-----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, PwIatZpQDmmvRyLvblPYn/xuHHp/IyHnPaG4yDzPzoV6juD0tm6WS3JXpToEWy5t sA14nvVFqbt4u2ebZpfLnQ== 0001029869-97-000629.txt : 19970520 0001029869-97-000629.hdr.sgml : 19970520 ACCESSION NUMBER: 0001029869-97-000629 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12926 FILM NUMBER: 97608634 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 10-Q 1 BEACON PROPERTIES CORP. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _______________________ Commission file number _____________________ 1-12926 _________________________ ____________________ BEACON PROPERTIES CORPORATION _______________________ (Exact name of Registrant as specified in its charter) __________ Maryland _____________ _____________ 04-3224258 ___________ (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) _________________50 Rowes Wharf, Boston, Massachusetts 02110___________________ ___________________(Address of principal executive offices)____________________ (Zip Code) _____________________________(617) 330-1400_________________________________ (Registrant's telephone number, including area code) _______________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- ---- APPLICABLE ONLY TO CORPORATE ISSUERS; Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 55,248,990 Shares of common stock, $.01 par value as of May 13, 1997 - -------------- 1 BEACON PROPERTIES CORPORATION FORM 10-Q INDEX -----
Page ---- Part I - Financial Information --------------------- Item 1. Financial Statements Consolidated Balance Sheets at March 31, 1997 and December 31, 1996 3 Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996 4 Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-14 Part II - Other Information ----------------- Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults Upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signature 16
2 BEACON PROPERTIES CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1997 1996 ----------------- ----------------- (unaudited) (In thousands) ASSETS Real estate: Land $ 213,813 $ 213,858 Buildings, improvements and equipment 1,482,626 1,477,672 ----------------- ----------------- 1,696,439 1,691,530 Less accumulated depreciation 110,994 97,535 ----------------- ----------------- 1,585,445 1,593,995 Deferred financing and leasing costs, net of accumulated amortization of $17,590 and $16,370 18,155 17,321 Cash and cash equivalents 14,156 36,086 Restricted cash 3,159 2,599 Accounts receivable 10,641 11,609 Accrued rent 16,636 13,065 Prepaid expenses and other assets 19,028 1,093 Mortgage notes receivable 51,507 51,491 Investments in and advance to joint ventures and corporations 52,121 52,153 ----------------- ----------------- Total assets $ 1,770,848 $ 1,779,412 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Mortgage notes payable $ 451,862 $ 452,212 Note payable, Credit Facility 153,000 153,000 Accounts payable, accrued expenses and other liabilities 34,414 41,764 Investment in joint venture 24,458 24,735 ----------------- ----------------- Total liabilities 663,734 671,711 ----------------- ----------------- Commitments and contingencies --- --- Minority interest in Operating Partnership 108,509 108,551 ----------------- ----------------- Stockholders' equity: Common stock, $.01 par value, authorized 100,000,000 shares, issued and outstanding 48,237,322 and 48,116,480 shares 482 481 Additional paid-in capital 1,025,803 1,022,110 Cumulative net income 78,067 60,047 Cumulative dividends (105,747) (83,488) ----------------- ----------------- Total stockholders' equity 998,605 999,150 ----------------- ----------------- Total liabilities and stockholders' equity $ 1,770,848 $ 1,779,412 ================= =================
The accompanying notes are an integral part of these consolidated financial statements. 3 BEACON PROPERTIES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarter Ended March 31, --------------------------------------------------------- 1997 1996 --------------------------------------------------------- (Unaudited and in thousands, except per share amounts and shares outstanding) Revenues: Rental income $ 63,601 $ 26,920 Management fees 821 750 Recoveries from tenants 8,351 3,245 Mortgage interest income 1,372 958 Other income 2,575 1,795 -------------------- ------------------- 76,720 33,668 -------------------- ------------------- Expenses: Property expenses 14,531 6,896 Real estate taxes 8,334 3,517 General and administrative 8,627 3,589 Mortgage interest expense 11,022 6,344 Interest - amortization of financing costs 477 561 Depreciation and amortization 