BOSTON PROPERTIES INC, S-11/A, 1998-01-02

BOSTON PROPERTIES INC
S-11/A, 1998-01-02
REAL ESTATE

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 2, 1998

REGISTRATION STATEMENT NO. 333-41449

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 2 TO FORM S-11
REGISTRATION STATEMENT

UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES
---------------
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)

---------------
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)

---------------
COPIES TO:

GILBERT G. MENNA, P.C. WALLACE L. SCHWARTZ, ESQ.
EDWARD M. SCHULMAN, ESQ. SUSAN J. SUTHERLAND, ESQ.
GOODWIN, PROCTER & HOAR LLP SKADDEN, ARPS, SLATE,
599 LEXINGTON AVENUE MEAGHER & FLOM LLP
NEW YORK, NEW YORK 10022 919 THIRD AVENUE
(212) 813-8800 NEW YORK, NEW YORK 10022
(212) 735-3000

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

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

CALCULATION OF REGISTRATION FEE

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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE ADDITIONAL
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................... 1,150,000 shares $33.344(2) $38,345,600(2) $11,312(3)
</TABLE>
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- -------------------------------------------------------------------------------

(1) The shares registered herewith are in addition to the 16,100,000 shares
previously registered and include 150,000 shares of Common Stock that the
U.S. Underwriters and the International Managers have the option to
purchase solely to cover over-allotments, if any.

(2) Estimated solely for purposes of calculating the registration fee, in
accordance with Rule 457(c) under the Securities Act of 1933, as amended.
Pursuant to Rule 457(c), the maximum aggregate offering price is based
upon the average of the high and low prices of the Common Stock on
December 29, 1997, as reported by the New York Stock Exchange.

(3) Such fee is in addition to the fee of $156,140 previously remitted on
account of the 16,100,000 shares previously registered.

---------------
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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<PAGE>

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 12,000,000 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 3,000,000 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION JANUARY 2, 1998

PROSPECTUS

15,000,000 SHARES
BOSTON PROPERTIES, INC.
[LOGO OF BOSTON PROPERTIES, INC. APPEARS HERE]
COMMON STOCK
----------

Boston Properties, Inc. is one of the largest owners and developers of office
properties in the United States, with a significant presence in Greater Boston,
Greater Washington, D.C., midtown Manhattan and Baltimore, Maryland. Since the
Company's initial public offering in June 1997 (the "Initial Offering"), the
Company has acquired three office properties; entered into contracts to acquire
ten office properties expected to close in January and February 1998; and is
currently developing six properties, consisting of five office properties and
one 221 room hotel. The aggregate anticipated investment since the Initial
Offering for these acquisitions and developments is approximately $1.2 billion.
The Company owns 92 properties (including the six properties under development
and the ten office properties under contract) aggregating approximately 18.2
million square feet. In addition, the Company owns, has under contract or has
options to acquire twelve parcels of land that will support approximately 1.5
million square feet of development.

The Company was 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. Upon completion of this Offering and the expected
application of the net proceeds therefrom, the Company's management and Board
of Directors will own a 23.8% economic interest in the Company, equal to
approximately $569.7 million as of December 29, 1997. 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 ended December 31, 1997.

All of the shares of the Common Stock offered hereby are being sold by the
Company. Of the 15,000,000 shares of Common Stock being offered hereby,
12,000,000 shares are being offered initially in the United States and Canada
by the U.S. Underwriters and 3,000,000 shares are being offered initially
outside the United States and Canada by the International Managers. See
"Underwriting."

The Common Stock is listed on the New York Stock Exchange (the "NYSE") under
the symbol "BXP." On December 29, 1997, the reported last sale price of the
Common Stock on the NYSE was $33.1875 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:
. The Company intends to acquire portfolios and individual properties; such
acquisitions may not achieve intended returns;
. The Company intends to develop commercial properties and its return on such
investments can be lower than anticipated because properties can cost more
to develop, take longer to develop or lease, or lease for lower rent than
anticipated;
. Conflicts of interest exist between the Company and Messrs. Zuckerman and
Linde in connection with the Company's operations, including with respect
to certain restrictions on the Company's ability to sell or transfer four
properties until June 23, 2007 without the consent of Messrs. Zuckerman and
Linde; five other properties are subject to similar restrictions for the
benefit of others;
. The Company relies on key personnel whose continued service is not
guaranteed, including Messrs. Zuckerman and Linde;
. Real estate investment and property management are risky as rents can
fluctuate and operating costs can increase; and
. The Company may not be able to refinance indebtedness on favorable terms,
and interest rates might increase on amounts drawn under the Company's line
of credit.
----------
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 1,800,000 shares of Common Stock, and has granted the
International Managers a 30-day option to purchase up to an additional
450,000 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 matters 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 , 1998.
----------
Joint Lead Managers and Joint Bookrunners
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
----------
BEAR, STEARNS & CO. INC.

DONALDSON, LUFKIN & JENRETTE

SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
----------
The date of this Prospectus is , 1998.
<PAGE>

[ART WORK]

[MAP(S) SHOWING LOCATION OF THE COMPANY'S PROPERTIES]

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."

<PAGE>

[ART WORK]

Property Acquisitions and Completed Developments Since the Company's Initial
Public Offering in June 1997

[Picture of 280 Park Avenue, New York, NY] [Picture of 875 Third
Avenue, New York,
New York]

[Picture of 201 Spring Street [Picture of 100 East
Lexington, Massachusetts] Pratt Street, Baltimore,
Maryland]

[Picture of 12300 Sunrise Valley Drive [Picture of Sugarland
(pending acquisition) Reston, Virginia] Building Two, Herndon,
[Picture of Virginia]
Riverfront Plaza, Richmond, Virginia]

Note: Not illustrated are eight of the nine
buildings in the Mulligan/Griffin portfolio,
a pending acquisition in Maryland and
Virginia, as well as completed developments in
Herndon and Springfield, Virginia. For additional
information, see "The Company-Recent Events

<PAGE>

For a summary of property, property type, operating and ownership data regarding
the Properties see the "Summary Property Data" table contained herein.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 1
The Company.............................................................. 1
Risk Factors............................................................. 6
Business and Growth Strategies........................................... 6
The Properties........................................................... 7
The Offering............................................................. 9
Distributions............................................................ 9
Tax Status of the Company................................................ 9
SUMMARY SELECTED FINANCIAL INFORMATION.................................... 10
RISK FACTORS.............................................................. 12
The Company May Not Achieve Expected Returns on Property Acquisitions.... 12
The Company's Investments in Property Development May Not Yield Expected
Returns................................................................. 12
Conflicts of Interest Exist Between the Company and Certain OP Unit
Holders, Including Messrs. Zuckerman and Linde, in Connection with the
Operation of the Company................................................ 12
For a period of time, sales of properties and repayment of indebtedness
will have different effects on holders of OP Units than on
stockholders.......................................................... 12
Messrs. Zuckerman and Linde will continue to engage in other
activities............................................................ 13
The Company Relies on Key Personnel Whose Continued Service is Not
Guaranteed.............................................................. 13
The Company's Performance and Value Are Subject to Risks Associated with
the Real Estate Industry................................................ 13
Lease expirations could adversely affect the Company's cash flow....... 13
Hotel operating risks could adversely affect the Company's cash flow... 13
Acquisition risks could adversely affect the Company................... 14
Uncontrollable factors affecting the Properties' performance and value
could produce lower returns........................................... 14
Illiquidity of real estate investments could adversely affect the
Company's financial condition......................................... 14
Liability for environmental matters could adversely affect the
Company's financial condition......................................... 14
The cost of complying with the Americans with Disabilities Act could
adversely affect the Company's cash flow.............................. 15
Uninsured losses could adversely affect the Company's cash flow........ 15
Changes in tax and environmental laws could adversely affect the
Company's financial condition......................................... 16
The Company's Use of Debt to Finance Acquisitions and Developments Could
Adversely Affect the Company............................................ 16
The required repayment of debt or of interest thereon can adversely
affect the Company.................................................... 16
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company's policy of no limitation on debt could adversely affect
the Company's cash flow............................................... 16
Failure to Qualify as a REIT Would Cause the Company to be Taxed as a
Corporation............................................................. 16
The Company will be taxed as a corporation if it fails to qualify as a
REIT.................................................................. 16
To qualify as a REIT the Company will need to maintain a certain level
of distributions...................................................... 17
Other Tax Liabilities.................................................. 17
The Ability of Stockholders to Control the Policies of the Company and
Effect a Change of Control of the Company is Limited.................... 17
Stockholder approval is not required to change policies of the
Company............................................................... 17
Stockholder approval is not required to engage in investment activity.. 18
Stock ownership limit in the Certificate could inhibit changes in
control............................................................... 18
Provisions in the Certificate and Bylaws and in the Operating
Partnership Agreement could prevent acquisitions and changes in
control............................................................... 18
Shareholder Rights Agreement could inhibit changes in control.......... 19
Certain provisions of Delaware law could inhibit acquisitions and
changes in control.................................................... 19
Provisions of debt instruments......................................... 19
Interest Rates, Equity Market Conditions, and Shares Available for
Future Sale Could Adversely Impact the Trading Price of the Common
Stock................................................................... 19
Interest rates and trading levels of equity markets could change....... 19
Availability of shares for future sale could adversely affect the
market price.......................................................... 20
The Company Has Had Historical Accounting Losses and Has a Deficit in
Owners' Equity; the Company May Experience Future Losses................ 20
THE COMPANY............................................................... 21
General.................................................................. 21
History.................................................................. 23
Recent Events............................................................ 24
BUSINESS AND GROWTH STRATEGIES............................................ 27
USE OF PROCEEDS........................................................... 31
PRICE RANGE OF SHARES AND DISTRIBUTION HISTORY............................ 32
CAPITALIZATION............................................................ 33
SELECTED FINANCIAL INFORMATION............................................ 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS............................................................ 37
Results of Operations.................................................... 37
Pro Forma Operating Results.............................................. 39
Liquidity and Capital Resources.......................................... 40
Cash Flows............................................................... 42
Inflation................................................................ 43
BUSINESS AND PROPERTIES................................................... 44
General.................................................................. 44
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Property Data..................................................... 45
Location of Properties.................................................... 47
Tenants................................................................... 48
The Office Properties..................................................... 55
The Hotel Properties...................................................... 72
Development Consulting and Third-Party Property Management................ 74
Partial Interests......................................................... 74
Environmental Matters..................................................... 75
Certain Agreements Relating to the Properties............................. 75
THE UNSECURED LINE OF CREDIT.......... 77
MANAGEMENT................................................................. 78
Directors and Executive Officers.......................................... 78
Committees of the Board of Directors...................................... 81
Compensation of Directors................................................. 81
Executive Compensation.................................................... 82
Employment and Noncompetition Agreements.................................. 83
Compensation Committee Interlocks and Insider Participation............... 84
Stock Option Plan......................................................... 84
Limitation of Liability and Indemnification............................... 86
Indemnification Agreements................................................ 87
CERTAIN TRANSACTIONS....................................................... 87
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES................................ 88
Investment Policies....................................................... 88
Dispositions.............................................................. 89
Financing Policies........................................................ 89
Conflict of Interest Policies............................................. 89
Personal Property......................................................... 90
Policies with Respect to Other Activities................................. 91
STRUCTURE AND FORMATION OF THE COMPANY..................................... 91
Formation Transactions.................................................... 91
Structure of the Company.................................................. 93
Benefits to Related Parties............................................... 94
OPERATING PARTNERSHIP AGREEMENT............................................ 95
Management................................................................ 95
Removal of the General Partner; Transfer of the General Partner's
Interest................................................................. 95
Amendments of the Operating Partnership Agreement......................... 95
Transfer of OP Units; Substitute Limited Partners......................... 96
Redemption of OP Units.................................................... 96
Issuance of Additional Limited Partnership Interests...................... 96
Extraordinary Transactions................................................ 97
Tax Protection Provisions................................................. 97
Exculpation and Indemnification of the General Partner.................... 98
Tax Matters............................................................... 98
Term...................................................................... 98
PRINCIPAL STOCKHOLDERS..................................................... 99
DESCRIPTION OF CAPITAL STOCK............................................... 100
General................................................................... 100
Common Stock.............................................................. 100
Preferred Stock........................................................... 100
Restrictions on Transfers................................................. 101
Shareholder Rights Agreement.............................................. 102
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE AND
BYLAWS.................................................................... 105
Amendment of Certificate and Bylaws....................................... 105
Dissolution of the Company................................................ 105
Meetings of Stockholders.................................................. 105
The Board of Directors.................................................... 105
Shareholder Rights Plan and Ownership Limitations......................... 106
Limitation of Liability and Indemnification............................... 106
Business Combinations..................................................... 107
Indemnification Agreements................................................ 107
SHARES AVAILABLE FOR FUTURE SALE........................................... 108
General................................................................... 108
Registration Rights....................................................... 108
FEDERAL INCOME TAX CONSEQUENCES............................................ 109
Federal Income Taxation of the Company.................................... 109
Opinion of Tax Counsel.................................................... 109
Requirements for Qualification............................................ 110
Failure to Qualify........................................................ 116
Taxation of U.S. Stockholders............................................. 116
Special Tax Considerations for Foreign Stockholders....................... 118
Information Reporting Requirements and Backup Withholding Tax............. 119
Other Tax Considerations.................................................. 120
State and Local Tax....................................................... 121
UNDERWRITING............................................................... 122
EXPERTS.................................................................... 124
LEGAL MATTERS.............................................................. 124
ADDITIONAL INFORMATION..................................................... 125
GLOSSARY................................................................... 126
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
</TABLE>

ii
<PAGE>

PROSPECTUS SUMMARY

This summary is qualified in its entirety by the more detailed information
included elsewhere in this Prospectus. Boston Properties Limited Partnership, a
Delaware limited partnership of which Boston Properties, Inc. is the sole
general partner, is referred to as the "Operating Partnership." Unless
otherwise indicated, the information contained in this Prospectus assumes that
(i) the Underwriters' overallotment options are not exercised, (ii) that the
market price per share of Common Stock is equal to $33.1875 (the reported
closing sale price of the Common Stock on the NYSE on December 29, 1997), and
(iii) none of the units of limited partnership of the Operating Partnership
("OP Units"), which are redeemable by the holders for cash or, at the election
of the Company, exchangeable for Common Stock, are so redeemed or exchanged.
All references in this Prospectus to the "Company" refer to Boston Properties,
Inc. and its subsidiaries, including the Operating Partnership, collectively,
unless the context otherwise requires. The Company's initial public offering of
Common Stock (the "Initial Offering") closed on June 23, 1997. All references
in this Prospectus to the historical activities of the Company prior to the
Initial Offering refer to the activities of the Boston Properties Predecessor
Group. See "Glossary" for the definitions of certain terms used in this
Prospectus.

THE COMPANY

GENERAL

Boston Properties, Inc. is one of the largest owners and developers of office
properties in the United States, with a significant presence in six submarkets
in Greater Boston, five submarkets in Greater Washington, D.C., two submarkets
in midtown Manhattan, and the downtown submarket of Baltimore, Maryland. The
Company owns 92 properties (the "Properties"), including six properties under
development and ten properties expected to be acquired in January and February
1998. The Properties aggregate approximately 18.2 million square feet.

Since the Company's initial public offering in June 1997 (the "Initial
Offering"), the Company has acquired three office properties; entered into
contracts to acquire ten office properties expected to close in January and
February 1998 (the "Acquisition Properties"); and is currently developing six
properties, consisting of five office properties aggregating approximately 1.1
million net rentable square feet and one 221 room hotel. The total anticipated
investment for the 13 properties acquired or to be acquired is approximately
$1.13 billion and the total anticipated investment for the six development
properties is approximately $106.1 million (of which $3.9 million was incurred
prior to the Initial Offering). In addition, the Company has delivered five
office properties that were under development at the time of the Initial
Offering, for a total anticipated investment of approximately $50.8 million (of
which $28.8 million was incurred prior to the Initial Offering). The Company
will use a portion of the proceeds of this Offering to purchase the Acquisition
Properties, which are located in Richmond, Virginia, Montgomery County,
Maryland and Fairfax County, Virginia and aggregate approximately 2.2 million
net rentable square feet; fund ongoing development, including with respect to
the six properties currently under development (the "Development Properties");
and repay the outstanding balance under the Company's unsecured line of credit.
As of December 29, 1997 the Company had $233.0 million outstanding under its
unsecured line of credit, which amounts had been incurred primarily to support
the Company's acquisition and development activity.

The Company was 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 expects to qualify as a REIT for federal
income tax purposes for the year ended December 31, 1997. Following the
completion of this Offering and the expected application of the net proceeds
therefrom, Messrs. Zuckerman and Linde will beneficially own in the aggregate a
22.1% economic interest in the Company and the other senior officers of the
Company will beneficially own in the aggregate a 1.7% economic interest in the
Company (in each case assuming the exchange of all OP Units for Common Stock).

The Company's portfolio consists of 92 Properties, including the ten
Acquisition Properties expected to be acquired in January and February 1998 and
the six Development Properties. The Properties consist of 79 office properties
("Office Properties"), including 48 Class A office buildings ("Class A Office
Buildings") and 31 properties that support both office and technical uses ("R&D
Properties"); nine industrial properties ("Industrial Properties"); three
hotels ("Hotel Properties"); and one parking garage (the "Garage Property").
Five of the Office Properties are Development Properties and are referred to as
the "Office Development Properties." One Hotel Property is a Development
Property and is referred to as the "Hotel Development Property." The Company
considers Class A office buildings to be centrally located buildings that are
professionally managed and maintained, attract high-quality tenants and command
upper-tier rental rates, and that are modern structures or have been modernized
to compete with newer buildings.

1
<PAGE>

The following chart shows the geographic location of the Company's Office and
Industrial Properties (including the five Office Development Properties and the
ten Acquisition Properties that are expected to be acquired in January and
February 1998) by net rentable square feet and Annualized Rent on a pro forma
basis as of September 30, 1997:

<TABLE>
<CAPTION>
NET RENTABLE SQUARE FEET OF
OFFICE AND INDUSTRIAL PROPERTIES
------------------------------------------------------
CLASS A PERCENT
OFFICE R&D INDUSTRIAL OF
MARKET BUILDINGS PROPERTIES PROPERTIES TOTAL TOTAL
------ --------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C>
GREATER BOSTON.. 2,322,403 545,206 247,318 3,114,927 22.2%
GREATER WASHINGTON, D.C.(2).. 4,352,050 1,322,905 236,743 5,911,698 42.2
BALTIMORE, MD... 633,482 -- -- 633,482 4.5
RICHMOND, VA
(2)............ 899,720 -- -- 899,720 6.4
MIDTOWN
MANHATTAN...... 2,880,508 -- -- 2,880,508 20.5
GREATER SAN
FRANCISCO...... -- 144,479 281,000 425,479 3.0
BUCKS COUNTY,
PA............. -- -- 161,000 161,000 1.2
---------- --------- ------- ---------- -----
TOTAL........... 11,088,163 2,012,590 926,061 14,026,814 100.0%
========== ========= ======= ========== =====
PERCENT OF
TOTAL.......... 79.0% 14.4% 6.6% 100.0%
NUMBER OF
PROPERTIES..... 48 31 9 88
<CAPTION>
ANNUALIZED RENT OF OFFICE AND
INDUSTRIAL PROPERTIES (1)
------------------------------------------------------------
CLASS A PERCENT
OFFICE R&D INDUSTRIAL OF
MARKET BUILDINGS PROPERTIES PROPERTIES TOTAL TOTAL
------ ------------- ---------- ---------- ----- -------
<S> <C> <C> <C> <C> <C>
GREATER BOSTON.. $ 43,760,880 $ 6,022,906 $1,649,144 $ 51,432,930 15.3%
GREATER WASHINGTON, D.C.(2).. 112,427,318 12,288,008 1,524,927 126,240,253 37.6
BALTIMORE, MD... 15,224,424 -- -- 15,224,424 4.5
RICHMOND, VA
(2)............ 17,563,259 -- -- 17,563,259 5.3
MIDTOWN
MANHATTAN...... 122,178,265 -- -- 122,178,265 36.4
GREATER SAN
FRANCISCO...... -- 1,061,181 1,029,027 2,090,208 0.6
BUCKS COUNTY,
PA............. -- -- 868,699 868,699 0.3
------------- ------------ ----------- ------------- -------
TOTAL........... $311,154,146 $19,372,095 $5,071,797 $335,598,038 100.0%
============= ============ =========== ============= =======
PERCENT OF
TOTAL.......... 92.7% 5.8% 1.5% 100.0%
NUMBER OF
PROPERTIES..... 48 31 9 88
</TABLE>
- -------
(1) Annualized Rent is the monthly contractual rent under existing leases as of
September 30, 1997 multiplied by twelve. This amount reflects total rent
before any rent abatements and includes expense reimbursements, which may
be estimates as of such date. Total rent abatements for leases in effect as
of September 30, 1997 were, on an annualized basis, approximately $12.9
million.

(2) Includes 1,277,454 and 899,720 net rentable square feet of Office
Properties in Greater Washington, D.C. and Richmond, Virginia,
respectively, that are under contract and expected to close in January and
February 1998.

The table above excludes (i) the Company's three Hotel Properties totaling
937,874 square feet (representing approximately $21.1 million of annualized
seasonally adjusted triple net rent based on the quarter ended September 30,
1997) and (ii) the Company's Garage Property and structured parking related to
the Company's Office Properties totaling 3,212,972 square feet (representing
approximately $1.5 million of annualized triple net rent based on the quarter
ended September 30, 1997).

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

As of September 30, 1997, the Office Properties (excluding the Office
Development Properties) and the Industrial Properties had a weighted average
occupancy rate of 96.0% and the Hotel Properties (excluding the Hotel
Development Property) had a weighted average occupancy rate for the nine months
ended September 30, 1997 of 88.0%. Leases with respect to 2.4% of the leased
square footage of the Office and Industrial Properties expired in the fourth
quarter of 1997, and 7.5% and 6.3% expire in calendar years 1998 and 1999,
respectively.

The Company has a $300 million unsecured revolving line of credit (the
"Unsecured Line of Credit") with BankBoston, N.A., as agent ("BankBoston") that
expires in June 2000. The Company uses the Unsecured Line of Credit principally
to facilitate its development and acquisition activities and for working
capital purposes. As of December 29, 1997, the Company had $233.0 million
outstanding under the Unsecured Line of Credit, all of which will be repaid
upon the completion of this Offering. See "Unsecured Line of Credit." As of
December 29, 1997, the Company had a debt to total market capitalization ratio
of approximately 41.8%. At the completion of this Offering and upon the
application of the net proceeds therefrom, the Company expects to have a debt
to total market capitalization ratio of approximately 35.8%. The Company does
not have a specific policy limiting the amount of leverage that it expects to
use as a whole or with respect to individual properties.

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, tax and legal
services. As of September 30, 1997, the Company had 312 employees, including 94
professionals. 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 at the U.S. International Trade Commission Building at 500 E
Street, SW, Washington, D.C. 20024 and at 599 Lexington Avenue, New York, New
York 10002.

2
<PAGE>

RECENT EVENTS

Since the Company's Initial Offering in June 1997, the Company has acquired
three Class A Office Buildings, entered into contracts to acquire the ten
Acquisition Properties expected to close in January and February 1998, and is
developing five Class A Office Buildings and one 221 room hotel for a total
anticipated investment of approximately $1.23 billion. The following describes
the 13 Properties acquired or expected to be acquired:

RECENT ACQUISITIONS

<TABLE>
<CAPTION>
DATE NET ANNUALIZED
ACQUIRED/ RENTABLE ANTICIPATED RENT PER
TO BE SQUARE INITIAL FUTURE TOTAL CURRENT LEASED SQ. FT.
PROPERTY ACQUIRED FEET INVESTMENT(1) INVESTMENT INVESTMENT OCCUPANCY AT 9/30/97(2)
-------- --------- --------- -------------- ----------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
280 Park Avenue, New
York, NY............... 9/97 1,198,769 $322,650,000 $28,986,652 $351,636,652 88% $41.95
100 East Pratt Street,
Baltimore, MD.......... 10/97 633,482 137,516,000 -- 137,516,000 97 24.53
875 Third Avenue, New
York, NY............... 11/97 681,669 206,500,000 2,400,000 208,900,000 100 42.37
Riverfront Plaza,
Richmond, VA........... 1/98 899,720 174,361,000 -- 174,361,000 97 20.16
Mulligan/Griffin
Portfolio, MD & VA(3).. 2/98 1,277,454 252,900,892 -- 252,900,892 96 27.64
--------- -------------- ----------- -------------- --- ------
TOTAL/WEIGHTED AVERAGE.. 4,691,094 $1,093,927,892 $31,386,652 $1,125,314,544 95% $31.58
========= ============== =========== ============== === ======
</TABLE>
- -------

(1) The initial investment shown represents the cash paid, the agreed upon
value of OP Units issued and the stated principal amount of any debt
assumed.

(2) At September 30, 1997 total rent abatements with respect to these
properties, on an annualized basis, were equal to $1.91 per leased square
foot.

(3) The Mulligan/Griffin Portfolio consists of nine Office Properties and six
parcels of land. Two of the Properties in the Mulligan/Griffin Portfolio
were designed and built to serve certain specialized business purposes of
the tenants at such Properties, resulting in rents that are presently
higher than average market rents for office properties in these submarkets
for tenants not requiring similarly customized properties.

280 Park Avenue. This Class A Office Building is located in the Park Avenue
submarket of midtown Manhattan. According to Insignia/Edward S. Gordon Co.,
Inc. ("Insignia/ESG"), at September 30, 1997, this submarket had an
availability rate of 7.6% and an average asking rent of $46.31 per square foot.
The Company anticipates investing approximately $29.0 million in tenant
improvements, leasing commissions and building system improvements. The
Property consists of two linked towers of 30 stories and 42 stories. Principal
tenants at this Property include Bankers Trust Company, Furman Selz LLC and the
National Football League.

100 East Pratt Street. This Class A Office Building is located in downtown
Baltimore, Maryland. According to Colliers Pinkard, at June 30, 1997, the first
tier of the downtown Baltimore Class A office market (which includes this
Property) had an availability rate of 8.6% and an average asking rent of $24.83
per square foot. The largest tenant at this Property is T. Rowe Price.

875 Third Avenue. This Class A Office Building is located in the East Side
submarket of midtown Manhattan on Third Avenue between 52nd and 53rd Streets.
According to Insignia/ESG, at September 30, 1997, the East Side submarket had
an availability rate of 12.6% and an average asking rent of $36.95 per square
foot. Principal tenants at this Property include Debevoise & Plimpton and
Instinet Corporation.

Riverfront Plaza. The Company has entered into a purchase and sale agreement
to acquire this Class A Office Building in Richmond, Virginia. According to
Harrison & Bates, at September 30, 1997, the Richmond Class A office market had
an availability rate of 5.0% and an average asking rent of $20.84 per square
foot. Primary tenants at this Property include Hunton & Williams and Wheat
First Butcher Singer, Inc. While the Company anticipates completing its
acquisition of this property in January 1998, there can be no assurances that
the Company will acquire this property in January 1998, or at all.

Mulligan/Griffin Portfolio. The Company has entered into agreements to
acquire this portfolio of nine office buildings aggregating approximately 1.3
million net rentable square feet and six parcels of land aggregating 30.7 acres
located in the Gaithersburg I-270 and I-270 Rockville submarkets of Montgomery
County, Maryland and the Springfield and Reston submarkets of Fairfax County,
Virginia. According to Spaulding & Slye, at September 30, 1997, these
submarkets had availability rates of 13.7%, 8.4%, 6.1% and 4.8% and average
asking rents of $19.50, $20.26, $10.04 and $21.86 per square foot,
respectively. Principal tenants at these properties include Lockheed Martin
Corporation and the United States of America. While the Company anticipates
completing its acquisition of these properties in February 1998, there can be
no assurances that the Company will acquire these properties in February 1998,
or at all.

3
<PAGE>

The Company regularly pursues the acquisition of income producing properties
and sites for development and may from time to time enter into letters of
intent, contribution agreements and purchase and sale agreements with respect
to the same. In addition to the contracts to acquire the Acquisition
Properties, the Company is currently a party to two purchase and sale
agreements with respect to sites located in Greater Washington, D.C. and
Greater Boston. The Company is conducting its due diligence review under both
agreements and currently has the right to terminate each agreement without
payment of a termination fee to the seller. There can be no assurance that
either of such land acquisitions will be consummated.

Since the Company's Initial Offering, the Company has completed the
development or redevelopment of the following Properties for its own account:

DEVELOPMENT PROPERTIES DELIVERED SINCE THE INITIAL OFFERING

<TABLE>
<CAPTION>
DATE NET
PLACED RENTABLE ANTICIPATED
IN NO. OF SQUARE TOTAL CURRENT
PROPERTY SERVICE LOCATION BUILDINGS FEET INVESTMENT+ OCCUPANCY
-------- ------- --------------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sugarland Building One.. 6/97 Herndon, VA 1 52,797 $ 5,962,348 82%
Sugarland Building Two.. 6/97 Herndon, VA 1 59,423 5,256,692 46
7700 Boston Boulevard,
Building Twelve........ 10/97 Springfield, VA 1 82,224 10,427,128 100
7501 Boston Boulevard,
Building Seven......... 11/97 Springfield, VA 1 75,756 11,469,620 100
201 Spring Street....... 11/97 Lexington, MA 1 102,000 17,689,442 100
--- ------- ----------- ---
TOTAL/WEIGHTED AVERAGE.. 5 372,200 $50,805,230 89%
=== ======= =========== ===
</TABLE>
- -------
+ As of November 30, 1997, the Company had invested $45.2 million, of which
$28.8 million was invested at or prior to the completion of the Initial
Offering.

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. The Company purchased the buildings vacant in 1996 and
completed improvements to them in June 1997. As of December 1, 1997
approximately 70% of the total of 112,220 net rentable square feet of these
buildings was committed under signed leases or letters of intent with leases in
negotiation.

7700 Boston Boulevard, Building Twelve and 7501 Boston Boulevard, Building
Seven. These R&D Properties are located on land owned by the Company in its
Virginia-95 Office Park and are currently 100% leased to Autometric, Inc. and
the General Services Administration for terms of 15 and 10 years, respectively.

201 Spring Street. This Class A Office Building is located in the Route 128
Northwest submarket of Greater Boston and is adjacent to the Company's existing
Class A Office Building at 191 Spring Street. The building is currently 100%
leased to MediaOne of Delaware, Inc. ("MediaOne"), formerly Continental
Cablevision, Inc. MediaOne has notified the Company that it intends to relocate
its headquarters to another state and sublease this building.

The Company is currently developing the following Properties for its own
account:

PROPERTIES CURRENTLY UNDER DEVELOPMENT

<TABLE>
<CAPTION>
NET
RENTABLE ANTICIPATED
ANTICIPATED NO. OF SQUARE TOTAL
DEVELOPMENT PROPERTIES COMPLETION LOCATION BUILDINGS FEET INVESTMENT+
---------------------- ----------- ------------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Class A Office Buildings
Reston Overlook (25%
ownership)............ Q1 1999 Reston, VA 2 444,000 $18,100,000(/1/)
Eight Cambridge Cen-
ter................... Q2 1999 Cambridge, MA 1 134,054 21,000,000
181 Spring Street...... Q2 1999 Lexington, MA 1 52,000 10,871,085
One Freedom Square (25%
ownership)............ Q4 1999 Reston, VA 1 406,980 19,150,000(/1/)
--- --------- ------------
Total Class A Office
Buildings............. 5 1,037,034 $ 69,121,085
Hotel
Residence Inn by
Marriott(R)........... Q1 1999 Cambridge, MA 1 187,474 $32,000,000
--- --------- ------------
TOTAL DEVELOPMENT PROP-
ERTIES................. 6 1,224,508 $101,121,085
=== ========= ============
</TABLE>
- -------
+ As of November 30, 1997, the Company had invested $6.9 million, of which
$3.9 million was invested at or prior to the completion of the Initial
Offering.
(1) Represents 25% of the total anticipated project-level investment.

4
<PAGE>

One and Two Reston Overlook. One Reston Overlook is an approximately 312,000
square foot, 12-story, Class A Office Building located in Reston, Virginia. The
Company is developing this property through its joint venture with Westbrook
Partners ("Westbrook"). Completion of One Reston Overlook is scheduled for
February 1999. Approximately 309,000 square feet of development is pre-leased
to BDM International ("BDM") for a term of twelve years (the building's
remaining 3,000 square feet are ground-floor retail space). The Company is also
constructing Two Reston Overlook, a six-story building on the site totaling
approximately 132,000 square feet. Two Reston Overlook is being developed
without a pre-leasing commitment in response to the significant unsatisfied
demand for office space in the Reston, Virginia market. Delivery of Two Reston
Overlook is scheduled for December 1998.

Eight Cambridge Center. This nine-story Class A Office Building is located in
the Cambridge Center development in East Cambridge, Massachusetts and is 100%
pre-leased to a leading Massachusetts based technology consulting firm.
Completion of this Class A Office Building is scheduled for April 1999.

181 Spring Street. This Class A Office Building is adjacent to the Company's
201 Spring Street Property in the Route 128 Northwest submarket of Greater
Boston. This property is being developed without a pre-leasing commitment in
response to the significant unsatisfied demand for office space in the Route
128 Northwest submarket. Completion of 181 Spring Street is scheduled for May
1999.

One Freedom Square. This Class A Office Building is currently being developed
by the Company in Reston, Virginia. The Company is developing this building
through its joint venture with Westbrook. This building is 59.0% pre-leased to
Andersen Consulting. Completion of the building is scheduled for the fourth
quarter of 1999.

Residence Inn by Marriott(R). The Company is currently developing this 221-
room limited service extended stay hotel on land owned by the Company in the
Cambridge Center development in East Cambridge, Massachusetts. The hotel will
be managed by the Residence Inn division of Marriott International, Inc. and is
scheduled to open in January 1999. As with the Company's other Hotel
Properties, the Company will lease this hotel and will have a participation in
the gross receipts of the hotel.

5
<PAGE>

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:

. the Company may acquire large properties or portfolios of properties that
would substantially increase the size of the Company, and the Company's
ability to assimilate such acquisitions and achieve the intended return on
investment cannot be assured;

. the development of commercial properties is subject to risks such as the
availability and timely receipt of regulatory approvals, the cost and
timely completion of construction, the availability of construction
financing on favorable terms, the timely leasing of the property, and the
leasing of the property at lower rental rates than anticipated, any of
which could have an adverse effect on the financial condition of the
Company;

. conflicts of interest between the Company and Messrs. Zuckerman and Linde,
including conflicts associated with the sale of any of the Properties or
with the repayment of indebtedness because of possible adverse tax
consequences which may influence them to not act in the best interests of
the stockholders; in particular the Company will, in general, be
restricted from selling or transferring in a taxable transaction any of
four Designated Properties until June 23, 2007 without the consent of
Messrs. Zuckerman and Linde; for the benefit of certain other holders of
OP Units the Company has agreed to restrictions on selling any of five
other Properties in taxable transactions for specified periods of time
and, in general, from repaying certain indebtedness with respect to these
and certain other Properties;

. dependence on key personnel whose continued service is not guaranteed,
particularly Messrs. Zuckerman and Linde;

. 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 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 and debt service, all of
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 or acceleration, 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; and

. 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 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.

BUSINESS AND GROWTH STRATEGIES

BUSINESS STRATEGY

The Company's primary objective is to maximize growth in cash flow and total
return to stockholders. The Company's strategy to achieve this objective is:
(i) to selectively acquire and 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."

6
<PAGE>

GROWTH STRATEGIES

External Growth

The Company will continue to pursue the following four areas of development
and acquisition activities, which the Company believes present significant
opportunities for external growth:

.Acquire assets and portfolios of assets from institutions or individuals.

.Acquire existing underperforming assets and portfolios of assets.

.Pursue development and land acquisitions in selected submarkets.

.Provide third-party development management services.

When desirable, the Company will offer OP Units or Common Stock to sellers of
properties to finance an acquisition and enable a tax deferred contribution of
a property to the Company.

Internal Growth

The Company believes there are significant opportunities to increase cash
flow from many of its existing Properties because they are high quality
properties in desirable locations in submarkets that are experiencing rising
rents and room rates, low vacancy rates and increasing demand for office, R&D
and industrial space and for hotel accommodations. The Company intends to:

.Directly manage properties to maximize the potential for tenant retention.

.Replace tenants quickly at best available market terms and lowest possible
transaction costs.

THE PROPERTIES

The Company's portfolio consists of 92 Properties, including the ten
Acquisition Properties expected to be acquired by the Company in January and
February 1998 and the six Development Properties. The Properties include 79
Office Properties, consisting of 48 Class A Office Buildings and 31 R&D
Properties; nine Industrial Properties; three Hotel Properties; and the Garage
Property.

The two in-service Hotel Properties are located in Boston and Cambridge,
Massachusetts. For the nine months ended September 30, 1997, the in-service
Hotel Properties had a weighted average occupancy rate of 88.0%, a weighted
average ADR of $189.27 and a weighted average REVPAR of $167.60. Management
believes that REVPAR (as defined more fully in the Glossary) is an industry
standard measure used to present hotel operating data.

To assist the Company in maintaining its status as a REIT, the Company leases
the two in-service Hotel Properties, pursuant to a lease with a participation
in the gross receipts of the Hotel Properties, to a lessee ("ZL Hotel LLC") in
which Messrs. Zuckerman and Linde are the sole member-managers. Messrs.
Zuckerman and Linde have a 9.8% economic interest in such lessee and one or
more unaffiliated public charities have a 90.2% economic interest. Marriott
International, Inc. manages these Hotel Properties under the Marriott (R) name
pursuant to a management agreement with the lessee. Under the REIT
requirements, revenues from a hotel are not considered to be rental income for
purposes of certain income tests which a REIT must meet. See "Federal Income
Tax Consequences--Requirements for Qualification." Accordingly, in order to
maintain its qualification as a REIT, the Company has entered into the
participating leases described above to provide revenue which qualifies as
rental income under the REIT requirements. The Company intends to make similar
arrangements with respect to the Hotel Development Property.

7
<PAGE>

The following chart shows the geographic location of the Company's Office
and Industrial Properties, including the Office Development Properties, by net
rentable square feet (excluding storage space) and Annualized Rent as of
September 30, 1997:
<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
(2) ............ 6 730,149 67,362 -- 797,511 5.7%
Route 128 NW
Bedford, MA..... 3 90,000 383,704 -- 473,704 3.4
Billerica, MA... 1 -- 64,140 -- 64,140 0.5
Burlington, MA.. 2 152,552 -- -- 152,552 1.0
Lexington, MA
(3)............. 11 842,957 30,000 -- 872,957 6.2
Route 128/MA
Turnpike
Waltham, MA..... 6 307,390 -- -- 307,390 2.2
Route 128 SW
Westwood, MA.... 2 -- -- 247,318 247,318 1.8
Route 128 South
Quincy, MA...... 1 168,829 -- -- 168,829 1.2
Boston.......... 1 30,526 -- -- 30,526 0.2
--- ---------- --------- ------- ---------- -----
Subtotal......... 33 2,322,403 545,206 247,318 3,114,927 22.2%
GREATER
WASHINGTON, D.C.
SW Washington,
D.C.(4)......... 4 1,560,941 -- -- 1,560,941 11.1%
West End
Washington,
D.C. ........... 1 280,065 -- -- 280,065 2.0
Montgomery
County, MD
Bethesda, MD.... 3 680,000 -- -- 680,000 4.9
Gaithersburg, MD
(5)............. 3 122,157 240,706 -- 362,863 2.6
Rockville,
MD(6)........... 1 77,747 -- -- 77,747 0.8
Fairfax County,
VA
Herndon, VA..... 2 -- 112,220 -- 112,220 0.8
Reston, VA (7).. 7 1,631,140 -- -- 1,631,140 11.6
Springfield, VA
(4)(8).......... 13 -- 969,979 -- 969,979 6.9
Prince George's
County, MD
Landover, MD.... 3 -- -- 236,743 236,743 1.7
--- ---------- --------- ------- ---------- -----
Subtotal......... 37 4,352,050 1,322,905 236,743 5,911,698 42.2%
BALTIMORE, MD 1 633,482 -- -- 633,482 4.5%
RICHMOND, VA(6) 1 899,720 -- -- 899,720 6.4%
MIDTOWN MANHATTAN
Park Avenue..... 2 2,198,839 -- -- 2,198,839 15.7%
East Side....... 1 681,669 -- -- 681,669 4.8
--- ---------- --------- ------- ---------- -----
Subtotal......... 3 2,880,508 -- -- 2,880,508 20.5%
GREATER SAN
FRANCISCO
Hayward, CA..... 1 -- -- 221,000 221,000 1.6%
San Francisco,
CA (9).......... 11 -- 144,479 60,000 204,479 1.4
--- ---------- --------- ------- ---------- -----
Subtotal......... 12 -- 144,479 281,000 425,479 3.0%
BUCKS COUNTY,
PA............... 1 -- -- 161,000 161,000 1.2%
--- ---------- --------- ------- ---------- -----
TOTAL............ 88 11,088,163 2,012,590 926,061 14,026,814 100.0%
=== ========== ========= ======= ========== =====
PERCENT OF TOTAL............. 79.0% 14.4% 6.6% 100.0%
NUMBER OF OFFICE AND
INDUSTRIAL PROPERTIES........ 48 31 9 88
<CAPTION>
ANNUALIZED 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
(2) ............ $ 13,789,950 $ 1,366,714 $ -- $ 15,156,664 4.5%
Route 128 NW
Bedford, MA..... 1,590,814 3,780,214 -- 5,371,028 1.6
Billerica, MA... -- 598,478 -- 598,478 0.2
Burlington, MA.. 3,257,655 -- -- 3,257,655 1.0
Lexington, MA
(3)............. 14,083,118 277,500 -- 14,360,618 4.2
Route 128/MA
Turnpike
Waltham, MA..... 6,691,931 -- -- 6,691,931 2.0
Route 128 SW
Westwood, MA.... -- -- 1,649,144 1,649,144 0.5
Route 128 South
Quincy, MA...... 3,267,240 -- -- 3,267,240 1.0
Boston.......... 1,080,172 -- -- 1,080,172 0.3
------------- ------------ ----------- ------------- -------
Subtotal......... $ 43,760,880 $ 6,022,906 $1,649,144 $ 51,432,930 15.3%
GREATER
WASHINGTON, D.C.
SW Washington,
D.C.(4)......... $ 53,174,273 $ -- $ -- $ 53,174,273 15.8%
West End
Washington,
D.C. ........... 12,911,442 -- -- 12,911,442 3.8
Montgomery
County, MD
Bethesda, MD.... 14,669,523 -- -- 14,669,523 4.4
Gaithersburg, MD
(5)............. 2,156,064 3,243,660 -- 5,399,724 1.6
Rockville,
MD(6)........... 1,500,756 -- -- 1,500,756 0.4
Fairfax County,
VA
Herndon, VA..... -- 1,157,431 -- 1,157,431 0.3
Reston, VA (7).. 28,015,260 -- -- 28,015,260 8.4
Springfield, VA
(4)(8).......... -- 7,886,917 -- 7,886,917 2.4
Prince George's
County, MD
Landover, MD.... -- -- 1,524,927 1,524,927 0.5
------------- ------------ ----------- ------------- -------
Subtotal......... $112,427,318 $12,288,008 $1,524,927 $126,240,253 37.6%
BALTIMORE, MD $ 15,224,424 $ -- $ -- $ 15,224,424 4.5%
RICHMOND, VA(6) $ 17,563,259 $ -- $ -- $ 17,563,259 5.3%
MIDTOWN MANHATTAN
Park Avenue..... $ 93,303,877 $ -- $ -- $ 93,303,877 27.8%
East Side....... 28,874,388 -- -- 28,874,388 8.6
------------- ------------ ----------- ------------- -------
Subtotal......... $122,178,265 $ -- $ -- $122,178,265 36.4%
GREATER SAN
FRANCISCO
Hayward, CA..... $ -- $ -- $ 676,188 $ 676,188 0.2%
San Francisco,
CA (9).......... -- 1,061,181 352,839 1,414,020 0.4
------------- ------------ ----------- ------------- -------
Subtotal......... $ -- $ 1,061,181 $1,029,027 $ 2,090,208 0.6%
BUCKS COUNTY,
PA............... $ -- $ -- $ 868,699 $ 868,699 0.3%
------------- ------------ ----------- ------------- -------
TOTAL............ $311,154,146 $19,372,095 $5,071,797 $335,598,038 100.0%
============= ============ =========== ============= =======
PERCENT OF TOTAL............. 92.7% 5.8% 1.5% 100.0%
NUMBER OF OFFICE AND
INDUSTRIAL PROPERTIES........ 48 31 9 88
</TABLE>
- ----
(1) Annualized Rent is the monthly contractual rent under existing leases as
of September 30, 1997 multiplied by twelve. This amount reflects total
rent before any rent abatements and includes expense reimbursements, which
may be estimates as of such date. Total rent abatements for leases in
effect as of September 30, 1997, on an annualized basis, were
approximately $12.9 million.
(2) Does not include 1997 Annualized Rent for one Development Property.
(3) Does not include 1997 Annualized Rent for one Development Property and one
Property developed and placed in service in November 1997.
(4) 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.
(5) Includes two Acquisition Properties. The Company owns a 75.0% general
partner interest in the limited partnership that owns the Class A Office
Building in this submarket. 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 Class A Office Building.
(6) This Property is an Acquisition Property.
(7) Includes four Acquisition Properties. Does not include 1997 Annualized
Rent for three Development Properties. The Company is acting as
development manager of, and is a 25.0% member of, a limited liability
company that owns these Development Properties. The Company's economic
interest may increase above 25.0% depending upon the achievement of
certain performance goals.
(8) Includes two Acquisition Properties. Does not include 1997 Annualized Rent
for two Properties developed and placed in service in October and November
1997.
(9) The Company owns a 35.7% controlling general partnership interest in the
nine R&D Properties and two Industrial Properties located in Greater San
Francisco, California.

8
<PAGE>

THE OFFERING

All of the shares of Common Stock offered hereby are being sold by the
Company.

<TABLE>
<S> <C>
Common Stock Offered...................... 15,000,000
U.S. Offering.......................... 12,000,000
International Offering................. 3,000,000
Common Stock Outstanding After the
Offering(l).............................. 53,694,041
Common Stock and OP Units Outstanding
After the Offering(1)(2)................. 72,157,961
Use of Proceeds........................... To reduce indebtedness, to fund the
acquisitions of Riverfront Plaza
and the Mulligan/Griffin Portfolio,
to fund ongoing development and for
general corporate and working
capital purposes
NYSE Symbol............................... "BXP"
</TABLE>
- -------
(1) Excludes 2,297,600 shares reserved for issuance upon exercise of
outstanding options.

(2) Includes 18,463,920 OP Units. This number assumes that the Company will
issue 1,506,591 restricted OP Units in connection with the acquisition of
the Mulligan/Griffin Portfolio. See "The Company--Recent Events." In
general, after August 23, 1998, or such later date as an OP Unit holder has
agreed, OP Units are redeemable by the holders for cash or, at the election
of the Company, exchangeable for shares of Common Stock on a one-for-one
basis.

DISTRIBUTIONS

With respect to the period from June 23, 1997 (the completion of the Initial
Offering) through September 30, 1997, the Company paid a distribution of $0.44
per share of Common Stock on November 21, 1997, which represents $0.405 per
share on a quarterly basis or $1.62 per share on an annualized basis. The
Company has declared, with respect to the quarter ended December 31, 1997, a
dividend of $0.405 per share payable on January 28, 1998 to shareholders of
record on December 28, 1997. Future distributions by the Company will be at the
discretion of the Board of Directors and will depend on the actual cash
available for distribution, its financial condition, capital requirements, the
annual distribution requirement under the REIT provisions of the code (see
"Federal Income Tax Consequences--Requirements for Qualification"), and such
other factors as the Board of Directors deems relevant. See "Risk Factors--
Changes in Policies Without Shareholder Approval."

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 ended December 31, 1997. The
Company believes, and has obtained an opinion of Goodwin, Procter & Hoar llp,
tax counsel to the Company ("Tax Counsel"), to the effect that, commencing with
its taxable year ended 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, including the lease of the
Hotel Properties and Garage Properties, will enable it to meet the requirements
for taxation as a REIT for federal income tax purposes. 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.

9
<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 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 L.L.P., independent accountants, whose report with respect thereto is
included elsewhere in this Prospectus.

The selected financial data at and for the nine months ended September 30,
1997 (which includes the Company and the Boston Properties Predecessor Group)
and for the nine months ended September 30, 1996 are derived from unaudited
financial statements. The unaudited financial information includes all
adjustments (consisting of normal recurring adjustments) that management
considers necessary for fair presentation of the consolidated and combined
financial position and results of operations for these periods. Consolidated
and combined operating results for the nine months ended September 30, 1997 are
not necessarily indicative of the results for the entire year ended December
31, 1997.

Unaudited pro forma adjustments and operating information for the nine months
ended September 30, 1997 and for the year ended December 31, 1996 are presented
as if the completion of the Initial Offering and the Formation Transactions,
the Offering, and the pending acquisitions subsequent to September 30, 1997 and
the acquisitions subsequent to December 31, 1996, had occurred at January 1,
1996, and the effect thereof was carried forward through the nine months ended
September 30, 1997. By necessity, such pro forma operating information
incorporates certain assumptions which are described in the notes to the Pro
Forma Condensed Consolidated Statements of Income included elsewhere in this
Prospectus. The unaudited pro forma balance sheet data is presented as if the
Offering and such pending acquisitions had occurred on September 30, 1997.

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.

