-----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, VJlTY2GRz+84euw59HDPSi0xB68q6kAwpUbG749mxPWzvAcANqkJyg4wMgffYQA8 /7OjduR6rMTR2zyLmgpQrA== 0000950146-96-001293.txt : 19960808 0000950146-96-001293.hdr.sgml : 19960808 ACCESSION NUMBER: 0000950146-96-001293 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960807 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEACON PROPERTIES CORP CENTRAL INDEX KEY: 0000920114 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043224258 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-02544 FILM NUMBER: 96604794 BUSINESS ADDRESS: STREET 1: 50 ROWES WHARF CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173301400 MAIL ADDRESS: STREET 1: 50 ROWES WHARF CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: BEACON OFFICE PROPERTIES INC DATE OF NAME CHANGE: 19940311 424B3 1 PROSPECTUS SUPPLEMENT - --------------------- (To Prospectus dated August 6, 1996) 5,000,000 Shares BEACON PROPERTIES CORPORATION Common Stock ---------- Beacon Properties Corporation (collectively with its subsidiaries, the "Company") is a self-administered and self-managed real estate investment trust (a "REIT") which owns a portfolio of Class A office properties and other commercial properties located in major metropolitan areas, including Boston and Atlanta, as well as commercial real estate development, construction, acquisition, leasing, design and management businesses. The Company owns or has an interest in 58 income producing commercial properties encompassing approximately 10 million rentable square feet (each, a "Property" and collectively, the "Properties"). As of June 30, 1996, the Properties were approximately 96% leased with over 800 tenants. In addition, the Company has entered into contracts to acquire ten additional office buildings encompassing approximately 1.6 million additional rentable square feet located in Fairfax County, Virginia, Washington, D.C., and suburban Chicago, Illinois for aggregate consideration of $227 million (collectively, the "Pending Acquisitions"). If all of the Pending Acquisitions are consummated, the Company will own or have an interest in 68 income producing commercial properties encompassing approximately 11.6 million rentable square feet. All of the shares of common stock of the Company, par value $.01 per share ("Common Stock"), offered hereby are being sold by the Company (the "Offering"). Senior executive officers and Directors of the Company and members of their families currently own approximately $100 million of equity of the Company (approximately 10% of the equity upon completion of the Offering.) The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the symbol "BCN." On August 6, 1996, the last reported sale price of the Common Stock on the NYSE was $26 per share. See "Price Range of Common Stock and Distribution History." See "Risk Factors" beginning on page S-13 for certain factors relevant to an investment in the Common Stock. ---------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Price to Underwriting Proceeds to Public Discount (1) Company (2) Per Share $25.75 $1.35 $24.40 Total (3) $128,750,000 $6,750,000 $122,000,000 (1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (2) Before deducting estimated expenses of $975,000 payable by the Company. (3) The Company has granted the Underwriters an option, exercisable for 30 days after the date of this Prospectus Supplement, to purchase up to an additional 750,000 shares of Common Stock to cover over-allotments, if any. If all such shares are purchased, the total Price to Public, Underwriting Discount and Proceeds to Company will be $148,062,500, $7,762,500 and $140,300,000, respectively. See "Underwriting." ---------- THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ---------- The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Common Stock offered hereby will be made in New York, New York, on or about August 12, 1996. ---------- Merrill Lynch & Co. Dean Witter Reynolds Inc. Donaldson, Lufkin & Jenrette Securities Corporation Lehman Brothers PaineWebber Incorporated Raymond James & Associates, Inc. ---------- The date of this Prospectus Supplement is August 6, 1996. [Photos of Pending Acquisitions, location maps of Chicago area and Fairfax County, Virginia area, pie charts indicating urban/suburban distribution of Properties and geographic distribution of Properties] IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 PROSPECTUS SUPPLEMENT SUMMARY The following summary is qualified in its entirety by the more detailed information included elsewhere in this Prospectus Supplement and the accompanying Prospectus or incorporated herein and therein by reference. Unless otherwise indicated, the information contained in this Prospectus Supplement assumes (i) that all units of limited partnership interest in Beacon Properties, L.P. ("Units") redeemable for Common Stock or cash have been redeemed for Common Stock and (ii) that the Underwriters' over-allotment option is not exercised. Unless the context otherwise requires, all references in this Prospectus Supplement to the "Company" shall mean Beacon Properties Corporation, Beacon Properties, L.P. (the "Operating Partnership"), the entity through which the Company holds substantially all of its direct and indirect interests in the Properties, and their subsidiaries on an aggregated basis. This Prospectus Supplement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference are discussed in the section entitled "Risk Factors" starting on page S-13 of this Prospectus Supplement. The Company The Company is a self-managed and self-administered real estate investment trust (a "REIT") which owns a portfolio of Class A office properties and other commercial properties located in major metropolitan areas, including Boston and Atlanta, as well as commercial real estate development, construction, acquisition, leasing and management businesses. Class A office properties generally are considered to be those that have excellent locations and access, attract high quality tenants, are well maintained and professionally managed, and achieve among the highest rent, occupancy and tenant retention rates within their markets. The Properties comprise approximately 10 million rentable square feet in the aggregate and, as of June 30, 1996, were approximately 96% leased with over 800 tenants. The Company has entered into contracts to acquire the Pending Acquisitions comprised of ten office buildings encompassing approximately 1.6 million additional rentable square feet located in Fairfax County, Virginia, Washington, D.C. and suburban Chicago, Illinois for aggregate consideration of $227 million. If all of the Pending Acquisitions are consummated, the Company will own or have an interest in 68 income producing commercial properties encompassing approximately 11.6 million rentable square feet and will have a total market capitalization of approximately $1.5 billion. Recent Developments Pending Acquisitions As part of its ongoing business, the Company continually conducts strategic analyses of major office markets in the United States to determine those markets which warrant acquisition of office properties. The Company places particular emphasis on office-using employment growth as well as the prospects for future supply of office space in each of the markets. The Company has determined that, in addition to the Boston, Atlanta and Washington, D.C. markets in which the Company now operates, the suburban Chicago market, where two of the Pending Acquisitions are located, and other select markets, also possess attractive market fundamentals. The Chicago metropolitan area, with over 50 Fortune 500 companies, is a major regional center with a strong infrastructure. According to the U.S. Bureau of Labor Statistics, the Chicago metropolitan area gained approximately 34,000 office-using jobs for the twelve months ended March 31, 1996. The Company believes that several Chicago suburban office submarkets are attractive due to employment growth in office-using jobs, the relatively short time frame expected to absorb the existing supply of office space and low vacancy rates. The Company also believes that its development and management experience in the Chicago market will benefit the Company's expansion into this market. The Company currently manages approximately 1.3 million square feet of office/industrial space in the Chicago area. Additionally, the Company's construction subsidiary has actively participated in several projects in the Chicago area over the past several years. S-3 The greater Washington, D.C. area, including northern Virginia, is also a major regional center with a strong infrastructure. According to the U.S. Bureau of Labor Statistics, the Washington, D.C. metropolitan area gained approximately 31,000 office-using jobs for the twelve months ended March 31, 1996. The Company believes that Fairfax County, Virginia represents an attractive market due to its employment growth in the high technology, professional service and telecommunications sectors, the relatively short time frame expected to absorb the existing supply of office space and low vacancy rates. The Company also believes that its extensive development and management experience in the greater Washington, D.C. market will benefit its further acquisition of properties in this area. The Company currently manages approximately 1.3 million square feet in the greater Washington, D.C. area, including the Polk and Taylor Buildings. The Company has entered into contracts to purchase the Pending Acquisitions for aggregate consideration of $227 million. The purchase of each of the Pending Acquisitions is subject to various closing conditions, including, but not limited to, satisfactory completion of the Company's due diligence and, with respect to the Fairfax County Portfolio (as defined below), agreement regarding the terms of the remediation of certain environmental matters concerning the John Marshall III developable land. See "Risk Factors--Possible Environmental Liabilities." The Company currently expects to complete the purchase of the Pending Acquisitions during early September 1996. No assurances can be made that the Company will acquire any or all of the Pending Acquisitions. In addition to the Pending Acquisitions, as part of its ongoing business, the Company continually engages in discussions with public and private real estate entities regarding possible portfolio or single asset acquisitions in various major metropolitan areas. No assurance can be made that the Company will acquire any of the property opportunities currently under review. Set forth below are summary descriptions of the Pending Acquisitions. New York Life Portfolio. In July 1996, the Company entered into a contract to acquire a portfolio of office properties, comprised of seven buildings, from New York Life Insurance Company (the "New York Life Portfolio") for aggregate consideration of $150 million in cash. The New York Life Portfolio consists of (i) the 8-story AT&T Plaza located in Oak Brook (suburban Chicago), Illinois built in 1984 comprising approximately 225,000 square feet of office space; (ii) the five-building Tri-State International office park located in Lincolnshire (suburban Chicago), Illinois built in 1986 comprising approximately 548,000 square feet; and (iii) an 11-story office property located at 1333 H Street in Washington, D.C. comprising approximately 239,000 square feet (approximately 205,000 square feet of which was built in 1982). Major tenants in the New York Life Portfolio include AT&T (approximately 44,000 square feet), A.C. Nielsen Company (approximately 55,000 square feet) and Reuters (approximately 55,000 square feet). The aggregate occupancy rate for the New York Life Portfolio as of June 30, 1996 was approximately 81%. AT&T Plaza and the Tri-State International office park are located in the Suburban Chicago Office Market. According to Grubb & Ellis, the entire Suburban Chicago Office Market had an overall vacancy of 12.0% as of June 1996, while the East-West Corridor submarket (location of AT&T Plaza) and the North Suburban submarket (location of the Tri-State International office park) had vacancy rates of 10.3% (9.2% for Class A office properties) and 12.6% (8.2% for Class A office properties), respectively, for the same period. Grubb & Ellis also reports that the East-West Corridor and North Suburban submarkets experienced net increases in square feet of leased space ("Net Absorption") of 730,000 square feet and 340,000 square feet, respectively, for the first six months of 1996. Upon the acquisition of the New York Life Portfolio, the Company intends to establish a regional office in the Chicago area to facilitate the leasing and management of the properties. The 1333 H Street property is located in the Washington, D.C. Office Market. According to Grubb & Ellis, the entire Washington, D.C. Office Market had an overall vacancy rate of 10.2% as of March 1996, while the East End submarket (location of 1333 H Street) experienced a vacancy rate of 10.1% for the same period. The Capitalization Rate (calculated by dividing (a) the expected net operating income (including the effect of straight line rents) generated by the portfolio based upon annualized revenues from signed leases in place at the properties as of June 30, 1996 by (b) the consideration paid for the properties) of the New York Life Portfolio acquisition is approximately 8.6%. In the event weighted average occupancy for the New York Life Portfolio S-4 increases to 95%, the Capitalization Rate would increase to 10.8%. The Capitalization Rate calculations assume that the New York Life Portfolio is purchased for cash; consequently, the Returns on Equity (as defined below) for the acquisition are equivalent to the Capitalization Rates. No assurance can be made that the Company will achieve such occupancy levels or increases in returns. Fairfax County Portfolio. In June 1996, the Company exercised an option to acquire a portfolio of three office buildings and a parcel of developable land located in Fairfax County, Virginia (the "Fairfax County Portfolio") for aggregate consideration of $77 million. The Fairfax County Portfolio consists of (i) the 11-story John Marshall I building located in the Tysons Corner area of McLean, Virginia, built in 1981 comprising approximately 261,000 square feet of office space; (ii) the 11- story E.J. Randolph building located in the Tysons Corner area of McLean, Virginia, built in 1983 comprising approximately 165,000 square feet of office space; (iii) the 6-story Northridge I building located in Reston/Herndon area of Virginia, built in 1988 comprising approximately 124,000 square feet of office space; and (iv) the John Marshall III parcel of developable land, with approximately 150,000 square feet of building capacity, located in the Tysons Corner area of McLean, Virginia. Major tenants in the Fairfax County Portfolio include Booz, Allen & Hamilton, Inc. (approximately 320,000 square feet) and Sprint Corporation (approximately 124,000 square feet). The aggregate occupancy rate of the Fairfax County Portfolio as of June 30, 1996 was approximately 94%. According to Grubb & Ellis, the Fairfax County, Virginia Market had an overall vacancy rate of 8.0% as of March 1996, and the submarkets of Tysons Corner and Reston/Herndon had vacancy rates of 8.2% and 5.3%, respectively, for the same period. Grubb & Ellis also reports that the Tysons Corner and Reston/Herndon submarkets experienced Net Absorption of 600,000 square feet and 400,000 square feet, respectively, for the three months ended March 31, 1996. The Capitalization Rate of the Fairfax County Portfolio acquisition is approximately 11.5%. The Return on Equity invested by the Company in the Fairfax County Portfolio is expected to be 21.3% assuming the repayment of approximately $18 million of the debt assumed in connection with the acquisition with a draw on the Company's credit facility (the "Credit Facility") provided by the First National Bank of Boston ("Bank of Boston"), as agent. Return on Equity is calculated by dividing (a) the expected net operating income (including the effect of straight line rents) generated by the portfolio based upon annualized revenues from signed leases in place at the properties as of June 30, 1996 less expected debt service on the principal amount of the mortgage debt and the Credit Facility debt that will encumber the properties upon completion of the acquisition by (b) the consideration paid for the properties less the principal amount of the mortgage debt and the Credit Facility debt that will encumber the properties upon completion of the acquisition. The blended Capitalization Rate on both the New York Life Portfolio and the Fairfax County Portfolio acquisitions is 9.6%. In the event weighted average occupancy for the New York Life Portfolio increases to 95%, the blended Capitalization Rate for the acquisitions would be 11.1%. No assurances can be made that the Company will achieve such occupancy levels or increases in returns. The Company intends to finance the New York Life Portfolio and the Fairfax County Portfolio acquisitions with the proceeds of this Offering, draws on the Credit Facility and cash and, with respect to the Fairfax County Portfolio, the assumption of $55.4 million of mortgage debt secured by the properties ($18 million of which will be repaid with a draw on the Credit Facility) and the issuance of 839,223 Units. The blended Return on Equity invested by the Company in both the New York Life Portfolio and the Fairfax County Portfolio is expected to be 10.2% or, assuming the weighted average occupancy for the New York Life Portfolio increases to 95%, 12.1%. No assurances can be made that the Company will achieve such occupancy levels or increases in returns. Activities Relating to the Perimeter Center Portfolio In February 1996, the Company purchased an approximately 3.3 million square foot portfolio comprised of 32 buildings located in Perimeter Center (suburban Atlanta), Georgia (the "Perimeter Center Portfolio"), associated ground leases, and rights and options to purchase adjoining land for approximately $336 million (excluding associated acquisition-related expenses). In March 1996, Metropolitan Life Insurance Company ("MetLife") S-5 provided $218 million of mortgage financing on the Perimeter Center Portfolio (the "MetLife Loan") to the Company. The MetLife Loan bears interest at a rate of 7.08% fixed over the ten year term of the loan. As of June 30, 1996, the aggregate occupancy rate of the Perimeter Center Portfolio was approximately 97%, an increase from an aggregate occupancy rate of 94% as of December 31, 1995. As a result of the closing of the Met Life Loan and the increased occupancy at the Property, the Capitalization Rate of the Perimeter Center Portfolio is approximately 11.4% and the Return on Equity invested by the Company in the Property is approximately 19.4%. Financing Activities In June 1996, the Company substantially modified the terms of the Credit Facility. Additionally, in July 1996, the maximum loan amount available under the Credit Facility was increased to $300 million. The Credit Facility matures in June 1999. Outstanding balances under the Credit Facility generally bear interest, at the Company's option, at either (i) the higher of (x) Bank of Boston's base interest rate and (y) one-half of one percent (1/2%) above the overnight federal funds effective rate or (ii) the Eurodollar rate plus 175 basis points. Following the closing of this Offering and the acquisition of the Pending Acquisitions, the Company will have available approximately $210 million of borrowing capacity under the Credit Facility, of which approximately $18 million will be outstanding. In order to increase the borrowing capacity to the maximum $300 million, the Company anticipates that it will be required to grant mortgages on additional properties. Increase in Distributions In July 1996, the Company announced an increase in its quarterly distribution of 10.1%, increasing the quarterly distribution on its Common Stock from $.42 per share to $.4625 per share, which, on an annualized basis, is equal to an annual distribution of $1.85 per share of Common Stock. The higher distribution rate commenced with the Company's distribution with respect to the second quarter of 1996, to be paid on August 23, 1996, to stockholders of record as of August 14, 1996. Accordingly, purchasers of Common Stock in the Offering who hold Common Stock as of the record date will receive the second quarter 1996 distribution in respect of the shares of Common Stock offered hereby. Other Developments Rowes Wharf Mortgage Debt. In connection with its initial public offering in May 1994 (the "Initial Offering"), the Company acquired a 45% indirect limited partner interest in Rowes Wharf Associates, the entity that owns the hotel space and leases the office and retail space at the Rowes Wharf Property. During the period from April 1995 through June 1996, the Company (together with an affiliate) and the Equitable Life Assurance Society of the United States, on behalf of its Prime Property Fund ("Equitable"), the Company's joint venture partner in the Rowes Wharf Property, acquired all of the outstanding first mortgage debt on the Rowes Wharf Property. The mortgage debt was purchased at approximately 50% of face value. See "Properties and Pending Acquisitions--Mortgage Indebtedness and Credit Facility." Crosby Corporate Center. The Company has substantially completed a $16 million redevelopment of Crosby Corporate Center, repositioning the Property from research/development space to a Class A suburban office park. As of June 30, 1996, Crosby Corporate Center was approximately 88% leased. Additionally, the Company has entered into an agreement to acquire a 29-acre parcel of land adjacent to the Crosby Corporate Center. This parcel has approximately 250,000 square feet of building capacity and the Company expects that development of a significant portion of the land could commence in early 1997, although no assurances can be made in this regard. The Company believes that demand for office space in the greater Boston Suburban Office Market (the location of the Crosby Corporate Center) will continue as several major tenants at the Property experience substantial growth. No assurance can be made that such increased demand will occur. S-6 Risk Factors An investment in the Common Stock involves various risks and prospective investors should carefully consider the matters discussed under "Risk Factors" prior to any investment in the Company. Such risks include, among others: (bullet) Risks associated with the addition of a substantial number of new properties to the Company's portfolio; (bullet) Risks associated with borrowing, such as the possibility that (i) the Company will not have sufficient funds available to make principal payments on outstanding debt; (ii) outstanding indebtedness will be refinanced at higher interest rates or otherwise on terms less favorable to the Company; and (iii) interest rates under the Credit Facility will increase, all of which could adversely affect the Company's ability to make expected distributions to stockholders and its ability to qualify as a REIT; (bullet) Risks associated with a Debt to Market Capitalization (as defined herein) following the Offering of approximately 36.1%; (bullet) The limited geographic diversification of the Properties and the Company's reliance upon the continued demand for office and other commercial space in the greater Boston and Atlanta metropolitan office properties markets; (bullet) Risks associated with the joint ownership of properties through entities in which the Company does not have sole control over the property; (bullet) Possible adverse consequences of limiting ownership of Common Stock by a single person to 6.0%, or 9.9% for certain stockholders, of the outstanding Common Stock; (bullet) Risks associated with the acquisition, development and construction of office and other commercial properties; (bullet) Real estate investment considerations, such as the effect of economic and other conditions in the market area on property cash flows and values, the need to renew leases or relet space upon the expiration of current leases, the ability of a property to generate revenues sufficient to meet debt service payments and other operating expenses, and the illiquidity of real estate investments, all of which may affect the Company's ability to make expected distributions; (bullet) Risks associated with investments in mortgage indebtedness, including the risk that a debtor may file for bankruptcy or otherwise be unable or refuse to make payments under the mortgage; (bullet) Potential liability of the Company for environmental liabilities either as an owner or as an operator of properties; (bullet) Risks associated with ownership of subsidiary corporations, including potential tax liabilities, lack of control over such subsidiaries and possible adverse consequences of REIT status on the business of subsidiaries; (bullet) Risks associated with the management of properties that are not controlled by the Company and properties owned by third parties; and (bullet) Possible increases in market interest rates, which lead prospective purchasers of Common Stock to demand a higher anticipated annual yield from future dividends, which in turn may adversely affect the market price of Common Stock. S-7 The Properties and Pending Acquisitions Set forth below are summary descriptions of the Properties and the Pending Acquisitions.
Rentable Year Ownership Area in Percent Leased Built/ Interest Property Square at June 30, Property Renovated (1) Location Feet 1996 -------- --------- --------- -------- -------- -------------- Properties: - ----------- Downtown Boston Office Market: 75-101 Federal Street 1985-1988 51.6% Boston, MA 812,000 94% One Post Office Square 1981 50% Boston, MA 764,129 99% Center Plaza 1966-1969 (2) Boston, MA 649,359 93% 150 Federal Street 1988 100% Boston, MA 530,279 100% Rowes Wharf 1987 45% Boston, MA 344,326 99% Russia Wharf 1978-1982 100% Boston, MA 314,596 100% 2 Oliver Street-147 Milk Street 1982-1988 100% Boston, MA 271,000 95% 175 Federal Street 1977 100% Boston, MA 203,349 89% South Station (3) 1988 100% Boston, MA 148,591 100% ---------- --- 4,037,629 96% ---------- --- North Central Atlanta Office Market: Perimeter Center Portfolio (4) 1970-1989 100% Atlanta, GA 3,302,136 97% ---------- --- Greater Boston Suburban Office Market: Wellesley Office Park (5) 1963-1984 100% Wellesley, MA 599,334 90% Crosby Corporate Center (6) 1996 100% Bedford, MA 336,000 88% Westwood Business Centre 1985 100% Westwood, MA 160,400 99% ---------- --- 1,095,734 91% ---------- --- Cambridge Office Market: One Canal Park 1987 100% Cambridge, MA 100,300 94% Ten Canal Park 1987 100% Cambridge, MA 110,000 88% ---------- --- 210,300 91% ---------- --- Suburban Philadelphia Office Market: Westlakes Office Park(7) 1988-1990 100% Berwyn, PA 443,592 94% ---------- --- Arlington County, Virginia Office Market: The Polk and Taylor Buildings 1970 10% Arlington, VA 890,000 100% ---------- --- Total Weighted Average Properties 9,979,391 96% ========== === Pending Acquisitions: - --------------------- New York Life Portfolio: AT&T Plaza 1984 100% Oakbrook, IL 225,318 100% Tri-State International(8) 1986 100% Lincolnshire, IL 548,000 68% 1333 H Street 1982(9) 100% Washington, D.C. 238,694 92% ---------- --- 1,012,012 81% ---------- --- Fairfax County Portfolio: John Marshall I 1981 100% McLean, VA 261,364 100% E.J. Randolph 1983 100% McLean, VA 164,677 80% Northridge I 1988 100% Reston/Herndon, VA 124,319 100% ---------- --- 550,360 94% ---------- --- Total Weighted Average Pending Acquisitions 1,562,372 85% ========= === Total Weighted Average Properties and Pending Acquisitions 11,541,763 95% ========== ===
S-8 - ---------- (1) The Company holds a general partner interest in One Post Office Square, a general partner and limited partner interest in Center Plaza and the Polk and Taylor Buildings and an indirect limited partner interest in Rowes Wharf Associates. The Company holds approximately 51.6% of the common stock of BeaMetFed, Inc. ("BeaMetFed"), the entity that holds the fee title to the 75-101 Federal Street Property. The Company owns a 100% fee interest in the remaining Properties, with the exception of South Station, in which the Company holds a ground leasehold interest. Upon the consummation of the Pending Acquisitions, the Company will hold a 100% fee interest in each of the Pending Acquisitions. (2) The Company holds a 1% general partner interest, a 75% limited partner interest and an option to purchase the remaining 24% limited partner interest in the partnership that owns the Center Plaza Property. (3) The Company owns a ground leasehold interest in the South Station Property which expires in 2024 but may be extended, at the Company's option, for two additional 15-year terms. Fee title to this Property is owned by an unaffiliated third party. This Property was originally built in the early 1900s and was fully rehabilitated in 1988. This Property includes a significant retail component. (4) The Perimeter Center Portfolio consists of 32 buildings and six ground leases. (5) The Wellesley Office Park consists of eight office buildings. (6) The Crosby Corporate Center consists of six office buildings. (7) The Westlakes Office Park consists of four office buildings. (8) The Tri-State International office park consists of five office buildings. (9) Approximately 205,000 square feet of the 1333 H Street property was built in 1982. The remaining approximately 34,000 square feet was renovated in 1982. S-9 The Offering All of the shares of Common Stock offered hereby are being sold by the Company. None of the Company's stockholders are selling any Common Stock in the Offering.
