PROSPECTUS SUPPLEMENT
(To Prospectus dated June 10, 1997)
8,000,000 Shares
BEACON PROPERTIES CORPORATION
8.98% Series A Cumulative Redeemable Preferred Stock
Liquidation Preference $25.00 Per Share
--------------------
Dividends on the 8.98% Series A Cumulative Redeemable Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"), of Beacon Properties
Corporation (collectively with its subsidiaries, the "Company") are cumulative
from the date of original issue and are payable quarterly, commencing on
September 15, 1997 at the rate of 8.98% per annum of the $25 liquidation
preference (equivalent to a fixed annual rate of $2.245 per share). See
"Description of Series A Preferred Stock--Dividends."
Except in certain circumstances relating to the Company's qualification as a
real estate investment trust (a "REIT") the Series A Preferred Stock is not
redeemable prior to June 15, 2002. On and after June 15, 2002, the Series A
Preferred Stock may be redeemed for cash at the option of the Company, in whole
or in part, at a redemption price of $25 per share, plus accrued and unpaid
dividends, if any, thereon to the redemption date. The redemption price (other
than the portion thereof consisting of accrued and unpaid dividends) shall be
payable solely out of the sale proceeds of other stock of the Company, which may
include other series of the Company's preferred stock, par value $.01 per share
("Preferred Stock"), and from no other source. The Series A Preferred Stock has
no stated maturity and will not be subject to any sinking fund or mandatory
redemption and will not be convertible into any other securities of the Company.
See "Description of Series A Preferred Stock--Redemption."
Application has been made to list the Series A Preferred Stock on the New
York Stock Exchange ("NYSE"). If so approved, trading of the Series A Preferred
Stock on the NYSE is expected to commence within a 30-day period after the
initial delivery of the Series A Preferred Stock. See "Underwriting."
See "Risk Factors" beginning on page S-11 for certain factors relevant to
an investment in the Series A Preferred 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(1) Discount(2) Company(3)
Per Share $25.00 $.7875 $24.2125
Total(4) $200,000,000 $6,300,000 $193,700,000
================================================================================
(1) Plus accrued dividends, if any, from the date of original issue.
(2) 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."
(3) Before deducting estimated expenses of $225,000 payable by the Company.
(4) 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 1,200,000 shares of Series A Preferred 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
$230,000,000, $7,245,000 and $222,755,000, respectively. See "Underwriting."
-------------------
The shares of Series A Preferred 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 Series A Preferred Stock offered hereby will be made in New
York, New York, on or about June 13, 1997.
-------------------
Merrill Lynch & Co.
Lehman Brothers
Morgan Stanley Dean Witter
-------------------
The date of this Prospectus Supplement is June 10, 1997.
<PAGE>
- -----------
Beacon
- -----------
Properties
- -----------
Corporation
- -----------
[U.S. Map with the following areas highlighted: San Francisco, Los Angeles,
Chicago, Atlanta, Washington and Boston]
Map Caption: Property Locations
[Tabular representation of pie charts]
Urban/Suburban Distribution of Properties
- -----------------------------------------
Suburban 67%
Urban 33%
Net Operating Income by Region
- ------------------------------
Washington 16%
Atlanta 18%
Boston 42%
San Francisco 6%
Los Angeles 6%
Chicago 12%
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES OF
SERIES A PREFERRED STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE
PURCHASE OF SERIES A PREFERRED STOCK TO COVER SYNDICATE SHORT POSITIONS AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<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 the Underwriters' over-allotment option is not exercised and
(ii) that the market price per share of the Company's common stock, $.01 par
value (the "Common Stock"), is $31.00 (the reported closing sale price of the
Common Stock on the NYSE on June 10, 1997). 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") 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-11 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, Los Angeles, San Francisco and Washington, D.C., as well as
commercial real estate development, 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 Company owns or
has an interest in 116 income producing commercial properties encompassing
approximately 18.6 million rentable square feet (each, a "Property and,
collectively, the "Properties"), approximately 67% of which are located in
suburban office markets and approximately 33% of which are located in downtown
office markets, primarily Boston. The Properties include the recently acquired
225 Franklin Street located in Boston, Massachusetts; a five-building office
complex located in Westchester (suburban Chicago), Illinois (the "Westbrook
Corporate Center"); 10880 Wilshire Boulevard located in suburban Los Angeles;
and Centerpointe I and II located in Fairfax County, Virginia (collectively, the
"Recent Acquisitions"). As of March 31, 1997, the Properties were approximately
96% leased with over 1,200 tenants.
The Company is currently experiencing a period of rapid growth. Since January
1997, the Company has invested approximately $641 million in office properties,
increasing its interests in real estate by over 36%. The Company currently has a
total market capitalization of approximately $3.0 billion. Based on information
contained in Merrill Lynch & Co.'s Comparative Valuation of REITs, according to
total market capitalization data as of May 16, 1997, the Company is the largest
REIT focused exclusively on the office sector.
The Company's business is conducted principally through the Operating
Partnership, two subsidiary corporations and two subsidiary limited
partnerships. The Company conducts third-party management operations through
Beacon Property Management Corporation, a Delaware corporation (the "Management
Company") and conducts third-party tenant space design services through Beacon
Design Corporation, a Massachusetts corporation (the "Design Company"). Through
the Management Company, the Company manages approximately 2.9 million square
feet of commercial and office space owned by third parties in various locations
including Boston and Springfield, Massachusetts and Chicago, Illinois. The
Company conducts substantially all of the 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").
S-3
<PAGE>
The Properties
Set forth below are summary descriptions of the Properties.
<TABLE>
<CAPTION>
Rentable Percent Leased
Year Built/ Ownership Property Area in At March 31,
Property Renovated Interest(1) Location Square Feet 1997
- ----------------------------------- ------------- ------------ ------------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Downtown Boston Office Market:
225 Franklin Street 1966(2) 100% Boston, MA 929,545 95%
75-101 Federal Street 1985-1998 51.6% Boston, MA 812,000 92%
One Post Office Square 1981 50% Boston, MA 764,129 99%
Center Plaza 1966-1969 (3) Boston, MA 649,359 98%
150 Federal Street 1988 100% Boston, MA 530,279 100%
Rowes Wharf 1987 45% Boston, MA 344,326 100%
Russia Wharf 1978-1982 100% Boston, MA 314,596 97%
2 Oliver Street-147 Milk Street 1982-1988 100% Boston, MA 271,000 99%
175 Federal Street 1977 100% Boston, MA 203,349 99%
South Station(4) 1988 100% Boston, MA 148,591 100%
---------- ----
4,967,174 97%
---------- ----
Greater Boston Suburban Office Market:
Wellesley Office Park(5) 1963-1984 100% Wellesley, MA 622,862 100%
Crosby Corporate Center(6) 1996 100% Bedford, MA 336,000 88%
175 Wyman Street (7) 100% Waltham, MA 335,000 (7)
Westwood Business Centre 1985 100% Westwood, MA 160,400 100%
New England Executive Park
Portfolio(8) 1970-1985 100% Burlington, MA 817,013 97%
---------- ----
2,271,275 97%(7)
---------- ----
Cambridge Office Market:
One Canal Park 1987 100% Cambridge, MA 100,300 100%
Ten Canal Park 1987 100% Cambridge, MA 110,000 92%
245 First Street(9) 1985-1986 100% Cambridge, MA 263,227 100%
---------- ----
473,527 98%
---------- ----
Central Perimeter Atlanta Office Market:
Perimeter Center Portfolio(10) 1970-1989 100% Atlanta, GA 3,302,136 96%
---------- ----
Arlington County, Virginia Office Market:
The Polk and Taylor Buildings 1970 10% Arlington, VA 890,000 100%
1300 North Seventeenth Street 1980 100% Rosslyn, VA 372,865 98%
1616 North Fort Myer Drive 1974 100% Rosslyn, VA 292,826 100%
---------- ----
1,555,691 100%
---------- ----
Fairfax County, Virginia Office Market:
John Marshall I 1981 100% McLean, VA 261,364 100%
E.J. Randolph 1983 100% McLean, VA 164,677 99%
Northridge I 1988 100% Reston/Herndon, VA 124,319 100%
Centerpointe I 1988 100% Fairfax, VA 204,481 100%
Centerpointe II 1990 100% Fairfax, VA 204,481 100%
---------- ----
959,322 100%
---------- ----
Washington, D.C. Office Market:
1333 H Street 1984(11) 100% Washington, D.C. 238,694 90%
Suburban Chicago Office Market:
AT&T Plaza 1984 100% Oak Brook, IL 225,318 98%
Tri-State International(12) 1986 100% Lincolnshire, IL 548,000 81%
Presidents Plaza(13) 1980-1982 100% Chicago, IL 791,000 91%
Westbrook Corporate Center(14) 1985-1996 100% Westchester, IL 1,106,000 88%
---------- ----
2,670,318 88%
---------- ----
West Los Angeles Office Market:
10960 Wilshire Boulevard 1971-1992 100% Westwood, CA 543,804 89%
10880 Wilshire Boulevard(15) 1970 100% Westwood, CA 531,176 85%
---------- ----
1,074,980 87%
Silicon Valley Office/R&D Market:
Shoreline Technology Park(16) 1985-1991 100% Mountain View, CA 726,500 100%
Lake Marriott Business Park(17) 1981 100% Santa Clara, CA 400,000 100%
---------- ----
1,126,500 100%
---------- ----
Total/Weighted Average (18) 18,639,617 96%
========== ====
</TABLE>
S-4
<PAGE>
- ---------------
(1) The Company holds a general partner interest in the entity which owns the
fee title in One Post Office Square; a general partner and limited partner
interest in the entities which own the fee title in each of Center Plaza
and the Polk and Taylor Buildings; and an indirect limited partner interest
in Rowes Wharf Associates, the entity that owns the hotel space and ground
leases the office and retail space at the Rowes Wharf Property. 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 and 10880 Wilshire
Boulevard, in each of which the Company holds a ground leasehold interest.
(2) The 225 Franklin Street Property has undergone an approximately $95 million
renovation during the past eight years, including installation of new
electrical systems, and a complete upgrade of mechanical systems,
elevators, lobbies, roofs and the exterior plaza of the building.
(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. 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 175 Wyman Street Property consists of a vacant 335,000 square foot
office/research and development complex and 26.7 acres of land suitable for
development. The Company plans to redevelop the Property into 400,000
square feet of Class A office space. Weighted Average excludes 175 Wyman
Street.
(8) 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.
(9) 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.
(10) The Perimeter Center Portfolio consists of 32 buildings and six ground
leases.
(11) 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.
(12) The Tri-State International complex consists of five office buildings.
(13) Presidents Plaza consists of four office buildings.
(14) Westbrook Corporate Center consists of five office buildings.
(15) The Company owns a ground leasehold interest in 10880 Wilshire Boulevard
which expires in 2068. The Company has an option to purchase the ground
under 10880 Wilshire Boulevard at fair market value in 2001.
(16) Shoreline Technology Park consists of twelve office buildings.
(17) Lake Marriott Business Park consists of seven office buildings.
(18) Weighted Average excludes 175 Wyman Street.
S-5
<PAGE>
Capitalization
The following table sets forth the capitalization of the Company on an
historical basis as of March 31, 1997, and for the Company as adjusted to give
effect to the issuance of the shares of Series A Preferred Stock in the Offering
and the application of the net proceeds from the Offering, the Company's April
1997 Common Stock offering and application of the net proceeds therefrom,
acquisitions and sale of Properties and related sources and uses of funds for
the period subsequent to March 31, 1997 to the date hereof, as if all had
occurred on March 31, 1997. 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.
<TABLE>
<CAPTION>
Historical As Adjusted(1)
------------- ---------------
(in thousands)
<S> <C> <C>
DEBT:
Credit Facility $ 153,000 $ 139,525
Mortgage Notes Payable 451,862 587,862
Total Debt 604,862 727,387
MINORITY INTEREST: 108,509 151,438
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value; 25,000,000 shares
authorized; 8,000,000 shares of Series A Cumulative
Redeemable Preferred Stock with an aggregate
liquidation preference of $200.0 million issued and
outstanding on an adjusted basis -- 80
Common Stock, $0.01 par value; 100,000,000
shares authorized; 48,237,322 shares issued and outstanding
(55,237,322 shares on an as adjusted basis) 482 552
Excess Stock, $0.01 par value; 50,000,000 shares
authorized, none issued and outstanding -- --
Additional paid-in capital 1,025,803 1,430,511
Cumulative net income 78,067 94,572
Cumulative dividends (105,747) (105,747)
---------- ----------
Total stockholders' equity 998,605 1,419,968
---------- ----------
Total capitalization $1,711,976 $2,298,793
========== ==========
</TABLE>
(1) Does not include(i) 7,647,934 shares of Common Stock reserved for issuance
upon possible redemption of a like number of Units and (ii) 5,131,542
shares of Common Stock reserved for issuance under the Company's 1994 Stock
Option Plan, 1996 Stock Option Plan and dividend reinvestment plan.
Summary Selected Financial Information
The following table sets forth selected financial and operating information
for the Company. The consolidated results of operations for the three months
ended March 31, 1997 have been derived from unaudited financial statements. The
consolidated results of operations of the Company for the years ended December
31, 1996 and 1995 have been derived from the financial statements audited by
Coopers & Lybrand L.L.P., independent accountants, whose report with respect to
the years 1996 and 1995 is incorporated by reference into the accompanying
Prospectus.
The unaudited selected pro forma financial and operating information is
presented as if the issuance of the shares of Series A Preferred Stock in the
Offering and the application of the net proceeds therefrom, the Company's
April 1997 Common Stock offering and application of the net proceeds therefrom,
acquisitions and sale of Properties and related sources and uses of funds for
the period subsequent to March 31, 1997 to the date hereof, had occurred as of
the beginning of the period. 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-6
<PAGE>
Beacon Properties Corporation
Summary Selected Financial Information
<TABLE>
<CAPTION>
Company
----------------------------------------------------------------
Pro Forma
Three Months Three Months For the Year For the Year
Ended Ended Ended Ended
March 31, 1997 March 31, 1997 December 31, December 31,
(unaudited) (unaudited) 1996 1995
---------------- ---------------- -------------- --------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenues:
Rental income $ 80,440 $ 63,601 $ 147,825 $ 71,050
Management fees 821 821 3,005 2,203
Recoveries from tenants 9,859 8,351 16,719 9,742
Mortgage interest income 1,372 1,372 4,970 2,546
Other income 2,450 2,575 11,272 5,502
-------------- -------------- ------------ -------------
Total revenues 94,942 76,720 183,791 91,043
-------------- -------------- ------------ -------------
Expenses:
Property expenses 17,956 14,531 37,211 18,090
Real estate taxes 10,531 8,334 18,124 10,217
General and administrative 8,679 8,627 19,331 9,755
Mortgage interest expense 13,442 11,022 30,300 15,226
Interest--amortization of financing costs 477 477 2,084 1,370
Depreciation and amortization 18,248 14,214 33,184 17,428
-------------- -------------- ------------ -------------
Total expenses 69,333 57,205 140,234 72,086
-------------- -------------- ------------ -------------
Income from operations 25,609 19,515 43,557 18,957
Equity in joint ventures and
corporations(1) 1,439 1,439 4,989 3,234
-------------- -------------- ------------ -------------
Income from continuing operations 27,048 20,954 48,546 22,191
Discontinued operations--Construction
Company:
Loss from operations (586) (586) (2,609) (12)
Loss on sale -- -- (249) --
-------------- -------------- ------------ -------------
Income before minority interest 26,462 20,368 45,688 22,179
Minority interest in Operating Partnership (2,672) (2,348) (5,988) (4,119)
-------------- -------------- ------------ -------------
Income before extraordinary items 23,790 18,020 39,700 18,060
Series A Preferred dividends (4,490) -- -- --
-------------- -------------- ------------ -------------
Income available for Common Stock before
extraordinary items $ 19,300 18,020 39,700 18,060
==============
Extraordinary items, net of minority
interest -- (3,368) --
-------------- ------------ -------------
Net income (2) $ 18,020 $ 36,332 $ 18,060
============== ============ =============
Per Share of Common Stock data:
Income from continuing operations $ 0.36 $ 0.38 $ 1.41 $ 1.09
Discontinued operations--Construction Company:
Loss from operations--Construction Company $ (0.01) $ (0.01) $ (0.08) $ (0.00)
Loss on sale -- $ (0.01) --
Income before extraordinary items $ 0.35 $ 0.37 $ 1.32 $ 1.09
Extraordinary items -- $ (0.11) --
Net income $ 0.37 $ 1.21 $ 1.09
Cash dividends declared $ .4625 $ 1.765 $ 1.24
Cash dividends paid $ .4625 $ 1.765 $ 1.64
Weighted average common shares outstanding 55,237,322 48,156,877 29,932,327 16,525,245
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
Company
----------------------------------------------------------------
Pro Forma
Three Months Three Months For the Year For the Year
Ended Ended Ended Ended
March 31, 1997 March 31, 1997 December 31, December 31,
(unaudited) (unaudited) 1996 1995
---------------- ---------------- -------------- --------------
(dollars in thousands)
<S> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate before accumulated depreciation $2,282,814 $1,696,439 $1,691,530 $471,142
Total assets 2,358,430 1,770,848 1,779,412 534,797
Mortgage debt 587,862 451,862 452,212 70,536
Note Payable, Credit Facility 139,525 153,000 153,000 130,500
Total liabilities 787,024 663,734 671,711 239,013
Total equity 1,419,968 998,605 999,150 258,822
OTHER INFORMATION:
Funds from Operations (FFO) before minority
interest (3) $ 45,716 $ 35,588 $ 83,154 $ 41,913
Company Funds from Operations (FFO) (3) 36,213 31,485 72,253 34,083
Cash flow provided by (used by):
Operating activities 28,408 91,682 32,518
Investing activities (28,303) (1,097,753) (145,750)
Financing activities (22,035) 1,037,656 102,636
Ratio of EBITDA to interest expense (4)(7) 4.08 3.87 3.33 3.30
Ratio of EBITDA to Fixed Charges and
Preferred Stock Dividends (5)(7) 2.99 3.59 2.95 2.92
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends (6)(7) 2.10 2.54 2.17 2.02
(1) Including deductions for:
Depreciation and amortization $ 1,006 $ 1,006 $ 4,033 $ 2,306
(2) Company share of Operating Partnership 87.84% 88.47% 86.89% 81.31%
(3) The Company believes that to facilitate a clear understanding of the
operating results of the Company, Funds from Operations ("FFO") should be
examined in conjunction with net income. The definition of FFO was clarified
in the National Association of Real Estate Investment Trusts, Inc.
("NAREIT") White Paper, adopted by the NAREIT Board of Governors on March 3,
1995, as net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructuring
and sales of property, plus depreciation and amortization (in each case only
real estate related assets), and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships
and joint ventures will be calculated to reflect FFO on the same basis. FFO
should not be considered as a substitute for net income as an indication of
the Company's performance or as a substitute for cash flow as a measure of
its liquidity. The Company's method of calculating FFO may be different from
methods used by other REITs. The following table reconciles pro forma net
income for the Company to pro forma FFO for the three months ended March 31,
1997:
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Three Months Ended
March 31, 1997
(unaudited)
------------------
(in thousands)
<S> <C>
Income before minority interest and extraordinary item $26,462
Add consolidated properties:
Depreciation and amortization 18,248
Add joint ventures properties:
Depreciation and amortization 1,006
-------
Funds from operations before minority interest 45,716
Less Series A Preferred Unit Distributions (4,490)
-------
Available for allocation 41,226
Company share of Operating Partnership before Series A Preferred Units 87.84%
-------
FFO available for common shares $36,213
========
</TABLE>
(4) For purposes of computing the ratio of EBITDA to interest expense, EBITDA
represents earnings before interest, taxes, depreciation and amortization.
