<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
NOVEMBER 12, 1998
BOSTON PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 1-13087 04-2473675
(State or other jurisdiction (Commission File (I.R.S. employer
of incorporation) Number) Identification No.)
8 ARLINGTON STREET
BOSTON, MASSACHUSETTS 02116
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(617) 859-2600
<PAGE>
Boston Properties, Inc. (the "Company") hereby amends its Current
Report on Form 8-K dated November 12, 1998, filed with the Securities and
Exchange Commission on November 25, 1998, to (i) add Item 5 below to describe
certain 1998 acquisitions that are individually insignificant under Rule 3-14 of
Regulation S-X, but when aggregated with all other individually insignificant
1998 acquisitions are significant under Rule 3-14 and (ii) amend Item 7 in its
entirety to include required financial statements, pro forma financial
information and certain exhibits.
ITEM 5. OTHER EVENTS
On June 25, 1998, the Company acquired University Place, an
approximately 196,000 square foot Class A office property located in
Cambridge, Massachusetts, for a total purchase price of approximately
$37.0 million. The Company financed the acquisition with cash.
On November 3, 1998, the Company acquired Reservoir Place, an
approximately 530,000 square foot Class A office property located in
Waltham, Massachusetts, for a total purchase price of approximately
$104.2 million. The Company financed the acquisition through the issuance
of common operating partnership units valued at approximately
$27.1 million and the assumption of debt with a fair value of approximately
$77.1 million.
The agreements made in connection with the acquisition of Reservoir
Place and University Place (the "Properties"), were negotiated at arms length
between the Company and representatives of the transferors. Neither the
Company, any subsidiary of the Company nor any director or officer of the
Company was affiliated with or had a material relationship with the
transferors. In determining the price to purchase the Properties, the Company
evaluated various factors, including, among others, the existing leases,
which are the primary source of revenue, the occupancy rates, the competitive
nature of the markets and comparative rental rates. Current and anticipated
operating expenses, maintenance and repair costs, real estate taxes and
capital improvement requirements were also evaluated. After reasonable
inquiry, the Company is not aware of any material factors (other than those
stated above) which would cause the reported financial information not to be
indicative of future operating results.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Assets Acquired:
Statement of Revenue over Certain Operating Expenses of University
Place for the fiscal year ended September 30, 1997 and (unaudited)
for the period from October 1, 1997 through June 24, 1998 (date of
acquisition).
Statement of Revenue over Certain Operating Expenses of Reservoir Place
for the year ended December 31, 1997 and (unaudited) for the nine
months ended September 30, 1998.
Combined Statement of Revenue over Certain Operating Expenses of the
Embarcadero Center Portfolio for the year ended December 31, 1997 and
(unaudited) for the nine months ended September 30, 1998.
(b) Pro Forma Financial Information:
The information contained in the following pro forma financial
statements assumes that both phases of the Embarcadero Center
acquisition have occurred in accordance with the agreements filed
on November 12, 1998.
Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1998 (unaudited).
Pro Forma Condensed Consolidated and Combined Statements of
Income for the nine months ended September 30, 1998 (unaudited)
and for the year ended December 31, 1997 (unaudited).
<PAGE>
(c) Exhibits
EXHIBIT NO.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of KPMG LLP, Independent Accountants.
99.1 Purchase and Sale Agreement, dated as of November 12, 1998, by
and between Two Embarcadero Center West and BP OFR LLC.*
99.2 Contribution Agreement, dated as of November 12, 1998, by and
among the Company, the Operating Partnership, Embarcadero
Center Investors Partnership ("ECIP") and the partners in ECIP
listed on Exhibit A thereto.*
99.3 Contribution Agreement, dated as of November 12, 1998, by and
among the Company, the Operating Partnership, Three
Embarcadero Center West ("Three ECW") and the partners in
Three ECW listed on Exhibit A thereto.*
99.4 Three ECW Redemption Agreement, dated as of November 12, 1998,
by and among Three ECW, the Operating Partnership, BP EC West
LLC, Prudential, PIC Realty Corporation ("PIC") and Prudential
Realty Securities II, Inc. ("PRS II").*
99.5 Three ECW Property Contribution Agreement, dated as of
November 12, 1998, by and among Three ECW, Prudential, PIC,
PRS II, the Operating Partnership, the Company and BP EC West
LLC.*
99.6 Registration Rights and Lock-Up Agreement, dated November 12,
1998, by and among the Company, the Operating Partnership and
the Holders named therein.*
99.7 Third Amended and Restated Partnership Agreement of One
Embarcadero Center Venture, dated as of November 12, 1998, by
and between Boston Properties LLC ("BPLLC"), as managing
general partner, BP EC1 Holdings LLC ("BP EC1 LLC"), as
non-managing general partner, and PIC, as non-managing general
partner.*
99.8 Third Amended and Restated Partnership Agreement of
Embarcadero Center Associates, dated as of November 12, 1998,
by and between BPLLC, as managing general partner, BP EC2
Holdings LLC ("BP EC2 LLC"), as non-managing general partner,
and PIC, as non-managing general partner.*
99.9 Second Amended and Restated Partnership Agreement of Three
Embarcadero Center Venture, dated as of November 12, 1998, by
and between BPLLC, as managing general partner, BP EC3
Holdings LLC ("BP EC3 LLC"), as non-managing general partner,
and Prudential, as non-managing general partner.*
99.10 Second Amended and Restated Partnership Agreement of Four
Embarcadero Center Venture, dated as of November 12, 1998, by
and between BPLLC, as managing general partner, BP EC4
Holdings LLC ("BP EC4 LLC"), as non-managing general partner,
and Prudential, as non-managing general partner.*
99.11 Note Purchase Agreement, dated as of November 12, 1998, by and
between Prudential Realty Securities, Inc. ("PRS") and One
Embarcadero Center Venture.*
99.12 Note Purchase Agreement, dated as of November 12, 1998, by and
between PRS and Embarcadero Center Associates.*
<PAGE>
99.13 Note Purchase Agreement, dated as of November 12, 1998, by and
between PRS and Three Embarcadero Center Venture.*
99.14 Note Purchase Agreement, dated as of November 12, 1998, by and
between PRS and Four Embarcadero Center Venture.*
99.15 Redemption Agreement, dated as of November 12, 1998, by and
among One Embarcadero Center Venture, BPLLC, BP EC1 LLC and
PIC.*
99.16 Redemption Agreement, dated as of November 12, 1998, by and
among Embarcadero Center Associates, BPLLC, BP EC2 LLC and
PIC.*
99.17 Redemption Agreement, dated as of November 12, 1998, by and
among Three Embarcadero Center Venture, BPLLC, BP EC3 LLC and
Prudential.*
99.18 Redemption Agreement, dated as of November 12, 1998, by and
among Four Embarcadero Center Venture, BPLLC, BP EC4 LLC and
Prudential.*
99.19 Option and Put Agreement, dated as of November 12, 1998, by
and between One Embarcadero Center Venture and Prudential.*
99.20 Option and Put Agreement, dated as of November 12, 1998, by
and between Embarcadero Center Associates and Prudential.*
99.21 Option and Put Agreement, dated as of November 12, 1998, by
and between Three Embarcadero Center Venture and Prudential.*
99.22 Option and Put Agreement, dated as of November 12, 1998, by
and between Four Embarcadero Center Venture and Prudential.*
99.23 Stock Purchase Agreement, dated as of September 28, 1998, by
and between the Company and Prudential.*
99.24 Certificate of Designations for the Series Two Preferred
Units, dated November 12, 1998.*
99.25 Certificate of Designations for the Series Three Preferred
Units, dated November 12, 1998.*
99.26 Form of Certificate of Designations for the Series A Preferred
Stock.*
- -------------------------------
*Previously filed.
