10-Q
Table of Contents         

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2016
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 1-13087 (Boston Properties, Inc.)
Commission File Number: 0-50209 (Boston Properties Limited Partnership)
 
 BOSTON PROPERTIES, INC.
BOSTON PROPERTIES LIMITED PARTNERSHIP
(Exact name of Registrants as specified in its charter)
 
Boston Properties, Inc.
Delaware
04-2473675
 
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
 
 
 
Boston Properties Limited Partnership
Delaware
04-3372948
 
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
Prudential Center, 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103
(Address of principal executive offices) (Zip Code)
(617) 236-3300
(Registrants’ telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
Boston Properties, Inc.:    Yes  x    No  ¨         Boston Properties Limited Partnership:    Yes  x    No  ¨    
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Boston Properties, Inc.:    Yes  x    No  ¨         Boston Properties Limited Partnership:    Yes  x    No  ¨    
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Boston Properties, Inc.:    
Large accelerated filer  ý         Accelerated filer  ¨         Non-accelerated filer  ¨         Smaller reporting company  ¨
Boston Properties Limited Partnership:
Large accelerated filer  ¨         Accelerated filer  ¨         Non-accelerated filer  x         Smaller reporting company  ¨


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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Boston Properties, Inc.:    Yes  ¨    No  x        Boston Properties Limited Partnership:    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Boston Properties, Inc.
Common Stock, par value $0.01 per share
153,611,330
(Registrant)
(Class)
(Outstanding on May 2, 2016)
 


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EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2016 of Boston Properties, Inc. and Boston Properties Limited Partnership. Unless stated otherwise or the context otherwise requires, references to “BXP” mean Boston Properties, Inc., a Delaware corporation and real estate investment trust (“REIT”), and references to “BPLP” and the “Operating Partnership” mean Boston Properties Limited Partnership, a Delaware limited partnership. References to the “Company,” “we,” “us” and “our” mean collectively BXP, BPLP and those entities/subsidiaries consolidated by BXP.
BPLP is the entity through which we conduct substantially all of our business and own, either directly or through subsidiaries, substantially all of our assets. BXP is the sole general partner and also a limited partner of BPLP. As the sole general partner of BPLP, BXP has exclusive control of BPLP’s day-to-day management.
As of March 31, 2016, BXP owned an approximate 89.4% ownership interest in BPLP. The remaining approximate 10.6% interest is owned by limited partners. The other limited partners of BPLP are (1) persons who contributed their direct or indirect interests in properties to BPLP in exchange for common units or preferred units of limited partnership interest in BPLP or (2) recipients of long term incentive plan units of BPLP pursuant to BXP’s Stock Option and Incentive Plans. Under the limited partnership agreement of BPLP, unitholders may present their common units of BPLP for redemption at any time (subject to restrictions agreed upon at the time of issuance of the units that may restrict such right for a period of time, generally one year from issuance). Upon presentation of a common unit for redemption, BPLP must redeem the unit for cash equal to the then value of a share of BXP’s common stock. In lieu of cash redemption by BPLP, however, BXP may elect to acquire any common units so tendered by issuing shares of BXP common stock in exchange for the common units. If BXP so elects, its common stock will be exchanged for common units on a one-for-one basis. This one-for-one exchange ratio is subject to specified adjustments to prevent dilution. BXP generally expects that it will elect to issue its common stock in connection with each such presentation for redemption rather than having BPLP pay cash. With each such exchange or redemption, BXP’s percentage ownership in BPLP will increase. In addition, whenever BXP issues shares of its common stock other than to acquire common units of BPLP, BXP must contribute any net proceeds it receives to BPLP and BPLP must issue to BXP an equivalent number of common units of BPLP. This structure is commonly referred to as an umbrella partnership REIT, or UPREIT.
The Company believes that combining the quarterly reports on Form 10-Q of BXP and BPLP into this single report provides the following benefits:
enhances investors’ understanding of BXP and BPLP by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation because a substantial portion of the disclosure applies to both BXP and BPLP; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
The Company believes it is important to understand the few differences between BXP and BPLP in the context of how BXP and BPLP operate as a consolidated company. The financial results of BPLP are consolidated into the financial statements of BXP. BXP does not have any other significant assets, liabilities or operations, other than its investment in BPLP, nor does it have employees of its own. BPLP, not BXP, generally executes all significant business relationships other than transactions involving the securities of BXP. BPLP holds substantially all of the assets of BXP, including ownership interests in joint ventures. BPLP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by BXP, which are contributed to the capital of BPLP in exchange for common or preferred units of partnership in BPLP, as applicable, BPLP generates all remaining capital required by the Company’s business. These sources include working capital, net cash provided by operating activities, borrowings under the revolving credit facility, the issuance of secured and unsecured debt and equity securities and proceeds received from the disposition of certain properties and joint ventures.
Shareholders’ equity, partners’ capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of BXP and BPLP. The limited partners of BPLP are accounted for as partners’ capital in BPLP’s financial statements and as noncontrolling interests in BXP’s financial statements. The noncontrolling interests in BPLP’s financial statements include the interests of unaffiliated partners in various consolidated partnerships and development joint venture partners. The noncontrolling interests in BXP’s financial statements include the same noncontrolling interests at BPLP’s level and limited partners of BPLP. The differences between shareholders’ equity and partners’ capital result from differences in the equity issued at BXP and BPLP levels.


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In addition, the consolidated financial statements of BXP and BPLP differ in total real estate assets resulting from previously applied acquisition accounting by BXP for the issuance of common stock in connection with non-sponsor OP Unit redemptions. This accounting resulted in a step-up of the real estate assets at BXP. This resulted in a difference between the net real estate of BXP as compared to BPLP of approximately $337.2 million, or 2.2% at March 31, 2016 and a corresponding difference in depreciation expense and gains on sales of real estate upon the sale of certain properties having an allocation of the real estate step-up. The acquisition accounting was nullified on a prospective basis beginning in 2009 as a result of the Company’s adoption of a new accounting standard requiring any future redemptions to be accounted for solely as an equity transaction.
To help investors better understand the key differences between BXP and BPLP, certain information for BXP and BPLP in this report has been separated, as set forth below:
Item 1. Financial Statements (unaudited) which includes the following specific disclosures for BXP and BPLP:
Note 8. Noncontrolling Interest;
Note 9. Stockholders’ Equity / Partners’ Capital; and
Note 10. Earnings Per Share / Common Unit;
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations includes information specific to each entity, where applicable;
Item 2. Liquidity and Capital Resources includes separate reconciliations of amounts to each entity’s financial statements, where applicable;
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of BXP and BPLP in order to establish that the requisite certifications have been made and that BXP and BPLP are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.



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BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
FORM 10-Q
for the quarter ended March 31, 2016
TABLE OF CONTENTS 
 
 
 
 
 
Page
 
 
 
ITEM 1.
 
 
 
Boston Properties, Inc.
 
 
 
 
 
 
 
 
 
Boston Properties Limited Partnership
 
 
 
 
 
 
 
 
 
Boston Properties, Inc. and Boston Properties Limited Partnership
 
 
 
 
 
ITEM 2.
ITEM 3.
ITEM 4.
 
 
 
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
 
 


Table of Contents         

PART I. FINANCIAL INFORMATION
ITEM 1—Financial Statements.



BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited )
 
March 31,
2016
 
December 31,
2015
 
(in thousands, except for share and par value amounts)
ASSETS
 
 
 
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $6,024,005 at March 31, 2016)
$
18,424,542

 
$
18,465,405

Construction in progress (amounts related to VIEs of $486,025 at March 31, 2016)
857,578

 
763,935

Land held for future development
256,952

 
252,195

Less: accumulated depreciation (amounts related to VIEs of ($690,415) at March 31, 2016)
(3,969,648
)
 
(3,925,894
)
Total real estate
15,569,424

 
15,555,641

Cash and cash equivalents (amounts related to VIEs of $227,255 at March 31, 2016)
1,605,678

 
723,718

Cash held in escrows (amounts related to VIEs of $3,671 at March 31, 2016)
71,349

 
73,790

Investments in securities
21,077

 
20,380

Tenant and other receivables (amounts related to VIEs of $24,403 at March 31, 2016)
73,759

 
97,865

Accrued rental income (amounts related to VIEs of $217,148 at March 31, 2016)
767,864

 
754,883

Deferred charges, net (amounts related to VIEs of $323,493 at March 31, 2016)
693,976

 
704,867

Prepaid expenses and other assets (amounts related to VIEs of $77,995 at March 31, 2016)
136,799

 
185,118

Investments in unconsolidated joint ventures
235,904

 
235,224

Total assets
$
19,175,830

 
$
18,351,486

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Mortgage notes payable, net (amounts related to VIEs of $2,060,838 at March 31, 2016)
$
3,416,622

 
$
3,435,242

Unsecured senior notes, net
6,255,602

 
5,264,819

Unsecured line of credit

 

Mezzanine notes payable (amounts related to VIEs of $308,142 at March 31, 2016)
308,142

 
308,482

Outside members' notes payable (amounts related to VIEs of $180,000 at March 31, 2016)
180,000

 
180,000

Accounts payable and accrued expenses (amounts related to VIEs of $82,270 at March 31, 2016)
252,727

 
274,709

Dividends and distributions payable
113,079

 
327,320

Accrued interest payable (amounts related to VIEs of $136,165 at March 31, 2016)
221,578

 
190,386

Other liabilities (amounts related to VIEs of $205,007 at March 31, 2016)
498,290

 
483,601

Total liabilities
11,246,040

 
10,464,559

Commitments and contingencies

 

Equity:
 
 
 
Stockholders’ equity attributable to Boston Properties, Inc.:
 
 
 
Excess stock, $0.01 par value, 150,000,000 shares authorized, none issued or outstanding

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized;
 
 
 
5.25% Series B cumulative redeemable preferred stock, $0.01 par value, liquidation preference $2,500 per share, 92,000 shares authorized, 80,000 shares issued and outstanding at March 31, 2016 and December 31, 2015
200,000

 
200,000

Common stock, $0.01 par value, 250,000,000 shares authorized, 153,683,866 and 153,658,866 issued and 153,604,966 and 153,579,966 outstanding at March 31, 2016 and December 31, 2015, respectively
1,536

 
1,536

Additional paid-in capital
6,306,723

 
6,305,687

Dividends in excess of earnings
(699,048
)
 
(780,952
)
Treasury common stock at cost, 78,900 shares at March 31, 2016 and December 31, 2015
(2,722
)
 
(2,722
)
Accumulated other comprehensive loss
(56,706
)
 
(14,114
)
Total stockholders’ equity attributable to Boston Properties, Inc.
5,749,783

 
5,709,435

Noncontrolling interests:
 
 
 
Common units of the Operating Partnership
616,095

 
603,092

Property partnerships
1,563,912

 
1,574,400

Total equity
7,929,790

 
7,886,927

Total liabilities and equity
$
19,175,830

 
$
18,351,486


The accompanying notes are an integral part of these consolidated financial statements.

1

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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Three months ended
March 31,
 
2016
 
2015
 
(in thousands, except for per share amounts)
Revenue
 
 
 
Rental
 
 
 
Base rent
$
536,128

 
$
490,682

Recoveries from tenants
89,586

 
88,593

Parking and other
24,825

 
24,788

Total rental revenue
650,539

 
604,063

Hotel revenue
8,757

 
9,085

Development and management services
6,689

 
5,328

Total revenue
665,985

 
618,476

Expenses
 
 
 
Operating
 
 
 
Rental
219,172

 
221,350

Hotel
7,634

 
7,576

General and administrative
29,353

 
28,791

Transaction costs
25

 
327

Depreciation and amortization
159,448

 
154,223

Total expenses
415,632

 
412,267

Operating income
250,353

 
206,209

Other income (expense)
 
 
 
Income from unconsolidated joint ventures
1,791

 
14,834

Interest and other income
1,505

 
1,407

Gains from investments in securities
259

 
393

Interest expense
(105,309
)
 
(108,757
)
Income before gains on sales of real estate
148,599

 
114,086

Gains on sales of real estate
67,623

 
95,084

Net income
216,222

 
209,170

Net income attributable to noncontrolling interests
 
 
 
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
)
Net income attributable to Boston Properties, Inc.
184,365

 
173,771

Preferred dividends
(2,618
)
 
(2,589
)
Net income attributable to Boston Properties, Inc. common shareholders
$
181,747

 
$
171,182

Basic earnings per common share attributable to Boston Properties, Inc. common shareholders:
 
 
 
Net income
$
1.18

 
$
1.12

Weighted average number of common shares outstanding
153,626

 
153,230

Diluted earnings per common share attributable to Boston Properties, Inc. common shareholders:
 
 
 
Net income
$
1.18

 
$
1.11

Weighted average number of common and common equivalent shares outstanding
153,917

 
153,873


The accompanying notes are an integral part of these consolidated financial statements.

2

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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three months ended
March 31,
 
2016
 
2015
 
(in thousands)
Net income
$
216,222

 
$
209,170

Other comprehensive loss:
 
 
 
Effective portion of interest rate contracts
(58,646
)
 
(3,533
)
Amortization of interest rate contracts (1)
627

 
627

Other comprehensive loss
(58,019
)
 
(2,906
)
Comprehensive income
158,203

 
206,264

Net income attributable to noncontrolling interests
(31,857
)
 
(35,399
)
Other comprehensive loss attributable to noncontrolling interests
15,427

 
303

Comprehensive income attributable to Boston Properties, Inc.
$
141,773

 
$
171,168

_______________
(1) Amounts reclassified from comprehensive income primarily to interest expense within the Boston Properties, Inc.’s Consolidated Statements of Operations.
































The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents         

BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited and in thousands)
 
Common Stock
 
Preferred Stock
 
Additional
Paid-in
Capital
 
Dividends in
Excess of
Earnings
 
Treasury
Stock,
at cost
 
Accumulated
Other
Comprehensive Loss
 
Noncontrolling
Interests
 
Total
 
Shares
 
Amount
 
 
Equity, December 31, 2015
153,580

 
$
1,536

 
$
200,000

 
$
6,305,687

 
$
(780,952
)
 
$
(2,722
)
 
$
(14,114
)
 
$
2,177,492

 
$
7,886,927

Redemption of operating partnership units to common stock
13

 

 

 
446

 

 

 

 
(446
)
 

Allocated net income for the year

 

 

 

 
184,365

 

 

 
31,857

 
216,222

Dividends/distributions declared

 

 

 

 
(102,461
)
 

 

 
(11,865
)
 
(114,326
)
Shares issued pursuant to stock purchase plan
3

 

 

 
332

 

 

 

 

 
332

Net activity from stock option and incentive plan
9

 

 

 
696

 

 

 

 
8,384

 
9,080

Contributions from noncontrolling interests in property partnerships

 

 

 

 

 

 

 
2,489

 
2,489

Distributions to noncontrolling interests in property partnerships

 

 

 

 

 

 

 
(12,915
)
 
(12,915
)
Effective portion of interest rate contracts

 

 

 

 

 

 
(43,154
)
 
(15,492
)
 
(58,646
)
Amortization of interest rate contracts

 

 

 

 

 

 
562

 
65

 
627

Reallocation of noncontrolling interest

 

 

 
(438
)
 

 

 

 
438

 

Equity, March 31, 2016
153,605

 
$
1,536

 
$
200,000

 
$
6,306,723

 
$
(699,048
)
 
$
(2,722
)
 
$
(56,706
)
 
$
2,180,007

 
$
7,929,790

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity, December 31, 2014
153,114

 
$
1,531

 
$
200,000

 
$
6,270,257

 
$
(762,464
)
 
$
(2,722
)
 
$
(9,304
)
 
