-----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, N+ELvWdsO9UTw9hzLYdC/PeVu6yQ7z0Gfn2Pg0PwhNVf3dZtFAMfsRsQxWvAJ+kF jqeyYW6MubZvb+2W9rfZuA== 0001029869-97-000440.txt : 19970409 0001029869-97-000440.hdr.sgml : 19970409 ACCESSION NUMBER: 0001029869-97-000440 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970407 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12926 FILM NUMBER: 97575902 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-K/A 1 AMENDMENT TO FORM 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 (NO FEE REQUIRED) Commission File No. 1-12926 BEACON PROPERTIES CORPORATION (Exact name of registrant as specified in its charter) Incorporated in Maryland 04-3224258 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 50 Rowes Wharf, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 617-330-1400 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $.01 par value New York Stock Exchange 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 [checkmark] No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S.)229.405 of this chapter) is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of the shares of common stock held by non-affiliates as of March 24, 1997 was approximately $1,669.6 million. The number of shares of common stock outstanding as of March 24, 1997 was 48,233,236. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the following documents have been incorporated by reference into the 10-K Parts indicated: Documents 10-K Parts 1. The 1997 Proxy Statement (The "1997 Proxy Statement") Part III EXPLANATORY NOTE This Amendment to Form 10-K is filed to amend Item 8 and Item 14 which are restated herein in their entirety. Item 8. Financial Statements and Supplementary Information See "Index to Financial Statements" on page F-1 of this Form 10-K. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) Financial Statements and Financial Statement Schedules See "Index to Financial Statements" on page F-1 of this Form 10-K. (b) Exhibits
Exhibit No. Description - ----------- ----------- 3.1(1) Articles of Incorporation of the Company, as amended. 3.2(2) Amended and Restated Bylaws of the Company. 3.3(2) First Amendment to Amended and Restated Bylaws of the Company. 9.1(3) Voting Trust Agreement between Edwin N. Sidman and Paula L. Sidman. 10.1(12) Amended and Restated Agreement of Limited Partnership of Beacon Properties, L.P., as amended. 10.2(4) Amended and Restated 1994 Stock Option and Incentive Plan. 10.3(1) Employment and Non-Competition Agreement between the Company and Alan M. Leventhal. 10.4(1) Form of Employment and Non-Competition Agreement between the Company and each of Edwin N. Sidman and Norman B. Leventhal. 10.5(1) Form of Indemnification Agreement between the Company and each of its directors and executive officers. 10.6(1) Registration Rights Agreement among the Company, Richard L. Friedman and John L. Hall, II dated May 26, 1994. 10.7(1) Registration Rights Agreement Among the Company and certain partners of Beacon Properties, L.P. dated May 26, 1994. 10.8(5) Registration Rights Agreement Among the Company, Wellesley Office Realty Corp. and Federal 175 Realty Corp. dated October 27, 1994. 10.9(7) Registration Rights Agreement between the Company and TMPC, L.P. dated February 15, 1996. 10.10(12) Registration Rights Agreement among the Company and the Fairfax County Portfolio contributors dated September 5, 1996. 10.11(12) Registration Rights Agreement between the Company and Metropolitan Life Insurance Company dated December 27, 1996. 10.12(3) Office/Retail Unit Lease, dated as of July 25, 1985 between Boston Redevelopment Authority as Landlord and Rowes Wharf Associates as Tenant for the Office/Retail Unit in the Condominium at Rowes Wharf, Boston, Massachusetts, as amended by a First Amendment to Ground Lease, dated as of June 11, 1987. 10.13(3) Lease Agreement, dated as of January 28, 1988, between Massachusetts Bay Transportation Authority, as Landlord and Beacon South Station Associates, L.P. as Tenant, as amended by a Lease Modification Agreement dated as of September 30, 1988, and a Second Amendment to Lease dated as of August 1, 1989. 10.14(6) Option Agreement (Second Tier Noteholders Loan) by and between CP Holding Corp. as Trustee of the Note Holding Trust under Indenture of Trust dated as of November 30, 1994 and Beacon Properties, L.P. 10.15(6) Option Agreement (Limited Partnership Interest) by and between CP Holding Corp. as Trustee of the Partnership Holding Trust under Indenture of Trust dated November 30, 1994 and Beacon Properties, L.P. 10.16(7) Agreement of Purchase and Sale by and between Metropolitan Life Insurance Company and Beacon Properties, L.P. dated December 19, 1995. 10.17(7) Contribution Agreement by and among Taylor & Mathis Enterprises, L.P., Taylor & Mathis LTD., Taylor & Mathis/South Terraces, LTD. and Beacon Properties, L.P. dated December 19, 1995. 1 Exhibit No. Description - ----------- ----------- 10.18(7) Addendum to Contribution Agreement by and among Taylor & Mathis Enterprises, L.P., Taylor & Mathis, LTD., Taylor & Mathis/South Terraces, LTD and Beacon Properties, L.P. dated December 19, 1995. 10.19(8) Option Agreement dated March 18, 1996 among John Marshall Associates Limited Partnership, Greensboro Associates Limited Partnership, Woodland-Northridge I Limited Partnership, Pimpernell Estates Limited Partnership, Goodridge Drive Associates Limited Partnership and Beacon Properties, L.P. 10.20(8) First Amendment to Option Agreement dated May 17, 1996 among John Marshall Associates Limited Partnership, Greensboro Associates Limited Partnership, Woodland-Northridge I Limited Partnership, Pimpernell Estates Limited Partnership, Goodridge Drive Associates Limited Partnership and Beacon Properties, L.P. 10.21(8) Second Amendment to Option Agreement dated May 31, 1996 among John Marshall Associates Limited Partnership, Greensboro Associates Limited Partnership, Woodland-Northridge I Limited Partnership, Pimpernell Estates Limited Partnership, Goodridge Drive Associates Limited Partnership and Beacon Properties, L.P. 10.22(8) Third Amendment to Option Agreement dated June 21, 1996 among John Marshall Associates Limited Partnership, Greensboro Associates Limited Partnership, Woodland-Northridge I Limited Partnership, Pimpernell Estates Limited Partnership, Goodridge Drive Associates Limited Partnership and Beacon Properties, L.P. 10.23(8) Sale and Purchase Agreement between New York Life Insurance Company and Beacon Properties, L.P., dated as of July 19, 1996. 10.24(9) Purchase and Sale Agreement between LaSalle Fund II and Beacon Properties, L.P. dated as of September 20, 1996. 10.25(9) First Amendment to Purchase and Sale Agreement between LaSalle Fund II and Beacon Properties, L.P., dated as of October 2, 1996. 10.26(9) Purchase and Sale Contract between New England Executive Park Limited Partnership, et al and Beacon Properties, L.P. dated as of November 1, 1996. 10.27(9) Agreement of Purchase and Sale and Joint Escrow Instructions between 10960 Property Corporation and Beacon Properties, L.P. dated October 3, 1996. 10.28(10) Contract of Sale between WRC Properties, Inc. and Beacon Properties, L.P. dated as of December 19, 1996. 10.29(10) Sale and Contribution Agreement between Metropolitan Life Insurance Company and Beacon Properties, L.P., dated as of November 20, 1996, including Exhibit T to Sales and Contribution Agreement. 10.30(11) Restated Revolving Credit Agreement among Beacon Properties, L.P., Beacon Properties Corporation and the First National Bank of Boston, dated June 27, 1996. 10.31(11) Amendment No. 1 to the Restated Revolving Credit Agreement among Beacon Properties, L.P., Beacon Properties Corporation and the First National Bank of Boston, dated July 18, 1996. 10.32(12) Loan Agreement between Beacon Properties, L.P. and Metropolitan Life Insurance Company, dated March 15, 1996. 10.33(12) Mortgage, Security Agreement and Fixture Filing by Wellesley Holding, L.P., Wellesley Holding II, L.P. and Beacon Properties, L.P. to Connecticut General Life Insurance Company, dated January 8, 1996. 10.34(12) Mortgage, Security Agreement and Fixture Filing by Center Plaza Associates Limited Partnership to Connecticut General Life Insurance Company, dated February 9, 1996. 21.1(12) Subsidiaries of the Registrant 23.1 Consent of Coopers & Lybrand L.L.P. 27.1(12) Financial Data Schedule
- --------------- (1) Filed as part of the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1994 and incorporated herein by reference. (2) Filed as part of the Company's Registration Statement on Form S-3 (File No. 333-17237) and incorporated herein by reference. 2 Exhibit No. Description - ----------- ----------- (3) Filed as part of the Company's Registration Statement on Form S-11 (File No. 33-76316) and incorporated herein by reference. (4) Filed as part of the Company's Registration Statement on Form S-8 (File No. 333-10417) and incorporated herein by reference. (5) Filed as part of the Company's Registration Statement on Form S-11 (File No. 33-88606) and incorporated herein by reference. (6) Filed as part of the Company's Current Report on Form 8-K dated December 1, 1994 and incorporated herein by reference. (7) Filed as part of the Company's Current Report on Form 8-K dated February 15, 1996 and incorporated herein by reference. (8) Filed as part of the Company's Current Report on Form 8-K dated July 23, 1996 and incorporated herein by reference. (9) Filed as part of the Company's Current Report on Form 8-K dated October 18, 1996 and incorporated herein by reference. (10) Filed as part of the Company's Current Report on Form 8-K dated December 20, 1996 and incorporated herein by reference. (11) Filed as part of the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996 and incorporated herein by reference. (12) Previously filed as part of this Form 10-K. (c) Reports on Form 8-K A Report on Form 8-K dated October 18, 1996 (as amended by Form 8-K/A-1, 8-K/A-2 and 8-K/A-3) was filed which included information regarding Items 2, 5 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 acquisitions of the Rosslyn, Virginia Portfolio, New England Executive Park Portfolio, The Riverview Building and 10960 Wilshire Boulevard. A Report on Form 8-K dated December 18, 1996 was filed which included information regarding Item 5. The Form 8-K was filed in connection with the execution of an Underwriting Agreement of 1,132,400 shares of common stock in December 1996. 3 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By: /s/ Robert J. Perriello ------------------------------------------ Robert J. Perriello, Senior Vice President and Chief Financial Officer Dated: April 3, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date ---------------------------------------------------------------------- -------------- /s/ Alan M. Leventhal Alan M. Leventhal President, Chief Executive Officer, and Director (Principal Executive Officer) April 3, 1997 /s/ Edwin N. Sidman Edwin N. Sidman Chairman of the Board of Directors April 3, 1997 /s/ Lionel P. Fortin Lionel P. Fortin Executive Vice President, Chief Operating Officer and Director April 3, 1997 /s/ Robert J. Perriello Robert J. Perriello Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) April 3, 1997 Norman B. Leventhal Director /s/ Graham O. Harrison Graham O. Harrison Director April 3, 1997 /s/ William F. McCall, Jr. William F. McCall, Jr. Director April 3, 1997 /s/ Steven Shulman Steven Shulman Director April 3, 1997 /s/ Scott M. Sperling Scott M. Sperling Director April 3, 1997 /s/ Dale F. Frey Dale F. Frey Director April 3, 1997