<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 hereunto duly authorized.
Date: January 26, 1999
BOSTON PROPERTIES, INC.
By: /S/ DAVID G. GAW
-------------------------
David G. Gaw
Chief Financial Officer
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Boston Properties, Inc.:
We have audited the accompanying statement of revenue over certain
operating expenses of University Place in Cambridge, Massachusetts (the
"Property") for the fiscal year ended September 30, 1997. This statement is the
responsibility of the Property's management. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the statement of revenue
over certain operating expenses is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Property's
revenue and expenses.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described in
Note 2) of the Property for the fiscal year ended September 30, 1997 in
conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
December 11, 1998
<PAGE>
UNIVERSITY PLACE
STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(in thousands)
<TABLE>
<CAPTION>
For the For the Period
year ended from October 1, 1997
September 30, 1997 through June 24, 1998
------------------ ---------------------
(Unaudited)
Revenue:
<S> <C> <C>
Base rent $ 5,381 $ 4,085
Recoveries from tenants 222 159
Garage, net 1,132 870
------- -------
6,735 5,114
------- -------
Certain operating expenses:
Repairs and maintenance 247 220
Utilities 330 218
General and administrative 291 267
Janitorial and cleaning 168 131
Security 92 66
Insurance 30 23
Ground rent 566 425
Real estate taxes 1,248 920
------- -------
2,972 2,270
------- -------
Excess of revenue over certain operating expenses $ 3,763 $ 2,844
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the statement.
<PAGE>
UNIVERSITY PLACE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. DESCRIPTION OF THE PROPERTY
The accompanying statement of revenue over certain operating
expenses (the "Statement") includes the operations of an approximately
196,000 square foot Class A office property known as University Place,
(the "Property") located in Cambridge, Massachusetts. The Property was
acquired on June 25, 1998 by Boston Properties, Inc. from an unrelated
third party.
2. BASIS OF ACCOUNTING
The accompanying Statement has been prepared on the accrual
basis of accounting. The Statement has been prepared in accordance with
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission
for real estate properties acquired or to be acquired. Accordingly,
this Statement excludes certain historical expenses not comparable to
the operations of the Property after acquisition such as amortization,
depreciation, certain interest costs, corporate expenses and certain
other costs not directly related to the future operations of the
Property.
3. SIGNIFICANT ACCOUNTING POLICIES
RENTAL REVENUE
Rental income is recognized on the straight-line method over
the terms of the related leases. The excess of recognized rentals over
amounts due pursuant to lease terms is recorded as accrued rent. The
impact of the straight-line rent adjustment increased revenue by
approximately $233 and $72 for the fiscal year ended September 30, 1997
and for the period from October 1, 1997 through June 24, 1998
(unaudited), respectively.
UNAUDITED INTERIM INFORMATION
The statement of revenue over certain operating expenses for
the period from October 1, 1997 through June 24, 1998 is unaudited. In
the opinion of management, all adjustments necessary for a fair
presentation of such Statement have been included. The results of
operations for the period are not necessarily indicative of future
results of operations.
<PAGE>
UNIVERSITY PLACE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
4. DESCRIPTION OF LEASING ARRANGEMENTS
The space is leased to tenants under leases with terms that
vary in length. Minimum lease payments excluding reimbursement clauses
and renewal options to be received during the next five years and
thereafter for noncancelable operating leases in effect at
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, (IN THOUSANDS)
------------
<S> <C>
1998.......................... $5,433
1999.......................... 5,216
2000.......................... 3,587
2001.......................... 2,976
2002.......................... 2,981
Thereafter.................... 8,297
</TABLE>
As of September 30, 1997, three tenants occupied approximately
65% of the leasable square feet and represented approximately 67% of
the contract rent.
5. GROUND RENT
The Property is subject to a ground lease that expires
December 31, 2028 (the "Ground Lease"). The Ground Lease, as amended,
requires a minimum payment of $500 per annum, plus the greater of
escalation rent and percentage rent, as defined in the agreement. The
ground lease provides the holder with an option to purchase the lease
interest commencing January 1, 2001. The purchase option is at the
greater of the fair market value or a calculated amount as defined
in the agreement.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Boston Properties, Inc.:
We have audited the accompanying statement of revenue over certain
operating expenses of Reservoir Place in Waltham, Massachusetts (the "Property")
for the year ended December 31, 1997. This statement is the responsibility of
the Property's management. Our responsibility is to express an opinion on this
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the statement of revenue over
certain operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Property's
revenue and expenses.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described in
Note 2) of the Property for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
December 18, 1998
<PAGE>
RESERVOIR PLACE
STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(in thousands)
<TABLE>
<CAPTION>
For the
For the nine months
year ended ended
December 31, 1997 September 30, 1998
----------------- -------------------
(Unaudited)
Revenue:
<S> <C> <C>
Base rent $ 11,387 $ 9,414
Recoveries from tenants 835 657
Other income 58 16
------- --------
12,280 10,087
------- --------
Certain operating expenses:
Repairs and maintenance 714 644
Janitorial and cleaning 463 420
Security 179 153
Utilities 201 236
General and administrative 109 84
Insurance 93 81
Real estate taxes 1,741 1,315
Interest expense 6,038 4,528
------- --------
9,538 7,461
------- --------
Excess of revenue over certain operating expenses $ 2,742 $ 2,626
------- --------
<S> ------- <C> --------
</TABLE>
The accompanying notes are an integral part of the Statement.
<PAGE>
RESERVOIR PLACE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. DESCRIPTION OF THE PROPERTY
The accompanying statement of revenue over certain operating
expenses (the "Statement") includes the operations of an approximately
530,000 square foot Class A office property known as Reservoir Place,
(the "Property") located in Waltham, Massachusetts. The Property was
acquired on November 3, 1998 by Boston Properties, Inc. from an
unrelated third party.
