<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED SEPTEMBER 5, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 5, 1997)
$300,000,000
BEACON PROPERTIES, L.P.
$150,000,000 % NOTES DUE , 2002
$150,000,000 % NOTES DUE , 2007
----------------
Beacon Properties, L.P., a Delaware limited partnership (the "Operating
Partnership"), will issue % Notes due 2002 (the "2002 Notes") and % Notes
due 2007 (the "2007 Notes" and, together with the 2002 Notes, the "Notes").
Interest on the Notes is payable semi-annually on and , commencing ,
1998. See "Description of Notes--Principal and Interest." The 2002 Notes will
mature on , 2002 and the 2007 Notes will mature on , 2007. The Notes may
be redeemed at any time at the option of the Operating Partnership, in whole
or in part, at a redemption price equal to the sum of (i) the principal amount
of the Notes being redeemed plus any accrued interest thereon to the
redemption date and (ii) the Make-Whole Amount (as hereinafter defined), if
any. See "Description of Notes--Optional Redemption."
Each series of the Notes will be represented by a global note (the "Global
Securities") registered in the name of The Depository Trust Company ("DTC") or
its nominee. Interests in the Global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by DTC
(with respect to beneficial interests of participants) or by participants or
persons that hold interests through participants (with respect to interests of
beneficial owners). Except as described herein and in the accompanying
Prospectus, Notes in definitive form will not be issued. See "Description of
Debt Securities--Global Securities" in the accompanying Prospectus and
"Description of Notes--Book-Entry System" herein.
SEE "RISK FACTORS" BEGINNING ON PAGE S-8 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE NOTES.
----------------
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 SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING OPERATING
PUBLIC(1) DISCOUNT(2) PARTNERSHIP(1)(3)
- -------------------------------------------------------
<S> <C> <C> <C>
Per 2002 Note % % %
- -------------------------------------------------------
Total $ $ $
- -------------------------------------------------------
Per 2007 Note % % %
- -------------------------------------------------------
Total $ $ $
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from September , 1997.
(2) The Operating Partnership and Beacon Properties Corporation have agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(3) Before deducting estimated expenses of $ payable by the Operating
Partnership.
----------------
Each series of Notes is offered by the several Underwriters, subject to
prior sale, when, as and if issued to and accepted by them, and 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 Notes
offered hereby will be made in book-entry form only on or about September ,
1997 through the facilities of DTC, against payment therefor in immediately
available funds.
----------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
----------------
The date of this Prospectus Supplement is September , 1997.
<PAGE>
- -------------
Beacon
- -------------
Properties
- -------------
Corporation
- -------------
PROPERTY LOCATIONS
LOGO
LOGO LOGO
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement and the
accompanying Prospectus or incorporated herein and therein by reference. Unless
the context otherwise requires, all references in this Prospectus Supplement to
the "Operating Partnership" shall mean Beacon Properties, L.P. and its
subsidiaries on an aggregated basis. This Prospectus Supplement contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The Operating Partnership's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference are discussed in the section
entitled "Risk Factors" starting on page S-8 of this Prospectus Supplement.
THE OPERATING PARTNERSHIP
The Operating Partnership owns a portfolio of Class A office properties and
other commercial properties located in major metropolitan areas, including
Boston, Atlanta, Chicago, Los Angeles, San Francisco and Washington, D.C., as
well as commercial real estate development, acquisition, leasing and management
businesses. Class A office properties generally are considered to be those that
have excellent locations and access, attract high quality tenants, are well
maintained and professionally managed, and achieve among the highest rent,
occupancy and tenant retention rates within their markets. As of July 1997, the
Operating Partnership owned or held an interest in 119 income producing
commercial properties encompassing approximately 18.8 million square feet
(each, a "Property and, collectively, the "Properties"). Approximately 67% of
the Operating Partnership's net operating income is produced by Properties
located in suburban office markets and approximately 33% by Properties located
in downtown office markets, primarily Boston. As of June 30, 1997, the
Properties were approximately 97% leased with over 1,250 tenants.
The sole general partner of the Operating Partnership is Beacon Properties
Corporation (the "Company"), a self-managed and self-administered real estate
investment trust ("REIT"). The Company owns approximately 89.6% of the
outstanding partnership interests ("Units") of the Operating Partnership.
Directors and officers of the Company and members of their families
collectively own approximately $133 million (approximately 6%) of the Company's
equity securities. The Operating Partnership conducts third-party management
operations through Beacon Property Management Corporation, a Delaware
corporation (the "Management Company"), and conducts third-party tenant space
design services through Beacon Design Corporation, a Massachusetts corporation
(the "Design Company"). Through the Management Company, the Operating
Partnership manages approximately 2.2 million square feet of commercial and
office space owned by third parties in various locations, including Boston and
Springfield, Massachusetts and Chicago, Illinois. The Operating Partnership
conducts substantially all of the management operations for wholly-owned
properties through Beacon Property Management, L.P., a Delaware limited
partnership (the "Management Partnership"), and conducts tenant space design
services for wholly-owned properties through Beacon Design, L.P., a Delaware
limited partnership (the "Design Partnership").
S-3
<PAGE>
THE PROPERTIES
Set forth below are summary descriptions of the Properties.
<TABLE>
<CAPTION>
PERCENT LEASED
YEAR BUILT/ OWNERSHIP PROPERTY AREA IN AT JUNE 30,
PROPERTY RENOVATED INTEREST(1) LOCATION SQUARE FEET 1997
-------- ----------- ----------- ------------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
DOWNTOWN BOSTON OFFICE
MARKET:
225 Franklin Street..... 1966(2) 100% Boston, MA 929,545 100%
75-101 Federal Street... 1985-1998 51.6% Boston, MA 812,000 92%
One Post Office Square.. 1981 50% Boston, MA 764,129 99%
Center Plaza............ 1966-1969 (3) Boston, MA 649,359 97%
150 Federal Street...... 1988 100% Boston, MA 530,279 100%
Rowes Wharf............. 1987 45% Boston, MA 344,326 100%
Russia Wharf............ 1978-1982 100% Boston, MA 314,596 100%
2 Oliver Street-147 Milk
Street................. 1982-1988 100% Boston, MA 271,000 99%
175 Federal Street...... 1977 100% Boston, MA 203,349 99%
South Station(4)........ 1988 100% Boston, MA 148,591 100%
---------- ---
4,967,174 98%
---------- ---
GREATER BOSTON SUBURBAN OFFICE MARKET:
Wellesley Office
Park(5)................ 1963-1984 100% Wellesley, MA 622,862 99%
Crosby Corporate
Center(6).............. 1996 100% Bedford, MA 336,000 98%
175 Wyman Street........ (7) 100% Waltham, MA 335,000 (7)
Westwood Business
Centre................. 1985 100% Westwood, MA 160,400 96%
New England Executive
Park Portfolio(8)...... 1970-1985 100% Burlington, MA 817,013 96%
---------- ---
2,271,275 98%(7)
---------- ---
CAMBRIDGE OFFICE MARKET:
One Canal Park.......... 1987 100% Cambridge, MA 100,300 100%
Ten Canal Park.......... 1987 100% Cambridge, MA 110,000 100%
245 First Street(9)..... 1985-1986 100% Cambridge, MA 263,227 100%
---------- ---
473,527 100%
---------- ---
CENTRAL PERIMETER ATLANTA OFFICE MARKET:
Perimeter Center
Portfolio(10).......... 1970-1989 100% Atlanta, GA 3,302,136 98%
---------- ---
ARLINGTON COUNTY, VIRGINIA OFFICE MARKET:
The Polk and Taylor
Buildings.............. 1970 10% Arlington, VA 890,000 100%
1300 North Seventeenth
Street................. 1980 100% Rosslyn, VA 372,865 99%
1616 North Fort Myer
Drive.................. 1974 100% Rosslyn, VA 292,826 100%
---------- ---
1,555,691 100%
---------- ---
FAIRFAX COUNTY, VIRGINIA OFFICE MARKET:
John Marshall I......... 1981 100% McLean, VA 261,364 100%
E.J. Randolph........... 1983 100% McLean, VA 164,677 99%
Northridge I............ 1988 100% Reston/Herndon, VA 124,319 100%
Centerpointe I.......... 1988 100% Fairfax, VA 204,481 99%
Centerpointe II......... 1990 100% Fairfax, VA 204,481 99%
---------- ---
959,322 99%
---------- ---
WASHINGTON, D.C. OFFICE
MARKET:
1333 H Street........... 1984(11) 100% Washington, D.C. 238,694 91%
---------- ---
SUBURBAN CHICAGO OFFICE
MARKET:
AT&T Plaza.............. 1984 100% Oak Brook, IL 225,318 98%
Tri-State
International(12)...... 1986 100% Lincolnshire, IL 548,000 81%
Presidents Plaza(13).... 1980-1982 100% Chicago, IL 791,000 95%
Westbrook Corporate
Center(14)............. 1985-1996 100% Westchester, IL 1,106,000 92%
---------- ---
2,670,318 91%
---------- ---
WEST LOS ANGELES OFFICE
MARKET:
10960 Wilshire
Boulevard.............. 1971-1992 100% Westwood, CA 543,804 89%
10880 Wilshire
Boulevard(15).......... 1970 100% Westwood, CA 531,176 85%
---------- ---
1,074,980 87%
---------- ---
SILICON VALLEY
OFFICE/R&D MARKET:
Shoreline Technology
Park(16)............... 1985-1991 100% Mountain View, CA 726,500 100%
Lake Marriott Business
Park(17)............... 1981 100% Santa Clara, CA 400,000 100%
Sunnyvale Business
Center(18)............. 1990 100% Sunnyvale, CA 175,000 100%
---------- ---
1,301,500 100%
---------- ---
Total/Weighted
Average(19)........... 18,814,617 97%
========== ===
</TABLE>
S-4
<PAGE>
- --------
(1) The Operating Partnership holds a general partner interest in the entity
which owns the fee title in the One Post Office Square Property; a general
partner and limited partner interest in the entities which own the fee
title in each of the Center Plaza Property and the Polk and Taylor
Buildings Property; and an indirect limited partner interest in Rowes
Wharf Associates, the entity that owns the hotel space and ground leases
the office and retail space at the Rowes Wharf Property. The Operating
Partnership holds approximately 50.8% of the common stock of BeaMetFed,
Inc. ("BeaMetFed"), a private REIT that holds the fee title to the 75-101
Federal Street Property. The Operating Partnership owns a 100% fee
interest in the remaining Properties, with the exception of South Station
and 10880 Wilshire Boulevard, in each of which the Operating Partnership
holds a ground leasehold interest.
(2) The 225 Franklin Street Property has undergone an approximately $95
million renovation during the past eight years, including installation of
new electrical systems, and a complete upgrade of mechanical systems,
elevators, lobbies, roofs and the exterior plaza of the building.
(3) The Operating Partnership holds a 1% general partner interest, a 75%
limited partner interest and an option to purchase the remaining 24%
limited partner interest in the partnership that owns the Center Plaza
Property.
(4) The Operating Partnership owns a ground leasehold interest in the South
Station Property which expires in 2024 but may be extended, at the
Operating Partnership's option, for two additional 15-year terms. This
Property was originally built in the early 1900s and was fully
rehabilitated in 1988. This Property includes a significant retail
component.
(5) The Wellesley Office Park consists of eight office buildings.
(6) The Crosby Corporate Center consists of six office buildings.
(7) The 175 Wyman Street Property consists of a vacant 335,000 square foot
office/research and development complex and 26.7 acres of land suitable
for development. The Operating Partnership plans to redevelop the Property
into 400,000 square feet of Class A office space. Weighted Average
excludes 175 Wyman Street.
(8) The New England Executive Park Portfolio consists of nine of the thirteen
office buildings located in the New England Executive Park, the remaining
four of which are owner-occupied.
(9) The 245 First Street Property consists of two attached structures
connected by a four-story atrium. Riverview I, a six-story office
building, was constructed in 1909 and renovated in 1986. Riverview II, an
eighteen-story structure with parking on the first nine floors, was
constructed in 1985.
(10) The Perimeter Center Portfolio consists of 32 buildings and six parcels of
land that the Operating Partnership has ground leased to tenants.
(11) Approximately 205,000 square feet of the 1333 H Street Property was built
in 1982. The remaining approximately 34,000 square feet was renovated in
1982.
(12) The Tri-State International complex consists of five office buildings.
(13) Presidents Plaza consists of four office buildings.
(14) Westbrook Corporate Center consists of five office buildings.
(15) The Operating Partnership owns a ground leasehold interest in 10880
Wilshire Boulevard which expires in 2068. The Operating Partnership has an
option to purchase the ground under 10880 Wilshire Boulevard at fair
market value in 2001.
(16) Shoreline Technology Park consists of twelve office buildings.
(17) Lake Marriott Business Park consists of seven office buildings.
(18) Sunnyvale Business Center consists of three office buildings.
(19) Weighted Average excludes 175 Wyman Street.
S-5
<PAGE>
THE OFFERING
Securities Offered.......... $150,000,000 aggregate principal amount of the
2002 Notes and $150,000,000 aggregate principal
amount of the 2007 Notes.
Maturity.................... , 2002 with respect to the 2002 Notes and
, 2007 with respect to the 2007 Notes.
Interest Payment Dates...... Semi-annually on and , commencing
1998
Ranking..................... The Notes will be senior unsecured obligations of
the Operating Partnership and will rank equally
with the Operating Partnership's other unsecured
and unsubordinated indebtedness. The Notes will
be effectively subordinated to mortgages and
other secured indebtedness of the Operating
Partnership and to indebtedness and other
liabilities of the Operating Partnership's
subsidiaries.
Use of Proceeds............. The net proceeds from the sale of the Notes will
be used to repay borrowings under the Operating
Partnership's unsecured $350 million credit
facility (the "Credit Facility") and for general
corporate and working capital purposes,
including, without limitation, funding of
potential acquisitions. See "Use of Proceeds."
Optional Redemption......... The Notes are redeemable at any time at the
option of the Operating Partnership, in whole or
in part, at a redemption price equal to the sum
of (i) the principal amount of the Notes being
redeemed plus any accrued interest thereon to the
redemption date and (ii) the Make-Whole Amount,
if any. See "Description of Notes--Optional
Redemption."
Certain Covenants........... The Notes contain various covenants including the
following:
. Neither the Operating Partnership nor any
Subsidiary (as hereinafter defined) may incur
any Indebtedness (as hereinafter defined) if,
after giving effect thereto, the aggregate
principal amount of all outstanding
Indebtedness of the Operating Partnership and
its Subsidiaries on a consolidated basis is
greater than 60% of the sum of (i) the Total
Assets (as hereinafter defined) of the
Operating Partnership and its Subsidiaries as
of the end of the most recent calendar quarter
and (ii) the purchase price of any real estate
assets or mortgages receivable acquired, and
the amount of any securities offering proceeds
received (to the extent that such proceeds were
not used to acquire real estate assets or
mortgages receivable or used to reduce
Indebtedness), by the Operating Partnership or
any Subsidiary since the end of such calendar
quarter, including those proceeds obtained in
connection with the incurrence of such
additional Indebtedness.
S-6
<PAGE>
. Neither the Operating Partnership nor any
Subsidiary may incur any Indebtedness secured
by any mortgage or other lien upon any of the
property of the Operating Partnership or any
Subsidiary if, after giving effect thereto, the
aggregate principal amount of all outstanding
Indebtedness of the Operating Partnership and
its Subsidiaries on a consolidated basis which
is secured by any mortgage or other lien on
property of the Operating Partnership or any
Subsidiary is greater than 40% of the sum of
(i) the Total Assets of the Operating
Partnership and its Subsidiaries as of the end
of the most recent calendar quarter and (ii)
the purchase price of any real estate assets or
mortgages receivable acquired, and the amount
of any securities offering proceeds received
(to the extent that such proceeds were not used
to acquire real estate assets or mortgages
receivable or used to reduce Indebtedness), by
the Operating Partnership or any Subsidiary
since the end of such calendar quarter,
including those proceeds obtained in connection
with the incurrence of such additional
Indebtedness.
. The Operating Partnership and its Subsidiaries
will maintain Total Unencumbered Assets (as
hereinafter defined) of not less than 150% of
the aggregate outstanding principal amount of
the Unsecured Indebtedness (as hereinafter
defined) of the Operating Partnership and its
Subsidiaries on a consolidated basis.
. Neither the Operating Partnership nor any
Subsidiary may incur any Indebtedness if, after
giving effect thereto, the ratio of
Consolidated Income Available for Debt Service
(as hereinafter defined) to the Annual Service
Charge (as hereinafter defined) for the four
consecutive fiscal quarters most recently ended
prior to the date on which such additional
Indebtedness is to be incurred shall have been
less than 1.5:1 on a pro forma basis after
giving effect to certain assumptions.
For a more complete description of the terms and
definitions used in the foregoing limitations,
see "Description of Notes--Certain Covenants."
S-7
<PAGE>
RISK FACTORS
An investment in the Notes involves various risks. Prospective investors
should carefully consider the following information in conjunction with the
other information contained in this Prospectus Supplement before purchasing
Notes.
RISKS OF ADVERSE EFFECT ON COMPANY FROM DEBT SERVICING AND REFINANCING,
INCREASES IN INTEREST RATES, FINANCIAL COVENANTS AND ABSENCE OF LIMITATIONS OF
DEBT
DEBT FINANCING AND EXISTING DEBT MATURITIES.
The Operating Partnership intends to finance the acquisition of additional
properties through the use of debt and equity financing. Additionally, in
connection with the acquisition of certain Properties for Units the Operating
Partnership has agreed to maintain certain levels of nonrecourse debt on the
Properties. The Operating Partnership is therefore subject to risks normally
associated with debt financing, including the possibility that the Operating
Partnership will have insufficient cash flow to meet required principal and
interest payments, will be unable to refinance existing indebtedness (which in
most cases will not be fully amortized at maturity), or will be unable to
secure favorable refinancing terms.
The Company currently has a policy of incurring debt only if upon such
incurrence the Company's Debt to Market Capitalization Ratio (as defined
below) would be 50% or less. For purposes of this policy, the Company's "Debt
to Market Capitalization Ratio" is calculated as the Company's proportionate
share of total consolidated and unconsolidated debt (excluding Rowes Wharf) as
a percentage of the sum of the market value of outstanding shares of stock of
the Company and Units plus the Company's proportionate share of total
consolidated and unconsolidated debt (excluding Rowes Wharf). The
organizational documents of the Company do not contain any limitation on the
amount of indebtedness the Company may incur. Accordingly, the Board of
Directors could alter or eliminate this policy and would do so, for example,
if it were necessary in order for the Company to continue to qualify as a
REIT.
The Operating Partnership anticipates that only a small portion of the
principal of its mortgage indebtedness will be repaid prior to maturity. If
the Operating Partnership does not have funds sufficient to repay such
indebtedness at maturity, it may need to refinance such indebtedness. If the
Operating Partnership is unable to refinance this indebtedness on acceptable
terms, it may be forced to dispose of Properties upon disadvantageous terms,
which could result in losses to the Operating Partnership. If prevailing
interest rates or other economic conditions result in higher interest rates at
a time when the Operating Partnership must refinance its indebtedness, the
Operating Partnership's interest expense would increase, which would adversely
affect the Operating Partnership's results of operations. Further, if a
Property or Properties are mortgaged to secure payment of indebtedness and the
Operating Partnership is unable to meet mortgage payments, the mortgagee could
foreclose or otherwise transfer the Property or Properties, with a consequent
loss of income and asset value to the Operating Partnership.
RISK OF ADVERSE EFFECT OF INCREASE IN MARKET INTEREST RATES ON VARIABLE
INTEREST RATES.
Outstanding advances under the Credit Facility bear interest at a variable
rate. The Operating Partnership may incur additional variable rate
indebtedness in the future. Accordingly, increases in interest rates could
increase the Operating Partnership's interest expense, which could adversely
affect the Operating Partnership's results of operations.
LIMITS ON CONTROL AND OTHER RISKS INVOLVED IN JOINT OWNERSHIP OF PROPERTIES.
The Operating Partnership does not own a 100% fee interest in the Center
Plaza Property, the One Post Office Square Property, the Rowes Wharf Property,
the Polk and Taylor Buildings Property or the 75-101 Federal Street Property.
Joint ownership of Properties may, under certain circumstances, involve risks
not otherwise present in wholly-owned properties. Such risks include the fact
that the Operating Partnership is not in a position
S-8
<PAGE>
to exercise sole decision-making authority regarding the Property and the
possibility that the Operating Partnership's partners or co-investors might
become bankrupt, develop business interests or goals inconsistent with the
business interests or goals of the Operating Partnership, or take action
contrary to the instructions or requests of the Operating Partnership or
contrary to the Operating Partnership's policies or objectives. Joint
ownership also involves the potential risk of impasse on decisions, such as a
sale, because neither the Operating Partnership nor the partners or co-
investors have full control over the entity owning the Property. The Operating
Partnership's organizational documents do not limit the amount of available
funds that may be invested in partnerships, joint ventures, or co-investments.
REAL ESTATE INVESTMENT RISKS
GENERAL RISKS.
Investments of the Operating Partnership are subject to the risks incident
to the ownership and operation of commercial real estate generally. The yields
available from equity investments in real estate depend on the amount of
income generated and expenses incurred. If the Properties do not generate
revenues sufficient to meet operating expenses, including debt service and
capital expenditures, the Operating Partnership's results of operations will
be adversely affected.
A commercial property's revenues and value may be adversely affected by a
number of factors, including the national, state and local economic climate;
real estate conditions (such as oversupply of or reduced demand for space and
changes in market rental rates); the perceptions of prospective tenants of the
safety, convenience and attractiveness of the properties; the ability of the
owner to provide adequate management, maintenance and insurance; the ability
to collect all rent from tenants on a timely basis; the expense of
periodically renovating, repairing and reletting spaces; and the increase of
operating costs (including real estate taxes and utilities) that may not be
passed through to tenants. Certain significant expenditures associated with
investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the property. If a property is
mortgaged to secure the payment of indebtedness and if the Operating
Partnership is unable to meet its mortgage payments, a loss could be sustained
as a result of foreclosure on the property or the exercise of other remedies
by the mortgagee. In addition, real estate values and income from properties
are also affected by such factors as compliance with laws, including tax laws,
interest rate levels and the availability of financing.