4 BEACON PROPERTIES CORPORATION CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS
Page(s) Report of Independent Accountants F-2 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3 Consolidated Statements of Operations for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 and for the Predecessor for the period January 1, 1994 to May 25, 1994 F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 and for the Predecessor for the period January 1, 1994 to May 25, 1994 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 and for the Predecessor for the period January 1, 1994 to May 25, 1994 F-6 to F-7 Notes to Consolidated Financial Statements F-8 to F-23 Report of Independent Accountants on Financial Statement Schedules F-24 to F-29
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Beacon Properties Corporation: We have audited the consolidated balance sheets of Beacon Properties Corporation as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994. We have also audited the combined statement of operations, owners' equity and cash flows of the Predecessor, more fully described in Note 1, for the period January 1, 1994 to May 25, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Beacon Properties Corporation as of December 31, 1996 and 1995 and the consolidated results of its operations and its cash flows for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994, and the combined results of operations and cash flows of the Predecessor for the period January 1, 1994 to May 25, 1994 in conformity with generally accepted accounting principles. Boston, Massachusetts /s/ Coopers & Lybrand L.L.P. January 28, 1997 F-2 BEACON PROPERTIES CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts)
December 31, ------------------------- 1996 1995 ------------- ----------- ASSETS Real estate: Land $ 213,858 $ 43,077 Buildings, improvements and equipment 1,477,672 428,065 ------------- ----------- 1,691,530 471,142 Less accumulated depreciation 97,535 66,571 ------------- ----------- 1,593,995 404,571 Deferred financing and leasing costs, net of accumulated amortization of $16,370 and $14,509 17,321 9,486 Cash and cash equivalents 36,086 4,501 Restricted cash 2,599 2,764 Accounts receivable 11,609 6,128 Accrued rent 13,065 6,493 Prepaid expenses and other assets 1,093 8,060 Mortgage notes receivable 51,491 34,778 Investments in and advance to joint ventures and corporations 52,153 58,016 ------------- ----------- Total assets $1,779,412 $534,797 ============= =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Mortgage notes payable 452,212 70,536 Note payable, Credit Facility 153,000 130,500 Accounts payable, accrued expenses and other liabilities 41,764 14,022 Investment in joint venture 24,735 23,955 ------------- ----------- Total liabilities 671,711 239,013 ------------- ----------- Commitments and contingencies -- -- Minority interest in Operating Partnership 108,551 36,962 ------------- ----------- Stockholders' equity: Common stock, $.01 par value, authorized 100,000,000 shares, issued and outstanding 48,116,480 and 20,215,822 shares 481 202 Additional paid-in capital 1,022,110 267,727 Cumulative net income 60,047 23,715 Cumulative dividends (83,488) (32,822) ------------- ----------- Total stockholders' equity 999,150 258,822 ------------- ----------- Total liabilities and stockholders' equity $1,779,412 $534,797 ============= ===========
The accompanying notes are an integral part of these consolidated financial statements. F-3 BEACON PROPERTIES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts)
Predecessor ---------------- For the Period For the Period Year Ended Year Ended May 26, 1994 to January 1, 1994 Dec. 31, 1996 Dec. 31, 1995 December 31, 1994 to May 25, 1994 ---------------- ---------------- ------------------ ---------------- Revenues: Rental income $ 147,825 $ 71,050 $ 25,144 $5,776 Management fees 3,005 2,203 -- 1,521 Recoveries from tenants 16,719 9,742 4,488 1,040 Mortgage interest income 4,970 2,546 -- -- Other income 11,272 5,502 2,301 675 ---------------- ---------------- ------------------ ---------------- Total revenues 183,791 91,043 31,933 9,012 ---------------- ---------------- ------------------ ---------------- Expenses: Property expenses 37,211 18,090 7,034 2,086 Real estate taxes 18,124 10,217 3,325 595 General and administrative 19,331 9,755 3,122 1,399 Mortgage interest expense 30,300 15,226 4,992 2,798 Interest--amortization of financing costs 2,084 1,370 617 373 Depreciation and amortization 33,184 17,428 6,924 2,385 ---------------- ---------------- ------------------ ---------------- Total expenses 140,234 72,086 26,014 9,636 ---------------- ---------------- ------------------ ---------------- Income (loss) from operations 43,557 18,957 5,919 (624) Equity in net income of joint ventures and corporations 4,989 3,234 929 198 ---------------- ---------------- ------------------ ---------------- Income (loss) from continuing operations 48,546 22,191 6,848 (426) Discontinued operations--Construction Company: Income (loss) from operations (2,609) (12) 477 102 Loss on sale (249) -- -- -- ---------------- ---------------- ------------------ ---------------- Income (loss) before minority interest 45,688 22,179 7,325 (324) Minority interest in loss of combined partnerships -- -- -- 931 Minority interest in Operating Partnership (5,988) (4,119) (1,670) -- ---------------- ---------------- ------------------ ---------------- Income before extraordinary items 39,700 18,060 5,655 607 Extraordinary items, net of minority interest (3,368) -- -- 8,898 ---------------- ---------------- ------------------ ---------------- Net income $ 36,332 $ 18,060 $ 5,655 $9,505 ================ ================ ================== ================ Income before extraordinary items per common share $ 1.32 $ 1.09 $ .48 -- Extraordinary items per common share (0.11) -- -- -- ---------------- ---------------- ------------------ ---------------- Net income per common share $ 1.21 $ 1.09 $ .48 -- ================ ================ ================== ================ Weighted average common shares outstanding 29,932,327 16,525,245 11,816,380 -- ================ ================ ================== ================
The accompanying notes are an integral part of these consolidated financial statements. F-4 BEACON PROPERTIES CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands, except per share amounts)
Stockholders' Equity Predecessor --------------------------------------------------------------- ------------ Common Stock ---------------------- Additional Owners' Shares Paid-in Cumulative Cumulative Equity Issued Amount Capital Net Income Dividends (Deficit) ------------- --------------------- ------------- ------------ ------------ Balance at December 31, 1993 $(57,954) Net income from January 1, 1994 to May 25, 1994 9,505 Contributions and other, net of distributions from January 1, 1994 to May 25, 1994 1,083 Issuance of stock for cash-- May 26, 1994--Initial Offering 11,117,850 $111 $ 173,341 -- Issuance of stock in connection with purchase of minority interests 698,530 7 11,868 -- Charge to reflect carryover of historical basis of accounting and recognition of minority interest in Operating Partnership for continuing investors -- -- (77,600) 47,366 Net income from May 26, 1994 to December 31, 1994 -- -- -- $ 5,655 -- Dividends declared ($0.96 per share) -- -- -- -- $(11,344) -- ------------- --------------------- ------------- ------------ ------------ Balance at December 31, 1994 11,816,380 118 107,609 5,655 (11,344) -- Issuance of stock 8,341,050 84 159,236 -- -- -- Issuance of stock under dividend reinvestment and share purchase plan 25,437 -- 492 -- -- -- Issuance of stock by exercise of options 12,367 -- 216 -- -- -- Issuance of stock in exchange for Operating Partnership unit redemptions 20,588 -- 174 -- -- -- Net income -- -- -- 18,060 -- -- Dividends declared ($1.24 per share) -- -- -- -- (21,478) -- ------------- --------------------- ------------- ------------ ------------ Balance at December 31, 1995 20,215,822 202 267,727 23,715 (32,822) -- Issuance of stock 27,641,400 276 749,589 -- -- -- Issuance of stock under dividend reinvestment and share purchase plan 101,431 1 2,647 -- -- -- Issuance of stock by exercise of options 97,827 1 1,662 -- -- -- Issuance of stock in exchange for Operating Partnership unit redemptions 60,000 1 485 -- -- -- Net income -- -- -- 36,332 -- -- Dividends declared ($1.765 per share) -- -- -- -- (50,666) -- ------------- --------------------- ------------- ------------ ------------ Balance at December 31, 1996 48,116,480 $481 $1,022,110 $ 60,047 $(83,488) $ -- ============= ===================== ============= ============ ============
The accompanying notes are an integral part of these consolidated financial statements. F-5 BEACON PROPERTIES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands, except per share amounts)
