Douglas Linde - President of Boston Properties Inc and Director of Boston Properties Inc Arista Joyner - Investor Relations Manager Michael LaBelle - Chief Financial Officer, Senior Vice President and Treasurer Mortimer Zuckerman - Co-Founder, Chairman, Chief Executive Officer, Head of Office of the Chairman, Member of Special Transactions Committee and Member of Significant Transactions Committee Robert Pester - Senior Vice President and Regional Manager of San Francisco office Raymond Ritchey - Executive Vice President, National Director of Acquisitions & Development and Member of Office of the Chairman

Jonathan Habermann - Goldman Sachs Group Inc. James Feldman - BofA Merrill Lynch Jeffrey Spector - BofA Merrill Lynch Steven Benyik - Jefferies & Company, Inc. Michael Knott - Green Street Advisors, Inc. Chris Caton Alexander Goldfarb - Sandler O'Neill + Partners, L.P. Ross Nussbaum - UBS Investment Bank Michael Bilerman - Citigroup Inc Srikanth Nagarajan - FBR Capital Markets & Co. David Harris - Gleacher & Company, Inc. Robert Stevenson - Macquarie Research

Good morning, and welcome to Boston Properties' Second Quarter Earnings Call. This call is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Ms. Arista Joyner, Investor Relations Manager for Boston Properties. Please go ahead.

Good morning, and welcome to Boston Properties' Second Quarter Earnings Conference Call. The press release and supplemental package were distributed last night, as well as furnished on Form 8-K. In the supplemental package, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. If you did not receive a copy, these documents are available in the Investor Relations section of our website at www.bostonproperties.com. An audio webcast of this call will be available for 12 months in the Investor Relations section of our website. At this time, we would like to inform you that certain statements made during this conference call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Boston Properties believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in Monday's press release, and from time to time in the company's filings with the SEC. The company does not undertake the duty to update any forward-looking statement. Having said that, I'd like to welcome Mort Zuckerman, Chairman of the Board and Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. Also during the question-and-answer portion of our call, our regional management team will be available to answer questions as well. I would now like to turn the call over to Mort Zuckerman for his formal remarks.

Good morning, everybody. Thank you for joining us. We're happy to have the opportunity once again to update you on both the company and the environment in which we are working. As for the environment, as you know, the national economic numbers have really deteriorated in the last several weeks, particularly when we found out how bad the first and second quarters were in terms of GDP growth. And if the numbers are correct, it's now 0.4% for the first quarter and 1.3% for the second quarter, an average of 0.85% but that assumes it's an annual growth. So in the first quarter, for the past year looking at a growth rate of about 0.4%. And needless to say, this is on the verge of perhaps looking into a double dip recession. It's certainly doesn't look promising. The unemployment numbers are very, very bad. The housing numbers are bad. And the consumer confidence numbers are bad. However, what is, I think in the sense, relatively very good are the commercial office buildings in major cities, particularly the cities that Boston Properties [audio gap], not by accident of course, focused on and focus in. So I think that we have a substantially strong story to describe to you, and we think this is going to continue over the next several periods and nobody really quite knows what the effect of presumably being agreed in the Congress, but it's certainly going to have a sort of downward pressure in the short run on the economy because it's bound to reduce government spending. Most of the deficits which they are talking about were extended into a later part of the year. But the first half of the year is so weak that you can imagine that everybody is looking at what's going to…

Thanks, Mort. Good morning, everybody. Happy summer. We -- when we got together with a number of you at the NAREIT Conference about 2 months ago, it was interesting because I think the question that almost everybody asked, and where we really focused a lot of our attention, was so have we started to see any changes in our customers approach to leasing decisions, and just to sort of remind everybody what our comment was which was the answer was no, and we really hadn't, and I think people were all excited to hear us say things have sort of slowed down, we actually hadn't seen any changes other than in fact there were starting to be even more of a pickup in the San Francisco and the Northern Peninsula market of California, which is sort of where we last left you. And I thought this morning what I would do is I'd begin my remarks with sort of a current perspective on that topic. And again, in the context of everything Mort just spoke about, things are not pretty from a macro perspective and clearly, there's a lot of uncertainty associated with the federal government and the budgetary numbers and where the reductions in the deficit spending are going to come from and when they're going to happen. But at the same time, and I think everyone will acknowledge, that if you think about businesses and use as a surrogate and the earnings numbers that as reported by the S&P 500, we just had another great, great quarter from American businesses, and there were year-to-year increases in top line sales and earnings and the margins. And where did it come from? Well, it came from computer peripherals and software and semiconductors, Internet services, some consumer on non-discretionaries. Pretty broad…

