Arista Joyner - Investor Relations Manager Mortimer B. Zuckerman - Co-Founder and Executive Chairman Owen D. Thomas - Chief Executive Officer and Director Douglas T. Linde - Director and President Michael E. LaBelle - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer John Francis Powers - Senior Vice President and Regional Manager of New York Office Raymond A. Ritchey - Head of the Washington, D.C. Office, Executive Vice President and National Director of Acquisitions & Development Bryan J. Koop - Senior Vice President and Regional Manager of Boston Office

Michael Bilerman - Citigroup Inc, Research Division Jed Reagan - Green Street Advisors, Inc., Research Division Jeffrey Spector - BofA Merrill Lynch, Research Division James C. Feldman - BofA Merrill Lynch, Research Division John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division Bradley K. Burke - Goldman Sachs Group Inc., Research Division Vance H. Edelson - Morgan Stanley, Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Jordan Sadler - KeyBanc Capital Markets Inc., Research Division Emmanuel Korchman - Citigroup Inc, Research Division

Good morning, and welcome to the 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 the 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 Tuesday's press release and, from time to time, in the company's filings with the SEC. The company does not undertake a duty to update any forward-looking statements. Having said that, I'd like to welcome Mort Zuckerman, Executive Chairman; Owen Thomas, Chief Executive Officer; Doug Linde, President; and Mike LaBelle, Chief Financial Officer. During the question-and-answer portion of our call, Ray Ritchey, our Executive Vice President of Acquisitions and Development, and our regional management teams will be available to address any questions. I would now like to turn the call over to Mort for his formal remarks.

Good morning, everybody. We are, as everybody else is in this wonderful economy of ours, basically operating in a fairly weak economy and a fairly low rate of growth and, particularly, in a fairly weak increase in employment where a large part of the employment comes from part-time work rather than from full-time work. Having said that, though, the markets that we are in, as you've all known, and we've sort of underscored over and over again, frankly are, if I could put it in popular terms, the top 1% of the markets in New York, Boston, Washington and San Francisco. They're the best markets, we believe, of any major cities in the United States. And it shows up in the activities that we are enjoying and working with. In particular, in each one of these markets, we have a range of products and those products, frankly, are meeting with a pretty good response from the marketplace to the extent that there is demand, and in each of these markets, there is demand. It's not a overwhelming demand, but it's a solid demand. The strongest markets are, for example, in San Francisco where they have the location there of the online world. It's probably the headquarters or the leading city for the online world, and they're growing at rates that we have not seen ever in any particular market. But Washington, New York and, indeed, Boston are still -- and Cambridge are still additional markets. In Washington, we, of course, also have a very, very substantial activity in Reston, Virginia. So we have a diversification even within these markets. Nevertheless, the one advantage that we are, frankly, able to exploit, take advantage of, is the interest rate environment which, as you all know, is almost at record lows over an…

Thank you, Mort. Good morning, everyone. As usual, I'll touch briefly on the operating environment, and our overall performance for the second quarter and then provide an update on our capital strategy and execution. Mort covered some details on the environment. I would just reiterate that we believe the U.S. economy continues to experience somewhat sluggish growth characteristics and the economic indicators are mixed. As all of you know, GDP growth in the first quarter was revised down to negative 2.9%. Although the second quarter GDP numbers have came out this morning at 4%, which was certainly above consensus forecast, full year GDP growth is estimated to be 3%, and I think that will probably now be raised as well. And the payroll numbers in June, at least on their face, were more favorable, and published unemployment's dropping -- has dropped to about 6.1%. Importantly, the impact of this sluggish and uneven growth on our business has not changed substantially from what we reported to you over the last few quarters. Those markets, such as San Francisco, Cambridge and segments of New York City, which are driven by tenants and technology and other creative sectors, are experiencing very favorable growth characteristics in terms of rent increases and net absorption. However, likewise, those markets that are more reliant on traditional tenants, such as government, financials and law firms, are exhibiting lower levels of activity and growth. For us, those markets would be downtown Washington, D.C. and, to some extent Midtown Manhattan. Now moving to results for the second quarter for us. We performed well and made considerable progress in the execution of our business. FFO for the second quarter was $1.35 per share, which is $0.02 per share above consensus forecast. There are several recurring and nonrecurring items in the quarterly…

