PROSPECTUS SUPPLEMENT
(To Prospectus dated November 14, 1996)
12,000,000 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,
Atlanta, Chicago and Washington, D.C., as well as commercial real estate
development, construction, acquisition, leasing, design and management
businesses. The Company owns or has an interest in 70 income producing
commercial properties encompassing approximately 12.2 million rentable square
feet (each, a "Property" and collectively, the "Properties"). As of September
30, 1996, the Properties were approximately 95% leased with over 900 tenants. In
addition, the Company has entered into contracts to acquire eleven additional
office buildings encompassing approximately 1.6 million additional rentable
square feet located in suburban Boston; Cambridge, Massachusetts; and suburban
Los Angeles, California for aggregate consideration of approximately $270
million (collectively, the "Pending Acquisitions"). If all of the Pending
Acquisitions are consummated, the Company will own or have an interest in 81
income producing commercial properties encompassing approximately 13.8 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 $110 million of equity
of the Company (approximately 7.4% 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 November 14, 1996, the last reported sale price of
the Common Stock on the NYSE was $31-1/8 per share. See "Price Range of
Common Stock and Distribution History."
See "Risk Factors" beginning on page S-14 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 $30.75 $1.61 $29.14
Total (3) $369,000,000 $19,320,000 $349,680,000
(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 $2,820,000 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 1,723,000 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 $421,982,250,
$22,094,030 and $399,888,220, respectively. See "Underwriting."
-------------
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
November 20, 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 November 14, 1996.
<PAGE>
[Omitted graphic material includes map of United States, pie charts showing
geographic distribution of properties and urban/suburban distribution of
properties and location maps for Westwood, California; Arlington, Virginia, and
Cambridge/Boston, Massachusetts. Omitted photographs depict 1300 North 17th
Street, Rosslyn, Virginia; 1616 North Ft. Myer Drive, Rosslyn, Virginia; various
buildings in the New England Executive Park, Burlington, Massachusetts; 245
First Street, Cambridge, Massachusetts and 10960 Wilshire Boulevard,
Los Angeles, California.]
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 and (ii) that the Underwriters' over-allotment option is not exercised.
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-14 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, Atlanta, Chicago and Washington, D.C., 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 12.2 million rentable square feet in the
aggregate and, as of September 30, 1996, were approximately 95% leased with
over 900 tenants.
The Company is currently experiencing a period of rapid growth. Upon
completion of the Pending Acquisitions, the Company will have invested nearly
$1 billion in office properties since January 1996, increasing its interests in
real estate by over 177%. The Company has entered into contracts to acquire the
Pending Acquisitions comprised of eleven office buildings encompassing
approximately 1.6 million additional rentable square feet located in suburban
Boston; Cambridge, Massachusetts; and suburban Los Angeles, California for
aggregate consideration of approximately $270 million. If all of the Pending
Acquisitions are consummated, the Company will own or have an interest in 81
income producing commercial properties encompassing approximately 13.8 million
rentable square feet, approximately 73% of which will be located in suburban
office markets and approximately 27% of which will be located in downtown office
markets, primarily Boston. Assuming the consummation of all of the Pending
Acquisitions, the Company will have a total market capitalization of
approximately $2.1 billion.
Recent Developments
Recent Acquisitions
Rosslyn, Virginia Portfolio. In October 1996, the Company acquired a
portfolio of two office buildings located in Rosslyn, Virginia (the "Rosslyn,
Virginia Portfolio") for aggregate consideration of approximately $99 million
in cash. The Company intends to invest approximately $3.1 million in capital
improvements in the Rosslyn, Virginia Portfolio over the next three years,
including upgrades to parking garages and various interior spaces of the
Property. The Company estimates that the aggregate purchase price for the
Rosslyn, Virginia Portfolio is approximately 70% of replacement cost.
The Rosslyn, Virginia Portfolio consists of (i) a 19-story office building
located at 1300 North 17th Street built in 1980 comprising approximately
373,000 square feet and (ii) a 19-story office building located at 1616 North
Ft. Myer Drive built in 1974 comprising approximately 293,000 square feet.
Major tenants in the Rosslyn, Virginia Portfolio include the American Red
Cross (approximately 75,000 square feet) and Price Waterhouse (approximately
74,000 square feet). The aggregate occupancy rate of the Rosslyn, Virginia
Portfolio as of September 30, 1996 was approximately 97%.
S-3
<PAGE>
The Rosslyn, Virginia Portfolio is located in the Rosslyn-Ballston
Corridor submarket of the Arlington County, Virginia Market. According to
Grubb & Ellis, a national real estate research firm, the Arlington County,
Virginia Market had an overall vacancy rate of 3.6% as of September 30, 1996,
and the Rosslyn-Ballston Corridor submarket had a vacancy rate of 6.0% for
the same period. Grubb & Ellis also reports that the Rosslyn-Ballston
Corridor submarket experienced net increases in square feet of leased space
("Net Absorption") of approximately 145,000 square feet for the first nine
months of 1996. For a description of the Arlington County, Virginia Market,
see "Properties and Pending Acquisitions."
Pending Acquisitions
The Company has entered into contracts to purchase the Pending Acquisitions
for aggregate consideration of approximately $270 million. The Company currently
expects to complete the purchase of the Pending Acquisitions during November
1996. However, the purchase of each of the Pending Acquisitions is subject to
various closing conditions. Accordingly, 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 assurances can be made that the Company
will acquire any of the property opportunities currently under review.
The following describes each of the Pending Acquisitions.
Greater Boston Suburban Office Market
New England Executive Park Portfolio. In November 1996, the Company
entered into a contract to acquire a portfolio of office properties located in
Burlington (suburban Boston), Massachusetts (the "New England Executive Park
Portfolio"). The New England Executive Park Portfolio consists of nine of the
thirteen buildings located in the New England Executive Park; the remaining four
are owner-occupied. The purchase price of the New England Executive Park
Portfolio is payable in two installments, approximately $75 million will be paid
at the closing of the acquisition with an additional $17 million payable on
November 30, 1998, contingent upon meeting conditions regarding occupancy or
rental income levels at the property in 1998. The Company estimates that the
aggregate purchase price for the New England Executive Park Portfolio, including
the $17 million contingent payment, is approximately 60% of replacement cost.
Following the consummation of the acquisition, the Company intends to invest
approximately $1.5 million in capital improvements in the New England Executive
Park Portfolio over the next three years, including roofs and upgrades to
mechanical systems.
The New England Executive Park Portfolio consists of nine office buildings
comprising an aggregate of approximately 817,000 square feet. The buildings
range in size from approximately 43,000 square feet to approximately 218,000
square feet and were developed between 1970 and 1985. Major tenants in the
New England Executive Park Portfolio include the Federal Aviation
Administration (approximately 114,000 square feet), Cayenne (approximately
63,000 square feet), Siemens Business Communications Systems, Inc.
(approximately 51,000 square feet) and Sun Microsystems, Inc. (approximately
44,000 square feet). The aggregate occupancy rate for the New England
Executive Park Portfolio as of September 30, 1996 was approximately 98%.
Based upon recent leasing activity at the New England Executive Park
Portfolio and the Company's knowledge of market conditions, the Company
believes that the existing rental rates at the property are approximately $5
to $6 per square foot below current market rates. Approximately 41% of the
leases in the New England Executive Park Portfolio expire in 1997, and an
additional 18% of the leases at the property expire in 1998. The Company
believes that it could experience an increase in net operating income from
the New England Executive Park Portfolio of up to approximately $2.8 million
if such leases are renewed, or new leases are made, at existing market rates.
No assurances can be given that such rental rates or increases in net
operating income will be achieved. In addition, the Company expects to incur
certain tenant improvement costs and leasing commissions in connection with
the releasing of this space.
S-4
<PAGE>
The New England Executive Park Portfolio is located in the Northwest
submarket of the Greater Boston Suburban Office Market. According to
Spaulding & Slye, the entire Greater Boston Suburban Office Market had an
overall vacancy rate of 5.5% as of September 30, 1996, while the Northwest
submarket had a vacancy rate of 4.3% for the same period. Spaulding & Slye
also reports that the Northwest submarket experienced Net Absorption of
approximately 600,000 square feet for the first nine months of 1996. The
Company believes that the Greater Boston Suburban Office Market possesses
attractive market fundamentals, as evidenced by the creation of approximately
20,000 office-using jobs in the Boston metropolitan area during the twelve
months ended June 30, 1996, according to the U.S. Bureau of Labor Statistics.
For a description of the Greater Boston Suburban Office Market, see
"Properties and Pending Acquisitions."
Cambridge Office Market
245 First Street. In October 1996, the Company entered into a contract to
acquire 245 First Street located in Cambridge, Massachusetts for aggregate
consideration of approximately $45 million in cash, approximately 90% of
replacement cost.
The 245 First Street property contains approximately 263,000 square feet
and consists of (i) Riverview I, a six-story office building renovated in
1986 and comprising approximately 109,000 square feet and (ii) Riverview II,
an 18-story structure built in 1985 comprising approximately 148,000 square
feet. Riverview I and Riverview II are connected by a four-story atrium
comprising approximately 6,000 square feet. Major tenants at 245 First Street
include Open Market, Inc. (approximately 81,000 square feet) and Softkey
International, Inc. (approximately 71,000 square feet). Softkey and certain
other tenants sublease their space from Mellon Bank who leases approximately
148,000 square feet of the property. As of September 30, 1996, the occupancy
rate for 245 First Street was 100%.
The 245 First Street property is located in the East Cambridge submarket
of the Cambridge Office Market. According to Spaulding & Slye, the Cambridge
Office Market had an overall vacancy rate of 1.1% as of September 30, 1996
and experienced Net Absorption of approximately 200,000 square feet for the
first nine months of 1996. The East Cambridge submarket had a vacancy rate of
1.2% as of September 30, 1996. For a description of the Cambridge Office
Market, see "Properties and Pending Acquisitions."
West Los Angeles Office Market
10960 Wilshire Boulevard. In October 1996, the Company entered into a
contract to acquire 10960 Wilshire Boulevard located in Westwood, California.
The 10960 Wilshire Boulevard acquisition will represent the Company's first
strategic acquisition in California. In connection with its continuing
analysis of major office markets and investment opportunities, the Company
has determined that the Los Angeles metropolitan area possesses attractive
market fundamentals, including growth in office-using employment. According
to the U.S. Bureau of Labor Statistics, during the twelve months ended June
30, 1996, approximately 51,000 office-using jobs were created in the Los
Angeles metropolitan area, primarily in the entertainment, export/import,
healthcare, telecommunications and aerospace industries. The Company has
further determined that the Westwood submarket of the West Los Angeles Office
Market is particularly attractive due to limited prospects for future supply
of office space. The Westwood submarket has significant constraints on
development including the limitation of new development to 1.5
floor-area-ratio with five-story height limitations. Additionally, limited
sites are available for development in the Westwood submarket, and the
Company believes that existing rental rates in this market do not currently
justify the cost of new construction.
The Company will acquire 10960 Wilshire Boulevard for aggregate
consideration of approximately $133 million in cash, approximately 80% of
replacement cost. Following the consummation of the acquisition, the Company
intends to invest approximately $1.8 million in capital improvements in the
property.
The 10960 Wilshire Boulevard property was built in 1971 and has undergone
approximately $39 million of capital improvements since 1992. The property
consists of approximately 544,000 square feet in a 23-story office building.
This property is one of the largest buildings in the Westwood submarket of
the West Los Angeles Office Market and given the current constraints on
development described above, this property cannot be duplicated in its
market. The property is located near Interstates 405 and 10 with easy access
to other West Los Angeles markets, downtown, the San Fernando Valley and the
Los Angeles airport. In addition, the property, which meets current
earthquake construction codes, is located in a business district, adjacent to
other Class A office buildings, Westwood Village, a retail area, and the UCLA
campus. Major tenants in 10960 Wilshire Boulevard include Saban
S-5
<PAGE>
Entertainment, Inc. (approximately 111,000 square feet), Philips Interactive
Media of America, Inc. (approximately 95,000 square feet), BBDO Worldwide,
Inc. (approximately 48,000 square feet) and Saltzburg, Ray & Bergman
(approximately 31,000 square feet). The Company currently intends to retain
the existing property manager of 10960 Wilshire Boulevard following the
consummation of the acquisition to facilitate the leasing and management of
the property. As of September 30, 1996, the occupancy rate for 10960 Wilshire
Boulevard was approximately 89%.
According to CB Commercial, the entire West Los Angeles Office Market
(consisting of approximately 37 million square feet) had an overall vacancy
rate of 13.4% as of September 30, 1996, while the Westwood submarket
(consisting of approximately 3.2 million square feet) experienced a vacancy
rate of 10.3% for the same period. CB Commercial also reports that the
Westwood submarket experienced Net Absorption of approximately 70,000 square
feet in the first nine months of 1996. For a description of the West Los
Angeles Office Market, see "Properties and Pending Acquisitions."
Based upon recent leasing activity at 10960 Wilshire Boulevard, the
Company believes that the existing rental rates at this property are
approximately $6 per square foot below current market rates. Approximately 5%
of the leases at the 10960 Wilshire Boulevard property expire in 1997 and
1998, and an additional 35% of the leases at the property expire in 1999
through 2001. In addition, approximately 57,000 square feet at the property
is currently available for occupancy. The Company expects to incur certain
tenant improvement costs and leasing commissions in connection with the
releasing of this space. The Company expects that the net operating income
generated by the property will increase as current leases are renewed, and
new leases are made, at market rates, although no assurances can be made in
this regard.
Capitalization Rates
The following table sets forth the Capitalization Rates for the Rosslyn,
Virginia Portfolio and the Pending Acquisitions. The Capitalization Rates are
calculated by dividing (a) the expected net operating income (including the
effect of any straight-line rents) generated by the property based upon
annualized revenues from signed leases in place at the property as of
September 30, 1996 by (b) the consideration paid for the property, including
any expected capital improvements.
Expected Expected
Property/Pending Net Operating Consideration Capitalization
Acquisition Income Paid Rate
- --------------------------- --------------- --------------- ----------------
(millions) (millions)
Rosslyn, Virginia Portfolio
(1) $11.5 $102.2 11.3%
New England Executive Park
Portfolio (2) 8.7 76.5 11.4%
245 First Street 5.6 45.0 12.4%
10960 Wilshire Boulevard
(3) 11.1 134.8 8.2%
-- ----- ------ ----
Total/Weighted Average $36.9 $358.5 10.3%
===== ====== =====
- ------------
(1) Net operating income includes approximately $600,000 of straight-line
rents and consideration includes approximately $3.1 million of expected
non-recurring capital improvements.
(2) Net operating income includes approximately $150,000 of straight-line
rents and consideration includes approximately $1.5 million of expected
non-recurring capital improvements. The consideration could increase by
$17 million in November 1998, as discussed above. Assuming the Company
achieves the $2.8 million increase in net operating income discussed
above and further assuming the Company becomes obligated to pay the
additional $17 million of consideration in November 1998, the
Capitalization Rate will increase to 12.3%; however, no assurances can be
made in this regard.
(3) Net operating income includes approximately $2.2 million of straight line
rents and consideration includes approximately $1.8 million of expected
non-recurring capital improvements. As discussed above, the Company
expects that net operating income will increase as vacant space is leased
and as current leases are renewed, or new leases made, at market rates,
however, no assurances can be made in this regard.
S-6
<PAGE>
Other Developments
Perimeter Center Portfolio Management. Effective January 1, 1997, the
Company, through Beacon Property Management, L.P., will assume all property
management and leasing responsibility for its approximately 3.3 million
square foot portfolio comprised of 32 buildings located in Perimeter Center
(suburban Atlanta), Georgia (the "Perimeter Center Portfolio"). The Company
acquired the Perimeter Center Portfolio in February 1996. Since the
acquisition, Beacon Property Management, L.P. has managed the Property and
Taylor & Mathis, Inc., the manager of the Property prior to the Company's
acquisition of it, has acted as submanager.
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
September 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 has
approximately 250,000 square feet of building capacity, 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 Northwest submarket of 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 assurances can be made that such increased demand will
occur. For a description of the Greater Boston Suburban Office Market, see
"Properties and Pending Acquisitions."
Expansion of Board of Directors. Effective January 1, 1997, the Board of
Directors of the Company will be expanded from seven to nine members, with
Dale F. Frey and Lionel P. Fortin becoming Directors. Mr. Frey is President
and Chairman of General Electric Investment Corporation and Vice President of
General Electric Company. Mr. Fortin currently serves as Senior Vice
President and Chief Operating Officer of the Company.
S-7
<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 Company's revolving credit
facility (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 Ratio (as
defined herein) upon completion of the Offering and the Pending Acquisitions
of approximately 26.3%;
[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, Atlanta and Washington, D.C. 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 to 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; 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 the Common Stock.
S-8
<PAGE>
The Properties and Pending Acquisitions
Set forth below are summary descriptions of the Properties and the Pending
Acquisitions.