Common Stock Offered 5,000,000 Common Stock Outstanding After the Offering (1) 37,476,094 Use of Proceeds To purchase the New York Life Portfolio (including the repayment of any amounts drawn under the Credit Facility in connection with the acquisition) and/or for general corporate and working capital purposes. NYSE Symbol "BCN"
- ---------- (1) Includes 5,107,831 shares of Common Stock that may be issued upon redemption of Units (which are redeemable by the holders for cash or, at the election of the Company, shares of Common Stock on a one-for-one basis), including 839,223 Units to be issued in connection with the acquisition of the Fairfax County Portfolio. Excludes 3,129,310 shares of Common Stock reserved for issuance pursuant to the Company's 1994 Stock Option Plan and dividend reinvestment plan. Distributions In July 1996, the Company announced an increase in its quarterly distribution of 10.1%, increasing the quarterly distribution on its Common Stock from $.42 per share to $.4625 per share, which, on an annualized basis, is equal to an annual distribution of $1.85 per share of Common Stock. Future distributions by the Company will be at the discretion of the Board of Directors and there can be no assurance that any such distributions will be made by the Company. Distributions by the Company to the extent of its current and accumulated earnings and profits for Federal income tax purposes generally will be taxable to stockholders as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable reduction of the stockholder's basis in its shares of Common Stock to the extent thereof, and thereafter as taxable gain. Distributions that are treated as a reduction of the stockholder's basis in its shares of Common Stock will have the effect of deferring taxation until the sale of the stockholder's shares. Summary Selected Financial Information The following table sets forth selected financial and operating information on an as adjusted basis for the Company and on a combined historical basis for the Company and The Beacon Group, the predecessor entity to the Company (the "Predecessor"). The consolidated results of operations of the Company for the six months ended June 30, 1996 and 1995 have been derived from unaudited financial statements. The consolidated results of operations of the Company for the year ended December 31, 1995 and for the period May 26, 1994 to December 31, 1994, the combined results of operations of the Predecessor for the period January 1, 1994 to May 25, 1994 and the combined historical operating information of the Predecessor for the years ended December 31, 1993, 1992 and 1991 have been derived from the financial statements audited by Coopers & Lybrand L.L.P., independent accountants. The unaudited selected pro forma financial and operating information is presented as if the Offering, the acquisition of the Properties acquired since January 1, 1995, the acquisition of the Pending Acquisitions and related assumption of debt had occurred as of January 1, 1995, for the condensed consolidated statement of operations. The pro forma financial information is not necessarily indicative of what the results of operations of the Company would have been for the periods indicated, nor does it purport to represent the Company's future results of operations. S-10
Company ---------------------------------------------------------------------------------------- Pro Forma Six Months Six Months Six Months For the Year Ended Ended Ended Pro Forma Ended June 30, 1996 June 30, 1996 June 30, 1995 1995 December 31, (unaudited) (unaudited) (unaudited) (unaudited) 1995 --------------- --------------- --------------- --------------- ---------------- (dollars in thousands, except per share amounts) OPERATING INFORMATION: Revenue: Rental income $ 81,335 $ 60,051 $ 34,093 $ 159,129 $ 71,050 Management fees 1,517 1,517 936 2,926 2,203 Recoveries from tenants 10,088 6,782 4,813 19,487 9,742 Mortgage interest income 2,776 2,165 611 5,573 2,546 Interest and other income 5,472 4,591 2,472 7,501 5,502 ----------- ---------- ----------- ---------- ----------- Total revenue 101,188 75,106 42,925 194,616 91,043 ----------- ---------- ----------- ---------- ----------- Expenses: Property expenses 20,138 14,770 8,531 39,511 18,090 Real estate taxes 9,768 7,831 4,901 17,953 10,217 General and administrative 8,574 7,362 4,570 13,986 9,755 Mortgage interest expense 16,805 13,661 7,977 33,315 15,226 Interest--amortization of financing costs 1,199 1,184 576 1,490 1,370 Depreciation and amortization 17,947 13,346 8,252 34,856 17,428 ----------- ---------- ----------- ---------- ----------- Total expenses 74,431 58,154 34,807 141,110 72,086 ----------- ---------- ----------- ---------- ----------- Income (loss) from operations 26,757 16,952 8,118 53,506 18,957 ----------- ---------- ----------- ---------- ----------- Construction revenue and other income -- -- -- -- -- Construction costs and operating expenses -- -- -- -- -- ----------- ---------- ----------- ---------- ----------- Income from construction -- -- -- -- -- ----------- ---------- ----------- ---------- ----------- Equity (loss) in joint ventures and corporations (1) 1,582 1,582 1,065 4,560 3,222 Minority interest in loss of combined partnerships -- -- -- -- -- ----------- ---------- ----------- ---------- ----------- Income (loss) before extraordinary items 28,339 18,534 9,183 58,066 22,179 Extraordinary items, net of minority interest -- (3,309) -- -- -- Minority interest in Operating Partnership (3,862) (2,681) (1,951) (7,914) (4,119 ----------- ---------- ----------- ---------- ----------- Net income (loss) (2) $ 12,544 $ 7,232 $ 18,060 ========== =========== =========== Net income before extraordinary item (2) $ 24,476 $ 50,152 =========== ========== Net income per share before extraordinary items .76 $ .64 1.55 Net income per share of Common Stock $ .51 $ .51 $ 1.09 Cash dividends declared per share of Common Stock $ -- $ .88 $ .82 -- $ 1.24 Cash dividends paid per share of Common Stock $ -- $ .84 $ .80 $ -- $ 1.64 Weighted average common shares outstanding 32,368,263 24,682,042 14,085,977 32,368,263 16,525,245
Predecessor ---------------------------------------------------------------------- For the Period For the Period May 26, 1994 to January 1, Years Ended December 31, December 31, 1994 to -------------------------------------------------- 1994 May 25, 1994 1993 1992 1991 --------------- --------------- --------------- --------------- ------------ (dollars in thousands, except per share amounts) OPERATING INFORMATION: Revenue: Rental income $ 25,144 $ 5,776 $14,315 $11,406 $14,850 Management fees -- 1,521 3,533 3,331 2,205 Recoveries from tenants 4,488 1,040 2,349 1,989 3,986 Mortgage interest income -- -- -- -- -- Interest and other income 2,301 675 2,176 2,003 3,134 ------------- ------- ------- ------- ------- Total revenue 31,933 9,012 22,373 18,729 24,175 ------------- ------- ------- ------- ------- Expenses: Property expenses 7,034 2,086 4,580 4,522 6,390 Real estate taxes 3,325 595 1,354 1,204 1,162 General and administrative 3,122 1,399 4,357 4,658 4,528 Mortgage interest expense 4,992 2,798 7,650 7,203 7,532 Interest--amortization of financing costs 617 373 192 138 320 Depreciation and amortization 6,924 2,385 5,577 5,505 4,967 ------------- ------- ------- ------- ------- Total expenses 26,014 9,636 23,710 23,230 24,899 ------------- ------- ------- ------- ------- Income (loss) from operations 5,919 (624) (1,337) (4,501) (724) ------------- ------- ------- ------- ------- Construction revenue and other income -- 24,238 72,197 52,256 39,749 Construction costs and operating expenses -- 24,136 71,757 52,120 39,679 ------------- ------- ------- ------- ------- Income from construction -- 102 440 136 70 ------------- ------- ------- ------- ------- Equity (loss) in joint ventures and corporations (1) 1,406 198 (5,953) (1,544) 84 Minority interest in loss of combined partnerships -- 931 1,539 2,656 1,087 ------------- ------- ------- ------- ------- Income (loss) before extraordinary items 7,325 607 (5,311) (3,253) 517 Extraordinary items, net of minority interest -- 8,898 1,554 -- -- Minority interest in Operating Partnership (1,670) -- -- -- -- ------------- ------- ------- ------- ------- Net income (loss) (2) $ 5,655 $ 9,505 $(3,757) $(3,253) $517 =========== ======= ======= ======= ==== Net income before extraordinary item (2) Net income per share before extraordinary items Net income per share of Common Stock $ 0.48 -- -- -- -- Cash dividends declared per share of Common Stock $ 0.96 -- -- -- -- Cash dividends paid per share of Common Stock $ 0.56 Weighted average common shares outstanding 11,816,380 -- -- -- --
S-11
Company ------------------------------------------------------------------------------------------ Pro Forma Six Months Six Months Six Months For the Year Ended Ended Ended Pro Forma Ended June 30, 1996 June 30, 1996 June 30, 1995 1995 December 31, (unaudited) (unaudited) (unaudited) (unaudited) 1995 ------------- ------------- ------------- ----------- ------------ (dollars in thousands, except per share amounts) BALANCE SHEET INFORMATION: Real estate before accumulated depreciation $1,051,924 $824,924 $415,654 $ -- $471,142 Total assets 1,125,862 927,837 433,648 -- 534,797 Mortgage debt 440,592 403,218 89,641 -- 70,536 Note Payable, Credit Facility 18,016 -- 98,300 -- 130,500 Total liabilities 507,246 451,856 220,749 -- 239,013 Total equity (deficit) 547,955 426,930 174,923 -- 258,822 (1) Including deductions for: Depreciation and amortization $ 1,994 $ 1,994 $ 832 $3,895 $ 2,306 Interest--Amortization of financing costs 448 448 $ 420 $ 896 $ 853 (2) Company share of Operating Partnership 86.4% 85.5% 78.7% 86.4% 81.3%
Predecessor ----------------------------------------------------------------------------------- For the Period For the Period May 26, 1994 to January 1, Years Ended December 31, December 31, 1994 to ------------------------------------------ 1994 May 25, 1994 1993 1992 1991 --------------- -------------- ---- ---- ---- (dollars in thousands, except per share amounts) BALANCE SHEET INFORMATION: Real estate before accumulated depreciation $400,419 $ 82,198 $ 81,220 $ 78,580 $ 76,489 Total assets 400,861 77,470 85,497 93,327 84,978 Mortgage debt 90,936 69,240 87,091 86,610 85,189 Note Payable, Credit Facility 130,300 -- -- -- -- Total liabilities 261,100 129,836 143,451 142,015 127,283 Total equity (deficit) 102,038 (52,366) (57,954) (48,688) (42,305) (1) Including deductions for: Depreciation and amortization $ 3,013 Interest--Amortization of financing costs $ 796 (2) Company share of Operating Partnership 77.2%
S-12 RISK FACTORS An investment in the Common Stock involves various risks. Prospective investors should carefully consider the following information in conjunction with the other information contained in this Prospectus Supplement before purchasing Common Stock in the Offering. Risks Associated with the Addition of a Substantial Number of New Properties The Company is currently experiencing a period of rapid growth. Since August 1995, the Company has invested approximately $417 million, increasing its interests in real estate by over 92%. Upon the completion of the Pending Acquisitions, the Company will have invested approximately $644 million since August 1995, increasing its interests in real estate by over 142%. The Company's ability to manage its growth effectively will require it to successfully apply its experience in managing its existing portfolio in new markets and to an increased number of properties. There can be no assurance that the Company will be able to manage these operations effectively. Real Estate Financing Risks Debt Financing and Existing Debt Maturities. The Company intends to finance the acquisition of additional properties through the use of debt and equity financing. The Company is subject to the risks normally associated with debt financing, including the risk that the Company's cash flow will be insufficient to meet required payments of principal and interest, the risk that existing indebtedness on the Properties (which in most cases will not have been fully amortized at maturity) will not be able to be refinanced or that the terms of such refinancing will not be as favorable as the terms of the existing indebtedness. Currently, the Company's total consolidated debt is approximately $403.1 million, and its total consolidated debt plus its proportionate share of total unconsolidated debt (other than Rowes Wharf) is approximately $496.4 million. The Company (together with an affiliate), and Equitable, the Company's joint venture partner in Rowes Wharf Associates, each hold one-half of the mortgage debt on the Rowes Wharf Property. See "Properties--Mortgage Indebtedness and Credit Facility." The Company's current indebtedness of approximately $496.4 million has maturities ranging from 1998 through 2006 and is secured by Properties. The Company currently has no balance outstanding under its Credit Facility. The Company's proportionate share of its current total unconsolidated debt (excluding Rowes Wharf) consists of approximately $46.9 million on the One Post Office Square Property (in which the Company has a 50% general partner interest) and approximately $46.4 million on the 75-101 Federal Street Property (in which the Company owns approximately 51.6% of the common stock of a private REIT that owns the Property). The Company currently has a policy of incurring debt only if upon such incurrence the Company's Debt to Market Capitalization Ratio (as defined below) would be 50% or less. For purposes of this policy, the Company's Debt to Market Capitalization Ratio is calculated as the Company's proportionate share of total consolidated and unconsolidated debt (excluding Rowes Wharf) as a percentage of the sum of the market value of outstanding shares of stock of the Company and Units plus the Company's proportionate share of total consolidated and unconsolidated debt (excluding Rowes Wharf). As noted, the Company (together with an affiliate) currently holds one-half of the Rowes Wharf mortgage indebtedness. Upon completion of the Offering and the Pending Acquisitions, the Company's Debt to Market Capitalization Ratio will be approximately 36.1%. Although the Company has adopted a Debt to Market Capitalization Ratio policy, the organizational documents of the Company do not contain any limitation on the amount of indebtedness the Company may incur. Accordingly, the Board of Directors could alter or eliminate this policy and would do so, for example, if it were necessary in order for the Company to continue to qualify as a REIT. The Company anticipates that only a small portion of the principal of the Company's mortgage indebtedness will be repaid prior to maturity. However, the Company may not have funds sufficient to repay such indebtedness at maturity and it may be necessary for the Company to refinance indebtedness through additional debt financing or equity offerings. If the Company is unable to refinance this indebtedness on acceptable terms, the Company may be forced to dispose of Properties upon disadvantageous terms, which could result in losses to the Company and adversely affect the amount of cash available for distribution to stockholders. If prevailing interest rates or other factors result in higher interest rates at a time when the Company must refinance its indebtedness, the Company's interest expense would increase, which would adversely affect the Company's results of operations and its ability to pay expected distributions to stockholders. Further, if a Property or Properties are mortgaged to secure payment S-13 of indebtedness and the Company is unable to meet mortgage payments, the Property or Properties could be foreclosed upon by or otherwise transferred to the mortgagee with a consequent loss of income and asset value to the Company. Even with respect to nonrecourse indebtedness, the lender may have the right to recover deficiencies from the Company in certain circumstances, including cases of fraud and environmental liabilities. See "Properties--Mortgage Indebtedness and Credit Facility." Risk of Rising Interest Rates. Outstanding advances under the Credit Facility bear interest at a variable rate. In addition, the Company may incur indebtedness in the future that also bears interest at a variable rate. Accordingly, increases in interest rates could increase the Company's interest expense, which could adversely affect the Company's results of operations and its ability to pay expected distributions to stockholders or cause the Company to be in default under certain Credit Facility covenants. Limited Geographic Diversification Upon completion of the Pending Acquisitions, approximately 45% and 34% of the Company's proportionate share of the rentable square feet of the Properties is located in the greater Boston metropolitan area and the North Central Atlanta Office Market, respectively. Consequently, the Company will continue to rely upon the demand for office and other commercial space in the greater Boston and Atlanta metropolitan areas. Although the Boston and Atlanta areas continue to recover from a severe economic downturn in real estate markets that occurred in the late 1980s and early 1990s, there can be no assurance that economic conditions in the Boston and Atlanta areas will continue to improve. Risks Involved in Joint Ownership of Properties The Company holds (i) a 76% general and limited partner interest in the property partnership that owns the Center Plaza Property, (ii) a 50% general partner interest in the property partnership that owns the One Post Office Square Property, (iii) a 90% limited partner interest (through Beacon Property Management Corporation and Beacon Construction Company, Inc.) in Rowes Wharf Limited Partnership, a limited partnership that owns a 50% general partner interest in Rowes Wharf Associates, the entity that owns the hotel space and leases the office and retail space at the Rowes Wharf Property, (iv) a 10% general and limited partner interest in the property partnership that owns the Polk and Taylor Buildings Property and (v) approximately 51.6% of the common stock of a private REIT which holds a direct fee interest in the 75-101 Federal Street Property. The Company is not in a position to exercise sole decision making authority regarding One Post Office Square, Rowes Wharf, the Polk and Taylor Buildings or 75-101 Federal Street. However, the Company is responsible for the day-to-day affairs of each such Property. Joint ownership of Properties may, under certain circumstances, involve risks not otherwise present, including the possibility that the Company's partners or co-investors might become bankrupt, that such partners or co- investors might at any time have economic or other business interests or goals that are inconsistent with the business interests or goals of the Company, and that such partners or co-investors may be in a position to take action contrary to the instructions or the requests of the Company or contrary to the Company's policies or objectives, including the Company's policy with respect to maintaining its qualification as a REIT. Such investments may also have the potential risk of impasse on decisions, such as a sale, because neither the Company nor the partners or co-investors would have full control over the entity owning the Property. Consequently, actions by such partners or co-investors might result in subjecting jointly-owned Properties to additional risk. The Company will, however, seek to maintain sufficient control of the entities holding jointly-owned Properties to permit the Company's business objectives to be achieved. Any capital contribution by the Company or the Operating Partnership to the property partnerships that own (directly or indirectly) the Rowes Wharf and Center Plaza Properties requires the approval of the Directors of the Company who are neither officers of the Company nor affiliated with Beacon. There is no limitation under the Company's organizational documents as to the amount of available funds that may be invested in partnerships, joint ventures or co-investments. Possible Adverse Consequences of Limits on Ownership of Common Stock In order to maintain its qualification as a REIT, not more than 50% in value of the outstanding capital stock of the Company may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code of 1986, as amended (the "Code"), to include certain entities) during the last half of a taxable year (other than the first year) (the "Five or Fewer Requirement"). In order to protect the Company against the risk of losing REIT status due to a concentration of ownership among its stockholders, the Articles of Incorporation of the S-14 Company limit ownership of the issued and outstanding Common Stock by any single stockholder to 6.0% of the aggregate value of the Company's shares of capital stock from time to time; provided, however, that entities whose ownership of Common Stock is attributed to the beneficial owners of such entities for purposes of the Five or Fewer Requirement, such as pension trusts qualifying under Section 401(a) of the Code, United States investment companies registered under the Investment Company Act of 1940, as amended, partnerships, trusts and corporations, will be limited by the Company's Articles of Incorporation to holding no more than 9.9% of the aggregate value of the Company's shares of capital stock. The Articles of Incorporation provide that the Board of Directors can waive this restriction if it is satisfied, based upon the advice of tax counsel, that ownership in excess of this limit will not jeopardize the Company's status as a REIT and the Board of Directors otherwise decides such action would be in the best interests of the Company. A transfer of shares to a person who, as a result of the transfer, violates the ownership limitations will be void. Shares acquired or transferred in breach of the ownership limitations will be automatically converted into shares not entitled to vote or to participate in dividends or other distributions. In addition, shares acquired or transferred in breach of the ownership limitations may be purchased by the Company for the lesser of the price paid and the average closing price for the ten trading days immediately preceding redemption. Risks of Acquisition, Development and Construction Activities The Company intends to acquire existing office and commercial properties to the extent that they can be acquired on advantageous terms and meet the Company's investment criteria. In light of current conditions in the Company's target market areas, the Company anticipates that in the near future additional properties will be added to the Company's portfolio through acquisitions rather than new development and construction. Acquisitions of commercial properties entail general investment risks associated with any real estate investment, including the risk that investments will fail to perform as expected or that estimates of the cost of improvements to bring an acquired property up to standards established for the intended market position may prove inaccurate. The Company also intends to continue the development and construction of office and other commercial properties, in accordance with the Company's development and underwriting policies as opportunities arise in the future. Risks associated with the Company's development and construction activities include the risk that: the Company may abandon development opportunities after expending resources to determine feasibility; construction costs of a project may exceed original estimates; occupancy rates and rents at a newly completed property may not be sufficient to make the properties profitable; financing may not be available on favorable terms for development of a property; and construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs. Development activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations. If any of the foregoing occurs, the Company's ability to make expected distributions to stockholders could be adversely affected. In addition, new development activities, regardless of whether or not they are ultimately successful, typically require a substantial portion of management's time and attention. The Company anticipates that future development will be financed, in whole or in part, through additional equity offerings or under lines of credit or other forms of secured or unsecured construction financing which will result in a risk that, upon completion of construction, permanent financing for newly developed properties may not be available or may be available only on disadvantageous terms. If a project is unsuccessful, the Company's losses may exceed its investment in the project. Real Estate Investment Risks General Risks. Investments of the Company are subject to the risks incident to the ownership and operation of commercial real estate generally. The yields available from equity investments in real estate depend on the amount of income generated and expenses incurred. If the Company's Properties do not generate revenues sufficient to meet operating expenses, including debt service and capital expenditures, the Company's results of operations and ability to make distributions to its stockholders will be adversely affected. A commercial property's revenues and value may be adversely affected by a number of factors, including the national, state and local economic climate and real estate conditions (such as oversupply of or reduced demand for space and changes in market rental rates); the perceptions of prospective tenants of the safety, convenience and attractiveness of the properties; the ability of the owner to provide adequate management, maintenance and S-15 insurance; the ability timely to collect all rent from tenants; the expense of periodically renovating, repairing and reletting spaces; and increasing operating costs (including real estate taxes and utilities) which may not be passed through to tenants. Certain significant expenditures associated with investments in real estate (such as mortgage payments, real estate taxes, insurance and maintenance costs) are generally not reduced when circumstances cause a reduction in rental revenues from the property. If a property is mortgaged to secure the payment of indebtedness and if the Company is unable to meet its mortgage payments, a loss could be sustained as a result of foreclosure on the property or the exercise of other remedies by the mortgagee. In addition, real estate values and income from properties are also affected by such factors as compliance with laws, including tax laws, interest rate levels and the availability of financing. Tenant Defaults. Substantially all of the Company's income is derived from rental income from real property. Consequently, the Company's results of operations and ability to make expected distributions to stockholders would be adversely affected if a significant number of tenants at the Properties failed to meet their lease obligations. In the event of a default by a lessee, the Company may experience delays in enforcing its rights as lessor and may incur substantial costs in protecting its investment. Additionally, as a significant number of the Company's tenants are in the financial services, legal and accounting businesses, the Company's results of operations and ability to make expected distributions to stockholders would be adversely affected if these industries experienced a significant reduction in workforce. At any time, a tenant of the Properties may also seek protection under the bankruptcy laws, which could result in rejection and termination of such tenant's lease and thereby cause a reduction in the cash available for distribution by the Company. If a tenant rejects its lease, the Company's claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim. The amount of the claim would be capped at the amount owed for unpaid pre-petition lease payments unrelated to the rejection, plus the greater of one year's lease payment or 15% of the remaining lease payments payable under the lease (but not to exceed the amount of three years' lease payments). No assurance can be given that the Company will not experience significant tenant defaults in the future. Ground Leases. Two of the Properties are the subject of long-term ground leases. In the case of the lease on the office and retail portions of the Rowes Wharf Property, the landlord becomes the owner of the portion of the Property subject to the lease at the expiration of the term of the lease or at the earlier termination by reason of a breach of the lease by the tenant. The lease on the Rowes Wharf Property, which expires in 2065, does not contain an extension option but includes an option to purchase. See "Properties and Pending Acquisitions--Downtown Boston Office Market." The ground lease pursuant to which the Company leases the South Station Property expires in 2024. The landowner becomes the owner of the South Station Property at the expiration of the term of the ground lease or at the earlier termination by reason of a breach of the lease by the tenant. The Company will have the right to extend the lease for two additional 15-year terms, subject to the landowner's right to terminate such additional periods upon two years' notice and payment to the Company of certain termination payments. Market Illiquidity. Equity real estate investments are relatively illiquid. Such illiquidity will tend to limit the ability of the Company to vary its portfolio promptly in response to changes in economic or other conditions. In addition, provisions of the Code limit the Company's ability to sell properties held for fewer than four years, which may affect the Company's ability to sell properties without adversely affecting returns to holders of Common Stock. Operating Risks. The Properties are subject to operating risks common to commercial real estate in general, any and all of which may adversely affect occupancy or rental rates. The Properties are subject to increases in operating expenses such as cleaning, electricity, heating, ventilation and air conditioning; elevator repair and maintenance; insurance and administrative costs; and other general costs associated with security, landscaping, repairs and maintenance. While the Company's tenants are currently obligated to pay these escalating costs, there can be no assurance that tenants will agree to pay such costs upon renewal or that new tenants will agree to pay such costs. If operating expenses increase, the local rental market may limit the extent to which rents may be increased to meet such increased expenses without decreasing occupancy rates. While the Company implements cost-saving incentive measures at each of its Properties, if any of the foregoing occurs, the Company's results of operations and its ability to make distributions to stockholders could be adversely affected. S-16 Risk of Investment in Mortgage Debt The Company may invest in mortgages which are secured by existing office and commercial properties in circumstances where the Company anticipates that its ownership of the mortgage may result in the acquisition of the related properties through foreclosure proceedings or negotiated settlements. In addition to the risks associated with investments in commercial office properties, investments in mortgage indebtedness present the additional risks that the fee owners of such properties may default in payments of interest on a current basis and that the filing of bankruptcy proceedings may stay the Company's foreclosure of such mortgages and receipt of payments thereunder. Under such circumstances, the Company may not realize its anticipated investment return, and may sustain losses relating to such investments. Possible Environmental Liabilities The Company's operating costs may be affected by the obligation to pay for the cost of complying with existing environmental laws, ordinances and regulations, as well as the cost of complying with future legislation. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous or toxic substances, or the failure to remediate such property properly, may adversely affect the owner's ability to borrow by using such real property as collateral. Persons who arrange for the transportation, disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, whether or not such facility is or ever was owned or operated by such person. Certain environmental laws and common law principles could be used to impose liability for releases of hazardous materials, including asbestos-containing materials ("ACMs"), into the environment, and third parties may seek recovery from owners or operators of real properties for personal injury associated with exposure to released ACMs or other hazardous materials. Environmental laws may also impose restrictions on the manner in which a property may be used or transferred or in which businesses may be operated, and these restrictions may require expenditures. In connection with the ownership and operation of the Properties, the Company may be potentially liable for any such costs. The cost of defending against claims of liability or remediating contaminated property and the cost of complying with environmental laws could materially adversely affect the Company's results of operations and financial condition. Phase I environmental site assessments ("ESAs") have been conducted at all of the Properties by qualified independent environmental engineers. The purpose of Phase I ESAs is to identify potential sources of contamination for which the Properties may be responsible and to assess the status of environmental regulatory compliance. The ESAs have not revealed any environmental liability or compliance concerns that the Company believes would have a material adverse effect on the Company's business, assets, results of operations or liquidity, nor is the Company aware of any such liability or concerns. Nevertheless, it is possible that these ESAs did not reveal all environmental liabilities or compliance concerns or that material environmental liabilities or compliance concerns exist of which the Company is currently unaware. The Company has not been notified by any governmental authority, and has no other knowledge of, any material noncompliance, liability or claim relating to hazardous or toxic substances or other environmental substances in connection with any of its Properties except as previously disclosed in documents incorporated herein by reference or as noted below. Fairfax County Portfolio. In connection with the Company's acquisition of the Fairfax County Portfolio, chlorinated solvents, primarily trichloroethane ("TCE"), have been detected in groundwater samples collected from monitoring wells located at the John Marshall III developable land (the "JM III Parcel"). Subsequent investigations of the JM III Parcel by an environmental consultant retained by the sellers of the Fairfax County Portfolio (the "Consultant") confirmed the presence of chlorinated solvents in groundwater at the JM III Parcel and on property adjacent to the JM III Parcel where an autobody repair shop is located. The sellers of the Fairfax County Portfolio have reported the findings of chlorinated solvent contamination on the JM III Parcel to the Virginia Department of Environmental Quality. The Consultant has concluded that the autobody repair shop is the probable source for the chlorinated solvent contamination, and is in the process of collecting additional soil and groundwater samples to confirm that conclusion and to prepare a remediation plan for the site. Under the terms of the option agreement relating to the Fairfax County Portfolio acquisition, the sellers of the property must produce a remediation plan (the "Remediation Plan") regarding the JM III Parcel by S-17 August 20, 1996. The Company may, in its sole discretion, terminate the option to purchase the Fairfax County Portfolio if the Remediation Plan is not acceptable to the Company. Risks of Investments in Subsidiaries The capital stock of each of Beacon Property Management Corporation, Beacon Construction Company, Inc. and Beacon Design Corporation (collectively, the "Subsidiary Corporations") is divided into two classes: voting common stock, 99% of which is held by officers and/or directors of such Subsidiary Corporations (each of whom, as of the date of this Prospectus Supplement, is also an officer and/or director of the Company) and 1% of which is held by the Operating Partnership, and nonvoting common stock, 100% of which is held by the Operating Partnership. Management's 99% voting common stock represents 1% of the economic interests in each of the Subsidiary Corporations. Members of each Subsidiary Corporation's management, as the holders of 99% of the voting common stock, retain the ability to elect the board of directors of each of the Subsidiary Corporations. Although the nonvoting common stock and the voting common stock of each of the Subsidiary Corporations held by the Company represent 99% of the economic interests in such corporations, the Company is not able to elect directors and its ability to influence the day-to-day decisions affecting these corporations may therefore be limited. As a result, the board of directors and management of each of the Subsidiary Corporations may implement business policies or decisions that would not have been implemented by persons controlled by the Company that are adverse to the interests of the Company or that lead to adverse financial results, which could adversely impact the Company's results of operations. The bylaws of each of the Subsidiary Corporations require that the voting common stock in such Subsidiary Corporation be held by officers of such Subsidiary Corporation at all times and require holders of voting common stock to enter into an agreement to that effect. Risks of Third-Party Management The Company manages Properties in which it does not own a controlling interest and intends to actively pursue the management of properties which are owned by third parties. Risks associated with the management of properties which are not controlled by the Company and properties owned by third parties include the risk that management contracts (which are typically cancelable without notice) will be terminated by the entity controlling the property or in connection with the sale of such property, the risk that contracts may not be renewed upon expiration or may not be renewed on terms consistent with current terms and the risk that the rental revenues upon which management fees are based will decline as a result of general real estate market conditions or specific market factors affecting properties managed by the Company, resulting in decreased management fee income. Although the Company has several third-party management contracts, there can be no assurance that these management contracts will not be terminated by the property owners in the future. Effect of Market Interest Rates on Price of Common Stock One of the factors that will influence the market price of the Common Stock in public markets is the annual yield on the price paid for shares of Common Stock from distributions by the Company. An increase in market interest rates may lead prospective purchasers of the Common Stock to demand a higher annual yield from future distributions. Such an increase in the required distributions yield may adversely affect the market price of the Common Stock. S-18 THE COMPANY General The Company is a self-administered and self-managed REIT which owns a portfolio of Class A office properties and other commercial properties located in major metropolitan areas, including Boston and Atlanta, as well as commercial real estate development, construction, acquisition, leasing and management businesses. Class A office properties generally are considered to be those that have excellent locations and access, attract high quality tenants, are well maintained and professionally managed, and achieve among the highest rent, occupancy and tenant retention rates within their markets. The Properties comprise approximately 10 million rentable square feet in the aggregate and, as of June 30, 1996, were approximately 96% leased with over 800 tenants. The Company has entered into contracts to acquire the Pending Acquisitions comprised of ten office buildings encompassing approximately 1.6 million additional rentable square feet located in Fairfax County, Virginia, Washington, D.C. and suburban Chicago, Illinois for aggregate consideration of $227 million. If all of the Pending Acquisitions are consummated, the Company will own or have an interest in 68 income producing commercial properties encompassing approximately 11.6 million rentable square feet and will have a total market capitalization of approximately $1.5 billion. The Company's executive offices are located at 50 Rowes Wharf in Boston, Massachusetts 02110 and its telephone number at that location is (617) 330-1400. RECENT DEVELOPMENTS Pending Acquisitions As part of its ongoing business, the Company continually conducts strategic analyses of major office markets in the United States to determine those markets which warrant acquisition of office properties. The Company places particular emphasis on office-using employment growth as well as the prospects for future supply of office space in each of the markets. The Company has determined that, in addition to the Boston, Atlanta and Washington, D.C. markets, in which the Company now operates, the suburban Chicago market, where two of the Pending Acquisitions are located, and other select markets, also possess attractive market fundamentals. The Chicago metropolitan area, with over 50 Fortune 500 companies, is a major regional center with a strong infrastructure. According to the U.S. Bureau of Labor Statistics, the Chicago metropolitan area gained approximately 34,000 office-using jobs for the twelve months ended March 31, 1996. The Company believes that several Chicago suburban office submarkets are attractive due to employment growth in office-using jobs, the relatively short time frame expected to absorb the existing supply of office space and low vacancy rates. The Company also believes that its development and management experience in the Chicago market will benefit the Company's expansion into this market. The Company currently manages approximately 1.3 million square feet of office/industrial space in the Chicago area. Additionally, the Company's construction subsidiary has actively participated in several projects in the Chicago area over the past several years. The greater Washington, D.C. area, including northern Virginia, is also a major regional center with a strong infrastructure. According to the U.S. Bureau of Labor Statistics, the Washington, D.C. metropolitan area gained approximately 31,000 office-using jobs for the twelve months ended March 31, 1996. The Company believes that Fairfax County, Virginia represents an attractive market due to its employment growth in the high technology, professional service and telecommunications sectors, the relatively short time frame expected to absorb the existing supply of office space and low vacancy rates. The Company also believes that its extensive development and management experience in the greater Washington, D.C. market will benefit its further acquisition of properties in this area. The Company currently manages approximately 1.3 million square feet in the greater Washington, D.C. area, including the Polk and Taylor Buildings. The Company has entered into contracts to purchase the Pending Acquisitions for aggregate consideration of $227 million. The purchase of each of the Pending Acquisitions is subject to various closing conditions, including, but not limited to, satisfactory completion of the Company's due diligence and, with respect to the Fairfax County Portfolio, agreement regarding the terms of the remediation of certain environmental matters concerning the John Marshall III land. See "Risk Factors--Possible Environmental Liabilities." The Company currently expects to S-19 complete the purchase of the Pending Acquisitions during early September 1996. No assurances can be made that the Company will acquire any or all of the Pending Acquisitions. In addition to the Pending Acquisitions, as part of its ongoing business, the Company continually engages in discussions with public and private real estate entities regarding possible portfolio or single asset acquisitions in various major metropolitan areas. No assurance can be made that the Company will acquire any of the property opportunities currently under review. Set forth below are summary descriptions of the Pending Acquisitions. New York Life Portfolio. In July 1996, the Company entered into a contract to acquire the New York Life Portfolio for aggregate consideration of $150 million in cash. The Company intends to use the net proceeds of the Offering to consummate the purchase, including the repayment of any funds drawn on the Credit Facility made in connection with the acquisition. The New York Life Portfolio consists of (i) the 8-story AT&T Plaza located in Oak Brook (suburban Chicago), Illinois built in 1984 comprising approximately 225,000 square feet of office space; (ii) the five-building Tri-State International office park located in Lincolnshire (suburban Chicago), Illinois built in 1986 comprising approximately 548,000 square feet; and (iii) an 11-story office property located at 1333 H Street in metropolitan Washington, D.C. comprising approximately 239,000 square feet (approximately 205,000 of which was built in 1982). Major tenants in the New York Life Portfolio include AT&T (approximately 44,000 square feet), A.C. Nielsen Company (approximately 55,000 square feet) and Reuters (approximately 55,000 square feet). The aggregate occupancy rate for the New York Life Portfolio as of June 30, 1996 was approximately 81%. AT&T Plaza and the Tri-State International office park are located in the Suburban Chicago Office Market. According to Grubb & Ellis, the entire Suburban Chicago Office Market had an overall vacancy of 12.0% as of June 1996, while the East-West Corridor submarket (location of AT&T Plaza) and the North Suburban submarket (location of the Tri-State International office park) had vacancy rates of 10.3% (9.2% for Class A office properties) and 12.6% (8.2% for Class A office properties), respectively, for the same period. Grubb & Ellis also reports that the East-West Corridor and North Suburban submarkets experienced Net Absorption of 730,000 square feet and 340,000 square feet, respectively, for the first six months of 1996. Upon the acquisition of the New York Life Portfolio, the Company intends to establish a regional office in the Chicago area to facilitate the leasing and management of the properties. The 1333 H Street property is located in the Washington, D.C. Office Market. According to Grubb & Ellis, the entire Washington, D.C. Office Market had an overall vacancy rate of 10.2% as of March 1996, while the East End submarket (location of 1333 H Street) experienced a vacancy rate of 10.1% for the same period. The Capitalization Rate (calculated by dividing (a) the expected net operating income (including the effect of straight line rents) generated by the portfolio based upon annualized revenues from signed leases in place at the properties as of June 30, 1996 by (b) the consideration paid for the properties) of the New York Life Portfolio acquisition is approximately 8.6%. In the event weighted average occupancy for the New York Life Portfolio increases to 95%, the Capitalization Rate would increase to 10.8%. The Capitalization Rate calculations assume that the New York Life Portfolio is purchased for cash; consequently, the Returns on Equity for the acquisition are equivalent to the Capitalization Rates. No assurance can be made that the Company will achieve such occupancy levels or increases in returns. Fairfax County Portfolio. In June 1996, the Company exercised an option to acquire the Fairfax County Portfolio for an aggregate consideration of $77 million. In connection with this acquisition, the Company has agreed to maintain at least $45.2 million of nonrecourse indebtedness outstanding on the properties for certain periods of time. The Fairfax County Portfolio consists of the (i) the 11-story John Marshall I building located in the Tysons Corner area of McLean, Virginia, built in 1981 comprising approximately 261,000 square feet of office space; (ii) the 11-story E.J. Randolph building located in the Tysons Corner area of McLean, Virginia, built in 1983 comprising approximately 165,000 square feet of office space; (iii) the 6-story Northridge I building located in Reston/Herndon area of Virginia, built in 1988 comprising approximately 124,000 square feet of office space; and (iv) the John Marshall III parcel of developable land, with approximately 150,000 square feet of building capacity, located in S-20 the Tysons Corner area of McLean, Virginia. Major tenants in the Fairfax County Portfolio include Booz, Allen & Hamilton, Inc. (approximately 320,000 square feet) and Sprint Corporation (approximately 124,000 square feet). The aggregate occupancy rate of the Fairfax County Portfolio as of June 30, 1996 was approximately 94%. According to Grubb & Ellis, the Fairfax County, Virginia Market had an overall vacancy rate of 8.0% as of March 1996, and the submarkets of Tysons Corner and Reston/Herndon had vacancy rates of 8.2% and 5.3%, respectively, for the same period. Grubb & Ellis also reports that the Tysons Corner and Reston/Herndon submarkets experienced Net Absorption of 600,000 square feet and 400,000 square feet, respectively, for the three months ended March 31, 1996. The Capitalization Rate of the Fairfax County Portfolio acquisition is approximately 11.5%. The Return on Equity invested by the Company in the Fairfax County Portfolio is expected to be 21.3% assuming the repayment of approximately $18 million of debt assumed in connection with the acquisition with a draw on the Credit Facility. Return on Equity is calculated by dividing (a) the expected net operating income (including the effect of straight line rents) generated by the portfolio based upon annualized revenues from signed leases in place at the properties as of June 30, 1996 less expected debt service on the principal amount of the mortgage debt and the Credit Facility debt that will encumber the properties upon completion of the acquisition by (b) the consideration paid for the properties less the principal amount of the mortgage debt and the Credit Facility debt that will encumber the properties upon completion of the acquisition. The blended Capitalization Rate on both the New York Life Portfolio and the Fairfax County Portfolio is 9.6%. In the event weighted average occupancy for the New York Life Portfolio increases to 95%, the blended Capitalization Rate for the acquisitions would be 11.1%. No assurances can be made that the Company will achieve such occupancy levels or increases in returns. The Company intends to finance the New York Life Portfolio and the Fairfax County Portfolio acquisitions with the proceeds of this Offering, draws on the Credit Facility and cash and, with respect to the Fairfax County Portfolio, the assumption of $55.4 million of mortgage debt secured by the properties ($18 million of which will be repaid with a draw on the Credit Facility) and the issuance of 839,223 Units. The blended Return on Equity invested by the Company in both the New York Life Portfolio and the Fairfax County Portfolio is 10.2% or, assuming the weighted average occupancy for the New York Life Portfolio increases to 95%, 12.1%. No assurances can be made that the Company will achieve such occupancy levels or increases in returns. Activities Relating to the Perimeter Center Portfolio In February 1996, the Company purchased the Perimeter Center Portfolio, associated ground leases, and rights and options to purchase adjoining land for approximately $336 million (excluding associated acquisition-related expenses). In March 1996, MetLife provided the $218 million MetLife Loan to the Company. The MetLife Loan bears interest at a rate of 7.08% fixed over the ten year term of the loan. As of June 30, 1996, the aggregate occupancy rate of the Perimeter Center Portfolio was approximately 97%, an increase from an aggregate occupancy rate of 94% as of December 31, 1995. As a result of the closing of the Met Life Loan and the increased occupancy at the Property, the Capitalization Rate of the Perimeter Center Portfolio is approximately 11.4% and the Return on Equity invested by the Company in the Property is approximately 19.4%. Financing Activities In June 1996, the Company substantially modified the terms of the Credit Facility. Additionally, in July 1996, the maximum loan amount available under the Credit Facility was increased to $300 million. The Credit Facility matures in June 1999. Outstanding balances under the Credit Facility generally bear interest, at the Company's option, at either (i) the higher of (x) Bank of Boston's base interest rate and (y) one-half of one percent (1/2%) above the overnight federal funds effective rate or (ii) the Eurodollar rate plus 175 basis points. Such interest rates are subject to adjustment under the Credit Facility if the Company's ratio of total liabilities to total assets exceeds 0.55 to 1. Following the closing of this Offering and the acquisition of the Pending Acquisitions, the Company will have available approximately $210 of borrowing capacity under the Credit Facility, of which approximately $18 million will be outstanding. In order to increase the borrowing capacity to the maximum $300 million, the Company anticipates that it will be required to grant mortgages on additional properties. S-21 Increase in Distributions In July 1996, the Company announced an increase in its quarterly distribution of 10.1%, increasing the quarterly distribution on its Common Stock from $.42 per share to $.4625 per share, which, on an annualized basis, is equal to an annual distribution of $1.85 per share of Common Stock. The higher distribution rate commenced with the Company's distribution with respect to the second quarter of 1996, to be paid on August 23, 1996, to stockholders of record as of August 14, 1996. Accordingly, purchasers of Common Stock in the Offering who hold Common Stock as of the record date will receive the second quarter 1996 distribution in respect of the shares of Common Stock offered hereby. Other Developments Rowes Wharf Mortgage Debt. In connection with the Initial Offering, the Company acquired a 45% indirect limited partner interest in Rowes Wharf Associates, the entity that owns the hotel space and leases the office and retail space at the Rowes Wharf Property. During the period from April 1995 through June 1996, the Company (together with an affiliate) and Equitable, the Company's joint venture partner in the Rowes Wharf Property, acquired all of the outstanding first mortgage debt on the Rowes Wharf Property. The mortgage debt was purchased at approximately 50% of face value. See "Properties and Pending Acquisitions--Mortgage Indebtedness and Credit Facility." Crosby Corporate Center. The Company has substantially completed a $16 million redevelopment of Crosby Corporate Center, repositioning the Property from research/development space to a Class A suburban office park. As of June 30, 1996, Crosby Corporate Center was approximately 88% leased. Additionally, the Company has entered into an agreement to acquire a 29-acre parcel of land adjacent to the Crosby Corporate Center. This parcel has approximately 250,000 square feet of building capacity and the Company expects that development of a significant portion of the land could commence in early 1997, although no assurances can be made in this regard. The Company believes that demand for office space in the greater Boston Suburban Office Market (the location of the Crosby Corporate Center) will continue as several major tenants at the Property experience substantial growth. No assurance can be made that such increased demand will occur. S-22 PROPERTIES AND PENDING ACQUISITIONS The Company owns or has an interest in a portfolio of Class A office properties and other commercial properties in prime locations in the greater Boston and Atlanta metropolitan areas, in Arlington, Virginia, and in the suburban Philadelphia area encompassing approximately 10 million rentable square feet. Class A office properties generally are considered to have excellent locations and access, attract high quality tenants, be well maintained and professionally managed and achieve among the highest rent, occupancy and tenant retention rates within their markets. The Downtown Boston Office Market Market Information According to Spaulding & Slye, as of March 1996, there were approximately 48 million square feet of private sector office space in the Downtown Boston Office Market. The following table sets forth the vacancy rates for the Downtown Boston Office Market from 1991 through March 1996. Period Vacancy Rate - ------------------ ------------- 1991 18.4% 1992 15.9% 1993 16.3% 1994 12.1% 1995 11.5% January--March 1996 11.3% Source: Spaulding & Slye Office Market Reports 1990 through April 1996. Spaulding & Slye reports that Net Absorption in 1995 was 400,000 square feet and 1.9 million square feet in 1994. This significant amount of Net Absorption is largely due to growth in the financial services, publishing and legal sections, together with the relocation of certain federal government groups. Property Descriptions The following chart describes each of the Company's Properties located in the Downtown Boston Office Market.
Year Built/ Rentable Area No. of Company's % Property Renovated in Square Feet Stories Ownership Parking - ------------------------------ --------------- --------------- ----------- --------------- ---------------- 175 Federal Street 1977 203,349 17 100% No One Post Office Square 1981 764,129 41 50%(a) 375-car garage South Station 1988 148,591 5 (b) (c) Center Plaza 1966-1969 649,359 9 (d) 575-car garage Rowes Wharf 1987 344,326 15 (e) 550-car garage Russia Wharf 1978-1982 314,596 (f) 100% 146 spaces 150 Federal Street 1988 530,279 28 100% 285-car garage 2 Oliver Street--147 Milk Street 1982-1988 271,000 (g) 100% No 75 Federal Street 1985 252,000 21 (h) No 101 Federal Street 1988 560,000 31 (h) 195-car garage --------- Total 4,037,629 =========
(a) One Post Office Square is owned by a joint venture between Equitable and the Company. The Company has a 50% interest in and is the managing venturer of this joint venture. (b) The Company owns 100% of a ground leasehold in this Property. (c) A 600-car garage is under construction by the Massachusetts Bay Transportation Authority. (d) The Company holds a 1% general partner interest, a 75% limited partner interest and an option to purchase the remaining 24% limited partner interest in the partnership that owns the Center Plaza Property. S-23 (e) The Company holds a 90% limited partner interest in Rowes Wharf Limited Partnership. Rowes Wharf Limited Partnership and Equitable each holds a 50% general partner interest in Rowes Wharf Associates, the partnership that owns the hotel space and leases the office and retail space at the Rowes Wharf Property. Consequently, the Company owns a 45% indirect limited partner interest in Rowes Wharf Associates. A Beacon Affiliate is the general partner of Rowes Wharf Limited Partnership. As general partner, this Beacon Affiliate has the authority to mortgage or sell all of the limited partnership's interest in Rowes Wharf without the Company's consent. (f) Russia Wharf is a complex of three seven-story buildings. (g) 2 Oliver Street is an 11-story office building and 147 Milk Street is an adjacent 10-story office building. (h) Fee interest in the 75-101 Federal Street Property is held by a private REIT, BeaMetFed. The Company holds approximately 51.6% of the common stock of BeaMetFed, and the Company's co-investor, Bedrifspensioenfonds voor de Metaallnijverheid (the "Dutch Metal Workers Pension Fund"), holds approximately 48.0% of the common stock of BeaMetFed. The remaining approximately 0.4% interest is held by other stockholders. Simultaneously with BeaMetFed's acquisition of the 75-101 Federal Street Property in September 1995, the Company issued 718,000 shares of Common Stock to the Dutch Metal Workers Pension Fund, a transaction that resulted in net proceeds of approximately $15.0 million. Base Rents and Net Effective Rents The following charts set forth the average annual Base Rent (as defined below) and the average annual Net Effective Rent (as defined below) per square foot for each of the Company's Properties in the Downtown Boston Office Market. Base Rent is gross rent excluding payments by tenants on account of real estate tax and operating expense escalation. Net Effective Rent is Base Rent adjusted on a straight-line basis for contractual rent step-ups and free rent periods, plus tenant payments on account of real estate tax and operating expense escalation, less total operating expenses and real estate taxes.
Average Annual Base Rents ----------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - -------- ---- ---- ---- ---- ---- ------- (per square foot) 175 Federal Street $12.98 $14.81 $17.79 $21.15 $23.82 $24.66 One Post Office Square 24.78 22.41 21.85 22.99 23.55 23.88 South Station 28.94 28.51 28.51 27.24 28.26 28.70 Center Plaza 21.27 19.65 21.40 22.98 22.95 22.29 Rowes Wharf 36.06 30.87 30.04 30.39 30.87 30.37 150 Federal Street 25.58 21.20 23.88 24.25 24.67 24.93 Russia Wharf(a) -- -- -- -- 12.53 13.75 75-101 Federal Street(a) -- -- -- -- 28.00 28.28 2 Oliver Street(a) -- -- -- -- 16.46 16.63 ------ ------ ------ ------ ------ ------ Weighted Average $25.04 $22.38 $23.30 $24.34 $23.75 $24.46 ====== ====== ====== ====== ====== ======
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by the Company subsequent to the Initial Offering and, consequently, information prior to the date of acquisition is unavailable. S-24
Average Annual Net Effective Rents ----------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - -------- ---- ---- ---- ---- ---- ------- (per square foot) 175 Federal Street $ 9.88 $12.40 $13.03 $13.97 $15.40 $16.49 One Post Office Square 17.87 14.47 14.32 15.01 15.03 14.98 South Station 17.24 14.56 15.87 18.16 20.05 20.75 Center Plaza 3.80 5.61 9.79 13.27 13.18 12.29 Rowes Wharf 22.15 14.26 15.45 17.65 18.22 17.88 150 Federal Street 20.17 17.51 19.99 20.95 21.14 21.14 Russia Wharf(a) -- -- -- -- 7.86 7.92 75-101 Federal Street(a) -- -- -- -- 19.10 18.48 2 Oliver Street(a) -- -- -- -- 11.53 11.60 ------ ------ ------ ------ ------ ------ Weighted Average $15.20 $13.16 $14.77 $16.22 $15.78 $16.02 ====== ====== ====== ====== ====== ======
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by the Company subsequent to the Initial Offering and, consequently, information prior to the date of acquisition is unavailable. Occupancy Rates The following chart sets forth the occupancy rate, expressed as a percentage, for each of the Company's Properties in the Downtown Boston Office Market.
Occupancy Rate ------------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - -------- ---- ---- ---- ---- ---- ------- 175 Federal Street 94% 100% 100% 94% 84% 89% One Post Office Square 95% 93% 95% 97% 99% 99% South Station 94% 96% 98% 100% 100% 100% Center Plaza 71% 73% 76% 84% 91% 93% Rowes Wharf 96% 91% 92% 96% 98% 99% 150 Federal Street 68% 98% 99% 98% 99% 100% Russia Wharf(a) -- -- -- -- 94% 100% 75-101 Federal Street(a) -- -- -- -- 93% 94% 2 Oliver Street(a) -- -- -- -- 93% 95% -- --- --- --- --- --- Weighted Average 84% 90% 91% 94% 95% 96% == === === === === ===
(a) Russia Wharf, 75-101 Federal Street and 2 Oliver Street were acquired by the Company subsequent to the Initial Offering and, consequently, information prior to the date of acquisition is unavailable. S-25 Lease Expirations The following table sets forth lease expirations (in square feet) for each of the Company's Properties in the Downtown Boston Office Market.