Thanks, Owen. Good morning, everybody. I'm going to start just with one brief comment on asset sales because I think it's important to reiterate. So last year, we sold about $1 billion of assets. And I would say, we had some pretty robust discussions about the near-term dilutive impact on our earnings and the accretive impact on our NAV of those decisions. And from the notes that I saw this morning, I think there's clearly attention in our earnings, in our short-term FFO numbers per share and the value that we are creating through the asset sale monetization perspective. As we move forward with these additional sales, I just want to reiterate why we're doing what we're doing. So we believe that targeted sales today provide a greater asset level of value creation opportunity in holding the asset, collecting the cash flow and then timing and executing on evaluation at a later date, which again is subject to both risk [indiscernible] of interest rate as well as future sales valuation. It's an opportune time to create asset level value. That's what we're doing, even though it's going to come with some short-term earnings dilution. And we obviously have a timing issue because most of our new investment opportunities, as Owen just described, involve development not immediate property acquisitions. So we will find ourselves, in all likelihood, with an inability to quickly redeploy that cash and, therefore, we create another special dividend opportunity. But that's really the rationale that we're using for what we're doing on a global basis. So let me talk a little bit about the markets now. It was an extraordinary 3 months in San Francisco. Year-to-date, there have been over 6.5 million square feet of leasing compared to about 9 million for all of 2013, which was…

Thanks, Doug. Good morning. I'm going to start with a quick recap of our performance for the second quarter. Our portfolio had a strong quarter. Same-store NOI was up 3.5% on a GAAP basis and 8.1% on a cash basis from last year. We have been projecting growth in our same-store, and it's primarily related to occupancy increases in suburban Boston and Princeton and at 510 and 540 Madison Avenue in New York City, as well as strong rent rollups on expiring leases in Cambridge and in San Francisco. We also have free rent burning off from prior period leasing that is driving some of the cash rent growth, particularly at the Hancock Tower, at 510 Madison Avenue, 399 Park Avenue and Patriots Park. For the quarter, we reported funds from operation of $1.35 per share, that was $0.02 per share above the midpoint of our guidance range. Our rental revenues were in line with our expectations, and we experienced about $4 million of lower than projected operating expenses. The majority of the expense savings were in repair and maintenance items, and we expect to incur most of them in the second half of 2014. So the savings will not entirely flow into the full year. We generated $1.5 million of better than projected development and management services income with stronger service income in our New York City building portfolio, and we brought online development fees associated with our 2 new joint ventures where we started construction at Annapolis Junction 8, and we have commenced permitting and design work at 501 K Street. We also had a little bit lower than expected G&A expenses due to higher capitalized wages associated with this quarter's leasing productivity and higher development activities. The combination of these items resulted in about $6 million or…

[Operator Instructions] And your first call comes from Michael Bilerman.

Owen, I think in your opening comments, you talked a little bit about pursuing some additional development sites and some acquisitions. You talked about $100 million in D.C. I was wondering if you can elaborate a little bit on the development opportunities and sort of where -- what markets they're in. Are they more mixed-use space than just pure office development, and sort of give us a little bit of sense of size?

Michael, the answer to your question is varied. We're looking for new development and acquisition opportunities in all of our markets. We're not focused on any one particular market. I would say, the -- in San Francisco, we pursued multiple sites. I would say the acquisition activity that we have in San Francisco has been much more focused on development as opposed to existing product. In Washington, I mentioned, the smaller acquisition that we're working on. In terms of developments, we've talked about 501 K Street, which -- where we have a joint venture on a site and we're seeking an anchor tenant to construct that building. We also have developments that we are considering related to the Reston Town Center. In New York, we are looking at acquisitions and development opportunities. And in Boston, I'd say, we are probably a little more focused on executing the robust pipeline that we're working on as opposed to identifying any new projects that we haven't announced. It's a little bit all over the place.

