<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 3, 1998
EQUITY OFFICE PROPERTIES TRUST
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
MARYLAND 1-13115 36-4151656
(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification No.)
Incorporation or Organization)
TWO NORTH RIVERSIDE PLAZA 60606
SUITE 2200, CHICAGO ILLINOIS (Zip Code)
(Address of Principal Executive
Offices)
</TABLE>
(312) 466-3300
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Financial Statements
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUITY OFFICE PROPERTIES TRUST
Date: September 3, 1998 By: /s/ STANLEY M. STEVENS
------------------------------------
Stanley M. Stevens
Executive Vice President,
Chief Legal Counsel and Secretary
3
<PAGE> 4
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
Capitalized terms used herein are as defined in the Company's Annual Report
on Form 10-K, as amended by Form 10-K/A, for the year ended December 31, 1997
and the Company's Form 10-Q for the six months ended June 30, 1998.
The accompanying unaudited Pro Forma Condensed Combined Balance Sheet as of
June 30, 1998 reflects the following transactions which all occurred or are
expected to occur subsequent to June 30, 1998: (a) the acquisition or probable
acquisition of 13 office properties; (b) the purchase of a mortgage receivable
for $245.0 million; and (c) the $50.0 million investment in preferred shares of
Capital Trust.
The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended June 30, 1998 reflects the following
transactions as if they had occurred on January 1, 1998: (a) the acquisition of
13 office properties, and one parking facility, acquired during the six months
ended June 30, 1998; (b) the acquisition of 10 office properties, acquired
between July 1, 1998 and July 29, 1998; (c) the purchase of the remaining
partnership interests in one of the Company's unconsolidated joint ventures; (d)
the probable acquisition of three office properties; (e) the purchase of a
mortgage receivable for $245.0 million; (f) the $50.0 million investment in
preferred shares of Capital Trust; (g) the February 1998 Notes Offering; (h) the
Series B Preferred Shares Offering; (i) the increase in the $600 Million Credit
Facility to $1.0 billion; (j) the UIT Offering; and (k) the June 1998 Notes
Offering.
The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1997 reflects the following
transactions as if they had occurred on January 1, 1997: (a) the acquisition of
66 office properties, including 20 office properties acquired by Beacon prior to
the Beacon Merger, and seven parking facilities, including an interest in four
parking facilities, acquired during the year ended December 31, 1997; (b) the
disposition of three office properties; (c) the $180 million private debt
offering (the "$180 Million Notes Offering") which occurred on September 3,
1997; (d) the transactions that occurred in connection with the consolidation of
the entities which comprise the predecessors ("Equity Office Predecessors") of
the Company (the "Consolidation") and the initial public offering (the "IPO"),
which closed on July 11, 1997, and the decrease in interest expense resulting
from the use of the net proceeds for the repayment of mortgage debt; (e) the net
change in interest expense from draws on the $1.5 Billion Credit Facility used
to refinance existing mortgage debt; (f) the Beacon Merger; (g) the acquisition
of 23 office properties and one parking facility acquired between January 1,
1998 and July 29, 1998; (h) the purchase of the remaining partnership interest
in one of the Company's unconsolidated joint ventures; (i) the probable
acquisition of three office properties; (j) the purchase of a mortgage
receivable for $245.0 million; (k) the $50.0 million investment in preferred
shares of Capital Trust; (l) the February 1998 Notes Offering; (m) the Series B
Preferred Shares Offering; (n) the increase in the $600 Million Credit Facility
to $1.0 billion; (o) the UIT Offering; and (p) the June 1998 Notes Offering.
The accompanying unaudited pro forma condensed combined financial
statements have been prepared by management of the Company and do not purport to
be indicative of the results which would actually have been obtained had the
transactions described above been completed on the dates indicated or which may
be obtained in the future. The pro forma condensed combined financial statements
should be read in conjunction with the accompanying notes to the pro forma
condensed combined financial statements as of and for the six months ended June
30, 1998 and the year ended December 31, 1997, included elsewhere herein.
