Noncontrolling Interests | 3 Months Ended |
Mar. 31, 2014 |
Noncontrolling Interest [Abstract] | ' |
Noncontrolling Interests | ' |
Noncontrolling Interests |
Noncontrolling interests relate to the interests in the Company not owned by Boston Properties, Inc. and interests in consolidated property partnerships not wholly-owned by the Company. As of March 31, 2014, the noncontrolling interests in the Company consisted of 15,583,853 OP Units, 1,554,353 LTIP Units, 394,590 2012 OPP Units, 314,974 2013 MYLTIP Units, 483,555 2014 MYLTIP Units, 666,116 Series Two Preferred Units (or 874,168 OP Units on an as converted basis) and 360,126 Series Four Preferred Units (none of which are convertible into OP Units) held by parties other than Boston Properties, Inc. |
Noncontrolling Interest—Redeemable Interest in Property Partnership |
On October 4, 2012, the Company completed the formation of a joint venture that owns and operates Fountain Square located in Reston, Virginia. The joint venture partner contributed the property valued at approximately $385.0 million and related mortgage indebtedness totaling approximately $211.3 million for a nominal 50% interest in the joint venture. The Company contributed cash totaling approximately $87.0 million for its nominal 50% interest, which cash was distributed to the joint venture partner. Pursuant to the joint venture agreement (i) the Company has rights to acquire the partner's nominal 50% interest and (ii) the partner has the right to cause the Company to acquire the partner's interest on January 4, 2016, in each case at a fixed price totaling approximately $102.0 million in cash. The fixed price option rights expire on January 31, 2016. The Company is consolidating this joint venture due to the Company's right to acquire the partner's nominal 50% interest. The Company initially recorded the noncontrolling interest at its acquisition-date fair value as temporary equity, due to the redemption option existing outside the control of the Company. The Company will accrete the changes in the redemption value quarterly over the period from the acquisition date to the earliest redemption date using the effective interest method. The Company will record the accretion after the allocation of net income and distributions of cash flow to the noncontrolling interest account balance. |
The following table reflects the activity of the noncontrolling interest—redeemable interest in property partnership in the Company's Fountain Square consolidated joint venture for the three months ended March 31, 2014 and 2013 (in thousands): |
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Balance at January 1, 2014 | $ | 99,609 | |
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Net loss | (106 | ) |
Distributions | (1,050 | ) |
Adjustment to reflect redeemable interest at redemption value | 1,874 | |
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Balance at March 31, 2014 | $ | 100,327 | |
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Balance at January 1, 2013 | $ | 97,558 | |
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Net loss | (525 | ) |
Distributions | (1,350 | ) |
Adjustment to reflect redeemable interest at redemption value | 2,533 | |
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Balance at March 31, 2013 | $ | 98,216 | |
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Noncontrolling Interest—Redeemable Preferred Units of the Company |
The Preferred Units at March 31, 2014 included 666,116 Series Two Preferred Units, which bear a preferred distribution equal to the greater of (1) the distribution which would have been paid in respect of the Series Two Preferred Unit had such Series Two Preferred Unit been converted into an OP Unit (including both regular and special distributions) or (2) 6.00% per annum on a liquidation preference of $50.00 per unit, and are convertible into OP Units at a rate of $38.10 per Preferred Unit (1.312336 OP Units for each Preferred Unit). On March 11, 2014, the Company’s general partner notified the holders of the outstanding Series Two Preferred Units that it had elected to redeem all of such Series Two Preferred Units on May 12, 2014. As a result of the Company's general partner’s election to redeem the units, all of the holders of the Series Two Preferred Units have elected to convert such units into 1.312336 OP Units, or an aggregate of 874,168 OP Units on or before May 12, 2014. Due to the holders' redemption option existing outside the control of the Company’s general partner, the Series Two Preferred Units are presented outside of permanent equity in the Company's Consolidated Balance Sheets. |
On February 18, 2014, the Company paid a distribution on its outstanding Series Two Preferred Units of $0.85302 per unit. |
Due to the redemption option and the conversion option existing outside the control of the Company, the Series Two Preferred Units are not included in Partners’ Capital and are reflected in the Consolidated Balance Sheets at an amount equivalent to the value of such units had such units been redeemed at March 31, 2014. The value of the Series Two Preferred Units, assuming all of such units had been converted and then redeemed at March 31, 2014, was approximately $100.1 million based on the closing price of Boston Properties, Inc.’s common stock of $114.53 per share on that date. |
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The Preferred Units at March 31, 2014 also included 360,126 Series Four Preferred Units, which bear a preferred distribution equal to 2.00% per annum on a liquidation preference of $50.00 per unit and are not convertible into OP Units. In order to secure the performance of certain obligations by the holders, such Series Four Preferred Units are subject to forfeiture pursuant to the terms of a pledge agreement. The holders of Series Four Preferred Units have the right, at certain times and subject to certain conditions set forth in the Certificate of Designations establishing the rights, limitations and preferences of the Series Four Preferred Units, to require the Company to redeem all their units for cash at the redemption price of $50.00 per unit. The Company also has the right, at certain times and subject to certain conditions, to redeem all of the Series Four Preferred Units for cash at the redemption price of $50.00 per unit. The Series Four Preferred Units that are subject to the security interest under the pledge agreement may not be redeemed until and unless such security interest is released. The Company's first right to redeem the Series Four Preferred Units was a 30-day period beginning on August 29, 2013. Due to the holders' redemption option existing outside the control of the Company, the Series Four Preferred Units are not included in Partners' Capital in the Company's Consolidated Balance Sheets. |