Great. Thanks, Doug. Good morning, everybody. Before I get to the earnings results for the quarter, I just wanted to touch on our capital markets activity. This quarter, we closed on a 3-year extension of our line of credit taking its maturity out to 2014. We reduced the size of the facility from $1 billion to $750 million based on our potential usage requirements. Although we included a $250 million accordion feature in the event we want to increase it back up to $1 billion. The pricing, which was at an all in cost, including the annual facility fee of LIBOR plus 145 basis points, is higher than our previous line but it's significantly lower than where these facilities were being priced just a few months ago. Pricing in the bank market has tightened in the past couple of quarters, and we're seeing it not only in lines of credit but also in construction and term loan markets. We're in the market for construction loans on 2 of our joint venture developments and are getting strong interest from multiple lenders. We are finalizing documentation on that $725 million refinancing of 601 Lexington Avenue. We've actually locked our interest rate now at 4.75% for a 10.5-year term with the syndicate of life insurance companies and expect to close later this month. Although there has been volatility in CMBS spreads recently, we still see the life insurance companies as competitive originators of term loans for good quality buildings as long as the leverage is moderate maxing out around 65% loan-to-value. Credit spreads in the market range from 150 to 200 basis points over the comparable term treasury rate. Our unsecured borrowing options remain appealing with bond spreads around 150 basis points resulting in a 4.25% coupon for 10-year money today. The convertible…

And your first call is from Chris Caton.

I wanted to follow up on the dire [ph] economic discussion in your -- if you're changing your leasing strategy at all. I think in the past you've said you need to market. I wonder to what extent that -- how's that shaping up here in the third quarter and also to the extent that, that may be shaping your disposition plan?

I'll start and, Mort, please, chime in if you think I'm being too aggressive here. I think what you heard us say, Chris, was that while we do feel that the macroeconomic conditions are not terribly robust, we continue to see a pretty strong growth trajectory in our core markets with regard to the locations and the tenants that are looking to be in the buildings where we operate. And so we're seeing on the margin an improvement in the conditions in those core markets. And that happens to be where the majority of our availability is. And so I would say, we're not in any sense changing our leasing perspective and focus because at the moment, we're not seeing any sense of change in our tenants' appetite for space other than, as I've said, potentially a slight slowdown in New York City. But again, that may very well just be summer.

And you think that kind of dichotomy of a weaker economy and better fundamentals, you think that's sustainable or is this -- are you just kind of evaluating on a realtime basis?

That -- if I could answer you with great conviction, maybe I would be figuring out where interest rates are going, too. Our perspective is that the overall economic conditions are going to be a challenge for a while, but the overall U.S. economy will, in fact, work its way out of this mess that we are in but it's going to be a lot of the same as opposed to some sudden change. And so as long as the types of companies that are prospering today continue to have the revenue streams and the innovation and the margin improvement, on a relative basis, that they're seeing, we're not pessimistic about the ability to see growth in places like suburban Boston and Reston, Virginia and California, both in the Peninsula as well as in the city, and in Cambridge, Massachusetts and in the Back Bay of Boston and the Plaza District of Midtown Manhattan.

And then last one for me. When you evaluate your international strategy without being specific to market, would your preference be to do a one-off acquisition or would you like to make a more consequential investment in one-time?

Mort, do you want to take that?

Yes. Frankly, I don't think we have a specific priority. And it really depends on the opportunities that we encounter and the credits on which those opportunities presented we would now have to take to do it on a multi-building basis. If we like the building, then we will, I think, most likely be doing it on a one-building-at-a-time strategy just because of the nature of the market that we are looking at.

Your next call is from Jeff Spector.

Given that the government is your -- you have the most exposure on a tenant basis to the government, can you just talk to us a little bit about that risk and how we should think about that?

Sure. And I'll -- Ray, feel free to do the additive here. The majority of our government leases are long-term leases or they're sort of mission-critical locations. And I think that in the short term, what we're ultimately going to see is if there were a lease that were expiring, and we have very few other than the contract, continued stuff that's going on up in Annapolis Junction, that those leases would just simply be extended on a short-term basis because there's no ability for the U.S. Government to go out and put a prospectus out there for a long-term commitment. But I think that particular types of buildings that the GSA is leasing from us and the fact, for example, the DIA commitment. They just made it a 20-year commitment. Really don't put us at risk for any changes in our existing portfolio with regards to the U.S. Government.

And just to amplify, Doug. We're seeing a lot of the GSA users coming to us well advance the lease expiration saying that, we don't have the capital to move, we don't have the capital for major renovations, but we like the buildings that you have for us. We like the services you're providing. Let's get together and to the extent we can do an early renewal and lock in a, what they perceive to be a very competitive rate well in advance than the lease expiration. So I would say that we're in very good shape also to our GSA exposure.

Okay. And then just I have one more question and Jamie Feldman's here with me, he has a couple. Just quickly on D.C., any thoughts of maybe selling the multifamily project there given where cap rates are and some of the trends we're seeing in DC?