RISKS OF ACQUISITION ACTIVITIES.
The Operating Partnership intends to acquire existing office and commercial
properties to the extent that they can be acquired on advantageous terms and
meet the Operating Partnership's investment criteria. Acquisitions of
commercial properties entail general investment risks associated with any real
estate investment, including the risk that investments will fail to perform as
expected or that estimates of the cost of improvements to bring an acquired
property up to standards established for the intended market position may
prove inaccurate.
RISKS OF DEVELOPMENT ACTIVITIES.
The Operating Partnership also intends to develop office and other
commercial properties, in accordance with its development and underwriting
policies. Risks associated with such development activities include the risk
that: the Operating Partnership may abandon development opportunities after
expending resources to determine feasibility; construction costs of a project
may exceed original estimates; occupancy rates and rents at a newly completed
property may not be sufficient to make the properties profitable; financing
may not be available on favorable terms for development of a property; and
construction and lease-up may not be completed on schedule, resulting in
increased debt service expense and construction costs. Development activities
are also subject to risks relating to the inability to obtain, or delays in
obtaining, all necessary zoning, land-use, building, occupancy, and other
required governmental permits and authorizations. If any of the foregoing
occurs, the
S-9
<PAGE>
Operating Partnership's results of operations could be adversely affected. In
addition, new development activities, regardless of whether or not they are
ultimately successful, typically require a substantial portion of management's
time and attention.
The Operating Partnership anticipates that future development will be
financed, in whole or in part, through equity and debt offerings or under
lines of credit or other forms of secured or unsecured construction financing
that will result in the risk that, upon completion of construction, permanent
financing for newly-developed properties may not be available or may be
available only on disadvantageous terms. If a project is unsuccessful, the
Operating Partnership's losses may exceed its investment in the project.
POTENTIAL ADVERSE EFFECT ON RESULTS OF OPERATIONS DUE TO RISKS ASSOCIATED
WITH TENANT DEFAULTS.
Substantially all of the Operating Partnership's income is derived from
rental income from real property. Consequently, the Operating Partnership's
results of operations could be adversely affected if a significant number of
tenants at the Properties failed to meet their lease obligations. In the event
of a default by a lessee, the Operating Partnership may experience delays in
enforcing its rights as lessor and may incur substantial costs in protecting
its investment. Additionally, as a significant number of the Operating
Partnership's tenants are in the financial services, legal and accounting
businesses, the Operating Partnership's results of operations would be
adversely affected if these industries experienced a significant reduction in
workforce. At any time, a tenant of the Properties may also seek protection
under the bankruptcy laws, which could result in rejection and termination of
such tenant's lease and thereby cause a reduction in the cash available for
distribution by the Operating Partnership. If a tenant rejects its lease, the
Operating Partnership's claim for breach of the lease would (absent collateral
securing the claim) be treated as a general unsecured claim. No assurance can
be given that the Operating Partnership will not experience significant tenant
defaults in the future.
POTENTIAL ADVERSE EFFECT ON RESULTS OF OPERATIONS DUE TO RISKS ASSOCIATED
WITH GROUND LEASES.
The Rowes Wharf Property, the South Station Property and the 10880 Wilshire
Boulevard Property are the subject of long-term ground leases. See
"Properties." The Operating Partnership's results of operations could be
adversely affected to the extent the Properties subject to ground leases
revert back to the landlord at the termination of the ground lease or the
Operating Partnership incurs additional expense by purchasing the ground under
these Properties at the termination of these ground leases.
POTENTIAL ADVERSE EFFECT ON RESULTS OF OPERATIONS DUE TO RISKS ASSOCIATED
WITH MARKET ILLIQUIDITY.
Equity real estate investments are relatively illiquid. Such illiquidity
will tend to limit the ability of the Operating Partnership to vary its
portfolio promptly in response to changes in economic or other conditions,
such as changes in the local or national real estate market. In addition,
provisions of the Internal Revenue Code limit the Operating Partnership's
ability to sell properties held for fewer than four years, which may affect
the Operating Partnership's ability to sell properties without adversely
affecting results of operations.
POTENTIAL ADVERSE EFFECT ON RESULTS OF OPERATIONS DUE TO OPERATING RISKS.
The Properties are subject to operating risks common to commercial real
estate in general, any and all of which may adversely affect occupancy or
rental rates. The Properties are subject to increases in operating expenses
such as cleaning, electricity, heating, ventilation and air conditioning;
elevator repair and maintenance; insurance and administrative costs; and other
general costs associated with security, landscaping, repairs and maintenance.
While the Operating Partnership's tenants are currently obligated to pay these
escalating costs, there can be no assurance that tenants will agree to pay
such costs upon renewal or that new tenants will agree to pay such costs. If
operating expenses increase, the local rental market may limit the extent to
which rents may be increased to meet such increased expenses without
decreasing occupancy rates. While the Operating Partnership implements cost-
saving incentive measures at each of its Properties, if any of the foregoing
occurs, the Operating Partnership's results of operations could be adversely
affected.
S-10
<PAGE>
RISK OF INVESTMENT IN MORTGAGE DEBT
The Operating Partnership may invest in mortgages that are secured by
existing office and commercial properties in circumstances where the Operating
Partnership anticipates that such investments may result in the Operating
Partnership's acquisition of the related properties through foreclosure
proceedings or negotiated settlements. In addition to the risks associated
with investments in commercial office properties, investments in mortgage
indebtedness present the additional risks that the fee owners of such
properties may default in payments of interest on a current basis or file for
bankruptcy, which may stay the Operating Partnership's foreclosure of such
mortgages and receipt of payments thereunder. Under such circumstances, the
Operating Partnership may not realize its anticipated investment return, and
may sustain losses relating to such investments.
RISK OF ADVERSE EFFECT ON RESULTS OF OPERATIONS DUE TO POSSIBLE ENVIRONMENTAL
LIABILITIES
The Operating Partnership's operating costs may be affected by the
obligation to pay for the cost of complying with existing environmental laws,
ordinances and regulations, as well as the cost of complying with future
legislation. Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under, or in such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible
for, the presence of such hazardous or toxic substances. In addition, the
presence of hazardous or toxic substances, or the failure to remediate such
property properly, may adversely affect the owner's ability to borrow by using
such real property as collateral. Persons who arrange for the transportation,
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility, whether or not such facility is or ever was owned or
operated by such person. Certain environmental laws and common law principles
could be used to impose liability for releases of hazardous materials,
including asbestos-containing materials ("ACMs"), into the environment, and
third parties may seek recovery from owners or operators of real properties
for personal injury associated with exposure to released ACMs or other
hazardous materials. Environmental laws may also impose restrictions on the
manner in which a property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In
connection with the ownership and operation of the Properties, the Operating
Partnership may be potentially liable for any such costs. The cost of
defending against claims of liability or remediating contaminated property and
the cost of complying with such environmental laws could materially adversely
affect the Operating Partnership's results of operations and financial
condition.
Phase I environmental site assessments ("ESAs") have been conducted at all
of the Properties by qualified independent environmental engineers. The
purpose of Phase I ESAs is to identify potential sources of contamination for
which the Properties may be responsible and to assess the status of
environmental regulatory compliance. The ESAs have not revealed any
environmental liability or compliance concerns that the Operating Partnership
believes would have a material adverse effect on the Operating Partnership's
business, assets, results of operations or liquidity, nor is the Operating
Partnership aware of any such liability or concerns. Nevertheless, it is
possible that these ESAs did not reveal all environmental liabilities or
compliance concerns or that material environmental liabilities or compliance
concerns exist of which the Operating Partnership is currently unaware.
The Operating Partnership has not been notified by any governmental
authority, and has no other knowledge of, any material noncompliance,
liability or claim relating to hazardous or toxic substances or other
environmental substances in connection with any of its Properties except as
previously disclosed in documents incorporated herein by reference.
S-11
<PAGE>
POSSIBLE ADDITIONAL RISKS ASSOCIATED WITH INVESTMENTS IN SUBSIDIARIES
Ninety-nine percent of the voting common stock (representing 1% of the
economic interest) of each of Beacon Property Management Corporation and
Beacon Design Corporation (collectively, the "Subsidiary Corporations") is
held by officers and/or directors of such Subsidiary Corporations. The
Operating Partnership holds 1% of such voting common stock and 100% of the
nonvoting common stock of each Subsidiary Corporation (representing a 99%
economic interest). Consequently, the Operating Partnership is not able to
elect directors of the Subsidiary Corporations. As a result, the directors and
management of each of the Subsidiary Corporations may implement business
policies or decisions that would not have been implemented by the Operating
Partnership, and that are adverse to the interests of the Operating
Partnership or that could adversely impact the Operating Partnership's results
of operations.
S-12
<PAGE>
THE OPERATING PARTNERSHIP
The Operating Partnership owns a portfolio of Class A office properties and
other commercial properties located in major metropolitan areas, including
Boston, Atlanta, Chicago, Los Angeles, San Francisco and Washington, D.C., as
well as commercial real estate development, acquisition, leasing and
management businesses. Class A office properties generally are considered to
be those that have excellent locations and access, attract high quality
tenants, are well maintained and professionally managed, and achieve among the
highest rent, occupancy and tenant retention rates within their markets. As of
July 1997, the Properties comprised approximately 18.8 million square feet in
the aggregate. Approximately 67% of the Operating Partnership's net operating
income is produced by Properties located in suburban office markets and
approximately 33% by Properties located in downtown office markets, primarily
in Boston. As of June 30, 1997, the Properties were approximately 97% leased
with over 1,250 tenants.
The Operating Partnership is currently experiencing a period of rapid
growth. The Operating Partnership has invested approximately $675 million in
office properties from January 1997 through July 1997, increasing its
interests in real estate by over 38%.
The sole general partner of the Operating Partnership is the Company, a
self-managed and self-administered REIT. The Company owns approximately 89.6%
of the outstanding Units of the Operating Partnership. Directors and officers
of the Company and members of their families collectively own approximately
$133 million (approximately 6%) of the Company's equity securities. The
Operating Partnership conducts third-party management operations through the
Management Company and conducts third-party tenant space design services
through the Design Company. Through the Management Company, the Operating
Partnership manages approximately 2.2 million square feet of commercial and
office space owned by third parties in various locations, including Boston and
Springfield, Massachusetts and Chicago, Illinois. The Operating Partnership
conducts substantially all of the management operations for wholly-owned
properties through the Management Partnership, and conducts tenant space
design services for wholly-owned properties through the Design Partnership.
The Company expects to meet short-term liquidity needs, such as normal
recurring expenses, debt service requirements and required distributions to
stockholders, from cash flows provided by operating activities. The Company
expects to meet long-term liquidity needs, such as the costs of development,
property acquisitions, scheduled debt maturities, major renovations and
expansions, through long-term secured and unsecured indebtedness and the
issuance of additional equity securities. The Company currently has a policy
of incurring debt only if upon such incurrence the Company's Debt to Market
Capitalization Ratio would be 50% or less. Additionally, it is the Company's
policy not to incur indebtedness other than short-term trade, employee
compensation, distributions payable or similar indebtedness that will be paid
in the ordinary course of business, and that indebtedness shall instead be
incurred by the Operating Partnership to the extent necessary to fund the
business activities conducted by the Operating Partnership, its subsidiaries
and affiliates.
The Operating Partnership's executive offices are located at 50 Rowes Wharf
in Boston, Massachusetts 02110 and its telephone number at that location is
(617) 330-1400.
S-13
<PAGE>
RECENT DEVELOPMENTS
RECENT ACQUISITIONS
Sunnyvale Business Center. In July 1997, the Operating Partnership acquired
a three-building office complex located in Sunnyvale, California (the
"Sunnyvale Business Center") for aggregate consideration of approximately
$34.1 million in cash. The Company estimates that the aggregate purchase price
for the Sunnyvale Business Center is slightly below replacement cost. The
Sunnyvale Business Center consists of three two-story office buildings
comprising an aggregate of approximately 175,000 square feet. The buildings
were built in 1990. Sunnyvale Business Center is 100% occupied by Advanced
Micro Devices, Inc. under a sublease from Silicon Graphics, Inc.
POTENTIAL ACQUISITIONS
As part of its ongoing business, the Operating Partnership continually
engages in discussions with public and private real estate entities regarding
possible portfolio or single asset acquisitions in various major metropolitan
areas. The purchase of any of these potential acquisitions is subject to
satisfaction of numerous conditions, including, without limitation, the
completion of due diligence and the negotiation and execution of definitive
purchase agreements. No assurances can be given that the Operating Partnership
will acquire any of the property acquisition opportunities currently under
review.
S-14
<PAGE>
PROPERTIES
The Operating Partnership owns a portfolio of Class A office properties and
other commercial properties located in major metropolitan areas, including
Boston, Atlanta, Chicago, Los Angeles, San Francisco and Washington, D.C. The
Properties encompass approximately 18.8 million square feet. Class A office
properties generally are considered to have excellent locations and access,
attract high quality tenants, be well maintained and professionally managed
and achieve among the highest rent, occupancy and tenant retention rates
within their markets.
THE DOWNTOWN BOSTON OFFICE MARKET
The following chart describes each of the Operating Partnership's Properties
located in the Downtown Boston Office Market.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
RENTABLE OPERATING AVERAGE ANNUAL NET EFFECTIVE OCCUPANCY
YEAR BUILT/ AREA IN PARTNERSHIP'S % BASE RENT (A) RENT (B) RATE
PROPERTY RENOVATED SQUARE FEET OWNERSHIP (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- ----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
225 Franklin Street..... 1966(c) 929,545 100% $36.61 $32.67 100%
75-101 Federal Street... 1985-1988 812,000 (d) 30.52 20.04 92%
One Post Office Square.. 1981 764,129 50%(e) 24.54 15.70 99%
Center Plaza............ 1966-1969 649,359 (f) 22.66 12.83 97%
150 Federal Street...... 1988 530,279 100% 25.15 21.25 100%
Rowes Wharf............. 1987 344,326 (g) 30.22 18.74 100%
Russia Wharf............ 1978-1982 314,596 100% 14.58 8.28 100%
2 Oliver Street-147 Milk
Street................. 1982-1988 271,000 100% 18.33 11.67 99%
175 Federal Street...... 1977 203,349 100% 25.61 15.62 99%
South Station........... 1988 148,591 (h) 30.85 20.89 100%
--------- ------ ------ ---
Total/Weighted
Average............. 4,967,174 $27.26 $19.49 98%
========= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent step-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
(c) The 225 Franklin Street Property has undergone an approximately $95
million renovation during the past eight years, including installation of
new electrical systems, and a complete upgrade of mechanical systems,
elevators, lobbies, roofs and the exterior plaza of the building.
(d) The Operating Partnership holds approximately 50.8% of the common stock of
BeaMetFed, Inc., a private REIT that holds the fee title to 75-101 Federal
Street.
(e) The Operating Partnership owns One Post Office Square with a joint venture
partner. The Operating Partnership has a 50% interest in and is the
managing venturer of this joint venture.
(f) The Operating Partnership holds a 1% general partner interest, a 75%
limited partner interest and an option to purchase the remaining 24%
limited partner interest in the partnership that owns the Center Plaza
Property.
(g) The Operating Partnership holds a 90% limited partner interest in Rowes
Wharf Limited Partnership ("RWLP"). RWLP and a joint venture partner each
hold a 50% general partner interest in Rowes Wharf Associates ("RWA"), the
partnership that owns the hotel space and leases the office and retail
space at the Rowes Wharf Property. Through its interest in RWLP, the
Operating Partnership owns a 45% indirect
S-15
<PAGE>
limited partner interest in RWA. The general partner of RWLP, has the
authority to mortgage or sell all of RWLP's interest in Rowes Wharf without
the Operating Partnership's consent. The office and retail portions of the
Rowes Wharf Property are subject to a ground lease which expires in 2065,
subject to the Operating Partnership's option to purchase.
(h) The Operating Partnership owns 100% of a ground leasehold in the South
Station Property which expires in 2024, subject to the Operating
Partnership's right to extend for two additional 15-year periods.
THE GREATER BOSTON SUBURBAN OFFICE MARKET
The following chart describes the Operating Partnership's Properties located
in the Greater Boston Suburban Office Market. The Operating Partnership owns a
100% fee interest in each Property located in the Greater Boston Suburban
Office Market, subject to an option to purchase Building Seventeen of the New
England Executive Park Portfolio by the tenant of the Property.
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL
YEAR BUILT/ AREA IN BASE RENT (A) NET EFFECTIVE RENT (B) OCCUPANCY RATE
PROPERTY RENOVATED SQUARE FEET (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- ----------- --------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
Wellesley Office Park... (c) 622,862 $24.70 $17.29 99%
Crosby Corporate
Center................. 1996 336,000 13.91 10.02 98%
175 Wyman Street........ (d) 335,000(d) (d) (d) (d)
Westwood Business
Centre................. 1985 160,400 19.57 11.33 96%
New England Executive
Park Portfolio......... (e) 817,013 19.40 12.44 96%
--------- ------ ------ ---
Total/Weighted Average
(f).................. 2,271,275 $20.19 $13.51 98%
========= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent step-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
(c) The Wellesley Office Park consists of eight office buildings constructed
between 1963 and 1996. The buildings in the Wellesley Office Park range in
size from approximately 29,500 square feet to approximately 155,700 square
feet.
(d) The 175 Wyman Street Property consists of a vacant 335,000 square foot
office/research and development complex and 26.7 acres of land suitable
for development. The Operating Partnership plans to redevelop the Property
into 400,000 square feet of Class A office space.
(e) The New England Executive Park Portfolio consists of nine of the thirteen
office buildings located in the New England Executive Park. The portfolio
was constructed between 1970 and 1985. The buildings in the New England
Executive Park Portfolio range in size from approximately 43,000 square
feet to approximately 218,000 square feet.
(f) Weighted Average excludes 175 Wyman Street.
S-16
<PAGE>
THE CAMBRIDGE OFFICE MARKET
The following chart describes each of the Operating Partnership's Properties
located in the Cambridge Office Market. The Operating Partnership owns a 100%
fee interest in each Property located in the Cambridge Office Market.
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL
YEAR BUILT/ RENTABLE AREA BASE RENT (A) NET EFFECTIVE RENT (B) OCCUPANCY RATE
PROPERTY RENOVATED IN SQUARE FEET (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- -------------- --------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
One Canal Park.......... 1987 100,300 $22.05 $13.99 100%
Ten Canal Park.......... 1987 110,000 19.00 12.16 100%
245 First Street........ 1985-1986 263,227(c) 22.34 17.46 100%
------- ------ ------ ---
Total/Weighted
Average............. 473,527 $21.49 $15.49 100%
======= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent step-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
(c) Riverview I (which consists of approximately 109,000 square feet) and
Riverview II (which consists of approximately 148,000 square feet) are
connected by a four-story atrium comprising approximately 6,000 square
feet.
THE CENTRAL PERIMETER ATLANTA OFFICE MARKET
The following is a description of the buildings located in the Perimeter
Center Portfolio. The Operating Partnership owns a 100% fee interest in each
of the Properties in the Perimeter Center Portfolio.
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL OCCUPANCY
YEAR BUILT/ RENTABLE AREA BASE RENT (A) NET EFFECTIVE RENT (B) RATE
PROPERTY RENOVATED IN SQUARE FEET (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- -------------- --------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
North Terraces.......... 1984 492,845 $20.39 $14.27 97%
South Terraces.......... 1986 494,513 20.83 13.28 100%
8,10,12,14,16 Perimeter
Center East............ 1970 64,998 15.01 10.20 95%
20,22,24,26 Perimeter
Center East............ 1973 69,727 15.17 9.74 88%
28,30,32 Perimeter
Center East............ 1974 104,816 14.11 8.68 98%
41 Perimeter Center
East................... 1974 92,021 15.52 9.98 98%
47 Perimeter Center
East................... 1974 92,021 15.35 9.89 92%
50 Perimeter Center
East................... 1981 6,300 6.62 6.62 100%
53 Perimeter Center
East................... 1972 90,505 15.78 11.05 94%
56 Perimeter Center
East................... 1977 93,625 15.72 8.56 87%
64 Perimeter Center
East................... 1971 183,037 5.34 2.38 100%
64A Perimeter Center
East................... 1985 372,498 20.66 17.39 100%
70,72,74,76 Perimeter
Center East............ 1972 61,932 15.84 10.68 97%
125 Perimeter Center
West................... 1972 223,059 4.10 3.07 100%
219 Perimeter Center
Parkway................ 1979 127,697 15.77 11.39 94%
223 Perimeter Center
Parkway................ 1978 127,823 16.50 11.43 100%
245 Perimeter Center
Parkway................ 1981 229,217 17.89 11.36 100%
301 Perimeter Center
North.................. 1982 151,416 18.47 12.25 100%
303 Perimeter Center
North.................. 1989 162,256 20.98 14.70 100%
Park Place Shopping
Center................. 1979 61,830 16.32 12.96 100%
--------- ------ ------ ---
Total/Weighted
Average............. 3,302,136 $16.85 $11.61 98%
========= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent step-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
S-17
<PAGE>
THE ARLINGTON COUNTY. VIRGINIA MARKET
The following chart describes each of the Operating Partnership's Properties
located in the Arlington County, Virginia Market.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
RENTABLE OPERATING AVERAGE ANNUAL NET EFFECTIVE OCCUPANCY
YEAR BUILT/ AREA IN PARTNERSHIP'S % BASE RENT (A) RENT (B) RATE
PROPERTY RENOVATED SQUARE FEET OWNERSHIP (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- ----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Polk and Taylor
Buildings(c)........... 1970 890,000 10%(d) $23.77 $19.23 100%
1300 North 17th Street.. 1980 372,865 100% 24.14 17.09 99%
1616 North Ft. Myer
Drive.................. 1974 292,826 100% 23.38 15.47 100%
--------- ------ ------ ---
Total/Weighted
Average............. 1,555,691 $23.78 $18.01 100%
========= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent step-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
(c) The Polk and Taylor Buildings Property is comprised of two buildings
commonly known as the James K. Polk Building (National Center 2) and the
Zachary Taylor Building (National Center 3), numbered 2521 and 2531
Jefferson Davis Highway, respectively.
