BOSTON PROPERTIES INC, S-11/A, 1997-05-20

BOSTON PROPERTIES INC
S-11/A, 1997-05-20
REAL ESTATE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1997

REGISTRATION STATEMENT NO. 333-25279

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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AMENDMENT NO. 2 TO

FORM S-11

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

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BOSTON PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)

8 ARLINGTON STREET
BOSTON, MASSACHUSETTS 02116
(617) 859-2600
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

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MORTIMER B. ZUCKERMAN, CHAIRMAN
EDWARD H. LINDE, PRESIDENT AND CHIEF EXECUTIVE OFFICER
BOSTON PROPERTIES, INC.
8 ARLINGTON STREET
BOSTON, MASSACHUSETTS 02116
(617) 859-2600
(NAME AND ADDRESS OF AGENT FOR SERVICE)

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COPIES TO:

GILBERT G. MENNA, P.C. WALLACE L. SCHWARTZ, ESQ.
GOODWIN, PROCTER & HOAR LLP SKADDEN, ARPS, SLATE,
EXCHANGE PLACE MEAGHER & FLOM LLP
BOSTON, MASSACHUSETTS 02109 919 THIRD AVENUE
(617) 570-1000 NEW YORK, NEW YORK 10022
(212) 735-3000

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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective.

---------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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EXPLANATORY NOTE

This Registration Statement contains a Prospectus relating to a public
offering in the United States and Canada (the "U.S. Offering") of an aggregate
of 25,120,000 shares of common stock (the "Common Stock") of Boston
Properties, Inc., a Delaware corporation, together with separate Prospectus
pages relating to a concurrent offering outside the United States and Canada
of an aggregate of 6,280,000 shares of Common Stock (the "International
Offering"). The complete Prospectus for the U.S. Offering follows immediately.
After such Prospectus are the following alternate pages for the International
Offering: a front cover page; an "Underwriting" section; and a back cover
page. All other pages of the Prospectus for the U.S. Offering are to be used
for both the U.S. Offering and the International Offering.
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS SUBJECT TO COMPLETION MAY 20, 1997
31,400,000 SHARES
BOSTON PROPERTIES, INC.
LOGO
COMMON STOCK
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Boston Properties, Inc. (together with its subsidiaries, the "Company") has
been formed to succeed to the real estate development, redevelopment,
acquisition, management, operating and leasing businesses associated with the
predecessor company founded by Mortimer B. Zuckerman and Edward H. Linde in
1970. The Company is one of the largest owners and developers of office
properties in the United States, with a significant presence in five submarkets
in Greater Boston, five submarkets in Greater Washington, D.C. and the Park
Avenue submarket of midtown Manhattan. Upon completion of this offering (the
"Offering"), the Company will own a portfolio of 74 properties aggregating
approximately 10.9 million square feet, 91% of which was developed or
substantially redeveloped by the Company. The properties consist of 62 office
properties with approximately 7.6 million net rentable square feet (including
seven office properties under development that will consist of approximately
810,000 net rentable square feet) and approximately 1.3 million additional
square feet of structured parking for 4,222 vehicles; nine industrial
properties with approximately 925,000 net rentable square feet; two hotels with
a total of 833 rooms consisting of approximately 750,000 square feet; and a
parking garage with 1,170 spaces (consisting of approximately 330,000 square
feet). In addition, the Company will own, have under contract or have options
to acquire six parcels of land totaling 47.4 acres, which will support
approximately 1.0 million square feet of development.

Following the Offering, Mr. Zuckerman will serve as Chairman, Mr. Linde will
serve as President and Chief Executive Officer and together they will own
approximately a 33.7% economic interest in the Company. Messrs. Zuckerman and
Linde have agreed that the Company will be the exclusive entity through which
they develop and acquire commercial properties. The Company is a fully
integrated, self-administered and self-managed real estate company and expects
to qualify as a real estate investment trust ("REIT") for federal income tax
purposes for the year ending December 31, 1997. Upon completion of the
Offering, the Company expects to have a $300 million unsecured line of credit
to facilitate its development and acquisition activity.
All of the shares of the Company's common stock, par value $.01 per share
("Common Stock"), offered hereby are being sold by the Company. Of the
31,400,000 shares of Common Stock being offered hereby, 25,120,000 shares are
being offered initially in the United States and Canada by the U.S.
Underwriters and 6,280,000 shares are being offered initially outside the
United States and Canada by the International Managers. See "Underwriting."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be $25.00
per share. See "Underwriting" for information relating to the factors to be
considered in determining the initial public offering price. The Company will
apply for listing of the Common Stock on the New York Stock Exchange under the
symbol "BXP."

SEE "RISK FACTORS" BEGINNING ON PAGE 23 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:
. Risks associated with the development of commercial properties;
. Conflicts of interest with affiliates of the Company in connection with
the formation of the Company, this Offering and the operations of the
Company's ongoing business;
. The possibility that certain provisions of the Company's organizational
documents may increase the costs and reduce the potential gains of the
Company in connection with the sale of, or the reduction of indebtedness
on, certain properties, if such sale or reduction of indebtedness caused
persons who had an interest in such properties prior to the Offering to
recognize taxable income;
. The possibility that the consideration to be given by the Company for
properties and other assets at the completion of the Offering may exceed
their fair market value; no third-party appraisals were obtained by the
Company regarding these properties and other assets;
. Risks inherent in real estate investment and property management;
. The possibility that the Company may not be able to refinance outstanding
debt upon maturity, that indebtedness might be refinanced on less
favorable terms, and that interest rates might increase on amounts drawn
under the Company's proposed line of credit;
. Taxation of the Company as a regular corporation if it fails to qualify as
a REIT; and
. Limitations on the stockholders' ability to change control of the Company
due to certain provisions of the Company's Certificate of Incorporation
and Bylaws, Delaware law and the partnership agreement of the Company's
operating partnership subsidiary.

----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................................. $ $ $
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Total(3)................................... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the U.S. Underwriters a 30-day option to purchase
up to an additional 3,768,000 shares of Common Stock, and has granted the
International Managers a 30-day option to purchase up to an additional
942,000 shares of Common Stock, on the same terms and conditions as set
forth above solely to cover overallotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."

----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued and accepted by them, subject to approval
of certain legal maters by counsel for the Underwriters. The Underwriters
reserve the right to withdraw, cancel or modify such offer and to reject orders
in whole or in part. It is expected that delivery of the shares will be made in
New York, New York on or about , 1997.

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Joint Lead Managers and Joint Bookrunners

MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.

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BEAR, STEARNS & CO. INC.

MORGAN STANLEY & CO.

INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
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The date of this Prospectus is , 1997.
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[ART WORK]

Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Such transactions may include stabilizing, the purchase of Common Stock to
cover syndicate short positions and the imposition of penalty bids. For a
description of these activities, see "Underwriting."
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TABLE OF CONTENTS

<TABLE>
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PAGE
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PROSPECTUS SUMMARY........................................................ 1
The Company.............................................................. 1
Risk Factors............................................................. 4
Business and Growth Strategies........................................... 5
The Properties........................................................... 7
Summary Property Data.................................................... 9
Unsecured Line of Credit................................................. 14
Structure and Formation of the Company................................... 14
The Offering............................................................. 19
Distributions............................................................ 19
Tax Status of the Company................................................ 19
SUMMARY SELECTED FINANCIAL INFORMATION.................................... 20
RISK FACTORS.............................................................. 23
THE COMPANY............................................................... 33
General.................................................................. 33
History.................................................................. 34
BUSINESS AND GROWTH STRATEGIES............................................ 37
USE OF PROCEEDS........................................................... 41
DISTRIBUTIONS............................................................. 42
CAPITALIZATION............................................................ 46
DILUTION.................................................................. 48
SELECTED FINANCIAL INFORMATION............................................ 49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................................ 52
Results of Operations.................................................... 52
Pro Forma Operating Results.............................................. 53
Liquidity and Capital Resources.......................................... 54
Cash Flows............................................................... 55
Funds from Operations.................................................... 55
Inflation................................................................ 56
BUSINESS AND PROPERTIES................................................... 57
General.................................................................. 57
Summary Property Data.................................................... 58
Location of Properties................................................... 60
Tenants.................................................................. 62
The Office Properties.................................................... 70
The Industrial Properties................................................ 90
The Hotel Properties..................................................... 96
The Development Properties............................................... 98
Development Parcels...................................................... 99
Proposed Developments.................................................... 99
Development Consulting and Third Party Property Management............... 100
Partial Interests........................................................ 101
Environmental Matters.................................................... 101
UNSECURED LINE OF CREDIT.................................................. 102
MANAGEMENT................................................................ 103
Directors and Executive Officers......................................... 103
Committees of the Board of Directors..................................... 106
Compensation of Directors................................................ 106
Executive Compensation................................................... 106
Employment and Noncompetition Agreements................................. 107
Stock Option Plan........................................................ 107
Limitation of Liability and Indemnification.............................. 110
Indemnification Agreements............................................... 111
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES............................... 112
Investment Policies...................................................... 112
Dispositions............................................................. 113
Financing Policies....................................................... 113
</TABLE>
<TABLE>
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PAGE
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<S> <C>
Conflict of Interest Policies........................................... 113
Policies with Respect to Other Activities............................... 114
STRUCTURE AND FORMATION OF THE COMPANY................................... 115
Formation Transactions.................................................. 115
Consequences of the Offering and the Formation Transactions............. 116
Benefits to Related Parties............................................. 117
Restrictions on Transfer................................................ 117
Restrictions on Ownership of Common Stock............................... 117
OPERATING PARTNERSHIP AGREEMENT.......................................... 118
Management.............................................................. 118
Removal of the General Partner; Transfer of the General Partner's
Interest............................................................... 119
Amendments of the Operating Partnership Agreement....................... 119
Transfer of OP Units; Substitute Limited Partners....................... 119
Redemption of OP Units.................................................. 119
Issuance of Additional Limited Partnership Interest..................... 120
Make-Whole Payments..................................................... 120
Exculpation and Indemnification of the General Partner.................. 120
Tax Matters............................................................. 121
Term.................................................................... 121
PRINCIPAL STOCKHOLDERS................................................... 122
DESCRIPTION OF CAPITAL STOCK............................................. 123
General................................................................. 123
Common Stock............................................................ 123
Preferred Stock......................................................... 123
Restrictions on Transfers............................................... 124
Shareholder Rights Agreement............................................ 125
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE AND
BYLAWS.................................................................. 128
Business Combinations................................................... 128
Amendment of Certificate and Bylaws..................................... 128
Dissolution of the Company.............................................. 128
Meetings of Stockholders................................................ 129
The Board of Directors.................................................. 129
Shareholder Rights Plan and Ownership Limitations....................... 129
Limitation of Liability and Indemnification............................. 129
Indemnification Agreements.............................................. 130
SHARES AVAILABLE FOR FUTURE SALE......................................... 131
General................................................................. 131
Registration Rights..................................................... 131
FEDERAL INCOME TAX CONSEQUENCES.......................................... 132
Federal Income Taxation of the Company.................................. 132
Opinion of Tax Counsel.................................................. 132
Requirements for Qualification.......................................... 133
Failure to Qualify...................................................... 139
Taxation of U.S. Stockholders........................................... 139
Special Tax Considerations for Foreign Stockholders..................... 140
Information Reporting Requirements and Backup Withholding Tax........... 142
Other Tax Considerations................................................ 142
State and Local Tax..................................................... 143
UNDERWRITING............................................................. 144
EXPERTS.................................................................. 147
LEGAL MATTERS............................................................ 147
ADDITIONAL INFORMATION................................................... 147
GLOSSARY................................................................. 148
</TABLE>

i
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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. The offering of 31,400,000
shares of common stock of Boston Properties, Inc., par value $.01 per share
("Common Stock"), pursuant to this Prospectus is referred to herein as the
"Offering." Boston Properties Limited Partnership, a Delaware limited
partnership that will own substantially all of the assets of the Company on a
consolidated basis and of which Boston Properties, Inc. is the sole general
partner and at the completion of the Offering will own a 68.7% partnership
interest, is referred to herein as the "Operating Partnership." Unless
otherwise indicated, the information contained in this Prospectus assumes that
(i) the Underwriters' overallotment option is not exercised, (ii) the
transactions described under "Structure and Formation of the Company" are
consummated, (iii) none of the units of limited partnership of the Operating
Partnership ("OP Units"), which are redeemable for cash or, at the election of
the Company, exchangeable for Common Stock, are so redeemed or exchanged, and
(iv) the Common Stock to be sold in the Offering is sold at the price specified
on the cover of this Prospectus. Although the Company and the Operating
Partnership are separate entities, for ease of reference and unless the context
otherwise requires, all references in this Prospectus to the "Company" refer to
Boston Properties, Inc. and its subsidiaries, including the Operating
Partnership, collectively. All references in this Prospectus to the historical
activities of the Company refer to the activities of the Company and the
affiliated entities that own the properties that the Company will succeed to at
the completion of the Offering. The Company and such affiliated entities are
sometimes referred to herein as the "Boston Properties Predecessor Group." See
"Glossary" for the definitions of certain terms used in this Prospectus.

THE COMPANY

GENERAL

The Company has been formed to succeed to the real estate development,
redevelopment, acquisition, management, operating and leasing businesses
associated with the predecessor company founded by Mortimer B. Zuckerman and
Edward H. Linde in 1970. The Company is one of the largest owners and
developers of office properties in the United States, with a significant
presence in five submarkets in Greater Boston, five submarkets in Greater
Washington, D.C. and the Park Avenue submarket of midtown Manhattan. Following
the Offering, Messrs. Zuckerman and Linde will beneficially own in the
aggregate a 33.7% economic interest in the Company and the other senior
officers of the Company will beneficially own in the aggregate a 2.3% economic
interest in the Company (in each case assuming the exchange of all OP Units for
Common Stock). Messrs. Zuckerman and Linde have agreed that the Company will be
the exclusive entity through which they develop or acquire commercial
properties. See "Management--Employment Agreements." The Company expects to
qualify as a REIT for federal income tax purposes for the year ended December
31, 1997.

Upon the completion of the Offering, the Company, through its subsidiaries,
will own a portfolio of 74 commercial real estate properties (the "Properties")
aggregating approximately 10.9 million square feet, 91% of which was developed
or substantially redeveloped by the Company. The Company will own a 100% fee
interest in 60 of the Properties that account for 98% of the total Escalated
Rent of the portfolio. The Properties consist of 62 office properties with
approximately 7.6 million net rentable square feet, including seven office
properties currently under development or redevelopment totaling approximately
810,000 net rentable square feet, which have approximately 1.3 million
additional square feet of structured parking for 4,222 vehicles (the "Office
Properties"); nine industrial properties with approximately 925,000 net
rentable square feet (the "Industrial Properties"); two hotels totaling 833
rooms and approximately 750,000 square feet (the "Hotel Properties"); and a
1,170 space parking garage with approximately 330,000 square feet (the "Garage
Property"). The seven Office Properties currently under development are
referred to herein as the "Development Properties." The Company believes that
it has created significant value in its properties by developing well located
properties that meet the demands of today's office tenants, redeveloping
underperforming assets, and improving the management of under-managed assets it
has acquired.

1
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The Properties are primarily located in eleven submarkets, including five
submarkets in Greater Boston (the East Cambridge, Route 128 NW, Route
128/Massachusetts Turnpike, Route 128 SW and Back Bay submarkets), five
submarkets in Greater Washington, D.C. (the Southwest Washington, D.C., West
End Washington, D.C., Montgomery County, Maryland, Fairfax County, Virginia and
Prince George's County, Maryland submarkets) and midtown Manhattan (the Park
Avenue submarket). The Company's single largest Property, with approximately
1.0 million net rentable square feet, is an Office Property located in midtown
Manhattan. As of December 31, 1996, the completed Office Properties and the
Industrial Properties had an occupancy rate of 94% and the Hotel Properties had
an average occupancy rate for the year ended December 31, 1996 of 84%. Leases
with respect to 10.5%, 11.1% and 7.1% of the leased square footage of the
Office and Industrial Properties expire in 1997, 1998 and 1999, respectively.
The weighted average Escalated Rent per square foot of such expiring square
footage is $17.70 compared to a weighted average Company quoted rental rate per
square foot as of January 1, 1997 for such expiring square footage of $20.34.
The Company will also own, have under contract or have options to acquire six
undeveloped parcels of land totaling 47.4 acres, located in Greater Boston and
Greater Washington, D.C., which will support approximately 1.0 million square
feet of development. The Company currently manages all of the Properties except
the Hotel Properties (which are managed by Marriott Hotels, Inc.
("Marriott(R)")), the Garage Property and parking garages that are a part of
certain of the Office Properties.

The Company believes that its capacity for growth will be enhanced by
combining the Company's experienced personnel, established market position and
relationships, hands-on approach to development and management, substantial
portfolio of existing properties and buildings under development, and existing
acquisition opportunities with the advantages that will be available to it in
its new status as a public company. These advantages include improved access to
debt and equity financing and the ability to acquire properties and sites
through the issuance of stock and OP Units, which can be of particular value to
potential sellers concerned about the tax consequences of property sales. The
Company also believes that because of its size and reputation it will be a
desirable buyer for those institutions or individuals wishing to sell
individual properties or portfolios of properties in exchange for an equity
position in a public real estate company.

The Company believes that the Properties are well positioned to provide a
base for continued growth. The Office and Industrial Properties are leased to
high quality tenants and located in submarkets with low vacancy rates and
rising rents. With the value added by the Company's in-house marketing,
leasing, tenant construction and property management programs, the Properties
have historically enjoyed high occupancy rates and speedy and efficient re-
leasing of vacated space.

The Company will continue to supplement its revenues, leverage the experience
of its personnel and strengthen its market position by providing comprehensive,
project-level development and management services on a selective basis to
private sector companies and government agencies ("third-party development
projects"). Between 1989 and 1996, the Company completed eight third-party
development projects comprising approximately 2.4 million square feet. In
addition to enhancing revenues without significantly increasing overhead, the
Company has achieved significant recognition and experience through this work,
which has led to enhanced opportunities for the Company to obtain build-to-suit
development projects.

Concurrently with the completion of the Offering, the Company expects to have
a three-year $300 million unsecured revolving line of credit (the "Unsecured
Line of Credit") to facilitate its development and acquisition activities and
for working capital purposes. A commercial bank (the "Line of Credit Bank")
will act as agent.

The Company intends to make regular quarterly distributions to its
stockholders, beginning with a distribution for the period commencing on the
completion of the Offering and ending on , 1997.

2
<PAGE>

The Company is a full-service real estate company, with substantial in-house
expertise and resources in acquisitions, development, financing, construction
management, property management, marketing, leasing, accounting, and legal
services. As of March 31, 1997, the Company had 284 employees, including 87
professionals involved in acquisitions, development, finance and legal matters.
The Company's 16 senior officers, together with Mr. Zuckerman, Chairman of the
Board, have an average of 24 years experience in the real estate industry and
an average of 16 years tenure with the Company. The Company's headquarters are
located at 8 Arlington Street, Boston, Massachusetts 02116 and its telephone
number is (617) 859-2600. In addition, the Company has regional offices in
Washington D.C. and mid-town Manhattan.

HISTORY

The Company was founded in Boston, Massachusetts in 1970 by Messrs. Zuckerman
and Linde to acquire and develop first-class commercial real estate for long-
term ownership and management. Over its 27 year history, the Company has
established a successful record of focusing on submarkets where the Company can
achieve leadership positions. The following paragraphs describe the Company's
development and evolution.

Growth in Boston

In the early 1970's, Messrs. Zuckerman and Linde identified the area of
suburban Boston along Route 128 as ready for the development of modern office
buildings, and they selected the quadrant west/northwest of Boston between the
Massachusetts Turnpike and US 93 as the most desirable area in which to
concentrate their efforts. Between 1978 and 1988, the Company acquired 13 key
sites in that area, and completed development of 17 office buildings on those
sites, containing more than 2.0 million net rentable square feet. During this
period, the Company built on its growing reputation for quality development in
the Boston area by successfully competing for control of sites available
through public competitions. The Company was awarded hotel development rights
on the Boston Harbor waterfront where it developed the 402 room Long Wharf
Marriott(R) Hotel. The Company was also selected by the Cambridge Redevelopment
Authority to be the developer of the 24 acre "Cambridge Center" site adjacent
to the Massachusetts Institute of Technology ("MIT"), where it has completed
development of ten buildings totaling over 1.7 million square feet and still
controls substantial additional development rights. In total for Greater
Boston, the Company has developed, acquired or redeveloped, for its own account
or for third parties, 41 buildings containing approximately 5.0 million square
feet, of which the Company still owns approximately 3.7 million square feet.

Expansion to Washington, D.C. and its Suburban Markets

The Company opened its Washington, D.C. regional office in November 1979 to
pursue development and acquisitions and to provide real estate development
services in Greater Washington, D.C., including the Northern Virginia and
suburban Maryland real estate markets. Within this region, the Company has
concentrated its efforts in those submarkets that it believes to be the
strongest, including Southwest Washington, D.C., Montgomery County, Maryland,
Fairfax County, Virginia and Prince George's County, Maryland. The Company's
first project in the Greater Washington, D.C. market was Capital Gallery, a
400,000 square foot Class A, multi-tenant office building that the Company
completed in 1981. During the past 17 years, the Company, for its own account
and third parties, has developed 30 buildings in Greater Washington, D.C.,
totaling approximately 5.8 million square feet. The Company continues to own 21
of these properties consisting of approximately 3.5 million square feet.

Expansion to Midtown Manhattan

3
<PAGE>

Company proceeded in 1984 with construction of a 1.0 million net rentable
square foot office tower. The building, which the Company still owns, has had
an occupancy rate in excess of 97% for the past seven years. The building has
continued to command premium rents within its submarket.

Response to Market Conditions

In the late 1980's, the Company decided not to undertake any new speculative
development or land or property acquisitions based on its assessment of a
growing oversupply and weakening real estate fundamentals in the markets in
which it operated. The Company was able to continue to prosper by operating the
portfolio of properties it had acquired and developed since 1970, by finding
opportunities for build-to-suit development, and by expanding the scope of its
third-party development management activities. Between 1989 and 1996, the
Company completed eight third-party development projects on a fee basis,
including major projects for the Architect of the Capitol, the Health Care
Financing Administration, the New York Daily News, Beth Israel Hospital and
Medical Information Technology. The Company is currently the development
manager on projects for, among others, the National Institutes of Health and
Acacia Mutual Life Insurance Company in Washington, D.C., the United States
Postal Service in New York City and Boston and the Hyatt Development
Corporation in Boston.

Recent Activities

As market conditions and tenant demand have improved during the past 12
months, the Company has begun to more aggressively pursue new development and
acquisition opportunities. At present, the Company is developing for its own
account the seven Development Properties, totaling approximately 810,000 square
feet, located in Greater Boston and Fairfax County, Virginia (consisting of
five Office Properties that will be 100% owned by the Company and two Office
Properties in which the Company will own a 25% interest). The Development
Properties are 68% pre-committed to tenants and the Company expects that its
stabilized return on cost for these Properties will exceed, in the aggregate,
12%. In addition, the Company is currently pursuing a number of proposed
development projects including, a 221 room Marriott(R) Residence Inn in
Cambridge, Massachusetts and a joint venture with Westbrook Real Estate
Partners LLC ("Westbrook") for the development of an approximately 370,000
square foot office building in Reston, Virginia. There can be no assurances
that the Company will ultimately develop either of these proposed development
projects. The Company is also pursuing potential property and site
acquisitions, as well as build-to-suit opportunities, in all of its major
markets.

RISK FACTORS

An investment in the Common Stock involves various risks, and prospective
investors should carefully consider the matters discussed under "Risk Factors"
prior to an investment in the Company. Such risks include, among others:

. risks associated with the development of commercial properties,
including that the development projects may not be completed on schedule
or within budget, resulting in increased debt service expense and
construction costs and delays in leasing such properties and generating
cash flow;

. conflicts of interest in connection with the formation of the Company
and the Offering, including conflicts relating to material benefits to
officers, directors and affiliates of the Company, which include receipt
of an aggregate of 14,575,367 OP Units and 3,933,541 shares of Common
Stock and repayment of approximately $707.1 million of indebtedness of
the partnerships in which such persons had interests prior to completion
of the Formation Transactions, some of which indebtedness had been
guaranteed by officers, directors and affiliates of the Company;

. conflicts of interest involving management of the Company and certain
members of the Board of Directors in business decisions regarding the
Company, including conflicts associated with the sale of any of the
Properties owned at the completion of the Offering or with prepayment of
certain indebtedness because of the possible adverse tax consequences of
such sales or prepayment to certain members of management and the Board
of Directors as holders of OP Units;

4
<PAGE>

. The possibility that certain provisions of the Company's organizational
documents may increase the costs and reduce the potential gains of the
Company in connection with the sale of, or the reduction of indebtedness
on, certain properties, if such sale or reduction of indebtedness caused
persons who had an interest in such properties prior to the Offering to
recognize taxable income.

. the possibility that the consideration to be given by the Company for
the Properties and other assets at the completion of the Offering may
exceed their fair market value; no third-party appraisals were obtained
by the Company regarding these Properties and other assets;

. real estate investment and property management risks such as the need to
renew leases or relet space upon lease expirations and, at times, to pay
renovation and reletting costs in connection therewith, the effect of
economic and other conditions on property cash flows and values, the
ability of tenants to make lease payments, the ability of a property to
generate revenue sufficient to meet operating expenses, including future
debt service, which may adversely affect the Company's ability to make
expected distributions to stockholders;

. the possibility that the Company may not be able to refinance
outstanding indebtedness upon maturity, that such indebtedness might be
refinanced at higher interest rates or otherwise on terms less favorable
to the Company than existing indebtedness, and the lack of limitations
in the Company's organizational documents on the amount of indebtedness
the Company may incur;

. taxation of the Company as a corporation if it fails to qualify as a
REIT for federal income tax purposes, the Company's liability for
certain federal, state and local income taxes in such event, and the
resulting decrease in cash available for distribution;

. anti-takeover effect of limiting actual or constructive ownership of
Common Stock of the Company by a single person other than Mr. Zuckerman
and Mr. Linde (and certain associated parties) to 6.6% of the
outstanding capital stock, subject to certain specified exceptions, and
certain other provisions contained in the organizational documents of
the Company and the Operating Partnership, and of a shareholder rights
plan adopted by the Company, any of which may have the effect of
delaying, deferring or preventing a transaction or change in control of
the Company that might involve a premium price for the Common Stock or
otherwise be in the best interests of the Company's stockholders;

. dependence on certain key personnel, particularly Messrs. Zuckerman and
Linde;

. the absence of a prior public market for the Common Stock; lack of
assurances that an active trading market will develop; and

. immediate and substantial dilution in the net tangible book value per
share of the shares of Common Stock purchased in the Offering.

BUSINESS AND GROWTH STRATEGIES

BUSINESS STRATEGY

The Company's primary business objective is to maximize growth in cash
available for distribution and to enhance the value of its portfolio in order
to maximize total return to stockholders. The Company's strategy to achieve
this objective is: (i) to selectively acquire and redevelop or develop
properties in the Company's existing markets, adjacent markets and in new
markets that present favorable opportunities; (ii) to maintain high occupancy
rates at rents that are at the high end of the markets in which the Properties
are located, and to continue to achieve high room and occupancy rates in the
Hotel Properties; and (iii) to selectively provide comprehensive, project-level
development and management services to third parties. See "Business and Growth
Strategies."

5
<PAGE>

GROWTH STRATEGIES

External Growth

The Company has targeted four areas of development and acquisition as
significant opportunities to execute the Company's external growth strategy:

Acquire Land for Development. The Company believes that development of
well positioned office buildings and R&D properties is currently or will be
justified in many of the submarkets in which the Company has a presence.
The Company believes in acquiring land in response to market conditions
that allow for the development of such land in the relatively near term.
Over its 27 year history, the Company has established a successful record
of carefully timing land acquisitions in submarkets where the Company can
become one of the market leaders in establishing rent and other business
terms. The Company has been particularly successful at acquiring sites or
options to purchase sites that need governmental approvals before the
commencement of development and thereby adding value through its
development expertise.

Acquire Existing Underperforming Assets. The Company will actively pursue
opportunities to acquire existing buildings that, while currently
generating income, are either underperforming the market due to poor
management or are currently leased below market with anticipated roll-over
of space. These opportunities may include the acquisition of entire
portfolios of properties. The Company is well positioned to identify and
acquire existing, underperforming properties for competitive prices and to
add significant additional value to such properties through its effective
marketing strategies and responsive property management program.

Acquire Assets from Institutions or Individuals. The Company believes
that due to its size, management strength and reputation it will be in an
advantageous position to acquire portfolios of assets or individual
properties from institutions or individuals seeking to convert their
ownership on a property level basis to the ownership of equity in a
diversified real estate operating company that offers liquidity through
access to the public equity markets. In addition, the Company may pursue
mergers with and acquisitions of compatible real estate firms. The ability
to offer OP Units to sellers who would otherwise recognize a gain upon a
sale of assets for cash or common stock may facilitate this type of
transaction on a tax-efficient basis. The Company is currently in
discussions with certain institutional investors to acquire certain of
their portfolio properties, but no assurances can be given that the Company
will purchase any of such properties.

Internal Growth

The Company believes that significant opportunities exist to increase cash
flow from its existing Properties because they are high quality properties in
desirable locations in submarkets that are experiencing rising rents, low
vacancy rates and increasing demand for office, R&D and industrial space. In
addition, the Company's Properties are in markets where supply is limited by
the lack of available sites and the difficulty of receiving the necessary
approvals for development on vacant land. The Company's strategy for maximizing
the benefits from these opportunities is (i) to provide high quality property
management services using its own employees in order to enhance tenant
preferences for renewal, expansion and relocation in the Company's properties,
and (ii) to achieve speed and transaction cost efficiency in replacing
departing tenants through the use of in-house services for marketing, lease
negotiation, and design and construction of tenant improvements.

Strong Growth Submarkets. In choosing locations for its properties, the
Company has paid particular attention to transportation and commuting
patterns, physical environment, adjacency to established business centers,
proximity to sources of business growth, and other local factors.
Substantially all of the Company's square footage of Office and Industrial
Properties are located in eleven submarkets in Greater Boston, Greater
Washington, D.C. and midtown Manhattan.

6
<PAGE>

These submarkets are experiencing increasing rents and as a result
current market rates often exceed the rents being paid by the Company's
tenants. The Company expects that leases expiring over the next three years
will be renewed, or space relet, at higher rents. Leases with respect to
10.5%, 11.1% and 7.1% of the leased square footage of the Office and
Industrial Properties expire in 1997, 1998 and 1999, respectively. The
weighted average Escalated Rent per square foot of such expiring square
footage is $17.70 compared to a weighted average Company quoted rental rate
per square foot as of January 1, 1997 for such expiring square footage of
$20.34.

In addition, the Company believes that the Hotel Properties will add to
the Company's internal growth because of their desirable locations in the
downtown Boston and East Cambridge submarkets, which are experiencing high
occupancy rates, and their effective management by Marriott(R), which has
achieved high guest satisfaction and limitations on increases in operating
costs.

Directly Managing Properties to Maximize the Potential for Tenant
Retention. The Company itself provides property management services, rather
than contracting for this service, to achieve awareness of and
responsiveness to tenant needs. The Company and the Properties also benefit
from cost efficiencies produced by an experienced work force attentive to
preventive maintenance and energy management and from the Company's
continuing programs to assure that its property management personnel
maintain good tenant relations. The Company has long recognized that
renewal of existing tenant leases, as opposed to tenant replacement, often
provides the best operating results, because renewals minimize transaction
costs associated with marketing, leasing and tenant improvements and avoid
interruptions in rental income during periods of vacancy and renovation of
space.

Replacing Tenants Quickly at Best Available Market Terms and Lowest
Possible Transaction Costs. The Company believes that it has a competitive
advantage in attracting new tenants and achieving rental rates at the
higher end of its markets as a result of its well-located, well-designed
and well-maintained properties, its reputation for high quality building
services and responsiveness to tenants, and its ability to offer expansion
and relocation alternatives within its submarkets. The Company's objective
throughout this process is to obtain the highest possible rental terms and
to achieve rent commencement for new tenancies as quickly as possible, and
the Company believes that its use of in-house resources for marketing,
leasing and tenant improvements continues to result in lower than average
transaction costs.

THE PROPERTIES

Upon completion of the Offering, the Company will own the 62 Office
Properties, the nine Industrial Properties, the two Hotel Properties and the
Garage Property. Seven of the Office Properties are currently under development
by the Company and are referred to as the "Development Properties."

OFFICE PROPERTIES

The Office Properties consist of 35 Class A office buildings (including three
Development Properties) ("Class A Office Buildings") and 27 properties
(including four Development Properties) that support both office and technical
uses ("R&D Properties"). The Company's 35 Class A Office Buildings contain
approximately 6.0 million net rentable square feet in urban and suburban
settings in Greater Boston, Greater Washington, D.C. and midtown Manhattan. The
Company's Class A Office Buildings include 599 Lexington Avenue in midtown
Manhattan, which has approximately 1.0 million net rentable square feet. As of
December 31, 1996, the 32 completed Class A Office Buildings had an occupancy
rate of 97%. The Company has developed or substantially redeveloped 34 of the
Class A Office Buildings since 1980, containing approximately 5.9 million net
rentable square feet. A number of the Office Properties include parking, and
the Company's Garage Property (a free-standing garage containing 1,170 spaces)
is located at the Company's Cambridge Center development.

The 27 R&D Properties contain approximately 1.6 million net rentable square
feet and consist primarily of suburban properties located in the Fairfax
County, Virginia submarket of Greater Washington, D.C. and the East Cambridge
and Route 128 NW submarkets of Greater Boston. As of December 31, 1996, the 23
completed R&D

7
<PAGE>

Properties had an occupancy rate of 96%. The Company has developed or
substantially redeveloped 17 of the R&D Properties since 1981.

Management believes that the location and quality of construction of the
Office Properties, as well as the Company's reputation for providing a high
level of tenant service, have enabled the Company to attract and retain a
diverse tenant base. As of December 31, 1996, the Office Properties were leased
to 350 tenants and no single tenant (other than the General Services
Administration, whose lease obligations are full faith and credit obligations
of the United States government) accounted for more than approximately 9.5% of
the aggregate Escalated Rent of the Company's office portfolio.

INDUSTRIAL PROPERTIES

The nine Industrial Properties contain approximately 925,000 rentable square
feet. The Industrial Properties are located in California, Maryland,
Massachusetts, and Pennsylvania. As of December 31, 1996, the Industrial
Properties had 14 tenants and, excluding a 221,000 net rentable square foot
building in Hayward, California (which is 27% leased, but for which the Company
has entered into a letter of intent to lease the remaining space), an occupancy
rate of 94%.

HOTEL PROPERTIES

The two Hotel Properties are located in Cambridge and Boston, Massachusetts.
The 402 room Long Wharf Marriott(R) Hotel is an eight-story building located on
the Boston Harbor waterfront. The hotel is within easy walking distance from
the heart of the business and financial district of Boston and many of the
city's major attractions. For the year ended December 31, 1996, the hotel had
an occupancy rate of 86.0%, an Average Daily Rate ("ADR") of $201.18 and
Revenue per Available Room ("REVPAR") of $173.01. The 431 room Cambridge Center
Marriott(R) Hotel is a 25-story building located in Kendall Square, Cambridge
and adjacent to the MIT campus. For the year ended December 31, 1996, the hotel
had an occupancy rate of 82.1%, an ADR of $150.52 and REVPAR of $123.58.

To assist the Company in maintaining its status as a REIT, the Company will
lease the Hotel Properties, pursuant to a lease with a participation in the
gross receipts of the Hotel Properties, to a lessee that is controlled by
Messrs. Zuckerman and Linde. Messrs. Zuckerman and Linde will have a 9.8%
economic interest in such lessee and one or more unaffiliated public charities
will have a 90.2% economic interest. Marriott International, Inc. will continue
to manage the Hotel Properties under the Marriott(R) name pursuant to a
management agreement with the lessee.

8
<PAGE>

SUMMARY PROPERTY DATA

Set forth below is a summary of information regarding the
Properties, including the seven Development Properties.

<TABLE>
<CAPTION>
NET PERCENT ESCALATED
YEAR(S) NO. RENTABLE LEASED RENT PERCENT OF
PERCENT BUILT/ OF SQUARE AS OF AS OF ESCALATED
PROPERTY NAME LOCATION OWNERSHIP RENOVATED(1) BLDGS. FEET 12/31/96 12/31/96(2) RENT
------------- -------- --------- ------------- ------ --------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OFFICE
PROPERTIES:
Class A Office
Buildings:
599 Lexington
Avenue (4)...... New York, NY 100.0% 1986 1 1,000,070 97% $ 51,470,410 27.2%
Two Independence
Square (5)...... SW, Washington, DC 100.0 1992 1 579,600 100 21,185,671 11.2
Democracy
Center.......... Bethesda, MD 100.0 1985-88/94-96 3 680,000 96 15,047,361 8.0
One Independence
Square (5)...... SW Washington, DC 100.0 1991 1 337,794 100 12,650,434 6.7
Capital
Gallery......... SW Washington, DC 100.0 1981 1 396,255 93 12,229,487 6.5
2300 N Street... NW Washington, D.C. 100.0 1986 1 276,906 88 11,712,087 6.2
The U.S.
International
Trade Commission
Building (5)
(6)............. SW Washington, DC 100.0 1987 1 243,998 100 6,673,165 3.5
One Cambridge
Center.......... Cambridge, MA 100.0 1987 1 215,385 100 6,015,824 3.2
Ten Cambridge
Center.......... Cambridge, MA 100.0 1990 1 152,664 100 4,251,071 2.2
191 Spring
Street.......... Lexington, MA 100.0 1971/95 1 162,700 100 3,986,701 2.1
10 & 20
Burlington Mall
Road............ Burlington, MA 100.0 1984-86/95-96 2 152,552 100 3,131,736 1.7
Lexington Office
Park............ Lexington, MA 100.0 1982 2 168,500 95 2,995,506 1.6
Waltham Office
Center.......... Waltham, MA 100.0 1968-70/87-88 3 129,658 100 2,575,521 1.4
Three Cambridge
Center.......... Cambridge, MA 100.0 1987 1 107,484 100 2,406,808 1.3
Montvale Center
(7)............. Gaithersburg, MD 75.0 1987 1 122,157 100 2,195,966 1.2
170 Tracer
Lane............ Waltham, MA 100.0 1980 1 73,258 100 1,681,073 0.9
195 West
Street.......... Waltham, MA 100.0 1990 1 63,500 100 1,564,296 0.8
Bedford Business
Park............ Bedford, MA 100.0 1980 1 90,000 100 1,513,011 0.8
91 Hartwell
Avenue.......... Lexington, MA 100.0 1985/96 1 122,135 51 1,318,024 0.7
33 Hayden
Avenue.......... Lexington, MA 100.0 1979 1 79,564 100 1,128,814 0.6
Eleven Cambridge
Center.......... Cambridge, MA 100.0 1984 1 79,616 100 1,118,563 0.6
100 Hayden
Avenue.......... Lexington, MA 100.0 1985 1 55,924 100 1,098,034 0.6
8 Arlington
Street (8)...... Boston, MA 100.0 1860/1920/89 1 30,526 100 1,080,172 0.6
32 Hartwell
Avenue.......... Lexington, MA 100.0 1968-79/87 1 69,154 100 1,002,211 0.5
204 Second
Avenue.......... Waltham, MA 100.0 1981/93 1 40,974 100 812,518 0.4
92 Hayden
Avenue.......... Lexington, MA 100.0 1968/84 1 30,980 100 632,109 0.3
BDM
International
Buildings* (9).. Reston, VA 25.0 1999 2 440,000 -- -- --
201 Spring
Street* (10).... Lexington, MA 100.0 1997 1 102,000 -- -- --
--- --------- --- ------------ -----
SUBTOTAL/WEIGHTED AVERAGE FOR CLASS A OFFICE BUILDINGS (11).... 35 6,003,354 97%(A) $171,476,573 90.7%
=== ========= === ============ =====
R&D Properties:
Bedford Business
Park............ Bedford, MA 100.0% 1962-78/96 2 383,704 100% $ 3,265,991 1.7%
7601 Boston
Boulevard,
Building
Eight (5)....... Springfield, VA 100.0 1986 1 103,750 100 1,437,971 0.8
Fourteen
Cambridge
Center.......... Cambridge, MA 100.0 1983 1 67,362 100 1,315,519 0.7
Hilltop Business
Center (12)..... So. San Francisco, CA 35.7 early 1970's 9 144,479 90 1,030,288 0.5
7600 Boston
Boulevard,
Building Nine... Springfield, VA 100.0 1987 1 69,832 100 878,600 0.5
7500 Boston
Boulevard,
Building
Six (5)......... Springfield, VA 100.0 1985 1 79,971 100 800,464 0.4
8000 Grainger
Court, Building
Five............ Springfield, VA 100.0 1984 1 90,465 100 759,790 0.4
7435 Boston
Boulevard,
Building One.... Springfield, VA 100.0 1982 1 105,414 67 753,100 0.4
7451 Boston
Boulevard,
Building Two.... Springfield, VA 100.0 1982 1 47,001 100 644,646 0.3
164 Lexington
Road............ Billerica, MA 100.0 1982 1 64,140 100 598,478 0.3
7374 Boston
Boulevard,
Building
Four (5)........ Springfield, VA 100.0 1984 1 57,321 100 595,823 0.3
8000 Corporate
Court, Building
Eleven.......... Springfield, VA 100.0 1989 1 52,539 100 395,053 0.2
7375 Boston
Boulevard,
Building
Ten (5)......... Springfield, VA 100.0 1988 1 26,865 100 342,999 0.2
17 Hartwell
Avenue.......... Lexington, MA 100.0 1968 1 30,000 100 198,000 0.1
7700 Boston
Boulevard,
Building
Twelve* (13).... Springfield, VA 100.0 1997 1 80,514 -- -- --
7501 Boston
Boulevard,
BuildingSeven* (14).. Springfield, VA 100.0 1997 1 75,756 -- -- --
Sugarland
Building
Two* (15)....... Herndon, VA 100.0 1986/97 1 59,585 -- -- --
Sugarland
Building
One* (15)....... Herndon, VA 100.0 1985/97 1 52,533 -- -- --
--- --------- --- ------------ -----
SUBTOTAL/WEIGHTED AVERAGE FOR R&D PROPERTIES................... 27 1,591,231 96%(B) $ 13,016,722 6.9%
=== ========= === ============ =====
INDUSTRIAL
PROPERTIES:
38 Cabot
Boulevard (16).. Bucks County, PA 100.0% 1972/84 1 161,000 100% $ 865,613 0.5%
6201 Columbia
Park Road,
Building Two.... Landover, MD 100.0 1986 1 99,885 87 694,935 0.4
2000 South Club
Drive, Building
Three........... Landover, MD 100.0 1988 1 83,608 100 685,338 0.4
40-46 Harvard
Street.......... Westwood, MA 100.0 1967/96 1 169,273 90 677,818 0.4
25-33 Dartmouth
Street.......... Westwood, MA 100.0 1966/96 1 78,045 87 658,645 0.3
1950 Stanford
Court, Building
One............. Landover, MD 100.0 1986 1 53,250 100 354,274 0.2
2391 West Winton
Avenue.......... Hayward, CA 100.0 1974 1 221,000 27(17) 234,000 0.1
560 Forbes
Boulevard (12).. So. San Francisco, CA 35.7 early 1970's 1 40,000 100 238,000 0.1
430 Rozzi Place
(12)............ So. San Francisco, CA 35.7 early 1970's 1 20,000 100 114,949 0.1
--- --------- --- ------------ -----
SUBTOTAL/WEIGHTED AVERAGE FOR INDUSTRIAL PROPERTIES............ 9 926,061 78%(17) $ 4,523,572 2.4%
=== ========= === ============ =====
TOTAL/WEIGHTED AVERAGE FOR OFFICE AND INDUSTRIAL
PROPERTIES..................................................... 71 8,520,646 94%(C) $189,016,867 100.0%
=== ========= === ============ =====
<CAPTION>
ESCALATED ANNUAL NET
RENT EFFECTIVE
PER RENT PER
LEASED LEASED
SQUARE SQUARE
PROPERTY NAME FOOT(2) FOOT(3)
------------- ----------- -----------
<S> <C> <C>
OFFICE
PROPERTIES:
Class A Office
Buildings:
599 Lexington
Avenue (4)...... $52.90 $47.13
Two Independence
Square (5)...... 36.65 36.80
Democracy
Center.......... 23.03 21.22
One Independence
Square (5)...... 37.45 34.34
Capital
Gallery......... 33.15 31.11
2300 N Street... 48.04 46.82
The U.S.
International
Trade Commission
Building (5)
(6)............. 27.35 24.79
One Cambridge
Center.......... 27.93 25.57
Ten Cambridge
Center.......... 27.85 23.11
191 Spring
Street.......... 24.50 22.26
10 & 20
Burlington Mall
Road............ 20.53 18.45
Lexington Office
Park............ 19.33 16.97
Waltham Office
Center.......... 19.86 18.54
Three Cambridge
Center.......... 22.39 20.45
Montvale Center
(7)............. 17.98 18.68
170 Tracer
Lane............ 22.95 19.08
195 West
Street.......... 24.63 20.36
Bedford Business
Park............ 16.81 15.78
91 Hartwell
Avenue.......... 21.24 19.71
33 Hayden
Avenue.......... 14.19 13.47
Eleven Cambridge
Center.......... 14.05 11.90
100 Hayden
Avenue.......... 19.63 18.91
8 Arlington
Street (8)...... 35.39 34.94
32 Hartwell
Avenue.......... 14.49 12.00
204 Second
Avenue.......... 19.83 19.14
92 Hayden
Avenue.......... 20.40 19.79
BDM
International
Buildings* (9).. -- --
201 Spring
Street* (10).... -- --
----------- -----------
SUBTOTAL/WEIGHTED AVERAGE FOR CLASS A OFFICE BUILDINGS (11).... $32.53(A) $30.00(A)
=========== ===========
R&D Properties:
Bedford Business
Park............ $ 8.51 $ 9.18
7601 Boston
Boulevard,
Building
Eight (5)....... 13.86 13.85
Fourteen
Cambridge
Center.......... 19.53 18.47
Hilltop Business
Center (12)..... 7.95 8.93
7600 Boston
Boulevard,
Building Nine... 12.58 10.20
7500 Boston
Boulevard,
Building
Six (5)......... 10.01 9.98
8000 Grainger
Court, Building
Five............ 8.40 7.58
7435 Boston
Boulevard,
Building One.... 10.60 8.07
7451 Boston
Boulevard,
Building Two.... 13.72 8.14
164 Lexington
Road............ 9.33 7.97
7374 Boston
Boulevard,
Building
Four (5)........ 10.39 10.14
8000 Corporate
Court, Building
Eleven.......... 7.52 7.59
7375 Boston
Boulevard,
Building
Ten (5)......... 12.77 7.82
17 Hartwell
Avenue.......... 6.60 6.60
7700 Boston
Boulevard,
Building
Twelve* (13).... -- --
7501 Boston
Boulevard,
BuildingSeven* (14).. -- --
Sugarland
Building
Two* (15)....... -- --
Sugarland
Building
One* (15)....... -- --
----------- -----------
SUBTOTAL/WEIGHTED AVERAGE FOR R&D PROPERTIES................... $10.22(B) $ 9.75(B)
=========== ===========
INDUSTRIAL
PROPERTIES:
38 Cabot
Boulevard (16).. $ 5.38 $ 5.38
6201 Columbia
Park Road,
Building Two.... 8.03 6.39
2000 South Club
Drive, Building
Three........... 8.20 7.06
40-46 Harvard
Street.......... 4.46 4.87
25-33 Dartmouth
Street.......... 9.75 7.89
1950 Stanford
Court, Building
One............. 6.65 6.93
2391 West Winton
Avenue.......... 3.90 2.81
560 Forbes
Boulevard (12).. 5.95 5.37
430 Rozzi Place
(12)............ 5.75 5.47
----------- -----------
SUBTOTAL/WEIGHTED AVERAGE FOR INDUSTRIAL PROPERTIES............ $ 6.25 $ 5.27
=========== ===========
TOTAL/WEIGHTED AVERAGE FOR OFFICE AND INDUSTRIAL
PROPERTIES..................................................... $26.00(C) $24.00(C)
=========== ===========
</TABLE>
* These Properties are Development Properties

<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED 12/31/96 YEAR ENDED 12/31/95
------------------------------ --------------------
AVERAGE REVENUE PER AVERAGE REVENUE PER
NUMBER NUMBER DAILY AVAILABLE DAILY AVAILABLE
PERCENT YEAR OF OF SQUARE AVERAGE RATE ROOM RATE ROOM
LOCATION OWNERSHIP BUILT BUILDINGS ROOMS FOOTAGE OCCUPANCY (ADR) (REVPAR)(18) (ADR) (REVPAR)(18)
------------- --------- ----- --------- ------ ---------- --------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOTEL PROPER-
TIES:
Long Wharf
Marriott........ Boston, MA 100.0% 1982 1 402 420,000 86.0% $201.18 $173.01 $192.95 $164.97
Cambridge Center
Marriott........ Cambridge, MA 100.0 1986 1 431 330,400 82.1 150.52 123.58 136.04 114.14
--- ----- ---------- ---- ------- ------- ------- -------
TOTAL/WEIGHTED AVERAGE FOR HOTEL PROPERTIES.... 2 833 750,400 84.0% $174.97 $147.44 $163.50 $138.67
=== ===== ========== ==== ======= ======= ======= =======
<CAPTION>
NUMBER NUMBER
PERCENT YEAR OF OF SQUARE
LOCATION OWNERSHIP BUILT BUILDINGS SPACES FOOTAGE
------------- --------- ----- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
GARAGE PROPERTY:
Cambridge Center
North Garage.... Cambridge, MA 100.0% 1990 1 1170 332,442
STRUCTURED PARK-
ING INCLUDED IN
CLASS A OFFICE
BUILDINGS....... 4,222 1,260,530
----- ----------
TOTAL FOR GARAGE
PROPERTY AND
STRUCTURED PARK-
ING............. 5,392 1,592,972
===== ----------
TOTAL FOR ALL
PROPERTIES...... 74 10,864,018
=== ==========
</TABLE>
- -------
(1) These dates do not include years in which tenant improvements were made to
the Properties, except with respect to 25-33 Dartmouth Street and 40-46
Harvard Street, whose interiors were completely rebuilt to satisfy tenant
needs in 1996.
(2) Escalated Rent represents the annualized monthly Base Rent in effect
(after giving effect to any contractual increases in monthly Base Rent
that have occurred up to December 31, 1996) plus annualized monthly tenant
pass-throughs of operating and other expenses (but excluding electricity
costs paid by tenants) under each lease executed as of December 31, 1996,
or, if such monthly rent has been reduced by a rent concession, the
monthly rent that would have been in effect at such date in the absence of
such concession.
(3) Annual Net Effective Rent Per Leased Square Foot represents the Base Rent
for the month of December 1996, plus tenant pass-throughs of operating and
other expenses (but excluding electricity costs paid by tenants), under
each lease executed as of December 31, 1996, presented on a straight-line
basis in accordance with GAAP, minus amortization of tenant improvement
costs and leasing commissions, if any, paid or payable by the Company
during such period, annualized.
(4) The Company's New York offices are located in this building, where it
occupies 12,896 square feet.
(5) The Property is leased on the basis of net usable square feet (which have
been converted to net rentable square feet for purposes of this table) due
to the requirements of the General Services Administration.
(6) The Company's Washington, D.C. offices are located in this building, where
it occupies 15,612 square feet.
(7) The Company owns a 75.0% general partner interest in the limited
partnership that owns this property. Because of the priority of the
Company's partnership interest, the Company expects to receive any
partnership distributions that are made with respect to this property.
(8) The Property, which is used exclusively as the Company's headquarters, was
constructed in two phases, circa 1860 and circa 1920.
(9) The Company is acting as development manager of these Properties and will
be the 25.0% managing member of a limited liability company that will own
the Properties. The Company's economic interest increases above 25.0% if
certain performance criteria are achieved. The Properties are expected to
be completed in 1999 and are 51.1% pre-leased to BDM International.
(10) The Property, which is currently under development by the Company, is
expected to be completed in late 1997 and is 100% committed to Continental
Cablevision.
(11) The Class A Office Buildings contain 4,222 structured parking spaces.
(12) The Company owns a 35.7% controlling general partnership interest in this
property.
(13) The Property, which is currently under development by the Company, is
expected to be completed in late 1997 and is 100% pre-leased to
Autometric, Inc.
(14) The Property, which is currently under development by the Company, is
expected to be completed in late 1997 and is 100% pre-leased to the
General Services Administration (for the United States Customs Service).
(15) The Property, which was acquired by the Company on November 25, 1996, is
currently being redeveloped by the Company.
(16) The original building (100,000 net rentable square feet ) was built in
1972, with an expansion building (61,000 net rentable square feet)
completed in 1984.
(17) The Company's Industrial Property in Hayward, California is currently
27.0% leased. The Company has entered into a letter of intent to lease the
remaining space. Excluding this Property, the Industrial Properties had an
occupancy rate of 94.0% at December 31, 1996.
(18) REVPAR is determined by dividing room revenue by available rooms for the
applicable period.
(A) Does not include three of the Development Properties.
(B) Does not include four of the Development Properties.
(C) Does not include the Development Properties.

DEVELOPMENT PARCELS

At the completion of the Offering, the Company will own, have under contract,
or have an option to develop or acquire six parcels consisting of an aggregate
of 47.4 acres of land. The Company believes that this land, some of which needs
zoning or other regulatory approvals prior to development, will be able to
support an aggregate of approximately 1.0 million square feet of development.
The following chart provides additional information with respect to undeveloped
parcels:

<TABLE>
<CAPTION>
NO. OF DEVELOPABLE
LOCATION SUBMARKET PARCELS ACREAGE SQUARE FEET (1)
- -------- --------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Springfield, VA Fairfax County, VA 3 9.4 130,000
Lexington, MA Route 128 NW 1 6.8 50,000
Cambridge, MA East Cambridge, MA 1 4.2 539,000
Andover, MA Route 495 N 1 27.0 290,000
--- ---- ---------
Total 6 47.4 1,009,000
=== ==== =========
</TABLE>
- -------
(1) Represents the total square feet of development that the parcel(s) will
support.

10
<PAGE>

MARKET INFORMATION

Greater Boston, Massachusetts

Greater Boston is the seventh largest metropolitan area in the United States
and has emerged as one of the top investment centers in the country. The
Greater Boston market is characterized by four core industry groups: (i) health
care, (ii) information technology, (iii) financial services and (iv) research
and development, including both academic and commercial research. According to
the Massachusetts Department of Employment and Training, Greater Boston's
employment base has expanded by 22% since 1992 to its current size of 1.9
million jobs. As a result of the steady growth in the Greater Boston economy,
the local unemployment rate has fallen from 7.0% in 1992 to 3.4% in 1996. In
addition, per capita income in Massachusetts grew by 6.4% in 1995, the second
largest gain in the country for that year, and grew by another 4.5% in 1996.

Between 1992 and 1996, according to information provided by Spaulding & Slye,
the office space availability rate in this market (space currently available
direct from landlord or by sublease, or scheduled to become available within 12
months) declined from 16.0% to 8.3% while average quoted rents increased 23%,
and space immediately available direct from landlord (the "Direct Vacancy
Rate") was only 5.0% at the end of 1996. During the same 1992-96 period, office
space supply grew by only 1.3% (351,000 square feet) and there was net
absorption of approximately 10.8 million square feet at a relatively steady
rate (approximately 1.8 million square feet in 1992, 2.2 million square feet
annually 1993-95, and 2.3 million square feet in 1996).

Greater Washington, D.C.

Greater Washington D.C., including the District of Columbia and the adjacent
areas of Northern Virginia and suburban Maryland, is the fifth largest
metropolitan area in the country and the heart of the nation's federal
government and policy-making activities. Business service industries, including
technology-intensive knowledge-based industries such as information management
and data communications, have been the economy's engines of growth in the
1990's, expanding substantially from 1992 to 1996. Unemployment in Greater
Washington fell from 5.4% in 1992 to 3.4% in 1996, well below the national rate
of 5.4%. In 1996, the area had a median household income of $48,100, the
highest in the country.

According to Spaulding & Slye, total office space supply in the Greater
Washington area was 244.7 million square feet in 1996 compared to 239.6 million
square feet in 1992, an increase of 5.1 million square feet, while during the
same period the market absorbed 14.1 million square feet, resulting in a
decrease in the availability rate from 14.4% in 1992 to 10.4% in 1996. The
absorption was particularly strong in 1995 and 1996, with approximately 9.2
million square feet of absorption and an increase in average asking rent from
$20.85 per square foot to $22.76 per square foot.

New York City

New York City is a world renowned business capital and cultural center, with
service and retail industries driving its economy. New York remains the
nation's leader in financial services and attracts international transactions
and global businesses. Despite increasing costs, New York City's economy has
remained competitive in the areas of retail/wholesale trade and business
services, which combine for over one-half of the City's employment base. The
employment base for this sector has increased by 8%, or 87,000 net new jobs,
during the past five years. The City's unemployment rate has fallen from 11% in
1992 to 8.8% in 1996.

According to information provided by Insignia/ESG, the Park Avenue Submarket
of midtown Manhattan in 1996 consisted of 25.6 million square feet of space,
with supply up 200,000 square feet over 1992. Availability rate declined in the
same period from 15.1% to 11.4% in midtown Manhattan and asking rent increased
from $40.36 per square foot to $44.40 per square foot.

11
<PAGE>

The following graph provides information regarding availability rates and
average asking rental rates at year end for each of the years from 1992 through
1996 for the combined submarkets in which the Company's Property's are located
in Greater Boston, Greater Washington, D.C. and New York City office markets.

[GRAPH APPEARS HERE]

Combined Company Markets /1/
Average Quoted Market Rent & Availability Rate/2/

<TABLE>
<CAPTION>
COMBINED COMPANY
MARKETS

<S> <C>
1992 $27.81
1993 $30.03
1994 $29.97
1995 $30.55
1996 $30.87

1992 11.7%
1993 11.7%
1994 11.6%
1995 9.7%
1996 8.8%
</TABLE>

(1) Includes Company submarkets in Greater Boston, Greater Washington, D.C. and
New York City.
(2) Weighted by Escalated Rent in each of the Company's submarkets,
respectively.
Source: Complied from third party sources.

12
<PAGE>

The following chart shows the geographic location of the Company's Office
and Industrial Properties by net rentable square feet and 1996 Escalated Rent:
<TABLE>
<CAPTION>
NET RENTABLE SQUARE FEET OF
OFFICE AND INDUSTRIAL PROPERTIES
----------------------------------------------------
NUMBER CLASS A PERCENT
OF OFFICE R&D INDUSTRIAL OF
MARKET/SUBMARKET PROPERTIES BUILDINGS PROPERTIES PROPERTIES TOTAL TOTAL
---------------- ---------- --------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
GREATER BOSTON
East Cambridge.. 5 555,149 67,362 -- 622,511 7.3%
Route 128 NW
Bedford, MA..... 3 90,000 383,704 -- 473,704 5.6
Billerica, MA... 1 -- 64,140 -- 64,140 .8
Burlington, MA.. 2 152,555 -- -- 152,552 1.8
Lexington, MA
(2)............. 10 790,957 30,000 -- 820,957 9.6
Route 128/MA
Turnpike
Waltham, MA..... 6 307,390 -- -- 307,390 3.6
Route 128 SW
Westwood, MA.... 2 -- -- 247,318 247,318 2.9
Downtown
Boston.......... 1 30,526 -- -- 30,526 0.4
--- --------- --------- ------- --------- ------
Subtotal......... 30 1,926,574 545,206 247,318 2,719,098 31.9
GREATER
WASHINGTON, D.C.
SW Washington,
D.C.(3)......... 4 1,557,447 -- -- 1,557,447 18.3
West End
Washington,
D.C. ........... 1 276,906 -- -- 276,906 3.3
Montgomery
County, MD
Bethesda, MD.... 3 680,000 -- -- 680,000 8.0
Gaithersburg, MD
(4)............. 1 122,157 -- -- 122,157 1.4
Fairfax County,
VA
Herndon, VA
(5)............. 2 -- 112,118 -- 112,118 1.3
Reston, VA (6).. 2 440,000 -- -- 440,000 5.2
Springfield, VA
(3)(7).......... 11 -- 789,428 -- 789,428 9.3
Prince George's
County, MD
Landover, MD.... 3 -- -- 236,743 236,743 2.8
--- --------- --------- ------- --------- ------
Subtotal......... 27 3,076,710 901,546 236,743 4,214,999 49.5
MIDTOWN MANHATTAN
Park Avenue..... 1 1,000,070 -- -- 1,000,070 11.7
GREATER SAN
FRANCISCO
Hayward, CA..... 1 -- -- 221,000 221,000 2.6
San Francisco,
CA (8).......... 11 -- 144,479 60,000 204,479 2.4
--- --------- --------- ------- --------- ------
Subtotal......... 12 -- 144,479 281,000 425,479 5.0
BUCKS COUNTY,
PA............... 1 -- -- 161,000 161,000 1.9
--- --------- --------- ------- --------- ------
TOTAL............ 71 6,003,354 1,591,231 926,061 8,520,646 100.00%
=== ========= ========= ======= ========= ======
PERCENT OF TOTAL............. 70.4% 18.7% 10.9% 100.0%
NUMBER OF OFFICE AND
INDUSTRIAL PROPERTIES........ 35 27 9 71
<CAPTION>
1996 ESCALATED RENT OF OFFICE AND
INDUSTRIAL PROPERTIES (1)
----------------------------------------------------
CLASS A PERCENT
OFFICE R&D INDUSTRIAL OF
MARKET/SUBMARKET BUILDINGS PROPERTIES PROPERTIES TOTAL TOTAL
---------------- ------------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C>
GREATER BOSTON
East Cambridge.. $ 13,792,266 $ 1,315,519 $ -- $ 15,107,785 8.0%
Route 128 NW
Bedford, MA..... 1,513,011 3,265,991 -- 4,779,002 2.5
Billerica, MA... -- 598,478 -- 598,478 0.3
Burlington, MA.. 3,131,736 -- -- 3,131,736 1.7
Lexington, MA
(2)............. 12,161,399 198,000 -- 12,359,399 6.5
Route 128/MA
Turnpike
Waltham, MA..... 6,633,408 -- -- 6,633,408 3.5
Route 128 SW
Westwood, MA.... -- -- 1,336,463 1,336,463 0.7
Downtown
Boston.......... 1,080,172 -- -- 1,080,172 0.6
------------- ------------ ----------- ------------- -------
Subtotal......... 38,311,992 5,377,988 1,336,463 45,026,443 23.8
GREATER
WASHINGTON, D.C.
SW Washington,
D.C.(3)......... 52,738,757 -- -- 52,738,757 27.9
West End
Washington,
D.C. ........... 11,712,087 -- -- 11,712,087 6.2
Montgomery
County, MD
Bethesda, MD.... 15,047,361 -- -- 15,047,361 8.0
Gaithersburg, MD
(4)............. 2,195,966 -- -- 2,195,966 1.2
Fairfax County,
VA
Herndon, VA
(5)............. -- -- -- -- --
Reston, VA (6).. -- -- -- -- --
Springfield, VA
(3)(7).......... -- 6,608,446 -- 6,608,446 3.5
Prince George's
County, MD
Landover, MD.... -- -- 1,734,547 1,734,547 0.9
------------- ------------ ----------- ------------- -------
Subtotal......... 81,694,171 6,608,446 1,734,547 90,037,164 47.6
MIDTOWN MANHATTAN
Park Avenue..... 51,470,410 -- -- 51,470,410 27.2
GREATER SAN
FRANCISCO
Hayward, CA..... -- -- 234,000 234,000 0.1
San Francisco,
CA (8).......... -- 1,030,288 352,949 1,383,237 0.7
------------- ------------ ----------- ------------- -------
Subtotal......... $ -- 1,030,288 586,949 1,617,237 0.9
BUCKS COUNTY,
PA............... -- - 865,613 865,613 0.5
------------- ------------ ----------- ------------- -------
TOTAL............ $171,476,573 $13,016,722 $4,523,572 $189,016,867 100.0%
============= ============ =========== ============= =======
PERCENT OF TOTAL............. 90.1% 6.9% 2.4% 100.0%
NUMBER OF OFFICE AND
INDUSTRIAL PROPERTIES........ 35 27 9 71
</TABLE>
- ----
(1) Escalated Rent represents the annualized monthly Base Rent in effect
(after giving effect to any contractual increases in monthly Base Rent
that have occurred up to December 31, 1996) plus annualized monthly tenant
pass-throughs of operating and other expenses (but excluding electricity
costs paid by tenants) under each lease executed as of December 31, 1996,
or, if such monthly rent has been reduced by a rent concession, the
monthly rent that would have been in effect at such date in the absence of
such concession.
(2) Does not include 1996 Escalated Rent for one Class A Office Building
currently under development by the Company.
(3) Certain of such Properties are leased on the basis of net usable square
feet (which have been converted to net rentable square feet for purposes
of this table) due to the requirements of the General Services
Administration.
(4) The Company will own a 75.0% general partner interest in the limited
partnership that will own this property. Because of the priority of the
Company's partnership interest, the Company expects to receive any
partnership distributions that are made with respect to this property.
(5) Does not include 1996 Escalated Rent for two R&D Properties currently
under redevelopment by the Company.
(6) Does not include 1996 Escalated Rent for two Class A Office Buildings
currently under development by the Company. The Company is acting as
development manager of, and will be the 25.0% managing member of a limited
liability company that will own the Properties. The Company's economic
interest may increase above 25.0% depending upon the achievement of
certain performance goals.
(7) Does not include 1996 Escalated Rent for two Office Properties currently
under development by the Company.
(8) The Company will own a 35.7% controlling general partnership interest in
the nine R&D Properties and two Industrial Properties located in Greater
San Francisco, California.

<PAGE>

UNSECURED LINE OF CREDIT

Upon completion of the Offering, the Company expects to have a three-year
$300 million Unsecured Line of Credit with the Line of Credit Bank to
facilitate its development and acquisition activities and for working capital
purposes. At the closing of the Offering, the Company expects to borrow
approximately $42.8 million under the Unsecured Line of Credit to repay
indebtedness incurred in connection with the Development Properties.

STRUCTURE AND FORMATION OF THE COMPANY

FORMATION TRANSACTIONS

Each Property that will be owned by the Company at the completion of the
Offering is currently owned by a partnership (a "Property Partnership") of
which Messrs. Zuckerman and Linde and others affiliated with Boston Properties,
Inc. control the managing general partner and, in most cases, a majority
economic interest. The other direct or indirect investors in the Property
Partnerships include persons formerly affiliated with Boston Properties, Inc.,
as well as private investors (including former owners of the land on which the
Properties were developed) who are not affiliated with Boston Properties, Inc.

Prior to or simultaneously with the completion of the Offering, the Company
will engage in the transactions described below (the "Formation Transactions"),
which are designed to consolidate the ownership of the Properties and the
commercial real estate business of the Company in the Operating Partnership, to
facilitate the Offering and to enable the Company to qualify as a REIT for
federal income tax purposes commencing with the taxable year ending December
31, 1997.

. Boston Properties, Inc., a Massachusetts corporation that was founded in
1970, will be reorganized to change its jurisdiction of organization to
Delaware.

. The Operating Partnership will be organized as a Delaware limited
partnership.

. The Company will sell 31,400,000 shares of Common Stock in the Offering
and will contribute approximately $727.0 million, the net proceeds of
the Offering, to the Operating Partnership in exchange for an equivalent
number of OP Units.

. Pursuant to one or more option, contribution or merger agreements, (i)
certain Property Partnerships will contribute Properties to the
Operating Partnership, or will merge into the Operating Partnership, in
exchange for OP Units and the assumption of debt, and the partners of
such Property Partnerships will receive such OP Units either directly as
merger consideration or as a distribution from the Property Partnership,
and (ii) certain persons, both affiliated and not affiliated with the
Company, will contribute their direct and indirect interests in certain
Property Partnerships to the Operating Partnership in exchange for OP
Units.

. Prior to the completion of the Offering, the Company will contribute
substantially all of its Greater Washington, D.C. third-party property
management business to Boston Properties Management, Inc. (the
"Development and Management Company"), a subsidiary of the Operating
Partnership. In order to retain qualification as a REIT, the Operating
Partnership will own a 1.0% voting interest but will hold a 95.0%
economic interest in the Development and Management Company. The
remaining voting and economic interest will be held by officers and
directors of the Development and Management Company. In addition, the
other management and development operations of the Company will be
contributed to the Operating Partnership.

. In connection with the transactions described in the preceding two
paragraphs, the Company will issue a total of 16,066,459 OP Units.

14
<PAGE>

. The contribution to the Operating Partnership of the Properties or of
the direct and indirect interests in the Property Partnerships is
subject to all of the terms and conditions of the related option, merger
and contribution agreements. With respect to direct or indirect
contributions of interests to the Property Partnerships, the Operating
Partnership will assume all the rights, obligations and responsibilities
of the holders of such interests. The transfer of such interests is
subject to the completion of the Offering. Any working capital or other
cash balance of the Property Partnership as of immediately prior to the
Offering will be distributed to the holders of such interests prior to
the contribution to the Operating Partnership. The contribution
agreements with respect to such interests generally contain
representations only with respect to the ownership of such interests by
the holders thereof and certain other limited matters.

. The Operating Partnership will enter into a participating lease with ZL
Hotel LLC. Marriott International, Inc. will continue to manage the
Hotel Properties under the Marriott(R) name pursuant to management
agreements with ZL Hotel LLC. Messrs. Zuckerman and Linde will be the
sole member-managers of the lessee and will own a 9.8% economic interest
in ZL Hotel LLC. ZL Hotel Corp. will own the remaining economic
interests in ZL Hotel LLC. One or more unaffiliated public charities
will own all of the capital stock of ZL Hotel Corp.

. The Company, through the Operating Partnership, expects to enter into
the $300 million Unsecured Credit Facility prior to or concurrently with
the completion of the foregoing Formation Transactions.

. Approximately $707.1 million of the net proceeds of the Offering,
together with $42.8 million drawn under the Unsecured Line of Credit,
will be used by the Operating Partnership to repay certain mortgage debt
secured by the Properties and to refinance existing indebtedness on
Development Properties, the interest on which will continue to be
capitalized during the development period.

As a result of the Formation Transactions, (i) the Company will own
35,333,541 OP Units, which will represent an approximately 68.7% economic
interest in the Operating Partnership, and Messrs. Zuckerman and Linde and
other persons with a direct or indirect interest in the Property Partnerships
will own 16,066,459 OP Units, which will represent the remaining approximately
31.3% economic interest in the Operating Partnership and (ii) the Company will
indirectly own a fee interest in all of the Properties. At the completion of
the Formation Transactions, Messrs. Zuckerman and Linde will own an aggregate
of 17,322,610 shares of Common Stock and OP Units.

In forming the Company, the Company will succeed to the ownership of each of
the Properties or the interests therein based upon a value for such property
determined by the Company. The valuation of the Company as a whole has been
determined based primarily upon a multiple of estimated funds from operations
and adjusted funds from operations attributable to all assets of the Company,
including the Company's interests in the Development and Management Company.

CONSEQUENCES OF THE OFFERING AND THE FORMATION TRANSACTIONS

Upon completion of the Formation Transactions, the Company will indirectly
own a fee interest in all of the Properties. The Operating Partnership will
hold substantially all of the assets of the Company. Based on the assumed
initial public offering price of the Common Stock, (i) the purchasers of Common
Stock in the Offering will own 88.9% of the outstanding Common Stock (or 61.1%
assuming exchange of all OP Units for shares of Common Stock), (ii) the Company
will be the sole general partner of the Operating Partnership and will own
68.7% of the interests in the Operating Partnership and (iii) Messrs. Zuckerman
and Linde will beneficially own, directly or indirectly through affiliates (not
including the Company), a total of 17,322,610 shares of Common Stock and OP
Units (representing a 33.7% economic interest in the Company). Pursuant to the
partnership agreement governing the Operating Partnership (the "Operating
Partnership Agreement"), persons receiving OP Units in the Formation
Transactions will have certain rights, beginning fourteen months after the
completion of the Offering, to cause the Operating Partnership to redeem their
OP Units for cash, or, at the election of the Company, to exchange their OP
Units for shares of Common Stock on a one-for-one basis. See "Underwriting"

15
<PAGE>

for certain transfer restrictions with respect to the OP Units and to shares of
Common Stock issued in exchange for such OP Units that are applicable to
Messrs. Zuckerman and Linde and other senior officers of the Company.