2. BASIS OF ACCOUNTING
The accompanying Statement has been prepared on the accrual
basis of accounting. The Statement has been prepared in accordance with
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission
for real estate properties acquired or to be acquired. Accordingly,
this Statement excludes certain historical expenses not comparable to
the operations of the Property after acquisition such as amortization,
depreciation, property management fees, certain interest costs,
corporate expenses and certain other costs not directly related to the
future operations of the Property.
3. SIGNIFICANT ACCOUNTING POLICIES
RENTAL REVENUE
Rental income is recognized on the straight-line method over
the terms of the related leases. The excess of recognized rentals over
amounts due pursuant to lease terms is recorded as accrued rent. The
impact of the straight-line rent adjustment increased revenue by
approximately $149 and $37 for the year ended December 31, 1997 and for
the nine months ended September 30, 1998 (unaudited), respectively.
UNAUDITED INTERIM INFORMATION
The statement of revenue over certain operating expenses for
the nine months ended September 30, 1998 is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of
such Statement have been included. The results of operations for the
period are not necessarily indicative of future results of operations.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
<PAGE>
RESERVOIR PLACE
NOTES TO STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
4. DESCRIPTION OF LEASING ARRANGEMENTS
The space is leased to tenants under leases with terms that
vary in length. Minimum lease payments excluding reimbursement clauses
and renewal options to be received during the next five years and
thereafter for noncancelable operating leases in effect at December 31,
1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
------------
<S> <C>
1998............................ $12,866
1999............................ 11,935
2000............................ 9,620
2001............................ 7,409
2002............................ 3,642
Thereafter...................... 3,988
</TABLE>
As of December 31, 1997, three tenants occupied approximately
37% of the leasable square feet and represented approximately 33% of
the contract rent.
5. DEBT ASSUMPTION
In connection with the acquisition, the mortgage debt (the
"Note") encumbering the Property totaling $66,444 at December 31, 1997
was assumed. The terms of the Note were modified upon assumption to
eliminate current principal payments. The Note requires interest only
payments through May 1, 1999 at an interest rate of 9.0866% and
principal and interest payments at an interest rate of 9.6457%
thereafter until maturity on November 1, 2006.
Principal payments due on the Note during the next five years
and thereafter are approximately as follows:
<TABLE>
<S> <C>
1998.................... $ --
1999.................... 326
2000.................... 603
2001.................... 712
2002.................... 1,342
Thereafter 63,461
</TABLE>
6. RELATED PARTY TRANSACTIONS
The property reimbursed an affiliate for salary and wages and
administrative costs totaling approximately $337 and $255 for the year
ended December 31, 1997 and the nine month period ended September 30,
1998 (unaudited), respectively.
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders of
Boston Properties, Inc.:
We have audited the accompanying Combined Statement of Revenue over Certain
Operating Expenses (the Statement) of the Embarcadero Center Portfolio, which
is comprised of One Embarcadero Center, Two Embarcadero Center, Three
Embarcadero Center, Four Embarcadero Center, Two Embarcadero Center West and
Three Embarcadero Center West, for the year ended December 31, 1997. The
Statement is the responsibility of management. Our responsibility is to express
an opinion on the Statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the Statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall Statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Statement was prepared to comply with the requirements of
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and
excludes certain expenses, described in note 2, that would not be comparable
to those resulting from the proposed future operations of the properties. It
is not intended to be a complete presentation of the operations of the
properties.
In our opinion, the Statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses, as described
in Note 2, of the Embarcadero Center Portfolio for the year ended December
31, 1997, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
San Francisco, California
December 18, 1998
<PAGE>
EMBARCADERO CENTER PORTFOLIO
COMBINED STATEMENTS OF REVENUE OVER CERTAIN OPERATING EXPENSES
(in thousands)
<TABLE>
<CAPTION>
For the
For the nine months
year ended ended
December 31, September 30,
1997 1998
------------------ ------------------
(Unaudited)
<S> <C> <C>
Rental:
Office rent (note 5) $ 93,594 $ 72,990
Retail rent 8,925 6,591
Escalation 2,672 2,281
Retail area charges 2,592 1,935
------------------ ------------------
Total rental 107,783 83,797
Other:
Storage 505 378
Parking (note 5) 7,854 6,546
Other income 3,130 2,594
------------------ ------------------
Total other 11,489 9,518
------------------ ------------------
Total revenue 119,272 93,315
------------------ ------------------
Certain operating expenses (notes 5 and 6):
Utilities 8,259 6,649
Security 3,427 2,565
Repairs and maintenance 16,167 11,876
Advertising and promotions 1,576 1,088
Insurance 4,150 2,501
Property tax 6,154 5,005
Interest on assumed loan 10,618 5,578
Other 1,291 955
------------------ ------------------
Total expenses 51,642 36,217
------------------ ------------------
Excess of revenue over certain
operating expenses $ 67,630 $ 57,098
------------------ ------------------
------------------ ------------------
</TABLE>
See accompanying notes to combined statements of revenue over certain
operating expenses.
<PAGE>
EMBARCADERO CENTER
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
(1) DESCRIPTION OF THE PROPERTIES
The accompanying statements of revenue over certain operating
expenses (the "Statement") includes the collective operations of the
Embarcadero Center Portfolio, which is comprised of six Class A
buildings with approximately 3.6 million square feet of net rentable
office space, 354,000 square feet of retail space and 2,090
underground parking spaces, known as One Embarcadero Center, Two
Embarcadero Center, Three Embarcadero Center, Four Embarcadero Center,
Two Embarcadero Center West, and Three Embarcadero Center West (the
"Properties") located in San Francisco, California. The Properties
were acquired by Boston Properties, Inc. on November 12, 1998 from an
unrelated third party.
(2) BASIS OF ACCOUNTING
The accompanying Statement has been prepared on the accrual method of
accounting. The Statements have been prepared in accordance with Rule
3-14 of Regulation S-X of the Securities and Exchange Commission for
real estate properties acquired or to be acquired. Accordingly, these
Statements exclude certain historical expenses not comparable to the
operations of the Properties after acquisition such as amortization,
depreciation, administrative and management fees and interest as these
expenses would not be comparable to the proposed future operations of
the Properties.
The acquisition of the Properties may result in a new valuation for
purposes of determining future property tax assessments.
(3) SIGNIFICANT ACCOUNTING POLICIES
(A) RENTAL REVENUE
Rental income of the Properties is recognized on a straight-line
basis over the terms of the related leases. The excess of
recognized rentals over amounts due pursuant to lease terms is
recorded as accrued rent. The impact of the straight-line rent
adjustment increased revenue by approximately $431 for the year
ended December 31, 1997 and decreased revenue by approximately
$148 for the nine months ended September 30, 1998 (unaudited).
(B) UNAUDITED INTERIM INFORMATION
The statement of revenue over certain operating expenses for
the nine months ended September 30, 1998 is unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such combined statement have been included.