4
<PAGE> 5
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 ACQUIRED
EQUITY OFFICE PROPERTIES AND EQUITY OFFICE
PROPERTIES TRUST PROBABLE CAPITAL TRUST PROPERTIES TRUST
HISTORICAL ACQUISITIONS INVESTMENT PRO FORMA
---------------- -------------- ------------- ----------------
(A) (B)
<S> <C> <C> <C> <C>
ASSETS
Investment in real estate, net........ $12,217,747 $341,377 $ -- $12,559,124
Cash and cash equivalents............. 52,751 (40,000) -- 12,751
Rents and other receivables........... 84,258 -- -- 84,258
Escrow deposits and restricted cash... 31,713 -- -- 31,713
Investments in unconsolidated joint
ventures and mortgage
receivables........................ 350,022 245,000 -- 595,022
Other assets.......................... 138,643 -- 50,000 188,643
----------- -------- ------- -----------
TOTAL ASSETS.................. $12,875,134 $546,377 $50,000 $13,471,511
=========== ======== ======= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage debt......................... $ 2,112,024 $ -- $ -- $ 2,112,024(C)
Unsecured notes....................... 2,459,481 -- -- 2,459,481(C)
Lines of credit....................... 367,944 542,003 50,000 959,947(C)
Distribution payable.................. 92,951 -- -- 92,951
Other liabilities..................... 348,142 -- -- 348,142
----------- -------- ------- -----------
TOTAL LIABILITIES............. 5,380,542 542,003 50,000 5,972,545
Minority interests:
Operating Partnership.............. 718,806 4,374 -- 723,180
Partially owned properties......... 29,695 -- -- 29,695
Preferred Shares (100,000 authorized
and 14,000 issued)................. 500,000 -- -- 500,000
Common Shares......................... 2,521 -- -- 2,521
Additional paid in capital............ 6,243,570 -- -- 6,243,570
----------- -------- ------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........ $12,875,134 $546,377 $50,000 $13,471,511
=========== ======== ======= ===========
</TABLE>
5
<PAGE> 6
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 ACQUIRED
EQUITY OFFICE PROPERTIES AND FEBRUARY 1998 SERIES B JUNE 1998
PROPERTIES TRUST PROBABLE NOTES PREFERRED UIT NOTES
HISTORICAL ACQUISITIONS OFFERING OFFERING OFFERING OFFERING
---------------- -------------- ------------- --------- -------- ---------
(D) (Q)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental....................... $597,901 $ 57,977 $ -- $ -- $ -- $ --
Tenant reimbursements........ 108,743 6,668 -- -- -- --
Parking...................... 44,607 3,198 -- -- -- --
Other........................ 13,640 906 -- -- -- --
Fees from noncombined
affiliates................. 2,664 -- -- -- -- --
Interest..................... 6,209 -- -- -- -- --
-------- -------- ----- ------- ----- -------
Total revenues......... 773,764 68,479 -- -- -- --
-------- -------- ----- ------- ----- -------
Expenses:
Property operating........... 276,907 24,856 -- -- -- --
Interest..................... 150,030 42,110 508(R) (2,774)(S) (760)(U) 1,966(V)
Depreciation................. 133,430 14,710 -- -- -- --
Amortization................. 2,747 -- -- -- -- --
General and administrative... 28,440 -- -- -- -- --
-------- -------- ----- ------- ----- -------
591,554 81,676 508 (2,774) (760) 1,966
-------- -------- ----- ------- ----- -------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint ventures
and mortgage receivables..... 182,210 (12,927) (508) 2,774 760 (1,966)
Minority interests:
Operating Partnership...... (17,026) 507 53 (61) (79) 203
Partially owned
properties............... (1,036) -- -- -- -- --
Income from investment in
unconsolidated joint ventures
and mortgage receivables..... 5,026 1,263 -- -- -- --
-------- -------- ----- ------- ----- -------
Net income from continuing
operations................... 169,174 (11,157) (455) 2,713 681 (1,763)
-------- -------- ----- ------- ----- -------
Preferred dividends........... (14,703) -- -- (2,188)(T) -- --
-------- -------- ----- ------- ----- -------
Net income available for
Common Shares................ $154,471 $(11,157) $(455) $ 525 $ 681 $(1,763)
======== ======== ===== ======= ===== =======
Net income available per
weighted average Common Share
Outstanding (Basic)..........
