SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT -------------- Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 26, 1997 BOSTON PROPERTIES, INC. (Exact name of Registrant as specified in its Charter) Delaware (State of Incorporation) 1-13087 04-2473675 (Commission File Number) (IRS Employer Id. Number) 8 Arlington Street Boston, Massachusetts 02116 (Address of principal executive offices) (Zip Code) (617) 859-2600 (Registrant's telephone number, including area code) Item 5 Other Events On November 26, 1997, Boston Properties, Inc. (the "Company"), through Boston Properties Limited Partnership (the "Operating Partnership"), entered into agreements to acquire a portfolio of properties and development sites (the "Mulligan/Griffin Portfolio") in the Greater Washington, D.C. area. The portfolio includes four office buildings in Reston, Virginia, one office building in Rockville, Maryland, and four R&D buildings, two each in Springfield, Virginia, and Gaithersburg, Maryland. The total net rentable square feet of the acquired properties is approximately 1.3 million square feet. Also included in the portfolio are two development sites in Reston, Virginia, and four in Rockville, Maryland, known as the Decoverly Office Park. These sites have a total additional development potential of over 900,000 square feet. The total acquisition price and related costs for the portfolio is approximately $252.9 million. The acquisition price will be paid in cash, the assumption of $113.3 million of existing debt to which the properties are subject, and the issuance of a minimum of $50 million of Operating Partnership units of limited partnership ("OP Units"). The value of the OP Units issued in the transaction will be based on the average closing price of the Company's Common Stock over the 20 trading days immediately preceding the closing, but such value shall in no event be less than $30 or more than $36. The acquisition of the Mulligan/Griffin Portfolio is scheduled to close in early February 1998, although no assurances can be given in this regard. Item 7 Financial Statements and Exhibits The following financial statements are being filed in connection with the proposed acquisition of the Mulligan/Griffin Portfolio, as described above. (a) Financial Statements under Rule 3-14 of Regulation S-X. Statement of Revenue Over Certain Operating Expenses of the Mulligan/Griffin Portfolio for the year ended December 31, 1996 and (unaudited) for the nine months ended September 30, 1997. (b) Pro Forma Financial Statements Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1997 (unaudited) Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 1997 (unaudited) and the year ended December 31, 1996 (unaudited) (c) Exhibits +10.1 Contribution Agreement dated November 26, 1997 among the Operating Partnership, Boston Properties LLC and the contributors named therein. 23.1 Consent of Coopers & Lybrand, L.L.P., Independent Accountants + Incorporated herein by reference to the Company's Registration Statement on Form S-11 (No. 333-41449). BOSTON PROPERTIES, INC. 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. BOSTON PROPERTIES, INC. /s/ David G. Gaw -------------------------------------- David G. Gaw Senior Vice President and Chief Financial Officer Date: December 16, 1997 MULLIGAN/GRIFFIN PORTFOLIO STATEMENT OF REVENUES OVER CERTAIN OPERATING EXPENSES For the year ended December 31, 1996 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Boston Properties, Inc.: We have audited the accompanying statement of revenue over certain operating expenses of the Mulligan/Griffin Portfolio in Greater Washington, D.C. (the "Portfolio") for the year ended December 31, 1996. This statement is the responsibility of the Properties' management. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenue over certain operating expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenue over certain operating expenses was prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission, and excludes certain expenses described in Note 2, and therefore is not intended to be a complete presentation of the Portfolio's revenue and expenses. In our opinion, the statement referred to above presents fairly, in all material respects, the revenue over certain operating expenses (as described in Note 2) of the Mulligan/Griffin Portfolio for the year ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. Boston, Massachusetts November 20, 1997 F-1 MULLIGAN/GRIFFIN PORTFOLIO STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES (DOLLARS IN THOUSANDS) The accompanying notes are an integral part of the statement. F-2
