 8,652,742 | $ | 10,795,898 | $ | 25,585,003 | $ | 14,204,545 | $ | 12,409,639 | ||||||||||||
Realized Pay | $ | 2,239,772 | $ | 798,257 | $ | 950,039 | $ | 3,988,068 | $ | 2,443,182 | (1) | $ | 2,854,217 | (1) | ||||||||||
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Payout as % of Target | 109% | 28% | 22% | 43% | 43% | (1) | 46% | (1) |
40
(1) | Amounts and percentages shown are estimated values for our CEO as of December 31, 2017, based on interim valuations performed by our valuation expert (which could change up or down over the balance of the respective measurement periods). |
48 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
The Compensation Committee believes that MYLTIP awards appropriately alignCOMPENSATION DISCUSSION AND ANALYSIS
V. | ALIGNMENT OF PAY WITH PERFORMANCE |
Based on the goal assessments, FPL’s benchmarking analysis and projections for compensation increases and decreases among our management’s focus on achieving the Company’s strategy with the relative TSR expectations of our stockholders. As of February 4, 2016, the performance measurement period for 2013 MYLTIP awards endedpeers and the performance measurement periods for 2014market generally, and 2015 MYLTIP awards were almost two-thirds and one-third complete, respectively. The following charts reflect (1) actual earned rewards for NEOs as a group for their 2013 MYLTIP and (2) estimated values for NEOs as a group for their 2014 and 2015 MYLTIPs as of December 31, 2015 based on tracking valuations performed by an expert (which could change up or down overother input received from FPL, the balance of the respective measurement periods). The data demonstrate that our NEOs’ performance-based pay going back to 2013 embodies a strong pay-for-performance philosophy.
BOSTON PROPERTIES, INC. |2016 Proxy Statement 41
Alignment of Pay with Performance
We look to a group of sixteen publicly traded real estate companies for benchmarking executive compensation (see“– Benchmarking Peer Group and Compensation Advisor’s Assessment” beginning on page 44). We use the median (50th percentile) of this benchmarking peer group as the beginning reference point and as the indicator of competitive market trends. The Compensation Committee then sets executive pay based on corporate and individual performance. The Compensation Committee concluded that the management team performed very well against its 2015 strategic, operational, capital and management goals, with particular emphasis on: (1) new development starts and deliveries, which are key elements of our long-term strategy for growth; (2) growth in diluted FFO per share; (3) growth in same property NOI; (4) management of the balance sheet; (5) leasing; and (6) enhancing communications with investors. On this basis, the Compensation Committee decided that 20152017 total compensation for the NEOs, as a group, should be set at a level that falls inreflects an increase of approximately 11% over 2016 total compensation, with a view to retention and providing incentives aligned with the second quartilebest long-term interests of our benchmarking peer group.the Company and its stockholders.
Variable Pay Mix
For each NEO, the Compensation Committee approves the appropriate level and mix of pay based on his role, responsibilities and performance. For 2015, the Compensation Committee took note of evolving roles within our senior executive team following the successful completion of a multi-year succession plan. In particular, the Compensation Committee noted Mr. Thomas’ strong leadership in setting our strategic direction following the transition of Mr. Zuckerman to non-executive Chairman, and that his total compensation lagged behind the median for CEOs within our benchmarking peer group. Based on these considerations, the Compensation Committee made a meaningful adjustment to increase Mr. Thomas’ compensation to bring it closer to, although still below, the median. The Compensation Committee also recognized Mr. LaBelle’s effective management of our balance sheet during volatile periods, his being recognized in 2015 as the top CFO in the REIT sector by portfolio managers and buy-side analysts, as well as sell-side analysts in an annual survey conducted byInstitutional Investor, and that his total compensation continues to be below the median for CFOs within our benchmarking peer group.
The Compensation Committee believes that our executive compensation is well-aligned with our stockholders’ interests and in line with peer companies.the Benchmarking Peer Group. Variable pay, consisting of LTI equity awards and annual cash bonus, constitutes the vast majority of our executive compensation (for our CEO, variable pay constitutes 92.3%increased to 92.4% of total compensation for 20152017 performance). This allows the Compensation Committee to reward good performance and penalize poor performance. To build even stronger pay-for-performance alignment with our stockholders, LTI equity awards are predominantly “at-risk,” performance-based MYLTIP awards, the ultimate value of which depends mostly on the
42 BOSTON PROPERTIES, INC. |2016 Proxy Statement
Company’s future relative TSR. The following charts present the allocation of total pay among different components for our CEO and the weighted-average of each component for our otherall NEOs as a group:
BOSTON PROPERTIES, INC. |2018 Proxy Statement 49
COMPENSATION DISCUSSION AND ANALYSIS
V. ALIGNMENT OF PAY WITH PERFORMANCE
2017 Compensation
The following table presents the total direct compensation of our NEOs, inclusive of salary, bonus and LTI equity awards, but not other items required by SEC rules to be reported in the Summary Compensation Table presented under “Compensation of Executive Officers.” We believe that this table most accurately reflects the decisions ofawards made by the Compensation Committee with respect to executive compensation for performance in 2014 and 2015,2017 compared to 2016, including MYLTIP awards whose value will be determined over a forward three-year period based on our relative TSR. To link annual awards of long-term equity incentive compensation to annual performance, the Compensation Committee, consistent with the majority of other companies whose fiscal year ends on December 31, typically makes equity awards for a particular year in late January or early February of the following year. SEC rules for equity awards (unlike for cash bonuses) require that they be presented as compensation for the year in which they were actually granted, and therefore equity awards shown in the Summary Compensation Table presented under “Compensation of Executive Officers” on page 5561 lag a year (i.e., awards made in January 2016February 2018 to reward performance in 20152017 are not reflected in this year’s Summary Compensation Table).
BOSTON PROPERTIES, INC. |2016 Proxy Statement 43
Salary | Cash Bonus | |||||||||||||||||||||||
Executive | 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||||||||||||
Owen D. Thomas | $ | 775,000 | $ | 750,000 | 3.3% | $ | 2,558,333 | $ | 1,972,500 | 29.7% | ||||||||||||||
Douglas T. Linde | $ | 715,000 | $ | 695,000 | 2.9% | $ | 1,805,000 | $ | 1,686,377 | 7.0% | ||||||||||||||
Raymond A. Ritchey | $ | 710,000 | $ | 690,000 | 2.9% | $ | 1,495,000 | $ | 1,480,000 | 1.0% | ||||||||||||||
Michael E. LaBelle | $ | 490,000 | $ | 475,000 | 3.2% | $ | 830,000 | $ | 785,000 | 5.7% | ||||||||||||||
Bryan J. Koop1 | $ | 390,000 | — | N/A | $ | 821,250 | — | N/A | ||||||||||||||||
LTI Equity Awards | Total Compensation | |||||||||||||||||||||||
Executive | 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||||||||||||
Owen D. Thomas | $ | 6,666,667 | $ | 5,527,500 | 20.6% | $ | 10,000,000 | $ | 8,250,000 | 21.2% | ||||||||||||||
Douglas T. Linde | $ | 4,680,000 | $ | 4,418,623 | 5.9% | $ | 7,200,000 | $ | 6,800,000 | 5.9% | ||||||||||||||
Raymond A. Ritchey | $ | 4,095,000 | $ | 4,030,000 | 1.6% | $ | 6,300,000 | $ | 6,200,000 | 1.6% | ||||||||||||||
Michael E. LaBelle | $ | 1,980,000 | $ | 1,540,000 | 28.6% | $ | 3,300,000 | $ | 2,800,000 | 17.9% | ||||||||||||||
Bryan J. Koop | $ | 1,338,750 | — | N/A | $ | 2,550,000 | — | N/A |
Salary(1) | Cash Bonus | |||||||||||||||||||||||
Executive | 2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||||||
Owen D. Thomas | $ | 875,000 | $ | 875,000 | —% | $ | 2,425,000 | $ | 2,558,333 | (5.2)% | ||||||||||||||
Douglas T. Linde | $ | 725,000 | $ | 725,000 | —% | $ | 1,935,000 | $ | 1,847,500 | 4.7% | ||||||||||||||
Raymond A. Ritchey | $ | 720,000 | $ | 720,000 | —% | $ | 2,080,000 | $ | 1,555,000 | 33.8% | ||||||||||||||
Michael E. LaBelle | $ | 500,000 | $ | 500,000 | —% | $ | 1,325,000 | $ | 900,000 | 47.2% | ||||||||||||||
Bryan J. Koop | $ | 400,000 | $ | 400,000 | —% | $ | 1,280,000 | $ | 835,000 | 53.3% | ||||||||||||||
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Total | $ | 3,220,000 | $ | 3,220,000 | —% | $ | 9,045,000 | $ | 7,695,833 | 17.5% | ||||||||||||||
LTI Equity Awards | Total Compensation | |||||||||||||||||||||||
Executive | 2017 | 2016 | % Change | 2017 | 2016 | % Change | ||||||||||||||||||
Owen D. Thomas | $ | 8,189,000 | $ | 6,866,667 | 19.3% | $ | 11,489,000 | $ | 10,300,000 | 11.5% | ||||||||||||||
Douglas T. Linde | $ | 5,331,000 | $ | 4,777,500 | 11.6% | $ | 7,991,000 | $ | 7,350,000 | 8.7% | ||||||||||||||
Raymond A. Ritchey | $ | 4,509,000 | $ | 4,225,000 | 6.7% | $ | 7,309,000 | $ | 6,500,000 | 12.4% | ||||||||||||||
Michael E. LaBelle | $ | 2,050,000 | $ | 2,100,000 | (2.4)% | $ | 3,875,000 | $ | 3,500,000 | 10.7% | ||||||||||||||
Bryan J. Koop | $ | 1,308,000 | $ | 1,365,000 | (4.2)% | $ | 2,988,000 | $ | 2,600,000 | 14.9% | ||||||||||||||
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Total | $ | 21,387,000 | $ | 19,334,167 | 10.6% | $ | 33,652,000 | $ | 30,250,000 | 11.2% |
(1) |
Benchmarking Peer Group and Compensation Advisor’s Assessment
The Compensation Committee monitors the effectiveness of our executive compensation program on an ongoing basis. For it to be effective, among other things, we believe it is necessary for compensation to be competitive with other large public real estate companies with which we compete for executive talent. The Compensation Committee uses industry peer group data as one tool in assessing and determining pay for our executive officers. Other REITs, however, both in the office sector and in other sectors, are not always comparable to us because of differences in underlying business fundamentals. Peer group data is intended to provide the Compensation Committee with insight into overall market pay levels, market trends, “best” governance practices, and overall industry performance. The median (50th percentile) serves as a reference point and indicator of competitive market trends and the Compensation Committee uses it as the starting point when setting our executive compensation. We believe this use of peer company data is consistent with how stockholders and proxy advisory firms use such data.
The Compensation Committee has retained FPL as its advisor since 2012 and every year re-assesses and re-affirms the independence of FPL in connection with renewal of the engagement. The Compensation Committee directed FPL to, among other things: (1) benchmark our executive compensation against our peers and assist in developing compensation objectives; (2) analyze trends in compensation in the marketplace generally and among our peers specifically; and (3) recommend the components and amounts of compensation for our top executive officers. FPL did not perform any other services for the Company in 2015.
FPL selected the companies to be included in the peer group we use for benchmarking executive compensation based on a review of the methodologies employed by twelve of the REITs included in the S&P 500 Index. Based on these criteria, FPL recommended to the Compensation Committee the same peer group of sixteen publicly traded real estate companies as it did last year, which are comparable to the Company in terms of total capitalization and assets, irrespective of property focus. FPL felt that size, as measured by total capitalization rather than equity market capitalization, is the most relevant criterion because top executives are ultimately responsible for managing the entire organization and total capitalization best depicts scale, complexity and breadth of operations, as well as the amount of capital and assets managed. Notably, fifteen out of the sixteen members of this benchmarking peer group also list us as a peer company.
4450 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
The following table provides the names and key information for each peer company as of December 31, 2015.
UPREIT Market | Total | |||||||||||||||
Name | Property Focus | Headquarters | Number of Employees | Capitalization (in millions) | Capitalization (in millions) | |||||||||||
American Tower Corporation | Specialty | Boston, MA | 3,371 | $41,097 | $60,252 | |||||||||||
AvalonBay Communities, Inc. | Multi-family | Arlington, VA | 2,981 | $25,228 | $31,754 | |||||||||||
Digital Realty Trust, Inc. | Specialty | San Francisco, CA | 1,295 | $11,264 | $18,560 | |||||||||||
Equity Residential | Multi-family | Chicago, IL | 3,500 | $30,938 | $41,948 | |||||||||||
General Growth Properties, Inc. | Regional Mall | Chicago, IL | 1,700 | $24,186 | $39,085 | |||||||||||
HCP, Inc. | Health Care | Long Beach, CA | 187 | $18,029 | $29,315 | |||||||||||
Host Hotels & Resorts, Inc. | Hotel | Bethesda, MD | 241 | $11,652 | $15,687 | |||||||||||
Kimco Realty Corporation | Shopping Center | N. Hyde Park, NY | 546 | $10,964 | $17,236 | |||||||||||
The Macerich Company | Regional Mall | Santa Monica, CA | 976 | $13,335 | $18,974 | |||||||||||
Prologis, Inc. | Industrial | San Francisco, CA | 1,555 | $23,261 | $38,286 | |||||||||||
Public Storage | Self-storage | Glendale, CA | 5,300 | $42,890 | $47,291 | |||||||||||
Simon Property Group, Inc. | Regional Mall | Indianapolis, IN | 3,150 | $70,238 | $92,803 | |||||||||||
SL Green Realty Corp. | Office | New York, NY | 1,177 | $11,718 | $23,139 | |||||||||||
Ventas, Inc. | Health Care | Chicago, IL | 466 | $19,049 | $30,348 | |||||||||||
Vornado Realty Trust | Diversified | New York, NY | 4,089 | $20,010 | $33,443 | |||||||||||
Welltower, Inc. | Health Care | Toledo, OH | 476 | $24,136 | $38,878 | |||||||||||
Median | 1,425 | $21,635 | $32,598 | |||||||||||||
Average | 1,938 | $24,876 | $36,062 | |||||||||||||
Boston Properties, Inc. | 765 | $21,874 | $32,865 | |||||||||||||
Relative Percentile Rank | 30%-ile | 50%-ile | 51%-ile |
FPL’s benchmarking review was based on information disclosed in the peer companies’ 2015 proxy statements (the latest year for which comprehensive data is publicly available), as well as FPL’s proprietary database. FPL also reviewed the 2015 NAREIT Compensation Survey (which FPL conducts) and additional proprietary real estate compensation surveys conducted throughout the year by FPL for additional context. FPL’s review compared our executive pay practices to cash and non-cash compensation awarded to executives in comparable positions at peer companies. FPL advised the Compensation Committee that the peer companies generally have compensation programs comparable to ours, with annual bonuses generally in the form of cash and annual long-term compensation generally in the form of equity with time-based vesting over three to five years and a focus on performance-based compensation.
Role of Management in Compensation Decisions
Our Chief Executive Officer and President make recommendations to the Compensation Committee on the compensation of executive officers who report to them based on their assessment of achievement of the Company’s strategic and tactical plans, executives’ individual performance and a variety of other factors (e.g., compensation history, tenure, responsibilities, market data for competitive positions and retention concerns). The Compensation Committee considers these recommendations together with input from FPL. All final decisions affecting executive compensation are made by the Compensation Committee.
BOSTON PROPERTIES, INC. |2016 Proxy Statement 45
We designed our executive compensation program to accomplish the following objectives:
OBJECTIVESCOMPENSATION DISCUSSION AND ANALYSIS
VI. | ALLOCATION OF LTI EQUITY AWARDS |
The following is a summary of how the Compensation Committee believes its decisions on NEO pay for their performance during 2015 are consistent with a pay-for-performance philosophy, provide alignment with stockholders and serve as a retention tool:
HOW WE ACCOMPLISH OUR OBJECTIVES
46 BOSTON PROPERTIES, INC. |2016 Proxy Statement
Base Salaries
The Compensation Committee periodically reviews base salaries for NEOs and makes adjustments to reflect market conditions, changes in responsibilities and merit increases. The Compensation Committee approved base salaries for 2016 as follows:
Executive | 2016 Base Salary | % Change from 2015 | ||||||
Owen D. Thomas | $ | 875,000 | 12.9% | |||||
Douglas T. Linde | $ | 725,000 | 1.4% | |||||
Raymond A. Ritchey | $ | 720,000 | 1.4% | |||||
Michael E. LaBelle | $ | 500,000 | 2.0% | |||||
Bryan J. Koop | $ | 400,000 | 2.6% |
Cash Bonuses
The Compensation Committee approved the following cash bonuses for 2015 performance:
Executive | Cash Bonus | % Change from 2014 | ||||||
Owen D. Thomas | $ | 2,558,333 | 29.7% | |||||
Douglas T. Linde | $ | 1,805,000 | 7.0% | |||||
Raymond A. Ritchey | $ | 1,495,000 | 1.0% | |||||
Michael E. LaBelle | $ | 830,000 | 5.7% | |||||
Bryan J. Koop | $ | 821,250 | N/A |
LTI Equity Awards
The Compensation Committee approved LTI equity awards to NEOs for 20152017 performance as a dollar amount that was then converted into a mix of performance-based MYLTIP awards and time-based, full-value equity awards. At the direction of the Committee, FPL conducted a multi-year, backward- and forwarding-looking analysis of peer equity award pay mix with the objective of finding the appropriate allocation to maintain the focus and dedication of a talented management team, which, in our case, has met or exceeded its goals as a whole. Based on the information received from FPL, the Committee determined that it would be advisable to migrate over time to an allocation of LTI equity awards for the NEOs that is closer to the 50% - 50% mix of performance-based and time-based that is widely accepted in the market and prevalent among our peers, although the precise allocation will vary among different NEOs and from year to year based on circumstances. Messrs. Thomas’ and Linde’s reallocation resulted in relatively larger portions of performance-based 2018 MYLTIP awards as compared to past LTI equity award mixes, and Messrs. Ritchey, LaBelle and Koop received relatively larger portions in time-based incentive equity. The following table sets forth the total combined valuedollar values of the performance-based and time-based equity awards to NEOs:NEOs for 2017:
Total LTI Equity Awards Grant Date Value | Performance-Based LTI Equity Awards as a Percentage of Total | Time-Based LTI Equity Awards as a Percentage of Total | ||||||||||||||||||||||||||
Executive | 2015 | 2014 | % Change | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||
Owen D. Thomas | $ | 6,666,667 | $ | 5,527,500 | 20.6% | 75.0% | 75.0% | 25.0% | 25.0% | |||||||||||||||||||
Douglas T. Linde | $ | 4,680,000 | $ | 4,418,623 | 5.9% | 75.0% | 75.0% | 25.0% | 25.0% | |||||||||||||||||||
Raymond A. Ritchey | $ | 4,095,000 | $ | 4,030,000 | 1.6% | 65.0% | 65.0% | 35.0% | 35.0% | |||||||||||||||||||
Michael E. LaBelle | $ | 1,980,000 | $ | 1,540,000 | 28.6% | 60.0% | 50.0% | 40.0% | �� | 50.0% | ||||||||||||||||||
Bryan J. Koop | $ | 1,338,750 | — | N/A | 50.0% | 50.0% | 50.0% | 50.0% |
BOSTON PROPERTIES, INC. |2016 Proxy Statement 47
Executive | Performance- Based LTI Equity Awards | Time-Based LTI Equity Awards | Total LTI Equity Awards | Total LTI Equity Awards as % of Total Compensation | ||||||||||||
Owen D. Thomas | $ | 4,339,000 | $ | 3,850,000 | $ | 8,189,000 | 71% | |||||||||
Douglas T. Linde | $ | 2,861,000 | $ | 2,470,000 | $ | 5,331,000 | 67% | |||||||||
Raymond A. Ritchey | $ | 2,100,000 | $ | 2,409,000 | $ | 4,509,000 | 62% | |||||||||
Michael E. LaBelle | $ | 912,500 | $ | 1,137,500 | $ | 2,050,000 | 53% | |||||||||
Bryan J. Koop | $ | 560,000 | $ | 748,000 | $ | 1,308,000 | 44% | |||||||||
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Total | $ | 10,772,500 | $ | 10,614,500 | $ | 21,387,000 | 64% |
The performance-based portion of LTI equity awards for 20152017 performance was made through 20162018 MYLTIP awards, with a three-year performance period (February 10, 20166, 2018 to February 9, 2019)5, 2021), an additional year of time-based vesting, a total target value for NEOs of approximately $14.8$13.1 million and an aggregate payout opportunity ranging from zero to a maximum of $37.0$26.3 million. The baseline share price for 20162018 MYLTIP awards was $112.728$118.46 (the average closing price per share of our common stock on the NYSE for the five trading days prior to and including February 10, 2016)6, 2018). The following table sets forth the 2016 MYLTIP awards to NEOs:
Executive | Percentage of 2016 MYLTIP | Grant Date Value | Target Value | |||||||||
Owen D. Thomas | 28.8% | $ | 5,000,000 | $ | 5,681,818 | |||||||
Douglas T. Linde | 20.2% | $ | 3,510,000 | $ | 3,988,636 | |||||||
Raymond A. Ritchey | 15.4% | $ | 2,661,750 | $ | 3,024,716 | |||||||
Michael E. LaBelle | 6.9% | $ | 1,188,000 | $ | 1,350,000 | |||||||
Bryan J. Koop | 3.9% | $ | 669,375 | $ | 760,653 |
Under the Financial Accounting Standards Board’s Accounting Standards Codification 718 “Compensation – Stock Compensation” (“ASC Topic 718”), we expect that 20162018 MYLTIP awards to NEOs will have an aggregate value of approximately $13.0$10.8 million, which amount will generally be amortized into earnings over the four-year plan period under the graded vesting method. 20162018 MYLTIP awards arewere made in the form of LTIP units that are subject to forfeiture to the extent they are not earned or do not become vested. The number of LTIP units issued was an estimate of the maximum number of LTIP units that NEOs could earn, based on certain assumptions. The number of LTIP units actually earned will be determined at the end of the performance period by dividing each NEO’s share of the total pool, if any, by the average per share closing price of our common stock on the NYSE for the fifteen trading days immediately preceding the measurement date. If fewer LTIP units than the number issued initially are earned, the balance will be forfeited. Prior to the measurement date, LTIP units issued on account of 20162017 MYLTIP awards will be entitled to receive per unit distributions equal to 10% of the regular quarterly distributions payable on a common unit, but will not be entitled to receive any special distributions, as opposed to distributions per unit equal to those, both regular and special, payable on a common unit after the measurement date.
