As filed with the Securities and Exchange Commission on April 25, 1997
Registration Statement No. 333-21787
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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BEACON PROPERTIES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
MARYLAND 04-3224258
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
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)
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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. [ ]
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.
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<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 April 25, 1997
540,059 Shares
Beacon Properties Corporation
Common Stock
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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
540,059 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"), or any transferee of
TMPC, L.P. (each, a "Unitholder" and together with TMPC, L.P. , 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. 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.
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 cash
equivalent of an equivalent number of shares of Common Stock (subject to
certain adjustments in the case of stock splits, stock dividends or similar
distributions); 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 (subject to certain adjustments in the case of
stock splits, stock dividends or similar distributions) or for cash.
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 540,059 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.
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.
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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.
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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 Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511,
and copies may be obtained at the prescribed rates from the Public Reference
Section of the Commission at its principal office in Washington, D.C.
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
1996, filed with the Commission pursuant to the Exchange Act,
including all amendments thereto.
2. The Company's Current Reports on Form 8-K, dated January 5, l996,
February 15, 1996, July 23, l996, October 18, l996, December 18, 1996,
December 20, 1996 and March 27, 1997 filed with the Commission
pursuant to the Exchange Act, including all amendments thereto.
3. The Company's Current Reports on Form 8K/A dated August 6, 1996 (which
relates to the Form 8-K dated July 23, 1996) and April 7, 1997 (which
relates to the Form 8-K dated March 27, 1997) 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.
2
<PAGE>
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.
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 $1.3 billion in office
properties, increasing its interests in real estate by over 245%. The
Company's ability to manage its growth effectively will require it to apply
successfully its experience managing its existing portfolio to new markets
and to an increased number of properties. The Company's results of operations
and ability to make expected distributions to stockholders could be adversely
affected if the Company is unable to manage these operations effectively.
There can be no assurance that the Company will be able to manage these
operations effectively.
3
<PAGE>
Risk of Adverse Effect on Company from Debt Servicing and Refinancing,
Increases in Interest Rates, Financial Covenants and Absence of Limitations
on Debt
Debt Financing and Existing Debt Maturities
The Company intends to finance the acquisition of additional properties
through the use of debt and equity financing. Additionally, in connection with
the acquisition of certain Properties for Units, the Company has agreed to
maintain certain levels of nonrecourse debt on the Properties in order to
minimize the tax consequences of these acquisitions to the Unit recipients. The
Company is therefore subject to risks normally associated with debt financing,
including the possibility that the Company will have insufficient cash flow to
meet required principal and interest payments, will be unable to refinance
existing indebtedness (which in most cases will not be fully amortized at
maturity), or will be unable to secure favorable refinancing terms.
Currently, the Company's total consolidated debt is approximately $485.8
million, and its total consolidated debt plus its proportionate share of
total unconsolidated debt (other than Rowes Wharf) is approximately $578.5
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 $451.8
million is secured by the Company's properties. In addition, the Company
currently has $34.0 million outstanding under its Credit Facility. The
Company's proportionate share of its current total unconsolidated debt
(excluding Rowes Wharf) consists of approximately $46.4 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 general economic conditions
result in higher interest rates at a time when the Company must refinance its
indebtedness, the Company's interest expense would increase, which would
adversely affect the Company's results of operations and its ability to pay
expected distributions to stockholders. Further, if 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 Adverse Effect of Increase in Market Interest Rates on Variable
Interest Rates
Outstanding advances under the Credit Facility bear interest at a variable
rate. The Company may incur additional variable rate indebtedness in the
future. Accordingly, increases in interest rates could increase the Company's
interest expense, which could adversely affect the Company's results of
operations and its ability to pay expected distributions to stockholders. An
increase in interest expense could also cause the Company to be in default
under certain Credit Facility covenants.
