As filed with the Securities and Exchange Commission on February 14, 1997
Registration Statement No. 333- ________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
BEACON PROPERTIES CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 04-3224258
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
Beacon Properties Corporation
50 Rowes Wharf
Boston, Massachusetts 02110
(617) 330-1400
(Name, Address and Telephone Number,
Including Area Code, of Agent for Service)
--------------------
copy to:
Gilbert G. Menna, P.C.
Kathryn I. Murtagh, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
(617) 570-1433
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Approximate date of commencement of proposed sale to public: From time
to time after this registration statement becomes effective, as determined by
the Unitholders.
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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Title of Securities Being Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Registered Offering Price Per Share Aggregate Offering Price Registration Fee
(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,125,809 $34.375 $38,699,684 $11,728
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</TABLE>
(1) This estimate is based on the average of the high and low sales prices on
the New York Stock Exchange of the Common Stock of Beacon Properties
Corporation on February 12, 1997, pursuant to Rule 457(c) under the
Securities Act of 1933, as amended, and is made solely for purposes of
determining the registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the
registrant 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.
================================================================================
<PAGE>
[RED HERRING]
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.
[/RED HERRING]
PROSPECTUS
Subject to Completion
Preliminary Prospectus dated February 14, 1997
1,125,809 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
("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 is a Maryland corporation and its Common Stock is listed
on the New York Stock Exchange under the symbol "BCN."
This Prospectus relates to the possible issuance by the Company of up to
1,125,809 shares (the "Redemption Shares") of common stock, par value $.01 per
share ("Common Stock"), of the Company, if and to the extent that TMPC, L.P.,
the holder of 540,059 units of limited partnership interest ("Units") in Beacon
Properties, L.P. (the "Operating Partnership"), Metropolitan Life Insurance
Company ("MetLife"), the holder of 585,750 Units, or any transferee of TMPC,
L.P. or MetLife (each, a "Unitholder" and together with TMPC, L.P. and MetLife,
the "Unitholders") exchanges such Units for Redemption Shares. The Units were
issued to TMPC, L.P. on February 15, 1996 in connection with the acquisition of
32 buildings located in Perimeter Center, suburban Atlanta, Georgia and to
MetLife on December 27, l996 in connection with the acquisition of the four
buildings known as Presidents Plaza, Chicago, Illinois. TMPC, L.P. may not,
without the prior written consent of the Operating Partnership, directly or
indirectly sell, offer or contract to sell, grant any option to purchase,
pledge, convert, distribute or otherwise dispose of ("Transfer") the Units until
February 16, 1997. MetLife may not Transfer the Units until December 28, l997.
The Unitholders and any agents, dealers or underwriters that participate
with the Unitholders in the distribution of the shares of Common Stock may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), in which case any commissions received by such
agents, dealers or underwriters and any profit on the resale of the shares of
Common Stock purchased by them may be deemed underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution" for
indemnification arrangements between the Company and the Unitholders.
Pursuant to the agreement of limited partnership of the Operating
Partnership (the "Partnership Agreement"), a Unitholder may tender all or a
portion of its Units to the Operating Partnership for redemption for the cash
equivalent of an equivalent number of shares of Common Stock; provided, however,
that the Company may, in its sole and absolute discretion, acquire any Units so
tendered for an equivalent number of shares of Common Stock or for the cash
equivalent of an equivalent number of shares of Common Stock.
The Company anticipates that it generally will elect to acquire directly
Units tendered for redemption and to issue Common Stock pursuant to this
Prospectus in exchange therefor rather than paying cash. As a result, the
Company may from time to time issue up to 1,125,809 Redemption Shares upon the
acquisition of Units tendered to the Operating Partnership for redemption.
Accordingly, the Company is registering the Redemption Shares to provide
Unitholders with freely tradeable securities upon redemption.
The Company will not receive any proceeds from the issuance of any
Redemption Shares, but will acquire Units tendered to the Operating Partnership
for redemption for which it elects to issue Redemption Shares. With each such
acquisition, the Company's interest in the Operating Partnership will increase.
The Common Stock is listed on the New York Stock Exchange ("NYSE") under
the symbol "BCN." To ensure that the Company maintains its qualification as a
REIT, ownership by any single person is limited to 6.0%, or 9.9% for certain
stockholders, of the value of the outstanding capital stock of the Company.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is__________ __, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Redemption Shares. This Prospectus, which constitutes part
of the Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits thereto on file with the Commission
pursuant to the Securities Act and the rules and regulations of the Commission
thereunder. The Registration Statement, including exhibits thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York,
New York 10048, and Northwestern Atrium Center, 500 W. Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and copies may be obtained at the prescribed
rates from the Public Reference Section of the Commission at its principal
office in Washington, D.C. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
The Company files information electronically with the Commission, and
the Commission maintains a Web Site that contains reports, proxy and information
statements and other information regarding registrants (including the Company)
that file electronically with the Commission. The address of the Commission's
Web Site is (http://www.sec.gov).
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and proxy statements and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
In addition, the Common Stock is listed on the New York Stock Exchange (the
"NYSE"), and such materials can be inspected and copied at the NYSE, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995, filed with the Commission pursuant to the Exchange Act.
2. The Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1996, June 30, 1996 and September 30, l996, filed with the Commission
pursuant to the Exchange Act.
3. The Company's Current Reports on Form 8-K, dated January 5, l996,
February 20, 1996, July 23, l996, October 18, l996, December 18, 1996 and
December 20, 1996, filed with the Commission pursuant to the Exchange Act,
including all amendments thereto.
4. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission pursuant to the
Exchange Act, including all amendments and reports updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of all shares of Common Stock registered
hereunder shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents.
Any statement contained in this Prospectus or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain, without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents.
Written requests should be mailed to Kathleen M. McCarthy, Beacon Properties
Corporation, 50 Rowes Wharf, Boston, Massachusetts 02110. Telephone requests may
be directed to (617) 330-1400.
2
<PAGE>
RISK FACTORS
This Prospectus 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 may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed below. An investment in the Common Stock involves
various risks. Unitholders and other prospective investors should carefully
consider the following information in conjunction with the other information
contained in this Prospectus before making an investment decision regarding the
Redemption Shares.
Tax Consequences to Unitholders of Exchange of Units
Tax Consequences of Exchange of Units. In the event that the Company
exercises its right to acquire Units tendered for redemption in exchange for
cash or Redemption Shares, the Company's acquisition of such Units will be
treated for tax purposes as a sale of the Units. Such a sale will be fully
taxable to the Unitholder and the Unitholder will be treated as realizing for
tax purposes an amount equal to the sum of the cash received or the value of the
Redemption Shares received in the exchange plus the amount of any Operating
Partnership liabilities allocable to the exchanged Units at the time of the
redemption or exchange. It is possible that the amount of gain recognized or
even the tax liability resulting from such gain could exceed the amount of cash
and the value of other property (i.e., Redemption Shares) received upon such
disposition. See "Description of Units and Redemption of Units --Tax
Consequences of Redemption." In addition, the ability of the Unitholder to sell
a substantial number of Redemption Shares in order to raise cash to pay tax
liabilities associated with the redemption of Units may be limited as a result
of fluctuations in the market price of the Common Stock, and the price the
Unitholder receives for such shares may not equal the value of its Units at the
time of redemption or exchange.
In the event that the Company does not exercise its right to acquire
Units tendered for redemption in exchange for cash or Redemption Shares, and
such Units are redeemed by the Operating Partnership for cash, the tax
consequences may differ. See "Description of Units and Redemption of Units."
Potential Change in Investment Upon Redemption of Units. If a Unitholder
exercises its right to require the redemption of all or a portion of its Units,
the Unitholder may receive cash or, at the option of the Company, Redemption
Shares in exchange for its Units. If the Unitholder receives cash from either
the Operating Partnership or the Company, the Unitholder will not have any
interest in the Company or the Operating Partnership (except to the extent that
it retains Units) and will not benefit from any subsequent increases in the
value of Common Stock and will not receive any future distributions from the
Company or the Operating Partnership (unless the Unitholder retains or acquires
in the future additional Common Stock or Units). If the Unitholder receives
Common Stock, the Unitholder will become a stockholder of the Company rather
than a holder of Units in the Operating Partnership. See "Description of Units
and Redemption of Units--Comparison of Ownership of Units and Common Stock."
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 224%. The Company's
ability to manage its growth effectively will require it to apply successfully
its experience managing its existing portfolio to new markets and to an
increased number of properties. There can be no assurance that the Company will
be able to manage these operations effectively.
Real Estate Financing Risks
Debt Financing and Existing Debt Maturities. The Company intends to
finance the acquisition of additional properties through the use of debt and
equity financing. The Company is therefore subject to risks normally associated
with debt financing, including the possibility that the Company will have
insufficient cash flow to meet required principal and interest payments, will be
unable to refinance existing indebtedness (which in most cases will not be fully
amortized at maturity), or will be unable to secure favorable refinancing terms.
3
<PAGE>
Currently, the Company's total consolidated debt is approximately $605
million, and its total consolidated debt plus its proportionate share of total
unconsolidated debt (other than Rowes Wharf) is approximately $697.8 million.
The Company (together with an affiliate) and the Equitable Life Assurance
Society of the United States, on behalf of its Prime Property Fund
("Equitable"), the Company's joint venture partner in Rowes Wharf Associates,
each holds one-half of the mortgage debt on the Rowes Wharf property. The
Company's current consolidated mortgage indebtedness of approximately $452
million is secured by the Company's 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 $46.4 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 a an affiliate) currently holds one-half of the Rowes Wharf mortgage
indebtedness. Although the Company has adopted a Debt to Market Capitalization
Ratio policy, the organizational documents of the Company do not contain any
limitation on the amount of indebtedness the Company may incur. Accordingly, the
Board of Directors could alter or eliminate this policy and would do so, for
example, if it were necessary in order for the Company to continue to qualify as
a REIT.