BOSTON PROPERTIES, INC. |2018 Proxy Statement 51
COMPENSATION DISCUSSION AND ANALYSIS
VI. ALLOCATION OF LTI EQUITY AWARDS
The time-based portion of 2015 LTI equity awards granted for 2017 performance to the NEOs other than Mr. Ritchey consisted of LTIP units or restricted shares of our common stock that vest ratably over a four-year period (25% per year). In the case of Mr. Ritchey, the time-based portion of his 20162017 LTI equity award was fully vested upon issuance because he had attained the retirement age of 65. Pursuant to our Equity Award Grant Policy discussed below, time-based full-value equity awards were issued as of the close of business on February 8, 20162, 2018 based on the closing price per share of our common stock on the NYSE on that date ($111.14)119.34).
VII. | BENCHMARKING PEER GROUP AND COMPENSATION ADVISOR’S ROLE |
The Committee monitors the effectiveness of our executive compensation program on an ongoing basis. For it to be effective, among other things, we believe it is necessary for compensation to be competitive with other large public real estate companies with which we compete for executive talent. The Committee uses industry peer group data as one tool in assessing and determining pay for our executive officers. Other REITs, however, both in the office sector and in other sectors, are not always comparable to us because of differences in underlying business fundamentals. Peer group data is intended to provide the Committee with insight into overall market pay levels, market trends, “best” governance practices, and overall industry performance. The median (50th percentile) serves as a reference point and indicator of competitive market trends and the Committee uses it as the starting point when setting our executive compensation. We believe this use of peer company data is consistent with how stockholders and proxy advisory firms use such data.
The Committee has retained FPL as its advisor since 2012 and every yearre-assesses andre-affirms the independence of FPL in connection with renewal of the engagement. The Committee directed FPL to, among other things: (1) benchmark our executive compensation against our peers and assist in developing compensation objectives, (2) analyze trends in compensation in the marketplace generally and among our peers specifically and (3) recommend the components and amounts of compensation for our top executive officers.
FPL selected the companies to be included in the peer group we use for benchmarking executive compensation based on a review of the methodologies employed by sixteen of the REITs included in the S&P 500 Index. Based on these criteria, FPL recommended to the Committee the same peer group of sixteen publicly traded real estate companies as it did in previous years, which are comparable to the Company in terms of total capitalization and assets, irrespective of property focus. FPL felt that size, as measured by total capitalization rather than equity market capitalization, is the most relevant criterion because top executives are ultimately responsible for managing the entire organization and total capitalization best depicts scale, complexity and breadth of operations, as well as the amount of capital and assets managed. Notably, fifteen out of the sixteen members of this Benchmarking Peer Group also list us as a peer company.
52 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
VII. BENCHMARKING PEER GROUP AND COMPENSATION ADVISOR’S ROLE
The following table provides the names and key information for each peer company:
Name | Property Focus | Headquarters | Number of Employees(1) | UPREIT Market Capitalization (in millions)(2) | Total Capitalization (in millions)(3) | |||||||||||
Alexandria Real Estate Equities, Inc. | Office | Pasadena, CA | 323 | $12,591 | $17,980 | |||||||||||
American Tower Corporation | Specialty | Boston, MA | 4,752 | $61,185 | $83,567 | |||||||||||
AvalonBay Communities, Inc. | Multi-family | Arlington, VA | 3,112 | $24,638 | $31,766 | |||||||||||
Digital Realty Trust, Inc. | Specialty | San Francisco, CA | 1,436 | $24,366 | $34,294 | |||||||||||
Equity Residential | Multi-family | Chicago, IL | 2,700 | $24,315 | $33,351 | |||||||||||
General Growth Properties, Inc. | Regional Mall | Chicago, IL | 1,700 | $22,615 | $36,677 | |||||||||||
HCP, Inc. | Health Care | Irvine, CA | 190 | $12,407 | $20,019 | |||||||||||
Host Hotels & Resorts, Inc. | Hotel | Bethesda, MD | 205 | $14,859 | $18,849 | |||||||||||
The Macerich Company | Regional Mall | Santa Monica, CA | 853 | $9,919 | $15,260 | |||||||||||
Prologis, Inc. | Industrial | San Francisco, CA | 1,565 | $35,350 | $47,741 | |||||||||||
Public Storage | Self-Storage | Glendale, CA | 5,600 | $36,423 | $41,897 | |||||||||||
Simon Property Group, Inc. | Regional Mall | Indianapolis, IN | 4,150 | $61,503 | $85,144 | |||||||||||
SL Green Realty Corp. | Office | New York, NY | 1,065 | $10,294 | $17,659 | |||||||||||
Ventas, Inc. | Health Care | Chicago, IL | 493 | $21,520 | $33,022 | |||||||||||
Vornado Realty Trust | Office | New York, NY | 3,989 | $15,759 | $26,904 | |||||||||||
Welltower, Inc. | Health Care | Toledo, OH | 392 | $23,618 | $36,759 | |||||||||||
Median | 1,501 | $23,116 | $33,187 | |||||||||||||
Average | 2,033 | $25,710 | $36,306 | |||||||||||||
Boston Properties, Inc. | 740 | $22,359 | $34,462 | |||||||||||||
Relative Percentile Rank | 31%-ile | 45%-ile | 60%-ile |
Source: S&P Dow Jones Indices, a Division of S&P Global. Data as of December 31, 2017.
(1) | Represents the number of employees on a full time equivalent basis. |
(2) | Represents market value of outstanding common stock. May include the value of OP units, where available. |
(3) | Total capitalization includes debt and the book value of any preferred stock. |
FPL’s benchmarking review was based, in part, on information disclosed in the peer companies’ proxy statements filed in 2017 (the latest year for which comprehensive data is publicly available). FPL also reviewed the 2017 NAREIT Compensation PoliciesSurvey (which FPL conducts) and additional proprietary real estate compensation surveys conducted throughout the year by FPL for additional context. FPL’s review compared our executive pay practices to cash andnon-cash compensation awarded to executives in comparable positions at peer companies. FPL advised the Committee that the peer companies generally have compensation programs comparable to ours, with annual bonuses generally in the form of cash and annual long-term compensation generally in the form of equity with time-based vesting over three to five years and a focus on performance-based compensation.
BOSTON PROPERTIES, INC. |2018 Proxy Statement 53
COMPENSATION DISCUSSION AND ANALYSIS
VIII. | ROLE OF MANAGEMENT IN COMPENSATION DECISIONS |
Our CEO and President make recommendations to the Committee on the compensation of executive officers who report to them based on their assessment of achievement of the Company’s strategic and tactical plans, executives’ individual performance and a variety of other factors (e.g., compensation history, tenure, responsibilities, market data for competitive positions and retention concerns). The Committee considers these recommendations together with input from FPL. All final decisions affecting executive compensation are made by the Committee.
IX. | OTHER COMPENSATION POLICIES |
Double-Trigger Acceleration of Vesting of Equity Awards uponUpon a Change of Control
The Company received a stockholder proposal at its 2014 annual meeting regarding accelerated vesting of equity awards of senior executives upon a change of control and approximately 53% of shares cast were voted in its favor. Although the level of support was barely a majority, the Compensation Committee was responsive to our stockholders and, with the advice of its independent advisor, FPL, undertook a full review of the Company’s policy regarding acceleration of vesting upon a change of control. As a result of that process, the Compensation Committee decided to modify time-basedTime-based equity awards made in 2015 or later to include “double-trigger” vesting, meaning that, if there is a “change of control” and the awards are not otherwise cancelled in connection with the change of control transaction, then they only become fully vested if, within 24 months after the change of control, the
48 BOSTON PROPERTIES, INC. |2016 Proxy Statement
executive’s employment is terminated by the Company or its successor without “cause” or the executive resigns for “good reason.” We believe that the change brought ourthis policy regarding acceleration of vesting upon a change of control is in line with current best practice while also continuing to remove potential disincentives for executives to pursue a change of control transaction that would benefit stockholders.
The stockholder proposal approved atAlthough not required, the 2014 annual meeting only called for changes to equity awards made to NEOs under future equity incentive plans or plan amendments that stockholders approve, and did not require that it be implemented to affect existing contractual rights. However, the Compensation Committee decided to make the change last year, and thosepolicy applicable to senior officers, including our Chief Executive Officer, who arewere entitled to single-trigger vesting under their employment agreements, haveand those executives voluntarily agreed to be subject to the new policy.change. The Compensation Committee believes that this demonstrates its and management’s responsiveness to stockholders and that the new policy addresses two key objectives:
• | Aligning executives’ interests with stockholders’ |
• | Minimizing conflicts of interest: double-trigger vesting in the context of a potential change of control reduces distraction and the risk that executives would leave the Company before a transaction is completed, while also preventing executives from receiving a windfall by compensating them only if their employment is terminated. |
The Company received substantially the same stockholder proposal at its 2015 annual meeting of stockholders, and approximately 72% of the shares cast were voted against the proposal.
Clawback Policy
The Compensation Committee adoptedWe have a formal “clawback” policy, which allows the Companyus to recoup from all executive officers and certain other specified officers incentive compensation paid on the basis of financial results that are subsequently restated. Under the policy, if the Company iswe are required to prepare an accounting restatement due to materialnon-compliance by the Company with any financial reporting requirement, the Compensation Committee may require those officers to repay or forfeit “excess compensation,” which includes annual cash bonus and long-term incentive compensation in any form (including stock options, restricted stock and LTIP units, whether time-based or performance-based) received by them during the three-year period preceding the publication of the restated financial statements, that the Compensation Committee determines was in excess of the amount that they would have received had such compensation been determined based on the financial results reported in the restated financial statements.
The Compensation Committee may take into account any factors it deems reasonable in determining (i)(1) whether to seek recoupment of previously paid excess compensation, (ii)(2) the amount of excess compensation to recoup from each individual officer, which may reflect whether the Compensation Committee concluded that he or she engaged in wrongdoing or committed grossly negligent acts or omissions, and (iii)(3) the form of the compensation to be recouped. The Compensation Committee intends to periodically review this policy and, as
54 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
IX. OTHER COMPENSATION POLICIES
appropriate, conform it to any applicable final rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Gross-Up for Excess Parachute Payments
The Compensation CommitteeIn January 2014, we adopted a formal “no taxgross-up” policy with respect to itsour senior executives. Pursuant to this policy, the Companywe will not make or promise to make any taxgross-up payment to any senior executive in the future, other than payments in accordance with obligations existing obligationsat the time of the policy’s adoption or pursuant to arrangements applicable to our management employees of the Company generally, such as a relocation policy. RecentAll of the employment agreements that we have entered into with new senior executives since 2013, including our original and new employment agreements with our CEO, Mr. Thomas, do not provide for taxgross-up payments and, accordingly, this policy represents the
BOSTON PROPERTIES, INC. |2016 Proxy Statement 49
formalization of the Compensation Committee’spre-existing practice with respect to taxgross-ups. In addition, the Compensation Committee adopted amendments to the Company’sour Senior Executive Severance Plan and Executive Severance Plan to provide that executives who become eligible to participate in these plans in the future will not be entitled to any taxgross-up payments under the plans.
Policy Concerning Hedging and Pledging Transactions
CertainWe have a policy prohibiting executive officers and directors from engaging in short sales and derivative transactions, in Companypurchasing our securities (suchon margin and pledging our securities as collateral for a loan. Transactions such as purchases and sales of publicly traded put and call options, short sales, hedging transactions such as prepaid variable forwards, equity swaps and collars)collars create a heightened compliance risk or could create the appearance of misalignment between management and stockholders. In addition, securities held in a margin account or pledged as collateral may be sold without consent if the owner fails to meet a margin call or defaults on the loan, thus creating the risk that a sale may occur at a time when an officer or director is aware of material,non-public information or otherwise is not permitted to trade in Company securities. Therefore, underAn exception from the policy executive officers and directors are prohibited from engaging in short sales and derivative transactions, purchasing Company securities on margin and pledging Company securities as collateral for a loan. An exception may be granted on acase-by-case basis where an executive officer or director who wishes to pledge Company securities as collateral for a loan (not including margin debt) clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities. No such exceptions have ever been granted.
Mandatory Minimum Equity Ownership Policy for Senior Executives
To align senior management with our stockholders and demonstrate to the investment community that our senior management is personally committed to our continued financial success, the Company haswe have a policy in place that requires the following officer positions to maintain equity ownership equal to a multiple of their base salaries as follows:
Title | Multiple of
| |||
Chief Executive Officer | 6.0x | |||
President | 5.0x | |||
Senior Executive Vice President | 5.0x | |||
Executive Vice President, Chief Financial Officer | 3.0x | |||
Executive Vice President, Regional Manager | 2.0x | |||
Senior Vice | 1.5x |
If an executiveexecutive’s ownership falls below the applicable guideline due solely to a decline in the value of our common stock, the executive will not be required to acquire additional shares to meet the
BOSTON PROPERTIES, INC. |2018 Proxy Statement 55
COMPENSATION DISCUSSION AND ANALYSIS
IX. OTHER COMPENSATION POLICIES
guideline, but he or she will be required to retain all shares then held (except for shares withheld to pay withholding taxes or the exercise price of options) until such time as the executive again attains the target multiple.
Employees who are hired or promoted to senior management positions will have a five-year period beginning on January 1 of the year following their appointment to achieve this ownership requirement. Exceptions may be made for significant extenuating personal circumstances. The types of securities that will be counted toward the equity ownership requirement include shares of our common stock, common units and LTIP units (excluding performance-based LTIP units until and unless they have been earned), in each case both vested and unvested, as well as shares acquired and held through our stock purchase and dividend reinvestment plans. Stock options will not be counted.
50 BOSTON PROPERTIES, INC. |2016 Proxy Statement
Equity Award Grant Policy
Under our Equity Award Grant Policy, ourWe have a policy that annual grants to employees are approved at a meeting of our Compensationby the Committee held in or around the third or fourth week of January each year. The policy specifies theyear, with an effective grant date for such awards as immediately following the closing of the NYSE on the second trading day after the Companywe publicly releases itsrelease financial results for the prior year. We believe this policy provides the necessary certainty and transparency for both employees and stockholders, while allowing the Compensation Committee desired flexibility.
Our Compensation Committee approves equity awards in dollar values. To the extent these awards are paid in the form of full-value awards (either shares of restricted stock and/or LTIP units), the number of shares/units granted is calculated by dividing the dollar value of the approved awards by the closing market price on the NYSE of a share of our common stock on the effective date of grant. To the extent these awards are made in the form of stock options, the number of shares underlying option grants is determined by dividing the dollar value of the approved awards by the fair value of aten-year option with the exercise price equal to the closing market price on the NYSE of a share of our common stock on the effective date of grant, as calculated by an independent valuation expert in accordance with ASC Topic 718 using assumptions approved by the Compensation Committee. The Equity Award Grant Policy diddoes not apply to MYLTIP awards because they are not “full-value” awards upon issuance and their value depends on our future TSR performance; accordingly, consistent with past practice for performance-based equity awards, the Compensation Committee determined that the MYLTIP baseline share price, from which TSR performance is measured, should be based on the average closing stock price for the five trading days prior to and including the effective date of grant.
LTIP Units
Since 2003, we have used a class of partnership interests in our Operating Partnership, called long term incentive units, or LTIP units, as a form of equity-based award for annual long-term incentive equity compensation. LTIP units are designed to qualify as “profits interests” in the Operating Partnership for federal income tax purposes, meaning that initially they are not economically equivalent in value to a share of our common stock, but over time can increase in value toone-for-one parity with common stock by operation of special tax rules applicable to profits interests. LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while allowing them to enjoy a more favorable income tax treatment. Each LTIP unit awarded is deemed equivalent to an award of one share of common stock reserved under our incentive equity plan. The key difference between LTIP units and restricted stock is that at the time of award, LTIP units do not have full economic parity with common units, but can achieve such parity over time upon the occurrence of specified events in accordance with partnership tax rules. Until and unless such parity is reached, the value that an executive will realize for a given number of vested LTIP units is less than the value of an equal number of shares of our common stock.
56 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
IX. OTHER COMPENSATION POLICIES
Under the 2014 MYLTIP, 2015 MYLTIP2016, 2017 and 20162018 MYLTIP, during the performance period holders of LTIP units will receive distributions equal toone-tenth ( 1⁄ (1 / 10th) of the amount of regular quarterly distributions paid on a common unit, but will not receive any special distributions. After the end of the performance period, holders of earned LTIP units, both vested and unvested, will be entitled to receive distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a common unit (which equal per share dividends (both regular and special) on our common stock). LTIP units awarded with time-based vesting conditions only, both vested and unvested, are entitled to receive distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a common unit.
Employment Agreements
We have employment agreements with each of our NEOs. (See “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control” beginning on page 62.69.) TheseFor NEOs other than Mr. Thomas, these agreements provide for a certain level of severance, generally the sum of base salary plus the prior year’s cash
BOSTON PROPERTIES, INC. |2016 Proxy Statement 51
bonus, 12 additional months of vesting in equity-based awards and participation in our health plan for up to 12 months, in the event of a termination of employment by us without cause or by the executives for good reason. The employment agreement with Mr. Thomas provides for stipulated severance benefits in lieu of participation in severance plans for which other NEOs are eligible. In return, each executive agrees, during the term of employment and for one year thereafter, not to compete with us, solicit our tenants or employees or interfere with our relationship with our tenants, suppliers, contractors, lenders, employees or with any governmental agency. We believe that these agreements are fair to the executives and to our stockholders and, because the severance benefits are negotiated at the time of the agreement, avoid the need for protracted negotiations in the event of termination.
Change in Control Arrangements
We have an employment agreement with Mr. Thomas that provides him with cash severance and certain benefits in the event of his termination under certain circumstances within 24 months following a change in control. Although Mr. Thomas was entitled to “single-trigger” vesting upon a change in control under his original employment agreement, he has agreed to be subject to the “double-trigger” vesting policy adopted for all time-based LTI equity awards made in 2015 or later. We also have two change in control severance plans, one for our President, Senior Executive Vice President and Executive Vice Presidents, and the other for our Senior Vice Presidents and those Vice Presidents with ten (10) or more years of tenure with us. These plans also provide cash severance and certain benefits in the event of termination of employment under certain circumstances within 24 months following a change in control. The change in control severance provision in Mr. Thomas’ employment agreement and the two change in control severance plans are “double trigger” arrangements, providing severance benefits only upon involuntary termination or constructive termination of the executive officer following a change in control. (See “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control” beginning on page 62.69.) Officers who became eligible under the two severance plans described above prior to their amendment in January 2014 upon adoption by the Compensation Committee of a formal “no taxgross-up” policy are entitled to agross-up payment in the event they become subject to the 20% golden parachute excise tax. This was market practice when these plans were adopted in 1998. Mr. Thomas is not entitled to a taxgross-up payment under his employment agreement.
In our experience, change in control cash severance protection for executive officers is common in the REIT industry. Our Compensation Committee believes it is fair to provide severance protection in the event of an involuntary termination or constructive termination of employment following a change in control because very often senior manager positions are eliminated following a change in control. By agreeing up front to provide severance benefits in the event of an involuntary termination or constructive
BOSTON PROPERTIES, INC. |2018 Proxy Statement 57
COMPENSATION DISCUSSION AND ANALYSIS
IX. OTHER COMPENSATION POLICIES
termination of employment following a change in control, the Compensation Committee believes we can reinforce and encourage the continued attention and dedication of senior management to their assigned duties without distraction in the face of an actual or threatened change in control and ensure that management is motivated to negotiate the best consideration for our stockholders. For treatment of equity awards in the event of a change in control, please see“– Double-Trigger Acceleration of Vesting of Equity Awards upon a Change of ControlControl”” above.
Perquisites
We provide Messrs. Linde, Ritchey and Koop a monthly car allowance of $750 and we provide all of our executive officers a designated parking space. Mr. Thomas’ employment agreement provides that he is entitled to the use of a Company-owned or leased vehicle, but Mr. Thomas has declined this benefit in 2015.at all times since 2013. Apart from these arrangements, we do not provide any other perquisites to our executive officers.
Deferred Compensation Plan
We offer a deferred compensation plan that enables our executives to defer a portionup to 20% of their base salaries and bonuses. The amounts deferred are not included in the executive’s current taxable income and, therefore, are not currently deductible by us. The executives select from a limited number of
52 BOSTON PROPERTIES, INC. |2016 Proxy Statement
mutual funds which serve as measurement funds, and the deferred amounts are increased or decreased to correspond to the market value of the mutual fund investments. Because the measurement funds are publicly traded securities, we do not consider any of the earnings credited under the deferred compensation plan to be “above market.” We do not provide any matching contribution to any executive officer who participates in this plan, other than a limited amount to make up for any loss of matching contributions under our Section 401(k) plan. We have made this plan available to our executives in order to ensure that our benefits are competitive. See “Compensation of Executive Officers – Nonqualified Deferred Compensation” beginning on page 60.68.
Retirement and Health and Welfare Benefits
We have never had a traditional or defined benefit pension plan. We maintain a Section 401(k) retirement plan in which all salaried employees can participate which provides a Company matching contribution of 200% of the first 3% of compensation contributed to the plan (utilizing earnings not in excess of an amount established by the Internal Revenue Service ($265,000270,000 in 2015)2017)). Other benefits, such as health and dental plans, group term life insurance, short- and long-term disability insurance and travel accident insurance, are also available generally to all of our salaried employees. Our executives participate in Company-sponsored benefit programs available broadly to generally all of our salaried employees, including our employee stock purchase plan and our Section 401(k) plan.
Deductibility of Executive Compensation
The Compensation Committee’s policy is to consider the tax treatment of compensation paid to our executive officers while simultaneously seeking to provide our executives with appropriate rewards for their performance. Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), a publicly-held corporation may not deduct compensation of more than $1 million paid to any “covered employee” unless certain exceptions are met primarily related to performance-based compensation. Substantially all of the services rendered by our executive officers were performed on behalf of our operating partnership or its subsidiaries. The Internal Revenue Service has issued a series of private letter rulings which indicate that compensation paid by an operating partnership to executive officers of a REIT that serves as its general partner is not subject to limitation under Section 162(m) to the extent such
58 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
IX. OTHER COMPENSATION POLICIES
compensation is attributable to services rendered to the operating partnership. We have not obtained a ruling on this issue, but have no reason to believe that the same conclusion would not apply to us. To the extent that compensation paid to our executive officers is subject to and does not qualify for deduction under Section 162(m), our Compensation Committee is prepared to exceed the limit on deductibility under Section 162(m) to the extent necessary to establish compensation programs that we believe provide appropriate incentives and reward our executives relative to their performance. Because we qualify as a REIT under the Code, we generally distribute at least 100% of our net taxable income each year and therefore do not pay federal income tax. As a result, and based on the level of cash compensation paid to our executive officers, the possible loss of a federal tax deduction would not be expected to have a material impact on us.
Accounting for Stock-Based Compensation
We account for stock-based awards in accordance with the requirements of ASC Topic 718.
