Boston Properties, Inc. : Boston Properties Announces Fourth Quarter 2011 Results

Reports diluted FFO per share of $1.21

Reports diluted EPS of $0.69

Boston Properties, Inc. (NYSE: BXP), a real estate investment trust, reported results today for the fourth quarter ended December 31, 2011.

Results for the quarter ended December 31, 2011

Funds from Operations (FFO) for the quarter ended December 31, 2011 were $179.3 million, or $1.21 per share basic and $1.21 per share diluted. This compares to FFO for the quarter ended December 31, 2010 of $89.9 million, or $0.64 per share basic and $0.64 per share diluted. FFO for the quarter ended December 31, 2010 includes $(0.50) per share on a diluted basis related to the losses from early extinguishments of debt totaling approximately $81.7 million primarily associated with the Company's Operating Partnership's redemption of $700.0 million in aggregate principal amount of its 6.25% senior notes due 2013 and the repurchase of $50.0 million aggregate principal amount of its 2.875% exchangeable senior notes due 2037. The weighted average number of basic and diluted shares outstanding totaled 147,732,138 and 149,435,490, respectively, for the quarter ended December 31, 2011 and 140,104,791 and 142,058,612, respectively, for the quarter ended December 31, 2010.

Net income (loss) available to common shareholders was $101.6 million for the quarter ended December 31, 2011, compared to $(12.9) million for the quarter ended December 31, 2010. Net income (loss) available to common shareholders per share (EPS) for the quarter ended December 31, 2011 was $0.69 basic and $0.69 on a diluted basis. This compares to EPS for the fourth quarter of 2010 of $(0.09) basic and $(0.09) on a diluted basis.

Results for the year ended December 31, 2011

FFO for the year ended December 31, 2011 was $711.0 million, or $4.88 per share basic and $4.84 per share diluted. This compares to FFO for the year ended December 31, 2010 of $547.4 million, or $3.93 per share basic and $3.90 per share diluted. The weighted average number of basic and diluted shares outstanding totaled 145,693,488 and 147,679,439, respectively, for the year ended December 31, 2011 and 139,439,637 and 141,518,065, respectively, for the year ended December 31, 2010.

Net income available to common shareholders was $272.7 million for the year ended December 31, 2011, compared to $159.1 million for the year ended December 31, 2010. Net income available to common shareholders per share (EPS) for the year ended December 31, 2011 was $1.87 basic and $1.86 on a diluted basis. This compares to EPS for the year ended December 31, 2010 of $1.14 basic and $1.14 on a diluted basis.

The reported results are unaudited and there can be no assurance that the results will not vary from the final information for the quarter and year ended December 31, 2011. In the opinion of management, all adjustments considered necessary for a fair presentation of these reported results have been made.

As of December 31, 2011, the Company's portfolio consisted of 153 properties, comprised primarily of Class A office space, one hotel, three residential properties and three retail properties, aggregating approximately 42.2 million square feet, including seven properties under construction totaling 2.6 million square feet. In addition, the Company has structured parking for vehicles containing approximately 15.1 million square feet. The overall percentage of leased space for the 143 properties in service (excluding the two in-service residential properties and the hotel) as of December 31, 2011 was 91.3%.

Significant events during the fourth quarter included:

• On October 14, 2011, an unconsolidated joint venture in which the Company has a 30% interest obtained construction financing totaling $107.0 million collateralized by its 500 North Capitol Street, NW redevelopment project located in Washington, DC. The construction financing bears interest at a variable rate equal to LIBOR plus 1.65% per annum and matures on October 14, 2014 with two, one-year extension options, subject to certain conditions. At closing, approximately $33.3 million was drawn to fund the repayment of the existing mortgage loan totaling $22.0 million and approximately $11.3 million of previously incurred development costs.
• On October 25, 2011, an unconsolidated joint venture in which the Company has a 60% interest completed the sale of Two Grand Central Tower located in New York City for approximately $401.0 million, including the assumption by the buyer of approximately $176.6 million of mortgage indebtedness. Net cash proceeds totaled approximately $210.0 million, of which the Company's share was approximately $126.0 million, after the payment of transaction costs of approximately $14.4 million. Two Grand Central Tower is an approximately 650,000 net rentable square foot Class A office tower. The Company had previously recognized an impairment loss on its investment in the unconsolidated joint venture totaling approximately $74.3 million. As a result, the Company recognized a gain on sale of real estate totaling approximately $46.2 million, which is included within income from unconsolidated joint ventures in the Company's consolidated statements of operations, but excluded from the Company's calculation of FFO.
• On November 9, 2011, the Company's Operating Partnership repurchased $50.0 million aggregate principal amount of its 2.875% exchangeable senior notes due 2037, which the holders may require the Operating Partnership to repurchase in February 2012, for approximately $50.2 million. The repurchased notes had an aggregate carrying value of approximately $49.6 million, resulting in the recognition of a loss on early extinguishment of debt of approximately $0.6 million.
• On November 9, 2011, the Company used available cash to repay the mortgage loan collateralized by its Reservoir Place property located in Waltham, Massachusetts totaling $50.0 million. The mortgage financing bore interest at a variable rate equal to Eurodollar plus 2.20% per annum and was scheduled to mature on July 30, 2014. There was no prepayment penalty. The Company recognized a loss from early extinguishment of debt totaling approximately $0.5 million consisting of the write-off of unamortized deferred financing costs.
• On November 10, 2011, the Company's Operating Partnership completed a public offering of $850.0 million in aggregate principal amount of 3.700% senior unsecured notes due 2018. The notes were priced at 99.767% of the principal amount to yield an effective interest rate (including financing fees) of 3.853% to maturity. The notes will mature on November 15, 2018, unless earlier redeemed. The aggregate net proceeds from the offering were approximately $841.2 million after deducting underwriting discounts and transaction expenses.
• On November 15, 2011, the Company completed and fully placed in-service the office component of its Atlantic Wharf development project located in Boston, Massachusetts. The office component is comprised of approximately 798,000 net rentable square feet and is currently 93% leased. In addition, on November 16, 2011, the Company terminated the construction loan facility collateralized by the office component of its Atlantic Wharf project totaling $192.5 million. The construction loan facility bore interest at a variable rate equal to LIBOR plus 3.00% per annum and was scheduled to mature on April 21, 2012 with two, one-year extension options, subject to certain conditions. The Company had not drawn any amounts under the facility. The Company recognized a loss from early extinguishment of debt totaling approximately $0.4 million consisting of the write-off of unamortized deferred financing costs.
• On November 17, 2011, an unconsolidated joint venture in which the Company has a 50% interest obtained construction financing totaling $19.0 million collateralized by its Annapolis Junction development project located in Annapolis, Maryland. The construction financing bears interest at a variable rate equal to LIBOR plus 1.65% per annum and matures on November 17, 2013 with two, one-year extension options, subject to certain conditions.

• On November 22, 2011, the Company acquired 2440 West El Camino Real located in Mountain View, California for a purchase price of approximately $71.5 million in cash. 2440 West El Camino Real is an approximately 140,000 net rentable square foot Class A office property that is currently 100% leased. The Company projects this property's 2012 Unleveraged FFO Return to be 7.5% and 2012 Unleveraged Cash Return to be 6.3%. The calculation of these returns and related disclosures are presented on the accompanying table entitled "Projected 2012 Returns on Operating Property Acquisition." There can be no assurance that actual returns will not differ materially from these projections.
• On November 22, 2011, the Company's Value-Added Fund refinanced the mortgage loan collateralized by its Mountain View Technology Park property located in Mountain View, California. The mortgage loan totaling approximately $24.6 million bore interest at a variable rate equal to LIBOR plus 1.50% per annum and had matured on November 15, 2011. The new mortgage loan totaling $20.0 million bears interest at a variable rate equal to LIBOR plus 2.50% per annum and matures on November 22, 2014. In connection with the loan refinancing, the joint venture repaid approximately $4.6 million of the previous mortgage loan utilizing existing cash reserves and the proceeds from a loan from the Company's Operating Partnership. The loan from the Company's Operating Partnership consists of an agreement to lend up to $6.0 million to the Value-Added Fund, of which approximately $3.7 million had been advanced as of December 31, 2011. The loan from the Company's Operating Partnership bears interest at a fixed rate of 10.0% per annum and matures on November 22, 2014.
• On December 14, 2011, the Company announced that its Board of Directors declared a regular quarterly cash dividend of $0.55 per share of common stock for the period from October 1, 2011 to December 31, 2011 payable on January 27, 2012 to shareholders of record as of the close of business on December 31, 2011. This represents an increase of 10.0% over last quarter's cash dividend of $0.50 per share.