Interest expense includes the Company's pro rata share of joint venture
interest expense.
(5) For purposes of computing the ratio of EBITDA to fixed charges and preferred
stock dividends, EBITDA represents earnings before interest, taxes,
depreciation and amortization. Fixed charges and preferred stock dividends
consist of interest costs, whether expensed or capitalized and including the
Company's pro rata share of joint venture interest expense, the interest
component of rental expense and amortization of debt issuance costs, plus
any dividends on outstanding preferred stock.
(6) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings have been calculated by adding fixed
charges, excluding capitalized interest, to income (loss) from continuing
operations before minority interest. Fixed charges and preferred stock
dividends consist of interest costs, whether expensed or capitalized, the
interest component of rental expense and amortization of debt issuance
costs, plus any dividends on outstanding preferred stock.
(7) EBITDA (i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be considered as
an alternative to net income (determined in accordance with GAAP) as a
measure of operating performance; and (iii) is not an alternative to cash
flows as a measure of liquidity. The Company's management believes that in
addition to cash flows and net income, EBITDA is a useful financial
performance measurement for assessing the operating performance of an
equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures. To evaluate EBITDA and the trends it depicts, the components
of EBITDA, such as revenues and operating expenses, should be considered.
The Company's method of calculating EBITDA may be different from the
methods used by other REITs.
S-9
<PAGE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities Offered 8,000,000 shares of Series A Cumulative Redeemable Preferred Stock (the "Series A
Preferred Stock"). The Series A Preferred Stock has been approved for listing on the NYSE,
subject to official notice of issuance. See "Underwriting."
Use of Proceeds To repay amounts drawn under the Credit Facility to purchase the Recent Acquisitions.
Ranking With respect to the payment of dividends and amounts upon liquidation, the Series A
Preferred Stock will rank senior to the Company's common stock, par value $.01 per share
("Common Stock"), which is the only capital stock of the Company currently outstanding.
See "Description of Series A Preferred Stock--Dividends" and "--Liquidation Preference."
Dividends Dividends on the Series A Preferred Stock are cumulative from the date of original issue
and are payable quarterly, commencing on September 15, 1997, at the rate of 8.98% per annum
of the $25 liquidation preference (equivalent to a fixed annual rate of $2.245 per share).
See "Description of Series A Preferred Stock--Dividends."
Liquidation Rights Equivalent to $25 per share of Series A Preferred Stock, plus an amount equal to
accrued and unpaid dividends (whether or not declared). See "Description of Series
A Preferred Stock--Liquidation Preference."
Redemption Except in certain circumstances relating to the preservation of the Company's
status as a REIT (see "Restrictions on Transfers of Capital Stock" in the
accompanying Prospectus), the Series A Preferred Stock is not redeemable prior to
June 15, 2002. On and after June 15, 2002, the Series A Preferred Stock will be
redeemable for cash at the option of the Company, in whole or in part, at a
redemption price of $25 per share, plus dividends accrued and unpaid to the
redemption date. The redemption price (other than the portion thereof consisting
of accrued and unpaid dividends) shall be payable solely out of the sale proceeds
of other stock of the Company, which may include other series of Preferred Stock,
and from no other source. See "Description of Series A Preferred Stock--
Redemption."
Voting Rights Holders of Series A Preferred Stock will generally have no voting rights except as
required by law. However, whenever dividends on any shares of Series A Preferred
Stock shall be in arrears for six or more quarterly periods, the holders of such
shares (voting separately as a class with all other series of parity Preferred
Stock upon which like voting rights have been conferred and are exercisable) will
be entitled to vote for the election of two additional directors of the Company
until all dividends accumulated on such shares of Series A Preferred Stock have
been fully paid or declared and a sum sufficient for the payment thereof set aside
for payment. In addition, certain changes to the terms of the Series A Preferred
Stock that would be materially adverse to the rights of holders of the Series A
Preferred Stock cannot be made without the affirmative vote of holders of
two-thirds of the outstanding Series A Preferred Stock. See "Description of Series
A Preferred Stock--Voting Rights."
Conversion The Series A Preferred Stock is not convertible or exchangeable for any other property
or securities of the Company.
</TABLE>
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RISK FACTORS
An investment in the Series A Preferred 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 Series A Preferred 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 1997, the Company has invested approximately $641 million in office
properties, increasing its interests in real estate by over 36%. 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. The Company's results of operations and ability
to make expected distributions to stockholders could be adversely affected if
the Company is unable to manage these operations effectively. There can be no
assurance that the Company will be able to manage these operations effectively.
Risks of Adverse Effect on Company from Debt Servicing and Refinancing,
Increases in Interest Rates, Financial Covenants and Absence of Limitations
of Debt
Debt Financing and Existing Debt Maturities.
The Company intends to finance the acquisition of additional properties
through the use of debt and equity financing. Additionally, in connection with
the acquisition of certain Properties for units of limited partnership interest
in the Operating Partnership ("Units"), the Company has agreed to maintain
certain levels of nonrecourse debt on the Properties in order to minimize the
tax consequences of these acquisitions to the Unit recipients. 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 $891.5
million, and its total consolidated debt plus its proportionate share of total
unconsolidated debt (other than Rowes Wharf) is approximately $984.0 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. The Company's current
consolidated mortgage indebtedness of approximately $587.5 million has
maturities ranging from 1998 through 2008 and is secured by Properties. In
addition, the Company currently has $304 million outstanding under its $350
million unsecured revolving credit facility (the "Credit Facility"). The
Company's proportionate share of its current total unconsolidated debt
(excluding Rowes Wharf) consists of approximately $46.1 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 application of the
proceeds therefrom, the Company's Debt to Market Capitalization Ratio will be
approximately 27.57%. 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.
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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 economic conditions result in higher interest rates at a time when the
Company must refinance its indebtedness, the Company's interest expense would
increase, which would adversely affect the Company's results of operations and
its ability to pay expected distributions to stockholders. Further, if a
Property or Properties are mortgaged to secure payment 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.
Risk of Adverse Effect of Increase in Market Interest Rates on 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.
Limits on Control and Other Risks Involved in Joint Ownership of Properties
The Company does not own a 100% fee interest in the Center Plaza Property,
the One Post Office Square Property, the Rowes Wharf Property, the Polk and
Taylor Buildings Property or the 75-101 Federal Street Property. Consequently,
while the Company is responsible for the day-to-day affairs of each of these
Properties, it is not in a position to exercise sole decision making authority
regarding the 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. The Company's organizational documents do not limit
the amount of available funds that may be invested in partnerships, joint
ventures, or co-investments.
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 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
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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.
Risks of Acquisition 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 primarily 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.
Risks of Development Activities.
The Company also intends to develop office and other commercial properties,
in accordance with its development and underwriting policies as opportunities
arise in the future. Risks associated with such development 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.
Potential Adverse Effect on Results of Operations Due to Risks Associated
With 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. No
assurance can be given that the Company will not experience significant tenant
defaults in the future.
Potential Adverse Effect on Results of Operations Due to Risks Associated
With Ground Leases.
The Rowes Wharf Property, the South Station Property and the 10880 Wilshire
Boulevard Property are the subject of long-term ground leases. See "The
Properties." The Company's results of operations and ability to make expected
distributions to stockholders could be adversely affected to the extent the
Properties subject to ground leases revert back to the landlord at the
termination of the ground lease or the Company incurs additional expense by
purchasing the ground under these Properties at the termination of these ground
leases.
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Potential Adverse Effect on Results of Operations Due to Risks Associated
With 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, such as changes in the
local or national real estate market. In addition, provisions of the Internal
Revenue 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 stockholders.
Potential Adverse Effect on Results of Operations Due to 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.
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.
Risk of Adverse Effect on Results of Operations due to 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
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a material adverse effect on the Company's business, assets, results of
operations or liquidity, nor is the Company aware of any such liability or
concerns. Nevertheless, it is possible that these ESAs did not reveal all
environmental liabilities or compliance concerns or that material environmental
liabilities or compliance concerns exist of which the Company is currently
unaware.
The Company has not been notified by any governmental authority, and has no
other knowledge of, any material noncompliance, liability or claim relating to
hazardous or toxic substances or other environmental substances in connection
with any of its Properties except as previously disclosed in documents
incorporated herein by reference or as described below.
175 Wyman Street, Waltham, Massachusetts. Site assessments at 175 Wyman
Street have identified the presence of trichloroethylene and tetrachloroethylene
in the groundwater (the "Existing Groundwater Condition"). The chemicals in the
groundwater are believed to be associated with former manufacturing use of the
Property. Prior to the acquisition of the Property by the Company, the former
owner of the Property, Hewlett-Packard Company, reported the Existing
Groundwater Condition to the Massachusetts Department of Environmental
Protection (the "DEP"). Hewlett-Packard Company sought and obtained approval
from DEP of an Immediate Response Action which involves installation of a system
to extract and treat contaminated groundwater (the "System"). According to its
submissions to DEP, Hewlett-Packard Company is in the process of installing the
System. In its purchase and sale agreement with the Company, Hewlett-Packard
Company agreed to indemnify the Company against costs of remediating the
Existing Groundwater Condition and claims by off-site parties for property
damage, personal injury, and natural resource damages related to the Existing
Groundwater Condition (the "Indemnity"). Any claim under the Indemnity is
subject to the risk that the indemnifying party will lack sufficient assets to
satisfy the claim. Moreover, any claim under the Indemnity may be subject to
substantial defenses, including but not limited to the defense that the claim
was exacerbated by the Company's development or redevelopment of the Property,
as to which matters the Company has indemnified Hewlett-Packard Company.
However, the Company does not believe that any such liability would have a
material adverse effect on its financial condition, results of operations and
liquidity.
Possible Additional Risks Associated with 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.
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THE COMPANY
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, Los Angeles,
San Francisco and Washington, D.C., as well as commercial real estate
development, 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 18.6 million
rentable square feet in the aggregate, approximately 67% of which are located in
suburban office markets and approximately 33% of which are located in downtown
office markets, primarily in Boston. As of March 31, 1997, the Properties were
approximately 96% leased with over 1,200 tenants.
The Company is currently experiencing a period of rapid growth. The Company
has invested approximately $641 million in office properties since January 1997,
increasing its interests in real estate by over 36%. The Company currently has a
total market capitalization of approximately $3.0 billion. Based on information
contained in Merrill Lynch & Co.'s Comparative Valuation of REITs, according
to total market capitalization data as of May 16, 1997, the Company is the
largest REIT focused exclusively on the office sector.
The Company's business is conducted principally through the Operating
Partnership, two subsidiary corporations and two subsidiary limited
partnerships. The Company conducts third-party management operations through the
Management Company and conducts third-party tenant space design services through
the Design Company. Through the Management Company, the Company manages
approximately 2.9 million square feet of commercial and office space owned by
third parties in various locations including Boston and Springfield,
Massachusetts and Chicago, Illinois. The Company conducts substantially all of
the management operations for wholly-owned properties through the Management
Partnership, and conducts tenant space design services for wholly-owned
properties through the Design Partnership.
The Company expects to meet short-term liquidity needs, such as normal
recurring expenses, debt service requirements and required distributions to
stockholders, from cash flows provided by operating activities. The Company
expects to meet long-term liquidity needs, such as the costs of development,
property acquisitions, scheduled debt maturities, major renovations and
expansions, through long-term secured and unsecured indebtedness and the
issuance of additional equity securities. The Company currently has a policy of
incurring debt only if upon such incurrence the Company's Debt to Market
Capitalization Ratio would be 50% or less. Additionally, it is the Company's
policy that Beacon Properties Corporation shall not incur indebtedness other
than short-term trade, employee compensation, distributions payable or similar
indebtedness that will be paid in the ordinary course of business, and that
indebtedness shall instead be incurred by the Operating Partnership to the
extent necessary to fund the business activities conducted by the Operating
Partnership, its subsidiaries and affiliates.
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.
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RECENT DEVELOPMENTS
Recent Acquisitions
Downtown Boston Office Market
225 Franklin Street. In June 1997, the Company acquired 225 Franklin Street
located in downtown Boston, Massachusetts, for aggregate consideration of
approximately $280 million in cash, $71 million of which relates to the
Company's recent sale of the Westlakes Office Park. The Company estimates that
the aggregate purchase price for 225 Franklin Street is approximately 85% of
replacement cost.
The 225 Franklin Street Property was built in 1966 and consists of
approximately 929,545 square feet of office space in a 33-story tower. The 225
Franklin Street Property has undergone an approximately $95 million renovation
during the past eight years, including installation of a new electrical system,
and a complete upgrade of mechanical systems, elevators, lobbies, roofs and the
exterior plaza of the building. Major tenants in 225 Franklin Street include
State Street Bank & Trust Company (approximately 501,000 square feet), Arthur
Andersen & Co. (approximately 98,000 square feet), and AEW Capital
(approximately 75,000 square feet). At March 31, 1997, the occupancy rate for
225 Franklin Street was approximately 95%.
Suburban Chicago Office Market
Westbrook Corporate Center. In May 1997, the Company acquired a five-building
office complex located in Westchester (suburban Chicago), Illinois (the
"Westbrook Corporate Center") for aggregate consideration of approximately
$182.1 million (including approximately $1.6 million in expected non-recurring
capital expenditures), consisting of the assumption of approximately $82 million
of mortgage debt, the borrowing of approximately $24 million of additional
mortgage debt, the issuance of approximately $43 million of Units and
approximately $33.1 million in cash. The Company estimates that the aggregate
purchase price for the Westbrook Corporate Center is approximately 90% of
replacement cost. In addition, the Company has also contracted to purchase for
between $3.58 million and $3.92 million (depending upon the date of acquisition)
a 10-acre parcel of land suitable for development which is contiguous to the
Property within twelve months of the acquisition.
The Company has agreed to make certain tax related payments to the seller if
the Company fails to maintain certain levels of nonrecourse indebtedness
outstanding on the Property and/or disposes of the real estate within ten years.
Westbrook Corporate Center consists of five 10-story office buildings
comprising an aggregate of approximately 1.1 million square feet. The buildings
each contain approximately 220,000 square feet and were developed between 1985
and 1996. Major tenants in the Westbrook Corporate Center include Navistar
International Corporation (approximately 100,000 square feet), Ameritech
(approximately 70,000 square feet), Peoplesoft (approximately 53,000 square
feet), Premier Health (approximately 45,000 square feet) and SAP America
(approximately 55,000 square feet). The aggregate occupancy rate for the
Westbrook Corporate Center as of March 31, 1997 was approximately 88%.
West Los Angeles Office Market
10880 Wilshire Boulevard. In April 1997, the Company acquired the leasehold
interest in 10880 Wilshire Boulevard located in Westwood, California. In
connection with the acquisition, the Company also acquired the right to purchase
the fee interest in the land underlying 10880 Wilshire Boulevard at fair market
value in 2001. The Company acquired the leasehold interest in 10880 Wilshire
Boulevard for aggregate consideration of approximately $102 million in cash
(including approximately $2.2 million in expected non-recurring capital
expenditures). The Company estimates that the aggregate purchase price for 10880
Wilshire Boulevard is approximately 75% of replacement cost, giving effect to
the leasehold.
The 10880 Wilshire Boulevard Property was built in 1970 and has undergone
approximately $34 million of capital improvements since 1992. The Property
consists of approximately 531,000 square feet in a 23-story office building.
Major tenants in 10880 Wilshire Boulevard include Showtime/Viacom International
Inc. (approximately 68,000 square feet), Corporate Media Partners (approximately
64,000 square feet), Oppenheimer & Co., Inc. (approximately 50,000 square feet)
and Pardee Construction Company (approximately 33,000 square feet). As of March
31, 1997, the occupancy rate for 10880 Wilshire Boulevard was approximately 85%.
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The Fairfax County, Virginia Market
Centerpointe I and II. In April 1997, the Company acquired two office
properties located in Fairfax County, Virginia ("Centerpointe I and II") for
aggregate consideration of approximately $55 million, consisting of
approximately $25 million in cash and the assumption of $30 million of mortgage
debt. The Company estimates that the aggregate purchase price for Centerpointe I
and II is approximately 75% of replacement cost.
The Centerpointe Property contains approximately 409,000 square feet and
consists of (i) Centerpointe I, an 11-story office building built in 1988 and
comprising approximately 204,500 square feet and (ii) Centerpointe II, an
11-story office building built in 1990 comprising approximately 204,500 square
feet. The sole tenant at Centerpointe I is American Management Systems, Inc.,
which also occupies approximately 100,000 square feet in Centerpointe II. Other
major tenants at Centerpointe II include Fujitsu Business Communications
Systems, Inc. (approximately 20,000 square feet) and Liberty Mutual Insurance
Company (approximately 15,000 square feet). As of March 31, 1997, the aggregate
occupancy rate for Centerpointe I and II was approximately 100%.
In connection with the acquisition of Centerpointe I and II, the Company also
entered into an option/put arrangement with the sellers of Centerpointe I and II
on an adjacent 7.8 acre parcel of land suitable for development. The Company
believes that this parcel could support up to approximately 340,000 square feet
of office space, subject to obtaining appropriate permitting.
Other Developments
Credit Facility. In April 1997, BankBoston, N.A. ("BankBoston") increased the
maximum borrowing amount under the Company's unsecured revolving Credit Facility
from $300 million to $350 million. Additionally, BankBoston reduced the interest
rate on the Credit Facility from the Eurodollar rate plus 175 basis points
(1.75%) to the Eurodollar rate plus 120 basis points (1.20%). The Company's
ability to incur borrowings under the Credit Facility is subject to satisfaction
of certain financial covenants set forth therein.
175 Wyman Street. In May 1997, the Company acquired 26.7 acres of land
suitable for development and a vacant 335,000 square foot office/research and
development complex located at 175 Wyman Street in Waltham (suburban Boston),
Massachusetts for approximately $24.0 million. The Company plans to redevelop
the Property into 400,000 square feet of Class A office space. The Company
expects that such development could begin in late 1997 or early 1998.
Sale of Westlakes Office Park. In May 1997, the Company sold the Westlakes
Office Park, the Company's sole Property in the Suburban Philadelphia Office
Market, for approximately $72.5 million in cash. The transaction was structured
as a like-kind exchange, with the net sale proceeds utilized toward the
acquisition of 225 Franklin Street.
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PROPERTIES
The Company owns a portfolio of Class A office properties and other
commercial properties located in major metropolitan areas, including Boston,
Atlanta, Chicago, Los Angeles, San Francisco and Washington, D.C. The Properties
encompass approximately 18.6 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
The following chart describes each of the Company's Properties located in the
Downtown Boston Office Market.