4
<PAGE>
Limits on Control and Other Risks Involved in Joint Ownership of Properties
The Company holds (i) a 76% general and limited partner interest in the
property partnership that owns the Center Plaza Property, (ii) a 50% general
partner interest in the property partnership that owns the One Post Office
Square Property, (iii) a 90% limited partner interest (through Beacon Property
Management Corporation and Beacon Construction Company, Inc.) in Rowes Wharf
Limited Partnership, a limited partnership that owns a 50% general partner
interest in Rowes Wharf Associates, the entity that owns the hotel space and
leases the office and retail space at the Rowes Wharf Property, (iv) a 10%
general and limited partner interest in the property partnership that owns the
Polk and Taylor Buildings Property and (v) approximately 51.6% of the common
stock of a private REIT 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.
Limits on Ownership of Common Stock May Deter Changes in Management
In order to maintain its REIT qualification, not more than 50% in value of
the outstanding capital stock of the Company may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Internal Revenue
Code of 1986, as amended (the "Code"), to include certain entities) during
the last half of a taxable year (other than the first year) (the "Five or
Fewer Requirement"). In order to protect the Company against the risk of
losing its REIT status due to a concentration of ownership among its
stockholders, the Articles of Incorporation of the Company limit ownership of
the issued and outstanding Common Stock by any single stockholder to 6.0% of
the 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.
Risks of Acquisition Activities
The Company intends to acquire existing office and commercial properties
to the extent that they can be acquired on advantageous terms and meet the
Company's investment criteria. In light of current conditions in the
Company's target market areas, the Company anticipates that in the near
future additional properties will be added
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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.
Risk of Development Activities
The Company also intends to continue the development of office and other
commercial properties, in accordance with the Company's development and
underwriting policies as opportunities arise in the future. Risks associated
with such development 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.
Potential Adverse Effect on Results of Operations Due to Risks Associated
with Tenant Defaults
Substantially all of the Company's income is derived from rental income
from real property. Consequently, the Company's results of operations and
ability to make expected distributions to stockholders could be adversely
affected if a significant number of tenants at 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
6
<PAGE>
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.
Potential Adverse Effect on Results of Operations Due to Risks Associated
with Ground Leases
Three 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.
The ground lease at 10880 Wilshire Boulevard expires in 2068. The Company has an
option to purchase the ground under 10880 Wilshire Boulevard at fair market
value in 2001. The Company's results of operations and ability to make expected
distributions to stockholders could be adversely affected to the extent the
Properties subject to ground leases revert back to the landlord at the
termination of the ground lease or the Company incurs additional expense by
purchasing the ground under the Properties at the termination of these ground
leases.
Potential Adverse Effect on Results of Operations Due to Risks Associated
with Market Illiquidity
Equity real estate investments are relatively illiquid. Such illiquidity
will tend to limit the ability of the Company to vary its portfolio promptly in
response to changes in economic or real estate market 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.
Potential Adverse Effect on Results of Operations Due to 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.
Risk of Adverse Effect on Results of Operations Due to Possible Environmental
Liabilities
The Company's operating costs may be affected by the obligation to pay for
the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. Under
various federal, state and local environmental laws, ordinances and regulations,
a current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances
7
<PAGE>
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.
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.
Potential Adverse Effect of Increase in Market Interest Rates on Price of
Common Stock
One of the factors that will influence the market price of the Common
Stock in public markets is the annual yield on the price paid for shares of
Common Stock from distributions by the Company. An increase in market
interest rates may lead prospective purchasers of the Common Stock to demand
a higher annual yield from future distributions. Such an increase in the
required distributions yield may adversely affect the market price of the
Common Stock.
8
<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.
9
<PAGE>
THE PROPERTIES
Set forth below are summary descriptions of the Properties.
