<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1999
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-13087
BOSTON PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 04-2473675
(State or other jurisdiction (IRS Employer Id. Number)
of incorporation or organization)
800 Boylston Street
Boston, Massachusetts 02199
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (617) 236-3300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock 63,548,144
(Class) (Outstanding on May 13, 1999)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
BOSTON PROPERTIES, INC.
FORM 10-Q
for the quarter ended March 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements:
a) Consolidated Balance Sheets as of March 31, 1999 and December
31, 1998.......................................................... 1
b) Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998.................................. 2
c) Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998.................................. 3
d) Notes to the Consolidated Financial Statements................. 4
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 10
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...... 16
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities........................................... 17
ITEM 6. Exhibits and Reports on Form 8-K................................ 17
Signatures.............................................................. 18
</TABLE>
<PAGE>
BOSTON PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(unaudited)
(in thousands, except
share amounts)
<S> <C> <C>
ASSETS
Real estate: $5,018,949 $4,917,193
Less: accumulated depreciation...................... (383,779) (357,384)
---------- ----------
Total real estate................................. 4,635,170 4,559,809
Cash and cash equivalents............................. 33,597 12,166
Notes receivable...................................... -- 420,143
Escrows............................................... 23,365 19,014
Tenant and other receivables, net..................... 42,188 40,830
Accrued rental income, net............................ 68,615 64,251
Deferred charges, net................................. 47,893 46,029
Prepaid expenses and other assets..................... 25,166 26,058
Investments in joint ventures......................... 59,664 46,787
---------- ----------
Total assets...................................... $4,935,658 $5,235,087
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable.............................. $2,758,755 $2,653,581
Notes payable....................................... -- 420,143
Unsecured line of credit............................ 252,000 15,000
Accounts payable and accrued expenses............... 51,282 33,638
Dividends payable................................... 43,342 40,494
Accrued interest payable............................ 12,028 7,307
Other liabilities................................... 22,688 37,209
---------- ----------
Total liabilities................................. 3,140,095 3,207,372
---------- ----------
Commitments and contingencies......................... -- --
---------- ----------
Minority interests.................................... 768,119 1,079,234
---------- ----------
Series A Convertible Redeemable Preferred Stock,
liquidation preference $50.00 per share, 2,000,000
shares issued and outstanding........................ 100,000 --
---------- ----------
Stockholders' equity:
Excess stock, $.01 par value, 150,000,000 shares
authorized, none issued or outstanding............. -- --
Common stock, $.01 par value, 250,000,000 shares
authorized, 63,540,106 and 63,527,819 issued and
outstanding in 1999 and 1998, respectively......... 635 635
Additional paid-in capital.......................... 936,745 955,711
Dividends in excess of earnings..................... (9,936) (7,865)
---------- ----------
Total stockholders' equity........................ 927,444 948,481
---------- ----------
Total liabilities and stockholders' equity...... $4,935,658 $5,235,087
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
1999 1998
------------ ------------
(unaudited and in
thousands,
except for per share
amounts)
<S> <C> <C>
Revenue
Rental:
Base rent........................................ $151,609 $79,270
Recoveries from tenants.......................... 17,414 9,557
Parking and other................................ 10,924 1,111
-------- -------
Total rental revenue........................... 179,947 89,938
Development and management services................ 4,047 1,776
Interest and other................................. 3,646 3,889
-------- -------
Total revenue.................................. 187,640 95,603
-------- -------
Expenses
Operating.......................................... 57,350 26,530
General and administrative......................... 6,610 4,821
Interest........................................... 50,459 24,929
Depreciation and amortization...................... 27,794 13,095
-------- -------
Total expenses................................. 142,213 69,375
-------- -------
Income before minority interests and joint venture
income.............................................. 45,427 26,228
Minority interests in property partnerships.......... (4,155) (123)
Income from unconsolidated joint venture............. 213 --
-------- -------
Income before minority interest in Operating
Partnership......................................... 41,485 26,105
Minority interest in Operating Partnership........... (15,712) (6,474)
-------- -------
Net income........................................... 25,773 19,631
Preferred dividend................................... (839) --
-------- -------
Net income available to common shareholders.......... $ 24,934 $19,631
======== =======
Basic earnings per share:
Net income available to common shareholders........ $ 0.39 $ 0.36
======== =======
Weighted average number of common shares
outstanding....................................... 63,534 54,283
======== =======
Diluted earnings per share:
Net income......................................... $ 0.39 $ 0.36
======== =======
Weighted average number of common and common
equivalent shares outstanding..................... 64,078 54,902
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
BOSTON PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended
-----------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income before preferred dividend............ $ 25,773 $ 19,631
Adjustments to reconcile net income before
preferred dividend to net cash provided by
operating activities:
Depreciation and amortization................... 27,794 13,095
Non-cash portion of interest expense............ (508) 3
Income from investment in unconsolidated joint
venture........................................ (213) --
Minority interests.............................. 15,612 6,474
Change in assets and liabilities:
Escrows......................................... (4,351) (9,016)
Tenant and other receivables, net............... (1,358) 5,605
Accrued rental income........................... (4,364) (3,876)
Prepaid expenses and other assets............... 892 6,996
Accounts payable and accrued expenses........... 13,618 14,012
Accrued interest payable........................ 4,721 1,271
