As filed with the Securities and Exchange Commission on April 7, 1997
Registration Statement No. 333-21769
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 3 to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
BEACON PROPERTIES CORPORATION
AND BEACON PROPERTIES, L.P.
(Exact name of registrant as specified in its charter)
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Beacon Properties Corporation--Maryland Beacon Properties Corporation--04-3224258
Beacon Properties L.P.--Delaware Beacon Properties, L.P.--04-3224259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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50 Rowes Wharf
Boston, Massachusetts 02110
(617) 330-1400
(Address and Telephone Number of Principal Executive Offices)
Alan M. Leventhal
President and Chief Executive Officer
and
William A. Bonn, Esq.
General Counsel
50 Rowes Wharf
Boston, Massachusetts 02110
(617) 330-1400
(Name, Address and Telephone Number, Including Area Code, of Agent for Service)
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copies to:
Gilbert G. Menna, P.C.
Kathryn I. Murtagh, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place, Boston, MA 02109
(617) 570-1000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Prospectus contained in this Registration Statement relates to and
constitutes a Post-Effective Amendment to the Registration Statement on Form
S-3 (No. 333-17237) of the Registrant, and it is intended to be the combined
prospectus referred to in Rule 429 under the Securities Act of 1933, as
amended.
The registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus supplement shall not constitute an offer
to sell nor the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED APRIL 7, 1997
PROSPECTUS SUPPLEMENT
(To Preliminary Prospectus dated April 7, 1997)
7,000,000 Shares
BEACON PROPERTIES CORPORATION
Common Stock
Beacon Properties Corporation (collectively with its subsidiaries, the
"Company") is a self-administered and self-managed real estate investment trust
(a "REIT") which owns a portfolio of Class A office properties and other
commercial properties located in major metropolitan areas, including Boston,
Atlanta, Chicago, Los Angeles, San Francisco and Washington, D.C., as well as
commercial real estate development, acquisition, leasing, design and management
businesses. The Company owns or has an interest in 104 income producing
commercial properties encompassing approximately 15.8 million rentable square
feet (each, a "Property" and collectively, the "Properties"), including the
recently acquired Shoreline Technology Park located in Mountain View,
California, Lake Marriott Business Park located in Santa Clara, California and
Presidents Plaza located in suburban Chicago, Illinois (collectively, the
"Recent Acquisitions"). As of December 31, 1996, the Properties were
approximately 96% leased with over 1,100 tenants. In addition, the Company has
entered into contracts to acquire eight additional office buildings encompassing
approximately 2 million additional rentable square feet consisting of Westbrook
Corporate Center located in suburban Chicago, Illinois; 10880 Wilshire Boulevard
located in suburban Los Angeles; and Centerpointe I and II located in Fairfax
County, Virginia for aggregate consideration of approximately $339.1 million
(collectively, the "Pending Acquisitions"). If all of the Pending Acquisitions
are consummated, the Company will own or have an interest in 112 income
producing commercial properties encompassing approximately 17.8 million rentable
square feet.
All of the shares of common stock of the Company, par value $.01 per share
("Common Stock"), offered hereby are being sold by the Company (the "Offering").
Senior executive officers and Directors of the Company and members of their
families currently own approximately $131 million of equity of the Company.
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "BCN." On March 26, 1997, the last reported sale price of the
Common Stock on the NYSE was $35 per share. See "Price Range of Common Stock and
Distribution History."
See "Risk Factors" beginning on page S-16 for certain factors relevant to
an investment in the Common Stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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Per Share $ $ $
Total(3) $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to an
additional 1,050,000 shares of Common Stock to cover over-allotments, if
any. If all such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them,
subject to approval of certain legal matters by counsel for the Underwriters.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery of the
Common Stock offered hereby will be made in New York, New York, on or about
April , 1997.
Merrill Lynch & Co.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers
Raymond James & Associates, Inc.
Smith Barney Inc.
The date of this Prospectus Supplement is April , 1997.
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Beacon
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Properties
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Corporation
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[Graphic of U.S Map with the following areas highlighted:
San Fransisco, Los Angeles, Chicago, Atlanta, Boston, Philadelphia, Washington
Urban/Suburban
Distribution of
Properties
Urban 21%
Suburban 79%
Geographic Distribution of Properties
Boston 34%
Chicago 17%
Los Angeles 7%
Philadelphia 3%
Atlanta 20%
Washington 12%
San Francisco 7%
Recent and Pending Acquisitions
PHOTO: Presidents Plaza, Chicago, Illinois
PHOTO: Presidents Plaza, Chicago, Illinois
PHOTO: Lake Marriott Business Park, Santa Clara, California
PHOTO: Shoreline Technology Park, Mountain View, California
PHOTO: Crosby Corporate Center, Bedford, Massachusetts Additional Development
PHOTO: 10880 Wilshire Boulevard, Los Angeles, California
PHOTO: Westbrook Corporate Center, Westchester, Illinois
PHOTO: Centerpointe, Fairfax, Virginia
PHOTO: Westbrook Corporate Center, Westchester, Illinois
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES OF
COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING THE PURCHASE OF
COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement and the
accompanying Prospectus or incorporated herein and therein by reference.
Unless otherwise indicated, the information contained in this Prospectus
Supplement assumes (i) that all units of limited partnership interest in
Beacon Properties, L.P. ("Units") redeemable for Common Stock or cash have
been redeemed for Common Stock, (ii) that the Underwriters' over-allotment
option is not exercised and (iii) that the market price per share of Common
Stock is equal to $35 (the reported closing sale price of the Common Stock on
the NYSE on March 26, 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"), the entity through which the Company holds substantially all
of its direct and indirect interests in the Properties, and their
subsidiaries on an aggregated basis. This Prospectus Supplement contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference are discussed in the section
entitled "Risk Factors" starting on page S-16 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 Properties comprise approximately 15.8 million rentable square feet in
the aggregate and, as of December 31, 1996, were approximately 96% leased
with over 1,100 tenants.
The Company is currently experiencing a period of rapid growth. Upon
completion of the Pending Acquisitions, the Company will have invested
approximately $1.5 billion in office properties since January 1996,
increasing its interests in real estate by over 290%. The Company has entered
into contracts to acquire the Pending Acquisitions comprised of eight office
buildings encompassing approximately 2.0 million additional rentable square
feet located in suburban Chicago, Illinois; suburban Los Angeles, California;
and Fairfax County, Virginia. The aggregate consideration for the Pending
Acquisitions is approximately $339.1 million. If all of the Pending
Acquisitions are consummated, the Company will own or have an interest in 112
income producing commercial buildings encompassing approximately 17.8 million
rentable square feet, approximately 79% of which will be located in suburban
office markets and approximately 21% of which will be located in downtown
office markets, primarily Boston. Assuming the consummation of all of the
Pending Acquisitions, the Company will have a total market capitalization of
approximately $2.9 billion.
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 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
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Risk Factors
An investment in the Common Stock involves various risks and prospective
investors should carefully consider the matters discussed under "Risk
Factors" prior to any investment in the Company. Such risks include, among
others:
[bullet] Risks associated with the Company's ability to manage effectively
the addition of a substantial number of new properties to the
Company's portfolio, which could adversely affect the Company's
results of operations and ability to make expected distributions to
stockholders;
[bullet] Risks associated with borrowing, such as the possibility that (i)
the Company will not have sufficient funds available to make
principal payments on outstanding debt; (ii) outstanding
indebtedness will be refinanced at higher interest rates or
otherwise on terms less favorable to the Company; and (iii)
interest rates under the Company's $300 million revolving credit
facility (the "Credit Facility") will increase, all of which
could adversely affect the Company's ability to make expected
distributions to stockholders and its ability to qualify as a
REIT;
[bullet] Risks associated with a Debt to Market Capitalization Ratio
(calculated as the Company's proportionate share of total
consolidated and unconsolidated debt, excluding Rowes Wharf) upon
completion of the Offering and the Pending Acquisitions of
approximately 25.2%, which could adversely affect the Company's
results of operations and ability to make expected distributions to
stockholders;
[bullet] Risks associated with the Company's joint ownership of properties
which prevent the Company from exercising sole decision making
authority over the property;
[bullet] Possible adverse consequences of limiting ownership of Common
Stock by a single person to 6.0%, or 9.9% for certain
stockholders, of the outstanding Common Stock, which may deter
changes in management;
[bullet] Risks associated with the acquisition and development of office
and other commercial properties such as the risk that the Company's
results of operations and ability to make expected distributions to
stockholders could be adversely affected if the investments fail to
perform as expected;
[bullet] Real estate investment considerations, such as the effect of
general economic and real estate market conditions in the market
area on property cash flows and values, the need to renew leases
or relet space upon the expiration of current leases, the ability
of a property to generate revenues sufficient to meet debt
service payments and other operating expenses, and the
illiquidity of real estate investments, all of which may affect
the Company's ability to make expected distributions;
[bullet] Risks associated with investments in mortgage indebtedness,
including the risk that a debtor may file for bankruptcy or
otherwise be unable or refuse to make payments under the mortgage
which may affect the Company's ability to realize its anticipated
investment return with respect to such investments;
[bullet] Potential liability of the Company for environmental liabilities
either as an owner or as an operator of properties which could
adversely affect the Company's results of operations, financial
condition and ability to make expected distributions;
[bullet] Risks associated with ownership of subsidiary corporations,
including potential tax liabilities to the Company from operating
subsidiaries, the Company's lack of control over such subsidiaries
due to tax requirements prohibiting the Company's ownership of
voting stock in such entities and possible adverse consequences of
the Company's status as a REIT on the business of subsidiaries; and
[bullet] Possible increases in market interest rates, which lead
prospective purchasers of Common Stock to demand a higher
anticipated annual yield from future dividends, which in turn may
adversely affect the market price of the Common Stock.
S-4
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Recent Developments
Recent Acquisitions
Silicon Valley Office/R&D Market
Shoreline Technology Park and Lake Marriott Business Park. In December
1996, the Company acquired a 12-building complex located in Mountain View,
California ("Shoreline Technology Park") and a 7-building complex located in
Santa Clara, California ("Lake Marriott Business Park") for aggregate
consideration of approximately $184 million (including approximately $1
million of expected non-recurring capital expenditures). The Company
purchased the Properties from Teachers Insurance and Annuity Association.
The Shoreline Technology Park is a 12-building complex developed between
1985 and 1991 which encompasses approximately 727,000 square feet. Shoreline
Technology Park is the headquarters of Silicon Graphics, Inc., which is the
sole tenant of the Property. The Lake Marriott Business Park is a 7-building
complex developed in 1981 which encompasses approximately 400,000 square feet.
Major tenants in the Lake Marriott Business Park include Silicon Valley
Bank (approximately 101,000 square feet) and Hitachi Computer Products
(America), Inc. (approximately 97,000 square feet). The Shoreline Technology
Park and substantially all of the Lake Marriott Business Park are currently
leased on a "triple-net" basis. The aggregate occupancy rate of both Properties
as of December 31, 1996 was 100%.
Shoreline Technology Park and Lake Marriott Business Park are located in
the Silicon Valley Office/R&D Market. According to Cornish & Carey, the
entire Silicon Valley Office/R&D Market, which consists of approximately 129
million rentable square feet, had an overall vacancy rate of 5.3% as of
December 31, 1996. Cornish & Carey also reports that the Silicon Valley
Office/R&D Market experienced net increases in square feet of leased space
("Net Absorption") of approximately 1.7 million square feet in 1996.
Shoreline Technology Park and Lake Marriott Business Park represent the
Company's first acquisitions in the Silicon Valley Office/R&D Market. As part
of its continuing analysis of major office markets and investment
opportunities, the Company has determined that the San Francisco and San Jose
metropolitan areas possess attractive market fundamentals, including growth
in office-using employment. According to the U.S. Bureau of Labor Statistics,
during the twelve months ended November 30, 1996, approximately 13,400
office-using jobs were created in the combined San Francisco/San Jose
metropolitan area, primarily in business services including multi- media,
computer software and hardware, and consulting. The Company has further
determined that the Silicon Valley Office/R&D Market is particularly
attractive due to its high concentration of knowledge-based industries
including biotechnology, communications, and computer hardware and software
as well as its proximity to major universities. Additionally, the Company
believes there is substantial constraint on new supply of office space in the
Silicon Valley Office/R&D Market due to geographic barriers and the high cost
of land.
Based upon its survey of brokers in the market and other internal
research, the Company believes that the existing rental rates per square foot
at Shoreline Technology Park and Lake Marriott Business Park are below
current market rates by approximately $7 to $9 and $5 to $7, respectively.
The Company expects that the net operating income generated by the Properties
will increase as current leases are renewed, and new leases are made, at
current market rates, although no assurances can be made in this regard. The
Company expects to incur certain tenant improvement costs and leasing
commissions in connection with the releasing of this space.
For a description of the Silicon Valley Office/R&D Market, see "Properties
and Pending Acquisitions."
Suburban Chicago Office Market
Presidents Plaza. In December 1996, the Company acquired a four-tower
office complex located near O'Hare International Airport in Chicago, Illinois
("Presidents Plaza") from Metropolitan Life Insurance Company ("MetLife").
Aggregate consideration for Presidents Plaza consisted of 1,171,500 Units
issued to MetLife (valued at approximately $39 million at the closing of the
acquisition) and approximately $38 million in cash. In addition, the Company
expects to incur approximately $1 million of non-recurring capital
improvements at the Property. The Company estimates that the aggregate
purchase price for Presidents Plaza is approximately 60% of replacement cost.
S-5
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Presidents Plaza, located at 8600 and 8700 West Bryn Mawr Avenue, consists
of two sets of 10- and 12-story towers encompassing an aggregate of
approximately 791,000 square feet. The Property was developed between 1980
and 1982. Major tenants at the Property include Cotter & Co. (approximately
175,000 square feet), Wilson Sporting Goods Co. (approximately 109,000 square
feet), and Gas Research Institute (approximately 97,000 square feet). As of
December 31, 1996, the Property was approximately 90% leased.
Presidents Plaza is located in the O'Hare submarket of the Suburban
Chicago Office Market. With the acquisition of Presidents Plaza, the Company
increased its holdings of office properties in the Suburban Chicago Office
Market to approximately 1.6 million square feet. According to Grubb & Ellis,
the entire suburban Chicago Office Market had an overall vacancy rate of
11.2% as of December 31, 1996, while the O'Hare submarket had a vacancy rate
of 14.8% for the same period. Grubb & Ellis also reports that the O'Hare
submarket experienced Net Absorption of approximately 242,000 square feet in
1996. The Company believes that the Suburban Chicago Office Market possesses
attractive market fundamentals, as evidenced by the creation of approximately
34,000 office-using jobs in the Chicago metropolitan area during the twelve
months ended November 30, 1996, according to the U.S. Bureau of Labor
Statistics. For a description of the Suburban Chicago Office Market, see
"Properties and Pending Acquisitions."
The Shoreline Technology Park, the Lake Marriott Business Park and
Presidents Plaza are collectively referred to herein as the "Recent
Acquisitions."
Pending Acquisitions
The Company has entered into contracts to purchase the Pending
Acquisitions for aggregate consideration of approximately $339.1 million
(including approximately $2.2 million in non-recurring capital expenditures).
The Company currently expects to complete the purchase of the Pending
Acquisitions during the second quarter of 1997. However, the purchase of each
of the Pending Acquisitions is subject to various closing conditions.
Accordingly, no assurances can be made that the Company will acquire any or
all of the Pending Acquisitions.
In addition to the Pending Acquisitions, as part of its ongoing business,
the Company continually engages in discussions with public and private real
estate entities regarding possible portfolio or single asset acquisitions in
various major metropolitan areas. No assurances can be made that the Company
will acquire any of the property opportunities currently under review.
The following describes each of the Pending Acquisitions.
Suburban Chicago Office Market
Westbrook Corporate Center. In March 1997, the Company entered into a
contract to acquire a five-building office complex located in Westchester
(suburban Chicago), Illinois (the "Westbrook Corporate Center"). The purchase
price of the property is approximately $182.1 million, consisting of the
expected assumption of approximately $106 million of mortgage debt, the issuance
of approximately $50 million of Units and approximately $26.1 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 entered into a contract to purchase a 10-acre parcel of land
suitable for development which is contiguous to the Westbrook Corporate Center,
for $3.5 million within twelve months of the acquisition.
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 December 31, 1996 was approximately 90%. Nearly
all of the vacancy at the property is attributable to the newest building in the
complex which opened in February 1996.
Westbrook Corporate Center is located in the East-West Corridor of the
Suburban Chicago Office Market. The Company currently owns approximately 1.6
million square feet of office properties in the Suburban Chicago Office
Market. According to Grubb & Ellis, the entire Suburban Chicago Office Market
had an overall vacancy rate of
S-6
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11.2% as of December 31, 1996, while the East-West Corridor submarket had a
vacancy rate of 9.8% for the same period. Grubb & Ellis also reports that the
East-West Corridor submarket experienced Net Absorption of approximately
524,000 square feet for 1996. As discussed above, the Company believes that
the Suburban Chicago Office Market possesses attractive market fundamentals,
as evidenced by the creation of approximately 34,000 office-using jobs in the
Chicago metropolitan area during the twelve months ended November 30, 1996,
according to the U.S. Bureau of Labor Statistics. For a description of the
Suburban Chicago Office Market, see "Properties and Pending Acquisitions."
West Los Angeles Office Market
10880 Wilshire Boulevard. In March 1997, the Company entered into a
contract to acquire the leasehold interest in 10880 Wilshire Boulevard
located in Westwood, California. In connection with the acquisition, the
Company will also acquire the right to purchase the fee interest in the land
at fair market value in 2001. The Company will acquire 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), approximately 75% of replacement cost,
after 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.
This property is one of the largest buildings in the Westwood submarket of the
West Los Angeles Office Market and given the current constraints on development
described below, this property cannot be duplicated in its market. The property
is located near Interstates 405 and 10 with easy access to other West Los
Angeles markets, downtown, the San Fernando Valley and the Los Angeles airport.
In addition, the property, which meets current earthquake construction codes, is
located in a business district, adjacent to other Class A office buildings,
Westwood Village, a retail area, and the UCLA campus. Major tenants in 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). The Company currently
intends to retain the existing property manager of 10880 Wilshire Boulevard
following the consummation of the acquisition to facilitate the leasing and
management of the property. As of December 31, 1996, the occupancy rate for
10880 Wilshire Boulevard was approximately 85%.
With the acquisition of 10880 Wilshire Boulevard, the Company will own
approximately 1.1 million square feet of office space in the Westwood
submarket of the West Los Angeles Office Market. According to CB Commercial,
the entire West Los Angeles Office Market (consisting of approximately 34
million square feet) had an overall vacancy rate of 11.4% as of December 31,
1996, while the Westwood submarket (consisting of approximately 2.7 million
square feet) experienced a vacancy rate of 9.1% for the same period. CB
Commercial also reports that the West Los Angeles Office Market experienced
Net Absorption of approximately 600,000 square feet in 1996. According to the
U.S. Bureau of Labor Statistics, during the twelve months ended November 30,
1996, approximately 51,000 office-using jobs were created in the Los Angeles
metropolitan area, primarily in the entertainment, export/import, healthcare,
telecommunications and aerospace industries. Additionally, limited sites are
available for development in the Westwood submarket and this submarket has
significant constraints on development including substantial development fees
and/or the limitation of new development to 1.5 floor-area-ratio with
five-story height limitations. For a description of the West Los Angeles
Office Market, see "Properties and Pending Acquisitions."
The Company expects that the net operating income (excluding the effect of
straight-line rents) generated by the property will increase $2.0 million and
$600,000, respectively, during 1998 and 1999 as free rent provisions in
current leases expire. Additionally, the Company expects that the net
operating income generated by the property will further increase as new
leases are made at market rates, although no assurances can be made in this
regard. Approximately 78,000 square feet at the property is currently
available for occupancy. The Company expects to incur certain tenant
improvement costs and leasing commissions in connection with the leasing of
this space.
The Fairfax County, Virginia Market
Centerpointe I and II. In March 1997, the Company entered into a contract
to acquire two office properties located in Fairfax County, Virginia
("Centerpointe I and II") for aggregate consideration of approximately $55
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million, consisting of approximately $25 million in cash and the assumption
of approximately $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 December 31, 1996, the
aggregate occupancy rate for Centerpointe I and II was approximately 100%.
In connection with the acquisition of Centerpointe I and II, the Company
has 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.
Centerpointe I and II are located in the Fairfax County, Virginia market.
The Company currently owns approximately 550,000 square feet of office
properties in Fairfax County, Virginia. According to Grubb & Ellis, the
Fairfax County, Virginia Market had an overall vacancy rate of 6.7% as of
December 31, 1996 and experienced Net Absorption of approximately 3.3 million
square feet for 1996. For a description of the Fairfax County, Virginia
Market, see "Properties and Pending Acquisitions."
Capitalization Rates
The following table sets forth the Capitalization Rates for the Recent
Acquisitions and the Pending Acquisitions. The Capitalization Rates are
calculated by dividing (a) the expected net operating income (including the
effect of any straight-line rents) generated by the property based upon
annualized revenues from signed leases in place at the property as of March
1, 1997 by (b) the consideration paid for the property, including any
expected capital improvements.
<TABLE>
<CAPTION>
Expected Expected
Net Operating Consideration Capitalization
Property/Pending Acquisition (1) Income Paid Rate
--------------------------------- --------------- --------------- ----------------
(millions) (millions)
<S> <C> <C> <C>
Shoreline Technology Park/
Lake Marriott Business Park (2) $17.5 $184.0 9.5%
Presidents Plaza (3) 8.5 78.0 10.9%
Westbrook Corporate Center (4) 18.3 182.1 10.1%
10880 Wilshire Boulevard (5) 8.2 102.0 8.0%
Centerpointe I and II (6) 5.5 55.0 10.0%
--------------- --------------- ----------------
Total/Weighted Average $58.0 $601.1 9.6%
=============== =============== ================
</TABLE>
(1) Pending Acquisitions appear in italics.
(2) Net operating income includes approximately $725,000 of straight-line
rents. Consideration Paid includes approximately $1 million of expected
non-recurring capital expenditures. The Company expects that net
operating income (excluding the effect of straight-line rents) will
increase by approximately $475,000 and $320,000, respectively, during
1998 and 1999 due to contractual rent increases scheduled to occur during
those periods.
(3) Net operating income includes approximately $2.84 million of
straight-line rents. Consideration Paid includes approximately $1 million
of expected non-recurring capital expenditures. The Company expects that
net operating income (excluding the effect of straight-line rents) will
increase by approximately $640,000 and $670,000, respectively, during
1998 and 1999 due to contractual rent increases scheduled to occur during
those periods.
(4) Net operating income includes approximately $1.2 million of straight-line
rents. The Company expects that net operating income (excluding the
effect of straight-line rents) will increase by approximately $1.2
million and $385,000, respectively, during 1998 and 1999 due to
contractual rent increases scheduled to occur during those periods.
Additionally, the Company expects that net operating income will increase
as vacant space in the newest building in the complex which opened in
February 1996 is leased, however, no assurances can
S-8
<PAGE>
be made in this regard. The Return on Equity (as defined below) invested
by the Company in the Westbrook Corporate Center is expected to be 12.9%.
Return on Equity is calculated by dividing (a) the expected net operating
income (including the effect of straight line rents) generated by the
property based upon annualized revenues from signed leases in place at
the property as of March 1, 1997 less expected debt service on $106
million of mortgage debt at an interest rate of approximately 8% per annum
(the "Expected Westbrook Debt") by (b) the consideration paid for the
property less the principal amount of the Expected Westbrook Debt.
(5) Net operating income includes approximately $2.7 million of straight-line
rents. Consideration Paid includes approximately $2.2 million of expected
non-recurring capital expenditures. As discussed above, the Company
expects that net operating income (excluding the effect of straight-line
rents) will increase by approximately $2.0 million and $600,000,
respectively, during 1998 and 1999 as free rent provisions in current
leases expire. The Company also expects that net operating income
(excluding the effect of straight-line rents) will increase by
approximately $195,000 and $210,000, respectively, during 1998 and 1999
due to contractual rent increases scheduled to occur during those
periods. Additionally, the Company expects that net operating income will
further increase as new leases are made at market rates, although no
assurance can be made in this regard.
(6) Net operating income includes approximately $800,000 of straight-line
rents. The Company expects that net operating income (excluding the
effect of straight-line rents) will increase by approximately $270,000
and $420,000, respectively, during 1998 and 1999 due to contractual rent
increases scheduled to occur during those periods. The Return on Equity
invested by the Company in Centerpointe I and II is expected to be 13.3%.
Return on Equity is calculated by dividing (a) the expected net operating
income (including the effect of straight line rents) generated by the
property based upon annualized revenues from signed leases in place at
the property as of March 1, 1997, less expected debt service on $30
million of mortgage debt at an interest rate of 7.32% per annum (the
"Expected Centerpointe Debt") by (b) the consideration paid for the
property less the principal amount of the Expected Centerpointe Debt.
Potential Acquisitions
As part of its ongoing business, the Company actively seeks opportunities
to acquire additional properties on favorable terms. The purchase of any of
these potential acquisitions is subject to satisfaction of numerous
conditions, including, without limitation, the completion of due diligence
and, with respect to the Rosemont, Illinois office complexes, the negotiation
and execution of definitive purchase agreements. Additionally, the purchase
of the Rosemont, Illinois office complexes are subject to rights of certain
tenants to purchase portions of each of the two complexes. No assurances can
be given that the Company will acquire any of the property opportunities
currently under review.
Rosemont, Illinois Office Complexes. In March 1997, the Company entered
into a letter of intent to acquire two office complexes located in Rosemont,
Illinois (suburban Chicago) comprising an aggregate of approximately 1.3
million square feet and which include approximately 2.9 acres of land
suitable for the development of approximately 250,000 square feet of
additional office space. This acquisition is subject, among other things, to
the rights of certain tenants to purchase portions of each of the two
complexes. See "Properties and Pending Acquisitions" for a description of the
O'Hare submarket of the Suburban Chicago Office Market.
175 Wyman Street. In March 1997, the Company entered into a contract to
acquire 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. 175 Wyman Street is located in the Route
128/Mass. Pike submarket. For a description of the Greater Boston Suburban
Office Market, see "Properties and Pending Acquisitions."
Other Developments
Credit Facility. The First National Bank of Boston ("Bank of Boston") has
committed to convert the Company's $300 million secured Credit Facility to an
unsecured facility. Additionally, Bank of Boston has committed to reduce the
interest rate on the Credit Facility.
Sale of Westlakes Office Park. The Company is negotiating to sell the
Westlakes Office Park, its sole property located in the Suburban Philadelphia
Office Market. The consummation of this sale is subject to
S-9
<PAGE>
customary closing conditions, including, but not limited to, purchaser's
satisfactory completion of its due diligence. At the Company's option, the
transaction may be structured as a like-kind exchange.
Crosby Corporate Center. In December 1996, the Company acquired a
28.6-acre parcel of land adjacent to the Crosby Corporate Center. This parcel
has approximately 250,000 square feet of building capacity, and the Company
expects that development of a significant portion of the land could commence
in the second quarter of 1997, although no assurances can be made in this
regard. The Company believes that demand for office space in the Northwest
submarket of the Greater Boston Suburban Office Market (the location of the
Crosby Corporate Center) will continue as several major tenants at the
Property experience substantial growth. No assurances can be made that such
increased demand will occur. For a description of the Greater Boston Suburban
Office Market, see "Properties and Pending Acquisitions."
Sale of Beacon Construction Company. In December 1996, Beacon Construction
Company, Inc. (the "Construction Company") sold substantially all of its
assets. The Construction Company's new business plan involves the completion
of certain contracts not transferred to the purchaser and the liquidation of
its remaining assets. The Company's decision to effect the sale of the
Construction Company was based upon the determination that the third-party
construction business was no longer an integral part of the Company's
business.
S-10
<PAGE>
The Properties and Pending Acquisitions
Set forth below are summary descriptions of the Properties and the
Pending Acquisitions.