Predecessor ---------------- For the Period For the Period Year Ended Year Ended May 26, 1994 to January 1, 1994 Dec. 31, 1996 Dec. 31, 1995 December 31, 1994 to May 25, 1994 ---------------- ---------------- ------------------ ---------------- Cash flows from operating activities: Net income $ 36,332 $ 18,060 $ 5,655 $ 9,505 ---------------- ---------------- ------------------ ---------------- Adjustments to reconcile net income to net cash provided by operating activities: Increase in accrued rent (6,572) (3,741) (915) (1,181) Depreciation, amortization and interest-- amortization of financing costs 35,268 18,798 7,541 2,848 Equity in net income of joint ventures and corporations (2,131) (3,222) (469) (201) Minority interest in loss of combined partnerships -- -- -- (1,519) Minority interest in Operating Partnership 5,988 4,119 1,670 -- Extraordinary items 3,368 -- -- (8,898) Deferred interest -- -- -- 367 Increase in accounts receivable (5,481) (1,746) (3,385) (376) (Increase) decrease in prepaid expenses and other assets (333) (82) 2,388 (1,940) Increase (decrease) in accounts payable, accrued expenses and other liabilities 25,243 332 (107) 1,636 ---------------- ---------------- ------------------ ---------------- Total adjustments 55,350 14,458 6,723 (9,264) ---------------- ---------------- ------------------ ---------------- Net cash provided by operating activities 91,682 32,518 12,378 241 ---------------- ---------------- ------------------ ---------------- Cash flows from investing activities: Property additions (1,088,775) (67,610) (204,582) (978) Payment of deferred leasing costs (6,157) (2,646) (1,010) (124) Decrease (increase) in prepaid expenses and other assets 5,000 (5,000) -- -- Purchase of minority interests -- -- (11,688) -- Investments in joint ventures -- -- (15,802) -- Distributions from joint ventures 8,727 3,692 1,637 -- Investments in and advance to corporations -- (41,471) (5,800) -- Cash from contributed assets -- -- 6,978 -- Restricted cash from contributed assets -- -- 420 -- Purchase of mortgage notes receivable (16,713) (34,778) -- -- Decrease (increase) in restricted cash 165 2,063 (4,827) -- ---------------- ---------------- ------------------ ---------------- Net cash used by investing activities (1,097,753) (145,750) (234,674) (1,102) ---------------- ---------------- ------------------ ----------------
The accompanying notes are an integral part of these consolidated financial statements. F-6 BEACON PROPERTIES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued (dollars in thousands, except per share amounts)
Predecessor ---------------- For the Period For the Period Year Ended Year Ended May 26, 1994 to January 1, 1994 Dec. 31, 1996 Dec. 31, 1995 December 31, 1994 to May 25, 1994 ---------------- ---------------- ------------------ ---------------- Cash flows from financing activities: Proceeds from offerings $ 754,778 $ 160,028 $173,452 $ -- Owners' contributions -- -- -- 412 Owners' distributions -- -- -- (4,329) Borrowings on Credit Facility 468,000 124,700 130,300 -- Borrowings on mortgage notes 608,000 -- -- 874 Repayments on Credit Facility (445,500) (124,500) -- -- Repayments on mortgage notes (281,814) (20,400) (49,677) (460) Advances (repayments of) amounts due to affiliates -- -- (5,355) 2,800 Payment of deferred financing costs (9,811) (2,457) (2,852) (13) Decrease (increase) in prepaid expenses and other assets 2,300 (2,300) -- -- Distributions paid to minority interests (7,631) (6,230) (1,858) -- Dividends paid to stockholders (50,666) (26,205) (6,617) -- ---------------- ---------------- ------------------ ---------------- Net cash provided (used) by financing activities 1,037,656 102,636 237,393 (716) ---------------- ---------------- ------------------ ---------------- Net increase (decrease) in cash and cash equivalents 31,585 (10,596) 15,097 (1,577) Cash and cash equivalents, beginning of period 4,501 15,097 -- 6,150 ---------------- ---------------- ------------------ ---------------- Cash and cash equivalents, end of period $ 36,086 $ 4,501 $ 15,097 $ 4,573 ================ ================ ================== ================ Supplemental disclosures: Cash paid during the period for interest $ 28,777 $ 14,738 $ 5,278 $ 2,811 Noncash activities: Acquisition of interests in properties -- -- 22,721 -- Increase in minority interest as a result of acquisition of interests in properties 74,226 -- 9,200 -- Liabilities assumed in connection with contributions and acquisitions of properties 55,529 861 93,518 -- Dividends declared to stockholders -- -- 4,727 -- Distributions declared to minority interest -- -- 1,524 -- Receivable from equity investment 781 1,057 -- -- Redemption of Operating Partnership units for common stock 486 174 -- -- Common stock issued in connection with purchase of minority interests -- -- 11,875 --
The accompanying notes are an integral part of these consolidated financial statements. F-7 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) 1. Organization, Offerings and Acquisitions: Beacon Properties Corporation (the "Company") was incorporated on March 4, 1994 as a Maryland corporation, and commenced operations effective with the completion of its initial offering on May 26, 1994. The Company qualifies as a real estate investment trust under the Internal Revenue Code of 1986, as amended. Concurrent with the initial offering, the Company contributed its interests in two properties and the net proceeds of the offering which approximated $173.5 million in exchange for an approximate 78% interest in Beacon Properties, L.P., (the "Operating Partnership"), which became the successor entity to The Beacon Group (the "Predecessor"). The Company was formed to continue and expand the commercial real estate development, construction, acquisition, leasing, design and management business of the Predecessor. Prior to the initial offering, the Predecessor was comprised of interests in 13 office properties and entities which provided design, leasing, development and construction services to each of the properties and unrelated third parties. During 1995, the Company completed three offerings totaling 8,341,050 shares of common stock. The net proceeds from these offerings totaling $159.3 million were used primarily to retire indebtedness incurred to acquire new properties and to acquire additional properties. During 1996, the Company completed three offerings totaling 27,641,400 shares of common stock. The net proceeds from these offerings totaling $749.9 million were used primarily to acquire additional properties. The following schedule summarizes the Company's interest in the properties as a result of its initial and subsequent offerings, and the related acquisition of properties and partnership interests. All properties have been consolidated by the Company and its Predecessor unless otherwise indicated in the notes:
Date Rentable Ownership Acquired by Area in Interest at Accounting the Company Square Feet 12/31/96 Method Notes ------------- ------------- -------------------------- Properties: Wellesley Office Park--Buildings 1-8, Wellesley, MA (A) 623,000 100% (E) Crosby Corporate Center, Bedford, MA (B) 336,000 100% South Station, Boston, MA (B) 149,000 100% 175 Federal Street, Boston, MA (B) 203,000 100% (E) One Post Office Square, Boston, MA (B) 764,000 50% (D) Center Plaza, Boston, MA (B) 649,000 100% Rowes Wharf, Boston, MA (B) 344,000 45% (F) 150 Federal Street, Boston, MA (B) 530,000 100% Polk and Taylor Buildings, Arlington, VA (B) 890,000 10% (G) One Canal Park, Cambridge, MA 6/10/94 100,000 100% Westwood Business Centre, Westwood, MA 6/10/94 160,000 100% Russia Wharf, Boston, MA 8/10/94 315,000 100% Westlakes Office Park--Buildings 1-3 and 5, Berwyn, PA (C) 444,000 100% 75-101 Federal Street, Boston, MA 9/29/95 812,000 52% (H) Two Oliver Street and 147 Milk Street, Boston, MA 10/6/95 271,000 100% Ten Canal Park, Cambridge, MA 12/21/95 110,000 100% Perimeter Center, Atlanta, GA 2/15/96 3,302,000 100% 1333 H Street, N.W., Washington, D.C. 8/16/96 239,000 100% AT&T Plaza, Oak Brook, IL 8/16/96 225,000 100% Tri-State International, Lincolnshire, IL 8/16/96 548,000 100% John Marshall I, McLean, VA 9/5/96 261,000 100% E.J. Randolph, McLean, VA 9/5/96 165,000 100% Continued F-8 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) Date Rentable Ownership Acquired by Area in Interest at Accounting the Company Square Feet 12/31/96 Method Notes ------------- ------------- -------------------------- Northridge I, Herndon, VA 9/5/96 124,000 100% 1300 North 17th Street, Rosslyn, VA 10/18/96 373,000 100% 1616 North Fort Myer Drive, Rosslyn, VA 10/18/96 293,000 100% New England Executive Park, Burlington, MA 11/15/96 817,000 100% The Riverview Building, Cambridge, MA 11/21/96 263,000 100% 10960 Wilshire Boulevard, Westwood, CA 11/21/96 544,000 100% Shoreline Technology Park, Mountain View, CA 12/20/96 727,000 100% Lake Marriott Business Park, Santa Clara, CA 12/20/96 400,000 100% Presidents Plaza, Chicago, IL 12/27/96 791,000 100% ------------- 15,772,000 ============= Service Entities: Beacon Construction Company, Inc. (B) 99% (I) Beacon Property Management, L.P. (B) 100% Beacon Property Management Corporation (B) 99% (I) Beacon Design Corporation (B) 99% (I) Beacon Design, L.P. (B) 100%
(A) Wellesley Building 8 was acquired May 4, 1995. Interests in the remaining Wellesley Buildings were contributed as part of the initial public offering. (B) Interests in this property or company were contributed or acquired as part of the initial public offering. (C) Westlakes Buildings 1, 3 and 5 were acquired October 21, 1994. Westlakes Building 2 was acquired July 26, 1995. (D) The Company is a general partner in the joint venture which owns the property and utilizes the equity method of accounting for its investment. (E) On October 28, 1994, the Company acquired the remaining interest in the 175 Federal Street and Wellesley 6 Joint Ventures which owned these properties. Prior to the acquisition of the remaining interest, the Company and its Predecessor used the equity method of accounting for its investments. (F) The Company owns an indirect limited partner interest and utilizes the equity method of accounting for its investment. (G) The Company owns a 1% general partner interest and a 9% limited partner interest and utilizes the equity method of accounting for its investment. (H) The Company is a shareholder in the corporation (private REIT) which owns the property and utilizes the equity method of accounting for its investment. (I) The Company used the cost method of accounting for its investments in these subsidiaries prior to 1995. The Company currently uses the equity method of accounting for its investments. (See Note 2). 