<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
EOP OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
---------------------------
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
TWO NORTH RIVERSIDE PLAZA
SUITE 2200, CHICAGO, ILLINOIS
(Address of Principal Executive Offices)
1-13625
(Commission File Number)
36-4156801
(IRS Employer Identification No.)
60606
(Zip Code)
(312) 466-3300
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro Forma Financial Statements
1
<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.
EOP OPERATING LIMITED PARTNERSHIP
<TABLE>
<S> <C>
Date: September 3, 1998 By: /s/ STANLEY M. STEVENS
----------------------------------------------------
Stanley M. Stevens
Executive Vice President,
Chief Legal Counsel and Secretary
</TABLE>
2
<PAGE> 4
EOP OPERATING LIMITED PARTNERSHIP
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.
3
<PAGE> 5
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
EOP
EOP 1998 ACQUIRED OPERATING
OPERATING PROPERTIES CAPITAL LIMITED
LIMITED AND PROBABLY TRUST PARTNERSHIP
PARTNERSHIP ACQUISITIONS INVESTMENT PRO FORMA
----------- ------------- ---------- -----------
(A) (B)
(IN THOUSANDS)
<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 PARTNERS' CAPITAL
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:
Partially owned properties.............. 29,695 -- -- 29,695
Preferred Units............................ 500,000 -- -- 500,000
General Partners' Capital.................. 115,704 -- -- 115,704
Limited Partners' Capital.................. 6,849,193 4,374 -- 6,853,567
----------- -------- ------- -----------
Total Liabilities and Partners'
Capital............................ $12,875,134 $546,377 $50,000 $13,471,511
=========== ======== ======= ===========
</TABLE>
4
<PAGE> 6
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
EOP OPERATING 1998 ACQUIRED
LIMITED PROPERTIES AND FEBRUARY SERIES B JUNE 1998
PARTNERSHIP PROBABLE 1998 NOTES PREFERRED UIT NOTES
HISTORICAL ACQUISITIONS OFFERING OFFERING OFFERING OFFERING
------------- -------------- ---------- --------- -------- ---------
(D) (Q)
(IN THOUSANDS)
<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/dividends............ 6,209 -- -- -- -- --
-------- -------- ----- ------- ----- -------
Total revenues.............. 773,764 68,749 -- -- -- --
-------- -------- ----- ------- ----- -------
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:
Partially owned
properties................ (1,036) -- -- -- -- --
Income from investment in
unconsolidated joint ventures
and mortgage receivables...... 5,026 1,263 -- -- -- --
-------- -------- ----- ------- ----- -------
Net income from continuing
operations.................... 186,200 (11,664) (508) 2,774 760 (1,966)
-------- -------- ----- ------- ----- -------
Preferred dividends............ (14,703) -- -- (2,188)(T) -- --
-------- -------- ----- ------- ----- -------
Net income available for
Units......................... $171,497 $(11,664) $(508) $ 586 $ 760 $(1,966)
======== ======== ===== ======= ===== =======
Net income available per
weighted average Unit
outstanding
(Basic).......................
Weighted Average Units
Outstanding (Basic)...........
Net income available per
weighted average Unit
outstanding (Diluted).........
Weighted Average Units
Outstanding (Diluted).........
<CAPTION>
EOP OPERATING
CAPITAL LIMITED
TRUST PARTNERSHIP
INVESTMENT PRO FORMA
---------- -------------
(W)
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Rental........................ $ -- $655,878
Tenant reimbursements......... -- 115,411
Parking....................... -- 47,805
Other......................... -- 14,546
Fees from noncombined
affiliates.................. -- 2,664
Interest/dividends............ 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:
Partially owned
properties................ -- (1,036)
Income from investment in
unconsolidated joint ventures
and mortgage receivables...... -- 6,289
------ --------
Net income from continuing
operations.................... 438 176,034
------ --------
Preferred dividends............ -- (16,891)
------ --------
Net income available for
Units......................... $ 438 $159,143
====== ========
Net income available per
weighted average Unit
outstanding
(Basic)....................... $ 0.57
========
Weighted Average Units
Outstanding (Basic)........... 281,261
========
Net income available per
weighted average Unit
outstanding (Diluted)......... $ 0.56
========
Weighted Average Units
Outstanding (Diluted)......... 282,381
========
</TABLE>
5
<PAGE> 7
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
EOP
OPERATING BEACON BEACON
LIMITED 1997 CONSOLIDATION PROPERTIES MERGER AND
PARTNERSHIP ACQUIRED FINANCING AND IPO L.P. 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:
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................... 144,135 45,192 (1,557) (16,606) 31,488 103,256 (483)
-------- -------- ------- -------- -------- -------- ------
Preferred dividends............ (649) (7,962) -- -- -- (9,349) --
-------- -------- ------- -------- -------- -------- ------
Net income available for
Units........................ $143,486 $ 37,230 $(1,557) $(16,606) $ 31,488 $ 93,907 $ (483)
======== ======== ======= ======== ======== ======== ======
Net income available per
weighted average Unit
outstanding (Basic)..........
