<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
--------------
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 26, 1997
BOSTON PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
Delaware
(State of Incorporation)
1-13087 04-2473675
(Commission File Number) (IRS Employer Id. Number)
8 Arlington Street
Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
(617) 859-2600
(Registrant's telephone number, including area code)
<PAGE>
Item 5 Other Events
On November 26, 1997, Boston Properties, Inc. (the "Company"), through Boston
Properties Limited Partnership (the "Operating Partnership"), entered into
agreements to acquire a portfolio of properties and development sites (the
"Mulligan/Griffin Portfolio") in the Greater Washington, D.C. area. The
portfolio includes four office buildings in Reston, Virginia, one office
building in Rockville, Maryland, and four R&D buildings, two each in
Springfield, Virginia, and Gaithersburg, Maryland. The total net rentable square
feet of the acquired properties is approximately 1.3 million square feet. Also
included in the portfolio are two development sites in Reston, Virginia, and
four in Rockville, Maryland, known as the Decoverly Office Park. These sites
have a total additional development potential of over 900,000 square feet.
The total acquisition price and related costs for the portfolio is approximately
$252.9 million. The acquisition price will be paid in cash, the assumption of
$113.3 million of existing debt to which the properties are subject, and the
issuance of a minimum of $50 million of Operating Partnership units of limited
partnership ("OP Units"). The value of the OP Units issued in the transaction
will be based on the average closing price of the Company's Common Stock over
the 20 trading days immediately preceding the closing, but such value shall in
no event be less than $30 or more than $36. The acquisition of the
Mulligan/Griffin Portfolio is scheduled to close in early February 1998,
although no assurances can be given in this regard.
Item 7 Financial Statements and Exhibits
The following financial statements are being filed in connection with the
proposed acquisition of the Mulligan/Griffin Portfolio, as described above.
(a) Financial Statements under Rule 3-14 of Regulation S-X.
Statement of Revenue Over Certain Operating Expenses of the Mulligan/Griffin
Portfolio for the year ended December 31, 1996 and (unaudited) for the nine
months ended September 30, 1997.
(b) Pro Forma Financial Statements
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997
(unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the nine months
ended September 30, 1997 (unaudited) and the year ended December 31, 1996
(unaudited)
(c) Exhibits
+10.1 Contribution Agreement dated November 26, 1997 among the Operating
Partnership, Boston Properties LLC and the contributors named therein.
23.1 Consent of Coopers & Lybrand, L.L.P., Independent Accountants
+ Incorporated herein by reference to the Company's Registration Statement on
Form S-11 (No. 333-41449).
<PAGE>
BOSTON PROPERTIES, INC.
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.
BOSTON PROPERTIES, INC.
/s/ David G. Gaw
--------------------------------------
David G. Gaw
Senior Vice President and
Chief Financial Officer
Date: December 16, 1997
<PAGE>
MULLIGAN/GRIFFIN PORTFOLIO
STATEMENT OF REVENUES
OVER CERTAIN OPERATING
EXPENSES
For the year ended
December 31, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Boston Properties, Inc.:
We have audited the accompanying statement of revenue over certain operating
expenses of the Mulligan/Griffin Portfolio in Greater Washington, D.C. (the
"Portfolio") for the year ended December 31, 1996. This statement is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenue over certain
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement of revenue over certain operating expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Portfolio's
revenue and expenses.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described in
Note 2) of the Mulligan/Griffin Portfolio for the year ended December 31, 1996
in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
November 20, 1997
F-1
<PAGE>
MULLIGAN/GRIFFIN PORTFOLIO
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------ -------------------------
(UNAUDITED)
<S> <C> <C>
Revenue:
Base rent....................... $25,548 $19,523
Recoveries from tenants......... 5,440 4,042
------- -------
30,988 23,565
------- -------
Certain operating expenses (Note 2
and 5)
Utilities....................... 2,264 1,664
Janitorial and cleaning......... 503 362
Security........................ 34 26
General and administrative...... 49 32
Interest........................ 11,085 7,842
Repairs and maintenance......... 1,255 766
Insurance....................... 153 116
Real estate taxes............... 1,456 1,208
------- -------
16,799 12,016
------- -------
Excess of revenue over certain op-
erating expenses................. $14,189 $11,549
======= =======
</TABLE>
The accompanying notes are an integral part of the statement.
F-2
<PAGE>
MULLIGAN/GRIFFIN PORTFOLIO
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. DESCRIPTION OF PORTFOLIO
The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the combined operations of nine office properties known
as the Mulligan/Griffin Portfolio, (the "Portfolio") located in the Greater
Washington, D.C. area, specifically in the Gaithersburg I-270 and I-270
Rockville submarkets of Montgomery County, Maryland and the Springfield and
Reston submarkets of Fairfax County, VA. The Portfolio will be acquired by
Boston Properties, Inc. from entities affiliated with Mulligan/Griffin and
Associates, Inc, an unrelated third party, and are detailed as follows:
<TABLE>
<CAPTION>
NO. OF SQUARE
PROPERTY NAME BUILDINGS FEET
------------- --------- -------
<S> <C> <C>
Lockheed Martin Building................................... 1 255,244
Reston Town Center Office Complex.......................... 2 261,046
National Imaging and Mapping Agency Building............... 1 263,870
Decoverly Two.............................................. 1 77,747
910 Clopper Road........................................... 1 180,650
930 Clopper Road........................................... 1 60,056
Fullerton Square........................................... 2 178,841
</TABLE>
- --------
2. BASIS OF ACCOUNTING
The accompanying Statement has been prepared on the accrual basis of
accounting. The Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the Portfolio
after acquisition such as amortization, depreciation, property management fees,
certain interest costs, ground lease payments, corporate expenses and certain
other costs not directly related to the future operations of the Portfolio.
3. SIGNIFICANT ACCOUNTING POLICIES
Rental Revenue
Rental income is recognized on the straight-line method over the terms of the
related leases. The excess of recognized rentals over amounts due pursuant to
lease terms is recorded as accrued rent. The impact of the straight-line rent
adjustment increased revenue by approximately $287 and decreased revenue by
approximately $99 for the year ended December 31, 1996, and the nine months
ended September 30, 1997 (unaudited), respectively.
Unaudited Interim Information
The statement of revenue over certain operating expenses for the nine months
ended September 30, 1997 is unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such statement have been
included. The results of operations for the period are not necessarily
indicative of future results of operations.