2. Summary of Significant Accounting Policies: Business The Company is a self-managed and self-administered real estate investment trust (a "REIT") which currently has interests in a portfolio of 104 Class A office properties and other commercial properties containing approximately 15.8 million rentable square feet located in Boston, Atlanta, Chicago, Los Angeles, Philadelphia, San Francisco, and Washington, D.C. The Company also owns and operates commercial real estate development, acquisition, leasing, design and management businesses. The Company manages approximately 2.9 million square feet of commercial and office space owned by third parties in various locations, including Boston, Waltham, and Springfield, Massachusetts and Chicago, Illinois. F-9 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) Principles of Consolidation The accompanying financial statements of the Company have been prepared on a consolidated basis which include all the accounts of the Company, its majority owned Operating Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated. The Company's consolidated financial statements reflect the properties acquired at their historical basis of accounting to the extent of the acquisition of interests from the Predecessors' owners who continued on as investors. The remaining interests acquired from the Predecessors' owners have been accounted for as a purchase and the excess of the purchase price over the related historical cost basis was allocated to real estate. The consolidated financial statements of the Company include, along with the contributed properties of the Predecessor, significant acquisitions of properties and ownership interests subsequent to the initial public offering; consequently, the operating results of the Company are not directly comparable to the Predecessor. The accompanying financial statements of the Predecessor have been presented on a combined basis which include all of the contributed properties and the management, leasing, and design entities. Real Estate Buildings and improvements are recorded at cost and are depreciated on the straight-line and declining balance methods over their estimated useful lives of nineteen to forty years and fifteen to twenty years, respectively. The cost of buildings and improvements includes the purchase price of the property or interests in property, legal fees, acquisition costs, interest, property taxes and other costs incurred during the period of construction. The Company capitalized interest costs of $1.0 million in 1996, $0.1 million in 1995, and $0 in 1994. In accordance with Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company periodically reviews its properties to determine if its carrying costs will be recovered from future operating cash flows. In cases where the Company does not expect to recover its carrying costs, the Company would recognize an impairment loss. No such losses have been recognized to date. Tenant improvements are depreciated over the terms of the related leases. Furniture, fixtures and equipment are depreciated using straight-line and declining balance methods over their expected useful lives of five to seven years. Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations or betterments which extend the economic useful life of the assets are capitalized. Deferred Financing and Leasing Costs Deferred financing costs include fees and costs incurred to obtain long-term financings, and are amortized over the terms of the respective loans on a basis which approximates the interest method. Deferred leasing costs incurred in the successful negotiation of leases, including brokerage, legal and other costs, have been deferred and are being amortized on a straight-line basis over the terms of the respective leases. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid assets with original maturities of three months or less from the date of purchase. The majority of the Company's cash and cash equivalents are held at major commercial banks. The Company has not experienced any losses to date on its invested cash. The carrying value of the cash and cash equivalents approximate market. Restricted Cash Restricted cash consists of cash held in escrow as required by lenders to satisfy real estate taxes and tenant improvement costs. F-10 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) Investments in and Advance to Joint Ventures and Corporations The Company and Predecessor use the equity method of accounting for their earnings in property joint ventures and corporations which it does not control. Losses in excess of investments are not recorded where the Company or the Predecessor is a limited partner and has not guaranteed nor intends to provide any future financial support to the respective properties. The Company utilized the cost method in 1994 for its earnings from service corporations. In 1995, the Company adopted the accounting prescribed in Emerging Issues Task Force Issue 95-6 "Accounting by a Real Estate Investment Trust for an Investment in a Service Corporation" and utilized the equity method for its investment in and earnings of service corporations. The effect of this change on 1994 results was not material and such amounts have been reclassified to conform to the 1995 presentation. Mortgage Notes Receivable Discounts from the principal balance on mortgage notes receivable, net of acquisition costs, are amortized as interest income over the term of the related notes using the effective yield method, based on management's evaluation of the current facts and circumstances and the ultimate ability to collect the principal balance of such notes. Offering Costs Underwriting commissions and offering costs incurred in connection with the initial and subsequent offerings have been reflected as a reduction of additional paid-in capital. Revenue Recognition Base rental income is reported on a straight-line basis over the terms of the respective leases. The impact of the straight-line rent adjustment increased revenues for the Company by $6.6 million, $3.7 million and $0.9 million and increased the Company's equity in net income of property joint ventures and corporations by $0.1 million, $0.2 million and $0.3 million for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994, respectively. Construction income of the Predecessor was recognized on the percentage-of-completion method on the basis of costs incurred and expected to be incurred. Management fees are recognized when they are earned. Income Taxes The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with its taxable period ended December 31, 1994. As a result, the Company will generally not be subject to federal income tax on its taxable income at corporate rates to the extent it distributes annually at least 95% of its taxable income to its shareholders and complies with certain other requirements. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements. Certain subsidiaries are subject to federal and state income tax on their taxable income at regular corporate rates. The Predecessor was not a legal entity subject to income taxes. No federal or state income taxes were applicable to the entities that managed and owned the properties; accordingly, none have been provided in the accompanying combined financial statements. Interest Rate Protection Agreements The Company has entered into interest rate protection agreements to reduce the impact of certain changes in interest rates on its variable rate debt. These agreements are accounted for as a hedge. Amounts paid for the agreements are amortized over the lives of the agreements on a basis which approximates the interest method. F-11 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) Payments under interest rate swap agreements are recognized as adjustments to interest expense when incurred. The Company's policy is to write-off unamortized amounts paid under interest rate protection agreements, when the related debt is paid off or there is a termination of the agreements prior to their maturity. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate protection agreements. However, the Company does not anticipate nonperformance by the counterparties. Per Share Data The assumed exercise of outstanding share options, using the treasury stock method, is not dilutive and, therefore, such amounts are not presented (see Note 9). The income tax status of dividends declared during the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 are as follows: 1996 1995 1994 ---- ---- ---- Ordinary income 91% 87% 66% Return of capital 9% 13% 34% Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Reclassifications Certain prior year balances have been reclassed to conform with current year presentation. 3. Accounts Receivable: December 31, -------------------- 1996 1995 --------- --------- Tenants $ 5,072 $2,137 Other 4,228 1,006 Affiliates 3,683 3,322 Allowance for uncollectible amounts (1,374) (337) --------- --------- Total $11,609 $6,128 ========= ========= 4. Mortgage Notes Receivable: The Company acquired a fifty percent interest in certain mortgage notes collateralized by property owned by a joint venture in which the Company has an indirect interest. The terms of the notes require interest-only payments at 8.71% quarterly on a principal balance of approximately $63.0 million and are due on April 1, 1999. The term may be extended for up to three years under certain conditions. The Company also has an option to purchase from an affiliate other mortgages collateralized by the same property. F-12 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) 5. Investments in and Advance to Joint Ventures and Corporations: The following is summarized financial information for the property joint ventures and corporation: December 31, ------------------------- 1996 1995 ------------ ------------ Balance sheets: Real estate, net $ 410,207 $ 419,096 Other assets 51,669 55,714 ------------ ------------ Total assets $461,876 $474,810 ============ ============ Mortgage notes payable 377,754 380,827 Loans and notes payable 72,136 68,606 Other liabilities 13,040 14,072 Partners' and shareholders' equity (deficiency) (1,054) 11,305 ------------ ------------ Total liabilities and equity (deficiency) $461,876 $474,810 ============ ============
Predecessor --------------- May 26, 1994 to Jan. 1, 1994 to 1996 1995 Dec. 31, 1994 May 25, 1994 ----------- -------------------------- --------------- Summary of operations: Rentals $117,283 $ 91,048 $ 59,983 $ 38,386 Other income 3,453 3,861 5,717 2,941 Operating expenses (61,086) (49,472) (34,688) (22,632) Mortgage interest expense (28,712) (23,232) (16,261) (13,432) Depreciation and amortization (18,592) (14,537) (11,427) (8,228) ----------- -------------------------- --------------- Net income (loss) $ 12,346 $ 7,668 $ 3,324 $ (2,965) =========== ========================== ===============
A reconciliation of interests in the underlying net assets to the Company's carrying value of property investments in joint ventures and corporation is as follows:
December 31, ---------------------- 1996 1995 ----------- ---------- Partners' and shareholders' equity (deficiency), as above $(1,054) $11,305 Deficits of other partners and shareholders 23,532 13,259 ----------- ---------- Company's share of equity 22,478 24,564 Excess of cost of investments over the net book value of underlying net assets, net of amortization and accumulated amortization of $122 and $75, respectively 1,310 1,357 ----------- ---------- Carrying value of property investments in joint ventures and corporation $23,788 $25,921 =========== ==========
F-13 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) The following is summarized financial information for the service corporations:
