<PAGE>
As filed with the Securities and Exchange Commission on January 19, 1999
Registration Statement No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
BOSTON PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2473675
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8 Arlington Street
Boston, Massachusetts 02116
(617) 859-2600
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
_______________________________
Mortimer B. Zuckerman, Chairman
Edward H. Linde, President
and Chief Executive Officer
BOSTON PROPERTIES, INC.
8 Arlington Street
Boston, Massachusetts 02116
(617) 859-2600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Gilbert G. Menna, P.C.
GOODWIN, PROCTER & HOAR LLP
Exchange Place
Boston, Massachusetts 02109
(617) 570-1000
_____________________________
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is used to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Title of Shares Being Amount to be Registered Proposed Maximum Proposed Maximum Amount of
Registered Offering Price Per Share(2) Aggregate Offering Price(2) Registration Fee
<S> <C> <C> <C> <C>
Common Stock, par value 1,471,456 $31.41 $46,218,432.96 $12,848.73
$.01 per share(1)
=================================================================================================================================
</TABLE>
(1) This Registration Statement also relates to the Rights to purchase shares
of Series E Junior Participating Cumulative Preferred Stock of the
Registrant which are attached to all shares of Common Stock issued,
pursuant to the terms of the Registrant's Shareholder Rights Agreement
dated June 16, 1997. Until the occurrence of certain prescribed events,
the Rights are not exercisable, are evidenced by the certificates for the
Common Stock and will be transferred with and only with such stock.
Because no separate consideration is paid for the Rights, the registration
fee therefor is included in the fee for the Common Stock. This
Registration Statement also relates to such additional shares as may be
issuable as a result of certain adjustments including, without limitation,
stock dividends, stock splits and distributions of options, warrants,
convertible securities, evidences of indebtedness or assets.
(2) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457(c) based on the average of the high and low sales prices on
the New York Stock Exchange on January 13, 1999.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
***********************************************************************
* The information in this prospectus is not complete and may be *
* changed. We may not sell these securities until the registration *
* statement filed with the Securities and Exchange Commission is *
* effective. This prospectus is not an offer to sell these securities *
* and it is not soliciting an offer to buy these securities in any *
* state where the offer or sale is not permitted. *
***********************************************************************
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 19, 1999
Prospectus 1,471,456 Shares
- ----------
BOSTON PROPERTIES, INC.
8 Arlington Street
Boston, Massachusetts 02116
(617) 859-2600
Common Stock
(par value $.01 per share)
__________________
Boston Properties, Inc. develops, acquires, owns and manages a diverse
portfolio of office, industrial and hotel properties in the United States. Our
properties are predominantly located in Greater Boston; Midtown Manhattan;
Greater Washington, D.C.; San Francisco, California; Princeton/East Brunswick,
New Jersey; Richmond, Virginia; and Baltimore, Maryland.
This prospectus is being delivered in connection with the possible issuance
by us of up to 1,471,456 shares of Common Stock of the Company (the "Redemption
Shares") to holders of certain common units of limited partnership interest ("OP
Units") in Boston Properties Limited Partnership (the "Operating Partnership").
Such holders may present such OP Units for redemption and we may elect to
acquire such OP Units for Redemption Shares in accordance with the limited
partnership agreement of the Operating Partnership. The Operating Partnership
is a Delaware limited partnership of which we are the sole general partner and
own a controlling interest. Substantially all of our properties are owned, and
all of our operations are conducted, by the Operating Partnership and its
subsidiaries.
The OP Units for which the Redemption Shares may be exchanged were issued on
February 1, 1998 upon the contribution to Boston Properties Limited Partnership
of certain properties and assets. Such OP Units first became redeemable on
February 11, 1999. We are registering the Redemption Shares pursuant to our
obligations under a Registration Rights and Lock-up Agreement dated February 1,
1998, but the registration of the Redemption Shares does not necessarily mean
that all or any portion of the OP Units will be presented for redemption or that
any of the Redemption Shares will be issued hereunder.
We will not receive any cash proceeds from the issuance of Redemption Shares
but will acquire additional OP Units in Boston Properties Limited Partnership in
exchange for any Redemption Shares that we may issue pursuant to this
Prospectus. We have agreed to bear certain expenses of registration of the
Redemption Shares under federal and state securities laws.
The Common Stock is listed on the New York Stock Exchange under the symbol
"BXP."
See "Risk Factors" beginning on page 4 for certain factors you should
consider before you invest in our Common Stock.
________________
The shares of Common Stock offered pursuant to this prospectus have not been
approved or disapproved by the Securities and Exchange Commission or any state
securities commission nor has the Securities and Exchange Commission or any
state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is January __, 1999
<PAGE>
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Redemption Shares. This prospectus is part of the Registration Statement. This
prospectus does not contain all the information contained in the Registration
Statement because we have omitted certain parts of the Registration Statement in
accordance with the rules and regulations of the SEC. For further information,
we refer you to the Registration Statement, which you may read and copy at the
public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. You may also obtain copies at the prescribed rates from the Public
Reference Section of the SEC at its principal office in Washington, D.C. You
may call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. The SEC maintains a web site that contains reports, proxy and
information statements and other information regarding registrants, including
Boston Properties, Inc., that file electronically with the SEC. You may access
the SEC's web site at http://www.sec.gov.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and we are required to file reports
and proxy statements and other information with the SEC. Such reports, proxy
statements and other information can be inspected and copied at the locations
described above. Copies of such materials can be obtained by mail from the
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at prescribed rates. Our Common Stock is
listed on the New York Stock Exchange ("NYSE"). You may also read our reports,
proxy and other information statements and other information which we file at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly, and special reports, proxy statements and other
information with the SEC. The SEC allows us to "incorporate by reference" the
information we file with the SEC, which means that we can disclose in this
prospectus important information to you by referring you to those documents.
The information below is incorporated in this prospectus by reference and is an
important part of this prospectus, and certain information that we file after
the date of this prospectus with the SEC will automatically be incorporated in
this prospectus and update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until we sell all
of the Redemption Shares.
. Our Annual Report on Form 10-K for the year ended December 31, 1997.
. Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998 and our Report on Form 10-Q/A
filed on December 1, 1998, amending the Report on form 10-Q for the quarter
ended September 30, 1998.
. The description of the Common Stock contained in our Registration
Statement on Form 8-A, filed on June 12, 1997, and all amendments and
reports updating the description.
. The description of the rights to purchase shares of the Company's
Series E Junior Participating Cumulative Preferred Stock contained in our
Registration Statement on Form 8-A, filed on June 12, 1997, and the
description contained in our Registration Statement on Form 8-A/A filed on
June 16, 1997 amending such description, and all amendments and reports
updating such description.
. Our Current Reports on Form 8-K filed on September 26, 1997,
November 6, 1997, November 26, 1997, December 16, 1997, January 12, 1998,
January 26, 1998, February 6, 1998, June 9, 1998, July 15, 1998, July 17,
1998, July 27, 1998, October 27, 1998 and November 25, 1998 and our Current
Reports on Form 8-K/A filed on November 14, 1997 and November 25, 1997,
amending our Current Report on Form 8-K filed on September 26, 1997, our
Current Reports on Form 8-K/A filed on November 14, 1997 and December 4,
1997, amending our Current Report on Form 8-K filed on November 6, 1997 and
our Current Report on Form 8-K/A filed on August 25, 1998, amending our
Current Reports on Form 8-K filed on July 15, 1998, July 17, 1998 and July
27, 1998, and our Current Report on Form 8-K filed on November 25, 1998.
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We will provide, without charge, at the written or oral request of anyone to
whom this prospectus is delivered, copies of the documents incorporated by
reference in this prospectus, other than an exhibit to a filing unless that
exhibit is specifically incorporated by reference into that filing. Written
requests should be directed to Boston Properties, Inc., 8 Arlington Street,
Boston, Massachusetts 02116, Attention: Chief Financial Officer. Telephone
requests may be directed to (617) 859-2600.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
different information. Any statement contained in this prospectus or in a
document incorporated by reference in this prospectus shall be deemed to be
modified or superseded to the extent that a statement contained in this
prospectus (in the case of a statement in a previously filed document
incorporated by reference herein), in any applicable prospectus supplement or in
any other subsequently filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus or any accompanying prospectus supplement.
Subject to the foregoing, all information appearing in this prospectus and each
accompanying prospectus supplement is qualified in its entirety by the
information appearing in the documents incorporated by reference.
We are not making an offer of these Redemption Shares in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of those
documents.
Statements contained in this prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance, reference
is made to the copy of such contract or document filed as an exhibit to the
Registration Statement or as an exhibit to another filing, each such statement
being qualified in all respects by such reference and the exhibits and schedules
thereto.
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RISK FACTORS
Before you present your OP Units for redemption, which may result in your
receipt of Redemption Shares, you should be aware that there are various risks
in making such an investment, including those described below. You should
consider carefully these risk factors together with all of the information
included or incorporated by reference in this prospectus before you decide to
present your OP Units for redemption. This section includes or refers to
certain forward-looking statements; you should refer to the explanation of the
qualifications and limitations on such forward-looking statements discussed
beginning on page 14.
Unless the context otherwise requires, all references to "we," "us" or the
"Company" refer (i) to Boston Properties, Inc., a Delaware corporation, and its
subsidiaries, including Boston Properties Limited Partnership, a Delaware
limited partnership (the " Operating Partnership"), of which Boston Properties,
Inc. is the sole general partner, and (ii) to the predecessors thereof (the
"Predecessor"). All activities prior to June 23, 1997 refer to activities of
the Predecessor.
Our Performance and Value is Subject to Risks Associated with the Real Estate
Industry
General Real Estate Ownership Risks
Our economic performance and the value of our real estate assets are subject
to the following risks generally associated with the ownership and operation of
real estate:
. changes in national economic conditions;
. increased operating costs (including real estate taxes and utilities);
. changes in interest rates and the availability of financing;
. other market and economic conditions that may affect regional real
estate markets, which are described below; and
. changes in laws and governmental regulations (including those governing
real estate usage, zoning and taxes).
If our properties do not generate sufficient income to meet operating
expenses, including future debt service costs, it will adversely affect our
ability to make distributions to our stockholders.
Risks Associated with Local Market Conditions
Currently, our properties are located primarily in seven markets: Greater
Boston; Midtown Manhattan; Greater Washington, D.C.; San Francisco, California;
Princeton/East Brunswick, New Jersey; Richmond, Virginia; and Baltimore,
Maryland. Local real estate market conditions may include a large supply of
competing space, and we will need to compete for tenants based on rental rates,
attractiveness and location of a property, and quality of maintenance and
management services. Local economic conditions may affect the ability of our
tenants to make lease payments. The economic condition of each of these local
markets may be dependent on one or more industries, and therefore an economic
downturn in one of these industry sectors may adversely affect our performance
in such market.
Difficulty of Selling Real Estate Investments
Real estate investments can be hard to sell, especially if local market
conditions are poor. This may limit our ability to change our portfolio
promptly in response to economic or other conditions. In addition, certain
significant expenditures, such as debt service costs (if any), real estate
taxes, and operating and maintenance costs, generally are not reduced when
market conditions are poor, resulting in a reduction in income from the
investment under such circumstances. These and any other factors or events that
would impede our Company from responding
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to changes in the performance of our investments could adversely affect our
financial condition and results of operations.
Inability to Renew Leases or Re-lease Space
We may not be able to renew leases or obtain new tenants to whom space may
be re-leased as leases expire, and the terms of a renewal or a new lease
(including the cost of required renovations or concessions to tenants) may be
less favorable than current lease terms. If we are unable to re-lease
substantial amounts of vacant space promptly, if the rental rates upon a renewal
or new lease are significantly lower than expected, or if reserves for costs of
re-leasing prove inadequate, then our cash flow will decrease and our ability to
make distributions to our stockholders will be adversely affected.
Risks Associated with Operating Hotel Properties
At present we own two hotel properties and are developing a third hotel
property. We lease the hotel properties to a lessee ("ZL Hotel LLC") in which
Messrs. Zuckerman and Linde are the sole member-managers. Messrs. Zuckerman and
Linde have a 9.8% economic interest in such lessee and two unaffiliated public
charities have a 90.2% economic interest. Marriott International, Inc. manages
the two in-service hotel properties under the Marriott(R) name pursuant to a
management agreement with ZL Hotel LLC. ZL Hotel LLC pays us a percentage of
the gross receipts that the hotel properties receive. Because the lease
payments to the Company are based on a participation in the gross receipts of
the hotel properties, if the hotel properties do not generate sufficient
receipts, our cash flow would be decreased and it could adversely affect our
ability to pay distributions to our stockholders. The following factors, among
others, are common to the hotel industry, and may reduce the receipts generated
by our hotel properties:
. our hotel properties compete for guests with other hotels and a
number of these hotels have greater marketing and financial resources than
our hotel operating business partners;
. if there is an increase in operating costs resulting from inflation
and other factors, ZL Hotel LLC may be unable to offset such increase by
increasing room rates;
. our hotels are subject to the fluctuating and seasonal demands of
business and commercial travelers and tourism;
. increases in energy costs and other expenses of travel may reduce
the travel by potential guests of our hotels; and
. our hotels are subject to general and local economic conditions that
may affect demand for travel.
Americans with Disabilities Act Compliance
The Americans with Disabilities Act (the "ADA") generally requires that
public accommodations, including office buildings and hotels, be accessible to
disabled persons. We believe that our properties are in substantial compliance
with the ADA and that we will not be required to make substantial capital
expenditures to address the requirements of the ADA. However, in the event that
we are not in compliance with the ADA, the federal government could fine the
Company or private litigants could be awarded damages against the Company. If,
pursuant to the ADA, we are required to make substantial alterations in one or
more of our properties, our financial condition and results of operations, as
well as the amount of cash available for distribution to our stockholders, could
be adversely affected.
Uninsured Losses
We carry comprehensive liability, fire, flood, extended coverage and rental
loss insurance, as applicable, with respect to our properties. We believe our
coverage is of the type and amount customarily obtained for or by an owner of
such properties. We believe all of our properties are adequately insured.
However, there are certain
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types of losses (such as from wars or catastrophic acts of nature) for which we
cannot obtain insurance or for which we cannot obtain insurance at a reasonable
cost. In the event of an uninsured loss or a loss in excess of our insurance
limits, we could lose the revenues generated from the affected property, as well
as the capital we have invested in the affected property. We would continue to
be obligated to repay any mortgage indebtedness or other obligations related to
the property. Any such loss could materially and adversely affect our business
and financial condition and results of operations.
Obtaining New Owner's Title Insurance Policies in Connection with Certain
Properties
We acquired from our Predecessor certain properties at the completion of our
initial public offering of Common Stock on June 23, 1997 (the "Initial
Offering"). Each of these acquired properties was, prior to its acquisition by
us, insured by title insurance policies that insured the owner of the property.
New owner's title insurance policies were not obtained in connection with our
acquisition of such properties. Nevertheless, because in many instances we
acquired the owner of the property and the owner remained in existence, certain
of these title insurance policies may continue to benefit subsidiaries of the
Company, although each such title insurance policy may be in an amount less than
the current value of the applicable property. If there was a title defect
related to any of these properties, or to any of the properties acquired at the
time of the Initial Offering that no longer are covered by title insurance
policies, we could lose both our capital invested in and our anticipated profits
from such property. We have obtained title insurance policies for any properties
that we acquired after the Initial Offering.