On February 18, 2014, the Company paid a distribution on its outstanding Series Four Preferred Units of $0.25 per unit. |
The following table reflects the activity of the noncontrolling interests—redeemable preferred units of the Company for the three months ended March 31, 2014 and 2013 (in thousands): |
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Balance at January 1, 2014 | $ | 105,746 | |
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Net income | 619 | |
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Distributions | (619 | ) |
Reallocation of partnership interest | 12,378 | |
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Balance at March 31, 2014 | $ | 118,124 | |
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Balance at January 1, 2013 | $ | 199,378 | |
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Net income | 1,180 | |
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Distributions | (1,180 | ) |
Reallocation of partnership interest | (6,208 | ) |
Balance at March 31, 2013 | $ | 193,170 | |
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Noncontrolling Interest—Common Units of the Company |
During the three months ended March 31, 2014, 18,528 OP Units were presented by the holders for redemption (including 17,191 OP Units issued upon conversion of LTIP Units) and were redeemed by Boston Properties, Inc. in exchange for an equal number of shares of Common Stock. |
At March 31, 2014, the Company had outstanding 394,590 2012 OPP Units, 314,974 2013 MYLTIP Units and 483,555 2014 MYLTIP Units. Prior to the measurement date (February 6, 2015 for 2012 OPP Units, February 4, 2016 for 2013 MYLTIP Units and February 3, 2017 for 2014 MYLTIP Units), holders of OPP Units and MYLTIP Units will be entitled to receive per unit distributions equal to one-tenth (10%) of the regular quarterly distributions payable on an OP Unit, but will not be entitled to receive any special distributions. After the measurement date, the number of OPP Units and MYLTIP Units, both vested and unvested, that OPP and MYLTIP award recipients have earned, if any, based on the establishment of a performance pool, will be entitled to receive distributions in an amount per unit equal to distributions, both regular and special, payable on an OP Unit. |
On January 31, 2014, the measurement period for the Company’s 2011 OPP Unit awards expired and Boston Properties, Inc.'s TRS was not sufficient for employees to earn and therefore become eligible to vest in any of the 2011 OPP Unit awards. Accordingly, all 2011 OPP Unit awards were automatically forfeited. |
On January 29, 2014, the Company paid a special cash distribution on the OP Units and LTIP Units in the amount of $2.25 per unit, a regular cash distribution on the OP Units and LTIP Units in the amount of $0.65 per unit, and a distribution on the 2011 OPP Units, 2012 OPP Units and 2013 MYLTIP Units in the amount of $0.065 per unit, to holders of record as of the close of business on December 31, 2013. The special cash distribution was in addition to the regular quarterly distribution on the OP Units and LTIP Units. Holders of the 2011 OPP Units, 2012 OPP Units, 2013 MYLTIP Units and 2014 MYLTIP Units are not entitled to receive any special distributions. Holders of Series Two Preferred Units will participate in the special cash distributions in connection with their conversion to OP Units in May 2014 as provided in the Company's partnership agreement. On March 18, 2014, Boston Properties, Inc., as general partner of the Company, declared a distribution on the OP Units and LTIP Units in the amount of $0.65 per unit and a distribution on the 2012 OPP Units, 2013 MYLTIP Units and 2014 MYLTIP Units in the amount of $0.065 per unit, in each case payable on April 30, 2014 to holders of record as of the close of business on March 31, 2014. |
The following table reflects the activity of the noncontrolling interests—redeemable common units for the three months ended March 31, 2014 and 2013 (in thousands): |
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Balance at January 1, 2014 | $ | 1,710,218 | |
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Contributions | 23,379 | |
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Net income | 6,160 | |
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Distributions | (11,218 | ) |
Conversion of redeemable partnership units | (627 | ) |
Unearned compensation | (14,619 | ) |
Accumulated other comprehensive loss | 62 | |
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Adjustment to reflect redeemable partnership units at redemption value | 249,484 | |
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Balance at March 31, 2014 | $ | 1,962,839 | |
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Balance at January 1, 2013 | $ | 1,836,522 | |
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Contributions | 22,403 | |
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Net income | 6,177 | |
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Distributions | (11,446 | ) |
Conversion of redeemable partnership units | (272 | ) |
Unearned compensation | (5,859 | ) |
Accumulated other comprehensive loss | 64 | |
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Adjustment to reflect redeemable partnership units at redemption value | (78,896 | ) |
Balance at March 31, 2013 | $ | 1,768,693 | |