<TABLE>
<CAPTION>
Percent
Rentable Leased
Area in at September
Property/Pending Year Built/ Ownership Property Square 30,
Acquisition (1) Renovated Interest(2) Location Feet 1996
- ------------------ ------------- ------------ ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
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 (3) Boston, MA 649,359 92%
150 Federal Street 1988 100% Boston, MA 530,279 99%
Rowes Wharf 1987 45% Boston, MA 344,326 98%
Russia Wharf 1978-1982 100% Boston, MA 314,596 100%
2 Oliver
Street-147 Milk
Street 1982-1988 100% Boston, MA 271,000 92%
175 Federal Street 1977 100% Boston, MA 203,349 94%
South Station(4) 1988 100% Boston, MA 148,591 100%
---------- -------------
4,037,629 96%
---------- -------------
Greater Boston
Suburban Office
Market:
Wellesley Office
Park(5) 1963-1984 100% Wellesley, MA 622,862 98%
Crosby Corporate
Center (6) 1996 100% Bedford, MA 336,000 88%
Westwood Business
Centre 1985 100% Westwood, MA 160,400 100%
NEW ENGLAND
EXECUTIVE PARK BURLINGTON,
PORTFOLIO (7) 1970-1985 100% MA 817,013 98%
---------- -------------
1,936,275 96%
---------- -------------
Cambridge Office
Market:
One Canal Park 1987 100% Cambridge, MA 100,300 94%
Ten Canal Park 1987 100% Cambridge, MA 110,000 92%
245 FIRST STREET
(8) 1985-1986 100% CAMBRIDGE, MA 263,227 100%
---------- -------------
473,527 97%
---------- -------------
North Central
Atlanta Office
Market:
Perimeter Center
Portfolio(9) 1970-1989 100% Atlanta, GA 3,302,136 98%
---------- -------------
Arlington County,
Virginia Office
Market:
The Polk and
Taylor Buildings 1970 10% Arlington, VA 890,000 100%
1300 North 17th
Street 1980 100% Rosslyn, VA 372,865 97%
1616 North Fort
Myer Drive 1974 100% Rosslyn, VA 292,826 97%
---------- -------------
1,555,691 99%
---------- -------------
Fairfax County,
Virginia Office
Market:
John Marshall I 1981 100% McLean, VA 261,364 100%
E.J. Randolph 1983 100% McLean, VA 164,677 80%
Northridge I Reston/Herndon,
1988 100% VA 124,319 100%
---------- -------------
550,360 94%
---------- -------------
Washington, D.C.
Office Market:
1333 H Street, Washington,
N.W. 1984(10) 100% D.C. 238,694 90%
---------- -------------
Suburban Chicago
Office Market:
AT&T Plaza 1984 100% Oak Brook, IL 225,318 100%
Tri-State Lincolnshire,
International(11) 1986 100% IL 548,000 70%
---------- -------------
773,318 78%
---------- -------------
West Los Angeles
Office Market:
10960 WILSHIRE
BOULEVARD 1971-1992 100% WESTWOOD, CA 543,804 89%
---------- -------------
Suburban
Philadelphia
Office Market:
Westlakes Office
Park(12) 1988-1990 100% Berwyn, PA 443,592 95%
---------- -------------
Total/Weighted
Average
Properties 12,230,982 95%
========== =============
Total/Weighted
Average
Pending
Acquisitions 1,624,044 95%
========== =============
Total/Weighted
Average
Properties
and Pending
Acquisitions 13,855,026 95%
========== =============
</TABLE>
S-9
<PAGE>
- ------------
(1) Pending Acquisitions appear in italics.
(2) 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.
(3) 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.
(4) 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 a 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.
(5) The Wellesley Office Park consists of eight office buildings.
(6) The Crosby Corporate Center consists of six office buildings.
(7) The New England Executive Park Portfolio consists of nine of the
thirteen office buildings located in the New England Executive Park, the
remaining four of which are owner-occupied.
(8) The 245 First Street property consists of two attached structures
connected by a four-story atrium. Riverview I, a six-story office
building, was constructed in 1909 and renovated in 1986. Riverview II,
an eighteen-story structure with parking on the first nine floors, was
constructed in 1985.
(9) The Perimeter Center Portfolio consists of 32 buildings and six ground
leases.
(10) 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.
(11) The Tri-State International complex consists of five office buildings.
(12) The Westlakes Office Park consists of four office buildings.
S-10
<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.
Common Stock Offered 12,000,000
Common Stock Outstanding After the 50,335,683
Offering(1)
Use of Proceeds To purchase the Pending Acquisitions,
to repay amounts drawn under the
Credit Facility to purchase the
Rosslyn, Virginia Portfolio and
certain other Properties and/or for
general corporate and working capital
purposes.
NYSE Symbol "BCN"
- ------------
(1) Includes 5,102,428 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). Excludes 3,764,328 shares of Common Stock reserved for issuance
pursuant to the Company's 1994 Stock Option Plan, 1996 Non-Qualified
Stock Option Plan, and dividend reinvestment plan.
Distributions
The Company regularly pays quarterly distributions on its Common Stock of
$.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 nine months ended September 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 and the acquisition of the Pending Acquisitions 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-11
<PAGE>
<TABLE>
<CAPTION>
Summary Selected Financial Information
Company
--------------------------------------------------------------
Pro Forma
Nine Months Nine Months Nine Months
Ended Ended Ended
September September September For the Year
30, 30, 30, Pro Forma Ended
1996 1996 1995 1995 December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995
------------ ------------ ------------ ----------- ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 156,944 $ 97,308 $ 52,281 $ 196,023 $ 71,050
Management fees 2,248 2,248 1,413 2,926 2,203
Recoveries from tenants 18,249 11,001 7,297 22,896 9,742
Mortgage interest income 4,178 3,567 1,564 5,573 2,546
Interest and other income 11,277 7,585 3,965 10,259 5,502
------------ ------------ ------------ ----------- ------------
Total revenue 192,896 121,709 66,520 237,677 91,043
------------ ------------ ------------ ----------- ------------
Expenses:
Property expenses 41,239 24,607 13,469 52,105 18,090
Real estate taxes 18,242 12,491 7,414 22,493 10,217
General and administrative 14,899 11,963 6,886 16,184 9,755
Mortgage interest expense 24,650 20,739 11,569 33,315 15,226
Interest--amortization of financing
costs 1,633 1,618 947 1,490 1,370
Depreciation and amortization 35,228 21,737 12,607 45,418 17,428
------------ ------------ ------------ ----------- ------------
Total expenses 135,891 93,155 52,892 171,004 72,086
------------ ------------ ------------ ----------- ------------
Income (loss) from operations 57,005 28,554 13,628 66,673 18,957
------------ ------------ ------------ ----------- ------------
Construction revenue and other income -- -- -- -- --
Construction costs and operating
expenses -- -- -- -- --
------------ ------------ ------------ ----------- ------------
Income from construction -- -- -- -- --
------------ ------------ ------------ ----------- ------------
Equity (loss) in joint ventures and
corporations (1) 2,053 2,053 1,735 4,560 3,222
Minority interest in loss of combined
partnerships -- -- -- -- --
------------ ------------ ------------ ----------- ------------
Income (loss) before minority interest
and extraordinary items 59,058 30,607 15,363 71,233 22,179
Minority interest in Operating
Partnerships (2) (5,987) (4,231) (3,043) (7,221) (4,119)
------------ ----------- ------------ ----------- ----------
Income before extraordinary items 53,071 26,376 12,320 64,012 18,060
============ ===========
Extraordinary items, net of minority (3,309) -- --
----------- ----------
Net income $ 23,067 $ 12,320 $ 18,060
=========== =========== ==========
Net income per share before
extraordinary items $ 1.17 $ .99 $ 1.42
Net income per share of Common Stock $ .86 $ .81 $ 1.09
Cash dividends declared per share of
Common Stock $ 1.345 $ 1.24 $ 1.24
Cash dividends paid per share of Common
Stock $ 1.3025 $ 1.22 $ 1.64
Weighted average common shares
outstanding 45,233,255 26,659,577 15,288,937 45,233,255 16,525,245
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor
------------- -------------------------------------------
For the Period For the Period
May 26, 1994 to January 1,
December 31, 1994 to Years Ended December 31,
---------------------------
1994 May 25, 1994 1993 1992 1991
--------------- -------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 25,144 $ 5,776 $14,315 $11,406 $14,850
Management fees -- 1,521 3,533 3,331 2,205
Recoveries from tenants 4,488 1,040 2,349 1,989 3,986
Mortgage interest income -- -- -- -- --
Interest and other income 2,301 675 2,176 2,003 3,134
--------------- -------------- -------- -------- --------
Total revenue 31,933 9,012 22,373 18,729 24,175
--------------- -------------- -------- -------- --------
Expenses:
Property expenses 7,034 2,086 4,580 4,522 6,390
Real estate taxes 3,325 595 1,354 1,204 1,162
General and administrative 3,122 1,399 4,357 4,658 4,528
Mortgage interest expense 4,992 2,798 7,650 7,203 7,532
Interest--amortization of financing
costs 617 373 192 138 320
Depreciation and amortization 6,924 2,385 5,577 5,505 4,967
--------------- -------------- -------- -------- --------
Total expenses 26,014 9,636 23,710 23,230 24,899
--------------- -------------- -------- -------- --------
Income (loss) from operations 5,919 (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) 1,406 198 (5,953) (1,544) 84
Minority interest in loss of combined
partnerships -- 931 1,539 2,656 1,087
--------------- -------------- -------- -------- --------
Income (loss) before minority interest
and extraordinary items 7,325 607 (5,311) (3,253) 517
Minority interest in Operating
Partnerships (2) (1,670) -- -- -- --
--------------- -------------- -------- -------- --------
Income before extraordinary items 5,655 607 (5,311) (3,253) 517
Extraordinary items, net of minority -- 8,898 1,554 -- --
--------------- -------------- -------- -------- --------
Net income $ 5,655 $ 9,505 $(3,757) $(3,253) $ 517
=============== ============== ======== ======== ========
Net income per share before
extraordinary items
Net income per share of Common Stock $ 0.48
Cash dividends declared per share of
Common Stock $ 0.96
Cash dividends paid per share of Common
Stock $ 0.56
Weighted average common shares
outstanding 11,816,380
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
Company
-------------------------------------------------------------
Pro Forma
Nine Months Nine Months Nine Months
Ended Ended Ended
September September September For the Year
30, 30, 30, Pro Forma Ended
1996 1996 1995 1995 December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995
------------ ------------------------ --------- ------------
(dollars in thousands, except per
share amounts)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate before accumulated
depreciation $1,413,463 $1,061,413 $431,817 $ -- $471,142
Total assets 1,490,867 1,144,007 507,629 -- 534,797
Mortgage debt 440,526 440,526 89,489 -- 70,536
Note Payable, Credit Facility 18,000 18,000 87,000 -- 130,500
Total liabilities 510,286 510,286 209,474 -- 239,013
Total equity (deficit) 910,483 563,623 260,679 -- 258,822
- -------------
(1) Including deductions for:
Depreciation and
amortization $ 2,998 $ 2,998 $ 1,314 $3,895 $ 2,306
Interest--Amortization of
financing costs $ 673 $ 673 $ 630 $ 896 $ 853
(2) Company share of Operating
Partnership 89.86% 86.1% 80.1% 89.86% 81.3%
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor
------------- --------------------------------------------
For the Period For the Period
May 26, 1994 to January 1,
December 31, 1994 to Years Ended December 31,
----------------------------
1994 May 25, 1994 1993 1992 1991
--------------- -------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate before accumulated
depreciation $400,419 $ 82,198 $ 81,220 $ 78,580 $ 76,489
Total assets 400,861 77,470 85,497 93,327 84,978
Mortgage debt 90,936 69,240 87,091 86,610 85,189
Note Payable, Credit Facility 130,300 -- -- -- --
Total liabilities 261,100 129,836 143,451 142,015 127,283
Total equity (deficit) 102,038 (52,366) (57,954) (48,688) (42,305)
- -------------
(1) Including deductions for:
Depreciation and
amortization $ 3,013
Interest--Amortization of
financing costs $ 796
(2) Company share of Operating
Partnership 77.2%
</TABLE>
S-13
<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
January 1996, the Company has invested approximately $679 million in office
properties, increasing its interests in real estate by over 128%. Upon the
completion of the Pending Acquisitions, the Company will have invested nearly
$1 billion since January 1996, increasing its interests in real estate by
over 177%. The Company's ability to manage its growth effectively will
require it to apply successfully its experience managing its existing
portfolio to 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 therefore subject to risks normally
associated with debt financing, including the possibility that the Company
will have insufficient cash flow to meet required principal and interest
payments, will be unable to refinance existing indebtedness (which in most
cases will not be fully amortized at maturity), or will be unable to secure
favorable refinancing terms.
Currently, the Company's total consolidated debt is approximately $558.3
million, and its total consolidated debt plus its proportionate share of
total unconsolidated debt (other than Rowes Wharf) is approximately $651.4
million. The Company (together with an affiliate), and Equitable Life
Assurance Society of the United States, on behalf of its Prime Property Fund
("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 consolidated mortgage indebtedness of approximately $440.3 million
has maturities ranging from 1996 through 2008 and is secured by Properties.
In addition, the Company currently has $118.0 million outstanding under its
Credit Facility. The Company's proportionate share of its current total
unconsolidated debt (excluding Rowes Wharf) consists of approximately $46.7
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 26.3%. 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, if
the Company does not have funds sufficient to repay such indebtedness at
maturity, the Company may need 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
S-14
<PAGE>
distributions to stockholders. Further, if a Property or Properties are
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments, the mortgagee could foreclose or otherwise transfer the
Property or Properties, 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 fraud and environmental liabilities. See
"Properties--Mortgage Indebtedness and Credit Facility."
Risk of Variable Interest Rates. Outstanding advances under the Credit
Facility bear interest at a variable rate. The Company may incur additional
variable rate indebtedness in the future. 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. An increase in interest expense could also
cause the Company to be in default under certain Credit Facility covenants.
Limited Geographic Diversification
Upon completion of the Pending Acquisitions, approximately 45% and 27% of
the Company's proportionate share of the rentable square feet of the
Properties will be 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 that 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 of
these Properties.
Joint ownership of Properties may, under certain circumstances, involve
risks not otherwise present in wholly-owned properties. Such risks include
the possibility that the Company's partners or co-investors might become
bankrupt, develop business interests or goals inconsistent with the business
interests or goals of the Company, or take action contrary to the
instructions or 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. Joint ownership also involves the potential risk of
impasse on decisions, such as a sale, because neither the Company nor the
partners or co-investors 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 The Beacon Companies. The Company's organizational documents
do not limit 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 REIT qualification, 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
S-15
<PAGE>
than the first year) (the "Five or Fewer Requirement"). In order to protect
the Company against the risk of losing its REIT status due to a concentration
of ownership among its stockholders, the Articles of Incorporation of the
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 and 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) are 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 Common Stock. The Articles of Incorporation provide that
the Board of Directors can waive these ownership limitations if the Board is
satisfied, based upon the advice of tax counsel, that ownership in excess of
these limits will not jeopardize the Company's status as a REIT, and further,
that such waiver would be in the best interest of the Company. A transfer of
shares to a person who, as a result of the transfer, would violate 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 such 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 that will result
in the 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;
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
S-16
<PAGE>
attractiveness of the properties; the ability of the owner to provide
adequate management, maintenance and insurance; the ability to collect all
rent from tenants on a timely basis; the expense of periodically renovating,
repairing and reletting spaces; and the increase of operating costs
(including real estate taxes and utilities) that 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 could
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. The ground
lease on the South Station Property expires in 2024. The landlord 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 landlord'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-17
<PAGE>
Risk of Investment in Mortgage Debt
The Company may invest in mortgages that are secured by existing office
and commercial properties in circumstances where the Company anticipates that
such investments may result in the Company's 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 or file for bankruptcy, which 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 such 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 affect 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.
New England Executive Park Portfolio. Site assessments at the New England
Executive Park Portfolio have identified the presence of trichloroethylene in
the groundwater at one monitoring well on the northern perimeter of the
property. The groundwater beneath the property flows into an aquifer, which
supplies drinking water to the Town of Burlington. The concentrations that
have been discovered at the property to date are slightly above the standards
established for trichloroethylene in areas contributing to drinking water
supplies and, as a result, must be reported to the Massachusetts Department
of Environmental Protection (the "DEP"). The owner of the property to the
north of the New England Executive Park Portfolio, which is upgradient of the
New England Executive Park Portfolio, has filed with the DEP indicating the
presence of trichloroethylene in the groundwater of such property. Prior to
the Company's acquisition of the property, the present owner of the New
England Executive Park Portfolio will file with the DEP to establish the
property's "Downgradient Property Status" under applicable regulations,
indicating that the property is not a source of the trichloroethylene
contamination that has been identified. The DEP
S-18
<PAGE>
has stated that its policy is not to require downgradient property owners to
perform remediation under these circumstances. In addition, the Town of
Burlington has allocated funds for, and is in the process of constructing, a
groundwater treatment facility at its drinking water supply that draws from
the subject aquifer. The Company has been advised that such treatment
facility has the capacity to treat any contaminants which may be derived from
the groundwater passing beneath the New England Executive Park Portfolio. The
Town's water treatment facility and the present policy of the DEP with
respect to downgradient property owners do not relieve the Company of
potential liability for the presence of the identified trichloroethylene,
although the Company does not believe that any such liability would have a
material adverse effect on the Company.