(d) The Operating Partnership holds a 10% general and limited partner interest
in the partnership that owns the Polk and Taylor Buildings Property.
THE FAIRFAX COUNTY, VIRGINIA MARKET
The following chart describes each of the Operating Partnership's Properties
located in the Fairfax County, Virginia Market. The Operating Partnership owns
a 100% fee interest in each Property located in the Fairfax County, Virginia
Market.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
RENTABLE AVERAGE ANNUAL NET EFFECTIVE OCCUPANCY
YEAR BUILT AREA IN BASE RENT (A) RENT (B) RATE
PROPERTY RENOVATED SQUARE FEET (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ---------- ----------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
John Marshall I......... 1981 261,364 $18.26 $15.85 100%
E.J. Randolph........... 1983 164,677 21.08 15.24 99%
Northridge I............ 1988 124,319 25.96 19.34 100%
Centerpointe I and II... 1988-1990 408,962(c) 16.42 12.72 99%
------- ------ ------ ---
Total/Weighted
Average............. 959,322 $18.96 $14.87 99%
======= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent step-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
(c) Centerpointe I and Centerpointe II each consist of 204,481 square feet.
S-18
<PAGE>
WASHINGTON, D.C. OFFICE MARKET
1333 H. Street, N.W. The 1333 H Street N.W. Property is an 11-story office
property comprising approximately 239,000 square feet, approximately 205,000
of which was built in 1982. The Operating Partnership owns a 100% fee interest
in the Property. As of June 30, 1997, the average annual Base Rent per square
foot and average annual Net Effective Rent per square foot for the 1333 H
Street, N.W. Property were $27.34 and $20.11, respectively. As of June 30,
1997, the Property was approximately 91% leased.
SUBURBAN CHICAGO OFFICE MARKET
The following chart describes each of the Operating Partnership's Properties
located in the Suburban Chicago Office Market. The Operating Partnership owns
a 100% fee interest in each Property located in the Suburban Chicago Office
Market.
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL OCCUPANCY
YEAR BUILT/ RENTABLE AREA BASE RENT (A) NET EFFECTIVE RENT (B) RATE
PROPERTY RENOVATED IN SQUARE FEET (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- -------------- --------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
Westbrook Corporate
Center................. 1985-1996 1,106,000 $24.23 $18.83 92%
AT&T Plaza.............. 1984 225,318 21.02 14.19 98%
Tri-State
International.......... 1986 548,000 22.41 15.55 81%
Presidents Plaza........ 1980-1982 791,000 19.64 11.73 95%
--------- ------ ------ ---
Total/Weighted
Average............. 2,670,318 $22.23 $15.66 91%
========= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent set-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
THE WEST LOS ANGELES OFFICE MARKET
The following chart describes each of the Operating Partnership's Properties
located in the West Los Angeles Office Market. The Operating Partnership owns
a 100% fee interest in the 10960 Wilshire Boulevard Property. The Operating
Partnership also holds a ground leasehold interest in 10880 Wilshire Boulevard
which expires in 2068. The Operating Partnership has an option to purchase the
ground under 10880 Wilshire Boulevard at fair market value in 2001.
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL OCCUPANCY
YEAR BUILT/ RENTABLE AREA BASE RENT (A) NET EFFECTIVE RENT (A) RATE
PROPERTY RENOVATED IN SQUARE FEET (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- -------------- --------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
10960 Wilshire
Boulevard.............. 1971/1992 543,804 $24.70 $18.52 89%
10880 Wilshire
Boulevard.............. 1970/1992 531,176 20.32 16.40 85%
--------- ------ ------ ---
Total/Weighted
Average............. 1,074,980 $22.53 $17.48 87%
========= ====== ====== ===
</TABLE>
- --------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) Net Effective Rent is Base Rent adjusted on a straight-line basis for
contractual rent step-ups and free rent periods, plus tenant payments on
account of real estate tax and operating expense escalations, less total
operating expenses and real estate taxes.
S-19
<PAGE>
SILICON VALLEY OFFICE/R&D MARKET
The following chart describes each of the Operating Partnership's Properties
located in the Silicon Valley Office/R&D Market. The Operating Partnership
owns a 100% fee interest in each Property located in the Silicon Valley
Office/R&D Market.
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL OCCUPANCY
YEAR BUILT/ RENTABLE AREA NET RENT (A) NET RENT, AS ADJUSTED (B) RATE
PROPERTY RENOVATED IN SQUARE FEET (AS OF 6/30/97) (AS OF 6/30/97) (AS OF 6/30/97)
- -------- ----------- -------------- --------------- ------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Shoreline Technology
Park................... 1985-1991 726,500 $17.88 $18.77 100%
Lake Marriott Business
Park................... 1981 400,000 10.29 10.78 100%
Sunnyvale Business
Center................. 1990 175,000 18.40 18.76 100%
--------- ------ ------ ---
Total/Weighted
Average............. 1,301,500 $15.62 $16.31 100%
========= ====== ====== ===
</TABLE>
- --------
(a) Shoreline Technology Park and substantially all of the Lake Marriott
Business Park are leased pursuant to triple net leases.
(b) Net rent, as adjusted on a straight-line basis to take into effect
periodic increases in net rent.
S-20
<PAGE>
LEASE EXPIRATIONS
The following tables set forth lease expirations (in square feet) for the
Operating Partnership's Properties by market area.
<TABLE>
<CAPTION>
LEASE EXPIRATIONS--ALL PROPERTIES
--------------------------------------------------------------------------------------------------------------
7/1/97
TO
MARKET AREA 12/31/97 1998 1999 2000 2001 2002 2003 2004
- ----------- ---------- ---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Downtown 249,466 395,270 425,144 510,748 784,437 607,867 188,860 192,319
Boston.......... square feet (a)
% sq. ft (b) 5.0% 8.0% 8.6% 10.3% 15.8% 12.2% 3.8% 3.9%
annual rent (c) 6,075,594 11,980,492 11,307,576 14,912,355 25,855,489 19,141,590 5,429,553 6,319,978
psf (d) $24.35 $30.31 $26.60 $29.20 $32.96 $31.49 $28.75 $32.86
tenants (e) 51 65 64 73 48 40 11 14
Suburban 306,574 224,914 198,839 198,607 168,590 119,454 53,521 104,177
Boston.......... square feet (a)
% sq. ft (b) 15.7% 11.6% 10.2% 10.2% 8.7% 6.1% 2.7% 5.4%
annual rent (c) 5,973,980 5,014,640 3,834,196 4,512,207 4,027,004 3,196,474 1,343,979 2,304,107
psf (d) $19.49 $22.30 $19.28 $22.72 $23.89 $26.76 $25.11 $22.12
tenants (e) 29 39 30 33 30 22 4 5
Cambridge....... square feet (a) 0 3.499 1,411 6,320 315,964 116,601 28,000 0
% sq. ft (b) 0.0% 0.7% 0.3% 1.3% 66.6% 24.6% 5.9% 0.0%
annual rent (c) 0 127,832 31,606 83,269 8,165,274 2,632,857 709,712 0
psf (d) $0.00 $36.53 $22.40 $13.18 $25.84 $22.58 $25.35 $0.00
tenants (e) 0 1 1 1 4 2 1 0
Central 175,793 301,259 682,727 354,180 877,258 165,104 36,301 234,772
Perimeter
Atlanta......... square feet (a)
% sq. ft (b) 5.3% 9.1% 20.7% 10.7% 26.6% 5.0% 1.1% 7.1%
annual rent (c) 3,379,801 4,956,704 13,060,126 7,123,239 15,897,573 3,902,076 856,054 1,297,628
psf (d) $19.23 $16.45 $19.13 $20.11 $18.12 $23.63 $23.58 $5.53
tenants (e) 29 55 60 40 44 15 4 4
Arlington 899,368 25,910 5,672 137,494 163,407 82,277 90,458 22,470
County, VA...... square feet (a)
% sq. ft (b) 57.8% 1.7% 0.4% 8.8% 10.5% 5.3% 5.8% 1.4%
annual rent (c) 17,970,646 656,494 133,333 3,724,838 4,212,266 1,876,142 2,365,666 656,940
psf (d) $19.98 $25.34 $23.51 $27.09 $25.78 $22.80 $26.15 $29.24
tenants (e) 9 5 2 10 6 5 5 1
Fairfax County, 19,293 14,481 36,544 137,943 67,282 48,493 4,890 68,821
VA.............. square feet (a)
% sq. ft (b) 2.0% 1.5% 3.8% 14.4% 7.0% 5.1% 0.5% 7.2%
annual rent (c) 319,499 288,774 775,128 3,585,474 1,699,923 1,011,741 98,582 1,705,126
psf (d) $16.56 $19.94 $21.21 $25.99 $25.27 $20.86 $20.16 $24.78
tenants (e) 2 6 4 3 7 7 1 2
Washington, 4,004 4,045 2,945 8,835 5,852 68,099 14,708 0
D.C. ........... square feet (a)
% sq. ft (b) 1.7% 1.7% 1.2% 3.7% 2.5% 28.5% 6.2% 0.0%
annual rent (c) 111,880 115,428 80,988 243,846 161,524 2,054,518 461,684 0
psf (d) $27.94 $28.54 $27.50 $27.60 $27.60 $30.17 $31.39 $0.00
tenants (e) 2 3 1 4 2 4 1 0
Suburban 156,012 209,743 238,557 408,061 343,803 268,873 207,837 98,059
Chicago......... square feet (a)
% sq. ft (b) 5.8% 7.9% 8.9% 15.3% 12.9% 10.1% 7.8% 3.7%
annual rent (c) 3,354,965 5,115,996 6,225,117 11,426,008 9,017,771 7,112,043 5,235,881 2,585,495
psf (d) $21.50 $24.39 $26.09 $28.00 $26.23 $26.45 $25.19 $26.37
tenants (e) 27 30 33 36 38 22 12 7
<CAPTION>
----------
2005 &
MARKET AREA BEYOND
- ----------- ----------
<S> <C> <C>
Downtown 1,521,212
Boston.......... square feet (a)
% sq. ft (b) 30.6%
annual rent (c) 62,668,541
psf (d) $41.20
tenants (e) 27
Suburban 529,275
Boston.......... square feet (a)
% sq. ft (b) 27.2%
annual rent (c) 11,755,413
psf (d) $22.21
tenants (e) 8
Cambridge....... square feet (a) 0
% sq. ft (b) 0.0%
annual rent (c) 0
psf (d) $0.00
tenants (e) 0
Central 409,619
Perimeter
Atlanta......... square feet (a)
% sq. ft (b) 12.4%
annual rent (c) 10,082,282
psf (d) $24.61
tenants (e) 5
Arlington 128,159
County, VA...... square feet (a)
% sq. ft (b) 8.2%
annual rent (c) 3,556,443
psf (d) $27.75
tenants (e) 4
Fairfax County, 554,769
VA.............. square feet (a)
% sq. ft (b) 57.9%
annual rent (c) 13,039,779
psf (d) $23.50
tenants (e) 5
Washington, 108,536
D.C. ........... square feet (a)
% sq. ft (b) 45.5%
annual rent (c) 3,660,672
psf (d) $33.73
tenants (e) 2
Suburban 496,584
Chicago......... square feet (a)
% sq. ft (b) 18.6%
annual rent (c) 14,449,347
psf (d) $29.10
tenants (e) 17
</TABLE>
S-21
<PAGE>
<TABLE>
<CAPTION>
LEASE EXPIRATIONS--ALL PROPERTIES
----------------------------------------------------------------------------------------------------------
7/1/97
TO
MARKET AREA 12/31/97 1998 1999 2000 2001 2002 2003 2004
- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
West Los 23,922 10,197 33,172 201,010 151,557 203,195 34,801 93,707
Angeles......... square feet (a)
% sq. ft (b) 2.2% 0.9% 3.1% 18.7% 14.1% 18.9% 3.2% 8.7%
annual rent (c) 585,840 292,711 917,803 5,526,941 4,462,547 6,381,888 1,134,632 3,041,886
psf (d) $24.49 $28.71 $27.67 $27.50 $29.44 $31.41 $32.60 $32.46
tenants (e) 1 3 8 23 20 10 3 3
Silicon Valley.. square feet (a) 60,548 9,465 24,548 509,320 205,932 0 0 0
% sq. ft (b) 5.4% 0.8% 2.2% 45.2% 18.3% 0.0% 0.0% 0.0%
annual rent (c) 938,578 133,634 241,383 7,991,481 3,554,326 0 0 0
psf (d) $15.50 $14.12 $9.83 $15.69 $17.26 $0.00 $0.00 $0.00
tenants (e) 2 2 3 7 1 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 1,894,980 1,198,783 1,649,559 2,472,518 3,084,082 1,679,963 659,376 814,325
Properties...... square feet (a)
% sq. ft (b) 10.3% 6.5% 9.0% 13.5% 16.8% 9.2% 3.6% 4.4%
annual rent (c) 38,710,783 28,682,704 36,607,256 59,129,659 77,053,697 47,309,329 17,635,744 17,911,161
psf (d) $20.43 $23.93 $22.19 $23.91 $24.98 $28.16 $26.75 $22.00
tenants (e) 152 209 206 230 200 127 42 36
<CAPTION>
------------
2005 &
MARKET AREA BEYOND
- ----------- -----------
<S> <C> <C>
West Los 185,152
Angeles......... square feet (a)
% sq. ft (b) 17.2%
annual rent (c) 6,256,648
psf (d) $33.79
tenants (e) 5
Silicon Valley.. square feet (a) 314,997
% sq. ft (b) 28.0%
annual rent (c) 5,967,949
psf (d) $18.95
tenants (e) 2
-----------
Total 4,248,303
Properties...... square feet (a)
% sq. ft (b) 23.2%
annual rent (c) 131,437,074
psf (d) $30.94
tenants (e) 76
</TABLE>
- ----
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate tax
and operating expense escalations, except leases with CPI increases in
lieu of expense recoveries (amounts in dollars)
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-22
<PAGE>
MORTGAGE INDEBTEDNESS AND CREDIT FACILITY
The Operating Partnership's total outstanding consolidated mortgage debt and
its proportionate share of the total outstanding unconsolidated mortgage debt
on the Properties (excluding Rowes Wharf) was approximately $679.3 million at
September 1, 1997. Additionally, at September 1, 1997, the Operating
Partnership's outstanding balance under the Credit Facility was $204.0
million. The following table sets forth certain information regarding the
consolidated and unconsolidated mortgage debt obligations of the Operating
Partnership, including mortgage obligations relating to specific Properties,
and the Credit Facility. All of the mortgage debt is nonrecourse to the
Operating Partnership.
<TABLE>
<CAPTION>
PRINCIPAL OPERATING
AMOUNT PARTNERSHIP'S
(AS OF PORTION OF INTEREST MATURITY
PROPERTY 9/1/97) PRINCIPAL RATE DATE(A)
- -------- --------- ------------- -------- --------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
MORTGAGE INDEBTEDNESS:
CONSOLIDATED PROPERTIES
175 Federal Street.................. 12.8 12.8 8.00% 7/1/98
150 Federal Street.................. 56.6 56.6 6.67% 11/1/98
Centerpointe I & II................. 30.0 30.0 7.32% 2/28/01
Wellesley Office Park............... 55.0 55.0 7.23% 2/1/03
Center Plaza........................ 60.0 60.0 7.23% 3/1/03
John Marshall I..................... 20.2 20.2 8.63% 6/1/04
Perimeter Center.................... 218.0 218.0 7.08% 3/31/06
Northridge I........................ 13.6 13.6 8.19% 1/1/07
E.J. Randolph....................... 15.0 15.0 8.19% 1/1/07
Westbrook Corporate Center.......... 105.7 105.7 8.00% 5/1/07
------ ------
Total Consolidated Properties..... $586.9 $586.9
------ ------
UNCONSOLIDATED PROPERTIES WITH RE-
SPECT TO WHICH THE OPERATING PART-
NERSHIP IS A GENERAL PARTNER OR
SHAREHOLDER
One Post Office Square.............. $ 67.1 $ 33.6 7.00% 8/1/00
One Post Office Square.............. 24.7 12.4 8.25% 8/1/00
70-101 Federal Street............... 90.0 46.4 7.61% 10/1/02
------ ------
Total Unconsolidated Properties... 181.8 92.4
------ ------
Total Mortgage Debt............... $768.7 $679.3
====== ======
CREDIT FACILITY..................... $204.0 $204.0 (b) 3/31/00
====== ======
</TABLE>
- --------
(a) All mortgage debt is subject to principal amortization over periods of 20
to 25 years and is prepayable prior to maturity subject to certain
conditions and penalties.
(b) At the Operating Partnership's option, at either (i) the higher of (x)
BankBoston, N.A.'s base interest rate and (y) one-half of one percent (
1/2%) above the overnight federal funds effective rate or (ii) the
Eurodollar rate plus 90 basis points (0.90%).
S-23
<PAGE>
USE OF PROCEEDS
The net cash proceeds to the Operating Partnership from the sale of the
Notes offered hereby, after deduction of estimated expenses of this offering,
are estimated to be approximately $297.9 million. The Operating Partnership
intends to apply approximately $204.0 million of the net proceeds of this
offering to repay amounts drawn under the Credit Facility and the remaining
approximately $93.9 million for general corporate and working capital
purposes, including, without limitation, funding of potential acquisitions.
All outstanding borrowings under the Credit Facility mature in March 2000 and
generally bear interest, at the Operating Partnership's option, at either (i)
the higher of (x) BankBoston, N.A.'s base interest rate and (y) one-half of
one percent ( 1/2%) above the overnight federal funds effective rate or (ii)
the Eurodollar rate plus 90 basis points (.90%). No prepayment penalties are
required in connection with the repayment of the Credit Facility.
Pending the uses described above, the net proceeds will be invested 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.
Such investments may include, for example, government and government agency
securities, certificates of deposit, interest-bearing bank deposits and
mortgage loan participations.
S-24
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Company's Common Stock trades on the NYSE under the symbol "BCN." On
September 3, 1997, the reported closing sale price per share of Common Stock
on the NYSE was $35 7/16. The following table sets forth the quarterly high
and low closing sales prices per share of the Common Stock reported on the
NYSE and the distributions paid by the Company with respect to each such
period.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DISTRIBUTIONS
------------- ------- ------- -------------
<S> <C> <C> <C>
March 31, 1995................................... $20 $17 1/2 $ .40
June 30, 1995.................................... $21 1/8 $19 1/4 $ .42
September 30, 1995............................... $21 3/4 $19 7/8 $ .42
December 31, 1995................................ $23 $20 1/8 $ .42
March 31, 1996................................... $26 5/8 $22 5/8 $ .42
June 30, 1996.................................... $26 1/4 $24 1/4 $.4625
September 30, 1996............................... $29 $24 3/4 $.4625
December 31, 1996................................ $37 $28 3/4 $.4625
March 31, 1997................................... $36 3/8 $33 1/8 $.4625
June 30, 1997.................................... $33 5/8 $29 7/8 $ .50
September 30, 1997 (through September 3, 1997)... $36 7/8 $33 1/8 N/A
</TABLE>
The Company currently pays a quarterly distribution on its Common Stock of
$.50 per share which, on an annualized basis, is equal to an annual
distribution of $2.00 per share of Common Stock. Future distributions by the
Company will be at the discretion of the Board of Directors and will depend on
the Company's financial condition, its capital requirements, the annual
distribution requirements under the REIT provisions of the United States Code
and such other factors as the Board of Directors deems relevant. There can be
no assurance that any such distributions will be made by the Company.
The Company has adopted a dividend reinvestment program under which holders
of Common Stock may elect automatically to reinvest dividends in additional
Common Stock. The Company may, from time to time, repurchase Common Stock in
the open market for purposes of fulfilling its obligations under this dividend
reinvestment program or may elect to issue additional Common Stock.
S-25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership on an historical basis as of June 30, 1997, and for the Operating
Partnership as adjusted to give effect to the issuance and sale of the Notes
and application of the net proceeds therefrom. See "Use of Proceeds." The
information set forth in the table should be read in conjunction with the
summary and selected financial information presented elsewhere in this
Prospectus Supplement and the Consolidated Financial Statements and notes
thereto incorporated by reference into the accompanying Prospectus.
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Credit Facility........................................ $ 149,000 $ --
Mortgage Notes Payable................................. 587,503 587,503
The Notes.............................................. -- 300,000
---------- ----------
Total Debt............................................ 736,503 887,503
---------- ----------
Limited Partners' Capital Interest
7,343,451 units issued and outstanding at redemption
value................................................. 244,629 244,629
---------- ----------
PARTNER'S CAPITAL:
Operating Partnership Units--63,375,143 issued and out-
standing
General partner--outstanding 553,751................... 13,210 13,210
Limited partner--outstanding 54,821,392................ 1,106,330 1,106,330
Series A Preferred partner--outstanding 8,000,000
(aggregate liquidation preference of $200 million).... 194,248 194,248
---------- ----------
Total partner's capital............................. 1,313,788 1,313,788
---------- ----------
Total capitalization................................ $2,294,920 $2,445,920
========== ==========
</TABLE>
S-26
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial and operating information
for the Operating Partnership and on a combined historical basis for the
Operating Partnership and The Beacon Group (the "Predecessor"). The
consolidated results of operations for the six months ended June 30, 1997 and
1996 have been derived from unaudited financial statements. The consolidated
results of operations of the Operating Partnership for the years ended
December 31, 1996 and 1995 and for the period from May 26, 1994 to December
31, 1994, the combined results of operations of the Predecessor for the period
from January 1, 1994 to May 25, 1994 and the combined historical operating
information of the Predecessor for the years ended December 31, 1993 and 1992
have been derived from the financial statements audited by Coopers & Lybrand
L.L.P., independent accountants, whose report with respect to the years 1992
through 1996 is incorporated by reference into the accompanying Prospectus.
