<PAGE> 1
As filed with the Securities and Exchange Commission on February 18, 1998
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OF REPORT
FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) DECEMBER 17, 1997
EOP OPERATING LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-13625 36-4156801
(STATE OR OTHER JURISDICTION OF (COMMISSION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)
TWO NORTH RIVERSIDE PLAZA, SUITE 2200
CHICAGO, ILLINOIS 60606
(ADDRESS OR PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (312) 466-3300
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report of Form 8-K dated
December 17, 1997 as set forth in the pages attached hereto:
Filing of amended information under Item 7 (a) and (b):
Item 7 (a): Financial statements of Beacon Properties, L.P. as of and for
the nine month period ended September 30, 1997 and as of and
for the years ended December 31, 1996 and 1995, respectively.
Item 7 (b): Pro forma financial information as of and for the nine
month period ended September 30, 1997 and for the year ended
December 31, 1996
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
Date: February 18, 1998 By: /s/ Richard D. Kincaid
----------------- --------------------------------
Richard D. Kincaid
Executive Vice President, Chief
Financial Officer
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Item 7 (a): --------------
<S> <C>
Financial statements of Beacon Properties, L.P. as of and for the nine month period ended
September 30, 1997 4
Financial statements of Beacon Properties, L.P. as of and for the years ended December 31,
1996 and 1995 13
Item 7 (b):
Pro forma financial information as of and for the nine month period ended September 30,
1997 and for the year ended December 31, 1996 for EOP Operating Limited Partnership 42
Pro forma financial information as of and for the nine month period ended September 30,
1997 and for the years ended December 31, 1996 and 1995 for Beacon Properties, L.P. 58
</TABLE>
3
<PAGE> 4
ITEM 7 (a): FINANCIAL STATEMENTS OF BEACON PROPERTIES, L.P. AS OF AND FOR THE
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
4
<PAGE> 5
BEACON PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(Unaudited)
(in thousands)
ASSETS
<S> <C> <C>
Real Estate:
Land $ 331,529 $ 213,858
Buildings, improvements and equipment 2,039,230 1,477,672
------------ ------------
2,370,759 1,691,530
Less accumulated depreciation 140,044 97,535
------------ ------------
2,230,715 1,593,995
Deferred financing and leasing costs, net of accumulated
amortization of $19,982 and $16,334 19,179 17,287
Cash and cash equivalents 33,401 35,896
Restricted cash 3,208 2,599
Accounts receivable 13,691 11,596
Accrued rent 26,959 13,065
Prepaid expenses and other assets 8,133 808
Mortgage and notes receivable 85,196 51,491
Investments in and advance to joint ventures and corporations 50,472 52,176
------------ ------------
Total assets $ 2,470,954 $ 1,778,913
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 586,925 $ 452,212
Note payable, Credit Facility 249,000 153,000
Accounts payable, accrued expenses and other liabilities 50,743 41,336
Investment in joint venture 24,052 24,735
------------ ------------
Total liabilities 910,720 671,283
------------ ------------
Commitments and contingencies -- ---
Limited partners' capital interest, 7,343,451 and 6,273,928
units outstanding, at redemption value 336,422 229,783
------------ ------------
Partner's capital:
Operating Partnership units issued and outstanding 63,656,517
and 48,116,480:
General partner - outstanding 630,000 and 543,904 12,318 10,530
Limited partner - outstanding 55,026,517 and 47,572,576 1,017,516 867,317
Series A Preferred partner - outstanding 8,000,000 and -0- 193,978 ---
------------ ------------
Total partner's capital 1,223,812 877,847
------------ ------------
Total liabilities and partner's capital $ 2,470,954 $ 1,778,913
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
(Unaudited and in thousands, except per unit amounts and
units outstanding)
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 83,857 $ 37,257 $ 218,544 $ 97,308
Management fees 866 731 2,445 2,248
Recoveries from tenants 11,779 4,219 29,376 11,001
Mortgage interest income 2,561 1,402 5,320 3,567
Other income 4,227 2,977 10,350 7,567
------------- ------------- ------------- -------------
103,290 46,586 266,035 121,691
------------- ------------- ------------- -------------
Expenses:
Property expenses 19,853 9,837 51,169 24,607
Real estate taxes 10,480 4,660 27,960 12,491
General and administrative 10,238 4,547 27,920 11,828
Mortgage interest expense 13,650 7,077 36,313 20,739
Interest - amortization of financing costs 395 434 1,131 1,618
Depreciation and amortization 18,940 8,387 50,756 21,726
------------- ------------- ------------- -------------
73,556 34,942 195,249 93,009
------------- ------------- ------------- -------------
Income from operations 29,734 11,644 70,786 28,682
Equity in net income of joint ventures and
corporations 1,668 1,271 4,940 3,836
------------- ------------- ------------- -------------
Income from continuing operations 31,402 12,915 75,726 32,518
Discontinued operations - Construction Company
Loss from operations (790) (841) (2,263) (1,911)
Gain on sale of property ---- ---- 16,736 ----
------------- ------------- ------------- -------------
Income before extraordinary items 30,612 12,074 90,199 30,607
Extraordinary items ---- ---- (2,635) (3,876)
------------- ------------- ------------- -------------
Net income $ 30,612 $ 12,074 $ 87,564 $ 26,731
============= ============= ============= =============
Net income per unit before extraordinary $ 0.42 $ 0.34 $ 1.42 $ 0.99
items and after allocation of income to
Series A preferred unit holders
Extraordinary items ---- ---- (0.04) (0.13)
------------- ------------- ------------- -------------
Net income per unit $ 0.42 $ 0.34 $ 1.38 $ 0.86
============= ============= ============= =============
Weighted average units outstanding 62,811,982 35,075,909 59,443,531 30,955,399
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities: (Unaudited and in thousands)
Net income $ 87,564 $ 26,731
------------ ------------
Adjustments to reconcile net income
to net cash provided by operating activities:
Increase in accrued rent (13,894) (4,144)
Depreciation, amortization and amortization of financing costs 51,889 23,344
Equity in net income of joint ventures and corporations (2,676) (1,925)
Gain on sale of property (16,736) ---
Extraordinary items 2,635 3,876
Increase in accounts receivable (2,095) (1,780)
Increase in prepaid expenses and other assets (1,519) (407)
Increase in accounts payable and accrued expenses 14,120 13,923
------------ ------------
Total adjustments 31,724 32,887
------------ ------------
Net cash provided by operating activities 119,288 59,618
------------ ------------
Cash flows from investing activities:
Property additions (574,487) (501,765)
Proceeds from sale of property 72,500 ---
Payment of deferred leasing costs (7,464) (4,184)
Increase in prepaid expenses and other assets (5,806) (4,000)
Notes receivable from affiliates (33,689) ---
Purchase of mortgage notes receivable (16) (16,712)
Capital distributions from joint ventures 3,662 4,525
(Decrease) increase in restricted cash (609) 360
------------ ------------
Net cash used by investing activities (545,909) (521,776)
------------ ------------
Cash flows from financing activities:
Capital contributions 419,766 316,543
Payment of deferred financing costs (1,606) (9,267)
Borrowings on Credit Facility 468,000 140,000
Payments on Credit Facility (372,000) (252,500)
Borrowings on mortgage notes --- 593,000
Payments on mortgage notes (1,287) (278,500)
Decrease in prepaid expenses and other assets --- 1,728
Distributions (88,747) (40,566)
------------ ------------
Net cash provided by financing activities 424,126 470,438
------------ ------------
Net (decrease) increase in cash and cash equivalents (2,495) 8,280
Cash and cash equivalents, beginning of period 35,896 4,481
------------ ------------
Cash and cash equivalents, end of period $ 33,401 $ 12,761
============ ============
Supplemental disclosures:
Cash paid during the period of interest $ 35,212 $ 18,998
============ ============
Non cash activities:
Increase in minority interest as a result of acquisition of properties $ 33,417 $ 35,229
============ ============
Liabilities assumed in connection with contributions and acquisitions
of properties $ 136,000 $ 55,229
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 8
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________
1. Organization and Basis of Presentation:
Organization
Beacon Properties, L.P. (the "Operating Partnership") was organized as a
Delaware limited partnership in April 1994 and commenced operations
effective on May 26, 1994. Simultaneously with the closing of the Initial
Public Offering (the "IPO") of Beacon Properties Corporation (the
"Company"), which is the sole general partner and a limited partner of the
Operating Partnership, contributed its interest in two properties and
approximately $173.4 million, the net proceeds of the IPO, to the Operating
Partnership in exchange for partnership interests ("Units"). The Operating
Partnership was formed to continue and expand the commercial real estate
business of The Beacon Group (the "Predecessor").
The Operating Partnership specializes in property ownership, management,
leasing, design and development and currently owns or has an interest in
123 properties totaling approximately 20.7 million square feet (the
"Properties").
Basis of Presentation
The financial statements of the Operating Partnership are consolidated and
include all the accounts of the Operating Partnership and its subsidiaries.
All significant intercompany balances and transactions have been
eliminated.
The accompanying financial statements are unaudited; however, they have
been prepared in accordance with generally accepted accounting principles
for interim financial information and in conjunction with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they
do not include all of the disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting solely of normal recurring matters)
necessary for a fair presentation of the financial statements for these
interim periods have been included. The results for the nine months ended
September 30, 1997 are not necessarily indicative of the results to be
obtained for the full fiscal year. These financial statements should be
read in conjunction with the December 31, 1996 audited financial statements
and notes thereto of the Operating Partnership, included in its annual
report on Form 10 (as amended by Form 10/A-1, Form 10/A-2, and Form 10/A-3)
for the fiscal year ended December 31, 1996. Certain reclassifications
have been made to previously reported amounts to conform with current
reporting.
8
<PAGE> 9
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________
2. Equity Investments in Real Estate:
The Operating Partnership reports its share of income and losses based on
its ownership interest in the respective equity investments. Losses in
excess of investments are not recorded where the Operating Partnership has
not guaranteed or does not intend to provide any future financial support.
The following summarized information has been presented for the property
joint ventures and property corporation for which the Operating Partnership
has recorded its share of the earnings for the nine months ended September
30, 1997.
<TABLE>
<CAPTION>
ONE POST POLK & 75-101
OFFICE SQUARE TAYLOR FEDERAL STREET
---------------- --------- -----------------
(in thousands)
<S> <C> <C> <C>
Balance sheets at September 30, 1997
Real estate, net $ 40,433 $ 89,166 $ 156,033
Cash 2,026 552 7,565
Other assets 10,495 2,497 2,978
---------------- --------- -----------------
$ 52,954 $ 92,215 $ 166,576
================ ========= =================
Mortgage notes payable $ 91,821 $ --- $ 90,000
Other liabilities 1,484 354 2,362
Equity (deficiency) (40,351) 91,861 74,214
---------------- --------- -----------------
$ 52,954 $ 92,215 $ 166,576
================ ========= =================
Summary of operations for the nine months
ended September 30, 1997
Revenues $ 17,857 $ 17,348 $ 21,383
Other income 364 591 1,062
---------------- --------- -----------------
Total revenues 18,221 17,939 22,445
---------------- --------- -----------------
Operating expenses 7,302 4,700 9,333
Mortgage interest expense 5,086 --- 5,189
Depreciation and amortization 2,691 2,573 3,630
---------------- --------- -----------------
Total expenses 15,079 7,273 18,152
---------------- --------- -----------------
Net income $ 3,142 $ 10,666 $ 4,293
================ ========= =================
Share of properties:
Depreciation and amortization $ 999 $ 257 $ 1,829
Interest - amortization of financing costs 629 --- 44
</TABLE>
9
<PAGE> 10
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_______
3. Mortgage Notes Payable:
On April 30, 1997, in connection with the acquisition of Centerpointe I and
II located in Fairfax County, Virginia, the Operating Partnership assumed
$30 million of mortgage debt secured by the properties. The mortgage has a
remaining term of 3.9 years, bears interest at 7.32% and requires monthly
installments of interest only until December 1, 1999, and principal and
interest during the remaining term based on a 25-year amortization
schedule.
On May 23, 1997, in connection with the acquisition of Westbrook Corporate
Center located in suburban Chicago, the Operating Partnership assumed
approximately $82 million of million of mortgage debt and borrowed $24
million of additional mortgage debt secured by the properties. The mortgage
has a term of ten years, bears interest at 8.00% and requires monthly
installments of principal and interest based on a 26-year amortization
schedule.
4. Note Payable, Credit Facility:
On April 8, 1997, the Operating Partnership replaced its $300 million
secured floating-rate credit facility (the "Credit Facility") with an
unsecured facility and decreased the interest rate on the Credit Facility
from the Eurodollar rate plus 175 basis points (1.75%) to the Eurodollar
rate plus 120 basis points (1.20%). Additionally, on April 30, 1997, the
maximum loan amount available under the Credit Facility was increased to
$350 million.
On August 8, 1997, the Operating Partnership amended the Credit Facility to
provide for a competitive bid option and a decrease in the interest rate on
the Credit Facility from the Eurodollar rate plus 120 basis points (1.20%)
to the Eurodollar rate plus 90 basis points (.90%).
As a result of the new unsecured Credit Facility, the Operating Partnership
recorded an extraordinary item of $2.6 million in connection with the
write-off of fees and costs to acquire the prior secured Credit Facility.
5. Commitments and Contingencies:
In connection with the acquisition of the Westbrook Corporate Center, the
Operating Partnership has agreed to maintain non-recourse financing assumed
from the sellers for a 10 year period and not to sell or otherwise transfer
any portion of the property prior to the tenth anniversary of the closing
date. If the Operating Partnership should choose not to maintain the
non-recourse provisions of the existing or new debt, or should choose to
sell the property, within the 10 year period it shall be required to make
payments to the sellers.
10
<PAGE> 11
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_______
6. Environmental issue:
Site assessments at 175 Wyman Street have identified the presence of
trichloroethylene and tetrachloroethylene in the groundwater (the "Existing
Groundwater Condition"). The chemicals in the groundwater are believed to
be associated with former manufacturing use of the Property. Prior to the
acquisition of the Property by the Operating Partnership, the former owner
of the Property, Hewlett-Packard Company, reported the Existing Groundwater
Condition to the Massachusetts Department of Environmental Protection (the
"DEP"). Hewlett-Packard Company sought and obtained approval from DEP of
an Immediate Response Action which involves installation of a system to
extract and treat contaminated groundwater (the "System"). According to
its submissions to DEP, Hewlett-Packard Company is in the process of
installing the System. In its purchase and sale agreement with the
Operating Partnership, Hewlett-Packard Company agreed to indemnify the
Operating Partnership against costs of remediating the Existing Groundwater
Condition and claims by off-site parties for property damage, personal
injury, and natural resource damages related to the Existing Groundwater
Condition (the "Indemnity"). Any claim under the Indemnity is subject to
the risk that the indemnifying party will lack sufficient assets to satisfy
the claim. Moreover, any claim under the Indemnity may be subject to
substantial defenses, including but not limited to the defense that the
claim was exacerbated by the Operating Partnership's development or
redevelopment of the Property, as to which matters the Operating Partnership
has indemnified Hewlett-Packard Company. However, the Operating Partnership
does not believe that any such liability would have a material adverse
effect on its financial condition, results of operations and liquidity.
7. Pro Forma Results (unaudited):
The following unaudited pro forma operating results for the Operating
Partnership have been prepared as if the 1996 and 1997 stock offerings and
the 1996 and 1997 property acquisitions and dispositions had occurred on
January 1, 1996. Unaudited pro forma financial information is presented for
informational purposes only and may not be indicative of what the actual
results of operations of the Operating Partnership would have been had the
events occurred as of January 1, 1996, nor does it purport to represent the
results of operations for future periods.
Nine Months ended September 30, 1997 and 1996 1997 1996
--------------------------------------------- ---- ----
Revenue $298,085 $274,809
Income before extraordinary item 62,639 56,239
Net income per unit
before extraordinary item and gain on sale $ 1.13 $ 1.01
11
<PAGE> 12
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_______
8. Agreement and Plan of Merger:
On September 15, 1997, Equity Office Properties Trust ("EOP"), EOP
Operating Limited Partnership, a Delaware limited partnership of which EOP
is the managing general partner ("EOP Partnership") and the Company and
the Operating Partnership entered into an Agreement and Plan of Merger (the
"Merger Agreement"). The Merger Agreement provides for a merger of the
Company with and into EOP (the "Merger") and a merger of the Operating
Partnership with and into EOP Partnership or a limited liability EOP or
limited partnership wholly owned directly or indirectly by EOP Partnership
(the "Partnership Merger" and, together with the Merger, the "Mergers").
At the effective time of the Mergers, (1) each outstanding share of common
stock, $0.01 par value per share, of the Company ("Company Common Shares")
will be converted into 1.4063 common shares of beneficial interest, $0.01
par value per share, of EOP ("EOP Common Shares"), with cash in lieu of
the issuance of any fractional interests, (ii) each share of 8.98% Series A
Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per
share, of the Company ("Company Preferred Shares") will be converted into
a 8.98% Series A Cumulative Redeemable Preferred Share, liquidation
preference $25.00 per share, of EOP ("EOP Preferred Shares"), and (iii)
each common partnership unit of the Operating Partnership (a "Operating
Partnership Unit") will be converted into 1.4063 Class A Units of EOP
Partnership ("EOP OP Units").
The Mergers are subject to customary closing conditions, including the
approval of the Merger by the shareholders of EOP and the Company and the
approval of the Partnership Merger, to the extent necessary, by the
partners of EOP Partnership and the Operating Partnership. The Company may
terminate the Merger Agreement if the average of the closing prices of EOP
Common Shares on the New York Stock Exchange for all trading days during
the period of twenty (20) consecutive trading days ending on the seventh
(7th) trading day prior to the date of the special meeting of the
shareholders of the Company called to vote upon the Merger is less than
$27.39. Subject to certain conditions and limitations, either party may
terminate the Merger Agreement if the Merger has not occurred by April 15,
1998.