10
<PAGE>

THE COMPANY AND THE BOSTON PROPERTIES PREDECESSOR GROUP
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR GROUP THE COMPANY
--------------------------- ------------------------- ------------
HISTORICAL
PRO FORMA ---------------------------------------
NINE MONTHS JUNE 23, JANUARY 1, NINE MONTHS PRO FORMA
ENDED 1997 TO 1997 TO ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, JUNE 22, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1996 1996
------------- ------------- ----------- ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues(1)..... $ 277,006 $ 68,353 $129,818 $202,319 $355,642
Income (loss)
before
extraordinary
items.......... 48,623 14,854 4,605 8,160 52,907
Net income
(loss)......... 22,779 4,605 8,160
PER SHARE OF
COMMON STOCK
DATA:
Income before
extraordinary
items $ .91 $ .38 -- -- $ .99
Net income...... -- $ .59 -- -- --
Weighted average
number of
shares
outstanding.... 53,694 38,694 -- -- 53,694
Weighted average
number of
shares and
OP Units
outstanding.... 72,158 54,760 -- -- 72,158
BALANCE SHEET
DATA, AT PERIOD
END:
Real estate,
before
accumulated
depreciation... $2,212,643 $1,433,376 -- -- --
Real estate,
after
accumulated
depreciation... 1,927,138 1,147,871 -- -- --
Cash and cash
equivalents.... 143,732 25,989 -- -- --
Total assets.... 2,195,506 1,295,638 -- -- --
Total
indebtedness... 1,334,665 985,614 -- -- --
Stockholders' or
owners' equity
(deficiency)... 667,175 195,481 -- -- --
OTHER DATA:
Funds from
Operations(2)
(unaudited).... $ 107,796 $ 30,879 $21,450 $ 34,652 $120,759
Company's Funds
from Operations
(unaudited).... 80,211 21,818 -- -- 89,857
EBITDA(3)(unaudited).. 184,431 47,106 74,838 117,525 232,263
Company's EBITDA
(unaudited).... 137,235 33,284 -- -- 172,827
Cash flow
provided by
operating
activities(4).. -- $ 25,930 $ 25,226 $ 31,109 --
Cash flow used
in investing
activities(4).. -- (356,794) (32,844) (42,952) --
Cash flow
provided by
(used in)
financing
activities(4).. -- 356,853 9,130 (1,555) --
<CAPTION>
THE PREDECESSOR GROUP
--------------------------------------------------------
HISTORICAL
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues(1)..... $ 269,933 $ 248,725 $ 244,083 $ 245,561 $ 241,212
Income (loss)
before
extraordinary
items.......... 8,273 (3,983) 7,171 17,086 16,010
Net income
(loss)......... 7,279 (3,983) 7,171 17,086 16,010
PER SHARE OF
COMMON STOCK
DATA:
Income before
extraordinary
items -- -- -- -- --
Net income...... -- -- -- -- --
Weighted average
number of
shares
outstanding.... -- -- -- -- --
Weighted average
number of
shares and
OP Units
outstanding.... -- -- -- -- --
BALANCE SHEET
DATA, AT PERIOD
END:
Real estate,
before
accumulated
depreciation... $1,035,571 $1,012,324 $ 984,853 $ 983,751 $ 982,348
Real estate,
after
accumulated
depreciation... 771,660 773,810 770,763 789,234 811,815
Cash and cash
equivalents.... 8,998 25,867 46,289 50,697 28,841
Total assets.... 896,511 922,786 940,155 961,715 971,648
Total
indebtedness... 1,442,476 1,401,408 1,413,331 1,426,882 1,417,940
Stockholders' or
owners' equity
(deficiency)... (576,632) (506,653) (502,230) (495,104) (480,398)
OTHER DATA:
Funds from
Operations(2)
(unaudited).... $ 36,318 $ 29,151 $ 39,568 $ 49,240 $ 50,097
Company's Funds
from Operations
(unaudited).... -- -- -- -- --
EBITDA(3)(unaudited).. 153,566 138,321 137,269 140,261 142,627
Company's EBITDA
(unaudited).... -- -- -- -- --
Cash flow
provided by
operating
activities(4).. $ 51,531 $ 29,092 $ 45,624 $ 59,834 $ 50,468
Cash flow used
in investing
activities(4).. (23,689) (36,844) (18,424) (9,437) (48,257)
Cash flow
provided by
(used in)
financing
activities(4).. (44,711) (12,670) (31,608) (28,540) 1,365
</TABLE>
- -------

(1) Pro forma revenue for the nine month period ended September 30, 1997 and
the year ended December 31, 1996 includes the lease revenue that the
Company has/will receive under the lease for the two in-service Hotel
Properties. After entering into such lease, the Company has not/will not
recognize direct hotel revenues and expenses.
(2) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company believes that Funds from Operations is helpful
to investors as a measure of the performance of an equity REIT because,
along with cash flow from operating activities, financing activities and
investing activities, it provides investors with an indication of the
ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company computes Funds from
Operations in accordance with standards established by NAREIT which may not
be comparable to Funds from Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. Funds
from Operations does not represent cash generated from operating activities
determined in accordance with GAAP and should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indication 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 cash distributions.
(3) 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 should not be considered
as an alternative to operating income or net income (determined in
accordance with GAAP) as an indicator of operating performance or as an
alternative to cash flows from operating activities (determined in
accordance with GAAP) as an indicator of liquidity and other combined or
consolidated income or cash flow statement data (determined in accordance
with GAAP).
(4) Pro forma information relating to cash flow from operating, investing and
financing activities has not been included because the Company believes
that the information would not be meaningful due to the number of
assumptions required in order to calculate this information.

11
<PAGE>

RISK FACTORS

Prospective investors should carefully consider the following matters before
purchasing shares of Common Stock in this Offering.

This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-
looking statements are inherently subject to risks and uncertainties, many of
which cannot be predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, financial and otherwise, may
differ materially from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" herein.

THE COMPANY MAY NOT ACHIEVE EXPECTED RETURNS ON PROPERTY ACQUISITIONS

The Company intends to continue to investigate and pursue acquisitions of
properties and portfolios of properties, including large portfolios that could
significantly increase the size of the Company and alter its capital
structure. There can be no assurance that the Company will be able to
assimilate acquisitions of properties, and in particular acquisitions of
portfolios of properties, or achieve the Company's intended return on
investment.

THE COMPANY'S INVESTMENTS IN PROPERTY DEVELOPMENT MAY NOT YIELD EXPECTED
RETURNS

The Company intends to continue to pursue the development of office,
industrial and hotel properties. 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 cash available for distribution to stockholders.

CONFLICTS OF INTEREST EXIST BETWEEN THE COMPANY AND CERTAIN OP UNIT HOLDERS,
INCLUDING MESSRS. ZUCKERMAN AND LINDE, IN CONNECTION WITH THE OPERATION OF THE
COMPANY

For a period of time, sales of properties and repayment of indebtedness will
have different effects on holders of OP Units than on stockholders. Certain
holders of OP Units, including Messrs. Zuckerman and Linde, will incur adverse
tax consequences upon the sale of certain of the Properties owned by the
Company and on the repayment of 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 has the exclusive authority under the
Operating Partnership Agreement to determine whether, when, and on what terms
to sell a Property (subject, in the case of certain Properties, to contractual
commitments described below) 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 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.

The Operating Partnership Agreement provides that, until June 23, 2007, the
Operating Partnership may not sell or otherwise transfer a Designated Property
(defined as One and Two Independence Square, 599 Lexington Avenue and Capital
Gallery) in a taxable transaction without the prior consent of Messrs.
Zuckerman and Linde. The Operating Partnership is not, however, required to
obtain the aforementioned consent from Messrs. Zuckerman or Linde if, at any
time during this period, each of Messrs. Zuckerman and Linde do not continue
to hold at least 30% of his original OP Units. Similar restrictions apply for
varying time periods with respect to

12
<PAGE>

five other Properties. The Designated Properties and such five other
Properties account for approximately 35.0% of the Company's pro forma Funds
from Operations for the nine months ended September 30, 1997. The Operating
Partnership has also entered into agreements providing Messrs. Zuckerman,
Linde and others with the right to guarantee additional and/or substitute
indebtedness of the Company in the event that certain other indebtedness is
repaid or reduced. See "Business and Properties--Certain Agreements Relating
to the Properties."

Messrs. Zuckerman and Linde will continue to engage in other
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
Mr. Linde's employment agreement and Mr. Zuckerman's non-compete agreement
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 and
Noncompetition Agreements."

THE COMPANY RELIES ON KEY PERSONNEL WHOSE CONTINUED SERVICE IS NOT GUARANTEED

The Company is dependent on the efforts of Messrs. Zuckerman and Linde and
other senior management personnel. Messrs. Zuckerman and Linde in particular
have national reputations which aid the Company in negotiations with lenders
and in having investment opportunities brought to the Company. The other
executive officers of the Company who serve as managers of the Company's
offices (Messrs. Burke, Ritchey, Barrett and Selsam) have strong regional
reputations which aid the Company in identifying opportunities, or having
opportunities brought to the Company, and in negotiating with tenants or
build-to-suit prospects. 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 in that the extent
and nature of the Company's relationships with lenders and prospective tenants
and with persons in the industry who may have access to investment
opportunities would be diminished. While Mr. Linde and the other executive
officers have employment agreements with the Company pursuant to which they
have agreed to devote substantially all of their business time to the business
and affairs of the Company and to not have substantial outside business
interests, this can serve as no guarantee that they will remain with the
Company for any specified term. Mr. Zuckerman, who has significant outside
business interests, including serving as Chairman of the Board of Directors of
U.S. News & World Report, The Atlantic Monthly magazine, the New York Daily
News and Applied Graphics Technologies and as a member of the Board of
Directors of Snyder Communications, does not have an employment agreement with
the Company and serves as a non-executive officer of the Company with the
title "Chairman of the Board of Directors." Mr. Zuckerman has historically
devoted a significant portion of his business time to the affairs of the
Company, although over the last twenty years less than a majority of his
business time, in the aggregate, has been spent on the Company's affairs.
Although Mr. Zuckerman cannot assure the Company that he will continue to
devote any specific portion of his time to the Company and has therefore
declined to enter into an employment agreement with the Company, Mr. Zuckerman
has no present commitments inconsistent with his current level of involvement
with the Company. See "Management--Employment and Noncompetition Agreements."

THE COMPANY'S PERFORMANCE AND VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE
REAL ESTATE INDUSTRY

Lease expirations could adversely affect the Company's cash flow. 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 7.5% and 6.3% of the aggregate
net rentable area of the Office Properties and the Industrial Properties
expire during 1998 and 1999, 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 operating risks could adversely affect the Company's cash flow. The
Hotel Properties are subject to all operating risks common to the hotel
industry. These risks include, among other things: (i) competition for

13
<PAGE>

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 are 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 could adversely affect the Company. 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 "The
Company's Use of Debt to Finance Acquisitions and Developments Could Adversely
Affect the Company." The Company does not intend to limit its investments to
the markets in which the Properties are currently primarily located.
Consequently, to the extent that it elects to invest in additional markets,
the 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.

Uncontrollable factors affecting the Properties' performance and value could
produce lower returns. The economic performance and value of the Company's
real estate assets is subject to all of the risks incident to the ownership
and operation of real estate. These include the risks normally associated with
changes in national, regional and local economic and market conditions. The
Properties are primarily located in four markets, Greater Boston, Greater
Washington, D.C., midtown Manhattan and Baltimore, Maryland. The economic
condition of each of such markets may be dependent on one or more industries.
An economic downturn in one of these industry sectors may have an adverse
effect on the Company's performance in such market. Local real estate market
conditions may include a large supply of competing space and 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 could adversely affect the Company's
financial condition. 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.

Liability for environmental matters could adversely affect the Company's
financial condition. 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

14
<PAGE>

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 have caused site
contamination. With respect to all of the Properties, independent
environmental consultants have been retained in the past to conduct or update
Phase I environmental assessments (which generally do not involve invasive
techniques such as soil or ground water sampling) and asbestos surveys 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. On January 15, 1997, the Company notified the state
regulatory authority that it would cooperate with and monitor the tenant at
the Property which is investigating this matter. That investigation is
underway and has identified the presence of hazardous substances in a catch
basin along the property line. It is expected that the tenant will take any
necessary response actions. The 91 Hartwell Avenue Property in Lexington,
Massachusetts was listed by the state regulatory authority as an unclassified
Confirmed Disposal Site in connection with groundwater contamination. The
Company engaged a specially licensed environmental consultant to perform the
necessary investigation and assessment and to prepare submittals to the state
regulatory authority. On August 1, 1997, such consultant submitted to the
state regulatory authority a Phase I--Limited Site Investigation Report and
Downgradient Property Status Opinion. This Opinion concluded that the property
qualifies for Downgradient Property Status under the state regulatory program.
Downgradient Property Status eliminates certain deadlines for conducting
response actions at a site. Although the Company believes that the current or
former owners of the upgradient source properties may ultimately be
responsible for some or all of the costs of such response actions, the Company
will take any necessary further response actions. 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.

The cost of complying with the Americans with Disabilities Act could
adversely affect the Company's cash flow. 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 could adversely affect the Company's cash flow. 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.

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New owner's title insurance policies were not obtained in connection with
the Formation Transactions. Prior to the Initial Offering, each of the
Properties was 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 remained 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 tax and environmental laws could adversely affect the Company's
financial condition. 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.

THE COMPANY'S USE OF DEBT TO FINANCE ACQUISITIONS AND DEVELOPMENTS COULD
ADVERSELY AFFECT THE COMPANY

The required repayment of debt or of interest thereon can adversely affect
the Company. Upon completion of the Offering and the expected application of
the net proceeds therefrom, the Company expects to have approximately $1.33
billion of outstanding indebtedness. As of December 29, 1997, the Company also
had an outstanding balance of $233.0 million under the Unsecured Line of
Credit. Advances under the Unsecured Line of Credit 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 the entire
$300.0 million available under the Unsecured Line of Credit is outstanding,
the Company would incur an additional $750,000 in interest expense per year
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 is
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. The mortgage loans secured by the One
Independence Square and Two Independence Square properties are cross-defaulted
as to each other. If an event of default were to occur under either of the
loans, the Company could be required to repay approximately $199.3 million,
together with any applicable prepayment charges, prior to the scheduled
maturity dates of the loans. In addition, the Unsecured Line of Credit is
cross-defaulted with respect to future recourse indebtedness of the Company if
the Company is in default with respect to an aggregate of $50.0 million or
more of such recourse indebtedness.

The Company's policy of no limitation on debt could adversely affect the
Company's cash flow. Upon completion of the Offering and the expected
application of the net proceeds therefrom, the Company's debt to total market
capitalization ratio will be approximately 35.8% (35.1% if the Underwriters'
overallotment options are 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.

FAILURE TO QUALIFY AS A REIT WOULD CAUSE THE COMPANY TO BE TAXED AS A
CORPORATION

The Company will be taxed as a corporation if it fails 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 ended December 31, 1997. Although
management of the Company believes that it is organized and will continue to
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 Tax Counsel to the effect that, commencing with its
taxable year ended 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 manner of operation, including the lease of the

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<PAGE>

Hotel Properties and Garage Properties, 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.
Recently enacted legislation has liberalized certain of the requirements for
REIT qualification for tax years beginning after August 5, 1997 and 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 qualify as a REIT 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 continue 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."

To qualify as a REIT the Company will need to maintain a certain level of
distributions. 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 other than such capital gain net
income which the REIT elects to retain and pay tax on 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.
Furthermore, the Company's depreciation deductions with respect to the
Properties acquired by the Operating Partnership by contribution from or
merger with the Property Partnership may be less than if the Company had
acquired its interests in the Properties directly for cash. 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.

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."

THE ABILITY OF STOCKHOLDERS TO CONTROL THE POLICIES OF THE COMPANY AND EFFECT
A CHANGE OF CONTROL OF THE COMPANY IS LIMITED

Stockholder approval is not required to change policies of the Company. The
Company's operating and financial policies, including its policies with
respect to acquisitions, growth, operations, indebtedness, capitalization and
distributions, are determined by the Company's Board of Directors.
Accordingly, stockholders have little direct control over the Company's
policies.

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<PAGE>

Stockholder approval is not required to engage in investment activity. The
Company expects to continue to acquire additional real estate assets pursuant
to its investment strategies and consistent with its investment policies. See
"Business and Growth Strategies--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
(although in the case of acquisitions that are material, the Company will, as
required by federal securities law, provide financial information regarding
the acquisition in public filings.)

Stock ownership limit in the Certificate could inhibit changes in
control. 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.

Provisions in the Certificate and Bylaws and in the Operating Partnership
Agreement could prevent acquisitions and changes in control. 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 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--
The Board of Directors." 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
Initial Offering, the Company authorized 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 Agreement."

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<PAGE>

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, as general partner of the Operating Partnership, has
agreed in the Operating Partnership Agreement with the limited partners that
the Company will not consummate a Business Combination in which the Company
conducted a vote of the stockholders unless the matter would have been
approved had holders of OP Units been able to vote together with the
stockholders on the transaction. The foregoing provision of the Operating
Partnership Agreement would under no circumstances enable or require the
Company to engage in a Business Combination which required the approval of the
Company's stockholders if the Company's stockholders did not in fact give the
requisite approval. Rather, if the Company's stockholders did approve a
Business Combination, the Company would not consummate the transaction unless
(i) the Company as general partner first conducts a vote of holders of OP
Units (including the Company) on the matter, (ii) the Company votes the OP
Units held by it in the same proportion as the stockholders of the Company
voted on the matter at the stockholder vote, and (iii) the result of such vote
of the OP Unit holders (including the proportionate vote of the Company's OP
Units) is that had such vote been a vote of stockholders, the Business
Combination would have been approved by the stockholders. 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 be prohibited from engaging in a proposed business combination.

Shareholder Rights Agreement could inhibit changes in control. The Company
has adopted a Shareholder Rights Agreement. Under the terms of the Shareholder
Rights Agreement, in general, if a person or group acquires more than 15% of
the outstanding shares of Common Stock (an "Acquiring Person"), all other
Stockholders will have the right to purchase securities from the Company at a
discount to such securities' fair market value, thus causing substantial
dilution to the Acquiring Person. The Shareholder Rights Agreement 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. In addition, since the Board of Directors of the Company can
prevent the Shareholder Rights Agreement from operating in the event the Board
approves of an Acquiring Person, the Shareholder Rights Agreement gives the
Board significant discretion over whether a potential acquiror's efforts to
acquire a large interest in the Company will be successful. Because the
Shareholder Rights Agreement contains provisions that are designed to assure
that Messrs. Zuckerman and Linde and their affiliates will never, alone, be
considered a group that is an Acquiring Person, and because the Shareholder
Rights Agreement contains provisions to assure that persons with an interest
in the Operating Partnership at the completion of the Offering can maintain
their percentage interest in the Company (assuming exchange of all OP Units
for Common Stock) without becoming an Acquiring Person, the Shareholder Rights
Agreement provides Messrs. Zuckerman and Linde with certain advantages under
the Shareholder Rights Agreement that are not available to other stockholders.
See "Description of Capital Stock--Shareholder Rights Agreement."

Certain provisions of Delaware law could inhibit acquisitions and changes in
control. 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."

Provisions of debt instruments. Certain provisions of agreements relating to
indebtedness on the 599 Lexington Avenue and Bedford Business Park Properties
provide that it is a default thereunder if Messrs. Zuckerman or Linde cease to
serve as a director of the Company or, in the case of 599 Lexington Avenue, to
control the management of such Property.

INTEREST RATES, EQUITY MARKET CONDITIONS, AND SHARES AVAILABLE FOR FUTURE SALE
COULD ADVERSELY IMPACT THE TRADING PRICE OF THE COMMON STOCK

Interest rates and trading levels of equity markets could change. 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

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<PAGE>

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.

Availability of shares for future sale could adversely affect the market
price. 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 own an aggregate of 15,978,611 shares of Common
Stock and OP Units. In addition, officers of the Company other than Messrs.
Zuckerman and Linde own an aggregate of 1,186,298 OP Units. Other persons who
contributed properties or interests in properties in connection with the
Formation Transactions or subsequent property acquisitions will, after the
completion of the Offering and the expected application of the net proceeds
therefrom, own approximately 3,888,551 additional OP Units. In general, OP
Units may, at the option of a holder after August 23, 1998 or such later date
as the holder may agree, be redeemed for cash or, at the option of the
Company, be exchanged for shares of Common Stock on a one-for-one basis. See
"Structure and Formation of the Company--Formation Transactions" and
"Operating Partnership Agreement--Redemption of OP Units." Messrs. Zuckerman
and Linde and the other executive and 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 (one
year in the case of senior officers who are not executive officers) from June
23, 1997 without the prior written consent of Goldman, Sachs & Co. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated. At the conclusion of the two year
restriction period (or earlier with the consent of Goldman, Sachs & Co. and
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. Other holders of OP Units benefit from similar
registration rights agreements. See "Shares Available for Future Sale." In
addition, after the completion of the Offering, 6,616,880 shares of Common
Stock will be reserved for issuance pursuant to the Company's Stock Option
Plan, of which 2,297,600 shares will be subject to outstanding options. 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
"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.

THE COMPANY HAS HAD HISTORICAL ACCOUNTING LOSSES AND HAS A DEFICIT IN OWNERS'
EQUITY; THE COMPANY MAY EXPERIENCE FUTURE LOSSES

After depreciation and amortization, the Company has had historical
accounting losses for certain fiscal years and there can be no assurances that
the Company will not have similar losses in the future. The Boston Properties
Predecessor Group had a net loss of approximately $4.0 million in the
aggregate in 1995 and had cumulative aggregate deficits in owners' equity of
approximately $576.6 million and approximately $506.7 million at December 31,
1996 and 1995, respectively. Net losses reflect the effect of certain non-cash
charges such as depreciation and amortization. The aggregate deficits reflect
the effects of depreciation and amortization described above plus the effects
of distributions in excess of earnings or of mortgage proceeds upon the
refinancing of properties.

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THE COMPANY

GENERAL

Boston Properties, Inc. is one of the largest owners and developers of
office properties in the United States, with a significant presence in six
submarkets in Greater Boston, five submarkets in Greater Washington, D.C., two
submarkets in midtown Manhattan, and the downtown submarket of Baltimore,
Maryland. The Company owns 92 Properties, including six Development Properties
and ten Acquisition Properties expected to be acquired in January and February
1998. The Properties aggregate approximately 18.2 million square feet.

Since the Company's Initial Offering in June 1997, the Company has acquired
three Office Properties; entered into contracts to acquire the ten Acquisition
Properties expected to close in January and February 1998; and is currently
developing the six Development Properties, which consist of five Office
Properties aggregating approximately 1.1 million net rentable square feet and
one 221 room hotel. The aggregate anticipated investment for the 13 Properties
acquired or to be acquired is approximately $1.13 billion and the total
anticipated investment for the six Development Properties is approximately
$106.1 million (of which $3.9 million was incurred prior to the Initial
Offering). In addition, the Company has delivered five Office Properties that
were under development at the time of the Initial Offering, for a total
anticipated investment of approximately $50.8 million (of which $28.8 million
was incurred prior to the Initial Offering). The Company will use a portion of
the proceeds of this Offering to purchase the ten Acquisition Properties,
which are located in Richmond, Virginia, Montgomery County, Maryland and
Fairfax County, Virginia and aggregate approximately 2.2 million net rentable
square feet; fund ongoing development, including the six Development
Properties; and repay the outstanding balance under the Company's Unsecured
Line of Credit. As of December 29, 1997 the Company had $233.0 million
outstanding under the Unsecured Line of Credit, which amounts had been
incurred primarily to support the Company's acquisition and development
activity.

The Company was 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 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." Following the
completion of this Offering and the expected application of the net proceeds
therefrom, Messrs. Zuckerman and Linde will beneficially own in the aggregate
a 22.1% economic interest in the Company and the other senior officers of the
Company will beneficially own in the aggregate a 1.7% economic interest in the
Company (in each case assuming the exchange of all OP Units for Common Stock).

The Company's portfolio consists of 79 Office Properties with approximately
13.1 million net rentable square feet (including five Office Development
Properties totaling approximately 1.1 million net rentable square feet and the
ten Acquisition Properties expected to be acquired in January and February
1998 totaling approximately 2.2 million net rentable square feet) that have
approximately 2.9 million square feet of structured parking for 8,119
vehicles; nine Industrial Properties with approximately 925,000 net rentable
square feet; three hotels, including one limited service extended stay hotel
under development, totaling 1,054 rooms and approximately 940,000 square feet;
and a 1,170 space parking garage of approximately 330,000 square feet. The
Company owns a 100% fee interest in 77 of the Properties that account for
approximately 99% of the Company's rental revenues. The Company also owns, has
under contract or has options to acquire twelve undeveloped parcels of land
totaling 69.7 acres, located primarily in Greater Boston and Greater
Washington, D.C., which will support approximately 1.5 million square feet of
development.

Over its 27 year history, the Company has developed 83 properties totaling
15.3 million square feet, including properties developed for third parties and
the six Development Properties currently under development. The Company's
current portfolio of 92 properties includes 60 of these Company-developed
properties. The Company believes that it has created significant value 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.

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<PAGE>

Development Property) had a weighted average occupancy rate for the nine month
period ended September 30, 1997 of 88.0%. Leases with respect to 2.4% of the
leased square footage of the Office and Industrial Properties expired in the
fourth quarter of 1997, and 7.5% and 6.3% expire in calendar years 1998 and
1999, respectively.

The Company currently manages all of the Properties except the Acquisition
Properties, the two in-service Hotel Properties, which are managed by Marriott
International, Inc., the Garage Property, and parking garages that are a part
of certain of the Office Properties. Upon completion of the Company's
acquisition of the Acquisition Properties, the Company will manage such
Properties. The Company has long-established, full-service offices in Boston,
midtown Manhattan and Washington, D.C. 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 increase the number
of properties it owns and manages with less than a proportional increase in
overhead costs.

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, and contractors. 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 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, in general, are located in submarkets with low
vacancy rates and rising rents and room rates. With the value added by the
Company's in-house marketing, leasing, tenant construction and property
management programs, the Company has historically achieved high occupancy
rates and efficient re-leasing of vacated space.

The Company believes that its capacity for growth will be enhanced by
combining its 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 are available to it 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 tax-
sensitive sellers. 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 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. Between
1989 and December 31, 1997, 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.

The Company has a $300 million unsecured revolving line of credit (the
"Unsecured Line of Credit") led by BankBoston, as agent, that expires in June
2000. The Company uses the Unsecured Line of Credit principally to facilitate
its development and acquisition activities and for working capital purposes.
As of December 29, 1997, the Company had $233.0 million outstanding under the
Unsecured Line of Credit, all of which will be repaid upon the completion of
this Offering. As of December 29, 1997, the Company had a debt to total market
capitalization ratio of approximately 41.8%. At the completion of this
Offering and the application of the net proceeds therefrom, the Company
expects to have a debt to total market capitalization ratio of approximately
35.8%. See "Unsecured Line of Credit."

22
<PAGE>

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. The Company
also built on its growing reputation for quality development in the Boston
area by successfully competing for control of sites available through public
competitions. In total for Greater Boston, the Company has developed, acquired
or redeveloped, for its own account or for third parties, 42 buildings
containing approximately 5.1 million square feet, of which the Company still
owns approximately 3.8 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. During the past
18 years, the Company, for its own account and for third parties, has
developed 34 buildings in Greater Washington, D.C., totaling approximately 6.1
million square feet. The Company continues to own 25 of these properties
consisting of approximately 3.8 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, and based on the Company's
assessment of the strengths of the site and the building design (including
larger floors than were generally available in the market area), 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, 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 December 31, 1997, the Company
completed eight third party development projects on a fee basis. 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.

23
<PAGE>

RECENT EVENTS

RECENT ACQUISITIONS

(1) The initial investment shown represents the cash paid, the agreed upon
value of OP Units issued and the stated principal amount of any debt
assumed.

(2) At September 30, 1997 total rent abatements with respect to these
properties, on an annualized basis, were equal to $1.91 per leased square
foot.

(3) The Mulligan/Griffin Portfolio consists of nine Office Properties and six
parcels of land. Two of the Properties were designed and built to serve
certain specialized business purposes of the tenants at these Properties,
resulting in rents that are presently higher than average market rents for
office properties in these submarkets for tenants not requiring similarly
customized properties.

280 Park Avenue. This Class A Office Building is located in the Park Avenue
submarket of midtown Manhattan. According to Insignia/ESG, at September 30,
1997, this submarket had an availability rate of 7.6% and an average asking
rent of $46.31 per square foot. The Company anticipates investing
approximately $29.0 million in tenant improvements, leasing commissions and
building system improvements. The Property consists of two linked towers of 30
stories and 42 stories. Principal tenants at this Property include Bankers
Trust Company, Furman Selz LLC and the National Football League.

100 East Pratt Street. This Class A Office Building is located in downtown
Baltimore, Maryland. According to Colliers Pinkard, at June 30, 1997, the
first tier of the downtown Baltimore Class A office market (which includes
this Property) had an availability rate of 8.6% and an average asking rent of
$24.83 per square foot. The largest tenant at this Property is T. Rowe Price.

Riverfront Plaza. The Company has entered into a purchase and sale agreement
to acquire this Class A Office Building in Richmond, Virginia. According to
Harrison & Bates, at September 30, 1997, the Richmond Class A office market
had an availability rate of 5.0% and an average asking rent of $20.84 per
square foot. Primary tenants at this Property include Hunton & Williams and
Wheat First Butcher Singer, Inc. While the Company anticipates completing its
acquisition of this property in January 1998, there can be no assurances that
the Company will acquire this property in January 1998, or at all.

24
<PAGE>

tenants at these properties include Lockheed Martin Corporation and the United
States of America. The $252.9 million acquisition price for the
Mulligan/Griffin Portfolio will be satisfied by acquiring the portfolio
subject to $113.3 million of mortgage debt (or substituting such
indebtedness); issuing $50.0 million of restricted OP Units, valued based on
the ten day daily trading average of Common Stock at the time of closing; and
paying the balance in cash or, at the election of the contributors, through
the issuance of additional restricted OP Units. While the Company anticipates
closing on these acquisitions in February 1998, there can be no assurances
that the Company will acquire these properties in February 1998, or at all.

The Company regularly pursues the acquisition of income producing properties
and sites for development and may from time to time enter into letters of
intent, contribution agreements and purchase and sale agreements with respect
to the same. In addition to the Acquisition Properties, the Company is
currently a party to two purchase and sale agreements with respect to sites
located in Greater Washington D.C. and Greater Boston. The Company is
conducting its due diligence review under both agreements and currently has
the right to terminate each agreement without payment of a termination fee to
the seller. There can be no assurance that either of such land acquisitions
will be consummated.

Since the Company's Initial Offering, the Company has completed the
development or redevelopment of the following Properties for its own account:

DEVELOPMENT PROPERTIES DELIVERED SINCE THE INITIAL OFFERING

<TABLE>
<CAPTION>
DATE NET
PLACED RENTABLE ANTICIPATED
IN NO. OF SQUARE TOTAL PERCENT
PROPERTY SERVICE LOCATION BUILDINGS FEET INVESTMENT+ LEASED
-------- ------- --------------- --------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Sugarland Building One.. 6/97 Herndon, VA 1 52,797 $ 5,962,348 82%
Sugarland Building Two.. 6/97 Herndon, VA 1 59,423 5,256,692 46
7700 Boston Boulevard,
Building Twelve........ 10/97 Springfield, VA 1 82,224 10,427,128 100
7501 Boston Boulevard,
Building
Seven.................. 11/97 Springfield, VA 1 75,756 11,469,620 100
201 Spring Street....... 11/97 Lexington, MA 1 102,000 17,689,442 100
--- ------- ----------- ---
TOTAL/WEIGHTED AVERAGE.. 5 372,200 $50,805,230 89%
=== ======= =========== ===
</TABLE>
- --------
+ As of November 30, 1997, the Company had invested $45.2 million, of which
$28.8 million was invested at or prior to the completion of the Initial
Offering.

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. The Company purchased the buildings vacant in 1996 and
completed improvements to them in June 1997. As of December 29, 1997
approximately 70.0% of the total of 112,220 net rentable square feet of these
buildings was committed under signed leases or letters of intent with leases
in negotiation.

201 Spring Street. This Class A Office Building is located in the Route 128
Northwest submarket of Greater Boston and is adjacent to the Company's
existing Class A Office Building at 191 Spring Street. The building is
currently 100% leased to MediaOne. MediaOne has notified the Company that it
intends to relocate its headquarters to another state and sublease this
building.

25
<PAGE>

The Company is currently developing the following Properties for its own
account:

PROPERTIES CURRENTLY UNDER DEVELOPMENT

<TABLE>
<CAPTION>
NET
RENTABLE ANTICIPATED
ANTICIPATED NO. OF SQUARE TOTAL
DEVELOPMENT PROPERTIES COMPLETION LOCATION BUILDINGS FEET INVESTMENT+
---------------------- ----------- ------------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Class A Office Buildings
Reston Overlook (25%
ownership)............ Q1 1999 Reston, VA 2 444,000 $ 18,100,000(1)
Eight Cambridge Cen-
ter................... Q2 1999 Cambridge, MA 1 175,000 26,000,000
181 Spring Street...... Q2 1999 Lexington, MA 1 52,000 10,871,085
One Freedom Square (25%
ownership)............ Q4 1999 Reston, VA 1 406,980 19,150,000(1)
--- --------- ------------
Total Class A Office
Buildings............. 5 1,077,980 $ 74,121,085
Hotel
Residence Inn by
Marriott(R)........... Q1 1999 Cambridge, MA 1 187,474 $ 32,000,000
--- --------- ------------
TOTAL DEVELOPMENT PROP-
ERTIES................. 6 1,265,454 $106,121,085
=== ========= ============
</TABLE>
- --------
+ As of November 30, 1997, the Company had invested $6.9 million, of which
$3.9 million was invested at or prior to the completion of the Initial
Offering.
(1) Represents 25% of the total anticipated project-level investment.

One and Two Reston Overlook. One Reston Overlook is an approximately 312,000
square foot, 12-story, Class A Office Building located in Reston, Virginia.
The Company is developing this property through its joint venture with
Westbrook. Completion of One Reston Overlook is scheduled for February 1999.
Approximately 309,000 square feet of development is pre-leased to BDM for a
term of twelve years (the building's remaining 3,000 square feet are ground-
floor retail space). The Company is also constructing Two Reston Overlook, a
six-story building on the site totaling approximately 132,000 square feet. Two
Reston Overlook is being developed without a pre-leasing commitment in
response to the significant unsatisfied demand for office space in the Reston,
Virginia market. Delivery of Two Reston Overlook is scheduled for December
1998.

Eight Cambridge Center. This nine-story Class A Office Building is located
in the Cambridge Center development in East Cambridge, Massachusetts and is
100% pre-leased to a leading Massachusetts based technology consulting firm.
Completion of this Class A Office Building is scheduled for April 1999.

One Freedom Square. This Class A Office Building is currently being
developed by the Company in Reston, Virginia. The Company is developing this
building through its joint venture relationship with Westbrook. This building
is 59.0% pre-leased to Andersen Consulting. Completion of the building is
scheduled for the fourth quarter of 1999.

Residence Inn by Marriott(R). The Company is currently developing this 221-
room limited service extended stay hotel on land owned by the Company in the
Cambridge Center development in East Cambridge, Massachusetts. The hotel will
be managed by the Residence Inn division of Marriott International, Inc. and
is scheduled to open in January 1999. As with the Company's other Hotel
Properties, the Company will lease this hotel and will have a participation in
the gross receipts of the hotel.

26
<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 develop properties
in the Company's existing markets, adjacent suburban markets and in new
markets that present favorable opportunities; (ii) 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 and acquired 125 properties (including the
Acquisition 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 (including sites under contract or option
to acquire) in its core markets that will support approximately 1.5 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 assets and portfolios 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. Some
of these properties may be acquired for cash but the Company believes that
it is particularly well positioned to appeal to sellers wishing to convert
on a tax deferred basis their ownership of property 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.

Acquire existing underperforming assets and portfolios of assets. The
Company has actively pursued and continues to pursue opportunities to
acquire existing buildings that, while currently generating income, are
either underperforming the market due to poor management or are currently
leased at below market rents 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.

27
<PAGE>

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 an
approximately 163,000 net rentable 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 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, 112,220 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.
As of December 29, 1997, 70.0% of the total of 112,220 net rentable square
feet was committed under signed leases or letters of intent with leases in
negotiation.

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.

Pursue development and land acquisitions in selected submarkets. 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.

The Company has entered into two joint ventures with Westbrook, a major
investment fund that owns the Mobil Land Corporation national portfolio.
The Company's first joint venture with Westbrook is for the construction of
Reston Overlook, a two-building, approximately 444,000 net rentable square
foot project. BDM has committed to lease the first 309,000 square feet and
is expected to occupy such space in February 1999. The Company's second
joint venture with Westbrook is for the construction of One Freedom Square,
an approximately 407,000 square foot office building, of which 240,000
square feet is pre-leased to Andersen Consulting. The Company expects to
complete this building in the fourth quarter of 1999. The Company expects
that its relationship with Westbrook with respect to properties in Reston,
Virginia will continue. 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--Proposed
Developments."

In addition, the Company is pursuing a number of proposed development
projects.

28
<PAGE>

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.

Provide 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 in which the Company is engaged, 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 & Pogue.

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, in general, are experiencing rising
rents, low vacancy rates and increasing demand for office and industrial
space. In addition, the Company's Properties are in markets where, in general,
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. 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.

Cultivate existing 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 fourteen submarkets in Greater Boston, Greater Washington, D.C.,
midtown Manhattan, Baltimore, Maryland, and Richmond, Virginia.

Many of these submarkets are experiencing increasing rents and as a
result current market rates often exceed the rents being paid by current
tenants in the Properties. The Company expects that leases expiring over
the next three years in these submarkets will be renewed, or space re-let,
at higher rents. Leases with

29
<PAGE>

respect to 2.4% of the leased square footage of the Office and Industrial
Properties expired in the fourth quarter of 1997, and 7.5% and 6.3% expire
in calendar years 1998 and 1999, respectively. The actual rental rates at
which available space will be re-let will depend on prevailing market
factors at the time. There can be no assurance that the Company will re-let
such space at an increased, or even at the then current, rental rate.

Directly manage 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.

Replace 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.

30
<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 $471.7 million (approximately $542.4 million if the
Underwriters' overallotment options are exercised in full). The net proceeds
of the Offering are expected to be used by the Company to (a) pay down $233.0
million of indebtedness under the Unsecured Line of Credit, (b) pay $52.6
million in connection with the acquisition of Riverfront Plaza, (c) pay $88.5
million in connection with the acquisition of the Mulligan/Griffin Portfolio
(which amount may be reduced upon the election of the sellers of these
Properties to receive a greater portion of the purchase price in restricted OP
Units), (d) to fund acquisition opportunities currently under contract if the
Company's due diligence with respect thereto is satisfactorily completed and a
closing thereon is consummated, and to fund other acquisition opportunities
that may arise, (e) fund property developments currently in process, and (f)
for general corporate and working capital purposes, including the possible
repayment of additional indebtedness and related prepayment penalties (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Mortgage Indebtedness"). The
outstanding balance under the Unsecured Line of Credit, which as of December
29, 1997 bore interest at a rate equal to LIBOR plus 125 basis points, or
7.125%, was incurred to (i) acquire Newport Office Park, (ii) acquire 100 East
Pratt Street, (iii) repay indebtedness incurred in connection with development
and acquisition activity prior to the Initial Offering, and (iv) for general
corporate purposes. This Offering is not contingent upon the consummation of
either of the acquisitions described in clauses (b) and (c) above.

If the Underwriters' overallotment options are exercised in full, the
Company expects to use the additional net proceeds (which will be
approximately $70.7 million) 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.

31
<PAGE>

PRICE RANGE OF SHARES AND DISTRIBUTION HISTORY

The Company's Common Stock began trading on the New York Stock Exchange on
June 18, 1997, under the symbol "BXP". The following table sets forth the high
and low closing prices per share of the Common Stock on the NYSE for the
periods indicated, as reported by the NYSE. The Initial Offering of the
Company's Common Stock at a price to the public of $25.00 per share was
completed on June 23, 1997.

<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DISTRIBUTIONS
------------- ------- ---- -------------
<S> <C> <C> <C>
June 30, 1997 (from June 18, 1997)........ $27 1/4 $26 1/8 $0.035(1)
Third Quarter............................. 33 1/4 26 5/8 0.405(2)
Fourth Quarter (through December 29,
1997).................................... 34 3/8 30 0.405(3)
</TABLE>
- --------
(1) This dividend with respect to the period from June 23, 1997 through June
30, 1997 was paid on November 21, 1997, together with the Company's
dividend for the quarter ended September 30, 1997.
(2) This dividend with respect to the quarter ended September 30, 1997 was
paid on November 21, 1997.

(3) This dividend will be paid on January 28, 1998 to shareholders of record
on December 28, 1997.

The Company currently intends to pay regular quarterly dividends to its
stockholders of $0.405 per share of Common Stock, which is equal to an annual
dividend of $1.62 per share. Dividend distributions will be declared at the
discretion of the Board of Directors and will depend on cash flow from
operations of the Company, its financial condition, capital requirements, the
annual distribution requirements under the REIT provisions of the Code and
such other factors as the Board of Directors may deem relevant. The Board of
Directors may modify the Company's dividend policy from time to time. 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
flow and the Operating Partnership's financial condition. Any decision by the
Board of Directors to reinvest the cash flow 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 has determined that the $0.44 per share dividend paid for the
period from June 23, 1997 through the end of the third quarter of 1997
represented ordinary dividend income to its stockholders.

On December 29, 1997 there were 119 holders of record of 38,694,041 shares
of the Company's Common Stock.

The Company has declared, in respect of the quarter ended December 31, 1997,
a dividend of $0.405 per share payable on January 28, 1998 to shareholders of
record on December 28, 1997.

32
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1997, and as adjusted to give effect to the Offering and
application of the net proceeds therefrom as described 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>
HISTORICAL AS ADJUSTED
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgage Notes.................................... $ 914,614 $1,334,665
Unsecured Line of Credit.......................... 71,000 -- (2)
Minority interest in Operating Partnership.......... 81,168 159,168
Stockholders' equity................................
Preferred Stock, $.01 par value, 50,000,000 shares
authorized, none issued or outstanding........... -- --
Excess Stock, $.01 par value, 150,000,000 shares
authorized, none issued or outstanding........... -- --
Common Stock, $.01 par value, 250,000,000 shares
authorized, 38,693,541 historical and 53,694,041
pro forma shares issued and outstanding(1)....... 387 537
Additional paid-in capital........................ 172,315 643,859
Retained earnings................................. 22,779 22,779
----------- -----------
Total capitalization............................ $ 1,262,263 $ 2,161,008
=========== ===========
</TABLE>
- --------

(1) Does not include 2,297,600 shares of Common Stock subject to options
granted under the Company's Stock Option Plan. Does not include 18,463,920
OP Units; after August 23, 1998 or such later date as an OP Unit holder
may agree, OP Units are redeemable by holders for cash or, at the election
of the Company, shares of Common Stock on a one-for-one basis.
(2) Reflects the net effect of the historical balance as adjusted for
drawdowns subsequent to September 30, 1997 of (i) approximately $137,500
to pay for the acquisition of 100 East Pratt Street and (ii) approximately
$24,500 to fund on going developments and for general corporate purposes,
less the approximately $233,000 balance of the Unsecured Line of Credit to
be repaid from the anticipated use of proceeds.

33
<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 included elsewhere 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 L.L.P., independent accountants, whose report with respect thereto is
included elsewhere in this Prospectus.

The selected financial data at and for the nine months ended September 30,
1997 (which includes the Company and the Boston Properties Predecessor Group)
and for the nine months ended September 30, 1996 are derived from unaudited
financial statements. The unaudited financial information includes all
adjustments (consisting of normal recurring adjustments) that management
considers necessary for fair presentation of the consolidated and combined
financial position and results of operations for these periods. Consolidated
and combined operating results for the nine months ended September 30, 1997
are not necessarily indicative of the results for the entire year ended
December 31, 1997.

Unaudited pro forma adjustments and operating information for the nine
months ended September 30, 1997 and for the year ended December 31, 1996 are
presented as if the completion of the Initial Offering and the Formation
Transactions, the Offering, and the pending acquisitions subsequent to
September 30, 1997 and the acquisitions subsequent to December 31, 1996, had
occurred at January 1, 1996, and the effect thereof was carried forward
through the nine months ended September 30, 1997. By necessity, such pro forma
operating information incorporates certain assumptions which are described in
the notes to the Pro Forma Condensed Consolidated Statements of Income
included elsewhere in this Prospectus. The unaudited pro forma balance sheet
data is presented as if the Offering and such pending acquisitions had
occurred on September 30, 1997.