S-27
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP PREDECESSOR
------------------------------------------------------------------ ----------------------------------
SIX MONTHS SIX MONTHS FOR THE PERIOD
ENDED ENDED FOR THE FOR THE MAY 26, 1994 FOR THE PERIOD YEARS ENDED
JUNE 30, JUNE 30, YEAR ENDED YEAR ENDED TO JANUARY 1, 1994 DECEMBER 31,
1997 1996 DECEMBER 31, DECEMBER 31, DECEMBER 31, TO MAY 25, ------------------
(UNAUDITED) (UNAUDITED) 1996 1995 1994 1994 1993 1992
----------- ----------- ------------ ------------ -------------- --------------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING
INFORMATION:
Revenues:
Rental Income....... $ 134,688 $ 60,051 $ 147,825 $ 69,781 $ 23,702 $ 5,776 $ 14,315 $ 11,406
Management fees..... 1,579 1,517 3,005 2,203 -- 1,521 3,533 3,331
Recoveries from
tenants............ 17,598 6,782 16,719 9,524 4,395 1,040 2,349 1,989
Mortgage interest
income............. 2,759 2,165 4,970 2,546 -- -- -- --
Other income........ 6,121 4,590 11,249 5,985 2,671 675 2,176 2,003
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Total Revenue..... 162,745 75,105 183,768 90,039 30,768 9,012 22,373 18,729
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Expenses:
Property expenses... 31,316 14,770 37,210 17,698 6,497 2,086 4,580 4,522
Real estate taxes... 17,480 7,831 18,124 9,950 3,015 595 1,354 1,204
General and
administrative..... 17,681 7,281 19,218 9,444 2,943 1,399 4,357 4,658
Mortgage interest
expense............ 22,663 13,661 30,300 15,220 4,970 2,798 7,650 7,203
Interest--
amortization of
financing costs.... 737 1,184 2,084 1,370 617 373 192 138
Depreciation and
amortization....... 31,816 13,349 33,170 17,233 6,727 2,385 5,577 5,505
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Total Expenses.... 121,693 58,076 140,106 70,915 24,769 9,636 23,710 23,230
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Income (loss) from
operations......... 41,052 17,029 43,662 19,124 5,999 (624) (1,337) (4,501)
Equity (loss) in
joint ventures and
corporations (1)... 3,271 2,575 4,899 3,103 858 198 (5,953) (1,544)
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Income (loss) from
continuing
operations before
minority interest.. 44,323 19,604 48,561 22,227 6,857 (426) (7,290) (6,045)
Minority interest in
partnerships and
corporations....... -- -- (15) (36) (8) 931 1,539 2,656
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Income (loss) from
continuing
operations......... 44,323 19,604 48,546 22,191 6,849 505 (5,751) (3,389)
Discontinued
Operations--
Construction
Company
Income (loss) from
operations........ (1,473) (1,070) (2,609) (12) 477 102 440 136
Loss on sale....... -- -- (249) -- -- -- -- --
Gain on sale of
property........... 16,736 -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Income (loss) before
extraordinary
items.............. 59,586 18,534 45,688 22,179 7,326 607 (5,311) (3,253)
Extraordinary
items.............. (2,635) (3,876) (3,876) -- -- 8,898 1,554 --
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Net income (loss)... $ 56,951 $ 14,658 $ 41,812 $ 22,179 $ 7,326 $ 9,505 $ (3,757) $ (3,253)
========== ========== ========== ========== ========== ======= ======== ========
Per unit data:
Income before
extraordinary
items............. $ 1.02 $ .64 $ 1.32 $ 1.09 $ 0.48 -- -- --
Extraordinary
items............. (.05) (.13) (0.11) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ------- -------- --------
Net income......... $ .97 $ .51 $ 1.21 $ 1.09 $ 0.48 -- -- --
========== ========== ========== ========== ========== ======= ======== ========
Distributions
declared.......... $ .925 $ .84 $ 1.765 $ 1.24 $ 0.96 -- -- --
Distributions
paid.............. $ .925 $ .84 $ 1.765 $ 1.64 $ .0.56 -- -- --
Weighted average
units
outstanding....... 57,731,389 28,872,503 34,446,907 20,323,327 15,270,899 -- -- --
</TABLE>
S-28
<PAGE>
<TABLE>
<CAPTION>
OPERATING PARTNERSHIP PREDECESSOR
------------------------------------------------------------------ ----------------------------------
SIX MONTHS SIX MONTHS FOR THE PERIOD
ENDED ENDED FOR THE FOR THE MAY 26, 1994 FOR THE PERIOD YEARS ENDED
JUNE 30, JUNE 30, YEAR ENDED YEAR ENDED TO JANUARY 1, 1994 DECEMBER 31,
1997 1996 DECEMBER 31, DECEMBER 31, DECEMBER 31, TO MAY 25, ------------------
(UNAUDITED) (UNAUDITED) 1996 1995 1994 1994 1993 1992
----------- ----------- ------------ ------------ -------------- --------------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate before
accumulated
depreciation........ $ 2,295,915 $ 824,924 $ 1,691,530 $ 471,142 $ 385,852 $ 82,198 $ 81,220 $ 78,580
Total assets......... 2,386,146 927,264 1,778,913 534,723 385,565 77,470 85,497 93,327
Mortgage debt........ 587,503 403,218 452,212 70,536 90,936 69,240 87,091 86,610
Note Payable, Credit
Facility............ 149,000 -- 153,000 130,500 130,300 -- -- --
Total liabilities.... 827,729 451,354 671,283 239,009 260,468 129,836 143,451 142,015
Total partners
capital............. 1,313,788 475,911 1,107,630 295,714 139,691 (52,366) (57,954) (48,688)
OTHER DATA:
Funds from Operations
(FFO) after
allocation of Series
A Preferred Unit
Distributions (2)... $ 75,851 $ 33,874 $ 83,154 $ 41,913 $ 17,262 -- -- --
Cash Flows provided
by (used by):
Operating
activities......... 92,190 35,159 92,232 32,963 11,155 241 5,408 10,069
Investing
activities......... (433,076) (358,250) (1,097,870) (145,924) (233,830) (1,102) (9,890) (2,091)
Financing
activities......... 354,088 351,212 1,037,053 102,636 237,481 (716) (830) (3,983)
Ratios:
Interest Coverage
(3)(5).............. 3.7 2.9 3.1 3.1 2.7 -- -- --
Fixed Charge Coverage
(4)(5).............. 3.4 2.8 2.9 2.9 2.6 -- -- --
Debt to Total
Assets.............. 30.9% 43.5% 34.0% 37.6% 57.4% -- -- --
Secured Debt to Total
Assets.............. 24.6% 43.5% 34.0% 37.6% 57.4% -- -- --
Unencumbered Assets
to Total Unsecured
Debt................ 8.8 n/a n/a n/a n/a -- -- --
- -----
(1) Including deductions for:
Depreciation and
amortization........ $ 2,076 $ 1,994 $ 4,033 $ 2,306 $ 3,013
Interest-amortization
of financing cost... $ 448 $ 448 $ 898 $ 853 $ 796
</TABLE>
S-29
<PAGE>
(footnotes continued from preceding page)
(2) The Operating Partnership believes that to facilitate a clear
understanding of the operating results of the Operating Partnership, Funds
from Operations ("FFO") should be examined in conjunction with net income.
The definition of FFO was clarified in the NAREIT White Paper, adopted by
the NAREIT Board of Governors on March 3, 1995, as net income (computed in
accordance with generally accepted accounting principles), excluding gains
(or losses) from debt restructuring and sales of property, plus
depreciation and amortization (in each case only real estate related
assets), and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures
will be calculated to reflect FFO on the same basis. FFO should not be
considered as a substitute for net income as an indication of the
Operating Partnership's performance or as a substitute for cash flow as a
measure of its liquidity. The Operating Partnership's method of
calculating FFO may be different from methods used by other companies.
(3) For purposes of computing the ratio of EBITDA to interest expense, EBITDA
represents earnings before interest, taxes, depreciation and amortization.
Interest expense includes the Operating Partnership's pro rata share of
joint venture interest expense.
(4) For purposes of computing the ratio of EBITDA to fixed charges, EBITDA
represents earnings before interest, taxes, depreciation and amortization.
Fixed charges consist of interest costs, whether expensed or capitalized
and including the Operating Partnership's pro rata share of joint venture
interest expense, principal amortization including the Operating
Partnership's pro rata share of joint venture principal amortization, plus
any distributions on outstanding preferred units.
(5) EBITDA (i) does not represent cash flow from operations as defined by
generally accepted accounting principles, (ii) should not be considered as
an alternative to net income (determined in accordance with GAAP) as a
measure of operating performance; and (iii) is not an alternative to cash
flows as a measure of liquidity. The Operating Partnership's management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance
of a company because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
company to incur and service debt and to fund acquisitions and other
capital expenditures. To evaluate EBITDA and the trends it depicts, the
components of EBITDA, such as revenues and operating expenses, should be
considered. The Operating Partnership's method of calculating EBITDA may
be different from the methods used by other companies.
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the "Senior Debt
Securities" set forth in the accompanying Prospectus under "Description of
Debt Securities," to which reference is hereby made.
GENERAL
The 2002 Notes and the 2007 Notes each constitute a separate series of
Senior Debt Securities (which are more fully described in the accompanying
Prospectus) to be issued under an Indenture, to be dated as of September ,
1997 (the "Original Indenture"), as supplemented by Supplemental Indenture No.
1, to be dated as of September , 1997 (the "Supplemental Indenture" and
together with the Original Indenture, the "Indenture"), between the Operating
Partnership and State Street Bank and Trust Company (the "Trustee"). The form
of the Indenture has been filed as an exhibit to the Registration Statement
pursuant to which the Notes have been registered and is available for
inspection at the offices of the Operating Partnership. The Indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made hereunder relating to the Indenture and the Notes
are summaries of certain provisions thereof, do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture and the Notes. All capitalized terms used but not
defined herein shall have the respective meanings set forth in the Indenture.
The Notes will be direct, senior unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership from time to time outstanding. The
Notes will be effectively subordinated to mortgages and other secured
indebtedness of the Operating Partnership and to indebtedness and other
liabilities of subsidiaries of the Operating Partnership. Accordingly, such
prior indebtedness will have to be satisfied in full before Holders (as
defined below) of the Notes will be able to realize any value from encumbered
or indirectly-held properties. In addition, the Notes will be repaid solely
from the assets of the Operating Partnership; Holders of the Notes will not
have recourse against any general partner or limited partner of the Operating
Partnership for the repayment of the Notes.
As of September 1, 1997, on a pro forma basis after giving effect to the
offering of the Notes and the application of the net proceeds therefrom as
described under "Use of Proceeds," the Operating Partnership would have had
approximately $886.9 million of indebtedness, of which approximately $586.9
million would have been secured by 53 of the Properties. The Operating
Partnership may incur additional indebtedness, including secured indebtedness,
subject to the provisions described below under "--Certain Covenants--
Limitations on Incurrence of Indebtedness."
The Notes will only be issued in fully registered form in denominations of
$1,000 and integral multiples thereof.
PRINCIPAL AND INTEREST
The 2002 Notes will bear interest at % per annum and will mature on ,
2002. The 2007 Notes will bear interest at % per annum and will mature on
, 2007. The Notes will bear interest from September , 1997 or from the
immediately preceding Interest Payment Date (as defined below) to which
interest has been paid, payable semi-annually in arrears on and of
each year, commencing , 1998 (each, an "Interest Payment Date"), to the
Persons (the "Holders") in whose name the Notes are registered in the Security
Register on the preceding or (whether or not a Business Day, as
defined below), as the case may be (each, a "Regular Record Date"). Interest
on the Notes will be computed on the basis of a 360-day year of twelve 30-day
months.
If any Interest Payment Date or Maturity falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no
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interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date or Maturity, as the case may be, to the next
Business Day. "Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banks in The City of New
York or the City of Boston are authorized or required by law, regulation or
executive order to close.
The principal of and interest on the Notes will be payable at the corporate
trust office of the Trustee (the "Paying Agent") in the City of Boston,
initially located at 225 Franklin Street, Boston, Massachusetts 02110,
provided that, at the option of the Operating Partnership, payment of interest
may be made by check mailed to the address of the Person entitled thereto as
it appears in the Security Register or by wire transfer of funds to such
Person at an account maintained within the United States.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or in part, at a redemption price equal to the sum of
(i) the principal amount of the Notes being redeemed plus any accrued interest
thereon to the redemption date and (ii) the Make-Whole Amount, if any, with
respect to such Notes (the "Redemption Price"); provided, however, that
interest due on an Interest Payment Date which is on or prior to the date
fixed for redemption will be payable to Holders of such Notes as of the close
of business on the Regular Record Date preceding such Interest Payment Date.
If notice has been given as provided in the Indenture and the Redemption
Price of any Notes called for redemption shall have been made available on the
redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and
the only right of the Holders in respect of such Notes will be to receive
payment of the Redemption Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the Security Register, not more than 60 nor less
than 30 days prior to the date fixed for redemption. The notice of redemption
will specify, among other items, the Redemption Price and the principal amount
of the Notes held by such Holder to be redeemed.
If less than all the Notes of any series are to be redeemed at the option of
the Operating Partnership, the Operating Partnership will notify the Trustee
at least 45 days prior to the giving of the redemption notice (or such shorter
period as is satisfactory to the Trustee) of the aggregate principal amount
and series of Notes to be redeemed and their redemption date. The Trustee
shall select, in such manner as it shall deem fair and appropriate, Notes of
the applicable series to be redeemed in part in the minimum authorized
denomination for Notes or in any integral multiple thereof.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any 2002 Note or 2007 Note, as the case may be, the
excess, if any, of (i) the aggregate present value as of the date of such
redemption or accelerated payment of each dollar of principal being redeemed
or paid and the amount of interest (exclusive of interest accrued to the date
of redemption or accelerated payment) that would have been payable in respect
of such dollar if such redemption or accelerated payment had not been made,
determined by discounting, on a semi-annual basis, such principal and interest
at the Reinvestment Rate (determined on the third Business Day preceding the
date such notice of redemption is given or declaration of acceleration is
made) from the respective dates on which such principal and interest would
have been payable if such redemption or accelerated payment had not been made,
over (ii) the aggregate principal being redeemed or paid.
"Reinvestment Rate" means .25% (twenty-five one hundredths of one percent)
plus the arithmetic mean of the yields under the respective headings "This
Week" and "Last Week" published in the Statistical Release under the caption
"Treasury Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining term to maturity, as of the redemption or
payment date, of the principal of Notes being redeemed or paid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to
the immediately preceding sentence and the Reinvestment Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month. For such
purposes of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole Amount
shall be used.
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"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States
government securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination of the Make-Whole
Amount, then such other reasonably comparable index which shall be designated
by the Operating Partnership.
CERTAIN COVENANTS
Limitations on Incurrence of Indebtedness. The Operating Partnership will
not, and will not permit any Subsidiary (as defined below) to, incur any
Indebtedness (as defined below) if, immediately after giving effect to the
incurrence of such additional Indebtedness and the application of the proceeds
thereof, the aggregate principal amount of all outstanding Indebtedness of the
Operating Partnership and its Subsidiaries on a consolidated basis determined
in accordance with GAAP is greater than 60% of the sum of (without
duplication) (i) the Total Assets (as defined below) of the Operating
Partnership and its Subsidiaries as of the end of the calendar quarter covered
in the Operating Partnership's Annual Report on Form 10-K or Quarterly Report
on Form 10-Q, as the case may be, most recently filed with the Securities and
Exchange Commission (the "Commission") (or, if such filing is not permitted
under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Indebtedness and (ii) the purchase price of any real estate assets
or mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Indebtedness), by
the Operating Partnership or any Subsidiary since the end of such calendar
quarter, including those proceeds obtained in connection with the incurrence
of such additional Indebtedness.
In addition to the foregoing limitation on the incurrence of Indebtedness,
the Operating Partnership will not, and will not permit any Subsidiary to,
incur any Indebtedness secured by any Encumbrance (as defined below) upon any
of the property of the Operating Partnership or any Subsidiary if, immediately
after giving effect to the incurrence of such additional Indebtedness and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Indebtedness of the Operating Partnership and its Subsidiaries on
a consolidated basis which is secured by an Encumbrance on property of the
Operating Partnership or any Subsidiary is greater than 40% of the sum of
(without duplication) (i) the Total Assets of the Operating Partnership and
its Subsidiaries as of the end of the calendar quarter covered in the
Operating Partnership's Annual Report on Form 10-K or Quarterly Report on Form
10-Q, as the case may be, most recently filed with the Commission (or, if such
filing is not permitted under the Exchange Act, with the Trustee) prior to the
incurrence of such additional Indebtedness and (ii) the purchase price of any
real estate assets or mortgages receivable acquired, and the amount of any
securities offering proceeds received (to the extent that such proceeds were
not used to acquire real estate assets or mortgages receivable or used to
reduce Indebtedness), by the Operating Partnership or any Subsidiary since the
end of such calendar quarter, including those proceeds obtained in connection
with the incurrence of such additional Indebtedness.
The Operating Partnership and its Subsidiaries may not at any time own Total
Unencumbered Assets (as defined below) equal to less than 150% of the
aggregate outstanding principal amount of the Unsecured Indebtedness (as
defined below) of the Operating Partnership and its Subsidiaries on a
consolidated basis.
In addition to the foregoing limitations on the incurrence of Indebtedness,
the Operating Partnership will not, and will not permit any Subsidiary to,
incur any Indebtedness if the ratio of Consolidated Income Available for Debt
Service (as defined below) to the Annual Service Charge (as defined below) for
the four consecutive fiscal quarters most recently ended prior to the date on
which such additional Indebtedness is to be incurred shall have been less than
1.5:1 on a pro forma basis after giving effect thereto and to the application
of the proceeds therefrom, and calculated on the assumption that (i) such
Indebtedness and any other Indebtedness incurred by the Operating Partnership
and its Subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other
Indebtedness, had occurred at the beginning of such period; (ii) the repayment
or retirement of any other Indebtedness by the Operating Partnership and its
Subsidiaries since the first day of such four-quarter period had been repaid
or retired at the beginning of such period (except that, in making such
computation, the amount of Indebtedness under any revolving credit facility
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shall be computed based upon the average daily balance of such Indebtedness
during such period); (iii) in the case of Acquired Indebtedness (as defined
below) or Indebtedness incurred in connection with any acquisition since the
first day of such four-quarter period, the related acquisition had occurred as
of the first day of such period with the appropriate adjustments with respect
to such acquisition being included in such pro forma calculation; and (iv) in
the case of any acquisition or disposition by the Operating Partnership or its
Subsidiaries of any asset or group of assets since the first day of such four-
quarter period, whether by merger, stock purchase or sale, or asset purchase
or sale, such acquisition or disposition or any related repayment of
Indebtedness had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition or disposition being
included in such pro forma calculation.
Provision of Financial Information. Whether or not the Operating Partnership
is subject to Section 13 or 15(d) of the Exchange Act, the Operating
Partnership will, to the extent permitted under the Exchange Act, file with
the Commission the annual reports, quarterly reports and other documents which
the Operating Partnership would have been required to file with the Commission
pursuant to such Section 13 or 15(d) if the Operating Partnership were so
subject, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Operating
Partnership would have been required to file such documents if the Operating
Partnership were so subject. The Operating Partnership will also in any event
(x) within 15 days of each Required Filing Date (i) if the Operating
Partnership is not then subject to such Section 13 of 15(d), transmit by mail
to all Holders of Notes, as their names and addresses appear in the Security
Register, without cost to such Holders, copies of the annual reports and
quarterly reports that the Operating Partnership would have been required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
if the Operating Partnership were subject to such Sections and (ii) file with
the Trustee copies of the annual reports, quarterly reports and other
documents that the Operating Partnership would have been required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the
Operating Partnership were subject to such Sections and (y) if filing such
documents by the Operating Partnership with the Commission is not permitted
under the Exchange Act, promptly upon written request and payment of the
reasonable cost of duplication and delivery, supply copies of such documents
to any prospective Holder.
Waiver of Certain Covenants. The Operating Partnership may omit to comply
with any term, provision or condition of the foregoing covenants, and with any
other term, provision or condition with respect to the 2002 Notes or the 2007
Notes, as the case may be (except any such term, provision or condition which
could not be amended without the consent of all Holders of such Notes), if
before or after the time for such compliance the Holders of a majority in
principal amount of all the outstanding 2002 Notes or 2007 Notes, as the case
may be, by Act of such Holders, either waive such compliance in such instance
or generally waive compliance with such covenant or condition. Except to the
extent so expressly waived, and until such waiver shall become effective, the
obligations of the Operating Partnership and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force
and effect.
As used herein, and in the Indenture:
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or
the date the acquired Person becomes a Subsidiary.
"Annual Service Charge" for any period means the aggregate interest expense
for such period in respect of, and the amortization during such period of any
original issue discount of, Indebtedness of the Operating Partnership and its
Subsidiaries and the amount of dividends which are payable during such period
in respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
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"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income (as defined below) of the Operating Partnership and
its Subsidiaries plus amounts which have been deducted, and minus amounts
which have been added, for the following (without duplication): (i) interest
on Indebtedness of the Operating Partnership and its Subsidiaries, (ii)
provision for taxes of the Operating Partnership and its Subsidiaries based on
income, (iii) amortization of debt discount, (iv) provisions for gains and
losses on properties and property depreciation and amortization, (v) the
effect of any noncash charge resulting from a change in accounting principles
in determining Earnings from Operations for such period and (vi) amortization
of deferred charges.
"Consolidated Net Income" for any period means the amount of net income
(loss) of the Operating Partnership and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part (other than Capital Stock which is
redeemable solely in exchange for Capital Stock which is not Disqualified
Stock or the redemption price of which may, at the option of such Person, be
paid in Capital Stock which is not Disqualified Stock), in each case on or
prior to the Stated Maturity of the Notes.
"Encumbrance" means any mortgage, lien, charge, pledge or security interest
of any kind.
"GAAP" means generally accepted accounting principles.