9. Subsequent Events:
On October 1, 1997, the Operating Partnership signed an additional $200
million term loan agreement with BankBoston which matures in April 1998.
On October 1, 1997, the Operating Partnership acquired the Civic Opera
Building located in Chicago, Illinois for aggregate consideration of
approximately $59.6 million, consisting of assumption of $31.8 million of
mortgage debt, approximately $21.1 million in cash and the issuance of $6.7
million of units of limited partnership interest in the Operating
Partnership ("Units").
On October 8, 1997, the Operating Partnership acquired 200 West Adams
located in Chicago, Illinois for aggregate consideration of approximately
$72.2 million.
On October 20, 1997, the Operating Partnership acquired Lakeside located in
Atlanta, Georgia for aggregate consideration of approximately $38.0
million.
On October 30, 1997, the Operating Partnership declared a quarterly
distribution of $31.5 million payable on November 21, 1997 to partners of
record on November 7, 1997.
12
<PAGE> 13
ITEM 7 (a): FINANCIAL STATEMENTS OF BEACON PROPERTIES, L.P. AS OF AND FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995.
13
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Beacon Properties, L.P.:
We have audited the consolidated balance sheets of Beacon Properties, L.P. as
of December 31, 1996 and 1995, and the related consolidated statements of
operations, partners' capital and cash flows for the years ended December 31,
1996 and 1995 and the period May 26, 1994 to December 31, 1994. We have also
audited the combined statement of operations, owners' equity and cash flows of
the Predecessor, more fully described in Note 1, for the period January 1, 1994
to May 25, 1994. These consolidated financial statements are the responsibility
of the Operating Partnership's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Beacon
Properties, L.P. as of December 31, 1996 and 1995 and the consolidated results
of its operations and its cash flows for the years ended December 31, 1996 and
1995 and the period May 26, 1994 to December 31, 1994, and the combined results
of operations and cash flows of the Predecessor for the period January 1, 1994
to May 25, 1994 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 21, 1997
14
<PAGE> 15
BEACON PROPERTIES, L.P.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------------
ASSETS 1996 1995
- ------ ---- ----
<S> <C> <C>
Real estate:
Land $ 213,858 $ 43,077
Buildings, improvements and equipment 1,477,672 428,065
----------- ----------
1,691,530 471,142
Less accumulated depreciation 97,535 66,571
----------- ----------
1,593,995 404,571
Deferred financing and leasing costs, net of
accumulated amortization of $16,334 and $14,487 17,287 9,438
Cash and cash equivalents 35,896 4,481
Restricted cash 2,599 2,764
Accounts receivable 11,596 6,111
Accrued rent 13,065 6,493
Prepaid expenses and other assets 808 8,060
Mortgage notes receivable 51,491 34,778
Investments in and advance to joint ventures
and corporations 52,176 58,027
----------- ----------
Total assets $ 1,778,913 $ 534,723
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable 452,212 70,536
Note payable, Credit Facility 153,000 130,500
Accounts payable, accrued expenses and
other liabilities 41,336 14,018
Investment in joint venture 24,735 23,955
----------- ----------
Total liabilities 671,283 239,009
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C>
Commitments and contingencies -- --
Limited partners' capital interest,
6,273,928 and 3,788,549 units
outstanding, at redemption value 229,783 87,137
----------- ----------
Partners' capital:
Operating units issued and outstanding,
48,116,480 and 20,215,822
General partner - outstanding
543,904 and 240,044 10,530 2,926
Limited partner - outstanding
47,572,576 and 19,975,788 867,317 205,651
----------- ----------
Total partners' capital 877,847 208,577
----------- ----------
Total liabilities and partners' capital $ 1,778,913 $ 534,723
=========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
16
<PAGE> 17
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Predecessor
-----------
For the Period
For the For the May 26, 1994 For the Period
Year Ended Year Ended to January 1, 1994
December 31, December 31, December 31, to
1996 1995 1994 May 25, 1994
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 147,825 $ 69,781 $ 23,702 $ 5,776
Management fees 3,005 2,203 -- 1,521
Recoveries from tenants 16,719 9,524 4,395 1,040
Mortgage interest income 4,970 2,546 -- --
Other income 11,249 5,985 2,671 675
----------- ----------- ----------- ---------
183,768 90,039 30,768 9,012
----------- ----------- ----------- ---------
Expenses:
Property expenses 37,210 17,698 6,497 2,086
Real estate taxes 18,124 9,950 3,015 595
General and administrative 19,218 9,444 2,943 1,399
Mortgage interest expense 30,300 15,220 4,970 2,798
Interest - amortization of financing costs 2,084 1,370 617 373
Depreciation and amortization 33,170 17,233 6,727 2,385
----------- ----------- ----------- ---------
140,106 70,915 24,769 9,636
----------- ----------- ----------- ---------
Income (loss) from operations 43,662 19,124 5,999 (624)
Equity in net income of joint ventures
and corporations 4,899 3,103 858 198
----------- ----------- ----------- ---------
Income (loss) from continuing operations
before minority interest 48,561 22,227 6,857 (426)
Minority interest in partnerships and
corporations (15) (36) (8) 931
----------- ----------- ----------- ---------
Income from continuing operations 48,546 22,191 6,849 505
Discontinued operations - construction company:
Income (loss) from operations (2,609) (12) 477 102
Loss on sale (249) -- -- --
----------- ----------- ----------- ---------
Income before extraordinary items 45,688 22,179 7,326 607
Extraordinary items (3,876) -- -- 8,898
----------- ----------- ----------- ---------
Net income $ 41,812 $ 22,179 $ 7,326 $ 9,505
=========== =========== =========== =========
Income before extraordinary items per unit $ 1.32 $ 1.09 $ 0.48
=========== =========== ===========
Extraordinary items per unit $ (0.11) -- --
=========== =========== ===========
Net income per unit $ 1.21 $ 1.09 $ 0.48
=========== =========== ===========
Weighted average units outstanding 34,446,907 20,323,327 15,270,899
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
17
<PAGE> 18
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
for the Period January 1, 1994 to December 31, 1996
(dollars in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Limited
General Limited Total Partners'
Partner's Partner's Partner's Capital
Capital Capital Capital Interest
--------------------------------------------------------
<S> <C> <C> <C> <C>
Owner's equity (Predecessor), at January 1, 1994 $(57,954)
Contributions and other, net of distributions from
January 1, 1994 to May 25, 1994 1,083
Net Income from January 1, 1994 through May 25, 1994 9,505
--------------------------------------------------------
Balance, at May 25, 1994 (47,366)
Capital contributions, net, May 26-December 31, 1994 $ 2,373 $182,884 $185,257 9,200
Net income, May 26-December 31, 1994 73 5,582 5,655 1,671
Distributions, May 26-December 31, 1994 ($0.96 per unit) (147) (11,197) (11,344) (3,382)
Adjustment to reflect limited partners' equity interest
at redemption value (1,123) (111,128) (112,251) 112,251
--------------------------------------------------------
Partners' capital, at December 31, 1994 1,176 66,141 67,317 72,374
Capital contributions, net -1995 1,940 157,781 159,721 307
Net income-1995 222 17,838 18,060 4,119
Distributions-1995 ($1.24 per unit ) (262) (21,216) (21,478) (4,706)
Adjustment to reflect limited partners' equity interest
at redemption value (150) (14,893) (15,043) 15,043
--------------------------------------------------------
Partners' capital, at December 31, 1995 2,926 205,651 208,577 87,137
Capital contributions, net -1996 8,466 744,792 753,258 75,143
Net income-1996 418 35,914 36,332 5,480
Distributions-1996 ($1.765 per unit ) (583) (50,083) (50,666) (7,631)
Adjustment to reflect limited partners' equity interest
at redemption value (697) (68,957) (69,654) 69,654
--------------------------------------------------------
Partners' capital, at December 31, 1996 $10,530 $867,317 $877,847 $229,783
========================================================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
18
<PAGE> 19
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Predecessor
-----------
For the Period
For the For the May 26, 1994 For the Period
Year Ended Year Ended to January 1, 1994
December 31, December 31, December 31, to
1996 1995 1994 May 25, 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 41,812 $ 22,179 $ 7,326 $ 9,505
----------- ----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued rent (6,572) (3,741) (915) (1,181)
Depreciation, amortization and interest-amortization
of financing costs 35,254 18,603 7,344 2,848
Equity in net income of joint ventures and corporations (2,026) (3,055) (1,327) (201)
Loss from minority interest in combined partnerships -- -- -- (1,519)
Extraordinary items 3,876 -- -- (8,898)
Deferred interest -- -- -- 367
Increase in accounts receivable (5,485) (1,746) (3,075) (376)
Decrease (increase) in prepaid expenses and other assets (48) (58) 2,541 (1,940)
Increase (decrease) in accounts payable, accrued expenses
and other liabilities 25,421 781 (739) 1,636
----------- ----------- ----------- -----------
Total adjustments 50,420 10,784 3,829 (9,264)
Net cash provided by operating activities 92,232 32,963 11,155 241
----------- ----------- ----------- -----------
Cash flows from investing activities:
Property additions (1,088,775) (67,610) (190,015) (978)
Loans receivable - affiliate -- -- (14,594) --
Payment of deferred leasing costs (6,157) (2,646) (1,010) (124)
Decrease (increase) in prepaid expenses and other assets 5,000 (5,000) -- --
Purchase of minority interests -- -- (11,688) --
Investments in joint ventures -- -- (15,802) --
Capital distributions from joint ventures 8,610 3,518 2,508 --
Investments in and advance to corporations -- (41,471) (5,800) --
Cash from contributed assets -- -- 6,978 --
Restricted cash from contributed assets -- -- 420 --
Purchase of mortgage notes receivable (16,713) (34,778) -- --
Decrease (increase) in restricted cash 165 2,063 (4,827) --
----------- ----------- ----------- -----------
Net cash used by investing activities (1,097,870) (145,924) (233,830) (1,102)
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
19
<PAGE> 20
BEACON PROPERTIES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(dollars in thousands)
<TABLE>
<CAPTION>
Predecessor
--------------------------------------------------------
For the Period
For the For the May 26, 1994 For the Period
Year Ended Year Ended to January 1, 1994
December 31, December 31, December 31, to
1996 1995 1994 May 25, 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from financing activities:
Capital contributions $ 754,175 $ 160,028 $ 173,452 $ 412
Borrowings on Credit Facility 468,000 124,700 130,300 --
Borrowings on mortgage notes 608,000 -- -- 874
Payments on Credit Facility (445,500) (124,500) -- --
Repayments on mortgage notes (281,814) (20,400) (49,677) (460)
Advances (repayments) of amounts due to affiliates -- -- (5,355) 2,800
Payment of deferred financing costs (9,811) (2,457) (2,764) (13)
Decrease (increase) in prepaid expenses and other assets 2,300 (2,300) -- --
Distributions (58,297) (32,435) (8,475) (4,329)
----------- ----------- ----------- -----------
Net cash provided by (used by) financing activities 1,037,053 102,636 237,481 (716)
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 31,415 (10,325) 14,806 (1,577)
Cash and cash equivalents, beginning of period 4,481 14,806 -- 6,150
Cash and cash equivalents, end of period $ 35,896 $ 4,481 $ 14,806 $ 4,573
=========== =========== =========== ===========
Supplemental disclosures:
Cash paid during the period for interest
(net of capitalized interest) $ 28,777 $ 14,738 $ 5,278 $ 2,811
=========== =========== =========== ===========
Noncash activities:
Acquisition of interests in properties -- -- $ 22,721
=========== =========== ===========
Increase in partners' capital as a result of
acquisition of interests in properties $ 74,226 -- $ 9,200
=========== =========== ===========
Liabilities assumed in connection with contributions
and acquisition of properties $ 55,529 $ 861 $ 93,518
=========== =========== ===========
Distributions payable to unit holders -- -- $ 6,251
=========== =========== ===========
Receivable from equity investment $ 769 $ 1,040
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
20
<PAGE> 21
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
1. Organization, Offerings and Acquisitions:
Beacon Properties, L.P. (the "Operating Partnership") was organized as a
Delaware limited partnership in April 1994 and commenced operations
effective on May 26, 1994. The Operating Partnership was formed to continue
and expand the commercial real estate development, construction,
acquisition, leasing, design and management business of The Beacon Group
(the "Predecessor").
Simultaneously with the closing of the initial public offering (the "IPO")
of Beacon Properties Corporation (the "Company"), which is the sole general
partner and a limited partner of the Operating Partnership, the Company
contributed its interests in two properties and approximately $173.4
million, the net proceeds of the IPO, to the Operating Partnership in
exchange for partnership interests ("Units").
The following schedule summarizes the Operating Partnership's interest in
the properties as a result of the initial and subsequent capital
contributions of the Company, and the related acquisition of properties
and partnership interests. All properties have been consolidated unless
otherwise indicated in the notes:
<TABLE>
<CAPTION>
Rentable Ownership Accounting
Date Area In Interest at Method
Acquired Square Feet 12/31/96 Notes
-------- ----------- -------- -----
<S> <C> <C> <C> <C>
Properties:
Wellesley Office Park - Buildings 1-8, Wellesley, MA (A) 622,862 100% (E)
Crosby Corporate Center, Bedford, MA (B) 336,000 100%
South Station, Boston, MA (B) 148,591 100%
175 Federal Street, Boston, MA (B) 203,349 100% (E)
One Post Office Square, Boston, MA (B) 764,129 50% (D)
Center Plaza, Boston, MA (B) 649,359 100%
Rowes Wharf, Boston, MA (B) 344,326 45% (F)
150 Federal Street, Boston, MA (B) 530,279 100%
Polk and Taylor Buildings, Arlington, VA (B) 890,000 9% (G)
One Canal Park, Cambridge, MA 6/10/94 100,300 100%
Westwood Business Centre, Westwood, MA 6/10/94 160,400 100%
Russia Wharf, Boston, MA 8/10/94 314,596 100%
Westlakes Office Park -
Buildings 1-3 and 5, Berwyn, PA (C) 443,592 100%
75-101 Federal Street, Boston, MA 9/29/95 812,000 51% (H)
2 Oliver Street - 147 Milk Street, Boston, MA 10/6/95 271,000 100%
Ten Canal Park, Cambridge, MA 12/21/95 110,000 100%
New England Executive Park,
Burlington, MA 11/15/96 817,013 100%
245 First Street, Cambridge, MA 11/21/96 263,227 100%
Perimeter Center, Atlanta, GA 2/15/96 3,302,136 100%
1300 North 17th Street, Rosslyn, VA 10/18/96 372,865 100%
1616 North Fort Myer Drive, Rosslyn, VA 10/18/96 292,826 100%
John Marshall I, McLean, VA 9/5/96 261,364 100%
E.J. Randolph, McLean, VA 9/5/96 164,677 100%
Northridge I, Reston/Herndon, VA 9/5/96 124,319 100%
1333 H Street, N.W., Washington, D.C. 8/16/96 238,694 100%
AT&T Plaza, Oak Brook, IL 8/16/96 225,318 100%
Tri-State International, Lincolnshire, IL 8/16/96 548,000 100%
10960 Wilshire Boulevard, Westwood, CA 11/21/96 543,804 100%
Shoreline Technology Park, Mountain View, CA 12/20/96 727,000 100%
Lake Marriott Business Park, Santa Clara, CA 12/20/96 400,000 100%
Presidents Plaza, Chicago, IL 12/27/96 791,000 100%
----------
15,773,026
==========
</TABLE>
Continued
21
<PAGE> 22
BEACON PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(dollars in thousands)
<TABLE>
<CAPTION>
Rentable Ownership Accounting
Date Area In Interest at Method
Acquired Square Feet 12/31/96 Notes
-------- ----------- -------- -----
<S> <C> <C> <C>
Service Entities:
Beacon Construction Company, Inc. (B) 99% (I)
Beacon Property Management, L.P. (B) 100%
Beacon Property Management Corporation (B) 99% (I)
Beacon Design Corporation (B) 99% (I)
Beacon Design L.P. (B) 100%
</TABLE>
(A) Wellesley Building 8 was acquired May 4, 1995. Interests in the remaining
Wellesley Buildings were contributed as part of the initial public
offering.
(B) Interests in this property or company were contributed or acquired as part
of the initial public offering.
(C) Westlakes Buildings 1, 3 and 5 were acquired October 21, 1994, Westlakes
Building 2 was acquired July 26, 1995.
(D) The Operating Partnership is a general partner in the joint venture which
owns the property and utilizes the equity method of accounting for its
investment.
(E) On October 28, 1994, the Operating Partnership acquired the remaining
interest in the 175 Federal Street and Wellesley 6 Joint Venture which
owned these properties. Prior to the acquisition of the remaining
interest, the Operating Partnership used the equity method of accounting
for its investments.
(F) The Operating Partnership owns an indirect limited partner interest and
utilizes the equity method of accounting for its investment. (See Note 2.)
(G) The Operating Partnership owns a 9% limited partner interest and utilizes
the equity method of accounting for its investment.
(H) The Operating Partnership is a shareholder in the corporation (private real
estate investment trust) which owns the property, and utilizes the equity
method of accounting for its investment.
(I) The Operating Partnership used the cost method of accounting for its
investments in these subsidiaries prior to 1995. The Operating Partnership
currently uses the equity method of accounting for its investments. (See
Note 2.)