<TABLE>
<CAPTION>
Rentable Percent Leased
Year Built/ Ownership Property Area in At December 31,
Property/Pending Acquisition(1) Renovated Interest(2) Location Square Feet 1996
---------------------------------- ------------- ------------ ------------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
Downtown Boston Office Market:
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 93%
150 Federal Street 1988 100% Boston, MA 530,279 99%
Rowes Wharf 1987 45% Boston, MA 344,326 100%
Russia Wharf 1978-1982 100% Boston, MA 314,596 98%
2 Oliver Street-147 Milk Street 1982-1988 100% Boston, MA 271,000 97%
175 Federal Street 1977 100% Boston, MA 203,349 94%
South Station(4) 1988 100% Boston, MA 148,591 100%
-------------- ---------------
4,037,629 96%
-------------- ---------------
Greater Boston Suburban Office Market:
Wellesley Office Park(5) 1963-1984 100% Wellesley, MA 622,862 100%
Crosby Corporate Center(6) 1996 100% Bedford, MA 336,000 88%
Westwood Business Centre 1985 100% Westwood, MA 160,400 100%
New England Executive Park
Portfolio(7) 1970-1985 100% Burlington, MA 817,013 98%
-------------- ---------------
1,936,275 97%
-------------- ---------------
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(8) 1985-1986 100% Cambridge, MA 263,227 100%
-------------- ---------------
473,527 98%
-------------- ---------------
Central Perimeter Atlanta Office Market:
Perimeter Center Portfolio(9) 1970-1989 100% Atlanta, GA 3,302,136 98%
-------------- ---------------
Arlington County, Virginia Office Market:
The Polk and Taylor Buildings 1970 10% Arlington, VA 890,000 100%
1300 North Seventeenth Street 1980 100% Rosslyn, VA 372,865 98%
1616 North Fort Myer Drive 1974 100% Rosslyn, VA 292,826 99%
-------------- ---------------
1,555,691 99%
-------------- ---------------
Fairfax County, Virginia Office Market:
John Marshall I 1981 100% McLean, VA 261,364 100%
E.J. Randolph 1983 100% McLean, VA 164,677 97%
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 99%
-------------- ---------------
Washington, D.C. Office Market:
1333 H Street 1984(10) 100% Washington, D.C. 238,694 90%
Suburban Chicago Office Market:
AT&T Plaza 1984 100% Oak Brook, IL 225,318 100%
Tri-State International(11) 1986 100% Lincolnshire, IL 548,000 74%
Presidents Plaza(12) 1980-1982 100% Chicago, IL 791,000 90%
Westbrook Corporate Center(13) 1985-1996 100% Westchester, IL 1,106,000 90%
-------------- ---------------
2,670,318 88%
-------------- ---------------
West Los Angeles Office Market:
10960 Wilshire Boulevard 1971-1992 100% Westwood, CA 543,804 89%
10880 Wilshire Boulevard 1970 100% Westwood, CA 531,176 85%
-------------- ---------------
1,074,980 87%
Suburban Philadelphia Office
Market:
Westlakes Office Park(14) 1988-1990 100% Berwyn, PA 443,592 98%
-------------- ---------------
Silicon Valley Office/R&D Market:
Shoreline Technology Park(15) 1985-1991 100% Mountain View, CA 726,500 100%
Lake Marriott Business Park(16) 1981 100% Santa Clara, CA 400,000 100%
-------------- ---------------
1,126,500 100%
-------------- ---------------
S-11
<PAGE>
Rentable Percent Leased
Year Built/ Ownership Property Area in At December 31,
Property/Pending Acquisition(1) Renovated Interest(2) Location Square Feet 1996
---------------------------------- ------------- ------------ ------------------ -------------- ---------------
Total Weighted Average
Properties 15,772,526 96%
============== ===============
Total Weighted Average
Pending Acquisitions 2,046,138 91%
============== ===============
Total Weighted Average
Properties and Pending
Acquisitions 17,818,664 96%
============== ===============
</TABLE>
(1) Pending Acquisitions appear in italics.
(2) The Company holds a general partner interest in One Post Office Square,
a general partner and limited partner interest in Center Plaza and the
Polk and Taylor Buildings and an indirect limited partner interest in
Rowes Wharf Associates. The Company holds approximately 51.6% of the
common stock of BeaMetFed, Inc. ("BeaMetFed"), the entity that holds the
fee title to the 75-101 Federal Street Property. The Company owns a 100%
fee interest in the remaining Properties, with the exception of South
Station, in which the Company holds a ground leasehold interest. Upon
the consummation of the Pending Acquisitions, the Company will hold a
100% fee interest in each of the Pending Acquisitions, with the
exception of 10880 Wilshire Boulevard, in which the Company will hold the
entire leasehold interest.
(3) The Company holds a 1% general partner interest, a 75% limited partner
interest and an option to purchase the remaining 24% limited partner
interest in the partnership that owns the Center Plaza Property.
(4) The Company owns a ground leasehold interest in the South Station
Property which expires in 2024 but may be extended, at the Company's
option, for two additional 15-year terms. Fee title to this Property is
owned by a unaffiliated third party. This Property was originally built
in the early 1900s and was fully rehabilitated in 1988. This Property
includes a significant retail component.
(5) The Wellesley Office Park consists of eight office buildings.
(6) The Crosby Corporate Center is a Property which consists of six office
buildings.
(7) The New England Executive Park Portfolio consists of nine of the
thirteen office buildings located in the New England Executive Park, the
remaining four of which are owner-occupied.
(8) The 245 First Street property consists of two attached structures
connected by a four-story atrium. Riverview I, a six-story office
building, was constructed in 1909 and renovated in 1986. Riverview II,
an eighteen-story structure with parking on the first nine floors, was
constructed in 1985.
(9) The Perimeter Center Portfolio consists of 32 buildings and six ground
leases.
(10) Approximately 205,000 square feet of the 1333 H Street Property was
built in 1982. The remaining approximately 34,000 square feet was
renovated in 1982.
(11) The Tri-State International complex consists of five office buildings.
The Company is currently negotiating leases that, if signed, would
increase the occupancy rate of this Property to 85%. No assurances can
be given that these leases will be signed.
(12) Presidents Plaza consists of four office buildings.
(13) Westbrook Corporate Center consists of five office buildings.
(14) The Westlakes Office Park consists of four office buildings. The Company
has entered into a contract to sell the Westlakes Office Park.
(15) Shoreline Technology Park consists of twelve office buildings.
(16) Lake Marriott Business Park consists of seven office buildings.
S-12
<PAGE>
The Offering
All of the shares of Common Stock offered hereby are being sold by the
Company. None of the Company's stockholders are selling any Common Stock in
the Offering.
<TABLE>
<S> <C>
Common Stock Offered 7,000,000
Common Stock Outstanding After the Offering(1) 62,818,979
Use of Proceeds To purchase the Pending Acquisitions (or repay
amounts drawn under the Credit Facility to acquire
the Pending Acquisitions), and to repay amounts
drawn under the Credit Facility to purchase the
Recent Acquisitions
NYSE Symbol "BCN"
</TABLE>
(1) Includes 7,702,499 shares of Common Stock that may be issued upon
redemption of Units (including Units to be issued in connection with a
Pending Acquisition). Such Units are redeemable by the holders for cash or,
at the election of the Company, shares of Common Stock on a one-for-one
basis. Excludes 3,619,747 shares of Common Stock reserved for issuance
pursuant to the Company's 1994 Stock Option Plan, 1996 Stock Option Plan,
and dividend reinvestment plan.
Distributions
The Company regularly pays quarterly distributions on its Common Stock of
$.4625 per share, which, on an annualized basis, is equal to an annual
distribution of $1.85 per share of Common Stock. Future distributions by the
Company will be at the discretion of the Board of Directors and there can be
no assurance that any such distributions will be made by the Company.
Distributions by the Company to the extent of its current and accumulated
earnings and profits for Federal income tax purposes generally will be
taxable to stockholders as ordinary dividend income. Distributions in excess
of current and accumulated earnings and profits will be treated as a
non-taxable reduction of the stockholder's basis in its shares of Common
Stock to the extent thereof, and thereafter as taxable gain. Distributions
that are treated as a reduction of the stockholder's basis in its shares of
Common Stock will have the effect of deferring taxation until the sale of the
stockholder's shares.
Summary Selected Financial Information
The following table sets forth selected financial and operating information
on an as adjusted basis for the Company and on a combined historical basis for
the Company and The Beacon Group, the predecessor entity to the Company (the
"Predecessor" or "Beacon"). 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.
The unaudited selected pro forma financial and operating information is
presented as if the Offering, the acquisition of the Properties acquired
since January 1, 1996 and the acquisition of the Pending Acquisitions had
occurred as of January 1, 1996, for the condensed consolidated statement of
operations. The pro forma financial information is not necessarily indicative
of what the results of operations of the Company would have been for the
periods indicated, nor does it purport to represent the Company's future
results of operations.
S-13
<PAGE>
<TABLE>
<CAPTION>
Beacon Properties Corporation
Summary Selected Financial Information
Company Predecessor
----------------------------------------------- -----------------------------------
For the For the
For the For the Period Period
Year Year May 26, January 1, Years Ended
Pro Forma Ended Ended 1994 to 1994 to December 31,
1996 December December December May 25, -----------------------
(unaudited) 31, 1996 31, 1995 31, 1994 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share amounts)
OPERATING INFORMATION:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $279,573 $147,825 $71,050 $25,144 $ 5,776 $14,315 $11,406
Management fees 3,005 3,005 2,203 -- 1,521 3,533 3,331
Recoveries from tenants 33,048 16,719 9,742 4,488 1,040 2,349 1,989
Mortgage interest income 5,581 4,970 2,546 -- -- -- --
Other income 17,348 11,272 5,502 2,301 675 2,176 2,003
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues 338,555 183,791 91,043 31,933 9,012 22,373 18,729
----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Property expenses 69,078 37,211 18,090 7,034 2,086 4,580 4,522
Real estate taxes 34,103 18,124 10,217 3,325 595 1,354 1,204
General and administrative 24,830 19,331 9,755 3,122 1,399 4,357 4,658
Mortgage interest expense 47,162 30,300 15,226 4,992 2,798 7,650 7,203
Interest--amortization of
financing costs 2,099 2,084 1,370 617 373 192 138
Depreciation and
amortization 64,927 33,184 17,428 6,924 2,385 5,577 5,505
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses 242,199 140,234 72,086 26,014 9,636 23,710 23,230
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations 96,356 43,557 18,957 5,919 (624) (1,337) (4,501)
Equity (loss) in joint
ventures and
corporations(1) 4,989 4,989 3,234 929 198 (5,953) (1,544)
Income (loss) from
continuing operations 101,345 48,546 22,191 6,848 (426) (7,290) (6,045)
Discontinued
operations-Construction
Company:
Income (loss) from
operations (2,609) (2,609) (12) 477 102 440 136
Loss on sale (249) (249) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
minority interest 98,487 45,688 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 Partnerships (12,026) (5,988) (4,119) (1,670) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary items $ 86,461 39,700 18,060 5,655 607 (5,311) (3,253)
===========
Extraordinary items, net of
minority interest (3,368) -- -- 8,898 1,554 --
Net income (loss)(2) $ 36,332 $18,060 $ 5,655 $ 9,505 $(3,757) $(3,253)
========== =========== =========== ========== =========== ==========
Per Share of Common Stock
data:
Income from continuing
operations $ 1.61 $ 1.41 $ 1.09 $ 0.45 -- -- --
Discontinued operations-
Construction Company:
Income (loss) from
operations $ (0.04) $ (0.08) $ (0.00) $ 0.03 -- -- --
Loss on sale $ (0.00) $ (0.01) -- -- -- -- --
Income before
extraordinary items $ 1.57 $ 1.32 $ 1.09 $ 0.48 -- -- --
Extraordinary items $ (0.11) -- -- -- -- --
Net income $ 1.21 $ 1.09 $ 0.48 -- -- --
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
Beacon Properties Corporation
Summary Selected Financial Information
Company Predecessor
----------------------------------------------- -----------------------------------
For the For the
For the For the Period Period
Year Year May 26, January 1, Years Ended
Pro Forma Ended Ended 1994 to 1994 to December 31,
1996 December December December May 25, -----------------------
(unaudited) 31, 1996 31, 1995 31, 1994 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash dividends declared $ 1.765 $ 1.24 $ 0.96 -- -- --
Cash dividends paid $ 1.765 $ 1.64 $ 0.56 -- -- --
Weighted average common
shares outstanding 55,116,480 29,932,327 16,525,245 11,816,380 -- -- --
BALANCE SHEET INFORMATION:
Real estate before
accumulated depreciation $ 2,030,630 $ 1,691,530 $ 471,142 $ 400,419 $ 82,198 $ 81,220 $ 78,580
Total assets 2,102,426 1,779,412 534,797 400,861 77,470 85,497 93,327
Mortgage debt 588,212 452,212 70,536 90,936 69,240 87,091 86,610
Note Payable, Credit
Facility 59,714 153,000 130,500 130,300 -- -- --
Total liabilities 714,425 671,711 239,013 261,100 129,836 143,451 142,015
Total equity (deficit) 1,229,450 999,150 258,822 102,038 (52,366) (57,954) (48,688)
(1) Including deductions
for: Depreciation and
amortization $ 4,033 $ 4,033 $ 2,306 $ 3,013
(2) Company share of
Operating Partnership 87.79% 86.89% 81.31% 77.20%
</TABLE>
S-15
<PAGE>
RISK FACTORS
An investment in the Common Stock involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this Prospectus Supplement before
purchasing Common Stock in the Offering.
Risks Associated with the Addition of a Substantial Number of New Properties
The Company is currently experiencing a period of rapid growth. Since
January 1996, the Company has invested approximately $1.2 billion in office
properties, increasing its interests in real estate by over 226%. Upon the
completion of the Pending Acquisitions, the Company will have invested
approximately $1.5 billion since January 1996, increasing its interests in
real estate by over 290%. 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 and Pending Acquisitions for
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 $604.8
million, and its total consolidated debt plus its proportionate share of
total unconsolidated debt (other than Rowes Wharf) is approximately $697.5
million. The Company (together with an affiliate), and Equitable Life
Assurance Society of the United States, on behalf of its Prime Property Fund
("Equitable"), the Company's joint venture partner in Rowes Wharf Associates,
each hold one-half of the mortgage debt on the Rowes Wharf Property. See
"Properties--Mortgage Indebtedness and Credit Facility." The Company's
current consolidated mortgage indebtedness of approximately $451.8 million
has maturities ranging from 1998 through 2008 and is secured by Properties.
In addition, the Company currently has $153 million outstanding under its
Credit Facility. The Company's proportionate share of its current total
unconsolidated debt (excluding Rowes Wharf) consists of approximately $46.3
million on the One Post Office Square Property (in which the Company has a
50% general partner interest) and approximately $46.4 million on the 75-101
Federal Street Property (in which the Company owns approximately 51.6% of the
common stock of a private REIT that owns the Property).
The Company currently has a policy of incurring debt only if upon such
incurrence the Company's Debt to Market Capitalization Ratio (as defined
below) would be 50% or less. For purposes of this policy, the Company's Debt
to Market Capitalization Ratio is calculated as the Company's proportionate
share of total consolidated and unconsolidated debt (excluding Rowes Wharf)
as a percentage of the sum of the market value of outstanding shares of stock
of the Company and Units plus the Company's proportionate share of total
consolidated and unconsolidated debt (excluding Rowes Wharf). As noted, the
Company (together with an affiliate) currently holds one-half of the Rowes
Wharf mortgage indebtedness. Upon completion of the Offering and the Pending
Acquisitions, the Company's Debt to Market Capitalization Ratio will be
approximately 25.2%. 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.
S-16
<PAGE>
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. See "Properties--Mortgage Indebtedness
and Credit Facility."
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 holds (i) a 76% general and limited partner interest in the
property partnership that owns the Center Plaza Property, (ii) a 50% general
partner interest in the property partnership that owns the One Post Office
Square Property, (iii) a 90% limited partner interest (through Beacon
Property Management Corporation and Beacon Construction Company, Inc.) in
Rowes Wharf Limited Partnership (a limited partnership that owns a 50%
general partner interest in Rowes Wharf Associates, the entity that owns the
hotel space and leases the office and retail space at the Rowes Wharf
Property), (iv) a 10% general and limited partner interest in the property
partnership that owns the Polk and Taylor Buildings Property, and (v)
approximately 51.6% of the common stock of a private REIT that holds a direct
fee interest in the 75-101 Federal Street Property. The Company is not in a
position to exercise sole decision making authority regarding One Post Office
Square, Rowes Wharf, the Polk and Taylor Buildings, or 75-101 Federal Street.
However, the Company is responsible for the day-to-day affairs of each of
these Properties.
Joint ownership of Properties may, under certain circumstances, involve
risks not otherwise present in wholly- owned properties. Such risks include
the possibility that the Company's partners or co-investors might become
bankrupt, develop business interests or goals inconsistent with the business
interests or goals of the Company, or take action contrary to the
instructions or requests of the Company or contrary to the Company's policies
or objectives, including the Company's policy with respect to maintaining its
qualification as a REIT. Joint ownership also involves the potential risk of
impasse on decisions, such as a sale, because neither the Company nor the
partners or co-investors have full control over the entity owning the
Property. Consequently, actions by such partners or co-investors might result
in subjecting jointly-owned Properties to additional risk.
The Company will, however, seek to maintain sufficient control of the
entities holding jointly-owned Properties to permit the Company's business
objectives to be achieved. Any capital contribution by the Company or the
Operating Partnership to the property partnerships that own (directly or
indirectly) the Rowes Wharf and Center Plaza Properties requires the approval
of the Directors of the Company who are neither officers of the Company nor
affiliated with The Beacon Companies. The Company's organizational documents
do not limit the amount of available funds that may be invested in
partnerships, joint ventures, or co-investments.
Limits on Ownership May Deter Changes in Management
In order to maintain its REIT qualification, not more than 50% in value of
the outstanding capital stock of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Internal Revenue
Code of 1986, as amended (the "Code"), to include certain entities) during
the last half of a taxable year (other than the first year) (the "Five or
Fewer Requirement"). In order to protect the Company against the risk of
losing its REIT status due to a concentration of ownership among its
stockholders, the Articles of Incorporation of the Company limit ownership of
the issued and outstanding Common Stock by any single stockholder to 6.0% of
the
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aggregate value of the Company's shares of capital stock from time to time;
provided, however, that entities whose ownership of Common Stock is
attributed to the beneficial owners of such entities for purposes of the Five
and Fewer Requirement (such as pension trusts qualifying under Section 401(a)
of the Code, United States investment companies registered under the
Investment Company Act of 1940, as amended, partnerships, trusts, and
corporations) are limited by the Company's Articles of Incorporation to
holding no more than 9.9% of the aggregate value of the Company's shares of
Common Stock. The Articles of Incorporation provide that the Board of
Directors can waive these ownership limitations if the Board is satisfied,
based upon the advice of tax counsel, that ownership in excess of these
limits will not jeopardize the Company's status as a REIT, and further, that
such waiver would be in the best interest of the Company. A transfer of
shares to a person who, as a result of the transfer, would violate the
ownership limitations will be void. Shares acquired or transferred in breach
of the ownership limitations will be automatically converted into shares not
entitled to vote or to participate in dividends or other distributions. In
addition, shares acquired or transferred in breach of the ownership
limitations may be purchased by the Company for the lesser of the price paid
and the average closing price for the ten trading days immediately preceding
redemption.
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 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 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 continue the development of office and other
commercial properties, in accordance with the Company's development and
underwriting policies as opportunities arise in the future. Risks associated
with such development 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.
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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. The amount of the claim would be capped
at the amount owed for unpaid pre-petition lease payments unrelated to the
rejection, plus the greater of one year's lease payment or 15% of the
remaining lease payments payable under the lease (but not to exceed the
amount of three years' lease payments). No assurance can be given that the
Company will not experience significant tenant defaults in the future.
Potential Adverse Effect on Results of Operations Due to Risks Associated
With Ground Leases.
Two of the Properties and 10880 Wilshire Boulevard, a Pending Acquisition,
are the subject of long-term ground leases. In the case of the lease on the
office and retail portions of the Rowes Wharf Property, the landlord becomes the
owner of the portion of the Property subject to the lease at the expiration of
the term of the lease or at the earlier termination by reason of a breach of the
lease by the tenant. The lease on the Rowes Wharf Property, which expires in
2065, does not contain an extension option but includes an option to purchase.
The ground lease on the South Station Property expires in 2024. The landlord
becomes the owner of the South Station Property at the expiration of the term of
the ground lease or at the earlier termination by reason of a breach of the
lease by the tenant. The Company will have the right to extend the lease for two
additional 15-year terms, subject to the landlord's right to terminate such
additional periods upon two years' notice and payment to the Company of certain
termination payments. The ground lease at 10880 Wilshire Boulevard expires in
2068. The Company will have an option to purchase the ground under 10880
Wilshire Boulevard at fair market value in 2001. 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.
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 Code
limit the Company's ability to sell properties held for fewer than four
years, which may affect the Company's ability to sell properties without
adversely affecting returns to holders of Common Stock.
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
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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 a material adverse affect on the Company's business, assets,
results of operations or liquidity, nor is the Company aware of any such
liability or concerns. Nevertheless, it is possible that these ESAs did not
reveal all environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which the Company
is currently unaware.
The Company has not been notified by any governmental authority, and has
no other knowledge of, any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental substances
in connection with any of its Properties except as previously disclosed in
documents incorporated herein by reference or as noted below.
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
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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.
Adverse Effect of Increase in Market Interest Rates on Price of Common Stock
One of the factors that will influence the market price of the Common
Stock in public markets is the annual yield on the price paid for shares of
Common Stock from distributions by the Company. An increase in market
interest rates may lead prospective purchasers of the Common Stock to demand
a higher annual yield from future distributions. Such an increase in the
required distributions yield may adversely affect the market price of the
Common Stock.
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THE COMPANY
General
The Company is a self-administered and self-managed REIT which owns a
portfolio of Class A office properties and other commercial properties
located in major metropolitan areas, including Boston, Atlanta, Chicago, 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 15.8 million rentable square feet in the aggregate and, as of
December 31, 1996, were approximately 96% leased with over 1,100 tenants.
The Company is currently experiencing a period of rapid growth. Upon
completion of the Pending Acquisitions, the Company will have invested
approximately $1.5 billion in office properties since January 1996,
increasing its interests in real estate by over 290%. The Company has entered
into contracts to acquire the Pending Acquisitions for aggregate
consideration of approximately $339.1 million. If all of the Pending
Acquisitions are consummated, the Company will own or have an interest in 112
income producing commercial properties encompassing approximately 17.8
million rentable square feet, approximately 79% of which will be located in
suburban office markets and approximately 21% of which will be located in
downtown office markets, primarily in Boston. Assuming the consummation of
all of the Pending Acquisitions, the Company will have a total market
capitalization of approximately $2.9 billion.
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 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's executive offices are located at 50 Rowes Wharf in Boston,
Massachusetts 02110 and its telephone number at that location is (617)
330-1400.
RECENT DEVELOPMENTS
Recent Acquisitions
Silicon Valley Office/R&D Market
Shoreline Technology Park and Lake Marriott Business Park. In December
1996, the Company acquired Shoreline Technology Park and Lake Marriott
Business Park for aggregate consideration of approximately $184 million
(including approximately $1 million of expected non-recurring capital
expenditures). The Company purchased the Properties from Teachers Insurance
and Annuity Association.
The Shoreline Technology Park is a 12-building complex developed between
1985 and 1991 which encompasses approximately 727,000 square feet. Shoreline
Technology Park is the headquarters of Silicon Graphics, Inc., which is the sole
tenant of the Property. The Lake Marriott Business Park is a 7-building complex
developed in 1981 which encompasses approximately 400,000 square feet. Major
tenants in the Lake Marriott Business Park include Silicon Valley Bank
(approximately 101,000 square feet) and Hitachi Computer Products (America),
Inc. (approximately 97,000 square feet). The Shoreline Technology Park and
substantially all of the Lake Marriott Business Park are currently leased on a
"triple-net" basis. The aggregate occupancy rate of both Properties as of
December 31, 1996 was 100%.
Shoreline Technology Park and Lake Marriott Business Park are located in
the Silicon Valley Office/R&D Market. According to Cornish & Carey, the
Silicon Valley Office/R&D Market, which consists of approximately 129 million
rentable square feet, had an overall vacancy rate of 5.3% as of December 31,
1996. Cornish & Carey
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also reports that the Silicon Valley Office/R&D Market experienced Net
Absorption of approximately 1.7 million square feet in 1996.
Shoreline Technology Park and Lake Marriott Business Park represent the
Company's first acquisitions in the Silicon Valley Office/R&D Market. As part
of its continuing analysis of major office markets and investment
opportunities, the Company has determined that the San Francisco and San Jose
metropolitan areas possess attractive market fundamentals, including growth
in office-using employment. According to the U.S. Bureau of Labor Statistics,
during the twelve months ended November 30, 1996, approximately 13,400
office-using jobs were created in the San Francisco and San Jose metropolitan
area, primarily in business services including multi-media, computer software
and hardware and consulting. The Company has further determined that the
Silicon Valley Office/R&D Market is particularly attractive due to its high
concentration of knowledge-based industries including biotechnology,
communications, and computer hardware and software as well as its proximity
to major universities. Additionally, the Company believes there is
substantial constraint on new supply of office space in the Silicon Valley
Office/R&D Market due to geographic barriers and the high cost of land.
Based upon its survey of brokers in the market and other internal
research, the Company believes that the existing rental rates per square foot
at Shoreline Technology Park and Lake Marriott Business Park are below
current market rates by approximately $7 to $9 and $5 to $7, respectively.
The Company expects that the net operating income generated by the Properties
will increase as current leases are renewed, and new leases are made, at
current market rates, although no assurances can be made in this regard. The
Company expects to incur certain tenant improvement costs and leasing
commissions in connection with the releasing of this space.
For a description of the Silicon Valley Office/R&D Market, see "Properties
and Pending Acquisitions."
Suburban Chicago Office Market
Presidents Plaza. In December 1996, the Company acquired Presidents Plaza
from MetLife. Aggregate consideration for Presidents Plaza consisted of
1,171,500 Units issued to MetLife (valued at approximately $39 million at the
closing of the acquisition) and approximately $38 million in cash. In
addition, the Company expects to incur approximately $1 million of
non-recurring capital expenditures at the Property. The Company estimates
that the aggregate purchase price for Presidents Plaza is approximately 60%
of replacement cost.
Presidents Plaza, located at 8600 and 8700 West Bryn Mawr Avenue near
O'Hare International Airport, consists of two sets of 10- and 12-story towers
encompassing an aggregate of approximately 791,000 square feet. The Property
was developed between 1980 and 1982. Major tenants at the Property include
Cotter & Co. (approximately 175,000 square feet), Wilson Sporting Goods Co.
(approximately 109,000 square feet) and Gas Research Institute (approximately
97,000 square feet). As of December 31, 1996, the Property was approximately
90% leased.
Presidents Plaza is located in the O'Hare submarket of the Suburban
Chicago Office Market. With the acquisition of Presidents Plaza, the Company
increased its holdings of office properties in the Suburban Chicago Office
Market to approximately 1.6 million square feet. According to Grubb & Ellis,
the entire suburban Chicago Office Market had an overall vacancy rate of
11.2% as of December 31, 1996, while the O'Hare submarket had a vacancy rate
of 14.8% for the same period. Grubb & Ellis also reports that the O'Hare
submarket experienced Net Absorption of approximately 242,000 square feet in
1996. The Company believes that the Suburban Chicago Office Market possesses
attractive market fundamentals, as evidenced by the creation of approximately
34,000 office-using jobs in the Chicago metropolitan area during the twelve
months ended November 30, 1996, according to the U.S. Bureau of Labor
Statistics. For a description of the Suburban Chicago Office Market, see
"Properties and Pending Acquisitions."
Pending Acquisitions
The Company has entered into contracts to purchase the Pending
Acquisitions for aggregate consideration of approximately $339.1 million
(including approximately $2.2 million in non-recurring capital expenditures).
The Company currently expects to complete the purchase of the Pending
Acquisitions during the second quarter of 1997. However, the purchase of each
of the Pending Acquisitions is subject to various closing conditions.
Accordingly, no assurances can be made that the Company will acquire any or
all of the Pending Acquisitions.
In addition to the Pending Acquisitions, as part of its ongoing business,
the Company continually engages in discussions with public and private real
estate entities regarding possible portfolio or single asset acquisitions in
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various major metropolitan areas. No assurances can be made that the Company
will acquire any of the property opportunities currently under review.
The following describes each of the Pending Acquisitions.