The aggregate estimated value to be given by the Operating Partnership for
the Properties or for interests in the Property Partnerships, and for the
development and management business of the Company, is approximately $1.94
billion, consisting of OP Units having a value of $500.0 million and the
assumption of $1.44 billion of indebtedness. The aggregate book value of the
interests and assets to be transferred to the Operating Partnership is
approximately negative $576.6 million. The Company does not believe that the
book value of such interests and assets reflects the fair market value of such
interests and assets.

No independent third-party appraisals, valuations or fairness opinions have
been obtained by the Company in connection with the Formation Transactions.
Accordingly, there can be no assurance that the value of the OP Units received
in the Formation Transactions by persons with interests in the Property
Partnerships is equivalent to the fair market value of the interests and assets
acquired by the Operating Partnership. See "Risk Factors--No Assurance as to
Value."

The following diagram depicts the ownership structure of the Company and the
Operating Partnership upon completion of the Offering and the Formation
Transactions:

16
<PAGE>

Boston Properties,Inc.,
Including its Principal Subsidiaries

Public M. Zuckerman,
Shareholders E. Linde and
(88.9%) affiliated parties
(11.1%)

BOSTON PROPERTIES, INC.
("COMPANY")
<TABLE>
<CAPTION>

<S> <C> <C> <C> <C> <C>
M. Zuckerman, General M. Zuckerman Public
E. Linde and Other Other Partner and Charities
affiliated parties Management Limited Partners Interest E. Linde
(1.0%)/
Limited Limited Limited Limited Managing Membership
Partner Partner Partner Partner Membership Interest
Interests Interests Interests Interest Interest (90.2%)
(25.9%) (2.3%) (3.1%) (67.7%) (9.8%)

Boston Properties Rental ZL Hotel LLC
Limited Partnership Payments (Lessee of Hotel Properties)
("Operating Partnership") on the
Hotel
Properties
Management
Officers of the Contract
Development
and
Voting Management
Interest Company Marriott(R) International, Inc.
(1%)/ as
Economic Voting Hotel
Interest Interest Operator
(95%) (99%)/
Economic
Interest
(5%)

Boston Properties
Management,
Inc.
("Development and
Management Company")
</TABLE>

<PAGE>

BENEFITS TO RELATED PARTIES

Certain affiliates of the Company will realize certain material benefits in
connection with the Formation Transactions, including the following:

. In respect of their respective ownership interests in the Property
Partnerships and the development and management business of the Company,
Messrs. Zuckerman and Linde will become beneficial owners of a total of
17,322,610 shares of Common Stock and OP Units, with a total value of
approximately $433.1 million based on the assumed initial public
offering price of the Common Stock, which value may differ from the fair
market value of such interests and assets. Other persons who will be
officers of the Company at the completion of the Offering will receive
1,186,298 OP Units for their interests in the Property Partnerships.

. Approximately $749.9 million of indebtedness, of which $707.1 million is
secured by the Properties, and $42.8 million is due to Messrs. Zuckerman
and Linde for amounts loaned in connection with the Development
Properties, and the related additional and accrued interest thereon, to
be assumed by the Operating Partnership will be repaid in the Formation
Transactions. A portion of this debt was previously guaranteed by
Messrs. Zuckerman and Linde. In addition, guarantees by Messrs.
Zuckerman and Linde with respect to certain other indebtedness that is
not being repaid in the Formation Transactions may be released. To the
extent such guarantees are not released, the Operating Partnership will
agree to indemnify Messrs. Zuckerman and Linde for any damages that may
arise due to the failure of the Operating Partnership to repay such
amounts when due.

. Messrs. Zuckerman and Linde and others receiving OP Units in connection
with the Formation Transactions will have registration rights with
respect to shares of Common Stock that may be issued in exchange for OP
Units.

. In connection with certain development projects or rights, Messrs.
Zuckerman and Linde have personally guaranteed, in certain instances,
performance of contractual obligations. In connection with the Formation
Transactions, they will be relieved of such guarantees or, to the extent
not so relieved, indemnified by the Operating Partnership for damages to
them that may arise from the Operating Partnership's failure to perform
such obligations in accordance with their terms.

RESTRICTIONS ON TRANSFER

Under the Operating Partnership Agreement, persons receiving OP Units in the
Formation Transactions are prohibited from transferring such OP Units, except
under certain limited circumstances, for a period of one year. In addition,
Messrs. Zuckerman and Linde and the other senior officers of the Company have
agreed not to sell any shares of Common Stock owned by them at the completion
of the Offering or acquired by them upon exchange of OP Units for a period of
two years after the completion of the Offering without the consent of Merrill
Lynch & Co.

RESTRICTIONS ON OWNERSHIP OF COMMON STOCK

Due to limitations on the concentration of ownership of stock of a REIT
imposed by the Internal Revenue Code of 1986, as amended (the "Code"), and to
otherwise address concerns relating to concentration of capital stock
ownership, the certificate of incorporation of the Company (the "Certificate")
prohibits any stockholder from actually or beneficially owning more than 6.6%
of the outstanding shares of Common Stock (the "Ownership Limit"), except that
each of Messrs. Zuckerman and Linde together with certain family members and
affiliates of each, and certain "look through entities," may actually and
beneficially own up to 15.0% of the outstanding shares of Common Stock. See
"Risk Factors--Risks Relating to Control of the Company" and "Description of
Capital Stock--Restrictions on Transfers."

18
<PAGE>

THE OFFERING

All of the shares of Common Stock offered hereby are being sold by the
Company. None of the Company's stockholders are selling any Common Stock in the
Offering.

<TABLE>
<S> <C>
Common Stock Offered........................... 31,400,000
U.S. Offering............................... 25,120,000
International Offering...................... 6,280,000
Common Stock Outstanding After the
Offering(l)................................... 35,333,541
Common Stock and OP Units Outstanding After the
Offering(2)................................... 51,400,000
Use of Proceeds................................ To reduce indebtedness and for
general corporate and working
capital purposes
Proposed NYSE Symbol........................... "BXP"
</TABLE>
- --------

(1) Excludes 4,883,000 shares of Common Stock reserved for issuance pursuant to
the Stock Option Plan, of which not more than 2,929,800 shares will be
subject to outstanding options upon completion of the Offering.

(2) Includes 16,066,459 shares of Common Stock that may be issued in exchange
for OP Units (which are redeemable by the holders for cash or, at the
election of the Company, shares of Common Stock on a one-for-one basis
beginning fourteen months after completion of the Offering). Excludes
4,883,000 shares of Common Stock reserved for issuance pursuant to the
Stock Option Plan.

DISTRIBUTIONS

The Company intends to make regular quarterly distributions to its
stockholders. The Company intends to pay a pro rata distribution with respect
to the period commencing on the completion of the Offering and ending on ,
1997, based upon $0.375 per share for a full quarter. On an annualized basis,
this would be $1.50 per share (of which the Company currently estimates $
may represent a return of capital for tax purposes), or an annual distribution
rate of 6.0% based on the initial public offering price per share of $25.00.
The Company estimates that this initial distribution will represent
approximately 94.8% of estimated Cash Available for Distribution for the 12
months ended December 31, 1997. The Company established this distribution rate
based upon an estimate of Cash Available for Distribution after the Offering.
See "Distributions" for information as to how this estimate was derived. The
Company intends to maintain its initial distribution rate for the twelve-month
period following completion of the Offering unless actual results of
operations, economic conditions or other factors differ materially from the
assumptions used in its estimate. Distributions by the Company will be
determined by the Board of Directors and will be dependent upon a number of
factors. The Company believes that its estimate of Cash Available for
Distribution constitutes a reasonable basis for setting the initial
distribution; however, no assurance can be given that the estimate will prove
accurate, and actual distributions may therefore be significantly different
from the expected distributions. In addition, in order to maintain its
qualification as a REIT under the Code, the Company is required to distribute
currently 95% of its taxable income. See "Distributions." The Company does not
intend to reduce the expected distribution per share if the Underwriters'
overallotment option is exercised.

TAX STATUS OF THE COMPANY

The Company intends to elect to be taxed as a REIT under Sections 856 through
860 of the Code, commencing with its taxable year ending December 31, 1997. The
Company believes, and has obtained an opinion of tax counsel to the effect
that, its organization and proposed method of operation will enable it to meet
the requirements for qualification as a REIT. To maintain REIT status, the
Company must meet a number of organizational and operational requirements,
including a requirement that it currently distribute at least 95% of its
taxable income to its stockholders. As a REIT, the Company generally will not
be subject to federal income tax on net income it distributes currently to its
stockholders. If the Company fails to qualify as a REIT in any taxable year, it
will be subject to federal income tax at regular corporate rates. See "Federal
Income Tax Consequences--Failure to Qualify" and "Risk Factors--Failure to
Qualify as a REIT." Even if the Company qualifies for taxation as a REIT, the
Company may be subject to certain federal, state and local taxes on its income
and property.

19
<PAGE>

SUMMARY SELECTED FINANCIAL INFORMATION

The following table sets forth unaudited pro forma financial and other
information for the Company and combined historical financial information for
the Boston Properties Predecessor Group. The following summary selected
financial information should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus.

The combined historical balance sheets as of December 31, 1996 and 1995 and
the combined statements of operations for the years ended December 31, 1996,
1995 and 1994 of the Boston Properties Predecessor Group have been derived from
the historical combined financial statements audited by Coopers & Lybrand,
L.L.P., independent accountants, whose report with respect thereto is included
elsewhere in this Prospectus.

Unaudited pro forma operating information for the year ended December 31,
1996 is presented as if the completion of the Offering and the Formation
Transactions occurred at January 1, 1996, and, therefore, incorporates certain
assumptions that are described in the notes to the Pro Forma Condensed
Consolidated Statements of Operations included elsewhere in this Prospectus.
The unaudited pro forma balance sheet data is presented as if the
aforementioned transactions had occurred on December 31, 1996.

The pro forma information does not purport to represent what the Company's
financial position or results of operations would actually have been if these
transactions had, in fact, occurred on such date or at the beginning of the
period indicated, or to project the Company's financial position or results of
operations at any future date or for any future period.

20
<PAGE>

THE COMPANY (PRO FORMA) AND THE BOSTON PROPERTIES PREDECESSOR GROUP
(HISTORICAL)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
PRO FORMA
1996 1996 1995 1994 1993 1992
---------- ---------- ---------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental revenue (1).... $ 215,334 $ 195,006 $ 179,265 $ 176,725 $ 182,776 $ 177,370
Hotel revenue (1)..... -- 65,678 61,320 58,436 54,788 52,682
Fee and other income
(2).................. 7,130 9,249 8,140 8,922 7,997 11,160
---------- ---------- ---------- --------- --------- ---------
Total revenues...... 222,464 269,933 248,725 244,083 245,561 241,212
Expenses:
Property expenses
(2).................. 60,236 58,195 55,421 53,239 54,766 49,621
Hotel expenses (1).... -- 46,734 44,018 42,753 40,286 38,957
General and adminis-
trative.............. 11,110 10,754 10,372 10,123 9,549 9,331
Interest.............. 53,061 107,121 106,952 95,331 88,510 90,443
Real estate
depreciation and
amortization......... 35,900 35,643 33,240 32,509 32,300 34,221
Other depreciation and
amortization......... 1,999 2,829 2,429 2,545 2,673 2,255
---------- ---------- ---------- --------- --------- ---------
Total expenses...... 162,306 261,276 252,432 236,500 228,084 224,828
Income (loss) before
extraordinary item and
minority interest in
combined partnership... 60,158 8,657 (3,707) 7,583 17,477 16,384
Minority interest in a
combined partnership... (384) (384) (276) (412) (391) (374)
---------- ---------- ---------- --------- --------- ---------
Income (loss) before
extraordinary item..... 59,774 8,273 (3,983) 7,171 17,086 16,010
Extraordinary item--loss
on early extinguishment
of debt................ -- (994) -- -- -- --
Minority interest in Op-
erating Partnership
(3).................... (18,709) -- -- -- -- --
---------- ---------- ---------- --------- --------- ---------
Net income (loss)....... $ 41,065 $ 7,279 $ (3,983) $ 7,171 $ 17,086 $ 16,010
========== ========== ========== ========= ========= =========
Net income per share.... $ 1.16 -- -- -- -- --
Weighted average number
of shares outstanding.. 35,334 -- -- -- -- --
Weighted average number
of shares and OP Units
outstanding............ 51,400 -- -- -- -- --
BALANCE SHEET DATA, AT
PERIOD END:
Real estate, before
accumulated
depreciation........... $1,045,854 $1,035,571 $1,012,324 $ 984,853 $ 983,751 $ 982,348
Real estate, after accu-
mulated depreciation... 781,943 771,660 773,810 770,763 789,234 811,815
Cash and cash equiva-
lents.................. 7,687 8,998 25,867 46,289 50,697 28,841
Total assets............ 889,505 896,511 922,786 940,155 961,715 971,648
Total Indebtedness...... 712,674 1,442,476 1,401,408 1,413,331 1,426,882 1,417,940
Stockholders' or owners'
equity (deficiency).... 100,492 (576,632) (506,653) (502,230) (495,104) (48,398)
OTHER DATA:
EBITDA (4).............. $ 103,348 $ 153,566 $ 138,321 $ 137,269 $ 140,261 $ 142,627
Funds from operations
(5).................... 60,508 36,318 29,151 39,568 49,240 50,097
Cash flow from operating
activities............. -- 53,804 30,933 47,566 59,834 50,468
Cash flow from investing
activities............. -- (23,689) (36,844) (18,424) (9,437) (48,257)
Cash flow from financing
activities............. -- (46,984) (14,511) (33,550) (28,540) 1,365
</TABLE>
- -------
(1) Rental revenue for pro forma 1996 includes the lease revenue that the
Company will receive under the lease for the two Hotel Properties. After
entering into such lease, the Company will not recognize direct hotel
revenues and expenses.
(2) The development and management operations of the Company are reflected on a
gross basis in the historical combined financial statements. In connection
with the Formation Transactions, substantially all of the Greater
Washington D.C. third party property management business will be
contributed by the Company to the Development and Management Company and
thereafter the operations of the Development and Management Company will be
accounted for by the Company under the equity method in the pro forma
statements; therefore, the pro forma statements include (i) revenues and
expenses on a gross basis, from development and management conducted
directly by the Operating Partnership in the respective income and expense
line items and (ii) the Development and Management Company's net operations
in the fee and other income line item. See "Business and Properties--
Development Consulting, Property Management and Third Party Management."

21
<PAGE>

(3) Represents the approximate 31.3% interest in the Operating Partnership that
will be owned by Messrs. Zuckerman and Linde and other continuing investors
in the Properties.
(4) EBITDA means operating income before mortgage and other interest, income
taxes, depreciation and amortization. The Company believes EBITDA is useful
to investors as an indicator of the Company's ability to service debt or
pay cash distributions. EBITDA, as calculated by the Company, is not
comparable to EBITDA reported by other REITs that do not define EBITDA
exactly as the Company defines that term. EBITDA does not represent cash
generated from operating activities in accordance with GAAP and should not
be considered as an alternative to operating income or net income as an
indicator of performance or as an alternative to cash flows from operating
activities as an indicator of liquidity. EBITDA for the respective periods
is calculated as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
PRO FORMA
1996 1996 1995 1994 1993 1992
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
EBITDA
Income (loss) before
minority interest and
extraordinary item..... $ 60,158 $ 8,657 $ (3,707) $ 7,583 $ 17,477 $ 16,384
Add:
Interest expense...... 53,061 107,121 106,952 95,331 88,510 90,443
Real estate deprecia-
tion and amortiza-
tion................. 35,900 35,643 33,240 32,509 32,300 34,221
Other depreciation and
amortization......... 1,999 2,829 2,429 2,545 2,673 2,255
Less: Minority combined
partnership's
share of EBITDA... (684) (684) (593) (699) (699) (676)
-------- -------- -------- -------- -------- --------
EBITDA.............. $150,434 $153,566 $138,321 $137,269 $140,261 $142,627
======== ======== ======== ======== ======== ========
EBITDA (Company's
68.7% Share)....... $103,348
</TABLE>

(5) The Company generally considers Funds from Operations an appropriate
measure of liquidity of an equity REIT because industry analysts have
accepted it as a performance measure of equity REITs. "Funds from
Operations" as defined by NAREIT means net income (loss) (computed in
accordance with GAAP) excluding significant non-recurring items, gains (or
losses) from debt restructuring and sale of property plus depreciation and
amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. The Company's Funds from
Operations are not comparable to Funds from Operations reported by other
REITs that do not define that term using the current NAREIT definition or
that interpret the current NAREIT definition differently than does the
Company. The Company believes that in order to facilitate a clear
understanding of the combined historical operating results of the
Properties and the Company, funds from Operations should be examined in
conjunction with the income (loss) as presented in the audited combined
financial statements and information included elsewhere in this Prospectus.
Funds from Operations should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indicator of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it indicative of funds available to fund the Company's
cash needs, including its ability to make distributions.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
PRO FORMA
1996 1996 1995 1994 1993 1992
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FUNDS FROM OPERATIONS
Income (loss) before
minority interest and
extraordinary item.... $60,158 $ 8,657 $(3,707) $ 7,583 $17,477 $16,384
Add:
Real estate
depreciation and
amortization........ 35,900 35,643 33,240 32,509 32,300 34,221
Less:
Minority combined
partnership's share
of funds from
operations.......... (479) (479) (382) (524) (537) (508)
Non-recurring item--
significant lease
termination fee(A).. (7,503) (7,503) -- -- -- --
------- ------- ------- ------- ------- -------
Funds from operations.. $88,076 $36,318 $29,151 $39,568 $49,240 $50,097
======= ======= ======= ======= ======= =======
Funds from operations
(Company's 68.7%
Share)................ $60,508 $ $ $ $ $
</TABLE>
- -------
(A) For Funds from Operations reporting purposes, the Company believes this
lease termination fee to be non-recurring.

<PAGE>

RISK FACTORS

Prospective investors should carefully consider the following matters in
conjunction with the other information contained in this Prospectus before
purchasing shares of Common Stock in the Offering.

REAL ESTATE DEVELOPMENT RISKS

The Company intends to pursue the development of office, industrial and
hotel properties, both for the Company's ownership and on a third-party fee-
for-services basis. See "Business and Growth Strategies." To the extent that
the Company engages in such development activities, it will be subject to the
risks normally associated with such activities. Such risks include, without
limitation, risks relating to the availability and timely receipt of zoning,
land use, building, occupancy, and other regulatory approvals, the cost and
timely completion of construction (including risks from causes beyond the
Company's control, such as weather, labor conditions or material shortages)
and the availability of construction financing on favorable terms. These risks
could result in substantial unanticipated delays or expense and, under certain
circumstances, could prevent completion of development activities once
undertaken, any of which could have an adverse effect on the financial
condition and results of operations of the Company and on the amount of funds
available for distribution to stockholders.

CONFLICTS OF INTEREST

Influence of Directors, Officers and Significant Stockholders

Officers and directors of the Company, including Messrs. Zuckerman and
Linde, will receive material benefits at the completion of the Offering,
including receipt of an aggregate of 14,575,367 OP Units and repayment of
approximately $749.9 million of indebtedness owed by the partnerships in which
they had a direct or indirect interest. Upon completion of the Offering,
Messrs. Zuckerman and Linde will own an aggregate of 17,322,610 shares of
Common Stock and OP Units representing approximately a 33.7% economic interest
in the Company. Messrs. Zuckerman and Linde also will receive certain benefits
from the Formation Transactions that will not generally be received by other
participants in the Formation Transactions. Such benefits include, without
limitation, repayment of guaranteed indebtedness and the release of guarantees
and deferral of tax consequences of contribution of the Properties to the
Operating Partnership. See "Certain Transactions--Formation Transactions."
Depending on their particular tax situations, Messrs. Zuckerman and/or Linde
could have interests that conflict with the interests of other holders of
shares of Common Stock. Messrs. Zuckerman and Linde will have substantial
influence on the management and operations of the Company and, as
stockholders, on the outcome of any matters submitted to a vote of the
stockholders, and such influence might be exercised in a manner inconsistent
with the interests of other stockholders. See "Management--Directors and
Executive Officers" and "Principal Stockholders."

Tax Consequences of Sale of Properties

Certain holders of OP Units, including Messrs. Zuckerman and Linde, may
incur adverse tax consequences upon the sale of certain of the Properties to
be owned by the Company at the completion of the Formation Transactions or the
repayment of certain indebtedness which are different from the tax
consequences to the Company and persons who purchase shares of Common Stock in
the Offering. Consequently, such holders may have different objectives
regarding the appropriate pricing and timing of any such sale or repayment of
indebtedness. While the Company will have the exclusive authority under the
Operating Partnership Agreement to determine whether, when, and on what terms
to sell a Property or when to refinance or repay indebtedness, any such
decision would require the approval of the Board of Directors. As Directors of
the Company, Messrs. Zuckerman and Linde will have substantial influence with
respect to any such decision, and such influence could be exercised in a
manner inconsistent with the interests of some, or a majority, of the
Company's stockholders, including in a manner which could prevent completion
of a Property sale or the repayment of indebtedness. See "--Make-Whole
Payments," and "Operating Partnership Agreement--Management."

23
<PAGE>

Other Real Estate Interests

One property (the "Excluded Property") that is managed by the Company and in
which Messrs. Zuckerman and/or Linde hold ownership interests is not being
contributed to the Company as part of the Formation Transactions. For a
description of the Excluded Property and certain option agreements related to
such property, see "Policies with Respect to Certain Activities--Conflict of
Interest Policies--Excluded Property." Messrs. Zuckerman and Linde will
continue to hold ownership interests in the Excluded Property that are not
contributed to the Operating Partnership. The Excluded Property is located in
the same markets as and may compete with the Company's Properties. Upon
completion of the Offering, the Excluded Property will be managed by the
Development and Management Company in return for a specified management fee.
There is no assurance, however, that the Excluded Property will continue to be
managed by the Development and Management Company.

Continued Involvement in Other Investment Activities

Messrs. Zuckerman and Linde have a broad and varied range of investment
interests. It is possible that companies in which one or both of Messrs.
Zuckerman and Linde has or may acquire an interest, and which are not directly
involved in real estate investment activities, will be owners of real property
and will acquire real property in the future. However, pursuant to their
employment and non-compete agreements with the Company, Messrs. Zuckerman and
Linde will not, in general, have management control over such companies and,
therefore, they may not be able to prevent one or more such companies from
engaging in activities that are in competition with activities of the Company.
See "Management--Employment Agreements."

MAKE-WHOLE PAYMENTS

The Operating Partnership Agreement provides that, for a period of 15 years
following the completion of the Offering (the "Make-Whole Period"), in
connection with the sale of, or the repayment or refinancing of indebtedness
on, any of the Designated Properties (as defined hereafter), the Company will
pay each person who contributed an interest in the Designated Property an
amount representing the federal and state income tax liability (assuming the
highest marginal federal and state income tax rates) associated with the
recognition of gain by such person in connection with any such transaction
(the "Make-Whole Amount"). No Make-Whole Amount would be due in the case of a
transaction that does not result in the recognition of gain for tax purposes
(such as Section 1031 "like-kind" exchanges under the Code). In order to
reduce the amount of gain that might be recognized by Messrs. Zuckerman and
Linde, they have agreed to guaranty, at the request of the Company in
connection with the sale of, or reduction of indebtedness on, any of the
Designated Properties, any other indebtedness of the Company, provided that
the aggregate amount of such guarantees, together with any then existing
guarantees of Messrs. Zuckerman and Linde of indebtedness of the Company,
shall not exceed the amounts of $ and $ , respectively (such amounts being
the respective amounts of indebtedness guaranteed by Messrs. Zuckerman and
Linde immediately following completion of the Offering).

The "Designated Properties" consist of the following properties: 599
Lexington Avenue, Independence Square, Capital Gallery, Democracy Center, the
U.S. International Trade Commission Building, Bedford Business Park, One
Cambridge Center, Long Wharf Marriott and Cambridge Center Marriott. As of
December 31, 1996, the Designated Properties accounted in the aggregate for
71.8% of the Company's Escalated Rent plus assumed annual participating lease
revenue with respect to the Hotel Properties. Payment of a Make-Whole Amount
may materially increase the cost and reduce the potential gain of the Company
in connection with the sale of, or the reduction of indebtedness on, a
Designated Property. The Make-Whole provisions may cause the Company to decide
not to sell, or to not reduce the indebtedness on, one or more of the
Designated Properties even if such sale, repayment or refinancing would be in
the best interests of the stockholders of the Company to do so in the absence
of the payment of Make-Whole Amounts. See "Operating Partnership Agreement--
Make-Whole Provisions."

NO ASSURANCE AS TO VALUE

The terms of the Formation Transactions were not determined by arm's-length
negotiations. The value of the Company was not determined on a property-by-
property basis because, in the view of management, the

24
<PAGE>

appropriate basis for valuing the Company is as an ongoing business
enterprise, rather than as a collection of assets. Therefore, the Company did
not obtain third-party appraisals of the Properties or valuations of the
Company. Accordingly, there can be no assurance that the value of shares of
Common Stock and OP Units issued in respect of the assets the Company will
succeed to in connection with the Formation Transactions accurately reflects
the respective fair market values of such assets. The total market
capitalization of the Company at the initial public offering price may not be
indicative of, and may exceed, the aggregate value of the individual
Properties and assets of the Company that would have been determined by
appraisals if such appraisals had been obtained. See "Structure and Formation
of the Company--Determination and Valuation of Ownership Interests."

RISKS RELATING TO CONTROL OF THE COMPANY

Ability to Change Policies without Stockholder Approval

The Company's operating and financial policies, including its policies with
respect to acquisitions, growth, operations, indebtedness, capitalization and
distributions, will be determined by the Company's Board of Directors.
Accordingly, stockholders will have little direct control over the Company's
policies, other than its policy of maintaining its qualification as a REIT for
federal income tax purposes. See "Policies With Respect to Certain
Activities."

Ability to Engage in Investment Activity Without Stockholder Approval

In the future, the Company expects to acquire additional real estate assets
pursuant to its investment strategies and consistent with its investment
policies. See "Business and Growth Strategies--External Growth" and "Policies
with Respect to Certain Activities--Investment Policies." The stockholders of
the Company will generally not be entitled to receive historical financial
statements regarding, or to vote on, any such acquisition and, instead, will
be required to rely entirely on the decisions of management.

Possible Adverse Consequences of Ownership Limit

In order to maintain its qualification as a REIT for federal income tax
purposes, not more than 50% in value of the outstanding stock of the Company
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code to include certain entities). See "Federal Income Tax
Consequences--Requirements for Qualification." In order to facilitate
maintenance of its qualification as a REIT for federal income tax purposes,
and to otherwise address concerns relating to concentration of capital stock
ownership, the Company generally has prohibited ownership, directly or by
virtue of the attribution provisions of the Code, by any single stockholder
(which does not include certain pension plans or mutual funds) of more than
6.6% of the issued and outstanding shares of the Company's Common Stock (the
"Ownership Limit"). The Board of Directors may waive or modify the Ownership
Limit with respect to one or more persons if it is satisfied, based upon the
advice of tax counsel, that ownership in excess of this limit will not
jeopardize the Company's status as a REIT for federal income tax purposes.
Notwithstanding the above, the Company's Certificate provides that each of
Messrs. Zuckerman and Linde, along with certain family members and affiliates
of each of Messrs. Zuckerman and Linde, respectively, as well as, in general,
pension plans and mutual funds, may actually and beneficially own up to 15% of
the outstanding shares of Common Stock. The Ownership Limit may have the
effect of inhibiting or impeding a change in control and, therefore, could
adversely affect the stockholders' ability to realize a premium over the then-
prevailing market price for the Common Stock in connection with such a
transaction.

Limitations on Acquisition of and Changes in Control Contained in the
Certificate and Bylaws and in the Operating Partnership Agreement

Certain provisions of the Company's Certificate and Bylaws (the "Bylaws")
and of the Operating Partnership Agreement may have the effect of inhibiting a
third party from making an acquisition proposal for the Company or of impeding
a change in control of the Company under circumstances that could otherwise
provide the holders of shares of Common Stock with the opportunity to realize
a premium over the then-prevailing market price of such shares. The Ownership
Limit described in the preceding paragraph also may have

25
<PAGE>

the effect of precluding acquisition of control of the Company even if such a
change in control were in the best interests of some, or a majority, of the
Company's stockholders. In addition, the Board of Directors has been divided
into three classes, the initial terms of which expire in 1998, 1999 and 2000,
with directors of a given class chosen for three-year terms upon expiration of
the terms of the members of that class. The staggered terms of the members of
the Board of Directors may adversely affect the stockholders' ability to
effect a change in control of the Company, even if such a change in control
were in the best interests of some, or a majority, of the Company's
stockholders. See "Management--Directors and Executive Officers." The
Certificate authorizes the Board of Directors to issue shares of preferred
stock ("Preferred Stock") in series and to establish the rights and
preferences of any series of Preferred Stock so issued. See "Description of
Capital Stock--Preferred Stock" and "Certain Provisions of Delaware law and
the Company's Certificate and Bylaws--Preferred Stock." The issuance of
Preferred Stock also could have the effect of delaying or preventing a change
in control of the Company, even if such a change in control were in the best
interests of some, or a majority, of the Company's stockholders. No shares of
Preferred Stock will be issued or outstanding immediately subsequent to the
Offering and the Company has no present intention to issue any such shares.
Prior to the completion of the Offering, the Company will authorize the
issuance of a series of preferred stock in connection with the adoption of a
shareholder rights plan. See "Description of Capital Stock--Shareholder Rights
Plan."

The Operating Partnership Agreement provides that the Company may not in
general engage in a business combination unless the holders of OP Units will
receive, or have the opportunity to receive, the same consideration per OP
Unit as holders of Common Stock receive per share of Common Stock in the
transaction; if holders of OP Units will not be treated in such manner in
connection with a proposed business combination, the Company may not engage in
such transaction unless limited partners (other than the Company) holding at
least 75% of the OP Units held by limited partners vote to approve the
business combination. In addition, the Operating Partnership Agreement
provides that if the Company proposes to engage in a business combination for
which it seeks the approval of a certain percentage (the "Required
Percentage") of the outstanding voting stock of the Company, it may not engage
in such transaction unless a vote of the limited partners of the Operating
Partnership (other than the Company) is taken and the result of the votes of
OP Unit holders and stockholders is that the Required Percentage of OP Units
and voting stock, taken together, has approved of the proposed business
combination. As a result of these provisions of the Operating Partnership, a
third party may be inhibited from making an acquisition proposal that it would
otherwise make, or the Company, despite having the requisite authority under
its Certificate of Incorporation, may not be authorized to engage in a
proposed business combination.

Shareholder Rights Plan

The Company has adopted a Shareholder Rights Plan. The Shareholder Rights
Plan may have the effect of inhibiting or impeding a change in control and,
therefore, could adversely affect the stockholders' ability to realize a
premium over the then-prevailing market price for the Common Stock in
connection with such a transaction. See "Description of Capital Stock--
Shareholder Rights Plan."

Limitations on Acquisition of and Changes in Control Pursuant to Delaware Law

Certain provisions of the Delaware General Corporation Law (the "DGCL") also
may have the effect of inhibiting a third party from making an acquisition
proposal for the Company or of impeding a change in control of the Company
under circumstances that otherwise could provide the holders of shares of
Common Stock with the opportunity to realize a premium over the then-
prevailing market price of such shares. See "Certain Provisions of Delaware
Law and the Company's Certificate and Bylaws."

RISKS RELATING TO DEBT

Real Estate Financing and Potential Effect of Rising Interest Rates on the
Company's Variable Rate Indebtedness

Upon completion of the Offering and the Formation Transactions, the Company
expects to have approximately $730 million of outstanding indebtedness. The
Company also intends to enter into and, over time, make borrowings under the
Unsecured Line of Credit. Advances under the Unsecured Line of Credit will
bear interest at a variable rate. In addition, the Company may incur other
variable rate indebtedness in the future. Increases in interest rates on such
indebtedness would increase the Company's interest expense (e.g., assuming

26
<PAGE>

the entire $300 million available under the Unsecured Line of Credit is
outstanding, the Company would incur an additional $750,000 in interest
expense for each 0.25% increase in interest rates), which could adversely
affect the Company's cash flow and its ability to pay expected distributions
to stockholders. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." The
Company will also be subject to risks normally associated with debt financing,
including the risk that the Company's cash flow will be insufficient to meet
required payments of principal and interest, the risk that any indebtedness
will not be able to be refinanced or that the terms of any such refinancing
will not be as favorable as the terms of such indebtedness.

No Limitation on Debt

Upon completion of the Offering and the Formation Transactions, the
Company's debt to total market capitalization ratio will be approximately
36.3% (33.1% if the Underwriters' overallotment option is exercised in full).
The Company does not have a policy limiting the amount of debt that the
Company may incur. Accordingly, the Company could become more highly
leveraged, resulting in an increase in debt service that could adversely
affect the Company's cash flow and, consequently, the amount available for
distribution to stockholders, and could increase the risk of default on the
Company's indebtedness.

GENERAL REAL ESTATE RISKS

Lease Expiration and Leasing of Vacant Space

The Company will be subject to the risks that, upon expiration, leases for
space in the Office Properties or the Industrial Properties may not be
renewed, the space may not be re-leased, or the terms of renewal or re-lease
(including the cost of required renovations or concessions to tenants) may be
less favorable than current lease terms. Leases on a total of 10.5% and 11.1%
of the aggregate net rentable area of the Office Properties and the Industrial
Properties expire during 1997 and 1998, respectively. If the Company were
unable to re-lease substantial amounts of vacant space promptly, if the rental
rates upon such re-lease were significantly lower than expected, or if
reserves for costs of re-leasing proved inadequate, the cash flow to the
Company would be decreased and the Company's ability to make distributions to
stockholders would be adversely affected.

Hotel Industry Risks

The Hotel Properties are subject to all operating risks common to the hotel
industry. These risks include, among other things: (i) competition for guests
from other hotels, a number of which may have greater marketing and financial
resources than the Company and Marriott(R); (ii) increases in operating costs
due to inflation and other factors, which increases may not have been offset
in recent years, and may not be offset in the future by increased room rates;
(iii) dependence on business and commercial travelers and tourism, which
business may fluctuate and be seasonal; (iv) increases in energy costs and
other expenses of travel, which may deter travelers; and (v) adverse effects
of general and local economic conditions. These factors could adversely affect
the ability of Marriott(R) to generate revenues and for ZL Hotel LLC to make
lease payments and therefore, the Company's ability to make expected
distributions to stockholders. Because the lease payments to the Company from
ZL Hotel LLC will be based on a participation in the gross receipts of the
Hotel Properties, the actual lease payments will increase or decrease over the
term of the lease in response to fluctuations in the gross receipts of the
Hotel Properties.

Acquisition Risks

There can be no assurance that the Company will be able to implement its
investment strategies successfully or that its property portfolio will expand
at all, or at any specified rate or to any specified size. In addition,
investment in additional real estate assets is subject to a number of risks.
In particular, investments are expected to be financed with funds drawn under
the Unsecured Line of Credit, which would subject the Company to the risks
described under "Risk Factors--Risks Relating to Debt." The Company does not
intend to limit its investments to the Greater Boston, Greater Washington,
D.C. and New York City markets in which the Properties are primarily located.
Consequently, to the extent that it elects to invest in additional markets,
the

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Company also will be subject to the risks associated with investment in new
markets, with which management may have relatively little experience and
familiarity. Investment in additional real estate assets also entails the
other risks associated with real estate investment generally, as described in
"--General Real Estate Risks."

Uncontrollable Factors Affecting Performance and Value

The economic performance and value of the Company's real estate assets will
be subject to all of the risks incident to the ownership and operation of real
estate. These include the risks normally associated with changes in general
national, regional and local economic and market conditions. Such local real
estate market conditions may include excess supply and intense competition for
tenants, including competition based on rental rates, attractiveness and
location of the Property and quality of maintenance, insurance and management
services. Economic and market conditions may impact the ability of tenants to
make lease payments. In addition, other factors may adversely affect the
performance and value of a Property, including changes in laws and
governmental regulations (including those governing usage, zoning and taxes),
changes in interest rates and the availability of financing. If the Properties
do not generate sufficient income to meet operating expenses, including future
debt service, the Company's income and ability to make distributions to its
stockholders will be adversely affected.

Illiquidity of Real Estate Investments

Because real estate investments are relatively illiquid, the Company's
ability to vary its portfolio promptly in response to economic or other
conditions will be limited. In addition, certain significant expenditures,
such as debt service (if any), real estate taxes, and operating and
maintenance costs, generally are not reduced in circumstances resulting in a
reduction in income from the investment. The foregoing and any other factor or
event that would impede the ability of the Company to respond to adverse
changes in the performance of its investments could have an adverse effect on
the Company's financial condition and results of operations.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal
or remediation of certain hazardous or toxic substances released on or in its
property, as well as certain other costs relating to hazardous or toxic
substances. Such liability may be imposed without regard to whether the owner
or operator knew of, or was responsible for, the release of such substances.
The presence of, or the failure to remediate properly, such substances, when
released, may adversely affect the owner's ability to sell the affected real
estate or to borrow using such real estate as collateral. Such costs or
liabilities could exceed the value of the affected real estate. The Company
has not been notified by any governmental authority of any noncompliance,
liability or other claim in connection with any of the Properties and the
Company is not aware of any other environmental condition with respect to any
of the Properties that management believes would have a material adverse
effect on the Company's business, assets or results of operations.

Some of the Properties are located in urban and industrial areas where fill
or current or historic industrial uses of the areas may have caused site
contamination at the Properties. Within the past 12 months, independent
environmental consultants were retained to conduct or update Phase I
environmental assessments (which generally do not involve invasive techniques
such as soil or ground water sampling) on all of the Properties. These
environmental assessments have not revealed any environmental conditions that
the Company believes will have a material adverse effect on its business,
assets or results of operations, and the Company is not aware of any other
environmental condition with respect to any of the Properties which the
Company believes would have such a material adverse effect. However, the
Company is aware of environmental conditions at two of the Properties that may
require remediation. With respect to 17 Hartwell Avenue in Lexington,
Massachusetts, the Company received a Notice of Potential Responsibility from
the state regulatory authority on January 9, 1997, related to groundwater
contamination, as well as Notices of Downgradient Property Status Submittals
from third parties concerning contamination at two downgradient properties.
The Company has notified the state regulatory authority that it will cooperate
with and monitor the tenant at the Property which is investigating this
matter. On January 15, 1992, 91 Hartwell Avenue in Lexington, Massachusetts
was listed by the state regulatory authority

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as an unclassified Confirmed Disposal Site in connection with groundwater
contamination. The Company has engaged a specially licensed environmental
consultant to perform the necessary investigation and assessment and to
prepare submittals to the state regulatory authority by August 2, 1997. See
"Business and Properties--Environmental Matters."

No assurance can be given that the environmental assessments and updates
identified all potential environmental liabilities, that no prior owner
created any material environmental condition not known to the Company or the
independent consultants preparing the assessments, that no environmental
liabilities may have developed since such environmental assessments were
prepared, or that future uses or conditions (including, without limitation,
changes in applicable environmental laws and regulations) will not result in
imposition of environmental liability.

Cost of Compliance with Americans with Disabilities Act

The Properties are subject to the requirements of the Americans with
Disabilities Act (the "ADA"), which generally requires that public
accommodations, including office buildings, be made accessible to disabled
persons. The Company believes that the Properties are in substantial
compliance with the ADA and that it will not be required to make substantial
capital expenditures to address the requirements of the ADA. However,
compliance with the ADA could require removal of access barriers and
noncompliance could result in imposition of fines by the federal government or
the award of damages to private litigants. If, pursuant to the ADA, the
Company were required to make substantial alterations in one or more of the
Properties, the Company's financial condition and results of operations, as
well as the amount of funds available for distribution to stockholders, could
be adversely affected.

Uninsured Losses

The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance, as applicable, with respect to the Properties, with
policy specification and insured limits customarily carried for similar
properties. In the opinion of management, all of the Properties are adequately
insured. There are, however, certain types of losses (such as from wars or
catastrophic acts of nature) that may be either uninsurable or not
economically insurable. Any uninsured loss could result in both loss of cash
flow from, and asset value of, the affected property.

It is anticipated that new owner's title insurance policies will not be
obtained in connection with the Formation Transactions. Each of the Properties
has previously been insured by title insurance policies insuring the interests
of the Property-owning entities. Certain of these title insurance policies may
continue to benefit those Property-owning entities which will remain after the
completion of the Formation Transactions. Nevertheless, each such title
insurance policy may be in an amount less than the current value of the
applicable Property. In the event of a loss with respect to a Property
relating to a title defect, the Company could lose both its capital invested
in and anticipated profits from such Property.

Changes in Laws

Costs resulting from changes in real estate taxes generally may be passed
through to tenants and will not affect the Company. Increases in income,
service or transfer taxes, however, generally are not passed through to
tenants and may adversely affect the Company's results of operations and the
amount of funds available to make distributions to stockholders. Similarly,
changes in laws increasing the potential liability for environmental
conditions existing on properties or increasing the restrictions on discharges
or other conditions may result in significant unanticipated expenditures,
which would adversely affect the Company's financial condition and results of
operations and the amount of funds available for distribution to stockholders.

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RISKS RELATING TO QUALIFICATION AND OPERATION AS A REIT

Failure to Qualify as a REIT

The Company intends to operate so as to qualify as a REIT under the Code,
commencing with its taxable year ending December 31, 1997. Although management
of the Company believes that it will be organized and will operate in such a
manner, no assurance can be given that it will so qualify or that it will
continue to qualify in the future. In this regard, the Company has received an
opinion of Goodwin, Procter & Hoar LLP, tax counsel to the Company ("Tax
Counsel"), to the effect that, commencing with its taxable year ending
December 31, 1997, the Company will be organized in conformity with the
requirements for qualification as a REIT under the Code, and that the
Company's proposed manner of operation will enable it to meet the requirements
for taxation as a REIT for federal income tax purposes. Qualification as a
REIT, however, involves the application of highly technical and complex Code
provisions as to which there are only limited judicial and administrative
interpretations. Certain facts and circumstances which may be wholly or
partially beyond the Company's control may affect its ability to qualify as a
REIT. In addition, no assurance can be given that future legislation, new
regulations, administrative interpretations or court decisions will not
significantly change the tax laws (or the application thereof) with respect to
qualification as a REIT for federal income tax purposes or the federal income
tax consequences of such qualification. However, the Company is not aware of
any proposal to amend the tax laws that would significantly and adversely
affect the Company's ability to qualify as a REIT. The opinion of Tax Counsel
is not binding on the Internal Revenue Service (the "IRS") or the courts.

If, in any taxable year, the Company were to fail to qualify as a REIT for
federal income tax purposes, it would not be allowed a deduction for
distributions to stockholders in computing taxable income and would be subject
to federal income tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, the Company would be disqualified
from treatment as a REIT for federal income tax purposes for the four taxable
years following the year during which qualification is lost. The additional
tax liability resulting from the failure to so qualify would significantly
reduce the amount of funds available for distribution to stockholders. In
addition, the Company would no longer be required to make distributions to
shareholders. Although the Company intends to operate in a manner designed to
permit it to qualify as a REIT for federal income tax purposes, it is possible
that future economic, market, legal, tax or other events or circumstances
could cause it to fail to so qualify. See "Federal Income Tax Consequences--
Requirements for Qualification."

Effect of Distribution Requirements

To obtain and maintain its status as a REIT for federal income tax purposes,
the Company generally will be required each year to distribute to its
stockholders at least 95% of its taxable income. In addition, the Company will
be subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by it with respect to any calendar year are less
than the sum of 85% of its ordinary income for such calendar year, 95% of its
capital gain net income for the calendar year and any amount of such income
that was not distributed in prior years. The Company may be required, under
certain circumstances, to accrue as income for tax purposes interest, rent and
other items treated as earned for tax purposes but not yet received. In
addition, the Company may be required not to accrue as expenses for tax
purposes certain items which actually have been paid. It is also possible that
the Company could realize income, such as income from cancellation of
indebtedness, which is not accompanied by cash proceeds. In any such event,
the Company could have taxable income in excess of cash available for
distribution. In such circumstances, the Company could be required to borrow
funds or liquidate investments on unfavorable terms in order to meet the
distribution requirement applicable to a REIT. See "Federal Income Tax
Consequences--Requirements for Qualification."

The Company intends to make distributions to stockholders sufficient to
comply with the 95% distribution requirement and to avoid the 4% nondeductible
excise tax described above. No assurances can be given, however, that the
Company will satisfy these requirements.

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Other Tax Liabilities

Even if it qualifies as a REIT for federal income tax purposes, the Company
may, and certain of its subsidiaries will, be subject to certain federal,
state and local taxes on their income and property. See "Federal Income Tax
Consequences--State and Local Tax."

RELIANCE ON KEY PERSONNEL

The Company is dependent on the efforts of Messrs. Zuckerman and Linde and
other senior management personnel. While the Company believes that it could
find replacements for these key executives, the loss of their services could
have a material adverse effect on the operations of the Company. While Mr.
Linde will have an employment agreement with the Company, this can serve as no
guarantee that he will remain with the Company for any specified term.

RISKS AFFECTING MARKET FOR THE COMMON STOCK

No Prior Market

Prior to the completion of the Offering, there will have been no public
market for shares of Common Stock. Although the Common Stock has been approved
for listing on the New York Stock Exchange, subject to official notice of
issuance, there can be no assurance that an active trading market will
develop. In addition, the initial public offering price was determined by
negotiations between the Company and the Representative of the Underwriters
and, therefore, may not be indicative of the market price for shares after the
Offering. See "Underwriting."

Effect of Changes in Interest Rates or Equity Markets

One of the factors that may be expected to influence the prevailing market
price of the Common Stock is the annual yield on the stock price from
distributions by the Company. Accordingly, an increase in market interest
rates may lead purchasers of shares of Common Stock in the secondary market to
demand a higher annual yield, which could adversely affect the market price of
the Common Stock. In addition, the market price of the Common Stock could be
adversely affected by changes in general market conditions or fluctuations in
the market for equity securities in general or REIT securities in particular.
Moreover, in the future, numerous other factors, including governmental
regulatory actions and proposed or actual modifications in the tax laws, could
have a significant impact on the market price of the Common Stock.

Effect of Shares Available for Future Sale

Sales of substantial amounts of Common Stock (including shares issued upon
the exercise of options), or the perception that such sales could occur, could
adversely affect the prevailing market price for the Common Stock. Messrs.
Zuckerman and Linde will own an aggregate of 17,322,610 shares of Common Stock
and OP Units at the completion of the Offering. In addition, executive
officers of the Company other than Messrs. Zuckerman and Linde will receive an
aggregate of 1,186,298 OP Units in connection with the Formation Transactions.
OP Units may, following a period of fourteen months after completion of the
Offering, be exchanged for cash or, at the option of the Company, for shares
of Common Stock on a one-for-one basis. See "Certain Transactions--Formation
Transactions" and "Certain Transactions--Operating Partnership Agreement;
Redemption/Exchange Rights." Messrs. Zuckerman and Linde and the other senior
officers of the Company have agreed, subject to certain limited exceptions,
not to offer, sell, contract to sell or otherwise dispose of any Common Stock
for a period of two years after the date of this Prospectus without the prior
written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. At the
conclusion of the two year restriction period (or earlier with the consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated), all shares of Common
Stock owned by Messrs. Zuckerman and Linde and such other individuals,
including shares of Common Stock acquired in exchange for OP Units, may be
sold in the public market pursuant to registration rights or any available
exemptions from registration. See "Shares Available for Future Sale." In
addition, up to 4,883,000 shares of Common Stock will be reserved for issuance
pursuant to the Company's Stock Option Plan. Shares of Common Stock purchased
pursuant to options granted under the Stock Option Plan will generally be
available for sale in the public market. See

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"Management--Stock Option Plan" and "Shares Available for Future Sale." No
prediction can be made as to the effect of future sales of Common Stock on the
market price of shares of Common Stock.

IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of Common Stock in the Offering will experience immediate
dilution of approximately $22.34 per share in the net tangible book value per
share of the Common Stock so purchased. Similarly, Messrs. Zuckerman and
Linde, the sole stockholders of the Company prior to the Offering, will
experience an immediate increase of approximately $32.93 per share in the
value of their shares of Common Stock. See "Dilution."

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THE COMPANY

GENERAL

The Company has been formed to succeed to the real estate development,
redevelopment, acquisition, management, operating and leasing businesses
associated with the predecessor company founded by Mortimer B. Zuckerman and
Edward H. Linde in 1970. The Company is one of the largest owners and
developers of office properties in the United States, with a significant
presence in five submarkets in Greater Boston, five submarkets in Greater
Washington, D.C. and the Park Avenue submarket of midtown Manhattan. The
Company believes that it has created significant value in its properties by
developing well located properties that meet the demands of today's office
tenants, redeveloping underperforming assets, and improving the management of
under-managed assets it has acquired. Following the Offering, Messrs.
Zuckerman and Linde will beneficially own in the aggregate a 33.7% economic
interest in the Company and the other senior officers of the Company will
beneficially own in the aggregate a 2.3% economic interest in the Company.
Messrs. Zuckerman and Linde have agreed that the Company will be the exclusive
entity through which they develop or acquire commercial properties. See
"Management--Employment Agreements." The Company expects to qualify as a REIT
for federal income tax purposes for the year ended December 31, 1997. See
"Federal Income Tax Consequences--Federal Income Taxation of the Company."

Upon the completion of the Offering, the Company, through its subsidiaries,
will own a portfolio of 74 commercial real estate properties aggregating
approximately 10.9 million square feet, 91% of which was (or is being)
developed or substantially redeveloped by the Company. The Company will own a
100% fee interest in 60 of the Properties that account for 98% of the total
Escalated Rent of the portfolio. The Properties consist of 62 office
properties with approximately 7.6 million net rentable square feet, including
seven office properties currently under development or redevelopment totaling
approximately 810,000 net rentable square feet, which have approximately 1.3
million square feet of structured parking for 4,222 vehicles; nine industrial
properties with approximately 925,000 net rentable square feet; two hotels
totaling 833 rooms and approximately 750,000 square feet and a 1,170 space
parking garage with approximately 330,000 additional square feet. The
Properties are primarily located in eleven submarkets, including five
submarkets in Greater Boston (the East Cambridge, Route 128 NW, Route
128/Massachusetts Turnpike, Route 128 SW and downtown Boston submarkets), five
submarkets in Greater Washington, D.C. (the Southwest Washington, D.C., West
End Washington, D.C., Montgomery County, Maryland, Fairfax County, Virginia
and Prince George's County, Maryland submarkets) and midtown Manhattan (the
Park Avenue submarket). The Company's single largest Property, with
approximately 1.0 million net rentable square feet, is an Office Property
located in midtown Manhattan. As of December 31, 1996, the completed Office
Properties and the Industrial Properties had an occupancy rate of 94% and the
completed Hotel Properties had an average occupancy rate for the year ended
December 31, 1996 of 84%. Leases with respect to 10.5%, 11.1% and 7.1% of the
leased square footage of the Office and Industrial Properties expire in 1997,
1998 and 1999, respectively. The weighted average Escalated Rent of such
expiring square footage is $17.70, compared to a weighted average Company
quoted rental rate per square foot as of January 1, 1997 for such expiring
footage of $20.34. The Company will also own, have under contract or have
options to acquire six undeveloped parcels of land totaling 47.4 acres,
located primarily in Greater Boston and Greater Washington, D.C., which will
support approximately 1.0 million square feet of development.

The Company has developed or substantially redeveloped 56 of the Properties
which total approximately 9.9 million square feet or 91% of the aggregate
square feet of all of the Properties. The Company currently manages all of the
Properties except the Hotel Properties, which are managed by Marriott Hotels,
Inc., the Garage Property, and parking garages that are a part of certain of
the Office Properties. The Company has long-established, full-service offices
in each of its three major market areas and achieves efficiencies of scale by
operating a centralized financial control and data center at its Boston
headquarters that is responsible for processing of all operating budgets,
billing and payments for all of its completed and development properties. As a
result, the Company believes that it has the capacity to substantially
increase the number of properties it owns and manages without proportional
increases in overhead costs.

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management, substantial portfolio of existing properties and buildings under
development, and existing acquisition opportunities with the advantages that
will be available to it in its new status as a public company. These advantages
include improved access to debt and equity financing and the ability to acquire
properties and sites through the issuance of stock and OP Units, which can be
of particular value to potential sellers concerned about the tax consequences
of property sales. The Company also believes that because of its size and
reputation it will be a desirable buyer for those institutions or individuals
wishing to sell individual properties or portfolios of properties in exchange
for an equity position in a public real estate company.

The Company believes it has superior access to potential development and
acquisition opportunities by virtue of its long-standing reputation and
relationships, both nationally and in its primary markets, with brokers,
tenants, financial institutions, development agencies, contractors, and others
involved in the real estate market. The Company intends to utilize its
experience with, and understanding of, the development and management of a
range of commercial property types to opportunistically pursue developments and
acquisitions within its existing and new markets. The Company's extensive
development experience includes suburban and downtown office buildings,
downtown hotels, mixed-use projects, R&D and research laboratory buildings,
suburban office/flex buildings, suburban office and industrial parks, warehouse
and distribution buildings, and special purpose facilities, as well as both new
construction and substantial renovation for re-use or repositioning. The
properties that the Company has developed have won numerous awards.

The Company will continue to supplement its revenues, leverage the experience
of its personnel and strengthen its market position by providing comprehensive,
project level development and management services on a selective basis to
private sector companies and government agencies ("third-party development
projects"). Between 1989 and 1996, the Company completed eight third-party
development projects comprising approximately 2.4 million net rentable square
feet. In addition to enhancing revenues without significantly increasing
overhead the Company has achieved significant recognition and experience
through this work, which has led to enhanced opportunities for the Company to
obtain build-to-suit development projects.

Concurrently with the completion of the Offering, the Company expects to have
in effect a three-year $300 million unsecured revolving line of credit (the
"Unsecured Line of Credit") led by a commercial bank (the "Line of Credit
Bank"), as agent. The Company intends to use the Unsecured Line of Credit
principally to fund growth opportunities and for working capital purposes. See
"Unsecured Line of Credit."

The Company intends to make regular quarterly distributions to its
stockholders, beginning with a distribution for the period commencing on the
completion of the Offering and ending on , 1997.

The Company is a full-service real estate company, with substantial in-house
expertise and resources in acquisitions, development, financing, construction
management, property management, marketing, leasing, accounting, and legal
services. As of March 31, 1997 the Company had 284 employees, including 87
professionals involved in acquisitions, development, finance and legal matters.
The Company's 16 senior officers, together with Mr. Zuckerman, Chairman of the
Board, have an average of 24 years experience in the real estate industry and
an average of 16 years tenure with the Company.

HISTORY

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Growth in Boston

In the early 1970's, Messrs. Zuckerman and Linde identified the area of
suburban Boston along Route 128 as ready for the development of modern office
buildings, and they selected the quadrant west/northwest of Boston between the
Massachusetts Turnpike and US 93 as the most desirable area in which to
concentrate their efforts. Between 1978 and 1988, the Company acquired 13 key
sites in that area, and completed development of 17 office buildings on those
sites, containing more than 2.0 million net rentable square feet. The Company
built on its growing reputation for quality development in the Boston area by
successfully competing for control of sites available through public
competitions. During this period, the Company was awarded hotel development
rights on the Boston Harbor waterfront where it developed the 402 room Long
Wharf Marriott(R) Hotel. The Company was also selected by the Cambridge
Redevelopment Authority to be the developer of the 24 acre "Cambridge Center"
site adjacent to the Massachusetts Institute of Technology ("MIT"), where it
has completed development of ten buildings totaling over 1.7 million square
feet and still controls substantial additional development rights. In total
for Greater Boston, the Company has developed, acquired or redeveloped, for
its own account or for third parties, 41 buildings containing approximately
5.0 million square feet, of which the Company still owns approximately 3.7
million square feet.

Expansion to Washington, D.C. and its Suburban Markets

The Company opened its Washington, D.C. regional office in November 1979 to
pursue development and acquisitions and to provide real estate development
services in Greater Washington, D.C., including the Northern Virginia and
suburban Maryland real estate markets. Within this region, the Company has
concentrated its efforts in those submarkets that it believes to be the
strongest, including Southwest Washington, D.C., Montgomery County, Maryland,
Fairfax County, Virginia and Prince George's County, Maryland. The Company's
first project in the Greater Washington, D.C. market was Capital Gallery, a
400,000 square foot Class A, multi-tenant office building that the Company
completed in 1981. During the past 17 years, the Company, for its own account
and for third parties, has developed 30 buildings in Greater Washington, D.C.,
totaling approximately 5.75 million square feet. The Company continues to own
21 of these properties consisting of approximately 3.5 million square feet.

Expansion to Midtown Manhattan

In the early 1980's, Messrs. Zuckerman and Linde decided to explore
opportunities to expand the Company's operations to New York City and focused
on midtown Manhattan as desirable for new development. The Company identified
a key block-front site at 599 Lexington Avenue (immediately south of Citicorp
Center), structured an acquisition responsive to the particular needs of the
site's owner, and obtained all necessary public approvals within 11 months of
acquiring the site. Based on the Company's assessment of the strengths of the
site and the building design (including large floorplates than were floor
generally available supply in the market area), the Company proceeded in 1984
with construction of a 1.0 million net rentable square foot office tower. The
building, which the Company still owns, has had an occupancy rate in excess of
97% for the past seven years. The building has continued to command premium
rents within its submarket.

Response to Market Conditions

In the mid-1980's the Company was designated as the developer of a project
in New York City in a joint venture with a national financial institution,
which intended to occupy a major portion of the leasable square footage
associated with the development. This institution withdrew from the project
due to changing economic circumstances and subsequently the Company withdrew
due to market conditions that made the project infeasible without a major
tenant precommitment. In the late 1980's, in response to market conditions,
the Company decided not to undertake any new speculative development or land
or property acquisitions based on its assessment of a growing oversupply and
weakening real estate fundamentals in the markets in which it operated. The
Company was able to continue to prosper by operating the portfolio of
properties it had acquired and developed since 1970, by finding opportunities
for build-to-suit development, and by expanding the scope of its third-party
development management activities. Between 1989 and 1996, the Company
completed eight third party development projects on a fee basis, including
major projects for the Architect of the Capitol, the Health Care Financing
Administration, the New York Daily News, Beth Israel Hospital and Medical
Information Technology. The Company is currently the development manager on
projects for, among others, the National

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Institutes of Health and Acacia Mutual Life Insurance Company in Washington,
D.C., the United States Postal Service in New York City and Boston and the
Hyatt Development Corporation in Boston.

Recent Activities

Recently, the Company began to more aggressively pursue potential new
development and acquisition opportunities and has increased its development
and acquisition activity. Currently, the Company is developing seven
properties, totaling approximately 810,000 square feet, located in Greater
Boston and Fairfax County, Virginia (consisting of five Office Properties that
will be 100% owned by the Company and two Office Properties in which the
Company will own a 25% interest). In 1996, in response to significant
unsatisfied tenant demand, the Company decided to begin construction of the
first new Class A speculative office building to be built in the 1990's along
Route 128 in suburban Boston. This 102,000 square foot building, to be
completed in the fall of 1997, is now committed in its entirety to Continental
Cablevision. In addition, in Springfield, Virginia, for pre-committed tenants,
the Company is developing two buildings in its Virginia-95 Business Park. One
of these buildings will be occupied by the United States Customs Service and
the other will serve as the headquarters of Autometric, Inc. In Reston,
Virginia, the Company is developing two Class A Office Buildings totaling
440,000 net rentable square feet. One of such buildings, with approximately
312,000 net rentable square feet, is 72% leased to, and will serve as the
headquarters of, BDM International. In 1996, the Company also acquired the two
Sugarland buildings in Herndon, Virginia, which the Company is redeveloping.
The Development Properties are 68% pre-committed to tenants. The Company
expects that its stabilized return on cost for those Properties will exceed in
the aggregate 12%. In addition, the Company is currently pursuing a number of
proposed development projects. One such proposed project is the development of
a 221 room Marriott(R) Residence Inn in Cambridge, Massachusetts on land with
respect to which the Company currently holds development rights. A second
proposed project, if consummated, will be a joint venture with Westbrook Real
Estate Partners LLC ("Westbrook") for the development of an approximately
370,000 square foot office building in Reston, Virginia. The Company is
currently in discussions with certain institutional investors to acquire
certain of their portfolio properties, and is also pursuing other potential
property and site acquisitions as well as build-to-suit opportunities in all
of its major markets. There can be no assurances that the Company will
ultimately acquire or develop any of such properties.

36
<PAGE>

BUSINESS AND GROWTH STRATEGIES

BUSINESS STRATEGY

The Company's primary business objective is to maximize growth in net
available cash for distribution and to enhance the value of its portfolio in
order to maximize total return to stockholders. The Company's strategy to
achieve this objective is: (i) to selectively acquire and redevelop or develop
additional properties in the Company's existing markets, adjacent suburban
markets and in new markets that present favorable opportunities; (ii) to
continue to maintain high lease renewal rates at rents that are at the high
end of the markets in which the Properties are located, and to continue to
achieve high room rates and occupancy rates in the Hotel Properties; and (iii)
to selectively provide fee-based development consulting and project management
services to third parties.

GROWTH STRATEGIES

External Growth

The Company believes that it is well positioned to realize significant
growth through external asset development and acquisition. During its 27 year
history, the Company has developed 107 properties for itself and third
parties. The Company believes that this development experience and the
Company's organizational depth positions the Company to continue to develop a
range of property types, from single-story suburban properties to high-rise
urban developments, within budget and on schedule. Other factors that
contribute to the Company's competitive position include: (i) the significant
increase in demand for new, high quality office and industrial space in the
Company's core market areas; (ii) the Company's control of sites in its core
markets that will support approximately 1.0 million square feet of new
development through fee ownership, contract ownership, and joint venture
relationships; (iii) the Company's reputation gained through the stability and
strength of its existing portfolio of properties; (iv) the Company's
relationships with leading national corporations and public institutions
seeking new facilities and development services; (v) the Company's
relationships with nationally recognized financial institutions that provide
capital to the real estate industry; and (vi) the substantial amount of
commercial real estate owned by domestic and foreign institutions, private
investors, and corporations who are seeking to sell such assets in the
Company's market areas.

The Company has targeted four areas of development and acquisition as
significant opportunities to execute the Company's external growth strategy:

. Acquire Land for Development. The Company believes that development of
well positioned office buildings and R&D properties is currently or will be
justified in many of the submarkets in which the Company has a presence.
The Company believes in acquiring land in response to market conditions
that allow for the development of such land in the relatively near term.
Over its 27 year history, the Company has established a successful record
of carefully timing land acquisitions in submarkets where the Company can
become one of the market leaders in establishing rent and other business
terms. The Company believes that there are opportunities in its existing
and other markets to acquire land with development potential at key
locations in markets which are experiencing growth.

In the past, the Company has been particularly successful at acquiring
sites or options to purchase sites that need governmental approvals before
the commencement of development. Because of the Company's development
expertise, knowledge of the governmental approval process and reputation
for quality development with local government approval bodies, the Company
generally has been able to secure the permits necessary to allow
development, thereby enabling the Company to profit from the increase in
their value once the necessary permits have been obtained.

In accordance with its belief that future development will provide
significant growth opportunities, the Company controls several major
parcels of land in its core submarkets which are positioned for near term
development. These sites are either (i) owned outright by the Company, (ii)
subject to options at prices that the Company believes are less than the
value of the land once developed, or (iii) owned by a third party with whom
the Company has established a joint venture relationship with respect to
such site.

37
<PAGE>

In the Company's Virginia-95 Business Park in Springfield, Virginia, the
Company is developing for pre-committed tenants two office buildings on
land that is owned by the Company. These buildings, an 80,514 net rentable
square foot two-story office building (with expansion potential for another
40,000 square feet) that, when completed, will serve as the headquarters of
Autometric, Inc., and a 75,756 net rentable square foot expansion of the
U.S. Customs Service Data Center currently in the Company's Virginia-95
Business Park, are both on target to be delivered by the end of 1997. In
addition, the Virginia-95 Business Park has the potential for an additional
130,000 square feet of development, including the possible expansion of the
Autometric, Inc. building.

The Company has entered into a joint venture with Westbrook, a major
investment fund that owns the Mobil Land Corporation national portfolio
including Reston Town Center, which is currently zoned for the development
of several office buildings in Reston, Virginia. The Company's first joint
venture with Westbrook is for the construction of a 2-building, 440,000
square foot project. BDM has committed to lease the first 225,000 square
feet, and the Company is currently negotiating with BDM to lease an
additional 84,000 square feet. BDM occupancy is expected in February 1999.

In addition, the Company is pursuing a number of proposed development
projects. One such project is the proposed development of a 221-room
Marriott(R) Residence Inn on a parcel of land in the Company's Cambridge
Center development. Subject to the Company receiving the necessary zoning
and other regulatory approvals, and certain other business matters, the
Company expects to begin construction of this hotel in the third quarter of
1997. In addition, the Company is currently negotiating a second joint
venture with Westbrook. This joint venture, if consummated, will be for the
construction of a 370,000 square foot office building, 60% of which will be
occupied by a major national tenant with whom negotiations are now
underway. No assurances can be given that the Company will ultimately
develop either of such properties. The Company expects that its
relationship with Westbrook will continue, resulting in additional joint
venture arrangements. The Reston market is one of the most active areas of
expansion for the rapidly growing Northern Virginia computer technology and
telecommunications industries. See "Business and Properties--The Proposed
Developments."

The Company believes that, in many cases, land owners with limited
development expertise and/or limited financial resources wish to align
their property with an experienced, stable development team who can secure
financing and lead tenants. The Company has historically been very
successful at securing lead tenants and favorable financing terms for its
major projects, and therefore is routinely sought as a joint venture
partner. Examples of the Company's successful joint ventures with land
owners include One and Two Independence Square in Southwest Washington,
D.C., which are the headquarters for the Office of the Comptroller of the
Currency and the National Aeronautics and Space Administration,
respectively, and the United States International Trade Commission
Building, which is the headquarters of the United States International
Trade Commission.

. Acquire Existing Underperforming Assets. The Company will actively
pursue opportunities to acquire existing buildings that, while currently
generating income, are either underperforming the market due to poor
management or are currently leased below market with anticipated roll-over
of space. These opportunities may include the acquisition of entire
portfolios of properties. The Company believes that because of its in-depth
market knowledge and development experience in each market in which it
currently operates, its national reputation with brokers, financial
institutions and others involved in the real estate market and its access
to competitively-priced capital, the Company is well positioned to identify
and acquire existing, underperforming properties for competitive prices and
to add significant additional value to such properties through its
effective marketing strategies and responsive property management program.

The Company's development capabilities enable the Company to purchase
properties that have significant redevelopment potential, and to redevelop
and re-position such properties in the market. Examples of the Company's
implementation of this strategy include the Company's redevelopment of a
160,000 square foot office building at 191 Spring Street in Lexington,
Massachusetts in 1995. The Company acquired the property on a sale and
short-term leaseback. When the existing tenant vacated, the Company

38
<PAGE>

redeveloped the property, adding a new facade, elevator and stair tower and
creating an atrium, and leased the property in its entirety as first-class
office space to The Stride Rite Corporation for its corporate headquarters.

Another example of the Company's implementation of this strategy was the
acquisition of the Sugarland Office Park in Herndon, Virginia. After the
major tenant of this two-building, 112,118 square foot, single story office
project moved out, the institutional owner decided to sell the property
rather than undertake a redevelopment or remarketing effort. The property
was substantially vacant when the Company acquired it in November of 1996.
By March of 1997, 61% of the available space was committed to new tenants.

Similarly, the Company has been successful at acquiring properties that
have more land available for development. When the Company acquired Bedford
Business Park in Bedford, Massachusetts, the property had 203,000 square
feet of buildings. The Company used additional zoning capacity to build an
additional 270,000 square feet on the site.

Acquisition of Assets from Institutions or Individuals. The Company
believes that due to its size, management strength and reputation it will
be in an advantageous position to acquire portfolios of assets or
individual properties from institutions or individuals seeking to convert
their ownership on a property level basis to the ownership of equity in a
diversified real estate operating company that offers liquidity through
access to the public equity markets. In addition, the Company may pursue
mergers with and acquisitions of compatible real estate firms. The ability
to offer OP Units to sellers who would otherwise recognize a gain upon a
sale of assets for cash or Common Stock may facilitate this type of
transaction on a tax-efficient basis. The Company is currently in
discussions with certain institutional investors to acquire certain of
their portfolio properties, but no assurances can be given that the Company
will purchase any of such properties.

Third-Party Development Management Services. While the primary objective
of the Company has been, and will continue to be, the development and
acquisition of quality, income producing buildings to be held for long term
ownership, a select amount of comprehensive project-level development
management services for third parties will be an element of the continued
growth and strategy of the Company. The Company believes that third-party
development projects permit the Company to: (i) create relationships with
major institutions and corporations that lead to new development
opportunities; (ii) continue to enhance the Company's reputation in its
core markets; (iii) create opportunities to enter new markets; and (iv)
leverage its operating overhead.

The Company's previous third-party development management projects
include the Thurgood Marshall Federal Judiciary Building in Washington,
D.C. and the Health Care Financing Administration Building in Woodlawn,
Maryland, laboratory facilities for Biogen and Beth Israel Hospital in
Cambridge and Boston, Massachusetts, and the New York Daily News
headquarters and printing plant in New York City and Jersey City, New
Jersey, respectively. The high quality of the Company's development
management projects is evidenced by the numerous awards bestowed upon the
Federal Judiciary Building, the Health Care Financing Administration
Building and the New York Daily News headquarters. Current third-party
development management projects that the Company is engaged in include the
development of a new $330 million Clinical Research Center for the National
Institutes of Health, the redevelopment of 90 Church Street in New York
City for the U.S. Postal Service, and the redevelopment of the Acacia
Mutual Life Insurance Company building in Washington, D.C. which has been
leased in its entirety to the law firm of Jones, Day, Reavis, and Pogue.

Internal Growth

39
<PAGE>

enhance tenant preferences for renewal, expansion and relocation in the
Company's properties, and (ii) to achieve speed and transaction cost
efficiency in replacing departing tenants through the use of in-house services
for marketing, lease negotiation, and design and construction of tenant
improvements. In addition, the Company believes that the Hotel Properties will
add to the Company's internal growth because of their desirable locations in
the downtown Boston and East Cambridge submarkets, which are experiencing high
occupancy rates and continued growth in room rates, and their effective
management by Marriott(R), which has achieved high guest satisfaction and
limitations on increases in operating costs.

Increasing Rents in Strong Submarkets. In choosing locations for its
properties, the Company has paid particular attention to transportation and
commuting patterns, physical environment, adjacency to established business
centers, proximity to sources of business growth and other local factors.
Substantially all of the Company's square footage of Office Properties are
located in ten submarkets in Greater Boston, Greater Washington, D.C. and
midtown Manhattan. In the Boston area, 622,511 net rentable square feet of
Office Properties are located in the Company's mixed-use Cambridge Center
development in the East Cambridge submarket, which is the largest and most
important submarket of Cambridge, Massachusetts. An additional 1,818,743
net rentable square feet of Office Properties are located in two adjacent
areas along the inner suburban circumferential highway, the Route
128/Massachusetts Turnpike and Route 128 NW submarkets, which are the
strongest submarkets in the Boston suburbs in terms of rental and occupancy
rates. In Greater Washington, D.C., 76.7% of the Company's 3,076,710 square
feet of space in Class A Office Buildings is concentrated in the Southwest
submarket, a strong market for quality government agency tenants and
tenants in related services, and in its Democracy Center and Montvale
Center projects in Montgomery County, Maryland. The Company's New York City
property is at 599 Lexington Avenue, adjacent to Citicorp Center in the
Park Avenue submarket of midtown Manhattan, which has historically been
midtown Manhattan's strongest office location.

These submarkets are experiencing increasing rents and as a result
current market rates often exceed the rents being paid by current tenants
in the Company's properties. The Company expects that leases expiring over
the next three years will be renewed, or space relet, at higher rents.
Leases with respect to 10.5%, 11.1% and 7.1% of the leased square footage
of the Office and Industrial Properties expires in 1997, 1998 and 1999,
respectively. The weighted average rent of such expiring square footage is
$17.70, compared to a weighted average Company quoted rental rate per
square foot as of January 1, 1997 of $20.34.