$
2,205,638

 
$
7,902,936

Redemption of operating partnership units to common stock
259

 
3

 

 
8,686

 

 

 

 
(8,689
)
 

Allocated net income for the year

 

 

 

 
173,771

 

 

 
33,168

 
206,939

Dividends/distributions declared

 

 

 

 
(102,300
)
 

 

 
(11,705
)
 
(114,005
)
Shares issued pursuant to stock purchase plan
2

 

 

 
313

 

 

 

 

 
313

Net activity from stock option and incentive plan
27

 

 

 
1,842

 

 

 

 
19,774

 
21,616

Contributions from noncontrolling interests in property partnerships

 

 

 

 

 

 

 
629

 
629

Distributions to noncontrolling interests in property partnerships

 

 

 

 

 

 

 
(16,574
)
 
(16,574
)
Effective portion of interest rate contracts

 

 

 

 

 

 
(3,165
)
 
(368
)
 
(3,533
)
Amortization of interest rate contracts

 

 

 

 

 

 
562

 
65

 
627

Reallocation of noncontrolling interest

 

 

 
5,162

 

 

 

 
(5,162
)
 

Equity, March 31, 2015
153,402

 
$
1,534

 
$
200,000

 
$
6,286,260

 
$
(690,993
)
 
$
(2,722
)
 
$
(11,907
)
 
$
2,216,776

 
$
7,998,948





The accompanying notes are an integral part of these consolidated financial statements.

4

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BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                         
 
For the three months ended March 31,
 
2016
 
2015
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
216,222

 
$
209,170

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
159,448

 
154,223

Non-cash compensation expense
10,069

 
11,011

Income from unconsolidated joint ventures
(1,791
)
 
(14,834
)
Distributions of net cash flow from operations of unconsolidated joint ventures
10,718

 
1,350

Gains from investments in securities
(259
)
 
(393
)
Non-cash portion of interest expense
(10,138
)
 
(10,884
)
Gains on sales of real estate
(67,623
)
 
(95,084
)
Change in assets and liabilities:
 
 
 
Cash held in escrows
1,940

 
1,044

Tenant and other receivables, net
25,018

 
(1,173
)
Accrued rental income, net
(12,981
)
 
(23,250
)
Prepaid expenses and other assets
45,560

 
3,447

Accounts payable and accrued expenses
(5,209
)
 
(5,535
)
Accrued interest payable
31,192

 
23,098

Other liabilities
(33,319
)
 
(23,136
)
Tenant leasing costs
(19,867
)
 
(27,608
)
Total adjustments
132,758

 
(7,724
)
Net cash provided by operating activities
348,980

 
201,446

Cash flows from investing activities:
 
 
 
Construction in progress
(122,940
)
 
(60,013
)
Building and other capital improvements
(25,329
)
 
(19,391
)
Tenant improvements
(55,739
)
 
(26,950
)
Proceeds from sales of real estate
104,816

 
194,821

Proceeds from sales of real estate placed in escrow
(104,696
)
 
(201,857
)
Proceeds from sales of real estate released from escrow
104,696

 
99,916

Cash released from escrow for land sale contracts
488

 

Deposit on real estate

 
(5,000
)
Capital contributions to unconsolidated joint ventures
(10,215
)
 
(2,444
)
Capital distributions from unconsolidated joint ventures

 
24,527

Investments in securities, net
(438
)
 
(884
)
Net cash provided by (used in) investing activities
(109,357
)
 
2,725

 
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents         

BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
For the three months ended March 31,
 
2016
 
2015
 
(in thousands)
Cash flows from financing activities:
 
 
 
Repayments of mortgage notes payable
(6,265
)
 
(7,024
)
Proceeds from unsecured senior notes
997,080

 

Proceeds from real estate financing transaction

 
6,000

Payments on real estate financing transactions
(781
)
 
(636
)
Deferred financing costs
(8,047
)
 
(20
)
Net proceeds from equity transactions
(657
)
 
(145
)
Dividends and distributions
(328,567
)
 
(883,684
)
        Contributions from noncontrolling interests in property partnerships
2,489

 
629

Distributions to noncontrolling interests in property partnerships
(12,915
)
 
(17,974
)
Net cash provided by (used in) financing activities
642,337

 
(902,854
)
Net increase (decrease) in cash and cash equivalents
881,960

 
(698,683
)
Cash and cash equivalents, beginning of period
723,718

 
1,763,079

Cash and cash equivalents, end of period
$
1,605,678

 
$
1,064,396

Supplemental disclosures:
 
 
 
Cash paid for interest
$
93,524

 
$
104,508

Interest capitalized
$
9,269

 
$
7,965

Non-cash investing and financing activities:
 
 
 
Additions to real estate included in accounts payable and accrued expenses
$
(24,857
)
 
$
9,243

Dividends and distributions declared but not paid
$
113,079

 
$
112,796

Conversions of noncontrolling interests to stockholders’ equity
$
446

 
$
8,689

Issuance of restricted securities to employees
$
32,630

 
$
42,279








The accompanying notes are an integral part of these consolidated financial statements.

6

Table of Contents         


BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2016
 
December 31,
2015
 
(in thousands, except for unit amounts)
ASSETS
 
 
 
Real estate, at cost (amounts related to variable interest entities (“VIEs”) of $5,944,607 at March 31, 2016)
$
18,006,818

 
$
18,045,011

Construction in progress (amounts related to VIEs of $486,025 at March 31, 2016)
857,578

 
763,935

Land held for future development
256,952

 
252,195

Less: accumulated depreciation (amounts related to VIEs of ($675,124) at March 31, 2016)
(3,889,084
)
 
(3,846,816
)
Total real estate
15,232,264

 
15,214,325

Cash and cash equivalents (amounts related to VIEs of $227,255 at March 31, 2016)
1,605,678

 
723,718

Cash held in escrows (amounts related to VIEs of $3,671 at March 31, 2016)
71,349

 
73,790

Investments in securities
21,077

 
20,380

Tenant and other receivables (amounts related to VIEs of $24,403 at March 31, 2016)
73,759

 
97,865

Accrued rental income (amounts related to VIEs of $217,148 at March 31, 2016)
767,864

 
754,883

Deferred charges, net (amounts related to VIEs of $323,493 at March 31, 2016)
693,976

 
704,867

Prepaid expenses and other assets (amounts related to VIEs of $77,995 at March 31, 2016)
136,799

 
185,118

Investments in unconsolidated joint ventures
235,904

 
235,224

Total assets
$
18,838,670

 
$
18,010,170

LIABILITIES AND CAPITAL
 
 
 
Liabilities:
 
 
 
Mortgage notes payable, net (amounts related to VIEs of $2,060,838 at March 31, 2016)
$
3,416,622

 
$
3,435,242

Unsecured senior notes, net
6,255,602

 
5,264,819

Unsecured line of credit

 

Mezzanine notes payable (amounts related to VIEs of $308,142 at March 31, 2016)
308,142

 
308,482

Outside members' notes payable (amounts related to VIEs of $180,000 at March 31, 2016)
180,000

 
180,000

Accounts payable and accrued expenses (amounts related to VIEs of $82,270 at March 31, 2016)
252,727

 
274,709

Distributions payable
113,079

 
327,320

Accrued interest payable (amounts related to VIEs of $136,165 at March 31, 2016)
221,578

 
190,386

Other liabilities (amounts related to VIEs of $205,007 at March 31, 2016)
498,290

 
483,601

Total liabilities
11,246,040

 
10,464,559

Commitments and contingencies

 

Noncontrolling interests:
 
 
 
Redeemable partnership units—16,092,449 and 16,097,473 common units and 2,065,185 and 1,831,714 long term incentive units outstanding at redemption value at March 31, 2016 and December 31, 2015, respectively
2,307,472

 
2,286,689

Capital:
 
 
 
5.25% Series B cumulative redeemable preferred units, liquidation preference $2,500 per unit, 80,000 units issued and outstanding at March 31, 2016 and December 31, 2015
193,623

 
193,623

Boston Properties Limited Partnership partners’ capital—1,717,626 and 1,715,092 general partner units and 151,887,340 and 151,864,874 limited partner units outstanding at March 31, 2016 and December 31, 2015, respectively
3,527,623

 
3,490,899

Noncontrolling interests in property partnerships
1,563,912

 
1,574,400

Total capital
5,285,158

 
5,258,922

Total liabilities and capital
$
18,838,670

 
$
18,010,170




The accompanying notes are an integral part of these consolidated financial statements.


