SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED JULY 23, 1996
PROSPECTUS SUPPLEMENT
- --------------------
(To Prospectus dated March 29, 1996)
5,000,000 Shares
BEACON PROPERTIES CORPORATION
Common Stock
-------------
Beacon Properties Corporation (collectively with its subsidiaries, the
"Company") is a self-administered and self-managed real estate investment
trust (a "REIT") which owns a portfolio of Class A office properties and
other commercial properties located in major metropolitan areas, including
Boston and Atlanta, as well as commercial real estate development,
construction, acquisition, leasing, design and management businesses. The
Company owns or has an interest in 58 income producing commercial properties
encompassing approximately 10 million rentable square feet (each, a
"Property" and collectively, the "Properties"). As of June 30, 1996, the
Properties were approximately 96% leased with over 800 tenants. In addition,
the Company has entered into contracts to acquire ten additional office
buildings encompassing approximately 1.6 million additional rentable square
feet located in Fairfax County, Virginia, Washington, D.C., and suburban
Chicago, Illinois for an aggregate purchase price of $227 million
(collectively, the "Pending Acquisitions"). If all of the Pending
Acquisitions are consummated, the Company will own or have an interest in 68
income producing commercial properties encompassing approximately 11.6
million rentable square feet.
All of the shares of common stock of the Company, par value $.01 per share
("Common Stock"), offered hereby are being sold by the Company (the
"Offering"). Senior executive officers and Directors of the Company and
members of their families currently own approximately $100 million of equity
of the Company (approximately 10% of the equity upon completion of the
Offering.)
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "BCN." On July 19, 1996, the reported closing sale price of
the Common Stock on the NYSE was $25-7/8 per share. See "Price Range of
Common Stock and Distribution History."
See "Risk Factors" beginning on page S-13 for certain factors relevant to
an investment in the Common Stock.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
Per Share $ $ $
Total (3) $ $ $
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to an
additional 750,000 shares of Common Stock to cover over-allotments, if
any. If all such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
-------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-------------
The shares of Common Stock are offered by the several Underwriters, subject to
prior sale, when, as and if issued to and accepted by them, subject to approval
of certain legal matters by counsel for the Underwriters. The Underwriters
reserve the right to withdraw, cancel or modify such offer and to reject orders
in whole or in part. It is expected that delivery of the Common Stock offered
hereby will be made in New York, New York, on or about , 1996.
-------------
Merrill Lynch & Co.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers
PaineWebber Incorporated
Raymond James & Associates, Inc.
-------------
The date of this Prospectus Supplement is , 1996.
<PAGE>
[Photos of Pending Acquisitions, location maps of Chicago area and Fairfax
County, Virginia area, pie charts indicating urban/suburban distribution of
Properties and geographic distribution of Properties]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMPANY'S COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement and the
accompanying Prospectus or incorporated herein and therein by reference.
Unless otherwise indicated, the information contained in this Prospectus
Supplement assumes (i) that all units of limited partnership interest in
Beacon Properties, L.P. ("Units") redeemable for Common Stock or cash have
been redeemed for Common Stock, (ii) that the Underwriters' over-allotment
option is not exercised and (iii) that the market price per share of Common
Stock is equal to $25.875 (the reported closing sale price of the Common
Stock on the NYSE on July 19, 1996). Unless the context otherwise requires,
all references in this Prospectus Supplement to the "Company" shall mean
Beacon Properties Corporation, Beacon Properties, L.P. (the "Operating
Partnership"), the entity through which the Company holds substantially all
of its direct and indirect interests in the Properties, and their
subsidiaries on an aggregated basis. This Prospectus Supplement contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference are discussed in the section
entitled "Risk Factors" starting on page S-13 of this Prospectus Supplement.
The Company
The Company is a self-managed and self-administered real estate investment
trust (a "REIT") which owns a portfolio of Class A office properties and
other commercial properties located in major metropolitan areas, including
Boston and Atlanta, as well as commercial real estate development,
construction, acquisition, leasing and management businesses. Class A office
properties generally are considered to be those that have excellent locations
and access, attract high quality tenants, are well maintained and
professionally managed, and achieve among the highest rent, occupancy and
tenant retention rates within their markets. The Properties comprise
approximately 10 million rentable square feet in the aggregate and, as of
June 30, 1996, were approximately 96% leased with over 800 tenants.
The Company has entered into contracts to acquire the Pending Acquisitions
comprised of ten office buildings encompassing approximately 1.6 million
additional rentable square feet located in Fairfax County, Virginia,
Washington, D.C. and suburban Chicago, Illinois for an aggregate purchase
price of $227 million. If all of the Pending Acquisitions are consummated,
the Company will own or have an interest in 68 income producing commercial
properties encompassing approximately 11.6 million rentable square feet and
will have a total market capitalization of approximately $1.5 billion.
Recent Developments
Pending Acquisitions
As part of its ongoing business, the Company continually conducts
strategic analyses of major office markets in the United States to determine
those markets which warrant acquisition of office properties. The Company
places particular emphasis on office-using employment growth as well as the
prospects for future supply of office space in each of the markets. The
Company has determined that, in addition to the Boston, Atlanta and
Washington, D.C. markets in which the Company now operates, the suburban
Chicago market, where two of the Pending Acquisitions are located, and other
select markets, also possess attractive market fundamentals.
The Chicago metropolitan area, with over 50 Fortune 500 companies, is a
major regional center with a strong infrastructure. According to the U.S.
Bureau of Labor Statistics, the Chicago metropolitan area gained
approximately 34,000 office-using jobs for the twelve months ended March 31,
1996. The Company believes that several Chicago suburban office submarkets
are attractive due to employment growth in office-using jobs, the relatively
short time frame expected to absorb the existing supply of office space and
low vacancy rates. The Company also believes that its development and
management experience in the Chicago market will benefit the Company's
expansion into this market. The Company currently manages approximately 1.3
million square feet of office/industrial space in the Chicago area.
Additionally, the Company's construction subsidiary has actively participated
in several projects in the Chicago area over the past several years.
S-3
<PAGE>
The greater Washington, D.C. area, including northern Virginia, is also a
major regional center with a strong infrastructure. According to the U.S.
Bureau of Labor Statistics, the Washington, D.C. metropolitan area gained
approximately 31,000 office-using jobs for the twelve months ended March 31,
1996. The Company believes that Fairfax County, Virginia represents an
attractive market due to its employment growth in the high technology,
professional service and telecommunications sectors, the relatively short
time frame expected to absorb the existing supply of office space and low
vacancy rates. The Company also believes that its extensive development and
management experience in the greater Washington, D.C. market will benefit its
further acquisition of properties in this area. The Company currently manages
approximately 1.3 million square feet in the greater Washington, D.C. area,
including the Polk and Taylor Buildings.
The Company has entered into contracts to purchase the Pending
Acquisitions for aggregate consideration of $227 million. The purchase of
each of the Pending Acquisitions is subject to various closing conditions,
including, but not limited to, satisfactory completion of the Company's due
diligence, and, with respect to the Fairfax County Portfolio (as defined
below), agreement regarding the terms of the remediation of certain
environmental matters concerning the John Marshall III developable land. See
"Risk Factors--Possible Environmental Liabilities." The Company currently
expects to complete the purchase of the Pending Acquisitions during early
September 1996. No assurances can be made that the Company will acquire any
or all of the Pending Acquisitions.
In addition to the Pending Acquisitions, as part of its ongoing business,
the Company continually engages in discussions with public and private real
estate entities regarding possible portfolio or single asset acquisitions in
various major metropolitan areas. No assurance can be made that the Company
will acquire any of the property opportunities currently under review.
Set forth below are summary descriptions of the Pending Acquisitions.
New York Life Portfolio. In July 1996, the Company entered into a contract
to acquire a portfolio of office properties, comprised of seven buildings,
from New York Life Insurance Company (the "New York Life Portfolio") for an
aggregate consideration of $150 million in cash.
The New York Life Portfolio consists of (i) the 8-story AT&T Plaza located
in Oak Brook (suburban Chicago), Illinois built in 1984 comprising
approximately 225,000 square feet of office space; (ii) the five-building
Tri-State International office park located in Lincolnshire (suburban
Chicago), Illinois built in 1986 comprising approximately 548,000 square
feet; and (iii) an 11-story office property located at 1333 H Street in
Washington, D.C. comprising approximately 239,000 square feet (approximately
205,000 square feet of which was built in 1982). Major tenants in the New
York Life Portfolio include AT&T (approximately 40,000 square feet), A.C.
Nielsen Company (approximately 55,000 square feet) and Reuters (approximately
55,000 square feet). The aggregate occupancy rate for the New York Life
Portfolio as of June 30, 1996 was approximately 81%.
AT&T Plaza and the Tri-State International office park are located in the
Suburban Chicago Office Market. According to Grubb & Ellis, the entire
Suburban Chicago Office Market had an overall vacancy of 12.0% as of June
1996, while the East-West Corridor submarket (location of AT&T Plaza) and the
North Suburban submarket (location of the Tri-State International office
park) had vacancy rates of 10.3% (9.2% for Class A office properties) and
12.6% (8.2% for Class A office properties), respectively, for the same
period. Grubb & Ellis also reports that the East-West Corridor and North
Suburban submarkets experienced net increases in square feet of leased space
("Net Absorption") of 730,000 square feet and 340,000 square feet,
respectively, for the first six months of 1996.
Upon the acquisition of the New York Life Portfolio, the Company intends
to establish a regional office in the Chicago area to facilitate the leasing
and management of the properties.
The 1333 H Street property is located in the Washington, D.C. Office
Market. According to Grubb & Ellis, the entire Washington, D.C. Office Market
had an overall vacancy rate of 10.2% as of March 1996, while the East End
submarket (location of 1333 H Street) experienced a vacancy rate of 10.1% for
the same period.
The Capitalization Rate (calculated by dividing (a) the expected net
operating income (including the effect of straight line rents) generated by
the portfolio based upon annualized revenues from signed leases in place at
the properties as of June 30, 1996 by (b) the consideration paid for the
Properties) of the New York Life Portfolio acquisition is approximately 8.6%.
In the event weighted average occupancy for the New York Life Portfolio
S-4
<PAGE>
increases to 95%, the Capitalization Rate would increase to 10.8%. The
Company expects to purchase the New York Life Portfolio for cash;
consequently, the Returns on Equity (as defined below) for the acquisition
are equivalent to the Capitalization Rates. No assurance can be made that the
Company will achieve such occupancy levels or increases in returns.
Fairfax County Portfolio. In June 1996, the Company exercised an option to
acquire a portfolio of three office buildings and a parcel of developable
land located in Fairfax County, Virginia (the "Fairfax County Portfolio") for
an aggregate consideration of $77 million.
The Fairfax County Portfolio consists of (i) the 11-story John Marshall I
building located in the Tysons Corner area of McLean, Virginia, built in 1981
comprising approximately 261,000 square feet of office space; (ii) the 11-
story E.J. Randolph building located in the Tysons Corner area of McLean,
Virginia, built in 1983 comprising approximately 165,000 square feet of
office space; (iii) the 6-story Northridge I building located in
Reston/Herndon area of Virginia, built in 1988 comprising approximately
124,000 square feet of office space; and (iv) the John Marshall III parcel of
developable land, with approximately 150,000 square feet of building
capacity, located in the Tysons Corner area of McLean, Virginia. Major
tenants in the Fairfax County Portfolio include Booz, Allen & Hamilton, Inc.
(approximately 320,000 square feet) and Sprint Corporation (approximately
124,000 square feet). The aggregate occupancy rate of the Fairfax County
Portfolio as of June 30, 1996 was approximately 94%.
According to Grubb & Ellis, the Fairfax County, Virginia Market had an
overall vacancy rate of 8.0% as of March 1996, and the submarkets of Tysons
Corner and Reston/Herndon had vacancy rates of 8.2% and 5.3%, respectively,
for the same period. Grubb & Ellis also reports that Tysons Corner and
Reston/Herndon submarkets experienced Net Absorption of 600,000 square feet
and 400,000 square feet, respectively, for the three months ended March 31,
1996.
The Capitalization Rate of the Fairfax County Portfolio acquisition is
approximately 11.5%. The Return on Equity invested by the Company in the
Fairfax County Portfolio is expected to be 21.3% assuming the repayment of
approximately $18 million of the debt assumed in connection with the
acquisition with a draw on the Company's credit facility (the "Credit
Facility") provided by the First National Bank of Boston ("Bank of Boston"),
as agent. Return on Equity is calculated by dividing (a) the expected net
operating income (including the effect of straight line rents) generated by
the portfolio based upon annualized revenues from signed leases in place at
the properties as of June 30, 1996 less expected debt service on the
principal amount of the mortgage debt and the Credit Facility debt that will
encumber the properties upon completion of the acquisition by (b) the
consideration paid for the properties less the principal amount of the
mortgage debt and the Credit Facility debt that will encumber the properties
upon completion of the acquisition.
The blended Capitalization Rate on both the New York Life Portfolio and
the Fairfax County Portfolio acquisitions is 9.6%. In the event weighted
average occupancy for the New York Life Portfolio increases to 95%, the
blended Capitalization Rate for the acquisitions would be 11.1%. No
assurances can be made that the Company will achieve such occupancy levels or
increases in returns.
The Company intends to finance the New York Life Portfolio and the Fairfax
County Portfolio acquisitions with the proceeds of this Offering and cash
and, with respect to the Fairfax County Portfolio, the assumption of $55.4
million of mortgage debt secured by the properties ($18 million of which will
be repaid with a draw on the Credit Facility) and the issuance of 839,223
Units. The blended Return on Equity invested by the Company in both the New
York Life Portfolio and the Fairfax County Portfolio is expected to be 10.2%
or, assuming the weighted average occupancy for the New York Life Portfolio
increases to 95%, 12.1%. No assurances can be made that the Company will
achieve such occupancy levels or increases in returns.
Activities Relating to the Perimeter Center Portfolio
In February 1996, the Company purchased an approximately 3.3 million
square foot portfolio comprised of 32 buildings located in Perimeter Center
(suburban Atlanta), Georgia (the "Perimeter Center Portfolio"), associated
ground leases, and rights and options to purchase adjoining land for
approximately $336 million (excluding associated acquisition-related
expenses). In March 1996, Metropolitan Life Insurance Company ("MetLife")
S-5
<PAGE>
provided $218 million of mortgage financing on the Perimeter Center Portfolio
(the "MetLife Loan") to the Company. The MetLife Loan bears interest at a
rate of 7.08% fixed over the ten year term of the loan. As of June 30, 1996,
the aggregate occupancy rate of the Perimeter Center Portfolio was
approximately 97%, an increase from an aggregate occupancy rate of 94% as of
December 31, 1995. As a result of the closing of the Met Life Loan and the
increased occupancy at the Property, the Capitalization Rate of the Perimeter
Center Portfolio is approximately 11.4% and the Return on Equity invested by
the Company in the Property is approximately 19.4%.
Financing Activities
In June 1996, the Company substantially modified the terms of the Credit
Facility. Additionally, in July 1996, the maximum loan amount available under
the Credit Facility was increased to $300 million. The Credit Facility
matures in June 1999. 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. Following the closing of this Offering and the acquisition of
the Pending Acquisitions, the Company will have available approximately $210
million of borrowing capacity under the Credit Facility, of which
approximately $18 million will be outstanding. In order to increase the
borrowing capacity to the maximum $300 million, the Company anticipates that
it will be required to grant mortgages on additional properties.
Increase in Distributions
In July 1996, the Company announced an increase in its quarterly
distribution of 10.1%, increasing the quarterly distribution on its Common
Stock from $.42 per share to $.4625 per share, which, on an annualized basis,
is equal to an annual distribution of $1.85 per share of Common Stock. The
higher distribution rate commenced with the Company's distribution with
respect to the second quarter of 1996, to be paid on August 23, 1996, to
stockholders of record as of August 14, 1996. Accordingly, it is currently
expected that purchasers of Common Stock in the Offering who hold Common
Stock as of the record date will receive the second quarter 1996 distribution
in respect of the shares of Common Stock offered hereby.
Other Developments
Rowes Wharf Mortgage Debt. In connection with its initial public offering
in May 1994 (the "Initial Offering"), the Company acquired a 45% indirect
limited partner interest in Rowes Wharf Associates, the entity that owns the
hotel space and leases the office and retail space at the Rowes Wharf
Property. During the period from April 1995 through June 1996, the Company
(together with an affiliate) and the Equitable Life Assurance Society of the
United States, on behalf of its Prime Property Fund ("Equitable"), the
Company's joint venture partner in the Rowes Wharf Property, acquired all of
the outstanding mortgage debt on the Rowes Wharf Property. The mortgage debt
was purchased at approximately 50% of face value. See "Properties and Pending
Acquisitions--Mortgage Indebtedness and Credit Facility."
Crosby Corporate Center. The Company has substantially completed a $16
million redevelopment of Crosby Corporate Center, repositioning the Property
from research/development space to a Class A suburban office park. As of June
30, 1996, Crosby Corporate Center was approximately 88% leased. Additionally,
the Company has entered into an agreement to acquire a 29-acre parcel of land
adjacent to the Crosby Corporate Center. This parcel will support
approximately 250,000 square feet of buildings and the Company expects that
development of a significant portion of the land could commence in early
1997, although no assurances can be made in this regard. The Company believes
that demand for office space in the greater Boston Suburban Office Market
(the location of the Crosby Corporate Center) will continue as several major
tenants at the Property experience substantial growth. No assurance can be
made that such increased demand will occur.
S-6
<PAGE>
Risk Factors
An investment in the Common Stock involves various risks and prospective
investors should carefully consider the matters discussed under "Risk
Factors" prior to any investment in the Company. Such risks include, among
others:
(bullet) Risks associated with the addition of a substantial number of new
properties to the Company's portfolio;
(bullet) Risks associated with borrowing, such as the possibility that (i)
the Company will not have sufficient funds available to make principal
payments on outstanding debt; (ii) outstanding indebtedness will be
refinanced at higher interest rates or otherwise on terms less favorable to
the Company; and (iii) interest rates under the Credit Facility will
increase, all of which could adversely affect the Company's ability to make
expected distributions to stockholders and its ability to qualify as a REIT;
(bullet) Risks associated with a Debt to Market Capitalization (as defined
herein) following the Offering of approximately 36.3%;
(bullet) The limited geographic diversification of the Properties and the
Company's reliance upon the continued demand for office and other commercial
space in the greater Boston and Atlanta metropolitan office properties
markets;
(bullet) Risks associated with the joint ownership of properties through
entities in which the Company does not have sole control over the property;
(bullet) Possible adverse consequences of limiting ownership of Common
Stock by a single person to 6.0%, or 9.9% for certain stockholders, of the
outstanding Common Stock;
(bullet) Risks associated with the acquisition, development and
construction of office and other commercial properties;
(bullet) Real estate investment considerations, such as the effect of
economic and other conditions in the market area on property cash flows and
values, the need to renew leases or relet space upon the expiration of
current leases, the ability of a property to generate revenues sufficient to
meet debt service payments and other operating expenses, and the illiquidity
of real estate investments, all of which may affect the Company's ability to
make expected distributions;
(bullet) Risks associated with investments in mortgage indebtedness,
including the risk that a debtor may file for bankruptcy or otherwise be
unable or refuse to make payments under the mortgage;
(bullet) Potential liability of the Company for environmental liabilities
either as an owner or as an operator of properties;
(bullet) Risks associated with ownership of subsidiary corporations,
including potential tax liabilities, lack of control over such subsidiaries
and possible adverse consequences of REIT status on the business of
subsidiaries;
(bullet) Risks associated with the management of properties that are not
controlled by the Company and properties owned by third parties; and
(bullet) Possible increases in market interest rates, which lead
prospective purchasers of Common Stock to demand a higher anticipated annual
yield from future dividends, which in turn may adversely affect the market
price of Common Stock.
S-7
<PAGE>
The Properties and Pending Acquisitions
Set forth below are summary descriptions of the Properties and the Pending
Acquisitions.
<TABLE>
<CAPTION>
Year Ownership Rentable Percent Leased
Built/ Interest Property Area in at June 30,
Property Renovated (1) Location Square Feet 1996
- ----------------------------------- --------- -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Properties:
Downtown Boston Office Market:
75-101 Federal Street 1985-1988 51.6% Boston, MA 812,000 94%
One Post Office Square 1981 50% Boston, MA 764,129 99%
Center Plaza 1966-1969 (2) Boston, MA 649,359 93%
150 Federal Street 1988 100% Boston, MA 530,279 100%
Rowes Wharf 1987 45% Boston, MA 344,326 99%
Russia Wharf 1978-1982 100% Boston, MA 314,596 100%
2 Oliver Street-147 Milk Street 1982-1988 100% Boston, MA 271,000 95%
175 Federal Street 1977 100% Boston, MA 203,349 89%
South Station (3) 1988 100% Boston, MA 148,591 100%
---------- -----
4,037,629 96%
---------- -----
North Central Atlanta Office
Market:
Perimeter Center Portfolio (4) 1970-1989 100% Atlanta, GA 3,302,136 97%
---------- -----
Greater Boston Suburban Office
Market:
Wellesley Office Park (5) 1963-1984 100% Wellesley, MA 599,334 90%
Crosby Corporate Center 1996 100% Bedford, MA 336,000 88%
Westwood Business Centre 1985 100% Westwood, MA 160,400 99%
----------
1,095,734 91%
---------- -----
Cambridge Office Market:
One Canal Park 1987 100% Cambridge, MA 100,300 94%
Ten Canal Park 1987 100% Cambridge, MA 110,000 88%
----------
210,300 91%
---------- -----
Suburban Philadelphia Office
Market:
Westlakes Office Park (6) 1988-1990 100% Berwyn, PA 443,592 94%
---------- -----
Arlington County, Virginia Office
Market:
The Polk and Taylor Buildings 1970 10% Arlington, VA 890,000 100%
---------- -----
Total Weighted Average
Properties 9,979,391 96%
========== =====
Pending Acquisitions:
New York Life Portfolio:
AT&T Plaza 1984 100% Oakbrook, IL 225,318 100%
Tri-State International (7) 1986 100% Lincolnshire, IL 548,000 68%
1333 H Street 1982(8) 100% Washington, D.C. 238,694 92%
---------- -----
1,012,012 81%
---------- -----
Fairfax County Portfolio:
John Marshall I 1981 100% McLean, VA 261,364 100%
E.J. Randolph 1983 100% McLean, VA 164,677 80%
Northridge I 1988 100% Reston/Herndon, VA 124,319 100%
---------- -----
550,360 94%
---------- -----
Total Weighted Average
Pending Acquisitions 1,562,372 85%
========== =====
Total Weighted Average
Properties and Pending
Acquisitions 11,541,763 95%
========== =====
</TABLE>
S-8
<PAGE>
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(1) The Company holds a general partner interest in One Post Office Square, a
general partner and limited partner interest in Center Plaza and the Polk
and Taylor Buildings and an indirect limited partner interest in Rowes
Wharf Associates. The Company holds approximately 51.6% of the common
stock of BeaMetFed, Inc. ("BeaMetFed"), the entity that holds the fee
title to the 75-101 Federal Street Property. The Company owns a 100% fee
interest in the remaining Properties, with the exception of South
Station, in which the Company holds a ground leasehold interest. Upon the
consummation of the Pending Acquisitions, the Company will hold a 100%
fee interest in each of the Pending Acquisitions.
(2) The Company holds a 1% general partner interest, a 75% limited partner
interest and an option to purchase the remaining 24% limited partner
interest in the partnership that owns the Center Plaza Property.
(3) The Company owns a ground leasehold interest in the South Station
Property which expires in 2024 but may be extended, at the Company's
option, for two additional 15-year terms. Fee title to this Property is
owned by an unaffiliated third party. This Property was originally built
in the early 1900s and was fully rehabilitated in 1988. This Property
includes a significant retail component.
(4) The Perimeter Center Portfolio consists of 32 buildings and six ground
leases.
(5) The Wellesley Office Park consists of eight office buildings.
(6) The Westlakes Office Park consists of four office buildings.
(7) The Tri-State International Office Park consists of five office
buildings.
(8) Approximately 205,000 square feet of the 1333 H Street property was built
in 1982. The remaining approximately 34,000 square feet was renovated in
1982.
S-9
<PAGE>
The Offering
All of the shares of Common Stock offered hereby are being sold by the
Company. None of the Company's stockholders are selling any Common Stock in
the Offering.
<TABLE>
<S> <C>
Common Stock Offered 5,000,000
Common Stock Outstanding After the Offering (1) 37,476,094
Use of Proceeds To purchase the New York Life Portfolio and/or
for general corporate and working capital
purposes.
NYSE Symbol "BCN"
</TABLE>
- -------------
(1) Includes 5,107,831 shares of Common Stock that may be issued upon
redemption of Units (which are redeemable by the holders for cash or, at
the election of the Company, shares of Common Stock on a one- for-one
basis), including 839,223 Units to be issued in connection with the
acquisition of the Fairfax County Portfolio. Excludes 3,129,310 shares of
Common Stock reserved for issuance pursuant to the Company's 1994 Stock
Option Plan and dividend reinvestment plan.
Distributions
In July 1996, the Company announced an increase in its quarterly
distribution of 10.1%, increasing the quarterly distribution on its Common
Stock from $.42 per share to $.4625 per share, which, on an annualized basis,
is equal to an annual distribution of $1.85 per share of Common Stock. Future
distributions by the Company will be at the discretion of the Board of
Directors and there can be no assurance that any such distributions will be
made by the Company. Distributions by the Company to the extent of its
current and accumulated earnings and profits for Federal income tax purposes
generally will be taxable to stockholders as ordinary dividend income.