34
<PAGE>

THE COMPANY AND THE BOSTON PROPERTIES PREDECESSOR GROUP
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR GROUP THE COMPANY
--------------------------- ------------------------- ------------
HISTORICAL
---------------------------------------
PRO FORMA
NINE MONTHS JUNE 23, JANUARY 1, NINE MONTHS PRO FORMA
ENDED 1997 TO 1997 TO ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, JUNE 22, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1996 1996
------------- ------------- ----------- ------------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental reve-
nue (1)........ $ 270,079 $ 64,253 $ 93,802 $147,391 $348,034
Hotel reve-
nue (1)........ -- -- 31,185 47,458 --
Fee and other
income......... 6,927 4,100 4,831 7,470 7,608
---------- ---------- -------- -------- --------
Total revenues.. 277,006 68,353 129,818 202,319 355,642
Expenses:
Property ex-
penses......... 82,609 17,893 27,032 43,728 110,157
Hotel ex-
penses (1)..... -- -- 22,452 32,359 --
General and ad-
ministrative... 9,396 3,164 5,116 8,149 12,538
Interest........ 76,435 16,091 53,324 82,627 103,650
Depreciation and
amortization... 42,917 10,113 17,054 27,008 57,811
---------- ---------- -------- -------- --------
Total expenses.. 211,357 47,261 124,978 193,871 284,156
Income (loss)
before minority
interest in
combined
partnership..... 65,649 21,092 4,840 8,448 71,486
Minority interest
in combined
partnership..... (304) (69) (235) (288) (384)
---------- ---------- -------- -------- --------
Income (loss)
before minority
interest in
Operating
Partnership..... 65,345 21,023 4,605 8,160 71,102
Minority interest
in Operating
Partnership..... (16,722) (6,169) -- -- (18,195)
---------- ---------- -------- -------- --------
Income (loss)
before
extraordinary
items........... $ 48,623 14,854 4,605 8,160 $ 52,907
========== ========
Extraordinary
gains (loss) on
early debt
extinguishments,
net of minority
interest........ 7,925 -- --
---------- -------- --------
Net income
(loss).......... $ 22,779 $ 4,605 $ 8,160
========== ======== ========
PER SHARE OF
COMMON STOCK
DATA:
Income before ex-
traordinary
items........... $ .91 $ .38 -- -- $ .99
Net income....... -- .59 -- -- --
Weighted average
number of shares
outstanding..... 53,694 38,694 -- -- 53,694
Weighted average
number of shares
and OP Units
outstanding..... 72,158 54,760 -- -- 72,158
BALANCE SHEET DATA, AT PERIOD
END:
Real estate,
before
accumulated
depreciation.... $2,212,643 $1,433,376 -- -- --
Real estate,
after
accumulated
depreciation.... 1,927,138 1,147,871 -- -- --
Cash and cash
equivalents..... 143,732 25,989 -- -- --
Total assets..... 2,195,506 1,295,638 -- -- --
Total indebted-
ness............ 1,334,665 985,614 -- -- --
Stockholders' or
owners' equity
(deficiency).... 667,175 195,481 -- -- --
OTHER DATA:
Funds from
Operations (2)
(unaudited)..... $ 107,796 $ 30,879 $ 21,450 $ 34,652 $120,759
Company's Funds
from Operations
(unaudited)..... 80,211 21,818 -- -- 89,857
EBITDA (3) (unau-
dited).......... 184,431 47,106 74,838 117,525 232,263
Company's
EBITDA(unaudited)
................ 137,235 33,284 -- -- 172,827
Cash flow
provided by
operating
activities (4)
................ -- $ 25,930 $ 25,226 $ 31,109 --
Cash flow used in
investing
activities (4)
................ -- (356,794) (32,844) (42,952) --
Cash flow
provided by
(used in)
financing
activities (4).. -- 356,853 9,130 (1,555) --
<CAPTION>
THE PREDECESSOR GROUP
-----------------------------------------------------------
HISTORICAL
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental reve-
nue (1)........ $ 195,006 $ 179,265 $ 176,725 $ 182,776 $ 177,370
Hotel reve-
nue (1)........ 65,678 61,320 58,436 54,788 52,682
Fee and other
income......... 9,249 8,140 8,922 7,997 11,160
----------- ----------- ----------- ----------- -----------
Total revenues.. 269,933 248,725 244,083 245,561 241,212
Expenses:
Property ex-
penses......... 58,195 55,421 53,239 54,766 49,621
Hotel ex-
penses (1)..... 46,734 44,018 42,753 40,286 38,957
General and ad-
ministrative... 10,754 10,372 10,123 9,549 9,331
Interest........ 109,394 108,793 97,273 90,335 91,889
Depreciation and
amortization... 36,199 33,828 33,112 33,148 35,030
----------- ----------- ----------- ----------- -----------
Total expenses.. 261,276 252,432 236,500 228,084 224,828
Income (loss)
before minority
interest in
combined
partnership..... 8,657 (3,707) 7,583 17,477 16,384
Minority interest
in combined
partnership..... (384) (276) (412) (391) (374)
----------- ----------- ----------- ----------- -----------
Income (loss)
before minority
interest in
Operating
Partnership..... 8,273 (3,983) 7,171 17,086 16,010
Minority interest
in Operating
Partnership..... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Income (loss)
before
extraordinary
items........... 8,273 (3,983) 7,171 17,086 16,010
Extraordinary
gains (loss) on
early debt
extinguishments,
net of minority
interest........ (994) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income
(loss).......... $ 7,279 $ (3,983) $ 7,171 $ 17,086 $ 16,010
=========== =========== =========== =========== ===========
PER SHARE OF
COMMON STOCK
DATA:
Income before ex-
traordinary
items........... -- -- -- -- --
Net income....... -- -- -- -- --
Weighted average
number of shares
outstanding..... -- -- -- -- --
Weighted average
number of shares
and OP Units
outstanding..... -- -- -- -- --
BALANCE SHEET DATA, AT PERIOD
END:
Real estate,
before
accumulated
depreciation.... $1,035,571 $1,012,324 $ 984,853 $ 983,751 $ 982,348
Real estate,
after
accumulated
depreciation.... 771,660 773,810 770,763 789,234 811,815
Cash and cash
equivalents..... 8,998 25,867 46,289 50,697 28,841
Total assets..... 896,511 922,786 940,155 961,715 971,648
Total indebted-
ness............ 1,442,476 1,401,408 1,413,331 1,426,882 1,417,940
Stockholders' or
owners' equity
(deficiency).... (576,632) (506,653) (502,230) (495,104) (480,398)
OTHER DATA:
Funds from
Operations (2)
(unaudited)..... $ 36,318 $ 29,151 $ 39,568 $ 49,240 $ 50,097
Company's Funds
from Operations
(unaudited)..... -- -- -- -- --
EBITDA (3) (unau-
dited).......... 153,566 138,321 137,269 140,261 142,627
Company's
EBITDA(unaudited)
................ -- -- -- -- --
Cash flow
provided by
operating
activities (4)
................ $ 51,531 $ 29,092 $ 45,624 $ 59,834 $ 50,468
Cash flow used in
investing
activities (4)
................ (23,689) (36,844) (18,424) (9,437) (48,257)
Cash flow
provided by
(used in)
financing
activities (4).. (44,711) (12,670) (31,608) (28,540) 1,365
</TABLE>

35
<PAGE>

- -------

(2) The White Paper on Funds from Operations approved by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") in March 1995 defines Funds from Operations as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses)
from debt restructuring and sales of properties, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. The Company believes that Funds from
Operations is helpful to investors as a measure of the performance of an
equity REIT because, along with cash flow from operating activities,
financing activities and investing activities, it provides investors with
an indication of the ability of the Company to incur and service debt, to
make capital expenditures and to fund other cash needs. The Company
computes Funds from Operations in accordance with standards established by
NAREIT which may not be comparable to Funds from Operations reported by
other REITs that do not define the term in accordance with the current
NAREIT definition or that interpret the current NAREIT definition
differently than the Company. Funds from Operations does not represent
cash generated from operating activities determined in accordance with
GAAP and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication 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 cash distributions. Funds from
Operations for the respective periods is calculated as follows:
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR GROUP THE COMPANY THE PREDECESSOR GROUP
--------------------------- ------------------------- ------------ -------------------------------------------
HISTORICAL
PRO FORMA ---------------------------------------
NINE MONTHS JUNE 23, JANUARY 1, NINE MONTHS PRO FORMA HISTORICAL
ENDED 1997 TO 1997 TO ENDED YEAR ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, JUNE 22, SEPTEMBER 30, DECEMBER 31, -------------------------------------------
1997 1997 1997 1996 1996 1996 1995 1994 1993 1992
------------- ------------- ----------- ------------- ------------ ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FUNDS FROM OPERA-
TIONS
Income (loss)
before minority
interest and
extraordinary
item............ $ 65,649 $21,092 $ 4,840 $ 8,448 $ 71,486 $ 8,657 $(3,707) $ 7,583 $17,477 $16,384
Add:
Real estate
depreciation
and
amortization.. 42,532 9,974 16,808 26,590 57,255 35,643 33,240 32,509 32,300 34,221
Less:
Minority
combined
partnership's
share of Funds
from
Operations.... (385) (187) (198) (386) (479) (479) (382) (524) (537) (508)
Non-recurring
item--
significant
lease
termination
fee........... -- -- -- -- (7,503) (7,503) -- -- -- --
-------- ------- ------- ------- -------- ------- ------- ------- ------- -------
Funds from
Operations
(unaudited)..... $107,796 $30,879 $21,450 $34,652 $120,759 $36,318 $29,151 $39,568 $49,240 $50,097
======== ======= ======= ======= ======== ======= ======= ======= ======= =======
</TABLE>
- -------
(3) 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 should not be considered
as an alternative to operating income or net income (determined in
accordance with GAAP) as an indicator of operating performance or as an
alternative to cash flows from operating activities (determined in
accordance with GAAP) as an indicator of liquidity and other combined or
consolidated income or cash flow statement data (determined in accordance
with GAAP). EBITDA for the respective periods is calculated as follows:

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR GROUP THE COMPANY THE PREDECESSOR GROUP
--------------------------- ------------------------- ------------ ----------------------------------------------
HISTORICAL
PRO FORMA ---------------------------------------
NINE MONTHS JUNE 23, JANUARY 1, NINE MONTHS PRO FORMA HISTORICAL
ENDED 1997 TO 1997 TO ENDED YEAR ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, SEPTEMBER 30, JUNE 22, SEPTEMBER 30, DECEMBER 31, ----------------------------------------------
1997 1997 1997 1996 1996 1996 1995 1994 1993 1992
------------- ------------- ----------- ------------- ------------ -------- -------- -------- -------- ------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA
Income (loss)
before minority
interest and
extraordinary
item............. $ 65,649 $21,092 $ 4,840 $ 8,448 $ 71,486 $ 8,657 $ (3,707) $ 7,583 $ 17,477 $ 16,384
Add:
Interest
expense........ 76,435 16,091 53,324 82,627 103,650 109,394 108,793 97,273 90,335 91,889
Real estate
depreciation
and
amortization... 42,532 9,974 16,808 26,590 57,255 35,643 33,240 32,509 32,300 34,221
Other
depreciation... 385 139 246 418 556 556 588 603 848 809
Less:
Minority
combined
partnership's
share of
EBITDA......... (570) (190) (380) (558) (684) (684) (593) (699) (699) (676)
-------- ------- ------- -------- -------- -------- -------- -------- -------- --------
EBITDA
(unaudited)...... $184,431 $47,106 $74,838 $117,525 $232,263 $153,566 $138,321 $137,269 $140,261 $142,627
======== ======= ======= ======== ======== ======== ======== ======== ======== ========
</TABLE>
(4) Pro forma information relating to cash flow from operating, investing and
financing activities has not been included because the Company believes
that the information would not be meaningful due to the number of
assumptions required in order to calculate this information.

36
<PAGE>

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

The following discussion is based primarily on the consolidated financial
statements of the Company for the period subsequent to its formation and on
the combined financial statements of the Boston Properties Predecessor Group
for the periods prior to the Formation Transactions.

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. The pro forma
financial position is presented as if the Offering and the acquisitions
subsequent to September 30, 1997 had occurred on September 30, 1997. The pro
forma results of operations is presented as if the Initial Offering, the
Formation Transactions, the Offering and the acquisitions subsequent to
December 31, 1996 had occurred on January 1, 1996. See "Structure and
Formation of the Company--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 60 of the Office
Properties that were owned as of that date (including five Office Properties
under development during 1996), nine Industrial Properties, two in-service
Hotel Properties and the Garage Property.

RESULTS OF OPERATIONS

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1996.

For discussion purposes, the results of operations for the nine months ended
September 30, 1997 combine the operating results of the Boston Properties
Predecessor Group for the period January 1, 1997 to June 22, 1997 and the
operating results of the Company for the period June 23, 1997 to September 30,
1997. The results of operations for the nine months ended September 30, 1996
represent solely the operating results of the Boston Properties Predecessor
Group. Consequently, the comparison of the periods provides only limited
information regarding the operations of the Company.

Rental revenue increased $10.7 million or 7.3% to $158.1 million from $147.4
million for the nine months ended September 30, 1997 compared to the nine
months ended September 30, 1996. Rental revenue for the nine months ended
September 30, 1997 includes rental revenue from the hotel leases for the
eight-day period June 23, 1997 to June 30, 1997 and the three months ended
September 30, 1997 as well as rental revenue from the properties acquired
during 1997.

Hotel operating revenue decreased $16.3 million or 34.3% to $31.2 million
from $47.5 million for the nine months ended September 30, 1997 compared to
the nine months ended September 30, 1996. Hotel operating revenue for the nine
months ended September 30, 1997 only includes revenue from January 1, 1997 to
June 22, 1997 as a result of the Operating Partnership entering into a
participating lease with ZL Hotel LLC at the time of the Initial Offering.

Third party management and development fee income increased $1.0 million or
20.4% to $5.9 million from $4.9 million for the nine months ended September
30, 1997 compared to the nine months ended September 30, 1996 as a result of
increased fees on existing projects as well as additional projects.

Interest income and other increased $0.4 million or 16.7% to $3.0 million
from $2.6 million for the nine months ended September 30, 1997 compared to the
nine months ended September 30, 1996, primarily due to increasing average cash
balances.

Property expenses increased $1.2 million or 2.7% to $44.9 million from $43.7
million for the nine months ended September 30, 1997 compared to the nine
months ended September 30, 1996 primarily as a result of real estate
acquisitions.

Hotel operating expenses decreased $10.0 million or 30.9% to $22.4 million
from $32.4 million for the nine months ended September 30, 1997 compared to
the nine months ended September 30, 1996. Hotel expenses for the nine months
ended September 30, 1997 only includes expenses from January 1, 1997 to June
22, 1997.

37
<PAGE>

General and administrative expenses increased $0.1 million or 1.6% to $8.3
million from $8.2 million for the nine months ended September 30, 1997
compared to the nine months ended September 30, 1996.

Interest expense decreased $13.2 million or 16.0% to $69.4 million from
$82.6 million for the nine months ended September 30, 1997 compared to the
nine months ended September 30, 1996. An increase in interest expense due to
increased indebtedness for the period January 1, 1997 to June 22, 1997 was
offset by a reduction in interest expense for the eight-day period June 23,
1997 to June 30, 1997 and the three months ended September 30, 1997 as a
result of the payoff of approximately $707 million of mortgage indebtedness.

Depreciation and amortization expense increased $0.2 million or 0.7% to
$27.2 million from $27.0 million for the nine months ended September 30, 1997
compared to the nine months ended September 30, 1996.

As a result of the foregoing, net income before minority interests and
extraordinary items increased $17.5 million to $25.9 million from $8.4 million
for the nine months ended September 30, 1997 compared to the nine months ended
September 30, 1996.

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 $0.2 million 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 a $1.1 million increase in utility
costs which was partially due to the increase in occupancy of the properties
during 1996 and an increase of $0.1 million in real estate taxes.

Hotel expenses increased $2.7 million or 6.2% 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 $0.4 million, 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 $0.6 million or 0.6% to $109.4 million from
$108.8 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 $2.4 million or 7.1% to
$36.2 million from $33.8 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.

38
<PAGE>

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.

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

Rental revenue increased $2.5 million or 1.4% 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 30.9% to $3.7 million from
$2.8 million 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 $11.5 million or 11.9% to $108.8 million from
$97.3 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 $716,000 or 2.2% to $33.9
million from $33.1 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

Nine Months Ended September 30, 1997. For the nine months ended September
30, 1997, pro forma net income before extraordinary item would have been $48.6
million compared to $19.5 million of historical net income for the nine months
ended September 30, 1997. The pro forma operating results for the nine months
ended September 30, 1997 include a minority interest in the Operating
Partnership of $16.7 million, whereas there was a minority interest in the
Operating Partnership of $6.2 million for the period from June 23, 1997
through September 30, 1997. On a pro forma basis, net income before minority
interest for the nine months ended September 30, 1997 would have been $65.3
million compared to $25.6 million of net income before extraordinary items for
the corresponding historical period. Income before minority interest in
Operating Partnership and extraordinary item increased by $39.7 million on a
pro forma basis for the nine months ended September 30, 1997 primarily due to
a reduction of interest expense and income earned on the 1997 acquisitions and
pending acquisitions.

39
<PAGE>

Pro forma rental revenue for 1996 and the nine months ended September 30,
1997 includes lease revenue from the Hotel and Garage Properties whereas the
historical financial statements include revenues and expenses on a gross basis
on the respective line items for the Hotel and Garage properties.

Upon completion of the Initial Offering, certain management fee contracts
were assigned to the Development and Management Company, which entity, on a
pro forma basis, has been accounted for under the equity method. Revenue and
expenses from these contracts are included on a gross basis in the historical
financial statements in their respective line items.

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 $71.1 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 $18.2 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 $52.9 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 $62.8 million on a pro forma basis for the
year ended December 31, 1996 primarily due to a reduction of interest expense.

Pro Forma rental revenue for the nine months ended September 30, 1997 and
for the year ended December 31, 1996 includes the lease revenues that the
Company receives from ZL Hotel LLC under the lease for the two in-service
Hotel Properties. After entering into such lease, the Company has not
recognized 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, a portion of the Greater Washington, D.C.
third-party property management business was contributed by the Company to the
Development and Management Company and thereafter the operations of the
Development and Management Company were 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 and Third-Party Property Management."

LIQUIDITY AND CAPITAL RESOURCES

Upon completion of the Offering and the expected application of the net
proceeds therefrom as described in "Use of Proceeds," the Company expects to
have reduced its total indebtedness from $1.56 billion to $1.33 billion, all
of which debt is secured by Properties (the "Mortgage Debt"). The $1.33
billion Mortgage Debt is comprised of 19 loans secured by 21 properties, with
a weighted average interest rate of 7.70% on the fixed rate portion.
Approximately 0.7% of the Mortgage Debt ($11.6 million) is floating rate.
There will be a total of $22.1 million of scheduled loan principal payments
due during the year ending December 31, 1998. At the completion of the
Offering and the expected application of the net proceeds therefrom, the
Company's debt to market capitalization ratio will be 35.8% (35.1% if the
underwriters' overallotment options are exercised in full).

40
<PAGE>

Mortgage Indebtedness. As of December 1, 1997, and including the effect of
acquiring the Acquisition Properties, the Company had outstanding
approximately $1.33 billion 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)
<S> <C> <C> <C> <C> <C>
599 Lexington Avenue.................. 7.00% $ 225,000 $ 15,750 July 19, 2005 $ 225,000(1)
280 Park Avenue....................... 7.00(2) 220,000 15,379 September 11, 2002 202,400
875 Third Avenue...................... 8.75 180,000 15,750(3) December 31, 2002 175,754
Riverfront Plaza(4)................... 7.03 121,800 10,358 January 7, 2008 95,856
Two Independence Square............... 7.90(5) 121,625 10,767 February 27, 2003 113,844
One Independence Square............... 7.90(5) 77,688 7,038 August 21, 2001 73,938
2300 N Street......................... 6.88 66,000 4,540 August 3, 2003 66,000
Capital Gallery....................... 8.24 60,029 5,767 August 15, 2006 49,555
The National Imagery and Mapping
Agency Building(6)(7)................ (8) 49,445 8,232 February 15, 2003 25,194
The Lockheed Martin Building(6)(7).... 9.38 42,952 7,215 July 15, 2002 24,379
10 & 20 Burlington Mall Road(9)....... 8.33 37,000 3,082 October 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 23,697 2,271 September 1, 2006 20,428
Bedford Business Park................. 8.50 23,119 1,980 December 10, 2008 15,891
Reston Town Center Office Complex(7).. 6.00 22,419 3,857 February 1, 2005 --
Montvale Center....................... 8.59 7,905 779 December 1, 2006 6,556
Newport Office Park................... 8.13 6,775 794 July 1, 2001 5,764
Hilltop Business Center............... 7.16(10) 4,617 535 December 15, 1998 4,400
---------- -------- ----------
Total............................... $1,330,071 $117,122 $1,181,959
========== ======== ==========
</TABLE>
- --------
(1) At maturity the lender has the option to purchase a 33.33% interest in
this Property in exchange for the cancellation of the loan indebtedness.
See "Business and Properties--The Office Properties--Midtown Manhattan
Office Market--Park Avenue Submarket--Description of Park Avenue Submarket
Properties."

(2) For purposes of calculating debt service, $213,000 of the outstanding
principal balance has a fixed rate of 7.00%. The remaining $7,000 of the
outstanding principal balance is calculated at LIBOR + 1.00%. For purposes
of calculating debt service, LIBOR was 5.70%.
(3) Represents interest only payments. Principal payments begin on January 1,
2000 based on a 30 year amortization schedule.
(4) The interest rate with respect to this loan will be fixed at a rate equal
to the ten year treasury note rate at the date the acquisition of this
Property is completed, plus 115 basis points. For purposes of this table,
the ten year treasury note rate of 5.88% at November 26, 1997 was used.
The Company has signed a purchase and sale agreement with respect to this
Property and anticipates closing in January 1998.

(5) The interest rate increases to 8.50% on March 25, 1998 through the loan
expiration.

(6) The lender has the option to require repayment in full of these loans at
the closing of the Company's acquisition of these Properties. Repayment at
such date would require the Company to reimburse the contributor for an
aggregate prepayment penalty of approximately $14.9 million. In connection
with these acquisitions, the contributor and the Company have been engaged
in discussions with the lender regarding the restructuring or refinancing
of these loans.
(7) The Company has agreed with the contributors of these properties to
maintain non-recourse indebtedness thereon for a period of time such that
if prepayment of these mortgage notes is required substitute indebtedness
would be required.
(8) Represents two loans with amounts outstanding of $47,721 and $1,724,
respectively. These loans have interest rates of 9.38% and 9.70%,
respectively.
(9) Includes outstanding indebtedness secured by 91 Hartwell Avenue and 92 and
100 Hayden Avenue.

(10) LIBOR+1.50%. For purposes of calculating debt service, LIBOR was 5.66%.

41
<PAGE>

In connection with the development and construction of two Development
Properties (One and Two Reston Overlook) in which the Company has a 25.0%
limited liability company interest, the limited liability company that owns
such Development Properties ("Reston Overlook JV") has secured a $60.0 million
construction loan for a term of three years with, subject to certain
conditions, two successive rights of extension for two years each. During the
initial term of the loan, interest only is due on outstanding amounts. During
the extension terms, any outstanding balance is amortized monthly based on a
25-year repayment schedule. Interest on outstanding amounts is payable at a
rate of LIBOR plus 125 basis points during the initial term and the first
extension term and at a rate of 150 basis points during the second extension
term or, during either extension term, at the Reston Overlook JV's election,
the lender's prime rate plus 100 basis points. The loan is subject to
customary financial and other covenants. The Company guarantees up to $10.0
million of the principal amount that may be drawn under the loan plus certain
other amounts and performances by the Reston Overlook JV.

The Unsecured Line of Credit. The Company has a three year, $300 million
Unsecured Line of Credit that expires in June 2000. The Unsecured Line of
Credit has been and will be used to facilitate development and acquisition
activities and for working capital purposes. A portion of the proceeds of this
Offering will be used to repay the $233.0 million of indebtedness currently
outstanding under the Company's Unsecured Line of Credit. See "Unsecured Line
of Credit."

Analysis of Liquidity and Capital Resources. 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.

The Company expects to meet its short-term liquidity requirements generally
through its 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 period from January 1, 1992 to September 30, 1997 the Company's recurring
tenant improvements and leasing commissions for Office and Industrial
Properties averaged $7.79 per square foot of leased space per year. During the
years ending December 31, 1998 through December 31, 2002, the Company expects
that the average annual cost of recurring tenant improvements and leasing
commissions for Office and Industrial Properties will be approximately
$8,759,799 based upon the average square footage of expiring leases during
such period of 1,124,493 square feet. The Company expects the cost of general
capital improvements to the Office and Industrial Properties during such
period to average $2,604,659 annually based upon an estimate of $0.20 per
square foot. Actual capital expenditures of the Hotel Properties are expected
to be $2,509,000 based upon the average annual capital expenditures at the
Hotel Properties during the period from January 1, 1992 to September 30, 1997.

The Company expects to meet its long-term liquidity requirements for the
funding of property development, property acquisitions and other non-recurring
capital improvements through long-term secured and unsecured indebtedness
(including the Unsecured Line of Credit) and the issuance of additional equity
securities from the Company. The Company also intends to fund property
development, property acquisitions and other non-recurring capital
improvements using the Unsecured Line of Credit on an interim basis.

The Company will have commitments to fund to completion development projects
that are currently in process. Commitments under these arrangements totaled
$63.0 million as of September 30, 1997. The Company expects to fund these
commitments initially using the Unsecured Line of Credit and cash flow from
operations. In addition, the Company has options to acquire land that require
minimum deposits that the Company will fund using the Unsecured Line of
Credit.

CASH FLOWS

Comparison for the nine months ended September 30, 1997 to the nine months
ended September 30, 1996. Cash and cash equivalents were $26.0 million and
$12.5 million at September 30, 1997 and 1996, respectively. Cash and cash
equivalents increased $17.0 million during the nine months ended September 30,
1997 compared to a decrease of $13.4 million during the nine months ended
September 30, 1996. The increase was due to a $367.5 million increase in net
cash provided by financing activities from $1.5 million used to $366.0 million
generated, a $356.6 million increase in net cash used in investing activities
from $43.0 million to $399.6

42
<PAGE>

million and an increase in cash flows provided by operating activities of
$20.1 million from $31.1 million to $51.2 million. The increase in net cash
provided by financing activities of $367.5 was primarily attributable to the
Initial Offering and the proceeds received from a mortgage note. The increase
in net cash used in investing activities of $356.6 million was attributable to
an increase in the acquisition of tenant improvements, leasing costs and new
development costs. The increase in cash provided by operating activities of
$20.1 million was primarily due to an increase in net income of $19.2 million.

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 was due to a $32.0 million increase in net cash used in financing
activities from $12.7 million to $44.7 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
$22.4 million from $29.1 million to $51.5 million. The increase in net cash
used in financing activities of $32.0 million was attributable to net
distributions to owners of $71.9 million offset by an increase of $39.9
million in loan proceeds net of financing costs, escrows, and loan principal
payments. The decrease in net cash used in investing activities of $13.1
million was 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 $22.4 million was 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 was due to an increase in cash used in investing activities of
$18.4 million from $18.4 million to $36.8 million and a decrease in cash
provided by operating activities of $16.5 million from $45.6 million to $29.1
million, offset by a decrease in net cash used in financing activities of
$18.9 million from $31.6 million to $12.70 million. The increase in cash used
in investing activities of $18.4 million was 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 $18.9 million was attributable to a $13.9
million decrease in net distributions to owners and a $5.0 million decrease in
loans payable and financing costs.

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.

43
<PAGE>

BUSINESS AND PROPERTIES

GENERAL

The Company's Properties consist of 79 Office Properties (including the five
Office Development Properties and the ten Acquisition Properties expected to
be acquired by the Company in January and February 1998), nine Industrial
Properties, three Hotel Properties (including the Hotel Development Property)
and the Garage Property. The total square footage of the Properties is
approximately 18.2 million square feet, comprised of (i) 48 Class A Office
Buildings (including five Office Development Properties and six Acquisition
Properties) totaling approximately 11.1 million net rentable square feet, with
approximately 2.9 million square feet of structured parking for 8,119
vehicles, (ii) 31 R&D Properties totaling approximately 2.0 million net
rentable square feet (including four Acquisition Properties), (iii) nine
Industrial Properties totaling approximately 925,000 net rentable square feet,
(iv) three Hotel Properties (including the Hotel Development Property), with
1,054 rooms, totaling approximately 940,000 square feet, and (v) the Garage
Property, with 1,170 parking spaces, consisting of approximately 330,000
square feet.

44
<PAGE>

SUMMARY PROPERTY DATA
Set forth below is a summary of information regarding the
Properties, including the Office Development Properties and the
Hotel Development Property. Properties marked with an asterisk
secure indebtedness of the Company.
<TABLE>
<CAPTION>
NET PERCENT
YEAR(S) NO. RENTABLE LEASED
PERCENT BUILT/ OF SQUARE AS OF
PROPERTY NAME LOCATION OWNERSHIP RENOVATED(1) BLDGS. FEET 9/30/97
- ------------- -------- --------- ----------------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
OFFICE PROPER-
TIES:
Class A Office
Buildings:
+*599 Lexington
Avenue (4)...... New York, NY 100.0% 1986 1 1,000,070 100%
+*280 Park Ave-
nue............. New York, NY 100.0 1968/95-96 1 1,198,769 82
+*875 Third Ave-
nue (5)......... New York, NY 100.0 1982 1 681,669 99
*Two Indepen-
dence Square
(6)............. SW, Washington, DC 100.0 1992 1 579,600 100
*Riverfront
Plaza (7)....... Richmond, VA 100.0 1990 1 899,720 97
100 East Pratt
Street (8)...... Baltimore, MD 100.0 1975/1991 1 633,482 98
Democracy Cen-
ter............. Bethesda, MD 100.0 1985-88/94-96 3 680,000 97
*2300 N Street.. NW, Washington, DC 100.0 1986 1 280,065 100
*One Indepen-
dence Square
(6)............. SW, Washington, DC 100.0 1991 1 337,794 100
*Capital Gal-
lery............ SW, Washington, DC 100.0 1981 1 399,549 90
*Lockheed Martin
Building
(9)(10)(11)..... Reston, VA 100.0 1987/1988 1 255,244 100
*National Imagery and Mapping Agency Bldg (9)(10).. Reston, VA 100.0 1987/1988 1 263,870 100
The U.S. Inter-
national Trade
Commission Bldg
(6)(12)......... SW, Washington, DC 100.0 1987 1 243,998 100
*Reston Town
Center Office
Complex (9)..... Reston, VA 100.0 1984 2 261,046 100
One Cambridge
Center.......... Cambridge, MA 100.0 1987 1 215,385 99
*Ten Cambridge
Center.......... Cambridge, MA 100.0 1990 1 152,664 100
*191 Spring
Street.......... Lexington, MA 100.0 1971/1995 1 162,700 100
*Newport Office
Park............ Quincy, MA 100.0 1988 1 168,829 100
*10 & 20 Bur-
lington Mall
Road............ Burlington, MA 100.0 1984-1986/95-96 2 2 152,552 98
Lexington Office
Park............ Lexington, MA 100.0 1982 2 168,500 86
*91 Hartwell Av-
enue............ Lexington, MA 100.0 1985/96 1 122,135 100
Waltham Office
Center.......... Waltham, MA 100.0 1968-1970/87-88 3 3 129,658 95
Three Cambridge
Center.......... Cambridge, MA 100.0 1987 1 107,484 100
*Montvale Center
(13)............ Gaithersburg, MD 75.0 1987 1 122,157 98
170 Tracer
Lane............ Waltham, MA 100.0 1980 1 73,258 100
195 West
Street.......... Waltham, MA 100.0 1990 1 63,500 100
*Bedford Busi-
ness Park....... Bedford, MA 100.0 1980 1 90,000 100
Decoverly Two
(9)............. Rockville, MD 100.0 1987 1 77,747 100
33 Hayden Ave-
nue............. Lexington, MA 100.0 1979 1 79,564 100
*100 Hayden Ave-
nue............. Lexington, MA 100.0 1985 1 55,924 100
Eleven Cambridge
Center.......... Cambridge, MA 100.0 1984 1 79,616 100
8 Arlington
Street (14)..... Boston, MA 100.0 1860-1920/1989 1 30,526 100
32 Hartwell Ave-
nue............. Lexington, MA 100.0 1968-1979/1987 1 69,154 100
204 Second Ave-
nue............. Waltham, MA 100.0 1981/1993 1 40,974 100
*92 Hayden Ave-
nue............. Lexington, MA 100.0 1968/1984 1 30,980 100
201 Spring
Street (15)..... Lexington, MA 100.0 1997 1 102,000 --
--- ---------- ---
SUBTOTAL/WEIGHTED AVERAGE FOR CLASS A OFFICE BUILDINGS (16)...... 43 10,010,183 96%
--- ---------- ---
R&D Properties:
*Bedford Busi-
ness Park....... Bedford, MA 100.0% 1962-1978/96 2 383,704 100%
910 Clopper Road
(9)............. Gaithersburg, MD 100.0 1982 1 180,650 96
7601 Boston Bou-
levard, Building
Eight (6)(17)... Springfield, VA 100.0 1986 1 103,750 100
Fourteen Cam-
bridge Center... Cambridge, MA 100.0 1983 1 67,362 100
Fullerton Square
(9)............. Springfield, VA 100.0 1987 2 178,841 79
*Hilltop Busi-
ness Center
(18)............ S. San Francisco, CA 35.7 early 1970's 9 144,479 91
930 Clopper Road
(9)............. Gaithersburg, MD 100.0 1989 1 60,056 100
7435 Boston Bou-
levard, Building
One............. Springfield, VA 100.0 1982 1 105,414 66
7500 Boston Bou-
levard, Building
Six (6)......... Springfield, VA 100.0 1985 1 79,971 100
8000 Grainger
Court, Building
Five............ Springfield, VA 100.0 1984 1 90,465 100
7600 Boston Bou-
levard, Building
Nine............ Springfield, VA 100.0 1987 1 69,832 100
Sugarland Build-
ing One......... Herndon, VA 100.0 1985/1997 1 52,797 82
7451 Boston Bou-
levard, Building
Two............. Springfield, VA 100.0 1982 1 47,001 100
164 Lexington
Road............ Billerica, MA 100.0 1982 1 64,140 100
7374 Boston Bou-
levard, Building
Four (6)........ Springfield, VA 100.0 1984 1 57,321 100
Sugarland Build-
ing Two......... Herndon, VA 100.0 1986/1997 1 59,423 46
8000 Corporate
Court, Building
Eleven.......... Springfield, VA 100.0 1989 1 52,539 100
7375 Boston Bou-
levard, Building
Ten (6)......... Springfield, VA 100.0 1988 1 26,865 100
17 Hartwell Ave-
nue............. Lexington, MA 100.0 1968 1 30,000 100
7700 Boston Bou-
levard, Building
Twelve (19)..... Springfield, VA 100.0 1997 1 82,224 --
7501 Boston
Boulevard,
Building Seven
(6)(20)......... Springfield, VA 100.0 1997 1 75,756 --
--- ---------- ---
SUBTOTAL/WEIGHTED AVERAGE FOR R&D PROPERTIES..................... 31 2,012,590 93%
--- ---------- ---
INDUSTRIAL PROP-
ERTIES:
38 Cabot Boule-
vard (21)....... Bucks County, PA 100.0% 1972/1984 1 161,000 100%
40-46 Harvard
Street.......... Westwood, MA 100.0 1967/1996 1 169,273 90
25-33 Dartmouth
Street.......... Westwood, MA 100.0 1966/1996 1 78,045 100
2000 South Club
Drive, Building
Three........... Landover, MD 100.0 1988 1 83,608 100
2391 West Winton
Avenue.......... Hayward, CA 100.0 1974 1 221,000 100
6201 Columbia
Park Road,
Building Two.... Landover, MD 100.0 1986 1 99,885 56
1950 Stanford
Court, Building
One............. Landover, MD 100.0 1986 1 53,250 100
560 Forbes Bou-
levard (17)..... S. San Francisco, CA 35.7 early 1970's 1 40,000 100
430 Rozzi Place
(17)............ S. San Francisco, CA 35.7 early 1970's 1 20,000 100
--- ---------- ---
SUBTOTAL/WEIGHTED AVERAGE FOR INDUSTRIAL PROPERTIES.............. 9 926,061 93%
--- ---------- ---
DEVELOPMENT
PROPERTIES:
Class A Office
Properties:
One and Two
Reston Overlook
(5)(22)......... Reston, VA 25.0% 1999 2 444,000 --
One Freedom
Square (23)..... Reston, VA 25.0 1999 1 406,980 --
Eight Cambridge
Center (24)..... Cambridge, MA 100.0 1999 1 175,000 --
181 Spring
Street (25)..... Lexington, MA 100.0 1999 1 52,000 --
--- ---------- ---
SUBTOTAL/WEIGHTED AVERAGE FOR OFFICE DEVELOPMENT PROPERTIES...... 5 1,077,980 --
--- ---------- ---
TOTAL/WEIGHTED AVERAGE FOR ALL OFFICE AND INDUSTRIAL PROPERTIES.. 88 14,026,814 96%(26)
--- ---------- ---
<CAPTION>
ANNUALIZED
NET
ANNUALIZED EFFECTIVE
ANNUALIZED RENT PER RENT PER
RENT PERCENT OF LEASED LEASED
AS OF ANNUALIZED SQUARE SQUARE
PROPERTY NAME 9/30/97(2) RENT FOOT(2) FOOT(3)
- ------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
OFFICE PROPER-
TIES:
Class A Office
Buildings:
+*599 Lexington
Avenue (4)...... $ 53,054,876 15.8% $53.21 $47.11
+*280 Park Ave-
nue............. 40,249,001 12.0 41.95 43.18
+*875 Third Ave-
nue (5)......... 28,874,388 8.6 42.37 43.27
*Two Indepen-
dence Square
(6)............. 21,317,592 6.4 36.88 37.05
*Riverfront
Plaza (7)....... 17,563,259 5.2 20.16 21.51
100 East Pratt
Street (8)...... 15,224,424 4.5 24.53 25.91
Democracy Cen-
ter............. 14,669,523 4.4 22.26 20.93
*2300 N Street.. 12,911,442 3.8 46.10 44.91
*One Indepen-
dence Square
(6)............. 12,677,045 3.8 37.53 34.22
*Capital Gal-
lery............ 11,691,352 3.5 32.36 31.07
*Lockheed Martin
Building
(9)(10)(11)..... 10,896,216 3.2 42.69 42.69
*National Imagery and Mapping Agency Bldg (9)(10).. 10,372,632 3.1 39.31 45.18
The U.S. Inter-
national Trade
Commission Bldg
(6)(12)......... 7,488,284 2.2 30.69 25.94
*Reston Town
Center Office
Complex (9)..... 6,746,412 2.0 25.84 28.49
One Cambridge
Center.......... 6,128,729 1.8 28.65 25.78
*Ten Cambridge
Center.......... 4,236,035 1.3 27.75 23.10
*191 Spring
Street.......... 4,035,648 1.2 24.80 21.92
*Newport Office
Park............ 3,267,240 1.0 19.35 17.57
*10 & 20 Bur-
lington Mall
Road............ 3,257,655 1.0 21.76 18.97
Lexington Office
Park............ 3,172,966 0.9 21.78 18.97
*91 Hartwell Av-
enue............ 2,729,205 0.8 22.35 20.81
Waltham Office
Center.......... 2,476,715 0.7 20.17 18.21
Three Cambridge
Center.......... 2,306,623 0.7 21.46 20.45
*Montvale Center
(13)............ 2,156,064 0.6 18.09 15.71
170 Tracer
Lane............ 1,737,309 0.5 23.71 19.04
195 West
Street.......... 1,600,931 0.5 25.21 20.84
*Bedford Busi-
ness Park....... 1,590,814 0.5 17.68 15.56
Decoverly Two
(9)............. 1,500,756 0.4 19.36 20.71
33 Hayden Ave-
nue............. 1,296,766 0.4 16.30 16.30
*100 Hayden Ave-
nue............. 1,176,733 0.4 21.04 19.38
Eleven Cambridge
Center.......... 1,118,563 0.3 14.05 11.30
8 Arlington
Street (14)..... 1,080,172 0.3 35.39 35.91
32 Hartwell Ave-
nue............. 1,022,128 0.3 14.78 14.39
204 Second Ave-
nue............. 876,976 0.3 21.40 18.29
*92 Hayden Ave-
nue............. 649,672 0.2 20.97 17.34
201 Spring
Street (15)..... -- -- -- --
------------ ---------- ---------- ----------
SUBTOTAL/WEIGHTED AVERAGE FOR CLASS A OFFICE
BUILDINGS (16)...... $311,154,146 92.7% $32.66 $31.72
------------ ---------- ---------- ----------
R&D Properties:
*Bedford Busi-
ness Park....... $ 3,780,214 1.1% $ 9.85 $ 8.00
910 Clopper Road
(9)............. 2,394,024 0.7 13.86 14.35
7601 Boston Bou-
levard, Building
Eight (6)(17)... 1,442,674 0.4 13.91 13.90
Fourteen Cam-
bridge Center... 1,366,714 0.4 20.29 18.33
Fullerton Square
(9)............. 1,301,148 0.4 9.16 9.74
*Hilltop Busi-
ness Center
(18)............ 1,061,181 0.3 8.06 9.62
930 Clopper Road
(9)............. 849,636 0.3 14.15 13.88
7435 Boston Bou-
levard, Building
One............. 764,560 0.2 10.91 8.48
7500 Boston Bou-
levard, Building
Six (6)......... 803,582 0.2 10.05 10.05
8000 Grainger
Court, Building
Five............ 764,369 0.2 8.45 8.04
7600 Boston Bou-
levard, Building
Nine............ 742,413 0.2 10.63 10.05
Sugarland Build-
ing One......... 741,041 0.2 17.12 16.97
7451 Boston Bou-
levard, Building
Two............. 660,950 0.2 14.06 8.19
164 Lexington
Road............ 598,478 0.2 9.33 8.50
7374 Boston Bou-
levard, Building
Four (6)........ 595,622 0.2 10.39 10.14
Sugarland Build-
ing Two......... 416,390 0.1 15.30 16.01
8000 Corporate
Court, Building
Eleven.......... 412,377 0.1 7.85 7.57
7375 Boston Bou-
levard, Building
Ten (6)......... 399,222 0.1 14.86 8.96
17 Hartwell Ave-
nue............. 277,500 0.1 9.25 8.95
7700 Boston Bou-
levard, Building
Twelve (19)..... -- -- -- --
7501 Boston
Boulevard,
Building Seven
(6)(20)......... -- -- -- --
------------ ---------- ---------- ----------
SUBTOTAL/WEIGHTED AVERAGE FOR R&D PROPERTIES...... $ 19,372,095 5.8% $11.26 $10.61
------------ ---------- ---------- ----------
INDUSTRIAL PROP-
ERTIES:
38 Cabot Boule-
vard (21)....... $ 868,699 0.3% $ 5.40 $ 5.40
40-46 Harvard
Street.......... 854,020 0.3 5.62 5.47
25-33 Dartmouth
Street.......... 795,124 0.2 10.19 9.86
2000 South Club
Drive, Building
Three........... 701,770 0.2 8.39 7.03
2391 West Winton
Avenue.......... 676,188 0.2 3.07 3.78
6201 Columbia
Park Road,
Building Two.... 451,475 0.1 8.07 6.48
1950 Stanford
Court, Building
One............. 371,682 0.1 6.98 7.38
560 Forbes Bou-
levard (17)..... 237,890 0.1 5.95 5.52
430 Rozzi Place
(17)............ 114,949 0.0 5.75 5.25
------------ ---------- ---------- ----------
SUBTOTAL/WEIGHTED AVERAGE FOR INDUSTRIAL PROPERTIES. $ 5,071,797 1.5% $ 5.87 $ 5.75
------------ ---------- ---------- ----------
DEVELOPMENT
PROPERTIES:
Class A Office
Properties:
One and Two
Reston Overlook
(5)(22)......... $ -- -- $ -- $ --
One Freedom
Square (23)..... -- -- -- --
Eight Cambridge
Center (24)..... -- -- -- --
181 Spring
Street (25)..... -- -- -- --
------------ ---------- ---------- ----------
SUBTOTAL/WEIGHTED AVERAGE FOR OFFICE DEVELOPMENT
PROPERTIES........................................ -- -- -- --
------------ ---------- ---------- ----------
TOTAL/WEIGHTED AVERAGE FOR ALL OFFICE AND
INDUSTRIAL PROPERTIES............................. $335,598,038 100.0% $27.71 $26.87
------------ ---------- ---------- ----------
</TABLE>

45
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED 9/30/97 ENDED 9/30/96
------------------------------ --------------------
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)(27) (ADR) (REVPAR)(27)
------------- --------- ----- --------- ------ ---------- --------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HOTEL PROPER-
TIES:
Long Wharf
Marriott(R)..... Boston, MA 100.0% 1982 1 402 420,000 88.0%
Cambridge Center
Marriott(R)..... Cambridge, MA 100.0 1986 1 431 330,400 88.0
Residence Inn by
Marriott(R)(28)
................ Cambridge, MA 100.0 1999 1 221 187,474 N/A -- -- -- --
--- ----- ---------- ---- ------- ------- ------- -------
TOTAL/WEIGHTED AVERAGE FOR HOTEL PROPERTIES.... 3 1,054 937,874 88.0% $189.27 $167.60 $173.48 $148.98
--- ===== ---------- ==== ======= ======= ======= =======
<CAPTION>
NUMBER NUMBER
PERCENT YEAR OF OF SQUARE
LOCATION OWNERSHIP BUILT BUILDINGS SPACES FOOTAGE
------------- --------- ----- --------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GARAGE PROPERTY:
Cambridge Center
North Garage.... Cambridge, MA 100.0% 1990 1 1,170 332,442
---
STRUCTURED PARKING INCLUDED IN CLASS A OFFICE
BUILDINGS...................................... 8,119 2,880,530
----- ----------
TOTAL FOR GARAGE PROPERTY AND STRUCTURED PARK-
ING............................................ 9,289 3,212,972
===== ----------
TOTAL FOR ALL PROPERTIES....................... 92 18,177,660
=== ==========
</TABLE>
- -------
+ This Property accounted for more than 10% of the Company's revenue for the
pro forma twelve months ended September 30, 1997 or the book value of this
Property accounted for more than 10% of the Company's total assets at such
time. For additional information about this Property, see the description
of the Property under "Business and Properties--The Office Properties."

* Upon completion of this Offering, the Company expects to have outstanding
approximately $1.3 billion of indebtedness secured by these Properties. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
(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) Annualized Rent is the monthly contractual rent under existing leases as
of September 30, 1997 multiplied by twelve. This amount reflects total
rent before any rent abatements and includes expense reimbursements,
which may be estimates as of such date. Total rent abatements for leases
in effect as September 30, 1997 were, on an annual basis, $12.9 million.
(3) Annualized Net Effective Rent is calculated for leases in effect as of
September 30, 1997 as follows: Annualized Rent, calculated as described
above (but by determining monthly rent on a straight line basis in
accordance with GAAP rather than adding back any rent abatement) was
reduced to reflect the annualized costs of tenant improvements and
leasing commissions, if any, paid or payable by the Company (calculated
by dividing the total tenant improvements and leasing commissions for a
given lease by the term of that lease in months and multiplying the
result by twelve).
(4) The Company's New York offices are located in this building, where it
occupies 12,896 square feet.
(5) The Company completed its acquisition of this Property on November 21,
1997.
(6) 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 (the
"GSA").
(7) The Company has entered into a contract to acquire this Property and
anticipates a closing date in January 1998.
(8) The Company completed its acquisition of this Property on October 23,
1997.
(9) This Property is part of the Mulligan/Griffin Portfolio. The Company has
entered into a contract to acquire this Property and anticipates a
closing date in February 1998.
(10) This Property was designed and built to serve certain specialized
business purposes of the tenant at this Property, resulting in rents that
are presently higher than average market rents for office properties in
this submarket for tenants not requiring similarly customized properties.
(11) The tenant at this Property has an option to purchase the Property in
July 2002 for a purchase price equal to the greater of the fair market
value of the Property or $30.6 million.
(12) The Company's Washington, D.C. offices are located in this building, also
known as 500 E Street, where it occupies 15,612 square feet.
(13) 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.
(14) The Property, which is used exclusively as the Company's headquarters,
was constructed in two phases, circa 1860 and circa 1920.
(15) The Property is 100% leased to MediaOne of Delaware, Inc., formerly known
as Continental Cablevision, Inc., whose lease commenced on November 1,
1997.
(16) The Class A Office Buildings contain 6,913 structured parking spaces.
(17) The General Services Administration, the tenant of this Property, has an
option to purchase this Property on September 30, 1999 for $14.0 million
and on September 30, 2014 for $22.0 million.
(18) The Company owns a 35.7% controlling general partnership interest in this
Property.
(19) The Property is 100% leased to Autometric, Inc., whose lease commenced on
October 15, 1997.
(20) The Property is 100% leased to the General Services Administration, whose
lease commenced on November 14, 1997.
(21) 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.
(22) The Company is acting as development manager of these Properties and will
be a 25.0% 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 70.0% pre-leased to BDM International.

(23) The Company is acting as development manager of this Property and will be
a 25% member of a limited liability company that will own the Property.
The Company's economic interest increases above 25.0% if certain
performance criteria are achieved. The Property is 59.0% pre-leased to
Andersen Consulting.

(24) This Property which is currently in development, is 100% pre-leased to a
leading Massachusetts based technology consulting firm. The Property is
expected to be completed in the second quarter of 1999.

(25) The Property is currently under development by a related third party and
is expected to be completed in late 1999. The Company has the option to
acquire the Property for its cost of development and intends to exercise
such option.
(26) Does not include the Office Development Properties.
(27) REVPAR is determined by dividing room revenue by available rooms for the
applicable period. Management believes that REVPAR (as defined more fully
in the Glossary) is an industry standard measure used to present hotel
operating data.
(28) The Property which is currently under development by the Company, is
expected to be completed in January of 1999. This will be a limited
service, extended stay Hotel.

DEVELOPMENT PARCELS
The Company owns, has under contract, or has an option to develop or acquire
twelve parcels consisting of an aggregate of 69.7 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 1,549,100 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>
Rockville, MD Montgomery County, MD 4 21.9 581,100
Reston, VA Fairfax County, VA 2 8.8 339,000
Andover, MA Route 495 N 2 27.0 290,000
Cambridge, MA East Cambridge, MA 1 2.6 209,000
Springfield, VA Fairfax County, VA 3 9.4 130,000
--- ---- ---------
Total 12 69.7 1,549,100
=== ==== =========
</TABLE>
- -------
(1) Represents the total square feet of development that the parcel(s) will
support.