14,214 5,862 -------------------- ------------------- 57,205 26,769 -------------------- ------------------- Income from operations 19,515 6,899 Equity in net income of joint ventures and corporations 1,439 1,407 -------------------- ------------------- Income from continuing operations 20,954 8,306 Discontinued operations - Construction Company Loss from operations (586) (407) -------------------- ------------------- Income before minority interest and extraordinary item 20,368 7,899 Minority interest in Operating Partnership (2,348) (1,227) -------------------- ------------------- Income before extraordinary item 18,020 6,672 Extraordinary item, net of minority interest --- (1,678) -------------------- ------------------- Net income $ 18,020 $ 4,994 ==================== =================== Income from continuing operations per common share $ 0.38 $ 0.32 Discontinued operations - Construction Company Loss from operations (0.01) (0.02) -------------------- ------------------- Income per common share before extraordinary item 0.37 0.30 Extraordinary item --- (0.07) -------------------- ------------------- Net income per common share $ 0.37 $ 0.23 ==================== =================== Weighted average common shares outstanding 48,156,877 22,074,715 ==================== ===================
The accompanying notes are an integral part of these consolidated financial statements. 4 BEACON PROPERTIES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, -------------------------------------------- 1997 1996 -------------------------------------------- (unaudited and in thousands) Cash flows from operating activities: Net income $ 18,020 $ 4,994 ---------------- ---------------- Adjustments to reconcile net income to net cash provided by operating activities: Increase in accrued rent (3,571) (1,068) Depreciation, amortization and amortization of financing costs 14,691 6,423 Equity in net income of joint ventures and corporations (853) (1,000) Minority interest in Operating Partnership 2,348 1,227 Extraordinary item --- 1,678 Decrease (increase) in accounts receivable 968 (2,755) Increase in prepaid expenses and other assets (557) (875) (Decrease) increase in accounts payable and accrued expenses (2,638) 9,838 ---------------- ---------------- Total adjustments 10,388 13,468 ---------------- ---------------- Net cash provided by operating activities 28,408 18,462 ---------------- ---------------- Cash flows from investing activities: Property additions (9,019) (335,547) Payment of deferred leasing costs (1,926) (1,745) (Increase) decrease in prepaid expenses and other assets (17,378) 5,000 Purchase of mortgage notes receivable (16) (9) Capital distributions from joint ventures 596 1,836 Increase in restricted cash (560) (1,662) ---------------- ---------------- Net cash used by investing activities (28,303) (332,127) ---------------- ---------------- Cash flows from financing activities: Proceeds from issuance of common stock, net of costs 3,092 175,329 Payment of deferred financing costs (128) (4,647) Borrowings on Credit Facility --- 75,000 Payments on Credit Facility --- (205,500) Borrowings on mortgage notes --- 593,000 Payments on mortgage notes (350) (260,158) Decrease in prepaid expenses and other assets --- 2,300 Distributions paid to minority interest in Operating Partnership (2,390) (1,591) Dividends paid to stockholders (22,259) (8,491) ---------------- ---------------- Net cash (used) provided by financing activities (22,035) 365,242 ---------------- ---------------- Net (decrease) increase in cash and cash equivalents (21,930) 51,577 Cash and cash equivalents, beginning of period 36,086 4,501 ---------------- ---------------- Cash and cash equivalents, end of period $ 14,156 $ 56,078 ================ ================ Supplemental disclosures: Cash paid during the period for interest $ 11,331 $ 5,343 ================ ================ Non cash activities: Increase in minority interest as a result of acquisition of properties $ --- $ 13,758 ================ ================