I think that we are -- there is no immediate plans to sell the multi-tenant property in either D.C. or in Boston. We really like the product that we created. We really like the timing associated with our lease-up. We are -- we recognize that we are not as savvy an operator of these assets as a public real estate investment trust company or somebody who's got 12,000 units across the country, so we recognize there's some amount of big that we're losing there. But I think we like the growth prospects on the assets that we have from a rental revenue perspective, and we're going to have a wait-and-see decision. And if we are in a position where we are looking for capital and we're not sitting on big balances of cash, it may be an appropriate transactions to look at disposing of, but there's no immediate plan.

I would also just add that Doug that virtually every one of our highly successful mixed-use projects, be it urban or suburban, that involves a residential component. And rather than spinning those off to third party operators who may or may not perform to our standards, having that arrow in our quiver, that we can execute multi-families. It's going to be, I think, increasingly more important with the -- for these projects.

And then this is Jamie with just a quick question on Silicon Valley in San Francisco. I mean, given the relative strength of that market, how do you think you could expand your exposure there? I mean, you've got the land in San Jose, is there interest in development there or is that a little bit outside the core? And then you have the Mountain View. But, I mean, can you grow further from here?

Well, we -- I think we are actually surprised at the fact that there are, in fact, 3 or 4 developers who are at least talking the game that they are going to start speculative development because we don't think the market is quite there yet. But if the market continues to have this robust growth that it’s had over the past, call it, 9 to 12 months, I think there's certainly an opportunity for us to look hard at the Zanker Road property we have and the North First property we have to do something that would involve incremental development on those sites. I think the site that's most challenged for us, quite frankly, is the site that is in downtown San Jose because I think that market has not been as robust as the others. We continue to look at other assets in the Silicon Valley. It's a very volatile market so you got to get in and you got to be comfortable that you're getting in at the right time and you got the right property. And, Bob, did you have any other comment for that?

No, I mean we've got several million square feet that we can build on North First, Zanker in the downtown. And clearly, the market's not there yet and it probably will be another 6 to 9 months until we know whether that market's sustainable from a rent growth standpoint, and at that point, we'll reevaluate whether or not we should develop.

And then finally, can you talk about the plans for Biogen's building in the suburbs given their new development?

Sure. So Biogen signed this 15-year lease with us. Biogen has a 15-year lease with us. Biogen is in the process of determining how much of their current footprint is going to be in the suburbs and how much of it's going to be moved into Cambridge. And Biogen, once they've determined what the timing of that is and how much they're leaving, we expect we'll be looking to sublet that property on a long-term basis to other tenants.

You're next call is from Michael Bilerman.

Josh Attie is here with me as well. Mort or Douglas, I want to come back to sort of looking at these other markets. And while I know on one hand it's always a duty to sort of think strategically about where else you want to be. You had a pretty straight strategy in these core markets for a long period of time. And, I guess, why now in terms of the taking a more serious look or more time when, Mort, I think you'd said in your opening comments that these sorts of assets, these core assets is where the capital's chasing the most and probably where they're getting bid up the most. So what is it about the environment today that makes you want to be more aggressive, putting aside the fact that you have cash and you're well-capitalized, and can ask, why would you want to enter in at this moment in time?

Well, it's in part because we are capable of taking on additional market and we are looking to do it on terms that we would feel comfortable with, both in the immediate term and the longer term. And we have the capital to do it. At some point, we had full offices in all the markets that we are in. We think we are in a position because of the very, very, [indiscernible] absolutely, I don't -- can't think of a better way to do it. The very satisfying way that we came through the last couple years and the validity of the strategy that we followed, and we feel very good about it, we think we are capable of continuing to grow the company and not just in the markets that we are in. So we're not going to buy buildings that have 3% cap rates, don't get me wrong. But I think we're in a position to do things and particularly, if we can find another market that we like. And the markets, for example, in the other parts of the world do not have the kinds of cap rates that we have in this market. So it's an opportunity, we think, and we want to get involved if it's possible in another market that we think that has the main characteristics of the markets that we are in and can provide another platform from which to grow the company. We want to continue to grow the company and we -- it's not a smooth transaction world. They're almost all one-off and you just have to be out there looking for them and just trying to put them together, and that's what we're going to be doing. And we're going to try and do it at least in one other market and if we can come up with other sauces in there too. I don't think we have any sort of policy constraints that this thing is going to gain other than the fact that we want to be in certain kinds of markets and we want to be at the upper end of those markets. And that's what we're going to be looking for. They're not -- this is not going to be easy to come by. We think that there are a lot of people that now realize that it is the best place to be so we're just going to have to play the game and see if we get our opportunity or not. We will find out when we do play that game, sooner or later if we do come up with an opportunity.

And you've talked about London and you talked about Toronto in the past. How many other markets are there outside of the U.S. and how many are there within the U.S. that you're sort of -- on your target list to look at?

