<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): January 22, 1998
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 2 Acquisition or Disposition of Assets
(a) On January 22, 1998, the Company, through its Operating Partnership
subsidiary, completed its acquisition of Riverfront Plaza, an approximately
900,000 net rentable square foot class A office building in Richmond, Virginia,
for a total investment of approximately $174.4 million, consisting of $52.6
million of cash and mortgage financing in the amount of $121.8 million.
(b) On February 2, 1998, the Company, through its Operating Partnership
subsidiary, completed its acquisition of the Mulligan/Griffin Portfolio, a
portfolio of nine Class A office buildings aggregating approximately
1.3 million net rentable square feet and six parcels of land aggregating 30.7
acres. These properties are located in Gaithersburg, MD, Rockville, MD,
Springfield, VA, and Reston, VA. The Company acquired the Mulligan/Griffin
Portfolio for approximately $252.9 million, consisting of $88.5 million of cash,
the assumption of $113.3 million of indebtedness, the assumption of other
liabilities in the amount of $1.1 million, and the issuance of 1,471,456 units
of limited partnership of the Company's Operating Partnership subsidiary.
Item 5 Other Events
On January 30, 1998, the Company completed a public offering of 23,000,000
shares of the Company's Common Stock (including 3,000,000 shares issued pursuant
to the exercise of the underwriters' overallotment options) at $35.125 per share
resulting in net proceeds to the Company of approximately $766.5 million.
Item 7 Financial Statements and Exhibits
(a) Financial Statements under Rule 3-14 of Regulation S-X.
Previously filed.
(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.
* 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: February 6, 1998
<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
subsequent to September 30, 1997 (the "Acquisition Properties"), and (ii) the
completion of the offering as described hereafter (the "Offering"). This Pro
Forma Condensed Consolidated Balance Sheet should be read in conjunction with
the Pro Forma Condensed Consolidated Statement of Income of the Company for the
nine months ended September 30, 1997 and the year ended December 31, 1996 and
the historical consolidated and combined financial statements and notes thereto
of the Company and the Boston Properties Predecessor Group (the "Predecessor
Group"). In management's opinion, all adjustments necessary to reflect the
above transactions have been made.
The following Pro Forma Condensed Consolidated Balance Sheet is not
necessarily indicative of what the actual financial position would have been
assuming the above transactions had been consummated at September 30, 1997,
nor does it purport to represent the future financial position of the Company.
The Offering
On January 30, 1998, the Company completed a public offering of 23,000,000
shares of the Company's Common Stock (including 3,000,000 issued pursuant to the
exercise of the underwriters' overallotment options) at $35.125 per share
resulting in net proceeds to the Company of approximately $766.5 million.
The Properties
The Company owns a portfolio of 92 commercial real estate properties (the
"Properties") aggregating approximately 18.2 million square feet. The properties
consist of 74 office properties with approximately 13.1 million net rentable
square feet (including five office properties under development containing
approximately 1.1 million net rentable square feet) and approximately 2.9
million additional square feet of structured parking for 8,119 vehicles, nine
industrial properties with approximately 925,000 net rentable square feet, three
hotels with a total of 1,054 rooms (consisting of approximately 940,000 square
feet) (including one hotel currently under development), and a parking garage
with 1,170 spaces (consisting of approximately 330,000 square feet). In
addition, the Company has under contract or has an option to acquire
six parcels of land totaling 120.0 acres, which will support approximately
2,249,100 square feet of development.
Acquisitions included in pro forma:
<TABLE>
<CAPTION>
Net Rentable Date of
Property Name Location Sq. Ft. Acquisition
------------- -------- ------- -----------
<S> <C> <C> <C>
Newport Office Park Quincy, MA 168,829 6/23/97
280 Park Avenue New York, NY 1,198,769 9/11/97
100 East Pratt Street Baltimore, MD 633,482 10/23/97
875 Third Avenue New York, NY 681,669 11/21/97
Riverfront Plaza Richmond, VA 899,720 1/22/98
Mulligan/Griffin Portfolio Reston, VA 1,277,454 2/2/98
Springfield, VA
Rockville, MD
Gaithersburg, MD
<CAPTION>
Purchase Price (dollars in thousands)
Common
Property Name Cash Debt Other OP Units Stock Total
------------- ---- ---- ----- -------- ------ ------
<S> <C> <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 88,516 113,262 1,123 50,000(2) -- 252,901
</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) The Company issued Operating Partnership Units in the amount of 1,471,456
for the Mulligan/Griffin Portfolio (valued at $33.98 per unit).