Weighted Average Common Shares
Outstanding (Basic)..........
Net income available per
weighted average Common Share
Outstanding (Diluted)........
Weighted Average Common Shares
Outstanding (Diluted)........
<CAPTION>
CAPITAL EQUITY OFFICE
TRUST PROPERTIES TRUST
INVESTMENT PRO FORMA
---------- ----------------
(W)
<S> <C> <C>
Revenues:
Rental....................... $ -- $655,878
Tenant reimbursements........ -- 115,411
Parking...................... -- 47,805
Other........................ -- 14,546
Fees from noncombined
affiliates................. -- 2,664
Interest..................... 2,063 8,272
------ --------
Total revenues......... 2,063 844,576
------ --------
Expenses:
Property operating........... -- 301,763
Interest..................... 1,625 192,705
Depreciation................. -- 148,140
Amortization................. -- 2,747
General and administrative... -- 28,440
------ --------
1,625 673,795
------ --------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint ventures
and mortgage receivables..... 438 170,781
Minority interests:
Operating Partnership...... (45) (16,448)(X)
Partially owned
properties............... -- (1,036)
Income from investment in
unconsolidated joint ventures
and mortgage receivables..... -- 6,289
------ --------
Net income from continuing
operations................... 393 159,586
------ --------
Preferred dividends........... -- (16,891)
------ --------
Net income available for
Common Shares................ $ 393 $142,695
====== ========
Net income available per
weighted average Common Share
Outstanding (Basic).......... $ 0.57
========
Weighted Average Common Shares
Outstanding (Basic).......... 252,078
========
Net income available per
weighted average Common Share
Outstanding (Diluted)........ $ 0.56
========
Weighted Average Common Shares
Outstanding (Diluted)........ 282,381
========
</TABLE>
6
<PAGE> 7
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
EQUITY BEACON
OFFICE BEACON MERGER
PROPERTIES 1997 CONSOLIDATION PROPERTIES AND
TRUST ACQUIRED FINANCING AND IPO CORPORATION HISTORICAL
HISTORICAL PROPERTIES DISPOSITIONS ACTIVITY ADJUSTMENTS HISTORICAL ADJUSTMENTS
---------- ---------- ------------ --------- ------------- ----------- -----------
(D) (E) (F) (L)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental................... $570,379 $245,032 $(5,645) $ -- $ 8,983 (H) $299,196 $5,834(M)
Tenant reimbursements.... 106,437 54,560 (62) -- -- 39,856 --
Parking.................. 47,051 17,229 (573) -- -- -- --
Other.................... 9,863 4,307 (431) -- -- 11,907 --
Fees from noncombined
affiliates............. 4,950 -- -- -- 3,090 --
Interest/dividends....... 13,392 69 -- -- -- 10,067 --
-------- -------- ------- -------- -------- -------- ------
Total revenues.... 752,072 321,197 (6,711) -- 8,983 364,116 5,834
-------- -------- ------- -------- -------- -------- ------
Expenses:
Property operating....... 282,964 124,069 (2,710) -- -- 107,905 --
Interest................. 164,105 94,782 (36) 16,606(G) (27,042)(I) 52,344 943(N)
Depreciation............. 122,074 56,550 (2,071) -- 2,737 (J) 65,034 5,374(O)
Amortization............. 7,357 -- (54) -- -- 4,209 --
General and
administrative......... 34,891 2,185 (283) -- 1,800 (K) 37,455 --(P)
-------- -------- ------- -------- -------- -------- ------
611,391 277,586 (5,154) 16,606 (22,505) 266,947 6,317
-------- -------- ------- -------- -------- -------- ------
Income before allocation to
minority interests,