The Company anticipates that only a small portion of the principal of
the Company's mortgage indebtedness will be repaid prior to maturity. However,
if the Company does not have funds sufficient to repay such indebtedness at
maturity, the Company may need to refinance indebtedness through additional debt
financing or equity offerings. If the Company is unable to refinance this
indebtedness on acceptable terms, the Company may be forced to dispose of
properties upon disadvantageous terms, which could result in losses to the
Company and adversely affect the amount of cash available for distribution to
stockholders. If prevailing interest rates or other factors result in higher
interest rates at a time when the Company must refinance its indebtedness, the
Company's interest expense would increase, which would adversely affect the
Company's results of operations and its ability to pay expected distributions to
stockholders. Further, if any of the Company's 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, with
a consequent loss of income and asset value to the Company. Even with respect to
nonrecourse indebtedness, the lender may have the right to recover deficiencies
from the Company in certain circumstances, including fraud and environmental
liabilities.
Risk of Interest Variable Rates. Outstanding advances under the Credit
Facility bear interest at a variable rate. The Company may incur additional
variable rate indebtedness in the future. Accordingly, increases in interest
rates could increase the Company's interest expense, which could adversely
affect the Company's results of operations and its ability to pay expected
distributions to stockholders. An increase in interest expense could also cause
the Company to be in default under certain Credit Facility covenants.
Limited Geographic Diversification
Approximately 39% and 24% of the Company's proportionate share of the
rentable square feet of its properties are located in the greater Boston
metropolitan area and the north central Atlanta office market, respectively.
Consequently, the Company will continue to rely upon the demand for office and
other commercial space in the greater Boston and Atlanta metropolitan areas.
Although the Boston and Atlanta areas continue to recover from a severe economic
downturn in real estate markets that occurred in the late 1980s and early 1990s,
there can be no assurance that economic conditions in the Boston and Atlanta
areas will continue to improve.
4
<PAGE>
Risks Involved in Joint Ownership of Properties
The Company holds (i) a 76% general and limited partner interest in the
property partnership that owns the Center Plaza Property, (ii) a 50% general
partner interest in the property partnership that owns the One Post Office
Square Property, (iii) a 90% limited partner interest (through Beacon Property
Management Corporation and Beacon Construction Company, Inc.) in Rowes Wharf
Limited Partnership, a limited partnership that owns a 50% general partner
interest in Rowes Wharf Associates, the entity that owns the hotel space and
leases the office and retail space at the Rowes Wharf Property, (iv) a 10%
general and limited partner interest in the property partnership that owns the
Polk and Taylor Buildings Property and (v) approximately 51.6% of the common
stock of a private REIT which holds a direct fee interest in the 75-101 Federal
Street Property. The Company is not in a position to exercise sole decision
making authority regarding One Post Office Square, Rowes Wharf, the Polk and
Taylor Buildings or 75-101 Federal Street. However, the Company is responsible
for the day-to-day affairs of each such Property.
Joint ownership of Properties may, under certain circumstances, involve
risks not otherwise present, including the possibility that the Company's
partners or co-investors might become bankrupt, that such partners or
co-investors might at any time have economic or other business interests or
goals that are inconsistent with the business interests or goals of the Company,
and that such partners or co-investors may be in a position to take action
contrary to the instructions or the requests of the Company or contrary to the
Company's policies or objectives, including the Company's policy with respect to
maintaining its qualification as a REIT. Joint ownership also involves the
potential risk of impasse on decisions, such as a sale, because neither the
Company nor the partners or co-investors have full control over the entity
owning the Property. Consequently, actions by such partners or co-investors
might result in subjecting jointly- owned Properties to additional risk.
The Company will, however, seek to maintain sufficient control of the
entities holding jointly- owned Properties to permit the Company's business
objectives to be achieved. Any capital contribution by the Company or the
Operating Partnership to the property partnerships that own (directly or
indirectly) the Rowes Wharf and Center Plaza Properties requires the approval of
the Directors of the Company who are neither officers of the Company nor
affiliated with The Beacon Companies. The Company's organizational documents do
not limit the amount of available funds that may be invested in partnerships,
joint ventures or co-investments.
Possible Adverse Consequences of Limits on Ownership of Common Stock
In order to maintain its REIT qualification, not more than 50% in value
of the outstanding capital stock of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Internal Revenue
Code of 1986, as amended (the "Code"), to include certain entities) during the
last half of a taxable year (other than the first year) (the "Five or Fewer
Requirement"). In order to protect the Company against the risk of losing its
REIT status due to a concentration of ownership among its stockholders, the
Articles of Incorporation of the Company limit ownership of the issued and
outstanding Common Stock by any single stockholder to 6.0% of the aggregate
value of the Company's shares of capital stock from time to time; provided,
however, that entities whose ownership of Common Stock is attributed to the
beneficial owners of such entities for purposes of the Five or Fewer Requirement
(such as pension trusts qualifying under Section 401(a) of the Code, United
States investment companies registered under the Investment Company Act of 1940,
as amended, partnerships, trusts, and corporations) 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.
5
<PAGE>
Risks of Acquisition, Development and Construction Activities
The Company intends to acquire existing office and commercial
properties to the extent that they can be acquired on advantageous terms and
meet the Company's investment criteria. In light of current conditions in the
Company's target market areas, the Company anticipates that in the near future
additional properties will be added to the Company's portfolio through
acquisitions rather than new development and construction. Acquisitions of
commercial properties entail general investment risks associated with any real
estate investment, including the risk that investments will fail to perform as
expected or that estimates of the cost of improvements to bring an acquired
property up to standards established for the intended market position may prove
inaccurate.
The Company also intends to continue the development and construction
of office and other commercial properties, in accordance with the Company's
development and underwriting policies as opportunities arise in the future.
Risks associated with such development and construction activities include the
risk that: the Company may abandon development opportunities after expending
resources to determine feasibility; construction costs of a project may exceed
original estimates; occupancy rates and rents at a newly completed property may
not be sufficient to make the properties profitable; financing may not be
available on favorable terms for development of a property; and construction and
lease-up may not be completed on schedule, resulting in increased debt service
expense and construction costs. Development activities are also subject to risks
relating to the inability to obtain, or delays in obtaining, all necessary
zoning, land-use, building, occupancy, and other required governmental permits
and authorizations. If any of the foregoing occurs, the Company's ability to
make expected distributions to stockholders could be adversely affected. In
addition, new development activities, regardless of whether or not they are
ultimately successful, typically require a substantial portion of management's
time and attention.
The Company anticipates that future development will be financed, in
whole or in part, through additional equity offerings or under lines of credit
or other forms of secured or unsecured construction financing that will result
in the risk that, upon completion of construction, permanent financing for newly
developed properties may not be available or may be available only on
disadvantageous terms. If a project is unsuccessful, the Company's losses may
exceed its investment in the project.
Real Estate Investment Risks
General Risks. Investments of the Company are subject to the risks
incident to the ownership and operation of commercial real estate generally. The
yields available from equity investments in real estate depend on the amount of
income generated and expenses incurred. If the Company's properties do not
generate revenues sufficient to meet operating expenses, including debt service
and capital expenditures, the Company's results of operations and ability to
make distributions to its stockholders will be adversely affected.
A commercial property's revenues and value may be adversely affected by
a number of factors, including the national, state and local economic climate
and real estate conditions (such as oversupply of or reduced demand for space
and changes in market rental rates); the perceptions of prospective tenants of
the safety, convenience and attractiveness of the properties; the ability of the
owner to provide adequate management, maintenance and insurance; the ability to
collect all rent from tenants on a timely basis; the expense of periodically
renovating, repairing and reletting spaces; and the increase of operating costs
(including real estate taxes and utilities) that may not be passed through to
tenants. Certain significant expenditures associated with investments in real
estate (such as mortgage payments, real estate taxes, insurance and maintenance
costs) are generally not reduced when circumstances cause a reduction in rental
revenues from the property. If a property is mortgaged to secure the payment of
indebtedness and if the Company is unable to meet its mortgage payments, a loss
could be sustained as a result of foreclosure on the property or the exercise of
other remedies by the mortgagee. In addition, real estate values and income from
properties are also affected by such factors as compliance with laws, including
tax laws, interest rate levels and the availability of financing.
Tenant Defaults. Substantially all of the Company's income is derived
from rental income from real property. Consequently, the Company's results of
operations and ability to make expected distributions
6
<PAGE>
to stockholders could be adversely affected if a significant number of tenants
at its 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 Company's properties may also seek
protection under the bankruptcy laws, which could result in rejection and
termination of such tenant's lease and thereby cause a reduction in the cash
available for distribution by the Company. If a tenant rejects its lease, the
Company's claim for breach of the lease would (absent collateral securing the
claim) be treated as a general unsecured claim. The amount of the claim would be
capped at the amount owed for unpaid pre-petition lease payments unrelated to
the rejection, plus the greater of one year's lease payment or 15% of the
remaining lease payments payable under the lease (but not to exceed the amount
of three years' lease payments). No assurance can be given that the Company will
not experience significant tenant defaults in the future.