(C) RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE>
EMBARCADERO CENTER
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
(4) DESCRIPTION OF LEASING ARRANGEMENTS
The office and retail space is leased to tenants under leases with terms
that vary in length. Minimum lease payments excluding reimbursement
clauses, percentage lease revenue of $663 and renewal options to be
received during the next five years and thereafter under noncancelable
operating leases in effect at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31: (IN THOUSANDS)
------------------------ --------------
<S> <C>
1998 $ 100,414
1999 91,165
2000 82,546
2001 74,271
2002 61,618
Thereafter 190,737
</TABLE>
(5) RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, affiliates of the Properties
leased space, including parking spaces, at the Properties. In 1997,
parking revenue includes approximately $579 from leased parking spaces
with affiliates and rental revenue includes $1,196 from leased
facilities with affiliates.
The Properties reimburse an affiliate for their pro rata share of
advertising and promotions expense. In addition, the Properties
reimburse the affiliate for salaries and wages, including benefits, of
affiliate employees who work on the Properties. Such salaries and
wages are included in security, repairs and maintenance,
administration, advertising and promotions, and other expenses line
items.
Included in the Statement are the following fees and reimbursements:
<TABLE>
<CAPTION>
1997
--------
<S> <C>
Security $ 138
Repairs and maintenance 56
Advertising and promotions 374
Other expenses 100
--------
$ 668
--------
--------
</TABLE>
The Properties participate in an insurance purchasing arrangement
administered by an affiliate whereby the affiliate purchases certain
insurance for the Properties and are reimbursed for such cost. The
affiliate is not an insurer under the arrangement. The total
reimbursements to the affiliate during 1997 totaled $73.
<PAGE>
EMBARCADERO CENTER
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
(6) DEBT ASSUMPTION
In connection with the acquisition of the Embarcadero Center Portfolio
Boston Properties, Inc. assumed a mortgage note payable secured by the
Four Embarcadero Center property. The assumed note had resulted from a
refinancing that was completed as of January 26, 1998. The interest
expense reflected in the Statement relates to the debt assumed.
Prepayment penalties and related swap termination costs incurred in
1998 are not reflected in the accompanying financial statements. The
principal amount of the note assumed was $108,698. The note bears
interest at a fixed rate of 6.83% and is payable in equal monthly
installments, including principal and interest, of $766. The note is
based on a 25 year amortization schedule, with the remaining principal
balance due and payable at maturity on February 1, 2008.
<PAGE>
BOSTON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1998
(Unaudited)
The accompanying unaudited Pro Forma Condensed Consolidated Balance Sheet of
Boston Properties, Inc. (the "Company") is presented as if the acquisitions
subsequent to September 30, 1998, Embarcadero Center and Reservoir Place (the
"Acquisition Properties"), had been consummated on September 30, 1998.
This Pro Forma Consolidated financial information should be read in conjunction
with Form 10-Q for the nine months ended September 30, 1998 (unaudited).
The following Pro Forma Condensed Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position would have been assuming the
above transactions had been consummated on September 30, 1998 nor does it
purport to represent the future financial position of the Company.
<PAGE>
Boston Properties
Pro Forma Condensed Consolidated Balance Sheet
September 30, 1998
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
---------------- -----------
BOSTON ACQUISITION
PROPERTIES, INC. PROPERTIES PRO FORMA
---------------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Real Estate and equipment: $3,562,645 $1,312,022 $4,874,667
Less accumulated depreciation (335,821) -- (335,821)
---------------- ----------- -----------
Total real estate and equipment 3,226,824 1,312,022 (A) 4,538,846
Cash and cash equivalents 15,544 15,544
Escrows 19,668 -- 19,668
Tenant and other receivables 33,160 -- 33,160
Accrued rental income 67,692 67,692
Deferred charges 41,244 2,013 (B) 43,257
Prepaid expenses and other assets 23,064 -- 23,064
Investment in joint ventures 32,136 -- 32,136
---------------- ----------- -----------
Total assets $3,459,332 $1,314,035 $4,773,367
---------------- ----------- -----------
---------------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $1,752,430 $ 807,128 (C) $2,559,558
Unsecured line of credit 195,000 93,447 (C) 288,447
Accounts payable and accrued expenses 41,502 -- 41,502
Accrued interest payable 4,784 -- 4,784
Other liabilities 26,357 -- 26,357
---------------- ----------- -----------
Total liabilities 2,020,073 900,575 2,920,648
Minority interests 462,015 413,460 (D) 875,475
Stockholders' equity:
Excess stock, $.01 par value, 150,000,000
shares authorized, none issued and
outstanding
Preferred stock, $.01 par value, 50,000,000
shares authorized, none issued or
outstanding
Common Stock: $.01 par value, 250,000,000
shares authorized, 63,527,552 issued and
outstanding 635 -- 635
Additional paid in capital 949,972 -- 949,972
Retained earnings 26,637 -- 26,637
---------------- ----------- -----------
Total stockholders' equity 977,244 -- 977,244
---------------- ----------- -----------
Total liabilities and
stockholders' equity $3,459,332 $1,314,035 $4,773,367
---------------- ----------- -----------
---------------- ----------- -----------
</TABLE>
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(dollars in thousands)
(A) Represents the acquisition price, including closing costs, of the
Acquisition Properties as follows:
<TABLE>
<S> <C>
Embarcadero Center (1)................... $1,207,834
Reservoir Place (2)...................... 104,188
----------
Total Acquired Properties $1,312,022
----------
----------
</TABLE>
1) The acquisition of the Embarcadero Center includes the issuance
of $386.4 million in Preferred Operating Partnership
Units (the "Preferred Units), the assumption of debt and new
mortgage acquisition financing totaling $730,000 and a draw
from the Unsecured Line of Credit of approximately $91,434.
2) The acquisition of Reservoir Place was funded through the
assumption of mortgage debt with a fair value of $77,128
and the issuance of approximately $27,060 of Operating
Partnership Units (the "OP Units").
(B) Represents costs incurred to refinance debt in connection with the
acquisition of Embarcadero Center.
(C) Represents the following debt transactions related to the Acquired
Properties:
MORTGAGE NOTES PAYABLE
<TABLE>
<S> <C>
Mortgage assumed in connection with the acquisition of Embarcadero Center............................ $ 108,698
Mortgage financing in connection with the acquisition of Embarcadero Center .......................... 621,302
Mortgage assumed in connection with the acquisition of Reservoir Place at
fair value ........................................................................................... 77,128
--------
Net increase in mortgage notes payable ............................................................... $807,128
--------
--------
UNSECURED LINE OF CREDIT
Draw down on Unsecured Line of Credit in connection with the acquisition and
refinancing of Embarcadero Center .................................................................... $ 93,447
--------
</TABLE>
(D) Adjustment to minority interest to reflect change as a result of the
increase in outstanding OP Units as a result of the issuance of OP Units
with a fair value of approximately $27.1 million in connection with the
acquisition of Reservoir Place and the issuance of Preferred Units
of $386.4 million in connection with the acquisition of Embarcadero
Center.