46
<PAGE>

The following chart shows the geographic location of the Company's Office
and Industrial Properties, including the Office Development Properties, by net
rentable square feet (excluding storage space) and Annualized Rent as of
September 30, 1997:
<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
(2) ............ 6 730,149 67,362 -- 797,511 5.7%
Route 128 NW
Bedford, MA..... 3 90,000 383,704 -- 473,704 3.4
Billerica, MA... 1 -- 64,140 -- 64,140 0.5
Burlington, MA.. 2 152,552 -- -- 152,552 1.0
Lexington, MA
(3)............. 11 842,957 30,000 -- 872,957 6.2
Route 128/MA
Turnpike
Waltham, MA..... 6 307,390 -- -- 307,390 2.2
Route 128 SW
Westwood, MA.... 2 -- -- 247,318 247,318 1.8
Route 128 South
Quincy, MA...... 1 168,829 -- -- 168,829 1.2
Boston.......... 1 30,526 -- -- 30,526 0.2
--- ---------- --------- ------- ---------- -----
Subtotal......... 33 2,322,403 545,206 247,318 3,114,927 22.2%
GREATER
WASHINGTON, D.C.
SW Washington,
D.C.(4)......... 4 1,560,941 -- -- 1,560,941 11.1%
West End
Washington,
D.C. ........... 1 280,065 -- -- 280,065 2.0
Montgomery
County, MD
Bethesda, MD.... 3 680,000 -- -- 680,000 4.9
Gaithersburg, MD
(5)............. 3 122,157 240,706 -- 362,863 2.6
Rockville,
MD(6)........... 1 77,747 -- -- 77,747 0.6
Fairfax County,
VA
Herndon, VA..... 2 -- 112,220 -- 112,220 0.8
Reston, VA (7).. 7 1,631,140 -- -- 1,631,140 11.6
Springfield, VA
(4)(8).......... 13 -- 969,979 -- 969,979 6.9
Prince George's
County, MD
Landover, MD.... 3 -- -- 236,743 236,743 1.7
--- ---------- --------- ------- ---------- -----
Subtotal......... 37 4,352,050 1,322,905 236,743 5,911,698 42.2%
BALTIMORE, MD 1 633,482 -- -- 633,482 4.5%
RICHMOND, VA(6) 1 899,720 -- -- 899,720 6.4%
MIDTOWN MANHATTAN
Park Avenue..... 2 2,198,839 -- -- 2,198,839 15.7%
East Side....... 1 681,669 -- -- 681,669 4.8
--- ---------- --------- ------- ---------- -----
Subtotal......... 3 2,880,508 -- -- 2,880,508 20.5%
GREATER SAN
FRANCISCO
Hayward, CA..... 1 -- -- 221,000 221,000 1.6%
San Francisco,
CA (9).......... 11 -- 144,479 60,000 204,479 1.4
--- ---------- --------- ------- ---------- -----
Subtotal......... 12 -- 144,479 281,000 425,479 3.0%
BUCKS COUNTY,
PA............... 1 -- -- 161,000 161,000 1.2%
--- ---------- --------- ------- ---------- -----
TOTAL............ 88 11,088,163 2,012,590 926,061 14,026,814 100.0%
=== ========== ========= ======= ========== =====
PERCENT OF TOTAL............. 79.0% 14.4% 6.6% 100.0%
NUMBER OF OFFICE AND
INDUSTRIAL PROPERTIES........ 48 31 9 88
<CAPTION>
ANNUALIZED 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
(2) ............ $ 13,789,950 $ 1,366,714 $ -- $ 15,156,664 4.5%
Route 128 NW
Bedford, MA..... 1,590,814 3,780,214 -- 5,371,028 1.6
Billerica, MA... -- 598,478 -- 598,478 0.2
Burlington, MA.. 3,257,655 -- -- 3,257,655 1.0
Lexington, MA
(3)............. 14,083,118 277,500 -- 14,360,618 4.2
Route 128/MA
Turnpike
Waltham, MA..... 6,691,931 -- -- 6,691,931 2.0
Route 128 SW
Westwood, MA.... -- -- 1,649,144 1,649,144 0.5
Route 128 South
Quincy, MA...... 3,267,240 -- -- 3,267,240 1.0
Boston.......... 1,080,172 -- -- 1,080,172 0.3
------------- ------------ ----------- ------------- -------
Subtotal......... $ 43,760,880 $ 6,022,906 $1,649,144 $ 51,432,930 15.3%
GREATER
WASHINGTON, D.C.
SW Washington,
D.C.(4)......... $ 53,174,273 $ -- $ -- $ 53,174,273 15.8%
West End
Washington,
D.C. ........... 12,911,442 -- -- 12,911,442 3.8
Montgomery
County, MD
Bethesda, MD.... 14,669,523 -- -- 14,669,523 4.4
Gaithersburg, MD
(5)............. 2,156,064 3,243,660 -- 5,399,724 1.6
Rockville,
MD(6)........... 1,500,756 -- -- 1,500,756 0.4
Fairfax County,
VA
Herndon, VA..... -- 1,157,431 -- 1,157,431 0.3
Reston, VA (7).. 28,015,260 -- -- 28,015,260 8.4
Springfield, VA
(4)(8).......... -- 7,886,917 -- 7,886,917 2.4
Prince George's
County, MD
Landover, MD.... -- -- 1,524,927 1,524,927 0.5
------------- ------------ ----------- ------------- -------
Subtotal......... $112,427,318 $12,288,008 $1,524,927 $126,240,253 37.6%
BALTIMORE, MD $ 15,224,424 $ -- $ -- $ 15,224,424 4.5%
RICHMOND, VA(6) $ 17,563,259 $ -- $ -- $ 17,563,259 5.3%
MIDTOWN MANHATTAN
Park Avenue..... $ 93,303,877 $ -- $ -- $ 93,303,877 27.8%
East Side....... 28,874,388 -- -- 28,874,388 8.6
------------- ------------ ----------- ------------- -------
Subtotal......... $122,178,265 $ -- $ -- $122,178,265 36.4%
GREATER SAN
FRANCISCO
Hayward, CA..... $ -- $ -- $ 676,188 $ 676,188 0.2%
San Francisco,
CA (9).......... -- 1,061,181 352,839 1,414,020 0.4
------------- ------------ ----------- ------------- -------
Subtotal......... $ -- $ 1,061,181 $1,029,027 $ 2,090,208 0.6%
BUCKS COUNTY,
PA............... $ -- $ -- $ 868,699 $ 868,699 0.3%
------------- ------------ ----------- ------------- -------
TOTAL............ $311,154,146 $19,372,095 $5,071,797 $335,598,038 100.0%
============= ============ =========== ============= =======
PERCENT OF TOTAL............. 92.7% 5.8% 1.5% 100.0%
NUMBER OF OFFICE AND
INDUSTRIAL PROPERTIES........ 48 31 9 88
</TABLE>
- ----
(1) Annualized Rent is the monthly contractual rent under existing leases as
of September 30, 1997 multiplied by twelve. This amount reflects total
rent before any rent abatements and includes expense reimbursements, which
may be estimates as of such date. Total rent abatements for leases in
effect as of September 30, 1997, on an annualized basis, were
approximately $12.9 million.
(2) Does not include 1997 Annualized Rent for one Development Property.
(3) Does not include 1997 Annualized Rent for one Development Property and one
Property developed and placed in service in November 1997.
(4) 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.
(5) Includes two Acquisition Properties. The Company owns a 75.0% general
partner interest in the limited partnership that owns the Class A Office
Building in this submarket. 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 Class A Office Building.
(6) This Property is an Acquisition Property.
(7) Includes four Acquisition Properties. Does not include 1997 Annualized
Rent for three Development Properties. The Company is acting as
development manager of, and is a 25.0% member of, a limited liability
company that owns these Development Properties. The Company's economic
interest may increase above 25.0% depending upon the achievement of
certain performance goals.
(8) Includes two Acquisition Properties. Does not include 1997 Annualized Rent
for two Properties developed and placed in service in October and November
1997.
(9) The Company owns a 35.7% controlling general partnership interest in the
nine R&D Properties and two Industrial Properties located in Greater San
Francisco, California.

47
<PAGE>

TENANTS

TENANT DIVERSIFICATION

The Properties currently are leased to over 500 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 September 30, 1997:

<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
and Space
Administration(2)..... Two Independence Square 178 569,337 4.7%
U.S. International The U.S. International Trade
Trade Commission(3)... Commission Building 118 217,772 1.8
U.S. Customs 7601 Boston Boulevard, Building Eight
Service(4)............ 204 103,750 0.9
U.S. Department of 7500 Boston Boulevard, Building Six
State(5).............. 29 79,971 0.7
U.S. Department of 7374 Boston Boulevard, Building Four
State(6).............. 36 57,321 0.5
U.S. Customs 7375 Boston Boulevard, Building Ten
Service(7)............ 117 11,398 0.1
--------- ---
Total GSA Square
Footage............. 1,039,549 8.6
Lockheed Martin Democracy Center,
Corporation(8)......... 8000 Grainger Court, Building Five,
7435 Boston Boulevard, Building One,
7451 Boston Boulevard, Building Two,
7375 Boston Boulevard, Building Ten,
Capital Gallery, Lockheed Martin
Building and National Imagery and
Mapping Agency Building 9-66 786,469 6.5
Shearman & Sterling..... 599 Lexington Avenue 119 424,649 3.5
Office of the
Comptroller of the
Currency(9)............ One Independence Square 104 331,518 2.7
Hunton & Williams....... Riverfront Plaza 102 302,424 2.5
Debevoise & Plimpton.... 875 Third Avenue 61 279,375 2.3
ComputerVision.......... Bedford Business Park 28-91 273,704 2.3
T. Rowe Price 100 East Pratt Street
Associates, Inc........ 8-109 268,842 2.2
United States of
America................ Reston Town Center Office Complex 87 261,046 2.2
Camp Dresser & McKee, One and Ten Cambridge Center
Inc. .................. 30 214,725 1.8
Bankers Trust Company... 280 Park Avenue 161 208,276 1.7
Shaw, Pittman, Potts & 2300 N Street
Trowbridge............. 108 204,154 1.7
Wheat First Butcher Riverfront Plaza
Singer, Inc. .......... 99 202,919 1.7
National Football 280 Park Avenue
League................. 173 201,658 1.7
The Stride Rite 191 Spring Street
Corporation............ 106 162,700 1.3
J.I. Case Company....... 38 Cabot Boulevard 9 161,000 1.3
Restoration Hardware. 2391 West Winton Avenue
Inc.................... 82 160,213 1.3
Furman Selz LLC (10).... 280 Park Avenue 196 159,288 1.3
Medisense, Inc. ........ Bedford Business Park 105 150,000 1.2
Instinet Corporation.... 875 Third Avenue 70 148,000 1.2
Jones, Day, Reavis & 599 Lexington Avenue
Pogue.................. 53-104 144,289 1.2
Sidley & Austin......... 875 Third Avenue 57 131,250 1.1
Output Technologies, 40-46 Harvard Street
Inc. .................. 70 128,105 1.1
Mercer Management 33 Hayden Avenue and 2300 N Street
Consulting, Inc........ 50-53 119,215 1.0
Harvard Pilgrim Health 100 Hayden Avenue and 170 Tracer Lane
Care, Inc. ............ 29-38 115,448 1.0
</TABLE>
- --------
(1) All GSA leases are full faith and credit obligations of the United States
Government. The GSA accounted for approximately 9.2% of total Annualized
Rent of Office and Industrial Properties as of September 30, 1997.
(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) Lease with the GSA for a net usable square footage amount of 99,155.
(5) Lease with the GSA for a net usable square footage amount of 77,142.
(6) Lease with the GSA for a net usable square footage amount of 47,629.
(7) Lease with the GSA for a net usable square footage amount of 9,911.
(8) LMC Properties, Inc., a subsidiary of Lockheed Martin Corporation
("Lockheed"), leases 179,059 of the 786,469 square feet shown. Lockheed
guarantees such leases. Lockheed occupies 519,114 of the indicated net
rentable square feet pursuant to an assignment and assumption of lease
between General Electric Company and Lockheed. General Electric Company
remains the primary obligor under such lease.
(9) Lease measured in net usable square footage of 293,736.

(10) Effective November 1, 1997, the Company leased an additional 46,078
square feet to Furman Selz LLC.

48
<PAGE>

LEASE EXPIRATIONS OF OFFICE AND INDUSTRIAL PROPERTIES

The following table sets forth a schedule of lease expirations for leases in
place as of September 30, 1997, for each of the ten years beginning with
October 1, 1997, for the Office and Industrial Properties, on an aggregate
basis by property type and submarket, assuming that none of the tenants
exercise renewal options and excluding an aggregate of 578,718 square feet of
unleased space. This table includes lease expiration information with respect
to the ten Acquisition Properties expected to be acquired by the Company in
January and February 1998.

OFFICE PROPERTIES
(MARKET/SUBMARKET)

<TABLE>
<CAPTION>
CLASS A OFFICE
BUILDINGS 1997 1998 1999 2000 2001 2002 2003 2004 2005
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GREATER BOSTON
(1)
East Cambridge
Square footage
of expiring
leases.......... 57,177 105,163 61,490 217,684 2,912 6,359 34,837 0 0
Percentage of
total rentable
sq. ft.......... 10.30% 18.94% 11.08% 39.21% 0.52% 1.15% 6.28% 0.00% 0.00%
Annualized Rent
(2)............. $1,408,934 $1,678,287 $1,513,228 $6,704,842 $ 85,698 $ 178,052 $ 769,614 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 7 5 11 3 1 1 3 0 0
Annualized Rent
per leased sq.
ft. ............ $ 22.64 $ 15.96 $ 24.61 $ 30.80 $ 29.43 $ 28.00 $ 22.09 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 26.92 $ 18.04 $ 29.10 $ 32.19 $ 29.43 $ 28.00 $ 29.95 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 28.72
Route 128 NW
Square footage
of expiring
leases.......... 23,215 47,100 119,789 126,239 220,052 56,648 0 60,093 90,000
Percentage of
total rentable
sq. ft.......... 2.49% 5.06% 12.86% 13.55% 23.62% 6.08% 0.00% 6.45% 9.66%
Annualized Rent
(2)............. $ 430,779 $ 921,138 $2,162,633 $2,770,938 $4,323,315 $1,314,183 $ 0 $1,382,139 $1,590,814
No. of tenants
whose leases ex-
pire............ 6 17 9 14 18 6 0 1 1
Annualized Rent
per leased sq.
ft. ............ $ 18.56 $ 19.56 $ 18.05 $ 21.95 $ 19.65 $ 23.20 $ 0.00 $ 23.20 $ 17.68
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 18.56 $ 20.11 $ 20.72 $ 21.95 $ 20.22 $ 25.20 $ 0.00 $ 25.00 $ 19.08
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 22.95
Route 128/Massa-
chusetts Turnpike
Square footage
of expiring
leases.......... 24,935 31,826 55,869 84,276 99,406 4,218 0 0 0
Percentage of
total rentable
sq. ft. ........ 8.11% 10.35% 18.18% 27.42% 32.34% 1.37% 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 524,171 $ 594,514 $1,112,239 $1,934,159 $2,431,649 $ 95,199 $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 4 9 9 4 4 1 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 21.02 $ 18.68 $ 19.91 $ 22.95 $ 24.46 $ 22.57 $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 21.02 $ 18.68 $ 20.15 $ 22.95 $ 24.46 $ 22.57 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 25.89
Route 128 South
Square footage
of expiring
leases.......... 4,500 0 0 0 70,878 93,451 0 0 0
Percentage of
total rentable
sq. ft. ........ 2.67% 0.00% 0.00% 0.00% 41.98% 55.35% 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 18,000 $ 0 $ 0 $ 0 $1,579,979 $1,669,261 $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 1 0 0 0 1 1 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 4.00 $ 0.00 $ 0.00 $ 0.00 $ 22.29 $ 17.86 $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 4.00 $ 0.00 $ 0.00 $ 0.00 $ 22.29 $ 19.92 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 22.00
GREATER WASHING-
TON, D.C.
Southwest Wash-
ington, D.C.
Square footage
of expiring
leases.......... 24,041 16,045 36,148 67,852 48,112 7,687 54,717 52,838 0
Percentage of
total rentable
sq. ft. ........ 1.54% 1.03% 2.32% 4.35% 3.08% 0.49% 3.51% 3.39% 0.00%
Annualized Rent
(2)............. $ 749,173 $ 488,370 $1,189,009 $2,369,016 $1,577,443 $ 203,611 $1,758,113 $1,925,201 $ 0
No. of tenants
whose leases ex-
pire............ 5 8 5 10 7 5 2 1 0
Annualized Rent
per leased sq.
ft. ............ $ 31.16 $ 30.44 $ 32.89 $ 34.91 $ 32.79 $ 26.49 $ 32.13 $ 36.44 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 38.91 $ 32.81 33.20 $ 35.41 $ 33.72 $ 29.60 $ 33.46 $ 44.94 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 37.19
West End Washing-
ton, D.C.
Square footage
of expiring
leases.......... 0 0 3,150 0 39,651 0 0 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 1.12% 0.00% 14.16% 0.00% 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 88,200 $ 0 $1,149,879 $ 0 $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 1 0 1 0 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 28.00 $ 0.00 $ 29.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (2).... $ 0.00 $ 0.00 $ 29.00 $ 0.00 $ 30.83 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 32.00
<CAPTION>
CLASS A OFFICE 2007 &
BUILDINGS 2006 BEYOND
-------------- ------------ ------------
<S> <C> <C>
GREATER BOSTON
(1)
East Cambridge
Square footage
of expiring
leases.......... 21,519 46,524
Percentage of
total rentable
sq. ft.......... 3.88% 8.38%
Annualized Rent
(2)............. $ 587,469 $ 863,826
No. of tenants
whose leases ex-
pire............ 1 1
Annualized Rent
per leased sq.
ft. ............ $ 27.30 $ 18.57
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 32.29 $ 21.03
Company Quoted
Rental Rate per
sq. ft. (4).....
Route 128 NW
Square footage
of expiring
leases.......... 162,700 0
Percentage of
total rentable
sq. ft.......... 17.47% 0.00%
Annualized Rent
(2)............. $ 4,035,648 $ 0
No. of tenants
whose leases ex-
pire............ 1 0
Annualized Rent
per leased sq.
ft. ............ $ 24.80 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 26.60 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
Route 128/Massa-
chusetts Turnpike
Square footage
of expiring
leases.......... 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
Route 128 South
Square footage
of expiring
leases.......... 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
GREATER WASHING-
TON, D.C.
Southwest Wash-
ington, D.C.
Square footage
of expiring
leases.......... 331,518 882,092
Percentage of
total rentable
sq. ft. ........ 21.24% 56.51%
Annualized Rent
(2)............. $12,659,802 $30,254,535
No. of tenants
whose leases ex-
pire............ 1 8
Annualized Rent
per leased sq.
ft. ............ $ 38.19 $ 34.30
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 39.21 $ 38.75
Company Quoted
Rental Rate per
sq. ft. (4).....
West End Washing-
ton, D.C.
Square footage
of expiring
leases.......... 204,154 33,110
Percentage of
total rentable
sq. ft. ........ 72.90% 11.82%
Annualized Rent
(2)............. $10,801,933 $ 871,430
No. of tenants
whose leases ex-
pire............ 1 1
Annualized Rent
per leased sq.
ft. ............ $ 52.91 $ 26.32
Annualized Rent
per leased sq.
ft. w/future
step-ups (2).... $ 63.05 $ 38.42
Company Quoted
Rental Rate per
sq. ft. (4).....
</TABLE>

49
<PAGE>

<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004
---------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONTGOMERY COUN-
TY, MD
Square footage
of expiring
leases.......... 18,844 100,447 68,949 133,782 44,421 206,281 69,476 19,789
Percentage of
total rentable
sq. ft. ........ 2.14% 11.42% 7.84% 15.20% 5.05% 23.44% 7.90% 2.25%
Annualized Rent
(2)............. $ 437,770 $1,928,771 $ 1,473,758 $ 2,605,370 $ 978,752 $ 4,669,581 $ 1,357,128 $ 408,733
No. of tenants
whose leases ex-
pire............ 5 12 10 17 8 10 1 2
Annualized Rent
per leased sq.
t. ............. $ 23.23 $ 20.38 $ 21.37 $ 19.47 $ 22.03 $ 22.64 $ 19.53 $ 20.65
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 23.23 $ 28.30 $ 26.66 $ 21.26 $ 22.50 $ 25.49 $ 19.50 $ 20.65
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 22.59
BALTIMORE, MD
Square footage
of expiring
leases.......... 16,865 106,168 7,390 22,683 27,891 55,570 70,262 8,715
Percentage of
total rentable
sq. ft. ........ 2.66% 16.76% 1.17% 3.58% 4.40% 8.77% 11.09% 1.38%
Annualized Rent
(2)............. $ 344,220 $1,966,932 $ 139,956 $ 540,312 $ 609,144 $ 1,247,868 $ 1,413,876 $ 271,488
No. of tenants
whose leases ex-
pire............ 5 11 1 3 1 5 2 2
Annualized Rent
per leased sq.
ft. ............ $ 20.41 $ 18.53 $ 18.94 $ 23.82 $ 21.84 $ 22.46 $ 20.12 $ 31.15
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 20.41 $ 18.53 $ 18.94 $ 24.07 $ 21.84 $ 25.04 $ 20.12 $ 35.73
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 27.12
FAIRFAX COUNTY,
VA
Square footage
of expiring
leases.......... 0 0 0 0 0 255,244 263,870 261,046
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 0.00% 0.00% 0.00% 32.72% 33.82% 33.46%
Annualized Rent
(2)............. $ 0 $ 0 $ 0 $ 0 $ 0 $10,896,216 $10,372,632 $ 6,746,412
No. of tenants
whose leases ex-
pire............ 0 0 0 0 0 1 1 1
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $42.69 $39.31 $25.84
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 42.69 45.66 29.72
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 0.00
RICHMOND, VA
Square footage
of expiring
leases.......... 0 17,610 117,973 65,517 80,144 3,336 23,855 48,060
Percentage of
total rentable
sq. ft. ........ 0.00% 1.96% 13.11% 7.28% 8.91% 0.37% 2.65% 5.34%
Annualized Rent
(2)............. $ 0 $ 268,872 $ 1,788,114 $ 1,482,420 $ 1,578,828 $ 63,384 $ 565,248 $ 907,692
No. of tenants
whose leases ex-
pire............ 0 4 8 11 13 1 3 1
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 15.27 $ 15.16 $ 22.63 $ 19.70 $ 19.00 $ 23.70 $ 18.89
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 15.27 $ 16.12 $ 24.66 $ 21.84 $ 22.23 $ 25.23 $ 22.93
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 22.00
MIDTOWN MANHATTAN
Park Avenue
Square footage
of expiring
leases.......... 48,367 37,113 350 72,792 78,421 403,520 47,061 6,145
Percentage of
total rentable
sq. ft. ........ 2.20% 1.69% .02% 3.31% 3.57% 18.35% 2.14% .28%
Annualized Rent
(2)............. $2,784,701 $1,559,480 $ 35,494 $ 3,769,144 $ 3,855,416 $21,959,975 $ 2,569,231 $ 462,266
No. of tenants
whose leases ex-
pire............ 4 9 1 12 6 12 8 2
Annualized Rent
per leased sq.
ft. ............ $ 57.57 $ 42.02 $ 101.41 $ 51.78 $ 49.16 $ 54.42 $ 54.59 $ 75.23
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 57.57 $ 42.02 $ 107.37 $ 51.69 $ 49.47 $ 57.36 $ 60.79 $ 79.25
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 44.45
East Side
Square footage
of expiring
leases.......... 0 435 65,901 0 2,768 436,875 151,435 4,150
Percentage of
total rentable
sq. ft. ........ 0% 0.06% 9.67% 0.00% 0.41% 64.09% 22.22% 0.61%
Annualized Rent
(2)............. $ $ 24,996 $ 2,038,596 $ 0 $ 267,528 $20,987,268 $ 4,375,752 $ 139,800
Percentage of
Annualized
Rent............ 0.00% 0.09% 7.06% 0.00% 0.93% 72.68% 15.15% 0.48%
No. of tenants
whose leases ex-
pire............ 1 3 0 1 3 5 2
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 57.46 $ 30.93 $ 0.00 $ 96.65 $ 48.04 $ 28.90 $ 33.69
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 57.46 $ 31.06 $ 0.00 $ 107.22 $ 49.18 $ 32.82 $ 37.61
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 43.71
TOTAL CLASS A OF-
FICE BUILDINGS
Square footage
of expiring
leases.......... 217,941 461,907 537,009 790,825 714,656 1,273,945 715,513 460,836
Percentage of
total rentable
sq. ft. ........ 2.20% 4.66% 5.42% 7.98% 7.21% 15.43% 7.22% 4.65%
Annualized Rent
(2)............. $6,697,748 $9,550,028 $11,541,227 $22,176,201 $18,437,631 $63,284,598 $11,451,834 $12,243,731
No. of tenants
whose leases ex-
pire............ 37 75 53 74 60 45 20 10
Annualized Rent
per leased sq.
ft. ............ $ 30.73 $ 20.68 $ 21.49 $ 28.04 $ 25.80 $ 41.38 $ 32.40 $ 26.57
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 32.18 $ 24.88 $ 23.36 $ 28.63 $ 26.51 $ 43.38 $ 33.01 $ 32.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 32.22
<CAPTION>
2007 &
2005 2006 BEYOND
----------- ------------ ------------
<S> <C> <C> <C>
MONTGOMERY COUN-
TY, MD
Square footage
of expiring
leases.......... 36,081 152,978 4,664
Percentage of
total rentable
sq. ft. ........ 4.10% 17.39% .53%
Annualized Rent
(2)............. $ 831,775 $ 3,458,413 $ 57,624
No. of tenants
whose leases ex-
pire............ 2 3 1
Annualized Rent
per leased sq.
t. ............. $ 23.05 $ 22.61 $ 12.36
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 28.92 $ 27.34 $ 12.87
Company Quoted
Rental Rate per
sq. ft. (4).....
BALTIMORE, MD
Square footage
of expiring
leases.......... 33,793 228,864 42,409
Percentage of
total rentable
sq. ft. ........ 5.33% 36.13% 6.69%
Annualized Rent
(2)............. $ 838,548 $ 6,330,204 $ 1,521,876
No. of tenants
whose leases ex-
pire............ 1 2 2
Annualized Rent
per leased sq.
ft. ............ $ 24.81 $ 27.66 $ 35.89
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 28.81 $ 31.14 $ 38.42
Company Quoted
Rental Rate per
sq. ft. (4).....
FAIRFAX COUNTY,
VA
Square footage
of expiring
leases.......... 0 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
RICHMOND, VA
Square footage
of expiring
leases.......... 202,919 289,112 22,567
Percentage of
total rentable
sq. ft. ........ 22.55% 32.13% 2.51%
Annualized Rent
(2)............. $4,021,257 $ 6,735,248 $ 152,196
No. of tenants
whose leases ex-
pire............ 1 1 2
Annualized Rent
per leased sq.
ft. ............ $ 19.82 $ 23.30 $ 6.74
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 22.52 $ 26.50 $ 6.74
Company Quoted
Rental Rate per
sq. ft. (4).....
MIDTOWN MANHATTAN
Park Avenue
Square footage
of expiring
leases.......... 33,543 21,344 1,207,788
Percentage of
total rentable
sq. ft. ........ 1.53% .97% 54.93%
Annualized Rent
(2)............. $1,667,072 $ 888,181 $53,752,917
No. of tenants
whose leases ex-
pire............ 5 2 18
Annualized Rent
per leased sq.
ft. ............ $ 49.70 $ 41.61 $ 44.51
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 52.95 $ 45.35 $ 47.53
Company Quoted
Rental Rate per
sq. ft. (4).....
East Side
Square footage
of expiring
leases.......... 9,790 1,075 9,115
Percentage of
total rentable
sq. ft. ........ 1.44% 0.16% 1.34%
Annualized Rent
(2)............. $ 322,356 $ 55,764 $ 662,328
Percentage of
Annualized
Rent............ 1.12% 0.19% 2.29%
No. of tenants
whose leases ex-
pire............ 3 1 3
Annualized Rent
per leased sq.
ft. ............ $ 32.93 $ 51.87 $ 77.98
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 37.24 $ 64.13 $ 94.53
Company Quoted
Rental Rate per
sq. ft. (4).....
TOTAL CLASS A OF-
FICE BUILDINGS
Square footage
of expiring
leases.......... 406,126 1,413,264 2,248,269
Percentage of
total rentable
sq. ft. ........ 4.10% 14.26% 22.69%
Annualized Rent
(2)............. $9,271,822 $45,552,662 $88,136,732
No. of tenants
whose leases ex-
pire............ 10 12 33
Annualized Rent
per leased sq.
ft. ............ $ 22.83 $ 32.23 $ 39.20
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 25.72 $ 36.02 $ 42.93
Company Quoted
Rental Rate per
sq. ft. (4).....
</TABLE>

50
<PAGE>

<TABLE>
<CAPTION>
<CAPTION> 1997 1998 1999 2000 2001 2002 2003 2004 2005
-------- ----2007 &------ ---------- ---------- -------- ---------- ---------- -------- ----------
2006 BEYOND
----------- -----------
R&D PROPERTIES

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GREATER BOSTON
East Cambridge
Square footage
of expiring
leases.......... 0 0 0 0 0 0 67,362 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 100.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $1,366,714 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 0 0 0 0 1 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 20.29 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 23.73 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 25.00
Route 128 NW
Square footage
of expiring
leases.......... 0 0 50,000 133,000 0 94,140 50,704 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 10.46% 27.83% 0.00% 19.70% 10.61% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 352,852 $1,294,196 $ 0 $ 875,976 $ 563,217 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 1 2 0 2 1 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 7.06 $ 9.73 $ 0.00 $ 9.31 $ 11.11 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 7.06 $ 9.73 $ 0.00 $ 9.62 $ 11.11 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 9.00
GREATER WASHING-
TON, D.C.
Montgomery Coun-
ty, MD
Square footage
of expiring
leases.......... 22,060 13,189 0 28,636 0 22,335 0 0 90,433
Percentage of
total rentable
sq. ft. ........ 9.16% 5.48% 0.00% 11.90% 0.00% 9.28% 0.00% 0.00% 37.57%
Annualized Rent
(2)............. $338,256 $ 217,440 $ 0 $ 439,092 $ 0 $ 342,480 $ 0 $ 0 $1,131,708
No. of tenants
whose leases ex-
pire............ 1 2 0 1 0 1 0 0 1
Annualized Rent
per leased sq.
ft.............. $ 15.33 $ 16.49 $ 0.00 $ 15.33 $ 0.00 $ 15.33 $ 0.00 $ 0.00 $ 12.51
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 15.33 $ 16.68 $ 0.00 $ 15.63 $ 0.00 $ 16.47 $ 0.00 $ 0.00 $ 13.97
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 14.88
Fairfax County,
VA
Square footage
of expiring
leases.......... 37,158 150,183 73,079 221,848 75,895 63,462 0 47,641 0
Percentage of
total rentable
sq. ft. ........ 4.02% 16.25% 7.91% 24.00% 8.21% 6.87% 0.00% 5.15% 0.00%
Annualized Rent
(2)............. $291,232 $1,259,525 $ 904,394 $2,252,064 $891,534 $1,015,907 $ 0 $561,005 $ 0
No. of tenants
whose leases ex-
pire............ 2 10 3 9 5 3 0 3 0
Annualized Rent
per leased sq.
ft.............. $ 7.84 $ 8.39 $ 12.38 $ 10.15 $ 11.75 $ 16.01 $ 0.00 $ 11.78 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 7.84 $ 8.39 $ 12.97 $ 10.32 $ 12.45 $ 16.92 $ 0.00 $ 14.57 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 11.68
GREATER SAN FRAN-
CISCO
Square footage
of expiring
leases.......... 8,930 27,450 38,593 31,519 10,000 13,200 2,000 0 0
Percentage of
total rentable
sq. ft. ........ 6.18% 19.00% 26.71% 21.82% 6.92% 9.14% 1.38% 0.00% 0.00%
Annualized Rent
(2)............. $ 87,097 $ 227,088 $ 301,578 $ 251,798 $ 74,340 $ 105,120 $ 14,160 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 7 12 15 11 4 5 1 0 0
Annualized Rent
per leased sq.
ft.............. $ 9.75 $ 8.27 $ 7.81 $ 7.99 $ 7.43 $ 7.96 $ 7.08 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 9.75 $ 8.27 $ 7.81 $ 7.99 $ 7.43 $ 7.96 $ 7.08 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 7.80
TOTAL R&D PROPER-
TIES
Square footage
of expiring
leases.......... 68,148 190,822 161,669 415,003 85,895 193,137 120,066 47,641 116,330
Percentage of
total rentable
sq. ft. ........ 3.67% 10.29% 8.72% 22.38% 4.63% 10.41% 6.47% 2.57% 6.27%
Annualized Rent
(2)............. $716,585 $1,704,053 $1,558,824 $4,237,150 $965,874 $2,339,485 $1,944,091 $561,005 $1,329,768
No. of tenants
whose leases ex-
pire............ 10 24 19 23 9 11 3 3 3
Annualized Rent
per leased sq.
ft.............. $ 10.52 $ 8.93 $ 9.64 $ 10.21 $ 12.24 $ 11.11 $ 16.19 $ 11.78 $ 11.43
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 10.52 $ 8.95 $ 9.91 $ 10.32 $ 13.42 12.70 $ 18.12 $ 14.57 $ 12.92
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 11.59
<S> <C> <C>
GREATER BOSTON
East Cambridge
Square footage
of expiring
leases.......... 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
Route 128 NW
Square footage
of expiring
leases.......... 150,000 0
Percentage of
total rentable
sq. ft. ........ 31.39% 0.00%
Annualized Rent
(2)............. $1,569,948 $ 0
No. of tenants
whose leases ex-
pire............ 1 0
Annualized Rent
per leased sq.
ft. ............ $ 10.47 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 10.47 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
GREATER WASHING-
TON, D.C.
Montgomery Coun-
ty, MD
Square footage
of expiring
leases.......... 0 56,161
Percentage of
total rentable
sq. ft. ........ 0.00% 23.33%
Annualized Rent
(2)............. $ 0 $ 774,684
No. of tenants
whose leases ex-
pire............ 0 1
Annualized Rent
per leased sq.
ft.............. $ 0.00 $ 13.79
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 18.10
Company Quoted
Rental Rate per
sq. ft. (4).....
Fairfax County,
VA
Square footage
of expiring
leases.......... 25,897 115,148
Percentage of
total rentable
sq. ft. ........ 2.8% 12.46%
Annualized Rent
(2)............. $ 198,060 1,670,627
No. of tenants
whose leases ex-
pire............ 2 2
Annualized Rent
per leased sq.
ft.............. $ 7.65 $ 14.51
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 9.24 $ 14.51
Company Quoted
Rental Rate per
sq. ft. (4).....
GREATER SAN FRAN-
CISCO
Square footage
of expiring
leases.......... 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized Rent
per leased sq.
ft.............. $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
TOTAL R&D PROPER-
TIES
Square footage
of expiring
leases.......... 150,000 171,309
Percentage of
total rentable
sq. ft. ........ 8.09% 9.24%
Annualized Rent
(2)............. $1,569,949 $2,445,311
No. of tenants
whose leases ex-
pire............ 3 3
Annualized Rent
per leased sq.
ft.............. $ 10.47 $ 14.27
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 10.47 $ 15.69
Company Quoted
Rental Rate per
sq. ft. (4).....

INDUSTRIAL PROPERTIES
(MARKET/SUBMARKET)
GREATER BOSTON
Route 128/Massa-
chusetts Turnpike
Square footage
of expiring
leases.......... 0 0 23,904 67,216 10,829 0 128,105 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 9.67% 27.18% 4.38% 0.00% 51.80% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 120,989 $ 663,355 $131,769 $ 0 $ 733,031 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 1 1 1 0 1 0 0
Annualized Rent
per leased sq.
ft. ........... $ 0.00 $ 0.00 $ 5.06 $ 9.87 $ 12.17 $ 0.00 $ 5.72 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00 $ 5.06 $ 9.87 $ 12.17 $ 0.00 $ 6.47 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 8.84
GREATER BOSTON
Route 128/Massa-
chusetts Turnpike
Square footage
of expiring
leases.......... 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0
Annualized Rent
per leased sq.
ft. ........... $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft.
w/future step-
ups (3)......... $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
</TABLE>

51
<PAGE>

<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002 2003 2004
---------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GREATER WASHING-
TON, D.C.
Prince George's
County, MD
Square footage
of expiring
leases.......... 20,500 116,358 34,863 21,064 0 0 0 0
Percentage of
total rentable
sq. ft. ........ 8.66% 49.15% 14.73% 8.90% 0.00% 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 253,812 $ 819,640 $ 307,976 $ 143,499 $ 0 $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 1 4 1 1 0 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 5.75 $ 8.21 $ 8.83 $ 6.81 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 5.75 $ 8.21 $ 8.83 $ 6.81 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 5.34
GREATER SAN FRAN-
CISCO
Square footage
of expiring
leases.......... 0 20,000 40,000 0 60,000 0 0 160,213
Percentage of
total rentable
sq. ft. ........ 0.00% 7.12% 14.23% 0.00% 21.35% 0.00% 0.00% 57.02%
Annualized Rent
(2)............. $ 0 $ 114,949 $ 237,870 $ 0 $ 234,000 $ 0 $ 0 $ 442,188
No. of tenants
whose leases ex-
pire............ 0 1 1 0 1 0 0 1
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 5.75 $ 5.95 $ 0.00 $ 3.90 $ 0.00 $ 0.00 $ 2.76
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 5.75 $ 6.31 $ 0.00 $ 3.90 $ 0.00 $ 0.00 $ 2.76
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 7.92
BUCKS COUNTY, PA
Square footage
of expiring
leases.......... 0 161,000 0 0 0 0 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 868,699 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 1 0 0 0 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 5.40 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 5.40 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 5.40
TOTAL INDUSTRIAL
PROPERTIES
Square footage
of expiring
leases.......... 20,500 297,358 98,767 88,280 70,629 0 128,105 160,213
Percentage of
total rentable
sq. ft. ........ 2.21% 32.11% 10.67% 9.53% 7.65% 0.00% 13.83% 17.30%
Annualized Rent
(2)............. $ 117,870 $ 1,939,230 $ 666,855 $ 806,854 $ 365,769 $ 0 $ 733,031 $ 442,188
No. of tenants
whose leases ex-
pire............ 1 6 3 2 2 0 1 1
Annualized Rent
per leased sq.
ft. ............ $ 5.75 $ 6.52 $ 6.75 $ 9.14 $ 5.16 $ 0.00 $ 5.72 $ 2.76
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 5.75 $ 6.52 $ 6.90 $ 9.14 $ 5.16 $ 0.00 $ 6.47 $ 2.76
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 6.13
TOTAL OFFICE AND
INDUSTRIAL PROP-
ERTIES
Square footage
of expiring
leases (6)...... 306,592 950,087 797,445 1,294,108 871,380 1,722,326 963,684 668,690
Percentage of
total rentable
sq. ft.......... 2.42% 7.49% 6.28% 10.20% 6.87% 13.57% 7.59% 5.29%
Annualized Rent
(2)............. $7,193,947 $13,193,311 $13,766,906 $27,220,205 $19,769,274 $65,624,083 $25,858,716 $13,246,924
No. of tenants
whose leases ex-
pire............ 48 105 74 99 71 55 24 14
Annualized Rent
per leased sq.
ft. ............ $ 24.57 $ 13.89 $ 17.26 $ 21.03 $ 22.69 $ 38.10 $ 26.83 $ 19.81
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 26.10 $ 15.93 $ 18.59 $ 21.09 $ 23.33 $ 39.79 $ 27.63 $ 18.91
Company Quoted
Rental Rate per
sq. ft. (4)..... $ 27.30
<CAPTION>
2007 &
2005 2006 BEYOND
------------ ------------ ------------
<S> <C> <C> <C>
GREATER WASHING-
TON, D.C.
Prince George's
County, MD
Square footage
of expiring
leases.......... 0 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
GREATER SAN FRAN-
CISCO
Square footage
of expiring
leases.......... 0 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
BUCKS COUNTY, PA
Square footage
of expiring
leases.......... 0 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
TOTAL INDUSTRIAL
PROPERTIES
Square footage
of expiring
leases.......... 0 0 0
Percentage of
total rentable
sq. ft. ........ 0.00% 0.00% 0.00%
Annualized Rent
(2)............. $ 0 $ 0 $ 0
No. of tenants
whose leases ex-
pire............ 0 0 0
Annualized Rent
per leased sq.
ft. ............ $ 0.00 $ 0.00 $ 0.00
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 0.00 $ 0.00 $ 0.00
Company Quoted
Rental Rate per
sq. ft. (4).....
TOTAL OFFICE AND
INDUSTRIAL PROP-
ERTIES
Square footage
of expiring
leases (6)...... 522,456 1,563,264 2,419,578
Percentage of
total rentable
sq. ft.......... 4.12% 12.32% 19.07%
Annualized Rent
(2)............. $10,601,590 $47,122,611 $90,582,043
No. of tenants
whose leases ex-
pire............ 13 15 36
Annualized Rent
per leased sq.
ft. ............ $ 20.29 $ 30.14 $ 37.44
Annualized Rent
per leased sq.
ft. w/future
step-ups (3).... $ 22.87 $ 33.57 $ 41.00
Company Quoted
Rental Rate per
sq. ft. (4).....
</TABLE>
- ----
(1) The Company owns one Class A Office Building in the Back Bay submarket of
Greater Boston. This Property serves as the Company's headquarters. The
Company is the sole tenant of this building.

(2) Annualized Rent is the monthly contractual rent under existing leases as
of September 30, 1997 multiplied by twelve. This amount reflects total
rent before any rent abatements and includes expense reimbursements, which
may be estimates as of such date.

(3) Annualized Rent Per Leased Square Foot with Future Step-Ups represents
Annualized Rent Per Leased Square Foot as described in footnote (2) above,
but also reflects contractual increases in monthly base rent that occur
after September 30, 1997.
(4) Represents weighted average rental rates per square foot quoted by the
Company as of October 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.

52
<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 and the nine months ended September 30, 1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, WEIGHTED
1992 1993 1994 1995 1996 1997 AVERAGE
OFFICE PROPERTIES ------- ------- ------- ------- ------- ----------------- --------
Class A Office Buildings
<S> <C> <C> <C> <C> <C> <C> <C>
RENEWALS
Number of leases....... 39 34 30 36 45 43
Square feet............ 298,580 163,008 239,441 78,216 226,941 460,888
Tenant improvement
costs per square
foot.................. $ 1.63 $ 0.47 $ 2.70 $ 0.48 $ 2.80 $ 7.29 $ 3.57
Leasing commission
costs per square
foot.................. 0.30 0.26 0.93 1.32 1.67 1.41 1.01
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $ 1.93 $ 0.73 $ 3.63 $ 1.80 $ 4.47 $ 8.70 $ 4.58
======= ======= ======= ======= ======= ======= ======
NEW LEASES
Number of leases....... 38 43 57 58 60 39
Square feet............ 374,558 288,287 451,018 690,297 782,782 310,533
Tenant improvement
costs per square
foot.................. $10.50 $10.43 $10.53 $ 8.08 $10.33 $ 12.04 $10.04
Leasing commission
costs per square
foot.................. 2.06 2.38 2.02 3.59 2.88 3.65 2.84
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $12.56 $12.81 $12.55 $11.67 $13.21 $ 15.69 $12.88
======= ======= ======= ======= ======= ======= ======
TOTAL
Number of leases....... 77 77 87 94 104 82
Square feet............ 673,138 451,295 690,459 768,513 970,072 771,421
Tenant improvement
costs per square
foot.................. $ 6.57 $ 6.83 $ 7.81 $ 7.30 $ 8.99 $ 9.20 $ 7.93
Leasing commission
costs per square
foot.................. 1.28 1.62 1.64 3.36 2.41 2.31 2.18
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $ 7.85 $ 8.45 $ 9.45 $10.66 $11.40 $ 11.51 $10.11
======= ======= ======= ======= ======= ======= ======
R&D Properties
RENEWALS
Number of leases....... 7 11 9 10 11 16
Square feet............ 58,400 20,890 49,552 31,492 139,254 91,596
Tenant improvement
costs per square
foot.................. $ 2.73 $ 2.22 $ 0.74 $ 1.35 $ 0.98 $ 0.85 $ 1.28
Leasing commission
costs per square
foot.................. 0.12 2.36 0.59 1.12 0.65 .11 0.91
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $ 2.85 $ 4.58 $ 1.33 $ 2.47 $ 1.63 $ .96 $ 2.19
======= ======= ======= ======= ======= ======= ======
NEW LEASES
Number of leases....... 28 26 20 16 16 17
Square feet............ 126,670 146,067 228,780 145,581 198,442 55,908
Tenant improvement
costs per square
foot.................. $ 3.42 $ 4.02 $ 0.19 $ 7.23 $15.01 $ 4.19 $ 5.93
Leasing commission
costs per square
foot.................. 0.84 1.66 0.34 0.75 1.62 .67 0.98
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $ 4.26 $ 5.68 $ 0.53 $ 7.98 $16.63 $ 4.86 $ 6.91
======= ======= ======= ======= ======= ======= ======
TOTAL
Number of leases....... 35 37 29 26 27 33
Square feet............ 185,070 166,957 276,332 177,073 337,676 147,504
Tenant improvement
costs per square
foot.................. $ 3.21 $ 3.79 $ 0.29 $ 6.18 $ 9.23 $ 2.12 $ 4.52
Leasing commission
costs per square
foot.................. 0.61 1.74 0.39 0.81 1.22 .33 0.86
------- ------- ------- ------- ------- ------- ------
Total tenant
improvement and
leasing commission
costs per square
foot................. $ 3.82 $ 5.53 $ 0.68 $ 6.99 $10.45 $ 2.45 $ 5.38
======= ======= ======= ======= ======= ======= ======
<CAPTION>
INDUSTRIAL PROPERTIES
<S> <C> <C> <C> <C> <C> <C> <C>
RENEWALS
Number of leases....... 1 0 2 4 3 1
Square feet............ 13,367 0 13,367 71,283 46,117 32,750
Tenant improvement
costs per square
foot.................. $ 2.27 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.17
Leasing commission
costs per square
foot.................. 0.00 0.00 0.32 0.06 0.57 0.00 0.20
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $ 2.27 $ 0.00 $ 0.32 $ 0.06 $ 0.57 $ 0.00 $ 0.37
======= ======= ======= ======= ======= ======= ======
NEW LEASES
Number of leases....... 3 4 4 9 5 2
Square feet............ 31,106 241,500 119,160 237,105 82,031 170,682
Tenant improvement
costs per square
foot.................. $ 1.00 $ 0.12 $ 1.58 $ 0.19 $ 1.09 $ 0.00 $ 0.44
Leasing commission
costs per square
foot.................. 1.33 0.16 2.08 1.09 1.25 1.19 1.01
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $ 2.33 $ 0.28 $ 3.66 $ 1.28 $ 2.34 $ 1.19 $ 1.45
======= ======= ======= ======= ======= ======= ======
TOTAL
Number of leases....... 4 4 6 13 8 3
Square feet............ 44,473 241,500 132,521 308,388 128,148 203,432
Tenant improvement
costs per square
foot.................. $ 1.38 $ 0.12 $ 1.42 $ 0.15 $ 0.70 $ 0.00 $ 0.39
Leasing commission
costs per square
foot.................. 0.93 0.16 1.90 0.85 1.01 1.00 0.87
------- ------- ------- ------- ------- ------- ------
Total tenant improve-
ment and leasing com-
mission costs per
square foot.......... $ 2.31 $ 0.28 $ 3.32 $ 1.00 $ 1.71 $ 1.00 $ 1.26
======= ======= ======= ======= ======= ======= ======
</TABLE>

53
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER WEIGHTED
TOTAL OFFICE AND 1992 1993 1994 1995 1996 30, 1997 AVERAGE
INDUSTRIAL PROPERTIES ------- ------- --------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
RENEWALS
Number of leases(1)... 47 45 41 50 59 60
Square feet(1)........ 370,347 183,898 302,360 180,991 412,312 585,234
Tenant improvement
costs per square
foot................. $1.83 $0.67 $2.26 $0.44 $1.87 $5.87 $2.84
Leasing commission
costs per square
foot................. 0.26 0.50 0.85 0.79 1.20 1.13 0.85
------- ------- --------- --------- --------- --------- ------
Total tenant
improvement and
leasing commission
costs per square
foot................ $2.09 $1.17 $3.11 $1.23 $3.07 $7.00 $3.69
======= ======= ========= ========= ========= ========= ======
NEW LEASES
Number of leases(2)... 69 73 81 83 81 58
Square feet(2)........ 532,334 675,854 796,958 1,072,983 1,063,235 537,123
Tenant improvement
costs per square
foot................. $8.26 $5.36 $6.25 $6.22 $10.49 $7.40 $7.44
Leasing commission
costs per square
foot................. 1.73 1.43 1.55 2.65 2.52 2.56 2.14
------- ------- --------- --------- --------- --------- ------
Total tenant
improvement and
leasing commission
costs per square
foot................ $9.99 $6.79 $7.80 $8.87 $13.01 $9.96 $9.58
======= ======= ========= ========= ========= ========= ======
TOTAL
Number of leases...... 116 118 122 133 140 118
Square feet........... 902,681 859,752 1,099,318 1,253,974 1,475,547 1,122,357
Tenant improvement
costs per square
foot................. $5.62 $4.35 $5.15 $5.39 $8.09 $6.60 $6.04
Leasing commission
costs per square
foot................. 1.12 1.23 1.36 2.38 2.16 1.81 1.75
------- ------- --------- --------- --------- --------- ------
Total tenant
improvement and
leasing commission
costs per square
foot................ $6.74 $5.58 $6.51 $7.77 $10.25 $8.41 $7.79
======= ======= ========= ========= ========= ========= ======
</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 the period from October 1, 1997 through December 31, 1997 and for
calendar year 1998, the Company projects the cost of building improvements and
equipment upgrades (excluding the costs of tenant improvements) at the
Properties (excluding the Hotel Properties and the Garage Property) to be
approximately $0.5 million and $2.6 million (or $0.20 per square foot)
respectively, which cost is expected to be paid from operating cash flows.
These projected capital expenditures are estimated based on historical capital
expenditures at the Company's Properties for the years 1992 through 1996 and
the nine months ended September 30, 1997. Historical capital expenditures at
Properties acquired by the Company for periods prior to such acquisition have
not been included in the determination of projected capital expenditures.

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 and the nine months
ended September 30, 1997.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------- SEPTEMBER 30, ANNUAL
1992 1993 1994 1995 1996 1997 AVERAGE
------ ------ ------ ------ ------ ------------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Recurring capital
expenditures........... $1,425 $1,547 $1,812 $1,618 $1,803 $1,019 $1,594
</TABLE>

The following table sets forth historical capital expenditures at the Hotel
Properties incurred during the years ending December 31, 1992 through December
31, 1996 and the nine months ended September 30, 1997. The average cost is
presented below:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------- SEPTEMBER 30, ANNUAL
1992 1993 1994 1995 1996 1997 AVERAGE
------ ---- ------ ------ ------ ------------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Hotel improvements,
equipment upgrades and
replacements.......... $3,182 $836 $1,917 $4,420 $3,041 $1,242 $2,509
</TABLE>

As of October 10, 1997, the Hotel Properties had an escrow balance in the
amount of $6.0 million.

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

54
<PAGE>

relationships with tenants through its active management style and by being
responsive to the needs of individual tenants. 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.

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/
FOR THE NINE WEIGHTED
MONTHS ENDED AVERAGE
1993 1994 1995 1996 SEPTEMBER 30, 1977 1993-9/30/97
------- --------- --------- ------- ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Number of leases expired
during calendar year... 95 105 95 104 106 100
Aggregate net rentable
square footage of
expiring leases........ 916,164 1,395,922 1,008,579 892,486 856,395 1,053,288
Number of lease
renewals............... 49 45 53 62 63 52
Aggregate net rentable
square footage of lease
renewals............... 336,156 452,885 444,229 451,504 577,308 421,194
Percentage of leases
renewed................ 51.6% 42.9% 55.8% 59.6% 59.4% 52.0%
Percentage of expiring
net rentable square
footage renewed........ 36.7% 32.4% 44.1% 50.6% 67.4% 40.0%
</TABLE>

THE OFFICE PROPERTIES

The Office Properties consist of the 48 Class A Office Buildings (including
five Office Development Properties and six Acquisition Properties) and the 31
R&D Properties (including four Acquisition Properties). The Company's 48 Class
A Office Buildings contain approximately 11.1 million net rentable square feet
in urban and suburban settings in Greater Boston, Greater Washington, D.C.,
midtown Manhattan, Baltimore, Maryland and, upon completion of the acquisition
of Riverfront Plaza, Richmond, Virginia. As of September 30, 1997, the Class A
Office Buildings (excluding the Office Development Properties) had a weighted
average occupancy rate of 96.0%. Forty-seven of the Class A Office Buildings,
including Office Development Properties (consisting of approximately 11.0
million rentable square feet), have been built or substantially redeveloped
since 1980.

The 31 R&D Properties contain approximately 2.0 million net rentable square
feet and consist primarily of suburban properties located in the Springfield,
Virginia and Gaithersburg, Maryland submarkets of Greater Washington, D.C. and
the East Cambridge and Route 128 Northwest submarkets of Greater Boston.
Twenty-one of the R&D Properties, totaling approximately 1.8 million net
rentable square feet, have been built or substantially renovated since 1980.
As of September 30, 1997, the R&D Properties had a weighted average occupancy
rate of 93.0%.