income from investment in
unconsolidated joint
ventures and mortgage
receivables.............. 140,681 43,611 (1,557) (16,606) 31,488 97,169 (483)
Minority interests:
Operating Partnership.... (7,010) -- -- -- (13,170) (12,021) 2,305
Partially owned
properties............. (1,701) -- -- -- -- -- --
Income from investment in
unconsolidated joint
ventures and mortgage
receivables.............. 5,155 1,581 -- -- 6,087
-------- -------- ------- -------- -------- -------- ------
Net income from continuing
operations............... 137,125 45,192 (1,557) (16,606) 18,318 91,235 1,822
-------- -------- ------- -------- -------- -------- ------
Preferred dividends........ (649) (7,962) -- -- (9,349) --
-------- -------- ------- -------- -------- -------- ------
Net income available to
Common Shares............ $136,476 $ 37,230 $(1,557) $(16,606) $ 18,318 $ 81,886 $1,822
======== ======== ======= ======== ======== ======== ======
Net income available per
weighted average Common
Share Outstanding
(Basic)..................
Weighted Average Common
Shares Outstanding
(Basic)..................
Net income available per
weighted average Common
Share Outstanding
(Diluted)................
Weighted Average Common
Shares Outstanding
(Diluted)................
</TABLE>
7
<PAGE> 8
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 ACQUIRED FEBRUARY JUNE
PROPERTIES AND 1998 SERIES B 1998 CAPITAL
PROBABLE NOTES PREFERRED UIT NOTES TRUST
ACQUISITIONS OFFERING OFFERING OFFERING OFFERING INVESTMENT
-------------- -------- --------- -------- -------- ----------
(Q) (W)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental....................... $142,892 $ -- $ -- $ -- $ -- $ --
Tenant reimbursements........ 20,564 -- -- -- -- --
Parking...................... 7,449 -- -- -- -- --
Other........................ 2,662 -- -- -- -- --
Fees from noncombined
affiliates................. -- -- -- -- -- --
Interest..................... -- -- -- -- -- 4,125
-------- ------- --------- ---------- ----- ------
Total revenues......... 173,567 -- -- -- -- 4,125
-------- ------- --------- ---------- ----- ------
Expenses:
Property operating........... 66,901 -- -- -- -- --
Interest..................... 100,427 3,735(R) (19,976)(S) (3,040)(U) 479(V) 3,450
Depreciation................. 33,876 -- -- -- -- --
Amortization................. -- -- -- -- -- --
General and administrative... -- -- -- -- -- --
-------- ------- --------- ---------- ----- ------
201,204 3,735 (19,976) (3,040) 479 3,450
-------- ------- --------- ---------- ----- ------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint ventures
and mortgage receivables..... (27,637) (3,735) 19,976 3,040 (479) 675
Minority interests:
Operating Partnership...... 2,827 388 (439) (316) 50 (70)
Partially owned
properties............... -- -- -- -- -- --
Income from investment in
unconsolidated joint ventures
and mortgage receivables..... 573 -- -- -- -- --
-------- ------- --------- ---------- ----- ------
Net income from continuing
operations................... (24,237) (3,347) 19,537 2,724 (429) 605
-------- ------- --------- ---------- ----- ------
Preferred dividends............ -- -- (15,750)(T) -- -- --
-------- ------- --------- ---------- ----- ------
Net income available for Common
Shares....................... $(24,237) $(3,347) $ 3,787 $ 2,724 $(429) $ 605
======== ======= ========= ========== ===== ======
Net income available per
weighted average Common Share
Outstanding (Basic)..........