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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) 
 
Three months ended
March 31,
 
2016
 
2015
 
(in thousands, except for per unit amounts)
Revenue
 
 
 
Rental
 
 
 
Base rent
$
536,128

 
$
490,682

Recoveries from tenants
89,586

 
88,593

Parking and other
24,825

 
24,788

Total rental revenue
650,539

 
604,063

Hotel revenue
8,757

 
9,085

Development and management services
6,689

 
5,328

Total revenue
665,985

 
618,476

Expenses
 
 
 
Operating
 
 
 
Rental
219,172

 
221,350

Hotel
7,634

 
7,576

General and administrative
29,353

 
28,791

Transaction costs
25

 
327

Depreciation and amortization
157,461

 
152,224

Total expenses
413,645

 
410,268

Operating income
252,340

 
208,208

Other income (expense)
 
 
 
Income from unconsolidated joint ventures
1,791

 
14,834

Interest and other income
1,505

 
1,407

Gains from investments in securities
259

 
393

Interest expense
(105,309
)
 
(108,757
)
Income before gains on sales of real estate
150,586

 
116,085

Gains on sales of real estate
69,792

 
95,084

Net income
220,378

 
211,169

Net income attributable to noncontrolling interests
 
 
 
Noncontrolling interests in property partnerships
(10,464
)
 
(15,208
)
Noncontrolling interest—redeemable preferred units

 
(3
)
Net income attributable to Boston Properties Limited Partnership
209,914

 
195,958

Preferred distributions
(2,618
)
 
(2,589
)
Net income attributable to Boston Properties Limited Partnership common unitholders
$
207,296

 
$
193,369

Basic earnings per common unit attributable to Boston Properties Limited Partnership common unitholders
 
 
 
Net income
$
1.21

 
$
1.13

Weighted average number of common units outstanding
171,309

 
171,084

Diluted earnings per common unit attributable to Boston Properties Limited Partnership common unitholders
 
 
 
Net income
$
1.21

 
$
1.12

Weighted average number of common and common equivalent units outstanding
171,600

 
171,727



The accompanying notes are an integral part of these consolidated financial statements.

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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three months ended
March 31,
 
2016
 
2015
 
(in thousands)
Net income
$
220,378

 
$
211,169

Other comprehensive loss:
 
 
 
Effective portion of interest rate contracts
(58,646
)
 
(3,533
)
Amortization of interest rate contracts (1)
627

 
627

Other comprehensive loss
(58,019
)
 
(2,906
)
Comprehensive income
162,359

 
208,263

Comprehensive (income) loss attributable to noncontrolling interests
62

 
(15,211
)
Comprehensive income attributable to Boston Properties Limited Partnership
$
162,421

 
$
193,052

_______________
(1) Amounts reclassified from comprehensive income primarily to interest expense within the Boston Properties Limited Partnership's Consolidated Statements of Operations.



































The accompanying notes are an integral part of these consolidated financial statements.

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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(Unaudited and in thousands)
 
 
Total Partners’ Capital
Balance at December 31, 2015
$
3,684,522

Contributions
1,165

Net income allocable to general and limited partner units
188,521

Distributions
(102,461
)
Accumulated other comprehensive loss
(42,592
)
Unearned compensation
(137
)
Conversion of redeemable partnership units
446

Adjustment to reflect redeemable partnership units at redemption value
(8,218
)
Balance at March 31, 2016
$
3,721,246

 
 
Balance at December 31, 2014
$
3,639,916

Contributions
3,763

Net income allocable to general and limited partner units
175,770

Distributions
(102,300
)
Accumulated other comprehensive loss
(2,603
)
Unearned compensation
(1,608
)
Conversion of redeemable partnership units
8,689

Adjustment to reflect redeemable partnership units at redemption value
(211,747
)
Balance at March 31, 2015
$
3,509,880



























The accompanying notes are an integral part of these consolidated financial statements.


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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
 
For the three months ended March 31,
 
2016
 
2015
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income
$
220,378

 
$
211,169

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
157,461

 
152,224

Non-cash compensation expense
10,069

 
11,011

Income from unconsolidated joint ventures
(1,791
)
 
(14,834
)
Distributions of net cash flow from operations of unconsolidated joint ventures
10,718

 
1,350

Gains from investments in securities
(259
)
 
(393
)
Non-cash portion of interest expense
(10,138
)
 
(10,884
)
Gains on sales of real estate
(69,792
)
 
(95,084
)
Change in assets and liabilities:
 
 
 
Cash held in escrows
1,940

 
1,044

Tenant and other receivables, net
25,018

 
(1,173
)
Accrued rental income, net
(12,981
)
 
(23,250
)
Prepaid expenses and other assets
45,560

 
3,447

Accounts payable and accrued expenses
(5,209
)
 
(5,535
)
Accrued interest payable
31,192

 
23,098

Other liabilities
(33,319
)
 
(23,136
)
Tenant leasing costs
(19,867
)
 
(27,608
)
Total adjustments
128,602

 
(9,723
)
Net cash provided by operating activities
348,980

 
201,446

Cash flows from investing activities:
 
 
 
Construction in progress
(122,940
)
 
(60,013
)
Building and other capital improvements
(25,329
)
 
(19,391
)
Tenant improvements
(55,739
)
 
(26,950
)
Proceeds from sales of real estate
104,816

 
194,821

Proceeds from sales of real estate placed in escrow
(104,696
)
 
(201,857
)
Proceeds from sales of real estate released from escrow
104,696

 
99,916

Cash released from escrow for land sale contracts
488

 

Deposit on real estate

 
(5,000
)
Capital contributions to unconsolidated joint ventures
(10,215
)
 
(2,444
)
Capital distributions from unconsolidated joint ventures

 
24,527

Investments in securities, net
(438
)
 
(884
)
Net cash provided by (used in) investing activities
(109,357
)
 
2,725


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BOSTON PROPERTIES LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 
 
For the three months ended March 31,
 
2016
 
2015
 
(in thousands)
Cash flows from financing activities:
 
 
 
Repayments of mortgage notes payable
(6,265
)
 
(7,024
)
Proceeds from unsecured senior notes
997,080

 

Proceeds from real estate financing transaction

 
6,000

Payments on real estate financing transaction
(781
)
 
(636
)
Deferred financing costs
(8,047
)
 
(20
)
Net proceeds from equity transactions
(657
)
 
(145
)
Distributions
(328,567
)
 
(883,684
)
Contributions from noncontrolling interests in property partnerships
2,489

 
629

Distributions to noncontrolling interests in property partnerships
(12,915
)
 
(17,974
)
Net cash provided by (used in) financing activities
642,337

 
(902,854
)
Net increase (decrease) in cash and cash equivalents
881,960

 
(698,683
)
Cash and cash equivalents, beginning of period
723,718

 
1,763,079

Cash and cash equivalents, end of period
$
1,605,678

 
$
1,064,396

Supplemental disclosures:
 
 
 
Cash paid for interest
$
93,524

 
$
104,508

Interest capitalized
$
9,269

 
$
7,965

Non-cash investing and financing activities:
 
 
 
Additions to real estate included in accounts payable and accrued expenses
$
(24,857
)
 
$
9,243

Distributions declared but not paid
$
113,079

 
$
112,796

Conversions of redeemable partnership units to partners’ capital
$
446

 
$
8,689

Issuance of restricted securities to employees
$
32,630

 
$
42,279
















The accompanying notes are an integral part of these consolidated financial statements.