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 September 30, 1997, the Office Properties were
leased to more than 500 tenants, and no single tenant accounted for more than
approximately 9.2% of the aggregate Annualized Rent of the Company's Office
and Industrial Properties.

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

55
<PAGE>

accompanied by rising rents. Between 1992 and September 30, 1997, 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 6.9%
while average quoted rents increased 37.4%, and the Direct Vacancy Rate was
only 3.9% at September 30, 1997. During this same 1992 through September 30,
1997 period office space supply grew by only 2.1% (2,175,000 square feet) and
there was net absorption of approximately 12.2 million square feet at a
relatively steady rate (approximately 1.8 million square feet in 1992, 2.2
million square feet annually from 1993 through 1995 2.3 million square feet in
1996, and 1.4 million square feet during the first nine months of 1997).

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 that 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. These three submarkets are already
experiencing low vacancy rates and have substantial limitations on potential
increases in supply because of limited sites available for development 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 September 30, 1997 of these submarkets, and
their supply sizes, were as follows: 1.2% Direct Vacancy in the 6.5 million
square feet East Cambridge submarket; 1.8% Direct Vacancy in the 11.5 million
square feet Route 128/West submarket; and 4.2% Direct Vacancy in the 7.4
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 almost 2
million jobs at the end of 1996. As a result of the steady growth in the
Boston economy, the local unemployment rate had fallen from 7.0% in 1992 to
3.4% at December 31, 1996.

In addition to its expanding economy, Massachusetts has a high and rising
standard of living. Per capita income in the Commonwealth is growing at a
faster pace than that of 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.

56
<PAGE>

EAST CAMBRIDGE OFFICE SUBMARKET

The Cambridge office market contains 9.8 million square feet and at
September 30, 1997 accounted for approximately 9% of Greater Boston's 103.6
million square foot office supply. According to Spaulding & Slye, the
availability rate in Cambridge as a whole fell from 12% at December 31, 1992
to 6.2% at September 30, 1997, with 813,000 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, Cambridge 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 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 3.8% at September 30, 1997
and the Direct Vacancy Rate was only 1.2% at September 30, 1997. The positive
impact of supply reductions on rent levels lagged behind absorption but is now
becoming evident; during 1992 through 1994 average asking rental rates
continued their post-1980's decline, dipping to a low of $18.67 per square
foot in 1994, before rebounding sharply during the succeeding two years and
reaching $27.59 per square foot at September 30, 1997. The Company believes
these rent levels are still 10-15% below current replacement cost rents and
will continue to increase significantly.

The Company has five Class A Office Buildings in this submarket with 730,149
net rentable square feet, one R&D Property with 67,362 net rentable square
feet and the Company's Garage Property, which contains 1,170 spaces.

East Cambridge Office Submarket
Average Quoted Market Rent &
Availability Rate

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 11% $20.54
1993 9% 19.03
1994 9% 18.67
1995 6% 21.64
1996 6% 26.7
9/30/97 3.8% 27.59
</TABLE>

57
<PAGE>

ROUTE 128 NORTHWEST SUBMARKET

The Route 128 Northwest 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 its September 30, 1997 total of
7.4 million square feet of space accounted for 7% of the total Greater Boston
supply, at such date, of approximately 103.6 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 1.2 million
square feet of space were absorbed between 1992 and September 30, 1997, while
only 215,000 square feet were added, with a resulting dramatic decrease in the
availability rate from 23.7% to 9.8% during this period and a Direct Vacancy
Rate at September 30, 1997 of only 4.2%. Average asking rental rates during
this period increased from $16.30 per square foot in 1992 to $22.31 per square
foot at September 30, 1997, with the greatest increase occurring in the period
since 1994 when 1,077,000 square feet of space were absorbed and average
asking rental rates increased from $17.01 to its current level. 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 has thirteen Class A Office Buildings in this submarket with
1,085,509 net rentable square feet and four R&D Properties with 477,844 net
rentable square feet.

Route 128 NW Office Submarket
Average Quoted Market Rent &
Availability Rate

[LINE GRAPH & BAR GRAPH APPEARS HERE]

Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 24% $16.3
1993 18% 16.13
1994 22% 17.01
1995 13% 21.1
1996 9% 22.5
9/30/97 9.8% 22.31
</TABLE>

RECENTLY COMPLETED DEVELOPMENT PROPERTY IN THE ROUTE 128 NORTHWEST SUBMARKET

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
Northwest submarket of Greater Boston. This building is adjacent to the
Company's existing Class A Office Building at 191 Spring Street. 201 Spring
Street was delivered November 1, 1997. The building is currently 100% leased
to MediaOne, formerly Continental Cablevision, Inc. MediaOne has notified the
Company that it intends to relocate its headquarters to another state and
sublease this building.

58
<PAGE>

GREATER WASHINGTON, D.C. 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 one of 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. In 1996 the area had a median household
income of $48,100, the highest in the country.

Employment increases in Greater Washington, D.C. associated with growth in
the private economy, particularly the service sector which as a whole grew 15%
in the five years ended December 31, 1996, 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, D.C. 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, D.C. area was 247.4
million square feet at September 30, 1997 compared to 239.6 million square
feet in 1992, an increase of 2.7 million square feet (an annual increase of
approximately 6% per year), while during the same period the market absorbed
approximately 18.5 million square feet, resulting in a decrease in the vacancy
rate from 14.4% in 1992 to 8.9% at September 30, 1997. The absorption was
particularly strong in 1995 and 1996, with approximately 9.2 million square
feet of absorption and an increase in asking rental rates 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.

PENDING ACQUISITION IN GREATER WASHINGTON, D.C. MARKET

Mulligan/Griffin Portfolio. The Mulligan/Griffin Portfolio consists of five
Class A Office Buildings and four R&D Properties, aggregating approximately
1.3 million net rentable square feet, and six parcels of land aggregating 30.7
acres, which will support approximately 920,000 square feet of development.
The Properties and parcels in the Mulligan/Griffin Portfolio are located in
the Gaithersburg I-270 and I-270 Rockville submarkets of Montgomery County,
Maryland and the Springfield and Reston submarkets of Fairfax County,
Virginia. The Company has entered into agreements to acquire these properties
and anticipates a closing date in February 1998. There can be no assurances,
however, that the Company will acquire these properties in February 1998, or
at all.

SOUTHWEST WASHINGTON, D.C. SUBMARKET

The 9.0 million square feet of Class A office space in the Southwest
Washington, D.C. submarket accounted for approximately 10% of the total Class
A office supply in Washington, D.C. at September 30, 1997. This submarket has
been one of the strongest submarkets in Greater Washington, D.C. over the past
five years.

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 9.5% at September 30, 1997 (Blue Cross-Blue Shield put
its owner-occupied 526,000 square foot building on the market in 1996). In
comparison, the availability rate in the Washington, D.C. market as a whole
averaged 10.3% between 1992 and 1995 and was 10.0% at September 30, 1997. The
asking rental rate in the Southwest Washington, D.C. submarket increased

59
<PAGE>

from $28.86 per square foot in 1992 to $29.91 per square foot at September 30,
1997. 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 has four Class A Office Buildings in this submarket with
1,560,941 net rentable square feet.

The following graph provides information regarding availability rates and
average asking rental rates per square foot at year end for each of the years
from 1992 through 1996 and at September 30, 1997 for office buildings in the
Southwest Washington, D.C. office submarket. Average asking rental rates
declined during the period from 1993 to September 30, 1997 and availability
rates varied during this period.

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

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 4.7% $28.86
1993 6.5% 36.84
1994 6.5% 34.61
1995 4.5% 32.81
1996 9.0% 31
9/30/97 9.5% 29.91
</TABLE>

MONTGOMERY COUNTY, MARYLAND SUBMARKETS

Montgomery County had a total of approximately 34.9 million square feet of
office space at September 30, 1997, accounting for 68% of the total suburban
Maryland office stock of approximately 51.3 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,
the absorption of 2.4 million square feet and a decline in availability from
19.4% to 14.7% as of September 30, 1997. The Company's Properties in this area
are located within three submarkets in Montgomery County, the Bethesda-Rock
Spring submarket, the Gaithersburg I-270 submarket and the I-270 Rockville
submarket.

BETHESDA-ROCK SPRING OFFICE SUBMARKET

The Bethesda-Rock Spring office submarket is the fourth largest in
Montgomery County and suburban Maryland, with a total of 4.7 million square
feet of office space at September 30, 1997. 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 defense contractors to place 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 1,025,000 square feet. With no
new supply of office space during this period, the availability rate at
September 30, 1997 fell to 3.7% and average asking rental rates rose to $23.09
per square foot.

60
<PAGE>

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

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

Availability
Year Rate Rent
---- ------------- ----
<S> <C> <C>
1992 8.7% $ 23
1993 18.8% 23
1994 25.6% 22
1995 17.1% 22.75
1996 4.6% 23
9/30/97 3.7% 23.09
</TABLE>

The Company has three Class A Office Properties in this submarket with
680,000 net rentable 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 had maintained a substantial presence in the area, causing
absorption to slump that year to negative 288,000 square feet and availability
to spike 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 since then, reducing the availability
rate to 13.7% by September 30, 1997 and sparking an increase in average asking
rental rates from $17.12 per square foot in 1994 to $19.50 per square foot at
September 30, 1997.

61
<PAGE>

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

[LINE GRAPH & BAR GRAPH APPEARS HERE]

Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 18.4% $19.34
1993 21.1% 19.36
1994 31.1% 17.12
1995 16.6% 17.88
1996 13.8% 19.4
9/30/97 13.7% 19.5
</TABLE>

The Company has one Class A Office Building in this submarket with 122,157
net rentable square feet. In addition, two of the Acquisition Properties are
located in this submarket.

I-270 ROCKVILLE OFFICE SUBMARKET

The I-270 Rockville office submarket had a total supply of 7.3 million
square feet of space at September 30, 1997, with no additions to supply since
December 31, 1992. During the period from December 31, 1992 through September
30, 1997, the availability rate in this submarket decreased from 11.7% to 8.4%
and average asking rental rates increased from $14.84 to $20.26 per square
foot.

I-270 Rockville Office Submarket
Average Quoted Market Rent &
Availabillity Rate

[LINE GRAPH & BAR GRAPH APPEARS HERE]

Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 12% $14.84
1993 14% 16.18
1994 14% 16.49
1995 12% 16.73
1996 11% 17.42
9/30/97 8.4% 20.26
</TABLE>

One Acquisition Property is located in this submarket.

62
<PAGE>

FAIRFAX COUNTY, VIRGINIA MARKET

The Fairfax County, Virginia office market had a total of approximately 62.4
million square feet of space at September 30, 1997, up only 2% over 1992. The
Company's completed Properties in Fairfax County are located in the
Springfield, Herndon and Reston submarkets.

SPRINGFIELD, VIRGINIA OFFICE SUBMARKET

The Springfield, Virginia office submarket had a total of approximately 5.4
million square feet at September 30, 1997. Continued positive absorption
during this period reduced the availability rate from 17.9% in 1992 to 6.1% at
September 30, 1997, and average asking rental rates, after falling to $7.65
per square foot in 1994, have increased substantially to $10.04 per square
foot at September 30, 1997.

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

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 17.9% $8.65
1993 16.7% 8.14
1994 16.7% 7.65
1995 11.2% 9.04
1996 7.6% 9.96
9/30/97 6.1% 10.04
</TABLE>

The Company has eleven R&D Properties in this submarket with 791,138 net
rentable square feet. In addition, two of the Acquisition Properties are
located in this submarket.

RECENTLY COMPLETED DEVELOPMENTS IN THE SPRINGFIELD, VIRGINIA FLEX/OFFICE
SUBMARKET

7700 Boston Boulevard, Building Twelve and 7501 Boston Boulevard, Building
Seven. On land owned by the Company in the Virginia-95 Business Park developed
by the Company, the Company completed and delivered two build-to-suit projects
in October and November, 1997. These two R&D Properties contain approximately
82,229 and 75,756 rentable square feet, respectively. 7501 Boston Boulevard,
Building Seven was developed by the Company for the General Services
Administration (specifically for use by the United States Customs Service).
7700 Boston Boulevard Building Twelve is the headquarters of Autometric, Inc.
and has expansion potential for another 40,000 square feet of space. 7501
Boston Boulevard, Building Seven and 7700 Boston Boulevard, Building Twelve
are leased in their entirety to the GSA and Autometric, Inc. for terms of 10
and 15 years, respectively.

63
<PAGE>

HERNDON, VIRGINIA OFFICE SUBMARKET

The Herndon, Virginia office submarket had total supply of 6.1 million
square feet at September 30, 1997, which had increased 100,000 square feet
since December 31, 1992. During the period from December 31, 1992 through
September 30, 1997, the availability rate in this submarket decreased from
23.1% to 7.4% and average asking rental rates increased from $13.38 to $19.84
per square foot.

Herndon, Vigrinia Office Submarket
Average Quoted Market Rent &
Availability

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 23% $13.38
1993 18% 11.18
1994 13% 11.13
1995 13% 12.25
1996 11% 14.76
9/30/97 7.4% 19.84
</TABLE>

The Company has two R&D Properties in this submarket with 112,220 net
rentable square feet.

RECENTLY COMPLETED RE-DEVELOPMENTS IN THE HERNDON, VIRGINIA OFFICE SUBMARKET

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 52,797 net rentable square feet and is on a 4.67
acre parcel with 297 parking spaces. Building Two, also constructed in 1985,
contains approximately 59,423 net rentable square feet and is on a 4.93 acre
parcel with 234 parking spaces. The Company purchased the buildings vacant in
1996, completed improvements to them in June 1997 and as of December 29, 1997
had approximately 70.0% of the total of 112,220 net rentable square feet
committed under signed leases or letters of intent with leases in negotiation.

RESTON, VIRGINIA OFFICE SUBMARKET

The Reston, Virginia Office Submarket had total supply of 9.5 million square
feet at September 30, 1997, with no additions to supply since December 31,
1992. During the period from December 31, 1992 through September 30, 1997, the
availability rate in this submarket decreased from 16.2% to 4.8% and average
asking rental rates increased from $15.25 to $21.86.

64
<PAGE>

Reston, Virginia Office Submarket
Average Quoted Market Rent &
Availability

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Availability
Year Rate Rent
---- ---- ----
<S> <C> <C>
1992 16.2% $15.25
1993 16.9% 12.63
1994 13.3% 12.84
1995 7.0% 17.56
1996 6.2% 18.07
9/30/97 4.8% 21.86
</TABLE>

Four of the Acquisition Properties and three of the Development Properties
are located in this submarket.

DOWNTOWN BALTIMORE, MARYLAND SUBMARKET

The metropolitan Baltimore, Maryland office market comprises approximately
36.4 million square feet, ranking it as the 21st largest office market in the
nation, comparable in size to San Diego and Cleveland. The Company's 100 East
Pratt Street Property is located in the downtown submarket of metropolitan
Baltimore. With 13.7 million square feet of office space, the downtown
Baltimore submarket accounted for approximately 37.5% of the metropolitan
Baltimore office market at June 30, 1997. The top tier of Class A Office
Buildings ("Tier A1") in downtown Baltimore consists of ten buildings,
including the Company's 100 East Pratt Street Property. The Tier A1 buildings
total approximately 3.6 million square feet and at June 30, 1997 had a
combined vacancy rate of 8.6%.

65
<PAGE>

The following graph provides information regarding availability rates and
average asking rental rates per square foot at year end for each of the years
from 1992 through 1996 and at September 30, 1997 for Class A office buildings
in the downtown Baltimore submarket. 100 East Pratt Street competes with the
nine other Tier A1 buildings in this submarket, which the Company believes
generally achieve higher rents and occupancy rates than Class A buildings in
this submarket in general.

Downtown Baltimore Submarket
Average Quoted Market Rent &
Availability Rate

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Availability
Year Rate Rent
---- ---- ----
<S> <C> <C>
1992 22% $ 19
1993 17% 19
1994 17% 19.5
1995 17% 21.5
1996 14% 22.5
9/30/97 13.1% 24.5
</TABLE>

The Company owns one Class A Office Building in this submarket with 633,482
net rentable square feet.

RECENT ACQUISITION IN BALTIMORE, MARYLAND SUBMARKET

100 East Pratt Street. 100 East Pratt Street is a 633,482 net rentable
square foot Class A Office Building. The property was acquired by the Company
in October 1997. 100 East Pratt Street is located along the prestigious "Pratt
Street Corridor" overlooking Baltimore's Inner Harbor. The office tower was
designed by Skidmore, Owings and Merrill and has won numerous architectural
awards. The building has a full complement of amenities including a 940 space
parking garage, health club and a conference center occupying an entire floor
for the exclusive use of tenants.

DOWNTOWN RICHMOND, VIRGINIA SUBMARKET

The Riverfront Plaza Property is located in the downtown submarket of
Richmond, Virginia. Located along the James River, the downtown submarket is
generally bounded by Interstate 64 to the north, the James River to the south,
U.S. Route 301 to the west and Interstate 95 to the east. The downtown
submarket is located approximately ten minutes' travel from Richmond
International Airport, and the region's affluent communities are easily
accessible in the suburbs to the north, east and west.

The downtown Richmond Class A office market consists of nine buildings with
3.0 million square feet of office space. During the period from 1992 through
September 30, 1997, the availability rate for Class A office space decreased
from 19.8% to 5.0% and average asking rental rates decreased from $22.23 per
square foot to $20.84 per square foot.

66
<PAGE>

Downtown Richmond Class A Office Submarket
Average Quoted Market Rent &
Availability Rate

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Availability
Year Rate Rent
---- ---- ----
<S> <C> <C>
1992 19.8% $22.23
1993 17.0% 21.84
1994 13.2% 20.86
1995 9.5% 20.4
1996 8.6% 20.4
9/30/97 5.0% 20.84
</TABLE>

One Acquisition Property is located in this submarket.

PENDING ACQUISITION IN RICHMOND, VIRGINIA SUBMARKET

Riverfront Plaza. Riverfront Plaza is an approximately 900,000 (excluding
storage space) net rentable square foot Class A office, retail and parking
complex consisting of twin 20-story towers. The Company entered into an
agreement to purchase the Property on November 11, 1997 and expects to close
the acquisition in January, 1998. There can be no assurance that this
acquisition will be consummated in January 1998, or at all. Riverfront Plaza
is located on the James River in Richmond, Virginia and is immediately
adjacent to the "Canal Walk" redevelopment area. This project, led by the City
of Richmond, calls for the renovation of the canal area into a mixed use "24-
hour" activity center. The building's 2,178 space garage provides the highest
ratio of parking of any building in Richmond.

MIDTOWN MANHATTAN OFFICE MARKET

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. A major gateway to the United States, its extensive
transportation infrastructure includes three 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 an area of growth. 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. 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.

67
<PAGE>

According to information provided by Insignia/ESG, the midtown Manhattan
market at September 30, 1997 consisted of 194.7 million square feet of space,
with supply up 3.2 million square feet (1.7%) 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 September 30, 1997 from 16.5% to 10.7% in midtown and an
increase in average asking rent from $32.19 per square foot to $34.31 per
square foot over the same period.

PARK AVENUE SUBMARKET

Two of the Company's three midtown Manhattan Office Properties are located
within the Park Avenue submarket of midtown Manhattan. The Park Avenue
submarket, with 25.7 million square feet of office space as of September 30,
1997 (an increase of only 300,000 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 from 1992 through September 30, 1997, the availability rate
in this submarket declined from 15.1% to 7.6% and average asking rental rates
increased from $40.36 per square foot to $46.31 per square foot.

Park Avenue Office Submarket
Average Quoted Market Rent &
Availability Rate

[LINE GRAPH AND BAR GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Availability
Year Rate Rent
---- ------------ ----
<S> <C> <C>
1992 15.1% $40.36
1993 13.1% $41.09
1994 8.2% $42.98
1995 12.5% $44.13
1996 11.4% $44.40
1997 7.6% $46.31

</TABLE>

Description of Park Avenue Submarket Properties

280 Park Avenue. The revenue from this Property amounted to more than 10% of
the Company's revenue for the pro forma nine months ended September 30, 1997.
The Company acquired this Property on September 11, 1997. 280 Park Avenue is a
modern Class A Office Building containing approximately 1.2 million net
rentable square feet. The Property is located on the full westerly blockfront
of Park Avenue between East 48th Street and East 49th Street and occupies two-
thirds of the block running from Park Avenue toward Madison Avenue. 280 Park
Avenue was designed by Emery Roth & Sons and was built in two phases. The 30
story East Tower was built in 1961 and the 42 story West Tower was constructed
in 1968. The Property recently underwent a significant modernization program
including upgrades to the HVAC and life safety systems, exterior plazas, lobby
areas, the Park Avenue and mid-block entrances. Across Park Avenue from the
Property to the north are the Waldorf-Astoria Hotel and the landmark St.
Bartholomew's Church. The Property is only four blocks from Grand Central
Terminal and its commuter rail lines and subway connections, and is one block
from a new direct entrance to Grand Central Terminal that is currently under
construction. As of September 30, 1997, Bankers

68
<PAGE>

Trust Company leased 208,276 net rentable square feet (approximately 18% of
the net rentable square feet) pursuant to a lease which expires February 28,
2011. Bankers Trust Company has two five-year extension options following the
initial lease expiration at a base rent equal to 85% of the fair rental value
of the property on the commencement date of such extension. Pursuant to such
lease, Bankers Trust Company is expected to pay base rent per leased square
foot of $35.00 during the years 1997 through 2001, $36.01 in 2002, $39.00
during the years 2003 through 2006, $40.01 in 2007, and $43.00 during the
years 2008 through 2011. As of September 30, 1997, the National Football
League leased 201,658 net rentable square feet (approximately 17% of the net
rentable square feet) pursuant to a lease which expires February 28, 2012.
Pursuant to such lease, the National Football League is expected to pay base
rent per leased square foot of $39.33 during the years 1997 through 2001,
$41.02 in 2002, $41.35 during the years 2003 through 2006, $43.04 in 2007, and
$43.37 during the years 2008 through 2012. As of September 30, 1997, Furman
Selz LLC leased 159,288 net rentable square feet (approximately 14% of the net
rentable square feet) pursuant to a lease which expires January 31, 2014.
Effective November 1, 1997, the Company has committed to lease an additional
46,078 square feet to Furman Selz LLC. This additional space brings the total
net rentable square feet to 205,366 (approximately 18% of the net rentable
square feet). Pursuant to such lease, Furman Selz LLC receives free rent
during the period from July 1, 1997 through February 1, 1999 on 159,288 square
feet and from November 1, 1997 through February 1, 1999 on 46,078 square feet.
Furman Selz LLC is expected to pay base rent per leased square foot of $37.29
in 1999, $40.75 during the years 2000 through 2003, $44.18 in 2004, $44.50
during the years 2005 through 2008, $47.97 in 2009, and $48.29 during the
years 2010 through 2014. In connection with this lease, the Company is
required to pay $9.2 million towards tenant improvements and $3.4 million of
leasing commissions.

Based on information provided by the previous owner of this Property, the
occupancy rate for this Property at January 5, 1994, 1995, 1996 and 1997 and
at September 30, 1997 was 88.2%, 77.1%, 70.0%, 83.7% and 81.9%, respectively.
The Average Effective Annual Rent per leased square foot of 280 Park Avenue
for the nine months ended September 30, 1997 was $42.71. Based on the
information provided to the Company by the previous owner of this Property,
the Company is unable to provide occupancy rates for 1992 and 1993 and Average
Effective Annual Rent information for the years 1992 through 1996.

The aggregate tax basis of depreciable real property at 280 Park Avenue for
federal income tax purposes was $197.3 million as of September 30, 1997.
Depreciation is computed on the straight-line method over the estimated life
of the real property which is 39 years. For the tax year ending June 30, 1998,
280 Park Avenue will be taxed by the Borough of Manhattan at a rate equal to
$10.164 per $100 of assessed value, resulting in a total tax for such period
equal to $9,575,493.

In the Company's opinion, 280 Park Avenue is adequately covered by
insurance.

In addition to normally recurring capital expenditures, the Company has
committed or budgeted to invest $29.0 million in tenant improvements, leasing
commissions and building system improvements.

The following schedule of lease expirations for this Property sets forth:
(i) the number of leases expiring; (ii) the total area in square feet covered
by such leases; (iii) the Annualized Rent represented by such leases; and (iv)
the percentage of Annualized Rent represented by such leases, for the three
months ended December 31, 1997, each of the years 1998 through 2006, and the
year 2007 and beyond:

<TABLE>
<CAPTION>
THREE
MONTHS
ENDED 2007 AND
12/31/97 1998 1999 2000 2001 2002 2003 2004 2005 2006 BEYOND
-------- -------- ---- ---------- ---------- -------- -------- ---- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of Leases
Expiring........ 1 3 0 9 6 1 3 0 1 1 15
Square Footage of
Expiring
Leases.......... 6,720 9,753 0 53,674 78,421 3,254 25,696 0 16,500 5,594 759,789
Annualized Rent.. $422,697 $392,546 $ 0 $2,765,709 $3,855,416 $134,024 $927,202 $ 0 $769,050 $194,392 $30,787,965
Percentage of
Annualized Rent
Expiring........ 1.05% 0.98% 0.00% 6.87% 9.58% 0.33% 2.30% 0.00% 1.91% 0.48% 76.49%
</TABLE>

599 Lexington Avenue. The revenue from this Property amounted to more than
10% of the Company's revenue for the pro forma twelve months ended September
30, 1997. 599 Lexington Avenue is a 50-story,

69
<PAGE>

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 provide 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.

As of September 30, 1997, Shearman & Sterling, a national law firm, leased
424,649 net rentable square feet (approximately 42% of the net rentable square
feet) pursuant to a lease which expires August 31, 2007. Pursuant to such
lease, Shearman & Sterling is expected to pay base rent per leased square foot
of $30.02 in 1997, $34.51 during the years 1998 through 2001, $35.84 in 2002,
and $38.23 during the years 2003 through 2007. In addition, under such lease
the tenant has four five-year extension options following the expiration of
the lease on August 31, 2007. As of December 31, 1996, Jones, Day, Reavis &
Pogue ("Jones, Day"), 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 with respect to 128,539 net rentable square
feet and on May 31, 2006 with respect to the remaining 15,750 net rentable
square feet. Jones, Day has a five-year renewal option with respect to the
128,539 net rentable square feet expiring February 28, 2002. Pursuant to its
lease, Jones, Day is expected to pay base rent per leased square foot of
$50.65 in 1997, $51.21 in 1998, $51.43 in 1999, $51.65 in 2000, $52.18 in
2001, and $52.41 in 2002, and, with respect to the 15,750 net rentable square
feet expiring May 31, $48.00 during the years 2003 through 2006. As of
December 31, 1996, 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. Pursuant to this lease, Citibank is expected to
pay base rent per leased square foot of $39.50 in 1997, $42.79 in 1998, and
$45.50 during the years 1999 through 2002.

The Average Effective Annual Rent per leased square foot of 599 Lexington
Avenue for the years ended December 31, 1992, 1993, 1994, 1995, 1996, and the
nine months ended September 30, 1997 was $41.08, $41.08, $40.75, $40.65,
$39.94 and $40.06, respectively. The occupancy rate of the Property for each
of such periods was 99.2%, 100.0%, 97.2%, 99.7%, 99.5% and 99.7%,
respectively.

The aggregate tax basis of depreciable real property at 599 Lexington Avenue
for federal income tax purposes was $144.8 million as of September 30, 1997.
Depreciation is computed on the straight-line method over the estimated life
of the real property which ranges from 18 to 39 years. The aggregate tax basis
of depreciable personal property associated with 599 Lexington Avenue for
federal income tax purposes was $6.0 million as of September 30, 1997.
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, 1998, 599 Lexington Avenue will
be taxed by the Borough of Manhattan at a rate equal to $10.164 per $100 of
assessed value, resulting in a total tax for such period equal to $10,766,725.

The Property is subject to a mortgage as set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources--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). The mortgage requires that the Property be managed by a limited
liability company (the "599 Manager") which is at all times controlled by Mr.
Zuckerman or Mr. Linde. The economic interests in the 599 Manager are 99.9%
owned by the Company, and Messrs. Zuckerman and Linde are the sole managing-
members, and hold the

70
<PAGE>

remaining 0.1% interest. In the event the 599 Manager is no longer controlled
by Mr. Zuckerman and Mr. Linde, other than as a result of their respective
deaths or incapacity, the mortgage lender could require the mortgage loan to
be repaid in its entirety prior to maturity. Each of Messrs. Zuckerman and
Linde have agreed to notify the Company at least six months prior to resigning
as a managing member of the 599 Manager.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
12/31/97 1998 1999 2000 2001 2002 2003 2004 2005 2006
------------ ---------- ------- ---------- ---- ----------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of Leases
Expiring....... 3 6 1 3 0 11 5 2 4 1
Square Footage
of Expiring
Leases......... 41,647 27,360 350 19,118 0 400,266 21,365 6,145 17,043 15,750
Annualized
Rent........... $2,362,004 $1,166,934 $35,494 $1,003,435 0 $21,825,951 $1,642,029 $462,266 $898,022 $693,789
Percentage of
Annualized Rent
Expiring....... 4.45% 2.20% 0.07% 1.89% 0.00% 41.14% 3.09% 0.87% 1.69% 1.31%
<CAPTION>
2007 AND
BEYOND
------------
<S> <C>
Number of Leases
Expiring....... 3
Square Footage
of Expiring
Leases......... 447,999
Annualized
Rent........... $22,964,952
Percentage of
Annualized Rent
Expiring....... 43.29%
</TABLE>

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.

See "Operating Partnership Agreement--Tax Protection Provisions."

EAST SIDE SUBMARKET

One of the Company's three midtown Manhattan Office Properties is located
within the East Side submarket of midtown Manhattan. The East Side Submarket
consists of 15.8 million square feet in 33 buildings generally located east of
Park Avenue and north of 46th Street. During the period from 1992 through
September 30, 1997, the availability rate in this submarket declined from
17.2% to 12.6% and average asking rental rates increased from $31.42 per
square foot to $36.95 per square foot.

East Side Office Submarket
Average Quoted Market Rent &
Availability Rate

[LINEGRAPH AND BARGRAPH APPEAR HERE]
<TABLE>
<CAPTION>
Availability
Year Rate Rent
---- ---- ----
<S> <C> <C>
1992 17.2% 31.42
1993 14.8% 30.2
1994 8.8% 32.21
1995 9.8% 35.3
1996 11.8% 34.77
1997 12.6% 36.95
</TABLE>

RECENT ACQUISITION IN EAST SIDE SUBMARKET

875 Third Avenue. The book value of this property amounted to approximately
10% of the Company's total assets on a pro forma basis as of September 30,
1997. The Company acquired this Property on November 21, 1997. This
approximately 682,000 net rentable square foot Class A Office Building is
located in

71
<PAGE>

midtown Manhattan on Third Avenue between 53rd and 52nd Streets. The Property
is located in the Eastside submarket of midtown Manhattan, one block from the
Park Avenue submarket. As of September 30, 1997, Debevoise & Plimpton leased
279,375 net rentable square feet (approximately 40% of the net rentable square
feet) pursuant to a lease which expires October 31, 2002. Pursuant to such
lease, Debevoise & Plimpton is expected to pay Base Rent per leased square
foot of $42.64 in 1997 and $44.12 during the years 1998 through 2002. As of
September 30, 1997, Instinet Corporation leased 148,000 net rentable square
feet (approximately 21% of the net rentable square feet) pursuant to a lease
which expires July 31, 2003. Pursuant to such lease, Instinet Corporation is
expected to pay base rent per leased square foot of $27.98 in 1997, $29.58 in
1998, $31.44 in 1999, and $31.85 during the years 2000 through 2003. As of
September 30, 1997, Sidley & Austin leased 131,250 net rentable square feet
(approximately 19% of the net rentable square feet) pursuant to a lease which
expires June 30, 2002. Pursuant to such lease, Sidley & Austin is expected to
pay base rate per leased square foot of $43.27 during the years 1997 through
2002. As of September 30, 1997, Grey Advertising, Inc. leased 90,250 net
rentable square feet (approximately 13% of the net rentable square feet) of
which 64,000 square feet expires December 31, 1999 and 26,250 square feet
expires June 30, 2002. Pursuant to its leases, Grey Advertising, Inc. is
expected to pay base rent per leased square foot of $30.11 in 1997, $31.53
during the years 1998 through 1999 and $38.50 during the years 2000 through
2002.

The Average Effective Annual Rent per leased square foot of 875 Third Avenue
for the nine months ended September 30, 1997 was $39.41. According to
information provided by the seller of this property, the occupancy rate for
this Property for the years ended December 31, 1992, 1993, 1994, 1995 and 1996
was 98.3%, 96.5%, 100.0%, 100.0% and 100.0%, respectively. The occupancy rate
of the Property for the nine months ended September 30, 1997 was 100%. Based
on the information provided to the Company by the previous owner of this
Property, the Company is unable to provide Average Effective Annual Rent
information for the years 1992 through 1996.

The aggregate tax basis of depreciable real property at 875 Third Avenue for
federal income tax purposes was $148.6 million as of September 30, 1997.
Depreciation is computed on the straight-line method over the estimated life
of the real property which is 39 years. For the tax year ending June 30, 1998,
875 Third Avenue will be taxed by the Borough of Manhattan at a rate equal to
$10.164 per $100 of assessed value, resulting in a total tax for such period
equal to $6,266,106.

For information concerning the expiration of leases with respect to 875
Third Avenue, see "Business and Properties--Tenants--Lease Expirations of
Office and Industrial Properties--Midtown Manhattan--East Side."

In the Company's opinion, 875 Third 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 875 Third
Avenue.

See "Operating Partnership Agreement--Tax Protection Provisions."

THE HOTEL PROPERTIES

The Company owns two in-service 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 Cambridge Center development. Both hotels are
operated by Marriott International, Inc. under the Marriott(R) name. In order
to assist the Company in maintaining its qualifications as a REIT under
federal tax law, the Company leases these Hotel Properties, pursuant to
separate leases with a participation in the gross receipts of the Hotel
Properties, to a lessee (ZL Hotel LLC) in which Messrs. Zuckerman and Linde
are the sole member-managers. Messrs. Zuckerman Linde have a 9.8% economic
interest in such lessee and two unaffiliated public charities have a 90.2%
economic interest. Marriott International, Inc. operates these Hotel
Properties under the Marriott(R) name pursuant to management agreements with
ZL Hotel LLC.

72
<PAGE>

THE HOTEL DEVELOPMENT PROPERTY

Residence Inn by Marriott(R). The Company is developing a 221 room limited
service Residence Inn by Marriott(R) on a site in the Cambridge Center
development in East Cambridge, Massachusetts. Residence Inn by Marriott(R) is
an extended stay hotel.

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.

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 from 1992 through 1996 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. Boston is also 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. In November 1997, the
state enacted legislation providing for the development of a new convention
center with an estimated cost of approximately $700 million that would contain
a 600,000 square foot main exhibit hall with 235,000 square feet of additional
meeting space, which would more than triple the 193,000 square feet currently
available in the Hynes Convention Center. There can be no assurances that this
new convention center will be developed as planned.

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 the years 1992 through 1996:

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

73
<PAGE>

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.

SEASONALITY

The Company's two completed hotels traditionally have experienced
significant seasonality in their net operating income, with average weighted
net operating income by quarter over the three years 1994 through 1996 as
follows:

<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------- -------------- ------------- --------------
<S> <C> <C> <C>
14% 30% 31% 25%
</TABLE>

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.

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.

THIRD-PARTY PROPERTY MANAGEMENT AND TENANT SERVICES

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. The Company served as development and project manager for all
of these properties.

PARTIAL INTERESTS

The Company owns less than a 100.0% fee interest in 15 of the Properties.
The Company owns a 25.0% limited liability company membership interest in
three buildings in Reston, Virginia, which the Company is

74
<PAGE>

currently developing in partnership with Westbrook. The Company's economic
interest in these properties may be increased above 25.0%, depending upon the
achievement of certain performance objectives. The Company owns a 75.0%
partnership interest and is the sole general partner of the limited
partnership that owns 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 owns 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 have caused site
contamination. With respect to all of the Properties, independent
environmental consultants have been retained in the past to conduct or update
Phase I environmental assessments (which generally do not involve invasive
techniques such as soil or ground water sampling) and asbestos surveys 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 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 responded to the state regulatory authority that it would
conduct an investigation. That investigation is underway and has identified
the presence of hazardous substances in a catch basin along the property line.
It is expected that the tenant will take any necessary response actions. 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. 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. On August 1, 1997, such consultant submitted to the state
regulatory authority a Phase I -- Limited Site Investigation Report and
Downgradient Property Status Opinion. This Opinion concluded that the property
qualifies for Downgradient Property Status under the state regulatory program.
Downgradient Property Status eliminates certain deadlines for conducting
response actions at a site. Although the Company believes that the current or
former owners of the upgradient source properties may ultimately be
responsible for some or all of the costs of such response actions, the Company
will take any necessary further response actions.

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.

CERTAIN AGREEMENTS RELATING TO THE PROPERTIES

The Operating Partnership Agreement provides that, until June 23, 2007, the
Operating Partnership may not sell or otherwise transfer any of the Designated
Properties (i.e., 599 Lexington Avenue, One and Two Independence Square, and
Capital Gallery, or a successor property obtained in a "like kind" exchange
for such

75
<PAGE>

properties) in a taxable transaction without the prior written consent of
Messrs. Zuckerman and Linde. In connection with the acquisition or
contribution of five other Properties, the Company entered into similar
agreements for the benefit of the selling or contributing parties.
Specifically, the Company has agreed with the party that contributed 875 Third
Avenue to the Operating Partnership that the Company will not sell or
otherwise transfer that Property in a taxable transaction until November 21,
2007 without the consent of that party. The Company has entered into a similar
agreement restricting the Company's ability to transfer 2300 N Street in a
taxable transaction until June 2002. In addition, the Company has agreed with
the parties that will contribute the Lockheed Martin Building, the National
Imagery and Mapping Agency Building and the Reston Town Center Office Complex
that the Company will not sell or otherwise transfer in a taxable transaction
such Properties (except to an existing tenant pursuant to an existing purchase
option) for a period of ten years from the date the Company completes the
acquisition of these Properties. In the case of a Designated Property, 2300 N
Street and 875 Third Avenue, the Operating Partnership is not required to
obtain the aforementioned consent from a party protected thereby if such party
does not continue to hold, during the applicable period, at least a specified
percentage of such party's original OP Units. In addition, since the consent
of the protected parties is required only in connection with a taxable sale or
other disposition of any Designated Property and certain other Properties, the
Operating Partnership will not be required to obtain such consent in
connection with a "like-kind" exchange of any such property in accordance with
Section 1031 of the Code or in connection with a number of other nontaxable
transactions, such as a nontaxable reorganization or merger of the Operating
Partnership or the formation of a joint venture involving a Property pursuant
to Section 721 of the Code.

The Operating Partnership has also entered into agreements providing Messrs.
Zuckerman, Linde and others with the right to guarantee additional and/or
substitute indebtedness of the Company in the event that certain other
indebtedness is repaid or reduced. See "The Operating Partnership--Tax
Protection Provisions."

76
<PAGE>

THE UNSECURED LINE OF CREDIT

Upon the completion of the Initial Offering, the Company entered into a
$300 million Unsecured Line of Credit with BankBoston, as agent, that expires
in June 2000. The Unsecured Line of Credit is a recourse obligation of the
Operating Partnership and is guaranteed by the Company. The Company has used,
and intends to continue to use, the Unsecured Line of Credit principally to
fund growth opportunities and for working capital purposes. As of December 29,
1997, the Company had an outstanding balance of $233.0 million under this line
of credit.

The Company's ability to borrow under the Unsecured Line of Credit is
subject to the Company's ongoing compliance with a number of financial and
other covenants. The Unsecured Line of Credit requires: the Company to
maintain a ratio of unsecured indebtedness to unencumbered property value of
not more than 60%; that the unencumbered properties must generate sufficient
net operating income to maintain a debt service coverage ratio of at least 1.4
to 1 (based on a 25-year amortization with an assumed interest rate equal to
the rate on seven-year U.S. Treasuries plus 2%); a total indebtedness to total
asset value ratio of not more than (i) 65% for the period from November 21,
1997 through April 30, 1998 and (ii) 55% after April 30, 1998; that the ratio
of EBITDA to debt service plus estimated capital expenditures and preferred
dividends be at least 1.75 to 1; and certain other customary covenants and
performance requirements. In addition, the Unsecured Line of Credit restricts
ownership of hotel properties to 25% of the Company's aggregate portfolio. The
Unsecured Line of Credit, except under certain circumstances, limits the
Company's ability to make distributions in excess of 90% of its annual Funds
from Operations.

The Unsecured Line of Credit, at the Company's election, bears interest at a
floating rate based on a spread over LIBOR equal to (i) 125 basis points
during the period from November 21, 1997 through January 31, 1998, (ii) 140
basis points during the period from February 1, 1998 through April 30, 1998,
and (iii) after April 30, 1998, from 90 basis points to 110 basis points,
depending upon the Company's applicable leverage ratio, or BankBoston's prime
rate. The Unsecured Line of Credit requires 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.

77
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Pursuant to the Certificate, the Board of Directors is divided into three
classes of directors. The initial terms of the three classes will expire in
1998 (Mr. Zuckerman), 1999 (Messrs. Patricof and Turchin) and 2000 (Messrs.
Linde and Seidenberg), 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 helps 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 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. A majority of directors are neither employees nor affiliates of the
Company.

The following table sets forth certain information with respect to the
directors and executive officers of the Company as of December 29, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ----------------------
<S> <C> <C>
Mortimer B. Zuckerman............................ 60 Chairman of the Board
Edward H. Linde.................................. 56 President,
Chief Executive
Officer and Director
Alan J. Patricof................................. 63 Director
Ivan G. Seidenberg............................... 51 Director
Martin Turchin................................... 56 Director
Raymond A. Ritchey............................... 47 Senior Vice President
Robert E. Burke.................................. 60 Senior Vice President
David R. Barrett................................. 56 Senior Vice President
Robert E. Selsam................................. 51 Senior Vice President
David G. Gaw..................................... 46 Senior Vice President,
Chief Financial
Officer
</TABLE>

The following is a biographical summary of the experience of the directors
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-Kettering 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 Vice President
and Senior Project Manager. Mr. Linde serves as Chairman of the Board of
Directors of the

78
<PAGE>

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, 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. Alan J. Patricof serves as a Director of the Company. Mr. Patricof is
Chairman of the Board of Directors of Patricof & Co. Ventures, Inc., the
company that he founded in 1969. He has more than 30 years of investment
experience with a particular expertise in portfolio management. Mr. Patricof
was Chairman of the White House Commission on the Small Business
Administration and a member of the Blue Ribbon Commission of the National
Association of Corporate Directors. He also serves as a director of Cellular
Communications International, Inc., Cellular Communications of Puerto Rico,
Inc., CoreComm Incorporated, Healthcare Direct, Inc., Johnny Rockets Group,
Inc., Medscape, Inc., NTL Incorporated, and SCP Communications, Inc. Mr.
Patricof received a BS in finance from Ohio State University and an MBA from
Columbia University Graduate School of Business.

Mr. Ivan G. Seidenberg serves as a Director of the Company. Mr. Seidenberg
is Vice Chairman, President and Chief Operating Officer of Bell Atlantic.
Prior to the merger of Bell Atlantic and NYNEX, Mr. Seidenberg was Chairman
and Chief Executive Officer of NYNEX where he held various positions since
1991. Mr. Seidenberg is a member of the Board of Directors of AlliedSignal
Inc., American Home Products Corp., The Conference Board, CVS Corp., Pace
University, The Museum of Television and Radio, The New York Hall of Science,
The New York Hospital and Viacom, Inc., and a director of Bell Atlantic. He is
Chairman of the Federal Communications Commission's Network Reliability and
Interoperability Council and a member of the Council on Foreign Relations and
the Lincoln Center Consolidated Fund Committee. Mr. Seidenberg received a BA
in mathematics from City University of New York and an MBA from Pace
University.

Mr. Martin Turchin serves as a Director of the Company. Since 1985, Mr.
Turchin has served as Vice-Chairman of Insignia/Edward S. Gordon Co., Inc., a
subsidiary of Insignia Financial Group, one of the nation's largest commercial
real estate brokerage and management firms. Mr. Turchin has more than 30 years
experience as a commercial real estate broker, consultant and advisor and has
been involved in some of the largest real estate transactions in the United
States. Mr. Turchin is a three time recipient of the Real Estate Board of New
York's "Most Ingenious Deal of the Year Award." Mr. Turchin attended City
College of the University of New York and St. John's Law School.

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

79
<PAGE>

portfolio of properties and was directly responsible for the approval, design,
construction and leasing of the 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 47-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 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 & 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.

80
<PAGE>

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 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

The Board of Directors has established an Audit Committee consisting of
Messrs. Patricof, Seidenberg and Turchin. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the scope and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls.

Compensation Committee

The Board of Directors has established a Compensation Committee to determine
compensation for the Company's executive officers. The members of the
Compensation Committee are Messrs. Patricof, Seidenberg and Turchin.

The Board of Directors has also established (i) a Special Acquisitions and
Finance Committee, which may authorize an acquisition or financing arrangement
up to $25.0 million, the members of which are Messrs. Zuckerman and Linde, and
(ii) a Significant Investments Committee, the members of which are Messrs.
Zuckerman, Linde and Turchin (with each of Messrs. Patricof and Seidenberg
available as alternate committee members), which may authorize, pursuant to a
vote that includes the affirmative vote of an independent director, an
acquisition or financing arrangement up to $200.0 million.

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 pays its non-employee directors annual compensation of $15,000
for their services. In addition, non-employee directors receive a fee of
$1,000 for each Board of Directors meeting attended in person.

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<PAGE>

Non-employee directors attending any committee meetings in person 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 also receive an additional fee of $250 for each
telephonic meeting attended. Each Non-Employee Director has made an election,
subject to approval of the Board's Compensation Committee, to receive, on a
deferred basis, shares of Common Stock in lieu of cash fees. Non-employee
directors are also reimbursed for reasonable expenses incurred to attend
director and committee meetings. Officers of the Company who are directors are
not paid any directors' fees. The Non-employee directors received, 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 total compensation paid in 1996 and the
annual base salary rates and other compensation earned in 1997 by the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Linde......... 1997 $150,000(1) (2) (3) 320,000(4) --
President and Chief 1996 7,000 -- $12,378(3) -- --
Executive Officer
Raymond A. Ritchey...... 1997 $250,000(1) (2) -- 200,000(4) (5)
Senior Vice President 1996 292,423 -- -- -- $4,150(5)
Robert E. Burke......... 1997 $250,000(1) (2) -- 160,000(4) (5)
Senior Vice President 1996 313,023 -- -- -- $4,150(5)
David R. Barrett........ 1997 $240,000(1) (2) -- 120,000(4) (5)
Senior Vice President 1996 285,493 -- -- -- $4,150(5)
Robert E. Selsam........ 1997 $221,500(1) $42,225 -- 80,000(4) (5)
Senior Vice President 1996 220,324 42,654 -- -- $4,150(5)
</TABLE>
- --------

(1) Represents rate of annual base salary for 1997 that was in effect
following the completion of the Initial Offering.
(2) 1997 bonus will be determined by the Board of Directors in its discretion.
(3) Represents the Company's contribution toward Mr. Linde's automobile
expenses. The Company anticipates that this amount will remain
approximately the same in 1997.
(4) One third of these options are exercisable on each of the third, fourth
and fifth anniversary of the Initial Offering.
(5) 1996 amounts include the Company's matching contribution under its 401(k)
plan ($4,000 per individual) and the Company's cost of term life insurance
(approximately $150 per individual). The Company anticipates that 1997
amounts will be approximately the same.

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<PAGE>

OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------- ANNUAL RATES OF
PERCENT OF SHARE PRICE
TOTAL OPTIONS EXERCISE APPRECIATION FOR
NAME OPTIONS GRANTED TO OR OPTION TERM
---- GRANTED EMPLOYEES IN BASE PRICE EXPIRATION --------------------
(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
------- ------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Linde......... 320,000 16.4% 25.00 (2) 5,030,400 12,748,800
Raymond A. Ritchey...... 200,000 10.3 25.00 (2) 3,144,000 7,968,000
Robert E. Burke......... 160,000 8.2 25.00 (2) 2,515,200 6,374,000
David R. Barrett........ 120,000 6.2 25.00 (2) 1,886,400 4,780,800
Robert E. Selsam........ 80,000 4.1 25.00 (2) 1,257,600 3,187,200
</TABLE>
- --------
(1) One third of these options are exercisable on each of the third, fourth
and fifth anniversary of the Initial Offering.
(2)The expiration date of the options is June 23, 2007.

Mr. Zuckerman, Chairman of the Board, also received a grant of 320,000
options on the same terms and with the same realizable values as Mr. Linde.

EMPLOYMENT AND NONCOMPETITION AGREEMENTS

Mr. Linde, as President and Chief Executive Officer, has an employment and
noncompetition agreement with the Company (the "Employment Agreement").
Pursuant to the Employment Agreement, until the third anniversary of the
Initial Offering, Mr. Linde will devote substantially all of his business time
to the business and affairs of the Company. Mr. Linde receives an annual base
salary of $150,000 and is eligible for bonus compensation, including stock
options, to be determined in the discretion of the Board of Directors. Mr.
Linde's employment with the Company may be terminated for "cause" by the
Company for: (i) gross negligence or willful misconduct; (ii) an uncured
breach of any of his material duties under the Employment Agreement; (iii)
fraud or other conduct against the material best interests of the Company; or
(iv) a conviction of a felony if such conviction has a material adverse effect
on the Company. Mr. Linde may terminate his employment for "good reason,"
which includes: (i) a substantial adverse change in the nature or scope of his
responsibilities and authority under the Employment Agreement or (ii) an
uncured breach by the Company of any of its material obligations under the
Employment Agreement. If Mr. Linde's employment is terminated by the Company
"without cause" or by Mr. Linde for "good reason," then Mr. Linde will be
entitled to a severance amount equal to the product of (x) his base salary
plus prior year's bonus multiplied by (y) the number of full and fractional
years that the noncompetition agreement described below is in effect (but in
any event at least one year's base salary plus prior year's bonus).