The accompanying notes are an integral part of these consolidated financial statements. 5 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -------- 1. Organization and Basis of Presentation: --------------------------------------- Organization ------------ Beacon Properties Corporation was incorporated on March 4, 1994 as a Maryland Corporation, and commenced operations effective with the completion of its Initial Public Offering (the "IPO") on May 26, 1994. Beacon Properties Corporation, together with Beacon Properties, L.P. (the "Operating Partnership") and their subsidiaries (collectively, the "Company") was formed to continue and expand the commercial real estate business of The Beacon Group (the "Predecessor"). The Company qualifies as a real estate investment trust under the Internal Revenue Code of 1986, as amended. The Company specializes in property ownership, management, leasing, design and development and, as of May 13, 1997, owned or had an interest in 103 properties totaling approximately 16.3 million square feet (the "Properties"). Basis of Presentation --------------------- The financial statements of the Company are consolidated and include all the accounts of the Company, its majority owned Operating Partnership and subsidiaries. All significant intercompany balances and transactions have been eliminated. The accompanying financial statements are unaudited; however, they have been prepared in accordance with generally accepted accounting principles for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. The results for the three months ended March 31, 1997 are not necessarily indicative of the results to be obtained for the full fiscal year. These financial statements should be read in conjunction with the December 31, 1996 audited financial statements and notes thereto of the Company, included in its annual report on Form 10-K (as amended by Form 10-K/A) for the fiscal year ended December 31, 1996. Certain reclassifications have been made to previously reported amounts to conform with current reporting. 6 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -------- 2. Equity Investments in Real Estate: ---------------------------------- The Company reports its share of income and losses based on its ownership interest in the respective equity investments. Losses in excess of investments are not recorded where the Company has not guaranteed or does not intend to provide any future financial support. The following summarized information has been presented for the property joint ventures and property corporation for which the Company has recorded its share of the earnings for the three months ended March 31, 1997.
One Post Polk & 75-101 Federal Office Square Taylor Street -------------------- ------------------- ----------------- (in thousands) Balance sheets at March 31, 1997 Real estate, net $ 40,095 $ 90,607 $ 155,658 Cash 1,740 810 9,824 Other assets 10,777 2,167 2,801 -------------------- ------------------- ----------------- $ 52,612 $ 93,584 $ 168,283 ==================== =================== ================= Mortgage notes payable $ 92,717 $ --- $ 90,000 Other liabilities 1,435 811 3,961 Equity (deficiency) (41,540) 92,773 74,322 -------------------- ------------------- ----------------- $ 52,612 $ 93,584 $ 168,283 ==================== =================== ================= Summary of operations for the three months ended March 31, 1997 Revenues $ 5,640 $ 5,827 $ 6,960 Other income 113 251 324 -------------------- ------------------- ----------------- Total revenues 5,753 6,078 7,284 -------------------- ------------------- ----------------- Operating expenses 2,344 1,543 3,006 Mortgage interest expense 1,704 --- 1,731 Depreciation and amortization 890 858 1,173 -------------------- ------------------- ----------------- Total expenses 4,938 2,401 5,910 -------------------- ------------------- ----------------- Net income $ 815 $ 3,677 $ 1,374 ==================== =================== ================= Share of properties: Depreciation and amortization $ 330 $ 86 $ 590
7 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------- 3. Commitments and Contingencies: ------------------------------ In March 1997, the Company entered into a contract to acquire an office complex located in Westchester (suburban Chicago), Illinois (the "Westbrook Corporate Center"). The purchase price of the property is approximately $182.1 million, consisting of the assumption of $106 million of mortgage debt, the issuance of approximately $50 million of units of limited partnership interest in the Operating Partnership ("Units") and approximately $26.1 million in cash. 4. Pro Forma Results (unaudited): ------------------------------ The following unaudited pro forma operating results for the Company have been prepared as if the 1996 stock offerings and the 1996 property acquisitions had occurred on January 1, 1996. Unaudited pro forma financial information is presented for informational purposes only and may not be indicative of what the actual results of operations of the Company would have been had the events occurred as of January 1, 1996, nor does it purport to represent the results of operations for future periods.