BOSTON PROPERTIES, INC. |2016 Proxy Statement 53
Assessment of Compensation-Related Risks
The Compensation Committee is responsible for overseeing the risks relating to compensation policies and practices affecting senior management on an ongoing basis. The Compensation Committee believes that because of the following there is a low likelihood that our compensation policies and practices would encourage excessive risk-taking:
RISK MITIGATION FACTORSRisk Mitigation Factors
• | our policies and programs are generally intended to encourage executives to focus on |
• | overall compensation is maintained at levels that are competitive with the |
• | the mix of compensation rewards long-term performance with a significantat-risk |
• | variable pay is based on the achievement of a variety of |
• | all equity awards are subject to multi-year |
• | executive officers are subject to minimum stock ownership guidelines and limitations on trading in our securities, including prohibitions on hedging and |
• | a clawback policy permits the Company to recoup compensation paid on the basis of financial results that are subsequently restated. |
BOSTON PROPERTIES, INC. |2018 Proxy Statement 59
The Compensation Committee of Boston Properties has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by the Compensation Committee:
Carol B. Einiger, Chair
Bruce W. Duncan
David A. Twardock Chair
Carol B. Einiger
Dr. Jacob A. Frenkel
5460 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation TableSUMMARY COMPENSATION TABLE
The following table sets forthshows the compensation paid for 2015, 2014 and 2013 to each of our NEOs.NEOs in accordance with Item 402(c) of RegulationS-K.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(5) | Option Awards ($)(5) | All Other Compensation ($)(10) | Total ($)(11) | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(6) | Total ($) | |||||||||||||||||||||||||||||||||||||||
Owen D. Thomas Chief Executive Officer | 2015 | 773,077 | 2,558,333 | (1) | 5,421,975 | (6) | 0 | 16,380 | 8,769,765 |
|
2017
|
|
|
875,000
|
|
|
2,425,000
|
|
|
6,745,617
|
(3)
|
|
16,680
|
|
|
10,062,297
|
| |||||||||||||||||||||||||
2014 | 750,000 | 1,972,500 | (2) | 3,698,841 | (7) | 0 | 16,200 | 6,437,541 |
|
2016
|
|
|
867,308
|
|
|
2,558,333
|
|
|
6,560,000
|
(4)
|
|
16,380
|
|
|
10,002,021
|
| ||||||||||||||||||||||||||
2013 | 559,615 | 1,293,750 | (3)(4) | 3,393,486 | (8) | 900,000 | (9) | 60,750 | 6,207,601 |
|
2015
|
|
|
773,077
|
|
|
2,558,333
|
|
|
5,421,975
|
(5)
|
|
16,380
|
|
|
8,769,765
|
| |||||||||||||||||||||||||
Douglas T. Linde President | 2015 | 713,462 | 1,805,000 | (1) | 4,418,624 | (6) | 0 | 32,700 | 6,969,786 |
|
2017
|
|
|
725,000
|
|
|
1,935,000
|
|
|
4,777,500
|
(3)
|
|
33,600
|
|
|
7,471,100
|
| |||||||||||||||||||||||||
2014 | 693,462 | 1,686,377 | (2) | 3,975,284 | (7) | 0 | 32,400 | 6,387,523 |
|
2016
|
|
|
724,231
|
|
|
1,847,500
|
|
|
4,605,120
|
(4)
|
|
33,300
|
|
|
7,210,151
|
| ||||||||||||||||||||||||||
2013 | 671,154 | 1,487,500 | (3) | 3,382,500 | (8) | 717,500 | (9) | 31,800 | 6,290,454 |
|
2015
|
|
|
713,462
|
|
|
1,805,000
|
|
|
4,418,624
|
(5)
|
|
32,700
|
|
|
6,969,786
|
| |||||||||||||||||||||||||
Raymond A. Ritchey Senior Executive Vice | 2015 | 708,462 | 1,495,000 | (1) | 3,853,737 | (6) | 0 | 29,088 | 6,086,287 |
|
2017
|
|
|
720,000
|
|
|
2,080,000
|
|
|
4,077,125
|
(3)
|
|
33,096
|
|
|
6,910,221
|
| |||||||||||||||||||||||||
2014 | 688,462 | 1,480,000 | (2) | 3,719,578 | (7) | 0 | 28,908 | 5,916,948 |
|
2016
|
|
|
719,231
|
|
|
1,555,000
|
|
|
3,915,844
|
(4)
|
|
32,796
|
|
|
6,222,871
|
| ||||||||||||||||||||||||||
2013 | 668,462 | 1,386,250 | (3) | 2,988,067 | (8) | 669,375 | (9) | 28,608 | 5,740,762 |
|
2015
|
|
|
708,462
|
|
|
1,495,000
|
|
|
3,853,737
|
(5)
|
|
29,088
|
|
|
6,086,287
|
| |||||||||||||||||||||||||
Michael E. LaBelle Executive Vice President, Chief Financial Officer and Treasurer | 2015 | 488,846 | 830,000 | (1) | 1,540,000 | (6) | 0 | 23,700 | 2,882,546 |
|
2017
|
|
|
500,000
|
|
|
1,325,000
|
|
|
2,100,000
|
(3)
|
|
24,600
|
|
|
3,949,600
|
| |||||||||||||||||||||||||
2014 | 473,846 | 785,000 | (2) | 1,323,988 | (7) | 0 | 23,400 | 2,606,234 |
|
2016
|
|
|
499,231
|
|
|
900,000
|
|
|
1,929,312
|
(4)
|
|
24,300
|
|
|
3,352,843
|
| ||||||||||||||||||||||||||
2013 | 456,539 | 665,000 | (3) | 1,012,452 | (8) | 150,000 | (9) | 22,800 | 2,306,791 |
|
2015
|
|
|
488,846
|
|
|
830,000
|
|
|
1,540,000
|
(5)
|
|
23,700
|
|
|
2,882,546
|
| |||||||||||||||||||||||||
Bryan J. Koop Executive Vice President, | 2015 | 388,846 | 821,250 | (1) | 1,243,150 | (6) | 0 | 32,700 | 2,485,946 |
|
2017
|
|
|
400,000
|
|
|
1,280,000
|
|
|
1,316,874
|
(3)
|
|
33,600
|
|
|
3,030,474
|
| |||||||||||||||||||||||||
Bryan J. Koop Executive Vice President, Boston Region |
|
2016
|
|
|
399,231
|
|
|
835,000
|
|
|
1,295,910
|
(4)
|
|
33,300
|
|
|
2,563,441
|
| ||||||||||||||||||||||||||||||||||
|
2015
|
|
|
388,846
|
|
|
821,250
|
|
|
1,243,150
|
(5)
|
|
32,700
|
|
|
2,485,946
|
|
(1) |
(2) |
A discussion of the assumptions used in calculating these values can be found in Note 17 to our |
Represents the |
Represents the |
Represents the |
BOSTON PROPERTIES, INC. |2016 Proxy Statement 55
BOSTON PROPERTIES, INC. |2018 Proxy Statement 61
COMPENSATION OF EXECUTIVE OFFICERS
The table below shows the components of “All Other Compensation” for |
Name | Life ($) | 401(k) Company Match ($) | Car Allowance ($) | Parking ($) | Total ($) | |||||||||||||||
Mr. Thomas | 480 | 15,900 | — | — | 16,380 | |||||||||||||||
Mr. Linde | 480 | 15,900 | 9,000 | 7,320 | 32,700 | |||||||||||||||
Mr. Ritchey | 480 | 15,900 | 9,000 | 3,708 | 29,088 | |||||||||||||||
Mr. LaBelle | 480 | 15,900 | — | 7,320 | 23,700 | |||||||||||||||
Mr. Koop | 480 | 15,900 | 9,000 | 7,320 | 32,700 |
Name | Life Insurance ($) | 401(k) Company Match ($) | Car Allowance ($) | Parking ($) | Total ($) | |||||||||||||||
Mr. Thomas
|
|
480
|
|
|
16,200
|
|
|
—
|
|
|
—
|
|
|
16,680
|
| |||||
Mr. Linde
|
|
480
|
|
|
16,200
|
|
|
9,000
|
|
|
7,920
|
|
|
33,600
|
| |||||
Mr. Ritchey
|
|
480
|
|
|
16,200
|
|
|
9,000
|
|
|
7,416
|
|
|
33,096
|
| |||||
Mr. LaBelle
|
|
480
|
|
|
16,200
|
|
|
—
|
|
|
7,920
|
|
|
24,600
|
| |||||
Mr. Koop
|
|
480
|
|
|
16,200
|
|
|
9,000
|
|
|
7,920
|
|
|
33,600
|
|
5662 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
2015 Grants of Plan-Based Awards2017 GRANTS OF PLAN-BASED AWARDS
The following table provides additional information about the plan-based awards granted to our NEOs during the year ended December 31, 2015.2017.
Name | Grant Date | Date of Compensation Committee Approval(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | Grant Date | Date of Compensation Committee Approval(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||
Threshold ($)(2) | Target ($)(2) | Maximum ($)(2) | Threshold ($)(2) | Target ($)(2) | Maximum ($)(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Owen D. Thomas | 2/3/2015 | 1/21/2015 | — | — | — | 9,744 | 1,276,350 |
|
2/3/2017
|
|
|
1/25/2017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,132
|
|
|
1,595,617
|
| ||||||||||||||||||||||||||||
2/5/2015 | 1/21/2015 | 2,159,180 | 4,318,359 | 10,795,898 | — | 4,145,625 |
|
2/7/2017
|
|
|
1/25/2017
|
|
|
0
|
|
|
6,204,819
|
|
|
12,409,639
|
|
|
—
|
|
|
5,150,000
|
| |||||||||||||||||||||||||||||
Douglas T. Linde | 2/3/2015 | 1/21/2015 | — | — | — | 7,789 | 1,104,656 |
|
2/3/2017
|
|
|
1/25/2017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,136
|
|
|
1,194,375
|
| ||||||||||||||||||||||||||||
2/5/2015 | 1/21/2015 | 1,726,025 | 3,452,050 | 8,630,125 | — | 3,313,968 |
|
2/7/2017
|
|
|
1/25/2017
|
|
|
0
|
|
|
4,317,018
|
|
|
8,634,036
|
|
|
—
|
|
|
3,583,125
|
| |||||||||||||||||||||||||||||
Raymond A. Ritchey | 2/3/2015 | 1/21/2015 | — | — | — | 9,946 | 1,234,237 |
|
2/3/2017
|
|
|
1/25/2017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,312
|
|
|
1,330,875
|
| ||||||||||||||||||||||||||||
2/5/2015 | 1/21/2015 | 1,364,323 | 2,728,646 | 6,821,615 | — | 2,619,500 |
|
2/7/2017
|
|
|
1/25/2017
|
|
|
0
|
|
|
3,308,735
|
|
|
6,617,470
|
|
|
—
|
|
|
2,746,250
|
| |||||||||||||||||||||||||||||
Michael E. LaBelle | 2/3/2015 | 1/21/2015 | — | — | — | 5,429 | 770,000 |
|
2/3/2017
|
|
|
1/25/2017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,425
|
|
|
840,000
|
| ||||||||||||||||||||||||||||
2/5/2015 | 1/21/2015 | 401,042 | 802,083 | 2,005,208 | — | 770,000 |
|
2/7/2017
|
|
|
1/25/2017
|
|
|
0
|
|
|
1,518,072
|
|
|
3,036,145
|
|
|
—
|
|
|
1,260,000
|
| |||||||||||||||||||||||||||||
Bryan J. Koop | 2/3/2015 | 1/21/2015 | — | — | — | 4,557 | 596,900 |
|
2/3/2017
|
|
|
1/25/2017
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,221
|
|
|
634,374
|
| ||||||||||||||||||||||||||||
2/5/2015 | 1/21/2015 | 336,589 | 673,177 | 1,682,943 | — | 646,250 |
|
2/7/2017
|
|
|
1/25/2017
|
|
|
0
|
|
|
822,289
|
|
|
1,644,578
|
|
|
—
|
|
|
682,500
|
|
(1) | For a discussion of the Company’s policy with respect to the effective grant dates for annual equity-based awards, see “Compensation Discussion and Analysis – Other Compensation Policies – Equity Award Grant Policy” beginning on page |
(2) | Represents |
(3) | Stock awards were made in the form of shares of restricted common stock and/or LTIP units at the election of each NEO. Each NEO |
BOSTON PROPERTIES, INC. |2018 Proxy Statement 63
COMPENSATION OF EXECUTIVE OFFICERS
(4) | The amounts included in this column represent the full grant date fair value of the restricted common stock and LTIP unit awards and |
64BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 57
COMPENSATION OF EXECUTIVE OFFICERS
Outstanding Equity Awards at DecemberOUTSTANDING EQUITY AWARDS AT DECEMBER 31, 20152017
The following table shows thesets forth information regarding outstanding equity awards held by our NEOs as of December 31, 2015.2017 pursuant to Item 402(f) of RegulationS-K.
Option Awards(1)(2) | Stock Awards(1) | Option Awards(1) | Stock Awards(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of or Units of Stock | Market Value of | Equity Awards: Number of | Equity Plan Awards: Market or Units or | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Owen D. Thomas | 27,141 | 27,141 | (5) | 95.69 | 4/2/2023 | 54,282 | — | 95.69 | 4/2/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12,116 | (8) | 1,545,275 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,537 | (9) | 833,729 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9,744 | (10) | 1,242,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
17,476 | (14) | 2,228,889 | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
22,834 | (15) | 2,912,248 | (15) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9,816 | (16) | 1,251,933 | (16) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9,540 | (3) | 1,240,486 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,179 | (4) | 283,335 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,066 | (5) | 398,672 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,872 | (6) | 633,506 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11,247 | (7) | 1,462,447 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
13,132 | (8) | 1,707,554 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
16,897 | (9) | 2,197,117 | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
22,232 | (10) | 2,890,827 | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
24,279 | (11) | 3,156,998 | (11) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Douglas T. Linde | 27,455 | — | 86.86 | 1/28/2021 | 27,455 | — | 86.86 | 1/28/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
25,857 | 8,619 | (6) | 100.77 | 2/3/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
20,546 | 20,546 | (7) | 98.46 | 2/1/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,846 | (11) | 618,059 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10,240 | (12) | 1,306,010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,960 | (9) | 887,678 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7,789 | (10) | 993,409 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
25,409 | (13) | 3,240,664 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
13,302 | (14) | 1,696,537 | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
24,311 | (15) | 3,100,625 | (15) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7,847 | (16) | 1,000,806 | (16) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Raymond A. Ritchey(19) | 24,739 | — | 86.86 | 1/28/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
32,120 | — | 100.77 | 2/3/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
39,943 | — | 98.46 | 2/1/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
23,715 | (13) | 3,024,611 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12,410 | (14) | 1,582,771 | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
20,052 | (15) | 2,557,432 | (15) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,202 | (16) | 791,003 | (16) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
34,476 | — | 100.77 | 2/3/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
41,092 | — | 98.46 | 2/1/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7,262 | (3) | 944,278 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,320 | (4) | 301,670 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,264 | (5) | 424,418 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,895 | (6) | 506,467 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7,896 | (7) | 1,026,717 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9,136 | (8) | 1,187,954 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
13,507 | (9) | 1,756,315 | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
15,607 | (10) | 2,029,378 | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
16,892 | (11) | 2,196,467 | (11) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Raymond A. Ritchey(12) | 24,739 | — | 86.86 | 1/28/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
32,120 | — | 100.77 | 2/3/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
39,943 | — | 98.46 | 2/1/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,775 | (3) | 880,953 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,693 | (5) | 350,171 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
10,677 | (9) | 1,388,330 | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11,835 | (10) | 1,538,905 | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12,947 | (11) | 1,683,498 | (11) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael E. LaBelle | 5,811 | 1,938 | (6) | 100.77 | 2/3/2022 | 7,749 | — | 100.77 | 2/3/2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,294 | 4,294 | (7) | 98.46 | 2/1/2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1,090 | (11) | 139,019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,141 | (12) | 273,063 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,770 | (9) | 608,366 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5,429 | (10) | 692,415 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11,857 | (13) | 1,512,242 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,489 | (14) | 827,607 | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5,553 | (15) | 708,230 | (15) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1,823 | (16) | 232,505 | (16) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bryan J. Koop | 5,616 | — | 86.86 | 1/28/2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5,300 | 1,767 | (6) | 100.77 | 2/3/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,133 | 4,134 | (7) | 98.46 | 2/1/2023 | 994 | (11) | 126,775 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,061 | (12) | 262,860 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,816 | (9) | 486,693 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,557 | (10) | 581,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9,740 | (13) | 1,242,240 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5,110 | (14) | 651,729 | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,443 | (15) | 566,660 | (15) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1,530 | (16) | 195,136 | (16) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8,588 | — | 98.46 | 2/1/2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,542 | (3) | 460,566 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1,590 | (4) | 206,748 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
746 | (5) | 97,002 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,715 | (6) | 353,031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5,345 | (7) | 695,010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,425 | (8) | 835,443 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3,138 | (9) | 408,034 | (9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5,282 | (10) | 686,818 | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5,940 | (11) | 772,378 | (11) |
BOSTON PROPERTIES, INC. |2018 Proxy Statement 65
COMPENSATION OF EXECUTIVE OFFICERS
Option Awards(1) | Stock Awards(1) | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||||||||||||||||||||||||||||
Bryan J. Koop | 5,616 | — | 86.86 | 1/28/2021 | ||||||||||||||||||||||||||||||||
7,067 | — | 100.77 | 2/3/2022 | |||||||||||||||||||||||||||||||||
8,267 | — | 98.46 | 2/1/2023 | |||||||||||||||||||||||||||||||||
2,789 | (3) | 362,654 | ||||||||||||||||||||||||||||||||||
1,272 | (4) | 165,398 | ||||||||||||||||||||||||||||||||||
597 | (5) | 77,628 | ||||||||||||||||||||||||||||||||||
2,279 | (6) | 296,338 | ||||||||||||||||||||||||||||||||||
4,517 | (7) | 587,346 | ||||||||||||||||||||||||||||||||||
5,221 | (8) | 678,887 | ||||||||||||||||||||||||||||||||||
2,634 | (9) | 342,499 | (9) | |||||||||||||||||||||||||||||||||
2,976 | (10) | 386,969 | (10) | |||||||||||||||||||||||||||||||||
3,217 | (11) | 418,307 | (11) |
(1) | This table does not include LTIP unit and restricted common stock |
58 BOSTON PROPERTIES, INC. |2016 Proxy Statement
The market value of such holdings is based on the closing price of our common stock as reported on the NYSE on December |
On January 31, 2014, these NEOs received awards of LTIP units and/or shares of restricted common stock under the 2012 Plan as follows: Mr. Thomas – 8,716 LTIP units; Mr. Linde – an aggregate of 9,280 LTIP units and shares of restricted common stock; Mr. LaBelle – 6,360 LTIP units; and Mr. Koop – 5,088 LTIP units. These LTIP units and restricted common shares vest ratably over four years, with 25% of the total award vesting on January 15 of each year beginning January 15, 2015, subject to acceleration under certain circumstances. |
On February 4, 2014, these NEOs received 2014 MYLTIP awards. On February 3, 2017, the measurement period for the 2014 MYLTIP awards ended and the Company’s TSR was sufficient for employees to earn and therefore become eligible to vest in a portion of the 2014 MYLTIP awards. These earned 2014 MYLTIP awards vested 50% on February 3, 2017 and 50% on February 3, 2018, subject to exceptions discussed under “– Potential Payments Upon Termination or Change in Control” below. |
(6) | On February 3, 2015, these NEOs received awards of LTIP units and/or shares of restricted common stock under the 2012 Plan as follows: Mr. Thomas – 9,744 LTIP units; Mr. Linde – 7,789 shares of restricted common stock; Mr. LaBelle – 5,429 shares of restricted common stock; and Mr. Koop – 4,557 LTIP units. These LTIP units and restricted common shares vest ratably over four years, with 25% of the total award vesting on January 15 of each year beginning January 15, 2016, subject to acceleration under certain circumstances. |
On February |
66 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
On February |
|
BOSTON PROPERTIES, INC. |2016 Proxy Statement 59
|
On February 5, 2015, these NEOs received 2015 MYLTIP awards. |
(10) | On February 10, 2016, these NEOs received 2016 MYLTIP awards. The measurement period for assessing performance ends on February 9, 2019. In accordance with SEC rules, the number of equity incentive plan awards is based on achieving “threshold” performance goals. If our performance had continued through the end of the performance period at the same rate as had occurred from the beginning of the performance period through December 31, 2017, our NEOs would earn approximately 43% of target. 2016 MYLTIP awards earned based on performance vest 50% on February 9, 2019 and 50% on February 9, 2020, subject to exceptions discussed under“– Potential Payments Upon Termination or Change in Control” below. |
(11) | On February 7, 2017, these NEOs received 2017 MYLTIP awards. The measurement period for assessing performance ends on February 6, 2020. In accordance with SEC rules, the number of equity incentive plan awards is based on achieving “threshold” performance goals. If our performance had continued through the end of the performance period at the same rate as had occurred from the beginning of the performance period through December 31, 2017, our NEOs would earn approximately 46% of target. 2017 MYLTIP awards earned based on performance vest 50% on February 6, 2020 and 50% on February 6, 2021, subject to exceptions discussed under “– Potential Payments Upon Termination or Change in Control” below. |
All of Mr. Ritchey’s |
2015 Option Exercises and Stock Vested2017 OPTION EXERCISES AND STOCK VESTED
The following table sets forth the aggregate number of options to purchase shares of our common stock exercised by our NEOs in 20152017 and the aggregate number of shares of common stock and LTIP units that vested in 2015.2017. The Value Realized on Exercise is the product of (1) the fair market value of a share of common stock on the date of exercise minus the exercise price, multiplied by (2) the number of shares of common stock underlying exercised options. Except as noted below, the Value Realized on Vesting is the product of (1) the closing price on the NYSE of a share of common stock on the vesting date (or, if the vesting date was not a trading day, the immediately preceding trading date), multiplied by (2) the number of shares/LTIP units vesting. In each case, the value realized is before payment of any applicable taxes and brokerage commissions.
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of on Vesting | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||||||||||
Owen D. Thomas | — | — | 8,237 | 1,152,933 |
|
—
|
|
|
—
|
|
|
22,259
|
|
|
2,877,680
|
| ||||||||||||||||
Douglas T. Linde | — | — | 25,888 | 3,631,844 |
|
—
|
|
|
—
|
|
|
35,852
|
|
|
4,658,538
|
| ||||||||||||||||
Raymond A. Ritchey | — | — | 17,851 | 2,524,652 |
|
—
|
|
|
—
|
|
|
33,201
|
|
|
4,338,770
|
| ||||||||||||||||
Michael E. LaBelle | 5,538 | 242,654 | 8,748 | 1,228,332 |
|
—
|
|
|
—
|
|
|
16,221
|
|
|
2,106,903
|
| ||||||||||||||||
Bryan J. Koop | — | — | 7,592 | 1,065,834 |
|
—
|
|
|
—
|
|
|
13,431
|
|
|
1,744,198
|
|
BOSTON PROPERTIES, INC. |2018 Proxy Statement 67
COMPENSATION OF EXECUTIVE OFFICERS
Nonqualified Deferred CompensationNONQUALIFIED DEFERRED COMPENSATION
We provide our executives with the opportunity to defer up to 20% of their base salary and cash bonuses. Deferrals are credited with earnings or losses based upon the executive’s selection of one or more of 28 measurement funds which are all publicly traded mutual funds. Executives may change their selection of measurement funds on a daily basis.