<PAGE>
BOSTON PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED
AND COMBINED STATEMENTS OF INCOME
For the nine months ended
September 30, 1998 and the year ended December 31, 1997
(Unaudited)
The accompanying unaudited Pro Forma Condensed Consolidated Statements of Income
for the nine months ended September 30, 1998 and for the year ended December 31,
1997 are presented as if the following transactions had occurred on January 1,
1997: (i) the consummation of the initial public offering (the "Initial
Offering") and related formation transactions, (ii) the consummation of the
second offering and private sale of common stock, (iii) the acquisition of the
previously completed 1997 acquisitions reported on Form 8-K's previously
filed with the Securities and Exchange Commission (the "1997 Acquired
Properties"), (iv) the 1998 acquisitions for which financial statements are
required to be filed pursuant to Rule 3-14 (the "1998 Acquired Properties"),
(v) the closing of mortgage financing and refinancings, and (vi) the drawdown
on the Unsecured Line of Credit as a result of acquisitions.
The operations of the hotel properties and certain parking garages have been
included in the pro forma financial information pursuant to participating lease
agreements for the Company to continue to qualify as a REIT under IRC
Section 856.
This Pro Forma Condensed Consolidated and Combined Statements of Income
should be read in conjunction with the historical consolidated and combined
financial statement and notes thereto of the Company and the Predecessor
Company, reported on Form 10-K for the year ended December 31, 1997 and on
Form 10-Q for the nine month period ended September 30, 1998.
The unaudited Pro Forma Condensed Consolidated financial information prepared
by Boston Properties' management is not necessarily indicative of what the
actual results of operations would have been for the nine month period ended
September 30, 1998 or for the year ended December 31, 1997, had the
previously described transactions actually occurred on January 1, 1997 and
the effect thereof carried forward through the nine month period ended
September 30, 1998, nor do they purport to present the future results of
operations of the Company.
<PAGE>
Boston Properties, Inc.
Pro Forma Condensed Consolidated and Combined Statements of Income
For the nine months ended September 30, 1998
(unaudited)
(dollars in thousands, except per share date)
<TABLE>
<CAPTION>
Boston
Properties, Inc.
------------------
Nine months
ended 1998 Other
September 30, 1998 Acquisitions Adjustments Pro Forma
------------------ ------------ ----------- ---------
(A)
<S> <C> <C> <C> <C>
Revenue:
Rental
Base rent $286,610 $155,457 $442,067
Recoveries from tenants 33,027 13,602 46,629
Parking and other 5,880 13,373 19,253
-------- -------- ------- --------
Total rental revenue 325,517 182,432 507,949
Development and management services 8,893 8,893
Interest and other 9,410 $ (8,353)(B) 1,057
-------- -------- ------- --------
Total revenue 343,820 182,432 (8,353) 517,899
-------- -------- ------- --------
Expenses
Rents:
Operating 50,444 41,780 92,224
Real estate taxes 46,744 17,994 64,738
General and administrative 16,750 - 2,325 (C) 19,075
Interest 81,926 16,251 44,177 (D) 142,354
Depreciation and amortization 51,212 30,559 (E) 81,771
-------- -------- ------- --------
Total expenses 247,076 106,584 46,502 400,162
-------- -------- ------- --------
Income before minority interests 96,744 75,848 (54,855) 117,737
Minority interest in property partnership (390) - - (390)
-------- -------- ------- --------
Income before minority interest in Operating Partnership
and extraordinary item 96,354 75,848 (54,855) 117,347
Minority interest in Operating Partnership (25,025) - (20,374)(F) (45,399)
-------- -------- ------- --------
Income before extraordinary item $ 71,329 $ 75,848 $(75,229) $ 71,948
-------- -------- ------- --------
-------- -------- ------- --------
Income before extraordinary item per common share-basic $ 1.19 $1.13
-------- ---------
-------- ---------
Weighted average number of common shares outstanding-basic 60,101 63,528
-------- ---------
-------- ---------
</TABLE>
<PAGE>
BOSTON PROPERTIES, INC
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
(A) Reflects the historical results of operations, as adjusted for base rent,
interest and depreciation, for the 1998 Acquired Properties for the nine
months ended September 30, 1998 as follows:
<TABLE>
<CAPTION>
Riverfront Mulligan/ Carnegie Prudential Metropolitan
Plaza (1) Griffin(1) Center (1) Center (1) Square (1)
----------- ------------ ---------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent $ 1,121 $ 2,357 $ 13,857 $ 30,098 $ 10,282
Adjustment (2) -- -- 537 1,791 209
-------- -------- -------- -------- --------
Total base rent 1,121 2,357 14,394 31,889 10,491
Recoveries from tenants 217 526 3,449 3,959 474
Other 117 530 232 2,391 --
-------- -------- -------- -------- --------
Total rental revenue 1,455 3,413 18,075 38,239 10,965
Expenses:
Operating 255 387 3,087 8,097 1,819
Real estate taxes 137 135 2,127 7,084 1,589
Interest -- 677 2,076 (3) -- 3,922 (4)
Depreciation and amortization 236 452 2,588 4,879 1,832
-------- -------- -------- -------- --------
Total expenses 628 1,651 9,878 20,060 9,162
-------- -------- -------- -------- --------
Net income $ 827 $ 1,762 $ 8,197 $ 18,179 $ 1,803
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
University Embarcadero Reservoir Total 1998
Place (1) Center (1) Place (1) Acquisitions
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Revenue:
Rental:
Base rent $ 2,672 $ 79,581 $ 9,414 $149,382
Adjustment (2) 33 3,449 56 6,075
-------- -------- -------- ---------
Total base rent 2,705 83,030 9,470 155,457
Recoveries from tenants 104 4,216 657 13,602
Other 569 9,518 16 13,373
-------- -------- -------- ---------
Total rental revenue 3,378 96,764 10,143 182,432
Expenses:
Operating 883 25,634 1,618 41,780
Real estate taxes 602 5,005 1,315 17,994
Interest -- 5,578 3,998 (5) 16,251
Depreciation and amortization 353 18,632 1,587 30,559
-------- -------- -------- ---------
Total expenses 1,838 54,849 8,518 106,584
-------- -------- -------- ---------
Net income $ 1,540 $ 41,915 $ 1,625 $ 75,848
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
(1) Reflects results of operations prior to acquisition.
(2) Represents an adjustment to straight-line rent based on the pro
forma acquisition date of January 1, 1997.
(3) Includes an adjustment of $15 to reflect effective interest
expense on the mortgage debt assumed.
(4) Includes an adjustment of ($1,098) to reflect effective interest
expense on the mortgage debt assumed.