Directly Managing Properties to Maximize the Potential for Tenant
Retention. The Company itself provides property management services, rather
than contracting for this service, to achieve awareness of and
responsiveness to tenant needs. The Company and the Properties also benefit
from cost efficiencies produced by an experienced work force attentive to
preventive maintenance and energy management and from the Company's
continuing programs to assure that its property management personnel at all
levels remain aware of their important role in tenant relations. The
Company has long recognized that renewal of existing tenant leases, as
opposed to tenant replacement, often provides the best operating results,
because renewals minimize transaction costs associated with marketing,
leasing and tenant improvements and avoid interruptions in rental income
during periods of vacancy and renovation of space.

40
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the Offering, after deducting the
underwriting discount and estimated expenses of the Offering, are estimated to
be approximately $727.0 million (approximately $836.8 million if the
Underwriters' overallotment is exercised in full). The net proceeds of the
Offering, together with approximately $42.8 million to be drawn under the
Unsecured Line of Credit upon the completion of the Offering, will be used by
the Company as follows: (i) approximately $707.1 million to repay certain
mortgage indebtedness secured by the Properties as set forth in the table
below; (ii) approximately $6.9 million for related prepayment penalties;
(iii) approximately $9.9 million to pay transfer taxes; (iv) to establish a
cash balance of approximately $1.6 million for working capital purposes; (v)
to repay notes aggregating approximately $42.8 million due affiliates of the
Company in respect of construction loans advanced with respect to the
Development Properties (with interest on such refinanced amount to be
capitalized, during the development period, in respect of the developments for
which such indebtedness was incurred) and (vi) approximately $1.5 million to
establish the Unsecured Line of Credit. The Company currently has no
agreements or understandings to purchase any properties or interests therein
other than the Properties and certain of the development parcels.

If the Underwriters' overallotment option is exercised in full, the Company
expects to use the additional net proceeds (which will be approximately $109.8
million) to repay indebtedness, acquire or develop additional properties, and
for general corporate purposes.

Pending application of cash proceeds, the Company will invest such portion
of the net proceeds in interest-bearing accounts and short-term, interest-
bearing securities, which are consistent with the Company's intention to
qualify for taxation as a REIT.

Certain information regarding the indebtedness to be repaid is set forth
below:

DEBT TO BE REPAID WITH A PORTION OF THE OFFERING PROCEEDS

<TABLE>
<CAPTION>
AMOUNT TO BE
PROPERTY MATURITY(1) INTEREST RATE(1) REPAID(1)(2)
- -------- ----------------- ---------------- ------------
<S> <C> <C> <C> <C>
599 Lexington Avenue.... July 19, 2005 8.000% $185,000,000
Cambridge Center
Marriott, One and Three
Cambridge Center....... June 30, 1997 LIBOR + 1.375(3) 125,000,000
Democracy Center........ July 24, 1998 LIBOR + 1.200(3) 109,500,000
Downtown Boston
Properties............. June 28, 1997 LIBOR + 0.700(3) 68,600,000
The U.S. International
Trade Commission
Building............... July 11, 1998 7.350 50,000,000
2300 N Street........... August 3, 1998 9.17 34,000,000
Lexington Office Park... June 30, 2001 LIBOR + 1.000(3) 15,176,028
Waltham Office Center... October 1, 1997 9.500 11,389,018
Eleven Cambridge
Center................. October 1, 1997 9.500 8,318,626
7601 Boston Boulevard,
Building Eight......... August 15, 1997 LIBOR + 1.250(3) 8,160,000
10 and 20 Burlington
Mall Road(4)........... July 1, 2001 8.33 8,000,000
8000 Grainger Court,
Building Five.......... August 15, 1997 LIBOR + 1.250(3) 7,470,000
Fourteen Cambridge
Center................. March 24, 2001 LIBOR + 1.750(3) 6,699,820
7500 Boston Boulevard,
Building Six........... August 15, 1997 LIBOR + 1.250(3) 6,277,500
195 West Street......... June 19, 1999 LIBOR + 1.75 (3) 5,700,066
7600 Boston Boulevard,
Building Nine.......... August 15, 1997 LIBOR + 1.250(3) 5,649,750
7435 Boston Boulevard,
Building One........... October 1, 1997 9.500 5,564,116
40-46 Harvard Street.... June 1, 2001 LIBOR + 1.000(3) 5,310,733
170 Tracer Lane......... October 1, 1997 9.500 5,145,947
6201 Columbia Park Road,
Building Two........... August 15, 1997 LIBOR + 1.250(3) 4,896,000
8 Arlington Street...... June 30, 2001 LIBOR + 1.000(3) 4,552,058
32 Hartwell Avenue...... October 1, 1997 9.500 4,163,697
7374 Boston Boulevard,
Building Four.......... October 1, 1997 9.500 3,567,569
2000 South Club Drive,
Building Three......... August 15, 1997 LIBOR + 1.250(3) 3,452,250
204 Second Avenue....... October 1, 1997 9.500 3,286,902
25-33 Dartmouth Street.. October 1, 1997 9.500 3,249,633
1950 Stanford Court,
Building One........... August 15, 1997 LIBOR + 1.250(3) 2,594,500
7451 Boston Boulevard,
Building Two........... October 1, 1997 9.500 2,183,375
164 Lexington Road...... November 30, 2000 7.800 1,951,797
2391 West Winton
Avenue................. March 20, 2006 9.875 1,309,837
17 Hartwell Avenue...... October 1, 1997 9.500 912,845
------------
Total................... $707,082,167
============
</TABLE>
- --------
(1) The Company estimates that the indebtedness to be repaid with a portion of
the proceeds of the Offering will have a weighted average interest rate of
approximately 7.28% and a weighted average maturity of approximately 4.0
years as of December 31, 1996. Repayment amounts assume that the
indebtedness is repaid on June 1, 1997. Exact repayment amounts may differ
due to amortization. Repayment amounts exclude prepayment penalties that
aggregate approximately $6.9 million.
(2) Represents prepayment of principal only.
(3) 30 Day LIBOR of 5.5% as of December 31, 1996 was used for calculation of
the weighted average interest rate.
(4) Includes 91 Hartwell Avenue and 92 and 100 Hayden Avenue.

<PAGE>

DISTRIBUTIONS

Subsequent to the Offering, the Company intends to make regular quarterly
distributions to the holders of its Common Stock. The Company intends to pay a
pro rata distribution with respect to the period commencing on the completion
of the Offering and ending on , 1997 based upon $0.375 per share for a
full quarter. On an annualized basis, this would be $1.50 per share, or an
annual distribution rate of approximately 6.0% based on the initial public
offering price per share of $25.00. The Company does not intend to reduce the
expected distribution per share if the Underwriters' overallotment option is
exercised. The following discussion and the information set forth in the table
and footnotes below should be read together with the financial statements and
notes thereto, the pro forma financial information and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" included elsewhere in this
Prospectus.

The distribution described above is expected to represent approximately
94.8% of the Company's Cash Available for Distribution for the 12 months ended
December 31, 1997. The Company's estimate of the Cash Available for
Distribution for the 12 months ended December 31, 1997 is based upon pro forma
Funds from Operations for the year ended December 31, 1996, with certain
adjustments based on the items described below. To estimate Cash Available for
Distribution for the 12 months ended December 31, 1997, pro forma Funds from
Operations for the year ended December 31, 1996 was adjusted (a) without
giving effect to any changes in working capital resulting from changes in
current assets and current liabilities (which changes are not anticipated to
be material) or the amount of cash estimated to be used for (i) development,
acquisition and other activities (other than a reserve for capital
expenditures and tenant improvements for renewing space) and (ii) financing
activities, (b) for certain known events and/or contractual commitments that
either occurred subsequent to December 31, 1996 or during the year ended
December 31, 1996 but were not in effect for the full year and (c) for certain
non-GAAP adjustments consisting of (i) adjusting historical rents as reported
on a GAAP basis to amounts currently being paid or due from tenants and (ii)
an estimate of amounts anticipated for recurring tenant improvements, leasing
commissions and capital expenditures. The estimate of Cash Available for
Distribution is being made solely for the purpose of setting the initial
distribution and is not intended to be a projection or forecast of the
Company's results of operations or its liquidity, nor is the methodology upon
which such adjustments were made necessarily intended to be a basis for
determining future distributions.

Future distributions by the Company will be at the discretion of the Board
of Directors and will depend on a number of factors, including the amount of
Cash Available for Distribution and the Operating Partnership's financial
condition. Any decision by the Board of Directors to reinvest the Cash
Available for Distribution rather than to distribute such funds to the Company
will depend upon the Operating Partnership's capital requirements, the annual
distribution requirements under the REIT provisions of the Code (see "Federal
Income Tax Consequences--Requirements for Qualification--Annual Distribution
Requirements") and such other factors as the Board of Directors deems
relevant. There can be no assurance that any distributions will be made or
that the estimated level of distributions will be maintained by the Company.

The Company anticipates that its distributions will exceed earnings and
profits for income tax reporting purposes due to non-cash expenses, primarily
depreciation and amortization, to be incurred by the Company. Therefore,
approximately % (or $ per share) of the distributions anticipated to be
paid by the Company for the first 12 months subsequent to the Offering are
expected to represent a return of capital for federal income tax purposes and
in such event will not be subject to federal income tax under current law to
the extent such distributions do not exceed a stockholder's basis in his or
her Common Stock. The nontaxable distributions will reduce the stockholder's
tax basis in the Common Stock and, therefore, the gain (or loss) recognized on
the sale of such Common Stock or upon liquidation of the Company will be
increased (or decreased) accordingly. The percentage of stockholder
distributions that represents a nontaxable return of capital may vary
substantially from year to year.

Federal income tax law requires that a REIT distribute annually at least 95%
of its REIT taxable income. See "Federal Income Tax Consequences--Requirements
for Qualification--Annual Distribution Requirements." The amount of
distributions on an annual basis necessary to maintain the Company's REIT
status based on pro forma taxable income of the Operating Partnership for the
year ended December 31, 1996 as adjusted for certain

42
<PAGE>

items in the following table would have been approximately $ million. The
estimated Cash Available for Distribution is anticipated to be in excess of
the annual distribution requirements applicable to REITs. Under certain
circumstances, the Company may be required to make distributions in excess of
Cash Available for Distribution in order to meet such distribution
requirements. For a discussion of the tax treatment of distributions to
holders of Common Stock see "Federal Income Tax Consequences."

The Company believes that its estimate of Cash Available for Distribution
constitutes a reasonable basis for setting the initial distribution, and the
Company expects to maintain its initial distribution rate for the 12 months
subsequent to the Offering unless actual results of operations, economic
conditions or other factors differ from the assumptions used in the estimate.
The Company's actual results of operations will be affected by a number of
factors, including the revenue received from the Properties, the operating
expenses of the Company, interest expense, the ability of tenants of the
Properties to meet their obligations and unanticipated capital expenditures.
Variations in the net proceeds from the Offering as a result of a change in
the initial public offering price or the exercise of the Underwriters'
overallotment option may affect the Cash Available for Distribution and the
payout ratio of Cash Available for Distribution and available reserves. No
assurance can be given that the Company's estimate will prove accurate. Actual
results may vary substantially from the estimate.

The following table describes the calculation of pro forma Funds from
Operations for the year ended December, 1996 and the adjustments made to pro
forma Funds from Operations for the year ended December 31, 1996 in estimating
initial Cash Available for Distribution for the year ended December 31, 1997
(amounts in thousands except share data, per share date, square footage data
and percentages):

<TABLE>
<S> <C>
Pro forma Income before Minority Interest and Extraordinary Item for
the year ended December 31, 1996.................................... $60,158
Less: Non-recurring item--lease termination fee.................... (7,503)
Less: Minority combined partnership's share of funds from
operations........................................................ (479)
Plus: Pro forma real estate depreciation for the year ended
December 31, 1996................................................. 32,088
Plus: Pro forma real estate amortization for the year ended
December 31, 1996................................................. 3,812
-------
Pro forma Funds from Operations for the year ended December 31, 1996
(1)................................................................. 88,076
Adjustments:
Net increases in contractual rent income (2)....................... 9,785
Provision for lease expirations, assuming no renewals (3).......... (3,914)
Net contractual income from leases signed from new developments
(4)............................................................... 527
Net effect of decrease in interest income and interest expense
(5)............................................................... (1,287)
-------
Estimated adjusted pro forma Funds from Operations for the year
ending December 31, 1997............................................ 93,187
Adjustments:
Net effect of straight-line rents (6).............................. (214)
Pro forma non-real estate amortization for the year ended December
31, 1996 (7)...................................................... 1,999
Scheduled mortgage loan principal payments (8)..................... (3,517)
Estimated annual provision for tenant improvements and leasing
commissions (9)................................................... (5,881)
Estimated annual provision for capital expenditures--office and
industrial properties (10)........................................ (1,609)
Estimated annual provision for capital expenditures--hotels (11)... (2,679)
-------
Estimated Cash Available for Distribution for the year ending
December 31, 1997................................................... $81,286
=======
The Company's share of estimated Cash Available for Distribution
(12).............................................................. $55,876
=======
Minority interest's share of estimated Cash Available for
Distribution...................................................... $25,410
=======
Total estimated initial annual distributions......................... $77,100
=======
Estimated initial annual distribution per share (13)............... $ 1.50
=======
Payout ratio based on estimated Cash Available for Distribution
(14).............................................................. 94.8%
=======
</TABLE>
- --------
(1) The Company generally considers Funds from Operations an appropriate
measure of liquidity of an equity REIT because industry analysts have
accepted it as a performance measure of equity REITs. "Funds from

43
<PAGE>

Operations" as defined by NAREIT means net income (loss) (computed in
accordance with GAAP) excluding non-recurring items, gains (or losses) from
debt restructuring and sales of property, plus depreciation and
amortization on real estate assets and after adjustments for unconsolidated
partnerships and joint ventures. The Company's Funds from Operations are
not comparable to Funds from Operations reported by other REITs that do not
define the term using the current NAREIT definition or than interpret the
current NAREIT definition differently than does the Company. The Company
believes that in order to facilitate a clear understanding of the combined
historical operating results of the Boston Properties Predecessor Group and
the Company, Funds from Operations should be examined in conjunction with
net income as presented in the combined financial statements and
information included elsewhere in this Prospectus. Funds from Operations
does not represent cash generated from operating activities in accordance
with GAAP and should not be considered as an alternative to net income as
an indication of the Company's performance or to cash flows as a measure of
liquidity or ability to make distributions.

(2) Represents the net increases in contractual rental income from new leases
and renewals that were not in effect for the entire 12-month period ended
December 31, 1996 and new leases and renewals that went into effect
between January 1, 1997 and May 16, 1997 and the effect of the hotel net
leases in effect at the closing date.

(3) Assumes no lease renewals or new leases (other than month-to-month leases)
for leases expiring after December 31, 1996 unless a new or renewal lease
has been entered into by May 16, 1997.
(4) Represents contractual rental revenue, net of operating expenses, to be
collected during the year ended December 31, 1997 from development
projects to be completed during 1997.
(5) Reflects an estimated reduction in interest income of $1,879 for the year
ending December 31, 1997 resulting from a decrease in the amount of escrow
cash to be held by the Company, partially offset by an estimated reduction
in interest expense of $592.
(6) Represents the effect of adjusting straight-line rental revenue included
in pro forma net income from the straight-line accrual basis to amounts
currently being paid or due from tenants.
(7) Pro forma amortization of financing costs of $1,443 plus corporate
depreciation of $556 for the year ended December 31, 1996.
(8) Represents scheduled payments of mortgage loan principal due during the
year ending December 31, 1997.
(9) Reflects recurring tenant improvements and lease commissions anticipated
for the year ending December 31, 1997 based on the weighted average tenant
improvements and leasing commissions expenditures for renewed and
retenanted space at the Properties incurred during 1992, 1993, 1994, 1995,
and 1996, multiplied by the average annual number of square feet of leased
space for which leases expire during the years ending December 31, 1997
through December 31, 2001. The weighted average annual per square foot
cost of tenant improvements and leasing commissions expenditures is
presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------ WEIGHTED
1992 1993 1994 1995 1996 AVERAGE
----- ----- ----- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Recurring Tenant improvements and
lease commissions per square foot.. $6.74 $5.59 $6.51 $7.77 $10.25 $ 7.67
Average annual square feet for which
leases expire during years ending
December 31, 1997 through December
31, 2001........................... 766,692
Total estimated annual recurring
capitalized tenant improvements and
leasing commission................. $ 5,881
</TABLE>

(10) For the year ending December 31, 1997, the estimated cost of recurring
building improvements and equipment upgrades and replacements (excluding
costs of tenant improvements) at the Office and Industrial Properties is
approximately $1,609 and is based on an annual estimated cost of $0.20
per square foot.
(11) Reflects recurring capital expenditures anticipated for the Hotel
Properties for the year ending December 31, 1997 based on the average
capital expenditures at the Hotels incurring during the years ending
December 31, 1992 through December 31, 1996. The average cost is
presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------- ANNUAL
1992 1993 1994 1995 1996 AVERAGE
------ ---- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Hotel improvements, equipment
upgrades and replacements....... $3,182 $836 $1,917 $4,420 $3,041 $2,679
</TABLE>

<PAGE>

At December 31, 1996 reserve accounts for hotel improvements for both
Properties aggregated $4,942. Pursuant to the Hotel Property management
agreements, Marriott(R) has agreed to reserve 5% and 6% of the gross revenues
of the Marriott(R) Long Wharf Hotel and the Cambridge Center Marriott(R),
respectively, for hotel improvements, equipment upgrades and replacements.

(12) The Company's share of estimated Cash Available for Distribution and
estimated initial annual cash distributions to stockholders of the
Company is based on its approximate 68.7% aggregate partnership interest
in the Operating Partnership.

(13) Based on a total of 35,333,541 shares of Common Stock to be outstanding
after the Offering, consisting of 31,400,000 shares to be sold in the
Offering, assuming no exercise of the Underwriters' overallotment option,
and 3,933,541 additional shares owned by Messrs. Zuckerman and Linde
after the Offering.
(14) Calculated as estimated initial annual distribution per share divided by
the Company's share of estimated Cash Available for Distribution per
share for the year ending December 31, 1997. The payout ratio based on
estimated adjusted pro forma Funds from Operations is %.

45
<PAGE>

CAPITALIZATION

The following table sets forth the combined historical capitalization of the
Boston Properties Predecessor Group together with the Property Partnerships and
the other assets to be acquired in the Formation Transactions and the pro forma
combined capitalization of the Company as of December 31, 1996, as adjusted to
give effect to the Formation Transactions, the Offering and the use of the net
proceeds from the Offering and from the initial borrowing under the Unsecured
Line of Credit as set forth under "Use of Proceeds." The information set forth
in the table should be read in conjunction with the combined historical
financial statements and notes thereto, the pro forma financial information and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
COMBINED
HISTORICAL AS ADJUSTED
----------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgage Notes and Unsecured Line of Credit
(1).......................................... $1,420,359 $730,128 (3)
Minority interest in Operating Partnership..... -- 45,785
Stockholders' equity:
Preferred Stock, $.01 par value, 50,000,000
shares authorized, none issued or
outstanding.................................. -- --
Common Stock, $.01 par value, 250,000,000
shares authorized; 35,333,541 issued and
outstanding (2).............................. -- 353
Additional Paid-in Capital.................... -- 100,139
Owners' Equity (Deficiency)................... (576,632) --
---------- --------
Total Stockholders' Equity (Deficiency)...... (576,632) 100,492
---------- --------
Total Capitalization........................ $ 843,727 $876,405
========== ========
</TABLE>
- --------
(1) Mortgage notes payable are comprised of 44 loans at December 31, 1996 and
1995, each of which is collateralized by a building and related land
included in real estate assets. The mortgage notes payable are generally
due in monthly installments and mature at various dates through September
30, 2012. Interest rates on fixed rate mortgage notes payable aggregating
$1,013,361 and $929,226 at December 31, 1996 and 1995, respectively, range
from 7.35% to 9.875% (averaging 8.18% at December 31, 1996). Interest rates
on variable rate mortgage notes payable aggregating $385,985 and $446,546
at December 31, 1996 and 1995, respectively, range from the London
Interbank Offered Rate ("LIBOR") 5.5% at December 31, 1996 to 1.375% above
the LIBOR rate.

The interest rates related to the mortgage notes payable for three
properties aggregating $610,782 and $612,657 at December 31, 1996 and 1995
are subject to periodic scheduled rate increases. Interest expense for
these mortgage notes payable is computed using the effective interest
method. The impact of using this method increased interest expense $644,
$1,347 and $3,131 for the years ended December 31, 1996, 1995 and 1994,
respectively. The cumulative liability related to these adjustments is
$21,013 and $20,369 at December 31, 1996 and 1995, respectively, and is
included in mortgage notes payable.

Combined aggregate principal maturities of mortgage notes payable at
December 31, 1996 are as follows:

The extraordinary loss reflected in the statement of operations for the year
ended December 31, 1996 resulted from a prepayment penalty upon the early
principal repayment of a mortgage note payable.

Certain mortgage notes payable are subject to prepayment penalties of varying
amounts in the event of an early principal repayment.

46
<PAGE>

(2) Includes shares of Common Stock to be issued in the Offering. Does not
include (i) 16,066,459 shares of Common Stock that may be issued upon the
exchange of OP Units issued in connection with the Formation Transactions,
or (ii) not more than 2,929,800 shares of Common Stock subject to options
granted under the Company's Stock Option Plan.

(3) As adjusted Mortgage Notes and Unsecured Line of Credit consists of the
pro forma Mortgage Notes payable and Unsecured Line of Credit of $712,674
as of December 31, 1996 adjusted (i) for the effects of the drawdown on
the Unsecured Line of Credit of $42,829 as of the Offering date less the
$22,117 drawdown used for pro forma purposes, and (ii) to reflect
anticipated principal amortization on the Mortgage Notes between December
31, 1996 and the Offering date.

47
<PAGE>

DILUTION

At December 31, 1996, the Company had a net tangible book value of
approximately $(605.5) million. After giving effect to (i) the sale of the
shares of Common Stock offered hereby (at an assumed initial public offering
price of $25.00 per share) and the receipt by the Company of approximately
$727.0 million in net proceeds from the Offering, after deducting the
underwriting discount and estimated Offering expenses, (ii) the repayment of
approximately $709.6 (at December 31, 1996) million of indebtedness under
mortgage debt, the pro forma net tangible book value at December 31, 1996
would have been $83.5 million, or $2.66 per share of Common Stock. This amount
represents an immediate increase in net tangible book value of $32.93 per
share to persons who held a direct or indirect interest in the assets of the
Company prior to the Offering (the "Continuing Investors") and an immediate
dilution in pro forma net tangible book value of $22.34 per share of Common
Stock to new investors. The following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share.................... $25.00
Deficiency in tangible book value per share prior to the
Offering(1)............................................. $(30.27)
Increase in net tangible book value per share
attributable to the Offering(2)......................... $32.93
Pro forma net tangible book value after the Offering(3).... $ 2.66
------
Dilution in net tangible book value per share of Common
Stock to new investors(4)................................. $22.34
======
</TABLE>
- --------

(1) Net tangible book value per share prior to the Offering is determined by
dividing net tangible book value of the Company (based on the December 31,
1996 net book value of the assets less net book value of deferred
financing and leasing costs to be contributed in connection with the
Formation Transactions, net of liabilities to be assumed) by the number of
shares of Common Stock held by, or issuable upon the exchange of all OP
Units to be issued to, the Continuing Investors.
(2) Based on the assumed initial public offering price of $25.00 per share of
Common Stock and after deducting Underwriters' discounts and commissions
and estimated Offering expenses.

(3) Based on total pro forma net tangible book value of $83.5 million divided
by the total number of shares of Common Stock. There is no impact on
dilution attributable to the issuance of Common Stock in exchange for OP
Units to be issued to the Continuing Investors since such OP Units would
be exchanged for Common Stock on a one-for-one basis.
(4) Dilution is determined by subtracting net tangible book value per share of
Common Stock after the Offering from the initial public offering price of
$25.00 per share of Common Stock.

The following table summarizes, on a pro forma basis giving effect to the
Offering and the Formation Transactions, the number of shares of Common Stock
to be sold by the Company in the Offering and the number of OP Units to be
issued to the Continuing Investors in connection with the Formation
Transactions, the net tangible book value as of December 31, 1996 of the
assets contributed in the Formation Transactions and the net tangible book
value of the average contribution per share based on total contributions.

<TABLE>
<CAPTION>
CASH/BOOK VALUE OF
COMMON STOCK/ TO THE COMPANY PURCHASE PRICE/BOOK
OP UNITS ISSUED CONTRIBUTIONS(1) VALUE OF AVG.
------------------ ------------------------- CONTRIBUTION
SHARES PERCENT $ PERCENT PER SHARE/UNIT
--------- -------- ----------- ------------------------------
(IN THOUSANDS EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
New Investors in the
Offering............... 31,400 61% $ 727,013 598% $ 25.00(2)
Common Stock issued to
Continuing Investors... 3,934 8% (119,075) (98)% $(30.27)
OP Units issued to
Continuing Investors... 16,066 31% $ (486,287) (400)% $(30.27)
--------- ------ ----------- ------ -------
Total................. 51,400 100% $ 121,651 100%
========= ====== =========== ======
</TABLE>
- --------

(1) Based on the December 31, 1996 net book value of the assets less net book
value of deferred financing and leasing costs to be contributed in
connection with the Formation Transactions, net of liabilities to be
assumed.
(2) Before deducting the underwriting discount and estimated expenses of the
Offering.

48
<PAGE>

SELECTED FINANCIAL INFORMATION

The following table sets forth unaudited pro forma financial and other
information for the Company and combined historical financial information for
the Boston Properties Predecessor Group. The following selected financial
information should be read in conjunction with the financial statements and
notes thereto contained in this Prospectus.

The combined historical balance sheets as of December 31, 1996 and 1995 and
combined historical statements of operations for the years ended December 31,
1996, 1995 and 1994 of the Boston Properties Predecessor Group have been
derived from the historical combined financial statements audited by Coopers &
Lybrand LLP, independent accountants, whose report with respect thereto is
included elsewhere in this Prospectus.

Unaudited pro forma operating information for the year ended December 31,
1996 is presented as if the completion of the Offering and the Formation
Transactions occurred at January 1, 1996 and, therefore, incorporates certain
assumptions that are described in the notes to the Pro Forma Condensed
Consolidated Statements of Operations included elsewhere in this Prospectus.
The unaudited pro forma balance sheet data is presented as if the
aforementioned transactions had occurred on December 31, 1996.

49
<PAGE>

THE COMPANY (PRO FORMA) AND THE BOSTON PROPERTIES PREDECESSOR GROUP
(HISTORICAL)

50
<PAGE>

(3) Represents the approximate 31.3% interest in the Operating Partnership
that will be owned by Messrs. Zuckerman and Linde and other continuing
investors in the Properties.
(4) EBITDA means operating income before mortgage and other interest, income
taxes, depreciation and amortization. The Company believes EBITDA is
useful to investors as an indicator of the Company's ability to service
debt or pay cash distributions. EBITDA, as calculated by the Company, is
not comparable to EBITDA reported by other REITs that do not define EBITDA
exactly as the Company defines that term. EBITDA does not represent cash
generated from operating activities in accordance with GAAP and should not
be considered as an alternative to operating income or net income as an
indicator of performance or as an alternative to cash flows from operating
activities as an indicator of liquidity. EBITDA for the respective periods
is calculated as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
PRO FORMA
1996 1996 1995 1994 1993 1992
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
EBITDA
Income (loss) before
minority interest and
extraordinary item..... $ 60,158 $ 8,657 $ (3,707) $ 7,583 $ 17,477 $ 16,384
Add:
Interest expense...... 53,061 107,121 106,952 95,331 88,510 90,443
Real estate deprecia-
tion and amortiza-
tion................. 35,900 35,643 33,240 32,509 32,300 34,221
Other depreciation and
amortization......... 1,999 2,829 2,429 2,545 2,673 2,255
Less: Minority combined
partnership's share
of EBITDA.......... (684) (684) (593) (699) (699) (676)
-------- -------- -------- -------- -------- --------
EBITDA.................. $150,434 $153,566 $138,321 $137,269 $140,261 $142,627
======== ======== ======== ======== ======== ========
EBITDA (Company's 68.7%
Share)................. $103,348
</TABLE>

(5) The Company generally considers Funds from Operations an appropriate
measure of liquidity of an equity REIT because industry analysts have
accepted it as a performance measure of equity REITs. "Funds from
Operations" as defined by NAREIT means net income (loss) (computed in
accordance with GAAP) excluding significant non-recurring items, gains (or
losses) from debt restructuring and sale of property plus depreciation and
amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. The Company's Funds from
Operations are not comparable to Funds from Operations reported by other
REITs that do not define that term using the current NAREIT definition or
that interpret the current NAREIT definition differently than does the
Company. The Company believes that in order to facilitate a clear
understanding of the combined historical operating results of the
Properties and the Company, funds from Operations should be examined in
conjunction with the income (loss) as presented in the audited combined
financial statements and information included elsewhere in this
Prospectus. Funds from Operations should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indicator of the Company's financial performance or to cash flow from
operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund
the Company's cash needs, including its ability to make distributions.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
PRO FORMA
1996 1996 1995 1994 1993 1992
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
FUNDS FROM OPERATIONS
Income (loss) before
minority interest and
extraordinary item.... $60,158 $ 8,657 $(3,707) $ 7,583 $17,477 $16,384
Add:
Real estate
depreciation and
amortization........ 35,900 35,643 33,240 32,509 32,300 34,221
Less:
Minority combined
partnership's share
of funds from
operations.......... (479) (479) (382) (524) (537) (508)
Non-recurring item--
significant lease
termination fee(A).. (7,503) (7,503) -- -- -- --
------- ------- ------- ------- ------- -------
Funds from operations.. $88,076 $36,318 $29,151 $39,568 $49,240 $50,097
======= ======= ======= ======= ======= =======
Funds from operations
(Company's 68.7%
Share)................ $60,508
</TABLE>
- -------
(A) For Funds from Operations reporting purposes, the Company believes this
lease termination fee to be non-recurring.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the "Selected
Financial Information" and the historical and pro forma financial statements
and notes thereto appearing elsewhere in this Prospectus. Such financial
statements and information reflect the historical financial position and
results of operations of the Boston Properties Predecessor Group, prior to the
completion of the Offering and the Formation Transactions. The pro forma
financial position is presented as if the Offering and the Formation
Transactions had occurred on December 31, 1996. The pro forma results of
operations is presented as if the Offering and the Formation Transactions had
occurred on January 1, 1996. See "Formation Transactions" and the Notes to the
pro forma financial statements of the Company. The combined financial
statements of the Boston Properties Predecessor Group consist of the 60 Office
Properties (including five Office Properties under development during 1996),
nine Industrial Properties, two Hotel Properties and the Garage Property.

RESULTS OF OPERATIONS

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995.

Rental revenue increased $15.7 million or 8.8% to $195.0 million from $179.3
million for the year ended December 31, 1996 compared to the year ended
December 31, 1995 primarily as a result of (i) a $7.5 million lease
termination fee received from a tenant at 599 Lexington Avenue for which the
space was immediately released (ii) an increase of $2.8 million due to the
completion of the redevelopment and leasing of 191 Spring Street and (iii) an
overall increase in occupancy and rental rates.

Hotel revenue increased $4.4 million or $7.1% to $65.7 million from $61.3
million for the year ended December 31, 1996 compared to the year ended
December 31, 1995 primarily as a result of an increase in average daily room
rates of 7.6%.

Third party management and development fee income increased $1.3 million or
29.5% to $5.7 million from $4.4 million for the year ended December 31, 1996
compared to the year ended December 31, 1995 primarily as a result of new fees
for development services for projects which began during 1996.

Interest and other income decreased $166,000 or 4.5% to $3.5 million from
$3.7 million primarily due to a reduction in interest income resulting from a
reduction in cash reserves.

Property expenses increased $2.8 million or 5.0% to $58.2 million from $55.4
million for the year ended December 31, 1996 compared to the year ended
December 31, 1995 primarily as a result of an increase of $0.2 million in real
estate taxes and a $1.1 million increase in utility costs which is partially
due to the increase in occupancy of the properties during 1996.

Hotel expenses increased $2.7 million or 6.1% to $46.7 million from $44.0
million for the year ended December 31, 1996 compared to the year ended
December 31, 1995.

General and administrative expense increased $382,000, or 3.7% to $10.8
million from $10.4 million for the year ended December 31, 1996 compared to
the year ended December 31, 1995.

Interest expense increased $169,000 or 0.2% to $107.1 million from $107.0
million for the year ended December 31, 1996 compared to the year ended
December 31, 1995 primarily as the result of an increase in interest expense
of 191 Spring Street resulting from the capitalization of interest during the
redevelopment of that property during 1995, an increase in total indebtedness
from new loans on Bedford Business Park and Capital Gallery, partially offset
by decreases in interest rates on variable rate loans.

Depreciation and amortization expense increased $2.8 million or 7.8% to
$38.5 million from $35.7 million for the year ended December 31, 1996 compared
to the year ended December 31, 1995 as a result of increased tenant
improvement costs incurred during the successful leasing of available space
during 1995 and 1996.

As a result of the foregoing, net income before extraordinary item and
minority interest in combined partnership increased $12.4 million to $8.7
million from a loss of $3.7 million for the year ended December 31, 1996
compared to the year ended December 31, 1995.

52
<PAGE>

COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994.

Rental revenue increased $2.6 million or 1.5% to $179.3 million from $176.7
million for the year ended December 31, 1995 compared to the year ended
December 31, 1994 as a result of increases in occupancy, including an increase
of $2.3 million from releasing at Democracy Center partially offset by a loss
of revenue of $2.7 million from 191 Spring Street which was taken out of
service for eleven months of 1995 while undergoing a complete redevelopment.

Hotel revenue increased $2.9 million or 4.9% to $61.3 million from $58.4
million for the year ended December 31, 1995 compared to the year ended
December 31, 1994 primarily as a result of an increase in the average daily
room rate of 7.7%.

Third party management and development fee revenue decreased $1.6 million or
27.0% to $4.4 million from $6.0 million primarily as the result of a decline
in revenue from projects completed in 1994.

Interest and other income increased $864,000 or 30.5% for the year ended
December 31, 1995 compared to the year ended December 31, 1994 primarily as a
result of an increase in interest income from cash investments.

Property expenses increased $2.2 million or 4.1% to $55.4 million from $53.2
million for the year ended December 31, 1995 compared to the year ended
December 31, 1994 primarily as a result of increased utilities and building
cleaning and maintenance costs.

Hotel expenses increased $1.3 million or 3.0% to $44.0 million from $42.8
million for the year ended December 31, 1995 compared to the year ended
December 31, 1994.

General and administrative expense increased $249,000, or 2.5% to $10.4
million from $10.1 million for the year ended December 31, 1995 compared to
the year ended December 31, 1994.

Interest expense increased $11.6 million or 12.2% to $107.0 million from
$95.3 million for the year ended December 31, 1995 compared to the year ended
December 31, 1994 as a result of increases in interest rates on variable rate
mortgage loans partially offset by a reduction in indebtedness resulting from
scheduled payments of mortgage loan principal and the capitalization of
interest of the 191 Spring Street loan during the redevelopment of that
property in 1995.

Depreciation and amortization expense increased $615,000 or 1.8% to $35.7
million from $35.1 million for the year ended December 31, 1995 compared to
the year ended December 31, 1994.

As a result of the foregoing, net income before extraordinary item and
minority interest in combined partnership decreased $11.3 million to a loss of
$3.7 million from $7.6 million of net income for the year ended December 31,
1995 compared to the year ended December 31, 1994.

PRO FORMA OPERATING RESULTS

Year Ended December 31, 1996. For the year ended December 31, 1996, pro
forma net income before minority interest in Operating Partnership and
extraordinary item would have been $59.8 million compared to $8.3 million of
historical net income for the year ended December 31, 1996. The pro forma
operating results for the year ended December 31, 1996 include a minority
interest in Operating Partnership of $18.7 million whereas there was no
minority interest in Operating Partnership in the corresponding historical
period. On a pro forma basis, net income before extraordinary item for the
year ended December 31, 1996 would have been $41.1 million compared to $8.3
million of net income before extraordinary items for the corresponding
historical period. Income before minority interest in Operating Partnership
and extraordinary item increased by $51.5 million on a pro forma basis for the
year ended December 31, 1996 primarily due to a reduction of interest expense
of $54.1 million.

Rental revenue for pro forma 1996 includes the lease revenues that the
Company will receive from ZL Hotel LLC under the lease for the two Hotel
Properties. After entering into such lease, the Company will not recognize
hotel revenues and expenses.

The development and management operations of the Company are reflected on a
gross basis in the historical combined financial statements. In connection
with the Formation Transactions, substantially all of the Greater

53
<PAGE>

Washington D.C. third party property management business will be contributed
by the Company to the Development and Management Company and thereafter the
operations of the Development and Management Company will be accounted for by
the Company under the equity method in the pro forma statements; therefore,
the pro forma statements include (i) revenues and expenses on a gross basis,
from development and management conducted directly by the Operating
Partnership in the respective income and expense line items and (ii) the
Development and Management Company's net operations in the fee and other
income line item. See "Business and Properties--Development Consulting,
Property Management and Third Party Management."

LIQUIDITY AND CAPITAL RESOURCES

Mortgage Financing. Upon completion of the Offering and the Formation
Transactions and the application of the net proceeds therefrom as described in
"Use of Proceeds," the Company expects to have reduced its total indebtedness
from $1.44 billion to $731.3 million, comprised of $688.5 million of debt
secured by Properties (the "Mortgage Debt") and $42.8 million of debt under
the Unsecured Line of Credit. The $688.5 million Mortgage Debt is comprised of
11 loans secured by 13 properties, with a weighted average interest rate of
7.6% on the fixed rate loans which total $683.8 million. There will be a total
of $3.5 million of scheduled loan principal payments due during the year
ending December 31, 1997. The Mortgage Debt will represent approximately 34.1%
of the Company's Total Market Capitalization.

Mortgage Indebtedness. As of June 1, 1997, the Company expects to have
outstanding approximately $688.5 million of indebtedness secured by each of
the Properties as listed below:

<TABLE>
<CAPTION>
ESTIMATED
INTEREST ANNUAL DEBT MATURITY BALANCE AT
PROPERTIES RATE PRINCIPAL SERVICE DATE MATURITY
- ---------- ---------- --------- ----------- ----------------- --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
599 Lexington Avenue.... 7.00% $225,000 $15,750 July 19, 2005 $225,000
Two Independence
Square................. 7.90 122,187 10,767 February 27, 2003 113,844
One Independence
Square................. 7.90 78,125 7,038 August 21, 2001 73,938
2300 N Street........... 7.25 66,000 4,785 August 3, 2003 66,000
Capital Gallery......... 8.24 60,364 5,767 August 15, 2006 49,555
10 & 20 Burlington Mall
Road(1)................ 8.33 37,000 3,082 July 1, 2001 37,000
Ten Cambridge Center &
North Garage........... 7.57 40,000 3,028 March 29, 2000 40,000
191 Spring Street....... 8.50 23,822 2,271 September 1, 2006 20,428
Bedford Business Park... 8.50 23,313 1,980 December 10, 2008 15,891
Montvale Center......... 8.59 7,953 779 December 1, 2006 6,556
Hilltop Business Cen-
ter.................... LIBOR+1.50% 4,700 553 December 1, 1998 4,400
-------- ------- --------
Total................. $688,464 $55,800 $652,612
======== ======= ========
</TABLE>
- --------
(1) Includes outstanding indebtedness secured by 91 Hartwell Avenue and 92 and
100 Hayden Avenue.
(2) For purposes of calculating debt service, LIBOR is presumed to be 6.0%.

The Unsecured Line of Credit. The Company is currently negotiating with a
commercial bank, the terms of the three year, $300 million Unsecured Line of
Credit. The Unsecured Line of Credit will be used to facilitate development
and acquisition activities and for working capital purposes.

Analysis of Liquidity and Capital Resources. Upon completion of the Offering
and the Formation Transactions and the use of proceeds therefrom, the Company
will have reduced its total indebtedness by approximately $709 million.

The Company believes the Offering and the Formation Transaction will improve
its financial performance through changes in its capital structure,
principally the substantial reduction in its overall debt and its debt to

54
<PAGE>

equity ratio. The Company anticipates that distributions will be paid from
cash available for distribution, which is expected to exceed cash historically
available for distribution as a result of the reduction in debt service
resulting from the repayment of indebtedness. Through the Formation
Transactions, the Company will repay $707.1 million of its existing mortgage
debt, reducing annual interest expense by approximately $54.1 million.

After the Offering, the Company expects to have approximately $257.2 million
available under the Unsecured Line of Credit. The Company anticipates that the
Unsecured Line of Credit will be used primarily to develop and acquire
properties and provide for working capital needs.

The Company expects to meet its short-term liquidity requirements generally
through its initial working capital and net cash provided by operations. The
Company's operating properties and hotels require periodic investments of
capital for tenant-related capital expenditures and for general capital
improvements. For the years ending December 31, 1992 through December 31,
1996, the Company's recurring tenant improvements and leasing commissions
averaged $7.67 per square foot of leased space per year. The Company expects
that the average annual cost of recurring tenant improvements and leasing
commissions will be $5,881,000 based upon an average annual square feet for
which leases expire during the years ending December 31, 1997 through December
31, 2001 of 766,692 square feet. The Company expects the cost of general
capital improvements to the properties to average $1,609,000 annually based
upon an estimate of $0.20 per square foot. General capital expenditures for
the hotels is expected to be $2,679,000 annually based upon the average actual
capital expenditures at the hotels for the years ending December 31, 1992
through December 31, 1996.

CASH FLOWS

Comparison for the Year Ended December 31, 1996 to Year Ended December 31,
1995. Cash and cash equivalents were $9.0 million and $25.9 million at
December 31, 1996 and 1995, respectively. Cash and cash equivalents decreased
$16.9 million during 1996 compared to a decrease of $20.4 million during 1995.
The decrease is due to a $32.5 million increase in net cash used in financing
activities from $14.5 million to $47.0 million, offset by a $13.1 million
decrease in net cash used in investing activities from $36.8 million to $23.7
million and an increase in cash flows provided by operating activities of
$22.9 million from $30.9 million to $53.8 million. The increase in net cash
used in financing activities of $32.5 million is attributable to net
distributions to owners of $71.9 million offset by an increase of $39.4
million in loan proceeds net of financing costs and loan principal payments.
The decrease in net cash used in investing activities of $13.2 million is
attributable to the acquisition of the two Sugarland properties for $7.5
million offset by a draw of restricted cash of $9.2 million and a net decrease
in additions to tenant improvements, leasing and development costs. The
increase in cash provided by operating activities of $22.9 million is due to
an increase in net income of $11.3 million and increases from accounts
receivable, escrows and prepaid expenses.

Comparison for the Year Ended December 31, 1995 to Year Ended December 31,
1994. Cash and cash equivalents were $25.9 million and $46.3 million at
December 31, 1995 and 1994 respectively. Cash and cash equivalents decreased
$20.4 million during 1995 compared to a decrease of $4.4 million during 1994.
The decrease is due to an increase in cash used in investing activities of
$18.4 million from $18.4 million to $36.8 million, a decrease in cash provided
by operating activities of $16.6 million from $47.6 million to $30.9 million
offset by a decrease in net cash used in financing activities of $19.0 million
from $33.5 million to $14.5 million. The increase in cash used in investing
activities of $18.4 million is due to an increase in tenant improvements,
building improvements and leasing costs of $16.6 million and the acquisition
of 164 Lexington Road of $1.8 million. The decrease in net cash used in
financing activities of $19.0 million is attributable to a $13.9 million
decrease in net distributions to owners and a $5.1 million decrease in loans
payable and financing costs.

FUNDS FROM OPERATIONS

Industry analysts generally consider Funds from Operations, as defined by
NAREIT, to be an alternative measure of performance of an equity REIT. Funds
from Operations, as defined by NAREIT, means net income (computed in
accordance with GAAP) excluding significant nonrecurring items, gains (or
losses) from debt

55
<PAGE>

restructuring and sales of property, plus depreciation and amortization on
real estate assets, and after adjustments for unconsolidated partnerships and
joint ventures. The Company's Funds from Operations are not comparable to
Funds from Operations reported by other REITs that do not define the term
using the current NAREIT definition or that interpret the current NAREIT
definition differently than does the Company. The Company believes that in
order to facilitate a clear understanding of the combined historical operating
results of the Boston Properties Predecessor Group and the Company, Funds from
Operations should be examined in conjunction with net income as presented in
the combined financial statements and information included elsewhere in this
Prospectus. Funds from Operations does not represent cash generated from
operating activities in accordance with GAAP and should not be considered as
an alternative to net income as an indication of the Company's performance or
to cash flows as a measure of liquidity or ability to make distributions.

INFLATION

Substantially all of the office leases provide for separate real estate tax
and operating expense escalations over a base amount. In addition, many of the
leases provide for fixed base rent increases or indexed increases. The Company
believes that inflationary increases may be at least partially offset by the
contractual rent increases described above.

56
<PAGE>

BUSINESS AND PROPERTIES

GENERAL

The Company's Properties consist of 62 Office Properties (including seven
Development Properties), nine Industrial Properties, the two Hotel Properties
and the Garage Property. The total square footage of the Properties is
approximately 10.9 million square feet, comprised of (i) 35 Class A Office
Buildings (including three Development Properties) totaling approximately 6.0
million net rentable square feet, with approximately 1.3 million square feet
of structured parking for 4,222 vehicles, (ii) 27 R&D Properties (including
four Development Properties) totaling approximately 1.6 million net rentable
square feet, (iii) nine Industrial Properties totaling approximately 925,000
net rentable square feet, (iv) two Hotel Properties, with 833 rooms, totaling
approximately 750,000 square feet, and (v) the Garage Property, with 1,170
parking spaces, consisting of approximately 330,000 square feet.

57
<PAGE>

SUMMARY PROPERTY DATA

Set forth below is a summary of information regarding the Properties,
including the seven Development Properties.
<TABLE>
<CAPTION>
ESCALATED
RENT
NET PERCENT ESCALATED PER
YEAR(S) NO. RENTABLE LEASED RENT PERCENT OF LEASED
PERCENT BUILT/ OF SQUARE AS OF AS OF ESCALATED SQUARE
PROPERTY NAME LOCATION OWNERSHIP RENOVATED(1) BLDGS. FEET 12/31/96 12/31/96(2) RENT FOOT(2)
------------- -------- --------- ------------- ------ --------- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OFFICE PROPER-
TIES:
Class A Office
Buildings:
599 Lexington
Avenue (4)...... New York, NY 100.0% 1986 1 1,000,070 97% $ 51,470,410 27.2% $52.90
Two Independence
Square (5)...... SW Washington, DC 100.0 1992 1 579,600 100 21,185,671 11.2 36.65
Democracy Cen-
ter............. Bethesda, MD 100.0 1985-88/94-96 3 680,000 96 15,047,361 8.0 23.03
One Independence
Square (5)...... SW Washington, DC 100.0 1991 1 337,794 100 12,650,434 6.7 37.45
Capital Gal-
lery............ SW Washington, DC 100.0 1981 1 396,255 93 12,229,487 6.5 33.15
2300 N Street... NW Washington, D.C. 100.0 1986 1 276,906 100 11,712,087 6.2 48.04
The U.S.
International
Trade Commission
Building (5)
(6)............. SW Washington, DC 100.0 1987 1 243,998 100 6,673,165 3.5 27.35
One Cambridge
Center.......... Cambridge, MA 100.0 1987 1 215,385 100 6,015,824 3.2 27.93
Ten Cambridge
Center.......... Cambridge, MA 100.0 1990 1 152,664 100 4,251,071 2.2 27.85
191 Spring
Street.......... Lexington, MA 100.0 1971/95 1 162,700 100 3,986,701 2.1 24.50
10 & 20 Burling-
ton Mall Road... Burlington, MA 100.0 1984-86/95-96 2 152,552 100 3,131,736 1.7 20.53
Lexington Office
Park............ Lexington, MA 100.0 1982 2 168,500 95 2,995,506 1.6 19.33
Waltham Office
Center.......... Waltham, MA 100.0 1968-70/87-88 3 129,658 100 2,575,521 1.4 19.86
Three Cambridge
Center.......... Cambridge, MA 100.0 1987 1 107,484 100 2,406,808 1.3 22.39
Montvale Center
(7)............. Gaithersburg, MD 75.0 1987 1 122,157 100 2,195,966 1.2 17.98
170 Tracer
Lane............ Waltham, MA 100.0 1980 1 73,258 100 1,681,073 0.9 22.95
195 West
Street.......... Waltham, MA 100.0 1990 1 63,500 100 1,564,296 0.8 24.63
Bedford Business
Park............ Bedford, MA 100.0 1980 1 90,000 100 1,513,011 0.8 16.81
91 Hartwell Ave-
nue............. Lexington, MA 100.0 1985/96 1 122,135 51 1,318,024 0.7 21.24
33 Hayden Ave-
nue............. Lexington, MA 100.0 1979 1 79,564 100 1,128,814 0.6 14.19
Eleven Cambridge
Center.......... Cambridge, MA 100.0 1984 1 79,616 100 1,118,563 0.6 14.05
100 Hayden Ave-
nue............. Lexington, MA 100.0 1985 1 55,924 100 1,098,034 0.6 19.63
8 Arlington
Street (8)...... Boston, MA 100.0 1860/1920/89 1 30,526 100 1,080,172 0.6 35.39
32 Hartwell Ave-
nue............. Lexington, MA 100.0 1968-79/87 1 69,154 100 1,002,211 0.5 14.49
204 Second Ave-
nue............. Waltham, MA 100.0 1981/93 1 40,974 100 812,518 0.4 19.83
92 Hayden Ave-
nue............. Lexington, MA 100.0 1968/84 1 30,980 100 632,109 0.3 20.40
BDM Interna-
tional Build-
ings* (9)....... Reston, VA 25.0 1999 2 440,000 -- -- -- --
201 Spring
Street* (10).... Lexington, MA 100.0 1997 1 102,000 -- -- -- --
--- --------- --- ------------ ----- ------
SUBTOTAL/WEIGHTED AVERAGE FOR CLASS A OFFICE BUILDINGS (11).... 35 6,003,354 97%(A) $171,476,573 90.7% $32.53(A)
=== ========= === ============ ===== ======
R&D Properties:
Bedford Business
Park............ Bedford, MA 100.0% 1962-78/96 2 383,704 100% $ 3,265,991 1.7% $ 8.51
7601 Boston Bou-
levard, Building
Eight (5)....... Springfield, VA 100.0 1986 1 103,750 100 1,437,971 0.8 13.86
Fourteen Cam-
bridge Center... Cambridge, MA 100.0 1983 1 67,362 100 1,315,519 0.7 19.53
Hilltop Business
Center (12)..... So. San Francisco, CA 35.7 early 1970's 9 144,479 90 1,030,288 0.5 7.95
7600 Boston Bou-
levard, Building
Nine............ Springfield, VA 100.0 1987 1 69,832 100 878,600 0.5 12.58
7500 Boston Bou-
levard, Building
Six(5).......... Springfield, VA 100.0 1985 1 79,971 100 800,464 0.4 10.01
8000 Grainger
Court, Building
Five............ Springfield, VA 100.0 1984 1 90,465 100 759,790 0.4 8.40
7435 Boston Bou-
levard, Building
One............. Springfield, VA 100.0 1982 1 105,414 67 753,100 0.4 10.60
7451 Boston Bou-
levard, Building
Two............. Springfield, VA 100.0 1982 1 47,001 100 644,646 0.3 13.72
164 Lexington
Road............ Billerica, MA 100.0 1982 1 64,140 100 598,478 0.3 9.33
7374 Boston Bou-
levard, Building
Four (5)........ Springfield, VA 100.0 1984 1 57,321 100 595,823 0.3 10.39
8000 Corporate
Court, Building
Eleven.......... Springfield, VA 100.0 1989 1 52,539 100 395,053 0.2 7.52
7375 Boston Bou-
levard, Building
Ten (5)......... Springfield, VA 100.0 1988 1 26,865 100 342,999 0.2 12.77
17 Hartwell Ave-
nue............. Lexington, MA 100.0 1968 1 30,000 100 198,000 0.1 6.60
7700 Boston Bou-
levard, Building
Twelve* (13).... Springfield, VA 100.0 1997 1 80,514 -- -- -- --
7501 Boston Bou-
levard, Building
Seven* (14)..... Springfield, VA 100.0 1997 1 75,756 -- -- -- --
Sugarland Build-
ing Two* (15)... Herndon, VA 100.0 1986/97 1 59,585 -- -- -- --
Sugarland Build-
ing One* (15)... Herndon, VA 100.0 1985/97 1 52,533 -- -- -- --
--- --------- --- ------------ ----- ------
SUBTOTAL/WEIGHTED AVERAGE FOR R&D PROPERTIES................... 27 1,591,231 96%(B) $ 13,016,722 6.9% $10.22(B)
=== ========= === ============ ===== ======
INDUSTRIAL PROP-
ERTIES:
38 Cabot Boule-
vard (16)....... Bucks County, PA 100.0% 1972/84 1 161,000 100% $ 865,613 0.5% $ 5.38
6201 Columbia
Park Road,
Building Two.... Landover, MD 100.0 1986 1 99,885 87 694,935 0.4 8.03
2000 South Club
Drive, Building
Three........... Landover, MD 100.0 1988 1 83,608 100 685,338 0.4 8.20
40-46 Harvard
Street.......... Westwood, MA 100.0 1967/96 1 169,273 90 677,818 0.4 4.46
25-33 Dartmouth
Street.......... Westwood, MA 100.0 1966/96 1 78,045 87 658,645 0.3 9.75
1950 Stanford
Court, Building
One............. Landover, MD 100.0 1986 1 53,250 100 354,274 0.2 6.65
2391 West Winton
Avenue.......... Hayward, CA 100.0 1974 1 221,000 27(17) 234,000 0.1 3.90
560 Forbes Bou-
levard (12)..... So. San Francisco, CA 35.7 early 1970's 1 40,000 100 238,000 0.1 5.95
430 Rozzi Place
(12)............ So. San Francisco, CA 35.7 early 1970's 1 20,000 100 114,949 0.1 5.75
--- --------- --- ------------ ----- ------
SUBTOTAL/WEIGHTED AVERAGE FOR INDUSTRIAL PROPERTIES............ 9 926,061 78%(17) $ 4,523,572 2.4% $ 6.25
=== ========= === ============ ===== ======
TOTAL/WEIGHTED AVERAGE FOR OFFICE AND INDUSTRIAL
PROPERTIES..................................................... 71 8,520,646 94%(C) $189,016,867 100.0% $26.00(C)
=== ========= === ============ ===== ======
<CAPTION>
ANNUAL NET
EFFECTIVE
RENT PER
LEASED
SQUARE
PROPERTY NAME FOOT(3)
------------- -----------
<S> <C>
OFFICE PROPER-
TIES:
Class A Office
Buildings:
599 Lexington
Avenue (4)...... $47.13
Two Independence
Square (5)...... 36.80
Democracy Cen-
ter............. 21.22
One Independence
Square (5)...... 34.34
Capital Gal-
lery............ 31.11
2300 N Street... 46.82
The U.S.
International
Trade Commission
Building (5)
(6)............. 24.79
One Cambridge
Center.......... 25.57
Ten Cambridge
Center.......... 23.11
191 Spring
Street.......... 22.26
10 & 20 Burling-
ton Mall Road... 18.45
Lexington Office
Park............ 16.97
Waltham Office
Center.......... 18.54
Three Cambridge
Center.......... 20.45
Montvale Center
(7)............. 18.68
170 Tracer
Lane............ 19.08
195 West
Street.......... 20.36
Bedford Business
Park............ 15.78
91 Hartwell Ave-
nue............. 19.71
33 Hayden Ave-
nue............. 13.47
Eleven Cambridge
Center.......... 11.90
100 Hayden Ave-
nue............. 18.91
8 Arlington
Street (8)...... 34.94
32 Hartwell Ave-
nue............. 12.00
204 Second Ave-
nue............. 19.14
92 Hayden Ave-
nue............. 19.79
BDM Interna-
tional Build-
ings* (9)....... --
201 Spring
Street* (10).... --
-----------
SUBTOTAL/WEIGHTED AVERAGE FOR CLASS A OFFICE BUILDINGS (11).... $30.00(A)
===========
R&D Properties:
Bedford Business
Park............ $ 9.18
7601 Boston Bou-
levard, Building
Eight (5)....... 13.85
Fourteen Cam-
bridge Center... 18.47
Hilltop Business
Center (12)..... 8.93
7600 Boston Bou-
levard, Building
Nine............ 10.20
7500 Boston Bou-
levard, Building
Six(5).......... 9.98
8000 Grainger
Court, Building
Five............ 7.58
7435 Boston Bou-
levard, Building
One............. 8.07
7451 Boston Bou-
levard, Building
Two............. 8.14
164 Lexington
Road............ 7.97
7374 Boston Bou-
levard, Building
Four (5)........ 10.14
8000 Corporate
Court, Building
Eleven.......... 7.59
7375 Boston Bou-
levard, Building
Ten (5)......... 7.82
17 Hartwell Ave-
nue............. 6.60
7700 Boston Bou-
levard, Building
Twelve* (13).... --
7501 Boston Bou-
levard, Building
Seven* (14)..... --
Sugarland Build-
ing Two* (15)... --
Sugarland Build-
ing One* (15)... --
-----------
SUBTOTAL/WEIGHTED AVERAGE FOR R&D PROPERTIES................... $ 9.75(B)
===========
INDUSTRIAL PROP-
ERTIES:
38 Cabot Boule-
vard (16)....... $ 5.38
6201 Columbia
Park Road,
Building Two.... 6.39
2000 South Club
Drive, Building
Three........... 7.06
40-46 Harvard
Street.......... 4.87
25-33 Dartmouth
Street.......... 7.89
1950 Stanford
Court, Building
One............. 6.93
2391 West Winton
Avenue.......... 2.81
560 Forbes Bou-
levard (12)..... 5.37
430 Rozzi Place
(12)............ 5.47
-----------
SUBTOTAL/WEIGHTED AVERAGE FOR INDUSTRIAL PROPERTIES............ $ 5.27
===========
TOTAL/WEIGHTED AVERAGE FOR OFFICE AND INDUSTRIAL
PROPERTIES..................................................... $24.00(C)
===========
</TABLE>
- -------
* These Properties are Development Properties

<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED 12/31/96 YEAR ENDED 12/31/95
------------------------------ --------------------
AVERAGE REVENUE PER AVERAGE REVENUE PER
NUMBER NUMBER DAILY AVAILABLE DAILY AVAILABLE
PERCENT YEAR OF OF SQUARE AVERAGE RATE ROOM RATE ROOM
LOCATION OWNERSHIP BUILT BUILDINGS ROOMS FOOTAGE OCCUPANCY (ADR) (REVPAR)(18) (ADR) (REVPAR)(18)
------------- --------- ----- --------- ------ ---------- --------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOTEL PROPER-
TIES:
Long Wharf
Marriott........ Boston, MA 100.0% 1982 1 402 420,000 86.0% $201.18 $173.01 $192.95 $164.97
Cambridge Center
Marriott........ Cambridge, MA 100.0 1986 1 431 330,400 82.1 150.52 123.58 136.04 114.14
--- ----- ---------- ---- ------- ------- ------- -------
TOTAL/WEIGHTED AVERAGE FOR HOTEL PROPERTIES.... 2 833 750,400 84.0% $174.97 $147.44 $163.50 $138.67
=== ===== ========== ==== ======= ======= ======= =======
<CAPTION>
NUMBER NUMBER
PERCENT YEAR OF OF SQUARE
LOCATION OWNERSHIP BUILT BUILDINGS SPACES FOOTAGE
------------- --------- ----- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
GARAGE PROPERTY:
Cambridge Center
North Garage.... Cambridge, MA 100.0% 1990 1 1170 332,442
STRUCTURED
PARKING INCLUDED
IN CLASS A
OFFICE
BUILDINGS....... 4,222 1,260,530
----- ----------
TOTAL FOR GARAGE
PROPERTY AND
STRUCTURED
PARKING......... 5,392 1,592,972
===== ----------
TOTAL FOR ALL
PROPERTIES...... 74 10,864,018
=== ==========
</TABLE>
- -------
(1) These dates do not include years in which tenant improvements were made to
the Properties, except with respect to 25-33 Dartmouth Street and 40-46
Harvard Street, whose interiors were completely rebuilt to satisfy tenant
needs in 1996.
(2) Escalated Rent represents the annualized monthly Base Rent in effect
(after giving effect to any contractual increases in monthly Base Rent
that have occurred up to December 31, 1996) plus annualized monthly tenant
pass-throughs of operating and other expenses (but excluding electricity
costs paid by tenants) under each lease executed as of December 31, 1996,
or, if such monthly rent has been reduced by a rent concession, the
monthly rent that would have been in effect at such date in the absence of
such concession.
(3) Annual Net Effective Rent Per Leased Square Foot represents the Base Rent
for the month of December 1996, plus tenant pass-throughs of operating and
other expenses (but excluding electricity costs paid by tenants), under
each lease executed as of December 31, 1996, presented on a straight-line
basis in accordance with GAAP, minus amortization of tenant improvement
costs and leasing commissions, if any, paid or payable by the Company
during such period, annualized.
(4) The Company's New York offices are located in this building, where it
occupies 12,896 square feet.
(5) The Property is leased on the basis of net usable square feet (which have
been converted to net rentable square feet for purposes of this table) due
to the requirements of the General Services Administration.
(6) The Company's Washington, D.C. offices are located in this building, where
it occupies 15,612 square feet.
(7) The Company owns a 75.0% general partner interest in the limited
partnership that owns this property. Because of the priority of the
Company's partnership interest, the Company expects to receive any
partnership distributions that are made with respect to this property.
(8) The Property, which is used exclusively as the Company's headquarters, was
constructed in two phases, circa 1860 and circa 1920.
(9) The Company is acting as development manager of these Properties and will
be the 25.0% managing member of a limited liability company that will own
the Properties. The Company's economic interest increases above 25.0% if
certain performance criteria are achieved. The Properties are expected to
be completed in 1999 and are 51.1% pre-leased to BDM International.
(10) The Property, which is currently under development by the Company, is
expected to be completed in late 1997 and is 100% committed to Continental
Cablevision.
(11) The Class A Office Buildings contain 4,222 structured parking spaces.
(12) The Company owns a 35.7% controlling general partnership interest in this
property.
(13) The Property, which is currently under development by the Company, is
expected to be completed in late 1997 and is 100% pre-leased to
Autometric, Inc.
(14) The Property, which is currently under development by the Company, is
expected to be completed in late 1997 and is 100% pre-leased to the
General Services Administration (for the United States Customs Service).
(15) The Property, which was acquired by the Company on November 25, 1996, is
currently being redeveloped by the Company.
(16) The original building (100,000 net rentable square feet ) was built in
1972, with an expansion building (61,000 net rentable square feet)
completed in 1984.
(17) The Company's Industrial Property in Hayward, California is currently
27.0% leased. The Company has entered into a letter of intent to lease the
remaining space. Excluding this Property, the Industrial Properties had an
occupancy rate of 94.0% at December 31, 1996.
(18) REVPAR is determined by dividing room revenue by available rooms for the
applicable period.
(A) Does not include three of the Development Properties.
(B) Does not include four of the Development Properties.
(C) Does not include the Development Properties.

DEVELOPMENT PARCELS

<TABLE>
<CAPTION>
NO. OF DEVELOPABLE
LOCATION SUBMARKET PARCELS ACREAGE SQUARE FEET (1)
- -------- --------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Springfield, VA Fairfax County, VA 3 9.4 130,000
Lexington, MA Route 128 NW 1 6.8 50,000
Cambridge, MA East Cambridge, MA 1 3.2 539,000
Andover, MA Route 495 N 1 27.0 290,000
--- ---- ---------
Total 6 47.4 1,009,000
=== ==== =========
</TABLE>
- -------
(1) Represents the total square feet of development that the parcel(s) will
support.

59
<PAGE>

LOCATION OF PROPERTIES

The following chart shows the geographic location of the Company's Office
and Industrial Properties by net rentable square feet and 1996 Escalated Rent:

<TABLE>
<CAPTION>
NET RENTABLE SQUARE FEET OF OFFICE AND INDUSTRIAL PROPERTIES
-------------------------------------------------------------------------
NUMBER CLASS A PERCENT
OF OFFICE INDUSTRIAL OF
MARKET/SUBMARKET PROPERTIES BUILDINGS R&D PROPERTIES PROPERTIES TOTAL TOTAL
---------------- ---------- ------------- ----------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Greater Boston
East Cambridge... 5 555,149 67,362 -- 622,511 7.3%
Route 128 NW
Bedford, MA..... 3 90,000 383,704 -- 473,704 5.6
Billerica, MA... 1 -- 64,140 -- 64,140 0.8
Burlington, MA.. 2 152,555 -- -- 152,552 1.8
Lexington, MA
(2)............. 10 790,957 30,000 -- 820,957 9.6
Route 128/MA
Turnpike
Waltham, MA..... 6 307,390 -- -- 307,390 3.6
Route 128 SW
Westwood, MA.... 2 -- -- 247,318 247,318 2.9
Downtown Boston.. 1 30,526 -- -- 30,526 0.4
--- ------------- ------------- ----------- ------------- ----------
Subtotal......... 30 1,926,574 545,206 247,318 2,719,098 31.9
Greater
Washington, D.C.
SW Washington,
D.C.(3).......... 4 1,557,447 -- -- 1,557,447 18.3
West End
Washington,
D.C. ............ 276,906 -- -- 276,906 3.3
Montgomery
County, MD
Bethesda, MD.... 3 680,000 -- -- 680,000 8.0
Gaithersburg, MD
(4)............. 1 122,157 -- -- 122,157 1.4
Fairfax County,
VA
Herndon, VA
(5)............. 2 -- 112,118 -- 112,118 1.3
Reston, VA (6).. 2 440,000 -- -- 440,000 5.2
Springfield, VA
(3)(7).......... 11 -- 789,428 -- 789,428 9.3
Prince George's
County, MD
Landover, MD.... 3 -- -- 236,743 236,743 2.8
--- ------------- ------------- ----------- ------------- ----------
Subtotal......... 27 3,076,710 901,546 236,743 4,214,999 49.5
Midtown Manhattan
Park Avenue...... 1 1,000,070 -- -- 1,000,070 11.7
Greater San
Francisco
Hayward, CA..... 1 -- -- 221,000 221,000 2.6
San Francisco,
CA (8).......... 11 -- 144,479 60,000 204,479 2.4
--- ------------- ------------- ----------- ------------- ----------
Subtotal......... 12 -- 144,479 281,000 425,479 5.0
Bucks County,
PA............... 1 -- -- 161,000 161,000 1.9
--- ------------- ------------- ----------- ------------- ----------
Total............ 71 6,003,354 1,591,231 926,061 8,520,646 100.00%
=== ============= ============= =========== ============= ==========
Percent of
Total............ 70.4% 18.7% 10.9% 100.0%
Number of Office
and Industrial
Properties....... 35 27 9 71
<CAPTION>
1996 ESCALATED RENT OF OFFICE AND INDUSTRIAL PROPERTIES (1)
--------------------------------------------------------------
CLASS A PERCENT
OFFICE INDUSTRIAL OF
MARKET/SUBMARKET BUILDINGS R&D PROPERTIES PROPERTIES TOTAL TOTAL
---------------- ------------- -------------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C>
Greater Boston
East Cambridge... $ 13,792,266 $ 1,315,519 $ -- $ 15,107,785 8.0%
Route 128 NW
Bedford, MA..... 1,513,011 3,265,991 -- 4,779,002 2.5
Billerica, MA... -- 598,478 -- 598,478 0.3
Burlington, MA.. 3,131,736 -- -- 3,131,736 1.7
Lexington, MA
(2)............. 12,161,399 198,000 -- 12,359,399 6.5
Route 128/MA
Turnpike
Waltham, MA..... 6,633,408 -- -- 6,633,408 3.5
Route 128 SW
Westwood, MA.... -- -- 1,336,463 1,336,463 0.7
Downtown Boston.. 1,080,172 -- -- 1,080,172 0.6
------------- -------------- ----------- ------------- -------
Subtotal......... 38,311,992 5,377,988 1,336,463 45,026,443 23.8
Greater
Washington, D.C.
SW Washington,
D.C.(3).......... 52,738,757 -- -- 52,738,757 27.9
West End
Washington,
D.C. ............ 11,712,087 -- -- 11,712,087 6.2
Montgomery
County, MD
Bethesda, MD.... 15,047,361 -- -- 15,047,361 8.0
Gaithersburg, MD
(4)............. 2,195,966 -- -- 2,195,966 1.2
Fairfax County,
VA
Herndon, VA
(5)............. -- -- -- -- --
Reston, VA (6).. -- -- -- -- --
Springfield, VA
(3)(7).......... -- 6,608,446 -- 6,608,446 3.5
Prince George's
County, MD
Landover, MD.... -- -- 1,734,547 1,734,547 0.9
------------- -------------- ----------- ------------- -------
Subtotal......... 81,694,171 6,608,446 1,734,547 90,037,164 47.6
Midtown Manhattan
Park Avenue...... 51,470,410 -- -- 51,470,410 27.2
Greater San
Francisco
Hayward, CA..... -- -- 234,000 234,000 0.1
San Francisco,
CA (8).......... -- 1,030,288 352,949 1,383,237 0.7
------------- -------------- ----------- ------------- -------
Subtotal......... -- 1,030,288 586,949 1,617,237 0.9
Bucks County,
PA............... -- -- 865,613 865,613 0.5
------------- -------------- ----------- ------------- -------
Total............ $171,476,573 $13,016,722 $4,523,572 $189,016,867 100.0%
============= ============== =========== ============= =======
Percent of
Total............ 90.7% 6.9% 2.4% 100.0%
Number of Office
and Industrial
Properties....... 35 27 9 71
</TABLE>
- ----
(1) Escalated Rent represents the annualized monthly Base Rent in effect
(after giving effect to any contractual increases in monthly Base Rent
that have occurred up to December 31, 1996) plus annualized monthly tenant
pass-throughs of operating and other expenses (but excluding electricity
costs paid by tenants) under each lease executed as of December 31, 1996,
or, if such monthly rent has been reduced by a rent concession, the
monthly rent that would have been in effect at such date in the absence of
such concession.
(2) Does not include 1996 Escalated Rent for one Class A Office Building
currently under development by the Company.
(3) Certain of such Properties are leased on the basis of net usable square
feet (which has been converted to net rentable square feet for purposes of
this table) due to the requirements of the General Services
Administration.
(4) The Company will own a 75.0% general partner interest in the limited
partnership that will own this property. Because of the priority of the
Company's partnership interest, the Company expects to receive any
partnership distributions that are made with respect to this Property.
(5) Does not include 1996 Escalated Rent for two R&D Properties currently
under redevelopment by the Company.
(6) Does not include 1996 Escalated Rent for two Class A Office Buildings
currently under development by the Company. The Company is acting as
development manager of, and will be the 25.0% managing members of the
limited liability company that will own the Properties. The Company's
economic interest may increase above 25.0% depending upon the achievement
of certain performance goals.
(7) Does not include 1996 Escalated Rent for two Office Properties currently
under development by the Company.
(8) The Company will own a 35.7% controlling general partnership interest in
the nine R&D Properties and two Industrial Properties located in San
Francisco, California.

<PAGE>

1996 ESCALATED RENT PER LEASED SQUARE FOOT AND ANNUAL NET EFFECTIVE RENT
PER LEASED SQUARE FOOT OF THE PROPERTIES BY LOCATION AND TYPE OF PROPERTY

The following table sets forth the 1996 annual base rent of the Office and
Industrial Properties by location and type of property.