Ground Leases. Two of the Company's properties are the subject of
long-term ground leases. In the case of the lease on the office and retail
portions of the Rowes Wharf property, the landlord becomes the owner of the
portion of the property subject to the lease at the expiration of the term of
the lease or at the earlier termination by reason of a breach of the lease by
the tenant. The lease on the Rowes Wharf property, which expires in 2065, does
not contain an extension option but includes an option to purchase. The ground
lease on the South Station property expires in 2024. The landlord becomes the
owner of the South Station property at the expiration of the term of the ground
lease or at the earlier termination by reason of a breach of the lease by the
tenant. The Company will have the right to extend the lease for two additional
15-year terms, subject to the landlord's right to terminate such additional
periods upon two years' notice and payment to the Company of certain termination
payments.
Market Illiquidity. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to vary
its portfolio promptly in response to changes in economic or other conditions.
In addition, provisions of the Code limit the Company's ability to sell
properties held for fewer than four years, which may affect the Company's
ability to sell properties without adversely affecting returns to holders of
Common Stock.
Operating Risks. The Company's 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 Company's 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. The Company's tenants are currently
obligated to pay these escalating costs, although there can be no assurance that
tenants will agree to pay such costs upon renewal or that new tenants will agree
to pay such costs. If operating expenses increase, the local rental market may
limit the extent to which rents may be increased to meet such increased expenses
without decreasing occupancy rates. While the Company implements cost-saving
incentive measures at each of its properties, if any of the foregoing occurs,
the Company's results of operations and its ability to make distributions to
stockholders could be adversely affected.
Risk of Investment in Mortgage Debt
The Company may invest in mortgages that are secured by existing office
and commercial properties. In 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.
7
<PAGE>
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 its 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 Company's properties by qualified independent environmental
engineers. The purpose of Phase I ESAs is to identify potential sources of
contamination for which the properties may be responsible and to assess the
status of environmental regulatory compliance. The ESAs have not revealed any
environmental liability or compliance concerns that the Company believes would
have a material adverse affect on the Company's business, assets, results of
operations or liquidity, nor is the Company aware of any such liability or
concerns. Nevertheless, it is possible that these ESAs did not reveal all
environmental liabilities or compliance concerns or that material environmental
liabilities or compliance concerns exist of which the Company is currently
unaware.
The Company has not been notified by any governmental authority, and
has no other knowledge of, any material noncompliance, liability or claim
relating to hazardous or toxic substances or other environmental substances in
connection with any of its properties except as previously disclosed in
documents incorporated herein by reference or as noted below.
New England Executive Park Portfolio. Site assessments at the New
England Executive Park Portfolio have identified the presence of
trichloroethylene in the groundwater at one monitoring well on the northern
perimeter of the property. The groundwater beneath the property flows into an
aquifer, which supplies drinking water to the Town of Burlington. The
concentrations that have been discovered at the property to date are slightly
above the standards established for trichloroethylene in areas contributing to
drinking water supplies and, as a result, must be reported to the Massachusetts
Department of Environmental Protection (the "DEP"). The owner of the property to
the north of the New England Executive Park Portfolio, which is upgradient of
the New England Executive Park Portfolio, has filed with the DEP indicating the
presence of trichloroethylene in the groundwater of such property. The former
owner of the New England Executive Park Portfolio filed with the DEP to
establish the property's "Downgradient Property Status" under applicable
regulations, indicating that the property is not a source of the
trichloroethylene contamination that has been identified. The DEP has stated
that its policy is not to require downgradient property owners to perform
remediation under these circumstances. In addition, the Town of Burlington has
allocated funds for, and is in the process of constructing, a groundwater
treatment facility at its drinking water supply that draws from the subject
aquifer. The Company has been advised that such treatment facility has the
capacity to treat any contaminants which may be derived from the groundwater
passing beneath the New England Executive Park Portfolio. The Town's water
treatment facility and the present policy of the DEP with respect to
downgradient property owners do not relieve the
8
<PAGE>
Company of potential liability for the presence of the identified
trichloroethylene, although the Company does not believe that any such liability
would have a material adverse effect on the Company.
245 First Street. Site assessments performed at 245 First Street have
identified the presence of oil in one soil sample taken at the property in an
amount that slightly exceeds the concentration that requires reporting to the
DEP. Based on these site assessments, however, an environmental consultant has
advised the Company that applicable regulatory requirements can be satisfied
without the need to perform any remediation at the property. As the owner of the
property, the Company could be held liable for costs associated with the
contamination that has been identified, although the Company does not believe
that such costs would have a material adverse effect on the Company.
Risks of Investments in Subsidiaries
The capital stock of each of Beacon Property Management Corporation,
Beacon Construction Company, Inc. and Beacon Design Corporation (collectively,
the "Subsidiary Corporations") is divided into two classes: voting and nonvoting
common stock. Of the voting common stock, 99% is held by officers and/or
directors of such Subsidiary Corporations (each of whom, as of the date of this
Prospectus, 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,
could adversely impact the Company's results of operations. The bylaws of each
of the Subsidiary Corporations require that the voting common stock in such
Subsidiary Corporation be held by officers of such Subsidiary Corporation at all
times and require holders of voting common stock to enter into an agreement to
that effect.
Effect of Market Interest Rates on Price of Common Stock
One of the factors that will influence the market price of the Common
Stock in public markets is the annual yield on the price paid for shares of
Common Stock from distributions by the Company. An increase in market interest
rates may lead prospective purchasers of the Common Stock to demand a higher
annual yield from future distributions. Such an increase in the required
distributions yield may adversely affect the market price of the Common Stock.
9
<PAGE>
THE COMPANY
General
The Company 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 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 an operating partnership, two subsidiary corporations and two
subsidiary limited partnerships. Beacon Properties, L.P. is a Delaware limited
partnership (the "Operating Partnership"), of which the Company is the sole
general partner. The Company conducts third-party management operations through
Beacon Property Management Corporation, a Delaware corporation (the "Management
Company"), and conducts third-party tenant space design services through Beacon
Design Corporation, a Massachusetts corporation (the "Design Company"). The
Company conducts management operations for wholly-owned properties through
Beacon Property Management, L.P., a Delaware limited partnership (the
"Management Partnership") and conducts tenant space design services for
wholly-owned properties through Beacon Design, L.P., a Delaware limited
partnership (the "Design Partnership").
The Company's executive offices are located at 50 Rowes Wharf in
Boston, Massachusetts 02110 and its telephone number at that location is
617-330-1400.
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<PAGE>
The Properties
Set forth below are summary descriptions of the Properties.
<TABLE>
<CAPTION>
Percent
Year Rentable Leased at
Built/ Ownership Property Area in December 31,
Property Renovated Interest(1) Location Square Feet 1996
-------- --------- ----------- -------- ----------- ----
<S> <C> <C> <C> <C> <C>
Downtown Boston Office Market:
75-101 Federal Street............... 1985-1988 51.6% Boston, MA 812,000 92%
One Post Office Square.............. 1981 50% Boston, MA 764,129 99%
Center Plaza........................ 1966-1969 (2) Boston, MA 649,359 93%
150 Federal Street.................. 1988 100% Boston, MA 530,279 99%
Rowes Wharf......................... 1987 45% Boston, MA 344,326 100%
Russia Wharf........................ 1978-1882 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(3).................... 1988 100% Boston, MA 148,591 100%
------- ----
4,037,629 96%
--------- -----
Greater Boston Suburban Office Market:
Wellesley Office Park(4)............ 1963-1984 100% Wellesley, MA 622,862 100%
Crosby Corporate Center(5).......... 1995-1996 100% Bedford, MA 336,000 88%
Westwood Business Centre............ 1985 100% Westwood, MA 160,400 100%
New England Executive Office Park (6) 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...................... 1098 100% Cambridge, MA 110,000 92%
245 First Street(7)................. 1985-1986 100% Cambridge, MA 263,227 100%
------- ----
473,527 98%
------- -----
North Central Atlanta Office Market:
Perimeter Center Portfolio(8)....... 1970-1989 100% Atlanta, GA 3,302,136 98%
--------- -----
Arlington County, Virginia Office Market:
The Polk and Taylor Buildings....... 1970 100% Arlington, VA 890,000 100%
1300 North 17th 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%
------- ----
550,360 99%
------- -----
Washington, D.C. Office Market:
1333 H Street, N.W.................. 1984(9) 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(10)......... 1986 100% Lincolnshire, IL 548,000 74%
Presidents Plaza (11)............... 100% Chicago, IL 791,000 90%
------- -----
1,564,318 86%
--------- -----
West Los Angeles Office Market:
10960 Wilshire...................... 1971-1992 100% Westwood, CA 543,804 89%
------- -----
Suburban Philadelphia Office Market:
Westlakes Office Park(12)........... 1988-1990 100% Berwyn, PA 443,592 98%
------- -----
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<PAGE>
Suburban Philadelphia Office Market:
Shoreline Technology Park (13)...... 1985-1991 100% Mountain Valley, CA 727,000 100%
Lake Marriott Business Park (14).... 1981 100% Santa Clara, CA 400,000 100%
------- ----
1,127,000 100%
--------- ----
Total/Weighted Average 15,773,026 96%
========== =====
</TABLE>
(1) The Company holds a general partner interest in One Post Office Square, a
general partner and limited partner interest in Center Plaza and the Polk
and Taylor Buildings and an indirect limited partner interest in Rowes
Wharf Associates. The Company holds approximately 51.6% of the common stock
of BeaMetFed, Inc., 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.
(2) The Company holds a 1% general partner interest, a 75% limited partner
interest and an option to purchase the remaining 24% limited partner
interest in the partnership that owns the Center Plaza Property.
(3) The Company owns a ground leasehold interest in the South Station Property
which expires in 2024 but may be extended, at the Company's option, for two
additional 15-year terms. Fee title to this Property is owned by an
unaffiliated third party. This Property was originally built in the early
1900s and was fully rehabilitated in 1988. This Property includes a
significant retail component.