(5) Includes an adjustment of ($530) to reflect effective interest
expense on the mortgage debt assumed.
(B) Reflects the net decrease in interest income as a result of cash used to
acquire the 1998 Acquired Properties.
(C) Reflects an incremental increase in general and administrative costs
related to the 1998 Acquired Properties and the establishment of regional
offices.
(D) Reflects increase in interest expense as a result of the following
transactions:
<TABLE>
<S> <C>
Interest on mortgage acquisition financing of Embarcadero Center in the principal
amount of $621,302 computed at an average interest rate of 6.63% ..................... $ 30,894
Interest on mortgage acquisition financing of the Prudential Center in the
principal amount of $300,000 computed at an interest rate of 6.72%
. .................................................................................... 10,108
Interest on Unsecured Line of Credit as a result of the 1998 Acquired Properties ..... 4,694
Interest on mortgage acquisition financing of Riverfront Plaza in the principal amount
of $121,800 computed at an interest rate of 6.61% .................................... 485
Amortization of deferred financing fees as a result of approximately $2.0
million of fees associated with the mortgage financing of Embarcadero
Center. The deferred fees are amortized over a weighted average of 8.7
years ................................................................................ 173
Interest reduction on refinancing and partial paydown of the Mulligan/Griffin
Portfolio loans ...................................................................... (1,377)
Interest reduction on paydown of $30 million related to the 875 Third Avenue
mortgage loan ........................................................................ (800)
--------
Net increase in interest expense ..................................................... $ 44,177
--------
--------
</TABLE>
(E) Detail of pro forma depreciation expense is presented below for the 1998
Acquired Properties:
<TABLE>
<CAPTION>
PURCHASE PRO FORMA
PROPERTIES PRICE DEPRECIATION(1)
----------------------------- --------------- -----------------
<S> <C> <C>
Riverfront Plaza(2) $ 174,361 236
Mulligan/Griffin Portfolio(2) 257,890 452
Carnegie Center Portfolio (2) 276,000 2,588
Prudential Center(2) 518,982 4,879
Metropolitan Square(2) 175,000 1,832
Embarcadero Center 1,207,834 18,632
Reservoir Place 104,188 1,587
University Place(2) 37,000 353
-----------------
$ 30,559
-----------------
-----------------
</TABLE>
(1) Represents depreciation expense on the properties which has been
calculated over 40 years for the building and over the life of the
lease for tenant improvements.
(2) Reflects pro forma depreciation expense for the period prior to
acquisition.
<PAGE>
BOSTON PROPERTIES, INC
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
(F) Reflects the adjustment for the Operating Partnership unit holders' share
of pro forma income before extraordinary items, including a distribution on
the preferred units.
<PAGE>
Boston Properties, Inc.
Pro Forma Condensed Consolidated Statements of Income
For the year ended December 31, 1997
(unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Boston
Properties
Boston Predecessor
Properties, Inc. Group
----------------- ------------- Pro Forma Adjustments
June 23, 1997 Jan.1, 1997 IPO
to to Formation Acquisition
December 31, 1997 June 22, 1997 Transactions Property
----------------- ------------- ------------ -----------
(A) (B)
<S> <C> <C> <C> <C>
Revenue:
Rental:
Base rent $ 126,401 $ 80,122 $ 9,396 $ 1,498
Recoveries from tenants 12,564 10,283 -- 101
Parking and other 676 3,397 (1,061) --
--------- --------- --------- ---------
Total rental revenue 139,641 93,802 8,335 1,599
Hotel -- 31,185 (31,185) --
Development and management services 3,813 3,685 (452) --
Interest and other 2,189 1,146 (352) --
--------- --------- --------- ---------
Total revenue 145,643 129,818 (23,654) 1,599
--------- --------- --------- ---------
Expenses:
Rental:
Operating 19,591 13,650 (353) 437
Real estate taxes 20,502 13,382 1,345 172
Hotel:
Operating -- 20,938 (20,938) --
Real estate taxes -- 1,514 (1,514) --
General and administrative 6,689 5,116 391 --
Interest 38,264 53,324 (28,151) --
Depreciation and amortization 21,719 17,054 124 210
--------- --------- --------- ---------
Total expenses 106,765 124,978 (49,096) 819
--------- --------- --------- ---------
Income before minority interests 38,878 4,840 25,442 780
Minority interest in property partnership (215) (235) -- --
--------- --------- --------- ---------
Income before minority interest in Operating Partnership
and extraordinary item 38,663 4,605 25,442 780
Minority interest in Operating Partnership (11,437) -- -- --
--------- --------- --------- ---------
Income before extraordinary item $ 27,226 $ 4,605 $ 25,442 $ 780
--------- --------- --------- ---------
--------- --------- --------- ---------
Income before extraordinary item per common share-basic $ 0.70
---------
---------
Weighted average number of common shares outstanding-basic 38,694
---------
---------
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------------------------------------------------
1997 1998 Other
Acquisitions Acquisitions Adjustments Pro Forma
------------ ------------ ----------- ---------
(C) (C)
<S> <C> <C> <C> <C>
Revenue:
Rental:
Base rent $ 54,440 $ 277,152 -- $ 549,009
Recoveries from tenants 7,639 30,027 -- 60,614
Parking and other 347 18,520 -- 21,879
--------- --------- --------- ---------
Total rental revenue 62,426 325,699 -- 631,502
Hotel -- --
Development and management services -- 7,046
Interest and other $ (2,983)(D) --
--------- --------- --------- ---------
Total revenue 62,426 325,699 (2,983) 638,548
--------- --------- --------- ---------
Expenses:
Rental:
Operating 14,580 75,816 123,721
Real estate taxes 13,049 33,026 81,476
Hotel:
Operating --
Real estate taxes --
General and administrative 4,300 (E) 16,496
Interest 11,138 36,851 87,182 (F) 198,608
Depreciation and amortization 7,709 55,583(G) 102,399
--------- --------- --------- ---------
Total expenses 46,476 201,276 91,482 522,700
--------- --------- --------- ---------
Income before minority interests 15,950 124,423 (94,465) 115,848
Minority interest in property partnership -- -- -- (450)
--------- --------- --------- ---------
Income before minority interest in Operating Partnership
and extraordinary item 15,950 124,423 (94,465) 115,398
Minority interest in Operating Partnership -- -- (42,638) (H) (54,075)
--------- --------- --------- ---------
Income before extraordinary item $ 15,950 $ 124,423 ($137,103) $ 61,323
--------- --------- --------- ---------
--------- --------- --------- ---------
Income before extraordinary item per common share-basic $ 0.97
---------
---------
Weighted average number of common shares outstanding-basic 63,528
---------
---------
</TABLE>
<PAGE>
BOSTON PROPERTIES, INC.
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
Notes to the Pro Forma Consolidated and Combined Statement of Income for the
year ended December 31, 1997
(A) Reflects the pro forma Formation Transactions adjustment summary for the
period from January 1, 1997 to June 22, 1997 (the "Predecessor Period").