"Indebtedness" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership or any Subsidiary, whether or not
contingent, in respect of (i) borrowed money or evidenced by bonds, notes,
debentures or similar instruments whether or not such indebtedness is secured
by any Encumbrance existing on property owned by the Operating Partnership or
any Subsidiary, (ii) indebtedness of a Person other than the Operating
Partnership or a Subsidiary which is secured by any Encumbrance existing on
property owned by the Operating Partnership or any Subsidiary, to the extent
of the lesser of (x) the amount of indebtedness so secured and (y) the fair
market value of the property subject to such Encumbrance, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of the Operating
Partnership or any Subsidiary with respect to redemption, repayment or other
repurchase of any Disqualified Stock, (v) any lease of property by the
Operating Partnership or any Subsidiary as lessee which is reflected on the
Operating Partnership's consolidated balance sheet as a capitalized lease in
accordance with GAAP, or (vi) interest rate swaps, caps or similar agreements
and foreign exchange contracts, currency swaps or similar agreements, to the
extent, in the case of items of indebtedness under (i) through (iii) above,
that any such items (other than letters of credit) would appear as a liability
on the Operating Partnership's consolidated balance sheet in accordance with
GAAP, and also includes, to the extent not otherwise included, any obligation
by the Operating Partnership or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Indebtedness of another Person (other than the
Operating Partnership or any Subsidiary) (it being understood that
Indebtedness shall be deemed to be incurred by the Operating Partnership or
any Subsidiary whenever the Operating Partnership or such Subsidiary shall
create, assume, guarantee or otherwise become liable in respect thereof).
"Subsidiary" means, with respect to any Person, any corporation or other
entity a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests, as the case may be, of which are owned,
directly or indirectly, by such Person. For the purposes of this definition,
"voting equity securities" means equity securities having voting power for the
election of directors, whether at all times or only so long as no senior class
of security has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) the Undepreciated Real
Estate Assets and (ii) all other assets of the Operating Partnership and its
Subsidiaries determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
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"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an Encumbrance that secures the payment of any
Indebtedness and (ii) all other assets of the Operating Partnership and its
Subsidiaries not subject to an Encumbrance that secures the payment of any
Indebtedness, determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with GAAP.
"Unsecured Indebtedness" means Indebtedness which is not secured by any
Encumbrance upon any of the properties of the Operating Partnership or any
Subsidiary.
See "Description of Debt Securities--Certain Covenants" in the accompanying
Prospectus for a description of additional covenants applicable to the
Operating Partnership.
EVENTS OF DEFAULT
The following events are "Events of Default" with respect to the particular
series of Notes: (a) default in the payment of any interest on any Note of
such series when such interest becomes due and payable that continues for a
period of 30 days; (b) default in the payment of the principal of (or Make-
Whole Amount, if any, on) any Note of such series when due and payable; (c)
default in the performance, or breach, of any covenant or warranty of the
Operating Partnership in the Indenture with respect to any Note of such series
and continuance of such default or breach for a period of 60 days after
written notice as provided in the Indenture; (d) default under any bond,
debenture, note, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed
(except for nonrecourse mortgage indebtedness which individually or in the
aggregate does not exceed $20 million) by the Operating Partnership (or by any
Subsidiary, the repayment of which the Operating Partnership has guaranteed or
for which the Operating Partnership is directly responsible or liable as
obligor or guarantor), having an aggregate principal amount outstanding of at
least $10,000,000, whether such indebtedness now exists or shall hereafter be
created, which default shall have resulted in such indebtedness becoming or
being declared due and payable prior to the date on which it would otherwise
have become due and payable, without such indebtedness having been discharged,
or such acceleration having been rescinded or annulled, within a period of 10
days after written notice to the Operating Partnership as provided in the
Indenture; (e) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Operating Partnership or any
Subsidiary in an aggregate amount (excluding amounts covered by insurance) in
excess of $10,000,000 and such judgments, orders or decrees remain
undischarged, unstayed and unsatisfied in an aggregate amount (excluding
amounts covered by insurance) in excess of $10,000,000 for a period of 30
consecutive days; and (f) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of
the Operating Partnership or any Significant Subsidiary. The term "Significant
Subsidiary" has the meaning ascribed to such term in Regulation S-X
promulgated under the Securities Act of 1933, as amended. If an Event of
Default specified in clause (f) above relating to the Operating Partnership or
any Significant Subsidiary occurs, the principal amount of, and the Make-Whole
Amount, on all outstanding Notes shall become automatically due and payable
without any declaration or other act on the part of the Trustee or of the
Holders.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The provisions of Article 14 of the Indenture relating to defeasance and
covenant defeasance, which are described under "Description of Debt
Securities--Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus, will apply to the Notes. Each of the covenants described under "--
Certain Covenants" herein and "Description of Debt Securities--Certain
Covenants" in the accompanying Prospectus will be subject to covenant
defeasance.
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BOOK-ENTRY SYSTEM
Each series of Notes will be represented by a global note (the "Global
Securities") registered in the name of The Depository Trust Company ("DTC") or
its nominee. Payments of principal of (and any Make-Whole Amount) and interest
on Notes represented by a Global Security will be made in immediately
available funds by the Trustee to DTC.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole holder of
the Notes represented by such Global Security for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to have Notes represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Notes in certificated form and will not be considered the
owners or holders thereof under the Indenture. The laws of some states require
that certain purchasers of securities take physical delivery of such
securities in certificated form; such laws may limit the transferability of
beneficial interests in a Global Security.
If DTC is at any time unwilling or unable to continue as depository and a
successor depository is not appointed by the Operating Partnership within 90
days, the Operating Partnership will issue individual Notes in certificated
form in exchange for the Global Securities. In addition, the Operating
Partnership may at any time, and in its sole discretion, determine not to have
any Notes represented by one or more Global Securities and, in such event,
will issue individual Notes in certificated form in exchange for the relevant
Global Securities. In any such instance, an owner of a beneficial interest in
a Global Security will be entitled to physical delivery of individual Notes in
certificated form of like tenor, equal in principal amount to such beneficial
interest and to have such Notes in certificated form registered in its name.
Notes so issued in certificated form will be issued in denominations of $1,000
or any integral multiple thereof and will be issued in registered form only,
without coupons.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Notes. The Notes will be
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully registered Note certificate is
issued with respect to each $200 million of principal amount of the Notes
of a series, and an additional certificate is issued with respect to any
remaining principal amount of such series.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934. DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-
entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on
file with the Commission.
Purchases of Notes under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Debt Securities on DTC's
records. The ownership interest of each actual purchaser of each Debt
Security ("Beneficial Owner") is in turn recorded on the Direct and
Indirect Participants' records. A Beneficial Owner does not receive written
confirmation from DTC of its purchase, but such Beneficial Owner is
expected to receive a written confirmation providing details of the
transaction, as well as periodic statements of its holdings, from the
Direct or Indirect Participant through which such Beneficial Owner entered
into the transaction. Transfers of ownership interest in Notes are
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners do not receive
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certificates representing their ownership interests in Notes, except in the
event that use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, the Notes are registered in the name
of DTC's partnership nominee, Cede & Co. The deposit of the Notes with DTC
and their registration in the name of Cede & Co. will effect no changes in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners
of the Notes; DTC records reflect only the identity of the Direct
Participants to whose accounts are credited, which may or may not be the
Beneficial Owners. The Participants remain responsible for keeping account
of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to Beneficial Owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the Notes.
Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy") to the
issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Notes are credited on the record date (identified on a
list attached to the Omnibus Proxy).
Payments of principal of (and any Make-Whole Amount) and interst on the
Notes are made to DTC. DTC's practice is to credit Direct Participant's
accounts on the payable date in accordance with their respective holdings
as shown on DTC's records unless DTC has reason to believe that it will not
receive payment on the payable date. Payments by Participants to Beneficial
Owners are governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form
or registered in "street name", and are the responsibility of such
Participant and not of DTC, the applicable Paying Agent or the Operating
Partnership, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal, any Make-Whole Amount,
and interest to DTC is the responsibility of the Operating Partnership or
the applicable Paying Agent, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursements of such
payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the
Operating Partnership or the applicable Paying Agent. Under such
circumstances, in the event that a successor securities depository is not
appointed, Note certificates are required to be printed and delivered.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In
that event, Note certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Operating Partnership
believes to be reliable, but the Operating Partnership takes no responsiblity
for the accuracy thereof.
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<PAGE>
GOVERNING LAW
The Indenture and the Notes will be governed by and shall be construed in
accordance with the laws of the State of New York.
NO PERSONAL LIABILITY OR RECOURSE
No recourse under or upon any obligation, covenant or agreement contained in
the Indenture or the Notes, or because of any indebtedness evidenced thereby,
or for any claim based thereon or otherwise in respect thereof, shall be had
(i) against the Company or any other past, present or future partner in the
Operating Partnership, (ii) against any other person or entity which owns an
interest, directly or indirectly, in any partner of the Operating Partnership,
or (iii) against any past, present or future stockholder, employee, officer or
director, as such, of the Company or any successor, either directly or though
the Operating Partnership or the Company or any successor, under any rule of
law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise. Each Holder
of Notes waives and releases all such liability by accepting such Notes. The
waiver and release are part of the consideration for the issue of the Notes.
S-39
<PAGE>
MANAGEMENT
OFFICERS AND DIRECTORS
The Operating Partnership is managed by the Company as its sole general
partner. The persons who are officers and Directors of the Company and their
respective positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
---- --- -------------------------
<C> <C> <S>
OFFICERS:
President, Chief Executive Officer and
Alan M. Leventhal.......... 45 Director
Executive Vice President, Chief Operating
Lionel P. Fortin........... 54 Officer and Director
Donald B. Brooks........... 54 Senior Vice President and Chief Executive,
Beacon Properties Southeast and Beacon
Properties Mid-Atlantic
Senior Vice President and Chief Investment
Charles H. Cremens......... 43 Officer
Senior Vice President and Chief Executive,
Jeremy B. Fletcher......... 48 Beacon Properties West
Carol G. Judson............ 45 Senior Vice President, Corporate Development
Senior Vice President--Leasing/Management and
Douglas S. Mitchell........ 55 Development
Senior Vice President and Chief Financial
Robert J. Perriello........ 54 Officer
Senior Vice President and Chief Executive,
E. Valjean Wheeler......... 52 Beacon Properties Midwest
William A. Bonn, Esq....... 45 General Counsel
Nancy J. Broderick......... 41 Vice President and Treasurer
Steven D. Fessler.......... 37 Vice President, Asset Management
Claude B. Hoopes........... 47 Vice President, Leasing
Henry Irwig................ 54 Vice President, Property Management
G. Douglas Lanois.......... 36 Vice President and Controller
Joseph McMahon............. 51 Vice President, Development
Erin R. O'Boyle............ 37 Vice President, Acquisitions
Thomas J. O'Connor......... 40 Vice President, Acquisitions
W. Malcolm O'Donnell, Jr... 43 Vice President, Acquisitions
Randy J. Parker............ 38 Vice President, Investor Relations
James J. Whalen............ 35 Vice President, Information Systems
M. Wistar Wood............. 36 Vice President, Acquisitions
DIRECTORS:
Edwin N. Sidman............ 54 Chairman of the Board and Director
Norman B. Leventhal........ 80 Director
Graham O. Harrison......... 71 Director
William F. McCall, Jr...... 60 Director
Steven Shulman............. 54 Director
Scott M. Sperling.......... 37 Director
Dale F. Frey............... 64 Director
</TABLE>
The following are biographical summaries of the experience of the officers
and Directors of the Company:
Mr. Alan Leventhal has served as President, Chief Executive Officer and a
Director of the Company since 1994. Mr. Leventhal joined Beacon in 1976 after
receiving a degree in economics from Northwestern University in 1974 and a
Master of Business Administration from the Amos Tuck School of Business
Administration at Dartmouth College in 1976. Mr. Leventhal is a trustee of the
Beth Israel Corporation, trustee of Boston University, trustee of the New
England Aquarium Corporation and a member of the Visiting Committee of the
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<PAGE>
College of Arts and Sciences at Northwestern University. He is also a member
of the Board of Overseers of WGBH and the Museum of Science. Mr. Leventhal is
the son of Norman B. Leventhal and the brother-in-law of Edwin N. Sidman.
Mr. Fortin serves as Executive Vice President, Chief Operating Officer and a
Director of the Company. From May 1994 through February 1995, Mr. Fortin
served as Chief Operating Officer and Chief Financial Officer of the Company.
From February 1995 through January 1997, Mr. Fortin served as Senior Vice
President of the Company. Mr. Fortin became Executive Vice President and a
Director of the Company in January 1997. Before joining Beacon in 1973, Mr.
Fortin was an Audit Supervisor with Laventhol & Horwath. Mr. Fortin graduated
from Bentley College in 1968 and is a member of the American Institute of
Certified Public Accountants and the Massachusetts Society of Certified Public
Accountants.
Mr. Brooks joined the Company in June 1996 and has served as Senior Vice
President of the Company and Chief Executive, Beacon Properties Southeast and
Beacon Properties Mid-Atlantic since that time. From 1986 to joining the
Company, Mr. Brooks was a private investor, consultant and real estate advisor
in the Atlanta area. He was President and Chief Operating Officer of The
Landmarks Group in Atlanta from 1974 to 1986, responsible for the development
of over 3 million square feet of office space in 30 buildings. Mr. Brooks
holds a law degree and Bachelor's degree in Accounting from Duke University.
Mr. Cremens joined the Company in February 1996 and has served as the Senior
Vice President and Chief Investment Officer of the Company since that time.
Prior to joining the Company, Mr. Cremens served as Vice President and Head of
Mortgage Loans and Real Estate Investments with Aetna Life & Casualty Company
from 1993 to 1996. Prior to his term at Aetna, Mr. Cremens held various senior
management positions with Bank of Boston from 1978 to 1993, including Managing
Director of Corporate Finance and Manager of the Restructured Real Estate and
OREO Departments. At the Company, Mr. Cremens is responsible for establishing
and implementing a long-term acquisition and portfolio strategy for the
Company. Mr. Cremens holds a Bachelor's degree from Williams College.
Mr. Fletcher serves as the Senior Vice President and Chief Executive of
Beacon Properties West. He joined the Company in May of 1997. Mr. Fletcher is
responsible for directing the growth and operations of the Company in the
Western United States. Prior to joining the Company, Mr. Fletcher was the
managing director of Insignia Commercial Group, Inc., Los Angeles. From 1983
to July 1996, Mr. Fletcher was with Paragon Group where he served as Senior
Vice President/General Partner of the Southern California/Arizona Region. Mr.
Fletcher received his Bachelor's degree in Geology from Albion College. He is
a member of the Urban Land Institute, Real Estate Investment Advisory Council
and National Association of Industrial and Office Properties and is a licensed
broker in the state of California.
Ms. Judson has served as the Senior Vice President, Corporate Development of
the Company since 1996. In this capacity, Ms. Judson is responsible for the
Company's corporate development, human resources and administration. Before
joining Beacon in 1980, Ms. Judson was Managing Director of the Brook House, a
luxury apartment complex in Brookline, Massachusetts. Ms. Judson received her
Bachelor of Science degree in mathematics with a minor in psychology from
Curry College. She is a member of the Northeast Human Resources Association
and the American Management Association and serves as a United Way Cabinet
Member.
Mr. Mitchell has served as the Senior Vice President-Leasing/Management and
Development of the Company and as President of the Management Company since
1994. In these capacities, Mr. Mitchell is responsible for the overall leasing
activities, property management and development activity of the Company. He
joined Beacon in 1961. He graduated from the Wentworth Institute in 1962 and
is a member of the Greater Boston Real Estate Board. Mr. Mitchell is also a
licensed real estate broker in Massachusetts and New York.
Mr. Perriello has served as Senior Vice President of the Company since May
1994 and became Chief Financial Officer of the Company in February of 1995. He
joined Beacon in 1970. During his career at Beacon, Mr. Perriello has been
responsible for many aspects of commercial development, including the debt and
equity financing of Beacon's Properties. Prior to joining Beacon, he was a
consulting engineer with Frederick R. Harris, Inc. in New York City and served
as an officer in the U.S. Army Corps of Engineers. Mr. Perriello holds a
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<PAGE>
Bachelor's degree in Civil Engineering from Rensselaer Polytechnic Institute
and a Master's of Business Administration from Harvard Business School. His
professional affiliations include membership in the Urban Land Institute.
Mr. Wheeler serves as Senior Vice President and Chief Executive of Beacon
Properties Midwest. He joined the Company in April 1997. Mr. Wheeler is
responsible for directing the growth and operations of the Company in the
Midwestern United States. Prior to joining the Company, Mr. Wheeler held
various senior management positions at Equity Office Holdings, L.L.C.
beginning in 1989 and served as President and Chief Operating Officer of
Equity Office Holdings, L.L.C. from 1995 through 1997. He also held various
senior management positions with the Broe Companies and Williams Realty
Corporation. Mr. Wheeler graduated from Oklahoma State University with a B.S.
in Education. He is a member of the Urban Land Institute and has served on the
National Advisory Council of the Building Owners and Managers Association
(BOMA).
Mr. Bonn has served as General Counsel to the Company since early 1997.
Prior to joining the Company as General Counsel, from 1987 to 1997 Mr. Bonn
worked with Property Capital Trust, another Boston-based real estate
investment trust, and served as Senior Vice President and General Counsel.
From 1978 to 1987 Mr. Bonn held various positions as an attorney with The
Prudential Insurance Company of America and was assigned to work with
Prudential's Realty Group in Newport Beach and Los Angeles, California; New
York City and at Prudential's headquarters in Newark, New Jersey. From 1976 to
1978 Mr. Bonn was engaged in the private practice of law in Los Angeles. Mr.
Bonn holds a Bachelor of Science Degree from the University of California at
San Diego and a Juris Doctor degree from the University of San Diego. He is
admitted to practice law in Massachusetts, New York and California, and is a
member of the American, California and Boston Bar Associations.
Ms. Broderick has served as Vice President and Treasurer of the Company
since 1994. In this capacity, Ms. Broderick is responsible for all financial
operations of the Company including administration of the Credit Facility. Ms.
Broderick joined Beacon in 1983. Ms. Broderick holds a Bachelor of Science
degree in Accounting from Stonehill College and a Master of Science degree in
Taxation from Bentley College. She is a member of the American Institute of
Certified Public Accountants and the Massachusetts Society of Public
Accountants.
Mr. Fessler has served as Vice President, Asset Management of the Company
since 1994. In this capacity, Mr. Fessler has overall responsibility for the
asset management of the Company's property portfolio. From 1983 to 1991 Mr.
Fessler served Beacon as Senior Development Manager and Vice President,
Development. Prior to rejoining Beacon in 1994, Mr. Fessler served as a Senior
Investment Manager with Copley Real Estate Advisors. Mr. Fessler holds
Bachelor's and Master's degrees from Stanford University. He serves on the
Board of Directors of the Massachusetts chapter of the National Association of
Industrial and Office Properties.
Mr. Hoopes joined Beacon in 1990 and has served as Vice President, Leasing
of the Company since 1994. In this capacity, Mr. Hoopes has responsibility for
the overall leasing strategy and leasing performance of the Company's
portfolio, as well as overseeing the leasing of the three million square feet
of space managed and leased for third party institutional clients. Mr. Hoopes
was previously a senior officer of The Landmarks Group, a major Atlanta
developer, where he was responsible for six million square feet of leasing
including an office park adjacent to the Perimeter Center Portfolio. Mr.
Hoopes is a graduate of Princeton University.
Mr. Irwig has served as Vice President, Commercial Properties of the Company
since 1994. In this capacity, Mr. Irwig is responsible for the management of
the Company's property portfolio and integrating third-party and acquisition
properties into the Company's portfolio. Mr. Irwig joined Beacon in 1985 and
since that time has held various positions in other divisions of the Company
relating to the assessment, repositioning, design, construction and management
of commercial and institutional buildings. Mr. Irwig received his Bachelor of
Architecture degree and his Ph.D. from the University of Witwatersrand.
Mr. Lanois has served as Controller of the Company since 1995. In this
capacity, Mr. Lanois is responsible for financial reporting, budgeting and
forecasting financial performance of the Company. Before joining Beacon
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<PAGE>
in 1992, Mr. Lanois was the Manager of the Real Estate Advisory Service Group
with Laventhol & Horwath and an Asset Manager with Aldrich, Eastman & Waltch.
Mr. Lanois received his B.B.A. in Accounting and a B.S. in Hotel, Restaurant
and Travel Administration from the University of Massachusetts, Amherst. He is
a certified public accountant and serves on committees for the Greater Boston
Real Estate Board and the Real Estate Finance Association.
Mr. McMahon has served as Vice President, Development of the Company since
January 1997. In this capacity, he is responsible for overseeing the
development and redevelopment of Beacon's Properties. Since joining the
Company in 1981, Mr. McMahon has held various positions including directing
and managing a number of development projects in Boston, Chicago and
Washington, D.C. Mr. McMahon holds a Bachelor's degree in Mathematics from
Boston College and a Master's degree in Civil Engineering and Construction
Management from the Massachusetts Institute of Technology. He is a member of
the National Association of Industrial and Office Properties.
Ms. O'Boyle has served as Vice President, Acquisitions of the Company since
1994. In this capacity, Ms. O'Boyle manages the search and negotiations for
ownership opportunities. Ms. O'Boyle joined Beacon in 1985 and previously
served the Company as Vice President, Asset Management. Ms. O'Boyle received
her Bachelor of Science in structural engineering from the University of
Delaware and her Master of Science in real estate development from the MIT
Center for Real Estate Development. Ms. O'Boyle is the past chair of the
Alumni Association for the MIT Center for Real Estate and is a past President
of the New England Women in Real Estate.
Mr. O'Connor has served as Vice President, Acquisitions of the Company since
1997. Mr. O'Connor is responsible for identifying acquisition opportunities in
Northern and Southern California. Prior to joining the Company in 1996, Mr.