22
<PAGE> 23
2. Summary of Significant Accounting Policies:
Business
The Operating Partnership currently has interests in a portfolio of 104
Class A office properties and other commercial properties containing
approximately 15.8 million rentable square feet located in Boston, Atlanta,
Chicago, Los Angeles, San Francisco and Washington, D.C.
The Operating Partnership also owns and operates commercial real estate
development, acquisition, leasing, design and management businesses. The
Operating Partnership currently manages approximately 2.9 million square
feet of commercial and office space owned by third parties in various
locations, including Boston, Waltham, and Springfield, Massachusetts and
Chicago, Illinois.
Principles of Consolidation
The accompanying financial statements of the Operating Partnership have
been prepared on a consolidated basis which include all the accounts of the
Operating Partnership and its subsidiaries. All significant intercompany
balances and transactions have been eliminated. The Operating Partnership's
consolidated financial statements reflect the properties acquired at their
historical basis of accounting to the extent of the acquisition of
interests from the Predecessors' owners who continued on as investors. The
remaining interests acquired from the Predecessors' owners have been
accounted for as a purchase and the excess of the purchase price over the
related historical cost basis was allocated to real estate.
The accompanying financial statements of the Predecessor have been
presented on a combined basis which include all the contributed properties
and the management, leasing and design entities.
Real Estate
Buildings and improvements are recorded at cost and are depreciated on the
straight-line and declining balance methods over their estimated useful
lives of nineteen to forty years and fifteen to twenty years, respectively.
The cost of buildings and improvements includes the purchase price of the
property or interests in property, legal fees, acquisition costs and
interest, property taxes, capitalized interest, and other costs incurred
during the period of construction. The Operating Partnership capitalized
interest costs of $1.0 million in 1996, $0.1 million in 1995, and $0 in
1994. In accordance with Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, the Operating Partnership periodically reviews
its properties to determine if its carrying costs will be recovered from
future operating cash flows. In cases where the Operating Partnership does
not expect to recover its carrying costs, the Operating Partnership
recognizes an impairment loss. No such losses have been recognized to date.
23
<PAGE> 24
Tenant improvements are depreciated over the terms of the related leases.
Furniture, fixtures and equipment are depreciated using the straight-line
and declining balance methods over their expected useful lives of five to
seven years.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments which extend the economic
useful life of the assets are capitalized.
Deferred Financing and Leasing Costs
Deferred financing costs include fees and costs incurred to obtain
long-term financings, and are amortized over the terms of the respective
loans on a basis which approximates the interest method. Deferred leasing
costs incurred in the successful negotiation of leases, including
brokerage, legal and other costs, have been deferred and are being
amortized on a straight-line basis over the terms of the respective leases.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid assets with original
maturities of three months or less from the date of purchase. The majority
of the Operating Partnership's cash and cash equivalents are held at major
commercial banks. The Operating Partnership has not experienced any losses
to date on its invested cash. The carrying value of the cash and cash
equivalents approximates market.
Restricted Cash
Restricted cash consists of cash held in escrow as required by lenders to
satisfy real estate taxes and tenant improvement costs.
Investments in and Advance to Joint Ventures and Corporations
The Operating Partnership uses the equity method of accounting for its
earnings in property joint ventures and corporations which it does not
control. Losses in excess of investments are not recorded where the
Operating Partnership is a limited partner and has not guaranteed nor
intends to provide any future financial support to the respective
properties.
Mortgage Notes Receivable
Discounts from the principal balance on mortgage loans receivable, net of
acquisition costs, are amortized as interest income over the due date of
the related loans using the effective yield method, based on management's
evaluation of the current facts and circumstances and the ultimate ability
to collect the principal balances of such loans.
24
<PAGE> 25
Revenue Recognition
Base rental income is reported on a straight-line basis over the terms of
the respective leases. The impact of the straight-line rent adjustment
increased revenues for the Operating Partnership by $6.6 million, $3.7
million and $1.9 million and increased its proportionate share of equity in
net income of property joint ventures and corporations by $0.1 million,
$0.2 million and $0.3 million for the years ended December 31, 1996 and
1995 and the period May 26, 1994 to December 31, 1994, respectively.
Management fees are recognized as revenue as they are earned.
Income Taxes
Income taxes are not considered in the accompanying financial statements
since such taxes, if any, are the responsibility of the partners.
Interest Rate Protection Agreements
The Operating Partnership has entered into interest rate protection
agreements to reduce the impact of certain changes in interest rates. These
agreements are held for purposes other than trading. Amounts paid for the
agreements are amortized over the lives of the agreements on a basis which
approximates the interest method. Payments under interest rate swap
agreements are recognized as adjustments to interest expense when incurred.
The Operating Partnership's policy is to write off unamortized amounts paid
under interest rate protection agreements, when the related debt is paid
off or there is a termination prior to the maturity of the agreements. The
Operating Partnership is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate protection
agreements. However, the Operating Partnership does not anticipate
nonperformance by the counterparties.
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 amount of assets and liabilities and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
Reclassifications
Certain prior year balances have been reclassed to conform with current
year presentation.
25
<PAGE> 26
3. Accounts Receivable:
December 31,
------------
1996 1995
-------- --------
Tenants $ 5,072 $ 2,137
Other 4,228 1,006
Affiliates 3,670 3,305
Allowance for uncollectible amounts (1,374) (337)
-------- --------
$ 11,596 $ 6,111
======== ========
4. Mortgage Notes Receivable:
The Operating Partnership acquired a fifty percent interest in certain
mortgages collateralized by property owned by a joint venture in which the
Operating Partnership has an indirect interest. The terms of the notes
require interest-only payments at 8.71% quarterly on a principal balance of
approximately $63.0 million and are due on April 1, 1999. The term may be
extended for up to three years under certain conditions. The Operating
Partnership also has an option to purchase from an affiliate other mortgage
interests collateralized by the same property.
5. Investments in and Advance to Joint Ventures and Corporations:
The following is summarized financial information for the property joint
ventures and corporation:
December 31,
------------
1996 1995
--------- ---------
Balance sheet:
Real estate, net $ 410,207 $ 419,096
Other assets 51,669 55,714
--------- ---------
$ 461,876 $ 474,810
========= =========
Mortgage notes payable $ 377,754 $ 380,827
Loans and notes payable 72,136 68,606
Other liabilities 13,040 14,072
Partners' and shareholders' equity
(deficiency) (1,054) 11,305
--------- ---------
$ 461,876 $ 474,810
========= =========
<TABLE>
<CAPTION>
For the Period Predecessor
For the For the May 26, 1994 For the Period
Year Ended Year Ended to January 1, 1994
December 31, December 31, December 31, to
1996 1995 1994 May 25, 1994
---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
Summary of operations:
Rentals $117,283 $91,048 $59,983 $38,386
Other income 3,453 3,861 5,717 2,941
Operating expenses 61,086 49,472 34,688 22,632
Mortgage interest expense 28,712 23,232 16,261 13,432
Depreciation and amortization 18,592 14,537 11,427 8,228
---------- ---------- -------------- ---------------
Net income (loss) $ 12,346 $ 7,668 $ 3,324 $(2,965)
========== ========== ============== ===============
</TABLE>
26
<PAGE> 27
A reconciliation of interests in property joint ventures and corporation to
the underlying net assets is as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Partners' and shareholders' (deficiency) capital, as above $(1,054) $11,305 $(51,742)
Deficits of other partners and shareholders 23,555 13,270 38,459
-------- --------- --------
Operating Partnership's share of equity (deficiency) 22,501 24,575 (13,283)
Excess of cost of investments over the net book value of
underlying net assets, net of amortization and accumulated
amortization of $122, $75 and $28, respectively 1,310 1,357 1,384
-------- --------- --------
Carrying value of property investments in joint ventures and
corporation $23,811 $25,932 $(11,899)
======== ========= ========
</TABLE>
The following is summarized financial information for the service
corporations:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Balance sheet:
Equipment, net $ 1,806 $ 715
Other assets 34,155 29,560
------- -------
$35,961 $30,275
======= =======
Other liabilities 37,360 27,124
Shareholders' equity (deficiency) (1,399) 3,151
------- -------
$35,961 $30,275
======= =======
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
For the Year For the Year For the Period
Ended Ended May 26, 1994 to
December 31, December 31, December 31,
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Summary of operations:
Construction income $140,903 $108,913 $52,429
Consulting and management fees 2,537 7,576 4,848
Interest and other income 266 383 184
Construction, consulting and management
fee costs 141,167 110,835 52,388
General and administrative expense 5,121 4,880 3,564
Depreciation and amortization 584 336 186
Minority interest in net income of joint venture 52 130 90
Interest expense to stockholder -- 650 --
------------ ----------- ------------
Net income (loss) $ (3,218) $ 41 $ 1,233
============ =========== ============
</TABLE>
A reconciliation of the underlying net assets to the Operating Partnership's
carrying value of investments in and advance to service corporations is as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
Shareholders' equity, as above $ (1,399) $ 3,151
(Deficit) equity of other shareholders (29) 11
-------- --------
Operating Partnership's share of equity (1,370) 3,140
Advance 5,000 5,000
-------- --------
Carrying value of investments in and advance to
service corporations 3,630 8,140
Carrying value of property investments in joint
ventures and corporation per above 23,811 25,932
-------- --------
$ 27,441 $ 34,072
======== ========
Per consolidated balance sheet:
Investments in and advance to joint
ventures and corporations $ 52,176 $ 58,027
Investment in joint venture (24,735) (23,955)
-------- --------
$ 27,441 $ 34,072
======== ========
</TABLE>
28
<PAGE> 29
6. Mortgage Notes Payable:
The mortgage notes payable collateralized by the certain properties and
assignment of leases, are as follows:
December 31,
---------------------
1996 1995
-------- --------
Mortgage notes with fixed interest at:
8.00% maturing July 1, 1998 $ 12,970 $13,236
6.67% maturing November 1, 1998 56,920 57,300
7.23% maturing February 1, 2003 55,000 -
7.23% maturing March 1, 2003 60,000 -
7.08% maturing March 31, 2006 218,000 -
8.19% maturing January 1, 2007 15,000 -
8.19% maturing January 1, 2007 13,600 -
8.38% maturing December 1, 2008 20,722 -
-------- -------
Total mortgage notes payable $452,212 $70,536
======== =======
The Operating Partnership's restricted cash consists of cash required by
these mortgages to be held in escrow for capital expenditures and/or real
estate taxes.
Scheduled maturities of mortgage notes payable are as follows:
1997 $ 2,127
1998 72,611
1999 6,602
2000 7,608
2001 8,171
Thereafter 355,093
--------
Total $452,212
========
The Operating Partnership determines the fair value of its mortgage notes
payable based upon the discounted cash flows at a discount rate that
approximates the Operating Partnership's effective borrowing rate. Based on
its evaluation, the Operating Partnership has determined that the fair
value of its mortgage notes approximates their carrying value.
In March 1996, the Operating Partnership repaid a debt and recorded an
extraordinary item of $2.2 million in connection with the write-off of fees
and costs to acquire the debt. The extraordinary item during the period
January 1, 1994 through May 25, 1994 represents the gains resulting from
the settlement of certain mortgage notes payable. As the prepayments were a
29
<PAGE> 30
condition to transfer the assets to the Operating Partnership, these items
were recorded by the Predecessor entity.
7. Note Payable -- Credit Facility:
The Operating Partnership presently has a three-year, $300 million
revolving credit facility (the "Credit Facility"). The Credit Facility
matures in June 1999 and is collateralized by cross-collateralized
mortgages and assignment of rents on certain properties.
Outstanding balances under the Credit Facility bear interest, at the
Company's option, at either (i) the higher of (x) Bank of Boston's base
interest rate and (y) one-half of one percent (1/2%) above the overnight
federal funds effective rate or (ii) the Eurodollar rate plus 175 basis
points (1.75%). The Company has an interest rate protection agreement
through May 1997 with respect to $135 million of the Credit Facility,
which provides for offsetting payments to the Company in the event that
90-day LIBOR exceeds 9.47% per annum. Effective May 1997 through May 1999,
the Company has an interest rate protection agreement with respect to
$137.5 million of the Credit Facility, which provides for offsetting
payments to the Company in the event that 90-day LIBOR exceeds 8.75% per
annum. This interest rate protection arrangement may be applied during
four quarters of the period May 1997 to May 1999.
The outstanding balance of the Credit Facility at December 31, 1996 was
$153.0 million. The weighted average amount outstanding during the years
ended December 31, 1996 and 1995 and the period May 26, 1994 to December
31, 1994 was $42.3 million, $99.7 million and $50.4 million, respectively.
The weighted average interest rate on amounts outstanding during the years
ended December 31, 1996 and 1995 and the period May 26, 1994 to December
31, 1994 was approximately 7.78%, 8.25% and 7.57%, respectively. The
applicable interest rate under the Credit Facility at December 31, 1996 was
8.25%.
Based upon the Credit Facility's variable interest rate, the Operating
Partnership has determined that the fair value of the Credit Facility
approximates its carrying value. The Operating Partnership determines the
fair value of its interest rate agreement based upon the quoted market
prices of similar instruments. Based on this analysis, the Operating
Partnership has determined that the fair value of this instrument
approximates its carrying value.
As a result of the substantial modification of the terms of the Credit
Facility, the Company recorded an extraordinary item of $1.7 million in
connection with the write-off of fees and costs relating to the prior
Credit Facility.
30
<PAGE> 31
8. Accounts Payable, Accrued Expenses and Other Liabilities:
December 31,
------------------
1996 1995
------ -----
Accounts payable and accrued expenses $29,139 $ 8,088
Deferred revenue and other 4,912 1,164
Affiliates 1,595 2,952
Other liabilities 504 647
Security deposits 5,186 1,167
------- -------
$41,336 $14,018
======= =======
9. Transactions with Affiliates
<TABLE>
<CAPTION>
Predecessor
----------------
For the Year For the Year For the Period For the Period
Ended Ended May 26, 1994 January 1, 1994
December 31, December 31, to to
1996 1995 December 31, 1994 May 25, 1994
------------ ------------ ----------------- ----------------
<S> <C> <C> <C> <C>
Management, rental, design, construction
fees and interest income $ 9,176 $ 5,640 $ 1,809
Construction costs 8,352 11,108 $ 241 --
Administrative salaries and expenses -- -- -- 469
</TABLE>
In 1995, the Operating Partnership entered into an agreement to lease its
home office from a joint venture in which the Operating Partnership has an
indirect interest. It previously subleased home office space from another
affiliate. Rental expense related to these arrangements was $1.3 million,
$0.3 million and $0.1 million for the years ended December 31, 1996 and
1995 and the period May 26, 1994 to December 31, 1994, respectively.
Future minimum rental payments at December 31, 1996 for the Operating
Partnership's home office are $1.3 million for 1997, $1.4 million for 1998
through 2001, and $1.0 million for 2002.
10. Limited Partners' Capital Interest
Pursuant to the Operating Partnership Agreement, certain limited partners
in the Operating Partnership have the right to redeem all or any portion
of their Units for cash from the Operating Partnership or, at the election
of the Company, for shares of common stock or cash as selected by the
Company. The amount of cash to be paid to the limited partner if the
redemption right is exercised and the cash option is selected will be
31
<PAGE> 32
based on the trading price of the Company's common stock at that time.
Such limited partners' redemption rights are not included in partners'
capital. Accordingly, the accompanying consolidated balance sheets have
been retroactively reclassified to reflect the limited partners' capital
interest in the Operating Partnership, measured at redemption value. This
reclassification results in a reduction of partners' equity of $69.7
million and $15.0 million as of December 31, 1996 and 1995, respectively
as a result of the increase in the redemption value.
11. Commitments and Contingencies:
Pension Plan
The Operating Partnership participates in a multiemployer defined-benefit
pension plan with some of its affiliates. This plan covered substantially
all full-time nonunion employees. The Operating Partnership's portion of
pension expense for the years ended December 31, 1996 and 1995 and the
period May 26, 1994 to December 31, 1994, was $0.2 million, $0.1 million,
and $0.1 million, respectively. The Predecessor's comparable allocated
portion of pension expense amounted to $0.1 million for the period
January 1, 1994 to May 25, 1994.
401(k) Plan
The eligible employees of the Operating Partnership participate in a
contributory savings plan with some of its affiliates. Under the plan, the
Operating Partnership may match contributions made by eligible employees
based on a percentage of the employee's salary. Currently, the Operating
Partnership matches 25% of contributions up to 3% of such employee's salary
(up to $30). The matching amount may be changed from time to time by the
Board of Directors of the Company. Expenses under this plan for 1996, 1995
and 1994 were not material.
Contingencies
The Operating Partnership is subject to various legal proceedings and
claims that arise in the ordinary course of business. These matters are
generally covered by insurance. Management believes that the final outcome
of such matters will not have a material adverse effect on the financial
position, results of operations or liquidity of the Operating Partnership.
Lease
The South Station property is subject to a ground lease expiring in 2024.
The lease provides two 15-year extension options. Under certain conditions,
the lessor reserves the right to terminate the lease at the end of the
initial term or at the end of the first extension period and pay the lessee
an amount based on a formula payment of fair value. The minimum rents in
connection with the lease are substantially based on percentage rent until
1997. The Operating Partnership is obligated to provide loans to the lessor
under certain conditions subject to a maximum of $0.9 million. As of
32
<PAGE> 33
December 31, 1996, no loans were outstanding.
Environmental
A former tenant of Crosby Corporate Center has agreed to perform the
necessary investigation and cleanup actions regarding remediation of
possible contamination, bear all costs associated with such cleanup
activities and indemnify the Operating Partnership for any costs or damages
it incurs in connection with such contamination. As the owner of the
property, however, the Operating Partnership could be held liable for the
costs of such activities if the former tenant fails to undertake such
actions.