Year Built/ Rentable Area Company's %
Property Renovated in Square Feet Ownership
- ------------------------------ ------------- --------------- -------------
225 Franklin Street 1966(c) 929,545 100%
75-101 Federal Street 1985-1988 812,000 (d)
One Post Office Square 1981 764,129 50%(e)
Center Plaza 1966-1969 649,359 (f)
150 Federal Street 1988 530,279 100%
Rowes Wharf 1987 344,326 (g)
Russia Wharf 1978-1982 314,596 100%
2 Oliver Street-147 Milk
Street 1982-1988 271,000 100%
175 Federal Street 1977 203,349 100%
South Station 1988 148,591 (h)
---------------
Total/Weighted Average 4,967,174
===============
Average
Annual Average Annual Occupancy
Base Rent (a) Net Effective Rate
(as of Rent (b) (as of
Property 3/31/97) (as of 3/31/97) 3/31/97)
- ------------------------------ ------------- --------------- -------------
225 Franklin Street $36.72 $33.09 95%
75-101 Federal Street 30.67 20.24 92%
One Post Office Square 24.29 15.46 99%
Center Plaza 22.58 12.63 98%
150 Federal Street 25.15 21.25 100%
Rowes Wharf 29.89 18.56 100%
Russia Wharf 14.22 8.09 97%
2 Oliver Street-147 Milk
Street 17.08 11.72 99%
175 Federal Street 25.21 15.58 99%
South Station 30.67 20.77 100%
------------- --------------- -------------
Total/Weighted Average $27.13 $19.51 97%
============= =============== =============
- -----------------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
(c) The 225 Franklin Street Property has undergone an approximately $95 million
renovation during the past eight years, including installation of new
electrical systems, and a complete upgrade of mechanical systems, elevators,
lobbies, roofs and the exterior plaza of the building.
(d) 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.
(e) The Company owns One Post Office Square with a joint venture partner. The
Company has a 50% interest in and is the managing venturer of this joint
venture.
(f) 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.
(g) The Company holds a 90% limited partner interest in Rowes Wharf Limited
Partnership ("RWLP"). RWLP and a joint venture partner 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. The office and retail portions of the Rowes
Wharf Property are subject to a ground lease which expires in 2065, subject
to the Company's option to purchase.
(h) The Company owns 100% of a ground leasehold in this Property which expires
in 2024, subject to the Company's right to extend for two additional 15-year
periods.
S-19
<PAGE>
The Greater Boston Suburban Office Market
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, subject to an
option to purchase Building Seventeen of the New England Executive Park
Portfolio by the tenant of the Property.
<TABLE>
<CAPTION>
Average Annual Average Annual Occupancy
Year Built/ Rentable Area Base Rent (a) Net Effective Rent (b) Rate
Property Renovated in Square Feet (as of 3/31/97) (as of 3/31/97) (as of 3/31/97)
- -------------------------- ------------- --------------- ---------------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
Wellesley Office Park (c) 622,862 $24.15 $16.99 100%
Crosby Corporate Center 1996 336,000 13.37 9.57 88%
175 Wyman Street (d) 335,000(d) (d) (d) (d)
Westwood Business Centre 1985 160,400 19.55 11.34 100%
New England Executive Park
Portfolio (e) 817,013 18.47 11.63 97%
--------------- ---------------- ---------------------- ----------------
Total/Weighted Average (f) 2,271,275 $19.53 $13.00 97%
=============== ================ ====================== ================
</TABLE>
- --------------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
(c) The Wellesley Office Park consists of eight office buildings constructed
between 1963 and 1996. The buildings in the Wellesley Office Park range in
size from approximately 29,500 square feet to approximately 155,700 square
feet.
(d) The 175 Wyman Street Property consists of a vacant 335,000 square foot
office/research and development complex and 26.7 acres of land suitable for
development. The Company plans to redevelop the Property into 400,000 square
feet of Class A office space.
(e) The New England Executive Park Portfolio consists of nine of the thirteen
office buildings located in the New England Executive Park. The portfolio
was constructed between 1970 and 1985. The buildings in the New England
Executive Park Portfolio range in size from approximately 43,000 square feet
to approximately 218,000 square feet.
(f) Weighted Average excludes 175 Wyman Street.
S-20
<PAGE>
The Cambridge Office Market
The following chart describes each of the Company's Properties located in the
Cambridge Office Market. The Company owns a 100% fee interest in each Property
located in the Cambridge Office Market.
<TABLE>
<CAPTION>
Average Annual Average Annual Occupancy
Year Built/ Rentable Area Base Rent (a) Net Effective Rent(b) Rate
Property Renovated in Square Feet (as of 3/31/97) (as of 3/31/97) (as of 3/31/97)
- ------------------------- ------------- --------------- ---------------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
One Canal Park 1987 100,300 $22.05 $13.99 100%
Ten Canal Park 1987 110,000 19.23 12.42 92%
245 First Street 1985-1986 263,227(c) 22.34 17.46 100%
--------------- ---------------- -------------------- ----------------
Total/Weighted Average 473,527 $21.55 $15.55 98%
=============== ================ ==================== ================
</TABLE>
- --------------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
(c) Riverview I (which consists of approximately 109,000 square feet) and
Riverview II (which consists of approximately 148,000 square feet) are
connected by a four-story atrium comprising approximately 6,000 square feet.
The Central Perimeter Atlanta Office Market
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.
<TABLE>
<CAPTION>
Average Annual
Year Built/ Rentable Area Base Rent (a)
Property Renovated in Square Feet (as of 3/31/97)
- -------- ----------- --------------- ----------------
<S> <C> <C> <C>
North Terraces 1984 492,845 $20.42
South Terraces 1986 494,513 20.33
8,10,12,14,16 Perimeter Center East 1970 64,998 14.62
20,22,24,26 Perimeter Center East 1973 69,727 15.11
28,30,32 Perimeter Center East 1974 104,816 13.36
41 Perimeter Center East 1974 92,021 15.33
47 Perimeter Center East 1974 92,021 15.17
50 Perimeter Center East 1981 6,300 6.62
53 Perimeter Center East 1972 90,505 15.69
56 Perimeter Center East 1977 93,625 15.72
64 Perimeter Center East 1971 183,037 5.34
64A Perimeter Center East 1985 372,498 20.36
70,72,74,76 Perimeter Center East 1972 61,932 15.91
125 Perimeter Center West 1972 223,059 4.10
219 Perimeter Center Parkway 1979 127,697 15.77
223 Perimeter Center Parkway 1978 127,823 16.50
245 Perimeter Center Parkway 1981 229,217 17.89
301 Perimeter Center North 1982 151,416 18.47
303 Perimeter Center North 1989 162,256 20.76
Park Place Shopping Center 1979 61,830 16.32
--------------- ----------------
Total/Weighted Average 3,302,136 $16.69
=============== ================
</TABLE>
Average
Annual
Net Effective
Rent (b) Occupancy
(as of Rate
Property 3/31/97) (as of 3/31/97)
- -------- ------------- ---------------
North Terraces $14.06 95%
South Terraces 13.38 92%
8,10,12,14,16 Perimeter Center East 9.67 92%
20,22,24,26 Perimeter Center East 9.68 89%
28,30,32 Perimeter Center East 8.59 96%
41 Perimeter Center East 9.98 98%
47 Perimeter Center East 9.81 90%
50 Perimeter Center East 6.62 100%
53 Perimeter Center East 11.05 94%
56 Perimeter Center East 8.56 87%
64 Perimeter Center East 2.38 100%
64A Perimeter Center East 17.39 100%
70,72,74,76 Perimeter Center East 10.68 97%
125 Perimeter Center West 3.07 100%
219 Perimeter Center Parkway 11.39 94%
223 Perimeter Center Parkway 11.43 100%
245 Perimeter Center Parkway 11.36 100%
301 Perimeter Center North 12.25 100%
303 Perimeter Center North 14.70 100%
Park Place Shopping Center 12.96 100%
------------- --------------
Total/Weighted Average $11.58 96%
============= ==============
- -------------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
S-21
<PAGE>
The Arlington County, Virginia Market
The following chart describes each of the Company's Properties located in the
Arlington County, Virginia Market.
<TABLE>
<CAPTION>
Average Annual Average Annual Occupancy
Base Rent (a) Net Effective Rate
Year Built/ Rentable Area Company's % (as of Rent (b) (as of
Property Renovated in Square Feet Ownership 3/31/97) (as of 3/31/97) 3/31/97)
- -------- ----------- --------------- ------------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Polk and Taylor Buildings(c) 1970 890,000 10%(d) $23.77 $19.23 100%
1300 North 17th Street 1980 372,865 100% 24.24 17.13 98%
1616 North Ft. Myer Drive 1974 292,826 100% 23.07 15.45 100%
--------------- ------------- --------------- ------------
Total/Weighted
Average 1,555,691 $23.75 $18.02 100%
=============== ============= =============== ============
</TABLE>
- ------------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
(c) 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.
(d) The Company holds a 10% general and limited partner interest in the
partnership that owns the Property.
The Fairfax County, Virginia Market
The following chart describes each of the Company's Properties located in the
Fairfax County, Virginia Market. The Company owns a 100% fee interest in each
Property located in the Fairfax County, Virginia Market.
<TABLE>
<CAPTION>
Average Annual Average Annual Occupancy
Year Built/ Rentable Area Base Rent (a) Net Effective Rent (b) Rate
Property Renovated in Square Feet (as of 3/31/97) (as of 3/31/97) (as of 3/31/97)
- --------- ----------- --------------- ---------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C>
John Marshall I 1981 261,364 $18.26 $15.85 100%
E.J. Randolph 1983 164,677 20.99 15.23 99%
Northridge I 1988 124,319 25.96 19.34 100%
Centerpointe I and II 1988-1990 408,962(c) 16.26 12.86 100%
------- ------ ------ ---
Total/Weighted
Average 959,322 $18.88 $14.92 100%
======= ====== ====== ===
</TABLE>
- --------------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
(c) Centerpointe I and Centerpointe II each consist of 204,481 square feet.
Washington, D.C. Office Market
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 March
31, 1997, 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 $27.38
and $20.20, respectively. As of March 31, 1997, the Property was approximately
90% leased.
S-22
<PAGE>
Suburban Chicago Office Market
The following chart describes each of the Company's Properties located in the
Suburban Chicago Office Market. The Company owns a 100% fee interest in each
Property located in the Suburban Chicago Office Market.
<TABLE>
<CAPTION>
Average Annual Average Annual Occupancy
Year Built/ Rentable Area Base Rent (a) Net Effective Rent (b) Rate
Property Renovated in Square Feet (as of 3/31/97) (as of 3/31/97) (as of 3/31/97)
-------------------------------------- --------------- ---------------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
Westbrook Corporate
Center 1985-1996 1,106,000 $23.76 $17.62 88%
AT&T Plaza 1984 225,318 20.80 14.16 98%
Tri-State International 1986 548,000 22.29 15.62 81%
Presidents Plaza 1980-1982 791,000 19.44 12.16 91%
--------- ------ ------ ---
Total/Weighted
Average 2,670,318 $21.93 $15.30 88%
========= ====== ====== ===
</TABLE>
- ----------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
The West Los Angeles Office Market
The following chart describes each of the Company's Properties located in the
West Los Angeles Office Market. The Company owns a 100% fee interest in the
10960 Wilshire Boulevard Property. The Company also holds a ground leasehold
interest in 10880 Wilshire Boulevard which expires in 2068. The Company has an
option to purchase the ground under 10880 Wilshire Boulevard at fair market
value in 2001.
<TABLE>
<CAPTION>
Average Annual Average Annual Occupancy
Year Built/ Rentable Area Base Rent (a) Net Effective Rent (b) Rate
Property Renovated in Square Feet (as of 3/31/97) (as of 3/31/97) (as of 3/31/97)
- -------- ----------- ---------------- ---------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
10960 Wilshire Boulevard 1971/1992 543,804 $24.70 $18.52 89%
10880 Wilshire Boulevard 1970/1992 531,176 20.98 16.39 85%
--------- ------ ------ ---
Total/Weighted
Average 1,074,980 $22.86 $17.47 87%
========= ====== ====== ===
</TABLE>
- -------------
(a) Base Rent is gross rent excluding payments by tenants on account of real
estate tax and operating expense escalation.
(b) 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 escalations, less total
operating expenses and real estate taxes.
Silicon Valley Office/R&D Market
The following chart describes each of the Company's Properties located in the
Silicon Valley Office/R&D Market. The Company owns a 100% fee interest in each
Property located in the Silicon Valley Office/R&D Market.
<TABLE>
<CAPTION>
Average Annual
Average Annual Net Rent, as Occupancy
Year Built/ Rentable Area Net Rent (a) adjusted (b) Rate
Property Renovated in Square Feet (as of 3/31/97) (as of 3/31/97) (as of 3/31/97)
- -------- ------------- ---------------- ---------------- --------------------------------
<S> <C> <C> <C> <C> <C>
Shoreline Technology Park 1985-1991 726,500 $17.84 $18.77 100%
Lake Marriott Business Park 1981 400,000 9.80 10.78 100%
--------- ------ ------ ---
Total/Weighted
Average 1,126,500 $14.98 $15.94 100%
========= ====== ====== ===
</TABLE>
- ------------
(a) Shoreline Technology Park and substantially all of the Lake Marriott
Business Park are leased pursuant to triple net leases.
(b) Net rent, as adjusted on a straight-line basis to take into effect periodic
increases in net rent.
S-23
<PAGE>
Lease Expirations
The following tables set forth lease expirations (in square feet) for the
Company's Properties by market area.
<TABLE>
<CAPTION>
Lease Expiration--All Properties
-------------------------------------------------------------
4/1/97
to
Market Area 12/31/97 1998 1999 2000
- ----------- -------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Downtown Boston square feet (a) 335,281 396,883 445,637 508,635
% sq. ft. (b) 6.8% 8.0% 9.0% 10.2%
annual rent (c) 8,477,354 12,109,174 12,027,613 14,854,012
psf (d) $ 25.28 $ 30.51 $ 26.99 $ 29.20
tenants (e) 59 66 66 73
Suburban Boston square feet (a) 362,090 209,018 190,002 190,133
% sq. ft (b) 18.6% 10.7% 9.8% 9.8%
annual rent (c) 7,049,338 4,382,611 3,537,454 4,199,168
psf (d) $ 19.47 $ 20.97 $ 18.62 $ 22.09
tenants (e) 43 37 28 31
Cambridge square feet (a) 0 3,499 1,411 6,320
% sq. ft (b) 0.0% 0.7% 0.3% 1.3%
annual rent (c) 0 127,832 31,606 83,269
psf (d) $ 0.00 $ 36.53 $ 22.40 $ 13.18
tenants (e) 0 1 1 1
Central Perimeter Atlanta square feet (a) 203,288 322,297 683,032 338,688
% sq. ft (b) 6.2% 9.8% 20.7% 10.3%
annual rent (c) 4,038,636 5,239,779 13,083,036 6,753,225
psf (d) $ 19.87 $ 16.26 $ 19.15 $ 19.94
tenants (e) 44 52 61 36
Arlington County, VA square feet (a) 899,368 25,910 5,672 137,494
% sq. ft (b) 57.8% 1.7% 0.4% 8.8%
annual rent (c) 17,970,646 656,494 133,333 3,724,838
psf (d) $ 19.98 $ 25.34 $ 23.51 $ 27.09
tenants (e) 10 5 2 10
Fairfax County, VA square feet (a) 28,712 19,267 32,151 142,193
% sq. ft (b) 3.0% 2.0% 3.4% 14.8%
annual rent (c) 566,135 376,057 697,328 3,663,117
psf (d) $ 19.72 $ 19.52 $ 21.69 $ 25.76
tenants (e) 4 6 4 3
Washington, D.C square feet (a) 4,004 4,045 2,945 8,835
% sq. ft (b) 1.7% 1.7% 1.2% 3.7%
annual rent (c) 111,880 115,428 80,988 243,846
psf (d) $ 27.94 $ 28.54 $ 27.50 $ 27.60
tenants (e) 4 3 1 3
Suburban Chicago square feet (a) 209,706 188,329 243,476 391,197
% sq. ft (b) 7.9% 7.1% 9.1% 14.6%
annual rent (c) 4,681,333 4,463,383 6,391,508 10,992,740
psf (d) $ 22.32 $ 23.70 $ 26.25 $ 28.10
tenants (e) 32 30 33 34
West Los Angeles square feet (a) 23,922 10,197 31,940 211,921
% sq. ft (b) 2.2% 0.9% 3.0% 19.7%
annual rent (c) 585,840 292,711 879,116 5,846,260
psf (d) $ 24.49 $ 28.71 $ 27.52 $ 27.59
tenants (e) 1 3 8 24
Silicon Valley square feet (a) 60,548 9,465 24,548 509,320
% sq. ft (b) 5.4% 0.8% 2.2% 45.2%
annual rent (c) 938,578 133,634 241,383 7,991,481
psf (d) $ 15.50 $ 14.12 $ 9.83 $ 15.69
tenants (e) 2 2 3 7
Total Properties square feet (a) 2,126,919 1,188,910 1,660,814 2,444,736
% sq. ft (b) 11.6% 6.5% 9.1% 13.4%
annual rent (c) 44,419,740 27,897,103 37,103,365 58,351,956
psf (d) $ 20.88 $ 23.46 $ 22.34 $ 23.87
tenants (e) 199 205 207 222
</TABLE>
<TABLE>
<CAPTION>
2005 &
Market Area 2001 2002 2003 2004 beyond
- ----------- ----------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Downtown Boston 799,235 532,630 181,277 166,822 1,462,473
16.1% 10.7% 3.7% 3.4% 29.5%
26,594,110 16,917,932 5,239,978 5,082,611 60,670,154
$ 33.27 $ 31.76 $ 28.91 $ 30.47 $ 41.48
50 32 10 12 27
Suburban Boston 171,619 107,875 53,521 101,431 497,760
8.8% 5.5% 2.7% 5.2% 25.6%
4,011,922 2,879,242 1,328,737 2,227,000 11,093,598
$ 23.38 $ 26.69 $ 24.83 $ 21.96 $ 22.29
30 15 4 4 8
Cambridge 315,964 107,667 28,000 0 0
66.6% 22.7% 5.9% 0.0% 0.0%
8,165,274 2,480,979 709,712 0 0
$ 25.84 $ 23.04 $ 25.35 $ 0.00 $ 0.00
4 2 1 0 0
Central Perimeter Atlanta 857,195 136,800 28,815 227,031 386,990
26.0% 4.1% 0.9% 6.9% 11.7%
15,506,948 3,205,680 620,005 1,092,801 9,429,272
$ 18.09 $ 23.43 $ 21.52 $ 4.81 $ 24.37
44 12 4 3 4
Arlington County, VA 163,407 78,191 84,134 28,794 126,642
10.5% 5.0% 5.4% 1.9% 8.1%
4,251,212 1,776,035 2,198,780 823,826 3,511,418
$ 26.02 $ 22.71 $ 26.13 $ 28.61 $ 27.73
6 5 4 2 4
Fairfax County, VA 67,276 42,925 0 68,821 554,769
7.0% 4.5% 0.0% 7.2% 57.9%
1,699,802 887,602 0 1,705,126 13,047,924
$ 25.27 $ 20.68 $ 0.00 $ 24.78 $ 23.52
7 7 0 2 5
Washington, D.C 5,852 65,154 14,708 0 108,536
2.5% 27.3% 6.2% 0.0% 45.5%
161,524 1,980,893 461,684 0 3,660,672
$ 27.60 $ 30.40 $ 31.39 $ 0.00 $ 33.73
2 4 1 0 2
Suburban Chicago 343,964 192,495 205,240 75,009 527,237
12.9% 7.2% 7.7% 2.8% 19.7%
9,021,973 5,080,709 5,114,752 1,998,064 15,168,175
$ 26.23 $ 26.39 $ 24.92 $ 26.64 $ 28.77
36 18 12 5 19
West Los Angeles 141,610 203,195 34,801 93,707 185,152
13.2% 18.9% 3.2% 8.7% 17.2%
4,165,446 6,381,888 1,134,632 3,041,886 6,256,648
$ 29.41 $ 31.41 $ 32.60 $ 32.46 $ 33.79
19 10 3 3 5
Silicon Valley 205,932 0 0 0 314,997
18.3% 0.0% 0.0% 0.0% 28.0%
3,554,326 0 0 0 5,967,949
$ 17.26 $ 0.00 $ 0.00 $ 0.00 $ 18.95
1 0 0 0 2
Total Properties 3,072,054 1,466,932 630,496 761,615 4,164,556
16.8% 8.0% 3.4% 4.2% 22.7%
77,132,537 41,590,960 16,808,280 15,971,314 128,805,810
$ 25.11 $ 28.35 $ 26.66 $ 20.97 $ 30.93
199 105 39 31 76
</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 (amounts in dollars)
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-24
<PAGE>
USE OF PROCEEDS
The net cash proceeds to the Company from the sale of the Series A Preferred
Stock offered hereby, after deduction of estimated expenses of the Offering, are
estimated to be approximately $193.5 million (approximately $222.5 million if
the Underwriters' over-allotment option is exercised in full). The Company
intends to contribute or otherwise transfer the net proceeds of the sale of the
Series A Preferred Stock to the Operating Partnership in exchange for 8.98%
Series A Preferred Units in the Operating Partnership, the economic terms of
which will be substantially identical to the Series A Preferred Stock. The
Operating Partnership will be required to make all required distributions on the
Series A Preferred Units (which will mirror the payments of distributions,
including accrued and unpaid distributions upon redemption, and of the
liquidation preference amount on the Series A Preferred Stock) prior to any
distribution of cash or assets to the holders of Units or to the holders of any
other interest in the Operating Partnership, except for any other series or
preference Units ranking on a parity with the Series A Preferred Units as to
distributions and/or liquidation rights and except for distributions required to
enable the Company to maintain its qualifications as a REIT.
