UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________to _______________________
Commission file number _____________________ 0-22139_____________________
_________________BEACON PROPERTIES, L.P.___________________
(Exact name of Registrant as specified in its charter)
__________Delaware___________ ___________ 04-3224259___________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
_________________50 Rowes Wharf, Boston, Massachusetts 02110___________________
____________________(Address of principal executive offices)____________________
(Zip Code)
_____________________________(617) 330-1400_________________________________
(Registrant's telephone number, including area code)
________________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
_____ ___
1
<PAGE>
BEACON PROPERTIES, L.P.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-14
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
</TABLE>
2
<PAGE>
BEACON PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(unaudited)
(In thousands)
ASSETS
<S> <C> <C>
Real estate:
Land $ 213,813 $ 213,858
Buildings, improvements and equipment 1,482,626 1,477,672
----------- ------------
1,696,439 1,691,530
Less accumulated depreciation 110,994 97,535
----------- ------------
1,585,445 1,593,995
Deferred financing and leasing costs, net
of accumulated amortization of $17,551 and $16,334 18,124 17,287
Cash and cash equivalents 13,392 35,896
Restricted cash 3,159 2,599
Accounts receivable 10,633 11,596
Accrued rent 16,636 13,065
Prepaid expenses and other assets 18,520 808
Mortgage notes receivable 51,507 51,491
Investments in and advance to joint ventures and corporations 52,181 52,176
----------- ------------
Total assets $ 1,769,597 $ 1,778,913
=========== ============
LIABILITIES AND PARTNER'S CAPITAL
Liabilities:
Mortgage notes payable $ 451,862 $ 452,212
Note payable, Credit Facility 153,000 153,000
Accounts payable, accrued expenses and other liabilities 33,234 41,336
Investment in joint venture 24,458 24,735
----------- ------------
Total liabilities 662,554 671,283
----------- ------------
Commitments and contingencies --- ---
Limited partners' capital interest, 6,273,928 units outstanding, at
redemption value 207,823 229,783
----------- ------------
Partner's capital
Operating units issued and outstanding 48,237,322 and 48,116,480
General partner - outstanding 545,113 and 543,904 10,748 10,530
Limited partner - outstanding 47,692,209 and 47,572,576 888,472 867,317
----------- ------------
Total partner's capital 899,220 877,847
----------- ------------
Total liabilities and partner's capital $ 1,769,597 $ 1,778,913
=========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Quarter Ended
March 31,
------------------------------------
1997 1996
------------ ------------
(Unaudited and in thousands, except per unit amounts and
units outstanding)
<S> <C> <C>
Revenues:
Rental income $ 63,601 $ 26,920
Management fees 821 750
Recoveries from tenants 8,351 3,245
Mortgage interest income 1,372 958
Other income 2,572 1,795
------------- -------------
76,717 33,668
------------- -------------
Expenses:
Property expenses 14,531 6,896
Real estate taxes 8,334 3,517
General and administrative 8,615 3,543
Mortgage interest expense 11,022 6,344
Interest - amortization of financing costs 477 561
Depreciation and amortization 14,211 5,859
------------- -------------
57,190 26,720
------------- -------------
Income from operations 19,527 6,948
Equity in net income of joint ventures and corporations 1,427 1,358
------------- -------------
Income from continuing operations 20,954 8,306
Discontinued operations - Construction Company
Loss from operations (586) (407)
------------- -------------
Income before extraordinary item 20,368 7,899
Extraordinary item --- (1,986)
------------- -------------
Net income $ 20,368 $ 5,913
============= =============
Income from continuing operations per unit $ 0.38 0.32
Discontinued operations - Construction Company
Loss from operations (0.01) (0.02)
------------- -------------
Income per unit before extraordinary item 0.37 0.30
Extraordinary item --- (0.07)
------------- -------------
Net income per unit $ 0.37 $ 0.23
============= =============
Weighted average units outstanding 54,430,805 26,136,261
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------------------------
1997 1996
---------- ----------
(unaudited and in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 20,368 $ 5,913
---------- ----------
Adjustments to reconcile net income
to net cash provided by operating activities:
Increase in accrued rent (3,571) (1,068)
Depreciation, amortization and amortization of financing costs 14,688 6,420
Equity in net income of joint ventures and corporations (841) (951)