<TABLE>
<CAPTION>
1996 ESCALATED RENT 1996 ANNUAL NET EFFECTIVE RENT
PER LEASED SQUARE FOOT(1) PER LEASED SQUARE FOOT(2)
-------------------------------------- --------------------------------------
NUMBER CLASS A CLASS A
OF OFFICE R&D INDUSTRIAL OFFICE R&D INDUSTRIAL
MARKET/SUBMARKET PROPERTIES BUILDINGS PROPERTIES PROPERTIES TOTAL BUILDINGS PROPERTIES PROPERTIES TOTAL
---------------- ---------- --------- ---------- ---------- ------ --------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Greater Boston
East Cambridge.......... 5 $24.84 $19.53 $ -- $24.27 $21.94 $18.47 $ -- $21.57
Route 128 NW
Bedford, MA............ 3 16.81 8.51 -- 10.09 15.78 9.18 -- 10.43
Billerica, MA.......... 1 -- 9.33 -- 9.33 -- 7.97 -- 7.97
Burlington, MA......... 2 20.53 -- -- 20.53 18.45 -- -- 18.45
Lexington, MA(3)....... 10 19.76 6.60 -- 19.15 17.95 6.60 -- 17.42
Route 128/MA Turnpike
Waltham, MA............ 6 21.58 -- -- 21.58 19.12 -- -- 19.12
Route 128 SW
Westwood, MA........... 2 -- -- 6.09 6.09 -- -- 5.80 5.80
Downtown Boston........ 1 35.39 -- -- 35.39 34.94 -- -- 34.94
--- ------ ------ ----- ------ ------ ------ ----- ------
Subtotal................ 30 21.88 9.86 6.09 17.90 19.65 10.04 5.80 16.36
Greater Washington, D.C.
SW Washington, D.C.(4).. 4 34.50 -- -- 34.50 32.97 -- -- 32.97
West End Washington,
D.C. ................... 1 48.04 -- -- 48.04 46.82 -- -- 46.82
Montgomery County, MD
Bethesda, MD........... 3 23.03 -- -- 23.03 21.22 -- -- 21.22
Gaithersburg, MD(5).... 1 17.98 -- -- 17.98 18.68 -- -- 18.68
Prince George's County,
MD
Landover, MD........... 3 -- -- 7.77 7.77 -- -- 5.28 5.28
Fairfax County, VA
Herndon, VA(6)......... 2 -- -- -- -- -- -- -- --
Reston, VA(7).......... 2 -- -- -- -- -- -- -- --
Springfield, VA(4)(8).. 11 -- 11.04 -- 11.04 -- 9.65 -- 9.65
--- ------ ------ ----- ------ ------ ------ ----- ------
Subtotal................ 27 32.06 11.04 7.77 26.72 30.57 9.65 5.28 25.19
Midtown Manhattan
Park Avenue............. 1 52.90 -- -- 52.90 47.13 -- -- 47.13
Greater San Francisco
Hayward, CA............ 1 -- -- 3.90 3.90 -- -- 2.81 2.81
San Francisco, CA(9)... 11 -- 7.95 5.88 7.29 -- 8.93 5.40 7.82
--- ------ ------ ----- ------ ------ ------ ----- ------
Subtotal................ 12 -- 7.95 4.89 6.48 -- 8.93 4.11 6.61
Bucks County, PA........ 1 -- -- 5.38 5.38 -- -- 5.38 5.38
Total................... 71 $32.53 $10.22 $6.25 $26.00 $30.00 $ 9.75 $5.27 $24.00
=== ====== ====== ===== ====== ====== ====== ===== ======
</TABLE>
- ----
(1) Escalated Rent Per Leased Square Foot represents the annualized monthly
Base Rent in effect (after giving effect to any contractual increases in
monthly Base Rent that have occurred up to December 31, 1996) plus
annualized monthly tenant pass-throughs of operating and other expenses
(but excluding electricity costs paid by tenants) under each lease
executed as of December 31, 1996, or, if such monthly rent has been
reduced by a rent concession, the monthly rent that would have been in
effect at such date in the absence of such concession, presented on a per
leased square foot basis.
(2) As used throughout this Prospectus, Annual Net Effective Rent Per Leased
Square Foot represents the Base Rent for the month of December 1996, plus
annualized monthly tenant pass-throughs of operating and other expenses
(but excluding electricity costs paid by tenants) under each lease
executed as of December 31, 1996, presented on a straight-line basis in
accordance with GAAP, minus amortization of tenant improvement costs and
leasing commissions, if any, paid or payable by the Company during such
period, annualized.
(3) Does not include rents for one Development Property.
(4) Certain of such Properties are leased on the basis of net usable square
feet (which has been converted to net rentable square feet for purposes of
this table) due to the requirements of General Services Administration.
(5) The Company will own a 75.0% general partner interest in the limited
partnership that will own this Property. Because of the priority of the
Company's partnership interest, the Company expects to receive any
partnership distributions that are made with respect to this Property.
(6) Does not include rents for two R&D Properties currently under
redevelopment by the Company.
(7) Does not include 1996 Escalated Rent for two Class A Office Buildings
currently under development by the Company. The Company is acting as
development manager of, and will be the 25.0% managing member of the
limited liability company that will own the Properties. The Company's
economic interest may increase above 25.0% depending upon the achievement
of certain performance goals.
(8) Does not include rents for two Office Properties currently under
development by the Company.
(9) The Company will own a 35.7% controlling general partnership interest in
the nine R&D Properties and two Industrial Properties located in San
Francisco, California.

<PAGE>

TENANTS

TENANT DIVERSIFICATION

The Properties currently are leased to over 364 tenants that are engaged in
a variety of businesses, including financial services, investment banking,
publishing, computer technology, health care services, accounting and law. The
following table sets forth information regarding the leases with respect to
the 25 largest tenants at the Properties, based on the amount of square
footage leased by such tenants as of December 31, 1996:

<TABLE>
<CAPTION>
REMAINING PERCENTAGE
LEASE TERM TOTAL NET OF AGGREGATE
IN RENTABLE LEASED
TENANT PROPERTY MONTHS SQUARE FEET SQUARE FEET
------ -------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
General Services
Administration:(1)
National Aeronautics Two Independence Square
and Space
Administration(2)..... 187 569,337 7.8%
U.S. International The U.S. International
Trade Trade Commission Building
Commission(3)(4)...... 8 217,772 3.0
U.S. Customs 7601 Boston Boulevard,
Service(5)............ Building Eight 213 103,750 1.4
U.S. Department of 7500 Boston Boulevard,
State(6).............. Building Six 38 79,971 1.1
U.S. Department of 7374 Boston Boulevard,
State(7).............. Building Four 45 57,321 0.8
U.S. Customs 7375 Boston Boulevard,
Service(8)............ Building Ten 8 11,398 0.2
--------- ----
Total GSA Square
Footage............. 1,039,549 14.3
Shearman & Sterling..... 599 Lexington Avenue 128 355,849 4.9
Office of the
Comptroller of the
Currency(9)............ One Independence Square 113 331,518 4.6
ComputerVision.......... Bedford Business Park 40-101 273,704 3.8
Lockheed Martin Democracy Center,
Corporation(10)........ 8000 Grainger Court,
Building Five,
7435 Boston Boulevard,
Building One,
7451 Boston Boulevard,
Building Two,
7375 Boston Boulevard,
Building Ten, and Capital
Gallery 21-66 267,355 3.7
Camp Dresser & McKee, One and Ten Cambridge
Inc. .................. Center 39 214,725 3.0
Shaw, Pittman, Potts & 2300 N Street
Trowbridge............. 117 204,154 2.8
The Stride Rite 191 Spring Street
Corporation............ 115 162,700 2.2
J.I. Case Company....... 38 Cabot Boulevard 18 161,000 2.2
Medisense, Inc. ........ Bedford Business Park 114 150,000 2.1
Jones, Day, Reavis & 599 Lexington Avenue
Pogue.................. 62 144,289 2.0
Output Technologies, 40-46 Harvard Street
Inc. .................. 79 128,105 1.8
Mercer Management 33 Hayden Avenue and 2300
Consulting, Inc.(11)... N Street 59-62 119,215 1.6
Harvard Pilgrim Health 100 Hayden Avenue and 170
Care, Inc. ............ Tracer Lane 38-47 115,448 1.6
Citibank, N.A. ......... 599 Lexington Avenue 72 114,350 1.6
American PCS, L.P. ..... Democracy Center 116 108,591 1.6
The National Gallery of 2000 South Club Drive,
Art.................... Building Three 22 83,608 1.2
Open Software Eleven Cambridge Center
Foundation............. 24 79,616 1.1
Logica North America, 32 Hartwell Avenue
Inc. .................. 58 69,154 1.0
Biogen, Inc. ........... Fourteen Cambridge Center 74 67,362 0.9
Harte-Hanks Data 164 Lexington Road
Technologies, Inc. .... 69 64,140 0.9
US Enrichment Democracy Center
Corporation............ 23 63,666 0.9
PAREXEL International 195 West Street
Corporation............ 56 63,500 0.9
Viking Office Products, 2391 West Winton Avenue
Inc. .................. 50 60,000 0.8
American Nurses Capital Gallery
Foundation............. 23-92 58,430 0.8
</TABLE>
- --------
(1) All General Services Administration ("GSA") leases are full faith and
credit obligations of the United States Government.
(2) Lease with the GSA for a net usable square footage amount of 488,374.
(3) Lease with the GSA for a net usable square footage amount of 198,388.
(4) The Company is currently negotiating a ten-year lease extension with the
tenant.
(5) Lease with the GSA for a net usable square footage amount of 99,155.
(6) Lease with the GSA for a net usable square footage amount of 77,142.
(7) Lease with the GSA for a net usable square footage amount of 47,629.
(8) Lease with the GSA for a net usable square footage amount of 9,911.
(9) Lease measured in net usable square footage of 293,736.
(10) LMC Properties, Inc., a subsidiary of Lockheed Martin Corporation, leases
179,059 of the 267,355 square feet shown. Lockheed Martin Corporation
guarantees such leases.
(11) As of December 31, 1996, Mercer Management Consulting, Inc. had 26 months
remaining under its lease at 33 Hayden Avenue. On April 2, 1997, Mercer
Management Consulting, Inc. signed a 36 month extension to such lease.

62
<PAGE>

LEASE DISTRIBUTION

The following table sets forth information relating to the distribution of
the Company's leases based on square feet, as of December 31, 1996:

<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF AGGREGATE
NUMBER PERCENT OF AGGREGATE ANNUAL ANNUAL
SQUARE FEET OF OF ALL TOTAL LEASED LEASED ESCALATED ESCALATED
UNDER LEASE LEASES LEASES SQUARE FEET SQUARE FEET RENT RENT
----------- ------ ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
2,500 or less........... 142 35.0% 204,857 2.8% $ 4,116,394 2.2%
2,501-5,000............. 79 19.5 284,994 3.9 6,712,057 3.6
5,001-7,500............. 39 9.6 240,386 3.3 5,527,156 2.9
7,501-10,000............ 23 5.7 191,504 2.6 4,902,928 2.6
10,001-20,000........... 43 10.6 600,200 8.3 14,260,801 7.5
20,001-40,000........... 36 8.9 1,008,203 13.9 22,019,658 11.6
40,001 +................ 44 10.8 4,739,563 65.2 131,477,873 69.6
--- ----- --------- ----- ------------ -----
Total................... 406 100.0% 7,269,707 100.0% $189,016,867 100.0%
=== ===== ========= ===== ============ =====
</TABLE>

63
<PAGE>

LEASE EXPIRATIONS OF OFFICE AND INDUSTRIAL PROPERTIES

The following table sets forth a schedule of lease expirations for leases in
place as of December 31, 1996, for each of the ten years beginning with 1997,
for the Office and Industrial Properties, on an aggregate basis by property
type and submarket, assuming that none of the tenants exercises renewal options
and excluding an aggregate of 440,551 square feet of unleased space. As of
December 31, 1996, the average lease term for the portfolio was 5.8 years.

OFFICE PROPERTIES
(MARKET/SUBMARKET)

<TABLE>
<CAPTION>
CLASS A OFFICE
BUILDINGS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-------------- --------- --------- --------- --------- --------- ------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GREATER BOSTON
(1)
East Cambridge
Square footage
of expiring
leases.......... 66,561 106,387 63,691 217,684 2,912 4,227 25,644 0 0 21,519
Percentage of
total leased sq.
ft.............. 11.99% 19.16% 11.47% 39.21% 0.52% 0.76% 4.62% 0.00% 0.00% 3.88%
Annual escalated
rent (2)........ 1,709,941 1,658,720 1,508,874 6,691,092 84,064 0 577,244 0 0 587,469
No. of tenants
whose leases ex-
pire............ 10 5 10 3 1 1 1 0 0 1
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 25.69 $ 15.59 $ 23.69 $ 30.74 $ 28.87 $ 0.00 $ 22.51 $ 0.00 $ 0.00 $ 27.30
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 25.69 $ 15.59 $ 24.04 $ 30.83 $ 28.87 $ 0.00 $ 29.53 $ 0.00 $ 0.00 $ 31.80
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 27.92
Route 128 NW
Square footage
of expiring
leases.......... 107,302 31,569 114,624 100,517 208,810 42,380 0 0 90,000 162,700
Percentage of
total leased sq.
ft.............. 11.52% 3.39% 12.31% 10.79% 22.42% 4.55% 0.00% 0.00% 9.66% 17.47%
Annual escalated
rent (2)........ 2,064,829 618,056 1,827,219 1,958,038 3,925,467 912,825 0 0 1,513,011 3,986,701
No. of tenants
whose leases ex-
pire............ 26 10 7 9 16 3 0 0 1 1
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 19.24 $ 19.58 $ 15.94 $ 19.48 $ 18.80 $ 21.54 $ 0.00 $ 0.00 $ 16.81 $ 24.50
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 20.59 $ 19.71 $ 17.49 $ 21.09 $ 19.73 $ 21.98 $ 0.00 $ 0.00 $ 18.22 $ 29.14
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 27.73
Route 128/Massa-
chusetts Turnpike
Square footage
of expiring
leases.......... 43,402 27,883 53,830 85,215 90,674 6,386 0 0 0 0
Percentage of
total leased sq.
ft. ............ 14.12% 9.07% 17.51% 27.72% 29.5% 2.08% 0.00% 0.00% 0.00% 0.00%
Annual escalated
rent (2)........ 883,936 515,460 1,048,487 1,875,565 2,181,934 128,026 0 0 0 0
No. of tenants
whose leases ex-
pire............ 9 7 9 4 3 2 0 0 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 20.37 $ 18.49 $ 19.48 $ 22.01 $ 24.06 $ 20.05 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 20.37 $ 18.50 $ 19.53 $ 22.06 $ 25.95 $ 22.19 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 26.48
WASHINGTON, D.C.
Southwest Wash-
ington, D.C.
Square footage
of expiring
leases.......... 288,199 48,855 40,204 87,733 51,848 1,892 41,678 52,838 0 331,518
Percentage of
total leased sq.
ft. ............ 18.50% 3.20% 2.58% 5.63% 3.33% 0.12% 2.68% 3.39% 0.00% 21.28%
Annual escalated
rent (2)........ 7,998,349 1,410,423 1,362,607 3,087,920 1,727,079 70,084 1,379,243 1,914,405 0 12,639,392
No. of tenants
whose leases ex-
pire............ 17 5 5 10 8 3 1 1 0 1
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 27.75 $ 28.29 $ 33.89 $ 35.20 $ 33.31 $ 37.04 $ 33.09 $ 36.23 $ 0.00 $ 38.13
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 27.76 $ 28.31 $ 33.89 $ 35.33 $ 34.33 $ 40.66 $ 33.09 $ 44.94 $ 0.00 $ 39.22
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 34.64
West End Washing-
ton, D.C.
Square footage
of expiring
leases.......... 0 0 0 0 39,651 0 0 0 0 204,154
Percentage of
total leased sq.
ft. ............ 0.00% 0.00% 0.00% 0.00% 14.32% 0.00% 0.00% 0.00% 0.00% 73.73%
Annual escalated
rent............ 0 0 0 0 1,149,879 0 0 0 0 10,562,208
No. of tenants
whose leases ex-
pire............ 0 0 0 0 1 0 0 0 0 1
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 29.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 51.74
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (2)......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 30.83 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 54.13
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 32.00
<CAPTION>
CLASS A OFFICE 2007 &
BUILDINGS BEYOND
-------------- -----------
<S> <C>
GREATER BOSTON
(1)
East Cambridge
Square footage
of expiring
leases.......... 46,524
Percentage of
total leased sq.
ft.............. 8.38%
Annual escalated
rent (2)........ 974,862
No. of tenants
whose leases ex-
pire............ 1
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 20.95
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 20.95
Company Quoted
Rental Rate per
sq. ft. (4).....
Route 128 NW
Square footage
of expiring
leases.......... 0
Percentage of
total leased sq.
ft.............. 0.00%
Annual escalated
rent (2)........ 0
No. of tenants
whose leases ex-
pire............ 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
Route 128/Massa-
chusetts Turnpike
Square footage
of expiring
leases.......... 0
Percentage of
total leased sq.
ft. ............ 0.00%
Annual escalated
rent (2)........ 0
No. of tenants
whose leases ex-
pire............ 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
WASHINGTON, D.C.
Southwest Wash-
ington, D.C.
Square footage
of expiring
leases.......... 582,905
Percentage of
total leased sq.
ft. ............ 37.42%
Annual escalated
rent (2)........ 21,149,255
No. of tenants
whose leases ex-
pire............ 3
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 36.28
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 38.58
Company Quoted
Rental Rate per
sq. ft. (4).....
West End Washing-
ton, D.C.
Square footage
of expiring
leases.......... 0
Percentage of
total leased sq.
ft. ............ 0.00%
Annual escalated
rent............ 0
No. of tenants
whose leases ex-
pire............ 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (2)......... $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
</TABLE>

64
<PAGE>

<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
---------- --------- --------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Montgomery Coun-
ty, MD
Square footage
of expiring
leases.......... 82,726 97,171 89,447 108,193 68,231 136,129 0 0 36,081
Percentage of
total leased sq.
ft. ............ 10.31% 12.11% 11.15% 13.49% 8.51% 16.97% 0.00% 0.00% 4.50%
Annual escalated
rent (2)........ 1,677,012 2,203,972 1,942,011 2,550,478 1,659,885 3,005,059 0 0 807,300
No. of tenants
whose leases ex-
pire............ 15 8 11 13 7 3 0 0 2
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 20.27 $ 22.68 $ 21.71 $ 23.57 $ 24.33 $ 22.08 $ 0.00 $ 0.00 $ 22.37
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 20.27 $ 23.15 $ 22.52 $ 24.80 $ 25.02 $ 24.87 $ 0.00 $ 0.00 $ 26.98
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 24.01
MIDTOWN MANHATTAN
(5)
Park Avenue
Square footage
of expiring
leases.......... 35,971 33,725 350 19,118 0 385,656 21,365 10,237 8,890
Percentage of
total leased sq.
ft. ............ 3.60% 3.37% 0.03% 1.91% 0.00% 38.56% 2.14% 1.02% 0.89%
Annual escalated
rent (2)........ 1,755,579 2,071,531 33,529 1,001,175 0 20,697,975 1,628,705 483,457 518,978
No. of tenants
whose leases ex-
pire............ 3 2 1 3 0 11 5 3 2
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 49.36 $ 61.42 $ 95.80 $ 52.37 $ 0.00 $ 53.67 $ 76.23 $ 47.23 $ 58.38
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 49.36 $ 61.42 $ 107.39 $ 52.37 $ 0.00 $ 58.23 $ 84.03 $ 49.64 $ 60.51
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 44.50
TOTAL CLASS A OF-
FICE BUILDINGS
Square footage
of expiring
leases.......... 624,161 346,590 362,146 618,460 462,126 576,669 88,687 63,075 134,971
Percentage of
total leased sq.
ft. ............ 11.43% 6.35% 6.63% 11.32% 8.46% 10.56% 1.62% 1.15% 2.47%
Annual escalated
rent (2)........ 16,109,596 8,478,162 7,722,727 17,164,268 10,728,308 24,813,969 3,585,192 2,397,862 2,839,289
No. of tenants
whose leases ex-
pire............ 80 37 43 42 36 23 7 4 5
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 25.81 $ 24.46 $ 21.32 $ 27.75 $ 23.22 $ 43.03 $ 40.43 $ 38.02 $ 21.04
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 26.05 $ 24.61 $ 22.10 $ 28.29 $ 24.38 $ 46.81 $ 44.33 $ 45.70 $ 26.39
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 32.24
<CAPTION>
2007 &
2006 BEYOND
----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Montgomery Coun-
ty, MD
Square footage
of expiring
leases.......... 152,978 4,664
Percentage of
total leased sq.
ft. ............ 19.07% 0.58%
Annual escalated
rent (2)........ 3,337,430 60,180
No. of tenants
whose leases ex-
pire............ 3 1
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 21.82 $ 12.90
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 22.99 $ 12.90
Company Quoted
Rental Rate per
sq. ft. (4).....
MIDTOWN MANHATTAN
(5)
Park Avenue
Square footage
of expiring
leases.......... 18,297 439,399
Percentage of
total leased sq.
ft. ............ 1.83% 43.94%
Annual escalated
rent (2)........ 842,635 21,870,197
No. of tenants
whose leases ex-
pire............ 2 4
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 46.05 $ 49.77
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 46.97 $ 51.80
Company Quoted
Rental Rate per
sq. ft. (4).....
TOTAL CLASS A OF-
FICE BUILDINGS
Square footage
of expiring
leases.......... 891,166 1,073,492
Percentage of
total leased sq.
ft. ............ 16.32% 20.96%
Annual escalated
rent (2)........ 31,955,835 44,054,494
No. of tenants
whose leases ex-
pire............ 9 9
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 35.86 $ 41.04
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 37.99 $ 43.11
Company Quoted
Rental Rate per
sq. ft. (4).....
R&D PROPERTIES
GREATER BOSTON
East Cambridge
Square footage
of expiring
leases.......... 0 0 0 0 0 0 67,362 0 0
Percentage of
total leased sq.
ft. ............ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 100.00% 0.00% 0.00%
Annual escalated
rent (2)........ 0 0 0 0 0 0 1,315,519 0 0
No. of tenants
whose leases ex-
pire............ 0 0 0 0 0 0 1 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 19.53 $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 25.86 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 25.00
Route 128NW
Square footage
of expiring
leases.......... 30,000 0 50,000 133,000 0 64,140 50,704 0 0
Percentage of
total leased sq.
ft. ............ 6.28% 0.00% 10.46% 27.83% 0.00% 13.42% 10.61% 0.00% 0.00%
Annual escalated
rent (2)........ 198,000 0 322,209 1,108,275 0 598,478 456,219 0 0
No. of tenants
whose leases ex-
pire............ 1 0 1 2 0 1 1 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 6.60 $ 0.00 $ 6.44 $ 8.33 $ 0.00 $ 9.33 $ 9.00 $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 6.60 $ 0.00 $ 6.44 $ 8.59 $ 0.00 $ 9.33 $ 9.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 8.93
GREATER BOSTON
East Cambridge
Square footage
of expiring
leases.......... 0 0
Percentage of
total leased sq.
ft. ............ 0.00% 0.00%
Annual escalated
rent (2)........ 0 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ 0$ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
Route 128NW
Square footage
of expiring
leases.......... 150,000 0
Percentage of
total leased sq.
ft. ............ 31.39% 0.00%
Annual escalated
rent (2)........ 1,379,288 0
No. of tenants
whose leases ex-
pire............ 1 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 9.20 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 9.20 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
--------- --------- --------- --------- ------- ------- --------- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GREATER WASHING-
TON, D.C.
Fairfax County, VA
Square footage of
expiring leases.. 44,433 165,863 47,001 190,361 41,793 0 0 5,600 0 0
Percentage of to-
tal leased sq.
ft. ............. 7.02% 26.20% 7.42% 30.07% 6.60% 0.00% 0.00% 0.88% 0.00% 0.00%
Annual escalated
rent (2)......... 576,004 1,425,064 644,646 1,905,052 571,248 0 0 48,461 0 0
No. of tenants
whose leases ex-
pire............. 3 9 1 6 2 0 0 1 0 0
Annualized esca-
lated rent per
leased sq. ft.... $ 12.96 $ 8.59 $ 13.72 $ 10.01 $ 13.67 $ 0.00 $ 0.00 $ 8.65 $0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 12.96 $ 8.79 $ 14.47 $ 10.09 $ 14.73 $ 0.00 $ 0.00 $10.12 $0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)...... $ 12.04
GREATER SAN FRAN-
CISCO
Square footage of
expiring leases.. 46,050 23,950 25,150 19,519 7,000 6,000 2,000 0 0 0
Percentage of to-
tal leased sq.
ft. ............. 31.87% 16.58% 17.41% 13.51% 4.84% 4.15% 1.38% 0.00% 0.00% 0.00%
Annual escalated
rent (2)......... 377,260 193,740 184,896 160,032 53,220 46,980 14,160 0 0 0
No. of tenants
whose leases ex-
pire............. 30 11 11 5 3 2 1 0 0 0
Annualized esca-
lated rent per
leased sq. ft.... $ 8.19 $ 8.09 $ 7.35 $ 8.20 $ 7.60 $ 7.83 $ 7.08 $ 0.00 $0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 8.26 $ 8.29 $ 7.86 $ 8.50 $ 8.67 $ 8.28 $ 8.52 $ 0.00 $0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)...... $ 7.80
TOTAL R&D PROPER-
TIES
Square footage of
expiring leases.. 120,483 189,813 122,151 342,880 48,793 70,140 120,066 5,600 0 150,000
Percentage of to-
tal leased sq.
ft. ............. 9.11% 14.35% 9.23% 25.92% 3.69% 5.30% 9.08% 0.42% 0.00% 11.34%
Annual escalated
rent (2)......... 1,151,264 1,618,804 1,151,751 3,173,359 624,468 645,458 1,785,898 48,461 0 1,379,288
No. of tenants
whose leases ex-
pire............. 34 20 13 13 5 3 3 1 0 1
Annualized esca-
lated rent per
leased sq. ft.... $ 9.56 $ 8.53 $ 9.43 $ 9.26 $ 12.80 $ 9.20 $ 14.87 $ 8.65 $0.00 $ 9.20
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 9.58 $ 8.73 $ 9.82 $ 9.42 $ 13.86 $ 9.24 $ 18.45 $10.12 $0.00 $ 9.20
Company Quoted
Rental Rate per
sq. ft. (4)...... $ 11.37
<CAPTION>
2007 &
BEYOND
----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GREATER WASHING-
TON, D.C.
Fairfax County, VA
Square footage of
expiring leases.. 103,750
Percentage of to-
tal leased sq.
ft. ............. 16.39%
Annual escalated
rent (2)......... 1,437,971
No. of tenants
whose leases ex-
pire............. 1
Annualized esca-
lated rent per
leased sq. ft.... $ 13.86
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 13.86
Company Quoted
Rental Rate per
sq. ft. (4)......
GREATER SAN FRAN-
CISCO
Square footage of
expiring leases.. 0
Percentage of to-
tal leased sq.
ft. ............. 0.00%
Annual escalated
rent (2)......... 0
No. of tenants
whose leases ex-
pire............. 0
Annualized esca-
lated rent per
leased sq. ft.... $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)......
TOTAL R&D PROPER-
TIES
Square footage of
expiring leases.. 103,750
Percentage of to-
tal leased sq.
ft. ............. 7.84%
Annual escalated
rent (2)......... 1,437,971
No. of tenants
whose leases ex-
pire............. 1
Annualized esca-
lated rent per
leased sq. ft.... $ 13.86
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 13.86
Company Quoted
Rental Rate per
sq. ft. (4)......
INDUSTRIAL PROPERTIES
(MARKET/SUBMARKET)

GREATER BOSTON
Route 128-Mass
Pike
Square footage of
expiring leases.. 0 0 23,904 56,747 10,829 0 128,105 0 0 0
Percentage of to-
tal leased sq.
ft. ............. 0.00% 0.00% 9.67% 22.94% 4.38% 0.00% 51.80% 0.00% 0.00% 0.00%
Annual escalated
rent (2)......... 0 0 117,298 532,187 126,458 0 560,520 0 0 0
No. of tenants
whose leases ex-
pire............. 0 0 1 1 1 0 1 0 0 0
Annualized esca-
lated rent per
leased sq. ft.
................ $ 0.00 $ 0.00 $ 4.91 $ 9.38 $ 11.68 $ 0.00 $ 4.38 $ 0.00 $0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 0.00 $ 0.00 $ 4.91 $ 9.38 $ 11.68 $ 0.00 $ 6.32 $ 0.00 $0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)...... $ 6.10
GREATER WASHING-
TON, D.C.
Prince Georges
County, MD
Square footage of
expiring leases.. 63,341 138,971 0 21,064 0 0 0 0 0 0
Percentage of to-
tal leased sq.
ft. ............. 26.76% 58.70% 0.00% 8.90% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Annual escalated
rent (2)......... 449,523 1,140,567 0 144,457 0 0 0 0 0 0
No. of tenants
whose leases ex-
pire............. 2 5 0 1 0 0 0 0 0 0
Annualized esca-
lated rent per
leased sq. ft. .. $ 7.10 $ 8.21 $ 0.00 $ 6.86 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 7.10 $ 8.40 $ 0.00 $ 6.86 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)...... $ 5.00
GREATER BOSTON
Route 128-Mass
Pike
Square footage of
expiring leases.. 0
Percentage of to-
tal leased sq.
ft. ............. 0.00%
Annual escalated
rent (2)......... 0
No. of tenants
whose leases ex-
pire............. 0
Annualized esca-
lated rent per
leased sq. ft.
................ $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)......
GREATER WASHING-
TON, D.C.
Prince Georges
County, MD
Square footage of
expiring leases.. 0
Percentage of to-
tal leased sq.
ft. ............. 0.00%
Annual escalated
rent (2)......... 0
No. of tenants
whose leases ex-
pire............. 0
Annualized esca-
lated rent per
leased sq. ft. .. $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-ups
(3).............. $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)......
</TABLE>

66
<PAGE>

<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004 2005
---------- ---------- --------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GREATER SAN FRAN-
CISCO
Square footage
of expiring
leases.......... 0 20,000 40,000 0 60,000 0 0 0 0
Percentage of
total leased sq.
ft. ............ 0.00% 7.12% 14.23% 0.00% 21.35% 0.00% 0.00% 0.00% 0.00%
Annual escalated
rent (2)........ 0 114,949 238,000 0 234,000 0 0 0 0
No. of tenants
whose leases ex-
pire............ 0 1 1 0 1 0 0 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00 $ 5.75 $ 5.95 $ 0.00 $ 3.90 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00 $ 5.75 $ 5.95 $ 0.00 $ 3.90 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 4.75
BUCKS COUNTY, PA
Square footage
of expiring
leases.......... 0 161,000 0 0 0 0 0 0 0
Percentage of
total leased sq.
ft. ............ 0.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Annual escalated
rent (2)........ 0 865,613 0 0 0 0 0 0 0
No. of tenants
whose leases ex-
pire............ 0 1 0 0 0 0 0 0 0
Annualized-esca-
lated rent per
leased sq.
ft. ............ $ 0.00 $ 5.38 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00 $ 5.38 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 7.50
TOTAL INDUSTRIAL
PROPERTIES
Square footage
of expiring
leases.......... 63,341 319,971 63,904 77,811 70,829 0 128,105 0 0
Percentage of
total leased sq.
ft. ............ 6.84% 34.55% 6.90% 8.40% 7.65% 0.00% 13.83% 0.00% 0.00%
Annual escalated
rent (2)........ 449,523 2,121,129 355,298 676,644 360,458 0 560,520 0 0
No. of tenants
whose leases ex-
pire............ 2 7 2 2 2 0 1 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 7.10 $ 6.63 $ 5.56 $ 8.70 $ 5.09 $ 0.00 $ 4.38 $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 7.10 $ 6.71 $ 5.56 $ 8.70 $ 5.09 $ 0.00 $ 6.32 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 5.65
TOTAL ALL PROPER-
TIES
Square footage
of expiring
leases (6)...... 807,985 856,374 548,201 1,039,151 581,748 646,809 336,858 68,675 134,971
Percentage of
total leased sq.
ft.............. 10.48% 11.11% 7.11% 13.48% 7.55% 8.39% 4.37% 0.89% 1.75%
Annual escalated
rent (2)........ 17,710,383 12,218,095 9,229,776 21,014,271 11,713,234 25,459,427 5,931,610 2,446,323 2,839,289
No. of tenants
whose leases ex-
pire............ 116 64 58 57 43 26 11 5 5
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 21.92 $ 14.27 $ 16.84 $ 20.22 $ 20.13 $ 39.36 $ 17.61 $ 35.62 $ 21.04
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 22.11 $ 14.40 $ 17.43 $ 20.59 $ 21.15 $ 42.73 $ 20.65 $ 42.80 $ 26.39
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 25.46
<CAPTION>
2007 &
2006 BEYOND
----------- -----------
<S> <C> <C>
GREATER SAN FRAN-
CISCO
Square footage
of expiring
leases.......... 0 0
Percentage of
total leased sq.
ft. ............ 0.00% 0.00%
Annual escalated
rent (2)........ 0 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
BUCKS COUNTY, PA
Square footage
of expiring
leases.......... 0 0
Percentage of
total leased sq.
ft. ............ 0.00% 0.00%
Annual escalated
rent (2)........ 0 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized-esca-
lated rent per
leased sq.
ft. ............ $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
TOTAL INDUSTRIAL
PROPERTIES
Square footage
of expiring
leases.......... 0 0
Percentage of
total leased sq.
ft. ............ 0.00% 0.00%
Annual escalated
rent (2)........ 0 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 0.00 $ 0.00
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
TOTAL ALL PROPER-
TIES
Square footage
of expiring
leases (6)...... 1,041,166 1,177,242
Percentage of
total leased sq.
ft.............. 13.5% 15.27%
Annual escalated
rent (2)........ 33,335,123 45,492,465
No. of tenants
whose leases ex-
pire............ 10 10
Annualized esca-
lated rent per
leased sq.
ft. ............ $ 32.02 $ 38.64
Annualized esca-
lated rent per
leased sq. ft.
w/future step-
ups (3)......... $ 33.84 $ 40.54
Company Quoted
Rental Rate per
sq. ft. (4).....
</TABLE>
- ----
(1) The Company owns one property in downtown Boston which is used exclusively
as the Company's headquarters.
(2) Escalated Rent represents the annualized monthly Base Rent in effect (after
giving effect to any contractual increases in monthly Base Rent that have
occurred up to December 31, 1996) including annualized monthly tenant pass-
throughs of operating and other expenses (but excluding electricity costs
paid by tenants) under each lease executed as of December 31, 1996, or, if
such monthly rent has been reduced by a rent concession, the monthly rent
that would have been in effect at such date in the absence of such
concession. For purposes of this table, pass-throughs of operating and
other expenses are estimated to remain constant.

(3) Represents Escalated Rent as described in footnote (2) above, but also
reflects contractual increases in monthly Base Rent that occur after
December 31, 1996.
(4) Represents weighted average rental rates per square foot quoted by the
Company as of January 1, 1997, based on total net rentable square feet of
Company Properties in the submarket. These rates have not been adjusted to
a full-service equivalent rate in markets in which the Company's rates are
not quoted on a full-service basis.
(5) Mandatory expansion rights for, Orrick Herrington & Sutcliffe LLP and
Shearman & Sterling totaling 83,000 square feet have been reflected in this
lease expiration schedule.
(6) As of April 30, 1997, 92,000 square feet, or 11% of the total 807,985
square feet expiring, has been renewed at an average rent of $27.97 per
square foot. Approximately 60% of the square footage expiring in 1997
expires after August 31, 1997.

<PAGE>

HISTORICAL TENANT IMPROVEMENTS AND LEASING COMMISSIONS

The following table sets forth certain historical information regarding
recurring tenant improvement and leasing commission costs for tenants at the
Office and Industrial Properties during the years ending December 31, 1992
through December 31, 1996.

<TABLE>
<CAPTION>
WEIGHTED
1992 1993 1994 1995 1996 AVERAGE
OFFICE PROPERTIES ------- ------- ------- ------- ------- --------
Class A Office Buildings
<S> <C> <C> <C> <C> <C> <C>
RENEWALS
Number of leases........... 39 34 30 36 45
Square feet................ 298,580 163,008 239,441 78,216 226,941
Tenant improvement costs
per square foot........... 1.63 0.47 2.70 0.48 2.80 1.87
Leasing commission costs
per square foot........... 0.30 0.26 0.93 1.32 1.67 0.83
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 1.93 0.73 3.63 1.80 4.47 2.70
======= ======= ======= ======= ======= =====
NEW LEASES
Number of leases........... 38 43 57 58 60
Square feet................ 374,558 288,287 451,018 690,297 782,782
Tenant improvement costs
per square foot........... 10.50 10.43 10.53 8.08 10.33 9.80
Leasing commission costs
per square foot........... 2.06 2.38 2.02 3.59 2.88 2.75
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 12.56 12.81 12.55 11.67 13.21 12.54
======= ======= ======= ======= ======= =====
TOTAL
Number of leases........... 77 77 87 94 104
Square feet................ 673,138 451,295 690,459 768,513 970,072
Tenant improvement costs
per square foot........... 6.57 6.83 7.81 7.30 8.99 7.66
Leasing commission costs
per square foot........... 1.28 1.62 1.64 3.36 2.41 2.15
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 7.85 8.45 9.46 10.66 11.40 9.81
======= ======= ======= ======= ======= =====
R&D Properties
RENEWALS
Number of leases........... 7 11 9 10 11
Square feet................ 58,400 20,890 49,552 31,492 139,254
Tenant improvement costs
per square foot........... 2.73 2.22 0.74 1.35 0.98 1.41
Leasing commission costs
per square foot........... 0.12 2.36 0.59 1.12 0.65 0.70
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 2.85 4.58 1.33 2.47 1.63 2.11
======= ======= ======= ======= ======= =====
NEW LEASES
Number of leases........... 28 26 20 16 16
Square feet................ 126,670 146,067 228,780 145,581 198,442
Tenant improvement costs
per square foot........... 3.42 4.02 0.19 7.23 15.01 6.04
Leasing commission costs
per square foot........... 0.84 1.66 0.34 0.75 1.62 1.01
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 4.26 5.67 0.54 7.98 16.63 7.06
======= ======= ======= ======= ======= =====
TOTAL
Number of leases........... 35 37 29 26 27
Square feet................ 185,070 166,957 276,332 177,073 337,676
Tenant improvement costs
per square foot........... 3.21 3.79 0.29 6.18 9.23 4.83
Leasing commission costs
per square foot........... 0.61 1.74 0.39 0.81 1.22 0.93
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 3.82 5.54 0.68 7.00 10.44 5.76
======= ======= ======= ======= ======= =====
<CAPTION>
INDUSTRIAL PROPERTIES
<S> <C> <C> <C> <C> <C> <C>
RENEWALS
Number of leases........... 1 0 2 4 3
Square feet................ 13,367 0 13,367 71,283 46,117
Tenant improvement costs
per square foot........... 2.27 0.00 0.00 0.00 0.00 0.21
Leasing commission costs
per square foot........... 0.00 0.00 0.32 0.06 0.57 0.24
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 2.27 0.00 0.32 0.06 0.57 0.45
======= ======= ======= ======= ======= =====
NEW LEASES
Number of leases........... 3 4 4 9 5
Square feet................ 31,106 241,500 119,160 237,105 82,031
Tenant improvement costs
per square foot........... 1.00 0.12 1.58 0.19 1.09 0.54
Leasing commission costs
per square foot........... 1.33 0.16 2.08 1.09 1.25 0.97
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 2.33 0.27 3.66 1.28 2.34 1.50
======= ======= ======= ======= ======= =====
TOTAL
Number of leases........... 4 4 6 13 8
Square feet................ 44,473 241,500 132,521 308,388 128,148
Tenant improvement costs
per square foot........... 1.38 0.12 1.42 0.15 0.70 0.48
Leasing commission costs
per square foot........... 0.93 0.16 1.90 0.85 1.01 0.84
------- ------- ------- ------- ------- -----
Total tenant improvement
and leasing commission
costs per square foot.... 2.31 0.27 3.32 1.00 1.70 1.33
======= ======= ======= ======= ======= =====
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
WEIGHTED
TOTAL OFFICE AND INDUSTRIAL 1992 1993 1994 1995 1996 AVERAGE
PROPERTIES ------- ------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
RENEWALS
Number of leases(1)....... 47 45 41 50 59
Square feet(1)........... 370,347 183,898 302,360 180,991 412,312
Tenant improvement costs
per square foot......... $1.83 $0.67 $2.26 $0.44 $1.87 $1.60
Leasing commission costs
per square foot......... $0.26 $0.50 $0.85 $0.79 $1.20 $0.75
------- ------- --------- --------- --------- ------
Total tenant improvement
and leasing commission
costs per square foot.. $2.09 $1.17 $3.10 $1.23 $3.07 $2.35
======= ======= ========= ========= ========= ======
NEW LEASES
Number of leases(2)....... 69 73 81 83 81
Square feet(2)........... 532,334 675,854 796,958 1,072,983 1,063,235
Tenant improvement costs
per square foot......... $8.26 $5.36 $6.25 $6.22 $10.49 $7.44
Leasing commission costs
per square foot......... $1.73 $1.43 $1.55 $2.65 $2.52 $2.09
------- ------- --------- --------- --------- ------
Total tenant improvement
and leasing commission
costs per square foot.. $9.98 $6.79 $7.80 $8.87 $13.02 $9.53
======= ======= ========= ========= ========= ======
TOTAL
Number of leases.......... 116 118 122 133 140
Square feet.............. 902,681 859,752 1,099,318 1,253,974 1,475,547
Tenant improvement costs
per square foot......... $5.62 $4.35 $5.15 $5.39 $8.09 $5.93
Leasing commission costs
per square foot......... $1.12 $1.23 $1.36 $2.38 $2.16 $1.74
------- ------- --------- --------- --------- ------
Total tenant improvement
and leasing commission
costs per square foot.. $6.74 $5.59 $6.51 $7.77 $10.25 $7.67
======= ======= ========= ========= ========= ======
</TABLE>
- --------
(1) Does not include retained tenants that have relocated to new space or
expanded into new space.
(2) Includes retained tenants that have relocated or expanded into new space.

HISTORICAL CAPITAL EXPENDITURES

For each of the years 1997 and 1998, the Company projects the cost of
building improvements and equipment upgrades (excluding the costs of tenant
improvements) at the Office and Industrial Properties to be approximately
$1,609,000 (or $0.20 per square foot), which cost is expected to be paid from
operating cash flows.

The following table sets forth certain historical information regarding
recurring capital expenditures at the Office and Industrial Properties for the
years ending December 31, 1992 through December 31, 1996.

During this period the Company made substantial investments in building
improvements to a number of the Properties and believes that almost all of its
Properties are now at or above current market standards. As a result, the
Company believes that the average annual cost of capital expenditures
(excluding tenant improvements) will be somewhat lower during the next five
years.

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 AVERAGE
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Recurring capital
expenditures........... $1,424,715 $1,546,773 $1,811,619 $1,618,349 $1,803,183 $1,640,928
</TABLE>

The following table sets forth historical capital expenditures at the Hotels
incurring during the years ending December 31, 1992 through December 31, 1996.
The average cost is presented below:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------- ANNUAL
1992 1993 1994 1995 1996 AVERAGE
------ ---- ------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Hotel improvements, equipment
upgrades and replacements........... $3,182 $836 $1,917 $4,420 $3,041 $2,679
</TABLE>

TENANT RELATIONS

The Company believes that its relationship with tenants contributes in large
part to its success in attracting, expanding and retaining its quality and
diverse tenant base. The Company strives to develop and maintain good
relationships with tenants through its active management style and by being
responsive to individual tenants' needs. The Company services tenants
primarily through its on site, professional management staff. Management
believes that tenant satisfaction fosters long-term tenant relationships and
creates expansion opportunities, which, in turn, enhance the Company's ability
to maintain and increase occupancy rates.

69
<PAGE>

HISTORICAL LEASE RENEWALS

The following table sets forth certain historical information regarding
tenants at the Properties who renewed an existing lease at or prior to the
expiration of the existing lease:

<TABLE>
<CAPTION>
TOTAL/
WEIGHTED
AVERAGE
1993 1994 1995 1996 1993-1996
------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Number of leases expired
during calendar year...... 95 105 95 104 100
Aggregate net rentable
square footage of expiring
leases.................... 916,164 1,395,922 1,008,579 892,486 1,053,288
Number of lease renewals... 49 45 53 62 52
Aggregate net rentable
square footage of lease
renewals.................. 336,156 452,885 444,229 451,504 421,194
Percentage of leases
renewed................... 51.58% 42.86% 55.79% 59.62% 52.00%
Percentage of expiring net
rentable square footage
renewed................... 36.69% 32.44% 44.05% 50.59% 40.00%
</TABLE>

THE OFFICE PROPERTIES

The Office Properties consist of the 35 Class A Office Buildings, including
three Development Properties, and the 27 R&D Properties, including four
Development Properties. The Company's 35 Class A Office Buildings contain
approximately 6.0 million net rentable square feet in urban and suburban
settings in Greater Boston, Greater Washington, D.C. and midtown Manhattan.
The Company's Class A Office Buildings include 599 Lexington Avenue in midtown
Manhattan, which has approximately 1.0 million net rentable square feet. As of
December 31, 1996, the 32 completed Class A Office Buildings had an occupancy
rate of 97%. Thirty-four of the Class A Office Buildings (consisting of
approximately 5.9 million rentable square feet) have been built or
substantially redeveloped since 1980.

The 27 R&D Properties contain approximately 1.6 million net rentable square
feet and consist primarily of suburban properties located in the Springfield,
Virginia submarket of Greater Washington, D.C. and the East Cambridge and
Route 128 NW submarkets of Greater Boston. Seventeen of the R&D Properties,
totaling approximately 1.4 million net rentable square feet, have been built
or substantially renovated since 1980. As of December 31, 1996, the 23
completed R&D Properties had an occupancy rate of 96%.

Management believes that the location and quality of construction of the
Office Properties, as well as the Company's reputation for providing a high
level of tenant service, have enabled the Company to attract and retain a
diverse tenant base. As of January 1, 1997, the Office Properties were leased
to 350 tenants, and no single tenant, other than the General Services
Administration, whose lease obligations are full faith and credit obligations
of the United States government, accounted for more than approximately 9.5% of
the aggregate Escalated Rent of the Company's office portfolio.

GREATER BOSTON OFFICE MARKET

Greater Boston, the seventh largest metropolitan area in the United States,
has a strong and diverse economy and is a nationally recognized center of
higher education, technological entrepreneurship, investment management,
health care and research and development. Economic growth during the 1990's
substantially increased demand for office space while there has been little
addition to the total office space supply of approximately 103 million square
feet in this market area defined by the cities and towns within or adjacent to
the US I-495 outer circumferential highway. This has resulted in substantial
absorption of available space accompanied by rising rents. Between 1992 and
1996, according to information provided by Spaulding & Slye, the office space
availability rate in this market (space currently available direct from
landlord or by sublease, or scheduled to become available within 12 months)
declined from 16.0% to 8.3% while average quoted rents increased 23%, and the
Direct Vacancy Rate was only 5.0% at the end of 1996. During this same 1992-96
period office space supply grew by only 1.3% (351,000 square feet) and there
was net absorption of approximately 10.8 million square feet at a relatively
steady rate (approximately 1.8 million square feet in 1992, 2.2 million square
feet annually 1993-95, and 2.3 million square feet in 1996).

70
<PAGE>

The Company expects this positive office space demand-supply relationship to
further strengthen due to the growing economy and anticipated increases in
population and employment. Between 1996 and 2001 the population of
metropolitan Boston is expected to grow by approximately 231,000, with an
increase in total employment of approximately 106,000, an increase in office
employment alone of approximately 56,000, and substantial resulting need for
office space. The Company believes this expected growth in demand will result
in further increases in rental rates in Greater Boston generally and
particularly in the three submarkets in which the Company's Greater Boston
office properties are concentrated, which are already experiencing low vacancy
rates and have substantial limitations on potential increases in supply
because of limited available marketable sites and significant regulatory
obstacles to development. These submarkets are East Cambridge, a market area
directly across the Charles River from downtown Boston that includes MIT, and
two submarkets adjacent to each other along the west/northwest quadrant of
"Route 128," the inner circumferential highway known for its concentration of
high-technology firms. According to Spaulding & Slye, the Direct Vacancy rates
at the end of 1996 of these submarkets, and their supply sizes, were as
follows: 1.8% Direct Vacancy in the 6.5 million square feet East Cambridge
submarket; 2.6% Direct Vacancy in the 11.5 million square feet Route 128/West
submarket; and 5.3% Direct Vacancy in the 7.2 million square feet Route 128
Northwest submarket.

The Greater Boston economy is strong and competitive due to its diversity.
The Greater Boston market is characterized by four core industry groups: (i)
information technology, (ii) financial services, (iii) health care, and (iv)
research and development, including both academic and commercial research.
Local businesses within these industry groups successfully compete both
nationally and internationally. Growth in the area has centered around the
emergence of a large number of small to medium-sized companies within these
industry groups.

Over 60 colleges and universities are located within the Greater Boston
area, attracting to the region in excess of 240,000 students from both within
the United States and abroad. These colleges and universities, including
Harvard University, MIT, Tufts University, Brandeis University, Boston
College, Northeastern University and Boston University, contribute $5 billion
annually to the local economy and draw a diverse and talented student
population to the region. Many graduates remain in the area, providing local
businesses with a highly-educated, top-quality workforce.

According to the Massachusetts Department of Employment and Training, the
Boston area's employment base has expanded by 22% since 1992 to its current
size of almost 2 million jobs. The service sector continues to increase its
share of the region's economy, currently accounting for 39% of the employment
base. As a result of the steady growth in the Boston economy, the local
unemployment rate has fallen from 7.0% in 1992 to 3.4% in 1996.

In addition to its expanding economy, Massachusetts has a high and rising
standard of living. Per capita income in the State is growing at a faster pace
than both the nation and the New England region as a whole. According to the
U.S. Commerce Department, per capita income in Massachusetts grew by 6.4% to
$28,021 in 1995, which was the second largest gain in the nation for that
year, and grew another 4.5% to $29,288 in 1996.

The Company believes that the prospects for continued economic growth in the
region are excellent because of the diverse mix of companies in the area,
which has helped to create an economy which is both broad and deep, the local
availability of venture and growth capital, the vitality of the City of Boston
as a business, cultural and residential center, and the major improvements in
transportation infrastructure currently underway.

THE BACK BAY OFFICE SUBMARKET

The Back Bay submarket of the downtown Boston office market contains 9.5
million square feet of space and accounts for 20% of the City's office market
inventory. The Back Bay submarket has recorded absorption levels over 250,000
square feet during each of the past three years. As a result, availability has
fallen from 12% in 1992 to 5.7% in 1996, the lowest rate among the downtown
Boston office submarkets. The strength of the Back Bay submarket is derived
from the increasing diversity in its tenant base. In addition, the Direct
Vacancy Rate for the year ended 1996 was 2.6%. Once dominated by large owners
and users, advertising firms and financial services institutions, the Back Bay
is now an attractive alternative to the higher priced Financial District.

71
<PAGE>

Rental rates, as quoted by local landlords, have steadily risen to $26.19 per
square foot in 1996 from $19.44 per square foot in 1992, representing an
increase of over 35%.

The following graph provides information regarding availability rates and
average asking rental rates at year end for each of the years from 1992
through 1996 for office buildings in the Back Bay office submarket.

[GRAPH APPEARS HERE]

Back Bay Office Submarket
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
BACK BAY OFFICE
<S> <C>
1992 $19.44
1993 $22.14
1994 $24.04
1995 $24.84
1996 $26.19

1992 12.0%
1993 14.9%
1994 12.1%
1995 8.4%
1996(1) 5.7%
</TABLE>

- --------------------
Source: Spaulding & Style
(1) The Direct Vacancy Rate was 2.6%

Description of the Boston Back Bay Property.

The Company's only Office Property in the downtown Back Bay submarket is
Eight Arlington Street, an historic, six-story Class A Office Building that
serves as the Company's headquarters. The building has a brownstone structure
and is situated among numerous other historic brick and brownstone buildings
in Boston's famous Back Bay area. The building is directly across from the
Boston Public Garden and is only a short walk from Beacon Hill and the
downtown Boston financial district. The Property contains approximately 26,990
rentable square feet of office space, as well as 3,536 square feet of storage
space. The building is located on an approximately 8,000 square foot parcel of
land, with executive parking for four cars available on site. The building was
originally constructed in two phases in 1860 and 1920 and was completely
renovated by the Company in 1989.

EAST CAMBRIDGE OFFICE SUBMARKET

The Cambridge office market contains 9.8 million square feet and accounts
for 9% of Greater Boston's 103.3 million square foot office supply. According
to Spaulding & Slye, the availability rate in Cambridge as a whole fell from
12% in 1992 to 5.5% in 1996, with 909,000 square feet absorbed while only
300,000 square feet were added to the supply. The presence of both Harvard
University and MIT attracts existing firms and is a source of new business
formation. In addition, the City benefits from proximity to Logan Airport and
to Boston across the Charles River as well as from its own urban attractions.
Office development has also been aided by the availability of rapid transit
and has concentrated along areas served by the Red and Green Lines of the
Metropolitan Boston Transit Authority (the "MBTA").

The East Cambridge submarket accounted for the majority of the growth in
supply that occurred in Cambridge during the 1980's and with 6.5 million
square feet, East Cambridge is now this city's largest and most active
submarket, accounting for 67% of the total office space inventory. The office
development in East Cambridge was in significant part the result of city
government initiatives that were accompanied by substantial roadway, open
space and other infrastructure improvements and expansions of supporting
retail and business services. According to Spaulding & Slye, the availability
rate in this submarket fell from 10.7% in 1992 to 5.7%

72
<PAGE>

in 1996 and the Direct Vacancy was only 1.8% at the end of 1996. The positive
impact of supply reductions on rent levels lagged behind absorption but is now
becoming evident; during 1992-1994 asking rents continued their post-1980's
decline, and reached a low of $18.67 per square foot in 1994, before
rebounding sharply during the succeeding two years and reaching $26.70 per
square foot at the end of 1996. The Company believes these rent levels are
still 20-25% below current replacement cost rents and will continue to
increase significantly.

The Company's East Cambridge Office Properties consist of four Class A
Office Buildings and one R&D Property.

[GRAPH APPEARS HERE]

East Cambridge Office Submarket
Average Quoted Market Rent &
Availability Rate

EAST CAMBRIDGE
<S> <C>
1992 $20.54
1993 $19.03
1994 $18.67
1995 $21.64
1996 $26.70

1992 11%
1993 9%
1994 9%
1995 6%
1996(1) 6%

</TABLE>
- ------------------
Source: Spaulding & Style
(1) Direct vacancy rate 1.8%

Description of the Company's Cambridge Center development project

All of the Company's Properties in East Cambridge are located in Cambridge
Center, a major mixed-use urban center developed by the Company on a 24-acre
site at the center of Kendall Square, Cambridge, Massachusetts, directly
across the Charles River from downtown Boston and immediately adjacent to the
East Campus of MIT. The Company has developed this project in close
cooperation with the City of Cambridge after being selected as developer by
the Cambridge Redevelopment Authority through a public competition. It is the
centerpiece of the revitalized Kendall Square area and the Company believes it
is the premier office development in the Cambridge market. As of December 31,
1996, the Company's East Cambridge Office Properties had an occupancy rate of
100%.

The master plan for Cambridge Center provides for over 2.7 million square
feet of new development. The primary office and high-end research and
development uses are supported by many services and amenities included in the
development, which include: the Company's 431-room Marriott Hotel with health
club, meeting, function and conference facilities; extensive tenant and
visitor parking providing the highest parking ratio available in the East
Cambridge market; direct rapid transit service by the Kendall Station of the
MBTA Red Line; major new urban parks and plazas constructed specifically for
Cambridge Center; and a wide range of restaurants, shops and business services
both directly in the development and in the immediately surrounding Kendall
Square area.

Cambridge Center is separated by public streets and other public rights of
way into three "superblock" development parcels, and the Company's properties
are located on the "East Parcel" and the "North Parcel." The remaining "West
Parcel" thus far has only one completed building, developed at Cambridge
Center by the

73
<PAGE>

Company in cooperation with the Whitehead Institute for Biomedical Research,
which owns the building. The Whitehead Institute is a world-renowned
biomedical research foundation affiliated with MIT. The balance of the West
Parcel consists of approximately four acres of undeveloped land on which the
Company controls all development rights.

Description of Cambridge Center East Parcel Properties.

The Company's three properties on the triangular East Parcel are the 12-
story One Cambridge Center office building, the 25-story Cambridge Center
Marriott(R) Hotel at Two Cambridge Center, and the four-story Three Cambridge
Center office building. These three buildings frame the major central public
plaza of the project whose fourth side opens south onto Main Street facing a
major entrance to MIT. The Company's main marketing center for Cambridge
Center is at street level on the east side of the plaza, and a main entrance
to the MBTA Red Line Kendall Station is on the west side of the plaza. More
specific information about the two Office Properties on the East Parcel
follows below. For information on the Cambridge Center Marriott Hotel, see "--
The Hotel Properties."

One Cambridge Center. This 12-story, 215,385 rentable square foot Class A
Office Building, built by the Company in 1987, stands at the apex of the
Cambridge Center development at the angled intersection of Main Street and
Broadway. The building's east facade faces downtown Boston over the Longfellow
Bridge and features a recessed and angled curtain wall between two columnar
brick elements. The curtain wall includes at its base a 2-story high private
atrium, which is part of space on the second and third floors of the building
under long term lease to Ernst & Young US LLP, for their Center for Business
Innovation. Other major tenants include the corporate headquarters of Camp,
Dresser & McKee Inc. ("CDM"), an internationally active environmental
engineering and development company, and computer software and consulting
firms including ON Technology, Inc. and Harlequin Incorporated. While 6 of the
floors in the building are occupied on a full-floor basis, the office floors
can be subdivided into suites as small as 1,000 square feet or less, and the
smallest current tenant occupies a suite of only 885 square feet.

Three Cambridge Center. This 4-story, 107,484 square foot Class A Office
Building, completed by the Company in 1987, provides 60,960 square feet of
office space on its upper three floors and 46,524 square feet of retail space
on the street level and connected lower level. The major office tenant at
present is The Hartford Fire Insurance Company (the "Hartford") which leases
35,687 square feet on the third and fourth floors of the building for a term
that expires November 30, 1997. The Hartford has advised the Company that it
will be relocating to a suburban building at the end of its lease term. By
March, 1997, all of the space to be vacated by The Hartford was committed
under letters of intent to two replacement tenants, at rents significantly
higher than those being paid by The Hartford and with expected downtime
between the departure of The Hartford and the start of rent under the new
leases averaging less than one month. While no binding agreements will be
established until final lease documents are executed with these tenants, the
Company believes these transactions will be successfully completed. As with
One Cambridge Center, all of the floors in the building are easily
subdividable. The balance of approximately 25,273 square feet of office space
in the building not under lease to The Hartford is currently leased to 10
tenants ranging in size from 918 square feet to 4,227 square feet.

The retail space in Three Cambridge Center is leased in its entirety for a
term running through June, 2012, to The Harvard Cooperative Society ("The
Coop") and houses the main branch of the "MIT Coop," the academic bookstore
and retail store serving MIT. The MIT Coop is managed for The Coop by Barnes &
Noble, and provides a wide range of retail goods that enhances the
attractiveness of Cambridge Center as an office location, including an 8,500
square foot food court.

Description of Cambridge Center North Parcel Properties.

The Company has four Properties on the Cambridge Center North Parcel. Three
of these Properties are set along and complete the streetfront facing on
Broadway, a main vehicular route through Cambridge that runs from the
Longfellow Bridge from Boston to Harvard Square to the west. Running from east
to west these properties are the seven-story Class A Office Building at Ten
Cambridge Center; the six-level North Garage, which is set back from Broadway
behind a handsomely landscaped park; and the four-story Class A Office
Building at Eleven Cambridge Center. The fourth property is the two-story
research and development building at Fourteen Cambridge Center on the northern
corner of the parcel bordered by Binney Street.

<PAGE>

Ten Cambridge Center. This seven-story, 152,664 square foot office
building's exterior of brick, glass and pre-cast concrete features a two-story
colonnade the full length of the 183-foot long facade on Broadway, with
distinctive inverted-T pre-cast concrete elements between brick columns. The
building, which was completed by the Company in 1990, is designed in all
respects to function as a multi-tenant building consistent in quality and
subdivision flexibility with the Company's East Parcel buildings described
above. The building is leased in its entirety to CDM, which has its corporate
headquarters at One Cambridge Center.

Cambridge Center North Garage. This 1,170-space, six-level parking garage,
completed by the Company in 1990, is set in a highly landscaped setting in the
middle of the North Parcel. It is set back from Broadway over 100 feet behind
a heavily-landscaped park which features a perennial garden surrounding a
central open lawn and which received the 1990 Urban Landscape Award from the
Massachusetts Horticultural Society. The garage provides parking spaces for
occupants of and business visitors to buildings at Cambridge Center and also
provides monthly parking to individuals in the Kendall Square area and
transient day parking. In order to assist the Company in maintaining its
qualifications as a REIT under federal tax law, following the Offering the
Company will lease this Property, pursuant to a lease with a participation in
the gross receipts of the Property, to Kinney Systems, Inc.

Eleven Cambridge Center. This 4-story, 79,616 square foot office building is
on the southwest corner of the North Parcel facing Broadway. The brick and
punched-window exterior is set back from Broadway behind a ten-foot deep
planter and the entrance to the building is at the center of this landscaped
zone through a three-story curtain wall into a lobby atrium of the same
height. As with Ten Cambridge Center, the building, which was built by the
Company in 1984, is designed to function in every respect as a multi-tenant
building with no modifications required to do so. The building is currently
leased in its entirety to the Open Software Foundation, originally founded in
1988 by a consortium of leading computer companies and which now has a
membership of over 200 firms worldwide.

Fourteen Cambridge Center. This two-story, 67,362 square feet R&D Property
with a brick exterior was built by the Company in 1983 to provide headquarters
offices, research laboratories and supporting facilities for Biogen, Inc.
Since that time Biogen has grown substantially and relocated most of its
office functions to other buildings at Cambridge Center and in the immediately
surrounding area. The building has extensive special HVAC and utility services
(including steam and gas) that provide it with the capacity to service high
intensity research and production facilities for the biotechnology industry
and allied research needs. The building's entrance is through a major curtain
wall element in its long west side flanked by extensive landscaping, opening
onto a two-story skylight-topped central atrium featuring a monumental central
staircase providing access directly to the second level.

ROUTE 128 NW SUBMARKET

The Route 128 NW office submarket comprises six towns (Lexington, Lincoln,
Concord, Bedford, Burlington and Billerica) with office locations primarily
accessed by circumferential Route 128 and radial Route 2 on the south and
Route 3 on the north. Construction activity during the 1980's nearly tripled
this submarket's office supply, and it's 1996 total of 7.2 million square feet
of space accounts for 16% of the total Greater Boston supply of approximately
45.2 million square feet. Together with the 11.5 million square feet of space
in the adjacent Route 128/Massachusetts Turnpike submarket to the south it
defines the preferred core of the suburban Boston office market area.

According to information from Spaulding & Slye, approximately one million
square feet of space were absorbed between 1992 and 1996 with no increase in
supply, with a resulting dramatic decrease in the availability rate from 23.7%
to 9.4% during this period and a direct vacancy rate at the end of 1996 of
only 5.3%. Asking rents during this period increased from $16.30 per square
foot in 1992 to $22.50 per square foot in 1996, with the greatest increase
occurring during the years 1994-1996 when 922,000 square feet of space were
absorbed and asking rent increased from $17.01 to $22.50. The Company believes
that vacancy will continue to decline in the face of growing demand and
limited increases in supply with resulting further increases in market rents.

The Company's Route 128 NW Office Properties consist of eleven Class A
Office Buildings and four R&D Properties.

75
<PAGE>

[GRAPH APPEARS HERE]

Route 128 NW Office Submarket
Average Quoted Market Rent &
Availability Rate
<TABLE>
<CAPTION>

RT. 128 NW OFFICE
<S> <C>
1992 $16.30
1993 $16.13
1994 $17.01
1995 $21.10
1996 $22.50

1992 24%
1993 18%
1994 22%
1995 13%
1996(1) 9%
</TABLE>
- ----------------------
Source: Spaulding & Style
(1) The direct vacancy rate was 5.3%

Description of Route 128 NW Office Properties

Route 2 Corridor Properties in the Route 128/NW Submarket

Route 2 is a state highway that is part of a major radial route from Boston
and Cambridge to circumferential Route 128, the western suburbs and beyond. In
the Route 128 NW submarket the Company owns four buildings and has a fifth
building under construction within the Route 2 corridor in Lexington inside of
Route 128 (Hayden Avenue/Spring Street). Significant characteristics of this
area are the high visibility and identity of the office buildings, proximity
to executive bedroom suburbs, the short (five mile) distance to Cambridge and
the desirability of a Lexington corporate address. All of these Properties
have excellent access off Route 2 with direct visibility from Route 2 or Route
128.

191 Spring Street. This 162,700 square foot, four story building is located
on a prominent hillside overlooking the Route 2 and Route 128 interchange in
Lexington, Massachusetts. The Class A Office Building was originally built in
1971 as the headquarters of a subsidiary of the Xerox Corporation. The Company
purchased the 32.8 acre property in 1985 with a leaseback of the building to
Xerox through September, 1994, and then obtained entitlements required for the
development of two additional buildings, one of which is currently under
construction at 201 Spring Street, as described under "Business and
Properties--Development Properties." In 1994, after Xerox's lease expiration,
the Company totally renovated the building to meet modern office standards,
including all new window systems and the addition of a 2,800 square foot,
three story atrium and a four story glass entrance tower. The building is now
100% leased as the corporate headquarters of The Stride Rite Corporation. The
site provides 560 parking spaces.

33 Hayden Avenue. This three story, Class A Office Building is located
directly off Route 2 in Lexington, Massachusetts, with easy access to Boston
and efficient floor plates. Mercer Management Consulting, Inc. and its
predecessor, The TBS Group, Inc., have occupied the building since its
construction in 1979. The building has a red brick facade and features a three
story skylit atrium with two glass elevators. The 79,564 square foot building
is located on a 10 acre parcel with 262 parking spaces and is surrounded by
wooded conservation land.

76
<PAGE>

92 Hayden Avenue. This is a two story, 30,980 square foot, Class A Office
Building that provides the opportunity for a small tenant to have the
visibility and identity of a large corporate user. The building was originally
built in 1968 as the regional headquarters of the Burroughs Corporation. In
1984 the Company purchased the Property and performed a major renovation which
included the addition of a two story atrium, new windows and mechanical
systems and new first class finishes in the tenant and common spaces. The
Property is situated on a 6.34 acre parcel of land and has 103 parking spaces.
The primary tenant in the building is Rath & Strong, Inc., a management
consulting firm (21,366 square feet).

100 Hayden Avenue. The Company developed this 2 1/2 story, Class A Office
Building in 1985 on the same parcel as 92 Hayden Avenue, Lexington,
Massachusetts. This brick building has rounded corners at the offset in the
efficient floor plan and a compact lobby space with a two story atrium. The
Property contains approximately 55,924 rentable square feet and has 204
parking spaces. The Property is leased in its entirety to Harvard Pilgrim
Health Care, Inc.

Hartwell Avenue Area Properties in the 128/NW Submarket

Hartwell Avenue is a commercially zoned office, research and development
district established by the Town of Lexington adjacent to Hanscom Field which
has become a major center of electronic and air defense technology and
research with leading defense contractors, such as Lincoln Laboratory,
Instrumentation Laboratories, The MITRE Corporation and the Air Force's EDS at
Hanscom Field. The Company owns three buildings along Hartwell Avenue.

17 Hartwell Avenue is a single story R&D building constructed in 1968. The
building is a metal framed, brick veneer structure located on a 5.25 acre site
in Lexington, Massachusetts. The Property contains approximately 30,000
rentable square feet and 100 parking spaces. The Property is located one mile
from the Route 4 and Route 128 interchange. Kendall Company has been the sole
tenant in the building for 20 years, and does new product research for tapes
and adhesives at this location. For a discussion of certain environmental
matters regarding this Property, see "--Environmental Matters."

32 Hartwell Avenue is a single story, Class A Office Building which contains
approximately 69,154 rentable square feet of office and research and
development space. The building was originally built as the regional sales
office of Hewlett-Packard Corporation in 1968, with additions completed in
each of 1976 and 1979 to accommodate their expansion. The building, which is a
metal framed, brick veneer structure, was completely refurbished by the
Company in 1987 with all new windows, mechanical systems and interior
improvements. The Property consists of 5.8 acres of land, including 311
parking spaces. The building is leased in its entirety to Logica North America
Inc.

91 Hartwell Avenue is a handsome three story, Class A Office Building with
approximately 122,328 rentable square feet of office space located on a 15
acre wooded site. The large floor plates, split cores and three skylit atria
make the building particularly attractive and efficient for large tenants. The
building was built by the Company in 1985 and has 427 parking spaces. The
Company made substantial renovations to the Property in 1995 and 1996,
including major landscaping, new lobby finishes, a new 2,000 square foot food
service facility and showers and locker rooms. Primary tenants at the Property
include RESTRAC, Inc. (60,093 square feet) and Workgroup Technology
Corporation (29,042 square feet). For a discussion of certain environmental
matters regarding this Property, see "--Environmental Matters."

Other Properties in the Route 128 NW Submarket

Lexington Office Park. These Properties are two Class A Office Buildings of
84,500 square feet each on a 21 acre site in Lexington, Massachusetts,
adjacent to the interchange of Route 4 with Route 128. The Properties'
proximity to the highway and its central location in the northwest high tech
market have resulted in high levels of occupancy throughout the buildings'
history. The buildings, which were built by the Company in the period from
1981 to 1983, are three story, steel frame structures, with brick veneer
exteriors. The L-shaped, mirror-image buildings face each other across a
center drop-off court facing on to a scenic pond on the well-landscaped

<PAGE>

site that includes 14 acres of conservation land. The site also includes 558
parking spaces. The largest tenants at this Property include Weather Services
Corporation (13,049 square feet) and Waterfield Technology Group, Inc. (12,857
square feet).

10 & 20 Burlington Mall Road. These Properties, comprised of two Class A
Office Buildings of distinctive curved design, are located directly adjacent
to the Route 3/3A interchange of Route 128 and have a signalized entrance
drive, are less than 1/2 mile from the Burlington Mall, a major suburban
retail center, and directly across the street from the 420 room Burlington
Marriott(R). The buildings were built by the Company during the two year
period from 1984 to 1986 and are steel frame structures with brick veneer
exteriors. 10 Burlington Mall Road is a three story building which contains
approximately 57,405 rentable square feet. 20 Burlington Mall Road is a four
story building which contains approximately 95,147 rentable square feet. Both
buildings have skylit atrium lobbies and floor plans particularly well suited
to multi-tenant occupancy. Structured and surface parking totaling 516 spaces
is available at the site. Primary tenants at these Properties include NOVASOFT
Systems, Inc., (27,676 square feet), Lernout & Hauspie Speech Products USA,
Inc. (16,088 square feet), Information Builders, Inc. (11,658 square feet) and
Aerotek, Inc. (9,488 square feet).

Bedford Business Park. This complex of three Properties contains
approximately 473,000 rentable square feet, comprised of 90,000 square feet of
Class A office space in a 3-story building completed by the Company in 1981, a
two-story R&D Building containing 50,000 rentable square feet, and a complex
of attached two-story structures containing 333,000 net rentable square feet.
The Properties are located on a 22 acre site in Bedford, Massachusetts,
directly off of the Route 3/Route 62 interchange, approximately five minutes
up Route 3 from Route 128. The Properties have frontage on Route 3 and provide
tenants with high visibility and identity. The original property acquired by
the Company consisted of four structures, totaling 203,000 square feet which
were constructed from 1962 to 1968. The Company has renovated these buildings
on lease turnovers and expanded the property with additional structures
totaling 270,000 square feet from 1978 to 1981. A total of 1,281 parking
spaces are available on the property. Primary tenants at the Properties
include ComputerVision Corporation (273,704 square feet), MediSense, Inc.,
(150,000 square feet), and Iris Graphics, Inc., a division of Scitex (50,000
square feet).

164 Lexington Road. This is a two story R&D building which contains 64,140
rentable square feet of office and research and development space. The
building was acquired by the Company in November of 1995 and major
improvements were made in 1996, including roof replacement. In July of 1996,
Harte-Hanks Data Technologies Inc., leased and occupied the entire building.
The building is located on a 4.2 acre site with 210 parking spaces, easily
accessible from the Route 62 interchange of Route 3, five miles north of the
Route 3/Route 128 interchange. The building has frontage on and is highly
visible from the Middlesex Turnpike.

ROUTE 128/MASSACHUSETTS TURNPIKE SUBMARKET

The Route 128/Massachusetts Turnpike office submarket, which includes such
cities and towns as Waltham, Wellesley, Newton, Needham and Watertown, has
consistently been a preferred suburban location in Greater Boston. Inventory
has remained steady at approximately 11.4 million square feet from 1992 to
1996 with the only addition to supply being a new 39,000 square foot building
completed during the third quarter of 1996, which was 100% pre-leased when
built.