Other liabilities............................... (14,521) 4,499
-------- ---------
Total adjustments............................. 37,322 39,063
-------- ---------
Net cash provided by operating activities..... 63,095 58,694
-------- ---------
Cash flows from investing activities:
Acquisitions/additions to real estate........... (97,630) (311,103)
Tenant leasing costs............................ (2,034) (2,653)
Investments in joint ventures................... (12,664) (810)
-------- ---------
Net cash used in investing activities......... (112,328) (314,566)
-------- ---------
Cash flows from financing activities:
Net proceeds from sales of common and preferred
stock.......................................... 100,000 765,668
Payment of offering costs....................... (31) --
Borrowings on unsecured line of credit.......... 347,000 --
Repayment of unsecured line of credit........... (110,000) (233,000)
Repayments of mortgage notes.................... (9,618) (2,213)
Proceeds from mortgage notes.................... 116,000 121,800
Repayment of notes payable...................... (328,143) --
Dividends and distributions..................... (42,615) (22,539)
Deferred financing.............................. (1,929) --
-------- ---------
Net cash provided by financing activities..... 70,664 629,716
-------- ---------
Net increase in cash............................. 21,431 373,844
Cash and cash equivalents, beginning of period... 12,166 17,560
-------- ---------
Cash and cash equivalents, end of period......... $ 33,597 $ 391,404
======== =========
Supplemental disclosures:
Cash paid for interest.......................... $ 46,246 $ 26,198
======== =========
Interest capitalized............................ $ 2,985 $ 613
======== =========
Non-cash activities:
Operating activity:
Non-cash portion of interest expense............ $ (508) $ 3
======== =========
Additions to real estate included in accounts
payable........................................ $ 4,026 $ --
======== =========
Investing and Financing activities:
Mortgage notes payable assumed in connection
with acquisitions.............................. $ -- $ 118,251
======== =========
Issuance of minority interest in connection
with acquisitions.............................. $ 100 $ 50,002
======== =========
Dividends and distributions declared but not
paid........................................... $ 43,342 $ --
======== =========
Notes receivable assigned in connection with an
acquistion..................................... $420,143 $ --
======== =========
Notes payable assigned in connection with an
acquisition.................................... $(92,000) $ --
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited and in thousands)
1. Organization
Boston Properties, Inc. (the "Company"), a Delaware corporation, is a self-
administered and self-managed real estate investment trust ("REIT"). Boston
Properties, Inc. is the sole general partner of Boston Properties Limited
Partnership (the "Operating Partnership") and at March 31, 1999, owned an
approximate 72.75% general and limited partnership interest in the Operating
Partnership. Partnership interests in the operating partnership are
denominated as "common units of partnership interest" (also referred to as "OP
Units") or "preferred units of partnership interest" (also referred to as
"Preferred Units"). All references to OP Units and Preferred Units exclude
such units held by the Company. 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 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 stock of the Company
("Common Stock"). 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 bear 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 to the Company refer to Boston Properties, Inc. and its
subsidiaries, including the Operating Partnership, collectively, unless the
context otherwise requires.
To assist the Company in maintaining its status as a REIT, the Company
leases its three in-service hotel properties, pursuant to a lease with a
participation in the gross receipts of such hotel properties, to a lessee ("ZL
Hotel LLC") in which Messrs. Zuckerman and Linde, the Chairman of the Board
and Chief Executive Officer, respectively, are the sole member-managers.
Messrs. Zuckerman and Linde have a 9.8% economic interest in such lessee and
one or more unaffiliated public charities have a 90.2% economic interest.
Marriott International, Inc. manages these hotel properties under the Marriott
name pursuant to a management agreement with the lessee. Under the REIT
requirements, revenues from a hotel are not considered to be rental income for
purposes of certain income tests which a REIT must meet. Accordingly, in order
to maintain its qualification as a REIT, the Company has entered into the
participating leases described above to provide revenue which qualifies as
rental income under the REIT requirements.
As of March 31, 1999, the Company and the Operating Partnership had
63,540,106 and 23,818,811 common shares and OP Units outstanding,
respectively. In addition, the Company and the Operating Partnership had
2,000,000 and 8,655,353 Preferred Shares and Units outstanding, respectively.
The Properties:
The Company owns a portfolio of 124 commercial real estate properties (121
and 94 properties at December 31, 1998 and March 31, 1998, respectively) (the
"Properties") aggregating over 32.0 million square feet. The properties
consist of 103 office properties with approximately 24.0 million net rentable
square feet (including eight properties under development expected to contain
approximately 1.6 million net rentable square feet) and approximately 6.2
million additional square feet of structured parking for 17,742 vehicles, nine
industrial properties with approximately 925,000 net rentable square feet,
three hotels with a total of 1,054 rooms (consisting of approximately 938,000
square feet), and a parking garage with 1,170 spaces (consisting of
approximately 330,000 square feet). In addition, the Company owns, has under
contract, or has an option to
4
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(unaudited and in thousands)
acquire 40 parcels of land totaling 480.9 acres, which will support
approximately 11.6 million square feet of development.
2. Basis of Presentation and Summary of Significant Accounting Policies
The consolidated financial statements of the Company include all the
accounts of the Company, its majority-owned Operating Partnership and
subsidiaries. The financial statements reflect the properties acquired at
their historical basis of accounting to the extent of the acquisition of
interests from the Predecessor's owners who continued as investors. The
remaining interests acquired for cash from those owners of the Predecessor who
decided to sell their interests have been accounted for as a purchase and the
excess of the purchase price over the related historical cost basis was
allocated to real estate. All significant intercompany balances and
transactions have been eliminated. These financial statements should be read
in conjunction with the Company's financial statements and notes thereto
contained in the Company's annual report on Form 10-K for its fiscal year
ended December 31, 1998.