December 31, --------------------- 1996 1995 ------------------- Balance sheets: Equipment, net $ 1,806 $ 715 Other assets 34,155 29,560 ------------------- Total assets $35,961 $30,275 =================== Other liabilities 37,360 27,124 Shareholders' equity (deficiency) (1,399) 3,151 ------------------- Total liabilities and equity (deficiency) $35,961 $30,275 ===================
May 26, 1994 to 1996 1995 Dec. 31, 1994 ------------ ------------ --------------- Summary of operations: Construction income $ 140,903 $ 108,913 $ 52,429 Consulting and management fees 2,537 7,576 4,848 Interest and other income 266 383 184 Construction, consulting and management fee costs (141,167) (110,835) (52,388) General and administrative expense (5,121) (4,880) (3,564) Depreciation and amortization (584) (336) (186) Minority interest in net income of joint venture (52) (130) (90) Interest expense to stockholder -- (650) -- ------------ ------------ --------------- Net income (loss) $ (3,218) $ 41 $ 1,233 ============ ============ ===============
A reconciliation of the underlying net assets to the Company's carrying value of investments in and advance to service corporations is as follows:
December 31, ----------------------- 1996 1995 ----------- ----------- Shareholders' equity (deficiency), as above $ (1,399) $ 3,151 Less equity (deficiency) of other shareholders (29) 11 ----------- ----------- Company's share of equity (deficiency) (1,370) 3,140 Advance 5,000 5,000 ----------- ----------- Carrying value of investments in and advance to service corporations 3,630 8,140 Carrying value of property investments in joint ventures and corporation, as above 23,788 25,921 ----------- ----------- Total $ 27,418 $ 34,061 =========== =========== Per consolidated balance sheet: Investments in and advance to joint ventures and corporations $ 52,153 $ 58,016 Investment in joint venture (24,735) (23,955) ----------- ----------- Total $ 27,418 $ 34,061 =========== ===========
F-14 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) 6. Mortgage Notes Payable: The mortgage notes payable, collateralized by the certain properties and assignment of leases, are as follows:
December 31, ---------------------- 1996 1995 ----------- ---------- Mortgage notes with fixed interest at: 8.00% maturing July 1, 1998 $ 12,970 $13,236 6.67% maturing November 1, 1998 56,920 57,300 7.23% maturing February 1, 2003 55,000 -- 7.23% maturing March 1, 2003 60,000 -- 7.08% maturing March 31, 2006 218,000 -- 8.19% maturing January 1, 2007 15,000 -- 8.19% maturing January 1, 2007 13,600 -- 8.38% maturing December 1, 2008 20,722 -- ----------- ---------- Total mortgage notes payable $452,212 $70,536 =========== ==========
The Company's restricted cash consists of cash required by these mortgages to be held in escrow for capital expenditures and/or real estate taxes. Scheduled maturities of mortgage notes payable are as follows: 1997 $ 2,127 1998 72,611 1999 6,602 2000 7,608 2001 8,171 Thereafter 355,093 -------- Total $452,212 ======== The Company computes the fair value of its mortgage notes payable based upon the discounted cash flows at a discount rate that approximates the Company's effective borrowing rate and the Company has determined that the fair value of its mortgage notes approximates their carrying value. In March 1996, the Company repaid a debt and recorded an extraordinary item of $1.9 million, net of minority interest, in connection with the write-off of fees and costs to acquire the debt. The extraordinary item during the period January 1, 1994 through May 25, 1994 represents the gains resulting from the settlement of certain mortgage notes payable. As the prepayments were a condition to transfering the assets to the Company, these items were recorded by the Predecessor entity. 7. Note Payable, Credit Facility: The Company has a three-year, $300 million revolving credit facility (the "Credit Facility"). The Credit Facility matures in June 1999 and is secured by cross-collateralized mortgages and assignment of rents on certain properties. Outstanding balances under the Credit Facility 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 (1.75%). The Company has an interest rate protection agreement through May 1997 with respect to $135 million of the Credit Facility, which provides for offsetting payments to the Company in the event that 90-day LIBOR exceeds 9.47% per annum. Effective May 1997 through May 1999, the Company has an interest rate protection agreement with respect to $137.5 million of the Credit Facility, which provides for offsetting F-15 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) payments to the Company in the event that 90-day LIBOR exceeds 8.75% per annum. This interest rate protection arrangement may be applied during any four quarters in the period from May 1997 to May 1999. The outstanding balance of the Credit Facility at December 31, 1996 was $153.0 million. The weighted average amount outstanding during the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 was $42.3 million, $99.7 million and $50.4 million, respectively. The weighted average interest rate on amounts outstanding during the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 was approximately 7.78%, 8.25% and 7.57%, respectively. The applicable interest rate under the Credit Facility at December 31, 1996 was 8.25%. Based upon the Credit Facility's variable interest rate and the Company's determination of the fair value of its interest rate agreement based upon the quoted market prices of similar instruments, the Company has determined that the fair value of these instruments approximate their carrying value. As a result of the substantial modification of the terms of the Credit Facility in June 1996, the Company recorded an extraordinary item of $1.5 million, net of minority interest, in connection with the write-off of fees and costs relating to the prior Credit Facility. 8. Accounts Payable, Accrued Expenses and Other Liabilities:
December 31, -------------------- 1996 1995 --------- --------- Accounts payable and accrued expenses $29,904 $ 8,092 Deferred liability 4,912 1,164 Affiliates 1,258 2,952 Other liabilities 504 647 Security deposits 5,186 1,167 --------- --------- Total $41,764 $14,022 ========= =========
9. Stockholders' Equity: Stock Option Plans During 1994, the Company adopted the 1994 Stock Option Plan, which initially reserved 1,102,080 shares of common stock. In May, 1996 the 1994 Stock Option Plan was amended to reserve an additional 1,621,485 shares of common stock. The 1994 Stock Option Plan is administered by the Compensation Committee of the Board of Directors (the "Committee") and officers and certain other employees of the Company are eligible to participate. Non-employee Directors of the Company are eligible to receive stock options under the 1994 Stock Option Plan on a limited basis. The 1994 Stock Option Plan authorizes (i) the grant of stock options that qualify as incentive stock options under Section 422 of the Code ("ISOs"), (ii) the grant of stock options that do not so qualify ("NQSOs"), (iii) the grant of stock options in lieu of cash for Directors' fees and employee bonuses, (iv) grants of shares of common stock contingent on the attainment of performance goals or subject to other restrictions, and (v) grants of shares of common stock in lieu of cash compensation. The exercise price of stock options will be determined by the Committee, but may not be less than 100% of the fair market value of the shares of Common Stock on the date of grant in the case of ISOs. However, in the case of grants of NQSOs granted in lieu of cash for Directors' fees and employee bonuses, the exercise price may not be less than 50% of the fair market value of the shares of common stock on the date of grant. NQSOs granted under the 1994 Stock Option Plan may, if approved by the Committee, accrue annually a dividend equivalent right which will entitle the option-holder to receive additional shares of common stock upon the exercise of the option. The Company has reserved 29,425 shares of common stock for issuance under the 1994 Stock Option Plan. Options issued vest at such time or times as determined by the F-16 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) Committee except for options issued to independent directors which vest on the date of grant. All options have a term of ten years from the grant date. In October 1996, the Company adopted the 1996 Stock Option Plan (the "1996 Plan"), which provides for the granting of options to purchase up to an aggregate of 750,000 shares of common stock to all employees other than the senior executive officers of the Company. The Company has reserved 168,500 shares of common stock for issuance under the 1996 Option Plan. The term of each option is fixed by the Committee. The Committee also determines at what time or times each option becomes vested and exercisable and, subject to the terms of the Plan, the period of time, if any, after death, disability, or termination of employment during which options may be exercised. The Committee may accelerate the exercisability of any option at any time. Changes in options outstanding under the 1994 and 1996 plans during the period were as follows:
Option Price --------------- Number Of Shares Per Share Under Option Average --------------- --------------- Granted at Initial Offering 630,250 $17.00 Granted May-December 1994 27,500 18.16 Canceled May-December 1994 (15,750) 17.00 --------------- --------------- Shares under Option at December 31, 1994 642,000 17.05 Exercised--1995 (12,367) 17.46 Granted--1995 414,000 20.14 Canceled--1995 (9,662) 17.00 --------------- --------------- Shares under Option at December 31, 1995 1,033,971 18.28 Exercised--1996 (97,827) 17.00 Granted--1996 2,236,550 28.72 Canceled--1996 (7,248) 19.16 --------------- --------------- Shares under option at December 31, 1996 3,165,446 25.69 =============== =============== Options available for grant at beginning of year 55,826 -- Options available for grant at end of year 197,925 --
The Company applies Accounting Principles Board Opinion No. 25 and related Interpretations in accounting for its plans. Financial Accounting Standards Board Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123") was issued in 1995 and, if fully adopted, changes the methods for recognition of cost on plans similar to those of the Company. Adoption of SFAS 123 is optional; however, had compensation cost for the Company's 1996 grants for stock-based compensation plans been determined consistent with SFAS 123, the Company's net income, net income applicable to common shareholders, and net income per common share would approximate the pro forma amounts below:
