Segment Information | 13. Segment Information The following tables present reconciliations 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 nine months ended September 30, 2016 and 2015 . Boston Properties, Inc. Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 (in thousands) Net income attributable to Boston Properties, Inc. common shareholders $ 76,753 $ 184,082 $ 355,114 $ 434,702 Add: Preferred dividends 2,589 2,647 7,796 7,854 Noncontrolling interest—common units of the Operating Partnership 9,387 21,302 42,120 50,906 Noncontrolling interest—redeemable preferred units of the Operating Partnership — — — 6 Noncontrolling interests in property partnerships (17,225 ) 115,240 53 139,712 Losses from interest rate contracts 140 — 140 — Losses from early extinguishments of debt 371 — 371 — Interest expense 104,641 108,727 314,953 326,018 Depreciation and amortization expense 203,748 153,015 516,371 475,082 Impairment loss 1,783 — 1,783 — Transaction costs 249 254 1,187 789 General and administrative expense 25,165 20,944 79,936 72,019 Less: Gains on sales of real estate 12,983 199,479 80,606 294,563 Gains (losses) from investments in securities 976 (1,515 ) 1,713 (1,146 ) Interest and other income 3,628 3,637 6,657 6,337 Income from unconsolidated joint ventures 1,464 2,647 5,489 20,559 Development and management services income 6,364 5,912 18,586 16,102 Net Operating Income $ 382,186 $ 396,051 $ 1,206,773 $ 1,170,673 Boston Properties Limited Partnership Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 (in thousands) Net income attributable to Boston Properties Limited Partnership common unitholders 91,306 207,626 408,540 491,847 Add: Preferred distributions 2,589 2,647 7,796 7,854 Noncontrolling interest—redeemable preferred units — — — 6 Noncontrolling interests in property partnerships (17,225 ) 115,240 53 139,712 Losses from interest rate contracts 140 — 140 — Losses from early extinguishments of debt 371 — 371 — Interest expense 104,641 108,727 314,953 326,018 Depreciation and amortization expense 198,582 151,017 507,234 469,087 Impairment loss 1,783 — 1,783 — Transaction costs 249 254 1,187 789 General and administrative expense 25,165 20,944 79,936 72,019 Less: Gains on sales of real estate 12,983 199,723 82,775 294,807 Gains (losses) from investments in securities 976 (1,515 ) 1,713 (1,146 ) Interest and other income 3,628 3,637 6,657 6,337 Income from unconsolidated joint ventures 1,464 2,647 5,489 20,559 Development and management services income 6,364 5,912 18,586 16,102 Net Operating Income $ 382,186 $ 396,051 $ 1,206,773 $ 1,170,673 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. Preferred dividends/distributions, noncontrolling interests, gains on sales of real estate, losses from interest rate contracts, losses from early extinguishments of debt, interest expense, gains (losses) from investments in securities, interest and other income, income from unconsolidated joint ventures, depreciation and amortization expense, impairment loss, transaction costs, general and administrative expenses and development and management services income 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 September 30, 2016 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 183,975 $ 237,262 $ 80,235 $ 100,666 $ 602,138 Residential 1,227 — — 3,145 4,372 Hotel 12,354 — — — 12,354 Total 197,556 237,262 80,235 103,811 618,864 % of Grand Totals 31.92 % 38.34 % 12.96 % 16.78 % 100.00 % Rental Expenses: Office 71,254 95,073 26,037 33,973 226,337 Residential 1,141 — — 1,082 2,223 Hotel 8,118 — — — 8,118 Total 80,513 95,073 26,037 35,055 236,678 % of Grand Totals 34.02 % 40.17 % 11.00 % 14.81 % 100.00 % Net operating income $ 117,043 $ 142,189 $ 54,198 $ 68,756 $ 382,186 % of Grand Totals 30.62 % 37.21 % 14.18 % 17.99 % 100.00 % For the three months ended September 30, 2015 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 179,278 $ 253,612 $ 77,315 $ 97,037 $ 607,242 Residential 1,275 — — 2,836 4,111 Hotel 12,619 — — — 12,619 Total 193,172 253,612 77,315 99,873 623,972 % of Grand Totals 30.96 % 40.64 % 12.39 % 16.01 % 100.00 % Rental Expenses: Office 71,898 88,496 25,883 31,985 218,262 Residential 485 — — 1,049 1,534 Hotel 8,125 — — — 8,125 Total 80,508 88,496 25,883 33,034 227,921 % of Grand Totals 35.32 % 38.83 % 11.36 % 14.49 % 100.00 % Net operating income $ 112,664 $ 165,116 $ 51,432 $ 66,839 $ 396,051 % of Grand Totals 28.45 % 41.69 % 12.98 % 16.88 % 100.00 % For the nine months ended September 30, 2016 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 540,850 $ 773,077 $ 235,076 $ 300,742 $ 1,849,745 Residential 3,578 — — 8,931 12,509 Hotel 33,919 — — — 33,919 Total 578,347 773,077 235,076 309,673 1,896,173 % of Grand Totals 30.50 % 40.77 % 12.40 % 16.33 % 100.00 % Rental Expenses: Office 210,695 272,620 75,412 101,514 660,241 Residential 2,174 — — 3,255 5,429 Hotel 23,730 — — — 23,730 Total 236,599 272,620 75,412 104,769 689,400 % of Grand Totals 34.32 % 39.54 % 10.94 % 15.20 % 100.00 % Net operating income $ 341,748 $ 500,457 $ 159,664 $ 204,904 $ 1,206,773 % of Grand Totals 28.32 % 41.47 % 13.23 % 16.98 % 100.00 % For the nine months ended September 30, 2015 : Boston New York San Francisco Washington, DC Total Rental Revenue: Office $ 536,241 $ 753,142 $ 223,561 $ 287,652 $ 1,800,596 Residential 3,584 — — 11,192 14,776 Hotel 35,107 — — — 35,107 Total 574,932 753,142 223,561 298,844 1,850,479 % of Grand Totals 31.07 % 40.70 % 12.08 % 16.15 % 100.00 % Rental Expenses: Office 218,002 259,218 73,119 98,660 648,999 Residential 1,505 — — 5,106 6,611 Hotel 24,196 — — — 24,196 Total 243,703 259,218 73,119 103,766 679,806 % of Grand Totals 35.85 % 38.13 % 10.76 % 15.26 % 100.00 % Net operating income $ 331,229 $ 493,924 $ 150,442 $ 195,078 $ 1,170,673 % of Grand Totals 28.29 % 42.19 % 12.85 % 16.67 % 100.00 % |