Suburban Chicago Office Market
Westbrook Corporate Center. In March 1997, the Company entered into a
contract to acquire Westbrook Corporate Center, a five-building office complex
located in Westchester (suburban Chicago), Illinois. The purchase price of the
property is approximately $182.1 million, consisting of the expected assumption
of approximately $106 million of mortgage debt, the issuance of approximately
$50 million of Units and approximately $26.1 million in cash. The sellers of
Westbrook Corporate Center are currently negotiating with their existing lender
regarding this indebtedness. If the sellers successfully negotiate the terms of
such indebtedness, the Company will assume such indebtedness upon the closing of
the acquisition. Alternatively, the Company will secure nonrecourse indebtedness
on the property in connection with the consummation of the acquisition. 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 a 10-acre parcel of land suitable for development
which is contiguous to the property for $3.5 million within twelve months of
the acquisition.
The Company has agreed to maintain at least $106 million of nonrecourse
indebtedness outstanding on the property and not to dispose of the real
estate for ten years. If the Company should choose to modify the financing or
dispose of the real estate within this time period it may be required to make
payments to the seller.
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 December
31, 1996 was approximately 90%. Nearly all of the vacancy at the property is
attributable to the newest building in the complex which opened in February
1996.
Westbrook Corporate Center is located in the East-West Corridor of the
Suburban Chicago Office Market. The Company currently owns approximately 1.6
million square feet of office Properties in the Suburban Chicago Office
Market. According to Grubb & Ellis, the entire Suburban Chicago Office Market
had an overall vacancy rate of 11.2% as of December 31, 1996, while the
East-West Corridor submarket had a vacancy rate of 9.8% for the same period.
Grubb & Ellis also reports that the East-West Corridor submarket experienced
Net Absorption of approximately 524,000 square feet for 1996. The Company
believes that the Suburban Chicago Office Market possesses attractive market
fundamentals, as evidenced by the creation of approximately 34,000
office-using jobs in the Chicago metropolitan area during the twelve months
ended November 30, 1996, according to the U.S. Bureau of Labor Statistics.
For a description of the Suburban Chicago Office Market, see "Properties and
Pending Acquisitions."
West Los Angeles Office Market
10880 Wilshire Boulevard. In March 1997, the Company entered into a
contract to acquire the leasehold interest in 10880 Wilshire Boulevard
located in Westwood, California. The ground lessor of 10880 Wilshire
Boulevard has a right of first refusal on the sale of this property. The
Company expects that the ground lessor will not exercise its right of first
refusal in connection with the Company's purchase of this property. In
connection with the acquisition, the Company will also acquire the right to
purchase the fee interest in the land underlying 10880 Wilshire Boulevard at
fair market value in 2001.
The Company will acquire 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), approximately 75% of replacement cost.
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
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building. This property is one of the largest buildings in the Westwood
submarket of the West Los Angeles Office Market and given the current
constraints on development described below, this property cannot be duplicated
in its market. The property is located near Interstates 405 and 10 with easy
access to other West Los Angeles markets, downtown, the San Fernando Valley and
the Los Angeles airport. In addition, the property, which meets current
earthquake construction codes, is located in a business district, adjacent to
other Class A office buildings, Westwood Village, a retail area, and the UCLA
campus. Major tenants in 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). The Company currently intends to retain the existing property manager of
10880 Wilshire Boulevard following the consummation of the acquisition to
facilitate the leasing and management of the property. As of December 31, 1996,
the occupancy rate for 10880 Wilshire Boulevard was approximately 85%.
With the acquisition of 10880 Wilshire Boulevard, the Company will own
approximately 1.1 million square feet of office space in the Westwood
submarket of the West Los Angeles Office Market. According to CB Commercial,
the entire West Los Angeles Office Market (consisting of approximately 34
million square feet) had an overall vacancy rate of 11.4% as of December 31,
1996, while the Westwood submarket (consisting of approximately 2.7 million
square feet) experienced a vacancy rate of 9.1% for the same period. CB
Commercial also reports that the West Los Angeles Office Market experienced
Net Absorption of approximately 600,000 square feet in 1996. According to the
U.S. Bureau of Labor Statistics, during the twelve months ended November 30,
1996, approximately 51,000 office-using jobs were created in the Los Angeles
metropolitan area, primarily in the entertainment, export/import, healthcare,
telecommunications and aerospace industries. Additionally, limited sites are
available for development in the Westwood submarket and this submarket has
significant constraints on development including substantial development fees
and/or the limitation of new development to 1.5 floor-area-ratio with
five-story height limitations. For a description of the West Los Angeles
Office Market, see "Properties and Pending Acquisitions."
The Company expects that the net operating income (excluding the effect of
straight-line rents) generated by the property will increase $2.0 million and
$600,000, respectively during 1998 and 1999 as free rent provisions in
current leases expire. Additionally, the Company expects that the net
operating income generated by the property will further increase as new
leases are made at market rates, although no assurances can be made in this
regard. Approximately 78,000 square feet at the property is currently
available for occupancy. The Company expects to incur certain tenant
improvement costs and leasing commissions in connection with the leasing of
this space.
The Fairfax County, Virginia Market
Centerpointe I and II. In March 1997, the Company entered into a contract to
acquire Centerpointe I and II for aggregate consideration of approximately $55
million, consisting of approximately $25 million in cash and the assumption of
approximately $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 December 31, 1996, the
aggregate occupancy rate for Centerpointe I and II was approximately 100%.
In connection with the acquisition of Centerpointe I and II, the Company
has 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.
Centerpointe I and II are located in the Fairfax County, Virginia market.
The Company currently owns approximately 550,000 square feet of office
Properties in Fairfax County, Virginia. According to Grubb & Ellis, the
Fairfax County, Virginia Market had an overall vacancy rate of 6.7% as of
December 31, 1996 and experienced Net Absorption of approximately 3.3 million
square feet for 1996. For a description of the Fairfax County, Virginia
Market, see "Properties and Pending Acquisitions."
S-25
<PAGE>
Capitalization Rates
The following table sets forth the Capitalization Rates for the Recent
Acquisitions and the Pending Acquisitions. The Capitalization Rates are
calculated by dividing (a) the expected net operating income (including the
effect of any straight-line rents) generated by the property based upon
annualized revenues from signed leases in place at the property as of March
1, 1997 by (b) the consideration paid for the property, including any
expected capital improvements.
<TABLE>
<CAPTION>
Expected
Net Operating Consideration Capitalization
Property/Pending Acquisition(1) Income Paid Rate
- ------------------------------- --------------- --------------- ----------------
(millions) (millions)
<S> <C> <C> <C>
Shoreline Technology Park/Lake Marriott Business Park(2) $17.5 $184.0 9.5%
Presidents Plaza(3) 8.5 78.0 10.9%
Westbrook Corporate Center(4) 18.3 182.1 10.1%
10880 Wilshire Boulevard(5) 8.2 102.0 8.0%
Centerpointe I and II(6) 5.5 55.0 10.0%
--------------- --------------- ----------------
Total/Weighted Average $58.0 $601.1 9.6%
=============== =============== ================
</TABLE>
(1) Pending Acquisitions appear in italics.
(2) Net operating income includes approximately $725,000 of straight-line
rents. Consideration Paid includes approximately $1 million of expected
non-recurring capital expenditures. The Company expects that net
operating income (excluding the effect of straight-line rents) will
increase by approximately $475,000 and $320,000, respectively, during
1998 and 1999 due to contractual rent increases scheduled to occur during
those periods.
(3) Net operating income includes approximately $2.84 million of
straight-line rents. Consideration Paid includes approximately $1 million
of expected non-recurring capital expenditures. The Company expects that
net operating income (excluding the effect of straight-line rents) will
increase by approximately $640,000 and $670,000, respectively, during
1998 and 1999 due to contractual rent increases scheduled to occur during
those periods.
(4) Net operating income includes approximately $1.2 million of straight-line
rents. The Company expects that net operating income (excluding the
effect of straight-line rents) will increase by approximately $1.2
million and $385,000, respectively, during 1998 and 1999 due to
contractual rent increases scheduled to occur during those periods.
Additionally, the Company expects that net operating income will increase
as vacant space in the newest building in the complex which opened in
February 1996 is leased, however, no assurances can be made in this
regard. The Return on Equity (as defined below) invested by the Company
in the Westbrook Corporate Center is expected to be 12.9%. Return on
Equity is calculated by dividing (a) the expected net operating income
(including the effect of straight line rents) generated by the property
based upon annualized revenues from signed leases in place at the
property as of March 1, 1997 less expected debt service on the Expected
Westbrook Debt by (b) the consideration paid for the property less the
principal amount of the Expected Westbrook Debt.
(5) Net operating income includes approximately $2.7 million of straight-line
rents. Consideration Paid includes approximately $2.2 million of
expected non-recurring capital expenditures. As discussed above, the
Company expects that net operating income (excluding the effect of
straight-line rents) will increase approximately $2.0 million and
$600,000, respectively, during 1998 and 1999 as free rent provisions in
current leases expire. The Company also expects that net operating income
(excluding the effect of straight-line rents) will increase by
approximately $195,000 and $210,000, respectively, during 1998 and 1999
due to contractual rent increases scheduled to occur during those
periods. Additionally, the Company expects that net operating income will
further increase as new leases are made at market rates, although no
assurance can be made in this regard.
(6) Net operating income includes approximately $800,000 of straight-line
rents. The Company expects that net operating income (excluding the
effect of straight-line rents) will increase by approximately $270,000
and $420,000, respectively, during 1998 and 1999 due to contractual rent
increases scheduled to occur during those periods. The Return on Equity
invested by the Company in Centerpointe I and II is expected to be 13.3%.
Return on Equity is calculated by dividing (a) the expected net operating
income (including the effect of straight line rents) generated by the
property based upon annualized revenues from signed leases in place at
the property as of March 1, 1997, less expected debt service on the Expected
Centerpointe Debt by (b) the consideration paid for the property less the
principal amount of the Expected Centerpointe Debt.
S-26
<PAGE>
Potential Acquisitions
As part of its ongoing business, the Company actively seeks opportunities
to acquire additional properties on favorable terms. The purchase of any of
these potential acquisitions is subject to satisfaction of numerous
conditions, including, without limitation, the completion of due diligence
and, with respect to the Rosemont, Illinois office complexes, the negotiation
and execution of definitive purchase agreements. Additionally, the purchase
of the Rosemont, Illinois office complexes are subject to rights of certain
tenants to purchase portions of each of the two complexes. No assurances can
be given that the Company will acquire any of the property opportunities
currently under review.
Rosemont, Illinois Office Complexes. In March 1997, the Company entered
into a letter of intent to acquire two office complexes located in Rosemont,
Illinois (suburban Chicago) comprising an aggregate of approximately 1.3
million square feet and which include approximately 2.9 acres of land
suitable for the development of approximately 250,000 square feet of
additional office space. This acquisition is subject, among other things, to
the rights of certain tenants to purchase portions of each of the two
complexes. See "Properties and Pending Acquisitions" for a description of the
O'Hare submarket of the Suburban Chicago Office Market.
175 Wyman Street. In March 1997, the Company entered into a contract to
acquire 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. 175 Wyman Street is located in the Route
128/Mass. Pike submarket. For a description of the Greater Boston Suburban
Office Market, see "Properties and Pending Acquisitions."
Other Developments
Credit Facility. Bank of Boston has committed to convert the Company's
$300 million secured Credit Facility to an unsecured facility. Additionally,
Bank of Boston has committed to reduce the interest rate on the Credit
Facility.
Sale of Westlakes Office Park. The Company is negotiating to sell the
Westlakes Office Park, the Company's sole Property in the Suburban Philadelphia
Office Market. The consummation of this sale is subject to customary closing
conditions, including, but not limited to, purchaser's satisfactory completion
of its due diligence. At the Company's option, the transaction may be structured
as a like-kind exchange.
Crosby Corporate Center. In December 1996, the Company acquired a 29-acre
parcel of land adjacent to the Crosby Corporate Center. This parcel has
approximately 250,000 square feet of building capacity, and the Company
expects that development of a significant portion of the land could commence
in the second quarter of 1997, although no assurances can be made in this
regard. The Company believes that demand for office space in the Northwest
submarket of the Greater Boston Suburban Office Market (the location of the
Crosby Corporate Center) will continue as several major tenants at the
Property experience substantial growth. No assurances can be made that such
increased demand will occur. For a description of the Greater Boston Suburban
Office Market, see "Properties and Pending Acquisitions."
Sale of Beacon Construction Company. In December 1996, the Construction
Company sold substantially all of its assets. The Construction Company's new
business plan involves the completion of certain contracts not transferred to
the purchaser and the liquidation of its remaining assets. The Company's
decision to effect the sale of the Construction Company was based upon the
determination that the third-party construction business was no longer an
integral part of the Company's business.
S-27
<PAGE>
PROPERTIES AND PENDING ACQUISITIONS
The Company owns a portfolio of Class A office properties and other
commercial properties located in major metropolitan areas, including Boston,
Atlanta, Chicago, Los Angeles, San Francisco and Washington, D.C. The
Properties encompass approximately 15.8 million rentable square feet. Class A
office properties generally are considered to have excellent locations and
access, attract high quality tenants, be well maintained and professionally
managed and achieve among the highest rent, occupancy and tenant retention
rates within their markets.
The Downtown Boston Office Market
Market Information
According to Spaulding & Slye, as of December 31, 1996, there were
approximately 47.4 million square feet of private sector office space in the
Downtown Boston Office Market. The following table sets forth the vacancy
rates for the Downtown Boston Office Market from 1992 through 1996.
<TABLE>
<CAPTION>
Period Vacancy Rate
- --------- ---------------
<S> <C>
1992 15.9%
1993 16.3%
1994 12.1%
1995 11.5%
1996 5.2%(a)
</TABLE>
(a) For periods prior to 1996, Spaulding & Slye calculated vacancy rate (or
available space) as space actively marketed for immediate or future
occupancy, including space available for sublet. For periods beginning in
1996, Spaulding & Slye also calculates vacancy rate as space available
for immediate occupancy. Under the original definition, the vacancy rate
(or available space) in 1996 would have been 7.6%.
Source: Spaulding & Slye Office Market Reports 1992 through January 1997.
Spaulding & Slye reports that Net Absorption in 1996 was 1.6 million
square feet and 400,000 square feet in 1995. This significant amount of Net
Absorption is largely due to growth in the financial services, publishing and
legal sections, together with the relocation of certain federal government
groups.
Property Descriptions
The following chart describes each of the Company's Properties located in the
Downtown Boston Office Market.
<TABLE>
<CAPTION>
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership Parking
--------------------------------- ------------- --------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
75-101 Federal Street 1985-1988 812,000 (a) (b) (c)
One Post Office Square 1981 764,129 41 50%(d) 375-car garage
Center Plaza 1966-1969 649,359 9 (e) 575-car garage
150 Federal Street 1988 530,279 28 100% 285-car garage
Rowes Wharf 1987 344,326 15 (f) 550-car garage
Russia Wharf 1978-1982 314,596 (g) 100% 146 spaces
2 Oliver Street-147 Milk Street 1982-1988 271,000 (h) 100% None
175 Federal Street 1977 203,349 17 100% None
South Station 1988 148,591 5 (i) (j)
---------------
Total 4,037,629
===============
</TABLE>
(a) 75 Federal Street is a 21-story building and 101 Federal Street is a
31-story building.
(b) The Company holds approximately 51.6% of the common stock of BeaMetFed,
Inc., a private REIT that holds the fee title to 75-101 Federal Street.
(c) 101 Federal Street has a 195-car garage.
(d) One Post Office Square is owned by a joint venture between Equitable and
the Company. The Company has a 50% interest in and is the managing
venturer of this joint venture.
(e) The Company holds a 1% general partner interest, a 75% limited partner
interest and an option to purchase the remaining 24% limited partner
interest in the partnership that owns the Center Plaza Property.
S-28
<PAGE>
(f) The Company holds a 90% limited partner interest in Rowes Wharf Limited
Partnership ("RWLP"). RWLP and Equitable each hold a 50% general partner
interest in Rowes Wharf Associates ("RWA"), the partnership that owns the
hotel space and leases the office and retail space at the Rowes Wharf
Property. Through its interest in RWLP, the Company owns a 45% indirect
limited partner interest in RWA. The general partner of RWLP, has the
authority to mortgage or sell all of RWLP's interest in Rowes Wharf
without the Company's consent.
(g) Russia Wharf is a complex of three seven-story buildings.
(h) 2 Oliver Street is an 11-story building and 147 Milk Street is a 10-story
building.
(i) The Company owns 100% of a ground leasehold in this Property.
(j) A 600-car garage is under construction by the Massachusetts Bay
Transportation Authority.
Base Rents and Net Effective Rents
The following charts set forth the average annual Base Rent (as defined
below) and the average annual Net Effective Rent (as defined below) per
square foot for each of the Company's Properties in the Downtown Boston
Office Market. Base Rent is gross rent excluding payments by tenants on
account of real estate tax and operating expense escalation. Net Effective
Rent is Base Rent adjusted on a straight-line basis for contractual rent
step-ups and free rent periods, plus tenant payments on account of real
estate tax and operating expense escalation, less total operating expenses
and real estate taxes.
Average Annual Base Rents
-----------------------------------------------------
As of 12/31
Property 1992 1993 1994 1995 1996
- -------------------------- -------- -------- -------- --------- ------------
(per square foot)
175 Federal Street $14.81 $17.79 $21.15 $23.82 $25.11
One Post Office Square 22.41 21.85 22.99 23.55 24.04
South Station 28.51 28.51 27.24 28.26 30.42
Center Plaza 19.65 21.40 22.98 22.95 22.41
Rowes Wharf 30.87 30.04 30.39 30.87 30.49
150 Federal Street 21.20 23.88 24.25 24.67 25.12
Russia Wharf(a) -- -- -- 12.53 14.01
75-101 Federal Street(a) -- -- -- 28.00 30.34
2 Oliver Street(a) -- -- -- 16.46 16.89
-------- -------- -------- --------- ------------
Weighted Average $22.38 $23.30 $24.34 $ 23.75 $24.78
======== ======== ======== ========= ============
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by
the Company subsequent to its initial public offering in May 1994 (the
"Initial Public Offering") and, consequently, information prior to the
date of acquisition is unavailable.
Average Annual Net Effective Rents
----------------------------------------------------
As of 12/31
Property 1992 1993 1994 1995 1996
- -------------------------- -------- -------- -------- -------- -------------
(per square foot)
175 Federal Street $12.40 $13.03 $13.97 $15.40 $16.49
One Post Office Square 14.47 14.32 15.01 15.03 14.88
South Station 14.56 15.87 18.16 20.05 20.59
Center Plaza 5.61 9.79 13.27 13.18 12.31
Rowes Wharf 14.26 15.45 17.65 18.22 17.77
150 Federal Street 17.51 19.99 20.95 21.14 21.26
Russia Wharf(a) -- -- -- 7.86 7.92
75-101 Federal Street(a) -- -- -- 19.10 20.12
2 Oliver Street(a) -- -- -- 11.53 11.70
-------- -------- -------- -------- -------------
Weighted Average $13.16 $14.77 $16.22 $15.78 $16.15
======== ======== ======== ======== =============
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by
the Company subsequent to its Initial Public Offering and, consequently,
information prior to the date of acquisition is unavailable.
S-29
<PAGE>
Occupancy Rates
The following chart sets forth the occupancy rate, expressed as a
percentage, for each of the Company's Properties in the Downtown Boston
Office Market.
<TABLE>
<CAPTION>
Occupancy Rate
------------------------------------------------------
As of 12/31
Property 1992 1993 1994 1995 1996
------------------------------ -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
175 Federal Street 100% 100% 94% 84% 94%
One Post Office Square 93% 95% 97% 99% 99%
South Station 96% 98% 100% 100% 100%
Center Plaza 73% 76% 84% 91% 93%
Rowes Wharf 91% 92% 96% 98% 100%
150 Federal Street 98% 99% 98% 99% 99%
Russia Wharf(a) -- -- -- 94% 98%
75-101 Federal Street(a) -- -- -- 93% 92%
2 Oliver Street(a) -- -- -- 93% 97%
-------- -------- -------- -------- ---------------
Weighted Average 90% 91% 94% 95% 96%
======== ======== ======== ======== ===============
</TABLE>
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by
the Company subsequent to the Initial Public Offering and, consequently,
information prior to the date of acquisition is unavailable.
Lease Expirations
The following table sets forth lease expirations (in square feet) for the
Company's Properties in the Downtown Boston Office Market. See "Lease
Expirations--All Properties" for a detailed description of lease expirations
at each of the Company's Properties.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
------------ ------------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
square feet (a) 403,735 408,357 443,870 408,509 723,343
% sq. ft. (b) 10.0% 10.1% 11.0% 10.1% 17.9%
annual rent (c) 9,668,253 12,361,782 12,045,829 10,236,753 22,730,854
psf (d) $23.95 $30.27 $27.14 $25.06 $31.42
tenants (e) 71 64 65 66 43
</TABLE>
<TABLE>
<CAPTION>
2005 &
2002 2003 2004 beyond
------------ ------------------------ ------------
<S> <C> <C> <C> <C>
square feet (a) 513,007 171,941 134,147 685,647
% sq. ft. (b) 12.7% 4.3% 3.3% 17.0%
annual rent (c) 16,523,017 4,925,273 4,064,996 22,729,697
psf (d) $32.21 $28.65 $30.30 $33.15
tenants (e) 21 8 11 18
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
The Greater Boston Suburban Office Market
Market Information
As of December 1996, there were approximately 46.1 million square feet of
private sector office space in the Greater Boston Suburban Office Market. Of
the 19 Properties located in the Greater Boston Suburban Office Market, eight
are located in the Route 128/Mass. Pike submarket, one (Westwood Business
Centre) is located in the South submarket and 10 (Crosby Corporate Center and
New England Executive Park Portfolio) are located in the Northwest submarket.
The following tables set forth the vacancy rates for the Route 128/Mass.
Pike, South, and Northwest submarkets from December 1992 through December
1996.
S-30
<PAGE>
<TABLE>
<CAPTION>
Route 128/
Mass. Pike Submarket South Submarket Northwest Submarket
- ------------------------ ------------------------- -------------------------
Date Vacancy Rate Date Vacancy Rate Date Vacancy Rate
- -------- --------------- -------- --------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
12/92 18.5% 12/92 13.5% 12/92 21.7%
12/93 11.6% 12/93 12.3% 12/93 18.0%
12/94 10.6% 12/94 9.4% 12/94 16.2%
12/95 9.6% 12/95 9.2% 12/95 13.7%
12/96 2.6%(a) 12/96 5.1%(a) 12/96 6.2%(a)
</TABLE>
(a) For periods prior to 1996, Spaulding & Slye calculated vacancy rate (or
available space) as space actively marketed for immediate or future
occupancy, including space available for sublet. For periods beginning in
1996, Spaulding & Slye also calculates vacancy rate as space available
for immediate occupancy. Under the original definition, the vacancy rate
(or available space) in 1996 in the Route 128/Mass. Pike, South and
Northwest submarkets would have been 4.7%, 9.1% and 16.5%, respectively.
Source: Spaulding & Slye Office Market Reports 1992 through January 1997.
Spaulding & Slye reports that Net Absorption for the Route 128/Mass. Pike
submarket was 531,000 square feet in 1996 and 100,000 square feet in 1995.
For the South submarket, Spaulding & Slye reports that Net Absorption was
39,000 square feet in 1996 and 100,000 square feet in 1995. In the Northwest
submarket, Spaulding & Slye reports Net Absorption was (309,000) square feet
in 1996 and 300,000 square feet in 1995.
Property Descriptions
The following chart describes the Company's Properties located in the
Greater Boston Suburban Office Market. The Company owns a 100% fee interest
in each Property located in the Greater Boston Suburban Office Market,
subject to an option to purchase Building Seventeen of the New England
Executive Park Portfolio by the tenant of the Property.
<TABLE>
<CAPTION>
Year Built/ Rentable Area No. of
Property Renovated in Square Feet Stories
- ---------------------------------------- ------------- --------------- ----------
<S> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One 1963 29,502 3
60 William Street, Building Two 1966 49,826 4
55 William Street, Building Three 1968 52,636 4
40 William Street, Building Four 1970 71,904 4
20 William Street, Building Five 1973 129,000 4
45 William Street, Building Six 1976 155,718 4
80 William Street, Building Seven 1984 71,324 4
100 William Street, Building Eight 1996 62,952 3
Crosby Corporate Center 1996 336,000 (a)
Westwood Business Centre 1985 160,400 3
New England Executive Park Portfolio:
Building One 1979 79,942 3
Building Two 1970 64,569 2
Building Six 1980 101,641 4
Building Eight 1982 218,761 6
Building Twelve 1970 94,860 4
Building Fifteen 1976 43,267 2
Building Sixteen 1978 59,541 3
Building Seventeen 1979 56,503 3
Building Twenty-Four 1985 97,929 4
---------------
Total Properties 1,936,275
===============
</TABLE>
(a) Crosby Corporate Center is a Property which consists of six one- and
two-story buildings.
S-31
<PAGE>
Base Rents and Net Effective Rents
The following charts set forth the average annual Base Rents and the
average annual Net Effective Rents per square foot for each of the Company's
Properties located in the Greater Boston Suburban Office Market.
<TABLE>
<CAPTION>
Average Annual Base Rents
-------------------------------------------------------
As of 12/31
Property 1992 1993 1994 1995 1996
------------------------------------------ --------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One $21.45 $20.97 $22.00 $22.60 $23.77
60 William Street, Building Two 22.04 16.62 19.26 19.39 20.98
55 William Street, Building Three 25.41 23.25 22.06 22.03 22.74
40 William Street, Building Four 23.33 22.89 22.28 23.08 24.37
20 William Street, Building Five 22.52 21.20 21.90 22.96 24.26
45 William Street, Building Six 15.65 15.46 16.52 16.28 22.80
80 William Street, Building Seven 37.71 37.34 25.00(a) 25.00 25.00
100 William Street, Building Eight(b) -- -- -- 23.00 28.50
Westwood Business Centre(b) -- -- -- 18.46 19.51
--------- -------- ----------- -------- -------------
Subtotal 22.96 21.63 21.03 20.50 23.08
--------- -------- ----------- -------- -------------
Crosby Corporate Center(b) -- -- -- -- 12.97
New England Executive Park Portfolio(b) -- -- -- -- 18.48
--------- -------- ----------- -------- -------------
Total Weighted Average $22.96 $21.63 $21.03 $20.50 $19.41
========= ======== =========== ======== =============
</TABLE>
(a) This reduction in Base Rent is attributable to the execution of a new
lease with the tenant occupying this Property for an 11-year term
commencing January 1, 1994.
(b) The 100 William Street Property, Westwood Business Centre and the New
England Executive Park Portfolio were acquired by the Company subsequent
to the Initial Public Offering and, consequently, information prior to
the date of acquisition is unavailable. The Crosby Corporate Center was
redeveloped by the Company from research/development space to Class A
office space and, consequently, historical information prior to such
redevelopment is not comparable.
<TABLE>
<CAPTION>
Average Annual Net Effective Rents
-------------------------------------------------------
As of 12/31
Property 1992 1993 1994 1995 1996
------------------------------------------ --------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One $12.40 $12.70 $13.19 $14.02 $16.15
60 William Street, Building Two 13.30 9.36 11.26 11.58 15.14
55 William Street, Building Three 16.36 14.86 13.86 13.92 14.89
40 William Street, Building Four 13.18 16.17 14.07 14.77 16.52
20 William Street, Building Five 12.38 11.92 13.04 14.11 15.61
45 William Street, Building Six 9.06 9.07 10.84 12.65 16.04
80 William Street, Building Seven 31.10 31.35 21.38(a) 19.47 20.38
100 William Street, Building Eight(b) -- -- -- 15.50 20.50
Westwood Business Centre(b) -- -- -- 11.41 11.38
--------- -------- ----------- -------- -------------
Subtotal 14.55 14.23 13.57 13.66 15.68
--------- -------- ----------- -------- -------------
Crosby Corporate Center (b) -- -- -- -- 9.57
New England Executive Park Portfolio(b) -- -- -- -- 11.62
--------- -------- ----------- -------- -------------
Total Weighted Average $14.55 $14.23 $13.57 $13.66 $12.92
========= ======== =========== ======== =============
</TABLE>
(a) This reduction in Net Effective Rent is attributable to the execution of
a new lease with the tenant occupying this Property for an 11-year term
commencing January 1, 1994.