The accompanying interim financial statements are unaudited; however, the
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and in conjunction
with the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the disclosures required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting solely of normal recurring
matters) necessary for a fair presentation of the financial statements for
these interim periods have been included. The results of operations for the
interim periods are not necessarily indicative of the results to be obtained
for other interim periods or for the full fiscal year.
3. Real Estate Acquisitions During the Quarter Ended March 31, 1999
On February 10, 1999, the Company closed on phase two of its acquisition of
Embarcadero Center. As a result, the Company's ownership percentage in the six
buildings comprising Embarcadero Center increased to 100%. The total purchase
price (including both phases one and two) of approximately $1.2 billion was
funded through the assumption or incurrence of $730.0 million of mortgage
financing, the issuance of Series Two and Three Preferred Units having an
aggregate value of approximately $286.4 million, cash of $100.0 million from
the proceeds of the sale of the Company's Series A Convertible Redeemable
Preferred Stock (the "Series A Preferred Shares"), and a draw down of
approximately $97.3 million on the Company's Unsecured Line of Credit. In
connection with the above, the proceeds from notes receivable of $420.1
million were used to discharge the notes payable.
On March 26, 1999, the Company acquired Sumner Square, a two-building office
complex located in Washington, D.C. containing approximately 204,000 square
feet. Sumner Square was acquired from related parties for approximately $32.6
million which was funded through a draw down on the Unsecured Line of Credit
of approximately $32.5 million and the issuance of approximately 3,252 OP
Units valued at approximately $0.1 million. The acquisition was approved by a
vote of the independent directors.
4. Investments in Joint Ventures
The investments in joint ventures represent (i) a 25% interest in a joint
venture which owns and operates two office buildings in Reston, Virginia, (ii)
a 25% interest in a joint venture which is developing one office building in
Reston, Virginia, and (iii) a 50% interest in a joint venture which is
developing an office building in Washington, D.C. The Company also serves as
development manager for the two joint ventures still under development. Under
the equity method of accounting, the net equity investment is reflected on the
consolidated balance sheets.
5
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(unaudited and in thousands)
The combined summarized balance sheets of the joint ventures are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Real estate and development in progress............. $197,745 $172,417
Other assets........................................ 10,473 10,032
-------- --------
Total assets.................................... $208,218 $182,449
======== ========
LIABILITIES AND PARTNERS' EQUITY
Construction loans payable.......................... $ 72,119 $ 55,638
Other liabilities................................... 16,464 20,595
-------- --------
Total liabilities............................... 88,583 76,233
Partners' equity.................................... 119,635 106,216
-------- --------
Total liabilities and partners' equity.......... $208,218 $182,449
======== ========
Company's Share of Equity........................... $ 59,664 $ 46,787
======== ========
</TABLE>
The summarized statement of operations of the joint venture placed in
service during the first quarter of 1999 is as follows:
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
1999
------------
(unaudited)
<S> <C>
Total revenue................................................... $1,791
Total expenses.................................................. 939
------
Net income...................................................... $ 852
======
Company's Share of Net Income................................... $ 213
======
</TABLE>
5. Minority Interests
Minority interest in the Operating Partnership relates to the interest in
the Operating Partnership and property partnerships that are not owned by the
Company. As of March 31, 1999, this interest consisted of 23,818,811 OP Units
and 8,655,353 Preferred Units outstanding and held by parties other than the
Company.
On February 16, 1999, the Operating Partnership paid a distribution on the
2,442,222 units of 7.25% Series One Preferred Units of $.61625 per unit, based
on an annual distribution of $2.465 per unit and paid a distribution on the
6,213,131 units of Series Two and Three Preferred Units of $.63014 per unit.
On March 26, 1999, the Operating Partnership issued 3,252 OP Units in
connection with the acquisition of Sumner Square.
6. Redeemable Preferred Stock and Stockholders' Equity
On February 16, 1999, the Company paid a dividend on the 2,000,000 shares of
Series A Convertible Redeemable Preferred Shares (the "Preferred Shares"), $50
liquidation preference per share, of approximately
6
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(unaudited and in thousands)
$.04110 per share for the period from issuance to February 15, 1999. In
addition, on March 22, 1999, the Board of Directors of the Company declared a
dividend of $0.64795 per share on the Preferred Shares payable on May 17, 1999
to shareholders of record on March 31, 1999. These Preferred Shares are not
classified as equity as they are redeemable for cash or shares at the election
of the holder.
On March 22, 1999, the Board of Directors of the Company declared a first
quarter dividend in the amount of $0.425 per Common Share payable on April 28,
1999 to shareholders of record as of March 31, 1999.
7. Earnings Per Share
<TABLE>
<CAPTION>
For the quarter ended March 31, 1999
-----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) amount
-------------- --------------- ------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Basic Earnings:
Income available to
common shareholders... $ 24,934 63,534 $ 0.39
Effect of Dilutive
Securities:
Stock Options.......... -- 544 --
-------------- ------------- ------------
Diluted Earnings:
Net income............. $ 24,934 64,078 $ 0.39
============== ============= ============
<CAPTION>
For the quarter ended March 31, 1998
-----------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) amount
-------------- --------------- ------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Basic Earnings:
Income available to
common shareholders... $ 19,631 54,283 $ 0.36
Effect of Dilutive
Securities:
Stock Options.......... -- 619 --
-------------- ------------- ------------
Diluted Earnings:
Net Income............. $ 19,631 54,902 $ 0.36
============== ============= ============
</TABLE>
8. Stock Option and Incentive Plan
During the quarter ended March 31, 1999, the Company issued 1,647,408
options at $33.375 per share. The options vest over a three-year period, with
1/3 of the options vesting each year. As of March 31, 1999, the Company has
outstanding options with respect to 7,460,155 common shares and an additional
1,851,794 common shares reserved for issuance under the Company's stock option
and incentive plan.