Changes in Tax and Environmental Laws
Generally, we have been able to pass costs resulting from increases in real
estate taxes through to tenants. However, we generally do not pass increases in
income, service or transfer taxes through to our tenants. Similarly, changes in
laws increasing the potential liability for environmental conditions existing on
our properties or increasing the restrictions on discharges or other conditions
may result in significant unanticipated expenditures. These increased costs
could adversely affect our financial condition and results of operations and the
amount of cash available for distribution to stockholders.
Risks Associated with Property Acquisitions
Since the Initial Offering, we have made large acquisitions of properties
and portfolios of properties. We intend to continue to investigate and pursue
acquisitions of properties and portfolios of properties, including large
portfolios that could continue to significantly increase our size and alter our
capital structure. Our ability to manage our growth effectively requires us to
integrate successfully new acquisitions into our existing operations. We cannot
assure our stockholders that we will be able to quickly and efficiently
integrate such new acquisitions, particularly acquisitions of portfolios of
properties. If we are unable to successfully manage our growth or integrate our
new acquisitions, our results of operations and financial condition could be
adversely affected.
Newly acquired properties may fail to perform as expected. We may
underestimate the costs necessary to bring an acquired property up to standards
established for its intended market position. Additionally, we expect that
other real estate investors with significant capital will compete with us for
attractive investment opportunities. This competition has increased prices for
properties of the type we would likely pursue. We expect to acquire properties
with cash from secured or unsecured financings and proceeds from offerings of
equity or debt. We may not be in a position or have the opportunity in the
future to make suitable property acquisitions on favorable terms.
Our Investments in Property Development May Be More Costly Than Anticipated
We intend to continue to develop and substantially renovate office,
industrial and hotel properties. To the extent that we engage in such
development activities, we will be subject to the risks normally associated with
such activities. These risks include, among others, the following:
. occupancy rates and rents at newly completed properties may not be
sufficient to enable us to achieve our intended return on investment;
. expenses of operating a completed development may be higher than
anticipated;
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. we may be unsuccessful or delayed in obtaining necessary zoning, land
use, building, occupancy, and other governmental permits and regulatory
approvals;
. we may incur construction costs for developing a property which exceed
our estimates due to factors beyond our control, such as weather, labor
conditions or material shortages; and
. we may not be able to obtain construction financing on favorable terms.
These risks could result in substantial unanticipated delays or expense
that could prevent completion or cause us to abandon development activities
which we have already begun to explore. If any of these events occur, it could
adversely affect our ability to achieve our projected yields on properties under
development and could prevent us from making expected distributions to our
stockholders.
In addition, development and construction activities, regardless of whether
or not they are ultimately successful, typically require a substantial portion
of management's time and attention.
We intend to develop properties in joint ventures with other persons or
entities. The use of a joint venture vehicle creates a risk of a dispute or a
risk that we will have to acquire a joint venturer's interest in a development
for a price or at a time that we would otherwise not purchase such interest.
We Depend on Key Personnel Whose Continued Service is Not Guaranteed
We depend on the efforts of key personnel, particularly Mortimer B.
Zuckerman, Chairman of the Board of Directors, and Edward H. Linde, President
and Chief Executive Officer. Among the reasons that Messrs. Zuckerman and Linde
are important to the success of the Company is that each has a national
reputation which attracts business and investment opportunities and assists us
in negotiations with lenders. If we lost their services, our relationships with
lenders, potential tenants and industry personnel would diminish. The other
executive officers of the Company who serve as managers of the Company's offices
have strong regional reputations. Their strong regional reputations aid us in
identifying opportunities, having opportunities brought to us, and negotiating
with tenants and build-to-suit prospects. While we believe that we could find
replacements for these key personnel, the loss of their services could
materially and adversely effect our operations because of diminished
relationships with lenders, prospective tenants and industry personnel.
Mr. Linde and the Company's other executive officers have employment
agreements in which they agree to devote substantially all of their business
time to the Company's business and affairs and not to have substantial outside
business interests. Because these officers may resign or be terminated at any
time, these employment agreements cannot guarantee that they will remain with
the Company for any particular period of time. The Company does not have an
employment agreement with Mr. Zuckerman. Mr. Zuckerman has substantial outside
business interests, including, serving as Chairman of the Board of Directors of
U.S. News & World Report, The Atlantic Monthly, The New York Daily News and
Applied Graphics Technologies, and serving as a member of the Board of Directors
of Snyder Communications. Such outside business interests could interfere with
his ability to devote time to the Company's business and affairs. For over
twenty years, Mr. Zuckerman has devoted a significant portion, although not a
majority, of his business time to the affairs of the Company. He cannot assure
the Company that he will continue to devote any specific portion of his time to
the Company and has therefore declined to enter into an employment agreement
with the Company. At present, Mr. Zuckerman has no commitments which would
prevent him from maintaining his current level of involvement with the Company.
Potential Liability for Environmental Matters Could Adversely Affect Our
Financial Condition
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real property may be required (often
regardless of knowledge or responsibility) to investigate and remediate the
effects of hazardous or toxic substances or petroleum product releases at a
property, and may be held liable to a governmental entity or to third parties
for property damage and for investigation and remediation costs incurred by them
in connection with such contamination. These costs and liabilities could be
substantial and could exceed the value of the affected real estate. If such
substances were present on one of our properties, our
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ability to borrow against, sell or rent the affected property could be adversely
affected. We have not been notified by any governmental authority of any
noncompliance, liability or other claim in connection with any of our
properties, and we are not aware of any other environmental condition with
respect to any of our properties that we believe would have a material adverse
effect on our business, assets, or results of operations.
Some of our properties are located in urban and industrial areas where fill
or current or historic industrial uses of the areas have caused site
contamination. Independent environmental consultants have been retained in the
past to conduct or update Phase I environmental assessments (which generally do
not involve invasive techniques such as soil or groundwater sampling) and
asbestos surveys on all of our properties. These environmental surveys have not
revealed any environmental conditions that we believe will have a material
adverse effect on our business, assets or results of operations, and we are not
aware of any other environmental condition with respect to any of our properties
which we believe would have such a material adverse effect. However, we are
aware of environmental conditions at three of our properties that may require
remediation:
. With respect to 17 Hartwell Avenue in Lexington, Massachusetts, we
received a Notice of Potential Responsibility from the state regulatory
authority on January 9, 1997, related to groundwater contamination. In
addition, we received Notices of Downgradient Property Status Submittals
from third parties concerning contamination at two downgradient properties.
On January 15, 1997, we notified the state regulatory authority that we
would cooperate with and monitor the tenant at the property (which
investigated the matter and undertook remedial actions). That investigation
identified the presence of hazardous substances in and near a catch basin
along the property line. The tenant completed an Immediate Response Action
at the site in April 1998. We expect the tenant will likewise take any
additional necessary response actions.
. The 91 Hartwell Avenue property in Lexington, Massachusetts was listed
by the state regulatory authority as an unclassified Confirmed Disposal Site
in connection with groundwater contamination. We engaged a specially
licensed environmental consultant to perform the necessary investigation and
assessment and to prepare submittals to the state regulatory authority. On
August 1, 1997, such consultant submitted to the state regulatory authority
a Phase I--Limited Site Investigation Report and Downgradient Property
Status Opinion. This Opinion concluded that the property qualifies for
Downgradient Property Status under the state regulatory program, which
eliminates certain deadlines for conducting response actions at a site and
may qualify us for liability relief under recent statutory amendments.
Although we believe that the current or former owners of the upgradient
source properties may ultimately be responsible for some or all of the costs
of such response actions, we will take any necessary further response
actions.
. An investigation at the 200 West Street property in Waltham,
Massachusetts identified groundwater contamination. We engaged a specially
licensed environmental consultant to perform the necessary investigation and
assessment and to prepare submittals to the state regulatory authority. On
March 11, 1998, the consultant submitted to the state regulatory authority a
Release Notification and Downgradient Property Status Opinion. This Opinion
concluded that the property qualifies for Downgradient Property Status under
the state regulatory program, which eliminates certain deadlines for
conducting response actions at a site and may qualify us for liability
relief under recent statutory amendments. Although we believe that the
current or former owners of the upgradient source properties may ultimately
be responsible for some or all of the costs of such response actions, we
will take any necessary further response actions.
No assurance can be given that the environmental assessments and updates
identified all potential environmental liabilities, that no prior owner created
any material environmental condition not known to us or the independent
consultants preparing the assessments, that no environmental liabilities may
have developed since such environmental assessments were prepared, or that
future uses or conditions (including, without limitation, changes in applicable
environmental laws and regulations) will not result in imposition of
environmental liability.
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Our Use of Debt to Finance Acquisitions and Developments Could Adversely Affect
Our Cash Flow
Required Repayment of Debt or Payment of Interest on Debt
We currently have, and may in the future incur, indebtedness that bears
interest at variable rates. Variable rate debt creates higher debt service
requirements if market rates increase, which could adversely affect our cash
flow and the amounts available to pay distributions to our stockholders. We are
subject to risks normally associated with debt financing, including the risk
that our cash flow will be insufficient to make required payments of principal
and interest, the risk that any indebtedness will not be able to be refinanced,
the risk that the terms of any refinancing will not be as favorable as the terms
of such indebtedness and the risk of a default under the terms of any
indebtedness and an acceleration resulting from such default.
No Limitation on Debt
We do not have a policy limiting the amount of debt that we may incur.
Accordingly, our management and Board of Directors have discretion to increase
the amount of the Company's outstanding debt at any time. We could become more
highly leveraged, resulting in an increase in debt service costs that could
adversely affect our cash flow and the amount available for distribution to our
stockholders. If we increase our debt we may also increase the risk of default
on our debt.
Financial Covenants Could Adversely Affect Our Financial Condition.
If a property is mortgaged to secure payment of indebtedness and we are
unable to meet mortgage payments, the mortgagee could foreclose on the property,
resulting in loss of income and asset value. The mortgages on our properties
contain customary negative covenants which, among other things, limit our
ability, without the prior consent of the lender, to further mortgage the
property or to discontinue insurance coverage. In addition, our credit
facilities contain certain customary restrictions, requirements and other
limitations on our ability to incur indebtedness, including total debt to assets
ratios, secured debt to total asset ratios, debt service coverage ratios and
minimum ratios of unencumbered assets to unsecured debt. Foreclosure on
mortgaged properties or an inability to refinance existing indebtedness would
likely have a negative impact on our financial condition and results of
operations.
Our Degree of Leverage Could Limit Our Ability to Obtain Additional
Financing.
Our Debt to Market Capitalization Ratio (total debt as a percentage of total
debt plus the market value of the outstanding Common Stock, OP Units and
Preferred Units (assuming conversion of all Preferred Units)) is approximately
50.9% as of December 31, 1998. A real estate company's degree of leverage could
have important consequences to its security holders, because leverage affects a
company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions, development or other general corporate purposes and
makes a company more vulnerable to a downturn in the economy generally.
To qualify as a REIT, we must distribute to our stockholders each year at
least 95% of our net taxable income (excluding any net capital gain). See
"Certain Federal Income Tax Considerations" below. Because of these
distribution requirements, it is not likely that we will be able to fund all
future capital needs, including for acquisitions and developments, from income
from operations. We therefore will have to rely on third-party sources of
capital, which may or may not be available on favorable terms or at all. Our
access to third-party sources of capital depends on a number of things,
including the market's perception of our growth potential and our current and
potential future earnings. Moreover, additional equity offerings may result in
substantial dilution of security holders' interests, and additional debt
financing may substantially increase our leverage.
Failure to Qualify as a REIT Would Cause Us to be Taxed as a Corporation
The Company is a real estate investment trust as defined in the Internal
Revenue Code (the "Code"). Entities that have this characterization under the
Code are also known as "REITs." In general, qualification as a REIT enables us
to deduct from our federal taxable income the amount of any dividends paid to
our stockholders. If we fail to qualify as a REIT, we will be taxed as a
corporation for both current and past years. Qualification as
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a REIT involves the application of highly technical and complex provisions under
the Internal Revenue Code (the "Code"), as to which there are only limited
judicial and administrative interpretations, and involves the determination of
various factual matters and circumstances not entirely within our control.
Therefore, although we believe that we are organized and operate as a REIT,
there is a risk that we will fail to maintain our status as a REIT. In addition,
we cannot assure you that future legislation, new regulations, administrative
interpretations or court decisions will not significantly change the tax laws
(or their application) with respect to qualification as a REIT for federal
income tax purposes or the federal income tax consequences of such
qualification.
If, in any taxable year, we failed to qualify as a REIT, we will be subject
to federal income tax (including any applicable alternative minimum tax) on our
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, we would be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. The additional tax liability resulting from the failure
to qualify as a REIT would significantly reduce or eliminate the amount of funds
available for distribution to our stockholders. In addition, we would no longer
be required to make distributions to our stockholders. See "Certain Federal
Income Tax Considerations" beginning on page 32.
The Ability of Our Stockholders to Control Our Policies and Affect a Change of
Control of Our Company is Limited, Which May Not Be in The Stockholders' Best
Interests
Change in Company Policies Without Stockholders' Approval
Our operating and financial policies, including the Company's policies with
respect to acquisitions, growth, operations, indebtedness, capitalization and
distributions, are determined by the Company's Board of Directors. Accordingly,
as a stockholder, you will have little direct control over our policies.
Engagement in Investment Activity Without Stockholders' Approval
We expect to continue to acquire additional real estate assets pursuant to
our investment strategies and consistent with our investment policies. As a
stockholder, you will generally not be entitled to vote on any such
acquisitions. You will not receive past financial statements regarding the real
estate assets to be acquired. Instead, our stockholders must rely entirely on
the decisions of management (although in the case of material acquisitions, we
will, as required by federal securities law, provide financial information
following the acquisition in filings with the SEC.)
Stock Ownership Limit
To maintain qualification as a REIT for federal income tax purposes, not
more than 50% in value of the Company's outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (as defined in the federal
income tax laws applicable to REITs) at any time during the last half of any
year. See "Certain Federal Income Tax Considerations" beginning on page 32.
The Company's Certificate of Incorporation (the "Charter") generally prohibits
ownership, directly or by virtue of the attribution provisions of the Code, by
any single stockholder (which does not include certain pension plans or mutual
funds) of more than 6.6% of the issued and outstanding shares of the Company's
Common Stock (the "Ownership Limit"). The Board of Directors may waive or
modify the Ownership Limit with respect to one or more persons if it is
satisfied that ownership in excess of this limit will not jeopardize the
Company's status as a REIT for federal income tax purposes. Notwithstanding the
above, the Charter provides that each of Messrs. Zuckerman and Linde, along with
certain family members and affiliates of each of Messrs. Zuckerman and Linde,
respectively, as well as, in general, pension plans and mutual funds, may
actually and beneficially own up to 15% of the outstanding shares of Common
Stock. The Ownership Limit may have the effect of inhibiting or impeding a
change in control and, therefore, could adversely affect our stockholders'
ability to realize, in connection with such a transaction, a premium over the
then-prevailing market price for the Common Stock. See "Description of Common
Stock - Restrictions on Transfer" beginning on page 25.