Three Months ended March 31, 1997 and 1996 1997 1996 ------------------------------------------ ---- ---- Revenue $ 76,720 $ 72,210 Income before extraordinary item 18,020 15,981 Net income per common share before extraordinary item $ .37 $ .33
5. Subsequent Events: ------------------ On April 9, 1997, the Company converted its $300 million secured floating-rate credit facility (the "Credit Facility") to an unsecured facility and decreased the interest rate on the Credit Facility from the Eurodollar rate plus 175 basis points (1.75%) to the Eurodollar rate plus 120 basis points (1.20%). Additionally, on April 30, 1997, the maximum loan amount available under the Credit Facility was increased to $350 million. On April 10, 1997, the Company sold 7,000,000 shares of common stock, $.01 par value, to the public at $32.125 per share (the "April 1997 Offering"). The proceeds of the April 1997 Offering, net of offering costs, were approximately $211.4 million. The net proceeds of the April 1997 Offering were used to purchase 10880 Wilshire Boulevard located in Westwood, California and two office properties located in Fairfax County, Virginia ("Centerpointe I and II") with the remaining balance used to pay down the Credit Facility. On April 23, 1997, the Company acquired 10880 Wilshire Boulevard located in Westwood, California for aggregate consideration of approximately $99 million. On April 24, 1997, the Company declared a dividend of $.4625 per common share payable on May 23, 1997 to stockholders of record on May 9, 1997. On April 30, 1997, the Company acquired Centerpointe I and II, located in Fairfax County, Virginia for aggregate consideration of approximately $55 million consisting of approximately $25 million in cash and assumption of $30 million of mortgage debt. On May 8, 1997, the Company sold the Westlakes Office Park property, its sole property located in Berwyn (suburban Philadelphia), Pennsylvania for approximately $72.5 million. The transaction will be treated as a like-kind exchange in which the sale proceeds, which are currently held in escrow, will be used to purchase a future acquisition property. 8 BEACON PROPERTIES CORPORATION PART I - ITEM 2 ------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This Form 10-Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934. The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. 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 include the following: Real estate investment considerations, such as the effect of economic and other conditions in the market area on cash flows and values; the need to renew leases or relet space upon the expiration of current leases, and the ability of a property to generate revenues sufficient to meet debt service payments and other operating expenses; and risks associated with borrowing, such as the possibility that the Company will not have sufficient funds available to make principal payments on outstanding debt, outstanding debt may be refinanced at higher interest rates or otherwise on terms less favorable to the Company and interest rates under the Credit Facility may increase. The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying financial statements and notes thereto. Results of Operations Comparison of Three Months Ended March 31, 1997 and March 31, 1996 The Company's gross revenues increased by 128% for the three months ended March 31, 1997 compared to the corresponding period in 1996. The growth in gross revenues was primarily the result of the acquisition of 78 Properties (the "Acquisition Properties") comprising 9.1 million square feet during 1996. The Company's proportionate share of weighted average square feet of office properties increased by 112% to 14.0 million square feet for the three months ended March 31, 1997 compared to 6.6 million square feet for the corresponding period in 1996. The Acquisition Properties increased revenues from rental operations, which includes rental income, recoveries from tenants and other income, by $41.1 million for the three months ended March 31, 1997 compared to the corresponding period in 1996. The remaining balance of the increase was primarily due to increases in occupancy and rental rates and completion of the redevelopment and achievement of 88% occupancy at the Crosby Corporate Center in 1996. The impact of the straight-line rent adjustment increased consolidated revenues for the Company by $3.6 million for the three months ended March 31, 1997 and $1.1 million for the corresponding