9. Segment Information
The Company's segments are based on the Company's method of internal
reporting, which classifies its operations by both geographic area and
property type. The Company's segments by geographic area are: Greater Boston,
Greater Washington, D.C., midtown Manhattan, Greater San Francisco, and New
Jersey and Pennsylvania. Segments by property type include: Class A Office,
R&D, Industrial, Hotels and Garage.
Asset information by segment is not reported, since the Company does not use
this measure to assess performance: therefore, the depreciation and
amortization expenses are not allocated among segments. Interest
7
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(unaudited and in thousands)
income, management and development services, interest expense and general and
administrative expenses are not included in net operating income, as the
internal reporting addresses these on a corporate level.
Information by Geographic Area and Property Type:
For the three months ended March 31, 1999:
<TABLE>
<CAPTION>
Greater Greater New Jersey
Greater Washington, Midtown San and
Boston D.C. Manhattan Francisco Pennsylvania Total
------- ----------- --------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Rental Revenue
Class A................ $36,955 $48,931 $34,191 $37,193 $9,457 $166,727
R&D.................... 1,683 4,533 -- 449 -- 6,665
Industrial............. 406 323 -- 274 180 1,183
Hotels................. 4,851 -- -- -- -- 4,851
Garage................. 521 -- -- -- -- 521
------- ------- ------- ------- ------ --------
Total.................. 44,416 53,787 34,191 37,916 9,637 179,947
------- ------- ------- ------- ------ --------
% of Grand Totals...... 24.68% 29.89% 19.00% 21.07% 5.36% 100.00%
------- ------- ------- ------- ------ --------
Rental Expenses
Class A................ 15,153 12,639 11,301 12,627 2,523 54,243
R&D.................... 528 970 -- 88 -- 1,586
Industrial............. 142 88 -- 50 28 308
Hotels................. 1,024 -- -- -- -- 1,024
Garage................. 189 -- -- -- -- 189
------- ------- ------- ------- ------ --------
Total.................. 17,036 13,697 11,301 12,765 2,551 57,350
------- ------- ------- ------- ------ --------
% of Grand Totals...... 29.71% 23.88% 19.70% 22.26% 4.45% 100.00%
------- ------- ------- ------- ------ --------
Net Operating Income.... $27,380 $40,090 $22,890 $25,151 $7,086 $122,597
======= ======= ======= ======= ====== ========
% of Grand Totals...... 22.33% 32.70% 18.67% 20.52% 5.78% 100.00%
======= ======= ======= ======= ====== ========
</TABLE>
For the three months ended March 31, 1998:
<TABLE>
<CAPTION>
Greater Greater New Jersey
Greater Washington, Midtown San and
Boston D.C. Manhattan Francisco Pennsylvania Total
------- ----------- --------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Rental Revenue
Class A................ $11,665 $35,247 $31,687 $-- $-- $78,599
R&D.................... 1,639 3,729 -- 315 -- 5,683
Industrial............. 408 346 -- 304 202 1,260
Hotels................. 3,955 -- -- -- -- 3,955
Garage................. 441 -- -- -- -- 441
------- ------- ------- ---- ---- -------
Total................... 18,108 39,322 31,687 619 202 89,938
------- ------- ------- ---- ---- -------
% of Grand Totals...... 20.13% 43.72% 35.23% 0.69% 0.23% 100.00%
------- ------- ------- ---- ---- -------
Rental Expenses
Class A................ $ 4,041 $ 8,928 $11,174 $-- $-- 24,143
R&D.................... 530 672 -- 90 -- 1,292
Industrial............. 150 83 -- 80 -- 313
Hotels................. 658 -- -- -- -- 658
Garage................. 124 -- -- -- -- 124
------- ------- ------- ---- ---- -------
Total.................. 5,503 9,683 11,174 170 -- 26,530
------- ------- ------- ---- ---- -------
% of Grand Totals...... 20.74% 36.50% 42.12% 0.64% 0.00% 100.00%
------- ------- ------- ---- ---- -------
Net Operating Income.... $12,605 $29,639 $20,513 $449 $202 $63,408
======= ======= ======= ==== ==== =======
% of Grand Totals...... 19.88% 46.74% 32.35% 0.71% 0.32% 100.00%
======= ======= ======= ==== ==== =======
</TABLE>
8
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
(unaudited and in thousands)
The following is a reconcilition of net operating income to income before
minority interests and joint venture income:
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Net Operating Income........................ $ 122,597 $ 63,408
Add:
Development and management services....... 4,047 1,776
Interest income........................... 3,646 3,889
Less:
General and administrative................ (6,610) (4,821)
Interest expense.......................... (50,459) (24,929)
Depreciation and amortization............. (27,794) (13,095)
-------------- -------------
Income before minority interests and joint
venture income............................. $ 45,427 $ 26,228
============== =============
</TABLE>
10. Unaudited Pro Forma Consolidated Financial Information
The accompanying unaudited pro forma information for the three months ended
March 31, 1999 and 1998 are presented as if the following real estate
acquisitions had occurred on January 1, 1998: Riverfront Plaza, the
Mulligan/Griffin Portfolio, the Carnegie Center portfolio, Metropolitan
Square, The Prudential Center, University Place, Reservoir Place and
Embarcadero Center. This pro forma information is based upon the historical
consolidated financial statements and should be read in conjunction with the
consolidated financial statements and the notes thereto.