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Charter and Bylaw Provisions
Certain provisions of the Company's Charter and bylaws, as amended and
restated (the "Bylaws"), could make it more difficult for someone to acquire
control of the Company. The Company's Board of Directors is divided into three
classes, with the members of each class serving a three-year term. The Charter
authorizes the Board of Directors to issue up to 50 million shares of Preferred
Stock without stockholder approval. The Board of Directors may establish the
preferences and rights of any Preferred Stock issued. These and other
restrictions may preclude acquisitions that could otherwise provide our
stockholders with the opportunity to realize a premium over the then-prevailing
market price of such shares.
Operating Partnership Agreement
We are the sole general partner of the Operating Partnership and, in
connection with most matters which could require a consent or vote of the
Operating Partnership's partners, hold approximately 65.0% of the voting power
therein (assuming conversion of all preferred units of limited partnership
("Preferred Units")). We have agreed in the limited partnership agreement of
the Operating Partnership (the "Operating Partnership Agreement") not to engage
in certain business combinations unless the limited partners who hold the
remaining common units of limited partnership ("Common Units" or "OP Units")
receive, or have the opportunity to receive, the same consideration per OP Unit
as our holders of Common Stock receive per share of Common Stock in the
transaction. If holders of OP Units do not receive such consideration, we cannot
engage in the transaction unless 75% of the limited partners (other than the
Company) vote to approve the transaction. In addition, we have agreed in the
Operating Partnership Agreement that we will not consummate certain business
combinations in which we conducted a vote of the stockholders unless (i) a vote
of holders of OP Units is conducted and (ii) the matter would have been approved
had holders of OP Units been able to vote as stockholders on the transaction.
The Operating Partnership Agreement does not enable us or require us to engage
in a business combination requiring our stockholders' approval if our
stockholders do not in fact give the required approval. Rather, if our
stockholders approve a business combination that requires a vote of
stockholders, we are therefore authorized under the Charter to engage in such
transaction but we are contractually prohibited under the Operating Partnership
Agreement from consummating the transaction unless
. holders of OP Units (including the Company) vote on the matter;
. the Company votes the OP Units it holds in the Operating Partnership
(which at all times equals the number of shares of Common Stock outstanding)
in the same proportion as our stockholders voted on the matter at the
stockholder vote; and
. the result of such vote of the OP Unit holders (including the
proportionate vote of the Company's OP Units) is such that had such vote
been a vote of stockholders holding a number of shares equal to the
number of outstanding OP Units, the business combination would have been
approved by our stockholders.
As a result of these provisions of the Operating Partnership, a third party
may be deterred from making an acquisition proposal that it would otherwise make
and we may be prohibited by contract from engaging in a proposed business
combination even though the Company's stockholders approve of the combination
and we have the authority to engage in the combination under our Charter.
Shareholder Rights Agreement
We have adopted a Shareholder Rights Agreement. Under the terms of this
agreement, we can in effect prevent a person or group from acquiring more than
15% of the outstanding shares of our Common Stock (an "Acquiring Person")
because, unless we approve of the Acquiring Person's purchase, after the
Acquiring Person acquires more than 15% of the outstanding Common Stock, all
stockholders (other than the Acquiring Person) will have the right to purchase
securities from us at a price that is less than their then fair market value.
Such purchases by the other stockholders would substantially reduce the value
and influence of the shares of our Common Stock owned by the Acquiring Person.
However, our Board of Directors can prevent the Shareholder Rights Agreement
from operating in this manner and thus has significant discretion to approve of
an acquiror's
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efforts to acquire a large interest in our Company. See "Description of Common
Stock - Shareholder Rights Agreement" beginning on page 26.
Provisions of Delaware Law
As a Delaware corporation, we are subject to the provisions of the Delaware
General Corporation Law (the "DGCL"), which imposes restrictions on certain
business combinations and requires compliance with certain procedures before
certain mergers and acquisitions can occur. The DGCL may delay or prevent
offers to acquire us and increase the difficulty of consummating any such
offers, even if an acquisition would be in our stockholders' best interest.
Conflicts of Interest Exist Between the Company and Certain Holders of OP Units
and Preferred Units in Connection with the Operation of the Company
Sales of Properties and Repayment of Related Indebtedness Will Have
Different Effects on OP Unitholders than on Stockholders
Certain holders of OP Units and Preferred Units, including Messrs. Zuckerman
and Linde, will incur adverse tax consequences upon the sale of certain of our
properties and on the repayment of related indebtedness which are different from
the tax consequences to the Company and our stockholders. Consequently, such
holders of OP Units and Preferred Units may have different objectives regarding
the appropriate pricing and timing of any such sale or repayment of
indebtedness. While the Company has exclusive authority under the Operating
Partnership Agreement to determine whether, when, and on what terms to sell a
property (subject, in the case of certain properties, to the contractual
commitments described below) or when to refinance or repay indebtedness, any
such decision would require the approval of our Board of Directors. As
directors and executive officers of the Company, Messrs. Zuckerman and Linde
have substantial influence with respect to any such decision. Their influence
could be exercised in a manner inconsistent with the interests of some, or a
majority, of our stockholders, including in a manner which could prevent
completion of a sale of a property or the repayment of indebtedness.
Agreement Not to Sell Certain Properties
Under the terms of the Operating Partnership Agreement, we have agreed not
to sell or otherwise transfer certain of our properties, prior to specified
dates, in any transaction that would trigger taxable income, without first
obtaining the consent of Messrs. Zuckerman and Linde. However, we are not
required to obtain their consent if, during the applicable period, each of them
does not hold at least 30% of his original OP Units. In addition, we have
entered into similar agreements with respect to other properties that we have
acquired for partnership interests in the Operating Partnership. There are a
total of 16 properties subject to these restrictions, and those 16 properties
are estimated to have accounted for approximately 68% of the Company's total
revenue on a pro forma basis for the year ended December 31, 1997.
The Operating Partnership has also entered into agreements providing Messrs.
Zuckerman and Linde and others with the right to guarantee additional and/or
substitute indebtedness of the Company in the event that certain other
indebtedness is repaid or reduced.
The agreements described above may hinder actions that the Company would
otherwise desire to take because the Company would be required to make payments
to the beneficiaries of such agreements if the Company violates these
agreements.
Messrs. Zuckerman and Linde Will Continue to Engage in Other Activities
Messrs. Zuckerman and Linde have a broad and varied range of investment
interests. Either one could acquire an interest in a company which is not
currently involved in real estate investment activities but which may acquire
real property in the future. However, pursuant to Mr. Linde's employment
agreement and Mr. Zuckerman's non-compete agreement with the Company, Messrs.
Zuckerman and Linde will not, in general, have
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management control over such companies and, therefore, they may not be able to
prevent one or more such companies from engaging in activities that are in
competition with our activities.
Possible Adverse Impact of Market Conditions on Market Price
As with other publicly traded equity securities, the value of our Common
Stock depends on various market conditions which may change from time to time.
Among the market conditions that may affect the value of our publicly traded
securities are the following: the extent of institutional investor interest in
the Company; the reputation of REITs and office REITs generally and the
attractiveness of their equity securities in comparison to other equity
securities (including securities issued by other real estate companies); our
financial condition and performance; and general financial market conditions.
One of the factors that investors may consider important in deciding whether
to buy or sell shares of a REIT is the dividend with respect to such REIT's
shares (as a percentage of the price of such shares) relative to market interest
rates. If market interest rates go up, prospective purchasers of REIT shares
may expect a higher distribution rate. Higher market interest rates would not,
however, result in more funds for us to distribute and, in fact, would likely
increase our borrowing costs and potentially decrease funds available for
distribution. Thus, higher market interest rates could cause the market price
of our publicly traded securities to go down in order to increase our dividend
as a percentage of the price of a share.
Tax Consequences of Exchanging OP Units for Redemption Shares
Tax Consequences of Exchanging OP Units for Redemption Shares. If we
acquire your OP Units in exchange for cash or Redemption Shares, the redemption
of such OP Units will be treated for tax purposes as a sale of your OP Units.
Such a sale will be fully taxable to you and you will be treated as realizing
for tax purposes an amount equal to the sum of (a) the cash you receive or the
value of the Redemption Shares you receive plus (b) the amount of any
liabilities of the Operating Partnership allocable to the exchanged OP Units at
the time of the redemption or exchange. It is possible that the amount of gain
recognized or even the tax liability resulting from such gain could exceed the
amount of cash and the value of other property (e.g., Redemption Shares) you
----
would receive upon such disposition. In addition, your ability to sell a
substantial number of Redemption Shares in order to raise cash to pay your tax
liabilities associated with the redemption of OP Units may be limited as a
result of fluctuations in the market price of our Common Stock, and the price
you receive for such shares may not equal the value of your OP Units at the time
of the redemption or exchange.
If we do not acquire the OP Units you tender for redemption in exchange for
Redemption Shares, and the Operating Partnership redeems such OP Units for cash,
the tax consequences may differ. See "Description Of Units and Redemption Of
Units -- Tax Consequences Of Redemption" beginning on page 18.
Potential Change in Investment Upon Redemption of OP Units. If you exercise
your right to require that we redeem all or a portion of your OP Units, you may
receive cash or, at our option, Redemption Shares in exchange for your OP Units.
If you receive cash, you will no longer have any interest in the Operating
Partnership (except to the extent that you retain OP Units) and you will not
benefit from any subsequent increases in our share price and you will not
receive any future distributions from us (unless you retain or acquire OP Units
or additional shares of Common Stock in the future). If you receive Common
Stock, you will become a stockholder of Boston Properties, Inc. rather than a
holder of OP Units in the Operating Partnership and as such will have different
economic and corporate governance rights than those you had as a holder of OP
Units.
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FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made under the captions
"Risk Factors" and "The Company" and elsewhere in this prospectus are "forward-
looking statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. Such forward-looking statements include,
without limitation, statements relating to acquisitions (including related pro
forma financial information) and other business development activities, future
capital expenditures, financing sources and availability and the effects of
regulations (including environmental regulation) and competition. When we use
the words "anticipate," "assume," "believe," "estimate," "expect," "intend" and
other similar expressions in this prospectus, they are generally forward-looking
statements. You should exercise caution in interpreting and relying on forward-
looking statements since they involve known and unknown risks, uncertainties and
other factors which are, in some cases, beyond our control and could materially
affect our actual results, performance or achievements. Factors that could
cause our actual results, performance or achievements to differ materially from
those expressed or implied by such forward-looking statements include, but are
not limited to, the following:
. we are subject to general risks affecting the real estate industry
such as the need to enter into new leases or renew leases on favorable terms
to generate rental revenues and dependence on our tenants' financial
condition;
. we may fail to identify, acquire, construct or develop additional
properties; we may develop properties that do not produce a desired yield on
invested capital; or we may fail to effectively integrate acquisitions of
properties or portfolios of properties;
. financing may not be available, or may not be available on favorable
terms;
. we need to make distributions to our stockholders for us to qualify
as a REIT and if we need to borrow the funds to make such distributions such
borrowings may not be available on favorable terms;
. we depend on the primary markets where our properties are located,
and these markets may be adversely affected by local economic and market
conditions which are beyond our control;
. we are subject to potential environmental liabilities;
. we are subject to complex regulations relating to our status as a
REIT and would be adversely affected if we failed to qualify as a REIT; and
. market interest rates could adversely affect the market prices for
our Common Stock and our performance and cash flow.
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THE COMPANY
Boston Properties, Inc.
Boston Properties, Inc., a Delaware corporation, develops, acquires, owns
and manages a diverse portfolio of office, industrial and hotel properties in
the United States. We are one of the largest owners and developers of office
properties in the United States, with a significant presence in Greater Boston;
Midtown Manhattan; Greater Washington, D.C.; San Francisco, California;
Princeton/East Brunswick, New Jersey; Richmond, Virginia; and Baltimore,
Maryland. As of January 19, 1999, we owned 122 properties aggregating over 31.8
million square feet (including ten properties currently under development that
will aggregate approximately 2.3 million square feet). The Company's properties
consist of 109 office properties, including 78 Class A office properties
(including nine under development) and 31 Research and Development properties;
nine industrial properties; three hotels (including one under development); and
one parking garage. The Company considers Class A office properties to be
centrally located buildings that are professionally managed and maintained,
attract high-quality tenants and command upper-tier rental rates, and that are
modern structures or have been modernized to compete with newer buildings. The
Company considers Research and Development properties to be properties that are
designed to address the market for research and development and other technical
uses as well as to be suitable for office use.
We are a self-administered and self-managed REIT. We have elected to be
treated as a REIT under the Code beginning with our taxable year ended December
31, 1997. We are listed on the NYSE under the symbol "BXP."
Our initial public offering of Common Stock was in June 1997 (the "Initial
Offering"). Contemporaneously with such offering, the Company and its Operating
Partnership subsidiary were formed to succeed to the ownership of real estate,
and the real estate development, redevelopment, acquisition, management,
operating and leasing businesses, associated with the predecessor organization
founded by Messrs. Zuckerman and Linde in 1970.
We are a full-service real estate company, with substantial in-house
expertise and resources in acquisitions, development, financing, construction
management, property management, marketing, leasing, accounting, tax and legal
services. Our headquarters are located at 8 Arlington Street, Boston,
Massachusetts 02116 and our telephone number is (617) 859-2600. In addition, we
have regional offices at the U.S. International Trade Commission Building at 500
E Street, SW, Washington, D.C. 20024, at 599 Lexington Avenue, New York, New
York 10002 and at Four Embarcadero Center, Suite 2600, San Francisco,
California, 94111. The Company's headquarters and regional offices are located
in properties owned by the Company.
Boston Properties Limited Partnership
Boston Properties Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), owns all of our assets (either directly or through
subsidiaries) and is the entity through which we conduct substantially all of
our business. This structure is commonly referred to as an umbrella partnership
REIT or UPREIT. Our Board of Directors manages the affairs of the Operating
Partnership. Boston Properties, Inc. is the sole general partner of the
Operating Partnership and on January 19, 1999, owned an approximate 65.0%
general and limited partnership interest in the Operating Partnership (assuming
conversion of all preferred units). The other partners of the Operating
Partnership are the investors who contributed their direct or indirect interests
in certain properties to the Operating Partnership in exchange for an interest
in the Operating Partnership, either at the completion of the Initial Offering
or upon subsequent acquisitions of other properties or interests therein by the
Operating Partnership.
Partnership interests in the operating partnership are denominated as
"common units of partnership interest" (also referred to as "OP Units" or
"Common Units") and preferred units of limited partnership ("Preferred Units").
A holder of an OP Unit may present such OP Unit to the Operating Partnership for
redemption at any time (subject to agreements upon the issuance of OP Units to
particular holders that may restrict such right for a period of time, generally
not less than one year). Upon presentation of an OP Unit for redemption, the
Operating Partnership must redeem such OP Unit for cash equal to the then value
of a share of common stock, except that the Company may, at its election, in
lieu of a cash redemption acquire such OP Unit for one share of common
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stock of the Company ("Common Stock"). With each such redemption or acquisition,
our percentage ownership interest in the Operating Partnership will increase. In
addition, whenever we sell or issue shares of Common Stock, we will be obligated
to contribute any net proceeds from such sale or issuance to the Operating
Partnership, and the Operating Partnership will be obligated to issue an
equivalent number of OP Units to us. Because the number of shares of Common
Stock outstanding at all times equals the number of OP Units that the Company
owns, one share of Common stock is generally the economic equivalent of one OP
Unit, and the quarterly distribution that may be paid to the holder of an OP
Unit equals the quarterly dividend that may be paid to the holder of a share of
Common Stock. Each series of Preferred Units bears a distribution that is set in
accordance with an amendment to the partnership agreement of the Operating
Partnership. Preferred Units may also be convertible into OP Units at the
election of the holder thereof or the Company.