Transactions completed subsequent to December 31, 2011:

• On January 10, 2012, the Company announced that holders of the 2.875% Exchangeable Senior Notes due 2037 (the "Notes") of its Operating Partnership have the right to surrender their Notes for purchase by the Operating Partnership (the "Put Right") on February 15, 2012. In connection with the Put Right, on January 10, 2012, the Operating Partnership distributed a Put Right Notice to the holders of the Notes and filed a Schedule TO with the Securities and Exchange Commission. The opportunity to exercise the Put Right will expire at 5:00 p.m., New York City time, on February 8, 2012. On January 10, 2012, the Company also announced that the Operating Partnership issued a notice of redemption to the holders of the Notes to redeem, on February 20, 2012 (the "Redemption Date"), all of the Notes outstanding on the Redemption Date. In connection with the redemption, holders of the Notes have the right to exchange their Notes prior to 5:00 p.m., New York City time, on February 16, 2012. Notes with respect to which the Put Right is not exercised (or with respect to which the Put Right is exercised and subsequently withdrawn prior to the withdrawal deadline) and that are not surrendered for exchange prior to 5:00 p.m., New York City time, on February 16, 2012, will be redeemed by the Operating Partnership on the Redemption Date at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest thereon to, but excluding, the Redemption Date. As of January 9, 2012, there was approximately $576,194,000 aggregate principal amount of the Notes outstanding.
• On January 25, 2012, the Company's Compensation Committee approved outperformance awards under the Company's 1997 Stock Option and Incentive Plan to officers and employees of the Company. These awards (the "2012 OPP Awards") are part of a broad-based, long-term incentive compensation program designed to provide the Company's management team with the potential to earn equity awards subject to the Company "outperforming" and creating shareholder value in a pay-for-performance structure. Recipients of 2012 OPP Awards will share in a maximum outperformance pool of $40.0 million if the total return to shareholders, including both share appreciation and dividends, exceeds absolute and relative hurdles over a three-year measurement period from February 7, 2012 to February 6, 2015. Earned awards are subject to two-years of time-based vesting after the performance measurement date. The Company expects that under the Financial Accounting Standards Board's Accounting Standards Codification ("ASC") 718 "Compensation - Stock Compensation" the 2012 OPP Awards will have an aggregate value of approximately $7.5 million, which amount will be amortized into earnings over the five-year plan period under the graded vesting method and has been reflected in the 2012 guidance below.
• As previously disclosed, the Company notified the master servicer of the non-recourse mortgage loan collateralized by the Company's Montvale Center property located in Gaithersburg, Maryland that the cash flows generated from the property were insufficient to fund debt service payments and capital improvements necessary to lease and operate the property and that the Company was not prepared to fund any cash shortfalls. The Company is not current on making debt service payments and is currently accruing interest at the default interest rate of 9.93% per annum. The loan was originally scheduled to mature on June 6, 2012. However, a receiver has been appointed for the property and the Company expects the property to be transferred to the lender during the first quarter of 2012.

EPS and FFO per Share Guidance:

The Company's guidance for the first quarter and full year 2012 for EPS (diluted) and FFO per share (diluted) is set forth and reconciled below. Except as described below, the estimates reflect management's view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of the events referenced in this release and otherwise referenced during the conference call referred to below. The estimates for the first quarter and full year 2012 include, among other things, the anticipated impact on EPS of the transfer of the Company's Montvale Center property located in Gaithersburg, Maryland, which is expected to occur during the first quarter of 2012 and result in a gain on forgiveness of debt of approximately $0.11 per share. The estimates do not include possible future gains or losses or the impact on operating results from other possible future property acquisitions or dispositions, other possible capital markets activity or possible future impairment charges. EPS estimates may be subject to fluctuations as a result of several factors, including changes in the recognition of depreciation and amortization expense and any gains or losses associated with disposition activity. The Company is not able to assess at this time the potential impact of these factors on projected EPS. By definition, FFO does not include real estate-related depreciation and amortization, impairment losses or gains or losses associated with disposition activities. There can be no assurance that the Company's actual results will not differ materially from the estimates set forth below.