(b) The 100 William Street Property, Westwood Business Centre and the New
England Executive Park Portfolio were acquired by the Company subsequent
to the Initial Public Offering and, consequently, information prior to
the date of acquisition is unavailable. The Crosby Corporate Center was
redeveloped by the Company from
S-32
<PAGE>
research/development space to Class A office space and, consequently,
historical information prior to such redevelopment is not comparable.
Occupancy Rates
The following chart sets forth the occupancy rate, expressed as a
percentage, for each of the Company's Properties located in the Greater
Boston Suburban Office Market.
<TABLE>
<CAPTION>
Occupancy Rate
------------------------------------------------------
As of 12/31
Property 1992 1993 1994 1995 1996
---------------------------------------------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Wellesley Office Park:
65 William Street, Building One 100% 100% 94% 100% 100%
60 William Street, Building Two 96% 100% 100% 98% 100%
55 William Street, Building Three 91% 96% 100% 100% 100%
40 William Street, Building Four 97% 100% 100% 93% 99%
20 William Street, Building Five 95% 97% 97% 97% 100%
45 William Street, Building Six 91% 90% 99% 98% 100%
80 William Street, Building Seven 100% 100% 100% 100% 100%
100 William Street, Building Eight(a) -- -- -- 100% 100%
Westwood Business Centre(a) -- -- -- 99% 100%
Subtotal 95% 97% 99% 98% 100%
-------- -------- -------- -------- ---------------
Crosby Corporate Center(a) -- -- -- -- 88%
New England Executive Park Portfolio(a) -- -- -- -- 98%
-------- -------- -------- -------- ---------------
Total Weighted Average 95% 97% 99% 98% 97%
======== ======== ======== ======== ===============
</TABLE>
(a) The 100 William Street Property, Westwood Business Centre and the New
England Executive Park Portfolio were acquired by the Company subsequent
to the Initial Public Offering and, consequently, information prior to
the date of acquisition is unavailable. The Crosby Corporate Center was
redeveloped by the Company from research/development space to Class A
office space and, consequently, historical information prior to such
development is not comparable.
Lease Expirations
The following table sets forth lease expirations (in square feet) for the
Company's Properties in the Greater Boston Suburban Office Market. See "Lease
Expirations--All Properties" for a detailed description of lease expirations
at each of the Company's Properties.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
------------ ------------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
square feet (a) 407,248 204,784 187,821 190,127 177,738
% sq. ft. (b) 20.9% 10.5% 9.6% 9.8% 9.1%
annual rent (c) 8,125,838 4,268,136 3,482,584 4,194,448 4,126,630
psf (d) $19.95 $20.84 $18.54 $22.06 $23.22
tenants (e) 51 38 28 30 32
</TABLE>
<TABLE>
<CAPTION>
2005 &
2002 2003 2004 beyond
------------ ------------------------ ------------
<S> <C> <C> <C> <C>
square feet (a) 77,740 44,457 97,400 497,760
% sq. ft. (b) 4.0% 2.3% 5.0% 25.6%
annual rent (c) 2,099,918 1,064,518 2,093,856 11,093,598
psf (d) $27.01 $23.94 $21.50 $22.29
tenants (e) 12 3 4 8
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-33
<PAGE>
The Cambridge Office Market
As of December 1996, there were approximately 9.8 million square feet of
office space in the Cambridge Office Market. The entire Cambridge Office
Market had a vacancy rate of 1.8% as of December 1996. Spaulding & Slye
reports Net Absorption in the Cambridge Office Market of approximately
180,000 square feet in 1996 and 210,000 square feet in 1995.
The following chart describes each of the Company's Properties located in
the Cambridge Office Market.
<TABLE>
<CAPTION>
Year Built/ Rentable Area No. of Company's
Property Renovated in Square Feet Stories Ownership
- --------------------- ------------- --------------- --------- ------------
<S> <C> <C> <C> <C>
One Canal Park 1987 100,300 4 100%
Ten Canal Park 1987 110,000 6 100%
245 First Street(a)
Riverview I 1986 109,000 6 100%
Riverview II 1985 148,000 18 100%
</TABLE>
(a) Riverview I and Riverview II are connected by a four-story atrium
comprising approximately 6,000 square feet.
The following chart sets forth the annual Base Rent per square foot, the
annual Net Effective Rent per square foot, and the occupancy rate for each of
the Company's Properties located in the Cambridge Office Market as of
December 31, 1996.
<TABLE>
<CAPTION>
Property Base Rent Net Effective Rent Occupancy Rate
- ---------------------- ------------ ------------------- ---------------
<S> <C> <C> <C>
One Canal Park $22.05 $13.99 100%
Ten Canal Park 19.23 12.42 92%
245 First Street 21.58 17.46 100%
------------ ------------------- ---------------
Weighted Average $21.13 $15.55 98%
============ =================== ===============
</TABLE>
The following table sets forth lease expirations (in square feet) for the
Company's Properties in the Cambridge Office Market. See "Lease
Expirations--All Properties" for a detailed description of lease expirations
at each of the Company's Properties.
<TABLE>
<CAPTION>
2005 &
1997 1998 1999 2000 2001 2002 2003 2004 beyond
------- --------- -------- -------------------- ------------ --------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
square feet (a) 0 3,499 1,411 6,320 315,964 107,667 28,000 0 0
% sq. ft. (b) 0.0% 0.7% 0.3% 1.3% 66.6% 22.7% 5.9% 0.0% 0.0%
annual rent (c) 0 127,832 31,606 83,269 8,165,274 2,480,979 709,712 0 0
psf (d) $0.00 $36.53 $22.40 $13.18 $25.84 $23.04 $25.35 $0.00 $0.0
tenants (e) 0 1 1 1 4 2 1 0 0
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-34
<PAGE>
The Central Perimeter Atlanta Office Market
Market Information
According to Jamison Research, Inc., as of December 1996 there were
approximately 91.0 million square feet of office space in the Atlanta Office
Market. The Central Perimeter submarket, the location of the Perimeter Center
Portfolio, had approximately 18.7 million square feet of office space. The
following table sets forth the vacancy rates and Net Absorption for the
Central Perimeter Atlanta Office Market from 1992 through 1996.
Vacancy Rate Net Absorption
--------------- ----------------------------
(in millions of square feet)
1992 16.8% .5
1993 11.7% 1.0
1994 8.7% .6
1995 6.0% .7
1996 3.8% .5
Sources: CB/Torto Wheaton 1992 through 1994; Jamison Research 1995 and 1996
Property Descriptions
The following is a description of the buildings located in the Perimeter
Center Portfolio. The Company owns a 100% fee interest in each of the
Properties in the Perimeter Center Portfolio.
Year Built/ Rentable Area
Property Renovated in Square Feet
- -------------------------------------- ------------- ---------------
North Terraces 1984 492,845
South Terraces 1986 494,513
8,10,12,14,16 Perimeter Center East 1970 64,998
20,22,24,26 Perimeter Center East 1973 69,727
28,30,32 Perimeter Center East 1974 104,816
41 Perimeter Center East 1974 92,021
47 Perimeter Center East 1974 92,021
50 Perimeter Center East 1981 6,300
53 Perimeter Center East 1972 90,505
56 Perimeter Center East 1977 93,625
64 Perimeter Center East 1971 183,037
64A Perimeter Center East 1985 372,498
70,72,74,76 Perimeter Center East 1972 61,932
125 Perimeter Center West 1972 223,059
219 Perimeter Center Parkway 1979 127,697
223 Perimeter Center Parkway 1978 127,823
245 Perimeter Center Parkway 1981 229,217
301 Perimeter Center North 1982 151,416
303 Perimeter Center North 1989 162,256
Park Place Shopping Center 1979 61,830
---------------
Total 3,302,136
===============
S-35
<PAGE>
Base Rents and Historic Net Rents
The following charts show the average annual Base Rent and the average
annual Historic Net Rent (as defined below) per square foot for each of the
Properties in the Perimeter Center Portfolio. Historic Net Rent is Base Rent
plus tenant payments on account of real estate tax and operating expense
escalation, less total operating expenses and real estate taxes.
<TABLE>
<CAPTION>
Average Annual Base Rents
--------------------------------------------------
As of
Property 1992 1993 1994 1995 12/31/96
- -------------------------------------- -------- -------- -------- -------- -----------
(per square foot)
<S> <C> <C> <C> <C> <C>
North Terraces $15.55 $17.94 $17.87 $18.06 $20.43
South Terraces 18.78 17.08 18.59 20.70 20.11
8,10,12,14,16 Perimeter Center East 14.32 13.51 13.91 11.63 14.33
20,22,24,26 Perimeter Center East 13.48 12.92 11.75 13.11 14.78
28,30,32 Perimeter Center East 13.01 10.34 10.42 12.52 13.38
41 Perimeter Center East 14.45 14.76 14.29 13.70 15.11
47 Perimeter Center East 16.13 15.84 14.94 15.39 15.16
50 Perimeter Center East 6.00 6.19 6.27 6.37 6.62
53 Perimeter Center East 13.44 13.57 13.62 15.02 15.62
56 Perimeter Center East 11.76 11.27 11.23 11.77 15.30
64 Perimeter Center East 5.34 5.34 5.34 5.34 5.34
64A Perimeter Center East 19.01 19.31 19.62 19.91 20.36
70,72,74,76 Perimeter Center East 13.74 13.90 14.76 16.02 15.88
125 Perimeter Center West 4.10 4.10 4.10 4.11 4.10
219 Perimeter Center Parkway 11.79 14.89 16.88 15.62 16.06
223 Perimeter Center Parkway 6.76 8.08 8.62 11.33 16.50
245 Perimeter Center Parkway 15.80 15.99 16.17 16.36 17.89
301 Perimeter Center North 17.17 17.17 17.73 17.80 18.47
303 Perimeter Center North 21.06 19.70 20.44 21.06 20.76
Park Place Shopping Ctr 18.86 19.78 19.32 25.53 16.28
-------- -------- -------- -------- -----------
Weighted Average $14.57 $14.81 $15.18 $15.89 $16.64
======== ======== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
Average Annual Historic Net Rents
--------------------------------------------------
As of 12/31
Property 1992(a) 1993(a) 1994(a) 1995(a) 1996(b)
- -------------------------------------- ------- -------- -------- ------- -------------
(per square foot)
<S> <C> <C> <C> <C> <C>
North Terraces $ 8.67 $10.70 $10.52 $ 9.38 $14.08
South Terraces 12.28 9.17 11.40 12.83 13.40
8,10,12,14,16 Perimeter Center East 7.17 6.09 5.03 4.47 9.15
20,22,24,26 Perimeter Center East 6.86 6.12 5.15 4.72 9.29
28,30,32 Perimeter Center East 6.78 2.63 4.31 5.66 8.59
41 Perimeter Center East 7.63 6.55 6.16 5.59 9.74
47 Perimeter Center East 8.85 9.09 7.61 7.28 9.82
50 Perimeter Center East 6.00 6.19 6.27 6.37 6.62
53 Perimeter Center East 7.07 7.88 7.45 8.26 11.00
56 Perimeter Center East 8.03 7.16 7.57 6.65 8.24
64 Perimeter Center East 3.33 3.29 3.24 3.20 2.38
64A Perimeter Center East 15.75 15.59 15.80 15.09 17.39
70,72,74,76 Perimeter Center East 6.95 7.13 7.48 8.05 10.63
125 Perimeter Center West 3.56 3.33 3.31 3.04 3.07
219 Perimeter Center Parkway 5.79 7.68 10.32 8.91 11.13
223 Perimeter Center Parkway 0.73 1.63 1.92 3.71 11.43
245 Perimeter Center Parkway 8.83 8.48 8.21 8.45 11.36
301 Perimeter Center North 11.09 9.91 10.58 9.85 12.25
303 Perimeter Center North 15.45 13.32 13.55 13.33 14.70
Park Place Shopping Ctr 12.29 13.38 12.60 16.50 12.96
------- -------- -------- ------- -------------
Weighted Average $ 9.26 $ 8.92 $ 9.28 $ 9.28 $11.54
======= ======== ======== ======= =============
</TABLE>
(a) Calculated as Historic Net Rent
(b) Calculated as Net Effective Rent
S-36
<PAGE>
Occupancy Rates
The following chart sets forth the occupancy rate, expressed as a
percentage, for each of the Properties located in the Perimeter Center
Portfolio.
<TABLE>
<CAPTION>
Occupancy Rates
---------------------------------------------------------
Property 1992 1993 1994 1995 As of 12/31/96
------------------------------------------ -------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C>
North Terraces 92% 96% 96% 84% 96%
South Terraces 84% 88% 92% 96% 100%
8,10,12,14,16 Perimeter Center East 69% 61% 60% 69% 90%
20,22,24,26 Perimeter Center East 87% 91% 85% 78% 94%
28,30,32 Perimeter Center East 65% 61% 83% 85% 96%
41 Perimeter Center East 78% 58% 61% 71% 100%
47 Perimeter Center East 75% 79% 87% 77% 91%
50 Perimeter Center East 100% 100% 100% 100% 100%
53 Perimeter Center East 70% 88% 88% 83% 90%
56 Perimeter Center East 100% 93% 93% 93% 84%
64 Perimeter Center East 100% 100% 100% 100% 100%
64A Perimeter Center East 100% 100% 100% 100% 100%
70,72,74,76 Perimeter Center East 89% 91% 89% 86% 96%
125 Perimeter Center West 100% 100% 100% 100% 100%
219 Perimeter Center Parkway 82% 64% 85% 99% 100%
223 Perimeter Center Parkway 100% 100% 100% 100% 100%
245 Perimeter Center Parkway 100% 100% 100% 100% 100%
301 Perimeter Center North 100% 100% 100% 100% 100%
303 Perimeter Center North 99% 100% 100% 100% 100%
Park Place Shopping Center 98% 100% 98% 91% 100%
-------- -------- -------- -------- ------------------
Weighted Average 91% 92% 94% 93% 98%
======== ======== ======== ======== ==================
</TABLE>
Lease Expirations
The following table sets forth lease expirations (in square feet) for the
Company's Properties in the Perimeter Center Portfolio. This table does not
contain information relating to certain ground leases in the Perimeter Center
Portfolio. See "Lease Expirations--All Properties" for a detailed description
of lease expirations at each of the Company's Properties.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
------------ ------------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
square feet (a) 302,600 344,306 680,607 339,519 804,125
% sq. ft. (b) 9.2% 10.4% 20.6% 10.3% 24.3%
annual rent (c) 6,023,929 5,690,219 13,038,907 6,992,412 14,180,418
psf (d) $19.91 $16.53 $19.16 $20.60 $17.63
tenants (e) 59 53 64 33 37
</TABLE>
2005 &
2002 2003 2004 beyond
------------ ------------------------ ------------
square feet (a) 105,606 13,916 223,059 386,990
% sq. ft. (b) 3.2% 0.4% 6.8% 11.7%
annual rent (c) 2,586,065 281,171 981,460 9,429,272
psf (d) $24.49 $20.20 $4.40 $24.37
tenants (e) 7 2 1 4
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-37
<PAGE>
The Arlington County, Virginia Market
As of December 1996 there were approximately 27.6 million square feet of
office space in the Arlington County, Virginia Market. According to Grubb &
Ellis, the Arlington County, Virginia Market had an overall vacancy rate of
3.6% as of December 1996. The Crystal City submarket (location of the Polk
and Taylor Buildings), with approximately 11.3 million square feet, had a
vacancy rate of 0.3% as of December 1996. The Rosslyn-Ballston Corridor
(location of the Rosslyn, Virginia Portfolio), with approximately 15.1
million square feet, had a vacancy rate of approximately 6.0% as of December
1996.
The following chart describes each of the Company's Properties located in
the Arlington County, Virginia Market.
<TABLE>
<CAPTION>
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership Parking
------------------------------ ---------------------------- ---------------------- -----------------
<S> <C> <C> <C> <C> <C>
Polk and Taylor Buildings(a) 1970 890,000 12 10%(b) 1,182-car garage
1300 North 17th Street 1980 373,000 19 100% 667-car garage
1616 North Ft. Myer Drive 1974 293,000 19 100% 627-car garage
---------------
Total 1,556,000
===============
</TABLE>
(a) The Polk and Taylor Buildings are comprised of two buildings commonly
known as the James K. Polk Building (National Center 2) and the Zachary
Taylor Building (National Center 3), numbered 2521 and 2531 Jefferson
Davis Highway, respectively.
(b) The Company holds a 10% general and limited partner interest in the
partnership that owns the Property.
The following chart sets forth Base Rents per square foot, Net Effective
Rents per square foot, and the occupancy rate expressed as a percentage, as of
December 31, 1996, for each Property located in the Arlington County, Virginia
Market.
Net Occupancy
Property Base Rent Effective Rent Rate
-------------------------------------------- --------------- -----------
Polk and Taylor Buildings $23.77 $19.23 100%
1300 North 17th Street 24.24 16.97 98%
1616 North Ft. Myer Drive 22.88 15.28 99%
---------------- --------------- -----------
Total/Weighted Average $23.71 $17.95 99%
================ =============== ===========
The following table sets forth lease expirations (in square feet) for the
Company's Properties in the Arlington County, Virginia Market. See "Lease
Expirations--All Properties" for a detailed description of lease expirations
at each of the Company's Properties.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
------------ ------------------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
square feet (a) 905,949 25,910 5,672 137,744 163,407
% sq. ft. (b) 58.2% 1.7% 0.4% 8.9% 10.5%
annual rent (c) 18,103,340 656,456 133,333 3,724,922 4,239,711
psf (d) $19.98 $25.34 $23.51 $27.04 $25.95
tenants (e) 10 5 2 10 7
</TABLE>
2005 &
2002 2003 2004 beyond
------------ ------------------------ ------------
square feet (a) 64,395 84,134 28,794 126,477
% sq. ft. (b) 4.1% 5.4% 1.9% 8.1%
annual rent (c) 1,431,878 2,198,780 823,890 3,416,497
psf (d) $22.24 $26.13 $28.61 $27.01
tenants (e) 5 4 2 4
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-38
<PAGE>
The Fairfax County, Virginia Market
As of December 1996, there were approximately 62.4 million square feet of
office space in the Fairfax County, Virginia Market, 21.0 million square feet
of which are located in the Tysons Corner submarket, 13 million square feet
of which are located in the Reston/Herndon submarket and 3.3 million square
feet of which are located in the Rte. 28/Chantilly Submarket. According to
Grubb & Ellis, the Fairfax County, Virginia Market had an overall vacancy
rate of 6.7% as of December 1996 and the submarkets of Tysons Corner,
Reston/Herndon and Rte. 28/ Chantilly had vacancy rates of 5.9%, 5.9% and
14.7%, respectively as of such time. Grubb & Ellis also reports that Tysons
Corner, Reston/Herndon and Rte. 28/Chantilly submarkets experienced Net
Absorption of 1.6 million square feet, 486,000 square feet and 245,000 square
feet, respectively, for the year ended December 31, 1996.
The following chart describes Centerpointe I and II, Pending Acquisitions,
and each of the Company's Properties located in the Fairfax County, Virginia
Market.
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership
- ---------------------- ------------- --------------- --------- -------------
John Marshall I 1981 261,364 11 100%
E.J. Randolph 1983 164,677 11 100%
Northridge I 1988 124,319 6 100%
---------------
Total Properties 550,360
===============
Pending Acquisitions
- ----------------------
Centerpointe I 1988 204,481 11 100%
Centerpointe II 1990 204,481 11 100%
---------------
Total Properties 408,962
===============
The following chart sets forth Base Rents per square foot, Net Effective
Rents per square foot, and the occupancy rate, expressed as a percentage, as of
December 31, 1996, for Centerpointe I and II, Pending Acquisitions and for each
Property located in the Fairfax County, Virginia Market.
Net Occupancy
Property Base Rent Effective Rent Rate
-------------------------------------------- --------------- -----------
John Marshall I $18.25 $15.85 100%
E.J. Randolph 21.14 15.47 97%
Northridge I 25.96 19.34 100%
---------------- --------------- -----------
Total/Weighted Average $20.86 $16.52 99%
================ =============== ===========
Pending Acquisitions
----------------------------
Centerpointe I & II $16.26 $12.86 100%
S-39
<PAGE>
The following table sets forth lease expirations (in square feet) for
Centerpointe I and II, Pending Acquisitions, and the Properties in the
Fairfax County, Virginia Market. See "Lease Expirations--All Properties" for
a detailed description of lease expirations at each of the Company's
Properties.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
------------ ------------ ------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
Properties
- ---------------
Total
Properties square feet (a) 2,576 3,223 1,801 132,410 61,870
% sq. ft. (b) 0.5% 0.6% 0.3% 24.1% 11.2%
annual rent (c) 75,085 72,195 75,588 3,454,029 1,582,669
psf (d) $29.15 $22.40 $41.97 $26.09 $25.58
tenants (e) 2 1 1 3 6
Pending
Acquisitions
- ---------------
Centerpointe I square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
Centerpointe II square feet (a) 24,218 15,094 30,350 10,733 5,394
% sq. ft. (b) 11.8% 7.4% 14.8% 5.2% 2.6%
annual rent (c) 507,420 290,761 621,740 222,189 109,282
psf (d) $20.95 $19.26 $20.49 $20.70 $20.26
tenants (e) 3 4 3 2 1
------------ ------------ ------------ ------------------------
Total
Properties
and Pending
Acquisitions square feet (a) 26,794 18,317 32,151 143,143 67,264
% sq. ft. (b) 2.8% 1.9% 3.4% 14.9% 7.0%
annual rent (c) 582,505 362,956 697,328 3,676,218 1,691,952
psf (d) $21.74 $19.82 $21.69 $25.68 $25.15
tenants (e) 5 5 4 5 7
</TABLE>
<TABLE>
<CAPTION>
2005 &
2002 2003 2004 beyond
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Properties
- ---------------
Total
Properties square feet (a) 14,958 0 70,366 258,576
% sq. ft. (b) 2.7% 0.0% 12.8% 47.0%
annual rent (c) 315,959 0 1,691,534 6,660,918
psf (d) $21.12 $0.00 $24.04 $25.76
tenants (e) 2 0 3 1
Pending
Acquisitions
- ---------------
Centerpointe I square feet (a) 0 0 0 203,630
% sq. ft. (b) 0.0% 0.0% 0.0% 100.0%
annual rent (c) 0 0 0 4,245,686
psf (d) $0.00 $0.00 $0.00 $20.85
tenants (e) 0 0 0 1
Centerpointe II square feet (a) 27,159 0 0 91,018
% sq. ft. (b) 13.3% 0.0% 0.0% 44.5%
annual rent (c) 551,185 0 0 2,092,684
psf (d) $20.29 $0.00 $0.00 $22.99
tenants (e) 4 0 0 2
------------ ------------ ------------ ------------
Total
Properties
and Pending
Acquisitions square feet (a) 42,117 0 70,366 553,224
% sq. ft. (b) 4.4% 0.0% 7.3% 57.7%
annual rent (c) 867,143 0 1,691,534 12,999,287
psf (d) $20.59 $0.00 $24.04 $23.50
tenants (e) 6 0 3 4
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
Washington, D.C. Office Market
As of December 1996 there were approximately 96.6 million square feet of
office space in the Washington, D.C. Office Market, approximately 28 million
of which is located in the East End submarket. 1333 H Street, N.W. is located
in the East End submarket. According to Grubb & Ellis, the Washington, D.C.
Office Market had an overall vacancy rate of 10.6% as of December 1996, while
the East End submarket experienced a vacancy rate of 10.3% as of such time.
1333 H Street, N.W. 1333 H Street N.W. is an 11-story office property
comprising approximately 239,000 square feet, approximately 205,000 of which
was built in 1982. The Company owns a 100% fee interest in the Property.
As of December 31, 1996, the average annual Base Rent per square foot and
average annual Net Effective Rent per square foot for the 1333 H Street, N.W.
Property were $27.10 and $20.01, respectively. As of December 31, 1996, the
Property was approximately 90% leased.
The following table sets forth lease expirations (in square feet) for 1333
H Street.
<TABLE>
<CAPTION>
2005 &
1997 1998 1999 2000 2001 2002 2003 2004 beyond
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
square feet (a) 11,020 4,045 0 8,835 2,945 57,041 14,708 0 108,536
% sq. ft. (b) 4.6% 1.7% 0.0% 3.7% 1.2% 23.9% 6.2% 0.0% 45.5%
annual rent (c) 292,571 115,428 0 243,846 79,692 1,744,884 461,684 0 3,660,672
psf (d) $26.55 $28.54 $0.00 $27.60 $27.06 $30.59 $31.39 $0.00 $33.73
tenants (e) 4 3 0 3 1 1 1 0 2
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
S-40
<PAGE>
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
Suburban Chicago Office Market
As of December 31, 1996, there were approximately 60.3 million square feet
of office space in the Suburban Chicago Office Market. Approximately 21
million square feet of which is located in the East-West Corridor submarket,
approximately 12.5 million square feet of which is located in the North
Suburban submarket and approximately 10 million square feet of which is
located in the O'Hare submarket. The AT&T Plaza building and the Pending
Acquisition, Westbrook Corporate Center, are located in the East-West
Corridor submarket, the Tri-State International property is located in the
North Suburban submarket and Presidents Plaza is located in the O'Hare
Submarket. According to Grubb & Ellis the Suburban Chicago Office Market had
an overall vacancy rate of 11.2% as of December 31, 1996. The East-West
Corridor submarket, North Suburban submarket and O'Hare submarket had vacancy
rates of 9.8% 11.2% and 14.8%, respectively, for the same period. Grubb &
Ellis also reports that the East-West Corridor, North Suburban and O'Hare
submarkets experienced Net Absorption of 524,000 square feet, 58,000 square
feet and 242,000 square feet, respectively, for the year ended December 31,
1996.
The following chart describes the Westbrook Corporate Center, a Pending
Acquisition, and each of the Company's Properties located in the Suburban
Chicago Office Market.
<TABLE>
<CAPTION>
Year Built/ Rentable Area No. of Company's %
Property Renovated in Square Feet Stories Ownership
----------------------------------------- --------------- --------- -------------
<S> <C> <C> <C> <C>
AT&T Plaza 1984 225,318 8 100%
Tri-State International 1986 548,000 (a) 100%
Presidents Plaza 1980-1982 791,000 (b) 100%
---------------
Total Properties 1,564,318
===============
Pending Acquisition
----------------------------
Westbrook Corporate Center 1985-1996 1,106,000 (c) 100%
</TABLE>
(a) The Tri-State International complex consists of five three-to-five-story
buildings.
(b) Presidents Plaza consists of four connected 10- and 12-story office
buildings.
(c) Westbrook Corporate Center consists of five 10-story office buildings.
The following chart sets forth Base Rents per square foot, Net Effective
Rents per square foot, and the occupancy rate expressed as a percentage, as of
December 31, 1996, for each Property in the Suburban Chicago Office Market, as
well as the Westbrook Corporate Center, a Pending Acquisition.
Net Occupancy
Property Base Rent Effective Rent Rate
-------------------------------------------- --------------- -----------
AT&T Plaza $20.89 $14.22 100%
Tri-State International 22.92 16.00 74%(a)
Presidents Plaza 19.32 12.12 90%
---------------- --------------- -----------
Total/Weighted Average $20.81 $13.78 86%
================ =============== ===========
Pending Acquisition
----------------------------
Westbrook Corporate Center $23.75 $17.62 90%
(a) The Company is currently negotiating leases that, if signed, would
increase the occupancy rate of this Property to 85%. No assurances can be
given that these leases will be signed.
S-41
<PAGE>
The following chart sets forth lease expirations (in square feet) for
Westbrook Corporate Center, a Pending Acquisition, and the Company's
Properties located in the Suburban Chicago Office Market. See "Lease
Expirations--All Properties" for a detailed description of lease expirations
at each of the Company's Properties.