Risks and Uncertainties
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
F-3
<PAGE>
MULLIGAN/GRIFFIN PORTFOLIO
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
4. DESCRIPTION OF LEASING ARRANGEMENTS
The space is leased to tenants under leases with terms that vary in length.
Minimum lease payments excluding certain real estate tax reimbursement clauses,
operating expense reimbursement clauses and renewal options to be received
during the next five years for noncancelable operating leases in effect at
December 31, 1996 are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------ --------------
<S> <C>
1997......................................... $25,809
1998......................................... 29,111
1999......................................... 29,048
2000......................................... 30,041
2001......................................... 29,441
Thereafter................................... 108,981
</TABLE>
As of December 31, 1996, two tenants occupied approximately 61% of the
leasable square feet and represented 87% of total 1996 Base Rent.
5. DEBT ASSUMPTION
In connection with the acquisition, Boston Properties, Inc. will assume
certain mortgage notes (the "Notes") encumbering three of the properties
totaling $122,982 at December 31, 1996. Boston Properties Inc.'s assumption of
these mortgages does not provide for any modification to the original terms;
therefore, interest expense incurred prior to Boston Properties Inc.'s
assumption of the mortgage notes is representative of future interest expense.
Accordingly, interest expense of $11,085 for 1996 and $7,842 for the nine
months ended September 30, 1997 (unaudited) is recognized in the accompanying
Statement. The Notes require payments of principal and interest through varying
terms ranging from July 15, 2002 to February 1, 2005. The interest rate on the
Notes range from 6.00% to 9.70%. These Notes are subject to prepayment
penalties of varying amounts in the event of an early principal repayment.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
<TABLE>
<S> <C>
1997................................................ $ 8,940
1998................................................ 9,728
1999................................................ 10,588
2000................................................ 11,524
2001................................................ 12,549
</TABLE>
F-4
<PAGE>
BOSTON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
The following unaudited Pro Forma Condensed Consolidated Balance Sheet of
Boston Properties, Inc. (the "Company") is presented as if the following
transactions had been consummated on September 30, 1997; (i) properties
acquired or to be acquired subsequent to September 30, 1997 (the "1997
Acquired Properties" and "Pending Acquisitions", collectively the "Acquisition
Properties"), and (ii) the completion of the offering as described hereafter
(the "Offering").
The following Pro Forma Condensed Consolidated Balance Sheet is not
necessarily indicative of what the actual financial position would have been
assuming the above transactions had been consummated at September 30, 1997,
nor does it purport to represent the future financial position of the Company.
The Offering
The Company has filed a registration statement on Form S-11 with the
Securities and Exchange Commission with respect to the Offering of
approximately 14.0 million common shares (excluding 2.1 million common shares
that may be issued upon exercise of the underwriters' overallotment options).
For purposes of the financial statements set forth herein, the assumed offering
price of such shares is $33.25, the closing price of the Company's Common Stock
on December 1, 1997.
The Properties
The Company will own a portfolio of 92 commercial real estate properties
(the "Properties") aggregating approximately 18.1 million square feet. The
properties consist of 79 office properties with approximately 13.1 million net
rentable square feet (including the Mulligan/Griffin Portfolio properties and
one other property under contract to acquire and five office properties under
development containing approximately 1.0 million net rentable square feet) and
approximately 2.9 million additional square feet of structured parking for 8,199
vehicles, nine industrial properties with approximately 926,000 net rentable
square feet, three hotels with a total of 1,054 rooms (consisting of
approximately 937,000 square feet) (including one hotel currently under
development), and a parking garage with 1,170 spaces (consisting of
approximately 332,000 square feet). In addition, the Company will own, have
under contract or have an option to acquire twelve parcels of land totaling 69.7
acres, which will support approximately 1,549,000 square feet of development.
Acquisitions included in pro forma:
<TABLE>
<CAPTION>
# of Rentable Date of
Property Name Buildings Location Sq. Ft. Acquisition
------------- --------- -------- ------- -----------
<S> <C> <C> <C> <C>
Newport Office Park 1 Quincy, MA 168,829 6/23/97
280 Park Avenue 1 New York, NY 1,198,769 9/11/97
100 East Pratt Street 1 Baltimore, MD 633,482 10/23/97
875 Third Avenue 1 New York, NY 691,088 11/21/97
Riverfront Plaza 1 Richmond, VA 899,720 Pending
Mulligan/Griffin Portfolio:
Lockheed Martin Building 1 Reston, VA 255,244 Pending
National Imaging and Mapping
Agency Building 1 Reston, VA 263,870 Pending
Reston Town Center Office
Complex 2 Reston, VA 261,046 Pending
Decoverly Two 1 Rockville, MD 77,747 Pending
910 Clopper Road 1 Gaithersburg 180,650 Pending
930 Clopper Road 1 Gaithersburg 60,056 Pending
Fullerton Square 2 Springfield, VA 178,841 Pending
<CAPTION>
Purchase Price (dollars in thousands)
Common
Property Name Cash Debt OP Units Stock Total
------------- ---- ---- -------- ------ ------
<S> <C> <C> <C> <C> <C>
Newport Office Park -- 21,700 -- -- 21,700
280 Park Avenue 102,650 220,000 -- -- 322,650
100 East Pratt Street 137,500 -- -- 16 137,516
875 Third Avenue 1,500 180,000 28,000(1) -- 209,500
Riverfront Plaza 52,561 121,800 -- -- 174,361
Mulligan/Griffin Portfolio 88,516 119,374 50,000(2) -- 257,890
</TABLE>
(1) The Company issued Operating Partnership Units in the amount of 890,869 for
875 Third Avenue (valued at $31.43 per OP unit).
(2) For purposes of the financial statements set forth herein, it is assured
that 1,503,759 Operating Partnership Units will be issued in connection
with the acquisition of the Mulligan/Griffin Portfolio (valued at $33.25
per OP unit).