				First Quarter 2012									Full Year 2012
				Low		-	High						Low		-	High
Projected EPS (diluted)				$	0.43	-	$	0.45					$	1.61	-	$	1.74
Add:
Projected Company Share of Real Estate  Depreciation and Amortization					0.80	-		0.80						3.15	-		3.15
Less:
Projected Company Share of Gains on  Sales/Transfers of Real Estate					0.11	-		0.11						0.11	-		0.11
Projected FFO per Share (diluted)				$	1.12	-	$	1.14					$	4.65	-	$	4.78

Boston Properties will host a conference call on Wednesday, February 1, 2012 at 10:00 AM Eastern Time, open to the general public, to discuss the fourth quarter and full year 2011 results, the 2012 projections and related assumptions, and other related matters that may be of interest to investors. The number to call for this interactive teleconference is (877) 706-4503 (Domestic) or (281) 913-8731 (International) and entering the passcode 34807645. A replay of the conference call will be available through February 15, 2012, by dialing (855) 859-2056 (Domestic) or (404) 537-3406 (International) and entering the passcode 34807645. There will also be a live audio webcast of the call which may be accessed on the Company's website at www.bostonproperties.com in the Investor Relations section. Shortly after the call a replay of the webcast will be available in the Investor Relations section of the Company's website and archived for up to twelve months following the call.

Additionally, a copy of Boston Properties' fourth quarter 2011 "Supplemental Operating and Financial Data" and this press release are available in the Investor Relations section of the Company's website at www.bostonproperties.com.

Boston Properties is a fully integrated, self-administered and self-managed real estate investment trust that develops, redevelops, acquires, manages, operates and owns a diverse portfolio of Class A office space, one hotel, three residential properties and three retail properties. The Company is one of the largest owners and developers of Class A office properties in the United States, concentrated in five markets - Boston, New York, Princeton, San Francisco and Washington, DC.

This press release contains forward-looking statements within the meaning of the Federal securities laws. You can identify these statements by our use of the words "assumes," "believes," "estimates," "expects," "guidance," "intends," "plans," "projects" and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond Boston Properties' control and could materially affect actual results, performance or achievements. These factors include, without limitation, the Company's ability to satisfy the closing conditions to the pending transactions described above, the ability to enter into new leases or renew leases on favorable terms, dependence on tenants' financial condition, the uncertainties of real estate development, acquisition and disposition activity, the ability to effectively integrate acquisitions, the uncertainty of investing in new markets, the costs and availability of financing, the effectiveness of our interest rate hedging contracts, the ability of our joint venture partners to satisfy their obligations, the effects of local, national and international economic and market conditions (including the impact of the European sovereign debt issues), the effects of acquisitions, dispositions and possible impairment charges on our operating results, the impact of newly adopted accounting principles on the Company's accounting policies and on period-to-period comparisons of financial results, regulatory changes and other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission. Boston Properties does not undertake a duty to update or revise any forward-looking statement, including its guidance for the first quarter and full fiscal year 2012, whether as a result of new information, future events or otherwise.

BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
				December 31,						December 31,
					2011						2010
				(in thousands, except for share amounts)
				(unaudited)
ASSETS
Real estate				$	12,303,965					$	10,933,977
Construction in progress					818,685						1,073,402
Land held for future development					266,822						757,556
Less: accumulated depreciation					(2,642,986	)					(2,323,818	)
Total real estate					10,746,486						10,441,117
Cash and cash equivalents					1,823,208						478,948
Cash held in escrows					40,332						308,031
Investments in securities					9,548						8,732
Tenant and other receivables, net of allowance for doubtful accounts of $1,766 and $2,081, respectively					79,838						60,813
Related party notes receivable					280,442						270,000
Interest receivable from related party notes receivable					89,854						69,005
Accrued rental income, net of allowance of $2,515 and $3,116, respectively					522,675						442,683
Deferred charges, net					445,403						436,019
Prepaid expenses and other assets					75,458						65,663
Investments in unconsolidated joint ventures					669,722						767,252
Total assets				$	14,782,966					$	13,348,263
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable				$	3,123,267					$	3,047,586
Unsecured senior notes, net of discount					3,865,186						3,016,598
Unsecured exchangeable senior notes, net of discount					1,715,685						1,721,817
Unsecured line of credit					-						-
Accounts payable and accrued expenses					155,139						161,592
Dividends and distributions payable					91,901						81,031
Accrued interest payable					69,105						62,327
Other liabilities					293,515						237,467
Total liabilities					9,313,798						8,328,418
Commitments and contingencies					-						-
Noncontrolling interest:
Redeemable preferred units of the Operating Partnership					55,652						55,652
Equity:
Stockholders' equity attributable to Boston Properties, Inc.
Excess stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding					-						-
Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued or outstanding					-						-
Common stock, $.01 par value, 250,000,000 shares authorized, 148,186,511 and 140,278,005 shares  issued and 148,107,611 and 140,199,105 shares outstanding at December 31, 2011 and 2010,  respectively					1,481						1,402
Additional paid-in capital					4,936,457						4,417,162
Dividends in excess of earnings					(53,080	)					(24,763	)
Treasury common stock, at cost					(2,722	)					(2,722	)
Accumulated other comprehensive loss					(16,138	)					(18,436	)
Total stockholders' equity attributable to Boston Properties, Inc.					4,865,998						4,372,643
Noncontrolling interests:
Common units of the Operating Partnership					548,581						592,164
Property partnerships					(1,063	)					(614	)
Total equity					5,413,516						4,964,193
Total liabilities and equity				$	14,782,966					$	13,348,263

BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
				Three months ended										Year ended
				December 31,										December 31,
					2011					2010					2011					2010
				(in thousands, except for per share amounts)
				(unaudited)
Revenue
Rental
Base rent				$	358,466				$	312,899				$	1,407,070				$	1,231,564
Recoveries from tenants					52,726					45,189					201,395					180,719
Parking and other					21,234					16,920					83,097					64,490
Total rental revenue					432,426					375,008					1,691,562					1,476,773
Hotel revenue					11,632					10,510					34,529					32,800
Development and management services					8,729					6,964					33,435					41,231
Total revenue					452,787					392,482					1,759,526					1,550,804
Expenses
Operating
Rental					154,146					125,384					593,977					501,694
Hotel					8,076					7,602					26,128					25,153
General and administrative					19,390					17,121					81,442					79,658
Acquisition costs					19					721					155					2,614
Suspension of development					-					-					-					(7,200	)
Depreciation and amortization					109,181					92,763					439,184					338,371
Total expenses					290,812					243,591					1,140,886					940,290
Operating income					161,975					148,891					618,640					610,514
Other income (expense)
Income from unconsolidated joint ventures					57,712					9,834					85,896					36,774
Interest and other income					1,179					1,691					5,358					7,332
Gains (losses) from investments in securities					38					682					(443	)				935
Interest expense					(103,967	)				(92,192	)				(394,131	)				(378,079	)
Losses from early extinguishments of debt					(1,494	)				(81,662	)				(1,494	)				(89,883	)
Income (loss) from continuing operations					115,443					(12,756	)				313,826					187,593
Gain on sale of real estate					-					-					-					2,734
Net income (loss)					115,443					(12,756	)				313,826					190,327
Net income (loss) attributable to noncontrolling interests
Noncontrolling interests in property partnerships					(440	)				(907	)				(1,558	)				(3,464	)
Noncontrolling interest - redeemable preferred units of the
Operating Partnership					(842	)				(795	)				(3,339	)				(3,343	)
Noncontrolling interest - common units of the Operating Partnership					(12,517	)				1,555					(36,250	)				(24,099	)
Noncontrolling interest in gain on sale of real estate - common units  of the Operating Partnership					-					-					-					(349	)
Net income (loss) attributable to Boston Properties, Inc.				$	101,644				$	(12,903	)			$	272,679				$	159,072
Basic earnings per common share attributable to Boston Properties, Inc.:
Net income (loss)				$	0.69				$	(0.09	)			$	1.87				$	1.14
Weighted average number of common shares outstanding					147,732					140,105					145,693					139,440
Diluted earnings per common share attributable to Boston Properties, Inc.:
Net income (loss)				$	0.69				$	(0.09	)			$	1.86				$	1.14
Weighted average number of common and common equivalent shares outstanding					147,974					140,105					146,218					140,057