This unaudited pro forma information does not purport to represent what the
actual results of operations of the Company would have been had the above
occurred, nor do they purport to predict the results of operations of future
periods.
<TABLE>
<CAPTION>
Three Months Three months
Ended 3/31/99 Ended 3/31/98
(pro forma) (pro forma)
-------------- --------------
(unaudited and in thousands,
except per share data)
<S> <C> <C>
Total revenue........................... $ 187,640 $ 182,138
Net income available to common
shareholders........................... $ 28,947 $ 27,858
Net income per share available to
common--basic.......................... $ 0.46 $ 0.44
Common shares outstanding--basic........ 63,534 63,370
Net income per share available to common
shareholders--diluted.................. $ 0.46 $ 0.44
Common shares outstanding--diluted...... 64,078 63,989
</TABLE>
9
<PAGE>
BOSTON PROPERTIES, INC.
ITEM 2--Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report. This Report
on Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results or developments
could differ materially from those projected in such statements as a result of
certain factors set forth in the section below entitled "Certain Factors
Affecting Future Operating Results" and elsewhere in this report.
Results of Operations
Comparison of the three months ended March 31, 1999 to the three months ended
March 31, 1998.
Rental revenue increased $90.0 million or 100.1% to $179.9 million from
$89.9 million for the three months ended March 31, 1999 compared to the three
months ended March 31, 1998. The increase is primarily due to rental revenue
earned totaling approximately $81.8 million on the operations of properties
acquired and placed in service since March 31, 1998.
Development and Management Services revenue increased $2.2 million or 127.9%
to $4.0 million from $1.8 million for the three months ended March 31, 1999
compared to the three months ended March 31, 1998. The increase is due to new
contracts earning fees during the first quarter of 1999.
Rental expenses increased $30.8 million or $116.2% to $57.4 million from
$26.5 million for the three months ended March 31, 1999 compared to the three
months ended March 31, 1998. This is primarily a result of approximately $28.3
million of expenses related to the operations of properties acquired and
placed in service since March 31, 1998.
General and administrative expenses increased $1.8 million or 37.1% to $6.6
million from $4.8 million for the three months ended March 31, 1999 compared
to the three months ended March 31, 1998 as a result of payroll and other
related costs of new employees hired in Boston, Washington, D.C. and New York
to support the operations of additional properties acquired and placed in
service since March 31, 1998.
Interest expense increased $25.6 million or 102.4% to $50.5 million from
$24.9 million for the three months ended March 31, 1999 compared to the three
months ended March 31, 1998 as a result of interest expense of approximately
$25.0 million on debt related to the properties acquired subsequent to March
31, 1998.
Depreciation and amortization expense increased $14.7 million or 112.3% to
27.8 million from $13.1 million for the three months ended March 31, 1999
compared to the three months ended March 31, 1998. This was primarily
attributed to approximately $12.7 million of depreciation expense related to
the operations of properties acquired subsequent to March 31, 1998.
As a result of the foregoing, net income before minority interest in the
Operating Partnership increased $15.4 million to $41.5 million from $26.1
million for the three months ended March 31, 1999 compared to the three months
ended March 31, 1998.
Liquidity and Capital Resources
The Company's consolidated indebtedness at March 31, 1999 was approximately
$3.0 billion at a weighted average interest rate of 6.97%. Based on the
Company's total market capitalization at March 31, 1999 of approximately $6.2
billion, the Company's consolidated debt represents 48.7% of its total market
capitalization.
The Company has a $500 million unsecured revolving line of credit (the
"Unsecured Line of Credit") with BankBoston, N.A., as agent, that expires in
June 2000. The Company uses the Unsecured Line of Credit principally to
facilitate its development and acquisition activities and for working capital
purposes. As of May 10, 1999, the Company had $272,000 outstanding under the
Unsecured Line of Credit.
10
<PAGE>
BOSTON PROPERTIES, INC.