The Company intends to apply the net proceeds of the Offering to repay
amounts drawn under the Credit Facility to acquire the Recent Acquisitions. All
outstanding borrowings under the Credit Facility mature in March 2000 and
generally bear interest, at the Company's option, at either (i) the higher of
(x) BankBoston'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 120
basis points (1.20%). No prepayment penalties are required in connection with
the repayment of the Credit Facility.
S-25
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Company's Common Stock trades on the NYSE under the symbol "BCN." On June
10, 1997, the reported closing sale price per share of Common Stock on the NYSE
was $31 and there were approximately 454 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
------------- ------- ------- ----------------
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 $24-1/4 $.4625
September 30, 1996 $29 $24-3/4 $.4625
December 31, 1996 $37 $28-3/4 $.4625
March 31, 1997 $36-3/8 $33-1/8 $.4625
June 30, 1997 (through June 10, 1997) $33-5/8 $29-7/8 N/A
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.
S-26
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on an
historical basis as of March 31, 1997, and for the Company as adjusted to give
effect to the issuance of the shares of Series A Preferred Stock in the Offering
and the application of the net proceeds from the Offering, the Company's April
1997 Common Stock offering and application of the net proceeds therefrom,
acquisitions and sale of Properties and related sources and uses of funds for
the period subsequent to March 31, 1997 to the date hereof, as if all had
occurred on March 31, 1997. 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.
<TABLE>
<CAPTION>
Historical As Adjusted(1)
------------- --------------
(in thousands)
<S> <C> <C>
DEBT:
Credit Facility $ 153,000 $ 139,525
Mortgage Notes Payable 451,862 587,862
Total Debt 604,862 727,387
MINORITY INTEREST: 108,509 151,438
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value;
25,000,000 shares authorized; 8,000,000
shares of Series A Cumulative
Redeemable Preferred Stock with an aggregate
liquidation preference of $200.0
million issued and outstanding on an
adjusted basis -- 80
Common Stock, $0.01 par value; 100,000,000
shares authorized; 48,237,322 shares
issued and outstanding (55,237,322 shares on
an as adjusted basis) 482 552
Excess Stock, $0.01 par value; 50,000,000 shares
authorized; none issued and outstanding -- --
Additional paid-in capital 1,025,803 1,430,511
Cumulative net income 78,067 94,572
Cumulative dividends (105,747) (105,747)
---------- ----------
Total stockholders' equity 998,605 1,419,968
---------- ----------
Total capitalization $1,711,976 $2,298,793
========== ==========
</TABLE>
- ------------
(1) Does not include (i) 7,647,934 shares of Common Stock reserved for issuance
upon possible redemption of a like number of Units and (ii) 5,131,542
shares of Common Stock reserved for issuance under the Company's 1994 Stock
Option Plan, 1996 Stock Option Plan and dividend reinvestment plan.
S-27
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial and operating information
for the Company and on a combined historical basis for the Company and the
Predecessor. The consolidated results of operations for the three months ended
March 31, 1997 and 1996 have been derived from unaudited financial statements.
The consolidated results of operations of the Company for the years ended
December 31, 1996 and 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 and 1992 have been derived
from the financial statements audited by Coopers & Lybrand L.L.P., independent
accountants, whose report with respect to the years 1992 through 1996 is
incorporated by reference into the accompanying Prospectus.
The unaudited selected pro forma financial and operating information is
presented as if the issuance of the shares of Series A Preferred Stock in the
Offering and the application of the net proceeds therefrom, the Company's April
1997 Common Stock offering and application of the net proceeds therefrom,
acquisitions and sale of Properties and related sources and uses of funds for
the period subsequent to March 31, 1997 to the date hereof, had occurred as of
the beginning of the period. 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-28
<PAGE>
Beacon Properties Corporation
Selected Financial Information
<TABLE>
<CAPTION>
Company
--------------------------------------------------------------------
Pro Forma
Three Months Three Months Three Months For the Year
Ended Ended Ended Pro Forma Ended
March 31, 1997 March 31, 1997 March 31, 1996 1996 December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1996
-------------- -------------- -------------- ---------- ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenues:
Rental income $80,440 $63,601 $26,920 $296,758 $147,825
Management fees 821 821 750 3,005 3,005
Recoveries from tenants 9,859 8,351 3,245 37,555 16,719
Mortgage interest income 1,372 1,372 958 5,581 4,970
Other income 2,450 2,575 1,795 17,285 11,272
-------------- -------------- -------------- --------- ------------
Total revenues 94,942 76,720 33,668 360,184 183,791
-------------- -------------- -------------- --------- ------------
Expenses:
Property expenses 17,956 14,531 6,896 71,583 37,211
Real estate taxes 10,531 8,334 3,517 37,323 18,124
General and administrative 8,679 8,627 3,589 25,202 19,331
Mortgage interest expense 13,442 11,022 6,344 53,372 30,300
Interest--amortization of
financing costs 477 477 561 2,099 2,084
Depreciation and
amortization 18,248 14,214 5,862 70,869 33,184
-------------- -------------- -------------- --------- ------------
Total expenses 69,333 57,205 26,769 260,448 140,234
-------------- -------------- -------------- --------- ------------
Income (loss) from operations 25,609 19,515 6,899 99,736 43,557
Equity (loss) in joint ventures
and corporations(1) 1,439 1,439 1,407 4,989 4,989
-------------- -------------- -------------- --------- ------------
Income (loss) from continuing
operations 27,048 20,954 8,306 104,725 48,546
Discontinued operations-
Construction Company:
Income (loss) from operations (586) (586) (407) (2,609) (2,609)
Loss on sale -- -- -- (249) (249)
Gain on sale--Westlakes Office
Park -- -- -- 16,505 --
-------------- -------------- -------------- --------- ------------
Income (loss) before minority
interest 26,462 20,368 7,899 118,372 45,688
Minority interest in loss of
combined partnerships -- -- --
Minority interest in Operating
Partnership (2,672) (2,348) (1,227) (12,212) (5,988)
-------------- -------------- -------------- --------- ------------
Income (loss) before
extraordinary items 23,790 18,020 6,672 106,160 39,700
Series A Preferred dividends (4,490) -- -- (17,960) --
-------------- -------------- -------------- --------- ------------
Income available for Common
Stock before extraordinary
items 19,300 18,020 6,672 88,200 39,700
============== ============== ============== ========= ============
Extraordinary items, net of
minority interest -- (1,678) (3,368)
-------------- -------------- ------------
Net income (loss)(2) $18,020 $ 4,994 $ 36,332
============== ============== ============
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor
----------------------------- ------------------------------------
For the Period
For the Year May 26, 1994 For the Period
Ended to January 1, Years Ended
December 31, December 31, 1994 to December 31,
1995 1994 May 25, 1994 1993 1992
-------------- -------------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION: (dollars in thousands)
Revenues:
Rental income $71,050 $25,144 $ 5,776 $14,315 $11,406
Management fees 2,203 -- 1,521 3,533 3,331
Recoveries from tenants 9,742 4,488 1,040 2,349 1,989
Mortgage interest income 2,546 -- -- -- --
Other income 5,502 2,301 675 2,176 2,003
-------------- -------------- -------------- --------- ------------
Total revenues 91,043 31,933 9,012 22,373 18,729
-------------- -------------- -------------- --------- ------------
Expenses:
Property expenses 18,090 7,034 2,086 4,580 4,522
Real estate taxes 10,217 3,325 595 1,354 1,204
General and administrative 9,755 3,122 1,399 4,357 4,658
Mortgage interest expense 15,226 4,992 2,798 7,650 7,203
Interest--amortization of
financing costs 1,370 617 373 192 138
Depreciation and
amortization 17,428 6,924 2,385 5,577 5,505
-------------- -------------- -------------- --------- ------------
Total expenses 72,086 26,014 9,636 23,710 23,230
-------------- -------------- -------------- --------- ------------
Income (loss) from operations 18,957 5,919 (624) (1,337) (4,501)
Equity (loss) in joint ventures
and corporations(1) 3,234 929 198 (5,953) (1,544)
-------------- -------------- -------------- --------- ------------
Income (loss) from continuing
operations 22,191 6,848 (426) (7,290) (6,045)
Discontinued operations-
Construction Company:
Income (loss) from operations (12) 477 102 440 136
Loss on sale -- -- -- -- --
Gain on sale--Westlakes Office
Park -- --
-------------- -------------- -------------- --------- ------------
Income (loss) before minority
interest 22,179 7,325 (324) (6,850) (5,909)
Minority interest in loss of
combined partnerships -- -- 931 1,539 2,656
Minority interest in Operating
Partnership (4,119) (1,670) -- -- --
-------------- -------------- -------------- --------- ------------
Income (loss) before
extraordinary items 18,060 5,655 607 (5,311) (3,253)
Series A Preferred dividends -- -- -- -- --
-------------- -------------- -------------- --------- ------------
Income available for Common
Stock before extraordinary
items 18,060 5,655 607 (5,311) (3,253)
============== ==============
Extraordinary items, net of
minority interest -- -- 8,898 1,554 --
-------------- -------------- -------------- --------- ------------
Net income (loss)(2) $18,060 $ 5,655 $ 9,505 $(3,757) $(3,253)
============== ============== ============== ========= ============
</TABLE>
S-29
<PAGE>
Beacon Properties Corporation
Selected Financial Information
<TABLE>
<CAPTION>
Company
---------------------------------------------------------------------
Pro Forma
Three Months Three Months Three Months For the Year
Ended Ended Ended Pro Forma Ended
March 31, 1997 March 31, 1997 March 31, 1996 1996 December 31,
(unaudited) (unaudited) (unaudited) (unaudited) 1996
-------------- -------------- -------------- ----------- -------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Per Share of Common Stock data:
Income from continuing
operations $ 0.36 $ 0.38 $ 0.32 $ 1.39 $ 1.41
Discontinued operations:
Income (loss) from
operations--Construction
Company $ (0.01) $ (0.01) $ (0.02) $ (0.04) $ (0.08)
Gain (loss) on sale $ -- $ -- $ -- $ 0.26 $ (0.01)
Income before extraordinary
items $ 0.35 $ 0.37 $ 0.30 $ 1.60 $ 1.32
Extraordinary items $ -- $ (0.07) $ (0.11)
Net income $ 0.37 $ 0.23 $ 1.21
Cash dividends declared $ .4625 $ .42 $ 1.765
Cash dividends paid $ .4625 $ .42 $ 1.765
Weighted average common
shares outstanding 55,237,322 48,156,877 22,074,715 55,237,322 29,932,327
BALANCE SHEET
INFORMATION:
Real estate before
accumulated depreciation $ 2,282,814 $ 1,696,439 $ 818,195 $ 1,691,530
Total assets 2,358,430 1,770,848 929,579 1,779,412
Mortgage debt 587,862 451,862 403,378 452,212
Note Payable, Credit Facility 139,525 153,000 -- 153,000
Total liabilities 787,024 663,734 449,677 671,711
Total equity (deficit) 1,419,968 998,605 429,854 999,150
OTHER INFORMATION:
Funds from Operations (FFO)
before minority interest (3) $ 45,716 $ 35,588 $ 14,715 $ 176,769 $ 83,154
Company Funds from
Operations (3) 36,213 31,485 12,428 139,498 72,253
Cash flow provided by
(used by):
Operating activities 28,408 18,462 -- 91,682
Investing activities (28,303) (332,127) -- (1,097,753)
Financing activities (22,035) 365,242 -- 1,037,656
Ratio of EBITDA to interest
expense (4)(7) 4.08 3.87 2.94 4.27 3.33
Ratio of EBITDA to Fixed
Charges and Preferred Stock
Dividends (5)(7) 2.99 3.59 2.62 3.10 2.95
Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends (6)(7) 2.10 2.54 1.93 2.05 2.17
- --------------
(1) Including deductions for
Depreciation and
amortization $ 1,006 $ 1,006 $ 954 $ 4,033 $ 4,033
(2) Company share of
Operating Partnership 87.84% 88.47% 84.46% 87.84% 86.89%
</TABLE>
<TABLE>
<CAPTION>
Company Predecessor
------------------------------- ----------------------------------
For the Year For the Period For the Period
Ended May 26, 1994 to January 1, Years Ended
December 31, December 31, 1994 to December 31,
1995 1994 May 25, 1994 1993 1992
------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
Per Share of Common Stock data:
Income from continuing
operations $ 1.09 $ 0.45 -- -- --
Discontinued operations:
Income (loss) from
operations--Construction
Company $ (0.00) $ 0.03 -- -- --
Gain (loss) on sale -- -- -- -- --
Income before extraordinary
items $ 1.09 $ 0.48 -- -- --
Extraordinary items -- -- -- -- --
Net income $ 1.09 $ 0.48 -- -- --
Cash dividends declared $ 1.24 $ 0.96 -- -- --
Cash dividends paid $ 1.64 $ 0.56 -- -- --
Weighted average common
shares outstanding 16,525,245 11,816,380 -- -- --
BALANCE SHEET
INFORMATION:
Real estate before
accumulated depreciation $ 471,142 $ 400,419 $ 82,198 $ 81,220 $ 78,580
Total assets 534,797 400,861 77,470 85,497 93,327
Mortgage debt 70,536 90,936 69,240 87,091 86,610
Note Payable, Credit Facility 130,500 130,300 -- -- --
Total liabilities 239,013 261,100 129,836 143,451 142,015
Total equity (deficit) 258,822 102,038 (52,366) (57,954) (48,688)
OTHER INFORMATION:
Funds from Operations (FFO)
before minority interest (3) $ 41,913 $ 17,262
Company Funds from
Operations (3) 34,083 13,351
Cash flow provided by (used by):
Operating activities 32,518 12,378 241 5,408 10,069
Investing activities (145,750) (234,674) (1,102) (9,890) (2,091)
Financing activities 102,636 237,393 (716) (830) (3,983)
Ratio of EBITDA to interest
expense (4)(7) 3.30 2.96
Ratio of EBITDA to Fixed
Charges and Preferred Stock
Dividends (5)(7) 2.92 2.54
Ratio of Earnings to Fixed
Charges and Preferred Stock
Dividends (6)(7) 2.02 1.62
- ----------------
(1) Including deductions for
Depreciation and
amortization $ 2,306 $ 3,013
(2) Company share of
Operating
Partnership 81.31% 77.20%
</TABLE>
S-30
<PAGE>
(3) The Company believes that to facilitate a clear understanding of the
operating results of the Company, Funds from Operations ("FFO") should be
examined in conjunction with net income. The definition of FFO was
clarified in the NAREIT White Paper, adopted by the NAREIT Board of
Governors on March 3, 1995, as net income (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and
amortization (in each case only real estate related assets), and after
adjustments for unconsolidated partnerships and joint ventures. Adjustments
for unconsolidated partnerships and joint ventures will be calculated to
reflect FFO on the same basis. FFO should not be considered as a substitute
for net income as an indication of the Company's performance or as a
substitute for cash flow as a measure of its liquidity. The Company's
method of calculating FFO may be different from methods used by other
REITs. The following table reconciles pro forma net income for the Company
to pro forma FFO for the three months ended March 31, 1997:
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Three Months Ended Year Ended
March 31, 1997 December 31, 1996
(unaudited) (unaudited)
------------------ -----------------
(in thousands)
<S> <C> <C>
Income before minority interest and extraordinary item $26,462 $118,372
Add consolidated properties:
Depreciation and amortization 18,248 70,869
Add joint ventures properties:
Depreciation and amortization 1,006 4,033
Less net gain on sale of assets -- (16,505)
------------------ -----------------
Funds from operations before minority interest 45,716 176,769
Less Series A Preferred Unit Distributions (4,490) (17,960)
------------------ -----------------
Available for allocation 41,226 158,809
Company share of Operating Partnership before Series A
Preferred Units 87.84% 87.84%
------------------ -----------------
FFO available for common shares $36,213 $139,498
================== =================
</TABLE>
(4) For purposes of computing the ratio of EBITDA to interest expense, EBITDA
represents earnings before interest, taxes, depreciation and amortization.
Interest expense includes the Company's pro rata share of joint venture
interest expense.
(5) For purposes of computing the ratio of EBITDA to fixed charges and preferred
stock dividends, EBITDA represents earnings before interest, taxes,
depreciation and amortization. Fixed charges and preferred stock dividends
consist of interest costs, whether expensed or capitalized and including the
Company's pro rata share of joint venture interest expense, the interest
component of rental expense and amortization of debt issuance costs, plus
any dividends on outstanding preferred stock.
(6) For purposes of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings have been calculated by adding fixed
charges, excluding capitalized interest, to income (loss) from continuing
operations before minority interest. Fixed charges and preferred stock
dividends consist of interest costs, whether expensed or capitalized, the
interest component of rental expense and amortization of debt issuance
costs, plus any dividends on outstanding preferred stock.