period in 1996. The impact of the straight-line rent adjustment decreased the Company's equity in net income of property joint ventures and corporations by $0.1 million for the three months ended March 31, 1997 and increased the Company's equity in net income of property joint ventures and corporations by $0.1 million for the corresponding period in 1996. Mortgage interest income for the three months ended March 31, 1997 was $1.4 million and $1.0 million for corresponding period in 1996. The increase of $0.4 million was the result of the Company's acquisition of the remaining portions of the outstanding first mortgage indebtedness on the Rowes Wharf Property in April and June 1996. The Acquisition Properties increased property expenses, real estate taxes and depreciation and amortization by $19.6 million for the three months ended March 31, 1997 compared to the corresponding period in 1996. The remaining balance of the increase was primarily due to additional operating expenses as a result of an increase in occupancy and the completion of the redevelopment and achievement of 88% occupancy at the Crosby Corporate Center in 1996. 9 BEACON PROPERTIES CORPORATION PART I - ITEM 2 ------- General and administrative expenses were $8.6 million for the three months ended March 31, 1997 and $3.6 million for the corresponding period in 1996. The Acquisition Properties increased general and administrative expenses by $1.5 million. The remaining balance of the increase was primarily due to an increase in corporate management and administrative costs. In 1996, the Company established its first regional offices in the Southeast and Mid-Atlantic and in the first quarter of 1997 regional offices in the Midwest and West had begun to be established. As a result, payroll expense increased by $1.8 million along with an increase in other employee related expenses. General and administrative expenses as a percentage of total revenue were 11.2% in 1997 and 10.65% in 1996. Net operating income (excluding the effect of straight-line rents) for properties owned for at least a full year (all properties except the Acquisition Properties) increased 4.9% for the three months ended March 31, 1997 compared to the corresponding period in 1996. Mortgage interest expense was $11.0 million for the three months ended March 31, 1997 and $6.3 million for the corresponding period in 1996. The increase of $4.7 million was primarily the result of debt incurred or assumed in connection with the acquisition in 1996 of the Perimeter Center Portfolio and the Fairfax County Portfolio and an increase in the weighted average outstanding balance of the Credit Facility of $153.0 million for the three months ended March 31, 1997 compared to $71.3 million for corresponding period in 1996. Interest-amortization of financing costs was $0.5 million for the three months ended March 31, 1997 and $0.6 million for the corresponding period in 1996. The decrease of $0.1 million was primarily the result of the reduction in amortization of financing costs of the Credit Facility as a result of the write-off of fees and costs of the Credit Facility which was substantially modified in June 1996. Loss from discontinued operations from the Construction Company was $0.6 million for the three months ended March 31, 1997 and $0.4 million for the corresponding period in 1996. In December 1996, substantially all of the assets of the Construction Company were sold to Skanska AB, a Swedish construction firm. The Construction Company's new business plan involves the completion of certain contracts not transferred to the purchaser and the liquidation of its remaining assets. An extraordinary item, net of minority interest, of $1.7 million loss for the three months ended March 31, 1996 was recorded in connection with the write-off of fees and costs to acquire a $260 million mortgage loan provided by Paine Webber Real Estate Securities, Inc. used to acquire the Perimeter Center Portfolio (the "Paine Webber Acquisition Loan"). The Paine Webber Acquisition Loan was repaid in March 1996 approximately three years prior to its maturity. The minority interest in the Operating Partnership represents the portion of the Operating Partnership which is not owned by the Company. 10 BEACON PROPERTIES CORPORATION PART I - ITEM 2 ------- As of March 31, 1997, the Company owned or had an interest in 104 income producing commercial properties. The percent leased calculation includes all leases executed as of March 31, 1997.
