Boston New York Washington, DC San Francisco Princeton Boston Properties 2009 Annual Report On the Cover General Motors Building 767 Fifth Avenue New York, NY Contents IFC Company Description 1 In Memoriam 2 Letter to Shareholders 5 Our Philosophy and Proven Strategy 7 Sustainability and Green Innovation 8 Board of Directors and Officers 9 Form 10-K IBC Corporate Information Boston Properties, Inc., a self- The Company acquires, develops and administered and self-managed real manages its properties through full- estate investment trust (REIT), is one service regional offices. Its property of the largest owners, managers and portfolio is comprised primarily of first- developers of first-class office properties class office space and also includes in the United States, with a significant one hotel, two residential properties presence in five markets: Boston, and three retail properties. Boston Washington, DC, Midtown Manhattan, Properties is well-known for its in-house San Francisco, and Princeton, NJ. building management expertise and The Company was founded in 1970 by responsiveness to tenants’ needs. The Mortimer B. Zuckerman and Edward Company holds a superior track record H. Linde in Boston, where it maintains in developing premium Central Business its headquarters. Boston Properties District (CBD) office buildings, suburban became a public company in June 1997 office centers and build-to-suit projects and is traded on the New York Stock for the U.S. government and a diverse Exchange under the symbol “BXP.” array of creditworthy tenants. This Annual Report contains “forward-looking statements” within the meaning of the federal securities laws. See the discussion under “Forward-Looking Statements” in the Form 10-K for matters to be considered in this regard. IN MEMORIAM Edward H. Linde 1941 - 2010 Edward H. Linde, Co-founder and Chief Executive Officer of Boston Properties, Bostonpassed Properties, away on JanuaryInc. a self- 10, 2010. administered and self-managed real estateDuring investment a 45-year trust career, (REIT), Ed changed is one the face of modern Boston and Cambridge ofleaving the largest an indelible owners, imprint managers, on the and skyline and culture – from the Prudential Center developersto Cambridge of first-class Center to officethe Boston properties Symphony Orchestra where he was chairman “He was as fine a citizen as in ofthe the United board. States, with a significant Boston has ever had. With all the presence in five markets: Boston, civic and public contributions Washington,Ed joined his D.C., partner Midtown Mort Manhattan,Zuckerman and they founded Boston Properties in he’s made, it’s hard to describe San1970. Francisco, Together, and they Princeton, developed N.J. it into one of the highest quality portfolios of the depth of his impact.” Theoffice Company buildings was in founded the country, in 1970 transitioning by into a public company in 1997 and Mortimergrowing B. from Zuckerman a market and capitalization Edward H. of $2.1 billion at its IPO to $20.5 billion in Mortimer B. Zuckerman LindeMarch in Boston,2010. where it maintains its headquarters. Boston Properties became a Bostonpublic company Properties’ in Juneportfolio 1997 includes and is some of the nation’s most iconic office tradedbuildings, on the including New York the Stock Prudential Exchange Center in Boston, Embarcadero Center in underSan Franciscothe symbol and BXP. the General Motors Building in New York City. When asked about what drove the company to focus on properties of this magnitude, Ed said “I’m a great believer in cities. People talk about smart growth. Cities allow people “If we can help people who of talent to congregate with other people of talent – and that produces steps forward that otherwise would not occur.” In an interview with The Boston Globe, really have talent and potential, Boston Mayor Tom Menino described his relationship with Ed, “He was about being then we’ll have done something honest and straightforward. He would come into my office and say, ‘This is what I of great value.” want to do and this is why.’ And it was never about money or financial gain; it was Edward H. Linde about the betterment of the city.” It was not just what he did, but how he did it that made Ed Linde’s life so extraordinary. Ed led his life through example. He showed respect for everyone, brought warmth to his interactions, was a great listener and whether he agreed with you or not, you knew that he appreciated your perspective. He also filled his life with philanthropic pursuits and through the Linde Foundation has made an enduring impact on the Boston region’s cultural and academic institutions. 