<TABLE>
<CAPTION>
Rentable Percent Leased
Year Built/ Ownership Property Area in at 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 Boulevard 1971-1992 100% Westwood, CA 543,804 89%
10880 Wilshire Boulevard 1970 100% Westwood, CA 531,176 85%
--------- ----
1,074,980 87%
10
<PAGE>
Rentable Percent Leased
Year Built/ Ownership Property Area in at December 31,
Property Renovated Interest (1) Location Square Feet 1996
- ----------------------------------- ------------- ------------ ---------------------------------- ---------------
Suburban Philadelphia Office Market:
Westlakes Office Park(12) 1988-1990 100% Berwyn, PA 443,592 98%
--------- ----
Suburban Philadelphia Office Market:
Shoreline Technology Park(13) 1985-1991 100% Mountain Valley, CA 726,500 100%
Lake Marriott Business Park(14) 1981 100% Santa Clara, CA 400,000 100%
--------- ----
1,126,500 100%
--------- ----
Total/Weighted Average 16,303,702 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.
11
<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 April 23, 1997, there were 55,248,490 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 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.
12
<PAGE>
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
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.
13
<PAGE>
In addition, the Company will have the right, for a period of 90 days during
the time any shares of Excess Stock are held by the Company in trust, to
purchase all or any portion of the Excess Stock from the original
transferee-stockholder at the lesser of (i) the price initially paid for such
shares by the original transferee stockholder, or if the original
transferee-stockholder did not give value for such shares (e.g., the shares were
received through a gift, devise or other transaction), the average closing price
for the class of stock from which such shares of Excess Stock were converted for
the ten days immediately preceding such sale or gift, and (ii) the average
closing price for the class of shares from which such shares of Excess Stock
were converted for the ten trading days immediately preceding the date the
Company elects to purchase such shares. The 90-day period begins on the date
notice is received of the violative transfer if the original
transferee-stockholder gives notice to the Company of the transfer or, if no
such notice is given, the date the Board of Directors determines that a
violative transfer has been made.
These restrictions will not preclude settlement of transactions through
the NYSE.
Each stockholder shall upon demand be required to disclose to the Company
in writing any information with respect to the direct, indirect and
constructive ownership of capital stock as the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency
or to determine any such compliance.
The Ownership Limit may have the effect of precluding acquisition of
control of the Company unless the Board of Directors determines that
maintenance of REIT status is no longer in the best interests of the Company.
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 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
14
<PAGE>
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 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 (i.e., 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) the
amount of money contributed (or deemed contributed as described below) and (ii)
his adjusted tax basis in 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 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
15
<PAGE>
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 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 from a
Unitholder who holds Units that were issued in exchange for a contribution of
property to the Operating Partnership, 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 Units
and 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. 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.
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<PAGE>
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, and the market value of its equity securities in relation to
the Company's view of the market value of its Properties, 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.
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
17
<PAGE>
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 (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.
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<PAGE>
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 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."
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<PAGE>
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.
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 to TMPC, L.P. under the
terms of a Registration Rights Agreement dated as of February 15, 1996 (the
"TMPC 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
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
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.
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<PAGE>
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.
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 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.
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<PAGE>
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
in excess of 1,000 shares of the Company's Common Stock.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996 and
1995 and the related consolidated statements of operations, stockholders' equity
and cash flows for the years ended December 31, 1996 and 1995 and for the period
May 26, 1994 to December 31, 1994, the combined statements of operations,
owners' equity (deficit) and cash flows for the period January 1, 1994 to
May 25, 1994 of The Beacon Group, predecessor to the Company, and the related
financial statement schedules of the Company as of December 31, 1996,
incorporated by reference herein from the Company's Annual Report on Form 10-K,
as amended, for the year ended December 31, 1996, have been so incorporated in
reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of said firm as experts in accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of 10880 Wilshire Boulevard in Westwood, California, Centerpointe in
Fairfax, Virginia, and Westbrook Corporate Center in Westchester, Illinois for
the year ended December 31, 1996, incorporated by reference herein from the
Company's current report on Form 8-K dated March 27, 1997, as amended on the
Form 8-K/A of the Company dated April 7, 1997, as amended, have been so
incorporated in reliance on the reports of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of Shoreline Technology Park in Mountain View, California, Lake Marriott
Business Park in Santa Clara, California and President's Plaza in Chicago,
Illinois for the year ended December 31, 1995, incorporated by reference herein
from the Company's current report on Form 8-K dated December 20, 1996, as
amended, have been so incorporated in reliance on the reports of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of said firm as
experts in accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of the Rosslyn Acquisitions in Rosslyn, Virginia, New England Executive
Park in Burlington, Massachusetts, and 10960 Wilshire Boulevard in Westwood,
California for the year ended December 31, 1995, incorporated by reference
herein from the Company's current report on Form 8-K dated October 18, 1996, as
amended, have been so incorporated in reliance on the reports of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of said firm as
experts in accounting and auditing.