F-5
<PAGE>
BOSTON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
BOSTON -----------------------------------
PROPERTIES, ACQUISITION OFFERING OTHER
INC. PROPERTIES (A) ADJUSTMENTS PRO FORMA
----------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Real estate and
equipment.............. $1,433,376 $779,267(B) -- -- $2,212,643
Less: accumulated
depreciation.......... (285,505) -- -- -- (285,505)
---------- -------- -------- ---------- ----------
Total real estate and
equipment............. 1,147,871 779,267 -- -- 1,927,138
Cash ................... 25,989 (145,435)(C) $441,061 $ (208,500)(C) 113,115
Escrows................. 10,673 2,631 (D) -- -- 13,304
Tenant and other
receivables............ 13,170 227 (E) -- -- 13,397
Accrued rental income... 50,377 -- -- -- 50,377
Deferred charges........ 34,707 -- -- -- 34,707
Prepaid expenses and
other assets........... 8,933 -- -- -- 8,933
Investment in Joint
Venture................ 3,918 -- -- -- 3,918
---------- -------- -------- ---------- ----------
Total assets........... $1,295,638 $636,690 $441,061 $(208,500) $2,164,889
========== ======== ======== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes
payable............... $ 914,614 $420,051(F) -- -- $1,334,665
Unsecured Line of
Credit................ 71,000 137,500(F) -- $(208,500)(F) --
Accounts payable and
accrued expenses...... 16,073 1,123(G) -- -- 17,196
Accrued interest
payable............... 3,639 -- -- -- 3,639
Rent received in
advance, security
deposits and other
liabilities........... 13,663 -- -- -- 13,663
---------- -------- -------- ---------- ----------
Total liabilities...... 1,018,989 558,674 -- (208,500) 1,369,163
---------- -------- -------- ---------- ----------
Minority interest in
Operating Partnership.. 81,168 78,000(B) -- -- 159,168
---------- -------- -------- ---------- ----------
Stockholders' equity:
Preferred stock, $.01
par value, 50,000,000
shares authorized,
none issued or
outstanding........... -- -- -- -- --
Excess stock, $.01 par
value, 150,000,000
shares authorized,
none issued or
outstanding........... -- -- -- -- --
Common stock, $.01 par
value, 250,000,000
shares authorized,
38,693,541 issued and
outstanding
(historical) and
52,694,041 shares
issued and outstanding
(pro forma)........... 387 -- $ 140 -- 527
Additional paid in
capital............... 172,315 16(B) 440,921 -- 613,252
Retained earnings...... 22,779 -- -- -- 22,779
---------- -------- -------- ---------- ----------
Total stockholders'
equity................ 195,481 16 441,061 -- 636,558
---------- -------- -------- ---------- ----------
Total liabilities and
stockholders' equity.. $1,295,638 $636,690 $441,061 $(208,500) $2,164,889
========== ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated balance sheet.
F-6
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER
30, 1997:
(A) Represents the net proceeds obtained from the issuance of 14.0 million
common shares in the Offering as follows:
<TABLE>
<S> <C>
$465,500
Gross proceeds from the Offering...................................
Underwriters' discount and other offering expenses................. (24,439)
--------
Net cash proceeds.................................................. 441,061
Par value of common shares/(1)/.................................... (140)
--------
$440,921
========
</TABLE>
- --------
/(1)/Representsthe issuance of 14.0 million ($.01 par value per share) common
shares in the Offering at an assumed offering price of $33.25 per share.
(B) Represents the purchase price, including closing costs, of the 1997
Acquired Properties and the Pending Acquisitions as follows:
<TABLE>
<CAPTION>
PURCHASE
1997 ACQUIRED PROPERTIES PRICE
------------------------ --------
<S> <C>
100 East Pratt Street /(1)/........................................ $137,516
875 Third Avenue /(2)/............................................. 209,500
<CAPTION>
PENDING ACQUISITIONS
--------------------
<S> <C>
Riverfront Plaza /(3)/............................................. 174,361
Mulligan/Griffin Portfolio /(4)/................................... 257,890
--------
Total Acquisition Properties................................... $779,267
========
</TABLE>
--------
/(1)/ The acquisition of 100 East Pratt Street was funded by a draw-down of
$137,500 from the Unsecured Line of Credit and the issuance of 500 shares
of common stock (valued at approximately $16, based on a value of $32.00
per share).
/(2)/ The acquisition of 875 Third Avenue was funded by the assumption of a
$180,000 mortgage note, payment of $1,500 in cash and the issuance of
890,869 restricted Operating Partnership Units (the "OP Units"). To the
extent that, for the ten trading days through and including December 31,
1998 the average daily closing price on the New York Stock Exchange of
shares of common stock is less than $31.43 per share (such average, the
"Share Average"), the Operating Partnership shall issue to the contributor
of 875 Third Avenue a number of additional OP Units (the "Additional OP
Units") such that the product of (x) the Share Average, multiplied by (y)
the sum of 890,869 plus the Additional OP Units, equals $28,000.
Consequently, for accounting purposes, the OP Units were valued at
approximately $28,000, based on a value of $31.43 per unit.
/(3)/ The acquisition of Riverfront Plaza will be funded through the payment
of $52,561 in cash and mortgage acquisition financing of $121,800.
/(4)/ The acquisition of the Mulligan/Griffin Portfolio will be funded
through the payment of $88,516 in cash, the assumption of the fair value
of mortgage debt in the amount of $118,251, the assumption of other
liabilities in the amount of $1,123 and the issuance of $50,000 in
restricted OP Units based on a price per unit of $33.25. In the event that
the actual Closing Day Value, defined as the average of the closing price
of the Company's common stock on the 20 days immediately preceeding the
closing of the acquisition is less than $30.00 per share, the number of OP
Units to be issued shall be determined as though the Closing Day value is
$30.00 per share; and in the event that the actual Closing Day Value
exceeds $36.00 per share the number of OP Units shall be determined as
though Closing Day Value is $36.00 per share. If the Closing Day Value is
any amount between $30.00 and $36.00, inclusive, the number of OP Units to
be issued shall be based on the actual Closing Day Value. The contributors
have the right to elect additional restrict OP units in lieu of cash.
F-7
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(CONTINUED)
(DOLLARS IN THOUSANDS)
(C) Represents the cash transactions as follows:
<TABLE>
<S> <C>
Net proceeds of the Offering described in Note (A) .............. $ 441,061
Proceeds and working capital used for the Acquisition
Properties...................................................... (145,435)
Paydown of Unsecured Line of Credit with proceeds from the
Offering........................................................ (208,500)
---------
Net increase in cash............................................. $ 87,126
=========
(D) Net increase reflects the following:
Required escrow deposit for the debt assumed on
the acquisition of 875 Third Avenue............................. $ 2,631
=========
</TABLE>
(E) Reflects tenant note receivable to be acquired in connection with the
pending acquisition of Riverfront Plaza.
