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.

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.

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.

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.

Real estate

Construction in progress

Land held for future development

Less: accumulated depreciation

Total real estate

Cash and cash equivalents

Cash held in escrows

Investments in securities

Tenant and other receivables, net of allowance for doubtful accounts of $1,766 and $2,081, respectively

Related party notes receivable

Interest receivable from related party notes receivable

Accrued rental income, net of allowance of $2,515 and $3,116, respectively

Deferred charges, net

Prepaid expenses and other assets

Investments in unconsolidated joint ventures

Total assets

Liabilities:

Mortgage notes payable

Unsecured senior notes, net of discount

Unsecured exchangeable senior notes, net of discount

Unsecured line of credit

Accounts payable and accrued expenses

Dividends and distributions payable

Accrued interest payable

Other liabilities

Total liabilities

Commitments and contingencies

Noncontrolling interest:

Redeemable preferred units of the Operating Partnership

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

Additional paid-in capital

Dividends in excess of earnings

Treasury common stock, at cost

Accumulated other comprehensive loss

Total stockholders’ equity attributable to Boston Properties, Inc.

Noncontrolling interests:

Common units of the Operating Partnership

Property partnerships

Total equity

Total liabilities and equity

(in thousands, except for per share amounts)

(unaudited)

Revenue

Rental

Base rent

Recoveries from tenants

Parking and other

Total rental revenue

Hotel revenue

Development and management services

Total revenue

Expenses

Operating

Rental

Hotel

General and administrative

Acquisition costs

Suspension of development

Depreciation and amortization

Total expenses

Operating income

Other income (expense)

Income from unconsolidated joint ventures

Interest and other income

Gains (losses) from investments in securities

Interest expense

Losses from early extinguishments of debt

Income (loss) from continuing operations

Gain on sale of real estate

Net income (loss)

Net income (loss) attributable to noncontrolling interests

Noncontrolling interests in property partnerships

Noncontrolling interest - redeemable preferred units of the Operating Partnership

Noncontrolling interest - common units of the Operating Partnership

Noncontrolling interest in gain on sale of real estate - common units of the Operating Partnership

Net income (loss) attributable to Boston Properties, Inc.

Basic earnings per common share attributable to Boston Properties, Inc.:

Net income (loss)

Weighted average number of common shares outstanding

Diluted earnings per common share attributable to Boston Properties, Inc.:

Net income (loss)

Weighted average number of common and common equivalent shares outstanding

(in thousands, except for per share amounts)

(unaudited)

Net income (loss) attributable to Boston Properties, Inc.

Add:

Noncontrolling interest in gain on sale of real estate - common units of the Operating Partnership

Noncontrolling interest - common units of the Operating Partnership

Noncontrolling interest - redeemable preferred units of the Operating Partnership

Noncontrolling interests in property partnerships

Less:

Gain on sale of real estate

Income (loss) from continuing operations

Add:

Real estate depreciation and amortization (2)

Less:

Gains on sales of real estate included within income from unconsolidated joint ventures (3)

Noncontrolling interests in property partnerships’ share of funds from operations

Noncontrolling interest - redeemable preferred units of the Operating Partnership

Funds from operations (FFO) attributable to the Operating Partnership

Less:

Noncontrolling interest - common units of the Operating Partnership’s share of funds from operations

Funds from operations attributable to Boston Properties, Inc.

Boston Properties, Inc.’s percentage share of funds from operations - basic

Weighted average shares outstanding - basic

FFO per share basic

Weighted average shares outstanding - diluted

FFO per share diluted

Boston

New York

Princeton

San Francisco

Washington, DC

Total Portfolio

Class A Office Portfolio

Office/Technical Portfolio

Total Portfolio