Distributions in excess of current and accumulated earnings and profits will
be treated as a non-taxable reduction of the stockholder's basis in its
shares of Common Stock to the extent thereof, and thereafter as taxable gain.
Distributions that are treated as a reduction of the stockholder's basis in
its shares of Common Stock will have the effect of deferring taxation until
the sale of the stockholder's shares.
Summary Selected Financial Information
The following table sets forth selected financial and operating
information on an as adjusted basis for the Company and on a combined
historical basis for the Company and The Beacon Group, the predecessor entity
to the Company (the "Predecessor"). The consolidated results of operations of
the Company for the six months ended June 30, 1996 and 1995 have been derived
from unaudited financial statements. The consolidated results of operations
of the Company for the year ended December 31, 1995 and for the period May
26, 1994 to December 31, 1994, the combined results of operations of the
Predecessor for the period January 1, 1994 to May 25, 1994 and the combined
historical operating information of the Predecessor for the years ended
December 31, 1993, 1992 and 1991 have been derived from the financial
statements audited by Coopers & Lybrand L.L.P., independent accountants.
The unaudited selected pro forma financial and operating information is
presented as if the Offering, the acquisition of the Properties acquired
since January 1, 1995, the acquisition of the Pending Acquisitions and
related assumption of debt had occurred as of January 1, 1995, for the
condensed consolidated statement of operations. The pro forma financial
information is not necessarily indicative of what the results of operations
of the Company would have been for the periods indicated, nor does it purport
to represent the Company's future results of operations.
S-10
<PAGE>
<TABLE>
<CAPTION>
Company
--------------------------------------------------------------------------------------------
Pro Forma
Six Months Six Months Six Months For the Year For the Period
Ended Ended Ended Pro Ended May 26, 1994 to
June 30, 1996 June 30, 1996 June 30, 1995 Forma 1995 December 31, December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995 1994
------------- ------------- ------------- ---------- ------------ ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 81,335 $ 60,051 $ 34,093 $ 159,129 $ 71,050 $ 25,144
Management fees 1,517 1,517 936 2,926 2,203 --
Recoveries from tenants 10,088 6,782 4,813 19,487 9,742 4,488
Mortgage interest income 2,776 2,165 611 5,573 2,546 --
Interest and other income 5,472 4,591 2,472 7,501 5,502 2,301
-------- -------- -------- ----- ------ ---------
Total revenue 101,188 75,106 42,925 194,616 91,043 31,933
-------- -------- -------- ----- ------ ---------
Expenses:
Property expenses 20,138 14,770 8,531 39,511 18,090 7,034
Real estate taxes 9,768 7,831 4,901 17,953 10,217 3,325
General and administrative 8,574 7,362 4,570 13,986 9,755 3,122
Mortgage interest expense 16,805 13,661 7,977 33,315 15,226 4,992
Interest--amortization of financing
costs 1,199 1,184 576 1,490 1,370 617
Depreciation and amortization 17,947 13,346 8,252 34,856 17,428 6,924
-------- -------- -------- ----- ------ ---------
Total expenses 74,431 58,154 34,807 141,110 72,086 26,014
-------- -------- -------- ----- ------ ---------
Income (loss) from operations 26,757 16,952 8,118 53,506 18,957 5,919
-------- -------- -------- ----- ------ ---------
Construction revenue and other
income -- -- -- -- -- --
Construction costs and operating
expenses -- -- -- -- -- --
-------- -------- -------- ----- ------ ---------
Income from construction -- -- -- -- -- --
-------- -------- -------- ----- ------ ---------
Equity (loss) in joint ventures and
corporations (1) 1,582 1,582 1,065 4,560 3,222 1,406
Minority interest in loss of
combined partnerships -- -- -- -- -- --
-------- -------- -------- ----- ------ ---------
Income (loss) before extraordinary
items 28,339 18,534 9,183 58,066 22,179 7,325
Extraordinary items, net of minority
interest -- (3,309) -- -- -- --
Minority interest in Operating
Partnership (3,862) (2,681) (1,951) (7,914) (4,119) (1,670)
-------- -------- -------- ----- ------ ---------
Net income (loss) (2) $ 12,544 $ 7,232 $ 18,060 $ 5,655
====== =========
Net income before extraordinary
item (2) $ 24,476 $ 50,152
======== =====
Net income per share before
extraordinary items .76 $ .64 1.55
Net income per share of Common Stock $ .51 $ .51 $ 1.09 $ 0.48
Cash dividends declared per share of
Common Stock $ -- $ .88 $ .82 -- $ 1.24 $ 0.96
Cash dividends paid per share of
Common Stock $ -- $ .84 $ .80 $ -- $ 1.64 $ 0.56
Weighted average common shares
outstanding 32,368,263 24,682,042 14,085,977 32,368,263 16,525,245 11,816,380
</TABLE>
<TABLE>
<CAPTION>
Predecessor
--------------------------------------------------
For the Period
January 1,
1994 to Years Ended December 31,
May 25, ---------------------------------
1994 1993 1992 1991
-------------- -------- -------- --------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 5,776 $ 14,315 $ 11,406 $ 14,850
Management fees 1,521 3,533 3,331 2,205
Recoveries from tenants 1,040 2,349 1,989 3,986
Mortgage interest income -- -- -- --
Interest and other income 675 2,176 2,003 3,134
-------- -------- -------- -----
Total revenue 9,012 22,373 18,729 24,175
-------- -------- -------- -----
Expenses:
Property expenses 2,086 4,580 4,522 6,390
Real estate taxes 595 1,354 1,204 1,162
General and administrative 1,399 4,357 4,658 4,528
Mortgage interest expense 2,798 7,650 7,203 7,532
Interest--amortization of financing
costs 373 192 138 320
Depreciation and amortization 2,385 5,577 5,505 4,967
-------- -------- -------- -----
Total expenses 9,636 23,710 23,230 24,899
-------- -------- -------- -----
Income (loss) from operations (624) (1,337) (4,501) (724)
-------- -------- -------- -----
Construction revenue and other
income 24,238 72,197 52,256 39,749
Construction costs and operating
expenses 24,136 71,757 52,120 39,679
-------- -------- -------- -----
Income from construction 102 440 136 70
-------- -------- -------- -----
Equity (loss) in joint ventures and
corporations (1) 198 (5,953) (1,544) 84
Minority interest in loss of
combined partnerships 931 1,539 2,656 1,087
-------- -------- -------- -----
Income (loss) before extraordinary
items 607 (5,311) (3,253) 517
Extraordinary items, net of minority
interest 8,898 1,554 -- --
Minority interest in Operating
Partnership -- -- -- --
-------- -------- -------- -----
Net income (loss) (2) $ 9,505 $ (3,757) $ (3,253) $ 517
======== ======== ======== =====
Net income before extraordinary item
(2)
Net income per share before
extraordinary items
Net income per share of Common Stock -- -- -- --
Cash dividends declared per share of
Common Stock -- -- -- --
Cash dividends paid per share of
Common Stock
Weighted average common shares
outstanding -- -- -- --
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
Company
--------------------------------------------------------------------------------------------
Pro Forma
Six Months Six Months Six Months For the Year For the Period
Ended Ended Ended Pro Ended May 26, 1994 to
June 30, 1996 June 30, 1996 June 30, 1995 Forma 1995 December 31, December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995 1994
------------- ------------- ------------- ---------- ------------ ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
INFORMATION:
Real estate before accumulated
depreciation $ 1,051,924 $ 824,924 $ 415,654 $ -- $ 471,142 $ 400,419
Total assets 1,126,450 927,837 433,648 -- 534,797 400,861
Mortgage debt 440,592 403,218 89,641 -- 70,536 90,936
Note Payable, Credit Facility 18,016 -- 98,300 -- 130,500 130,300
Total liabilities 507,246 451,856 220,749 -- 239,013 261,100
Total equity (deficit) 548,543 426,930 174,923 -- 258,822 102,038
- -------------
(1) Including deductions for:
Depreciation and
amortization $ 1,994 $ 1,994 $ 832 $ 3,895 $ 2,306 $ 3,013
Interest--Amortization of
financing costs 448 448 $ 420 $ 896 $ 853 $ 796
(2) Company share of Operating
Partnership 86.4% 85.5% 78.7% 86.4% 81.3% 77.2%
</TABLE>
<TABLE>
<CAPTION>
Predecessor
--------------------------------------------------
For the Period
January 1,
1994 to Years Ended December 31,
May 25, ---------------------------------
1994 1993 1992 1991
-------------- -------- -------- --------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
BALANCE SHEET
INFORMATION:
Real estate before accumulated
depreciation $ 82,198 $ 81,220 $ 78,580 $ 76,489
Total assets 77,470 85,497 93,327 84,978
Mortgage debt 69,240 87,091 86,610 85,189
Note Payable, Credit Facility -- -- -- --
Total liabilities 129,836 143,451 142,015 127,283
Total equity (deficit) (52,366) (57,954) (48,688) (42,305)
- -------------
(1) Including deductions for:
Depreciation and
amortization
Interest--Amortization of
financing costs
(2) Company share of Operating
Partnership
</TABLE>
S-12
<PAGE>
RISK FACTORS
An investment in the Common Stock involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this Prospectus Supplement before
purchasing Common Stock in the Offering.
Risks Associated with the Addition of a Substantial Number of New Properties
The Company is currently experiencing a period of rapid growth. Since
August 1995, the Company has invested approximately $417 million, increasing
its interests in real estate by over 92%. Upon the completion of the Pending
Acquisitions, the Company will have invested approximately $644 million since
August 1995, increasing its interests in real estate by over 142%. The
Company's ability to manage its growth effectively will require it to
successfully apply its experience in managing its existing portfolio in new
markets and to an increased number of properties. There can be no assurance
that the Company will be able to manage these operations effectively.
Real Estate Financing Risks
Debt Financing and Existing Debt Maturities. The Company intends to
finance the acquisition of additional properties through the use of debt and
equity financing. The Company is subject to the risks normally associated
with debt financing, including the risk that the Company's cash flow will be
insufficient to meet required payments of principal and interest, the risk
that existing indebtedness on the Properties (which in most cases will not
have been fully amortized at maturity) will not be able to be refinanced or
that the terms of such refinancing will not be as favorable as the terms of
the existing indebtedness.
Currently, the Company's total consolidated debt is approximately $403.1
million, and its total consolidated debt plus its proportionate share of
total unconsolidated debt (other than Rowes Wharf) is approximately $496.4
million. The Company (together with an affiliate), and Equitable, the
Company's joint venture partner in Rowes Wharf Associates, each hold one-half
of the mortgage debt on the Rowes Wharf Property. See "Properties--Mortgage
Indebtedness and Credit Facility." The Company's current indebtedness of
approximately $496.4 million has maturities ranging from 1998 through 2006
and is secured by Properties. The Company currently has no balance
outstanding under its Credit Facility. The Company's proportionate share of
its current total unconsolidated debt (excluding Rowes Wharf) consists of
approximately $46.9 million on the One Post Office Square Property (in which
the Company has a 50% general partner interest) and approximately $46.4
million on the 75-101 Federal Street Property (in which the Company owns
approximately 51.6% of the common stock of a private REIT that owns the
Property).
The Company currently has a policy of incurring debt only if upon such
incurrence the Company's Debt to Market Capitalization Ratio (as defined
below) would be 50% or less. For purposes of this policy, the Company's Debt
to Market Capitalization Ratio is calculated as the Company's proportionate
share of total consolidated and unconsolidated debt (excluding Rowes Wharf)
as a percentage of the sum of the market value of outstanding shares of stock
of the Company and Units plus the Company's proportionate share of total
consolidated and unconsolidated debt (excluding Rowes Wharf). As noted, the
Company (together with an affiliate) currently holds one-half of the Rowes
Wharf mortgage indebtedness. Upon completion of the Offering and the Pending
Acquisitions, the Company's Debt to Market Capitalization Ratio will be
approximately 36.3%. Although the Company has adopted a Debt to Market
Capitalization Ratio policy, the organizational documents of the Company do
not contain any limitation on the amount of indebtedness the Company may
incur. Accordingly, the Board of Directors could alter or eliminate this
policy and would do so, for example, if it were necessary in order for the
Company to continue to qualify as a REIT.
The Company anticipates that only a small portion of the principal of the
Company's mortgage indebtedness will be repaid prior to maturity. However,
the Company may not have funds sufficient to repay such indebtedness at
maturity and it may be necessary for the Company to refinance indebtedness
through additional debt financing or equity offerings. If the Company is
unable to refinance this indebtedness on acceptable terms, the Company may be
forced to dispose of Properties upon disadvantageous terms, which could
result in losses to the Company and adversely affect the amount of cash
available for distribution to stockholders. If prevailing interest rates or
other factors result in higher interest rates at a time when the Company must
refinance its indebtedness, the Company's interest expense would increase,
which would adversely affect the Company's results of operations and its
ability to pay expected distributions to stockholders. Further, if a Property
or Properties are mortgaged to secure payment
S-13
<PAGE>
of indebtedness and the Company is unable to meet mortgage payments, the
Property or Properties could be foreclosed upon by or otherwise transferred
to the mortgagee with a consequent loss of income and asset value to the
Company. Even with respect to nonrecourse indebtedness, the lender may have
the right to recover deficiencies from the Company in certain circumstances,
including cases of fraud and environmental liabilities. See
"Properties--Mortgage Indebtedness and Credit Facility."
Risk of Rising Interest Rates. Outstanding advances under the Credit
Facility bear interest at a variable rate. In addition, the Company may incur
indebtedness in the future that also bears interest at a variable rate.
Accordingly, increases in interest rates could increase the Company's
interest expense, which could adversely affect the Company's results of
operations and its ability to pay expected distributions to stockholders or
cause the Company to be in default under certain Credit Facility covenants.
Limited Geographic Diversification
Upon completion of the Pending Acquisitions, approximately 45% and 34% of
the Company's proportionate share of the rentable square feet of the
Properties is located in the greater Boston metropolitan area and the North
Central Atlanta Office Market, respectively. Consequently, the Company will
continue to rely upon the demand for office and other commercial space in the
greater Boston and Atlanta metropolitan areas. Although the Boston and
Atlanta areas continue to recover from a severe economic downturn in real
estate markets that occurred in the late 1980s and early 1990s, there can be
no assurance that economic conditions in the Boston and Atlanta areas will
continue to improve.
Risks Involved in Joint Ownership of Properties
The Company holds (i) a 76% general and limited partner interest in the
property partnership that owns the Center Plaza Property, (ii) a 50% general
partner interest in the property partnership that owns the One Post Office
Square Property, (iii) a 90% limited partner interest (through Beacon
Property Management Corporation and Beacon Construction Company, Inc.) in
Rowes Wharf Limited Partnership, a limited partnership that owns a 50%
general partner interest in Rowes Wharf Associates, the entity that owns the
hotel space and leases the office and retail space at the Rowes Wharf
Property, (iv) a 10% general and limited partner interest in the property
partnership that owns the Polk and Taylor Buildings Property and (v)
approximately 51.6% of the common stock of a private REIT which holds a
direct fee interest in the 75-101 Federal Street Property. The Company is not
in a position to exercise sole decision making authority regarding One Post
Office Square, Rowes Wharf, the Polk and Taylor Buildings or 75-101 Federal
Street. However, the Company is responsible for the day-to-day affairs of
each such Property.
Joint ownership of Properties may, under certain circumstances, involve
risks not otherwise present, including the possibility that the Company's
partners or co-investors might become bankrupt, that such partners or co-
investors might at any time have economic or other business interests or
goals that are inconsistent with the business interests or goals of the
Company, and that such partners or co-investors may be in a position to take
action contrary to the instructions or the requests of the Company or
contrary to the Company's policies or objectives, including the Company's
policy with respect to maintaining its qualification as a REIT. Such
investments may also have the potential risk of impasse on decisions, such as
a sale, because neither the Company nor the partners or co-investors would
have full control over the entity owning the Property. Consequently, actions
by such partners or co-investors might result in subjecting jointly-owned
Properties to additional risk. The Company will, however, seek to maintain
sufficient control of the entities holding jointly-owned Properties to permit
the Company's business objectives to be achieved. Any capital contribution by
the Company or the Operating Partnership to the property partnerships that
own (directly or indirectly) the Rowes Wharf and Center Plaza Properties
requires the approval of the Directors of the Company who are neither
officers of the Company nor affiliated with Beacon. There is no limitation
under the Company's organizational documents as to the amount of available
funds that may be invested in partnerships, joint ventures or co-investments.
Possible Adverse Consequences of Limits on Ownership of Common Stock
In order to maintain its qualification as a REIT, not more than 50% in
value of the outstanding capital stock of the Company may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), to include certain entities)
during the last half of a taxable year (other than the first year) (the "Five
or Fewer Requirement"). In order to protect the Company against the risk of
losing REIT status due to a concentration of ownership among its
stockholders, the Articles of Incorporation of the
S-14
<PAGE>
Company limit ownership of the issued and outstanding Common Stock by any
single stockholder to 6.0% of the aggregate value of the Company's shares of
capital stock from time to time; provided, however, that entities whose
ownership of Common Stock is attributed to the beneficial owners of such
entities for purposes of the Five or Fewer Requirement, such as pension
trusts qualifying under Section 401(a) of the Code, United States investment
companies registered under the Investment Company Act of 1940, as amended,
partnerships, trusts and corporations, will be limited by the Company's
Articles of Incorporation to holding no more than 9.9% of the aggregate value
of the Company's shares of capital stock. The Articles of Incorporation
provide that the Board of Directors can waive this restriction if it is
satisfied, based upon the advice of tax counsel, that ownership in excess of
this limit will not jeopardize the Company's status as a REIT and the Board
of Directors otherwise decides such action would be in the best interests of
the Company. A transfer of shares to a person who, as a result of the
transfer, violates the ownership limitations will be void. Shares acquired or
transferred in breach of the ownership limitations will be automatically
converted into shares not entitled to vote or to participate in dividends or
other distributions. In addition, shares acquired or transferred in breach of
the ownership limitations may be purchased by the Company for the lesser of
the price paid and the average closing price for the ten trading days
immediately preceding redemption.
Risks of Acquisition, Development and Construction Activities
The Company intends to acquire existing office and commercial properties
to the extent that they can be acquired on advantageous terms and meet the
Company's investment criteria. In light of current conditions in the
Company's target market areas, the Company anticipates that in the near
future additional properties will be added to the Company's portfolio through
acquisitions rather than new development and construction. Acquisitions of
commercial properties entail general investment risks associated with any
real estate investment, including the risk that investments will fail to
perform as expected or that estimates of the cost of improvements to bring an
acquired property up to standards established for the intended market
position may prove inaccurate.
The Company also intends to continue the development and construction of
office and other commercial properties, in accordance with the Company's
development and underwriting policies as opportunities arise in the future.
Risks associated with the Company's development and construction activities
include the risk that: the Company may abandon development opportunities
after expending resources to determine feasibility; construction costs of a
project may exceed original estimates; occupancy rates and rents at a newly
completed property may not be sufficient to make the properties profitable;
financing may not be available on favorable terms for development of a
property; and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs.
Development activities are also subject to risks relating to the inability to
obtain, or delays in obtaining, all necessary zoning, land-use, building,
occupancy, and other required governmental permits and authorizations. If any
of the foregoing occurs, the Company's ability to make expected distributions
to stockholders could be adversely affected. In addition, new development
activities, regardless of whether or not they are ultimately successful,
typically require a substantial portion of management's time and attention.
The Company anticipates that future development will be financed, in whole
or in part, through additional equity offerings or under lines of credit or
other forms of secured or unsecured construction financing which will result
in a risk that, upon completion of construction, permanent financing for
newly developed properties may not be available or may be available only on
disadvantageous terms. If a project is unsuccessful, the Company's losses may
exceed its investment in the project.
Real Estate Investment Risks
General Risks. Investments of the Company are subject to the risks
incident to the ownership and operation of commercial real estate generally.
The yields available from equity investments in real estate depend on the
amount of income generated and expenses incurred. If the Company's Properties
do not generate revenues sufficient to meet operating expenses, including
debt service and capital expenditures, the Company's results of operations
and ability to make distributions to its stockholders will be adversely
affected.
A commercial property's revenues and value may be adversely affected by a
number of factors, including the national, state and local economic climate
and real estate conditions (such as oversupply of or reduced demand for space
and changes in market rental rates); the perceptions of prospective tenants
of the safety, convenience and attractiveness of the properties; the ability
of the owner to provide adequate management, maintenance and
S-15
<PAGE>
insurance; the ability timely to collect all rent from tenants; the expense
of periodically renovating, repairing and reletting spaces; and increasing
operating costs (including real estate taxes and utilities) which may not be
passed through to tenants. Certain significant expenditures associated with
investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the property. If a property is
mortgaged to secure the payment of indebtedness and if the Company is unable
to meet its mortgage payments, a loss could be sustained as a result of
foreclosure on the property or the exercise of other remedies by the
mortgagee. In addition, real estate values and income from properties are
also affected by such factors as compliance with laws, including tax laws,
interest rate levels and the availability of financing.
Tenant Defaults. Substantially all of the Company's income is derived from
rental income from real property. Consequently, the Company's results of
operations and ability to make expected distributions to stockholders would
be adversely affected if a significant number of tenants at the Properties
failed to meet their lease obligations. In the event of a default by a
lessee, the Company may experience delays in enforcing its rights as lessor
and may incur substantial costs in protecting its investment. Additionally,
as a significant number of the Company's tenants are in the financial
services, legal and accounting businesses, the Company's results of
operations and ability to make expected distributions to stockholders would
be adversely affected if these industries experienced a significant reduction
in workforce. At any time, a tenant of the Properties may also seek
protection under the bankruptcy laws, which could result in rejection and
termination of such tenant's lease and thereby cause a reduction in the cash
available for distribution by the Company. If a tenant rejects its lease, the
Company's claim for breach of the lease would (absent collateral securing the
claim) be treated as a general unsecured claim. The amount of the claim would
be capped at the amount owed for unpaid pre-petition lease payments unrelated
to the rejection, plus the greater of one year's lease payment or 15% of the
remaining lease payments payable under the lease (but not to exceed the
amount of three years' lease payments). No assurance can be given that the
Company will not experience significant tenant defaults in the future.
Ground Leases. Two of the Properties are the subject of long-term ground
leases. In the case of the lease on the office and retail portions of the
Rowes Wharf Property, the landlord becomes the owner of the portion of the
Property subject to the lease at the expiration of the term of the lease or
at the earlier termination by reason of a breach of the lease by the tenant.
The lease on the Rowes Wharf Property, which expires in 2065, does not
contain an extension option but includes an option to purchase. See
"Properties and Pending Acquisitions--Downtown Boston Office Market." The
ground lease pursuant to which the Company leases the South Station Property
expires in 2024. The landowner becomes the owner of the South Station
Property at the expiration of the term of the ground lease or at the earlier
termination by reason of a breach of the lease by the tenant. The Company
will have the right to extend the lease for two additional 15-year terms,
subject to the landowner's right to terminate such additional periods upon
two years' notice and payment to the Company of certain termination payments.
Market Illiquidity. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to
vary its portfolio promptly in response to changes in economic or other
conditions. In addition, provisions of the Code limit the Company's ability
to sell properties held for fewer than four years, which may affect the
Company's ability to sell properties without adversely affecting returns to
holders of Common Stock.
Operating Risks. The Properties are subject to operating risks common to
commercial real estate in general, any and all of which may adversely affect
occupancy or rental rates. The Properties are subject to increases in
operating expenses such as cleaning, electricity, heating, ventilation and
air conditioning; elevator repair and maintenance; insurance and
administrative costs; and other general costs associated with security,
landscaping, repairs and maintenance. While the Company's tenants are
currently obligated to pay these escalating costs, there can be no assurance
that tenants will agree to pay such costs upon renewal or that new tenants
will agree to pay such costs. If operating expenses increase, the local
rental market may limit the extent to which rents may be increased to meet
such increased expenses without decreasing occupancy rates. While the Company
implements cost-saving incentive measures at each of its Properties, if any
of the foregoing occurs, the Company's results of operations and its ability
to make distributions to stockholders could be adversely affected.
S-16
<PAGE>
Risk of Investment in Mortgage Debt
The Company may invest in mortgages which are secured by existing office
and commercial properties in circumstances where the Company anticipates that
its ownership of the mortgage may result in the acquisition of the related
properties through foreclosure proceedings or negotiated settlements. In
addition to the risks associated with investments in commercial office
properties, investments in mortgage indebtedness present the additional risks
that the fee owners of such properties may default in payments of interest on
a current basis and that the filing of bankruptcy proceedings may stay the
Company's foreclosure of such mortgages and receipt of payments thereunder.
Under such circumstances, the Company may not realize its anticipated
investment return, and may sustain losses relating to such investments.
Possible Environmental Liabilities
The Company's operating costs may be affected by the obligation to pay for
the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. Under
various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic
substances on, under or in such property. Such laws often impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. In addition, the presence of
hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the owner's ability to borrow by using such
real property as collateral. Persons who arrange for the transportation,
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility, whether or not such facility is or ever was owned or
operated by such person. Certain environmental laws and common law principles
could be used to impose liability for releases of hazardous materials,
including asbestos-containing materials ("ACMs"), into the environment, and
third parties may seek recovery from owners or operators of real properties
for personal injury associated with exposure to released ACMs or other
hazardous materials. Environmental laws may also impose restrictions on the
manner in which a property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In
connection with the ownership and operation of the Properties, the Company
may be potentially liable for any such costs. The cost of defending against
claims of liability or remediating contaminated property and the cost of
complying with environmental laws could materially adversely affect the
Company's results of operations and financial condition. Phase I
environmental site assessments ("ESAs") have been conducted at all of the
Properties by qualified independent environmental engineers. The purpose of
Phase I ESAs is to identify potential sources of contamination for which the
Properties may be responsible and to assess the status of environmental
regulatory compliance. The ESAs have not revealed any environmental liability
or compliance concerns that the Company believes would have a material
adverse effect on the Company's business, assets, results of operations or
liquidity, nor is the Company aware of any such liability or concerns.