Lease Expirations--Downtown Boston Office Market ------------------------------------------------------------------------------------------------ 7/1/96 to Property 12/31/96 1997 1998 1999 - -------- -------- ---- ---- ---- 175 Federal Street square feet (a) 9,318 3,610 4,775 0 % sq. ft. (b) 4.6% 1.8% 2.3% 0.0% annual rent (c) $197,199 $91,728 $201,745 $0 psf (d) $21.16 $25.41 $42.25 (f) $0.00 tenants (e) 3 1 1 0 Center Plaza square feet (a) 15,768 76,044 89,314 35,245 % sq. ft. (b) 2.4% 11.7% 13.8% 5.4% annual rent (c) $280,387 $1,990,760 $2,016,537 $741,628 psf (d) $17.78 $26.18 $22.58 $21.04 tenants (e) 5 8 7 9 One Post Office Square square feet (a) 24,516 39,981 28,280 33,702 % sq. ft. (b) 3.2% 5.2% 3.7% 4.4% annual rent (c) $771,775 $1,140,656 $787,255 $982,382 psf (d) $31.48 $28.53 $27.84 $29.15 tenants (e) 2 8 6 11 South Station (g) square feet (a) 410 1,086 11,541 1,401 % sq. ft. (b) 0.3% 0.7% 7.8% 0.9% annual rent (c) $72,623 $113,935 $1,065,930 $391,925 psf (d) $177.13 $104.91 $92.36 $279.75 tenants (e) 3 2 2 4 Rowes Wharf square feet (a) 8,080 63,281 121,332 37,865 % sq. ft. (b) 2.3% 18.4% 35.2% 11.0% annual rent (c) $212,640 $1,679,065 $4,215,221 $1,186,919 psf (d) $26.32 $26.53 $34.74 $31.35 tenants (e) 3 5 9 7 150 Federal Street square feet (a) 13,154 12,458 223,826 41,472 % sq. ft. (b) 2.5% 2.3% 42.2% 7.8% annual rent (c) $319,027 $279,204 $9,197,800 $1,134,535 psf (d) $24.25 $22.41 $41.09 $27.36 tenants (e) 7 2 3 2 Russia Wharf square feet (a) 14,166 57,452 34,028 65,854 % sq. ft. (b) 4.6% 18.5% 10.9% 21.2% annual rent (c) $214,867 $810,965 $534,727 $993,244 psf (d) $15.17 $14.12 $15.71 $15.08 tenants (e) 4 13 7 6 75 Federal Street square feet (a) 33,447 3,567 43,757 53,476 % sq. ft. (b) 13.2% 1.4% 17.3% 21.1% annual rent (c) $833,181 $66,780 $1,139,304 $1,659,858 psf (d) $24.91 $18.72 $26.04 $31.04 tenants (e) 6 1 11 7 101 Federal Street square feet (a) 12,555 74,217 110,411 100,831 % sq. ft. (b) 2.2% 13.3% 19.7% 18.0% annual rent (c) $268,982 $2,007,590 $3,859,939 $3,723,712 psf (d) $21.42 $27.05 $34.96 $36.93 tenants (e) 2 5 8 9 2 Oliver Street square feet (a) 25,310 36,851 15,287 37,802 % sq. ft. (b) 9.4% 13.7% 5.7% 14.0% annual rent (c) $460,830 $602,347 $292,758 $626,542 psf (d) $18.21 $16.35 $19.15 $16.57 tenants (e) 4 10 8 9 ------------- ------------- ------------- --------------- TOTAL square feet (a) 156,724 368,547 682,551 407,648 % sq. ft. (b) 3.9% 9.1% 16.9% 10.1% annual rent (c) $3,631,511 $8,783,029 $23,311,216 $11,440,746 psf (d) $23.17 $23.83 $34.15 $28.07 tenants (e) 39 55 62 64
Lease Expirations--Downtown Boston Office Market ---------------------------------------------------------------------------------------------------- 2005 & Property 2000 2001 2002 2003 2004 beyond - -------- ---- ---- ---- ---- ---- ------ 175 Federal Street 34,079 12,329 66,306 0 6,793 45,482 16.8% 6.1% 32.6% 0.0% 3.3% 22.4% $816,972 $322,784 $2,242,683 $0 $176,618 $1,426,193 $23.97 $26.18 $33.82 $0.00 $26.00 $31.36 8 4 2 0 1 1 Center Plaza 96,244 50,791 15,656 128,201 40,035 57,235 14.8% 7.8% 2.4% 19.7% 6.2% 8.8% $2,341,012 $1,291,605 $506,492 $3,531,104 $1,108,376 $1,584,854 $24.32 $25.43 $32.35 $27.54 $27.69 $27.69 12 8 4 2 4 6 One Post Office Square 33,536 425,162 0 8,673 0 164,434 4.4% 55.6% 0.0% 1.1% 0.0% 21.5% $1,001,692 $12,467,208 $0 $314,917 $0 $4,372,464 $29.87 $29.32 $0.00 $36.31 $0.00 $26.59 6 4 0 1 0 2 South Station (g) 2,373 105 125,999 500 2,410 725 1.6% 0.1% 84.8% 0.3% 1.6% 0.5% $325,685 $20,721 $4,326,715 $81,980 $429,037 $100,050 $137.25 $197.34 $34.34 $163.96 $178.02 $138.00 5 1 5 1 3 1 Rowes Wharf 18,479 10,356 75,362 0 5,280 0 5.4% 3.0% 21.9% 0.0% 1.5% 0.0% $553,215 $308,983 $2,983,590 $0 $116,096 $0 $29.94 $29.84 $39.59 $0.00 $21.99 $0.00 4 2 2 0 1 0 150 Federal Street 44,562 11,119 183,239 0 0 0 8.4% 2.1% 34.6% 0.0% 0.0% 0.0% $1,505,946 $282,846 $5,143,936 $0 $0 $0 $33.79 $25.44 $28.07 $0.00 $0.00 $0.00 7 2 3 0 0 0 Russia Wharf 81,488 12,334 7,590 5,782 1,835 30,773 26.2% 4.0% 2.4% 1.9% 0.6% 9.9% $1,288,587 $215,497 $121,440 $103,498 $27,905 $566,128 $15.81 $17.47 $16.00 $17.90 $15.21 $18.40 9 3 1 1 2 1 75 Federal Street 39,339 20,603 0 22,630 0 0 15.5% 8.1% 0.0% 8.9% 0.0% 0.0% $895,715 $424,792 $0 $623,270 $0 $0 $22.77 $20.62 $0.00 $27.54 $0.00 $0.00 5 3 0 2 0 0 101 Federal Street 6,475 112,763 19,310 0 77,794 31,394 1.2% 20.1% 3.4% 0.0% 13.9% 5.6% $198,808 $5,084,995 $473,926 $0 $1,989,684 $942,527 $30.70 $45.09 $24.54 $0.00 $25.58 $30.02 3 4 1 0 1 2 2 Oliver Street 50,960 12,946 1,750 6,155 0 68,205 18.9% 4.8% 0.6% 2.3% 0.0% 25.3% $1,012,749 $240,736 $32,375 $104,635 $0 $2,138,679 $19.87 $18.60 $18.50 $17.00 $0.00 $31.36 10 4 1 1 0 2 ------------------- ----------- ----------- ----------- ----------- ----------- TOTAL 407,535 668,508 495,212 171,941 134,147 398,248 10.1% 16.6% 12.3% 4.3% 3.3% 9.9% $9,940,380 $20,660,167 $15,831,158 $4,759,403 $3,847,716 $11,130,895 $24.39 $30.90 $31.97 $27.68 $28.68 $27.95 69 35 19 8 12 15
(a) Total area in square feet covered by such leases (b) Percentage of total square feet represented by such leases (c) Annualized expiring base rental income represented by such leases in the year of expiration plus 1995 tenant payments on account of real estate tax and operating expense escalations, except leases with CPI increases in lieu of expense recoveries. (d) Calculated as annual rent divided by square feet (e) The number of tenants whose lease will expire (f) Lease expirations reflect retail tenants only for 1998. (g) Lease expirations reflect retail tenants only for 1996 through 2001 and 2003 and beyond. S-26 The North Central Atlanta Office Market Market Information According to Jamison, as of March 1996 there were approximately 89.5 million square feet of office space in the Atlanta Office Market. The North Central submarket, the location of the Perimeter Center Portfolio, had approximately 20.2 million square feet of office space. The following table sets forth the vacancy rates and Net Absorption for the North Central Atlanta Office Market from 1991 through March 1996. Period Vacancy Net Absorption - ------------------ ------ ------------------------- (in millions of square feet) 1991 19.6% .6 1992 16.8% .5 1993 11.7% 1.0 1994 8.7% .6 1995 6.0% .7 January--March 1996 5.3% .2 - ---------- Sources: CB/Torto Wheaton 1991 through 1994; Jamison Research 1995 and 1996 Property Descriptions The following is a description of the buildings located in the Perimeter Center Portfolio. The Company owns a 100% fee interest in each of the Properties in the Perimeter Center Portfolio. Year Built/ Rentable Area Property Renovated in Square Feet - -------- --------- -------------- North Terraces 1984 492,845 South Terraces 1986 494,513 8,10,12,14,16 Perimeter Center East 1970 64,998 20,22,24,26 Perimeter Center East 1973 69,727 28,30,32 Perimeter Center East 1974 104,816 41 Perimeter Center East 1974 92,021 47 Perimeter Center East 1974 92,021 50 Perimeter Center East 1981 6,300 53 Perimeter Center East 1972 90,505 56 Perimeter Center East 1977 93,625 64 Perimeter Center East 1971 183,037 64A Perimeter Center East 1985 372,498 70,72,74,76 Perimeter Center East 1972 61,932 125 Perimeter Center West 1972 223,059 219 Perimeter Center Parkway 1979 127,697 223 Perimeter Center Parkway 1978 127,823 245 Perimeter Center Parkway 1981 229,217 301 Perimeter Center North 1982 151,416 303 Perimeter Center North 1989 162,256 Park Place Shopping Center 1979 61,830 --------- Total 3,302,136 ========= S-27 Base Rents and Historic Net Rents The following charts show the average annual Base Rent and the average annual Historic Net Rent (as defined below) per square foot for each of the Properties in the Perimeter Center Portfolio. Historic Net Rent is Base Rent plus tenant payments on account of real estate tax and operating expense escalation, less total operating expenses and real estate taxes.
Average Annual Base Rents ---------------------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - -------- ---- ---- ---- ---- ---- ------- (per square foot) North Terraces $16.89 $15.55 $17.94 $17.87 $18.06 $ 19.66 South Terraces 19.87 18.78 17.08 18.59 20.70 20.07 8,10,12,14,16 Perimeter Center East 12.29 14.32 13.51 13.91 11.63 13.86 20,22,24,26 Perimeter Center East 12.62 13.48 12.92 11.75 13.11 14.53 28,30,32 Perimeter Center East 13.52 13.01 10.34 10.42 12.52 12.80 41 Perimeter Center East 13.09 14.45 14.76 14.29 13.70 14.57 47 Perimeter Center East 16.13 16.13 15.84 14.94 15.39 14.79 50 Perimeter Center East 6.08 6.00 6.19 6.27 6.37 6.62 53 Perimeter Center East 8.72 13.44 13.57 13.62 15.02 15.45 56 Perimeter Center East 11.90 11.76 11.27 11.23 11.77 11.62 64 Perimeter Center East 5.34 5.34 5.34 5.34 5.34 5.34 64A Perimeter Center East 18.71 19.01 19.31 19.62 19.91 20.06 70,72,74,76 Perimeter Center East 14.89 13.74 13.90 14.76 16.02 15.11 125 Perimeter Center West 4.10 4.10 4.10 4.10 4.11 4.10 219 Perimeter Center Parkway 14.18 11.79 14.89 16.88 15.62 15.50 223 Perimeter Center Parkway 13.75 6.76 8.08 8.62 11.33 11.25 245 Perimeter Center Parkway 15.26 15.80 15.99 16.17 16.36 17.66 301 Perimeter Center North 15.41 17.17 17.17 17.73 17.80 18.47 303 Perimeter Center North 16.96 21.06 19.70 20.44 21.06 20.54 Park Place Shopping Center 17.80 18.86 19.78 19.32 25.53 16.20 ------ ------ ------ ------ ------ ------- Weighted Average $14.81 $14.57 $14.81 $15.18 $15.89 $16.05 ====== ====== ====== ====== ====== =======
Average Annual Historic Net Rents ---------------------------------------------------------------- As of Property 1991(a) 1992(a) 1993(a) 1994(a) 1995(a) 6/30/96(b) - -------- ------- ------- ------- ------- ------- ---------- (per square foot) North Terraces $ 9.59 $ 8.67 $10.70 $10.52 $ 9.38 $13.37 South Terraces 13.61 12.28 9.17 11.40 12.83 13.21 8,10,12,14,16 Perimeter Center East 5.60 7.17 6.09 5.03 4.47 8.70 20,22,24,26 Perimeter Center East 6.35 6.86 6.12 5.15 4.72 9.08 28,30,32 Perimeter Center East 7.08 6.78 2.63 4.31 5.66 8.02 41 Perimeter Center East 5.97 7.63 6.55 6.16 5.59 9.09 47 Perimeter Center East 9.71 8.85 9.09 7.61 7.28 9.30 50 Perimeter Center East 6.08 6.00 6.19 6.27 6.37 6.62 53 Perimeter Center East 1.72 7.07 7.88 7.45 8.26 10.47 56 Perimeter Center East 8.03 8.03 7.16 7.57 6.65 7.83 64 Perimeter Center East 2.83 3.33 3.29 3.24 3.20 2.98 64A Perimeter Center East 14.69 15.75 15.59 15.80 15.09 17.32 70,72,74,76 Perimeter Center East 8.04 6.95 7.13 7.48 8.05 10.17 125 Perimeter Center West 3.41 3.56 3.33 3.31 3.04 3.16 219 Perimeter Center Parkway 7.55 5.79 7.68 10.32 8.91 10.13 223 Perimeter Center Parkway 6.35 0.73 1.63 1.92 3.71 11.08 245 Perimeter Center Parkway 10.38 8.83 8.48 8.21 8.45 11.50 301 Perimeter Center North 8.97 11.09 9.91 10.58 9.85 11.82 303 Perimeter Center North 10.60 15.45 13.32 13.55 13.33 14.19 Park Place Shopping Center 11.31 12.29 13.38 12.60 16.50 12.93 ------ ------ ------ ------ ------ ------ Weighted Average $ 9.41 $ 9.26 $ 8.92 $ 9.28 $ 9.28 $11.25 ====== ====== ====== ====== ====== ======
(a) Calculated as Historic Net Rent (b) Calculated as Net Effective Rent S-28 Occupancy Rates The following chart sets forth the occupancy rate, expressed as a percentage, for each of the Properties located in the Perimeter Center Portfolio for each of 1990 through 1995, and as of June 30, 1996.
Occupancy Rate ---------------------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - -------- ---- ---- ---- ---- ---- ------- North Terraces 86% 92% 96% 96% 84% 98% South Terraces 90% 84% 88% 92% 96% 98% 8,10,12,14,16 Perimeter Center East 70% 69% 61% 60% 69% 77% 20,22,24,26 Perimeter Center East 84% 87% 91% 85% 78% 94% 28,30,32 Perimeter Center East 70% 65% 61% 83% 85% 94% 41 Perimeter Center East 77% 78% 58% 61% 71% 85% 47 Perimeter Center East 79% 75% 79% 87% 77% 85% 50 Perimeter Center East 100% 100% 100% 100% 100% 100% 53 Perimeter Center East 61% 70% 88% 88% 83% 70% 56 Perimeter Center East 100% 100% 93% 93% 93% 99% 64 Perimeter Center East 100% 100% 100% 100% 100% 100% 64A Perimeter Center East 100% 100% 100% 100% 100% 100% 70,72,74,76 Perimeter Center East 82% 89% 91% 89% 86% 88% 125 Perimeter Center West 100% 100% 100% 100% 100% 100% 219 Perimeter Center Parkway 73% 82% 64% 85% 99% 100% 223 Perimeter Center Parkway 67% 100% 100% 100% 100% 100% 245 Perimeter Center Parkway 100% 100% 100% 100% 100% 100% 301 Perimeter Center North 99% 100% 100% 100% 100% 100% 303 Perimeter Center North 100% 99% 100% 100% 100% 100% Park Place Shopping Center 91% 98% 100% 98% 91% 100% ------ ------ ------ ------ ------ ------- Weighted Average 89% 91% 92% 94% 93% 97% ====== ====== ====== ====== ====== =======
S-29 Lease Expirations The following table sets forth lease expirations (in square feet) for the Company's Properties in the Perimeter Center Portfolio. This table does not contain information relating to certain ground leases in the Perimeter Center Portfolio.
Lease Expirations--Perimeter Center Portfolio ------------------------------------------------------------------------ 7/1/96 to Property 12/31/96 1997 1998 1999 - -------- -------- ---- ---- ---- North Terraces square feet (a) 67,524 31,179 18,295 79,666 % sq. ft. (b) 13.7% 6.3% 3.7% 16.2% annual rent (c) $1,441,902 $617,778 $356,293 $1,539,051 annual rent psf (d) $21.35 $19.81 $19.47 $19.32 tenants (e) 18 7 7 7 South Terraces square feet (a) 51,910 183,274 112,362 94,470 % sq. ft. (b) 10.5% 37.1% 22.7% 19.1% annual rent (c) $1,067,901 $4,240,969 $2,096,022 $1,869,454 annual rent psf (d) $20.57 $23.14 $18.65 $19.79 tenants (e) 12 17 19 18 8,10,12,14,16 Perimeter square feet (a) 3,326 17,880 1,441 4,408 Center East % sq. ft. (b) 5.1% 27.5% 2.2% 6.8% annual rent (c) $44,931 $255,559 $15,592 $70,494 annual rent psf (d) $13.51 $14.29 $10.82 $15.99 tenants (e) 4 7 2 3 20,22,24,26 Perimeter square feet (a) 10,477 5,185 18,792 9,957 Center East % sq. ft. (b) 15.0% 7.4% 27.0% 14.3% annual rent (c) $134,535 $75,682 $264,081 $160,392 annual rent psf (d) $12.84 $14.60 $14.05 $16.11 tenants (e) 6 5 5 3 28,30,32 Perimeter square feet (a) 0 3,788 88,107 2,363 Center East % sq. ft. (b) 0.0% 3.6% 83.9% 2.2% annual rent (c) $0 $49,883 $1,165,602 $34,500 annual rent psf (d) $0.00 $13.17 $13.23 $14.60 tenants (e) 0 3 5 1 41 Perimeter Center East square feet (a) 1,876 0 32,308 30,545 % sq. ft. (b) 2.0% 0.0% 35.1% 33.2% annual rent (c) $7,035 $0 $498,448 $468,954 annual rent psf (d) $3.75 $0.00 $15.43 $15.35 tenants (e) 1 0 2 4 47 Perimeter Center East square feet (a) 2,230 2,756 16,354 14,871 % sq. ft. (b) 2.4% 3.0% 17.8% 16.2% annual rent (c) $32,090 $51,592 $249,373 $225,204 annual rent psf (d) $14.39 $18.72 $15.25 $15.14 tenants (e) 1 1 6 2 50 Perimeter Center East square feet (a) 0 0 6,300 0 % sq. ft. (b) 0.0% 0.0% 100.0% 0.0% annual rent (c) $0 $0 $61,677 $0 annual rent psf (d) $0.00 $0.00 $9.79 $0.00 tenants (e) 0 0 1 0 53 Perimeter Center East square feet (a) 8,017 33,972 4,024 13,746 % sq. ft. (b) 8.9% 37.5% 4.4% 15.2% annual rent (c) $147,753 $550,392 $63,458 $195,460 annual rent psf (d) $18.43 $16.20 $15.77 $14.22 tenants (e) 1 3 1 2 56 Perimeter Center East square feet (a) 86,679 0 0 0 % sq. ft. (b) 92.6% 0.0% 0.0% 0.0% annual rent (c) $1,218,229 $0 $0 $0 annual rent psf (d) $14.05 $0.00 $0.00 $0.00 tenants (e) 2 0 0 0 64 Perimeter Center East square feet (a) 0 0 0 0 % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% annual rent (c) $0 $0 $0 $0 annual rent psf (d) $0.00 $0.00 $0.00 $0.00 tenants (e) 0 0 0 0 64A Perimeter Center East square feet (a) 0 0 0 0 % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% annual rent (c) $0 $0 $0 $0 annual rent psf (d) $0.00 $0.00 $0.00 $0.00 tenants (e) 0 0 0 0 70,72,74,76 Perimeter square feet (a) 8,460 4,506 3,204 16,423 Center East % sq. ft. (b) 13.7% 7.3% 5.2% 26.5% annual rent (c) $129,020 $61,168 $37,225 $304,919 annual rent psf (d) $15.25 $13.57 $11.62 $18.57 tenants (e) 2 3 3 2 (Notes on following page)
Lease Expirations--Perimeter Center Portfolio ---------------------------------------------------------------------------------------------------- 2005 and Property 2000 2001 2002 2003 2004 beyond - -------- ---- ---- ---- ---- ---- ------ North Terraces 196,907 68,515 17,990 0 0 2,718 39.9% 13.9% 3.6% 0.0% 0.0% 0.6% $4,131,101 $2,000,355 $423,371 $0 $0 $0 $20.98 $29.20 $23.53 $0.00 $0.00 $0.00 13 6 2 0 0 1 South Terraces 38,723 1,430 0 0 0 0 7.8% 0.3% 0.0% 0.0% 0.0% 0.0% $860,954 $38,624 $0 $0 $0 $0 $22.23 $27.01 $0.00 $0.00 $0.00 $0.00 2 1 0 0 0 0 8,10,12,14,16 Perimeter 5,169 17,581 0 0 0 0 Center East 8.0% 27.0% 0.0% 0.0% 0.0% 0.0% $92,473 $251,651 $0 $0 $0 $0 $17.89 $14.31 $0.00 $0.00 $0.00 $0.00 1 2 0 0 0 0 20,22,24,26 Perimeter 21,059 0 0 0 0 0 Center East 30.2% 0.0% 0.0% 0.0% 0.0% 0.0% $351,994 $0 $0 $0 $0 $0 $16.71 $0.00 $0.00 $0.00 $0.00 $0.00 1 0 0 0 0 0 28,30,32 Perimeter 4,152 0 0 0 0 0 Center East 4.0% 0.0% 0.0% 0.0% 0.0% 0.0% $67,300 $0 $0 $0 $0 $0 $16.21 $0.00 $0.00 $0.00 $0.00 $0.00 2 0 0 0 0 0 41 Perimeter Center East 13,463 0 0 0 0 0 14.6% 0.0% 0.0% 0.0% 0.0% 0.0% $237,377 $0 $0 $0 $0 $0 $17.63 $0.00 $0.00 $0.00 $0.00 $0.00 2 0 0 0 0 0 47 Perimeter Center East 41,904 0 0 0 0 0 45.5% 0.0% 0.0% 0.0% 0.0% 0.0% $677,354 $0 $0 $0 $0 $0 $16.16 $0.00 $0.00 $0.00 $0.00 $0.00 6 0 0 0 0 0 50 Perimeter Center East 0 0 0 0 0 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $0 $0 $0 $0 $0 $0 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0 0 0 0 0 0 53 Perimeter Center East 0 3,586 0 0 0 0 0.0% 4.0% 0.0% 0.0% 0.0% 0.0% $0 $72,365 $0 $0 $0 $0 $0.00 $20.18 $0.00 $0.00 $0.00 $0.00 0 1 0 0 0 0 56 Perimeter Center East 5,742 0 0 0 0 0 6.1% 0.0% 0.0% 0.0% 0.0% 0.0% $117,768 $0 $0 $0 $0 $0 $20.51 $0.00 $0.00 $0.00 $0.00 $0.00 1 0 0 0 0 0 64 Perimeter Center East 0 183,037 0 0 0 0 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% $0 $1,746,388 $0 $0 $0 $0 $0.00 $9.54 $0.00 $0.00 $0.00 $0.00 0 1 0 0 0 0 64A Perimeter Center East 0 0 0 0 0 372,498 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% $0 $0 $0 $0 $0 $9,166,954 $0.00 $0.00 $0.00 $0.00 $0.00 $24.61 0 0 0 0 0 1 70,72,74,76 Perimeter 17,296 4,636 0 0 0 0 Center East 27.9% 7.5% 0.0% 0.0% 0.0% 0.0% $310,914 $81,315 $0 $0 $0 $0 $17.98 $17.54 $0.00 $0.00 $0.00 $0.00 2 1 0 0 0 0 (Notes on following page)
S-30
Lease Expirations--Perimeter Center Portfolio (continued) ------------------------------------------------------------------------ 7/1/96 to Property 12/31/96 1997 1998 1999 - -------- -------- ---- ---- ---- 125 Perimeter Center square feet (a) 0 0 0 0 West (f) % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% annual rent (c) $0 $0 $0 $0 annual rent psf (d) $0.00 $0.00 $0.00 $0.00 tenants (e) 0 0 0 0 219 Perimeter Center square feet (a) 7,845 3,886 70,381 26,574 Parkway % sq. ft. (b) 6.1% 3.0% 55.1% 20.8% annual rent (c) $133,261 $72,163 $1,119,904 $409,172 annual rent psf (d) $16.99 $18.57 $15.91 $15.40 tenants (e) 2 1 4 1 223 Perimeter Center square feet (a) 0 0 0 0 Parkway % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% annual rent (c) $0 $0 $0 $0 annual rent psf (d) $0.00 $0.00 $0.00 $0.00 tenants (e) 0 0 0 0 245 Perimeter Center square feet (a) 0 0 0 0 Parkway % sq. ft. (b) 0.0% 0.0% 0.0% 0.0% annual rent (c) $0 $0 $0 $0 annual rent psf (d) $0.00 $0.00 $0.00 $0.00 tenants (e) 0 0 0 0 301 Perimeter Center square feet (a) 0 0 0 151,416 North % sq. ft. (b) 0.0% 0.0% 0.0% 100.0% annual rent (c) $0 $0 $0 $2,677,440 annual rent psf (d) $0.00 $0.00 $0.00 $17.68 tenants (e) 0 0 0 1 303 Perimeter Center square feet (a) 0 0 0 162,256 North % sq. ft. (b) 0.0% 0.0% 0.0% 100.0% annual rent (c) $0 $0 $0 $3,592,679 annual rent psf (d) $0.00 $0.00 $0.00 $22.14 tenants (e) 0 0 0 2 Park Place Shopping Center square feet (a) 0 2,489 5,955 21,720 % sq. ft. (b) 0.0% 4.0% 9.6% 35.1% annual rent (c) $0 $47,191 $107,728 $386,231 annual rent psf (d) $0.00 $18.96 $18.09 $17.78 tenants (e) 0 1 4 5 -------- ------- ---------- -------- TOTAL square feet (a) 248,344 288,915 377,523 628,415 % sq. ft. (b) 7.5% 8.7% 11.4% 19.0% annual rent (c) $4,356,656 $6,022,378 $6,035,402 $11,933,950 annual rent psf (d) $17.54 $20.84 $15.99 $18.99 tenants (e) 49 48 59 51
Lease Expirations--Perimeter Center Portfolio (continued) ---------------------------------------------------------------------------------------------------- 2005 and Property 2000 2001 2002 2003 2004 beyond - -------- ---- ---- ---- ---- ---- ------ 125 Perimeter Center 0 0 0 0 223,059 0 West (f) 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% $0 $0 $0 $0 $1,001,603 $0 $0.00 $0.00 $0.00 $0.00 $4.49 $0.00 0 0 0 0 1 0 219 Perimeter Center 3,375 15,202 0 0 0 0 Parkway 2.6% 11.9% 0.0% 0.0% 0.0% 0.0% $50,558 $286,986 $0 $0 $0 $0 $14.98 $18.88 $0.00 $0.00 $0.00 $0.00 1 1 0 0 0 0 223 Perimeter Center 0 127,823 0 0 0 0 Parkway 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% $0 $2,428,637 $0 $0 $0 $0 $0.00 $19.00 $0.00 $0.00 $0.00 $0.00 0 1 0 0 0 0 245 Perimeter Center 0 229,217 0 0 0 0 Parkway 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% $0 $4,286,082 $0 $0 $0 $0 $0.00 $18.70 $0.00 $0.00 $0.00 $0.00 0 1 0 0 0 0 301 Perimeter Center 0 0 0 0 0 0 North 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $0 $0 $0 $0 $0 $0 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0 0 0 0 0 0 303 Perimeter Center 0 0 0 0 0 0 North 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $0 $0 $0 $0 $0 $0 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0 0 0 0 0 0 Park Place Shopping Center 18,038 1,854 0 0 0 11,774 29.2% 3.0% 0.0% 0.0% 0.0% 19.0% $367,960 $52,301 $0 $0 $0 $239,393 $20.40 $28.21 $0.00 $0.00 $0.00 $20.33 4 1 0 0 0 2 ---------- ----------- -------- ----- ---------- ---------- TOTAL 365,828 652,881 17,990 0 223,059 386,990 11.1% 19.8% 0.5% 0.0% 6.8% 11.7% $7,265,752 $11,244,705 $423,371 $0 $1,001,603 $9,406,347 $19.86 $17.22 $23.53 $0.00 $4.49 $24.31 35 16 2 0 1 4
(a) Total area in square feet covered by such leases (b) Percentage of total square feet represented by such leases (c) Annualized expiring base rental income represented by such leases in the year of expiration plus 1995 tenant payments on account of real estate and operating escalations, except leases with CPI increases in lieu of expense recoveries (d) Calculated as annual rent divided by square feet (e) The number of tenants whose leases will expire (f) 125 Perimeter Center is reflected as a 2004 expiration; although the lease expires in 1999, the tenant has an option to extend for five years in 1999 at a rental rate that is significantly below market S-31 The Greater Boston Suburban Office Market Market Information As of March 1996, there were approximately 44 million square feet of private sector office space in the Greater Boston Suburban Office Market. Of the ten Properties located in the Greater Boston Suburban Office Market, eight are located in the Route 128/Mass. Pike submarket, one (Westwood Business Centre) is located in the South submarket and one (Crosby Corporate Center) is located in the Northwest submarket. The following tables set forth the vacancy rates for the Route 128/Mass. Pike, South, and Northwest submarkets from December 1991 through March 1996. Route 128/ Mass. Pike Submarket South Submarket Northwest Submarket ------------------------- ----------------------- --------------------- Date Vacancy Rate Date Vacancy Rate Date Vacancy Rate - ------- ------------ ---- ------------ ---- ------------ 12/91 18.5% 12/91 17.4% 12/91 23.1% 12/92 18.5% 12/92 13.5% 12/92 21.7% 12/93 11.6% 12/93 12.3% 12/93 18.0% 12/94 10.6% 12/94 9.4% 12/94 16.2% 12/95 9.6% 12/95 9.2% 12/95 13.7% 3/96 8.0% 3/96 8.0% 3/96 15.5% Source: Spaulding & Slye Office Market Reports 1990 through April 1996. Spaulding & Slye reports that Net Absorption for the Route 128/Mass. Pike submarket was 100,000 square feet in both 1995 and 1994. For the South submarket, Spaulding & Slye reports that Net Absorption was 100,000 square feet in 1995 and 300,000 square feet in 1994. In the Northwest submarket, Spaulding & Slye reports Net Absorption for 1995 and 1994 of 300,000 square feet and 100,000 square feet, respectively. Property Descriptions The following chart describes the Company's Properties located in the Greater Boston Suburban Office Market. The Company owns a 100% fee interest in each Property located in the Greater Boston Suburban Office Market. Year Built/ Rentable Area No. of Property Renovated in Square Feet Stories - -------------------------------------------------------------------- -------- Wellesley Office Park: 65 William Street, Building One 1963 29,502 3 60 William Street, Building Two 1966 49,826 4 55 William Street, Building Three 1968 52,636 4 40 William Street, Building Four 1970 71,904 4 20 William Street, Building Five 1973 129,000 4 45 William Street, Building Six 1976 155,718 4 80 William Street, Building Seven 1984 71,324 4 100 William Street, Building Eight 1968 39,424 3 Westwood Business Centre 1985 160,400 3 Crosby Corporate Center 1996 336,000 (a) --------------- Total 1,095,734 =============== (a) Crosby Corporate Center is a six building complex with one and two story buildings. S-32 Base Rents and Net Effective Rents The following charts set forth the average annual Base Rents and the average annual Net Effective Rents per square foot for each of the Company's Properties located in the Greater Boston Suburban Office Market.
