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Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

12. Segment Information

The following tables present reconciliations of Net Income Attributable to Boston Properties, Inc. Common Shareholders to the Company’s share of Net Operating Income and Net Income Attributable to Boston Properties Limited Partnership Common Unitholders to the Company’s share of Net Operating Income for the three and six months ended June 30, 2020 and 2019.

Boston Properties, Inc.

						Three months ended June 30,																		Six months ended June 30,
						2020						2019						2020						2019
						(in thousands)
Net income attributable to Boston Properties, Inc. common shareholders						$	266,525					$	164,318					$	764,232					$	262,431
Add:
Preferred dividends						2,625						2,625						5,250						5,250
Noncontrolling interest—common units of the Operating Partnership						30,197						19,036						87,525						30,627
Noncontrolling interests in property partnerships						(767)						17,482						18,719						36,312
Interest expense						107,142						102,357						208,733						203,366
Impairment loss						—						—						—						24,038
Net operating income from unconsolidated joint ventures						27,911						24,715						56,669						50,064
Depreciation and amortization expense						178,188						177,411						349,282						342,005
Transaction costs						332						417						947						877
Payroll and related costs from management services contracts						2,484						2,403						5,721						5,798
General and administrative expense						37,743						35,071						74,197						76,833
Less:
Net operating income attributable to noncontrolling interests in property partnerships						32,427						45,562						80,088						92,647
Gains (losses) from investments in securities						4,552						1,165						(893)						4,134
Interest and other income (loss)						1,305						3,615						4,322						7,368
Gains on sales of real estate						203,767						1,686						613,932						781
Income from unconsolidated joint ventures						1,832						47,964						1,463						48,177
Direct reimbursements of payroll and related costs from management services contracts						2,484						2,403						5,721						5,798
Development and management services revenue						8,125						9,986						16,004						19,263
Company’s share of Net Operating Income						$	397,888					$	433,454					$	850,638					$	859,433

Boston Properties Limited Partnership

						Three months ended June 30,																		Six months ended June 30,
						2020						2019						2020						2019
						(in thousands)
Net income attributable to Boston Properties Limited Partnership common unitholders						$	301,975					$	185,715					$	868,308					$	299,097
Add:
Preferred distributions						2,625						2,625						5,250						5,250
Noncontrolling interests in property partnerships						(767)						17,482						18,719						36,312
Interest expense						107,142						102,357						208,733						203,366
Impairment loss						—						—						—						22,272
Net operating income from unconsolidated joint ventures						27,911						24,715						56,669						50,064
Depreciation and amortization expense						176,409						175,199						345,694						337,881
Transaction costs						332						417						947						877
Payroll and related costs from management services contracts						2,484						2,403						5,721						5,798
General and administrative expense						37,743						35,071						74,197						76,833
Less:
Net operating income attributable to noncontrolling interests in property partnerships						32,427						45,562						80,088						92,647
Gains (losses) from investments in securities						4,552						1,165						(893)						4,134
Interest and other income (loss)						1,305						3,615						4,322						7,368
Gains on sales of real estate						207,241						1,835						626,895						930
Income from unconsolidated joint ventures						1,832						47,964						1,463						48,177
Direct reimbursements of payroll and related costs from management services contracts						2,484						2,403						5,721						5,798
Development and management services revenue						8,125						9,986						16,004						19,263
Company’s share of Net Operating Income						$	397,888					$	433,454					$	850,638					$	859,433

Net operating income (“NOI”) is a non-GAAP financial measure equal to net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders, as applicable, the most directly comparable GAAP financial measures, plus (1) preferred dividends/distributions, net income attributable to noncontrolling interests, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts and corporate general and administrative expense less (2) gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, income from unconsolidated joint ventures, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue. The Company believes NOI is useful to investors as a performance measure and believes it provides useful information to investors regarding its results of operations and financial condition because, when compared across periods, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and development activity on an unleveraged basis, providing perspective not immediately apparent from net income attributable to Boston Properties, Inc. common shareholders and net income attributable to Boston Properties Limited Partnership common unitholders. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level as opposed to the property level. Similarly, interest expense may be incurred at the property level even though the financing proceeds may be used at the corporate level (e.g., used for other investment activity). In addition, depreciation and amortization expense, because of historical cost accounting and useful life estimates, may distort operating performance measures at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs or real estate companies that define NOI differently.