Rentable Percent Average Net Effective Square Feet Leased Base Rent Rent ----------------- -------------- ------------- ---------------- Downtown Boston Office Market: Center Plaza 649,000 98% $22.58 $12.63 75-101 Federal Street 812,000 92% 30.67 20.24 One Post Office Square 764,000 99% 24.29 15.46 150 Federal Street 530,000 100% 25.15 21.25 Russia Wharf 315,000 97% 14.22 8.09 Rowes Wharf 344,000 100% 29.89 18.56 Two Oliver-147 Milk Street 271,000 99% 17.08 11.72 175 Federal Street 203,000 99% 25.21 15.58 South Station 149,000 100% 30.67 20.77 -------------------------------------------------------------------------------------------------------------------- Subtotal 4,037,000 98% 24.92 16.38 -------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- North Central Atlanta Office Market: Perimeter Center Portfolio 3,302,000 96% 16.69 11.58 -------------------------------------------------------------------------------------------------------------------- Greater Boston Suburban Office Market: Wellesley Office Park Buildings 1-8 623,000 100% 24.15 16.99 Crosby Corporate Center 336,000 88% 13.37 9.57 Westwood Business Centre 160,000 100% 19.55 11.34 New England Executive Park 817,000 97% 18.47 11.63 -------------------------------------------------------------------------------------------------------------------- Subtotal 1,936,000 97% 19.53 13.00 -------------------------------------------------------------------------------------------------------------------- Cambridge Office Market: One Canal Park 100,000 100% 22.05 13.99 Ten Canal Park 110,000 92% 19.23 12.42 The Riverview Building 263,000 100% 22.34 17.46 -------------------------------------------------------------------------------------------------------------------- Subtotal 473,000 98% 21.55 15.55 -------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- Suburban Philadelphia Office Market: Westlakes 1, 2, 3 & 5 444,000 100% 20.34 15.84 -------------------------------------------------------------------------------------------------------------------- Suburban Virginia Office Market: Polk and Taylor Buildings 890,000 100% 23.77 19.23 E.J. Randolph 165,000 99% 20.99 15.23 John Marshall I 261,000 100% 18.26 15.85 Northridge I 124,000 100% 25.96 19.34 1300 North 17th Street 373,000 98% 24.24 17.13 1616 North Fort Myer Drive 293,000 100% 23.07 15.45 -------------------------------------------------------------------------------------------------------------------- Subtotal 2,106,000 100% 22.98 17.61 -------------------------------------------------------------------------------------------------------------------- 11 Washington, D.C. Office Market: -------------------------------------------------------------------------------------------------------------------- 1333 H Street 239000 90% 27.38 20.20 -------------------------------------------------------------------------------------------------------------------- Suburban Chicago Office Market: AT&T Plaza 225,000 98% 20.80 14.16 Tri-State International 548,000 83% 22.49 15.80 Presidents Plaza 791,000 91% 19.44 12.16 -------------------------------------------------------------------------------------------------------------------- Subtotal 1,564,000 89% 20.70 13.72 -------------------------------------------------------------------------------------------------------------------- West Los Angeles Office Market: 10960 Wilshire Boulevard 544,000 89% 24.70 18.52 -------------------------------------------------------------------------------------------------------------------- Subtotal 544,000 89% 24.70 18.52 -------------------------------------------------------------------------------------------------------------------- Silicon Valley Office Market: (NNN) Shoreline Technology Park 727,000 100% 17.84 18.77 Lake Marriott Business Park 400,000 100% 9.80 10.78 -------------------------------------------------------------------------------------------------------------------- Subtotal 1,127,000 100% 14.98 15.94 -------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------- Total Weighted Average Properties 15,772,000 96% $20.94 $14.92 --------------------------------------------------------------------------------------------------------------------
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. The following table reflects the lease expiration schedule of the 104 income producing commercial properties the Company owned or had an interest in as of March 31, 1997.