<TABLE>
<CAPTION>
Rent
Hotels Interest Property Property
Pro Forma and Parking Hotel Mgmt and Operating Real Estate
Adjustments Garage Income Revenue Fees Other Expenses Taxes
- ----------- ------ ------ -------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(1) Assignment of contracts...................... $(452)
(2) Equity investment income..................... $ 21
(3) Operation of hotels and garage............... $(1,061) $(31,185) $(353) $1,345
(4) Rental of hotels and garage.................. $9,396
(5) General and administrative...................
(6) Amortization of deferred financing costs.....
(7) Release of restricted cash................... (373)
(8) Depreciation expense.........................
(9) Mortgage interest............................
------ ------- -------- ----- ----- ----- -------
Pro Forma Formation Transactions adjustment
summary total $9,396 $(1,061) $(31,185) $(452) $(352) $(353) $1,345
------ ------- -------- ----- ----- ----- -------
------ ------- -------- ----- ----- ----- -------
<CAPTION>
Hotel
Hotel Real General
Pro Forma Operating Estate & Interest Depreciation
Adjustments Expenses Taxes Admin Expense Expense
- ----------- --------- ------ ------- -------- ------------
<S> <C> <C> <C> <C> <C>
(1) Assignment of contracts...................... $(430)
(2) Equity investment income.....................
(3) Operation of hotels and garage.............. $(20,938) $(1,514)
(4) Rental of hotels and garage..................
(5) General and administrative................... 821
(6) Amortization of deferred financing costs..... $ (189)
(7) Release of restricted cash...................
(8) Depreciation expense......................... $124
(9) Mortgage interest............................ (27,962)
-------- ------- ------ -------- ----
Pro Forma Formation Transactions adjustment
summary total $(20,938) $(1,514) $ 391 $(28,151) $124
-------- ------- ------ -------- ----
-------- ------- ------ -------- ----
</TABLE>
(1) In connection with the Formation Transactions, certain third-party
management contracts were assigned to the Development and Management
Company. As a result of the assignment, operating income, expenses
and overhead attributable to the contracts were reflected in the
operations of the Development and Management Company as detailed
below:
<TABLE>
<CAPTION>
<S> <C>
Management services............................................... $ 452
General and administrative expenses............................... (430)
-----
Manager contract income...................................... $ 22
-----
-----
</TABLE>
(2) The Operating Partnership holds a 95% economic interest in the
Development and Management Company and records an equity interest of
$21 on the $22 net income.
(3) In connection with the Formation Transactions, the Operating
Partnership entered into participating leases for the operation of
the hotels and parking garage. As a result of these agreements,
revenue and expenses will not be reflected from the operation of
these businesses.
(4) Represents rental income from the leasing of the hotels and parking
garage owned by the Operating Partnership. The hotel lease
arrangements are with an affiliate.
(5) Reflects an increase of $821 in general and administrative expenses
as a result of operating as a public company.
(6) Reflects the net increase of $290 in the amortization of deferred
financing costs for the $1,800 fee and related professional costs on
the Unsecured Line of Credit, less a net reduction of $479 in
amortization of deferred financing costs related to debt paid off
with the Initial Offering proceeds.
(7) Reflects the decrease in interest income as a result of the release
of cash previously required to be held in escrow per the terms of
the various mortgage note payable agreements.
(8) Reflects the increase in depreciation from depreciating over 40
years the pro forma increase in real estate from the purchase of
limited partners' interests and transfer cost paid.
(9) Reflects the repayment of a portion of the existing mortgage
indebtedness from proceeds of the Initial Offering for the Predecessor
Period:
<TABLE>
<CAPTION>
Principal Interest
Properties Amount Rate Interest
- ---------- --------- -------- --------
<S> <C> <C> <C>
599 Lexington Avenue......................................... $225,000 7.00% $ 7,547
Two Independence Square...................................... 122,505 7.90% 4,637
One Independence Square...................................... 78,327 7.90% 2,965
2300 N Street................................................ 66,000 7.00% 2,214
Capital Gallery.............................................. 60,559 8.24% 2,391
Ten Cambridge Center......................................... 25,000 7.57% 907
191 Spring Street............................................ 23,883 8.50% 973
Bedford Business Park........................................ 23,376 8.50% 952
10 & 20 Burlington Mall Road................................. 16,621 8.33% 663
Cambridge Center North Garage................................ 15,000 7.57% 544
91 Hartwell Avenue........................................... 11,322 8.33% 452
92 & 100 Hayden Avenue....................................... 9,057 8.33% 362
Montvale Center.............................................. 7,969 8.59% 328
Newport Office Park.......................................... 6,874 8.13% 268
Hilltop Business Center...................................... 4,750 7.00% 159
--------
Total..................................................... 25,362
Historical interest expense- Predecessor Period.............. (53,324)
--------
Pro forma interest expense adjustment for the
Predecessor Period.......................................... $(27,962)
--------
--------
</TABLE>
(B) Reflects the results of operations, as adjusted for depreciation, of the
Newport Office Park, acquired concurrent with the Initial Offering, for the
period from January 1, 1997 to June 22, 1997 (the acquisition date).
(C) Reflects the historical results of operations, as adjusted for base rent,
interest and depreciation, for the 1997 and 1998 Acquired Properties for
the year ended December 31, 1997 as follows:
<PAGE>
<TABLE>
<CAPTION>
280 Park Ave 100 East Pratt 875 Third Ave Total 1997
(1) (1) (1) Acquisitions
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue:
Rental:
Base rent $17,012 $10,924 $18,646 $46,582
Adjustment(2) 7,437 397 24 7,858
--------- --------- --------- ---------
Total rental revenue 24,449 11,321 18,670 54,440
Recoveries from tenants 1,707 2,133 3,799 7,639
Parking and other 80 267 -- 347
--------- --------- --------- ---------
Total revenue 26,236 13,721 22,469 62,426
--------- --------- --------- ---------
Expenses:
Rental:
Operating 7,772 3,453 3,355 14,580
Real estate taxes 6,677 1,541 4,831 13,049
Interest
Depreciation and amortization 3,355 1,934 2,420 7,709
--------- --------- --------- ---------
Total expenses 17,804 6,928 21,744 46,476
--------- --------- --------- ---------
Net income $ 8,432 $ 6,793 $ 725 $ 15,950
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(1) Reflects results of operations prior to acquisition.
(2) Represents an adjustment to straight-line rent based on the pro
forma acquisition date of January 1, 1997.
(3) Includes an adjustment of ($675) to reflect effective interest on
the mortgage debt assumed.