(7) EBITDA (i) does not represent cash flow from operations as defined by
generally accepted accounting principles, (ii) should not be considered as
an alternative to net income (determined in accordance with GAAP) as a
measure of operating performance; and (iii) is not an alternative to cash
flows as a measure of liquidity. The Company's management believes that in
addition to cash flows and net income, EBITDA is a useful financial
performance measurement for assessing the operating performance of an
equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures. To evaluate EBITDA and the trends it depicts, the components
of EBITDA, such as revenues and operating expenses, should be considered.
The Company's method of calculating EBITDA may be different from the
methods used by other REITs.
S-31
<PAGE>
DESCRIPTION OF SERIES A PREFERRED STOCK
This description of the particular terms of the Series A Preferred Stock
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Preferred Stock set forth in the
accompanying Prospectus, to which description reference is hereby made.
General
The Company is authorized to issue up to 25 million shares of Preferred Stock
in one or more series, with such terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, in each case, if any, as
are permitted by Maryland law and as the Board of Directors of the Company may
determine by adoption of an amendment of the Company's Articles of
Incorporation, as amended (the "Articles"), without any further vote or action
by the Company's stockholders. See "Description of Preferred Stock" in the
accompanying Prospectus. The Series A Preferred Stock is a series of the
Company's Preferred Stock.
The following summary of the terms and provisions of the Series A Preferred
Stock does not purport to be complete and is qualified in its entirety by
reference to the pertinent sections of the Articles and the Articles
Supplementary creating the Series A Preferred Stock (the "Designating
Amendment"), each of which is available from the Company.
Dividends
Holders of shares of the Series A Preferred Stock shall be entitled to
receive, when and as authorized by the Board of Directors, out of funds legally
available for the payment of dividends, cumulative preferential cash dividends
at the rate of 8.98% per annum of the $25 liquidation preference (equivalent to
a fixed annual rate of $2.245 per share). Such dividends shall be cumulative
from the date of original issue and shall be payable quarterly in arrears on or
before the 15th day of each March, June, September and December or, if not a
business day, the next succeeding business day (each, a "Dividend Payment
Date"). The first dividend, which will be paid on September 15, 1997, will be
for less than a full quarter. Such dividend and any dividend payable on the
Series A Preferred Stock for any partial dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Dividends will be
payable to holders of record as they appear in the stock records of the Company
at the close of business on the applicable record date, which shall be the 1st
day of the calendar month in which the applicable Dividend Payment Date falls or
on such other date designated by the Board of Directors of the Company for the
payment of dividends that is not more than 30 nor less than 10 days prior to
such Dividend Payment Date (each, a "Dividend Record Date").
No dividends on shares of Series A Preferred Stock shall be authorized by the
Board of Directors of the Company or paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law.
Notwithstanding the foregoing, dividends on the Series A Preferred Stock will
accrue whether or not the Company has earnings, whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are authorized. Accrued but unpaid dividends on the Series A Preferred
Stock will accumulate as of the Dividend Payment Date on which they first become
payable. Except as set forth in the next sentence, no dividends will be
authorized or paid or set apart for payment on any stock of the Company or any
other series of Preferred Stock ranking, as to dividends, on a parity with or
junior to the Series A Preferred Stock (other than a dividend in shares of the
Company's Common Stock or in shares of any other class of stock ranking junior
to the Series A Preferred Stock as to dividends and upon liquidation) for any
period unless (i) full cumulative dividends have been or contemporaneously are
authorized and paid or authorized and (ii) a sum sufficient for the payment
thereof is set apart for such payment on the Series A Preferred Stock for all
past dividend periods and the then current dividend period. When dividends are
not paid in full (or a sum sufficient for such full payment is not so set apart)
upon the Series A Preferred Stock and the shares of any other series of
Preferred Stock ranking on a parity as to dividends with the Series A Preferred
Stock, all dividends authorized upon the Series A Preferred Stock and any other
series of Preferred Stock ranking on a parity as to dividends with the Series A
Preferred Stock shall be authorized pro rata so that the amount of dividends
authorized per share of Series A Preferred Stock and such other series of
Preferred Stock shall in all cases bear to each other the same ratio
S-32
<PAGE>
that accrued dividends per share on the Series A Preferred Stock and such other
series of Preferred Stock (which shall not include any accrual in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) bear to each other. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Stock which may be in arrears.
Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Series A Preferred Stock have been or
contemporaneously are authorized and paid or declared and a sum sufficient for
the payment thereof is set apart for payment for all past dividend periods and
the then current dividend period, no dividends (other than in shares of Common
Stock or other shares of stock ranking junior to the Series A Preferred Stock as
to dividends and upon liquidation) shall be authorized or paid or set aside for
payment nor shall any other distribution be authorized or made upon the Common
Stock, or any other stock of the Company ranking junior to or on a parity with
the Series A Preferred Stock as to dividends or upon liquidation, nor shall any
shares of Common Stock, or any other shares of stock of the Company ranking
junior to or on a parity with the Series A Preferred Stock as to dividends or
upon liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any such shares) by the Company (except by conversion into or
exchange for other stock of the Company ranking junior to the Series A Preferred
Stock of such series as to dividends and upon liquidation). Holders of shares of
the Series A Preferred Stock shall not be entitled to any dividend, whether
payable in cash, property or stock, in excess of full cumulative dividends on
the Series A Preferred Stock as provided above. Any dividend payment made on
shares of the Series A Preferred Stock shall first be credited against the
earliest accrued but unpaid dividend due with respect to such shares which
remains payable. See "Description of Preferred Stock--Dividends" in the
accompanying Prospectus.
The Company intends to contribute or otherwise transfer the net proceeds of
the sale of the Series A Preferred Stock to the Operating Partnership in
exchange for 8.98% Series A Preferred Units in the Operating Partnership, the
economic terms of which will be substantially identical to the Series A
Preferred Stock. The Operating Partnership will be required to make all required
distributions on the Series A Preferred Units (which will mirror the payments of
distributions, including accrued and unpaid distributions upon redemption, and
of the liquidation preference amount on the Series A Preferred Stock) prior to
any distribution of cash or assets to the holders of Units or to the holders of
any other interest in the Operating Partnership, except for any other series or
preference Units ranking on a parity with the Series A Preferred Units as to
distributions and/or liquidation rights and except for distributions required to
enable the Company to maintain its qualifications as a REIT.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, the holders of shares of Series A Preferred Stock
are entitled to be paid out of the assets of the Company legally available for
distribution to its stockholders a liquidation preference of $25 per share, plus
an amount equal to any accrued and unpaid dividends to the date of payment,
before any distribution of assets is made to holders of Common Stock or any
other class or series of stock of the Company that ranks junior to the Series A
Preferred Stock as to liquidation rights. Holders of Series A Preferred Stock
will be entitled to written notice of any such liquidation. After payment of the
full amount of the liquidating distributions to which they are entitled, the
holders of Series A Preferred Stock will have no right or claim to any of the
remaining assets of the Company. The consolidation or merger of the Company with
or into any other corporation, trust or entity or of any other corporation,
trust or other entity with or into the Company, or the sale, lease or conveyance
of all or substantially all of the property or business of the Company, shall
not be deemed to constitute a liquidation, dissolution or winding up of the
Company. For further information regarding the rights of the holders of the
Series A Preferred Stock upon the liquidation, dissolution or winding up of the
Company, see "Description of Preferred Stock--Liquidation Preference" in the
accompanying Prospectus.
Redemption
The Series A Preferred Stock is not redeemable prior to June 15, 2002.
However, in order to ensure that the Company remains a qualified REIT for
federal income tax purposes, Series A Preferred Stock will be subject to the
Articles, pursuant to which Series A Preferred Stock owned by a stockholder in
excess of the Ownership Limit (as defined in the accompanying Prospectus) will
automatically be exchanged for shares of Excess Stock, and the Company will have
the right to purchase Excess Stock from the holder. See "Restrictions on
Transfers of Capital Stock" in the accompanying Prospectus. On and after June
15, 2002, the Company, at its option upon not less than 30 nor more than 60
days' written
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notice, may redeem shares of the Series A Preferred Stock, in whole or in part,
at any time or from time to time, for cash at a redemption price of $25 per
share, plus all accrued and unpaid dividends thereon to the date fixed for
redemption (except as provided below), without interest. The redemption price of
the Series A Preferred Stock (other than the portion thereof consisting of
accrued and unpaid dividends) is payable solely out of the sale proceeds of
other stock of the Company, which may include other series of Preferred Stock,
and from no other source. For purposes of the preceding sentence, "stock" means
any equity securities (including Common Stock and Preferred Stock), shares,
interest, participation or other ownership interests (however designated) and
any rights (other than debt securities convertible into or exchangeable for
equity securities) or options to purchase any of the foregoing. Holders of
Series A Preferred Stock to be redeemed shall surrender such Series A Preferred
Stock at the place designated in such notice and shall be entitled to the
redemption price and any accrued and unpaid dividends payable upon such
redemption following such surrender. If notice of redemption of any shares of
Series A Preferred Stock has been given and if the funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of any shares of Series A Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such shares
of Series A Preferred Stock, such shares of Series A Preferred Stock shall no
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price plus any accrued and
unpaid dividends payable upon such redemption. If less than all of the
outstanding Series A Preferred Stock is to be redeemed, the Series A Preferred
Stock to be redeemed shall be selected pro rata (as nearly as may be practicable
without creating fractional shares) or by any other equitable method determined
by the Company.
Unless full cumulative dividends on all shares of Series A Preferred Stock
shall have been or contemporaneously are authorized and paid or authorized and a
sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period, no shares of Series A
Preferred Stock shall be redeemed unless all outstanding shares of Series A
Preferred Stock are simultaneously redeemed and the Company shall not purchase
or otherwise acquire directly or indirectly any shares of Series A Preferred
Stock (except by exchange for stock of the Company ranking junior to the Series
A Preferred Stock as to dividends and upon liquidation); provided, however, that
the foregoing shall not prevent the purchase by the Company of shares of Excess
Stock in order to ensure that the Company remains qualified as a REIT for
Federal income tax purposes, as described under "Restrictions on Transfers of
Capital Stock" in the accompanying Prospectus, or the purchase or acquisition of
shares of Series A Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Series A Preferred
Stock.
Notice of redemption will be given by publication in a newspaper of general
circulation in the City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days prior to
the redemption date. A similar notice will be mailed by the Company, postage
prepaid, not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series A Preferred Stock to
be redeemed at their respective addresses as they appear on the stock transfer
records of the Company. No failure to give such notice or any defect thereto or
in the mailing thereof shall affect the validity of the proceedings for the
redemption of any shares of Series A Preferred Stock except as to the holder to
whom notice was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of shares of Series
A Preferred Stock to be redeemed; (iv) the place or places where the Series A
Preferred Stock is to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date. If less than all of the Series A Preferred Stock held by any
holder is to be redeemed, the notice mailed to such holder shall also specify
the number of shares of Series A Preferred Stock held by such holder to be
redeemed.
Immediately prior to any redemption of Series A Preferred Stock, the Company
shall pay, in cash, any accumulated and unpaid dividends through the redemption
date, unless a redemption date falls after a Dividend Record Date and prior to
the corresponding Dividend Payment Date, in which case each holder of Series A
Preferred Stock at the close of business on such Dividend Record Date shall be
entitled to the dividend payable on such shares on the corresponding Dividend
Payment Date notwithstanding the redemption of such shares before such Dividend
Payment Date. Except as provided above, the Company will make no payment or
allowance for unpaid dividends, whether or not in arrears, on Series A Preferred
Stock which is redeemed.
The Series A Preferred Stock has no stated maturity and will not be subject
to any sinking fund or mandatory redemption. However, in order to ensure that
the Company remains a qualified REIT for Federal income tax purposes, Series A
Preferred Stock owned by a stockholder in excess of the Ownership Limit will
automatically be exchanged
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for shares of Excess Stock, and the Company will have the right to purchase
Excess Stock from the holder. Shares of Series A Preferred Stock which have been
exchanged for Excess Stock may be redeemed, in whole or in part, and, if in
part, pro rata from the holders of record of such shares in proportion to the
number of such shares held by such holders (with adjustments to avoid redemption
of fractional shares) or by any other equitable method determined by the
Company, at any time when outstanding shares of Series A Preferred Stock are
being redeemed.
Voting Rights
Holders of the Series A Preferred Stock will not have any voting rights,
except as set forth below.
Whenever dividends on any shares of Series A Preferred Stock shall be in
arrears for six or more quarterly periods (a "Preferred Dividend Default"), the
holders of such shares of Series A Preferred Stock (voting separately as a class
with all other series of Preferred Stock ranking on a parity with the Series A
Preferred Stock as to dividends or upon liquidation ("Parity Preferred") upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of a total of two additional directors of the
Company (the "Preferred Stock Directors") at a special meeting called by the
holders of record of at least 20% of the outstanding shares of Series A
Preferred Stock or the holders of shares of any series of Parity Preferred so in
arrears (unless such request is received less than 90 days before the date fixed
for the next annual or special meeting of the stockholders) or at the next
annual meeting of stockholders, and at each subsequent annual meeting until all
dividends accumulated on such shares of Series A Preferred Stock for the past
dividend periods and the dividend for the then current dividend period shall
have been fully paid or authorized and a sum sufficient for the payment thereof
set aside for payment in full. If and when all accumulated dividends and the
dividend for the then current dividend period on the Series A Preferred Stock
shall have been paid in full or set aside for payment in full, the holders
thereof shall be divested of the foregoing voting rights (subject to revesting
in the event of each and every Preferred Dividend Default) and, if all
accumulated dividends and the dividend for the current dividend period have been
paid on all series of Parity Preferred upon which like voting rights have been
conferred and are exerciseable, the term of office of each Preferred Stock
Director so elected shall terminate. Any Preferred Stock Director may be removed
at any time when they have the voting rights described above with or without
cause by, and shall not be removed otherwise than by the vote of, the holders of
record of a majority of the outstanding shares of the Series A Preferred Stock
(voting separately as a class with all series of Parity Preferred upon which
like voting rights have been conferred and are exercisable). So long as a
Preferred Dividend Default shall continue, any vacancy in the office of a
Preferred Stock Director may be filled by written consent of the Preferred Stock
Director remaining in office, or if none remains in office, by a vote of the
holders of record of a majority of the outstanding shares of Series A Preferred
Stock when they have the voting rights described above (voting separately as a
class with all series of Parity Preferred upon which like voting rights have
been conferred and are exercisable). The Preferred Stock Directors shall each be
entitled to one vote per director on any matter.
So long as any shares of Series A Preferred Stock remain outstanding, the
Company will not, without the affirmative vote or consent of the holders of at
least two-thirds of the shares of the Series A Preferred Stock outstanding at
the time, given in person or by proxy, either in writing or at a meeting (such
series voting separately as a class), (a) authorize or create, or increase the
authorized or issued amount of, any class or series of stock ranking prior to
the Series A Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized stock of the Company into such shares, or create, authorize or
issue any obligation or security convertible into or evidencing the right to
purchase any such shares; or (b) amend, alter or repeal the provisions of the
Articles or the Designating Amendment, whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series A Preferred Stock or the
holders thereof; provided, however, with respect to the occurrence of any Event
set forth in (b) above, so long as the Series A Preferred Stock remains
outstanding with the terms thereof materially unchanged, the occurrence of any
such Event shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of the Series A Preferred
Stock and provided further that (i) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or (ii) any increase in the amount of authorized shares of such series,
in each case ranking on a parity with or junior to the Series A Preferred Stock
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
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<PAGE>
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of Series A Preferred Stock shall have been
redeemed or called for redemption upon proper notice and sufficient funds shall
have been deposited in trust to effect such redemption.
Conversion
The Series A Preferred Stock is not convertible into or exchangeable for any
other property or securities of the Company, except that the shares of Series A
Preferred Stock may be exchanged for shares of Excess Stock, in accordance with
the Articles. See "Restrictions on Transfers of Capital Stock" in the
accompanying Prospectus.
Restrictions on Ownership
For information regarding restrictions on ownership of the Series A Preferred
Stock, see "Restrictions on Transfers of Capital Stock" in the accompanying
Prospectus.
Transfer Agent
The transfer agent, registrar and dividend disbursing agent for the Series A
Preferred Stock will be Boston EquiServe.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations is based
on current law, is for general information only, and is not tax advice. This
discussion does not purport to deal with all aspects of taxation that may be
relevant to particular stockholders in light of their personal investment or tax
circumstances, or to certain types of stockholders (including insurance
companies, tax exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the United
States) subject to special treatment under the federal income tax laws. In
addition, this section does not discuss foreign, state or local taxation.
This discussion does not address the taxation of the Company or the impact on
the Company of its election to be taxed as a REIT. Such matters are discussed in
the accompanying Prospectus under "Federal Income Tax Considerations."
Prospective investors should consult, and must depend on, their own tax advisors
regarding the state, local, foreign and other tax consequences of holding and
disposing of Series A Preferred Stock.
Distributions on Series A Preferred Stock
As long as the Company qualifies as a REIT, distributions that are made to
its stockholders out of the Company's current accumulated earnings and profits,
and that are not designated as capital gain dividends, generally will be taxed
to stockholders as ordinary income, either in the year of payment or, with
respect to distributions declared in the last quarter of any year and paid by
January 31 of the following year, in the year of declaration, and will not be
eligible for the dividends received deduction for corporations. The Company's
earnings and profits will be allocated first to any outstanding Series A
Preferred Stock. A distribution of net capital gain by the Company generally
will be treated as long term capital gain to stockholders to the extent properly
designated by the Company as a capital gain dividend and regardless of the
length of time a stockholder has held such stockholder's Series A Preferred
Stock. Under Section 291 of the Code, however, corporate stockholders may be
required to treat up to 20% of any such capital gain as ordinary income.
Corporate stockholders of a REIT generally are required to treat the portion of
a capital gain distribution attributable to the gain from the REIT's sale or
exchange of depreciable real property as subject to the 20% ordinary income rule
of Section 291 of the Code. Capital gain distributions also are not eligible for
the dividends received deduction for corporations. A dividend in excess of
current or accumulated earnings and profits will constitute a nontaxable return
of capital to the extent of the stockholder's basis in such stockholder's Series
A Preferred Stock, and will be applied to reduce the stockholder's basis in the
Series A Preferred Stock. To the extent such a dividend is greater than such
basis, it will be treated as capital gain to those stockholders holding their
Series A Preferred Stock as capital assets. The Company will notify stockholders
as to the portions of each distribution which, in its judgment, constitute
ordinary income, capital gain distributions or return of capital. Should the
Company incur ordinary or capital losses, stockholders will not be entitled to
include such losses in their own income tax returns.
Redemption of Series A Preferred Stock
A redemption of shares of Series A Preferred Stock for cash generally will be
treated as a sale or exchange if the holder of such redeemed shares does not
own, actually or constructively within the meaning of Section 318 of the Code,
any stock of the Company other than the redeemed Series A Preferred Stock. If a
holder does own, actually or constructively, such other stock (including Series
A Preferred Stock not redeemed), a redemption of Series A Preferred Stock may be
treated as a dividend to the extent of the Company's current or accumulated
earnings and profits. Such dividend treatment would not apply if the redemption
were "not essentially equivalent to a dividend" with respect to the holder under
Section 302(b)(1) of the Code. A distribution to a holder will be "not
essentially equivalent to a dividend" if it results in a "meaningful reduction"
in the holder's stock interest in the Company. For this purpose, a redemption of
Series A Preferred Stock that results in a reduction in the proportionate
interest in the Company (taking into account any ownership of Common Stock and
any stock constructively owned) of a holder whose relative stock interest in the
Company is minimal and who exercises no control over corporate affairs should be
regarded as a meaningful reduction in the holder's stock interest in the
Company. If the redemption of the Series A Preferred Stock for cash is not
treated as a distribution taxable as a dividend, the redemption will result in
capital gain or loss equal to the difference between the amount of cash received
by the holder and the holder's adjusted tax basis in the Series A Preferred
Stock redeemed.