245 First Street. Site assessments performed at 245 First Street have
identified the presence of oil in one soil sample taken at the property in an
amount that slightly exceeds the concentration that requires reporting to the
DEP. Based on these site assessments, however, an environmental consultant
has advised the Company that applicable regulatory requirements can be
satisfied without the need to perform any remediation at the property. As the
owner of the property, the Company could be held liable for costs associated
with the contamination that has been identified, although the Company does
not believe that such costs would have a material adverse effect on 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 and nonvoting common stock. Of the voting common stock, 99% 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% is held by the Operating Partnership. Of the nonvoting
common stock, 100% 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 represents 99% of the economic interests in
such corporations, the Company is not able to elect directors. 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, and
that are adverse to the interests of the Company or that 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.
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-19
<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, Atlanta, Chicago and
Washington, D.C., 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 12.2 million rentable square feet in the aggregate and, as of
September 30, 1996, were approximately 95% leased with over 900 tenants.
The Company is currently experiencing a period of rapid growth. Upon
completion of the Pending Acquisitions, the Company will have invested nearly
$1 billion in office properties since January 1996, increasing its interests in
real estate by over 177%. The Company has entered into contracts to acquire the
Pending Acquisitions comprised of eleven office buildings encompassing
approximately 1.6 million additional rentable square feet located in suburban
Boston; Cambridge, Massachusetts; and suburban Los Angeles, California for
aggregate consideration of approximately $270 million. If all of the Pending
Acquisitions are consummated, the Company will own or have an interest in 81
income producing commercial properties encompassing approximately 13.8 million
rentable square feet, approximately 73% of which will be located in suburban
office markets and approximately 27% of which will be located in downtown office
markets, primarily in Boston. Assuming the consummation of all of the Pending
Acquisitions, the Company will have a total market capitalization of
approximately $2.1 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
Recent Acquisitions
Rosslyn, Virginia Portfolio. In October 1996, the Company acquired the
Rosslyn, Virginia Portfolio for aggregate consideration of approximately $99
million in cash. The Company intends to invest approximately $3.1 million in
capital improvements in the Rosslyn, Virginia Portfolio over the next three
years, including upgrades to parking garages and various interior spaces of
the Property. The Company estimates that the aggregate purchase price for the
Rosslyn, Virginia Portfolio is approximately 70% of replacement cost.
The Rosslyn, Virginia Portfolio consists of (i) a 19-story office building
located at 1300 North 17th Street built in 1980 comprising approximately
373,000 square feet and (ii) a 19-story office building located at 1616 North
Ft. Myer Drive built in 1974 comprising approximately 293,000 square feet.
Major tenants in the Rosslyn, Virginia Portfolio include the American Red
Cross (approximately 75,000 square feet) and Price Waterhouse (approximately
74,000 square feet). The aggregate occupancy rate of the Rosslyn, Virginia
Portfolio as of September 30, 1996 was approximately 97%.
The Rosslyn, Virginia Portfolio is located in the Rosslyn-Ballston
Corridor submarket of the Arlington County, Virginia Market. According to
Grubb & Ellis, the Arlington County, Virginia Market had an overall vacancy
rate of 3.6% as of September 30, 1996, and the Rosslyn-Ballston Corridor
submarket had a vacancy rate of 6.0% for the same period. Grubb & Ellis also
reports that the Rosslyn-Ballston Corridor submarket experienced Net
Absorption of approximately 145,000 square feet for the first nine months of
1996. For a description of the Arlington County, Virginia Market, see
"Properties and Pending Acquisitions."
Pending Acquisitions
The Company has entered into contracts to purchase the Pending Acquisitions
for aggregate consideration of approximately $270 million. The Company currently
expects to complete the purchase of the Pending Acquisitions during November
1996. However, the purchase of each of the Pending Acquisitions is subject to
various closing conditions. Accordingly, no assurances can be made that the
Company will acquire any or all of the Pending Acquisitions.
S-20
<PAGE>
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 assurances can be made that the Company
will acquire any of the property opportunities currently under review.
The following describes each of the Pending Acquisitions.
Greater Boston Suburban Office Market
New England Executive Park Portfolio. In November 1996, the Company
entered into a contract to acquire a portfolio of office properties located in
Burlington (suburban Boston), Massachusetts. The New England Executive Park
Portfolio consists of nine of the thirteen buildings located in the New England
Executive Park; the remaining four are owner-occupied. The purchase price of the
New England Executive Park Portfolio is payable in two installments,
approximately $75 million will be paid at the closing of the acquisition with an
additional $17 million payable on November 30, 1998, contingent upon meeting
conditions regarding occupancy or rental income levels at the property in 1998.
Assuming the Company becomes obligated to pay the $17 million contingent
payment, such payment shall be made, at the seller's option, in either cash or
shares of Common Stock. The Company has obtained a line of credit under the
Credit Facility to secure this $17 million contingent payment. In addition,
under limited circumstances, the seller has an option to reacquire the property,
if the conditions are not met. The Company estimates that the aggregate purchase
price for the New England Executive Park Portfolio, including the $17 million
contingent payment, is approximately 60% of replacement cost. Following the
consummation of the acquisition, the Company intends to invest approximately
$1.5 million in capital improvements in the New England Executive Park Portfolio
over the next three years, including roofs and upgrades to mechanical systems.
The New England Executive Park Portfolio consists of nine office buildings
comprising an aggregate of approximately 817,000 square feet. The buildings
range in size from approximately 43,000 square feet to approximately 218,000
square feet and were developed between 1970 and 1985. Major tenants in the
New England Executive Park Portfolio include the Federal Aviation
Administration (approximately 114,000 square feet), Cayenne (approximately
63,000 square feet), Siemens Business Communications Systems, Inc.
(approximately 51,000 square feet) and Sun Microsystems, Inc. (approximately
44,000 square feet). The aggregate occupancy rate for the New England
Executive Park Portfolio as of September 30, 1996 was approximately 98%.
Based upon recent leasing activity at the New England Executive Park
Portfolio and the Company's knowledge of market conditions, the Company
believes that the existing rental rates at the property are approximately $5
to $6 per square foot below current market rates. Approximately 41% of the
leases in the New England Executive Park Portfolio expire in 1997, and an
additional 18% of the leases at the property expire in 1998. The Company
believes that it could experience an increase in net operating income from
the New England Executive Park Portfolio of up to approximately $2.8 million
if such leases are renewed, or new leases are made, at existing market rates.
No assurances can be given that such rental rates or increases in net
operating income will be achieved. In addition, the Company expects to incur
certain tenant improvement costs and leasing commissions in connection with
the releasing of this space.
The New England Executive Park Portfolio is located in the Northwest
submarket of the Greater Boston Suburban Office Market. According to
Spaulding & Slye, the entire Greater Boston Suburban Office Market had an
overall vacancy rate of 5.5% as of September 30, 1996, while the Northwest
submarket had a vacancy rate of 4.3% for the same period. Spaulding & Slye
also reports that the Northwest submarket experienced Net Absorption of
approximately 600,000 square feet for the first nine months of 1996. The
Company believes that the Greater Boston Suburban Office Market possesses
attractive market fundamentals, as evidenced by the creation of approximately
20,000 office-using jobs in the Boston metropolitan area during the twelve
months ended June 30, 1996, according to the U.S. Bureau of Labor Statistics.
For a description of the Greater Boston Suburban Office Market, see
"Properties and Pending Acquisitions."
Cambridge Office Market
245 First Street. In October 1996, the Company entered into a contract to
acquire 245 First Street located in Cambridge, Massachusetts for aggregate
consideration of approximately $45 million in cash, approximately 90% of
replacement cost.
S-21
<PAGE>
The 245 First Street property contains approximately 263,000 square feet
and consists of (i) Riverview I, a six-story office building renovated in
1986 and comprising approximately 109,000 square feet and (ii) Riverview II,
an 18-story structure built in 1985 comprising approximately 148,000 square
feet. Riverview I and Riverview II are connected by a four-story atrium
comprising approximately 6,000 square feet. Major tenants at 245 First Street
include Open Market, Inc. (approximately 81,000 square feet) and Softkey
International, Inc. (approximately 71,000 square feet). Softkey and certain
other tenants sublease their space from Mellon Bank who leases approximately
148,000 square feet of the property. As of September 30, 1996, the occupancy
rate for 245 First Street was 100%.
The 245 First Street property is located in the East Cambridge submarket
of the Cambridge Office Market. According to Spaulding & Slye, the Cambridge
Office Market had an overall vacancy rate of 1.1% as of September 30, 1996
and experienced Net Absorption of approximately 200,000 square feet for the
first nine months of 1996. The East Cambridge submarket had a vacancy rate of
1.2% as of September 30, 1996. For a description of the Cambridge Office
Market, see "Properties and Pending Acquisitions."
West Los Angeles Office Market
10960 Wilshire Boulevard. In October 1996, the Company entered into a
contract to acquire 10960 Wilshire Boulevard located in Westwood, California.
The 10960 Wilshire Boulevard acquisition will represent the Company's first
strategic acquisition in California. In connection with its continuing
analysis of major office markets and investment opportunities, the Company
has determined that the Los Angeles metropolitan area possesses attractive
market fundamentals, including growth in office-using employment. According
to the U.S. Bureau of Labor Statistics, during the twelve months ended June
30, 1996, approximately 51,000 office-using jobs were created in the Los
Angeles metropolitan area, primarily in the entertainment, export/import,
healthcare, telecommunications and aerospace industries. The Company has
further determined that the Westwood submarket of the West Los Angeles Office
Market is particularly attractive due to limited prospects for future supply
of office space. The Westwood submarket has significant constraints on
development including the limitation of new development to 1.5
floor-area-ratio with five-story height limitations. Additionally, limited
sites are available for development in the Westwood submarket, and the
Company believes that existing rental rates in this market do not currently
justify the cost of new construction.
The Company will acquire 10960 Wilshire Boulevard for aggregate
consideration of approximately $133 million in cash, approximately 80% of
replacement cost. Following the consummation of the acquisition, the Company
intends to invest approximately $1.8 million in capital improvements in the
property.
The 10960 Wilshire Boulevard property was built in 1971 and has undergone
approximately $39 million of capital improvements since 1992. The property
consists of approximately 544,000 square feet in a 23-story office building.
This property is one of the largest buildings in the Westwood submarket of
the West Los Angeles Office Market and given the current constraints on
development described above, this property cannot be duplicated in its
market. The property is located near Interstates 405 and 10 with easy access
to other West Los Angeles markets, downtown, the San Fernando Valley and the
Los Angeles airport. In addition, the property, which meets current
earthquake construction codes, is located in a business district, adjacent to
other Class A office buildings, Westwood Village, a retail area, and the UCLA
campus. Major tenants in 10960 Wilshire Boulevard include Saban
Entertainment, Inc. (approximately 111,000 square feet), Philips Interactive
Media of America, Inc. (approximately 95,000 square feet), BBDO Worldwide,
Inc. (approximately 48,000 square feet) and Saltzburg, Ray & Bergman
(approximately 31,000 square feet). The Company currently intends to retain
the existing property manager of 10960 Wilshire Boulevard following the
consummation of the acquisition to facilitate the leasing and management of
the property. As of September 30, 1996, the occupancy rate for 10960 Wilshire
Boulevard was approximately 89%.
According to CB Commercial, the entire West Los Angeles Office Market
(consisting of approximately 37 million square feet) had an overall vacancy
rate of 13.4% as of September 30, 1996, while the Westwood submarket
(consisting of approximately 3.2 million square feet) experienced a vacancy
rate of 10.3% for the same period. CB Commercial also reports that the
Westwood submarket experienced Net Absorption of approximately 70,000 square
feet in the first nine months of 1996. For a description of the West Los
Angeles Office Market, see "Properties and Pending Acquisitions."
Based upon recent leasing activity at 10960 Wilshire Boulevard, the
Company believes that the existing rental rates at this property are
approximately $6 per square foot below current market rates. Approximately 5%
of the leases at the 10960 Wilshire Boulevard property expire in 1997 and
1998, and an additional 35% of the leases at the property expire in 1999
through 2001. In addition, approximately 57,000 square feet at the property
is currently
S-22
<PAGE>
available for occupancy. The Company expects to incur certain tenant
improvement costs and leasing commissions in connection with the releasing of
this space. The Company expects that the net operating income generated by
the property will increase as current leases are renewed, and new leases are
made, at market rates, although no assurances can be made in this regard.
Capitalization Rates
The following table sets forth the Capitalization Rates for the Rosslyn,
Virginia Portfolio and the Pending Acquisitions. The Capitalization Rates are
calculated by dividing (a) the expected net operating income (including the
effect of any straight-line rents) generated by the property based upon
annualized revenues from signed leases in place at the property as of
September 30, 1996 by (b) the consideration paid for the property, including
any expected capital improvements.
Expected Expected
Property/Pending Net Operating Consideration Capitalization
Acquisition Income Paid Rate
- --------------------------- --------------- --------------- ----------------
(millions) (millions)
Rosslyn, Virginia Portfolio
(1) $11.5 $102.2 11.3%
New England Executive Park
Portfolio (2) 8.7 76.5 11.4%
245 First Street 5.6 45.0 12.4%
10960 Wilshire Boulevard
(3) 11.1 134.8 8.2%
----- ------ ----
Total/Weighted Average $36.9 $358.5 10.3%
===== ====== ====
- ------------
(1) Net operating income includes approximately $600,000 of straight-line
rents and consideration includes approximately $3.1 million of expected
non-recurring capital improvements.
(2) Net operating income includes approximately $150,000 of straight-line
rents and consideration includes approximately $1.5 million of expected
non-recurring capital improvements. The consideration could increase by
$17 million in November 1998, as discussed above. Assuming the Company
achieves the $2.8 million increase in net operating income discussed
above and further assuming the Company becomes obligated to pay the
additional $17 million of consideration in November 1998, the
Capitalization Rate will increase to 12.3%; however, no assurances can be
made in this regard.
(3) Net operating income includes approximately $2.2 million of straight line
rents and consideration includes approximately $1.8 million of expected
non-recurring capital improvements. As discussed above, the Company
expects that net operating income will increase as vacant space is leased
and as current leases are renewed, or new leases made, at market rates,
however, no assurances can be made in this regard.
Other Developments
Perimeter Center Portfolio Management. Effective January 1, 1997, the
Company, through Beacon Property Management, L.P., will assume all property
management and leasing responsibility for the Perimeter Center Portfolio. The
Company acquired the Perimeter Center Portfolio in February 1996. Since the
acquisition, Beacon Property Management, L.P. has managed the Property and
Taylor & Mathis, Inc., the manager of the Property prior to the Company's
acquisition of it, has acted as submanager.
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
September 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 has
approximately 250,000 square feet of building capacity, 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 Northwest submarket of 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 assurances can be made that such increased demand will
occur. For a description of the Greater Boston Suburban Office Market, see
"Properties and Pending Acquisitions."
Expansion of Board of Directors. Effective January 1, 1997, the Board of
Directors of the Company will be expanded from seven to nine members, with
Dale F. Frey and Lionel P. Fortin becoming Directors. Mr. Frey
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<PAGE>
is President and Chairman of General Electric Investment Corporation and Vice
President of General Electric Company. Mr. Fortin currently serves as Senior
Vice President and Chief Operating Officer of the Company.
Compensation Developments
In October 1996, the Company adopted the 1996 Non-Qualified Stock Option Plan
(the "1996 Plan"), which provides for the granting of options to purchase up to
an aggregate of 750,000 shares of Common Stock to all employees other than the
senior executive officers of the Company. As part of its analysis of
compensation, the Compensation Committee of the Company has determined to grant
options to purchase the entire 750,000 shares of Common Stock available under
the 1996 Plan during November 1996. Additionally, the Compensation Committee has
also determined to grant options to purchase an additional approximately
1,100,000 shares of Common Stock pursuant to the Company's 1994 Stock Option
Plan. These additional grants are also expected to occur during November 1996.
S-24
<PAGE>
PROPERTIES AND PENDING ACQUISITIONS
The Company owns a portfolio of Class A office properties and other
commercial properties located in major metropolitan areas, including Boston,
Atlanta, Chicago and Washington, D.C. The Properties encompass approximately
12.2 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 September 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 September 1996.
Period Vacancy Rate
--------------- ---------------
1991 18.4%
1992 15.9%
1993 16.3%
1994 12.1%
1995 11.5%
September 1996 6.0%(a)
- -------------
(a) For periods prior to 1996, Spaulding & Slye calculated vacancy rate (or
available space) as space actively marketed for immediate or future
occupancy, including space available for sublet. For periods beginning in
1996, Spaulding & Slye also calculates vacancy rate as space available
for immediate occupancy. Under the original definition, the vacancy rate
(or available space) in September 1996 would have been 9.6%.