(4) The Wellesley Office Park consists of eight office buildings.
(5) The Crosby Corporate Center is a Property which consists of six office
buildings.
(6) 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.
(7) 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.
(8) The Perimeter Center Property consists of 32 buildings and six ground
leases.
(9) 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.
(10) The Tri-State International complex consists of five office buildings.
(11) Presidents Plaza consists of four office buildings.
(12) The Westlakes Office Park consists of four office buildings.
(13) Shoreline Technology Park consists of twelve office buildings.
(14) Lake Marriott Business Park consists of seven office buildings.
12
<PAGE>
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Articles of Incorporation (the "Articles of Incorporation") and Bylaws
(the "Bylaws"), each as amended, as in effect.
General
Under the Articles of Incorporation, the Company has authority to issue
100 million shares of Common Stock, par value $.01 per share. Under Maryland
law, stockholders generally are not responsible for the corporation's debts or
obligations. At February 11, 1997, there were 48,128,281 shares of Common Stock
issued and outstanding.
Terms
All shares of Common Stock offered hereby have been duly authorized, and
are fully paid and non-assessable. Subject to the preferential rights of any
other shares or series of stock and to the provisions of the Company's Articles
of Incorporation regarding excess stock, $.01 par value per share ("Excess
Stock"), holders of shares of Common Stock will be entitled to receive dividends
on shares of Common Stock if, as and when authorized and declared by the Board
of Directors of the Company out of assets legally available therefor and to
share ratably in the assets of the Company legally available for distribution to
its stockholders in the event of its liquidation, dissolution or winding-up
after payment of, or adequate provision for, all known debts and liabilities of
the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, each outstanding share of Common Stock entitles the
holder to one vote on all matters submitted to a vote of stockholders, including
the election of Directors and, except as otherwise required by law or except as
provided with respect to any other class or series of stock, the holders of
Common Stock will possess the exclusive voting power. There is no cumulative
voting in the election of Directors, which means that the holders of a majority
of the outstanding shares of Common Stock can elect all of the Directors then
standing for election, and the holders of the remaining shares of Common Stock
will not be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the Maryland General Corporation Law (the "MGCL"), a
corporation generally cannot dissolve, amend its Articles of Incorporation,
merge, sell all or substantially all of its assets, engage in a share exchange
or engage in similar transactions outside the ordinary course of business unless
approved by the affirmative vote of stockholders holding at least two-thirds of
the shares entitled to vote on the matter unless a lesser percentage (but not
less than a majority of all of the votes to be cast on the matter) is set
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<PAGE>
forth in the corporation's Articles of Incorporation. The Company's Articles of
Incorporation do not provide for a lesser percentage in such situations.
Transfer Agent
The transfer agent and registrar for the Common Stock is Boston
EquiServe.
RESTRICTIONS ON TRANSFERS OF COMMON 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
limit such entities to holding no more than 9.9% of the aggregate value of the
Company's shares of capital stock (the "Look-Through Ownership Limit"). Any
transfer of shares of capital stock or of any security convertible into shares
of capital stock that would create a direct or indirect ownership of shares of
capital stock in excess of the Ownership Limit or the Look-Through Ownership
Limit or that would result in the disqualification of the Company as a REIT,
including any transfer that results in the shares of capital stock being owned
by fewer than 100 persons or results in the Company being "closely held" within
the meaning of Section 856(h) of the Code, shall be null and void, and the
intended transferee will acquire no rights to the shares of capital stock. The
foregoing restrictions on transferability and ownership will not apply if the
Board of Directors determines that it is no longer in the best interests of the
Company to attempt to qualify, or to continue to qualify, as a REIT. The Board
of Directors may, in its sole discretion, waive the Ownership Limit and the
Look-Through Ownership Limit if evidence satisfactory to the Board of Directors
and the Company's tax counsel is presented that the changes in ownership will
not then or in the future jeopardize the Company's REIT status and the Board of
Directors otherwise decides that such action is in the best interest of the
Company.
Shares of capital stock owned, or deemed to be owned, or transferred to
a stockholder in excess of the Ownership Limit or the Look-Through Ownership
Limit will automatically be converted into shares of Excess Stock that will be
transferred, by operation of law, to the Company as trustee of a trust for the
exclusive benefit of the transferees to whom such shares of capital stock may be
ultimately transferred without violating the Ownership Limit or the Look-Through
Ownership Limit. While the Excess Stock is held in trust, it will not be
entitled to vote, it will not be considered for purposes of any stockholder vote
or the determination of a quorum for such vote, and, except upon liquidation, it
will not be entitled to participate in dividends or other distributions. Any
distribution paid to a proposed transferee of Excess
14
<PAGE>
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.
DESCRIPTION OF UNITS AND REDEMPTION OF UNITS
General
Unitholders may, subject to certain limitations, require the Operating
Partnership to redeem all or a portion of their Units (the "Redemption Right").
This Redemption Right shall be exercised pursuant to a notice of redemption
delivered to the Operating Partnership, with a copy delivered to the Company.
Upon
15
<PAGE>
redemption, a Unitholder will receive for each Unit redeemed cash in an amount
equal to the market value (as defined below) of a share of Common Stock (subject
to certain adjustments in the event of stock dividends and stock splits);
provided, however, that the Company may, in its sole discretion, by notice to
the Unitholder within five business days after receipt of the notice of
redemption, elect to acquire any Unit presented to the Operating Partnership for
redemption for cash or for one share of Common Stock (subject to the same
adjustments). The market value of the Common Stock for purposes of redeeming
Units will be equal to the average of the closing trading price of the Common
Stock for the ten trading days prior to the day on which the redemption notice
was received by the Operating Partnership.
The Company anticipates that it generally will elect to acquire any
Units presented to the Operating Partnership for redemption by the issuance of
the Redemption Shares. Such an acquisition by the Company will be treated as a
sale of the Units to the Company for Federal income tax purposes. See "--Tax
Consequences of Redemption." Upon a redemption for cash, a Unitholder's right to
receive distributions with respect to the Units redeemed will cease. Upon the
receipt of Redemption Shares, a Unitholder will have rights as a stockholder of
the Company, including the right to receive dividends from the time of its
acquisition of the Redemption Shares.
A Unitholder must notify the Company of its desire to require the
Operating Partnership to redeem Units. A Unitholder must request the redemption
of at least 1,000 Units. No redemption can occur if the delivery of Redemption
Shares would be prohibited under the provisions of the Company's Articles of
Incorporation to protect the Company's qualification as a REIT.
Tax Consequences of Redemption
The following discussion summarizes certain Federal income tax
considerations that may be relevant to a Unitholder should it exercise its right
to redeem its Units.
Tax Treatment of Exchange or Redemption of Units. If the Company elects
to purchase Units tendered for redemption, the Partnership Agreement provides
that each of the Unitholder, the Operating Partnership and the Company shall
treat the transaction between the Unitholder and the Company as a sale of Units
by the Unitholder at the time of such redemption. Such sale will be fully
taxable to the Unitholder and the Unitholder will be treated as realizing for
tax purposes an amount equal to the sum of the cash value or the value of the
Common Stock received in the exchange plus the amount of any Operating
Partnership liabilities allocable to the redeemed Units at the time of the
redemption. The determination of the amount of gain or loss is discussed more
fully below. If the Company does not elect to purchase a Unitholder's Units
tendered for redemption and the Operating Partnership redeems such Units for
cash that the Company contributes to the Operating Partnership to effect such
redemption, the redemption likely also would be treated for tax purposes as a
sale of such Units to the Company in a fully taxable transaction, although the
matter is not free from doubt. In that event, the Unitholder would be treated as
realizing an amount equal to the sum of the cash received in the exchange plus
the amount of any Operating Partnership liabilities allocable to the redeemed
Units at the time of the redemption. The determination of the amount and
character of gain or loss in the event of such a sale is discussed more fully
below. See "--Tax Treatment of Disposition of Units by a Limited Partner
Generally."
If the Company does not elect to purchase Units tendered for redemption
and the Operating Partnership redeems a Unitholder's Units for cash that is not
contributed by the Company to effect the redemption, the tax consequences would
be the same as described in the previous paragraph, except that, if the
Operating Partnership redeems less than all of a Unitholder's Units, the
Unitholder would not be permitted to recognize any loss occurring on the
transaction and would recognize taxable gain only to the
16
<PAGE>
extent that the cash, plus the amount of any Operating Partnership liabilities
allocable to the redeemed Units, exceeded the Unitholder's adjusted basis in all
of its Units immediately before the redemption.
If the Company contributes cash to the Operating Partnership to effect a
redemption, and in the event that the redemption transaction is treated as the
redemption of a Unitholder's Units by the Operating Partnership rather than a
sale of Units to the Company, the income tax consequences to the Unitholder
would be as described in the preceding paragraph.
Tax Treatment of Disposition of Units by a Limited Partner Generally. If
a Unit is disposed of in a manner that is treated as a sale of the Unit, or a
limited partner otherwise disposes of a Unit, the determination of gain or loss
from the sale or other disposition will be based on the difference between the
amount considered realized for tax purposes and the adjusted tax basis in such
Unit. See "--Basis of Units." Upon the sale of a Unit, the "amount realized"
will be measured by the sum of the cash and fair market value of other property
(e.g., Redemption Shares) received plus the amount of any Operating Partnership
liabilities allocable to the Units sold. To the extent that the amount of cash
or property received plus the allocable share of any Operating Partnership
liabilities exceeds the limited partner's adjusted tax basis in the Units
disposed of, such limited partner will recognize gain. It is possible that the
amount of gain recognized or even the tax liability resulting from such gain
could exceed the amount of cash and/or the value of any other property (i.e.,
Redemption Shares) received upon such disposition.
Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that the amount realized
upon the sale of a Unit attributable to a limited partner's share of "unrealized
receivables" of the Operating Partnership (as defined in Section 751 of the
Code) exceeds the basis attributed to those assets, such excess will be treated
as ordinary income. Unrealized receivables include, to the extent not previously
included in Operating Partnership income, any rights to payment for services
rendered or to be rendered. Unrealized receivables also include amounts that
would be subject to recapture as ordinary income if the Operating Partnership
had sold its assets at their fair market value at the time of the transfer of a
Unit.
Basis of Units. In general, a Unitholder who acquired his Units by
contribution of property and/or money to the Operating Partnership had an
initial tax basis in his Units ("Initial Basis") equal to the sum of (i) any
other property contributed in exchange for such Units, and less the amount of
any money distributed (or deemed distributed, as described below) in connection
with the acquisition of the Units. the Initial Basis of Units acquired by other
means would have been determined under the general rules of the Code, including
the partnership provisions, governing the determination of tax basis. other
rules, including the "disguised sale" rules discussed below, also may affect
Initial Basis, and Unitholders are urged to consult their own tax advisors
regarding their Initial Basis. Generally, a limited partner's initial tax basis
("Initial Basis") in his Units is increased by (i) such limited partner's share
of Operating Partnership taxable and tax-exempt income and (ii) increases in
such limited partner's allocable share of liabilities of the Operating
Partnership. Conversely, a limited partner's basis in his Units is decreased
(but not below zero) by (A) such limited partner's share of Operating
Partnership distributions, (B) decreases in such limited partner's allocable
share of liabilities of the Operating Partnership, (C) such limited partner's
share of losses of the Operating Partnership and (D) such limited partner's
share of nondeductible expenditures of the Operating Partnership that are not
chargeable to his capital account.
Potential Application of the Disguised Sale Regulations to a Redemption
of Units. There is a risk that a redemption by the Operating Partnership of
Units issued in exchange for a contribution of property to the Operating
Partnership may cause the original transfer of property to the Operating
Partnership in exchange
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for Units to be treated as a "disguised sale" of property. Section 707 of the
Code and the Treasury Regulations thereunder (the "disguised Sale Regulations")
generally provide that, unless one of the prescribed exceptions is applicable, a
partner's contribution of property to a partnership and a simultaneous or
subsequent transfer of money or other consideration (which may include the
assumption of or taking subject to a liability) from the partnership to the
partner will be presumed to be a sale, in whole or in part, of such property by
the partner to the partnership. Further, the Disguised Sale Regulations provide
generally that, in the absence of an applicable exception, if money or other
consideration is transferred by a partnership to a partner within two years of
the partner's contribution of property, the transactions are presumed to be a
sale of the contributed property unless the facts and circumstances clearly
establish that the transfers do not constitute a sale. the Disguised Sale
Regulations also provide that if two years have passed between the transfer of
money or other consideration and the contribution of property, the transactions
will be presumed not to be a sale unless the facts and circumstances clearly
establish that the transfers constitute a sale.
Accordingly, if a Unit is redeemed by the Operating Partnership fro a
Unitholder who holds Units that were issued in exchange for a contribution of
property to the Operating Partners, the Internal Revenue Service (the "IRS")
could contend that the Disguised Sale Regulations apply because the Unitholder
will thus receive cash subsequent to a previous contribution of property to the
Operating Partnership. in that event, the IRS could contend that the
contribution was taxable as a disguised sale under the Disguised Sale
Regulations. Any gain recognized thereby may be eligible for installment
reporting under Section 453 of the Code, subject to certain limitations. In
addition, in such event, the Disguised Sale Regulations might apply to cause a
portion of the proceeds received by a redeeming Unitholder to be characterized
as original issue discount on a deferred obligation which would be taxable as
interest income in accordance with the provisions of Section 1272 of the Code.
Each Unitholder is advised to consult its own tax advisors to determine whether
redemption of its Units could be subject to the Disguised Sale Regulations.
Comparison of Ownership of Units and Common Stock
The nature of an investment in Common Stock of the Company is generally
economically equivalent to an investment in Units in the Operating Partnership.
There are, however, some differences between ownership of Common Stock, some of
which may be material to investors. The information below highlights a number of
significant differences between the Operating Partnership and the Company
relating to, among other things, form of organization, permitted investments,
policies and restrictions, management structure, compensation and fees, investor
rights and Federal income taxation and compares certain legal rights associated
with the ownership of Units and Common Stock, respectively. These comparisons
are intended to assist Unitholders in understanding how their investment will be
changed if their Units are acquired for Common Stock. This discussion is summary
in nature and does not constitute a complete discussion of these matters, and
investors should carefully review the balance of this Prospectus and the
registration statement of which this Prospectus is a part for additional
important information about the Company.
Form of Organization and Assets Owned. The Operating Partnership is
organized as a Delaware limited partnership. A substantial amount of the
Company's operations are conducted through the Operating Partnership.
The Company is organized under the laws of the State of Maryland. The
Company maintains both a limited partner interest and a general partner interest
in the Operating Partnership, which gives the Company an indirect investment in
the Properties and other assets owned by the Operating Partnership.
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The Company currently has an approximate 88.5% economic interest in the
Operating Partnership, and such interest will increase as Units are redeemed for
cash or acquired by the Company.
Length of Investment. The Operating Partnership has a stated termination
date of December 31, 2093, although it may be terminated earlier under certain
circumstances. The Company has a perpetual term and intends to continue its
operations for an indefinite time period.
Purchase and Permitted Investments. The purpose of the Operating
Partnership includes the conduct of any business that may be lawfully conducted
by a limited partnership formed under Delaware law, except that the Partnership
Agreement requires the business of the Operating Partnership to be conducted in
such a manner that will permit the Company to be classified as a REIT for
Federal income tax purposes. The Operating Partnership may, subject to the
foregoing limitation, invest or enter into partnerships, joint ventures or
similar arrangements and may own interests in any other entity.
Under its Articles of Incorporation, the Company may engage in any
lawful activity permitted under the Maryland General Corporation Law. However,
under the Partnership Agreement, the Company, as the general partner of the
Operating Partnership, may not, directly or indirectly, enter into or conduct
any business other than in connection with the ownership, acquisition and
disposition of interests in the Operating Partnership or the management of the
business thereof.
Additional Equity. The Operating Partnership is authorized to issue
Units and other partnership interests to its partners or to other persons for
such consideration and on such terms and conditions as the Company, as general
partner, in its sole discretion, may deem appropriate.
The Board of Directors of the Company may authorize the issuance of
shares of capital stock of any class, whether now or hereafter authorized, or
securities or rights, convertible into shares of capital stock, for such
consideration as the Board of Directors may deem advisable, subject to such
restrictions or limitations as may be set forth in the Company's Bylaws. As long
as the Operating Partnership is in existence, the proceeds of all equity capital
raised by the Company will be contributed to the Operating Partnership in
exchange for Units or other interests in the Operating Partnership.
Borrowing Policies. The Operating Partnership has no restrictions on
borrowings, and the Company as general partner, has full power and authority to
borrow money on behalf of the Operating Partnership.
The Company is not restricted under its governing instruments from
incurring borrowings. The Company has, however, adopted a policy that currently
limits total borrowings to 50% of the total market capitalization of the
Company. See "Risk Factors--Real Estate Financing Risks." The foregoing reflects
the Company's general policy over time and is not intended to operate in a
manner that inappropriately restricts the Company's ability to raise additional
capital, including additional debt, to implement its planned growth, to pursue
attractive acquisition opportunities that may arise or to otherwise act in a
manner that the Board of Directors believes to be in the best interests of the
Company and its stockholders. The Board of Directors, with the assistance of
management of the Company, may reevaluate from time to time its debt and other
capitalization policies in light of then current economic conditions, including
the relative costs of debt and equity capital, the market value of its
Properties, growth and acquisition opportunities, the market value of its equity
securities in relation to the Company's view of the market value of its
Properties, and other factors, and may modify its debt policy. Such modification
may include increasing or decreasing its general ratio of debt to total market
capitalization or substituting another measuring standard.
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Other Investment Restrictions. Other than restrictions precluding
investments by the Operating Partnership that would adversely affect the
qualification of the Company as a REIT, there are no restrictions upon the
Operating Partnership's authority to enter into certain transactions, including,
among others, making investments, lending Operating Partnership funds, or
reinvesting the Operating Partnership's cash flow and net sale or refinancing
proceeds.
Neither the Company's Articles of Incorporation nor its Bylaws impose
any restrictions upon the types of investments that may be made by the Company.
Management Control. All management powers over the business and affairs
of the Operating Partnership are vested in the Company, as general partner, and
no limited partner of the Operating Partnership has any right to participate in
or exercise control or management power over the business and affairs of the
Operating Partnership. The Company may not be removed as general partner by the
limited partners with or without cause.
The Board of Directors has exclusive control over the Company's business
and affairs subject only to the restrictions in the Articles of Incorporation
and the Bylaws. The Board of Directors is classified into three classes. At each
annual meeting of the stockholders, the successors of the class of directors
whose terms expire at that meeting will be elected. The policies adopted by the
Board of Directors may be altered or eliminated without advice of the
stockholders. Accordingly, except for their vote in the elections of directors,
stockholders have no control over the ordinary business policies of the Company.