Average Annual Base Rents ------------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - -------- ---- ---- ---- ---- ---- ------- Wellesley Office Park: 65 William Street, Building One $18.98 $21.45 $20.97 $22.00 $22.60 $23.69 60 William Street, Building Two 26.24 22.04 16.62 19.26 19.39 20.59 55 William Street, Building Three 21.82 25.41 23.25 22.06 22.03 22.54 40 William Street, Building Four 20.20 23.33 22.89 22.28 23.08 23.75 20 William Street, Building Five 23.20 22.52 21.20 21.90 22.96 23.73 45 William Street, Building Six 17.03 15.65 15.46 16.52 16.28 22.77 80 William Street, Building Seven 38.37 37.71 37.34 25.00(a) 25.00 25.00 100 William Street, Building Eight(b) -- -- -- -- 23.00 23.00 Westwood Business Centre(b) -- -- -- -- 18.46 19.40 Crosby Corporate Center(b) -- -- -- -- -- 15.62 ----- ----- ----- ------- ----- -------- Weighted Average $22.99 $22.96 $21.63 $21.03 $20.50 $20.35 ===== ===== ===== ======= ===== ========
(a) This reduction in Base Rent is attributable to the execution of a new lease with the tenant occupying this Property for an 11-year term commencing January 1, 1994. (b) The 100 William Street Property and Westwood Business Centre were acquired by the Company subsequent to the Initial Offering and, consequently, information prior to the date of acquisition is unavailable. The Crosby Corporate Center was redeveloped by the Company from research/development space to Class A office space and, consequently, historical information prior to such redevelopment is not comparable.
Average Annual Net Effective Rents ------------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - -------- ---- ---- ---- ---- ---- ------- Wellesley Office Park: 65 William Street, Building One $10.17 $12.40 $12.70 $13.19 $14.02 $15.47 60 William Street, Building Two 12.69 13.30 9.36 11.26 11.58 12.97 55 William Street, Building Three 12.90 16.36 14.86 13.86 13.92 14.65 40 William Street, Building Four 11.47 13.18 16.17 14.07 14.77 15.76 20 William Street, Building Five 12.45 12.38 11.92 13.04 14.11 15.10 45 William Street, Building Six 10.95 9.06 9.07 10.84 12.65 15.32 80 William Street, Building Seven 31.02 31.10 31.35 21.38(a) 19.47 20.38 100 William Street, Building Eight(b) -- -- -- -- 15.50 15.50 Westwood Business Centre(b) -- -- -- -- 11.41 11.38 Crosby Corporate Center(b) -- -- -- -- -- 13.35 ----- ----- ----- ------- ----- -------- Weighted Average $14.28 $14.55 $14.23 $13.57 $13.66 $14.35 ===== ===== ===== ======= ===== ========
(a) This reduction in Net Effective Rent is attributable to the execution of a new lease with the tenant occupying this Property for an 11-year term commencing January 1, 1994. (b) The 100 William Street Property and Westwood Business Centre were acquired by the Company subsequent to the Initial Offering and, consequently, information prior to the date of acquisition is unavailable. The Crosby Corporate Center was redeveloped by the Company from research/development space to Class A office space and, consequently, historical information prior to such redevelopment is not comparable. S-33 Occupancy Rates The following chart sets forth the occupancy rate, expressed as a percentage, for each of the Company's Properties located in the Greater Boston Suburban Office Market.
Occupancy Rate ------------------------------------------------------- As of Property 1991 1992 1993 1994 1995 6/30/96 - ----------------------------------------- ----- ----- ----- ----- ----- ---------- Wellesley Office Park: 65 William Street, Building One 97% 100% 100% 94% 100% 87% 60 William Street, Building Two 98% 96% 100% 100% 98% 93% 55 William Street, Building Three 100% 91% 96% 100% 100% 100% 40 William Street, Building Four 100% 97% 100% 100% 93% 94% 20 William Street, Building Five 95% 95% 97% 97% 97% 97% 45 William Street, Building Six 97% 91% 90% 99% 98% 73% 80 William Street, Building Seven 100% 100% 100% 100% 100% 100% 100 William Street, Building Eight(a) -- -- -- -- 100% 100% Westwood Business Centre(a) -- -- -- -- 99% 99% Crosby Corporate Center(a) -- -- -- -- -- 48%(b) ---- ---- ---- ---- ---- ---- Weighted Average 98% 95% 97% 99% 98% 79%(c) ==== ==== ==== ==== ==== ====
(a) The 100 William Street Property and Westwood Business Centre were acquired by the Company subsequent to the Initial Offering and, consequently, information prior to the date of acquisition is unavailable. The Crosby Corporate Center was redeveloped by the Company from research/development space to Class A office space and, consequently, historical information prior to such development is not comparable. (b) This Property is approximately 88% leased with occupancy of new tenants scheduled for August 1996. (c) Occupancy rate information does not incorporate the effect of signed leases in place at Crosby Corporate Center. If the effect of such leases were considered, the weighted average occupancy rate would be approximately 91%. S-34 Lease Expirations The following table sets forth lease expirations (in square feet) for each of the Company's Properties in the Greater Boston Suburban Office Market.
Lease Expirations--Greater Boston Suburban Office Market ------------------------------------------------------------------------ 7/1/96 to Property 12/31/96 1997 1998 1999 - -------- -------- ---- ---- ---- 65 William Street square feet(a) 5,864 3,769 1,103 2,274 Building One % sq. ft.(b) 19.9% 12.8% 3.7% 7.7% annual rent(c) $129,947 $89,525 $23,449 $52,302 psf(d) $22.16 $23.75 $21.26 $23.00 tenants(e) 3 4 1 1 60 William Street square feet(a) 0 0 18,457 2,348 Building Two % sq. ft.(b) 0.0% 0.0% 34.8% 4.4% annual rent(c) $0 $0 $357,117 $54,021 psf(d) $0.00 $0.00 $19.35 $23.01 tenants(e) 0 0 3 1 55 William Street square feet(a) 8,757 16,415 10,413 2,394 Building Three % sq. ft.(b) 15.9% 29.8% 18.9% 4.3% annual rent(c) $191,290 $378,606 $229,612 $61,636 psf(d) $21.84 $23.06 $22.05 $25.75 tenants(e) 3 3 2 2 40 William Street square feet 6,539 23,705 0 9,099 Building Four % sq. ft.(b) 8.8% 32.0% 0.0% 12.3% annual rent(c) $146,459 $531,845 $0 $211,217 psf(d) $22.40 $22.44 $0.00 $23.21 tenants(e) 3 2 0 2 20 William Street square feet 5,820 21,707 35,542 7,634 Building Five % sq. ft.(b) 4.5% 16.8% 27.6% 5.9% annual rent(c) $140,936 $505,925 $803,384 $189,449 psf(d) $24.22 $23.31 $22.60 $24.82 tenants(e) 2 8 11 3 45 William Street square feet(a) 10,939 13,200 0 0 Building Six % sq. ft.(b) 6.9% 8.3% 0.0% 0.0% annual rent(c) $256,376 $271,443 $0 $0 psf(d) $23.44 $20.56 $0.00 $0.00 tenants(e) 5 1 0 0 80 William Street square feet(a) 0 0 0 0 Building Seven % sq. ft.(b) 0.0% 0.0% 0.0% 0.0% annual rent(c) $0 $0 $0 $0 psf(d) $0.00 $0.00 $0.00 $0.00 tenants(e) 0 0 0 0 100 William Street square feet(a) 39,424 0 0 0 Building Eight % sq. ft.(b) 100.0% 0.0% 0.0% 0.0% annual rent(c) $906,752 $0 $0 $0 psf(d) $23.00 $0.00 $0.00 $0.00 tenants(e) 1 0 0 0 Westwood Business Centre square feet(a) 4,085 24,588 3,500 18,784 % sq. ft.(b) 2.5% 15.3% 2.2% 11.7% annual rent(c) $87,030 $565,381 $67,453 $379,447 psf(d) $21.30 $22.99 $19.27 $20.20 tenants(e) 2 2 1 6 Crosby Corporate Center square feet(a) 0 0 0 40,500 % sq. ft(b) 0.0% 0.0% 0.0% 12.1% annual rent(c) $0 $0 $0 $416,287 psf(d) $0.00 $0.00 $0.00 $10.28 tenants(e) 0 0 0 1 ---------- ---------- ---------- ------------ TOTAL square feet(a) 81,428 103,384 69,015 83,033 % sq. ft.(b) 7.4% 9.3% 6.2% 7.5% annual rent(c) $1,858,790 $2,342,724 $1,481,015 $1,364,359 psf(d) $22.83 $22.66 $21.46 $16.43 tenants(e) 19 20 18 16
Lease Expirations--Greater Boston Suburban Office Market ---------------------------------------------------------------------------------------------------- 2005 and Property 2000 2001 2002 2003 2004 beyond - -------- ---- ---- ---- ---- ---- ------ 65 William Street 3,429 5,794 3,874 0 0 0 Building One 11.6% 19.6% 13.1% 0.0% 0.0% 0.0% $88,047 $145,935 $92,949 $0 $0 $0 $25.68 $25.19 $23.99 $0.00 $0.00 $0.00 2 2 2 0 0 0 60 William Street 23,207 5,914 0 0 0 0 Building Two 43.7% 11.1% 0.0% 0.0% 0.0% 0.0% $502,736 $155,583 $0 $0 $0 $0 $21.66 $26.31 $0.00 $0.00 $0.00 $0.00 3 2 0 0 0 0 55 William Street 0 4,657 0 0 12,470 0 Building Three 0.0% 8.5% 0.0% 0.0% 22.6% 0.0% $0 $130,646 $0 $0 $294,761 $0 $0.00 $28.05 $0.00 $0.00 $23.64 $0.00 0 1 0 0 1 0 40 William Street 0 8,374 22,003 0 0 0 Building Four 0.0% 11.3% 29.7% 0.0% 0.0% 0.0% $0 $217,739 $572,078 $0 $0 $0 $0.00 $26.00 $26.00 $0.00 $0.00 $0.00 0 1 1 0 0 0 20 William Street 32,647 9,715 12,800 0 0 0 Building Five 25.3% 7.5% 9.9% 0.0% 0.0% 0.0% $830,062 $248,885 $321,671 $0 $0 $0 $25.43 $25.62 $25.13 $0.00 $0.00 $0.00 8 3 1 0 0 0 45 William Street 0 0 0 15,001 21,700 56,180 Building Six 0.0% 0.0% 0.0% 9.6% 13.7% 35.5% $0 $0 $0 $397,527 $526,324 $1,677,017 $0.00 $0.00 $0.00 $26.50 $24.25 $29.85 0 0 0 1 1 2 80 William Street 0 0 0 0 0 71,324 Building Seven 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% $0 $0 $0 $0 $0 $2,190,897 $0.00 $0.00 $0.00 $0.00 $0.00 $30.72 0 0 0 0 0 1 100 William Street 0 0 0 0 0 0 Building Eight 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $0 $0 $0 $0 $0 $0 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0 0 0 0 0 0 Westwood Business Centre 10,467 33,841 0 0 62,972 0 6.5% 21.1% 0.0% 0.0% 39.3% 0.0% $217,122 $964,300 $0 $0 $1,230,571 $0 $20.74 $28.50 $0.00 $0.00 $19.54 $0.00 3 1 0 0 1 0 Crosby Corporate Center 0 0 0 0 0 257,114 0.0% 0.0% 0.0% 0.0% 0.0% 76.5% $0 $0 $0 $0 $0 $5,468,760 $0.00 $0.00 $0.00 $0.00 $0.00 $21.27 0 0 0 0 0 4 ---------- ---------- -------- -------- ---------- ---------- TOTAL 69,750 68,295 38,677 15,001 97,142 384,618 6.3% 6.2% 3.5% 1.4% 8.8% 34.8% $1,637,966 $1,863,089 $986,699 $397,527 $2,051,656 $9,336,674 $23.48 $27.28 $25.51 $26.50 $21.12 $24.28 16 10 4 1 3 7
(a) Total area in square feet covered by such leases (b) Percentage of total square feet represented by such leases (c) Annualized base rental income represented by such leases in the year of expiration plus 1995 tenant payments on account of real estate tax and operating expense escalations, except leases with CPI increases in lieu of expense recoveries. (d) Calculated as annual rent divided by square feet (e) The number of tenants whose leases will expire S-35 The Cambridge Office Market As of March 1996, there were approximately 10 million square feet of office space in the Cambridge Office Market. The entire Cambridge Office Market had a vacancy rate of 4.4% in March 1996 and the East Cambridge submarket had a vacancy rate of 4.9% for the same period. Spaulding & Slye reports Net Absorption of 210,000 square feet in the Cambridge Office Market in 1995 and 100,000 square feet in 1994. There can be no assurance, however, that this upward trend will continue. One Canal Park and Ten Canal Park are located in the East Cambridge submarket. The average Base Rent rate per square foot and the average annual Net Effective Rent per square foot for One Canal Park and Ten Canal Park were $16.81 and $13.00, and $20.36 and $12.85, respectively, as of June 30, 1996. One Canal Park. One Canal Park is a four-story, 100,300 rentable square foot office building located in the East Cambridge submarket. Construction was completed in 1987. The Company owns a 100% fee interest in this Property. As of June 30, 1996, One Canal Park was 94% leased. Ten Canal Park. Ten Canal Park is a six-story, 110,000 rentable square foot office building located in the East Cambridge submarket. Construction was completed in 1987. The Company owns a 100% fee interest in this Property. As of June 30, 1996, Ten Canal Park was approximately 88% leased. The following table sets forth lease expirations (in square feet) for each of the Company's Properties in the Cambridge Office Market.
Lease Expirations--Cambridge Office Market ------------------------------------------------------------------------ 7/1/96 to Property 12/31/96 1997 1998 1999 - -------- -------- ---- ---- ---- One Canal Park square feet (a) 0 0 3,499 1,411 % sq. ft. (b) 0.0% 0.0% 3.5% 1.4% annual rent (c) $0 $0 $122,937 $29,968 psf (d) $0.00 $0.00 $35.13 $21.24 tenants (e) 0 0 1 1 Ten Canal Park square feet (a) 12,331 0 0 0 % sq. ft. (b) 11.1% 0.0% 0.0% 0.0% annual rent (c) $298,191 $0 $0 $0 psf (d) $24.18 $0.00 $0.00 $0.00 tenants (e) 2 0 0 0 -------- ----- -------- ------- TOTAL square feet (a) 12,331 0 3,499 1,411 % sq. ft. (b) 5.8% 0.0% 1.7% 0.7% annual rent (c) $298,191 $0 $122,937 $29,968 psf (d) $24.18 $0.00 $35.13 $21.24 tenants (e) 2 0 1 1
Lease Expirations--Cambridge Office Market ---------------------------------------------------------------------------------------------------- 2005 and Property 2000 2001 2002 2003 2004 beyond - -------- ---- ---- ---- ---- ---- ------ One Canal Park 0 87,244 0 0 0 0 0.0% 87.0% 0.0% 0.0% 0.0% 0.0% $0 $1,842,665 $0 $0 $0 $0 $0.00 $21.12 $0.00 $0.00 $0.00 $0.00 0 2 0 0 0 0 Ten Canal Park 0 0 84,998 0 0 0 0.0% 0.0% 76.7% 0.0% 0.0% 0.0% $0 $0 $1,974,504 $0 $0 $0 $0.00 $0.00 $23.23 $0.00 $0.00 $0.00 0 0 1 0 0 0 ----- ---------- ---------- ----- ----- ----- TOTAL 0 87,244 84,998 0 0 0 0.0% 41.3% 40.3% 0.0% 0.0% 0.0% $0 $1,842,665 $1,974,504 $0 $0 $0 $0.00 $21.12 $23.23 $0.00 $0.00 $0.00 0 2 1 0 0 0
(a) Total area in square feet covered by such leases (b) Percentage of total square feet represented by such leases (c) Annualized base rental income represented by such leases in the year of expiration plus 1995 tenant payments on account of real estate tax and operating expense escalations, except leases with CPI increases in lieu of expense recoveries. (d) Calculated as annual rent divided by square feet (e) The number of tenants whose leases will expire S-36 The Suburban Philadelphia Office Market As of June 1996 there were approximately 35.2 million square feet of office space in the Suburban Philadelphia Office Market. According to Grubb & Ellis, the entire Suburban Philadelphia Office Market had a vacancy rate of 12.9% in June 1996. One, Two, Three and Five Westlakes Drive are located in the Suburban Philadelphia Office Market. The average Base Rent per square foot and the average annual Net Effective Rent per square foot for the four Properties were $20.56 and $15.77, respectively, as of June 30, 1996. Westlakes Office Park. Each building in the Westlakes Office Park is a three-story office building. These buildings were constructed between 1988 and 1990. Collectively, these buildings contain an aggregate of approximately 444,000 square feet. As of June 30, 1996, these buildings were approximately 94% leased. The following table sets forth lease expirations (in square feet) for each of the Company's Properties in the Suburban Philadelphia Office Market.
Lease Expirations--Suburban Philadelphia Office Market --------------------------------------------------------------------- Property 1996 1997 1998 1999 - -------- ---- ---- ---- ---- One Westlakes Drive square feet(a) 37,159 20,616 19,329 14,685 % sq. ft.(b) 27.1% 15.0% 14.1% 10.7% annual rent(c) $814,262 $457,260 $391,845 $226,298 psf(d) $21.91 $22.18 $20.27 $15.41 tenants(e) 7 4 3 3 Two Westlakes Drive square feet(a) 1,812 6,668 3,258 11,827 % sq. ft.(b) 1.4% 5.2% 2.5% 9.2% annual rent(c) $20,043 $139,471 $60,022 $249,071 psf(d) $11.06 $20.92 $18.42 $21.06 tenants(e) 2 1 2 2 Three Westlakes Drive square feet(a) 0 3,680 0 0 % sq. ft.(b) 0.0% 3.1% 0.0% 0.0% annual rent(c) $0 $90,060 $0 $0 psf(d) $0.00 $24.47 $0.00 $0.00 tenants(e) 0 1 0 0 Five Westlakes Drive square feet(a) 16,542 0 0 27,480 % sq. ft.(b) 27.6% 0.0% 0.0% 45.8% annual rent(c) $452,698 $0 $0 $667,864 psf(d) $27.37 $0.00 $0.00 $24.30 tenants(e) 3 0 0 2 ---------- --------- --------- ---------- TOTAL square feet(a) 55,513 30,964 22,587 53,992 % sq. ft.(b) 12.5% 7.0% 5.1% 12.2% annual rent(c) $1,287,003 $686,791 $451,866 $1,143,233 psf(d) $23.18 $22.18 $20.01 $21.17 tenants(e) 12 6 5 7
Lease Expirations--Suburban Philadelphia Office Market ---------------------------------------------------------------------------------------------------- 2005 and Property 2000 2001 2002 2003 2004 beyond - -------- ---- ---- ---- ---- ---- ------ One Westlakes Drive 13,839 0 14,538 0 0 0 10.1% 0.0% 10.6% 0.0% 0.0% 0.0% $293,492 $0 $312,760 $0 $0 $0 $21.21 $0.00 $21.51 $0.00 $0.00 $0.00 3 0 1 0 0 0 Two Westlakes Drive 35,447 0 0 44,236 0 22,413 27.5% 0.0% 0.0% 34.3% 0.0% 17.4% $778,427 $0 $0 $973,192 $0 $411,319 $21.96 $0.00 $0.00 $22.00 $0.00 $18.35 2 0 0 2 0 2 Three Westlakes Drive 109,065 0 0 0 0 0 92.4% 0.0% 0.0% 0.0% 0.0% 0.0% $2,727,600 $0 $0 $0 $0 $0 $25.01 $0.00 $0.00 $0.00 $0.00 $0.00 2 0 0 0 0 0 Five Westlakes Drive 12,928 0 0 2,746 0 0 21.5% 0.0% 0.0% 4.6% 0.0% 0.0% $303,630 $0 $0 $60,412 $0 $0 $23.49 $0.00 $0.00 $22.00 $0.00 $0.00 2 0 0 1 0 0 ---------- ----- -------- --------- ------ -------- TOTAL 171,279 0 14,538 46,982 0 22,413 38.6% 0.0% 3.3% 10.6% 0.0% 5.0% $4,103,149 $0 $312,760 $1,033,604 $0 $411,319 $23.96 $0.00 $21.51 $22.00 $0.00 $18.35 9 0 1 3 0 2
(a) Total area in square feet covered by such leases (b) Percentage of total square feet represented by such leases (c) Annualized base rental income represented by such leases in the year of expiration plus 1995 tenant payments on account of real estate tax and operating expense escalations, except leases with CPI increases in lieu of expense recoveries. (d) Calculated as annual rent divided by square feet (e) The number of tenants whose leases will expire S-37 The Arlington County, Virginia Market As of March 1996 there were approximately 27.7 million square feet of office space in the Arlington County, Virginia Market. According to Grubb & Ellis, the Arlington County, Virginia Market had a vacancy rate of 4.1% as of March 1996. The Crystal City submarket, with approximately 11.3 million square feet, had a vacancy rate of 0.5% in March 1996. The Polk and Taylor Buildings. The Polk and Taylor Buildings are comprised of two twelve-story office buildings in the Crystal City submarket, commonly known as the James K. Polk Building (National Center 2) and the Zachary Taylor Building (National Center 3), numbered 2521 Jefferson Davis Highway and 2531 Jefferson Davis Highway, respectively. The Polk and Taylor Buildings together contain approximately 890,000 rentable square feet with an underground parking garage for 1,182 vehicles. Both buildings were constructed in 1970. The Company holds a 10% general and limited partner interest in the partnership that owns the Polk and Taylor Buildings. Crystal Holdings Corporation, an affiliate of the President and Fellows of Harvard College, owns the remaining 90% general and limited partner interest in such partnership. As of December 31, 1995, the Polk and Taylor Buildings were 100% leased, with substantially all of the space leased to the United States of America, acting by and through its General Services Administration, for occupancy by the United States Navy under leases which will expire in the summer of 1997 and provide for annual Base Rent in 1996 of approximately $18 million. This lease contains an option to renew for a one year period with an increase in Net Effective Rent of $2.35 per square foot. Suburban Chicago Office Market and Washington, D.C. Office Market As of June 1996, there were approximately 59.8 million square feet of office space in the Suburban Chicago Office Market, approximately 20.4 million of which is located in the East-West Corridor submarket and approximately 12.5 million of which is located in the North Suburban submarket. The AT&T Plaza building is located in East-West Corridor submarket and the Tri-State International property is located in the North Suburban submarket. According to Grubb & Ellis the Suburban Chicago Office Market had an overall vacancy rate of 12.0% as of June 1996, while the East-West Corridor submarket and North Suburban submarket had vacancy rates of 10.3% (9.2% for Class A office properties) and 12.6% (8.2% for Class A office properties), respectively, for the same period. Grubb & Ellis also reports that the East-West Corridor and North submarkets experienced Net Absorption of 730,000 square feet and 340,000 square feet, respectively, for the first six months of 1996. As of March 1996, there were approximately 95.9 million square feet of office space in the Washington, D.C. Office Market, approximately 28 million of which is located in the East End submarket. 1333 H Street is located in the East End submarket. According to Grubb & Ellis, the Washington, D.C. Office Market had an overall vacancy rate of 10.2% as of March 1996, while the East End submarket experienced a vacancy rate of 10.1% for the same period. The following chart sets forth average annual Base Rents per square foot, average annual Net Effective Rents per square foot, and the occupancy rate expressed as a percentage, as of June 30, 1996, for each property in the New York Life Portfolio.