Weighted Average Common Shares
Outstanding (Basic)..........
Net income available per
weighted average Common Share
Outstanding (Diluted)........
Weighted Average Common Shares
Outstanding (Diluted)........
<CAPTION>
EQUITY OFFICE
PROPERTIES TRUST
PRO FORMA
----------------
<S> <C>
Revenues:
Rental....................... $1,266,671
Tenant reimbursements........ 221,355
Parking...................... 71,156
Other........................ 28,308
Fees from noncombined
affiliates................. 8,040
Interest..................... 27,653
----------
Total revenues......... 1,623,183
----------
Expenses:
Property operating........... 579,129
Interest..................... 386,777
Depreciation................. 283,574
Amortization................. 11,512
General and administrative... 76,048
----------
1,377,040
----------
Income before allocation to
minority interests, income
from investment in
unconsolidated joint ventures
and mortgage receivables..... 286,143
Minority interests:
Operating Partnership...... (27,456)(X)
Partially owned
properties............... (1,701)
Income from investment in
unconsolidated joint ventures
and mortgage receivables..... 13,396
----------
Net income from continuing
operations................... 270,382
----------
Preferred dividends............ (33,710)
----------
Net income available for Common
Shares....................... $ 236,672
==========
Net income available per
weighted average Common Share
Outstanding (Basic).......... $ 0.94
==========
Weighted Average Common Shares
Outstanding (Basic).......... 251,156
==========
Net income available per
weighted average Common Share
Outstanding (Diluted)........ $ 0.94
==========
Weighted Average Common Shares
Outstanding (Diluted)........ 282,275
==========
</TABLE>
8
<PAGE> 9
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
A. To reflect the following acquisitions during the period from July 1, 1998 to
July 29, 1998 and the Probable Acquisitions:
<TABLE>
<CAPTION>
VALUE
PURCHASE CASH LIABILITIES OF UNITS
PROPERTY DATE ACQUIRED PRICE PAID ISSUED ISSUED
-------- ------------- -------- ---- ----------- --------
<S> <C> <C> <C> <C> <C>
Northland Plaza............................. July 2, 1998 47,000 47,000 -- --
Miller Global Portfolio..................... July 15, 1998 125,003 73,938 51,065
Second and Spring........................... July 29, 1998 19,374 15,000 -- 4,374
Colonnade I, II and III..................... (1) 150,000 150,000 -- --
-------- -------- ------- ------
Total investment in real estate........ 341,377 360,007 51,065 4,374
Park Avenue Tower........................... July 15, 1998 245,000 245,000 -- --
-------- -------- ------- ------
Total investment in unconsolidated
joint ventures and mortgage
receivables.......................... 245,000 245,000 -- --
-------- -------- ------- ------
Total.................................. $586,377 $530,938 $51,065 $4,374
======== ======== ======= ======
</TABLE>
- -------------------------
(1) Probable Acquisition
B. On July 29, 1998, the Company completed the purchase of 50,000 shares of
Capital Trust 8.25% Step Up Convertible Preferred Securities, for $50
million, in a private placement.
C. Scheduled payments of principal on total indebtedness for each of the next
five years and thereafter, on a pro forma basis are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 213,886
1999........................................................ 52,908
2000........................................................ 158,451
2001........................................................ 1,303,936
2002........................................................ 319,583
Thereafter.................................................. 3,476,519
----------
Subtotal............................................... 5,525,283
Net premium (net of accumulated amortization of $2.1
million).................................................. 6,169
----------
Total............................................. $5,531,452
==========
</TABLE>
D. Represents the consolidated historical statement of operations of the
Company for the six months ended June 30, 1998 for the Pro Forma Condensed
Combined Statement of Operations for the six months ended June 30, 1998 and
the combined historical statements of operations of the Company for the
period from July 11, 1997 to December 31, 1997 and Equity Office
Predecessors for the period from January 1, 1997 to July 10, 1997, for the
Pro Forma Condensed Combined Statement of Operations for the year ended
December 31, 1997.