The Employment Agreement prohibits Mr. Linde while he is a director or an
officer of the Company and for one year thereafter, but in any event until the
third anniversary of the Initial Offering, from (i) engaging, directly or
indirectly, in the acquisition, development, construction, operation,
management, or leasing of any commercial real estate property, (ii)
intentionally interfering with the Company's relationships with its tenants,
suppliers, contractors, lenders or employees or with any governmental agency,
or (iii) soliciting the Company's tenants or employees. Pursuant to the
Employment Agreement, however, Mr. Linde may engage in minority interest
passive investments which include the acquisition, holding, and exercise of
voting rights associated with investments made through (i) the purchase of
securities that represent a non-controlling, minority interest in an entity or
(ii) the lending of money, but without management of the property or business
to which such investment directly or indirectly relates and without any
business or strategic consultation with such entity. In addition, Mr. Linde
may participate as an officer or director of any charitable organization, and
he may continue to own and operate the one Personal Property. The period that
this noncompetition agreement is in effect may be terminated prematurely by
the Company which will reduce the severance amount payable to Mr. Linde. In
addition, the agreement provides that the noncompetition provision shall not
apply if Mr. Linde's employment is terminated following certain changes of
control of the Company; in such event, the severance amount payable to Mr.
Linde

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will be determined by reference to the period of time that the noncompetition
provision would have been in effect in the absence of such a change of
control. See "Policies with Respect to Certain Activities--Conflict of
Interest Policies--Excluded Property."

Messrs. Barrett, Burke, Ritchey, Rosenfeld and Selsam have employment
agreements with the Company similar to that of Mr. Linde, except that the
geographic scope of their noncompetition provisions is limited to the
Company's markets at the time of termination of their employment. In addition,
Mr. Zuckerman is a party to an agreement with the Company that contains
noncompetition provisions of the same scope and duration as the noncompetition
provisions of Mr. Linde's Employment Agreement. The Company will continue to
be subject during the term of Mr. Selsam's employment to an agreement dated
August 10, 1995 pursuant to which (i) he was paid $35,000 on August 1, 1997
and (ii) he is paid 5% of the management fees earned on 90 Church Street, a
property managed by the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company has established a Compensation Committee consisting of Messrs.
Seidenberg, Patricof and Turchin, none of whom was or is an officer or
employee of the Company. As the compensation of the Company's senior officers
for 1997 was established at the time of the Initial Offering, the Compensation
Committee did not meet during 1997. None of such persons had any relationships
requiring disclosure under applicable rules and regulations.

STOCK OPTION PLAN

The Company has adopted 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 is
administered by the Compensation Committee. The maximum number of shares
available for issuance under the Plan is 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. After the completion of the Offering and the
expected application of the net proceeds therefrom, there will be 6,855,006
shares reserved for issuance under the Plan.

The following summary of the Plan is qualified in its entirety by reference
to the full text of the Plan, a copy of which has been filed with the
Securities and Exchange Commission as an exhibit to the Registration Statement
of which this Prospectus is a part.

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 25% 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.

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.

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<PAGE>

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.

The Plan provides for the automatic grant of Non-Qualified Options to non-
employee directors. Each non-employee director received, 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.

The Committee may also award, subject to such conditions and restrictions as
the Committee may determine, shares of Common Stock; deferred stock units
which are ultimately payable in the form of shares of Common Stock;
performance share awards to participants entitling the participants to receive
shares of Common Stock upon the achievement of individual or Company
performance goals; 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; awards of capital stock other than Common
Stock and other awards that are valued in whole or in part by reference to or
are otherwise based on, Common Stock.

The Committee may provide in each award agreement that the award becomes
fully vested and non-forfeitable if, after a Change of Control of the Company
(as defined in the Plan), the participant's employment is terminated by the
Company (or its successor) without cause, or if the participant voluntarily
resigns for "good reason" (as defined in the Plan).

NEW PLAN BENEFITS

Approximately 175 employees and four non-employee directors are currently
eligible to participate in the Plan. The table below shows the options that
have been granted to current employees and non-employee directors as of
December 31, 1997.

1997 STOCK OPTION AND INCENTIVE PLAN

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING STOCK OPTION(1)
----------------- --------------------------
<S> <C>
Mortimer B. Zuckerman........................... 320,000
Chairman
Edward H. Linde................................. 320,000
President and Chief Executive Officer
Executive Group (6 persons)..................... 930,000
Non-Employee Director Group (4 persons)......... 350,000
Non-Executive Officer Employee Group
(approximately 157 persons).................... 1,017,600
</TABLE>
- --------
(1) All options were granted to the employees and the non-employee directors
at the Initial Offering price of $25.00. In general, one-third of the
options granted to officers and Mr. Zuckerman will be exercisable on each
of the third, fourth and fifth 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 first, second and third
anniversary of the date of grant, respectively. Other than the options
granted to Mr. Zuckerman as described above, 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.

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<PAGE>

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,
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 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. 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.

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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.

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
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.

CERTAIN TRANSACTIONS

Prior to the Initial Offering, Messrs. Zuckerman and Linde made loans
totaling $40.5 million to entities that owned certain development properties
and parcels of land that the Company succeeded to the ownership of at the
completion of the Offering. Such loans bore interest at an annual rate of
9.25%, which interest was capitalized over the period that such loans have
been outstanding. At the completion of the Initial Offering, the balance of
such loans was approximately $42.8 million, which balance was repaid at the
completion of the Initial Offering with amounts drawn under the Unsecured Line
of Credit.

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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 conducts 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. The Company has
not established a specific policy regarding the relative priority of these
investment objectives. 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 continue 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 continue to
invest primarily in developments of commercial properties and acquisitions of
existing improved properties or properties in need of redevelopment, and
acquisitions of 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 continue 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 does not have a policy that restricts the amount or percentage of
assets that will be invested in any specific property.

The Company may also continue to 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. See "Policies with Respect to Certain Activities--Conflict of
Interest Policies" and "Operating Partnership Agreement--Tax Protection
Provisions."

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--Impact of Debt on the Company" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

CONFLICT OF INTEREST POLICIES

Certain holders of OP Units, including Messrs. Zuckerman and Linde, will
incur adverse tax consequences upon the sale of certain of the Properties
owned by the Company and on the repayment of 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 (other than a Designated 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 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.

In this connection, the Operating Partnership Agreement provides that, until
June 23, 2007, the Operating Partnership may not sell or otherwise transfer a
Designated Property (defined as One and Two Independence Square, 599 Lexington
Avenue and Capital Gallery, or a successor property acquired in a like-kind
exchange for such a property) in a taxable transaction without the prior
consent of Messrs. Zuckerman and Linde. Similarly, the Company has agreed with
the party that contributed 875 Third Avenue to the Operating Partnership that
the Company will not sell or otherwise transfer that Property or a successor
property in a taxable transaction until November 21, 2007 without the consent
of that party. The Operating Partnership is not, however, required to obtain
this consent from Messrs. Zuckerman or Linde or the parties to the 875 Third
Avenue transaction who are protected thereby if at any time during the
applicable period the protected party does not continue to hold at least a
specified percentage of such party's original OP Units. In addition, the
Company has agreed with the parties that will contribute the Lockheed Martin
Building, the National Imagery and Mapping Agency Building and the Reston Town
Center Office Complex that the Company will not sell or otherwise transfer
such Properties (except to an existing tenant pursuant to an existing purchase
option) for a period of ten years from the date the

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Company completes its acquisition of these Properties. For the pro forma nine
months ended September 30, 1997, the Properties described above in this
paragraph comprised approximately 35.0% of the Company's pro forma Funds from
Operations.

In addition to the foregoing, the Operating Partnership agreed to undertake
to use its reasonable commercial efforts to cause its lenders to permit
Messrs. Zuckerman and Linde to guarantee additional and/or substitute
Operating Partnership indebtedness following the Initial Offering if Messrs.
Zuckerman or Linde would recognize gain following the Offering as a result of
the refinancing of the Operating Partnership's indebtedness. The Operating
Partnership is under no obligation, however, to maintain any specified debt or
any specified level of indebtedness. See "Operating Partnership Agreement--Tax
Protection Provisions" for a more complete description of these provisions.

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 an economic interest of more
than five percent 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
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.

See "Risk Factors--Conflicts of Interests."

PERSONAL PROPERTY

At the completion of the Initial Offering the Operating Partnership
succeeded 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, held ownership interests. One property (the "Personal Property") was
not contributed to the Company in the Initial Offering. The Personal Property
was Sumner Square, a four building office complex located in Washington, D.C.,
NW (203,765 net rentable square feet).

Since the Personal Property is located in the same market as certain of the
Company's Properties, it may compete with such Properties. The Personal
Property is managed by the Company in return for a management fee with
customary terms that are approved by the Company's independent directors. In
1996, the management fee paid with respect to the Personal Property was
approximately $314,000. There is no assurance, however, that the Personal
Property will continue to be managed by the Operating Partnership or the
Development and

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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 Personal Property. See "Risk Factors--Conflicts of
Interest."

The partnership that owns the Personal Property and in which Messrs.
Zuckerman and Linde and other affiliates of the Company hold indirect
ownership interests (the "Partnership") has granted the Company an option to
acquire the Personal Property for a cash price equal to the sum of (i) $1.00
over the outstanding indebtedness of the Partnership (to the extent not
assumed by the Company), (ii) the net cash capital contributions made by the
partners of the Partnership after June 23, 1997, with interest thereon, (iii)
any expenses associated with the sale (not to exceed $50,000), and (iv) real
estate taxes incurred in connection with the transfer of the Personal
Property.

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. The
Company has in the past issued Common Stock and OP Units in exchange for
properties. 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. 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 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

Prior to the completion of the Initial Offering, each Property that was
owned by the Company at the completion of the Initial Offering was owned by a
partnership (a "Property Partnership") of which Messrs. Zuckerman and Linde
and others affiliated with Boston Properties, Inc. controlled the managing
general partner and, in most cases, a majority economic interest. The other
direct or indirect investors in the Property Partnerships included 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 were not affiliated with Boston Properties, Inc.

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

. Boston Properties, Inc., a Massachusetts company ("BP-Massachusetts")
that was founded in 1970, was reorganized to change its jurisdiction of
organization to Delaware. This reorganization was effected by merging
BP-Massachusetts with and into Boston Properties, Inc., a Delaware
corporation ("BP-Delaware"), immediately prior to the completion of the
Initial Offering.

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. The Company sold 36,110,000 shares of Common Stock in the Initial
Offering and contributed approximately $839.2 million, the net proceeds
of the Initial 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 contributed Properties to the Operating
Partnership, or merged into and with the Operating Partnership, in
exchange for OP Units and the assumption of debt, and the partners of
such Property Partnerships received 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, contributed their direct and indirect interests in certain
Property Partnerships to the Operating Partnership in exchange for OP
Units.

. Prior to the completion of the Initial Offering, the Company contributed
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 owns a 1.0% voting interest, and holds a 95.0% economic
interest, in the Development and Management Company. The remaining
voting and economic interest is held by officers and directors of the
Development and Management Company. In addition, the other management
and development operations of the Company were contributed to the
Operating Partnership.

. In connection with the transactions described in the preceding two
paragraphs, the Operating Partnership issued a total of 18,650,001 OP
Units and shares of Common Stock.

. With respect to direct or indirect contributions of interests to the
Property Partnerships, the Operating Partnership assumed all the rights,
obligations and responsibilities of the holders of such interests. Any
working capital or other cash balance of the Property Partnership as of
immediately prior to the Initial Offering was distributed to the holders
of such interests prior to the contribution to the Operating
Partnership. The contribution agreements with respect to such interests
generally contained representations only with respect to the ownership
of such interests by the holders thereof and certain other limited
matters.

. The Operating Partnership entered into a participating lease with ZL
Hotel LLC. Marriott International, Inc. continues to manage the Hotel
Properties under the Marriott(R) name pursuant to management agreements
with ZL Hotel LLC. Messrs. Zuckerman and Linde are the sole member-
managers of the lessee and own a 9.8% economic interest in ZL Hotel LLC.
ZL Hotel Corp. owns the remaining 90.2% economic interest in ZL Hotel
LLC. Two unaffiliated public charities own all of the capital stock of
ZL Hotel Corp.

. Approximately $707.1 million of the net proceeds of the Initial
Offering, together with $57.7 million drawn under the Unsecured Line of
Credit, was used by the Operating Partnership to acquire the Newport
Office Park Property, repay certain mortgage indebtedness secured by the
Properties and to refinance existing indebtedness with respect to the
certain development properties and certain parcels of land, the interest
on which will continue to be capitalized during the development period.

As a result of the Formation Transactions, (i) the Company owned 38,693,541
OP Units, which represented an approximately 70.7% economic interest in the
Operating Partnership, and Messrs. Zuckerman and Linde and other persons with
a direct or indirect interest in the Property Partnerships owned 16,066,459 OP
Units, which represented the remaining approximately 29.3% economic interest
in the Operating Partnership and (ii) the Company indirectly owned a fee
interest in all of the Properties. At the completion of the Formation
Transactions, Messrs. Zuckerman and Linde owned an aggregate of 15,972,611
shares of Common Stock and OP Units.

No independent third-party appraisals, valuations or fairness opinions were
obtained by the Company in connection with the Formation Transactions. In
forming the Company, the Company succeeded 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 was
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.

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<PAGE>

STRUCTURE OF THE COMPANY

Upon the completion of this Offering and the expected application of the net
proceeds therefrom, the structure and ownership of the Company will be as
illustrated in the chart set forth below:

[CHART DEPICTING BOSTON PROPERTIES, INC. AND ITS PRINCIPAL SUBSIDIARIES APPEARS
HERE]

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BENEFITS TO RELATED PARTIES

Certain affiliates of the Company realized 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 became beneficial owners of a total of
15,972,611 shares of Common Stock and OP Units, with a total value of
approximately $399.3 million based on the Initial Offering price of the
Common Stock. Other persons who were officers of the Company at the
completion of the Initial Offering received 1,186,298 OP Units, with a
total value of approximately $29.7 million based on the Initial Offering
price, for their interests in the Property Partnerships. In addition,
guarantees by Messrs. Zuckerman and Linde with respect to principal
repayment of approximately $92 million of indebtedness were released
because such indebtedness was repaid at the completion of the Initial
Offering. The book value of the interests and assets transferred to the
Company by Messrs. Zuckerman and Linde and other officers of the Company
was approximately negative $506.3 million.

. Approximately $749.9 million of indebtedness, of which $707.1 million
was secured by the Properties, and $42.8 million was due to Messrs.
Zuckerman and Linde for amounts loaned in connection with certain
development properties and certain parcels of land, and the related
additional and accrued interest thereon, assumed by the Operating
Partnership was repaid in the Formation Transactions. A portion of this
debt was previously guaranteed by Messrs. Zuckerman and Linde. Messrs.
Zuckerman and Linde continued to guarantee certain indebtedness of the
Company. See "Operating Partnership Agreement--Tax Protection
Provisions."

. Messrs. Zuckerman and Linde and others who received OP Units in
connection with the Formation Transactions were granted 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 had direct or indirect personal liability, in
certain instances, for the performance of contractual obligations by or
for the benefit of the Operating Partnership. In connection with the
Formation Transactions, they were relieved of such personal liability
or, to the extent they were not so relieved, the Operating Partnership
agreed to cause such contractual obligations to be performed and to
indemnify Messrs. Zuckerman and Linde and their affiliates for all
damages and expenses that may arise from any failure to do so.

. Messrs. Zuckerman and Linde owned approximately 7.1% of the outstanding
Common Stock following the Initial Offering, served as directors and as
officers with the titles Chairman of the Board and President and Chief
Executive Officer, respectively, and the Company entered into an
employment agreement with Mr. Linde.

. A "grandfather" provision in the Company's Shareholder Rights Agreement
which assures that Messrs. Zuckerman and Linde and their affiliates
would not, alone, be deemed to be a "group" that would trigger the
exercisability of rights issued thereunder and that would enable them to
continue to own, whether through ownership of Common Stock or OP Units,
a percentage economic interest in the Company equal to their interest as
of immediately after the completion of the Initial Offering.

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<PAGE>

OPERATING PARTNERSHIP AGREEMENT

The following summary of the Operating Partnership Agreement describes the
material provisions of such agreement. This summary 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 after
the completion of the Offering and the expected application of the net
proceeds therefrom approximately 74.4% of the economic interests in, the
Operating Partnership. The Company holds a one percent general partner
interest in the Operating Partnership and the balance is held as a limited
partner interest. The Company conducts substantially all of its business
through the Operating Partnership and its subsidiaries.

Pursuant to the Operating Partnership Agreement, the Company, as the sole
general partner of the Operating Partnership, generally 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. Certain restrictions apply to the Company's
ability to engage in a Business Combination, as described more fully under
"Extraordinary Transactions" below.

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.

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 (ii) if the limited partners holding at least three-
fourths of the OP Units (excluding OP Units owned by the Company) consent to
such transfer or (iii) to certain affiliates 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

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<PAGE>

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, has 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 Initial 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 executive and 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 Goldman, Sachs & Co. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated for a period of two years (one year in the
case of senior officers who are not executive officers) from June 1997.

REDEMPTION OF OP UNITS

Beginning on August 23, 1998 (or such later date as a holder of OP Units may
agree), 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 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 acquired OP Units in the Formation Transactions or in
connection with acquisitions by the Company have certain rights, pursuant to
separate registration rights agreements, 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 INTERESTS

The Company is authorized, without the consent of the limited partners, to
cause the Operating Partnership to issue additional OP Units to the Company,
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

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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.

EXTRAORDINARY TRANSACTIONS

The Operating Partnership Agreement provides that the Company may not
generally engage in any merger, consolidation or other combination with or
into another person or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization or change of outstanding shares of
Common Stock (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, as general partner of the
Operating Partnership, has agreed in the Operating Partnership Agreement with
the limited partners that the Company will not consummate a Business
Combination in which the Company conducted a vote of the stockholders unless
the matter would have been approved had holders of OP Units been able to vote
together with the stockholders on the transaction. The foregoing provision of
the Operating Partnership Agreement would under no circumstances enable or
require the Company to engage in a Business Combination which required the
approval of the Company's stockholders if the Company's stockholders did not
in fact give the requisite approval. Rather, if the Company's stockholders did
approve a Business Combination, the Company would not consummate the
transaction unless (i) the Company as general partner first conducts a vote of
holders of OP Units (including the Company) on the matter, (ii) the Company
votes the OP Units held by it in the same proportion as the stockholders of
the Company voted on the matter at the stockholder vote, and (iii) the result
of such vote of the OP Unit holders (including the proportionate vote of the
Company's OP Units) is that had such vote been a vote of stockholders, the
Business Combination would have been approved by the stockholders. 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.

TAX PROTECTION PROVISIONS

The Operating Partnership Agreement provides that, until June 23, 2007, the
Operating Partnership may not sell or otherwise transfer a Designated Property
in a taxable transaction without the prior written consent of Messrs.
Zuckerman and Linde. The Operating Partnership is not required to obtain the
aforementioned consent from Messrs. Zuckerman or Linde if they do not continue
to hold during the applicable period at least a specified percentage of his
original OP Units. Since the consent of Messrs. Zuckerman and Linde is
required only in connection with a taxable sale or other disposition of any
Designated Property, the Operating Partnership will not be required to obtain
such consent in connection with a "like-kind" exchange of any such property
under Section 1031 of the Code or in connection with a number of other
nontaxable transactions, such as a nontaxable reorganization or merger of the
Operating Partnership or the formation of a joint venture involving a
Designated Property pursuant to Section 721 of the Code. The Company has
entered into similar agreements for the benefit of the party or parties who
contributed certain Properties to the Operating Partnership. See "Business and
Properties--Certain Agreements Relating to the Properties."

Messrs. Zuckerman and Linde recognized approximately $80 million in gain as
a result of the Formation Transactions. To avoid the recognition of additional
gain, Messrs. Zuckerman and Linde (together with certain

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<PAGE>

other Continuing Investors) agreed to guarantee certain indebtedness of the
Company in the amount of approximately $135 million, which is represented by
non-recourse liabilities on five of the Properties (2300 N Street, Ten
Cambridge Center, the Garage Property, 191 Spring Street and Hilltop Business
Center). Messrs. Zuckerman and Linde also agreed to guarantee up to
approximately $57.7 million of any recourse liabilities of the Operating
Partnership (which initially consisted of amounts outstanding under the
Unsecured Line of Credit) through a deficit restoration obligation set forth
in the Operating Partnership Agreement. In addition to these guarantees,
Messrs. Zuckerman and Linde also avoided the recognition of gain as a result
of the allocation of their share of the Operating Partnership's non-recourse
indebtedness in the amount of approximately $695.3 million (including the
approximately $134.5 million noted above). The Company has entered into
similar agreements for the benefit of the party or parties who contributed
certain Properties to the Operating Partnership. See "Business and
Properties--Certain Agreements Relating to the Properties."

If the level of indebtedness of the Operating Partnership were to fall below
the total indebtedness following the Initial Offering (approximately $753
million), Messrs. Zuckerman and Linde would recognize taxable gain under
Section 731 of the Code. To reduce this risk to Messrs. Zuckerman and Linde
while providing the Company with sole control over its level of indebtedness,
the Operating Partnership agreed to undertake to use its reasonable commercial
efforts to cause its lenders to permit Messrs. Zuckerman and Linde to
guarantee additional and/or substitute indebtedness following the Initial
Offering. The Operating Partnership, however, is under no obligation to
Messrs. Zuckerman and Linde to maintain any specified debt or any specified
level of indebtedness or to make any payments to Messrs. Zuckerman or Linde if
a reduction in the indebtedness of the Operating Partnership were to result in
the recognition of gain by Messrs. Zuckerman or Linde. See "Risk Factors--
Conflicts of Interest." In addition, the Company has agreed with the parties
that contributed certain Properties to the Company to permit such parties to
guarantee certain amounts of indebtedness for specified periods of time.

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 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 is the tax matters partner of the Operating Partnership and, as
such, has 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, 2095 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 that may be issued in
exchange for OP Units presented for redemption) by each director, by each
Named Executive Officer, by all directors 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 AND PERCENTAGE PERCENT
OP UNITS BENEFICIALLY OF ALL OF ALL
OWNED AFTER COMMON STOCK COMMON
NAM OF BENEFICIAL OWNER(1)E THE OFFERING AND OP UNITS STOCK(2)
- --------------------------- --------------------- ------------ --------
<S> <C> <C> <C>
Mortimer B. Zuckerman (3)(5)....... 8,957,894 12.7% 14.6%
Edward H. Linde (4)(5)............. 7,020,714 9.9 11.8
Alan J. Patricof (6)............... 5,000 * *
Ivan G. Seidenberg (6)............. 500 * *
Martin Turchin (7)................. 5,000 * *
Robert E. Burke (8)................ 286,048 * *
Raymond A. Ritchey (9)............. 286,048 * *
David R. Barrett (10).............. 169,381 * *
Robert E. Selsam (11).............. 9,000 * *
All directors and executive
officers as a group (10 persons).. 16,813,618 23.8% 24.8%
</TABLE>
- --------
* Less than 1%.
(1) Address: c/o Boston Properties, Inc., 8 Arlington Street, Boston,
Massachusetts 02116.
(2) Assumes that all the OP Units held by the person are presented to the
Operating Partnership for redemption and acquired by the Company for
shares of Common Stock. The total number of shares of Common Stock
outstanding used in calculating the percentage assumes that none of the
OP Units held by other persons are similarly acquired for Common Stock.
(3) Includes 2,136,312 OP Units held by certain trusts that received OP Units
in the Formation Transactions in exchange for interests in the
Properties. Includes 1,291,770 shares of Common Stock.
(4) Includes 2,135,854 OP Units held by certain trusts that received OP Units
in the Formation Transactions in exchange for interests in the
Properties. Includes 1,297,771 shares of Common Stock, 6,000 of which are
held by a trust.
(5) Excludes 21,600 of the OP Units owned by Square 36 Properties Limited
Partnership ("Square 36"). Messrs. Zuckerman and Linde control the
general partner of Square 36 but do not have an economic interest in such
OP Units and cannot dispose of such OP Units without the consent of an
unaffiliated limited partner of Square 36.
(6) Shares of Common Stock.
(7) Shares of Common Stock, of which 3,000 shares are held by a family trust.
(8) Includes 37,926 OP Units held by a limited liability company.
(9) Includes 35,600 OP Units held by a limited liability company.
(10) Includes 23,600 OP Units held by a limited liability company.
(11) Includes 1,000 shares of Common Stock.

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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

The Company adopted its Amended and Restated Certificate of Incorporation
(the "Certificate") on June 23, 1997. Under the Certificate, 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 this Offering,
53,694,041 shares of Common Stock will be issued and outstanding and no shares
of Excess Stock or Preferred Stock will be issued and outstanding.

With respect to the Preferred Stock, the Certificate authorizes the
Directors to set or change 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 are 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
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. The Company has authorized the issuance of a series
of preferred stock in connection with the Company's shareholder rights plan.
See "--Shareholder Rights Agreement"; "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 person (which includes any
"group" of persons) (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 generally "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. A Related Party, however, will not be deemed to
beneficially own shares by virtue of clause (iii) of the preceding sentence
and a "group" of which a Related Party is a member will generally not have
attributed to the group's beneficial ownership any shares beneficially owned
by such Related Party. 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, all of whom are also Related Parties under the
Certificate. 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

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longer in the best interests of the Company to 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 is presented that the changes in ownership will not 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 Trading 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 do 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.

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 a day prior to effectiveness of the Registration Statement with respect
to the Initial Offering (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 E Junior Participating
Cumulative Preferred Stock, par value $.01 per share (the "Series E Preferred
Stock") at a cash exercise price of $100 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 (an "Acquiring
Person") has acquired beneficial ownership of more than 15% of the sum of the
outstanding shares of Common Stock and Excess Stock ("Common Shares") (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 more than
15% of the outstanding Common Shares (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. In addition, no person who is a partner of the
Operating Partnership as of the closing of the Offering will be an Acquiring
Person unless such person acquires beneficial ownership of (i) more than 15%
of the outstanding Common Shares and (ii) a greater percentage of the then
outstanding Common Shares and OP Units (excluding OP Units held by the
Company) than that percentage of the total number of shares of Common Stock
and OP Units (excluding OP Units held by the Company) that such partner held
at the conclusion of the Initial Offering. Furthermore, no "group" of which a
Related Party is a member will be deemed to beneficially own the Common Shares
beneficially owned by such Related Party.

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 E 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

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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 E Preferred Stock at an
exchange ratio of one share of Common Stock or one Unit of Series E 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 E 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 E Preferred Stock, (ii) if holders of the
Series E Preferred Stock are granted certain rights or warrants to subscribe
for Series E Preferred Stock or convertible securities at less than the
current market price of the Series E Preferred Stock, or (iii) upon the
distribution to holders of the Series E 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 E 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 $0.001
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).

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 SEC and is
incorporated as an exhibit hereto by reference to the Registration Statement
with respect to the Initial Offering. 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 have been filed with the SEC
and are incorporated as exhibits hereto by reference to the Registration
Statement with respect to the Initial Offering.

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 with the
SEC and are incorporated as exhibits hereto by reference to the Registration
Statement with respect to the Initial Offering. See also "Description of
Capital Stock--Restrictions on Transfers."

AMENDMENT OF CERTIFICATE AND BYLAWS

The Company's Certificate may be amended only by the affirmative vote of the
holders of two-thirds (or, if more than 75% of the directors then in office
approve the amendment, a majority) 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 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

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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 more than 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 has adopted a Shareholder Rights Plan. 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--Shareholder Rights Agreement."

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Certificate generally limits the liability of the Company's
Directors 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 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.

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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
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.

BUSINESS COMBINATIONS

The Company is 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 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.

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 and the acquisition of the Acquisition
Properties, the Company will have outstanding 53,694,041 shares of Common
Stock and an additional 18,463,920 shares of Common Stock will be reserved for
issuance upon exchange of OP Units. All outstanding shares of Common Stock
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, 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. Affiliates of the Company (such as Messrs. Zuckerman and Linde
who in the aggregate beneficially own 2,589,541 shares of Common Stock) remain
subject to such limitations without regard to the lapse of time.

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 "Management--Compensation
of Directors." Following the completion of this Offering the Company will have
reserved for issuance under the Plan 6,618,880 shares of Common Stock,
including 2,297,600 shares issuable upon exercise of outstanding options.
Prior to June 23, 1998, 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 then be resold without
restriction, unless held by affiliates.

The Common Stock is traded on the NYSE. 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--Market
for the Common Stock."

REGISTRATION RIGHTS

The Company has granted those persons who have received OP Units 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. With respect to the
16,066,459 OP Units issued at the time of the Initial Offering, these
registration rights require the Company to register all such shares of Common
Stock effective as of August 23, 1997. With respect to the 890,869 OP Units
issued in connection with the acquisition of 875 Third Avenue, registration is
required to be effected by February 1999. With respect to OP Units to be
issued in connection with the acquisition of the Mulligan/Griffin Portfolio,
registration is required to be effected by the 375th day after the closing of
that acquisition. 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 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 ADVISED TO CONSULT HIS OR HER OWN TAX ADVISER
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF THE COMMON STOCK AND OF THE COMPANY'S ELECTION TO BE
TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE.

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, 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 Initial Offering, the
Company's election to be taxed as a REIT, and the Offering. 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."

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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 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

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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
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 Initial 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 and
transferred to a charity for resale, with the original stockholder entitled to
receive certain proceeds from such a resale. See "Description of Capital
Stock--Restrictions on Transfers." Excess stock is a separate class of capital
stock of the Company that is entitled to no voting rights but shares ratably
with the Common Stock in dividends and rights upon dissolution. 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)
are 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.

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. 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 year. For purposes
of applying the 30% gross income test, the holding period of Properties
acquired by the Operating Partnership in the Formation Transactions was
deemed to have commenced on the date of acquisition. Recently enacted
legislation repealed the 30% gross income test for tax years beginning
after August 5, 1997.

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 two completed Hotel Properties, ZL
Hotel LLC leases from the Operating Partnership the two Hotel Properties for a
ten year period. The hotel leases provide that ZL Hotel LLC is 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.

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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 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 were 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 leases 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

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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.

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 were to
fail the 30% income test for its taxable year ended December 31, 1997, and in
such case, the Company would cease to qualify as a REIT. The 30% gross income
test has been repealed for taxable years beginning after August 5, 1997. See
"Risk Factors--Failure to Qualify as a REIT."

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

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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.

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 other than such capital
gain net income which the REIT elects to retain and pay tax on 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. Pursuant to recently enacted legislation,
the Company may elect to retain, rather than distribute its net long-term
capital gains for tax years beginning after August 5, 1997. The effect of such
an election is that (i) the Company is required to pay the tax on such gains,
(ii) U.S. Stockholders, while required to include their proportionate share of
the undistributed long-term capital gains in income, will receive a credit or
refund for their share of the tax paid by the REIT and (iii) the basis of U.S.
Stockholder's Common Stock would be increased by the amount of the
undistributed long-term capital gains (minus the amount of capital gains tax
paid by the Company) included in the U.S. Stockholder's long-term capital
gains. 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

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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 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, (c) is an estate or trust, the income of
which is subject to United States federal income taxation regardless of its
source or (d) a trust if a U.S. court is able to exercise primary supervision
over the administration of such trust and one or more U.S. persons have the
authority to control all substantial decisions of such trust. 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

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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 the
taxable year without regard to the period for which the stockholder has held
his stock. Pursuant to recently enacted legislation, in the case of a
stockholder who is an individual, an estate or a trust, long-term capital
gains and losses are separated into three tax rate groups: a 20% group, a 25%
group and a 28% group and subject to tax at the rate effective for each group.
Pursuant to IRS Notice 97-64, 1997-47 IRB 1, the Company will designate
capital gain dividends, if any, as 20% rate gain distributions, 25% rate gain
distributions or 28% rate distributions and detail such designations in a
notice to its stockholders. 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.

IRS Notice 97-64 describes temporary regulations that will be issued in
regard to the proper treatment of capital gain dividends and undistributed
capital gains and gives interim guidance that should be followed in this area
until further notice. To the extent that the Company has net capital gain for
a taxable year, dividends paid during the year (or that are deemed to be paid
in a taxable year beginning after December 31, 1997) may be designated by it
as capital gain dividends. In general, a capital gain dividend is treated by
the shareholders as a gain from the sale or exchange of a capital asset held
for more than one year. If the Company designates a dividend as a capital gain
dividend for a taxable year ending on or after May 7, 1997, it may also
designate the dividend as a 20% rate gain distribution, an unrecaptured
section 1250 gain distribution, or a 28% rate gain distribution. If no
additional designation is made regarding a capital gain dividend, it will be
taxable as a 28% rate gain distribution. If any capital gain dividend is
received on or after May 7, 1997, but is treated as being paid during a
taxable year that ends on or before that date, the dividend will be taxable as
a 28% rate gain distribution. This interim guidance may be changed in the
future. As a result, prospective investors are urged to consult their own tax
advisors with respect to the proper treatment of capital gain dividends and
undistributed capital gains.

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. Net capital gain from the disposition of Common Stock and
capital gain dividends generally will be included in investment income for
purposes of the investment interest deduction limitations only if and to the
extent the stockholder so elects, in which case such capital gains will be
taxed as ordinary 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
capital loss to the extent of any capital gain dividends received by the
selling stockholder from those shares. Due to ambiguities in the Taxpayer
Relief Act of 1997, pending guidance from the IRS, it is not clear whether or
how such capital loss will be separated into the 20% group, the 25% group and
the 28% group.

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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.

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.

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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 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.

On October 6, 1997, the U.S. Treasury Department issued final Treasury
regulations governing information reporting and the certification procedures
regarding withholding and backup withholding on certain amounts paid to Non-
U.S. Stockholders after December 31, 1998. The new Treasury regulations may
alter the procedures for claiming the benefits of an income tax treaty. Non-
U.S. Stockholders should consult their tax advisors concerning the effect, if
any, of such new Treasury regulations on an investment in Common Stock.

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

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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 (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. Currently, the Company intends to elect the "traditional
method with curative allocations" 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 the contribution (the "ceiling
rule") 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

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sale, with a corresponding benefit to the other partners in the Operating
Partnership. If the "traditional method with curative allocations" is elected
by the Company the Operating Partnership Agreement may specially allocate
taxable gain on sale of the Properties to the contributing partners up to the
aggregate amount of depreciation deductions with respect to each such Property
that the "ceiling rule" prevented the Company from being allocated.

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 initially had a tax basis equal to their fair market
value. Thus, Section 704(c) of the Code does 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.

In addition, the Taxpayer Relief Act of 1997 includes several provisions,
some of which have been indicated in the discussion above, that will
liberalize certain of the requirements for qualification as a REIT. However,
these provisions will have neither a material beneficial effect nor a material
adverse effect on the Company's ability to operate as a REIT.

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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 3,000,000 shares to the International Managers (as defined below), the
Company has agreed to sell to each of the U.S. Underwriters, for whom Goldman,
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns
& Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Morgan
Stanley & Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated, Smith Barney Inc. and Chase Securities 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>
Goldman, Sachs & Co. ..........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................................
Bear, Stearns & Co. Inc. ......................................
Donaldson, Lufkin & Jenrette Securities Corporation............
Morgan Stanley & Co. Incorporated .............................
PaineWebber Incorporated ......................................
Prudential Securities Incorporated ............................
Smith Barney Inc. .............................................
Chase Securities Inc. .........................................
----------
Total...................................................... 12,000,000
==========
</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 Goldman Sachs International, Merrill Lynch
International, Bear, Stearns International Limited, Donaldson, Lufkin &
Jenrette International, Morgan Stanley & Co. International Limited,
PaineWebber International (UK) Ltd., Prudential-Bache Securities (U.K.) Inc.,
Smith Barney Inc. and Chase Manhattan International Limited are acting as lead
managers. Subject to the terms and conditions set forth in the International
Purchase Agreement and concurrently with the sale of 12,000,000 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 3,000,000 shares of Common Stock. The 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 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 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 public offering price, less an amount not
greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the International Managers

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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 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 1,800,000
additional shares of Common Stock to cover overallotments, if any, at the
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 450,000 additional shares of Common Stock to cover
overallotments, if any, on terms similar to those granted to the U.S.
Underwriters.

In the Purchase Agreements, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

The Company, the Operating Partnership and certain persons who owned
interests in one or more of the Properties prior to the Initial Offering and
who received OP Units in exchange for such interests in the Formation
Transactions (the "Non-Affiliated Participants") 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 June 1997, without the prior written consent of
Goldman, Sachs & Co. and 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 Securities and Exchange Commission 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
received 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 June 1997, without the
prior written consent of Goldman, Sachs & Co. and 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.

If the Underwriters create a short position in the Common Stock in
connection with this 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.

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 this Offering.

123
<PAGE>

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.

Merrill Lynch, Pierce, Fenner & Smith Incorporated occupies approximately
27,000 square feet at 100 East Pratt Street under a lease with the Company
that expires in 2002. In addition, certain of the Underwriters and their
affiliates engage in general financing and banking transactions with the
Company. The Prudential Insurance Company of America, an affiliate of
Prudential Securities Incorporated, is the lender with respect to the
mortgages on The National Imagery and Mapping Agency Building and The Lockheed
Martin Building. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--Mortgage
Indebtedness." An affiliate of Chase Securities Inc. is a lender under the
Unsecured Line of Credit and will receive a portion of the amounts repaid
under the Unsecured Line of Credit with the proceeds of this Offering. See
"Use of Proceeds."

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 and the
Statements of Revenue over Certain Operating Expenses of 280 Park Avenue, 100
East Pratt Street, 875 Third Avenue, Riverfront Plaza and the Mulligan/
Griffin Portfolio for the year ended December 31, 1996, 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. Gilbert G. Menna, the
sole shareholder of Gilbert G. Menna, P.C., a partner of Goodwin, Procter &
Hoar llp, serves as an Assistant Secretary of the Company. Certain partners of
Goodwin, Procter & Hoar LLP or their affiliates, together with Mr. Menna, own
approximately 20,000 shares of Common Stock. Goodwin, Procter & Hoar llp
occupies approximately 26,000 square feet at 599 Lexington Avenue under a
lease with the Company that expires in 2002.

Certain legal matters will be passed upon for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP.

124
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") 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 Commission. 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 Commission as its principal office at 450 Fifth Street,
Northwest, Washington, D.C. 20549, upon payment of the fees prescribed by the
Commission. The Commission 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 Commission.

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 is 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.

125
<PAGE>

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.

"Annualized Net Effective Rent" is calculated for leases in effect as of
September 30, 1997 as follows: Annualized Rent, calculated as described below
(but by determining monthly rent on a straight line basis in accordance with
GAAP rather than adding back any rent abatement) was reduced to reflect the
annualized costs of tenant improvements and leasing commissions, if any, paid
or payable by the Company (calculated by dividing the total tenant
improvements and leasing commissions for a given lease by the term of that
lease in months and multiplying the result by twelve).

"Annualized Rent" means the monthly contractual rent under existing leases
as of September 30, 1997 multiplied by twelve. This amount reflects total rent
before any rent abatements and includes expense reimbursements, which may be
estimates as of such date.

"Acquisition Properties" means the ten Office Properties subject to purchase
and sale agreements or contribution and exchange agreements which the Company
expects to acquire in January and February 1998.

"Average Effective Annual Rent" means the contractual rent for the month of
December of the applicable year, presented on a straight-line basis in
accordance with GAAP, exclusive of tenant pass-throughs of operating and other
expenses.

"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 were 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.

"Class A Office Buildings" means the 48 Class A office buildings, including
five Class A office buildings currently under development by the Company and
six Class A office buildings expected to be acquired by the Company in January
and February 1998. The Company considers Class A office buildings to be
centrally located buildings that are professionally managed and maintained,
attract high-quality tenants and command upper-tier rental rates, and that are
modern structures or have been modernized to successfully compete with newer
buildings.

"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.

126
<PAGE>

"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 October 1, 1997, 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.

"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 succeeded 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, One and Two
Independence Square, and Capital Gallery, or a successor property acquired in
a "like kind" exchange for such a property.

"Development Properties" means the five Office Properties and one Hotel
Property under development or redevelopment by the Company at December 31,
1997.

"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.

"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.

"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 upon
the completion of the Initial Offering of the Properties from the Property
Partnerships and other entities which owned one or more Properties prior to
the completion of the Initial Offering 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.

"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.

127
<PAGE>

"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 Development Property" means the limited service extended stay hotel
currently under development by the Company.

"Hotel Properties" means the two full service hotels and one limited service
extended stay hotel (which is currently under development) which the Company
owns.

"HVAC" means heating, ventilation and air conditioning.

"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 Goldman Sachs International and
Merrill Lynch International 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.

"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.

"Marriott (R)" means Marriott International, Inc., the manager of the three
Hotel Properties.

"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 four 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, Inc.

"Offering" means the offering of shares of Common Stock of the Company
pursuant to, and as described in, this Prospectus.

"Office Development Properties" means the five office properties currently
under development by the Company.

"Office Properties" means the 48 Class A Office Buildings, including five
Class A Office Buildings currently under development by the Company and six
Class A Office Buildings expected to be acquired in January and February 1998,
and 27 R&D Properties, including four R&D Properties expected to be acquired
in February 1998, in which the Company has an interest.

"OP Units" means limited and general partnership interests in the Operating
Partnership.

128
<PAGE>

"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.

"Personal Property" means the property in which Messrs. Zuckerman and Linde
hold ownership interests but which was not contributed to the Company as part
of the Formation Transactions.

"Plan" means the Boston Properties, Inc. 1997 Stock Option and Incentive
Plan.

"Preferred Stock" means shares of Series E 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 92 commercial real estate properties referred to
herein in which the Company has an interest (including the six Development
Properties and the ten Acquisition Properties).

"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 Office Properties in which the Company has an
interest that support both office, research and development and other
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 Ownership 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 persons to holding no more than
15.0% of the number of outstanding shares of any class or series of capital
stock of the Company.

129
<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.

"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 (excluding food and beverage revenue) over
the applicable period by available rooms (i.e., the sum of the number of rooms
available to be rented at a Hotel Property on each day of 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 and structured parking related to the Office 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.

"Unsecured Line of Credit" means the $300 million unsecured revolving line
of credit with BankBoston, N.A., as agent that expires in June 2000.

"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 Goldman, Sachs & Co. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated 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.

"White Paper" means the White Paper on Funds from Operations approved by the
Board of Governors of NAREIT in March 1995.

130
<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 September 30,
1997................................................................... F-2
Notes to the Pro Forma Condensed Consolidated Balance Sheet............. F-4
Pro Forma Condensed Consolidated Statement of Income for the nine months
ended September 30, 1997 and for the year ended December 31, 1996 ..... F-6
Notes to the Pro Forma Condensed Consolidated Statement of Income....... F-8
Pro Forma Condensed Consolidated Statement of Income for the year ended
December 31, 1996...................................................... F-12
Notes to the Pro Forma Condensed Consolidated Statement of Income....... F-13
Boston Properties, Inc., and Boston Properties Predecessor Group:
Report of Independent Accountants....................................... F-16
Consolidated Balance Sheet as of September 30, 1997 (unaudited) and
Combined Balance Sheets as of December 31, 1996 and 1995 .............. F-17
Consolidated Statement of Operations for the period from June 23, 1997
to September 30, 1997 (unaudited) and Combined Statements of Operations
for the period from January 1, 1997 to June 22, 1997 (unaudited) and
for the nine months ended September 30, 1996 (unaudited) and for the
years ended December 31, 1996, 1995 and 1994 .......................... F-18
Consolidated Statement of Stockholders' Equity for the period from June
23, 1997 to September 30, 1997 (unaudited) and Combined Statements of
Owners' Equity (Deficit) for the period from January 1, 1997 to June
22, 1997 (unaudited) and for the years ended December 31, 1996, 1995
and 1994 .............................................................. F-19
Consolidated Statement of Cash Flows for the period from June 23, 1997
to September 30, 1997 (unaudited) and Combined Statements of Cash Flows
for the periods from January 1, 1997 to June 22, 1997 (unaudited), for
the nine months ended September 30, 1996 (unaudited) and for the years
ended December 31, 1996, 1995 and 1994................................. F-20
Notes to Consolidated and Combined Financial Statements................. F-21
Schedule III: Real Estate and Accumulated Depreciation as of December
31, 1996............................................................... F-30
The following represents the properties acquired or to be acquired by the
Company subsequent to the Initial Offering:
1997 Acquisitions:
280 Park Avenue
Report of Independent Accountants....................................... F-35
Statement of Revenue over Certain Operating Expenses for the year ended
December 31, 1996 and the period from January 1, 1997 to September 11,
1997 (unaudited)....................................................... F-36
Notes to Statement of Revenue over Certain Operating Expenses........... F-37
100 East Pratt Street
Report of Independent Accountants....................................... F-39
Statement of Revenue over Certain Operating Expenses for the year ended
December 31, 1996 and the nine months ended September 30, 1997
(unaudited) ........................................................... F-40
Notes to Statement of Revenue over Certain Operating Expenses........... F-41
875 Third Avenue
Report of Independent Accountants....................................... F-42
Statement of Revenue over Certain Operating Expenses for the year ended
December 31, 1996 and the nine months ended September 30, 1997
(unaudited) ........................................................... F-43
Notes to Statement of Revenue over Certain Operating Expenses........... F-44
Pending Acquisitions:
Riverfront Plaza
Report of Independent Accountants....................................... F-46
Statement of Revenue over Certain Operating Expenses for the year ended
December 31, 1996 and the nine months ended September 30, 1997
(unaudited) ........................................................... F-47
Notes to Statement of Revenue over Certain Operating Expenses........... F-48
Mulligan/Griffin Portfolio
Report of Independent Accountants....................................... F-49
Statement of Revenue over Certain Operating Expenses for the year ended
December 31, 1996 and the nine months ended September 30, 1997
(unaudited)............................................................ F-50
Notes to Statement of Revenue over Certain Operating Expenses .......... F-51
</TABLE>

F-1
<PAGE>

BOSTON PROPERTIES, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 1997
(UNAUDITED)

The following unaudited Pro Forma Condensed Consolidated Balance Sheet of
Boston Properties, Inc. (the "Company") is presented as if the following
transactions had been consummated on September 30, 1997; (i) properties
acquired or to be acquired subsequent to September 30, 1997 (the "1997
Acquired Properties" and "Pending Acquisitions", collectively the "Acquisition
Properties"), and (ii) the completion of this offering (the "Offering"). This
Pro Forma Condensed Consolidated Balance Sheet should be read in conjunction
with the Pro Forma Condensed Consolidated Statement of Income of the Company
for the nine months ended September 30, 1997 and the year ended December 31,
1996 and the historical consolidated and combined financial statements and
notes thereto of the Company and the Boston Properties Predecessor Group (the
"Predecessor Group") included elsewhere in this Prospectus. In management's
opinion, all adjustments necessary to reflect the above transactions have been
made.

The following Pro Forma Condensed Consolidated Balance Sheet is not
necessarily indicative of what the actual financial position would have been
assuming the above transactions had been consummated at September 30, 1997,
nor does it purport to represent the future financial position of the Company.

The Properties

The Company will own a portfolio of 92 commercial real estate properties
(the "Properties") aggregating approximately 18.2 million square feet. The
properties consist of 79 office properties with approximately 13.1 million net
rentable square feet (including five office properties under development
containing approximately 1.1 million net rentable square feet) and
approximately 2.9 million additional square feet of structured parking for
8,119 vehicles, nine industrial properties with approximately 926,000 net
rentable square feet, three hotels with a total of 1,054 rooms (consisting of
approximately 937,000 square feet) (including one hotel currently under
development), and a parking garage with 1,170 spaces (consisting of
approximately 332,000 square feet). In addition, the Company will own, have
under contract or have an option to acquire twelve parcels of land totaling
69.7 acres, which will support approximately 1,549,000 square feet of
development.

The Offering

The Company has filed a registration statement on Form S-11 with the
Securities and Exchange Commission with respect to the Offering of
approximately 15.0 million common shares at an estimated offering price of
$33.1875 (excluding 2.25 million common shares that may be issued upon
exercise of the underwriters' overallotment options).