<TABLE>
<CAPTION>
Properties 1997 1998 1999 2000 2001
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total
Properties square feet (a) 185,270 84,556 139,618 130,898 148,772
% sq. ft (b) 11.8% 5.4% 8.9% 8.4% 9.5%
annual rent (c) 3,999,836 1,787,574 3,464,805 2,878,835 3,754,977
psf (d) $21.59 $21.14 $24.82 $21.99 $25.24
tenants (e) 24 17 18 15 16
Pending Acquisition
-------------------------------
Westbrook
Corporate
Center square feet (a) 66,228 106,823 97,347 256,406 204,350
% sq. ft. (b) 6.0% 9.7% 8.8% 23.2% 18.5%
annual rent (c) 1,747,948 2,757,545 2,765,629 8,023,751 5,558,367
psf (d) $26.39 $25.81 $28.41 $31.29 $27.20
tenants (e) 12 14 15 19 18
--------- --------- --------- --------- ---------
Total
Properties
and
Pending
Acquisitions square feet (a) 251,498 191,379 236,965 387,304 353,122
% sq. ft. (b) 9.4% 7.2% 8.9% 14.5% 13.2%
annual rent (c) 5,747,784 4,545,119 6,230,434 10,902,586 9,313,345
psf (d) $22.85 $23.75 $26.29 $28.15 $26.37
tenants (e) 36 31 33 34 34
</TABLE>
2005 &
Properties 2002 2003 2004 beyond
Total
Properties square feet (a) 46,748 100,470 62,734 440,895
% sq. ft (b) 3.0% 6.4% 4.0% 28.2%
annual rent (c) 1,220,090 2,534,563 1,601,557 12,923,801
psf (d) $26.10 $25.23 $25.53 $29.31
tenants (e) 5 6 3 10
Pending Acquisition
-------------------------------
Westbrook
Corporate
Center square feet (a) 88,927 101,787 12,275 60,314
% sq. ft. (b) 8.0% 9.2% 1.1% 5.5%
annual rent (c) 2,484,161 2,501,276 396,525 1,544,220
psf (d) $27.93 $24.57 $32.30 $25.60
tenants (e) 6 5 2 8
--------- --------- ------- ---------
Total
Properties
and
Pending
Acquisitions square feet (a) 135,675 202,257 75,009 501,209
% sq. ft. (b) 5.1% 7.6% 2.8% 18.8%
annual rent (c) 3,704,251 5,035,839 1,998,081 14,468,021
psf (d) $27.30 $24.90 $26.64 $28.87
tenants (e) 11 11 5 18
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
The Suburban Philadelphia Office Market
As of December 1996 there were approximately 35.2 million square feet of
office space in the Suburban Philadelphia Office Market. According to Grubb &
Ellis, the entire Suburban Philadelphia Office Market had a vacancy rate of
11.5% in December 1996.
One, Two, Three and Five Westlakes Drive are located in the Suburban
Philadelphia Office Market. The average Base Rent per square foot and the
average annual Net Effective Rent per square foot for the four Properties
were $20.40 and $15.86, respectively, as of December 31, 1996.
Westlakes Office Park. Each building in the Westlakes Office Park is a
three-story office building. These buildings were constructed between 1988
and 1990. Collectively, these buildings contain an aggregate of approximately
444,000 square feet. As of December 31, 1996, these buildings were
approximately 98% leased. The Company has entered into a contract to sell the
Westlakes Office Park, the consummation of which is subject to numerous
closing conditions, including, but not limited to, satisfactory completion of
the purchaser's due diligence. At the Company's option, the transaction may
be structured as a like-kind exchange.
The following table sets forth lease expirations (in square feet) for the
Company's Properties in the Suburban Philadelphia Office Market. See "Lease
Expirations--All Properties" for a detailed description of lease expirations
at each of the Company's Properties.
<TABLE>
<CAPTION>
2005 &
1997 1998 1999 2000 2001 2002 2003 2004 beyond
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
square feet (a) 31,170 23,558 53,467 180,951 24,552 27,572 56,557 0 40,852
% sq. ft. (b) 7.0% 5.3% 12.0% 40.8% 5.5% 6.2% 12.7% 0.0% 9.2%
annual rent (c) 622,385 505,948 1,159,030 4,298,994 573,093 634,975 1,315,506 0 866,432
psf (d) $19.97 $21.48 $21.68 $23.76 $23.34 $23.03 $23.26 $0.00 $21.21
tenants (e) 7 5 7 9 7 2 2 0 3
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized 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.
S-42
<PAGE>
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
The West Los Angeles Office Market
As of December 1996, there were approximately 33.6 million square feet of
office space in the West Los Angeles Office Market. The Westwood submarket,
the location of 10960 Wilshire Boulevard and the Pending Acquisition 10880
Wilshire Boulevard, had approximately 2.8 million square feet of office
space. According to CB Commercial, the West Los Angeles Office Market had an
overall vacancy rate of 11.4% as of December 31, 1996, and the Westwood
submarket had a vacancy rate of 9.1% at such time.
10960 Wilshire Boulevard. 10960 Wilshire Boulevard consists of
approximately 544,000 square feet in a 23- story office building. The
Property was built in 1971 and has undergone approximately $39 million of
capital improvements since 1992.
As of December 31, 1996, the average annual Base Rent per square foot and
average annual Net Effective Rent per square foot for 10960 Wilshire
Boulevard were $24.00 and $18.53, respectively. As of December 31, 1996 the
Property was approximately 89% leased.
10880 Wilshire Boulevard. 10880 Wilshire Boulevard consists of
approximately 531,000 square feet in a 23- story office building. The
Property was built in 1970 and has undergone approximately $34 million of
capital improvements since 1992.
As of December 31, 1996, the average annual Base Rent per square foot and
average annual Net Effective Rent per square foot for 10880 Wilshire
Boulevard were $20.98 and $16.39, respectively. As of December 31, 1996, the
Property was approximately 85% leased.
The following table sets forth lease expirations (in square feet) for
10960 Wilshire Boulevard and 10880 Wilshire Boulevard, a Pending Acquisition.
<TABLE>
<CAPTION>
Property 1997 1998 1999 2000 2001
- --------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
10960 Wilshire
Boulevard square feet (a) 23,922 3,030 9,126 162,021 20,761
% sq. ft. (b) 4.4% 0.6% 1.7% 29.8% 3.8%
annual rent (c) 585,840 88,608 262,561 4,561,300 598,825
psf (d) $24.49 $29.24 $28.77 $28.15 $28.84
tenants (e) 1 1 3 14 3
Pending
Acquisition
- ---------------
10880 Wilshire
Boulevard square feet (a) 0 7,167 22,814 49,900 119,702
% sq. ft. (b) 0.0% 1.3% 4.3% 9.4% 22.5%
annual rent (c) 0 204,103 616,555 1,284,960 3,533,553
psf (d) $0.0 $28.48 $27.03 $25.75 $29.52
tenants (e) 0 2 5 10 16
Total Property
and
Pending
Acquisition square feet (a) 23,922 10,197 31,940 211,921 140,463
% sq. ft (b) 2.2% 0.9% 3.0% 19.7% 13.1%
annual rent (c) 585,840 292,711 879,116 5,846,260 4,132,377
psf (d) $24.49 $28.71 $27.52 $27.59 $29.42
tenants (e) 1 3 8 24 19
</TABLE>
2005 &
Property 2002 2003 2004 beyond
- --------------- --------- --------- --------- ---------
10960 Wilshire
Boulevard square feet (a) 52,382 34,801 10,658 167,586
% sq. ft. (b) 9.6% 6.4% 2.0% 30.8%
annual rent (c) 1,809,183 1,134,632 350,807 5,664,221
psf (d) $34.54 $32.60 $32.91 $33.80
tenants (e) 3 3 1 4
Pending
Acquisition
- ---------------
10880 Wilshire
Boulevard square feet (a) 150,813 0 83,049 17,566
% sq. ft. (b) 28.4% 0.0% 15.6% 3.3%
annual rent (c) 4,572,705 0 2,691,079 592,427
psf (d) $30.32 $0.00 $32.40 $33.73
tenants (e) 7 0 2 1
Total Property
and
Pending
Acquisition square feet (a) 203,195 34,801 93,707 185,152
% sq. ft (b) 18.9% 3.2% 8.7% 17.2%
annual rent (c) 6,381,888 1,134,632 3,041,886 6,256,648
psf (d) $31.41 $32.60 $32.46 $33.79
tenants (e) 10 3 3 5
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases plus
1996 tenant payments on account of real estate tax and operating expense
escalations.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-43
<PAGE>
Silicon Valley Office/R&D Market
Shoreline Technology Park and Lake Marriott Business Park are located in
the Silicon Valley Office/R&D Market. According to Cornish & Carey, the
entire Silicon Valley Office/R&D Market, which consists of approximately 129
million rentable square feet, had an overall vacancy rate of 5.3% as of
December 31, 1996. Cornish & Carey also reports that the Silicon Valley
Office/R&D Market experienced Net Absorption of approximately 1.7 million
square feet in 1996.
Shoreline Technology Park. Shoreline Technology Park consists of twelve
office buildings totaling approximately 727,000 rentable square feet. The
Property is located in Mountain View, California and was constructed between
1985 and 1991. The Company owns a 100% fee interest in the Property. As of
December 31, 1996, the Property was 100% leased.
Lake Marriott Business Park. Lake Marriott Business Park consists of seven
office buildings totaling approximately 400,000 rentable square feet. The
Property is located in Santa Clara, California and was constructed in 1981.
The Company owns a 100% fee interest in the Property. As of December 31,
1996, the Property was 100% leased.
Shoreline Technology Park and substantially all of the Lake Marriott
Business Park are leased pursuant to triple net leases which include periodic
increases in net rent. Net rent, and net rent on a straight-line basis taking
into effect rent increases, for Shoreline Technology Park were $17.84 and
$18.77, respectively, and for Lake Marriott Business Park were $9.80 and $10.78,
respectively.
The following table sets forth lease expirations (in square feet) for both
of the Company's Properties in the Silicon Valley Office/R&D Market.
<TABLE>
<CAPTION>
2005 &
1997 1998 1999 2000 2001 2002 2003 2004 beyond
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
square feet (a) 60,548 9,465 24,548 509,320 205,932 0 0 0 314,997
% sq. ft. (b) 5.4% 0.8% 2.2% 45.2% 18.3% 0% 0% 0% 28.0%
annual rent (c) 938,578 133,634 241,383 7,991,481 3,554,326 0 0 0 5,967,949
psf (d) $15.50 $14.12 $9.83 $15.69 $17.26 $0.00 $0.00 $0.00 $18.95
tenants (e) 2 2 3 7 1 0 0 0 2
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring net rental income represented by such leases.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-44
<PAGE>
Lease Expirations--All Properties and Pending Acquisitions
The following tables set forth lease expirations (in square feet) for each
of the Company's Properties and Pending Acquisitions by market area.
<TABLE>
<CAPTION>
Lease Expiration--All Markets
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Downtown Boston square feet (a) 403,735 408,357 443,870 408,509 723,343
% sq. ft. (b) 10.0% 10.1% 11.0% 10.1% 17.9%
annual rent (c) 9,668,253 12,361,782 12,045,829 10,236,753 22,730,854
psf (d) $23.95 $30.27 $27.14 $25.06 $31.42
tenants (e) 71 64 65 66 43
Suburban Boston square feet (a) 407,248 204,784 187,821 190,127 177,738
% sq. ft (b) 20.9% 10.5% 9.6% 9.8% 9.1%
annual rent (c) 8,125,838 4,268,136 3,482,584 4,194,448 4,126,630
psf (d) $19.95 $20.84 $18.54 $22.06 $23.22
tenants (e) 51 38 28 30 32
Cambridge square feet (a) 0 3,499 1,411 6,320 315,964
% sq. ft (b) 0.0% 0.7% 0.3% 1.3% 66.6%
annual rent (c) 0 127,832 31,606 83,269 8,165,274
psf (d) $0.00 $36.53 $22.40 $13.18 $25.84
tenants (e) 0 1 1 1 4
Central
Perimeter
Atlanta square feet (a) 302,600 344,306 680,607 339,519 804,125
% sq. ft (b) 9.2% 10.4% 20.6% 10.3% 24.3%
annual rent (c) 6,023,929 5,690,219 13,038,907 6,992,412 14,180,418
psf (d) $19.91 $16.53 $19.16 $20.60 $17.63
tenants (e) 59 53 64 33 37
Arlington
County, VA square feet (a) 905,949 25,910 5,672 137,744 163,407
% sq. ft (b) 58.2% 1.7% 0.4% 8.9% 10.5%
annual rent (c) 18,103,340 656,456 133,333 3,724,928 4,239,711
psf (d) $19.98 $25.34 $23.51 $27.04 $25.95
tenants (e) 10 5 2 10 7
Fairfax County,
VA square feet (a) 26,794 18,317 32,151 143,143 67,264
% sq. ft (b) 2.8% 1.9% 3.4% 14.9% 7.0%
annual rent (c) 582,505 362,956 697,328 3,676,218 1,691,952
psf (d) $21.74 $19.82 $21.69 $25.68 $25.15
tenants (e) 5 5 4 5 7
Washington, D.C square feet (a) 11,020 4,045 0 8,835 2,945
% sq. ft (b) 4.6% 1.7% 0.0% 3.7% 1.2%
annual rent (c) 292,571 115,428 0 243,846 79,692
psf (d) $26.55 $28.54 $0.00 $27.60 $27.06
tenants (e) 4 3 0 3 1
Suburban
Chicago square feet (a) 251,498 191,379 236,965 387,304 353,122
% sq. ft (b) 9.4% 7.2% 8.9% 14.5% 13.2%
annual rent (c) 5,747,784 4,545,119 6,230,434 10,902,586 9,313,345
psf (d) $22.85 $23.75 $26.29 $28.15 $26.37
tenants (e) 36 31 33 34 34
Suburban
Philadelphia square feet (a) 31,170 23,558 53,467 180,951 24,552
% sq. ft (b) 7.0% 5.3% 12.0% 40.8% 5.5%
annual rent (c) 622,385 505,948 1,159,030 4,298,994 573,093
psf (d) $19.97 $21.48 $21.68 $23.76 $23.34
tenants (e) 7 51 7 9 7
West Los
Angeles square feet (a) 23,922 10,197 31,940 211,921 140,463
% sq. ft (b) 2.2% 0.9% 3.0% 19.7% 13.1%
annual rent (c) 585,840 292,711 879,116 5,846,260 4,132,377
psf (d) $24.49 $28.71 $27.52 $27.59 $29.42
tenants (e) 1 3 8 24 19
Silicon Valley square feet (a) 60,548 9,465 24,548 509,320 205,932
% sq. ft (b) 5.4% 0.8% 2.2% 45.2% 18.3%
annual rent (c) 938,578 133,634 241,383 7,991,481 3,554,326
psf (d) $15.50 $14.12 $9.83 $15.69 $17.26
tenants (e) 2 2 3 7 1
----------- ----------- ----------- ----------- -----------
Total
Properties square feet (a) 2,424,484 1,243,817 1,698,452 2,523,693 2,978,855
% sq. ft (b) 13.6% 7.0% 9.5% 14.2% 16.7%
annual rent (c) 50,691,022 29,060,220 37,939,551 58,191,190 72,787,672
psf (d) $20.91 $23.36 $22.34 $23.06 $24.43
tenants (e) 246 210 215 222 192
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Downtown Boston square feet (a) 513,007 171,941 134,147 685,647
% sq. ft. (b) 12.7% 4.3% 3.3% 17.0%
annual rent (c) 16,523,017 4,925,273 4,064,996 22,729,697
psf (d) $32.21 $28.65 $30.30 $33.15
tenants (e) 21 8 11 18
Suburban Boston square feet (a) 77,740 44,457 97,400 497,760
% sq. ft (b) 4.0% 2.3% 5.0% 25.6%
annual rent (c) 2,099,918 1,064,518 2,093,856 11,093,598
psf (d) $27.01 $23.94 $21.50 $22.29
tenants (e) 12 3 4 8
Cambridge square feet (a) 107,667 28,000 0 0
% sq. ft (b) 22.7% 5.9% 0.0% 0.0%
annual rent (c) 2,480,979 709,712 0 0
psf (d) $23.04 $25.35 $0.00 $0.00
tenants (e) 2 1 0 0
Central
Perimeter
Atlanta square feet (a) 105,606 13,916 223,059 386,990
% sq. ft (b) 3.2% 0.4% 6.8% 11.7%
annual rent (c) 2,586,065 281,171 981,460 9,429,272
psf (d) $24.49 $20.20 $4.40 $24.37
tenants (e) 7 2 1 4
Arlington
County, VA square feet (a) 64,395 84,134 28,794 126,477
% sq. ft (b) 4.1% 5.4% 1.9% 8.1%
annual rent (c) 1,431,878 2,198,780 823,890 3,416,497
psf (d) $22.24 $26.13 $28.61 $27.01
tenants (e) 5 4 2 4
Fairfax County,
VA square feet (a) 42,117 0 70,366 553,224
% sq. ft (b) 4.4% 0.0% 7.3% 57.7%
annual rent (c) 867,143 0 1,691,534 12,999,287
psf (d) $20.59 $0.00 $24.04 $23.50
tenants (e) 6 0 3 4
Washington, D.C square feet (a) 57,041 14,708 0 108,536
% sq. ft (b) 23.9% 6.2% 0.0% 45.5%
annual rent (c) 1,744,884 461,684 0 3,660,672
psf (d) $30.59 $31.39 $0.00 $33.73
tenants (e) 1 1 0 2
Suburban
Chicago square feet (a) 135,675 202,257 75,009 501,209
% sq. ft (b) 5.1% 7.6% 2.8% 18.8%
annual rent (c) 3,704,251 5,035,839 1,998,081 14,468,021
psf (d) $27.30 $24.90 $26.64 $28.87
tenants (e) 11 11 5 18
Suburban
Philadelphia square feet (a) 27,572 56,557 0 40,852
% sq. ft (b) 6.2% 12.7% 0.0% 9.2%
annual rent (c) 634,975 1,315,506 0 866,432
psf (d) $23.03 $23.26 $0.00 $21.21
tenants (e) 2 2 0 3
West Los
Angeles square feet (a) 203,195 34,801 93,707 185,152
% sq. ft (b) 18.9% 3.2% 8.7% 17.2%
annual rent (c) 6,381,888 1,134,632 3,041,886 6,256,648
psf (d) $31.41 $32.60 $32.46 $33.79
tenants (e) 10 3 3 5
Silicon Valley square feet (a) 0 0 0 314,997
% sq. ft (b) 0.0% 0.0% 0.0% 28.0%
annual rent (c) 0 0 0 5,967,949
psf (d) $0.00 $0.00 $0.00 $18.95
tenants (e) 0 0 0 2
----------- ----------- ----------- -----------
Total
Properties square feet (a) 1,334,015 650,771 722,482 3,400,844
% sq. ft (b) 7.5% 3.7% 4.1% 19.1%
annual rent (c) 38,455,000 17,127,115 14,695,703 90,888,073
psf (d) $28.83 $26.32 $20.34 $26.73
tenants (e) 77 35 29 68
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-45
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Downtown Boston Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
175 Federal
Street square feet (a) 9,619 4,775 0 33,484 25,290
% sq. ft. (b) 4.7% 2.3% 0.0% 16.5% 12.4%
annual rent (c) 223,958 195,627 0 826,525 663,919
psf (d) $23.28 $40.97 $0.00 $24.68 $26.25
tenants (e) 3 1 0 7 8
Center Plaza square feet (a) 85,760 92,475 36,643 96,244 50,791
% sq. ft (b) 13.2% 14.2% 5.6% 14.8% 7.8%
annual rent (c) 1,976,095 2,239,103 823,162 2,515,817 1,366,597
psf (d) $23.04 $24.21 $22.46 $26.14 $26.91
tenants (e) 12 7 9 12 8
One Post Office
Sq. square feet (a) 38,051 32,702 32,302 33,536 446,892
% sq. ft (b) 5.0% 4.3% 4.2% 4.4% 58.5%
annual rent (c) 1,093,862 905,686 953,178 1,026,925 13,453,695
psf (d) $28.75 $27.70 $29.51 $30.62 $30.11
tenants (e) 8 6 11 6 4
South Station
(g) square feet (a) 1,586 11,541 1,401 2,093 105
% sq. ft (b) 1.1% 7.8% 0.9% 1.4% 0.1%
annual rent (c) 174,128 1,109,103 399,092 286,215 21,078
psf (d) $109.79 $96.10 $284.86 $136.75 $200.74
tenants (e) 4 2 4 4 1
Rowes Wharf square feet (a) 73,034 53,057 40,602 15,569 10,356
% sq. ft (b) 21.2% 15.4% 11.8% 4.5% 3.0%
annual rent (c) 1,924,484 1,437,340 1,269,229 513,086 308,983
psf (d) $26.35 $27.09 $31.26 $32.96 $29.84
tenants (e) 8 9 7 3 2
150 Federal (f) square feet (a) 14,138 3,635 78,668 44,562 13,996
% sq. ft (b) 2.7% 0.7% 14.8% 8.4% 2.6%
annual rent (c) 330,912 122,024 1,629,766 1,510,974 360,211
psf (d) $23.41 $33.57 $20.72 $33.91 $25.74
tenants (e) 2 3 4 7 3
Russia Wharf square feet (a) 56,638 34,028 65,854 84,195 14,895
% sq. ft (b) 18.2% 10.9% 21.2% 27.1% 4.8%
annual rent (c) 853,672 554,518 998,859 1,357,632 258,532
psf (d) $15.07 $16.30 $15.17 $16.12 $17.36
tenants (e) 13 7 6 9 4
75 Federal square feet (a) 23,182 43,757 53,476 39,339 20,603
% sq. ft (b) 9.2% 17.3% 21.1% 15.5% 8.1%
annual rent (c) 567,832 1,240,157 1,703,688 898,321 400,431
psf (d) $24.49 $28.34 $31.86 $22.84 $19.44
tenants (e) 6 11 6 5 3
101 Federal square feet (a) 54,725 116,792 95,071 6,475 116,866
% sq. ft (b) 9.8% 20.9% 17.0% 1.2% 20.9%
annual rent (c) 1,681,207 4,253,126 3,612,460 208,090 5,427,680
psf (d) $30.72 $36.42 $38.00 $32.14 $46.44
tenants (e) 5 11 8 3 5
Two Oliver square feet (a) 47,002 15,595 39,853 53,012 23,549
% sq. ft (b) 17.4% 5.8% 14.8% 19.6% 8.7%
annual rent (c) 842,103 305,100 656,395 1,093,167 469,728
psf (d) $17.92 $19.56 $16.47 $20.62 $19.95
tenants (e) 10 7 10 10 5
----------- ----------- ----------- ----------- -----------
Total
Properties square feet (a) 403,735 408,357 443,870 408,509 723,343
% sq. ft (b) 10.0% 10.1% 11.0% 10.1% 17.9%
annual rent (c) 9,668,253 12,361,782 12,045,829 10,236,753 22,730,854
psf (d) $23.95 $30.27 $27.14 $25.06 $31.42
tenants (e) 71 64 65 66 43
</TABLE>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- -----------
175 Federal
Street square feet (a) 66,306 0 6,793 45,482
% sq. ft. (b) 32.6% 0.0% 3.3% 22.4%
annual rent (c) 2,300,303 0 181,101 1,461,168
psf (d) $34.69 $0.00 $26.66 $32.13
tenants (e) 2 0 1 1
Center Plaza square feet (a) 22,500 128,201 40,035 57,235
% sq. ft (b) 3.5% 19.7% 6.2% 8.8%
annual rent (c) 744,921 3,668,509 1,194,472 1,689,255
psf (d) $33.11 $28.62 $29.84 $29.51
tenants (e) 5 2 4 6
One Post Office
Sq. square feet (a) 0 8,673 0 164,434
% sq. ft (b) 0.0% 1.1% 0.0% 21.5%
annual rent (c) 0 322,809 0 4,446,925
psf (d) $0.00 $37.22 $0.00 $27.04
tenants (e) 0 1 0 2
South Station
(g) square feet (a) 125,999 500 2,410 725
% sq. ft (b) 84.8% 0.3% 1.6% 0.5%
annual rent (c) 4,460,478 82,300 394,562 156,310
psf (d) $35.40 $164.60 $163.72 $215.60
tenants (e) 5 1 3 1
Rowes Wharf square feet (a) 75,662 0 5,280 68,275
% sq. ft (b) 22.0% 0.0% 1.5% 19.8%
annual rent (c) 3,006,549 0 116,096 2,457,900
psf (d) $39.74 $0.00 $21.99 $36.00
tenants (e) 2 0 1 1
150 Federal (f) square feet (a) 183,239 0 0 186,437
% sq. ft (b) 34.6% 0.0% 0.0% 35.2%
annual rent (c) 5,186,658 0 0 7,317,652
psf (d) $28.31 $0.00 $0.00 $39.25
tenants (e) 2 0 0 1
Russia Wharf square feet (a) 11,725 5,782 1,835 30,773
% sq. ft (b) 3.8% 1.9% 0.6% 9.9%
annual rent (c) 159,265 107,372 26,983 584,643
psf (d) $13.58 $18.57 $14.70 $19.00
tenants (e) 2 1 1 1
75 Federal square feet (a) 0 22,630 0 0
% sq. ft (b) 0.0% 8.9% 0.0% 0.0%
annual rent (c) 0 636,140 0 0
psf (d) $0.00 $28.11 $0.00 $0.00
tenants (e) 0 2 0 0
101 Federal square feet (a) 19,310 0 77,794 64,081
% sq. ft (b) 3.4% 0.0% 13.9% 11.4%
annual rent (c) 502,060 0 2,151,782 2,477,225
psf (d) $26.00 $0.00 $27.66 $38.66
tenants (e) 1 0 1 3
Two Oliver square feet (a) 8,266 6,155 0 68,205
% sq. ft (b) 3.1% 2.3% 0.0% 25.3%
annual rent (c) 162,783 108,143 0 2,138,619
psf (d) $19.69 $17.57 $0.00 $31.36
tenants (e) 2 1 0 2
----------- ----------- ----------- -----------
Total
Properties square feet (a) 513,007 171,941 134,147 685,647
% sq. ft (b) 12.7% 4.3% 3.3% 17.0%
annual rent (c) 16,523,017 4,925,273 4,064,996 22,729,697
psf (d) $32.21 $28.65 $30.30 $33.15
tenants (e) 21 8 11 18
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
(f) Lease expirations reflect retail tenants only for 1998.
(g) Lease expirations reflect retail tenants only for 1997 through 2001 and
2003 and beyond.
