-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EB+5G2yMRmGsTNNiK0dg+Yxjf2g7QrktgEbOOOKSDZq6a2L95slcunHjc6tldAd7 Ir7mFSGYqLp8Cpgc6YJqEg== 0000908737-02-000402.txt : 20021112 0000908737-02-000402.hdr.sgml : 20021111 20021112170351 ACCESSION NUMBER: 0000908737-02-000402 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HRPT PROPERTIES TRUST CENTRAL INDEX KEY: 0000803649 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046558834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09317 FILM NUMBER: 02817815 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02458 BUSINESS PHONE: 6177968350 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02458 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH & REHABILITATION PROPERTIES TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH & RETIREMENT PROPERTIES TRUST DATE OF NAME CHANGE: 19940811 10-Q 1 hrp10q_3rdq.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 1-9317 HRPT PROPERTIES TRUST Maryland 04-6558834 (State of Incorporation) (IRS Employer Identification No.) 400 Centre Street, Newton, Massachusetts 02458 617-332-3990 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Shares outstanding Class at November 4, 2002 - --------------------------------------- ------------------- Common shares of beneficial interest, $0.01 par value per share 128,825,247 HRPT PROPERTIES TRUST FORM 10-Q SEPTEMBER 30, 2002 INDEX PART I Financial Information Page Item 1. Financial Statements (unaudited) Consolidated Balance Sheets - September 30, 2002 and December 31, 2001 1 Consolidated Statements of Income - Three and Nine Months Ended September 30, 2002 and 2001 2 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2002 and 2001 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 Item 4. Controls and Procedures 11 Certain Important Factors 12 PART II Other Information Item 6. Exhibits and Report on Form 8-K 13 Signatures 14 Certifications 15
HRPT PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts) September 30, December 31, 2002 2001 -------------- -------------- (unaudited) (audited) ASSETS Real estate properties, at cost: Land $ 320,315 $ 302,601 Buildings and improvements 2,486,624 2,289,886 ----------- ----------- 2,806,939 2,592,487 Less accumulated depreciation 266,493 219,140 ----------- ----------- 2,540,446 2,373,347 Equity investments 265,519 273,442 Cash and cash equivalents 185,182 50,555 Restricted cash 7,347 8,582 Rents receivable, net 55,737 46,847 Other assets, net 53,632 52,653 ----------- ----------- $ 3,107,863 $ 2,805,426 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Borrowings on revolving credit facility $-- $-- Senior notes payable, net 772,843 757,505 Mortgage notes payable, net 337,107 339,712 Accounts payable and accrued expenses 38,548 32,888 Deferred rents 9,994 7,924 Security deposits 7,952 7,334 Due to affiliates 11,103 3,563 Commitments and contingencies -- -- Shareholders' equity: Preferred shares of beneficial interest, $0.01 par value, 50,000,000 shares authorized: Series A, 8,000,000 shares issued and outstanding 193,086 193,086 Series B, 12,000,000 and zero shares issued and outstanding, respectively 290,180 -- Common shares of beneficial interest, $0.01 par value: 150,000,000 shares authorized, 128,825,247 and 128,808,747 shares issued and outstanding, respectively 1,288 1,288 Additional paid in capital 1,945,753 1,945,610 Cumulative net income 978,931 903,752 Cumulative common distributions (1,449,790) (1,372,503) Cumulative preferred distributions (29,132) (14,319) Unrealized holding loss on investments -- (414) ----------- ----------- Total shareholders' equity 1,930,316 1,656,500 ----------- ----------- $ 3,107,863 $ 2,805,426 =========== ===========
See accompanying notes 1
HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ------------------------- 2002 2001 2002 2001 ----------- ---------- --------- ---------- REVENUES: Rental income $ 100,863 $ 95,589 $ 298,534 $ 289,395 Interest and other income 1,204 1,195 2,937 5,865 --------- --------- --------- --------- Total revenues 102,067 96,784 301,471 295,260 --------- --------- --------- --------- EXPENSES: Operating expenses 37,339 34,247 109,222 104,424 Interest (including amortization of note discounts and deferred financing fees) 21,346 21,986 64,505 68,654 Depreciation and amortization 16,928 15,371 49,731 45,913 General and administrative 3,916 4,061 11,792 11,794 Reversal of impairment of assets -- -- -- (3,955) --------- --------- --------- --------- Total expenses 79,529 75,665 235,250 226,830 --------- --------- --------- --------- Income before equity in earnings of equity investments and extraordinary item 22,538 21,119 66,221 68,430 Equity in earnings of equity investments 4,784 4,280 13,842 10,630 Loss on equity transactions of equity investments -- (5,636) (1,421) (5,636) --------- --------- --------- --------- Income before extraordinary item 27,322 19,763 78,642 73,424 Extraordinary item - early extinguishment of debt (119) -- (3,463) (2,149) --------- --------- --------- --------- Net income 27,203 19,763 75,179 71,275 Preferred distributions (6,250) (4,938) (16,125) (11,905) --------- --------- --------- --------- Net income available for common shareholders $ 20,953 $ 14,825 $ 59,054 $ 59,370 ========= ========= ========= ========= Weighted average common shares outstanding 128,824 129,937 128,814 130,710 ========= ========= ========= ========= Basic and diluted earnings per common share: Income before extraordinary item $ 0.16 $ 0.11 $ 0.49 $ 0.47 Extraordinary item - early extinguishment of debt -- -- (0.03) (0.02) --------- --------- --------- --------- Net income $ 0.16 $ 0.11 $ 0.46 $ 0.45 ========= ========= ========= =========
See accompanying notes 2
HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) Nine Months Ended September 30, -------------------------------- 2002 2001 ----------- ------------- Cash flows from operating activities: Net income $ 75,179 $ 71,275 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 47,434 44,405 Amortization of note discounts and deferred financing fees 3,980 3,597 Other amortization 2,297 1,508 Reversal of impairment of assets -- (3,955) Equity in earnings of equity investments (13,842) (10,630) Loss on equity transactions of equity investments 1,421 5,636 Distributions of earnings from equity investments 13,842 10,630 Extraordinary item 240 2,149 Change in assets and liabilities: Increase in rents receivable and other assets (14,331) (15,630) Increase (decrease) in accounts payable and accrued expenses 5,660 (10,178) Increase (decrease) in deferred rents 2,070 (94) Increase in security deposits 618 290 Increase (decrease) in due to affiliates 7,540 (4,689) --------- --------- Cash provided by operating activities 132,108 94,314 --------- --------- Cash flows from investing activities: Real estate acquisitions and improvements (215,159) (31,438) Distributions in excess of earnings from equity investments 6,502 9,338 Proceeds from repayment of real estate mortgages receivable -- 10,404 Proceeds from sale of real estate 740 10,444 Decrease in restricted cash 1,235 16,258 --------- --------- Cash (used for) provided by investing activities (206,682) 15,006 --------- --------- Cash flows from financing activities: Repurchase of common shares -- (20,803) Proceeds from issuance of preferred shares 290,180 193,086 Proceeds from borrowings 566,768 -- Payments on borrowings (555,289) (205,691) Deferred finance costs (358) (6,737) Distributions to common shareholders (77,287) (78,603) Distributions to preferred shareholders (14,813) (9,382) --------- --------- Cash provided by (used for) financing activities 209,201 (128,130) --------- --------- Increase (decrease) in cash and cash equivalents 134,627 (18,810) Cash and cash equivalents at beginning of period 50,555 92,681 --------- --------- Cash and cash equivalents at end of period $ 185,182 $ 73,871 ========= ========= Supplemental cash flow information: Interest paid (including capitalized interest paid of $2,832 and $603, respectively) $ 60,214 $ 70,640
See accompanying notes 3 HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 1. Basis of Presentation The accompanying consolidated financial statements of HRPT Properties Trust and its subsidiaries (the "Company") have been prepared without audit. Certain information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to make the information presented not misleading. However, the accompanying financial statements should be read in conjunction with the financial statements and notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances between HRPT Properties Trust and its subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior year's financial statements to conform to the current year's presentation. Note 2. Comprehensive Income The following is a reconciliation of net income to comprehensive income for the three and nine months ended September 30, 2002 and 2001:
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ---------------------------- 2002 2001 2002 2001 ------------ ------------- ------------ ----------- Net income $27,203 $19,763 $75,179 $71,275 Other comprehensive income: Unrealized holding gains (losses) on investments 1,713 (95) 1,713 4,964 Less: reclassification adjustment for gains realized in net income (1,299) -- (1,299) -- ------------ ------------- ------------ ----------- Net unrealized gains (losses) 414 (95) 414 4,964 ------------ ------------- ------------ ----------- Comprehensive income $27,617 $19,668 $75,593 $76,239 ============ ============= ============ ===========