As a lessee of certain property, the Operating Partnership has received an
indemnity from the owner to the extent the Operating Partnership is
assessed costs relating to environmental cleanup.
Site assessments at the New England Executive Park have identified
contamination in the groundwater at a monitoring well which flows into an
aquifer, which supplies drinking water to the Town of Burlington. The Town
of Burlington has allocated funds for, and is in the process of
constructing, a groundwater treatment facility at its drinking water supply
that draws from the subject aquifer. The Operating Partnership has been
advised that such treatment facility has the capacity to treat any
contaminants which may be derived from the groundwater passing
beneath the New England Executive Park. Although the Town's water treatment
facility does not relieve the Operating Partnership of potential liability
for the presence of the contaminants, the Operating Partnership does not
believe that any such liability would have a material adverse effect on the
Operating Partnership.
Based on site assessments performed at 245 First Street which have
identified the presence of oil that slightly exceeds the concentration that
requires reporting to the Massachusetts Department of Environmental
Protection, an environmental consultant has advised the Operating
Partnership that applicable regulatory requirements can be satisfied
without the need to perform any remediation at the property. The Operating
Partnership could be held liable for costs associated with the
contamination that has been identified, although the Operating Partnership
does not believe that such costs would have a material adverse effect on
the Operating Partnership.
In connection with the acquisition of the John Marshall land, the sellers
have reported the findings of contamination to the Virginia Department of
Environmental Quality and have retained an environmental consultant to
prepare a remediation plan. Units valued at approximately $1.0 million were
escrowed from the purchase price to be released to the seller upon
performance of remediation pursuant to a remediation plan approved by the
Operating Partnership. The escrow further provides that the Operating
Partnership may receive some or all of the remaining escrowed Units upon
certain conditions.
Management does not believe that any costs, if incurred, would have a
material adverse effect on the financial condition, annual results of
33
<PAGE> 34
operations, or liquidity of the Operating Partnership.
Other
The Operating Partnership has an obligation to pay $17.0 million in
connection with the acquisition of real estate upon the achievement of
conditions regarding occupancy or rental income levels.
In connection with the acquisition of the John Marshall I, E.J. Randolph
and Northridge I properties, the Operating Partnership has agreed to
maintain the non-recourse financing assumed from the sellers for a five
year period and not to dispose of the property for a seven year period. If
the Operating Partnership should choose not to maintain the non-recourse
provisions of the existing or new debt, or sell the properties, within
these respective time periods it shall be required to make payments to the
sellers of approximately $6.0 million in 1997, reducing ratably to zero
through 2003.
12. Future Minimum Rents:
Future minimum rentals to be received under noncancelable tenant leases for
all fully consolidated properties at December 31, 1996 are due for years
ended December 31 as follows:
1997 $ 188,032
1998 175,732
1999 170,086
2000 143,288
2001 113,718
Thereafter 370,698
----------
Total future minimum rents $1,161,554
==========
34
<PAGE> 35
13. Geographic Concentration:
The Operating Partnership owns properties with a total cost at December 31,
1996 as follows:
Downtown Boston $ 284,574
Suburban Boston 279,987
Suburban Atlanta 343,014
Suburban Philadelphia 59,018
Suburban Virginia 178,166
Downtown Los Angeles 133,307
Suburban San Francisco 184,207
Suburban Chicago 175,819
Downtown Washington 53,438
----------
$1,691,530
==========
14. Pro Forma Results (Unaudited):
The following unaudited pro forma operating results for the Operating
Partnership have been prepared as if capital contributions and property
acquisitions during 1995 and 1996 had occurred on January 1, 1995.
Unaudited pro forma financial information is presented for informational
purposes only and may not be indicative of what the actual results of
operations of the Operating Partnership would have been had the events
occurred as of January 1, 1995, nor does it purport to represent the
results of operations for future periods. Pro forma results have not been
presented for 1994 as the Operating Partnership's operations did not
commence until May 26, 1994.
For the year ended
December 31,
1996 1995
-------- --------
Revenues $299,124 $265,878
Income before extraordinary items 84,619 79,007
Net income 80,728 79,007
Net income per unit 1.48 1.45
15. Discontinued Operations:
On December 31, 1996, certain assets of the construction company were sold.
These assets included fixed assets, general construction contracts in
progress, and the receivables and payables related to these contracts. All
employees were transferred to the buyer who is expected to complete all
outstanding construction work for projects not purchased as part of the
sale.
16. Subsequent Events:
Declaration of Distribution
On January 28, 1997, the Operating Partnership declared a quarterly
distribution of $25.2 million, payable on February 28, 1997 to partners of
record on February 10, 1997.
35
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Partners of Beacon Properties L.P.:
Our report on the consolidated financial statements of Beacon Properties L.P. is
included on page F-1 of this Form 10. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedules listed in the Item 15(a) of this Form 10.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 21, 1997
36
<PAGE> 37
Schedule III
BEACON PROPERTIES, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Initial Cost
--------------------------------------
Buildings
and
Description Encumbrances Land Improvements
----------- ------------ ---- ------------
<S> <C> <C> <C>
Commercial Property:
Wellesley Office Park - Buildings 1-8 - Wellesley, MA............ $ 55,000 $ 9,110 $ 75,829
Crosby Corporate Center - Bedford, MA............................ -(1) 978 10,478
South Station - Boston, MA....................................... - 21,487
175 Federal St. - Boston, MA..................................... 12,970 1,404 24,505
Center Plaza - Boston, MA........................................ 60,000 7,301 65,712
150 Federal St.- Boston, MA...................................... 56,920(2) 11,265 101,280
One Canal Park - Cambridge, MA................................... -(1) 931 8,444
Ten Canal Park - Cambridge, MA................................... -(1) 1,179 10,609
2 Oliver Street - Boston, MA..................................... -(1) 1,796 16,166
Westwood Business Centre - Westwood, MA.......................... -(1) 1,159 10,498
Russia Wharf - Boston, MA........................................ -(1) 1,442 12,974
Westlakes Office Park - Buildings 1,2, 3 and 5 - Berwyn, PA...... -(1) 6,335 46,267
Perimeter Center - Atlanta, GA................................... 218,000 46,438 292,305
AT&T Plaza - Oak Brook, IL....................................... -(1) 3,510 31,587
Tri-State International - Lincolnshire, IL....................... -(1) 6,222 55,999
1333H Street, N.W. - Washington, D.C............................. -(1) 5,337 48,033
E.J. Randolph - McLean, VA....................................... 15,000 3,590 19,520
John Marshall I - McLean, VA..................................... 20,722 5,996 27,991
Northridge I - Herndon, VA....................................... 13,600 1,911 19,264
1300 North 17th Street - Rosslyn, VA............................. -(1) 8,007 46,758
1616 North Fort Myer Drive - Rosslyn, VA......................... -(1) 6,156 38,651
New England Executive Park - Burlington, MA..................... -(1) 7,067 68,259
10960 Wilshire Boulevard - Westwood, CA.......................... - 11,200 122,039
245 First Street - Cambridge, MA................................. - 4,513 40,616
Shoreline Technology Park - Mountain View, CA.................... - 39,547 101,444
Lake Marriott Business Park - Santa Clara, CA.................... - 12,032 31,128
Presidents Plaza - Chicago, IL................................... - 7,750 69,752
--------- -------- ----------
$452,212 $212,176 $1,417,595
========= ======== ==========
</TABLE>
37
<PAGE> 38
Schedule III
BEACON PROPERTIES, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION--(Continued)
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Subsequent Gross Amount at Which
to Acquisition Carried at Close of Period
------------------------- ----------------------------------
Cost Capitalized
Buildings Buildings
and and
Description Land Improvements Land Improvements Total
----------- ------- ------------ ------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Commercial Property:
Wellesley Office Park - Buildings 1-8 - Wellesley, MA............ - $12,866 $ 9,110 $ 88,695 $ 97,805
Crosby Corporate Center - Bedford, MA............................ $1,505 14,880 2,483 25,358 27,841
South Station - Boston, MA....................................... - 861 - 22,348 22,348
175 Federal St. - Boston, MA..................................... - 3,196 1,404 27,701 29,105
Center Plaza - Boston, MA........................................ - 8,810 7,301 74,522 81,823
150 Federal St.- Boston, MA...................................... - 1,326 11,265 102,606 113,871
One Canal Park - Cambridge, MA................................... - 139 931 8,583 9,514
Ten Canal Park - Cambridge, MA................................... - 135 1,179 10,744 11,923
2 Oliver Street - Boston, MA..................................... - 1,376 1,796 17,542 19,338
Westwood Business Centre - Westwood, MA.......................... - 674 1,159 11,172 12,331
Russia Wharf - Boston, MA........................................ 177 3,496 1,619 16,470 18,089
Westlakes Office Park - Buildings 1,2, 3 and 5 - Berwyn, PA...... - 6,416 6,335 52,683 59,018
Perimeter Center - Atlanta, GA................................... - 4,271 46,438 296,576 343,014
AT&T Plaza - Oak Brook, IL....................................... - 18 3,510 31,605 35,115
Tri-State International - Lincolnshire, IL....................... - 950 6,222 56,949 63,171
1333H Street, N.W. - Washington, D.C............................. - 68 5,337 48,101 53,438
E.J. Randolph - McLean, VA....................................... - 36 3,590 19,556 23,146
John Marshall I - McLean, VA..................................... - 147 5,996 28,138 34,134
Northridge I - Herndon, VA....................................... - 41 1,911 19,305 21,216
1300 North 17th Street - Rosslyn, VA............................. - 11 8,007 46,769 54,776
1616 North Fort Myer Drive - Rosslyn, VA......................... - 87 6,156 38,738 44,894
New England Executive Park - Burlington, MA..................... - 64 7,067 68,323 75,390
10960 Wilshire Boulevard - Westwood, CA.......................... - 68 11,200 122,107 133,307
245 First Street - Cambridge, MA................................. - 54 4,513 40,670 45,183
Shoreline Technology Park - Mountain View, CA.................... - 49 39,547 101,493 141,040
Lake Marriott Business Park - Santa Clara, CA..................... - 7 12,032 31,135 43,167
Presidents Plaza - Chicago, IL................................... - 31 7,750 69,783 77,533
------ ------- -------- ----------- ----------
$1,682 $60,077 $213,858 $1,477,672 $1,691,530
====== ======= ======== =========== ==========
</TABLE>
38
<PAGE> 39
Schedule III
BEACON PROPERTIES, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION--(Continued)
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Life on Which
Depreciation
in Latest
Date of Income
Accumulated Construction/ Date
Statements Description Depreciation Renovation Acquired is Computed
- ----------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C>
Commercial Property:
Wellesley Office Park - Buildings 1-8 - Wellesley, MA............ $33,913 1963-1984 1994/1995 (3)
Crosby Corporate Center - Bedford, MA............................ 6,702 1981 5/26/94 (3)
South Station - Boston, MA....................................... 13,434 1988 5/26/94 (3)
175 Federal St. - Boston, MA..................................... 7,258 1977 10/28/94 (3)
Center Plaza - Boston, MA........................................ 5,884 1966-1969 12/01/94 (3)
150 Federal St.- Boston, MA...................................... 8,961 1988 5/26/94 (3)
One Canal Park - Cambridge, MA................................... 770 1987 6/10/94 (3)
Ten Canal Park - Cambridge, MA................................... 386 1987 12/20/95 (3)
2 Oliver Street - Boston, MA..................................... 783 1982-1988 10/06/95 (3)
Westwood Business Centre - Westwood, MA.......................... 1,083 1985 6/10/94 (3)
Russia Wharf - Boston, MA........................................ 1,453 1978-1982 8/10/94 (3)
Westlakes Office Park - Buildings 1,2, 3 and 5 - Berwyn, PA...... 3,931 1988-1990 7/95 & 10/94 (3)
Perimeter Center - Atlanta, GA................................... 8,822 1970-1989 2/15/96 (3)
AT&T Plaza - Oak Brook, IL....................................... 395 1984 8/16/96 (3)
Tri-State International - Lincolnshire, IL....................... 710 1986 8/16/96 (3)
1333H Street, N.W. - Washington, D.C............................. 601 1984 8/16/96 (3)
E.J. Randolph - McLean, VA....................................... 217 1983 9/05/96 (3)
John Marshall I - McLean, VA..................................... 306 1981 9/05/96 (3)
Northridge I - Herndon, VA....................................... 214 1988 9/05/96 (3)
1300 North 17th Street - Rosslyn, VA............................. 325 1980 10/18/96 (3)
1616 North Fort Myer Drive - Rosslyn, VA......................... 271 1974 10/18/96 (3)
New England Executive Park - Burlington, MA..................... 291 1970-1985 11/15/96 (3)
10960 Wilshire Boulevard - Westwood, CA.......................... 439 1971-1992 11/21/96 (3)
245 First Street - Cambridge, MA................................. 170 1985-1986 11/21/96 (3)
Shoreline Technology Park - Mountain View, CA.................... 141 1985-1991 12/20/96 (3)
Lake Marriott Business Park - Santa Clara, CA.................... 43 1981 12/20/96 (3)
Presidents Plaza - Chicago, IL................................... 32 1980-1982 12/27/96 (3)
-------
$97,535
=======
</TABLE>
(1) These properties are collateral for a Note Payable under the Credit
Facility. The outstanding balance under the Note at December 31, 1996 is
$153,000.
(2) This property is comprised of two Units. Unit A is collateral for a Note
Payable under the Credit Facility. Unit B is collateral for a Mortgage
Note Payable in the amount of $56,920.
(3) Buildings and improvements - 19 to 40 years; Personal property - 5 to 10
years; tenant improvements - over the terms of the related leases.
Depreciation of building and improvements and personal property is
calculated over the following estimated useful lives, using straight line and
declining balance methods:
Buildings and improvements - 19 to 40 years
Tenant Improvements -over the terms of the related leases
Personal property - 5 to 10 years
The aggregate cost for federal income tax purposes was approximately
$1,390.3 million at December 31, 1996.
39
<PAGE> 40
The changes in total real estate assets for the years ended December 31,
1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period
January 1, 1994 to May 25, 1994 are as follows:
<TABLE>
<CAPTION>
Company Predecessor
--------------------------------------- -------------
May 26, 1994 Jan. 1, 1994
to to 1996 1995
Dec. 31, 1994 May 25, 1994 ---- ----
------------- ------------
<S> <C> <C> <C> <C>
Balance, beginning of period............................. $ 471,142 $400,419 $207,013 * $81,220
Acquisitions, Construction Costs and Improvements........ 1,220,388 70,723 193,406 978
---------- -------- -------- -------
Balance, end of period................................... $1,691,530 $471,142 $400,419 $82,198
========== ======== ======== =======
</TABLE>
- ------------------------
* Represents initial acquisition cost of properties in the formation of the
Company.
The changes in accumulated depreciation for the years ended December 31,
1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period
January 1, 1994 to May 25, 1994 are as follows:
<TABLE>
<CAPTION>
Company Predecessor
--------------------------------------- -------------
May 26, 1994 Jan. 1, 1994
to to 1996 1995
Dec. 31, 1994 May 25, 1994 ---- ----
------------- ------------
<S> <C> <C> <C> <C>
Balance, beginning of period............................ $66,571 $51,115 $45,044 ** $37,167
Depreciation for period................................. 30,964 15,456 6,071 2,055
------- ------- ------- -------
Balance, end of period.................................. $97,535 $66,571 $51,115 $39,222
======= ======= ======= =======
</TABLE>
- ---------------------------
** Balance reflects prior accumulated depreciation carried over due to
accounting for formation acquisitions as poolings of interests.
40
<PAGE> 41
\
Schedule IV
BEACON PROPERTIES, L.P.
MORTGAGE LOANS ON REAL ESTATE
December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Principal Amount of
Final Periodic Face Carrying Loans Subject to
Interest Maturity Payment Prior Amount of Amount of Delinquent Principal Commercial
Rate Date Term Liens Mortgages Mortgages (1) or Interest Property
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rowes Wharf.............8.71% 4/1/99 Interest-only - $63,000 $51,491 - Boston, MA
</TABLE>
(1) The aggregate cost of the Company's mortgage loans for federal income tax
purposes $51,491 at December 31, 1996.
Reconciliation of Mortgage Loans on real estate for the year ended December 31:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Balance at beginning of year.................. $34,778
Additions during period:
Acquisition of mortgage loans............. 16,713
Deductions during period:
Principal collections..................... -
------
Balance at end of year........................ $51,491
=======
</TABLE>
41
<PAGE> 42
ITEM 7 (B): PRO FORMA FINANCIAL INFORMATION AS OF AND FOR THE NINE MONTH
PERIOD ENDED SEPTEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
for EOP Operating Limited Partnership
42
<PAGE> 43
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
The accompanying unaudited Pro Forma Condensed Combined Balance Sheet as
of September 30, 1997 reflects the following transactions which all occurred
subsequent to September 30, 1997: (a) the acquisition of 35 office properties
and one parking facility; (b) the sale of 9.7 million units of partnership
interest ("Units") in EOP Operating Limited Partnership (the "Operating
Partnership"); (c) draws on the term loan (the "$1.5 billion Credit Facility")
to fund acquisitions and repay mortgage indebtedness; (d) the acquisition of a
50% interest in the mortgage note securing the 1325 Avenue of the Americas
property acquired in November, 1997; and (e) the merger of Beacon Properties,
L.P. ("Beacon") with and into the Operating Partnership on December 19, 1997
(the "Merger").