O'Connor was an asset manager at Copley Real Estate Advisors from 1987 to 1996
where he was responsible for a portfolio of 5 million square feet of office
properties, primarily in California. Prior to Copley, Mr. O'Connor held
positions with Coopers & Lybrand, The Sheraton Corporation and PaineWebber
Properties. Mr. O'Connor is a graduate of Boston College with a Bachelor's
degree in Accounting and Finance.
Mr. O'Donnell has served as Vice President, Acquisitions of the Company
since May 1997. In this capacity, he manages the search and negotiations for
ownership opportunities in the Western United States. From 1994 through 1997,
Mr. O'Donnell was Managing Director of Hackman O'Donnell Partners LLC, a
closely-held real estate investment firm active in markets nationwide. From
1987 through 1993, Mr. O'Donnell was a partner with Overton, Moore &
Associates, Inc., a leading Southern California real estate company. Mr.
O'Donnell graduated from the University of Southern California with a
Bachelor's degree in Journalism. He is past chairman of the Los Angeles
Commercial Realty Association and a member of the Real Estate Investment
Advisory Council.
Mr. Parker has served as Vice President, Investor Relations of the Company
since he joined the Company in July 1996. Prior to joining the Company, Mr.
Parker was Senior Vice President and Portfolio Manager of Aldrich, Eastman &
Waltch in Boston from 1988 to 1996, responsible for the management of over
$400 million of investment portfolios on behalf of institutional clients. Mr.
Parker holds a Master of Business Administration from The Wharton School,
University of Pennsylvania and a Bachelor of Architecture degree from the
University of Kentucky.
Mr. Whalen has served as Vice President, Information Systems of the Company
since 1995. In this capacity, Mr. Whalen is responsible for overseeing the
maintenance and support of corporate information systems, including an
extensive internal computer network allowing efficient communications with the
Properties. Prior to joining Beacon in January 1993 Mr. Whalen was Director
Information Services and Technology of Plan International from 1989 to 1993.
Mr. Whalen is a graduate of the University of Notre Dame and the recipient of
the New York City Urban Fellowship.
Mr. Wood has served as Vice President, Acquisitions of the Company since
February 1997. In this capacity he manages the search and negotiations for
ownership opportunities. Mr. Wood served as Vice President of Acquisitions for
Metric Realty from August 1995 to 1997 and oversaw all acquisition activity in
a 26-state
S-43
<PAGE>
territory. Prior to joining Metric, he was with Copley Real Estate Advisors
from 1992 to July 1995, responsible for acquisitions and sales. Mr. Wood is a
graduate of Princeton University and holds a MBA from the Wharton School,
University of Pennsylvania. He is the founder of REIAC's Northeast Chapter,
and a member of ICSC.
Mr. Sidman has served as the Chairman of the Board and a Director of the
Company since 1994. He is currently the Managing Partner of The Beacon
Companies. Prior to joining Beacon in 1971, Mr. Sidman practiced law with the
predecessor to the firm of Rubin and Rudman in Boston. Mr. Sidman graduated
from the University of Michigan and holds a law degree from Harvard
University. Mr. Sidman's professional affiliations include service as Senior
Vice Chairman of the National Realty Committee. Mr. Sidman's civic commitment
includes being a past Chairman of the Combined Jewish Philanthropies of
Greater Boston, a member of the Board of Trustees of Duke University, a member
of the Board of Directors and Executive Committee for the United Way of
Massachusetts Bay, a member of the Executive Committee of the Artery Business
Committee and a member of the Board of The Friends of Post Office Square. Mr.
Sidman is the son-in-law of Norman B. Leventhal and the brother-in-law of Alan
M. Leventhal.
Mr. Norman Leventhal has served as a Director of the Company since 1994. He
is the co-founder and Chairman of The Beacon Companies. Mr. Leventhal is a
graduate of the Boston Latin School and the Massachusetts Institute of
Technology. At the Massachusetts Institute of Technology, he is a Life Member
Emeritus of the Corporation and has served MIT in many capacities including as
a Member of the Executive Committee, Member of the Investment Committee, and
Chairman of the Corporation Visiting Committee for The School of Architecture
and Planning. Mr. Leventhal is also an Honorary Life Member of the Board of
Overseers of The Museum of Fine Arts and has been a Member of the Board of
Trustees of The Museum of Science. Among other civic contributions, Mr.
Leventhal has served as Chairman of The Artery Business Committee, is Chairman
of The Friends of Post Office Square and is Chairman of the Trust for City
Hall Plaza. Mr. Leventhal also serves as Director of Doubletree Corporation
and Picower Institute for Medical Research. Mr. Leventhal is the father of
Alan M. Leventhal and the father-in-law of Edwin N. Sidman.
Mr. Harrison has served as a Director of the Company since 1994. Mr.
Harrison has served as Vice President and Chief Investment Officer of Howard
Hughes Medical Institute ("Hughes") in Bethesda, Maryland from 1985 to 1994.
Mr. Harrison retired as President of the U.S. Steel Pension Fund in June 1985,
after thirty years of service, to take on the portfolio startup at Hughes. He
also served as a Director of General Re Corporation in Stamford, Connecticut.
Mr. Harrison serves as a trustee of Property Capital Trust in Boston, a member
of the Investment Advisory Committee of the New York State Common Retirement
Fund, Warburg Pincus Investors, European Strategic Investors (London),
Emerging World Investors L.P. and Desai Capital Management; Vice-Chairman of
the Advisory Committee of Butler Capital, Chairman of the Swarthmore College
Investment Committee, and member of Advisory Council--The Trust for Public
Land. Mr. Harrison is a graduate of Swarthmore College and of Harvard Business
School, and is a retired U.S. Air Force officer.
Mr. McCall has served as a Director of the Company since 1994. Mr. McCall
has served as Chairman of McCall & Almy, Inc., Boston, Massachusetts, since
1989. Mr. McCall was a founder of Leggat McCall & Werner in 1965 and served as
Chairman and Chief Executive Officer of Leggat McCall/Grubb & Ellis through
1989. Mr. McCall is currently a director of Citizens Bank of Massachusetts,
Jobs for Massachusetts and the Massachusetts Business Development Corporation.
Mr. McCall is also a trustee of the Urban Land Institute and a member of the
American Society of Real Estate Counselors. Mr. McCall is a graduate of The
College of the Holy Cross.
Mr. Shulman has served as a Director of the Company since 1995. Since 1984,
Mr. Shulman has been active in investment banking through his wholly owned
company The Hampton Group and Lantona Associates, Inc., where he serves as a
Managing Director. Currently, Mr. Shulman is a significant shareholder and
director in a diversified group of companies including Wilshire Restaurant
Group, Inc., where he previously served as Chairman; Ermanco Incorporated;
Terrace Holdings, Inc.; and Corinthian Directory. Mr. Shulman is a graduate of
Stevens Institute of Technology where he received a Bachelor's degree in
Mechanical Engineering and a Master's degree in Industrial Management. Mr.
Shulman serves as Vice Chairman on the Board of Stevens Institute of
Technology.
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<PAGE>
Mr. Sperling has served as a Director of the Company since 1994. Mr.
Sperling joined Thomas H. Lee Co., a Boston-based investment firm, as a
general partner in September 1994. Previously, Mr. Sperling served as Managing
Partner and Vice Chairman of the Aeneas Group, Inc./Harvard Management Company
from 1984 through 1994. Mr. Sperling has been the founder and/or lead investor
of numerous companies and has led the acquisition or turnaround of companies
in a wide variety of industries. He is currently a director of Livent,
PriCellular Corporation, Softkey, The Learning Company, General Chemical
Group, Object Design, Inc. and several private firms. He received a Master's
of Business Administration from the Harvard Business School and received his
undergraduate degree from Purdue University. Mr. Sperling is a member of the
Corporation of the Brigham and Women's Hospital and a director of the American
Technion Society.
Mr. Frey has served as a Director of the Company since January 1997. Mr Frey
also serves on the Board of Directors of Rhone-Poulenc Rorer; USF&G
Corporation; Praxair, Inc.; Doubletree Hotels Corporation and First American
Financial Corporation. From 1984 until 1997, Mr. Frey was Chairman and
President of the Board of Directors of General Electric Investment
Corporation. From 1980 until 1997, Mr. Frey was also Vice President of General
Electric Company. Mr. Frey is also Chairman of the Cancer Research Fund of the
Damon-Runyon-Walter Winchell Foundation and a Trustee of Franklin and Marshall
College. He also serves on the advisory committees of Forstmann Little &
Company and the New York State Common Retirement Fund. Mr. Frey is also a
member of the Financial Executives Institute. Mr. Frey is a graduate of
Franklin and Marshall College and received a Master of Business Administration
in Economics and Accounting from New York University.
S-45
<PAGE>
UNDERWRITING
Subject to the terms and conditions in the terms agreement and related
underwriting agreement (collectively, the "Underwriting Agreement") among the
Company, the Operating Partnership and each of the underwriters named below
(the "Underwriters"), the Operating Partnership has agreed to sell to each of
the Underwriters, and each of the Underwriters has severally agreed to
purchase from, the Operating Partnership the respective principal amount of
Notes set forth opposite their respective names.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 2002 NOTES OF 2007 NOTES
----------- ---------------- ----------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
Lehman Brothers Inc. .........................
Morgan Stanley & Co. Incorporated.............
------------ ------------
Total.................................... $150,000,000 $150,000,000
============ ============
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
respectively, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase all of the Notes being sold pursuant to
the Underwriting Agreement if any such Notes are purchased. Under certain
circumstances, the commitments of non-defaulting Underwriters may be
increased.
The Underwriters have advised the Operating Partnership that the
Underwriters propose initially to offer the Notes to the public at the public
offering price set forth on the cover page of this Prospectus Supplement and
to certain dealers at such price less a concession not in excess of % of
the principal amount of the 2002 Notes and % of the principal amount of the
2007 Notes. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of % of the principal amount of the 2002 Notes and
% of the principal amount of the 2007 Notes on sales to certain other
dealers. After the initial public offering, the public offering prices,
concessions and discounts may be changed.
In the Underwriting Agreement, the Company and the Operating Partnership
have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act. Insofar as indemnification of
the Underwriters for liabilities arising under the Securities Act may be
permitted pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Securities and Exchange Commission (the
"Commission") such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Each series of Notes is a new issue of securities with no established
trading market. The Underwriters have advised the Operating Partnership that
they intend to make a market in the Notes, but are not obligated to do so and
may discontinue market making at any time without notice.
In connection with the offering of the Notes, the rules of the Commission
permit Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to
engage in certain transactions that stabilize the price of the Notes. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
this offering, i.e., if they sell more Notes than are set forth on the cover
page of this Prospectus Supplement, Merrill Lynch may reduce that short
position by purchasing Notes in the open market. 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.
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<PAGE>
Neither the Operating Partnership 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 Notes. In
addition, neither the Operating Partnership nor any of the Underwriters makes
any representation that Merrill Lynch will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
S-47
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin,
Procter & Hoar llp, Boston, Massachusetts, a limited liability partnership
including professional corporations, as corporate, securities, real estate and
tax counsel to the Company, and by Goulston & Storrs, P.C., Boston,
Massachusetts, as real estate counsel to the Company. Gilbert G. Menna, whose
professional corporation is a partner of Goodwin, Procter & Hoar llp, is an
assistant secretary of the Company and owns in excess of 1,000 shares of the
Company's Common Stock. Certain legal matters related to the offering of the
Notes will be passed upon for the Underwriters by Brown & Wood llp, New York,
New York. Brown & Wood llp will rely on Goodwin, Procter & Hoar llp, as to
certain matters of Maryland law.
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<PAGE>
PROSPECTUS
$700,000,000
BEACON PROPERTIES CORPORATION
PREFERRED STOCK
COMMON STOCK
$500,000,000
BEACON PROPERTIES, L.P.
DEBT SECURITIES
----------------
Beacon Properties Corporation (together with its subsidiaries, the
"Company") may offer from time to time in one or more series (i) shares of its
preferred stock, $.01 par value per share ("Preferred Stock") and (ii) shares
of its common stock, $.01 par value per share ("Common Stock"). Beacon
Properties, L.P. (the "Operating Partnership") may offer from time to time in
one or more series unsecured non-convertible investment grade debt securities
(the "Debt Securities"). The aggregate public offering price of the Preferred
Stock and the Common Stock shall be up to $700,000,000 (or its equivalent in
another currency based on the exchange rate at the time of sale) and the
aggregate public offering price of the Debt Securities (collectively with the
Preferred Stock and the Common Stock, the "Securities") shall be up to
$500,000,000 (or its equivalent in another currency based on the exchange rate
at the time of sale). The Securities will be issued in amounts, at prices and
on terms to be determined at the time of offering. The Securities may be
offered separately or together, in separate series, in amounts, at prices and
on terms to be set forth in one or more supplements to this Prospectus (each a
"Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Preferred Stock, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price;
(ii) in the case of Common Stock, any initial public offering price; and (iii)
in the case of Debt Securities, the specific title and series, aggregate
principal amount, ranking, currency, form (which may be registered or bearer,
or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Operating Partnership or repayment at the
option of the holder, terms for sinking fund payments, covenants and any
initial public offering price. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be consistent with the Company's Articles
of Incorporation, as then in effect, or otherwise appropriate to preserve the
status of the Company as a real estate investment trust ("REIT") for federal
income tax purposes. See "Restrictions on Transfers of Capital Stock."
The applicable Prospectus Supplement will also contain information, where
appropriate, about material United States Federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities
covered by such Prospectus Supplement.
The Securities may be offered by the Company or the Operating Partnership
directly to one or more purchasers, through agents designated from time to
time by the Company or the Operating Partnership, or to or through
underwriters or dealers. If any agents or underwriters are involved in the
sale of any of the Securities, their names, and any applicable purchase price,
fee, commission or discount arrangement between or among them, will be set
forth, or will be calculable from the information set forth, in an
accompanying Prospectus Supplement. See "Plan of Distribution." No Securities
may be sold without delivery of a Prospectus Supplement describing the method
and terms of the offering of such Securities.
----------------
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.
----------------
The date of this Prospectus is September 5, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company and the Operating Partnership have filed with the Securities and
Exchange Commission (the "SEC" or "Commission") a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
This Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits thereto on file with the Commission pursuant to the Securities Act
and the rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits thereto, may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511, and copies may be obtained at the prescribed rates from the Public
Reference Section of the Commission at its principal office in Washington,
D.C. The Commission also maintains a Web site at http://www.sec.gov containing
reports, proxy and information statements and other information regarding
registrants, including the Company and the Operating Partnership, that file
electronically with the Commission. Statements contained in this Prospectus as
to the contents of any contract or other document referred to 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.
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and proxy statements and
other information with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the locations described
above. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. In addition, the Common Stock is
listed on the New York Stock Exchange (the "NYSE"), and such materials can be
inspected and copied at the NYSE, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1996, filed with the Commission pursuant to the Exchange Act, including
all amendments thereto.
2. The Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997 and June 30, 1997, filed with the Commission pursuant to the
Exchange Act, including all amendments thereto. The Operating Partnership's
Quarterly Reports on Form 10-Q for the periods ended March 31, 1997 and
June 30, 1997, filed with the Commission pursuant to the Exchange Act,
including all amendments thereto.
3. The Company's Current Reports on Form 8-K dated January 5, 1996,
February 15, 1996, July 23, 1996, October 18, 1996, December 18, 1996,
December 20, 1996 and March 27, 1997 and June 4, 1997 filed with the
Commission pursuant to the Exchange Act, including all amendments thereto.
The Operating Partnership's Current Report on Form 8-K dated June 4, 1997,
filed with the Commission pursuant to the Exchange Act, including all
amendments thereto.
4. The Company's Current Reports on Form 8-K/A dated August 6, 1996
(which Current Report relates to the Form 8-K dated July 23, 1996) and
April 7, 1997 filed with the Commission pursuant to the Exchange Act (which
Current Report relates to the Form 8-K dated March 27, 1997), including all
amendments thereto.
5. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission pursuant to
the Exchange Act, including all amendments and reports updating such
description.
2
<PAGE>
6. The description of the Company's 8.98% Series A Cumulative Redeemable
Preferred Stock contained in its Registration Statement on Form 8-A/A dated
July 10, 1997 (which relates to the Form 8-A dated June 4, 1997).
7. The Operating Partnership's Registration Statement on Form 10 filed
with the Commission pursuant to the Exchange Act, including all amendments
and reports updating such description.
All other documents filed with the Commission by the Company or the
Operating Partnership pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the particular Securities are to be
incorporated herein by reference and such documents shall be deemed to be a
part hereof from the date of filing of such documents. Any person receiving a
copy of this Prospectus may obtain, without charge, upon request, a copy of
any of the documents incorporated by reference herein (except for the exhibits
to such documents, unless such exhibits are specifically incorporated by
reference into such documents). Written requests for such copies should be
mailed to Kathleen M. McCarthy, Beacon Properties Corporation, 50 Rowes Wharf,
Boston, Massachusetts 02110. Telephone requests may be directed to Ms.
McCarthy at (617) 330-1400.
Any statement contained in a document incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY AND THE OPERATING PARTNERSHIP
Beacon Properties Corporation is a self-administered and self-managed real
estate investment trust ("REIT") which owns a portfolio of Class A office
properties and other commercial properties (collectively, the "Properties")
located in major metropolitan areas, including Boston, Atlanta, Chicago, Los
Angeles, San Francisco and Washington, D.C., as well as commercial real estate
development, acquisition, leasing, design and management businesses. The
Company is a Maryland corporation and its Common Stock is listed on the
New York Stock Exchange under the symbol "BCN."
The Company's business is conducted principally through subsidiaries which
consist of the Operating Partnership, two subsidiary corporations and two
subsidiary limited partnerships. The Operating Partnership is a Delaware
limited partnership, of which the Company is the sole general partner. The
Company conducts third-party management operations through Beacon Property
Management Corporation, a Delaware corporation (the "Management Company"), and
conducts third-party tenant space design services through Beacon Design
Corporation, a Massachusetts corporation (the "Design Company"). The Company
conducts management operations for wholly-owned properties through Beacon
Property Management, L.P., a Delaware limited partnership (the "Management
Partnership"), and conducts tenant space design services for wholly-owned
properties through Beacon Design, L.P., a Delaware limited partnership (the
"Design Partnership").
Currently, the Company's and the Operating Partnership's total consolidated
outstanding debt are approximately $790.9 million and $790.9 million,
respectively, and their total consolidated debt plus their proportionate share
of total unconsolidated debt (other than the Rowes Wharf Property debt) are
approximately $883.3 million and $882.6 million, respectively.
The Company's executive offices are located at 50 Rowes Wharf in Boston,
Massachusetts 02110 and its telephone number at that location is 617-330-1400.
3
<PAGE>
USE OF PROCEEDS
The Company is required by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock
or Preferred Stock in the Operating Partnership in exchange for additional
Units or preferred Units, as the case may be. As will be more fully described
in the applicable Prospectus Supplement, the Company and the Operating
Partnership intend to use the net proceeds from the sale of Securities for
general corporate purposes, including repayment of indebtedness, investment in
new properties and new developments and maintenance of currently owned
properties.
RATIOS OF EARNINGS TO FIXED CHARGES AND RATIOS OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the consolidated ratios of earnings to fixed
charges for the Company and the Operating Partnership for the six months ended
June 30, 1997, for the years ended December 31, 1996 and 1995 and for the
period from May 26, 1994 to December 31, 1994, and for The Beacon Group, the
predecessor to the Company and the Operating Partnership (the "Predecessor"),
for the period from January 1, 1994 to May 25, 1994 and for the years ended
December 31, 1993 and 1992.
<TABLE>
<CAPTION>
FOR THE PERIOD
SIX MONTHS FOR THE PERIOD JANUARY 1,
ENDED YEAR ENDED YEAR ENDED MAY 26, 1994 TO 1994 TO YEAR ENDED YEAR ENDED
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, MAY 25, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1994 1994 1993 1992
---------- ------------ ------------ --------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
2.59 2.17 2.02 1.62 0.94 0.65 0.72
</TABLE>
The consolidated ratios of earnings to combined fixed charges and preferred
stock dividends for the Company and the Operating Partnership for the six
months ended June 30, 1997 is 2.51x.
The ratios of (i) earnings to fixed charges and (ii) earnings to combined
fixed charges and preferred stock dividends were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges (excluding preferred stock
dividends). Fixed charges consist of interest expense, rent expense, and the
amortization of debt issuance costs, and with respect to the ratios of
earnings to combined fixed charges and preferred stock dividends, preferred
stock dividend requirements.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Company conducts substantially all of its business, and indirectly holds
substantially all of its interests in the Properties, through the Operating
Partnership. Consequently, the Operating Partnership, and not the Company,
will issue the Debt Securities. The Debt Securities will be direct unsecured
obligations of the Operating Partnership and may be either senior Debt
Securities ("Senior Securities") or subordinated Debt Securities
("Subordinated Securities"). The Debt Securities will be issued under one or
more indentures, each dated as of a date prior to the issuance of the Debt
Securities to which it relates. Senior Securities and Subordinated Securities
may be issued pursuant to separate indentures (respectively, a "Senior
Indenture" and a "Subordinated Indenture"), in each case between the Operating
Partnership and a trustee (a "Trustee"), which may be the same Trustee, and in
the form that has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part, subject to such amendments or supplements as
may be adopted from time to time. The Senior Indenture and the Subordinated
Indenture, as amended or supplemented from time to time, are sometimes
hereinafter referred to collectively as the "Indentures." The Indentures will
be subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made under this heading relating to the Debt Securities
and the Indentures are summaries of the anticipated material provisions
thereof, do not purport to be complete and are qualified in their entirety by
reference to the Indentures and such Debt Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
TERMS
The indebtedness represented by the Senior Securities will rank equally with
all other unsecured and unsubordinated indebtedness of the Operating
Partnership. The indebtedness represented by Subordinated Securities will be
subordinated in right of payment to the prior payment in full of the Senior
Debt of the Operating Partnership as described under "--Subordination." The
particular terms of the Debt Securities offered by a Prospectus Supplement
will be described in the applicable Prospectus Supplement, along with any
applicable modifications of or additions to the general terms of the Debt
Securities as described herein and in the applicable Indenture and any
applicable federal income tax considerations. Accordingly, for a description
of the terms of any series of Debt Securities, reference must be made to both
the Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Operating Partnership or
as set forth in the applicable Indenture or in one or more indentures
supplemental to such Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuance of additional Debt Securities of such series.