F-2
<PAGE>

BOSTON PROPERTIES, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
BOSTON -----------------------------------
PROPERTIES, ACQUISITION OFFERING OTHER
INC. PROPERTIES (A) ADJUSTMENTS PRO FORMA
----------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Real estate and
equipment.............. $1,433,376 $779,267(B) -- -- $2,212,643
Less: accumulated
depreciation.......... (285,505) -- -- -- (285,505)
---------- -------- -------- ---------- ----------
Total real estate and
equipment............. 1,147,871 779,267 -- -- 1,927,138
Cash ................... 25,989 (145,435)(C) $471,678 $ (208,500)(C) 143,732
Escrows................. 10,673 2,631 (D) -- -- 13,304
Tenant and other
receivables............ 13,170 227 (E) -- -- 13,397
Accrued rental income... 50,377 -- -- -- 50,377
Deferred charges........ 34,707 -- -- -- 34,707
Prepaid expenses and
other assets........... 8,933 -- -- -- 8,933
Investment in Joint
Venture................ 3,918 -- -- -- 3,918
---------- -------- -------- ---------- ----------
Total assets........... $1,295,638 $636,690 $471,678 $(208,500) $2,195,506
========== ======== ======== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes
payable............... $ 914,614 $420,051(F) -- -- $1,334,665
Unsecured Line of
Credit................ 71,000 137,500(F) -- $(208,500)(F) --
Accounts payable and
accrued expenses...... 16,073 1,123(G) -- -- 17,196
Accrued interest
payable............... 3,639 -- -- -- 3,639
Rent received in
advance, security
deposits and other
liabilities........... 13,663 -- -- -- 13,663
---------- -------- -------- ---------- ----------
Total liabilities...... 1,018,989 558,674 -- (208,500) 1,369,163
---------- -------- -------- ---------- ----------
Minority interest in
Operating Partnership.. 81,168 78,000(B) -- -- 159,168
---------- -------- -------- ---------- ----------
Stockholders' equity:
Preferred stock, $.01
par value, 50,000,000
shares authorized,
none issued or
outstanding........... -- -- -- -- --
Excess stock, $.01 par
value, 150,000,000
shares authorized,
none issued or
outstanding........... -- -- -- -- --
Common stock, $.01 par
value, 250,000,000
shares authorized,
38,693,541 issued and
outstanding
(historical) and
53,694,041 shares
issued and outstanding
(pro forma)........... 387 -- $ 150 -- 537
Additional paid in
capital............... 172,315 16(B) 471,528 -- 643,859
Retained earnings...... 22,779 -- -- -- 22,779
---------- -------- -------- ---------- ----------
Total stockholders'
equity................ 195,481 16 471,678 -- 667,175
---------- -------- -------- ---------- ----------
Total liabilities and
stockholders' equity.. $1,295,638 $636,690 $471,678 $(208,500) $2,195,506
========== ======== ======== ========== ==========
</TABLE>

The accompanying notes are an integral part of the pro forma condensed
consolidated balance sheet.

F-3
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER
30, 1997:

(A) Represents the net proceeds obtained from the issuance of 15.0 million
common shares in the Offering as follows:

<TABLE>
<S> <C>
$497,813
Gross proceeds from the Offering...................................
Underwriters' discount and other offering expenses................. (26,135)
--------
Net cash proceeds.................................................. 471,678
Par value of common shares(/1/).................................... (150)
--------
$471,528
========
</TABLE>
- --------

(/1/Represents)the issuance of 15.0 million ($.01 par value per share) common
shares in the Offering at an assumed offering price of $33.1875 per share.

(B) Represents the purchase price, including closing costs, of the 1997
Acquired Properties and the Pending Acquisitions as follows:

<TABLE>
<CAPTION>
PURCHASE
1997 ACQUIRED PROPERTIES PRICE
------------------------ --------
<S> <C>
100 East Pratt Street (/1/)........................................ $137,516
875 Third Avenue (/2/)............................................. 209,500
<CAPTION>
PENDING ACQUISITIONS
--------------------
<S> <C>
Riverfront Plaza (/3/)............................................. 174,361
Mulligan/Griffin Portfolio (/4/)................................... 257,890
--------
Total Acquisition Properties................................... $779,267
========
</TABLE>

--------
(/1/) The acquisition of 100 East Pratt Street was funded by a draw-down of
$137,500 from the Unsecured Line of Credit and the issuance of 500
shares of common stock (valued at approximately $16, based on a value
of $32.00 per share).
(/2/) The acquisition of 875 Third Avenue was funded by the assumption of a
$180,000 mortgage note, payment of $1,500 in cash and the issuance of
890,869 restricted Operating Partnership Units (the "OP Units"). To the
extent that, for the ten trading days through and including December
31, 1998 the average daily closing price on the New York Stock Exchange
of shares of common stock is less than $31.43 per share (such average,
the "Share Average"), the Operating Partnership shall issue to the
contributor of 875 Third Avenue a number of additional OP Units (the
"Additional OP Units") such that the product of (x) the Share Average,
multiplied by (y) the sum of 890,869 plus the Additional OP Units,
equals $28,000. Consequently, for accounting purposes, the OP Units
were valued at approximately $28,000, based on a value of $31.43 per
unit.
(/3/) The acquisition of Riverfront Plaza will be funded through the payment
of $52,561 in cash and mortgage acquisition financing of $121,800.

(/4/) The acquisition of the Mulligan/Griffin Portfolio will be funded
through the payment of $88,516 in cash, the assumption of the fair
value of mortgage debt in the amount of $118,251, the assumption of
other liabilities in the amount of $1,123 and the issuance of $50,000
in restricted OP Units based on a price per unit of $33.1875. In the
event that the actual Closing Day Value, defined as the average of the
closing price of the Company's common stock on the 20 days immediately
preceeding the closing of the acquisition is less than $30.00 per
share, the number of OP Units to be issued shall be determined as
though the Closing Day Value is $30.00 per share; and in the event that
the actual Closing Day Value exceeds $36.00 per share the number of OP
Units shall be determined as though Closing Day Value is $36.00 per
share. If the Closing Day Value is any amount between $30.00 and
$36.00, inclusive, the number of OP Units to be issued shall be based
on the actual Closing Day Value. The contributors have the right to
elect additional restricted OP units in lieu of cash.

F-4
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(CONTINUED)

(DOLLARS IN THOUSANDS)

<TABLE>
<S> <C>
Net proceeds of the Offering described in Note (A) ............. $ 471,678
Proceeds and working capital used for the Acquisition
Properties..................................................... (145,435)
Paydown of Unsecured Line of Credit with proceeds from the
Offering....................................................... (208,500)
---------
Net increase in cash............................................ $ 117,743
=========

(D) Net increase reflects the following:

Required escrow deposit for the debt assumed on
the acquisition of 875 Third Avenue............................ $ 2,631
=========
</TABLE>

(E) Reflects tenant note receivable to be acquired in connection with the
pending acquisition of Riverfront Plaza.
(F) Represents the debt transactions as follows:

MORTGAGE NOTES PAYABLE
<TABLE>
<S> <C>
Debt assumed in connection with the acquisition of 875 Third
Avenue........................................................... $180,000
Mortgage acquisition financing in connection with the pending
acquisition of Riverfront Plaza.................................. 121,800
Debt assumed in connection with the pending acquisition of the
Mulligan/Griffin Portfolio....................................... 118,251
--------
Net increase in mortgage indebtedness............................. $420,051
========
</TABLE>
UNSECURED LINE OF CREDIT
<TABLE>
<S> <C>
Draw-down from the Unsecured Line of Credit in connection with
the acquisition of 100 East Pratt Street...................... $ 137,500
Paydown of the Unsecured Line of Credit from proceeds of the
Offering, net ................................................ (208,500)
---------
Net decrease in Unsecured Line of Credit....................... $ (71,000)
=========
</TABLE>

(G) Reflects other liabilities to be assumed in connection with the pending
acquisition of the Mulligan/Griffin Portfolio.

F-5
<PAGE>

BOSTON PROPERTIES, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND FOR THE YEAR ENDED DECEMBER
31, 1996
(UNAUDITED)

The following unaudited Pro Forma Condensed Consolidated Statement of Income
for the nine months ended September 30, 1997 and for the year ended December
31, 1996 is presented as if the following transactions had occurred on January
1, 1996; (i) the consummation of the initial public offering (the "Initial
Offering") and related Formation Transactions, and the Offering (ii) the
acquisition of the property acquired concurrent with the Initial Offering (the
"Initial Offering Acquisition Property"), (iii) the acquisition of properties
acquired subsequent to the Initial Offering (the "1997 Acquisitions"), (iv)
the acquisition of the pending acquisitions (the "Pending Acquisitions") and
(v) the closing of the mortgage financing.

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 garage 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.

This Pro Forma Condensed Consolidated Statement of Income should be read in
conjunction with the Pro Forma Condensed Consolidated Balance Sheet of the
Company and the historical consolidated and combined financial statements and
notes thereto of the Company and the Predecessor Company included elsewhere in
the Prospectus.

The unaudited Pro Forma Condensed Consolidated Statement of Income is not
necessarily indicative of what the actual results of operations would have
been for the nine months ended September 30, 1997, or for the year ended
December 31, 1996, had the previously described transactions actually occurred
on January 1, 1996 and the effect thereof carried forward through the nine
month period ended September 30, 1997, nor do they purport to present the
future results of operations of the Company.

F-6
<PAGE>

BOSTON PROPERTIES, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
BOSTON
PROPERTIES
PREDECESSOR
GROUP PRO FORMA ADJUSTMENTS
BOSTON PROPERTIES, INC. JANUARY 1, ---------------------------------------------------------------
JUNE 23, 1997 1997 INITIAL
TO TO OFFERING
SEPTEMBER 30, JUNE 22, FORMATION ACQUISITION 1997 PENDING OTHER
1997 1997 TRANSACTIONS PROPERTY ACQUISITIONS ACQUISITIONS ADJUSTMENTS
----------------------- ----------- ------------ ----------- ------------ ------------ -----------
(A) (B) (C) (C)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent........ $57,892 $80,122 $ 9,396 $1,498 $54,440 $33,223 --
Recoveries from
tenants.......... 6,144 10,283 -- 101 7,639 6,059 --
Parking and
other............ 217 3,397 (1,061) -- 347 382 --
------- ------- -------- ------ ------- ------- --------
Total rental
revenue......... 64,253 93,802 8,335 1,599 62,426 39,664 --
Hotel............ -- 31,185 (31,185) -- -- -- --
Development and
management
services......... 2,221 3,685 (452) -- -- -- --
Interest and
other............ 1,879 1,146 (352) -- -- -- $(1,200) (D)
------- ------- -------- ------ ------- ------- --------
Total revenue... 68,353 129,818 (23,654) 1,599 62,426 39,664 (1,200)
------- ------- -------- ------ ------- ------- --------
Expenses:
Rental:
Operating........ 8,828 13,650 (353) 437 14,580 6,027 --
Real estate
taxes............ 9,065 13,382 1,345 172 13,049 2,427 --
Hotel:
Operating........ -- 20,938 (20,938) -- -- -- --
Real estate tax-
es............... -- 1,514 (1,514) -- -- -- --
General and
administrative... 3,164 5,116 391 -- -- -- 725 (E)
Interest......... 16,091 53,324 (28,151) -- 11,813 6,519 16,839 (F)
Depreciation and
amortization..... 10,113 17,054 124 210(G) 7,646 7,770 --
------- ------- -------- ------ ------- ------- --------
Total expenses.. 47,261 124,978 (49,096) 819 47,088 22,743 17,564
------- ------- -------- ------ ------- ------- --------
Income before
minority interests
.................. 21,092 4,840 25,442 780 15,338 16,921 (18,764)
Minority interest
in property
partnership....... (69) (235) -- -- -- -- --
------- ------- -------- ------ ------- ------- --------
Income before
minority interest
in Operating
Partnership ...... 21,023 4,605 25,442 780 15,338 16,921 (18,764)
Minority interest
in Operating
Partnership....... (6,169) -- -- -- -- -- (10,553)(H)
------- ------- -------- ------ ------- ------- --------
Income before
extraordinary
item.............. $14,854 $ 4,605 $ 25,442 $ 780 $15,338 $16,921 $(29,317)
======= ======= ======== ====== ======= ======= ========
Income before ex-
traordinary item
per common share.. $ .38
=======
Weighted average
number of common
shares outstand-
ing............... 38,694
=======
<CAPTION>
PRO
FORMA
---------
<S> <C>
Revenue:
Rental:
Base rent........ $236,571
Recoveries from
tenants.......... 30,226
Parking and
other............ 3,282
---------
Total rental
revenue......... 270,079
Hotel............ --
Development and
management
services......... 5,454
Interest and
other............ 1,473
---------
Total revenue... 277,006
---------
Expenses:
Rental:
Operating........ 43,169
Real estate
taxes............ 39,440
Hotel:
Operating........ --
Real estate tax-
es............... --
General and
administrative... 9,396
Interest......... 76,435
Depreciation and
amortization..... 42,917
---------
Total expenses.. 211,357
---------
Income before
minority interests
.................. 65,649
Minority interest
in property
partnership....... (304)
---------
Income before
minority interest
in Operating
Partnership ...... 65,345
Minority interest
in Operating
Partnership....... (16,722)
---------
Income before
extraordinary
item.............. $ 48,623
=========
Income before ex-
traordinary item
per common share.. $ .91
=========
Weighted average
number of common
shares outstand-
ing............... 53,694
=========
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated statement of income.

F-7
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

(DOLLARS IN THOUSANDS)

NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997

A. Reflects the pro forma Formation Transactions adjustment summary for the
period from January 1, 1997 to June 22, 1997 (the "Predecessor Period").

<TABLE>
<CAPTION>
RENT HOTEL
HOTELS INTEREST PROPERTY PROPERTY HOTEL REAL GENERAL
PRO FORMA AND PARKING HOTEL MGMT AND OPERATING REAL ESTATE OPERATING ESTATE & INTEREST
ADJUSTMENTS GARAGE INCOME REVENUE FEES OTHER EXPENSES TAXES EXPENSES TAXES ADMIN EXPENSE
- ----------- ------ ------- -------- ----- -------- --------- ----------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(1)Assignment of
contracts..... $(452) $(430)
(2)Equity
investment
income........ $21
(3)Operation of
hotels and
garage........ $(1,061) $(31,185) $(353) $1,345 $(20,938) $(1,514)
(4)Rental of
hotels and
garage........ $9,396
(5)General and
administrative.. 821
(6)Amortization
of deferred
financing
costs......... $ (189)
(7)Release of
restricted
cash.......... (373)
(8)Depreciation
expense.......
(9)Mortgage
interest...... (27,962)
------ ------- -------- ----- ----- ----- ------ -------- ------- ----- --------
Pro Forma
Formation
Transactions
adjustment
summary total... $9,396 $(1,061) $(31,185) $(452) $(352) $(353) $1,345 $(20,938) $(1,514) $ 391 $(28,151)
====== ======= ======== ===== ===== ===== ====== ======== ======= ===== ========
<CAPTION>
PRO FORMA DEPRECIATION
ADJUSTMENTS EXPENSE
- ----------- ------------
<S> <C>
(1)Assignment of
contracts.....
(2)Equity
investment
income........
(3)Operation of
hotels and
garage........
(4)Rental of
hotels and
garage........
(5)General and
administrative..
(6)Amortization
of deferred
financing
costs.........
(7)Release of
restricted
cash..........
(8)Depreciation
expense....... $124
(9)Mortgage
interest......
------------
Pro Forma
Formation
Transactions
adjustment
summary total... $124
============
</TABLE>

(1) In connection with the Formation Transactions, certain third-party
management contracts were assigned to the Development and Management
Company. As a result of the assignment, operating income, expenses and
overhead attributable to the contracts were reflected in the operations
of the Development and Management Company as detailed below:

<TABLE>
<S> <C>
Management services................................................ $ 452
General and administrative expenses................................ (430)
-----
Manager contract income........................................... $ 22
=====
</TABLE>

(2) The Operating Partnership holds a 95% economic interest in the
Development and Management Company and records an equity interest of $21
on the $22 net income.
(3) In connection with the Formation Transactions, the Operating Partnership
entered 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 $821 in general and administrative expenses as a
result of operating as a public company.
(6) Reflects the net increase of $290 in the amortization of deferred
financing costs for the $1,800 fee and related professional costs on the
Unsecured Line of Credit, less a net reduction of $479 in amortization of
deferred financing costs related to debt paid off with the Initial
Offering proceeds.

F-8
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)

(DOLLARS IN THOUSANDS)

(7) 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.
(8) 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.
(9) Reflects the repayment of a portion of the existing mortgage
indebtedness from proceeds of the Initial Offering for the Predecessor
Period:

<TABLE>
<CAPTION>
PRINCIPAL INTEREST
PROPERTIES AMOUNT RATE INTEREST
---------- --------- -------- --------
<S> <C> <C> <C>
599 Lexington Avenue........................... $225,000 7.00% $ 7,547
Two Independence Square........................ 122,505 7.90% 4,637
One Independence Square........................ 78,327 7.90% 2,965
2300 N Street.................................. 66,000 7.00% 2,214
Capital Gallery................................ 60,559 8.24% 2,391
Ten Cambridge Center........................... 25,000 7.57% 907
191 Spring Street.............................. 23,883 8.50% 973
Bedford Business Park.......................... 23,376 8.50% 952
10 & 20 Burlington Mall Road................... 16,621 8.33% 663
Cambridge Center North Garage.................. 15,000 7.57% 544
91 Hartwell Avenue............................. 11,322 8.33% 452
92 & 100 Hayden Avenue......................... 9,057 8.33% 362
Montvale Center................................ 7,969 8.59% 328
Newport Office Park............................ 6,874 8.13% 268
Hilltop Business Center........................ 4,750 7.00% 159
--------
Total......................................... 25,362
Historical interest expense - Predecessor Peri-
od............................................ (53,324)
--------
Pro forma interest expense adjustment for the
Predecessor Period............................ $(27,962)
========
</TABLE>

B. Reflects the results of operations, as adjusted for depreciation, of the
Newport Office Park, acquired concurrent with the Initial Offering, for the
period from January 1, 1997 to June 22, 1997 (the acquisition date).

F-9
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)

(DOLLARS IN THOUSANDS)

C. Reflects the historical results of operations, as adjusted for base rent
and depreciation, for the 1997 Acquisitions and Pending Acquisitions for
the nine months ended September 30, 1997 as follows:

1997 ACQUISITIONS

<TABLE>
<CAPTION>
280 PARK 100 EAST PRATT 875 THIRD
AVENUE(1) STREET AVENUE TOTAL
--------- -------------- --------- -------
<S> <C> <C> <C> <C>
Revenue:
Base rent.......................... $17,012 $10,924 $18,646 $46,582
Adjustment(2)...................... 7,437 397 24 7,858
------- ------- ------- -------
Total base rent.................. 24,449 11,321 18,670 54,440
Recoveries from tenants............ 1,707 2,133 3,799 7,639
Other.............................. 80 267 -- 347
------- ------- ------- -------
Total rental revenue............. 26,236 13,721 22,469 62,426
------- ------- ------- -------
Expenses:
Operating.......................... 7,772 3,453 3,355 14,580
Real estate taxes.................. 6,677 1,541 4,831 13,049
Interest........................... -- -- 11,813 11,813
Depreciation(Note G)............... 3,355 1,934 2,357 7,646
------- ------- ------- -------
Total expenses................... 17,804 6,928 22,356 47,088
------- ------- ------- -------
Net income......................... $ 8,432 $ 6,793 $ 113 $15,338
======= ======= ======= =======
</TABLE>
- --------
(1) Reflects the results of operations for the period from January 1, 1997
through September 11, 1997 (the acquisition date).
(2) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996 and also includes an adjustment for
rental income from Banker's Trust during the period they occupied 280 Park
Avenue as owner/occupant of the building (the rental figure is based upon
the lease entered into by Banker's Trust concurrent with the sale of the
building to the Company on September 11, 1997).

PENDING ACQUISITIONS

<TABLE>
<CAPTION>
RIVERFRONT MULLIGAN/GRIFFIN
PLAZA PORTFOLIO TOTAL
---------- ---------------- -------
<S> <C> <C> <C>
Revenue:
Base rent................................. $13,023 $19,523 $32,546
Adjustment(1)............................. 389 288 677
------- ------- -------
Total base rent......................... 13,412 19,811 33,223
Recoveries from tenants................... 2,017 4,042 6,059
Other..................................... 382 -- 382
------- ------- -------
Total rental revenue.................... 15,811 23,853 39,664
------- ------- -------
Expenses:
Operating................................. 2,761 3,266(2) 6,027
Real estate taxes......................... 1,219 1,208 2,427
Interest.................................. -- 6,519(3) 6,519
Depreciation(Note G)...................... 2,288 5,482 7,770
------- ------- -------
Total expenses.......................... 6,268 16,475 22,743
------- ------- -------
Net income................................ $ 9,543 $ 7,378 $16,921
======= ======= =======
</TABLE>
- --------
(1) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996.
(2) Includes an adjustment of $300 to reflect the Company's estimate of
additional property level operating expenses.
(3) Includes an adjustment of ($1,323) to reflect effective interest on the
fair value of mortgage debt assumed.

F-10
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)

(DOLLARS IN THOUSANDS)

D. Reflects reduction in interest income as a result of cash used for the
acquisition of 280 Park Avenue.

E. Reflects the incremental increase in general and administrative costs
related to the 1997 Acquisitions and Pending Acquisitions.

F. Reflects the net increase in interest as a result of the following debt
transactions:

<TABLE>
<S> <C>
Payoff of the Unsecured Line of Credit with proceeds from the Of-
fering for the period subsequent to the Initial Offering, net of
amounts capitalized............................................. $ (411)
Mortgage acquisition financing of 280 Park Avenue in the original
principal amount of $220 million computed at an interest rate of
7.00% for the period January 1, 1997 to September 11, 1997 (date
of acquisition)................................................. 10,675
Amortization of deferred financing fees for the period from
January 1, 1997 to September 11, 1997 (date of acquisition) as a
result of approximately $1.1 million of fees associated with the
mortgage financing of 280 Park Avenue. The deferred financing
fees are amortized over the five year term of the loan ......... 153
Mortgage acquisition financing of Riverfront Plaza in the
principal amount of $121,800 computed at the 10 year U.S.
Treasury Note rate (5.88% at November 26, 1997) plus 1.15% ..... 6,422
-------
Increase in interest expense for the period subsequent to the
Initial Offering................................................ $16,839
=======
</TABLE>

G. Detail of pro forma depreciation expense is presented below for the Initial
Offering Acquisition Property, the 1997 Acquisitions and the Pending
Acquisitions:

<TABLE>
<CAPTION>
PURCHASE PRO FORMA
PROPERTY(IES) PRICE DEPRECIATION(1)
- ------------- -------- ---------------
<S> <C> <C>
INITIAL OFFERING ACQUISITION PROPERTY
Newport Office Park(2)................................. $ 21,700 $ 210
======
1997 ACQUISITIONS
280 Park Avenue(2)..................................... 322,650 $3,355
100 East Pratt Street.................................. 137,516 1,934
875 Third Avenue....................................... 209,500 2,357
------
$7,646
======
PENDING ACQUISITIONS
Riverfront Plaza....................................... 174,361 $2,288
Mulligan/Griffin Portfolio............................. 257,890 5,482
------
$7,770
======
</TABLE>
- --------
(1) Represents depreciation expense on the properties which has been
calculated over 40 years for the building and over the life of the lease
for tenant improvements.
(2) Reflects pro forma depreciation expense for the periods prior to
acquisition.

H. Adjustment to minority interest to reflect the minority investors interest
in the Operating Partnership following the Offering and issuance of OP Units
and common shares.

F-11
<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
BOSTON -----------------------------------------------------------------------
PROPERTIES INITIAL
PREDECESSOR FORMATION OFFERING 1997 PENDING OTHER PRO
GROUP TRANSACTIONS ACQUISITION PROPERTY ACQUISITIONS ACQUISITIONS ADJUSTMENTS FORMA
----------- ------------ -------------------- ------------ ------------ ----------- --------
(A) (B) (C) (C)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent.............. $169,420 $22,371 $2,908 $66,637 $42,332 -- $303,668
Recoveries from
tenants................ 22,607 -- 180 11,379 8,416 -- 42,582
Parking and other...... 2,979 (2,043) -- 412 436 -- 1,784
-------- ------- ------ ------- ------- -------- --------
Total rental revenue.. 195,006 20,328 3,088 78,428 51,184 -- 348,034
Hotel.................. 65,678 (65,678) -- -- -- -- --
Development and
management services.... 5,719 (936) -- -- -- -- 4,783
Interest and other..... 3,530 (705) -- -- -- -- 2,825
-------- ------- ------ ------- ------- -------- --------
Total revenue......... 269,933 (46,991) 3,088 78,428 51,184 -- 355,642
-------- ------- ------ ------- ------- -------- --------
Expenses:
Rental:
Operating.............. 29,823 (713) 879 18,751 8,523 -- 57,263
Real estate taxes...... 28,372 2,754 347 18,327 3,094 -- 52,894
Hotel:
Operating.............. 43,634 (43,634) -- -- -- -- --
Real estate taxes...... 3,100 (3,100) -- -- -- -- --
General and
administrative......... 10,754 834 -- -- -- $ 950(D) 12,538
Interest............... 109,394 (54,398) -- 15,750 8,721 24,183(E) 103,650
Depreciation and
amortization........... 36,199 257 434(F) 10,561 10,360 -- 57,811
-------- ------- ------ ------- ------- -------- --------
Total expenses........ 261,276 (98,000) 1,660 63,389 30,698 25,133 284,156
-------- ------- ------ ------- ------- -------- --------
Income before minority
interests .............. 8,657 51,009 1,428 15,039 20,486 (25,133) 71,486
Minority interest in
property partnership.... (384) -- -- -- -- -- (384)
-------- ------- ------ ------- ------- -------- --------
Income before minority
interest in Operating
Partnership ............ 8,273 51,009 1,428 15,039 20,486 (25,133) 71,102
Minority interest in
Operating Partnership... -- -- -- -- -- (18,195)(G) (18,195)
-------- ------- ------ ------- ------- -------- --------
Income before
extraordinary item...... $ 8,273 $51,009 $1,428 $15,039 $20,486 $(43,328) $ 52,907
======== ======= ====== ======= ======= ======== ========
Income before
extraordinary item per
common share............ $ .99
========
Weighted average number
of common shares
outstanding............. 53,694
========
</TABLE>

The accompanying notes are an integral part of the pro forma condensed
consolidated statement of income.

F-12
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME

(DOLLARS IN THOUSANDS)

NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR
ENDED DECEMBER 31, 1996

A. Reflects the pro forma Formation Transactions adjustment summary 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 GENERAL & INTEREST
ADJUSTMENTS GARAGE INCOME REVENUE FEES OTHER EXPENSES TAXES EXPENSES TAXES ADMIN EXPENSE
- ----------- ------ ------- -------- ----- -------- --------- ----------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(1) Assignment of
contracts....... $(936) $ (866)
(2)Equity
investment
income.......... $66
(3)Operation of
hotels and
garage.......... $(2,043) $(65,678) $(713) $2,754 $(43,634) $ (3,100)
(4)Rental of hotels
and garage...... $22,371
(5)General and
administrative.. 1,700
(6)Amortization of
deferred
financing
costs........... $ (731)
(7)Release of
restricted
cash............ (771)
(8)Depreciation
expense.........
(9)Mortgage
interest........ (53,667)
------- ------- -------- ----- ----- ----- ------ -------- -------- ------ --------
Pro forma
formation
transactions
adjustment
summary total... $22,371 $(2,043) $(65,678) $(936) $(705) $(713) $2,754 $(43,634) $(3,100) $ 834 $(54,398)
======= ======= ======== ===== ===== ===== ====== ======== ======== ====== ========
<CAPTION>
DEPREC-
PRO FORMA IATION
ADJUSTMENTS EXPENSE
- ----------- -------
<S> <C>
(1) Assignment of
contracts.......
(2)Equity
investment
income..........
(3)Operation of
hotels and
garage..........
(4)Rental of hotels
and garage......
(5)General and
administrative..
(6)Amortization of
deferred
financing
costs...........
(7)Release of
restricted
cash............
(8)Depreciation
expense......... $257
(9)Mortgage
interest........
-------
Pro forma
formation
transactions
adjustment
summary total... $257
=======
</TABLE>
- ----
(1) In connection with the Formation Transactions, certain third-party
management contracts are assigned to the Development and Management
Company. As a result of the assignment, current operating income,
expenses and overhead attributable to the contracts are reflected in the
operations of the Development and Management Company as detailed below:

<TABLE>
<S> <C>
Management services.................................................. $936
General and administrative expenses.................................. (866)
----
Manager contract income............................................. $ 70
====
</TABLE>

(2) The Operating Partnership holds a 95% economic interest in the
Development and Management Company and records an equity interest of $66
on the $70 net income.

(3) In connection with the Formation Transactions, the Operating Partnership
entered into participating leases for the operation of the hotels and
parking garage. As a result of these agreements, revenue and expenses are
not 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 operating as a public company.

(6) 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 net reduction of $1,331 in amortization
of deferred financing costs related to debt paid off with the Initial
Offering proceeds.

(7) 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.

(8) 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.

F-13
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)

(DOLLARS IN THOUSANDS)

(9) Reflects the repayment of a portion of the existing mortgage
indebtedness from proceeds of the Initial Offering and the corresponding
adjustment to interest expense incurred in 1996.

<TABLE>
<CAPTION>
PRINCIPAL INTEREST
PROPERTY(IES) AMOUNT RATE INTEREST
------------- --------- -------- ---------
<S> <C> <C> <C>
599 Lexington Avenue................... $225,000 7.00% $ 15,750(1)
Two Independence Square................ 122,855 7.90% 9,813
One Independence Square................ 78,700 7.90% 6,276
2300 N Street.......................... 66,000 7.00% 4,620(1)
Capital Gallery........................ 60,751 8.24% 5,761
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(1)
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
Newport Office Park.................... 6,874 8.13% 558
Hilltop Business Center................ 4,817 7.00% 318
---------
Pro forma totals....................... 53,454
Historical interest expense for the
year ended December 31, 1996.......... (107,121)
---------
Pro forma interest expense adjustment.. $ (53,667)
=========
</TABLE>
- --------
(1) The interest expense used in this calculation assumes the mortgage
loan was outstanding during all of 1996.

B. Reflects the historical results of operations, as adjusted for
depreciation, for Newport Office Park, acquired concurrent with the Initial
Offering for the year ended December 31, 1996.

C. Reflects the historical results of operations, as adjusted for base rent
and depreciation, for the 1997 Acquisitions and Pending Acquisitions for the
year ended December 31, 1996 as follows:

1997 ACQUISITIONS

<TABLE>
<CAPTION>
280 PARK 100 EAST PRATT 875 THIRD
AVENUE STREET AVENUE TOTAL
-------- -------------- --------- -------
<S> <C> <C> <C> <C>
Revenue:
Base rent........................... $16,786 $14,046 $25,255 $56,087
Adjustment(1)....................... 9,991 528 31 10,550
------- ------- ------- -------
Total base rent................... 26,777 14,574 25,286 66,637
Recoveries from tenants............. 2,600 2,966 5,813 11,379
Other............................... 59 353 -- 412
------- ------- ------- -------
Total rental revenue.............. 29,436 17,893 31,099 78,428
------- ------- ------- -------
Expenses:
Operating........................... 10,169 4,333 4,249 18,751
Real estate taxes................... 9,908 2,054 6,365 18,327
Interest............................ -- -- 15,750 15,750
Depreciation(Note F)................ 4,840 2,578 3,143 10,561
------- ------- ------- -------
Total expenses.................... 24,917 8,965 29,507 63,389
------- ------- ------- -------
Net income.......................... $ 4,519 $ 8,928 $ 1,592 $15,039
======= ======= ======= =======
</TABLE>
- --------
(1) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996 and also includes an adjustment for
rental income from Banker's Trust during the period they occupied 280 Park
Avenue as owner/occupant of the building (the rental figure is based upon
the lease entered into by Banker's Trust concurrent with the sale of the
building to the Company on September 11, 1997).

F-14
<PAGE>

BOSTON PROPERTIES, INC.

NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)

(DOLLARS IN THOUSANDS)

PENDING ACQUISITIONS
<TABLE>
<CAPTION>
RIVERFRONT MULLIGAN/GRIFFIN
PLAZA PORTFOLIO TOTAL
---------- ---------------- -------
<S> <C> <C> <C>
Revenue:
Base rent................................. $15,898 $25,548 $41,446
Adjustment(1)............................. 522 364 886
------- ------- -------
Total base rent......................... 16,420 25,912 42,332
Recoveries from tenants................... 2,976 5,440 8,416
Other..................................... 436 -- 436
------- ------- -------
Total rental revenue.................... 19,832 31,352 51,184
------- ------- -------
Expenses:
Operating................................. 3,865 4,658(2) 8,523
Real estate taxes......................... 1,638 1,456 3,094
Interest.................................. -- 8,721(3) 8,721
Depreciation(Note F)...................... 3,051 7,309 10,360
------- ------- -------
Total expenses.......................... 8,554 22,144 30,698
------- ------- -------
Net income................................ $11,278 $ 9,208 $20,486
======= ======= =======
</TABLE>
- --------
(1) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996.
(2) Includes an adjustment of $400 to reflect the Company's estimate of
additional property level operating expenses.
(3) Includes an adjustment of ($2,634) to reflect effective interest on the
fair value of the mortgage debt assumed.

D. Reflects the incremental increase in general and administrative costs
related to the 1997 Acquisitions and Pending Acquisitions.

E. Reflects the net increase in interest expense as a result of the following
debt transactions:

<TABLE>
<S> <C>
Acquisition mortgage financing of 280 Park Avenue in the original
principal amount of $220 million computed at an interest rate of
7.00% for the year ended December 31, 1996.......................... $15,400
Amortization of deferred financing fees as a result of approximately
$1.1 million of fees associated with the mortgage financing of 280
Park Avenue. The deferred financing fees are amortized over the five
year term of the loan .............................................. 220
Mortgage acquisition financing of Riverfront Plaza in the principal
amount of $121,800 computed at the 10 year U.S. Treasury Note rate
(5.88% at November 26, 1997) plus 1.15% ............................ 8,563
-------
Increase in interest expense......................................... $24,183
=======
</TABLE>
F. Detail of pro forma depreciation expense is presented below for the Initial
Offering Acquisition Property, the 1997 Acquisitions and the Pending
Acquisitions:

<TABLE>
<CAPTION>
PURCHASE PRO FORMA
PROPERTY(IES) PRICE DEPRECIATION(1)
- ------------- -------- ---------------
<S> <C> <C>
INITIAL OFFERING ACQUISITION PROPERTY
Newport Office Park.................................... $ 21,700 $ 434
=======
1997 ACQUISITIONS
280 Park Avenue........................................ 322,650 $ 4,840
100 East Pratt Street.................................. 137,516 2,578
875 Third Avenue....................................... 209,500 3,143
-------
$10,561
=======
PENDING ACQUISITIONS
Riverfront Plaza....................................... 174,361 $ 3,051
Mulligan/Griffin Portfolio............................. 257,890 7,309
-------
$10,360
=======
</TABLE>
- --------
(1) Represents depreciation expense on the properties which has been
calculated over 40 years for the building and over the life of the lease
for tenant improvements.

G. Adjustment to minority interest to reflect the minority investors interest
in the Operating Partnership following the Offering and issuance of OP Units
and common shares.

F-15
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners and Owners of 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-16
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

CONSOLIDATED AND COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THE PREDECESSOR GROUP
THE COMPANY DECEMBER 31,
SEPTEMBER 30, ----------------------
1997 1996 1995
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate and equipment:
Land and land improvements............. $ 298,818 $ 169,424 $ 169,721
Buildings and improvements............. 937,717 702,720 698,053
Tenant improvements.................... 116,255 107,808 101,701
Furniture, fixtures and equipment...... 32,633 34,034 32,831
Development and construction in proc-
ess................................... 47,953 21,585 10,018
---------- ---------- ----------
1,433,376 1,035,571 1,012,324
Less: accumulated depreciation......... (285,505) (263,911) (238,514)
---------- ---------- ----------
Total real estate and equipment...... 1,147,871 771,660 773,810
Cash and cash equivalents................ 25,989 8,998 25,867
Escrows.................................. 10,673 25,474 27,716
Tenant and other receivables............. 13,170 12,049 14,362
Accrued rental income.................... 50,377 49,206 49,681
Deferred costs net of accumulated amorti-
zation of $38,504, $52,627 and $46,819
at September 30, 1997, and December 31,
1996 and 1995, respectively............. 34,707 24,722 22,829
Prepaid expenses and other assets........ 8,933 4,402 8,521
Investment in Joint Venture.............. 3,918 -- --
---------- ---------- ----------
Total assets......................... $1,295,638 $ 896,511 $ 922,786
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' AND OWNERS'
EQUITY (DEFICIT)
Liabilities:
Mortgage notes payable................. $914,614 $1,420,359 $1,396,141
Unsecured line of credit............... 71,000 -- --
Notes payable--affiliates.............. -- 22,117 5,267
Accounts payable and accrued expenses.. 16,073 13,795 14,367
Accrued interest payable............... 3,639 9,667 9,088
Rents received in advance, security de-
posits and other liabilities.......... 13,663 7,205 4,576
---------- ---------- ----------
Total liabilities.................... 1,018,989 1,473,143 1,429,439
---------- ---------- ----------
Commitments and contingencies............ -- -- --
---------- ---------- ----------
Minority interest in Operating Partner-
ship.................................... 81,168 -- --
---------- ---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value,
50,000,000 shares authorized, none is-
sued or outstanding................... -- -- --
Excess Stock, $01 par value,
150,000,000 shares authorized, none
issued or outstanding................. -- -- --
Common stock, $.01 par value,
250,000,000 shares authorized,
38,693,541 issued and outstanding..... 387 -- --
Additional paid in capital............. 172,315 -- --
Retained earnings...................... 22,779 -- --
Owners' deficit.......................... -- (576,632) (506,653)
---------- ---------- ----------
Total stockholders' and owners' equity
(deficit)............................ 195,481 (576,632) (506,653)
---------- ---------- ----------
Total liabilities and stockholders'
and owners' equity (deficit)........ $1,295,638 $ 896,511 $ 922,786
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated and combined
financial statements.

F-17
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR GROUP
------------------ ---------------------------------------------------------------
JUNE 23, 1997 JANUARY 1, 1997 NINE MONTHS YEARS ENDED DECEMBER 31,
TO TO ENDED ----------------------------
SEPTEMBER 30, 1997 JUNE 22, 1997 SEPTEMBER 30, 1996 1996 1995 1994
------------------ --------------- ------------------ -------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent........... $57,892 $ 80,122 $127,727 $169,420 $155,614 $153,101
Recoveries from
tenants............ 6,144 10,283 17,401 22,607 21,124 21,710
Parking and other... 217 3,397 2,263 2,979 2,527 1,914
------- -------- -------- -------- -------- --------
Total rental
revenue.......... 64,253 93,802 147,391 195,006 179,265 176,725
Hotel................. -- 31,185 47,458 65,678 61,320 58,436
Development and
management services.. 2,221 3,685 4,880 5,719 4,444 6,090
Interest and other.... 1,879 1,146 2,590 3,530 3,696 2,832
------- -------- -------- -------- -------- --------
Total revenue..... 68,353 129,818 202,319 269,933 248,725 244,083
------- -------- -------- -------- -------- --------
Expenses:
Rental:
Operating........... 8,828 13,650 22,332 29,823 27,142 25,061
Real estate taxes... 9,065 13,382 21,396 28,372 28,279 28,178
Hotel:
Operating........... -- 20,938 30,590 43,634 41,501 40,276
Real estate taxes... -- 1,514 1,769 3,100 2,517 2,477
General and
administrative....... 3,164 5,116 8,149 10,754 10,372 10,123
Interest.............. 16,091 53,324 82,627 109,394 108,793 97,273
Depreciation and
amortization......... 10,113 17,054 27,008 36,199 33,828 33,112
------- -------- -------- -------- -------- --------
Total expenses..... 47,261 124,978 193,871 261,276 252,432 236,500
------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary items and
minority interests..... 21,092 4,840 8,448 8,657 (3,707) 7,583
Minority interest in
combined partnership... (69) (235) (288) (384) (276) (412)
------- -------- -------- -------- -------- --------
Income (loss) before
minority interest in
Operating Partnership
and extraordinary
items.................. 21,023 4,605 8,160 8,273 (3,983) 7,171
Minority interest in
Operating Partnership.. (6,169) -- -- -- -- --
------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary items.... 14,854 4,605 8,160 8,273 (3,983) 7,171
Net extraordinary items
on early
extinguishments, net of
minority interest...... 7,925 -- -- (994) -- --
------- -------- -------- -------- -------- --------
Net income (loss)....... $22,779 $ 4,605 $ 8,160 $ 7,279 $ (3,983) $ 7,171
======= ======== ======== ======== ======== ========
Net income per share.... $ .59
=======
Shares outstanding...... 38,694
=======
</TABLE>

The accompanying notes are an integral part of these consolidated and combined
financial statements.

F-18
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' AND OWNERS' EQUITY
(DEFICIT)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PREDECESSOR
ADDITIONAL GROUP
COMMON PAID-IN EQUITY
STOCK SHARES PAR VALUE CAPITAL (DEFICIT) TOTAL
------------ --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1,
1994................... $(495,104) $ (495,104)
Contributions......... 24,323 24,323
Net income............ 7,171 7,171
Distributions......... (38,620) (38,620)
--------- ----------
Balance, December 31,
1994................... (502,230) (502,230)
Contributions......... 44,661 44,661
Net loss.............. (3,983) (3,983)
Distributions......... (45,101) (45,101)
--------- ----------
Balance, December 31,
1995................... (506,653) (506,653)
Contributions......... 33,279 33,279
Net income............ 7,279 7,279
Distributions and
conversion of equity
to note payable-
affiliate............ (110,537) (110,537)
--------- ----------
Balance, December 31,
1996................... (576,632) (576,632)
Contributions
(unaudited).......... 9,330 9,330
Net income for the
period January 1,
1997 through June 22,
1997 (unaudited)..... 4,605 4,605
Distributions
(unaudited).......... (32,125) (32,125)
--------- ----------
Balance contributed at
June 22, 1997.......... $(594,822) $ (594,822)
Reclassification
adjustments............ $(594,822) 594,822 --
Sale of Common Stock net
of Offering costs...... 38,694 $387 838,822 -- 839,209
Allocation of minority
interest in Operating
Partnership............ -- -- (71,685) -- (71,685)
Net income, June 23,
1997 to
September 30, 1997
(unaudited)............ -- -- -- 22,779 22,779
------ ---- --------- --------- ----------
Stockholders' Equity,
September 30, 1997.... 38,694 $387 $ 172,315 $ 22,779 $ 195,481
====== ==== ========= ========= ==========
</TABLE>

The accompanying notes are an integral part of these consolidated and combined
financial statements.

F-19
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR GROUP
------------- -------------------------------------------------------
JUNE 23, JANUARY 1, NINE MONTHS
1997 TO 1997 TO ENDED YEARS ENDED DECEMBER 31,
SEPTEMBER 30, JUNE 22, SEPTEMBER 30, -----------------------------
1997 1997 1996 1996 1995 1994
------------- ----------- ------------- --------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)...... $ 22,779 $ 4,605 $ 8,160 $ 7,279 $ (3,983) $ 7,171
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Depreciation and
amortization.......... 10,113 17,054 27,008 36,199 33,828 33,112
Minority interest in
Operating
Partnership........... 9,463 -- -- -- -- --
Effective interest
adjustment............ 173 1,497 483 644 1,347 3,131
Extraordinary gain on
early debt
extinguishment........ (11,216) -- -- -- -- --
Change in operating
assets/liabilities:
Tenant receivables..... 5,993 (7,114) (2,856) 2,313 (1,049) 270
Escrows................ -- -- -- (1,033) 692 21
Prepaid expenses and
other assets.......... (3,038) (1,494) 759 2,777 (360) 1,550
Accounts payable and
accrued expenses...... (2,138) 5,220 (2,007) (1,673) (2,219) 267
Accrued interest
payable............... (8,049) 2,021 (3,335) 579 1,667 (62)
Accrued rental income.. (881) (291) 955 475 (360) 1,252
Rent received in
advance, security
deposits and other
liabilities........... 2,731 3,728 1,942 3,971 (471) (1,088)
--------- -------- -------- --------- -------- --------
Cash flows provided by
operating activities.. 25,930 25,226 31,109 51,531 29,092 45,624
--------- -------- -------- --------- -------- --------
Cash flows from
investing activities:
Acquisition of or
additions to real
estate and equipment.. (366,054) (27,721) (14,606) (30,238) (33,960) (11,878)
Tenant leasing costs... 95 (2,550) 599 (4,077) (3,191) (1,554)
Escrows................ -- -- (28,945) 9,525 307 (4,992)
Change in accounts
payable............... -- -- -- 1,101 -- --
Investment in Joint
Venture............... (1,345) (2,573) -- -- -- --
Cash from contributed
asset................. 10,510 -- -- -- -- --
--------- -------- -------- --------- -------- --------
Cash flows used in
investing activities.. (356,794) (32,844) (42,952) (23,689) (36,844) (18,424)
--------- -------- -------- --------- -------- --------
Cash flows from
financing activities:
Net proceeds from sale
of common stock....... 839,209 -- -- -- -- --
Owners' contributions.. -- 9,330 5,317 33,279 44,661 24,323
Owners' distributions.. -- (32,125) -- (105,619) (45,101) (38,620)
Borrowings on unsecured
line of credit........ 71,000 -- -- -- -- --
Proceeds from mortgage
notes payable......... 220,000 -- -- 117,269 1,200 --
Proceeds (payments)
from notes payable--
affiliate............. (38,833) 16,716 169 11,933 171 (236)
Repayment of mortgage
notes payable......... (708,090) (3,799) (1,464) (93,695) (14,641) (16,445)
Accounts receivable--
affiliate............. -- (804) -- -- -- --
Accounts payable--
affiliate............. (19,983) 19,983 -- -- -- --
Escrows................ 14,934 (136) -- (6,250) -- --
Deferred financing
costs................. (12,872) (35) (5,577) (1,628) 1,040 (630)
Costs related to debt
extinguishment........ (8,512) -- -- -- -- --
--------- -------- -------- --------- -------- --------
Cash flows provided by
(used in) financing
activities............ 356,853 9,130 (1,555) (44,711) (12,670) (31,608)
--------- -------- -------- --------- -------- --------
Net increase (decrease)
in cash and cash
equivalents............ 25,989 1,512 (13,398) (16,869) (20,422) (4,408)
Cash and cash
equivalents, beginning
of period.............. -- 8,998 25,867 25,867 46,289 50,697
--------- -------- -------- --------- -------- --------
Cash and cash
equivalents, end of
period................. $ 25,989 $ 10,510 $ 12,469 $ 8,998 $ 25,867 $ 46,289
========= ======== ======== ========= ======== ========
Supplemental cash flow
information:
Cash paid for
interest.............. $ 26,032 $ 50,917 $ 80,775 $ 107,700 $108,618 $ 95,269
========= ======== ======== ========= ======== ========
Interest capitalized... $ 683 $ 1,111 $ 275 $ 366 $ 1,543 $ --
========= ======== ======== ========= ======== ========
Supplemental disclosure
of noncash
transactions:
Conversion of owners'
equity to notes
payable--affiliate.... -- -- -- $ 4,918 $ -- $ --
========= ======== ======== ========= ======== ========
Net liabilities assumed
in connection with the
contribution of prop-
erties................ $ 594,822 -- -- -- -- --
========= ======== ======== ========= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated and combined
financial statements.

F-20
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

1. ORGANIZATION AND BASIS OF PRESENTATION:

Organization

Boston Properties, Inc. (The "Company") a Delaware corporation, was formed
to succeed (i) the real estate development, redevelopment, ownership,
acquisition, management, operating and leasing business associated with Boston
Properties, Inc., a Massachusetts corporation founded in 1970, and (ii)
various property partnerships under common control with the predecessor
company (collectively, the "Boston Properties Predecessor Group" or the
"Predecessor"). The Company intends to qualify as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended.

On June 23, 1997, the Company commenced operations after completing an
initial public offering of 36,110,000 common shares (including 4,710,000
shares issued as a result of the exercise of an over-allotment option by the
underwriters) (the "Initial Offering"). The 36,110,000 shares of common stock
were issued at a price per share of $25.00, generating gross proceeds of
$902,750. The proceeds to the Company, net of underwriters' discount and
offering costs were approximately $839,209.

The following transactions occurred simultaneously with the completion of
the Initial Offering (collectively, the "Formation Transactions").

. The Company became the sole general partner of Boston Properties Limited
Partnership (the "Operating Partnership"). Upon completion of the Initial
Offering, the Company contributed substantially all of the net proceeds of
the offering in exchange for an approximate 70.66% interest in the
Operating Partnership.

. The Operating Partnership exercised various option and purchase agreements
whereby it issued units in the Operating Partnership ("Units") representing
an approximate 29.34% limited partnership interest, to the continuing
investors in exchange for interests in certain properties.

. The Company contributed substantially all of its Greater Washington, DC
third-party management business to Boston Properties Management, Inc. (the
"Development and Management Company"), a subsidiary of the Operating
Partnership.

. The Operating Partnership entered into a participating lease with ZL Hotel
LLC. Marriott International, Inc. manages the Company's two hotel
properties under the Marriott(R) name. Messrs. Zuckerman and Linde are the
sole member-managers of the ZL Hotel LLC and own a 9.8% economic interest
in ZL Hotel LLC. ZL Hotel Corp. owns the remaining 90.2% economic interest
in ZL Hotel LLC. Certain public charities own all the capital stock of ZL
Hotel Corp.

. The Company, through the Operating Partnership, entered into a $300 million
unsecured credit facility with BankBoston, N.A., as agent (the "Unsecured
Line of Credit"). The Unsecured Line of Credit is a recourse obligation of
the Operating Partnership and is guaranteed by the Company. The Company has
used the Unsecured Line of Credit principally to fund growth opportunities
and for working capital purposes. The Company's ability to borrow under the
Unsecured Line of Credit is subject to the Company's ongoing compliance
with a number of financial and other covenants.

. The Operating Partnership utilized $696,236 of the proceeds of the
Offering, together with $54,000 under the Unsecured Line of Credit, to
repay $707,071 of mortgage indebtedness ($47,780 of which was paid on July
1, 1997), $28,843 of indebtedness due to Messrs. Zuckerman and Linde
related to development of properties in process and $14,322 to fund the
acquisition of an approximate 170,000 square foot office building located
in Quincy, Massachusetts.