F-1
<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 $784,885(B) -- -- $2,218,261
Less: accumulated
depreciation.......... (285,505) -- -- -- (285,505)
---------- -------- -------- ---------- ----------
Total real estate and
equipment............. 1,147,871 784,885 -- -- 1,932,756
Cash ................... 25,989 (78,374)(C) $765,462 $ (275,561)(C) 437,516
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 $709,369 $765,462 $(275,561) $2,494,908
========== ======== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes
payable............... $ 914,614 $425,669(F) -- -- $1,340,283
Unsecured Line of
Credit................ 71,000 204,561(F) -- $(275,561)(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...... 1,018,989 631,353 -- (275,561) 1,374,781
---------- -------- -------- ---------- ----------
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........... -- -- -- -- --
Common stock, $.01 par
value, 250,000,000
shares authorized,
38,693,541 issued and
outstanding
(historical) and
61,694,041 shares
issued and outstanding
(pro forma)........... 387 -- $ 230 -- 617
Additional paid in
capital............... 172,315 16(B) 765,232 -- 937,563
Retained earnings...... 22,779 -- -- -- 22,779
---------- -------- -------- ---------- ----------
Total stockholders'
equity................ 195,481 16 765,462 -- 960,959
---------- -------- -------- ---------- ----------
Total liabilities and
stockholders' equity.. $1,295,638 $709,369 $765,462 $(275,561) $2,494,908
========== ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated balance sheet.
F-2
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER 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 23.0 million
common shares (including 3.0 million shares issued pursuant to the exercise of
the underwriters' overallotment options) in the Offering as follows:
<TABLE>
<S> <C>
Gross proceeds from the Offering................................... $807,875
Underwriters' discount and other offering expenses................. (42,413)
--------
Net cash proceeds.................................................. 765,462
Par value of common shares(/1/).................................... (230)
--------
$765,232
========
</TABLE>
- --------
(/1/) Represents the issuance of 23.0 million ($.01 par value per share) common
shares in the Offering at an offering price of $35.125 per share.
(B) Represents the purchase price, including closing costs, of the 1997
Acquired Properties as follows:
<TABLE>
<CAPTION>
PURCHASE
ACQUISITION PROPERTIES PRICE
---------------------- --------
<S> <C>
100 East Pratt Street (/1/)........................................ $137,516
875 Third Avenue (/2/)............................................. 215,118
Riverfront Plaza (/3/)............................................. 174,361
Mulligan/Griffin Portfolio(/4/).................................... 257,890
--------
Total Acquisition Properties................................... $784,885
========
</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 the
fair value of mortgage debt in the amount of $185,618, payment of $1,500
in cash and the issuance of 890,869 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 was funded through a draw-down from
the unsecured line of credit of $52,561 in cash and mortgage acquisition
financing of $121,800.
(/4/) The acquisition of the Mulligan/Griffin Portfolio was funded through the
payment of $74,016 in cash, a draw-down of $14,500 from the Unsecured Line
of Credit, 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 approximately $33.98.
(C) Represents the cash transactions as follows:
<TABLE>
<S> <C>
Net proceeds of the Offering described in Note (A) ............. $ 765,462
Proceeds and working capital used for the Acquisition
Properties..................................................... (78,374)
Paydown of Unsecured Line of Credit with proceeds from the
Offering....................................................... (275,561)
---------
Net increase in cash............................................ $ 411,527
=========
(D) Net increase reflects the following:
Required escrow deposit for the debt assumed on
the acquisition of 875 Third Avenue............................ $ 2,631
=========
</TABLE>
F-3
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET--(CONTINUED)
(DOLLARS IN THOUSANDS)
(E) Reflects a tenant note receivable purchased in connection with the
acquisition of Riverfront Plaza.