Management Liability and Indemnification. The Partnership Agreement
generally provides that the Company, as general partner, will incur no liability
to the Operating Partnership or any limited partner for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or omission
if the Company acted in good faith. In addition, the Company is not responsible
for any misconduct or negligence on the part of its agents provided the Company
appointed such agents in good faith. The Company may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisors, and any action it takes or omits to take in reliance
upon the opinion of such persons, as to matters which the Company reasonably
believes to be within their professional or expert competence, shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion. The Partnership Agreement also provides for
indemnification of the Company the Directors and officers of the Company, and
such other persons as the Company may from time to time designate, against any
and all losses, claims, damages, liabilities, expenses, judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings that relate to the operations of the Operating Partnership
in which such person may be involved.
The Company's Articles of Incorporation and Bylaws provide certain
limitations on the liability of the Company's Directors and officers for
monetary damages to the Company. The Articles of Incorporation and the Bylaws
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 require it to indemnify its officers, Directors and
certain other parties to the fullest extent permitted from time to time by
Maryland law. The Maryland General Corporation Law 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
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(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 Maryland General Corporation Law 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 things, 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 is against public policy and unenforceable pursuant to Section 14
of the Securities Act.
Anti-takeover Provisions. Except in limited circumstances, the Company,
as general partner, has exclusive management power over the business and affairs
of the Operating Partnership. The Company may not be removed as general partner
by the limited partners with or without cause.
The Articles of Incorporation and Bylaws of the Company and Maryland law
contain a number of provisions that may have the effect of delaying or
discouraging an unsolicited proposal for the acquisition of the Company or the
removal of incumbent management.
Voting Rights. Under the Partnership Agreement, the limited partners do
not have voting rights relating to the operation and management of the Operating
Partnership except in connection with matters, as described more fully below,
involving certain amendments to the Partnership Agreement, dissolution of the
Operating Partnership and the sale or exchange of all or substantially all of
the Operating Partnership's assets, including mergers or other combinations.
Stockholders of the Company have the right to vote, among other things,
on a merger or sale of substantially all of the assets of the Company, certain
amendments to the Articles of Incorporation and dissolution of the Company. The
Company is managed and controlled by a Board of Directors consisting of three
classes having staggered terms of office. Each class is to be elected by the
stockholders at annual meetings of the Company. Each share of Common Stock has
one vote, and the Articles of Incorporation permit the Board of Directors to
classify and issue Preferred Stock in one or more series having voting power
which may differ from that of the Common Stock.
Amendment of the Partnership Agreement or the Company's Articles of
Incorporation. Amendments to the Partnership Agreement may be proposed by the
Company, as general partner, or by limited partners holding 20% or more of the
partnership interests and generally require approval of limited partners
(including the Company) holding a majority of the outstanding limited partner
interests. Certain amendments that would, among other things, convert a limited
partner's interest into a general partner's
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interest, modify the limited liability of any limited partner, alter the
interest of any limited partner in profits, losses or distributions, alter or
modify the redemption right described herein, or cause the termination of the
Operating Partnership at a time inconsistent with the terms of the Partnership
Agreement must be approved by the Company, as general partner, and each limited
partner that would be adversely affected by any such amendment.
Amendments to the Company's Articles of Incorporation must be approved
by affirmative vote of the holders of not less than two-thirds of all votes
entitled to be cast on the matter.
Vote Required to Dissolve the Operating Partnership or the Company.
Under Delaware law, the Operating Partnership may be dissolved, other than in
accordance with the terms of the Partnership Agreement, only upon the unanimous
vote of the limited partners. Under Maryland law, the Board of Directors must
obtain the approval of holders of not less than two-thirds of all outstanding
shares of capital stock of the Company in order to dissolve the Company.
Vote Required to Sell Assets or Merge. Under the Partnership Agreement,
except in certain circumstances, the Operating Partnership may not sell,
exchange, transfer or otherwise dispose of all or substantially all of its
assets, including by way of merger or consolidation or other combination of the
Operating Partnership, without the consent of the limited partners (including
the Company) holding 85% or more of the limited partner interests of the
Operating Partnership.
Under Maryland law and the Company's Articles of Incorporation, the sale
of all or substantially all of the assets of the Company or any merger or
consolidation of the Company requires the approval of the Board of Directors and
the affirmative vote of two-thirds of all the votes entitled to be cast on the
matter. No approval of the stockholders is required for the sale of less than
all or substantially all of the Company's assets.
Compensation, Fees and Distributions. The Company does not receive any
compensation for its services as general partner of the Operating Partnership.
As a partner in the Operating Partnership, however, the Company has the same
right to allocations and distributions as other partners of the Operating
Partnership. In addition, the Operating Partnership will reimburse the Company,
as general partner, for all expenses incurred relating to the ownership and
operation of, or for the benefit of, the Operating Partnership.
The Directors and officers of the Company receive compensation for their
services.
Liability of Investors. Under the Partnership Agreement and applicable
Delaware law, the liability of the limited partners for the Operating
Partnership's debts and obligations is generally limited to the amount of their
investment in the Operating Partnership.
Under Maryland law, stockholders generally are not personally liable for
the debts or obligations of the Company. See "Description of Capital
Stock--General."
Nature of Investment. The Units constitute equity interests entitling
holders thereof to their pro rata share of cash distributions made to the
limited partners of the Operating Partnership. The Company is entitled to
receive its pro rata share of distributions made by the Operating Partnership
with respect to its interest in the Operating Partnership.
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Shares of Common Stock constitute equity interests in the Company. Each
stockholder will be entitled to his pro rata share of any dividends or
distributions paid with respect to Common Stock. The dividends payable to the
stockholders are not fixed in amount and are paid only if, when and as declared
by the Board of Directors. In order to qualify as a REIT, the Company must
distribute at least 95% of its taxable income (excluding capital gains), and any
taxable income (including capital gains) not distributed will be subject to
corporate income tax.
Potential Dilution of Rights. The Company, as general partner, is
authorized, in its sole discretion and without limited partner approval, to
cause the Operating Partnership to issue additional limited partnership
interests and other equity securities for any partnership purpose at any time to
the limited partners or to other persons on terms established by the Company.
The Board of Directors of the Company may issue, in its discretion,
additional shares of Common Stock and has the authority to issue from the
authorized capital stock a variety of other equity securities of the Company
with such powers, preferences and rights as the Board of Directors may designate
at the time. The issuance of additional shares of Common Stock or other similar
equity securities may result in the dilution of interests of the stockholders.
Liquidity. Subject to certain exceptions, (i) as of February 16, 1997,
TMPC, L.P. may transfer up to 540,059 Units with or without the consent of the
Company; and (ii) as of December 28, 1997, MetLife may transfer up to 585,750
Units with or without the consent of the Company. However, the Company, as
general partner, in its sole and absolute discretion, may or may not consent to
the admission as a substituted limited partner of any transferee of such Units.
If the Company does not consent to the admission of a transferee as a
substituted limited partner, the transferee shall be considered an assignee of
an economic interest in the Operating Partnership but will not be a holder of
Units for any other purpose; accordingly, the assignee will not be permitted to
vote on any affairs or issues on which a limited partner may vote.
The Common Stock is listed on the NYSE. The breadth and strength of this
market will depend, among other things, upon the number of shares outstanding,
the Company's financial results and prospects, the general interest in the
Company's real estate investments and the Company's dividend yield compared to
that of other debt and equity securities.
REGISTRATION RIGHTS
The registration of the Redemption Shares pursuant to this Registration
Statement of which this Prospectus is a part will discharge the Company's
obligations with respect to such Redemption Shares (i) to TMPC, L.P. under the
terms of a Registration Rights Agreement dated as of February 15, 1996 (the
"TMPC Registration Rights Agreement") and (ii) to MetLife under the terms of a
Registration Rights Agreement dated as of December 27, 1996 (the "MetLife
Registration Rights Agreement"), which the Company entered into in connection
with the issuance of the Units. The following summary does not purport to be
complete and is qualified in its entirety by reference to the Registration
Rights Agreement.
TMPC Registration Rights Agreement. Under the TMPC Registration Rights
Agreement, at any time after February 15, 1997 until the earlier of (i) May 26,
2015 or (ii) the date on which all the Redemption Shares issued to TMPC have
become eligible for sale pursuant to Rule 144(k) promulgated under the
Securities Act, TMPC, L.P. may request that the Company cause to be filed a
"shelf registration statement" (a "Shelf Registration") covering the Redemption
Shares; provided, however, that TMPC, L.P. shall not make such a request with
respect to Redemption Shares (A) disposed of under an effective Shelf
Registration relating thereto, (B) sold pursuant to Rule 144 under the
Securities Act or (C) eligible for sale
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pursuant to Rule 144 under the Securities Act. The TMPC Registration Rights
Agreement requires the Company to use reasonable efforts to keep such Shelf
Registration effective until the earliest of (a) the date on which TMPC, L.P. no
longer holds any Redemption Shares registered under such Shelf Registration (b)
the date on which the Redemption Shares may be sold by TMPC, L.P. pursuant to
Rule 144(k) promulgated under the Securities Act or (c) the date that is six
months from the effective date of such Shelf Registration. As long as the
Registration Statement of which this Prospectus is a part remains effective, the
Redemption Shares held by TMPC when issued by the Company pursuant to this
Prospectus will no longer be entitled to the benefits of the TMPC Registration
Rights Agreement.