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BOSTON PROPERTIES, INC. AND BOSTON PROPERTIES LIMITED PARTNERSHIP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Boston Properties, Inc., a Delaware corporation, is a fully integrated, self-administered and self-managed real estate investment trust (“REIT”). Boston Properties, Inc. is the sole general partner of Boston Properties Limited Partnership and at March 31, 2016 owned an approximate 89.4% (89.5% at December 31, 2015) general and limited partnership interest in Boston Properties Limited Partnership. Unless stated otherwise or the context requires, the “Company” refers to Boston Properties, Inc. and its subsidiaries, including Boston Properties Limited Partnership, its operating partnership, and its consolidated subsidiaries. Partnership interests in Boston Properties Limited Partnership include:
common units of partnership interest (also referred to as “OP Units”),
long term incentive units of partnership interest (also referred to as “LTIP Units”), and
preferred units of partnership interest (also referred to as “Preferred Units”).
Unless specifically noted otherwise, all references to OP Units exclude units held by Boston Properties, Inc. A holder of an OP Unit may present such OP Unit to Boston Properties Limited Partnership for redemption at any time (subject to restrictions agreed upon at the time of issuance of OP Units to particular holders that may restrict such redemption right for a period of time, generally one year from issuance). Upon presentation of an OP Unit for redemption, Boston Properties Limited Partnership is obligated to redeem such OP Unit for cash equal to the value of a share of common stock of Boston Properties, Inc. (“Common Stock”) at such time. In lieu of a cash redemption, Boston Properties, Inc. may elect to acquire such OP Unit for one share of Common Stock. Because the number of shares of Common Stock outstanding at all times equals the number of OP Units that Boston Properties, Inc. owns, one share of Common Stock is generally the economic equivalent of one OP Unit, and the quarterly distribution that may be paid to the holder of an OP Unit equals the quarterly dividend that may be paid to the holder of a share of Common Stock.
The Company uses LTIP Units as a form of equity-based award for annual long-term incentive equity compensation. The Company has also issued LTIP Units to employees in the form of (1) 2012 outperformance plan awards (“2012 OPP Units”) and (2) 2013, 2014, 2015 and 2016 multi-year, long-term incentive program awards (also referred to as “2013 MYLTIP Units,” “2014 MYLTIP Units,” “2015 MYLTIP Units” and “2016 MYLTIP Units,” respectively, and collectively as “MYLTIP Units”), each of which, upon the satisfaction of certain performance and vesting conditions, is convertible into one OP Unit. The three-year measurement periods for the 2012 OPP Units and 2013 MYLTIP Units expired on February 6, 2015 and February 4, 2016, respectively, and Boston Properties, Inc.’s total stockholder return (“TSR”) was sufficient for employees to earn and therefore become eligible to vest in a portion of the awards. Unless and until they are earned, the rights, preferences and privileges of the 2014, 2015 and 2016 MYLTIP Units differ from other LTIP Units granted to employees (including, as of February 6, 2015, the 2012 OPP Units and, as of February 4, 2016, the 2013 MYLTIP Units). Therefore, unless specifically noted otherwise, all references to LTIP Units exclude the 2014, 2015 and 2016 MYLTIP Units. LTIP Units (including the 2012 OPP Units and the 2013 MYLTIP Units), whether vested or not, will receive the same quarterly per unit distributions as OP Units, which equal per share dividends on Common Stock (See Notes 8, 9 and 11).
At March 31, 2016, there was one series of Preferred Units outstanding (i.e., Series B Preferred Units). The Series B Preferred Units were issued to Boston Properties, Inc. on March 27, 2013 in connection with issuance of 80,000 shares (8,000,000 depositary shares each representing 1/100th of a share) of 5.25% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”). Boston Properties, Inc. contributed the net proceeds from the offering to Boston Properties Limited Partnership in exchange for 80,000 Series B Preferred Units having terms and preferences generally mirroring those of the Series B Preferred Stock (See Note 9).
Properties
At March 31, 2016, the Company owned or had interests in a portfolio of 167 commercial real estate properties (the “Properties”) aggregating approximately 46.3 million net rentable square feet of primarily Class A office properties, including eleven properties under construction/redevelopment totaling approximately 4.6 million net rentable square feet. At March 31, 2016, the Properties consisted of:

157 Office properties (including nine properties under construction/redevelopment);
one hotel;
five retail properties; and
four residential properties (including two properties under construction).

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Table of Contents         

The Company owns or controls undeveloped land parcels totaling approximately 457.1 acres.
The Company considers Class A office properties to be centrally located buildings that are professionally managed and maintained, attract high-quality tenants and command upper-tier rental rates, and that are modern structures or have been modernized to compete with newer buildings.
2. Basis of Presentation and Summary of Significant Accounting Policies
Boston Properties, Inc. does not have any other significant assets, liabilities or operations, other than its investment in Boston Properties Limited Partnership, nor does it have employees of its own. Boston Properties Limited Partnership, not Boston Properties, Inc., generally executes all significant business relationships other than transactions involving securities of Boston Properties, Inc. All majority-owned subsidiaries and joint ventures over which the Company has financial and operating control and variable interest entities (“VIEs”) in which the Company has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Company’s share of the earnings of these joint ventures and companies is included in consolidated net income.
The accompanying interim financial statements are unaudited; however, the financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair statement of the financial statements for these interim periods have been included. The results of operations for the interim periods are not necessarily indicative of the results to be obtained for other interim periods or for the full fiscal year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosure required by GAAP. These financial statements should be read in conjunction with the Company’s financial statements and notes thereto contained in the Company’s Annual Report in the Company’s Form 10-K for its fiscal year ended December 31, 2015. Beginning on January 1, 2016, the properties that were historically part of the Company’s Office/Technical segment are reflected as Office properties (See Note 12).
Fair Value of Financial Instruments
The Company determines the fair value of its unsecured senior notes using market prices. The inputs used in determining the fair value of the Company’s unsecured senior notes are categorized at a level 1 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) due to the fact that the Company uses quoted market rates to value these instruments. However, the inputs used in determining the fair value could be categorized at a level 2 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) if trading volumes are low. The Company determines the fair value of its mortgage notes payable using discounted cash flow analysis by discounting the spread between the future contractual interest payments and hypothetical future interest payments on mortgage debt based on current market rates for similar securities. In determining the current market rates, the Company adds its estimates of market spreads to the quoted yields on federal government treasury securities with similar maturity dates to its debt. The inputs used in determining the fair value of the Company’s mortgage notes payable and mezzanine notes payable are categorized at a level 3 basis (as defined in the accounting standards for Fair Value Measurements and Disclosures) due to the fact that the Company considers the rates used in the valuation techniques to be unobservable inputs.
Because the Company’s valuations of its financial instruments are based on these types of estimates, the actual fair values of its financial instruments may differ materially if the Company’s estimates do not prove to be accurate. The following table presents the aggregate carrying value of the Company’s indebtedness and the Company’s corresponding estimate of fair value as of March 31, 2016 and December 31, 2015 (in thousands):
 
 
March 31, 2016
 
December 31, 2015
 
Carrying
Amount
 
 
 
Estimated
Fair Value
 
Carrying
Amount
 
 
 
Estimated
Fair Value
Mortgage notes payable, net
$
3,416,622

 
  
 
$
3,477,310

 
$
3,435,242

 
  
 
$
3,503,746

Mezzanine notes payable
308,142

 
 
 
306,089

 
308,482

 
 
 
306,103

Unsecured senior notes, net
6,255,602

 
  
 
6,705,353

 
5,264,819

 
  
 
5,547,738

Total
$
9,980,366

 
  
 
$
10,488,752

 
$
9,008,543

 
  
 
$
9,357,587

    

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The Company uses interest rate swap agreements to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.  To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties.  However, as of March 31, 2016, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.  As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Variable Interest Entities (VIEs)
On January 1, 2016, the Company adopted Accounting Standards Update (“ASU”) ASU 2015-02, “Consolidation (Topic 810):  Amendments to the Consolidation Analysis” (“ASU 2015-02”).  ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 (1) modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, (2) eliminates the presumption that a general partner should consolidate a limited partnership and (3) affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships. The Company reviewed all of their legal entities in accordance with ASU 2015-02 and concluded that certain of its legal entities, including Boston Properties Limited Partnership, which had been consolidated in accordance with the voting interest model are now variable interest entities under the VIE model, as discussed below.  The adoption of the guidance did not alter any of the Company’s consolidation conclusions, but resulted in additional disclosures.