(F) Represents the debt transactions as follows:
MORTGAGE NOTES PAYABLE
<TABLE>
<S> <C>
Debt assumed in connection with the acquisition of 875 Third
Avenue........................................................... $185,618
Seller 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............................. $425,669
========
</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
Draw-down from the Unsecured Line of Credit in connection with
the acquisition of Riverfront Plaza........................... 52,561
Draw-down from the Unsecured Line of Credit in connection with
two properties in the Mulligan/Griffin Portfolio.............. 14,500
Paydown of the Unsecured Line of Credit from proceeds of the
Offering, net ................................................ (275,561)
---------
Net decrease in Unsecured Line of Credit....................... $ (71,000)
=========
</TABLE>
(G) Reflects other liabilities assumed in connection with the acquisition of the
Mulligan/Griffin Portfolio.
F-4
<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 "Acquisition Properties"), and
(iv) 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 garages 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.
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-5
<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 PROPERTIES OTHER
1997 1997 TRANSACTIONS PROPERTY ACQUISITION ADJUSTMENTS
----------------------- ----------- ------------ ----------- ----------- -----------
(A) (B) (C)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent........ $57,892 $80,122 $ 9,396 $1,498 $87,663 --
Recoveries from
tenants.......... 6,144 10,283 -- 101 13,698 --
Parking and
other............ 217 3,397 (1,061) -- 729 --
------- ------- -------- ------ ------- --------
Total rental
revenue......... 64,253 93,802 8,335 1,599 102,090 --
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) 1,599 102,090 (1,200)
------- ------- -------- ------ ------- --------
Expenses:
Rental:
Operating........ 8,828 13,650 (353) 437 20,607 --
Real estate
taxes............ 9,065 13,382 1,345 172 15,476 --
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) -- 17,657 16,455 (F)
Depreciation and
amortization..... 10,113 17,054 124 210(G) 15,479 --
------- ------- -------- ------ ------- --------
Total expenses.. 47,261 124,978 (49,096) 819 69,219 17,180
------- ------- -------- ------ ------- --------
Income before
minority interests
.................. 21,092 4,840 25,442 780 32,871 (18,380)
Minority interest
in property
partnership....... (69) (235) -- -- -- --
------- ------- -------- ------ ------- --------
Income before
minority interest
in Operating
Partnership ...... 21,023 4,605 25,442 780 32,871 (18,380)
Minority interest
in Operating
Partnership....... (6,169) -- -- -- -- (9,089)(H)
------- ------- -------- ------ ------- --------
Income before
extraordinary
item.............. $14,854 $ 4,605 $ 25,442 $ 780 $32,871 $(27,469)
======= ======= ======== ====== ======= ========
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......... 75,376
Depreciation and
amortization..... 42,980
---------
Total expenses.. 210,361
---------
Income before
minority interests
.................. 66,645
Minority interest
in property
partnership....... (304)
---------
Income before
minority interest
in Operating
Partnership ...... 66,341
Minority interest
in Operating
Partnership....... (15,258)
---------
Income before
extraordinary
item.............. $ 51,083
=========
Income before ex-
traordinary item
per common share.. $ .83
=========
Weighted average
number of common
shares outstand-
ing............... 61,694
=========
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated statement of income.
F-6
<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-7
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(DOLLARS IN THOUSANDS)
(7) Reflects the decrease in interest income as a result of the release of
cash previously required to be held in escrow per the terms of the
various mortgage note payable agreements.
(8) Reflects the increase in depreciation from depreciating over 40 years
the pro forma increase to real estate from the purchase of limited
partners' interests and transfer costs paid.
(9) Reflects the repayment of a portion of the existing mortgage
indebtedness from proceeds of the Initial Offering for the Predecessor
Period:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
PROPERTIES AMOUNT RATE INTEREST
---------- --------- -------- --------
<S> <C> <C> <C>
599 Lexington Avenue........................... $225,000 7.00% $ 7,547
Two Independence Square........................ 122,505 7.90% 4,637
One Independence Square........................ 78,327 7.90% 2,965
2300 N Street.................................. 66,000 7.00% 2,214
Capital Gallery................................ 60,559 8.24% 2,391
Ten Cambridge Center........................... 25,000 7.57% 907
191 Spring Street.............................. 23,883 8.50% 973
Bedford Business Park.......................... 23,376 8.50% 952
10 & 20 Burlington Mall Road................... 16,621 8.33% 663
Cambridge Center North Garage.................. 15,000 7.57% 544
91 Hartwell Avenue............................. 11,322 8.33% 452
92 & 100 Hayden Avenue......................... 9,057 8.33% 362
Montvale Center................................ 7,969 8.59% 328
Newport Office Park............................ 6,874 8.13% 268
Hilltop Business Center........................ 4,750 7.00% 159
--------
Total......................................... 25,362
Historical interest expense - Predecessor Peri-
od............................................ (53,324)
--------
Pro forma interest expense adjustment for the
Predecessor Period............................ $(27,962)
========
</TABLE>
B. Reflects the results of operations, as adjusted for depreciation, of the
Newport Office Park, acquired concurrent with the Initial Offering, for the
period from January 1, 1997 to June 22, 1997 (the acquisition date).