Extraordinary item --- 1,986
Decrease (increase) in accounts receivable 963 (2,755)
Increase in prepaid expenses and other assets (334) (703)
(Decrease) increase in accounts payable and accrued expenses (3,390) 9,639
---------- ----------
Total adjustments 7,515 12,568
---------- ----------
Net cash provided by operating activities 27,883 18,481
---------- ----------
Cash flows from investing activities:
Property additions (9,019) (335,547)
Payment of deferred leasing costs (1,926) (1,745)
(Increase) decrease in prepaid expenses and other assets (17,378) 5,000
Purchase of mortgage notes receivable (16) (9)
Capital distributions from joint ventures 547 1,782
Increase in restricted cash (560) (1,662)
---------- ----------
Net cash used by investing activities (28,352) (332,181)
---------- ----------
Cash flows from financing activities:
Capital contributions 3,092 175,329
Payment of deferred financing costs (128) (4,647)
Borrowings on Credit Facility --- 75,000
Payments on Credit Facility --- (205,500)
Borrowings on mortgage notes --- 593,000
Payments on mortgage notes (350) (260,158)
Decrease in prepaid expenses and other assets --- 2,300
Distributions (24,649) (10,082)
---------- ----------
Net cash (used) provided by financing activities (22,035) 365,242
---------- ----------
Net (decrease) increase in cash and cash equivalents (22,504) 51,542
Cash and cash equivalents, beginning of period 35,896 4,481
---------- ----------
Cash and cash equivalents, end of period $ 13,392 $ 56,023
========== ==========
Supplemental disclosures:
Cash paid during the period for interest $ 11,331 $ 5,343
========== ==========
Non cash activities:
Increase in minority interest as a result of acquisition of properties $ --- $ 13,758
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------
1. Organization and Basis of Presentation:
Organization
Beacon Properties, L.P. ( the "Operating Partnership" ) was organized as
a Delaware limited partnership in April 1994 and commenced operations
effective on May 26, 1994. Simultaneously with the closing of the
Initial Public Offering ( the "IPO" ) of Beacon Properties Corporation (
the " Company" ), which is the sole general partner and a limited
partner of the Operating Partnership, the Company contributed its
interest in two properties and approximately $173.4 million, the net
proceeds of the IPO, to the Operating Partnership in exchange for
partnership interests ("Units"). The Operating Partnership was formed to
continue and expand the commercial real estate business of The Beacon
Group ( the "Predecessor" ).
The Operating Partnership specializes in property ownership, management,
leasing, design and development and, as of May 13, 1997, owned or had an
interest in 103 properties totaling approximately 16.3 million square
feet (the "Properties").
Basis of Presentation
The financial statements of the Operating Partnership are consolidated
and include all the accounts of the Operating Partnership and its
subsidiaries. All significant intercompany balances and transactions
have been eliminated.
The accompanying financial statements are unaudited; however, they have
been prepared in accordance with generally accepted accounting
principles for interim financial information and in conjunction with the
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the disclosures required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
solely of normal recurring matters) necessary for a fair presentation of
the financial statements for these interim periods have been included.
The results for the three months ended March 31, 1997 are not
necessarily indicative of the results to be obtained for the full fiscal
year. These financial statements should be read in conjunction with the
December 31, 1996 audited financial statements and notes thereto of the
Operating Partnership, included in its Form 10 ( as amended by Form
10/A-1, Form 10/A-2 and Form 10/A-3 ) for the fiscal year ended December
31, 1996. Certain reclassifications have been made to previously
reported amounts to conform with current reporting.
6
<PAGE>
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------
2. Equity Investments in Real Estate:
The Operating Partnership reports its share of income and losses based
on its ownership interest in the respective equity investments. Losses
in excess of investments are not recorded where the Operating
Partnership has not guaranteed or does not intend to provide any future
financial support. The following summarized information has been
presented for the property joint ventures and property corporation for
which the Operating Partnership has recorded its share of the earnings
for the three months ended March 31, 1997.