I mean, Michael, just to sort of reiterate what we said in past calls, so in Boston, we have the North Station development, which is in excess of 1.8 million square feet, of which we're -- we presumably will be a 50% partner with Delaware North, and that's a 2015 start, which is not in our numbers anywhere. There's been some reports about the conversations we're having regarding the -- what's referred to the 100 Clarence Street garage, which is a site that, in all likelihood, could support some additional development, and we're working diligently with Mass Department of Transportation on figuring out a way to untap a couple of those sites, and those are in excess of 600,000 or 700,000 square feet apiece. We've got another building at 10 and 20 CityPoint, which we could build and then there's another close to 350,000 square feet of permitting that we're going to be getting accomplished in August for another building associated with the site that we're selling. And then, as I said, we have the Cambridge development. So that's a pretty big pipeline in Boston. In Washington, D.C., as Owen said, 501 K Street is a development that we are drawing right now, and Ray and his team are making active leasing proposals, and we're optimistic that someone is going to step up and take a very significant portion of that and allow us to get started some time in '15 or 16. In Reston, we have the 2 major developments in the urban core, which is 275,000 square-foot of building, which I described, as well as the signature site, which is another 500-plus thousand square feet of residential, which given our success at The Avant, we're very encouraged by. And then we have the Gateway site, which is another…

Right. And it sounds like certainly over the next 18 months, that clearly well over $1 billion could be added to the pipeline.

Those are your words, but I'm not going to disagree with you.

Your next question comes from Jed Reagan from Green Street Advisors.

On the Trulia lease commitment of 535 and then maybe just in general, if you can expand on the types of tenants that are expressing interest in Transbay and 535 these days, and maybe what kind of timing you might expect for reaching 90% leased at those 2 projects.

So, Jed, could you please repeat your question again because you got cut off at the beginning of it so I didn't hear the earliest part of it.

The first part of it was just whether the Zillow/Trulia merger might have any impact on Trulia lease commitment there at 535?

Sure. Trulia was the first lease we signed. And during their process of being acquired or merging, depending upon your perspective, with Zillow, they approved and signed a lease extension. And they're building up this space, as we speak -- expansion, excuse me. So our strong inclination is that, as Dave said, they're going to be running 2 brands. And Zillow has a relatively small office in San Francisco and that they will fully be occupying the space that they've taken at 535. With regards to the other demand at 535 Mission and the Transbay Tower, which by the way we don't call it anymore, it's called the Salesforce Tower, which is the way we should be referring to it. We are seeing what I would refer to as a number of the traditional legal financial services oriented lease expiration driven requirements -- the major banks and law firms. And then we are making presentations and having conversations with a lot of the -- what I refer to as the technology or the new economy companies that Mort was describing, that are growing exponentially in San Francisco. As I described, they're very chunky and they're very large, and everyone is looking forward from a planning perspective because they all see the day when there's not much in the of way of blocks of space available, and Transbay Tower happens to be the one place where, right now, there is a block of space that is available for occupancy. With regards to the -- when we get to 95%, if all the leases that we are in discussions with at 535 actually were to happen, we would be basically 95% before the end of the year. I can't tell you whether or not all those leases are going to occur, but we have active proposals out that encompass more than 100% of the available square footage, which is 207,000 square feet.

Although we may be able to sign those leases, they wouldn't commence the rent until mid to later '15 at best.

And Salesforce Tower, you feel like you might be able to reel in another bigger tenant this year?

We are optimistic about the market. We are -- we feel that Salesforce Tower is an incredibly exciting project. And we are in no sort of rush to lease the next space, but if a tenant comes along that is looking for a block of space and is prepared to have an economic discussion with us, we are prepared to do another lease.

Okay, great. And just to follow up, some of your competitors have talked about the flattening of the Manhattan office market and sort of a general shift to the south and west on the island. And just curious if you can talk about the extent to which year you're feeling that in your portfolio. And then does it sort of change how you're thinking about your longer-term footprint in Manhattan?

John Powers, do you want to take that one?

Well, there is certainly a lot of activity in Midtown South. That's the hottest market in Manhattan and that relates very much to Owen's opening comment about the increase in tech in the more steady-state and some decline in the law firm with steady-state and are unchanging in the financial service industry. The high-end law firms, or high-end financial firms are still very strong in Midtown. And we see a very good market here in Midtown. We don't see the positive growth or the spillover to downtown is getting because it's price advantaged.

And your next question comes from Jeff Spector of Bank of America.

I'm here with Jamie Feldman, too. Our first question, I guess, is on the development pipeline. And can you just talk to us a little bit about the size you're comfortable with versus the risks of development?