The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the nine months ended September 30, 1997 reflects the following
transactions as if they had occurred on January 1, 1997: (a) the acquisition of
46 office properties and seven parking facilities, including an interest in
four parking facilities, acquired between January 1, 1997 and December 17,
1997, and the disposition of two office properties; (b) the $180 million
private debt offering (the "Private Debt Offering") which occurred on September
3, 1997; (c) the transactions that occurred in connection with the
consolidation of the entities which comprise the predecessors ("Equity Office
Predecessors") of the Operating Partnership (the "Consolidation") and the
initial public offering (the "Offering"), 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; (d) the net change in interest expense from
draws on the $1.5 billion Credit Facility used to refinance existing mortgage
debt; (e) interest income from the 50% interest in the mortgage note securing
the 1325 Avenue of the Americas property; and (f) the Merger.
The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1996 reflects the following
transactions as if they had occurred on January 1, 1996: (a) the acquisition of
57 office properties and 14 parking facilities, including an interest in four
parking facilities, acquired between January 1, 1996 and December 17, 1997 and
the disposition of two office properties; (b) the Private Debt Offering which
occurred on September 3, 1997; (c) the Consolidation and the Offering, and the
decrease in interest expense resulting from the use of the net proceeds for the
repayment of mortgage debt; (d) the net change in interest expense from draws
on the $1.5 billion Credit Facility used to refinance existing mortgage debt;
(e) interest income from the 50% interest in the mortgage note securing the
1325 Avenue of the Americas property; and (f) the Merger.
The accompanying unaudited pro forma condensed combined financial
statements have been prepared by management of the Operating Partnership 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 nine month period ended September 30, 1997 and the year ended
December 31, 1996, included elsewhere herein.
43
<PAGE> 44
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
EOP OPERATING
LIMITED
PARTNERSHIP
HISTORICAL ACQUIRED PROPERTIES OTHER ACTIVITY
--------------------------------------------------------------------
ASSETS (A)
<S> <C> <C> <C>
Investment in real estate, net $5,000,159 $ 1,942,807 $ -
Cash and cash equivalents 132,649 (1,365,916) 1,237,659 (B)
Rents and other receivables 16,190 - -
Escrow deposits and restricted cash 42,966 - -
Investment in mortgage notes - - 25,150 (C)
Investments in unconsolidated joint ventures 93,826 20,000 -
Other assets 70,132 - 4,875 (D)
--------------------------------------------------------------------
TOTAL ASSETS $5,355,922 $ 596,891 $ 1,267,684
====================================================================
LIABILITIES AND PARTNERS' CAPITAL
Mortage debt $1,325,333 $ 257,674 $ (233,921) (E)
Notes Payable 180,000 - -
Revolving line of credit/term loan 211,125 - 1,229,065 (F)
Distribution payable 42,964 - -
Other liabilities 132,748 30,629 -
--------------------------------------------------------------------
TOTAL LIABILITIES 1,892,170 288,303 995,144
Minority interests:
Partially owned properties 28,118 - -
Partners' capital 3,435,634 308,588 272,540 (G)
--------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $5,355,922 $ 596,891 $ 1,267,684
====================================================================
<CAPTION>
EOP OPERATING
BEACON PROPERTIES L.P. MERGER LIMITED PARTNERSHIP
PRE-MERGER PRO FORMA ADJUSTMENTS PRO FORMA
----------------------------------------------------------------
ASSETS (H) (I)
<S> <C> <C> <C>
Investment in real estate, net $2,459,465 $ 1,597,516 (J) $ 10,999,947
Cash and cash equivalennts 9,798 (9,234) (K) 4,956
Rents and other receivables 85,196 - 101,386
Escrow deposits and restricted cash - - 42,966
Investment in morttage notes - - 25,150
Investments in unconsolidated joint ventures 50,472 - 164,298
Other assets 62,514 (46,203) (L) 91,318
----------------------------------------------------------------
TOTAL ASSETS $2,667,445 $ 1,542,079 $ 11,430,021
================================================================
LIABILITIES AND PARTNERS' CAPITAL
Mortage debt $ 618,698 $ (6,000) (M) $ 1,961,784
Notes Payable - - 180,000
Revolving line of credit/term loan 407,017 - 1,847,207
Distribution payable - - 42,964
Other liabilities 74,795 (24,051) (M) 214,121
----------------------------------------------------------------
TOTAL LIABILITIES 1,100,510 (30,051) 4,246,076
Minority interests:
Partially owned properties - - 28,118
Partners' capital 1,566,935 1,572,130 (N) 7,155,827
----------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $2,667,445 $ 1,542,079 $ 11,430,021
================================================================
</TABLE>
52
<PAGE> 45
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
EOP OPERATING
LIMITED PARTNERSHIP 1997 ACQUIRED
HISTORICAL PROPERTIES DISPOSITIONS
------------------- -------------- --------------
(O) (P) (Q)
<S> <C> <C> <C>
Revenues:
Rental $ 381,108 $ 169,133 $ (2,558)
Tenant reimbursements 66,855 41,748 (62)
Parking 33,744 15,114 (573)
Other 7,600 3,013 (26)
Mangement fees 3,841 - -
Interest 10,524 65 -
------------ --------- ----------
Total revenues 503,672 229,073 (3,219)
------------ --------- ----------
Expenses:
Property operating 190,170 87,299 (1,595)
Interest 110,419 67,176 (36)
Depreciation 80,166 38,837 -
Amortization 5,884 - (54)
General and administrative 23,056 - -
------------ --------- ----------
409,695 193,312 (1,685)
------------ --------- ----------
Income before allocation to minority interests, income from
investments in unconsolidated joint ventures, gain on sales of real
estate and extraordinary items 93,977 35,761 (1,534)
Discontinued operations:
Loss from operations - Construction Company
Minority interests:
Partially owned propertiees (1,191) - -
Income from investments in unconsolidated joint ventures 3,408 1,463 -
Gain on sales of real estate 12,510 - (12,510)
Preferred dividends - - -
------------ --------- ----------
Income before extraordinary items 108,704 37,224 (14,044)
Extraordinary items (13,204) - 275
------------ --------- ----------
Net income $ 95,500 $ 37,224 $ (13,769)
============ ========= ==========
<CAPTION>
CONSOLIDATION AND BEACON PROPERTIES,
OFFERING L.P. PRE-MERGER
FINANCING ACTIVITY ADJUSTMENTS PRO FORMA
------------------ ----------------- ------------------
(Z)
<S> <C> <C> <C>
Revenues:
Rental $ - $ 8,983 (U) $ 271,273
Tenant reimbursements - - 38,164
Parking - - -
Other - - 11,039
Mangement fees - - 2,445
Interest 2,188 (R) - 7,153
------------ --------- ----------
Total revenues 2,188 8,983 330,074
------------ --------- ----------
Expenses:
Property operating - - 104,285
Interest 12,761 (S) (25,343) (V) 53,831
Depreciation - 1,205 (W) 61,690
Amortization 4,141 (T) (1,699) (X) -
General and administrative - 1,800 (Y) 29,717
------------ --------- ----------
16,902 (24,037) 249,523
------------ --------- ----------
Income before allocation to minority interests, income from
investments in unconsolidated joint ventures, gain on sales of real
estate and extraordinary items (14,714) 33,020 80,551
Discontinued operations:
Loss from operations - Construction Company (2,263)
Minority interests:
Partially owned propertiees - (42) -
Income from investments in unconsolidated joint ventures - - 4,602
Gain on sales of real estate - - -
Preferred dividends - - (13,470)
------------ --------- ----------
Income before extraordinary items (14,714) 32,978 69,420
Extraordinary items - - -
------------ --------- ----------
Net income $ (14,714) $ 32,978 $ 69,420
============ ========= ==========
<CAPTION>
EOP OPERATING
LIMITED PARTNERSHIP
MERGER ADJUSTMENTS PRO FORMA
------------------ --------------------
<S> <C> <C>
Revenues:
Rental $ 1,412 (AA) $ 829,351
Tenant reimbursements - 146,705
Parking - 48,285
Other - 21,626
Mangement fees - 6,286
Interest - 19,930
---------- -----------
Total revenues 1,412 1,072,183
---------- -----------
Expenses:
Property operating - 380,159
Interest - 218,808
Depreciation 6,759 (AB) 188,657
Amortization 514 (AC) 8,786
General and administrative (15,000) (AD) 39,573
---------- -----------
(7,727) 835,983
---------- -----------
Income before allocation to minority interests, income from
investments in unconsolidated joint ventures, gain on sales of real
estate and extraordinary items 9,139 236,200
Discontinued operations:
Loss from operations - Construction Company - (2,263)
Minority interests:
Partially owned propertiees - (1,233) (AE)
Income from investments in unconsolidated joint ventures - 9,473
Gain on sales of real estate - -
Preferred dividends - (13,470)
---------- -----------
Income before extraordinary items 9,139 228,707
Extraordinary items - (12,929)
---------- -----------
Net income $ 9,139 $ 215,778
========== ===========
Net income per Unit $ 0.77 (AF)
===========
Weighted Average Units Outstanding 279,411
===========
</TABLE>
53
<PAGE> 46
EOP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION> EOP OPERATING
LIMITED PARTNERSHIP 1996 ACQUIRED 1997 ACQUIRED
HISTORICAL PROPERTIES PROPERTIES DISPOSITIONS
--------------------- ------------- ------------- ------------
(O) (P) (P) (Q)
<S> <C> <C> <C> <C>
Revenues:
Rental $ 386,481 $ 53,340 $ 239,256 $ (8,303)
Tenant reimbursements 62,036 9,967 51,795 (88)
Parking 27,253 13,518 20,900 (1,462)
Other 17,626 1,797 6,176 (99)
Management fees 5,120 - - -
Interest 9,608 - 249 (7)
------------- --------- --------- ---------
508,124 78,622 318,376 (9,959)
Expenses ------------- --------- --------- ---------
Property operating 201,067 30,971 125,661 (5,046)
Interest 119,595 24,178 103,290 (956)
Depreciation 82,905 13,090 59,205 (1,941)
Amortization 13,332 - - (346)
General and administrative 23,145 - - -
------------- --------- --------- ---------
440,044 68,239 288,156 (8,289)
------------- --------- --------- ---------
Income before allocation to minority interests, income from
investments in unconsolidated joint ventures, gain on sales of real
estate and extraordinary items 68,080 10,383 30,220 (1,670)
Discontinued operations:
Loss from operations - Construction Company
Loss on sale - Construction Company
Minority interests:
Partially owned properties (2,086) - - -
Income from investments in unconsolidated joint ventures 2,093 - 3,218 (AF)
Gain on sales of real estate 5,338 - - -
Preferred dividends ------------- --------- --------- ---------
Income before extraordinary items 73,425 10,383 33,438 (1,670)
Extraordinary items - - - -
------------- --------- --------- ---------
Net income $ 73,425 $ 10,383 $ 33,438 $ (1,670)
============= ========= ========= =========
<CAPTION>
FINANCING ACTIVITY CONSOLIDATION BEACON PROPERTIES,
ACTIVITY L.P. PRE-MERGER
PRO FORMA
------------------ ------------- ------------------
(Z)
<S> <C> <C> <C>
Revenues:
Rental $ - $ 16,264 (U) $ 332,309
Tenant reimbursements - - 46,885
Parking - - -
Other - - 18,026
Management fees - - 3,005
Interest 2,917 (R) - 8,376
------------- ---------- ---------
2,917 16,264 408,601
Expenses ------------- ---------- ---------
Property operating - - 132,230
Interest 11,606 (S) (43,041) (V) 73,888
Depreciation - 7,183 (W) 78,745
Amortization 4,387 (T) (8,591) (X) -
General and administrative - 2,400 (Y) 27,099
------------- ---------- ---------
15,993 (42,049) 311,962
------------- ---------- ---------
Income before allocation to minority interests, income from
investments in unconsolidated joint ventures, gain on sales of real
estate and extraordinary items (13,076) 58,313 96,639
Discontinued operations:
Loss from operations - Construction Company (2,609)
Loss on sale - Construction Company (249)
Minority interests:
Partially owned properties - (56) -
Income from investments in unconsolidated joint ventures - - 4,539
Gain on sales of real estate - - 16,505
Preferred dividends (17,960)
------------- ---------- ---------
Income before extraordinary items (13,076) 58,257 96,865
Extraordinary items - - -
------------- ---------- ---------
Net income $ (13,076) $ 58,257 $ 96,865
============= ========== =========
<CAPTION>
EOP OPERATING LIMITED
MERGER ADJUSTMENTS PARTNERSHIP PRO FORMS
------------------ ---------------------
<S> <C> <C>
Revenues:
Rental $ 3,750 (AA) $ 1,023,097
Tenant reimbursements - 170,595
Parking - 60,209
Other - 43,526
Management fees - 8,125
Interest - 21,143
---------- -------------
3,750 1,326,695
Expenses ---------- -------------
Property operating - 484,883
Interest - 288,560
Depreciation 12,537 (AB) 251,724
Amortization 632 (AC) 9,414
General and administrative (20,000) (AD) 32,644
---------- -------------
(6,831) 1,067,225
---------- -------------
Income before allocation to minority interests, income from
investments in unconsolidated joint ventures, gain on sales of real
estate and extraordinary items 10,581 259,470
Discontinued operations:
Loss from operations - Construction Company - (2,609)
Loss on sale - Construction Company - (249)
Minority interests: -
Partially owned properties - (2,142) (AE)
Income from investments in unconsolidated joint ventures - 9,850
Gain on sales of real estate - 21,843
Preferred dividends - (17,960)
---------- -------------
Income before extraordinary items 10,581 268,203
Extraordinary items - -
---------- -------------
Net income $ 10,581 $ 268,203
========== =============
Net income per Unit $ 0.97 (AF)
=============
Weighted average outstanding 279,411
=============
</TABLE>
54
<PAGE> 47
EOP OPERATING LIMITED PARTNERSHIP
NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
A. To reflect the following acquisitions acquired during the period from
October 1, 1997 to December 17, 1997, as previously reported in Equity
Office Properties Trust's Current Report on Form 8-K dated October 1, 1997
and the Operating Partnership's Current Report on Form 8-K dated December
17, 1997, respectively:
<TABLE>
<CAPTION>
VALUE OF UNITS
PROPERTY NOTE PURCHASE COST CASH PAID LIABILITIES ASSUMED ISSUED
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Prudential Properties (1) $289,000 $211,950 $6,000 $71,050
550 South Hope Street (2) 99,500 99,500 -- --
Acorn Properties (3) 127,500 98,364 14,749 14,387
10 & 30 South Wacker Drive (4) 481,301 462,000 19,301 --
One Lafayette Centre (5) 81,680 51,910 5,330 24,440
Acorn Properties (6) 17,161 10,659 2,923 3,579
PPM Properties (7) 91,940 91,940 -- --
LaSalle Office Plaza (8) 97,425 97,425 -- --
Stanwix Parking Facility (9) 17,300 17,300 -- --
Wright Runstad Properties (10) 640,000 208,867 240,000 191,133
---------------------------------------------------------------------------
1,942,807 1,349,915 288,303 304,589
Investment in Wright
Runstad Associates
Limited Partnership (11) 20,000 16,001 -- 3,999
---------------------------------------------------------------------------
Total $1,962,807 $1,365,916 $288,303 $308,588
============================================================================
</TABLE>
(1) Acquired on October 1, 1997, and consists of six properties.
(2) Acquired on October 6, 1997.
(3) Acquired on October 7, 1997, and consists of nine properties.
(4) Acquired on October 7, 1997, and consists of two properties.
The purchase price includes approximately $19.3 million related
to a real estate tax liability from closing prorations.
(5) Acquired on October 17, 1997.
(6) Acquired on November 21, 1997, and consists of two properties.
(7) Acquired on November 24, 1997, and consists of three properties.
(8) Acquired on November 25, 1997.
(9) Acquired on November 25, 1997.
(10) Acquired on December 17, 1997, and consists of ten properties.
(11) Acquired on December 17, 1997.
47
<PAGE> 48
B. To reflect the following transactions:
<TABLE>
<S> <C>
Issuance of 3.0 million Units at $24.50 each which occurred on October $ 73,950
1, 1997
Issuance of 6.7 million Units at $30.00 each which occurred on October 200,000
20, 1997
Net proceeds from the $1.5 billion Credit Facility to fund acquisitions
and other activity (see Note F) 968,584
Payment of fees related to the $1.5 billion Credit Facility (see Note D) (4,875)
----------
Net cash proceeds $1,237,659
==========
</TABLE>
C. To reflect the investment in the mortgage note securing the 1325 Avenue
of the Americas property made in November, 1997. The Operating
Partnership owns a 50% interest in the mortgage note which bears interest
at LIBOR plus 6%.
D. To reflect fees paid by the Operating Partnership pertaining to the $1.5
billion Credit Facility which was obtained in October, 1997. The fees
will be amortized to interest expense over the term of the $1.5 billion
Credit Facility, which is nine months.
