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, Princeton, San Francisco and Washington, DC. Segments by property type include: Class A Office, Office/Technical, 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, general and administrative expenses, transaction costs, impairment loss, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, gains from early extinguishments of debt, gains on consolidation of joint ventures, income from unconsolidated joint ventures, discontinued operations and noncontrolling interests 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 accounting principles generally accepted in the United States of America, 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.

On May 31, 2013, the Company's two joint venture partners in 767 Venture, LLC (the entity that owns 767 Fifth Avenue (the General Motors Building) located in New York City) transferred all of their interests in the joint venture to third parties. (See Note 3). Effective as of May 31, 2013, the Company accounts for the assets, liabilities and operations of 767 Venture, LLC on a consolidated basis in its financial statements instead of under the equity method of accounting Upon consolidation, the operations for this building will be included in the New York region.

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

For the three months ended June 30, 2013:



	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	164,855		$	143,305		$	14,853		$	53,331		$	99,621		$	475,965
Office/Technical	5,538			—			—			5,327			4,031			14,896
Residential	1,065			—			—			—			4,419			5,484
Hotel	11,118			—			—			—			—			11,118
Total	182,576			143,305			14,853			58,658			108,071			507,463
% of Grand Totals	35.98		%	28.24		%	2.93		%	11.56		%	21.29		%	100.0		%
Rental Expenses:
Class A Office	63,181			48,205			7,667			21,264			32,920			173,237
Office/Technical	1,627			—			—			1,116			1,027			3,770
Residential	407			—			—			—			2,423			2,830
Hotel	7,335			—			—			—			—			7,335
Total	72,550			48,205			7,667			22,380			36,370			187,172
% of Grand Totals	38.76		%	25.75		%	4.10		%	11.96		%	19.43		%	100.0		%
Net operating income	$	110,026		$	95,100		$	7,186		$	36,278		$	71,701		$	320,291
% of Grand Totals	34.35		%	29.69		%	2.24		%	11.33		%	22.39		%	100.0		%

For the three months ended June 30, 2012:



	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	157,642		$	122,657		$	15,617		$	52,102		$	88,740		$	436,758
Office/Technical	5,744			—			—			144			4,054			9,942
Residential	1,013			—			—			—			4,023			5,036
Hotel	10,049			—			—			—			—			10,049
Total	174,448			122,657			15,617			52,246			96,817			461,785
% of Grand Totals	37.78		%	26.56		%	3.38		%	11.31		%	20.97		%	100.0		%
Rental Expenses:
Class A Office	60,504			38,936			7,691			20,507			28,306			155,944
Office/Technical	1,652			—			—			38			964			2,654
Residential	367			—			—			—			2,207			2,574
Hotel	6,616			—			—			—			—			6,616
Total	69,139			38,936			7,691			20,545			31,477			167,788
% of Grand Totals	41.21		%	23.21		%	4.58		%	12.24		%	18.76		%	100.0		%
Net operating income	$	105,309		$	83,721		$	7,926		$	31,701		$	65,340		$	293,997
% of Grand Totals	35.82		%	28.48		%	2.70		%	10.78		%	22.22		%	100.0		%

For the six months ended June 30, 2013:



	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	326,358		$	265,401		$	31,280		$	106,002		$	197,486		$	926,527
Office/Technical	11,191			—			—			5,478			8,074			24,743
Residential	2,132			—			—			—			8,930			11,062
Hotel	19,409			—			—			—			—			19,409
Total	359,090			265,401			31,280			111,480			214,490			981,741
% of Grand Totals	36.58		%	27.03		%	3.19		%	11.35		%	21.85		%	100.0		%
Rental Expenses:
Class A Office	128,913			90,092			15,314			41,136			64,843			340,298
Office/Technical	3,414			—			—			1,151			2,031			6,596
Residential	850			—			—			—			4,713			5,563
Hotel	14,379			—			—			—			—			14,379
Total	147,556			90,092			15,314			42,287			71,587			366,836
% of Grand Totals	40.22		%	24.56		%	4.17		%	11.53		%	19.52		%	100.0		%
Net operating income	$	211,534		$	175,309		$	15,966		$	69,193		$	142,903		$	614,905
% of Grand Totals	34.40		%	28.51		%	2.60		%	11.25		%	23.24		%	100.0		%

For the six months ended June 30, 2012:



	Boston			New York			Princeton			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	298,650		$	240,246		$	30,467		$	102,766		$	179,137		$	851,266
Office/Technical	11,343			—			—			196			8,146			19,685
Residential	1,896			—			—			—			7,621			9,517
Hotel	16,865			—			—			—			—			16,865
Total	328,754			240,246			30,467			102,962			194,904			897,333
% of Grand Totals	36.64		%	26.77		%	3.40		%	11.47		%	21.72		%	100.0		%
Rental Expenses:
Class A Office	118,337			77,443			15,049			39,924			55,747			306,500
Office/Technical	3,152			—			—			62			2,011			5,225
Residential	757			—			—			—			4,532			5,289
Hotel	12,715			—			—			—			—			12,715
Total	134,961			77,443			15,049			39,986			62,290			329,729
% of Grand Totals	40.93		%	23.49		%	4.56		%	12.13		%	18.89		%	100.0		%
Net operating income	$	193,793		$	162,803		$	15,418		$	62,976		$	132,614		$	567,604
% of Grand Totals	34.14		%	28.68		%	2.72		%	11.10		%	23.36		%	100.0		%

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



	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Net Operating Income	$	320,291		$	293,997		$	614,905		$	567,604
Add:
Development and management services income	7,857			9,564			16,593			17,709
Income from unconsolidated joint ventures	48,783			21,191			57,504			32,912
Gains on consolidation of joint ventures	387,801			—			387,801			—
Interest and other income	1,296			2,382			2,767			4,028
Gains (losses) from investments in securities	181			(186		)	916			615
Gains from early extinguishments of debt	152			274			152			1,041
Income from discontinued operations	873			218			934		—	788
Gain on sale of real estate from discontinued operations	—			36,877			—			36,877
Gain on forgiveness of debt from discontinued operations	—			—			20,182			—
Less:
General and administrative expense	22,194			19,066			65,765			46,685
Transaction costs	535			8			978			2,112
Depreciation and amortization expense	134,604			111,168			255,199			219,630
Interest expense	103,140			99,901			203,573		—	203,138
Impairment loss	—			—			8,306			—
Impairment loss from discontinued operations	—			—			3,241			—
Noncontrolling interest in property partnerships	(219		)	457			2,355		—	1,003
Noncontrolling interest—redeemable preferred units of the Operating Partnership	1,123			765			2,303		—	1,566
Noncontrolling interest—common units of the Operating Partnership	50,734			10,318			55,277		—	16,310
Noncontrolling interest in discontinued operations—common units of the Operating Partnership	88			4,075			1,900		—	4,159
Net income attributable to Boston Properties, Inc.	$	455,035		$	118,559		$	502,857		$	166,971