<TABLE>
<CAPTION>
One Post Polk & 75-101 Federal
Office Square Taylor Street
------------- ----------- --------------
(in thousands)
<S> <C> <C> <C>
Balance sheets at March 31, 1997
Real estate, net $ 40,095 $ 90,607 $ 155,658
Cash 1,740 810 9,824
Other assets 10,777 2,167 2,801
------------ ----------- ----------
$ 52,612 $ 93,584 $ 168,283
============ =========== ==========
Mortgage notes payable $ 92,717 $ --- $ 90,000
Other liabilities 1,435 811 3,961
Equity ( deficiency ) (41,540) 92,773 74,322
------------ ----------- ----------
$ 52,612 $ 93,584 $ 168,283
============ =========== ==========
Summary of operations for the three months
ended March 31, 1997
Revenues $ 5,640 $ 5,827 $ 6,960
Other income 113 251 324
------------ ----------- ----------
Total revenues 5,753 6,078 7,284
------------ ----------- ----------
Operating expenses 2,344 1,543 3,006
Mortgage interest expense 1,704 --- 1,731
Depreciation and amortization 890 858 1,173
------------ ----------- ----------
Total expenses 4,938 2,401 5,910
------------ ----------- ----------
Net income $ 815 $ 3,677 $ 1,374
============ =========== ==========
Share of properties:
Depreciation and amortization $ 330 $ 86 $ 590
</TABLE>
7
<PAGE>
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
3. Commitments and Contingencies:
In March 1997, the Operating Partnership entered into a contract to
acquire an office complex located in Westchester ( suburban Chicago ),
Illinois ( the "Westbrook Corporate Center" ). The purchase price of the
property is approximately $182.1 million, consisting of the assumption
of $106 million of mortgage debt, the issuance of approximately $50
million of Units and approximately $26.1 million in cash.
4. Pro Forma Results ( unaudited ):
The following unaudited pro forma operating results for the Operating
Partnership have been prepared as if the 1996 Unit issuances and the
1996 property acquisitions had occurred on January 1, 1996. Unaudited
pro forma financial information is presented for informational purposes
only and may not be indicative of what the actual results of operations
of the Operating Partnership would have been had the events occurred as
of January 1, 1996, nor does it purport to represent the results of
operations for future periods.
Three Months ended March 31, 1997 and 1996 1997 1996
------------------------------------------ ---- ----
Revenue $76,717 $72,210
Income before extraordinary item 20,368 18,060
Net income per unit
before extraordinary item $ .37 $ .33
5. Subsequent Events:
On April 9, 1997, the Operating Partnership converted its $300 million
secured floating-rate credit facility ( the "Credit Facility" ) to an
unsecured facility and decreased the interest rate on the Credit
Facility from the Eurodollar rate plus 175 basis points ( 1.75% ) to the
Eurodollar rate plus 120 basis points ( 1.20% ). Additionally, on April
30, 1997, the maximum loan amount available under the Credit Facility
was increased to $350 million.
On April 10, 1997, the Company sold 7,000,000 shares of common stock,
$.01 par value, to the public at $32.125 per share ( the "April 1997
Offering" ) and contributed the net proceeds of approximately $211.4
million to the Operating Partnership in exchange for a like number of
Units. The net proceeds of the April 1997 Offering were used to purchase
10880 Wilshire Boulevard located in Westwood, California and two office
properties located in Fairfax County, Virginia ("Centerpointe I and II")
with the remaining balance used to pay down the Credit Facility.
On April 23, 1997, the Operating Partnership acquired 10880 Wilshire
Boulevard located in Westwood, California for aggregate consideration of
approximately $99 million.
On April 24, 1997, the Operating Partnership declared a quarterly
distribution of $28.5 million payable on May 23, 1997 to partners of
record on May 9, 1997.
On April 30, 1997, the Operating Partnership acquired Centerpointe I and
II, located in Fairfax County, Virginia for aggregate consideration of
approximately $55 million consisting of approximately $25 million in
cash and assumption of $30 million of mortgage debt.
On May 8, 1997, the Operating Partnership sold the Westlakes Office Park
property, its sole property located in Berwyn ( suburban Philadelphia ),
Pennsylvania for approximately $72.5 million. The transaction will be
treated as a like-kind exchange in which the sale proceeds, which are
currently held in escrow, will be used to purchase a future acquisition
property.
8
<PAGE>
BEACON PROPERTIES, L.P.
PART I - ITEM 2
-------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This Form 10-Q contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The words "believe", "expect", "anticipate", "intend", "estimate" and
other expressions which are predictions of or indicate future events and trends
and which do not relate to historical matters identify forward-looking
statements. 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 include the following: Real estate investment
considerations, such as the effect of economic and other conditions in the
market area on cash flows and values; the need to renew leases or relet space
upon the expiration of current leases, and the ability of a property to generate
revenues sufficient to meet debt service payments and other operating expenses;
and risks associated with borrowing, such as the possibility that the Operating
Partnership will not have sufficient funds available to make principal payments
on outstanding debt, outstanding debt may be refinanced at higher interest rates
or otherwise on terms less favorable to the Operating Partnership and interest
rates under the Credit Facility may increase.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying financial
statements and notes thereto.