(F) Represents the debt transactions as follows:
MORTGAGE NOTES PAYABLE
<TABLE>
<S> <C>
Debt assumed in connection with the acquisition of 875 Third Ave-
nue............................................................... $180,000
Mortgage acquisition financing in connection with the acquisition
of Riverfront Plaza............................................... 121,800
Debt assumed in connection with the acquisition of the
Mulligan/Griffin Portfolio........................................ 118,251
--------
Net increase in mortgage indebtedness.............................. $420,051
========
</TABLE>
UNSECURED LINE OF CREDIT
<TABLE>
<S> <C>
Draw-down from the Unsecured Line of Credit in connection with
the acquisition of 100 East Pratt Street....................... $ 137,500
Paydown of the Unsecured Line of Credit from proceeds of the Of-
fering, net ................................................... (208,500)
---------
Net decrease in Unsecured Line of Credit........................ $ (71,000)
=========
</TABLE>
(G) Reflects other liabilities to be assumed in connection with the pending
acquisition of the Mulligan/Griffin Portfolio.
F-8
<PAGE>
BOSTON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND FOR THE YEAR ENDED DECEMBER
31, 1996
(UNAUDITED)
The following unaudited Pro Forma Condensed Consolidated Statement of Income
for the nine months ended September 30, 1997 and for the year ended December
31, 1996 is presented as if the following transactions had occurred on January
1, 1996; (i) the consummation of the initial public offering (the "Initial
Offering") and related Formation Transactions, and the Offering (ii) the
acquisition of the property acquired concurrent with the Initial Offering (the
"Initial Offering Acquisition Property"), (iii) the acquisition of properties
acquired subsequent to the Initial Offering (the "1997 Acquisitions"), (iv) the
acquisition of the pending acquisitions (the "Pending Acquisitions") and (v)
the closing of the mortgage financing.
The Development and Management Company has been included in the pro forma
financial information under the equity method of accounting due to the
Operating Partnership's ownership of a noncontrolling, 1% voting interest.
The operations of the hotel properties and the parking garage have been
included in the pro forma financial information pursuant to participating lease
agreements to be entered into in order for the Company to continue to qualify
as a REIT under IRC Section 856.
This Pro Forma Condensed Consolidated Statement of Income should be read in
conjunction with the Pro Forma Condensed Consolidated Balance Sheet of the
Company and the historical consolidated and combined financial statements and
notes thereto of the Company and the Predecessor Company included elsewhere in
the Prospectus.
The unaudited Pro Forma Condensed Consolidated Statement of Income is not
necessarily indicative of what the actual results of operations would have been
for the nine months ended September 30, 1997, or for the year ended December
31, 1996, had the previously described transactions actually occurred on
January 1, 1996 and the effect thereof carried forward through the nine month
period ended September 30, 1997, nor do they purport to present the future
results of operations of the Company.
F-9
<PAGE>
BOSTON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BOSTON
PROPERTIES
PREDECESSOR
GROUP PRO FORMA ADJUSTMENTS
BOSTON PROPERTIES, INC. JANUARY 1, ---------------------------------------------------------------
JUNE 23, 1997 1997 INITIAL
TO TO OFFERING
SEPTEMBER 30, JUNE 22, FORMATION ACQUISITION 1997 PENDING OTHER
1997 1997 TRANSACTIONS PROPERTY ACQUISITIONS ACQUISITIONS ADJUSTMENTS
----------------------- ----------- ------------ ----------- ------------ ------------ -----------
(A) (B) (C) (C)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent........ $57,892 $80,122 $ 9,396 $1,498 $54,440 $33,223 --
Recoveries from
tenants.......... 6,144 10,283 -- 101 7,639 6,059 --
Parking and
other............ 217 3,397 (1,061) -- 347 382 --
------- ------- -------- ------ ------- ------- --------
Total rental
revenue......... 64,253 93,802 8,335 1,599 62,426 39,664 --
Hotel............ -- 31,185 (31,185) -- -- -- --
Development and
management
services......... 2,221 3,685 (452) -- -- -- --
Interest and
other............ 1,879 1,146 (352) -- -- -- $(1,200) (D)
------- ------- -------- ------ ------- ------- --------
Total revenue... 68,353 129,818 (23,654) 1,599 62,426 39,664 (1,200)
------- ------- -------- ------ ------- ------- --------
Expenses:
Rental:
Operating........ 8,828 13,650 (353) 437 14,580 6,027 --
Real estate
taxes............ 9,065 13,382 1,345 172 13,049 2,427 --
Hotel:
Operating........ -- 20,938 (20,938) -- -- -- --
Real estate tax-
es............... -- 1,514 (1,514) -- -- -- --
General and
administrative... 3,164 5,116 391 -- -- -- 725 (E)
Interest......... 16,091 53,324 (28,151) -- 11,813 6,519 16,839 (F)
Depreciation and
amortization..... 10,113 17,054 124 210(G) 7,646 8,009 --
------- ------- -------- ------ ------- ------- --------
Total expenses.. 47,261 124,978 (49,096) 819 47,088 22,982 17,564
------- ------- -------- ------ ------- ------- --------
Income before
minority interests
.................. 21,092 4,840 25,442 780 15,338 16,682 (18,764)
Minority interest
in property
partnership....... (69) (235) -- -- -- -- --
------- ------- -------- ------ ------- ------- --------
Income before
minority interest
in Operating
Partnership ...... 21,023 4,605 25,442 780 15,338 16,682 (18,764)
Minority interest
in Operating
Partnership....... (6,169) -- -- -- -- -- (10,719)(H)
------- ------- -------- ------ ------- ------- --------
Income before
extraordinary
item.............. $14,854 $ 4,605 $ 25,442 $ 780 $15,338 $16,682 $(29,483)
======= ======= ======== ====== ======= ======= ========
Income before ex-
traordinary item
per common share.. $ .38
=======
Weighted average
number of common
shares outstand-
ing............... 38,694
=======
<CAPTION>
PRO
FORMA
---------
<S> <C>
Revenue:
Rental:
Base rent........ $236,571
Recoveries from
tenants.......... 30,226
Parking and
other............ 3,282
---------
Total rental
revenue......... 270,079
Hotel............ --
Development and
management
services......... 5,454
Interest and
other............ 1,473
---------
Total revenue... 277,006
---------
Expenses:
Rental:
Operating........ 43,169
Real estate
taxes............ 39,440
Hotel:
Operating........ --
Real estate tax-
es............... --
General and
administrative... 9,396
Interest......... 76,435
Depreciation and
amortization..... 43,156
---------
Total expenses.. 211,596
---------
Income before
minority interests
.................. 65,410
Minority interest
in property
partnership....... (304)
---------
Income before
minority interest
in Operating
Partnership ...... 65,106
Minority interest
in Operating
Partnership....... (16,888)
---------
Income before
extraordinary
item.............. $ 48,218
=========
Income before ex-
traordinary item
per common share.. $ .92
=========
Weighted average
number of common
shares outstand-
ing............... 52,694
=========
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated statement of income.