E. To reflect the mortgage debt repaid from draws on the $1.5 billion Credit
Facility and to write-off the unamortized mark-to-market adjustments for
the following properties recorded at the time of the Consolidation and the
Offering based on the outstanding principal balances as of September 30,
1997:
<TABLE>
<CAPTION>
PROPERTY INTEREST RATE MATURITY DATE BALANCE AT 9/30/97
- --------------------------------------------------------------------------
<S> <C> <C> <C>
1601 Market LIBOR + 1.25% June 30, 2001 $ 24,152
1620 L Street 8.00% Feb. 4, 2000 21,086
9400 NCX LIBOR + 1.65% May 10, 2001 14,218
Bank One Center LIBOR + 1.1% Mar. 19, 1999 83,500
NationsBank 8.00% Dec. 1, 2003 18,855
North Central Plaza LIBOR + 1.75% Aug. 3, 1999 14,930
San Jacinto LIBOR + 1.125% Dec. 13, 1998 18,212
Sterling Plaza LIBOR + 1.75% Dec. 8, 1998 15,628
The Quadrant EURODOLLAR + 2.00% May 31, 1999 18,000
Union Square EURODOLLAR + 2.00% May 31, 1999 6,750
-------
Subtotal 235,331
Less: Write-off of unamortized
mark-to-market adjustments for debt
repaid on San Jacinto, NationsBank and
Bank One Center (1,410)
--------
$233,921
========
</TABLE>
48
<PAGE> 49
F. To record draws on the $1.5 billion Credit Facility for the following
transactions:
<TABLE>
<S> <C>
Draws to fund acquisitions and other activity (see Note B) $968,584
Draws to repay mortgage debt (see Note E) 235,331
Draw to fund investment in mortgage note (see Note C) 25,150
----------
$1,229,065
==========
</TABLE>
G. To reflect the net increase in partners' capital due to the following
transactions:
<TABLE>
<S> <C>
Units issued after September 30, 1997 (see Note B) $ 273,950
Write-off unamortized mark-to-market adjustments
on mortgage debt repaid with the $1.5 billion
Credit Facility (see Note E) (1,410)
----------
$ 272,540
==========
</TABLE>
H. Represents Beacon's pre-Merger pro forma balance sheet as of September 30,
1997 which includes certain acquisitions and other adjustments that
occurred subsequent to September 30, 1997.
I. Represents adjustments to record the Merger which was accounted for using
the purchase method of accounting, based upon the purchase price of
approximately $4.3 billion and a market value of $31.30 per Unit of the
Operating Partnership, as follows:
<TABLE>
<S> <C>
Issuance of 93.9 million Units based on the 1.4063
exchange rate, in exchange for 66.8 million units of
partnership interest in Beacon ("Beacon Units") $2,939,065
Issuance of $200 million of preferred units to preferred
unitholders of Beacon 200,000
Assumption of mortgage debt and other liabilities of Beacon 1,100,510
Adjustment to mortgage debt and other liabilities of
Beacon's to market value (see Note M) (30,051)
Merger costs (see calculation below) 93,897
-----------
$4,303,421
===========
</TABLE>
The following is a calculation of the estimated fees and other expenses
related to the Merger:
<TABLE>
<S> <C>
Employee termination costs $70,120
Debt assumption fees 2,600
Transfer taxes 2,200
Advisory fees 4,500
Legal and accounting fees 4,750
Other, including printing and filing costs 9,727
-------
$93,897
=======
</TABLE>
49
<PAGE> 50
J. Represents the increase in Beacon's investment in real estate, net, based
upon the Operating Partnership's purchase price as adjusted to reflect the
allocation to other tangible assets of Beacon being acquired:
<TABLE>
<S> <C>
Purchase price (see Note I) $4,303,421
----------
Less: Pre-merger pro forma basis of Beacon's net assets
acquired:
Rental property, net 2,459,465
Cash and cash equivalents, including $84.7 million
received in connection with the exercise of options
related to 3.37 million Beacon Units 94,461
Investment in unconsolidated joint ventures 50,472
Other assets, less write-off of deferred rents receivable
of $27.0 million and deferred financing and leasing costs
of $19.2 million (see Note L) 101,507
----------
Subtotal 2,705,905
----------
Step-up to record fair value of Beacon's investment in real
estate, net $1,597,516
==========
</TABLE>
K. To record the net decrease in cash from the following transactions:
<TABLE>
<S> <C>
Cash received from the exercise of Beacon options
(see Note J) $ 84,663
Transaction costs associated with the Merger (see Note I) (93,897)
----------
Net decrease in cash $ (9,234)
==========
</TABLE>
L. To eliminate Beacon's deferred rents receivable of $27.0 million which
arose from the historical straight-lining of rents, and Beacon's deferred
financing and leasing costs of $19.2 million which were not assigned any
value in the allocation of the purchase price.
M. To adjust Beacon's mortgage debt and other liabilities to market value.
N. To reflect the net increase in partners' capital associated with the
Merger, as follows:
<TABLE>
<S> <C>
Issuance of 93.9 million Units based on the
1.4063 exchange rate, in exchange for 66.8
million Beacon Units $2,939,065
Less: Beacon pro forma partners' capital and
minority interests (1,366,935)
----------
Net increase to partners' capital $1,572,130
==========
</TABLE>
O. Represents the combined historical statements of operations of the
Operating Partnership for the period from July 11, 1997 to September 30,
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 nine months ended September 30, 1997 and the historical
statement of operations of Equity Office Predecessors for the Pro Forma
Condensed Combined Statement of Operations for the year ended December 31,
1996.
P. To reflect the operations and the depreciation expense for (a) the pro
forma condensed combined statement of operations for the nine months ended
September 30, 1997; for the period from January 1, 1997 through the
earlier of the date of acquisition or September 30, 1997, as applicable,
for properties acquired in 1997, and (b) the pro forma condensed combined
statement of operations for the year ended December 31, 1996; for the
period from January 1, 1996 through the date of acquisition for properties
acquired in 1996, or December 31, 1996 for the properties acquired in
1997. Interest
50
<PAGE> 51
expense was also adjusted, where applicable, to reflect
nine months and a full year, for the nine months ended September 30, 1997
and the year ended December 31, 1996, respectively.
<TABLE>
<CAPTION>
PROPERTY DATE ACQUIRED NOTE REFERENCE
- --------------------------------------------------------------------------------
<S> <C> <C>
1601 Market Street January 18, 1996 1
Promenade II June 14, 1996 1
Two California Plaza August 23, 1996 1
BP Tower September 4, 1996 1
SunTrust Center September 18, 1996 1
Reston Town Center October 22, 1996 1
One Phoenix Plaza December 4, 1996 1
Colonnade I December 4, 1996 1
Boston Harbor Garage December 10, 1996 1
Milwaukee Center Parking Garage December 18, 1996 1
15th & Sansom Streets Garage December 27, 1996 1
1616 Chancellor Street Garage December 27, 1996 1
Juniper / Locusts Streets Garage December 27, 1996 1
1616 Sansom Street Garage December 27, 1996 1
1111 Sansom Street Garage December 27, 1996 1
177 Broad Street January 29, 1997 2
Biltmore Apartments January 29, 1997 2
Preston Commons March 21, 1997 2
Oakbrook Terrace Tower April 16, 1997 2
50 % Interest in Civic Parking, L.L.C. April 16, 1997 2
One Maritime Plaza April 21, 1997 2
Smith Barney Tower April 29, 1997 2
201 Mission Street April 30, 1997 2
30 N. LaSalle June 13, 1997 2
Adams - Wabash Parking Facility August 11, 1997 2
Columbus America Properties September 3, 1997 2
Prudential Properties October 1, 1997 2
550 South Hope Street October 6, 1997 2
10 & 30 South Wacker Drive October 7, 1997 2
Acorn Properties October 7, 1997 2
One Lafayette Centre October 17, 1997 2
Acorn Properties November 21, 1997 2
PPM Properties November 24, 1997 2
LaSalle Office Plaza November 25, 1997 2
Stanwix Parking Facility November 25, 1997 2
Wright Runstad Properties December 17, 1997 2
Wright Runstad Associates Limited
Partnership December 17, 1997 2
</TABLE>
Note 1: Included in the Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 1996, in the column entitled "1996
Acquired Properties".
Note 2: Included in the Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 1996 and for the nine months ended
September 30, 1997, in the column entitled "1997 Acquired Properties".
The depreciation adjustment of $38.8 million in the "1997 Acquired
Properties" column in the statement of operations for the nine months ended
September 30, 1997, and the depreciation adjustment of $13.1 million in the
"1996 Acquired Properties" column and $59.2 million in the "1997 Acquired
Properties" column in the statement of operations for the year ended
December 31, 1996, are
51
<PAGE> 52
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.
Q. To eliminate the operations of Barton Oaks Plaza II and 8383 Wilshire for
the nine months ended September 30, 1997 and the year ended December 31,
1996, which were sold in January and May 1997, respectively.
R. To reflect interest income from the 50% investment in the mortgage note
(see Note C).
S. To reflect the additional interest expense on debt obtained in the nine
months ended September 30, 1997 on properties acquired before 1997 and to
reflect the Private Debt Offering which occurred on September 3, 1997, and
paydown of the revolving credit facility for the nine months ended
September 30, 1997 and the year ended December 31, 1996, and to reflect
the $235.3 million of mortgage indebtedness repaid from draws on the $1.5
billion Credit Facility (see Note E) and the repayment of the revolving
credit facility balance.
T. To eliminate the $.7 and $.5 million of amortization expense recorded on
the mark-to-market adjustment on debt repaid from draws on the $1.5
billion Credit Facility and to reflect amortization of $4.9 million
related to the fees associated with the $1.5 billion Credit Facility (see
Note D) for the nine months ended September 30, 1997 and the year ended
December 31, 1996.
U. To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the Consolidation and the Offering closed on January
1, 1997 and 1996, respectively, for the pro forma condensed combined
statement of operations for the nine months ended September 30, 1997 and
the year ended December 31, 1996.
V. To reflect the net change 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 Offering and cash held by Equity Office Predecessors.
52
<PAGE> 53
W. To reflect depreciation expense related to the adjustment to record the
net equity value of the investment in real estate for the nine months
ended September 30, 1997 and for the year ended December 31, 1996, on a
straight-line basis, as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31, 1996
1997
----------------------------------------
<S> <C> <C>
Historical investment in
real estate before
accumulated depreciation $5,022,946 $5,022,946
Less: Portion allocated to land
estimated to be 10% (502,295) (502,295)
----------------------------------------
Depreciable basis $4,520,651 $4,520,651
========================================
Depreciation expense based on an
estimated useful life of 40 years $84,762 $113,016
----------------------------------------
Less: Historical depreciation expense (80,166) (82,905)
Pro forma depreciation expense on
1996 Acquired Properties - (13,090)
Pro forma depreciation expense on
properties acquired in 1997 prior to
the Consolidation and the Offering (3,391) (11,779)
Depreciation expense on disposed
properties - 1,941
----------------------------------------
Depreciation expense adjustment $1,205 $7,183
========================================
</TABLE>
X. To eliminate the $5.9 million and $13.3 million of amortization
historically recognized as a result of the write-off of deferred loan
costs, lease acquisition costs and organization costs, net of the $4.1
million and $4.4 million amortization of the discount required to record
the mortgage debt at fair value recorded in connection with the
Consolidation and the Offering, and the $0.1 million and $0.3 million of
amortization relating to disposed properties for the nine months ended
September 30, 1997 and the year ended December 31, 1996.
Y. To reflect additional general and administrative expenses expected to be
incurred as a result of reporting as a public entity as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31, 1996
1997
----------------------------------------
<S> <C> <C>
Trustees and officers insurance $ 375 $ 500
Printing and mailing 375 500
Trustees and directors fees 225 300
Investor relations 225 300
Other 600 800
----------------------------------------
Total $1,800 $2,400
========================================
</TABLE>
Z. Represents Beacon's pre-Merger pro forma statements of operations for the
nine months ended September 30, 1997 and the year ended December 31, 1996,
respectively, which includes certain acquisitions and other adjustments
that occurred subsequent to September 30, 1997.
53
<PAGE> 54
AA. To reflect the adjustment for the straight-line effect of scheduled rent
increases, assuming the Merger closed on January 1, 1997 and January 1, 1996,
respectively, for the pro forma condensed combined statements of operations for
the nine months ended September 30, 1997 and the year ended December 31, 1996,
respectively.
AB. To reflect the depreciation expense related to the adjustment to record the
net equity value of the investment in real estate on a straight-line basis and
amortization of the mark-to-market adjustment of Beacon's mortgage debt for the
nine months ended September 30, 1997 and the year ended December 31, 1996
associated with the Merger, as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR
ENDED SEPTEMBER 30, ENDED DECEMBER
1997 31, 1996
-------------------------------------
<S> <C> <C>
Beacon pro forma investment in
real estate, net (see Note H) $2,459,465 $2,459,465
Adjustment to the basis of the
investment in real estate
(see Note J) 1,597,516 1,597,516
-------------------------------------
Total investment in real estate,
post-Merger 4,056,981 4,056,981
Less: portion allocated to land,
estimated to be 10% (405,698) (405,698)
-------------------------------------
Pro Forma depreciable basis of
Beacon's investment in real
estate, net $3,651,283 $3,651,283
=====================================
Depreciation expense based on an
estimated useful life of 40 years $68,462 $91,282
Beacon pro forma depreciation expense
(see Note H) 61,690 78,745
-------------------------------------
Adjustment to depreciation expense $6,772 $12,537
=====================================
</TABLE>
AC. To reflect amortization of mark-to-market adjustment of Beacon's mortgage
debt.
AD. To reflect the anticipated reduction of general and administrative expenses
as a result of the Merger.
AE. To reflect the 5% economic interest that the Operating Partnership does
not own in Equity Office Properties Management Corp. (the "Management
Corp."):
<TABLE>
<S> <C> <C>
Historical ownership interest
in partially owned properties $1,191 $2,086
----------------------
Fees from noncombined affiliates 3,840 5,120
Less: Management Corp. expenses 3,000 4,000
----------------------
Estimated Management Corp. net
income 840 1,120
----------------------
Economic interest of 5% in the
Management Corp. 42 56
----------------------
Net income allocated to
minority interests ownership in
partially owned properties $1,233 $2,142
======================
</TABLE>
AF. Net income per Unit is based upon 279.4 million Units outstanding upon
acquisition of certain properties, issuance of additional Units and the
Merger.
61
<PAGE> 55
<PAGE> 56
<PAGE> 57
<PAGE> 58
BEACON PROPERTIES, L.P.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma Condensed Consolidated Balance Sheet
of Beacon Properties, L.P. (the "Operating Partnership") as of September 30,
1997, is presented as if the Civic Opera Building, 200 West Adams, 101 North
Wacker and Lakeside properties were acquired on September 30, 1997.
The pro forma Condensed Consolidated Statements of Operations for the
year ended December 31, 1996 and nine months ended September 30, 1997 are
presented as if the acquisition of the Properties acquired from January 1, 1996
to October 20, 1997 (as more fully described below) and 101 North Wacker, the
closing of the MetLife Mortgage loan, the Beacon Properties Corporation common
stock offerings from January 1996 to April 1997 (as more fully described below)
and the Beacon Properties Corporation 8.98% Series A Cumulative Redeemable
Preferred Stock Offering at $25.00 per share had occurred as of January 1,
1996.
In management's opinion, all adjustments necessary to reflect the above
discussed transactions have been made. The unaudited pro forma Condensed
Consolidated Balance Sheet and Statement of Operations are not necessarily
indicative of what actual results of operations of the Operating Partnership
would have been for the period, nor does it purport to represent the Operating
Partnership's results of operations for future periods.