The following represents the outstanding principal balances due under the
first mortgages at March 31, 1999:
<TABLE>
<CAPTION>
Properties Interest Rate Principal Amount Maturity Date
- ---------- ------------- ---------------- ------------------
(in thousands)
<S> <C> <C> <C>
Prudential Center 6.72% 297,735 July 1, 2008
599 Lexington Avenue 7.00% 225,000(1) July 19, 2005
280 Park Avenue 7.00% 220,000(2) September 11, 2002
Embarcadero Center One 6.70% 159,570 December 10, 2008
Embarcadero Center Two 6.70% 159,570 December 10, 2008
Embarcadero Center Four 6.79% 159,375 February 1, 2006
875 Third Ave 8.00% 153,600(3) December 31, 2002
Embarcadero Center Three 6.40% 149,579 January 1, 2007
Two Independence Square 8.09% 119,771(4) February 27, 2003
Riverfront Plaza 6.61% 119,480 January 21, 2008
Democracy Center 7.05% 110,000 April 9, 2009
Metropolitan Square 6.75% 106,834(5) June 1, 2000
Embarcadero West Tower 6.50% 99,724 January 1, 2006
100 East Pratt Street 6.73% 94,430 November 1, 2008
Reservoir Place 6.88% 76,723(6) November 1, 2006
One Independence Square 8.12% 76,302(4) August 21, 2001
2300 N Street 6.88% 66,000 August 3, 2003
Capital Gallery 8.24% 58,877 August 15, 2006
Ten Cambridge Center and North
Garage 7.57% 40,000 March 29, 2000
10 and 20 Burlington Mall Road 8.33% 37,000(7) October 1, 2001
Lockheed Martin Building 6.61% 27,129 June 1, 2008
Reston Corporate Center 6.56% 25,613 May 1, 2008
1301 New York Avenue 6.70% 24,909 August 15, 2009
191 Spring Street 8.50% 23,360 September 1, 2006
Bedford Business Park 8.50% 22,557 December 10, 2008
NIMA Building 6.51% 22,192 June 1, 2008
212 Carnegie Center 7.25% 20,819 December 31, 2000
202 Carnegie Center 7.25% 19,384 December 31, 2000
214 Carnegie Center 8.19% 13,633(8) October 31, 2000
101 Carnegie Center 7.66% 8,843 April 1, 2006
Montvale Center 8.59% 7,764 December 1, 2006
Newport Office Park 8.13% 6,433 July 1, 2001
Hilltop Business Center 6.81% 6,000 March 1, 2019
201 Carnegie Center 7.08% 549 February 1, 2010
----------
Total $2,758,755
==========
</TABLE>
- --------
(1) At maturity the lender has the option to purchase a 33.33% interest in
this Property in exchange for the cancellation of the principal balance of
approximately $225 million.
(2) Outstanding principal of $213,000 bears interest at a fixed rate of 7.00%.
The remaining $7,000 bears interest at a floating rate equal to LIBOR +
1.00%.
(3) The principal amount and interest rate shown has been adjusted to reflect
the fair value of the note. The actual principal balance at March 31, 1999
was $150,000 and the interest rate was 8.75%.
11
<PAGE>
BOSTON PROPERTIES, INC.
(4) The principal amount and interest rate shown has been adjusted to reflect
the effective rates on the loans. The actual principal balances at March
31, 1999 were $119,469 and $76,188, respectively. The actual interest
rates are 8.50% and continue at such rates through the loan expiration.
(5) The principal amount and interest rate shown has been adjusted to reflect
the fair value of the note. The actual principal balance at March 31, 1999
was $104,040 and interest rate was 9.13%.
(6) The principal amount and interest rate shown has been adjusted to reflect
the fair value of the note. The actual principal balance at March 31, 1999
was $66,444 and the interest rate was 9.09%.
(7) Includes outstanding indebtedness secured by 91 Hartwell Avenue and 92 and
100 Hayden Avenue.
(8) The principal amount and interest rate shown has been adjusted to reflect
the effective rate on the loan. The actual principal balance at March 31,
1999 was $13,341 and the interest rate was 9.13%.
The Company expects to meet its short-term liquidity requirements generally
through its existing working capital and net cash provided by operations. The
Company's operating properties and hotels require periodic investments of
capital for tenant-related capital expenditures and for general capital
improvements. For the three months ended March 31, 1999, the Company's
recurring capital expenditures totaled $1.5 million.
The Company expects to meet its long-term requirements for the funding of
property development, property acquisitions and other non-recurring capital
improvements through long-term secured and unsecured indebtedness (including
the Unsecured Line of Credit) and the issuance of additional equity securities
of the Company. During the quarter ended March 31, 1999, the Company received
$110.0 million of mortgage financing secured by Democracy Center.
The Company has development projects currently in process, which require
commitments to fund to completion. Commitments under these arrangements
totaled $210.6 million as of March 31, 1999. The Company expects to fund these
commitments using available cash and the Unsecured Line of Credit. In
addition, the Company has options to acquire land that require minimum
deposits that the Company will fund using available cash the Unsecured Line of
Credit.
On March 26, 1999, the Company acquired Sumner Square from related parties
for approximately $32.6 million. The acquisition was funded through a draw
down on the Unsecured Line of Credit of approximately $32.5 million and the
issuance of approximately 3,252 OP Units valued at approximately $0.1 million.
Funds from Operations
Management believes Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows
from operating activities, financing activities and investing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures. The Company computes
Funds from Operations in accordance with standards established by the White
Paper on Funds from Operations approved by the Board of Governors of NAREIT in
1995, which may differ from the methodology for calculating Funds from
Operations utilized by other equity REITs, and accordingly, may not be
comparable to such other REITs. The White Paper defines Funds from Operations
as net income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from debt restructuring and sales of property, plus real estate
related depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Further, Funds from Operations does not
represent amounts available for management's discretionary use because of
needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. Funds from Operations should not be considered
as an alternative to net income (determined in accordance with GAAP) as an
indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make
12
<PAGE>
BOSTON PROPERTIES, INC.
distributions. The Company believes that in order to facilitate a clear
understanding of the historical operating results of the Company. Funds from
Operations should be examined in conjunction with net income as presented in
the consolidated financial statements.