Well, we certainly -- we look to Toronto and we spent a fair amount of time there, and we had potential opportunity there but there is a special tax provision there that maybe makes it much more difficult for us to go into that market because the income there has a fairly high tax, at least by our standards, I think it's 31% if memory serves. And that makes it very difficult to be competitive in terms of our investment in a market like Toronto. London is another thing. Again, we're looking at it. We want to develop an office there if we can get the kinds of properties that we would like. There are a lot of foreign investors who are very interested in going into the London market so nothing we're going to do there is going to be cheap, but we are intending to, if we can, build an operating platform there and see if we can continue to grow in that market as we have in the other markets that we've been in, which is a big point still, even more just theory than practice. We invested one particular situation, which at this point is not going forward for reasons of what our due diligence can invest. But having said that, there -- we still like the market and we're going to look around for additional activity within that market. The other thing that we find, frankly, is that -- and it's, in the way, if we go [indiscernible] but not totally. Boston Properties has a very good name recognition and reputation in these markets, and that helps us in terms of the possibility of expanding our reach. But we're going to be very careful and very selective about the markets that we go into if we do go into the market, because we do believe that the fundamental strategy that we followed so far is the strategy with the intent to follow it as we go forward.

And then just a question, just going back to your comments on New York in terms of the transaction activity that predominantly you're using a lot of recap trades and I don't know if Bob Pester on the call as well. But in terms of how that's impacting the leasing market, you mentioned Nomura, right? It's the Worldwide Plaza that's off of everyone's radar. No one would lease there, and all of a sudden, as it gets recap and the leasing is happening. So has that changed the dynamic at all with a lot of these assets now getting new fresh equity and more stable cap structures impacting the leasing in the marketplace?

My answer, Michael, would be that it certainly was for some of the distressed assets. I think the term distressed is no longer one that's used in sort of the normal course of describing the New York City office building market. And while there may be some buildings that are in and around the downtown market or in markets that are south of 42nd Street and off of Eighth Avenue, places like that where there may be some recapitalizations going on that I think are in line with your suggestion which is a building that really was being starved from capital suddenly has an opportunity to be more aggressive about leasing space because it now has the ability to do transactions. I mean, clearly, that was the case with Worldwide Plaza prior to the sales that come through from Deutsche Bank, there was nothing going on there. The majority of these other recaps are high quality buildings. The one building that I would say, again, was in that sort of dialogue and is not is 280 Park Avenue, with the ESSO green in Granado [ph] having recapitalized ineffectively. They are certainly in a position where they can do transactions. I'm not sure the building was ever out of the market, because I think everyone appreciated that given the location, that building would in fact have some capital come to it at a point in time when there was a real lease to be garnered there. So I think most of the buildings have gotten to the point where they are stabilized and are no longer -- there's no longer a have and a have-not list when tenant reps are bringing their clients through buildings in Midtown Manhattan.

Your next call is from Rob Stevenson.

Doug, can you talk a little bit about the TIs and leasing commission trends in your various markets in terms of where you're seeing the biggest improvements over the last 6 months and what the recent trends have been and sort of which markets are still stubbornly high versus historical level?

I would tell you that I think they're all stubbornly high, because they're -- it's just where the market is. We are in our downtown markets, be it Boston, Washington, D.C., New York City or San Francisco, giving $65 plus or minus a square foot on second generation spaces. And in Washington, D.C., as shocking as it may sound, $90 to $100 a square foot is sort of the norm for a "new premier building." You're also getting a new premier rent, which is somewhere in the mid-50s on a triple net basis, so it goes sort of correspondingly hand in hand. The TIs haven't really pushed down significantly. The -- I think that the contribution that the tenants are putting into the spaces are starting to pick up again. So there was a point where tenants were saying, "Well, we really don't want to put any capital into the buildings and we really want you to do it." And because of the cost associated with redoing a floor for 10 years or more, there was not an insignificant amount of capital that would have to go in there. And at that point, some of the numbers were slightly higher, so you might have seen $70 or $75 a square foot in the San Francisco or Boston or New York City market. And it's come down slightly from that, but it's been pretty sticky. And then in the suburbs, in suburban Boston, suburban Washington, D.C., your still depending upon the transaction. If you're doing a 10-year lease, you could be at $50 a square foot. And it's the -- you got to have the perspective that as good as things have gotten relative to where they were, they're still, in almost every one of these markets, a double-digit mid-teens availability rate. So it is not a landlord's market from a demand perspective.

Okay. And then can you talk a little bit about the sale of Two Grand Central, how you're finding the interest level and whether or not the vacancy there is -- that you guys feel that you're going to get the pricing for a higher vacancy or a higher occupancy level?