During the nine months ended September 30, 2002, the Company sold all of its marketable equity securities for $12,878 and realized gains of $1,299 that are included in other income on the Company's consolidated statements of income. Note 3. Equity Investments At September 30, 2002, the Company had the following equity investments in Senior Housing Properties Trust ("SNH") and Hospitality Properties Trust ("HPT") and realized the following equity in earnings from those investments:
Equity Investments Equity in Earnings -------------------------------- -------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, September 30, December 31, ------------------------------ ---------------------------- 2002 2001 2002 2001 2002 2001 -------------- -------------- ------------ ------------- ------------ ----------- SNH $167,283 $171,969 $2,836 $2,343 $8,019 $4,890 HPT 98,236 101,473 1,948 1,937 5,823 5,740 -------------- -------------- ------------ ------------- ------------ ----------- $265,519 $273,442 $4,784 $4,280 $13,842 $10,630 ============== ============== ============ ============= ============ ===========
4 HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (dollars in thousands, except per share amounts) At September 30, 2002, the Company owned 12,809,238 common shares, or 21.9%, of SNH with a carrying value of $167,283 and a market value, based on quoted market prices, of $143,720, and 4,000,000 common shares, or 6.4%, of HPT with a carrying value of $98,236 and a market value, based on quoted market prices, of $132,480. In February 2002 SNH completed a public offering of common shares. As a result of this transaction, the Company's ownership percentage of SNH was reduced from 29.5% at December 31, 2001, to 21.9% at September 30, 2002, and the Company recognized a non cash loss of $1,421 as a result of this sale by SNH at a price below the Company's carrying value of its SNH shares. The Company's two managing trustees are also managing trustees of SNH and HPT, and owners of Reit Management & Research LLC, which is the investment manager to the Company, SNH and HPT. The Company's investments in SNH and HPT are accounted for using the equity method of accounting. Note 4. Real Estate Properties During the nine months ended September 30, 2002, the Company acquired 13 properties for $176,692 and funded $38,467 of improvements to its existing properties. The Company also sold one property in January 2002 for net cash proceeds of $740. One property with an undepreciated book value of $81,367 as of September 30, 2002, has been undergoing an extensive redevelopment expected to be substantially complete in the fourth quarter of 2002. This property was pre-leased and rent is expected to commence prior to the end of 2002. During redevelopment, no rental income or depreciation is being recognized, and redevelopment costs, including interest, are being capitalized. Note 5. Indebtedness On March 26, 2002, the Company redeemed at par plus a premium, all $160,000 of its 6.875% senior notes due in August 2002. This redemption was funded using borrowings under the Company's revolving bank credit facility. In connection with this redemption, the Company recognized an extraordinary loss of $3,344 from the prepayment premium and the write-off of deferred financing fees and a note discount. In April 2002 the Company issued unsecured senior notes totaling $200,000, raising net proceeds of $196,768. These notes bear interest at 6.95%, require semi-annual interest payments and mature in April 2012. The net proceeds from this offering were used to repay amounts outstanding under the Company's revolving bank credit facility. In July 2002 the Company repurchased and retired $21,720 of its $150,000 6.75% senior notes due in December 2002, at par plus a premium, using cash on hand and borrowings under its revolving bank credit facility. The premium paid plus the write-off of deferred financing fees and the unamortized original issue note discount totaled $119 and was recognized as an extraordinary loss in the period ending September 30, 2002. The Company's public debt indentures and credit facility agreement contain a number of financial and other covenants, including a credit facility covenant which limits the amount of aggregate distributions on preferred and common shares to 90% of operating cash flow available for shareholder distributions as defined in the credit facility. Note 6. Shareholders' Equity In July 2002, 15,000 common shares with an aggregate market value of $130 were granted to officers of the Company and employees of the Company's investment manager. One-third of these shares vest immediately and the balance vests over a two-year period. The Company includes the value of granted shares in general and administrative expenses. In September 2002 the Company issued 12,000,000 series B cumulative redeemable preferred shares in a public offering for net proceeds of $290,180. Each series B preferred share requires dividends of $2.1875 per annum, payable in equal quarterly payments. Each series B preferred share has a liquidation preference of $25.00 and is redeemable, at the Company's option, for $25.00 each plus accrued and unpaid dividends at any time on or after September 12, 2007. The proceeds from this offering were used to repay amounts outstanding under the Company's revolving bank credit facility, to prepay debt and to acquire properties. 5 HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (dollars in thousands, except per share amounts) Note 7. New Accounting Prouncements In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, "Rescission of FASB Statements No. 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("FAS 145"). The provisions of this standard eliminate the requirement that a gain or loss from the extinguishment of debt be classified as an extraordinary item, unless it can be considered unusual in nature and infrequent in occurrence. The Company will be required to implement FAS 145 on January 1, 2003. Upon implementation, the Company will reclassify all extraordinary gains or losses from debt extinguishments in 2002 and prior as ordinary income/loss from operations. Note 8. Subsequent Events In October 2002, the Company declared a distribution on its common shares with respect to the quarter ended September 30, 2002, of $0.20 per common share, or $25,800, which will be paid on or about November 22, 2002, to shareholders of record on October 22, 2002. The Company also announced a distribution on its series A cumulative redeemable preferred shares of $0.6172 per share, or $4,938 and a partial quarter's distribution on its series B cumulative redeemable preferred shares of $0.3828 per share, or $4,594 which will be paid on or about November 15, 2002, to shareholders of record as of November 1, 2002. In October 2002 the Company purchased three commercial office properties for $236,250 plus closing costs, using cash on hand and borrowings under its revolving bank credit facility. Also, in October 2002, the Company redeemed at par plus accrued interest, the outstanding balance of $128,280 of its 6.75% notes due in December 2002. During the fourth quarter of 2002, the Company will realize an extraordinary loss of $45 as a result of the write off of unamortized issuance costs in connection with this redemption. 6 HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion presents an analysis of our results of operations for the three and nine months ended September 30, 2002 and 2001, and should be read in conjunction with our Annual Report on Form 10-K. Results of Operations Three Months Ended September 30, 2002, Compared to Three Months Ended September 30, 2001 Total revenues for the three months ended September 30, 2002, increased to $102.1 million from $96.8 million for the three months ended September 30, 2001. Rental income increased in 2002 by $5.3 million primarily as a result of our acquisition of 13 properties in 2002 and two properties in 2001. This increase was partially offset by a decline in rents resulting from the decrease in property occupancy during the 2002 period compared to the 2001 period. Total expenses for the three months ended September 30, 2002, increased to $79.5 million from $75.7 million for the three months ended September 30, 2001, due primarily to increases in operating expenses and depreciation and amortization, offset by a decrease in interest expense. Operating expenses and depreciation and amortization expenses increased by $3.1 million and $1.6 million, respectively, primarily as a result of the acquisition of properties in 2002 and 2001. Interest expense decreased by $640,000. The decrease in interest expense results from lower interest rates and capitalization of interest on debt allocable to a property being redeveloped during 2002, partially offset by interest incurred to finance property acquisitions. Equity in earnings of equity investments increased by $504,000 for the three months ended September 30, 2002, compared to the same period in 2001 due primarily to an increase in earnings from Senior Housing Properties Trust ("SNH"). Also, a loss on equity transactions of equity investments of $5.6 million was recognized in the 2001 third quarter, reflecting the issuance of common shares by SNH at a price below our per share carrying value. Net income before preferred distributions was $27.2 million for the 2002 period, and $19.8 million for the 2001 period. Net income available for common shareholders is net income reduced by preferred distributions and was $21.0 million, or $0.16 per common share, in