1996 1995 ------------------- Net income: As reported $36,332 $18,060 Pro forma (unaudited) 35,530 18,007 Net income per common share: As reported 1.21 1.09 Pro forma (unaudited) 1.19 1.09
The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts. SFAS 123 does not apply to awards prior to 1995, and additional awards in future years are anticipated. F-17 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) The fair value of each option granted under SFAS 123, estimated on the date of grant using the Black-Scholes option-pricing model, is $3.38 for 1996 and $2.04 for 1995. The following table presents the annualized weighted- average values of the significant assumptions used to estimate the fair values of the options:
1996 1995 ------- -------- Risk-free interest rate 6.22% 5.45% Expected life in years 6.0 6.0 Expected volatility 16.6% 16.1% Expected dividend yield 6.0% 6.0%
The following table summarizes information about options outstanding at December 31, 1996:
Options Outstanding Options Exercisable - ---------------------------------------------------- --------------------------------------- Weighted Weighted Weighted Number Average Average Number Average Range of Outstanding Remaining Exercise Exercisable Exercise Exercise Prices at 12/31/96 Contractual Life Price at 12/31/96 Price ------------------ -------------- ---------------------------- -------------- ------------ $12.0625 - $15.0000 2,614 9.48 $13.4150 2,576 $ 13.4230 17.0000 - 17.0000 497,396 7.38 17.0000 300,998 17.0000 17.1875 - 18.3125 22,936 7.54 18.1680 20,437 18.1580 20.1250 - 20.1250 395,000 8.92 20.1250 136,685 20.1250 20.3750 - 25.8750 426,000 9.28 24.9049 26,000 22.4807 26.0000 - 26.7500 35,000 9.49 26.2142 15,000 26.0000 29.6250 - 29.6250 1,779,500 9.85 29.6250 0 0.0000 31.0000 - 31.0000 1,000 9.89 31.0000 0 0.0000 31.5000 - 31.5000 1,000 9.90 31.5000 0 0.0000 32.2500 - 32.2500 5,000 9.94 32.2500 0 0.0000 -------------- ---------------------------- -------------- ------------ 12.0625 - 32.2500 3,165,446 9.25 $25.6915 501,696 $18.4333 ============== ============================ ============== ============
Stock Purchase Plan In 1995, the Company instituted a dividend reinvestment and stock purchase plan for holders of the Company's stock. The plan permits shareholders to automatically reinvest their cash dividends or invest limited amounts of cash payments in newly issued shares or open market purchases of the Company's common stock. At December 31, 1996 and 1995, there were 373,132 and 474,563 shares reserved for issuance under the dividend reinvestment and stock purchase plan. 10. Transactions with Affiliates:
Predecessor --------------- May 26, 1994 to Jan. 1, 1994 to 1996 1995 Dec. 31, 1994 May 25, 1994 -------- -------- --------------- --------------- Management, design and construction fees and interest income $9,176 $ 5,640 $1,809 Administrative salaries and expenses -- -- 469 Construction costs 8,352 11,108 $241 --
In 1995, the Company entered into an agreement to lease its corporate offices from a joint venture in which the Company has an indirect interest. It previously subleased corporate office space from another affiliate. Rental expense related to these arrangements was $1.3 million, $0.3 million and $0.1 million for the years ended December 31, 1996 and 1995 and the period from May 26, 1994 to December 31, 1994, respectively. F-18 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) Future minimum rental payments at December 31, 1996 for the Company's corporate offices are $1.3 million for 1997, $1.4 million for 1998 through 2001, and $1.0 million for 2002. 11. Minority Interests: Minority Interest in Operating Partnership Minority interest in the Operating Partnership relates to the portion which is not owned by the Company and, at December 31, 1996, amounted to 11.5%. In conjunction with the formation of the Company persons contributing interests in properties to the Operating Partnership elected to receive either common stock of the Company or interests in the Operating Partnership ("Units"). Each Unit may be redeemed for cash equal to the fair market value of a share of common stock at the time of redemption or, at the option of the Company, one share of common stock. When a unitholder redeems a Unit for a share of common stock or cash, minority interest is reduced and the Company's investment in the Operating Partnership is increased. At December 31, 1996 and 1995, 6,273,928 and 3,788,549 units were outstanding, respectively. Minority Interest in Combined Partnerships This amount presented in the financial statements of the Predecessor represents the losses of the properties in excess of capital of owners, who will continue to hold their respective economic interest in the combined partnerships, and are capable of funding their share of future capital calls. 12. Commitments and Contingencies: Pension Plan The Company participates in a defined-benefit pension plan with some of its affiliates. This plan covers substantially all full-time non-union employees. The Company's portion of pension expense for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 was $0.2 million, $0.1 million, and $0.1 million, respectively. The Predecessor's comparable allocated portion of pension expense amounted to $0.1 million for the period January 1, 1994 to May 25, 1994. 401K Plan The eligible employees of the Company participate in a contributory savings plan with some of its affiliates. Under the plan, the Company may match contributions made by eligible employees based on a percentage of the employee's salary. The Company matches 25% of contributions up to 3% of such employee's salary (up to $30,000). The matching amount may be changed from time to time by the Board of Directors. Expenses under this Plan for 1995, 1994 and 1993 were not material. Contingencies The Company is subject to various legal proceedings and claims that arose in the ordinary course of business. These matters are generally covered by insurance. Management believes that the final outcome of such matters will not have a material adverse effect on the financial position, results of operations or liquidity of the Company. Lease The South Station property is subject to a ground lease expiring in 2024. The lease provides for two 15-year extension options. Under certain conditions, the lessor reserves the right to terminate the lease at the end of the initial term or at the end of the first extension period and pay the lessee an amount based on a formula payment F-19 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) of fair value. The minimum rents in connection with the lease are substantially based on percentage rent until 1997. The Company is obligated to provide loans to the lessor under certain conditions subject to a maximum of $0.9 million. As of December 31, 1996, no such loans were outstanding. Environmental A former tenant of Crosby Corporate Center has agreed to perform the necessary investigation and cleanup actions regarding remediation of possible contamination, bear all costs associated with such cleanup activities and indemnify the Company for any costs or damages it incurs in connection with such contamination. As the owner of the property, however, the Company could be held liable for the costs of such activities if the former tenant fails to undertake such actions. As a lessee of certain property, the Company has received an indemnity from the owner to the extent the Company is assessed costs relating to environmental cleanup. Site assessments at the New England Executive Park have identified contamination in the groundwater at a monitoring well which flows into an aquifer, which supplies drinking water to the Town of Burlington. The Town of Burlington has allocated funds for, and is in the process of constructing, a groundwater treatment facility at its drinking water supply that draws from the subject aquifer. The Company has been advised that such treatment facility has the capacity to treat any contaminants which may be derived from the groundwater passing beneath the New England Executive Park. Based on site assessments performed at The Riverview Building which have identified the presence of oil that slightly exceeds the concentration that requires reporting to the Massachusetts Department of Environmental Protection, an environmental consultant has advised the Company that applicable regulatory requirements can be satisfied without the need to perform any remediation at the property. In connection with the acquisition of the John Marshall land, the sellers have reported the findings of contamination to the Virginia Department of Environmental Quality and have retained an environmental consultant to prepare a remediation plan. Units valued at approximately $1.0 million were escrowed from the purchase price to be released to the seller upon performance of remediation pursuant to a remediation plan approved by the Company. The escrow further provides that the Company may receive some or all of the remaining escrowed Units upon certain conditions. The Company does not believe that any costs, if incurred, in connection with these environmental matters would have a material adverse effect on the financial position, results of operations, or liquidity of the Company. Other The Company guarantees the surety bonds of an affiliate in an amount up to $5.0 million. The Company has an obligation to pay $17.0 million in connection with the acquisition of real estate upon the achievement of conditions regarding occupancy or rental income levels. In connection with the acquisition of the John Marshall I, E. J. Randolph and Northridge I properties, the Company has agreed to maintain the non-recourse financing assumed from the sellers for a five year period and not to dispose of the property for a seven year period. If the Company should choose not to maintain the non-recourse provisions of the existing or new debt, or sell the properties, within these respective time periods it shall be required to make payments to the sellers of approximately $6.0 million in 1997, reducing ratably to zero through 2003. F-20 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) 13. Segment Information: The Predecessor operated principally in three segments: rental operations, property management, and construction. Revenues for the management segment include management revenues earned from the rental operations segment which are subsequently eliminated in consolidation. Income (loss) from operations consists of total revenues less total expenses excluding the effects of the following items: equity in net income (loss) of joint ventures, minority interest in loss of combined partnerships and extraordinary gain.