If a redemption of Series A Preferred Stock is treated as a distribution that
is taxable as a dividend, the holder's adjusted tax basis in the redeemed Series
A Preferred Stock will be transferred to any remaining stock holdings in the
Company. If the holder does not retain any stock ownership in the Company, the
holder may lose such basis entirely.
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<PAGE>
MANAGEMENT
Officers and Directors
The persons who are officers and Directors of the Company and their
respective positions are as follows:
<TABLE>
<CAPTION>
Name Age Position and Offices Held
- -------------------------- ----- -----------------------------------------------------
<S> <C> <C>
Officers:
Alan M. Leventhal 44 President, Chief Executive Officer and Director
Lionel P. Fortin 53 Executive Vice President, Chief Operating Officer and
Director
Donald B. Brooks 54 Senior Vice President and Chief Executive, Beacon
Properties Southeast
Charles H. Cremens 43 Senior Vice President and Chief Investment Officer
Jeremy B. Fletcher 48 Senior Vice President and Chief Executive, Beacon
Properties West
Carol G. Judson 45 Senior Vice President, Corporate Development
Douglas S. Mitchell 54 Senior Vice President--Leasing/Management and
Development
Robert J. Perriello 54 Senior Vice President and Chief Financial Officer
E. Valjean Wheeler 52 Senior Vice President and Chief Executive, Beacon
Properties Midwest
William A. Bonn, Esq 45 General Counsel
Nancy J. Broderick 41 Vice President and Treasurer
Steven D. Fessler 37 Vice President, Asset Management
Claude B. Hoopes 47 Vice President, Leasing
Henry Irwig 54 Vice President, Property Management
G. Douglas Lanois 36 Controller
Joseph McMahon 51 Vice President, Development
Erin R. O'Boyle 37 Vice President, Acquisitions
Thomas J. O'Connor 40 Vice President, Acquisitions
W. Malcolm O'Donnell, Jr. 43 Vice President, Acquisitions
Randy J. Parker 38 Vice President, Investor Relations
James J. Whalen 34 Vice President, Information Systems
M. Wistar Wood 36 Vice President, Acquisitions
Directors:
Edwin N. Sidman 54 Chairman of the Board and Director
Norman B. Leventhal 79 Director
Graham O. Harrison 71 Director
William F. McCall, Jr 60 Director
Steven Shulman 54 Director
Scott M. Sperling 37 Director
Dale F. Frey 64 Director
</TABLE>
The following are biographical summaries of the experience of the officers
and Directors of the Company:
Mr. Alan Leventhal has served as President, Chief Executive Officer and a
Director of the Company since 1994. 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.
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<PAGE>
Mr. Fortin serves as Executive Vice President, Chief Operating Officer and
a Director of the Company. From May 1994 through February 1995, Mr. Fortin
served as Chief Financial Officer of the Company. From February 1995 through
January 1997, Mr. Fortin served as Senior Vice President of the Company. Mr.
Fortin became Executive Vice President and a Director of the Company in
January 1997. Before joining Beacon in 1973, Mr. Fortin was an Audit
Supervisor with Laventhol & Horwath. Mr. Fortin graduated from Bentley
College in 1968 and is a member of the American Institute of Certified Public
Accountants and the Massachusetts Society of Certified Public Accountants.
Mr. Brooks joined the Company in June 1996 and has served as Senior Vice
President of the Company and Chief Executive, Beacon Properties Southeast since
that time. From 1986 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 joined the Company in February 1996 and has served as the Senior
Vice President and Chief Investment Officer of the Company since that time.
Prior to joining the Company, Mr. Cremens served as Vice President and Head of
Mortgage Loans and Real Estate Investments with Aetna Life & Casualty Company
from 1993 to 1996. Prior to his term at Aetna, Mr. Cremens held various senior
management positions with Bank of Boston from 1978 to 1993, including Managing
Director of Corporate Finance and Manager of the Restructured Real Estate and
OREO Departments. 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.
Mr. Fletcher serves as the Senior Vice President and Chief Executive of
Beacon Properties West. He joined the Company in May of 1997. Mr. Fletcher is
responsible for directing the growth and operations of the Company in the
Western United States. Prior to joining the Company, Mr. Fletcher was the
managing director of Insignia Commercial Group, Inc., Los Angeles. From 1983
to July 1996, Mr. Fletcher was with Paragon Group where he served as Senior
Vice President/General Partner of the Southern California/Arizona Region. Mr.
Fletcher received his Bachelor's degree in Geology from Albion College. He is
a member of the Urban Land Institute (ULI), Real Estate Investment Advisory
Council (REAIC) and National Association of Industrial and Office Properties
(NAIOP) and is a licensed broker in the state of California.
Ms. Judson has served as the Senior Vice President, Corporate Development of
the Company since 1996. 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 with a minor in psychology from Curry
College. She is a member of the Northeast Human Resources Association and the
American Management Association and serves as a United Way Cabinet Member.
Mr. Mitchell has served as the Senior Vice President-Leasing/Management and
Development of the Company and as President of the Management Company since
1994. 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 has served as Senior Vice President of the Company since May
1994 and became Chief Financial Officer of the Company in February of 1995.
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. Wheeler serves as Senior Vice President and Chief Executive of Beacon
Properties Midwest. He joined the Company in April 1997. Mr. Wheeler is
responsible for directing the growth and operations of the Company in the
Midwestern United States. Prior to joining the Company, Mr. Wheeler held
various senior management positions at Equity Office Holdings, L.L.C.
beginning in 1989 and served as President and Chief Operating Officer
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<PAGE>
of Equity Office Holdings, L.L.C. from 1995 through 1997. He also held
various senior management positions with the Broe Companies and Williams
Realty Corporation. Mr. Wheeler graduated from Oklahoma State University with
a B.S. in Education. He is a member of the Urban Land Institute and has
served on the National Advisory Council of the Building Owners and Managers
Association (BOMA).
Mr. Bonn has served as General Counsel to the Company since early 1997. Prior
to joining the Company as General Counsel, from 1987 to 1997 Mr. Bonn worked
with Property Capital Trust, another Boston-based real estate investment trust,
and served as Senior Vice President and General Counsel. From 1978 to 1987 Mr.
Bonn held various positions as an attorney with The Prudential Insurance Company
of America and was assigned to work with Prudential's Realty Group in Newport
Beach and Los Angeles, California; New York City and at Prudential's
headquarters in Newark, New Jersey. From 1976 to 1978 Mr. Bonn was engaged in
the private practice of law in Los Angeles. Mr. Bonn holds a Bachelor of Science
Degree from the University of California at San Diego and a Juris Doctor degree
from the University of San Diego. He is admitted to practice law in
Massachusetts, New York and California, and is a member of the American,
California and Boston Bar Associations.
Ms. Broderick has served as Vice President and Treasurer of the Company
since 1994. 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 has served as Vice President, Asset Management of the Company
since 1994. In this capacity, Mr. Fessler has overall responsibility for the
asset management of the Company's property portfolio. From 1983 to 1991 Mr.
Fessler served Beacon as Senior Development Manager and Vice President,
Development. Prior to rejoining Beacon in 1994, 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 joined Beacon in 1990 and has served as Vice President, Leasing of
the Company since 1994. In this capacity, Mr. Hoopes has responsibility for the
overall leasing strategy and leasing performance of the Company's portfolio, as
well as overseeing the leasing of the three million square feet of space managed
and leased for third party institutional clients. Mr. Hoopes was previously a
senior officer of The Landmarks Group, a major Atlanta developer, where he was
responsible for six million square feet of leasing including an office park
adjacent to the Perimeter Center Portfolio. Mr. Hoopes is a graduate of
Princeton University.
Mr. Irwig has served as Vice President, Commercial Properties of the
Company since 1994. 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 has served as Controller of the Company since 1995. 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.
Mr. McMahon has served as Vice President, Development of the Company since
January 1997. In this capacity, he is responsible for overseeing the development
and redevelopment of Beacon's Properties. Since joining the Company in 1981, Mr.
McMahon has held various positions including directing and managing a number of
development projects in Boston, Chicago and Washington, D.C. Mr. McMahon holds a
Bachelor's degree in Mathematics from Boston College and a Master's degree in
Civil Engineering and Construction Management from the Massachusetts Institute
of Technology. He is a member of the National Association of Industrial and
Office Properties (NAIOP).
S-40
<PAGE>
Ms. O'Boyle has served as Vice President, Acquisitions of the Company
since 1994. In this capacity, Ms. O'Boyle manages the search and negotiations
for ownership opportunities. Ms. O'Boyle joined Beacon in 1985 and 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 a past President
of the New England Women in Real Estate (NEWIRE).
Mr. O'Connor has served as Vice President, Acquisitions of the Company
since 1997. Mr. O'Connor is responsible for identifying acquisition
opportunities in Northern and Southern California. Prior to joining the
Company in 1996, Mr. O'Connor was an asset manager at Copley Real Estate
Advisors from 1987 to 1996 where he was responsible for a portfolio of 5
million square feet of office properties, primarily in California. Prior to
Copley, Mr. O'Connor held positions with Coopers & Lybrand, The Sheraton
Corporation and PaineWebber Properties. Mr. O'Connor is a graduate of Boston
College with a Bachelor's degree in Accounting and Finance.
Mr. O'Donnell has served as Vice President, Acquisitions of the Company since
May 1997. In this capacity, he manages the search and negotiations for ownership
opportunities in the Western United States. From 1994 through 1997, Mr.
O'Donnell was Managing Director of Hackman O'Donnell Partners LLC, a
closely-held real estate investment firm active in markets nationwide. From 1987
through 1993, Mr. O'Donnell was a partner with Overton, Moore & Associates,
Inc., a leading Southern California real estate company. Mr. O'Donnell graduated
from the University of Southern California with a Bachelor's degree in
Journalism. He is past chairman of the Los Angeles Commercial Realty Association
(LACRA) and a member of the Real Estate Investment Advisory Council (REIAC).
Mr. Parker has served as Vice President, Investor Relations of the Company
since 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 from 1988 to 1996, 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 has served as Vice President, Information Systems of the Company
since 1995. 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.
Prior to joining Beacon in January 1993 Mr. Whalen was Director Information
Services and Technology of Plan International from 1989 to 1993. Mr. Whalen is a
graduate of the University of Notre Dame and the recipient of the New York City
Urban Fellowship.
Mr. Wood has served as Vice President, Acquisitions of the Company since
February 1997. In this capacity he manages the search and negotiations for
ownership opportunities. Mr. Wood served as Vice President of Acquisitions for
Metric Realty from August 1995 to 1997 and oversaw all acquisition activity in a
26-state territory. Prior to joining Metric, he was with Copley Real Estate
Advisors from 1992 to July 1995, responsible for acquisitions and sales. Mr.
Wood is a graduate of Princeton University and holds a MBA from the Wharton
School, University of Pennsylvania. He is the founder of REIAC's Northeast
Chapter, and a member of ICSC.
Mr. Sidman has served as the Chairman of the Board and a Director of the
Company since 1994. 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 has served as a Director of the Company since 1994.
He is the co-founder and Chairman of The Beacon Companies. 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
S-41
<PAGE>
Committee, and Chairman of the Corporation Visiting Committee for The School
of Architecture and Planning. Mr. Leventhal is also an Honorary Life Member
of the Board of Overseers of The Museum of Fine Arts and has been a Member of
the Board of Trustees of The Museum of Science. Among other civic
contributions, Mr. Leventhal has served as Chairman of The Artery Business
Committee, is Chairman of The Friends of Post Office Square and is Chairman
of the Trust for City Hall Plaza. Mr. Leventhal also serves as Director of
Doubletree Corporation and Picower Institute for Medical Research. Mr.
Leventhal is the father of Alan M. Leventhal and the father-in-law of Edwin
N. Sidman.
Mr. Harrison has served as a Director of the Company since 1994. 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 has served as a Director of the Company since 1994. 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 has served as a Director of the Company since 1995. Since
1984, Mr. Shulman has been active in investment banking through his wholly
owned company The Hampton Group and Lantona Associates, Inc., where he serves
as a Managing Director. Currently, Mr. Shulman is a significant shareholder
and director in a diversified group of companies including Wilshire
Restaurant Group, Inc., where he previously served as Chairman; Ermanco
Incorporated; Terrace Holdings, Inc.; and Corinthian Directory. 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 has served as a Director of the Company since 1994. 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, The Learning Company,
General Chemical Group, Object Design, 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 has served as a Director of the Company since January 1997. Mr
Frey also serves on the Board of Directors of Rhone-Poulenc Rorer; USF&G
Corporation; Praxair, Inc.; Doubletree Hotels Corporation and First American
Financial Corporation. From 1984 until 1997, Mr. Frey was Chairman and
President of the Board of Directors of General Electric Investment
Corporation. From 1980 until 1997, Mr. Frey was also Vice President of
General Electric Company. Mr. Frey is also Chairman of the Cancer Research
Fund of the Damon-Runyon-Walter Winchell Foundation and a Trustee of Franklin
and Marshall College. He also serves on the advisory committees of Forstmann
Little & Company and 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.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions in the terms agreement and related
underwriting agreement (collectively, the "Underwriting Agreement") among the
Company and each of the underwriters named below (the "Underwriters"), the
Company has agreed to sell to each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Lehman Brothers Inc. and
Morgan Stanley & Co. Incorporated 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 Series A Preferred
Stock set forth opposite their respective names.
Number of
Shares of
Series A
Underwriter Preferred Stock
----------- ----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 2,350,000
Lehman Brothers Inc. 2,345,000
Morgan Stanley & Co. Incorporated 2,345,000
Alex. Brown & Sons Incorporated 80,000
Cowen & Company 80,000
Dain Bosworth Incorporated 80,000
A.G. Edwards & Sons, Inc. 80,000
EVEREN Securities, Inc. 80,000
The Ohio Company 80,000
Oppenheimer & Co., Inc. 80,000
Piper Jaffray Inc. 80,000
Prudential Securities Incorporated 80,000
Raymond James & Associates, Inc. 80,000
Tucker Anthony Incorporated 80,000
Wheat, First Securities, Inc. 80,000
----------------
Total 8,000,000
================
In the Underwriting Agreement, the several Underwriters have agreed,
respectively, subject to the terms and conditions set forth in the Underwriting
Agreement, to purchase all of the shares of Series A Preferred Stock being sold
pursuant to the Underwriting Agreement if any of such shares of Series A
Preferred 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 Series A Preferred 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 $.50 per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $.35 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 1,200,000
additional shares of Series A Preferred 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 Series A Preferred Stock to be purchased by it shown in the
foregoing table bears to the shares of Series A Preferred 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 Securities
and Exchange Commission (the "Commission") 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
S-43
<PAGE>
Lynch, directly or indirectly, sell, offer or contract to sell, grant any option
for the sale of, or otherwise dispose of any shares of Series A Preferred Stock
or securities which are substantially similar to or convertible into or
exchangeable for Shares of Series A Preferred Stock.
The shares of Series A Preferred Stock have been approved for listing on the
NYSE, subject to official notice of issuance. Prior to the Offering, there has
been no public market for the shares of Series A Preferred Stock. Trading of the
shares of Series A Preferred Stock on the NYSE is expected to commence within a
30-day period after the initial delivery of the shares of Series A Preferred
Stock. The Representatives have advised the Company that they intend to make a
market in the Series A Preferred Stock prior to the commencement of trading on
the NYSE, but are not obligated to do so and may discontinue market making at
any time without notice.
In connection with the Offering, the rules of the Commission permit the
Representatives to engage in certain transactions that stabilize the price of
the Series A Preferred Stock. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the Series A
Preferred Stock.
If the Underwriters create a short position in the Series A Preferred Stock
in connection with the Offering, i.e., if they sell more shares of Series A
Preferred Stock than are set forth on the cover page of this Prospectus
Supplement, the Representatives may reduce that short position by purchasing
Series A Preferred Stock in the open market. The Representatives may also elect
to reduce any short position by exercising all or part of the over- allotment
option described above.
The Representatives may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Representatives purchase shares of
Series A Preferred Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Series A Preferred Stock, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Series A Preferred Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
S-44
<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 in excess of 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-45
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
$375,125,000
Beacon Properties Corporation
PREFERRED STOCK
COMMON STOCK
$400,000,000
Beacon Properties, L.P.
DEBT SECURITIES
------------------
Beacon Properties Corporation (together with its subsidiaries, the "Company")
may offer from time to time in one or more series (i) shares of its preferred
stock, $.01 par value per share ("Preferred Stock") and (ii) shares of its
common stock, $.01 par value per share ("Common Stock"). Beacon Properties, L.P.
(the "Operating Partnership") may offer from time to time in one or more series
unsecured non-convertible investment grade debt securities (the "Debt
Securities"). The aggregate public offering price of the Preferred Stock and the
Common Stock shall be up to $375,125,000 (or its equivalent in another currency
based on the exchange rate at the time of sale) and the aggregate public
offering price of the Debt Securities (collectively with the Preferred Stock and
the Common Stock, the "Securities") shall be up to $400,000,000 (or its
equivalent in another currency based on the exchange rate at the time of sale).
The Securities will be issued in amounts, at prices and on terms to be
determined at the time of offering. The Securities may be offered separately or
together, in separate series, 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 Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Preferred Stock, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price; (ii)
in the case of Common Stock, any initial public offering price; and (iii) in the
case of Debt Securities, the specific title, aggregate principal amount,
ranking, currency, form (which may be registered or bearer, or certificated or
global), authorized denominations, maturity, rate (or manner of calculation
thereof) and time of payment of interest, terms for redemption at the option of
the Operating Partnership or repayment at the option of the holder, terms for
sinking fund payments, covenants and any initial public offering price. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Securities, 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 material United States Federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered by the Company or the Operating Partnership
directly to one or more purchasers, through agents designated from time to time
by the Company or the Operating Partnership, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, 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 Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
------------------
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 June 10, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company and the Operating Partnership have 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 Securities offered hereby. 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 Citicorp Center, 500
West 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. The Commission also
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission. Statements contained
in this Prospectus as to the contents of any contract or other document referred
to are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
In addition, the Common Stock is listed on the New York Stock Exchange (the
"NYSE"), and such materials can be inspected and copied at the NYSE, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996, filed with the Commission pursuant to the Exchange Act, including all
amendments thereto.
2. The Company's Quarterly Report on Form 10-Q for the period ended March 31,
1997, filed with the Commission pursuant to the Exchange Act, including all
amendments thereto. The Operating Partnership's Quarterly Report on Form 10-Q
for the period ended March 31, 1997, filed with the Commission pursuant to the
Exchange Act, including all amendments thereto.