the 2002 period, compared to $14.8 million, or $0.11 per common share in the 2001 period. The increases in both net income and net income available for common shareholders is due primarily to property acquisitions in 2002 and 2001, the decrease in interest expense, the increase in equity income from our investment in SNH and the prior period loss recognized from the issuance of common shares by SNH, offset by the decrease in rents from lower occupancies in continuing properties. Net income available for common shareholders for the three months ended September 30, 2002, also includes a partial period deduction for preferred distributions on our series B preferred shares that were issued in September 2002. Nine Months Ended September 30, 2002, Compared to Nine Months Ended September 30, 2001 Total revenues for the nine months ended September 30, 2002, increased to $301.5 million from $295.3 million for the nine months ended September 30, 2001. Rental income increased in 2002 by $9.1 million and interest and other income decreased in 2002 by $2.9 million, compared to the prior period. Rental income increased primarily from the acquisition of 13 properties in 2002 and two properties in 2001, offset by decreases resulting from the sale of four properties in 2001, and a decline in property occupancy during the 2002 period from the 2001 period. Interest and other income decreased primarily as a result of lower cash balances invested in 2002 compared to 2001 and lower interest rates. 7 HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Total expenses for the nine months ended September 30, 2002, increased to $235.3 million from $226.8 million for the nine months ended September 30, 2001. This increase results from operating expenses and depreciation and amortization from buildings purchased in 2002 and 2001, and the reversal of an impairment loss reserve totaling $4.0 million recognized in 2001 offset by a decrease in interest expense. Interest expense decreased by $4.1 million during the nine months ended September 30, 2002, compared to the prior year period, primarily as a result of the repayment of debt during the first quarter of 2001 and capitalization of interest during the 2002 period with respect to debt allocable to a property being redeveloped, partially offset by interest on debt incurred to finance acquisitions in 2002. Equity in earnings of equity investments increased by $3.2 million for the nine months ended September 30, 2002, compared to the same period in 2001 primarily due to an increase in earnings from SNH. A loss on equity transactions of equity investments of $1.4 million was recognized in 2002 from the issuance of common shares by SNH at a price below our per share carrying value, compared to a loss of $5.6 million recognized in 2001. Net income before preferred distributions increased to $75.2 million for the 2002 period, from $71.3 million for the 2001 period. The increase is due primarily to property acquisitions in 2002 and 2001, capitalized interest on debt allocable to a property in redevelopment during 2002, a smaller loss recognized from the issuance of common shares by SNH in 2002 compared to 2001, and the increase in equity income from our investment in SNH, offset by the reversal of an impairment loss reserve in 2001, lower interest income on invested cash balances, the extraordinary loss recognized from the prepayment of debt in 2002, assets sold during 2001 and a decrease in property occupancy. Net income available for common shareholders is net income reduced by preferred distributions and was $59.1 million, or $0.46 per common share, in the 2002 period, compared to $59.4 million, or $0.45 per common share in the 2001 period. The decrease reflects the foregoing factors, distributions accrued during 2002 on our series B preferred shares which were issued in September 2002 and the partial period distribution paid during 2001 on our series A preferred shares issued in February 2001. Liquidity and Capital Resources Our Operating Liquidity and Resources Our principal sources of funds for current expenses and for distributions to shareholders are our operations, primarily rents from our properties and, to a lesser extent, distributions received from our equity investments. Rents are generally received from our non-government tenants monthly in advance, and from our government tenants monthly in arrears. This flow of funds has historically been sufficient for us to pay day-to-day operating expenses, interest and distributions. We believe that our operating cash flow will be sufficient to meet our operating expenses, interest and distribution payments for the foreseeable future. Our Investment and Financing Liquidity and Resources We have a $425 million unsecured revolving credit facility with a group of commercial banks, which may be expanded, in certain circumstances, by up to $200 million. We use this credit facility to fund acquisitions and improvements and to accommodate occasional cash needs which may result from timing differences between our receipt of rents and our desire to make distributions or our need to pay operating expenses. Borrowings under this credit facility bear interest at LIBOR plus a premium and mature in April 2005. Funds may be drawn, repaid and redrawn until maturity and no principal payment is due until maturity. At September 30, 2002, there were no amounts outstanding and the entire $425 million was available for borrowing under this credit facility, and we had cash and cash equivalents of $185.2 million. In October 2002 we used substantially all of this cash, supplemented by draws of $197 million on our credit facility, to repay $128.3 million of debt and acquire properties for $236.3 million. In the future we expect to use existing cash balances, borrowings under our credit facility and net proceeds of offerings of equity or debt securities to fund additional property acquisitions and meet substantially all of our debt principal repayment obligations. 8 HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) As of November 4, 2002, we had outstanding commitments aggregating approximately $28.5 million to acquire office buildings. The acquisition of these office buildings is subject to various closing conditions customary in real estate transactions and we do not know when or if these office buildings will be acquired. Principal payments due during the next five years required under all of our debt obligations as of September 30, 2002, are $129.9 million in 2002, $5.6 million in 2003, $9.9 million in 2004, $107.1 million in 2005, $7.7 million in 2006 and $865.1 million thereafter. As noted above, we paid $128.3 million of our 2002 debt maturities in October 2002. To the extent we borrow on our credit facility and, as the maturity dates of our credit facility and term debts approach over the longer term, we will explore various alternatives for the repayment of amounts due. Such alternatives in the short term and long term may include borrowings under our revolving credit facility, incurring additional long term debt and issuing new equity securities. An effective shelf registration statement allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. As of September 30, 2002, we had $1.8 billion available on our effective $3 billion shelf registration statement. Although there can be no assurance that we will consummate any additional debt or equity offerings or other financings, we believe we will have access to various types of financing in the future, including debt or equity securities offerings, with which to finance future acquisitions and to pay our debt and other obligations. At September 30, 2002, we owned 12.8 million, or 21.9%, of the common shares of beneficial interest of SNH with a carrying value of $167.3 million and a market value of $143.7 million, and 4.0 million, or 6.4%, of the common shares of beneficial interest of Hospitality Properties Trust ("HPT") with a carrying value of $98.2 million and a market value of $132.5 million. On November 4, 2002, the market values of our SNH and HPT shares were $133.7 million and $134.1 million, respectively. On July 3, 2002, we filed an application with the Securities and Exchange Commission to permit the sale of some of our shareholdings in our former subsidiaries, SNH and HPT, as well as new shares of ours to a new mutual fund to be organized by a subsidiary of Reit Management & Research LLC, the investment manager to us, SNH and HPT. The SEC review process for this application is expected to take several months. The decision as to whether to proceed with the fund creation and the sale of shares to the fund will depend upon market conditions if and after the application is approved, particularly the market price of our shares and of HPT and SNH shares and the uses of sales proceeds available to us at that time. Debt Covenants Our principal unsecured debt obligations at September 30, 2002, are our unsecured revolving credit facility and our $776.3 million of public debt. Our public debt is governed by indentures. These indentures and our credit facility agreement contain a number of financial ratio covenants which generally restrict our ability to incur debts, including debts secured by mortgages on our properties in excess of calculated amounts, require us to maintain a minimum net worth, as defined, and require us to maintain other ratios, as defined. Our credit facility also includes a covenant which limits the amount of aggregate distributions on preferred and common shares to 90% of operating cash flow available for shareholder distributions as defined in the credit facility. At September 30, 2002, we were in compliance with all of our covenants under our indentures and our credit agreement. In addition to our principal unsecured debt obligations, we have $349.0 million of mortgage notes outstanding at September 30, 2002. Our mortgage notes are secured by 25 of our properties. None of our indentures, our revolving bank credit facility or our mortgage notes contain provisions for acceleration which could be triggered by our debt ratings. However, under our credit agreement, our senior debt rating is used to determine the fees and interest rate applied to borrowings. Our public debt indentures contain cross default provisions to any other debts equal to or in excess of $20 million. Similarly, a default on any of our public debt indentures would constitute a default under our credit agreement. 