Sure. We've had this conversation, I think from time to time during our history, and I'll start with the following, which is we are opportunity constrained not capital constrained. We are a $30 billion enterprise right now. And at any one time, having a series of projects that are in different stages of development from conception to leasing to coming and going into service of a $1 billion or $2 billion is not something that we are at all uncomfortable with. We've described the issues associated with development in the past, regarding the issues with permitting, the issues with construction and the issues with leasing, and we feel like we are really good at managing all of those issues. And that on the leasing side, the issues associated with new development and the issues associated with lease expiration driven vacancy are not too dissimilar. And often times, the advantage is associated with new construction and the changes in the way people are using space and the attractive nature of being able to move into a new environment relative to -- in the example that we're dealing with right now, having to rebuild over a 12- to 18-month period of time and having to swing through it actually create an incentive and an advantage to development. So it puts us in a position where we feel even more comfortable taking the leasing risk on certain developments, particularly when we have a major commitment for a portion of it, a.k.a. 888 Boylston Street than we necessarily have with the risks associated with our "availability in our portfolio."

The other thing to recall, Jeff, is that these developments cycle through. So for example, we have a $3.5 billion pipeline today, but $1.7 billion of it is delivering in the next 6 months or is delivered effectively. And by the way, those are primarily leased, 77% leased to 250. You're basically 100% leased to 680, which is the 2 biggest ones that are delivering. So again, when you think about percentage of overall company size, we don't anticipate it increasing to a level that will be significantly more than what it is now as a percentage of company at any one time.

Okay, that's helpful. And then, just wanted to focus, I guess, on law firms. I mean, one of the -- obviously, one of the tenants that has been downsizing. We appreciate your comments on next year. With M&A picking up this year, I guess, we were hoping to maybe hear that some of the discussions have changed a bit more recently. Is that -- I guess, that's not the case. The law firms you're speaking with, they're still talking about downsizing space in the coming years. Nothing has really changed there.

Well, Jeff, there are 2 things that are going on, okay. So the first is that any law firm, and I don't care whether they're in the M&A business or the patent and trade business or the litigation business, that has an installation that was built 15 or 20 years ago, by definition, is looking at the way they're utilizing that space very differently. And we talked about this before, law libraries and the way conference rooms are used and the more uniform nature associated with the way offices are built out and the lack of secretarial or administrative report stations[ph] -- that in itself is creating a reduction in the total overhead of occupied space necessary for a law firm. Then, there are, in fact, mergers and acquisitions going on within law firms. I mean, so some of those firms are growing. And then, there are business unit differentiations. So, as an example, firms that have -- maybe had a significant bankruptcy practice, probably are in more of a downsizing mode than those firms that are in the patent and trade and for a biotechnology complex, right? So as I said, we actually have, in New York City, of the 6 firms that we're talking to, 2 of them were actually looking to maintain the same amount of space and that's after rebuilding it. So that would imply some growth for a few of them. And then, we have others depending upon their business practices and how much space they have that are going in other direction. So I think that, any law firm that has an installation that's probably pre-2007 is -- can find efficiency. And we're still -- I refer to the sort of the sixth or seventh inning of the continuum in the law firm world of tenants moving through their footprints and getting to sort of what I would refer to as the right size environment.

Okay. I appreciate those thoughts. And Jamie just has one quick question.

Yes, just a quick follow-up, if you guys don't mind. Michael, are able to quantify the FFO impact of the transitional leases in 2015?

We're not going to give guidance for '15 today. I think the challenge that we have is that I described that 500,000 or 700,000 square feet of space, which is over 100 basis points of our space that is going to be going through transition. So with that kind of occupancy loss, we do continue to have roll-ups, particularly in San Francisco, where we hope we will see positive absorption. In New York City, there is opportunity to grow occupancy. Then we'll have roll-ups in Boston. So if those may offset each other, we'll see, but it's some headwind to having real kind of same-store growth in 2015.

Your next question is from John Guinee. John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Three quick questions. First, on your law firm deals, I guess, Doug, can you give us just a basic number in terms of price dollars per square foot for releasing costs, TI, leasing commission, base building upgrades, how that tends to be split between BXP and the tenant? And is there any security obtained in this day and age for those kind of capital commitments? And then maybe this is also yours, Doug, but if I look back at your land inventory, about 9 million square feet of developable square feet and then another 2 million of options, do you have sort of near-term plans to either develop or monetize those? And then the third question would be for our friend, Ray Ritchey, if he can talk about what's happening in the DC market excluding the CBD and excluding Reston Town Center with the opening of the Silver Line.