Consolidated VIEs are those where the Company is considered to be the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which is defined by the entity having both of the following characteristics: 1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and 2) the obligation to absorb losses or the right to receive the returns from the VIE that could potentially be significant to the VIE.  The Company has determined that is it the primary beneficiary for seven of the eight entities which are VIEs.
Consolidated Variable Interest Entities
As of March 31, 2016, Boston Properties, Inc. has identified seven consolidated VIEs, including Boston Properties Limited Partnership.  These are the entities which own the following in-service properties: 767 Fifth Avenue (the General Motors Building), Time Square Tower, 601 Lexington Avenue, Atlantic Wharf Office Building and 100 Federal Street, the entity that owns the Salesforce Tower which is currently under development and Boston Properties Limited Partnership.

The Company consolidates these VIEs as it is the primary beneficiary.  The third parties’ interests in these consolidated entities, with the exception of Boston Properties Limited Partnership, are reflected as noncontrolling interest in property partnerships in the accompanying Consolidated Financial Statements (See Note 8). 

In addition, Boston Properties, Inc.’s significant asset is its investment in Boston Properties Limited Partnership, and consequently, substantially all of Boston Properties, Inc.’s assets and liabilities represent the assets and liabilities of Boston Properties Limited Partnership.  All of Boston Properties, Inc.’s debt is an obligation of Boston Properties Limited Partnership.
Variable Interest Entities Not Consolidated
The Company has determined that its BNY Tower Holdings LLC joint venture is a VIE.  The Company does not consolidate this entity as the Company does not have the power to direct the activities that, when taken together, most significantly impact the VIE’s performance and therefore, the Company is not considered to be the primary beneficiary.

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Table of Contents         

Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contract with Customers (Topic 606)” (“ASU 2014-09”). The objective of ASU 2014-09 is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying ASU 2014-09, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB’s Accounting Standards Codification (“ASC”). In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), which delayed the effective date of ASU 2014-09 by one year making it effective for the first interim period within annual reporting periods beginning after December 15, 2017. Early adoption is permitted as of the original effective date. The Company is currently assessing the potential impact that the adoption of ASU 2014-09 will have on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and shall be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Early adoption is permitted for financial statements that have not been previously issued. On January 1, 2016, the Company adopted ASU 2015-03 and retrospectively applied the guidance to its Mortgage Notes Payable and Unsecured Senior Notes for all periods presented. Unamortized deferred financing costs, which were previously included in Deferred Charges, Net, totaling approximately $3.2 million and $31.3 million are included in Mortgage Notes Payable, Net and Unsecured Senior Notes, Net, respectively, as of March 31, 2016 and approximately $3.5 million and $24.5 million are included in Mortgage Notes Payable, Net and Unsecured Senior Notes, Net, respectively, as of December 31, 2015.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is effective for the Company for reporting periods beginning after December 15, 2017. Early application is permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-01 will have on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases” (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 is expected to impact the Company’s consolidated financial statements as the Company has certain operating land lease arrangements for which it is the lessee. ASU 2016-02 supersedes previous leasing standards. ASU 2016-02 is effective for the Company for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-02 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-05, “Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships” (“ASU 2016-05”) which provides guidance clarifying that a novation of party to a derivative instrument, whereby one of the parties to a derivative instrument is replaced with another party, does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge criteria continue to be met. ASU 2016-05 is effective for the Company for reporting periods beginning after December 15, 2016, with early adoption

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permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-05 will have on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 is intended to improve the accounting for share-based payments and affects all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment awards are simplified with ASU 2016-09, including income tax consequences, classification of awards as equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for the Company for reporting periods beginning after December 15, 2016, with early adoption permitted. The Company is currently assessing the potential impact that the adoption of ASU 2016-09 will have on its consolidated financial statements.
3. Real Estate Activity During the Three Months Ended March 31, 2016
Dispositions
On February 1, 2016, the Company completed the sale of its 415 Main Street property located in Cambridge, Massachusetts to the tenant for a gross sale price of approximately $105.4 million.  Net cash proceeds totaled approximately $104.9 million, resulting in a gain on sale of real estate totaling approximately $60.8 million for Boston Properties, Inc. and approximately $63.0 million for Boston Properties Limited Partnership. As part of its lease signed on July 14, 2004, the tenant was granted a fixed-price option to purchase the building at the beginning of the 11th lease year, which option was exercised by the tenant on October 22, 2014. 415 Main Street is an office property with approximately 231,000 net rentable square feet. 415 Main Street contributed approximately $1.2 million and $2.6 million of net income to the Company for the period from January 1, 2016 through January 31, 2016 and for the three months ended March 31, 2015, respectively.
Lease Terminations
On February 3, 2016, the Company entered into a lease termination agreement with a tenant for an approximately 85,000 square foot lease at its 250 West 55th Street property located in New York City.  The lease was scheduled to expire on February 28, 2035.  In consideration for the termination of the lease, the tenant paid the Company approximately $45.0 million, which was recognized as termination income and is included in Base Rent in the accompanying Consolidated Statements of Operations for the three months ended March 31, 2016.

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4. Investments in Unconsolidated Joint Ventures
The investments in unconsolidated joint ventures consist of the following at March 31, 2016 and December 31, 2015:
 
 
 
 
 
Nominal %
Ownership
 
 
Carrying Value of Investment (1)
 
Entity
 
Properties
 
 
 
March 31, 2016
 
December 31, 2015
 
 
 
 
 
 
 
 
(in thousands)
 
Square 407 Limited Partnership
 
Market Square North
 
50.0
%
 
 
$
(9,506
)
 
$
(9,951
)
 
The Metropolitan Square Associates LLC
 
Metropolitan Square
 
51.0
%
 
 
9,238

 
9,179

 
BP/CRF 901 New York Avenue LLC
 
901 New York Avenue
 
25.0
%
(2) 
 
(11,617
)
 
(11,958
)
 
WP Project Developer LLC
 
Wisconsin Place Land and Infrastructure
 
33.3
%
(3) 
 
43,057

 
43,524

 
Annapolis Junction NFM, LLC
 
Annapolis Junction
 
50.0
%
(4) (5) 
 
21,134

 
29,009

 
540 Madison Venture LLC
 
540 Madison Avenue
 
60.0
%
 
 
67,715

 
68,983

 
500 North Capitol LLC
 
500 North Capitol Street, NW
 
30.0
%
 
 
(3,470
)
 
(3,292
)
 
501 K Street LLC
 
1001 6th Street
 
50.0
%
(6) 
 
42,540

 
42,584

 
Podium Developer LLC
 
The Hub on Causeway
 
50.0
%
 
 
23,881

 
18,508

 
1265 Main Office JV LLC
 
1265 Main Street
 
50.0
%
 
 
16,143

 
11,916

 
BNY Tower Holdings LLC
 
Dock72 at the Brooklyn Navy Yard
 
50.0
%
(7)
 
12,196

 
11,521

 
 
 
 
 
 
 
 
$
211,311

 
$
210,023

 
 _______________
(1)
Investments with deficit balances aggregating approximately $24.6 million and $25.2 million at March 31, 2016 and December 31, 2015, respectively, have been reflected within Other Liabilities on the Company’s Consolidated Balance Sheets.
(2)
The Company’s economic ownership has increased based on the achievement of certain return thresholds.
(3)
The Company’s wholly-owned entity that owns the office component of the project also owns a 33.3% interest in the entity owning the land, parking garage and infrastructure of the project.
(4)
The joint venture owns four in-service buildings and two undeveloped land parcels.
(5)
See Note 13.
(6)
Under the joint venture agreement for this land parcel, the partner will be entitled to up to two additional payments from the venture based on increases in total entitled square footage of the project above 520,000 square feet and achieving certain project returns at stabilization.
(7)
Entity is a VIE (See Note 2).
Certain of the Company’s unconsolidated joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures at an agreed upon fair value. Under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners.