60 BOSTON PROPERTIES, INC. |2016 Proxy Statement
The table below summarizes the annual rates of return for the year ended December 31, 20152017 for the 28 measurement funds:
Name of Fund | 2015 Rate of Return (%) | Name of Fund | 2015 Rate of Return (%) | |||||||
Allianz NFJ Dividend Value Fund | -8.22 | T. Rowe Price Mid-Cap Value | -3.34 | |||||||
American Beacon Small Cap Value | -4.39 | Virtus Real Estate Securities A | 1.05 | |||||||
Artisan Mid Cap | 2.63 | T. Rowe Price Retirement 2005 | -0.75 | |||||||
Vanguard Small-Cap Index(1) | -3.40 | T. Rowe Price Retirement 2010 | -0.82 | |||||||
T. Rowe Price Dividend Growth | 2.42 | T. Rowe Price Retirement 2015 | -0.58 | |||||||
Dodge & Cox International | -10.99 | T. Rowe Price Retirement 2020 | -0.36 | |||||||
Domini Social Equity | -7.35 | T. Rowe Price Retirement 2025 | -0.17 | |||||||
Oakmark Equity & Income | -4.36 | T. Rowe Price Retirement 2030 | -0.02 | |||||||
PIMCO Low Duration Bond | 0.55 | T. Rowe Price Retirement 2035 | 0.13 | |||||||
Dodge & Cox Income | -0.73 | T. Rowe Price Retirement 2040 | 0.21 | |||||||
Vanguard Total Stock Market Index | 0.45 | T. Rowe Price Retirement 2045 | 0.24 | |||||||
Vanguard Total Bond Market Index | 0.11 | T. Rowe Price Retirement 2050 | 0.26 | |||||||
Vanguard Total International Stock Index | -4.00 | T. Rowe Price Retirement 2055 | 0.26 | |||||||
T. Rowe Price Growth Stock | 10.96 | T. Rowe Price Retirement Balanced | -0.75 |
Name of Fund | 2017 Rate of Return (%) | Name of Fund | 2017 Rate of Return (%) | |||||||
American Beacon Small Cap Value
|
|
7.90
|
|
T. Rowe Price Retirement 2025
|
|
17.01
|
| |||
Artisan Mid Cap
|
|
19.74
|
|
T. Rowe Price Retirement 2030
|
|
18.71
|
| |||
Dodge & Cox Income
|
|
4.28
|
|
T. Rowe Price Retirement 2035
|
|
20.07
|
| |||
Dodge & Cox International
|
|
22.24
|
|
T. Rowe Price Retirement 2040
|
|
21.19
|
| |||
Domini Impact Equity
|
|
14.28
|
|
T. Rowe Price Retirement 2045
|
|
21.55
|
| |||
Oakmark Equity & Income
|
|
13.83
|
|
T. Rowe Price Retirement 2050
|
|
21.54
|
| |||
PIMCO Low Duration Bond
|
|
1.94
|
|
T. Rowe Price Retirement 2055
|
|
21.50
|
| |||
T. Rowe Price Dividend Growth
|
|
18.59
|
|
T. Rowe Price Retirement 2060
|
|
21.45
|
| |||
T. Rowe Price Growth Stock
|
|
32.46
|
|
T. Rowe Price Retirement Balanced Fund
|
|
9.90
|
| |||
T. Rowe PriceMid-Cap Value
|
|
10.84
|
|
VanguardSmall-Cap Index
|
|
15.45
|
| |||
T. Rowe Price Retirement 2005
|
|
10.24
|
|
Vanguard Total Bond Market Index
|
|
3.54
|
| |||
T. Rowe Price Retirement 2010
|
|
11.15
|
|
Vanguard Total International Stock Index
|
|
26.68
|
| |||
T. Rowe Price Retirement 2015
|
|
12.87
|
|
Vanguard Total Stock Market Index
|
|
20.18
|
| |||
T. Rowe Price Retirement 2020
|
|
15.12
|
|
Virtus Real Estate Securities A
|
|
5.80
|
|
Benefits under the deferred compensation plan are generally paid in a lump sum upon the executive’s termination of employment prior to attainment of retirement age (age 55 with five years of service) or the executive’s death, or in a lump sum or annual installments for a period of up to 15 years (as previously selected by the executive) upon the executive’s retirement. Payment will generally start or be made by January 15 following the year of termination or retirement, or six months after the executive’s termination or retirement, whichever is later. Executives may also at the time of deferral elect a fixed distribution date, which must be at least five years after the end of the calendar year in which amounts are deferred. The deferred compensation plan also permits anin-service withdrawal of the executive’s account balance attributable topre-2005 deferrals, subject to a withdrawal penalty equal to 10% of the amount withdrawn.
68 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows deferrals made by our NEOs to the deferred compensation plan during the year ended December 31, 2015,2017, the earnings (losses) and withdrawals/distributions during the year, and the aggregate account balance of each NEO under the deferred compensation plan as of December 31, 2015.2017.
Name | Executive Contributions in 2015 ($)(1)(2) | Registrant ($) | Aggregate Earnings in 2015 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/2015($)(3) | Executive Contributions in 2017 ($)(1)(2) | Registrant Contributions in 2017 ($) | Aggregate Earnings in 2017 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/2017($)(3) | ||||||||||||||||||||||||||||||
Owen D. Thomas | 154,615 | — | -2,970 | — | 305,383 |
|
175,000
|
|
|
—
|
|
|
112,675
|
|
|
—
|
|
|
798,375
|
| ||||||||||||||||||||
Douglas T. Linde | — | — | — | — | — |
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
| ||||||||||||||||||||
Raymond A. Ritchey | 218,846 | — | -72,744 | — | 1,905,379 |
|
72,000
|
|
|
—
|
|
|
394,152
|
|
|
—
|
|
|
2,854,023
|
| ||||||||||||||||||||
Michael E. LaBelle | 24,442 | — | -19,703 | — | 828,200 |
|
—
|
|
|
—
|
|
|
193,181
|
|
|
—
|
|
|
1,124,019
|
| ||||||||||||||||||||
Bryan J. Koop | 114,912 | — | -19,159 | — | 735,711 |
|
131,500
|
|
|
—
|
|
|
127,602
|
|
|
—
|
|
|
1,205,382
|
|
(1) | These amounts do not include any contributions out of bonus payments that were made during |
BOSTON PROPERTIES, INC. |2016 Proxy Statement 61
(2) | Of the amounts reported in the contributions column, (a) |
(3) | Of the amounts reported in the aggregate balance column, (a) |
Potential Payments Upon Termination or Change in ControlPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Employment Agreements and Severance Arrangements
We have variousEach NEO’s employment and severance arrangements with us is at-will, but all of our NEOs have employment agreements that provide them the right to providereceive severance and other benefits in the event of the termination of their employment underby the Company without “cause” (as defined in the applicable employment agreement), by the NEO with “good reason” (as defined in the applicable employment agreement), or upon the occurrence of a change in control and certain circumstances.triggering events. All of the NEOs other than our CEO participate in the Company’s change in control severance plan, whereas the payments and benefits to which our CEO is entitled following a termination within twenty-four (24) months after a change in control are provided in his employment agreement. In returnconsideration for such protection,the benefits and protections afforded by the employment agreements, each NEO has agreed to be bound by confidentiality, non-competition, non-interference and non-solicitation restrictive covenants and to provide to us post-termination litigation and regulatory cooperation. In addition, our 2012 Plan and LTI equity award agreements (including MYLTIP awards) provide for vesting or forfeiture of LTI equity awards upon termination of employment of our NEOs under different circumstances, including termination without “cause” or for “good reason,” in each case both prior to and following a change in control, upon death or disability, and upon qualified retirement. The material terms of these various arrangements are summarized below.
Under theseGeneral Terms of Employment Agreements
We originally hired Mr. Thomas to be our CEO effective April 2, 2013. The initial term of Mr. Thomas’ employment arrangements,agreement was three years, with automaticone-year renewals commencing on the third and
BOSTON PROPERTIES, INC. |2018 Proxy Statement 69
COMPENSATION OF EXECUTIVE OFFICERS
fourth anniversaries of the effective date unless prior written notice of termination was given. The term of Mr. Thomas’ original employment agreement expired on April 2, 2018 on which date we entered into a new employment agreement with him. The following is a summary of Mr. Thomas’ new employment agreement:
Term. April 2, 2018 through June 30, 2023.
Duties. As CEO, Mr. Thomas reports directly to the Board of Directors, and must devote substantially all of his working time and efforts to the performance of his duties.
Board Membership. Our Board will continue to nominate Mr. Thomas forre-election as a member of the Board of Directors, while he remains CEO, and he has agreed to resign from the Board upon termination of employment.
Outside Activities. Mr. Thomas may participate as an officer or director of, or advisor to, any organization that is not engaged in commercial real estate activities (e.g., Nareit) and also engage in religious, charitable or other community activities provided that they do not materially restrict his ability to fulfill his obligations to us as an officer. Mr. Thomas may also continue serving on the Board of Lehman Brothers Holdings Inc. and may engage in “Minority Interest Passive Investments,” which are defined as acquiring, holding and exercising the voting rights associated with an investment made through (1) a non-controlling, minority interest in an entity or (2) the lending of money, in either case with the purpose or intent of obtaining a return on such investment but without management of the property or business to which the investment directly or indirectly relates and without any business or strategic consultation by Mr. Thomas.
Base Salary. $875,000, subject to annual review and may be increased but not decreased.
Target Bonus. 250% of his base salary, with the actual amount to be determined at the discretion of the Compensation Committee.
Incentive Equity. The amount shall be determined at the discretion of the Compensation Committee based on Company and individual performance and competitive peer group information. LTI equity awards may be provided in the form of stock options, restricted stock, restricted stock units and/or LTIP units and may be subject to either time-based and/or performance-based vesting as determined by the Compensation Committee.
Benefits. Mr. Thomas is entitled to participate in all of our employee benefit plans or programs as in effect from time to time for our senior executive employees, including medical/dental insurance, life insurance, disability insurance and deferred compensation plans, plus the use of a Company-owned or leased automobile.
No TaxGross-Ups. Mr. Thomas is not entitled to participate in any of the Company’s change in control severance plans or programs. As such, Mr. Thomas is not entitled to receive any taxgross-up payments, but, in the event that any payment or benefit to be paid or provided to Mr. Thomas would be subject to the golden parachute excise tax, the payments and benefits will be reduced to the extent necessary to avoid the imposition of the excise tax if doing so would result in a greaterafter-tax benefit to Mr. Thomas.
Attainment of Age 62 with 10 or More Years of Service. Future LTI equity award agreements shall provide that if Mr. Thomas is employed by us when he attains age 62 and has completed at least ten (10) years of employment with us:
regardless of whether he remains employed, the full number of LTIP units (and/or shares of common stock or other equity-based awards, if applicable) he earns (if any) under any
70 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
LTI equity awards with performance-based vesting (e.g., a MYLTIP award) shall be determined in the same manner and at the same time as otherwise would have been the case if he had remained employed through the full vesting period for the applicable award, including without limitation with respect to performance hurdles and lapse of restrictions on transfer, without any proration of the award due to service time, and with any service-based vesting requirements deemed satisfied over the relevant service-vesting schedule, so long as he agrees to be bound by the post-employmentnon-competition, non-interference andnon-solicitation covenants (which are otherwise applicable for one (1) year under the agreement) until the latest date of full vesting applicable to any performance-based award entitled to the foregoing benefits. |
Expiration of the Term. The expiration of Mr. Thomas’ agreement on June 30, 2023 will not constitute or result in a termination of employment by the Company without cause, and the severance provisions (other than retirement eligibility) shall not apply.
Restrictive Covenants. While he is an officer and for one year thereafter (or longer as provided above with respect to LTI equity awards with performance-based vesting), Mr. Thomas is prohibited from:
Mr. Thomas is also subject to confidentiality requirements and post-termination litigation and regulatory cooperation obligations.
In addition, thenon-competition provision shall not apply if Mr. Thomas’ employment is terminated following a change in control (as defined in the 2012 Plan, as amended from time to time).
Attorneys’ Fees. We have agreed to pay Mr. Thomas’ actual advisor fees (legal and tax) incurred in connection with the contemplation, preparation, negotiation and execution of his employment agreement up to a maximum of $25,000.
We also have employment agreements with our other NEOs—Messrs. Linde, Ritchey, LaBelle and Koop—under which each has agreed to devote substantially all of his business time to our business and affairs. The initial term of each of these employment agreements was two years beginning November 29, 2002 (January 24, 2008 in the case of Mr. LaBelle), with automaticone-year renewals commencing on each anniversary date unless written notice of termination is given at least 90 days prior to such date by either party. The base salary for each of these NEOs is to be reviewed annually by the Compensation Committee and may be increased but not decreased in its discretion. Each NEO is also eligible to receive a cash bonus and equity-based compensation to be determined at the discretion of the Compensation Committee.
Similar to Mr. Thomas’ employment agreement, the other NEOs’ employment agreements containnon-competition,non-interference andnon-solicitation restrictions (which shall not apply if the NEO’s employment is terminated following a change in control (as defined in the senior executive severance plan)) and permit them to participate as an officer or director of, or advisor to, any charitable or other
BOSTON PROPERTIES, INC. |2018 Proxy Statement 71
COMPENSATION OF EXECUTIVE OFFICERS
tax exempt organization only and the scope of the noncompetition provision in each employment agreement is limited to our markets at the time of termination of their employment.
Termination Provisions
Voluntary Termination; Termination with “Cause”
Upon a voluntary termination by the NEO, is terminatedother than a “good reason” termination, or a termination with “cause” by us “without cause”the Company, the NEOs are not entitled to any additional or the NEO terminatesspecial payments pursuant to their employment agreements, severance arrangements or other contractual arrangements.
Termination Without “Cause” or for “good reason,” the“Good Reason” Prior to a Change in Control
Each NEO will be entitled to receivethe following payments and benefits upon a pro-ratedtermination by the Company without “cause” or by the NEO for “good reason” prior to a change in control pursuant to their employment agreements, except for performance-based LTI equity awards, which are governed by the relevant award agreements:
• | For performance-based LTI equity awards for which the three-year performance period has ended and that have been earned (i.e., as of December 31, 2017, 2014 MYLTIP awards), unvested LTIP units will no longer be subject to forfeiture. |
• | For performance-based LTI equity awards for which the three-year performance period has not ended (i.e., as of December 31, 2017, the 2015-2017 MYLTIP awards), the number of LTIP units the NEO will earn, if any, will be determined in the same manner, with respect to the performance hurdles, and at the same time as it otherwise would have been (i.e., as of the end of the performance period or upon a change in control) and will then bepro-rated based on the portion of the three-year performance period during which the NEO was employed by us. |
Receipt of these payments and dependents may also participatebenefits (other than the pro rata target bonus and performance-based LTI equity awards) in our health planconnection with a termination without cause or for up to 18 months (24 months in the case of Mr. Thomas) after termination of employment. In addition, each NEO, other than Mr. Thomas, will be entitled to an additional 12 months of vesting of his outstanding equity awards with time-based vesting. Mr. Thomas will be entitled to full vesting of his initial equity grants with time-based vesting and an additional 24 months of vesting in his other time-based equity awards. All NEOs will also become vested on a pro-rated basis in any outstanding equity awards with performance-based vesting,good reason is subject to attainmentthe NEO’s execution of performance goals.a general release of claims with us.
If an NEO’s employment with us is terminatedTermination by reason of deaththe Company Without “Cause” or disability, he or his beneficiary will be entitled to receiveby the NEO for “Good Reason” within 24 Months after a pro-rated target bonus for the year of termination. In addition, he will become fully vestedChange in his outstanding equity awards with time-based vesting, and subject to payment of premiums, he or his spouse and dependents may participate in our health plan for up to 18 months after termination of employment. The NEO will also become fully vested in any outstanding equity awards with performance-based vesting, subject to attainment of performance goals.Control
If Mr. Thomas’ employment with us ends upon the conclusion of the initial three-year term of his employment agreement or the first year of the extended term following our non-renewal of the agreement, he will not be entitled to receive any cash severance or benefits continuation, but he will receive accelerated vesting of his equity awards to the same extent as described above forUpon a termination “without cause” or for “good reason.”
If an NEO’s employment is terminated by us “without cause”the Company without “cause” or by the NEO for “good reason” upon orreason,” in either case within 24 months afterfollowing a “changechange in control,” then such each NEO will be entitled to a pro-ratedthe payments and benefits listed below. Except in the case of Mr. Thomas’, these payments and benefits are governed by our
72 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
senior executive severance plan. Mr. Thomas does not participate in any of our severance plans; his payments are governed by his employment agreement.
62 BOSTON PROPERTIES, INC. |2016 Proxy Statement
active employees’ rate, may also participate
Pursuant to the relevant MYLTIP award agreements for performance-based LTI equity awards, the number of LTIP units earned by each NEO will be determined on the date of the change in control (see “–Change in Control without Termination”below).
In addition, each NEO other than Mr. Thomas, will be entitled to receive a taxgross-up payment in the event he becomes subject to the golden parachute excise tax (as discussed above under “Compensation Discussion and Analysis – IX. Other Compensation Policies –Gross-Up for Excess Parachute Payments”).
The Compensation Committee decidedChange in Control without Termination
Under our 2012 Plan, all time-based LTI equity awards made prior to modifyDecember 31, 2014 become fully vested upon a “change of control” (as defined in the 2012 Plan). However, time-based LTI equity awards made in 2015 or later to include “double-trigger” vesting, meaning that, if there is a “change of control” (as defined in the Company’s 2012 Plan) and the awards are not otherwise cancelled in connection with the change of control transaction, then they only become fully vested if, within 24 months after the change of control, the executive’s employment is terminated by the Company or its successor without “cause” or the executive resigns for “good reason.” Although Mr. Thomas is
Under the relevant performance-based LTI equity award agreements, in the event of a change in control prior to the end of the three-year performance period, the number of LTIP units earned, if any, will be calculated as of the date of the change in control (without proration) based on our performance through such date. Any LTIP units earned will be fully vested. In the event of a change in control following the end of the three-year performance period any LTIP units that had been earned prior to the date of the change in control will become fully vested.
Termination upon Death or Disability
Except for performance-based LTI equity awards, which are governed by the relevant award agreements, each NEO will be entitled to single-trigger vestingthe following payments and benefits upon a “changetermination upon death or disability pursuant to their employment agreements:
• | Full vesting of all performance-based LTI equity awards for which the three-year performance period has ended and that have been earned (i.e., as of December 31, 2017, 2014 MYLTIP awards). |
BOSTON PROPERTIES, INC. |2018 Proxy Statement 73
COMPENSATION OF EXECUTIVE OFFICERS
• | For performance-based LTI equity awards for which the three-year performance period has not ended, the number of LTIP units that the NEO will earn, if any, will be determined in the same manner, with respect to the performance hurdles, and at the same time as it otherwise would have been (i.e., as of the end of the performance period or upon a change in control) and the NEO will be fully vested in all of the LTIP units earned. |
Qualified Retirement
Retirement-Related Provisions inOur outstanding time-based LTI Equity Awards
In general,equity awards provide that when an employee attains age 65, or attains age 62 and completes 20 years of service with us, while still in service, the employee becomes fully vested in all time-based LTI equity awards. As of December 31, 2015,2017, Mr. Ritchey satisfied the age condition and, therefore, all of his time-based LTI equity awards had vested.
In the case of outstanding performance-based LTI equity awards granted prior to 2014for which the three-year performance period has ended and that have been earned (i.e., the 2012 OPP and 2013 MYLTIP)as of December 31, 2017, 2014 MYLTIP awards), if an employee retires after attaining age 65 or attaining age 62 with 20 years of service with us, then the employeeunvested LTIP units will become vested on a pro-rated basis, based on the number of days served in the performance period,no longer be subject to attainmentforfeiture but the NEO will not be permitted to transfer the LTIP units until they otherwise would have vested under the terms of performance goals.the awards.
In the case of performance-basedPerformance-based LTI equity awards granted underfor which the 2014three-year performance period has not ended (i.e., as of December 31, 2017, 2015-2017 MYLTIP 2015 MYLTIP and 2016 MYLTIP:awards) generally provide that:
• |
BOSTON PROPERTIES, INC. |2016 Proxy Statement 63
The following tables show potential payments and benefits that would have been provided to our NEOs upon the occurrence of a change in control and certain termination triggering events, assuming such change in control or terminating event occurred on December 31, 2015. The closing market price of our common stock on the NYSE on December 31, 2015 was $127.54 per share.