Nevertheless, it is possible that these ESAs did not reveal all environmental
liabilities or compliance concerns or that material environmental liabilities
or compliance concerns exist of which the Company is currently unaware. The
Company has not been notified by any governmental authority, and has no other
knowledge of, any material noncompliance, liability or claim relating to
hazardous or toxic substances or other environmental substances in connection
with any of its Properties except as previously disclosed in documents
incorporated herein by reference or as noted below.
In connection with the Company's acquisition of the Fairfax County
Portfolio, chlorinated solvents, primarily trichloroethane ("TCE"), have been
detected in groundwater samples collected from monitoring wells located at
the John Marshall III developable land (the "JM III Parcel"). Subsequent
investigations of the JM III Parcel by an environmental consultant retained
by the sellers of the Fairfax County Portfolio (the "Consultant") confirmed
the presence of chlorinated solvents in groundwater at the JM III Parcel and
on property adjacent to the JM III Parcel where an autobody repair shop is
located.
The sellers of the Fairfax County Portfolio have reported the findings of
chlorinated solvent contamination on the JM III Parcel to the Virginia
Department of Environmental Quality. The Consultant has concluded that the
autobody repair shop is the probable source for the chlorinated solvent
contamination, and is in the process of collecting additional soil and
groundwater samples to confirm that conclusion and to prepare a remediation
plan for the site. Under the terms of the option agreement relating to the
Fairfax County Portfolio acquisition, the sellers of the property must
produce a remediation plan (the "Remediation Plan") regarding the JM III
Parcel by
S-17
<PAGE>
August 20, 1996. The Company may, in its sole discretion, terminate the
option to purchase the Fairfax County Portfolio if the Remediation Plan is
not acceptable to the Company.
Risks of Investments in Subsidiaries
The capital stock of each of Beacon Property Management Corporation,
Beacon Construction Company, Inc. and Beacon Design Corporation
(collectively, the "Subsidiary Corporations") is divided into two classes:
voting common stock, 99% of which is held by officers and/or directors of
such Subsidiary Corporations (each of whom, as of the date of this Prospectus
Supplement, is also an officer and/or director of the Company) and 1% of
which is held by the Operating Partnership, and nonvoting common stock, 100%
of which is held by the Operating Partnership. Management's 99% voting common
stock represents 1% of the economic interests in each of the Subsidiary
Corporations. Members of each Subsidiary Corporation's management, as the
holders of 99% of the voting common stock, retain the ability to elect the
board of directors of each of the Subsidiary Corporations. Although the
nonvoting common stock and the voting common stock of each of the Subsidiary
Corporations held by the Company represent 99% of the economic interests in
such corporations, the Company is not able to elect directors and its ability
to influence the day-to-day decisions affecting these corporations may
therefore be limited. As a result, the board of directors and management of
each of the Subsidiary Corporations may implement business policies or
decisions that would not have been implemented by persons controlled by the
Company that are adverse to the interests of the Company or that lead to
adverse financial results, which could adversely impact the Company's results
of operations. The bylaws of each of the Subsidiary Corporations require that
the voting common stock in such Subsidiary Corporation be held by officers of
such Subsidiary Corporation at all times and require holders of voting common
stock to enter into an agreement to that effect.
Risks of Third-Party Management
The Company manages Properties in which it does not own a controlling
interest and intends to actively pursue the management of properties which
are owned by third parties. Risks associated with the management of
properties which are not controlled by the Company and properties owned by
third parties include the risk that management contracts (which are typically
cancelable without notice) will be terminated by the entity controlling the
property or in connection with the sale of such property, the risk that
contracts may not be renewed upon expiration or may not be renewed on terms
consistent with current terms and the risk that the rental revenues upon
which management fees are based will decline as a result of general real
estate market conditions or specific market factors affecting properties
managed by the Company, resulting in decreased management fee income.
Although the Company has several third-party management contracts, there can
be no assurance that these management contracts will not be terminated by the
property owners in the future.
Effect of Market Interest Rates on Price of Common Stock
One of the factors that will influence the market price of the Common
Stock in public markets is the annual yield on the price paid for shares of
Common Stock from distributions by the Company. An increase in market
interest rates may lead prospective purchasers of the Common Stock to demand
a higher annual yield from future distributions. Such an increase in the
required distributions yield may adversely affect the market price of the
Common Stock.
S-18
<PAGE>
THE COMPANY
General
The Company is a self-administered and self-managed REIT which owns a
portfolio of Class A office properties and other commercial properties
located in major metropolitan areas, including Boston and Atlanta, as well as
commercial real estate development, construction, acquisition, leasing and
management businesses. Class A office properties generally are considered to
be those that have excellent locations and access, attract high quality
tenants, are well maintained and professionally managed, and achieve among
the highest rent, occupancy and tenant retention rates within their markets.
The Properties comprise approximately 10 million rentable square feet in the
aggregate and, as of June 30, 1996, were approximately 96% leased with over
800 tenants.
The Company has entered into contracts to acquire the Pending Acquisitions
comprised of ten office buildings encompassing approximately 1.6 million
additional rentable square feet located in Fairfax County, Virginia,
Washington, D.C. and suburban Chicago, Illinois for an aggregate purchase
price of $227 million. If all of the Pending Acquisitions are consummated,
the Company will own or have an interest in 68 income producing commercial
properties encompassing approximately 11.6 million rentable square feet and
will have a total market capitalization of approximately $1.5 billion.
The Company's executive offices are located at 50 Rowes Wharf in Boston,
Massachusetts 02110 and its telephone number at that location is (617)
330-1400.
RECENT DEVELOPMENTS
Pending Acquisitions
As part of its ongoing business, the Company continually conducts
strategic analyses of major office markets in the United States to determine
those markets which warrant acquisition of office properties. The Company
places particular emphasis on office-using employment growth as well as the
prospects for future supply of office space in each of the markets. The
Company has determined that, in addition to the Boston, Atlanta and
Washington, D.C. markets, in which the Company now operates, the suburban
Chicago market, where two of the Pending Acquisitions are located, and other
select markets, also possess attractive market fundamentals.
The Chicago metropolitan area, with over 50 Fortune 500 companies, is a
major regional center with a strong infrastructure. According to the U.S.
Bureau of Labor Statistics, the Chicago metropolitan area gained
approximately 34,000 office-using jobs for the twelve months ended March 31,
1996. The Company believes that several Chicago suburban office submarkets
are attractive due to employment growth in office-using jobs, the relatively
short time frame expected to absorb the existing supply of office space and
low vacancy rates. The Company also believes that its development and
management experience in the Chicago market will benefit the Company's
expansion into this market. The Company currently manages approximately 1.3
million square feet of office/industrial space in the Chicago area.
Additionally, the Company's construction subsidiary has actively participated
in several projects in the Chicago area over the past several years.
The greater Washington, D.C. area, including northern Virginia, is also a
major regional center with a strong infrastructure. According to the U.S.
Bureau of Labor Statistics, the Washington, D.C. metropolitan area gained
approximately 31,000 office-using jobs for the twelve months ended March 31,
1996. The Company believes that Fairfax County, Virginia represents an
attractive market due to its employment growth in the high technology,
professional service and telecommunications sectors, the relatively short
time frame expected to absorb the existing supply of office space and low
vacancy rates. The Company also believes that its extensive development and
management experience in the greater Washington, D.C. market will benefit its
further acquisition of properties in this area. The Company currently manages
approximately 1.3 million square feet in the greater Washington, D.C. area,
including the Polk and Taylor Buildings.
The Company has entered into contracts to purchase the Pending
Acquisitions for aggregate consideration of $227 million. The purchase of
each of the Pending Acquisitions is subject to various closing conditions,
including, but not limited to, satisfactory completion of the Company's due
diligence and, with respect to the Fairfax County Portfolio, agreement
regarding the terms of the remediation of certain environmental matters
concerning the John Marshall III land. See "Risk Factors--Possible
Environmental Liabilities." The Company currently expects to
S-19
<PAGE>
complete the purchase of the Pending Acquisitions during early September
1996. No assurances can be made that the Company will acquire any or all of
the Pending Acquisitions.
In addition to the Pending Acquisitions, as part of its ongoing business,
the Company continually engages in discussions with public and private real
estate entities regarding possible portfolio or single asset acquisitions in
various major metropolitan areas. No assurance can be made that the Company
will acquire any of the property opportunities currently under review.
Set forth below are summary descriptions of the Pending Acquisitions.
New York Life Portfolio. In July 1996, the Company entered into a contract
to acquire the New York Life Portfolio for an aggregate consideration of $150
million in cash. The Company intends to use the net proceeds of the Offering
to consummate the purchase.
The New York Life Portfolio consists of (i) the 8-story AT&T Plaza located
in Oak Brook (suburban Chicago), Illinois built in 1984 comprising
approximately 225,000 square feet of office space; (ii) the five-building
Tri-State International office park located in Lincolnshire (suburban
Chicago), Illinois built in 1986 comprising approximately 548,000 square
feet; and (iii) an 11-story office property located at 1333 H Street in
metropolitan Washington, D.C. comprising approximately 239,000 square feet
(approximately 205,000 of which was built in 1982). Major tenants in the New
York Life Portfolio include AT&T (approximately 40,000 square feet), A.C.
Nielsen Company (approximately 55,000 square feet) and Reuters (approximately
55,000 square feet). The aggregate occupancy rate for the New York Life
Portfolio as of June 30, 1996 was approximately 81%.
AT&T Plaza and the Tri-State International office park are located in the
Suburban Chicago Office Market. According to Grubb & Ellis, the entire
Suburban Chicago Office Market had an overall vacancy of 12.0% as of June
1996, while the East-West Corridor submarket (location of AT&T Plaza) and the
North Suburban Submarket (location of the Tri-State International office
park) had vacancy rates of 10.3% (9.2% for Class A office properties) and
12.6% (8.2% for Class A office properties), respectively, for the same
period. Grubb & Ellis also reports that the East-West Corridor and North
Suburban submarkets experienced Net Absorption of 730,000 square feet and
340,000 square feet, respectively, for the first six months of 1996.
Upon the acquisition of the New York Life Portfolio, the Company intends
to establish a regional office in the Chicago area to facilitate the leasing
and management of the properties.
The 1333 H Street property is located in the Washington, D.C. Office
Market. According to Grubb & Ellis, the entire Washington, D.C. Office Market
had an overall vacancy rate of 10.2% as of March 1996, while the East End
submarket (location of 1333 H Street) experienced a vacancy rate of 10.1% for
the same period.
The Capitalization Rate (calculated by dividing (a) the expected net
operating income (including the effect of straight line rents) generated by
the portfolio based upon annualized revenues from signed leases in place at
the properties as of June 30, 1996 by (b) the consideration paid for the
Properties) of the New York Life Portfolio acquisition is approximately 8.6%.
In the event weighted average occupancy for the New York Life Portfolio
increases to 95%, the Capitalization Rate would increase to 10.8%. The
Company expects to purchase the New York Life Portfolio for cash;
consequently, the Returns on Equity for the acquisition are equivalent to the
Capitalization Rates. No assurance can be made that the Company will achieve
such occupancy levels or increases in returns.
Fairfax County Portfolio. In June 1996, the Company exercised an option to
acquire the Fairfax County Portfolio for an aggregate consideration of $77
million. In connection with this acquisition, the Company has agreed to
maintain at least $45.2 million of debt on the properties for certain periods
of time.
The Fairfax County Portfolio consists of the (i) the 11-story John
Marshall I building located in the Tysons Corner area of McLean, Virginia,
built in 1981 comprising approximately 261,000 square feet of office space;
(ii) the 11-story E.J. Randolph building located in the Tysons Corner area of
McLean, Virginia, built in 1983 comprising approximately 165,000 square feet
of office space; (iii) the 6-story Northridge I building located in
Reston/Herndon area of Virginia, built in 1988 comprising approximately
124,000 square feet of office space; and (iv) the John Marshall III parcel of
developable land, with approximately 150,000 square feet of building
capacity, located in the Tysons Corner area of McLean, Virginia. Major
tenants in the Fairfax County Portfolio include Booz, Allen
S-20
<PAGE>
& Hamilton, Inc. (approximately 320,000 square feet) and Sprint Corporation
(approximately 124,000 square feet). The aggregate occupancy rate of the
Fairfax County Portfolio as of June 30, 1996 was approximately 94%.
According to Grubb & Ellis, the Fairfax County, Virginia Market had an
overall vacancy rate of 8.0% as of March 1996, and the submarkets of Tysons
Corner and Reston/Herndon had vacancy rates of 8.2% and 5.3%, respectively,
for the same period. Grubb & Ellis also reports that Tysons Corner and
Reston/Herndon submarkets experienced Net Absorption of 600,000 square feet
and 400,000 square feet, respectively, for the three months ended March 31,
1996.
The Capitalization Rate of the Fairfax County Portfolio acquisition is
approximately 11.5%. The Return on Equity invested by the Company in the
Fairfax County Portfolio is expected to be 21.3% assuming the repayment of
approximately $18 million of debt assumed in connection with the acquisition
with a draw on the Credit Facility. Return on Equity is calculated by
dividing (a) the expected net operating income (including the effect of
straight line rents) generated by the portfolio based upon annualized
revenues from signed leases in place at the properties as of June 30, 1996
less expected debt service on the principal amount of the mortgage debt and
the Credit Facility debt that will encumber the properties upon completion of
the acquisition by (b) the consideration paid for the properties less the
principal amount of the mortgage debt and the Credit Facility debt that will
encumber the properties upon completion of the acquisition.
The blended Capitalization Rate on both the New York Life Portfolio and
the Fairfax County Portfolio is 9.6%. In the event weighted average occupancy
for the New York Life Portfolio increases to 95%, the blended Capitalization
Rate for the acquisitions would be 11.1%. No assurances can be made that the
Company will achieve such occupancy levels or increases in returns.
The Company intends to finance the New York Life Portfolio and the Fairfax
County Portfolio acquisitions with the proceeds of this Offering and cash
and, with respect to the Fairfax County Portfolio, the assumption of $55.4
million of mortgage debt secured by the properties ($18 million of which will
be repaid with a draw on the Credit Facility) and the issuance of 839,223
Units. The blended Return on Equity invested by the Company in both the New
York Life Portfolio and the Fairfax County Portfolio is 10.2% or, assuming
the weighted average occupancy for the New York Life Portfolio increases to
95%, 12.1%. No assurances can be made that the Company will achieve such
occupancy levels or increases in returns.
Activities Relating to the Perimeter Center Portfolio
In February 1996, the Company purchased the Perimeter Center Portfolio,
associated ground leases, and rights and options to purchase adjoining land
for approximately $336 million (excluding associated acquisition-related
expenses). In March 1996, MetLife provided the $218 million MetLife Loan to
the Company. The MetLife Loan bears interest at a rate of 7.08% fixed over
the ten year term of the loan. As of June 30, 1996, the aggregate occupancy
rate of the Perimeter Center Portfolio was approximately 97%, an increase
from an aggregate occupancy rate of 94% as of December 31, 1995. As a result
of the closing of the Met Life Loan and the increased occupancy at the
Property, the Capitalization Rate of the Perimeter Center Portfolio is
approximately 11.4% and the Return on Equity invested by the Company in the
Property is approximately 19.4%.
Financing Activities
In June 1996, the Company substantially modified the terms of the Credit
Facility. Additionally, in July 1996, the maximum loan amount available under
the Credit Facility was increased to $300 million. The Credit Facility
matures in June 1999. 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. Following the closing of this Offering and the acquisition of
the Pending Acquisitions, the Company will have available approximately $210
of borrowing capacity under the Credit Facility, of which approximately $18
million will be outstanding. In order to increase the borrowing capacity to
the maximum $300 million, the Company anticipates that it will be required to
grant mortgages on additional properties.
S-21
<PAGE>
Increase in Distributions
In July 1996, the Company announced an increase in its quarterly
distribution of 10.1%, increasing the quarterly distribution on its Common
Stock from $.42 per share to $.4625 per share, which, on an annualized basis,
is equal to an annual distribution of $1.85 per share of Common Stock. The
higher distribution rate commenced with the Company's distribution with
respect to the second quarter of 1996, to be paid on August 23, 1996, to
stockholders of record as of August 14, 1996. Accordingly, it is currently
expected that purchasers of Common Stock in the Offering who hold Common
Stock as of the record date will receive the second quarter 1996 distribution
in respect of the shares of Common Stock offered hereby.
Other Developments
Rowes Wharf Mortgage Debt. In connection with the Initial Offering, the
Company acquired a 45% indirect limited partner interest in Rowes Wharf
Associates, the entity that owns the hotel space and leases the office and
retail space at the Rowes Wharf Property. During the period from April 1995
through June 1996, the Company (together with an affiliate) and Equitable,
the Company's joint venture partner in the Rowes Wharf Property, acquired all
of the outstanding mortgage debt on the Rowes Wharf Property. The mortgage
debt was purchased at approximately 50% of face value. See "Properties and
Pending Acquisitions--Mortgage Indebtedness and Credit Facility."
Crosby Corporate Center. The Company has substantially completed a $16
million redevelopment of Crosby Corporate Center, repositioning the Property
from research/development space to a Class A suburban office park. As of June
30, 1996, Crosby Corporate Center was approximately 88% leased. Additionally,
the Company has entered into an agreement to acquire a 29-acre parcel of land
adjacent to the Crosby Corporate Center. This parcel will support
approximately 250,000 square feet of buildings and the Company expects that
development of a significant portion of the land could commence in early
1997, although no assurances can be made in this regard. The Company believes
that demand for office space in the greater Boston Suburban Office Market
(the location of the Crosby Corporate Center) will continue as several major
tenants at the Property experience substantial growth. No assurance can be
made that such increased demand will occur.
S-22
<PAGE>
PROPERTIES AND PENDING ACQUISITIONS
The Company owns or has an interest in a portfolio of Class A office
properties and other commercial properties in prime locations in the greater
Boston and Atlanta metropolitan areas, in Arlington, Virginia, and in the
suburban Philadelphia area encompassing approximately 10 million rentable
square feet. Class A office properties generally are considered to have
excellent locations and access, attract high quality tenants, be well
maintained and professionally managed and achieve among the highest rent,
occupancy and tenant retention rates within their markets.
The Downtown Boston Office Market
Market Information
According to Spaulding & Slye, as of March 1996, there were approximately
48 million square feet of private sector office space in the Downtown Boston
Office Market. The following table sets forth the vacancy rates for the
Downtown Boston Office Market from 1991 through March 1996.
Period Vacancy Rate
------ ------------
1991 18.4%
1992 15.9%
1993 16.3%
1994 12.1%
1995 11.5%
January--March 1996 11.3%
- -------------
Source: Spaulding & Slye Office Market Reports 1990 through April 1996.
Spaulding & Slye reports that Net Absorption in 1995 was 400,000 square
feet and 1.9 million square feet in 1994. This significant amount of Net
Absorption is largely due to growth in the financial services, publishing and
legal sections, together with the relocation of certain federal government
groups.
Property Descriptions
The following chart describes each of the Company's Properties located in
the Downtown Boston Office Market.
<TABLE>
<CAPTION>
Rentable
Year Area Company's
Built/ in Square No. of %
Property Renovated Feet Stories Ownership Parking
- -------- --------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
175 Federal Street 1977 203,349 17 100% No
One Post Office Square 1981 764,129 41 50%(a) 375-car garage
South Station 1988 148,591 5 (b) (c)
Center Plaza 1966-1969 649,359 9 (d) 575-car garage
Rowes Wharf 1987 344,326 15 (e) 550-car garage
Russia Wharf 1978-1982 314,596 (f) 100% 146 spaces
150 Federal Street 1988 530,279 28 100% 285-car garage
2 Oliver Street--147 Milk
Street 1982-1988 271,000 (g) 100% No
75 Federal Street 1985 252,000 21 (h) No
101 Federal Street 1988 560,000 31 (h) 195-car garage
---------
Total 4,037,629
=========
</TABLE>
- -------------
(a) One Post Office Square is owned by a joint venture between Equitable and
the Company. The Company has a 50% interest in and is the managing
venturer of this joint venture.
(b) The Company owns 100% of a ground leasehold in this Property.
(c) A 600-car garage is under construction by the Massachusetts Bay
Transportation Authority.
(d) The Company holds a 1% general partner interest, a 75% limited partner
interest and an option to purchase the remaining 24% limited partner
interest in the partnership that owns the Center Plaza Property.
S-23
<PAGE>
(e) The Company holds a 90% limited partner interest in Rowes Wharf Limited
Partnership. Rowes Wharf Limited Partnership and Equitable each holds a
50% general partner interest in Rowes Wharf Associates, the partnership
that owns the hotel space and leases the office and retail space at the
Rowes Wharf Property. Consequently, the Company owns a 45% indirect
limited partner interest in Rowes Wharf Associates. A Beacon Affiliate is
the general partner of Rowes Wharf Limited Partnership. As general
partner, this Beacon Affiliate has the authority to mortgage or sell all
of the limited partnership's interest in Rowes Wharf without the
Company's consent.
(f) Russia Wharf is a complex of three seven-story buildings.
(g) 2 Oliver Street is an 11-story office building and 147 Milk Street is an
adjacent 10-story office building.
(h) Fee interest in the 75-101 Federal Street Property is held by a private
REIT, BeaMetFed. The Company holds approximately 51.6% of the common
stock of BeaMetFed, and the Company's co-investor, Bedrifspensioenfonds
voor de Metaallnijverheid (the "Dutch Metal Workers Pension Fund"), holds
approximately 48.0% of the common stock of BeaMetFed. The remaining
approximately 0.4% interest is held by other stockholders. Simultaneously
with BeaMetFed's acquisition of the 75-101 Federal Street Property in
September 1995, the Company issued 718,000 shares of Common Stock to the
Dutch Metal Workers Pension Fund, a transaction that resulted in net
proceeds of approximately $15.0 million.
Base Rents and Net Effective Rents
The following charts set forth the average annual Base Rent (as defined
below) and the average annual Net Effective Rent (as defined below) per
square foot for each of the Company's Properties in the Downtown Boston
Office Market. Base Rent is gross rent excluding payments by tenants on
account of real estate tax and operating expense escalation. Net Effective
Rent is Base Rent adjusted on a straight-line basis for contractual rent
step-ups and free rent periods, plus tenant payments on account of real
estate tax and operating expense escalation, less total operating expenses
and real estate taxes.
Average Annual Base Rents
-----------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- ---------------------- ----- ----- ----- ----- ----- --------
(per square foot)
175 Federal Street $12.98 $14.81 $17.79 $21.15 $23.82 $24.66
One Post Office Square 24.78 22.41 21.85 22.99 23.55 23.88
South Station 28.94 28.51 28.51 27.24 28.26 28.70
Center Plaza 21.27 19.65 21.40 22.98 22.95 22.29
Rowes Wharf 36.06 30.87 30.04 30.39 30.87 30.37
150 Federal Street 25.58 21.20 23.88 24.25 24.67 24.93
Russia Wharf(a) -- -- -- -- 12.53 13.75
75-101 Federal
Street(a) -- -- -- -- 28.00 28.28
2 Oliver Street(a) -- -- -- -- 16.46 16.63
--- --- --- --- --- ------
Weighted Average $25.04 $22.38 $23.30 $24.34 $23.75 $24.46
=== === === === === ======
- -------------
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by
the Company subsequent to the Initial Offering and, consequently,
information prior to the date of acquisition is unavailable.
S-24
<PAGE>
Average Annual Net Effective Rents
-----------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- ---------------------- ----- ----- ----- ----- ----- --------
(per square foot)
175 Federal Street $ 9.88 $12.40 $13.03 $13.97 $15.40 $16.49
One Post Office Square 17.87 14.47 14.32 15.01 15.03 14.98
South Station 17.24 14.56 15.87 18.16 20.05 20.75
Center Plaza 3.80 5.61 9.79 13.27 13.18 12.29
Rowes Wharf 22.15 14.26 15.45 17.65 18.22 17.88
150 Federal Street 20.17 17.51 19.99 20.95 21.14 21.14
Russia Wharf(a) -- -- -- -- 7.86 7.92
75-101 Federal
Street(a) -- -- -- -- 19.10 18.48
2 Oliver Street(a) -- -- -- -- 11.53 11.60
--- --- --- --- --- ------
Weighted Average $15.20 $13.16 $14.77 $16.22 $15.78 $16.02
=== === === === === ======
- -------------
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by
the Company subsequent to the Initial Offering and, consequently,
information prior to the date of acquisition is unavailable.
Occupancy Rates
The following chart sets forth the occupancy rate, expressed as a
percentage, for each of the Company's Properties in the Downtown Boston
Office Market.
<TABLE>
<CAPTION>
Occupancy Rate
-------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- -------------------------- ----- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
175 Federal Street 94% 100% 100% 94% 84% 89%
One Post Office Square 95% 93% 95% 97% 99% 99%
South Station 94% 96% 98% 100% 100% 100%
Center Plaza 71% 73% 76% 84% 91% 93%
Rowes Wharf 96% 91% 92% 96% 98% 99%
150 Federal Street 68% 98% 99% 98% 99% 100%
Russia Wharf(a) -- -- -- -- 94% 100%
75-101 Federal Street(a) -- -- -- -- 93% 94%
2 Oliver Street(a) -- -- -- -- 93% 95%
--- --- --- --- --- --------
Weighted Average 84% 90% 91% 94% 95% 96%
=== === === === === ========
</TABLE>
- -------------
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by
the Company subsequent to the Initial Offering and, consequently,
information prior to the date of acquisition is unavailable.