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Pursuant to the Company’s partnership agreement, certain limited partners in the Company have the right to redeem all or any portion of their interest for cash from the Company. However, Boston Properties, Inc. may elect to acquire the limited partner’s interest by issuing its Common Stock in exchange for the interest. The amount of cash to be paid to the limited partner if the redemption right is exercised and Boston Properties, Inc. does not elect to issue its Common Stock is based on the trading price of Boston Properties, Inc.’s common stock at that time. Due to the redemption option existing outside the control of the Company, such limited partners’ units are not included in Partners’ Capital. The value of the OP Units not owned by Boston Properties, Inc. (including LTIP Units assuming that all conditions had been met for the conversion thereof), assuming all of such units had been redeemed at March 31, 2014 was approximately $2.0 billion based on the closing price of Boston Properties, Inc.’s common stock of $114.53 per share. |
Noncontrolling Interests—Property Partnerships |
The noncontrolling interests in property partnerships consist of the outside equity interests in ventures that are consolidated with the financial results of the Company because the Company exercises control over the entities that own the properties. The equity interests in these ventures that are not owned by the Company, totaling approximately $725.1 million at March 31, 2014 and approximately $726.1 million at December 31, 2013, are included in Noncontrolling Interests—Property Partnerships on the accompanying Consolidated Balance Sheets. |
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On February 7, 2013, the partner in the Company's Salesforce Tower (formerly Transbay Tower) joint venture issued a notice that it was electing under the joint venture agreement to reduce its nominal ownership interest in the venture from 50% to 5%. On February 26, 2013, the Company issued a notice to the partner electing to proceed with the venture on that basis. As a result, the Company has a 95% nominal interest in and is consolidating the joint venture. Under the joint venture agreement, if certain return thresholds are achieved the partner will be entitled to an additional promoted interest. In addition, if the Company elects to fund the construction of Salesforce Tower without a construction loan (or a construction loan of less than 50% of project costs), then the partner has the option to require the Company to fund up to 2.5% of the total project costs (i.e., of 50% of the partner's 5% interest in the venture) in the form of a loan to the partner. This loan would bear interest at the then prevailing market construction loan interest rates. Also, under the agreement, (1) the partner has the right to cause the Company to purchase the partner's interest after the defined stabilization date and (2) the Company has the right to acquire the partner's interest on the third anniversary of the stabilization date, in each case at an agreed upon purchase price or appraised value. |
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On May 31, 2013, the Company's two joint venture partners in 767 Venture, LLC (the entity that owns 767 Fifth Avenue(the General Motors Building) in New York City) transferred all of their interests in the joint venture to third parties. In connection with the transfer, the Company and its new joint venture partners modified the Company's relative decision making authority and consent rights with respect to the joint venture's assets and operations. These changes resulted in the Company having sufficient financial and operating control over 767 Venture, LLC such that the Company now accounts for the assets, liabilities and operations of 767 Venture, LLC on a consolidated basis in its financial statements instead of under the equity method of accounting. Upon consolidation, the Company recognized the new joint venture partners' aggregate 40% equity interest at its aggregate fair value of approximately $480.9 million within Noncontrolling Interests—Property Partnerships on the accompanying Consolidated Balance Sheets. |
On October 9, 2013, the Company completed the sale of a 45% ownership interest in its Times Square Tower property for a gross sale price of $684.0 million in cash. Net cash proceeds totaled approximately $673.1 million, after the payment of transaction costs. In connection with the sale, the Company formed a joint venture with the buyer and will provide customary property management and leasing services to the joint venture. Times Square Tower is an approximately 1,246,000 net rentable square foot Class A office tower located in New York City. The transaction did not qualify as a sale of real estate for financial reporting purposes because the Company continues to control the joint venture and will therefore continue to account for the entity on a consolidated basis in its financial statements. The Company has accounted for the transaction as an equity transaction and has recognized noncontrolling interest in its consolidated balance sheets totaling approximately $243.5 million, which is equal to 45% of the carrying value of the total equity of the property immediately prior to the transaction. |
The following table reflects the activity of the noncontrolling interests in property partnerships for the three months ended March 31, 2014 and 2013 (in thousands): |
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Balance at January 1, 2014 | $ | 726,132 | |
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Capital contributions | 468 | |
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Net income | 2,586 | |
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Distributions | (4,093 | ) |
Balance at March 31, 2014 | $ | 725,093 | |
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Balance at January 1, 2013 | $ | (1,964 | ) |
Capital contributions | 10,421 | |
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Net income | 566 | |
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Distributions | (750 | ) |
Balance at March 31, 2013 | $ | 8,273 | |
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