All references in this prospectus to the Company or to "we" or similar terms
refer to Boston Properties, Inc. and its subsidiaries, including the Operating
Partnership, collectively, unless the context otherwise requires.
Generally, pursuant to the terms of the Operating Partnership Agreement, we
have the exclusive power to manage and conduct the business of the Operating
Partnership. Under the Operating Partnership Agreement, we generally have the
maximum rights and powers permitted to the general partner of a Delaware limited
partnership. Limited partners of the Operating Partnership generally have only
such rights and powers as are reserved to limited partners expressly by Delaware
law, and have no authority to transact business for, or participate in the
management activities or decisions of, the Operating Partnership. The limited
partners do not have the right to remove us as general partner. The limited
partners of the Operating Partnership do have the right to vote, under certain
circumstances, on business combinations of Boston Properties, Inc. or the
Operating Partnership.
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DESCRIPTION OF UNITS AND REDEMPTION OF UNITS
General
The Operating Partnership may issue common units of limited partnership
("Common Units" or "OP Units") and preferred units of limited partnership
("Preferred Units"). As of January 19, 1999, the Operating Partnership had
outstanding 87,325,817 OP Units (including 63,527,819 owned by Boston
Properties, Inc.), and 8,754,201 Preferred Units, as described below.
Each holder of OP Units (sometimes referred to as a "Unitholder") may,
subject to certain limitations, require that the Operating Partnership redeem
all or a portion of such holder's OP Units (the "Redemption Right"). You may
exercise such Redemption Right by delivering a Notice of Redemption to us and to
the Operating Partnership. After presentation for redemption, you will receive
for each OP Unit presented cash in an amount equal to the market value of a
share of Common Stock (as determined in accordance with the Operating
Partnership Agreement, and subject to certain adjustments to prevent dilution),
except that we may, in our sole discretion, elect to acquire any OP Unit so
presented to the Operating Partnership in exchange for one share of Common Stock
(subject to the same adjustments).
We may elect to acquire any Units presented to the Operating Partnership for
redemption by issuing "Redemption Shares" pursuant to this Prospectus. Such an
acquisition will be treated as a sale by you of your OP Units for federal income
tax purposes. Upon a redemption for cash, your right to receive distributions
with respect to the OP Units redeemed will cease; upon a sale for Redemption
Shares, you will have rights as a shareholder of our Company, including the
right to receive dividends, from the time of your acquisition of the Redemption
Shares.
You must notify us of your desire to require the Operating Partnership to
redeem OP Units. You must request the redemption of at least 1,000 OP Units (or
all of your OP Units, if less). No redemption can occur if the delivery of
Redemption Shares would be prohibited in order to protect our qualification as a
REIT under the provisions of our Certificate of Incorporation.
Preferred Units
On June 30, 1998, the Operating Partnership issued 2,442,222 Series One
Preferred Units (the "One Preferred Units") in the Operating Partnership. Each
One Preferred Unit has a liquidation preference of $34 and bears a preferred
distribution of 7.25% per annum. One Preferred Units are convertible into OP
Units at a rate of $38.25 per OP Unit. The One Preferred Units are convertible
into OP Units (i) at the holder's election at any time or (ii) at our election
on or after June 30, 2003, provided that at the time of such election the
Company's Common Stock has a 20-day trading average of $42.08 per share.
On November 12, 1998, the Operating Partnership issued an aggregate of
6,311,979 Series Two and Series Three Preferred Units (the "Two/Three Preferred
Units"), which have substantially similar terms. The Two/Three Preferred Units
are convertible, at the holder's election, at any time on and after December 31,
2002 (the "Conversion Date") into OP Units at a conversion price of $38.10 per
OP Unit.
Distributions on the Two/Three Preferred Units (the "Ordinary Preferred
Distribution") are payable quarterly and accrue at a rate of 5.0% per annum
through March 31, 1999; 5.5% through December 31, 1999; 5.625% through December
31, 2000; 6.0% through December 31, 2001; 6.5% through December 31, 2002; 7.0%
until May 12, 2009; and 6.0% thereafter. However, if at any time (whether or
not the Conversion Date has passed) the quarterly distributions on the OP Units
into which a Two/Three Preferred Unit may be converted (the "Ratchet
Distribution") are greater than the Ordinary Preferred Distribution due on such
Preferred Unit, then each Two/Three Preferred Unit will receive, in respect of
that quarter, the Ratchet Distribution rather than the lower Ordinary Preferred
Distribution.
The terms of the Two/Three Preferred Units provide that they may be redeemed
in six annual tranches, beginning in the tenth year after their issuance, at the
election of the Company or the holders. In lieu of its right to require an
annual redemption of Two/Three Preferred Units, the Company may elect to convert
a tranche of
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Two/Three Preferred Units into OP Units provided that at the time of such forced
conversion the weighted average of the closing price of the Company's Common
Stock during the preceding ten day period exceeds 110% of the Conversion Price.
Tax Consequences of Redemption
The following discussion summarizes certain federal income tax
considerations that may be relevant to you if you exercise your right to require
the redemption of your OP Units.
Tax Treatment of Exchange or Redemption of OP Units. If we elect to
purchase OP Units you tender for redemption, the Operating Partnership Agreement
provides that each of you, the Company and the Operating Partnership shall treat
the transaction as a sale of OP Units at the time of such redemption. Such sale
will be fully taxable to you and you will be treated as realizing for tax
purposes an amount equal to the sum of (a) the cash value or the value of the
Common Stock received in the exchange plus (b) the amount of any liabilities of
the Operating Partnership allocable to the redeemed OP Units at the time of the
redemption. The determination of the amount of gain or loss is discussed more
fully below. If we do not elect to acquire your OP Units tendered for
redemption and the Operating Partnership redeems such Units for cash that we
contribute to the Operating Partnership to effect such redemption, the
redemption likely would be treated for tax purposes as a sale of such OP Units
in a fully taxable transaction, although the matter is not free from doubt. In
that event, you would be treated as realizing an amount equal to the sum of (a)
the cash received in the exchange plus (b) the amount of any liabilities of the
Operating Partnership allocable to the redeemed OP Units at the time of the
redemption. The determination of the amount and character of gain or loss in
the event of such a sale is discussed more fully below.
If we do not elect to purchase OP Units you tender for redemption and the
Operating Partnership redeems your OP Units for cash that is not contributed by
---
us to effect the redemption, the tax consequences would be the same as described
in the previous paragraph, except that if the Operating Partnership redeems less
than all of your OP Units, you would not be permitted to recognize any loss
occurring on the transaction and would recognize taxable gain only to the extent
that the cash, plus the amount of any liabilities of the Operating Partnership
allocable to the redeemed Units, exceeded your adjusted basis in all of your OP
Units immediately before the redemption.
If we contribute cash to the Operating Partnership to effect a redemption,
and in the unlikely event that the redemption transaction is treated as the
redemption of your OP Units by the Operating Partnership rather than a sale of
OP Units to us, the income tax consequences to you would be as described in the
preceding paragraph.
Tax Treatment of Disposition of OP Units by a Limited Partner Generally. If
you dispose of an OP Unit in a manner that is treated as a sale of the OP Unit,
or you otherwise dispose of an OP Unit, the determination of gain or loss from
the sale or other disposition will be based on the difference between the amount
considered realized for tax purposes and the tax basis in such OP Unit. Upon
the sale of an OP Unit, the "amount realized" will be measured by the sum of the
cash and fair market value of other property (e.g., Redemption Shares) received
----
plus the amount of any liabilities of the Operating Partnership allocable to the
OP Units sold. To the extent that the amount of cash or property received plus
the allocable share of any liabilities of the Operating Partnership exceeds your
basis for the OP Units disposed of, you will recognize gain. It is possible
that the gain you recognize upon a disposition of OP Units, and perhaps even the
tax liability resulting from such gain, could exceed the amount of cash and/or
the value of any other property (e.g., Redemption Shares) you receive upon such
----
disposition. Therefore, you should carefully consider the tax consequences of
presenting your OP Units for redemption and should consult with professional
advisors (e.g., an accountant, a lawyer) before doing so.
----
Except as described below, any gain you recognize upon a sale or other
disposition of OP Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that the amount
realized upon the sale of an OP Unit attributable to your share of "unrealized
receivables" of the Operating Partnership (as defined in Section 751 of the
Code) exceeds the basis attributed to those assets, such excess will be treated
as ordinary income. Unrealized receivables include, to the extent not
previously included in the Operating Partnership's income, any rights to payment
for services rendered or to be rendered. Unrealized receivables also include
amounts that would be subject to recapture as ordinary income if the Operating
Partnership had sold its assets at their fair market value at the time of the
transfer of an OP Unit.
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Basis of OP Units. In general, a limited partner who contributed a
partnership interest in exchange for his OP Units has an initial tax basis in
his OP Units ("Initial Basis") equal to his basis in the contributed partnership
interest. A limited partner's Initial Basis in his OP Units generally is
increased by (i) such limited partner's share of the Operating Partnership's
taxable and tax-exempt income and (ii) increases in such limited partner's
allocable share of liabilities of the Operating Partnership (including any
increase in his share of liabilities occurring in connection with the
contribution of property to the Operating Partnership). Generally, such
partner's basis in his OP Units is decreased (but not below zero) by (A) such
partner's share of the Operating Partnership's distributions, (B) decreases in
such partner's allocable share of liabilities of the Operating Partnership
(including any decrease in his share of liabilities of the Operating Partnership
occurring in connection with the contribution of property to the Operating
Partnership), (C) such partner's share of losses of the Operating Partnership
and (D) such partner's share of nondeductible expenditures of the Operating
Partnership that are not chargeable to his capital account.
Potential Application of the Disguised Sale Regulations to a Redemption of
OP Units. There is a risk that a redemption by the Operating Partnership of OP
Units issued in connection with a contribution of property to the Operating
Partnership may cause the original transfer of property to the Operating
Partnership in exchange for OP Units to be treated as a "disguised sale" of
property. Section 707 of the Code and the Treasury Regulations thereunder (the
"Disguised Sale Regulations") generally provide that, unless one of the
prescribed exceptions is applicable, a partner's contribution of property to a
partnership and a simultaneous or subsequent transfer of money or other
consideration (including the assumption of or taking subject to a liability)
from the partnership to the partner will be presumed to be a sale, in whole or
in part, of such property by the partner to the partnership. Further, the
Disguised Sale Regulations provide generally that, in the absence of an
applicable exception, if money or other consideration is transferred by a
partnership to a partner within two years of the partner's contribution of
property, the transactions are presumed to be a sale of the contributed property
unless the facts and circumstances clearly establish that the transfers do not
constitute a sale. The Disguised Sale Regulations also provide that if two
years have passed between the transfer of money or other consideration and the
contribution of property, the transactions will be presumed not to be a sale
unless the facts and circumstances clearly establish that the transfers
constitute a sale.
Accordingly, if you (or a predecessor who conveyed your OP Units to you in a
transaction which did not cause the recognition of taxable gain on such transfer
of OP Units) received your OP Units upon the contribution of property to the
Operating Partnership and your OP Units are redeemed by the Operating
Partnership, the Internal Revenue Service ("IRS") could contend that the
Disguised Sale Regulations apply because you will thus receive cash subsequent
to a previous contribution of property to the Operating Partnership. In that
event, the IRS could contend that the related contribution of property to the
Operating Partnership was taxable as a disguised sale under the Disguised Sale
Regulations. Any gain recognized thereby may be eligible for installment
reporting under Section 453 of the Code, subject to certain limitations. In
addition, in such event, the Disguised Sale Regulations might apply to cause a
portion of the proceeds you receive to be characterized as original issue
discount on a deferred obligation which would be taxable as interest income in
accordance with the provisions of Section 1272 of the Code.
Comparison of Ownership of OP Units and Common Stock
Generally, except for differing tax treatment, the nature of any investment
in our Common Stock is substantially equivalent economically to an investment in
OP Units in the Operating Partnership. A holder of a share of our Common Stock
receives a dividend from the Company equal in amount to the distribution that a
holder of an OP Unit receives from the Operating Partnership, and stockholders
and Unitholders generally share in the risks and rewards of ownership in the
enterprise we are conducting. However, there are some differences between
ownership of OP Units and ownership of Common Stock, some of which may be
material to investors.
The information below highlights a number of significant differences between
the Operating Partnership and our Company relating to, among other things, form
of organization and investor rights. These comparisons are intended to assist
you in understanding how your investment will be changed if your OP Units are
acquired for Common Stock. This discussion is summary in nature and does not
constitute a complete discussion of these matters, and you should carefully
review the balance of this prospectus and the registration statement of which
this prospectus is a part for additional important information about us.
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Form of Organization and Assets Owned. The Operating Partnership is
organized as a Delaware limited partnership. All of our operations are
conducted through the Operating Partnership.
Boston Properties, Inc. is a Delaware corporation. We elected to be taxed
as a REIT under the Code commencing with our taxable year ended December 31,
1997, and intend to maintain our qualifications as a REIT. We maintain both a
limited partner interest and a general partner interest in the Operating
Partnership which gives us an indirect investment in the properties and other
assets owned by the Operating Partnership. We currently have a 65.0% economic
interest in the Operating Partnership (assuming conversion of all outstanding
Preferred Units into OP Units). Our interest in the Operating Partnership will
(i) increase as OP Units are redeemed for cash or acquired by us and as we issue
additional capital stock and contribute the net proceeds from such issuance to
the Operating Partnership in exchange for additional interests in the Operating
Partnership and (ii) decrease as we issue additional OP Units and Preferred
Units in exchange for property contributed to the Operating Partnership.
Length of Investment. The Operating Partnership has a stated termination
date of December 31, 2095, although it may be terminated earlier under certain
circumstances. Boston Properties, Inc. has a perpetual term.
Purchase and Permitted Investments. The purpose of the Operating
Partnership includes the conduct of any business that may be lawfully conducted
by a limited partnership formed under Delaware law except that the Operating
Partnership Agreement requires that the partnership conduct its business in a
manner that will permit Boston Properties, Inc. to continue to be classified as
a REIT for federal income tax purposes. The Operating Partnership may, subject
to the foregoing limitation, invest or enter into partnerships, joint ventures
or similar arrangements and may own interests in any other entity.
The Charter of Boston Properties, Inc. permits us to engage in any lawful
activity permitted under Delaware law. However, under the Operating Partnership
Agreement, we, as the general partner, may not conduct any business other than
the business of the Operating Partnership and cannot own any assets other than
our interest in the Operating Partnership.
Additional Equity. The Operating Partnership is authorized to issue OP
Units, Preferred Units and other partnership interests to its partners or to
other persons for such consideration and on such terms and conditions as we, as
general partner, in our sole discretion, may deem appropriate. In addition, we
may cause the Operating Partnership to issue to us additional OP Units,
Preferred Units or other partnership interests in different series or classes
which may be senior to the OP Units, provided such issuance to us is in
conjunction with an issuance of securities of our Company having substantially
similar rights and in which the proceeds of the offering are contributed to the
Operating Partnership. No limited partner has any preemptive or similar rights
with respect to additional capital contributions to the Operating Partnership or
the issuance or sale of any interests therein.