E. To reflect the operations and the depreciation expense for properties
acquired in 1997 for the period from January 1, 1997 through the date of
acquisition. Interest expense was also adjusted, where applicable, to a full
year, for the year ended December 31, 1997.
<TABLE>
<CAPTION>
NOTE
PROPERTY DATE ACQUIRED REFERENCE
-------- ------------- ---------
<S> <C> <C>
177 Broad Street............................................ January 29, 1997
Biltmore Apartments......................................... January 29, 1997
</TABLE>
9
<PAGE> 10
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
PROPERTY DATE ACQUIRED REFERENCE
-------- ------------- ---------
<S> <C> <C>
Preston Commons............................................. March 21, 1997
Oakbrook Terrace Tower...................................... April 16, 1997
50% Interest in Civic Parking, L.L.C........................ April 16, 1997
One Maritime Plaza.......................................... April 21, 1997
10880 Wilshire Boulevard.................................... April 23, 1997 (1)
Smith Barney Tower.......................................... April 29, 1997
201 Mission Street.......................................... April 30, 1997
Centerpointe I and II....................................... April 30, 1997 (1)
Westbrook Corporate Center.................................. May 23, 1997 (1)
225 Franklin Street......................................... June 4, 1997 (1)
30 N. LaSalle............................................... June 13, 1997
Sunnyvale Business Center................................... July 1, 1997 (1)
Adams -- Wabash Parking Facility............................ August 11, 1997
Columbus America Properties................................. September 3, 1997
Civic Opera Building........................................ October 1, 1997 (1)
Prudential Properties....................................... October 1, 1997
550 South Hope Street....................................... October 6, 1997
10 & 30 South Wacker Drive.................................. October 7, 1997
Acorn Properties............................................ October 7, 1997
200 West Adams.............................................. October 8, 1997 (1)
One Lafayette Centre........................................ October 17, 1997
Lakeside Office Park........................................ October 20, 1997 (1)
Acorn Properties............................................ November 21, 1997
PPM Properties.............................................. November 24, 1997
LaSalle Office Plaza........................................ November 25, 1997
Stanwix Parking Facility.................................... November 25, 1997
101 North Wacker............................................ December 11, 1997 (1)
Wright Runstad Properties................................... December 17, 1997
Wright Runstad Associates Limited Partnership............... December 17, 1997
</TABLE>
- -------------------------
(1) Represents properties acquired during 1997 by Beacon prior to the Beacon
Merger.
The depreciation adjustment of $56.6 million in the "1997 Acquired
Properties" column in the statement of operations for the year ended December
31, 1997, is based on the cost to acquire the above listed properties, assuming
that 10% of the purchase price is allocated to land and the depreciable lives
are 40 years. Depreciation is computed using the straight-line method.
F. To eliminate the operations of Barton Oaks Plaza II, Westlakes Office Park
and 8383 Wilshire for the year ended December 31, 1997. Barton Oaks Plaza II
was sold in January 1997 and Westlakes Office Park and 8383 Wilshire were
sold in May 1997.
G. To reflect the additional interest expense on debt obtained in the year
ended December 31, 1997 on properties acquired before 1997 and to reflect
the $180 Million Notes Offering which occurred on September 3, 1997, and the
resulting paydown of the revolving credit facility, and to reflect the
$235.3 million of mortgage indebtedness repaid from draws on the $1.5
Billion Credit Facility and the repayment of the revolving credit facility
balance. The adjustment also eliminates amortization expense recorded on the
mark-to-market adjustment on debt repaid from draws on the $1.5 Billion
Credit Facility
10
<PAGE> 11
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
and reflects amortization related to the fees associated with the $1.5
Billion Credit Facility for the year ended December 31, 1997, as follows:
<TABLE>
<S> <C>
Additional interest from debt obtained during 1997 on
properties acquired before 1997........................... $ 1,042
Additional interest on $180 Million Notes Offering.......... 9,218
Additional interest on $1.5 Billion Credit Facility......... 24,126
Decrease in interest from repayment of mortgage
indebtedness.............................................. (13,263)
Decrease in interest from repayment of the revolving credit
facility.................................................. (8,052)
Amortization of fees associated with the $1.5 Billion Credit
Facility.................................................. 5,018
Eliminate amortization expense recorded on mark to market
adjustment on debt repaid with the $1.5 Billion Credit
Facility.................................................. (1,483)