The following table presents the Company's Funds from Operations for the
three months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1999 March 31, 1998
------------------ ------------------
<S> <C> <C>
Income before minority interests..... $45,427 $26,228
Add:
Real estate depreciation and
amortization...................... 27,549 12,944
Income from unconsolidated joint
venture........................... 213 --
Less:
Minority property partnership's
share of Funds from Operations.... (3,163) (144)
Preferred dividends and
distributions..................... (7,212) --
------- -------
Funds from Operations................ $62,814 $39,028
======= =======
Company's share...................... $45,697 $29,349
======= =======
</TABLE>
Reconciliation to Diluted Funds from Operations:
<TABLE>
<CAPTION>
For the three months ended For the three months ended
March 31, 1999 March 31, 1998
------------------------------ ------------------------------
Income Shares Income Shares
(Numerator) (Denominator) (Numerator) (Denominator)
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Funds from Operations... $ 62,814 87,330 $ 39,028 72,185
Effect of Dilutive
Securities
Convertible Preferred
Units................ 6,373 10,325 -- --
Convertible Preferred
Stock................ 839 1,459 -- --
Stock options......... -- 544 -- 619
------------- ------------ ------------- ------------
Diluted Funds from
Operations............. $ 70,026 99,658 $ 39,028 72,804
============= ============ ============= ============
Company's share of Di-
luted Funds from
Operations (76.12% and
75.20%,
respectively).......... $ 53,306 75,862 $ 29,349 54,902
============= ============ ============= ============
</TABLE>
Certain Factors Affecting Future Operating Results
This Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, regarding the
Company's business, strategies, revenues, expenditures and operating and
capital requirements. The words "believe," "expect," "anticipate," "intend,"
"estimate," "assume," and other similar expressions which are predictions of
or indicate future events and trends and which do not relate solely to
historical matters identify forward-looking statements. Caution should be
exercised in interpreting such forward-looking statements, and undue reliance
should not be placed on such statements, because they involve known and
unknown risks, uncertainties and other factors, which are in some cases beyond
the control of the Company and may cause the actual results, performance or
achievements of the Company to differ materially from anticipated future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements are necessarily dependent
on assumptions, data or methods that may be incorrect or imprecise and they
may be incapable of being realized. The following factors, among others, could
cause actual results and future events to differ materially from those set
forth or contemplated in the forward-looking
13
<PAGE>
BOSTON PROPERTIES, INC.
statements made in this report: default under or non-renewal of leases by
tenants, increased interest rates and operating costs, failure to obtain
necessary outside financing, difficulties in identifying properties to acquire
and completing acquisitions, failure to successfully integrate acquired
properties into the Company's operations, risks and uncertainties affecting
property development and construction (including, without limitation,
construction delays, cost overruns, inability to obtain necessary permits and
public opposition to such activities), failure to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, as amended,
environmental uncertainties, risks related to natural disasters, financial
market fluctuations, changes in real estate and zoning laws and increases in
real property tax rates. The Company's success also generally depends upon
national and regional economic trends. The Company assumes no obligation to
update forward-looking statements.
Inflation
Substantially all of the office leases provide for separate real estate tax
and operating expense escalations over a base amount. In addition, many of the
leases provide for fixed base rent increases or indexed increases. The Company
believes that inflationary increases may be at least partially offset by the
contractual rent increases described above.
Year 2000 Compliance
The Year 2000 issue relates to how computer systems and programs will
recognize and process dates after the year 1999. Most computer systems and
programs, which use two digits to specify a year, if not modified prior to the
year 2000, will be unable to distinguish between the year 1900 and the year
2000. This could result in system failures or miscalculations that could
result in disruptions of normal business operations. The Year 2000 issue can
also affect embedded technology systems and programs of a building such as
elevator, security, energy, fire and safety systems. The Year 2000 issue
affects virtually all companies and organizations.
In March of 1998, the Company formed a Year 2000 project team that consists
of Company personnel. The team includes a coordinator from Property Management
in each of its regions and a representative from Legal, Risk Management and
Information Systems. The project team conducts monthly meetings to coordinate
a common work plan, to share information and to review the progress of
activities in each region.
The Year 2000 Project encompasses a review of compliance risks for the
Company's computer information and building systems and is divided into three
phases.
Phase I targets the discovery of issues, an inventory of all building and
internal systems, and an initial assessment of risks. Correspondence has been
sent to vendors, including equipment manufacturers, service providers,
maintenance and utility companies, requesting letters regarding Year 2000
compliance for specific systems. To date responses have been received from
over 95% of the vendors with the remaining responses due mostly from vendors
doing business with the Company's most recently acquired properties.
In Phase I, correspondence has been sent to tenants highlighting the Year
2000 issue and providing a general statement of the Company's progress. The
Company has decided not to survey its tenant base, other than its largest
tenant (the General Services Administration), as no other single tenant
represents more than 5% of the Company's annual revenues. Due to the Company's
large tenant base, the success of the Company is not closely tied to one
particular tenant. As a result, the Company does not believe there should be a
material adverse effect on the Company's financial condition and results of
operations if a limited number of the Company's tenants were unable to pay
rent on a timely basis due to Year 2000 related problems.
All work related to Phase I has been performed by current employees of the
Company. No third parties have been used during this process nor has the
Company hired an employee specifically for Year 2000 issues, and as a result,
the costs incurred related only to internal payroll costs, which at this time
are not material.
14
<PAGE>
BOSTON PROPERTIES, INC.
Phase II began in September 1998 and is expected to continue through June
1999. It consists of the following:
. Continued assessment of risks, including follow up with vendor responses
deemed inadequate (if any)
. Remediation of identified compliance problems by June 30, 1999
. Testing of building systems
. Development of contingency plans for all systems deemed critical to the
operation of buildings
Phase III will begin in July 1999 and will prepare building operations
personnel at each property for the night and weekend of December 31, 1999. As
part of its contingency planning, the Company is assessing the security and
support requirements of tenants for the night of December 31, 1999 and the
required on-site staffing presence of Company personnel.
