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. Beginning on January 1, 2014, the properties that were historically part of the Princeton region are reflected as the suburban component of the New York region. Therefore, the operations for the Princeton region have been included in the New York region. Accordingly, amounts reflected below for the New York region have been adjusted to reflect the Company's retrospective inclusion of the Princeton region in the New York region. The Company’s segments by geographic area are Boston, New York, 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 income, general and administrative expenses, transaction costs, impairment loss, interest expense, depreciation and amortization expense, gains (losses) from investments in securities, gains (losses) from early extinguishments of debt, income from unconsolidated joint ventures, gains on consolidation of joint ventures, discontinued operations, gains on sales of real estate 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. 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.

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. 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 are included in the New York region.

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

For the three months ended September 30, 2014:



	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	176,788		$	243,033		$	61,691		$	96,219		$	577,731
Office/Technical	6,056			—			5,892			3,713			15,661
Residential	1,137			—			—			5,881			7,018
Hotel	11,918			—			—			—			11,918
Total	195,899			243,033			67,583			105,813			612,328
% of Grand Totals	31.99		%	39.69		%	11.04		%	17.28		%	100.00		%
Rental Expenses:
Class A Office	69,026			82,335			22,484			32,898			206,743
Office/Technical	1,901			—			1,363			1,009			4,273
Residential	509			—			—			3,654			4,163
Hotel	7,585			—			—			—			7,585
Total	79,021			82,335			23,847			37,561			222,764
% of Grand Totals	35.47		%	36.96		%	10.71		%	16.86		%	100.00		%
Net operating income	$	116,878		$	160,698		$	43,736		$	68,252		$	389,564
% of Grand Totals	30.00		%	41.25		%	11.23		%	17.52		%	100.00		%

For the three months ended September 30, 2013:



	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	170,415		$	214,086		$	53,841		$	96,141		$	534,483
Office/Technical	5,662			—			5,839			3,877			15,378
Residential	1,125			—			—			4,368			5,493
Hotel	10,652			—			—			—			10,652
Total	187,854			214,086			59,680			104,386			566,006
% of Grand Totals	33.19		%	37.83		%	10.54		%	18.44		%	100.00		%
Rental Expenses:
Class A Office	67,228			73,355			20,006			31,678			192,267
Office/Technical	1,763			—			1,287			1,064			4,114
Residential	466			—			—			2,441			2,907
Hotel	6,580			—			—			—			6,580
Total	76,037			73,355			21,293			35,183			205,868
% of Grand Totals	36.94		%	35.63		%	10.34		%	17.09		%	100.00		%
Net operating income	$	111,817		$	140,731		$	38,387		$	69,203		$	360,138
% of Grand Totals	31.05		%	39.08		%	10.66		%	19.21		%	100.00		%

For the nine months ended September 30, 2014:



	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	520,857		$	684,240		$	173,749		$	287,489		$	1,666,335
Office/Technical	17,788			—			18,451			11,044			47,283
Residential	3,389			—			—			15,609			18,998
Hotel	32,478			—			—			—			32,478
Total	574,512			684,240			192,200			314,142			1,765,094
% of Grand Totals	32.55		%	38.76		%	10.89		%	17.80		%	100.00		%
Rental Expenses:
Class A Office	206,242			231,668			63,078			98,818			599,806
Office/Technical	5,326			—			3,885			3,335			12,546
Residential	1,501			—			—			10,360			11,861
Hotel	21,697			—			—			—			21,697
Total	234,766			231,668			66,963			112,513			645,910
% of Grand Totals	36.35		%	35.86		%	10.37		%	17.42		%	100.00		%
Net operating income	$	339,746		$	452,572		$	125,237		$	201,629		$	1,119,184
% of Grand Totals	30.36		%	40.43		%	11.19		%	18.02		%	100.00		%

For the nine months ended September 30, 2013:



	Boston			New York			San Francisco			Washington, DC			Total
Rental Revenue:
Class A Office	$	495,376		$	510,767		$	159,843		$	284,554		$	1,450,540
Office/Technical	16,853			—			11,317			11,951			40,121
Residential	3,257			—			—			13,298			16,555
Hotel	30,061			—			—			—			30,061
Total	545,547			510,767			171,160			309,803			1,537,277
% of Grand Totals	35.49		%	33.23		%	11.13		%	20.15		%	100.00		%
Rental Expenses:
Class A Office	195,206			177,800			58,036			94,145			525,187
Office/Technical	5,177			—			2,439			3,095			10,711
Residential	1,316			—			—			7,154			8,470
Hotel	20,959			—			—			—			20,959
Total	222,658			177,800			60,475			104,394			565,327
% of Grand Totals	39.38		%	31.45		%	10.70		%	18.47		%	100.00		%
Net operating income	$	322,889		$	332,967		$	110,685		$	205,409		$	971,950
% of Grand Totals	33.22		%	34.26		%	11.39		%	21.13		%	100.00		%

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



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014		2013
	(in thousands)
Net Operating Income	$	389,564		$	360,138		$	1,119,184	$	971,950
Add:
Development and management services income	6,475			5,475			18,197		22,063
Income from unconsolidated joint ventures	4,419			14,736			10,069		72,240
Gains on consolidation of joint ventures	—			(1,810		)	—		385,991
Interest and other income	3,421			3,879			6,841		6,646
Gains (losses) from investments in securities	(297		)	956			651		1,872
Gains (losses) from early extinguishments of debt	—			(30		)	—		122
Income from discontinued operations	—			1,677			—		7,486
Gain on sale of real estate from discontinued operations	—			86,448			—		86,448
Gain on forgiveness of debt from discontinued operations	—			—			—		20,182
Gains on sales of real estate	41,937			—			41,937		—
Less:
General and administrative expense	22,589			24,841			75,765		94,673
Transaction costs	1,402			766			2,500		1,744
Depreciation and amortization expense	157,245			153,253			466,143		406,162
Interest expense	113,308			122,173			337,839		325,746
Impairment loss	—			—			—		8,306
Impairment loss from discontinued operations	—			—			—		3,241
Noncontrolling interest in property partnerships	5,566			(3,279		)	17,473		(924		)
Noncontrolling interest—redeemable preferred units of the Operating Partnership	75			1,082			1,014		3,385
Noncontrolling interest—common units of the Operating Partnership	14,963			8,339			29,819		62,945
Noncontrolling interest in discontinued operations—common units of the Operating Partnership	—			8,970			—		11,450
Net income attributable to Boston Properties, Inc.	$	130,371		$	155,324		$	266,326	$	658,272