-------
Total....................................................... $16,606
=======
</TABLE>
H. To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the Consolidation and the IPO closed on January 1, 1997.
I. To reflect the net decrease in interest expense associated with the $15.0
million of mortgage debt on Denver Corporate Center Towers II and III
repaid in May 1997 and the $598.4 million repaid with the net proceeds of
the IPO and cash held by Equity Office Predecessors. In addition, to
eliminate the $5.9 million of amortization historically recognized as a
result of the write-off of deferred loan costs, net of the $4.1 million
amortization of the discount required to record the mortgage debt at fair
value recorded in connection with the Consolidation and the IPO.
J. To reflect depreciation expense related to the adjustment to record the net
equity value of the investment in real estate for the year ended December
31, 1997, on a straight-line basis, as follows:
<TABLE>
<S> <C>
Historical investment in real estate before accumulated
depreciation at time of IPO............................... $5,022,946
Less: Portion allocated to land estimated to be 10%......... (502,295)
----------
Depreciable basis........................................... $4,520,651
==========
Depreciation expense based on an estimated useful life of 40
years..................................................... $ 113,016
Less: Historical depreciation expense related to properties
contributed at the Consolidation and IPO.................. (106,888)
Less: Pro forma depreciation expense on properties acquired
in 1997 prior to the Consolidation and the IPO............ (3,391)
----------
Depreciation expense adjustment............................. $ 2,737
==========
</TABLE>
K. To reflect additional general and administrative expenses expected to be
incurred as a result of reporting as a public entity as follows:
<TABLE>
<S> <C>
Trustees' and officers' insurance........................... $ 375
Printing and mailing........................................ 375
Trustees' fees.............................................. 225
Investor relations.......................................... 225
Other....................................................... 600
------
Total....................................................... $1,800
======
</TABLE>
L. Represents Beacon's historical statement of operations prior to the Beacon
Merger for the period from January 1, 1997 to December 18, 1997.
11
<PAGE> 12
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
M. To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the Beacon Merger closed on January 1, 1997.
N. To reflect amortization of mark-to-market adjustment of Beacon's mortgage
debt.
O. To reflect the depreciation expense related to the adjustment to record the
net equity value of the investment in real estate and investment in joint
ventures on a straight-line basis for the year ended December 31, 1997
associated with the Beacon Merger, as follows:
<TABLE>
<S> <C>
Investment in real estate for Beacon Properties............. $4,204,502
Less: Portion allocated to land............................. (515,022)
----------
Pro Forma depreciable basis of Beacon's investment in real
estate, net............................................... $3,689,480
==========
Depreciation expense based on an estimated useful life of 40
years..................................................... $ 92,237
Less: Historical expense related to the Beacon Properties,
including the period from December 19, 1997 to December
31, 1997 after the Beacon Merger.......................... (73,393)
Less: Pro Forma depreciation expense on Beacon's 1997
acquired properties....................................... (13,470)
----------
Adjustment to depreciation expense.......................... $ 5,374
==========
</TABLE>
P. Management has estimated that there will be a reduction of general and
administrative expenses as a result of the Beacon Merger, as follows. The
general and administrative expenses savings have not been included in the
pro forma condensed combined statement of operations. There can be no
assurance that the Company will be successful in realizing such anticipated
cost savings.