9 HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) As of September 30, 2002, we have no commercial paper, derivatives, swaps, hedges, guarantees or joint ventures. None of our debt documentation requires us to provide collateral security in the event of a ratings downgrade. We have no "off balance sheet" arrangements. 10 HRPT PROPERTIES TRUST Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in our exposures to market changes in interest rates or the manner in how we manage our exposures since December 31, 2001, other than an increase in the amount outstanding on our revolving credit facility, which occurred subsequent to September 30, 2002. The following table shows the impact a 10% change in interest rates would have on our floating rate interest expense: Impact of Changes in Interest Rates ---------------------------------------------------- Total Interest Interest Rate Outstanding Expense Per Year Debt Per Year ------------- -------------- ---------------- (dollars in thousands) At November 4, 2002 2.6% $197,000 $5,122 10% reduction 2.3% $197,000 $4,531 10% increase 2.9% $197,000 $5,713 Item 4. Controls and Procedures a) Within the 90 days prior to the date of this report, management of the Company carried out an evaluation, under the supervision and with the participation of our Managing Trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 and 15d-14. Based upon that evaluation, the Managing Trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings. b) There have been no significant changes in the Company's internal controls or in other factors that could significantly affect those controls since the Company's evaluation of these controls, including any corrective actions with regard to significant deficiencies and material weaknesses. 11 HRPT PROPERTIES TRUST CERTAIN IMPORTANT FACTORS THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD LOOKING STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-Q AND INCLUDE REFERENCES TO PROPERTY ACQUISITIONS, DEBT AND EQUITY FINANCING POSSIBILITIES, INCLUDING THE REPAYMENT OF DEBT, ACCOUNTING ESTIMATES AND OTHER MATTERS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR CURRENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED AND THEY MAY NOT OCCUR. FOR EXAMPLE, WE MAY BE UNABLE TO BUY PROPERTIES AT ACCEPTABLE PRICES OR TO CONCLUDE DEBT AND EQUITY FINANCINGS ON ACCEPTABLE TERMS. ALSO, THE FACT THAT THE COMPANY HAS FILED AN APPLICATION WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") TO SELL ITS SHARES AND ITS SHAREHOLDINGS OF HPT AND SNH TO A FUND DOES NOT MEAN THAT SUCH SALES WILL OCCUR; THE SEC MAY NOT APPROVE THIS APPLICATION OR THE COMPANY MAY DECIDE NOT TO PROCEED WITH THIS SALE BECAUSE IT CONSIDERS THE MARKET PRICES OF THE SHARES TOO LOW, BECAUSE WE DO NOT HAVE AN ATTRACTIVE USE OF PROCEEDS OR FOR OTHER REASONS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED JULY 1, 1994, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRPT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. 12 Part II Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 4.1 Articles Supplementary relating to the 8 3/4% Series B Cumulative Redeemable Preferred Shares. 12.1 Computation of Ratio of Earnings to Fixed Charges 12.2 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K: 1. Current Report on Form 8-K, dated September 4, 2002, relating to the filing of a preliminary prospectus supplement to the Company's existing shelf registration statement for the sale of Series B cumulative redeemable preferred shares. 2. Current Report on Form 8-K, dated September 6, 2002, relating to the issuance and sale of 11,000,000 shares of a new series of preferred shares, 8 3/4% Series B Cumulative Redeemable Preferred Shares, and filing as exhibits, (a) Purchase Agreement, dated as of September 6, 2002, between HRPT Properties Trust and the several underwriters named therein, pertaining to 11,000,000 8 3/4% Series B Cumulative Redeemable Preferred Shares, (b) form of Articles Supplementary relating to the 8 3/4% Series B Cumulative Redeemable Preferred Shares, (c) Form of temporary 8 3/4% Series B Cumulative Redeemable Preferred Share Certificate, (d) Opinion of Sullivan & Worcester LLP re: tax matters, (e) computation of Ratio of Earnings to Fixed Charges, (f) computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions, (g) computation of Pro Forma Ratio of Earnings to Fixed Charges, (h) computation of Pro Forma Ratio of Earnings to Combined Fixed Charges and Preferred Distributions, and (i) Consent of Sullivan & Worcester LLP. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HRPT PROPERTIES TRUST By: /s/ John A. Mannix --------------------------------------- John A. Mannix President and Chief Operating Officer Dated: November 12, 2002 By: /s/ John C. Popeo --------------------------------------- John C. Popeo Treasurer and Chief Financial Officer Dated: November 12, 2002 14 I, John A. Mannix, certify that: 1. I have reviewed this quarterly report on Form 10-Q of HRPT Properties Trust; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ John A. Mannix ----------------------- ----------------------------- John A. Mannix President and Chief Operating Officer 15 I, John C. Popeo, certify that: 1. I have reviewed this quarterly report on Form 10-Q of HRPT Properties Trust; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ John C. Popeo ---------------------- ------------------------------------- John C. Popeo Treasurer and Chief Financial Officer 16 I, Barry M. Portnoy, certify that: 1. I have reviewed this quarterly report on Form 10-Q of HRPT Properties Trust; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ Barry M. Portnoy ---------------------- ------------------------------------- Barry M. Portnoy Managing Trustee 17 I, Gerard M. Martin, certify that: 1. I have reviewed this quarterly report on Form 10-Q of HRPT Properties Trust; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/ Gerard M. Martin ----------------------- --------------------------------- Gerard M. Martin Managing Trustee 18 EX-4.1 3 exh4-1.txt Exhibit 4.1 HRPT PROPERTIES TRUST ARTICLES SUPPLEMENTARY 8 3/4% SERIES B CUMULATIVE REDEEMABLE PREFERRED SHARES $0.01 par value per share HRPT PROPERTIES TRUST, a Maryland real estate investment trust (the "Trust"), having its principal office in Newton, Massachusetts, hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: Pursuant to authority expressly vested in the Trustees by Section 6.1 of the Third Amendment and Restatement of Declaration of Trust of the Trust, dated July 1, 1994, as amended and supplemented (the "Declaration"), the Trustees have duly classified and designated 12,650,000 Preferred Shares of the Trust as 8 3/4% Series B Cumulative Redeemable Preferred Shares, $0.01 par value per share, of the Trust ("Series B Preferred Shares"). SECOND: The preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms or conditions of redemption of the Series B Preferred Shares are as follows, which upon any restatement of the Declaration shall be made part of Article VI of the Declaration, with any necessary or appropriate changes to the enumeration or lettering of sections or subsections hereof. Capitalized terms used in this ARTICLE SECOND which are defined in the Declaration and not otherwise defined herein are used herein as so defined in the Declaration. 8 3/4% Series B Cumulative Redeemable Preferred Shares, $0.01 par value per share 1. Designation and Number. A series of Preferred Shares, designated the 8 3/4 % Series B Cumulative Redeemable Preferred Shares, $0.01 par value per share (the "Series B Preferred Shares"), is hereby established. The number of authorized Series B Preferred Shares is 12,650,000. 2. Relative Seniority. In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, the Series B Preferred Shares shall rank (i) senior to the Common Shares, the Junior Participating Preferred Shares and any other class or series of Shares of the Trust, the terms of which specifically provide that such class or series ranks, as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, junior to the Series B Preferred Shares (the Shares described in this clause (i) being, collectively, "Junior Shares"), (ii) on a parity with the 9 7/8% Series A Cumulative Redeemable Preferred Shares, $0.01 par value per share (the "Series A Preferred Shares"), and any other class or series of Shares of the Trust, the terms of which specifically provide that such class or series ranks, as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, on a parity with the Series B Preferred Shares, and (iii) junior to any class or series of Shares of the Trust, the terms of which specifically provide that such class or series ranks, as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, senior to the Series B Preferred Shares. For the avoidance of doubt, debt securities of the Trust which are convertible into or exchangeable for Shares of the Trust or any other debt securities of the Trust do not constitute a class or series of Shares for purposes of this Section 2. 