Payments Upon Termination | Qualified Retirement ($) | Involuntary Not for Cause Termination/ Good Reason Termination ($) | Involuntary or ($)(1) | Change in Control Without Termination ($)(1) | Death or ($) | |||||||||||||||
Owen D. Thomas | ||||||||||||||||||||
Bonus | — | 1,782,500 | — | — | 1,782,500 | |||||||||||||||
Severance | — | 5,495,000 | 7,871,250 | — | — | |||||||||||||||
Unvested Equity Awards(2)(3)(4) | — | 3,586,910 | 4,486,194 | 3,243,444 | 4,486,194 | |||||||||||||||
2013 MYLTIP awards(5) | — | 2,153,733 | 2,228,889 | 2,228,889 | 2,228,889 | |||||||||||||||
2014 MYLTIP awards(5) | — | 1,848,413 | 2,912,248 | 2,912,248 | 2,912,248 | |||||||||||||||
2015 MYLTIP awards(5) | — | 376,152 | 1,251,933 | 1,251,933 | 1,251,933 | |||||||||||||||
Benefits Continuation | — | 35,240 | 52,860 | — | 26,430 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise Tax Gross-Up(7) | — | — | — | — | — | |||||||||||||||
Total | — | 15,277,948 | 18,953,374 | 9,636,514 | 12,688,194 | |||||||||||||||
Douglas T. Linde | ||||||||||||||||||||
Bonus | — | 715,000 | — | — | 715,000 | |||||||||||||||
Severance | — | 2,401,377 | 6,768,877 | — | — | |||||||||||||||
Unvested Equity Awards(2)(3)(4) | — | 3,425,010 | 7,874,028 | 6,880,619 | 7,874,028 | |||||||||||||||
2013 MYLTIP awards(5) | — | 1,642,260 | 1,696,537 | 1,696,537 | 1,696,537 | |||||||||||||||
2014 MYLTIP awards(5) | — | 1,967,976 | 3,100,625 | 3,100,625 | 3,100,625 | |||||||||||||||
2015 MYLTIP awards(5) | — | 300,699 | 1,000,806 | 1,000,806 | 1,000,806 | |||||||||||||||
Benefits Continuation | — | 17,620 | 54,300 | — | 26,430 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise Tax Gross-Up | — | — | 5,704,320 | — | — | |||||||||||||||
Total | — | 10,469,942 | 26,349,493 | 12,678,587 | 14,413,426 | |||||||||||||||
Raymond A. Ritchey | ||||||||||||||||||||
Bonus | — | 710,000 | — | — | 710,000 | |||||||||||||||
Severance | — | 2,190,000 | 6,396,250 | — | — | |||||||||||||||
Unvested Equity Awards(2)(3)(4) | 3,204,611 | 1,008,204 | 3,204,611 | 3,204,611 | 3,204,611 | |||||||||||||||
2013 MYLTIP awards(5) | 1,532,134 | 1,532,134 | 1,582,771 | 1,582,771 | 1,582,771 | |||||||||||||||
2014 MYLTIP awards(5) | 2,557,432 | 1,623,210 | 2,557,432 | 2,557,432 | 2,557,432 | |||||||||||||||
2015 MYLTIP awards(5) | 764,997 | 237,662 | 791,003 | 791,003 | 791,003 | |||||||||||||||
Benefits Continuation | — | 16,018 | 49,494 | — | 24,027 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise Tax Gross-Up | — | — | 0 | — | — | |||||||||||||||
Total | 8,059,174 | 7,317,228 | 14,731,561 | 8,135,817 | 8,869,844 |
64 BOSTON PROPERTIES, INC. |2016 Proxy Statement
Payments Upon Termination | Qualified Retirement ($) | Involuntary Not for Cause Termination/ Good Reason Termination ($) | Involuntary or ($)(1) | Change in Control Without Termination ($)(1) | Death or ($) | |||||||||||||||
Michael E. LaBelle | ||||||||||||||||||||
Bonus | — | 490,000 | — | — | 490,000 | |||||||||||||||
Severance | — | 1,275,000 | 3,670,000 | — | — | |||||||||||||||
Unvested Equity Awards(2)(3)(4) | — | 1,269,700 | 3,401,854 | 2,709,439 | 3,401,854 | |||||||||||||||
2013 MYLTIP awards(5) | — | 801,129 | 827,607 | 827,607 | 827,607 | |||||||||||||||
2014 MYLTIP awards(5) | — | 449,515 | 708,230 | 708,230 | 708,230 | |||||||||||||||
2015 MYLTIP awards(5) | — | 69,858 | 232,505 | 232,505 | 232,505 | |||||||||||||||
Benefits Continuation | — | 17,620 | 54,300 | — | 26,430 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise Tax Gross-Up | — | — | 2,931,052 | — | — | |||||||||||||||
Total | — | 4,372,822 | 11,975,548 | 4,477,781 | 5,686,626 | |||||||||||||||
Bryan J. Koop | ||||||||||||||||||||
Bonus | — | 390,000 | — | — | 390,000 | |||||||||||||||
Severance | — | 1,072,500 | 2,889,500 | — | — | |||||||||||||||
Unvested Equity Awards(2)(3)(4) | — | 1,087,173 | 2,867,286 | 2,286,086 | 2,286,086 | |||||||||||||||
2013 MYLTIP awards(5) | — | 630,879 | 651,729 | 651,729 | 651,729 | |||||||||||||||
2014 MYLTIP awards(5) | — | 359,661 | 566,660 | 566,660 | 566,660 | |||||||||||||||
2015 MYLTIP awards(5) | — | 58,630 | 195,136 | 195,136 | 195,139 | |||||||||||||||
Benefits Continuation | — | 17,620 | 54,300 | — | 26,430 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise Tax Gross-Up | — | — | 2,335,551 | — | — | |||||||||||||||
Total | — | 3,616,463 | 9,710,162 | 3,699,611 | 4,116,044 |
|
BOSTON PROPERTIES, INC. |2016 Proxy Statement 65
|
In both cases, any LTIP Units that are earned will not be subject to forfeiture but the employee will not be permitted to transfer the LTIP units until they otherwise would have vested under the terms of the awards.
With respect to future grants of LTI equity awards, Mr. Thomas’ new employment agreement governs the terms and conditions of the vesting of such awards upon his attainment of age 62 with 10 or more years of service. (See “– General Terms of Employment Agreements.”)
74 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
Estimated Payments Upon Termination or Change in Control
The tables that follow show the potential payments and benefits that would have been provided to our NEOs assuming such events occurred on December 31, 2017.
Payments Upon Termination | Qualified Retirement ($) | Involuntary Not for Cause Termination/ Good Reason Termination ($) | Involuntary or Good Reason Termination Following Change in Control ($)(1) | Change in Control Without Termination ($)(1) | Death or Disability ($) | |||||||||||||||
Owen D. Thomas(2) | ||||||||||||||||||||
Bonus | — | 2,012,500 | 2,012,500 | — | 2,012,500 | |||||||||||||||
Severance | — | 6,866,666 | 9,714,166 | — | — | |||||||||||||||
Unvested Equity Awards(3)(4) | — | 4,384,741 | 5,726,001 | 1,922,494 | 5,726,001 | |||||||||||||||
2015 MYLTIP awards(5) | — | 850,781 | 878,873 | 878,873 | 878,873 | |||||||||||||||
2016 MYLTIP awards(5) | — | 1,566,630 | 2,486,174 | 2,486,174 | 2,486,174 | |||||||||||||||
2017 MYLTIP awards(5) | — | 868,119 | 2,904,350 | 2,904,350 | 2,904,350 | |||||||||||||||
Benefits Continuation | — | 42,332 | 63,498 | — | 31,749 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise TaxGross-Up(7) | — | — | — | — | — | |||||||||||||||
Total | — | 16,591,769 | 23,935,562 | 8,191,891 | 14,039,647 | |||||||||||||||
Douglas T. Linde | ||||||||||||||||||||
Bonus | — | 725,000 | — | — | 725,000 | |||||||||||||||
Severance | — | 2,572,500 | 7,513,877 | — | — | |||||||||||||||
Unvested Equity Awards(3)(4) | — | 2,562,761 | 4,391,503 | 1,670,365 | 4,391,503 | |||||||||||||||
2015 MYLTIP awards(5) | — | 680,096 | 702,552 | 702,552 | 702,552 | |||||||||||||||
2016 MYLTIP awards(5) | — | 1,099,755 | 1,745,263 | 1,745,263 | 1,745,263 | |||||||||||||||
2017 MYLTIP awards(5) | — | 604,022 | 2,020,796 | 2,020,796 | 2,020,796 | |||||||||||||||
Benefits Continuation | — | 21,166 | 64,818 | — | 31,749 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise TaxGross-Up | — | — | 5,676,775 | — | — | |||||||||||||||
Total | — | 8,265,300 | 22,265,584 | 6,138,976 | 9,616,863 | |||||||||||||||
Raymond A. Ritchey | ||||||||||||||||||||
Bonus | — | 720,000 | — | — | 720,000 | |||||||||||||||
Severance | — | 2,275,000 | 6,690,000 | — | — | |||||||||||||||
Unvested Equity Awards(3)(4)(8) | 1,231,124 | 1,231,124 | 1,231,124 | 1,231,124 | 1,231,124 | |||||||||||||||
2015 MYLTIP awards(5) | 555,358 | 537,607 | 555,358 | 555,358 | 555,358 | |||||||||||||||
2016 MYLTIP awards(5) | 1,323,445 | 833,952 | 1,323,445 | 1,323,445 | 1,323,445 | |||||||||||||||
2017 MYLTIP awards(5) | 1,496,445 | 462,937 | 1,548,787 | 1,548,787 | 1,548,787 | |||||||||||||||
Benefits Continuation | — | 19,242 | 59,046 | — | 28,863 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise TaxGross-Up | — | — | 4,377,034 | — | — | |||||||||||||||
Total | 4,606,372 | 6,079,862 | 15,934,794 | 4,658,714 | 5,407,577 |
BOSTON PROPERTIES, INC. |2018 Proxy Statement 75
COMPENSATION OF EXECUTIVE OFFICERS
Payments Upon Termination | Qualified Retirement ($) | Involuntary Not for Cause Termination/ Good Reason Termination ($) | Involuntary or Good Reason Termination Following Change in Control ($)(1) | Change in Control Without Termination ($)(1) | Death or Disability ($) | |||||||||||||||
Michael E. LaBelle | ||||||||||||||||||||
Bonus | — | 500,000 | — | — | 500,000 | |||||||||||||||
Severance | — | 1,400,000 | 4,015,000 | — | — | |||||||||||||||
Unvested Equity Awards(3)(4) | — | 1,381,309 | 2,647,800 | 764,316 | 2,647,800 | |||||||||||||||
2015 MYLTIP awards(5) | — | 157,972 | 163,188 | 163,188 | 163,188 | |||||||||||||||
2016 MYLTIP awards(5) | — | 372,238 | 590,726 | 590,726 | 590,726 | |||||||||||||||
2017 MYLTIP awards(5) | — | 212,405 | 710,614 | 710,614 | 710,614 | |||||||||||||||
Benefits Continuation | — | 21,166 | 64,818 | — | 31,749 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise TaxGross-Up | — | — | 2,741,403 | — | — | |||||||||||||||
Total | — | 4,045,090 | 11,083,549 | 2,228,844 | 4,644,077 | |||||||||||||||
Bryan J. Koop | ||||||||||||||||||||
Bonus | — | 400,000 | — | — | 400,000 | |||||||||||||||
Severance | — | 1,235,000 | 3,538,750 | — | — | |||||||||||||||
Unvested Equity Awards(3)(4) | — | 1,119,298 | 2,168,250 | 605,680 | 2,168,250 | |||||||||||||||
2015 MYLTIP awards(5) | — | 132,671 | 137,052 | 137,052 | 137,052 | |||||||||||||||
2016 MYLTIP awards(5) | — | 209,758 | 332,877 | 332,877 | 332,877 | |||||||||||||||
2017 MYLTIP awards(5) | — | 115,044 | 384,889 | 384,889 | 384,889 | |||||||||||||||
Benefits Continuation | — | 21,166 | 64,818 | — | 31,749 | |||||||||||||||
Other Benefits(6) | — | — | 150,000 | — | — | |||||||||||||||
Excise TaxGross-Up | — | — | 2,296,957 | — | — | |||||||||||||||
Total | — | 3,232,937 | 9,073,593 | 1,460,498 | 3,454,817 |
(1) | Assumes termination occurs simultaneously with a change in control. |
(2) | We entered into a new employment agreement with Mr. Thomas on April 2, 2018. |
(3) | Restricted common stock, LTIP units and LTIP units that |
(4) | Includes the following shares of restricted common stock and LTIP units (including outstanding performance-based LTI equity awards for which the three-year performance period |
• |
• | Involuntary not for cause termination or a good reason termination within 24 months following a change in control and death or disability |
76 BOSTON PROPERTIES, INC. |2018 Proxy Statement
COMPENSATION OF EXECUTIVE OFFICERS
• | Change in control without termination: Mr. Thomas – 14,785 LTIP units; Mr. Linde – an aggregate of 12,846 LTIP units and shares of restricted common stock; Mr. Ritchey – 9,468 LTIP units; Mr. LaBelle – an aggregate of 5,878 LTIP units and shares of restricted common stock; and Mr. Koop – 4,658 LTIP units. |
• | Qualified retirement: Mr. Ritchey – 9,468 LTIP units |
(5) | As of December 31, 2017 the three-year performance periods had not ended for the 2015 MYLTIP awards, 2016 MYLTIP awards and 2017 MYLTIP awards. The values set forth above relating to the number of LTIP units that would have been earned |
(6) | Includes outplacement services valued at 15% of the sum of current base salary |
(7) | Under his employment agreement, Mr. Thomas is not entitled to receive |
66 BOSTON PROPERTIES, INC. |2016 Proxy Statement
(8) | All of Mr. Ritchey’s LTIP units (other than LTIP units earned pursuant to the 2013 MYLTIP awards and 2014 MYLTIP awards) and shares of restricted common stock previously vested because he attained the age of 65. |
The above discussion and the amounts shown in the above tables do not include payments and benefits to the extent they have been earned prior to the termination of employment or are provided on anon-discriminatory basis to salaried employees upon termination of employment. These include:
• | distribution of plan balances under our 401(k) plan and thenon-qualified deferred compensation plan (see |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of RegulationS-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Thomas, our CEO:
For 2017, our last completed fiscal year:
BOSTON PROPERTIES, INC. |2018 Proxy Statement 77
COMPENSATION OF EXECUTIVE OFFICERS
Based on this information, for 2017 the ratio of the annual total compensation of Mr. Thomas to the median of the annual total compensation of all other employees was 96 to 1.
We identified the median employee by totaling (1) cash compensation (i.e., wages, overtime and bonus) as reflected on our payroll records for 2017 and (2) the value of LTI equity awards that were granted in 2017 and subject to time-based vesting, for all individuals, excluding our CEO, who we employed on December 31, 2017 (whether on a full-time, part-time, temporary or seasonal basis). In addition, we annualized the wages of full-time employees who were hired during 2017 but did not work for us the entire fiscal year. We did not make any other assumptions, adjustments, or estimates with respect to total cash compensation or LTI compensation.
After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our NEOs as set forth in the Summary Compensation Table.
In promulgating Item 402(u) of RegulationS-K, the SEC permits registrants to use reasonable estimates and certain prescribed alternative methodologies. As a result, our calculation of the CEO pay ratio may differ from the calculations used by other companies.
78 BOSTON PROPERTIES, INC. |2018 Proxy Statement
Our directors who are also employees receive no additional compensation for their services as directors. During 2015,2017, we paid ournon-employee directors:
Annual cash retainer for their services(1) | $ | 67,500 | ||
Annual cash retainer to the lead independent director(1) | $ | 15,000 | ||
Annual cash retainer to the Chair of each of the Audit Committee, Compensation Committee and NCG Committee(1) | $ | 15,000 | ||
Fee for each Board meeting attended | $1,500 | |||
Fee for each Committee meeting attended | $1,500 |
(1) | Payable in quarterly installments |
Committee attendance fees are received whether or not the committee meeting is held on the same day as a meeting of our Board of Directors.Non-employee directors also are reimbursed for reasonable expenses incurred to attend Board of Directors and committee meetings.
Ms. Einiger and Messrs. Klein, Lustig, Patricof, Seidenberg and Twardock each made an election,Non-employee directors may elect, in accordance with our 2012 Plan, and approved by our Board of Directors, to defer all cash retainer and meeting attendance fees payable to such director during 2015 and to receive his or her deferred cash compensation in the form of our common stock uponfollowing the director’s retirement from our Board of Directors. Each director is credited with the number of deferred stock units determined by dividing the amount of the cash compensation deferred during each calendar quarter by the closing market price of our common stock on the NYSE on the last trading day of the quarter. Hypothetical dividends on the deferred stock units are “reinvested” in additional deferred stock units based on the closing market price of the common stock on the cash dividend payment date. Payment of a director’s account may only be made in either a lump sum of shares of our common stock equal to the number of deferred stock units in a director’s account uponor in ten annual installments following the director’s retirement from our Board of Directors.
Additionally, in 20152017 each continuingnon-employee director was entitled to receive, on the fifth business day after the annual meeting of stockholders, a number of shares of restricted common stock or, if elected by such director, LTIP units (or a combination of both) valued at $120,000.$127,500. In addition, any newnon-employee director that is appointed to our Board of Directors other than at an annual meeting of stockholders would be entitled to receive, on the fifth business day after the appointment, a number of shares of restricted common stock (or, if offered by the Board of Directors and elected by such director, LTIP units) valued at $120,000$127,500 (prorated based on the number of months from the date the director is first appointed to our Board of Directors to the date of the Company’s next annual meeting of stockholders). These annual
Annual and initial grants of restricted common stock or, if elected by the director, LTIP units (or a combination of both) are made pursuant to a policy adopted by the Board of Directors so that the equity compensation ofnon-employee directors will be determined by a formula. The actual number of shares of restricted common stock or LTIP units that we grant is determined by dividing the fixed value of the grant by the closing market price of our common stock on the NYSE on the grant date. Pursuant to this policy, on May 27, 2015, Ms.31, 2017, Mses. Einiger and Dykstra and Messrs.
BOSTON PROPERTIES, INC. |2016 Proxy Statement 67
Duncan, Frenkel, Klein, Lustig, Patricof, Seidenberg, Turchin Twardock and ZuckermanTwardock each received 9101,050 LTIP units, shares of restricted common stock or a combination of both. Annual and initial grants of LTIP units and restricted common stock will vest 100% on the earlier of (1) the first anniversary of the grant date and (2) the date of the next annual meeting of stockholders.
In addition to the foregoing compensation for non-employee directors, beginning in 2015, Mr. Zuckerman is entitled to $350,000 per year for serving as Chairman. One-third ( 1⁄3rd) of this amount will be payable in equal quarterly cash installments and two-thirds ( 2⁄3rds) will be payable in shares of restricted common stock, or at his election, LTIP units, on the fifth business day after each annual meeting of stockholders. See“Certain Relationships and Related Person Transactions” beginning on page 74. Accordingly, on March 9, 2015, the Company granted Mr. Zuckerman an aggregate of 997 LTIP units representing a prorated initial non-employee director award and initial Chairman equity award for the period between January 1, 2015 and May 19, 2015 (i.e., the date of the 2015 annual meeting of stockholders). These LTIP units vested on May 19, 2015. In addition, for his service as Chairman, Mr. Zuckerman received 1,769 LTIP units on May 27, 2015.
The Compensation Committee reviews and makes recommendations to the full Board of Directors regarding the compensation of non-employee directors, and the full Board of Directors is responsible for approving any changes to the compensation program for non-employee directors. The compensation program for non-employee directors remained the same for calendar years 2013, 2014 and 2015. In late 2015, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (“Cook”), an independent compensation consultant, to assist it in conductingadopted a comprehensive review and assessment of the Company’s non-employee director compensation program. More specifically, Cook reviewed (1) how the use of each component of total compensation (e.g., cash retainers, meeting fees and equity awards) compared to market practice, and (2) how the total compensation for Board and committee members compared to market practice. Cook’s report presented data comparing our director compensation to market levels using the same peer group of 16 publicly-traded REITs in a variety of asset classes used by the Compensation Committee in benchmarking executive compensation. The Compensation Committee oversaw the selection of the peer group and the overall project.
Cook’s findings showedpolicy that total annualized compensation paid to the non-employee directors was slightly below the peer group median. Based on those findings, Cook recommended an increase to total annualized compensation in the form of increased annual cash retainers and annual equity grants for non-employee directors. As a result, the Compensation Committee recommended, and our Board of Directors approved, effective January 1, 2016, (1) an increase of $7,500 to the annual cash retainer from $60,000 to $67,500 and (2) an increase of $7,500 in the value of the shares of restricted stock (or, if offeredno person shall be nominated by the Board of Directors and elected by suchfor election as anon-employee director LTIP units) that each (x) continuing non-employee director is entitled to receive on the fifth business day after each annual meeting of stockholders and (y) new non-employee director is entitled to receive, which amount will be prorated based on the number of months from the date the director is first appointedfollowing his or elected to ourher 75th birthday. The Board of Director toDirectors may waive this policy for an incumbent director who attained the dateage of the Company’s next annual meeting of stockholders, is entitled to receive from $120,000 to $127,500. All other terms and conditions of the annual equity grant, including the vesting schedule, will remain unchanged. Cook did not recommend, and the Compensation Committee did not make, any changes to the cash meeting fees or the committee chair, lead director and non-executive Chairman retainers.
6879 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
COMPENSATION OF DIRECTORS
or prior to February 22, 2018 if it deems advisable to have additional time to recruit a desired successor nominee. If the Board of Directors waives this policy for an incumbent director, (b) such incumbent director isre-elected and (c) such incumbent director voluntarily resigns prior to the end of his or her term in order to facilitate the appointment of a successor director, then the policy of the Board will be to accelerate the vesting of any outstanding, unvested time-based equity awards held by such incumbent director that otherwise would have vested during such incumbent director’s then-current term.
Director CompensationDIRECTOR COMPENSATION TABLE
The following table summarizes the compensation earned by ournon-employee directors during the year ended December 31, 2015.2017.
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||||
Mortimer B. Zuckerman | 197,667 | 2,479,038 | 723,338 | (3) | 531,685 | (4) | 3,931,728 | |||||||||||||||||||||||||||||||||
Bruce W. Duncan | 97,500 | 114,750 | — | — | 212,250 | |||||||||||||||||||||||||||||||||||
Karen E. Dykstra | 90,000 | 121,125 | — | — | 211,125 | |||||||||||||||||||||||||||||||||||
Carol B. Einiger | 79,500 | 110,836 | — | — | 190,336 | 112,500 | 114,750 | — | — | 227,250 | ||||||||||||||||||||||||||||||
Dr. Jacob A. Frenkel | 99,000 | 110,836 | — | — | 209,836 | 97,500 | 114,750 | — | — | 212,250 | ||||||||||||||||||||||||||||||
Joel I. Klein | 87,000 | 120,000 | — | — | 207,000 | 97,500 | 114,750 | — | — | 212,250 | ||||||||||||||||||||||||||||||
Matthew J. Lustig | 72,000 | 110,836 | — | — | 182,836 | 82,500 | 114,750 | — | — | 197,250 | ||||||||||||||||||||||||||||||
Alan J. Patricof | 100,500 | 110,836 | — | — | 211,336 | 94,500 | 114,750 | — | — | 209,250 | ||||||||||||||||||||||||||||||
Ivan G. Seidenberg | 85,500 | 120,000 | — | — | 205,500 | |||||||||||||||||||||||||||||||||||
Martin Turchin | 70,500 | 115,418 | — | — | 185,918 | 90,000 | 114,750 | — | — | 204,750 | ||||||||||||||||||||||||||||||
David A. Twardock | 108,000 | 120,000 | — | — | 228,000 | 123,000 | 127,500 | — | — | 250,500 |
(1) | Ms. Einiger and Messrs. Klein, Lustig, Patricof |
Name | Deferred Stock
| |||
| ||||
Carol B. Einiger | ||||
| ||||
Joel I. Klein | ||||
Matthew J. Lustig | ||||
Alan J. Patricof | ||||
| ||||
| ||||
David A. Twardock |
BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 6980
COMPENSATION OF DIRECTORS
(2) | Represents the total fair value of common stock and LTIP unit awards granted tonon-employee directors in |
Name | LTIP Units (#) | Common Stock (#) | ||||||
Carol B. Einiger | 910 | — | ||||||
Dr. Jacob A. Frenkel | 910 | — | ||||||
Joel I. Klein | — | 910 | ||||||
Matthew J. Lustig | 910 | — | ||||||
Alan J. Patricof | 910 | — | ||||||
Ivan G. Seidenberg | — | 910 | ||||||
Martin Turchin | 455 | 455 | ||||||
David A. Twardock | — | 910 |
Name | LTIP Units (#) | Common Stock (#) | ||||||
Bruce W. Duncan | 1,050 | — | ||||||
Karen E. Dykstra | 525 | 525 | ||||||
Carol B. Einiger | 1,050 | — | ||||||
Dr. Jacob A. Frenkel | 1050 | — | ||||||
Joel I. Klein | 1,050 | — | ||||||
Matthew J. Lustig | 1,050 | — | ||||||
Alan J. Patricof | 1,050 | — | ||||||
Martin Turchin | 1,050 | — | ||||||
David A. Twardock | — | 1,050 |
Director Stock Ownership GuidelinesDIRECTOR STOCK OWNERSHIP GUIDELINES
Our Board believes it is important to align the interests of the directors with those of the stockholders and for directors to hold equity ownership positions in Boston Properties. Accordingly, eachnon-employee director is expected to retain an aggregate number of shares of our common stock, our deferred stock units (and related dividend equivalent rights), and LTIP units and common units in our Operating Partnership, whether vested or not, equal to at least the aggregate number of such shares or units received by the director as annual retainers during the first three years following the later of: (a) our 2007 annual meeting of stockholders or (b) our annual meeting of stockholders at which the director was initially elected or, if earlier, the first annual meeting of stockholders following the initial appointment of the director. Compliance with these ownership guidelines will be measured as of the end of each fiscal year. Any director who is prohibited by law or by applicable regulation of his or her employer from owning equity in the Company shall be exempt from this requirement. The NCG Committee may consider whether exceptions should be made for any director on whom this requirement could impose a financial hardship.
