Segment Information

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Information

12. Segment Information

The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by both geographic area and property type. The Company’s segments by geographic area are Boston, New York, San Francisco and Washington, DC. Segments by property type include: Office, Residential and Hotel.

Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Interest and other income, development and management services income, general and administrative expenses, transaction costs, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, income from unconsolidated joint ventures, gains on sales of real estate, noncontrolling interests and preferred dividends/distributions are not included in Net Operating Income as internal reporting addresses these items on a corporate level.

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 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.

The Company has modified the presentation of its Office/Technical properties to be included within Office properties to align with its method of internal reporting, which shifted after the disposition of 415 Main Street in Cambridge, Massachusetts. As such, the amounts previously included in Office/Technical are now included in Office for all periods presented.

Information by geographic area and property type (dollars in thousands):

For the three months ended March 31, 2016:

	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Office	$	177,827		$	291,858		$	76,317		$	100,488		$	646,490
Residential	1,171			—			—			2,878			4,049
Hotel	8,757			—			—			—			8,757
Total	187,755			291,858			76,317			103,366			659,296
% of Grand Totals	28.48		%	44.27		%	11.57		%	15.68		%	100.00		%
Rental Expenses:
Office	70,687			88,798			23,905			34,182			217,572
Residential	520			—			—			1,080			1,600
Hotel	7,634			—			—			—			7,634
Total	78,841			88,798			23,905			35,262			226,806
% of Grand Totals	34.76		%	39.15		%	10.54		%	15.55		%	100.00		%
Net operating income	$	108,914		$	203,060		$	52,412		$	68,104		$	432,490
% of Grand Totals	25.18		%	46.95		%	12.12		%	15.75		%	100.00		%

For the three months ended March 31, 2015:

	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Office	$	176,027		$	253,098		$	71,911		$	96,173		$	597,209
Residential	1,178			—			—			5,676			6,854
Hotel	9,085			—			—			—			9,085
Total	186,290			253,098			71,911			101,849			613,148
% of Grand Totals	30.38		%	41.28		%	11.73		%	16.61		%	100.00		%
Rental Expenses:
Office	76,451			85,061			22,821			33,471			217,804
Residential	509			—			—			3,037			3,546
Hotel	7,576			—			—			—			7,576
Total	84,536			85,061			22,821			36,508			228,926
% of Grand Totals	36.92		%	37.16		%	9.97		%	15.95		%	100.00		%
Net operating income	$	101,754		$	168,037		$	49,090		$	65,341		$	384,222
% of Grand Totals	26.48		%	43.73		%	12.78		%	17.01		%	100.00		%

Boston Properties, Inc.

The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties, Inc. common shareholders:

	Three months ended March 31,
	2016		2015
	(in thousands)
Net Operating Income	$	432,490	$	384,222
Add:
Development and management services income	6,689		5,328
Income from unconsolidated joint ventures	1,791		14,834
Interest and other income	1,505		1,407
Gains from investments in securities	259		393
Gains on sales of real estate	67,623		95,084
Less:
General and administrative expense	29,353		28,791
Transaction costs	25		327
Depreciation and amortization expense	159,448		154,223
Interest expense	105,309		108,757
Noncontrolling interests in property partnerships	10,464		15,208
Noncontrolling interest—redeemable preferred units of the Operating Partnership	—		3
Noncontrolling interest—common units of the Operating Partnership	21,393		20,188
Preferred dividends	2,618		2,589
Net income attributable to Boston Properties, Inc. common shareholders	$	181,747	$	171,182

Boston Properties Limited Partnership

The following is a reconciliation of Net Operating Income to net income attributable to Boston Properties Limited Partnership common unitholders:

	Three months ended March 31,
	2016		2015
	(in thousands)
Net Operating Income	$	432,490	$	384,222
Add:
Development and management services income	6,689		5,328
Income from unconsolidated joint ventures	1,791		14,834
Interest and other income	1,505		1,407
Gains from investments in securities	259		393
Gains on sales of real estate	69,792		95,084
Less:
General and administrative expense	29,353		28,791
Transaction costs	25		327
Depreciation and amortization expense	157,461		152,224
Interest expense	105,309		108,757
Noncontrolling interests in property partnerships	10,464		15,208
Noncontrolling interest—redeemable preferred units	—		3
Preferred distributions	2,618		2,589
Net income attributable to Boston Properties Limited Partnership common unitholders	$	207,296	$	193,369