3. Dividends and Distributions. (a) Subject to the preferential rights of the holders of any class or series of Shares of the Trust ranking senior to the Series B Preferred Shares as to dividends, the holders of the then outstanding Series B Preferred Shares shall be entitled to receive, when and as authorized by the Trustees and declared by the Trust, out of any funds legally available therefor, cumulative dividends at a rate of eight and three fourths percent (8 3/4 %) per annum of the Twenty-five Dollars ($25.00) per share liquidation preference of the Series B Preferred Shares (equivalent to the annual rate of $2.1875 per share). Such dividends shall accrue and be cumulative from (but excluding) September 12, 2002 (the "Original Issue Date") in the case of Series B Preferred Shares issued on or prior to October 11, 2002, and otherwise from (but excluding) the date of the original issuance thereof, and will be payable quarterly in arrears in cash on the fifteenth day of each February, May, August and November beginning on November 15, 2002 (each such day being hereinafter called a "Quarterly Dividend Date"); provided that if any Quarterly Dividend Date is not a Business Day (as hereinafter defined), then the dividend which would otherwise have been payable on such Quarterly Dividend Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Quarterly Dividend Date, and no interest or additional dividends or other sums shall accrue on the amount so payable from such Quarterly Dividend Date to such next succeeding Business Day. As used herein the term "Dividend Period" for Series B Preferred Shares means the period from but excluding the Original Issue Date or other date of the original issuance thereof, as applicable, and ending on and including the next following Quarterly Dividend Date, and each subsequent period from but excluding a Quarterly Dividend Date and ending on and including the next following Quarterly Dividend Date. The amount of any dividend payable for any full Dividend Period or portion thereof shall be computed on the basis of a 360-day year of twelve 30-day months (it being understood that the first Dividend Period is shorter than a full Dividend Period). Dividends shall be payable to holders of record as they appear in the share records of the Trust at the close of business on the applicable record date (the "Record Date"), which shall be a date designated by the Trustees for the payment of dividends that is not more than 60 nor less than 10 days prior to the applicable Quarterly Dividend Date. (b) Dividends on the Series B Preferred Shares shall accrue and be cumulative, whether or not (i) the Trust has earnings, (ii) there are funds legally available for the payment of such dividends or (iii) such dividends have been declared. (c) If Series B Preferred Shares are outstanding, no full dividends shall be declared or paid or set apart for payment on any other class or series of Shares of the Trust ranking, as to dividends, on a parity with the Series B Preferred Shares for any period, unless the full cumulative dividends on the Series B Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series B Preferred Shares and the Shares of any other class or series ranking on a parity as to dividends with the Series B Preferred Shares, all dividends declared upon Series B Preferred Shares and any such other class or series of Shares -2- shall in all cases bear to each other the same ratio that accrued dividends per share on the Series B Preferred Shares and such other class or series of Shares (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such other class or series does not have a cumulative dividend) bear to each other. (d) Except as provided in Section 3(c) above, unless full cumulative dividends on the Series B Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the repayment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no dividends (other than in Common Shares or other Junior Shares or options, warrants or rights to subscribe for or purchase Common Shares or other Junior Shares) shall be declared or paid or set apart for payment and no other distribution shall be declared or made upon the Common Shares or any other Shares ranking junior to the Series B Preferred Shares as to rights to receive dividends or to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, nor shall any Common Shares or any other such Shares be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such Shares) by the Trust except (i) by conversion into or exchange for Common Shares or other Junior Shares, (ii) pursuant to pro rata offers to purchase or a concurrent redemption of all, or a pro rata portion of, the outstanding Series B Preferred Shares and any other class or series of Shares ranking on a parity with Series B Preferred Shares as to rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, (iii) by redemption, purchase or other acquisition of Common Shares made for purposes of an incentive, benefit or share purchase plan of the Trust or any of its subsidiaries for officers, Trustees or employees or others performing or providing similar services, (iv) by redemption, purchase or other acquisition of rights to purchase Junior Participating Preferred Shares pursuant to the Rights Agreement, dated as of October 17, 1994, between the Trust and State Street Bank and Trust Company, as rights agent, or pursuant to any replacement agreement therefor relating to such rights, each as in effect from time to time, or of any similar rights from time to time issued by the Trust in connection with a successor or supplemental shareholder rights protection plan adopted by the Trustees, and (v) for redemptions, purchases or other acquisitions by the Trust, whether pursuant to any provision of the Declaration or otherwise, for the purpose of preserving the Trust's status as a real estate investment trust (a "REIT") for federal income tax purposes. (e) No interest, or sum of money in lieu thereof, shall be payable in respect of any dividend payment or payments on Series B Preferred Shares which may be in arrears, and the holders of Series B Preferred Shares are not entitled to any dividends, whether payable in cash, securities or other property, in excess of the full cumulative dividends described in this Section 3. Except as otherwise expressly provided herein, the Series B Preferred Shares shall not be entitled to participate in the earnings or assets of the Trust. (f) Any dividend payment made on the Series B Preferred Shares shall be first credited against the earliest accrued but unpaid dividend due with respect to such Shares which remains payable. Any cash dividends paid in respect of Series B Preferred Shares, including any portion thereof which the Trust elects to designate as "capital gain dividends" (as defined in Section 857 (or any successor provision) of the Internal Revenue Code) or as a return of capital, shall be credited to the cumulative dividends on the Series B Preferred Shares. -3- (g) No dividends on the Series B Preferred Shares shall be authorized by the Trustees or be paid or set apart for payment by the Trust at such time as the terms and provisions of any agreement of the Trust, including any agreement relating to its indebtedness, directly or indirectly prohibit authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration, payment or setting apart for payment shall be restricted or prohibited by law. (h) The Trust shall remain entitled to receive and retain any interest or other earnings on any money set aside for the payment of dividends on Series B Preferred Shares and holders thereof shall have no claim to such interest or other earnings. Any funds for the payment of dividends on Series B Preferred Shares which have been set apart by the Trust and which remain unclaimed by the holders of the Series B Preferred Shares entitled thereto on the first anniversary of the applicable Quarterly Dividend Date, or other dividend payment date, shall revert and be repaid to the general funds of the Trust, and thereafter the holders of the Series B Preferred Shares entitled to the funds which have reverted or been repaid to the Trust shall look only to the general funds of the Trust for payment, without interest or other earnings thereon. (i) "Business Day" shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York or Boston, Massachusetts are authorized or required by law, regulation or executive order to close. 4. Liquidation Rights. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Trust, before any distribution or payment shall be made to the holders of any Common Shares or any other Shares ranking junior to the Series B Preferred Shares as to rights to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, but subject to the preferential rights of holders of any class or series of Shares ranking senior to the Series B Preferred Shares as to rights to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, the holders of Series B Preferred Shares shall be entitled to receive, out of assets of the Trust legally available for distribution to shareholders, liquidating distributions in cash or property at its fair market value as determined by the Trustees in the amount of Twenty-five Dollars ($25.00) per Series B Preferred Share, plus an amount equal to all dividends accrued and unpaid thereon. (b) After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series B Preferred Shares will have no right or claim to any of the remaining assets of the Trust. (c) In the event that upon any voluntary or involuntary liquidation, dissolution or winding up of the Trust, the available assets of the Trust are insufficient to pay the full amount of the liquidating distributions on all outstanding Series B Preferred Shares and the full amounts payable as liquidating distributions on all Shares of other classes or series of Shares of the Trust ranking on a parity with the Series B Preferred Shares as to rights to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Trust, then the holders of the Series B Preferred Shares and all other such classes or series of Shares shall share -4- ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. (d) For purposes of this Section 4, neither the sale, lease, transfer or conveyance of all or substantially all of the property or business of the Trust, nor the merger or consolidation of the Trust into or with any other entity or the merger or consolidation of any other entity into or with the Trust or a statutory share exchange by the Trust, shall be deemed to be a dissolution, liquidation or winding up of the Trust. (e) In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption or other acquisition of Shares or otherwise, is permitted under Maryland law, amounts that would be needed, if the Trust were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the holders of Series B Preferred Shares will not be added to the Trust's total liabilities. 5. Redemption by the Trust. (a) Optional Redemption. The Series B Preferred Shares are not redeemable prior to September 12, 2007, except as otherwise provided in Section 5(b) below. On and after September 12, 2007, the Trust may, at its option, redeem Series B Preferred Shares in whole or from time to time in part, for cash at a redemption price per share of Twenty-five Dollars ($25.00), together with all accrued and unpaid dividends to the date fixed for redemption, except as otherwise provided in Section 5(c)(vi) below, and without interest (the "Series B Redemption Price"). Each date fixed for redemption of Series B Preferred Shares pursuant to this Section 5(a) or to Section 5(b) below is referred to in these provisions of the Series B Preferred Shares as a "Series B Redemption Date." The Series B Preferred Shares have no stated maturity and are not subject to any sinking fund or mandatory redemption. Any redemption of Series B Preferred Shares pursuant to this Section 5(a) shall be made in accordance with the applicable provisions of Section 5(c) below. (b) Special Optional Redemption. The Trust may, at its option, redeem at any time all or from time to time any Series B Preferred Shares which constitute Excess Series B Preferred Shares (as defined in Section 9 below) for cash at a redemption price per share equal to the Series B Redemption Price, subject, with respect to the portion of the Series B Redemption Price constituting accrued and unpaid dividends to the date fixed for redemption, to Section 5(c)(vi) below, and without interest. The Trust's right to redeem Excess Series B Preferred Shares shall be in addition to, and shall not limit, its rights with respect to such Series B Preferred Shares set forth in Section 9 below or in Section 6.14 of the Declaration. Any redemption of Series B Preferred Shares pursuant to this Section 5(b) shall be made in accordance with the applicable provisions of Section 5(c) below. (c) Procedures and Terms for Redemption. (i) Notice of redemption will be mailed at least 30 days but not more than 60 days before the Series B Redemption Date to each holder of record of Series B Preferred Shares to be redeemed at the address shown on the share transfer books of the Trust; provided that if the Trust shall have reasonably concluded, based on advice of -5- independent tax counsel experienced in such matters, that a redemption pursuant to Section 5(b) must be made on a date (the "Special Redemption Date") which is earlier than 30 days after the date of such mailing in order to preserve the status of the Trust as a REIT for federal income tax purposes or to comply with federal tax laws relating to the Trust's qualification as a REIT, then the Trust may give such shorter notice as is necessary to effect such redemption on the Special Redemption Date. Each notice of redemption shall state: (A) the applicable Series B Redemption Date; (B) the number of Series B Preferred Shares to be redeemed; (C) the applicable Series B Redemption Price; (D) the place or places where certificates for such Series B Preferred Shares are to be surrendered for payment of the Series B Redemption Price; and (E) that dividends on the Series B Preferred Shares to be redeemed will cease to accrue on such Series B Redemption Date. If fewer than all the Series B Preferred Shares are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of Series B Preferred Shares to be redeemed from each such holder or the method for calculating that number. No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series B Preferred Shares except as to the holder to whom the Trust has failed to give notice or to whom notice was defective. (ii) If notice of redemption of Series B Preferred Shares has been mailed in accordance with Section 5(c)(i) above and if the funds necessary for such redemption have been set aside by the Trust in trust for the benefit of the holders of the Series B Preferred Shares so called for redemption, subject to the provisions of Section 5(c)(v) below, then from and after the Series B Redemption Date specified in the notice, dividends will cease to accumulate, and such Shares shall no longer be deemed to be outstanding and shall not have the status of Series B Preferred Shares and all rights of the holders thereof as shareholders of the Trust (except the right to receive the Series B Redemption Price) shall terminate. (iii) Upon surrender, in accordance with the Trust's notice of redemption, of the certificates for any Series B Preferred Shares redeemed (properly endorsed or assigned for transfer and with applicable signature guarantees, if the Trust shall so require and the notice shall so state), the Series B Preferred Shares shall be redeemed by the Trust at the Series B Redemption Price. In case fewer than all the Series B Preferred Shares evidenced by any such certificate are redeemed, a new certificate or certificates shall be issued evidencing the unredeemed Series B Preferred Shares without cost to the holder thereof. (iv) If fewer than all of the outstanding Series B Preferred Shares are to be redeemed, the number of Series B Preferred Shares to be redeemed will be determined by the Trust and such Shares may be redeemed pro rata from the holders of record of such Shares in proportion to the number of such Shares held by such holders (with adjustments to avoid redemption of fractional Shares), by lot or by any other equitable method determined by the Trust. (v) Any funds for the redemption of Series B Preferred Shares which have been set aside by the Trust pursuant to Section 5(c)(ii) above, shall be irrevocably -6- set aside separate and apart from the Trust's other funds in trust for the pro rata benefit of the holders of the Series B Preferred Shares called for redemption, except that: (A) the Trust shall be entitled to receive any interest or other earnings, if any, earned on any money so set aside in trust, and the holders of any Shares redeemed shall have no claim to such interest or other earnings; and (B) any balance of monies deposited by the Trust and unclaimed by the holders of the Series B Preferred Shares entitled thereto at the expiration of one year from the applicable Series B Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the general funds of the Trust, and after any such repayment, the holders of the Shares entitled to the funds which have been repaid to the Trust shall look only to the general funds of the Trust for payment without interest or other earnings thereon. (vi) Anything in these provisions of the Series B Preferred Shares to the contrary notwithstanding, the holders of record of Series B Preferred Shares at the close of business on a Record Date will be entitled to receive the dividend payable with respect to such Shares on the corresponding Quarterly Dividend Date notwithstanding the redemption of such Shares after such Record Date and on or prior to such Quarterly Dividend Date or the Trust's default in the payment of the dividend due on such Quarterly Dividend Date, in which case the amount payable upon redemption of such Series B Preferred Shares will not include such dividend (and the full amount of the dividend payable for the applicable Dividend Period shall instead be paid on such Quarterly Dividend Date to the holders of record on such Record Date as aforesaid). Except as provided in this clause (vi) and except to the extent that accrued and unpaid dividends are payable as a part of the Series B Redemption Price pursuant to Section 5(a) or 5(b), the Trust will make no payment or allowance for unpaid dividends, regardless of whether or not in arrears, on Series B Preferred Shares called for redemption. (vii) Notwithstanding the foregoing, unless the full cumulative dividends on all Series B Preferred Shares shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, no Series B Preferred