Source: Spaulding & Slye Office Market Reports 1990 through September 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>
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership Parking
- ------------------ ------------- --------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
75-101 Federal
Street 1985-1988 812,000 (a) (b) (c)
One Post Office
Square 1981 764,129 41 50%(d) 375-car garage
Center Plaza 1966-1969 649,359 9 (e) 575-car garage
150 Federal Street 1988 530,279 28 100% 285-car garage
Rowes Wharf 1987 344,326 15 (f) 550-car garage
Russia Wharf 1978-1982 314,596 (g) 100% 146 spaces
2 Oliver
Street-147 Milk
Street 1982-1988 271,000 (h) 100% None
175 Federal Street 1977 203,349 17 100% None
South Station 1988 148,591 5 (i) (j)
---------------
Total 4,037,629
===============
</TABLE>
- ------------
(a) 75 Federal Street is a 21-story building and 101 Federal Street is a
31-story building.
(b) The Company holds approximately 51.6% of the common stock of BeaMetFed,
Inc., a private REIT that holds the fee title to 75-101 Federal Street.
(c) 101 Federal Street has a 195-car garage.
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<PAGE>
(d) 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.
(e) 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.
(f) The Company holds a 90% limited partner interest in Rowes Wharf Limited
Partnership ("RWLP"). RWLP and Equitable each hold a 50% general partner
interest in Rowes Wharf Associates ("RWA"), the partnership that owns the
hotel space and leases the office and retail space at the Rowes Wharf
Property. Through its interest in RWLP, the Company owns a 45% indirect
limited partner interest in RWA. The general partner of RWLP, has the
authority to mortgage or sell all of RWLP's interest in Rowes Wharf
without the Company's consent.
(g) Russia Wharf is a complex of three seven-story buildings.
(h) 2 Oliver Street is an 11-story building and 147 Milk Street is a 10-story
building.
(i) The Company owns 100% of a ground leasehold in this Property.
(j) A 600-car garage is under construction by the Massachusetts Bay
Transportation Authority.
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 9/30/96
- ------------------ -------- -------- -------- -------- ------ ---------
(per square foot)
175 Federal Street $12.98 $14.81 $17.79 $21.15 $23.82 $24.73
One Post Office
Square 24.78 22.41 21.85 22.99 23.55 24.02
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 22.44
Rowes Wharf 36.06 30.87 30.04 30.39 30.87 30.42
150 Federal Street 25.58 21.20 23.88 24.25 24.67 24.98
Russia Wharf(a) -- -- -- -- 12.53 13.77
75-101 Federal
Street(a) -- -- -- -- 28.00 29.76
2 Oliver Street(a) -- -- -- -- 16.46 16.63
-------- -------- -------- -------- ------ ------
Weighted
Average $25.04 $22.38 $23.30 $24.34 $23.75 $24.52
======== ======== ======== ======== ====== ======
- ------------
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by
the Company subsequent to its initial public offering in May 1994 (the
"Initial Offering") and, consequently, information prior to the date of
acquisition is unavailable.
S-26
<PAGE>
Average Annual Net Effective Rents
----------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 9/30/96
- ------------------ -------- -------- -------- -------- ------ ---------
(per square foot)
175 Federal Street $ 9.88 $12.40 $13.03 $13.97 $15.40 $16.42
One Post Office
Square 17.87 14.47 14.32 15.01 15.03 15.00
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 12.40
Rowes Wharf 22.15 14.26 15.45 17.65 18.22 17.94
150 Federal Street 20.17 17.51 19.99 20.95 21.14 21.23
Russia Wharf(a) -- -- -- -- 7.86 7.88
75-101 Federal
Street(a) -- -- -- -- 19.10 19.36
2 Oliver Street(a) -- -- -- -- 11.53 11.62
-------- -------- -------- -------- ------ ------
Weighted
Average $15.20 $13.16 $14.77 $16.22 $15.78 $16.04
======== ======== ======== ======== ====== ======
- ------------
(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.
Occupancy Rate
---------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 9/30/96
- ------------------ -------- -------- -------- -------- -------- ----------
175 Federal Street 94% 100% 100% 94% 84% 94%
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% 92%
Rowes Wharf 96% 91% 92% 96% 98% 98%
150 Federal Street 68% 98% 99% 98% 99% 99%
Russia Wharf(a) -- -- -- -- 94% 100%
75-101 Federal
Street(a) -- -- -- -- 93% 94%
2 Oliver Street(a) -- -- -- -- 93% 92%
-------- -------- -------- -------- -------- ----------
Weighted
Average 84% 90% 91% 94% 95% 96%
======== ======== ======== ======== ======== ==========
- ------------
(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-27
<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
--------------------------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
175 Federal Street square feet (a) 6,009 3,610 4,775 0
% sq. ft. (b) 3.0% 1.8% 2.3% 0.0%
annual rent (c) $ 117,783 $ 91,728 $ 201,745 $ 0
psf (d) $ 19.60 $ 25.41 $ 42.25(f) $ 0.00
tenants (e) 2 1 1 0
Center Plaza square feet (a) 8,222 78,990 87,916 36,643
% sq. ft. (b) 1.3% 12.2% 13.5% 5.6%
annual rent (c) $ 124,885 $2,071,608 $ 1,988,577 $ 780,423
psf (d) $ 15.19 $ 26.23 $ 22.62 $ 21.30
tenants (e) 5 8 7 9
One Post Office Square square feet (a) 23,424 38,051 32,702 32,302
% sq. ft. (b) 3.1% 5.0% 4.3% 4.2%
annual rent (c) $ 776,983 $1,119,515 $ 878,171 $ 928,409
psf (d) $ 33.17 $ 29.42 $ 26.85 $ 28.74
tenants (e) 2 8 6 11
South Station (g) square feet (a) 410 1,086 11,541 1,401
% sq. ft. (b) 0.3% 0.7% 7.8% 0.9%
annual rent (c) $ 72,623 $ 113,935 $ 1,065,930 $ 391,925
psf (d) $ 177.13 $ 104.91 $ 92.36 $ 279.75
tenants (e) 3 2 2 4
Rowes Wharf square feet (a) 3,029 66,191 121,332 39,102
% sq. ft. (b) 0.9% 19.2% 35.2% 11.4%
annual rent (c) $ 73,641 $1,719,194 $ 4,215,221 $ 1,224,229
psf (d) $ 24.31 $ 25.97 $ 34.74 $ 31.31
tenants (e) 1 5 9 7
150 Federal Street square feet (a) 6,084 12,458 2,855 77,355
% sq. ft. (b) 1.1% 2.3% 0.5% 14.6%
annual rent (c) $ 152,118 $ 279,204 $ 98,214 $ 1,172,307
psf (d) $ 25.00 $ 22.41 $ 34.40 $ 15.15
tenants (e) 3 2 2 2
Russia Wharf square feet (a) 6,106 60,773 34,028 65,854
% sq. ft. (b) 2.0% 19.5% 10.9% 21.2%
annual rent (c) $ 83,330 $ 847,496 $ 534,727 $ 993,244
psf (d) $ 13.65 $ 13.95 $ 15.71 $ 15.08
tenants (e) 1 13 7 6
75 Federal Street square feet (a) 33,447 3,567 43,757 53,476
% sq. ft. (b) 13.2% 1.4% 17.3% 21.1%
annual rent (c) $ 833,181 $ 66,780 $ 1,139,304 $ 1,659,858
psf (d) $ 24.91 $ 18.72 $ 26.04 $ 31.04
tenants (e) 6 1 11 7
101 Federal Street square feet (a) 10,292 74,217 116,792 100,831
% sq. ft. (b) 1.8% 13.3% 20.9% 18.0%
annual rent (c) $ 203,047 $2,007,590 $ 4,028,823 $ 3,723,712
psf (d) $ 19.73 $ 27.05 $ 34.50 $ 36.93
tenants (e) 1 5 8 9
2 Oliver Street square feet (a) 18,631 36,851 15,287 37,802
% sq. ft. (b) 6.9% 13.7% 5.7% 14.0%
annual rent (c) $ 339,100 $ 602,347 $ 292,758 $ 626,542
psf (d) $ 18.20 $ 16.35 $ 19.15 $ 16.57
tenants (e) 3 10 8 9
------------ ------------ ------------ ------------
TOTAL square feet (a) 115,654 375,794 470,985 444,766
% sq. ft. (b) 2.9% 9.3% 11.7% 11.0%
annual rent (c) $2,776,691 $8,919,397 $14,443,471 $11,500,649
psf (d) $ 24.01 $ 23.73 $ 30.67 $ 25.86
tenants (e) 27 55 61 64
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
175 Federal Street 33,484 25,294 66,306 0 6,793 45,482
16.5% 12.4% 32.6% 0.0% 3.3% 22.4%
$ 803,228 $ 659,961 $ 2,242,683 $ 0 $ 176,618 $ 1,426,193
$ 23.99 $ 26.09 $ 33.82 $ 0.00 $ 26.00 $ 31.36
8 4 2 0 1 1
Center Plaza 96,244 50,791 15,656 128,201 40,035 57,235
14.8% 7.8% 2.4% 19.7% 6.2% 8.8%
$2,341,012 $ 1,291,605 $ 506,492 $3,531,104 $1,108,376 $ 1,584,854
$ 24.32 $ 25.43 $ 32.35 $ 27.54 $ 27.69 $ 27.69
12 8 4 2 4 6
One Post Office Square 33,536 425,162 0 8,673 0 164,434
4.4% 55.6% 0.0% 1.1% 0.0% 21.5%
$1,001,692 $12,467,208 $ 0 $ 314,917 $ 0 $ 4,372,464
$ 29.87 $ 29.32 $ 0.00 $ 36.31 $ 0.00 $ 26.59
6 4 0 1 0 2
South Station (g) 2,373 105 125,999 500 2,410 725
1.6% 0.1% 84.8% 0.3% 1.6% 0.5%
$ 325,685 $ 20,721 $ 4,326,715 $ 81,980 $ 429,037 $ 100,050
$ 137.25 $ 197.34 $ 34.34 $ 163.96 $ 178.02 $ 138.00
5 1 5 1 3 1
Rowes Wharf 15,569 10,356 75,362 0 5,280 0
4.5% 3.0% 21.9% 0.0% 1.5% 0.0%
$ 513,086 $ 308,983 $ 2,983,590 $ 0 $ 116,096 $ 0
$ 32.96 $ 29.84 $ 39.59 $ 0.00 $ 21.99 $ 0.00
4 2 2 0 1 0
150 Federal Street 44,562 11,119 183,239 0 0 186,437
8.4% 2.1% 34.6% 0.0% 0.0% 35.2%
$1,505,946 $ 282,846 $ 5,143,936 $ 0 $ 0 $ 7,317,652
$ 33.79 $ 25.44 $ 28.07 $ 0.00 $ 0.00 $ 39.25
7 2 3 0 0 1
Russia Wharf 84,205 14,895 7,590 5,782 1,835 30,773
27.1% 4.8% 2.4% 1.9% 0.6% 9.9%
$1,326,625 $ 259,034 $ 121,440 $ 103,498 $ 27,905 $ 566,128
$ 15.75 $ 17.39 $ 16.00 $ 17.90 $ 15.21 $ 18.40
9 4 1 1 2 1
75 Federal Street 39,339 20,603 0 22,630 0 0
15.5% 8.1% 0.0% 8.9% 0.0% 0.0%
$ 895,715 $ 394,592 $ 0 $ 623,270 $ 0 $ 0
$ 22.77 $ 19.15 $ 0.00 $ 27.54 $ 0.00 $ 0.00
5 3 0 2 0 0
101 Federal Street 6,475 112,763 19,310 0 77,794 31,394
1.2% 20.1% 3.4% 0.0% 13.9% 5.6%
$ 198,808 $ 5,084,995 $ 473,925 $ 0 $1,989,684 $ 942,527
$ 30.70 $ 45.09 $ 24.54 $ 0.00 $ 25.58 $ 30.02
3 4 1 0 1 2
2 Oliver Street 50,960 12,946 1,750 6,155 0 68,205
18.9% 4.8% 0.6% 2.3% 0.0% 25.3%
$1,012,749 $ 240,736 $ 32,375 $ 104,635 $ 0 $ 2,138,679
$ 19.87 $ 18.60 $ 18.50 $ 17.00 $ 0.00 $ 31.36
10 4 1 1 0 2
----------- ------------ ------------ ------------ ------------ ------------
TOTAL 406,747 684,034 495,212 171,941 134,147 584,685
10.1% 17.0% 12.3% 4.3% 3.3% 14.5%
$9,924,545 $21,010,682 $15,831,158 $4,759,403 $3,847,716 $18,448,547
$ 24.40 $ 30.72 $ 31.97 $ 27.68 $ 28.68 $ 31.55
69 36 19 8 12 16
</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.
S-28
<PAGE>
(g) Lease expirations reflect retail tenants only for 1996 through 2001 and
2003 and beyond.
The Greater Boston Suburban Office Market
Market Information
As of September 1996, there were approximately 45.1 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 New England Executive Park
Portfolio, a Pending Acquisition, 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 September 1996.
Route 128/
Mass. Pike Submarket South Submarket Northwest Submarket
- ------------------------- ----------------------- ------------------------
Date Vacancy Rate Date Vacancy 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%
9/96 2.0%(a) 9/96 6.4%(a) 9/96 4.3%(a)
- ------------
(a) For periods prior to 1996, Spaulding & Slye calculated vacancy rate (or
available space) as space actively marketed for immediate or future
occupancy, including space available for sublet. For periods beginning in
1996, Spaulding & Slye also calculates vacancy rate as space available
for immediate occupancy. Under the original definition, the vacancy rate
(or available space) in September 1996 in the Route 128/Mass. Pike, South
and Northwest Submarkets would have been 4.3%, 9.0% and 5.1%,
respectively.
Source: Spaulding & Slye Office Market Reports 1990 through September 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 and Pending Acquisition 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.
Following completion of the Pending Acquisitions, the Company will own a 100%
fee interest in each building in the New England Executive Park Portfolio,
subject to an option to purchase Building Seventeen by the tenant of the
property.
Year Built/ Rentable Area No. of
Property Renovated in Square 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 62,952 3
Crosby Corporate Center 1996 336,000 (a)
Westwood Business Centre 1985 160,400 3
---------------
Total Properties 1,119,262
===============
S-29
<PAGE>
Year Built/ Rentable Area No. of
Pending Acquisition Renovated in Square Feet Stories
------------------------------------------------- ---------------- ----------
New England Executive Park
Portfolio:
Building One 1979 79,942 3
Building Three 1970 64,569 2
Building Six 1980 101,641 4
Building Eight 1982 218,761 6
Building Twelve 1970 94,860 4
Building Fifteen 1976 43,267 2
Building Sixteen 1978 59,541 3
Building Seventeen 1979 56,503 3
Building Twenty Four 1985 97,929 4
----------------
Total Pending Acquisition 817,013
================
- ------------
(a) Crosby Corporate Center is a six building complex with one and two story
buildings.
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. As of
September 30, 1996, the average Base Rent per square foot and average Net
Effective Rent per square foot at the New England Executive Park Portfolio
were $18.45 and $11.48, respectively.
<TABLE>
<CAPTION>
Average Annual Base Rents
-------------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 9/30/96
- ---------------------------------------- -------- -------- ------ -------- -------- -----------
<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 $23.78
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 22.70
40 William Street, Building Four 20.20 23.33 22.89 22.28 23.08 24.35
20 William Street, Building Five 23.20 22.52 21.20 21.90 22.96 24.06
45 William Street, Building Six 17.03 15.65 15.46 16.52 16.28 22.82
80 William Street, Building Seven 38.37 37.71 37.34 25.00(a) 25.00 25.00
100 William Street, Building Eight(b) -- -- -- -- 23.00 28.50(c)
Crosby Corporate Center(b) -- -- -- -- -- 13.17
Westwood Business Centre(b) -- -- -- -- 18.46 19.46
-------- -------- ------ -------- -------- -----------
Weighted Average $22.99 $22.96 $21.63 $21.03 $20.50 $20.08
======== ======== ====== ======== ======== ===========
</TABLE>
- ------------
(a) 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.
(b) 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.
(c) Property under lease which anticipates the tenant taking occupancy of the
premises in early 1997.
S-30
<PAGE>
<TABLE>
<CAPTION>
Average Annual Net Effective Rents
------------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 9/30/96
- ---------------------------------------- -------- -------- ------- --------- -------- ----------
<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 $16.08
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 14.85
40 William Street, Building Four 11.47 13.18 16.17 14.07 14.77 16.38
20 William Street, Building Five 12.45 12.38 11.92 13.04 14.11 15.37
45 William Street, Building Six 10.95 9.06 9.07 10.84 12.65 15.49
80 William Street, Building Seven 31.02 31.10 31.35 21.38(a) 19.47 20.38
100 William Street, Building Eight(b) -- -- -- -- 15.50 20.50
Crosby Corporate Center(b) -- -- -- -- -- 9.74
Westwood Business Centre(b) -- -- -- -- 11.41 11.40
-------- -------- ------- --------- ------- ----------
Weighted Average $14.28 $14.55 $14.23 $13.57 $13.66 $13.70
======== ======== ======= ========= ======= ==========
</TABLE>
- ------------
(a) 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.
(b) 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.
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. As of September 30, 1996, the occupancy rate
for the New England Executive Park Portfolio was 98%.