3. The Company's Current Reports on Form 8-K dated January 5, 1996, February
15, 1996, July 23, 1996, October 18, 1996, December 18, 1996, December 20, 1996,
March 27, 1997 and June 4, 1997 filed with the Commission pursuant to the
Exchange Act, including all amendments thereto. The Operating Partnership's
Current Report on Form 8-K dated June 4, 1997, filed with the Commission
pursuant to the Exchange Act, including all amendments thereto.
4. The Company's Current Reports on Form 8-K/A dated August 6, 1996 (which
Current Report relates to the Form 8-K dated July 23, 1996) and April 7, 1997
(which Current Report relates to the Form 8-K dated March 27, 1997) filed with
the Commission pursuant to the Exchange Act, including all amendments thereto.
5. 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.
6. The Operating Partnership's Registration Statement on Form 10 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 or the Operating
Partnership 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 Securities are to be incorporated herein by reference and such
documents shall
2
<PAGE>
be deemed to be a part hereof from the date of filing of such documents. Any
person receiving a copy of this Prospectus may obtain, without charge, upon
request, a copy of any of the documents incorporated by reference herein (except
for the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Written requests for such copies
should be mailed to Kathleen M. McCarthy, Beacon Properties Corporation, 50
Rowes Wharf, Boston, Massachusetts 02110. Telephone requests may be directed to
Ms. McCarthy at (617) 330-1400.
Any statement contained in a document incorporated or deemed to be
incorporated by reference 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.
THE COMPANY AND THE OPERATING PARTNERSHIP
Beacon Properties Corporation is a self-administered and self-managed real
estate investment trust ("REIT") which owns a portfolio of Class A office
properties and other commercial properties (collectively, the "Properties")
located in major metropolitan areas, including Boston, Atlanta, Chicago, Los
Angeles, San Francisco and Washington, D.C., as well as commercial real estate
development, acquisition, leasing, design and management businesses. The Company
is a Maryland corporation and its 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 the Operating Partnership, two subsidiary corporations and two
subsidiary limited partnerships. The Operating Partnership is a Delaware limited
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"), and conducts
third-party tenant space design services through Beacon Design Corporation, a
Massachusetts corporation (the "Design Company"). The Company conducts
substantially all of its 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").
Currently, the Company's and the Operating Partnership's total consolidated
outstanding debt are approximately $891.5 million and $891.5 million,
respectively, and their total consolidated debt plus their proportionate share
of total unconsolidated debt (other than the Rowes Wharf Property debt) are
approximately $984.0 million and $983.4 million, respectively.
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
The Company is required by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock or
Preferred Stock in the Operating Partnership in exchange for additional Units or
preferred Units, as the case may be. As will be more fully described in the
applicable Prospectus Supplement, the Company and the Operating Partnership
intend to use the net proceeds from the sale of Securities for general corporate
purposes, including repayment of indebtedness, investment in new properties and
new developments and maintenance of currently owned properties.
3
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to fixed
charges for the Company and the Operating Partnership for the three months ended
March 31, 1997 and the years ended December 31, 1996 and 1995 and for the period
May 26, 1994 to December 31, 1994, and for The Beacon Group, the predecessor to
the Company and the Operating Partnership (the "Predecessor"), for the period
January 1, 1994 to May 25, 1994 and for the years ended December 31, 1993 and
1992.
<TABLE>
<CAPTION>
For the
Period For the
May 26, 1994 Period
Three Months Year Ended Year Ended to January 1, 1994 Year Ended Year Ended
Ended December December December to December December
March 31, 1997 31, 1996 31, 1995 31, 1994 May 25, 1994 31, 1993 31, 1992
--------------------------- ------------ -------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
2.54 2.17 2.02 1.62 1.07 0.72 0.84
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense, the interest component of rent expense, and the amortization of debt
issuance costs. To date, the Company has not issued any Preferred Stock;
therefore, the ratios of earnings to combined fixed charges and preferred stock
dividend requirements are the same as the ratios of earnings to fixed charges
presented above.
DESCRIPTION OF DEBT SECURITIES
General
The Company conducts substantially all of its business, and indirectly holds
substantially all of its interests in the Properties, through the Operating
Partnership. Consequently, the Operating Partnership, and not the Company, will
issue the Debt Securities. The Debt Securities will be direct unsecured
obligations of the Operating Partnership and may be either senior Debt
Securities ("Senior Securities") or subordinated Debt Securities ("Subordinated
Securities"). The Debt Securities will be issued under one or more indentures,
each dated as of a date prior to the issuance of the Debt Securities to which it
relates. Senior Securities and Subordinated Securities may be issued pursuant to
separate indentures (respectively, a "Senior Indenture" and a "Subordinated
Indenture"), in each case between the Operating Partnership and a trustee (a
"Trustee"), which may be the same Trustee, and in the form that has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part,
subject to such amendments or supplements as may be adopted from time to time.
The Senior Indenture and the Subordinated Indenture, as amended or supplemented
from time to time, are sometimes hereinafter referred to collectively as the
"Indentures." The Indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made under this
heading relating to the Debt Securities and the Indentures are summaries of the
anticipated material provisions thereof, do not purport to be complete and are
qualified in their entirety by reference to the Indentures and such Debt
Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
Terms
The indebtedness represented by the Senior Securities will rank equally with
all other unsecured and unsubordinated indebtedness of the Operating
Partnership. The indebtedness represented by Subordinated Securities will be
subordinated in right of payment to the prior payment in full of the Senior Debt
of the Operating Partnership as described under "--Subordination." The
particular terms of the Debt Securities offered by a Prospectus Supplement will
be described in the applicable Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the applicable Indenture and any applicable federal
income tax considerations. Accordingly, for a description of the terms of any
series of Debt Securities, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities set forth
in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time by the Operating Partnership or as
set forth in the applicable Indenture or in one or more indentures supplemental
to such Indenture.
4
<PAGE>
All Debt Securities of one series need not be issued at the same time and,
unless otherwise provided, a series may be reopened, without the consent of the
holders of the Debt Securities of such series, for issuance of additional Debt
Securities of such series.
Each Indenture will provide that the Operating Partnership may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under an Indenture may resign or be
removed with respect to one or more series of Debt Securities and a successor
Trustee may be appointed to act with respect to such series. In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any other
Trustee, and, except as otherwise indicated herein, any action described herein
to be taken by each Trustee may be taken by each such Trustee with respect to,
and only with respect to, the one or more series of Debt Securities for which it
is Trustee under the applicable Indenture.
The following summaries set forth certain general terms and provisions of the
Indentures and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt
Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount thereof) at
which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) The date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the
persons to whom such interest shall be payable, and the basis upon which
interest shall be calculated if other than that of a 360-day year of
twelve 30-day months;
(7) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for conversion or registration of
transfer or exchange and where notices or demands to or upon the
Operating Partnership in respect of such Debt Securities and the
applicable Indenture may be served;
(8) The period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt Securities
may, pursuant to any optional or mandatory redemption provisions, be
redeemed, as a whole or in part, at the option of the Operating
Partnership;
(9) The obligation, if any, of the Operating Partnership to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or
periods within which, the price or prices at which and the other terms
and conditions upon which such Debt Securities will be redeemed, repaid
or purchased, as a whole or in part, pursuant to such obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency
unit or units, or composite currency or currencies) and the manner in
which such amounts shall be determined;
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(12) Whether such Debt Securities will be issued in certificated or
book-entry form and, if in book entry form, the identity of the
depository for such Debt Securities;
(13) Whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
(14) The applicability, if any, of the defeasance and covenant defeasance
provisions described herein or set forth in the applicable Indenture, or
any modification thereof;
(15) Whether and under what circumstances the Operating Partnership will pay
any additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Company will
have the option to redeem such Debt Securities in lieu of making such
payment;
(16) Any deletions from, modifications of or additions to the events of
default or covenants of the Operating Partnership, to the extent
different from those described herein or set forth in the applicable
Indenture with respect to such Debt Securities, and any change in the
right of any Trustee or any of the holders to declare the principal
amount of any of such Debt Securities due and payable;
(17) With respect to any Debt Securities that provide for optional redemption
or prepayment upon the occurrence of certain events (such as a change of
control of the Operating Partnership), (i) the possible effects of such
provisions on the market price of the Operating Partnership's or the
Company's securities or in deterring certain mergers, tender offers or
other takeover attempts, and the intention of the Operating Partnership
to comply with the requirements of Rule 14e-1 under the Exchange Act and
any other applicable securities laws in connection with such provisions;
(ii) whether the occurrence of the specified events may give rise to
cross-defaults on other indebtedness such that payment on such Debt
Securities may be effectively subordinated; and (iii) the existence of
any limitation on the Operating Partnership's financial or legal ability
to repurchase such Debt Securities upon the occurrence of such an event
(including, if true, the lack of assurance that such a repurchase can be
effected) and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may
constitute an Event of Default; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, any special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as described under "Merger, Consolidation or Sale of Assets" or as may
be set forth in any Prospectus Supplement, the Debt Securities will not contain
any provisions that would limit the ability of the Operating Partnership to
incur indebtedness or that would afford holders of Debt Securities protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or the
Company, or any affiliate of any such party, (ii) a change of control, or (iii)
a reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "Merger,
Consolidation or Sale of Assets," the Operating Partnership may, in the future,
enter into certain transactions, such as the sale of all or substantially all of
its assets or the merger or consolidation of the Operating Partnership, that
would increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which may
have an adverse effect on the Operating Partnership's ability to service its
indebtedness, including the Debt Securities. Neither Maryland General
Corporation Law nor the governing instruments of the Company and the Operating
Partnership define the term "substantially all" in connection with the sale of
assets. Additionally, Maryland cases interpreting the words "substantially all"
all rely heavily upon the facts and circumstances of the particular case. As a
consequence of the lack of a definition of the term "substantially all," a
holder of Debt Securities must review the financial and other information
disclosed by the Operating Partnership to the public to determine whether a sale
of "substantially all" of the assets of the Operating Partnership has occurred.
Therefore, a risk of uncertainty exists for the holders of Debt Securities as a
consequence of the lack of a definition of the term
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"substantially all". Restrictions on ownership and transfers of the Common Stock
and Preferred Stock are designed to preserve the Company's status as a REIT and,
therefore, may act to prevent or hinder a change of control. See "Description of
Common Stock" and "Restrictions on Transfers of Capital Stock." Reference is
made to the applicable Prospectus Supplement for information with respect to any
deletions from, modifications of, or additions to, the events of default or
covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
Denomination, Interest, Registration and Transfer
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Operating Partnership for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by the
Operating Partnership for such purpose. Every Debt Security surrendered for
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer, and the person requesting such action must
provide evidence of title and identity satisfactory to the applicable Trustee or
transfer agent. No service charge will be made for any registration of transfer
or exchange of any Debt Securities, but the Trustee or the Operating Partnership
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the applicable Trustee) initially
designated by the Operating Partnership with respect to any series of Debt
Securities, the Operating Partnership may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that the Operating Partnership will be required
to maintain a transfer agent in each place of payment for such series. The
Operating Partnership may at any time designate additional transfer agents with
respect to any series of Debt Securities.
Neither the Operating Partnership nor any Trustee shall be required (i) to
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before the day of mailing
of a notice of redemption of any Debt Securities that may be selected for
redemption and ending at the close of business on the day of such mailing; (ii)
to register the transfer of or exchange any Debt Security, or portion thereof,
so selected for redemption, in whole or in part, except the unredeemed portion
of any Debt Security being redeemed in part; or (iii) to issue, register the
transfer of or exchange any Debt Security that has been surrendered for
repayment at the option of the holder, except the portion, if any, of such Debt
Security not to be so repaid.
Merger, Consolidation or Sale of Assets
The Indentures will provide that the Operating Partnership may, without the
consent of the holders of any outstanding Debt Securities, consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with
or into, any other entity provided that (i) either the Operating Partnership
shall be the continuing entity, or the successor entity (if other than the
Operating Partnership) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets, shall expressly
assume (A) the Operating Partnership's obligations to pay principal of (and
premium, if any) and interest on all of the Debt Securities and (B) the due and
punctual performance and observance of all of the covenants and conditions
contained in each Indenture; (ii) immediately after giving effect to such
transaction and treating any indebtedness that becomes an obligation of the
Operating Partnership or any subsidiary as a result thereof as having been
incurred by the Operating Partnership or such subsidiary at the time of such
transaction, no event of default under the Indentures, and no event which, after
notice or the lapse of time, or both, would become such an event of default,
shall have occurred and be continuing; and (iii) an officers' certificate and
legal opinion covering such conditions shall be delivered to each Trustee.
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Certain Covenants
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures will require the Operating Partnership to do or cause to
be done all things necessary to preserve and keep in full force and effect its
existence, rights and franchises; provided, however, that the Operating
Partnership shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of its business.
Maintenance of Properties. The Indentures will require the Operating
Partnership to cause all of its material properties used or useful in the
conduct of its business or the business of any subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Operating Partnership may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Operating Partnership and its subsidiaries shall not
be prevented from selling or otherwise disposing of their properties for value
in the ordinary course of business.
Insurance. The Indentures will require the Operating Partnership to cause
each of its and its subsidiaries' insurable properties to be insured against
loss or damage at least equal to their then full insurable value with insurers
of recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating
service.
Payment of Taxes and Other Claims. The Indentures will require the Operating
Partnership to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any subsidiary or upon the income, profits
or property of the Operating Partnership or any subsidiary and (ii) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of the Operating Partnership or any subsidiary; provided,
however, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith.
Additional Covenants. Any additional covenants of the Operating
Partnership with respect to any series of Debt Securities will be set forth
in the Prospectus Supplement relating thereto.
Events of Default, Notice and Waiver
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default for 30
days in the payment of any installment of interest on any Debt Security of such
series; (ii) default in the payment of principal of (or premium, if any, on) any
Debt Security of such series at its maturity; (iii) default in making any
sinking fund payment as required for any Debt Security of such series; (iv)
default in the performance or breach of any other covenant or warranty of the
Operating Partnership contained in the Indenture (other than a covenant added to
the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the applicable Indenture; (v) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed (except
mortgage indebtedness) by the Operating Partnership or any of its subsidiaries
in an aggregate principal amount in excess of $25,000,000 or under any indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed (except mortgage indebtedness)
by the Operating Partnership or any of its subsidiaries in an aggregate
principal amount in excess of $25,000,000, whether such indebtedness exists on
the date of such Indenture or shall thereafter be created, which default shall
have resulted in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable or
such obligations being accelerated, without such acceleration having been
rescinded or annulled; (vi) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Operating Partnership or any Significant Subsidiary of the Operating
Partnership; and (vii) any other event of default provided with respect to a
particular series of Debt Securities. The term "Significant Subsidiary" has the
meaning ascribed to such term in Regulation S-X promulgated under the Securities
Act.
If an Event of Default under any Indenture with respect to Debt Securities of
any series at the time outstanding occurs and is continuing, then in every such
case the applicable Trustee or the holders of not less than 25% in principal
amount of the Debt Securities of that series will have the right to declare the
principal amount (or, if the
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Debt Securities of that series are Original Issue Discount Securities or indexed
securities, such portion of the principal amount as may be specified in the
terms thereof) of all the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Operating Partnership (and to the
applicable Trustee if given by the holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under any Indenture, as the case may be)
has been made, but before a judgment or decree for payment of the money due has
been obtained by the applicable Trustee, the holders of not less than a majority
in principal amount of outstanding Debt Securities of such series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (i) the
Operating Partnership shall have deposited with the applicable Trustee all
required payments of the principal of (and premium, if any) and interest on the
Debt Securities of such series (or of all Debt Securities then outstanding under
the applicable Indenture, as the case may be), plus certain fees, expenses,
disbursements and advances of the applicable Trustee; and (ii) all events of
default, other than the non-payment of accelerated principal (or specified
portion thereof), with respect to Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may be)
have been cured or waived as provided in such Indenture. The Indentures will
also provide that the holders of not less than a majority in principal amount of
the outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) may waive any
past default with respect to such series and its consequences, except a default
(i) in the payment of the principal of (or premium, if any) or interest on any
Debt Security of such series; or (ii) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended without
the consent of the holder of each outstanding Debt Security affected thereby.
The Indentures will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the holders of any series of Debt Securities
of any default with respect to such series (except a default in the payment of
the principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
The Indentures will provide that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written request
to institute proceedings in respect of an event of default from the holders of
not less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof.
The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the applicable Indenture,
which may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to deliver to each Trustee a certificate, signed by
one of several specified officers of the Operating Partnership, stating whether
or not such officer has knowledge of any default under the applicable Indenture
and, if so, specifying each such default and the nature and status thereof.
Modification of the Indentures
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such modification
or amendment may,
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without the consent of the holder of each such Debt Security affected thereby,
(i) change the stated maturity of the principal of, or any installment of
interest (or premium, if any) on, any such Debt Security; (ii) reduce the
principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder of any such
Debt Security; (iii) change the place of payment, or the coin or currency, for
payment of principal of, premium, if any, or interest on any such Debt Security;
(iv) impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (v) reduce the above-stated percentage
of any outstanding Debt Securities necessary to modify or amend the applicable
Indenture with respect to such Debt Securities, to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the applicable Indenture; or (vi)
modify any of the foregoing provisions or any of the provisions relating to the
waiver of certain past defaults or certain covenants, except to increase the
required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the holder of
such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Operating Partnership with certain restrictive covenants of the applicable
Indenture.
Modifications and amendments of an Indenture will be permitted to be made by
the Operating Partnership and the respective Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes: (i)
to evidence the succession of another person to the Operating Partnership as
obligor under such Indenture; (ii) to add to the covenants of the Operating
Partnership for the benefit of the holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in such Indenture; (iii) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (iv) to add or change any
provisions of an Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided that such action
shall not adversely affect the interests of the holders of the Debt Securities
of any series in any material respect; (v) to change or eliminate any provisions
of an Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series; (viii) to provide for the acceptance of appointment by
a successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in an Indenture, provided that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued under
such Indenture; or (x) to supplement any of the provisions of an Indenture to
the extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, provided that such action shall not adversely
affect the interests of the holders of the outstanding Debt Securities of any
series.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above); (iii) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant to such
Indenture; and (iv) Debt Securities owned by the Operating Partnership or any
other obligor upon the Debt Securities or any affiliate of the Operating
Partnership or of such other obligor shall be disregarded.
The Indentures will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting will be permitted to be called at any
time by the applicable Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 10% in principal amount of the
outstanding Debt Securities of such series, in any such case upon notice given
as provided in such Indenture. Except for any consent that must be given
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by the holder of each Debt Security affected by certain modifications and
amendments of an Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present may be adopted by the
affirmative vote of the holders of a majority in principal amount of the
outstanding Debt Securities of that series; provided, however, that, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage, which is less
than a majority, in principal amount of the outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the holders of such specified
percentage in principal amount of the outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with an Indenture will be
binding on all holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the holders of not less than a specified percentage in principal amount
of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indentures will provide that if
any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting; and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
Subordination
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Securities will be subject to the following subordination
provisions.