The Board of Directors of the Company in its discretion may cause the
Company to issue additional equity securities consisting of common stock or
preferred stock; provided, that the total number of shares issued does not
exceed the authorized number of shares of capital stock set forth in our
Charter. As long as the Operating Partnership is in existence, the net proceeds
of all equity capital raised by us will be contributed to the Operating
Partnership in exchange for OP Units, Preferred Units or other interests in the
Operating Partnership.
Borrowing Policies. The Operating Partnership has no restrictions on
borrowings and we, as general partner, have full power and authority to cause
the Operating Partnership to borrow money. We do not have a policy limiting the
amount of debt that we may incur and we are not restricted under our Charter or
Bylaws from making borrowings. Accordingly, we could become more highly
leveraged, resulting in an increase in debt service that could adversely affect
our cash flow and, consequently, the amount available for distribution to
stockholders.
Other Investment Restrictions. Other than restrictions precluding
investments by the Operating Partnership that would adversely affect the
qualification of the Company as a REIT, there are no restrictions upon the
Operating Partnership's authority to enter into transactions, including, among
others, making investments, lending its funds, or reinvesting its cash flow and
net sale or refinancing proceeds.
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Neither our Charter nor our Bylaws impose any restrictions upon the types of
investments we can make except that, under the Charter, the Board of Directors
is prohibited from taking any action that would terminate our REIT status,
unless 75% of our directors vote to terminate such REIT status.
Management Control. All management powers over the business and affairs of
the Operating Partnership are vested in the Company as general partner and no
limited partner of the Operating Partnership has any right to participate in or
exercise control or management power over the ordinary business and affairs of
the Operating Partnership. We as general partner may not be removed by the
limited partners with or without cause.
Our Board of Directors has exclusive control over our business and affairs
subject only to those restrictions set forth in the Charter and the Bylaws or
provided by Delaware law. The Board of Directors is classified into three
classes. At each annual meeting of the shareholders, the successors of the
class of directors whose terms expire at that meeting will be elected. The
policies adopted by the Board of Directors may be altered or eliminated without
the advice of the stockholders. Accordingly, except for their vote in the
elections of directors, stockholders have no control over the ordinary business
policies of our Company.
Management Liability and Indemnification. The Operating Partnership
Agreement generally provides that we, as general partner, will incur no
liability to the Operating Partnership or any limited partner for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if we acted in good faith. In addition, we, as general partner,
are not responsible for any misconduct or negligence on the part of our agents
provided we appointed such agents in good faith. We, as general partner, may
consult with legal counsel, accountants, appraisers, management consultants,
investment bankers and other consultants and advisors, and any action we take or
omit to take in reliance upon the opinion of such persons, as to matters which
we, as general partner, reasonably believe to be within their professional or
expert competence, shall be conclusively presumed to have been done or omitted
in good faith and in accordance with such opinion. The Operating Partnership
Agreement also provides for the indemnification of us, as general partner, of
our directors and officers, and of such other persons as we, as general partner,
may from time to time designate, against any and all losses, claims, damages,
liabilities, expenses, judgments, fines, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings in which such
person may be involved that relate to the operations of the Operating
Partnership.
The Charter eliminates, subject to certain exceptions (including the
receiving of an improper benefit), the personal liability of a director to our
Company or our stockholders for monetary damages for breaches of such director's
duty of care or other duties as a director. The effect of this provision in the
Charter is to eliminate our rights and the rights of our stockholders (through
stockholders' derivative suits on our behalf) to recover monetary damages
against a director for breach of the fiduciary duty of care as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in certain limited situations. This provision does not limit or
eliminate the rights of any stockholder to seek non-monetary relief such as an
injunction or rescission in the event that a director breaches such Director's
duty of care. These provisions also do not alter the liability of directors
under federal securities laws.
Anti-takeover Provisions. Except in limited circumstances, we, as the
general partner, have exclusive management power over the business and affairs
of the Operating Partnership. We may not be removed as general partner of the
Operating Partnership by the limited partners with or without cause.
Our Charter, our Bylaws, and Delaware law contain a number of provisions
that may have the effect of delaying or discouraging an unsolicited proposal for
the acquisition of the Company or the removal of incumbent management.
Voting Rights. Under the Operating Partnership Agreement, the limited
partners do not have voting rights relating to the operation and management of
the Operating Partnership except in connection with matters, as described more
fully below, involving certain amendments to the Operating Partnership
Agreement, dissolution of the Operating Partnership and the sale or exchange of
all or substantially all of the Operating Partnership's assets, including
mergers or other combinations.
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Our stockholders have the right to vote, among other things, in the election
of each class of directors, on a merger involving the issuance of more than 20%
of our outstanding Common Stock, on a sale of substantially all of our assets,
most amendments to our Charter and the dissolution of our Company. We are
managed and controlled by a Board of Directors consisting of three classes
having staggered terms of office. Each class is elected by the stockholders at
our annual meeting. Each share of Common Stock has one vote, and the Charter
permits the Board of Directors to classify and issue Preferred Stock in one or
more series having voting powers which may differ from that of the Common Stock.
Amendment of the Operating Partnership Agreement or the Charter. Amendments
to the Operating Partnership Agreement (a) may be proposed by us, as general
partner, or by limited partners holding 20% or more of the partnership interests
and (b) generally require approval of limited partners (including us) holding a
majority of the outstanding limited partner interests. Certain amendments that
would, among other things, convert a limited partner's interest into a general
partner's interest, modify the limited liability of any limited partner, alter
the interest of any limited partner in profits, losses or distributions, alter
or modify the redemption right described herein, or cause the termination of the
Operating Partnership at a time inconsistent with the terms of the Operating
Partnership Agreement must be approved by us, as general partner, and each
limited partner that would be adversely affected by any such amendment.
Amendments to the Charter must be approved by the Board of Directors and
generally by the vote of a majority of the votes entitled to be cast at a
meeting of stockholders. However, certain provisions of the Charter may not be
amended, altered, changed or repealed without the affirmative vote of the
holders of at least 66 2/3 % or 75% of the voting power of all of the shares of
capital stock then certified to vote, voting as a single class.
Vote Required to Dissolve the Operating Partnership or our Company. Under
Delaware law and the Operating Partnership Agreement, the Operating Partnership
may be dissolved only upon an election to dissolve by the Company as general
partner and the affirmative consent of limited partners (including the Company)
holding 85% of the OP Units of the limited partners. Under Delaware law, the
Board of Directors must obtain approval of holders of a majority of all
outstanding shares of our capital stock in order to dissolve the Company.
Vote Required to Sell Assets or Merge. Boston Properties, Inc. has agreed
in the limited partnership agreement of the Operating Partnership (the
"Operating Partnership Agreement") not to engage in certain business
combinations unless the limited partners who hold the remaining common units of
limited partnership ("Common Units" or "OP Units") receive, or have the
opportunity to receive, the same consideration per OP Unit as our holders of
Common Stock receive per share of Common Stock in the transaction. If holders
of OP Units do not receive such consideration, we cannot engage in the
transaction unless 75% of the limited partners (other than the Company) vote to
approve the transaction. In addition, we have agreed in the Operating
Partnership Agreement that we will not consummate certain business combinations
in which we conducted a vote of the stockholders unless (i) a vote of holders of
OP Units is conducted and (ii) the matter would have been approved had holders
of OP Units been able to vote as stockholders on the transaction. The Operating
Partnership Agreement does not enable us or require us to engage in a business
combination requiring our stockholders' approval if our stockholders do not in
fact give the required approval. Rather, if our stockholders approve a business
combination that requires a vote of stockholders, we are therefore authorized
under the Charter to engage in such transaction but we are contractually
prohibited under the Operating Partnership Agreement from consummating the
transaction unless
. holders of OP Units (including the Company) vote on the matter;
. the Company votes the OP Units it holds in the Operating Partnership
(which at all times equals the number of shares of Common Stock outstanding)
in the same proportion as our stockholders voted on the matter at the
stockholder vote; and
. the result of such vote of the OP Unit holders (including the
proportionate vote of the Company's OP Units) is such that had such vote
been a vote of stockholders holding a number of shares equal to the
number of outstanding OP Units, the business combination would have been
approved by our stockholders.
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Under the Charter, the sale of all or substantially all of our assets or any
merger or consolidation of our Company requires the approval of 75% of the
Directors and holders of a majority of the outstanding Common Stock. No
approval of the stockholders is required for the sale of less than substantially
all of our assets.
Compensation, Fees and Distributions. The Company does not receive any
compensation for its services as general partner of the Operating Partnership.
As a partner in the Operating Partnership, however, the Company has a right to
allocations and distributions from the Operating Partnership in respect of the
OP Units and Preferred Units it may hold. In addition, the Operating
Partnership will reimburse us as general partner for all expenses incurred
relating to the ongoing operation of the Company.
Our directors and officers receive compensation for their services.
Liability of Investors. Under the Operating Partnership Agreement and
applicable Delaware law, the liability of the limited partners for the Operating
Partnership's debts and obligations is generally limited to the amount of their
investment in the Operating Partnership.
Under Delaware law, stockholders generally are not personally liable for the
debts or obligations of the Company.
Nature of Investment. The OP Units constitute equity interests entitling
each limited partner to his pro rata share of cash distributions made to
Unitholders, which may be made in the sole discretion of the General Partner.
The Common Stock constitutes equity interests in the Company. We are
entitled to receive our pro rata share of distributions made by the Operating
Partnership with respect to our interest in the Operating Partnership, and each
stockholder will be entitled to his or her pro rata share of any dividends paid
with respect to Common Stock. The dividends payable to the stockholders are not
fixed in amount and are only paid if, when and as declared by the Board of
Directors. In order to qualify as a REIT, we must distribute at least 95% of
our taxable income (excluding capital gains), and any taxable income (including
capital gains) not distributed will be subject to corporate income tax.
Potential Dilution of Rights. We, as general partner, are authorized, in
our sole discretion and without limited partner approval, to cause the Operating
Partnership to issue additional OP Units, Preferred Units and other equity
securities for any partnership purpose at any time to the limited partners or to
other persons on terms established by us as general partner.
The Board of Directors of the Company may in its discretion cause the
issuance of additional Common Stock or other equity securities with such powers,
preferences and rights as the Board of Directors may designate at the time. The
issuance of additional Common Stock or other equity securities may result in the
dilution of interests of the stockholders.
Liquidity. Subject to certain exceptions, or as otherwise set forth in an
agreement between the Operating Partnership and a limited partner, a limited
partner may transfer all or any portion of his or her OP Units without our
consent as general partner. However, except as we may otherwise agree in
advance, we, as general partner, in our sole and absolute discretion, may or may
not consent to the admission as a limited partner of any transferee of such OP
Units. If we, as general partner do not consent to the admission of a permitted
transferee, the transferee shall be considered an assignee of an economic
interest in the Operating Partnership but will not be a holder of OP Units for
any other purpose; as such the assignee will not be permitted to vote on any
affairs or issues on which a limited partner may vote.
There is no market for OP Units, and the OP Units are not registered under
the Securities Exchange Act of 1934 nor are they listed for trading on any
securities exchange. The issuance of the Redemption Shares in exchange for OP
Units has been registered under the Securities Act. The Common Stock (including
the Redemption Shares) is of a class that has been registered under the
Securities Exchange Act of 1934 and that is listed for trading on the New York
Stock Exchange.
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DESCRIPTION OF COMMON STOCK
This section describes the general terms and provisions of the shares of our
Common Stock that we may offer by this prospectus. The summary is not complete.
We have incorporated by reference our Charter and Bylaws as exhibits to this
Registration Statement. You should read our Charter and Bylaws before you
acquire any Common Stock.
General
As of January 19, 1999, our authorized Common Stock was 250,000,000 shares,
of which 63,527,819 shares were issued and outstanding. All shares of Common
Stock will, when issued, be duly authorized, fully paid and nonassessable. This
means that the full price for the outstanding Common Stock will have been paid
at issuance and that you, as a holder of such shares of Common Stock, will not
be later required to pay us any additional monies for such Common Stock.
Dividends
As a holder of Common Stock, you may receive dividends, out of our funds
that we can legally use to pay dividends, when and if such dividends are
declared by our Board of Directors.
Voting Rights
Subject to the provisions of our Charter regarding Excess Stock (as defined
below), as a holder of Common Stock you have the exclusive power to vote on all
matters presented to our stockholders, unless Delaware law or the Designating
Amendment for an outstanding series of Preferred Stock gives the holders of any
outstanding Preferred Stock the right to vote on certain matters or generally.
As a holder of Common Stock, you are entitled to one vote per share. There is
no cumulative voting in the election of our Directors which means that at any
meeting of our stockholders the holders of a majority of the outstanding shares
of Common Stock can cast all of their votes for each Director to be elected at
such meeting, thus electing all of the Directors then standing for election, and
the votes held by the holders of the remaining Common Stock will not be
sufficient to elect any Director.
Other Rights
Subject to the provisions of our Charter regarding Excess Stock, each share
of Common Stock has equal dividend, distribution, liquidation and other rights,
and has no preference, appraisal (except as provided by Delaware law) or
exchange rights.
As a holder of Common Stock, you have no conversion, sinking fund or
redemption rights, or preemptive rights to subscribe for any securities of our
Company.
We intend to furnish our stockholders with annual reports containing our
audited consolidated financial statements and an opinion thereon expressed by an
independent public accounting firm.
Pursuant to Delaware law, a merger or consolidation involving a Delaware
corporation, such as our Company, generally requires the approval of a majority
of the outstanding shares that are entitled to vote on such matters. However,
Delaware law provides that no vote of our stockholders is required to authorize
a merger in which we are the surviving corporation following the merger and:
. our Charter is not amended in any respect by the merger;
. each share of stock outstanding prior to the merger is to be an
identical share of stock after the effective date of the merger; and
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. any shares of common stock (together with any other securities
convertible into shares of common stock) to be issued or delivered under the
plan of merger aggregate to no more than 20% of the number of shares of
common stock outstanding immediately prior to the effective date of the
merger.
Transfer Agent
The transfer agent and registrar for the Common Stock is BankBoston, N.A.
Restrictions on Transfer
Ownership Limit. Among the requirements that we must meet to qualify as a
REIT under the Code is that not more than 50% in value of our outstanding
capital stock may be owned, directly or indirectly, by five or fewer individuals
(as defined in the federal income tax laws applicable to REITs) during the last
half of a taxable year (other than the first year). Additionally, such shares of
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. In order to protect us against
the risk of losing our status as a REIT and to otherwise protect us from the
consequences of a concentration of ownership among our stockholders, our
Charter, subject to certain exceptions, provides that no single person (which
includes any "group" of persons) (other than "Related Parties," as defined
below, and certain "Look-Through Entities," as defined below), may "beneficially
own" more than 6.6% (the "Ownership Limit") of the aggregate number of
outstanding shares of any class or series of capital stock. Under our Charter,
a person generally "beneficially owns" shares if (i) such person has direct
ownership of such shares, (ii) such person has indirect ownership of such shares
taking into account the constructive ownership rules of Section 544 of the Code,
as modified by Section 856(h)(1)(B) of the Code, or (iii) such person would be
deemed to "beneficially own" such shares pursuant to Rule 13d-3 under the
Exchange Act. These ownership limitations may have the effect of precluding
acquisition of control of our Company.