I can't say. I don't think we ought to discuss that at this point since we're in the throes of that kind of conversation, and this would not be the appropriate forum in which we went through this on an leasee -- where we come out and talk about it at the next conversation. It's just not where we would want to have this kind of a conversation. It's not because we don't want to share it with you, but we're in dialogue with various people. We don't think we ought to have an open conversation about it.

Your next call is from Michael Knott.

Just curious, can you elaborate a little bit more about your view on Manhattan? I can't tell quite if you guys are bullish or kind of maybe a little bit -- a touch bearish on Manhattan from here maybe versus your perspective 3 months ago. And then just kind of how do you think this cycle looks in Manhattan over the next couple of years.

I would say we are very much bullish on Manhattan. I think we have recognized that be it the summer or be it the uncertainty in the world with regards to, in particular, how financial institutions are being reviewed and understood in terms of what their business models are going to be, there's sort of been -- sort of a slight pullback from those institutions. And while that is occurring, I don't think anyone is suggesting that the Manhattan market has gotten soft. It is just not as robust as it was 60 days ago. And as I said, the transaction activity in the month -- in the second quarter was fantastic. No leases were sort of put on hold because of what's going on in the world, but our sense is of that there is not this -- quite the sense of urgency that there was in January, February, March that there -- today in July of 2011 from tenants' perspective.

Okay. And then just to go back to the question about international expansion. I was a little surprised to hear sort of the reasons being -- because you have capital and to grow the company. What do you think about the expected return profile of that kind of deal maybe relative to what you can do in your current markets? Do you need a higher return in those markets versus markets you're already familiar with. Just curious your thoughts on that sort of angle.

Well, each market has its own sort of dynamic and cap rate. Frankly, I think we would have probably have a starting off yield in some of these other markets that would be higher than we would have if we were buying buildings just to stay at the current major markets that we are in just because of the nature of the way those markets play out. But they have different features, so we have to take it into account. What we are basically looking for are markets which -- in international cities with a big financial component, where we think we have comfort, in the long term, growth of those markets and appreciation of assets over time. I think we're in a position to -- and it's not easy to find these assets, but I think we are in a position, if we do find them, to make reasonably judicious acquisitions that will meet the kind of longer-term growth patterns that we expect from our investments. From our point of view, it's clearly another platform for growth, and we don't -- we're not going to very small cities or other cities that we don't think have the characteristics that we see in the markets we're in. So we just feel this is sort of another level of opportunity, and we're not being precipitous. We're going to move very carefully. And if we find a situation that we like, we'll move ahead and only under those circumstances. And we would, frankly, use the same standards in the markets we're in.

Your next call is from Alex Goldfarb. Alexander Goldfarb - Sandler O'Neill + Partners, L.P.: Mike, just want to get your thoughts. You had mentioned sort of CMBS and life at the beginning but just want to understand a little better. If the CMBS slowdown continues, do you think that the life companies will remain as aggressive as they are? Or do you think they made gap out a bit? And then also just curious, from the sovereign side, do you think that increased interest from sovereigns and lending on CBD assets could backfill any giveback where CMBS pulls back?

I mean, I think -- I'm still confident that the CMBS market will work its way out. I think that this is -- they have experienced, over the past kind of 6 to 8 weeks a little bit of growing pains in coming back from where they were during the crisis and people looking very closely and some concern over the quality of what is in some of these portfolios, some thinness in the investor base, where you have a 1 or 2 that may decide they're not going to play, and it kind of affects a deal. But I do believe that, that market will have a place in financing commercial real estate and office buildings. On the life insurance company side, they will compete with each other as well as with the foreign institutions that come in. And before we had significant amounts of CMBS, they competed with each other, and there were competitive spreads that were -- if you look at historic standards, their spreads were not ever tremendously outside of where they are today. If you look back 5, 6, 7 years and you think about somewhere around 200 basis points as a credit spread for a life insurance company on high-quality mortgage, pretty much in line with where the history and the expectations are and where we are currently. So I feel like there's plenty of capital that those companies need to put out. I think the challenge today is financing higher leveraged assets and financing assets that are in tertiary markets or lower quality assets. For our stuff, when we go and talk to the insurance companies or the foreign banks, we are right in their target market. So we have plenty of bids to come out and -- look, even for an asset the size of 601 Lexington Avenue, which is a big loan where you need multiple insurance companies, and you think about it. Well, there's probably only 7 or 8 insurance companies that can really play in that, but that was enough to create a competitive environment so that we -- we were able to get ourselves a pretty competitive and attractive transaction. And if we were doing that again today, I would think that we would have a similar dichotomy of separate life insurance companies and foreign banks that were willing to compete and bid for those loans. Alexander Goldfarb - Sandler O'Neill + Partners, L.P.: And then what about on the sovereign side? Like, are you seeing sovereign to maybe instead of investing in treasuries are looking to invest more in CBD office?