F-8
<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 Acquisition Properties for the nine months ended
September 30, 1997 as follows:
ACQUISITION PROPERTIES
<TABLE>
<CAPTION>
280 PARK 100 EAST PRATT 875 THIRD RIVERFRONT MULLIGAN/
AVENUE(1) STREET AVENUE PLAZA GRIFFIN PORTFOLIO TOTAL
--------- -------------- --------- ---------- ----------------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Base rent.......................... $17,012 $10,924 $18,646 $13,023 $19,523 $79,128
Adjustment(2)...................... 7,437 397 24 389 288 8,535
------- ------- ------- ------- ------- -------
Total base rent.................. 24,449 11,321 18,670 13,412 19,811 87,663
Recoveries from tenants............ 1,707 2,133 3,799 2,017 4,042 13,698
Other.............................. 80 267 -- 382 -- 729
------- ------- ------- ------- ------- -------
Total rental revenue............. 26,236 13,721 22,469 15,811 23,853 102,090
------- ------- ------- ------- ------- -------
Expenses:
Operating.......................... 7,772 3,453 3,355 2,761 3,266 (4) 20,607
Real estate taxes.................. 6,677 1,541 4,831 1,219 1,208 15,476
Interest........................... -- -- 11,138 (3) -- 6,519 (5) 17,657
Depreciation(Note G)............... 3,355 1,934 2,420 2,288 5,482 15,479
------- ------- ------- ------- ------- -------
Total expenses................... 17,804 6,928 21,744 6,268 16,475 69,219
------- ------- ------- ------- ------- -------
Net income......................... $ 8,432 $ 6,793 $ 725 $ 9,543 $ 7,378 $32,871
======= ======= ======= ======= ======= =======
</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).
(3) Includes an adjustment of ($675) to reflect effective interest on the fair
value of mortgage debt assumed.
(4) Includes an adjustment of $300 to reflect the Company's estimate of
additional property level operating expenses.
(5) Includes an adjustment of ($1,323) to reflect effective interest on the
fair value of mortgage debt assumed.
F-9
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME--(CONTINUED)
(DOLLARS IN THOUSANDS)
D. Reflects the 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 Acquisition Properties.
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 an interest rate of
6.61% .......................................................... 6,038
-------
Increase in interest expense for the period subsequent to the
Initial Offering................................................ $16,455
=======
</TABLE>
G. Detail of pro forma depreciation expense is presented below for the Initial
Offering Acquisition Property and the Acquisition Properties:
<TABLE>
<CAPTION>
PURCHASE PRO FORMA
PROPERTY(IES) PRICE DEPRECIATION(1)
- ------------- -------- ---------------
<S> <C> <C>
INITIAL OFFERING ACQUISITION PROPERTY
Newport Office Park(2)................................. $ 21,700 $ 210
=======
ACQUISITION PROPERTIES
280 Park Avenue(2)..................................... $322,650 $ 3,355
100 East Pratt Street.................................. 137,516 1,934
875 Third Avenue....................................... 215,118 2,420
Riverfront Plaza....................................... 174,361 2,288
Mulligan/Griffin Portfolio............................. 257,890 5,482
-------
$15,479
=======
</TABLE>
- --------
(1) Represents the 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-10
<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 ACQUISITION OTHER PRO
GROUP TRANSACTIONS ACQUISITION PROPERTY PROPERTIES ADJUSTMENTS FORMA
----------- ------------ -------------------- ------------ ----------- --------
(A) (B) (C)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent.............. $169,420 $22,371 $2,908 $108,969 -- $303,668
Recoveries from
tenants................ 22,607 -- 180 19,795 -- 42,582
Parking and other...... 2,979 (2,043) -- 848 -- 1,784
-------- ------- ------ ------- -------- --------
Total rental revenue.. 195,006 20,328 3,088 129,612 -- 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) 3,088 129,612 -- 355,642
-------- ------- ------ ------- -------- --------
Expenses:
Rental:
Operating.............. 29,823 (713) 879 27,274 -- 57,263