Results of Operations
Comparison of Three Months Ended March 31, 1997 and March 31, 1996
The Operating Partnership's gross revenues increased by 128% for the three
months ended March 31, 1997 compared to the corresponding period in 1996. The
growth in gross revenues was primarily the result of the acquisition of 78
Properties (the "Acquisition Properties" ) comprising 9.1 million square feet
during 1996. The Operating Partnership's proportionate share of weighted average
square feet of office properties increased by 112% to 14.0 million square feet
for the three months ended March 31, 1997 compared to 6.6 million square feet
for the corresponding period in 1996.
The Acquisition Properties increased revenues from rental operations, which
includes rental income, recoveries from tenants and other income, by $41.1
million for the three months ended March 31, 1997 compared to the corresponding
period in 1996. The remaining balance of the increase was primarily due to
increases in occupancy and rental rates and completion of the redevelopment and
achievement of 88% occupancy at the Crosby Corporate Center in 1996.
The impact of the straight-line rent adjustment increased consolidated revenues
for the Operating Partnership by $3.6 million for the three months ended March
31, 1997 and $1.1 million for the corresponding period in 1996. The impact of
the straight-line rent adjustment decreased the Operating Partnership's equity
in net income of property joint ventures and corporations by $0.1 million for
the three months ended March 31, 1997 and increased the Operating Partnership's
equity in net income of property joint ventures and corporations by $0.1 million
for the corresponding period in 1996.
Mortgage interest income for the three months ended March 31, 1997 was $1.4
million and $1.0 million for corresponding period in 1996. The increase of $0.4
million was the result of the Operating Partnership's acquisition of the
remaining portions of the outstanding first mortgage indebtedness on the Rowes
Wharf Property in April and June 1996.
The Acquisition Properties increased property expenses, real estate taxes and
depreciation and amortization by $19.6 million for the three months ended March
31, 1997 compared to the corresponding period in 1996. The remaining balance of
the increase was primarily due to additional operating expenses as a result of
an increase in occupancy and the completion of the redevelopment and achievement
of 88% occupancy at the Crosby Corporate Center in 1996.
9
<PAGE>
BEACON PROPERTIES, L.P.
PART I - ITEM 2
-------
General and administrative expenses were $8.6 million for the three months ended
March 31, 1997 and $3.5 million for the corresponding period in 1996. The
Acquisition Properties increased general and administrative expenses by $1.5
million. The remaining balance of the increase was primarily due to an increase
in corporate management and administrative costs. In 1996, the Operating
Partnership established its first regional offices in the Southeast and
Mid-Atlantic and in the first quarter of 1997 regional offices in the Midwest
and West had begun to be established. As a result, payroll expense increased by
$1.8 million along with an increase in other employee related expenses. General
and administrative expenses as a percentage of total revenue were 11.2% in 1997
and 10.65% in 1996.
Net operating income ( excluding the effect of straight-line rents ) for
properties owned for at least a full year ( all properties except the
Acquisition Properties ) increased 4.9% for the three months ended March 31,
1997 compared to the corresponding period in 1996.
Mortgage interest expense was $11.0 million for the three months ended March 31,
1997 and $6.3 million for the corresponding period in 1996. The increase of $4.7
million was primarily the result of debt incurred or assumed in connection with
the acquisition in 1996 of the Perimeter Center Portfolio and the Fairfax County
Portfolio and an increase in the weighted average outstanding balance of the
Credit Facility of $153.0 million for the three months ended March 31, 1997
compared to $71.3 million for corresponding period in 1996.
Interest-amortization of financing costs was $0.5 million for the three months
ended March 31, 1997 and $0.6 million for the corresponding period in 1996. The
decrease of $0.1 million was primarily the result of the reduction in
amortization of financing costs of the Credit Facility as a result of the
write-off of fees and costs of the Credit Facility which was substantially
modified in June 1996.
Loss from discontinued operations from the Construction Company was $0.6 million
for the three months ended March 31, 1997 and $0.4 million for the corresponding
period in 1996. In December 1996, substantially all of the assets of the
Construction Company were sold to Skanska AB, a Swedish construction firm. The
Construction Company's new business plan involves the completion of certain
contracts not transferred to the purchaser and the liquidation of its remaining
assets.