<TABLE>
<CAPTION>
Occupancy Rate
------------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 9/30/96
-------------------------------------------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One 97% 100% 100% 94% 100% 100%
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% 90%
20 William Street, Building Five 95% 95% 97% 97% 97% 98%
45 William Street, Building Six 97% 91% 90% 99% 98% 100%
80 William Street, Building Seven 100% 100% 100% 100% 100% 100%
100 William Street, Building Eight(a) -- -- -- -- 100% 100%
Crosby Corporate Center(a) -- -- -- -- -- 88%
Westwood Business Centre(a) -- -- -- -- 99% 100%
-------- -------- -------- -------- -------- ------------
Weighted Average 98% 95% 97% 99% 98% 95%
======== ======== ======== ======== ======== ============
</TABLE>
- ------------
(a) 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.
S-31
<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 and
for the New England Executive Park Portfolio.
<TABLE>
<CAPTION>
Lease Expirations--Greater Boston Suburban Office
Market
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
65 William Street square feet(a) 4,357 3,504 1,103 3,456
Building One % sq. ft.(b) 14.8% 11.9% 3.7% 11.7%
annual rent(c) $ 95,854 $ 87,377 $ 23,449 $ 84,216
psf(d) $ 22.00 $ 24.94 $ 21.26 $ 24.37
tenants(e) 1 5 1 2
60 William Street square feet(a) 0 0 18,457 2,348
Building Two % sq. ft.(b) 0.0% 0.0% 34.8% 4.4%
annual rent(c) $ 0 $ 0 $ 357,117 $ 54,021
psf(d) $ 0.00 $ 0.00 $ 19.35 $ 23.01
tenants(e) 0 0 3 1
55 William Street square feet(a) 3,952 18,020 10,413 2,394
Building Three % sq. ft.(b) 7.2% 32.7% 18.9% 4.3%
annual rent(c) $ 79,040 $ 420,336 $ 229,612 $ 61,636
psf(d) $ 20.00 $ 23.33 $ 22.05 $ 25.75
tenants(e) 3 3 2 2
40 William Street square feet 659 25,469 0 2,453
Building Four % sq. ft.(b) 0.9% 34.3% 0.0% 3.3%
annual rent(c) $ 10,544 $ 580,355 $ 0 $ 67,458
psf(d) $ 16.00 $ 22.79 $ 0.00 $ 27.50
tenants(e) 3 2 0 2
20 William Street square feet 2,282 17,517 31,500 11,946
Building Five % sq. ft.(b) 1.8% 13.6% 24.4% 9.3%
annual rent(c) $ 52,486 $ 396,432 $ 733,206 $ 285,151
psf(d) $ 23.00 $ 22.63 $ 23.28 $ 23.87
tenants(e) 2 8 11 4
45 William Street square feet(a) 0 13,200 0 0
Building Six % sq. ft.(b) 0.0% 8.3% 0.0% 0.0%
annual rent(c) $ 0 $ 271,443 $ 0 $ 0
psf(d) $ 0.00 $ 20.56 $ 0.00 $ 0.00
tenants(e) 0 1 0 0
80 William Street square feet(a) 0 0 0 0
Building Seven % sq. ft.(b) 0.0% 0.0% 0.0% 0.0%
annual rent(c) $ 0 $ 0 $ 0 $ 0
psf(d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants(e) 0 0 0 0
100 William Street square feet(a) 0 0 0 0
Building Eight % sq. ft.(b) 0.0% 0.0% 0.0% 0.0%
annual rent(c) $ 0 $ 0 $ 0 $ 0
psf(d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants(e) 0 0 0 0
Westwood Business Centre square feet(a) 1,350 27,323 3,500 21,468
% sq. ft.(b) 0.8% 17.0% 2.2% 13.4%
annual rent(c) $ 28,306 $ 622,816 $ 67,453 $ 442,027
psf(d) $ 20.97 $ 22.79 $ 19.27 $ 20.59
tenants(e) 1 3 1 6
Crosby Corporate Center square feet(a) 0 0 0 40,500
% sq. ft(b) 0.0% 0.0% 0.0% 12.1%
annual rent(c) $ 0 $ 0 $ 0 $ 416,287
psf(d) $ 0.00 $ 0.00 $ 0.00 $ 10.28
tenants(e) 0 0 0 1
------------ ------------ ------------ ------------
TOTAL PROPERTIES square feet(a) 12,600 105,033 64,973 84,565
% sq. ft.(b) 1.1% 9.3% 5.8% 7.5%
annual rent(c) $266,230 $2,378,759 $1,410,837 $1,410,796
psf(d) $ 21.13 $ 22.65 $ 21.71 $ 16.68
tenants(e) 10 22 18 18
Pending Acquisitions
- ---------------------------
New England Executive square feet(a) 10,831 336,702 144,725 93,227
Park Portfolio % sq. ft.(b) 1.3% 41.2% 17.7% 11.4%
annual rent(c) $235,500 $6,188,372 $2,861,261 $1,880,761
psf(d) $ 21.74 $ 18.38 $ 19.77 $ 20.17
tenants(e) 1 29 17 12
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
65 William Street 3,429 8,603 5,473 0 0 661
Building One 11.6% 29.2% 18.6% 0.0% 0.0% 2.2%
$ 88,047 $ 221,762 $ 135,323 $ 0 $ 0 $ 16,856
$ 25.68 $ 25.78 $ 24.73 $ 0.00 $ 0.00 $ 25.50
2 2 3 0 0 1
60 William Street 23,207 5,939 0 0 0 0
Building Two 43.7% 11.2% 0.0% 0.0% 0.0% 0.0%
$ 502,736 $ 156,227 $ 0 $ 0 $ 0 $ 0
$ 21.66 $ 26.31 $ 0.00 $ 0.00 $ 0.00 $ 0.00
3 2 0 0 0 0
55 William Street 0 7,857 0 0 12,470 0
Building Three 0.0% 14.3% 0.0% 0.0% 22.6% 0.0%
$ 0 $ 215,446 $ 0 $ 0 $ 294,761 $ 0
$ 0.00 $ 27.42 $ 0.00 $ 0.00 $ 23.64 $ 0.00
0 1 0 0 1 0
40 William Street 0 10,529 27,975 0 0 0
Building Four 0.0% 14.2% 37.7% 0.0% 0.0% 0.0%
$ 0 $ 273,769 $ 733,322 $ 0 $ 0 $ 0
$ 0.00 $ 26.00 $ 26.21 $ 0.00 $ 0.00 $ 0.00
0 2 1 0 0 0
20 William Street 32,647 5,272 25,484 0 0 0
Building Five 25.3% 4.1% 19.8% 0.0% 0.0% 0.0%
$ 830,062 $ 137,712 $ 673,894 $ 0 $ 0 $ 0
$ 25.43 $ 26.12 $ 26.44 $ 0.00 $ 0.00 $ 0.00
8 3 3 0 0 0
45 William Street 0 0 0 15,001 21,700 109,016
Building Six 0.0% 0.0% 0.0% 9.6% 13.7% 68.8%
$ 0 $ 0 $ 0 $397,527 $ 526,324 $ 2,993,765
$ 0.00 $ 0.00 $ 0.00 $ 26.50 $ 24.25 $ 27.46
0 0 0 1 1 2
80 William Street 0 0 0 0 0 71,324
Building Seven 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
$ 0 $ 0 $ 0 $ 0 $ 0 $ 2,190,897
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 30.72
0 0 0 0 0 1
100 William Street 0 0 0 0 0 62,952
Building Eight 0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
$ 0 $ 0 $ 0 $ 0 $ 0 $ 1,794,132
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 28.50
0 0 0 0 0 1
Westwood Business Centre 10,075 33,841 0 0 62,972 0
6.3% 21.1% 0.0% 0.0% 39.3% 0.0%
$ 206,112 $ 964,300 $ 0 $ 0 $1,230,571 $ 0
$ 20.46 $ 28.50 $ 0.00 $ 0.00 $ 19.54 $ 0.00
3 1 0 0 1 0
Crosby Corporate Center 0 0 0 0 0 255,914
0.0% 0.0% 0.0% 0.0% 0.0% 76.2%
$ 0 $ 0 $ 0 $ 0 $ 0 $ 4,238,553
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 16.56
0 0 0 0 0 4
----------- ------------ ------------ ------------ ------------ ------------
TOTAL PROPERTIES 69,358 72,041 58,932 15,001 97,142 499,867
6.1% 6.4% 5.2% 1.3% 8.6% 44.2%
$1,626,957 $1,969,217 $1,542,539 $397,527 $2,051,656 $11,234,203
$ 23.46 $ 27.33 $ 26.17 $ 26.50 $ 21.12 $ 22.47
16 11 7 1 3 9
Pending Acquisitions
- ---------------------------
New England Executive 117,608 78,395 0 17,931 258 0
Park Portfolio 14.4% 9.6% 0.0% 2.2% 0.0% 0.0%
$2,399,214 $1,700,187 $ 0 $379,176 $ 8,772 $ 0
$ 20.40 $ 21.69 $ 0.00 $ 21.15 $ 34.00 $ 0.00
13 16 0 1 1 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 (1996 tenant payments for New
England Executive Park Portfolio) 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-32
<PAGE>
The Cambridge Office Market
As of September 1996, there were approximately 9.6 million square feet of
office space in the Cambridge Office Market. The entire Cambridge Office
Market had a vacancy rate of 1.1% as of September 1996 and the East Cambridge
submarket had a vacancy rate of 1.2% for the same period. Spaulding & Slye
reports Net Absorption in the Cambridge Office Market of approximately
210,000 square feet in 1995 and 100,000 square feet in 1994.
One Canal Park and Ten Canal Park, as well as 245 First Street, a Pending
Acquisition, 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, Ten Canal Park and 245 First Street were
$21.13 and $13.69, $19.80 and $12.45, and $21.58 and $17.46, respectively, as
of September 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 September 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 September 30, 1996, Ten Canal Park was approximately 92% leased.
245 First Street. 245 First Street contains approximately 263,000 square
feet and consists of (i) Riverview I, a six-story office building renovated
in 1986 and comprising approximately 109,000 square feet and (ii) Riverview
II, an 18-story structure built in 1985 comprising approximately 148,000
square feet. Riverview I and Riverview II are connected by a four-story
atrium comprising approximately 6,000 square feet. 245 First Street is
located in the East Cambridge submarket. The Company has contracted to
acquire a 100% fee interest in this property. As of September 30, 1996, 245
First Street was 100% leased.
The following table sets forth lease expirations (in square feet) for each
of the Company's Properties in the Cambridge Office Market and for 245 First
Street.
<TABLE>
<CAPTION>
Lease Expirations--Cambridge Office Market
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
One Canal Park square feet (a) 0 0 3,499 1,411
% sq. ft. (b) 0.00% 0.00% 3.5% 1.4%
annual rent (c) $ 0 $ 0 $122,937 $29,968
psf (d) $0.00 $0.00 $ 35.13 $ 21.24
tenants (e) 0 0 1 1
Ten Canal Park square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) $ 0 $ 0 $ 0 $ 0
psf (d) $0.00 $0.00 $ 0.00 $ 0.00
tenants (e) 0 0 0 0
------------ ------------ ------------ ------------
TOTAL PROPERTIES square feet (a) 0 0 3,499 1,411
% sq. ft. (b) 0.0% 0.0% 1.7% 0.7%
annual rent (c) $ 0 $ 0 $122,937 $29,968
psf (d) $0.00 $0.00 $ 35.13 $ 21.24
tenants (e) 0 0 1 1
Pending Acquisitions
- ---------------------------
245 First Street square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) $ 0 $ 0 $ 0 $ 0
psf (d) $0.00 $0.00 $ 0.00 $ 0.00
tenants (e) 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- --------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
One Canal Park 0 87,244 0 0 0 0
0.0% 87.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $1,929,276 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 22.11 $ 0.00 $ 0.00 $0.00 $0.00
0 2 0 0 0 0
Ten Canal Park 0 0 101,909 0 0 0
0.0% 0.0% 91.9% 0.0% 0.0% 0.0%
$ 0 $ 0 $2,367,346 $ 0 $ 0 $ 0
$ 0.00 $ 0.00 $ 23.23 $ 0.00 $0.00 $0.00
0 0 1 0 0 0
--------- ------------ ------------ ------------ ------------ ------------
TOTAL PROPERTIES 0 87,244 101,909 0 0 0
0.0% 41.3% 48.3% 0.0% 0.0% 0.0%
$ 0 $1,929,276 $2,367,346 $ 0 $ 0 $ 0
$ 0.00 $ 22.11 $ 23.23 $ 0.00 $0.00 $0.00
0 2 1 0 0 0
Pending Acquisitions
- ---------------------------
245 First Street 6,320 228,720 0 28,000 0 0
2.4% 87.0% 0.0% 10.6% 0.0% 0.0%
$83,269 $6,130,514 $ 0 $709,712 $ 0 $ 0
$ 13.18 $ 26.80 $ 0.00 $ 25.35 $0.00 $0.00
1 2 0 1 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 (1996 tenant payments in the case of
245 First Street) 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-33
<PAGE>
The North Central Atlanta Office Market
Market Information
According to Jamison Research, Inc., as of August 1996 there were
approximately 89.8 million square feet of office space in the Atlanta Office
Market. The North Central submarket, the location of the Perimeter Center
Portfolio, had approximately 18.7 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 August 1996.
Period Vacancy Rate 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--August 1996 5.0% .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 Built/ Rentable Area
Property Renovated in Square 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-34
<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 9/30/96
- -------------------------------------- -------- -------- -------- -------- ------ ---------
(per square foot)
<S> <C> <C> <C> <C> <C> <C>
North Terraces $16.89 $15.55 $17.94 $17.87 $18.06 $19.71
South Terraces 19.87 18.78 17.08 18.59 20.70 20.27
8,10,12,14,16 Perimeter Center East 12.29 14.32 13.51 13.91 11.63 14.22
20,22,24,26 Perimeter Center East 12.62 13.48 12.92 11.75 13.11 14.65
28,30,32 Perimeter Center East 13.52 13.01 10.34 10.42 12.52 13.35
41 Perimeter Center East 13.09 14.45 14.76 14.29 13.70 15.05
47 Perimeter Center East 16.13 16.13 15.84 14.94 15.39 14.92
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 15.82
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 15.41
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 17.81
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 20.76
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 $16.17
======== ======== ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Average Annual Historic Net Rents
--------------------------------------------------------
As of
Property 1991(a) 1992(a) 1993(a) 1994(a) 1995(a) 9/30/96(b)
- --------------------------------------- ------- ------- -------- -------- ------ ----------
(per square foot)
<S> <C> <C> <C> <C> <C> <C>
North Terraces $ 9.59 $ 8.67 $10.70 $10.52 $ 9.38 $13.50
South Terraces 13.61 12.28 9.17 11.40 12.83 13.39
8,10,12,14,16 Perimeter Center East 5.60 7.17 6.09 5.03 4.47 9.04
20,22,24,26 Perimeter Center East 6.35 6.86 6.12 5.15 4.72 9.21
28,30,32 Perimeter Center East 7.08 6.78 2.63 4.31 5.66 8.61
41 Perimeter Center East 5.97 7.63 6.55 6.16 5.59 9.46
47 Perimeter Center East 9.71 8.85 9.09 7.61 7.28 9.47
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 10.76
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 10.53
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 $11.35
======= ======= ======== ======== ======= ========
</TABLE>
- ------------
(a) Calculated as Historic Net Rent
(b) Calculated as Net Effective Rent
S-35
<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.