F-10
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997
A. Reflects the pro forma Formation Transactions adjustment summary for the
period from January 1, 1997 to June 22, 1997 (the "Predecessor Period").
<TABLE>
<CAPTION>
RENT HOTEL
HOTELS INTEREST PROPERTY PROPERTY HOTEL REAL GENERAL
PRO FORMA AND PARKING HOTEL MGMT AND OPERATING REAL ESTATE OPERATING ESTATE & INTEREST
ADJUSTMENTS GARAGE INCOME REVENUE FEES OTHER EXPENSES TAXES EXPENSES TAXES ADMIN EXPENSE
- ----------- ------ ------- -------- ----- -------- --------- ----------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(1)Assignment of
contracts..... $(452) $(430)
(2)Equity
investment
income........ $21
(3)Operation of
hotels and
garage........ $(1,061) $(31,185) $(353) $1,345 $(20,938) $(1,514)
(4)Rental of
hotels and
garage........ $9,396
(5)General and
administrative.. 821
(6)Amortization
of deferred
financing
costs......... $ (189)
(7)Release of
restricted
cash.......... (373)
(8)Depreciation
expense.......
(9)Mortgage
interest...... (27,962)
------ ------- -------- ----- ----- ----- ------ -------- ------- ----- --------
Pro Forma
Formation
Transactions
adjustment
summary total... $9,396 $(1,061) $(31,185) $(452) $(352) $(353) $1,345 $(20,938) $(1,514) $ 391 $(28,151)
====== ======= ======== ===== ===== ===== ====== ======== ======= ===== ========
<CAPTION>
PRO FORMA DEPRECIATION
ADJUSTMENTS EXPENSE
- ----------- ------------
<S> <C>
(1)Assignment of
contracts.....
(2)Equity
investment
income........
(3)Operation of
hotels and
garage........
(4)Rental of
hotels and
garage........
(5)General and
administrative..
(6)Amortization
of deferred
financing
costs.........
(7)Release of
restricted
cash..........
(8)Depreciation
expense....... $124
(9)Mortgage
interest......
------------
Pro Forma
Formation
Transactions
adjustment
summary total... $124
============
</TABLE>
(1) In connection with the Formation Transactions, certain third-party
management contracts were assigned to the Development and Management
Company. As a result of the assignment, operating income, expenses and
overhead attributable to the contracts were reflected in the operations
of the Development and Management Company as detailed below:
<TABLE>
<S> <C>
Management services................................................ $ 452
General and administrative expenses................................ (430)
-----
Manager contract income........................................... $ 22
=====
</TABLE>
(2) The Operating Partnership holds a 95% economic interest in the
Development and Management Company and records an equity interest of $21
on the $22 net income.
(3) In connection with the Formation Transactions, the Operating Partnership
entered into participating leases for the operation of the hotels and
parking garage. As a result of these agreements, revenue and expenses
will not be reflected from the operation of these businesses.
(4) Represents rental income from the leasing of the hotels and parking
garage owned by the Operating Partnership. The hotel lease arrangements
are with an affiliate.
(5) Reflects an increase of $821 in general and administrative expenses as a
result of operating as a public company.
(6) Reflects the net increase of $290 in the amortization of deferred
financing costs for the $1,800 fee and related professional costs on the
Unsecured Line of Credit, less a net reduction of $479 in amortization of
deferred financing costs related to debt paid off with the Initial
Offering proceeds.
F-11
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(DOLLARS IN THOUSANDS)
(7) Reflects the decrease in interest income as a result of the release of
cash previously required to be held in escrow per the terms of the
various mortgage note payable agreements.
(8) Reflects the increase in depreciation from depreciating over 40 years
the pro forma increase to real estate from the purchase of limited
partners' interests and transfer costs paid.
(9) Reflects the repayment of a portion of the existing mortgage
indebtedness from proceeds of the Initial Offering for the Predecessor
Period:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
PROPERTIES AMOUNT RATE INTEREST
---------- --------- -------- --------
<S> <C> <C> <C>
599 Lexington Avenue.......................... $225,000 7.00% $ 7,547
Two Independence Square....................... 122,505 7.90% 4,637
One Independence Square....................... 78,327 7.90% 2,965
2300 N Street................................. 66,000 7.00% 2,214
Capital Gallery............................... 60,559 8.24% 2,391
Ten Cambridge Center.......................... 25,000 7.57% 907
191 Spring Street............................. 23,883 8.50% 973
Bedford Business Park......................... 23,376 8.50% 952
10 & 20 Burlington Mall Road.................. 16,621 8.33% 663
Cambridge Center North Garage................. 15,000 7.57% 544
91 Hartwell Avenue............................ 11,322 8.33% 452
92 & 100 Hayden Avenue........................ 9,057 8.33% 362
Montvale Center............................... 7,969 8.59% 328
Newport Office Park........................... 6,874 8.13% 268
Hilltop Business Center....................... 4,750 7.00% 159
--------
Total........................................ 25,362
Historical interest expense - Predecessor Pe-
riod......................................... (53,324)
--------
Pro forma interest expense adjustment for the
Predecessor Period........................... $(27,962)
========
</TABLE>
B. Reflects the results of operations, as adjusted for depreciation, of the
Newport Office Park, acquired concurrent with the Initial Offering, for the
period from January 1, 1997 to June 22, 1997 (the acquisition date).