Alex, let me answer that question. There have been some sovereign funds that have gotten into this. So for example, GIC has gotten into a couple of these deals and bought the -- sort of the subordinated pieces of the money. CIC effectively is doing it, because they have investments in Bank of China and places like that. We have not seen any of the "Canadian sovereigns" or the Middle Eastern sovereign funds by themselves say, "We're interested in making loans." They're not -- at the moment, none of those companies are set up to originate loans. It may very well be that are giving money to some of their U.S. partners. So that an insurance company may have a pool of capital from a particular fund like that, that they are using to supplement their own particular lending strategy, but we have not seen direct investing from any of those folks. Alexander Goldfarb - Sandler O'Neill + Partners, L.P.: Okay. And just my second question is on the Princeton portfolio. Just sort of curious. Have you guys gotten any reverse inquiries now that it's -- people know that you were marketing, and it's now -- that deal fell through? But have others come back to you saying, "Hey, we'd like to buy?" And if so, just curious if the valuations are what you would consider attractive or if it's not really there yet. And I understand that you'd want to time any sale to be tax efficient.

The answer is we certainly -- we have certainly had conversations from people who were sniffing around the transaction and who were not chosen to go forward, who'd say' "Hey, if you ever sell the property again, we'd love to take a look at it." This is sort of where our bidding was, which we already knew where it was. At this point, we are not engaging in those conversations. We're engaging with tenants to try and reduce the amount of available space in the project. And again, if the moment is right and we think the right thing to do is to sell the asset, we'll -- we would execution at some point in the future.

Your next call is from Sri Nagarajan. Srikanth Nagarajan - FBR Capital Markets & Co.: Just a quick question. Given your commentary on what I would call is a frothiness in the market as well as the government uncertainty and lack of jobs, one quarter ago, we were talking about competing development in Midtown Manhattan today. What is your sense of the competitors' prospects and more new development in Midtown Manhattan?

I don't think anything has changed, Sri. The large tenants that were -- are looking at the West Side rail yards or the site across the Port Authority bus station or the Farley Building or the other " mega-sites." I'd soon have long-term perspective, and they want to be in New York City long term. And they're looking to consolidate or change the way they are using real estate, and they continue to be thoughtful about their alternatives are. We are competing with a group of tenants that are not looking at those types of buildings, because our delivery is going to be 2014-ish. And those other building deliveries are going to be 2016-ish or later for the most part, because they have to build platforms, in theory, before they get going. So we haven't really seen any meaningful change in the dynamic for those other potential competitive new developments in those locations in Midtown Manhattan or in -- or downtown.

Your next call is from Jay Habermann.

Maybe for Mike on the converts and the -- they become plausible in 2012. You mentioned possibly addressing them in the back of the year. Can you give us some sense of your bias at this point? I know rates are still relatively low, and taking advantage of 10-year money at this point might still be attractive but just your interest in terms of issuing new converts.

Well, I think that -- we have this discussion pretty constantly around here given the attractiveness of the capital markets. As we look at the level of treasury rates, certainly and the coupons available in the convert market versus the bond market, I mean, both are potentially attractive places for us. We do believe that the right thing for us to do is to refinance this debt. We do believe it's going to be put to us, so we're expecting that we will be refinancing this debt. We haven't made a decision on what type of debt to use. I would say that longer term is better. So one of the negatives about the convert market is that it's typically shorter term versus a bond market, where we've accessed debt in the 10- to 12-year marketplace. Although as we look at our maturity profile and you look at 2018, 2018 is a very attractive window for us to potentially layer in some debt whether that be a 7-year unsecured bond that would have a very, very low coupon, based upon what the 7-year treasury rate is today. Or you can do a 7-year convert if you wanted to. And we're going to compare those 2 and think about those things as we consider making this decision and the timing of this decision, which is also reliant upon our view of where the market is and where rates are going to go in the short term. So maybe we'll do something sooner rather than later. I mean, we could wait 3, 4, 5, 6 months as well depending on what our view of what the capital markets is over that intervening timeframe.

And there are components that go into a convertible discussion that are not easy to put your finger on an answer on, which is so what's your stock price going to be in 5 or 7 years? What's the growth rate of your stock price going to be? And do you feel -- are you getting paid fairly for that option? And what's going to happen with your dividend? And if your dividend is going to be going up because your earnings are going to be going up, how does that impact the overall coupon on the convert and what that cost of capital is? So we're dealing with sort of a pretty complex set of issues. Big picture, we're going to take out the convert. If we think interest rates are going to be at a terrific level for a long time, we're less in a rush to do that. If we think that there's a choice -- chance that rates may possibly spike up a little bit, we're probably more inclined to do something. But it matures in less than 6 months, so it's going to happen in the next 2 quarters.

That's helpful. And then maybe Doug or Mort, just on West L.A., can you give us some thoughts in terms of where this market is coming up in your rankings as you evaluate potential new opportunities and maybe even comparing the returns you see there?