According to Spaulding & Slye, the Route 128/Massachusetts Turnpike office
submarket steadily improved from 1992 to 1995, with the movement into the area
of a number of software and health care companies, including Parametric
Technologies, Atria, SAP America, Tufts Associated Health Plan, and Harvard
Pilgrim Health Care. The availability rate decreased from 13.6% in 1992 to
9.1% in 1995. In 1996 the absorption level increased to 531,000 square feet,
more than doubling the level for the previous year, and the availability rate
declined to 4.7%, a record low and the lowest of any suburban submarket with
the direct vacancy rate falling to 2.6%.

Historically, the Route 128/Massachusetts Turnpike submarket has
consistently commanded higher rental rates than other suburban submarkets in
the Greater Boston area. The average quoted rental rate for first class

78
<PAGE>

office space was $23.70 per square foot in 1996, the highest rental rate among
the suburban office submarkets in Greater Boston.

The Company's Route 128/Mass Pike Office Properties consist of six Class A
Office Buildings.

[GRAPH APPEARS HERE]

Route 128/Massachusetts Turnpike
Office Submarket
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
ROUTE 128/MASS.
<S> <C>
1992 $17.93
1993 $16.62
1994 $17.47
1995 $21.25
1996 $23.70

1992 13.6%
1993 11.1%
1994 11.1%
1995 9.1%
1996(1) 4.7%
</TABLE>
- -------------------
Source: Spaulding & Syle
(1) Direct vacancy rate 2.6%

Description of Route 128/Massachusetts Turnpike Properties

195 West Street is a unique office environment in the Waltham/Route 128
market. The three story, 63,500 square foot, Class A Office Building is
located on a 7.7 acre wooded site bordering 28 acres of conservation land in
Weston. The building is sited to minimize impacts on the land and thus
achieves the effect of a wooded country setting, even though the Property is
only a short distance from Route 128 and the major arterial routes of Route 2
and the Massachusetts Turnpike. The building, which was constructed by the
Company in 1990, has an attractive red brick facade with grey granite accent
pieces. The building contains a beautiful three story skylit atrium space with
glass railings, monumental stair and patterned granite floor. There are 188
surface parking spaces and 42 basement garage parking spaces on the Property.
The sole tenant in the building is PAREXEL International Corporation.

Waltham Office Center consists of a complex of three Class A Office
Buildings totaling 129,658 square feet located on a 8.23 acre site on Totten
Pond Road in Waltham, Massachusetts, directly adjacent to the Winter
Street/Totten Pond Road interchange off Route 128. The two three-story
buildings at 486 and 504 Totten Pond Road each contains approximately 32,000
rentable square feet of office space, while 470 Totten Pond Road is a five-
story building which contains approximately 65,000 rentable square feet. The
buildings have precast concrete facades with highly articulated punched window
openings and were constructed during the two year period from 1968 to 1970.
The building common areas and tenant spaces were fully renovated by the
Company in 1987 and 1988. Waltham Office Center is a multi-tenant complex
characterized by a large number of small to medium size tenants and a long
history of nearly full occupancy. Larger tenants at these Properties include
Sungard Financial Systems, Inc. (41,912 square feet), Atlantic Aerospace
Electronics Corporation (18,736 square feet) and New England Telephone and
Telegraph Company (17,642 square feet).

170 Tracer Lane is a three story, Class A Office Building which contains
73,258 square feet of office space. The Property is located directly off of
the Trapelo Road interchange with Route 128 at the Waltham/Lexington

79
<PAGE>

municipal boundary. The Property has considerable frontage directly on Route
128 which provides high visibility for its angular design and for tenant
signage facing this major highway. The building has a brick veneer exterior
and a three story skylit atrium at its entrance. Built by the Company in 1980,
the building is situated on a 9.7 acre parcel of land which include 227
parking spaces. The primary tenant at this Property is Harvard Pilgrim Health
Care, Inc. (59,524 square feet).

204 Second Avenue is a 3 1/2 story, Class A Office Building located on a 1.8
acre site in Waltham, Massachusetts. The building abuts Route 128 which is
less than 50 yards away, providing premier visibility, signage and
identification for the primary tenant. The building contains approximately
41,557 square feet of office space and was built in 1981. The Company
substantially renovated the lobby and common areas in 1993. Parking is
available on the premises at a ratio of 3.3 spaces per 1,000 rentable square
feet. The primary tenant at this Property is Ikon Office Solutions (formerly
A-Copy, Inc., a division of ALCO Standard Corporation) (20,004 square feet).

GREATER WASHINGTON, D.C. OFFICE MARKET

Greater Washington D.C., which includes the District of Columbia and the
adjacent areas of Northern Virginia and suburban Maryland, is the fifth
largest metropolitan area in the country and the heart of the nation's federal
government and policy-making activities. The region's workforce is the most
highly educated of metropolitan areas nationwide and has the highest
participation of women in the labor force and the highest concentration of
scientists and engineers, with the second largest concentration of high
technology firms. Business service industries, including technology-intensive
knowledge-based industries such as information management and data
communications, have been the economy's engines of growth in the 1990's,
expanding by 26.5% from 1992 to 1996, and in 1996 the area had a median
household income of $48,100, the highest in the country.

Employment increases associated with growth in the private economy,
particularly the service sector which as a whole grew 15% in the past five
years, have more than offset the job reductions resulting from the substantial
downsizing of the government sector during this period, and non-government
employment now accounts for approximately three-quarters of the area's total
employment. Unemployment in Greater Washington fell from 5.4% in 1992 to 3.4%
in 1996, well below the national 1996 rate of 5.4%. The Company believes that
these trends and resulting increasing demand for office space will continue in
light of the composition of the region's economy and anticipated population
and employment growth. The Washington D.C. metropolitan area population is
expected to increase by 552,000 between 1996 and 2001, with growth in total
employment of approximately 175,000 and growth in office-based employment of
approximately 88,500.

The growth in business demand for office space over the last five years,
combined with relatively limited increases in supply, is directly reflected in
vacancy reductions and strengthening rents. According to Spaulding & Slye,
total office space supply in the Greater Washington area was 244.7 million
square feet in 1996 compared to 239.6 million square feet in 1992, an increase
of 5.1 million square feet (an annual increase of approximately 0.5% per
year), while during the same period the market absorbed approximately 14.1
million square feet, resulting in a decrease in the vacancy rate from 14.4% in
1992 to 10.4% in 1996. The absorption was particularly strong in 1995 and
1996, with approximately 9.2 million square feet of absorption and an increase
in average asking rent from $20.85 per square foot to $22.76 per square foot.
The Company believes that for the foreseeable future space absorption will
continue to substantially outstrip growth in supply and that further
reductions in vacancy rates will be accompanied by proportionally greater
increases in rent levels.

SOUTHWEST WASHINGTON, D.C. SUBMARKET

The 9.0 million square feet of Class A office space in the Southwest
Washington, D.C. submarket accounts for approximately 10% of the total Class A
office supply in Washington, D.C. and this submarket has been one of the
strongest submarkets in Greater Washington, D.C. over the past five years,
according to Spaulding and Slye.

According to Spaulding & Slye, the availability rate in this submarket
averaged 5.6% between 1992 and 1995 and had fallen to a low of 4.5% in 1995
before it increased to 9.0% in 1996 (when Blue Cross-Blue Shield

<PAGE>

put its owner-occupied 526,000 square foot building on the market). In
comparison, the availability rate in the Southwest Washington, D.C. submarket
as a whole averaged 10.3% between 1992 and 1995 and was 11.4% in 1996. The
asking rental rate in the Southwest Washington, D.C. submarket increased from
$28.86 per square foot in 1992 to $31.00 per square foot in 1996 while the
asking rental rate in the Southwest Washington, D.C. submarket as a whole
declined from $30.13 per square foot in 1992 to $27.11 per square foot in
1996. The Company believes the relative strength of the Southwest Washington,
D.C. submarket reflects the accessibility to major government offices and the
comparatively limited supply of private office space as a proportion of total
office space (including government-owned buildings) in this submarket.

The Company's Southwest Washington, D.C. Office Properties consist of five
Class A office properties.

[GRAPH APPEARS HERE]

Southwest Washington D.C. Office Submarket
Average Quoted Market Rent &
Availability Rate
<TABLE>
<CAPTION>

WASHINGTON D.C.
<S> <C>
1992 $28.86
1993 $36.84
1994 $34.61
1995 $32.81
1996 $31.00

1992 4.7%
1993 6.5%
1994 6.5%
1995 4.5%
1996 9.0%

</TABLE>
-------------------
Source: Spaulding & Slye

Description of Southwest Washington, D.C. Properties

Independence Square. These Properties are two Class A Office Buildings
developed by the Company. Independence Square is located in the southwest
office market of downtown Washington, D.C. in close proximity to numerous
government agencies and buildings. METRO rail access is available within one
block of the building. Both buildings have limestone colored, pre-cast
concrete exteriors with curtain wall elements. The lobbies of the buildings
are two stories with marble walls and terrazzo floors.

One Independence Square is a nine-story building which serves as the
headquarters for the Office of the Comptroller of Currency. Built by the
Company in 1991, the building has approximately 337,794 net rentable square
feet of office space. The building is situated on a 1.17 acre parcel of land.
The four level, below ground garage has 389 parking spaces which are leased to
the building's tenant. This Property has only one tenant, the Office of the
Comptroller of Currency.

Two Independence Square is a nine-story building with a below-grade
concourse level. The building is the headquarters for the National Aeronautics
and Space Administration. Built by the Company in 1992, the building has
approximately 579,600 net rentable square feet of office (569,337 square feet)
and retail (10,263 square feet) space. The building is located on a 2.2 acre
site. There are 700 parking spaces available in the three level, below ground
garage which are leased to the building's tenant. The Property has only one
office tenant, the General Services Administration (for use and occupancy by
the National Aeronautics and Space Administration) (569,337

81
<PAGE>

square feet). With respect to Two Independence Square, the Company was awarded
a Certificate of Merit and Excellence in construction from the Associated
Builders and Contractors.

One tenant at Two Independence Square occupies approximately 98.5% of the
rentable square feet. As of December 31, 1996, the General Services
Administration, on behalf of The National Aeronautics and Space Administration
occupied 569,337 square feet pursuant to a lease which expires July 19, 2012,
with one 10-year renewal option. The General Services Administration's rent
for 1996 was approximately $21.1 million. The GSA's lease provides for annual
adjustments to reflect inflation and increases in real estate taxes with
respect to the $20.0 million base rent component and an annual 4% increase on
the $1.1 million parking component of the rent.

The escalated annual rent per square foot of Two Independence Square for the
years ended December 31, 1992, 1993, 1994, 1995, and 1996 was $16.03, $35.79,
$36.39, 37.02 and $37.06, respectively. The occupancy rate of the Property for
each such years was 100%.

The aggregate tax basis of depreciable real property of Two Independence
Square for federal income tax purposes was $68.7 million as of December 31,
1996. Depreciation is computed on the Straight-Line Method over the estimated
life of the real property which range from 15-39 years. For the tax year
ending September 30, 1997, Two Independence Square was taxed by the District
of Columbia at a rate equal to $2.15 per $100 of assessed value, resulting in
a total tax for such period equal to $3,066,717.

The leases of two tenants in this Property expire in the year 2002, such
leases cover 1,352 net rentable square feet. For the year ended December 31,
1996 the Escalated Rent under such leases was $47,458, representing 0.2% of
the total Escalated Rent of the Property. No other leases at this Property
expire in the period from January 1, 1997, through December 31, 2006.

In the Company's opinion this Property is adequately covered by insurance.

Other than normally recurring capital expenditures, the Company has no plans
with respect to material renovation, improvement or redevelopment of Two
Independence Square.

Capital Gallery. This two-building, Class A office complex is located in
Southwest Washington, D.C., in the heart of the federal government district.
The Property is located one block from the Mall and approximately eight blocks
from the Capitol Building. Virtually every major government agency is in close
proximity to these Properties. The Properties are accessible by the METRO rail
for which there is a stop located within the front plaza area. The Virginia
Rail Express has a platform at the rear of the buildings. The buildings, which
were constructed by the Company in 1981, are connected by a three-story
gallery which serves as both a pedestrian way and a shopping arcade. The
exteriors of both buildings are precast concrete facades. The buildings are
situated on a 125,452 square foot site which includes a landscaped plaza in
the rear of the buildings. The buildings contain approximately 398,469
rentable square feet of both office (384,662 square feet) and retail (13,847
square feet) space. A below ground parking garage contains 466 parking spaces
on three levels. Primary tenants at these Properties include American Nurses
Foundation (52,838 square feet), Mathematica Policy Research, Inc. (41,678
square feet) and The Graduate School, United States Department of Agriculture
(73,458 square feet).

The U.S. International Trade Commission Building. The U.S. International
Trade Commission Building is a Class A Office Building located in Southwest,
Washington, D.C. Built in 1987 by the Company, the building is situated on a
1.09 acre parcel of land at 500 E Street between 4th and 6th Streets. Directly
across the street from the building is the Department of Transportation and
access to the METRO rail. The building is located southwest of Capitol Hill,
approximately four blocks from the Mall. The building was designed by the
nationally renowned architectural firm of Kohn Pedersen Fox and has pre-cast
concrete, curtain wall exteriors. The building is a nine-story structure with
approximately 243,798 net rentable square feet. Eight of the nine stories are
leased by the General Services Administration (for use and occupancy by the
U.S. Trade Commission and the Social

82
<PAGE>

Security Administration). The General Services Administration's lease accounts
for 217,772 net rentable square feet, or 89.3% of the aggregate net rentable
square feet in the building. Within the space leased by the General Services
Administration are several column-free, two-story courtrooms, as well as
extensive library facilities and special purpose areas. The Property has a
below ground parking garage with 214 parking spaces on five levels.

WEST END WASHINGTON, D.C., SUBMARKET

The West End submarket is a geographical area bounded by DuPont Circle on
the north, New Hampshire Avenue on the east, Foggy Bottom and Pennsylvania
Avenue on the south and Rock Creek and Georgetown on the west. The West End is
a blend of residential, commercial office and retail uses which is a
transition area between the predominantly commercial office uses in the
abutting Central Business District to the east and the predominantly
residential uses in Georgetown to the west. The West End submarket contains
approximately 4.3 million square feet of commercial office space, with more
than 2.7 million square feet constructed since 1980. Large law firms,
consulting firms and associations are the principal tenants in the West End.

According to Spaulding & Slye, availability rates in the West End office
submarket have declined from 11.2% in 1994 to 7.7% in 1996.

[GRAPH APPEARS HERE]

West End Washington, D.C.
Office Submarket
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
WEST END DC
<S> <C> <C>
1992 $28.77
1993 $28.10
1994 $28.95 LINE-Rent
1995 $26.00
1996 $26.31

1992 6.0%
1993 7.6%
1994 11.2% BAR-Availab
1995 10.3%
1996 7.7%
</TABLE>
- --------------------
Source: Spaulding & Slye

Description of West End Washington, D.C. Property

2300 N Street. 2300 N Street is a Class A Office Building located in the
West End, Washington, D.C. Built in 1986 by the Company, the building is
situated on a 1.1-acre parcel of land on the south side of N Street between
23rd and 24th Streets. The building was designed by the nationally renowned
architectural firm of Skidmore Owings and Merrill and has a brick and
architectural precast concrete exterior wall. The building has a three-level
underground garage with parking for 275 vehicles. It is located across the
street from the headquarters of U.S. News & World Report and abuts the luxury
Park Hyatt hotel. The eight-story building contains approximately 279,240
rentable square feet and is the headquarters for the law firm of Shaw,
Pittman, Potts & Trowbridge which leases approximately 206,488 rentable square
feet, which includes 2,334 rentable square feet of storage space. Other
tenants include Mercer Management Consulting, Inc. (36,048 square feet) and
Wilkinson, Barker, Knauer & Quinn (33,110 square feet).

83
<PAGE>

MONTGOMERY COUNTY, MARYLAND SUBMARKETS

Montgomery County had a total of approximately 35 million square feet of
office space at the end of 1996, accounting for 69% of the total suburban
Maryland office stock of approximately 50.9 million square feet. According to
Spaulding & Slye, there has been significant improvement in the suburban
Maryland market in the past two years, with virtually no increase in supply,
absorption of 2.4 million square feet, a decline in availability from 19.4% to
14.7% and an increase in average asking rent from $18.90 per square foot to
$21.00 per square foot. The Company's Properties in this area are located
within two submarkets in Montgomery County, the Bethesda-Rock Spring submarket
and the Gaithersburg I-270 submarket.

BETHESDA-ROCK SPRING OFFICE SUBMARKET

The Bethesda-Rock Spring office submarket is the third largest in Montgomery
County and suburban Maryland, with a total of 4.7 million square feet of
office space at the end of 1996. According to Spaulding & Slye, supply has
remained flat since the addition of 777,000 square feet during 1993. This
supply addition, combined with cutbacks in defense spending that led to
defense contractors putting substantial amounts of sublease space on the
market in 1994, resulted in negative absorption in 1994 and caused
availability to spike briefly to 25.6% at the end of that year. Since then the
market has strengthened considerably, absorbing 396,000 square feet during
1995 and a record high 587,000 square feet during 1996, with some of the
largest transactions in suburban Maryland in 1996 occurring in this submarket,
including Principal Health Care, Wellspring Resources and Host Marriott. With
no new supply during this period, the availability rate at the end of 1996
fell to 4.6% and the average asking rent was $23.00 per square foot.

[GRAPH APPEARS HERE]

Bethesda-Rock Spring Office Submarket
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
BETHESDA-ROCK SPRING
<S> <C>
1992 $23.00
1993 $23.00
1994 $22.00
1995 $22.75
1996 $23.00

1992 8.7%
1993 18.8%
1994 25.6%
1995 17.1%
1996 4.6%
</TABLE>
- --------------------
Source: Spaulding & Slye

Description of Bethesda-Rock Spring Properties

Democracy Center. These Properties are three Class A Office Buildings which
contain approximately 680,000 rentable square feet of office (669,098 square
feet) and retail (10,902 square feet) space. The complex was designed by the
national firm of Skidmore, Ownings & Merrill and reflects the highest
architectural standards. In 1985, the complex was voted the "Best Office
Complex" by the National Association of Industrial and Office Parks.

84
<PAGE>

The Properties are situated within Rock Spring Park in Bethesda, Maryland,
the most prominent and attractive corporate office park in the metropolitan
area. The three buildings are located on a carefully landscaped, 15 acre site
where they are clustered around a 1 1/2 acre ceremonial plaza. The Properties
have extensive frontage along and visibility from Interstate 270, the major
thoroughfare in Montgomery County. The Properties are accessible via METRO
rail and bus and are only 30 minutes from Washington National, Dulles
International and Baltimore-Washington International Airports.

The three buildings, which were constructed by the Company, were completed
in the years 1985, 1986 and 1988. The buildings are steel frame structures
with pre-cast concrete exteriors. Two of the buildings are nine stories and
the third building is fifteen stories. All three buildings are connected by a
below ground public parking garage facility. The two levels in the garage
facility, together with the surface parking area immediately adjacent to the
complex, provide over 2,000 parking spaces. Primary tenants at these
Properties include LMC Properties, Inc. (117,720 square feet), American PCS,
L.P. (111,590 square feet) and United States Enrichment Corporation (63,666
square feet).

GAITHERSBURG I-270 OFFICE SUBMARKET

The Gaithersburg I-270 office submarket consists of 2.9 million square feet
with inventory remaining steady since a 76,000 square foot building was
completed in 1992. In 1994 this submarket was impacted by the departure of
IBM, which previously had maintained a substantial presence in the area, and
absorption slumped that year to negative 288,000 square feet with availability
spiking to 31.1%. The following year transactions by government contractors
led to a sharp turnaround, with record-high absorption of 415,000 square feet
in 1995 and further positive absorption in 1996, leading to reduction in the
availability rate to 13.8% by the end of 1996 and an upturn in average asking
rents from $17.12 per square foot in 1994 to $19.40 per square foot in 1996.

The following graph provides information regarding availability rates and
average asking rental rates at year end for each of the years from 1992
through 1996 for office properties in the Gaithersburg I-270 office submarket.

[GRAPH APPEARS HERE]

Gaitersburg I-270 Office Submarket
Average Quoted Market Rent &
Availability Rate

GAITHERSBURG
<S> <C>
1992 $19.34
1993 $19.36
1994 $17.12
1995 $17.88
1996 $19.40

1992 18.4%
1993 21.1%
1994 31.1%
1995 16.6%
1996 13.8%
</TABLE>
- -------------------
Source: Spaulding & Style

Description of Gaithersburg I-270 Property

Montvale Center. Montvale Center is a seven-story, Class A Office Building
which contains approximately 120,112 net rentable square feet of corporate
office and related space. The Property is located in Montgomery County,
Maryland, two blocks from the major arterial roads in the County, Route 355
and Interstate 270. The building is located on a 5.8 acre site which has been
landscaped to create a wooded, park-like environment. Built by the Company in
1987, the building is a steel frame, brick veneer structure which features

85
<PAGE>

a prominent two-story glass and metal panel base and an arcade at the main
entrance. Adjacent to the building are 401 parking spaces. A primary tenant at
this Property is Integrated Telecom Technology, Inc. (17,000 square feet).

FAIRFAX COUNTY, VIRGINIA MARKET

The Fairfax County, Virginia office market had a total of approximately 61.7
million square feet of space at the end of 1996, up only 400,000 square feet
over 1992. The Company's Properties in Fairfax County are in office/flex
buildings in the Springfield, Virginia submarket which had a total of
approximately 5.2 million square feet at the end of 1996 with no increase in
supply since 1992. Continued positive absorption during this period reduced
the availability rate from 17.9% in 1992 to 7.6% in 1996, and asking rental
rates, after falling to $7.65 per square foot in 1994, have increased
substantially to $9.96 per square foot at the end of 1996.

The following graph provides information regarding availability rates and
average rental rates at year end for each of the years from 1992 through 1996
for office buildings in the Springfield, Virginia flex/office submarket.

[CHART APPEARS HERE]

Springfield, Virginia Flex/Office Submarket
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
SPRINGFIELD
<S> <C>
1992 $8.65
1993 $8.14
1994 $7.65
1995 $9.04
1996 $9.96

1992 17.9%
1993 16.7%
1994 16.7%
1995 11.2%
1996 7.6%
</TABLE>
---------------
Source: Spaulding & Slye

Description of Fairfax County Properties

The Company's completed Fairfax County, Virginia Office Properties consist
of 11 R&D Properties situated within the Company's Virginia 95 Business Park
(the "Business Park") located in Springfield, Virginia. The Business Park is
approximately fifteen miles from downtown Washington, D.C. The Business Park
is situated on Interstate 95, the only highway which provides direct truck
access to the downtown area. Only minutes from the Capital Beltway, the major
markets of the Greater Washington, D.C. area, including Baltimore, Maryland
and Richmond, Virginia, are easily accessible from the Business Park. All of
the buildings are steel frame structures with brick cavity exterior walls,
except for 8000 Corporate Court, Building Eleven which has concrete, tilt
walls.

7601 Boston Boulevard, Building Eight. 7601 Boston Boulevard, Building Eight
is a mezzanine style R&D building built by the Company in 1986. Located within
the Business Park, the building is situated on a 7.3 acre parcel of land,
which includes 328 off-street parking spaces. The building has approximately
103,750 rentable square feet of office (30,000 square feet), computer center
(60,000 square feet) and storage (13,750 square feet) space. The building is
fully leased to the General Services Administration (for use and occupancy by
the United States Customs Service).

86
<PAGE>

7600 Boston Boulevard, Building Nine. 7600 Boston Boulevard, Building Nine
is a mezzanine style R&D building located on a 4.32 acre site within the
Business Park. Built by the Company in 1987, the building contains
approximately 69,832 rentable square feet of office (49,832 square feet),
light assembly (15,000 square feet) and storage (5,000 square feet) space.
Adjacent to the building are 249 off-street parking spaces. A primary tenant
at this Property is ALLNEWSCO., Inc. (27,455 square feet).

7500 Boston Boulevard, Building Six. 7500 Boston Boulevard, Building Six is
a mezzanine style R&D building situated on a 4.7 acre site within the Business
Park. The building was built by the Company in 1985 and contains approximately
79,971 rentable square feet of office (34,829 square feet), light assembly
(10,000 square feet) and storage (35,142 square feet) space. There are 245
off-street parking spaces adjacent to the building. The Property has one
tenant, the General Services Administration (for use and occupancy by the
Department of State).

8000 Grainger Court, Building Five. 8000 Grainger Court, Building Five is a
mezzanine style R&D building containing approximately 90,885 rentable square
feet of office (85,000 square feet) and light assembly (5,885 square feet)
space. The building is located on a 6.5 acre site within the Business Park.
The building was constructed by the Company in 1984. Adjacent to the building
are 347 off-street parking spaces. The Property has two tenants, Lockheed
Martin Corporation (57,065 square feet) and Price Waterhouse (33,400 square
feet).

7435 Boston Boulevard, Building One. 7435 Boston Boulevard, Building One is
a single story, R&D building located within the Business Park. The Property
contains approximately 106,242 rentable square feet of office (76,346 square
feet) and light assembly (29,896) space. Built by the Company in 1982, the
building is located on a 7.48 acre, extensively landscaped site, which
includes 314 off-street parking spaces. Primary tenants at this Property
include ADT Security Systems, Mid-South, Inc. (23,439 square feet) and
Lockheed Martin Corporation (18,350 square feet).

7451 Boston Boulevard, Building Two. 7451 Boston Boulevard, Building Two is
a single story, R&D building located on a 5.2 acre site within the Business
Park. The building contains approximately 47,001 rentable square feet of
office (18,500 square feet) and light assembly (28,916 square feet) space. The
building was constructed by the Company in 1982. Adjacent to the building are
166 off-street parking spaces. The building is fully leased to LMC Properties,
Inc., a subsidiary of the Lockheed Martin Corporation.

7374 Boston Boulevard, Building Four. 7374 Boston Boulevard, Building Four
is a mezzanine style, R&D building located on a 4.2 acre site within the
Business Park. The building contains approximately 57,321 rentable square feet
of office (40,500 square feet) and warehouse (16,821 square feet) space. There
are 207 off-street parking spaces adjacent to the building. Built by the
Company in 1984, the building is fully leased to General Services
Administration (for use and occupancy by the Department of State).

8000 Corporate Court, Building Eleven. 8000 Corporate Court, Building Eleven
is a single story, R&D building which was constructed by the Company in 1989.
The building is situated on a five acre parcel of land within the Business
Park and contains approximately 52,539 square feet of office (6,000 square
feet), production (15,500 square feet) and warehouse (31,039 square feet)
space. Adjacent to the building are 120 off-street parking spaces. This
Property is entirely leased to Global InSync Corporation.

7375 Boston Boulevard, Building Ten. 7375 Boston Boulevard, Building Ten is
a two-story, R&D building situated on a 2.8 acre parcel of land within the
Business Park. The building was constructed by the Company in 1988 and
contains approximately 26,865 rentable square feet of office (21,265 square
feet) and restaurant (5,600 square feet) space. There are 157 off-street
parking spaces adjacent to the building. Primary tenants at this Property
include the General Services Administration (for use and occupancy by the
United States Customs Service) (11,398 square feet) and Boston Cafe (5,600
square feet).

MIDTOWN MANHATTAN OFFICE MARKET

<PAGE>

transactions and global businesses. A major gateway to the United States, its
extensive transportation infrastructure includes three domestic and
international airports, premier port and rail services and the nation's
largest mass transit system.

Despite increasing costs, New York City's economy has remained competitive
in the areas of retail/wholesale trade and business services, which combine
for over one-half of the City's employment base. The services sector,
particularly financial, legal, public relations and other business service
industries, continue to be areas of growth. The employment base of this sector
has increased by eight percent, or 87,000 net new jobs, during the past five
years. This sector also provides high wage jobs which have contributed to the
high level of consumption-based activity in the City's economy over the past
several years.

Largely a result of growing opportunities in the services and
retail/wholesale trade sectors, the unemployment rate in New York City has
recovered steadily during the past five years. The City's unemployment rate
has fallen from 11.0% in 1992 to 8.8% in 1996. This overall increase in
employment has combined with a trend to locational preference for Midtown
Manhattan as compared to the Downtown/Wall Street area for office-based
employers, leading to falling vacancy rates and increasing rent levels in this
market area.

According to information provided by Insignia/ESG, the Midtown Manhattan
market in 1996 consisted of 194.6 million square feet of space, with supply up
3.1 million square feet (1.6%) over 1992 and absorption of 8.6 million square
feet in the same period. The resulting net reduction in supply correlates with
a decline in the availability rate (space currently vacant becoming available
within 12 months directly or on sublease and additions to supply) from 1992 to
1996 from 16.5% to 13.4% in Midtown and an increase in asking rent from $32.19
per square foot to $33.31 per square foot over the same period.

Park Avenue Submarket

The Company's Property in New York City, the 1 million square foot Class A
Office Building at 599 Lexington Avenue, is located within the Park Avenue
submarket of the midtown Manhattan market area. The Park Avenue submarket,
with 25.6 million square feet of office space in 1996 (an increase of only
200,000 square feet over 1992), is characterized by higher rent levels and
lower availability rates than midtown Manhattan generally and has also seen
greater improvement during the past five years. During the period 1992-96 the
availability rate in this submarket declined from 15.1% to 11.4% and the
average asking rent increased from $40.36/square foot to $44.40/square foot.
The Company has maintained its Property in this submarket at very high
occupancy rates throughout this period.

88
<PAGE>

[GRAPH APPEARS HERE]

Park Avenue Office Submarket
Average Quoted Market Rent &
Availability Rate

PARK AVENUE
<S> <C>
1992 $40.36
1993 $41.09
1994 $42.98
1995 $44.13
1996 $44.40

1992 15.1%
1993 13.1%
1994 8.2%
1995 12.5%
1996 11.4%
</TABLE>

- ------------------
Source: Insignia/ESG

Description of Midtown Manhattan Property

599 Lexington Avenue. 599 Lexington Avenue is a 50-story, 1 million square
foot Class A Office Building that occupies the entire blockfront on the east
side of Lexington Avenue between 52nd and 53rd Streets, directly across 53rd
Street from Citicorp Center. The building was completed by the Company in
1984. Designed by architect Edward Larrabee Barnes, 599 Lexington Avenue has a
finely detailed aluminum and glass curtain wall exterior and rises to its 653
foot height through a series of distinctive geometric setbacks. The building
sits on a 45,000 square foot site including a triangular plaza in front of its
main entrance facing the corner of 53rd Street and Lexington Avenue that
includes an entrance to the City subway system providing direct access to two
separate subway lines. The 50-foot tall glass-fronted marble lobby showcases a
major three dimensional work by American artist Frank Stella. The ground floor
of the building has approximately 24,500 square feet of retail space fronting
on Lexington Avenue and 52nd and 53rd Streets. Approximately 80% of the
985,500 rentable square feet of office space is on virtually column-free
floors of 21,000 square feet or more, which the Company believes enables
tenants to house their operations with an unusually high level of efficiency.
The building's setbacks at its upper levels provides a series of floors of
15,750 and then 7,600 square feet that can offer high visibility for small and
medium-size tenancies on a multi-tenant or full floor occupancy basis.

Three tenants at the Property occupy approximately 61% of the net rentable
square feet in the aggregate. As of December 31, 1996, Shearman & Sterling, a
national law firm, leased 355,849 net rentable square feet (approximately 36%
of the net rentable square feet) pursuant to a lease which expires August 31,
2007. Jones, Day, Reavis & Pogue, a national law firm, leased 144,289 net
rentable square feet (approximately 14% of the net rentable square feet)
pursuant to a lease which expires February 28, 2002. Citibank, N.A., a
national bank, leased 114,350 square feet (approximately 11% of the net
rentable square feet) pursuant to a lease which expires on December 31, 2002.

The average Escalated Rent per square foot of 599 Lexington Avenue for the
years ended December 31, 1992, 1993, 1994, 1995, and 1996 was $49.19, $53.20,
$53.35, $53.06, and $52.22, respectively. The occupancy rate of the Property
for each of such years was 99.2%, 100.0%, 97.2%, 99.7%, and 99.5%,
respectively.

The aggregate tax basis of depreciable real property at 599 Lexington Avenue
for federal income tax purposes was $138.8 million as of December 31, 1996.
Depreciation is computed on the straight-line method over the estimated life
of the real property which range from 18 to 39 years. The aggregate tax basis
of

89
<PAGE>

depreciable personal property associated with 599 Lexington Avenue for federal
income tax purposes was $6.0 million as of December 31, 1996. Depreciation is
computed on the straight-line and double declining balance methods over the
estimated useful life of the personal property of five or seven years. For the
tax year ending June 30, 1997, 599 Lexington Avenue was taxed by the Borough
of Manhattan at a rate equal to $10.25 per $100 of assessed value, resulting
in a total tax for such period equal to $10,819,961.

The Property is subject to a mortgage as set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Mortgage Indebtedness." Such mortgage is not prepayable. The mortgage lender
has an option to purchase, at the maturity of the mortgage, a 33.33% interest
in the Property in exchange for cancellation of the outstanding balance of the
mortgage (which option, if exercised, would ascribe an implied value of
approximately $675.0 million to the Property as a whole).

For information concerning the expiration of leases with respect to 599
Lexington Avenue, see "Business and Properties--Tenants--Lease Expirations of
Office and Industrial Properties."

In the Company's opinion 599 Lexington Avenue is adequately covered by
insurance.

Other than normally recurring capital expenditures, the Company has no plans
with respect to material renovation, improvement or redevelopment of 599
Lexington Avenue.

THE INDUSTRIAL PROPERTIES

The Company owns nine Industrial Properties aggregating a total of
approximately 925,000 net rentable square feet. Typically, these Properties
are located in business or Industrial parks near major freeways. At December
31, 1996, the aggregate occupancy rate for the Industrial Properties was 78%.

GREATER BOSTON INDUSTRIAL MARKET

Route 128 SW Submarket

The Route 128 SW Industrial submarket consists of four towns, Westwood,
Dedham, Canton, and Needham, Massachusetts. Supply has remained flat at 4.9
million square feet during 1992-1996. Spaulding & Slye indicates that the
submarket has experienced a steady recovery over the past five years. Its
availability rate has decreased from 26.3% in 1992 to 6.3% in 1996, its lowest
since 5.5% in 1986. Currently, there is 316,000 square feet of available space
in the submarket.

Following low absorption levels of 43,000 square feet in 1992 and a negative
18,000 square feet in 1993, absorption in the Route 128 SW submarket increased
to 373,000 square feet in 1994, which was followed by a record high level of
410,000 square feet in 1995. With the tightening of the submarket in the first
quarter of 1996, combined with limited opportunities for tenants, the
absorption level decreased during the year to 221,000 square feet.

In the Route 128 SW submarket of Greater Boston, the Company has two
Industrial Properties.

<PAGE>

The following graph provides information regarding availability rates and
average asking rental rates at year end for each of the years from 1992
through 1996 for the industrial properties in the Route 128 SW industrial
submarket.

[CHART APPEARS HERE]

Route 128 SW Industrial Submarket
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
RT. 128 SW INDUSTRIAL
<S> <C>
1992 $5.47
1993 $4.66
1994 $5.62
1995 $5.56
1996 $7.08

1992 26.3%
1993 26.6%
1994 19.1%
1995 10.8%
1996 6.3%
</TABLE>
-------------------
Source: Spaulding & Slye

40-46 Harvard Street. 40-46 Harvard Street is a warehousing and distribution
facility located in Westwood, Massachusetts. The building contains
approximately 139,839 rentable square feet of warehouse space on the first
level and approximately 29,439 rentable square feet of office space on the
mezzanine level which overlooks the warehouse. Located so as to service major
arteries, the Property is situated one-quarter mile from Route 128 and one-
half mile from Interstate 95. Built in 1967, the building is a steel frame,
brick wall on concrete masonry structure. 171 parking spaces are available on
the premises. The primary tenant at this Property is Output Technologies, Inc.
(128,105 square feet).

25-33 Dartmouth Street. 25-33 Dartmouth Street is a single story, multi-
purpose facility located in Westwood, Massachusetts, one-quarter mile from
Route 128. The Property is part of a large research and development and
warehousing park and contains approximately 78,045 square feet of rentable
space suitable for office, research and development or warehouse use. The
building is situated on a 5.58 acre parcel of land, which includes 189 parking
spaces. Built in 1966, the building is a steel frame, brick wall on concrete
masonry structure. The primary tenant at this Property is SkyRock Services
Corporation (56,747 square feet).

GREATER WASHINGTON, D.C. INDUSTRIAL MARKET

PRINCE GEORGE'S COUNTY MARYLAND/LANDOVER-CHEVERLY INDUSTRIAL SUBMARKET

The Central Prince George's County, Maryland industrial market includes a
total of approximately 10.7 million square feet of space. This submarket has
remained relatively stable over the past five years, with vacancy at 4.8% in
1992 and 5.1% in 1996, fluctuating below those levels during that period.
Asking rents have increased moderately from $4.25 per square foot in 1992 to
$4.55 per square foot in 1996.

91
<PAGE>

[GRAPH APPEARS HERE]

Landover/Cheverly Maryland Industrial Submarket
Average Quoted Market Rent &
Availability Rate

LANDOVER
<S> <C>
1992 $4.25
1993 $4.25
1994 $4.50
1995 $4.50
1996 $4.55

1992 4.8%
1993 1.4%
1994 3.3%
1995 0.9%
1996 5.1%
</TABLE>
- -----------------
Source: The Michael Companies, Inc.

Description of Landover/Cheverly Maryland Submarket Properties

The Company has three Industrial Properties in this submarket. All of these
Properties are located in Maryland 50 Industrial Park (the "Industrial Park")
in Landover, Maryland, which was developed by the Company. The location of the
Industrial Park is a well-situated "hub" for Greater Washington, D.C. The
Industrial Park is less than one mile from Route 50 which provides direct
access to downtown Washington. In addition, the Industrial Park is an
established stop on the METRO bus line and is less than one mile from a METRO
rail station.

6201 Columbia Park Road, Building Two. 6201 Columbia Park Road, Building Two
is a single story, light assembly and distribution building located on a 6.5
acre, extensively landscaped site within the Industrial Park. The Property
contains approximately 99,885 rentable square feet of office (12,000 square
feet), warehouse (77,885 square feet) and service (10,000 square feet) space.
The building is a steel frame, concrete tilt-wall structure which was built by
the Company in 1986. There are 248 off-street parking spaces adjacent to the
building. The primary tenants at this Property include Circuit City Stores,
Inc. (34,863 square feet) and Safeway, Inc (21,591 square feet).

2000 South Club Drive, Building Three. 2000 South Club Drive, Building Three
is a single story, office and distribution building situated on a 6.88 acre,
extensively landscaped parcel of land within the Industrial Park. The building
is a steel frame, concrete tilt-wall structure which contains approximately
83,608 rentable square feet of warehouse (78,608 square feet) and office
(5,000 square feet) space. The building was constructed by the Company in
1988. Adjacent to the building are 173 off-street parking spaces. This
Property has as its sole tenant The National Gallery of Art.

1950 Stanford Court, Building One. 1950 Stanford Court, Building One is a
single story, office and distribution building situated on a 3.4 acre,
extensively landscaped site within the Industrial Park. Built by the Company
in 1986, the building is a steel frame, concrete tilt-wall structure, which
contains both office (5,000 square feet) and warehouse (48,250 square feet)
space. Adjacent to the building are 91 off-street parking spaces. The primary
tenant at this Property is Federal Express Corporation (32,750 square feet).

92
<PAGE>

GREATER SAN FRANCISCO INDUSTRIAL MARKET

The Company's Industrial Properties in Greater San Francisco are located in
two submarkets, North Peninsula and Hayward/Union City. Industrial space rents
in this market area are quoted on a monthly rather than an annual basis.

NORTHERN PENINSULA INDUSTRIAL SUBMARKET

The Northern Peninsula submarket has a total of approximately 24.3 million
square feet of space in South San Francisco, Brisbane, San Bruno and
Burlingame. According to CB Commercial, consistent positive absorption of
space between 1992-95 brought the availability rate down from 12.1% to 9.1%
accompanied by the start of increasing rent levels. Absorption increased
sharply to 950,000 square feet in 1996 with availability dropping to 5.1%,
accompanied by the start of a more significant increase in rental levels which
the Company expects to continue following the pattern of rent level increases
lagging the rate of availability decline.

The following graphs provide information regarding availability rates and
average asking rental rates at year end for each of the years from 1992
through 1996 for industrial properties in the Northern Peninsula industrial
submarket, for each of warehouse/office and incubator space. Rents in this
submarket are quoted on a monthly basis but are shown annualized in the graph
for ease of comparability.

[CHART APPEARS HERE]

Northern Peninsula Industrial Submarket
Warehouse/Office
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
N. PENINSULA
<S> <C>
1992 $4.20
1993 $4.32
1994 $4.56
1995 $4.80
1996 $5.40

1992 12.1%
1993 11.0%
1994 10.7%
1995 9.1%
1996 5.1%
</TABLE>
- --------------------
Note: Average asking rents in California are typically quoted on a monthly
basis. In this case, the average asking rents have been annualized.
Source: CB Commercial

93
<PAGE>

[GRAPH APPEARS HERE]

Northern Peninsula Industrial Submarket
Incubator Space
Average Quoted Market Rent &
Availability Rate

N. PENINSULA INCUBATOR
<S> <C>
1992 $7.20
1993 $7.20
1994 $7.32
1995 $7.44
1996 $7.68

1992 12.1%
1993 11.0%
1994 10.7%
1995 9.1%
1996 5.1%
</TABLE>
- --------------------
Note: Average asking rents in California are typically quoted on a monthly
basis. In this case, the monthly average asking rents have been
annualized.
Source: CB Commercial

Description of Northern Peninsula Submarket Properties

The Company has three Properties in this submarket, all located in the
Company's master planned Hilltop Industrial Park development (the "Industrial
Park") in South San Francisco, California. Approximately twenty minutes south
of downtown San Francisco, the Industrial Park is accessible from two
interchanges off the Bayshore Freeway. Hotels, shopping and public
transportation, as well as San Francisco International Airport, are easily
accessible from the Industrial Park. The Properties at 560 Forbes Boulevard
and 430 Rozzi Place described below provide space for tenants seeking
warehouse and distribution facilities with related office space. The third
Property, Hilltop Business Center, is easily subdividable down to relatively
small space increments and meets tenant requirements for "incubator space" in
such buildings which, according to CB Commercial, commands rent levels 50% or
more higher than larger size warehouse/distribution spaces.

Hilltop Business Center. These Properties comprise a nine building office
and warehouse complex located on a fully landscaped 14.2 acre site in the
Industrial Park. The Properties contain approximately 144,579 aggregate
rentable square feet and 568 parking spaces. Constructed in the early 1970's,
all of the buildings are one-story structures with painted concrete, tilt-up
panel exteriors. Primary tenants at these Properties include Bionike
Technologies, Inc. (10,819 square feet), RJT Express, Inc. (5,000 square feet)
and ABC Building Services, Inc. (4,500 square feet).

560 Forbes Boulevard. 560 Forbes Boulevard is an industrial and office
building situated on a 5.5 acre parcel of land in the Industrial Park. The
Property contains approximately 40,000 rentable square feet and 30 parking
spaces. Built in the early 1970's, the building has painted concrete, tilt-up
panel exterior walls. The Property has one tenant, Graphics Arts Center, Inc.

430 Rozzi Place. 430 Rozzi Place is a single story, office and Industrial
building with approximately 20,000 rentable square feet. The building is
situated on a 3.2 acre parcel of developed industrial land in the Industrial
Park. There are ten parking spaces available on the premises. The building was
constructed in the early 1970's and has a painted concrete, tilt-up panel
exterior. This Property has one tenant, See's Candies, Inc.

HAYWARD/UNION CITY INDUSTRIAL SUBMARKET

Substantial absorption of space during 1992-96 in this submarket has
resulted in a drop in the vacancy rate from 14.4% to 4.1% and a significant
increase in asking rent levels even as there were additions to supply in the
last two years. According to CB Commercial, supply was flat at approximately
22.0 million square feet during

94
<PAGE>

1992-94 while an average of 442,000 square feet were absorbed each year during
the first two years of that period increasing to 882,000 absorbed in 1994.
During 1995 there was net absorption of 420,000 square feet on top of
absorption of 497,000 square feet of new supply--i.e., total absorption of
existing plus new supply of approximately 917,000 square feet--and this rose
further to net absorption in 1996 of 1,399,000 square feet in a year in which
647,000 square feet was added to supply. Average asking rent (quoted in this
market on a monthly basis) on a triple-net basis increased from $.24 per
square foot in 1992 to $.33 per square foot in 1996 reflecting this
significant reduction in available space.

The following graph provides information regarding availability rates and
average asking rental rates at year end for each of the years from 1992
through 1996 for industrial properties in the Hayward/Union City submarket.
Rents in this submarket are quoted on a monthly basis but are shown annualized
in the graph for ease of comparability.

[CHART APPEARS HERE]

Hayward/Union City Industrial Submarket
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
HAYWARD
<S> <C>
1992 $2.88
1993 $3.12
1994 $3.12
1995 $3.60
1996 $4.08

1992 13.4%
1993 11.4%
1994 7.3%
1995 7.5%
1996 4.1%
</TABLE>
- ---------------------
Note: Average asking rents in California are typically shown on a monthly
basis. In this case, the average asking rents have been annualized.
Source: CB Commercial

Description of Hayward/Union City Submarket Property

2391 West Winton Avenue. The Company's fourth Industrial Property in the San
Francisco area is 2391 West Winton Avenue, a single story, industrial building
which also offers mezzanine office space. The Property is located in Hayward,
California, across the bay from San Francisco and just four miles from the
Oakland Airport. The Property is part of the planned Hayward Industrial Park
development. The Property contains approximately 221,000 rentable square feet
and 257 parking spaces. Constructed in 1974, the building is situated on a
9.74 acre parcel of land and has a painted concrete, tilt-up panel exterior.
This Property has one tenant, Viking Office Products, Inc.

LOWER BUCKS COUNTY, PENNSYLVANIA INDUSTRIAL MARKET

The Lower Bucks County industrial market totals approximately 18.5 million
square feet of space and experienced significantly high vacancy rates in the
beginning of the 1990's, but net absorption of 2.3 million square feet during
1993-96, plus absorption of approximately 600,000 square feet of additional
supply, brought the availability rate down to 8.8% at the end of 1996.

95
<PAGE>

[GRAPH APPEARS HERE]

Lower Bucks County Industrial Market
Average Quoted Market Rent &
Availability Rate

<TABLE>
<CAPTION>
LOWER BUCKS
<S> <C>
1992 $2.50
1993 $2.50
1994 $3.50
1995 $3.45
1996 $3.45

1992 18.2%
1993 18.9%
1994 5.3%
1995 4.7%
1996 8.8%
</TABLE>
- --------------------
Source: The Flynn Company

Description of Bucks County, Pennsylvania Property

The Company has one Industrial Property in the Bucks County, Pennsylvania
market, 38 Cabot Boulevard. 38 Cabot Boulevard is a single story, industrial
building located in Bucks County, Pennsylvania, approximately thirty miles
northeast of Philadelphia. The Property contains approximately 161,000
rentable square feet. The building is located on a 9.4 acre parcel of
developed industrial land. The building, which has a painted, concrete panel
exterior, was originally built in 1972. In 1984, the Company completed an
expansion building which added 61,000 rentable square feet to the Property.
This Property has one tenant, J.I. Case Company.

THE HOTEL PROPERTIES

The Company owns two Hotel Properties in the Greater Boston area, one in
downtown Boston on the Boston Harbor waterfront and one in East Cambridge that
is part of the Company's Cambridge Center development. Both hotels are
operated by Marriott under the Marriott(R) name. In order to assist the
Company in maintaining its qualifications as a REIT under federal tax law,
following the Offering the Company will lease the Hotel Properties, pursuant
to separate leases with a participation in the gross receipts of the Hotel
Properties, to a lessee (ZL Hotel LLC) that is controlled by Messrs. Zuckerman
and Linde. Messrs. Zuckerman Linde will have a 9.8% economic interest in such
lessee and one or more unaffiliated public charities will have a 90.2%
economic interest. Marriott(R) will continue to operate the Hotel Properties
under the Marriott name pursuant to management agreements with ZL Hotel LLC.

GREATER BOSTON HOTEL MARKET

Over the past five years the Greater Boston hotel market has consistently
ranked as one of the strongest lodging markets in the country, with high
occupancy and average room rates resulting in revenues per available room
("REVPAR", the hotel industry standard of comparison) significantly higher
than average. In 1996, according to Horwath Landauer/Smith Travel Research,
the Greater Boston hotel market supply of approximately 34,500 rooms had an
overall occupancy rate of 73.5% and an average room rate of $105.51, ranking
fourth in both of these categories out of the top 25 markets nationwide.

96
<PAGE>

The strength of this market reflects the broad base of room demand in Boston
as a national and international business, tourist and meeting destination.
Business growth in Boston during 1992-96 has been strong as reflected in
falling office vacancy rates and unemployment rates (see "--The Office
Properties--Greater Boston Office Market"). Boston has grown steadily as a
national and international tourist destination, with total visitors to Boston
reaching a record 10.6 million in 1996 according to the Boston Convention and
Tourist Bureau, up 21% over 1992. And Boston is an important meeting and
convention site, ranked as a "first-tier" convention city even though as a
result of the limited size of exhibition space available in its Hynes
Convention Center it does not rank in the top 30 in the amount of prime
exhibit space in its principal convention facility. The City and State are
presently working on plans for a new convention center with an estimated cost
of approximately $700 million targeted to have a total of 592,000 square feet
of exhibit space, which would more than triple the 193,000 square feet
currently available in the Hynes (Interim Report on the Trade & Convention
Center, City of Boston & Commonwealth of Massachusetts, January 1997).

BOSTON/CAMBRIDGE HOTEL SUBMARKET

The Company's completed Hotel Properties are located in downtown Boston and
in East Cambridge, the latter directly across the Longfellow Bridge from
Boston. The Boston/Cambridge lodging market, at the core of the metropolitan
area, has a total of approximately 13,371 rooms and achieves higher occupancy
and room rates than the Greater Boston market as a whole, with resulting
higher REVPAR, as indicated in the following table which indicates the
performance of that market during 1992-96:

BOSTON/CAMBRIDGE HOTEL SUBMARKET, 1992-1996

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Occupancy.......................... 71.5% 74.6% 76.5% 77.4% 78.1%
Average Daily Rate................. $115.25 $118.75 $126.75 $133.00 $143.25
REVPAR............................. $ 82.41 $ 88.59 $ 96.92 $102.88 $111.84
Percent Change..................... 7.5% 9.4% 6.1% 8.7%
Available Room Supply.............. 13,069 13,112 13,224 13.359 13,371
Percent Change..................... 0.3% 0.9% 1.0% 0.1%
</TABLE>
- --------
Source: Pinnacle Advisory Group

New additions to the Boston hotel market are underway and anticipated and if
the proposed new Convention Center is constructed further additions to supply
are expected. The Company believes that business, tourist and convention and
meeting-driven demand will increase as well, supported by major transportation
infrastructure improvements currently underway including the $10.4 billion
Central Artery/Ted Williams Tunnel project (which will improve access to
downtown Boston and Logan International Airport and the urban quality of
downtown Boston) and the $1.2 billion Logan 2000 program (the modernization
and facility expansion of Logan International Airport). The Company also
believes that because of their excellent locations and the advantages of
Marriott(R) brand strength and marketing programs and management, its Hotel
Properties will continue to perform strongly and benefit directly from such
growth in overall demand.

DESCRIPTION OF THE COMPANY'S HOTEL PROPERTIES

The two completed Hotel Properties have the following characteristics:

Long Wharf Marriott(R) Hotel. The 402 room Long Wharf Marriott(R) Hotel is
an eight-story building located directly on the Boston Harbor waterfront. The
hotel opened in March of 1982. The interior-corridor, atrium-style structure
has a shape which is reminiscent of a ship, and the vast majority of guest
rooms overlook either the waterfront or downtown Boston. Surrounding land uses
consist of Boston Harbor to the east, the New England Aquarium to the south,
Faneuil Hall Marketplace across Atlantic Avenue to the west and Columbus
Waterfront Park to the north. The hotel is within easy walking distance of the
heart of the business and financial district and most of Boston's major
attractions, such as the Aquarium, Faneuil Hall, Downtown Crossing, the Old
State House, the Fleet Center and Boston Common. The hotel has been operated
as a Marriott(R) since its

<PAGE>

opening, pursuant to a management agreement with Marriott(R) and has
consistently achieved occupancy, average room rate and REVPAR levels among the
highest of all Marriott(R) hotels. For the year ended December 31, 1996, the
Long Wharf Marriott(R) Hotel had an occupancy rate of 85.7%, an ADR of $201.18
and REVPAR of $173.01.

Cambridge Center Marriott Hotel. The 431 room Cambridge Center Marriott(R)
Hotel is a 25-story building located in Kendall Square, Cambridge. The hotel
opened in September 1986. The hotel is the centerpiece of the Cambridge Center
development, an office and mixed-use development with 1.7 million square feet
of rentable space, including the hotel and five other office and R&D buildings
owned by the Company. For more information regarding Cambridge Center, see "--
The Office Properties--Greater Boston Office Market--East Cambridge
Submarket--Description of East Cambridge Properties." The hotel is in the
heart of Kendall square and is adjacent to the MIT campus. The hotel is easily
accessible by public transportation connecting directly to downtown Boston
(two rapid transit stops to the east) and Harvard Square in Cambridge (two
stops to the west). The hotel has been operated as a Marriott(R) since its
opening, pursuant to a management agreement with Marriott(R). For the year
ended December 31, 1996, the Cambridge Center Marriott Hotel had an occupancy
rate of 82.6%, an ADR of $150.52 and REVPAR of $123.58.

MARRIOTT(R) IS A REGISTERED TRADEMARK OF MARRIOTT INTERNATIONAL, INC., WHICH
HAS NOT ENDORSED OR APPROVED THE OFFERING OR ANY OF THE FINANCIAL RESULTS OF
THE HOTELS SET FORTH IN THIS PROSPECTUS. INVESTORS IN THE COMPANY WILL NOT
RECEIVE AN INTEREST IN MARRIOTT INTERNATIONAL, INC.

THE DEVELOPMENT PROPERTIES

The Company is currently developing the following seven properties for the
Company's ownership:

BDM International Building and Phase II Building. The BDM International
Building is an approximately 312,000 square foot, 12-story, Class A Office
Building located in Reston, Virginia. The Reston market is an active area of
expansion for the rapidly growing Northern Virginia computer, technology, and
telecommunications industries. The Company is developing this property through
its joint venture with Westbrook. The Company owns a 25.0% interest in the BDM
International building, which economic interest may be increased above 25.0%
depending upon the achievement of certain performance objectives. Completion
of the BDM International Building is scheduled for February of 1999.
Approximately 225,000 square feet of development is pre-leased to BDM
International ("BDM") for a term of twelve years, and the Company is currently
negotiating with BDM for BDM to lease an additional 84,000 square feet of
office space (the building's remaining 3,000 square feet are ground-floor
retail space). Associated with the development of the new headquarters for BDM
International, the Company is also constructing a second, six story, 126,500
net rentable square feet building on the site. This building will be developed
without a pre-leasing commitment in response to the significant unsatisfied
demand for office space in the Reston, Virginia market. Parking (1548 spaces)
for both the BDM International Building and the Phase II Building will be
provided on-site in surface lots and a four story parking deck. Delivery of
the Phase II building is scheduled for December 1998.

201 Spring Street. 201 Spring Street is a 102,000 net rentable square foot,
Class A Office Building located in Lexington, Massachusetts, in the Route 128
NW submarket of Greater Boston. This building will be adjacent to the
Company's existing Class A Office Building at 191 Spring Street. Completion of
201 Spring Street is scheduled for September, 1997. The building is currently
100% committed to Continental Cablevision under a letter of intent and lease
negotiations are presently underway.

7700 Boston Boulevard, Building Twelve and 7501 Boston Boulevard, Building
Seven. On land owned by the Company in its Virginia-95 Office Park, the
Company is in the process of completing two build-to-suit projects. These two
R&D Properties contain approximately 80,514 and 75,756 rentable square feet,
respectively. 7501 Boston Boulevard, Building Seven is being developed by the
Company for the General Services Administration (specifically for use by the
United States Customs Service). 7700 Boston Boulevard Building Twelve will be
the headquarters of Autometric, Inc. and has expansion potential for another
40,000 square feet

98
<PAGE>

of space. Both buildings are scheduled for completion in late 1997. 7501
Boston Boulevard, Building Seven and 7700 Boston Boulevard, Building Twelve
are entirely pre-leased to the General Services Administration and Autometric,
Inc. for terms of 10 and 15 years, respectively.

Sugarland Buildings One and Two. These single story office/flex buildings on
extensively landscaped sites are located in the Sugarland Office Complex in
Herndon, Virginia, within one mile of Reston Town Center and in the midst of
the Reston-Herndon-Dulles high-technology area. Building One, constructed in
1985, contains approximately 52,533 net rentable square feet and is on a 4.67
acre parcel with 297 parking spaces. Building Two, also constructed in 1985,
contains approximately 59,585 net rentable square feet and is on a 4.93 acre
parcel with 234 parking spaces. The Company purchased the buildings vacant in
1996, made improvements to them and has approximately 72,000 square feet of
the total of 112,161 net rentable square feet committed under signed leases or
letters of intent with leases in negotiation.

DEVELOPMENT PARCELS

The Company expects that a significant portion of its future growth will
come through development and redevelopment projects. For development
opportunities, the Company seeks vacant land in desirable markets including,
where appropriate, where it can add value by overcoming adverse zoning
regulations or by locating tenants who will work with the Company towards a
"build-to-suit" or significant pre-lease arrangement. The Company believes
that its reputation in its current markets for developing properties for its
own account and others will aid it in working with tenants on a "build-to-
suit" or pre-lease basis. In addition to the seven Development Properties (See
"--Summary Property Data" and "--The Office Properties--The Development
Properties"), at the completion of the Offering the Company will own, have
under contract, or have an option to develop or acquire six parcels consisting
of an aggregate of 47.4 acres of land. The Company believes that this land,
some of which needs zoning or other regulatory approvals prior to development,
will be able to support an aggregate of approximately 1.0 million square feet
of development. The following chart provides additional information with
respect to the undeveloped parcels.

<TABLE>
<CAPTION>
NO. OF DEVELOPABLE
LOCATION SUBMARKET PARCELS ACREAGE SQUARE FEET(1)
-------- ------------------ ------- ------- --------------
<S> <C> <C> <C> <C>
Springfield, VA Fairfax County, VA 3 9.4 130,000
Lexington, MA Route 128 NW 1 6.8 50,000
Cambridge, MA East Cambridge, MA 1 4.2 539,000
Andover, MA Route 495 N 1 27.0 290,000
--- ---- ---------
Total 6 47.4 1,009,000
</TABLE>
--------
(1) Represents the total square feet of development or
additional development that the parcel(s) will support.

PROPOSED DEVELOPMENTS

The Company is currently pursuing a number of proposed development projects,
including:

Cambridge Center Marriott(R) Residence Inn. Subject to obtaining necessary
government approvals and resolving certain business matters, the Company
intends to develop a 221 room limited-service Residence Inn by Marriott(R) on
a site on the West Parcel at Cambridge Center (see "--The Office Properties--
East Cambridge Submarket--Description of East Cambridge Properties").
Marriott(R)'s Residence Inn is an extended-stay Hotel Development. This
property is subject, among other contingencies, to obtaining required
approvals, permits, rezoning and negotiation of a management agreement with
Marriott(R) International, which currently manages the two Hotel Properties
owned by the Company.

Reston Joint Venture. The Company is currently working with Westbrook on the
development of a 370,000 square foot office building in Reston, Virginia, 60%
pre-committed to a national consulting firm, in which the Company would own a
joint venture interest.

99
<PAGE>

There can be no assurances that the Company will ultimately develop either
of the above proposed developments.

DEVELOPMENT CONSULTING AND THIRD PARTY PROPERTY MANAGEMENT

DEVELOPMENT CONSULTING

Because commercial real estate development is a highly complex and
specialized business, many corporate and government entities that decide to
develop a property primarily for their own use seek a development and project
manager to assist with the design and execution of the project. The Company
has found development consulting and project management to be a desirable way
to leverage the Company's extensive experience in project and construction
management, marketing, leasing, finance, governmental relations, tax, real
estate law, and accounting. The Company's engagement in this type of activity
has three distinct attractions:

. Development consulting and project management can be a significant
source of revenue that requires little incremental investment by the
Company. To support the Company's own activities, the Company's offices
in Boston and Washington, D.C. are staffed with professionals who are
able to provide the full range of services needed for project design and
execution. By taking on third party projects, the Company is able to
fully utilize the talents of those individuals and add to their
experience and knowledge base.

. In addition to being a profitable source of revenue, the Company has
achieved significant recognition in its primary markets for successful
oversight of high-visibility projects. The Company believes that such
recognition has added to the Company's credibility when bidding for
build-to-suit projects or attempting to significantly pre-lease a
project under construction.

. The Company has been successful at retaining clients at the end of
third-party development projects and becoming the property manager for
the completed project. These property management engagements are
excellent sources of incremental revenues without the need for large
investment or risk.

The Company provided significant development consulting and project
management in connection with the following projects:

Thurgood Marshall Federal Judiciary Building, Washington, D.C. Completed in
1992, this approximately 1.0 million square foot office building houses the
Administrative Office of the United States Courts. The Company was selected
after a public competition to provide comprehensive services to the Architect
of the Capitol under a fee-for-services contract. Design and construction were
completed on schedule in 37 months and the final cost was 7% below budget. The
project, which the Company still manages under contract, received the 1995
Federal Government Design Award.

Health Care Financing Administration ("HCFA"), Woodlawn, Maryland. The
Company and its co-developer, chosen over five other teams, designed and built
the 920,000 square foot headquarters of HCFA on a 60-acre campus in Woodlawn,
Maryland. The project was completed on time in 32 months and 8% under the
approved budget amount.

The Acacia Mutual Life Building, Washington, D.C. The Company is acting as
development manager for this project, which involves the substantial
redevelopment of a 200,000 square foot, 2-building complex. Acacia Mutual Life
Insurance Company, the owner of the building, selected the Company to oversee
the design, financing and construction of the interior and parking structure.
The law firm of Jones, Day, Reavis and Pogue has leased the complex as their
new Washington, D.C. headquarters and will be occupying the building beginning
in mid-1999.

National Institutes of Health, Bethesda, Maryland. The Company is acting as
development manager for a new Clinical Research Center for the National
Institutes of Health at its Bethesda, Maryland campus. The Company was
selected by the General Services Administration in 1995 to provide this
service from among four competitors. Scheduled for completion in the year
2002, the Clinical Research Center will contain approximately 850,000 square
feet.

100
<PAGE>

90 Church Street, New York, New York. The Company is acting as development
consultant to the United States Postal Service (the "USPS") for the
redevelopment of 90 Church Street. The base of the 15-story building will
continue to be used as a United States Postal Service mail processing
facility, but the tower portion is being renovated for new tenants who have
already committed to occupy almost all of the building's available space. The
Company is also master lessee of the building and as such is responsible for
the daily operation of the building and all construction work in the building
and acts as exclusive leasing agent.

Beth Israel Research Lab, Boston, Massachusetts. In 1992 Boston's Beth
Israel Hospital retained the Company as development manager for the conversion
of a 96,000 square foot former warehouse into a modern research laboratory
facility. The Company established the project budget, supervised design,
developed a fast-track schedule, hired and supervised the general contractor
and delivered the facility for first occupancy only 20 months after getting
the assignment.

Medical Information Technology ("Meditech") Headquarters, Norwood,
Massachusetts. The Company served as Development Manager for Meditech on the
development of a four building corporate campus on a 60-acre property in
Norwood, Massachusetts. Approvals were obtained for a master plan which
preserves open space and an existing nine hole golf course.

THIRD-PARTY PROPERTY MANAGEMENT

The Company generally does not provide third-party property management
services, but the Company has been willing to accept property management
engagements in certain cases where the Company had a pre-existing relationship
with a major tenant or client for whom the Company provided development
services. In Greater Washington, D.C., the Company manages six properties for
third parties and earns gross revenues of approximately $936,000 per year. The
Company served as development and project manager for all of these properties.

PARTIAL INTERESTS

Upon completion of the Offering, the Company will own less than a 100.0% fee
interest in 14 of the Properties. The Company will own a 25.0% limited
liability company membership interest in a two-building complex (one building
of which is leased entirely to BDM International) in Reston, Virginia, which
the Company is currently developing in partnership with Westbrook Partners,
LLC. The Company's economic interest in this property may be increased above
25.0%, depending upon the achievement of certain performance objectives. The
Company will own a 75.0% partnership interest and will be the sole general
partner of the limited partnership that will own 100.0% of the fee interest in
Montvale Center in Gaithersburg, Maryland. Because of the priority of the
Company's 75.0% partnership interest, the Company expects to receive
substantially all of any partnership distributions that are made with respect
to this property. The Company will own a 35.7% controlling general partnership
interest in the nine Hilltop Business Center properties, 560 Forbes Boulevard
in South San Francisco, California and 430 Rozzi Place in South San Francisco,
California.

ENVIRONMENTAL MATTERS

Some of the Properties are located in urban and industrial areas where fill
or current or historical industrial uses of the areas may have caused site
contamination at the Properties. Within the past 12 months, independent
environmental consultants were retained to conduct or update Phase I
environmental assessments (which generally do not involve invasive techniques
such as soil or ground water sampling) on all of the Properties. These
environmental assessments have not revealed any environmental conditions that
the Company believes will have a material adverse effect on its business,
assets or results of operations, and the Company is not aware of any other
environmental condition with respect to any of the Properties which the
Company believes would have such a material adverse effect.

With respect to 17 Hartwell Avenue in Lexington, Massachusetts, the Company
received a Notice of Potential Responsibility ("NOR") from the state
regulatory authority on January 9, 1997, related to groundwater

101
<PAGE>

contamination. In addition, the Company received a Notice of Downgradient
Property Status Submittal from each of two third parties concerning alleged
contamination at two downgradient properties. 17 Hartwell Avenue is a 30,000
square foot office building occupied by Kendall Company, a division of Tyco
International, which has been the tenant of the entire building for 20 years.
The tenant received a similar NOR and has responded to the state regulatory
authority that it will conduct an investigation. The lease with the tenant
contains a provision pursuant to which the tenant indemnifies the Company
against such liability. The Company has notified the state regulatory
authority that it will cooperate with and monitor the tenant's investigation.

On January 15, 1992, 91 Hartwell Avenue in Lexington, Massachusetts was
listed by the state regulatory authority as an unclassified Confirmed Disposal
Site in connection with groundwater contamination. 91 Hartwell Avenue is a
122,328 square foot office building occupied by five tenants. A health risk
assessment conducted in 1991 by an environmental consultant concluded that
contamination at the property does not pose a human health hazard, and a
letter to the state regulatory authority on August 26, 1992 concluded that no
further remedial response action is necessary at the site. With respect to the
1992 listing, the Company has engaged a specially licensed environmental
consultant to perform the necessary investigation and assessment and to
prepare submittals to the state regulatory authority by August 2, 1997. There
is evidence that the contamination may be migrating from an upgradient source,
in which event the property may qualify for a Downgradient Property Status.
Such status would eliminate the need for the August 2, 1997 submittal and may
assist the Company in assigning responsibility for future investigation and/or
remedial actions to the current or former owners of the upgradient properties.

The Company expects that any resolution of the environmental matters
relating to 17 Hartwell Ave. and 91 Hartwell Ave. will not have a material
impact on the financial position, results of operations or liquidity of the
Company.

THE UNSECURED LINE OF CREDIT

Concurrently with the completion of the Offering, the Company expects to
have a three-year, $300 million Unsecured Line of Credit with the Line of
Credit Bank. The Unsecured Line of Credit will be a recourse obligation of the
Operating Partnership and will be guaranteed by the Company. The Company
intends to use the Unsecured Line of Credit principally to fund growth
opportunities and for working capital purposes. At the closing of the
Offering, the Company expects to draw down approximately $42.8 million under
this line of credit.

The Company's ability to borrow under the Unsecured Line of Credit is
subject to the Company's compliance with a number of customary financial and
other covenants on an ongoing basis, including loan to unencumbered property
value and debt service coverage ratios, limitations on additional indebtedness
and stockholder distributions, and a minimum net worth requirement.

The Unsecured Line of Credit will, at the Company's election, bear interest
at a floating rate based on a spread over LIBOR or the Line of Credit Lender's
prime rate, and will require monthly payments of interest only on prime rate
loans, with interest on LIBOR loans payable on the last day of an interest
period but not less often than quarterly. LIBOR loans may be for periods of
between thirty and 180 days.

The Line of Credit Bank has not yet issued a commitment to provide the
Unsecured Line of Credit. In the event a commitment is so issued, the
Unsecured Line of Credit will be subject to final approval and satisfactory
completion of the Offering, completion by the Line of Credit Lender of its due
diligence and preparation and execution of an acceptable credit agreement.

102
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Board of Directors of the Company will be expanded immediately following
the consummation of the Offering to include the director nominees named below,
each of whom has been nominated for election and consented to serve. Upon
election of the director nominees, there will be a majority of directors who
are neither employees nor affiliates of the Company. Pursuant to the
Certificate of Incorporation, the Board of Directors is divided into three
classes of directors. The initial terms of the three classes will expire in
1998, 1999 and 2000, respectively. Beginning in 1998, directors of each class
will be chosen for three-year terms upon the expiration of their current terms
and each year one class of directors will be elected by the stockholders. The
Company believes that classification of the Board of Directors will help to
assure the continuity and stability of the Company's business strategies and
policies as determined by the Board of Directors. Holders of shares of Common
Stock will have no right to cumulative voting in the election of directors.
Consequently, at each annual meeting of stockholders, the holders of a
majority of the shares of Common Stock will be able to elect all of the
successors of the class of directors whose terms expire at that meeting.

The following table sets forth certain information with respect to the
directors, director nominees and executive officers of the Company immediately
following the consummation of this Offering:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ----------------------
<S> <C> <C>
Mortimer B. Zuckerman............................ 59 Chairman of the Board
Edward H. Linde.................................. 55 President,
Chief Executive
Officer and Director
Raymond A. Ritchey............................... 46 Senior Vice President
Robert E. Burke.................................. 59 Senior Vice President
David R. Barrett................................. 55 Senior Vice President
Robert E. Selsam................................. 50 Senior Vice President
David G. Gaw..................................... 45 Senior Vice President,
Chief Financial
Officer
</TABLE>

The following is a biographical summary of the experience of the directors,
director nominees and executive and senior officers of the Company:

Directors and Executive Officers

Mr. Mortimer B. Zuckerman serves as Chairman of the Board of Directors of
the Company. Mr. Zuckerman co-founded the Company in 1970 after spending seven
years at Cabot, Cabot & Forbes where he rose to the position of Senior Vice
President and Chief Financial Officer. He is a graduate of McGill University,
Montreal receiving an undergraduate degree in 1957 and a degree of law in
1961. He received an MBA with distinction from the Wharton School, University
of Pennsylvania in 1961 and a Master of Law from Harvard University in 1962.
Mr. Zuckerman serves as a Trustee for New York University, a Director and
Member of the Executive Committee of WNET/Channel 13 New York, a Trustee of
Memorial Sloan-Kittering Cancer Institute, a Trustee of the Institute For
Advanced Studies at Princeton, a Member of the Harvard Medical School Board of
Visitors, and a Member of the Council on Foreign Relations and the
International Institute For Strategic Studies. He is also Chairman and Editor-
in-Chief of U.S. News & World Report, Chairman of The Atlantic Monthly
Magazine, Chairman and Co-Publisher of the New York Daily News and Chairman of
the Board of Applied Graphics Technologies (AGT) and a member of the Board of
Directors of Snyder Communications.

Mr. Edward H. Linde serves as President, Chief Executive Officer and a
Director of the Company. Mr. Linde co-founded the Company in 1970 after
spending five years at Cabot, Cabot & Forbes where he became

103
<PAGE>

Vice President and Senior Project Manager. Mr. Linde serves as Chairman of the
Board of Directors of the Massachusetts Government Land Bank and Co-Chairman
of the Massachusetts Development Finance Agency. He is also a member of the
Board of Directors of the CareGroup and the Beth Israel Deaconess Medical
Center, an Overseer of the Boston Symphony Orchestra, a Member of the
Massachusetts Institute of Technology Visiting Committee to the Department of
Urban Studies and Planning (where he also was a Member of the MIT Corporation
from 1990 to 1995) and a member of the Board of Fellows of the Harvard Medical
School. Mr. Linde is a member of the Board of Applied Graphics Technologies
(AGT). He received a BS in Civil Engineering from MIT in 1962 and an MBA from
Harvard Business School, where he was a Baker Scholar, in 1964.