S-25
<PAGE>
Lease Expirations
The following table sets forth lease expirations (in square feet) for each
of the Company's Properties in the Downtown Boston Office Market.
<TABLE>
<CAPTION>
Lease Expirations--Downtown Boston Office Market
---------------------------------------------------------------------------------------------------
7/1/96
to
Property 12/31/96 1997 1998 1999 2000
---------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
175 Federal square feet (a) 9,318 3,610 4,775 0 34,079
% sq. ft. (b) 4.6% 1.8% 2.3% 0.0% 16.8%
annual rent (c) $197,199 $91,728 $201,745 $0 $816,972
psf (d) $21.16 $25.41 $42.25(f) $0.00 $23.97
tenants (e) 3 1 1 0 8
Center Plaza square feet (a) 15,768 76,044 89,314 35,245 96,244
% sq. ft. (b) 2.4% 11.7% 13.8% 5.4% 14.8%
annual rent (c) $280,387 $1,990,760 $2,016,537 $741,628 $2,341,012
psf (d) $17.78 $26.18 $22.58 $21.04 $24.32
tenants (e) 5 8 7 9 12
One Post Offc. Sq. square feet (a) 24,516 39,981 28,280 33,702 33,536
% sq. ft. (b) 3.2% 5.2% 3.7% 4.4% 4.4%
annual rent (c) $771,775 $1,140,656 $787,255 $982,382 $1,001,692
psf (d) $31.48 $28.53 $27.84 $29.15 $29.87
tenants (e) 2 8 6 11 6
South Station (g) square feet (a) 410 1,086 11,541 1,401 2,373
% sq. ft. (b) 0.3% 0.7% 7.8% 0.9% 1.6%
annual rent (c) $72,623 $113,935 $1,065,930 $391,925 $325,685
psf (d) $177.13 $104.91 $92.36 $279.75 $137.25
tenants (e) 3 2 2 4 5
Rowes Wharf square feet (a) 8,080 63,281 121,332 37,865 18,479
% sq. ft. (b) 2.3% 18.4% 35.2% 11.0% 5.4%
annual rent (c) $212,640 $1,679,065 $4,215,221 $1,186,919 $553,215
psf (d) $26.32 $26.53 $34.74 $31.35 $29.94
tenants (e) 3 5 9 7 4
150 Federal square feet (a) 13,154 12,458 223,826 41,472 44,562
% sq. ft. (b) 2.5% 2.3% 42.2% 7.8% 8.4%
annual rent (c) $319,027 $279,204 $9,197,800 $1,134,535 $1,505,946
psf (d) $24.25 $22.41 $41.09 $27.36 $33.79
tenants (e) 7 2 3 2 7
Russia Wharf square feet (a) 14,166 57,452 34,028 65,854 81,488
% sq. ft. (b) 4.6% 18.5% 10.9% 21.2% 26.2%
annual rent (c) $214,867 $810,965 $534,727 $993,244 $1,288,587
psf (d) $15.17 $14.12 $15.71 $15.08 $15.81
tenants (e) 4 13 7 6 9
75 Federal square feet (a) 33,447 3,567 43,757 53,476 39,339
% sq. ft. (b) 13.2% 1.4% 17.3% 21.1% 15.5%
annual rent (c) $833,181 $66,780 $1,139,304 $1,659,858 $895,715
psf (d) $24.91 $18.72 $26.04 $31.04 $22.77
tenants (e) 6 1 11 7 5
101 Federal square feet (a) 12,555 74,217 110,411 100,831 6,475
% sq. ft. (b) 2.2% 13.3% 19.7% 18.0% 1.2%
annual rent (c) $268,982 $2,007,590 $3,859,939 $3,723,712 $198,808
psf (d) $21.42 $27.05 $34.96 $36.93 $30.70
tenants (e) 2 5 8 9 3
2 Oliver square feet (a) 25,310 36,851 15,287 37,802 50,960
% sq. ft. (b) 9.4% 13.7% 5.7% 14.0% 18.9%
annual rent (c) $460,830 $602,347 $292,758 $626,542 $1,012,749
psf (d) $18.21 $16.35 $19.15 $16.57 $19.87
tenants (e) 4 10 8 9 10
--------- --------- --------- --------- -----------
TOTAL square feet (a) 156,724 368,547 682,551 407,648 407,535
% sq. ft. (b) 3.9% 9.1% 16.9% 10.1% 10.1%
annual rent (c) $3,631,511 $8,783,029 $23,311,216 $11,440,746 $9,940,380
psf (d) $23.17 $23.83 $34.15 $28.07 $24.39
tenants (e) 39 55 62 64 69
</TABLE>
<TABLE>
<CAPTION>
Lease Expirations--Downtown Boston Office Market
---------------------------------------------------------------------------------------------------
2005 &
Property 2001 2002 2003 2004 beyond
---------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
175 Federal square feet (a) 12,329 66,306 0 6,793 45,482
% sq. ft. (b) 6.1% 32.6% 0.0% 3.3% 22.4%
annual rent (c) $322,784 $2,242,683 $0 $176,618 $1,426,193
psf (d) $26.18 $33.82 $0.00 $26.00 $31.36
tenants (e) 4 2 0 1 1
Center Plaza square feet (a) 50,791 15,656 128,201 40,035 57,235
% sq. ft. (b) 7.8% 2.4% 19.7% 6.2% 8.8%
annual rent (c) $1,291,605 $506,492 $3,531,104 $1,108,376 $1,584,854
psf (d) $25.43 $32.35 $27.54 $27.69 $27.69
tenants (e) 8 4 2 4 6
One Post Offc. Sq. square feet (a) 425,162 0 8,673 0 164,434
% sq. ft. (b) 55.6% 0.0% 1.1% 0.0% 21.5%
annual rent (c) $12,467,208 $0 $314,917 $0 $4,372,464
psf (d) $29.32 $0.00 $36.31 $0.00 $26.59
tenants (e) 4 0 1 0 2
South Station (g) square feet (a) 105 125,999 500 2,410 725
% sq. ft. (b) 0.1% 84.8% 0.3% 1.6% 0.5%
annual rent (c) $20,721 $4,326,715 $81,980 $429,037 $100,050
psf (d) $197.34 $34.34 $163.96 $178.02 $138.00
tenants (e) 1 5 1 3 1
Rowes Wharf square feet (a) 10,356 75,362 0 5,280 0
% sq. ft. (b) 3.0% 21.9% 0.0% 1.5% 0.0%
annual rent (c) $308,983 $2,983,590 $0 $116,096 $0
psf (d) $29.84 $39.59 $0.00 $21.99 $0.00
tenants (e) 2 2 0 1 0
150 Federal square feet (a) 11,119 183,239 0 0 0
% sq. ft. (b) 2.1% 34.6% 0.0% 0.0% 0.0%
annual rent (c) $282,846 $5,143,936 $0 $0 $0
psf (d) $25.44 $28.07 $0.00 $0.00 $0.00
tenants (e) 2 3 0 0 0
Russia Wharf square feet (a) 12,334 7,590 5,782 1,835 30,773
% sq. ft. (b) 4.0% 2.4% 1.9% 0.6% 9.9%
annual rent (c) $215,497 $121,440 $103,498 $27,905 $566,128
psf (d) $17.47 $16.00 $17.90 $15.21 $18.40
tenants (e) 3 1 1 2 1
75 Federal square feet (a) 20,603 0 22,630 0 0
% sq. ft. (b) 8.1% 0.0% 8.9% 0.0% 0.0%
annual rent (c) $424,792 $0 $623,270 $0 $0
psf (d) $20.62 $0.00 $27.54 $0.00 $0.00
tenants (e) 3 0 2 0 0
101 Federal square feet (a) 112,763 19,310 0 77,794 31,394
% sq. ft. (b) 20.1% 3.4% 0.0% 13.9% 5.6%
annual rent (c) $5,084,995 $473,926 $0 $1,989,684 $942,527
psf (d) $45.09 $24.54 $0.00 $25.58 $30.02
tenants (e) 4 1 0 1 2
2 Oliver square feet (a) 12,946 1,750 6,155 0 68,205
% sq. ft. (b) 4.8% 0.6% 2.3% 0.0% 25.3%
annual rent (c) $240,736 $32,375 $104,635 $0 $2,138,679
psf (d) $18.60 $18.50 $17.00 $0.00 $31.36
tenants (e) 4 1 1 0 2
--------- --------- --------- --------- -----------
TOTAL square feet (a) 668,508 495,212 171,941 134,147 398,248
% sq. ft. (b) 16.6% 12.3% 4.3% 3.3% 9.9%
annual rent (c) $20,660,167 $15,831,158 $4,759,403 $3,847,716 $11,130,895
psf (d) $30.90 $31.97 $27.68 $28.68 $27.95
tenants (e) 35 19 8 12 15
</TABLE>
- -------------
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1995 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose lease will expire
(f) Lease expirations reflect retail tenants only for 1998.
(g) Lease expirations reflect retail tenants only for 1996 through 2001 and
2003 and beyond.
S-26
<PAGE>
The North Central Atlanta Office Market
Market Information
According to Jamison, as of March 1996 there were approximately 89.5
million square feet of office space in the Atlanta Office Market. The North
Central submarket, the location of the Perimeter Center Portfolio, had
approximately 20.2 million square feet of office space. The following table
sets forth the vacancy rates and Net Absorption for the North Central Atlanta
Office Market from 1991 through March 1996.
Period Vacancy Net Absorption
------ ------- --------------
(in millions of square feet)
1991 19.6% .6
1992 16.8% .5
1993 11.7% 1.0
1994 8.7% .6
1995 6.0% .7
January--March 1996 5.3% .2
- -------------
Sources: CB/Torto Wheaton 1991 through 1994; Jamison Research 1995 and 1996
Property Descriptions
The following is a description of the buildings located in the Perimeter
Center Portfolio. The Company owns a 100% fee interest in each of the
Properties in the Perimeter Center Portfolio.
Year Rentable Area
Built/ in Square
Property Renovated Feet
- -------- --------- -------------
North Terraces 1984 492,845
South Terraces 1986 494,513
8,10,12,14,16 Perimeter Center East 1970 64,998
20,22,24,26 Perimeter Center East 1973 69,727
28,30,32 Perimeter Center East 1974 104,816
41 Perimeter Center East 1974 92,021
47 Perimeter Center East 1974 92,021
50 Perimeter Center East 1981 6,300
53 Perimeter Center East 1972 90,505
56 Perimeter Center East 1977 93,625
64 Perimeter Center East 1971 183,037
64A Perimeter Center East 1985 372,498
70,72,74,76 Perimeter Center East 1972 61,932
125 Perimeter Center West 1972 223,059
219 Perimeter Center Parkway 1979 127,697
223 Perimeter Center Parkway 1978 127,823
245 Perimeter Center Parkway 1981 229,217
301 Perimeter Center North 1982 151,416
303 Perimeter Center North 1989 162,256
Park Place Shopping Center 1979 61,830
-----------
Total 3,302,136
===========
S-27
<PAGE>
Base Rents and Historic Net Rents
The following charts show the average annual Base Rent and the average
annual Historic Net Rent (as defined below) per square foot for each of the
Properties in the Perimeter Center Portfolio. Historic Net Rent is Base Rent
plus tenant payments on account of real estate tax and operating expense
escalation, less total operating expenses and real estate taxes.
<TABLE>
<CAPTION>
Average Annual Base Rents
-----------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- -------- ---- ---- ---- ---- ---- -------
(per square foot)
<S> <C> <C> <C> <C> <C> <C>
North Terraces $16.89 $15.55 $17.94 $17.87 $18.06 $19.66
South Terraces 19.87 18.78 17.08 18.59 20.70 20.07
8,10,12,14,16 Perimeter Center
East 12.29 14.32 13.51 13.91 11.63 13.86
20,22,24,26 Perimeter Center East 12.62 13.48 12.92 11.75 13.11 14.53
28,30,32 Perimeter Center East 13.52 13.01 10.34 10.42 12.52 12.80
41 Perimeter Center East 13.09 14.45 14.76 14.29 13.70 14.57
47 Perimeter Center East 16.13 16.13 15.84 14.94 15.39 14.79
50 Perimeter Center East 6.08 6.00 6.19 6.27 6.37 6.62
53 Perimeter Center East 8.72 13.44 13.57 13.62 15.02 15.45
56 Perimeter Center East 11.90 11.76 11.27 11.23 11.77 11.62
64 Perimeter Center East 5.34 5.34 5.34 5.34 5.34 5.34
64A Perimeter Center East 18.71 19.01 19.31 19.62 19.91 20.06
70,72,74,76 Perimeter Center East 14.89 13.74 13.90 14.76 16.02 15.11
125 Perimeter Center West 4.10 4.10 4.10 4.10 4.11 4.10
219 Perimeter Center Parkway 14.18 11.79 14.89 16.88 15.62 15.50
223 Perimeter Center Parkway 13.75 6.76 8.08 8.62 11.33 11.25
245 Perimeter Center Parkway 15.26 15.80 15.99 16.17 16.36 17.66
301 Perimeter Center North 15.41 17.17 17.17 17.73 17.80 18.47
303 Perimeter Center North 16.96 21.06 19.70 20.44 21.06 20.54
Park Place Shopping Center 17.80 18.86 19.78 19.32 25.53 16.20
------ ------ ------ ------ ------ ------
Weighted Average $14.81 $14.57 $14.81 $15.18 $15.89 $16.05
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Average Annual Historic Net Rents
---------------------------------------------------
As of
Property 1991(1) 1992(1) 1993(1) 1994(1) 1995(1) 6/30/96 (2)
- -------- ------- ------- ------- ------- ------- -----------
(per square foot)
<S> <C> <C> <C> <C> <C> <C>
North Terraces $ 9.59 $ 8.67 $10.70 $10.52 $ 9.38 $13.37
South Terraces 13.61 12.28 9.17 11.40 12.83 13.21
8,10,12,14,16 Perimeter Center East 5.60 7.17 6.09 5.03 4.47 8.70
20,22,24,26 Perimeter Center East 6.35 6.86 6.12 5.15 4.72 9.08
28,30,32 Perimeter Center East 7.08 6.78 2.63 4.31 5.66 8.02
41 Perimeter Center East 5.97 7.63 6.55 6.16 5.59 9.09
47 Perimeter Center East 9.71 8.85 9.09 7.61 7.28 9.30
50 Perimeter Center East 6.08 6.00 6.19 6.27 6.37 6.62
53 Perimeter Center East 1.72 7.07 7.88 7.45 8.26 10.47
56 Perimeter Center East 8.03 8.03 7.16 7.57 6.65 7.83
64 Perimeter Center East 2.83 3.33 3.29 3.24 3.20 2.98
64A Perimeter Center East 14.69 15.75 15.59 15.80 15.09 17.32
70,72,74,76 Perimeter Center East 8.04 6.95 7.13 7.48 8.05 10.17
125 Perimeter Center West 3.41 3.56 3.33 3.31 3.04 3.16
219 Perimeter Center Parkway 7.55 5.79 7.68 10.32 8.91 10.13
223 Perimeter Center Parkway 6.35 0.73 1.63 1.92 3.71 11.08
245 Perimeter Center Parkway 10.38 8.83 8.48 8.21 8.45 11.50
301 Perimeter Center North 8.97 11.09 9.91 10.58 9.85 11.82
303 Perimeter Center North 10.60 15.45 13.32 13.55 13.33 14.19
Park Place Shopping Center 11.31 12.29 13.38 12.60 16.50 12.93
------ ------ ------ ------ ------ ------
Weighted Average $ 9.41 $ 9.26 $ 8.92 $ 9.28 $ 9.28 $11.25
====== ====== ====== ====== ====== ======
</TABLE>
- -------------
(1) Calculated as Historic Net Rent
(2) Calculated as Net Effective Rent
S-28
<PAGE>
Occupancy Rates
The following chart sets forth the occupancy rate, expressed as a
percentage, for each of the Properties located in the Perimeter Center
Portfolio for each of 1990 through 1995, and as of June 30, 1996.
<TABLE>
<CAPTION>
Occupancy Rate
-----------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- -------- ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
North Terraces 86% 92% 96% 96% 84% 98%
South Terraces 90% 84% 88% 92% 96% 98%
8,10,12,14,16 Perimeter Center East 70% 69% 61% 60% 69% 77%
20,22,24,26 Perimeter Center East 84% 87% 91% 85% 78% 94%
28,30,32 Perimeter Center East 70% 65% 61% 83% 85% 94%
41 Perimeter Center East 77% 78% 58% 61% 71% 85%
47 Perimeter Center East 79% 75% 79% 87% 77% 85%
50 Perimeter Center East 100% 100% 100% 100% 100% 100%
53 Perimeter Center East 61% 70% 88% 88% 83% 70%
56 Perimeter Center East 100% 100% 93% 93% 93% 99%
64 Perimeter Center East 100% 100% 100% 100% 100% 100%
64A Perimeter Center East 100% 100% 100% 100% 100% 100%
70,72,74,76 Perimeter Center East 82% 89% 91% 89% 86% 88%
125 Perimeter Center West 100% 100% 100% 100% 100% 100%
219 Perimeter Center Parkway 73% 82% 64% 85% 99% 100%
223 Perimeter Center Parkway 67% 100% 100% 100% 100% 100%
245 Perimeter Center Parkway 100% 100% 100% 100% 100% 100%
301 Perimeter Center North 99% 100% 100% 100% 100% 100%
303 Perimeter Center North 100% 99% 100% 100% 100% 100%
Park Place Shopping Center 91% 98% 100% 98% 91% 100%
--- --- --- --- --- ------
Weighted Average 89% 91% 92% 94% 93% 97%
=== === === === === ======
</TABLE>
S-29
<PAGE>
Lease Expirations
The following table sets forth lease expirations (in square feet) for the
Company's Properties in the Perimeter Center Portfolio. This table does not
contain information relating to certain ground leases in the Perimeter Center
Portfolio.
<TABLE>
<CAPTION>
Lease Expirations--Perimeter Center Portfolio
------------------------------------------------------------------------
7/1/96
to
Property 12/31/96 1997 1998 1999 2000
- -------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
North Terraces square feet (a) 67,524 31,179 18,295 79,666 196,907
% sq. ft. (b) 13.7% 6.3% 3.7% 16.2% 39.9%
annual rent (c) $1,441,902 $617,778 $356,293 $1,539,051 $4,131,101
annual rent psf (d) $21.35 $19.81 $19.47 $19.32 $20.98
tenants (e) 18 7 7 7 13
South Terraces square feet (a) 51,910 183,274 112,362 94,470 38,723
% sq. ft. (b) 10.5% 37.1% 22.7% 19.1% 7.8%
annual rent (c) $1,067,901 $4,240,969 $2,096,022 $1,869,454 $860,954
annual rent psf (d) $20.57 $23.14 $18.65 $19.79 $22.23
tenants (e) 12 17 19 18 2
8,10,12,14,16
Perimeter square feet (a) 3,326 17,880 1,441 4,408 5,169
Center East % sq. ft. (b) 5.1% 27.5% 2.2% 6.8% 8.0%
annual rent (c) $44,931 $255,559 $15,592 $70,494 $92,473
annual rent psf (d) $13.51 $14.29 $10.82 $15.99 $17.89
tenants (e) 4 7 2 3 1
20,22,24,26 Perimeter square feet (a) 10,477 5,185 18,792 9,957 21,059
Center East % sq. ft. (b) 15.0% 7.4% 27.0% 14.3% 30.2%
annual rent (c) $134,535 $75,682 $264,081 $160,392 $351,994
annual rent psf (d) $12.84 $14.60 $14.05 $16.11 $16.71
tenants (e) 6 5 5 3 1
28,30,32 Perimeter square feet (a) 0 3,788 88,107 2,363 4,152
Center East % sq. ft. (b) 0.0% 3.6% 83.9% 2.2% 4.0%
annual rent (c) $0 $49,883 $1,165,602 $34,500 $67,300
annual rent psf (d) $0.00 $13.17 $13.23 $14.60 $16.21
tenants (e) 0 3 5 1 2
41 Perimeter Center East square feet (a) 1,876 0 32,308 30,545 13,463
% sq. ft. (b) 2.0% 0.0% 35.1% 33.2% 14.6%
annual rent (c) $7,035 $0 $498,448 $468,954 $237,377
annual rent psf (d) $3.75 $0.00 $15.43 $15.35 $17.63
tenants (e) 1 0 2 4 2
47 Perimeter Center East square feet (a) 2,230 2,756 16,354 14,871 41,904
% sq. ft. (b) 2.4% 3.0% 17.8% 16.2% 45.5%
annual rent (c) $32,090 $51,592 $249,373 $225,204 $677,354
annual rent psf (d) $14.39 $18.72 $15.25 $15.14 $16.16
tenants (e) 1 1 6 2 6
50 Perimeter Center East square feet (a) 0 0 6,300 0 0
% sq. ft. (b) 0.0% 0.0% 100.0% 0.0% 0.0%
annual rent (c) $0 $0 $61,677 $0 $0
annual rent psf (d) $0.00 $0.00 $9.79 $0.00 $0.00
tenants (e) 0 0 1 0 0
53 Perimeter Center East square feet (a) 8,017 33,972 4,024 13,746 0
% sq. ft. (b) 8.9% 37.5% 4.4% 15.2% 0.0%
annual rent (c) $147,753 $550,392 $63,458 $195,460 $0
annual rent psf (d) $18.43 $16.20 $15.77 $14.22 $0.00
tenants (e) 1 3 1 2 0
56 Perimeter Center East square feet (a) 86,679 0 0 0 5,742
% sq. ft. (b) 92.6% 0.0% 0.0% 0.0% 6.1%
annual rent (c) $1,218,229 $0 $0 $0 $117,768
annual rent psf (d) $14.05 $0.00 $0.00 $0.00 $20.51
tenants (e) 2 0 0 0 1
64 Perimeter Center
East square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
64A Perimeter Center
East square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
70,72,74,76 Perimeter square feet (a) 8,460 4,506 3,204 16,423 17,296
Center East % sq. ft. (b) 13.7% 7.3% 5.2% 26.5% 27.9%
annual rent (c) $129,020 $61,168 $37,225 $304,919 $310,914
annual rent psf (d) $15.25 $13.57 $11.62 $18.57 $17.98
tenants (e) 2 3 3 2 2
</TABLE>
<TABLE>
<CAPTION>
Lease Expirations--Perimeter Center Portfolio (continued)
------------------------------------------------------------------------
2005 and
Property 2001 2002 2003 2004 beyond
- -------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
North Terraces square feet (a) 68,515 17,990 0 0 2,718
% sq. ft. (b) 13.9% 3.6% 0.0% 0.0% 0.6%
annual rent (c) $2,000,355 $423,371 $0 $0 $0
annual rent psf (d) $29.20 $23.53 $0.00 $0.00 $0.00
tenants (e) 6 2 0 0 1
South Terraces square feet (a) 1,430 0 0 0 0
% sq. ft. (b) 0.3% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $38,624 $0 $0 $0 $0
annual rent psf (d) $27.01 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
8,10,12,14,16
Perimeter square feet (a) 17,581 0 0 0 0
Center East % sq. ft. (b) 27.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $251,651 $0 $0 $0 $0
annual rent psf (d) $14.31 $0.00 $0.00 $0.00 $0.00
tenants (e) 2 0 0 0 0
20,22,24,26 Perimeter square feet (a) 0 0 0 0 0
Center East % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
28,30,32 Perimeter square feet (a) 0 0 0 0 0
Center East % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
41 Perimeter Center East square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
47 Perimeter Center East square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
50 Perimeter Center East square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
53 Perimeter Center East square feet (a) 3,586 0 0 0 0
% sq. ft. (b) 4.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $72,365 $0 $0 $0 40
annual rent psf (d) $20.18 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
56 Perimeter Center East square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
64 Perimeter Center East square feet (a) 183,037 0 0 0 0
% sq. ft. (b) 100.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $1,746,388 $0 $0 $0 $0
annual rent psf (d) $9.54 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
64A Perimeter Center East square feet (a) 0 0 0 0 372,498
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 100.0%
annual rent (c) $0 $0 $0 $0 $9,166,954
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $24.61
tenants (e) 0 0 0 0 1
70,72,74,76 Perimeter square feet (a) 4,636 0 0 0 0
Center East % sq. ft. (b) 7.5% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $81,315 $0 $0 $0 $0
annual rent psf (d) $17.54 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
</TABLE>
(Notes on following page)
S-30
<PAGE>
<TABLE>
<CAPTION>
Lease Expirations--Perimeter Center Portfolio (continued)
------------------------------------------------------------------------
7/1/96
to
Property 12/31/96 1997 1998 1999 2000
- -------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
125 Perimeter Center square feet (a) 0 0 0 0 0
West (f) % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
219 Perimeter Center square feet (a) 7,845 3,886 70,381 26,574 3,375
Parkway % sq. ft. (b) 6.1% 3.0% 55.1% 20.8% 2.6%
annual rent (c) 133,261 $72,163 $1,119,904 $409,172 $50,558
annual rent psf (d) $16.99 $18.57 $15.91 $15.40 $14.98
tenants (e) 2 1 4 1 1
223 Perimeter Center square feet (a) 0 0 0 0 0
Parkway % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
245 Perimeter Center square feet (a) 0 0 0 0 0
Parkway % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 40.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
301 Perimeter Center square feet (a) 0 0 0 151,416 0
North % sq. ft. (b) 0.0% 0.0% 0.0% 100.0% 0.0%
annual rent (c) $0 $0 $0 $2,677,440 $0
annual rent psf (d) $0.00 $0.00 $0.00 $17.68 $0.00
tenants (e) 0 0 0 1 0
303 Perimeter Center square feet (a) 0 0 0 162,256 0
North % sq. ft. (b) 0.0% 0.0% 0.0% 100.0% 0.0%
annual rent (c) $0 $0 $0 $3,592,679 $0
annual rent psf (d) $0.00 $0.00 $0.00 $22.14 $0.00
tenants (e) 0 0 0 2 0
Park Place Shopping
Center square feet (a) 0 2,489 5,955 21,720 18,038
% sq. ft. (b) 0.0% 4.0% 9.6% 35.1% 29.2%
annual rent (c) $0 $47,191 $107,728 $386,231 $367,960
annual rent psf (d) $0.00 $18.96 $18.09 $17.78 4420.40
tenants (e) 0 1 4 5 4
---------------------- --------- --------- --------- --------- -----------
TOTAL square feet (a) 248,344 288,915 377,523 628,415 365,828
% sq. ft. (b) 7.5% 8.7% 11.4% 19.0% 11.1%
annual rent (c) $4,356,656 $6,022,378 $6,035,402 $11,933,950 $7,265,752
annual rent psf (d) $17.54 $20.84 $15.99 $18.99 $19.86
tenants (e) 49 48 59 51 35
</TABLE>
<TABLE>
<CAPTION>
Lease Expirations--Perimeter Center Portfolio (continued)
------------------------------------------------------------------------
2005 and
Property 2001 2002 2003 2004 beyond
- -------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
125 Perimeter Center square feet (a) 0 0 0 223,059 0
West (f) % sq. ft. (b) 0.0% 0.0% 0.0% 100.0% 0.0%
annual rent (c) $0 $0 $0 $1,001,603 $0
annual rent psf (d) $0.00 $0.00 $0.00 $4.49 $0.00
tenants (e) 0 0 0 1 0
219 Perimeter Center square feet (a) 15,202 0 0 0 0
Parkway % sq. ft. (b) 11.9% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 286,986 $0 $0 $0 $0
annual rent psf (d) $18.88 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
223 Perimeter Center square feet (a) 127,823 0 0 0 0
Parkway % sq. ft. (b) 100.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $2,428,637 $0 $0 $0 $0
annual rent psf (d) $19.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
245 Perimeter Center square feet (a) 229,217 0 0 0 0
Parkway % sq. ft. (b) 100.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $4,286,082 $0 $0 $0 $0
annual rent psf (d) $18.70 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
301 Perimeter Center square feet (a) 0 0 0 0 0
North % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
303 Perimeter Center square feet (a) 0 0 0 0 0
North % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $0 $0 $0 $0 $0
annual rent psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
Park Place Shopping
Center square feet (a) 1,854 0 0 0 11,774
% sq. ft. (b) 3.0% 0.0% 0.0% 0.0% 19.0%
annual rent (c) $52,301 $0 $0 $0 $239,393
annual rent psf (d) $28.21 $0.00 $0.00 $0.00 $20.33
tenants (e) 1 0 0 0 2
---------------------- --------- --------- --------- --------- -----------
TOTAL square feet (a) 652,881 17,990 0 223,059 386,990
% sq. ft. (b) 19.8% 0.5% 0.0% 6.8% 11.7%
annual rent (c) $11,244,705 $423,371 $0 $1,001,603 $9,406,347
annual rent psf (d) $17.22 $23.53 $0.00 $4.49 $24.31
tenants (e) 16 2 0 1 4
</TABLE>
- -------------
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1995 tenant payments on account of real estate
and operating escalations, except leases with CPI increases in lieu of
expense recoveries
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
(f) 125 Perimeter Center is reflected as a 2004 expiration; although the
lease expires in 1999, the tenant has an option to extend for five years
in 1999 at a rental rate that is significantly below market
S-31
<PAGE>
The Greater Boston Suburban Office Market
Market Information
As of March 1996, there were approximately 44 million square feet of
private sector office space in the Greater Boston Suburban Office Market. Of
the ten Properties located in the Greater Boston Suburban Office Market,
eight are located in the Route 128/Mass. Pike submarket, one (Westwood
Business Centre) is located in the South submarket and one (Crosby Corporate
Center) is located in the Northwest submarket. The following tables set forth
the vacancy rates for the Route 128/Mass. Pike, South, and Northwest
submarkets from December 1991 through March 1996.