F-12
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(DOLLARS IN THOUSANDS)
C. Reflects the historical results of operations, as adjusted for base rent and
depreciation, for the 1997 Acquisitions and Pending Acquisitions for the
nine months ended September 30, 1997 as follows:
1997 ACQUISITIONS
<TABLE>
<CAPTION>
280 PARK 100 EAST PRATT 875 THIRD
AVENUE(1) STREET AVENUE TOTAL
--------- -------------- --------- -------
<S> <C> <C> <C> <C>
Revenue:
Base rent.......................... $17,012 $10,924 $18,646 $46,582
Adjustment(2)...................... 7,437 397 24 7,858
------- ------- ------- -------
Total base rent.................. 24,449 11,321 18,670 54,440
Recoveries from tenants............ 1,707 2,133 3,799 7,639
Other.............................. 80 267 -- 347
------- ------- ------- -------
Total rental revenue............. 26,236 13,721 22,469 62,426
------- ------- ------- -------
Expenses:
Operating.......................... 7,772 3,453 3,355 14,580
Real estate taxes.................. 6,677 1,541 4,831 13,049
Interest........................... -- -- 11,813 11,813
Depreciation(Note G)............... 3,355 1,934 2,357 7,646
------- ------- ------- -------
Total expenses................... 17,804 6,928 22,356 47,088
------- ------- ------- -------
Net income......................... $ 8,432 $ 6,793 $ 113 $15,338
======= ======= ======= =======
</TABLE>
- --------
(1) Reflects the results of operations for the period from January 1, 1997
through September 11, 1997 (the acquisition date).
(2) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996 and also includes an adjustment for
rental income from Banker's Trust during the period they occupied 280 Park
Avenue as owner/occupant of the building (the rental figure is based upon
the lease entered into by Banker's Trust concurrent with the sale of the
building to the Company on September 11, 1997).
PENDING ACQUISITIONS
<TABLE>
<CAPTION>
RIVERFRONT MULLIGAN/GRIFFIN
PLAZA PORTFOLIO TOTAL
---------- ---------------- -------
<S> <C> <C> <C>
Revenue:
Base rent................................. $13,023 $19,523 $32,546
Adjustment(1)............................. 389 288 677
------- ------- -------
Total base rent......................... 13,412 19,811 33,223
Recoveries from tenants................... 2,017 4,042 6,059
Other..................................... 382 -- 382
------- ------- -------
Total rental revenue.................... 15,811 23,853 39,664
------- ------- -------
Expenses:
Operating................................. 2,761 3,266(2) 6,027
Real estate taxes......................... 1,219 1,208 2,427
Interest.................................. -- 6,519(3) 6,519
Depreciation(Note G)...................... 2,288 5,721 8,009
------- ------- -------
Total expenses.......................... 6,268 16,714 22,982
------- ------- -------
Net income................................ $ 9,543 $ 7,139 $16,682
======= ======= =======
</TABLE>
- --------
(1) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996.
(2) Includes an adjustment of $300 to reflect the Company's estimate of
additional property level operating expenses.
(3) Includes an adjustment of ($1,323) to reflect effective interest on the
fair value of mortgage debt assumed.
F-13
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(DOLLARS IN THOUSANDS)
D. Reflects reduction in interest income as a result of cash used for the
acquisition of 280 Park Avenue.
E. Reflects the incremental increase in general and administrative costs
related to the 1997 Acquisitions and Pending Acquisitions.
F. Reflects the net increase in interest as a result of the following debt
transactions:
<TABLE>
<S> <C>
Payoff of the Unsecured Line of Credit with proceeds from the Of-
fering for the period subsequent to the Initial Offering, net of
amounts capitalized............................................. $ (411)
Mortgage acquisition financing of 280 Park Avenue in the original
principal amount of $220 million computed at an interest rate of
7.00% for the period January 1, 1997 to September 11, 1997 (date
of acquisition)................................................. 10,675
Amortization of deferred financing fees for the period from
January 1, 1997 to September 11, 1997 (date of acquisition) as a
result of approximately $1.1 million of fees associated with the
mortgage financing of 280 Park Avenue. The deferred financing
fees are amortized over the five year term of the loan ......... 153
Mortgage acquisition financing of Riverfront Plaza in the
principal amount of $121,800 computed at the 10 year U.S.
Treasury Note rate (5.88% at November 17, 1997) plus 1.15% ..... 6,422
-------
Increase in interest expense for the period subsequent to the
Initial Offering................................................ $16,839
=======
</TABLE>
G. Detail of pro forma depreciation expense is presented below for the Initial
Offering Acquisition Property, the 1997 Acquisitions and the Pending
Acquisitions:
<TABLE>
<CAPTION>
PURCHASE PRO FORMA
PROPERTY(IES) PRICE DEPRECIATION(1)
- ------------- -------- ---------------
<S> <C> <C>
INITIAL OFFERING ACQUISITION PROPERTY
Newport Office Park(2)................................. $ 21,700 $ 210
======
1997 ACQUISITIONS
280 Park Avenue(2)..................................... 322,650 $3,355
100 East Pratt Street.................................. 137,516 1,934
875 Third Avenue....................................... 209,500 2,357
------
$7,646
======
PENDING ACQUISITIONS
Riverfront Plaza....................................... 174,361 $2,288
Mulligan/Griffin Portfolio............................. 257,890 5,721
------
$8,009
======
</TABLE>
- --------
(1) Represents depreciation expense on the properties which has been calculated
over 40 years for the building and over the life of the lease for tenant
improvements.
(2) Reflects pro forma depreciation expense for the periods prior to
acquisition.
H. Adjustment to minority interest to reflect the minority investors interest
in the Operating Partnership following the Offering and issuance of OP Units
and common shares.