Mr. Raymond A. Ritchey serves as a Senior Vice President, Co-Manager of the
Washington office and National Director of Acquisitions and Development for
the Company. In this capacity, Mr. Ritchey is responsible for all marketing
and new opportunity origination in the Washington area and directly oversees
similar activities for the Company on a national basis. Mr. Ritchey joined the
Company in 1980, leading the Company's expansion to become one of the dominant
real estate firms in the Washington metropolitan area. For four years prior to
joining the Company, Mr. Ritchey was one of the leading commercial real estate
brokers in the Washington area with Coldwell Banker. He is a 1972 graduate of
the U.S. Naval Academy and a 1973 graduate of the U.S. Naval Post Graduate
School in Monterey, California.

Mr. Robert E. Burke serves as a Senior Vice President and Co-Manager of the
Washington office for the Company. He joined the Company in 1979 to open its
Washington area office serving as general manager in charge of operations of
that office. Prior to 1979, Mr. Burke spent 7 1/2 years as General Manager of
the John Fitzgerald Kennedy Library Corporation. He received dual degrees in
1960 when he earned a BS from Bates College and a Bachelor of Civil
Engineering degree from Rensselaer Polytechnic Institute.

Mr. David R. Barrett serves as Senior Vice President and Manager of the
Boston office of the Company. He joined the Company in 1976 after six years as
a principal in a consulting firm specializing in housing and urban development
and after serving as Special Assistant to the Administrator of the Housing and
Development Administration of the City of New York. He has been involved in
all aspects of developing the Company's portfolio of properties and was
directly responsible for the approval, design, construction and leasing of its
Cambridge Center development. Mr. Barrett received a BA from Columbia College
in 1963 and an LLB with honors from Harvard Law School in 1966 where he was an
editor of the Harvard Law Review.

Mr. Robert E. Selsam is a Senior Vice President and Manager of the Company's
New York office. He joined the Company in 1984, prior to which he was Director
of Planning for the Metropolitan Transportation Authority of the State of New
York. Mr. Selsam serves as Secretary and member of the Executive Committee of
the New York Building Congress, is Executive Vice President and past Co-
Chairman of the Associated Builders and Owners of New York, a member of the
Executive Committee of the Association for a Better New York, and Vice
President and Trustee of the New York Foundation for Architecture. He received
a BA from the University of Pennsylvania in 1968 and a MS in Urban Planning
from the Columbia University School of Architecture in 1970. Mr. Selsam has
had direct involvement in all aspects of the Company's New York activities
including development, leasing and building operations.

Mr. David G. Gaw is Senior Vice President and Chief Financial Officer for
the Company, where he oversees a 40-person accounting, control and financial
management department. He joined the Company in 1982 and has been involved in
the Company's financial operations since then, including administering the
Company's financings and banking relationships. From 1978 to 1982 he served as
Vice President for the Norwood Group. Mr. Gaw received a BSBA from Suffolk
University in 1973 and also received an MBA from Suffolk University in 1983.

Senior Officers

Mr. Frederick J. DeAngelis serves as Senior Vice President and General
Counsel for the Company, where he oversees a staff of three lawyers and one
paralegal. Mr. DeAngelis joined the Company in 1980 after serving

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as a partner at the firm of Lane & Altman in Boston. He received an AB in
Economics (cum laude) from Holy Cross College in 1970 and a doctor of law
degree (magna cum laude) from Boston College Law School in 1973.

Mr. Stephen R. Clineburg, who joined the Company in 1984, serves as Senior
Vice President and Regional General Counsel, Washington region. From June 1972
through July 1984, Mr. Clineburg was an attorney at the Gulf Oil Corporation
and before that had been a Vice President and Title Officer of the Real Title
Corporation in Fairfax, Virginia. Mr. Clineburg graduated from Columbia
University with a BA in English in 1963 and from the University of Virginia
Law School in Charlottesville in 1966.

Mr. James C. Rosenfeld is a Senior Vice President of the Company, where he
has been responsible for all suburban Boston project development. Prior to
joining the Company in 1980, he worked for ten years at Cabot, Cabot and
Forbes where he served as project manager on major commercial office building
projects. Mr. Rosenfeld received an AB from Bowdoin College in 1965.

Mr. E. Mitchell Norville is Senior Vice President and Senior Project
Manager-Washington for the Company. In that capacity he oversees development
of the Company's projects, including its fee development work for third
parties. He has had direct responsibility for the project management of such
projects as Independence Square, the headquarters for HCFA, and the work being
performed for the National Institute of Health. Mr. Norville joined the
Company in 1984 following his graduation from the University of Virginia with
an MBA. He also received a BS in Mechanical Engineering from Clemson
University in 1980.

Mr. Peter D. Johnston is a Senior Vice President of the Company, where he
has been responsible for the development of more than one million square feet
of the Company's Washington, D.C., commercial projects. He joined Boston
Properties in 1987 after receiving an MBA from the University of Virginia. Mr.
Johnston also received a Bachelor of Business Administration from Roanoke
College in 1981 as well as an MA degree from Hollins College in 1982.

Mr. John D. Camera, Jr. is Senior Vice President--Boston Construction
Management for the Company and in that capacity oversees the Company's Boston
area construction activities. Mr. Camera, who joined the Company in 1980, has
more than 30 years of construction industry experience. He is a 1964 graduate
of the Worcester Polytechnic Institute where he received a BS in Civil
Engineering. Following graduation he served in the U.S. Navy Civil Engineering
Corps. During his time at the Company, he has been responsible for more than
$325 million of construction activity.

Mr. Jonathan B. Kurtis is Senior Vice President--Washington Construction
Management for the Company. In that capacity he oversees all of the Company's
Washington area construction activities and has been responsible for more than
$517 million of successfully completed construction undertaken by the Company.
Mr. Kurtis joined the Company in 1984 following seven years of general
contractor project management experience. He graduated from the University of
Florida in Gainesville, Florida with a Bachelor of Building Construction in
1977.

Mr. John J. Baraldi is Senior Vice President and National Director of
Property Management at the Company. In that capacity, and based on his 35
years of property management experience, he provides national leadership and
guidance to the property managers responsible for each of the Company's
geographical areas of activity. Mr. Baraldi joined the Company in 1975 after
holding property management positions at Cabot, Cabot & Forbes and the General
Foods Corporation.

Mr. David H. Boone is Senior Vice President and Director of Washington Area
Property Management for the Company. In that capacity, he has direct
responsibility for the property management of the Company's Washington
properties. Mr. Boone joined the Company in 1986 after 23 years experience in
building operations and property management with other firms. Mr. Boone has
also served as commercial Vice President for BOMA (Building Owners & Managers
Association) Washington, D.C. and on the Board of Governors for BOMA
International.

Mr. William J. Wedge serves as Senior Vice President--Tax Counsel for the
Company. He joined Boston Properties in 1984 after serving in the Tax
Department of Coopers & Lybrand. Mr. Wedge graduated from

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Dartmouth College in 1977 with a B.A. in History and Government, received a JD
(cum laude) from Suffolk Law School in 1981 and was awarded a Masters of
Taxation (LLM) by Boston University Law School in 1984. Mr. Wedge is an
Adjunct Professor of Law at Suffolk Law School. He oversees tax and corporate
affairs for the Company.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

Promptly following the consummation of the Offering, the Board of Directors
will establish an Audit Committee. The Audit Committee will make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the scope and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls. The Audit Committee
will initially consist of two or more non-employee directors.

Compensation Committee

Promptly following the completion of the Offering, the Board of Directors
will establish a Compensation Committee to establish remuneration levels for
executive officers of the Company and implement the Company's Stock Option
Plan and any other incentive programs. The Compensation Committee will
initially consist of two or more non-employee directors.

The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company.

COMPENSATION OF DIRECTORS

The Company intends to pay its non-employee directors annual compensation of
$15,000 for their services. In addition, non-employee directors will receive a
fee of $1,000 for each Board of Directors meeting attended in person. Non-
employee directors attending any committee meetings in person will receive an
additional fee of $1,000 for each committee meeting attended, unless the
committee meeting is held on the day of a meeting of the Board of Directors.
Non-employee directors will also receive an additional fee of $250 for each
telephonic meeting attended. Non-employee directors will also be reimbursed
for reasonable expenses incurred to attend director and committee meetings.
Officers of the Company who are directors will not be paid any directors'
fees. Non-employee directors will receive, upon initial election to the Board
of Directors, an option to purchase 10,000 shares of Common Stock, and
annually thereafter will receive an option to purchase 5,000 shares of Common
Stock. These options will become exercisable over two years.

EXECUTIVE COMPENSATION

The following table sets forth the annual base salary rates and other
compensation expected to be paid in 1997 to the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers (the "Named Executive Officers").

<TABLE>
<CAPTION>
1997 BASE OPTIONS
NAME TITLE SALARY RATE ALLOCATED(1)
---- ------------------- ----------- ------------
<S> <C> <C> <C>
Edward H. Linde.................... President and Chief
Executive Officer
</TABLE>
- --------
(1) One third of these options will be exercisable on each of the , and
anniversaries of the date of grant, respectively.

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<PAGE>

EMPLOYMENT AND NONCOMPETITION AGREEMENTS

Mr. Linde, as President and Chief Executive Officer, will enter into an
employment and noncompetition agreement with the Company (the "Employment
Agreement"). Pursuant to the Employment Agreement, Mr. Linde will devote
substantially all of his business time to the business and affairs of the
Company and the Operating Partnership. The Agreement is for a two year term
and prohibits, with certain limited exceptions, Mr. Linde, during his period
of employment and following termination of his employment by the Company with
cause or by Mr. Linde without good reason, from engaging directly or
indirectly, in the development, operation, management or leasing of commercial
properties. Such noncompetition provision expires at the later of the end of
the term of the agreement or one year after such a termination of employment.
Mr. Zuckerman will enter into a noncompetition agreement of the same scope and
duration.

STOCK OPTION PLAN

Prior to the completion of the Offering, the Company will adopt the Boston
Properties, Inc. 1997 Stock Option and Incentive Plan (the "Plan") to provide
incentives to attract and retain executive officers, directors, employees and
other key personnel. The Plan will be administered by the Compensation
Committee. The maximum number of shares available for issuance under the Plan
will be 9.5% of the total number of shares of Common Stock and OP Units (other
than OP Units owned by the Company) outstanding from time to time (initially
4,883,000 shares).

Stock Options

The Plan permits the granting of (i) options to purchase Common Stock
intended to qualify as incentive stock options ("Incentive Options") under
Section 422 of the Code and (ii) options that do not so qualify ("Non-
Qualified Options"). The option exercise price of each option will be
determined by the Committee but may not be less than 100% of the fair market
value of the Common Stock on the date of grant in the case of incentive stock
options, and may not be less than 50% of the fair market value of the Common
Stock on the date of grant in the case of Non-Qualified Options. Plan
participants may elect, with the consent of the Committee, to receive
discounted Non-Qualified Options in lieu of cash compensation.

The term of each option will be fixed by the Committee and may not exceed
ten years from date of grant in the case of an Incentive Option. The Committee
will determine at what time or times each option may be exercised and, subject
to the provisions of the Plan, the period of time, if any, after retirement,
death, disability or termination of employment during which options may be
exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Committee.

Upon exercise of options, the option exercise price must be paid in full
either in cash or by certified or bank check or other instrument acceptable to
the Committee or, if the Committee so permits, by delivery of shares of Common
Stock already owned by the optionee or delivery of a promissory note. The
exercise price may also be delivered to the Company by a broker pursuant to
irrevocable instructions to the broker from the optionee.

At the discretion of the Committee, stock options granted under the Plan may
include a "re-load" feature pursuant to which an optionee exercising an option
by the delivery of shares of Common Stock would automatically be granted an
additional stock option (with an exercise price equal to the fair market value
of the Common Stock on the date the additional stock option is granted) to
purchase that number of shares of Common Stock equal to the number delivered
to exercise the original stock option. The purpose of this feature is to
enable participants to maintain an equity interest in the Company without
dilution.

To qualify as Incentive Options, options must meet additional Federal tax
requirements, including limits on the value of shares subject to Incentive
Options which first become exercisable in any one calendar year, and a shorter
term and higher minimum exercise price in the case of certain large
stockholders.

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Stock Options Granted to Non-employee Directors

The Plan provides for the automatic grant of Non-Qualified Options to non-
employee directors. Each non-employee director will receive, upon initial
election to the Board of Directors, a Non-Qualified Option to acquire 10,000
shares of Common Stock. Each non-employee director who is serving as a
director of the Company on the fifth business day after each annual meeting of
shareholders, beginning with the 1998 annual meeting, will automatically be
granted on such day a Non-Qualified Option to acquire 5,000 shares of Common
Stock. The exercise price of each such Non-Qualified Option is the fair market
value of the Common Stock on the date of grant. One-half of each Non-Qualified
Option shall be exercisable on each of the first and second anniversary date
of grant. The Committee may also grant additional Non-Qualified Options to
non-employee directors.

Restricted Stock

The Committee may also award shares of Common Stock to participants, subject
to such conditions and restrictions as the Committee may determine. These
conditions and restrictions may include the achievement of certain performance
goals and/or continued employment with the Company through a specified
restricted period. The purchase price of shares of restricted stock will be
determined by the Committee. If the performance goals and other restrictions
are not attained, the participants will forfeit their shares of restricted
stock.

Unrestricted Stock

The Committee may also grant shares (at no cost or for a purchase price
determined by the Committee) which are free from any restrictions under the
Plan. Shares of unrestricted stock may be issued to participants in
recognition of past services or other valid consideration, and may be issued
in lieu of cash compensation to be paid to such participants.

Subject to the consent of the Committee, a participant may make an advance
irrevocable election to receive a portion of his compensation in shares of
unrestricted stock (valued at fair market value on the date the cash
compensation would otherwise be paid). In certain instances, a participant may
also elect to defer receipt of his shares of unrestricted stock in accordance
with such rules and procedures as may from time to time be established by the
Company. During the period of deferral, the deferred shares would receive
dividend equivalent rights.

Performance Share Awards

The Committee may also grant performance share awards to participants
entitling the participants to receive shares of Common Stock upon the
achievement of individual or Company performance goals and such other
conditions as the Committee shall determine.

Dividend Equivalent Rights

The Committee may grant dividend equivalent rights, which entitle the
recipient to receive credits for dividends that would be paid if the recipient
had held specified shares of Common Stock. Dividend equivalent rights may be
granted as a component of another award or as a freestanding award. Dividend
equivalent rights credited under the Plan may be paid currently or be deemed
to be reinvested in additional shares of Common Stock, which may thereafter
accrue additional dividend equivalent rights at fair market value at the time
of deemed reinvestment or on the terms then governing the reinvestment of
dividends under the Company's dividend reinvestment plan, if any. Dividend
equivalent rights may be settled in cash, shares, or a combination thereof, in
a single installment or installments, as specified in the award. Awards
payable in cash on a deferred basis may provide for crediting and payment of
interest equivalents.

Adjustments for Stock Dividends, Mergers, Etc.

The Committee will make appropriate adjustments in outstanding awards to
reflect stock dividends, stock splits and similar events. In the event of a
merger, liquidation, sale of the Company or similar event, the Committee, in
its discretion, may provide for substitution or adjustments of outstanding
awards, or may terminate all awards with payment of cash or in kind
consideration.

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Amendments and Termination

The Board of Directors may at any time amend or discontinue the Plan and the
Committee may at any time amend or cancel outstanding awards for the purpose
of satisfying changes in the law or for any other lawful purpose. However, no
such action may be taken which adversely affects any rights under outstanding
awards without the holder's consent. Further, Plan amendments shall be subject
to approval by the Company's stockholders if and to the extent required by the
Code to preserve the qualified status of Incentive Options or to preserve tax
deductibility of compensation earned under stock options.

NEW PLAN BENEFITS

Approximately employees and non-employee directors are currently
eligible to participate in the Plan. The table below shows the options that
will be granted to employees and non-employee directors.

1997 STOCK OPTION AND INCENTIVE PLAN

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING STOCK OPTION(1)
----------------- --------------------------
<S> <C>
Mortimer B. Zuckerman.........................
Chairman
Edward H. Linde...............................
President and Chief Executive Officer
Executive Group ( persons)...................
Non-Employee Director Group ( persons).......
Non-Executive Officer Employee Group (
persons).....................................
</TABLE>
- --------
(1) Options will be granted to the employees on the date of this Prospectus at
the public offering price of $ . Options will be granted to the non-
employee directors on the closing date of the Offering at the fair market
value on such date. One-third of the options granted to officers will be
exercisable on each of the , and anniversary of the date of
grant, respectively. One-third of the options granted to employees who are
not officers will be exercisable on each of the , and
anniversary of the date of grant, respectively. One-half of the options
granted to non-employee directors will be exercisable on each of the first
and second anniversary date of grant, respectively.

TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE

The following is a summary of the principal Federal income tax consequences
of option grants under the Plan. It does not describe all Federal tax
consequences under the Plan, nor does it describe state or local tax
consequences.

INCENTIVE OPTIONS

Under the Code, an employee will not realize taxable income by reason of the
grant or the exercise of an Incentive Option. If an employee exercises an
Incentive Option and does not dispose of the shares until the later of (a) two
years from the date the option was granted or (b) one year from the date the
shares were transferred to the employee, the entire gain, if any, realized
upon disposition of such shares will be taxable to the employee as long-term
capital gain, and the Company will not be entitled to any deduction. If an
employee disposes of the shares within such one-year or two-year period in a
manner so as to violate the holding period requirements (a "disqualifying
disposition"), the employee generally will realize ordinary income in the year
of disposition, and, provided the Company complies with applicable withholding
requirements, the Company will receive a corresponding deduction, in an amount
equal to the excess of (1) the lesser of (x) the amount, if any, realized on
the disposition and (y) the fair market value of the shares on the date the
option was exercised over (2) the option price. Any additional gain realized
on the disposition of the shares acquired upon exercise of the option will be
long-term or short-term capital gain and any loss will be long-term or short-
term capital loss depending upon the holding period for such shares. The
employee will be considered to have disposed of his shares if he sells,

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<PAGE>

exchanges, makes a gift of or transfers legal title to the shares (except by
pledge or by transfer on death). If the disposition of shares is by gift and
violates the holding period requirements, the amount of the employee's
ordinary income (and the Company's deduction) is equal to the fair market
value of the shares on the date of exercise less the option price. If the
disposition is by sale or exchange, the employee's tax basis will equal the
amount paid for the shares plus any ordinary income realized as a result of
the disqualifying distribution. The exercise of an Incentive Option may
subject the employee to the alternative minimum tax.

Special rules apply if an employee surrenders shares of Common Stock in
payment of the exercise price of his Incentive Option.

An Incentive Option that is exercised by an employee more than three months
after an employee's employment terminates will be treated as a Non-Qualified
Option for Federal income tax purposes. In the case of an employee who is
disabled, the three-month period is extended to one year and in the case of an
employee who dies, the three-month employment rule does not apply.

NON-QUALIFIED OPTIONS

There are no Federal income tax consequences to either the optionee or the
Company on the grant of a Non-Qualified Option. On the exercise of a Non-
Qualified Option, the optionee (except as described below) has taxable
ordinary income equal to the excess of the fair market value of the Common
Stock received on the exercise date over the option price of the shares. The
optionee's tax basis for the shares acquired upon exercise of a Non-Qualified
Option is increased by the amount of such taxable income. The Company will be
entitled to a Federal income tax deduction in an amount equal to such excess,
provided the Company complies with applicable withholding rules. Upon the sale
of the shares acquired by exercise of a Non-Qualified Option, the optionee
will realize long-term or short-term capital gain or loss depending upon his
or her holding period for such shares.

Special rules apply if an optionee surrenders shares of Common Stock in
payment of the exercise price of a Non-Qualified Option.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's directors and officers are and will be indemnified against
certain liabilities under Delaware law, the Certificate of Incorporation and
Bylaws of the Company and the Operating Partnership Agreement. The Certificate
of Incorporation of the Company requires the Company to indemnify its
directors and officers to the fullest extent permitted from time to time under
Delaware law.

The Bylaws provide that directors and officers of the Company shall be, and,
in the discretion of the Board of Directors, non-officer employees may be,
indemnified by the Company to the fullest extent authorized by Delaware law,
as it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
the Company. The Bylaws also provide that the right of directors and officers
to indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any bylaw, agreement,
vote of stockholders or otherwise. The Certificate contains a provision
permitted by Delaware law that generally eliminates the personal liability of
directors for monetary damages for breaches of their fiduciary duty, including
breaches involving negligence or gross negligence in business combinations,
unless the director has breached his or her duty of loyalty, failed to act in
good faith, engaged in intentional misconduct or a knowing violation of law,
paid a dividend or approved a stock repurchase in violation of the Delaware
General Corporation Law ("DGCL") or obtained an improper personal benefit. The
provision does not alter a director's liability under the federal securities
laws. In addition, this provision does not affect the availability of
equitable remedies, such as an injunction or rescission, for breach of
fiduciary duty. The Company believes that this provision will assist the
Company in attracting and retaining qualified individuals to serve as officers
and directors.

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The Operating Partnership Agreement also provides for indemnification of the
Company and its directors and officers to the same extent indemnification is
provided to directors and officers of the Company in the Company's Certificate
of Incorporation and limits the liability of the Company and its directors and
officers to the Operating Partnership and its partners, to the same extent
that the liability of directors and officers of the Company to the Company and
its stockholders is limited under their organizational documents.

INDEMNIFICATION AGREEMENTS

The Company has entered into indemnification agreements with each of its
directors and executive officers. The indemnification agreements require,
among other things, that the Company indemnify its directors and executive
officers to the fullest extent permitted by law and advance to the directors
and executive officers all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Under these
agreements, the Company must also indemnify and advance all expenses incurred
by directors and executive officers seeking to enforce their rights under the
indemnification agreements and may cover directors and executive officers
under the Company's directors' and officers' liability insurance. Although the
form of indemnification agreement offers substantially the same scope of
coverage afforded by law, as a traditional form of contract it may provide
greater assurance to directors and executive officers that indemnification
will be available.

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POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of certain investment, financing and other
policies of the Company. These policies have been determined by the Company's
Board of Directors and, in general, may be amended or revised from time to
time by the Board of Directors without a vote of the stockholders.

INVESTMENT POLICIES

INVESTMENT IN REAL ESTATE OR INTERESTS IN REAL ESTATE

The Company will conduct all of its investment activities through the
Operating Partnership and its affiliates. The Company's investment objectives
are to provide quarterly cash distributions and achieve long-term capital
appreciation through increases in the value of the Company. For a discussion
of the Properties and the Company's acquisition and other strategic
objectives, see "Business and Properties" and "Business and Growth
Strategies."

The Company expects to pursue its investment objectives primarily through
the ownership by the Operating Partnership of the Properties and other
acquired properties. The Company currently intends to invest primarily in
existing improved properties, existing properties in need of redevelopment and
land which the Company believes has development potential. Future investment
or development activities will not be limited to any geographic area or
product type or to a specified percentage of the Company's assets. While the
Company intends to diversify in terms of property locations, size and market,
the Company does not have any limit on the amount or percentage of its assets
that may be invested in any one property or any one geographic area. The
Company intends to engage in such future investment or development activities
in a manner that is consistent with the maintenance of its status as a REIT
for federal income tax purposes. In addition, the Company may purchase or
lease income-producing commercial and other types of properties for long-term
investment, expand and improve the real estate presently owned or other
properties purchased, or sell such real estate properties, in whole or in
part, when circumstances warrant.

The Company may also participate with third parties in property ownership,
through joint ventures or other types of co-ownership. Such investments may
permit the Company to own interests in larger assets without unduly
restricting diversification and, therefore, add flexibility in structuring its
portfolio. The Company will not, however, enter into a joint venture or
partnership to make an investment that would not otherwise meet its investment
policies.

Equity investments may be subject to existing mortgage financing and other
indebtedness or such financing or indebtedness as may be incurred in
connection with acquiring or refinancing these investments. Debt service on
such financing or indebtedness will have a priority over any distributions
with respect to the Common Stock. Investments are also subject to the
Company's policy not to be treated as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act").

INVESTMENTS IN REAL ESTATE MORTGAGES

While the Company's current portfolio consists of, and the Company's
business objectives emphasize, equity investments in commercial real estate,
the Company may, at the discretion of the Board of Directors, invest in
mortgages and other types of real estate interests consistent with the
Company's qualification as a REIT. The Company does not presently intend to
invest in mortgages or deeds of trust, but may invest in participating or
convertible mortgages if the Company concludes that it may benefit from the
cash flow or any appreciation in value of the property. Investments in real
estate mortgages run the risk that one or more borrowers may default under
such mortgages and that the collateral securing such mortgages may not be
sufficient to enable the Company to recoup its full investment.

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SECURITIES OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE ACTIVITIES
AND OTHER ISSUERS

Subject to the percentage of ownership limitations and gross income tests
necessary for REIT qualification, the Company also may invest in securities of
other REITs, other entities engaged in real estate activities or securities of
other issuers, including for the purpose of exercising control over such
entities.

DISPOSITIONS

The Company does not currently intend to dispose of any of the Properties,
although it reserves the right to do so if, based upon management's periodic
review of the Company's portfolio, the Board of Directors determines that such
action would be in the best interests of the Company. Any decision to dispose
of a Property will be made by the Company and approved by a majority of the
Board of Directors. The tax consequences of the disposition of the Properties
may, however, influence the decision of certain directors and executive
officers of the Company who hold OP Units as to the desirability of a proposed
disposition. In addition, the Operating Partnership Agreement provides that if
a person who contributed an interest in any of the Designated Properties to
the Operating Partnership in connection with of the Formation Transactions is
caused, at any time during the Make-Whole Period, to recognize taxable gain as
a result of the sale of or reduction of indebtedness on, any of such
Properties, then the Operating Partnership shall pay a Make-Whole Amount to
such person in respect of the resulting adverse tax consequence. See
"Operating Partnership Agreement--Make-Whole Payment." The payment of the
Make-Whole Amount, if applicable, decreases the net proceeds to the Company
from a disposition of these Properties.

FINANCING POLICIES

The Company does not have a policy limiting the amount of indebtedness that
the Company may incur. In addition, the Certificate and Bylaws do not limit
the amount or percentage of indebtedness that the Company may incur. The
Company has not established any limit on the number or amount of mortgages
that may be placed on any single property or on its portfolio as a whole.

The Board of Directors will consider a number of factors when evaluating the
Company's level of indebtedness and when making decisions regarding the
incurrence of indebtedness, including the purchase price of properties to be
acquired with debt financing, the estimated market value of its properties
upon refinancing and the ability of particular properties and the Company as a
whole to generate cash flow to cover expected debt service. See "Risk
Factors--No Limitations on Debt" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

CONFLICT OF INTEREST POLICIES

The Company has adopted certain policies that are designed to eliminate or
minimize certain potential conflicts of interest. In addition, the Company's
Board of Directors is subject to certain provisions of Delaware law, which are
also designed to eliminate or minimize conflicts. However, there can be no
assurance that these policies or provisions of law will always be successful
in eliminating the influence of such conflicts, and if they are not
successful, decisions could be made that might fail to reflect fully the
interests of all stockholders.

The Company has adopted a policy that, without the approval of a majority of
the disinterested directors, it will not (i) acquire from or sell to any
director, officer or employee of the Company, or any entity in which a
director, officer or employee of the Company has a material financial or a
controlling interest, or acquire from or sell to any affiliate of any of the
foregoing, any of the assets or other property of the Company, (ii) make any
loan to or borrow from any of the foregoing persons or (iii) engage in any
other transaction with any of the foregoing persons.

Pursuant to Delaware law, a contract or other transaction between the
Company and a Director or between the Company and any other corporation or
other entity in which a Director is a director or has a material financial

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interest is not void or voidable solely on the grounds of such common
directorship or interest, the presence of such Director at the meeting at
which the contract or transaction is authorized, approved or ratified or the
counting of the Director's vote in favor thereof if (i) the material facts
relating to the common directorship or interest and as to the transaction are
disclosed to the Board of Directors or a committee of the Board, and the Board
or committee in good faith authorizes the transaction or contract by the
affirmative vote of a majority of disinterested directors, even if the
disinterested directors constitute less than a quorum, or (ii) the material
facts relating to the common directorship or interest and as to the
transaction are disclosed to the shareholders entitled to vote thereon, and
the transaction is approved in good faith by vote of the shareholders, or
(iii) the transaction or contract is fair and reasonable to the Company at the
time it is authorized, ratified or approved.

EXCLUDED PROPERTY

The Operating Partnership is succeeding to all but one of the properties
managed by the Company or in which the Company or affiliates of the Company,
including Messrs. Zuckerman and Linde, hold ownership interests. One property
(the "Excluded Property") is not being contributed to the Company. The
Excluded Property is Sumner Square, a four building, office complex located in
N.W., Washington, D.C. (203,765 net rentable square feet).

Since the Excluded Property is located in the same market as certain of the
the Company's Properties, it may compete with such Properties. Upon completion
of the Offering, the Excluded Property will be managed by the Operating
Partnership or the Development and Management Company in return for a
specified management fee. There is no assurance, however, that the Excluded
Property will continue to be managed by the Operating Partnership or the
Development and Management Company or that fiduciary obligations will not
require Messrs. Zuckerman and Linde, from time to time, to devote a
significant amount of their time to the Excluded Property. See "Risk Factors--
Conflicts of Interest--Other Real Estate Interests."

Messrs. Zuckerman and Linde have given the Company an option to acquire
their interest in Sumner Square for a cash price equal to the sum of (i) the
then outstanding indebtedness secured by the property, (ii) expenses
associated with the sale (not to exceed $50,000), and (iii) the taxes payable
by Messrs. Zuckerman and Linde as a result of such transfer.

POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company has authority to offer Common Stock, Preferred Stock or options
to purchase stock in exchange for property and to repurchase or otherwise
acquire its Common Stock or other securities in the open market or otherwise,
and the Company may engage in such activities in the future. As described
under "Operating Partnership Agreement--Redemption of OP Units," the Company
expects (but is not obligated) to issue Common Stock to holders of OP Units in
the Operating Partnership upon exercise of their redemption rights. Except in
connection with the Formation Transactions, the Company has not issued Common
Stock, OP Units or any other securities in exchange for property or any other
purpose, and the Board of Directors has no present intention of causing the
Company to repurchase any Common Stock. The Company may issue Preferred Stock
from time to time, in one or more series, as authorized by the Board of
Directors without the need for stockholder approval. See "Description of
Capital Stock--Preferred Stock." The Company has not engaged in trading,
underwriting or agency distribution or sale of securities of other issuers
other than the Operating Partnership and does not intend to do so. At all
times, the Company intends to make investments in such a manner as to qualify
as a REIT, unless because of circumstances or changes in the Code (or the
Treasury Regulations), the Board of Directors determines that it is no longer
in the best interest of the Company to qualify as a REIT and such
determination is approved by a two-thirds vote of the Company's stockholders
as required by the Certificate. The Company has not made any loans to third
parties, although it may in the future make loans to third parties, including,
without limitation, to joint ventures in which it participates. The Company
intends to make investments in such a way that it will not be treated as an
investment company under the 1940

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Act. The Company's policies with respect to such activities may be reviewed
and modified or amended from time to time by the Company's Board of Directors
without a vote of the stockholders.

STRUCTURE AND FORMATION OF THE COMPANY

FORMATION TRANSACTIONS

Each Property that will be owned by the Company at the completion of the
Offering is currently owned by a partnership (a "Property Partnership") of
which Messrs. Zuckerman and Linde and others affiliated with Boston
Properties, Inc. control the managing general partner and, in most cases, a
majority economic interest. The other direct or indirect investors in the
Property Partnerships include persons formerly affiliated with Boston
Properties, Inc., as well as private investors (including former owners of the
land on which the Properties were developed) who are not affiliated with
Boston Properties, Inc.

Prior to or simultaneously with the completion of the Offering, the Company
will engage in the transactions described below (the "Formation
Transactions"), which are designed to consolidate the ownership of the
Properties and the commercial real estate business of the Company in the
Operating Partnership, to facilitate the Offering and to enable the Company to
qualify as a REIT for federal income tax purposes commencing with the taxable
year ending December 31, 1997.

. Boston Properties, Inc., a Massachusetts company that was founded in
1970, will be reorganized to change its jurisdiction of organization to
Delaware.

. The Operating Partnership will be organized as a Delaware limited
partnership.

. Prior to the completion of the Offering, the Company will contribute
substantially all of its Greater Washington, D.C. third-party property
management business to Boston Properties Management C Corp. (the
"Development and Management Company"), a subsidiary of the Operating
Partnership. In order to retain qualification as a REIT, the Operating
Partnership will own a 1.0% voting interest but will hold a 95.0%
economic interest in the Development and Management Company. The
remaining voting and economic interest will be held by officers and
directors of the Development and Management Company. In addition, the
other management and development operations of the Company will be
contributed to the Operating Partnership.

. In connection with the transactions described in the preceding two
paragraphs, the Company will issue a total of 16,066,459 OP Units.

. The contribution to the Operating Partnership of the Properties or of
the direct and indirect interests in the Property Partnerships is
subject to all of the terms and conditions of the related option, merger
and contribution agreements. With respect to direct or indirect
contributions of interests to the Property
Partnerships, the Operating Partnership will assume all the rights,
obligations and responsibilities of the holders of such interests. The
transfer of such interests is subject to the completion of the Offering.
Any working capital or other cash balance of the Property Partnership as
of immediately prior to the Offering will be distributed to the holders
of such interests prior to the contribution to the Operating
Partnership. The contribution agreements with respect to such interests
generally contain representations only with respect to the ownership of
such interests by the holders thereof and certain other limited matters.

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CONSEQUENCES OF THE OFFERING AND THE FORMATION TRANSACTIONS

Upon completion of the Formation Transactions, the Company will own an
indirect fee interest in all of the Properties. The Operating Partnership will
hold substantially all of the assets of the Company. Based on the assumed
initial public offering price of the Common Stock, (i) the purchasers of
Common Stock in the Offering will own 88.9 of the outstanding Common Stock (or
61.1% assuming exchange of all OP Units for shares of Common Stock), (ii) the
Company will be the sole general partner of the Operating Partnership and will
own 68.7% of the interests in the Operating Partnership and (iii) Messrs.
Zuckerman and Linde will beneficially own, directly or indirectly through
affiliates (not including the Company), a total of 17,322,610 shares of Common
Stock and OP Units (representing a 33.7% economic interest in the Company).
Pursuant to the partnership agreement governing the Operating Partnership (the
"Operating Partnership Agreement"), persons receiving OP Units in the
Formation Transactions will have certain rights, beginning fourteen months
after the completion of the Offering, to cause the Operating Partnership to
redeem their OP Units for cash, or, at the election of the Company, to
exchange their OP Units for shares of Common Stock on a one-for-one basis. See
"Underwriting" for certain transfer restrictions with respect to the OP Units
and to shares of Common Stock issued in exchange for such OP Units that are
applicable to Messrs. Zuckerman and Linde and other senior officers of the
Company.

No independent third-party appraisals, valuations or fairness opinions have
been obtained by the Company in connection with the Formation Transactions.
Accordingly, there can be no assurance that the value of the OP Units and cash
received in the Formation Transactions by persons with interests in the
Property Partnerships is

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equivalent to the fair market value of the interests and assets acquired by the
Company and contributed to the Operating Partnership. See "Risk Factors--No
Assurance as to Value."

BENEFITS TO RELATED PARTIES

Certain affiliates of the Company will realize certain material benefits in
connection with the Formation Transactions, including the following:

RESTRICTIONS ON TRANSFER

RESTRICTIONS ON OWNERSHIP OF COMMON STOCK

Due to limitations on the concentration of ownership of stock of a REIT
imposed by the Internal Revenue Code of 1986, as amended (the "Code"), and to
otherwise address concerns relating to concentration of capital stock
ownership, the certificate of incorporation of the Company (the "Certificate")
prohibits any stockholder from actually or beneficially owning more than 6.6%
of the outstanding shares of Common Stock (the "Ownership Limit"), except that
Messrs. Zuckerman and Linde and certain family members and affiliates of each
and certain "look through entities" may actually and beneficially own up to
15.0% of the outstanding shares of Common Stock. See "Risk Factors--Risks
Relating to Control of the Company" and "Description of Capital Stock--
Restrictions on Transfers."

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OPERATING PARTNERSHIP AGREEMENT

The following summary of the Operating Partnership Agreement, including the
descriptions of certain provisions thereof set forth elsewhere in this
Prospectus, is qualified in its entirety by reference to the Operating
Partnership Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.

MANAGEMENT

The Operating Partnership was organized as a Delaware limited partnership on
April 8, 1997. The Company is the sole general partner of, and will hold
approximately 68.7% of the economic interests in, the Operating Partnership.
The Company will conduct substantially all of its business through the
Operating Partnership and its subsidiaries. The Company will hold a one
percent general partner interest in the Operating Partnership and the balance
will be held as a limited partner interest.

Pursuant to the Operating Partnership Agreement, the Company, as the sole
general partner of the Operating Partnership, has full, exclusive and complete
responsibility and discretion in the management, operation and control of the
Operating Partnership, including the ability to cause the Operating
Partnership to enter into certain major transactions, including acquisitions,
developments and dispositions of properties and refinancings of existing
indebtedness. No limited partner may take part in the operation, management or
control of the business of the Operating Partnership by virtue of being a
holder of OP Units. Notwithstanding the foregoing, the Operating Partnership
Agreement provides that the Company may not in general engage in a business
combination unless the holders of OP Units will receive, or have the
opportunity to receive, the same consideration per OP Unit as holders of
Common Stock receive per share of Common Stock in the transaction; if holders
of OP Units will not be treated in such manner in connection with a proposed
business combination, the Company may not engage in such transaction unless
limited partners (other than the Company) holding at least 75% of the OP Units
held by limited partners vote to approve the business combination. In
addition, the Company is prohibited under the Operating Partnership Agreement
from consummating a transaction (such as a merger or sale of all or
substantially all of its assets) that requires, or in connection with which
the Company conducted, a vote of the Company's stockholders unless (i) the
Company provides the holders of OP Units with the same information as was
supplied to the Company's stockholders in connection with such vote, along
with a description of any tax consequences of the proposed transaction to
holders of OP Units, (ii) the Company, as general partner, conducts a vote of
the limited partners of the Operating Partnership (other than the Company) and
(iii) persons holding at least the Required Percentage (as defined below) of
the outstanding shares of Common Stock and OP Units (other than the OP Units
held by the Company), collectively, voted to approve the proposed transaction.
The Required Percentage equals the minimum percentage of outstanding shares of
Common Stock that are required to be held by the stockholders of the Company
who vote for approval of the transaction in order for the Company to have
authority to engage in such transaction (or, in the case of a transaction for
which stockholder approval is not required but is sought, the percentage which
the Company stated would be required before it proceeded with the
transaction), but in no event less than 66.67%.

The limited partners of the Operating Partnership have agreed that in the
event of any conflict in the fiduciary duties owed by the Company to its
stockholders and by the Company, as general partner of the Operating
Partnership, to such limited partners, the Company may act in the best
interests of the Company's stockholders without violating its fiduciary duties
to such limited partners or being liable for any resulting breach of its
duties to the limited partners.

The Operating Partnership Agreement provides that all business activities of
the Company, including all activities pertaining to the acquisition and
operation of properties, must be conducted through the Operating Partnership,
and that the Operating Partnership must be operated in a manner that will
enable the Company to satisfy the requirements for being classified as a REIT.

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REMOVAL OF THE GENERAL PARTNER; TRANSFER OF THE GENERAL PARTNER'S INTEREST

The Operating Partnership provides that the limited partners may not remove
the Company as general partner of the Operating Partnership. The Company may
not transfer any of its interests as general or limited partner in the
Operating Partnership except (i) in connection with a merger or sale of all or
substantially all of its assets pursuant to a transaction for which it has
obtained the requisite approval in accordance with the terms of the Operating
Partnership Agreement or (ii) to an affiliate of the Company.

AMENDMENTS OF THE OPERATING PARTNERSHIP AGREEMENT

Amendments to the Operating Partnership Agreement may be proposed by the
Company or by limited partners owning at least 20% of the OP Units.

Generally, the Operating Partnership Agreement may be amended with the
approval of the Company, as general partner, and limited partners (including
the Company) holding a majority of the OP Units. Certain amendments that
would, among other things, convert a limited partner's interest into a general
partner's interest, modify the limited liability of a limited partner, alter
the interest of a partner in profits or losses or the right to receive any
distributions, alter or modify the redemption right described above, or cause
the termination of the Operating Partnership at a time or on terms
inconsistent with those set forth in the Operating Partnership Agreement must
be approved by the Company and each limited partner that would be adversely
affected by such amendment. Notwithstanding the foregoing, the Company, as
general partner, will have the power, without the consent of the limited
partners, to amend the Operating Partnership Agreement as may be required to
(1) add to the obligations of the Company as general partner or surrender any
right or power granted to the Company as general partner; (2) reflect the
admission, substitution, termination or withdrawal of partners in accordance
with the terms of the Operating Partnership Agreement; (3) establish the
rights, powers, duties and preferences of any additional partnership interests
issued in accordance with the terms of the Operating Partnership Agreement;
(4) reflect a change of an inconsequential nature that does not materially
adversely affect the limited partners, or cure any ambiguity, correct or
supplement any provisions of the Operating Partnership Agreement not
inconsistent with law or with other provisions of the Operating Partnership
Agreement, or make other changes concerning matters under the Operating
Partnership Agreement that are not otherwise inconsistent with the Operating
Partnership Agreement or law; or (5) satisfy any requirements of federal or
state law. Certain provisions affecting the rights and duties of the Company
as general partner (e.g., restrictions on the Company's power to conduct
businesses other than owning OP Units; restrictions relating to the issuance
of securities of the Company and related capital contributions to the
Operating Partnership; restrictions relating to certain extraordinary
transactions involving the Company or the Operating Partnership) may not be
amended without the approval of a majority or, in certain instances, a
supermajority of the OP Units not held by the Company.

TRANSFER OF OP UNITS; SUBSTITUTE LIMITED PARTNERS

The Operating Partnership Agreement provides that limited partners generally
may transfer their OP Units without the consent of any other person, but may
substitute a transferee as a limited partner only with the prior written
consent of the Company as the sole general partner of the Operating
Partnership. In addition, limited partners may not transfer OP Units in any
event until the one-year anniversary of the Offering or in violation of
certain regulatory and other restrictions set forth in the Operating
Partnership Agreement. Notwithstanding the foregoing, Messrs. Zuckerman and
Linde and the other senior officers of the Company have entered into
agreements pursuant to which they may not transfer or dispose of OP Units or
Common Stock without the consent of Merrill Lynch for a period of two years
following the completion of the Offering.

REDEMPTION OF OP UNITS

After that date which is fourteen months after the completion of the
Offering, the Operating Partnership will be obligated to redeem each OP Unit
at the request of the holder thereof for cash equal to the fair market

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value of one share of Common Stock at the time of such redemption (as
determined in accordance with the provisions of the Operating Partnership
Agreement), provided that the Company may elect to acquire any such OP Unit
presented for redemption for one share of Common Stock or an amount of cash of
the same value. The Company presently anticipates that it will elect to issue
Common Stock in connection with each such redemption rather than having the
Operating Partnership pay cash. With each such redemption, the Company's
percentage ownership interest in the Operating Partnership will increase.
Persons other than the Company who acquire OP Units in the Formation
Transactions will have certain rights, pursuant to a separate registration
rights agreement, to have the issuance of shares of Common Stock that may be
issued to them in exchange for their OP Units, or the resale of such shares by
them, registered under the Securities Act. See "Shares Available for Future
Sale."

ISSUANCE OF ADDITIONAL LIMITED PARTNERSHIP INTEREST

The Company is authorized, without the consent of the limited partners, to
cause the Operating Partnership to issue additional OP Units to itself, to the
limited partners or to other persons for such consideration and on such terms
and conditions as the Company deems appropriate. If additional OP Units are
issued to the Company, then the Company must (i) issue additional shares of
Common Stock and must contribute to the Operating Partnership the entire
proceeds received by the Company from such issuance or (ii) issue additional
OP Units to all partners in proportion to their respective interests in the
Operating Partnership. In addition, the Company may cause the Operating
Partnership to issue to the Company additional partnership interests in
different series or classes, which may be senior to the OP Units, in
conjunction with an offering of securities of the Company having substantially
similar rights, in which the proceeds thereof are contributed to the Operating
Partnership. Consideration for additional partnership interests may be cash or
other property or assets. No limited partner has preemptive, preferential or
similar rights with respect to additional capital contributions to the
Operating Partnership or the issuance or sale of any partnership interests
therein.

MAKE-WHOLE PAYMENTS

The Operating Partnership Agreement provides that, during the Make-Whole
Period, in connection with the sale of, or the reduction of indebtedness on,
any of the Designated Properties, the Company will pay each person who
contributed an interest in the Designated Property a Make-Whole Amount
representing the federal and state income tax liability (assuming the highest
marginal federal and state income tax rates) associated with the recognition
of built-in gain (i.e., the amount of gain that would have been recognized had
the Designated Property been sold for cash at the closing of the Offering) by
such person in connection with any such transaction. No Make-Whole Amount
would be due in the case of a transaction that does not result in the
recognition of gain for tax purposes (such as Section 1031 "like-kind"
exchanges under the Code). In order to reduce the amount of built-in gain that
might be recognized by Messrs. Zuckerman and Linde, they have agreed to
guaranty, at the request of the Company in connection with the sale of, or
reduction of indebtedness on, any of the Designated Properties, any other
indebtedness of the Company, provided that the aggregate amount of such
guarantees, together with any then existing guarantees of Messrs. Zuckerman
and Linde of indebtedness of the Company, shall not exceed the amounts of $
and $ , respectively, (such amounts being the respective amounts of
indebtedness guaranteed by Messrs. Zuckerman and Linde immediately following
completion of the Offering). Any amendment to the provisions of the Operating
Partnership Agreement relating to the payment of Make-Whole Amounts shall not
be effective against a limited partner who did not consent in writing to such
amendment.

EXCULPATION AND INDEMNIFICATION OF THE GENERAL PARTNER

The Operating Partnership Agreement generally provides that the Company, as
general partner of the Operating Partnership, will incur no liability to the
Operating Partnership or any limited partner for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or
omission if the Company carried out its duties in good faith. In addition, the
Company is not responsible for any misconduct or negligence on the part of its
agents, provided the Company appointed such agents in good faith. The Company
may consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisors, and any
action it takes or omits to take in reliance upon the opinion of such persons,
as to matters that

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the Company reasonably believes to be within their professional or expert
competence, shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion.

The Operating Partnership Agreement also provides for indemnification of the
Company, the directors and officers of the Company, and such other persons as
the Company may from time to time designate against any judgments, penalties,
fines, settlements and reasonable expenses actually incurred by such person in
connection with the preceding unless it is established that: (1) the act or
omission of the indemnified person was material to the matter giving rise to
the preceding and either was committed in bad faith or was the result of
active and deliberate dishonesty; (2) the indemnified person actually received
an improper personal benefit in money, property or services; or (3) in the
case of any criminal proceeding, the indemnified person had reasonable cause
to believe that the act or omission was unlawful.

TAX MATTERS

The Company will be the tax matters partner of the Operating Partnership
and, as such, will have the authority to make tax elections under the Code on
behalf of the Operating Partnership.

TERM

The Operating Partnership will continue in full force and effect until
December 31, 2050 or until sooner dissolved pursuant to the terms of the
Operating Partnership Agreement.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock (including Common Stock which may be issued in
exchange for OP Units presented for redemption) by each director and director
nominee, by each Named Executive Officer, by all directors (including director
nominees) and executive officers of the Company as a group and by each person
who is expected to be the beneficial owner of 5% or more of the outstanding
shares of Common Stock immediately following the completion of the Offering.
Except as indicated below, all of such Common Stock is owned directly, and the
indicated person has sole voting and investment power.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK, PERCENTAGE OF
ASSUMING FULL COMMON STOCK
NAME AND ADDRESS EXCHANGE OF OP UNITS OUTSTANDING
---------------- -------------------- -------------
<S> <C> <C>
Mortimer B. Zuckerman.................................... 9,632,895 22.4%
Edward H. Linde.......................................... 7,689,715 18.7%
</TABLE>

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DESCRIPTION OF CAPITAL STOCK

The description of the Company's capital stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Certificate and Bylaws, copies of which are exhibits to the
Registration Statement of which this Prospectus is a part.

GENERAL

Under the Certificate of Incorporation, the Company has authority to issue
up to 450 million shares of stock, consisting of 250 million shares of Common
Stock, par value $0.01 per share, 150 million shares of excess stock, par
value $0.01 per share ("Excess Stock") (as described below), and 50 million
shares of Preferred Stock, par value $0.01 per share. Under Delaware law,
stockholders generally are not responsible for the corporation's debts or
obligations. Upon completion of the Offering, 35,333,541 shares of Common
Stock will be issued and outstanding and no shares of Excess Stock or
Preferred Stock will be issued and outstanding.

The Certificate authorizes the Directors to classify or reclassify any
unissued shares of capital stock by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
distributions, qualifications or terms or conditions of redemption of such
stock.

COMMON STOCK

All shares of Common Stock offered hereby have been duly authorized, and are
fully paid and nonassessable. Subject to the preferential rights of any other
shares or series of shares and to the provisions of the Company's Certificate
regarding Excess Stock, holders of Common Stock will be entitled to receive
dividends on Common Stock if, as and when authorized and declared by the Board
of Directors of the Company out of assets legally available therefor and to
share ratably in the assets of the Company legally available for distribution
to its stockholders in the event of its liquidation, dissolution or winding-up
after payment of, or adequate provision for, all known debts and liabilities
of the Company.

Subject to the provisions of the Company's Certificate regarding Excess
Stock, each outstanding share of Common Stock entitles the holder to one vote
on all matters submitted to a vote of stockholders, including the election of
directors, and, except as otherwise required by law or except as provided with
respect to any other class or series of shares, the holders of Common Stock
will possess exclusive voting power. There is no cumulative voting in the
election of directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the directors then
standing for election, and the holders of the remaining shares of Common Stock
will not be able to elect any director.

Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.

The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
information.

Subject to the provisions of the Company's Certificate regarding Excess
Stock, all Common Stock has equal dividend, distribution, liquidation and
other rights, and has no preference, appraisal (except as provided by Delaware
law) or exchange rights.

PREFERRED STOCK

Preferred Stock may be issued from time to time, in one or more series, as
authorized by the Board of Directors. Prior to the issuance of shares of each
series, the Board of Directors is required by the DGCL and the Company's
Certificate to fix for each series, subject to the provisions of the Company's
Certificate regarding

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Excess Stock, such terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, as are permitted by
Delaware law. Such rights, powers, restrictions and limitations could include
the right to receive specified dividend payments and payments on liquidation
prior to any such payments being made to the holders of some, or a majority,
of the Common Stock. The Board of Directors could authorize the issuance of
Preferred Stock with terms and conditions that could have the effect of
discouraging a takeover or any other transaction that holders of Common Stock
might believe to be in their best interests or in which holders of some, or a
majority, of the Common Stock might receive a premium for their shares over
the then current market price of such shares. As of the date hereof, no shares
of Preferred Stock are outstanding, and the Company has no present plans to
issue any Preferred Stock. Prior to the completion of the Offering, the
Company will authorize the issuance of a series of preferred stock in
connection with the adoption of a shareholder rights plan. See "--Shareholder
Rights Plan."

See "Certain Provisions of Delaware Law and of the Company's Certificate and
Bylaws."

RESTRICTIONS ON TRANSFERS

In order for the Company to qualify as a REIT under the Code, among other
things, not more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (defined in the
Code to include certain entities) during the last half of a taxable year
(other than the first year) (the "Five or Fewer Requirement"), and such shares
of capital stock must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of 12 months (other than the first year) or
during a proportionate part of a shorter taxable year. See "Federal Income Tax
Consequences." In order to protect the Company against the risk of losing its
status as a REIT and to otherwise protect the Company from the consequences of
a concentration of ownership among its stockholders, the Certificate, subject
to certain exceptions, provides that no single holder (other than the "Related
Parties," as defined below and certain "Look-Through Entities," as defined
below), may "beneficially own" more than 6.6% (the "Ownership Limit") of the
aggregate number of outstanding shares of any class or series of capital
stock. Under the Certificate, a person "beneficially owns" shares if (i) such
person has direct ownership of such shares, (ii) such person has indirect
ownership of such shares taking into account the constructive ownership rules
of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code,
or (iii) such person would be deemed to "beneficially own" such shares
pursuant to Rule 13d-3 under the Exchange Act, except that a Related Party
will not be deemed to beneficially own shares by virtue of the preceding
clause (iii). Each of Mr. Zuckerman and his respective heirs, legatees and
devisees, and any other person whose beneficial ownership of shares of Common
Stock would be attributed under the Code to Mr. Zuckerman, is a Related Party,
and such persons are subject to a "Related Party Ownership Limit" of 15%, such
that none of such persons shall be deemed to beneficially own shares in excess
of the Ownership Limit unless, in the aggregate, such persons own shares of
any class or series of capital stock in excess of 15% of the number of shares
of such class or series outstanding. A similar Related Party Ownership Limit
is applied to Mr. Linde and persons with a similar relationship to Mr. Linde.
The Company's Certificate provides that pension plans described in Section
401(a) of the Code and mutual funds registered under the Investment Company
Act of 1940 ("Look-Through Entities") are subject to a 15% "Look-Through
Ownership Limit." Pension plans and mutual funds are among the entities that
are not treated as holders of stock under the Five or Fewer Requirement and
the beneficial owners of such entities will be counted as holders for this
purpose. Any transfer of shares of capital stock or of any security
convertible into shares of capital stock that would create a direct or
indirect ownership of shares of capital stock in excess of the Ownership
Limit, the Look-Through Ownership Limit or the Related Party Ownership Limit,
as applicable, or that would result in the disqualification of the Company as
a REIT, including any transfer that results in the shares of capital stock
being owned by fewer than 100 persons or results in the Company being "closely
held" within the meaning of Section 856(h) of the Code or results in the
Company constructively owning 10% or more of the ownership interests in a
tenant of the Company within the meaning of Section 318 of the Code as
modified by Section 856(d)(5) of the Code, shall be null and void, and the
intended transferee will acquire no rights to the shares of capital stock. The
foregoing restrictions on transferability and ownership will not apply if the
Board of Directors determines that it is no longer in the best interests of
the Company to

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attempt to qualify, or to continue to qualify, as a REIT. The Board of
Directors may, in its sole discretion, waive the Ownership Limit, the Look-
Through Ownership Limit and the Related Party Ownership Limit if evidence
satisfactory to the Board of Directors and the Company's tax counsel is
presented that the changes in ownership will not then or in the future
jeopardize the Company's REIT status and the Board of Directors otherwise
decides that such action is in the best interest of the Company.

If any purported transfer of capital stock of the Company or any other event
would otherwise result in any person violating the Ownership Limit, the Look-
Through Ownership Limit or the Related Party Limit, as applicable, or the
Certificate, then any such purported transfer will be void and of no force or
effect with respect to the purported transferee (the "Prohibited Transferee")
as to that number of shares in excess of the applicable Limit and the
Prohibited Transferee shall acquire no right or interest (or, in the case of
any event other than a purported transfer, the person or entity holding record
title to any such shares in excess of the applicable Limit (the "Prohibited
Owner") shall cease to own any right or interest) in such excess shares. Any
such excess shares described above will be converted automatically into an
equal number of shares of Excess Stock (the "Excess Shares") and transferred
automatically, by operation of law, to a trust, the beneficiary of which will
be a qualified charitable organization selected by the Company (the
"Beneficiary"). Such automatic transfer shall be deemed to be effective as of
the close of business on the Business Day (as defined in the Certificate)
prior to the date of such violative transfer. As soon as practical after the
transfer of shares to the trust, the trustee of the trust (who shall be
designated by the Company and be unaffiliated with the Company and any
Prohibited Transferee or Prohibited Owner) will be required to sell such
Excess Shares to a person or entity who could own such shares without
violating the applicable Limit, and distribute to the Prohibited Transferee an
amount equal to the lesser of the price paid by the Prohibited Transferee for
such Excess Shares or the sales proceeds received by the trust for such Excess
Shares. In the case of any Excess Shares resulting from any event other than a
transfer, or from a transfer for no consideration (such as a gift), the
trustee will be required to sell such Excess Shares to a qualified person or
entity and distribute to the Prohibited Owner an amount equal to the lesser of
the fair market value of such Excess Shares as of the date of such event or
the sales proceeds received by the trust for such Excess Shares. In either
case, any proceeds in excess of the amount distributable to the Prohibited
Transferee or Prohibited Owner, as applicable, will be distributed to the
Beneficiary. Prior to a sale of any such Excess Shares by the trust, the
trustee will be entitled to receive in trust for the Beneficiary, all
dividends and other distributions paid by the Company with respect to such
Excess Shares.

In addition, shares of stock of the Company held in the trust shall be
deemed to have been offered for sale to the Company, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the trust (or, in the case of a
devise or gift, the market price at the time of such devise or gift) and (ii)
the market price on the date the Company, or its designee, accepts such offer.
The Company shall have the right to accept such offer for a period of 90 days.
Upon such a sale to the company, the interest of the Beneficiary in the shares
sold shall terminate and the trustee shall distribute the net proceeds of the
sale to the Prohibited Owner.

These restrictions will not preclude settlement of transactions through the
NYSE.

Each stockholder shall upon demand be required to disclose to the Company in
writing any information with respect to the direct, indirect and constructive
ownership of capital stock as the Board of Directors deems necessary to comply
with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine
any such compliance.

The Ownership Limit may have the effect of precluding acquisition of control
of the Company unless the Board of Directors determines that maintenance of
REIT status is no longer in the best interests of the Company.

SHAREHOLDER RIGHTS AGREEMENT

The Board of Directors of the Company has adopted a Shareholder Rights
Agreement (the "Rights Agreement"). The adoption of the Rights Agreement could
make it more difficult for a third party to acquire, or could discourage a
third party from acquiring, the Company or a large block of the Company's
Common Stock.

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Pursuant to the terms of the Rights Agreement, the Board of Directors
declared a dividend distribution of one Preferred Stock Purchase Right (a
"Right") for each outstanding share of Common Stock to stockholders of record
as of the close of business on the business day following effectiveness of the
Registration Statement of which this Prospectus is a part. (the "Record
Date"). In addition, one Right will automatically attach to each share of
Common Stock issued between the Record Date and the Distribution Date (as
hereinafter defined). Each Right entitles the registered holder to purchase
from the Company a unit consisting of one one-thousandth of a share (a "Unit")
of Series A Junior Participating Cumulative Preferred Stock, par value $.01
per share (the "Series A Preferred Stock") at a cash exercise price of $
per Unit (the "Exercise Price"), subject to adjustment. Each Share offered
hereby will be entitled to a Right when distributed.

Initially, the Rights are not exercisable and are attached to and trade with
the outstanding shares of Common Stock. The Rights will separate from the
Common Stock and will become exercisable upon the earliest of (i) the close of
business on the tenth calendar day following the first public announcement
that a person or group of affiliated or associated persons has acquired
beneficial ownership of 15% or more of the outstanding shares of Common Stock
(an "Acquiring Person") (the date of said announcement being referred to as
the "Stock Acquisition Date"), or (ii) the close of business on the tenth
business day (or such other calendar day as the Board of Directors may
determine) following the commencement of a tender offer or exchange offer that
would result upon its consummation in a person or group becoming the
beneficial owner of 15% or more of the outstanding shares of Common Stock (the
earlier of such dates being herein referred to as the "Distribution Date").
For these purposes, a person will not be deemed to beneficially own shares of
Common Stock which may be issued in exchange for OP Units.

Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), (a) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (b) new Common Stock certificates issued after the Record Date
will contain a notation incorporating the Shareholder Rights Agreement by
reference, and (c) the surrender for transfer of any certificates for Common
Stock will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.

The Rights are not exercisable until the Distribution Date and will expire
in 2007, unless previously redeemed or exchanged by the Company as described
below.

As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. Except as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.

In the event that a Stock Acquisition Date occurs, proper provision will be
made so that each holder of a Right (other than an Acquiring Person or its
associates or affiliates, whose Rights shall become null and void) will
thereafter have the right to receive upon exercise that number of Units of
Series A Preferred Stock of the Company having a market value of two times the
exercise price of the Right (such right being referred to as the "Subscription
Right"). In the event that, at any time following the Stock Acquisition Date,
(i) the Company consolidates with, or merges with and into, any other person,
and the Company is not the continuing or surviving corporation, (ii) any
person consolidates with the Company, or merges with and into the Company and
the Company is the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the shares of Common Stock are
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or (iii) 50% or more of the Company's assets or
earning power is sold, mortgaged or otherwise transferred, each holder of a
Right shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a market value equal to two times the exercise
price of the Right (such right being referred to as the "Merger Right"). The
holder of a Right will continue to have the Merger Right whether or not such
holder has exercised the Subscription Right. Rights that are or were
beneficially owned by an Acquiring Person may under certain circumstances
specified in the Rights Agreement become null and void.

At any time after the Stock Acquisition Date, the Board of Directors may, at
its option, exchange all or any part of the then outstanding and exercisable
Rights for shares of Common Stock or Units of Series A Preferred

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Stock at an exchange ratio of one share of Common Stock or one Unit of Series
A Preferred Stock per Right. Notwithstanding the foregoing, the Board of
Directors generally will not be empowered to effect such exchange at any time
after any person becomes the beneficial owner of 50% or more of the Common
Stock of the Company.

The Exercise Price payable, and the number of Units of Series A Preferred
Stock or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A Preferred Stock, (ii) if holders of the
Series A Preferred Stock are granted certain rights or warrants to subscribe
for Series A Preferred Stock or convertible securities at less than the
current market price of the Series A Preferred Stock, or (iii) upon the
distribution to holders of the Series A Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustment in the Exercise Price will be
required until cumulative adjustments amount to at least 1% of the Exercise
Price, determined on a per Right basis. The Company is not obligated to issue
fractional Units. If the Company elects not to issue fractional Units, in lieu
thereof an adjustment in cash will be made based on the fair market value of
the Series A Preferred Stock on the last trading date prior to the date of
exercise. Any of the provisions of the Rights Agreement may be amended by the
Board of Directors at any time prior to the Distribution Date.

The Rights may be redeemed in whole, but not in part, at a price of $0.01
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors only until
the earlier of (i) the close of business on the tenth calendar day after the
Stock Acquisition Date, or (ii) the expiration date of the Rights Agreement.
Immediately upon the action of the Board of Directors ordering redemption of
the Rights, the Rights will terminate and thereafter the only right of the
holders of Rights will be to receive the redemption price.

The Rights Agreement may be amended by the Board of Directors in its sole
discretion until the Distribution Date. After the Distribution Date, the Board
of Directors may, subject to certain limitations set forth in the Rights
Agreement, amend the Rights Agreement only to cure any ambiguity, defect or
inconsistency, to shorten or lengthen any time period, or to make changes that
do not adversely affect the interests of Rights holders (excluding the
interests of an Acquiring Person or its associates or affiliates). In
addition, the Board of Directors may at any time prior to such time as any
person becomes an Acquiring Person amend the Rights Agreement to lower the
threshold at which a person becomes an Acquiring Person to not less than the
greater of (i) the sum of 0.001% and the largest percentage of the outstanding
Common Stock then owned by any person, and (ii) 10%.

Until a Right is exercised, the holder will have no rights as a stockholder
of the Company (beyond those as an existing stockholder), including the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
become exercisable for Units, other securities of the Company, other
consideration or for common stock of an acquiring company.

A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to the Registration Statement of which this
Prospectus is a part. A copy of the Rights Agreement is also available from
the Company upon written request. The foregoing description of the Rights does
not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement, which is incorporated herein by reference.

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CERTAIN PROVISIONS OF DELAWARE LAW AND
THE COMPANY'S CERTIFICATE AND BYLAWS

The following summary of certain provisions of Delaware law and the
Company's Certificate and Bylaws does not purport to be complete and is
subject to and qualified in its entirety by reference to Delaware law and the
Company's Certificate and Bylaws, copies of which are exhibits to the
Registration Statement of which this Prospectus is a part.

The Certificate and the Bylaws of the Company contain certain provisions
that could make more difficult the acquisition of the Company by means of a
tender offer, a proxy contest or otherwise. These provisions are expected to
discourage certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire control of the
Company to negotiate first with the Board of Directors. The Company believes
that the benefits of these provisions outweigh the potential disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals might result in an improvement of their terms. The description set
forth below is intended as a summary only and is qualified in its entirety by
reference to the Certificate and the Bylaws, which have been filed as exhibits
to the Registration Statement of which this Prospectus is a part. See also
"Description of Capital Stock--Restrictions on Transfers."

BUSINESS COMBINATIONS

Upon completion of the Offering, the Company will be subject to the
provisions of section 203 ("Section 203") of the DGCL. Section 203 provides,
with certain exceptions, that a Delaware corporation may not engage in any of
a broad range of business combinations with a person or affiliate, or
associate of such person, who is an "interested stockholder" for a period of
three years from the date that such person became an interested stockholder
unless: (i) the transaction resulting in a person becoming an interested
stockholder, or the business combination, was approved by the board of
directors of the corporation before the consummation of such transaction; (ii)
the interested stockholder owned 85% or more of the outstanding voting stock
of the corporation immediately after the transaction in which it became an
interested stockholder (excluding shares owned by persons who are both
officers and directors of the corporation, and shares held by certain employee
stock ownership plans); or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined (with certain limited exceptions) as any
person who, together with affiliates and associates, owns or within the prior
three years did own, 15% or more of the corporation's outstanding voting
stock.

AMENDMENT OF CERTIFICATE AND BYLAWS

The Company's Certificate may be amended only by the affirmative vote of the
holders of two-thirds of all of the votes entitled to be cast on the matter
except that amendments dealing with certain articles of the Certificate (for
example, articles relating to stockholder action; the powers, election of,
removal of and classification of directors; limitation of liability; and
amendment of the By-laws or the Certificate) shall require the affirmative
vote of not less than seventy-five percent of the outstanding votes entitled
to be cast on the matter. Unless otherwise required by law, the Board of
Directors may amend the Company's Bylaws by the affirmative vote of a majority
of the directors then in office. The Bylaws may also be amended by the
stockholders, at an annual meeting or at a special meeting called for such
purpose, by the affirmative vote of at least seventy-five percent of the votes
entitled to be cast on the matter; provided, that if the Board of Directors
recommends that stockholders approve such amendment at such meeting, such
amendment shall require the affirmative vote of only a majority of the shares
present at such meeting and entitled to vote.

DISSOLUTION OF THE COMPANY

The DGCL permits the dissolution of the Company by (i) the affirmative vote
of a majority of the entire Board of Directors declaring such dissolution to
be advisable and directing that the proposed dissolution be

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submitted for consideration at an annual or special meeting of stockholders,
and (ii) upon proper notice, stockholder approval by the affirmative vote of a
majority of the votes entitled to be cast on the matter.

MEETINGS OF STOCKHOLDERS

Under the Company's Bylaws, annual meetings of stockholders shall be held at
such date and time as determined by the Board of Directors, the Chairman of
the Board or the President. The Bylaws establish an advance notice procedure
for stockholders to make nominations of candidates for directors or bring
other business before an annual meeting of stockholders. Special meetings of
stockholders may be called only by a majority of the Directors then in office
and only matters set forth in the notice of the meeting may be considered and
acted upon at such a meeting.

THE BOARD OF DIRECTORS

The Company's Certificate provides that the Board of Directors shall
initially consist of five Directors and thereafter the number of Directors of
the Company may be established by the Board of Directors but may not be fewer
than the minimum number required by the DGCL nor more than eleven. Subject to
the rights, if any, of the holders of any series of Preferred Stock to elect
directors and to fill vacancies in the Board of Directors relating thereto,
any vacancy will be filled, including any vacancy created by an increase in
the number of Directors, at any regular meeting or at any special meeting
called for the purpose, by a majority of the remaining Directors. Pursuant to
the terms of the Certificate, the Directors are divided into three classes.
One class will hold office initially for a term expiring at the annual meeting
of stockholders to be held in 1998, another class will hold office initially
for a term expiring at the annual meeting of stockholders to be held in 1999
and the third class will hold office initially for a term expiring in 2000. As
the term of each class expires, Directors in that class will be elected for a
term of three years and until their successors are duly elected and qualified.
The use of a classified board may render more difficult a change in control of
the Company or removal of incumbent management. The Company believes, however,
that classification of the Board of Directors will help to assure the
continuity and stability of its business strategies and policies.

The Certificate provides that the affirmative vote of 75% of the Directors
then in office is required to approve certain transactions or actions of the
Board, including a change of control (as defined) of the Company or of the
Operating Partnership, any amendment to the Operating Partnership Agreement,
any waiver of the limitations on ownership contained in the Certificate,
certain issuances of equity securities by the Company or termination of the
Company's status as a REIT.

SHAREHOLDER RIGHTS PLAN AND OWNERSHIP LIMITATIONS

The Company will adopt a Shareholder Rights Plan prior to the completion of
the Offering. In addition, the Certificate contains provisions that limit the
ownership by any person of shares of any class or series of capital stock of
the Company. See "Description of Capital Stock."

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Certificate generally limits the liability of the Company's
Directors and officers to the Company to the fullest extent permitted from
time to time by Delaware law. The DGCL permits, but does not require, a
corporation to indemnify its directors, officers, employees or agents and
expressly provides that the indemnification provided for under the DGCL shall
not be deemed exclusive of any indemnification right under any bylaw, vote of
stockholders or disinterested directors, or otherwise. The DGCL permits
indemnification against expenses and certain other liabilities arising out of
legal actions brought or threatened against such persons for their conduct on
behalf of a corporation, provided that each such person acted in good faith
and in a manner that he reasonably believed was in or not opposed to such
corporation's best interests and in the case of a criminal

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proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The DGCL does not allow indemnification of directors in the case of
an action by or in the right of a corporation (including stockholder
derivative suits) unless the directors successfully defend the action or
indemnification is ordered by the court.

The Bylaws provide that Directors and officers of the Company shall be, and,
in the discretion of the Board of Directors, non-officer employees may be,
indemnified by the Company to the fullest extent authorized by Delaware law,
as it now exists or may in the future be amended, against all expenses and
liabilities actually and reasonably incurred in connection with service for or
on behalf of the Company. The Bylaws also provide that the right of directors
and officers to indemnification shall be a contract right and shall not be
exclusive of any other right now possessed or hereafter acquired under any
bylaw, agreement, vote of stockholders, or otherwise. The Certificate contains
a provision permitted by Delaware law that generally eliminates the personal
liability of directors for monetary damages for breaches of their fiduciary
duty, including breaches involving negligence or gross negligence in business
combinations, unless the director has breached his or her duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or a knowing
violation of law, paid a dividend or approved a stock repurchase in violation
of the DGCL or obtained an improper personal benefit. The provision does not
alter a director's liability under the federal securities laws. In addition,
this provision does not affect the availability of equitable remedies, such as
an injunction or rescission, for breach of fiduciary duty.

IT IS THE POSITION OF THE SEC THAT INDEMNIFICATION OF DIRECTORS AND OFFICERS
FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") IS AGAINST PUBLIC POLICY AND IS UNENFORCEABLE PURSUANT TO
SECTION 14 OF THE SECURITIES ACT.

INDEMNIFICATION AGREEMENTS

The Company has entered into indemnification agreements with each of its
directors and executive officers. The indemnification agreements require,
among other things, that the Company indemnify its directors and executive
officers to the fullest extent permitted by law and advance to the directors
and executive officers all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Under these
agreements, the Company must also indemnify and advance all expenses incurred
by directors and executive officers seeking to enforce their rights under the
indemnification agreements and may cover directors and executive officers
under the Company's directors' and officers' liability insurance. Although the
form of indemnification agreement offers substantially the same scope of
coverage afforded by law, it provides greater assurance to directors and
executive officers that indemnification will be available, because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or the stockholders to eliminate the rights it provides.