<TABLE>
<CAPTION>
Occupancy Rate
------------------------------------------------------------
As of
Property 1991 1992 1993 1994 1995 9/30/96
------------------------------------------ -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
North Terraces 86% 92% 96% 96% 84% 95%
South Terraces 90% 84% 88% 92% 96% 98%
8,10,12,14,16 Perimeter Center East 70% 69% 61% 60% 69% 90%
20,22,24,26 Perimeter Center East 84% 87% 91% 85% 78% 96%
28,30,32 Perimeter Center East 70% 65% 61% 83% 85% 93%
41 Perimeter Center East 77% 78% 58% 61% 71% 100%
47 Perimeter Center East 79% 75% 79% 87% 77% 87%
50 Perimeter Center East 100% 100% 100% 100% 100% 100%
53 Perimeter Center East 61% 70% 88% 88% 83% 89%
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% 94%
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% 98%
======== ======== ======== ======== ======== ============
</TABLE>
S-36
<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
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- -------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
North Terraces square feet (a) 33,447 32,602 16,484 79,666
% sq. ft. (b) 6.8% 6.6% 3.3% 16.2%
annual rent (c) $ 686,451 $ 646,238 $ 310,257 $1,539,051
annual rent psf (d) $ 20.52 $ 19.82 $ 18.82 $ 19.32
tenants (e) 12 8 6 7
South Terraces square feet (a) 34,797 191,213 112,745 96,857
% sq. ft. (b) 7.0% 38.7% 22.8% 19.6%
annual rent (c) $ 737,093 $4,438,045 $2,102,510 $1,922,539
annual rent psf (d) $ 21.18 $ 23.21 $ 18.65 $ 19.85
tenants (e) 6 17 21 20
8,10,12,14,16 Perimeter square feet (a) 1,814 18,567 1,441 7,196
Center East % sq. ft. (b) 2.8% 28.6% 2.2% 11.1%
annual rent (c) $ 24,377 $ 266,551 $ 15,592 $ 118,838
annual rent psf (d) $ 13.44 $ 14.36 $ 10.82 $ 16.51
tenants (e) 2 8 2 4
20,22,24,26 Perimeter square feet (a) 9,434 5,185 18,792 11,010
Center East % sq. ft. (b) 13.5% 7.4% 27.0% 15.8%
annual rent (c) $ 121,373 $ 75,682 $ 264,081 $ 178,040
annual rent ps (d) $ 12.87 $ 14.60 $ 14.05 $ 16.17
tenants (e) 5 5 5 4
28,30,32 Perimeter square feet (a) 0 3,788 87,871 2,363
Center East % sq. ft. (b) 0.0% 3.6% 83.6% 2.2%
annual rent (c) $ 0 $ 49,883 $1,230,390 $ 34,500
annual rent psf (d) $ 0.00 $ 13.17 $ 14.00 $ 14.60
tenants (e) 0 3 5 1
41 Perimeter Center East square feet (a) 1,876 0 32,308 33,520
% sq. ft. (b) 2.0% 0.0% 35.1% 36.4%
annual rent (c) $ 7,035 $ 0 $ 498,448 $ 523,872
annual rent psf (d) $ 3.75 $ 0.00 $ 15.43 $ 15.63
tenants (e) 1 0 2 5
47 Perimeter Center East square feet (a) 0 2,756 16,354 14,871
% sq. ft. (b) 0.0% 3.0% 17.8% 16.2%
annual rent (c) $ 0 $ 51,592 $ 249,373 $ 225,204
annual rent psf (d) $ 0.00 $ 18.72 $ 15.25 $ 15.14
tenants (e) 0 1 6 2
50 Perimeter Center East square feet (a) 0 0 6,300 0
% sq. ft. (b) 0.0% 0.0% 100.0% 0.0%
annual rent (c) $ 0 $ 0 $ 61,677 $ 0
annual rent psf (d) $ 0.00 $ 0.00 $ 9.79 $ 0.00
tenants (e) 0 0 1 0
53 Perimeter Center East square feet (a) 8,017 44,064 4,024 20,446
% sq. ft. (b) 8.9% 48.7% 4.4% 22.6%
annual rent (c) $ 147,753 $ 718,706 $ 63,458 $ 321,531
annual rent psf (d) $ 18.43 $ 16.31 $ 15.77 $ 15.73
tenants (e) 1 3 1 2
56 Perimeter Center East square feet (a) 86,679 0 0 0
% sq. ft. (b) 92.6% 0.0% 0.0% 0.0%
annual rent (c) $1,218,229 $ 0 $ 0 $ 0
annual rent psf (d) $ 14.05 $ 0.00 $ 0.00 $ 0.00
tenants (e) 2 0 0 0
64 Perimeter Center East square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) $ 0 $ 0 $ 0 $ 0
annual rent psf (d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants (e) 0 0 0 0
64A Perimeter Center East square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) $ 0 $ 0 $ 0 $ 0
annual rent psf (d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants (e) 0 0 0 0
70,72,74,76 Perimeter square feet (a) 0 11,960 1,830 16,423
Center East % sq. ft. (b) 0.0% 19.3% 3.0% 26.5%
annual rent (c) $ 0 $ 184,181 $ 23,098 $ 304,919
annual rent psf (d) $ 0.0 $ 15.40 $ 12.62 $ 18.57
tenants (e) 0 5 2 2
(Notes on following page)
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
North Terraces 178,167 103,674 19,687 0 0 2,718
36.1% 21.0% 4.0% 0.0% 0.0% 0.6%
$3,635,253 $2,924,126 $467,493 $ 0 $ 0 $ 0
$ 20.40 $ 28.21 $ 23.75 $ 0.00 $0.00 $ 0.00
11 8 2 0 0 1
South Terraces 42,798 6,397 0 0 0 0
8.7% 1.3% 0.0% 0.0% 0.0% 0.0%
$ 959,854 $ 167,518 $ 0 $ 0 $ 0 $ 0
$ 22.43 $ 26.19 $ 0.00 $ 0.00 $0.00 $ 0.00
2 2 0 0 0 0
8,10,12,14,16 Perimeter 5,169 24,537 0 0 0 0
Center East 8.0% 37.8% 0.0% 0.0% 0.0% 0.0%
$ 92,473 $ 368,373 $ 0 $ 0 $ 0 $ 0
$ 17.89 $ 15.01 $ 0.00 $ 0.00 $0.00 $ 0.00
1 3 0 0 0 0
20,22,24,26 Perimeter 21,059 1,236 0 0 0 0
Center East 30.2% 1.8% 0.0% 0.0% 0.0% 0.0%
$ 351,994 $ 24,596 $ 0 $ 0 $ 0 $ 0
$ 16.71 $ 19.90 $ 0.00 $ 0.00 $0.00 $ 0.00
1 1 0 0 0 0
28,30,32 Perimeter 4,152 0 0 0 0 0
Center East 4.0% 0.0% 0.0% 0.0% 0.0% 0.0%
$ 67,300 $ 0 $ 0 $ 0 $ 0 $ 0
$ 16.21 $ 0.00 $ 0.00 $ 0.00 $0.00 $ 0.00
2 0 0 0 0 0
41 Perimeter Center East 13,463 10,826 0 0 0 0
14.6% 11.8% 0.0% 0.0% 0.0% 0.0%
$ 237,377 $ 192,330 $ 0 $ 0 $ 0 $ 0
$ 17.63 $ 17.77 $ 0.00 $ 0.00 $0.00 $ 0.00
2 1 0 0 0 0
47 Perimeter Center East 41,904 2,330 0 1,577 0 0
45.5% 2.5% 0.0% 1.7% 0.0% 0.0%
$ 677,354 $ 49,559 $ 0 $31,808 $ 0 $ 0
$ 16.16 $ 21.27 $ 0.00 $ 20.17 $0.00 $ 0.00
6 1 0 1 0 0
50 Perimeter Center East 0 0 0 0 0 0
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $ 0 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $0.00 $ 0.00
0 0 0 0 0 0
53 Perimeter Center East 0 3,586 0 0 0 0
0.0% 4.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $ 72,365 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 20.18 $ 0.00 $ 0.00 $0.00 $ 0.00
0 1 0 0 0 0
56 Perimeter Center East 5,742 0 0 0 0 0
6.1% 0.0% 0.0% 0.0% 0.0% 0.0%
$ 117,768 $ 0 $ 0 $ 0 $ 0 $ 0
$ 20.51 $ 0.00 $ 0.00 $ 0.00 $0.00 $ 0.00
1 0 0 0 0 0
64 Perimeter Center East 0 183,037 0 0 0 0
0.0% 100.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $1,746,388 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 9.54 $ 0.00 $ 0.00 $0.00 $ 0.00
0 1 0 0 0 0
64A Perimeter Center East 0 0 0 0 0 372,498
0.0% 0.0% 0.0% 0.0% 0.0% 100.0%
$ 0 $ 0 $ 0 $ 0 $ 0 $9,166,954
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $0.00 $ 24.61
0 0 0 0 0 1
70,72,74,76 Perimeter 17,738 10,251 0 0 0 0
Center East 28.6% 16.6% 0.0% 0.0% 0.0% 0.0%
$ 318,410 $ 180,539 $ 0 $ 0 $ 0 $ 0
$ 17.95 $ 17.61 $ 0.00 $ 0.00 $0.00 $ 0.00
2 2 0 0 0 0
(Notes on following page)
</TABLE>
S-37
<PAGE>
<TABLE>
<CAPTION>
Lease Expirations--Perimeter Center Portfolio
(continued)
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- -------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
125 Perimeter Center square feet (a) 0 0 0 0
West (f) % sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) $ 0 $ 0 $ 0 $ 0
annual rent psf (d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants (e) 0 0 0 0
219 Perimeter Center square feet (a) 7,845 3,886 70,379 26,574
Parkway % sq. ft. (b) 6.1% 3.0% 55.1% 20.8%
annual rent (c) $ 133,261 $ 72,163 $1,119,870 $ 409,172
annual rent psf (d) $ 16.99 $ 18.57 $ 15.91 $ 15.40
tenants (e) 2 1 3 1
223 Perimeter Center square feet (a) 0 0 0 0
Parkway % sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) $ 0 $ 0 $ 0 $ 0
annual rent psf (d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants (e) 0 0 0 0
245 Perimeter Center square feet (a) 0 0 0 0
Parkway % sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) $ 0 $ 0 $ 0 $ 0
annual rent psf (d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants (e) 0 0 0 0
301 Perimeter Center square feet (a) 0 0 0 151,416
North % sq. ft. (b) 0.0% 0.0% 0.0% 100.0%
annual rent (c) $ 0 $ 0 $ 0 $ 2,677,440
annual rent psf (d) $ 0.00 $ 0.00 $ 0.00 $ 17.68
tenants (e) 0 0 0 1
303 Perimeter Center square feet (a) 0 0 0 162,256
North % sq. ft. (b) 0.0% 0.0% 0.0% 100.0%
annual rent (c) $ 0 $ 0 $ 0 $ 3,592,679
annual rent psf (d) $ 0.00 $ 0.00 $ 0.00 $ 22.14
tenants (e) 0 0 0 2
Park Place Shopping Center square feet (a) 0 2,489 5,955 16,920
% sq. ft. (b) 0.0% 4.0% 9.6% 27.4%
annual rent (c) $ 0 $ 47,191 $ 107,728 $ 290,423
annual rent psf (d) $ 0.00 $ 18.96 $ 18.09 $ 17.16
tenants (e) 0 1 4 4
-------------------- ------------ ------------ ------------ ------------
TOTAL square feet (a) 183,909 316,510 374,483 639,518
% sq. ft. (b) 5.6% 9.6% 11.3% 19.4%
annual rent (c) $3,075,571 $6,550,234 $6,046,482 $12,138,208
annual rent psf (d) $ 16.72 $ 20.70 $ 16.15 $ 18.98
tenants (e) 31 52 58 55
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
125 Perimeter Center 0 0 0 0 223,059 0
West (f) 0.0% 0.0% 0.0% 0.0% 100.0% 0.0%
$ 0 $ 0 $ 0 $ 0 $1,001,603 $ 0
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 4.49 $ 0.00
0 0 0 0 1 0
219 Perimeter Center 3,375 15,202 0 0 0 0
Parkway 2.6% 11.9% 0.0% 0.0% 0.0% 0.0%
$ 50,558 $ 286,986 $ 0 $ 0 $ 0 $ 0
$ 14.98 $ 18.88 $ 0.00 $ 0.00 $ 0.00 $ 0.00
1 1 0 0 0 0
223 Perimeter Center 0 127,823 0 0 0 0
Parkway 0.0% 100.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $ 2,428,637 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 19.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
0 1 0 0 0 0
245 Perimeter Center 0 229,217 0 0 0 0
Parkway 0.0% 100.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $ 4,286,082 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 18.70 $ 0.00 $ 0.00 $ 0.00 $ 0.00
0 1 0 0 0 0
301 Perimeter Center 0 0 0 0 0 0
North 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $ 0 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
0 0 0 0 0 0
303 Perimeter Center 0 0 0 0 0 0
North 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $ 0 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
0 0 0 0 0 0
Park Place Shopping Center 15,101 9,591 0 0 0 11,774
24.4% 15.5% 0.0% 0.0% 0.0% 19.0%
$ 312,274 $ 203,795 $ 0 $ 0 $ 0 $ 239,393
$ 20.68 $ 21.25 $ 0.00 $ 0.00 $ 0.00 $ 20.33
4 2 0 0 0 2
------------ ------------ ------------ ------------ ------------ ------------
TOTAL 348,668 727,707 19,687 1,577 223,059 386,990
10.6% 22.0% 0.6% 0.0% 6.8% 11.7%
$6,820,615 $12,931,293 $467,493 $31,808 $1,001,603 $9,406,347
$ 19.56 $ 17.77 $ 23.75 $ 20.17 $ 4.49 $ 24.31
33 25 2 1 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-38
<PAGE>
The Arlington County, Virginia Market
As of September 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 an overall vacancy rate of
3.6% as of September 1996. The Crystal City submarket (location of the Polk
and Taylor Buildings), with approximately 11.3 million square feet, had a
vacancy rate of 0.3% in September 1996. The Rosslyn-Ballston Corridor
(location of the Rosslyn, Virginia Portfolio), with approximately 15.1
million square feet, had a vacancy rate of approximately 6.0% in September
1996.
The following chart describes each of the Company's Properties located in
the Arlington County, Virginia Market.
<TABLE>
<CAPTION>
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership Parking
------------------------------- ------------- --------------- ---------------------- -----------------
<S> <C> <C> <C> <C> <C>
Polk and Taylor Buildings(a) 1970 890,000 12 10%(b) 1,182-car garage
1300 North 17th Street 1980 373,000 19 100% 667-car garage
1616 North Ft. Myer Drive 1974 293,000 19 100% 627-car garage
---------------
Total 1,556,000
===============
</TABLE>
- ------------
(a) The Polk and Taylor Buildings are comprised of two buildings commonly
known as the James K. Polk Building (National Center 2) and the Zachary
Taylor Building (National Center 3), numbered 2521 and 2531 Jefferson
Davis Highway, respectively.
(b) The Company holds a 10% general and limited partner interest in the
partnership that owns the Property.
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 September 30, 1996, for each Property
located in the Arlington County, Virginia Market.
Average
Average Annual Annual Net Occupancy
Property Base Rent Effective Rent Rate
-------------------------------------------- --------------- -----------
Polk and Taylor Buildings $23.77 $19.23 100%
1300 North 17th Street 23.36 17.02 97%
1616 North Ft. Myer Drive 22.68 15.12 97%
---------------- --------------- -----------
Total/Weighted Average $23.46 $17.93 99%
================ =============== ===========
The following table sets forth lease expirations (in square feet) for each
of the Company's Properties in the Arlington County Virginia Market.
<TABLE>
<CAPTION>
Lease Expirations--Arlington County, Virginia
Market
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ---------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Polk & Taylor square feet (a) 0 890,000 0 0
% sq. ft. (b) 0.00% 100.0% 0.0% 0.0%
annual rent (c) $ 0 $17,119,116 $ 0 $ 0
psf (d) $ 0.00 $ 19.23 $ 0.00 $ 0.00
tenants (e) 0 6 0 0
1300 N 17th Street square feet (a) 18,171 25,164 21,284 5,672
% sq. ft (b) 4.9% 6.7% 5.7% 1.5%
annual rent (c) $396,551 $ 611,459 $558,004 $133,571
psf (d) $ 21.82 $ 24.30 $ 26.22 $ 23.55
tenants (e) 2 3 4 2
1616 North Ft Myer square feet (a) 889 6,587 4,626 0
% sq. ft (b) 0.3% 2.2% 1.6% 0.0%
annual rent (c) $ 19,946 $ 156,710 $ 94,917 $ 0
psf (d) $ 22.44 $ 23.79 $ 20.52 $ 0.00
tenants (e) 2 2 1 0
TOTAL square feet (a) 19,060 921,751 25,910 5,672
% sq. ft (b) 1.2% 59.3% 1.7% 0.4%
annual rent (c) $416,497 $17,887,284 $652,921 $133,571
psf (d) $ 21.85 $ 19.41 $ 25.20 $ 23.55
tenants (e) 4 11 5 2
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Polk & Taylor 0 0 0 0 0 0
0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
$ 0 $ 0 $ 0 $ 0 $ 0 $ 0
$ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
0 0 0 0 0 0
1300 N 17th Street 97,639 57,389 40,157 40,252 22,470 33,192
26.2% 15.4% 10.8% 10.8% 6.0% 8.9%
$2,731,996 $1,385,957 $1,023,077 $1,090,746 $656,940 $1,011,342
$ 27.98 $ 24.15 $ 25.48 $ 27.10 $ 29.24 $ 30.47
6 3 3 2 1 2
1616 North Ft Myer 39,855 86,631 12,208 43,882 6,324 82,035
13.6% 29.6% 4.2% 15.0% 2.2% 28.0%
$ 588,674 $2,306,508 $ 324,352 $1,108,034 $166,950 $2,186,591
$ 14.77 $ 26.62 $ 26.57 $ 25.25 $ 26.40 $ 26.65
4 2 1 2 1 3
TOTAL 137,494 144,020 52,365 84,134 28,794 115,227
8.8% 9.3% 3.4% 5.4% 1.9% 7.4%
$3,320,670 $3,692,465 $1,347,429 $2,198,780 $823,890 $3,197,932
$ 24.15 $ 25.64 $ 25.73 $ 26.13 $ 28.61 $ 27.75
10 5 4 4 2 5
</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 plus
1996 tenant payments on account of real estate tax and operating expense
escalations.