The Company expects building-card access, energy management and garage
access systems to commonly require remediation. The replacement of energy
management systems at Embarcadero Center in San Francisco, CA and Riverfront
Plaza in Richmond, VA will be completed in August 1999 and October 1999,
respectively, and represent the only exceptions to the Company's current
expectation that all remediation work for building systems will be completed
by June 30, 1999.
Recent upgrades to desktop computers and internal networks throughout the
organization combined with the replacement of the electronic mail and the
accounting systems during 1998 addressed Year 2000 compliance issues with core
operating systems. All ancillary software packages that support isolated
functions, including tax reporting, and were non-compliant, were upgraded
before the end of 1998 with the exception of work order processing software
that is currently being replaced at several properties and will be completed
by June 30, 1999.
The total costs associated with the Year 2000 issue are not expected to be
material to the company's financial position. The estimated cost of
remediation efforts is approximately $1.1 million, which excludes costs for
all internal personnel working on the project. To date, the Company has
incurred $0.3 million of these costs. In most cases, the upgrade of non-
compliant systems represents an acceleration of planned replacement dates.
The Year 2000 project team has adopted a test protocol and procedure.
Property managers, working with service vendors, are conducting tests of
building systems. As of March 31, 1999, successful tests have been carried out
and documented for critical building systems at many properties throughout the
portfolio.
The Company has conducted tenant presentations at several locations that
have included representatives of outside utilities such as Con Edison in New
York.
The Company currently does not have a contingency plan in place. The Company
is, however, working with service vendors, and expects that contingency plans
will be developed by the project team by June 30, 1999 for all systems deemed
critical to the operation of buildings. Most systems supporting the operation
of a building can revert to manual operation if necessary.
The discussion above regarding the Company's Year 2000 Project contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The Company's assessment of the impact of the Year 2000
issue may prove to be inaccurate due to a number of factors which cannot be
determined with certainty, including the receipt of inaccurate compliance
certification from third party vendors, inaccurate testing or assessments by
Company personnel of Company equipment or systems, and inaccurate projections
by the Company of the cost of remediation and/or replacement of affected
equipment and systems. A failure by the Company to adequately remediate or
replace affected equipment or systems due to the factors cited above or for
other reasons, a material
15
<PAGE>
BOSTON PROPERTIES, INC.
increase in the actual cost of such remediation or replacement, or a failure
by a third party vendor to remediate Year 2000 problems in systems that are
vital to the operation of the Company's properties or financial systems, could
cause a material disruption to the Company's business and adversely affect its
results of operations and financial condition.
ITEM 3--Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss from adverse changes in market prices and
interest rates. The primary market risk facing the Company is mortgage debt,
which bears interest at fixed rates, and therefore, the fair value of these
instruments is affected by changes in the market interest rates. The following
table presents principal cash flows (in thousands) based upon maturity dates
of the debt obligations and the related weighted average interest rates by
expected maturity dates for the fixed rate debt. The interest rate of the
variable rate debt as of March 31, 1999 was LIBOR plus 1.00%.
<TABLE>
<CAPTION>
Mortgage debt, including current portion
------------------------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Total Fair Value
------- ------- ------- ------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate.............. $28,748 235,619 148,908 381,440 210,117 1,746,923 $2,751,755 $2,751,755
Average Interest Rate... 7.05% 7.13% 7.88% 7.38% 7.54% 6.83%
Variable Rate........... -- -- -- $7,000 -- -- $7,000 $7,000
</TABLE>
16
<PAGE>
BOSTON PROPERTIES, INC.
PART II. OTHER INFORMATION
ITEM 2--Changes in Securities
On February 10, 1999, the Company closed on Phase 2 of its acquisition of
Embarcadero Center. Consideration included the issuance of 2,000,000 shares of
Series A Convertible Redeemable Preferred Stock. Such shares were issued in a
transaction that was exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) of such Act.
On March 26, 1999, the Company acquired Sumner Square for consideration that
included the issuance of 3,252 OP Units. Such OP Units were issued to
accredited investors in a transaction that was exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) of such Act.
ITEM 6--Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -- ----------------------- ---
<C> <S> <C> <C>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
A Form 8-K dated January 26, 1999 was filed with the Securities and Exchange
Commission to report under Item 5 of such report the information presented to
investors and analysts and the Company's press release for the quarter ended
December 31, 1998.
A Form 8-K dated February 17, 1999 was filed with the Securities and
Exchange Commission to report under Item 5 of such report that the Company had
closed on phase two of the Embarcadero Center acquisition.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOSTON PROPERTIES, INC.
May 14, 1999
/s/ David G. Gaw
_____________________________________
David G. Gaw,
Chief Financial Officer
(duly authorized officer and
principal financial officer)
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 33,597
<SECURITIES> 0
<RECEIVABLES> 42,188
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 252,595
<PP&E> 5,018,949
<DEPRECIATION> 26,395
<TOTAL-ASSETS> 4,935,658
<CURRENT-LIABILITIES> 158,088
<BONDS> 0
0
100,000
<COMMON> 635
<OTHER-SE> 926,809
<TOTAL-LIABILITY-AND-EQUITY> 4,935,658
<SALES> 179,947
<TOTAL-REVENUES> 187,640
<CGS> 0
<TOTAL-COSTS> 142,213
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,459
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,934
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,934
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