An extraordinary item of $2.0 million loss for the three months ended March 31,
1996 was recorded in connection with the write-off of fees and costs to acquire
a $260 million mortgage loan provided by Paine Webber Real Estate Securities,
Inc. used to acquire the Perimeter Center Portfolio ( the "Paine Webber
Acquisition Loan" ). The Paine Webber Acquisition Loan was repaid in March 1996
approximately three years prior to its maturity.
10
<PAGE>
BEACON PROPERTIES, L.P.
PART I - ITEM 2
-------
As of March 31, 1997, the Operating Partnership owned or had an interest in 104
income producing commercial properties. The percent leased calculation includes
all leases executed as of March 31, 1997.
<TABLE>
<CAPTION>
Rentable Percent Average Net Effective
Square Feet Leased Base Rent Rent
----------- ------- --------- -------------
<S> <C> <C> <C> <C>
Downtown Boston Office Market:
Center Plaza 649,000 98% $22.58 $12.63
75-101 Federal Street 812,000 92% 30.67 20.24
One Post Office Square 764,000 99% 24.29 15.46
150 Federal Street 530,000 100% 25.15 21.25
Russia Wharf 315,000 97% 14.22 8.09
Rowes Wharf 344,000 100% 29.89 18.56
Two Oliver-147 Milk Street 271,000 99% 17.08 11.72
175 Federal Street 203,000 99% 25.21 15.58
South Station 149,000 100% 30.67 20.77
--------------------------------------------------------------------------------------------------------------------
Subtotal 4,037,000 98% 24.92 16.38
--------------------------------------------------------------------------------------------------------------------
North Central Atlanta Office Market:
Perimeter Center Portfolio 3,302,000 96% 16.69 11.58
--------------------------------------------------------------------------------------------------------------------
Greater Boston Suburban Office Market:
Wellesley Office Park Buildings 1-8 623,000 100% 24.15 16.99
Crosby Corporate Center 336,000 88% 13.37 9.57
Westwood Business Centre 160,000 100% 19.55 11.34
New England Executive Park 817,000 97% 18.47 11.63
--------------------------------------------------------------------------------------------------------------------
Subtotal 1,936,000 97% 19.53 13.00
--------------------------------------------------------------------------------------------------------------------
Cambridge Office Market:
One Canal Park 100,000 100% 22.05 13.99
Ten Canal Park 110,000 92% 19.23 12.42
The Riverview Building 263,000 100% 22.34 17.46
--------------------------------------------------------------------------------------------------------------------
Subtotal 473,000 98% 21.55 15.55
--------------------------------------------------------------------------------------------------------------------
Suburban Philadelphia Office Market:
Westlakes 1, 2, 3 & 5 444,000 100% 20.34 15.84
--------------------------------------------------------------------------------------------------------------------
Suburban Virginia Office Market:
Polk and Taylor Buildings 890,000 100% 23.77 19.23
E.J. Randolph 165,000 99% 20.99 15.23
John Marshall I 261,000 100% 18.26 15.85
Northridge I 124,000 100% 25.96 19.34
1300 North 17th Street 373,000 98% 24.24 17.13
1616 North Fort Myer Drive 293,000 100% 23.07 15.45
--------------------------------------------------------------------------------------------------------------------
Subtotal 2,106,000 100% 22.98 17.61
--------------------------------------------------------------------------------------------------------------------
Washington, D.C. Office Market:
--------------------------------------------------------------------------------------------------------------------
1333 H Street 239,000 90% 27.38 20.20
--------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
BEACON PROPERTIES, L.P.
PART I - ITEM 2
<TABLE>
<CAPTION>
Rentable Percent Average Net Effective
Square Feet Leased Base Rent Rent
----------- ------- --------- -------------
<S> <C> <C> <C> <C>
Suburban Chicago Office Market:
AT&T Plaza 225,000 98% 20.80 14.16
Tri-State International 548,000 83% 22.49 15.80
Presidents Plaza 791,000 91% 19.44 12.16
--------------------------------------------------------------------------------------------------------------------
Subtotal 1,564,000 89% 20.70 13.72
--------------------------------------------------------------------------------------------------------------------
West Los Angeles Office Market:
10960 Wilshire Boulevard 544,000 89% 24.70 18.52
--------------------------------------------------------------------------------------------------------------------
Subtotal 544,000 89% 24.70 18.52
--------------------------------------------------------------------------------------------------------------------
Silicon Valley Office Market: (NNN)
Shoreline Technology Park 727,000 100% 17.84 18.77
Lake Marriott Business Park 400,000 100% 9.80 10.78
--------------------------------------------------------------------------------------------------------------------
Subtotal 1,127,000 100% 14.98 15.94
--------------------------------------------------------------------------------------------------------------------
Total Weighted Average Properties 15,772,000 96% $20.94 $14.92
--------------------------------------------------------------------------------------------------------------------
</TABLE>
Base rent is gross rent excluding payments by tenants on account of
real estate tax and operating expense escalation.