BOSTON PROPERTIES, INC.
FUNDS FROM OPERATIONS (1)
		Three months ended								Year ended
		December 31,								December 31,
			2011				2010				2011				2010
		(in thousands, except for per share amounts)
		(unaudited)
Net income (loss) attributable to Boston Properties, Inc.		$	101,644			$	(12,903	)		$	272,679			$	159,072
Add:
Noncontrolling interest in gain on sale of real estate - common units  of the Operating Partnership			-				-				-				349
Noncontrolling interest - common units of the Operating Partnership			12,517				(1,555	)			36,250				24,099
Noncontrolling interest - redeemable preferred units of the Operating Partnership			842				795				3,339				3,343
Noncontrolling interests in property partnerships			440				907				1,558				3,464
Less:
Gain on sale of real estate			-				-				-				2,734
Income (loss) from continuing operations			115,443				(12,756	)			313,826				187,593
Add:
Real estate depreciation and amortization (2)			133,415				118,573				541,791				450,546
Less:
Gains on sales of real estate included within income from  unconsolidated joint ventures (3)			46,166				572				46,166				572
Noncontrolling interests in property partnerships' share of funds from operations			904				1,686				3,412				6,862
Noncontrolling interest - redeemable preferred units of the Operating Partnership			842				795				3,339				3,343
Funds from operations (FFO) attributable to the Operating Partnership			200,946				102,764				802,700				627,362
Less:
Noncontrolling interest - common units of the Operating Partnership's  share of funds from operations			21,648				12,886				91,709				80,006
Funds from operations attributable to Boston Properties, Inc.		$	179,298			$	89,878			$	710,991			$	547,356
Boston Properties, Inc.'s percentage share of funds from operations - basic			89.23	%			87.46	%			88.57	%			87.25	%
Weighted average shares outstanding - basic			147,732				140,105				145,693				139,440
FFO per share basic		$	1.21			$	0.64			$	4.88			$	3.93
Weighted average shares outstanding - diluted			149,435				142,059				147,679				141,518
FFO per share diluted		$	1.21			$	0.64			$	4.84			$	3.90

	(1)		Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), we calculate Funds from Operations, or "FFO," by adjusting net income (loss) attributable to Boston Properties, Inc. (computed in accordance with GAAP, including non-recurring items) for gains (or losses) from sales of properties, impairment losses on depreciable real estate of consolidated real estate, impairment losses on investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate related depreciation and amortization, and after adjustment for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure. The use of FFO, combined with the required primary GAAP presentations, has been fundamentally beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. Management generally considers FFO to be a useful measure for reviewing our comparative operating and financial performance because, by excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment losses and real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help one compare the operating performance of a company's real estate between periods or as compared to different companies.
			Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently.
			FFO should not be considered as an alternative to net income attributable to Boston Properties, Inc. (determined in accordance with GAAP) as an indication of our performance. FFO does not represent cash generated from operating activities determined in accordance with GAAP, and is not a measure of liquidity or an indicator of our ability to make cash distributions. We believe that to further understand our performance, FFO should be compared with our reported net income attributable to Boston Properties, Inc. and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.
	(2)		Real estate depreciation and amortization consists of depreciation and amortization from the Consolidated Statements of Operations of $109,181, $92,763, $439,184 and $338,371, our share of unconsolidated joint venture real estate depreciation and amortization of $24,592, $26,206, $103,970 and $113,945, less corporate-related depreciation and amortization of $358, $396, $1,363 and $1,770 for the three months and year ended December 31, 2011 and 2010, respectively.
	(3)		Consists of the portion of income from unconsolidated joint ventures related to the gain on sale of real estate from (1) the sale of Two Grand Central Tower during the three months and year ended December 31, 2011 and (2) the sale of the Company's 5.00% equity interest in the Company's unconsolidated joint venture entity that owned the retail portion of the Wisconsin Place mixed-use property during the three months and year ended December 31, 2010.