F-14
<PAGE>
BOSTON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
BOSTON -----------------------------------------------------------------------
PROPERTIES INITIAL
PREDECESSOR FORMATION OFFERING 1997 PENDING OTHER PRO
GROUP TRANSACTIONS ACQUISITION PROPERTY ACQUISITIONS ACQUISITIONS ADJUSTMENTS FORMA
----------- ------------ -------------------- ------------ ------------ ----------- --------
(A) (B) (C) (C)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent.............. $169,420 $22,371 $2,908 $66,637 $42,332 -- $303,668
Recoveries from
tenants................ 22,607 -- 180 11,379 8,416 -- 42,582
Parking and other...... 2,979 (2,043) -- 412 436 -- 1,784
-------- ------- ------ ------- ------- -------- --------
Total rental revenue.. 195,006 20,328 3,088 78,428 51,184 -- 348,034
Hotel.................. 65,678 (65,678) -- -- -- -- --
Development and
management services.... 5,719 (936) -- -- -- -- 4,783
Interest and other..... 3,530 (705) -- -- -- -- 2,825
-------- ------- ------ ------- ------- -------- --------
Total revenue......... 269,933 (46,991) 3,088 78,428 51,184 -- 355,642
-------- ------- ------ ------- ------- -------- --------
Expenses:
Rental:
Operating.............. 29,823 (713) 879 18,751 8,523 -- 57,263
Real estate taxes...... 28,372 2,754 347 18,327 3,094 -- 52,894
Hotel:
Operating.............. 43,634 (43,634) -- -- -- -- --
Real estate taxes...... 3,100 (3,100) -- -- -- -- --
General and
administrative......... 10,754 834 -- -- -- $ 950(D) 12,538
Interest............... 109,394 (54,398) -- 15,750 8,721 24,183(E) 103,650
Depreciation and
amortization........... 36,199 257 434(F) 10,561 10,679 -- 58,130
-------- ------- ------ ------- ------- -------- --------
Total expenses........ 261,276 (98,000) 1,660 63,389 31,017 25,133 284,475
-------- ------- ------ ------- ------- -------- --------
Income before minority
interests .............. 8,657 51,009 1,428 15,039 20,167 (25,133) 71,167
Minority interest in
property partnership.... (384) -- -- -- -- -- (384)
-------- ------- ------ ------- ------- -------- --------
Income before minority
interest in Operating
Partnership ............ 8,273 51,009 1,428 15,039 20,167 (25,133) 70,783
Minority interest in
Operating Partnership... -- -- -- -- -- (18,361)(G) (18,361)
-------- ------- ------ ------- ------- -------- --------
Income before
extraordinary item...... $ 8,273 $51,009 $1,428 $15,039 $20,167 $(43,494) $ 52,422
======== ======= ====== ======= ======= ======== ========
Income before
extraordinary item per
common share............ $ .99
========
Weighted average number
of common shares
outstanding............. 52,694
========
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated statement of income.
F-15
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR
ENDED DECEMBER 31, 1996
A. Reflects the pro forma Formation Transactions adjustment summary for the
year ended December 31, 1996.
<TABLE>
<CAPTION>
RENT HOTEL
HOTELS INTEREST PROPERTY PROPERTY HOTEL REAL
PRO FORMA AND PARKING HOTEL MGMT AND OPERATING REAL ESTATE OPERATING ESTATE GENERAL & INTEREST
ADJUSTMENTS GARAGE INCOME REVENUE FEES OTHER EXPENSES TAXES EXPENSES TAXES ADMIN EXPENSE
- ----------- ------ ------- -------- ----- -------- --------- ----------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(1) Assignment of
contracts....... $(936) $ (866)
(2)Equity
investment
income.......... $66
(3)Operation of
hotels and
garage.......... $(2,043) $(65,678) $(713) $2,754 $(43,634) $ (3,100)
(4)Rental of hotels
and garage...... $22,371
(5)General and
administrative.. 1,700
(6)Amortization of
deferred
financing
costs........... $ (731)
(7)Release of
restricted
cash............ (771)
(8)Depreciation
expense.........
(9)Mortgage
interest........ (53,667)
------- ------- -------- ----- ----- ----- ------ -------- -------- ------ --------
Pro forma
formation
transactions
adjustment
summary total... $22,371 $(2,043) $(65,678) $(936) $(705) $(713) $2,754 $(43,634) $(3,100) $ 834 $(54,398)
======= ======= ======== ===== ===== ===== ====== ======== ======== ====== ========
<CAPTION>
DEPREC-
PRO FORMA IATION
ADJUSTMENTS EXPENSE
- ----------- -------
<S> <C>
(1) Assignment of
contracts.......
(2)Equity
investment
income..........
(3)Operation of
hotels and
garage..........
(4)Rental of hotels
and garage......
(5)General and
administrative..
(6)Amortization of
deferred
financing
costs...........
(7)Release of
restricted
cash............
(8)Depreciation
expense......... $257
(9)Mortgage
interest........
-------
Pro forma
formation
transactions
adjustment
summary total... $257
=======
</TABLE>
- ----
(1) In connection with the Formation Transactions, certain third-party
management contracts are assigned to the Development and Management
Company. As a result of the assignment, current operating income,
expenses and overhead attributable to the contracts are reflected in the
operations of the Development and Management Company as detailed below:
<TABLE>
<S> <C>
Management services.................................................. $936
General and administrative expenses.................................. (866)
----
Manager contract income............................................. $ 70
====
</TABLE>
(2) The Operating Partnership holds a 95% economic interest in the
Development and Management Company and records an equity interest of $66
on the $70 net income.
(3) In connection with the Formation Transactions, the Operating Partnership
entered into participating leases for the operation of the hotels and
parking garage. As a result of these agreements, revenue and expenses are
not reflected from the operation of these businesses.
(4) Represents rental income from the leasing of the hotels and parking
garage owned by the Operating Partnership. The hotel lease arrangements
are with an affiliate.
(5) Reflects an increase of $1,700 in general and administrative expenses as
a result of operating as a public company.
(6) Reflects the net increase of $600 in the amortization of deferred
financing costs for the $1,800 fee and related professional costs on the
Unsecured Line of Credit, less a net reduction of $1,331 in amortization
of deferred financing costs related to debt paid off with the Initial
Offering proceeds.
(7) Reflects the decrease in interest income as a result of the release of
cash previously required to be held in escrow per the terms of the
various mortgage note payable agreements.
(8) Reflects the increase in depreciation from depreciating over 40 years the
pro forma increase to real estate from the purchase of limited partners'
interests and transfer costs paid.
F-16
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(DOLLARS IN THOUSANDS)
(9) Reflects the repayment of a portion of the existing mortgage
indebtedness from proceeds of the Initial Offering and the corresponding
adjustment to interest expense incurred in 1996.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
PROPERTY(IES) AMOUNT RATE INTEREST
------------- --------- -------- ---------
<S> <C> <C> <C>
599 Lexington Avenue.................... $225,000 7.00% $ 15,750(1)
Two Independence Square................. 122,855 7.90% 9,813
One Independence Square................. 78,700 7.90% 6,276
2300 N Street........................... 66,000 7.00% 4,620(1)
Capital Gallery......................... 60,751 8.24% 5,761
Ten Cambridge Center.................... 25,000 7.57% 1,924
191 Spring Street....................... 23,942 8.50% 1,697
Bedford Business Park................... 23,500 8.50% 1,998(1)
10 & 20 Burlington Mall Road............ 16,621 8.33% 1,385
Cambridge Center North Garage........... 15,000 7.57% 1,183
91 Hartwell Avenue...................... 11,322 8.33% 943
92 & 100 Hayden Avenue.................. 9,057 8.33% 754
Montvale Center......................... 7,992 8.59% 474
Newport Office Park..................... 6,874 8.13% 558
Hilltop Business Center................. 4,817 7.00% 318
---------
Pro forma totals........................ 53,454
Historical interest expense for the year
ended December 31, 1996................ (107,121)
---------
Pro forma interest expense adjustment... $ (53,667)
=========
</TABLE>
- --------
(1) The interest expense used in this calculation assumes the mortgage
loan was outstanding during all of 1996.