Related Party Ownership Limit. The effect of clause (iii) of the preceding
paragraph is that a person will generally be deemed, for purposes of the
Ownership Limit, to beneficially own any shares with respect to which such
person has the direct or indirect power to vote or cause their disposition.
Notwithstanding the above, a Related Party will not be deemed to beneficially
own shares by virtue of clause (iii) of the preceding paragraph and a "group" of
which a Related Party is a member will generally not have attributed to the
group's beneficial ownership any shares beneficially owned by such Related
Party. Each of Mr. Zuckerman and his respective heirs, legatees and devises,
and any other person whose beneficial ownership of shares of Common Stock would
be attributed under the Code to Mr. Zuckerman, is a "Related Party," and such
persons are subject to a "Related Party Ownership Limit" of 15%, such that none
of such persons shall be deemed to beneficially own shares in excess of the
Ownership Limit unless, in the aggregate, such persons own shares of any class
or series of capital stock in excess of 15% of the number of shares of such
class or series outstanding. A similar Related Party Ownership Limit is applied
to Mr. Linde and persons with a similar relationship to Mr. Linde, all of whom
are also Related Parties under our Charter.
Look-Through Ownership Limit. Our Charter provides that pension plans
described in Section 401(a) of the Code and mutual funds registered under the
Investment Company Act of 1940 ("Look-Through Entities") are subject to a 15%
"Look-Through Ownership Limit." Pension plans and mutual funds are among the
entities that are not treated as holders of stock under the Five or Fewer
Requirement and the beneficial owners of such entities will be counted as
holders for this purpose.
Waiver of Ownership Limits by Our Board of Directors. The foregoing
restrictions on transferability and ownership will not apply if our Board of
Directors determines that it is no longer in the best interests of our Company
to attempt to qualify, or to continue to qualify, as a REIT. Our Board of
Directors may, in its sole discretion, waive the Ownership Limit, the Look-
Through Ownership Limit and the Related Party Ownership Limit in any particular
instance if evidence satisfactory to our Board of Directors is presented that
the waiver of the Limit will not jeopardize our REIT status and our Board of
Directors otherwise decides that such action is in our best interest.
Transfers in Violation of Our Transfer Restrictions Will Be Null and Void.
Any purported transfer of shares of capital stock or of any security convertible
into shares of capital stock that would create a direct or indirect
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ownership of shares of capital stock in excess of the Ownership Limit, the Look-
Through Ownership Limit or the Related Party Ownership Limit, as applicable, or
that would result in our disqualification as a REIT, including any transfer that
results in the shares of capital stock being owned by fewer than 100 persons or
results in our Company being "closely held" within the meaning of Section 856(h)
of the Code or results in our Company constructively owning 10% or more of the
ownership interests in a tenant of ours within the meaning of Section 318 of the
Code as modified by Section 856(d)(5) of the Code, shall be null and void and of
no force or effect with respect to the purported transferee (the "Prohibited
Transferee") as to that number of shares in excess of the applicable limit. The
Prohibited Transferee will acquire no right or interest (or, in the case of any
event other than a purported transfer, the person or entity holding record title
to any such shares in excess of the applicable limit (the "Prohibited Owner")
will cease to own any right or interest) in such excess shares. Any such excess
shares described above will be converted automatically into an equal number of
shares of Excess Stock (the "Excess Shares"). The Excess Shares will be
transferred automatically, by operation of law, to a trust, the beneficiary of
which will be a qualified charitable organization selected by us (the
"Beneficiary"). Such automatic transfer will be deemed to be effective as of the
close of business on the Trading Day (as defined in our Charter) prior to the
date of such violative transfer. As soon as practical after the transfer of
shares to the trust, the trustee of the trust (who shall be designated by us and
be unaffiliated with us and any Prohibited Transferee or Prohibited Owner) will
be required to sell such Excess Shares to a person or entity who could own such
shares without violating the applicable limit, and distribute to the Prohibited
Transferee an amount equal to the lesser of the price paid by the Prohibited
Transferee for such Excess Shares or the sales proceeds received by the trust
for such Excess Shares. In the case of any Excess Shares resulting from any
event other than a transfer, or from a transfer for no consideration (such as a
gift), the trustee will be required to sell such Excess Shares to a qualified
person or entity and distribute to the Prohibited Owner an amount equal to the
lesser of the fair market value of such Excess Shares as of the date of such
event or the sales proceeds received by the trust for such Excess Shares. In
either case, any proceeds in excess of the amount distributable to the
Prohibited Transferee or Prohibited Owner, as applicable, will be distributed to
the Beneficiary. Prior to a sale of any such Excess Shares by the trust, the
trustee will be entitled to receive in trust for the Beneficiary all dividends
and other distributions paid by us with respect to such Excess Shares.
In addition, shares of stock of our Company held in the trust will be deemed
to have been offered for sale to our Company, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the trust (or, in the case of a devise or gift, the
market price at the time of such devise or gift) and (ii) the market price on
the date we, or our designee, accepts such offer. We will have the right to
accept such offer for a period of 90 days. Upon such a sale to us, the interest
of the Beneficiary in the shares sold will terminate and the trustee shall
distribute the net proceeds of the sale to the Prohibited Transferee (or, in the
case of a devise or gift, the Prohibited Owner).
These restrictions do not preclude settlement of transactions through the
NYSE.
Disclosure of Stock Ownership by Our Stockholders. Our Charter provides
that our stockholders are required upon demand to disclose to us in writing any
information with respect to their direct, indirect and constructive ownership of
capital stock as our Board of Directors deems necessary to comply with the
provisions of the Code applicable to REITs, to comply with the requirements of
any taxing authority or governmental agency or to determine any such compliance.
Shareholder Rights Agreement
On June 11, 1997, the Board of Directors adopted a Shareholder Rights
Agreement (the "Rights Agreement"). The adoption of the Rights Agreement could
make it more difficult for a third party to acquire, or could discourage a third
party from acquiring, the Company or a large block of the Company's Common
Stock.
In accordance with the Rights Agreement, one Preferred Stock Purchase Right
(a "Right") is attached to each outstanding share of Common Stock, and one Right
will be attached to each share of Common Stock issued before the Distribution
Date (as defined below). Under certain conditions, each Right entitles the
registered holder to purchase from the Company one one-thousandth (1/1000) of a
share (a "Series E Unit") of Series E Junior Participating Cumulative Preferred
Stock, par value $.01 per share, of the Company (the "Series E Preferred
Stock"), at a cash exercise price of $100.00 per Series E Unit (the "Exercise
Price"), subject to adjustment. The
26
<PAGE>
Company has designated 200,000 shares of Series E Preferred Stock and has
reserved such shares for issuance under the Rights Agreement.
The Rights are not exercisable until the Distribution Date and will expire
on June 11, 2007, unless previously redeemed or exchanged by the Company as
described below. Until a Right is exercised, the holder will have no rights as
a stockholder of the Company (beyond those as an existing stockholder),
including the right to vote or to receive dividends. While the distribution of
the Rights will not be taxable to stockholders or to the Company, stockholders
may, depending upon the circumstances, recognize taxable income in the event
that the Rights become exercisable for Series E Units, other securities of the
Company, other consideration or for common stock of an acquiring company.
Initially, the Rights are attached to and trade with the outstanding shares
of Common Stock. The Rights will separate from the Common Stock and will become
exercisable upon the earlier of the close of business on:
(i) the tenth calendar day following the first public announcement that a
person or a group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of more than 15% of the sum
of the outstanding shares of Common Stock and Excess Stock ("Common
Shares") (the date of said announcement being referred to as the "Stock
Acquisition Date"); or
(ii) the tenth business day (or such other calendar day as the Board of
Directors may determine) following the commencement of a tender offer
or exchange offer that would result upon its consummation in a person
or group becoming the beneficial owner of more than 15% of the
outstanding Common Shares (the earlier of such dates being herein
referred to as the "Distribution Date").
Under the Rights Agreement, shares of Common Stock that may be issued in
exchange for outstanding OP Units are not included in the definition of
beneficial ownership. Also, a person who became a partner of the Operating
Partnership at the time of the Initial Offering will not be an Acquiring Person
if such person does not acquire a greater percentage of (A) the sum of (i) the
outstanding shares of Common Stock plus (ii) the outstanding OP Units held by
persons other than the Company than (B) the percentage that such person had at
the completion of the Initial Offering. Furthermore, no "group" of which a
Related Party is a member will be deemed to beneficially own the Common Shares
beneficially owned by such Related Party.
In the event that a Stock Acquisition Date occurs, proper provision will be
made so that each holder of a Right (other than an Acquiring Person or its
associates or affiliates, whose Rights shall become null and void) will
thereafter have the right to receive upon exercise that number of Series E Units
of Series E Preferred Stock having a market value of two times the exercise
price of the Right (such right being referred to as the "Subscription Right").
In addition, if at anytime following the Stock Acquisition Date the Company
engages in certain business combinations with an acquiring company, each holder
of a Right shall have the right to receive, upon exercise, common stock of the
acquiring company having a market value equal to two times the exercise price of
the Right (such right being referred to as the "Merger Right") if:
(i) the Company consolidates with, or merges with and into, any other
person, and the Company is not the continuing or surviving
corporation;
(ii) any person consolidates with the Company, or merges with and into the
Company and the Company is the continuing or surviving corporation of
such merger and, in connection with such merger, all or part of the
shares of Common Stock are changed into or exchanged for stock or
other securities of any other person or cash or any other property; or
(iii) 50% or more of the Company's assets or earning power is sold,
mortgaged or otherwise transferred.
The holder of a Right will continue to have the Merger Right whether or not such
holder has exercised the Subscription Right.
27
<PAGE>
The Exercise Price payable, and the number of Series E Units of Series E
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution.
At any time after the Stock Acquisition Date, the Board of Directors may, at
its option, exchange all or any part of the then outstanding and exercisable
Rights for shares of Common Stock or Units of Series E Preferred Stock at an
exchange ratio of one share of Common Stock or one Unit of Series E Preferred
Stock per Right. However, the Board of Directors generally will not be empowered
to effect such exchange at any time after any person becomes the beneficial
owner of 50% or more of the Common Stock of the Company.
The Rights may be redeemed in whole, but not in part, at a price of $0.001
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors only until the
earlier of (i) the close of business on the tenth calendar day after the Stock
Acquisition Date, or (ii) the expiration date of the Rights Agreement.
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and thereafter the only right of the holders
of Rights will be to receive the redemption price.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), (a) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (b) new Common Stock certificates issued after the Record Date
will contain a notation incorporating the Shareholder Rights Agreement by
reference, and (c) the surrender for transfer of any certificates for Common
Stock will also constitute the transfer of the Rights associated with the Common
Stock represented by such certificate.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights. Except as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
The Board of Directors in its sole discretion may amend the Rights Agreement
until the Distribution Date. After the Distribution Date, the Board of Directors
may, subject to certain limitations set forth in the Rights Agreement, amend the
Rights Agreement only to cure any ambiguity, defect or inconsistency, to shorten
or lengthen any time period, or to make changes that do not adversely affect the
interests of Rights holders (excluding the interests of an Acquiring Person or
its associates or affiliates).
A copy of the Rights Agreement has been filed with the SEC. A copy of the
Rights Agreement is also available from the Company upon written request. The
foregoing description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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<PAGE>
CERTAIN PROVISIONS OF DELAWARE LAW AND
OUR CHARTER AND BYLAWS
The Company's Charter and Bylaws contain certain provisions that could make
more difficult an acquisition of the Company by means of a tender offer, a proxy
contest or otherwise. These provisions are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of the Company to negotiate first with our
Board of Directors. We believe that the benefits of these provisions outweigh
the potential disadvantages of discouraging such proposals because, among other
things, negotiation of such proposals might result in an improvement of their
terms. The description set forth below is intended as a summary only and is
qualified in its entirety by reference to our Charter and Bylaws, which have
been filed with the SEC. See also "Description of Common Stock -- Restrictions
on Transfers" beginning on page 25.
Amendment of Our Charter and Bylaws
Amendments to the Charter must be approved by the Board of Directors and
generally by the vote of a majority of the votes entitled to be cast at a
meeting of stockholders. However, amendments dealing with certain articles of
our Charter (for example, articles relating to stockholder action; the powers,
election of, removal of and classification of directors; limitation of
liability; and amendment of our Bylaws or Charter) require the affirmative vote
of not less than 75% of the outstanding votes entitled to be cast on the matter.
Unless otherwise required by law, our Board of Directors may amend our Bylaws by
the affirmative vote of a majority of the directors then in office. Our Bylaws
may also be amended by our stockholders, at an annual meeting or at a special
meeting called for such purpose, by the affirmative vote of at least seventy-
five percent of the votes entitled to be cast on the matter; provided, that if
our Board of Directors recommends that our stockholders approve such amendment
at such meeting, such amendment will require the affirmative vote of only a
majority of the shares present at such meeting and entitled to vote.
Dissolution of our Company
The DGCL and our Charter permit our Company to be dissolved by (i) the
affirmative vote of 75% of the directors then in office declaring such
dissolution to be advisable and directing that the proposed dissolution be
submitted for consideration at an annual or special meeting of our stockholders,
and (ii) upon proper notice, stockholder approval by the affirmative vote of a
majority of the votes entitled to be cast on the matter.
Meetings of Stockholders
Under our Bylaws, we will hold annual meetings of our stockholders at such
date and time as determined by our Board of Directors, the Chairman of our Board
or our President. Our Bylaws establish an advance notice procedure for our
stockholders to make nominations of candidates for directors or bring other
business before an annual meeting of stockholders. Special meetings of our
stockholders may be called only by a majority of the Directors then in office
and only matters set forth in the notice of the meeting may be considered and
acted upon at such a meeting.
Our Board of Directors
Our Charter provides that our Board of Directors will initially consist of
five directors and thereafter the number of directors of our Company may be
established by our Board of Directors. However, the number of directors may not
be fewer than the minimum number required by the DGCL nor more than eleven.
Subject to the rights, if any, of the holders of any series of Preferred Stock
to elect directors and to fill vacancies in our Board of Directors relating
thereto, any vacancy will be filled, including any vacancy created by an
increase in the number of directors, at any regular meeting or at any special
meeting called for the purpose, by a majority of the remaining directors.
Pursuant to the terms of our Charter, the directors are divided into three
classes. As the term of each class expires, directors in that class will be
elected for a term of three years and until their successors are duly elected
and qualified. The use of a classified board of directors may render more
difficult a change in control
29
<PAGE>
of our Company or removal of incumbent management. We believe, however, that
classification of our Board of Directors will help to assure the continuity and
stability of our business strategies and policies.
Our Charter provides that the affirmative vote of more than 75% of the
directors then in office is required to approve certain transactions or actions
of our Board of Directors, including a change of control (as defined) of our
Company or of the Operating Partnership, any amendment to the Operating
Partnership Agreement, any waiver of the limitations on ownership contained in
our Charter, certain issuances of equity securities by our Company or
termination of our status as a REIT.
Shareholder Rights Plan and Ownership Limitations
We have adopted a Shareholder Rights Agreement. In addition, our Charter
contains provisions that limit the ownership by any person of shares of any
class or series of capital stock of our Company. See "Description of Common
Stock--Shareholder Rights Agreement" beginning on page 26 and "--Restrictions on
Transfer" beginning on page 25).