Route 128/
Mass. Pike Submarket South Submarket Northwest Submarket
- ---------------------- ------------------- ---------------------
Vacancy Vacancy
Date Rate Date Rate Date Vacancy Rate
- ------- ----------- ---- ----------- ---- -------------
12/91 18.5% 12/91 17.4% 12/91 23.1%
12/92 18.5% 12/92 13.5% 12/92 21.7%
12/93 11.6% 12/93 12.3% 12/93 18.0%
12/94 10.6% 12/94 9.4% 12/94 16.2%
12/95 9.6% 12/95 9.2% 12/95 13.7%
3/96 8.0% 3/96 8.0% 3/96 15.5%
- -------------
Source: Spaulding & Slye Office Market Reports 1990 through April 1996.
Spaulding & Slye reports that Net Absorption for the Route 128/Mass. Pike
submarket was 100,000 square feet in both 1995 and 1994. For the South
submarket, Spaulding & Slye reports that Net Absorption was 100,000 square
feet in 1995 and 300,000 square feet in 1994. In the Northwest submarket,
Spaulding & Slye reports Net Absorption for 1995 and 1994 of 300,000 square
feet and 100,000 square feet, respectively.
Property Descriptions
The following chart describes the Company's Properties located in the
Greater Boston Suburban Office Market. The Company owns a 100% fee interest
in each Property located in the Greater Boston Suburban Office Market.
Rentable
Year Area
Built/ in Square No. of
Property Renovated Feet Stories
- ---------------------------------- --------- ----------- --------
Wellesley Office Park:
65 William Street, Building One 1963 29,502 3
60 William Street, Building Two 1966 49,826 4
55 William Street, Building Three 1968 52,636 4
40 William Street, Building Four 1970 71,904 4
20 William Street, Building Five 1973 129,000 4
45 William Street, Building Six 1976 155,718 4
80 William Street, Building Seven 1984 71,324 4
100 William Street, Building
Eight 1968 39,424 3
Westwood Business Centre 1985 160,400 3
Crosby Corporate Center 1996 336,000 (a)
---------
Total 1,095,734
=========
- -------------
(a) Crosby Corporate Center is a six building complex with one and two story
buildings.
S-32
<PAGE>
Base Rents and Net Effective Rents
The following charts set forth the average annual Base Rents and the
average annual Net Effective Rents per square foot for each of the Company's
Properties located in the Greater Boston Suburban Office Market.
<TABLE>
<CAPTION>
Average Annual Base Rents
-----------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- ------------------------------------ ----- ----- ----- ----------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One $18.98 $21.45 $20.97 $22.00 $22.60 $ 23.69
60 William Street, Building Two 26.24 22.04 16.62 19.26 19.39 20.59
55 William Street, Building Three 21.82 25.41 23.25 22.06 22.03 22.54
40 William Street, Building Four 20.20 23.33 22.89 22.28 23.08 23.75
20 William Street, Building Five 23.20 22.52 21.20 21.90 22.96 23.73
45 William Street, Building Six 17.03 15.65 15.46 16.52 16.28 22.77
80 William Street, Building Seven 38.37 37.71 37.34 25.00 (1) 25.00 25.00
100 William Street, Building Eight
(2) -- -- -- -- 23.00 23.00
Westwood Business Centre (2) -- -- -- -- 18.46 19.40
Crosby Corporate Center (2) -- -- -- -- -- 15.62
----- ----- ----- ----------- ----- --------
Weighted Average $22.99 $22.96 $21.63 $21.03 $20.50 $20.35
===== ===== ===== =========== ===== ========
</TABLE>
- -------------
(1) This reduction in Base Rent is attributable to the execution of a new
lease with the tenant occupying this Property for an 11-year term
commencing January 1, 1994.
(2) The 100 William Street Property and Westwood Business Centre were
acquired by the Company subsequent to the Initial Offering and,
consequently, information prior to the date of acquisition is
unavailable. The Crosby Corporate Center was redeveloped by the Company
from research/development space to Class A office space and,
consequently, historical information prior to such redevelopment is not
comparable.
<TABLE>
<CAPTION>
Average Annual Net Effective Rents
-----------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- ------------------------------------ ----- ----- ----- ----------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One $10.17 $12.40 $12.70 $13.19 $14.02 $ 15.47
60 William Street, Building Two 12.69 13.30 9.36 11.26 11.58 12.97
55 William Street, Building Three 12.90 16.36 14.86 13.86 13.92 14.65
40 William Street, Building Four 11.47 13.18 16.17 14.07 14.77 15.76
20 William Street, Building Five 12.45 12.38 11.92 13.04 14.11 15.10
45 William Street, Building Six 10.95 9.06 9.07 10.84 12.65 15.32
80 William Street, Building Seven 31.02 31.10 31.35 21.38 (1) 19.47 20.38
100 William Street, Building Eight
(2) -- -- -- -- 15.50 15.50
Westwood Business Centre (2) -- -- -- -- 11.41 11.38
Crosby Corporate Center (2) -- -- -- -- -- 13.35
----- ----- ----- ----------- ----- --------
Weighted Average $14.28 $14.55 $14.23 $13.57 $13.66 $14.35
===== ===== ===== =========== ===== ========
</TABLE>
- -------------
(1) This reduction in Net Effective Rent is attributable to the execution of
a new lease with the tenant occupying this Property for an 11-year term
commencing January 1, 1994.
(2) The 100 William Street Property and Westwood Business Centre were
acquired by the Company subsequent to the Initial Offering and,
consequently, information prior to the date of acquisition is
unavailable. The Crosby Corporate Center was redeveloped by the Company
from research/development space to Class A office space and,
consequently, historical information prior to such redevelopment is not
comparable.
S-33
<PAGE>
Occupancy Rates
The following chart sets forth the occupancy rate, expressed as a
percentage, for each of the Company's Properties located in the Greater
Boston Suburban Office Market.
<TABLE>
<CAPTION>
Occupancy Rate
-------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 6/30/96
- ---------------------------------------- ----- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One 97% 100% 100% 94% 100% 87%
60 William Street, Building Two 98% 96% 100% 100% 98% 93%
55 William Street, Building Three 100% 91% 96% 100% 100% 100%
40 William Street, Building Four 100% 97% 100% 100% 93% 94%
20 William Street, Building Five 95% 95% 97% 97% 97% 97%
45 William Street, Building Six 97% 91% 90% 99% 98% 73%
80 William Street, Building Seven 100% 100% 100% 100% 100% 100%
100 William Street, Building Eight (1) -- -- -- -- 100% 100%
Westwood Business Centre (1) -- -- -- -- 99% 99%
Crosby Corporate Center (1) -- -- -- -- -- 48% (2)
----- ----- ----- ----- ----- ----------
Weighted Average 98% 95% 97% 99% 98% 79% (3)
===== ===== ===== ===== ===== ==========
</TABLE>
- -------------
(1) The 100 William Street Property and Westwood Business Centre were
acquired by the Company subsequent to the Initial Offering and,
consequently, information prior to the date of acquisition is
unavailable. The Crosby Corporate Center was redeveloped by the Company
from research/development space to Class A office space and,
consequently, historical information prior to such development is not
comparable.
(2) This Property is approximately 88% leased with occupancy of new tenants
scheduled for August 1996.
(3) Occupancy rate information does not incorporate the effect of signed
leases in place at Crosby Corporate Center. If the effect of such leases
were considered, the weighted average occupancy rate would be
approximately 91%.
S-34
<PAGE>
Lease Expirations
The following table sets forth lease expirations (in square feet) for each
of the Company's Properties in the Greater Boston Suburban Office Market.
<TABLE>
<CAPTION>
Lease Expirations--Greater Boston Suburban Office Market
------------------------------------------------------------------------
7/1/96
to
Property 12/31/96 1997 1998 1999 2000
---------------------- ----------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
65 William Street square feet(a) 5,864 3,769 1,103 2,274 3,429
Building One % sq. ft.(b) 19.9% 12.8% 3.7% 7.7% 11.6%
annual rent(c) $129,947 $89,525 $23,449 $52,302 $88,047
psf(d) $22.16 $23.75 $21.26 $23.00 $25.68
tenants(e) 3 4 1 1 2
60 William Street square feet(a) 0 0 18,457 2,348 23,207
Building Two % sq. ft.(b) 0.0% 0.0% 34.8% 4.4% 43.7%
annual rent(c) $ 0 $0 $357,117 $54,021 $502,736
psf(d) $0.00 $0.00 $19.35 $23.01 $21.66
tenants(e) 0 0 3 1 3
55 William Street square feet(a) 8,757 16,415 10,413 2,394 0
Building Three % sq. ft.(b) 15.9% 29.8% 18.9% 4.3% 0.0%
annual rent(c) $191,290 $378,606 $229,612 $61,636 $0
psf(d) $21.84 $23.06 $22.05 $25.75 $0.00
tenants(e) 3 3 2 2 0
40 William Street square feet 6,539 23,705 0 9,099 0
Building Four % sq. ft.(b) 8.8% 32.0% 0.0% 12.3% 0.0%
annual rent(c) $146,459 $531,845 $0 $211,217 $0
psf(d) $22.40 $22.44 $0.00 $23.21 $0.00
tenants(e) 3 2 0 2 0
20 William Street square feet 5,820 21,707 35,542 7,634 32,647
Building Five % sq. ft.(b) 4.5% 16.8% 27.6% 5.9% 25.3%
annual rent(c) $140,936 $505,925 $803,384 $189,449 $830,062
psf(d) $24.22 $23.31 $22.60 $24.82 $25.43
tenants(e) 2 8 11 3 8
45 William Street square feet(a) 10,939 13,200 0 0 0
Building Six % sq. ft.(b) 6.9% 8.3% 0.0% 0.0% 0.0%
annual rent(c) $256,376 $271,443 $0 $0 $0
psf(d) $23.44 $20.56 $0.00 $0.00 $0.00
tenants(e) 5 1 0 0 0
80 William Street square feet(a) 0 0 0 0 0
Building Seven % sq. ft.(b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c) $0 $0 $0 $0 $0
psf(d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants(e) 0 0 0 0 0
100 William Street square feet(a) 39,424 0 0 0 0
Building Eight % sq. ft.(b) 100.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c) $906,752 $0 $0 $0 $0
psf(d) $23.00 $0.00 $0.00 $0.00 $0.00
tenants(e) 1 0 0 0 0
Westwood square feet(a) 4,085 24,588 3,500 18,784 10,467
% sq. ft.(b) 2.5% 15.3% 2.2% 11.7% 6.5%
annual rent(c) $87,030 $565,381 $67,453 $379,447 $217,122
psf(d) $21.30 $22.99 $19.27 $20.20 $20.74
tenants(e) 2 2 1 6 3
Crosby Corporate
Center square feet(a) 0 0 0 40,500 0
% sq. ft(b) 0.0% 0.0% 0.0% 12.1% 0.0%
annual rent(c) $0 $0 $0 $416,287 $0
psf(d) $0.00 $0.00 $0.00 $10.28 $0.00
tenants(e) 0 0 0 1 0
--------- --------- --------- --------- -----------
TOTAL square feet(a) 81,428 103,384 69,015 83,033 69,750
SUBURBAN % sq. ft.(b) 7.4% 9.3% 6.2% 7.5% 6.3%
annual rent(c) $1,858,790 $2,342,724 $1,481,015 $1,364,359 $1,637,966
psf(d) $22.83 $22.66 $21.46 $16.43 $23.48
tenants(e) 19 20 18 16 16
</TABLE>
<TABLE>
<CAPTION>
Lease Expirations--Greater Boston Suburban Office Market
------------------------------------------------------------------------
2005 and
Property 2001 2002 2003 2004 beyond
- -------- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
65 William Street square feet(a) 5,794 3,874 0 0 0
Building One % sq. ft.(b) 19.6% 13.1% 0.0% 0.0% 0.0%
annual rent(c) $145,935 $92,949 $0 $0 $0
psf(d) $25.19 $23.99 $0.00 $0.00 $0.00
tenants(e) 2 2 0 0 0
60 William Street square feet(a) 5,914 0 0 0 0
Building Two % sq. ft.(b) 11.1% 0.0% 0.0% 0.0% 0.0%
annual rent(c) $155,583 $0 $0 $0 $0
psf(d) $26.31 $0.00 $0.00 $0.00 $0.00
tenants(e) 2 0 0 0 0
55 William Street square feet(a) 4,657 0 0 12,470 0
Building Three % sq. ft.(b) 8.5% 0.0% 0.0% 22.6% 0.0%
annual rent(c) $130,646 $0 $0 $294,761 $0
psf(d) $28.05 $0.00 $0.00 $23.64 $0.00
tenants(e) 1 0 0 1 0
40 William Street square feet 8,374 22,003 0 0 0
Building Four % sq. ft.(b) 11.3% 29.7% 0.0% 0.0% 0.0%
annual rent(c) $217,739 $572,078 $0 $0 $0
psf(d) $26.00 $26.00 $0.00 $0.00 $0.00
tenants(e) 1 1 0 0 0
20 William Street square feet 9,715 12,800 0 0 0
Building Five % sq. ft.(b) 7.5% 9.9% 0.0% 0.0% 0.0%
annual rent(c) $248,885 $321,671 $0 $0 $0
psf(d) $25.62 $25.13 $0.00 $0.00 $0.00
tenants(e) 3 1 0 0 0
45 William Street square feet(a) 0 0 15,001 21,700 56,180
Building Six % sq. ft.(b) 0.0% 0.0% 9.6% 13.7% 35.5%
annual rent(c) $0 $0 $397,527 526,324 $1,677,017
psf(d) $0.00 $0.00 $26.50 $24.25 $29.85
tenants(e) 0 0 1 1 2
80 William Street square feet(a) 0 0 0 0 71,324
Building Seven % sq. ft.(b) 0.0% 0.0% 0.0% 0.0% 100.0%
annual rent(c) $0 $0 $0 $0 $2,190,897
psf(d) $0.00 $0.00 $0.00 $0.00 $30.72
tenants(e) 0 0 0 0 1
100 William Street square feet(a) 0 0 0 0 0
Building Eight % sq. ft.(b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c) $0 $0 $0 $0 $0
psf(d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants(e) 0 0 0 0 0
Westwood square feet(a) 33,841 0 0 62,972 0
% sq. ft.(b) 21.1% 0.0% 0.0% 39.3% 0.0%
annual rent(c) $964,300 $0 $0 $1,230,571 $0
psf(d) $28.50 $0.00 $0.00 $19.54 $0.00
tenants(e) 1 0 0 1 0
Crosby Corporate
Center square feet(a) 0 0 0 0 257,114
% sq. ft(b) 0.0% 0.0% 0.0% 0.0% 76.5%
annual rent(c) $0 $0 $0 $0 $5,468,760
psf(d) $0.00 $0.00 $0.00 $0.00 $21.27
tenants(e) 0 0 0 0 4
--------- --------- --------- --------- -----------
TOTAL square feet(a) 68,295 38,677 15,001 97,142 384,618
SUBURBAN % sq. ft.(b) 6.2% 3.5% 1.4% 8.8% 34.8%
annual rent(c) $1,863,089 $986,699 $397,527 $2,051,656 $9,336,674
psf(d) $27.28 $25.51 $26.50 $21.12 $24.28
tenants(e) 10 4 1 3 7
</TABLE>
- -------------
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized base rental income represented by such leases in the year of
expiration plus 1995 tenant payments on account of real estate tax and
operating expense escalations, except leases with CPI increases in lieu
of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-35
<PAGE>
The Cambridge Office Market
As of March 1996, there were approximately 10 million square feet of
office space in the Cambridge Office Market. The entire Cambridge Office
Market had a vacancy rate of 4.4% in March 1996 and the East Cambridge
submarket had a vacancy rate of 4.9% for the same period. Spaulding & Slye
reports Net Absorption of 210,000 square feet in the Cambridge Office Market
in 1995 and 100,000 square feet in 1994. There can be no assurance, however,
that this upward trend will continue.
One Canal Park and Ten Canal Park are located in the East Cambridge
submarket. The average Base Rent rate per square foot and the average annual
Net Effective Rent per square foot for One Canal Park and Ten Canal Park were
$16.81 and $13.00, and $20.36 and $12.85, respectively, as of June 30, 1996.
One Canal Park. One Canal Park is a four-story, 100,300 rentable square
foot office building located in the East Cambridge submarket. Construction
was completed in 1987. The Company owns a 100% fee interest in this Property.
As of June 30, 1996, One Canal Park was 94% leased.
Ten Canal Park. Ten Canal Park is a six-story, 110,000 rentable square
foot office building located in the East Cambridge submarket. Construction
was completed in 1987. The Company owns a 100% fee interest in this Property.
As of June 30, 1996, Ten Canal Park was approximately 88% leased.
The following table sets forth lease expirations (in square feet) for each
of the Company's Properties in the Cambridge Office Market.
<TABLE>
<CAPTION>
Lease Expirations--Cambridge Office Market
------------------------------------------------------------------------
7/1/96
to
Property 12/31/96 1997 1998 1999 2000
- ----------------- ----------------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
One Canal square feet (a) 0 0 3,499 1,411 0
% sq. ft. (b) 0.0% 0.0% 3.5% 1.4% 0.0%
annual rent (c) $0 $0 $122,937 $29,968 $0
psf (d) $0.00 $0.00 $35.13 $21.24 $0.00
tenants (e) 0 0 1 1 0
Ten Canal square feet (a) 12,331 0 0 0 0
% sq. ft. (b) 11.1% 0.0% 0.0% 0.0% 0.0%
annual rent (c) $298,191 $0 $0 $0 $0
psf (d) $24.18 $0.00 $0.00 $0.00 $0.00
tenants (e) 2 0 0 0 0
--------- --------- --------- --------- -----------
TOTAL square feet (a) 12,331 0 3,499 1,411 0
% sq. ft. (b) 5.8% 0.0% 1.7% 0.7% 0.0%
annual rent (c) $298,191 $0 $122,937 $29,968 $0
psf (d) $24.18 $0.00 $35.13 $21.24 $0.00
tenants (e) 2 0 1 1 0
</TABLE>
<TABLE>
<CAPTION>
Lease Expirations--Cambridge Office Market
------------------------------------------------------------------------
2005 and
Property 2001 2002 2003 2004 beyond
- ----------------- ---------------------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
One Canal square feet (a) 87,244 0 0 0 0
% sq. ft. (b) 87.0% 0.0% 0.0% 0.0% 0.0
annual rent (c) $1,842,665 $0 $0 $0 $0
psf (d) $21.12 $0.00 $0.00 $0.00 $0.00
tenants (e) 2 0 0 0 0
Ten Canal square feet (a) 0 84,998 0 0 0
% sq. ft. (b) 0.0% 76.7% 0.0% 0.0% 0.0
annual rent (c) $0 $1,974,504 $0 $0 $0
psf (d) $0.00 $23.23 $0.00 $0.00 $0.00
tenants (e) 0 1 0 0 0
--------- --------- --------- --------- ------
TOTAL square feet (a) 87,244 84,998 0 0 0
% sq. ft. (b) 41.3% 40.3% 0.0% 0.0% 0.0
annual rent (c) $1,842,665 $1,974,504 $0 $0 $0
psf (d) $21.12 $23.23 $0.00 $0.00 $0.00
tenants (e) 2 1 0 0 0
</TABLE>
- -------------
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized base rental income represented by such leases in the year of
expiration plus 1995 tenant payments on account of real estate tax and
operating expense escalations, except leases with CPI increases in lieu
of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-36
<PAGE>
The Suburban Philadelphia Office Market
As of June 1996 there were approximately 35.2 million square feet of
office space in the Suburban Philadelphia Office Market. According to Grubb &
Ellis, the entire Suburban Philadelphia Office Market had a vacancy rate of
12.9% in June 1996.
One, Two, Three and Five Westlakes Drive are located in the Suburban
Philadelphia Office Market. The average Base Rent per square foot and the
average annual Net Effective Rent per square foot for the four Properties
were $20.56 and $15.77, respectively, as of June 30, 1996.
Westlakes Office Park. Each building in the Westlakes Office Park is a
three-story office building. These buildings were constructed between 1988
and 1990. Collectively, these buildings contain an aggregate of approximately
444,000 square feet. As of June 30, 1996, these buildings were approximately
94% leased.
The following table sets forth lease expirations (in square feet) for each
of the Company's Properties in the Suburban Philadelphia Office Market.