Each Indenture will provide that the Operating Partnership may, but need
not, designate more than one Trustee thereunder, each with respect to one or
more series of Debt Securities. Any Trustee under an Indenture may resign or
be removed with respect to one or more series of Debt Securities and a
successor Trustee may be appointed to act with respect to such series. In the
event that two or more persons are acting as Trustee with respect to different
series of Debt Securities, each such Trustee shall be a Trustee of a trust
under the applicable Indenture separate and apart from the trust administered
by any other Trustee, and, except as otherwise indicated herein, any action
described herein to be taken by each Trustee may be taken by each such Trustee
with respect to, and only with respect to, the one or more series of Debt
Securities for which it is Trustee under the applicable Indenture.
5
<PAGE>
The following summaries set forth certain general terms and provisions of
the Indentures and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) The date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment dates,
or the method by which such dates shall be determined, the persons to whom
such interest shall be payable, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months;
(7) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Operating Partnership
in respect of such Debt Securities and the applicable Indenture may be
served;
(8) The period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt Securities
may, pursuant to any optional or mandatory redemption provisions, be
redeemed, as a whole or in part, at the option of the Operating
Partnership;
(9) The obligation, if any, of the Operating Partnership to redeem, repay
or purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the other terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units, or composite currency or currencies) and the manner in which such
amounts shall be determined;
(12) Whether such Debt Securities will be issued in certificated or book-
entry form and, if in book entry form, the identity of the depository for
such Debt Securities;
(13) Whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(14) The applicability, if any, of the defeasance and covenant
defeasance provisions described herein or set forth in the applicable
Indenture, or any modification thereof;
6
<PAGE>
(15) Whether and under what circumstances the Operating Partnership will
pay any additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have
the option to redeem such Debt Securities in lieu of making such payment;
(16) Any deletions from, modifications of or additions to the events of
default or covenants of the Operating Partnership, to the extent different
from those described herein or set forth in the applicable Indenture with
respect to such Debt Securities, and any change in the right of any Trustee
or any of the holders to declare the principal amount of any of such Debt
Securities due and payable;
(17) With respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such as a
change of control of the Operating Partnership), (i) the possible effects
of such provisions on the market price of the Operating Partnership's or
the Company's securities or in deterring certain mergers, tender offers or
other takeover attempts, and the intention of the Operating Partnership to
comply with the requirements of Rule 14e-1 under the Exchange Act and any
other applicable securities laws in connection with such provisions; (ii)
whether the occurrence of the specified events may give rise to cross-
defaults on other indebtedness such that payment on such Debt Securities
may be effectively subordinated; and (iii) the existence of any limitation
on the Operating Partnership's financial or legal ability to repurchase
such Debt Securities upon the occurrence of such an event (including, if
true, the lack of assurance that such a repurchase can be effected) and the
impact, if any, under the Indenture of such a failure, including whether
and under what circumstances such a failure may constitute an Event of
Default; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities").
In such cases, any special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as described under "Merger, Consolidation or Sale of Assets" or as
may be set forth in any Prospectus Supplement, the Debt Securities will not
contain any provisions that would limit the ability of the Operating
Partnership to incur indebtedness or that would afford holders of Debt
Securities protection in the event of (i) a highly leveraged or similar
transaction involving the Operating Partnership, the management of the
Operating Partnership or the Company, or any affiliate of any such party, (ii)
a change of control, or (iii) a reorganization, restructuring, merger or
similar transaction involving the Operating Partnership that may adversely
affect the holders of the Debt Securities. In addition, subject to the
limitations set forth under "Merger, Consolidation or Sale of Assets," the
Operating Partnership may, in the future, enter into certain transactions,
such as the sale of all or substantially all of its assets or the merger or
consolidation of the Operating Partnership, that would increase the amount of
the Operating Partnership's indebtedness or substantially reduce or eliminate
the Operating Partnership's indebtedness or substantially reduce or eliminate
the Operating Partnership's assets, which may have an adverse effect on the
Operating Partnership's ability to service its indebtedness, including the
Debt Securities. Neither Maryland General Corporation Law nor the governing
instruments of the Company and the Operating Partnership define the term
"substantially all" in connection with the sale of assets. Additionally,
Maryland cases interpreting the words "substantially all" rely heavily upon
the facts and circumstances of the particular case. As a consequence of the
lack of a definition of the term "substantially all," a holder of Debt
Securities must review the financial and other information disclosed by the
Operating Partnership to the public to determine whether a sale of
"substantially all" of the assets of the Operating Partnership has occurred.
Therefore, a risk of uncertainty exists for the holders of Debt Securities as
a consequence of the lack of a definition of the term "substantially all".
Restrictions on ownership and transfers of the Common Stock and Preferred
Stock are designed to preserve the Company's status as a REIT and, therefore,
may act to prevent or hinder a change of control. See "Description of Common
Stock" and "Restrictions on Transfers of Capital Stock." Reference is made to
the applicable Prospectus Supplement for
7
<PAGE>
information with respect to any deletions from, modifications of, or additions
to, the events of default or covenants that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee or at the
office of any transfer agent designated by the Operating Partnership for such
purpose. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for registration of transfer or exchange thereof at the corporate
trust office of the applicable Trustee or at the office of any transfer agent
designated by the Operating Partnership for such purpose. Every Debt Security
surrendered for registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer, and the person requesting
such action must provide evidence of title and identity satisfactory to the
applicable Trustee or transfer agent. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Trustee
or the Operating Partnership may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. If the
applicable Prospectus Supplement refers to any transfer agent (in addition to
the applicable Trustee) initially designated by the Operating Partnership with
respect to any series of Debt Securities, the Operating Partnership may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which any such transfer agent acts, except that the
Operating Partnership will be required to maintain a transfer agent in each
place of payment for such series. The Operating Partnership may at any time
designate additional transfer agents with respect to any series of Debt
Securities.
Neither the Operating Partnership nor any Trustee shall be required (i) to
issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption of any Debt Securities that may be selected
for redemption and ending at the close of business on the day of such mailing;
(ii) to register the transfer of or exchange any Debt Security, or portion
thereof, so selected for redemption, in whole or in part, except the
unredeemed portion of any Debt Security being redeemed in part; or (iii) to
issue, register the transfer of or exchange any Debt Security that has been
surrendered for repayment at the option of the holder, except the portion, if
any, of such Debt Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indentures will provide that the Operating Partnership may, without the
consent of the holders of any outstanding Debt Securities, consolidate with,
or sell, lease or convey all or substantially all of its assets to, or merge
with or into, any other entity provided that (i) either the Operating
Partnership shall be the continuing entity, or the successor entity (if other
than the Operating Partnership) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such
assets, shall expressly assume (A) the Operating Partnership's obligations to
pay principal of (and premium, if any) and interest on all of the Debt
Securities and (B) the due and punctual performance and observance of all of
the covenants and conditions contained in each Indenture; (ii) immediately
after giving effect to such transaction and treating any indebtedness that
becomes an obligation of the Operating Partnership or any subsidiary as a
result thereof as having been incurred by the Operating Partnership or such
subsidiary at the time of such transaction, no event of default under the
Indentures, and no event which, after notice or the lapse of time, or both,
would become such an event of default, shall have occurred and be continuing;
and (iii) an officers' certificate and legal opinion covering such conditions
shall be delivered to each Trustee.
8
<PAGE>
CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures will require the Operating Partnership to do or cause
to be done all things necessary to preserve and keep in full force and effect
its existence, rights and franchises; provided, however, that the Operating
Partnership shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of its business.
Maintenance of Properties. The Indentures will require the Operating
Partnership to cause all of its material properties used or useful in the
conduct of its business or the business of any subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Operating Partnership may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times; provided, however, that the Operating Partnership and its subsidiaries
shall not be prevented from selling or otherwise disposing of their properties
for value in the ordinary course of business.
Insurance. The Indentures will require the Operating Partnership to cause
each of its and its subsidiaries' insurable properties to be insured against
loss or damage at least equal to their then full insurable value with insurers
of recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating
service.
Payment of Taxes and Other Claims. The Indentures will require the Operating
Partnership to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any subsidiary or upon the income,
profits or property of the Operating Partnership or any subsidiary and (ii)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Operating Partnership or any
subsidiary; provided, however, that the Operating Partnership shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith.
Additional Covenants. Any additional covenants of the Operating Partnership
with respect to any series of Debt Securities will be set forth in the
Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default for 30
days in the payment of any installment of interest on any Debt Security of
such series; (ii) default in the payment of principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (iii) default in making
any sinking fund payment as required for any Debt Security of such series;
(iv) default in the performance or breach of any other covenant or warranty of
the Operating Partnership contained in the Indenture (other than a covenant
added to the Indenture solely for the benefit of a series of Debt Securities
issued thereunder other than such series), continued for 60 days after written
notice as provided in the applicable Indenture; (v) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed (except
mortgage indebtedness) by the Operating Partnership or any of its subsidiaries
in an aggregate principal amount in excess of $25,000,000 or under any
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any indebtedness for money borrowed (except mortgage
indebtedness) by the Operating Partnership or any of its subsidiaries in an
aggregate principal amount in excess of $25,000,000, whether such indebtedness
exists on the date of such Indenture or shall thereafter be created, which
default shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable or such obligations being accelerated, without such acceleration
having been rescinded or annulled; (vi) certain events of bankruptcy,
insolvency or reorganization, or court
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appointment of a receiver, liquidator or trustee of the Operating Partnership
or any Significant Subsidiary of the Operating Partnership; and (vii) any
other event of default provided with respect to a particular series of Debt
Securities. The term "Significant Subsidiary" has the meaning ascribed to such
term in Regulation S-X promulgated under the Securities Act.
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Operating Partnership (and to the applicable Trustee if given
by the holders). However, at any time after such a declaration of acceleration
with respect to Debt Securities of such series (or of all Debt Securities then
outstanding under any Indenture, as the case may be) has been made, but before
a judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the holders of not less than a majority in principal
amount of outstanding Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (i) the
Operating Partnership shall have deposited with the applicable Trustee all
required payments of the principal of (and premium, if any) and interest on
the Debt Securities of such series (or of all Debt Securities then outstanding
under the applicable Indenture, as the case may be), plus certain fees,
expenses, disbursements and advances of the applicable Trustee; and (ii) all
events of default, other than the non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in such Indenture. The
Indentures will also provide that the holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case
may be) may waive any past default with respect to such series and its
consequences, except a default (i) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series; or (ii) in
respect of a covenant or provision contained in the applicable Indenture that
cannot be modified or amended without the consent of the holder of each
outstanding Debt Security affected thereby.
The Indentures will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if specified responsible officers
of such Trustee consider such withholding to be in the interest of such
holders.
The Indentures will provide that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an event of default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest on such Debt Securities at the
respective due dates thereof.
The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no
obligation to exercise any of its rights or powers under an Indenture at the
request or direction of any holders of any series of Debt Securities then
outstanding under such Indenture, unless such holders shall have offered to
the Trustee thereunder reasonable security or indemnity. The holders of not
less than a majority in principal amount of the outstanding Debt Securities of
any series (or of all Debt Securities then outstanding under an Indenture, as
the case may be) shall have the right to direct the time, method and
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place of conducting any proceeding for any remedy available to the applicable
Trustee, or of exercising any trust or power conferred upon such Trustee.
However, a Trustee may refuse to follow any direction which is in conflict
with any law or the applicable Indenture, which may involve such Trustee in
personal liability or which may be unduly prejudicial to the holders of Debt
Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to deliver to each Trustee a certificate, signed
by one of several specified officers of the Operating Partnership, stating
whether or not such officer has knowledge of any default under the applicable
Indenture and, if so, specifying each such default and the nature and status
thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder of each such
Debt Security affected thereby, (i) change the stated maturity of the
principal of, or any installment of interest (or premium, if any) on, any such
Debt Security; (ii) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security,
or reduce the amount of principal of an Original Issue Discount Security that
would be due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect any right of
repayment of the holder of any such Debt Security; (iii) change the place of
payment, or the coin or currency, for payment of principal of, premium, if
any, or interest on any such Debt Security; (iv) impair the right to institute
suit for the enforcement of any payment on or with respect to any such Debt
Security; (v) reduce the above-stated percentage of any outstanding Debt
Securities necessary to modify or amend the applicable Indenture with respect
to such Debt Securities, to waive compliance with certain provisions thereof
or certain defaults and consequences thereunder or to reduce the quorum or
voting requirements set forth in the applicable Indenture; or (vi) modify any
of the foregoing provisions or any of the provisions relating to the waiver of
certain past defaults or certain covenants, except to increase the required
percentage to effect such action or to provide that certain other provisions
may not be modified or waived without the consent of the holder of such Debt
Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Operating Partnership with certain restrictive covenants of
the applicable Indenture.
Modifications and amendments of an Indenture will be permitted to be made by
the Operating Partnership and the respective Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes:
(i) to evidence the succession of another person to the Operating Partnership
as obligor under such Indenture; (ii) to add to the covenants of the Operating
Partnership for the benefit of the holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in such Indenture; (iii) to add events of default for the benefit
of the holders of all or any series of Debt Securities; (iv) to add or change
any provisions of an Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate
the issuance of Debt Securities in uncertificated form, provided that such
action shall not adversely affect the interests of the holders of the Debt
Securities of any series in any material respect; (v) to change or eliminate
any provisions of an Indenture, provided that any such change or elimination
shall become effective only when there are no Debt Securities outstanding of
any series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series; (viii) to provide for the acceptance
of appointment by a successor Trustee or facilitate the administration of the
trusts under an Indenture by more than one Trustee; (ix) to cure any
ambiguity, defect or inconsistency in an Indenture, provided that such action
shall not adversely affect the interests of holders of Debt Securities of any
series issued under such Indenture; or (x) to supplement any of the provisions
of an Indenture to the extent necessary to permit or facilitate defeasance and
discharge of
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any series of such Debt Securities, provided that such action shall not
adversely affect the interests of the holders of the outstanding Debt
Securities of any series.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof; (ii) the principal
amount of any Debt Security denominated in a foreign currency that shall be
deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above);
(iii) the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided with respect to such indexed
security pursuant to such Indenture; and (iv) Debt Securities owned by the
Operating Partnership or any other obligor upon the Debt Securities or any
affiliate of the Operating Partnership or of such other obligor shall be
disregarded.
The Indentures will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting will be permitted to be called at
any time by the applicable Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 10% in principal amount of the
outstanding Debt Securities of such series, in any such case upon notice given
as provided in such Indenture. Except for any consent that must be given by
the holder of each Debt Security affected by certain modifications and
amendments of an Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present may be adopted by the
affirmative vote of the holders of a majority in principal amount of the
outstanding Debt Securities of that series; provided, however, that, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage, which is less
than a majority, in principal amount of the outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of holders
of Debt Securities of any series duly held in accordance with an Indenture
will be binding on all holders of Debt Securities of that series. The quorum
at any meeting called to adopt a resolution, and at any reconvened meeting,
will be persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may
be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indentures will provide that
if any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders
of such series and one or more additional series: (i) there shall be no
minimum quorum requirement for such meeting; and (ii) the principal amount of
the outstanding Debt Securities of such series that vote in favor of such
request, demand, authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such request,
demand, authorization, direction, notice, consent, waiver or other action has
been made, given or taken under such Indenture.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Securities will be subject to the following subordination
provisions.
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Upon any distribution to creditors of the Operating Partnership in a
liquidation, dissolution or reorganization, the payment of the principal of
and interest on any Subordinated Securities will be subordinated to the extent
provided in the applicable Indenture in right of payment to the prior payment
in full of all Senior Debt (as defined below), but the obligation of the
Operating Partnership to make payments of the principal of and interest on
such Subordinated Securities will not otherwise be affected. No payment of
principal or interest will be permitted to be made on Subordinated Securities
at any time if a default on Senior Debt exists that permits the holders of
such Senior Debt to accelerate its maturity and the default is the subject of
judicial proceedings or the Operating Partnership receives notice of the
default. After all Senior Debt is paid in full and until the Subordinated
Securities are paid in full, holders will be subrogated to the rights of
holders of Senior Debt to the extent that distributions otherwise payable to
holders have been applied to the payment of Senior Debt. The Subordinated
Indenture will not restrict the amount of Senior Debt or other indebtedness of
the Operating Partnership and its subsidiaries. As a result of these
subordination provisions, in the event of a distribution of assets upon
insolvency, holders of Subordinated Indebtedness may recover less, ratably,
than general creditors of the Operating Partnership.
Senior Debt will be defined in the applicable Indenture as the principal of
and interest on, or substantially similar payments to be made by the Operating
Partnership in respect of, the following, whether outstanding at the date of
execution of the applicable Indenture or thereafter incurred, created or
assumed: (i) indebtedness of the Operating Partnership for money borrowed or
represented by purchase-money obligations; (ii) indebtedness of the Operating
Partnership evidenced by notes, debentures, or bonds, or other securities
issued under the provisions of an indenture, fiscal agency agreement or other
agreement; (iii) obligations of the Operating Partnership as lessee under
leases of property either made as part of any sale and leaseback transaction
to which the Operating Partnership is a party or otherwise; (iv) indebtedness,
obligations and liabilities of others in respect of which the Operating
Partnership is liable contingently or otherwise to pay or advance money or
property or as guarantor, endorser or otherwise or which the Operating
Partnership has agreed to purchase or otherwise acquire; and (v) any binding
commitment of the Operating Partnership to fund any real estate investment or
to fund any investment in any entity making such real estate investment, in
each case other than (A) any such indebtedness, obligation or liability
referred to in clauses (i) through (iv) above as to which, in the instrument
creating or evidencing the same pursuant to which the same is outstanding, it
is provided that such indebtedness, obligation or liability is not superior in
right of payment to the Subordinated Securities or ranks without preference to
the Subordinated Securities; (B) any such indebtedness, obligation or
liability which is subordinated to indebtedness of the Operating Partnership
to substantially the same extent as or to a greater extent than the
Subordinated Securities are subordinated; and (C) the Subordinated Securities.
There will not be any restrictions in any Indenture relating to Subordinated
Securities upon the creation of additional Senior Debt.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Operating Partnership's
most recent fiscal quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership will be permitted, at its option, to discharge certain
obligations to holders of any series of Debt Securities issued under any
Indenture that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due
and payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient
to pay the entire indebtedness on such Debt Securities in respect of principal
(and premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or
redemption date, as the case may be.
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The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Operating Partnership may elect either
(i) to defease and be discharged from any and all obligations with respect to
such Debt Securities (except for the obligation to pay additional amounts, if
any, upon the occurrence of certain events of tax, assessment or governmental
charge with respect to payments on such Debt Securities and the obligations to
register the transfer or exchange of such Debt Securities, to replace
temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain
an office or agency in respect of such Debt Securities and to hold moneys for
payment in trust) ("defeasance"); or (ii) to be released from its obligations
with respect to such Debt Securities under the applicable Indenture (being the
restrictions described under "--Certain Covenants") or, if provided in the
applicable Prospectus Supplement, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not
constitute an event of default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Operating
Partnership with the applicable Trustee, in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities, which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities,
and any mandatory sinking fund or analogous payments thereon, on the scheduled
due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the applicable Trustee an
opinion of counsel (as specified in the applicable Indenture) to the effect
that the holders of such Debt Securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to U.S. federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred, and such opinion
of counsel, in the case of defeasance, will be required to refer to and be
based upon a ruling received from or published by the Internal Revenue Service
or a change in applicable United States federal income tax law occurring after
the date of the Indenture. In the event of such defeasance, the holders of
such Debt Securities would thereafter be able to look only to such trust fund
for payment of principal (and premium, if any) and interest.
"Government Obligations" means securities that are (i) direct obligations of
the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged; or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which
issued the foreign currency in which the Debt Securities of such series are
payable, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided, however, that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the Government Obligation or the specific payment
of interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of
any series, (i) the holder of a Debt Security of such series is entitled to,
and does, elect pursuant to the applicable Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security; or (ii) a Conversion Event (as defined below) occurs in respect of
the currency, currency unit or composite currency in which such deposit has
been made, the indebtedness represented by such Debt Security will be deemed
to have been, and will be, fully discharged and satisfied through the payment
of the principal of (and premium, if any) and interest on such Debt Security
as they become due out of the proceeds yielded by converting the amount
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so deposited in respect of such Debt Security into the currency, currency unit
or composite currency in which such Debt Security becomes payable as a result
of such election or such cessation of usage based on the applicable market
exchange rate. "Conversion Event" means the cessation of use of (i) a
currency, currency unit or composite currency both by the government of the
country which issued such currency and for the settlement of transactions by a
central bank or other public institutions of or within the international
banking community; (ii) the European Currency Unit ("ECU") both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities; or (iii) any currency unit
or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a foreign currency that ceases to be used
by its government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any event of default other than the event of default
described in clause (iv) under "--Events of Default, Notice and Waiver" with
respect to specified sections of an Indenture (which sections would no longer
be applicable to such Debt Securities) or described in clause (vii) under "--
Events of Default, Notice and Waiver" with respect to any other covenant as to
which there has been covenant defeasance, the amount in such currency,
currency unit or composite currency in which such Debt Securities are payable,
and Government Obligations on deposit with the applicable Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
stated maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such event of
default. However, the Operating Partnership would remain liable to make
payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or any equity interest in the Operating
Partnership.
PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
the address of which will be stated in the applicable Prospectus Supplement;
provided, however, that, at the option of the Operating Partnership, payment
of interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or
by wire transfer of funds to such person at an account maintained within the
United States.