(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 September 1996, there were approximately 62.4 million square feet of
office space in the Fairfax County, Virginia Market, 21.0 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
6.7% as of September 1996 and the submarkets of Tysons Corner and
Reston/Herndon each had vacancy rates of 5.9% as of such time. Grubb & Ellis
also reports that Tysons Corner and Reston/Herndon submarkets experienced Net
Absorption of 1,277,000 square feet and 400,000 square feet, respectively,
for the nine months ended September 30, 1996. The following chart describes
each of the Company's Properties located in the Fairfax County, Virginia
Market.
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership
---------------- ------------- ---------------- --------- -------------
John Marshall I 1981 261,364 11 100%
E.J. Randolph 1983 164,677 11 100%
Northridge I 1988 124,319 6 100%
----------------
Total 550,360
================
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 September 30, 1996, for each Property
located in the Fairfax County, Virginia Market.
Average
Average Annual Annual Net Occupancy
Property Base Rent Effective Rent Rate
------------------------------------------- --------------- -----------
John Marshall I $17.50 $15.85 100%
E.J. Randolph 20.83 15.83 80%
Northridge I 25.49 19.34 100%
------ ------ ----
Total/Weighted Average $20.30 $16.63 94%
====== ====== ====
The following table sets forth lease expirations (in square feet) for each
of the Properties in the Fairfax County, Virginia Market.
<TABLE>
<CAPTION>
Lease Expirations--Fairfax County, Virginia Market
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
John Marshall I square feet(a) 0 0 0 0
% sq. ft.(b) 0.0% 0.0% 0.0% 0.0%
annual rent(c) $ 0 $ 0 $ 0 $ 0
psf(d) $ 0.00 $ 0.00 $0.00 $ 0.00
tenants(e) 0 0 0 0
E.J. Randolph square feet(a) 9,208 2,576 0 1,801
% sq. ft.(b) 5.6% 1.6% 0.0% 1.1%
annual rent(c) $221,424 $71,876 $ 0 $65,606
psf(d) $ 24.05 $ 27.90 $0.00 $ 36.43
tenants(e) 1 2 0 3
Northridge I square feet(a) 0 0 0 0
% sq. ft.(b) 0.0% 0.0% 0.0% 0.0%
annual rent(c) $ 0 $ 0 $ 0 $ 0
psf(d) $ 0.00 $ 0.00 $0.00 $ 0.00
tenants(e) 0 0 0 0
------------ ------------ ------------ ------------
TOTAL
FAIRFAX square feet(a) 9,208 2,576 0 1,801
% sq. ft.(b) 1.7% 0.5% 0.0% 0.3%
annual rent(c) $221,424 $71,876 $ 0 $65,606
psf(d) $ 24.05 $ 27.90 $0.00 $ 36.43
tenants(e) 1 2 0 3
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John Marshall I 0 2,788 0 0 0 258,576
0.0% 1.1% 0.0% 0.0% 0.0% 98.9%
$ 0 $ 92,639 $ 0 $ 0 $ 0 $6,660,918
$ 0.00 $ 33.23 $ 0.00 $0.00 $ 0.00 $ 25.76
0 1 0 0 0 1
E.J. Randolph 8,091 20,714 8,014 0 82,149 0
4.9% 12.6% 4.9% 0.0% 49.9% 0.0%
$ 213,406 $547,586 $179,113 $ 0 $1,967,927 $ 0
$ 26.38 $ 26.44 $ 22.35 $0.00 $ 23.96 $ 0.00
2 2 1 0 4 0
Northridge I 124,319 0 0 0 0 0
100.0% 0.0% 0.0% 0.0% 0.0% 0.0%
$3,346,079 $ 0 $ 0 $ 0 $ 0 $ 0
$ 26.92 $ 0.00 $ 0.00 $0.00 $ 0.00 $ 0.00
1 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------
TOTAL
FAIRFAX 132,410 23,502 8,014 0 82,149 258,576
24.1% 4.3% 1.5% 0.0% 14.9% 47.0%
$3,559,484 $640,225 $179,113 $ 0 $1,967,927 $6,660,918
$ 26.88 $ 27.24 $ 22.35 $0.00 $ 23.96 $ 25.76
3 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 1996 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>
Washington, D.C. Office Market
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, N.W. 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% as of such time.
1333 H Street, N.W. 1333 H Street, N.W. is an 11-story office property
comprising approximately 239,000 square feet, approximately 205,000 of which
was built in 1982. The Company owns a 100% fee interest in the Property.
As of September 30, 1996, the average annual Base Rent per square foot and
average annual Net Effective Rent per square foot for the 1333 H Street, N.W.
Property were $26.58 and $19.68, respectively. As of September 30, 1996, the
Property was approximately 90% leased.
The following table sets forth lease expirations (in square feet) for 1333
H Street.
<TABLE>
<CAPTION>
Lease Expirations--Washington, D.C. Office Market
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1333 H Street, N.W. square feet(a) 17,632 2,223 4,045 0
% sq. ft.(b) 7.4% 0.9% 1.7% 0.0%
annual rent(c) $393,047 $109,788 $112,722 $ 0
psf(d) $ 22.29 $ 49.39 $ 27.87 $0.00
tenants(e) 4 1 3 0
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1333 H Street, N.W. 8,835 2,945 57,041 14,708 0 108,536
3.7% 1.2% 23.9% 6.2% 0.0% 45.5%
$246,683 $77,836 $1,758,913 $461,684 $ 0 $3,707,067
$ 27.92 $ 26.43 $ 30.84 $ 31.39 $0.00 $ 34.16
3 1 1 1 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 expiring base rental income represented by such leases in the
year of expiration plus 1996 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
Suburban Chicago Office Market
As of September 1996, there were approximately 60.3 million square feet of
office space in the Suburban Chicago Office Market, approximately 20.8
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 11.2% as of September 1996, while the East-West
Corridor submarket and North Suburban submarket had vacancy rates of 9.8%
(9.5% for Class A office properties) and 11.2% (7.9% 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 1,130,000 square feet and 610,000 square feet, respectively,
for the first nine months of 1996.
The following chart describes each of the Company's Properties located in
the Suburban Chicago Office Market.
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership
- ----------------------- ------------- ---------------- --------- ------------
AT&T Plaza 1984 225,318 8 100%
Tri-State International 1986 548,000 (a) 100%
----------------
Total 773,318
================
- ------------
(a) The Tri-State International complex consists of five buildings.
S-41
<PAGE>
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 September 30, 1996, for each Property in the
Suburban Chicago Office Market.
Average
Average Annual Annual Net Occupancy
Property Base Rent Effective Rent Rate
-------------------------------------------- --------------- -----------
AT&T Plaza $20.70 $14.15 100%
Tri-State International 23.13 16.77 70%
------ ------ ----
Total Weighted Average $22.43 $16.00 78%
====== ====== ====
<TABLE>
<CAPTION>
Lease Expirations--Suburban Chicago Office Market
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
AT&T Plaza square feet (a) 5,144 10,313 39,525 29,539
% sq. ft (b) 2.3% 4.6% 17.5% 13.1%
annual rent (c) $119,789 $ 200,629 $ 814,860 $ 669,941
psf (d) $ 23.29 $ 19.45 $ 20.62 $ 22.68
tenants (e) 2 4 6 2
Tri-State International square feet (a) 24,239 116,169 17,436 60,002
% sq. ft. (b) 4.4% 21.2% 3.2% 10.9%
annual rent (c) $503,150 $2,693,452 $ 361,023 $1,578,120
psf (d) $ 20.76 $ 23.19 $ 20.71 $ 26.30
tenants (e) 3 8 2 5
------------ ------------ ------------ ------------
TOTAL square feet (a) 29,383 126,482 56,961 89,541
% sq. ft. (b) 3.8% 16.4% 7.4% 11.6%
annual rent (c) $622,939 $2,894,080 $1,175,883 $2,248,062
psf (d) $ 21.20 $ 22.88 $ 20.64 $ 25.11
tenants (e) 5 12 8 7
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AT&T Plaza 79,574 0 12,288 38,249 8,165 2,521
35.3% 0.0% 5.5% 17.0% 3.6% 1.1%
$1,758,066 $ 0 $282,240 $994,404 $197,014 $ 0
$ 22.09 $ 0.00 $ 22.97 $ 26.00 $ 24.13 $ 0.00
4 0 2 3 1 1
Tri-State International 24,018 85,722 776 0 27,491 26,578
4.4% 15.6% 0.1% 0.0% 5.0% 4.9%
$ 548,544 $2,253,911 $ 11,578 $ 0 $721,639 $736,211
$ 22.84 $ 26.29 $ 14.92 $ 0.00 $ 26.25 $ 27.70
3 9 1 0 1 1
------------ ------------ ------------ ------------ ------------ ------------
TOTAL 103,592 85,722 13,064 38,249 35,656 29,099
13.4% 11.1% 1.7% 4.9% 4.6% 3.8%
$2,306,609 $2,253,911 $293,818 $994,404 $918,652 $736,211
$ 22.27 26.29 $ 22.49 $ 26.00 $ 25.76 $ 25.30
7 9 3 3 2 2
</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 plus
1996 tenant payments on account of real estate tax and operating expense
escalations.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-42
<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 $20.47 and $15.84, respectively, as of September 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 September 30, 1996, these buildings were
approximately 95% leased. The Company has entered into a contract to sell the
Westlakes Office Park, the consummation of which is subject to numerous closing
conditions, including, but not limited to, satisfactory completion of the
purchaser's due diligence. At the Company's option, the transaction may be
structured as a like-kind exchange.
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
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
One Westlakes Drive square feet(a) 9,639 20,616 19,329 14,685
% sq. ft.(b) 7.0% 15.0% 14.1% 10.7%
annual rent(c) $212,906 $457,260 $391,845 $ 226,298
psf(d) $ 22.09 $ 22.18 $ 20.27 $ 15.41
tenants(e) 4 4 3 3
Two Westlakes Drive square feet(a) 912 6,668 5,394 11,827
% sq. ft.(b) 0.7% 5.2% 4.2% 9.2%
annual rent(c) $ 6,840 $139,471 $110,218 $ 249,071
psf(d) $ 7.50 $ 20.92 $ 20.43 $ 21.06
tenants(e) 1 1 2 2
Three Westlakes Drive square feet(a) 0 0 0 0
% sq. ft.(b) 0.0% 0.0% 0.0% 0.0%
annual rent(c) $ 0 $ 0 $ 0 $ 0
psf(d) $ 0.00 $ 0.00 $ 0.00 $ 0.00
tenants(e) 0 0 0 0
Five Westlakes Drive square feet(a) 11,803 0 0 27,480
% sq. ft.(b) 19.7% 0.0% 0.0% 45.8%
annual rent(c) $348,267 $ 0 $ 0 $ 667,864
psf(d) $ 29.51 $ 0.00 $ 0.00 $ 24.30
tenants(e) 2 0 0 2
------------ ------------ ------------ ------------
TOTAL square feet(a) 22,354 27,284 24,723 53,992
% sq. ft.(b) 5.0% 6.1% 5.6% 12.2%
annual rent(c) $568,012 $596,732 $502,062 $1,143,233
psf(d) $ 25.41 $ 21.87 $ 20.31 $ 21.17
tenants(e) 7 5 5 7
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
One Westlakes Drive 13,839 13,114 14,538 0 0 18,439
10.1% 9.6% 10.6% 0.0% 0.0% 3.5%
$ 293,492 $291,294 $312,760 $ 0 $ 0 $442,536
$ 21.21 $ 22.21 $ 21.51 $ 0.00 $0.00 $ 24.00
3 3 1 0 0 1
Two Westlakes Drive 35,447 0 0 44,846 0 22,413
27.5% 0.0% 0.0% 34.8% 0.0% 17.4%
$ 778,427 $ 0 $ 0 $ 986,612 $ 0 $411,319
$ 21.96 $ 0.00 $ 0.00 $ 22.00 $0.00 $ 18.35
2 0 0 2 0 2
Three Westlakes Drive 115,057 0 0 0 0 0
97.5% 0.0% 0.0% 0.0% 0.0% 0.0%
$2,845,884 $ 0 $ 0 $ 0 $ 0 $ 0
$ 24.73 $ 0.00 $ 0.00 $ 0.00 $0.00 $ 0.00
2 0 0 0 0 0
Five Westlakes Drive 12,928 1,000 0 2,746 0 0
21.5% 1.7% 0.0% 4.6% 0.0% 0.0%
$ 303,630 $ 23,350 $ 0 $ 60,412 $ 0 $ 0
$ 23.49 $ 23.35 $ 0.00 $ 22.00 $0.00 $ 0.00
2 1 0 1 0 0
------------ ------------ ------------ ------------ ------------ ------------
TOTAL 177,271 14,114 14,538 47,592 0 40,852
39.9% 3.2% 3.3% 10.7% 0.0% 9.2%
$4,221,433 $314,644 $312,760 $1,047,024 $ 0 $853,855
$ 23.81 $ 22.29 $ 21.51 $ 22.00 $0.00 $ 20.90
9 4 1 3 0 3
</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
The West Los Angeles Office Market
As of September 1996, there were approximately 37 million square feet of
office space in the West Los Angeles Office Market. The Westwood submarket,
the location of 10960 Wilshire Boulevard, had approximately 3.2 million
square feet of office space. According to CB Commercial, the West Los Angeles
Office Market had an overall vacancy rate of 13.4% as of September 30, 1996,
and the Westwood submarket had a vacancy rate of 10.3% at such time.
10960 Wilshire Boulevard. 10960 Wilshire Boulevard consists of
approximately 544,000 square feet in a 23-story office building. The property
was built in 1971 and has undergone approximately $39 million of capital
improvements since 1992.
As of September 30, 1996, the average annual Base Rent per square foot and
average annual Net Effective Rent per square foot for 10960 Wilshire
Boulevard were $24.00 and $18.53, respectively. As of September 30, 1996 the
property was approximately 89% leased.
S-43
<PAGE>
The following table sets forth lease expirations (in square feet) for
10960 Wilshire Boulevard.
<TABLE>
<CAPTION>
Lease Expiration Summary
---------------------------------------------------
10/1/96
to
Property 12/31/96 1997 1998 1999
- --------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
10960 Wilshire Boulevard square feet (a) 0 23,922 3,030 9,126
% sq. ft (b) 0.0% 4.4% 0.6% 1.7%
annual rent (c) $ 0 $585,840 $88,608 $262,561
psf (d) $0.00 $ 24.49 $ 29.24 $ 28.77
tenants (e) 0 1 1 3
</TABLE>
<TABLE>
<CAPTION>
2005 and
Property 2000 2001 2002 2003 2004 beyond
- --------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
10960 Wilshire Boulevard 162,021 20,761 52,382 34,801 10,658 167,586
29.8% 3.8% 9.6% 6.4% 2.0% 30.8%
$4,561,300 $598,825 $1,809,183 $1,134,632 $350,807 $5,664,221
$ 28.15 $ 28.84 $ 34.54 $ 32.60 $ 32.91 $ 33.80
14 3 3 3 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 plus
1996 tenant payments on account of real estate tax and operating expense
escalations.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose lease will expire
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. Accordingly, information regarding Properties acquired
during 1996 is excluded.
(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.
S-44
<PAGE>
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.
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. Accordingly, information regarding Properties acquired
during 1996 is excluded.
(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-45
<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) was approximately $533.4 million at
November 1, 1996. Additionally, at November 1, 1996, the Company had
approximately $118.0 million outstanding 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.
<TABLE>
<CAPTION>
Principal Company's
Amount Portion
(as of of Interest Maturity Prepayment
Property 11/1/96) 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 13.0 13.0 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)
John Marshall I 20.9 20.9 8.38% 12/1/08 Prepayable subject to
conditions(k)
Northridge I 16.4 16.4 7.28% 12/14/96(l) Prepayable subject to
----------- ------------ conditions(m)
Total Consolidated $440.3 $440.3
Properties
----------- ------------
Unconsolidated Properties
with respect to which the
Company is a general
partner or shareholder
One Post Office Square(n) $ 68.0 $ 34.0 7.00% 8/1/00(o) Prepayable subject to
conditions(p)
One Post Office Square(n) 25.3 12.7 8.25% 8/1/00(q) Prepayable subject to
conditions(r)
75-101 Federal Street(s) 90.0 46.4 7.61% 10/1/02(t) Prepayable subject to
----------- ------------ conditions(u)
Total Unconsolidated 183.3 93.1
Properties
----------- ------------
Total Mortgage Debt $623.6 $533.4
=========== ============
Credit Facility:
Various Properties(v) $118.0 $118.0 (w) 6/27/99 Prepayable at any
=========== ============ time without penalty
</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.
(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.
S-46
<PAGE>
(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) Mandatory annual prepayments and additional prepayments subject to
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.
(l) The estimated balance due on maturity is approximately $16.4 million.
(m) Prepayable subject to a payment equal to the greater of 1% of the
outstanding principal balance or an amount based on U.S. Treasury notes
having a term closest to the date of maturity.
(n) 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.
(o) The Company's share of the estimated balance due on maturity is
approximately $31.9 million.
(p) 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.
(q) The Company's share of the estimated balance due on maturity is
approximately $11.2 million.
(r) 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.
(s) 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.
(t) The Company's share of the estimated balance due on maturity is
approximately $44.0 million.
(u) 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.