S-46
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Greater Boston Suburban Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- -------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
65 William Street square feet (a) 2,607 1,103 3,416 4,326 8,603
Building One % sq. ft (b) 8.8% 3.7% 11.6% 14.7% 29.2%
annual rent (c) 67,625 25,204 84,712 121,140 221,601
psf (d) $25.94 $22.85 $24.80 $28.00 $25.76
tenants (e) 4 1 2 2 3
60 William Street square feet (a) 0 6,932 2,348 23,715 9,189
Building Two % sq. ft (b) 0.0% 13.1% 4.4% 44.7% 17.3%
annual rent (c) 0 163,932 54,802 530,003 247,242
psf (d) $0.00 $23.65 $23.34 $22.35 $26.91
tenants (e) 0 2 1 3 3
55 William Street square feet (a) 18,020 10,413 2,394 0 7,857
Building Three % sq. ft (b) 32.7% 18.9% 4.3% 0.0% 14.3%
annual rent (c) 433,430 242,077 62,163 0 215,446
psf (d) $24.05 $23.25 $25.97 $0.00 $27.42
tenants (e) 4 2 2 0 2
40 William Street square feet (a) 29,453 0 2,453 0 10,529
Building Four % sq. ft (b) 39.7% 0.0% 3.3% 0.0% 14.2%
annual rent (c) 697,434 0 67,482 0 273,769
psf (d) $23.68 $0.00 $27.51 $0.00 $26.00
tenants (e) 5 0 1 0 2
20 William Street square feet (a) 17,517 31,500 8,414 32,647 10,723
Building Five % sq. ft (b) 13.6% 24.4% 6.5% 25.3% 8.3%
annual rent (c) 405,266 767,176 196,237 842,870 304,551
psf (d) $23.14 $24.35 $23.32 $25.82 $28.40
tenants (e) 8 12 3 8 4
45 William Street square feet (a) 2,353 0 0 0 0
Building Six % sq. ft (b) 1.5% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 47,391 0 0 0 0
psf (d) $20.14 $0.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0 0
80 William Street square feet (a) 0 0 0 0 0
Building Seven % sq. ft (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
100 William Street square feet (a) 0 0 0 0 0
Building Eight % sq. ft (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
New England square feet (a) 311,360 151,336 104,093 119,364 96,996
Executive Park % sq. ft (b) 38.1% 18.5% 12.7% 14.6% 11.9%
annual rent (c) 5,857,644 2,998,383 2,136,520 2,489,371 1,871,803
psf (d) $18.81 $19.81 $20.53 $20.86 $19.30
tenants (e) 26 20 12 14 17
Westwood square feet (a) 25,938 3,500 24,203 10,075 33,841
% sq. ft (b) 16.2% 2.2% 15.1% 6.3% 21.1%
annual rent (c) 617,048 71,365 518,192 211,064 992,218
psf (d) $23.79 $20.39 $21.41 $20.95 $29.32
tenants (e) 3 1 6 3 1
Crosby square feet (a) 0 0 40,500 0 0
% sq. ft (b) 0.0% 0.0% 12.1% 0.0% 0.0%
annual rent (c) 0 0 362,475 0 0
psf (d) $0.00 $0.00 $8.95 $0.00 $0.00
tenants (e) 0 0 1 0 0
----------- ----------- ----------- ----------- -----------
Total Properties square feet (a) 407,248 204,784 187,821 190,127 177,738
% sq. ft (b) 20.9% 10.5% 9.6% 9.8% 9.1%
annual rent (c) 8,125,838 4,268,136 3,482,584 4,194,448 4,126,630
psf (d) $19.95 $20.84 $18.54 $22.06 $23.22
tenants (e) 51 38 28 30 32
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- -------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
65 William Street square feet (a) 5,473 0 0 661
Building One % sq. ft (b) 18.6% 0.0% 0.0% 2.2%
annual rent (c) 135,362 0 0 16,856
psf (d) $24.73 $0.00 $0.00 $25.50
tenants (e) 3 0 0 1
60 William Street square feet (a) 0 11,525 0 0
Building Two % sq. ft (b) 0.0% 21.7% 0.0% 0.0%
annual rent (c) 0 287,816 0 0
psf (d) $0.00 $24.97 $0.00 $0.00
tenants (e) 0 1 0 0
55 William Street square feet (a) 0 0 12,470 0
Building Three % sq. ft (b) 0.0% 0.0% 22.6% 0.0%
annual rent (c) 0 0 310,503 0
psf (d) $0.00 $0.00 $24.90 $0.00
tenants (e) 0 0 1 0
40 William Street square feet (a) 31,125 0 0 0
Building Four % sq. ft (b) 42.0% 0.0% 0.0% 0.0%
annual rent (c) 853,866 0 0 0
psf (d) $27.43 $0.00 $0.00 $0.00
tenants (e) 3 0 0 0
20 William Street square feet (a) 29,016 0 0 0
Building Five % sq. ft (b) 22.5% 0.0% 0.0% 0.0%
annual rent (c) 777,341 0 0 0
psf (d) $26.79 $0.00 $0.00 $0.00
tenants (e) 4 0 0 0
45 William Street square feet (a) 10,847 15,001 21,700 106,909
Building Six % sq. ft (b) 7.0% 9.6% 13.7% 67.5%
annual rent (c) 303,933 397,527 540,330 2,802,344
psf (d) $28.02 $26.50 $24.90 $26.21
tenants (e) 1 1 1 2
80 William Street square feet (a) 0 0 0 71,324
Building Seven % sq. ft (b) 0.0% 0.0% 0.0% 100.0%
annual rent (c) 0 0 0 2,241,713
psf (d) $0.00 $0.00 $0.00 $31.43
tenants (e) 0 0 0 1
100 William Street square feet (a) 0 0 0 62,952
Building Eight % sq. ft (b) 0.0% 0.0% 0.0% 100.0%
annual rent (c) 0 0 0 1,794,132
psf (d) $0.00 $0.00 $0.00 $28.50
tenants (e) 0 0 0 1
New England square feet (a) 1,279 17,931 258 0
Executive Park % sq. ft (b) 0.2% 2.2% 0.0% 0.0%
annual rent (c) 29,417 379,176 8,772 0
psf (d) $23.00 $21.15 $34.00 $0.00
tenants (e) 1 1 1 0
Westwood square feet (a) 0 0 62,972 0
% sq. ft (b) 0.0% 0.0% 39.3% 0.0%
annual rent (c) 0 0 1,234,251 0
psf (d) $0.00 $0.00 $19.60 $0.00
tenants (e) 0 0 1 0
Crosby square feet (a) 0 0 0 255,914
% sq. ft (b) 0.0% 0.0% 0.0% 76.2%
annual rent (c) 0 0 0 4,238,553
psf (d) $0.00 $0.00 $0.00 $16.56
tenants (e) 0 0 0 3
----------- ----------- ----------- -----------
Total Properties square feet (a) 77,740 44,457 97,400 497,760
% sq. ft (b) 4.0% 2.3% 5.0% 25.6%
annual rent (c) 2,099,918 1,064,518 2,093,856 11,093,598
psf (d) $27.01 $23.94 $21.50 $22.29
tenants (e) 12 3 4 8
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases plus
1996 tenant payments on account of real estate tax and operating expense
escalations, except leases with CPI increases in lieu of expense
recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-47
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Cambridge Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
One Canal Park square feet (a) 0 3,499 1,411 0 87,244
% sq. ft (b) 0.0% 3.5% 1.4% 0.0% 87.0%
annual rent (c) 0 127,832 31,606 0 2,034,760
psf (d) $0.00 $36.53 $22.40 $0.00 $23.32
tenants (e) 0 1 1 0 2
Ten Canal Park square feet (a) 0 0 0 0 0
% sq. ft (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
245 First
Street square feet (a) 0 0 0 6,320 228,720
% sq. ft (b) 0.0% 0.0% 0.0% 2.4% 87.0%
annual rent (c) 0 0 0 83,269 6,130,514
psf (d) $0.00 $0.00 $0.00 $13.18 $26.80
tenants (e) 0 0 0 1 2
----------- ----------- ----------- ----------- -----------
Total
Properties square feet 0 3,499 1,411 6,320 315,964
% sq. ft 0.0% 0.7% 0.3% 1.3% 66.6%
Annual rent 0 127,832 31,606 83,269 8,165,274
psf (d) $0.00 $36.53 $22.40 $13.18 $25.84
Tenants 0 1 1 1 4
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
One Canal Park square feet (a) 5,758 0 0 0
% sq. ft (b) 5.7% 0.0% 0.0% 0.0%
annual rent (c) 172,740 0 0 0
psf (d) $30.00 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0
Ten Canal Park square feet (a) 101,909 0 0 0
% sq. ft (b) 38.7% 0.0% 0.0% 0.0%
annual rent (c) 2,308,239 0 0 0
psf (d) $22.65 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0
245 First
Street square feet (a) 0 28,000 0 0
% sq. ft (b) 0.0% 10.6% 0.0% 0.0%
annual rent (c) 0 709,712 0 0
psf (d) $0.00 $25.35 $0.00 $0.00
tenants (e) 0 1 0 0
----------- ----------- ----------- -----------
Total
Properties square feet 107,667 28,000 0 0
% sq. ft 22.7% 5.9% 0.0% 0.0%
Annual rent 2,480,979 709,712 0 0
psf (d) $23.04 $25.35 $0.00 $0.00
Tenants 2 1 0 0
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized base rental income represented by such leases in the year of
expiration plus 1996 tenant payments on account of real estate tax and
operating expense escalations, except leases with CPI increases in lieu
of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-48
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Central Perimeter Atlanta Office Market
----------------------------------------------------------------
Property 1997 1998 1999 2000 2001
- -------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
North Terraces square feet (a) 38,343 11,825 83,535 178,212 131,275
% sq. ft. (b) 7.8% 2.4% 16.9% 36.1% 26.6%
annual rent (c 780,688 277,749 1,658,281 3,907,185 3,370,263
psf (d) $20.36 $23.49 $19.85 $21.92 $25.67
tenants (e) 9 5 9 12 12
South Terraces square feet (a) 157,987 93,378 96,863 42,798 8,301
% sq. ft. (b) 31.9% 18.9% 19.6% 8.7% 1.7%
annual rent (c) 3,600,717 1,780,470 1,970,551 980,749 217,403
psf (d) $22.79 $19.07 $20.34 $22.92 $26.19
tenants (e) 19 21 20 2 3
8-16 Perimeter Center square feet (a) 18,484 1,441 6,844 5,169 26,857
% sq. ft. (b) 28.4% 2.2% 10.5% 8.0% 41.3%
annual rent (c) 259,916 15,592 112,333 92,473 414,941
psf (d) $14.06 $10.82 $16.41 $17.89 $15.45
tenants (e) 8 2 4 1 5
20-26 Perimeter Center square feet (a) 12,420 18,792 11,888 21,059 1,236
% sq. ft. (b) 17.8% 27.0% 17.0% 30.2% 1.8%
annual rent (c) 167,468 264,081 193,239 351,994 24,596
psf (d) $13.48 $14.05 $16.25 $16.71 $19.90
tenants (e) 7 4 5 1 1
28-32 Perimeter Center square feet (a) 3,788 87,871 4,888 4,152 0
% sq. ft. (b) 3.6% 83.6% 4.7% 4.0% 0.0%
annual rent (c) 49,883 1,230,390 68,535 67,300 0
psf (d) $13.17 $14.00 $14.02 $16.21 $0.00
tenants (e) 3 5 4 2 0
41 Perimeter Center square feet (a) 1,876 32,308 33,520 13,463 10,826
% sq. ft. (b) 2.0% 35.1% 36.4% 14.6% 11.8%
annual rent (c) 7,035 500,977 546,941 237,377 192,330
psf (d) $3.75 $15.51 $16.32 $17.63 $17.77
tenants (e) 1 2 5 2 1
47 Perimeter Center square feet (a) 2,756 14,227 14,871 32,710 5,062
% sq. ft. (b) 3.0% 15.5% 16.2% 35.5% 5.5%
annual rent (c) 51,592 216,426 227,221 544,263 101,467
psf (d) $18.72 $15.21 $15.28 $16.64 $20.04
tenants (e) 1 5 2 5 2
50 Perimeter Center square feet (a) 0 6,300 0 0 0
% sq. ft. (b) 0.0% 100.0% 0.0% 0.0% 0.0%
annual rent (c) 0 61,677 0 0 0
psf (d) $0.00 $9.79 $0.00 $0.00 $0.00
tenants (e) 0 1 0 0 0
53 Perimeter Center square feet (a) 44,064 0 20,446 0 17,035
% sq. ft. (b) 48.7% 0.0% 22.6% 0.0% 18.8%
annual rent (c) 730,292 0 321,531 0 335,188
psf (d) $16.57 $0.00 $15.73 $0.00 $19.68
tenants (e) 3 0 4 0 3
56 Perimeter Center square feet (a) 4,547 0 31,874 5,742 28,412
% sq. ft. (b) 4.9% 0.0% 34.0% 6.1% 30.3%
annual rent (c) 72,752 0 446,236 117,768 483,004
psf (d) $16.00 $0.00 $14.00 $20.51 $17.00
tenants (e) 1 0 1 1 1
66 Perimeter Center square feet (a) 0 0 0 0 183,037
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 100.0%
annual rent (c) 0 0 0 0 1,636,351
psf (d) $0.00 $0.00 $0.00 $0.00 $8.94
tenants (e) 0 0 0 0 1
64 Perimeter Center square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
70-76 Perimeter Center square feet (a) 11,960 1,830 16,423 17,738 10,251
% sq. ft. (b) 19.3% 3.0% 26.5% 28.6% 16.6%
annual rent (c) 184,181 28,981 304,919 330,017 180,539
psf (d) $15.40 $15.84 $18.57 $18.61 $17.61
tenants (e) 5 2 2 2 3
125 Perimeter Center (f) square feet (a) 0 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- -------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
North Terraces square feet (a) 24,400 0 0 2,718
% sq. ft. (b) 4.9% 0.0% 0.0% 0.6%
annual rent (c 598,246 0 0 0
psf (d) $24.52 $0.00 $0.00 $0.00
tenants (e) 3 0 0 1
South Terraces square feet (a) 70,497 1,568 0 0
% sq. ft. (b) 14.3% 0.3% 0.0% 0.0%
annual rent (c) 1,792,656 40,298 0 0
psf (d) $25.43 $25.70 $0.00 $0.00
tenants (e) 2 1 0 0
8-16 Perimeter Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
20-26 Perimeter Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
28-32 Perimeter Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
41 Perimeter Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
47 Perimeter Center square feet (a) 1,350 12,348 0 0
% sq. ft. (b) 1.5% 13.4% 0.0% 0.0%
annual rent (c) 20,912 240,873 0 0
psf (d) $15.49 $19.51 $0.00 $0.00
tenants (e) 1 1 0 0
50 Perimeter Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
53 Perimeter Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
56 Perimeter Center square feet (a) 7,886 0 0 0
% sq. ft. (b) 8.4% 0.0% 0.0% 0.0%
annual rent (c) 147,547 0 0 0
psf (d) $18.71 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
66 Perimeter Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
64 Perimeter Center square feet (a) 0 0 0 372,498
% sq. ft. (b) 0.0% 0.0% 0.0% 100.0%
annual rent (c) 0 0 0 9,189,526
psf (d) $0.00 $0.00 $0.00 $24.67
tenants (e) 0 0 0 1
70-76 Perimeter Center square feet (a) 1,473 0 0 0
% sq. ft. (b) 2.4% 0.0% 0.0% 0.0%
annual rent (c) 26,705 0 0 0
psf (d) $18.13 $0.00 $0.00 $0.00
tenants (e) 1 0 0 0
125 Perimeter Center (f) square feet (a) 0 0 223,059 0
% sq. ft. (b) 0.0% 0.0% 100.0% 0.0%
annual rent (c) 0 0 981,460 0
psf (d) $0.00 $0.00 $4.40 $0.00
tenants (e) 0 0 1 0
</TABLE>
S-49
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Arlington County, Virginia Office Market
--------------------------------------------------------------
Property 1997 1998 1999 2000 2001
- ----------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
219 Perimeter
Center square feet (a) 3,886 70,379 28,863 3,375 15,202
% sq. ft. (b) 3.0% 54.9% 22.5% 2.6% 11.9%
annual rent (c) 72,163 1,205,983 479,619 50,558 292,611
psf (d) $18.57 $17.14 $16.62 $14.98 $19.25
tenants (e) 1 2 1 1 1
223 Perimeter
Center square feet (a) 0 0 0 0 127,823
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 100.0%
annual rent (c) 0 0 0 0 2,473,375
psf (d) $0.00 $0.00 $0.00 $0.00 $19.35
tenants (e) 0 0 0 0 1
245 Perimeter
Center square feet (a) 0 0 0 0 229,217
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0% 100.0%
annual rent (c) 0 0 0 0 4,254,268
psf (d) $0.00 $0.00 $0.00 $0.00 $18.56
tenants (e) 0 0 0 0 1
301 Perimeter
Center square feet (a) 0 0 151,416 0 0
% sq. ft. (b) 0.0% 0.0% 100.0% 0.0% 0.0%
annual rent (c) 0 0 2,743,658 0 0
psf (d) $0.00 $0.00 $18.12 $0.00 $0.00
tenants (e) 0 0 1 0 0
303 Perimeter
Center square feet (a) 0 0 162,256 0 0
% sq. ft. (b) 0.0% 0.0% 100.0% 0.0% 0.0%
annual rent (c) 0 0 3,674,913 0 0
psf (d) $0.00 $0.00 $22.65 $0.00 $0.00
tenants (e) 0 0 2 0 0
Park Place
Shopping Ctr. square feet (a) 2,489 5,955 16,920 15,101 9,591
% sq. ft. (b) 4.0% 9.6% 27.4% 24.4% 15.5%
annual rent (c) 47,241 107,893 290,930 312,728 204,083
psf (d) $18.98 $18.12 $17.19 $20.71 $21.28
tenants (e) 1 4 4 4 2
-------- ----------- ----------- ----------- -----------
Total Properties square feet (a) 302,600 344,306 680,607 339,519 804,125
% sq. ft. (b) 9.2% 10.4% 20.6% 10.3% 24.3%
annual rent (c) 6,023,92 5,690,219 13,038,907 6,992,412 14,180,418
psf (d) $19.91 $16.53 $19.16 $20.60 $17.63
tenants (e) 59 53 64 33 37
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
219 Perimeter
Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
223 Perimeter
Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
245 Perimeter
Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
301 Perimeter
Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
303 Perimeter
Center square feet (a) 0 0 0 0
% sq. ft. (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
Park Place
Shopping Ctr. square feet (a) 0 0 0 11,774
% sq. ft. (b) 0.0% 0.0% 0.0% 19.0%
annual rent (c) 0 0 0 239,746
psf (d) $0.00 $0.00 $0.00 $20.36
tenants (e) 0 0 0 2
----------- ----------- ----------- ----------
Total
Properties square feet (a) 105,606 13,916 223,059 386,990
% sq. ft. (b) 3.2% 0.4% 6.8% 11.7%
annual rent (c) 2,586,065 281,171 981,460 9,429,272
psf (d) $24.49 $20.20 $4.40 $24.37
tenants (e) 7 2 1 4
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
and operating escalations, except leases with CPI increases in lieu of
expense recoveries
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
(f) 125 Perimeter Center is reflected as a 2004 expiration; although the
lease expires in 1999, the tenant has an option to extend for five years
in 1999 at a rental rate that is significantly below market.
S-50
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Arlington County, Virginia Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1300 North 17th
Street square feet (a) 13,473 21,284 5,672 97,639 76,137
% sq. ft (b) 3.6% 5.7% 1.5% 26.2% 20.4%
annual rent (c) 287,032 563,333 133,333 2,705,217 1,919,369
psf (d) $21.30 $26.47 $23.51 $27.71 $25.21
tenants (e) 2 4 2 6 4
1616 North Ft.
Myer Drive square feet (a) 2,476 4,626 0 40,105 87,270
% sq. ft (b) 0.8% 1.6% 0.0% 13.7% 29.8%
annual rent (c) 57,750 93,123 0 1,019,706 2,320,342
psf (d) $23.32 $20.13 $0.00 $25.43 $26.59
tenants (e) 2 1 0 4 3
Polk and Taylor
Buildings square feet (a) 890,000 0 0 0 0
% sq. ft (b) 100.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c) 17,758,558 0 0 0 0
psf (d) $19.95 $0.00 $0.00 $0.00 $0.00
tenants (e) 6 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total
Properties square feet (a) 905,949 25,910 5,672 137,744 163,407
% sq. ft (b) 58.2% 1.7% 0.4% 8.9% 10.5%
annual rent (c) 18,103,340 656,456 133,333 3,724,922 4,239,711
psf (d) $19.98 $25.34 $23.51 $27.04 $25.95
tenants (e) 10 5 2 10 7
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1300 North 17th
Street square feet (a) 52,187 40,252 22,470 33,192
% sq. ft (b) 14.0% 10.8% 6.0% 8.9%
annual rent (c) 1,107,526 1,090,746 656,940 1,011,342
psf (d) $21.22 $27.10 $29.24 $30.47
tenants (e) 4 2 1 2
1616 North Ft.
Myer Drive square feet (a) 12,208 43,882 6,324 93,285
% sq. ft (b) 4.2% 15.0% 2.2% 31.9%
annual rent (c) 324,352 1,108,034 166,950 2,405,155
psf (d) $26.57 $25.25 $26.40 $25.78
tenants (e) 1 2 1 2
Polk and Taylor
Buildings square feet (a) 0 0 0 0
% sq. ft (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
----------- ----------- ----------- -----------
Total
Properties square feet (a) 64,395 84,134 28,794 126,477
% sq. ft (b) 4.1% 5.4% 1.9% 8.1%
annual rent (c) 1,431,878 2,198,780 823,890 3,416,497
psf (d) $22.24 $26.13 $28.61 $27.01
tenants (e) 5 4 2 4
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases plus
1996 tenant payments on account of real estate tax and operating expense
escalations.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-51
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Fairfax County, Virginia Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
E J Randolph square feet (a) 2,576 3,223 1,801 8,091 59,082
% sq. ft (b) 1.6% 2.0% 1.1% 4.9% 35.9%
annual rent (c) 75,085 72,195 75,588 216,762 1,485,452
psf (d) $29.15 $22.40 $41.97 $26.79 $25.14
tenants (e) 2 1 1 2 5
John Marshall square feet (a) 0 0 0 0 2,788
% sq. ft (b) 0.0% 0.0% 0.0% 0.0% 1.1%
annual rent (c) 0 0 0 0 97,218
psf (d) $0.00 $0.00 $0.00 $0.00 $34.87
tenants (e) 0 0 0 0 1
Northridge square feet (a) 0 0 0 124,319 0
% sq. ft (b) 0.0% 0.0% 0.0% 100.0% 0.0%
annual rent (c) 0 0 0 3,237,267 0
psf (d) $0.00 $0.00 $0.00 $26.04 $0.00
tenants (e) 0 0 0 1 0
----------- ----------- ----------- ----------- -----------
Total
Properties square feet (a) 2,576 3,223 1,801 132,410 61,870
% sq. ft (b) 0.5% 0.6% 0.3% 24.1% 11.2%
annual rent (c) 75,085 72,195 75,588 3,454,029 1,582,669
psf (d) $29.15 $22.40 $41.97 $26.09 $25.58
tenants (e) 2 1 1 3 6
Pending Acquisitions
- --------------------
Centerpointe I
& II square feet (a) 24,218 15,094 30,350 10,733 5,394
% sq. ft (b) 5.9% 3.7% 7.4% 2.6% 1.3%
annual rent (c) 507,420 290,761 621,740 222,189 109,282
psf (d) $20.95 $19.26 $20.49 $20.70 $20.26
tenants (e) 3 4 3 2 1
----------- ----------- ----------- ----------- -----------
Total
Properties
and
Pending
Acquisitions square feet (a) 26,794 18,317 32,151 143,143 67,264
% sq. ft (b) 2.8% 1.9% 3.4% 14.9% 7.0%
annual rent (c) 582,505 362,956 697,328 3,676,218 1,691,952
psf (d) $21.74 $19.82 $21.69 $25.68 $25.15
tenants (e) 5 5 4 5 7
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
E J Randolph square feet (a) 14,958 0 70,366 0
% sq. ft (b) 9.1% 0.0% 42.7% 0.0%
annual rent (c) 315,959 0 1,691,534 0
psf (d) $21.12 $0.00 $24.04 $0.00
tenants (e) 2 0 3 0
John Marshall square feet (a) 0 0 0 258,576
% sq. ft (b) 0.0% 0.0% 0.0% 98.9%
annual rent (c) 0 0 0 6,660,918
psf (d) $0.00 $0.00 $0.00 $25.76
tenants (e) 0 0 0 1
Northridge square feet (a) 0 0 0 0
% sq. ft (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
----------- ----------- ----------- -----------
Total
Properties square feet (a) 14,958 0 70,366 258,576
% sq. ft (b) 2.7% 0.0% 12.8% 47.0%
annual rent (c) 315,959 0 1,691,534 6,660,918
psf (d) $21.12 $0.00 $24.04 $25.76
tenants (e) 2 0 3 1
Pending Acquisitions
-------------------
Centerpointe I
& II square feet (a) 27,159 0 0 294,648
% sq. ft (b) 6.7% 0.0% 0.0% 72.2%
annual rent (c) 551,185 0 0 6,338,370
psf (d) $20.29 $0.00 $0.00 $21.51
tenants (e) 4 0 0 3
----------- ----------- ----------- -----------
Total
Properties
and
Pending
Acquisitions square feet (a) 42,117 0 70,366 553,224
% sq. ft (b) 4.4% 0.0% 7.3% 57.7%
annual rent (c) 867,143 0 1,691,534 12,999,287
psf (d) $20.59 $0.00 $24.04 $23.50
tenants (e) 6 0 3 4
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
<TABLE>
<CAPTION>
Lease Expiration--Washington, D.C. Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1333 H Street square feet (a) 11,020 4,045 0 8,835 2,945
% sq. ft (b) 4.6% 1.7% 0.0% 3.7% 1.2%
annual rent (c) 292,571 115,428 0 243,846 79,692
psf (d) $26.55 $28.54 $0.00 $27.60 $27.06
tenants (e) 4 3 0 3 1
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1333 H Street square feet (a) 57,041 14,708 0 108,536
% sq. ft (b) 23.9% 6.2% 0.0% 45.5%
annual rent (c) 1,744,884 461,684 0 3,660,672
psf (d) $30.59 $31.39 $0.00 $33.73
tenants (e) 1 1 0 2
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases plus
1996 tenant payments on account of real estate tax & operating expense
escalations.
(d) Annual rent (c) divided by square feet (a)
(e) The number of tenants whose lease will expire
S-52
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Suburban Chicago Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
AT&T Plaza square feet (a) 12,860 39,525 29,539 79,574 0
% sq. ft (b) 5.7% 17.5% 13.1% 35.3% 0.0%
annual rent (c) 276,755 814,860 669,941 1,762,418 0
psf (d) $21.52 $20.62 $22.68 $22.15 $0.00
tenants (e) 5 6 2 4 0
Presidents
Plaza square feet (a) 48,849 25,065 50,077 27,306 35,746
% sq. ft (b) 6.2% 3.2% 6.3% 3.5% 4.5%
annual rent (c) 1,002,924 564,901 1,217,406 577,395 858,056
psf (d) $20.53 $22.54 $24.31 $21.15 $24.00
tenants (e) 10 8 11 8 5
Tri State Int'l square feet (a) 123,561 19,966 60,002 24,018 113,026
% sq. ft (b) 22.5% 3.6% 10.9% 4.4% 20.6%
annual rent (c) 2,720,157 407,813 1,577,457 539,023 2,896,921
psf (d) $22.01 $20.43 $26.29 $22.44 $25.63
tenants (e) 9 3 5 3 11
----------- ----------- ----------- ----------- -----------
Total
Properties square feet (a) 185,270 84,556 139,618 130,898 148,772
% sq. ft (b) 11.8% 5.4% 8.9% 8.4% 9.5%
annual rent (c) 3,999,836 1,787,574 3,464,805 2,878,835 3,754,977
psf (d) $21.59 $21.14 $24.82 $21.99 $25.24
tenants (e) 24 17 18 15 16
Pending
Acquisition
- ---------------
Westbrook
Corporate
Center square feet (a) 66,228 106,823 97,347 256,406 204,350
% sq. ft. (b) 6.0% 9.7% 8.8% 23.2% 18.5%
annual rent (c) 1,747,948 2,757,545 2,765,629 8,023,751 5,558,367
psf (d) $26.39 $25.81 $28.41 $31.29 $27.20
tenants (e) 12 14 15 19 18
Total
Properties
and
Pending
Acquisition square feet (a) 251,498 191,379 236,965 387,304 353,122
% sq. ft. (b) 9.4% 7.2% 8.9% 14.5% 13.2%
annual rent (c) 5,747,784 4,545,119 6,230,434 10,902,586 9,313,345
psf (d) $22.85 $23.75 $26.29 $28.15 $26.37
tenants (e) 36 31 33 34 34
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AT&T Plaza square feet (a) 12,288 38,249 8,165 2,521
% sq. ft (b) 5.5% 17.0% 3.6% 1.1%
annual rent (c) 282,240 994,404 197,014 0
psf (d) $22.97 $26.00 $24.13 $0.00
tenants (e) 2 3 1 1
Presidents
Plaza square feet (a) 24,532 62,221 27,078 411,796
% sq. ft (b) 3.1% 7.9% 3.4% 52.1%
annual rent (c) 712,848 1,540,159 687,578 12,187,590
psf (d) $29.06 $24.75 $25.39 $29.60
tenants (e) 2 3 1 8
Tri State Int'l square feet (a) 9,928 0 27,491 26,578
% sq. ft (b) 1.8% 0.0% 5.0% 4.9%
annual rent (c) 225,003 0 716,965 736,211
psf (d) $22.66 $0.00 $26.08 $27.70
tenants (e) 1 0 1 1
----------- ----------- ----------- -----------
Total
Properties square feet (a) 46,748 100,470 62,734 440,895
% sq. ft (b) 3.0% 6.4% 4.0% 28.2%
annual rent (c) 1,220,090 2,534,563 1,601,557 12,923,801
psf (d) $26.10 $25.23 $25.53 $29.31
tenants (e) 5 6 3 10
Pending
Acquisition
- ---------------
Westbrook
Corporate
Center square feet (a) 88,927 101,787 12,275 60,314
% sq. ft. (b) 8.0% 9.2% 1.1% 5.5%
annual rent (c) 2,484,161 2,501,276 396,525 1,544,220
psf (d) $27.93 $24.57 $32.30 $25.60
tenants (e) 6 5 2 8
Total
Properties
and
Pending
Acquisition square feet (a) 135,675 202,257 75,009 501,209
% sq. ft. (b) 5.1% 7.6% 2.8% 18.8%
annual rent (c) 3,704,251 5,035,839 1,998,081 14,468,021
psf (d) $27.30 $24.90 $26.64 $28.87
tenants (e) 11 11 5 18
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases plus
1996 tenant payments on account of real estate tax and operating expense
escalations.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
S-53
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Suburban Philadelphia Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Westlakes 1 square feet (a) 24,502 18,164 16,098 13,839 23,552
% sq. ft (b) 17.9% 13.3% 11.8% 10.1% 17.2%
annual rent (c) 480,156 394,345 268,589 300,159 549,743
psf (d) $19.60 $21.71 $16.68 $21.69 $23.34
tenants (e) 6 3 4 3 6
Westlakes 2 square feet (a) 6,668 5,394 9,889 35,447 0
% sq. ft (b) 5.2% 4.2% 7.7% 27.5% 0.0%
annual rent (c) 142,228 111,604 213,278 798,851 0
psf (d) $21.33 $20.69 $21.57 $22.54 $0.00
tenants (e) 1 2 2 2 0
Westlakes 3 square feet (a) 0 0 0 118,737 0
% sq. ft (b) 0.0% 0.0% 0.0% 100.6% 0.0%
annual rent (c) 0 0 0 2,896,267 0
psf (d) $0.00 $0.00 $0.00 $24.39 $0.00
tenants (e) 0 0 0 2 0
Westlakes 5 square feet (a) 0 0 27,480 12,928 1,000
% sq. ft (b) 0.0% 0.0% 45.8% 21.5% 1.7%
annual rent (c) 0 0 677,163 303,717 23,350
psf (d) $0.00 $0.00 $24.64 $23.49 $23.35
tenants (e) 0 0 1 2 1
----------- ----------- ----------- ----------- -----------
Total
Properties square feet (a) 31,170 23,558 53,467 180,951 24,552
% sq. ft (b) 7.0% 5.3% 12.0% 40.8% 5.5%
annual rent (c) 622,385 505,948 1,159,030 4,298,994 573,093
psf (d) $19.97 $21.48 $21.68 $23.76 $23.34
tenants (e) 7 5 7 9 7
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Westlakes 1 square feet (a) 23,872 0 0 18,439
% sq. ft (b) 17.4% 0.0% 0.0% 13.5%
annual rent (c) 546,175 0 0 442,536
psf (d) $22.88 $0.00 $0.00 $24.00
tenants (e) 1 0 0 1
Westlakes 2 square feet (a) 0 44,846 0 22,413
% sq. ft (b) 0.0% 34.8% 0.0% 17.4%
annual rent (c) 0 990,717 0 423,896
psf (d) $0.00 $22.09 $0.00 $18.91
tenants (e) 0 1 0 2
Westlakes 3 square feet (a) 0 0 0 0
% sq. ft (b) 0.0% 0.0% 0.0% 0.0%
annual rent (c) 0 0 0 0
psf (d) $0.00 $0.00 $0.00 $0.00
tenants (e) 0 0 0 0
Westlakes 5 square feet (a) 3,700 11,711 0 0
% sq. ft (b) 6.2% 19.5% 0.0% 0.0%
annual rent (c) 88,800 324,790 0 0
psf (d) $24.00 $27.73 $0.00 $0.00
tenants (e) 1 1 0 0
----------- ----------- ----------- -----------
Total
Properties square feet (a) 27,572 56,557 0 40,852
% sq. ft (b) 6.2% 12.7% 0.0% 9.2%
annual rent (c) 634,975 1,315,506 0 866,432
psf (d) $23.03 $23.26 $0.00 $21.21
tenants (e) 2 2 0 3
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus 1996 tenant payments on account of real estate
tax and operating expense escalations, except leases with CPI increases
in lieu of expense recoveries.