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 escalation, less total
operating expenses and real estate taxes.
The following table reflects the lease expiration schedule of the 104 income
producing commercial properties the Operating Partnership owned or had an
interest in as of March 31, 1997.
<TABLE>
<CAPTION>
Year or period of Square % of Annual Annual Rent
Expiration Feet Square feet Rent (1) per Square Foot # of tenants
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4/1-12/31/97 2,053,205 13.0% $42,439,146 $20.67 189
1998 1,074,143 6.8% 24,897,070 23.18 189
1999 1,561,188 9.9% 34,174,277 21.89 190
2000 2,217,647 14.1% 48,707,065 21.96 193
2001 2,701,909 17.1% 65,086,877 24.09 167
2002 1,236,509 7.8% 34,787,934 28.13 91
2003 588,104 3.7% 15,620,637 26.56 36
2004 633,616 4.0% 11,877,595 18.75 26
2005 & beyond 3,166,362 20.1% 86,853,794 27.43 63
------------------------------------------------------------------------------------------------
Total leased 15,232,683 96.5% $364,444,395 $23.93 1,144
------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized expiring base rental income represented by such leases plus 1996
tenant payments on account of real estate tax and operating expense escalations.
12
<PAGE>
BEACON PROPERTIES, L.P.
PART I - ITEM 2
-------
Liquidity and Capital Resources
Cash and cash equivalents were $13.4 million at March 31, 1997 compared to $35.9
million at December 31, 1996. The decrease in cash and cash equivalents was
primarily the result of an increase in deposits on pending property acquisitions
of $17.4 million.
Investing Activities
At March 31, 1997, the Operating Partnership had approximately $17.4 million of
deposits outstanding in connection with the acquisition of Westbrook Corporate
Center, Centerpointe I and II, two office complexes located in Rosemont,
Illinois and 175 Wyman Street, located in Waltham (suburban Boston),
Massachusetts.
On April 23, 1997, the Operating Partnership acquired 10880 Wilshire Boulevard
located in Westwood, California for aggregate consideration of approximately $99
million. The Operating Partnership used proceeds contributed by the Company from
the April 1997 Offering to purchase the portfolio.
On April 30, 1997, the Operating Partnership acquired Centerpointe I and II,
located in Fairfax County, Virginia, for aggregate consideration of
approximately $55 million consisting of approximately $25 million in cash and
assumption of $30 million of mortgage debt. The Operating Partnership used
proceeds contributed by the Company from the April 1997 Offering for the cash
portion of the acquisition .
On May 8, 1997, the Operating Partnership sold the Westlakes Office Park
property, its sole property located in Berwyn (suburban Philadelphia),
Pennsylvania for approximately $72.5 million. The transaction will be treated as
a like-kind exchange in which the sale proceeds, which are currently held in
escrow, will be used to purchase a future acquisition property.
Financing Activities
On April 10, 1997, the Company sold 7,000,000 shares of common stock, $.01 par
value, to the public at $32.125 per share and contributed the net proceeds of
approximately $211.4 million to the Operating Partnership in exchange for a like
number of Units. The net proceeds of the April 1997 Offering were used to
purchase 10880 Wilshire Boulevard and Centerpointe I and II properties with the
remaining balance used to pay down the Credit Facility.
On April 24, 1997, the Operating Partnership declared a quarterly distribution
of $28.5 million payable on May 23, 1997 to partners of record on May 9, 1997.