<TABLE>
<S> <C>
Salaries and benefits....................................... $16,500
Rent........................................................ 1,200
Office and computer expenses................................ 1,600
Investor relations.......................................... 1,600
Other....................................................... 1,100
-------
Total....................................................... $22,000
=======
</TABLE>
Q. To reflect the operations and the depreciation expense for the following
properties acquired in 1998 for (a) the pro forma condensed combined
statement of operations for the six months ended June 30, 1998; for the
period from January 1, 1998 through the earlier of the date of acquisition
or June 30, 1998, as applicable, and (b) the pro forma condensed combined
statement of operations for the year ended December 31, 1997, for the period
from January 1, 1997 to December 31, 1997. Interest expense was also
12
<PAGE> 13
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
adjusted, where applicable, to reflect six months and a full year, for the
six months ended June 30, 1998 and the year ended December 31, 1997,
respectively.
<TABLE>
<CAPTION>
PROPERTY DATE ACQUIRED
-------- -------------
<S> <C>
BP Tower Garage............................................. January 29, 1998
100 Summer Street........................................... March 18, 1998
The Tower at New England Executive Park..................... March 31, 1998
Denver Post Tower........................................... April 21, 1998
301 Howard and 215 Fremont.................................. April 29, 1998
Miller Global Portfolio..................................... (1)
Millennium Plaza............................................ May 19, 1998
Polk & Taylor(2)............................................ May 22, 1998
Walker Building............................................. June 1, 1998
Columbia Seafirst Center.................................... June 26, 1998
Northland Plaza............................................. July 2, 1998
Park Avenue Tower(2)........................................ July 15, 1998
Second and Spring........................................... July 29, 1998
Colonnade I and II.......................................... Probable Acquisition
</TABLE>
- -------------------------
(1) The Company acquired four properties on April 30, 1998 and one property on
May 15, 1998 and the remaining eight properties on July 15, 1998.
The depreciation adjustment of $14,710 million for the six months ended June
30, 1998 and $33,876 million for the year ended December 31, 1997 is based
on the cost to acquire the properties described above assuming that 10% of
the purchase price is allocated to land and the depreciable lives are 40
years. Depreciation is computed using the straight-line method.
(2) Income from investment in unconsolidated joint ventures and mortgage
receivables has been adjusted for (i) the acquisition of a the remaining 90%
interest in Polk & Taylor; and (ii) the acquisition of mortgage receivable
on Park Avenue Tower.
R. To reflect the net increase in interest expense in connection with the
February 1998 Notes Offering and the paydown of the revolving credit
facility and the $1.5 Billion Credit Facility with the net proceeds of the
February 1998 Notes Offering and to reflect amortization of the financing
costs incurred in connection with the February 1998 Notes Offering.
S. To reflect the decrease in interest expense in connection with the paydown of
the Credit Facilities with the net proceeds of the Series B Preferred
Offering.
T. To reflect preferred dividends in connection with the Series B Preferred
Offering of 5.25% per annum.
U. To reflect the decrease in interest in connection with the paydown of the
Credit Facilities with the net proceeds of the UIT Offering.
V. To reflect the net increase in interest expense in connection with the June
1998 Notes Offering and the paydown of the revolving credit facility with
the net proceeds of the June 1998 Notes Offering and to reflect amortization
of the financing cost incurred in connection with the June 1998 Notes
Offering.
W. To reflect income from our investment in Capital Trust and interest expense
on the line of credit (see Note B).
13
<PAGE> 14
EQUITY OFFICE PROPERTIES TRUST
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
X. To reflect the 12.5% minority interests ownership in the Company at June 30,
1998 and December 31, 1997, respectively:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Historical allocation of income and minority interests...... $17,026 $ 7,010
Beacon minority interests allocation........................ -- 12,021
Minority interests allocation of income after pro forma
adjustments............................................... (578) 8,425
------- -------
Net income allocated to minority interests ownership in the
Company................................................... $16,448 $27,456
======= =======
</TABLE>
14