The statements of excess of revenues over specific operating expenses for
each of the Fairfax County Portfolio in Tysons Corner and Herndon, Virginia,
1333 H Street in Washington, DC, AT&T Plaza in Oak Brook, Illinois, and
Tri-State International in Lincolnshire, Illinois for the year ended December
31, 1995, incorporated by reference herein from the Company's current report on
Form 8-K dated July 23, 1996, as amended on the Form 8-K/A of the Company dated
August 6, 1996, have been so incorporated in reliance on the reports of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of said firm
as experts in accounting and auditing.
The statement of excess of revenues over specific operating expenses for
Perimeter Center in Atlanta, Georgia for the year ended December 31, 1995,
incorporated by reference herein from the Company's current report on Form 8-K
dated February 15, 1996, as amended, has been so incorporated in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing.
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No 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Available Information 2
Incorporation of Certain Documents by Reference 2
Risk Factors 3
The Company 9
The Properties 10
Description of Common Stock 12
Restrictions on Transfers of Common Stock 13
Description of Units and Redemption of Units 14
Registration Rights 20
Federal Income Tax Considerations 21
Plan of Distribution 21
Legal Matters 22
Experts 22
</TABLE>
540,059 Shares
BEACON PROPERTIES
CORPORATION
Common Stock
PROSPECTUS
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, 1997
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated fees and expenses payable by
the Company in connection with the issuance and distribution of the Common
Stock registered hereby (all amounts except the registration fee are
estimated):
<TABLE>
<CAPTION>
<S> <C>
Registration fee $11,728
Printing and duplicating expenses 2,000
Legal fees and expenses 2,500
Miscellaneous 1,000
-------
Total $17,228
=======
</TABLE>
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.
Item 16. Exhibits
4.1 Articles of Incorporation (1).
4.2 Bylaws (2).
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
Common Stock being registered (3).
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax
matters (3).
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
II-1
<PAGE>
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1
hereto) (3).
24.1 Power of Attorney (included on the signature page hereto) (3).
- -------------
(1) Previously filed as an exhibit to Registrant's June 30, 1994 Form 10-Q.
(2) Previously filed as an exhibit to Registrant's Registration Statement on
Form S-3 (File No. 333-17237) and incorporated herein by reference.
(3) Previously filed as an exhibit to this Form S-3.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the undersigned registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, 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-2
<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 amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, Commonwealth of Massachusetts on this
25th day of April, 1997.
BEACON PROPERTIES CORPORATION
By: /s/ Alan M. Leventhal
-----------------------------
Alan M. Leventhal
President and Chief Executive
Officer
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>
<S> <C> <C>
Signature Capacity Date
- --------------------------- ----------------------------------- ---------------
/s/ Alan M. Leventhal President, Chief Executive April 25, 1997
- --------------------------- Officer and Director
Alan M. Leventhal (Principal Executive
Officer)
* Chairman of the Board April 25, 1997
- --------------------------- of Directors
Edwin N. Sidman
/s/ Lionel P. Fortin Executive Vice President, April 25, 1997
- --------------------------- Chief Operating Officer and
Lionel P. Fortin Director
* Senior Vice President and April 25, 1997
- --------------------------- Chief Financial Officer
Robert J. Perriello (Principal Financial Officer
and Principal Accounting Officer)
* Director April 25, 1997
- ---------------------------
Norman B. Leventhal
* Director April 25, 1997
- ---------------------------
Dale F. Frey
Director
- ---------------------------
Graham O. Harrison
* Director April 25, 1997
- ---------------------------
William F. McCall, Jr.