7081 BOSTON PROPERTIES, INC. | 20162018 Proxy Statement
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Ms. Einiger and Messrs. TwardockDuncan and Frenkel.Twardock. None of these persons has served as an officer or employee of Boston Properties. None of these persons had any relationships with Boston Properties requiring disclosure under applicable rules and regulations of the SEC. None of Boston Properties’ executive officers served as a director or a member of a compensation committee (or other committee serving a similar function) of any other entity, thean executive officersofficer of which served as a director of Boston Properties or a member of the Compensation Committee during 2015.2017.
BOSTON PROPERTIES, INC. |2018 Proxy Statement 82
PROPOSAL 2: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Section 14A(a)(1) of the Exchange Act generally requires each public company to include in its proxy statement a separate resolution subject to anon-binding stockholder vote to approve the compensation of the Company’s named executive officers,NEOs, as disclosed in its proxy statement pursuant to Item 402 of RegulationS-K, not less frequently than once every three years. This is commonly known as a “Say-on-Pay”“Say-on-Pay” proposal or resolution.
At our 20112017 annual meeting of stockholders, our stockholders voted on, among other matters, a proposal regarding the frequency of holding anon-binding, advisory vote on the compensation of our named executive officers. A majorityNEOs. More than 85% of the votes cast on the frequency proposal were cast in favor of holding a non-binding, advisory vote on the compensation of the Company’s named executive officers every year, which was consistent with the recommendation of our Board of Directors. Our Board of Directors considered the voting results with respect to the frequency proposal and other factors, and the Board of Directors currently intends for the Company to hold anon-binding, advisory vote on the compensation of the Company’s named executive officersNEOs every year until the next required advisory vote on the frequency of holding thenon-binding, advisory vote on the compensation of our named executive officers.NEOs, which will occur not later than the 2023 annual meeting of stockholders.
Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the 20162018 annual meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement pursuant to the Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
The vote is advisory, and therefore not binding on Boston Properties, the Compensation Committee or our Board of Directors. However, our Board of Directors and our Compensation Committee value the opinions of our stockholders and intend to take into account the results of the vote when considering future compensation decisions for our named executive officers.
The Board of Directors unanimously recommends a voteFOR the approval of the Company’s NEO compensation on an advisory basis. Properly authorized proxies solicited by the Board of Directors will be votedFORthis proposal unless instructions to the contrary are given.
The affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the approval of this proposal. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Brokernon-votes, if any, are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome.
The Board of Directors unanimously recommends a voteFOR this proposal. Properly authorized proxies solicited by the Board of Directors will be votedFOR this proposal unless instructions to the contrary are given.
83BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 71
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our consolidated financial statements. The Audit Committee has selected and appointed PricewaterhouseCoopers LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2016.2018. PricewaterhouseCoopers LLP has audited our consolidated financial statements continuously since our initial public offering in June 1997. In order to ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm. Further, in conjunction with the mandated rotation of the PricewaterhouseCoopers LLP’s lead engagement partner, the Audit Committee and its chairmanChair were directly involved in the selection of PricewaterhouseCoopers LLP’s lead engagement partner. The members of the Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm is in the best interests of Boston Properties and its stockholders.
Although ratification by stockholders is not required by law or by ourBy-laws, the Audit Committee believes that submission of its selection to stockholders is a matter of good corporate governance. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time if the Audit Committee believes that such a change would be in the best interests of Boston Properties and its stockholders. If our stockholders do not ratify the appointment of PricewaterhouseCoopers LLP, the Audit Committee will takeconsider that fact, into consideration, together with such other factors it deems relevant, in determining its next selection of independent auditors.
It is anticipated that a representative of PricewaterhouseCoopers LLP will attend the annual meeting of stockholders, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
The Board of Directors unanimously recommends a voteFOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2018. Properly authorized proxies solicited by the Board of Directors will be votedFOR this proposal unless instructions to the contrary are given.
BOSTON PROPERTIES, INC. |2018 Proxy Statement 84
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FeesFEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee is responsible for the audit fee negotiations associated with the retention of PricewaterhouseCoopers LLP. Aggregate fees for professional services rendered by PricewaterhouseCoopers LLP for the years ended December 31, 20152017 and 20142016 were as follows:
2015 | 2014 | |||||||
Audit Fees | ||||||||
Recurring audit, quarterly reviews and accounting assistance for new accounting standards and potential transactions | $ | 1,947,295 | $ | 1,621,945 | ||||
Comfort letters, consents and assistance with documents filed with the SEC and securities offerings | 128,889 | 76,000 | ||||||
|
|
|
| |||||
Subtotal | 2,076,184 | 1,697,945 | ||||||
Audit-Related Fees | ||||||||
Audits required by lenders, joint ventures, tenants and employee benefit plans | 414,148 | 396,560 | ||||||
Tax Fees | ||||||||
Recurring tax compliance | 271,769 | 287,508 | ||||||
Tax planning and research | 237,428 | 414,061 | ||||||
REIT and other compliance matters | 132,958 | 47,743 |
72 BOSTON PROPERTIES, INC. |2016 Proxy Statement
2015 | 2014 | 2017 | 2016 | |||||||||||||
Audit Fees | ||||||||||||||||
Recurring audit, quarterly reviews and accounting assistance for new accounting standards and potential transactions | $ | 2,204,421 | $ | 2,108,417 | ||||||||||||
Comfort letters, consents and assistance with documents filed with the SEC and securities offerings | 173,580 | 93,411 | ||||||||||||||
|
| |||||||||||||||
Subtotal | 2,378,001 | 2,201,828 | ||||||||||||||
Audit-Related Fees | ||||||||||||||||
Audits required by lenders, joint ventures and tenants | 341,042 | 341,937 | ||||||||||||||
Tax Fees | ||||||||||||||||
Recurring tax compliance and REIT and other compliance matters | 409,640 | 407,618 | ||||||||||||||
Tax planning and research | 120,810 | 61,781 | ||||||||||||||
Tax assistance for potential transactions | 50,437 | 85,014 | 7,480 | 16,176 | ||||||||||||
Sales and use tax examinations | 14,356 | 16,832 | ||||||||||||||
State and local tax examinations | 37,750 | 6,648 | ||||||||||||||
|
|
|
| |||||||||||||
Subtotal | 706,948 | 851,158 | 575,680 | 492,223 | ||||||||||||
All Other Fees | ||||||||||||||||
Software licensing fee | 1,800 | 1,800 | 2,700 | 1,800 | ||||||||||||
|
|
|
| |||||||||||||
Total | $ | 3,199,080 | $ | 2,947,463 | $ | 3,297,423 | $ | 3,037,788 |
Auditor Fees PolicyAUDIT ANDNON-AUDIT SERVICESPRE-APPROVAL POLICY
The Audit Committee has approved a policy concerning thepre-approval of audit andnon-audit services to be provided by PricewaterhouseCoopers LLP, our independent registered public accounting firm. The policy requires that all services provided by PricewaterhouseCoopers LLP to us, including audit services, audit-related services, tax services and other services, must bepre-approved by the Audit Committee. In some cases,pre-approval is provided by the full Audit Committee for up to a year, and relates to a particular category or group of services and is subject to a particular budget.budgeted maximum. In other cases, specificpre-approval is required. The Audit Committee has delegated authority to the Chair of the Audit Committee topre-approve additional services, and any suchpre-approvals must then be communicated to the full Audit Committee.
The Audit Committee approved all audit andnon-audit services provided to us by PricewaterhouseCoopers LLP during the 20152017 and 20142016 fiscal years.years and none of the services described above were approved pursuant to Rule2-01(c)(7)(i)(c) of RegulationS-X, which relates to circumstances where the Audit Committeepre-approval requirement is waived.
The affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the ratification of the appointment of PricewaterhouseCoopers LLP. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the
85 BOSTON PROPERTIES, INC. |2018 Proxy Statement
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
proposal. Brokernon-votes, if any, are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome.
The Board of Directors unanimously recommends a voteFOR this proposal. Properly authorized proxies solicited by the Board of Directors will be votedFOR this proposal unless instructions to the contrary are given.
The members of the Audit Committee of the Board of Directors of Boston Properties submit this report in connection with the committee’s review of the financial reports for the fiscal year ended December 31, 20152017 as follows:
1. | The Audit Committee has reviewed and discussed with management the audited financial statements for Boston Properties, Inc. for the fiscal year ended December 31, |
2. | The Audit Committee has discussed with representatives of PricewaterhouseCoopers LLP the matters required to be discussed |
3. | The Audit Committee has received the written disclosures and the letter from the independent accountant required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. |
BOSTON PROPERTIES, INC. |2016 Proxy Statement 73
Based on the review and discussions referred to above, the Audit Committee recommended to theour Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 20152017 for filing with the SEC.
The Audit Committee operates pursuant to a charter that was approved by our Board of Directors. A copy of the Audit Committee Charter is available on our website athttp://www.bostonproperties.com under the heading “Corporate Governance.”
Submitted by the Audit Committee:
David A. Twardock, Chair
Karen E. Dykstra
Alan J. Patricof Chair
Joel I. KleinMartin Turchin
BOSTON PROPERTIES, INC. |David A. Twardock2018 Proxy Statement 86
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The Board of Directors has adopted a Related Person Transaction Approval and Disclosure Policy for the review, approval or ratification of any related person transaction. This written policy provides that all related person transactions, other than a transaction for which an obligation to disclose under Item 404 of RegulationS-K (or any successor provision) arises solely from the fact that a beneficial owner of more than 5% of a class of the Company’s voting securities (or an immediate family member of any such beneficial owner) has an interest in the transaction, must be reviewed and approved by a majority of the disinterested directors on our Board of Directors in advance of us or any of our subsidiaries entering into the transaction; provided that, if we or any of our subsidiaries enter into a transaction without recognizing that such transaction constitutes a related person transaction, the approval requirement will be satisfied if such transaction is ratified by a majority of the disinterested directors on the Board of Directors promptly after we recognize that such transaction constituted a related person transaction. Disinterested directors are directors that do not have a personal financial interest in the transaction that is adverse to our financial interest or that of our stockholders. The term “related person transaction” refers to a transaction required to be disclosed by us pursuant to Item 404 of RegulationS-K (or any successor provision) promulgated by the SEC. For purposes of determining whether such disclosure is required, a related person will not be deemed to have a direct or indirect material interest in any transaction that is deemed to be not material (or would be deemed not material if such related person was a director) for purposes of determining director independence pursuant to the Company’s categorical standards of director independence. Please refer to the categorical standards under “Corporate Governance Principles and Board Matters – The Board of Directors – Director Independence” beginning on page 6 of this proxy statement.
As previously disclosed, on March 10, 2013, we entered into a Transition Benefits Agreement (the “TBA”) with Mr. Zuckerman in connection with the appointment of Mr. Thomas as our Chief Executive Officer. The TBA provides that, as non-executive Chairman, Mr. Zuckerman will be entitled to retain the perquisites provided to him when he entered into the TBA on a basis comparable to what was provided to him in the past. These benefits consist of: his existing office suite or, at his election, other Company-owned office space, including related furnishings, equipment and technical support; a full-time secretary; drivers and 50% of the cost of an automobile; and 50% of the cost of an additional secretary and of a financial administrative assistant.
As previously disclosed, on March 9, 2015, following Mr. Zuckerman’s transition from Executive Chairman to non-executive Chairman of the Board, we entered into a supplemental agreement (the “Letter Agreement”) with Mr. Zuckerman addressing his compensation following this transition. Pursuant to the Letter Agreement, we agreed to pay Mr. Zuckerman the same compensation that we pay to all of our other non-employee directors plus $350,000 per year to be allocated between cash and equity in the same manner as the existing non-employee director retainer (i.e., one-third payable in equal quarterly cash installments and two-thirds payable in shares of restricted common stock or, at his election, LTIP units). In addition, we agreed that Mr. Zuckerman would continue to be entitled to receive the benefits provided for in the TBA for so long as he was serving as a director, without regard
74 BOSTON PROPERTIES, INC. |2016 Proxy Statement
to his service as Chairman. We also agreed that, if he no longer serves on the Board of Directors, he will continue to receive these benefits (other than an additional secretary and financial administrative assistant) until December 31, 2019, he will be entitled to the use of office facilities until December 31, 2024 and, in the event of his death, his executors, administrators and/or heirs will be allowed to use his office facilities until June 30, 2020 (or for six months if death occurs after January 1, 2020) and will have the support of a secretary for six months. Finally, we agreed to extend the period for the exercise of Mr. Zuckerman’s stock options until the earlier of one year from when he ceases to be a director or the original option expiration date.
As discussed under“Corporate Governance Principles and Board Matters – The Board of Directors – Composition of the Board of Directors; Director Succession Planning,” Mr. Zuckerman will not be standing for re-election at the 2016 annual meeting of stockholders. In light of the extraordinary contributions that Mr. Zuckerman has made to Boston Properties over his career and in recognition of his long and dedicated service as Chairman of the Board, our Board of Directors has conferred the honorary title of Chairman Emeritus upon Mr. Zuckerman effective upon the completion of his term as a director. Our Board expects that, as Chairman Emeritus, Mr. Zuckerman will continue to attend meetings of our Board of Directors and provide advice and counsel to our Board despite no longer formally serving as a director or officer of Boston Properties. In connection with his transition from Chairman of the Board to Chairman Emeritus, on March 9, 2016, we modified the terms of the Letter Agreement to provide that, for so long as he holds the title of Chairman Emeritus, we will provide Mr. Zuckerman with the compensation and benefits in accordance with the terms of the Letter Agreement to the same extent as if he was continuing to serve as the Chairman of the Board. Mr. Zuckerman will be entitled to retain the title of Chairman Emeritus for so long as he is generally willing and able to attend meetings of our Board of Directors.
Prior to joining the Company effective January 2, 2014, Mr. John F. Powers provided commercial real estate brokerage services to the Company, on behalf of his prior employer, CBRE, Inc., in connection with certain leasing transactions. Mr. Powers received approximately $614,000 during 2015 and is expected to receive approximately $250,000 in 2016 in the form of residual payments related to these transactions. Mr. Powers is the Executive Vice President, New York Region for Boston Properties.7.
Since January 1, 2015,2017, the Company has paid a firm controlled by Mr. Raymond A. Ritchey’s brother aggregate leasing commissions of approximately $404,000.$1,289,115. Given current leasing activity, the Company expects to pay additional commissions to this firm during 2016.2018. Mr. Ritchey is the Senior Executive Vice President of Boston Properties. The Company believes the terms of the related agreements are comparable to, and in most cases more favorable to us than, similar arrangements with other brokers in relevant markets.
During 2017, we received lease and related payments of approximately $454,000 from Fidelity Brokerage Services LLC. Based on a Schedule 13G/A filed with the SEC on February 13, 2018, FMR LLC, the parent entity of Fidelity Brokerage Services LLC, is the beneficial owner of more than 5% of our common stock.
We are partners with affiliates of Norges Bank Investment Management in joint ventures relating to Times Square Tower, 601 Lexington Avenue, 100 Federal Street and Atlantic Wharf Office. Based on a Schedule 13G filed with the SEC on January 5, 2018, Norges Bank (The Central Bank of Norway), an affiliate of Norges Bank Investment Management, is the beneficial owner of more than 5% of our common stock.
87 BOSTON PROPERTIES, INC. |2018 Proxy Statement
INFORMATION ABOUT THE ANNUAL MEETING
Why did I receive a Notice of Internet Availability of Proxy Materials?
In order to both save money and help conserve natural resources, we are making this proxy statement and our 2017 annual report, including a copy of our annual report on Form10-K and financial statements for the year ended December 31, 2017, available to our stockholders electronically via the Internet instead of mailing the full set of printed proxy materials, in accordance with the rules of the SEC. On or about April 6, 2018, we began mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this proxy statement and our annual report online, as well as instructions on how to vote. Also on or about April 6, 2018, we began mailing printed copies of these proxy materials to stockholders that have requested printed copies. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The Notice also instructs you on how you may vote via the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. Our 2017 annual report is not part of the proxy solicitation material.
What is the purpose of the annual meeting?
At the annual meeting, stockholders will be asked to vote upon the matters set forth in the accompanying notice of annual meeting, including the election of directors, an advisory resolution on named executive officer compensation and the ratification of the appointment of our independent registered public accounting firm.
Will other matters be voted on at the annual meeting?
We are not currently aware of any other matters to be presented at the 2018 annual meeting other than those described in this proxy statement. If any other matters not described in this proxy statement are properly presented at the meeting, any proxies received by us will be voted in the discretion of the proxy holders.
If you were a stockholder of record as of the close of business on March 28, 2018, which is referred to in this proxy statement as the “record date,” you are entitled to receive notice of the annual meeting and to vote the shares of common stock that you held as of the close of business on the record date. Each stockholder is entitled to one vote for each share of common stock held by such stockholder on the record date. Holders of common units, LTIP units, preferred stock and deferred stock units are not entitled to vote such securities on any of the matters presented at the 2018 annual meeting.
All stockholders of record of shares of common stock of Boston Properties, Inc. at the close of business on the record date, or their designated proxies, are authorized to attend the annual meeting. Each stockholder and proxy will be asked to present a valid government-issued photo identification, such as a driver’s license or passport, before being admitted. If you are not a stockholder of record but you hold your shares in “street name” (i.e., your shares are held in an account maintained by a bank, broker or other nominee), then you should provide proof of beneficial ownership as of the record date, such as an account statement reflecting your stock ownership as of the record date, a copy of the voting instruction card provided by your broker, bank or other nominee, or other similar evidence of ownership. We reserve the right to determine the validity of any purported proof of beneficial
BOSTON PROPERTIES, INC. |2018 Proxy Statement 88
INFORMATION ABOUT THE ANNUAL MEETING
ownership. If you do not have proof of ownership, you may not be admitted to the annual meeting. Cameras, recording devices and other electronic devices will not be permitted, and attendees may be subject to security inspections and other security precautions. You may obtain directions to the annual meeting on our website athttp://www.bostonproperties.com/proxy.
The presence, in person or by proxy, of holders of at least a majority of the total number of outstanding shares of common stock entitled to vote is necessary to constitute a quorum for the transaction of business at the annual meeting. As of the record date, there were 154,347,768 shares of common stock outstanding and entitled to vote at the annual meeting. Each share of common stock outstanding on the record date is entitled to one vote on each matter properly submitted at the annual meeting and, with respect to the election of directors, one vote for each director to be elected. Abstentions or “brokernon-votes” (i.e., shares represented at the meeting held by brokers, as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to which, on one or more but not all matters, the broker does not have discretionary voting power to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction of business at the annual meeting.
Voting in Person at the Meeting
If you are a stockholder of record and attend the annual meeting, you may vote in person at the meeting. If your shares of common stock are held in street name and you wish to vote in person at the meeting, you will need to obtain a “legal proxy” from the broker, bank or other nominee that holds your shares of common stock of record.
Voting by Proxy for Shares Registered Directly in the Name of the Stockholder
If you hold your shares of common stock in your own name as a holder of record with our transfer agent, Computershare Trust Company, N.A., you may instruct the proxy holders named in the proxy card how to vote your shares of common stock in one of the following ways:
• | Vote by Internet.You may vote via the Internet by following the instructions provided in the Notice or, if you received printed materials, on your proxy card. The website for Internet voting is printed on the Notice and also on your proxy card. Please have your Notice or proxy card in hand. Internet voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 22, 2018. You will receive a series of instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded. |
If you vote via the Internet, you do not need to return your proxy card.
• | Vote by Telephone.If you received printed copies of the proxy materials, you also have the option to vote by telephone by calling the toll-free number listed on your proxy card. Telephone voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 22, 2018. When you call, pleasehave your proxy card in hand. You will receive a series of voice instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded. If you did not receive printed materials and would like to vote by telephone, you must request printed copies of the proxy materials by following the instructions on your Notice. |
If you vote by telephone, you do not need to return your proxy card.
• | Vote by Mail.If you received printed materials, and would like to vote by mail, then please mark, sign and date your proxy card and return it promptly to our transfer agent, |
89 BOSTON PROPERTIES, INC. |2018 Proxy Statement
INFORMATION ABOUT THE ANNUAL MEETING
Computershare Trust Company, N.A., in the postage-paid envelope provided. If you did not receive printed materials and would like to vote by mail, you must request printed copies of the proxy materials by following the instructions on your Notice. |
Voting by Proxy for Shares Registered in Street Name
If your shares of common stock are held in street name, then you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of common stock voted.
May I revoke my proxy instructions?
You may revoke your proxy at any time before it has been exercised by:
If you are a stockholder of record as of the record date attending the annual meeting you may vote in person whether or not a proxy has been previously given, but your presence (without further action) at the annual meeting will not constitute revocation of a previously given proxy.
How can I access Boston Properties’ proxy materials electronically?