Okay. So let me see if I can do this succinctly. With regard to leasing costs associated with major law firms in cities like Washington and New York, where it's most germane for our purposes, a new transaction, okay so it's kind of moving into a new installation. It's probably getting in Washington, D.C., a tenant improvement allowances of up between $100 and $110 a square foot, and in New York City, it's somewhere between $65 and $80 a square foot. In New York, we believe that the cost of a new installation is somewhere in excess of $200 a square foot when you factor in furniture cabling and everything else, and in D.C., it's probably somewhere in the neighborhood of $175 a square foot. So that is the sort of costs. These deals are all different in terms of what's actually going on, and traditionally, in New York City, there's free rent associated with the move for the build-out time, so to the extent that a tenant is in place and they're not getting free rent, there's a transition of those economics to either rent or into additional TIs, and similarly in Washington, D.C. And then depending upon the age of the building, there may or may not be base building improvements that are required. So as an example, a building like 599, we are undertaking a lobby renovation because we think it's the right thing to do for the building, independent of the lease expiration. And the building work that's being done on elevators, for example, is sort of outside of a change to the tenant improvement, so that's not part of those costs. And that's obviously amortized over the entire value of the building over a much longer period of time. And then there are cases -- in cases where a building -- in one of the buildings we're looking in Washington, D.C., we may do a major gut rehab and change the entire HVAC system because we think that the building has gone past its useful life and we think it's the right thing to do both for the tenant and for the building, and those costs would all be on our side of the equation. So that's sort of -- that's the first question.

I would also add, Doug, of the commissions that are forthcoming on these transactions, well, the biggest change is we're seeing the law firms participate greatly in the commission. So the commission could be $25 to $35 a square foot, but the law firms are going to harvest back between $15 and $20 of that, so that helps offset some of the costs associated with the build-out through the law firms' participation of the commissions.

So with regards to our land inventory, John, I think we are working through 2 things. One is, there are certain sites that we are aggressively developing, a.k.a. things like 888 Boylston Street. And then there are others sites that we are aggressively trying to sell. So as an example, we have a land inventory in Rockville, Maryland associated with our Tower Oaks project, and we are looking to actually have an agreement with a non-office building owner to convert that land and permit that land into a different use, stick-built or multifamily or single-purpose, single-family homes, and we would be selling some of that land in manners like that. Again, we're selling a parcel out at the Broad Run project. We're selling a parcel of land that we have in Waltham because we're getting a terrific price and it's improving the environment around it. So over time, I'd say, we are working through that, and then a lot of that land, we hope to develop ourselves.

And your third question, John, regarding the DC market, were you're asking specifically about the Silver Line or just the market in general? John W. Guinee - Stifel, Nicolaus & Company, Incorporated, Research Division: Essentially, if you look at the core urban markets, Crystal City, Rosslyn-Ballston corridor, Tysons, with the Silver Line, Southwest, they seem to be surprisingly anemic, unless you can tell me otherwise.

No, I would fully support that position. The vacancy in Crystal City and in Rosslyn is approaching 30%. And the recently announced CEB deal was a little bit of a head fake in that while they're going to take down half of the new JBG building, or about 350,000 square feet, the space they're leaving behind equal to the amount of space they're taking. And thus, JBG is going to add 300,000 square feet to the market. So this will push the availability vacancy rate in excess of 30% in Rosslyn. And then in Crystal City, Pentagon City, you have the TSA out with a major procurement that may continue to show some continued erosion in that market itself. So while the Silver Line, I think, is going to be great long-term, and specifically for us in Reston Town Center, is going to create that development opportunity that Doug mentioned earlier, that $2.5 million to $3 million feet, certainly, in the short term, the Silver Line has done very little to impact or improve the market conditions in the RB corridor or in Tysons Corner.

Your next question comes from Brad Burke of Goldman Sachs.

I was hoping that you could touch more on what you're thinking on a potential for new JVs. First, are those included in the $1 billion of asset sales that you're think about for this year, or is that in addition to the $1 billion? And then, you said that they're likely to take the form of what you already did in Times Square. So should we be thinking about these mostly focused on New York office?

Yes. It's Owen. So to answer your question, what we said about dispositions for this year is that we felt that they would be in excess of $1 billion, and we'll continue with that guidance. I referenced the Times Square joint venture that we did last year as an example of something that we might consider for this year. And to go back to the merits of that, we were able to -- we feel monetized a portion of an asset at a terrific pricing. We retained the leasing and the management of the building, and we also retained the upside that was in the interest of that we owned. And then lastly, no, I wouldn't say that we would consider joint ventures only in New York. We might consider our own assets outside of New York as well.