Average Rentable Area Average Annual Annual Net Occupancy Property (in square feet) Base Rent Effective Rent Rate - ----------------------------------- ----------------- ----------------- ----------------- --------- AT&T Plaza 225,318 $20.78 $14.21 100% Tri-State International 548,000 23.84 16.79 68% 1333 H Street 238,694 26.90 20.77 92% --------------- --------------- --------------- ------- Total Weighted Average 1,012,012 $23.82 $17.16 81%
S-38 The following table sets forth lease expirations (in square feet) for each of the properties in the New York Life Portfolio.
Lease Expirations--New York Life Portfolio ------------------------------------------------------------------------ (7/1-12/31) Property 1996 1997 1998 1999 - -------- ---------- ---- ---- ---- AT&T Plaza square feet(a) 5,144 10,313 39,731 29,539 % sq. ft.(b) 2.3% 4.6% 17.6% 13.1% annual rent(c) $119,789 $200,629 $829,624 $669,598 psf(d) $23.29 $19.45 $20.88 $22.67 tenants(e) 2 4 6 2 Tri-State International square feet(a) 18,569 120,039 17,436 62,585 % sq. ft.(b) 3.4% 21.9% 3.2% 11.4% annual rent(c) $523,337 $2,884,193 $361,023 $1,640,939 psf(d) $28.18 $24.03 $20.71 $26.22 tenants(e) 2 9 2 6 1333 H Street square feet(a) 0 2,223 4,045 2,097 % sq. ft.(b) 0.0% 0.9% 1.7% 1.2% annual rent(c) $0 $109,788 $110,867 $43,954 psf(d) $0.00 $49.39 $27.41 $15.12 tenants(e) 0 1 3 1 -------- ---------- ---------- ---------- TOTAL square feet(a) 23,713 132,575 61,212 95,031 % sq. ft.(b) 2.3% 13.1% 6.0% 9.4% annual rent(c) $643,126 $3,194,609 $1,301,514 $2,354,491 psf(d) $27.12 $24.10 $21.26 $24.78 tenants(e) 4 14 11 9
Lease Expirations--New York Life Portfolio ---------------------------------------------------------------------------------------------------- 2005 and Property 2000 2001 2002 2003 2004 beyond - -------- ---- ---- ---- ---- ---- ------ AT&T Plaza 79,574 0 12,288 38,249 8,165 2,315 35.3% 0.0% 5.5% 17.0% 3.6% 1.0% $1,758,066 $0 $282,240 $992,014 $197,014 $0 $22.09 $0.00 $22.97 $25.94 $24.13 $0.00 4 0 2 3 1 1 Tri-State International 18,237 107,254 0 0 27,491 0 3.3% 19.6% 0.0% 0.0% 5.0% 0.0% $364,440 $2,831,535 $0 $0 $721,639 $0 $19.98 $26.40 $0.00 $0.00 $26.25 $0.00 3 10 0 0 1 0 1333 H Street 8,835 2,945 57,041 14,708 0 127,248 3.7% 1.2% 23.9% 6.2% 0.0% 53.3% $247,390 $77,836 $1,758,913 $461,684 $0 $4,370,422 $28.00 $26.43 $30.84 $31.39 $0.00 $34.35 3 1 1 1 0 2 ---------- ---------- ---------- ---------- -------- ---------- TOTAL 106,646 110,199 69,329 52,957 35,656 129,563 10.5% 10.9% 6.9% 5.2% 3.5% 12.8% $2,369,895 $2,909,371 $2,041,152 $1,453,698 $918,652 $4,370,422 $22.22 $26.40 $29.44 $27.45 $25.76 $33.73 10 11 3 4 2 3
(a) Total area in square feet covered by such leases (b) Percentage of total square feet represented by such leases (c) Annualized expiring base rental income represented by such leases in the year of expiration plus 1995 tenant payments on account of real estate tax and operating expense escalations, except leases with CPI increases in lieu of expense recoveries. (d) Calculated as annual rent divided by square feet (e) The number of tenants whose leases will expire S-39 The Fairfax County, Virginia Market As of March 1996, there were approximately 62.4 million square feet of office space in the Fairfax County, Virginia Market, 20.7 million square feet of which are located in the Tysons Corner submarket and 13 million square feet of which are located in the Reston/Herndon submarket. According to Grubb & Ellis, the Fairfax County, Virginia Market had an overall vacancy rate of 8.0% as of March 1996 and the submarkets of Tysons Corner and Reston/Herndon had vacancy rates of 8.2% and 5.3%, respectively, for the same period. Grubb & Ellis also reports that Tysons Corner and Reston/Herndon submarkets experienced Net Absorption of 600,000 square feet and 400,000 square feet, respectively, for the three months ended March 31, 1996. The Fairfax County Portfolio is located in the Fairfax County, Virginia Market. The following chart sets forth average annual Base Rents per square foot, average annual Net Effective Rents per square foot, and the occupancy rate, expressed as a percentage, as of June 30, 1996, for each property in the Fairfax County Portfolio.
Average Rentable Area Average Annual Annual Net Occupancy Property (in square feet) Base Rent Effective Rent Rate - -------- ---------------- --------- -------------- ---- John Marshall I 261,364 $17.30 $15.73 100% E.J. Randolph 164,677 20.74 15.82 80% Northridge I 124,319 25.49 19.34 100% ------- ------ ------ -- Total Weighted Average 550,360 $19.60 $16.57 94%
The following table sets forth lease expirations (in square feet) for each of the properties in the Fairfax County Portfolio.
Lease Expirations--Fairfax County Portfolio ------------------------------------------------------------------------ (7/1-12/31) Property 1996 1997 1998 1999 - -------- ----------- ---- ---- ---- John Marshall I square feet(a) 0 0 0 0 % sq. ft.(b) 0.0% 0.0% 0.0% 0.0% annual rent(c) $0 $0 $0 $0 psf(d) $0.00 $0.00 $0.00 $0.00 tenants(e) 0 0 0 0 E.J. Randolph square feet(a) 10,976 808 0 1,801 % sq. ft.(b) 6.7% 0.5% 0.0% 1.1% annual rent(c) $275,171 $16,537 $0 $65,606 psf(d) $25.07 $20.47 $0.00 $36.43 tenants(e) 2 1 0 3 Northridge I square feet(a) 0 0 0 0 % sq. ft.(b) 0.0% 0.0% 0.0% 0.0% annual rent(c) $0 $0 $0 $0 psf(d) $0.00 $0.00 $0.00 $0.00 tenants(e) 0 0 0 0 ------------- ------------- ------------- --------------- TOTAL square feet(a) 10,976 808 0 1,801 % sq. ft.(b) 2.0% 0.1% 0.0% 0.3% annual rent(c) $275,171 $16,537 $0 $65,606 psf(d) $25.07 $20.47 $0.00 $36.43 tenants(e) 2 1 0 3
Lease Expirations--Fairfax County Portfolio ---------------------------------------------------------------------------------------------------- 2005 and Property 2000 2001 2002 2003 2004 beyond - ------------------------ -------------------- ------------- ------------- ------------- ------------- ---------- John Marshall I 0 2,788 0 0 0 258,576 0.0% 1.1% 0.0% 0.0% 0.0% 98.9% $0 $92,639 $0 $0 $0 $6,653,160 $0.00 $33.23 $0.00 $0.00 $0.00 $25.73 0 1 0 0 0 1 E.J. Randolph 8,091 20,714 8,014 0 82,149 0 4.9% 12.6% 4.9% 0.0% 49.9% 0.0% $217,035 $544,555 $179,113 $0 $1,965,238 $0 $26.82 $26.29 $22.35 $0.00 $23.92 $0.00 2 2 1 0 4 0 Northridge I 124,319 0 0 0 0 0 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% $3,346,079 $0 $0 $0 $0 $0 $26.92 $0.00 $0.00 $0.00 $0.00 $0.00 1 0 0 0 0 0 ---------- -------- -------- ----- ---------- ---------- TOTAL 132,410 23,502 8,014 0 82,149 258,576 24.1% 4.3% 1.5% 0.0% 14.9% 47.0% $3,563,113 $637,194 $179,113 $0 $1,965,238 $6,653,160 $26.91 $27.11 $22.35 $0.00 $23.92 $25.73 3 3 1 0 4 1
(a) Total area in square feet covered by such leases (b) Percentage of total square feet represented by such leases (c) Annualized expiring base rental income represented by such leases in the year of expiration plus 1995 tenant payments on account of real estate tax and operating expense escalations, except leases with CPI increases in lieu of expense recoveries. (d) Calculated as annual rent divided by square feet (e) The number of tenants whose leases will expire S-40 Historical Non-Incremental Revenue-Generating Capital Expenditures and Tenant Improvement Costs The following tables set forth annual and per square foot recurring, non-incremental revenue-generating capital expenditures and non-incremental revenue-generating tenant improvement costs to retain revenues attributable to existing leased space (including leasing commissions and rent concessions) for the period 1991 through 1995. The tables provide total capital expenditures and non-incremental revenue-generating tenant improvement costs for the Properties, without regard to the Company's proportionate ownership interest in each Property, and the Company's proportionate share of total capital expenditures and tenant improvement costs based on its ownership interest in the Properties with respect to which such expenditures and costs were incurred. All capital expenditures presented for the Properties are non-incremental revenue-generating. As noted, revenue-generating tenant improvement costs are excluded from the table set forth immediately below. Such costs generally relate to vacant space, unless a prior tenant was paying rent while such space was being improved for a future tenant, in which case the costs to improve such space were considered non-incremental revenue-generating and, therefore, included in the table. The historical capital expenditures and tenant improvement costs set forth below are not necessarily indicative of future recurring, non-incremental revenue-generating capital expenditures or non-incremental revenue-generating tenant improvement costs. Properties (excluding Perimeter Center Portfolio)
1991-1995 1991(a) 1992(a) 1993(a) 1994(a) 1995(a) Average(a) ------- ------- ------- ------- ------- ---------- (dollars in thousands, except per square foot data) Capital Expenditures Properties Total Annual $ 917 $ 702 $ 226 $1,001(b) $3,309(b)(c) $1,231 Per square foot $ 0.31 $ 0.23 $ 0.08 $ 0.24 $ 0.50 $ 0.27 Company's Proportionate Share Annual $ 730 $ 551 $ 193 $ 609(b) $2,174(b)(c) $ 851 Per square foot $ 0.35 $ 0.26 $ 0.09 $ 0.15 $ 0.44 $ 0.26 Non-incremental Revenue-Generating Tenant Improvement Costs Properties Total Annual $4,229 $2,650 $2,077 $4,289(c) $7,369 $4,123 Per square foot improved $13.09 $ 7.38 $10.43 $10.24 $10.13 $10.25 Per square foot total $ 1.41 $ 0.88 $ 0.69 $ 1.02 $ 1.10 $ 1.02 Company's Proportionate Share Annual $2,737 $2,167 $1,806 $3,280(c) $7,040 $3,406 Per square foot improved $13.14 $ 8.86 $11.78 $ 9.71 $10.60 $10.82 Per square foot total $ 1.30 $ 1.03 $ 0.86 $ 1.15 $ 1.43 $ 1.15
(a) Information regarding the Properties acquired in the Initial Offering is presented for all periods. Information regarding Properties acquired subsequent to the Initial Offering is presented from the date of acquisition. (b) Excludes cost incurred in connection with the redevelopment of the Center Plaza Property of $1.4 million and $0.86 million, or $1.1 million and $0.86 million for the Company's proportionate share of such expenditures for the years 1994 and 1995, respectively. A portion of these capital expenditures are incremental revenue-generating expenditures. (c) Includes $1.8 million and $0.2 million tenant improvement costs for the years 1994 and 1995, respectively, for renewal of an existing 20-year tenant, for an additional 15 years, representing approximately 25% of the 175 Federal Street Property. This amount was funded from escrow reserves established by Beacon prior to the Initial Offering. The Company's proportionate share is $1.1 million and $0.2 million. Also includes $0.9 million and $1.0 million of tenant improvement costs for the years 1994 and 1995, respectively, for renewal of an existing 10-year tenant, for an additional 11 years, occupying 100% of the 80 William Street Property. This amount was funded from reserves set up at the closing of the Initial Offering. Perimeter Center Portfolio
1991-1995 1991 1992 1993 1994 1995 Average ---- ---- ---- ---- ---- ------- (dollars in thousands, except per square foot data) Capital Expenditures Annual $ 928 $1,729 $1,499 $1,419 $ 969 $1,309 Per square foot $ 0.28 $ 0.52 $ 0.45 $ 0.43 $ 0.29 $ 0.39 Non-incremental Revenue-Generating Tenant Improvement Costs(a) Annual $4,431 $1,093 $1,854 $1,943 $2,736 $2,411 Per square foot improved $ 9.72 $ 8.58 $ 7.05 $ 6.27 $ 5.86 $ 7.50 Per square foot total $ 1.34 $ 0.33 $ 0.56 $ 0.59 $ 0.83 $ 0.73
(a) Costs are presented in the year in which the related lease was signed. S-41 Historical Incremental Revenue-Generating Tenant Improvement Costs The following tables set forth annual and per square foot incremental revenue-generating tenant improvement costs (including lease commissions and rent concessions) for the period 1991 through 1995. The Company does not have any historical incremental revenue-generating capital expenditures. The foregoing tables provide all remaining tenant improvement costs not included in the tables set forth above for the Properties (excluding Crosby Corporate Center redevelopment costs), without regard to the Company's proportionate ownership interest in each Property, and provide the Company's proportionate share of such tenant improvement costs based on its ownership interest in the Properties with respect to which such costs were incurred. Incremental revenue-generating tenant improvement costs generally relate to vacant non-revenue generating space. The historical incremental revenue- generating tenant improvement costs set forth below are not necessarily indicative of future incremental revenue- generating tenant improvement costs. Properties (excluding Perimeter Center Portfolio)
1991-1995 1991(a) 1992(a) 1993(a) 1994(a) 1995(a) Average(a) ------- ------- ------- ------- ------- ---------- (dollars in thousands, except per square foot data) Incremental Revenue-Generating Tenant Improvement Costs Properties Total Annual $1,693 $3,055(b) $7,438(c) $6,141 $8,027 $5,271 Per square foot improved $13.90 $22.55 $29.90 $26.92 $29.56 $24.57 Per square foot total $ 0.56 $ 1.02 $ 2.47 $ 1.47 $ 1.20 $ 1.34 Company's Proportionate Share Annual $1,176 $2,134 $5,221 $4,051 $7,283 $3,973 Per square foot improved $14.70 $24.55 $31.26 $25.77 $30.24 $25.30 Per square foot total $ 0.56 $ 1.01 $ 2.47 $ 1.43 $ 1.48 $ 1.39
(a) Information regarding the Properties acquired in the Initial Offering is presented for all periods. Information regarding Properties acquired subsequent to the Initial Offering is presented from the date of acquisition. (b) This amount includes approximately $1.75 million of tenant improvement costs relating to a six-year leasehold of approximately 5% of the total rentable square footage of the Center Plaza Property. (c) This amount includes approximately $4.34 million of tenant improvement costs relating to a 10-year leasehold and an 11-year leasehold aggregating 19% of the total rentable square footage of the Center Plaza Property. Perimeter Center Portfolio
1991-1995 1991 1992 1993 1994 1995 Average ---- ---- ---- ---- ---- ------- (dollars in thousands, except per square foot data) Incremental Revenue-Generating Tenant Improvement Costs(a) Annual $4,126 $1,256 $2,247 $2,085 $2,600 $2,463 Per square foot improved $18.31 $17.02 $15.12 $16.54 $16.09 $16.62 Per square foot total $ 1.25 $ 0.38 $ 0.68 $ 0.63 $ 0.79 $ 0.75
(a) Costs are presented in the year in which the related lease was signed. S-42 Mortgage Indebtedness and Credit Facility The Company's total outstanding consolidated mortgage debt and its proportionate share of the total outstanding unconsolidated mortgage debt on the Properties (excluding Rowes Wharf) will be approximately $496.4 million at August 1, 1996. Additionally, at August 1, 1996, the Company will have no outstanding balance under the Credit Facility. The following table sets forth certain information regarding the consolidated and unconsolidated mortgage debt obligations of the Company, including mortgage obligations relating to specific Properties, and the Credit Facility. All of the mortgage debt is nonrecourse to the Company. The following table also sets forth certain information regarding the mortgage debt to be assumed by the Company in connection with the Pending Acquisitions.
Principal Company's Amount Portion (as of of Interest Maturity Prepayment Property 8/1/96) Principal Rate Date Provisions -------- ------- --------- ---- ---- ---------- (dollar amounts in millions) Mortgage Indebtedness: Consolidated Properties 150 Federal Street $ 57.0 $ 57.0 6.67% 11/1/98(a) Prepayable subject to conditions(b) 175 Federal Street 13.1 13.1 8.00% 7/1/98(c) Prepayable subject to conditions(d) Wellesley Office Park 55.0 55.0 7.23% 2/1/03(e) Prepayable subject to conditions(f) Center Plaza 60.0 60.0 7.23% 3/1/03(g) Prepayable subject to conditions(h) Perimeter Center Portfolio 218.0 218.0 7.08% 4/1/06(i) Prepayable subject to ------ ------ conditions(j) Total Consolidated Properties $403.1 $403.1 ------ ------ Unconsolidated Properties with respect to which the Company is a general partner or shareholder One Post Office Square(k) $ 68.2 $ 34.1 7.00% 8/1/00(l) Prepayable subject to conditions(m) One Post Office Square(k) 25.5 12.8 8.25% 8/1/00(n) Prepayable subject to conditions(o) 75-101 Federal Street(p) 90.0 46.4 7.61% 10/1/02(q) Prepayable subject to ------ ------ conditions(r) Total Unconsolidated Properties 183.7 93.3 ------ ------ Total Mortgage Debt $586.8 $496.4 ====== ====== Credit Facility: Various Properties(s) $ 0(t) $ 0(t) (u) 6/27/99 Prepayable at any ====== ====== time without penalty Pending Acquisitions: John Marshall I $ 21.1 $ 21.1 8.38% 12/1/08 Prepayable subject to conditions(v) E.J. Randolph 18.0(t) 18.0(t) (u) 6/27/99 Prepayable subject to conditions(w) Northridge I 16.3 16.3 7.28% 12/14/96(x) Prepayable subject to ------ ------ conditions(y) $ 55.4 $ 55.4 ====== ======
(a) The estimated balance due on maturity is approximately $56.1 million. (b) Prepayable subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity but in no event less than 1% of the then balance. Prepayable at par from and after April 1, 1998. (c) The estimated balance due on maturity is approximately $12.5 million. S-43 (d) Prepayable subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity plus 1.50%, but in no event less than 1% of the then balance. Prepayable at par from and after March 1, 1998. (e) The estimated balance due on maturity is approximately $51.9 million. (f) Prepayable after August 1, 1999 subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity plus 0.50%. Prepayable at par from and after October 1, 2002. (g) The estimated balance due on maturity is approximately $56.7 million. (h) Prepayable after September 1, 1999 subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity plus 0.50%. Prepayable at par from and after November 1, 2002. (i) The estimated balance due on maturity is approximately $183.8 million. (j) Closed to prepayment during the first two years of the loan, prepayable in years three through ten subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity plus 0.50%, and prepayable at par during the last 90 days of the loan. (k) The Company owns a 50% general partner interest in the partnership that owns One Post Office Square. Consequently, the Company's portion of the debt on the One Post Office Square Property is 50% of the principal amount. (l) The Company's share of the estimated balance due on maturity is approximately $31.9 million. (m) Prepayable after August 31, 1997 subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity plus 0.50%. Prepayable at par from and after February 1, 2000. (n) The Company's share of the estimated balance due on maturity is approximately $11.2 million. (o) Prepayable subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity plus 1.50%. Prepayable at par from and after May 1, 2000. (p) The Company owns an approximate 51.6% equity interest in the private REIT that owns 75-101 Federal Street. Consequently, the Company's portion of the debt on the 75-101 Federal Street property is approximately 51.6% of the principal amount. (q) The Company's share of the estimated balance due on maturity is approximately $44.0 million. (r) Prepayable after January 1, 1999 subject to a yield maintenance payment based on the rate of United States Treasury Notes having a term closest to the date of maturity plus 0.50%. Prepayable at par from and after June 1, 2002. (s) The Credit Facility is secured by cross-collateralized mortgages and assignments of rents on the Crosby Corporate Center, 150 Federal Street, One Canal Park, Westwood Business Centre, Westlakes Office Park, 2 Oliver Street, Ten Canal Park and Russia Wharf. (t) Following the consummation of the Pending Acquisitions, it is currently anticipated that the Company will have $18 million outstanding under its Credit Facility (drawn in connection with the payment of assumed mortgage debt on the E.J. Randolph building) and may also have, to the extent necessary for the consummation of the acquisition of the New York Life Portfolio, additional amounts outstanding. (u) Outstanding balances under the Credit Facility generally bear interest, at the Company's option, at either (i) the higher of (x) Bank of Boston's base interest rate and (y) 1/2% above the overnight federal funds effective rate or (ii) the Eurodollar rate plus 175 basis points. (v) Mandatory annual prepayments and additional prepayments subject to payments of 5% of the amount prepaid before November 1, 1999, decreasing by 0.5% each subsequent year through September 1, 2008, after which no premium is due upon prepayment. S-44 (w) Prepayable subject to a payment of 3.5% of the amount prepaid through July 9, 1997, decreasing by 0.5% each subsequent year. (x) The estimated balance due on maturity is approximately $16.1 million. (y) Prepayable subject to a payment equal to the greater of 1% of the outstanding principal balance or an amount based on U.S. Treasury notes having a term closest to the date of maturity. The Company owns a 45% indirect limited partner interest in Rowes Wharf Associates, the partnership that owns the hotel space and leases the office and retail space at Rowes Wharf. The Company (together with an affiliate) and Equitable each own one-half of the first mortgage debt on the Rowes Wharf Property. The Company has no obligation to fund principal or interest payments with respect to the unconsolidated debt of Rowes Wharf Associates or to fund operating or other deficits with respect to Rowes Wharf Associates. As of August 1, 1996, the aggregate outstanding principal amount of Rowes Wharf Associates' first mortgage debt, which consists of two tiers of debt, equals approximately $201.2 million. The first-tier debt is equal to approximately $126.0 million, currently bears interest at a rate of 8.71% per annum and matures in April 1999. Pursuant to its terms, the first-tier debt may be prepaid at any time and principal repayment may be extended for up to three years, provided that a 1.1 interest coverage is achieved at that time. Rowes Wharf Associates currently maintains a significant cash account to fund any shortfalls on this debt. The second-tier debt is equal to approximately $75.2 million, currently bears interest at the lesser of 6.0% or 50.0% of cash flow after interest payments have been made in respect of the first-tier debt and matures in April 2002. The second-tier debt may be prepaid in full with 50% of the net proceeds from certain sales or refinancings of Rowes Wharf Associates' debt, regardless of the amount of such proceeds, or at maturity based on the appraised value of the Property. S-45 USE OF PROCEEDS The net cash proceeds to the Company from the sale of the Common Stock offered hereby, after deduction of estimated expenses of the Offering, are estimated to be approximately $121.0 million (approximately $139.3 million if the Underwriters' over-allotment option is exercised in full). The Company intends to apply the net proceeds of the Offering to purchase the New York Life Portfolio (including the repayment of any amounts drawn under the Credit Facility in connection with the acquisition), and/or for general corporate and working capital purposes. All outstanding borrowings under the Credit Facility mature in June 1999 and generally bear interest, at the Company's option, at either (i) the higher of (x) Bank of Boston's base interest rate and (y) one-half of one percent (1/2%) above the overnight federal funds effective rate or (ii) the Eurodollar rate plus 175 basis points. No prepayment penalties are required in connection with the repayment of the Credit Facility. Pending application of the net proceeds, the Company will invest such portion of the net proceeds in interest-bearing accounts and short-term, interest-bearing securities. S-46 PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY The Company's Common Stock began trading on the NYSE on May 20, 1994, under the symbol "BCN." On August 6, 1996, the reported closing sale price per share of Common Stock on the NYSE was $26 and there were approximately 354 holders of record of the Company's Common Stock. The following table sets forth the quarterly high and low closing sales prices per share of the Common Stock reported on the NYSE and the distributions paid by the Company with respect to each such period.