B. Reflects the historical results of operations, as adjusted for
depreciation, for Newport Office Park, acquired concurrent with the Initial
Offering for the year ended December 31, 1996.
C. Reflects the historical results of operations, as adjusted for base rent
and depreciation, for the 1997 Acquisitions and Pending Acquisitions for the
year ended December 31, 1996 as follows:
1997 ACQUISITIONS
<TABLE>
<CAPTION>
280 PARK 100 EAST PRATT 875 THIRD
AVENUE STREET AVENUE TOTAL
-------- -------------- --------- -------
<S> <C> <C> <C> <C>
Revenue:
Base rent........................... $16,786 $14,046 $25,255 $56,087
Adjustment(1)....................... 9,991 528 31 10,550
------- ------- ------- -------
Total base rent................... 26,777 14,574 25,286 66,637
Recoveries from tenants............. 2,600 2,966 5,813 11,379
Other............................... 59 353 -- 412
------- ------- ------- -------
Total rental revenue.............. 29,436 17,893 31,099 78,428
------- ------- ------- -------
Expenses:
Operating........................... 10,169 4,333 4,249 18,751
Real estate taxes................... 9,908 2,054 6,365 18,327
Interest............................ -- -- 15,750 15,750
Depreciation(Note F)................ 4,840 2,578 3,143 10,561
------- ------- ------- -------
Total expenses.................... 24,917 8,965 29,507 63,389
------- ------- ------- -------
Net income.......................... $ 4,519 $ 8,928 $ 1,592 $15,039
======= ======= ======= =======
</TABLE>
- --------
(1) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996 and also includes an adjustment for
rental income from Banker's Trust during the period they occupied 280 Park
Avenue as owner/occupant of the building (the rental figure is based upon
the lease entered into by Banker's Trust concurrent with the sale of the
building to the Company on September 11, 1997).
F-17
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(DOLLARS IN THOUSANDS)
PENDING ACQUISITIONS
<TABLE>
<CAPTION>
RIVERFRONT MULLIGAN/GRIFFIN
PLAZA PORTFOLIO TOTAL
---------- ---------------- -------
<S> <C> <C> <C>
Revenue:
Base rent................................. $15,898 $25,548 $41,446
Adjustment(1)............................. 522 364 886
------- ------- -------
Total base rent......................... 16,420 25,912 42,332
Recoveries from tenants................... 2,976 5,440 8,416
Other..................................... 436 -- 436
------- ------- -------
Total rental revenue.................... 19,832 31,352 51,184
------- ------- -------
Expenses:
Operating................................. 3,865 4,658(2) 8,523
Real estate taxes......................... 1,638 1,456 3,094
Interest.................................. -- 8,721(3) 8,721
Depreciation(Note F)...................... 3,051 7,628 10,679
------- ------- -------
Total expenses.......................... 8,554 22,463 31,017
------- ------- -------
Net income................................ $11,278 $ 8,889 $20,167
======= ======= =======
</TABLE>
- --------
(1) Represents an adjustment to straight-line rent based on the pro forma
acquisition date of January 1, 1996.
(2) Includes an adjustment of $400 to reflect the Company's estimate of
additional property level operating expenses.
(3) Includes an adjustment of ($2,634) to reflect effective interest on the
fair value of the mortgage debt assumed.
D. Reflects the incremental increase in general and administrative costs
related to the 1997 Acquisitions and Pending Acquisitions.
E. Reflects the net increase in interest expense as a result of the following
debt transactions:
<TABLE>
<S> <C>
Acquisition mortgage financing of 280 Park Avenue in the original
principal amount of $220 million computed at an interest rate of
7.00% for the year ended December 31, 1996.......................... $15,400
Amortization of deferred financing fees as a result of approximately
$1.1 million of fees associated with the mortgage financing of 280
Park Avenue. The deferred financing fees are amortized over the five
year term of the loan .............................................. 220
Mortgage acquisition financing of Riverfront Plaza in the principal
amount of $121,800 computed at the 10 year U.S. Treasury Note rate
(5.88% at November 17, 1997) plus 1.15% ............................ 8,563
-------
Increase in interest expense......................................... $24,183
=======
</TABLE>
- --------
F. Detail of pro forma depreciation expense is presented below for the Initial
Offering Acquisition Property, the 1997 Acquisitions and the Pending
Acquisitions:
<TABLE>
<CAPTION>
PURCHASE PRO FORMA
PROPERTY(IES) PRICE DEPRECIATION(1)
- ------------- -------- ---------------
<S> <C> <C>
INITIAL OFFERING ACQUISITION PROPERTY
Newport Office Park.................................... $ 21,700 $ 434
=======
1997 ACQUISITIONS
280 Park Avenue........................................ 322,650 $ 4,840
100 East Pratt Street.................................. 137,516 2,578
875 Third Avenue....................................... 209,500 3,143
-------
$10,561
=======
PENDING ACQUISITIONS
Riverfront Plaza....................................... 174,361 $ 3,051
Mulligan/Griffin Portfolio............................. 257,890 7,628
-------
$10,679
=======
</TABLE>
- --------
(1) Represents depreciation expense on the properties which has been calculated
over 40 years for the building and over the life of the lease for tenant
improvements.
G. Adjustment to minority interest to reflect the minority investors interest
in the Operating Partnership following the Offering and issuance of OP Units
and common shares.
F-18
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this report on Form 8-K of Boston Properties,
Inc. dated December 16, 1997 of our report dated November 20, 1997 on our
audit of the Statement of Revenue Over Certain Operating Expenses of the
Mulligan/Griffin Portfolio.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
December 16, 1997