Weighted Average Units
Outstanding (Basic)..........
Net income available per
weighted average Unit
outstanding (Diluted)........
Weighted Average Units
Outstanding (Diluted)........
</TABLE>
6
<PAGE> 8
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 ACQUIRED
PROPERTIES AND FEBRUARY SERIES B JUNE
PROBABLE 1998 NOTES PREFERRED UIT 1998 NOTES
ACQUISITIONS OFFERING OFFERING OFFERING OFFERING
-------------- ---------- --------- -------- ----------
(Q)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental................. $142,892 $ -- $ -- $ -- $ --
Tenant
reimbursements....... 20,564 -- -- -- --
Parking................ 7,449 -- -- -- --
Other.................. 2,662 -- -- -- --
Fees from noncombined
affiliates........... -- -- -- -- --
Interest/dividends..... -- -- -- -- --
-------- ------- -------- ------- -----
Total revenues... 173,567 -- -- -- --
-------- ------- -------- ------- -----
Expenses:
Property operating..... 66,901 -- -- -- --
Interest............... 100,427 3,735(R) (19,976)(S) (3,040)(U) 479(V)
Depreciation........... 33,876 -- -- -- --
Amortization........... -- -- -- -- --
General and
administrative....... -- -- -- -- --
-------- ------- -------- ------- -----
201,204 3,735 (19,976) (3,040) 479
-------- ------- -------- ------- -----
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)
Minority interests:
Partially owned
properties........... -- -- -- -- --
Income from investment in
unconsolidated joint
ventures and mortgage
receivables............ 573 -- -- -- --
-------- ------- -------- ------- -----
Net income from
continuing
operations............. (27,064) (3,735) 19,976 3,040 (479)
-------- ------- -------- ------- -----
Preferred dividends...... -- -- (15,750)(T) --
-------- ------- -------- ------- -----
Net income available for
Units.................. $(27,064) $(3,735) $ 4,226 $ 3,040 $(479)
======== ======= ======== ======= =====
Net income available per
weighted average Unit
outstanding (Basic)....
Weighted Average Units
Outstanding (Basic)....
Net income available per
weighted average Unit
outstanding
(Diluted)..............
Weighted Average Units
Outstanding
(Diluted)..............
<CAPTION>
EOP OPERATING
LIMITED
CAPITAL TRUST PARTNERSHIP
INVESTMENT PRO FORMA
------------- -------------
(W)
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Rental................. $ -- $1,266,671
Tenant
reimbursements....... -- 221,355
Parking................ -- 71,156
Other.................. -- 28,308
Fees from noncombined
affiliates........... -- 8,040
Interest/dividends..... 4,125 27,653
------ ----------
Total revenues... 4,125 1,623,183
------ ----------
Expenses:
Property operating..... -- 579,129
Interest............... 3,450 386,777
Depreciation........... -- 283,574
Amortization........... -- 11,512
General and
administrative....... -- 76,048
------ ----------
3,450 1,377,040
------ ----------
Income before allocation
to minority interests,
income from investment
in unconsolidated joint
ventures and mortgage
receivables............ 675 286,143
Minority interests:
Partially owned
properties........... -- (1,701)
Income from investment in
unconsolidated joint
ventures and mortgage
receivables............ -- 13,396
------ ----------
Net income from
continuing
operations............. 675 297,838
------ ----------
Preferred dividends...... (33,710)
------ ----------
Net income available for
Units.................. $ 675 $ 264,128
====== ==========
Net income available per
weighted average Unit
outstanding (Basic).... $ 0.94
==========
Weighted Average Units
Outstanding (Basic).... 280,498
==========
Net income available per
weighted average Unit
outstanding
(Diluted).............. $ 0.94
==========
Weighted Average Units
Outstanding
(Diluted).............. 282,275
==========
</TABLE>
7
<PAGE> 9
EOP OPERATING LIMITED PARTNERSHIP
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>
PURCHASE CASH LIABILITIES VALUE OF
PROPERTY DATE ACQUIRED PRICE PAID ISSUED UNITS 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............. 341,377 285,938 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.
8
<PAGE> 10
EOP OPERATING LIMITED PARTNERSHIP
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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
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 (1)
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.
9
<PAGE> 11
EOP OPERATING LIMITED PARTNERSHIP
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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 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>
10
<PAGE> 12
EOP OPERATING LIMITED PARTNERSHIP
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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.
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
11
<PAGE> 13
EOP OPERATING LIMITED PARTNERSHIP
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
December 31, 1997, for the period from January 1, 1997 to December 31,
1997. Interest expense was also 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>
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 the remaining
90% interest in Polk & Taylor; and (ii) the acquisition of a 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 distributions 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).
12