Quarter Ended High Low Distributions ------------- ---- --- ------------- September 30, 1994 $19(1/2) $17(3/4) $ .40 December 31, 1994 $19 $17 $ .40 March 31, 1995 $20 $17(1/2) $ .40 June 30, 1995 $21(1/8) $19(1/4) $ .42 September 30, 1995 $21(3/4) $19(7/8) $ .42 December 31, 1995 $23 $20(1/8) $ .42 March 31, 1996 $26(5/8) $22(5/8) $ .42 June 30, 1996 $26(1/4) $24(1/2) $.4625(a) September 30, 1996 (through August 6, 1996) $26(3/8) $24(3/4)
(a) To be paid August 23, 1996 to stockholders of record as of August 14, 1996. In July 1996, the Company announced an increase in its quarterly distribution of 10.1%, increasing the quarterly distribution on its Common Stock from $.42 per share to $.4625 per share, which on an annualized basis, is equal to an annual distribution of $1.85 per share of Common Stock. The higher distribution rate commenced with the Company's distribution with respect to the second quarter of 1996, to be paid on August 23, 1996, to stockholders of record as of August 14, 1996. Accordingly, purchasers of Common Stock in the Offering who hold Common Stock as of the record date will receive the second quarter 1996 distribution in respect of the shares of Common Stock offered hereby. As a result, if purchasers of Common Stock in the Offering continue to hold such shares on the record date for distributions over the next twelve months, such purchasers will receive four quarterly distribution payments in addition to the second quarter 1996 distribution. Future distributions by the Company will be at the discretion of the Board of Directors and will depend on the Company's financial condition, its capital requirements, the annual distribution requirements under the REIT provisions of the United States Code and such other factors as the Board of Directors deems relevant. There can be no assurance that any such distributions will be made by the Company. Distributions by the Company to the extent of its current and accumulated earnings and profits for Federal income tax purposes generally will be taxable to stockholders as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable reduction of the stockholder's basis in its shares of Common Stock to the extent thereof, and thereafter as taxable gain. Distributions that are treated as a reduction of the stockholder's basis in its shares of Common Stock will have the effect of deferring taxation until the sale of the stockholder's shares. The Company has adopted a dividend reinvestment program under which holders of Common Stock may elect automatically to reinvest dividends in additional Common Stock. The Company may, from time to time, repurchase Common Stock in the open market for purposes of fulfilling its obligations under this dividend reinvestment program or may elect to issue additional Common Stock. Historical Total Return An investor who purchased Common Stock in the Company's Initial Offering on May 24, 1994, who reinvested all dividends paid in additional shares of Common Stock, and who held such shares through the close of business on August 6, 1996 would have had a cumulative pretax total return of 77.2% or an annual compounded pretax return of 29.5% based upon the closing price of the Common Stock on August 6, 1996. Past performance, however, is not necessarily indicative of the results that will be obtained in the future from an investment in the Common Stock, and no assurance can be given that an investor in this Offering will achieve similar results. S-47 CAPITALIZATION The following table sets forth the capitalization of the Company on an historical basis as of June 30, 1996, and for the Company as adjusted to give effect to the issuance of the shares of Common Stock in the Offering and the application of the net proceeds from the Offering as if the Offering and the acquisitions of the Fairfax County Portfolio and the New York Life Portfolio had occurred on June 30, 1996. See "Use of Proceeds." The information set forth in the table should be read in conjunction with the summary and selected financial information presented elsewhere in this Prospectus Supplement and the Consolidated Financial Statements and notes thereto incorporated by reference into the accompanying Prospectus. Historical As Adjusted (1) ---------- --------------- (in thousands) DEBT: Credit Facility $ 0 $ 18,016 Mortgage Notes Payable 403,218 440,592 ------- ---------- Total Debt 403,218 458,608 ------- ---------- MINORITY INTEREST: 49,051 70,661 ------- ---------- STOCKHOLDERS EQUITY: Common Stock, $.01 par value; 175,000,000 shares authorized; 27,368,263 (historical) shares issued and outstanding (32,368,263 shares on an as adjusted basis) (1) 274 324 Additional paid-in capital 443,165 564,140 Cumulative net income 36,259 36,259 Cumulative dividends (52,768) (52,768 ------- ---------- Total stockholder's equity 426,930 547,955 ------- ---------- Total capitalization $879,199 $1,077,224 ======= ========== (1) Does not include Common Stock reserved for issuance upon (i) possible redemption of 5,107,831 Units (including 839,223 Units to be issued in connection with the acquisition of the Fairfax County Portfolio) and (ii) exercise of 1,072,110 options granted pursuant to the 1994 Stock Option Plan. A total of 3,129,310 shares of Common Stock are reserved for issuance under the 1994 Stock Option Plan and dividend reinvestment plan. S-48 SELECTED FINANCIAL INFORMATION The following table sets forth selected financial and operating information on an as adjusted basis for the Company and on a combined historical basis for the Company and the Predecessor. The consolidated results of operations of the Company for the six months ended June 30, 1996 and 1995 have been derived from unaudited financial statements. The consolidated results of operations of the Company for the year ended December 31, 1995 and for the period May 26, 1994 to December 31, 1994, the combined results of operations of the Predecessor for the period January 1, 1994 to May 25, 1994 and the combined historical operating information of the Predecessor for the years ended December 31, 1993, 1992 and 1991 have been derived from the financial statements audited by Coopers & Lybrand L.L.P., independent accountants, whose report with respect to the years 1995, 1994 and 1993 is incorporated by reference into the accompanying Prospectus. The unaudited selected pro forma financial and operating information is presented as if the Offering, the acquisition of the Properties acquired since January 1, 1995, the acquisition of the Pending Acquisitions and related assumption of debt had occurred as of January 1, 1995, for the condensed consolidated statement of operations. The pro forma financial information is not necessarily indicative of what the results of operations of the Company would have been as of and for the periods indicated, nor does it purport to represent the Company's future financial position and results of operations. S-49
Company ---------------------------------------------------------------------------------------- Pro Forma Six Months Six Months Six Months For the Year Ended Ended Ended Pro Forma Ended June 30, 1996 June 30, 1996 June 30, 1995 1995 December 31, (unaudited) (unaudited) (unaudited) (unaudited) 1995 --------------- --------------- --------------- --------------- --------------- (dollars in thousands, except per share amounts) OPERATING INFORMATION: Revenue: Rental income $ 81,335 $ 60,051 $ 34,093 $ 159,129 $ 71,050 Management fees 1,517 1,517 936 2,926 2,203 Recoveries from tenants 10,088 6,782 4,813 19,487 9,742 Mortgage interest income 2,776 2,165 611 5,573 2,546 Interest and other income 5,472 4,591 2,472 7,501 5,502 ----------- ----------- ----------- ----------- ----------- Total revenue 101,188 75,106 42,925 194,616 91,043 ----------- ----------- ----------- ----------- ----------- Expenses: Property expenses 20,138 14,770 8,531 39,511 18,090 Real estate taxes 9,768 7,831 4,901 17,953 10,217 General and administrative 8,574 7,362 4,570 13,986 9,755 Mortgage interest expense 16,805 13,661 7,977 33,315 15,226 Interest--amortization of financing costs 1,199 1,184 576 1,490 1,370 Depreciation and amortization 17,947 13,346 8,252 34,856 17,428 ----------- ----------- ----------- ----------- ----------- Total expenses 74,431 58,154 34,807 141,110 72,086 ----------- ----------- ----------- ----------- ----------- Income (loss) from operations 26,757 16,952 8,118 53,506 18,957 ----------- ----------- ----------- ----------- ----------- Construction revenue and other income -- -- -- -- -- Construction costs and operating expenses -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Income from construction -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Equity (loss) in joint ventures and corporations (1) 1,582 1,582 1,065 4,560 3,222 Minority interest in loss of combined partnerships -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Income (loss) before extraordinary items 28,339 18,534 9,183 58,066 22,179 Extraordinary items, net of minority interest -- (3,309) -- -- -- Minority interest in Operating Partnership (3,862) (2,681) (1,951) (7,914) (4,119) ----------- ----------- ----------- ----------- ----------- Net income (loss) (2) $ 12,544 $ 7,232 $ 18,060 =========== =========== =========== Net income before extraordinary item (2) $ 24,476 $ 50,152 =========== =========== Net income per share before extraordinary items .76 $ .64 $ 1.55 Net income per share of Common Stock $ .51 $ .51 $ 1.09 Cash dividends declared per share of Common Stock $ -- $ .88 $ .82 -- $ 1.24 Cash dividends paid per share of Common Stock $ -- $ .84 $ .80 $ -- $ 1.64 Weighted average common shares outstanding 32,368,263 24,682,042 14,085,977 32,368,263 16,525,245
Predecessor ---------------------------------------------------------------------- For the Period For the Period May 26, 1994 to January 1, Years Ended December 31, December 31, 1994 to ----------------------------------------------------- 1994 May 25, 1994 1993 1992 1991 --------------- --------------- --------------- --------------- --------------- (dollars in thousands, except per share amounts) OPERATING INFORMATION: Revenue: Rental income $ 25,144 $ 5,776 $14,315 $11,406 $14,850 Management fees -- 1,521 3,533 3,331 2,205 Recoveries from tenants 4,488 1,040 2,349 1,989 3,986 Mortgage interest income -- -- -- -- -- Interest and other income 2,301 675 2,176 2,003 3,134 ----------- ------- -------- ------- ------- Total revenue 31,933 9,012 22,373 18,729 24,175 ----------- ------- -------- ------- ------- Expenses: Property expenses 7,034 2,086 4,580 4,522 6,390 Real estate taxes 3,325 595 1,354 1,204 1,162 General and administrative 3,122 1,399 4,357 4,658 4,528 Mortgage interest expense 4,992 2,798 7,650 7,203 7,532 Interest--amortization of financing costs 617 373 192 138 320 Depreciation and amortization 6,924 2,385 5,577 5,505 4,967 ----------- ------- -------- ------- ------- Total expenses 26,014 9,636 23,710 23,230 24,899 ----------- ------- -------- ------- ------- Income (loss) from operations 5,919 (624) (1,337) (4,501) (724) ----------- ------- -------- ------- ------- Construction revenue and other income -- 24,238 72,197 52,256 39,749 Construction costs and operating expenses -- 24,136 71,757 52,120 39,679 ----------- ------- -------- ------- ------- Income from construction -- 102 440 136 70 ----------- ------- -------- ------- ------- Equity (loss) in joint ventures and corporations (1) 1,406 198 (5,953) (1,544) 84 Minority interest in loss of combined partnerships -- 931 1,539 2,656 1,087 ----------- ------- -------- ------- ------- Income (loss) before extraordinary items 7,325 607 (5,311) (3,253) 517 Extraordinary items, net of minority interest -- 8,898 1,554 -- -- Minority interest in Operating Partnership (1,670) -- -- -- -- ----------- ------- -------- ------- ------- Net income (loss) (2) $ 5,655 $ 9,505 $ (3,757) $(3,253) $ 517 =========== ======= ======== ======= ======= Net income before extraordinary item (2) Net income per share before extraordinary items Net income per share of Common Stock $ 0.48 -- -- -- -- Cash dividends declared per share of Common Stock $ 0.96 -- -- -- -- Cash dividends paid per share of Common Stock $ 0.56 Weighted average common shares outstanding 11,816,380 -- -- -- --
S-50
Company ---------------------------------------------------------------------------------------- Pro Forma Six Months Six Months Six Months For the Year Ended Ended Ended Pro Forma Ended June 30, 1996 June 30, 1996 June 30, 1995 1995 December 31, (unaudited) (unaudited) (unaudited) (unaudited) 1995 --------------- --------------- --------------- --------------- -------------- (dollars in thousands, except per share amounts) BALANCE SHEET INFORMATION: Real estate before accumulated depreciation $ 1,051,924 $824,924 $415,654 $ -- $471,142 Total assets 1,125,862 927,837 433,648 -- 534,797 Mortgage debt 440,592 403,218 89,641 -- 70,536 Note Payable, Credit Facility 18,016 -- 98,300 -- 130,500 Total liabilities 507,246 451,856 220,749 -- 239,013 Total equity (deficit) 547,955 426,930 174,923 -- 258,822 (1) Including deductions for: Depreciation and amortization $ 1,994 $ 1,994 $ 832 $3,895 $ 2,306 Interest--Amortization of financing costs 448 448 $ 420 $ 896 $ 853 (2) Company share of Operating Partnership 86.4% 85.5% 78.7% 86.4% 81.3%
Predecessor ---------------------------------------------------------------------- For the Period For the Period May 26, 1994 to January 1, Years Ended December 31, December 31, 1994 to --------------------------------------------------- 1994 May 25, 1994 1993 1992 1991 --------------- ------------ ---- ---- ---- (dollars in thousands, except per share amounts) BALANCE SHEET INFORMATION: Real estate before accumulated depreciation $400,419 $ 82,198 $ 81,220 $ 78,580 $ 76,489 Total assets 400,861 77,470 85,497 93,327 84,978 Mortgage debt 90,936 69,240 87,091 86,610 85,189 Note Payable, Credit Facility 130,300 -- -- -- -- Total liabilities 261,100 129,836 143,451 142,015 127,283 Total equity (deficit) 102,038 (52,366) (57,954) (48,688) (42,305) (1) Including deductions for: Depreciation and amortization $ 3,013 Interest--Amortization of financing costs $ 796 (2) Company share of Operating Partnership 77.2%
S-51 MANAGEMENT Officers and Directors The persons who are officers and Directors of the Company and their respective positions are as follows:
Name Age Position and Offices Held ---- --- ------------------------- Officers: Alan M. Leventhal 44 President, Chief Executive Officer and Director Lionel P. Fortin 53 Senior Vice President and Chief Operating Officer Douglas S. Mitchell 54 Senior Vice President--Leasing/Management and Development Robert J. Perriello 53 Senior Vice President and Chief Financial Officer James M. Becker 54 Senior Vice President--Design & Construction Donald B. Brooks 54 Senior Vice President and Chief Executive, Beacon Properties Southeast Charles H. Cremens 42 Senior Vice President and Chief Investment Officer Carol G. Judson 44 Senior Vice President, Corporate Development Nancy J. Broderick 39 Vice President and Treasurer Steven D. Fessler 36 Vice President, Asset Management Claude B. Hoopes 46 Vice President, Leasing Henry Irwig 52 Vice President, Commercial Properties G. Douglas Lanois 35 Controller Erin R. O'Boyle 36 Vice President, Acquisitions Randy J. Parker 38 Vice President, Investor Relations James J. Whalen 33 Vice President, Information Systems Directors: Edwin N. Sidman 53 Chairman of the Board and Director Norman B. Leventhal 78 Director Graham O. Harrison 71 Director William F. McCall, Jr 60 Director Steven Shulman 54 Director Scott M. Sperling 37 Director
The following are biographical summaries of the experience of the officers and Directors of the Company: Mr. Alan Leventhal serves as President, Chief Executive Officer and a Director of the Company. Mr. Leventhal joined Beacon in 1976 after receiving a degree in economics from Northwestern University in 1974 and a Master of Business Administration from the Amos Tuck School of Business Administration at Dartmouth College in 1976. Mr. Leventhal is a trustee of the Beth Israel Corporation, trustee of Boston University, trustee of the New England Aquarium Corporation and a member of the Visiting Committee of the College of Arts and Sciences at Northwestern University. He is also a member of the Board of Overseers of WGBH and the Museum of Science. Mr. Leventhal is the son of Norman B. Leventhal and the brother-in-law of Edwin N. Sidman. Mr. Fortin serves as Senior Vice President and Chief Operating Officer of the Company. From May 1994 through February 1995, Mr. Fortin served as Chief Financial Officer of the Company. Before joining Beacon in 1973, Mr. Fortin was an Audit Supervisor with Laventhol & Horwath. Mr. Fortin graduated from Bentley College in 1968 and is a member of the American Institute of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. Mr. Mitchell serves as the Senior Vice President-Leasing/Management and Development of the Company and as President of the Management Company. In these capacities, Mr. Mitchell is responsible for the overall leasing activities, property management and development activity of the Company. He joined Beacon in 1961. He graduated from the Wentworth Institute in 1962 and is a member of the Greater Boston Real Estate Board. Mr. Mitchell is also a licensed real estate broker in Massachusetts and New York. S-52 Mr. Perriello serves as Senior Vice President and Chief Financial Officer of the Company. He joined Beacon in 1970. During his career at Beacon, Mr. Perriello has been responsible for many aspects of commercial development, including the debt and equity financing of Beacon's Properties. Prior to joining Beacon, he was a consulting engineer with Frederick R. Harris, Inc. in New York City and served as an officer in the U.S. Army Corps of Engineers. Mr. Perriello holds a Bachelor's degree in Civil Engineering from Rensselaer Polytechnic Institute and a Master's of Business Administration from Harvard Business School. His professional affiliations include membership in the Urban Land Institute. Mr. Becker serves as Senior Vice President-Design & Construction of the Company. He joined Beacon in 1980. He is also President of Beacon Construction Company. At the Company he is responsible for design, construction management and general construction operations. Mr. Becker received both a Bachelor's and a Master's degree from Cornell University and a Doctorate in structural engineering from the University of California, Berkeley. He is a registered professional engineer in Massachusetts, President of the Associated General Contractors of Massachusetts and Chairman of the Engineering Center Educational Trust. Mr. Brooks serves as Senior Vice President of the Company and Chief Executive, Beacon Properties Southeast. He joined the Company in June 1996. Prior to joining the Company, Mr. Brooks was a private investor, consultant and real estate advisor in the Atlanta area. He was President and Chief Operating Officer of The Landmarks Group in Atlanta from 1974 to 1986, responsible for the development of over 3 million square feet of office space in 30 buildings. Mr. Brooks holds a law degree and Bachelor degree in Accounting from Duke University. Mr. Cremens serves as the Senior Vice President and Chief Investment Officer of the Company. He joined the Company in February 1996. Prior to joining the Company, Mr. Cremens served as President/Real Estate Investments with Aetna Life & Casualty Company and as Managing Director/Senior Officer Restructured Real Estate/OREO Departments at Bank of Boston. At the Company, Mr. Cremens is responsible for establishing and implementing a long-term acquisition and portfolio strategy for the Company. Mr. Cremens holds a Bachelor's degree from Williams College. Ms. Judson serves as the Senior Vice President, Corporate Development of the Company. In this capacity, Ms. Judson is responsible for the Company's corporate development, human resources and administration. Before joining Beacon in 1980, Ms. Judson was Managing Director of the Brook House, a luxury apartment complex in Brookline, Massachusetts. Ms. Judson received her Bachelor of Science degree in mathematics and psychology from Curry College. She is a member of the Northeast Human Resources Association and the American Management Association. Ms. Broderick serves as Vice President and Treasurer of the Company. In this capacity, Ms. Broderick is responsible for all financial operations of the Company including administration of the Credit Facility. Ms. Broderick joined Beacon in 1983. Ms. Broderick holds a Bachelor of Science degree in Accounting from Stonehill College and a Master of Science degree in Taxation from Bentley College. She is a certified public accountant and a member of the American Institute of Certified Public Accountants and the Massachusetts Society of Public Accountants. Mr. Fessler serves as Vice President, Asset Management of the Company. In this capacity, Mr. Fessler has responsibility for the asset management of the Company's property portfolio. Mr. Fessler previously served the Company as Senior Development Manager and Vice President, Development. Prior to joining the Company, Mr. Fessler served as a Senior Investment Manager with Copley Real Estate Advisors. Mr. Fessler holds Bachelor's and Master's degrees from Stanford University. Mr. Hoopes serves as Vice President, Leasing of the Company. In this capacity, Mr. Hoopes has responsibility for the overall leasing strategy and leasing performance of the Company's portfolio, as well as overseeing the leasing of the three million square feet of space managed and leased for third party institutional clients. Mr. Hoopes was previously a senior officer of The Landmarks Group, a major Atlanta developer, where he was responsible for six million square feet of leasing including an office park adjacent to the Perimeter Center Portfolio. Mr. Hoopes is a graduate of Princeton University. S-53 Mr. Irwig serves as Vice President, Commercial Properties of the Company. In this capacity, Mr. Irwig is responsible for the management of the Company's property portfolio and integrating third-party and acquisition properties into the Company's portfolio. Mr. Irwig joined Beacon in 1985 and since that time has held various positions in other divisions of the Company relating to the assessment, repositioning, design, construction and management of commercial and institutional buildings. Mr. Irwig received his Bachelor of Architecture degree and his Ph.D. from the University of Witwatersrand. Mr. Lanois serves as Controller of the Company. In this capacity, Mr. Lanois is responsible for financial reporting, budgeting and forecasting financial performance of the Company. Before joining Beacon in 1992, Mr. Lanois was the Manager of the Real Estate Advisory Service Group with Laventhal & Horwath and an Asset Manager with Aldrich, Eastman & Waltch. Mr. Lanois received his B.B.A. in Accounting and a B.S. in Hotel, Restaurant and Travel Administration from the University of Massachusetts, Amherst. He is a certified public accountant and serves on committees for the Greater Boston Real Estate Board and the Real Estate Finance Association. Ms. O'Boyle serves as Vice President, Acquisitions of the Company. In this capacity, Ms. O'Boyle manages the search and negotiations for ownership opportunities. Ms. O'Boyle previously served the Company as Vice President, Asset Management. Ms. O'Boyle received her Bachelor of Science in structural engineering from the University of Delaware and her Master of Science in real estate development from the MIT Center for Real Estate Development. Ms. O'Boyle is the past chair of the Alumni Association for the MIT Center for Real Estate and is current President of the New England Women in Real Estate (NEWIRE). Mr. Parker serves as Vice President, Investor Relations of the Company. He joined the Company in July 1996. Prior to joining the Company, Mr. Parker was Senior Vice President and Portfolio Manager of Aldrich, Eastman & Waltch in Boston, responsible for the management of over $400 million of investment portfolios on behalf of institutional clients. Mr. Parker holds a Master of Business Administration from The Wharton School, University of Pennsylvania and a Bachelor of Architecture degree from the University of Kentucky. Mr. Whalen serves as Vice President, Information Systems of the Company. In this capacity, Mr. Whalen is responsible for overseeing the maintenance and support of corporate information systems, including an extensive internal computer network allowing efficient communications with the Properties. Mr. Whalen is a graduate of the University of Notre Dame and the recipient of the New York City Urban Fellowship. Mr. Sidman serves as the Chairman of the Board and a Director of the Company. He is currently the Managing Partner of The Beacon Companies. Prior to joining Beacon in 1971, Mr. Sidman practiced law with the predecessor to the firm of Rubin and Rudman in Boston. Mr. Sidman graduated from the University of Michigan and holds a law degree from Harvard University. Mr. Sidman's professional affiliations include service as Senior Vice Chairman of the National Realty Committee. Mr. Sidman's civic commitment includes being a past Chairman of the Combined Jewish Philanthropies of Greater Boston, a member of the Board of Trustees of Duke University, a member of the Board of Directors and Executive Committee for the United Way of Massachusetts Bay, a member of the Executive Committee of the Artery Business Committee and a member of the Board of The Friends of Post Office Square. Mr. Sidman is the son-in-law of Norman B. Leventhal and the brother-in-law of Alan M. Leventhal. Mr. Norman Leventhal serves as a Director of the Company. He is the co-founder and Chairman of Beacon. Mr. Leventhal is a graduate of the Boston Latin School and the Massachusetts Institute of Technology. At the Massachusetts Institute of Technology, he is a Life Member Emeritus of the Corporation and has served MIT in many capacities including as a Member of the Executive Committee, Member of the Investment Committee, and Chairman of the Corporation Visiting Committee for The School of Architecture and Planning. Mr. Leventhal is also an Honorary Life Member of the Board of Overseers of The Museum of Fine Arts and has been a Member of the Board of Trustees of The Museum of Science. Among other civic contributions, Mr. Leventhal has served as Chairman of The Artery Business Committee, is Chairman of The Friends of Post Office Square and is Chairman of the Trust for City Hall Plaza. Mr. Leventhal also serves as Director of Doubletree Corporation and Picower Institute for Medical Research. Mr. Leventhal is the father of Alan M. Leventhal and the father-in-law of Edwin N. Sidman. Mr. Harrison serves as a Director of the Company. Mr. Harrison has served as Vice President and Chief Investment Officer of Howard Hughes Medical Institute ("Hughes") in Bethesda, Maryland from 1985 to 1994. Mr. Harrison retired as President of the U.S. Steel Pension Fund in June 1985, after thirty years of service, to take S-54 on the portfolio startup at Hughes. He also served as a Director of General Re Corporation in Stamford, Connecticut. Mr. Harrison serves as a Trustee of Property Capital Trust in Boston, a member of the Investment Advisory Committee of the New York State Common Retirement Fund, Warburg Pincus Investors, European Strategic Investors (London), Emerging World Investors L.P. and Desai Capital Management; Vice-Chairman of the Advisory Committee of Butler Capital, Chairman of the Swarthmore College Investment Committee, and member of Advisory Council--The Trust for Public Land. Mr. Harrison is a graduate of Swarthmore College and of Harvard Business School, and is a retired U.S. Air Force officer. Mr. McCall serves as a Director of the Company. Mr. McCall has served as Chairman of McCall & Almy, Inc., Boston, Massachusetts, since 1989. Mr. McCall was a founder of Leggat McCall & Werner in 1965 and served as Chairman and Chief Executive Officer of Leggat McCall/Grubb & Ellis through 1989. Mr. McCall is currently a director of Citizens Bank of Massachusetts, Copley Properties, Inc., Jobs for Massachusetts and the Massachusetts Business Development Corporation. Mr. McCall is also a trustee of the Urban Land Institute and a member of the American Society of Real Estate Counselors. Mr. McCall is a graduate of The College of the Holy Cross. Mr. Shulman serves as a Director of the Company. Since 1984, Mr. Shulman has been active in investment banking through his wholly owned company The Hampton Group. Currently, Mr. Shulman is a major shareholder and director in a diversified group of companies including Wilshire Restaurant Group, Inc., where he previously served as Chairman; Ermanco Incorporated; Holiday Farms Limited; and Corinthian Directory, Inc. Mr. Shulman also previously served as a director of Robertson-Ceco Corporation and Pullman, both NYSE companies. Mr. Shulman is a graduate of Stevens Institute of Technology where he received a Bachelor's degree in Mechanical Engineering and a Master's degree in Industrial Management. Mr. Shulman serves as Vice Chairman on the Board of Stevens Institute of Technology. Mr. Sperling serves as a Director of the Company. Mr. Sperling joined Thomas H. Lee Co., a Boston-based investment firm, as a general partner in September 1994. Previously, Mr. Sperling served as Managing Partner and Vice Chairman of the Aeneas Group, Inc./Harvard Management Company from 1984 through 1994. Mr. Sperling has been the founder and/or lead investor of numerous companies and has led the acquisition or turnaround of companies in a wide variety of industries. He is currently a director of Livent, PriCellular Corporation, Softkey International, KAI, Inc. and several private firms. He received a Master's of Business Administration from the Harvard Business School and received his undergraduate degree from Purdue University. Mr. Sperling is a member of the Corporation of the Brigham and Women's Hospital and a director of the American Technion Society. S-55 UNDERWRITING Subject to the terms and conditions in the terms agreement and related underwriting agreement (collectively, the "Underwriting Agreement") among the Company and each of the underwriters named below (the "Underwriters"), the Company has agreed to sell to each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Dean Witter Reynolds Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc., PaineWebber Incorporated and Raymond James & Associates, Inc. are acting as representatives (the "Representatives"), and each of the Underwriters has severally agreed to purchase from the Company the respective number of shares of Common Stock set forth opposite their respective names. Number of Underwriter Shares ------ Merrill Lynch, Pierce, Fenner & Smith Incorporated 425,000 Dean Witter Reynolds Inc. 425,000 Donaldson, Lufkin & Jenrette Securities Corporation 425,000 Lehman Brothers Inc. 425,000 PaineWebber Incorporated 425,000 Raymond James & Associates, Inc. 425,000 Bear, Stearns & Co. Inc. 100,000 Alex. Brown & Sons Incorporated 100,000 CS First Boston Corporation 100,000 A.G. Edwards & Sons, Inc. 100,000 J.P. Morgan Securities Inc. 100,000 Prudential Securities Incorporated 100,000 Salomon Brothers Inc 