<TABLE>
<CAPTION>
Lease Expirations--Suburban Philadelphia Office Market
------------------------------------------------------------------------
Property 1996 1997 1998 1999 2000
- ----------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Westlakes 1 square feet(a) 37,159 20,616 19,329 14,685 13,839
% sq. ft.(b) 27.1% 15.0% 14.1% 10.7% 10.1%
annual rent(c) $814,262 $457,260 $391,845 $226,298 $293,492
psf(d) $21.91 $22.18 $20.27 $15.41 $21.21
tenants(e) 7 4 3 3 3
Westlakes 2 square feet(a) 1,812 6,668 3,258 11,827 35,447
% sq. ft.(b) 1.4% 5.2% 2.5% 9.2% 27.5%
annual rent(c) $20,043 $139,471 $60,022 $249,071 $778,427
psf(d) $11.06 $20.92 $18.42 $21.06 $21.96
tenants(e) 2 1 2 2 2
Westlakes 3 square feet(a) 0 3,680 0 0 109,065
% sq. ft.(b) 0.0% 3.1% 0.0% 0.0% 92.4%
annual rent(c) $0 $90,060 $0 $0 $2,727,600
psf(d) $0.00 $24.47 $0.00 $0.00 $25.01
tenants(e) 0 1 0 0 2
Westlakes 5 square feet(a) 16,542 0 0 27,480 12,928
% sq. ft.(b) 27.6% 0.0% 0.0% 45.8% 21.5%
annual rent(c) $452,698 $0 $0 $667,864 $303,630
psf(d) $27.37 $0.00 $0.00 $24.30 $23.49
tenants(e) 3 0 0 2 2
--------- --------- --------- --------- -----------
TOTAL square feet(a) 55,513 30,964 22,587 53,992 171,279
% sq. ft.(b) 12.5% 7.0% 5.1% 12.2% 38.6%
annual rent(c) $1,287,003 $686,791 $451,866 $1,143,233 $4,103,149
psf(d) $23.18 $22.18 $20.01 $21.17 $23.96
tenants(e) 12 6 5 7 9
</TABLE>
<TABLE>
<CAPTION>
Lease Expirations--Suburban Philadelphia Office Market
------------------------------------------------------------------------
2005 and
Property 2001 2002 2003 2004 beyond
- ----------------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Westlakes 1 square feet(a) 0 14,538 0 0 0
% sq. ft.(b) 0.0% 10.6% 0.0% 0.0% 0.0%
annual rent(c) $0 $312,760 $0 $0 $0
psf(d) $0.00 $21.51 $0.00 $0.00 $0.00
tenants(e) 0 1 0 0 0
Westlakes 2 square feet(a) 0 0 44,236 0 22,413
% sq. ft.(b) 0.0% 0.0% 34.3% 0.0% 17.4%
annual rent(c) $0 $0 $973,192 $0 $411,319
psf(d) $0.00 $0.00 $22.00 $0.00 $18.35
tenants(e) 0 0 2 0 2
Westlakes 3 square feet(a) 0 0 0 0 0
% sq. ft.(b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c) $0 $0 $0 $0 $0
psf(d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants(e) 0 0 0 0 0
Westlakes 5 square feet(a) 0 0 2,746 0 0
% sq. ft.(b) 0.0% 0.0% 4.6% 0.0% 0.0%
annual rent(c) $0 $0 $60,412 $0 $0
psf(d) $0.00 $0.00 $22.00 $0.00 $0.00
tenants(e) 0 0 1 0 0
--------- --------- --------- --------- --------
TOTAL square feet(a) 0 14,538 46,982 0 22,413
% sq. ft.(b) 0.0% 3.3% 10.6% 0.0% 5.0%
annual rent(c) $0 $312,760 $1,033,604 $0 $411,319
psf(d) $0.00 $21.51 $22.00 $0.00 $18.35
tenants(e) 0 1 3 0 2
</TABLE>
- -------------
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized base rental income represented by such leases in the year of
expiration plus 1995 tenant payments on account of real estate tax and
operating expense escalations, except leases with CPI increases in lieu
of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-37
<PAGE>
The Arlington County, Virginia Market
As of March 1996 there were approximately 27.7 million square feet of
office space in the Arlington County, Virginia Market. According to Grubb &
Ellis, the Arlington County, Virginia Market had a vacancy rate of 4.1% as of
March 1996. The Crystal City submarket, with approximately 11.3 million
square feet, had a vacancy rate of 0.5% in March 1996.
The Polk and Taylor Buildings. The Polk and Taylor Buildings are comprised
of two twelve-story office buildings in the Crystal City submarket, commonly
known as the James K. Polk Building (National Center 2) and the Zachary
Taylor Building (National Center 3), numbered 2521 Jefferson Davis Highway
and 2531 Jefferson Davis Highway, respectively. The Polk and Taylor Buildings
together contain approximately 890,000 rentable square feet with an
underground parking garage for 1,182 vehicles. Both buildings were
constructed in 1970.
The Company holds a 10% general and limited partner interest in the
partnership that owns the Polk and Taylor Buildings. Crystal Holdings
Corporation, an affiliate of the President and Fellows of Harvard College,
owns the remaining 90% general and limited partner interest in such
partnership.
As of December 31, 1995, the Polk and Taylor Buildings were 100% leased, with
substantially all of the space leased to the United States of America, acting by
and through its General Services Administration, for occupancy by the United
States Navy under leases which will expire in the summer of 1997 and provide for
annual Base Rent in 1996 of approximately $18 million. This lease contains an
option to renew for a one year period with an increase in Net Effective Rent of
$2.35 per square foot.
Suburban Chicago Office Market and Washington, D.C. Office Market
As of June 1996, there were approximately 59.8 million square feet of
office space in the Suburban Chicago Office Market, approximately 20.4
million of which is located in the East-West Corridor submarket and
approximately 12.5 million of which is located in the North Suburban
submarket. The AT&T Plaza building is located in East-West Corridor submarket
and the Tri-State International property is located in the North Suburban
submarket. According to Grubb & Ellis the Suburban Chicago Office Market had
an overall vacancy rate of 12.0% as of June 1996, while the East-West
Corridor submarket and North Suburban submarket had vacancy rates of 10.3%
(9.2% for Class A office properties) and 12.6% (8.2% for Class A office
properties), respectively, for the same period. Grubb & Ellis also reports
that the East-West Corridor and North submarkets experienced Net Absorption
of 730,000 square feet and 340,000 square feet, respectively, for the first
six months of 1996.
As of March 1996, there were approximately 95.9 million square feet of
office space in the Washington, D.C. Office Market, approximately 28 million
of which is located in the East End submarket. 1333 H Street is located in
the East End submarket. According to Grubb & Ellis, the Washington, D.C.
Office Market had an overall vacancy rate of 10.2% as of March 1996, while
the East End submarket experienced a vacancy rate of 10.1% for the same
period.
The following chart sets forth average annual Base Rents per square foot,
average annual Net Effective Rents per square foot, and the occupancy rate
expressed as a percentage, as of June 30, 1996, for each property in the New
York Life Portfolio.
<TABLE>
<CAPTION>
Rentable Average
Area Average Annual Net
(in square Annual Effective Occupancy
Property feet) Base Rent Rent Rate
- ------------------------ ----------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
AT&T Plaza 225,318 $20.78 $14.21 100%
Tri-State International 548,000 23.84 16.79 68%
1333 H Street 238,694 26.90 20.77 92%
--------- ---------- ---------- -------
Total Weighted Average 1,012,012 $23.82 $17.16 81%
</TABLE>
S-38
<PAGE>
The following table sets forth lease expirations (in square feet) for each
of the properties in the New York Life Portfolio.
<TABLE>
<CAPTION>
Lease Expirations--New York Life Portfolio
------------------------------------------------------------------------
(7/1-12/31)
Property 1996 1997 1998 1999 2000
- ----------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
AT&T Plaza square feet(a) 5,144 10,313 39,731 29,539 79,574
% sq. ft.(b) 2.3% 4.6% 17.6% 13.1% 35.3%
annual rent(c) $119,789 $200,629 $829,624 $669,598 $1,758,066
psf(d) $23.29 $19.45 $20.88 $22.67 $22.09
tenants(e) 2 4 6 2 4
Tri-State
International square feet(a) 18,569 120,039 17,436 62,585 18,237
% sq. ft.(b) 3.4% 21.9% 3.2% 11.4% 3.3%
annual rent(c) $523,337 $2,884,193 $361,023 $1,640,939 $364,440
psf(d) $28.18 $24.03 $20.71 $26.22 $19.98
tenants(e) 2 9 2 6 3
--------- --------- --------- --------- -----------
1333 H Street square feet(a) 0 2,223 4,045 2,097 8,835
% sq. ft.(b) 0.0% 0.9% 1.7% 1.2% 3.7%
annual rent(c) $0 $109,788 $110,867 $43,954 $247,390
psf(d) $0.00 $49.39 $27.41 $15.12 $28.00
tenants(e) 0 1 3 1 3
TOTAL square feet(a) 23,713 132,575 61,212 95,031 106,646
% sq. ft.(b) 2.3% 13.1% 6.0% 9.4% 10.5%
annual rent(c) $643,126 $3,194,609 $1,301,514 $2,354,491 $2,369,895
psf(d) $27.12 $24.10 $21.26 $24.78 $22.22
tenants(e) 4 14 11 9 10
</TABLE>
<TABLE>
<CAPTION>
Lease Expirations--New York Life Portfolio
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2005 and
Property 2001 2002 2003 2004 beyond
- ----------------- --------- --------- --------- --------- -----------
AT&T Plaza square feet(a) 0 12,288 38,249 8,165 2,315
% sq. ft.(b) 0.0% 5.5% 17.0% 3.6% 1.0%
annual rent(c) $0 $282,240 $992,014 $197,014 $0
psf(d) $0.00 $22.97 $25.94 $24.13 $0.00
tenants(e) 0 2 3 1 1
Tri-State
International square feet(a) 107,254 0 0 27,491 0
% sq. ft.(b) 19.6% 0.0% 0.0% 5.0% 0.0%
annual rent(c) $2,831,535 $0 $0 $721,639 $0
psf(d) $26.40 $0.00 $0.00 $26.25 $0.00
tenants(e) 10 0 0 1 0
--------- --------- --------- --------- -----------
1333 H Street square feet(a) 2,945 57,041 14,708 0 127,248
% sq. ft.(b) 1.2% 23.9% 6.2% 0.0% 53.3%
annual rent(c) $77,836 $1,758,913 $461,684 $0 $4,370,422
psf(d) $26.43 $30.84 $31.39 $0.00 $34.35
tenants(e) 1 1 1 0 2
TOTAL square feet(a) 110,199 69,329 52,957 35,656 129,563
% sq. ft.(b) 10.9% 6.9% 5.2% 3.5% 12.8%
annual rent(c) $2,909,371 $2,041,152 $1,453,698 $918,652 $4,370,422
psf(d) $26.40 $29.44 $27.45 $25.76 $33.73
tenants(e) 11 3 4 2 3
</TABLE>
- -------------
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1995 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-39
<PAGE>
The Fairfax County, Virginia Market
As of March 1996, there were approximately 62.4 million square feet of
office space in the Fairfax County, Virginia Market, 20.7 million square feet
of which are located in the Tysons Corner submarket and 13 million square
feet of which are located in the Reston/Herndon submarket. According to Grubb
& Ellis, the Fairfax County, Virginia Market had an overall vacancy rate of
8.0% as of March 1996 and the submarkets of Tysons Corner and Reston/ Herndon
had vacancy rates of 8.2% and 5.3%, respectively, for the same period. Grubb
& Ellis also reports that Tysons Corner and Reston/Herndon submarkets
experienced Net Absorption of 600,000 square feet and 400,000 square feet,
respectively, for the three months ended March 31, 1996. The Fairfax County
Portfolio is located in the Fairfax County, Virginia Market.
The following chart sets forth average annual Base Rents per square foot,
average annual Net Effective Rents per square foot, and the occupancy rate,
expressed as a percentage, as of June 30, 1996, for each property in the
Fairfax County Portfolio.
<TABLE>
<CAPTION>
Rentable Average
Area Average Annual Net
(in square Annual Effective Occupancy
Property feet) Base Rent Rent Rate
- ------------------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
John Marshall I 261,364 $17.30 $15.73 100%
E.J. Randolph 164,677 20.74 15.82 80%
Northridge I 124,319 25.49 19.34 100%
---------- ---------- ---------- -------
Total Weighted Average 550,360 $19.60 $16.57 94%
</TABLE>
The following table sets forth lease expirations (in square feet) for each
of the properties in the Fairfax County Portfolio.
<TABLE>
<CAPTION>
Lease Expirations--Fairfax County Portfolio
------------------------------------------------------------------------
(7/1-12/31)
Property 1996 1997 1998 1999 2000
- ----------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Marshall I square feet(a) 0 0 0 0 0
% sq. ft.(b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c) $0 $0 $0 $0 $0
psf(d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants(e) 0 0 0 0 0
E.J. Randolph square feet(a) 10,976 808 0 1,801 8,091
% sq. ft.(b) 6.7% 0.5% 0.0% 1.1% 4.9%
annual rent(c) $275,171 $16,537 $0 $65,606 $217,035
psf(d) $25.07 $20.47 $0.00 36.43 $26.82
tenants(e) 2 1 0 3 2
Northridge I square feet(a) 0 0 0 0 124,319
% sq. ft.(b) 0.0% 0.0% 0.0% 0.0% 100.0%
annual rent(c) $0 $0 $0 $0 $3,346,079
psf(d) $0.00 $0.00 $0.00 $0.00 $26.92
tenants(e) 0 0 0 0 1
--------- --------- --------- --------- -----------
TOTAL square feet(a) 10,976 808 0 1,801 132,410
% sq. ft.(b) 2.0% 0.1% 0.0% 0.3% 24.1%
annual rent(c) $275,171 $16,537 $0 $65,606 $3,563,113
psf(d) $25.07 $20.47 $0.00 $36.43 $26.91
tenants(e) 2 1 0 3 3
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2001 2002 2003 2004 beyond
- ----------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Marshall I square feet(a) 2,788 0 0 0 258,576
% sq. ft.(b) 1.1% 0.0% 0.0% 0.0% 98.9%
annual rent(c) $92,639 $0 $0 $0 $6,653,160
psf(d) $33.23 $0.00 $0.00 $0.00 $25.73
tenants(e) 1 0 0 0 1
E.J. Randolph square feet(a) 20,714 8,014 0 82,149 0
% sq. ft.(b) 12.6% 4.9% 0.0% 49.9% 0.0%
annual rent(c) $544,555 $179,113 $0 $1,965,238 $0
psf(d) $26.29 $22.35 $0.00 $23.92 $0.00
tenants(e) 2 1 0 4 0
Northridge I square feet(a) 0 0 0 0 0
% sq. ft.(b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c) $0 $0 $0 $0 $0
psf(d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants(e) 0 0 0 0 0
--------- --------- --------- --------- -----------
TOTAL square feet(a) 23,502 8,014 0 82,149 258,576
% sq. ft.(b) 4.3% 1.5% 0.0% 14.9% 47.0%
annual rent(c) $637,194 $179,113 $0 $1,965,238 $6,653,160
psf(d) $27.11 $22.35 $0.00 $23.92 $25.73
tenants(e) 3 1 0 4 1
</TABLE>
- -------------
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1995 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-40
<PAGE>
Historical Non-Incremental Revenue-Generating Capital Expenditures and Tenant
Improvement Costs
The following tables set forth annual and per square foot recurring,
non-incremental revenue-generating capital expenditures and non-incremental
revenue-generating tenant improvement costs to retain revenues attributable
to existing leased space (including leasing commissions and rent concessions)
for the period 1991 through 1995. The tables provide total capital
expenditures and non-incremental revenue-generating tenant improvement costs
for the Properties, without regard to the Company's proportionate ownership
interest in each Property, and the Company's proportionate share of total
capital expenditures and tenant improvement costs based on its ownership
interest in the Properties with respect to which such expenditures and costs
were incurred. All capital expenditures presented for the Properties are
non-incremental revenue-generating. As noted, revenue-generating tenant
improvement costs are excluded from the table set forth immediately below.
Such costs generally relate to vacant space, unless a prior tenant was paying
rent while such space was being improved for a future tenant, in which case
the costs to improve such space were considered non- incremental
revenue-generating and, therefore, included in the table. The historical
capital expenditures and tenant improvement costs set forth below are not
necessarily indicative of future recurring, non-incremental
revenue-generating capital expenditures or non-incremental revenue-generating
tenant improvement costs.
Properties (excluding Perimeter Center Portfolio)
<TABLE>
<CAPTION>
1991-1995
1991(a) 1992(a) 1993(a) 1994(a) 1995(a) Average(a)
------- ------- ------- ------- ------- ----------
(dollars in thousands, except per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditures
Properties Total
Annual $ 917 $ 702 $ 226 $ 1,001(b) $ 3,309(b)(c) $ 1,231
Per square foot $ 0.31 $ 0.23 $ 0.08 $ 0.24 $ 0.50 $ 0.27
Company's Proportionate Share
Annual $ 730 $ 551 $ 193 $ 609(b) $ 2,174(b)(c) $ 851
Per square foot $ 0.35 $ 0.26 $ 0.09 $ 0.15 $ 0.44 $ 0.26
Non-incremental
Revenue-Generating
Tenant Improvement Costs
Properties Total
Annual $4,229 $2,650 $2,077 $ 4,289(c) $ 7,369 $ 4,123
Per square foot improved $13.09 $ 7.38 $10.43 $ 10.24 $ 10.13 $ 10.25
Per square foot total $ 1.41 $ 0.88 $ 0.69 $ 1.02 $ 1.10 $ 1.02
Company's Proportionate Share
Annual $2,737 $2,167 $1,806 $ 3,280(c) $ 7,040 $ 3,406
Per square foot improved $13.14 $ 8.86 $11.78 $ 9.71 $ 10.60 $ 10.82
Per square foot total $ 1.30 $ 1.03 $ 0.86 $ 1.15 $ 1.43 $ 1.15
</TABLE>
- -------------
(a) Information regarding the Properties acquired in the Initial Offering is
presented for all periods. Information regarding Properties acquired
subsequent to the Initial Offering is presented from the date of
acquisition.
(b) Excludes cost incurred in connection with the redevelopment of the Center
Plaza Property of $1.4 million and $0.86 million, or $1.1 million and
$0.86 million for the Company's proportionate share of such expenditures
for the years 1994 and 1995, respectively. A portion of these capital
expenditures are incremental revenue-generating expenditures.
(c) Includes $1.8 million and $0.2 million tenant improvement costs for the
years 1994 and 1995, respectively, for renewal of an existing 20-year
tenant, for an additional 15 years, representing approximately 25% of the
175 Federal Street Property. This amount was funded from escrow reserves
established by Beacon prior to the Initial Offering. The Company's
proportionate share is $1.1 million and $0.2 million. Also includes $0.9
million and $1.0 million of tenant improvement costs for the years 1994
and 1995, respectively, for renewal of an existing 10-year tenant, for an
additional 11 years, occupying 100% of the 80 William Street Property.
This amount was funded from reserves set up at the closing of the Initial
Offering.
Perimeter Center Portfolio
<TABLE>
<CAPTION>
1991-1995
1991 1992 1993 1994 1995 Average
----- ----- ----- ----- ----- ---------
(dollars in thousands, except per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditures
Annual $ 928 $1,729 $1,499 $1,419 $ 969 $1,309
Per square foot $ 0.28 $ 0.52 $ 0.45 $ 0.43 $ 0.29 $ 0.39
Non-incremental
Revenue-Generating
Tenant Improvement Costs(a)
Annual $4,431 $1,093 $1,854 $1,943 $2,736 $2,411
Per square foot improved $ 9.72 $ 8.58 $ 7.05 $ 6.27 $ 5.86 $ 7.50
Per square foot total $ 1.34 $ 0.33 $ 0.56 $ 0.59 $ 0.83 $ 0.73
</TABLE>
- -------------
(a) Costs are presented in the year in which the related lease was signed.
S-41
<PAGE>
Historical Incremental Revenue-Generating Tenant Improvement Costs
The following tables set forth annual and per square foot incremental
revenue-generating tenant improvement costs (including lease commissions and
rent concessions) for the period 1991 through 1995. The Company does not have
any historical incremental revenue-generating capital expenditures. The
foregoing tables provide all remaining tenant improvement costs not included
in the tables set forth above for the Properties (excluding Crosby Corporate
Center redevelopment costs), without regard to the Company's proportionate
ownership interest in each Property, and provide the Company's proportionate
share of such tenant improvement costs based on its ownership interest in the
Properties with respect to which such costs were incurred. Incremental
revenue-generating tenant improvement costs generally relate to vacant
non-revenue generating space. The historical incremental revenue- generating
tenant improvement costs set forth below are not necessarily indicative of
future incremental revenue- generating tenant improvement costs.
Properties (excluding Perimeter Center Portfolio)
<TABLE>
<CAPTION>
1991-1995
1991(a) 1992(a) 1993(a) 1994(a) 1995(a) Average(a)
------- ------- ------- ------- ------- ----------
(dollars in thousands, except per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Incremental Revenue-Generating
Tenant Improvement Costs
Properties Total
Annual $1,693 $3,055(b) $7,438(c) $6,141 $8,027 $5,271
Per square foot improved $13.90 $22.55 $29.90 $26.92 $29.56 $24.57
Per square foot total $ 0.56 $ 1.02 $ 2.47 $ 1.47 $ 1.20 $ 1.34
Company's Proportionate
Share
Annual $1,176 $2,134 $5,221 $4,051 $7,283 $3,973
Per square foot improved $14.70 $24.55 $31.26 $25.77 $30.24 $25.30
Per square foot total $ 0.56 $ 1.01 $ 2.47 $ 1.43 $ 1.48 $ 1.39
</TABLE>
- -------------
(a) Information regarding the Properties acquired in the Initial Offering is
presented for all periods. Information regarding Properties acquired
subsequent to the Initial Offering is presented from the date of
acquisition.
(b) This amount includes approximately $1.75 million of tenant improvement
costs relating to a six-year leasehold of approximately 5% of the total
rentable square footage of the Center Plaza Property.
(c) This amount includes approximately $4.34 million of tenant improvement
costs relating to a 10-year leasehold and an 11-year leasehold
aggregating 19% of the total rentable square footage of the Center Plaza
Property.
Perimeter Center Portfolio
<TABLE>
<CAPTION>
1991-1995
1991 1992 1993 1994 1995 Average
----- ----- ----- ----- ----- ---------
(dollars in thousands, except per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Incremental
Revenue-Generating
Tenant Improvement Costs(a)
Annual $4,126 $1,256 $2,247 $2,085 $2,600 $2,463
Per square foot improved $18.31 $17.02 $15.12 $16.54 $16.09 $16.62
Per square foot total $ 1.25 $ 0.38 $ 0.68 $ 0.63 $ 0.79 $ 0.75
</TABLE>
- -------------
(a) Costs are presented in the year in which the related lease was signed.
S-42
<PAGE>
Mortgage Indebtedness and Credit Facility
The Company's total outstanding consolidated mortgage debt and its
proportionate share of the total outstanding unconsolidated mortgage debt on
the Properties (excluding Rowes Wharf) will be approximately $496.4 million
at August 1, 1996. Additionally, at August 1, 1996, the Company will have no
outstanding balance under the Credit Facility. The following table sets forth
certain information regarding the consolidated and unconsolidated mortgage
debt obligations of the Company, including mortgage obligations relating to
specific Properties, and the Credit Facility. All of the mortgage debt is
nonrecourse to the Company. The following table also sets forth certain
information regarding the mortgage debt to be assumed by the Company in
connection with the Pending Acquisitions.
<TABLE>
<CAPTION>
Principal Company's
Amount Portion
(as of of Interest Maturity Prepayment
Property 8/1/96) Principal Rate Date Provisions
- ------------------------------------- ------- -------- ------ ---------- ------------------------
(dollar amounts in millions)
<S> <C> <C> <C> <C> <C>
Mortgage Indebtedness:
Consolidated Properties
150 Federal Street $ 57.0 $ 57.0 6.67% 11/1/98(a) Prepayable subject to
conditions(b)
175 Federal Street 13.1 13.1 8.00% 7/1/98(c) Prepayable subject to
conditions(d)
Wellesley Office Park 55.0 55.0 7.23% 2/1/03(e) Prepayable subject to
conditions(f)
Center Plaza 60.0 60.0 7.23% 3/1/03(g) Prepayable subject to
conditions(h)
Perimeter Center Portfolio 218.0 218.0 7.08% 4/1/06(i) Prepayable subject to
----- ------ conditions(j)
Total Consolidated Properties $403.1 $403.1
----- ------
Unconsolidated Properties with
respect to which the Company is a
general partner or shareholder
One Post Office Square(k) $ 68.2 $ 34.1 7.00% 8/1/00(l) Prepayable subject to
conditions(m)
One Post Office Square(k) 25.5 12.8 8.25% 8/1/00(n) Prepayable subject to
conditions(o)
75-101 Federal Street(p) 90.0 46.4 7.61% 10/1/02(q) Prepayable subject to
----- ------ conditions(r)
Total Unconsolidated Properties 183.7 93.3
----- ------
Total Mortgage Debt $586.8 $496.4
===== ======
Credit Facility:
Various Properties(s) $ 0(t) $ 0(t) (u) 6/27/99 Prepayable at any
===== ====== time without penalty
Pending Acquisitions:
John Marshall I $21.1 $21.1 8.38% 12/1/08 Prepayable subject to
conditions(v)
E.J. Randolph 18.0(t) 18.0(t) (u) 6/27/99 Prepayable subject to
conditions(w)
Northridge I 16.3 16.3 7.28% 12/14/96(x) Prepayable subject to
----- ------ conditions(y)
$ 55.4 $55.4
</TABLE>
- -------------
(a) The estimated balance due on maturity is approximately $56.1 million.
(b) Prepayable subject to a yield maintenance payment based on the rate of
United States Treasury Notes having a term closest to the date of
maturity but in no event less than 1% of the then balance. Prepayable at
par from and after April 1, 1998.
(c) The estimated balance due on maturity is approximately $12.5 million.
S-43
<PAGE>
(d) Prepayable subject to a yield maintenance payment based on the rate of
United States Treasury Notes having a term closest to the date of
maturity plus 1.50%, but in no event less than 1% of the then balance.
Prepayable at par from and after March 1, 1998.
(e) The estimated balance due on maturity is approximately $51.9 million.
(f) Prepayable after August 1, 1999 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after
October 1, 2002.
(g) The estimated balance due on maturity is approximately $56.7 million.
(h) Prepayable after September 1, 1999 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after
November 1, 2002.