(v) The Credit Facility is secured by cross-collateralized mortgages and
assignments of rents on the Crosby Corporate Center, a portion of 150
Federal Street, One Canal Park, Westwood Business Centre, Westlakes
Office Park, 2 Oliver Street, Ten Canal Park, Russia Wharf, AT&T Plaza,
Tri-State International office park, 1333 H Street, N.W., the E.J.
Randolph building, 1300 North 17th Street and 1616 North Ft. Myer.
(w) Outstanding balances under the Credit Facility generally 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.
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 first 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
November 1, 1996, the
S-47
<PAGE>
aggregate outstanding principal amount of Rowes Wharf Associates' first
mortgage debt, which consists of two tiers of debt, equals approximately
$201.2 million. The 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. The 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 the 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-48
<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 $346.9 million (approximately $397 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 Pending Acquisitions (or repay amounts drawn under the Credit Facility to
acquire the Pending Acquisitions), to repay amounts drawn under the Credit
Facility in connection with the purchase of the Rosslyn, Virginia Portfolio
and certain other Properties, and/or for general corporate and working
capital purposes. All outstanding borrowings under the Credit Facility mature
in June 1999 and generally 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. No prepayment penalties are
required in connection with the repayment of the Credit Facility. 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-49
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Company's Common Stock trades on the NYSE under the symbol "BCN." On
November 14, 1996, the reported closing sale price per share of Common Stock
on the NYSE was $31-1/8 and there were approximately 372 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
- --------------------------- ---------- ---------- ----------------
June 30, 1994 (from May 20,
1994) $18-1/4 $17-1/8 $ .16(a)
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
September 30, 1996 $29 $24-3/4 $.4625(b)
December 31, 1996 (through
November 14, 1996) $31-7/8 $29-1/8
- ------------
(a) The Company paid a distribution of $.16 per share of Common Stock on
August 25, 1994, for the period May 26, 1994 (the closing of the Initial
Offering) through June 30, 1994, which would be equivalent to a quarterly
distribution of $.40 and an annual distribution of $1.60 per share of
Common Stock.
(b) To be paid November 22, 1996 to stockholders of record as of November 8,
1996. Accordingly, purchasers of Common Stock in the Offering will not
receive the third quarter 1996 dividend in respect of the shares of
Common Stock offered hereby.
The Company pays a quarterly distribution on its Common Stock of $.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 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
November 14, 1996 would have had a cumulative pretax total return of 118.5% or
an annual compounded pretax return of 36.9% based upon the closing price of
the Common Stock on November 14, 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-50
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on an
historical basis as of September 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 Pending Acquisitions had occurred on September 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 $ 18,000 $ 18,000
Mortgage Notes Payable 440,526 440,526
------------- ---------------
Total Debt 458,526 458,526
------------- ---------------
MINORITY INTEREST: 70,098 70,098
------------- ---------------
STOCKHOLDERS EQUITY:
Common Stock, $.01 par value; 175,000,000
shares authorized; 33,233,255 (historical)
shares issued and outstanding (45,233,255
shares on an as adjusted basis) (1) 332 452
Additional paid-in capital 584,626 931,366
Cumulative net income 46,782 46,782
Cumulative dividends (68,117) (68,117)
------------- ---------------
Total stockholder's equity 563,623 910,483
------------- ---------------
Total capitalization $1,092,247 $1,439,107
============= ===============
- ------------
(1) Does not include Common Stock reserved for issuance upon (i) possible
redemption of 5,102,428 Units and (ii) exercise of 1,072,110 options
granted pursuant to the 1994 Stock Option Plan. A total of 3,764,328
shares of Common Stock are reserved for issuance under the 1994 Stock
Option Plan, the 1996 Plan and dividend reinvestment plan.
S-51
<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 nine months ended September 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 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-52
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Information
Company
--------------------------------------------------------------
Pro Forma
Nine Months Nine Months Nine Months
Ended Ended Ended
September September September For the Year
30, 30, 30, Pro Forma Ended
1996 1996 1995 1995 December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995
------------ ------------ ------------ ----------- ------------
(dollars in thousands, except per
share amounts)
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 156,944 $ 97,308 $ 52,281 $ 196,023 $ 71,050
Management fees 2,248 2,248 1,413 2,926 2,203
Recoveries from tenants 18,249 11,001 7,297 22,896 9,742
Mortgage interest income 4,178 3,567 1,564 5,573 2,546
Interest and other income 11,277 7,585 3,965 10,259 5,502
------------ ------------ ------------ ----------- ------------
Total revenue 192,896 121,709 66,520 237,677 91,043
------------ ------------ ------------ ----------- ------------
Expenses:
Property expenses 41,239 24,607 13,469 52,105 18,090
Real estate taxes 18,242 12,491 7,414 22,493 10,217
General and administrative 14,899 11,963 6,886 16,184 9,755
Mortgage interest expense 24,650 20,739 11,569 33,315 15,226
Interest--amortization of financing
costs 1,633 1,618 947 1,490 1,370
Depreciation and amortization 35,228 21,737 12,607 45,418 17,428
------------ ------------ ------------ ----------- ------------
Total expenses 135,891 93,155 52,892 171,004 72,086
------------ ------------ ------------ ----------- ------------
Income (loss) from operations 57,005 28,554 13,628 66,673 18,957
------------ ------------ ------------ ----------- ------------
Construction revenue and other income -- -- -- -- --
Construction costs and operating
expenses -- -- -- -- --
------------ ------------ ------------ ----------- ------------
Income from construction -- -- -- -- --
------------ ------------ ------------ ----------- ------------
Equity (loss) in joint ventures and
corporations (1) 2,053 2,053 1,735 4,560 3,222
Minority interest in loss of combined
partnerships -- -- -- -- --
------------ ------------ ------------ ----------- ------------
Income (loss) before minority interest
and extraordinary items 59,058 30,607 15,363 71,233 22,179
Minority interest in Operating
Partnerships (2) (5,987) (4,231) (3,043) (7,221) (4,119)
------------ ------------ ------------ ----------- ----------
Income before extraordinary items 53,071 26,376 12,320 64,012 18,060
============ ============
Extraordinary items, net of minority (3,309) -- --
----------- ------------ ----------
Net income $ 23,067 $ 12,320 $ 18,060
=========== ============ ==========
Net income per share before
extraordinary items $ 1.17 $ .99 $ $ 1.42
Net income per share of Common Stock $ .86 $ .81 $ 1.09
Cash dividends declared per share of
Common Stock $ 1.345 $ 1.24 $ 1.24
Cash dividends paid per share of Common
Stock $ 1.3025 $ 1.22 $ 1.64
Weighted average common shares
outstanding 45,233,255 26,659,577 15,288,937 45,233,255 16,525,245
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor
-------------- -------------------------------------------
For the Period For the Period
May 26, 1994 to January 1,
December 31, 1994 to Years Ended December 31,
---------------------------
1994 May 25, 1994 1993 1992 1991
--------------- -------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue:
Rental income $ 25,144 $ 5,776 $14,315 $11,406 $14,850
Management fees -- 1,521 3,533 3,331 2,205
Recoveries from tenants 4,488 1,040 2,349 1,989 3,986
Mortgage interest income -- -- -- -- --
Interest and other income 2,301 675 2,176 2,003 3,134
--------------- -------------- -------- -------- --------
Total revenue 31,933 9,012 22,373 18,729 24,175
--------------- -------------- -------- -------- --------
Expenses:
Property expenses 7,034 2,086 4,580 4,522 6,390
Real estate taxes 3,325 595 1,354 1,204 1,162
General and administrative 3,122 1,399 4,357 4,658 4,528
Mortgage interest expense 4,992 2,798 7,650 7,203 7,532
Interest--amortization of financing
costs 617 373 192 138 320
Depreciation and amortization 6,924 2,385 5,577 5,505 4,967
--------------- -------------- -------- -------- --------
Total expenses 26,014 9,636 23,710 23,230 24,899
--------------- -------------- -------- -------- --------
Income (loss) from operations 5,919 (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) 1,406 198 (5,953) (1,544) 84
Minority interest in loss of combined
partnerships -- 931 1,539 2,656 1,087
--------------- -------------- -------- -------- --------
Income (loss) before minority interest
and extraordinary items 7,325 607 (5,311) (3,253) 517
Minority interest in Operating
Partnerships (2) (1,670) -- -- -- --
--------------- -------------- -------- -------- --------
Income before extraordinary items 5,655 607 (5,311) (3,253) 517
Extraordinary items, net of minority -- 8,898 1,554 -- --
--------------- -------------- -------- -------- --------
Net income $ 5,655 $ 9,505 $(3,757) $(3,253) $ 517
=============== ============== ======== ======== ========
Net income per share before
extraordinary items
Net income per share of Common Stock $ 0.48
Cash dividends declared per share of
Common Stock $ 0.96
Cash dividends paid per share of Common
Stock $ 0.56
Weighted average common shares
outstanding 11,816,380
</TABLE>
S-53
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Information
Company
-------------------------------------------------------------
Pro Forma
Nine Months Nine Months Nine Months
Ended Ended Ended
September September September For the Year
30, 30, 30, Pro Forma Ended
1996 1996 1995 1995 December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1995
------------ ------------------------ --------- ------------
(dollars in thousands, except per
share amounts)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate before accumulated
depreciation $1,413,463 $1,061,413 $431,817 $ -- $471,142
Total assets 1,490,867 1,144,007 507,629 -- 534,797
Mortgage debt 440,526 440,526 89,489 -- 70,536
Note Payable, Credit Facility 18,000 18,000 87,000 -- 130,500
Total liabilities 510,286 510,286 209,474 -- 239,013
Total equity (deficit) 910,483 563,623 260,679 -- 258,822
- -------------
(1) Including deductions for:
Depreciation and
amortization $ 2,998 $ 2,998 $ 1,314 $3,895 $ 2,306
Interest--Amortization of
financing costs $ 673 $ 673 $ 630 $ 896 $ 853
(2) Company share of Operating
Partnership 89.86% 86.1% 80.1% 89.86% 81.3%
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor
-------------- --------------------------------------------
For the Period For the Period
May 26, 1994 to January 1,
December 31, 1994 to Years Ended December 31,
----------------------------
1994 May 25, 1994 1993 1992 1991
--------------- -------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate before accumulated
depreciation $400,419 $ 82,198 $ 81,220 $ 78,580 $ 76,489
Total assets 400,861 77,470 85,497 93,327 84,978
Mortgage debt 90,936 69,240 87,091 86,610 85,189
Note Payable, Credit Facility 130,300 -- -- -- --
Total liabilities 261,100 129,836 143,451 142,015 127,283
Total equity (deficit) 102,038 (52,366) (57,954) (48,688) (42,305)
- -------------
(1) Including deductions for:
Depreciation and
amortization $ 3,013
Interest--Amortization of
financing costs $ 796
(2) Company share of Operating
Partnership 77.2%
</TABLE>
S-54
<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
(current); Executive Vice President, Chief
Operating Officer and Director (effective
January 1, 1997)
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 79 Director
Graham O. Harrison 71 Director
William F. McCall, 60 Director
Jr
Steven Shulman 54 Director
Scott M. Sperling 37 Director
Dale F. Frey 64 Director (effective January 1, 1997)
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. Effective January 1, 1997, Mr. Fortin will
serve as Executive Vice President, Chief Operating Officer and Director 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.
S-55
<PAGE>
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.
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's 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 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 overall 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. He serves on the Board of
Directors of the Massachusetts chapter of the National Association of
Industrial and Office Properties.
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
S-56
<PAGE>
million square feet of leasing including an office park adjacent to the
Perimeter Center Portfolio. Mr. Hoopes is a graduate of Princeton University.
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
Laventhol & 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.
S-57
<PAGE>
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 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, 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.
Mr. Frey will serve as a Director of the Company beginning on January 1,
1997. Mr. Frey is President and Chairman of the Board of Directors of General
Electric Investment Corporation, a position he has held since July 1984. Mr.
Frey is also Vice President of General Electric Company, a position he has
held since June 1980. Mr. Frey serves as a trustee of General Electric
Pension Trust. Mr. Frey also serves on the Board of Directors of General
Electric Financial Services, Inc.; General Electric Capital Corporation;
Rhone-Poulenc Rorer; USF&G Corporation; Praxais, Inc.; Doubletree Hotels
Corporation and the Cancer Research Fund of the Damon-Runyon-Walter Winchell
Foundation. Mr. Frey is also a Trustee of Franklin and Marshall College. Mr.
Frey is also a member of the Forstmann Little & Company and the Warburg
Pincus advisory committees; and the Investment Advisory Committee of the New
York State Common Retirement Fund. Mr. Frey is also a member of the Financial
Executives Institute. Mr. Frey is a graduate of Franklin and Marshall College
and received a Master of Business Administration in Economics and Accounting
from New York University.
S-58
<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
Underwriter Shares
----------- -------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 1,412,000
Dean Witter Reynolds Inc. 1,412,000
Donaldson, Lufkin & Jenrette Securities Corporation 1,412,000
Lehman Brothers Inc. 1,412,000
PaineWebber Incorporated 1,412,000
Raymond James & Associates, Inc. 1,412,000
Bear, Stearns & Co. Inc. 246,000
Alex. Brown & Sons Incorporated 246,000
CS First Boston Corporation 246,000
A.G. Edwards & Sons, Inc. 246,000
J.P. Morgan Securities Inc. 246,000
Prudential Securities Incorporated 246,000
Salomon Brothers Inc 246,000
Smith Barney Inc. 246,000
Adams, Harkness & Hill, Inc. 60,000
Advest, Inc. 60,000
Crowell, Weedon & Co. 60,000
EVEREN Securities, Inc. 60,000
Fahnestock & Co. Inc. 60,000
First Albany Corporation 60,000
Friedman, Billings, Ramsey & Co., Inc. 60,000
Furman Selz LLC 60,000
Genesis Merchant Group Securities 60,000
Gruntal & Co., Incorporated 60,000
Harris Webb & Garrison, Inc. 60,000
Interstate/Johnson Lane Corporation 60,000
Janney Montgomery Scott Inc. 60,000
Edward D. Jones & Co., L.P. 60,000
C.L. King & Associates, Inc. 60,000
Legg Mason Wood Walker, Incorporated 60,000
McDonald & Company Securities, Inc. 60,000
Moors & Cabot, Inc. 60,000
Pennsylvania Merchant Group Ltd 60,000
The Robinson-Humphrey Company, Inc. 60,000
The Seidler Companies Incorporated 60,000
Sterne, Agee & Leach, Inc. 60,000
Stifel, Nicolaus & Company, Incorporated 60,000
Tucker Anthony Incorporated 60,000
Utendahl Capital Partners, L.P. 60,000
Wheat, First Securities, Inc. 60,000
-----------
Total 12,000,000
===========
S-59
<PAGE>
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 $.95 per
share. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of $.10 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 1,723,000
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."
S-60
<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, P.C., 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.
S-61
<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 date of this Prospectus is November 14, 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 files information electronically with the Commission, and the
Commission maintains a Web Site that contains reports, proxy and information
statements and other information regarding registrants (including the
Company) that file electronically with the Commission. The address of the
Commission's Web Site is (http://www.sec.gov).
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 Reports on Form 10-Q for the periods ended
March 31, 1996, June 30, 1996, and September 30, 1996, filed with the
Commission pursuant to the Exchange Act.
3. The Company's Current Reports on Form 8-K, as amended, dated January
5, 1996, February 20, 1996, July 23, 1996, and October 18, 1996, each filed with
the Commission pursuant to the Exchange Act, including all amendments thereto.
4. 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
November 14, 1996, the Company had outstanding 33,234,255 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, real estate
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 specific 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
specific operating expenses for each of the Fairfax County Portfolio in
Tysons Corner and Herndon, Virginia, AT&T Plaza in Oak Brook, Illinois,
Tri-State International in Lincolnshire, Illinois and 1333 H Street in
Washington, D.C. for the year ended December 31, 1995, incorporated by
reference herein from the Company's report on Form 8-K dated July 23, 1996,
have been so incorporated in reliance on the reports 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
specific operating expenses for each of the Rosslyn Acquisitions in Rosslyn,
Virginia, the New England Executive Park in Burlington, Massachusetts and
10960 Wilshire Boulevard in Westwood, California for the year ended December
31, 1995, incorporated by reference herein from the Company's current report
on Form 8-K dated October 18, 1996, have been so incorporated in reliance on
the reports of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of said firm as experts in accounting and auditing.
7
<PAGE>
=========================================================
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 circumstances, 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.
------------
TABLE OF CONTENTS
Page
---------
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary S-3
Risk Factors S-14
The Company S-20
Recent Developments S-20
Properties and Pending Acquisitions S-25
Use of Proceeds S-49
Price Range of Common Stock and
Distribution History S-50
Capitalization S-51
Selected Financial Information S-52
Management S-55
Underwriting S-59
Legal Matters S-61
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
=============================================================================
=============================================================================
12,000,000 Shares
BEACON PROPERTIES
CORPORATION
Common Stock
------------
P R O S P E C T U S S U P P L E M E N T
------------
Merrill Lynch & Co.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers
PaineWebber Incorporated
Raymond James &
Associates, Inc.
November 14, 1996
==============================================================================