* Director April 25, 1997
- ---------------------------
Steven Shulman
* Director April 25, 1997
- ---------------------------
Scott M. Sperling
By: /s/ Alan M. Leventhal
- ---------------------------
Alan M. Leventhal
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Exhibit No. Description
- ------------ ------------
4.1 Articles of Incorporation (1).
4.2 Bylaws, as amended (2).
5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the Securities being registered (3).
8.1 Opinion of Goodwin, Procter & Hoar LLP as to certain tax
matters (3).
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
23.2 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto) (3).
24.1 Power of Attorney (included on the signature page hereto) (3).
</TABLE>
- -------------
(1) Previously filed as an exhibit to Registrant's June 30, 1994 Form 10-Q.
(2) Previously filed as an exhibit to Registrant's Registration Statement on
Form S-3 (File No. 333-17237) filed and incorporated herein by reference.
(3) Previously filed as an exhibit to this Form S-3.
II-4
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement,
relating to the registration of 540,059 shares of common stock of Beacon
Properties Corporation (the "Company") on Form S-3 (File No. 333-21787) of our
report dated January 28, 1997, appearing in the Company's Annual Report on Form
10-K, as amended, for the year ended December 31, 1996 on our audits of the
consolidated financial position of the Company as of December 31, 1996 and 1995
and the consolidated result of its operations and its cash flows for the years
ended December 31, 1996 and 1995 and for the period May 26, 1994 to December 31,
1994, the combined results of operations and cash flows of The Beacon Group,
predecessor to the Company, for the period January 1, 1994 to May 25, 1994, and
the related financial statement schedules of the Company as of December 31,
1996.
We also consent to the incorporation by reference of our report dated March
11, 1997 on our audit of the statement of excess of revenues over specific
operating expenses of 10880 Wilshire Boulevard in Westwood, California for the
year ended December 31, 1996, of our report dated March 18, 1997 on our audit of
the statement of excess of revenues over specific operating expenses of
Centerpointe in Fairfax, Virginia for the year ended December 31, 1996, and of
our report dated March 21, 1997 on our audit of the statement of excess of
revenues over specific operating expenses of Westbrook Corporate Center in
Westchester, Illinois for the year ended December 31, 1996, which reports were
filed with the Securities and Exchange Commission on the Form 8-K of the Company
dated March 27, 1997, as amended on the Form 8-K/A of the Company dated April 7,
1997, as amended.
We also consent to the incorporation by reference of our report dated
February 6, 1997 on our audit of the statement of excess of revenues over
specific operating expenses of Shoreline Technology Park in Mountain View,
California for the year ended December 31, 1995, of our report dated December
20, 1996 on our audit of the statement of excess of revenues over specific
operating expenses of Lake Marriott Business Park in Santa Clara, California
for the year ended December 31, 1995, and of our report dated December 20,
1996 on our audit of the statement of excess of revenues over specific
operating expenses of President's Plaza in Chicago, Illinois for the year
ended December 31, 1995, which reports were filed with the Securities and
Exchange Commission on the Form 8-K of the Company dated December 20, 1996,
as amended.
We also consent to the incorporation by reference of our audit report
dated September 27, 1996 on our audit of the statement of excess of revenues
over specific operating expenses of the Rosslyn Acquisitions in Rosslyn,
Virginia for the year ended December 31, 1995, of our report dated March 15,
1996 on our audit of the statement of excess of revenues over specific
operating expenses of the New England Executive Park in Burlington,
Massachusetts for the year ended December 31, 1995, and of our report dated
October 29, 1996 on our audit of the statement of excess of revenues over
specific operating expenses of 10960 Wilshire Boulevard in Westwood,
California for the year ended December 31, 1995, which reports were filed
with the Securities and Exchange Commission on the Form 8-K of the Company
dated October 18, 1996, as amended.
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, as amended on the Form 8-K/A of the Company dated August 6,
1996.
<PAGE>
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
specific operating expenses of Perimeter Center in 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 15, 1996,
as amended.
We also consent to the reference to our Firm under the caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 24, 1997