(d) Calculated as annual rent divided by square feet
(e) The number of tenants whose leases will expire
<TABLE>
<CAPTION>
Lease Expiration--West Los Angeles Office Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- -------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
10960 Wilshire
Boulevard square feet (a) 23,922 3,030 9,126 162,021 20,761
% sq. ft (b) 4.4% 0.6% 1.7% 29.8% 3.8%
annual rent (c) 585,840 88,608 262,561 4,561,300 598,825
psf (d) $24.49 $29.24 $28.77 $28.15 $28.84
tenants (e) 1 1 3 14 3
Pending Acquisition
- -------------------
10880 Wilshire
Boulevard square feet (a) 0 7,167 22,814 49,900 119,702
% sq. ft (b) 0.0% 1.3% 4.3% 9.4% 22.5%
annual rent (c) 0 204,103 616,555 1,284,960 3,533,553
psf (d) $0.00 $28.48 $27.03 $25.75 $29.52
tenants (e) 0 2 5 10 16
----------- ----------- ----------- ----------- -----------
Total Property
and
Pending
Acquisition square feet (a) 23,922 10,197 31,940 211,921 140,463
% sq. ft (b) 2.2% 0.9% 3.0% 19.7% 13.1%
annual rent (c) 585,840 292,711 879,116 5,846,260 4,132,377
psf (d) $24.49 $28.71 $27.52 $27.59 $29.42
tenants (e) 1 3 8 24 19
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
10960 Wilshire
Boulevard square feet (a) 52,382 34,801 10,658 167,586
% sq. ft (b) 9.6% 6.4% 2.0% 30.8%
annual rent (c) 1,809,183 1,134,632 350,807 5,664,221
psf (d) $34.54 $32.60 $32.91 $33.80
tenants (e) 3 3 1 4
Pending Acquisition
------------------
10880 Wilshire
Boulevard square feet (a) 150,813 0 83,049 17,566
% sq. ft (b) 28.4% 0.0% 15.6% 3.3%
annual rent (c) 4,572,705 0 2,691,079 592,427
psf (d) $30.32 $0.00 $32.40 $33.73
tenants (e) 7 0 2 1
----------- ----------- ----------- -----------
Total Property
and
Pending
Acquisition square feet (a) 203,195 34,801 93,707 185,152
% sq. ft (b) 18.9% 3.2% 8.7% 17.2%
annual rent (c) 6,381,888 1,134,632 3,041,886 6,256,648
psf (d) $31.41 $32.60 $32.46 $33.79
tenants (e) 10 3 3 5
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring base rental income represented by such leases plus
1996 tenant payments on account of real estate tax and operating expense
escalations.
(d) Annual rent (c) divided by square feet (a)
(e) The number of tenants whose leases will expire
S-54
<PAGE>
<TABLE>
<CAPTION>
Lease Expiration--Silicon Valley Office/R&D Market
-----------------------------------------------------------
Property 1997 1998 1999 2000 2001
- -------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lake Marriott square feet (a) 60,548 9,465 24,548 138,302 40,320
% sq. ft (b) 15.1% 2.4% 6.1% 34.6% 10.1%
annual rent (c) 938,578 133,634 241,383 1,233,922 508,032
psf (d) $15.50 $14.12 $9.83 $8,92 $12.60
tenants (e) 2 2 3 6 1
Shoreline square feet (a) 0 0 0 371,018 165,612
% sq. ft (b) 0.0% 0.0% 0.0% 51.1% 22.8%
annual rent (c) 0 0 0 6,757,560 3,046,294
psf (d) $0.00 $0.00 $0.00 $18.21 $18.39
tenants (e) 0 0 0 1 0
----------- ----------- ----------- ----------- -----------
Total
Properties square feet (a) 60,548 9,465 24,548 509,320 205,932
% sq. ft (b) 5.4% 0.8% 2.2% 45.2% 18.3%
annual rent (c) 938,578 133,634 241,383 7,991,481 3,554,326
psf (d) $15.50 $14.12 $9.83 $15.69 $17.26
tenants (e) 2 2 3 7 1
</TABLE>
<TABLE>
<CAPTION>
2005 &
Property 2002 2003 2004 beyond
- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lake Marriott square feet (a) 0 0 0 125,119
% sq. ft (b) 0.0% 0.0% 0.0% 31.3%
annual rent (c) 0 0 0 1,400,718
psf (d) $0.00 $0.00 $0.00 $11.20
tenants (e) 0 0 0 2
Shoreline square feet (a) 0 0 0 189,878
% sq. ft (b) 0.0% 0.0% 0.0% 26.1%
annual rent (c) 0 0 0 4,567,231
psf (d) $0.00 $0.00 $0.00 $24.05
tenants (e) 0 0 0 0
----------- ----------- ----------- -----------
Total
Properties square feet (a) 0 0 0 314,997
% sq. ft (b) 0.0% 0.0% 0.0% 28.0%
annual rent (c) 0 0 0 5,967,949
psf (d) $0.00 $0.00 $0.00 $18.95
tenants (e) 0 0 0 2
</TABLE>
(a) Total area in square feet covered by such leases
(b) Percentage of total square feet represented by such leases
(c) Annualized expiring Net rental income represented by such leases
(d) Annual net rent (c) divided by square feet (a)
(e) The number of tenants whose lease will expire
Historical Non-Incremental Revenue-Generating Capital Expenditures and Tenant
Improvement Costs
The following table sets forth annual and per square foot recurring,
non-incremental revenue-generating capital expenditures and non-incremental
revenue-generating tenant improvement costs to retain revenues attributable
to existing leased space (including leasing commissions and rent concessions)
for the period 1992 through 1996. All capital expenditures presented for the
Properties are non-incremental revenue-generating and therefore exclude
redevelopment costs associated with Crosby Corporate Center and 100 William
Street. As noted, revenue-generating tenant improvement costs are excluded
from the table set forth immediately below. Such costs generally relate to
vacant space, unless a prior tenant was paying rent while such space was
being improved for a future tenant, in which case the costs to improve such
space were considered non-incremental revenue-generating and, therefore,
included in the table. The historical capital expenditures and tenant
improvement costs set forth below are not necessarily indicative of future
recurring, non-incremental revenue-generating capital expenditures or non-
incremental revenue-generating tenant improvement costs.
<TABLE>
<CAPTION>
Properties
---------------------------------------------------------------------
1992-1996
1992(a) 1993(a) 1994(a) 1995(a) 1996(a) Average(a)
-------- -------- ------------ ------------ ------------ -----------
(dollars in thousands, except per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditures
Properties Total
Annual $ 702 $ 226 $1,001(b) $3,309(b) $6,023(c) $2,252
Per square foot $ 0.23 $ 0.08 $ 0.24 $ 0.50 $ 0.57 $ 0.32
Company's Proportionate Share
Annual $ 551 $ 193 $ 609(b) $2,174(b) $3,849(c) $1,475
Per square foot $ 0.26 $ 0.09 $ 0.15 $ 0.44 $ 0.44 $ 0.28
Non-incremental Revenue-
Generating Tenant Improvement
Costs
Properties Total
Annual $2,650 $2,077 $4,289 $7,369 $9,592 $5,195
Per square foot improved $ 7.38 $10.43 $10.24 $10.13 $ 6.72 $ 8.98
Company's Proportionate Share
Annual $2,167 $1,806 $3,280 $7,040 $9,027 $4,664
Per square foot improved $ 8.86 $11.78 $ 9.71 $10.60 $12.65 $10.72
</TABLE>
S-55
<PAGE>
(a) Information regarding the Properties acquired in the Initial Offering is
presented for all periods. Information regarding Properties acquired
subsequent to the Initial Offering is presented from the date of
acquisition.
(b) Excludes cost incurred in connection with the redevelopment of the Center
Plaza Property of $1.4 million and $0.86 million, or $1.1 million and
$0.86 million for the Company's proportionate share of such expenditures
for the years 1994 and 1995, respectively. A portion of these capital
expenditures are incremental revenue-generating expenditures.
(c) Excludes 1996 costs incurred in connection with non-recurring events such
as code-required enhancements and other unique expenditures. The
non-recurring expenditures were $3.0 million for 1996. The Company's
proportionate share was $2.3 million for 1996.
Historical Incremental Revenue-Generating Tenant Improvement Costs
The following table sets forth annual and per square foot incremental
revenue-generating tenant improvement costs (including lease commissions,
legal and other leasing costs) for the period 1992 through 1996. Costs
associated with redevelopment of Crosby Corporate Center and 100 William
Street are excluded from this table. Incremental revenue-generating tenant
improvement costs generally relate to vacant non-revenue generating space.
The historical incremental revenue-generating tenant improvement costs set
forth below are not necessarily indicative of future incremental
revenue-generating tenant improvement costs.
<TABLE>
<CAPTION>
Properties
------------------------------------------------------------
1992-1996
1992(a) 1993(a) 1994(a) 1995(a) 1996(a) Average(a)
-------- -------- -------- -------- --------- -----------
(dollars in thousands, except per square foot data)
<S> <C> <C> <C> <C> <C> <C>
Incremental Revenue-Generating
Tenant Improvement Costs
Properties Total
Annual $3,055 $7,438 $6,141 $8,027 $15,890 $8,110
Per square foot improved $22.55 $29.90 $26.92 $29.56 $ 20.39 $25.86
Company's Proportionated Share
Annual $2,134 $5,221 $4,051 $7,283 $15,314 $6,801
Per square foot improved $24.55 $31.26 $25.77 $30.24 $ 20.26 $26.42
</TABLE>
(a) Information regarding the Properties acquired in the Initial Offering is
presented for all periods. Information regarding Properties acquired
subsequent to the Initial Offering is presented from the date of
acquisition.
S-56
<PAGE>
Mortgage Indebtedness and Credit Facility
The Company's total outstanding consolidated mortgage debt and its
proportionate share of the total outstanding unconsolidated mortgage debt on
the Properties (excluding Rowes Wharf) will be approximately $697.5 million
at April 1, 1997. Additionally, at April 1, 1997, the Company will have
approximately $153.0 million outstanding under the Credit Facility. The
following table sets forth certain information regarding the consolidated and
unconsolidated mortgage debt obligations of the Company, including mortgage
obligations relating to specific Properties, and the Credit Facility. All of
the mortgage debt is nonrecourse to the Company.
<TABLE>
<CAPTION>
Principal
Amount Company's
(as of Portion of Interest Maturity Prepayment
Property 4/1/97) Principal Rate Date Provisions
-------------------------------- ----------------------- --------- -------------- ---------------------
(dollar amounts in millions)
<S> <C> <C> <C> <C> <C>
Mortgage Indebtedness:
Consolidated Properties
150 Federal Street $ 56.8 $ 56.8 6.67% 11/1/98(a) Prepayable subject to
conditions(b)
175 Federal Street 12.9 12.9 8.00% 7/1/98(c) Prepayable subject to
conditions(d)
Wellesley Office Park 55.0 55.0 7.23% 2/1/03(e) Prepayable subject to
conditions(f)
Center Plaza 60.0 60.0 7.23% 3/1/03(g) Prepayable subject to
conditions(h)
Perimeter Center Portfolio 218.0 218.0 7.08% 3/31/06(i) Prepayable subject to
conditions(j)
John Marshal I 20.5 20.5 8.38% 12/1/08 Prepayable subject to
conditions(k)
Northridge I 13.6 13.6 8.19% 1/1/07(l) Prepayable subject to
conditions(m)
E.J. Randolph 15.0 15.0 8.19% 1/1/07(n) Prepayable subject
----------------------- to conditions(m)
Total Consolidated Properties $451.8 $451.8
-----------------------
Unconsolidated Properties with respect to
which the Company is a general
partner or shareholder
One Post Office Square (o) $ 67.5 $ 33.8 7.00% 8/1/00(p) Prepayable subject to
conditions(q)
One Post Office Square (o) 25.0 12.5 8.25% 8/1/00(r) Prepayable subject to
conditions(s)
75-101 Federal Street(t) 90.0 46.4 7.61% 10/1/02(u) Prepayable subject
----------------------- to conditions(v)
Total Unconsolidated Properties 182.5 92.7
-----------------------
Total Mortgage Debt $634.3 $544.5
=======================
Credit Facility:
Various Properties(w) $153.0 $153.0 (x) 6/27/99 Prepayable at any
======================= time without penalty
</TABLE>
(a) The estimated balance due on maturity is approximately $56.1 million.
(b) Prepayable subject to a yield maintenance payment based on the rate of
United States Treasury Notes having a term closest to the date of
maturity but in no event less than 1% of the then balance. Prepayable at
par from and after April 1, 1998.
(c) The estimated balance due on maturity is approximately $12.5 million.
(d) Prepayable subject to a yield maintenance payment based on the rate of
United States Treasury Notes having a term closest to the date of
maturity plus 1.50%, but in no event less than 1% of the then balance.
Prepayable at par from and after March 1, 1998.
S-57
<PAGE>
(e) The estimated balance due on maturity is approximately $51.9 million.
(f) Prepayable after August 1, 1999 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after
October 1, 2002.
(g) The estimated balance due on maturity is approximately $56.7 million.
(h) Prepayable after September 1, 1999 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after
November 1, 2002.
(i) The estimated balance due on maturity is approximately $183.8 million.
(j) Closed to prepayment during the first two years of the loan, prepayable
in years three through ten subject to a yield maintenance payment based
on the rate of United States Treasury Notes having a term closest to the
date of maturity plus 0.50%, and prepayable at par during the last 90
days of the loan.
(k) Mandatory annual prepayments and additional prepayments subject to
payments of 5% of the amount prepaid before November 1, 1999, decreasing
by 0.5% each subsequent year through September 1, 2008, after which no
premium is due upon prepayment.
(l) The estimated balance due on maturity is approximately $11.7 million.
(m) Prepayable subject to a payment equal to the greater of 1% of the
outstanding principal balance or a yield maintenance payment based on the
rate of United States Treasury Notes having a term closest to the date of
maturity for a prepayment occurring prior to December 1, 1998, such
interest rate to be increased by 0.5% for a prepayment occurring after
December 1, 1998.
(n) The estimated balance due on maturity is approximately $12.9 million.
(o) The Company owns a 50% general partner interest in the partnership that
owns One Post Office Square. Consequently, the Company's portion of the
debt on the One Post Office Square Property is 50% of the principal
amount.
(p) The Company's share of the estimated balance due on maturity is
approximately $31.9 million.
(q) Prepayable after August 31, 1997 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after
February 1, 2000.
(r) The Company's share of the estimated balance due on maturity is
approximately $11.2 million.
(s) Prepayable subject to a yield maintenance payment based on the rate of
United States Treasury Notes having a term closest to the date of
maturity plus 1.50%. Prepayable at par from and after May 1, 2000.
(t) The Company owns an approximate 51.6% equity interest in the private REIT
that owns 75-101 Federal Street. Consequently, the Company's portion of
the debt on the 75-101 Federal Street property is approximately 51.6% of
the principal amount.
(u) The Company's share of the estimated balance due on maturity is
approximately $44.0 million.
(v) Prepayable after January 1, 1999 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest
to the date of maturity plus 0.50%. Prepayable at par from and after June
1, 2002.
(w) The Credit Facility is secured by cross-collateralized mortgages and
assignments of rents on the Crosby Corporate Center, a portion of 150
Federal Street, One Canal Park, Westwood Business Centre, Westlakes
Office Park, 2 Oliver Street, Ten Canal Park, Russia Wharf, AT&T Plaza,
Tri-State International office park, 1333 H Street, N.W., 1300 North 17th
Street, 1616 North Ft. Myer and the New England Executive Park.
(x) Outstanding balances under the Credit Facility generally bear interest,
at the Company's option, at either (i) the higher of (x) Bank of Boston's
base interest rate and (y) 1/2% above the overnight federal funds
effective rate or (ii) the Eurodollar rate plus 175 basis points (1.75%).
S-58
<PAGE>
The Company owns a 45% indirect limited partner interest in Rowes Wharf
Associates, the partnership that owns the hotel space and leases the office
and retail space at Rowes Wharf. The Company (together with an affiliate) and
Equitable each own one-half of the first mortgage debt on the Rowes Wharf
Property. The Company has no obligation to fund principal or interest
payments with respect to the unconsolidated debt of Rowes Wharf Associates or
to fund operating or other deficits with respect to Rowes Wharf Associates.
As of April 1, 1997, the aggregate outstanding principal amount of Rowes
Wharf Associates' first mortgage debt, which consists of two tiers of debt,
equals approximately $201.2 million. The first-tier debt is equal to
approximately $126.0 million, currently bears interest at a rate of 8.71% per
annum and matures in April 1999. Pursuant to its terms, the first-tier debt
may be prepaid at any time and principal repayment may be extended for up to
three years, provided that a 1.1 interest coverage is achieved at that time.
Rowes Wharf Associates currently maintains a significant cash account to fund
any shortfalls on this debt. The second-tier debt is equal to approximately
$75.2 million, currently bears interest at the lesser of 6.0% or 50.0% of
cash flow after interest payments have been made in respect of the first-tier
debt and matures in April 2002. The second-tier debt may be prepaid in full
with 50% of the net proceeds from certain sales or refinancings of Rowes
Wharf Associates' debt, regardless of the amount of such proceeds, or at
maturity based on the appraised value of the Property.
S-59
<PAGE>
USE OF PROCEEDS
The net cash proceeds to the Company from the sale of the Common Stock
offered hereby, after deduction of estimated expenses of the Offering, are
estimated to be approximately $230.3 million (approximately $264.8 million if
the Underwriters' over-allotment option is exercised in full).
The Company intends to apply approximately $137.0 million of the net
proceeds of the Offering to purchase the Pending Acquisitions (or repay
amounts drawn under the Credit Facility to acquire the Pending Acquisitions) and
approximately $93.3 million of the net proceeds to repay amounts drawn under
the Credit Facility in connection with the purchase of the Recent
Acquisitions. The Company will also assume approximately $136 million of
mortgage debt and issue approximately $50 million of Units to consummate the
Pending Acquisitions. All outstanding borrowings under the Credit Facility
mature in June 1999 and generally bear interest, at the Company's option, at
either (i) the higher of (x) Bank of Boston's base interest rate and (y)
one-half of one percent (1/2%) above the overnight federal funds effective
rate or (ii) the Eurodollar rate plus 175 basis points (1.75%). No prepayment
penalties are required in connection with the repayment of the Credit
Facility. Pending application of the net proceeds, the Company will invest
such portion of the net proceeds in interest-bearing accounts and short-term,
interest-bearing securities.
S-60
<PAGE>
PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY
The Company's Common Stock trades on the NYSE under the symbol "BCN." On
March 26, 1997, the reported closing sale price per share of Common Stock on
the NYSE was $35 and there were approximately 410 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 (through March 26, 1997) $36-3/8 $34-1/8 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.
Historical Total Return
An investor who purchased Common Stock in the Company's Initial Public
Offering on May 24, 1994, who reinvested all dividends paid in additional
shares of Common Stock, and who held such shares through the close of
business on March 26, 1997 would have had a cumulative pretax total return of
153% or an annual compounded pretax return of 38% based upon the closing
price of the Common Stock on March 26, 1997. Past performance, however, is
not necessarily indicative of the results that will be obtained in the future
from an investment in the Common Stock, and no assurance can be given that an
investor in this Offering will achieve similar results.
S-61
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company on an
historical basis as of December 31, 1996, and for the Company as adjusted to
give effect to the issuance of the shares of Common Stock in the Offering and
the application of the net proceeds from the Offering as if the Offering and
the acquisitions of the Pending Acquisitions had occurred on December 31,
1996. See "Use of Proceeds." The information set forth in the table should be
read in conjunction with the summary and selected financial information
presented elsewhere in this Prospectus Supplement and the Consolidated
Financial Statements and notes thereto incorporated by reference into the
accompanying Prospectus.
Historical As Adjusted(1)
------------- ---------------
(in thousands)
DEBT:
Credit Facility $ 153,000 $ 59,714
Mortgage Notes Payable 452,212 588,212
------------- ---------------
Total Debt 605,212 647,926
------------- ---------------
MINORITY INTEREST: 108,551 158,551
------------- ---------------
STOCKHOLDERS EQUITY:
Common Stock, $0.01 par value; 100,000,000
shares authorized; 48,116,480 (historical)
shares issued and outstanding (55,116,480
shares on an as adjusted basis)(1) 481 551
Additional paid-in capital 1,022,110 1,252,340
Cumulative net income 60,047 60,047
Cumulative dividends (83,488) (83,488)
------------- ---------------
Total stockholders' equity 999,150 1,229,450
------------- ---------------
Total capitalization $1,712,913 $2,035,927
============= ===============
(1) Does not include Common Stock reserved for issuance upon (i) possible
redemption of 7,702,499 Units (including Units to be issued in connection
with a Pending Acquisition) and (ii) exercise of 3,619,747 shares of Common
Stock reserved for issuance under the 1994 Stock Option Plan, the 1996
Stock Option Plan and dividend reinvestment plan.
S-62
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial and operating
information on an as adjusted basis for the Company and on a combined
historical basis for the Company and the Predecessor. The consolidated
results of operations of the Company for the 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 1995, 1994
and 1993 is incorporated by reference into the accompanying Prospectus.
The unaudited selected pro forma financial and operating information is
presented as if the Offering, the acquisition of the Properties acquired
since January 1, 1996, the acquisition of the Pending Acquisitions had
occurred as of January 1, 1996, for the condensed consolidated statement of
operations. The pro forma financial information is not necessarily indicative
of what the results of operations of the Company would have been as of and
for the periods indicated, nor does it purport to represent the Company's
future financial position and results of operations.
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<PAGE>
<TABLE>
<CAPTION>
Beacon Properties Corporation
Selected Financial Information
Company Predecessor
----------------------------------------------- -----------------------------------
For the For the
For the For the Period Period
Year Year May 26, January 1, Years Ended
Pro Forma Ended Ended 1994 to 1994 to December 31,
1996 December December December May 25, -----------------------
(unaudited) 31, 1996 31, 1995 31, 1994 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share amounts)
OPERATING INFORMATION:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $279,573 $147,825 $71,050 $25,144 $ 5,776 $14,315 $11,406
Management fees 3,005 3,005 2,203 -- 1,521 3,533 3,331
Recoveries from tenants 33,048 16,719 9,742 4,488 1,040 2,349 1,989
Mortgage interest income 5,581 4,970 2,546 -- -- -- --
Other income 17,348 11,272 5,502 2,301 675 2,176 2,003
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues 338,555 183,791 91,043 31,933 9,012 22,373 18,729
----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Property expenses 69,078 37,211 18,090 7,034 2,086 4,580 4,522
Real estate taxes 34,103 18,124 10,217 3,325 595 1,354 1,204
General and administrative 24,830 19,331 9,755 3,122 1,399 4,357 4,658
Mortgage interest expense 47,162 30,300 15,226 4,992 2,798 7,650 7,203
Interest--amortization of
financing costs 2,099 2,084 1,370 617 373 192 138
Depreciation and
amortization 64,927 33,184 17,428 6,924 2,385 5,577 5,505
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total expenses 242,199 140,234 72,086 26,014 9,636 23,710 23,230
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations 96,356 43,557 18,957 5,919 (624) (1,337) (4,501)
Equity (loss) in joint
ventures and
corporations(1) 4,989 4,989 3,234 929 198 (5,953) (1,544)
Income (loss) from
continuing operations 101,345 48,546 22,191 6,848 (426) (7,290) (6,045)
Discontinued
operations-Construction
Company:
Income (loss) from
operations: (2,609) (2,609) (12) 477 102 440 136
Loss on sale (249) (249) -- -- -- -- --
Income (loss) before
minority interest 98,487 45,688 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 Partnerships (12,026) (5,988) (4,119) (1,670) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
extraordinary items $ 86,461 39,700 18,060 5,655 607 (5,311) (3,253)
==========
Extraordinary items, net of
minority interest (3,368) -- -- 8,898 1,554 --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)(2) $ 36,332 $18,060 $ 5,655 $ 9,505 $(3,757) $(3,253)
=========== =========== =========== =========== =========== ===========
Per Share of Common Stock
data:
Income from continuing
operations $ 1.61 $ 1.41 $ 1.09 $ 0.45 -- -- --
Discontinued operations-
Construction Company:
Income (loss) from
operations $ (0.04) $ (0.08) $ (0.00) $ 0.03 -- -- --
Loss on sale $ (0.00) $ (0.01) -- -- -- -- --
Income before
extraordinary items $ 1.57 $ 1.32 $ 1.09 $ 0.48 -- -- --
Extraordinary items $ (0.11) -- -- -- -- --
Net income $ 1.21 $ 1.09 $ 0.48 -- -- --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Beacon Properties Corporation
Selected Financial Information
Company Predecessor
----------------------------------------------- -----------------------------------
For the For the
For the For the Period Period
Year Year May 26, January 1, Years Ended
Pro Forma Ended Ended 1994 to 1994 to December 31,
1996 December December December May 25, -----------------------
(unaudited) 31, 1996 31, 1995 31, 1994 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash dividends declared $ 1.765 $ 1.24 $ 0.96 -- -- --
Cash dividends paid $ 1.765 $ 1.64 $ 0.56 -- -- --
Weighted average common
shares outstanding 55,116,480 29,932,327 16,525,245 11,816,380 -- -- --
BALANCE SHEET INFORMATION:
Real estate before
accumulated depreciation $ 2,030,630 $ 1,691,530 $ 471,142 $ 400,419 $ 82,198 $ 81,220 $ 78,580
Total assets 2,102,426 1,779,412 534,797 400,861 77,470 85,497 93,327
Mortgage debt 588,212 452,212 70,536 90,936 69,240 87,091 86,610
Note Payable, Credit
Facility 59,714 153,000 130,500 130,300 -- -- --
Total liabilities 714,425 671,711 239,013 261,100 129,836 143,451 142,015
Total equity (deficit) 1,229,450 999,150 258,822 102,038 (52,366) (57,954) (48,688)
(1) Including deductions
for: Depreciation and
amortization $ 4.033 $ 4,033 $ 2,306 $ 3,013
(2) Company share of
Operating Partnership 87.79% 86.89% 81.31% 77.20%
</TABLE>
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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
Douglas S. Mitchell 54 Senior Vice President--Leasing/Management and
Development
Robert J. Perriello 54 Senior Vice President and Chief Financial Officer
Donald B. Brooks 54 Senior Vice President and Chief Executive, Beacon
Properties Southeast
Charles H. Cremens 42 Senior Vice President and Chief Investment Officer
Carol G. Judson 44 Senior Vice President, Corporate Development
William A. Bonn, Esq 45 General Counsel
Nancy J. Broderick 40 Vice President and Treasurer
Steven D. Fessler 37 Vice President, Asset Management
Claude B. Hoopes 46 Vice President, Leasing
Henry Irwig 52 Vice President, Commercial Properties
G. Douglas Lanois 36 Controller
Erin R. O'Boyle 36 Vice President, Acquisitions
Thomas J. O'Connor 40 Vice President, Acquisitions
Randy J. Parker 38 Vice President, Investor Relations
James J. Whalen 33 Vice President, Information Systems
M. Wistar Wood 36 Vice President, Acquisitions
Directors:
Edwin N. Sidman 53 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.