Okay. That's helpful. And then just on the decision pool, The Avenue off the market. I realized that you can have issues with any given buyer, but what's the thought process on completely pulling it off the market versus just trying to line up a different buyer?

Well, I think -- this is the Ray. We're considering the overall position of The Avenue book, the office building and the apartment building. And while -- let's put it this way. Our discussion with the current buyer has ceased. And we're evaluating where we go forward either with the buyer that has been considering the properties for the last 2 or 3 months, whether we take it back to the market or we continue to own it for the long haul. I mean, listen, it is a phenomenal asset that continues to perform in the best location in Washington D.C., and this was not a -- this was clearly trying to take advantage of industry environment and the interest from a capital markets for trophy-level properties like The Avenue. And certainly, nothing has happened that has distinguished that or altered our approach towards in our viewpoint of that asset.

The next question comes from Vance Edelson of Morgan Stanley.

Following up on an earlier question. Outside of West 55th there's no other New York development currently underway. And you mentioned you're looking at other opportunities, but given that New York is one of your largest markets, the fact that it's clearly at present not one of your larger development markets, is that just a matter of timing? Could it one day be one of your top development markets? Or do you think you just have better long-term opportunities in other cities? And related to that, is expanding into another district in New York City -- I think you touched on that a little bit earlier, but is that a realistic near-term possibility?

As a public company, we've developed $3 million square-foot towers in Midtown Manhattan, and we think we've been highly successful at creating value to that process. We have a new Regional Manager in the form of John Powers, who has I think both a desire and an expectation to dramatically ramp up our activities in New York City, commensurate with the opportunities that he can find. And there is a significant desire to extend and expand our New York City outreach in terms of development as well as other types of transactions. And we've discussed in the past that we would consider doing residential, not unlike what we're doing in Washington and we're doing in Boston, at this point on a new development perspective as well. And again, as we said earlier in the call, we're opportunity-starved, not capital-starved. And so, we're focused on trying to grow that.

Okay. Good to hear. And then, shifting gears, could you discuss retail strength in Boston and the inclusion of retail in your projects like 888 Boylston, how integral is retail to the overall appeal of the project? And then longer term, do you see the non-office mix for BXP -- you just mentioned residential, but do you see the non-office mix with resi and retail moving any higher than it is currently?

So, I'll break this into suburban and urban, okay? So from an urban perspective, having the right cachet associated with any of the buildings that we have in the form of what I would refer to as amenity-driven retail is pretty important. But when you're in the city, you also happen to be in a network where there are a lot of alternatives, right? So there are restaurants and dry cleaners and drug stores and hard goods and soft goods sellers of other things that are around that. The Prudential Center in itself is very different because it is effectively a regional mall in an urban location. And it's one of the highest producing productivity malls that we're aware of. I mean, it's over $1,000 a square foot, and it sells per square foot. An it's got both soft goods as well as restaurant and ancillary products and hard goods like -- Microsoft has a store here. Well, as we think about new developments across all of our markets, we are exceedingly aware that the old idea of having a suburban office park with a cafeteria in it is not the ideal mix for a tenant and a group of tenants that want to go into a location like that. So where we can, we're amenitizing and providing as much in the way of additional services to our customers, our tenants as we possibly can. And in the case of, for example, what we're doing in CityPoint, creating restaurants that have a full-service menu, where you can both get breakfast, lunch and dinner and have a cocktail after 6:00 at night or whatever time you want to have your cocktail, is a pretty big draw for those tenants that are looking for an environment where they're trying to recruit and retain the best employees. And relative to going to a suburban office building that it really doesn't have that availability, it is a strong advantage and something we are acutely trying to bring to as many of our properties as we possibly can. And if you think about the cluster that we have, we talked about trying to create these clusters of great place, great space. And so it's a pretty strong focus of what we are trying to do, but we are not trying to become a major retail owner of space in an absentee perspective aside from how we're dealing with our office buildings.