This proxy statement and our 2017 annual report are available athttp://www.edocumentview.com/bxp. Instead of receiving copies of our future annual reports, proxy statements, proxy cards and, when applicable, Notices of Internet Availability of Proxy Materials, by mail, we encourage you to elect to receive an email that will provide electronic links to our proxy materials and also will give you an electronic link to the proxy voting site. Choosing to receive your future proxy materials online will save us the cost of producing and mailing the proxy materials or Notices of Internet Availability of Proxy Materials to you and help conserve natural resources. You may sign up for electronic delivery by visitinghttp://www.bostonproperties.com/proxy.
If you and other residents at your mailing address own shares of common stock in street name, your broker, bank or other nominee may have sent you a notice that your household will receive only one annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement. This procedure, known as “householding,” is intended to reduce the volume of duplicate information stockholders receive and also reduce our printing and postage costs. Under applicable law, if you consented or were deemed to have consented, your broker, bank or other nominee may send one copy of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement to your address for all residents that own shares of common stock in street name. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee. If you are receiving multiple copies of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement, you may be able to request householding by contacting your broker, bank or other nominee.
If you wish to request extra copies free of charge of our annual report or proxy statement, please send your request to Investor Relations, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103; call us with your request at(617) 236-3322; or visit our website athttp://www.bostonproperties.com.
BOSTON PROPERTIES, INC. |2018 Proxy Statement 90
Expenses of SolicitationEXPENSES OF SOLICITATION
The cost of solicitation of proxies will be borne by Boston Properties. In an effort to have as large a representationmany votes cast at the annual meeting as possible, special solicitation of proxies may, in certain instances, be made personally or by telephone, electronic communication or mail by one or more employees of Boston Properties. We also may reimburse brokers, banks, nominees and other fiduciaries for postage and reasonable clerical expenses of forwarding the proxy material to their principals who are beneficial owners of shares of our common stock. In addition, MacKenzie Partners, Inc., a proxy solicitation firm, has been engaged by Boston Properties to act as proxy solicitor and will receive a fee of $7,500 plus reimbursement of reasonableout-of-pocket expenses.
StockholderSTOCKHOLDER NOMINATIONS FOR DIRECTOR AND PROPOSALS FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS
Rule14a-8 Proposals for the 2017 Annual Meeting
Any stockholder proposals submitted pursuant to Exchange Act Rule14a-8 for inclusion in Boston Properties’ proxy statement and form of proxy for its 20172019 annual meeting of stockholders must be received by Boston Properties on or before December 2, 20167, 2018 in order to be considered for inclusion in itsour proxy statement
BOSTON PROPERTIES, INC. |2016 Proxy Statement 75
and form of proxy. SuchThe proposals must also comply with the requirements as to form and substance established by the SEC if such proposalsthey are to be included in the proxy statement and form of proxy. Any such proposal should be mailed to: Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103, Attn.: Secretary.
Director Nominees (Proxy Access)
In order for an eligible stockholder or group of stockholders to nominate a director nominee for election at Boston Properties’ 20172019 annual meeting pursuant to the proxy access provision of ourBy-laws, notice of such nomination and other required information must be received by Boston Properties on or before December 2, 20167, 2018 unless our 20172019 annual meeting of stockholders is scheduled to take place before April 17, 201723, 2019 or after July 16, 2017.22, 2019. OurBy-laws state that such notice and other required information must be received by Boston Properties not less than 120 days prior to the anniversary of the date of the proxy statement for the prior year’s annual meeting of stockholders; provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days before the anniversary of the date of the immediately preceding annual meeting, or the annual meeting anniversary date, or more than 60 days after the annual meeting anniversary date, or if no annual meeting was held in the preceding year, the deadline for the receipt of such notice and other required information shall be the close of business on the later of (i)(1) the 180th day prior to the scheduled date of such annual meeting or (ii)(2) the 15th day following the day on which public announcement of the date of such annual meeting is first made.
In addition, ourBy-laws require the eligible stockholder or group of stockholders to update and supplement such information (or provide notice stating that there are no updates or supplements) as of specified dates. Notices and other required information must be received by our Secretary at our principal executive office, which is currently Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103.
Other Proposals or Nominees
Stockholder proposals and nominations of directors to be presented at Boston Properties’ 20172019 annual meeting, other than stockholder proposals submitted pursuant to Exchange Act Rule14a-8 for inclusion in Boston Properties’ proxy statement and form of proxy for its 2017our 2019 annual meeting or
91 BOSTON PROPERTIES, INC. |2018 Proxy Statement
OTHER MATTERS
submitted pursuant to the proxy access provision of ourBy-laws, must be received in writing at our principal executive office not earlier than January 17, 2017,23, 2019, nor later than March 3, 2017,9, 2019, unless our 20172019 annual meeting of stockholders is scheduled to take place before April 17, 201723, 2019 or after July 16, 2017.22, 2019. OurBy-laws state that the stockholder must provide timely written notice of such proposal or a nomination and supporting documentation as well as be present at such meeting, either in person or by a representative. A stockholder’s notice shall be timely received by Boston Properties at its principal executive office not less than seventy-five (75) days nor more than one hundred twenty (120) days prior to the annual meeting anniversary date; provided, however, that in the event the annual meeting is scheduled to be held on a date more than thirty (30) days before the annual meeting anniversary date or more than sixty (60) days after the annual meeting anniversary date, a stockholder’s notice shall be timely if received by Boston Properties at its principal executive office not later than the close of business on the later of (1) the seventy-fifth (75th) day prior to the scheduled date of such annual meeting or (2) the fifteenth (15th) day following the day on which public announcement of the date of such annual meeting is first made by Boston Properties. Proxies solicited by our Board of Directors will confer discretionary voting authority with respect to these proposals, subject to SEC rules and regulations governing the exercise of this authority. Any such proposals must be received by our Secretary at our principal executive office, which is currently Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103.
76BOSTON PROPERTIES, INC. | 20162018 Proxy Statement 92
AdjustedReconciliation of Net DebtIncome Attributable to Combined EBITDA ReconciliationBoston Properties, Inc. Common Shareholders to BXP’s Share of Same Property Net Operating Income (Loss) (NOI)
(excluding termination income)
For the years ended December 31, | ||||||||
2015 | 2014 | |||||||
(dollars in thousands) | ||||||||
Net income attributable to Boston Properties, Inc. (BXP) common stockholders | $ | 572,606 | $ | 433,111 | ||||
Add: | ||||||||
Preferred dividends | 10,500 | 10,500 | ||||||
Net income attributable to noncontrolling interests | 216,812 | 82,446 | ||||||
Losses from early extinguishments of debt | 22,040 | 10,633 | ||||||
Interest expense | 432,196 | 455,743 | ||||||
Depreciation and amortization | 639,542 | 628,573 | ||||||
Less: | ||||||||
Gains on sales of real estate | 375,895 | 168,039 | ||||||
Gains (losses) from investments in securities | (653 | ) | 1,038 | |||||
Interest and other income | 6,777 | 8,765 | ||||||
Income from unconsolidated joint ventures | 22,770 | 12,769 | ||||||
|
|
|
| |||||
EBITDA | 1,488,907 | 1,430,395 | ||||||
Unconsolidated joint venture EBITDA | 47,308 | 45,116 | ||||||
|
|
|
| |||||
Combined EBITDA | $ | 1,536,215 | $ | 1,475,511 | ||||
|
|
|
| |||||
Total Consolidated Debt | $ | 9,036,513 | $ | 9,906,984 | ||||
BXP’s share of unconsolidated joint venture debt | 353,386 | 351,500 | ||||||
|
|
|
| |||||
Total Combined Debt | 9,389,899 | 10,258,484 | ||||||
Less: | ||||||||
Cash & cash equivalents | 723,718 | 1,763,079 | ||||||
|
|
|
| |||||
Net Debt | 8,666,181 | 8,495,405 | ||||||
Less: | ||||||||
Restricted cash held in escrow for potential §1031 like-kind exchanges | — | 433,794 | ||||||
Add: | ||||||||
Special dividends payable | 214,386 | 769,790 | ||||||
|
|
|
| |||||
Adjusted Net Debt | $ | 8,880,567 | $ | 8,831,401 | ||||
|
|
|
| |||||
Combined EBITDA | $ | 1,536,215 | $ | 1,475,511 | ||||
Adjusted Net Debt to Combined EBITDA | 5.8 | 6.0 |
For the year ended December 31, | ||||||||
2017 | 2016 | |||||||
(unaudited and in thousands) | ||||||||
Net Income Attributable to Boston Properties, Inc. Common Shareholders | $ | 451,939 | $ | 502,285 | ||||
Preferred dividends | 10,500 | 10,500 | ||||||
|
|
|
| |||||
Net Income Attributable to Boston Properties, Inc. | 462,439 | 512,785 | ||||||
Net Income Attributable to Noncontrolling Interests: | ||||||||
Noncontrolling interest – common units of the Operating Partnership | 52,210 | 59,260 | ||||||
Noncontrolling interests in property partnerships | 47,832 | (2,068 | ) | |||||
|
|
|
| |||||
Net Income | 562,481 | 569,977 | ||||||
Gains on sales of real estate | 7,663 | 80,606 | ||||||
|
|
|
| |||||
Income Before Gains on Sales of Real Estate | 554,818 | 489,371 | ||||||
Other Expenses: | ||||||||
Add: | ||||||||
Losses from interest rate contracts | — | 140 | ||||||
Interest expense | 374,481 | 412,849 | ||||||
Other Income: | ||||||||
Less: | ||||||||
Gains (losses) from early extinguishments of debt | 496 | (371 | ) | |||||
Gains from investments in securities | 3,678 | 2,273 | ||||||
Interest and other income | 5,783 | 7,230 | ||||||
Gain on sale of investment in unconsolidated joint venture | — | 59,370 | ||||||
Income from unconsolidated joint ventures | 11,232 | 8,074 | ||||||
|
|
|
| |||||
Operating Income | 908,110 | 825,784 | ||||||
Other Expenses: | ||||||||
Add: | ||||||||
Depreciation and amortization expense | 617,547 | 694,403 | ||||||
Impairment loss | — | 1,783 | ||||||
Transaction costs | 668 | 2,387 | ||||||
General and administrative expense | 113,715 | 105,229 | ||||||
Other Revenue: | ||||||||
Less: | ||||||||
Development and management services revenue | 34,605 | 28,284 | ||||||
|
|
|
| |||||
Net Operating Income (Loss) (NOI) | 1,605,435 | 1,601,302 | ||||||
Less: | ||||||||
Termination income | 23,058 | 59,293 | ||||||
NOI from non Same Properties (excluding termination income) | 50,167 | 45,687 | ||||||
|
|
|
| |||||
Same Property NOI (excluding termination income) | 1,532,210 | 1,496,322 | ||||||
Less: | ||||||||
Partners’ share of NOI from consolidated joint ventures (excluding termination income)(1) | 175,876 | 176,998 | ||||||
BXP’s share of NOI from non Same Properties from unconsolidated joint ventures (excluding termination income) | 28,489 | 14,982 | ||||||
Add: | ||||||||
Partners’ share of NOI from non Same Properties from consolidated joint ventures (excluding termination income) | (1,648 | ) | 1,914 | |||||
BXP’s share of NOI from unconsolidated joint ventures (excluding termination income)(2) | 63,345 | 50,015 | ||||||
|
|
|
| |||||
BXP’s Share of Same Property NOI (excluding termination income) | $ | 1,389,542 | $ | 1,356,271 | ||||
|
|
|
|
Adjusted net debt to combined EBITDA is a non-GAAP financial measure. A reconciliation of the components of adjusted net debt to combined EBITDA to the most directly comparable GAAP financial measures is set forth above. We present this ratio because it provides management, investors and others with additional means of evaluating our overall financial flexibility, capital structure and leverage.
(1) | See “Consolidated Joint Ventures” in this Appendix for additional details. |
(2) | See “Unconsolidated Joint Ventures” in this Appendix for additional details. |
BOSTON PROPERTIES, INC. | 20162018 Proxy Statement A-1
Reconciliation of Net Income Attributable to Boston Properties, Inc. Common Shareholders to BXP’s Share of Same Property Net Operating Income (Loss) (NOI) – Cash
(excluding termination income)
For the year ended December 31, | ||||||||
2017 | 2016 | |||||||
(unaudited and in thousands) | ||||||||
Net Income Attributable to Boston Properties, Inc. Common Shareholders | $ | 451,939 | $ | 502,285 | ||||
Preferred dividends | 10,500 | 10,500 | ||||||
|
|
|
| |||||
Net Income Attributable to Boston Properties, Inc. | 462,439 | 512,785 | ||||||
Net Income Attributable to Noncontrolling Interests: | ||||||||
Noncontrolling interest – common units of the Operating Partnership | 52,210 | 59,260 | ||||||
Noncontrolling interests in property partnerships | 47,832 | (2,068 | ) | |||||
|
|
|
| |||||
Net Income | 562,481 | 569,977 | ||||||
Gains on sales of real estate | 7,663 | 80,606 | ||||||
|
|
|
| |||||
Income Before Gains on Sales of Real Estate | 554,818 | 489,371 | ||||||
Other Expenses: | ||||||||
Add: | ||||||||
Losses from interest rate contracts | — | 140 | ||||||
Interest expense | 374,481 | 412,849 | ||||||
Other Income: | ||||||||
Less: | ||||||||
Gains (losses) from early extinguishments of debt | 496 | (371 | ) | |||||
Gains from investments in securities | 3,678 | 2,273 | ||||||
Interest and other income | 5,783 | 7,230 | ||||||
Gain on sale of investment in unconsolidated joint venture | — | 59,370 | ||||||
Income from unconsolidated joint ventures | 11,232 | 8,074 | ||||||
|
|
|
| |||||
Operating Income | 908,110 | 825,784 | ||||||
Other Expenses: | ||||||||
Add: | ||||||||
Depreciation and amortization expense | 617,547 | 694,403 | ||||||
Impairment loss | — | 1,783 | ||||||
Transaction costs | 668 | 2,387 | ||||||
General and administrative expense | 113,715 | 105,229 | ||||||
Other Revenue: | ||||||||
Less: | ||||||||
Development and management services revenue | 34,605 | 28,284 | ||||||
|
|
|
| |||||
Net Operating Income (Loss) (NOI) | 1,605,435 | 1,601,302 | ||||||
Less: | ||||||||
Straight-line rent | 53,511 | 33,739 | ||||||
Fair value lease revenue | 22,290 | 30,381 | ||||||
Termination income | 23,058 | 59,293 | ||||||
Add: | ||||||||
Straight-line ground rent expense adjustment | 2,489 | 3,951 | ||||||
Lease transaction costs that qualify as rent inducements | 920 | 8,853 | ||||||
|
|
|
| |||||
NOI – cash (excluding termination income) | 1,509,985 | 1,490,693 | ||||||
Less: | ||||||||
NOI – cash from non Same Properties (excluding termination income) | 42,337 | 48,266 | ||||||
|
|
|
| |||||
Same Property NOI – cash (excluding termination income) | 1,467,648 | 1,442,427 | ||||||
Less: | ||||||||
Partners’ share of NOI – cash from consolidated joint ventures (excluding termination income)(1) | 166,732 | 162,672 | ||||||
BXP’s share of NOI – cash from non Same Properties from unconsolidated joint ventures (excluding termination income) | 18,960 | 8,952 | ||||||
Add: | ||||||||
Partners’ share of NOI – cash from non Same Properties from consolidated joint ventures (excluding termination income) | (1,558 | ) | 2,316 | |||||
BXP’s share of NOI – cash from unconsolidated joint ventures (excluding termination income)(2) | 50,983 | 39,242 | ||||||
|
|
|
| |||||
BXP’s Share of Same Property NOI – cash (excluding termination income) | $ | 1,331,381 | $ | 1,312,361 | ||||
|
|
|
|
(1) | See “Consolidated Joint Ventures” in this Appendix for additional details. |
(2) | See “Unconsolidated Joint Ventures” in this Appendix for additional details. |
A-2 BOSTON PROPERTIES, INC. |2018 Proxy Statement
for the year ended December 31, 2017
(unaudited and dollars in thousands)
Norges Joint Ventures | ||||||||||||||||
767 Fifth Avenue (The GM Building) | Times Square Tower 601 Lexington Avenue 100 Federal Street Atlantic Wharf Office | Salesforce Tower | Total Consolidated Joint Ventures | |||||||||||||
REVENUE | ||||||||||||||||
Rental | $ | 273,163 | $ | 355,720 | $ | 3,462 | $ | 632,345 | ||||||||
Straight-line rent | 7,229 | (343 | ) | (2,791 | ) | 4,095 | ||||||||||
Fair value lease revenue | 15,372 | 944 | — | 16,316 | ||||||||||||
Termination income | 14,228 | (1,415 | ) | — | 12,813 | |||||||||||
Parking and other | 2,357 | 5,379 | — | 7,736 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenue | 312,349 | 360,285 | 671 | 673,305 | ||||||||||||
EXPENSES | ||||||||||||||||
Operating | 114,987 | 133,691 | 296 | 248,974 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NET OPERATING INCOME (LOSS) (NOI) | 197,362 | 226,594 | 375 | 424,331 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Development and management services revenue | (2,355 | ) | (3,132 | ) | (50 | ) | (5,537 | ) | ||||||||
Interest and other income | (773 | ) | (1,308 | ) | (60 | ) | (2,141 | ) | ||||||||
Interest expense | 89,184 | 30,045 | — | 119,229 | ||||||||||||
Interest expense – outside members’ notes | 16,256 | — | — | 16,256 | ||||||||||||
Fair value interest adjustment | (20,227 | ) | — | — | (20,227 | ) | ||||||||||
Depreciation and amortization | 103,314 | 82,189 | 129 | 185,632 | ||||||||||||
Gain from early extinguishment of debt | (14,606 | ) | — | — | (14,606 | ) | ||||||||||
Other | — | 78 | — | 78 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
SUBTOTAL | 170,793 | 107,872 | 19 | 278,684 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NET INCOME | $ | 26,569 | $ | 118,722 | $ | 356 | $ | 145,647 | ||||||||
|
|
|
|
|
|
|
| |||||||||
BXP’s ownership percentage | 60.00% | 55.00% | 95.00% | |||||||||||||
|
|
|
|
|
| |||||||||||
Partners’ share of NOI(1) | $ | 78,945 | $ | 101,967 | $ | 19 | $ | 180,931 | ||||||||
|
|
|
|
|
|
|
| |||||||||
BXP’s share of NOI | $ | 118,417 | $ | 124,627 | $ | 356 | $ | 243,400 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Reconciliation of Partners’ share of NOI(1): | ||||||||||||||||
Rental revenue | $ | 124,939 | $ | 162,129 | $ | 34 | $ | 287,102 | ||||||||
Less: Termination income | 5,691 | (636 | ) | — | 5,055 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Rental revenue (excluding termination income) | 119,248 | 162,765 | 34 | 282,047 | ||||||||||||
Operating expenses | 45,995 | 60,161 | 15 | 106,171 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NOI (excluding termination income) | $ | 73,253 | $ | 102,604 | $ | 19 | $ | 175,876 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Rental revenue (excluding termination income) | $ | 119,248 | $ | 162,765 | 34 | $ | 282,047 | |||||||||
Less: Straight-line rent | 2,892 | (155 | ) | (140 | ) | 2,597 | ||||||||||
Fair value lease revenue | 6,149 | 423 | — | 6,572 | ||||||||||||
Add: Lease transaction costs that qualify as rent inducements(2) | 25 | — | — | 25 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 110,232 | 162,497 | 174 | 272,903 | ||||||||||||
Less: Operating expenses | 45,995 | 60,161 | 15 | 106,171 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NOI – cash (excluding termination income) | $ | 64,237 | $ | 102,336 | $ | 159 | $ | 166,732 | ||||||||
|
|
|
|
|
|
|
|
(1) | Amounts represent the partners’ share based on their respective ownership percentage. |
(2) | Consists of lease transaction costs that qualify as rent inducements in accordance with GAAP. |
BOSTON PROPERTIES, INC. |2018 Proxy Statement A-3
CONSOLIDATED JOINT VENTURES
for the year ended December 31, 2016
(unaudited and dollars in thousands)
Norges Joint Ventures | ||||||||||||||||
767 Fifth Avenue (The GM Building) | Times Square Tower 601 Lexington Avenue 100 Federal Street Atlantic Wharf Office | Salesforce Tower | Total Consolidated Joint Ventures | |||||||||||||
REVENUE | ||||||||||||||||
Rental | $ | 262,511 | $ | 350,933 | $ | — | $ | 613,444 | ||||||||
Straight-line rent | 13,069 | (2,230 | ) | — | 10,839 | |||||||||||
Fair value lease revenue | 18,178 | 6,331 | — | 24,509 | ||||||||||||
Termination income | (109 | ) | 3,443 | — | 3,334 | |||||||||||
Parking and other | 2,815 | 5,630 | — | 8,445 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenue | 296,464 | 364,107 | — | 660,571 | ||||||||||||
EXPENSES | ||||||||||||||||
Operating | 109,513 | 133,607 | 15 | 243,135 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NET OPERATING INCOME (LOSS) (NOI) | 186,951 | 230,500 | (15 | ) | 417,436 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Management services income | (1,204 | ) | (2,331 | ) | — | (3,535 | ) | |||||||||
Interest and other income | (160 | ) | (639 | ) | — | (799 | ) | |||||||||
Interest expense | 96,004 | 32,993 | — | 128,997 | ||||||||||||
Interest expense – outside members’ notes | 34,322 | — | — | 34,322 | ||||||||||||
Fair value interest adjustment | (45,545 | ) | — | — | (45,545 | ) | ||||||||||
Depreciation and amortization | 112,933 | 137,870 | — | 250,803 | ||||||||||||
Other | — | 78 | — | 78 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
SUBTOTAL | 196,350 | 167,971 | — | 364,321 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NET INCOME (LOSS) | $ | (9,399 | ) | $ | 62,529 | $ | (15 | ) | $ | 53,115 | ||||||
|
|
|
|
|
|
|
| |||||||||
BXP’s ownership percentage | 60.00% | 55.00% | 95.00% | |||||||||||||
|
|
|
|
|
| |||||||||||
Partners’ share of NOI(1) | $ | 74,780 | $ | 103,725 | $ | (1 | ) | $ | 178,504 | |||||||
|
|
|
|
|
|
|
| |||||||||
BXP’s share of NOI | $ | 112,171 | $ | 126,775 | $ | (14 | ) | $ | 238,932 | |||||||
|
|
|
|
|
|
|
| |||||||||
Reconciliation of Partners’ share of NOI(1): |
| |||||||||||||||