Limitation of Liability and Indemnification
Our Charter generally limits the liability of our directors to our Company
to the fullest extent permitted from time to time by Delaware law. The DGCL
permits, but does not require, a corporation to indemnify its directors,
officers, employees or agents and expressly provides that the indemnification
provided for under the DGCL shall not be deemed exclusive of any indemnification
right under any bylaw, vote of stockholders or disinterested directors, or
otherwise. The DGCL permits indemnification against expenses and certain other
liabilities arising out of legal actions brought or threatened against such
persons for their conduct on behalf of a corporation, provided that each such
person acted in good faith and in a manner that he or she reasonably believed
was in or not opposed to such corporation's best interests and, in the case of a
criminal proceeding, provided such person had no reasonable cause to believe his
or her conduct was unlawful. The DGCL does not allow indemnification of
directors in the case of an action by or in the right of a corporation
(including stockholder derivative suits) unless the directors successfully
defend the action or indemnification is ordered by the court.
Our Bylaws provide that our directors and officers will be, and, in the
discretion of our Board of Directors, non-officer employees may be, indemnified
by our Company to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
actually and reasonably incurred in connection with service for or on behalf of
our Company. Our Bylaws also provide that the right of directors and officers
to indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any bylaw, agreement, vote
of stockholders, or otherwise. Our Charter contains a provision permitted by
Delaware law that generally eliminates the personal liability of directors for
monetary damages for breaches of their fiduciary duty, including breaches
involving negligence or gross negligence in business combinations, unless the
director has breached his or her duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or a knowing violation of law, paid a dividend
or approved a stock repurchase in violation of the DGCL or obtained an improper
personal benefit. This provision does not alter a director's liability under
the federal securities laws. In addition, this provision does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling our Company
pursuant to the foregoing provisions, we have been informed that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Business Combinations
We are subject to the provisions of section 203 ("Section 203") of the DGCL.
Section 203 provides, with certain exceptions, that a Delaware corporation may
not engage in any of a broad range of business combinations with a person or
affiliate, or associate of such person, who is an "interested stockholder" for a
period of three years from the date that such person became an interested
stockholder unless:
30
<PAGE>
. the transaction resulting in a person becoming an interested
stockholder, or the business combination, was approved by the board of
directors of the corporation before the consummation of such transaction;
. the interested stockholder owned 85% or more of the outstanding voting
stock of the corporation immediately after the transaction in which it
became an interested stockholder (excluding shares owned by persons who are
both officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or
. on or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and
by the holders of at least 66 2/3% of the corporation's outstanding voting
stock at an annual or special meeting, excluding shares owned by the
interested stockholder.
Under Section 203, an "interested stockholder" is defined (with certain
exceptions) as any person who, together with affiliates and associates, owns or
within the prior three years did own, 15% or more of the corporation's
outstanding voting stock.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors
and executive officers. The indemnification agreements require, among other
things, that we indemnify our directors and executive officers to the fullest
extent permitted by law and advance to our directors and executive officers all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Under these agreements, we must also
indemnify and advance all expenses incurred by our directors and executive
officers seeking to enforce their rights under the indemnification agreements
and may cover our directors and executive officers under our directors' and
officers' liability insurance. Although the form of indemnification agreement
offers substantially the same scope of coverage afforded by law, it provides
greater assurance to our directors and executive officers that indemnification
will be available, because, as a contract, it cannot be modified unilaterally in
the future by our Board of Directors or stockholders to eliminate the rights it
provides.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations is based
on current law, is for general information only, and is not tax advice. This
discussion does not purport to address all aspects of taxation that may be
relevant to particular stockholders in light of their personal investment or tax
circumstances, or to certain types of stockholders (including insurance
companies, tax-exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the United
States) subject to special treatment under the federal income tax laws.
We intend to operate in a manner that will enable us to qualify as a REIT
under the Internal Revenue Code of 1986, as amended (the "Code"). Although we
believe that we are organized and operate in such a manner, we cannot assure you
that we qualify or will remain qualified as a REIT. Qualification as a REIT
involves the application of highly technical and complex Code provisions for
which there are only limited judicial and administrative interpretations. The
determination of various factual matters and circumstances not entirely within
our control may affect our ability to qualify as a REIT. If we fail to qualify
as a REIT, we will be subject to federal income tax (including any applicable
alternative minimum tax) on all of our taxable income at regular corporate rates
(i.e., we will no longer be able, in general, to deduct from our taxable income
----
dividends that we pay to our stockholders). In addition, unless entitled to
relief under certain statutory provisions, we will be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. The additional tax would significantly reduce the cash
flow available for distribution to stockholders. This Prospectus does not
address the taxation of Boston Properties, Inc. or the impact on Boston
Properties, Inc. of its election to be taxed as a REIT. The discussion set
forth below assumes that we qualify as a REIT under the Code.
Taxation of Taxable Domestic Stockholders
Dividends and Other Distributions. As long as we qualify as a REIT,
distributions made to our taxable domestic stockholders out of current or
accumulated earnings and profits (and not designated as capital gain dividends)
will be taken into account by them as ordinary income and will not be eligible
for the dividends received deduction for corporations. For purposes of
determining whether distributions on the Common Stock are out of current or
accumulated earnings and profits, our earnings and profits will be allocated
first to outstanding Preferred Stock and then to outstanding Common Stock.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed our actual net capital
gain for the taxable year) without regard to the period for which the holder has
held its Common Stock. However, corporate holders may be required to treat up
to 20% of certain capital gain dividends as ordinary income. Distributions in
excess of current and accumulated earnings and profits will not be taxable to a
holder to the extent that they do not exceed the adjusted tax basis of the
holder's shares, but rather will reduce the adjusted basis of such shares. To
the extent that such distributions exceed the adjusted basis of a holder's
shares they will be included in income as long-term gain (or short-term capital
gain if the shares have been held for one year or less) assuming the shares are
a capital asset in the hands of the holder. In addition, any dividend declared
by Boston Properties, Inc. in October, November or December of any year payable
to a stockholder of record on a specified date in any such month shall be
treated as both paid by Boston Properties, Inc. and received by the stockholder
on December 31 of such year, provided that the dividend is actually paid by us
during January of the following calendar year. Stockholders may not include in
their individual income tax returns any of our net operating losses or capital
losses.
Sale of Common Stock. On the sale of shares of the Common Stock, gain or
loss will be recognized by the holder in an amount equal to the difference
between (i) the amount of cash and fair market value of any property received on
such sale, and (ii) the holder's adjusted basis in the Common Stock. Such gain
or loss will be capital gain or loss if the shares of the Common Stock are held
as capital assets, and will be long-term gain or loss if such shares are held
for more than one year. In general, any loss upon a sale or exchange of shares
by a holder who has held such shares for six months or less (after applying
certain holding period rules), will be treated as a long-term capital loss to
the extent of distributions from Boston Properties, Inc. required to be treated
by such holder as long-term capital gain.
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Backup Withholding
We will report to our domestic stockholders and the Internal Revenue Service
(the "IRS") the amount of dividends paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless such holder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact, or
(b) provides a taxpayer identification number, certifies that the holder is not
subject to backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide us with his correct taxpayer identification number may also be subject
to penalties imposed by the IRS. Any amount paid as backup withholding will be
creditable against the stockholder's income tax liability.
Taxation of Certain Tax-exempt Stockholders
Generally, a tax-exempt investor that is exempt from tax on its investment
income, such as an individual retirement account ("IRA") or a Section 401(k)
plan that holds the Common Stock as an investment will not be subject to tax on
dividends paid by Boston Properties, Inc. However, if such tax-exempt investor
is treated as having purchased its Common Stock with borrowed funds then some or
all of its dividends from the Common Stock will be subject to tax. In addition,
under some circumstances certain pension plans (including Section 401(k) plans
but not, for example, IRAs) that own more than 10% (by value) of our outstanding
stock, including Common Stock, could be subject to tax on a portion of their
Common Stock dividends even if their Common Stock is held for investment and is
not treated as acquired with borrowed funds.
Other Tax Consequences
Boston Properties, Inc. and its stockholders may be subject to state or
local taxation in various state or local jurisdictions, including those in which
it or they own property, transact business or reside. The state and local tax
treatment of Boston Properties, Inc. and its stockholders may not conform to the
federal income tax consequences discussed above. Consequently, prospective
stockholders should consult their own tax advisors regarding the effect of state
and local tax laws on an investment in Boston Properties, Inc.
33
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NO PROCEEDS TO THE COMPANY
We will not receive any of the proceeds of the sale of the Redemption Shares
offered hereby, although we will acquire OP Units in the Operating Partnership
in exchange for any Redemption Shares we issue. We are paying the fees and
expenses associated with registering the Redemption Shares.
PLAN OF DISTRIBUTION
This Prospectus relates to the possible issuance of the Redemption Shares
if, and to the extent that, holders of 1,471,456 OP Units issued upon the
contribution of certain properties and assets tender such OP Units for
redemption and we elect to acquire such tendered OP Units for Common Stock.
We have registered the offer and issuance of the Redemption Shares pursuant
to our obligations under the Registration Rights Agreement, but registration of
such shares does not necessarily mean that all or any portion of the OP Units
will be presented for redemption or that we will issue Redemption Shares. We
will not receive any proceeds from the issuance of Redemption Shares to
Unitholders, although we will acquire OP Units in exchange for Redemption
Shares.
We are paying the fees and expenses associated with registering the
redemption shares.
LEGAL MATTERS
The legality of the Redemption Shares will be passed upon for our Company by
Goodwin, Procter & Hoar LLP. Gilbert G. Menna, the sole shareholder of Gilbert
G. Menna, P.C., a partner of Goodwin, Procter & Hoar LLP, serves as an Assistant
Secretary of our Company. Certain partners of Goodwin, Procter & Hoar LLP or
their affiliates, together with Mr. Menna, own approximately 20,000 shares of
Common Stock. Goodwin, Procter & Hoar LLP occupies approximately 26,000 square
feet at 599 Lexington Avenue, New York under a lease that expires in 2002.
EXPERTS
The financial statements and schedules for the year ended December 31, 1997
referred to and incorporated by reference in this prospectus or elsewhere in the
Registration Statement of which this prospectus is a part have been audited by
PricewaterhouseCoopers LLP, independent accountants, and are incorporated herein
in reliance upon the authority of said firm as experts in accounting and
auditing.
34
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==================================================
We have not authorized anyone else to give any
information or to make any representations not
contained or incorporated by reference in this
prospectus in connection with the offering covered
by this prospectus. If given or made, such
information or representations must not be relied
upon as having been authorized by the Company.
This prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the
common stock, in any jurisdiction where, or to any
person to whom, it is unlawful to make any such
offer or solicitation. Neither the delivery of
this prospectus nor any offer or sale made
hereunder shall, under any circumstances, create
an implication that there has not been any change
in the facts set forth in this prospectus or in
the affairs of the Company since the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................... 2
Incorporation of Certain
Documents by Reference................ 2
Risk Factors............................ 4
The Company............................. 15
Description of Units and
Redemption of Units................... 17
Description of Common Stock............. 24
Certain Provisions of Delaware Law and
Our Charter and Bylaws.................. 29
Federal Income Tax Considerations....... 32
No Proceeds to the Company.............. 34
Plan of Distribution.................... 34
Legal Matters........................... 34
Experts................................. 34
</TABLE>
==================================================
==================================================
1,471,456 Shares
Boston Properties, Inc.
Common Stock
--------------
Prospectus
--------------
January __, 1999
==================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated fees and expenses payable by
our Company in connection with the issuance and distribution of the Securities
registered hereby (all amounts except the registration fee are estimated):
<TABLE>
<S> <C>
Registration fee.................................. $12,848.73
Printing and duplicating expenses................. $ 5,000.00
Legal fees and expenses........................... $10,000.00
Accounting fees and expenses...................... $ 5,000.00
Blue sky fees and expenses........................ -0-
Trustee Fees...................................... -0-
Miscellaneous..................................... -0-
Total............................................. $32,848.73
----------
</TABLE>
Item 15. Indemnification of Directors and Officers.
Our Charter and Bylaws provide certain limitations on the liability of our
directors and officers for monetary damages to our Company. Our Charter and
Bylaws obligate our Company to indemnify its directors and officers, and permit
our Company to indemnify its employees and other agents, against certain
liabilities incurred in connection with their service in such capacities. These
provisions could reduce the legal remedies available to our Company and our
stockholders against these individuals.
Our Charter limits the liability of our directors and officers to our
Company to the fullest extent permitted from time to time by the DGCL. The DGCL
permits, but does not require, a corporation to indemnify its directors,
officers, employees or agents and expressly provides that the indemnification
provided for under the DGCL shall not be deemed exclusive of any indemnification
right under any bylaw, vote of stockholders or disinterested directors, or
otherwise. The DGCL permits indemnification against expenses and certain other
liabilities arising out of legal actions brought or threatened against such
persons for their conduct on behalf of the corporation, provided that each such
person acted in good faith and in a manner that he reasonably believed was in or
not opposed to the corporation's best interests and in the case of a criminal
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The DGCL does not allow indemnification of directors in the case of an action by
or in the right of the corporation (including stockholder derivative suits)
unless the directors successfully defend the action or indemnification is
ordered by the court.
Our Charter contains a provision permitted by Delaware law that generally
eliminates the personal liability of directors for monetary damages for breaches
of their fiduciary duty, including breaches involving negligence or gross
negligence in business combinations, unless the director has breached his or her
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or a knowing violation of law, paid a dividend or approved a stock repurchase in
violation of the DGCL or obtained an improper personal benefit. The provision
does not alter a director's liability under the federal securities laws. In
addition, this provision does not affect the availability of equitable remedies,
such as an injunction or rescission, for breach of fiduciary duty.
Our Bylaws provide that our directors and officers will be, and, in the
discretion of our Board of Directors, non-officer employees may be, indemnified
by us to the fullest extent authorized by Delaware law, as it now exists or may
in the future be amended, against all expenses and liabilities actually and
reasonably incurred in connection with service for or on behalf of our Company.
Our Bylaws also provide that the right of directors and officers to
indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any bylaw, agreement, vote
of stockholders, or otherwise.
We have entered into indemnification agreements with each of our directors
and executive officers. The indemnification agreements require, among other
matters, that we indemnify our directors and officers to the fullest extent
permitted by law and advance to the directors and officers all related expenses,
subject to reimbursement if it is subsequently determined that indemnification
is not permitted. Under these agreements, we must also indemnify and advance
all expenses incurred by directors and officers seeking to enforce their rights
under the indemnification agreements and may cover directors and officers under
our directors' and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by law, it provides additional assurance to directors and officers that
indemnification will be available because, as a contract, it cannot be modified
unilaterally in the future by our Board of Directors or our stockholders to
eliminate the rights it provides. It is the position of the SEC that
indemnification of directors and officers for liabilities under the Securities
Act is against public policy and unenforceable pursuant to Section 14 of the
Securities Act.
Item 16. Exhibits.
4.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company's Registration Statement
on Form S-11 (File No. 333-25279)).
4.2 Amended and Restated Bylaws of the Company (incorporated herein by
reference to the Company's Registration Statement on Form S-11 (File No.
333-25279)).
4.3 Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership (incorporated herein by reference to the Company's
Current Report on Form 8-K dated June 30, 1998, filed with the Commission
on July 15, 1998).