FOR THE YEAR ENDED FOR THE NINE MONTHS ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997 ------------------ ------------------------- (UNAUDITED) Revenue: Base rent....................... $25,548 $19,523 Recoveries from tenants......... 5,440 4,042 ------- ------- 30,988 23,565 ------- ------- Certain operating expenses (Note 2 and 5) Utilities....................... 2,264 1,664 Janitorial and cleaning......... 503 362 Security........................ 34 26 General and administrative...... 49 32 Interest........................ 11,085 7,842 Repairs and maintenance......... 1,255 766 Insurance....................... 153 116 Real estate taxes............... 1,456 1,208 ------- ------- 16,799 12,016 ------- ------- Excess of revenue over certain op- erating expenses................. $14,189 $11,549 ======= ======= MULLIGAN/GRIFFIN PORTFOLIO NOTES TO STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES (DOLLARS IN THOUSANDS) 1. DESCRIPTION OF PORTFOLIO The accompanying statement of revenue over certain operating expenses (the "Statement") includes the combined operations of nine office properties known as the Mulligan/Griffin Portfolio, (the "Portfolio") located in the Greater Washington, D.C. area, specifically in the Gaithersburg I-270 and I-270 Rockville submarkets of Montgomery County, Maryland and the Springfield and Reston submarkets of Fairfax County, VA. The Portfolio will be acquired by Boston Properties, Inc. from entities affiliated with Mulligan/Griffin and Associates, Inc, an unrelated third party, and are detailed as follows: - -------- 2. BASIS OF ACCOUNTING The accompanying Statement has been prepared on the accrual basis of accounting. The Statement has been prepared in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for real estate properties acquired or to be acquired. Accordingly, this statement excludes certain historical expenses not comparable to the operations of the Portfolio after acquisition such as amortization, depreciation, property management fees, certain interest costs, ground lease payments, corporate expenses and certain other costs not directly related to the future operations of the Portfolio. 3. SIGNIFICANT ACCOUNTING POLICIES Rental Revenue Rental income is recognized on the straight-line method over the terms of the related leases. The excess of recognized rentals over amounts due pursuant to lease terms is recorded as accrued rent. The impact of the straight-line rent adjustment increased revenue by approximately $287 and decreased revenue by approximately $99 for the year ended December 31, 1996, and the nine months ended September 30, 1997 (unaudited), respectively. Unaudited Interim Information The statement of revenue over certain operating expenses for the nine months ended September 30, 1997 is unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such statement have been included. The results of operations for the period are not necessarily indicative of future results of operations. 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 amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. F-3
NO. OF SQUARE PROPERTY NAME BUILDINGS FEET ------------- --------- ------- Lockheed Martin Building................................... 1 255,244 Reston Town Center Office Complex.......................... 2 261,046 National Imaging and Mapping Agency Building............... 1 263,870 Decoverly Two.............................................. 1 77,747 910 Clopper Road........................................... 1 180,650 930 Clopper Road........................................... 1 60,056 Fullerton Square........................................... 2 178,841 MULLIGAN/GRIFFIN PORTFOLIO NOTES TO STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES (DOLLARS IN THOUSANDS) 4. DESCRIPTION OF LEASING ARRANGEMENTS The space is leased to tenants under leases with terms that vary in length. Minimum lease payments excluding certain real estate tax reimbursement clauses, operating expense reimbursement clauses and renewal options to be received during the next five years for noncancelable operating leases in effect at December 31, 1996 are approximately as follows: As of December 31, 1996, two tenants occupied approximately 61% of the leasable square feet and represented 87% of total 1996 Base Rent. 5. DEBT ASSUMPTION In connection with the acquisition, Boston