7
<PAGE> 59
Acquisitions included in pro forma:
<TABLE>
<CAPTION>
Rentable Year Built/ Date of
Property Name Sq Ft Renovated Acquisition
- ------------- -------- ----------- -----------
<S> <C> <C> <C>
1996 Acquisitions
- ---------------------------------------------------------------------------------------
Perimeter Center, Atlanta, GA 3,302,000 1970-1989 02/15/96
- ---------------------------------------------------------------------------------------
New York Life Portfolio,
Chicago, IL and Washington, D.C. 1,012,000 1984-1986 08/16/96
- ---------------------------------------------------------------------------------------
Fairfax County Portfolio,
McLean, VA and Herndon, VA 550,000 1981-1988 09/05/96
- ---------------------------------------------------------------------------------------
Rosslyn Virginia Portfolio, Rosslyn, VA 666,000 1974-1980 10/18/96
- ---------------------------------------------------------------------------------------
New England Executive Park, Burlington, MA 817,000 1970-1985 11/15/96
- ---------------------------------------------------------------------------------------
245 First Street, Cambridge, MA 263,000 1985-1986 11/21/96
- ---------------------------------------------------------------------------------------
10960 Wilshire Boulevard, Westwood, CA 544,000 1971-1992 11/21/96
- ---------------------------------------------------------------------------------------
Shoreline Technology Park, Mountain View, CA 727,000 1985-1991 12/20/96
- ---------------------------------------------------------------------------------------
Lake Marriott Business Park, Santa Clara, CA 400,000 1981 12/20/96
- ---------------------------------------------------------------------------------------
Presidents Plaza, Chicago, IL 791,000 1980-1982 12/27/96
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
Purchase Price (in thousands)
-------------------------------------
Seller Cash Debt O.P.Units Total
- ----- ---- ---- --------- -----
<S> <C> <C> <C> <C>
1996 Acquisitions
- --------------------------------------------------------------------------------
Metropolitan Life Insurance Company $322,200 $ 13,800 $336,000
- --------------------------------------------------------------------------------
New York Life Insurance Company $150,000 $150,000
- --------------------------------------------------------------------------------
Greensboro Associates, John Marshall Associates
Limited Partnership and Woodland-Northridge I
Limited Partnership $ 55,400 $ 21,600 $ 77,000
- --------------------------------------------------------------------------------
LaSalle Fund II $ 99,050 $ 99,050
- --------------------------------------------------------------------------------
New England Executive Park Limited
Partnership, et al $ 75,000 $ 75,000
- --------------------------------------------------------------------------------
Riverview Building Combined Limited Partnership
$ 45,000 $ 45,000
- --------------------------------------------------------------------------------
10960 Property Corporation $133,000 $133,000
- --------------------------------------------------------------------------------
Teachers Insurance and Annuity Association (TIAA)
$139,080 $139,080
- --------------------------------------------------------------------------------
Teachers Insurance and Annuity Association (TIAA)
$ 43,920 $ 43,920
- --------------------------------------------------------------------------------
Metropolitan Life Insurance Company $ 38,000 $ 39,000 $ 77,000
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
Rentable Year Built/ Date of
Seller Sq. Ft. Renovated Acquisition
- ----- ---------- ------------- ----------------
<S> <C> <C> <C>
1997 Acquisitions
- --------------------------------------------------------------------------------------------
10880 Wilshire Boulevard, Westwood, CA 531,000 1970 4/23/97
- --------------------------------------------------------------------------------------------
Centerpointe I and II, Fairfax, VA 409,000 1988-1990 4/30/97
- --------------------------------------------------------------------------------------------
Westbrook Corporate Center, Westchester, IL 1,106,000 1985-1996 5/23/97
- --------------------------------------------------------------------------------------------
175 Wyman Street, Waltham, MA (1) (1) 5/13/97
- --------------------------------------------------------------------------------------------
225 Franklin Street, Boston, MA 929,545 1966 6/4/97
- --------------------------------------------------------------------------------------------
Sunnyvale Business Center, Sunnyvale, CA 175,000 1990 7/1/97
- --------------------------------------------------------------------------------------------
Riverside, Newton, MA (2) (2) 8/21/97
- --------------------------------------------------------------------------------------------
150 California, San Francisco, CA (3) (3) 9/25/97
- --------------------------------------------------------------------------------------------
Media Center , Los Angeles, CA (4) (4) 9/29/97
- --------------------------------------------------------------------------------------------
Civic Opera Building, Chicago, IL 824,000 1994 10/1/97
- --------------------------------------------------------------------------------------------
200 West Adams, Chicago, IL 677,000 1985 10/8/97
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 62
<TABLE>
<S> <C> <C> <C>
Lakeside, Atlanta, GA 391,000 1972-1978 10/20/97
- ---------------------------------------------------------------------------------------
101 North Wacker, Chicago, IL 575,000 1980 Pending
</TABLE>
<TABLE>
<CAPTION>
Purchase Price (in thousands)
-------------------------------------
Seller Cash Debt O.P.Units Total
- ----- ---- ---- --------- -----
<S> <C> <C> <C> <C>
1997 Acquisitions
- ---------------------------------------------------------------------------------------
10880 Property Corporation $ 99,800 $ 99,800
- ---------------------------------------------------------------------------------------
Joshua Realty Corporation $ 25,000 $ 30,000 $ 55,000
- ---------------------------------------------------------------------------------------
Westbrook Corporate Center Associates,
Westbrook Corporate Center IV Associates Limited
Partnership and Westbrook Corporate
Center V Associates Limited Partnership $ 42,700 $106,000 $ 33,400 $182,100
- ---------------------------------------------------------------------------------------
Hewlett-Packard Company $ 24,000 $ 24,000
- ---------------------------------------------------------------------------------------
Hexalon Real Estate, Inc. $280,000 $280,000
- ---------------------------------------------------------------------------------------
O.M. Sunnyvale Associates, L.P. $ 33,800 $ 33,800
- ---------------------------------------------------------------------------------------
Cabot, Cabot & Forbes of New England, Inc. $ 32,500 $ 32,500
- ---------------------------------------------------------------------------------------
CalProp, Inc. $ 10,600 $ 10,600
- ---------------------------------------------------------------------------------------
City of Burbank, Ishverbhai Patel,
Patel Charitable Remainder Unitrust
and Burbank Holdings, Inc. $ 18,850 $ 18,850
- ---------------------------------------------------------------------------------------
Windy Point LLC and Range Line LLC $ 21,136 $ 31,773 $ 6,701 $ 59,610
- ---------------------------------------------------------------------------------------
Adams Family LLC $ 72,175 $ 72,175
- ---------------------------------------------------------------------------------------
Mutual Life Insurance Company of New York $ 38,000 $ 38,000
- ---------------------------------------------------------------------------------------
Dai-lchi and Metropolitan Life Insurance Co. $ 58,965 $ 58,965
- ---------------------------------------------------------------------------------------
</TABLE>
(1) 175 Wyman Street consists of a vacant 335,000 square for office/research
and development complex and 26.7 acres of land suitable for development. The
Operating partnership plans to redevelop the property into 400,000 square feet
of class A office space.
(2) The Riverside investment consists of a mortgage loan receivable from
Riverside Project LLC in the amount of $26,000 which bears interest at 9% and
is due upon sale along with 50% of any excess sale proceeds. In addition, loans
bearing interest at 7% in the amount of $3,250 each are due from Beacon Property
Management Corporation and Beacon Design Corporation, the proceeds of which were
used by these entities to capitalize Riverside Project LLC.
(3) 150 California land consists of a parcel of land on which the
Operating Partnership plans to develop a 207,000 square foot class A office
property.
(4) Media Center consists of a parcel of land on which the Operating
Partnership plans to develop a 585,000 square feet of class A office space.
Common and Preferred Stock Offerings included in pro forma:
<TABLE>
<CAPTION>
Price Per Gross Net
Year Month Shares Type Share Proceeds Proceeds
- ---- ----- ------ ---- --------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1996 March 7,036,000 Common $26.25 $184,695 $173,800
1996 August 5,750,000 Common 25.75 148,063 139,400
1996 November 13,723,000 Common 30.75 421,982 398,900
1996 December 1,132,400 Common 33.465 37,896 37,800
1997 April 7,000,000 Common 32.125 224,875 212,722
1997 June 8,000,000 Preferred 25.00 200,000 193,350
</TABLE>
<PAGE> 63
BEACON PROPERTIES, L.P.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------------------------------
Beacon
Properties,
L.P. Civic Opera 200 West 101 North
Historical Building Adams Lakeside Wacker
---------- -------- ----- -------- ------
(dollars in thousands)
ASSETS
<S> <C> <C> <C> <C> <C>
Real estate, net $2,230,715 $ 59,610 $ 72,175 $ 38,000 $ 58,965
Deferred financing and leasing costs, net 19,179
Cash and cash equivalents 36,609 (20,136) (6,675)
Mortgages and notes receivable 85,196
Other assets 48,783 (1,000) (500) (1,000) (2,948)
Investments in and advance
to joint ventures and corporations 50,472
----------- ----------- ---------- ----------- ---------
Total assets $2,470,954 $ 38,474 $ 65,000 $ 37,000 $ 56,017
=========== =========== ========== =========== =========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $ 586,925 $ 31,773 (A)
Note payable, Credit Facility 249,000 $ 65,000 $ 37,000 $ 56,017
Other liabilities 50,743
Investment in joint venture 24,052
----------- ----------- ---------- ----------- ---------
Total liabilities 910,720 31,773 65,000 37,000 $ 56,017
Limited partners' capital interest at
redemption value 336,422 6,701 (B)
Partners' capital 1,223,812
----------- ----------- ---------- ----------- ---------
Total liabilities and partners' capital $ 2,470,954 $ 38,474 $ 65,000 $ 37,000 $ 56,017
=========== =========== ========== =========== ==========
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
Pro Forma Adjustments
-----------------------------------
Pro Forma
Pro Forma Consolidated
--------- ------------
(dollars in thousands)
ASSETS
<S> <C> <C>
Real estate, net $ 2,459,465
Deferred financing and leasing costs, net 19,179
Cash and cash equivalents 9,798
Mortgages and notes receivable 85,196
Other assets 43,335
Investments in and advance
to joint ventures and corporations 50,472
------------- -----------
Total assets $ 2,667,445
============= ===========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $ 618,698
Note payable, Credit Facility 407,017
Other liabilities 50,743
Investment in joint venture 24,052
------------- ------------
Total liabilities 1,100,510
Limited partners' capital interest at
redemption value $ 480(C) 343,603
Partners' capital (480) 1,223,332
------------- ------------
Total liabilities and partners' capital $ 2,667,445
============= ============
</TABLE>
(A) The mortgage debt has an interest rate of 7.37% and requires monthly
principal and interest payments based on a 25 year amortization schedule.
The mortgage matures March 15, 2000 but maybe extended until March 15, 2003
based on compliance with certain covenant requirements.
(B) The seller of Civic Opera Building was issued $6,701 of Operating
Partnership Units consisting of 156,756 units valued at $42.745 each.
(C) Pro forma adjustment required to adjust the issuance of 156,756 units
(See (B)) to September 30, 1997 redemption value of $45.8125 per Unit.
The $45.8125 value per Unit is based on the closing price of Beacon
Properties Corporation's common stock on September 30, 1997.
9
<PAGE> 65
BEACON PROPERTIES, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Beacon October &
Properties, New York Life November
L.P. Perimeter and Fairfax Va. 1996
Historical Center (A) Portfolios (B) Acquisitions (G)
----------- ---------- -------------- ----------------
(dollars in thousands except per unit amounts and units outstanding)
Revenue:
<S> <C> <C> <C> <C>
Rental income $147,825 $6,420 19,098 38,886
Management fees 3,005
Recoveries from tenants 16,719 304 3,788 3,674
Mortgage interest income 4,970
Other income 11,272 208 845 3,012
------------ ----------- --------------- ---------------
Total revenue 183,791 6,932 23,731 45,572
------------ ----------- --------------- ---------------
Expenses:
Property expenses 37,211 1,562 4,875 11,716
Real estate taxes 18,124 591 1,708 3,991
General and administrative 19,331 378 812 1,700
Mortgage interest expense 30,300 1,895 (C) 2,954 (F)
Interest - amortization of
financing costs 2,084 15 (D)
Depreciation and amortization 33,184 1,196 (E) 4,374 (E) 9,105 (E)
------------ ----------- --------------- ---------------
Total expenses 140,234 5,637 14,723 26,512
------------ ----------- --------------- ---------------
Income from operations 43,557 1,295 9,008 19,060
Equity in net income of joint
ventures and corporation 4,989
------------ ----------- --------------- ---------------
Income from continuing operations 48,546 1,295 9,008 19,060
Discontinued operations:
Loss from operations - Construction
Company (2,609)
Loss on sale - Construction Company (249)
Gain on sale - Westlakes Office Park
------------ ----------- --------------- ---------------
Income before extraordinary items 45,688 1,295 9,008 19,060
Series A Preferred distributions
------------ ----------- --------------- ---------------
Net income available for units
before extraordinary items $45,688 $1,295 $9,008 $19,060
============ =========== =============== ===============
</TABLE>
Units Outstanding (Excluding Preferred Units)
Net income per unit
(1) Includes Depreciation and amortization of $4,033
<PAGE> 66
(1) Includes Depreciation and amortization of $4,033
<TABLE>
<CAPTION>
Properties
December Acquired Westlakes
1996 as of Office Park
Acquisitions (H) September 30, 1997 (I) Sale (K)
---------------- ---------------------- --------
(dollars in thousands except per unit amounts and units outstanding)
Revenue:
<S> <C> <C> <C>
Rental income 26,858 69,302 ($8,422)
Management fees
Recoveries from tenants 6,099 8,203 (1,020)
Mortgage interest income
Other income 470 2,783 (1,293)
--------- ---------- --------
Total revenue 33,427 80,288 (10,735)
--------- ---------- --------
Expenses:
Property expenses 4,509 14,299 (2,588)
Real estate taxes 5,036 8,700 (626)
General and administrative 1,250 2,011 (471)
Mortgage interest expense 10,380 (J)
Interest - amortization of financing costs
Depreciation and amortization 6,555 (E) 19,927 (E) (2,458)
--------- ---------- --------
Total expenses 17,350 55,317 (6,143)
--------- ---------- --------
Income from operations 16,077 24,971 (4,592)
Equity in net income of joint ventures and corporation
--------- ---------- --------
Income from continuing operations 16,077 24,971 (4,592)
Discontinued operations:
Loss from operations - Construction Company
Loss on sale - Construction Company
Gain on sale - Westlakes Office Park 16,505
Income before extraordinary items 16,077 24,971 11,913
--------- ---------- --------
Series A Preferred distributions
Net income available for units
before extraordinary items $16,077 $24,971 $11,913
========= ========== ========
Units Outstanding (Excluding Preferred Units)
Net income per unit
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
Properties
Acquired or to
be Aquired After Pro Forma Pro Forma
September 30, 1997 (L) Adjustments Consolidated
---------------------- ----------- ------------
(dollars in thousands except per unit amounts and units outstanding)
<S> <C> <C> <C>
Revenue:
Rental income $32,342 $332,309
Management fees 3,005
Recoveries from tenants 9,118 46,885
Mortgage interest income 3,406 (M) 8,376
Other income 729 18,026
--------- --------- ---------
Total revenue 42,189 3,406 408,601
--------- --------- --------
Expenses: 12,792 84,375
Property expenses 10,330 47,854
Real estate taxes 2,087 27,099
General and administrative 26,261 (N) 71,789
Mortgage interest expense
Interest - amortization of financing costs 2,099
Depreciation and amortization 6,863 (E) 78,745
--------- --------- --------
Total expenses 32,072 26,261 311,962
--------- --------- --------
Income from operations 10,117 (22,855) 96,640
Equity in net income of joint ventures and corporation
(450)(O) 4,539(1)
--------- --------- --------
Income from continuing operations 10,117 (23,305) 101,178
Discontinued operations:
Loss from operations - Construction Company (2,609)
Loss on sale - Construction Company (249)
Gain on sale - Westlakes Office Park 16,505
--------- --------- --------
Income before extraordinary items 10,117 (23,305) 114,825
Series A Preferred distributions (17,960)(P) (17,960)
--------- --------- --------
Net income available for units
before extraordinary items $10,117 ($41,265) $96,865
========= ======== ========
Units Outstanding (Excluding Preferred Units) 63,156,724
Net income per unit $1.53
(1) Includes Depreciation and amortization of $4,033
</TABLE>
See accompanying notes to pro forma condensed consolidated statement of
operations.
10
<PAGE> 68
BEACON PROPERTIES, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(A) Results of operations of Perimeter Center for the period ended
February 14, 1996.
<TABLE>
<S> <C>
Rental income- historical $6,128
Pro forma straight-line rent adjustment 292
---------
Pro forma rental income $6,420
=========
</TABLE>
<PAGE> 69
(B) Results of operations of the Fairfax County Portfolio and the New York
Life Portfolio for the periods ended September 4, 1996 and August 15,
1996, respectively.
<TABLE>
<CAPTION>
Fairfax New York
County Life
Portfolio Portfolio Total
--------------------------------------------
<S> <C> <C> <C>
Revenue:
Rental income-historical $7,284 $11,048 $18,332
Pro forma straight-line rent adjustment 377 389 766
------------------------------------------
Pro forma rental income 7,661 11,437 19,098
Management fees
Recoveries from tenants 541 3,247 3,788
Mortgage interest income
Other income 72 773 845
------------------------------------------
Total revenue 8,274 15,457 23,731
------------------------------------------
Expenses:
Property expenses 1,581 3,294 4,875
Real estate taxes 363 1,345 1,708
General and administrative 80 732 812
Mortgage interest expense (F) 2,954 2,954
Interest - amortization of financing costs
Depreciation and amortization (E) 1,568 2,806 4,374
------------------------------------------
Total expenses 6,546 8,177 14,723
------------------------------------------
Income from operations $1,728 $7,280 $9,008
==========================================
</TABLE>
(C) Net interest expense associated with the MetLife Mortgage Loan in the
amount of $218 million based on a 7.08% interest rate for the period
ended prior to March 15, 1996.
(D) Amortization of the costs of obtaining the permanent financing at $1.2
million over 10 years.
11
<PAGE> 70
BEACON PROPERTIES, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(E) Detail of depreciation expense by property is presented as follows:
<TABLE>
<CAPTION>
Basis Life Depreciation
----- ---- ------------
<S> <C> <C> <C>
Perimeter Center $287,130 30 yrs $1,196
=======
Fairfax County Portfolio 69,300 30 yrs $1,568
The New York Life Portfolio 135,000 30 yrs 2,806
-------
$4,374
=======
October & November 1996 Acquisitions:
------------------------------------
Rosslyn, Virginia Portfolio 89,145 30 yrs $2,353
New England Executive Park 67,500 30 yrs 1,969
245 First Street 40,500 30 yrs 1,209
10960 Wilshire Boulevard 119,700 30 yrs 3,574
-------
$9,105
=======
December 1996 Acquisitions:
--------------------------
Lake Marriott Business Park 31,110 30 yrs $1,008
Shoreline Technology Park 100,650 30 yrs 3,263
Presidents Plaza 69,250 30 yrs 2,284
-------
$6,555
=======
1997 acquisitions as of September 30, 1997
------------------------------------------
10880 Wilshire Boulevard 102,000 30 yrs $3,400
Centerpointe 49,500 30 yrs 1,650
Westbrook Corporate Center 163,890 30 yrs 5,463
225 Franklin Street 252,000 30 yrs 8,400
Sunnyvale Business Center 30,420 30 yrs 1,014
-------
$19,927
=======
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
Properties acquired or to be acquired
-------------------------------------
after September 30, 1997:
------------------------
<S> <C> <C> <C>
Civic Opera Building 53,649 30 yrs 1,789
200 West Adams 64,958 30 yrs 2,165
Lakeside 34,200 30 yrs 1,140
101 North Wacker 53,069 30 yrs 1,769
-------
$6,863
=======
</TABLE>
<PAGE> 72
(F) Fairfax County Portfolio interest expense on debt assumed for period prior
to acquisition:
<TABLE>
<CAPTION>
Principal Rate Expense
--------- ---- -------
<S> <C> <C> <C>
John Marshall $ 21,068 8.38% $ 1,197
EJ Randolph (1) 18,016 7.78% 951
Northridge 16,306 7.28% 806
-------- -------
$ 55,390 $ 2,954
======== =======
</TABLE>
(1) Paid off by Credit Facility proceeds at closing.