Rental Management Construction Elimination Total ---------------------- --------------- -------------- ---------- January 1, 1994--May 25, 1994 Revenues $ 7,610 $1,766 $24,238 $(364) $33,250 Income (Loss) from Operations (1,848) 1,260 102 (36) (522) Identifiable Assets 63,335 283 14,141 (289) 77,470 Depreciation and Amortization 2,383 2 91 -- 2,476 Capital Expenditures 837 -- 141 -- 978
14. Future Minimum Rents: Future minimum rentals to be received under noncancelable tenant leases in effect at December 31, 1996 are as follows:
1997 $ 188,032 1998 175,732 1999 170,086 2000 143,288 2001 113,718 Thereafter 370,698 ---------- Total $1,161,554 ==========
15. Geographic Concentration: The Company owns properties with a total cost at December 31, 1996 as follows:
Downtown Boston $ 284,574 Suburban Boston 279,987 Suburban Atlanta 343,014 Suburban Philadelphia 59,018 Suburban Virginia 178,166 Suburban Los Angeles 133,307 Suburban San Francisco 184,207 Suburban Chicago 175,819 Downtown Washington 53,438 ---------- Total $1,691,530 ==========
F-21 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts) 16. Selected Quarterly Financial Information: (unaudited) The following schedule is a summary of the quarterly results of operations for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994:
First Second Third Fourth Quarter Quarter Quarter Quarter Total --------- --------- --------- --------- ----------- Year Ended December 31, 1996 Revenue $33,668 $41,438 $46,602 $62,082 $183,791 Income from continuing operations 6,899 10,053 11,603 15,002 43,557 Discontinued operations--Construction Company: Loss from operations (407) (663) (841) (698) (2,609) Loss on sale -- -- -- (249) (249) Extraordinary items, net of minority interest (1,726) (1,642) -- -- (3,368) Net income 4,994 7,550 10,524 13,265 36,332 Net income per common share 0.23 0.28 0.34 0.34 1.21
First Second Third Fourth Quarter Quarter Quarter Quarter Total --------- --------- --------- --------- ---------- Year Ended December 31, 1995 Revenue $20,801 $22,124 $23,595 $24,523 $91,043 Income from continuing operations 3,498 4,620 5,510 5,329 18,957 Discontinued operations--Construction Company: Loss from operations -- -- (12) -- (12) Net income 3,081 4,151 5,088 5,740 18,060 Net income per common share 0.25 0.26 0.29 0.28 1.09
Second Third Fourth Period Quarter Quarter Total -------- --------- --------- ---------- May 26, 1994--December 31, 1994 Revenue $3,997 $11,387 $16,549 $31,933 Income from continuing operations 784 1,578 3,557 5,919 Discontinued operations--Construction Company: Income from operations 42 165 270 477 Net income 826 1,826 3,003 5,655 Net income per common share 0.07 0.15 0.26 0.48
17. Pro Forma Results: (unaudited) The following unaudited pro forma operating results for the Company have been prepared as if capital contributions and property acquisitions during 1995 and 1996 had occurred on January 1, 1995. 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, 1995, nor does it purport to represent the results of operations for future periods. Pro forma results have not been presented for 1994 as the Company operations did not commence until May 26, 1994. F-22 BEACON PROPERTIES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued (dollars in thousands, except per share amounts)
December 31, ----------------------- 1996 1995 ----------- ----------- Revenues $299,147 $266,882 Income before extraordinary items 74,845 69,894 Net income 71,416 69,894 Net income per common share 1.48 1.45
18. Discontinued Operations: On December 31, 1996, certain assets of the Construction Company were sold. These assets included fixed assets, general construction contracts in progress, and the receivables and payables related to these contracts. All employees were transferred to the buyer who is expected to complete all outstanding construction work for projects not purchased as part of the sale. 19. Subsequent Events: Declaration of Dividend On January 28, 1997, the Company declared a quarterly dividend of $0.4625 per common share, payable on February 28, 1997 to shareholders of record on February 10, 1997. F-23 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors and Stockholders of Beacon Properties Corporation: Our report on the consolidated financial statements of Beacon Properties Corporation is included on page F-1 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the Item 14(a) of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Boston, Massachusetts /s/ Coopers & Lybrand L.L.P. January 28, 1997 F-24 Schedule III BEACON PROPERTIES CORPORATION REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1996 (dollars in thousands)
Initial Cost --------------------------- Buildings and Description Encumbrances Land Improvements - ----------- ------------ ----------- --------------- Commercial Property: Wellesley Office Park--Buildings 1-8--Wellesley, MA $ 55,000 $ 9,110 $ 75,829 Crosby Corporate Center--Bedford, MA --(1) 978 10,478 South Station--Boston, MA -- -- 21,487 175 Federal St.--Boston, MA 12,970 1,404 24,505 Center Plaza--Boston, MA 60,000 7,301 65,712 150 Federal St.--Boston, MA 56,920(2) 11,265 101,280 One Canal Park--Cambridge, MA --(1) 931 8,444 Ten Canal Park--Cambridge, MA --(1) 1,179 10,609 Two Oliver Street--Boston, MA --(1) 1,796 16,166 Westwood Business Centre--Westwood, MA --(1) 1,159 10,498 Russia Wharf--Boston, MA --(1) 1,442 12,974 Westlakes Office Park--Buildings 1, 2, 3 and 5--Berwyn, PA --(1) 6,335 46,267 Perimeter Center--Atlanta, GA 218,000 46,438 292,305 AT&T Plaza--Oak Brook, IL --(1) 3,510 31,587 Tri-State International--Lincolnshire, IL --(1) 6,222 55,999 1333H Street, N.W.--Washington, D.C. --(1) 5,337 48,033 E.J. Randolph--McLean, VA 15,000 3,590 19,520 John Marshall I--McLean, VA 20,722 5,996 27,991 Northridge I--Herndon, VA 13,600 1,911 19,264 1300 North 17th Street--Rosslyn, VA --(1) 8,007 46,758 1616 North Fort Myer Drive--Rosslyn, VA --(1) 6,156 38,651 New England Executive Park--Burlington, MA --(1) 7,067 68,259 10960 Wilshire Boulevard--Westwood, CA -- 11,200 122,039 The Riverview Building--Cambridge, MA -- 4,513 40,616 Shoreline Technology Park--Mountain View, CA -- 39,547 101,444 Lake Marriott Business Park--Santa Clara, CA -- 12,032 31,128 Presidents Plaza--Chicago, IL -- 7,750 69,752 --------------- ----------- --------------- $ 452,212 $212,176 $1,417,595 =============== =========== ===============
F-25 Schedule III BEACON PROPERTIES CORPORATION REAL ESTATE AND ACCUMULATED DEPRECIATION--Continued December 31, 1996 (dollars in thousands) Cost Capitalized