<TABLE>
<CAPTION>
Riverfront Mulligan/ Carnegie Prudential Metropolitan
Plaza Griffin Center Center Square
------------ ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental:
Base rent $ 17,299 $ 25,924 $ 27,294 $ 56,052 $ 19,255
Adjustment (1) 909 464 1,127 3,542 148
-------- -------- -------- -------- --------
Total base rent 18,208 26,388 28,421 59,594 19,403
Recoveries from tenants 2,891 5,314 7,128 7,273 1,100
Parking and Other 454 -- 427 4,960 --
-------- -------- -------- -------- --------
Total rental revenue 21,553 31,702 35,976 71,827 20,503
Expenses:
Rental:
Operating 3,954 3,927 7,034 19,368 3,180
Real estate taxes 1,625 1,608 4,253 13,543 2,854
Interest -- 8,692(2) 4,835(3) -- 7,334(4)
Depreciation and amortization 3,923 5,480 5,175 9,731 3,500
-------- -------- -------- -------- --------
Total expenses 9,502 19,707 21,297 42,642 16,868
-------- -------- -------- -------- --------
Net income $ 12,051 $ 11,995 $ 14,679 $ 29,185 $ 3,635
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Embarcadero Reservoir University Total 1998
Center Place Place Acquisitions
----------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Rental:
Base rent $102,519 $ 11,387 $ 5,381 $265,111
Adjustment (1) 5,706 78 67 12,041
-------- -------- -------- --------
Total base rent 108,225 11,465 5,448 277,152
Recoveries from tenants 5,264 835 222 30,027
Other 11,489 58 1,132 18,520
-------- -------- -------- --------
Total rental revenue 124,978 12,358 6,802 325,699
-------- -------- -------- --------
Expenses:
Rental:
Operating 34,870 1,759 1,724 75,816
Real estate taxes 6,154 1,741 1,248 33,026
Interest 10,618 5,372(5) -- 36,851
Depreciation and amortization 24,912 2,122 740 55,583
-------- -------- -------- --------
Total expenses 76,554 10,994 3,712 201,276
-------- -------- -------- --------
Net income $ 48,424 $ 1,364 $ 3,090 $124,423
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(1) Represents an adjustment to straight-line rent based on the pro
forma acquisition date of January 1, 1997.
(2) Includes an adjustment of ($1,671) to reflect the effective
interest expense of the mortgage debt assumed.
(3) Includes and adjustment of $28 to reflect effective interest
expense on the mortgage debt assumed.
(4) Includes an adjustment of ($2,255) to reflect effective interest
expense on the mortgage debt assumed.
(5) Includes an adjustment of ($666) to reflect effective interest
expense on the mortgage debt assumed.
(D) Reflects reduction in interest income as a result of cash used for the
acquisition of properties.
(E) Reflects an incremental increase in general and administrative costs
related to the 1997 and 1998 Acquired Properties and the establishment of
regional offices.
(F) Reflects increase in interest expense as a result of the following
transactions:
<TABLE>
<S> <C>
Interest on mortgage acquisition financing of Embarcadero Center in the principal
amount of $621,302 computed at an average interest rate of 6.63% ..................... $ 41,192
Interest on mortgage acquisition financing of the Prudential Center in the principal
amount of $300,000 computed at an interest rate of 6.72% ............................. 20,160
Interest on Unsecured Line of Credit as a result of the 1997 and 1998 Acquired
Properties ........................................................................... 14,526
Interest on mortgage acquisition financing of 280 Park Avenue in the
original principal amount of $220 million computed at an interest rate of
7.00% for the period January 1, 1997 to September 11, 1997 (date of
acquisition) ......................................................................... 10,675
Interest on mortgage acquisition financing of Riverfront Plaza in the principal amount
of $121,800 computed at an interest rate of 6.61% .................................... 8,051
</TABLE>
<PAGE>
BOSTON PROPERTIES, INC
NOTES TO THE PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
<TABLE>
<S> <C>
Amortization of deferred financing fees as a result of approximately $2.0
million of fees associated with the mortgage financing of Embarcadero
Center. The deferred fees are amortized over a weighted average of 8.7
years ................................................................................ 231
Amortization of deferred financing fees for the period from January 1, 1997
to September 11, 1997 (date of acquisition) as a result of approximately
$1.1 million of fees associated with the mortgage financing of 280 Park
Avenue. The deferred financing fees are amortized over the five year term
of the loan .......................................................................... 153
Interest reduction on refinancing and partial paydown of the Mulligan/Griffin
Portfolio loans ...................................................................... (5,406)
Interest reduction on paydown of $30 million related to the 875 Third Avenue
mortgage loan ........................................................................ (2,400)
--------
Net increase in interest expense ..................................................... $ 87,182
--------
--------
</TABLE>
(G) Detail of pro forma depreciation expense is presented below for the 1998
Acquired Properties:
<TABLE>
<CAPTION>
Purchase Pro forma
Properties Price Depreciation(1)
----------------------------- ------------------ ---------------
<S> <C> <C>
Riverfront Plaza $ 174,361 $ 3,923
Mulligan/Griffin Portfolio 257,890 5,480
Carnegie Center Portfolio 276,000 5,175
Prudential Center 518,982 9,731
Metropolitan Square 175,000 3,500
Embarcadero Center 1,207,834 24,912
Reservoir Place 104,188 2,122
University Place 37,000 740
--------------
$ 55,583
--------------
--------------
</TABLE>
(1) Represents depreciation expense on the properties which has been
calculated over 40 years for the building and over the life of the
lease for tenant improvements.
(H) Reflects the adjustment for the operating partnership unit
holders' share of pro forma income before extraordinary items,
including the distribution on the preferred units.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Boston Properties, Inc. on Forms S-3 (files Nos. 333-69375, 333-70765 and
333-68379) of our reports indicated below with respect to the financial
statements indicated below, which reports are included in this Form 8-K/A of
Boston Properties, dated January 26, 1999.
<TABLE>
<CAPTION>
Date of
Independent
Financial Statements Accountants Report
-------------------- ------------------
<S> <C>
Statement of revenue over certain expenses
of University Place for the year ended September 30, 1997.......... December 11, 1998
Statement of revenue over certain operating expenses
of Reservoir Place for the year ended December 31, 1997............ December 18, 1998
</TABLE>
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
January 25, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
Nos. 333-69375, 333-70765, and 333-68379 on Form S-3 of Boston Properties,
Inc. of our report dated December 18, 1998 relating to the Combined Statement
of Revenues over Certain Operating Expenses of Embarcadero Center Portfolio
for the year ended December 31, 1997, which report appears in this Form
8-K/A. Our report on the Combined Statement of Revenues over Certain
Operating Expenses contains a paragraph indicating that the Statement was
prepared for the purpose of complying with the requirements of Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission and excludes certain
expenses that would not be comparable to those resulting from the proposed
future operations of the properties. It is not intended to be a complete
presentation of the operations of the properties.
/s/ KPMG LLP
San Francisco, California
January 21, 1999