II-1
<PAGE>
4.4 Shareholder Rights Agreement dated as of June 16, 1997 between the
Company and BankBoston, N.A., as Rights Agent (incorporated herein by
reference to the Company's Registration Statement on Form S-11 (File No.
333-25279).
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
Securities being registered.
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax matters.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Public Accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included as part of
Exhibits 5.1 and 8.1 hereto).
24.1 Powers of Attorney (included on signature page of Registration
Statement as filed).
_____________________
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any acts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
-------- -------
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
undersigned registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under
Item 15 above, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
respective registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, such registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set
forth the results of the subscription offer, the transactions by the
underwriters during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of any
subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set forth on
the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Boston
Properties, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, the Commonwealth of Massachusetts, on
this 19th day of January, 1999.
BOSTON PROPERTIES, INC.
By: /s/ Edward H. Linde
------------------------------
Name: Edward H. Linde
Title: President and Chief
Executive Officer
KNOW ALL BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Mortimer B. Zuckerman, Edward H. Linde
and David G. Gaw as such person's true and lawful attorney-in-fact and agent
with full power of substitution and resubstitution, for such person in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
(or any Registration Statement for the same offering that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to
file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that any said attorney-in-fact
and agent, or any substitute or substitutes of any of them, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Mortimer B. Zuckerman Chairman of the Board January 19, 1999
- -------------------------------- of Directors
Mortimer B. Zuckerman
/s/ Edward H. Linde President and Chief January 19, 1999
- -------------------------------- Executive Officer,
Edward H. Linde Director (Principal
Executive Officer)
/s/ David G. Gaw Chief Financial Officer January 19, 1999
- -------------------------------- (Principal Financial
David G. Gaw Officer and Principal
Accounting Officer)
/s/ Alan J. Patricof Director January 19, 1999
- --------------------------------
Alan J. Patricof
/s/ Ivan G. Seidenberg Director January 19, 1999
- --------------------------------
Ivan G. Seidenberg
/s/ Martin Turchin Director January 19, 1999
- --------------------------------
Martin Turchin
/s/ Alan B. Landis Director January 19, 1999
- --------------------------------
Alan B. Landis
/s/ Richard E. Salomon Director January 19, 1999
- --------------------------------
Richard E. Salomon
II-3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
4.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company's Registration
Statement on Form S-11 (File No. 333-25279)).
4.2 Amended and Restated Bylaws of the Company (incorporated herein by
reference to the Company's Registration Statement on Form S-11
(File No. 333-25279)).
4.3 Second Amended and Restated Agreement of Limited Partnership of the
Operating Partnership (incorporated herein by reference to the
Company's Current Report on Form 8-K dated June 30, 1998, filed with
the Commission on July 15, 1998).
4.4 Shareholder Rights Agreement dated as of June 16, 1997 between the
Company and BankBoston, N.A., as Rights Agent (incorporated herein by
reference to the Company's Registration Statement on Form S-11
(File No. 333-25279).
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
Securities being registered.
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax matters.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Public Accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included as part of
Exhibits 5.1 and 8.1 hereto).
24.1 Powers of Attorney (included on signature page of Registration
Statement as filed).
__________________________
<PAGE>
Exhibit 5.1
-----------
GOODWIN, PROCTER & HOAR LLP
COUNSELORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
January 19, 1999
Boston Properties, Inc.
8 Arlington Street
Boston, MA 02116
Ladies and Gentlemen:
This opinion is furnished in connection with the registration on Form S-3
(the "Registration Statement") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), of the issuance of up to 1,471,456 shares (the
"Redemption Shares") of common stock, par value $.01 per share ("Common Stock"),
of Boston Properties Inc. (the "Company"). The Redemption Shares may be issued
by the Company if and to the extent that common units of limited partnership
interest ("Redemption Units") in Boston Properties Limited Partnership, a
Delaware limited partnership (the "Operating Partnership"), that were originally
issued to John F. Griffin, George G. Mulligan, Barbara Huppe, Barry M.
Fitzpatrick, David E. Schutt, Charles A. Salcetti, Nancy M. Griffin, Caroline A.
Griffith, David M. Whitmer, George H. Beuchert, III, Cynthia A. Benedetti, The
Donald N. Coupard Revocable Trust, The Patricia E. Coupard Revocable Trust,
Tech Park 270 Phase III Limited Partnership, Tech Park 270 Limited Partnership,
Decoverly Two Limited Partnership, Reston Town Center Office Park Phase One
Limited Partnership, MGA Virginia 85-1 Limited Partnership, MGA Virginia 86-2
Limited Partnership, Decoverly Four Limited Partnership, Decoverly Five Limited
Partnership, Decoverly Six Limited Partnership, Decoverly Seven Limited
Partnership, Reston Corporate Center Limited Partnership, and MGA Virginia 96-1
Limited Partnership, in connection with the acquisition of properties in
Maryland and Virginia on February 1, 1998, are presented to the Operating
Partnership for redemption (which may occur at any time on or after February 11,
1999) and the Company exercises its right under the partnership agreement of the
Operating Partnership to acquire such Redemption Units in exchange for shares of
Common Stock.
In connection with rendering this opinion, we have examined the Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws of the
Company, each as amended to date; such records of the corporate proceedings of
the Company as we deemed material; and such other certificates, receipts,
records and documents as we considered necessary for the purposes of this
opinion. In our examination, we have assumed the
<PAGE>
Boston Properties, Inc.
January 19, 1999
Page 2
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as certified, photostatic or
facsimile copies, the authenticity of the originals of such copies and the
authenticity of telephonic confirmations of public officials and others. As to
facts material to our opinion, we have relied upon certificates or telephonic
confirmations of public officials and certificates, documents, statements and
other information of the Company or representatives or officers thereof.
We are attorneys admitted to practice in The Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America, the laws of The Commonwealth of
Massachusetts, and the Delaware General Corporation Law.
Based upon the foregoing, we are of the opinion that, when the Redemption
Shares have been issued in exchange for Redemption Units tendered to the
Operating Partnership for redemption as contemplated by the limited partnership
agreement of the Operating Partnership, such Redemption Shares will be validly
issued, fully paid and nonassessable.
The foregoing assumes that all requisite steps were taken to comply with
the requirements of the Securities Act and applicable requirements of state laws
regulating the offer and sale of securities.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this opinion
under the heading "Legal Matters" in the Prospectus which is a part of such
Registration Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
Exhibit 8.1
-----------
GOODWIN, PROCTER & HOAR LLP
COUNSELORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
January 19, 1999
Boston Properties, Inc.
8 Arlington Street
Boston, Massachusetts 02116
Ladies and Gentlemen:
We have acted as counsel to Boston Properties, Inc., a Delaware corporation
(the "Company") in connection with the preparation of a registration statement
(the "Registration Statement") filed with the Securities and Exchange Commission
on Form S-3, as amended, relating to the issuance of up to 1,471,456 shares (the
"Redemption Shares") of common stock, par value $.01 per share ("Common Stock"),
of the Company. The Redemption Shares may be issued by the Company if and to
the extent that common units of limited partnership interest ("Redemption
Units") in Boston Properties Limited Partnership, a Delaware limited partnership
(the "Operating Partnership"), that were originally issued to John F. Griffin,
George G. Mulligan, Barbara Huppe, Barry M. Fitzpatrick, David E. Schutt,
Charles A. Salcetti, Nancy M. Griffin, Caroline A. Griffith, David M. Whitmer,
George H. Beuchert, III, Cynthia A. Benedetti, The Donald N. Coupard Revocable
Trust, The Patricia E. Coupard Revocable Trust, Tech Park 270 Phase III Limited
Partnership, Tech Park 270 Limited Partnership, Decoverly Two Limited
Partnership, Reston Town Center Office Park Phase One Limited Partnership, MGA
Virginia 85-1 Limited Partnership, MGA Virginia 86-2 Limited Partnership,
Decoverly Four Limited Partnership, Decoverly Five Limited Partnership,
Decoverly Six Limited Partnership, Decoverly Seven Limited Partnership, Reston
Corporate Center Limited Partnership, and MGA Virginia 96-1 Limited Partnership,
in connection with the acquisition of properties in Maryland and Virginia on
February 1, 1998, are presented to the Operating Partnership for redemption
(which may occur at any time on or after February 11, 1999) and the Company
exercises its right under the partnership agreement of the Operating Partnership
to acquire such Redemption Units in exchange for shares of Common Stock. You
have requested our opinion on certain federal income tax matters in connection
with the issuance.
<PAGE>
Boston Properties, Inc.
January 19, 1999
Page 2
Capitalized terms not defined herein shall have the same meaning as in the
Registration Statement.
In rendering the following opinion, we have examined the Amended and
Restated Certificate of Incorporation (the "Articles") and Bylaws of the
Company, and such other records, certificates and documents as we have deemed
necessary or appropriate for purposes of rendering the opinion set forth herein
(collectively, the "Documents"). We have reviewed the investment activities,
operations and governance of the Company and its subsidiaries. We have relied
upon representations of duly appointed officers of the Company and the Operating
Partnership (including without limitation, representations contained in a letter
dated January 19, 1999 (the "Officer's Certificate")), principally relating to
the Company's organization and operations. We assume that each such
representation is and will be true, correct and complete and that all
representations that speak in the future, or to the intention, or to the best of
the belief and knowledge of any person(s) or party(ies) are and will be true,
correct and complete as if made without such qualification. Nothing has come to
our attention which would cause us to believe that any of such representations
are untrue, incorrect or incomplete. We assume that the Company will be
operated in accordance with the applicable laws and the terms and conditions of
applicable documents. We have also reviewed the Registration Statement, the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, and such other documents as we have deemed appropriate. In
addition, we have relied upon certain additional facts and assumptions described
below.
In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to us, and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. In
addition, we assume that all interests in the Operating Partnership have been
and will be issued in a transaction (or transactions) that are not required to
be registered under the Securities Act of 1933 and that no interest in the
Operating Partnership offered for sale outside the United States would have been
required to be registered under the Securities Act of 1933 if such interest had
been offered for sale within the United States. We have further assumed that
during its short 1997 taxable year ending December 31, 1997 and subsequent
taxable years, the Company has operated and will operate in such a manner that
has made and will make the representations contained in the Officer's
Certificate true for all such years, and that the Company and its subsidiaries
will not make any amendments to its organizational documents
<PAGE>
Boston Properties, Inc.
January 19, 1999
Page 3
after the date of this opinion that would affect the Company's qualification as
a real estate investment trust for any taxable year. For purposes of our
opinion, we have made no independent investigation of the facts contained in the
documents and assumptions set forth above, the representations set forth in the
Officer's Certificate, or the Registration Statement. No facts have come to our
attention, however, that would cause us to question the accuracy and
completeness of such facts or documents in a material way.
The discussion and conclusion set forth below are based upon the Code, the
Income Tax Regulations and Procedure and Administration Regulations promulgated
thereunder and existing administrative and judicial interpretation thereof, all
of which are subject to change. No assurance can therefore be given that the
federal income tax consequences described below will not be altered in the
future. Based on the documents and assumptions set forth above, the
representations set forth in the Officer's Certificate and provided that the
Company continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution, and other requirements of the Code
necessary for a corporation to qualify as a real estate investment trust, we are
of the opinion that:
(1) Commencing with the Company's initial taxable year ended December 31,
1997, the Company has been operated and organized in conformity with the
requirements for qualification as a "real estate investment trust" under the
Code, and its method of operation, as described in the Officers Certificate,
will enable it to continue to meet the requirements for qualification as a "real
estate investment trust" under the Code, and
(2) The information in the Registration Statement under the caption
"Certain Federal Income Tax Considerations" to the extent that it constitutes
matters of law or legal conclusions, have been reviewed by us and is correct in
all material respects, and our opinion set forth in such discussion is
confirmed.
We will not review on a continuing basis the Company's compliance with the
documents or assumptions set forth above, or the representations set forth in
the Officer's Certificate. Accordingly, no assurance can be given that the
actual results of the Company's operations for any given taxable year will
satisfy the requirements for qualification and taxation as a real estate
investment trust under the Code. The ability of the Company to continue to meet
the requirements for qualification and taxation as a real estate investment
trust will be dependent upon the Company's ability to continue to meet in each
year the applicable asset composition, source of income, shareholder
diversification, distribution, and other requirements of the Code necessary for
a corporation to qualify as a real estate investment trust. The foregoing
opinions are limited to the federal income tax matters addressed herein, and no
other opinions are rendered
<PAGE>
Boston Properties, Inc.
January 19, 1999
Page 4
with respect to other federal tax matters or to any issues arising out of the
tax laws of any state or locality. We express no opinion with respect to the
transactions described herein other than those expressly set forth herein. You
should recognize that our opinion is not binding on the Internal Revenue Service
and that the Internal Revenue Service may disagree with the opinion contained
herein. Although we believe that our opinion will be sustained if challenged,
there is no guarantee that this will be the case. Except as specifically
discussed above, the opinion expressed herein is based upon the laws that
currently exist. Consequently, future changes in the law may cause the federal
income tax treatment of the transactions herein to be materially and adversely
different from that described above. This opinion may be relied on solely by you
in connection with the issuance.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to Goodwin, Procter &
Hoar, LLP under the caption "Certain Federal Income Tax Considerations" in the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is required by Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder by
the Securities and Exchange Commission.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
Goodwin, Procter & Hoar LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Form S-3 Registration Statement of Boston Properties, Inc. and to the
incorporation by reference therein of our reports indicated below with respect
to the financial statements indicated below of Boston Properties, Inc.
Date of
Independent
Financial Statements Accountants Report
-------------------- ------------------
Financial statements of Boston Properties, Inc. January 23, 1998,
as of December 31, 1997 and for the period from except for Note 16
June 23, 1997 to December 31, 1997, and of The as to which the date
Boston Properties Predecessor Group as of is February 2, 1998
December 31, 1996 and for the year ended
December 31, 1996 and 1995, and for the period
from January 1, 1997 to June 22, 1997.
Financial statement schedules of Boston Properties,
Inc. as of December 31, 1997. January 23, 1998
Statement of revenue over certain operating
expenses of Riverfront Plaza for the year
ended December 31, 1997. August 17, 1998
Statement of revenue over certain operating
expenses of Mulligan/Griffin Portfolio for
the year ended December 31, 1997. August 14, 1998
Statement of revenue over certain operating
expenses of Carnegie Center Portfolio for
the year ended December 31, 1997. July 30, 1998
Statement of revenue over certain operating
expenses of Prudential Center for the year
ended December 31, 1997. July 24, 1998
Statement of revenue over certain operating
expenses of Metropolitan Square for the year
ended December 31, 1997. July 10, 1998
Statement of revenue over certain operating
expenses of Riverfront Plaza for the year
ended December 31, 1996. November 25, 1997
Statement of revenue over certain operating
expenses of Mulligan/Griffin Portfolio for
the year ended December 31, 1996. November 20, 1997
Statement of revenue over certain operating
expenses of 100 East Pratt Street for
the year ended December 31, 1996. November 3, 1997
Statement of revenue over certain operating
expenses of 875 Third Avenue for the year
ended December 31, 1996. October 17, 1997
Statement of revenue over certain operating
expenses of 280 Park Avenue for the year
ended December 31, 1996. October 17, 1997
/s/ PricewaterhouseCoopers LLP
---------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 18, 1999