We think it's a very good market. It's very hard to get a significant position there. There are some very serious players there, and we have looked at it off and on for quite a long period of time. We analyzed that markets in various angles, and we have yet to find a way to break into it on a scale that makes sense. But we'd be very interested if you happen to know somebody who wants to sell a number of buildings there. But it's a very active local market, and we're -- we've just -- we've never been able to find something that we would like to go to on a scale that would make it worthwhile for us.

Your next call is from David Harris. David Harris - Gleacher & Company, Inc.: We seem to be in the season of major job cuts from the banks. I mean, with regard to your comment on New York, are these not yet of a scale to have sort of an impact on the market? Or are we talking of a lag? I mean, obviously, this is something that's happened over a number of years, over a number of cycles, so we can all draw on our own experience in that regard.

So David, this is Doug. Here will be my perspective. If you believe that the cuts that are going on in the New York City investment banks are a -- going to result in those people leaving the market and finding employment in some other parts of the United States, that would lead one to think that this is sort of a structural change and then therefore, things are lagging. Our view to date has been that the type of person who wants to live and work in New York City is more mobile than an institution and that in many cases, the cuts that are occurring are really not an elimination of a job per se but a decision to change the business focus of the institution and so that those people may in fact be able to find meaningful employment at other institutions or other start-ups or other midsized firms in Midtown Manhattan or downtown Manhattan but in the metropolitan area. So it's not necessarily a 0-sum gain when those people leave and that they may in fact be going someplace else. And when you have a -- for example, Nomura, as I understand, it is moving from 550,000 square feet to 900,000 square feet of space. Presumably, they're going to be hiring people. I don't know what kind of people they're hiring, if they're research people, if they're hiring asset management people, if they're hiring structures finance people, if they're hiring investment banks, but they're going to be hiring people. Similarly with Jefferies -- and again, what we saw in 2008 to 2009 when we sort of felt the first shoe like this drop when there was a major financial panic, a lot of the smaller institutions grabbed market share, and they grabbed people share by grabbing very smart, sophisticated, well-educated people who want to live in New York City and just were able to find another alternative to where they could work. David Harris - Gleacher & Company, Inc.: Okay. Can I just go back on the overseas market expansion and just be clear if I can with -- on one point? Is -- are you focused primarily on English-speaking cities? And so we could clearly take Paris and then Tokyo off the list.

No, not necessarily, but I think we certainly feel slightly more comfortable in English than we do in almost any other language that's spoken on the continent. And both -- it's not just the language. It's the law and the customs, and we want to build operating platforms in these markets. So I think we're going to be fairly cautious in terms of where we would enter on a large scale at the beginning. David Harris - Gleacher & Company, Inc.: And I probably carry too much baggage with regard to London, but it's probably my views. After 15, 16 years of living here, I'd still classify it as the supreme, unchallenged global city and a city with a very sophisticated and mature property market. So my question is, is that in that context -- there's been tremendous international flows in and out of London over time -- is would it make more sense to perhaps foray into London with a partner, sovereign wealth fund, Middle Eastern money and such like, which has had a tremendous long history of involvement in a market like London? Or would you think you'd be primarily focused on looking for assets on balance sheet?

Well, we actually have taken that tack as well. I mean, we really have talked to other partners, because some of the transactions are very large in London. And I think we are a very good partner for some of these sovereign funds, and we would be -- and we already talked to them, and we would be very open to working with sovereign funds. We've done in the past, and we think it's a very good way to enter into these markets on the right scale. With regard to your point, it's absolutely valid.

Your next call is from Ross Nussbaum.

One quick question. Doug or Mort, how does your view of the interest rate environment over the next, let's call it 12 to 36 months, both on the short and long end of the curve, impact how you think about allocating capital to new investments and the required investment returns you need?

Well, of course, it has an effect. I mean, what we sort of look at is, first, the property and the overall sense of what we think the yield on the property is. And what we have tried to do, and I think we've done it well so far, is to just make sure that we are very, very well capitalized as a company under current market conditions, where we think the interest rates are very attractive for a company like us. And we sort of want to make sure that we can do without having to worry about where the capital markets will be, that we can do some major acquisitions based on what our current sort of financial strength and liquidity make possible. And so we've been very, very conservative in that sense and happily so. We even -- we felt there was a big bubble in the market, as you may remember, back 5 years ago. We sold a lot of real estate. And we've been in great financial shape, and we're still open to selling some of our buildings depending on what prices we get, obviously. But I think what we're -- sort of if we had to sort of describe the strategy, I don't think we're not going to be for financing. We just want to make sure we have the corporate capability of taking on almost any major acquisition that would come along our way if we wanted to make that purchase, that we wouldn't have to worry about the ability to get financing nor would the sellers have to worry that we would have to be able to make it subject to financing. And we think that is a major competitive advantage in trying to buy these buildings, and that's something we're -- we positioned ourself to take advantage of it, and we will continue to position ourself to take advantage of it. Well, if there are no further questions, perhaps it would be timely just to thank you all for taking the time to listen to our sort of quarterly performance and talked again about where we think the markets are and where we think our growth is going to be. And we look forward to continuing this certainly in response to our next quarter, and I thank you all for taking the time to join up with us.