Pursuant to the TMPC Registration Rights Agreement, the Company has
agreed to pay all expenses incurred in the registration of the Redemption Shares
(other than brokerage and underwriting commissions and taxes of any kind and
other than for any legal, accounting and other expenses incurred by TMPC, L.P.
thereunder). The Company also has agreed to indemnify TMPC, L.P. under the TMPC
Registration Rights Agreements and its officers, directors and other affiliated
persons and any person who controls TMPC, L.P. against any and all losses,
claims, damages and expenses arising under the securities laws in connection
with the Registration Statement or this Prospectus, subject to certain
limitations. In addition, TMPC, L.P. has agreed to indemnify the Company and its
Directors, officers and any person who controls the Company against all losses,
claims, damages and expenses arising under the securities laws insofar as such
loss, claim, damage or expense relates to written information furnished to the
Company by TMPC, L.P. for use in this Registration Statement or Prospectus or an
amendment or supplement hereto or the failure by TMPC, L.P. to deliver or cause
to be delivered this Prospectus or any amendment or supplement hereto to any
purchaser from TMPC, L.P. of shares covered by the Registration Statement.
MetLife Registration Rights Agreement. In connection with the
acquisition of the Presidents Plaza Property, the Operating Partnership issued
an aggregate of 1,171,500 Units to MetLife. MetLife agreed not to transfer
585,750 of these Units (the "Six-Month Units") until June 28, l997 and agreed
not to transfer the remaining 585,750 Units (the "Twelve-Month Units") until
December 28, l997. Under the MetLife Registration Rights Agreement, no later
than April 26, 1997, the Company shall cause to be filed a shelf registration
statement (the "Initial MetLife Registration") relating to the resale of shares
of Common Stock issuable to MetLife upon conversion of the Six-Month Units;
provided, however, that MetLife shall not make such a request with respect to
shares of Common Stock (A) disposed of under an effective Shelf Registration
relating thereto, (B) sold pursuant to Rule 144 under the Securities Act or (C)
eligible for sale pursuant to Rule 144 under the Securities Act. The Company
also is required to use reasonable efforts to keep such Shelf Registration
effective until the earliest of (a) the date on which MetLife no longer holds
any shares of Common Stock registered under such Shelf Registration (b) the date
on which the shares of common stock may be sold by MetLife pursuant to Rule
144(k) promulgated under the Securities Act or (c) the date that is two and
one-half years from the effective date of such Shelf Registration.
The MetLife Registration Rights Agreement further provides that, at any
time after June 28, 1999, MetLife may request that the Company cause to be filed
a Shelf Registration covering the shares of Common Stock issuable to MetLife
upon conversion of the Six-Month Units; provided, however, that MetLife shall
not make such a request with respect to shares of Common Stock (A) disposed of
under an effective Shelf Registration relating thereto, (B) sold pursuant to
Rule 144 under the Securities Act or (C) eligible for sale pursuant to Rule 144
under the Securities Act. The Company also is required to use reasonable efforts
to keep such Shelf Registration effective until the earliest of (a) the date on
which MetLife no longer holds any shares of Common Stock registered under such
Shelf Registration (b) the date on which the shares of Common Stock registered
under such Shelf Registration may be sold by MetLife pursuant to Rule 144(k)
promulgated under the Securities Act or (c) the date that is six months from the
effective date of such Shelf Registration.
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Under the MetLife Registration Rights Agreement, no later than November
15, l997, the Company shall cause to be filed a shelf registration statement
(the "Issuance Registration Statement") relating to the issuance of the
Redemption Shares upon the conversion of the Twelve-Month Units. The Company is
required to use reasonable efforts to keep such Issuance Registration Statement
effective until the date on which MetLife has redeemed its Twelve-Month Units
for Redemption Shares. If the Company is unable to keep the Issuance
Registration statement effective for that period of time, MetLife will have the
same rights described in the two preceding paragraphs with respect to the
Twelve-Month Units and the Six-Month Units. The Prospectus and the Registration
Statement of which it is a part constitutes the Issuance Registration Statement.
Pursuant to the MetLife Registration Rights Agreement, the Company has
agreed to pay all expenses incurred in the registration of the shares of Common
Stock to be issued upon redemption of the Six-Month Units and the Twelve-Month
Units (other than brokerage and underwriting commissions and taxes of any kind
and other than for any legal, accounting and other expenses incurred by MetLife
thereunder). The Company also has agreed to indemnify MetLife under the MetLife
Registration Rights Agreements and its officers, directors and other affiliated
persons and any person who controls MetLife against any and all losses, claims,
damages and expenses arising under the securities laws in connection with the
Registration Statement or this Prospectus, subject to certain limitations. In
addition, MetLife has agreed to indemnify the Company and its Directors,
officers and any person who controls the Company against all losses, claims,
damages and expenses arising under the securities laws insofar as such loss,
claim, damage or expense relates to written information furnished to the Company
by MetLife for use in this Registration Statement or Prospectus or an amendment
or supplement hereto or the failure by MetLife to deliver or cause to be
delivered this Prospectus or any amendment or supplement hereto to any purchaser
from MetLife of shares covered by the Registration Statement.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to
continue to operate, in such a manner as to qualify as a REIT under the Code,
but no assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the Federal income tax treatment of the Company and its
stockholders. For the particular provisions that govern the Federal income tax
treatment of the Company and its stockholders, reference is made to Sections 856
through 860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
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 any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends
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will be taxed as long-term capital gain income to the stockholders. To the
extent that distributions exceed current or accumulated earnings and profits,
they will constitute a return of capital, rather than dividend or capital gain
income, and will reduce the basis for the stockholder's Common Stock with
respect to which the distribution is paid or, to the extent that they exceed
such basis, will be taxed in the same manner as gain from the sale of that
Common Stock.
Unitholders are urged to consult with their own tax advisors with
respect to the appropriateness of an investment in the Redemption Shares
registered 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 a Unitholder's own tax
characteristics.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the issuance of any
Redemption Shares, but will acquire Units tendered to the Operating Partnership
for redemption for which it elects to issue Redemption Shares. The shares of
Common Stock offered hereby may be sold from time to time on the NYSE on terms
to be determined at the time of such sales.
The shares of Common Stock offered hereby may be sold from time to time
in one or more transactions at a fixed offering price, which may be changed, or
at varying prices determined at the time of sale or at negotiated prices.
The Company will pay substantially all the expenses incurred by the
Unitholders and the Company incident to the Offering, but excluding any
underwriting discounts, commissions, and transfer taxes.
The Company has agreed to indemnify the Unitholders against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts, a limited liability partnership
including professional corporations, as corporate, securities and tax counsel to
the Company. Gilbert G. Menna, whose professional corporation is a partner of
Goodwin, Procter & Hoar LLP, is an assistant secretary of the Company and owns
1,000 shares of the Company's Common Stock.
26
<PAGE>
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995
and 1994 and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1995 and for the period
May 26, 1994 to December 31, 1994, and the combined statements of operations,
owners' equity (deficit) and cash flows for the period January 1, 1994 to May
25, 1994 and the year ended December 31, 1993 of The Beacon Group, predecessor
to the Company, and the related financial statement schedules of the Company as
of December 31, 1995, incorporated herein by reference from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 have been so
incorporated in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing. The statement of excess of revenues over specific operating expenses
for Perimeter Center, Atlanta, Georgia for the year ended December 31, 1995,
incorporated by reference herein from the Company's current report on Form 8-K
dated February 20, 1996, has been so incorporated in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
said firm as experts in accounting and auditing. The statements of excess of
revenues over specific operating expenses for each of the Fairfax County
Portfolio in Tysons Corner and Herndon, Virginia, AT&T Plaza in Oak Brook,
Illinois, Tri-State International in Lincolnshire, Illinois and 1333 H. Street
in Washington, D.C. for the year ended December 31, 1995, incorporated by
reference herein from the Company's report on Form 8-K dated July 23, 1996, have
been so incorporated in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing. The statements of excess of revenues over specific
operating expenses for each of the Rosslyn Acquisitions in Rosslyn, Virginia,
the New England Executive Park in Burlington, Massachusetts and 10960 Wilshire
Boulevard in Westwood, California for the year ended December 31, 1995,
incorporated by reference herein from the Company's current report on Form 8-K
dated October 18, 1996, have been so incorporated in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
said firm as experts in accounting and auditing.
27
<PAGE>
================================================================================
No person has been authorized in connection with the offering made hereby to
give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company or any other person. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the Securities offered hereby to any person or by anyone in any
jurisdiction in which it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.
---------------------------
TABLE OF CONTENTS
Page
----
Available Information........................................................2
Incorporation of Certain Documents by Reference..............................2
Risk Factors.................................................................3
The Company.................................................................10
Description of Common Stock ................................................13
Restrictions on Transfers of Common Stock...................................14
Description of Units and Redemption of Units................................15
Registration Rights.........................................................23
Federal Income Tax Considerations...........................................25
Plan of Distribution........................................................26
Legal Matters...............................................................26
Experts.....................................................................27
================================================================================
================================================================================
1,125,809 Shares
Beacon Properties
Corporation
Common Stock
-----------------------
PROSPECTUS
-----------------------
_________________, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution7
The following table sets forth the estimated fees and expenses payable
by the Company in connection with the issuance and distribution of the Common
Stock registered hereby (all amounts except the registration fee are estimated):
Registration fee.......................................................$11,728
Printing and duplicating expenses...................................... 2,000
Legal fees and expenses................................................ 2,500
Miscellaneous.......................................................... 1,000
Total ...............................................................$17,228
Item 15. Indemnification of Directors and Officers
The Company's Articles of Incorporation and Bylaws provide certain
limitations on the liability of the Company's Directors and officers for
monetary damages to the Company. The Articles of Incorporation, and the Bylaws
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 require it to indemnify its officers, Directors and
certain other parties to the fullest extent permitted from time to time by
Maryland law. The Maryland General Corporation Law 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
Maryland General Corporation Law 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 things, 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 is against public policy and unenforceable pursuant to Section 14
of the Securities Act.