Some additional discussion on the retail. This is Bryan Koop. At The Prudential Center, as Doug mentioned, we're performing already at over $1,000 a square foot. We're very fortunate that we have a considerable role coming up. We have an opportunity to take -- we're performing at $1,000 a square foot. And that's what many performers and they're at $400, $500 a square foot. There's going to be opportunity to bring new, exciting retailers to produce at higher levels. And then when we look at 888, it's a really great, perfect combination of being able to support that building, but also enhance, call it, with greater destinations on Boylston Street for the rest of The Prudential Center. So we're really optimistic about the next few years of retail at The Prudential Center.

Your next question comes from Ross Nussbaum of UBS.

I'm just curious. A number of your peers have been quite active on the Manhattan street retail scene. And I don't want to say you guys have been noticeably or notably absent because you do obviously have some street retail in a couple of buildings, but you haven't done any one-off deals. Could you just give us your perspective on that niche of the market and how you're thinking about it going forward?

This is a not terribly well-informed answer, but I'll give you my perspective, and others may have a different one, which is we have not focused on buying individual condominium interest in high-value potential long-term lease rollover Manhattan, Fifth Avenue, Madison Avenue, Broadway, and Times Square retail as a strategy, because we're focusing on trying to put dollars to work in the office residential business in bigger volumes than that. It doesn't mean that we don't think there's an opportunity to create value there. I mean, as you said, we have, in excess of $60 million of revenue, and most of it is NOI. It's just that the 767 Fifth Avenue, that's the General Motors Building, and we have a 100,000 square feet of space there, so we have a pretty significant, relatively speaking, volume of that. And we are working really hard right now figuring out ways to significantly enhance the assets that we have on the 53rd and Lexington and Park corridor, a.k.a. 601, the Citibank -- the former Citibank building, as well as 399, to really create value and significantly increase the revenue potential of the street-level retail in those buildings. So it's not that we're not thinking about it. It's just we've not been focused on going out and buying a sort of one-off and creating a business like that.

Okay. And the second question I had was on Reston Town Center, and specifically given the pricing that you achieved on Patriots Park, and what I consider Reston Town Center to be, which is kind of an oasis in the middle of a suburban D.C. office desert, is that an asset you've ever considered selling or JV-ing and focusing your efforts in D.C. sort of in a more high-rise urban footprint?

I'll answer that one. This is Ray Ritchey. And by the way, I'm in the Boston office today. I mean, it's just magic. It's just wonderful to be up here with these people. I can say that from our perspective in Washington that the Reston asset is a core asset not only today, but the future of that specific region is very much sized to the continuous success of Reston Town Center. And that while we are an oasis in a desert, we are a very large oasis and dominate the market. And we see even in times of softness in the surrounding markets, our ability to continue to outperform, and this is before the metro comes. And any future supply that will have a similar type of amenity base, and thus attracts them to the tenant, we control. So this is the market that we dominate today and we'll dominate in the future. And others in this table may have a different opinion, but they'll get a stronger argument against the Washington contingent, if that's in fact the case.

I'd just put it in a slightly less personal context, which is that we believe that there continues to be an opportunity for strong growth in the Reston market. And that's both for the appreciation of the cash flows in the existing assets, we reinvest in those assets and make them better -- a.k.a. from what we're looking at doing, for example, with the retail in Fountain Square. And then we have -- as I suggested, we've got 750,000 square feet of immediate development, and we have another 2 million to 3 million square feet of longer-term development until we look at what we can create and what we can grow, invest in. And I guess, to the extent that at some point, we felt there was no growth left in it, we feel differently. But right now, our crystal ball tells us that this cluster in this particular location has a really strong long-term growth prospect, and that it's the kind of place we should be investing on money and see strong increases in our cash flow over a long time period.

Also, the past part disposition was a long-term 20-year lease. So real upsize for a long period of time at a very attractive capital environment. So that was more -- but the sale was more opportunistic and not indicative of the company's commitment to Reston.

And your next question comes from Alexander Goldfarb of Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Two questions here. First, maybe it's for John. But as you guys look at New York, just given the way land pricing has gone, are you still able to sort of find deals where you can outright own the land? Or are you increasingly looking at ground lease situations? And, by extension, are you also having to look at situations where it's either a combination with residential or hotel to make the numbers work? Just sort of curious just with the bid from condos, curious if straight-up office deals, fee simple ownership, still if you can make them [ph] and sell.