Rental revenue | $ | 118,586 | $ | 163,847 | $ | — | $ | 282,433 | ||||||||
Less: Termination income | (44 | ) | 1,550 | — | 1,506 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Rental revenue (excluding termination income) | 118,630 | 162,297 | — | 280,927 | ||||||||||||
Operating expenses | 43,805 | 60,123 | 1 | 103,929 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NOI (excluding termination income) | $ | 74,825 | $ | 102,174 | $ | (1 | ) | $ | 176,998 | |||||||
|
|
|
|
|
|
|
| |||||||||
Rental revenue (excluding termination income) | $ | 118,630 | $ | 162,297 | $ | — | $ | 280,927 | ||||||||
Less: Straight-line rent | 5,228 | (1,004 | ) | — | 4,224 | |||||||||||
Fair value lease revenue | 7,271 | 2,848 | — | 10,119 | ||||||||||||
Add: Lease transaction costs that qualify as rent inducements(2) | 17 | — | — | 17 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 106,148 | 160,453 | — | 266,601 | ||||||||||||
Less: Operating expenses | 43,805 | 60,123 | 1 | 103,929 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NOI – cash (excluding termination income) | $ | 62,343 | $ | 100,330 | $ | (1 | ) | $ | 162,672 | |||||||
|
|
|
|
|
|
|
|
(1) | Amounts represent the partners’ share based on their respective ownership percentage. |
(2) | Consists of lease transaction costs that qualify as rent inducements in accordance with GAAP. |
A-4 BOSTON PROPERTIES, INC. |2018 Proxy Statement
for the year ended December 31, 2017
(unaudited and dollars in thousands)
540 Madison Avenue | Market Square North | Metropolitan Square | 901 New York Avenue | Wisconsin Place Parking Facility | Annapolis Junction(1) | |||||||||||||||||||
REVENUE | ||||||||||||||||||||||||
Rental | $ | 26,036 | $ | 15,864 | $ | 18,883 | $ | 27,543 | $ | 3,909 | $ | 8,043 | ||||||||||||
Operating recoveries | 2,994 | 3,327 | 5,394 | 4,983 | 1,335 | 2,220 | ||||||||||||||||||
Straight-line rent | (550 | ) | 2,559 | 6,861 | 2,186 | — | 845 | |||||||||||||||||
Fair value lease revenue | — | — | — | — | — | — | ||||||||||||||||||
Termination income | 694 | — | (13 | ) | — | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total revenue | 29,174 | 21,750 | 31,125 | 34,712 | 5,244 | 11,108 | ||||||||||||||||||
EXPENSES | ||||||||||||||||||||||||
Operating | 14,073 | 9,264 | 14,695 | 13,903 | 2,540 | 6,523 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
NET OPERATING INCOME (LOSS) (NOI) | 15,101 | 12,486 | 16,430 | 20,809 | 2,704 | 4,585 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Interest expense | 3,336 | 6,010 | 9,433 | 8,301 | — | 4,696 | ||||||||||||||||||
Depreciation and amortization | 7,745 | 5,956 | 7,676 | 6,089 | 5,540 | 4,269 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
SUBTOTAL | 11,081 | 11,966 | 17,109 | 14,390 | 5,540 | 8,965 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
NET INCOME (LOSS) | $ | 4,020 | $ | 520 | $ | (679 | ) | $ | 6,419 | $ | (2,836 | ) | $ | (4,380 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
BXP’s nominal ownership percentage | 60.00% | 50.00% | 20.00% | 25.00% | 33.33% | 50.00% | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
BXP’s share of net income (loss) | $ | 2,410 | $ | 260 | $ | (135 | ) | $ | 7,008 | (3) | $ | (946 | ) | $ | (2,190 | ) | ||||||||
Total basis differential(5) | 683 | (561 | ) | (214 | ) | (300 | ) | (30 | ) | (102 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income (loss) from unconsolidated joint ventures | $ | 3,093 | $ | (301 | ) | $ | (349 | ) | $ | 6,708 | (3) | $ | (976 | ) | $ | (2,292 | ) | |||||||
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BXP’s share of revenue | $ | 17,504 | $ | 10,875 | $ | 6,225 | $ | 16,682 | $ | 1,748 | $ | 5,554 | ||||||||||||
BXP’s share of operating expenses | 8,445 | 4,632 | 2,940 | 6,682 | 847 | 3,263 | ||||||||||||||||||
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BXP’s share of NOI | 9,059 | 6,243 | 3,285 | 10,000 | (3) | 901 | 2,291 | |||||||||||||||||
Less: | ||||||||||||||||||||||||
BXP’s share of termination income | 416 | — | (3 | ) | — | (3) | — | — | ||||||||||||||||
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BXP’s share of NOI (excluding termination income) | 8,643 | 6,243 | 3,288 | 10,000 | (3) | 901 | 2,291 | |||||||||||||||||
Less: | ||||||||||||||||||||||||
BXP’s share of straight-line rent | (330 | ) | 1,279 | 1,372 | 1,050 | (3) | — | 422 | ||||||||||||||||
BXP’s share of fair value lease revenue | — | — | — | — | (3) | — | — | |||||||||||||||||
Add: | ||||||||||||||||||||||||
BXP’s share of lease transaction costs that qualify as rent inducements | — | 381 | 470 | 34 | (3) | — | 163 | |||||||||||||||||
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BXP’s share of NOI – cash (excluding termination income) | $ | 8,973 | $ | 5,345 | $ | 2,386 | $ | 8,984 | (3) | $ | 901 | $ | 2,032 | |||||||||||
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BOSTON PROPERTIES, INC. |2018 Proxy Statement A-5
UNCONSOLIDATED JOINT VENTURES
for the year ended December 31, 2017(continued)
(unaudited and dollars in thousands)
500 North Capitol Street, N.W. | Colorado Center | 1265 Main Street | Other Joint Ventures(2) | Total Unconsolidated Joint Ventures | ||||||||||||||||
REVENUE | ||||||||||||||||||||
Rental | $ | 11,713 | $ | 53,725 | $ | 3,987 | $ | 1,764 | $ | 171,467 | ||||||||||
Operating recoveries | 4,976 | 2,006 | 1,015 | — | 28,250 | |||||||||||||||
Straight-line rent | 295 | 9,534 | — | — | 21,730 | |||||||||||||||
Fair value lease revenue | — | 384 | — | — | 384 | |||||||||||||||
Termination income | — | (12 | ) | — | — | 669 | ||||||||||||||
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| |||||||||||
Total revenue | 16,984 | 65,637 | 5,002 | 1,764 | 222,500 | |||||||||||||||
EXPENSES | ||||||||||||||||||||
Operating | 5,611 | 21,257 | 1,066 | 1,608 | 90,540 | |||||||||||||||
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| |||||||||||
NET OPERATING INCOME (LOSS) (NOI) | 11,373 | 44,380 | 3,936 | 156 | 131,960 | |||||||||||||||
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Interest expense | 4,475 | 8,588 | 1,538 | — | 46,377 | |||||||||||||||
Depreciation and amortization | 3,811 | 16,806 | 1,635 | — | 59,527 | |||||||||||||||
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SUBTOTAL | 8,286 | 25,394 | 3,173 | — | 105,904 | |||||||||||||||
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NET INCOME (LOSS) | $ | 3,087 | $ | 18,986 | $ | 763 | $ | 156 | $ | 26,056 | ||||||||||
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BXP’s nominal ownership percentage | 30.00% | 50.00% | 50.00% | 50.00% | ||||||||||||||||
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| |||||||||||||
BXP’s share of net income (loss) | $ | 927 | $ | 9,465 | $ | 382 | $ | 276 | $ | 17,457 | ||||||||||
Total basis differential(5) | 20 | (5,704 | )(4) | (20 | ) | 3 | (6,225 | ) | ||||||||||||
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Income (loss) from unconsolidated joint ventures | $ | 947 | $ | 3,761 | $ | 362 | $ | 279 | $ | 11,232 | ||||||||||
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BXP’s share of revenue | $ | 5,095 | $ | 37,530 | $ | 2,501 | $ | 882 | $ | 104,596 | ||||||||||
BXP’s share of operating expenses | 1,684 | 10,608 | 533 | 803 | 40,437 | |||||||||||||||
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| |||||||||||
BXP’s share of net operating income (loss) | 3,411 | 26,922 | 1,968 | 79 | 64,159 | |||||||||||||||
Less: | ||||||||||||||||||||
BXP’s share of termination income | — | 401 | — | — | 814 | |||||||||||||||
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BXP’s share of NOI (excluding termination income) | 3,411 | 26,521 | 1,968 | 79 | 63,345 | |||||||||||||||
Less: | ||||||||||||||||||||
BXP’s share of straight-line rent | 88 | 7,672 | — | — | 11,553 | |||||||||||||||
BXP’s share of fair value lease revenue | — | 1,857 | — | — | 1,857 | |||||||||||||||
Add: | ||||||||||||||||||||
BXP’s share of lease transaction costs that qualify as rent inducements | — | — | — | — | 1,048 | |||||||||||||||
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BXP’s share of NOI – cash (excluding termination income) | $ | 3,323 | $ | 16,992 | $ | 1,968 | $ | 79 | $ | 50,983 | ||||||||||
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(1) | Annapolis Junction includes four properties in service and two undeveloped land parcels. |
(2) | Includes The Hub on Causeway, 1001 6th Street, Dock 72 and 7750 Wisconsin Avenue. |
(3) | Reflects the allocation percentages pursuant to the achievement of specified investment return thresholds as provided for in the joint venture agreement. |
(4) | The Company’s purchase price allocation under ASC 805 for Colorado Center differs from the historical basis of the venture resulting in the majority of the basis differential for this venture. |
(5) | Represents adjustments related to the carrying values and depreciation of certain of the Company’s investment in unconsolidated joint ventures. |
A-6 BOSTON PROPERTIES, INC. |2018 Proxy Statement
UNCONSOLIDATED JOINT VENTURES
for the year ended December 31, 2016
(unaudited and dollars in thousands)
540 Madison Avenue | Market Square North | Metropolitan Square(1) | 901 New York Avenue | Wisconsin Place Parking Facility | Annapolis Junction(2) | |||||||||||||||||||
REVENUE | ||||||||||||||||||||||||
Rental | $ | 25,325 | $ | 15,388 | $ | 20,250 | $ | 25,166 | $ | 4,020 | $ | 9,903 | ||||||||||||
Operating recoveries | 3,707 | 3,254 | 5,212 | 4,552 | 1,195 | 2,690 | ||||||||||||||||||
Straight-line rent | 533 | 3,527 | 5,575 | 2,432 | — | 167 | ||||||||||||||||||
Fair value lease revenue | (4 | ) | — | — | — | — | — | |||||||||||||||||
Termination income | 51 | 34 | (61 | ) | — | — | — | |||||||||||||||||
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Total revenue | 29,612 | 22,203 | 30,976 | 32,150 | 5,215 | 12,760 | ||||||||||||||||||
EXPENSES | ||||||||||||||||||||||||
Operating | 14,469 | 9,077 | 14,288 | 13,419 | 2,180 | 7,099 | ||||||||||||||||||
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NET OPERATING INCOME (LOSS) (NOI) | 15,143 | 13,126 | 16,688 | 18,731 | 3,035 | 5,661 | ||||||||||||||||||
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Interest expense | 2,620 | 6,119 | 9,732 | 8,300 | — | 2,643 | ||||||||||||||||||
Depreciation and amortization | 7,499 | 3,665 | 6,800 | 5,464 | 5,531 | 4,099 | ||||||||||||||||||
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SUBTOTAL | 10,119 | 9,784 | 16,532 | 13,764 | 5,531 | 6,742 | ||||||||||||||||||
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| |||||||||||||
NET INCOME (LOSS) | $ | 5,024 | $ | 3,342 | $ | 156 | $ | 4,967 | $ | (2,496 | ) | $ | (1,081 | ) | ||||||||||
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BXP’s nominal ownership percentage | 60.00% | 50.00% | 20.00% | 25.00% | 33.33% | 50.00% | ||||||||||||||||||
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BXP’s share of net income (loss) | $ | 3,014 | $ | 1,671 | $ | 76 | $ | 1,372 | $ | (830 | ) | $ | (540 | ) | ||||||||||
Total basis differential(5) | 687 | (25 | ) | 59,526 | (27 | ) | (28 | ) | (11 | ) | ||||||||||||||
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Income (loss) from unconsolidated joint ventures | $ | 3,701 | $ | 1,646 | $ | 59,602 | $ | 1,345 | (3) | $ | (858 | ) | $ | (551 | ) | |||||||||
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BXP’s share of revenue | $ | 17,269 | $ | 10,680 | $ | 13,187 | $ | 14,897 | $ | 1,640 | $ | 5,977 | ||||||||||||
BXP’s share of operating expenses | 8,184 | 4,116 | 5,680 | 5,925 | 628 | 3,145 | ||||||||||||||||||
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BXP’s share of net operating income (loss) | 9,085 | 6,564 | 7,507 | 8,972 | (3) | 1,012 | 2,832 | |||||||||||||||||
Less: | ||||||||||||||||||||||||
BXP’s share of termination income | 30 | 17 | (31 | ) | — | — | — | |||||||||||||||||
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BXP’s share of NOI (excluding termination income) | 9,055 | 6,547 | 7,538 | 8,972 | 1,012 | 2,832 | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
BXP’s share of straight-line rent | 320 | 1,764 | 2,390 | 1,161 | — | 84 | ||||||||||||||||||
BXP’s share of fair value lease revenue | (2 | ) | — | — | — | — | — | |||||||||||||||||
Add: | ||||||||||||||||||||||||
BXP’s share of lease transaction costs that qualify as rent inducements | — | — | 15 | — | — | — | ||||||||||||||||||
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BXP’s share of NOI – cash (excluding termination income) | $ | 8,737 | $ | 4,783 | $ | 5,163 | $ | 7,811 | (3) | $ | 1,012 | $ | 2,748 | |||||||||||
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BOSTON PROPERTIES, INC. |2018 Proxy Statement A-7
UNCONSOLIDATED JOINT VENTURES
for the year ended December 31, 2016 (continued)
(unaudited and dollars in thousands)
500 North Capitol Street, N.W. | Colorado Center | 1001 6th Street | 1265 Main Street | Total Unconsolidated Joint Ventures | ||||||||||||||||
REVENUE | ||||||||||||||||||||
Rental | $ | 10,728 | $ | 19,866 | $ | 895 | $ | 994 | $ | 132,535 | ||||||||||
Operating recoveries | 4,672 | 878 | — | 205 | 26,365 | |||||||||||||||
Straight-line rent | 1,163 | 4,673 | — | — | 18,070 | |||||||||||||||
Fair value lease revenue | — | 192 | — | — | 188 | |||||||||||||||
Termination income | — | — | — | — | 24 | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total revenue | 16,563 | 25,609 | 895 | 1,199 | 177,182 | |||||||||||||||
EXPENSES | ||||||||||||||||||||
Operating | 5,177 | 9,613 | 1,192 | 227 | 76,741 | |||||||||||||||
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|
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|
|
|
|
|
|
| |||||||||||
NET OPERATING INCOME (LOSS) (NOI) | 11,386 | 15,996 | (297 | ) | 972 | 100,441 | ||||||||||||||
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|
|
|
|
|
| |||||||||||
Interest expense | 4,500 | — | — | 102 | 34,016 | |||||||||||||||
Depreciation and amortization | 3,707 | 6,589 | — | 379 | 43,733 | |||||||||||||||
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| |||||||||||
SUBTOTAL | 8,207 | 6,589 | — | 481 | 77,749 | |||||||||||||||
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|
|
| |||||||||||
NET INCOME (LOSS) | $ | 3,179 | $ | 9,407 | $ | (297 | ) | $ | 491 | $ | 22,692 | |||||||||
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| |||||||||||
BXP’s nominal ownership percentage | 30.00% | 49.80% | 50.00% | 50.00% | ||||||||||||||||
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| |||||||||||||
BXP’s share of net income (loss) | $ | 954 | $ | 4,685 | $ | (150 | ) | $ | 246 | $ | 10,498 | |||||||||
Total basis differential(5) | (4 | ) | (3,168 | )(4) | — | (4 | ) | 56,946 | ||||||||||||
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| |||||||||||
Income (loss) from unconsolidated joint ventures | $ | 950 | $ | 1,517 | $ | (150 | ) | $ | 242 | $ | 67,444 | |||||||||
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| |||||||||||
BXP’s share of revenue | $ | 4,627 | $ | 15,096 | $ | 448 | $ | 600 | $ | 84,421 | ||||||||||
BXP’s share of operating expenses | 1,212 | 4,788 | 598 | 114 | 34,390 | |||||||||||||||
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|
|
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| |||||||||||
BXP’s share of net operating income (loss) | 3,415 | 10,308 | (150 | ) | 486 | 50,031 | ||||||||||||||
Less: | ||||||||||||||||||||
BXP’s share of termination income | — | — | — | — | 16 | |||||||||||||||
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| |||||||||||
BXP’s share of NOI (excluding termination income) | 3,415 | 10,308 | (150 | ) | 486 | 50,015 | ||||||||||||||
Less: | ||||||||||||||||||||
BXP’s share of straight-line rent | 349 | 3,760 | — | — | 9,828 | |||||||||||||||
BXP’s share of fair value lease revenue | — | 1,005 | — | — | 1,003 | |||||||||||||||
Add: | ||||||||||||||||||||
BXP’s share of lease transaction costs that qualify as rent inducements | 43 | — | — | — | 58 | |||||||||||||||
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| |||||||||||
BXP’s share of NOI – cash (excluding termination income) | $ | 3,109 | $ | 5,543 | $ | (150 | ) | $ | 486 | $ | 39,242 | |||||||||
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(1) | On October 20, 2016, the Company and its partner in the unconsolidated joint venture that owns Metropolitan Square, completed the sale of an 80% interest in the joint venture. Prior to the sale, the Company owned a 51% interest and its partner owned a 49% interest in the joint venture. Following the sale, the Company continues to own a 20% interest in the joint venture with the buyer owning the remaining 80%. |
(2) | Annapolis Junction includes four properties in service and two undeveloped land parcels. |
(3) | Reflects the allocation percentages pursuant to the achievement of specified investment return thresholds as provided for in the joint venture agreement. |
(4) | The Company’s purchase price allocation under ASC 805 for Colorado Center differs from the historical basis of the venture resulting in the majority of the basis differential for this venture. |
(5) | Represents adjustments related to the carrying values and depreciation of certain of the Company’s investment in unconsolidated joint ventures. |
A-8 BOSTON PROPERTIES, INC. |2018 Proxy Statement
Electronic Voting Instructions | ||||||||||
You can vote by Internet or telephone! | ||||||||||
Available 24 hours per day, 7 days per week! | ||||||||||
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. | ||||||||||
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | ||||||||||
Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on May | ||||||||||
|
Vote by Internet | |||||||||
• Go towww.envisionreports.com/BXP | ||||||||||
• Or scan the QR code with your smartphone | ||||||||||
• Follow the steps outlined on the secure website | ||||||||||
Vote by telephone | ||||||||||
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone | ||||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. |
• Follow the instructions provided by the recorded message |
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
The Board of Directors recommends a vote
| ||||||||||||||||||||||||||||
1. | To elect the eleven nominees for director named in the proxy statement, each to serve for a one-year term and until their respective successors are duly elected and qualified: | |||||||||||||||||||||||||||
For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||
01 - | 05 - | 09 - Owen D. Thomas | ||||||||||||||||||||||||||
02 - | 06 - | 10 - Martin Turchin | ||||||||||||||||||||||||||
03 - | 07 - | 11 - David A. Twardock | ||||||||||||||||||||||||||
04 - | 08 - | |||||||||||||||||||||||||||
For
| Against | Abstain | For | Against | Abstain | |||||||||||||||||||||||||||||||||||||
The Board of Directors recommends a vote “FOR” Proposal 2.
| The Board of Directors recommends a vote “FOR” Proposal 2.
| The Board of Directors recommends a vote “FOR” Proposal 3.
| ||||||||||||||||||||||||||||||||||||||||
2. | To approve, by non-binding resolution, the Company’s named executive officer compensation. | ¨ | ¨ | ¨ | 3. | To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. | ¨ | ¨ | ¨ | To approve, by non-binding, advisory resolution, the Company’s named executive officer compensation. | For
☐ | Against
☐ | Abstain
☐ | 3. | To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2018. | For
☐ | Against
☐ | Abstain
☐ | ||||||||||||||||||||||||
4. | In their discretion, the proxies are authorized to vote upon any other matters that are properly brought by or at the direction of the Board of Directors before the Annual Meeting and at any adjournments or postponements thereof. | In their discretion, the proxies are authorized to vote upon any other matters that are properly brought by or at the direction of the Board of Directors before the Annual Meeting and at any adjournments or postponements thereof. |
IF VOTING BY MAIL, YOUMUST COMPLETE BOTH SIDES OF THIS CARD.
02AKBGP02SHSB
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Proxy
| ||
BOSTON PROPERTIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2018 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 17, 201623, 2018
The undersigned hereby appoints Douglas T. Linde and Frank D. Burt, and each of them, as proxies for the undersigned, each with the power to appoint his substitute, and hereby authorizes them to attend the 2018 Annual Meeting of Stockholders of Boston Properties, Inc. (the “Annual Meeting”) to be held at Lotte New York Palace Hotel, 455 Madison Avenue, 5th Floor, New York, NY 10022Salesforce Tower, 415 Mission Street, Lobby Level, San Francisco, CA 94105 on May 17, 201623, 2018 at 10:9:00 a.m., EasternPacific Time, and at any adjournments or postponements thereof, to vote, as designated on the reverse side, all of the shares that the undersigned is entitled to vote at the Annual Meeting and otherwise to represent the undersigned with all of the powers the undersigned would possess if personally present at the Annual Meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders, the Proxy Statement and the Annual Report to Stockholders and revokes any proxy heretofore given with respect to the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. UNLESS DIRECTION IS GIVEN TO THE CONTRARY, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2 AND 3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER MATTERS THAT ARE PROPERLY BROUGHT BY OR AT THE DIRECTION OF THE BOARD OF DIRECTORS BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXIES TO VOTE WITH RESPECT TO THE ELECTION OF ANY INDIVIDUAL FOR DIRECTOR WHERE ONE OR MORE NOMINEES ARE UNABLE TO SERVE, OR FOR GOOD CAUSE WILL NOT SERVE, AND WITH RESPECT TO MATTERS INCIDENTAL TO THE CONDUCT OF THE ANNUAL MEETING.
PLEASE MARK, SIGN AND DATE AND RETURN PROMPTLY, OR VOTE BY TELEPHONE OR INTERNET.
THIS PROXY IS CONTINUED ON REVERSE SIDE
Please sign exactly as name appears hereon. Joint owners should each sign. Executors, administrators, trustees, guardians or other fiduciaries should give full title as such. If signing for a company or partnership, please sign in full company or partnership name by a duly authorized officer or partner.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. |
/ / |
IF VOTING BY MAIL, YOUMUST COMPLETE BOTH SIDES OF THIS CARD. + |