Properties, Inc. will assume certain mortgage notes (the "Notes") encumbering three of the properties totaling $122,982 at December 31, 1996. Boston Properties Inc.'s assumption of these mortgages does not provide for any modification to the original terms; therefore, interest expense incurred prior to Boston Properties Inc.'s assumption of the mortgage notes is representative of future interest expense. Accordingly, interest expense of $11,085 for 1996 and $7,842 for the nine months ended September 30, 1997 (unaudited) is recognized in the accompanying Statement. The Notes require payments of principal and interest through varying terms ranging from July 15, 2002 to February 1, 2005. The interest rate on the Notes range from 6.00% to 9.70%. These Notes are subject to prepayment penalties of varying amounts in the event of an early principal repayment. Principal payments due on the mortgage notes during the next five years are approximately as follows:
YEAR ENDING DECEMBER 31, (IN THOUSANDS) ------------ -------------- 1997......................................... $25,809 1998......................................... 29,111 1999......................................... 29,048 2000......................................... 30,041 2001......................................... 29,441 Thereafter................................... 108,981 F-4
1997................................................ $ 8,940 1998................................................ 9,728 1999................................................ 10,588 2000................................................ 11,524 2001................................................ 12,549 BOSTON PROPERTIES, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1997 (UNAUDITED) The following unaudited Pro Forma Condensed Consolidated Balance Sheet of Boston Properties, Inc. (the "Company") is presented as if the following transactions had been consummated on September 30, 1997; (i) properties acquired or to be acquired subsequent to September 30, 1997 (the "1997 Acquired Properties" and "Pending Acquisitions", collectively the "Acquisition Properties"), and (ii) the completion of the offering as described hereafter (the "Offering"). The following Pro Forma Condensed Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been assuming the above transactions had been consummated at September 30, 1997, nor does it purport to represent the future financial position of the Company. The Offering The Company has filed a registration statement on Form S-11 with the Securities and Exchange Commission with respect to the Offering of approximately 14.0 million common shares (excluding 2.1 million common shares that may be issued upon exercise of the underwriters' overallotment options). For purposes of the financial statements set forth herein, the assumed offering price of such shares is $33.25, the closing price of the Company's Common Stock on December 1, 1997. The Properties The Company will own a portfolio of 92 commercial real estate properties (the "Properties") aggregating approximately 18.1 million square feet. The properties consist of 79 office properties with approximately 13.1 million net rentable square feet (including the Mulligan/Griffin Portfolio properties and one other property under contract to acquire and five office properties under development containing approximately 1.0 million net rentable square feet) and approximately 2.9 million additional square feet of structured parking for 8,199 vehicles, nine industrial properties with approximately 926,000 net rentable square feet, three hotels with a total of 1,054 rooms (consisting of approximately 937,000 square feet) (including one hotel currently under development), and a parking garage with 1,170 spaces (consisting of approximately 332,000 square feet). In addition, the Company will own, have under contract or have an option to acquire twelve parcels of land totaling 69.7 acres, which will support approximately 1,549,000 square feet of development. Acquisitions included in pro forma: (1) The Company issued Operating Partnership Units in the amount of 890,869 for 875 Third Avenue (valued at $31.43 per OP unit). (2) For purposes of the financial statements set forth herein, it is assured that 1,503,759 Operating Partnership Units will be issued in connection with the acquisition of the Mulligan/Griffin Portfolio (valued at $33.25 per OP unit). F-5