John, do you want -- he addressed the question to you, so

It's a very difficult market. There's a lot of money-shaking deals here, and it's very difficult. So my approach is not to focus on the books that I get but to try to be innovative and proactive in the market and look for other type of opportunities. And I think we're making some inroads, but nothing that we can announce here. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. But do you think that we'll see either ground lease situations or mixed-use situation, as you announced, future New York or borough deals?

I would say, we're open to all of that. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then for Ray, if you can just give some color on the D.C. acquisition. Maybe I missed it in the MD&A. But is this a redevelopment play? Is this a major lease expiration, where the reason you're buying it is because you're comfortable you've got a tenant to back that. So just sort of curious, some color on the D.C. acquisition.

This is Doug. We don't feel comfortable talking about what the D.C. acquisition is at this point because it's an off-market letter of intent that we're approaching, and obviously it's a transaction that Ray has found that we think there's great long-term value creation opportunities on, but it's not appropriate to talk any more about it at this point.

And your next question comes from Jordan Sadler of KeyBanc Capital.

I just wanted to take the other side of Ross' question, if I could. I'm just curious about in terms of D.C., you've got this oasis in Reston that seems to have this natural barriers to entry. Whereas, in the district, there don't seem to be huge barriers to entry like we see in some of the other cities that you're focused and even in Reston with construction continuing in some big potential sites. What are the thoughts surrounding sort of paring that portion of the D.C. exposure and maybe concentrating more in Reston?

So let me just give you some historical context about what we've done in D.C. because I think it's important in answering the question. So the vast majority of our holdings in D.C. were done through development, ground-up development, where we have found either sites or landowners who had sites, and we've done joint ventures with those parties in order to be in the value creation business on a long-term basis. There have been 1 or 2 acquisitions that have been done in what I would refer to as transitional times when the capital markets were struggling and we had the availability of funds to buy buildings at very, very attractive valuations, where we felt we could reposition those assets, or honestly, wait until the leases rolled and just mark-to-market over a period of time. And that continues to be where we are focused in Washington, D.C. Interestingly, we have actually done a significant amount of pruning in D.C. over the time that we've been a public company as well. We sold 1301 New York Avenue last year. We've sold -- we're in joint venture with a significant number of our properties, so we sold the joint venture interest in Metropolitan Square when we did our 901 New York Avenue deal. We sold one of our major assets in the Southwest of the city 10 or 11 years ago.

The Marketing Center.

The Marketing Center [ph], which is in the suburb. So we continue to be thoughtful about the long-term opportunities to create value in D.C., as well as what the appropriate exit point is for particular assets.

I mean, we're underway right now, Jordan, as you know, with 601 Mass. That's a site that we controlled 5 years ago with a lease back from NPR, built their new headquarters. The project is 85% lease-free activity, doesn't deliver for another 15 months. the cash on cash return, that's going to be mid 8 unlevered when it's delivered. So while Washington continues to be challenged, at risk of sounding self-serving here, we have continued to outperform the market not only in Reston, but also downtown. And we're planning a really good defense on the 3 major renewals we have. We're very, very optimistic about our own chances of success of keeping all 3. So while Washington has had a little bit of dip in the last 2 or 3 years, and relative to barriers to entry, that pesky height limit keeps those buildings at 11 or 12 stories. So for us to deliver a $1 million square foot tower that you see in the other 3 markets, it takes $4 billion or $5 billion to meet that level of supply. So we're still bullish on D.C. and specifically very bullish on Boston Properties' position in that market.

And your last question comes from Michael Bilerman of Citi.

It's actually Manny here with Michael. Just thinking about -- you mentioned 2015 cash NOI growth. I was wondering what the spread between the cash and the GAAP may be given the burn-off of free rents and other things.

There still is a GAAP, so we still do have free rent burning off in some of the same-store from some of the leasing that we've done. I don't want to describe right now what the amount of that GAAP is, but there still is some more in there. I do -- I would expect the same-store portfolio, the noncash rent to be lower in '15 than it was in '14, although we will have noncash rents in our development portfolio that actually will probably be higher than in '14. But if you just look at the same-store, it would be lower.

And at this time, I would like to turn the call back to management for any additional remarks.

Okay. It's Owen Thomas. Let me just summarize by saying hopefully we've been able to demonstrate to you how busy we are at the current time given all the projects and activities going on. We feel we had a strong second quarter operationally. And we made significant progress executing the long-term strategy that we've been articulating to you. Thank you for your time and attention.

Thank you, guys.

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