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The combined summarized balance sheets of the Company’s unconsolidated joint ventures are as follows:
 
March 31, 2016
 
December 31, 2015
 
(in thousands)
ASSETS
 
 
 
Real estate and development in process, net
$
1,041,533

 
$
1,072,412

Other assets
225,200

 
252,285

Total assets
$
1,266,733

 
$
1,324,697

LIABILITIES AND MEMBERS’/PARTNERS’ EQUITY
 
 
 
Mortgage and notes payable, net
$
829,089

 
$
830,125

Other liabilities
38,920

 
44,549

Members’/Partners’ equity
398,724

 
450,023

Total liabilities and members’/partners’ equity
$
1,266,733

 
$
1,324,697

Company’s share of equity
$
238,166

 
$
237,070

Basis differentials (1)
(26,855
)
 
(27,047
)
Carrying value of the Company’s investments in unconsolidated joint ventures (2)
$
211,311

 
$
210,023

 _______________
(1)
This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differentials occur from impairment of investments and upon the transfer of assets that were previously owned by the Company into a joint venture. In addition, certain acquisition, transaction and other costs may not be reflected in the net assets at the joint venture level.
(2)
Investments with deficit balances aggregating approximately $24.6 million and $25.2 million at March 31, 2016 and December 31, 2015, respectively, have been reflected within Other Liabilities on the Company’s Consolidated Balance Sheets.
The combined summarized statements of operations of the Company’s unconsolidated joint ventures are as follows:
 
For the three months ended March 31,
 
 
2016
 
2015
 
 
(in thousands)
 
Total revenue (1)
$
37,669

 
$
39,532

 
Expenses
 
 
 
 
Operating
16,667

 
16,275

 
Depreciation and amortization
9,064

 
9,071

 
Total expenses
25,731

 
25,346

 
Operating income
11,938

 
14,186

 
Other expense
 
 
 
 
Interest expense
8,389

 
7,980

 
Net income
$
3,549

 
$
6,206

 
 
 
 
 
 
Company’s share of net income
$
1,599

 
$
14,642

(2)
Basis differential
192

 
192

 
Income from unconsolidated joint ventures
$
1,791

 
$
14,834

 
 _______________ 
(1)
Includes straight-line rent adjustments of approximately $2.2 million and $1.6 million for the three months ended March 31, 2016 and 2015, respectively.
(2)
During the three months ended March 31, 2015, the Company received a distribution of approximately $24.5 million, which was generated from the excess loan proceeds from the refinancing of 901 New York Avenue’s mortgage loan to a new 10-year mortgage loan totaling $225.0 million.  The Company’s allocation of income and distributions for the three months ended March 31, 2015 was not proportionate to its nominal ownership interest as a result of the achievement of specified investment return thresholds, as provided for in the joint venture agreement.

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5. Unsecured Senior Notes
The following summarizes the unsecured senior notes outstanding as of March 31, 2016 (dollars in thousands):
 
Coupon/
Stated Rate
 
Effective
Rate(1)
 
Principal
Amount
 
Maturity Date(2)
 
10 Year Unsecured Senior Notes
5.875
%
 
5.967
%
 
$
700,000

 
October 15, 2019
 
10 Year Unsecured Senior Notes
5.625
%
 
5.708
%
 
700,000

 
November 15, 2020
 
10 Year Unsecured Senior Notes
4.125
%
 
4.289
%
 
850,000

 
May 15, 2021
 
7 Year Unsecured Senior Notes
3.700
%
 
3.853
%
 
850,000

 
November 15, 2018
 
11 Year Unsecured Senior Notes
3.850
%
 
3.954
%
 
1,000,000

 
February 1, 2023
 
10.5 Year Unsecured Senior Notes
3.125
%
 
3.279
%
 
500,000

 
September 1, 2023
 
10.5 Year Unsecured Senior Notes
3.800
%
 
3.916
%
 
700,000

 
February 1, 2024
 
10 Year Unsecured Senior Notes
3.650
%
 
3.766
%
 
1,000,000

 
February 1, 2026
 
Total principal
 
 
 
 
6,300,000

 
 
 
Net unamortized discount
 
 
 
 
(13,148
)
 
 
 
Deferred financing costs, net
 
 
 
 
(31,250
)
 
 
 
Total
 
 
 
 
$
6,255,602

 
 
 
 
_______________  
(1)
Yield on issuance date including the effects of discounts on the notes and the amortization of financing costs.
(2)
No principal amounts are due prior to maturity.
The indenture relating to the unsecured senior notes contains certain financial restrictions and requirements, including (1) a leverage ratio not to exceed 60%, (2) a secured debt leverage ratio not to exceed 50%, (3) an interest coverage ratio of greater than 1.50, and (4) an unencumbered asset value of not less than 150% of unsecured debt. At March 31, 2016, Boston Properties Limited Partnership was in compliance with each of these financial restrictions and requirements.
On January 20, 2016, Boston Properties Limited Partnership completed a public offering of $1.0 billion in aggregate principal amount of its 3.650% senior unsecured notes due 2026. The notes were priced at 99.708% of the principal amount to yield an effective rate (including financing fees) of 3.766% to maturity. The notes will mature on February 1, 2026, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $988.9 million after deducting underwriting discounts and transaction expenses.
6. Derivative Instruments and Hedging Activities
As of March 31, 2016, Boston Properties Limited Partnership has entered into seventeen forward-starting interest rate swap contracts that fix the 10-year swap rate at a weighted-average rate of approximately 2.423% per annum on notional amounts aggregating $550.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in September 2016 and maturity in September 2026. In addition, as of March 31, 2016, 767 Fifth Partners LLC, which is the consolidated entity (in which the Company has a 60% interest and owns 767 Fifth Avenue (the General Motors Building) in New York City), has entered into sixteen forward-starting interest rate swap contracts (including two contracts entered into during the three months ended March 31, 2016 with notional amounts aggregating $50.0 million), which fix the 10-year swap rate at a weighted-average rate of approximately 2.619% per annum on notional amounts aggregating $450.0 million. These interest rate swap contracts were entered into in advance of a financing with a target commencement date in June 2017 and maturity in June 2027. Boston Properties Limited Partnership’s and 767 Fifth Avenue Partners LLC’s interest rate swap contracts consisted of the following at March 31, 2016 (dollars in thousands):
Derivative Instrument
 
Aggregate Notional Amount
 
Effective Date
 
Maturity Date
 
Strike Rate Range
 
Balance Sheet Location
 
Fair Value
 
 
 
 
Low
 
High
 
 
Boston Properties Limited Partnership:
 
 
 
 
 
 
 
 
 
 
Interest Rate Swaps
 
$
550,000

 
September 1, 2016
 
September 1, 2026
 
2.129
%
-
2.571
%
 
Other Liabilities
 
$
(36,561
)
767 Fifth Partners LLC:
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swaps
 
$
450,000

 
June 7, 2017
 
June 7, 2027
 
2.336
%
-
2.950
%
 
Other Liabilities
 
$
(32,387
)
 
 
$
1,000,000

 
 
 
 
 
 
 
 
 
 
 
$
(68,948
)

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Table of Contents         

Boston Properties Limited Partnership’s and 767 Fifth Avenue Partners LLC’s interest rate swap contracts consisted of the following at December 31, 2015 (dollars in thousands):
Derivative Instrument
 