Shares shall be redeemed unless all outstanding Series B Preferred Shares are simultaneously redeemed; provided, however, that (i) the foregoing shall not prevent the redemption of Series B Preferred Shares pursuant to Section 5(b) above or the purchase or acquisition of Series B Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series B Preferred Shares, and (ii) the foregoing shall not in any respect limit the terms and provisions of Section 6.14 of the Declaration or Section 9 hereof. In addition, unless the full cumulative dividends on all outstanding Series B Preferred Shares have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Dividend Periods and the then current Dividend Period, the Trust shall not purchase or otherwise acquire directly or indirectly any Series B Preferred Shares (except by conversion into or exchange for Common Shares or other Junior Shares); provided, -7- however, that (i) the foregoing shall not prevent the redemption of Series B Preferred Shares pursuant to Section 5(b) above or the purchase or acquisition of Series B Preferred Shares pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series B Preferred Shares, and (ii) the foregoing shall not in any respect limit the terms and provisions of Section 6.14 of the Declaration or Section 9 hereof. (viii) For the avoidance of doubt, the provisions of this Section 5 shall not limit any direct or indirect purchase or acquisition by the Trust of all or any Series B Preferred Shares on the open market (including in privately negotiated transactions), except as otherwise expressly provided in Section 5(c)(vii) above. 6. Voting Rights. Notwithstanding anything to the contrary contained in the Declaration, except as set forth below in this Section 6, the holders of the Series B Preferred Shares shall not be entitled to vote at any meeting of the shareholders for election of Trustees or for any other purpose or otherwise to participate in any action taken by the Trust or the shareholders thereof, or to receive notice of any meeting of shareholders (except for such notices as may be expressly required by law). (a) At any time dividends on the Series B Preferred Shares shall be in arrears for six or more quarterly periods, whether or not the quarterly periods are consecutive, the holders of Series B Preferred Shares (voting separately as a class with all other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of two additional Trustees of the Trust at the next annual meeting of shareholders and for those or other replacement Trustees at each subsequent meeting (and the number of Trustees then constituting the Board of Trustees will automatically increase by two, if not already increased by two by reason of the election of Trustees by the holders of such Preferred Shares), until all dividends accumulated on Series B Preferred Shares for the past Dividend Periods and the then current Dividend Period shall have been fully paid or declared and a sum sufficient for the payment thereof set apart for payment. For the avoidance of doubt, and by means of example, in the event dividends on the Series B Preferred Shares and the Series A Preferred Shares shall both be in arrears for six or more quarterly periods, the holders of Series B Preferred Shares and Series A Preferred Shares (and the holders of all other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable) shall be entitled to vote for the election of two additional Trustees in the aggregate, not four or more additional Trustees. (i) Upon the full payment of all such dividends accumulated on Series B Preferred Shares for the past Dividend Periods and the then current Dividend Period or the declaration in full thereof and the Trust's setting aside a sum sufficient for the payment thereof, the right of the holders of Series B Preferred Shares to elect such two Trustees shall cease, and (unless there are one or more other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable) the term of office of such Trustees previously so elected shall automatically terminate and the authorized number of Trustees of the Trust will thereupon automatically return to the number of authorized Trustees otherwise in effect, but subject always to the same provisions for the reinstatement and divestment of the right to elect two additional Trustees in the case of any such future dividend arrearage. -8- (ii) If at any time when the voting rights conferred upon the Series B Preferred Shares pursuant to this Section 6(a) are exercisable any vacancy in the office of a Trustee elected pursuant to this Section 6(a) shall occur, then such vacancy may be filled only by the written consent of the remaining such Trustee or by vote of the holders of record of the outstanding Series B Preferred Shares and any other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Shares in the election of Trustees pursuant to this Section 6(a). (iii) Any Trustee elected or appointed pursuant to this Section 6(a) may be removed only by the holders of the outstanding Series B Preferred Shares and any other series of Preferred Shares of the Trust upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series B Preferred Shares in the election of Trustees pursuant to this Section 6(a), and may not be removed by the holders of the Common Shares. (iv) The term of any Trustees elected or appointed pursuant to this Section 6(a) shall be from the date of such election or appointment and their qualification until the next annual meeting of the shareholders and until their successors are duly elected and qualify, except as otherwise provided above in this Section 6(a). (b) So long as any Series B Preferred Shares remain outstanding, the Trust shall not, without the affirmative vote or consent of the holders of at least two-thirds of the Series B Preferred Shares outstanding at the time, given in person or by proxy, either in writing or at a meeting (the holders of Series B Preferred Shares voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of Shares ranking senior to the Series B Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Trust, or reclassify any authorized Shares of the Trust into any such Shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such Shares, or (ii) amend, alter or repeal the provisions of the Declaration or the terms of the Series B Preferred Shares, whether by merger, consolidation or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series B Preferred Shares; provided, however, that any increase in the amount of authorized Preferred Shares, any issuance of or increase in the amount of Series B Preferred Shares or any creation or issuance of or increase in the amount of authorized shares of any class or series of Preferred Shares which rank on a parity with the Series B Preferred Shares with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up of the Trust or which are Junior Shares shall not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of the Series B Preferred Shares. (c) The voting provisions set forth in clauses (a) and (b) above will not apply if, at or prior to the time when the act with respect to which a vote would otherwise be required shall be effected, all outstanding Series B Preferred Shares shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust pursuant to the provisions of Sections 5(c)(ii) and 5(c)(v) hereof to effect the redemption. -9- (d) On each matter submitted to a vote of the holders of Series B Preferred Shares or on which the holders of Series B Preferred Shares are otherwise entitled to vote as provided herein, each Series B Preferred Share shall be entitled to one vote, except that when Shares of any other class or series of Preferred Shares of the Trust have the right to vote with the Series B Preferred Shares as a single class on any matter, the Series B Preferred Shares and the Shares of each such other class or series will have one vote for each Twenty-five Dollars ($25.00) of liquidation preference. 7. Conversion. The Series B Preferred Shares are not convertible into or exchangeable for any other property or securities of the Trust. This provision will not prevent the Trust from offering to convert or exchange the Series B Preferred Shares. 8. Status of Redeemed and Reacquired Series B Preferred Shares. In the event any Series B Preferred Shares shall be redeemed pursuant to Section 5 hereof or otherwise reacquired by the Trust, the Shares so redeemed or reacquired shall become authorized but unissued Series B Preferred Shares, available for future issuance and reclassification by the Trust or, if so determined by the Trustees, may be retired and canceled by the Trust. 