BOSTON PROPERTIES, INC.
PROJECTED 2012 RETURNS ON OPERATING PROPERTY ACQUISITION
(dollars in thousands)
						2440 West El Camino Real
	Base rent and recoveries from tenants					$	6,442
	Straight-line rent						420
	Fair value lease revenue						463
	Parking and other						221
	Total rental revenue						7,546
	Operating Expenses						2,186
	Revenue less Operating Expenses						5,360
	Depreciation and amortization						3,350
	Net income					$	2,010
	Add:
	Depreciation and amortization						3,350
	Unleveraged FFO (1)					$	5,360
	Less:
	Straight-line rent						(420	)
	Fair value lease revenue						(463	)
	Unleveraged Cash					$	4,477
	Purchase Price					$	71,500
	Estimated closing and other costs						95
	Total Unleveraged Investment					$	71,595
	Unleveraged FFO Return (1)						7.5	%
	Unleveraged Cash Return (2)						6.3	%

(1)		Pursuant to the revised definition of Funds from Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), we calculate Funds from Operations, or "FFO," by adjusting net income (loss) (computed in accordance with GAAP, including non-recurring items) for gains (or losses) from sales of properties, impairment losses on depreciable real estate of consolidated real estate, impairment losses on investments in unconsolidated joint ventures driven by a measurable decrease in the fair value of depreciable real estate held by the unconsolidated joint ventures, real estate related depreciation and amortization, and after adjustment for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure. Unleveraged FFO excludes, among other items, interest expense, which may vary depending on the level of corporate debt or property-specific debt. Unleveraged FFO Return is also a non-GAAP financial measure that is determined by dividing (A) Unleveraged FFO (based on the projected results for the year ending December 31, 2012) by (B) the Company's Total Unleveraged Investment. Management believes projected Unleveraged FFO Return is a useful measure in the real estate industry when determining the appropriate purchase price for a property or estimating a property's value. When evaluating acquisition opportunities, management considers, among other factors, projected Unleveraged FFO Return because it excludes, among other items, interest expense (which may vary depending on the level of corporate debt or property-specific debt), as well as depreciation and amortization expense (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates). Other factors that management considers include its cost of capital and available financing alternatives. Other companies may compute FFO, Unleveraged FFO and Unleveraged FFO Return differently and these are not indicators of a real estate asset's capacity to generate cash flow.
(2)		Unleveraged Cash Return is a non-GAAP financial measure that is determined by dividing (A) Unleveraged Cash (based on the projected results for the year ending December 31, 2012) by (B) the Company's Total Unleveraged Investment. Other real estate companies may calculate this return differently. Management believes that projected Unleveraged Cash Return is also a useful measure of a property's value when used in addition to Unleveraged FFO Return because, by eliminating the effect of straight-lining of rent and the treatment of in-place above- and below-market leases, it enables an investor to assess the projected cash on cash return from the property over the forecasted period.
		Management is presenting these projected returns and related calculations to assist investors in analyzing the Company's acquisition. Management does not intend to present this data for any other purpose, for any other period or for its other properties, and is not intending for these measures to otherwise provide information to investors about the Company's financial condition or results of operations. The Company does not undertake a duty to update any of these projections. There can be no assurance that actual returns will not differ materially from these projections.

BOSTON PROPERTIES, INC.
PORTFOLIO LEASING PERCENTAGES
					% Leased by Location
					December 31, 2011						December 31, 2010
Boston					87.1	%					89.4	%
New York					97.8	%					96.9	%
Princeton					75.8	%					80.8	%
San Francisco					87.9	%					92.9	%
Washington, DC					96.9	%					97.3	%
	Total Portfolio				91.3	%					93.2	%
					% Leased by Type
					December 31, 2011						December 31, 2010
Class A Office Portfolio					91.3	%					93.6	%
Office/Technical Portfolio					92.6	%					85.5	%
	Total Portfolio				91.3	%					93.2	%

Boston Properties, Inc.
Michael Walsh, 617-236-3410
Senior Vice President, Finance
or
Arista Joyner, 617-236-3343
Investor Relations Manager

Partner Area