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.
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<PAGE>
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. 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.
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 and psychology from
Curry College. She is a member of the Northeast Human Resources Association
and the American Management Association.
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.
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<PAGE>
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.
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 current
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. 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
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<PAGE>
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 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.
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<PAGE>
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.
Compensation Developments
Stock Option Plan. In connection with adopting its 1994 Stock Option Plan,
the Company reserved 1,102,080 shares of Common Stock for issuance. In 1995,
stockholders approved an increase in the number of shares of Common Stock
reserved for issuance under the 1994 Stock Option Plan to an aggregate of
2,723,565 shares. The Company intends to seek approval from its stockholders
at the 1997 Annual Meeting to increase the number of shares reserved for
issuance pursuant to the 1994 Stock Option Plan to 8% of the outstanding
shares of Common Stock and Units held by limited partners other than the
Company that are subject to redemption.
1997 Extraordinary Performance Stock Incentive Plan for Senior Executives.
In January 1997, the Compensation Committee of the Board of Directors
approved the Extraordinary Performance Stock Incentive Plan for Senior
Executives (the "Incentive Plan") which provides for grants of restricted
Common Stock to the Company's senior executives if certain performance goals
are met. The Company intends to seek approval from its stockholders at the
1997 Annual Meeting to approve the Incentive Plan.
Executive Severance Agreements/Special Termination Plan. In January 1997,
the Compensation Committee of the Board of Directors approved the adoption of
Executive Severance Agreements and a Special Termination Plan (the "Severance
Arrangements") which provide for cash severance payments and the continuation of
benefits to certain executive officers of the Company if such officer
experiences a "terminating event" (as defined below) within a given period of
time following a "change in control" (as defined below). The Severance
Agreements define a "change in control" as (i) any person becoming a beneficial
owner of the securities of the Company representing a specified percentage of
either (A) the combined voting power of the Company's then outstanding
securities having the right to vote for the Company's Board of Directors or (B)
the then outstanding shares of all classes of stock of the Company, or (ii)
individuals who, at the date of the Severance Agreements, constituted the Board
of Directors of the Company (the "Incumbent Directors") cease to constitute at
least a majority of the Company's Board of Directors, provided that any person
becoming a director whose election or nomination was approved by at least a
majority of the Incumbent Directors shall be considered an Incumbent Director,
or (iii) the stockholders of the Company approve (A) any consolidation or merger
where the Company's stock does not represent at least 50% of the voting shares
of the surviving company, (B) any sale, lease, exchange or transfer of all or
substantially all of the assets of the Company, or (C) any plan or proposal for
the liquidation or dissolution of the Company. The Severance Agreements define a
"terminating event" as any of the following events occurring subsequent to a
"change in control": (i) termination by the Company of the employment of the
executive for any reason other than (A) a willful act of dishonesty by the
executive, (B) a conviction of the executive of a crime involving moral
turpitude, (C) the gross or willful failure by the executive to substantially
perform his or her duties, or (D) the failure by the executive to perform his or
her full-time duties by reason of his or her death, disability or retirement, or
(ii) termination by the executive of his or her employment with the Company upon
the occurence of (A) a substantial adverse change in the nature or scope of the
executive's responsibilities, authorities, powers, functions or duties, (B) a
substantial reduction in the executive's annual base salary, (C) a relocation of
the Company's offices or (D) the failure by the Company to obtain an effective
agreement from any successor to assume and agree to perform the Severance
Agreement. The Company intends to execute definitive documentation regarding the
Severance Arrangements during the second quarter of 1997.
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<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief and general summary of the material federal income
tax considerations relating to the tax treatment of Common Stock. The following
assumes the Company has and will continue to qualify as a REIT. See "Federal
Income Tax Considerations" in the Prospectus. 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 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 Supplement with
respect to the transactions entered into or contemplated prior to the
effective date of such changes.
EACH INVESTOR IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF AN INVESTMENT IN THE COMMON
STOCK.
Taxation of Taxable U.S. Shareholders
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by such U.S. shareholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. shareholder" means a holder of Common Stock that
for U.S. federal income tax purposes is (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate, the income of which is subject to
United States federal income taxation regardless of its source, or (iv) a
trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust, and that (v) is not an entity that has special status under the Code
(such as a tax-exempt organization.) Distributions that are designated as
capital gain dividends will be taxed as long-term capital gains (to the
extent they do not exceed the Company's actual net capital gain for the
taxable year) without regard to the period for which the shareholder has held
his Common Stock. However, corporate shareholders may be required to treat up
to 20% of certain capital gain dividends as ordinary income. Distributions in
excess of current and accumulated earnings and profits will not be taxable to
a shareholder to the extent that they do not exceed the adjusted basis of the
shareholder's Common Stock, but rather will reduce the adjusted basis of such
stock. To the extent that such distributions in excess of current and
accumulated earnings and profits exceed the adjusted basis of a shareholder's
Common Stock, such distributions will be included in income as long-term
capital gain (or short-term capital gain if the shares of Common Stock have
been held for one year or less) assuming the shares of Common Stock are a
capital asset in the hands of the shareholder. In addition, any distribution
declared by the Company in October, November, or December of any year and
payable to a shareholder of record on a specified date in any such month
shall be treated as both paid by the Company and received by the shareholder
on December 31 of such year, provided that the distribution is actually paid
by the Company during January of the following calendar year.
Shareholders may not include in their individual income tax returns any
net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against its future
income (subject to certain limitations). Taxable distributions from the
Company and gain from the disposition of Common Stock will not be treated
as passive activity income and, therefore, shareholders generally will not be
able to apply any "passive activity losses" (such as losses from certain
types of limited partnerships in which the shareholder is a limited partner)
against such income. In addition, taxable distributions from the Company
generally will be treated as investment income for purposes of the investment
interest limitations. Capital gains from the disposition of shares of Common
Stock (or distributions treated as such) will be treated as investment income
only if the shareholder so elects, in which case such capital gains will be
taxed at ordinary income rates. The Company will notify shareholders after
the close of the Company's taxable year as to the portions of the
distributions attributable to that year that constitute ordinary income,
return of capital, and capital gain.
Taxation of Shareholders on the Disposition of the Securities
In general, any gain or loss realized upon a taxable disposition of the
shares of Common Stock by a shareholder who is not a dealer in securities
will be treated as long-term capital gain or loss if the shares of Common
Stock have been held for more than one year and otherwise as short-term
capital gain or loss. However, any loss upon a sale or exchange of shares of
Common Stock by a shareholder who has held such stock for six months or less
(after applying certain holding period rules), will be treated as a long-term
capital loss to the extent of distributions from the Company required to be
treated by such shareholder as long-term capital gain. All or a portion of
any loss realized upon a taxable disposition of
S-71
<PAGE>
shares of Common Stock may be disallowed if other shares of Common Stock
are purchased within 30 days before or after the disposition.
Information Reporting Requirements and Backup Withholding
The Company will report to its U.S. shareholders and the Service the amount
of distributions paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 31% with respect to
distributions paid unless such holder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact,
or (ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with the applicable
requirements of the backup withholding rules. A shareholder who does not
provide the Company with his correct taxpayer identification number also may
be subject to penalties imposed by the Service. Any amount paid as backup
withholding will be creditable against the shareholder's income tax
liability. In addition, the Company may be required to withhold a portion of
capital gain distributions to any shareholders who fail to certify their
nonforeign status to the Company. The Service issued proposed regulations in
April 1996 regarding the backup withholding rules. These proposed regulations
would alter the current system of backup withholding compliance.
Taxation of Tax-Exempt Shareholders
Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts ("Exempt Organizations"), generally
are exempt from federal income taxation. However, they are subject to taxation
on their unrelated business taxable income ("UBTI"). While many investments in
real estate generate UBTI, amounts distributed by the Company to an Exempt
Organization generally should not constitute UBTI. However, if any Exempt
Organization finances its acquisition of Common Stock with debt, a portion of
its income from the Company will constitute UBTI pursuant to the "debt-financed
property" rules. Furthermore, social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, and qualified group
legal services plans that are exempt from taxation under paragraphs (7), (9),
(17), and (20), respectively, of Code section 501(c) are subject to different
UBTI rules, which generally will require them to characterize distributions from
the Company as UBTI. In addition, in certain circumstances, a pension trust that
owns more than 10% of the Company's stock is required to treat a percentage of
the dividends from the Company as UBTI (the "UBTI Percentage"). The UBTI
Percentage is the gross income derived by the Company from an unrelated trade or
business (determined as if the Company were a pension trust) divided by the
gross income of the Company for the year in which the dividends are paid. The
UBTI rules applies to a pension trust holding more than 10% of the Company's
stock only if (i) the UBTI Percentage is at least 5%, (ii) the Company qualifies
as a REIT by reason of the modification of the 5/50 Rule that allows the
beneficiaries of the pension trust to be treated as holding stock of the Company
in proportion to their actuarial interests in the pension trust, and (iii)
either (A) one pension trust owns more than 25% of the value of the Company's
stock or (B) a group of pension trusts individually holding more than 10% of the
value of the Company's stock collectively own more than 50% of the value of the
Company's stock.
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.
S-72
<PAGE>
UNDERWRITING
Subject to the terms and conditions in the terms agreement and related
underwriting agreement (collectively, the "Underwriting Agreement") among the
Company and each of the underwriters named below (the "Underwriters"), the
Company has agreed to sell to each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Dean Witter
Reynolds Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Lehman
Brothers Inc., Raymond James & Associates, Inc. and Smith Barney Inc. are
acting as representatives (the "Representatives"), and each of the
Underwriters has severally agreed to purchase from the Company the respective
number of shares of Common Stock set forth opposite their respective names.
Number of
Underwriter Shares
-----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Lehman Brothers Inc.
Raymond James & Associates, Inc.
Smith Barney Inc.
-----------
Total 7,000,000
===========
In the Underwriting Agreement, the several Underwriters have agreed,
respectively, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase all of the shares of Common Stock being
sold pursuant to the Underwriting Agreement if any of such shares of Common
Stock are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased.
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to
1,050,000 additional shares of Common Stock to cover over-allotments, if any,
at the initial public offering price, less the underwriting discount set
forth on the cover page of this Prospectus Supplement. If the Underwriters
exercise this option, each Underwriter will have a firm commitment, subject
to certain conditions, to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
foregoing table bears to the shares of Common Stock initially offered hereby.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. Insofar as indemnification of the Underwriters for
liabilities arising under the Securities Act may be permitted pursuant to the
foregoing provisions, the Company has been informed that in the opinion of
the 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 Lynch,
directly or indirectly, sell, offer or contract to sell, grant any option for
the sale of, or otherwise dispose of any shares of Common Stock or Units or
any security convertible into or exercisable for shares of Common Stock or
Units.
The Common Stock is listed on the NYSE under the symbol "BCN."
S-73
<PAGE>
In connection with the Offering, the rules of the Commission permit the
Representatives to engage in certain transactions that stabilize the price of
the Common Stock. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement, the
Representatives may reduce that short position by purchasing Common 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 Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common 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 Common 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-74
<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-75
<PAGE>
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED APRIL 7, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell nor
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
PROSPECTUS
$600,000,000
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 $600,000,000 (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 April, 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.
2. The Company's Current Reports on Form 8-K dated January 5, 1996, February
20, 1996, July 23, 1996, October 18, 1996, December 20, 1996 and March 27, 1997
filed with the Commission pursuant to the Exchange Act, including all amendments
thereto.
3. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission pursuant to the
Exchange Act, including all amendments and reports updating such description.
4. 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 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.
2
<PAGE>
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 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 were approximately $604.8 million and $604.8
million, respectively, and their total consolidated debt plus their
proportionate share of total unconsolidated debt (other than the Rowes Wharf
Property debt) were approximately $697.5 million and $696.8 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.
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 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 Period
Year Ended Year Ended May 26, 1994 to January 1, 1994 to Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994 May 25, 1994 December 31, 1993 December 31, 1992
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
2.19 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, 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.
3
<PAGE>
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. 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;
4
<PAGE>
(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;
(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
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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.
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
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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.
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
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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 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.
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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, 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
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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 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
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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 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
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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 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
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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 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.
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.
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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 the
date of this Prospectus. 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.
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 March 26, 1997, the Company had outstanding 48,233,236
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
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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.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
Restrictions on Transfers
In order for the Company to qualify as a REIT under the Code, among other
things, not more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (defined in the
Code to include certain entities) during the last half of a taxable year
(other than the first year) (the "Five or Fewer Requirement"), and such
shares of capital stock must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months (other than the first
year) or during a proportionate part of a shorter taxable year. See "Federal
Income Tax Considerations." In order to protect the Company against the risk
of losing its status as a REIT on account of a concentration of ownership
among its stockholders, the Articles of Incorporation, subject to certain
exceptions, provide that no single holder may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 6.0% (the
"Ownership Limit") of the aggregate value of the Company's shares of Common
Stock. Pursuant to the Code, Common Stock held by certain types of entities,
such as pension trusts qualifying under Section 401(a) of the Code, United
States investment companies registered under the Investment Company Act,
partnerships, trusts and corporations, will be attributed to the beneficial
owners of such entities for purposes of the Five or Fewer Requirement (i.e.,
the beneficial owners of such entities will be counted as holders). The
Company's Articles of Incorporation limits such entities to holding no more
than 9.9% of the aggregate value
19
<PAGE>
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.
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.
20
<PAGE>
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 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,
21
<PAGE>
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.
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
22
<PAGE>
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.
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
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, 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, 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
23
<PAGE>
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, 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
20, 1996, 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 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, 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 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, 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.
24
<PAGE>
Location Maps
Los Angeles area map depicting the area surrounding the 10880 Wilshire Boulevard
property
Chicago area map depicting the area surrounding the Presidents Plaza and
Westbrook Corporate Center properties
Washington, D.C. area map depicting the area surrounding the Centerpointe
property
San Fransisco area map depicting the area surrounding the Lake Marriott and
Shoreline Technology Park properties
<PAGE>
No dealer, salesperson or other individual has been authorized to give any
information or make any representations not contained or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus in
connection with the offer made by this Prospectus Supplement and the
accompanying Prospectus. If given or made, such information or representation
must not be relied upon as having been authorized by the Company or the
Underwriters. This Prospectus Supplement and the accompanying Prospectus do
not constitute an offer to sell, or a solicitation of an offer to buy, the
Shares in any jurisdiction where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus
Supplement and the accompanying Prospectus nor any sale made hereunder shall,
under any 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary S-3
Risk Factors S-16
The Company S-22
Recent Developments S-22
Properties and Pending Acquisitions S-28
Use of Proceeds S-60
Price Range of Common Stock and
Distribution History S-61
Capitalization S-62
Selected Financial Information S-63
Management S-66
Federal Income Tax Considerations S-71
Underwriting S-73
Legal Matters S-75
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 3
Description of Debt Securities 4
Description of Preferred Stock 13
Description of Common Stock 18
Restrictions on Transfers of Capital Stock 19
Federal Income Tax Considerations 21
Plan of Distribution 22
Legal Matters 23
Experts 23
</TABLE>
7,000,000 Shares
BEACON PROPERTIES
CORPORATION
Common Stock
PROSPECTUS SUPPLEMENT
Merrill Lynch & Co.
Dean Witter Reynolds Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers
Raymond James &
Associates, Inc.
Smith Barney Inc.
April , 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated fees and expenses payable by the
Company and the Operating Partnership in connection with the issuance and
distribution of the Securities registered hereby (all amounts except the
registration fee are estimated):
Registration fee 303,031
Printing and duplicating expenses 10,000
Legal fees and expenses 50,000
Accounting fees and expenses 30,000
Miscellaneous 5,000
----------
Total $398,031
==========
Item 15. Indemnification of Directors and Officers.
The Company's Articles of Incorporation, as amended, and Bylaws, as amended,
provide certain limitations on the liability of the Company's Directors and
officers for monetary damages to the Company. The Articles of Incorporation,
as amended, and the Bylaws, as amended, obligate the Company to indemnify its
Directors and officers, and permit the Company to indemnify its employees and
other agents, against certain liabilities incurred in connection with their
service in such capacities. These provisions could reduce the legal remedies
available to the Company and the stockholders against these individuals.
The Company's Bylaws, as amended, require it to indemnify its officers,
Directors and certain other parties to the fullest extent permitted from time
to time by Maryland law. Maryland General Corporation Law ("MGCL") permits a
corporation to indemnify (a) any present or former Director or officer who
has been successful, on the merits or otherwise, in the defense of a
proceeding to which he was made a party by reason of his service in that
capacity, against reasonable expenses incurred by him in connection with the
proceeding and (b) any present or former director or officer against any
claim or liability unless it is established that (i) his act or omission was
committed in bad faith or was the result of active or deliberate dishonesty,
(ii) he actually received an improper personal benefit in money, property or
services or (iii) in the case of a criminal proceeding, he had reasonable
cause to believe that his act or omission was unlawful. The MGCL also permits
the Company to provide indemnification and advance expenses to a present or
former director or officer who served a predecessor of the Company in such
capacity, and to any employer or agent of the Company or a predecessor of the
Company.
The Company has entered into indemnification agreements with each of its
executive officers and Directors. The indemnification agreements require,
among other matters, that the Company indemnify its officers and directors to
the fullest extent permitted by law and advance to the officers and Directors
all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. Under these agreements, the
Company must also indemnify and advance all expenses incurred by officers and
Directors seeking to enforce their rights under the indemnification
agreements and may cover officers and Directors under the Company's
Directors' and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by law, it provides additional assurance to Directors and officers
that indemnification will be available because, as a contract, it cannot be
modified unilaterally in the future by the Board of Directors or the
Stockholders to eliminate the rights it provides. It is the position of the
SEC that indemnification of directors and officers for liabilities under the
Securities Act of 1933, as amended (the "Securities Act") is against public
policy and unenforceable pursuant to Section 14 of the Securities Act.
The Company provides coverage for its directors and officers under a
directors' and officers' liability insurance policy.
Item 16. Exhibits.
4.1 Articles of Incorporation (1).
4.2 Bylaws (2).
II-1
<PAGE>
4.3 Indenture for Senior Debt Securities (3).
4.4 Form of Senior Debt Security (included in Exhibit No. 4.3) (3)
4.5 Indenture for Subordinated Debt Securities (3).
4.6 Form of Subordinated Debt Security (included in Exhibit No. 4.5) (3).
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
Securities being registered (3).
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax matters (3).
12.1 Calculation of Ratios of Earnings to Fixed Charges (3).
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto) (3).
24.1 Powers of Attorney (included on the signature page hereof) (3).
(1) Previously filed as an exhibit to the Company's Current Report on Form
10-Q for the three months ended June 30, 1996.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form S-3 (File No. 333-17237).
(3) Previously filed as an exhibit to this Registration Statement.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the undersigned registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described under Item 15 above, or otherwise, the registrant has been
advised that in the opinion of the Securities and
II-2
<PAGE>
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act
under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants certify that they have reasonable grounds to believe that they
meet all of the requirements for filing on Form S-3 and have duly caused this
amendment to the registration statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Commonwealth
of Massachusetts on this 4th day of April, 1997.
BEACON PROPERTIES CORPORATION
By: /s/ Alan M. Leventhal
---------------------
Alan M. Leventhal
President and Chief Executive Officer
BEACON PROPERTIES, L.P.
By: Beacon Properties Corporation
Its: General Partner
By: /s/ Alan M. Leventhal
----------------------
Alan M. Leventhal
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons
in the capacities and on the date indicated. Each person listed below has
signed this amendment to the registration statement (i) in their capacity as
an officer or director of Beacon Properties Corporation ("BCN"), on behalf of
BCN, and (ii) as an officer or director of BCN, in its capacity as general
partner of Beacon Properties, L.P.
Signature Capacity Date
---------------------------- --------------------------------- --------------
/s/ Alan M. Leventhal President, Chief Executive
------------------------- Officer and Director
Alan M. Leventhal (Principal Executive
Officer) April 4, 1997
* Chairman of the Board
- -------------------------- of Directors April 4, 1997
Edwin N. Sidman
/s/ Lionel P. Fortin Executive Vice President;
- -------------------------- Chief Operating Officer and
Lionel P. Fortin Director
* Senior Vice President and
- -------------------------- Chief Financial Officer
Robert J. Perriello (Principal Financial Officer
and Accounting Officer) April 4, 1997
* Director
- --------------------------
Norman B. Leventhal April 4, 1997
* Director
- --------------------------
Dale F. Frey April 4, 1997
Director
- --------------------------
Graham O. Harrison
* Director
- --------------------------
William F. McCall, Jr. April 4, 1997
II-4
<PAGE>
Signature Capacity Date
---------------------------- --------------------------------- --------------
* Director
- --------------------------
Steven Shulman April 4, 1997
* Director
- --------------------------
Scott M. Sperling April 4, 1997
*By: Lionel P. Fortin
- --------------------------
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
---------------- ----------------------------------------------------------------------------------------
<S> <C>
4.1 Articles of Incorporation (1).
4.2 Bylaws (2).
4.3 Indenture for Senior Debt Securities (3).
4.4 Form of Senior Debt Security (included in Exhibit No. 4.3) (3).
4.5 Indenture for Subordinated Debt Securities (3).
4.6 Form of Subordinated Debt Security (included in Exhibit No. 4.5) (3).
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the Securities being
registered (3).
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax matters (3).
12.1 Calculation of Ratios of Earnings to Fixed Charges (3).
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto) (3).
24.1 Powers of Attorney (included on the signature page hereto) (3).
</TABLE>
(1) Previously filed as an exhibit to the Company's Current Report of Form
10-Q for the three months ended June 30, 1994.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form S-3 (333-17237).
(3) Previously filed as an exhibit to this Registration Statement.
II-6
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement, relating to the registration of an indeterminate number of shares of
preferred stock and common stock of Beacon Properties Corporation (the
"Company") with an aggregate offering price of up to $600,000,000 and debt
securities of Beacon Properties, L.P. (the "Operating Partnership") with an
aggregate public offering price of up to $400,000,000, on Form S-3 of our report
dated January 28, 1997, appearing in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 on our audits of the consolidated financial
position of the Company as of December 31, 1996 and 1995 and the consolidated
results of its operations and its cash flows for the years ended December 31,
1996 and 1995 and for the period May 26, 1994 to December 31, 1994, the combined
results of operations and cash flows of The Beacon Group, predecessor to the
Company, for the period January 1, 1994 to May 25, 1994, and the related
financial statement schedules of the Company as of December 31, 1996.
We also consent to the incorporation by reference of our report dated
January 21, 1997 on our audits of 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 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, which report was filed with the Securities and Exchange
Commission on the Form 10 of the Operating Partnership.
We also consent to the incorporation by reference of our report dated March
11, 1997 on our audit of the statement of excess of revenues over specific
operating expenses of 10880 Wilshire Boulevard in Westwood, California for the
year ended December 31, 1996, of our report dated March 18, 1997 on our audit of
the statement of excess of revenues over specific operating expenses of
Centerpointe in Fairfax, Virginia for the year ended December 31, 1996, and of
our report dated March 21, 1997 on our audit of the statement of excess of
revenues over specific operating expenses of Westbrook Corporate Center in
Westchester, Illinois for the year ended December 31, 1996, which reports were
filed with the Securities and Exchange Commission on the Form 8-K of the Company
dated March 27, 1997.
We also consent to the incorporation by reference of our report dated
February 6, 1997 on our audit of the statement of excess of revenues over
specific operating expenses of Shoreline Technology Park in Mountain View,
California for the year ended December 31, 1995, of our report dated December
20, 1996 on our audit of the statement of excess of revenues over specific
operating expenses of Lake Marriott Business Park in Santa Clara, California for
the year ended December 31, 1995, and of our report dated December 20, 1996 on
our audit of the statement of excess of revenues over specific operating
expenses of Presidents Plaza in Chicago, Illinois for the year ended December
31, 1995, which reports were filed with the Securities and Exchange Commission
on the Form 8-K of the Company dated December 20, 1996, as amended.
We also consent to the incorporation by reference of our audit report dated
September 27, 1996 on our audit of the statement of excess of revenues over
specific operating expenses of the Rosslyn Acquisitions in Rosslyn, Virginia for
the year ended December 31, 1995, of our report dated March 15, 1996 on our
audit of the statement of excess of revenues over specific operating expenses of
the New England Executive Park in Burlington, Massachusetts for the year ended
December 31, 1995, and of our report dated October 29, 1996 on our audit of the
statement of excess of revenues over specific operating expenses of 10960
Wilshire Boulevard in Westwood, California for the year ended December 31, 1995,
which reports were filed with the Securities and Exchange Commission on the Form
8-K of the Company dated October 18, 1996.
We also consent to the incorporation by reference of our report dated April
19, 1996 on our audit of the statement of excess of revenues over specific
operating expenses of Fairfax County Portfolio in Tysons Corner and Herndon,
Virginia for the year ended December 31, 1995, of our report dated July 3, 1996
on our audit of the statement of excess of revenues over specific operating
expenses of 1333 H Street in Washington, DC for the year ended December 31,
1995, of our report dated July 8, 1996 on our audit of the statement of excess
of revenues over specific operating expenses of AT&T Plaza in Oak Brook,
Illinois for the year ended December 10, 1995, and of our report dated July 8,
1996 on our audit of the statement of excess of revenues over specific operating
expenses of Tri-State International in Lincolnshire, Illinois for the year ended
December 31, 1995, which reports were filed with the Securities and Exchange
Commission on the Form 8-K of the Company dated July 23, 1996.
We also consent to the incorporation by reference of our report dated
February 14, 1996 on our audit of the statement of excess of revenues over
specified operating expenses of Perimeter Center, Atlanta, Georgia for the year
ended December 31, 1995, which report was filed with the Securities and Exchange
Commission on the Form 8-K of the Company dated February 20, 1996.
We also consent to the reference to our Firm under the caption "Experts".
Boston, Massachusetts /s/ COOPERS & LYBRAND L.L.P.
April 4, 1997