The Company’s internal reporting utilizes its share of NOI, which includes its share of NOI from consolidated and unconsolidated joint ventures, which is a non-GAAP financial measure that is calculated as the consolidated amount, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s economic percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ economic percentage ownership interests and, in some cases, after priority allocations, income allocation to private REIT shareholders and their share of fees due to the Company). The Company’s share of NOI from unconsolidated joint ventures does not include its share of gains on sale of real estate from unconsolidated joint ventures, which is included within Income From Unconsolidated Joint Ventures in the Company’s Consolidated Statements of Operations.  Management utilizes its share of NOI in assessing its performance as the Company has several significant joint ventures and, in some cases, the Company exercises significant influence over, but does not control, the joint venture, in which case GAAP requires that the Company account for the joint venture entity using the equity method of accounting and the Company does not consolidate it for financial reporting purposes. In other cases, GAAP requires that the Company consolidate the venture even though the Company’s partner(s) owns a significant percentage interest. As a result, the presentations of the Company’s share of NOI should not be considered a substitute for, and should only be considered together with and as a supplement to, the Company’s financial information presented in accordance with GAAP.

Asset information by segment is not reported because the Company does not use this measure to assess performance. Therefore, depreciation and amortization expense is not allocated among segments. Preferred dividends/distributions, interest expense, impairment loss, depreciation and amortization expense, transaction costs, payroll and related costs from management services contracts, corporate general and administrative expense, gains (losses) from investments in securities, interest and other income (loss), gains on sales of real estate, direct reimbursements of payroll and related costs from management services contracts and development and management services revenue are not included in NOI and are provided as reconciling items to the Company’s reconciliations of its share of NOI to net income attributable to common shareholders/unitholders.

The Company’s segments are based on the Company’s method of internal reporting which classifies its operations by geographic area. The Company’s segments by geographic area are Boston, Los Angeles, New York, San Francisco and Washington, DC. The Company also presents information for each segment by property type, including Office, Residential and Hotel.

Included within the Office property type are commercial office and retail leases, as well as parking revenue.  Upon the adoption of ASC 842, any write-off for bad debt, including accrued rent, will be recorded as a reduction to lease revenue. As a result of COVID-19, during the three and six months ended June 30, 2020, the Company wrote off approximately $35.9 million and $37.4 million, respectively, related to accrued rent balances and approximately $18.0 million and $18.9 million, respectively, related to accounts receivable balances. The write-offs were for tenants, primarily in the retail sector, that either terminated their leases or that the Company considered their accrued rent and/or accounts receivable balances no longer probable of collection.

In addition, parking and other revenue for the three and six months ended June 30, 2020 decreased by approximately $12.4 million and $12.8 million, respectively, compared to 2019. These decreases were primarily in transient and monthly parking revenue.

The degree to which the Company’s commercial and retail tenants’ and parking operators’ businesses are, or will continue to be, negatively impacted by COVID-19, including by measures intended to reduce its spread, such as mandatory business closures and “stay-at-home” orders, could result in a reduction in the Company’s cash flows or require that the Company write off additional accrued rent and/or accounts receivable balances, and this could have a material adverse effect on lease revenue and thus the results of the Company’s Office property type.

The Boston Marriott Cambridge closed in March 2020 and did not re-open during the second quarter. The Company is uncertain as to when the hotel will re-open. The hotel is operating at a monthly deficit and its continued closure has had, and will continue to have, a material adverse impact on the hotel’s operations and thus the results of the Company’s Hotel property type.

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

For the three months ended June 30, 2020:

			Boston						Los Angeles						New York						San Francisco						Washington, DC						Total
Rental Revenue: (1)
Office			$	218,351					$	—					$	204,242					$	128,233					$	83,837					$	634,663
Residential			3,401						—						—						—						6,001						9,402
Hotel			99						—						—						—						—						99
Total			221,851						—						204,242						128,233						89,838						644,164
% of Grand Totals			34.43		%				—		%				31.71		%				19.91		%				13.95		%				100.00		%
Rental Expenses:
Office			75,694						—						88,367						39,081						32,680						235,822
Residential			1,235						—						—						—						2,730						3,965
Hotel			1,973						—						—						—						—						1,973
Total			78,902						—						88,367						39,081						35,410						241,760
% of Grand Totals			32.64		%				—		%				36.54		%				16.17		%				14.65		%				100.00		%
Net operating income			$	142,949					$	—					$	115,875					$	89,152					$	54,428					$	402,404
% of Grand Totals			35.52		%				—		%				28.80		%				22.15		%				13.53		%				100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships			(10,576)						—						(21,851)						—						—						(32,427)
Add: Company’s share of net operating income from unconsolidated joint ventures			2,627						15,026						815						4,127						5,316						27,911
Company’s share of net operating income			$	135,000					$	15,026					$	94,839					$	93,279					$	59,744					$	397,888
% of Grand Totals			33.92		%				3.78		%				23.84		%				23.44		%				15.02		%				100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

For the three months ended June 30, 2019:

			Boston						Los Angeles						New York						San Francisco						Washington, DC						Total
Rental Revenue: (1)
Office			$	217,961					$	—					$	251,556					$	131,506					$	96,486					$	697,509
Residential			3,222						—						—						—						5,777						8,999
Hotel			14,844						—						—						—						—						14,844
Total			236,027						—						251,556						131,506						102,263						721,352
% of Grand Totals			32.72		%				—		%				34.87		%				18.23		%				14.18		%				100.00		%
Rental Expenses:
Office			77,660						—						96,809						43,708						35,672						253,849
Residential			1,279						—						—						—						2,843						4,122
Hotel			9,080						—						—						—						—						9,080
Total			88,019						—						96,809						43,708						38,515						267,051
% of Grand Totals			32.96		%				—		%				36.25		%				16.37		%				14.42		%				100.00		%
Net operating income			$	148,008					$	—					$	154,747					$	87,798					$	63,748					$	454,301
% of Grand Totals			32.58		%				—		%				34.06		%				19.33		%				14.03		%				100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships			(10,031)						—						(35,531)						—						—						(45,562)
Add: Company’s share of net operating income from unconsolidated joint ventures			818						15,454						1,696						—						6,747						24,715
Company’s share of net operating income			$	138,795					$	15,454					$	120,912					$	87,798					$	70,495					$	433,454
% of Grand Totals			32.01		%				3.57		%				27.90		%				20.26		%				16.26		%				100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

For the six months ended June 30, 2020:

			Boston						Los Angeles						New York						San Francisco						Washington, DC						Total
Rental Revenue: (1)
Office			$	457,849					$	—					$	459,528					$	264,972					$	176,973					$	1,359,322
Residential			7,469						—						—						—						11,889						19,358
Hotel			6,924						—						—						—						—						6,924
Total			472,242						—						459,528						264,972						188,862						1,385,604
% of Grand Totals			34.09		%				—		%				33.16		%				19.12		%				13.63		%				100.00		%
Rental Expenses:
Office			158,239						—						187,507						81,650						67,328						494,724
Residential			2,575						—						—						—						5,454						8,029
Hotel			8,794						—						—						—						—						8,794
Total			169,608						—						187,507						81,650						72,782						511,547
% of Grand Totals			33.16		%				—		%				36.65		%				15.96		%				14.23		%				100.00		%
Net operating income			$	302,634					$	—					$	272,021					$	183,322					$	116,080					$	874,057
% of Grand Totals			34.63		%				—		%				31.12		%				20.97		%				13.28		%				100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships			(21,239)						—						(58,849)						—						—						(80,088)
Add: Company’s share of net operating income from unconsolidated joint ventures			5,726						30,956						1,571						7,286						11,130						56,669
Company’s share of net operating income			$	287,121					$	30,956					$	214,743					$	190,608					$	127,210					$	850,638
% of Grand Totals			33.76		%				3.64		%				25.24		%				22.41		%				14.95		%				100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

For the six months ended June 30, 2019:

			Boston						Los Angeles						New York						San Francisco						Washington, DC						Total
Rental Revenue: (1)
Office			$	435,372					$	—					$	510,187					$	255,561					$	192,831					$	1,393,951
Residential			5,923						—						—						—						10,791						16,714
Hotel			23,782						—						—						—						—						23,782
Total			465,077						—						510,187						255,561						203,622						1,434,447
% of Grand Totals			32.42		%				—		%				35.56		%				17.82		%				14.20		%				100.00		%
Rental Expenses:
Office			157,160						—						193,780						84,833						71,819						507,592
Residential			2,485						—						—						—						5,411						7,896
Hotel			16,943						—						—						—						—						16,943
Total			176,588						—						193,780						84,833						77,230						532,431
% of Grand Totals			33.17		%				—		%				36.39		%				15.93		%				14.51		%				100.00		%
Net operating income			$	288,489					$	—					$	316,407					$	170,728					$	126,392					$	902,016
% of Grand Totals			31.98		%				—		%				35.08		%				18.93		%				14.01		%				100.00		%
Less: Net operating income attributable to noncontrolling interests in property partnerships			(19,404)						—						(72,795)						(448)						—						(92,647)
Add: Company’s share of net operating income from unconsolidated joint ventures			1,590						31,162						3,482						—						13,830						50,064
Company’s share of net operating income			$	270,675					$	31,162					$	247,094					$	170,280					$	140,222					$	859,433
% of Grand Totals			31.49		%				3.63		%				28.75		%				19.81		%				16.32		%				100.00		%

  _______________

(1)Rental Revenue is equal to Total Revenue per the Company’s Consolidated Statements of Operations, less Development and Management Services Revenue and Direct Reimbursements of Payroll and Related Costs from Management Services Contracts Revenue per the Consolidated Statements of Operations.

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- References

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- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

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