1 Mortimer B. Zuckerman Chairman of the Board and Chief Executive Officer Douglas T. Linde President To Our Shareholders The sudden passing of Ed Linde on January 10, 2010 was a profound loss not only to Boston Properties, but also to the Boston community and the national real estate industry. He was a giant in the real estate industry, a tremendous philanthropist in the Boston community and a true leader in every aspect of his life. His presence, easy manner, self- effacing style, warmth, integrity, wisdom, vision and curiosity will be greatly missed, but the values he instilled, his approach to running the business and the example he set for how we should conduct ourselves and interact with shareholders, tenants, contractors, vendors, public officials, industry colleagues, lenders and analysts are the foundation of everything we are and do at Boston Properties. Ed loved the real estate industry and had he became the unknowing mentor to a unemployment rate was almost 10% remarkable business acumen. Developing generation of real estate professionals as we ended 2009. While economists, buildings, which encompassed locally and across the country. analysts and labor forecasters can debate architecture, engineering, public policy, what is necessary to spur a recovery in finance and salesmanship, offered him Ed was incredibly proud of the the job market, the timing of a recovery in the opportunity to apply his many talents organization he helped found more the real estate markets will be driven by to make cities like Boston, Cambridge, than 40 years ago. The opportunities the pace of new job creation. If we Washington, DC and New York better that came with transitioning to a public compare the overall business climate to places. He loved cities. He believed in company back in 1997 allowed Boston a year ago, there is a sense that the quality, and he knew how to achieve the Properties to capitalize on its expertise, aggressive steps taken by companies in right balance between creating great, grow and strengthen its management response to the recession (cost cutting, enduring projects and making them team and provide an enduring platform. employment reductions, deleveraging financially rewarding. It is not only the The senior management of Boston and restructuring) have built a stable location and quality of its assets that Properties all have unique skills and foundation on which our customers can distinguishes Boston Properties, but the talent, but they also had the opportunity move forward. Geographic regions and example Ed set for how every employee and good fortune to learn from industries will experience varying paces should conduct himself or herself. If he or Ed for many years, ensuring that of improvement and we are hopeful that someone at Boston Properties made a Boston Properties will continue to we will see signs of improvement in the commitment, he would follow through. succeed despite the challenging real estate markets in 2010. When Ed Linde said Boston Properties economic environment. would do something, it got done, and if As we reflect back on Boston Properties’ winning a bid for a new project meant The financial markets enjoyed a healthy performance in 2009 and the challenges making a commitment he could not live recovery during 2009 with the S&P 500 that the economy and the company up to, he would bid on his terms knowing up 24% and the NASDAQ up 44%, but faced, it is hard to forget that the financial he would likely not prevail. Along the way we have not yet seen a similar recovery in markets were frozen in March 2009 and the labor markets. The headline U.S. 2 Boston Properties’ Income Boston Properties’ Total by Region Return to Shareholders $250.00 BXP 42% New York S&P 500 22% Boston $200.00 Equity REIT Index 22% Washington, DC 11% San Francisco $150.00 3% Princeton $100.00 $50.00 ’04 ’05 ’06 ’07 ’08 ’09 Percentage of our Net Operating Income, which includes The graph assumes an investment of $100 on December our share of our unconsolidated joint venture assets, for 31, 2004 and the reinvestment of dividends. Data the quarter ended December 31, 2009. shown is based on the share price or index values, as applicable, as of December 31 of each year shown. Source: NAREIT that Lehman Brothers and General We are often asked what actions we Leasing transactions also originate Motors used their bankruptcy status to took to allow us to weather a very volatile from events other than national or even terminate more than 550,000 square feet and difficult economic environment and regional job growth, namely lease of leases in our New York City portfolio real estate market in 2009. Our answer is expirations, mergers and acquisitions and totaling over $55 million of annualized that our long-held strategy, executed new business formation. Even in an rent. During the remainder of the year, we consistently over the last 40 years, of economy with high unemployment, there raised over $1.8 billion of debt and equity concentrating on developing, acquiring, are still tenants that have expansion or and re-leased more than 460,000 square owning and self-managing the highest growth plans which require incremental feet of that same space, recovering quality, iconic office buildings in premier real estate.