Capitalization
At March 31, 1997, the Operating Partnership's total consolidated debt was
approximately $604.9 million, and its total consolidated debt plus its
proportionate share of total unconsolidated debt ( other than the Rowes Wharf
property debt ) was approximately $697.0 million at March 31, 1997. At March 31,
1997, the Operating Partnership's outstanding consolidated debt consisted of
approximately $153.0 million under its floating-rate Credit Facility and
approximately $451.9 million of fixed rate mortgage indebtedness with an
weighted average rate of 7.22%, collateralized by properties owned 100% by the
Operating Partnership. The Operating Partnership's proportionate share of its
current total unconsolidated debt ( excluding the Rowes Wharf property debt )
consists of approximately $46.4 million on the One Post Office Square Property (
in which the Operating Partnership has a 50% general partner interest ) and
approximately $45.7 million on the 75-101 Federal Street property ( in which the
Operating Partnership owns approximately 51% of the common stock of a private
REIT that owns the property ).The weighted average rate of the Operating
Partnership's unconsolidated fixed rate mortgage indebtedness is 7.47%. The
weighted average rate of the Operating Partnership's consolidated and
unconsolidated fixed rate mortgage indebtedness is 7.27% and the weighted
average maturity is approximately 6.7 years.
13
<PAGE>
BEACON PROPERTIES, L.P.
PART I - ITEM 2
-------
Based on the Operating Partnership's total market capitalization of $2,502.6
million at March 31, 1997 ( equating the value at one Unit to one Share of
Common Stock at the March 31, 1997 closing stock price of $33.125 ), the
Operating Partnership's consolidated debt plus its proportionate share of total
unconsolidated debt ( other than the Rowes Wharf property debt ) represented
approximately 28% of its total market capitalization.
Funds from Operations
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 National Association of Real Estate Investment Trusts, Inc.
("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
following table presents the calculations for FFO for the periods ended March
31, 1997 and March 31, 1996.
For the Quarter ended
March 31,
--------------------------------
1997 1996
---- ----
(in thousands)
Income before extraordinary item $ 20,368 $ 7,899
Add consolidated properties:
Depreciation and amortization 14,214 5,862
Add joint ventures properties:
Depreciation and amortization 1,006 954
-------------- --------------
Funds from operations $ 35,588 $ 14,715
============== ==============
Weighted average units outstanding 54,431 26,136
============== ==============
Short and Long Term Liquidity
The Operating Partnership has considered its short-term ( up to 12 months )
liquidity needs and the adequacy of expected liquidity sources to meet these
needs. The Operating Partnership believes that its principal short-term
liquidity needs are to fund normal recurring expenses, debt service requirements
and the minimum distribution required to maintain the Company's REIT
qualifications under the Internal Revenue Code of 1986, as amended. The
Operating Partnership believes that these needs will be fully funded from cash
flows provided by operating activities.
The Operating Partnership expects to meet long-term ( greater than 12 months )
liquidity requirements for the costs of development, property acquisitions,
scheduled debt maturities, major renovations, expansions and other non-recurring
capital improvements through long-term secured and unsecured indebtedness and
the issuance of additional Operating Partnership Units and equity securities.
The Operating Partnership may finance the redevelopment or acquisition of
additional properties by using its Credit Facility.
14
<PAGE>
BEACON PROPERTIES, L.P.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
The Operating Partnership has issued Units in private placement in
reliance on an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended:
On March 3, 1997, the Company issued an aggregate of 95,619 shares of
common stock pursuant to its Dividend Reinvestment Plan. The Company
has contributed the proceeds ( approximately $3.2 million ) of these
sales to the Operating Partnership in consideration of an aggregate of
95,619 Units.
During the three months ended March 31, 1997, the Company has issued an
aggregate of 25,223 shares of common stock upon the exercise of stock
options. The Company has contributed the proceeds ( approximately $0.5
million ) of these sales to the Operating Partnership in consideration
of an aggregate of 25,223 Units.
In connection with the April 1997 Offering, the Company has issued an
aggregate of 7,000,000 shares of common stock .The Company has
contributed the proceeds ( approximately $211.4 million ) of these
sales to the Operating Partnership in consideration of an aggregate of
7,000,000 Units.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated Limited Partnership Agreement of the Operating
Partnership, as amended (Incorporated by Reference to the Operating
Partnership's Registration Statement on Form 10 as filed with the
Securities and Exchange Commission.)
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
15
<PAGE>
BEACON PROPERTIES, L.P.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEACON PROPERTIES, L.P.
By Beacon Properties Corporation
General Partner
/s/ Robert J. Perriello
------------------------
Robert J. Perriello,
Senior Vice President,
and Chief Financial Officer
Date: May 20, 1997
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
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<PP&E> 1,696,439
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