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Original Source: FD (FAIR DISCLOSURE) WIRE
MICHAEL, ANALYST, MODERATOR, CITIGROUP: We're going to get started with the 2:35 session at the 2007 Citigroup CEO Global Conference. I'm very happy to have with us right now Boston Properties. I'll turn it over to CEO Ed Linde, as well as CFO Doug Linde, for their opening comments and then I'm sure we'll get into a pretty good conversation. So, Ed, I'll turn it over to you.
ED LINDE, PRESIDENT, CEO, BOSTON PROPERTIES: Thank you, Michael.
Let me just give you a brief description of Boston Properties. It's pretty boring, since we've been doing the same thing since we became public in 1997, and before that we even did the same thing when we were private. So, as much as I would like to announce a change in our strategy, I'm not going to.
Boston Properties has concentrated on high-quality, first-class office buildings throughout its life as a Company. We've been very selective in our markets. We have major concentrations of first-class office buildings in Boston, Washington, D.C., New York City, San Francisco, and also have property in Princeton, New Jersey.
We are also known for and I think probably a differentiating factor in our performance grows from the fact that we have a development capacity. We've developed over 12 million square feet of space since our IPO. Now, we did some major acquisitions as well, but especially now at a time when acquisitions are so pricey and yields, therefore, are relatively low, our development capacity I think will become more important over the next -- in the next few years.
We also have had a very consistent strategy over that period of time. We do believe in quality. We know that the kinds of tenants that are attracted to first-class office buildings generally are more stable in terms of financial capacity, so we don't have problems when we enter into long-term leases with them. We also have found that, especially in down cycles, there is a flight to quality and therefore owning those kinds of assets has held us in good stead. I mentioned the markets in which we are involved. We picked those markets on purpose. They are hard markets to get into. They are high barriers to entry. They are markets which are attractive to knowledge-based companies and therefore maintain higher occupancies than a lot of other markets in the country.
We also are pretty conservative when it comes to financing, when it comes to leasing. We don't -- we do believe in long-term leases. So that, in fact, our average lease term is over 7 years. And our leverage today is much -- frankly, is much too low, but it's around 22 or 23%, something like that.
We have been -- we have sold properties recently. In the last 3 years, we've sold $3.5 billion worth of property, taking advantage in what we believe is an attractive market. It does not mean that the people who bought those properties didn't do a smart thing; it's just that they had a very different kind of investment horizon or an investment strategy than we had.
I don't think I mentioned our total portfolio size. It's over 40 million square feet. About 31 million square feet of that is office space. We own a couple of hotels. We own, associated with that office space, parking facilities. But primarily we are office space, owners of which 75% of our space is CBD. Once again, that gets back to the barriers to entry.
With that, I'll stop and open it up to your questions.
MICHAEL: I'll kick it off, maybe taking a little bit off your comments. You talked about being very deliberate in strategy about the markets that you're in and the type of assets that you're buying and have developed, but you also talked about selling $3.5 billion of assets over the past few years. How do you reconcile that versus your comments of trying to build market share in the higher barrier markets and being tough to build, about maybe keeping those for the long term rather than selling them?
ED LINDE: Frankly, I think that we already have significant market share in the markets in which we operate. Nobody, to the best of my knowledge, with perhaps one exception, owns enough space in any one market to really, by themselves, have pricing power. But if you have a certain critical mass which enables you to deal from a position of strength with the brokerage community, with the tenant community, with the governmental authorities, etc., I think that is sufficient. And so to bulk up by buying assets in the markets in which we all operate, 4% yields, or 3% yields, just did not seem to me, to us, to make a great deal of sense.
And so what we would prefer …