And we do have a question from the line of Steve Benyik. Steven Benyik - Jefferies & Company, Inc.: I guess for Mike, you mentioned the $1 billion of cash following the closing of the 601 Lex loan. You mentioned the possibility of closing on a couple of construction loans. Just wondering can you give us a sense as to what the magnitude of those construction loans might be and what is assumed as a yearend cash balance in guidance.

Well, the construction loans are on our JV developments. So it's 500 North Capitol, and it is the Annapolis Junction 6 project. So both of the requirements for those loans is very small. On our behalf, it's something like less than $50 million for those. So our -- we will build up our cash position to $1 billion. There's probably maybe less than $100 million of spend on the other development properties through the end of the year, so I would expect somewhere around $900 million by the end of the year is a good estimate.

Assuming we don't do any acquisitions. Steven Benyik - Jefferies & Company, Inc.: Okay. And then I guess in terms of tapping the ATM, can you just talk a little bit about under what circumstances that might make the most sense. You talked about some other potential unsecured converge you could do, but will tapping the ATM be more for a larger acquisition where you'd want it to be leverage neutral?

I mean, I think that we've been pretty pleased with our ability to use the ATM, especially in conjunction with the acquisitions that we made. We made $1.5 billion of acquisitions, so we thought it was prudent for us to go and utilize the $400 million that we put in our initial program. Given our success with that, we thought it was a good idea to put a new program up. We think it's a great tool to have, and we think that it's probably a tool we'll keep in our set on a consistent basis. Our use of it is really going to be reliant upon what we -- what our expectations are for acquisitions. We're very comfortable with our liquidity and our capital structure based on a kind of steady-state basis. But if we really see the opportunity to put more capital out, that's going to be the driver behind potentially using that some more. So as we investigate those opportunities, we will consider utilizing that ATM in line with those types of investments. Steven Benyik - Jefferies & Company, Inc.: Okay. And then just lastly for Doug. I guess, when you look at some of the recent New York City transaction cap rates, it's at 5%, and you compare that to, again, some of the Wall Street related headwinds and to the extent that some of those firms may be the real drivers of rent growth, I guess how do you sort of look at sustainability of that lower cap rate environment and also whether you're seeing any more price sensitivity from these financial firms as it relates to they're looking at space at 250 West 55th?

So you asked a couple of different questions in there. I don't personally think that the investment banks or the universal banks have been driving rent growth in Midtown Manhattan over the past 2 to 3 years. It's really been driven by the smaller financial institutions that have been growing and by smaller firms and the hedge funds and the private equity firms and some of the non-financials that have been making moves in and around the city. The -- I think we've been pretty consistent in our view, which is we don't think there's going to be tremendous rent growth in Midtown Manhattan in the short-term, because there's just enough available space, and there's not a lot of lease expiration growth occurring. But that doesn't mean there won't be pockets of rent growth, in particular, submarkets, in particular, classes of inventory, in particular, the high-quality premier buildings in places like the Plaza District, because we have, in fact, seen pretty strong rent growth in those markets over the past couple of years. With regards to cap rate and rental rate growth, I -- we have obviously not been successful at purchasing assets in Midtown Manhattan since we purchased 510 Madison Avenue, and we have been looking. I don't believe that the purchasers of those buildings are underwriting 30% or 40% rent growth over the next 1 to 2 years. I assume what they're doing is they're underwriting 5% or 7% or 10% little spikes here and there and then getting to 40% or 50% rent growth over a 7- to 9-year period of time, which quite frankly, is probably not unrealistic. It's a question of how it's weighted. That's really the most dramatic impact in terms of what that is. And then they're looking at overall investments in the world and how they think real estate in Midtown Manhattan's going to -- is going to fare in a very volatile economic environment, and I don't think those types of the things are going to change in the short term. And so even if there is a dropoff in payrolls at Goldman Sachs and Bank of America and Merrill Lynch and Barclays and JPMorgan and the other banks, investment banks out in the city. If, in fact, the Basel rules and the other Dodd-Frank stuff sort of impacts the way they're going to be operating their businesses, I don't get a sense that, that in and itself is going to impact cap rates as much as what would happen if interest rates spike dramatically. And that said, we feel pretty comfortable that interest rates are going to be low for a period of time. Okay. Thank you, everyone. And we will -- have a great summer, we'll talk to you in the fall.

This concludes today's Boston Properties conference call. Thank you again for attending, and have a good day.