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SHARES AVAILABLE FOR FUTURE SALE

GENERAL

Upon the completion of the Offering, the Company will have outstanding
35,333,541 shares of Common Stock (40,043,541 shares if the Underwriters'
overallotment option is exercised in full). In addition, 16,066,459 shares of
Common Stock are reserved for issuance upon exchange of OP Units. The shares
of Common Stock issued in the Offering will be freely tradeable by persons
other than "affiliates" of the Company without restriction under the
Securities Act, subject to the limitations on ownership set forth in the
Company's Certificate and Bylaws. See "Description of Capital Stock--
Restrictions on Transfers." The shares of Common Stock acquired in redemption
of OP Units (the "Restricted Shares") will be "restricted" securities under
the meaning of Rule 144 promulgated under the Securities Act ("Rule 144") and
may not be sold in the absence of registration under the Securities Act unless
an exemption from registration is available, including exemptions contained in
Rule 144. As described below under "--Registration Rights," the Company has
granted certain holders registration rights with respect to their shares of
Common Stock.

In general, under Rule 144 effective April 29, 1997, if one year has elapsed
since the later of the date of acquisition of Restricted Shares from the
Company or any "affiliate" of the Company, as that term is defined under the
Securities Act, the acquiror or subsequent holder thereof is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the date on which notice of the sale is filed with the SEC. Sales
under Rule 144 are also subject to certain manner of sales provisions, notice
requirements and the availability of current public information about the
Company. If two years have elapsed since the date of acquisition of Restricted
Shares from the Company or from any "affiliate" of the Company, and the
acquiror or subsequent holder thereof is deemed not to have been an affiliate
of the Company at any time during the 90 days preceding a sale, such person is
entitled to sell such shares in the public market under Rule 144(k) without
regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.

The Company has established the Stock Option Plan for the purpose of
attracting and retaining directors, executive officers and other key
employees. See "Management--Stock Option Plan" and "--Compensation of
Directors." The Company intends to issue options to purchase approximately
shares of Common Stock to directors, executive officers and certain key
employees prior to the completion of the Offering and has reserved
additional shares for future issuance under the Stock Option Plan. Prior to
the expiration of the initial 12-month period following consummation of the
Offering, the Company expects to file a registration statement on Form S-8
with the SEC with respect to the shares of Common Stock issuable under the
Stock Option Plan, which shares may be resold without restriction, unless held
by affiliates.

Prior to the Offering, there has been no public market for the Common Stock.
Trading of the Common Stock on the NYSE is expected to commence immediately
following the completion of the Offering. No prediction can be made as to the
effect, if any, that future sales of shares, or the availability of shares for
future sale, will have on the market price prevailing from time to time. Sales
of substantial amounts of Common Stock (including shares issued upon the
exercise of Options), or the perception that such sales occur, could adversely
affect prevailing market prices of the Common Stock. See "Risk Factors--Risks
Affecting Market for the Common Stock--No Prior Market" and "--Effect of
Shares Available for Future Sale on Share Price."

REGISTRATION RIGHTS

The Company has granted those persons with a direct or indirect interest in
the Property Partnerships who will receive OP Units in the Formation
Transactions certain registration rights with respect to the shares of Common
Stock that may be acquired by them in connection with the exercise of the
Redemption/Exchange Rights under the Operating Partnership Agreement. These
registration rights require the Company to register all such shares of Common
Stock effective as of that date which is fourteen months following completion
of the Offering. The Company will bear expenses incident to its registration
requirements under the registration rights, except that such expenses shall
not include any underwriting discounts or commissions or transfer taxes, if
any, relating to such shares.

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FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material federal income tax consequences
associated with an investment in the Common Stock. Goodwin, Procter & Hoar
LLP, which has acted as tax counsel to the Company in connection with the
formation of the Company and the Company's election to be taxed as a REIT, has
reviewed the following discussion and is of the opinion that it is an accurate
description of the federal income tax considerations that are likely to be
material to a holder of Common Stock. The following discussion is not
exhaustive of all possible tax considerations and is not tax advice. Moreover,
this summary does not deal with all tax aspects that might be relevant to a
particular prospective stockholder in light of his/her personal circumstances;
nor does it deal with particular types of stockholders that are subject to
special treatment under the Code, such as insurance companies, financial
institutions and broker-dealers. The Code provisions governing the Federal
income tax treatment of REITs are highly technical and complex, and this
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof. The following discussion and the opinions of Goodwin,
Procter & Hoar LLP are based on current law. Unless the context requires
otherwise, references to the "Company" in this "Federal Income Tax
Consequences" section refer only to Boston Properties, Inc.

EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO SUCH PURCHASER'S SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF THE PURCHASE, HOLDING AND SALE OF COMMON STOCK IN
THE COMPANY.

FEDERAL INCOME TAXATION OF THE COMPANY

Upon consultation with its advisers, the Company believes that it is in a
position to qualify for treatment as a REIT for the year ended December 31,
1997, upon filing of its election to be taxed as a REIT, and intends to
operate so as to meet the requirements under the Code for qualification as a
REIT, commencing with its taxable year ended December 31, 1997 and thereafter.
The Company also believes, after consultation with its advisers, that it has
been organized, has operated and will operate in such a manner as to qualify
for taxation as a REIT under the Code. No assurance can be given, however,
that such requirements have been or will be met.

OPINION OF TAX COUNSEL

Goodwin, Procter & Hoar LLP has acted as counsel to the Company in
connection with the formation of the Company, the Offering and the Company's
election to be taxed as a REIT. In the opinion of Goodwin, Procter & Hoar LLP,
commencing with the Company's taxable year ended December 31, 1997, the
Company will qualify to be taxed as a REIT under the Code, provided that (i)
the elections and other procedural steps described in this discussion of
"Federal Income Tax Consequences" are completed in a timely fashion and
(ii) the Company and the Operating Partnership operate in accordance with
various assumptions and factual representations made by the Company and the
Operating Partnership concerning their business, properties and operations. It
must be emphasized that Goodwin, Procter & Hoar LLP's opinion is based on
various assumptions and is conditioned upon such assumptions and
representations made by the Company and the Operating Partnership concerning
their business and properties as set forth in this Prospectus. Such factual
assumptions and representations are set forth below in this discussion of
"Federal Income Tax Consequences." In addition, Goodwin, Procter & Hoar LLP's
opinion is based upon the factual representations of the Company and the
Operating Partnership concerning its business and properties as set forth in
this Prospectus. Moreover, such qualification and taxation as a REIT depends
upon the Company's ability to meet, through actual annual operating results,
distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Code discussed below, the results of
which will not be reviewed by Goodwin, Procter & Hoar LLP. Accordingly, no
assurance can be given that the actual results of the Company's operations for
any one taxable year will satisfy such requirements. See "Risk Factors--
Failure to Qualify as a REIT; Other Tax Liabilities."

The opinion of Goodwin, Procter & Hoar LLP is also based upon existing law
as currently applicable, IRS regulations, currently published administrative
positions of the IRS and judicial decisions, which are subject to

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change either prospectively or retroactively. No assurance can be given that
any such changes would not modify the conclusions expressed in the opinion.
Moreover, unlike a private letter ruling (which will not be sought), an
opinion of counsel is not binding on the IRS, and no assurance can be given
that the IRS will not successfully challenge the status of the Company as a
REIT.

If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on that portion of its ordinary
income or capital gain that is currently distributed to stockholders. The REIT
provisions of the Code generally allow a REIT to deduct dividends paid to its
stockholders. This deduction for dividends paid to stockholders substantially
eliminates the federal "double taxation" on earnings (once at the corporate
level and once again at the stockholder level) that usually results from
investments in a corporation.

Even if the Company qualifies for taxation as a REIT, however, the Company
will be subject to federal income tax, as follows: First, the Company will be
taxed at regular corporate rates on its undistributed REIT taxable income,
including undistributed net capital gains. Second, under certain
circumstances, the Company may be subject to the "alternative minimum tax."
Third, if the Company has net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business or other non-qualifying income from foreclosure
property, it will be subject to tax at the highest corporate rate on such
income. Fourth, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property other
than foreclosure property held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if the
Company should fail to satisfy either the 75% or 95% gross income test
(discussed below) but has nonetheless maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of the amount by which the
Company fails the 75% or 95% test, multiplied by a fraction intended to
reflect the Company's profitability. Sixth, if the Company fails to distribute
during each year at least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain net income for such year and
(iii) any undistributed taxable income from prior periods, the Company will be
subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. Seventh, if the Company should acquire any
asset from a C corporation (i.e., a corporation generally subject to full
corporate-level tax) in a carryover-basis transaction and the Company
subsequently recognizes gain on the disposition of such asset during the ten-
year period (the "Recognition Period") beginning on the date on which the
asset was acquired by the Company, then, to the extent of the excess of (a)
the fair market value of the asset as of the beginning of the applicable
Recognition Period over (b) the Company's adjusted basis in such asset as of
the beginning of such Recognition Period (the "Built-In Gain"), such gain will
be subject to tax at the highest regular corporate rate, pursuant to
guidelines issued by the IRS (the "Built-In Gain Rules").

REQUIREMENTS FOR QUALIFICATION

To qualify as a REIT, the Company must elect to be so treated and must meet
the requirements, discussed below, relating to the Company's organization,
sources of income, nature of assets and distributions of income to
stockholders.

ORGANIZATIONAL REQUIREMENTS

The Code defines a REIT as a corporation, trust or association: (i) that is
managed by one or more directors or trustees, (ii) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest, (iii) that would be taxable as a domestic corporation but
for the REIT requirements, (iv) that is neither a financial institution nor an
insurance company subject to certain provisions of the Code, (v) the
beneficial ownership of which is held by 100 or more persons, and (vi) during
the last half of each taxable year not more than 50% in value of the
outstanding stock of which is owned, directly or indirectly through the
application of certain attribution rules, by five or fewer individuals (as
defined in the Code to include certain entities). In addition, certain other
tests, described below, regarding the nature of its income and assets also
must be satisfied. The Code provides that conditions (i) through (iv),
inclusive, must be met during the entire taxable year and that condition (v)
must be met during at least 335 days of a taxable year of 12 months, or during
a

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proportionate part of a taxable year of less than 12 months. Conditions (v)
and (vi) (the "100 Stockholder Requirement" and "Five or Fewer Requirement")
will not apply until after the first taxable year for which an election is
made to be taxed as a REIT. For purposes of conditions (v) and (vi), pension
funds and certain other tax-exempt entities are treated as individuals,
subject to a "look-through" exception in the case of condition (vi).

Prior to consummation of the Offering, the Company did not satisfy
conditions (v) and (vi) above. The Company's issuance of Common Stock in
connection with the Formation Transactions and the Offering permitted it to
satisfy the 100 Stockholder Requirement and the Five or Fewer Requirement. In
order to protect the Company from a concentration of ownership of its stock
that would cause the Company to fail the Five or Fewer Requirement, the
Company's Certificate provides that stock owned, or deemed to be owned or
transferred to a stockholder in excess of the Ownership Limit or the Look-
Through Ownership Limit will automatically be converted into Excess Stock. See
"Description of Capital Stock--Restrictions on Transfers." Because of the
absence of authority on this issue, however, there is no assurance that the
operation of the Excess Stock or other provisions contained in the Certificate
will, as a matter of law, prevent a concentration of ownership of stock in
excess of the Ownership Limit from causing the Company to violate the Five or
Fewer Requirement. If there were a concentration of ownership that would cause
the Company to violate the Five or Fewer Requirement, and the operation of the
Excess Stock or other provisions contained in the Certificate were not held to
cure such violation, the Company would be disqualified as a REIT. In rendering
its opinion that the Company is organized in a manner that permits the Company
to qualify as a REIT, Goodwin, Procter & Hoar LLP is relying on the
representation of the Company that the ownership of its stock (without regard
to the Excess Stock provisions) satisfies the Five or Fewer Requirement, and
Goodwin, Procter & Hoar LLP expresses no opinion as to whether, as a matter of
law, the Excess Stock or other provisions contained in the Certificate
preclude the Company from failing the Five or Fewer Requirement.

In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. The Company's taxable year is the calendar year.

In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate
share (based on its interest in partnership capital) of the assets of the
partnership and will be deemed to be entitled to the income of the partnership
attributable to such share. In addition, the character of the assets and gross
income of the partnership shall retain the same character in the hands of the
REIT for purposes of Section 856 of the Code, including satisfying the gross
income tests and asset tests. Thus, the Company's proportionate share of the
assets, liabilities and items of income of the Operating Partnership
(including the Operating Partnership's share of the assets and liabilities and
items of income with respect to any partnership in which it holds an interest)
will be treated as assets, liabilities and items of income of the Company for
purposes of applying the requirements described herein.

INCOME TESTS

To maintain qualification as a REIT, three gross income requirements must be
satisfied annually.

. First, at least 75% of the Company's gross income, excluding gross
income from certain dispositions of property held primarily for sale to
customers in the ordinary course of a trade or business ("prohibited
transactions"), for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on
real property (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary investments.

. Second, at least 95% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be
derived from such real property investments described above and from
dividends, interest and gain from the sale or disposition of stock or
securities or from any combination of the foregoing.

. Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions and gain from the sale or
other disposition of real property held for less than four years (apart
from involuntary conversions and sales of foreclosure property) must
represent less than 30% of the Company's gross income (including gross
income from prohibited transactions) for each taxable

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year. For purposes of applying the 30% gross income test, the holding
period of Properties acquired by the Operating Partnership in the
Formation Transactions were deemed to have commenced on the date of
acquisition.

Rents received or deemed to be received by the Company qualify as "rents
from real property" in satisfying the gross income requirements for a REIT
described above only if several conditions are met.

. First, the amount of rent generally must not be based in whole or in
part on the income or profits of any person. An amount received or
accrued generally will not be excluded from the term "rents from real
property," however, solely by reason of being based on a fixed
percentage or percentages of receipts or sales.

. Second, the Code provides that rents received from a tenant will not
qualify as "rents from real property" in satisfying the gross income
tests if the REIT, or an owner of 10% or more of the REIT, directly or
constructively owns 10% or more of such tenant (a "Related Party
Tenant") or a subtenant of such tenant (in which case only rent
attributable to the subtenant is disqualified).

. Third, if rent attributable to personal property, leased in connection
with a lease of real property, is greater than 15% of the total rent
received under the lease, then the portion of rent attributable to the
personal property will not qualify as "rents from real property."

. Finally, for rents to qualify as "rents from real property" the REIT
must not operate or manage the property or furnish or render services to
tenants, other than through an "independent contractor" who is
adequately compensated and from whom the REIT does not derive any
income; provided, however, that a REIT may provide services with respect
to its properties and the income will qualify as "rents from real
property" if the services are "usually or customarily rendered" in
connection with the rental of room or other space for occupancy only and
are not otherwise considered "rendered to the occupant."

The Company does not charge rent that is based in whole or in part on the
income or profits of any person (except by reason of being based on a fixed
percentage or percentages of receipts or sales consistent with the rule
described above). The Company does not derive, and does not anticipate
deriving, rent attributable to personal property leased in connection with
real property that exceeds 15% of the total rents.

Pursuant to leases with respect to the Hotel Properties, ZL Hotel LLC will
lease from the Operating Partnership the Hotel Properties for a ten year
period. The hotel leases provide that ZL Hotel LLC will be obligated to pay to
the Operating Partnership (i) the greater of Base Rent or Participating Rent
(collectively, the "Rents") and (ii) Additional Charges. Participating Rent is
calculated by multiplying fixed percentages by various revenue categories for
each of the Hotel Properties. Both Base Rent and the thresholds in the
Participating Rent formulas will be adjusted for inflation. Base Rent accrues
and is required to be paid monthly. Participating Rent is payable monthly,
with monthly adjustments based on actual results.

In order for Base Rent, Participating Rent and Additional Charges to
constitute "rents from real property," the leases must be respected as true
leases for federal income tax purposes and not treated as service contracts,
joint ventures or some other type of arrangement. The determination of whether
the leases are true leases depends on an analysis of all the surrounding facts
and circumstances. In making such a determination, courts have considered a
variety of factors, including the following: (i) the intent of the parties,
(ii) the form of the agreement, (iii) the degree of control over the property
that is retained by the property owner (e.g., whether the lessee has
substantial control over the operation of the property or whether the lessee
was required simply to use its best efforts to perform its obligations under
the agreement), and (iv) the extent to which the property owner retains the
risk of loss with respect to the property (e.g., whether the lessee bears the
risk of increases in operating expenses or the risk of damage to the property)
or the potential for economic gain (e.g., appreciation ) with respect to the
property.

In addition, Code section 7701(e) provides that a contract that purports to
be a service contract (or a partnership agreement) is treated instead as a
lease of property if the contract is properly treated as such, taking into
account all relevant factors, including whether or not: (i) the service
recipient is in physical possession of

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the property, (ii) the service recipient controls the property, (iii) the
service recipient has a significant economic or possessory interest in the
property (e.g., the property's use is likely to be dedicated to the service
recipient for a substantial portion of the useful life of the property, the
recipient shares the risk that the property will decline in value, the
recipient shares in any appreciation in the value of the property, the
recipient shares in savings in the property's operating costs, or the
recipient bears the risk of damage to or loss of the property), (iv) the
service provider does not bear any risk of substantially diminished receipts
or substantially increased expenditures if there is nonperformance under the
contract, (v) the service provider does not use the property concurrently to
provide significant services to entities unrelated to the service recipient,
and (vi) the total contract price does not substantially exceed the rental
value of the property for the contract period. Since the determination whether
a service contract should be treated as a lease is inherently factual, the
presence or absence of any single factor may not be dispositive in every case.
The hotel leases have been structured to qualify as true leases for federal
income tax purposes.

Investors should be aware that there are no controlling Treasury
Regulations, published rulings, or judicial decisions involving leases with
terms substantially the same as the hotel leases that discuss whether such
leases constitute true leases for federal income tax purposes. Therefore,
there can be no complete assurance that the IRS will not assert a contrary
position. If the leases are recharacterized as service contracts or
partnership agreements, rather than true leases, part or all of the payments
that the Operating Partnership receives from the lessee would not be
considered rent or would not otherwise satisfy the various requirements for
qualification as "rents from real property." In that case, the Company likely
would not be able to satisfy either the 75% or 95% gross income tests and, as
a result, would lose its REIT status.

As indicated above, "rents from real property" must not be based in whole or
in part on the income or profits of any person. The Participating Rent should
qualify as "rents from real property" since it is based on percentages of
receipts or sales which percentages are fixed at the time the leases are
entered into, provided (i) the leases are not renegotiated during the term of
the leases in a manner that has the effect of basing Participating Rent on
income or profits and (ii) the leases conform with normal business practice.
More generally, the Participating Rent will not qualify as "rents from real
property" if, considering the hotel leases and all the surrounding
circumstances, the arrangement does not conform with normal business practice,
but is in reality used as a means of basing the Participating Rent on income
or profits. Since the Participating Rent is based on fixed percentages of the
gross revenues from the hotels that are established in the hotel leases, and
the Company has represented that the percentages (i) will not be renegotiated
during the terms of the leases in a manner that has the effect of basing the
Participating Rent on income or profits and (ii) conform with normal business
practice, the Participating Rent should not be considered based in whole or in
part on the income or profits of any person. Furthermore, the Company has
represented that, with respect to other hotel properties that it acquires in
the future, it will not charge rent for any property that is based in whole or
in part on the income or profits of any person (except by reason of being
based on a fixed percentage of gross revenues, as described above.)

Pursuant to leases with independent third parties, the Operating Partnership
or certain subsidiary partnerships will lease the Garage Property and the
garage portions of certain of the Office Properties to independent third
parties for periods between one to three years. The parking leases provide
that the Operating Partnership will receive rent based on the gross receipts
of the parking garage. The same "true lease" and "rent from real property"
analysis applies with respect to the parking leases as is described above for
the hotel leases. The garage leases also have been structured to qualify as
true leases for federal income tax purposes. As is the case with respect to
the hotel leases, there can be no complete assurance that the IRS will not
assert a contrary position, which if successful could result in the loss of
the Company's status as a REIT.

Through the Operating Partnership, which is not an "independent contractor,"
the Company provides certain services with respect to the Properties, but the
Company believes (and has represented to Goodwin, Procter & Hoar LLP) that all
such services are considered "usually or customarily rendered" in connection
with the rental of space for occupancy only, so that the provision of such
services does not jeopardize the qualification of rent from the Properties as
"rents from real property." In rendering its opinion on the Company's ability
to qualify as a REIT, Goodwin, Procter & Hoar LLP is relying on such
representations. In the case of any services that are not "usual and
customary" under the foregoing rules, the Company intends to employ
"independent contractors" to provide such services.

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The Operating Partnership may receive certain types of income with respect
to the properties it owns that will not qualify under the 75% or 95% gross
income test. In particular, dividends on the Company's stock in the
Development and Management Company will not qualify under the 75% gross income
test. The Company believes, however, that the aggregate amount of such non-
qualifying income in any taxable year will not cause the Company to exceed the
limits on non-qualifying income under the 75% and 95% gross income tests.

If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for that
year if it is eligible for relief under certain provisions of the Code. These
relief provisions generally will be available if (i) the Company's failure to
meet these tests was due to reasonable cause and not due to willful neglect,
(ii) the Company attaches a schedule of the sources of its income to its
Federal income tax return and (iii) any incorrect information on the schedule
is not due to fraud with intent to evade tax. It is not possible, however, to
state whether, in all circumstances, the Company would be entitled to the
benefit of these relief provisions. For example, if the Company fails to
satisfy the gross income tests because nonqualifying income that the Company
intentionally incurs exceeds the limits on such income, the IRS could conclude
that the Company's failure to satisfy the tests was not due to reasonable
cause. As discussed above in "--Opinion of Tax Counsel," even if these relief
provisions apply, a tax would be imposed with respect to the excess net
income. No similar mitigation provision provides relief if the Company fails
the 30% income test, and in such case, the Company will cease to qualify as a
REIT. See "Risk Factors--Failure to Qualify as a REIT; Other Tax Liabilities."

ASSET TESTS

At the close of each quarter of its taxable year, the Company also must
satisfy three tests relating to the nature and diversification of its assets.

. First, at least 75% of the value of the Company's total assets must be
represented by real estate assets, cash, cash items and government
securities.

. Second, no more than 25% of the Company's total assets may be
represented by securities other than those in the 75% asset class.

. Third, of the investments included in the 25% asset class, the value of
any one issuer's securities owned by the Company may not exceed 5% of
the value of the Company's total assets, and the Company may not own
more than 10% of any one issuer's outstanding voting securities.

The 5% test must generally be met for any quarter in which the Company
acquires securities of an issuer. Thus, this requirement must be satisfied not
only on the date the Company acquires securities of the Development and
Management Company, but also each time the Company increases its ownership of
securities of the Development and Management Company (including as a result of
increasing its interest in the Operating Partnership as limited partners
exercise their redemption rights).

The Operating Partnership owns 100% of the nonvoting stock and 1% of the
voting stock of the Development and Management Company, and by virtue of its
ownership of Units, the Company is considered to own its pro rata share of
such stock. Neither the Company nor the Operating Partnership, however, owns
more than 10% of the voting securities of the Development and Management
Company. In addition, the Company and its senior management do not believe
that the Company's pro rata share of the value of the securities of the
Development and Management Company exceeds 5% of the total value of the
Company's assets. The Company's belief is based in part upon its analysis of
the value of the equity and unsecured debt securities of the Development and
Management Company owned by the Operating Partnership relative to the value of
the other assets owned by the Operating Partnership. No independent appraisals
have been obtained to support this conclusion, however, and Goodwin, Procter
and Hoar LLP, in rendering its opinion as to the qualification of the Company
as a REIT, is relying on the conclusions of the Company and its senior
management as to the value of the securities of the Development and Management
Company. There can be no assurance that the IRS might not contend that the
value of the securities of the Development and Management Company held by the
Company (through the Operating Partnership) exceeds the 5% value limitation.

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As noted above, the 5% value requirement must be satisfied not only on the
date the Company acquires equity and unsecured debt securities of the
Development and Management Company, but also each time the Company increases
its ownership of such securities of the Development and Management Company
(including as a result of increasing its interest in the Operating Partnership
as partners exercise their redemption rights). Although the Company plans to
take steps to ensure that it satisfied the 5% value test for any quarter with
respect to which retesting is to occur, there can be no assurance that such
steps will always be successful or will not require a reduction in the
Company's overall interest in the Development and Management Company.

After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. The Company maintains, and will continue to maintain,
adequate records of the value of its assets to ensure compliance with the
asset tests and will take such other actions within 30 days after the close of
any quarter as may be required to cure any noncompliance.

ANNUAL DISTRIBUTION REQUIREMENTS

In order to be taxed as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its stockholders in an amount
at least equal to (a) the sum of (i) 95% of the Company's "REIT taxable
income" (computed without regard to the dividends-paid deduction and the
Company's capital gain) and (ii) 95% of the net income, if any, from
foreclosure property in excess of the special tax on income from foreclosure
property, minus (b) the sum of certain items of non-cash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before the Company timely files its Federal
income tax return for such year and if paid on or before the first regular
dividend payment after such declaration. Even if the Company satisfies the
foregoing distribution requirements, to the extent that the Company does not
distribute all of its net capital gain or "REIT taxable income" as adjusted,
it will be subject to tax thereon at regular capital gains or ordinary
corporate tax rates. Furthermore, if the Company should fail to distribute
during each calendar year at least the sum of (a) 85% of its ordinary income
for that year, (b) 95% of its capital gain net income for that year and (c)
any undistributed taxable income from prior periods, the Company would be
subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. In addition, if the Company disposes of any
asset subject to the Built-In Gain Rules during the applicable Recognition
Period, the Company will be required, pursuant to guidance issued by the IRS,
to distribute at least 95% of the Built-In Gain (after tax), if any,
recognized on the disposition of the asset.

The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements. In this regard, the Operating Partnership
Agreement authorizes the Company, as general partner, to take such steps as
may be necessary to cause the Operating Partnership to distribute to its
partners an amount sufficient to permit the Company to meet these distribution
requirements.

It is expected that the Company's REIT taxable income will be less than its
cash flow due to the allowance of depreciation and other non-cash charges in
computing REIT taxable income. Accordingly, the Company anticipates that it
will generally have sufficient cash or liquid assets to enable it to satisfy
the 95% distribution requirement. It is possible, however, that the Company,
from time to time, may not have sufficient cash or other liquid assets to meet
the 95% distribution requirement or to distribute such greater amount as may
be necessary to avoid income and excise taxation, as a result of timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company, or as a result of
nondeductible expenses such as principal amortization or capital expenditures
in excess of noncash deductions. In the event that such timing differences
occur, the Company may find it necessary to arrange for borrowings or, if
possible, pay taxable stock dividends in order to meet the dividend
requirement.

Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends"
to stockholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be
able to avoid

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being taxed on amounts distributed as deficiency dividends. The Company will,
however, be required to pay interest based upon the amount of any deduction
taken for deficiency dividends.

FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which
the Company fails to qualify will not be deductible by the Company nor will
they be required to be made. In such event, to the extent of current or
accumulated earnings and profits, all distributions to stockholders will be
dividends, taxable as ordinary income, and subject to certain limitations of
the Code, corporate distributees may be eligible for the dividends-received
deduction. Unless the Company is entitled to relief under specific statutory
provisions, the Company also will be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief. For example, if the Company fails to
satisfy the gross income tests because nonqualifying income that the Company
intentionally incurs exceeds the limit on such income, the IRS could conclude
that the Company's failure to satisfy the tests was not due to reasonable
cause. See "Risk Factors--Failure to Qualify as a REIT; Other Tax
Liabilities."

TAXATION OF U.S. STOCKHOLDERS

As used herein, the term "U.S. Stockholder" means a holder of Common Stock
that for United States federal income tax purposes (a) is a citizen or
resident of the United States, (b) is a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof or (c) is an estate or trust, the income of
which is subject to United States federal income taxation regardless of its
source. For any taxable year for which the Company qualifies for taxation as a
REIT, amounts distributed to taxable U.S. Stockholders will be taxed as
follows.

DISTRIBUTIONS GENERALLY

Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will constitute dividends up to the amount of the Company's
current or accumulated earnings and profits and will be taxable to the
stockholders as ordinary income. These distributions are not eligible for the
dividends-received deduction for corporations. To the extent that the Company
makes a distribution in excess of its current or accumulated earnings and
profits, the distribution will be treated first as a tax-free return of
capital, reducing the tax basis in the U.S. Stockholder's Common Stock, and
the amount of such distribution in excess of a U.S. Stockholder's tax basis in
its Common Stock will be taxable as gain realized from the sale of its Common
Stock. Dividends declared by the Company in October, November or December of
any year payable to a stockholder of record on a specified date in any such
month shall be treated as both paid by the Company and received by the
stockholder on December 31 of the year, provided that the dividend is actually
paid by the Company during January of the following calendar year.
Stockholders may not include on their own federal income tax returns any
losses of the Company.

The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the amount required
to be distributed in order to avoid imposition of the 4% excise tax discussed
in "--Opinion of Tax Counsel" above. Moreover, any "deficiency dividend" will
be treated as an ordinary or capital gain dividend, as the case may be,
regardless of the Company's earnings and profits. As a result, stockholders
may be required to treat certain distributions that would otherwise result in
a tax-free return of capital as taxable dividends.

CAPITAL GAIN DIVIDENDS

Dividends to U.S. Stockholders that are properly designated by the Company
as capital gain dividends will be treated as long-term capital gains (to the
extent they do not exceed the Company's actual net capital gain) for

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the taxable year without regard to the period for which the stockholder has
held his stock. However, corporate stockholders may be required to treat up to
20% of certain capital gain dividends as ordinary income. Capital gain
dividends are not eligible for the dividends-received deduction for
corporations.

PASSIVE ACTIVITY LOSS AND INVESTMENT INTEREST LIMITATIONS

Distributions from the Company and gain from the disposition of Common Stock
will not be treated as passive activity income, and therefore stockholders may
not be able to apply any "passive losses" against such income. Dividends from
the Company (to the extent they do not constitute a return of capital) will
generally be treated as investment income for purposes of the investment
income limitation. Under recently enacted legislation, net capital gain from
the disposition of Common Stock and capital gain dividends generally will be
excluded from investment income.

CERTAIN DISPOSITIONS OF SHARES

Losses incurred on the sale or exchange of Common Stock held for less than
six months (after applying certain holding period rules) will be deemed long-
term capital loss to the extent of any capital gain dividends received by the
selling stockholder from those shares.

TREATMENT OF TAX-EXEMPT STOCKHOLDERS

Distributions from the Company to a tax-exempt employee pension trust or
other domestic tax-exempt stockholder generally, will not constitute
"unrelated business taxable income" ("UBTI") unless the stockholder has
borrowed to acquire or carry its Common Stock. Qualified trusts that hold more
than 10% (by value) of the shares of certain REITS, however, may be required
to treat a certain percentage of such a REIT's distributions as UBTI. This
requirement will apply only if (i) the REIT would not qualify as such for
federal income tax purposes but for the application of the "look-through"
exception to the Five or Fewer Requirement applicable to shares held by
qualified trusts and (ii) the REIT is "predominantly held" by qualified
trusts. A REIT is predominantly held by qualified trusts if either (i) a
single qualified trust holds more than 25% by value of the interests in the
REIT or (ii) one or more qualified trusts, each owning more than 10% by value
of the interests in the REIT, hold in the aggregate more than 50% of the
interests in the REIT. The percentage of any REIT dividend treated as UBTI is
equal to the ratio of (a) the UBTI earned by the REIT (treating the REIT as if
it were a qualified trust and therefore subject to tax on UBTI) to (b) the
total gross income (less certain associated expenses) of the REIT. A de
minimis exception applies where the ratio set forth in the preceding sentence
is less than 5% for any year. For these purposes, a qualified trust is any
trust described in section 401(a) of the Code and exempt from tax under
section 501(a) of the Code. The provisions requiring qualified trusts to treat
a portion of REIT distributions as UBTI will not apply if the REIT is able to
satisfy the Five or Fewer Requirement without relying upon the "look-through"
exception.

SPECIAL TAX CONSIDERATIONS FOR FOREIGN STOCKHOLDERS
The rules governing United States income taxation of non-resident alien
individuals, foreign corporations, foreign partnerships and foreign trusts and
estates (collectively, "Non-U.S. Stockholders") are complex, and the following
discussion is intended only as a summary of these rules. Prospective Non-U.S.
Stockholders should consult with their own tax advisors to determine the
impact of federal, state and local income tax laws on an investment in the
Company, including any reporting requirements.

In general, Non-U.S. Stockholders will be subject to regular United States
federal income tax with respect to their investment in the Company if the
investment is "effectively connected" with the Non-U.S. Stockholder's conduct
of a trade or business in the United States. A corporate Non-U.S. Stockholder
that receives income that is (or is treated as) effectively connected with a
U.S. trade or business also may be subject to the branch profits tax under
section 884 of the Code, which is payable in addition to regular United States
federal corporate income tax. The following discussion will apply to Non-U.S.
Stockholders whose investment in the Company is not so effectively connected.

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A distribution by the Company that is not attributable to gain from the sale
or exchange by the Company of a United States real property interest and that
is not designated by the Company as a capital gain dividend will be treated as
an ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. Generally, any ordinary income dividend will
be subject to a United States federal income tax equal to 30% of the gross
amount of the dividend unless this tax is reduced by an applicable tax treaty.
Such a distribution in excess of the Company's earnings and profits will be
treated first as a return of capital that will reduce a Non-U.S. Stockholder's
basis in its Common Stock (but not below zero) and then as gain from the
disposition of such shares, the tax treatment of which is described under the
rules discussed below with respect to dispositions of Common Stock.

Distributions by the Company that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.
Stockholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S.
Stockholder as if the distributions were gains "effectively connected" with a
United States trade or business. Accordingly, a Non-U.S. Stockholder will be
taxed at the normal capital gain rates applicable to a U.S. Stockholder
(subject to any applicable alternative minimum tax and a special alternative
minimum tax in the case of non-resident alien individuals). Distributions
subject to FIRPTA also may be subject to a 30% branch profits tax when made to
a foreign corporate stockholder that is not entitled to treaty exemptions.

Although tax treaties may reduce the Company's withholding obligations, the
Company generally will be required to withhold from distributions to Non-U.S.
Stockholders, and remit to the IRS, (i) 35% of designated capital gain
dividends (or, if greater, 35% of the amount of any distributions that could
be designated as capital gain dividends) and (ii) 30% of ordinary dividends
paid out of earnings and profits. In addition, if the Company designates prior
distributions as capital gain dividends, subsequent distributions, up to the
amount of such prior distributions, will be treated as capital gain dividends
for purposes of withholding. A distribution in excess of the Company's
earnings and profits will be subject to 30% dividend withholding if at the
time of the distribution it cannot be determined whether the distribution will
be in an amount in excess of the Company's current or accumulated earnings and
profits. If the amount of tax withheld by the Company with respect to a
distribution to a Non-U.S. Stockholder exceeds the stockholder's United States
tax liability with respect to such distribution, the Non-U.S. Stockholder may
file for a refund of such excess from the IRS.

Unless the Common Stock constitutes a "United States real property interest"
within the meaning of FIRPTA, a sale of Common Stock by a Non-U.S. Stockholder
generally will not be subject to United States federal income taxation. The
Common Stock will not constitute a United States real property interest if the
Company is a "domestically controlled REIT." A domestically controlled REIT is
a REIT in which at all times during a specified testing period less than 50%
in value of its shares is held directly or indirectly by Non-U.S.
Stockholders. It is currently anticipated that the Company will be a
domestically controlled REIT and therefore that sales of Common Stock will not
be subject to taxation under FIRPTA. However, because the Common Stock will be
publicly traded, no assurance can be given that the Company will continue to
be a domestically controlled REIT. If the Company were not a domestically
controlled REIT, whether a Non-U.S. Stockholder's sale of Common Stock would
be subject to tax under FIRPTA as a sale of a United States real property
interest would depend on whether the Common Stock were "regularly traded" on
an established securities market (such as the NYSE on which the Common Stock
will be listed) and on the size of the selling stockholder's interest in the
Company. If the gain on the sale of Common Stock were subject to taxation
under FIRPTA, the Non-U.S. Stockholder would be subject to the same treatment
as a U.S. Stockholder with respect to the gain (subject to any applicable
alternative minimum tax and a special alternative minimum tax in the case of
non-resident alien individuals). In addition, distributions that are treated
as gain from the disposition of Common Stock and are subject to tax under
FIRPTA also may be subject to a 30% branch profit tax when made to a foreign
corporate stockholder that is not entitled to treaty exemptions. In any event,
a purchaser of Common Stock from a Non-U.S. Stockholder will not be required
to withhold under FIRPTA on the purchase price if the purchased Common Stock
is "regularly traded" on an established securities market (such as the NYSE)
or if the Company is a domestically controlled REIT. Otherwise, under FIRPTA
the purchaser of Common Stock may be required to withhold 10% of the purchase
price and remit this amount to the IRS. Capital gains not subject to FIRPTA
will be taxable to a Non-U.S. Stockholder if the Non-U.S. Stockholder is a
non-resident alien individual who is

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present in the United States for 183 days or more during the taxable year and
certain other conditions apply, in which case the non-resident alien
individual will be subject to a 30% tax on his or her U.S. source capital
gains.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

Under certain circumstances, U.S. Stockholders may be subject to backup
withholding at a rate of 31% on payments made with respect to, or cash
proceeds of a sale or exchange of, Common Stock. Backup withholding will apply
only if the holder (i) fails to furnish his or her taxpayer identification
number ("TIN") (which, for an individual, would be his or her Social Security
Number), (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that he
or she has failed properly to report payments of interest and dividends or is
otherwise subject to backup withholding or (iv) under certain circumstances,
fails to certify, under penalties of perjury, that he or she has furnished a
correct TIN and (a) that he or she has not been notified by the IRS that he or
she is subject to backup withholding for failure to report interest and
dividend payments or (b) that he or she has been notified by the IRS that he
or she is no longer subject to backup withholding. Backup withholding will not
apply with respect to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations.

U.S. Stockholders should consult their own tax advisors regarding their
qualifications for exemption from backup withholding and the procedure for
obtaining such an exemption. Backup withholding is not an additional tax.
Rather, the amount of any backup withholding with respect to a payment to a
U.S. Stockholder will be allowed as a credit against the U.S. Stockholder's
United States federal income tax liability and may entitle the U.S.
Stockholder to a refund, provided that the required information is furnished
to the IRS.

Additional issues may arise pertaining to information reporting and backup
withholding for Non-U.S. Stockholders. Non-U.S. Stockholders should consult
their tax advisors with regard to U.S. information reporting and backup
withholding.

OTHER TAX CONSIDERATIONS

EFFECT OF TAX STATUS OF OPERATING PARTNERSHIP ON REIT QUALIFICATION

Substantially all of the Company's investments are through the Operating
Partnership. In addition, the Operating Partnership holds interests in certain
Properties through subsidiary partnerships. The Company's interest in these
partnerships may involve special tax considerations. Such considerations
include (i) the allocations of items of income and expense, which could affect
the computation of taxable income of the Company, (ii) the status of the
Operating Partnership, and other subsidiary partnerships as partnerships (as
opposed to associations taxable as corporations) for federal income tax
purposes, and (iii) the taking of actions by the Operating Partnership and
subsidiary partnerships that could adversely affect the Company's
qualifications as a REIT. In the opinion of Goodwin, Procter & Hoar LLP, based
on certain representations of the Company and its subsidiaries, each of the
Operating Partnership, and the other subsidiary partnerships in which the
Operating Partnership has an interest will be treated for Federal income tax
purposes as a partnership (and not as an association taxable as a
corporation). If any of the Operating Partnership, or other subsidiary
partnerships in which the Operating Partnership has an interest were treated
as an association taxable as a corporation, the Company would fail to qualify
as a REIT for a number of reasons.

TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES

When property is contributed to a partnership in exchange for an interest in
the partnership, the partnership generally takes a carryover basis in that
property for tax purposes equal to the adjusted basis of the contributing
partner in the property, rather than a basis equal to the fair market value of
the property at the time of contribution. Pursuant to section 704(c) of the
Code, income, gain, loss and deduction attributable to such contributed
property must be allocated in a manner such that the contributing partner is
charged with, or benefits from, respectively, the unrealized gain or
unrealized loss associated with the property at the time of the contribution.
The amount of such unrealized gain or unrealized loss is generally equal to
the difference between the fair market value of the contributed property at
the time of contribution and the adjusted tax basis of such property at the
time of contribution

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(a "Book-Tax Difference"). Such allocations are solely for Federal income tax
purposes and do not affect the book capital accounts or other economic or
legal arrangements among the partners. The Operating Partnership was formed by
way of contributions of appreciated property (including certain of the
Properties). Consequently, the Operating Partnership Agreement requires such
allocations to be made in a manner consistent with section 704(c) of the Code.
Final and temporary Regulations under Section 704(c) of the Code provide
partnerships with a choice of several methods of accounting for Book-Tax
Differences for property contributed to a partnership on or after December 21,
1993, including the retention of the "traditional method" that was available
under prior law or the election of certain alternative methods. The Company
intends to elect the "traditional method" of Section 704(c) allocations. Under
the traditional method, which is the least favorable method from the Company's
perspective, the carryover basis of contributed interests in the Properties in
the hands of the Operating Partnership could cause the Company (i) to be
allocated lower amounts of depreciation deductions for tax purposes than would
be allocated to the Company if all Properties were to have a tax basis equal
to their fair market value at the time of contribution and (ii) to be
allocated taxable gain in the event of a sale of such contributed interests in
the Properties in excess of the economic or book income allocated to the
Company as a result of such sale, with a corresponding benefit to the other
partners in the Operating Partnership. These allocations possibly could cause
the Company to recognize taxable income in excess of cash proceeds, which
might adversely affect the Company's ability to comply with REIT distribution
requirements, although the Company does not anticipate that this will occur.

Interests in the Properties purchased for cash by the Operating Partnership
simultaneously with or subsequent to the admission of the Company to the
Operating Partnership will initially have a tax basis equal to their fair
market value. Thus, Section 704(c) of the Code will not apply to such
interests.

A portion of the amounts to be used to fund distributions to stockholders is
expected to come from the Development and Management Company, through
dividends on stock held by the Operating Partnership. The Development and
Management Company will not qualify as a REIT and will pay federal, state and
local income taxes on its taxable income at normal corporate rates. The
federal, state or local income taxes that the company is required to pay will
reduce the amount of dividends payable by such company to the Operating
Partnership and cash available for distribution by the Company, which in turn
could require the Operating Partnership to secure funds from additional
sources in order to allow the Company to make required distributions.

As described above, the value of the equity and unsecured debt securities of
the Development and Management Company held by the Company cannot exceed 5% of
the value of the Company's assets at a time when a Partner exercises his
redemption right (or the Company otherwise is considered to acquire additional
securities of the Development and Management Company). See "--Requirements for
Qualification--Asset Tests." This limitation may restrict the ability of the
Development and Management Company to increase the size of its respective
business unless the value of the assets of the Company is increasing at a
commensurate rate.

STATE AND LOCAL TAX

The Company and its operating subsidiaries may be subject to state and local
tax in states and localities in which they do business or own property. The
tax treatment of the Company and its operating subsidiaries and the holders of
Common Stock in such jurisdictions may differ from the federal income tax
treatment described above.

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UNDERWRITING

Subject to the terms and conditions in the United States purchase agreement
(the "U.S. Purchase Agreement"), among the Company and each of the
underwriters named below (the "U.S. Underwriters"), and concurrently with the
sale of 6,280,000 shares to the International Managers (as defined below), the
Company has agreed to sell to each of the U.S. Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Bear,
Stearns & Co. Inc., Morgan Stanley & Co. Incorporated, PaineWebber
Incorporated, Prudential Securities Incorporated, and Smith Barney Inc. are
acting as representatives (the "U.S. Representatives"), and each of the U.S.
Underwriters has severally agreed to purchase from the Company, the respective
number of shares of Common Stock set forth opposite their respective names:

<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
Goldman, Sachs & Co. ..........................................
Bear, Stearns & Co. Inc. ......................................
Morgan Stanley & Co. Incorporated..............................
PaineWebber Incorporated.......................................
Prudential Securities Incorporated.............................
Smith Barney Inc. .............................................
Total..................................................... 25,120,000
==========
</TABLE>

The Company has also entered into a purchase agreement (the "International
Purchase Agreement" and, together with the U.S. Purchase Agreement, the
"Purchase Agreements") with certain underwriters outside the United States and
Canada (the "International Managers" and, together with the U.S. Underwriters,
the "Underwriters") for whom Merrill Lynch International, Goldman Sachs
International, Bear, Stearns International Limited, Morgan Stanley & Co.
International Limited, PaineWebber International (U.K.) Ltd., Prudential-Bache
Securites, and Smith Barney Inc. are acting as lead managers. Subject to the
terms and conditions set forth in the International Purchase Agreement and
concurrently with the sale of 25,120,000 shares of Common Stock to the U.S.
Underwriters pursuant to the U.S. Purchase Agreement, the Company has agreed
to sell to the International Managers, and the International Managers have
severally agreed to purchase from the Company, an aggregate of 6,280,000
shares of Common Stock. The initial public offering price per share and the
total underwriting discount per share are identical under the U.S. Purchase
Agreement and the International Purchase Agreement.

In each Purchase Agreement, the several U.S. Underwriters and the several
International Managers have agreed, respectively, subject to the terms and
conditions set forth in such Purchase Agreement, to purchase all of the shares
of Common Stock being sold pursuant to such Purchase Agreement if any of such
shares of Common Stock are purchased. Under certain circumstances, the
commitments of non-defaulting U.S. Underwriters or International Managers (as
the case may be) may be increased. The sale of shares of Common Stock pursuant
to the U.S. Purchase Agreement and the International Purchase Agreement are
conditioned upon each other.

The U.S. Representatives have advised the Company that the U.S. Underwriters
propose to offer the Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $ per share. The U.S.
Underwriters may allow, and such dealers may re-allow, a discount not in
excess of $ per share on sales to certain other brokers and dealers. After
the date of this Prospectus, the initial public offering price and concession
and discount may be changed.

The Company has been informed that the U.S. Underwriters and the
International Managers have entered into an agreement (the "Intersyndicate
Agreement") providing for the coordination of their activities. Under the
terms of the Intersyndicate Agreement, the U.S. Underwriters and the
International Managers are permitted to sell shares of Common Stock to each
other for purposes of resale at the initial public offering price, less an
amount not greater than the selling concession. Under the terms of the
Intersyndicate Agreement, the International Managers and any dealer to whom
they sell shares of Common Stock will not offer to sell or sell

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shares of Common Stock to persons who are United States persons or Canadian
persons or to persons they believe intend to resell to persons who are United
States persons or Canadian persons, and the U.S. Underwriters and any dealer
to whom they sell shares of Common Stock will not offer to sell or sell shares
of Common Stock to persons who are non-United States and non-Canadian persons
or to persons they believe intend to resell to non-United States and non-
Canadian persons, except in each case for transactions pursuant to such
agreement.

The Company has granted to the U.S. Underwriters an option, exercisable for
30 days after the date of this Prospectus, to purchase up to 3,768,000
additional shares of Common Stock to cover overallotments, if any, at the
initial public offering price, less the underwriting discount set forth on the
cover page of this Prospectus. If the U.S. Underwriters exercise this option,
each U.S. Underwriter will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the foregoing
table bears to such U.S. Underwriters' initial amount reflected in the
foregoing table. The Company also has granted an option to the International
Managers, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to 942,000 additional shares of Common Stock to
cover overallotments, if any, on terms similar to those granted to the U.S.
Underwriters.

At the request of the Company, the U.S. Underwriters have reserved up to
shares of Common Stock for sale at the public offering price to certain
employees of the Company, their business affiliates and related parties who
have expressed an interest in purchasing shares. The number of shares
available to the general public will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares that are not so purchased by
such persons at the completion of the Offerings will be offered by the U.S.
Underwriters to the general public on the same terms as the other shares
offered by this Prospectus.

In the Purchase Agreements, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. Insofar as indemnification of the Underwriters for liabilities
arising under the Securities Act may be permitted pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

The Company, the Operating Partnership and certain persons who owned
interests in one or more of the Properties prior to the Offering and who
received OP Units in exchange for such interests in the Formation Transactions
(the "Non-Affiliated Participants") have agreed, subject to certain
exceptions, not to sell, offer or contract to sell, grant any option for the
sale of, or otherwise dispose of any shares of Common Stock or OP Units, or
any securities convertible into or exchangeable for Common Stock or OP Units,
for a period of one year from the date of the Prospectus, without the prior
written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The
Company has granted certain registration rights pursuant to which the Non-
Affiliated Participants may require the Company to file a registration
statement with the SEC with respect to sales of any shares received by the
Non-Affiliated Participants in exchange for their OP Units after the
expiration of the one-year period.

Messrs. Zuckerman and Linde and the senior officers of the Company who will
receive OP Units and/or shares of Common Stock in the Formation Transactions
have agreed, subject to certain exceptions, not to sell, offer or contract to
sell, grant any option for the sale of, or otherwise dispose of any shares of
Common Stock or OP Units for a period of two years from the date of the
Prospectus, without the prior written consent of Merrill Lynch, Pierce, Fenner
& Smith Incorporated.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the U.S. Representatives are permitted to engage
in certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.

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Common Stock in the open market. The U.S. Representatives and the
International Managers, respectively, may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.

The U.S. Representatives and the International Managers, respectively, may
also impose a penalty bid on certain Underwriters and selling group members.
This means that if the U.S. Representatives or the International Managers
purchase shares of Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Common Stock, they may reclaim
the amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, none of the Underwriters makes any representation that the U.S.
Representatives or the International Managers will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.

The Underwriters do not intend to confirm sales to any account over which
they exercise discretionary authority.

Prior to the Offerings, there has been no public market for the Common Stock
of the Company. The initial public offering price has been determined through
negotiations between the Company and the U.S. Representatives. Among the
factors considered in such negotiations, in addition to prevailing market
conditions, are dividend yields and financial characteristics of publicly
traded REITs that the Company and the U.S. Representatives believe to be
comparable to the Company, the expected results of operations of the Company
(which are based on the results of operations of the Boston Properties
Predecessor Group and the third-party development and management business in
recent periods), estimates of the future business potential and earnings
prospects of the Company as a whole and the current state of the real estate
market in the Company's primary markets and the economy as a whole.

The Company will apply for listing of the Common Stock on the New York Stock
Exchange under the symbol "BXP." In order to meet one of the requirements for
listing the Common Stock on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more shares of Common Stock to a minimum of
2,000 beneficial holders.

The Company will pay to Merrill Lynch, Pierce, Fenner & Smith Incorporated
an advisory fee equal to % of the gross proceeds received from the sale of
Common Stock to public investors in the Offerings for financial advisory
services rendered in connection with the Company's formation as a REIT.

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EXPERTS

The combined historical financial statements and financial statement schedule
of the Boston Properties Predecessor Group included in this Prospectus and the
Registration Statement of which this Prospectus is a part, to the extent and
for the periods indicated in their reports, have been audited by Coopers &
Lybrand, L.L.P., independent accountants, and are included herein in reliance
upon the authority of such firm as experts in accounting and auditing.

In addition, certain statistical information provided under the captions
"Prospectus Summary--The Properties" and "Business and Properties" has been
prepared by Spaulding & Slye, and is included herein in reliance upon the
authority of such firm as expert in, among other things, office and industrial
real estate market conditions.

LEGAL MATTERS

Certain legal matters, including the validity of the shares of Common Stock
offered hereby, will be passed upon for the Company by Goodwin, Procter &
Hoar LLP. In addition, the description of federal income tax consequences
contained in this Prospectus under the heading "Federal Income Tax
Consequences" is based upon the opinion of Goodwin, Procter & Hoar LLP.
Goodwin, Procter & Hoar LLP served as corporate and real estate counsel in
connection with the Formation Transactions and the Offering. Bingham, Dana &
Gould LLP (which advised the Company in connection with the restructuring of
indebtedness on the Company's 599 Lexington Avenue Property) and Shaw, Pittman,
Potts & Trowbridge serve as real estate counsel for the Company.

Certain legal matters will be passed upon for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the "SEC")
a Registration Statement on Form S-11 (of which this Prospectus is a part)
under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the
rules and regulations of the SEC. Statements contained in this Prospectus as to
the content of any contract or other document are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference and the exhibits and
schedules hereto. For further information regarding the Company and the Common
Stock offered hereby, reference is hereby made to the Registration Statement
and such exhibits and schedules, which may be obtained from the SEC as its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the fees prescribed by the SEC. The SEC maintains a website at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the SEC.

Statements contained in this Prospectus as to the contents of any contract or
other document that is filed as an exhibit to the Registration Statement are
not necessarily complete, and each such statement is qualified in its entirety
by reference to the full text of such contract or document.

The Company will be required to file reports and other information with the
Commission pursuant to the Securities Exchange Act of 1934. In addition to
applicable legal or NYSE requirements, if any, holders of Common Shares will
receive annual reports containing audited financial statements with a report
thereon by the Company's independent certified public accounts, and quarterly
reports containing unaudited financial information for each of the first three
quarters of each fiscal year.

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GLOSSARY

"100 Stockholder Requirement" means the requirement that beneficial
ownership of a corporation must be held by 100 or more persons in order to
qualify as a REIT under the Code.

"1940 Act" means the Investment Company Act of 1940, as amended.

"Absorption" means the net increase in square feet of leased space.

"ADA" means the Americans with Disabilities Act, enacted on July 26, 1990.

"ADR" means the average daily rate of a Hotel Property.

"Annual Net Effective Rent" means the annualized Base Rent for the month of
December 1996, plus tenant pass-throughs of operating and other expenses (but
excluding electricity costs paid by tenants), under each lease executed as of
December 31, 1996, presented on a straight-line basis in accordance with GAAP,
minus amortization of tenant improvement costs and leasing commissions, if
any, paid or payable by the Company during such period, annualized.

"Base Rent" means gross rent excluding payments by tenants on account of
real estate tax and operating expense escalation.

"Beneficiary" means the qualified charitable organization selected by the
Company to serve as the beneficiary of the trust which shall hold any Excess
Shares.

"Book-Tax Difference" means the difference between the fair market value of
the contributed property at the time of contribution and the adjusted tax
basis of such property at the time of contribution.

"Boston Properties Predecessor Group" means Boston Properties, Inc., the
Property Partnerships and the other entities which owned interests in one or
more of the Properties or in other assets that will be contributed to the
Company in connection with the Formation Transactions.

"Built-In Gain" means the excess of the fair market value of an asset as of
the beginning of the applicable Recognition Period over the Company's adjusted
basis in such asset as of the beginning of such Recognition Period.

"Built-In Gain Rules" means the built-in gain rules promulgated in
guidelines issued by the IRS.

"Bylaws" means the Amended and Restated Bylaws of the Company.

"Certificate" means the Amended and Restated Certificate of Incorporation of
the Company.

"Code" means the Internal Revenue Code of 1986, as amended, together with
its predecessor.

"Commission" or the "SEC" means the Securities and Exchange Commission.

"Common Stock" means shares of the Company's common stock, $.01 par value
per share.

"Company" means Boston Properties, Inc., a Delaware corporation, and its
subsidiaries on a consolidated basis, including the Operating Partnership and
the Development and Management Company.

"Company Quoted Rental Rate" means the weighted average rental rate per
square foot quoted by the Company as of December 31, 1996, based on the total
net rentable square feet of Properties in the applicable submarket. This rate
is not adjusted to a full-service equivalent rate in markets in which the
Company's rates are not quoted on a full-service basis.

148
<PAGE>

"Continuing Investors" means the persons who held a direct or indirect
interest in the assets of the Company prior to the Offering.

"Development and Management Company" means Boston Properties Management,
Inc., the subsidiary of the Operating Partnership which will succeed to a
portion of the third-party commercial real estate property management business
of Boston Properties, Inc.

"Designated Property" means any of 599 Lexington Avenue, Independence
Square, Capital Gallery, Democracy Center, the U.S. International Trade
Commission Building, Bedford Business Park, One Cambridge Center, Long Wharf
Marriott and Cambridge Center Marriott.

"Development Properties" means the seven Office Properties currently under
development or redevelopment by the Company.

"DGCL" means the Delaware General Corporation Law.

"Direct Vacancy Rate" means space immediately available by landlords.

"EBITDA" means earnings before interest, taxes, depreciation and
amortization.

"Escalated Rent" means the annualized monthly Base Rent in effect (after
giving effect to any contractual increases in monthly Base Rent that have
occurred up to December 31, 1996) plus annualized monthly tenant pass-throughs
of operating and other expenses (but excluding electricity costs paid by
tenants) under each lease executed as of December 31, 1996, or, if such
monthly rent has been reduced by a rent concession, the monthly rent that
would have been in effect at such date in the absence of such concession.

"Excess Shares" means those shares of Common Stock in excess of the
Ownership Limit, the Look-Through Ownership Limit, the Related Party Limit, or
the Certificate which are automatically converted into an equal number of
shares of Excess Stock.

"Excess Stock" means the separate class of shares of stock of the Company
into which shares of stock of the Company owned, or deemed to be owned, or
transferred to a stockholder in excess of the Ownership Limit, the Related
Party Limit or the Look-Through Ownership Limit, as applicable, will
automatically be converted.

"Excluded Property" means the property in which Messrs. Zuckerman and Linde
hold ownership interests but which is not being contributed to the Company as
part of the Formation Transactions.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980, as
amended.

"Five or Fewer Requirement" means the requirement under the Code that not
more than 50% in value of the Company's outstanding shares of Stock may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code) during the last half of a taxable year (other than the first year).

"Formation Transactions" means the transactions relating to the formation of
the Company and its subsidiaries, including the transfer to the Company of the
Properties from the Property Partnerships and other entities which own one or
more Properties and the development, project management and property
management businesses of Boston Properties, Inc.

"Funds from Operations" means, in accordance with the resolution adopted by
the Board of Governors of NAREIT, net income (loss) (computed in accordance
with GAAP), excluding significant non-recurring items, gains (or losses) from
debt restructuring and sales of property, plus depreciation and amortization
on real estate assets, and after adjustments for unconsolidated partnerships
and joint ventures.

"GAAP" means generally accepted accounting principles.

"Garage Property" means the 1,170 space parking garage in which the Company
has an interest.

149
<PAGE>

"Greater Boston" means the city of Boston and ninety surrounding
municipalities in the Commonwealth of Massachusetts, as designated by
Spaulding & Slye in its market study cited herein.

"Greater Washington, D.C." means the city of Washington D.C. and fifty
surrounding municipalities, as designated by Spaulding & Slye in its market
study cited herein.

"GSA" means the General Services Administration of the United States
Government.

"Hotel Properties" means the two full service hotels which the Company will
own at the completion of the Offering.

"Industrial Properties" means the nine industrial properties in which the
Company has an interest.

"International Purchase Agreement" means the purchase agreement among the
Company and the International Managers.

"International Managers" means the underwriters outside the United States
and Canada named in this Prospectus for whom Merrill Lynch International,
Goldman Sachs International, Bear, Stearns International Limited, PaineWebber
International (U.K.) Ltd, Prudential-Bache Securities, and Smith Barney Inc.
are acting as lead managers.

"Intersyndicate Agreement" means the agreement between the U.S. Underwriters
and the International Managers providing for the coordination of their
activities.

"IRS" means the Internal Revenue Service.

"LIBOR" means the London Interbank Offered Rate.

"Line of Credit Bank" means the commercial bank which will lead the
Unsecured Line of Credit as agent.

"Look-Through Ownership Limit" means the ownership limit applicable to
entities which are looked through for purposes of the Five or Fewer
Requirement restricting such entities to holding no more than 15.0% of the
number of outstanding shares of any class or series of capital stock of the
Company.

"Make-Whole Amount" means the amount that may be required to be paid, in
connection with a sale of or reduction of indebtedness on a Designated
Property, to a person who had an interest in such Designated Property prior to
the completion of the Offering and who recognized taxable gain as a result of
such sale or reduction of indebtedness.

"Make-Whole Period" means the 15 year period following the completion of the
Offering.

"Marriott (R)" means Marriott International, Inc., the manager of the two
Hotel Properties.

"MBTA" means the Metropolitan Boston Transit Authority.

"MIT" means the Massachusetts Institute of Technology.

"Mortgage Debt" means the total mortgage debt secured by the Properties
following the Offering.

"Named Executive Officers" means the Company's Chief Executive Officer and
each of the Company's five other most highly compensated executive officers.

"NAREIT" means the National Association of Real Estate Investment Trusts.

"Non-U.S. Stockholders" means non-United States stockholders for federal
income tax purposes.

"NYSE" means The New York Stock Exchange.

150
<PAGE>

"Offering" means the offering of shares of Common Stock of the Company
pursuant to, and as described in, this Prospectus.

"Office Properties" means the 62 office properties, including seven office
properties currently under development or redevelopment by the Company, in
which the Company has an interest.

"OP Units" means limited and general partnership interests in the Operating
Partnership.

"Operating Partnership" means Boston Properties Limited Partnership, a
Delaware limited partnership.

"Operating Partnership Agreement" means the amended and restated agreement
of limited partnership of the Operating Partnership.

"Ownership Limit" means the restriction contained in the Company's
Certificate providing that, subject to certain exceptions, no holder may own,
or be deemed to own by virtue of the attribution provision of the Code, more
than 6.6% of the number of outstanding shares of any class or series of
capital stock of the Company.

"Plan" means the Boston Properties, Inc. 1997 Stock Option and Incentive
Plan, adopted by the Board of Directors prior to the date hereof.

"Preferred Stock" means shares of Series A preferred stock of the Company,
$.01 par value per share.

"Prohibited Owner" means a person or entity holding record title to shares
of Common Stock in excess of the Ownership Limit, the Look-Through Ownership
Limit, the Related Party Limit, or the Certificate.

"Prohibited Transferee" means the transferee of any purported transfer of
capital stock of the Company or any other event which would otherwise result
in the transferee violating the Ownership Limit, the Look-Through Ownership
Limit, the Related Party Limit, or the Certificate.

"Properties" means the 74 commercial real estate properties referred to
herein in which the Company has an interest.

"Property Partnership" means a general or limited partnership which, prior
to the Formation Transactions, owned or had an interest in one or more
Properties.

"Prospectus" means this prospectus, as the same may be amended.

"Purchase Agreements" means the U.S. Purchase Agreement and the
International Purchase Agreement.

"R&D Properties" means the 27 properties, including four Development
Properties, in which the Company has an interest that support both office and
technical uses.

"Recognition Period" means the ten-year period beginning on the date on
which the Company acquires an asset from a C corporation in a carry-over basis
transaction.

"REIT" means real estate investment trust, as defined by Sections 856
through 860 of the Code and applicable Treasury Regulations.

"REIT Requirements" means the requirements for qualifying as a REIT under
Sections 856 through 860 of the Code and applicable Treasury Regulations.

"Related Party" means each of Messrs. Zuckerman and Linde, their respective
heirs, legatees and devisees, and any other person whose beneficial ownership
of shares of Common Stock would be attributed under the Code to Messrs.
Zuckerman, Linde, or their respective heirs, legatees or devisees.

"Related Party Limit" means the ownership limit applicable to each of Mr.
Zuckerman and associated related parties and Mr. Linde and associated related
parties restricting each such class of personsto holding no more than 15.0% of
the number of outstanding shares of any class or series of capital stock of
the Company.

151
<PAGE>

"Related Party Tenant" means a tenant or subtenant of the Company which is
10% or more constructively or directly owned by an owner of 10% or more of the
Company under the Code.

"Rents" means Base Rent.

"Restricted Stock" means the shares of Common Stock acquired by holders in
redemption of OP Units which will constitute "restricted" securities as
defined by Rule 144.

"REVPAR" means the revenue per available room of a Hotel Property as
determined by dividing room revenue by available rooms for the applicable
period.

"Rule 144" means Rule 144 promulgated under the Securities Act.

"Securities Act" means the Securities Act of 1933, as amended.

"Stock" means Common Stock and Preferred Stock.

"Subsidiary Corporation" means the Development and Management Company.

"Tax Counsel" means Goodwin, Procter & Hoar LLP, tax counsel to the
Company.

"TIN" means taxpayer identification number.

"Total Square Footage" means total net rentable square feet of the Office
and Industrial Properties, plus total square footage of the Hotel and Garage
Properties.

"Treasury Regulations" means regulations of the U.S. Department of Treasury
under the Code.

"UBTI" means unrelated business taxable income as defined by Section 512(a)
of the Code and applicable Treasury Regulations.

"Underwriters" means the U.S. Underwriters and the International Managers.

"U.S. or United States" means the United States of America (including the
District of Columbia), its territories, possessions and other areas subject to
its jurisdiction.

"U.S. Purchase Agreement" means the purchase agreement among the Company and
the U.S. Underwriters.

"U.S. Representatives" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co. Inc., PaineWebber
Incorporated, Prudential Securities Incorporated and Smith Barney Inc. acting
as representatives for the U.S. Underwriters.

"U.S. Stockholder" means a United States stockholder under the REIT
Requirements.

"U.S. Underwriters" means the underwriters for the United States and Canada
named in this Prospectus for whom the U.S. Representatives are acting as
representatives.

152
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Boston Properties, Inc.:
Unaudited Pro Forma Condensed Consolidated Financial Information:
Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1996.. F-2
Pro Forma Condensed Consolidated Statement of Income for the year ended
December 31, 1996...................................................... F-3
Notes and Management's Assumptions to the Pro Forma Condensed
Consolidated Financial Information..................................... F-4
Boston Properties Predecessor Group:
Report of Independent Accountants....................................... F-12
Combined Balance Sheets as of December 31, 1996 and 1995................ F-13
Combined Statements of Operations for the years ended December 31, 1996,
1995 and 1994.......................................................... F-14
Combined Statements of Owners' Equity (Deficit) for the years ended
December 31, 1996, 1995 and 1994....................................... F-15
Combined Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994.......................................................... F-16
Notes to Combined Financial Statements.................................. F-17
Schedule III: Real Estate and Accumulated Depreciation as of December
31, 1996............................................................... S-1
</TABLE>

F-1
<PAGE>

BOSTON PROPERTIES, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (NOTE 5)
---------------------------------------------
THE OTHER
OFFERING ADJUSTMENTS
PREDECESSOR (A)(I) (B)(I) PRO FORMA
----------- -------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Real estate and equipment........ $1,035,571 $ $ 10,283 $1,045,854
Less: accumulated
depreciation.................. (263,911) (263,911)
---------- -------- --------- ----------
Total real estate and
equipment................... 771,660 10,283 781,943
Cash and cash equivalents........ 8,998 727,363 (728,674) 7,687
Escrows.......................... 25,474 (15,419) 10,055
Tenant and other receivables..... 12,049 12,049
Accrued rental income............ 49,206 49,206
Tenant leasing costs............. 18,308 18,308
Deferred financing costs......... 6,414 (96) 6,318
Prepaid expenses and other as-
sets............................ 4,402 (463) 3,939
---------- -------- --------- ----------
Total assets................. $ 896,511 $726,900 $(733,906) $ 889,505
========== ======== ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Mortgage notes payable and
unsecured line of credit...... $1,420,359 $ $(707,685) $ 712,674
Notes payable--affiliate....... 22,117 (22,117) --
Accounts payable and accrued
expenses...................... 13,795 (113) 13,682
Accrued interest payable....... 9,667 9,667
Rent received in advance,
security deposits and other
liabilities................... 7,205 7,205
---------- -------- --------- ----------
Total liabilities............ 1,473,143 (113) (729,802) 743,228
---------- -------- --------- ----------
Commitments and contingencies.... -- --
Minority interest in Operating
Partnership..................... -- 45,785 45,785
---------- -------- --------- ----------
Stockholders' and owners' equity
................................ (576,632) 727,013 (49,889) 100,492
---------- -------- --------- ----------
Total liabilities and
equity...................... $ 896,511 $726,900 $(733,906) $ 889,505
========== ======== ========= ==========
</TABLE>

The accompanying notes are an integral part of the pro forma condensed
consolidated balance sheet.

F-2
<PAGE>

BOSTON PROPERTIES, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS (NOTE 5)
---------------------------------
OTHER
ADJUSTMENTS
PREDECESSOR B(II) PRO FORMA
----------- ----------- ---------
<S> <C> <C> <C>
Revenue:
Rental:
Base rent............................... $169,420 -- $169,420
Rent--hotels and garage................. -- $ 22,371 22,371
Recoveries from tenants................. 22,607 22,607
Parking and other....................... 2,979 (2,043) 936
-------- -------- --------
Total rental revenue.................. 195,006 20,328 215,334
Hotel..................................... 65,678 (65,678) --
Development and management services....... 5,719 (1,414) 4,305
Interest and other........................ 3,530 (705) 2,825
-------- -------- --------
Total revenue......................... 269,933 (47,469) 222,464
-------- -------- --------
Expenses:
Rental:
Operating............................... 29,823 (713) 29,110
Real estate taxes....................... 28,372 2,754 31,126
Hotel:
Operating............................... 43,634 (43,634) --
Real estate taxes....................... 3,100 (3,100) --
General and administrative................ 10,754 356 11,110
Interest.................................. 107,121 (54,060) 53,061
Interest--amortization of financing
costs.................................... 2,273 (830) 1,443
Depreciation and amortization............. 36,199 257 36,456
-------- -------- --------
Total expenses........................ 261,276 (98,970) 162,306
-------- -------- --------
Income before minority interests and
extraordinary item......................... 8,657 51,501 60,158
Minority interest in combined partnership... (384) -- (384)
-------- -------- --------
Income before minority interest in Operating
Partnership and extraordinary item......... 8,273 51,501 59,774
Minority interest in Operating Partnership.. -- (18,709) (18,709)
-------- -------- --------
Net income before extraordinary item........ $ 8,273 $ 32,792 $ 41,065
======== ======== ========
Net income before extraordinary item per
share...................................... $ 1.16
========
Weighted average number of shares
outstanding................................ 35,334
========
</TABLE>

The accompanying notes are an integral part of the pro forma condensed
consolidated statement of income.

F-3
<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

(DOLLARS IN THOUSANDS)

1. ORGANIZATION:

Boston Properties Inc. (the "Company"), which was formed in 1970, will be
reorganized to change its jurisdiction of organization from Massachusetts to
Delaware. The Company intends to qualify as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended, commencing with
its taxable year ending December 31, 1997. The Company will acquire the sole
general partnership interest in Boston Properties, L.P. (the "Operating
Partnership"), and will own a 68.7% partnership interest in the Operating
Partnership.

The Company has been reorganized to succeed to (i) the real estate
development redevelopment, ownership, acquisition, management, operating and
leasing business associated with the Predecessor Company and (ii) various
Property Partnerships under common control with the Company (collectively, the
"Boston Properties Predecessor Group" or the "Predecessor"). The Company will
contribute substantially all of its Greater Washington D.C. third-party
property management business to Boston Properties Management Company, Inc.
(the "Development and Management Company"), a company in which the Operating
Partnership will have a 95% economic interest.

2. FORMATION TRANSACTIONS:

The Offering

The Company has filed a registration statement on Form S-11 with the
Securities and Exchange Commission with respect to the public offering (the
"Offering") of 31.4 million common shares (exclusive of 4.7 million common
shares subject to the underwriters' over-allotment option) at an estimated
initial offering price of $25 per share. The Company will contribute certain
management and development operations and the net proceeds from the Offering
to the Operating Partnership in exchange for 35.3 million partnership units
("Units"), representing an approximate 68.7% interest, in the Operating
Partnership.

The Operating Partnership is the successor to the Boston Properties
Predecessor Group. Each property that is included in the financial statements
is currently owned by a Property Partnership affiliated with Boston
Properties, Inc. which controls the managing general partner and, in most
cases, a majority economic interest. Certain Property Partnerships will
contribute properties to the Operating Partnership, or will merge into the
Operating Partnership, in exchange for Units and the assumption of debt, and
the partners of such Property Partnerships will receive such proceeds either
directly as merger consideration or as a distribution from the Property
Partnership, and certain persons, both affiliated and not affiliated with the
Company, will contribute their direct and indirect interests in certain
Property Partnerships in exchange for units. The acquisition or contribution
of the various Boston Properties Predecessor Group interests will be accounted
for at their historical cost. The interests of some of the limited partners of
the Operating Partnership will be acquired by the Company with cash. The
acquisition of such limited partners' interests will be accounted for using
purchase accounting based on the cash paid, resulting in an incremental
increase in the basis of the Predecessor Company's real estate.

The Properties

Upon completion of the Offering, the Company will own a portfolio of 74
properties (72 properties at December 31, 1996) aggregating approximately 10.9
million square feet, 91% of which was developed or substantially redeveloped
by the Company. The properties consist of 62 office properties with
approximately 7.6 million net rentable square feet (including seven office
properties under development containing approximately 810,000 net rentable
square feet) and approximately 1.3 million additional square feet of
structured parking for 4,222 vehicles, nine industrial properties with
approximately 925,000 net rentable square feet, two hotels with a total of 833
rooms (consisting of approximately 750,000 square feet), and a parking garage
with 1,170 spaces

F-4
<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

(DOLLARS IN THOUSANDS)

(consisting of approximately 330,000 square feet). In addition, the Company
will own, have under contract or have an option to acquire six parcels of land
totaling 47.4 acres, which will support approximately 1,009,000 square feet of
development.