Real estate taxes...... 28,372 2,754 347 21,421 -- 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) -- 23,571 23,671(E) 102,238
Depreciation and
amortization........... 36,199 257 434 21,005(F) -- 57,895
-------- ------- ------ ------- -------- --------
Total expenses........ 261,276 (98,000) 1,660 93,271 24,621 282,828
-------- ------- ------ ------- -------- --------
Income before minority
interests .............. 8,657 51,009 1,428 36,341 (24,621) 72,814
Minority interest in
property partnership.... (384) -- -- -- -- (384)
-------- ------- ------ ------- -------- --------
Income before minority
interest in Operating
Partnership ............ 8,273 51,009 1,428 36,341 (24,621) 72,430
Minority interest in
Operating Partnership... -- -- -- -- (16,659)(G) (16,659)
-------- ------- ------ ------- -------- --------
Net income.............. $ 8,273 $51,009 $1,428 $36,341 $(41,280) $ 55,771
======== ======= ====== ======= ======== ========
Net income per common
share................... $ .90
========
Weighted average number
of common shares
outstanding............. 61,694
========
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated statement of income.
F-11
<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-12
<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 Acquisition Properties for the year ended December 31,
1996 as follows:
ACQUISITION PROPERTIES
<TABLE>
<CAPTION>
280 PARK 100 EAST PRATT 875 THIRD RIVERFRONT MULLIGAN/GRIFFIN
AVENUE STREET AVENUE PLAZA PORTFOLIO TOTAL
-------- -------------- --------- ---------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Base rent............. $16,786 $14,046 $25,255 $15,898 $25,548 $ 97,533
Adjustment(1)......... 9,991 528 31 522 364 11,436
------- ------- ------- ------- ------- --------
Total base rent..... 26,777 14,574 25,286 16,420 25,912 108,969
Recoveries from ten-
ants................. 2,600 2,966 5,813 2,976 5,440 19,795
Other................. 59 353 -- 436 -- 848
------- ------- ------- ------- ------- --------
Total rental
revenue............ 29,436 17,893 31,099 19,832 31,352 129,612
------- ------- ------- ------- ------- --------
Expenses:
Operating............. 10,169 4,333 4,249 3,865 4,658(3) 27,274
Real estate taxes..... 9,908 2,054 6,365 1,638 1,456 21,421
Interest.............. -- -- 14,850(2) -- 8,721(4) 23,571
Depreciation(Note F).. 4,840 2,578 3,227 3,051 7,309 21,005
------- ------- ------- ------- ------- --------
Total expenses...... 24,917 8,965 28,691 8,554 22,144 93,271
------- ------- ------- ------- ------- --------
Net income............ $ 4,519 $ 8,928 $ 2,408 $11,278 $ 9,208 $ 36,341
======= ======= ======= ======= ======= ========
</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).
(2) Includes an adjustment of ($900) 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)
(3) Includes an adjustment of $400 to reflect the Company's estimate of
additional property level operating expenses.
(4) Includes an adjustment of ($2,364) 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 Acquisition Properties.
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 an interest rate of 6.61%............ 8,051
-------
Increase in interest expense......................................... $23,671
=======
</TABLE>
F. Detail of pro forma depreciation expense is presented below for the Initial
Offering Acquisition Property and the Acquisition Properties:
<TABLE>
<CAPTION>
PURCHASE PRO FORMA
PROPERTY(IES) PRICE DEPRECIATION(1)
- ------------- -------- ---------------
<S> <C> <C>
INITIAL OFFERING ACQUISITION PROPERTY
Newport Office Park.................................... $ 21,700 $ 434
=======
ACQUISITION PROPERTIES
280 Park Avenue........................................ $322,650 $ 4,840
100 East Pratt Street.................................. 137,516 2,578
875 Third Avenue....................................... 215,118 3,227
Riverfront Plaza....................................... 174,361 3,051
Mulligan/Griffin Portfolio............................. 257,890 7,309
-------
$21,005
=======
</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-14