All moneys paid by the Operating Partnership to a paying agent or a Trustee
for the payment of the principal of or any premium or interest on any Debt
Security which remain unclaimed at the end of two years after such principal,
premium or interest has become due and payable will be repaid to the Operating
Partnership, and the holder of such Debt Security thereafter may look only to
the Operating Partnership for payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
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DESCRIPTION OF PREFERRED STOCK
The description of the Company's Preferred Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Articles of Incorporation (the "Articles of Incorporation") and
Bylaws (the "Bylaws"), as in effect.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 25
million shares of Preferred Stock, 8 million of which are issued and
outstanding as of the date of this Prospectus. Shares of Preferred Stock may
be issued from time to time, in one or more series, as authorized by the Board
of Directors of the Company. Prior to issuance of shares of each series, the
Board of Directors is required by the Maryland General Corporation Law
("MGCL") and the Company's Articles of Incorporation to fix for each series,
subject to the provisions of the Company's Articles of Incorporation regarding
excess stock, $.01 par value per share ("Excess Stock"), the 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 Maryland law. The Preferred
Stock will, when issued, be fully paid and nonassessable and will have no
preemptive rights. The Board of Directors could authorize the issuance of
shares of Preferred Stock with terms and conditions that could have the effect
of discouraging a takeover or 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 shares of Common Stock might receive a premium for their
shares over the then market price of such shares of Common Stock.
TERMS
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws
and any applicable amendment to the Articles of Incorporation designating
terms of a series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion price
or rate (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
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(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of
Common Stock of the Company, and to all equity securities ranking junior to
such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with
all equity securities issued by the Company, the terms of which specifically
provide that such equity securities rank on a parity with the Preferred Stock
with respect to dividend rights or rights upon liquidation, dissolution or
winding up of the Company; and (iii) junior to all equity securities issued by
the Company, the terms of which specifically provide that such equity
securities rank senior to the Preferred Stock with respect to dividend rights
or rights upon liquidation, dissolution or winding up of the Company. The term
"equity securities" does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of
assets of the Company legally available for payment, cash dividends at such
rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Each such dividend shall be payable to holders of record as they
appear on the share transfer books of the Company on such record dates as
shall be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company
fails to declare a dividend payable on a dividend payment date on any series
of the Preferred Stock for which dividends are non-cumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series are declared payable on
any future dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company
of any other series ranking, as to dividends, on a parity with or junior to
the Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment on the Preferred Stock
of such series for all past dividend periods and the then current dividend
period; or (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of
such series. When dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon Preferred Stock of any series and the
shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared upon
Preferred Stock of such series and any other series of Preferred Stock ranking
on a parity as to dividends with such Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Preferred Stock of
such series and such other series of Preferred Stock shall in all cases bear
to each other the same ratio that accrued dividends per share on the Preferred
Stock of such series (which shall not include any accumulation in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) and such other series of Preferred Stock bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on Preferred Stock of such
series which may be in arrears.
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Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period; and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for payment for the then
current dividend period, no dividends (other than in shares of Common Stock or
other shares of capital stock ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation) shall be declared or paid or set
aside for payment nor shall any other distribution be declared or made upon
the Common Stock, or any other capital stock of the Company ranking junior to
or on a parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any such
shares) by the Company (except by conversion into or exchange for other
capital stock of the Company ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remain payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and
at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Stock of any series is payable only from
the net proceeds of the issuance of shares of capital stock of the Company,
the terms of such Preferred Stock may provide that, if no such shares of
capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price
then due, such Preferred Stock shall automatically and mandatorily be
converted into the applicable shares of capital stock of the Company pursuant
to conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative dividend, full cumulative dividends on all shares of such series
of Preferred Stock shall have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period; and (ii)
if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of such series of Preferred Stock shall be redeemed unless
all outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status
of the Company or pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of Preferred Stock of such series.
In addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series
of Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof
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set apart for payment for all past dividend periods and the then current
dividend period; and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Company shall not purchase or otherwise acquire directly
or indirectly any shares of Preferred Stock of such series (except by
conversion into or exchange for capital shares of the Company ranking junior
to the Preferred Stock of such series as to dividends and upon liquidation);
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of Preferred Stock of such series to preserve the REIT
status of the Company or pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding shares of Preferred Stock of such
series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of
record of such shares in proportion to the number of such shares held or for
which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable manner determined
by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Stock are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the shares of
Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of shares of Preferred Stock
to be redeemed from each such holder. If notice of redemption of any Preferred
Stock has been given and if the funds necessary for such redemption have been
set aside by the Company in trust for the benefit of the holders of any
Preferred Stock so called for redemption, then from and after the redemption
date dividends will cease to accrue on such Preferred Stock, and all rights of
the holders of such shares will terminate, except the right to receive the
redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of
capital stock of the Company ranking junior to the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of the Company legally available for distribution to
stockholders liquidating distributions in the amount of the liquidation
preference per share, if any, set forth in the applicable Prospectus
Supplement, plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid noncumulative
dividends for prior dividend periods). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Preferred
Stock will have no right or claim to any of the remaining assets of the
Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company
are insufficient to pay the amount of the liquidating distributions on all
outstanding shares of Preferred Stock and the corresponding amounts payable on
all shares of other classes or series of capital stock of the Company ranking
on a parity with the Preferred Stock in the distribution of assets, then the
holders of the Preferred Stock and all other such classes or series of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be
respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
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consolidation or merger of the Company with or into any other corporation,
trust or entity, or the sale, lease or conveyance of all or substantially all
of the property or business of the Company, shall not be deemed to constitute
a liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will
not, without the affirmative vote or consent of the holders of at least two-
thirds of the shares of such series of Preferred Stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (such
series voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any class or series of capital stock ranking
prior to such series of Preferred Stock with respect to payment of dividends
or the distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital stock of the Company into such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of the Company's Articles of Incorporation or the
Designating Amendment for such series of Preferred Stock, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of such series of
Preferred Stock or the holders thereof; provided, however, with respect to the
occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event the
Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of Preferred Stock, and
provided further that (A) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or (B) any increase in the amount of authorized shares of such series
or any other series of Preferred Stock, in each case ranking on a parity with
or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the shares of Preferred Stock are
convertible, the conversion price or rate (or manner of calculation thereof),
the conversion period, provisions as to whether conversion will be at the
option of the holders of the Preferred Stock or the Company, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities, including any Preferred Stock of the Company.
Therefore, the Designating Amendment for each series of Preferred Stock may
contain provisions restricting the ownership and transfer of the Preferred
Stock. The applicable Prospectus Supplement
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will specify any additional ownership limitation relating to a series of
Preferred Stock. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Articles of Incorporation and Bylaws, as in effect.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 100
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At September 3, 1997, the Company had outstanding 55,448,226
shares of Common Stock.
TERMS
All shares of Common Stock offered hereby have been duly authorized, and are
fully paid and non-assessable. Subject to the preferential rights of any other
shares or series of stock and to the provisions of the Company's Articles of
Incorporation regarding excess stock, $.01 par value per share ("Excess
Stock"), holders of shares of Common Stock will be entitled to receive
dividends on shares of 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 Articles of Incorporation
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 stock, the
holders of Common Stock will possess the 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 Directors.
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 Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the Maryland General Corporation Law (the "MGCL"), a corporation
generally cannot dissolve, amend its Articles of Incorporation, merge, sell
all or substantially all of its assets, engage in a share exchange or engage
in similar transactions outside the ordinary course of business unless
approved by the affirmative vote of stockholders holding at least two-thirds
of the shares entitled to vote on the matter unless a lesser percentage (but
not less than a majority of all of the votes to be cast on the matter) is set
forth in the corporation's Articles of Incorporation. The Company's Articles
of Incorporation do not provide for a lesser percentage in such situations.
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RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital
Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is Boston EquiServe.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
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
Considerations." In order to protect the Company against the risk of losing
its status as a REIT on account of a concentration of ownership among its
stockholders, the Articles of Incorporation, subject to certain exceptions,
provide that no single holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 6.0% (the "Ownership Limit") of
the aggregate value of the Company's shares of Common Stock. Pursuant to the
Code, Common Stock held by certain types of entities, such as pension trusts
qualifying under Section 401(a) of the Code, United States investment
companies registered under the Investment Company Act, partnerships, trusts
and corporations, will be attributed to the beneficial owners of such entities
for purposes of the Five or Fewer Requirement (i.e., the beneficial owners of
such entities will be counted as holders). The Company's Articles of
Incorporation limits such entities to holding no more than 9.9% of the
aggregate value of the Company's shares of capital stock (the "Look-Through
Ownership Limit"). 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
or the Look-Through Ownership Limit 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, shall be null and void, and the intended transferee will
acquire no rights to the shares of capital stock. The foregoing restrictions
on transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to
attempt to qualify, or to continue to qualify, as a REIT. The Board of
Directors may, in its sole discretion, waive the Ownership Limit and the Look-
Through Ownership Limit if evidence satisfactory to the Board of Directors and
the Company's tax counsel is presented that the changes in ownership will not
then or in the future jeopardize the Company's REIT status and the Board of
Directors otherwise decides that such action is in the best interest of the
Company.
Shares of capital 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 shares of Excess Stock that will be
transferred, by operation of law, to the Company as trustee of a trust for the
exclusive benefit of the transferees to whom such shares of capital stock may
be ultimately transferred without violating the Ownership Limit or the Look-
Through Ownership Limit. While the Excess Stock is held in trust, it will not
be entitled to vote, it will not be considered for purposes of any stockholder
vote or the determination of a quorum for such vote, and, except upon
liquidation, it will not be entitled to participate in dividends or other
distributions. Any distribution paid to a proposed transferee of Excess Stock
prior to the discovery by the Company that capital
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stock has been transferred in violation of the provisions of the Company's
Articles of Incorporation shall be repaid to the Company upon demand. The
Excess Stock is not treasury stock, but rather constitutes a separate class of
issued and outstanding stock of the Company. The original transferee
stockholder may, at any time the Excess Stock is held by the Company in trust,
transfer the interest in the trust representing the Excess Stock to any person
whose ownership of the shares of capital stock exchanged for such Excess Stock
would be permitted under the Ownership Limit or the Look-Through Ownership
Limit, at a price not in excess of (i) the price paid by the original
transferee-stockholder for the shares of capital stock that were exchanged
into Excess Stock, or (ii) if the original transferee-stockholder did not give
value for such shares (e.g., the stock was received through a gift, devise or
other transaction), the average closing price for the class of shares from
which such shares of Excess Stock were converted for the ten days immediately
preceding such sale or gift. Immediately upon the transfer to the permitted
transferee, the Excess Stock will automatically be converted back into shares
of capital stock of the class from which it was converted. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee of
any shares of Excess Stock may be deemed, at the option of the Company, to
have acted as an agent on behalf of the Company in acquiring the Excess Stock
and to hold the Excess Stock on behalf of the Company.
In addition, the Company will have the right, for a period of 90 days during
the time any shares of Excess Stock are held by the Company in trust, to
purchase all or any portion of the Excess Stock from the original transferee-
stockholder at the lesser of (i) the price initially paid for such shares by
the original transferee stockholder, or if the original transferee-stockholder
did not give value for such shares (e.g., the shares were received through a
gift, devise or other transaction), the average closing price for the class of
stock from which such shares of Excess Stock were converted for the ten days
immediately preceding such sale or gift, and (ii) the average closing price
for the class of shares from which such shares of Excess Stock were converted
for the ten trading days immediately preceding the date the Company elects to
purchase such shares. The 90-day period begins on the date notice is received
of the violative transfer if the original transferee-stockholder gives notice
to the Company of the transfer or, if no such notice is given, the date the
Board of Directors determines that a violative transfer has been made.
These restrictions will not preclude settlement of transactions through the
NYSE.
Each stockholder shall upon demand be required to disclose to the Company in
writing any information with respect to the direct, indirect and constructive
ownership of capital stock as the Board of Directors deems necessary to comply
with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine
any such compliance.
The Ownership Limit may have the effect of precluding acquisition of control
of the Company unless the Board of Directors determines that maintenance of
REIT status is no longer in the best interests of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to continue to
operate, in such a manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of the material federal
income tax considerations of an investment in the Company's Securities to the
extent those considerations relate to the taxation of the Company. To the
extent such considerations relate to the tax treatment of particular
Securities, they will be addressed in the applicable Prospectus Supplement.
Goodwin, Procter & Hoar llp has acted as counsel to the Company and has
reviewed this summary and is of the opinion that to the extent that it
constitutes matters of law, summaries of legal matters, or legal conclusions,
this summary is accurate in all material respects. For the particular
provisions that govern the federal income tax treatment of the Company and its
stockholders, reference is made to Sections 856 through 860 of the Code and
the regulations thereunder. The following summary is qualified in its entirety
by such reference.
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The statements in this discussion and the opinion of Goodwin, Procter and
Hoar llp are based on current provisions of the Code, Treasury Regulations,
the legislative history of the Code, existing administrative rulings and
practices of the Service, and judicial decisions. No assurance can be given
that future legislative, judicial, or administrative actions or decisions,
which may be retroactive in effect, will not affect the accuracy of any
statements in this Prospectus with respect to the transactions entered into or
contemplated prior to the effective date of such changes.
EACH INVESTOR IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF AN INVESTMENT IN THE COMPANY'S
SECURITIES.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income
that it distributes to its stockholders. However, the Company may be subject
to federal income tax under certain circumstances including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions
are available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could
have a material adverse effect upon its stockholders.
In addition to meeting a number of technical requirements, including
requirements regarding distributions to shareholders, diversification of
ownership and record keeping, to qualify as a REIT the Company must meet
certain tests regarding the nature of its assets and its gross income. The
Company is largely restricted under these tests to holding "real estate
assets" (as defined in the Code) for investment (and not for resale) and
relatively small amounts of investment securities. Accordingly, the Company's
ability to diversify its holdings outside of investments in real estate is
limited. The requirements of the statutory tests also impose certain
requirements on the Company's leases with its tenants, including restrictions
on the Company's ability to provide noncustomary services to its tenants.
Because the Company's proportionate share of the assets and items of income of
the Operating Partnership and its subsidiary partnerships are treated as
assets and gross income of the Company, the same restrictions apply to the
operations and investments of the Operating Partnership and the subsidiary
partnerships. Further, changes in law, or in the interpretation of the law,
may change the nature and effect of these restrictions or add additional
restrictions to the manner in which the Company conducts its business.
In the opinion of Goodwin, Procter & Hoar llp, commencing with the taxable
year ending December 31, 1994, the Company has been organized and operated in
conformity with the requirements for qualification and taxation as a REIT
under the Code, and the Company's proposed method of operation will enable it
to continue to meet the requirements for qualification and taxation as a REIT
under the Code. Investors should be aware, however, that opinions of counsel
are not binding upon the Internal Revenue Service (the "Service") or any
court. Moreover, Goodwin, Procter & Hoar llp's opinion is based on various
assumptions and is conditioned upon certain representations made by the
Company as to factual matters, including representations regarding the nature
of the Company's properties, and the future conduct of the Company's business.
The Company's qualification and taxation as a REIT depends upon the Company's
ability to meet on a continuing basis, through actual annual operating
results, the distribution levels, stock ownership, and other various
qualification tests imposed under the Code. Goodwin, Procter & Hoar llp will
not review the Company's compliance with those tests on a continuing basis.
Accordingly, no assurance can be given that the actual results of the
Company's operation for any particular taxable year will satisfy such
requirements.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax
consequences of an investment in the Company, including the possibility of
United States income tax withholding on Company distributions.
24
<PAGE>
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell Securities through
underwriters or dealers, directly to one or more purchasers, through agents or
through a combination of any such methods of sale.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company, from the Operating Partnership or from
purchasers of Securities, for whom they may act as agents, in the form of
discounts, concessions or commissions. Underwriters may sell Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers,
and agents that participate in the distribution of Securities may be deemed to
be underwriters under the Securities Act, and any discounts or commissions
they receive from the Company or the Operating Partnership, and any profit on
the resale of Securities they realize may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
or the Operating Partnership will be described, in the applicable Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other
than the Common Stock which is listed on the NYSE. Any shares of Common Stock
sold pursuant to a Prospectus Supplement will be listed on the NYSE, subject
to official notice of issuance. The Operating Partnership or the Company may
elect to list any series of Debt Securities or Preferred Stock on an exchange,
but is not obligated to do so. It is possible that one or more underwriters
may make a market in a series of Securities, but will not be obligated to do
so and may discontinue any market making at any time without notice.
Therefore, no assurance can be given as to the liquidity of, or the trading
market for, the Securities.
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act. 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.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be tenants of, the Company or the Operating Partnership in
the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership will authorize underwriters or other persons acting as
the Company's or the Operating Partnership's agents to solicit offers by
certain institutions to purchase Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by the Company or the Operating Partnership, as the case may be. The
obligations of any purchaser under any such contract will be subject to the
condition that the purchase of the Debt Securities shall not at the time of
delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
If so indicated in the applicable Prospectus Supplement, the Operating
Partnership will authorize underwriters or other persons acting as the
Operating Partnership's agents to solicit offers by certain institutions to
purchase Debt Securities from the Operating Partnership at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery
25
<PAGE>
on the date or dates stated in such Prospectus Supplement. Each Contract will
be for an amount not less than, and the aggregate principal amount of Debt
Securities sold pursuant to Contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of the Operating Partnership.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Debt Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject, and (ii) if the Debt
Securities are being sold to underwriters, the Operating Partnership shall
have sold to such underwriters the total principal amount of the Debt
Securities less the principal amount thereof covered by Contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in
certain states Securities may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the
Securities for a period of two business days prior to the commencement of such
distribution.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin,
Procter & Hoar llp, Boston, Massachusetts, a limited liability partnership
including professional corporations, as corporate, securities and tax counsel
to the Company. Gilbert G. Menna, whose professional corporation is a partner
of Goodwin, Procter & Hoar llp, is an assistant secretary of the Company and
owns in excess of 1,000 shares of the Company's Common Stock.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1995 and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1996 and 1995 and for
the period May 26, 1994 to December 31, 1994, the combined statements of
operations, owners' equity (deficit) and cash flows for the period January 1,
1994 to May 25, 1994 of The Beacon Group, predecessor to the Company, and the
related financial statement schedules of the Company as of December 31, 1996,
incorporated by reference herein from the Company's Annual Report on Form 10-
K, as amended, for the year ended December 31, 1996, have been so incorporated
in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheets of the Operating Partnership as of December
31, 1996 and 1995 and the related consolidated statements of operations,
partners' capital and cash flows for the years ended December 31, 1996 and
1995 and the period May 26, 1994 to December 31, 1994, the combined statements
of operations, limited partners' capital interest and cash flows for the
period January 1, 1994 to May 25, 1994, of The Beacon Group, predecessor to
the Operating Partnership, and the related financial statement schedules of
the Operating Partnership as of December 31, 1996, incorporated by reference
herein from the Operating Partnership's Form 10, as amended, have been so
incorporated in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The statement of excess of revenues over specific operating expenses for 225
Franklin Street in Boston, Massachusetts for the year ended December 31, 1996,
incorporated by reference herein from the Company's report on Form 8-K dated
June 4, 1997, as amended on the Form 8-K/A of the Company dated June 11, 1997,
has been so incorporated in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of said firm as
experts in accounting and auditing.
26
<PAGE>
The statements of excess of revenues over specific operating expenses for
each of 10880 Wilshire Boulevard in Westwood, California, Centerpointe in
Fairfax, Virginia, and Westbrook Corporate Center in Westchester, Illinois for
the year ended December 31, 1996, incorporated by reference herein from the
Company's current report on Form 8-K dated March 27, 1997, as amended on the
Form 8-K/A of the Company dated April 7, 1997, have been so incorporated in
reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of said firm as experts in accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of the Rosslyn Acquisitions in Rosslyn, Virginia, New England Executive
Park in Burlington, Massachusetts, and 10960 Wilshire Boulevard in Westwood,
California for the year ended December 31, 1995, incorporated by reference
herein from the Company's current report on Form 8-K dated October 18, 1996,
as amended, have been so incorporated in reliance on the reports of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of said firm
as experts in accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of the Fairfax County Portfolio in Tysons Corner and Herndon, Virginia,
1333 H Street in Washington, DC, AT&T Plaza in Oak Brook, Illinois, and Tri-
State International in Lincolnshire, Illinois for the year ended December 31,
1995, incorporated by reference herein from the Company's current report on
Form 8-K dated July 23, 1996, as amended on the Form 8-K/A of the Company
dated August 6, 1996, have been so incorporated in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
said firm as experts in accounting and auditing.
The statement of excess of revenues over specific operating expenses for
Perimeter Center in Atlanta, Georgia for the year ended December 31, 1995,
incorporated by reference herein from the Company's current report on Form 8-K
dated February 15, 1996, as amended, has been so incorporated in reliance on
the reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of Shoreline Technology Park in Mountain View, California, Lake Marriott
Business Park in Santa Clara, California and Presidents Plaza in Chicago,
Illinois for the year ended December 31, 1995, incorporated by reference
herein from the Company's report on Form 8-K dated December 20, 1996, as
amended, have been so incorporated in reliance on the reports of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of said firm
as experts in accounting and auditing.
27
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP
OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary............................................ S-3
Risk Factors............................................................. S-8
The Operating Partnership................................................ S-13
Recent Developments...................................................... S-14
Properties............................................................... S-15
Use of Proceeds.......................................................... S-24
Price Range of Common Stock and Distribution History..................... S-25
Capitalization........................................................... S-26
Selected Financial Information........................................... S-27
Description of Notes..................................................... S-31
Management............................................................... S-40
Underwriting............................................................. S-46
Legal Matters............................................................ S-48
PROSPECTUS
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
The Company and the Operating Partnership................................ 3
Use of Proceeds.......................................................... 4
Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined
Fixed Charges and Preferred Stock Dividends............................. 4
Description of Debt Securities........................................... 5
Description of Preferred Stock........................................... 16
Description of Common Stock.............................................. 21
Restrictions on Transfers of Capital Stock............................... 22
Federal Income Tax Considerations........................................ 23
Plan of Distribution..................................................... 25
Legal Matters............................................................ 26
Experts.................................................................. 26
</TABLE>
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$300,000,000
BEACON PROPERTIES, L.P.
$150,000,000 % NOTES DUE , 2002
$150,000,000 % NOTES DUE , 2007
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
SEPTEMBER , 1997
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