9. Restrictions on Transfer. (a) The Trustees, by notice to the holder thereof, may purchase any or all Series B Preferred Shares that have been transferred pursuant to a transfer which, in the opinion of the Trustees, would jeopardize the status of the Trust as a REIT for federal income tax purposes. Without limiting the generality of the foregoing, as a condition to the transfer and/or registration of transfer of any Series B Preferred Shares ("Excess Series B Preferred Shares") which could result in (i) direct or indirect ownership (as defined in Section 6.14(i) of the Declaration) of Series B Preferred Shares representing more than 8.5% in value of the total Series B Preferred Shares outstanding becoming concentrated in the hands of one owner other than an Excepted Person (as such term is defined in Section 6.14(c) of the Declaration), or (ii) the outstanding Series B Preferred Shares being owned by fewer than 120 persons, such potential owner shall file with the Trust the statement or affidavit described in Section 6.14(b) of the Declaration no later than the fifteenth day prior to any transfer, registration of transfer or transaction which, if consummated, would result in such ownership. The Trustees shall have the power and right (i) by lot or other means deemed equitable by them to call for the purchase from the beneficial owner or the shareholder of such Excess Series B Preferred Shares, and (ii) to refuse to transfer or issue Excess Series B Preferred Shares or share certificates to any Person (as defined in Section 1.4(r) of the Declaration) whose acquisition of such Series B Preferred Shares would, in the opinion of the Trustees, result in the direct or indirect beneficial ownership of any Excess Series B Preferred Shares by a person other than any of the Excepted Persons. -10- (b) Any Excess Series B Preferred Shares shall automatically be deemed to constitute Excess Shares (within the meaning of the Declaration) and shall be treated in the manner prescribed for Excess Shares, including, without limitation, the provisions set forth in Section 6.14(c) thereof. (c) Notwithstanding any other provision of the Declaration or hereof to the contrary, any purported acquisition of Series B Preferred Shares (whether such purported acquisition results from the direct or indirect acquisition or ownership (as defined for purposes of the Declaration) of Series B Preferred Shares) which would result in the disqualification of the Trust as a REIT for federal income tax purposes, shall be null and void. Any such Series B Preferred Shares may be treated by the Trustees in the manner prescribed for Excess Series B Preferred Shares in these provisions of the Series B Preferred Shares and for Excess Shares in Section 6.14(c) of the Declaration. (d) The provisions of this Section 9 shall not limit the applicability of Section 6.14 of the Declaration to Series B Preferred Shares in accordance with the terms thereof, and the provisions of this Section 9 and of Section 6.14 of the Declaration shall not limit the right of the Trust to elect to redeem Excess Series B Preferred Shares pursuant to Section 5(b) hereof. Nothing contained in this Section 9 or in any other provision of the Series B Preferred Shares shall limit the authority of the Trustees to take such other action as they deem necessary or advisable to protect the Trust and the interests of the shareholders by preservation of the Trust's status as a REIT for federal income tax purposes. The provisions of subsections (g) through (i) of Section 6.14 of the Declaration shall be applicable to this Section 9 as though (i) the references therein to Section 6.14 of the Declaration referred instead to this Section 9 and (ii) the references therein to subsections of Section 6.14 of the Declaration referred to the comparable provisions of this Section 9. 10. Severability. If any preference, right, voting power, restriction, limitation as to dividends or other distributions, qualification, term or condition of redemption or other term of the Series B Preferred Shares is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, then, to the extent permitted by law, all other preferences, rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, terms and conditions of redemption and other terms of the Series B Preferred Shares which can be given effect without the invalid, unlawful or unenforceable preference, right, voting power, restriction, limitation as to dividends or other distributions, qualification, term or condition of redemption or other term of the Series B Preferred Shares shall remain in full force and effect and shall not be deemed dependent upon any invalid, unlawful or unenforceable preference, right, voting power, restriction, limitation as to dividends or other distributions, qualification, term or condition of redemption or other term of the Series B Preferred Shares. THIRD: The Series B Preferred Shares have been classified and designated by the Board of Trustees under the authority contained in the Declaration. FOURTH: These Articles Supplementary have been approved by the Board of Trustees in the manner and by the vote required by law. -11- FIFTH: The undersigned President of the Trust acknowledges these Articles Supplementary to be the trust act of the Trust and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and this statement is made under the penalties for perjury. (Remainder of Page Intentionally Left Blank) -12- IN WITNESS WHEREOF, HRPT PROPERTIES TRUST has caused these Articles Supplementary to be signed in its name and on its behalf by its President and witnessed by its Secretary on September 6, 2002. WITNESS: HRPT PROPERTIES TRUST /s/ John C. Popeo By: /s/ John A. Mannix - ----------------- ----------------------- John C. Popeo John A. Mannix Secretary President EX-12.1 4 exh12-1.txt Exhibit 12.1
HRPT PROPERTIES TRUST COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Interest Only) (dollars in thousands) Nine Months Ended September 30, Year Ended December 31, ------------------------- ------------------------------------------------------------------ 2002 2001(1) 2001(1) 2000(1) 1999(1) 1998(1) 1997(1) ------------ ------------ ------------- ------------- ------------ ------------ ------------ Earnings: Income before equity in earnings (loss) of equity investments and extraordinary item $66,221 $68,430 $89,659 $110,086 $116,638 $136,756 $97,230 Fixed charges 67,337 69,257 91,305 104,337 91,420 66,612 38,703 Distributions from equity investments 20,344 19,968 26,651 30,294 18,606 10,320 9,640 Capitalized interest (2,832) (603) (787) (1,680) (1,488) (447) (165) ------------ ------------ ------------- ------------- ------------ ------------ ------------ Adjusted Earnings $151,070 $157,052 $206,828 $243,037 $225,176 $213,241 $145,408 ============ ============ ============= ============= ============ ============ ============ Fixed Charges: Interest expense (including amortization of note discounts and deferred financing fees) $64,505 $68,654 $90,518 $102,657 $89,932 $66,165 $38,538 Capitalized interest 2,832 603 787 1,680 1,488 447 165 ------------ ------------ ------------- ------------- ------------ ------------ ------------ Total Fixed Charges $67,337 $69,257 $91,305 $104,337 $91,420 $66,612 $38,703 ============ ============ ============= ============= ============ ============ ============ Ratio of Earnings to Fixed Charges 2.2x 2.3x 2.3x 2.3x 2.5x 3.2x 3.8x ============ ============ ============= ============= ============ ============ ============ (1) Reclassifications have been made to the prior years' financial statements to conform to the current year's presentation.
EX-12.2 5 exh12-2.txt Exhibit 12.2
HRPT PROPERTIES TRUST COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DISTRIBUTIONS (dollars in thousands) Nine Months Ended September 30, Year Ended December 31, ------------------------- ------------------------------------------------------------------ 2002 2001(1) 2001(1) 2000(1) 1999(1) 1998(1) 1997(1) ------------ ------------ ------------- ------------- ------------ ------------ ------------ Earnings: Income before equity in earnings (loss) of equity investments and extraordinary item $66,221 $68,430 $89,659 $110,086 $116,638 $136,756 $97,230 Fixed charges before preferred distributions 67,337 69,257 91,305 104,337 91,420 66,612 38,703 Distributions from equity investments 20,344 19,968 26,651 30,294 18,606 10,320 9,640 Capitalized interest (2,832) (603) (787) (1,680) (1,488) (447) (165) ------------ ------------ ------------- ------------- ------------ ------------ ------------ Adjusted Earnings $151,070 $157,052 $206,828 $243,037 $225,176 $213,241 $145,408 ============ ============ ============= ============= ============ ============ ============ Fixed Charges: Interest expense (including amortization of note discounts and deferred financing fees) $64,505 $68,654 $90,518 $102,657 $89,932 $66,165 $38,538 Capitalized interest 2,832 603 787 1,680 1,488 447 165 Preferred distributions 16,125 11,905 16,842 -- -- -- -- ------------ ------------ ------------- ------------- ------------ ------------ ------------ Total Fixed Charges $83,462 $81,162 $108,147 $104,337 $91,420 $66,612 $38,703 ============ ============ ============= ============= ============ ============ ============ Ratio of Earnings to Combined Fixed Charges and Preferred Distributions 1.8x 1.9x 1.9x 2.3x 2.5x 3.2x 3.8x ============ ============ ============= ============= ============ ============ ============ (1) Reclassifications have been made to the prior years' financial statements to conform to the current year's presentation.
EX-99.1 6 exh99-1.txt Exhibit 99.1 Certification Required by 18 U.S.C. Sec. 1350 (Section 906 of the Sarbanes - Oxley Act of 2002) ------------------------------------------------ In connection with the filing by HRPT Properties Trust (the "Company") of the Quarterly Report on Form 10-Q for the period ending September 30, 2002 (the "Report"), each of the undersigned hereby certifies, to the best of his knowledge: 1) The Report fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934, and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/Barry M. Portnoy /s/John A. Mannix - -------------------- ------------------ Barry M. Portnoy John A. Mannix Managing Trustee President and Chief Operating Officer /s/Gerard M. Martin /s/John C. Popeo - ------------------- ---------------- Gerard M. Martin John C. Popeo Managing Trustee Treasurer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----