. Messrs. Zuckerman and Linde received an aggregate of 2,583,541 shares.

F-21
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Basis of Presentation

The accompanying consolidated financial statements of Boston Properties,
Inc. include all accounts of the Company and its subsidiaries, including the
Operating Partnership as of September 30, 1997 (unaudited) and for the period
June 23, 1997 to September 30, 1997 (unaudited). All significant intercompany
amounts have been eliminated.

The accompanying combined financial statements of the Boston Properties
Predecessor Group comprise interests in properties and the third party
commercial real estate development, project management and property management
business of Boston Properties, Inc. as of September 30, 1996 and for the
period from January 1, 1997 to June 22, 1997 and years ended December 31,
1996, 1995 and 1994. All significant intercompany amounts have been
eliminated.

The business combination was structured as an exchange of properties or
partnership interests by the Boston Properties Predecessor Group for limited
partnership interests in the Operating Partnership, which holds the operating
assets of the Company. The Company is the general and majority partner of the
Operating Partnership. The Operating Partner holds all of the assets of the
Predecessor entities as a result of the business combination. Due to the
affiliation of the Predecessor, the business combination was 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 consolidated
presentation.

Properties

December 31, 1996

The interests in properties at December 31, 1996 included in the
accompanying consolidated financial statements consist of 72 commercial real
estate properties (the "Properties") aggregating approximately 10.4 million
square feet. 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 122,000 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 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 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.

Property Acquisitions

On June 25, 1997, the Company acquired Newport Office Park, for $21.7
million. The property is an approximately 170,000 square foot office building
located in Quincy, Massachusetts.

On September 11, 1997, the Company acquired 280 Park Avenue, a Class A
Office Building located in midtown Manhattan. The 1.2 million square foot
property was acquired for approximately $322.6 million. The acquisition was
funded by a $220 million loan from Chase Manhattan Bank and $102.6 million of
cash.

F-22
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. REAL ESTATE AND EQUIPMENT

Real estate and equipment are stated at depreciated cost. Pursuant to
Statement of Financial Accounting Standards Opinion No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of", impairment losses are recorded on long-lived assets used in operation,
when events and circumstances indicate that the assets might be impaired and
the estimated undiscounted cash flows to be generated by those assets are less
than the carrying amount of those assets. Upon determination that an
impairment has occurred, those assets shall be reduced to fair value. 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 $375 and $417 for the period from January
1, 1997 to June 22, 1997 and the period from June 23, 1997 to September 30,
1997, collectively the period (the "Nine Months Ended") and the nine months
ended September 30, 1996, respectively, and $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 Company's and the Predecessor's cash and cash equivalents are held at
major commercial banks. There have been no experienced losses to date on any
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
increased revenues by $1,171 and decreased revenues by $955 for the nine
months ended September 30, 1997 and 1996, respectively, and 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.

F-23
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

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. OFFERING COSTS

Underwriting commissions and offering costs incurred in connection with the
Initial Offering have been reflected as a reduction of additional paid in
capital.

F. INCOME TAXES

Prior to June 23, 1997, all of the Properties were owned by partnerships,
trusts and an S-corporation, none of which are 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 Company's consolidated financial statements
and 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.

The ongoing operations of these Properties generally will not be subject to
Federal income taxes as long as the Company qualifies as a real estate
investment trust ("REIT"). A REIT will generally not be subject to Federal
income taxation on that portion of its income that qualifies as REIT taxable
income to the extent that it distributes such taxable income to it's
stockholders and complies with certain requirements (including distribution of
at least 95% of its taxable income). As a REIT, the Company is allowed to
reduce taxable income by all or a portion of its distributions to
stockholders. As distributions have exceeded taxable income, no Federal income
tax provision (benefit) has been reflected in the accompanying consolidated
Financial Statements. State income taxes are not significant.

G. EARNINGS PER SHARE

Earnings per share is calculated based on the weighted average number of
common shares outstanding. The assumed exercise of outstanding stock options,
using the treasury stock method, is immaterial, and therefore such amounts are
not presented.

H. DEFERRED COSTS

Deferred costs include tenant leasing costs and deferred financing fees.

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.

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.

I. INVESTMENT IN JOINT VENTURE

The investment in joint venture represents a 25% interest in an entity which
will own two office buildings in Reston, VA for which the Company serves as
development manager. Such investment is accounted for under the equity method.

J. 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.

F-24
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

K. 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.

L. 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.

M. UNAUDITED INTERIM STATEMENTS

The combined consolidated financial statements as of September 30, 1997 and
for the nine months ended September 30, 1997 and 1996 and accompanying
footnotes are unaudited. In the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of such combined financial statements have been included. The
results of operations for the periods described above are not necessarily
indicative of the Company's future results of operations for the full year
ending December 31, 1997.

N. RECLASSIFICATIONS

Certain amounts have been reclassified in the 1996, 1995 and 1994 financial
statements in order to conform with the current presentation.

3. MORTGAGE NOTES PAYABLE:

Mortgage notes payable are comprised of 16, 44 and 44 loans at September 30,
1997, December 31, 1996 and 1995, respectively, 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 $689,947, $1,013,361 and $929,226 at
September 30, 1997, December 31, 1996 and 1995, respectively, range from 7.35%
to 9.875% (averaging 7.37% and 8.18% at September 30, 1997, and December 31,
1996, respectively). Interest rates on variable rate mortgage notes payable
aggregating $295,667, $385,985 and $446,546 at September 30, 1997, December
31, 1996 and 1995, respectively, range from 0.7% above the London Interbank
Offered Rate ("LIBOR"), 5.6% at September 30, 1997 and December 31, 1996 to
1.75% above the LIBOR rate.

The interest rates related to the mortgage notes payable for two properties
aggregating $199,313 at September 30, 1997 and for three properties
aggregating, $610,782 and $612,657 at December 31, 1996 and 1995, respectively
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 $132 and $161 for the
nine months ended September 30, 1997 and 1996, respectively, and $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 $782, $21,013 and
$20,369 at September 30, 1997, 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:

<TABLE>
<CAPTION>
DECEMBER 31
-----------
<S> <C>
1997............................................................. $334,784
1998............................................................. 219,748
1999............................................................. 11,315
2000............................................................. 48,040
2001............................................................. 153,148
</TABLE>

F-25
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Certain mortgage indebtedness aggregating $707,071 was repaid in conjunction
with the Initial Offering of which $659,291 and $47,780 was repaid at June 23,
1997 and July 1, 1997, respectively. The repayments, along with (i) the
payment of certain related prepayment penalties, (ii) the write-off of the
related previously capitalized deferred financing costs, and (iii) the
extinguishment of the excess of the mortgage note payable balance over the
principal payment required for the 599 Lexington Avenue property (which was a
result of the application of the effective interest method to this increasing
rate loan), generated a net gain of $7,925 (net of minority interest share of
$3,291), which has been reflected as an extraordinary gain to the Company in
the period from June 23, 1997 to September 30, 1997.

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 tenant represented 12%, 15%, 15%, 17% and 16% of the Predecessor's total
rental income for the nine months ended September 30, 1997 and 1996 and for
the years ended December 31, 1996, 1995, and 1994, respectively.

5. MINORITY INTEREST:

Minority interest in the Operating Partnership relates to the interest in
the Operating Partnership that is not owned by the Company.

In conjunction with the formation of the Company, persons contributing
interests in properties to the Operating Partnership received Units. Beginning
fourteen months after the completion of the offering, the Operating
Partnership will, at the request of any Unitholder, be obligated to redeem
each Unit held by such Unitholder for, at the option of the Operating
Partnership, (i) cash equal to the fair market value of one share of the
Company's common stock at the time of redemption, or (ii) one share of the
Company's common stock. Such redemptions will cause the Company's percentage
ownership in the Operating Partnership to increase.

6. RELATED PARTY TRANSACTIONS:

Notes payable--affiliates 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 $7,949, $7,773, $10,455, $10,522 and $10,518 has been
received from affiliates for the nine months ended September 30, 1997 and
1996, and for the years ended December 31, 1996, 1995 and 1994, respectively.

F-26
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

Development fees of $0, $25, $25, $125, and $478, have been received from
affiliates for the nine months ended September 30, 1997 and 1996, and for the
years ended December 31, 1996, 1995, and 1994, respectively.

Management fees and other income of $268, $314, $419, $554, and $544, have
been received from affiliates for the nine months ended September 30, 1997 and
1996, and for the years ended December 31, 1996, 1995, and 1994, respectively.

7. 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 cost to the
Predecessor of this matching for the nine months ended September 30, 1997 and
1996, and for the years ended December 31, 1996, 1995 and 1994, was $312,
$285, $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.

8. STOCK OPTION AND INCENTIVE PLAN:

The Company has established a stock option and incentive plan for the
purpose of attracting and retaining qualified executives and rewarding them
for superior performance in achieving the Company's business goals and
enhancing stockholder value. In conjunction with the Offering, the Company
granted options with respect to 2,290,000 common shares to directors, officers
and employees. All of such options were issued at an exercise price of $25.00.
The term of each of such options is 10 years from the date of grant. In
general, one-third of each of the options granted to officers and Mr.
Zuckerman are exercisable on each of the third, fourth, and fifth 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 first, second and third anniversary of the date of
grant, respectively. Other than the options granted to Mr. Zuckerman, one-half
of the options granted to non-employee directors will be exercisable on each
of the first and second anniversary of the date of grant, respectively.

As of September 30, 1997, the Company had granted options with respect to
2,290,000 common shares and an additional 2,464,750 common shares were
reserved for issuance under the Company's stock option and incentive plan.

9. 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.

F-27
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)

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 investigation has identified the presence of hazardous
substances in a catch basin along the property line. It is expected that the
tenant will take any necessary response actions. 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 $155 million at September 30, 1997.

The Predecessor has future development rights related to the purchase,
construction, and completion of approximately 1.6 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

For the years ended December 31, 1996, 1995 and 1994, the hotels were
managed pursuant to contracts which expired in 2012 with a national hotel
management company. These agreements included base and incentive fee
provisions. The fees under these agreements aggregated $4,974, $4,410 and
$4,001, respectively.

10. NEWLY ISSUED ACCOUNTING STANDARDS:

Financial Accounting Standards Board Statement No. 128 ("FAS 128") "Earnings
Per Share" is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. The Company intends to
adopt the requirements of this pronouncement in its financial statements for
the year ending December 31, 1997. FAS 128 specified the computation,
presentation and disclosure requirements for net income per share. FAS 128
also requires the presentation of diluted net income per share which the
Company was not previously required to present under generally accepted
accounting principles.

Financial Accounting Standards Board Statement No. 129 ("FAS 129")
"Disclosure of Information about Capital Structure" is effective for financial
statements issued for periods ending after December 31, 1997. FAS 129
establishes standards for disclosure of information about securities,
liquidation preference of preferred stock and redeemable stock.

Financial Accounting Standards Board Statement No. 130 ("FAS 130")
"Reporting Comprehensive Income" is effective for fiscal years beginning after
December 15, 1997, although earlier application is permitted. The Company
intends to adopt the requirements of this pronouncement in its financial
statements for the year ending December 31, 1998. FAS 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. FAS 130 requires that
all components of comprehensive income shall be reported in the financial
statements in the period in which they are recognized. Furthermore, a total
amount for comprehensive income shall be displayed in the financial statement
where the components of other comprehensive income are reported. The Company
was not previously required to present comprehensive income or the components
thereof in its financial statements under generally accepted accounting
principles.

F-28
<PAGE>

BOSTON PROPERTIES, INC.
AND
BOSTON PROPERTIES PREDECESSOR GROUP

NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Financial Accounting Standards Board Statement No. 131 ("FAS 131")
"Disclosures about Segments of an Enterprise and Related Information" is
effective for financial statements issued for periods beginning after December
15, 1997. FAS 131 requires disclosures about segments of an enterprise and
related information regarding the different types of business activities in
which an enterprise engages and the different economic environments in which
it operates.

The Company does not believe that the implementation of FAS 128, FAS 129,
FAS 130 or FAS 131 will have a material impact on its financial statements.

11. 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.

12. SUBSEQUENT EVENTS:

On October 23, 1997, the Company acquired 100 East Pratt Street in
Baltimore, Maryland for $137.5 million of cash (including closing costs) and
the issuance of 500 shares of the Company's Common Stock. This Class A Office
Building consists of 634,829 net rentable square feet and an eight-story
parking garage. The acquisition was funded through a draw-down of $137.5
million under the Unsecured Line of Credit.

On October 29, 1997 and December 15, 1997, the Company declared a dividend
of $.44 per share payable on November 21, 1997 to shareholders of record on
November 7, 1997 and $.405 per share payable on January 28, 1998 to
shareholders of record on December 28, 1997, respectively. The dividends
relate to the three months ended September 30, 1997 in the amount of $.405 per
share and the period from June 23, 1997 to June 30, 1997 in the amount of
$.035 per share, and the three months ended December 31, 1997, respectively.

On November 11, 1997, the Company entered into a purchase and sale agreement
to acquire, for approximately $174.3 million, Riverfront Plaza, a Class A
Office Building with approximately 900,000 net rentable square feet located in
Richmond, Virginia.

On November 21, 1997, the Company acquired 875 Third Avenue, for
approximately $209.5 million. The Property is an approximately 682,000 square
foot Class A Office Building located in midtown Manhattan, New York.

On November 26, 1997, the Company entered into agreements to acquire, for
approximately $257.9 million, the Mulligan/Griffin Portfolio, a Class A Office
Building Portfolio with approximately 1,277,000 net rentable square feet
located in Fairfax County, VA and Montgomery County, MD.

On December 3, 1997, the Company filed a registration statement on Form S-
11, as amended, with the Securities and Exchange Commission with respect to
the offering of approximately 15.0 million shares of Common Stock at an
estimated offering price of $33.1875 (excluding 2.25 million shares of Common
Stock that may be issued upon exercise of the underwriters' overallotment
options).

F-29
<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>

F-30
<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>

F-31
<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>

F-32
<PAGE>

SCHEDULE III

BOSTON PROPERTIES PREDECESSOR GROUP

REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

F-33
<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>

F-34
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Boston Properties, Inc.:

We have audited the accompanying statement of revenue over certain operating
expenses of 280 Park Avenue in midtown Manhattan, New York (the "Property")
for the year ended December 31, 1996. This statement is the responsibility of
the Property's management. Our responsibility is to express an opinion on this
statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of revenue over
certain operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

The accompanying statement of revenue over certain operating expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Property's
revenue and expenses.

In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described
in Note 2) of 280 Park Avenue for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts
October 17, 1997

F-35
<PAGE>

280 PARK AVENUE
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 1, 1997 TO
DECEMBER 31, 1996 SEPTEMBER 11, 1997
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Base rent............................. $16,786 $17,012
Recoveries from tenants............... 2,600 1,707
Other income.......................... 59 80
------- -------
19,445 18,799
------- -------
Certain operating expenses (Note 2)
Utilities............................. 3,777 2,644
Janitorial and cleaning............... 1,839 1,609
Security.............................. 506 393
General and administrative............ 769 605
Repairs and maintenance............... 3,028 2,320
Insurance............................. 250 201
Real estate taxes..................... 9,908 6,677
------- -------
20,077 14,449
------- -------
Excess (deficiency) of revenue over
certain operating expenses............. $ (632) $ 4,350
======= =======
</TABLE>

The accompanying notes are an integral part of the statement.

F-36
<PAGE>

280 PARK AVENUE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF THE PROPERTY

The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the operations of an approximately 1.2 million square
foot office building located at 280 Park Avenue in midtown Manhattan, New
York. The property was acquired by Boston Properties, Inc. (the "Company") on
September 11, 1997 from Bankers Trust (the "Bank"), an unrelated party. During
1996 and 1997, the Bank, as owner occupant repositioned the Property for sale
and reduced their occupancy from approximately 800,000 sq. ft. to 200,000 sq.
ft. A significant portion of space occupied by the Bank, as owner occupant,
was substantially renovated and leased to outside tenants.

2. BASIS OF ACCOUNTING

The accompanying Statement has been prepared on the accrual basis of
accounting. The Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
revenue attributable to the owner occupied space and certain historical
expenses not comparable to the operations of the Property after acquisition
such as amortization, depreciation, property management fees, certain owner
occupant expenses, corporate expenses and certain other costs not directly
related to the future operations of the Property.

3. SIGNIFICANT ACCOUNTING POLICIES

Rental Revenue

Rental income is recognized on the straight-line method over the terms of
the related leases. The excess of recognized rentals over amounts due pursuant
to lease terms is recorded as accrued rent. The impact of the straight-line
rent adjustment increased revenue by approximately $6.2 million and $5.2
million for the year ended December 31, 1996 and for the period January 1,
1997 to September 11, 1997 (unaudited), respectively.

Unaudited Interim Information

The statement of revenue over certain operating expenses for the period from
January 1, 1997 to September 11, 1997 is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
statement have been included. The results of operations for the period are not
necessarily indicative of the Property's future results of operations.

Risks and Uncertainties

F-37
<PAGE>

280 PARK AVENUE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

4 DESCRIPTION OF LEASING ARRANGEMENTS

The commercial and office space is leased to tenants under leases with terms
that vary in length. Certain leases contain real estate tax reimbursement
clauses, operating expenses reimbursement clauses and renewal options. Minimum
lease payments due under noncancelable operating leases in effect as of
September 11, 1997 (unaudited), for the remainder of 1997 and annually
thereafter are as follows:

<TABLE>
<CAPTION>
PRO FORMA(1)
------------
<S> <C>
1997 (9/12/97 -12/31/97) $ 8,859
1998 31,649
1999 40,025
2000 38,726
2001 35,604
Thereafter 359,745
</TABLE>

As of September 12, 1997, three tenants, including the Bank occupied
approximately 52% of the leasable square feet and represented 42% of total
1996 Base Rent.

(1) Includes the addition of rent that the Bank will owe under terms of a
lease entered into with the Company concurrent with the sale of the
Property.

F-38
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Boston Properties, Inc.:

We have audited the accompanying statement of revenue over certain operating
expenses of 100 East Pratt Street in Baltimore, Maryland (the "Property") for
the year ended December 31, 1996. This statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described
in Note 2) of 100 East Pratt Street for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts
November 3, 1997

F-39
<PAGE>

100 EAST PRATT STREET
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE MONTHS
DECEMBER 31, 1996 ENDED SEPTEMBER 30, 1997
------------------ -------------------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Base rent...................... $11,826 $ 9,218
Recoveries from tenants........ 2,966 2,133
Garage--net.................... 2,220 1,706
Other income................... 353 267
------- -------
17,365 13,324
------- -------
Certain operating expenses:
Utilities...................... 1,661 1,406
Janitorial and cleaning........ 637 504
Security....................... 315 255
General and administrative..... 566 424
Repairs and maintenance........ 1,084 811
Insurance...................... 70 53
Real estate taxes.............. 2,054 1,541
------- -------
6,387 4,994
------- -------
Excess of revenue over certain
operating expenses.............. $10,978 $ 8,330
======= =======
</TABLE>

The accompanying notes are an integral part of the statement.

F-40
<PAGE>

100 EAST PRATT STREET
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF THE PROPERTY

The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the operations of 100 East Pratt Street, an
approximately 634,000 square foot office building located on the inner harbor
in downtown Baltimore, Maryland. The Property was acquired on October 23, 1997
from an unrelated third party.

2. BASIS OF ACCOUNTING

The accompanying statement of revenue over certain operating expenses is
presented on the accrual basis. This statement has been prepared in accordance
with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for
real estate properties acquired or to be acquired. Accordingly, this statement
excludes certain historical income and expenses not comparable to the
operations of the property after acquisition, such as interest income,
depreciation, amortization, and interest expense.

3. SIGNIFICANT ACCOUNTING POLICIES

Rental Revenue

Rental income is recognized on the straight-line method over the terms of
the related leases. The excess of recognized rentals over amounts due pursuant
to lease terms is recorded as accrued rent. The impact of the straight-line
rent adjustment increased revenue by approximately $361 and decreases revenue
by approximately $318 for the year ended December 31, 1996 and for the nine
months ended September 30, 1997 (unaudited), respectively.

Unaudited Interim Information

The combined statement revenue over certain operating expenses for the nine
months ended September 30, 1997 is unaudited. In the opinion of management,
all adjustments necessary for a fair presentation of such statement have been
included. The results of operations for the period are not necessarily
indicative of the Property's future results of operations.

Risks and Uncertainties

4. DESCRIPTION OF LEASING ARRANGEMENTS

The commercial and office space is leased to tenants under leases with terms
that vary in length. Certain leases contain real estate tax reimbursement
clauses, operating expense reimbursement clauses and renewal options. Minimum
lease payments to be received during the next five years for noncancelable
operating leases in effect at December 31, 1996 are approximately as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------ --------------
<S> <C>
1997......................................... $12,294
1998......................................... 11,727
1999......................................... 11,435
2000......................................... 11,185
2001......................................... 10,656
Thereafter................................... 39,516
</TABLE>

As of December 31, 1996, two tenants occupied approximately 42% of the
leasable square feet and represented approximately 48% of total 1996 Base
Rent.

F-41
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Boston Properties, Inc.:

We have audited the accompanying statement of revenue over certain operating
expenses of 875 Third Avenue in midtown Manhattan, New York (the "Property")
for the year ended December 31, 1996. This statement is the responsibility of
the Property's management. Our responsibility is to express an opinion on this
statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described
in Note 2) of 875 Third Avenue for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts
October 17, 1997

F-42
<PAGE>

875 THIRD AVENUE
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------ -------------------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Base rent...................... $25,255 $18,646
Recoveries from tenants........ 5,813 3,799
------- -------
31,068 22,445
------- -------
Certain operating expenses (Note
2)
Utilities...................... 1,002 859
Janitorial and cleaning........ 1,159 911
Security....................... 347 256
General and administrative..... 530 428
Interest....................... 15,750 11,813
Repairs and maintenance........ 999 740
Insurance...................... 212 161
Real estate taxes.............. 6,365 4,831
------- -------
26,364 19,999
------- -------
Excess of revenue over certain
operating expenses.............. $ 4,704 $ 2,446
======= =======
</TABLE>

The accompanying notes are an integral part of the statement.

F-43
<PAGE>

875 THIRD AVENUE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF THE PROPERTY

The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the operations of 875 Third Avenue, an approximately
682,000 square foot office building located in midtown Manhattan, New York.
The Property will be acquired by Boston Properties, Inc. from an unrelated
third party.

2. BASIS OF ACCOUNTING

The accompanying Statement has been prepared on the accrual basis of
accounting. The Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the Property
after acquisition such as amortization, depreciation, property management
fees, certain interest costs, corporate expenses and certain other costs not
directly related to the future operations of the Property.

3. SIGNIFICANT ACCOUNTING POLICIES

Rental Revenue

Rental income is recognized on the straight-line method over the terms of
the related leases. The excess of recognized rentals over amounts due pursuant
to lease terms is recorded as accrued rent. The impact of the straight-line
rent adjustment increased revenue by approximately $1.3 million and $768 for
the year ended December 31, 1996, and the nine months ended September 30, 1997
(unaudited), respectively.

Unaudited Interim Information

The statement of revenue over certain operating expenses for the nine months
ended September 30, 1997 is unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such statement have been
included. The results of operations for the period are not necessarily
indicative of the Property's future results of operations.

Risks and Uncertainties

4. DESCRIPTION OF LEASING ARRANGEMENTS

The commercial and office space is leased to tenants under leases with terms
that vary in length. Certain leases contain real estate tax reimbursement
clauses, operating expense reimbursement clauses and renewal options. Minimum
lease payments to be received during the next five years for noncancelable
operating leases in effect at December 31, 1996 are approximately as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------ --------------
<S> <C>
1997......................................... $22,776
1998......................................... 24,667
1999......................................... 24,716
2000......................................... 22,920
2001......................................... 22,960
Thereafter................................... 22,608
</TABLE>

F-44
<PAGE>

875 THIRD AVENUE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

As of December 31, 1996, 3 tenants occupied approximately 77% of the
leasable square feet and represented 84% of total 1996 Base Rent.

5. DEBT ASSUMPTION

In connection with the acquisition, Boston Properties, Inc. will assume a
mortgage note (the "Note") encumbering the property of $180,000 at December
31, 1996. Boston Properties, Inc.'s assumption of this mortgage does not
provide for any modification to the original terms; therefore, interest
expense incurred prior to Boston Properties, Inc.'s assumption of the mortgage
note is representative of future interest expense. Accordingly, interest
expense of $15,750 for 1996 and $11,813 for the nine months ended September
30, 1997 (unaudited) is recognized in the accompanying Statement. The Note
requires interest only payments through January 1, 2000. Beginning February 1,
2000, the Note requires monthly installments of principal and interest of
$1,416 and matures on January 1, 2003. The interest rate on the note is 8.75%.
The note is subject to a prepayment penalty until October 1, 2002 in the event
of an early principal repayment.

Principal payments due on the mortgage note during the next five years are
approximately as follows:

F-45
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Boston Properties, Inc.:

We have audited the accompanying statement of revenue over certain operating
expenses of Riverfront Plaza in Richmond, Virginia (the "Property") for the
year ended December 31, 1996. This statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described
in Note 2) of Riverfront Plaza for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts
November 25, 1997

F-46
<PAGE>

RIVERFRONT PLAZA
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------ -------------------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Base rent...................... $13,723 $11,263
Recoveries from tenants........ 2,976 2,017
Garage--net.................... 2,175 1,760
Other income................... 436 382
------- -------
19,310 15,422
------- -------
Certain operating expenses (Note
2)
Utilities...................... 1,578 1,118
Janitorial and cleaning........ 741 541
Security....................... 339 270
General and administrative..... 360 245
Repairs and maintenance........ 683 470
Insurance...................... 164 117
Real estate taxes.............. 1,638 1,219
------- -------
5,503 3,980
------- -------
Excess of revenue over certain
operating expenses.............. $13,807 $11,442
======= =======
</TABLE>

The accompanying notes are an integral part of the statement.

F-47
<PAGE>

RIVERFRONT PLAZA
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF THE PROPERTY

The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the operations of an approximately 899,720 square foot
office building located in Richmond, Virginia. The Property will be acquired
by Boston Properties, Inc. from an unrelated third party.

2. BASIS OF ACCOUNTING

The accompanying Statement has been prepared on the accrual basis of
accounting. The Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the Property
after acquisition such as amortization, depreciation, property management
fees, certain interest costs, corporate expenses, certain bad debts and
certain other costs not directly related to the future operations of the
Property.

3. SIGNIFICANT ACCOUNTING POLICIES

Rental Revenue

Rental income is recognized on the straight-line method over the terms of
the related leases. The excess of recognized rentals over amounts due pursuant
to lease terms is recorded as accrued rent. The impact of the straight-line
rent adjustment increased revenue by approximately $621 and $143 for the year
ended December 31, 1996, and the nine months ended September 30, 1997
(unaudited), respectively.

Unaudited Interim Information

Risks and Uncertainties

4. DESCRIPTION OF LEASING ARRANGEMENTS

The commercial and office space is leased to tenants under leases with terms
that vary in length. Certain leases contain real estate tax reimbursement
clauses, operating expense reimbursement clauses and renewal options. Minimum
lease payments to be received during the next five years for noncancelable
operating leases in effect at December 31, 1996 are approximately as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
--------------
(IN THOUSANDS)
<S> <C>
1997......................................... $13,615
1998......................................... 13,870
1999......................................... 13,148
2000......................................... 12,427
2001......................................... 10,574
Thereafter................................... 39,718
</TABLE>

As of December 31, 1996, two tenants occupied approximately 55% of the
leasable square feet and represented 56% of total 1996 Base Rent.

F-48
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Boston Properties, Inc.:

We have audited the accompanying statement of revenue over certain operating
expenses of the Mulligan/Griffin Portfolio in Greater Washington, D.C. (the
"Portfolio") for the year ended December 31, 1996. This statement is the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described
in Note 2) of the Mulligan/Griffin Portfolio for the year ended December 31,
1996 in conformity with generally accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts
November 20, 1997

F-49
<PAGE>

MULLIGAN/GRIFFIN PORTFOLIO
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------ -------------------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Base rent...................... $25,548 $19,523
Recoveries from tenants........ 5,440 4,042
------- -------
30,988 23,565
------- -------
Certain operating expenses (Note
2 and 5)
Utilities...................... 2,264 1,664
Janitorial and cleaning........ 503 362
Security....................... 34 26
General and administrative..... 49 32
Interest....................... 11,085 7,842
Repairs and maintenance........ 1,255 766
Insurance...................... 153 116
Real estate taxes.............. 1,456 1,208
------- -------
16,799 12,016
------- -------
Excess of revenue over certain
operating expenses.............. $14,189 $11,549
======= =======
</TABLE>

The accompanying notes are an integral part of the statement.

F-50
<PAGE>

MULLIGAN/GRIFFIN PORTFOLIO
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

1. DESCRIPTION OF PORTFOLIO

The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the combined operations of nine office properties known
as the Mulligan/Griffin Portfolio, (the "Portfolio") located in the Greater
Washington, D.C. area, specifically in the Gaithersburg I-270 and I-270
Rockville submarkets of Montgomery County, Maryland and the Springfield and
Reston submarkets of Fairfax County, VA. The Portfolio will be acquired by
Boston Properties, Inc. from entities affiliated with Mulligan/Griffin and
Associates, Inc, an unrelated third party, and are detailed as follows:

<TABLE>
<CAPTION>
NO. OF SQUARE
PROPERTY NAME BUILDINGS FEET
------------- --------- -------
<S> <C> <C>
Lockheed Martin Building................................... 1 255,244
Reston Town Center......................................... 2 261,046
National Imagery and Mapping Agency Complex................ 1 263,870
Decoverly Two.............................................. 1 77,747
910 Clopper Road........................................... 1 180,650
930 Clopper Road........................................... 1 60,056
Fullerton Square........................................... 2 178,841
</TABLE>
- --------

2. BASIS OF ACCOUNTING

The accompanying Statement has been prepared on the accrual basis of
accounting. The Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the Portfolio
after acquisition such as amortization, depreciation, property management
fees, certain interest costs, ground lease payments, corporate expenses and
certain other costs not directly related to the future operations of the
Portfolio.

3. SIGNIFICANT ACCOUNTING POLICIES

Rental Revenue

Rental income is recognized on the straight-line method over the terms of
the related leases. The excess of recognized rentals over amounts due pursuant
to lease terms is recorded as accrued rent. The impact of the straight-line
rent adjustment increased revenue by approximately $287 and decreased revenue
by approximately $99 for the year ended December 31, 1996, and the nine months
ended September 30, 1997 (unaudited), respectively.

Unaudited Interim Information

Risks and Uncertainties

F-51
<PAGE>

MULLIGAN/GRIFFIN PORTFOLIO
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES

(DOLLARS IN THOUSANDS)

4. DESCRIPTION OF LEASING ARRANGEMENTS

The space is leased to tenants under leases with terms that vary in length.
Minimum lease payments excluding certain real estate tax reimbursement
clauses, operating expense reimbursement clauses and renewal options to be
received during the next five years for noncancelable operating leases in
effect at December 31, 1996 are approximately as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------ --------------
<S> <C>
1997......................................... $25,809
1998......................................... 29,111
1999......................................... 29,048
2000......................................... 30,041
2001......................................... 29,441
Thereafter................................... 108,981
</TABLE>

As of December 31, 1996, two tenants occupied approximately 61% of the
leasable square feet and represented 87% of total 1996 Base Rent.

5. DEBT ASSUMPTION

In connection with the acquisition, Boston Properties, Inc. will assume
certain mortgage notes (the "Notes") encumbering three of the properties
totaling $122,982 at December 31, 1996. Boston Properties Inc.'s assumption of
these mortgages does not provide for any modification to the original terms;
therefore, interest expense incurred prior to Boston Properties Inc.'s
assumption of the mortgage notes is representative of future interest expense.
Accordingly, interest expense of $11,085 for 1996 and $7,842 for the nine
months ended September 30, 1997 (unaudited) is recognized in the accompanying
Statement. The Notes require payments of principal and interest through
varying terms ranging from July 15, 2002 to February 1, 2005. The interest
rate on the Notes range from 6.00% to 9.70%. These Notes are subject to
prepayment penalties of varying amounts in the event of an early principal
repayment.

Principal payments due on the mortgage notes during the next five years are
approximately as follows:

F-52
<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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Summary Selected Financial Information................................... 10
Risk Factors............................................................. 12
The Company.............................................................. 21
Business and Growth Strategies........................................... 27
Use of Proceeds.......................................................... 31
Price Range of Shares and Distribution History........................... 32
Capitalization........................................................... 33
Selected Financial Information........................................... 34
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 37
Business and Properties.................................................. 44
The Unsecured Line of Credit............................................. 77
Management............................................................... 78
Certain Transactions..................................................... 87
Policies with Respect to Certain Activities.............................. 88
Structure and Formation of the Company................................... 91
Operating Partnership Agreement.......................................... 95
Principal Stockholders................................................... 99
Description of Capital Stock............................................. 100
Certain Provisions of Delaware Law and the Company's Certificate and
Bylaws.................................................................. 105
Shares Available for Future Sale......................................... 108
Federal Income Tax Consequences.......................................... 109
Underwriting............................................................. 122
Experts.................................................................. 124
Legal Matters............................................................ 124
Additional Information................................................... 125
Glossary................................................................. 126
Index to Financial Statements............................................ F-1
</TABLE>

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

UNTIL , 1998 (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.

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

15,000,000 SHARES

[LOGO OF BOSTON PROPERTIES, INC. APPEARS HERE]

BOSTON PROPERTIES, INC.

COMMON STOCK

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

PROSPECTUS

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

Joint Lead Managers
and Joint Bookrunners

GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.

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

BEAR, STEARNS & CO. INC.

DONALDSON, LUFKIN & JENRETTE

SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
CHASE SECURITIES INC.

, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION JANUARY 2, 1998

PROSPECTUS

15,000,000 SHARES
BOSTON PROPERTIES, INC.

[LOGO OF BOSTON PROPERTIES, INC. APPEARS HERE]

COMMON STOCK
----------

SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:
. The Company intends to acquire portfolios and individual properties; such
acquisitions may not achieve intended returns;
. The Company intends to develop commercial properties and its return on such
investments can be lower than anticipated because properties can cost more
to develop, take longer to develop or lease, or lease for lower rent than
anticipated;
. Conflicts of interest exist between the Company and Messrs. Zuckerman and
Linde in connection with the Company's operations, including with respect
to certain restrictions on the Company's ability to sell or transfer four
properties until June 23, 2007 without the consent of Messrs. Zuckerman and
Linde; five other properties are subject to similar restrictions for the
benefit of others;
. The Company relies on key personnel whose continued service is not
guaranteed, including Messrs. Zuckerman and Linde;
. Real estate investment and property management are risky as rents can
fluctuate and operating costs can increase; and
. The Company may not be able to refinance indebtedness on favorable terms,
and interest rates might increase on amounts drawn under the Company's line
of credit.
----------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................. $ $ $
- ------------------------------------------------------------------------
Total(3).............................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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 1,800,000 shares of Common Stock, and has granted the
International Managers a 30-day option to purchase up to an additional
450,000 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 matters 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 , 1998.
----------
Joint Lead Managers and Joint Bookrunners
GOLDMAN SACHS INTERNATIONAL MERRILL LYNCH INTERNATIONAL
----------
BEAR, STEARNS INTERNATIONAL LIMITED

DONALDSON, LUFKIN & JENRETTE

INTERNATIONAL
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL-BACHE SECURITIES
SALOMON SMITH BARNEY INTERNATIONAL
CHASE MANHATTAN INTERNATIONAL LIMITED
----------
The date of this Prospectus is , 1998.
<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 12,000,000 shares to the U.S. Underwriters (as defined below), the
Company has agreed to sell to each of the International Managers, for whom
Goldman Sachs International, Merrill Lynch International, Bear, Stearns
International Limited, Donaldson, Lufkin & Jenrette International, Morgan
Stanley & Co. International Limited, PaineWebber International (UK) Ltd.,
Prudential-Bache Securities (U.K.) Inc., Smith Barney Inc. and Chase Manhattan
International Limited 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>
Goldman Sachs International.....................................
Merrill Lynch International.....................................
Bear, Stearns International Limited.............................
Donaldson, Lufkin & Jenrette International......................
Morgan Stanley & Co. International Limited......................
PaineWebber International (UK) Ltd. ............................
Prudential-Bache Securities (U.K.) Inc. ........................
Smith Barney Inc. ..............................................
Chase Manhattan International Limited...........................
---------
Total...................................................... 3,000,000
=========
</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 Goldman, Sachs & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated, Prudential Securities Incorporated,
Smith Barney Inc. and Chase Securities 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 3,000,000 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 12,000,000
shares of Common Stock. The 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 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 Goldman Sachs 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.

122
<PAGE>

sell shares of Common Stock to each other for purposes of resale at the 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
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 450,000
additional shares of Common Stock to cover overallotments, if any, at the
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 1,800,000 additional shares of Common Stock to
cover overallotments, if any, on terms similar to those granted to the
International Managers.

In the Purchase Agreements, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

The Company, the Operating Partnership and certain persons who owned
interests in one or more of the Properties prior to the Initial 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 June 1997, without the prior written
consent of Goldman, Sachs & Co. and 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 Securities and Exchange Commission 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 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom the document may otherwise
lawfully be issued or passed on.

123
<PAGE>

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 and the
Statements of Revenue over Certain Operating Expenses of 280 Park Avenue, 100
East Pratt Street, 875 Third Avenue, Riverfront Plaza and the Mulligan/Griffin
Portfolio for the year ended December 31, 1996, 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.

LEGAL MATTERS

Certain legal matters will be passed upon for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP.

124
<PAGE>

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

SUMMARY TABLE OF CONTENTS

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

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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15,000,000 SHARES

[LOGO OF BOSTON PROPERTIES, INC. APPEARS HERE]

BOSTON PROPERTIES, INC.

COMMON STOCK

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

PROSPECTUS

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

Joint Lead Managers
and Joint Bookrunners

GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL

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

BEAR, STEARNS INTERNATIONAL LIMITED

DONALDSON, LUFKIN & JENRETTE

INTERNATIONAL
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL-BACHE SECURITIES
SALOMON SMITH BARNEY INTERNATIONAL
CHASE MANHATTAN INTERNATIONAL LIMITED

, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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........... $ 168,000
NASD Fee...................................................... 30,500
New York Stock Exchange Listing Fee........................... 49,000
Transfer Agent's and Registrar's Fees......................... 2,500
Printing Fees................................................. 300,000
Legal Fees and Expenses (other than Blue Sky)................. 175,000
Accounting Fees and Expenses.................................. 200,000
Blue Sky Fees and Expenses (including fees of counsel)........ 20,000
Miscellaneous Expenses........................................ 270,000
----------
Total....................................................... $1,215,000
==========
</TABLE>

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.

On September 2, 1997, the Operating Partnership and the Company entered into
a Contribution Agreement with Kenvic Associates, a New York general
partnership, pursuant to which the Operating Partnership agreed to acquire all
of Kenvic Associates' right, title and interest in and to 875 Third Avenue,
New York, New York, in exchange for the issuance by the Operating Partnership
of 890,869 OP Units, subject to adjustment based on the average closing price
of the Common Stock for the ten trading days prior to and including December
31, 1998. The Operating Partnership acquired 875 Third Avenue and issued
890,869 OP Units to Kenvic Associates on November 21, 1997.

On October 23, 1997, in connection with the Company's acquisition of 100
East Pratt Street, the Company issued 500 shares of Common Stock to
International Business Machines Corporation, one of the sellers of the
Property.

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.

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
+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 --Form of Shareholder Rights Agreement dated as of June , 1997
between the Company and BankBoston, N.A., as Rights Agent.
*4.2 --Form of Certificate of Designation for Series E Junior
Participating Cumulative Preferred Stock, par value $.01 per
share
*4.3 --Form of Common Stock Certificate
+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 --Form of Noncompetition Agreement between the Company and
Mortimer B. Zuckerman
*10.4 --Form of Employment and Noncompetition Agreement between the
Company and Edward H. Linde
*10.5 --Form of Employment Agreement between the Company and certain
executive officers
*10.6 --Form of Indemnification Agreement between the Company and each
of its directors and executive officers
*10.7 --Omnibus Option Agreement by and among Boston Properties Limited
Partnership (the "Operating Partnership") and the Grantors named
therein dated as of April 9, 1997
*10.8 --Revolving Credit Agreement with BankBoston, N.A.
*10.9 --Form of Registration Rights Agreement among the Company and the
persons named therein
*10.10 --Form of Lease Agreement dated as of June , 1997 between Edward
H. Linde and Mortimer B. Zuckerman, as Trustees of Downtown
Boston Properties Trust, and ZL Hotel LLC
*10.11 --Form of Lease Agreement dated as of June , 1997 between Edward
H. Linde and Mortimer B. Zuckerman, as Trustees of Two Cambridge
Center Trust, and ZL Hotel LLC
*10.12 --Option Agreement between Boston Properties Limited Partnership
and Square 36 Properties Limited Partnership dated April 15, 1997
*10.13 --Form of Certificate of Incorporation of Boston Properties
Management, Inc.
*10.14 --Form of By-laws of Boston Properties Management, Inc.
*10.15 --Form of Limited Liability Agreement of ZL Hotel LLC
*10.16 --Form of Option Agreement to Acquire the Property known as Sumner
Square
*10.17 --Loan Modification Agreement between Lexreal Associates and
Mitsui Seimei America Corporation relating to loan secured by 599
Lexington Avenue
*10.18 --Loan Modification and Extension Agreement by and between
Southwest Market Limited Partnership, a District of Columbia
limited partnership, Mortimer B. Zuckerman and Edward H. Linde
and the Sumitomo Bank, Limited, for One Independence Square,
dated as of September 26, 1994
*10.19 --Loan Modification and Extension Agreement by and among Southwest
Market Limited Partnership, a District of Columbia limited
partnership, Mortimer B. Zuckerman and Edward H. Linde and the
Sumitomo Bank, Limited, for Two Independence Square, dated as of
September 26, 1994
*10.20 --Construction Loan Agreement by and between the Sumitomo Bank,
Limited and Southwest Market Limited Partnership, dated as of
August 21, 1990
*10.21 --Construction Loan Agreement by and between the Sumitomo Bank,
Limited and Southwest Market Limited Partnership for Two
Independence Square, dated as of February 22, 1991
*10.22 --Consent and Loan Modification Agreement regarding One
Independence Square between the Sumitomo Bank, Limited and
Southwest Market Limited Partnership dated as of June , 1997
*10.23 --Consent and Loan Modification Agreement regarding Two
Independence Square between the Sumitomo Bank, Limited and
Southwest Market Limited Partnership dated as of June , 1997
*10.24 --Form of Amended and Restated Loan Agreement between Square 36
Office Joint Venture and the Sanwa Bank Limited dated as of June
, 1997
*10.25 --Indemnification Agreement between Boston Properties Limited
Partnership and Mortimer B. Zuckerman and Edward H. Linde
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*10.26 --Compensation Agreement between the Company and Robert Selsam,
dated as of August 10, 1995 relating to 90 Church Street
(5)10.27 --Contribution Agreement dated as of September 2, 1997 by and
among the Operating Partnership, the Company and Kenvic
Associates.
(5)10.28 --Lock-Up and Registration Rights Agreement dated November 21,
1997 by and among the Operating Partnership, the Company and
Kenvic Associates.
(5)10.29 --Agreement dated November 21, 1997 by and between the Operating
Partnership and Kenvic Associates.
(5)10.30 --Note and Mortgage Modification and Spreader Agreement between
John Hancock, as lender and Boston Properties Limited
Partnership, as borrower.
(2)10.31 --Agreement between Bankers Trust Company as seller and Boston
Properties Limited Partnership, as purchaser, dated September 11,
1997
(1)10.32 --Term loan agreement between Chase Manhattan Bank, as lender and
Boston Properties Limited Partnership, as borrower, dated
September 11, 1997
(1)10.33 --Interest Guarantee and Agreement between Chase Manhattan Bank,
as lender and Boston Properties Limited Partnership, as borrower,
dated September 11, 1997
(1)10.34 --Net Cash Flow Shortfall Guarantee and Agreement between Chase
Manhattan Bank, as lender and Boston Properties Limited
Partnership, as borrower, dated September 11, 1997
(1)10.35 --Hazardous Material Guaranty and Indemnification Agreement
between Chase Manhattan Bank, as lender and Boston Properties
Limited Partnership, as borrower, dated September 11, 1997
(2)10.36 --Swap Transaction Agreement between the Chase Manhattan Bank and
Boston Properties, Inc. dated November 4, 1997
(3)10.37 --Amended and Restated Real Estate Purchase and Sale Contract
Between International Business Machines Corporation, as seller,
and Boston Properties Limited Partnership, as buyer, dated
October 20, 1997
(4)10.38 --First Amendment to Revolving Credit Agreement dated July 29,
1997 by and among the Company, BankBoston, N.A., and the
subsidiaries of the Company and lending institutions named
therein.
(4)10.39 --Second Amendment to Revolving Credit Agreement dated July 30,
1997 by and among the Company, BankBoston, N.A., and the
subsidiaries of the Company and lending institutions named
therein.
(4)10.40 --Third Amendment to Revolving Credit Agreement dated September
11, 1997 by and among the Company, BankBoston N.A., and the
subsidiaries of the Company and lending institutions named
therein.
(4)10.41 --Fourth Amendment to Revolving Credit Agreement dated October 31,
1997 by and among the Company, BankBoston, N.A., and the
subsidiaries of the Company and lending institutions named
therein.
(5)10.42 --Environmental Indemnity and Agreement made by Boston Properties
Limited Partnership in favor of John Hancock Mutual Life
Insurance Company.
(5)10.43 --Indemnification Agreement made by Boston Properties Limited
Partnership in favor of John Hancock Mutual Life Insurance
Company.
+10.44 --Consolidation, Extension and Modification Agreement dated as of
May 11, 1988 by and between Kenvic Associates and John Hancock
Mutual Life Insurance Company.
+10.45 --Modification Agreement dated as of May 30, 1990 by and between
Kenvic Associates and John Hancock Mutual Life Insurance Company.
+10.46 --Note and Mortgage Modification Agreement dated as of July 23,
1992 by and between Kenvic Associates and John Hancock Mutual
Life Insurance Company.
+10.47 --Note and Mortgage Modification and Spreader Agreement dated as
of December 29, 1995 by and between Kenvic Associates and John
Hancock Mutual Life Insurance Company.
+10.48 --Contribution Agreement dated November 26, 1997 among the
Operating Partnership, Boston Properties LLC and the contributors
named therein.
+21.1 --Schedule of Subsidiaries of the Company
23.1 --Consent of Coopers & Lybrand, L.L.P.
(5)23.2 --Consent of Spaulding & Slye
(5)23.3 --Consent of Insignia/Edward S. Gordon Co., Inc.
(5)23.4 --Consent of Pinnacle Advisory Group
(5)23.5 --Consent of Colliers Pinkard
(5)23.6 --Consent of Harrison & Bates
(5)23.7 --Consent of Landauer Hospitality Group
+23.8 --Consent of Goodwin, Procter & Hoar llp (included in Exhibits 5.1
and 8.1)
</TABLE>
- --------
*Incorporated herein by reference to the Company's Registration Statement on
Form S-11 (No. 333-25279)
+To be filed by amendment.
(1) Incorporated herein by reference to the Company's Current Report on Form 8-
K/A filed November 14, 1997.
(2) Incorporated herein by reference to the Company's Current Report on Form 8-
K/A-2 filed November 25, 1997.
(3) Incorporated herein by reference to the Company's Current Report on Form 8-
K/A filed November 14, 1997.
(4) Incorporated herein by reference to the Company's Current Report on Form 8-K
filed November 26, 1997.
(5) Previously filed.

II-4
<PAGE>

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-5
<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 NO. 2 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 2ND DAY OF JANUARY, 1998.

Boston Properties, Inc.

By: /s/ Edward H. Linde
------------------------------------
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

* Chairman of the
- ------------------------------------ Board of Directors January 2, 1998
MORTIMER B. ZUCKERMAN

/s/ Edward H. Linde President and Chief
- ------------------------------------ Executive Officer, January 2, 1998
EDWARD H. LINDE Director
(Principal
Executive Officer)

/s/ David G. Gaw Chief Financial
- ------------------------------------ Officer (Principal January 2, 1998
DAVID G. GAW Financial Officer
and Principal
Accounting
Officer)

* Director
- ------------------------------------ January 2, 1998
ALAN J. PATRICOF

* Director
- ------------------------------------ January 2, 1998
IVAN G. SEIDENBERG

* Director
- ------------------------------------ January 2, 1998
MARTIN TURCHIN

*/s/ Edward H. Linde
- ------------------------------------
EDWARD H. LINDE, AS ATTORNEY-IN-
FACT

II-6
<PAGE>

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Amendment No.
2 to Form S-11 (File No. 333-41449) of Boston Properties, Inc. of our reports
dated (i) May 1, 1997 on our audits of the combined financial statements and
financial statement schedule of the Boston Properties Predecessor Group, (ii)
October 17, 1997 on our audit of the statement of revenue over certain
operating expenses of 280 Park Avenue, (iii) October 17, 1997 on our audit of
the statement of revenue over certain operating expenses of 875 Third Avenue,
(iv) November 3, 1997 on our audit of the statement of revenue over certain
operating expenses of 100 East Pratt Street, (v) November 25, 1997 on our
audit of the statement of revenue over certain operating expenses of
Riverfront Plaza and (vi) November 20, 1997 on our audit of the statement of
revenue over certain operating expenses of the Mulligan/Griffin Portfolio. We
also consent to the reference to our firm under the caption "Experts".

/s/ Coopers & Lybrand L.L.P.

Boston, Massachusetts

December 30, 1997