(i) The estimated balance due on maturity is approximately $183.8 million.
(j) Closed to prepayment during the first two years of the loan, prepayable
in years three through ten subject to a yield maintenance payment based
on the rate of United States Treasury Notes having a term closest to the
date of maturity plus 0.50%, and prepayable at par during the last 90
days of the loan.
(k) The Company owns a 50% general partner interest in the partnership that
owns One Post Office Square. Consequently, the Company's portion of the
debt on the One Post Office Square Property is 50% of the principal
amount.
(l) The Company's share of the estimated balance due on maturity is
approximately $31.9 million.
(m) Prepayable after August 31, 1997 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after
February 1, 2000.
(n) The Company's share of the estimated balance due on maturity is
approximately $11.2 million.
(o) Prepayable subject to a yield maintenance payment based on the rate of
United States Treasury Notes having a term closest to the date of
maturity plus 1.50%. Prepayable at par from and after May 1, 2000.
(p) The Company owns an approximate 51.6% equity interest in the private REIT
that owns 75-101 Federal Street. Consequently, the Company's portion of
the debt on the 75-101 Federal Street property is approximately 51.6% of
the principal amount.
(q) The Company's share of the estimated balance due on maturity is
approximately $44.0 million.
(r) Prepayable after January 1, 1999 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after June
1, 2002.
(s) The Credit Facility is secured by cross-collateralized mortgages and
assignments of rents on the Crosby Corporate Center, 150 Federal Street,
One Canal Park, Westwood Business Centre, Westlakes Office Park, 2 Oliver
Street, Ten Canal Park and Russia Wharf.
(t) Following the consummation of the Pending Acquisitions, it is currently
anticipated that the Company will have $18 million outstanding under its
Credit Facility (drawn in connection with the payment of assumed mortgage
debt on the E.J. Randolph building) and may also have, to the extent
necessary for the consummation of the acquisition of the New York Life
Portfolio, additional amounts outstanding.
(u) 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) 1/2% above the overnight federal funds effective
rate or (ii) the Eurodollar rate plus 175 basis points.
(v) Mandatory annual prepayments and additional prepayments subject to
prepayment payments of 5% of the amount prepaid before November 1, 1999,
decreasing by 0.5% each subsequent year through September 1, 2008, after
which no premium is due upon prepayment.
S-44
<PAGE>
(w) Prepayable subject to a prepayment payment of 3.5% of the amount prepaid
through July 9, 1997, decreasing by 0.5% each subsequent year.
(x) The estimated balance due on maturity is approximately $16.1 million.
(y) Prepayable subject to a payment equal to the greater of 1% of the
outstanding principal balance or a yield maintenance amount based on U.S.
Treasury notes having a term closest to the date of maturity.
The Company owns a 45% indirect limited partner interest in Rowes Wharf
Associates, the partnership that owns the hotel space and leases the office
and retail space at Rowes Wharf. The Company (together with an affiliate) and
Equitable each own one-half of the mortgage debt on the Rowes Wharf Property.
The Company has no obligation to fund principal or interest payments with
respect to the unconsolidated debt of Rowes Wharf Associates or to fund
operating or other deficits with respect to Rowes Wharf Associates. As of
August 1, 1996, the aggregate outstanding principal amount of Rowes Wharf
Associates' debt, which consists of two tiers of debt, equals approximately
$201.2 million. Rowes Wharf Associates' first-tier debt is equal to
approximately $126.0 million, currently bears interest at a rate of 8.71% per
annum and matures in April 1999.
Pursuant to its terms, the first-tier debt may be prepaid at any time and
principal repayment may be extended for up to three years, provided that a
1.1 interest coverage is achieved at that time. Rowes Wharf Associates
currently maintains a significant cash account to fund any shortfalls on this
debt. Rowes Wharf Associates' second-tier debt is equal to approximately
$75.2 million, currently bears interest at the lesser of 6.0% or 50.0% of
cash flow after interest payments have been made in respect of Rowes Wharf
Associates' first-tier debt and matures in April 2002. The second- tier debt
may be prepaid in full with 50% of the net proceeds from certain sales or
refinancings of Rowes Wharf Associates' debt, regardless of the amount of
such proceeds, or at maturity based on the appraised value of the Property.
S-45
<PAGE>
USE OF PROCEEDS
The net cash proceeds to the Company from the sale of the Common Stock
offered hereby, after deduction of estimated expenses of the Offering, are
estimated to be approximately $121.6 million (approximately $139.9 million if
the Underwriters' over-allotment option is exercised in full).
The Company intends to apply the net proceeds of the Offering to purchase
the New York Life Portfolio, and/or for general corporate and working capital
purposes. Pending application of the net proceeds, the Company will invest
such portion of the net proceeds in interest-bearing accounts and short-term,
interest-bearing securities.
S-46
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Company's Common Stock began trading on the NYSE on May 20, 1994,
under the symbol "BCN." On July 19, 1996, the reported closing sale price per
share of Common Stock on the NYSE was $25-7/8 and there were approximately
316 holders of record of the Company's Common Stock. The following table sets
forth the quarterly high and low closing sales prices per share of the Common
Stock reported on the NYSE and the distributions paid by the Company with
respect to each such period.
Quarter Ended High Low Distributions
------------- ---- --- -------------
September 30, 1994 $19-1/2 $17-3/4 $ .40
December 31, 1994 $19 $17 $ .40
March 31, 1995 $20 $17-1/2 $ .40
June 30, 1995 $21-1/8 $19-1/4 $ .42
September 30, 1995 $21-3/4 $19-7/8 $ .42
December 31, 1995 $23 $20-1/8 $ .42
March 31, 1996 $26-5/8 $22-5/8 $ .42
June 30, 1996 $26-1/4 $24-1/2 $.4625(a)
September 30, 1996 (through July 19, 1996) $26-1/4 $25-1/4
- -------------
(a) To be paid August 23, 1996 to stockholders of record as of August 14,
1996.
In July 1996, the Company announced an increase in its quarterly
distribution of 10.1%, increasing the quarterly distribution on its Common
Stock from $.42 per share to $.4625 per share, which on an annualized basis,
is equal to an annual distribution of $1.85 per share of Common Stock. The
higher distribution rate commenced with the Company's distribution with
respect to the second quarter of 1996, to be paid on August 23, 1996, to
stockholders of record as of August 14, 1996. Accordingly, it is currently
expected that purchasers of Common Stock in the Offering who hold Common
Stock as of the record date will receive the second quarter 1996 distribution
in respect of the shares of Common Stock offered hereby. As a result, if
purchasers of Common Stock in the Offering continue to hold such shares on
the record date for distributions over the next twelve months, such
purchasers will receive four quarterly distribution payments in addition to
the second quarter 1996 distribution.
Future distributions by the Company will be at the discretion of the Board
of Directors and will depend on the Company's financial condition, its
capital requirements, the annual distribution requirements under the REIT
provisions of the United States Code and such other factors as the Board of
Directors deems relevant. There can be no assurance that any such
distributions will be made by the Company.
Distributions by the Company to the extent of its current and accumulated
earnings and profits for Federal income tax purposes generally will be
taxable to stockholders as ordinary dividend income. Distributions in excess
of current and accumulated earnings and profits will be treated as a
non-taxable reduction of the stockholder's basis in its shares of Common
Stock to the extent thereof, and thereafter as taxable gain. Distributions
that are treated as a reduction of the stockholder's basis in its shares of
Common Stock will have the effect of deferring taxation until the sale of the
stockholder's shares.
The Company has adopted a dividend reinvestment program under which
holders of Common Stock may elect automatically to reinvest dividends in
additional Common Stock. The Company may, from time to time, repurchase
Common Stock in the open market for purposes of fulfilling its obligations
under this dividend reinvestment program or may elect to issue additional
Common Stock.
Historical Total Return
An investor who purchased Common Stock in the Company's Initial Offering
on May 24, 1994, who reinvested all dividends paid in additional shares of
Common Stock, and who held such shares through the close of business on July
19, 1996 would have had a cumulative pretax total return of 76.4% or an
annual compounded pretax return of 30.0% based upon the closing price of the
Common Stock on July 19, 1996. Past performance, however, is not necessarily
indicative of the results that will be obtained in the future from an
investment in the Common Stock, and no assurance can be given that an
investor in this Offering will achieve similar results.
S-47
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on an
historical basis as of June 30, 1996, and for the Company as adjusted to give
effect to the issuance of the shares of Common Stock in the Offering and the
application of the net proceeds from the Offering as if the Offering and the
acquisitions of the Fairfax County Portfolio and the New York Life Portfolio
had occurred on June 30, 1996. See "Use of Proceeds." The information set
forth in the table should be read in conjunction with the summary and
selected financial information presented elsewhere in this Prospectus
Supplement and the Consolidated Financial Statements and notes thereto
incorporated by reference into the accompanying Prospectus.
Historical As Adjusted(1)
---------- --------------
(in thousands)
DEBT:
Credit Facility $ 0 $ 18,016
Mortgage Notes Payable 403,218 440,592
------- -----------
Total Debt 403,218 458,608
------- -----------
MINORITY INTEREST: 49,051 70,661
------- -----------
STOCKHOLDERS EQUITY:
Common Stock, $.01 par value; 175,000,000
shares authorized; 27,368,263
(historical) shares issued and
outstanding (32,368,263 shares on
an as adjusted basis) (1) 274 324
Additional paid-in capital 443,165 564,728
Cumulative net income 36,259 36,259
Cumulative dividends (52,768) (52,768)
------- -----------
Total stockholder's equity 426,930 548,543
------- -----------
Total capitalization $879,199 $1,077,812
======= ===========
- -------------
(1) Does not include Common Stock reserved for issuance upon (i) possible
redemption of 5,107,831 Units (including 839,223 Units to be issued in
connection with the acquisition of the Fairfax County Portfolio) and (ii)
exercise of 1,072,110 options granted pursuant to the 1994 Stock Option
Plan. A total of 3,129,310 shares of Common Stock are reserved for
issuance under the 1994 Stock Option Plan and dividend reinvestment plan.
S-48
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial and operating
information on an as adjusted basis for the Company and on a combined
historical basis for the Company and the Predecessor. The consolidated
results of operations of the Company for the six months ended June 30, 1996
and 1995 have been derived from unaudited financial statements. The
consolidated results of operations of the Company for the year ended December
31, 1995 and for the period May 26, 1994 to December 31, 1994, the combined
results of operations of the Predecessor for the period January 1, 1994 to
May 25, 1994 and the combined historical operating information of the
Predecessor for the years ended December 31, 1993, 1992 and 1991 have been
derived from the financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report with respect to the years 1995, 1994
and 1993 is incorporated by reference into the accompanying Prospectus.
The unaudited selected pro forma financial and operating information is
presented as if the Offering, the acquisition of the Properties acquired
since January 1, 1995, the acquisition of the Pending Acquisitions and
related assumption of debt had occurred as of January 1, 1995, for the
condensed consolidated statement of operations. The pro forma financial
information is not necessarily indicative of what the results of operations
of the Company would have been as of and for the periods indicated, nor does
it purport to represent the Company's future financial position and results
of operations.
S-49
<PAGE>
<TABLE>
<CAPTION>
Company
--------------------------------------------------------------------------------------------
Pro Forma
Six Months Six Months Six Months For the Year For the Period
Ended Ended Ended Pro Ended May 26, 1994 to
June 30, 1996 June 30, 1996 June 30, 1995 Forma 1995 December 31, December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995 1994
------------- ------------- ------------- ---------- ------------ ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 81,335 $ 60,051 $ 34,093 $ 159,129 $ 71,050 $ 25,144
Management fees 1,517 1,517 936 2,926 2,203 --
Recoveries from tenants 10,088 6,782 4,813 19,487 9,742 4,488
Mortgage interest income 2,776 2,165 611 5,573 2,546 --
Interest and other income 5,472 4,591 2,472 7,501 5,502 2,301
-------- -------- -------- ----- ------ ---------
Total revenue 101,188 75,106 42,925 194,616 91,043 31,933
-------- -------- -------- ----- ------ ---------
Expenses:
Property expenses 20,138 14,770 8,531 39,511 18,090 7,034
Real estate taxes 9,768 7,831 4,901 17,953 10,217 3,325
General and administrative 8,574 7,362 4,570 13,986 9,755 3,122
Mortgage interest expense 16,805 13,661 7,977 33,315 15,226 4,992
Interest--amortization of financing
costs 1,199 1,184 576 1,490 1,370 617
Depreciation and amortization 17,947 13,346 8,252 34,856 17,428 6,924
-------- -------- -------- ----- ------ ---------
Total expenses 74,431 58,154 34,807 141,110 72,086 26,014
-------- -------- -------- ----- ------ ---------
Income (loss) from operations 26,757 16,952 8,118 53,506 18,957 5,919
-------- -------- -------- ----- ------ ---------
Construction revenue and other
income -- -- -- -- -- --
Construction costs and operating
expenses -- -- -- -- -- --
-------- -------- -------- ----- ------ ---------
Income from construction -- -- -- -- -- --
-------- -------- -------- ----- ------ ---------
Equity (loss) in joint ventures and
corporations (1) 1,582 1,582 1,065 4,560 3,222 1,406
Minority interest in loss of
combined partnerships -- -- -- -- -- --
-------- -------- -------- ----- ------ ---------
Income (loss) before extraordinary
items 28,339 18,534 9,183 58,066 22,179 7,325
Extraordinary items, net of minority
interest -- (3,309) -- -- -- --
Minority interest in Operating
Partnership (3,862) (2,681) (1,951) (7,914) (4,119) (1,670)
-------- -------- -------- ----- ------ ---------
Net income (loss) (2) $ 12,544 $ 7,232 $ 18,060 $ 5,655
====== =========
Net income before extraordinary
item (2) $ 24,476 $ 50,152
======== =====
Net income per share before
extraordinary items .76 $ .64 1.55
Net income per share of Common Stock $ .51 $ .51 $ 1.09 $ 0.48
Cash dividends declared per share of
Common Stock $ -- $ .88 $ .82 -- $ 1.24 $ 0.96
Cash dividends paid per share of
Common Stock $ -- $ .84 $ .80 $ -- $ 1.64 $ 0.56
Weighted average common shares
outstanding 32,368,263 24,682,042 14,085,977 32,368,263 16,525,245 11,816,380
</TABLE>
<TABLE>
<CAPTION>
Predecessor
--------------------------------------------------
For the Period
January 1,
1994 to Years Ended December 31,
May 25, ---------------------------------
1994 1993 1992 1991
-------------- -------- -------- --------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 5,776 $ 14,315 $ 11,406 $ 14,850
Management fees 1,521 3,533 3,331 2,205
Recoveries from tenants 1,040 2,349 1,989 3,986
Mortgage interest income -- -- -- --
Interest and other income 675 2,176 2,003 3,134
-------- -------- -------- -----
Total revenue 9,012 22,373 18,729 24,175
-------- -------- -------- -----
Expenses:
Property expenses 2,086 4,580 4,522 6,390
Real estate taxes 595 1,354 1,204 1,162
General and administrative 1,399 4,357 4,658 4,528
Mortgage interest expense 2,798 7,650 7,203 7,532
Interest--amortization of financing
costs 373 192 138 320
Depreciation and amortization 2,385 5,577 5,505 4,967
-------- -------- -------- -----
Total expenses 9,636 23,710 23,230 24,899
-------- -------- -------- -----
Income (loss) from operations (624) (1,337) (4,501) (724)
-------- -------- -------- -----
Construction revenue and other
income 24,238 72,197 52,256 39,749
Construction costs and operating
expenses 24,136 71,757 52,120 39,679
-------- -------- -------- -----
Income from construction 102 440 136 70
-------- -------- -------- -----
Equity (loss) in joint ventures and
corporations (1) 198 (5,953) (1,544) 84
Minority interest in loss of
combined partnerships 931 1,539 2,656 1,087
-------- -------- -------- -----
Income (loss) before extraordinary
items 607 (5,311) (3,253) 517
Extraordinary items, net of minority
interest 8,898 1,554 -- --
Minority interest in Operating
Partnership -- -- -- --
-------- -------- -------- -----
Net income (loss) (2) $ 9,505 $ (3,757) $ (3,253) $ 517
======== ======== ======== =====
Net income before extraordinary item
(2)
Net income per share before
extraordinary items
Net income per share of Common Stock -- -- -- --
Cash dividends declared per share of
Common Stock -- -- -- --
Cash dividends paid per share of
Common Stock
Weighted average common shares
outstanding -- -- -- --
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
Company
--------------------------------------------------------------------------------------------
Pro Forma
Six Months Six Months Six Months For the Year For the Period
Ended Ended Ended Pro Ended May 26, 1994 to
June 30, 1996 June 30, 1996 June 30, 1995 Forma 1995 December 31, December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995 1994
------------- ------------- ------------- ---------- ------------ ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
INFORMATION:
Real estate before accumulated
depreciation $ 1,051,924 $ 824,924 $ 415,654 $ -- $ 471,142 $ 400,419
Total assets 1,126,450 927,837 433,648 -- 534,797 400,861
Mortgage debt 440,592 403,218 89,641 -- 70,536 90,936
Note Payable, Credit Facility 18,016 -- 98,300 -- 130,500 130,300
Total liabilities 507,246 451,856 220,749 -- 239,013 261,100
Total equity (deficit) 548,543 426,930 174,923 -- 258,822 102,038
- -------------
(1) Including deductions for:
Depreciation and
amortization $ 1,994 $ 1,994 $ 832 $ 3,895 $ 2,306 $ 3,013
Interest--Amortization of
financing costs 448 448 $ 420 $ 896 $ 853 $ 796
(2) Company share of Operating
Partnership 86.4% 85.5% 78.7% 86.4% 81.3% 77.2%
</TABLE>
<TABLE>
<CAPTION>
Predecessor
--------------------------------------------------
For the Period
January 1,
1994 to Years Ended December 31,
May 25, ---------------------------------
1994 1993 1992 1991
-------------- -------- -------- --------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
BALANCE SHEET
INFORMATION:
Real estate before accumulated
depreciation $ 82,198 $ 81,220 $ 78,580 $ 76,489
Total assets 77,470 85,497 93,327 84,978
Mortgage debt 69,240 87,091 86,610 85,189
Note Payable, Credit Facility -- -- -- --
Total liabilities 129,836 143,451 142,015 127,283
Total equity (deficit) (52,366) (57,954) (48,688) (42,305)
- -------------
(1) Including deductions for:
Depreciation and
amortization
Interest--Amortization of
financing costs
(2) Company share of Operating
Partnership
</TABLE>
S-51
<PAGE>
MANAGEMENT
Officers and Directors
The persons who are officers and Directors of the Company and their
respective positions are as follows:
Name Age Position and Offices Held
---- --- -------------------------
Officers:
Alan M. Leventhal 44 President, Chief Executive Officer and
Director
Lionel P. Fortin 53 Senior Vice President and Chief Operating
Officer
Douglas S. Mitchell 54 Senior Vice President--Leasing/Management and
Development
Robert J. Perriello 53 Senior Vice President and Chief Financial
Officer
James M. Becker 54 Senior Vice President--Design & Construction
Donald B. Brooks 54 Senior Vice President and Chief Executive,
Beacon
Properties Southeast
Charles H. Cremens 42 Senior Vice President and Chief Investment
Officer
Carol G. Judson 44 Senior Vice President, Corporate Development
Nancy J. Broderick 39 Vice President and Treasurer
Steven D. Fessler 36 Vice President, Asset Management
Claude B. Hoopes 46 Vice President, Leasing
Henry Irwig 52 Vice President, Commercial Properties
G. Douglas Lanois 35 Controller
Erin R. O'Boyle 36 Vice President, Acquisitions
Randy J. Parker 38 Vice President, Investor Relations
James J. Whalen 33 Vice President, Information Systems
Directors:
Edwin N. Sidman 53 Chairman of the Board and Director
Norman B. Leventhal 78 Director
Graham O. Harrison 71 Director
William F. McCall, Jr. 60 Director
Steven Shulman 54 Director
Scott M. Sperling 37 Director
The following are biographical summaries of the experience of the officers
and Directors of the Company:
Mr. Alan Leventhal serves as President, Chief Executive Officer and a
Director of the Company. Mr. Leventhal joined Beacon in 1976 after receiving
a degree in economics from Northwestern University in 1974 and a Master of
Business Administration from the Amos Tuck School of Business Administration
at Dartmouth College in 1976. Mr. Leventhal is a trustee of the Beth Israel
Corporation, trustee of Boston University, trustee of the New England
Aquarium Corporation and a member of the Visiting Committee of the College of
Arts and Sciences at Northwestern University. He is also a member of the
Board of Overseers of WGBH and the Museum of Science. Mr. Leventhal is the
son of Norman B. Leventhal and the brother-in-law of Edwin N. Sidman.
Mr. Fortin serves as Senior Vice President and Chief Operating Officer of
the Company. From May 1994 through February 1995, Mr. Fortin served as Chief
Financial Officer of the Company. Before joining Beacon in 1973, Mr. Fortin
was an Audit Supervisor with Laventhol & Horwath. Mr. Fortin graduated from
Bentley College in 1968 and is a member of the American Institute of
Certified Public Accountants and the Massachusetts Society of Certified
Public Accountants.
Mr. Mitchell serves as the Senior Vice President-Leasing/Management and
Development of the Company and as President of the Management Company. In
these capacities, Mr. Mitchell is responsible for the overall leasing
activities, property management and development activity of the Company. He
joined Beacon in 1961. He graduated from the Wentworth Institute in 1962 and
is a member of the Greater Boston Real Estate Board. Mr. Mitchell is also a
licensed real estate broker in Massachusetts and New York.
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Mr. Perriello serves as Senior Vice President and Chief Financial Officer of
the Company. He joined Beacon in 1970. During his career at Beacon, Mr.
Perriello has been responsible for many aspects of commercial development,
including the debt and equity financing of Beacon's Properties. Prior to joining
Beacon, he was a consulting engineer with Frederick R. Harris, Inc. in New York
City and served as an officer in the U.S. Army Corps of Engineers. Mr. Perriello
holds a Bachelor's degree in Civil Engineering from Rensselaer Polytechnic
Institute and a Master's of Business Administration from Harvard Business
School. His professional affiliations include membership in the Urban Land
Institute.
Mr. Becker serves as Senior Vice President-Design & Construction of the
Company. He joined Beacon in 1980. He is also President of Beacon
Construction Company. At the Company he is responsible for design,
construction management and general construction operations. Mr. Becker
received both a Bachelor's and a Master's degree from Cornell University and
a Doctorate in structural engineering from the University of California,
Berkeley. He is a registered professional engineer in Massachusetts,
President of the Associated General Contractors of Massachusetts and Chairman
of the Engineering Center Educational Trust.
Mr. Brooks serves as Senior Vice President of the Company and Chief
Executive, Beacon Properties Southeast. He joined the Company in June 1996.
Prior to joining the Company, Mr. Brooks was a private investor, consultant
and real estate advisor in the Atlanta area. He was President and Chief
Operating Officer of The Landmarks Group in Atlanta from 1974 to 1986,
responsible for the development of over 3 million square feet of office space
in 30 buildings. Mr. Brooks holds a law degree and Bachelor degree in
Accounting from Duke University.
Mr. Cremens serves as the Senior Vice President and Chief Investment
Officer of the Company. He joined the Company in February 1996. Prior to
joining the Company, Mr. Cremens served as President/Real Estate Investments
with Aetna Life & Casualty Company and as Managing Director/Senior Officer
Restructured Real Estate/OREO Departments at Bank of Boston. At the Company,
Mr. Cremens is responsible for establishing and implementing a long-term
acquisition and portfolio strategy for the Company. Mr. Cremens holds a
Bachelor's degree from Williams College.
Ms. Judson serves as the Senior Vice President, Corporate Development of
the Company. In this capacity, Ms. Judson is responsible for the Company's
corporate development, human resources and administration. Before joining
Beacon in 1980, Ms. Judson was Managing Director of the Brook House, a luxury
apartment complex in Brookline, Massachusetts. Ms. Judson received her
Bachelor of Science degree in mathematics and psychology from Curry College.
She is a member of the Northeast Human Resources Association and the American
Management Association.
Ms. Broderick serves as Vice President and Treasurer of the Company. In
this capacity, Ms. Broderick is responsible for all financial operations of
the Company including administration of the Credit Facility. Ms. Broderick
joined Beacon in 1983. Ms. Broderick holds a Bachelor of Science degree in
Accounting from Stonehill College and a Master of Science degree in Taxation
from Bentley College. She is a certified public accountant and a member of
the American Institute of Certified Public Accountants and the Massachusetts
Society of Public Accountants.
Mr. Fessler serves as Vice President, Asset Management of the Company. In
this capacity, Mr. Fessler has responsibility for the asset management of the
Company's property portfolio. Mr. Fessler previously served the Company as
Senior Development Manager and Vice President, Development. Prior to joining
the Company, Mr. Fessler served as a Senior Investment Manager with Copley
Real Estate Advisors. Mr. Fessler holds Bachelor's and Master's degrees from
Stanford University.
Mr. Hoopes serves as Vice President, Leasing of the Company. In this
capacity, Mr. Hoopes has responsibility for the overall leasing strategy and
leasing performance of the Company's portfolio, as well as overseeing the
leasing of the three million square feet of space managed and leased for
third party institutional clients. Mr. Hoopes was previously a senior officer
of The Landmarks Group, a major Atlanta developer, where he was responsible
for six million square feet of leasing including an office park adjacent to
the Perimeter Center Portfolio. Mr. Hoopes is a graduate of Princeton
University.