Third-Party Business

Substantially all of the Greater Washington D.C. third party property
management business will be contributed to the Development and Management
Company as described under "Organization." The other management and
development operations of the Company will be contributed to the Operating
Partnership.

Other

The Operating Partnership will enter into a participating lease with ZL
Hotel LLC. Marriott Hotels, Inc. will continue to manage the Hotel Properties
under the Marriott name pursuant to management agreements with ZL Hotel LLC.
Messrs. Zuckerman and Linde will be the sole member-managers of the lessee and
will own a 9.8% economic interest in ZL Hotel LLC. ZL Hotel Corp. will own the
remaining economic interests in ZL Hotel LLC. One or more public charities
will own all of the capital stock of ZL Hotel Corp.

Unsecured Line of Credit

Concurrent with the completion of the Offering, the Company expects to have
a three-year, $300 million Unsecured Line of Credit with the Line of Credit
Bank. The Unsecured Line of Credit will be a recourse obligation of the
Operating Partnership and will be guaranteed by the Company. The Company
intends to use the Unsecured Line of Credit principally to fund growth
opportunities and for working capital purposes. At the closing of the
Offering, the Company expects to draw down approximately $42.8 million ($22.1
million for pro forma presentation as of December 31, 1996) under this line of
credit.

The Unsecured Line of Credit will, at the Company's election, bear interest
at a floating rate based on a spread over LIBOR or the Line of Credit Bank's
prime rate, and will require monthly payments of interest only on prime rate
loans, with interest on LIBOR loans payable on the last day of an interest
period but not less often than quarterly. LIBOR loans may be for periods of
between thirty and 180 days.

The Line of Credit Bank has not yet issued a commitment to provide the
Unsecured Line of Credit. In the event a commitment is so issued, the
Unsecured Line of Credit will be subject to final approval and satisfactory
completion of the Offerings, completion by the Line of Credit Lender of its
due diligence and preparation and execution of an acceptable credit agreement.

Repayment of Mortgage Notes Payable and Notes Payable--Affiliate

Approximately $709,563 (as of December 31, 1996) of the net proceeds of the
Offering will be used to repay certain mortgage indebtedness collateralized by
the Properties as set forth in the following table and $22,117 (as of December
31, 1996) for notes due affiliates of the Company in respect of construction
loans advanced by them for certain of the Development Properties.

F-5
<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

(DOLLARS IN THOUSANDS)

Certain information regarding the indebtedness to be repaid is set forth
below:

MORTGAGE NOTES PAYABLE TO BE REPAID WITH A PORTION OF THE OFFERING PROCEEDS

<TABLE>
<CAPTION>
AMOUNT TO
INTEREST BE REPAID
PROPERTY MATURITY DATE RATE (IN 000'S)
-------- ------------------ -------- ----------
<S> <C> <C> <C>
599 Lexington Avenue................... April 19, 2005 8.000% $185,000
Democracy Center....................... July 24, 1998 6.700% 110,100
Long Wharf Marriott.................... June 28, 1997 6.200% 68,600
Cambridge Center Marriott.............. June 30, 1997 6.875% 61,000
The U.S. International Trade Commission
Building.............................. July 12, 1997 7.350% 50,000
One Cambridge Center................... June 30, 1997 6.875% 45,000
2300 N Street.......................... August 3, 1998 9.100% 34,000
Three Cambridge Center................. June 30,1997 6.875% 19,000
Lexington Office Park.................. June 30, 2001 6.500% 15,373
Waltham Office Center.................. October 1, 1997 9.500% 11,389
7601 Boston Boulevard, Building Eight.. August 15, 1997 6.750% 8,372
Eleven Cambridge Center................ October 1, 1997 9.500% 8,319
8000 Grainger Court, Building Five..... August 15, 1997 6.750% 7,664
Fourteen Cambridge Center.............. March 24, 2001 7.250% 6,748
7500 Boston Boulevard, Building Six.... August 15, 1997 6.759% 6,441
195 West Street........................ June 19, 1999 7.250% 5,856
7600 Boston Boulevard, Building Nine... August 16, 1997 6.750% 5,796
7435 Boston Boulevard, Building One.... October 1, 1997 9.500% 5,564
40-46 Harvard Street................... June 30, 2001 6.500% 5,380
170 Tracer Lane........................ October 1, 1997 9.500% 5,146
6201 Columbia Park Road, Building Two.. August 15, 1997 6.750% 5,023
Eight Arlington Street................. June 30, 2001 6.325% 4,611
32 Hartwell Avenue..................... October 1, 1997 9.500% 4,223
7374 Boston Boulevard, Building Four... October 1, 1997 9.500% 3,619
10-20 Burlington Mall Road............. July 1, 2001 8.330% 3,594
2000 South Club Drive, Building Three.. August 15, 1997 6.750% 3,542
204 Second Avenue...................... September 30, 2012 9.500% 3,374
25-33 Dartmouth Street................. October 1, 1997 9.500% 3,296
1950 Stanford Court, Building One...... August 15, 1997 6.750% 2,662
91 Hartwell Avenue..................... July 1, 2001 8.330% 2,448
7451 Boston Boulevard, Building Two.... October 1, 1997 9.500% 2,215
164 Lexington Road..................... November 30, 2000 7.800% 1,969
92 & 100 Hayden Avenue................. July 1, 2001 8.330% 1,958
2391 West Winton Avenue................ March 20, 2006 9.875% 1,343
17 Hartwell Avenue..................... October 1, 1997 9.500% 938
--------
$709,563
========
</TABLE>

3. BASIS OF PRESENTATION:

The accompanying unaudited pro forma financial information has been prepared
based upon certain pro forma adjustments to the historical combined financial
statements of the Boston Properties Predecessor Group.

The pro forma balance sheet of the Company as of December 31, 1996 has been
prepared as if the Formation Transactions, as discussed above, had been
consummated on December 31, 1996. The pro forma

F-6
<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

(DOLLARS IN THOUSANDS)

statement of income for the year ended December 31, 1996 has been prepared as
if the Formation Transactions had been consummated at January 1, 1996.

The Development and Management Company has been included in the pro forma
financial information under the equity method of accounting due to the
Operating Partnership's ownership of a noncontrolling, 1% voting interest.

The operations of the hotel properties and the parking garages have been
included in the pro forma financial information pursuant to participating
lease agreements to be entered into in order for the Company to continue to
qualify as a REIT under IRC Section 856.

The unaudited pro forma information is not necessarily indicative of what
the actual financial position would have been at December 31, 1996 or what the
actual results of operations would have been for the year ended December 31,
1996 had the Formation Transactions been consummated on December 31, 1996 or
January 1, 1996 and carried forward through the year presented, nor do they
purport to present the future financial position or results of operations of
the Company. The pro forma financial information should be read in conjunction
with the historical combined financial statements and notes thereto of the
Predecessor.

4. ASSUMPTIONS:

Certain assumptions regarding the operations of the Company have been made
in connection with the preparation of the pro forma financial information.
These assumptions are as follows:

(a) The pro forma financial information assumes that the Company has
elected to be, and qualified as, a REIT for federal income tax purposes and
has distributed all of its taxable income for the applicable periods, and,
therefore, incurred no federal income tax liabilities.

(b) Rental income has been recognized on a straight-line method of
accounting in accordance with generally accepted accounting principles.

(d) General and administrative expenses historically incurred by the
Properties and the Boston Properties Predecessor Group have been adjusted
to reflect the self-administered structure of the Company and the
additional expenses of being a public company.

(e) Pro forma net income per share has been calculated using 35.3 million
common shares as the weighted average number of shares outstanding during
the pro forma period reflecting the issuance of 31.4 million common shares
to the public in the Offering and 3.9 million common shares held by Messrs.
Zuckerman and Linde.

5. PRO FORMA ADJUSTMENTS FOR DECEMBER 31, 1996:

A. THE OFFERING:

(i) Balance Sheet

Reflects the initial capitalization of the Company including the issuance of
31.4 million Common shares in connection with the Offering at an assumed
initial public offering price of $25 per share. The estimated costs of the
Offering, totaling $57,987 have been reflected as an offset to Additional
paid-in capital. The resulting net proceeds of the Offering total $727,013. An
additional 3.9 million Common shares will be held by Messrs. Zuckerman and
Linde.

F-7
<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

(DOLLARS IN THOUSANDS)

B. OTHER ADJUSTMENTS:

(i) Balance Sheet

The following Pro Forma Adjustment Summary table summarizes the pro forma
adjustments made to the December 31, 1996 Boston Properties Predecessor Group
Balance Sheet. The column totals reflect the net adjustments presented in the
Balance Sheet on F-2. The summary below should be read in conjunction with the
following notes.

PRO FORMA ADJUSTMENT SUMMARY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
BALANCE SHEET
DECEMBER 31, 1996

<TABLE>
<CAPTION>
DEFERRED CASH AND MORTGAGE NOTES SHARE-
PRO FORMA REAL FINANCING CASH NOTES PAYABLE- MINORITY HOLDERS'
ADJUSTMENT ESTATE COSTS, NET EQUIVALENTS ESCROWS PAYABLE AFFILIATE INTEREST EQUITY
- ---------- ------- ---------- ----------- -------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5B(i)(1) Purchase of
limited
partners'
interests...... $414 $(550) $ 136
5B(i)(2) Transfer costs
paid........... 9,869 (9,869)
5B(i)(3) Deferred
financing costs
and mortgage
loan prepayment
penalties,
net............ $(96) (8,692) 8,788
5B(i)(4) Mortgage loan
repayment,
net............ (709,563) $(687,446) $(22,117)
5B(i)(5) Extinguishment
of 599
Lexington
debt........... (20,239) (20,239)
5B(i)(6) Release of
escrows........ $(15,419) 15,419
5B(i)(7) Predecessor
ownership...... $ 45,785 (45,785)
------- ---- --------- -------- --------- -------- -------- --------
Pro Forma other
adjustments total.... $10,283 $(96) $(728,674) $(15,419) $(707,685) $(22,117) $ 45,785 $(49,889)
======= ==== ========= ======== ========= ======== ======== ========
</TABLE>
- --------
(1) Reflects the incremental increase in basis of the Predecessor Company's
Real Estate resulting from the purchase of the limited partners' interest
in the Operating Partnership.
(2) Represents the transfer costs paid and the corresponding increase in
basis of the property totaling $9,869 in connection with the contribution
of the property by Boston Properties Predecessor Group concurrent with
the Offering.
(3) Represents the write-off to Stockholders' Equity of previously
capitalized deferred financing costs on mortgage loans to be repaid
concurrent with the Offering, offset by the capitalization for the
financing fee and related professional costs to be incurred on the
Unsecured Line of Credit and prepayment penalties of $6,892 on early
retirement of mortgage loans charged directly to pro forma Shareholders'
equity.
(4) Reflects the expected paydown of (i) outstanding mortgage loans of the
properties and (ii) the notes payable due to affiliates in the amounts
(as of December 31, 1996) of $709,563 and $22,117, respectively, with
proceeds from the Offering, net of anticipated borrowings from the
Unsecured Line of Credit totaling $22,117 as follows:

<TABLE>
<S> <C>
Repayment of mortgage notes payable.............................. $(709,563)
Drawdown of Unsecured Line of Credit............................. 22,117
---------
Net mortgage loan repayments................................... $(687,446)
=========
</TABLE>

F-8

<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

(DOLLARS IN THOUSANDS)

(5) Represents the increase to Pro Forma Stockholders' Equity for the excess
mortgage note payable balance over principal repayment required for the
599 Lexington Avenue loan necessitated by this increasing rate loan being
accounted for on the effective interest method. (See Footnote #3 in the
Boston Properties Predecessor Group Historical Combined Financial
Statements)
(6) Reflects the release of cash previously required to be held in escrow per
the terms of the various mortgage notes payable agreements. The cash will
be distributed to the Predecessor owner concurrent with the repayment of
the related mortgage notes payable.

(7) Represents the equity attributable to Units owned by the Boston
Properties Predecessor Group. The Company is the sole general partner of
the Operating Partnership and will own approximately 68.7% of the
Operating Partnership. Persons with an interest in the Property
Partnerships prior to the Formation Transactions will own in the
aggregate 16,066,459 Units, which will represent an approximate 31.3%
minority interest in the Operating Partnership. The minority interest is
reported as the equity of the Operating Partnership multiplied by such
persons' ownership percentage in the Operating Partnership.

(ii) Statement of Income

The following Pro Forma Adjustment Summary table summarizes the other pro
forma adjustments made to the Boston Properties Predecessor Group's Statement
of Operations for the year ended December 31, 1996. The column totals reflect
the net adjustments presented on the Statement of Income on F-3. The summary
below should be read in conjunction with the following notes.

F-9
<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

(DOLLARS IN THOUSANDS)

PRO FORMA ADJUSTMENT SUMMARY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
RENT HOTEL
HOTELS INTEREST PROPERTY PROPERTY HOTEL REAL
PRO FORMA AND PARKING HOTEL MGMT AND OPERATING REAL ESTATE OPERATING ESTATE
ADJUSTMENTS GARAGE INCOME REVENUE FEES OTHER EXPENSES TAXES EXPENSES TAXES
- ----------- ------ ------- -------- ------- -------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5B(ii)(1)
Assignment
of
contracts $(1,414)
5B(ii)(2) Equity
investment
income... $66
5B(ii)(3) Operation
of hotels
and
garages.. $(2,043) $(65,678) $(713) $2,754 $(43,634) $ (3,100)
5B(ii)(4) Rental of
hotels
and
garages.. $22,371
5B(ii)(5) General
and
admin....
5B(ii)(6) Mortgage
interest..
5B(ii)(7) Amortization
of
deferred
financing
costs....
5B(ii)(8) Release
of
restricted
cash..... (771)
5B(ii)(9) Depreciation
Expense..
5B(ii)(10) Predecessor
ownership..
------- ------- -------- ------- ----- ----- ------ -------- --------
Pro Forma other
adjustments
total........... $22,371 $(2,043) $(65,678) $(1,414) $(705) $(713) $2,754 $(43,634) $(3,100)
======= ======= ======== ======= ===== ===== ====== ======== ========
<CAPTION>
GENERAL INTEREST DEPREC-
PRO FORMA OFFICE & INTEREST EXPENSE IATION MINORITY
ADJUSTMENTS ADMIN EXPENSE AMORT EXPENSE INTEREST
- ----------- --------- --------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
5B(ii)(1)
Assignment
of
contracts $(1,344)
5B(ii)(2) Equity
investment
income...
5B(ii)(3) Operation
of hotels
and
garages..
5B(ii)(4) Rental of
hotels
and
garages..
5B(ii)(5) General
and
admin.... 1,700
5B(ii)(6) Mortgage
interest.. $(54,060)
5B(ii)(7) Amortization
of
deferred
financing
costs.... $(830)
5B(ii)(8) Release
of
restricted
cash.....
5B(ii)(9) Depreciation
Expense.. $257
5B(ii)(10) Predecessor
ownership.. $(18,709)
--------- --------- -------- ------- ---------
Pro Forma other
adjustments
total........... $ 356 $(54,060) $(830) $257 $(18,709)
========= ========= ======== ======= =========
</TABLE>

F-10

<PAGE>

BOSTON PROPERTIES, INC.

NOTES AND MANAGEMENT'S ASSUMPTIONS TO THE
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

(DOLLARS IN THOUSANDS)

- --------

(1) In connection with the Formation Transactions, certain third-party
management contracts will be assigned to the Development and Management
Company. As a result of the assignment, current operating income, expenses
and overhead attributable to the contracts will be reflected in the
operations of the Development and Management Company as detailed below:

<TABLE>
<S> <C>
Management services................................................. $1,414
General and administrative expenses................................. (1,344)
------
Manager contract income............................................ $ 70
======
</TABLE>

(2) The Operating Partnership will hold a 95% economic interest in the
Development and Management Company and record an equity interest of $66 on
the $70 net income.

(3) In connection with the Formation Transactions, the Operating Partnership
will enter into participating leases for the operation of the hotels and
parking garage. As a result of these agreements, revenue and expenses will
not be reflected from the operation of these businesses.

(4) Represents rental income from the leasing of the hotels and parking garage
owned by the Operating Partnership. The hotel lease arrangements are with
an affiliate.
(5) Reflects an increase of $1,700 in general and administrative expenses as a
result of being a public company.
(6) Reflects the net decrease in interest expense as a result of the repayment
of a portion of the existing mortgage indebtedness in connection with the
Offering. The following outlines the mortgage notes payable to be
outstanding subsequent to the Offering and the corresponding interest
expense incurred in 1996:

<TABLE>
<CAPTION>
PRINCIPAL INTEREST INTEREST
AMOUNT RATE (IN 000'S)
PROPERTY(IES) --------- -------- ----------
<S> <C> <C> <C>
599 Lexington Avenue.................... $225,000 7.00% $15,750(a)
Two Independence Square................. 122,855 7.90% 9,813
One Independence Square................. 78,700 7.90% 6,276
Capital Gallery......................... 60,751 8.24% 5,761
2300 N Street........................... 66,000 7.25% 4,785(a)
Ten Cambridge Center.................... 25,000 7.57% 1,924
191 Spring Street....................... 23,942 8.50% 1,697
Bedford Business Park................... 23,500 8.50% 1,998(a)
10 & 20 Burlington Mall Road............ 16,621 8.33% 1,385
Cambridge Center North Garage........... 15,000 7.57% 1,183
91 Hartwell Avenue...................... 11,322 8.33% 943
92 & 100 Hayden Avenue.................. 9,057 8.33% 754
Montvale Center......................... 7,992 8.59% 474
Hilltop Business Center................. 4,817 7.00% 318
-------- -------
Pro forma totals........................ $690,557 53,061(b)
======== -------
Historical interest expense for the year
ended December 31, 1996................ 107,121
-------
Pro forma interest expense adjustment... $54,060
=======
</TABLE>
--------
(a) The interest expense used in this calculation assumes the mortgage
loan was outstanding during all of 1996.
(b) Interest on the outstanding balance on the Unsecured Line of Credit
to be used for development purposes is assumed to be capitalized
for purposes of the pro forma presentation.
(7) Reflects the net increase of $600 in the amortization of Deferred
financing costs for the $1,800 fee and related professional costs on the
Unsecured Line of Credit, less a reduction of $1,430 in amortization of
Deferred financing costs related to debt paid off with the Offering
proceeds.
(8) Reflects the decrease in interest income as a result of the release of
cash previously required to be held in escrow per the terms of the various
mortgage note payable agreements.

(9) Reflects the increase in depreciation from depreciating over 40 years the
pro forma increase to real estate from the purchase of limited partners'
interests and transfer costs paid.

(10) Represents net income attributable to the minority interest in the
Operating Partnership to be held by persons who had an interest in the
Property Partnerships prior to the Formation Transactions. Such persons
will own in the aggregate approximately 31.3% of the Operating
Partnership. The Company, is the sole general partner and will own
approximately 68.7% of the Operating Partnership.

F-11
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners and Owners of
the Boston Properties Predecessor Group

We have audited the accompanying combined balance sheets of the Boston
Properties Predecessor Group as of December 31, 1996 and 1995, and the related
combined statements of operations, owners' equity (deficit), and cash flows
for each of the three years in the period ended December 31, 1996 and the
financial statement schedule included on the index at F-1 of this Prospectus.
These combined financial statements and financial statement schedule are the
responsibility of the management of the Boston Properties Predecessor Group.
Our responsibility is to express an opinion on these combined financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Boston Properties Predecessor Group as of December 31, 1996 and 1995, and the
combined results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic combined financial statements taken as a whole, presents fairly, in
all material respects, the information required to be set forth therein.

/S/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 1, 1997

F-12
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

COMBINED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Real estate and equipment:
Land and land improvements.......................... $ 169,424 $ 169,721
Buildings and improvements.......................... 702,720 698,053
Tenant improvements................................. 107,808 101,701
Furniture, fixtures and equipment................... 34,034 32,831
Development and construction in process............. 21,585 10,018
---------- ----------
1,035,571 1,012,324
Less: accumulated depreciation...................... (263,911) (238,514)
---------- ----------
Total real estate and equipment................... 771,660 773,810
Cash and cash equivalents............................. 8,998 25,867
Escrows............................................... 25,474 27,716
Tenant and other receivables.......................... 12,049 14,362
Accrued rental income................................. 49,206 49,681
Tenant leasing costs net of accumulated amortization
of $29,859 in 1996 and $26,047 in 1995............... 18,308 18,043
Deferred financing costs, net of accumulated
amortization of $22,768 in 1996 and $20,772 in 1995.. 6,414 4,786
Prepaid expenses and other assets..................... 4,402 8,521
---------- ----------
Total assets...................................... $ 896,511 $ 922,786
========== ==========
LIABILITIES AND OWNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage notes payable.............................. $1,420,359 $1,396,141
Notes payable--affiliate............................ 22,117 5,267
Accounts payable and accrued expenses............... 13,795 14,367
Accrued interest payable............................ 9,667 9,088
Rents received in advance, security deposits and
other liabilities.................................. 7,205 4,576
---------- ----------
Total liabilities................................. 1,473,143 1,429,439
Commitments and contingencies......................... -- --
Owners' equity (deficit).............................. (576,632) (506,653)
---------- ----------
Total liabilities and owners' equity (deficit).... $ 896,511 $ 922,786
========== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-13
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

COMBINED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Rental:
Base rent................................... $169,420 $155,614 $153,101
Recoveries from tenants..................... 22,607 21,124 21,710
Parking and other........................... 2,979 2,527 1,914
-------- -------- --------
Total rental revenue...................... 195,006 179,265 176,725
Hotel......................................... 65,678 61,320 58,436
Development and management services........... 5,719 4,444 6,090
Interest and other............................ 3,530 3,696 2,832
-------- -------- --------
Total revenue............................. 269,933 248,725 244,083
-------- -------- --------
Expenses:
Rental:
Operating................................... 29,823 27,142 25,061
Real estate taxes........................... 28,372 28,279 28,178
Hotel:
Operating................................... 43,634 41,501 40,276
Real estate taxes........................... 3,100 2,517 2,477
General and administrative.................... 10,754 10,372 10,123
Interest...................................... 107,121 106,952 95,331
Interest--amortization of financing costs..... 2,273 1,841 1,942
Depreciation and amortization................. 36,199 33,828 33,112
-------- -------- --------
Total expenses............................. 261,276 252,432 236,500
-------- -------- --------
Income (loss) before extraordinary item and
minority interest.............................. 8,657 (3,707) 7,583
Minority interest in combined partnership....... (384) (276) (412)
-------- -------- --------
Income (loss) before extraordinary item......... 8,273 (3,983) 7,171
Extraordinary item-loss on early extinguishment
of debt........................................ (994) -- --
-------- -------- --------
Net income (loss)............................... $ 7,279 $ (3,983) $ 7,171
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-14
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

COMBINED STATEMENTS OF OWNERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
Balance at January 1, 1994...................................... $(495,104)
Contributions................................................. 24,323
Net income.................................................... 7,171
Distributions................................................. (38,620)
---------
Balance at December 31, 1994.................................... (502,230)
Contributions................................................. 44,661
Net loss...................................................... (3,983)
Distributions................................................. (45,101)
---------
Balance at December 31, 1995.................................... (506,653)
Contributions................................................. 33,279
Net income.................................................... 7,279
Distributions and conversion of equity to note payable-
affiliate.................................................... (110,537)
---------
Balance at December 31, 1996.................................... $(576,632)
=========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-15
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

COMBINED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ 7,279 $ (3,983) $ 7,171
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization................ 36,199 33,828 33,112
Amortization of financing costs.............. 2,273 1,841 1,942
Accrued rental income........................ 475 (360) 1,252
Effective interest adjustment................ 644 1,347 3,131
Change in operating assets/liabilities:
Tenant receivables........................... 2,313 (1,049) 270
Escrows...................................... (1,033) 692 21
Prepaid expenses and other assets............ 2,777 (360) 1,550
Accounts payable and accrued expenses........ (1,673) (2,219) 267
Accrued interest payable..................... 579 1,667 (62)
Rent received in advance, security deposits
and other liabilities....................... 3,971 (471) (1,088)
-------- -------- --------
Cash flows provided by operating activities... 53,804 30,933 47,566
-------- -------- --------
Cash flows from investing activities:
Acquisition of or additions to real estate and
equipment..................................... (30,238) (33,960) (11,878)
Tenant leasing costs........................... (4,077) (3,191) (1,554)
Escrows........................................ 9,525 307 (4,992)
Change in accounts payable..................... 1,101 -- --
-------- -------- --------
Cash flows used in investing activities....... (23,689) (36,844) (18,424)
-------- -------- --------
Cash flows from financing activities:
Owners' contributions.......................... 33,279 44,661 24,323
Owners' distributions.......................... (105,619) (45,101) (38,620)
Proceeds from mortgage notes payable........... 117,269 1,200 --
Proceeds from notes payable--affiliate......... 11,933 171 (236)
Repayment of mortgage notes payable............ (93,695) (14,641) (16,445)
Escrows........................................ (6,250) -- --
Deferred financing costs....................... (3,901) (801) (2,572)
-------- -------- --------
Cash flows used in financing activities....... (46,984) (14,511) (33,550)
-------- -------- --------
Net decrease in cash and cash equivalents........ (16,869) (20,422) (4,408)
Cash and cash equivalents, beginning of year..... 25,867 46,289 50,697
-------- -------- --------
Cash and cash equivalents, end of year........... $ 8,998 $ 25,867 $ 46,289
======== ======== ========
Supplemental cash flow information:
Cash paid for interest......................... $107,700 $108,618 $ 95,269
======== ======== ========
Interest capitalized........................... $ 366 $ 1,543 $ --
======== ======== ========
Supplemental disclosure of noncash transaction:
Conversion of owners' equity to notes payable-
affiliate..................................... $ 4,918 $ -- $ --
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-16
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. ORGANIZATION AND BASIS OF PRESENTATION:

The accompanying combined financial statements comprise interests in
properties and the third party commercial real estate development, project
management and property management business of Boston Properties, Inc. at
December 31, 1996.

The accompanying financial statements have been presented on a combined
basis because of the affiliates, general partners and common management which
control the business operations of each entity and because the Properties are
expected to be the subject of a business combination with Boston Properties,
Inc. (the "Company"), which was formed in 1970 and will be reorganized to
change its jurisdiction of organization from Massachusetts to Delaware and is
expected to qualify as a real estate investment trust under the Internal
Revenue Code of 1986, as amended.

The entities owning the properties and Boston Properties, Inc. collectively
are referred to as the "Boston Properties Predecessor Group" or the
"Predecessor."

The interests in properties at December 31, 1996 included in the
accompanying combined financial statements consist of 72 commercial real
estate properties (the "Properties") aggregating approximately 9.2 million
square feet. The Predecessor owns a 100% fee interest in 60 of the Properties.
The Predecessor also owns a 75.0% general partner interest (100% economic
interest as a result of a priority of the Predecessor's interest in one of the
properties which comprises approximately 120,000 square feet). Additionally,
the Predecessor owns a 35.7% controlling general partnership interest in 11 of
the properties which comprise approximately 204,500 square feet. The
Properties consist of 60 office properties with approximately 7.1 million net
rentable square feet, including five office properties currently under
development or redevelopment totaling approximately 371,000 net rentable
square feet (the "Office Properties"); nine industrial properties with
approximately 925,000 net rentable square feet (the "Industrial Properties");
two full service hotels totaling 833 rooms and approximately 750,000 square
feet (the "Hotel Properties"); and a 1,170 space parking garage with
approximately 332,000 square feet located within the Company's mixed-use
development in East Cambridge, Massachusetts (the "Garage Property"). The
Properties are primarily located in ten submarkets, including five submarkets
in Greater Boston (the East Cambridge, Route 128 NW, Route 128/Massachusetts
Turnpike, Route 128 SW and downtown Boston submarkets), five submarkets in
Greater Washington, D.C. (the Southwest and West End Washington, D.C.,
Montgomery County, Maryland, Fairfax County, Virginia and Prince George's
County, Maryland Submarkets) and midtown Manhattan (the Park Avenue
Submarket). The Predecessors' single largest Property, with approximately 1.0
million net rentable square feet, is an Office Property located in the Park
Avenue submarket of midtown Manhattan.

Boston Properties L.P. (the "Operating Partnership") has acquired the right
to purchase from the partners and owners in the Predecessor their interests
therein in exchange for an interest in the Operating Partnership, which will
hold the operating assets of the Company. The Company will be the general and
majority partner of the Operating Partnership. The Operating Partnership will
hold all of the assets of the Predecessor entities as a result of the expected
business combination. Due to the affiliation of the Predecessor, the business
combination will be accounted for as a reorganization of entities under common
control which is similar to the accounting used for a pooling of interests.
All significant intercompany balances and transactions have been eliminated in
the combined presentation.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. REAL ESTATE AND EQUIPMENT

Real estate and equipment are stated at depreciated cost. The Company will
record impairment losses on long-lived assets used in operation, when events
and circumstances indicate that the assets might be impaired

F-17
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

and the estimated undiscounted cash flows to be generated by those assets are
less than the carrying amount of those assets. No such impairment losses have
been recognized to date.

The cost of buildings and improvements includes the purchase price of
property, legal fees, acquisition costs as well as interest, property taxes
and other costs incurred during the period of development.

Depreciation is computed on the straight line basis over the estimated
useful lives of the assets, as follows:

<TABLE>
<S> <C>
Land improvements............................. 25 to 40 years
Building costs................................ 10 to 40 years
Tenant improvements........................... Terms of the lease useful life
Furniture, fixtures, and equipment............ 5 to 7 years
</TABLE>

Depreciation expense for corporate furniture, fixtures, and equipment and
corporate occupied real property was $556, $588 and $603 for the years ended
December 31, 1996, 1995 and 1994, respectively.

Expenditures for repairs and maintenance are charged to operations as
incurred. Significant betterments are capitalized.

When assets are sold or retired, their costs and related accumulated
depreciation are removed from the accounts with the resulting gains or losses
reflected in net income or (loss) for the period.

B. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and investments with
maturities of three months or less from the date of purchase. The majority of
the Predecessor's cash and cash equivalents are held at major commercial
banks. The Predecessor has not experienced any losses to date on its invested
cash.

C. ESCROWS

Escrows include amounts established pursuant to various agreements for
security deposits, property taxes, insurance and capital improvements.

D. REVENUE RECOGNITION

Base rental revenue is reported on a straight-line basis over the terms of
the respective leases. The impact of the straight line rent adjustment
decreased revenues by $475, increased revenues by $360, and decreased revenues
by $1,252 for the years ended December 31, 1996, 1995 and 1994, respectively.

Accrued rental income represents rental income earned in excess of rent
payments received pursuant to the terms of the individual lease agreements,
net of an allowance for doubtful accounts.

Development fees are recognized ratably over the period of development.
Management fees are recognized as revenue as they are earned.

Revenue recognition of fees received for lease terminations are deferred and
amortized to income using the straight line method over the remaining original
lease term until the space is subsequently leased.

E. INCOME TAXES

No provision for income taxes is necessary in the financial statements of
the Predecessor since the Predecessor's statements combine the operations and
balances of partnerships, trusts and an S-corporation, none

F-18
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

of which is directly subject to income tax. The tax effect of its activities
accrues to the individual partners and or principals of the respective entity.

Certain entities included in the Predecessor's combined financial statements
are subject to District of Columbia franchise taxes. Franchise taxes are
recorded as rental operating expenses in the accompanying combined financial
statements.

F. TENANT LEASING COSTS

Fees and costs incurred in the successful negotiation of leases, including
brokerage, legal and other costs have been deferred and are being amortized on
a straight line basis over the terms of the respective leases.

G. DEFERRED FINANCING COSTS

Fees and costs incurred to obtain long-term financing have been deferred and
are being amortized over the terms of the respective loans on a basis which
approximates the effective interest method.

H. INTEREST EXPENSE

Interest expense on fixed rate debt with periodic rate increases is computed
using the effective interest method over the terms of the respective loans.

I. PARTNERS' CAPITAL CONTRIBUTIONS, DISTRIBUTIONS AND PROFITS AND LOSSES

Partners' capital contributions, distributions and profits and losses are
allocated in accordance with the terms of individual partnership agreements.

J. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

3. MORTGAGE NOTES PAYABLE:

Mortgage notes payable are comprised of 44 loans at December 31, 1996 and
1995, each of which is collateralized by a building and related land included
in real estate assets. The mortgage notes payable are generally due in monthly
installments and mature at various dates through September 30, 2012. Interest
rates on fixed rate mortgage notes payable aggregating $1,013,361 and $929,226
at December 31, 1996 and 1995, respectively, range from 7.35% to 9.88%
(averaging 8.18% at December 31, 1996). Interest rates on variable rate
mortgage notes payable aggregating $385,985 and $446,546 at December 31, 1996
and 1995, respectively, range from 0.7% above the London Interbank Offered
Rate ("LIBOR") 5.5% at December 31, 1996 to 1.75% above the LIBOR rate.

The interest rates related to the mortgage notes payable for three
properties aggregating $610,782 and $612,657 at December 31, 1996 and 1995 are
subject to periodic scheduled rate increases. Interest expense for these
mortgage notes payable is computed using the effective interest method. The
impact of using this method increased interest expense $644, $1,347 and $3,131
for the years ended December 31, 1996, 1995 and 1994, respectively. The
cumulative liability related to these adjustments is $21,013 and $20,369 at
December 31, 1996 and 1995, respectively, and is included in mortgage notes
payable.

F-19
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Combined aggregate principal maturities of mortgage notes payable at
December 31, 1996 are as follows:

The extraordinary loss reflected in the statement of operations for the year
ended December 31, 1996 resulted from a prepayment penalty upon the early
principal repayment of a mortgage note payable.

Certain mortgage notes payable are subject to prepayment penalties of
varying amounts in the event of an early principal repayment.

4. LEASING ACTIVITIES:

Future minimum lease payments to be received as of December 31, 1996 under
noncancelable operating leases, which expire on various dates through 2012,
are as follows:

<TABLE>
<S> <C>
Years ending December 31:
1997............................................................. $161,817
1998............................................................. 146,721
1999............................................................. 137,180
2000............................................................. 122,164
2001............................................................. 110,626
Thereafter....................................................... 506,398
</TABLE>

One major tenant, the General Services Administration, represented 15%, 17%
and 16% of the Predecessor's total rental income for the years ended December
31, 1996, 1995, and 1994, respectively.

5. RELATED PARTY TRANSACTIONS:

Notes payable--affiliate consists of amounts funded by affiliates for office
buildings under renovation or construction. The notes bear interest at the
prime rate plus 1% and are due on demand.

Rental income of $10,455, $10,522 and $10,518 has been received from
affiliates for 1996, 1995 and 1994, respectively.

Development fees of $25, $125, and $478, have been received from affiliates
for 1996, 1995, and 1994, respectively.

Management fees and other income of $419, $554, and $544, have been received
from affiliates for 1996, 1995, and 1994, respectively.

Additionally, certain mortgage notes payable aggregating $214,005 at
December 31, 1996 are guaranteed by affiliates of the Predecessor.

6. SAVINGS PLAN:

Effective January 1, 1985, the Predecessor adopted a 401(K) Savings Plan
(the "Plan") for its employees. Under the Plan, employees, age 18 and older,
are eligible to participate in the Plan after they have completed three months
of service. In addition, participants may elect to make an after-tax
contribution of up to 10% of their wages.

The Plan provides that matching employer contributions are to be determined
at the discretion of the Predecessor. The Predecessor matches 200% of the
first 2% of pay (utilizing pay that is not in excess of $100). The

F-20
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

cost to the Predecessor of this matching for the years ended December 31,
1996, 1995 and 1994, was $359, $319 and $216, respectively.

Participants are immediately vested in their pre-tax and after-tax
contributions. Participants vest in the Predecessor's matching contributions
and earnings thereon over a seven year period.

7. COMMITMENTS AND CONTINGENCIES:

Legal Matters

The Predecessor is subject to various legal proceedings and claims that
arise in the ordinary course of business. These matters are generally covered
by insurance. The Predecessor believes that the final outcome of such matters
will not have a material adverse effect on the financial position, results of
operations or liquidity of the Predecessor.

Environmental Matters

On January 9, 1997, the Predecessor received a Notice of Potential
Responsibility ("NOR") related to groundwater contamination at one of the
Predecessor's properties located in Massachusetts. The lease with the tenant
of the property contains an indemnification from the tenant to the Predecessor
for liability due to the tenant's actions. The tenant is currently conducting
an investigation. The Predecessor expects that any resolution will not have a
material impact on the financial position, results of operations or liquidity
of the Predecessor.

Development

The Predecessor has entered into contracts for the construction and
renovation of projects currently under development. Commitments under these
arrangements totaled approximately $37 million at December 31, 1996.

The Predecessor has future development rights related to the purchase,
construction, and completion of approximately 1.4 million square feet of
office and industrial space. The Predecessor is required to make minimum
deposits of $1 million during the next six years to maintain these rights. If
the Predecessor elects to purchase the land, all deposits would be applied to
the purchase price.

Management Contracts

The hotels are managed pursuant to contracts which expire in 2012 with a
national hotel management company. These agreements include base and incentive
fee provisions. The fees under these agreements aggregated $4,974, $4,410 and
$4,001 for the years ended December 31, 1996, 1995 and 1994, respectively.

8. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying values of cash and cash equivalents, escrows, receivables,
accounts payable, accrued expenses and other assets and liabilities are
reasonable estimates of their fair values because of the short maturities of
these instruments. Mortgage notes payable have aggregate carrying values which
approximate their estimated fair values based upon the remaining maturities
for certain debt and interest rates for debt with similar terms and remaining
maturities.

F-21
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CON-
NECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SO-
LICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.

---------------

SUMMARY TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Summary Selected Financial Information................................... 20
Risk Factors............................................................. 23
The Company.............................................................. 33
Business and Growth Strategies........................................... 37
Use of Proceeds.......................................................... 41
Distributions............................................................ 42
Capitalization........................................................... 46
Dilution................................................................. 48
Selected Financial Information........................................... 49
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 52
Business and Properties.................................................. 57
Unsecured Line of Credit................................................. 102
Management............................................................... 103
Policies with Respect to Certain Activities.............................. 112
Structure and Formation of the Company................................... 115
Operating Partnership Agreement.......................................... 118
Principal Stockholders................................................... 122
Description of Capital Stock............................................. 123
Certain Provisions of Delaware Law and the Company's Certificate of
Incorporation and Bylaws................................................ 128
Shares Available for Future Sale......................................... 131
Federal Income Tax Consequences.......................................... 132
Underwriting............................................................. 144
Experts.................................................................. 147
Legal Matters............................................................ 147
Additional Information................................................... 147
Glossary................................................................. 148
Index to Financial Statements............................................ F-1
</TABLE>

---------------

UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN THIS DIS-
TRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF THE DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

31,400,000 SHARES

LOGO

BOSTON PROPERTIES, INC.

COMMON STOCK

---------------

PROSPECTUS

---------------

Joint Lead Managers

and Joint Bookrunners

MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.

---------------

BEAR, STEARNS & CO., INC.

MORGAN STANLEY & CO.
INCORPORATED

PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED SMITH BARNEY INC.

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PROSPECTUS SUBJECT TO COMPLETION MAY 20, 1997
31,400,000 SHARES
BOSTON PROPERTIES, INC.
LOGO
COMMON STOCK

----------
Boston Properties, Inc. (together with its subsidiaries, the "Company") has
been formed to succeed to the real estate development, redevelopment,
acquisition, management, operating and leasing businesses associated with the
predecessor company founded by Mortimer B. Zuckerman and Edward H. Linde in
1970. The Company is one of the largest owners and developers of office
properties in the United States, with a significant presence in five submarkets
in Greater Boston, five submarkets in Greater Washington, D.C. and the Park
Avenue submarket of midtown Manhattan. Upon completion of this offering (the
"Offering"), the Company will own a portfolio of 74 properties aggregating
approximately 10.9 million square feet, 91% of which was developed or
substantially redeveloped by the Company. The properties consist of 62 office
properties with approximately 7.6 million net rentable square feet (including
seven office properties under development that will consist of approximately
810,000 net rentable square feet) and approximately 1.3 million additional
square feet of structured parking for 4,222 vehicles; nine industrial
properties with approximately 925,000 net rentable square feet; two hotels with
a total of 833 rooms consisting of approximately 750,000 square feet; and a
parking garage with 1,170 spaces (consisting of approximately 330,000 square
feet). In addition, the Company will own, have under contract or have options
to acquire six parcels of land totaling 47.4 acres, which will support
approximately 1.0 million square feet of development.

----------

Joint Lead Managers and Joint Bookrunners

MERRILL LYNCH INTERNATIONAL GOLDMAN SACHS INTERNATIONAL

----------
BEAR, STEARNS INTERNATIONAL LIMITED

MORGAN STANLEY & CO.

INTERNATIONAL
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
PRUDENTIAL-BACHE SECURITIES
SMITH BARNEY INC.
----------

The date of this Prospectus is , 1997.
<PAGE>

UNDERWRITING

Subject to the terms and conditions in the international purchase agreement
(the "International Purchase Agreement"), among the Company and each of the
underwriters named below (the "International Managers"), and concurrently with
the sale of 25,120,000 shares to the U.S. Underwriters (as defined below), the
Company has agreed to sell to each of the International Managers, for whom
Merrill Lynch International, Goldman Sachs International, Bear, Stearns
International Limited, Morgan Stanley & Co. International Limited, PaineWebber
International (U.K.) Ltd., Prudential-Bache Securities, and Smith Barney Inc.
are acting as lead managers (the "Lead Managers"), and each of the
International Managers has severally agreed to purchase from the Company, the
respective number of shares of Common Stock set forth opposite their
respective names:

<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch International.....................................
Goldman Sachs International.....................................
Bear, Stearns International Limited.............................
Morgan Stanley & Co. International Limited......................
PaineWebber International (U.K.) Ltd. ..........................
Prudential-Bache Securities.....................................
Smith Barney Inc. ..............................................
---------
Total...................................................... 6,280,000
=========
</TABLE>

The Company has also entered into a purchase agreement (the "U.S. Purchase
Agreement" and, together with the International Purchase Agreement, the
"Purchase Agreements") with certain underwriters in the United States and
Canada (the "U.S. Underwriters" and, together with the International
Underwriters, the "Underwriters") for whom Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Morgan
Stanley & Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated, and Smith Barney Inc. are acting as representatives. Subject to
the terms and conditions set forth in the U.S. Purchase Agreement and
concurrently with the sale of 6,280,000 shares of Common Stock to the
International Managers pursuant to the International Purchase Agreement, the
Company has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters
have severally agreed to purchase from the Company, an aggregate of 25,120,000
shares of Common Stock. The initial public offering price per share and the
total underwriting discount per share are identical under the U.S. Purchase
Agreement and the International Purchase Agreement.

The Lead Managers have advised the Company that the International Managers
propose to offer the Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus, and to certain banks,
brokers and dealers (the "Selling Group") at such price less a concession not
in excess of $ per share. The International Managers may allow, and such
dealers may re-allow with the consent of Merrill Lynch International, a
discount not in excess of $ per share on sales to certain other
International Managers and members of the Selling Group. After the date of
this Prospectus, the public offering price and concession and discount may be
changed.

144
<PAGE>

shares of Common Stock to persons who are United States persons or Canadian
persons or to persons they believe intend to resell to persons who are United
States persons or Canadian persons, and the U.S. Underwriters and any dealer to
whom they sell shares of Common Stock will not offer to sell or sell shares of
Common Stock to persons who are non-United States and non-Canadian persons or
to persons they believe intend to resell to non-United States and non-Canadian
persons, except in each case for transactions pursuant to such agreement.

The Company has granted to the International Managers an option, exercisable
for 30 days after the date of this Prospectus, to purchase up to 942,000
additional shares of Common Stock to cover overallotments, if any, at the
initial public offering price, less the underwriting discount set forth on the
cover page of this Prospectus. If the International Managers exercise this
option, each International Manager will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage thereof which
the number of shares of Common Stock to be purchased by it shown in the
foregoing table bears to such International Managers' initial amount reflected
in the foregoing table. The Company also has granted an option to the U.S.
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to 3,768,000 additional shares of Common Stock to
cover overallotments, if any, on terms similar to those granted to the
International Managers.

At the request of the Company, the U.S. Underwriters have reserved up to
shares of Common Stock for sale at the public offering price to certain
employees of the Company, their business affiliates and related parties who
have expressed an interest in purchasing shares. The number of shares available
to the general public will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares that are not so purchased by such persons
at the completion of the Offerings will be offered by the U.S. Underwriters to
the general public on the same terms as the other shares offered by this
Prospectus.

The Company, the Operating Partnership and certain persons who owned
interests in one or more of the Properties prior to the Offering and who
received OP Units in exchange for such interests in the Formation Transactions
(the "Non-Affiliated Participants") have agreed, subject to certain exceptions,
not to sell, offer or contract to sell, grant any option for the sale of, or
otherwise dispose of any shares of Common Stock or OP Units, or any securities
convertible into or exchangeable for Common Stock or OP Units, for a period of
one year from the date of the Prospectus, without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Company has granted
certain registration rights pursuant to which the Non-Affiliated Participants
may require the Company to file a registration statement with the SEC with
respect to sales of any shares received by the Non-Affiliated Participants in
exchange for their OP Units after the expiration of the one-year period.

Each of the Company and the International Managers has represented and agreed
that (a) it has not offered or sold, and prior to the date six months after the
date of this Prospectus will not offer or sell any Shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purpose of their businesses or otherwise in
circumstances which do not constitute an offer to the public in the United
Kingdom for the purposes of the Public Offers of Securities Regulations 1995,
(b) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the shares of Common Stock in, from or otherwise the United Kingdom and (c) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue or sale of the
Common Stock to a person who is of a kind described in Article II(3) of the
Financial Services Act

145
<PAGE>

1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom
the document may otherwise lawfully be issued or passed on.

If the Underwriters create a short position in the Common Stock in connection
with the offering, i.e., if they sell more shares of Common Stock than are set
forth on the cover page of this Prospectus, the U.S. Representatives and the
International Managers, respectively, may reduce that short position by
purchasing Common Stock in the open market. The U.S. Representatives and the
International Managers, respectively, may also elect to reduce any short
position by exercising all or part of the over-allotment option described
above.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, none of
the Underwriters makes any representation that the U.S. Representatives or the
International Managers will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.

The Underwriters do not intend to confirm sales to any account over which
they exercise discretionary authority.

The Company has applied for listing of the Common Stock on the New York Stock
Exchange under the symbol "BXP." In order to meet one of the requirements for
listing the Common Stock on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more shares of Common Stock to a minimum of
2,000 beneficial holders.

The Company will pay to Merrill Lynch, Pierce, Fenner & Smith Incorporated an
advisory fee equal to % of the gross proceeds received from the sale of
Common Stock to public investors in the Offerings for financial advisory
services rendered in connection with the Company's formation as a REIT.

146
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICI-
TATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.

---------------

SUMMARY TABLE OF CONTENTS

---------------

UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIRE-
MENT IS IN ADDITION TO THE OBLIGATION OF THE DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

31,400,000 SHARES

LOGO

BOSTON PROPERTIES, INC.

COMMON STOCK

---------------

PROSPECTUS

---------------

Joint Lead Managers

and Joint Bookrunners

MERRILL LYNCH INTERNATIONAL GOLDMAN SACHS INTERNATIONAL

---------------

BEAR, STEARNS INTERNATIONAL LIMITED

MORGAN STANLEY & CO.
INTERNATIONAL

PAINEWEBBER INTERNATIONAL (U.K.) LTD.
PRUDENTIAL-BACHE SECURITIES SMITH BARNEY INC.

, 1997

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table itemizes the expenses incurred by the Company in
connection with the offering of the shares of Common Stock being registered
hereby. All of the amounts shown are estimates, except the Securities and
Exchange Commission Registration Fee.

<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
Securities and Exchange Commission Registration Fee............. $273,561
NASD Fee........................................................ 30,500
New York Stock Exchange Listing Fee............................. *
Transfer Agent's and Registrar's Fees........................... *
Printing Fees................................................... *
Legal Fees and Expenses (other than Blue Sky)................... *
Accounting Fees and Expenses.................................... *
Blue Sky Fees and Expenses (including fees of counsel).......... *
Miscellaneous Expenses.......................................... *
--------
Total......................................................... $ *
========
</TABLE>
- --------
* To be filed by amendment.

ITEM 31. SALES TO SPECIAL PARTIES.

See Item 32.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.

On April 8, 1997, the Operating Partnership was formed with Boston
Properties, Inc., a Massachusetts Corporation ("BP-Massachusetts"), as general
partner and an affiliate as a limited partner. The sale of the interests in
the Operating Partnership was made in reliance on Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act").

On April 9 and 15, 1997, the Company entered into an Omnibus Option
Agreement (or, in the case of one entity, a similar agreement) with a total of
80 individuals (the "Individuals") and entities ("Entities") (including
entities such as trusts or limited partnerships in which one or more of the
Individuals may have the primary economic or a controlling interest). None of
the Entities was formed for the purpose of entering into the Omnibus Option
Agreement and acquiring OP Units. Such agreement provides that the Operating
Partnership can, at its option and without any further action by such
Individuals or Entities, acquire all or any of the interests of the
Individuals or Entities in the 74 Properties (collectively, the "Interests").
The right of the Operating Partnership to acquire all or any of the Interests
from the Individuals and Entities and to issue OP Units in exchange therefor
is subject only to the fulfillment of conditions (principally, the completion
of the Offering) beyond the control of the Individuals and Entities. The total
number of OP Units that will be issued to the Individuals and Entities will
depend on the final offering price of a share of Common Stock in the Offering.
Such agreement was entered into and will be consummated in reliance on Section
4(2) of, and Regulation D under, the Securities Act.

On April 11, 1997, BP-Massachusetts and Boston Properties, Inc., a Delaware
corporation ("BP-Delaware"), and the Operating Partnership, entered into a
number of agreements (including a merger agreement and a contribution
agreement) that memorializes (i) the issuance of Common Stock by BP-Delaware
to the stockholders of BP-Massachusetts (Messrs. Zuckerman and Linde) upon
consummation of a reincorporation merger in connection with the Formation
Transactions and (ii) the contribution to the Operating Partnership of

II-1
<PAGE>

the proceeds of the Offering and the management and development operations
currently held by BP-Massachusetts. Such agreements were entered into and will
be consummated in reliance on Section 4(2) of the Securities Act.

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Certificate, as amended, and Bylaws provide certain
limitations on the liability of the Company's directors and officers for
monetary damages to the Company. The Certificate and Bylaws obligate the
Company to indemnify its directors and officers, and permit the Company to
indemnify its employees and other agents, against certain liabilities incurred
in connection with their service in such capacities. These provisions could
reduce the legal remedies available to the Company and the stockholders
against these individuals. See "Certain Provisions of Delaware Law and The
Company's Certificate and Bylaws--Limitation of Liability and
Indemnification."

The Company's Certificate limits the liability of the Company's directors
and officers to the Company to the fullest extent permitted from time to time
by Delaware law. The DGCL permits, but does not require, a corporation to
indemnify its directors, officers, employees or agents and expressly provides
that the indemnification provided for under the DGCL shall not be deemed
exclusive of any indemnification right under any bylaw, vote of stockholders
or disinterested directors, or otherwise. The DGCL permits indemnification
against expenses and certain other liabilities arising out of legal actions
brought or threatened against such persons for their conduct on behalf of the
corporation, provided that each such person acted in good faith and in a
manner that he reasonably believed was in or not opposed to the corporation's
best interests and in the case of a criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The DGCL does not allow
indemnification of directors in the case of an action by or in the right of
the corporation (including stockholder derivative suits) unless the directors
successfully defend the action or indemnification is ordered by the court.

The Company has entered into indemnification agreements with each of its
directors and executive officers. The indemnification agreements require,
among other matters, that the Company indemnify its directors and officers to
the fullest extent permitted by law and advance to the directors and officers
all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. Under these agreements, the
Company must also indemnify and advance all expenses incurred by directors and
officers seeking to enforce their rights under the indemnification agreements
and may cover directors and officers under the Company's directors' and
officers' liability insurance. Although the form of indemnification agreement
offers substantially the same scope of coverage afforded by law, it provides
additional assurance to directors and officers that indemnification will be
available because, as a contract, it cannot be modified unilaterally in the
future by the Board of Directors or the Stockholders to eliminate the rights
it provides. It is the position of the SEC that indemnification of directors
and officers for liabilities under the Securities Act of 1933, as amended (the
"Securities Act") is against public policy and unenforceable pursuant to
Section 14 of the Securities Act.

ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.

Not applicable.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.

(b) Exhibits. The following is a complete list of Exhibits filed or
incorporated by reference as part of this Registration Statement.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*1.1 --Form of U.S. Purchase Agreement
*1.2 --Form of International Purchase Agreement
</TABLE>

II-2

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*3.1 --Form of Amended and Restated Certificate of Incorporation of the
Company
*3.2 --Form of Amended and Restated Bylaws of the Company
*4.1 --Shareholder Rights Agreement dated as of , 1997 between the
Company and , as Rights Agent
*5.1 --Opinion of Goodwin, Procter & Hoar LLP regarding legality of the
shares of the Common Stock issued
*8.1 --Opinion of Goodwin, Procter & Hoar LLP regarding tax matters
*10.1 --Form of Amended and Restated Agreement of Limited Partnership of
the Operating Partnership
*10.2 --1997 Stock Option and Incentive Plan
*10.3 --Noncompetition Agreement between the Company and Mortimer B.
Zuckerman
*10.4 --Employment and Noncompetition Agreement between the Company and
Edward H. Linde
*10.5 --Form of Indemnification Agreement between the Company and each
of its directors and executive officers
+10.6 --Omnibus Option Agreement by and among Boston Properties Limited
Partnership (the "Operating Partnership") and the Grantors named
therein dated as of April 9, 1997
*10.7 --Revolving Credit Agreement
*10.8 --Form of Registration Rights Agreement among the Company and the
persons named therein
*10.9 --Form of Hotel Lease Agreement
*10.10 --Option Agreement between Boston Properties Limited Partnership
and Square 36 Properties Limited Partnership dated April 15,
1997.
*21.1 --Schedule of Subsidiaries of the Company
23.1 --Consent of Coopers & Lybrand, L.L.P.
+23.3 --Consent of Spaulding & Slye
*23.4 --Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1)
*24.1 --Powers of Attorney
27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
+ Previously filed

ITEM 36. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(b) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, BOSTON
PROPERTIES, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-11 AND HAS DULY CAUSED THIS
AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOSTON, THE COMMONWEALTH
OF MASSACHUSETTS, ON THIS 20 DAY OF MAY, 1997.

Boston Properties, Inc.

/s/ Edward H. Linde
By: __________________________________
NAME: EDWARD H. LINDE
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

/s/ Mortimer B. Zuckerman Chairman of the
- ------------------------------------ Board of Directors May 20, 1997
MORTIMER B. ZUCKERMAN

/s/ Edward H. Linde President and Chief
- ------------------------------------ Executive Officer, May 20, 1997
EDWARD H. LINDE Director
(Principal
Executive Officer)

/s/ David G. Gaw Chief Financial
- ------------------------------------ Officer (Principal May 20, 1997
DAVID G. GAW Financial Officer
and Principal
Accounting
Officer)

II-4
<PAGE>

SCHEDULE III

BOSTON PROPERTIES PREDECESSOR GROUP

REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
INITIAL COST
------------------
COSTS
CAPITALIZED
SUBSEQUENT
PROPERTY NAME TYPE LOCATION ENCUMBRANCES LAND BUILDINGS TO ACQUISITION
- ---------------- ------- ------------------ ------------ -------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
599 Lexington
Avenue Office New York, NY $430,239 $81,040 $100,507 $ 67,459
2300 N. Street Office NW, Washington, DC 100,000 16,509 22,415 10,076
10 & 20 Mall
Road Office Burlington, MA 20,215 930 6,928 8,237
8 Arlington
Street Office Boston, MA 4,611 90 1,855 133
32 Hartwell Ave Office Lexington, MA 4,222 168 1,943 2,720
91 Hartwell Ave Office Lexington, MA 13,770 784 6,464 1,342
195 West Street Office Waltham, MA 5,856 758 5,150 2,557
191 Spring
Street Office Lexington, MA 23,942 5,175 27,166 17,693
201 Spring
Street Office Lexington, MA -- 1,500 3,637 --
Waltham Office
Center Office Waltham, MA 11,389 422 2,719 2,926
204 Second
Avenue Office Waltham, MA 3,374 37 2,402 630
170 Tracer Lane Office Waltham, MA 5,146 398 4,601 1,282
33 Hayden Avenue Office Lexington, MA -- 266 3,234 110
92 Hayden Avenue Office Lexington, MA 11,015 230 3,145 510
100 Hayden
Avenue Office Lexington, MA -- 364 3,603 264
Lexington Office
Park Office Lexington, MA 15,373 998 1,426 9,472
Bedford Business Office/ Bedford, MA 23,500 502 3,403 12,743
Park R & D
One Cambridge
Center Office Cambridge, MA 45,000 134 25,110 3,133
Three Cambridge
Center Office Cambridge, MA 19,000 174 12,200 598
Ten Cambridge
Center Office Cambridge, MA 25,000 1,299 12,943 4,420
Eleven Cambridge
Center Office Cambridge, MA 8,319 121 5,535 392
Capital Gallery Office SW, Washington DC 60,751 4,725 29,560 7,033
The U.S.
International
Commission
Building Office SW, Washington DC 50,000 109 22,420 9,293
-------- -------- -------- --------
Subtotal $880,722 $116,733 $308,366 $163,023
-------- -------- -------- --------
<CAPTION>
GROSS AMOUNT
CARRIED AT CLOSE OF PERIOD
-----------------------------------------------
DEVELOPMENT
LAND BUILDING AND DEPRECIABLE
AND AND CONSTRUCTION ACCUMULATED YEAR BUILT/ LIVES
PROPERTY NAME IMPROVEMENTS IMPROVEMENTS IN PROCESS TOTAL DEPRECIATION RENOVATED (YEARS)
- ----------------- ------------ ------------ ------------ -------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
599 Lexington
Avenue $81,040 $167,966 $ -- $249,006 $ 58,567 1986 (1)
2300 N. Street 16,509 32,491 -- 49,000 9,001 1986 (1)
10 & 20 Mall
Road 939 15,156 -- 16,095 4,474 1984-86 (1)
8 Arlington
Street 90 1,988 -- 2,078 770 1860-1920/1989 (1)
32 Hartwell Ave 168 4,663 -- 4,831 2,244 1968-79/1987-88 (1)
91 Hartwell Ave 784 7,806 -- 8,590 2,081 1985 (1)
195 West Street 1,611 6,854 -- 8,465 1,286 1990 (1)
191 Spring
Street 5,175 44,859 -- 50,034 8,857 1971/1995 (1)
201 Spring
Street -- -- 5,137 5,137 -- 1997 N/A
Waltham Office
Center 425 5,642 -- 6,067 3,004 1968-70/1987-88 (1)
204 Second
Avenue 37 3,032 -- 3,069 1,291 1981/1993 (1)
170 Tracer Lane 418 5,863 -- 6,281 2,122 1980 (1)
33 Hayden Avenue 266 3,344 -- 3,610 1,517 1979 (1)
92 Hayden Avenue 230 3,655 -- 3,885 1,294 1968/1984 (1)
100 Hayden
Avenue 364 3,867 -- 4,231 1,132 1985 (1)
Lexington Office
Park 1,072 10,824 -- 11,896 3,561 1982 (1)
Bedford Business 502 16,146 -- 16,648 5,831 1969-80 (1)
Park
One Cambridge
Center 134 28,243 -- 28,377 7,975 1987 (1)
Three Cambridge
Center 174 12,798 -- 12,972 3,181 1987 (1)
Ten Cambridge
Center 1,868 16,794 -- 18,662 4,882 1990 (1)
Eleven Cambridge
Center 121 5,927 -- 6,048 1,975 1984 (1)
Capital Gallery 4,725 36,593 -- 41,318 14,192 1981 (1)
The U.S.
International
Commission
Building 1,569 30,253 -- 31,822 10,762 1987 (1)
------------ ------------ ------------ -------- ------------
Subtotal $118,221 $464,764 $5,137 $588,122 $ 149,999
------------ ------------ ------------ -------- ------------
</TABLE>

S-1
<PAGE>

SCHEDULE III

BOSTON PROPERTIES PREDECESSOR GROUP

REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
INITIAL COST
-------------------
COSTS
CAPITALIZED
SUBSEQUENT
PROPERTY NAME TYPE LOCATION ENCUMBRANCES LAND BUILDINGS TO ACQUISITIONS
- ------------- ------ ----------------- ------------ --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Subtotal from
previous page $ 880,722 $ 116,733 $ 308,366 $ 163,023
---------- --------- --------- ---------
One Independence
Square Office SW, Washington DC 78,700 $ 9,356 $ 33,701 $ 14,170
Two Independence
Square Office SW, Washington DC 122,856 14,053 59,883 8,795
Montvale Center Office Gaithersburg, MD 7,992 1,574 9,786 3,433
Democracy Center Office Bethesda, MD 110,100 12,550 50,015 18,392
7435 Boston
Boulevard,
Building One Office Springfield, VA 5,564 392 3,822 1,199
7451 Boston
Boulevard,
Building Two Office Springfield, VA 2,215 249 1,542 1,460
7374 Boston
Boulevard,
Building Four Office Springfield, VA 3,619 241 1,605 462
8000 Grainger
Court,
Building Five Office Springfield, VA 7,664 366 4,282 603
7500 Boston
Boulevard,
Building Six Office Springfield , VA 6,440 138 3,749 206
7501 Boston
Boulevard,
Building Seven Office Springfield, VA -- 665 878 --
7601 Boston
Boulevard,
Building Eight Office Springfield, VA 8,372 200 3,883 453
7600 Boston
Boulevard,
Building Nine Office Springfield, VA 5,796 127 2,839 1,386
7375 Boston
Boulevard,
Building Ten Office Springfield, VA -- 23 2,685 559
8000 Boston
Boulevard,
Building Eleven Office Springfield, VA -- 136 3,071 88
---------- --------- --------- ---------
Subtotal $1,240,040 $ 156,803 $ 490,107 $ 214,229
---------- --------- --------- ---------
<CAPTION>
GROSS AMOUNT
CARRIED AT CLOSE OF PERIOD
------------------------------------------------
DEVELOPMENT
LAND BUILDING AND YEAR DEPRECIABLE
AND AND CONSTRUCTION ACCUMULATED BUILT/ LIVES
PROPERTY NAME IMPROVEMENTS IMPROVEMENTS IN PROCESS TOTAL DEPRECIATION RENOVATED (YEARS)
- ------------- ------------ ------------ ------------ --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Subtotal from
previous page $ 118,221 $ 464,764 $ 5,137 $ 588,122 $ 149,999
------------ ------------ ------------ --------- ------------
One Independence
Square $ 9,634 $ 47,593 $ -- $ 57,227 $ 9,556 1991 (1)
Two Independence
Square 15,038 67,693 -- 82,731 9,228 1992 (1)
Montvale Center 2,399 12,394 -- 14,793 3,384 1987 (1)
Democracy Center 13,695 67,262 -- 80,957 17,710 1985-88 (1)
7435 Boston
Boulevard,
Building One 486 4,927 -- 5,413 1,571 1982 (1)
7451 Boston
Boulevard,
Building Two 535 2,716 -- 3,251 1,141 1982 (1)
7374 Boston
Boulevard,
Building Four 303 2,005 -- 2,308 639 1984 (1)
8000 Grainger
Court,
Building Five 453 4,798 -- 5,251 1,509 1984 (1)
7500 Boston
Boulevard,
Building Six 282 3,811 -- 4,093 1,174 1985 (1)
7501 Boston
Boulevard,
Building Seven -- -- 1,543 1,543 -- 1997 N/A
7601 Boston
Boulevard,
Building Eight 378 4,158 -- 4,536 1,270 1986 (1)
7600 Boston
Boulevard,
Building Nine 189 4,163 -- 4,352 1,212 1987 (1)
7375 Boston
Boulevard,
Building Ten 47 3,220 -- 3,267 894 1988 (1)
8000 Boston
Boulevard,
Building Eleven 214 3,081 -- 3,295 629 1989 (1)
------------ ------------ ------------ --------- ------------
Subtotal $ 161,874 $ 692,585 $ 6,680 $ 861,139 $ 199,916
------------ ------------ ------------ --------- ------------
</TABLE>

S-2
<PAGE>

SCHEDULE III

BOSTON PROPERTIES PREDECESSOR GROUP

REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
INITIAL COST
-------------------
COSTS
CAPITALIZED
SUBSEQUENT
PROPERTY NAME TYPE LOCATION ENCUMBRANCES LAND BUILDINGS TO ACQUISITION
- ---------------- ---------- --------------------- ------------ --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Subtotal from
previous page $1,240,040 $ 156,803 $ 490,107 $ 214,229
---------- --------- --------- ---------
7700 Boston
Boulevard,
Building Twelve Office Springfield, VA -- $ 1,105 $ 1,042 $ --
Sugarland
Building One Office Herndon, VA -- 735 2,739 --
Sugarland
Building Two Office Herndon, VA -- 834 3,216 --
Hilltop Business
Center Office So. San Francisco, CA 4,817 53 492 140
164 Lexington
Road Office Billerica, MA 1,970 592 1,370 127
25-33 Dartmouth
Street Industrial Westwood, MA 3,296 273 1,595 470
40-46 Harvard
Street Industrial Westwood, MA 5,380 351 1,782 1,347
1950 Stanford
Court, Building
One Industrial Landover, MD 2,662 269 1,554 161
6201 Columbia
Park, Building
Two Industrial Landover, MD 5,023 505 2,746 951
2000 South Club
Drive, Building
Three Industrial Landover, MD 3,542 465 2,125 702
38 Cabot
Boulevard Industrial Bucks County, PA -- 329 1,238 1,933
430 Rozzi Place Industrial So. San Francisco, CA -- 24 217 67
560 Forbes
Boulevard Industrial So. San Francisco, CA -- 48 435 133
2391 West Winton
Avenue Industrial Hayward, CA 1,343 182 1,217 41
17 Hartwell
Avenue R&D Lexington, MA 938 26 150 362
Fourteen
Cambridge R&D Cambridge, MA 6,748 110 4,483 --
Long Wharf
Marriott Hotel Boston, MA 68,600 1,752 37,534 2,216
Cambridge Center Hotel Cambridge, MA 61,000 478 37,918 3,734
Cambridge Center
N. Garage Cambridge, MA 15,000 639 11,630 527
---------- --------- --------- ---------
Subtotal $1,420,359 $ 165,573 $ 603,590 $ 227,140
---------- --------- --------- ---------
<CAPTION>
GROSS AMOUNT
CARRIED AT CLOSE OF PERIOD
------------------------------------------------
DEVELOPMENT
AND DEPRECIABLE
LAND AND BUILDING AND CONSTRUCTION ACCUMULATED YEAR BUILT/ LIVES
PROPERTY NAME IMPROVEMENTS IMPROVEMENTS IN PROCESS TOTAL DEPRECIATION RENOVATED (YEARS)
- ----------------- ------------ ------------ ------------ --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Subtotal from
previous page $ 161,874 $ 692,585 $ 6,680 $ 861,139 $ 199,916
------------ ------------ ------------ --------- ------------
7700 Boston
Boulevard,
Building Twelve $ -- $ -- $ 2,147 $ 2,147 $ -- 1997 N/A
Sugarland
Building One -- -- 3,474 3,474 -- 1985/1997 N/A
Sugarland
Building Two -- -- 4,050 4,050 -- 1986/1997 N/A
Hilltop Business
Center 53 632 -- 685 260 early 1970's (1)
164 Lexington
Road 592 1,497 -- 2,089 39 1995 (1)
25-33 Dartmouth
Street 273 2,065 -- 2,338 1,120 1966 (1)
40-46 Harvard
Street 351 3,129 -- 3,480 2,244 1967 (1)
1950 Stanford
Court, Building
One 350 1,634 -- 1,984 444 1986 (1)
6201 Columbia
Park, Building
Two 960 3,242 -- 4,202 1,186 1986 (1)
2000 South Club
Drive, Building
Three 859 2,433 -- 3,292 682 1988 (1)
38 Cabot
Boulevard 329 3,171 -- 3,500 2,709 1972/1984 (1)
430 Rozzi Place 24 284 -- 308 117 early 1970's (1)
560 Forbes
Boulevard 48 568 -- 616 234 early 1970's (1)
2391 West Winton
Avenue 182 1,258 -- 1,440 858 1974 (1)
17 Hartwell
Avenue 26 512 -- 538 435 1968 (1)
Fourteen
Cambridge 110 4,483 -- 4,593 1,569 1983 (1)
Long Wharf
Marriott 1,752 39,750 -- 41,502 14,527 1982 (1)
Cambridge Center 478 41,652 -- 42,130 10,129 1986 (1)
Cambridge Center
N. 1,163 11,633 -- 12,796 2,000 1990 (1)
------------ ------------ ------------ --------- ------------
Subtotal $ 169,424 $ 810,528 $ 16,351 $ 996,303 $ 238,469
------------ ------------ ------------ --------- ------------
</TABLE>

S-3
<PAGE>

SCHEDULE III

BOSTON PROPERTIES PREDECESSOR GROUP

REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

S-4
<PAGE>

BOSTON PROPERTIES PREDECESSOR GROUP

REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

A summary of activity for real estate and accumulated depreciation is as
follows:

<TABLE>
<CAPTION>
1996 1995 1994
---------- -------- --------
<S> <C> <C> <C>
Real estate:
Balance at beginning of year............. $979,493 $952,374 $951,693
Improvements and
acquisition/development of real
estate................................ 28,110 29,660 9,397
Write-off of fully depreciated assets.. (6,066) (2,541) (8,716)
---------- -------- --------
Balance at end of year................... $1,001,537 $979,493 $952,374
========== ======== ========
Accumulated depreciation:
Balance at beginning of year............. 215,303 189,712 170,308
Depreciation expense................... 29,232 28,132 28,120
Write-off of fully depreciated assets.. (6,066) (2,541) (8,716)
---------- -------- --------
Balance at end of year................... $238,469 $215,303 $189,712
========== ======== ========
</TABLE>

S-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
*1.1 --Form of U.S. Purchase Agreement
*1.2 --Form of International Purchase Agreement
*3.1 --Form of Amended and Restated Certificate of Incorporation
of the Company
*3.2 --Form of Amended and Restated Bylaws of the Company
*4.1 --Shareholder Rights Agreement dated as of , 1997
between the Company and , as Rights Agent.
*5.1 --Opinion of Goodwin, Procter & Hoar LLP regarding legality
of the shares of the Common Stock issued
*8.1 --Opinion of Goodwin, Procter & Hoar LLP regarding tax
matters
*10.1 --Form of Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
*10.2 --1997 Stock Option and Incentive Plan
*10.3 --Noncompetition Agreement between the Company and Mortimer
B. Zuckerman
*10.4 --Employment and Noncompetition Agreement between the
Company and Edward H. Linde
*10.5 --Form of Indemnification Agreement between the Company and
each of its directors and executive officers
+10.6 --Omnibus Option Agreement by and among Boston Properties
Limited Partnership (the "Operating Partnership") and the
Grantors named therein dated as of April 9, 1997
*10.7 --Revolving Credit Agreement
*10.8 --Form of Registration Rights Agreement among the Company
and the persons named therein
*10.9 --Form of Hotel Lease Agreement
*10.10 --Option Agreement between Boston Properties Limited
Partnership and Square 36 Properties Limited Partnership
dated April 15, 1997.
*21.1 --Schedule of Subsidiaries of the Company
23.1 --Consent of Coopers & Lybrand, L.L.P.
+23.3 --Consent of Spaulding & Slye
*23.4 --Consent of Goodwin, Procter & Hoar LLP (included in
Exhibit 5.1)
*24.1 --Powers of Attorney
27.1 --Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
+ Previously filed

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-11
(File No. 333-25279) of our report dated May 1, 1997, on our audits of the
combined financial statements and financial statement schedule of the Boston
Properties Predecessor Group. We also consent to the references to our firm
under the caption "Experts".

Coopers & Lybrand L.L.P.

Boston, Massachusetts

May 20, 1997