Aggregate Notional Amount
 
Effective Date
 
Maturity Date
 
Strike Rate Range
 
Balance Sheet Location
 
Fair Value
 
 
 
 
Low
 
High
 
 
Boston Properties Limited Partnership:
 
 
 
 
 
 
 
 
 
 
Interest Rate Swaps
 
$
400,000

 
September 1, 2016
 
September 1, 2026
 
2.348
%
-
2.571
%
 
Other Liabilities
 
$
(5,419
)
Interest Rate Swaps
 
150,000

 
September 1, 2016
 
September 1, 2026
 
2.129
%
-
2.325
%
 
Prepaid Expenses and Other Assets
 
1,188

 
 
$
550,000

 
 
 
 
 
 
 
 
 
 
 
$
(4,231
)
767 Fifth Partners LLC:
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Swaps
 
$
250,000

 
June 7, 2017
 
June 7, 2027
 
2.677
%
-
2.950
%
 
Other Liabilities
 
$
(7,247
)
Interest Rate Swaps
 
150,000

 
June 7, 2017
 
June 7, 2027
 
2.336
%
-
2.430
%
 
Prepaid Expenses and Other Assets
 
1,176

 
 
$
400,000

 
 
 
 
 
 
 
 
 
 
 
$
(6,071
)
 
 
$
950,000

 
 
 
 
 
 
 
 
 
 
 
$
(10,302
)
Boston Properties Limited Partnership entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce its exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in September 2016. The Company’s 767 Fifth Partners LLC consolidated entity entered into the interest rate swap contracts designated and qualifying as cash flow hedges to reduce its exposure to the variability in future cash flows attributable to changes in the 10-year swap rate in contemplation of obtaining 10-year fixed-rate financing in June 2017. Boston Properties Limited Partnership has formally documented all of its relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. Boston Properties Limited Partnership also assesses and documents, both at the hedging instrument’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows associated with the hedged items. All components of the forward-starting interest rate swap contracts were included in the assessment of hedge effectiveness. Boston Properties Limited Partnership has agreements with each of its derivative counterparties that contain a provision where it could be declared in default on its derivative obligations if repayment of its indebtedness is accelerated by the lender due to its default on the indebtedness. As of March 31, 2016, the fair value of derivatives in a liability position, excluding any adjustment for nonperformance risk and excluding accrued interest, related to these agreements was approximately $69.3 million. As of March 31, 2016, Boston Properties Limited Partnership has not posted any collateral related to these agreements. If Boston Properties Limited Partnership had breached any of these provisions at March 31, 2016, it could have been required to settle its obligations under the agreements at their termination value of approximately $69.3 million. The Company accounts for the effective portion of changes in the fair value of a derivative in accumulated other comprehensive loss and subsequently reclassifies the effective portion to earnings over the term that the hedged transaction affects earnings. The Company accounts for the ineffective portion of changes in the fair value of a derivative directly in earnings. During the three months ended March 31, 2016, the Company has recorded the changes in fair value of the swap contracts related to the effective portion of the interest rate contracts aggregating approximately $68.9 million in Other Liabilities and Accumulated Other Comprehensive Loss within the Company’s Consolidated Balance Sheets. During the three months ended March 31, 2016, the Company did not record any hedge ineffectiveness. The Company expects that within the next twelve months it will reclassify into earnings as an increase to interest expense approximately $2.1 million of the amounts recorded within Accumulated Other Comprehensive Loss relating to the forward-starting interest rate swap contracts in effect and as of March 31, 2016.
The following table presents the location in the financial statements of the losses recognized related to the Company’s cash flow hedges for the three months ended March 31, 2016 and 2015:
 
 
Three months ended
March 31,
 
 
2016
 
2015
 
 
(in thousands)
Amount of loss related to the effective portion recognized in other comprehensive loss
 
$
(58,646
)
 
$
(3,533
)
Amount of loss related to the effective portion subsequently reclassified to earnings (1)
 
$
(627
)
 
$
(627
)
Amount of gain (loss) related to the ineffective portion and amount excluded from effectiveness testing
 
$

 
$

___________

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Table of Contents         

(1)
Consists of amounts from previous interest rate hedging programs entered into prior to 2015.
Boston Properties, Inc.
The following table reflects the changes in accumulated other comprehensive loss for the three months ended March 31, 2016 and 2015 (in thousands):
Balance at December 31, 2015
 
$
(14,114
)
Effective portion of interest rate contracts
 
(58,646
)
Amortization of interest rate contracts (1)
 
627

Other comprehensive loss attributable to noncontrolling interests
 
15,427

Balance at March 31, 2016
 
$
(56,706
)
 
 
 
Balance at December 31, 2014
 
$
(9,304
)
Effective portion of interest rate contracts
 
(3,533
)
Amortization of interest rate contracts (1)
 
627

Other comprehensive loss attributable to noncontrolling interests
 
303

Balance at March 31, 2015
 
$
(11,907
)
___________
(1)
Consists of amounts from previous interest rate hedging programs entered into prior to 2015.
Boston Properties Limited Partnership
The following table reflects the changes in accumulated other comprehensive loss for the three months ended March 31, 2016 and 2015 (in thousands):
Balance at December 31, 2015
 
$
(18,337
)
Effective portion of interest rate contracts
 
(58,646
)
Amortization of interest rate contracts (1)
 
627

Other comprehensive loss attributable to noncontrolling interests
 
10,526

Balance at March 31, 2016
 
$
(65,830
)
 
 
 
Balance at December 31, 2014
 
$
(12,973
)
Effective portion of interest rate contracts
 
(3,533
)
Amortization of interest rate contracts (1)
 
627

Balance at March 31, 2015
 
$
(15,879
)
___________
(1)
Consists of amounts from previous interest rate hedging programs entered into prior to 2015.

7. Commitments and Contingencies
General
In the normal course of business, the Company guarantees its performance of services or indemnifies third parties against its negligence. In addition, in the normal course of business, the Company guarantees to certain tenants the obligations of its subsidiaries for the payment of tenant improvement allowances and brokerage commissions in connection with their leases and limited costs arising from delays in delivery of their premises. 
The Company has letter of credit and performance obligations related to lender and development requirements that total approximately $22.5 million.

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Certain of the Company’s joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. With limited exception, under these provisions, the Company is not compelled to purchase the interest of its outside joint venture partners. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved the partners will be entitled to an additional promoted interest or payments.
In connection with the assumption of 767 Fifth Avenue’s (the General Motors Building) secured loan by the Company’s consolidated joint venture entity, 767 Venture, LLC, the Company guaranteed the consolidated joint venture’s obligation to fund various escrows, including tenant improvements, taxes and insurance in lieu of cash deposits. As of March 31, 2016, the maximum funding obligation under the guarantee was approximately $16.2 million. The Company earns a fee from the joint venture for providing the guarantee and has an agreement with the outside partners to reimburse the joint venture for their share of any payments made under the guarantee.
In connection with 767 Fifth Partners LLC entering into interest rate swap contracts (See Note 6), the Company guaranteed 767 Fifth Partners LLC’s obligations under the hedging agreements in favor of each hedge counterparty. 767 Fifth Partners LLC is the entity that owns 767 Fifth Avenue (the General Motors Building). It is a subsidiary of 767 Venture, LLC, a consolidated entity in which the Company has a 60% interest. The Company earns a fee from the joint venture for providing the guarantee and has an agreement with the outside partners to reimburse the joint venture for their share of any payments made under the guarantee.
In connection with the mortgage financing collateralized by the Company’s Fountain Square property located in Reston, Virginia, the Company has agreed to guarantee approximately $0.7 million related to its obligation to provide funds for certain tenant re-leasing costs. The mortgage financing is scheduled to mature on October 11, 2016 (See Note 13).
From time to time, the Company (or the applicable joint venture) has also agreed to guarantee portions of the principal, interest or other amounts in connection with other unconsolidated joint venture borrowings. In addition to the financial guarantees referenced above, the Company has agreed to customa