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Mr. Irwig serves as Vice President, Commercial Properties of the Company. In
this capacity, Mr. Irwig is responsible for the management of the Company's
property portfolio and integrating third-party and acquisition properties into
the Company's portfolio. Mr. Irwig joined Beacon in 1985 and since that time has
held various positions in other divisions of the Company relating to the
assessment, repositioning, design, construction and management of commercial and
institutional buildings. Mr. Irwig received his Bachelor of Architecture degree
and his Ph.D. from the University of Witwatersrand.
Mr. Lanois serves as Controller of the Company. In this capacity, Mr.
Lanois is responsible for financial reporting, budgeting and forecasting
financial performance of the Company. Before joining Beacon in 1992, Mr.
Lanois was the Manager of the Real Estate Advisory Service Group with
Laventhal & Horwath and an Asset Manager with Aldrich, Eastman & Waltch. Mr.
Lanois received his B.B.A. in Accounting and a B.S. in Hotel, Restaurant and
Travel Administration from the University of Massachusetts, Amherst. He is a
certified public accountant and serves on committees for the Greater Boston
Real Estate Board and the Real Estate Finance Association.
Ms. O'Boyle serves as Vice President, Acquisitions of the Company. In this
capacity, Ms. O'Boyle manages the search and negotiations for ownership
opportunities. Ms. O'Boyle previously served the Company as Vice President,
Asset Management. Ms. O'Boyle received her Bachelor of Science in structural
engineering from the University of Delaware and her Master of Science in real
estate development from the MIT Center for Real Estate Development. Ms.
O'Boyle is the past chair of the Alumni Association for the MIT Center for
Real Estate and is current President of the New England Women in Real Estate
(NEWIRE).
Mr. Parker serves as Vice President, Investor Relations of the Company. He
joined the Company in July 1996. Prior to joining the Company, Mr. Parker was
Senior Vice President and Portfolio Manager of Aldrich, Eastman & Waltch in
Boston, responsible for the management of over $400 million of investment
portfolios on behalf of institutional clients. Mr. Parker holds a Master of
Business Administration from The Wharton School, University of Pennsylvania
and a Bachelor of Architecture degree from the University of Kentucky.
Mr. Whalen serves as Vice President, Information Systems of the Company.
In this capacity, Mr. Whalen is responsible for overseeing the maintenance
and support of corporate information systems, including an extensive internal
computer network allowing efficient communications with the Properties. Mr.
Whalen is a graduate of the University of Notre Dame and the recipient of the
New York City Urban Fellowship.
Mr. Sidman serves as the Chairman of the Board and a Director of the
Company. He is currently the Managing Partner of The Beacon Companies. Prior
to joining Beacon in 1971, Mr. Sidman practiced law with the predecessor to
the firm of Rubin and Rudman in Boston. Mr. Sidman graduated from the
University of Michigan and holds a law degree from Harvard University. Mr.
Sidman's professional affiliations include service as Senior Vice Chairman of
the National Realty Committee. Mr. Sidman's civic commitment includes being a
past Chairman of the Combined Jewish Philanthropies of Greater Boston, a
member of the Board of Trustees of Duke University, a member of the Board of
Directors and Executive Committee for the United Way of Massachusetts Bay, a
member of the Executive Committee of the Artery Business Committee and a
member of the Board of The Friends of Post Office Square. Mr. Sidman is the
son-in-law of Norman B. Leventhal and the brother-in-law of Alan M.
Leventhal.
Mr. Norman Leventhal serves as a Director of the Company. He is the
co-founder and Chairman of Beacon. Mr. Leventhal is a graduate of the Boston
Latin School and the Massachusetts Institute of Technology. At the
Massachusetts Institute of Technology, he is a Life Member Emeritus of the
Corporation and has served MIT in many capacities including as a Member of
the Executive Committee, Member of the Investment Committee, and Chairman of
the Corporation Visiting Committee for The School of Architecture and
Planning. Mr. Leventhal is also an Honorary Life Member of the Board of
Overseers of The Museum of Fine Arts and has been a Member of the Board of
Trustees of The Museum of Science. Among other civic contributions, Mr.
Leventhal has served as Chairman of The Artery Business Committee, is
Chairman of The Friends of Post Office Square and is Chairman of the Trust
for City Hall Plaza. Mr. Leventhal also serves as Director of Doubletree
Corporation and Picower Institute for Medical Research. Mr. Leventhal is the
father of Alan M. Leventhal and the father-in-law of Edwin N. Sidman.
Mr. Harrison serves as a Director of the Company. Mr. Harrison has served
as Vice President and Chief Investment Officer of Howard Hughes Medical
Institute ("Hughes") in Bethesda, Maryland from 1985 to 1994. Mr. Harrison
retired as President of the U.S. Steel Pension Fund in June 1985, after
thirty years of service, to take
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on the portfolio startup at Hughes. He also served as a Director of General
Re Corporation in Stamford, Connecticut. Mr. Harrison serves as a Trustee of
Property Capital Trust in Boston, a member of the Investment Advisory
Committee of the New York State Common Retirement Fund, Warburg Pincus
Investors, European Strategic Investors (London), Emerging World Investors
L.P. and Desai Capital Management; Vice-Chairman of the Advisory Committee of
Butler Capital, Chairman of the Swarthmore College Investment Committee, and
member of Advisory Council--The Trust for Public Land. Mr. Harrison is a
graduate of Swarthmore College and of Harvard Business School, and is a
retired U.S. Air Force officer.
Mr. McCall serves as a Director of the Company. Mr. McCall has served as
Chairman of McCall & Almy, Inc., Boston, Massachusetts, since 1989. Mr.
McCall was a founder of Leggat McCall & Werner in 1965 and served as Chairman
and Chief Executive Officer of Leggat McCall/Grubb & Ellis through 1989. Mr.
McCall is currently a director of Citizens Bank of Massachusetts, Copley
Properties, Inc., Jobs for Massachusetts and the Massachusetts Business
Development Corporation. Mr. McCall is also a trustee of the Urban Land
Institute and a member of the American Society of Real Estate Counselors. Mr.
McCall is a graduate of The College of the Holy Cross.
Mr. Shulman serves as a Director of the Company. Since 1984, Mr. Shulman
has been active in investment banking through his wholly owned company The
Hampton Group. Currently, Mr. Shulman is a major shareholder and director in
a diversified group of companies including Wilshire Restaurant Group, Inc.,
where he previously served as Chairman; Ermanco Incorporated; Holiday Farms
Limited; and Corinthian Directory, Inc. Mr. Shulman also previously served as
a director of Robertson-Ceco Corporation and Pullman, both NYSE companies.
Mr. Shulman is a graduate of Stevens Institute of Technology where he
received a Bachelor's degree in Mechanical Engineering and a Master's degree
in Industrial Management. Mr. Shulman serves as Vice Chairman on the Board of
Stevens Institute of Technology.
Mr. Sperling serves as a Director of the Company. Mr. Sperling joined
Thomas H. Lee Co., a Boston-based investment firm, as a general partner in
September 1994. Previously, Mr. Sperling served as Managing Partner and Vice
Chairman of the Aeneas Group, Inc./Harvard Management Company from 1984
through 1994. Mr. Sperling has been the founder and/or lead investor of
numerous companies and has led the acquisition or turnaround of companies in
a wide variety of industries. He is currently a director of Livent,
PriCellular Corporation, Softkey International, KAI, Inc. and several private
firms. He received a Master's of Business Administration from the Harvard
Business School and received his undergraduate degree from Purdue University.
Mr. Sperling is a member of the Corporation of the Brigham and Women's
Hospital and a director of the American Technion Society.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions in the terms agreement and related
underwriting agreement (collectively, the "Underwriting Agreement") among the
Company and each of the underwriters named below (the "Underwriters"), the
Company has agreed to sell to each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Dean Witter
Reynolds Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Lehman
Brothers Inc., PaineWebber Incorporated and Raymond James & Associates, Inc.
are acting as representatives (the "Representatives"), and each of the
Underwriters has severally agreed to purchase from the Company the respective
number of shares of Common Stock set forth opposite their respective names.
Number
of
Underwriters Shares
------------ ------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc.
PaineWebber Incorporated
Raymond James & Associates, Inc.
-------
Total 5,000,000
=======
In the Underwriting Agreement, the several Underwriters have agreed,
respectively, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase all of the shares of Common Stock being
sold pursuant to the Underwriting Agreement if any of such shares of Common
Stock are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased.
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to 750,000
additional shares of Common Stock to cover over-allotments, if any, at the
initial public offering price, less the underwriting discount set forth on
the cover page of this Prospectus Supplement. If the Underwriters exercise
this option, each Underwriter will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the foregoing
table bears to the shares of Common Stock initially offered hereby.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. Insofar as indemnification of the Underwriters for
liabilities arising under the Securities Act may be permitted pursuant to the
foregoing provisions, the Company has been informed that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
The Company and the Operating Partnership have agreed that for a period of
90 days from the date of this Prospectus Supplement they will not, subject to
certain exceptions, without the prior written consent of Merrill Lynch,
directly or indirectly, sell, offer or contract to sell, grant any option for
the sale of, or otherwise dispose of any shares of Common Stock or Units or
any security convertible into or exercisable for shares of Common Stock or
Units.
The Common Stock is listed on the NYSE under the symbol "BCN."
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<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts, a limited liability partnership
including professional corporations, as corporate, securities, real estate
and tax counsel to the Company, and by Goulston & Storrs, Boston,
Massachusetts, as real estate counsel to the Company. Gilbert G. Menna, whose
professional corporation is a partner of Goodwin, Procter & Hoar LLP, is an
assistant secretary of the Company and owns 1,000 shares of the Company's
Common Stock. Certain legal matters related to the Offering will be passed
upon for the Underwriters by Brown & Wood LLP, New York, New York. Brown &
Wood LLP will rely on Goodwin, Procter & Hoar LLP, as to certain matters of
Maryland law.
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<PAGE>
PROSPECTUS
Beacon Properties Corporation
$500,000,000
Common Stock
-------------
Beacon Properties Corporation ("Beacon" or the "Company") may offer from
time to time shares of its common stock, $.01 par value per share ("Common
Stock"), with an aggregate public offering price of up to $500,000,000 in
amounts, at prices and on terms to be determined at the time of offering. The
Common Stock may be offered in amounts, at prices and on terms to be set
forth in one or more supplements to this Prospectus (each a "Prospectus
Supplement").
The specific terms of the Common Stock for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include any initial public offering price. In addition, such specific terms
may include limitations on direct or beneficial ownership and restrictions on
transfer of the Common Stock, in each case as may be consistent with the
Company's Articles of Incorporation, as then in effect, or otherwise
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes. See "Restrictions on
Transfers of Capital Stock."
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Common Stock
covered by such Prospectus Supplement.
The Common Stock may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company or to
or through underwriters or dealers. If any agents or underwriters are
involved in the sale of any of the Common Stock, their names, and any
applicable purchase price, fee, commission or discount arrangement between or
among them, will be set forth, or will be calculable from the information set
forth, in an accompanying Prospectus Supplement. See "Plan of Distribution."
No Common Stock may be sold without delivery of a Prospectus Supplement
describing the method and terms of the offering of such Common Stock.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-------------
The date of this Prospectus is March 29, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Common Stock. This Prospectus, which
constitutes part of the Registration Statement, omits certain of the
information contained in the Registration Statement and the exhibits thereto
on file with the Commission pursuant to the Securities Act and the rules and
regulations of the Commission thereunder. The Registration Statement,
including exhibits thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and copies may be obtained at the prescribed rates from
the Public Reference Section of the Commission at its principal office in
Washington, D.C. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
prescribed rates. In addition, the Common Stock is listed on the New York
Stock Exchange (the "NYSE"), and such materials can be inspected and copied
at the NYSE, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1995, filed with the Commission pursuant to the Exchange Act.
2. The Company's Current Report on Form 8-K, dated February 20, 1996,
filed with the Commission pursuant to the Exchange Act, including all
amendments thereto.
3. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission pursuant to the
Exchange Act, including all amendments and reports updating such description.
All other documents filed with the Commission by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering of the Common
Stock are to be incorporated herein by reference and such documents shall be
deemed to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without charge,
upon written or oral request, a copy of any of the documents incorporated by
reference herein, except for the exhibits to such documents. Written requests
should be mailed to Kathleen M. McCarthy, Beacon Properties Corporation, 50
Rowes Wharf, Boston, Massachusetts 02110. Telephone requests may be directed
to (617) 330-1400.
2
<PAGE>
THE COMPANY
General
Beacon Properties Corporation along with its subsidiaries (the "Company")
owns a portfolio of Class A office properties and other commercial properties
located primarily in the greater Boston and Atlanta metropolitan areas.
Beacon, a Maryland corporation, is a self-administered and self-managed real
estate investment trust. Beacon's Common Stock is listed on the New York
Stock Exchange under the symbol "BCN."
The Company's business is conducted principally through subsidiaries which
consist of an operating partnership, three subsidiary corporations and two
subsidiary limited partnerships. Beacon Properties, L.P. is a Delaware
limited partnership (the "Operating Partnership"), of which the Company is
the sole general partner. The Company conducts third-party management
operations through Beacon Property Management Corporation, a Delaware
corporation (the "Management Company"), conducts its construction operations
through Beacon Construction Company, Inc., a Delaware corporation (the
"Construction Company"), and conducts third-party tenant space design
services through Beacon Design Corporation, a Massachusetts corporation (the
"Design Company"). The Company conducts management operations for
wholly-owned properties through Beacon Property Management, L.P., a Delaware
limited partnership (the "Management Partnership") and conducts tenant space
design services for wholly-owned properties through Beacon Design, L.P., a
Delaware limited partnership (the "Design Partnership").
The Company's executive offices are located at 50 Rowes Wharf in Boston,
Massachusetts 02110 and its telephone number at that location is (617)
330-1400.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Common Stock for
general corporate purposes, including repayment of indebtedness, investment
in new properties and new developments and maintenance of currently owned
properties.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Articles of Incorporation (the "Articles of Incorporation") and
Bylaws (the "Bylaws"), each as amended, as in effect.
General
Under the Articles of Incorporation, the Company has authority to issue
100 million shares of Common Stock. Under Maryland law, stockholders
generally are not responsible for the corporation's debts or obligations. At
March 20, 1996, the Company had outstanding 27,272,481 shares of Common
Stock.
Terms
All shares of Common Stock offered hereby have been duly authorized, and
are fully paid and non-assessable. Subject to the preferential rights of any
other shares or series of stock and to the provisions of the Company's
Articles of Incorporation regarding excess stock, $.01 par value per share
("Excess Stock"), holders of shares of Common Stock will be entitled to
receive dividends on shares of Common Stock if, as and when authorized and
declared by the Board of Directors of the Company out of assets legally
available therefor and to share ratably in the assets of the Company legally
available for distribution to its stockholders in the event of its
liquidation, dissolution or winding-up after payment of, or adequate
provision for, all known debts and liabilities of the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, each outstanding share of Common Stock entitles the
holder to one vote on all matters submitted to a vote of stockholders,
including the election of Directors and, except as otherwise required by law
or except as provided with respect to any other class or series of stock, the
holders of Common Stock will possess the exclusive voting power. There is no
cumulative voting in the election of Directors, which means that the holders
of a majority of the outstanding shares of Common Stock can elect all of the
Directors then standing for election, and the holders of the remaining shares
of Common Stock will not be able to elect any Directors.
3
<PAGE>
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
information.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the Maryland General Corporation Law (the "MGCL"), a
corporation generally cannot dissolve, amend its Articles of Incorporation,
merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes to be cast on
the matter) is set forth in the corporation's Articles of Incorporation. The
Company's Articles of Incorporation do not provide for a lesser percentage in
such situations.
Restrictions on Ownership
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital
Stock."
Transfer Agent
The transfer agent and registrar for the Common Stock is Boston EquiServe.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
Restrictions on Transfers
In order for the Company to qualify as a REIT under the Code, among other
things, not more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (defined in the
Code to include certain entities) during the last half of a taxable year
(other than the first year) (the "Five or Fewer Requirement"), and such
shares of capital stock must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months (other than the first
year) or during a proportionate part of a shorter taxable year. See "Federal
Income Tax Considerations." In order to protect the Company against the risk
of losing its status as a REIT on account of a concentration of ownership
among its stockholders, the Articles of Incorporation, subject to certain
exceptions, provide that no single holder may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 6.0% (the
"Ownership Limit") of the aggregate value of the Company's shares of Common
Stock. Pursuant to the Code, Common Stock held by certain types of entities,
such as pension trusts qualifying under Section 401(a) of the Code, United
States investment companies registered under the Investment Company Act,
partnerships, trusts and corporations, will be attributed to the beneficial
owners of such entities for purposes of the Five or Fewer Requirement (i.e.,
the beneficial owners of such entities will be counted as holders). The
Company's Articles of Incorporation limits such entities to holding no more
than 9.9% of the aggregate value of the Company's shares of capital stock
(the "Look-Through Ownership Limit"). Any transfer of shares of capital stock
or of any security convertible into shares of capital stock that would create
a direct or indirect ownership of shares of capital stock in excess of the
Ownership Limit or the Look-Through Ownership Limit or that would result in
the disqualification of the Company as a REIT, including any transfer that
results in the shares of capital stock being owned by fewer than 100 persons
or results in the Company being "closely held" within the meaning of Section
856(h) of the Code, shall be null and void, and the intended transferee will
acquire no rights to the shares of capital stock. The foregoing restrictions
on transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to
attempt to qualify, or to continue to qualify, as a REIT. The Board of
Directors may, in its sole discretion, waive the Ownership Limit and the
Look-Through Ownership Limit if evidence satisfactory to the Board of
Directors and the Company's tax counsel is presented
4
<PAGE>
that the changes in ownership will not then or in the future jeopardize the
Company's REIT status and the Board of Directors otherwise decides that such
action is in the best interest of the Company.
Shares of capital stock owned, or deemed to be owned, or transferred to a
stockholder in excess of the Ownership Limit or the Look-Through Ownership
Limit will automatically be converted into shares of Excess Stock that will
be transferred, by operation of law, to the Company as trustee of a trust for
the exclusive benefit of the transferees to whom such shares of capital stock
may be ultimately transferred without violating the Ownership Limit or the
Look-Through Ownership Limit. While the Excess Stock is held in trust, it
will not be entitled to vote, it will not be considered for purposes of any
stockholder vote or the determination of a quorum for such vote, and, except
upon liquidation, it will not be entitled to participate in dividends or
other distributions. Any distribution paid to a proposed transferee of Excess
Stock prior to the discovery by the Company that capital stock has been
transferred in violation of the provisions of the Company's Articles of
Incorporation shall be repaid to the Company upon demand. The Excess Stock is
not treasury stock, but rather constitutes a separate class of issued and
outstanding stock of the Company. The original transferee stockholder may, at
any time the Excess Stock is held by the Company in trust, transfer the
interest in the trust representing the Excess Stock to any person whose
ownership of the shares of capital stock exchanged for such Excess Stock
would be permitted under the Ownership Limit or the Look- Through Ownership
Limit, at a price not in excess of (i) the price paid by the original
transferee-stockholder for the shares of capital stock that were exchanged
into Excess Stock, or (ii) if the original transferee-stockholder did not
give value for such shares (e.g., the stock was received through a gift,
devise or other transaction), the average closing price for the class of
shares from which such shares of Excess Stock were converted for the ten days
immediately preceding such sale or gift. Immediately upon the transfer to the
permitted transferee, the Excess Stock will automatically be converted back
into shares of capital stock of the class from which it was converted. If the
foregoing transfer restrictions are determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the intended
transferee of any shares of Excess Stock may be deemed, at the option of the
Company, to have acted as an agent on behalf of the Company in acquiring the
Excess Stock and to hold the Excess Stock on behalf of the Company.
In addition, the Company will have the right, for a period of 90 days
during the time any shares of Excess Stock are held by the Company in trust,
to purchase all or any portion of the Excess Stock from the original
transferee-stockholder at the lesser of (i) the price initially paid for such
shares by the original transferee stockholder, or if the original
transferee-stockholder did not give value for such shares (e.g., the shares
were received through a gift, devise or other transaction), the average
closing price for the class of stock from which such shares of Excess Stock
were converted for the ten days immediately preceding such sale or gift, and
(ii) the average closing price for the class of shares from which such shares
of Excess Stock were converted for the ten trading days immediately preceding
the date the Company elects to purchase such shares. The 90-day period begins
on the date notice is received of the violative transfer if the original
transferee-stockholder gives notice to the Company of the transfer or, if no
such notice is given, the date the Board of Directors determines that a
violative transfer has been made.
These restrictions will not preclude settlement of transactions through
the NYSE.
Each stockholder shall upon demand be required to disclose to the Company
in writing any information with respect to the direct, indirect and
constructive ownership of capital stock as the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency
or to determine any such compliance.
The Ownership Limit may have the effect of precluding acquisition of
control of the Company unless the Board of Directors determines that
maintenance of REIT status is no longer in the best interests of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to continue
to operate, in such a manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions
that currently govern the federal income tax treatment of the Company and its
stockholders. For the particular provisions that govern the federal income
tax treatment of the Company and its stockholders, reference is made to
Sections 856 through 860 of the Code and the regulations thereunder. The
following summary is qualified in its entirety by such reference.
5
<PAGE>
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income
that it distributes to its stockholders. If the Company fails to qualify
during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could
have a material adverse effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders.
To the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholder's Common
Stock with respect to which the distribution is paid or, to the extent that
they exceed such basis, will be taxed in the same manner as gain from the
sale of that Common Stock.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Common Stock offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular,
foreign investors should consult their own tax advisors concerning the tax
consequences of an investment in the Company, including the possibility of
United States income tax withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Common Stock through underwriters or dealers,
directly to one or more purchasers, through agents or through a combination
of any such methods of sale.
The distribution of the Common Stock may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices.
In connection with the sale of Common Stock, underwriters or agents may
receive compensation from the Company or from purchasers of Common Stock, for
whom they may act as agents, in the form of discounts, concessions or
commissions. Underwriters may sell Common Stock to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters and/or commissions from the purchasers
for whom they may act as agents. Underwriters, dealers, and agents that
participate in the distribution of Common Stock may be deemed to be
underwriters under the Securities Act, and any discounts or commissions they
receive from the Company and any profit on the resale of Common Stock they
realize may be deemed to be underwriting discounts and commissions under the
Securities Act. Any such underwriter or agent will be identified, and any
such compensation received from the Company will be described, in the
applicable Prospectus Supplement.
Any shares of Common Stock sold pursuant to a Prospectus Supplement will
be listed on the NYSE, subject to official notice of issuance.
Under agreements into which the Company may enter, underwriters, dealers
and agents who participate in the distribution of Common Stock may be
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be tenants of, the Company in the ordinary course of
business.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Common Stock may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is
complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Common Stock offered hereby may not
simultaneously engage in market making activities with respect to the Common
Stock for a period of two business days prior to the commencement of such
distribution.
6
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts, a limited liability partnership
including professional corporations, as corporate, securities and tax counsel
to the Company. Gilbert G. Menna, whose professional corporation is a partner
of Goodwin, Procter & Hoar LLP, is an assistant secretary of the Company and
owns 1,000 shares of the Company's Common Stock.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995 and
1994 and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1995 and for the period
from May 26, 1994 to December 31, 1994, and the combined statements of
operations, owners' equity (deficit) and cash flows for the period January 1,
1994 to May 25, 1994 and the year ended December 31, 1993 of The Beacon
Group, predecessor to the Company, and the related financial statement
schedules of the Company as of December 31, 1995, incorporated herein by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 have been so incorporated in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing. The statement of excess of
revenues over specified operating expenses for Perimeter Center, Atlanta,
Georgia for the year ended December 31, 1995, incorporated by reference
herein from the Company's current report on Form 8-K dated February 20, 1996,
has been so incorporated in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of said firm as
experts in accounting and auditing. The statements of excess of revenues over
specified operating expenses for each of the Fairfax County Portfolio, AT&T
Plaza, Tri-State International and 1333 H Street for the year ended December 31,
1995, incorporated by reference herein from the Company's current report on Form
8-K dated July 23, 1996, have been so incorporated in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
said firm as experts in accounting and auditing.
7
<PAGE>
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No dealer, salesperson or other individual has been authorized to give
any information or make any representations not contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus in
connection with the offer made by this Prospectus Supplement and the
accompanying Prospectus. If given or made, such information or representation
must not be relied upon as having been authorized by the Company or the
Underwriters. This Prospectus Supplement and the accompanying Prospectus do
not constitute an offer to sell, or a solicitation of an offer to buy, the
Shares in any jurisdiction where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus
Supplement and the accompanying Prospectus nor any sale made hereunder shall,
under any circum- stances, create an implication that there has not been any
change in the facts set forth in this Prospectus Supplement and the
accompanying Prospectus or in the affairs of the Company since the date
hereof.
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TABLE OF CONTENTS
Page
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PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary S-3
Risk Factors S-13
The Company S-19
Recent Developments S-19
Properties and Pending Acquisitions S-23
Use of Proceeds S-46
Price Range of Common Stock and
Distribution History S-47
Capitalization S-48
Selected Financial Information S-49
Management S-52
Underwriting S-56
Legal Matters S-57
PROSPECTUS
Available Information 2
Incorporation of Certain Documents by
Reference 2
The Company 3
Use of Proceeds 3
Description of Common Stock 3
Restrictions on Transfers of Capital Stock 4
Federal Income Tax Considerations 5
Plan of Distribution 6
Legal Matters 7
Experts 7
================================================================================
================================================================================
5,000,000 Shares
BEACON PROPERTIES
CORPORATION
Common Stock
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PROSPECTUS SUPPLEMENT
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Merrill Lynch & Co.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers
PaineWebber Incorporated
Raymond James &
Associates, Inc.
, 1996
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