Segment Information | 13. Segment Information Below is a reconciliation of Net Income Attributable to Boston Properties, Inc. Common Shareholders to Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to Net Operating Income for the three and six months ended June 30, 2016 and 2015. Boston Properties, Inc. Three months ended June 30, Six months ended June 30, 2016 2015 2016 2015 (in thousands) Net income attributable to Boston Properties, Inc. common shareholders $ 96,597 $ 79,460 $ 278,323 $ 250,694 Add: Preferred dividends 2,589 2,618 5,207 5,207 Noncontrolling interest—common units of the Operating Partnership 11,357 9,394 32,771 29,530 Noncontrolling interest—redeemable preferred units of the Operating Partnership — 3 — 6 Noncontrolling interests in property partnerships 6,814 9,264 17,278 24,472 Interest expense 105,003 108,534 210,312 217,291 Depreciation and amortization expense 153,175 167,844 312,623 322,067 Transaction costs 913 208 938 535 General and administrative expense 25,418 22,284 54,771 51,075 Less: Gains on sales of real estate — — 67,623 95,084 Gains (losses) from investments in securities 478 (24 ) 737 369 Interest and other income 1,524 1,293 3,029 2,700 Income from unconsolidated joint ventures 2,234 3,078 4,025 17,912 Development and management services income 5,533 4,862 12,222 10,190 Net Operating Income $ 392,097 $ 390,400 $ 824,587 $ 774,622 Boston Properties Limited Partnership Three months ended June 30, Six months ended June 30, 2016 2015 2016 2015 (in thousands) Net income attributable to Boston Properties Limited Partnership common unitholders 109,938 90,852 317,234 284,221 Add: Preferred distributions 2,589 2,618 5,207 5,207 Noncontrolling interest—redeemable preferred units — 3 — 6 Noncontrolling interests in property partnerships 6,814 9,264 17,278 24,472 Interest expense 105,003 108,534 210,312 217,291 Depreciation and amortization expense 151,191 165,846 308,652 318,070 Transaction costs 913 208 938 535 General and administrative expense 25,418 22,284 54,771 51,075 Less: Gains on sales of real estate — — 69,792 95,084 Gains (losses) from investments in securities 478 (24 ) 737 369 Interest and other income 1,524 1,293 3,029 2,700 Income from unconsolidated joint ventures 2,234 3,078 4,025 17,912 Development and management services income 5,533 4,862 12,222 10,190 Net Operating Income $ 392,097 $ 390,400 $ 824,587 $ 774,622 Net Operating Income is not a measure of operating results or cash flows from operating activities as measured by GAAP, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. All companies may not calculate Net Operating Income in the same manner. The Company considers Net Operating Income to be an appropriate supplemental performance measure to net income because it helps both investors and management to understand the core operations of the Company’s properties. The Company’s management also uses Net Operating Income to evaluate regional property level performance and to make decisions about resource allocations. Further, the Company believes Net Operating Income is useful to investors as a performance measure because, when compared across periods, Net Operating Income reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspectives not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Interest and other income, development and management services income, general and administrative expenses, transaction costs, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, income from unconsolidated joint ventures, gains on sales of real estate, noncontrolling interests and preferred dividends/distributions are not included in Net Operating Income as internal reporting addresses these items on a corporate level. The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by both geographic area and property type. The Company’s segments by geographic area are Boston, New York, San Francisco and Washington, DC. Segments by property type include: Office, Residential and Hotel. Beginning on January 1, 2016, the properties that were historically included in the Company’s Office/Technical segment are now included in the Office segment to align with its method of internal reporting, which shifted after the disposition of 415 Main Street in Cambridge, Massachusetts. As such, the amounts previously included in Office/Technical are now included in Office for all periods presented. Information by geographic area and property type (dollars in thousands): For the three months ended June 30, 2016 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 179,048 $ 243,957 $ 78,524 $ 99,588 $ 601,117 Residential 1,180 — — 2,908 4,088 Hotel 12,808 — — — 12,808 Total 193,036 243,957 78,524 102,496 618,013 % of Grand Totals 31.24 % 39.47 % 12.71 % 16.58 % 100.00 % Rental Expenses: Office 68,754 88,749 25,470 33,359 216,332 Residential 513 — — 1,093 1,606 Hotel 7,978 — — — 7,978 Total 77,245 88,749 25,470 34,452 225,916 % of Grand Totals 34.19 % 39.29 % 11.27 % 15.25 % 100.00 % Net operating income $ 115,791 $ 155,208 $ 53,054 $ 68,044 $ 392,097 % of Grand Totals 29.53 % 39.59 % 13.53 % 17.35 % 100.00 % For the three months ended June 30, 2015 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 180,936 $ 246,432 $ 74,335 $ 94,442 $ 596,145 Residential 1,131 — — 2,680 3,811 Hotel 13,403 — — — 13,403 Total 195,470 246,432 74,335 97,122 613,359 % of Grand Totals 31.87 % 40.18 % 12.12 % 15.83 % 100.00 % Rental Expenses: Office 69,653 85,661 24,415 33,204 212,933 Residential 511 — — 1,020 1,531 Hotel 8,495 — — — 8,495 Total 78,659 85,661 24,415 34,224 222,959 % of Grand Totals 35.28 % 38.42 % 10.95 % 15.35 % 100.00 % Net operating income $ 116,811 $ 160,771 $ 49,920 $ 62,898 $ 390,400 % of Grand Totals 29.92 % 41.18 % 12.79 % 16.11 % 100.00 % For the six months ended June 30, 2016 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 356,875 $ 535,815 $ 154,841 $ 200,076 $ 1,247,607 Residential 2,351 — — 5,786 8,137 Hotel 21,565 — — — 21,565 Total 380,791 535,815 154,841 205,862 1,277,309 % of Grand Totals 29.81 % 41.95 % 12.12 % 16.12 % 100.00 % Rental Expenses: Office 139,441 177,547 49,375 67,541 433,904 Residential 1,033 — — 2,173 3,206 Hotel 15,612 — — — 15,612 Total 156,086 177,547 49,375 69,714 452,722 % of Grand Totals 34.47 % 39.22 % 10.91 % 15.40 % 100.00 % Net operating income $ 224,705 $ 358,268 $ 105,466 $ 136,148 $ 824,587 % of Grand Totals 27.25 % 43.45 % 12.79 % 16.51 % 100.00 % For the six months ended June 30, 2015 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 356,963 $ 499,530 $ 146,246 $ 190,615 $ 1,193,354 Residential 2,309 — — 8,356 10,665 Hotel 22,488 — — — 22,488 Total 381,760 499,530 146,246 198,971 1,226,507 % of Grand Totals 31.13 % 40.73 % 11.92 % 16.22 % 100.00 % Rental Expenses: Office 146,104 170,722 47,236 66,675 430,737 Residential 1,020 — — 4,057 5,077 Hotel 16,071 — — — 16,071 Total 163,195 170,722 47,236 70,732 451,885 % of Grand Totals 36.12 % 37.78 % 10.45 % 15.65 % 100.00 % Net operating income $ 218,565 $ 328,808 $ 99,010 $ 128,239 $ 774,622 % of Grand Totals 28.22 % 42.45 % 12.78 % 16.55 % 100.00 % |