II-1
<PAGE>
Item 16. Exhibits
4.1* Articles of Incorporation.
4.2** Bylaws.
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the Common
Stock being registered.
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax matters.
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).
24.1 Power of Attorney (included on the signature page hereto).
- ----------------------------------
* Previously filed as an exhibit to Registrant's June 30, 1994 Form 10-Q.
** Previously filed as an exhibit to Registrant's Registration Statement on
Form S-3 (File No. 333-17237) and incorporated herein by reference.
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.
II-2
<PAGE>
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act
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 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 Commission such indemnification is against public
policy as expressed in the Securities Act 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 and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, Commonwealth of Massachusetts on this 14th
day of February, 1997.
BEACON PROPERTIES CORPORATION
By: /s/ Alan M. Leventhal
--------------------------------------
Alan M. Leventhal
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
Directors of Beacon Properties Corporation, hereby severally constitute Alan M.
Leventhal and Lionel P. Fortin, and each of them singly, as our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement filed
herewith and any and all amendments to said Registration Statement (or any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933), and generally to do
all such things in our names and in our capacities as officers and Directors to
enable Beacon Properties Corporation to comply with the provisions of the
Securities Act of 1933, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorneys, or any of them, to said Registration Statement and any
and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Alan M. Leventhal President, Chief Executive February 14, 1997
- ------------------------- Officer and Director
Alan M. Leventhal (Principal Executive
Officer)
/s/ Edwin N. Sidman Chairman of the Board February 14, 1997
- ------------------------- of Directors
Edwin N. Sidman
- ------------------------- Executive Vice President,
Lionel P. Fortin Chief Operating Officer and
Director
/s/ Robert J. Perriello Senior Vice President and February 14, 1997
- -------------------------
Robert J. Perriello Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
/s/ Norman B. Leventhal Director February 14, 1997
- -------------------------
Norman B. Leventhal
II-4
<PAGE>
/s/ Dale F. Frey Director February 14, 1997
- --------------------------
Dale F. Frey
- -------------------------- Director
Graham O. Harrison
/s/ William F. McCall, Jr. Director February 14, 1997
- --------------------------
William F. McCall, Jr.
/s/ Steven Shulman Director February 14, 1997
- --------------------------
Steven Shulman
/s/ Scott M. Sperling Director February 14, 1997
- --------------------------
Scott M. Sperling
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
4.1* Articles of Incorporation.
4.2** Bylaws, as amended
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
Securities being registered.
8.1 Opinion of Goodwin, Procter & Hoar LLP as to
certain tax matters.
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).
24.1 Power of Attorney (included on the signature page hereto).
- --------------------------
* Previously filed as an exhibit to Registrant's June 30, 1994 Form 10-Q.
** Previously filed as an exhibit to Registrant's Registration Statement on
Form S-3 (File No. 333- 17237) filed and incorporated herein by reference.
II-6
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
February 14, 1997
Beacon Properties Corporation
50 Rowes Wharf
Boston, Massachusetts 02110
Re: Legality of Securities to be Registered
Pursuant to the Registration Statement on Form S-3
--------------------------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with the registration on Form
S-3 (the "Registration Statement") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), of 1,125,809 shares of common stock, par value
$.01 per share ("Common Stock"), of Beacon Properties Corporation, a Maryland
corporation (the "Company"). The Common Stock registered pursuant to the
Registration Statement (the "Redemption Shares") may be issued by the Company
if, and to the extent that, holders of units of limited partnership interest
("Units") in Beacon Properties, L.P. (the "Operating Partnership") tender such
Units to the Operating Partnership for redemption and the Company exercises its
contractual right to acquire such tendered Units for Common Stock.
In connection with rendering this opinion, we have examined the
Articles of Incorporation of the Company, as amended and restated to the date
hereof and on file with the Maryland State Department of Assessments and
Taxation; the Bylaws of the Company; the Agreement of Limited Partnership of the
Operating Partnership, as amended to the date hereof (the "Partnership
Agreement"); such records of the corporate proceedings of the Company as we
deemed material; the Registration Statement and the exhibits thereto; and such
other certificates, receipts, records and documents as we considered necessary
for the purposes of this opinion. In our examination, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as certified, photostatic or
facsimile copies, the authenticity of the originals of such copies and the
authenticity of telephonic confirmations of public officials and others. As to
facts material to our opinion, we have relied upon certificates or telephonic
confirmations of public officials and certificates, documents, statements and
other information of the Company or representatives or officers thereof.
We are attorneys admitted to practice in The Commonwealth of
Massachusetts. We express no opinion concerning the laws of any jurisdictions
other than the laws of the United
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Beacon Properties Corporation
February 14 1997
Page 2
States of America, the laws of The Commonwealth of Massachusetts and the
Maryland General Corporation Law, and also express no opinion with respect to
the blue sky or securities laws of any state, including Massachusetts and
Maryland.
Based upon the foregoing, we are of the opinion that under the Maryland
General Corporation Law, pursuant to which the Company was incorporated:
(1) When the Registration Statement relating to the Redemption Shares
has become effective under the Securities Act and the Redemption Shares have
been duly issued and exchanged for Units tendered to the Operating Partnership
for redemption in accordance with the provisions of the Partnership Agreement as
described in the Registration Statement, such Redemption Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this opinion
under the heading "Legal Matters" in the Prospectus which is a part of such the
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
February 14, 1997
Beacon Properties Corporation
50 Rowes Wharf
Boston, MA 02110
Re: Certain Federal Income Tax Matters
----------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with the registration on Form
S-3 (the "Registration Statement") pursuant to the Securities Act of 1933, as
amended, of 1,125,809 shares of common stock, par value $.01 per share, of
Beacon Properties Corporation, a Maryland corporation (the "Company"), filed by
the Company on or about the date hereof with the Securities and Exchange
Commission. This opinion relates to the Company's qualification for federal
income tax purposes as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code").
In rendering the following opinion, we have examined the Registration
Statement, the Articles of Incorporation and Bylaws of the Company, and such
other records, certificates and documents as we have deemed necessary or
appropriate for purposes of rendering the opinion set forth herein. We also have
relied upon the representations of the Company and the Operating Partnership
regarding the manner in which the Company has been and will continue to be owned
and operated. We have neither independently investigated nor verified such
representations, and we assume that such representations are true, correct and
complete and that all representations made "to the best of the knowledge and
belief" of any person(s) or party(ies) or with similar qualification are and
will be true, correct and complete as if made without such qualification. We
assume that the Company has been and will be operated in accordance with
applicable laws and the terms and conditions of applicable documents. In
addition, we have relied on certain additional facts and assumptions described
below.
In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person, (vi) the accuracy and completeness of
all records made available to
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Beacon Properties Corporation
February 14, 1997
Page 2
us, and (vii) the factual accuracy of all representations, warranties and other
statements made by all parties. We also have assumed, without investigation,
that all documents, certificates, warranties and covenants on which we have
relied in rendering the opinion set forth below and that were given or dated
earlier than the date of this letter continue to remain accurate, insofar as
relevant to the opinion set forth herein, from such earlier date through and
including the date of this letter.
The discussion and conclusions set forth below are based upon the Code,
the Income Tax Regulations and Procedure and Administration Regulations
promulgated thereunder and existing administrative and judicial interpretations
thereof, all of which are subject to change. No assurance can therefore be given
that the federal income tax consequences described below will not be altered in
the future.
Based upon and subject to the foregoing, and provided that the Company
continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution, recordkeeping and other requirements
of the Code necessary for a corporation to qualify as a REIT, we are of the
opinion that:
1. Commencing with the Company's first taxable year ended December
31, 1994, the Company has been organized in conformity with the
requirements for qualification as a "real estate investment
trust" under the Code, and the Company's method of operation, as
described in the representations referred to above, will enable
it to continue to meet the requirements for qualification and
taxation as a "real estate investment trust" under the Code.
2. The statements in the Registration Statement set forth under the
caption "Federal Income Tax Considerations," to the extent such
information constitutes matters of law, summaries of legal
matters or legal conclusions, have been reviewed by us and are
accurate in all material respects.
We express no opinion with respect to the transactions described in the
Registration Statement other than those expressly set forth herein. You should
recognize that our opinion is not binding on the Internal Revenue Service (the
"IRS") and that the IRS may disagree with the opinion contained herein. Although
we believe that our opinion will be sustained if challenged, there can be no
assurance that this will be the case. The opinion expressed herein
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Beacon Properties Corporation
February 14, 1997
Page 3
is based upon the law as it currently exists. Consequently, future changes in
the law may cause the federal income tax treatment of the transactions described
herein to be materially and adversely different from that described above.
We consent to being named as counsel to the Company in the Registration
Statement, to the references in the Registration Statement to our firm and to
the inclusion of a copy of this opinion letter as an exhibit to the Registration
Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement,
relating to the registration of 1,125,809 shares of common stock of Beacon
Properties Corporation (the "Company"), on Form S-3 of our report dated
January 17, 1996 (except for Note 19 for which the date is February 15, 1996),
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 on our audits of the consolidated financial position of the
Company as of December 31, 1995 and 1994 and the consolidated results of its
operations and its cash flows for the year ended December 31, 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 for the year ended December 31, 1993, and
the related financial statement schedules of the Company as of December 31,
1995.
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 for 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 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 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 reference to our Firm under the caption "Experts" in such
Registration Statement.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 14, 1997