Year or period of Square % of Annual Annual Rent Expiration Feet Square feet Rent (1) per Square Foot # of tenants ----------------------------------------------------------------------------------------------------------------------------- 4/1-12/31/97 2,053,205 13.0% $42,439,146 $20.67 189 1998 1,074,143 6.8% 24,897,070 23.18 189 1999 1,561,188 9.9% 34,174,277 21.89 190 2000 2,217,647 14.1% 48,707,065 21.96 193 2001 2,701,909 17.1% 65,086,877 24.09 167 2002 1,236,509 7.8% 34,787,934 28.13 91 2003 588,104 3.7% 15,620,637 26.56 36 2004 633,616 4.0% 11,877,595 18.75 26 2005 & beyond 3,166,362 20.1% 86,853,794 27.43 63 -------------------------------------------------------------------------------------------------------- Total leased 15,232,683 96.5% $364,444,395 $23.93 1,144 --------------------------------------------------------------------------------------------------------
(1) Annualized expiring base rental income represented by such leases plus 1996 tenant payments on account of real estate tax and operating expense escalations. 12 BEACON PROPERTIES CORPORATION PART I - ITEM 2 ------- Liquidity and Capital Resources Cash and cash equivalents were $14.2 million at March 31, 1997 compared to $36.1 million at December 31, 1996. The decrease in cash and cash equivalents was primarily the result of an increase in deposits on pending property acquisitions of $17.4 million. Investing Activities At March 31, 1997, the Company had approximately $17.4 million of deposits outstanding in connection with the acquisition of Westbrook Corporate Center, Centerpointe I and II, two office complexes located in Rosemont, Illinois and 175 Wyman Street, located in Waltham (suburban Boston), Massachusetts. On April 23, 1997, the Company acquired 10880 Wilshire Boulevard located in Westwood, California for aggregate consideration of approximately $99 million. The Company used proceeds from the April 1997 Offering to purchase the portfolio. On April 30, 1997, the Company acquired Centerpointe I and II, located in Fairfax County, Virginia, for aggregate consideration of approximately $55 million consisting of approximately $25 million in cash and assumption of $30 million of mortgage debt. The Company used proceeds from the April 1997 Offering for the cash portion of the acquisition. On May 8, 1997, the Company sold the Westlakes Office Park property, its sole property located in Berwyn (suburban Philadelphia), Pennsylvania for approximately $72.5 million. The transaction will be treated as a like-kind exchange in which the sale proceeds, which are currently held in escrow, will be used to purchase a future acquisition property. Financing Activities On April 10, 1997, the Company sold 7,000,000 shares of common stock, $.01 par value, to the public at $32.125 per share. The proceeds of the April 1997 Offering, net of offering costs, were approximately $211.4 million. The net proceeds of the April 1997 Offering were used to purchase 10880 Wilshire Boulevard and Centerpointe I and II properties with the remaining balance used to pay down the Credit Facility. On April 24, 1997, the Company declared a dividend of $.4625 per common share payable on May 23, 1997 to stockholders of record on May 9, 1997. Capitalization At March 31, 1997, the Company's total consolidated debt was approximately $604.9 million, and its total consolidated debt plus its proportionate share of total unconsolidated debt (other than the Rowes Wharf property debt) was approximately $697.7 million at March 31, 1997. At March 31, 1997, the Company's outstanding consolidated debt consisted of approximately $153.0 million under its floating-rate Credit Facility and approximately $451.9 million of fixed rate mortgage indebtedness with an weighted average rate of 7.22%, collateralized by properties owned 100% by the Company. The Company's proportionate share of its current total unconsolidated debt (excluding the Rowes Wharf property debt) consists of approximately $46.4 million on the One Post Office Square Property (in which the Company has a 50% general partner interest) and approximately $46.4 million on the 75-101 Federal Street property (in which the Company owns approximately 52% of the common stock of a private REIT that owns the property). The weighted average rate of the Company's unconsolidated fixed rate mortgage indebtedness is 7.47%. The weighted average rate of the Company's consolidated and unconsolidated fixed rate mortgage indebtedness is 7.27% and the weighted average maturity is approximately 6.7 years. 13 BEACON PROPERTIES CORPORATION PART I - ITEM 2 ------- Based on the Company's total market capitalization of $2,503.3 million at March 31, 1997 (at the March 31, 1997 closing stock price of $33.125 per share and including the 6,273,928 Units of minority interest in the Operating Partnership), the Company's consolidated debt plus its proportionate share of total unconsolidated debt (other than the Rowes Wharf property debt) represented approximately 28% of its total market capitalization. Funds from Operations The Company believes that to facilitate a clear understanding of the operating results of the Company, Funds from Operations ("FFO") should be examined in conjunction with net income. The definition of FFO was clarified in the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") White Paper, adopted by the NAREIT Board of Governors on March 3, 1995, as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization (in each case only real estate related assets), and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis. FFO should not be considered as a substitute for net income as an indication of the Company's performance or as a substitute for cash flow as a measure of its liquidity. The following table presents the calculations for FFO for the periods ended March 31, 1997 and March 31, 1996.