Upon any distribution to creditors of the Operating Partnership in a
liquidation, dissolution or reorganization, the payment of the principal of and
interest on any Subordinated Securities will be subordinated to the extent
provided in the applicable Indenture in right of payment to the prior payment in
full of all Senior Debt (as defined below), but the obligation of the Operating
Partnership to make payments of the principal of and interest on such
Subordinated Securities will not otherwise be affected. No payment of principal
or interest will be permitted to be made on Subordinated Securities at any time
if a default on Senior Debt exists that permits the holders of such Senior Debt
to accelerate its maturity and the default is the subject of judicial
proceedings or the Operating Partnership receives notice of the default. After
all Senior Debt is paid in full and until the Subordinated Securities are paid
in full, holders will be subrogated to the rights of holders of Senior Debt to
the extent that distributions otherwise payable to holders have been applied to
the payment of Senior Debt. The Subordinated Indenture will not restrict the
amount of Senior Debt or other indebtedness of the Operating Partnership and its
subsidiaries. As a result of these subordination provisions, in the event of a
distribution of assets upon insolvency, holders of Subordinated Indebtedness may
recover less, ratably, than general creditors of the Operating Partnership.
Senior Debt will be defined in the applicable Indenture as the principal of
and interest on, or substantially similar payments to be made by the Operating
Partnership in respect of, the following, whether outstanding at the date of
execution of the applicable Indenture or thereafter incurred, created or
assumed: (i) indebtedness of the Operating Partnership for money borrowed or
represented by purchase-money obligations; (ii) indebtedness of the Operating
Partnership evidenced by notes, debentures, or bonds, or other securities issued
under the provisions of an indenture, fiscal agency agreement or other
agreement; (iii) obligations of the Operating Partnership as lessee under leases
of property either made as part of any sale and leaseback transaction to which
the Operating Partnership is a party or otherwise; (iv) indebtedness,
obligations and liabilities of others in respect of which the Operating
Partnership is liable contingently or otherwise to pay or advance money or
property or as guarantor, endorser or otherwise or which the Operating
Partnership has agreed to purchase or otherwise acquire; and (v) any binding
commitment of the Operating Partnership to fund any real estate investment or to
fund any investment in any entity
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making such real estate investment, in each case other than (A) any such
indebtedness, obligation or liability referred to in clauses (i) through (iv)
above as to which, in the instrument creating or evidencing the same pursuant to
which the same is outstanding, it is provided that such indebtedness, obligation
or liability is not superior in right of payment to the Subordinated Securities
or ranks without preference to the Subordinated Securities; (B) any such
indebtedness, obligation or liability which is subordinated to indebtedness of
the Operating Partnership to substantially the same extent as or to a greater
extent than the Subordinated Securities are subordinated; and (C) the
Subordinated Securities. There will not be any restrictions in any Indenture
relating to Subordinated Securities upon the creation of additional Senior Debt.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Operating Partnership's
most recent fiscal quarter.
Discharge, Defeasance and Covenant Defeasance
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership will be permitted, at its option, to discharge certain
obligations to holders of any series of Debt Securities issued under any
Indenture that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or redemption
date, as the case may be.
The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Operating Partnership may elect either (i)
to defease and be discharged from any and all obligations with respect to such
Debt Securities (except for the obligation to pay additional amounts, if any,
upon the occurrence of certain events of tax, assessment or governmental charge
with respect to payments on such Debt Securities and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities, to hold moneys for payment in trust)
("defeasance"); or (ii) to be released from its obligations with respect to such
Debt Securities under the applicable Indenture (being the restrictions described
under "--Certain Covenants") or, if provided in the applicable Prospectus
Supplement, its obligations with respect to any other covenant, and any omission
to comply with such obligations shall not constitute an event of default with
respect to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by the Operating Partnership with the applicable Trustee, in
trust, of an amount, in such currency or currencies, currency unit or units or
composite currency or currencies in which such Debt Securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities, which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other things,
the Operating Partnership has delivered to the applicable Trustee an opinion of
counsel (as specified in the applicable Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium, if any) and interest.
"Government Obligations" means securities that are (i) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged; or (ii) obligations of a person
controlled or supervised
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by and acting as an agency or instrumentality of the United States of America or
such government which issued the foreign currency in which the Debt Securities
of such series are payable, the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America or such
other government, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank or trust company as custodian with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
depository receipt; provided, however, that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series, (i) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the applicable Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security; or (ii) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Debt Security will be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or such cessation of usage based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community; (ii) the
European Currency Unit ("ECU") both within the European Monetary System and for
the settlement of transactions by public institutions of or within the European
Communities; or (iii) any currency unit or composite currency other than the ECU
for the purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that is payable in a foreign currency
that ceases to be used by its government of issuance shall be made in U.S.
dollars.
In the event the Company effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any event of default other than the event of default described in
clause (iv) under "--Events of Default, Notice and Waiver" with respect to
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (vii) under "--Events of
Default, Notice and Waiver" with respect to any other covenant as to which there
has been covenant defeasance, the amount in such currency, currency unit or
composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their stated maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such event of default. However, the Operating
Partnership would remain liable to make payment of such amounts due at the time
of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
No Conversion Rights
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or any equity interest in the Operating
Partnership.
Payment
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided, however, that, at the option
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of the Operating Partnership, payment of interest may be made by check mailed to
the address of the person entitled thereto as it appears in the applicable
register for such Debt Securities or by wire transfer of funds to such person at
an account maintained within the United States.
All moneys paid by the Operating Partnership to a paying agent or a Trustee
for the payment of the principal of or any premium or interest on any Debt
Security which remain unclaimed at the end of two years after such principal,
premium or interest has become due and payable will be repaid to the Operating
Partnership, and the holder of such Debt Security thereafter may look only to
the Operating Partnership for payment thereof.
Global Securities
The Debt Securities of a series may be issued in whole or in part in the form
of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
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DESCRIPTION OF PREFERRED STOCK
The description of the Company's Preferred 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"), as in effect.
General
Under the Articles of Incorporation, the Company has authority to issue 25
million shares of Preferred Stock, none of which was outstanding as of June 10,
1997. Shares of Preferred Stock may be issued from time to time, in one or more
series, as authorized by the Board of Directors of the Company. Prior to
issuance of shares of each series, the Board of Directors is required by the
Maryland General Corporation Law ("MGCL") and the Company's Articles of
Incorporation to fix for each series, subject to the provisions of the Company's
Articles of Incorporation regarding excess stock, $.01 par value per share
("Excess Stock"), the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, as are permitted by
Maryland law. The Preferred Stock will, when issued, be fully paid and
nonassessable and will have no preemptive rights. The Board of Directors could
authorize the issuance of shares of Preferred Stock with terms and conditions
that could have the effect of discouraging a takeover or other transaction that
holders of Common Stock might believe to be in their best interests or in which
holders of some, or a majority, of the shares of Common Stock might receive a
premium for their shares over the then market price of such shares of Common
Stock.
Terms
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws and
any applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred Stock
will be convertible into Common Stock, including the conversion price or
rate (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
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Rank
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Stock of the Company, and to all equity securities ranking junior to such
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company; (ii) on a parity with all equity
securities issued by the Company, the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company; and (iii) junior to all equity securities issued by the Company, the
terms of which specifically provide that such equity securities rank senior to
the Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company. The term "equity securities" does not
include convertible debt securities.
Dividends
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period; or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if such
series of Preferred Stock has a cumulative dividend, full cumulative dividends
on the Preferred Stock of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof is
set apart for payment for all past dividend periods and the then current
dividend period; and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
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Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remain payable.
Redemption
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative dividend, full cumulative dividends on all shares of such series of
Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period; and (ii) if a
series of Preferred Stock does not have a cumulative dividend, full dividends on
all shares of the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, no shares of such
series of Preferred Stock shall be redeemed unless all outstanding shares of
Preferred Stock of such series are simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series to preserve the REIT status of the Company or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
shares of Preferred Stock of such series. In addition, unless (i) if such series
of Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of such series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period; and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred Stock of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation); provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of Preferred Stock of such series to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held or for which
redemption is requested
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by such holder (with adjustments to avoid redemption of fractional shares) or by
any other equitable manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
Voting Rights
Holders of the Preferred Stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated in
the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Company's Articles of Incorporation or the Designating Amendment for such
series of Preferred Stock,
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whether by merger, consolidation or otherwise (an "Event"), so as to materially
and adversely affect any right, preference, privilege or voting power of such
series of Preferred Stock or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in (ii) above, so long
as the Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event the Company
may not be the surviving entity, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting power of holders of Preferred Stock, and provided further that (A) any
increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (B) any increase in the
amount of authorized shares of such series or any other series of Preferred
Stock, in each case ranking on a parity with or junior to the Preferred Stock of
such series with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up, shall not be deemed to materially
and adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
Conversion Rights
The terms and conditions, if any, upon which any series of Preferred Stock is
convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price or rate (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
of the Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
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, including any
Preferred Stock of the Company. Therefore, the Designating Amendment for each
series of Preferred Stock may contain provisions restricting the ownership and
transfer of the Preferred Stock. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to a series of Preferred
Stock. See "Restrictions on Transfers of Capital Stock."
Transfer Agent
The transfer agent and registrar for the Preferred Stock will be set forth in
the applicable Prospectus Supplement.
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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 and Bylaws, as in effect.
General
Under the Articles of Incorporation, the Company has authority to issue 100
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At June 10, 1997, the Company had outstanding 55,371,975 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.
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.
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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 capital 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
provide that such entities will be "looked through" for purposes of the
Ownership Limit and 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 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.
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<PAGE>
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 the material federal
income tax considerations of an investment in the Company's Securities to the
extent those considerations relate to the taxation of the Company. To the extent
such considerations relate to the tax treatment of particular Securities, they
will be addressed in the applicable Prospectus Supplement. Goodwin, Procter &
Hoar llp has acted as counsel to the Company and has reviewed this summary and
is of the opinion that to the extent that it constitutes matters of law,
summaries of legal matters, or legal conclusions, this summary is accurate in
all material respects. 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.
The statements in this discussion and the opinion of Goodwin, Procter and
Hoar LLP are based on current provisions of the Code, Treasury Regulations, the
legislative history of the Code, existing administrative rulings and practices
of the Service, and judicial decisions. No assurance can be given that future
legislative, judicial, or administrative actions or decisions, which may be
retroactive in effect, will not affect the accuracy of any statements in this
Prospectus with respect to the transactions entered into or contemplated prior
to the effective date of such changes.
EACH INVESTOR IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF AN INVESTMENT IN THE COMPANY'S
SECURITIES.
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. However, the Company may be subject to
federal income tax under certain circumstances including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions. 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 addition to meeting a number of technical requirements, including
requirements regarding distributions to shareholders, diversification of
ownership and record keeping, to qualify as a REIT the Company must meet certain
tests regarding the nature of its assets and its gross income. The Company is
largely restricted under these tests to holding "real estate assets" (as defined
in the Code) for investment (and not for resale) and relatively small
22
<PAGE>
amounts of investment securities. Accordingly, the Company's ability to
diversify its holdings outside of investments in real estate is limited. The
requirements of the statutory tests also impose certain requirements on the
Company's leases with its tenants, including restrictions on the Company's
ability to provide noncustomary services to its tenants. Because the Company's
proportionate share of the assets and items of income of the Operating
Partnership and its subsidiary partnerships are treated as assets and gross
income of the Company, the same restrictions apply to the operations and
investments of the Operating Partnership and the subsidiary partnerships.
Further, changes in law, or in the interpretation of the law, may change the
nature and effect of these restrictions or add additional restrictions to the
manner in which the Company conducts its business.
In the opinion of Goodwin, Procter & Hoar llp, commencing with the taxable
year ending December 31, 1994, the Company has been organized and operated in
conformity with the requirements for qualification and taxation as a REIT under
the Code, and the Company's proposed method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT under
the Code. Investors should be aware, however, that opinions of counsel are not
binding upon the Internal Revenue Service (the "Service") or any court.
Moreover, Goodwin, Procter & Hoar llp's opinion is based on various assumptions
and is conditioned upon certain representations made by the Company as to
factual matters, including representations regarding the nature of the Company's
properties, and the future conduct of the Company's business. The Company's
qualification and taxation as a REIT depends upon the Company's ability to meet
on a continuing basis, through actual annual operating results, the distribution
levels, stock ownership, and other various qualification tests imposed under the
Code. Goodwin, Procter & Hoar llp will not review the Company's compliance with
those tests on a continuing basis. Accordingly, no assurance can be given that
the actual results of the Company's operation for any particular taxable year
will satisfy such requirements.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities 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 and the Operating Partnership may sell Securities 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 Securities 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 Securities, underwriters or agents may receive
compensation from the Company, from the Operating Partnership or from purchasers
of Securities, for whom they may act as agents, in the form of discounts,
concessions or commissions. Underwriters may sell Securities 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 Securities may be deemed to be
underwriters under the Securities Act, and any discounts or commissions they
receive from the Company or the Operating Partnership, and any profit on the
resale of Securities 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 or the Operating
Partnership will be described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other than
the Common Stock which is listed on the NYSE. Any shares of Common Stock sold
pursuant to a Prospectus Supplement will be listed on the NYSE, subject to
official notice of issuance. The Operating Partnership or the Company may elect
to list any series of Debt Securities or Preferred Stock on an exchange, but is
not obligated to do so. It is possible that one or more underwriters may make a
market in a series of Securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Therefore, no
assurance can be given as to the liquidity of, or the trading market for, the
Securities.
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<PAGE>
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act. In the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be tenants of, the Company or the Operating Partnership in the
ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership will authorize underwriters or other persons acting as the
Company's or the Operating Partnership's agents to solicit offers by certain
institutions to purchase Securities from the Company pursuant to contracts
providing for payment and delivery on a future date. Institutions with which
such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company or the Operating Partnership, as the case may be. The obligations of
any purchaser under any such contract will be subject to the condition that the
purchase of the Debt Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
If so indicated in the applicable Prospectus Supplement, the Operating
Partnership will authorize underwriters or other persons acting as the Operating
Partnership's agents to solicit offers by certain institutions to purchase Debt
Securities from the Operating Partnership at the public offering price set forth
in such Prospectus Supplement pursuant to delayed delivery contracts
("Contracts") providing for payment and delivery on the date or dates stated in
such Prospectus Supplement. Each Contract will be for an amount not less than,
and the aggregate principal amount of Debt Securities sold pursuant to Contracts
shall be not less nor more than, the respective amounts stated in the applicable
Prospectus Supplement. Institutions with whom Contracts, when authorized, may be
made include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to the approval of the Operating
Partnership. Contracts will not be subject to any conditions except (i) the
purchase by an institution of the Debt Securities covered by its Contracts shall
not at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which such institution is subject, and (ii) if the Debt
Securities are being sold to underwriters, the Operating Partnership shall have
sold to such underwriters the total principal amount of the Debt Securities less
the principal amount thereof covered by Contracts.
In order to comply with the securities laws of certain states, if applicable,
the Securities offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
Securities 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 Securities offered hereby may not
simultaneously engage in market making activities with respect to the Securities
for a period of two business days prior to the commencement of such
distribution.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin, Procter
& Hoar LLP, Boston, Massachusetts, a limited liability partnership including
professional corporations, as corporate, securities and tax counsel to the
Company. Gilbert G. Menna, whose professional corporation is a partner of
Goodwin, Procter & Hoar LLP, is an assistant secretary of the Company and owns
in excess of 1,000 shares of the Company's Common Stock.
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EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1995 and the related consolidated statements of operations, stockholders' equity
and cash flows for the years ended December 31, 1996 and 1995 and for the period
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 of The Beacon Group, predecessor to the Company, and the related
financial statement schedules of the Company as of December 31, 1996,
incorporated by reference herein from the Company's Annual Report on Form 10-K,
as amended, for the year ended December 31, 1996 have been so incorporated in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The consolidated balance sheets of the Operating Partnership as of December
31, 1996 and 1995 and the related consolidated statements of operations,
partners' capital and cash flows for the years ended December 31, 1996 and 1995
and the period May 26, 1994 to December 31, 1994 and on the combined results of
operations and cash flows of The Beacon Group, predecessor to the Operating
Partnership, for the period January 1, 1994 to May 25, 1994, incorporated by
reference herein from the Operating Partnership's Form 10, as amended, have been
so incorporated in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of the Rosslyn Acquisitions in Rosslyn, Virginia, 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, as
amended, 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 Fairfax County Portfolio in Tysons Corner and Herndon, Virginia,
1333 H Street in Washington, DC, AT&T Plaza in Oak Brook, Illinois, and
Tri-State International in Lincolnshire, Illinois for the year ended December
31, 1995, incorporated by reference herein from the Company's current report on
Form 8-K dated July 23, 1996, as amended on the Form 8-K/A of the Company dated
August 6, 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 statement of excess of revenues over specific operating expenses for
Perimeter Center in 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 15, 1996, as amended, has 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 Shoreline Technology Park in Mountain View, California, Lake Marriott
Business Park in Santa Clara, California and Presidents Plaza in Chicago,
Illinois for the year ended December 31, 1995, incorporated by reference herein
from the Company's report on Form 8-K dated December 20, 1996, as amended, 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 10880 Wilshire Boulevard in Westwood, California, Centerpointe in
Fairfax, Virginia, and Westbrook Corporate Center in Westchester, Illinois for
the year ended December 31, 1996, incorporated by reference herein from the
Company's current report on Form 8-K dated March 27, 1997, as amended on the
Form 8-K/A of the Company dated April 7, 1997, 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 statement of excess of revenues over specific operating expenses for 225
Franklin Street in Boston, Massachusetts for the year ended December 31, 1996,
incorporated by reference herein from the Company's report on Form 8-K dated
June 4, 1997 has 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.
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No dealer, salesperson or other individual has been authorized to give any
information or make any representations not contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus in
connection with the offer made by this Prospectus Supplement and the
accompanying Prospectus. If given or made, such information or representation
must not be relied upon as having been authorized by the Company or the
Underwriters. This Prospectus Supplement and the accompanying Prospectus do not
constitute an offer to sell, or a solicitation of an offer to buy, the Shares in
any jurisdiction where, or to any person to whom, it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus Supplement and
the accompanying Prospectus nor any sale made hereunder shall, under any circum-
stances, create an implication that there has not been any change in the facts
set forth in this Prospectus Supplement and the accompanying Prospectus or in
the affairs of the Company since the date hereof.
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TABLE OF CONTENTS
Page
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PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary S-3
Risk Factors S-11
The Company S-16
Recent Developments S-17
Properties S-19
Use of Proceeds S-25
Price Range of Common Stock and Distribution
History S-26
Capitalization S-27
Selected Financial Information S-28
Description of Series A Preferred Stock S-32
Certain Federal Income Tax Considerations S-37
Management S-38
Underwriting S-43
Legal Matters S-45
PROSPECTUS
Available Information 2
Incorporation of Certain Documents by
Reference 2
The Company and the Operating Partnership 3
Use of Proceeds 3
Ratios of Earnings to Fixed Charges 4
Description of Debt Securities 4
Description of Preferred Stock 15
Description of Common Stock 20
Restrictions on Transfers of Capital Stock 21
Federal Income Tax Considerations 22
Plan of Distribution 23
Legal Matters 24
Experts 25
8,000,000 Shares
BEACON PROPERTIES
CORPORATION
8.98% Series A
Cumulative Redeemable
Preferred Stock
---------------------
PROSPECTUS SUPPLEMENT
---------------------
Merrill Lynch & Co.
Lehman Brothers
Morgan Stanley Dean Witter
June 10, 1997