Subsequent Gross Amount at Which to Acquisition Carried at Close of Period ----------------------- ----------------------------------------- Buildings Buildings and and Description Land Improvements Land Improvements Total - ----------- -------- -------------- ----------- --------------- ------------ Commercial Property: Wellesley Office Park--Buildings 1-8-- Wellesley, MA -- $12,866 $ 9,110 $ 88,695 $ 97,805 Crosby Corporate Center--Bedford, MA $1,505 14,880 2,483 25,358 27,841 South Station--Boston, MA -- 861 -- 22,348 22,348 175 Federal St.--Boston, MA -- 3,196 1,404 27,701 29,105 Center Plaza--Boston, MA -- 8,810 7,301 74,522 81,823 150 Federal St.--Boston, MA -- 1,326 11,265 102,606 113,871 One Canal Park--Cambridge, MA -- 139 931 8,583 9,514 Ten Canal Park--Cambridge, MA -- 135 1,179 10,744 11,923 Two Oliver Street--Boston, MA -- 1,376 1,796 17,542 19,338 Westwood Business Centre--Westwood, MA -- 674 1,159 11,172 12,331 Russia Wharf--Boston, MA 177 3,496 1,619 16,470 18,089 Westlakes Office Park--Buildings 1, 2, 3 and 5--Berwyn, PA -- 6,416 6,335 52,683 59,018 Perimeter Center--Atlanta, GA -- 4,271 46,438 296,576 343,014 AT&T Plaza--Oak Brook, IL -- 18 3,510 31,605 35,115 Tri-State International--Lincolnshire, IL -- 950 6,222 56,949 63,171 1333H Street, N.W.--Washington, D.C. -- 68 5,337 48,101 53,438 E.J. Randolph--McLean, VA -- 36 3,590 19,556 23,146 John Marshall I--McLean, VA -- 147 5,996 28,138 34,134 Northridge I--Herndon, VA -- 41 1,911 19,305 21,216 1300 North 17th Street--Rosslyn, VA -- 11 8,007 46,769 54,776 1616 North Fort Myer Drive--Rosslyn, VA -- 87 6,156 38,738 44,894 New England Executive Park--Burlington, MA -- 64 7,067 68,323 75,390 10960 Wilshire Boulevard--Westwood, CA -- 68 11,200 122,107 133,307 The Riverview Building--Cambridge, MA -- 54 4,513 40,670 45,183 Shoreline Technology Park--Mountain View, CA -- 49 39,547 101,493 141,040 Lake Marriott Business Park--Santa Clara, CA -- 7 12,032 31,135 43,167 Presidents Plaza--Chicago, IL -- 31 7,750 69,783 77,533 --------- ------------- ----------- --------------- ------------ $1,682 $60,077 $213,858 $1,477,672 $1,691,530 ========= ============= =========== =============== ============
F-26 Schedule III BEACON PROPERTIES CORPORATION REAL ESTATE AND ACCUMULATED DEPRECIATION--Continued December 31, 1996 (dollars in thousands)
Life on Which Depreciation in Latest Date of Income Accumulated Construction/ Date Statements Description Depreciation Renovation Acquired is Computed - ----------- --------------- --------------- --------------- --------------- Commercial Property: Wellesley Office Park--Buildings 1-8-- Wellesley, MA $33,913 1963-1984 1994/1995 (3) Crosby Corporate Center--Bedford, MA 6,702 1981 5/26/94 (3) South Station--Boston, MA 13,434 1988 5/26/94 (3) 175 Federal St.--Boston, MA 7,258 1977 10/28/94 (3) Center Plaza--Boston, MA 5,884 1966-1969 12/01/94 (3) 150 Federal St.--Boston, MA 8,961 1988 5/26/94 (3) One Canal Park--Cambridge, MA 770 1987 6/10/94 (3) Ten Canal Park--Cambridge, MA 386 1987 12/20/95 (3) Two Oliver Street--Boston, MA 783 1982-1988 10/06/95 (3) Westwood Business Centre--Westwood, MA 1,083 1985 6/10/94 (3) Russia Wharf--Boston, MA 1,453 1978-1982 8/10/94 (3) Westlakes Office Park--Buildings 1, 2, 3 and 5--Berwyn, PA 3,931 1988-1990 7/95 & 10/94 (3) Perimeter Center--Atlanta, GA 8,822 1970-1989 2/15/96 (3) AT&T Plaza--Oak Brook, IL 395 1984 8/16/96 (3) Tri-State International--Lincolnshire, IL 710 1986 8/16/96 (3) 1333H Street, N.W.--Washington, D.C. 601 1984 8/16/96 (3) E.J. Randolph--McLean, VA 217 1983 9/05/96 (3) John Marshall I--McLean, VA 306 1981 9/05/96 (3) Northridge I--Herndon, VA 214 1988 9/05/96 (3) 1300 North 17th Street--Rosslyn, VA 325 1980 10/18/96 (3) 1616 North Fort Myer Drive--Rosslyn, VA 271 1974 10/18/96 (3) New England Executive Park--Burlington, MA 291 1970-1985 11/15/96 (3) 10960 Wilshire Boulevard--Westwood, CA 439 1971-1992 11/21/96 (3) The Riverview Building--Cambridge, MA 170 1985-1986 11/21/96 (3) Shoreline Technology Park--Mountain View, CA 141 1985-1991 12/20/96 (3) Lake Marriott Business Park--Santa Clara, CA 43 1981 12/20/96 (3) Presidents Plaza--Chicago, IL 32 1980-1982 12/27/96 (3) ------- $97,535 =======
(1) These properties are collateral for a Note Payable under the Credit Facility. The outstanding balance under the Note at December 31, 1996 is $153,000. (2) This property is comprised of two Units. Unit A is collateral for a Note Payable under the Credit Facility. Unit B is collateral for a Mortgage Note Payable in the amount of $56,920. (3) Buildings and improvements--19 to 40 years; Personal property--5 to 10 years; tenant improvements--over the terms of the related leases. F-27 Schedule III BEACON PROPERTIES CORPORATION REAL ESTATE AND ACCUMULATED DEPRECIATION--Continued December 31, 1996 (dollars in thousands) Depreciation of building and improvements and personal property is calculated over the following estimated useful lives, using straight line and declining balance methods: Buildings and improvements--19 to 40 years Tenant Improvements--over the terms of the related leases Personal property--5 to 10 years The aggregate cost for federal income tax purposes was approximately $1,390.3 million at December 31, 1996. The changes in total real estate assets for the years ended December 31, 1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period January 1, 1994 to May 25, 1994 are as follows:
Company Predecessor ------------------------------------------ --------------- May 26, 1994 Jan. 1, 1994 to to 1996 1995 Dec. 31, 1994 May 25, 1994 ------------- ----------- ---------------- --------------- Balance, beginning of period $ 471,142 $400,419 $207,013* $81,220 Acquisitions, Construction Costs and Improvements 1,220,388 70,723 193,406 978 ------------- ----------- ---------------- --------------- Balance, end of period $1,691,530 $471,142 $ 400,419 $82,198 ============= =========== ================ ===============
* Represents initial acquisition cost of properties in the formation of the Company. The changes in accumulated depreciation for the years ended December 31, 1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period January 1, 1994 to May 25, 1994 are as follows:
Company Predecessor ------------------------------------- --------------- May 26, 1994 Jan. 1, 1994 to to 1996 1995 Dec. 31, 1994 May 25, 1994 --------- --------- ---------------- --------------- Balance, beginning of period $66,571 $51,115 $45,044** $37,167 Depreciation for period 30,964 15,456 6,071 2,055 --------- --------- ---------------- --------------- Balance, end of period $97,535 $66,571 $ 51,115 $39,222 ========= ========= ================ ===============
** Balance reflects prior accumulated depreciation carried over due to accounting for formation acquisitions as poolings of interests. F-28 Schedule IV BEACON PROPERTIES CORPORATION MORTGAGE LOANS ON REAL ESTATE December 31, 1996 (dollars in thousands)
Principal Amount of Final Periodic Face Carrying Loans Subject to Interest Maturity Payment Prior Amount of Amount of Delinquent Principal Commercial Property Rate Date Term Liens Mortgages Mortgages (1) or Interest - --------------------- --------- ------------------------- ------ ------------ -------------- --------------------- Rowes Wharf Boston, MA 8.71% 4/1/99 Interest-only -- $63,000 $51,491 --
(1) The aggregate cost of the Company's mortgage loans for federal income tax purposes was $51,491 at December 31, 1996. Reconciliation of Mortgage Loans on real estate for the year ended December 31:
1996 ---------- Balance at beginning of year $34,778 Additions during period: Acquisition of mortgage loans 16,713 Deductions during period: Principal collections -- ---------- Balance at end of year $51,491 ==========
F-29 EX-23.1 2 CONSENTS OF EXPERTS AND COUNSEL CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-05707, 333-21787 and 333-21769) and Form S-8 (File Nos. 33-88606 and 333-19603) of Beacon Properties Corporation of our report dated January 28, 1997 on our audits of the consolidated financial position of Beacon Properties Corporation as of December 31, 1996 and 1995 and the consolidated results of its operations and its cash flows for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 and the combined results of operations and cash flows of The Beacon Group, predecessor to Beacon Properties Corporation, for the period January 1, 1994 to May 25, 1994, which report is included in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the financial statement schedules of Beacon Properties Corporation as of December 31, 1996. /s/ COOPERS & LYBRAND L.L.P. Boston, Massachusetts April 4, 1997 -----END PRIVACY-ENHANCED MESSAGE-----