For the Quarter ended March 31, ----------------------------------- 1997 1996 ---- ---- (in thousands) Income before minority interest and extraordinary item $ 20,368 $ 7,899 Add consolidated properties: Depreciation and amortization 14,214 5,862 Add joint ventures properties: Depreciation and amortization 1,006 954 --------------- -------------- Funds from operations before minority interest 35,588 14,715 Company share of Operating Partnership 88.47% 84.46% --------------- -------------- Company funds from operations $ 31,485 $ 12,428 =============== ============== Weighted average common shares outstanding 48,157 22,075 =============== ==============
Short and Long Term Liquidity The Company has considered its short-term (up to 12 months) liquidity needs and the adequacy of expected liquidity sources to meet these needs. The Company believes that its principal short-term liquidity needs are to fund normal recurring expenses, debt service requirements and the minimum distribution required to maintain the Company's REIT qualifications under the Internal Revenue Code of 1986, as amended. The Company believes that these needs will be fully funded from cash flows provided by operating activities. The Company expects to meet long-term (greater than 12 months) liquidity requirements for the costs of development, property acquisitions, scheduled debt maturities, major renovations, expansions and other non-recurring capital improvements through long-term secured and unsecured indebtedness and the issuance of additional Operating Partnership Units and equity securities. The Company may finance the redevelopment or acquisition of additional properties by using its Credit Facility. 14 BEACON PROPERTIES CORPORATION PART II ------- OTHER INFORMATION - ----------------- Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 Articles of Incorporation of the Company, as amended (Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1994) 3.2 Amended and Restated Bylaws of the Company (Incorporated by reference from the Company's Registration Statement on Form S-3 (File No. 333-17237)) 27.1 Financial Data Schedule (b) Reports on Form 8-K. A report on Form 8-K dated December 20, 1996 (as amended by Form 8-K/A and Form 8-K/A-2) was filed which included information regarding Items 2 and 7. Included in Item 7 were financial statements, pro forma information and exhibits. The Form 8-K was filed in connection with the Company's acquisition of the Shoreline Technology Park, Lake Marriott Business Park and Presidents Plaza properties. A report on Form 8-K dated March 27, 1997 (as amended by Form 8-K/A) and a report on Form 8-K/A dated April 7, 1997 (as amended by Form 8-K/A) were filed which included information regarding Items 5 and 7. Included in Item 7 were financial statements, pro forma information and exhibits. The reports were filed in connection with the Company's pending acquisition of the Westbrook Corporate Center, 10880 Wilshire Boulevard and Centerpointe I and II properties and the April 1997 offering. 15 BEACON PROPERTIES CORPORATION SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BEACON PROPERTIES CORPORATION /s/ Robert J. Perriello ----------------------------- Robert J. Perriello, Senior Vice President, and Chief Financial Officer Date: May 15, 1997 16 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 14,156 0 27,277 0 0 43,825 1,696,439 110,994 1,770,848 34,414 604,862 482 0 0 998,123 1,770,848 0 78,159 0 46,183 2,348 0 11,022 18,606 0 18,606 (586) 0 0 18,020 0.37 0.37
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