12
<PAGE> 73
BEACON PROPERTIES, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTOF OPERATIONS
For the Year Ended December 31, 1996 (Unaudited)
(G) Results of operations of the Rosslyn, Virginia Portfolio, New England
Executive Park, 245 First Street and 10960 Wilshire Boulevard for the
period prior acquisition.
<TABLE>
<CAPTION>
Rosslyn New England 10960
Virginia Executive Wilshire
Portfolio Park 245 First St. Blvd. Total
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income- historical $11,639 $11,766 $4,552 $9,650 $37,607
Pro forma straight-line rent adjustment 361 283 510 124 1,278
----------------------------------------------------------------------
Pro forma rental income 12,000 12,049 5,062 9,774 38,885
Management fees
Recoveries from tenants 528 1,113 1,776 257 3,674
Mortgage interest income
Other income $1,066 533 1,413 3,012
----------------------------------------------------------------------
Total revenue 13,594 13,162 7,371 11,444 45,571
----------------------------------------------------------------------
Expenses:
Property expenses 2,612 4,958 1,020 3,126 11,716
Real estate taxes 747 1,421 913 910 3,991
General and administrative 576 471 81 572 1,700
Mortgage interest expense
Interest - amortization of financing costs
Depreciation and amortization (E) 2,353 1,969 1,209 3,574 9,105
----------------------------------------------------------------------
Total expenses 6,287 8,819 3,223 8,183 26,512
----------------------------------------------------------------------
Income from operations 7,308 4,342 4,148 3,261 19,059
======================================================================
</TABLE>
(H) Results of operations of Lake Marriott Business Park, Shoreline Technology
Park and Presidents Plaza for the period prior to acquisition.
<TABLE>
<CAPTION>
Shoreline Lake Marriott
Technology Business Presidents
Park Park Plaza Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Rental income-historical $12,941 $3,824 $9,244 26,009
Pro forma straight-line rent adjustment 237 611 848
-------------------------------------------------------------
Pro forma rental income 12,941 4,061 9,855 26,857
Management fees
</TABLE>
<PAGE> 74
<TABLE>
<S> <C> <C> <C> <C>
Recoveries from tenants 1,068 996 4,035 6,099
Mortgage interest income
Other income 470 470
-------------------------------------------------------------------------------------------------
Total revenue 14,010 5,057 14,359 33,426
-------------------------------------------------------------------------------------------------
Expenses:
Property expenses 106 718 3,685 4,509
Real estate taxes 1,069 395 3,572 5,036
General and administrative 71 8 1,171 1,250
Mortgage interest expense
Interest - amortization of financing costs
Depreciation and amortization (E) 3,263 1,008 2,284 6,555
------------------------------------------------------------------------------------------------
Total expenses 4,509 2,129 10,712 17,350
------------------------------------------------------------------------------------------------
Income from operations 9,501 2,928 3,647 16,076
================================================================================================
</TABLE>
13
<PAGE> 75
BEACON PROPERTIES, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(I) Results of operations of 10880 Wilshire Boulevard, Centerpointe,
Westbrook Corporate Center, 225 Franklin Street and Sunnyvale Business
Center for the year 1996.
<TABLE>
<CAPTION> 10880 Westbrook 225 Sunnyvale
Wilshire Corporate Franklin Business
Boulevard Centerpointe Center Street Center Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income-historical $8,687 $7,293 $21,029 $24,172 $3,209 $64,390
Pro forma straight-line rent adjustment 399 300 2,778 1,435 4,912
-----------------------------------------------------------------------------------------------------------------------------
Pro forma rental income 9,086 7,593 23,807 25,607 3,209 69,302
Management fees
Recoveries from tenants 80 578 1,806 5,527 212 8,203
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Mortgage interest income
Other income 1,306 99 136 1,230 12 2,783
-----------------------------------------------------------------------------------------------------------------------------
Total revenue 10,472 8,270 25,749 32,364 3,433 80,288
-----------------------------------------------------------------------------------------------------------------------------
Expenses:
Property expenses 3,066 1,740 4,400 5,093 14,299
Real estate taxes 1,043 497 3,113 3,846 201 8,700
General and administrative 720 180 208 844 59 2,011
Mortgage interest expense (J) 1,914 8,466 10,380
Interest - amortization of financing costs
Depreciation and amortization (E) 3,400 1,650 5,463 8,400 1,014 19,927
-----------------------------------------------------------------------------------------------------------------------------
Total expenses 8,229 5,981 21,650 18,183 1,274 55,317
-----------------------------------------------------------------------------------------------------------------------------
Income from operations $2,243 $2,289 $4,099 $14,181 $2,159 $24,971
=============================================================================================================================
</TABLE>
(J) Interest expense in mortgage debt assumed:
Centerpointe - historical 1996 expense.
Westbrook Corporate Center - based on a principal balance of $106,000 with
interest at 8%.
(K) Historical results of operations of Westlakes Office Park
(L) Results of operations of Civic Opera Building, 200 West Adams, Lakeside and
101 North Wacker for the year 1996.
<TABLE>
<CAPTION>
Civic 200 101
Building Adams Lakeside Wacker Total
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income-historical $10,358 $10,467 $4,408 $6,426 $31,659
Pro forma straight-line rent adjustment 69 (68) 105 577 683
-------------------------------------------------------
Pro forma rental income 10,427 10,399 4,513 7,003 32,342
Management fees
Recoveries from tenants 1,545 2,647 241 4,685 9,118
</TABLE>
<PAGE> 76
<TABLE>
<S> <C> <C> <C> <C> <C>
Mortgage interest income
Other income 551 67 36 75 729
--------------------------------------------------------------
Total revenue 12,523 13,113 4,790 11,763 42,189
--------------------------------------------------------------
Expenses:
Property expenses 6,070 2,393 1,795 2,534 12,792
Real estate taxes 1,990 3,539 358 4,443 10,330
General and administrative 937 339 462 349 2,087
Mortgage interest expense (J)
Interest - amortization of financing costs
Depreciation and amortization (E) 1,789 2,165 1,140 1,769 6,863
--------------------------------------------------------------
Total expenses 10,786 8,436 3,755 9,095 32,072
--------------------------------------------------------------
Income from operations $ 1,738 $ 4,677 $1,035 $2,668 $10,118
==============================================================
</TABLE>
F-14
<PAGE> 77
BEACON PROPERTIES, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
<TABLE>
<S> <C>
(M) Interest income related to the acquisition of the Rowes Wharf mortgage $ 611
Interest income on Riverside notes receivable:
Interest income - note receivable from Riverside Project LLC ($26,000 * 9%) 2,340
Interest income - note receivable from Beacon Design Corp. ($3,250 * 7%) 228
Interest income - note receivable from Beacon Property Management Corp.
($3,250 * 7%) 228
--------
Total
2,795
--------
Grand total
$ 3,406
========
(N) Credit facility interest expense:
Credit Facility balance per pro forma balance sheet $407,017
Less Credit Facility balances relating to development projects
in which the associated interest expense would be capitalized:
Development projects owned or underdevelopment as of September 30, 1997:
Crosby Phase II (6,350)
175 Wyman Street (24,840)
150 California (10,640)
Media Center (19,030)
-------------
Adjusted pro forma Credit Facility balance 346,157
Average Credit Facility rate through December 31, 1996 7.78%
-------------
Pro Forma Credit Facility interest expense full year 26,931
Less historical 1996 Credit Facility interest expense 3,294
-------------
Pro Forma Credit Facility adjustment 23,637
-------------
Mortgage Interest:
Pro forma mortgage interest on Centerpointe full year based on principal
balance of $30,000 with interest at 7.32% 2,196
Less: Historical 1996 interest expense 1,914
-------------
282
-------------
Mortgage Interest:
Pro forma mortgage interest on Civic Opera Building full year based on
principal balance of $31,773 with interest at 7.37% 2,342
-------------
Grand total $26,261
=============
(0) Adjustment to equity in net income of corporations as a result of Riverside
notes:
Beacon Design Corp. note payable ($3,250 * 7%) ($228)
Beacon Property Management Corp. note payable ($3,250 * 7%) (228)
-------------
Total interest expense adjustment (455)
Operating Partnership ownership % of entities 98.99%
-------------
Adjustment to equity in net income of corporations ($450)
=============
(P) Series A preferred units based on 8,000,000 units with a $25.00 per unit
redemption price at 8.98%.
</TABLE>
<PAGE> 78
BEACON PROPERTIES, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Beacon Properties
Properties, Acquired Westlakes
L.P. as of Office Park
Historical September 30, 1997(A) Sale (B)
----------- --------------------- --------
(dollars in thousands except per unit amounts and units outstanding)
<S> <C> <C> <C>
Revenue:
Rental income $218,544 $30,761 (3,087)
Management fees 2,445
Recoveries from tenants 29,376 3,066 (408)
Mortgage interest income 5,320
Other income 10,350 276 (405)
----------- ------------- --------------
Total revenue 266,035 34,102 (3,900)
----------- ------------- --------------
Expenses:
Property expenses 51,169 5,943 (878)
Real estate taxes 27,960 3,821 (237)
General and administrative 27,920 548 (283)
Mortgage interest expense 36,313 4,065
Interest - amortization of financing costs 1,131
Depreciation and amortization 50,756 7,858 (D) (2,071)
----------- ------------- --------------
Total expenses 195,249 22,236 (3,469)
------------ ------------- --------------
Income from operations 70,786 11,867 (431)
Equity in net income of joint ventures and corporations 4,940
----------- ------------- --------------
Income from continuing operations 75,726 11,867 (431)
Discontinued operations:
Loss from operations - Construction Company (2,263)
----------- ------------- --------------
Income before extraordinary items 73,463 11,867 (431)
Series A Preferred distributions (5,388)
----------- ------------- --------------
Net income available for units
before extraordinary items $68,075 $11,867 (431)
=========== ============ ==============
Units Outstanding ( Excluding Preferred Units )
Net income per unit
</TABLE>
- ----------------
(1) Includes Depreciation and amortization of $3,086
<PAGE> 79
<TABLE>
<CAPTION>
Properties
Acquired or to be
Acquired After Pro Forma Pro Forma
September 30, 1997(C) Adjustments Consolidated
--------------------- ----------- ------------
(dollars in thousands except per unit amounts and units outstanding)
<S> <C> <C> <C>
Revenue:
Rental income $25,055 $271,273
Management fees 2,445
Recoveries from tenants 6,131 38,164
Mortgage interest income 1,833 (E) 7,153
Other income 818 11,039
------- -------- ----------
Total revenue 32,003 1,833 330,074
------- -------- ----------
Expenses:
Property expenses 8,369 64,602
Real estate taxes 8,139 39,683
General and administrative 1,532 29,717
Mortgage interest expense 12,322 (F) 52,700
Interest - amortization of
financing costs 1,131
Depreciation and amortization 5,147 (D) 61,690
------- -------- ----------
Total expenses 23,186 12,322 249,523
------- -------- ----------
Income from operations 8,817 (10,488) 80,551
</TABLE>
Equity in net income of joint ventures and corporations
(338) (G) 4,602 (1)
(1) Includes Depreciation and amortization of $3,086
<TABLE>
-------------- -------------- ---------------
<S> <C> <C> <C>
Income from continuing operations 8,817 (10,826) 85,153
Discontinued operations:
Loss from operations - Construction Company (2,263)
-------------- -------------- ---------------
Income before extraordinary items 8,817 (10,826) 82,890
Series A Preferred distributions (8,082)(H) (13,470)
-------------- -------------- ---------------
Net income available for units
before extraordinary items $8,817 ($18,908) $69,420
============== ============== ===============
Units Outstanding ( Excluding Preferred Units ) 63,156,724
Net income per unit $1.10
</TABLE>
<PAGE> 80
See accompanying notes to pro forma condensed consolidated statement of
operations.
16
BEACON PROPERTIES, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(Unaudited)
(A) Results of operations of 10880 Wilshire Boulevard, Centerpointe, Westbrook
Corporate Center, 225 Franklin Street and Sunnyvale Business Center for the
period prior to the date of acquisition.
<TABLE>
<CAPTION>
10880 Westbrook 225 Sunnyvale
Wilshire Corporate Franklin Business
Boulevard Centerpointe Center Street Center Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental income - historical $4,078 $2,411 $9,961 $11,512 $1,610 $29,572
Pro forma straight - line rent adjustment 660 99 464 (34) 1,189
---------------------------------------------------------------------------
Pro forma rental income 4,738 2,510 10,425 11,478 1,610 30,761
Management fees
Recoveries from tenants 38 191 475 2,260 102 3,066
Mortgage interest income
Other income 80 33 2 154 7 276
---------------------------------------------------------------------------
Total revenue 4,856 2,734 10,902 13,892 1,719 34,103
---------------------------------------------------------------------------
Expenses:
Property expenses 1,274 575 1,941 2,153 5,943
Real estate taxes 360 164 1,617 1,578 102 3,821
General and administrative 30 60 27 344 87 548
Mortgage interest expense 726 3,339 4,065
Interest - amortization of financing costs
Depreciation and amortization (E) 1,058 545 2,155 3,593 507 7,858
---------------------------------------------------------------------------
Total expenses 2,722 2,070 9,079 7,668 696 22,235
---------------------------------------------------------------------------
Income from operations $2,134 $664 $1,823 $6,224 $1,023 $11,867
</TABLE>
<PAGE> 81
============================================================================
(B) The results of operations for Westlakes Office Park for the period
January 1, 1997 to May 7, 1997.
(C) Results of operations of Civic Opera Building, 200 West Adams, Lakeside and
101 North Wacker for the nine months ended September 30, 1997.
<TABLE>
<CAPTION>
Civic 200 101
Opera West North
Building Adams Lakeside Wacker Total
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income-historical $7,405 $8,315 $3,522 $5,333 $24,575
Pro forma straight-line rent adjustment 88 (51) 29 415 481
--------------------------------------------------
Pro forma rental income 7,493 8,264 3,551 5,748 25,056
Management fees
Recoveries from tenants 856 1,746 218 3,311 6,131
Mortgage interest income
Other income 219 57 32 510 818
--------------------------------------------------
Total revenue 8,568 10,067 3,801 9,569 32,005
--------------------------------------------------
Expenses:
Property expenses 3,309 1,733 1,440 1,887 8,369
Real estate taxes 1,574 2,957 278 3,330 8,139
General and administrative 671 222 378 261 1,532
Mortgage interest expense
Interest - amortization of financing costs
Depreciation and amortization (E) 1,341 1,624 855 1,327 5,147
--------------------------------------------------
Total expenses 6,895 6,536 2,951 6,805 23,187
--------------------------------------------------
Income from operations $1,673 $3,531 $850 $2,764 $8,818
==================================================
</TABLE>
17
<PAGE> 82
BEACON PROPERTIES, L.P.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(Unaudited)
(D) Detail of depreciation expense by property is presented as follows:
<TABLE>
<CAPTION>
Basis Life Depreciation
----- ---- ------------
<S> <C> <C> <C>
1997 acquisitions as of September 30, 1997
------------------------------------------
10880 Wilshire Boulevard $102,000 30 yrs $1,058
Centerpointe 49,500 30 yrs 545
Westbrook Corporate Center 163,890 30 yrs 2,155
225 Franklin Street 252,000 30 yrs 3,593
Sunnyvale Business Center 30,420 30 yrs 507
---------
$7,858
=========
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
Properties acquired or to be acquired
-------------------------------------
after September 30, 1997:
------------------------
<S> <C> <C> <C>
Civic Opera Building $53,649 30 yrs $1,341
200 West Adams 64,958 30 yrs 1,624
Lakeside 34,200 30 yrs 855
101 North Wacker 53,069 30 yrs 1,327
------
$5,147
======
</TABLE>
<TABLE>
<S> <C>
(E) Interest income on Riverside notes receivable:
Interest income - note receivable from Riverside Project LLC ($26,000*9%) $ 1,744
Interest income - note receivable from Beacon Design Corp. ($3,250*7%) 171
Interest income - note receivable from Beacon Property Management Corp.($ 3,250*7) 171
---------
Total $ 2,096
Less: Historical 1997 Interest Income (263)
---------
$ 1,833
=========
(F) Credit facility interest expense:
Credit Facility balance per pro forma balance sheet $ 407,017
Less Credit Facility balances relating to development projects
in which the associated interest expense would be capitalized:
Development projects owned or underdevelopment as of September 30, 1997:
Crosby Phase II (6,350)
175 Wyman Street (24,840)
150 California (10,640)
Media Center (19,030)
---------
Adjusted pro forma Credit Facility balance 346,157
Average Credit Facility rate through September 30, 1997 7.21%
---------
Pro Forma Credit Facility interest expense full year 24,958
75%
---------
Pro Forma Credit Facility interest expense 3/4 year 18,718
---------
</TABLE>
19
<PAGE> 84
Less historical 1997 Credit Facility interest expense (8,153)
------------
Pro Forma Credit Facility adjustment 10,565
------------
Mortgage Interest:
Pro forma mortgage interest on Civic Opera Building 3/4 year based on
principal balance of $31,773 with interest at 7.37% 1,757
------------
Grand total $12,322
============
<PAGE> 85
(G) Adjustment to equity in net income of corporations as a result of
Riverside notes:
Beacon Design Corp. note payable ($3,250*7%) ($171)
Beacon Property Management Corp. note payable ($3,250*7%) (171)
-------
Total interest expense adjustment (342)
Operating Partnership ownership % of entities 98.99%
-------
Adjustment to equity in net income of corporations ($338)
=======
g
(H) Series A preferred units based on 8,000,000 units with a $25.00 per
unit redemption price at 8.98%.
18