100,000 Smith Barney Inc. 100,000 Adams, Harkness & Hill, Inc. 50,000 Advest, Inc. 50,000 J.C. Bradford & Co. 50,000 Cowen & Company 50,000 Dain Bosworth Incorporated 50,000 Dominick & Dominick, Incorporated 50,000 EVEREN Securities, Inc. 50,000 Fahnestock & Co. Inc. 50,000 First Albany Corporation 50,000 Friedman, Billings, Ramsey & Co., Inc. 50,000 Furman Selz LLC 50,000 Genesis Merchant Group Securities 50,000 Gruntal & Co., Incorporated 50,000 Interstate/Johnson Lane Corporation 50,000 Janney Montgomery Scott Inc. 50,000 Jefferies & Company, Inc. 50,000 Edward D. Jones & Co. 50,000 Josephthal Lyon & Ross Incorporated 50,000 C.L. King & Associates, Inc. 50,000 Legg Mason Wood Walker, Incorporated 50,000 McDonald & Company Securities, Inc. 50,000 Moors & Cabot, Inc. 50,000 Morgan Keegan & Company, Inc. 50,000 Pennsylvania Merchant Group Ltd 50,000 Piper Jaffray Inc. 50,000 Pryor, McClendon, Counts & Co., Inc. 50,000 The Robinson-Humphrey Company, Inc. 50,000 S-56 Number of Underwriter Shares ------ Roney & Co., LLC 50,000 Sterne, Agee & Leach, Inc. 50,000 Stifel, Nicolaus & Company, Incorporated 50,000 Tucker Anthony Incorporated 50,000 Utendahl Capital Partners, L.P. 50,000 Wheat, First Securities, Inc. 50,000 --------- Total 5,000,000 ========= In the Underwriting Agreement, the several Underwriters have agreed, respectively, subject to the terms and conditions set forth in the Underwriting Agreement, to purchase all of the shares of Common Stock being sold pursuant to the Underwriting Agreement if any of such shares of Common Stock are purchased. Under certain circumstances, the commitments of non-defaulting Underwriters may be increased. The Representatives have advised the Company that the Underwriters propose initially to offer the Common Stock to the public at the public offering price set forth on the cover page of this Prospectus Supplement and to certain dealers at such price less a concession not in excess of $.80 per share. The Underwriters may allow, and such dealers may reallow, a discount not in excess of $.10 per share on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Company has granted to the Underwriters an option, exercisable for 30 days after the date of this Prospectus Supplement, to purchase up to 750,000 additional shares of Common Stock to cover over-allotments, if any, at the initial public offering price, less the underwriting discount set forth on the cover page of this Prospectus Supplement. If the Underwriters exercise this option, each Underwriter will have a firm commitment, subject to certain conditions, to purchase approximately the same percentage thereof which the number of shares of Common Stock to be purchased by it shown in the foregoing table bears to the shares of Common Stock initially offered hereby. In the Underwriting Agreement, the Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification of the Underwriters for liabilities arising under the Securities Act may be permitted pursuant to the foregoing provisions, the Company has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. The Company and the Operating Partnership have agreed that for a period of 90 days from the date of this Prospectus Supplement they will not, subject to certain exceptions, without the prior written consent of Merrill Lynch, directly or indirectly, sell, offer or contract to sell, grant any option for the sale of, or otherwise dispose of any shares of Common Stock or Units or any security convertible into or exercisable for shares of Common Stock or Units. The Common Stock is listed on the NYSE under the symbol "BCN." S-57 LEGAL MATTERS Certain legal matters will be passed upon for the Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts, a limited liability partnership including professional corporations, as corporate, securities, real estate and tax counsel to the Company, and by Goulston & Storrs, P.C., Boston, Massachusetts, as real estate counsel to the Company. Gilbert G. Menna, whose professional corporation is a partner of Goodwin, Procter & Hoar LLP, is an assistant secretary of the Company and owns 1,000 shares of the Company's Common Stock. Certain legal matters related to the Offering will be passed upon for the Underwriters by Brown & Wood LLP, New York, New York. Brown & Wood LLP will rely on Goodwin, Procter & Hoar LLP, as to certain matters of Maryland law. S-58 PROSPECTUS Beacon Properties Corporation $500,000,000 Common Stock ---------- Beacon Properties Corporation ("Beacon" or the "Company") may offer from time to time shares of its common stock, $.01 par value per share ("Common Stock"), with an aggregate public offering price of up to $500,000,000 in amounts, at prices and on terms to be determined at the time of offering. The Common Stock may be offered in amounts, at prices and on terms to be set forth in one or more supplements to this Prospectus (each a "Prospectus Supplement"). The specific terms of the Common Stock for which this Prospectus is being delivered will be set forth in the applicable Prospectus Supplement and will include any initial public offering price. In addition, such specific terms may include limitations on direct or beneficial ownership and restrictions on transfer of the Common Stock, in each case as may be consistent with the Company's Articles of Incorporation, as then in effect, or otherwise appropriate to preserve the status of the Company as a real estate investment trust ("REIT") for federal income tax purposes. See "Restrictions on Transfers of Capital Stock." The applicable Prospectus Supplement will also contain information, where appropriate, about certain United States federal income tax considerations relating to, and any listing on a securities exchange of, the Common Stock covered by such Prospectus Supplement. The Common Stock may be offered by the Company directly to one or more purchasers, through agents designated from time to time by the Company or to or through underwriters or dealers. If any agents or underwriters are involved in the sale of any of the Common Stock, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them, will be set forth, or will be calculable from the information set forth, in an accompanying Prospectus Supplement. See "Plan of Distribution." No Common Stock may be sold without delivery of a Prospectus Supplement describing the method and terms of the offering of such Common Stock. ---------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ---------- The date of this Prospectus is August 6, 1996. AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "SEC" or "Commission") a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock. This Prospectus, which constitutes part of the Registration Statement, omits certain of the information contained in the Registration Statement and the exhibits thereto on file with the Commission pursuant to the Securities Act and the rules and regulations of the Commission thereunder. The Registration Statement, including exhibits thereto, may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and copies may be obtained at the prescribed rates from the Public Reference Section of the Commission at its principal office in Washington, D.C. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and proxy statements and other information with the Commission. Such reports, proxy statements and other information can be inspected and copied at the locations described above. Copies of such materials can be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. In addition, the Common Stock is listed on the New York Stock Exchange (the "NYSE"), and such materials can be inspected and copied at the NYSE, 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents are incorporated herein by reference: 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1995, filed with the Commission pursuant to the Exchange Act. 2. The Company's Current Reports on Form 10-Q for the periods ended March 31, 1996 and June 30, 1996, filed with the Commission pursuant to the Exchange Act. 3. The Company's Current Reports on Form 8-K, dated January 5, 1996, February 20, 1996 and July 23, 1996, each filed with the Commission pursuant to the Exchange Act, including all amendments thereto. 4. The description of the Company's Common Stock contained in its Registration Statement on Form 8-A filed with the Commission pursuant to the Exchange Act, including all amendments and reports updating such description. All other documents filed with the Commission by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Common Stock are to be incorporated herein by reference and such documents shall be deemed to be a part hereof from the date of filing of such documents. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Any person receiving a copy of this Prospectus may obtain, without charge, upon written or oral request, a copy of any of the documents incorporated by reference herein, except for the exhibits to such documents. Written requests should be mailed to Kathleen M. McCarthy, Beacon Properties Corporation, 50 Rowes Wharf, Boston, Massachusetts 02110. Telephone requests may be directed to (617) 330-1400. 2 THE COMPANY General Beacon Properties Corporation along with its subsidiaries (the "Company") owns a portfolio of Class A office properties and other commercial properties located primarily in the greater Boston and Atlanta metropolitan areas. Beacon, a Maryland corporation, is a self-administered and self-managed real estate investment trust. Beacon's Common Stock is listed on the New York Stock Exchange under the symbol "BCN." The Company's business is conducted principally through subsidiaries which consist of an operating partnership, three subsidiary corporations and two subsidiary limited partnerships. Beacon Properties, L.P. is a Delaware limited partnership (the "Operating Partnership"), of which the Company is the sole general partner. The Company conducts third-party management operations through Beacon Property Management Corporation, a Delaware corporation (the "Management Company"), conducts its construction operations through Beacon Construction Company, Inc., a Delaware corporation (the "Construction Company"), and conducts third-party tenant space design services through Beacon Design Corporation, a Massachusetts corporation (the "Design Company"). The Company conducts management operations for wholly-owned properties through Beacon Property Management, L.P., a Delaware limited partnership (the "Management Partnership") and conducts tenant space design services for wholly-owned properties through Beacon Design, L.P., a Delaware limited partnership (the "Design Partnership"). The Company's executive offices are located at 50 Rowes Wharf in Boston, Massachusetts 02110 and its telephone number at that location is (617) 330-1400. USE OF PROCEEDS Unless otherwise described in the applicable Prospectus Supplement, the Company intends to use the net proceeds from the sale of Common Stock for general corporate purposes, including repayment of indebtedness, investment in new properties and new developments and maintenance of currently owned properties. DESCRIPTION OF COMMON STOCK The description of the Company's Common Stock set forth below does not purport to be complete and is qualified in its entirety by reference to the Company's Articles of Incorporation (the "Articles of Incorporation") and Bylaws (the "Bylaws"), each as amended, as in effect. General Under the Articles of Incorporation, the Company has authority to issue 100 million shares of Common Stock. Under Maryland law, stockholders generally are not responsible for the corporation's debts or obligations. At August 6, 1996, the Company had outstanding 27,433,063 shares of Common Stock. Terms All shares of Common Stock offered hereby have been duly authorized, and are fully paid and non-assessable. Subject to the preferential rights of any other shares or series of stock and to the provisions of the Company's Articles of Incorporation regarding excess stock, $.01 par value per share ("Excess Stock"), holders of shares of Common Stock will be entitled to receive dividends on shares of Common Stock if, as and when authorized and declared by the Board of Directors of the Company out of assets legally available therefor and to share ratably in the assets of the Company legally available for distribution to its stockholders in the event of its liquidation, dissolution or winding-up after payment of, or adequate provision for, all known debts and liabilities of the Company. Subject to the provisions of the Company's Articles of Incorporation regarding Excess Stock, each outstanding share of Common Stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of Directors and, except as otherwise required by law or except as provided with respect to any other class or series of stock, the holders of Common Stock will possess the exclusive voting power. There is no cumulative voting in the election of Directors, which means that the holders of a majority of the outstanding shares of Common Stock can elect all of the Directors then standing for election, and the holders of the remaining shares of Common Stock will not be able to elect any Directors. 3 Holders of Common Stock have no conversion, sinking fund or redemption rights, or preemptive rights to subscribe for any securities of the Company. The Company intends to furnish its stockholders with annual reports containing audited consolidated financial statements and an opinion thereon expressed by an independent public accounting firm and quarterly reports for the first three quarters of each fiscal year containing unaudited financial information. Subject to the provisions of the Company's Articles of Incorporation regarding Excess Stock, all shares of Common Stock will have equal dividend, distribution, liquidation and other rights, and will have no preference, appraisal or exchange rights. Pursuant to the Maryland General Corporation Law (the "MGCL"), a corporation generally cannot dissolve, amend its Articles of Incorporation, merge, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless approved by the affirmative vote of stockholders holding at least two-thirds of the shares entitled to vote on the matter unless a lesser percentage (but not less than a majority of all of the votes to be cast on the matter) is set forth in the corporation's Articles of Incorporation. The Company's Articles of Incorporation do not provide for a lesser percentage in such situations. Restrictions on Ownership For the Company to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), not more than 50% in value of its outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year. To assist the Company in meeting this requirement, the Company may take certain actions to limit the beneficial ownership, directly or indirectly, by a single person of the Company's outstanding equity securities. See "Restrictions on Transfers of Capital Stock." Transfer Agent The transfer agent and registrar for the Common Stock is Boston EquiServe. RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK Restrictions on Transfers In order for the Company to qualify as a REIT under the Code, among other things, not more than 50% in value of its outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (defined in the Code to include certain entities) during the last half of a taxable year (other than the first year) (the "Five or Fewer Requirement"), and such shares of capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year) or during a proportionate part of a shorter taxable year. See "Federal Income Tax Considerations." In order to protect the Company against the risk of losing its status as a REIT on account of a concentration of ownership among its stockholders, the Articles of Incorporation, subject to certain exceptions, provide that no single holder may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 6.0% (the "Ownership Limit") of the aggregate value of the Company's shares of Common Stock. Pursuant to the Code, Common Stock held by certain types of entities, such as pension trusts qualifying under Section 401(a) of the Code, United States investment companies registered under the Investment Company Act, partnerships, trusts and corporations, will be attributed to the beneficial owners of such entities for purposes of the Five or Fewer Requirement (i.e., the beneficial owners of such entities will be counted as holders). The Company's Articles of Incorporation limits such entities to holding no more than 9.9% of the aggregate value of the Company's shares of capital stock (the "Look-Through Ownership Limit"). Any transfer of shares of capital stock or of any security convertible into shares of capital stock that would create a direct or indirect ownership of shares of capital stock in excess of the Ownership Limit or the Look-Through Ownership Limit or that would result in the disqualification of the Company as a REIT, including any transfer that results in the shares of capital stock being owned by fewer than 100 persons or results in the Company being "closely held" within the meaning of Section 856(h) of the Code, shall be null and void, and the intended transferee will acquire no rights to the shares of capital stock. The foregoing restrictions on transferability and ownership will not apply if the Board of Directors determines that it is no longer in the best interests of the Company to attempt to qualify, or to continue to qualify, as a REIT. The Board of Directors may, in its sole discretion, waive the Ownership Limit and the Look-Through Ownership Limit if evidence satisfactory to the Board of Directors and the Company's tax counsel is presented 4 that the changes in ownership will not then or in the future jeopardize the Company's REIT status and the Board of Directors otherwise decides that such action is in the best interest of the Company. Shares of capital stock owned, or deemed to be owned, or transferred to a stockholder in excess of the Ownership Limit or the Look-Through Ownership Limit will automatically be converted into shares of Excess Stock that will be transferred, by operation of law, to the Company as trustee of a trust for the exclusive benefit of the transferees to whom such shares of capital stock may be ultimately transferred without violating the Ownership Limit or the Look-Through Ownership Limit. While the Excess Stock is held in trust, it will not be entitled to vote, it will not be considered for purposes of any stockholder vote or the determination of a quorum for such vote, and, except upon liquidation, it will not be entitled to participate in dividends or other distributions. Any distribution paid to a proposed transferee of Excess Stock prior to the discovery by the Company that capital stock has been transferred in violation of the provisions of the Company's Articles of Incorporation shall be repaid to the Company upon demand. The Excess Stock is not treasury stock, but rather constitutes a separate class of issued and outstanding stock of the Company. The original transferee stockholder may, at any time the Excess Stock is held by the Company in trust, transfer the interest in the trust representing the Excess Stock to any person whose ownership of the shares of capital stock exchanged for such Excess Stock would be permitted under the Ownership Limit or the Look-Through Ownership Limit, at a price not in excess of (i) the price paid by the original transferee-stockholder for the shares of capital stock that were exchanged into Excess Stock, or (ii) if the original transferee-stockholder did not give value for such shares (e.g., the stock was received through a gift, devise or other transaction), the average closing price for the class of shares from which such shares of Excess Stock were converted for the ten days immediately preceding such sale or gift. Immediately upon the transfer to the permitted transferee, the Excess Stock will automatically be converted back into shares of capital stock of the class from which it was converted. If the foregoing transfer restrictions are determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the intended transferee of any shares of Excess Stock may be deemed, at the option of the Company, to have acted as an agent on behalf of the Company in acquiring the Excess Stock and to hold the Excess Stock on behalf of the Company. In addition, the Company will have the right, for a period of 90 days during the time any shares of Excess Stock are held by the Company in trust, to purchase all or any portion of the Excess Stock from the original transferee-stockholder at the lesser of (i) the price initially paid for such shares by the original transferee stockholder, or if the original transferee-stockholder did not give value for such shares (e.g., the shares were received through a gift, devise or other transaction), the average closing price for the class of stock from which such shares of Excess Stock were converted for the ten days immediately preceding such sale or gift, and (ii) the average closing price for the class of shares from which such shares of Excess Stock were converted for the ten trading days immediately preceding the date the Company elects to purchase such shares. The 90-day period begins on the date notice is received of the violative transfer if the original transferee-stockholder gives notice to the Company of the transfer or, if no such notice is given, the date the Board of Directors determines that a violative transfer has been made. These restrictions will not preclude settlement of transactions through the NYSE. Each stockholder shall upon demand be required to disclose to the Company in writing any information with respect to the direct, indirect and constructive ownership of capital stock as the Board of Directors deems necessary to comply with the provisions of the Code applicable to REITs, to comply with the requirements of any taxing authority or governmental agency or to determine any such compliance. The Ownership Limit may have the effect of precluding acquisition of control of the Company unless the Board of Directors determines that maintenance of REIT status is no longer in the best interests of the Company. FEDERAL INCOME TAX CONSIDERATIONS The Company believes it has operated, and the Company intends to continue to operate, in such a manner as to qualify as a REIT under the Code, but no assurance can be given that it will at all times so qualify. The provisions of the Code pertaining to REITs are highly technical and complex. The following is a brief and general summary of certain provisions that currently govern the federal income tax treatment of the Company and its stockholders. For the particular provisions that govern the federal income tax treatment of the Company and its stockholders, reference is made to Sections 856 through 860 of the Code and the regulations thereunder. The following summary is qualified in its entirety by such reference. 5 Under the Code, if certain requirements are met in a taxable year, a REIT generally will not be subject to federal income tax with respect to income that it distributes to its stockholders. If the Company fails to qualify during any taxable year as a REIT, unless certain relief provisions are available, it will be subject to tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates, which could have a material adverse effect upon its stockholders. In any year in which the Company qualifies to be taxed as a REIT, distributions made to its stockholders out of current or accumulated earnings and profits will be taxed to stockholders as ordinary income except that distributions of net capital gains designated by the Company as capital gain dividends will be taxed as long-term capital gain income to the stockholders. To the extent that distributions exceed current or accumulated earnings and profits, they will constitute a return of capital, rather than dividend or capital gain income, and will reduce the basis for the stockholder's Common Stock with respect to which the distribution is paid or, to the extent that they exceed such basis, will be taxed in the same manner as gain from the sale of that Common Stock. Investors are urged to consult their own tax advisors with respect to the appropriateness of an investment in the Common Stock offered hereby and with respect to the tax consequences arising under federal law and the laws of any state, municipality or other taxing jurisdiction, including tax consequences resulting from such investor's own tax characteristics. In particular, foreign investors should consult their own tax advisors concerning the tax consequences of an investment in the Company, including the possibility of United States income tax withholding on Company distributions. PLAN OF DISTRIBUTION The Company may sell Common Stock through underwriters or dealers, directly to one or more purchasers, through agents or through a combination of any such methods of sale. The distribution of the Common Stock may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. In connection with the sale of Common Stock, underwriters or agents may receive compensation from the Company or from purchasers of Common Stock, for whom they may act as agents, in the form of discounts, concessions or commissions. Underwriters may sell Common Stock to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers, and agents that participate in the distribution of Common Stock may be deemed to be underwriters under the Securities Act, and any discounts or commissions they receive from the Company and any profit on the resale of Common Stock they realize may be deemed to be underwriting discounts and commissions under the Securities Act. Any such underwriter or agent will be identified, and any such compensation received from the Company will be described, in the applicable Prospectus Supplement. Any shares of Common Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE, subject to official notice of issuance. Under agreements into which the Company may enter, underwriters, dealers and agents who participate in the distribution of Common Stock may be entitled to indemnification by the Company against certain liabilities, including liabilities under the Securities Act. Underwriters, dealers and agents may engage in transactions with, or perform services for, or be tenants of, the Company in the ordinary course of business. In order to comply with the securities laws of certain states, if applicable, the Common Stock offered hereby will be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states Common Stock may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the Common Stock offered hereby may not simultaneously engage in market making activities with respect to the Common Stock for a period of two business days prior to the commencement of such distribution. 6 LEGAL MATTERS Certain legal matters will be passed upon for the Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts, a limited liability partnership including professional corporations, as corporate, securities, real estate and tax counsel to the Company. Gilbert G. Menna, whose professional corporation is a partner of Goodwin, Procter & Hoar LLP, is an assistant secretary of the Company and owns 1,000 shares of the Company's Common Stock. EXPERTS The consolidated balance sheets of the Company as of December 31, 1995 and 1994 and the related consolidated statements of operations, stockholders' equity and cash flows for the year ended December 31, 1995 and for the period from May 26, 1994 to December 31, 1994, and the combined statements of operations, owners' equity (deficit) and cash flows for the period January 1, 1994 to May 25, 1994 and the year ended December 31, 1993 of The Beacon Group, predecessor to the Company, and the related financial statement schedules of the Company as of December 31, 1995, incorporated herein by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1995 have been so incorporated in reliance on the reports of Coopers & Lybrand L.L.P., independent accountants, given on the authority of that firm as experts in accounting and auditing. The statement of excess of revenues over specified operating expenses for Perimeter Center, Atlanta, Georgia for the year ended December 31, 1995, incorporated by reference herein from the Company's current report on Form 8-K dated February 20, 1996, has been so incorporated in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of said firm as experts in accounting and auditing. The statements of excess of revenues over specified operating expenses for each of the Fairfax County Portfolio in Tysons Corner and Herndon, Virginia, AT&T Plaza in Oak Brook, Illinois, Tri-State International in Lincolnshire, Illinois and 1333 H Street in Washington, D.C. for the year ended December 31, 1995, incorporated by reference herein from the Company's current report on Form 8-K dated July 23, 1996, have been so incorporated in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, given on the authority of said firm as experts in accounting and auditing. 7 ================================================================================ No dealer, salesperson or other individual has been authorized to give any information or make any representations not contained or incorporated by reference in this Prospectus Supplement and the accompanying Prospectus in connection with the offer made by this Prospectus Supplement and the accompanying Prospectus. If given or made, such information or representation must not be relied upon as having been authorized by the Company or the Underwriters. This Prospectus Supplement and the accompanying Prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, the Shares in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus Supplement and the accompanying Prospectus nor any sale made hereunder shall, under any circumstances, create an implication that there has not been any change in the facts set forth in this Prospectus Supplement and the accompanying Prospectus or in the affairs of the Company since the date hereof. ---------- TABLE OF CONTENTS Page ------- PROSPECTUS SUPPLEMENT Prospectus Supplement Summary S-3 Risk Factors S-13 The Company S-19 Recent Developments S-19 Properties and Pending Acquisitions S-23 Use of Proceeds S-46 Price Range of Common Stock and Distribution History S-47 Capitalization S-48 Selected Financial Information S-49 Management S-52 Underwriting S-56 Legal Matters S-58 PROSPECTUS Available Information 2 Incorporation of Certain Documents by Reference 2 The Company 3 Use of Proceeds 3 Description of Common Stock 3 Restrictions on Transfers of Capital Stock 4 Federal Income Tax Considerations 5 Plan of Distribution 6 Legal Matters 7 Experts 7 ================================================================================ ================================================================================ 5,000,000 Shares BEACON PROPERTIES CORPORATION Common Stock --------------------- P R O S P E C T U S S U P P L E M E N T --------------------- Merrill Lynch & Co. Dean Witter Reynolds Inc. Donaldson, Lufkin & Jenrette Securities Corporation Lehman Brothers PaineWebber Incorporated Raymond James & Associates, Inc. August 6, 1996 ================================================================================ -----END PRIVACY-ENHANCED MESSAGE-----