# of Rentable Date of Property Name Buildings Location Sq. Ft. Acquisition ------------- --------- -------- ------- ----------- Newport Office Park 1 Quincy, MA 168,829 6/23/97 280 Park Avenue 1 New York, NY 1,198,769 9/11/97 100 East Pratt Street 1 Baltimore, MD 633,482 10/23/97 875 Third Avenue 1 New York, NY 691,088 11/21/97 Riverfront Plaza 1 Richmond, VA 899,720 Pending Mulligan/Griffin Portfolio: Lockheed Martin Building 1 Reston, VA 255,244 Pending National Imaging and Mapping Agency Building 1 Reston, VA 263,870 Pending Reston Town Center Office Complex 2 Reston, VA 261,046 Pending Decoverly Two 1 Rockville, MD 77,747 Pending 910 Clopper Road 1 Gaithersburg 180,650 Pending 930 Clopper Road 1 Gaithersburg 60,056 Pending Fullerton Square 2 Springfield, VA 178,841 Pending Purchase Price (dollars in thousands) Common Property Name Cash Debt OP Units Stock Total ------------- ---- ---- -------- ------ ------ Newport Office Park -- 21,700 -- -- 21,700 280 Park Avenue 102,650 220,000 -- -- 322,650 100 East Pratt Street 137,500 -- -- 16 137,516 875 Third Avenue 1,500 180,000 28,000(1) -- 209,500 Riverfront Plaza 52,561 121,800 -- -- 174,361 Mulligan/Griffin Portfolio 88,516 119,374 50,000(2) -- 257,890 BOSTON PROPERTIES, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1997 (UNAUDITED) (DOLLARS IN THOUSANDS) The accompanying notes are an integral part of the pro forma condensed consolidated balance sheet. F-6
PRO FORMA ADJUSTMENTS BOSTON ----------------------------------- PROPERTIES, ACQUISITION OFFERING OTHER INC. PROPERTIES (A) ADJUSTMENTS PRO FORMA ----------- ----------- -------- ----------- ---------- ASSETS Real estate and equipment.............. $1,433,376 $779,267(B) -- -- $2,212,643 Less: accumulated depreciation.......... (285,505) -- -- -- (285,505) ---------- -------- -------- ---------- ---------- Total real estate and equipment............. 1,147,871 779,267 -- -- 1,927,138 Cash ................... 25,989 (145,435)(C) $441,061 $ (208,500)(C) 113,115 Escrows................. 10,673 2,631 (D) -- -- 13,304 Tenant and other receivables............ 13,170 227 (E) -- -- 13,397 Accrued rental income... 50,377 -- -- -- 50,377 Deferred charges........ 34,707 -- -- -- 34,707 Prepaid expenses and other assets........... 8,933 -- -- -- 8,933 Investment in Joint Venture................ 3,918 -- -- -- 3,918 ---------- -------- -------- ---------- ---------- Total assets........... $1,295,638 $636,690 $441,061 $(208,500) $2,164,889 ========== ======== ======== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Mortgage notes payable............... $ 914,614 $420,051(F) -- -- $1,334,665 Unsecured Line of Credit................ 71,000 137,500(F) -- $(208,500)(F) -- Accounts payable and accrued expenses...... 16,073 1,123(G) -- -- 17,196 Accrued interest payable............... 3,639 -- -- -- 3,639 Rent received in advance, security deposits and other liabilities........... 13,663 -- -- -- 13,663 ---------- -------- -------- ---------- ---------- Total liabilities...... 1,018,989 558,674 -- (208,500) 1,369,163 ---------- -------- -------- ---------- ---------- Minority interest in Operating Partnership.. 81,168 78,000(B) -- -- 159,168 ---------- -------- -------- ---------- ---------- Stockholders' equity: Preferred stock, $.01 par value, 50,000,000 shares authorized, none issued or outstanding........... -- -- -- -- -- Excess stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding........... -- -- -- -- -- Common stock, $.01 par value, 250,000,000 shares authorized, 38,693,541 issued and outstanding (historical) and 52,694,041 shares issued and outstanding (pro forma)........... 387 -- $ 140 -- 527 Additional paid in capital............... 172,315 16(B) 440,921 -- 613,252 Retained earnings...... 22,779 -- -- -- 22,779 ---------- -------- -------- ---------- ---------- Total stockholders' equity................ 195,481 16 441,061 -- 636,558 ---------- -------- -------- ---------- ---------- Total liabilities and stockholders' equity.. $1,295,638 $636,690 $441,061 $(208,500) $2,164,889 ========== ======== ======== ========== ========== BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997: (A) Represents the net proceeds obtained from the issuance of 14.0 million common shares in the Offering as follows: - -------- /(1)/Representsthe issuance of 14.0 million ($.01 par value per share) common shares in the Offering at an assumed offering price of $33.25 per share. (B) Represents the purchase price, including closing costs, of the 1997 Acquired Properties and the Pending Acquisitions as follows:
$465,500 Gross proceeds from the Offering................................... Underwriters' discount and other offering expenses................. (24,439) -------- Net cash proceeds.................................................. 441,061 Par value of common shares/(1)/.................................... (140) -------- $440,921 ======== -------- /(1)/ The acquisition of 100 East Pratt Street was funded by a draw-down of $137,500 from the Unsecured Line of Credit and the issuance of 500 shares of common stock (valued at approximately $16, based on a value of $32.00 per share). /(2)/ The acquisition of 875 Third Avenue was funded by the assumption of a $180,000 mortgage note, payment of $1,500 in cash and the issuance of 890,869 restricted Operating Partnership Units (the "OP Units"). To the extent that, for the ten trading days through and including December 31, 1998 the average daily closing price on the New York Stock Exchange of shares of common stock is less than $31.43 per share (such average, the "Share Average"), the Operating Partnership shall issue to the contributor of 875 Third Avenue a number of additional OP Units (the "Additional OP Units") such that the product of (x) the Share Average, multiplied by (y) the sum of 890,869 plus the Additional OP Units, equals $28,000. Consequently, for accounting purposes, the OP Units were valued at approximately $28,000, based on a value of $31.43 per unit. /(3)/ The acquisition of Riverfront Plaza will be funded through the payment of $52,561 in cash and mortgage acquisition financing of $121,800. /(4)/ The acquisition of the Mulligan/Griffin Portfolio will be funded through the payment of $88,516 in cash, the assumption of the fair value of mortgage debt in the amount of $118,251, the assumption of other liabilities in the amount of $1,123 and the issuance of $50,000 in restricted OP Units based on a price per unit of $33.25. In the event that the actual Closing Day Value, defined as the average of the closing price of the Company's common stock on the 20 days immediately preceeding the closing of the acquisition is less than $30.00 per share, the number of OP Units to be issued shall be determined as though the Closing Day value is $30.00 per share; and in the event that the actual Closing Day Value exceeds $36.00 per share the number of OP Units shall be determined as though Closing Day Value is $36.00 per share. If the Closing Day Value is any amount between $30.00 and $36.00, inclusive, the number of OP Units to be issued shall be based on the actual Closing Day Value. The contributors have the right to elect additional restrict OP units in lieu of cash. F-7
PURCHASE 1997 ACQUIRED PROPERTIES PRICE ------------------------ -------- 100 East Pratt Street /(1)/........................................ $137,516 875 Third Avenue /(2)/............................................. 209,500 PENDING ACQUISITIONS -------------------- Riverfront Plaza /(3)/............................................. 174,361 Mulligan/Griffin Portfolio /(4)/................................... 257,890 -------- Total Acquisition Properties................................... $779,267 ======== BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET--(CONTINUED) (DOLLARS IN THOUSANDS) (C) Represents the cash transactions as follows: (E) Reflects tenant note receivable to be acquired in connection with the pending acquisition of Riverfront Plaza. (F) Represents the debt transactions as follows: MORTGAGE NOTES PAYABLE
Net proceeds of the Offering described in Note (A) .............. $ 441,061 Proceeds and working capital used for the Acquisition Properties...................................................... (145,435) Paydown of Unsecured Line of Credit with proceeds from the Offering........................................................ (208,500) --------- Net increase in cash............................................. $ 87,126 ========= (D) Net increase reflects the following: Required escrow deposit for the debt assumed on the acquisition of 875 Third Avenue............................. $ 2,631 ========= UNSECURED LINE OF CREDIT
Debt assumed in connection with the acquisition of 875 Third Ave- nue............................................................... $180,000 Mortgage acquisition financing in connection with the acquisition of Riverfront Plaza............................................... 121,800 Debt assumed in connection with the acquisition of the Mulligan/Griffin Portfolio........................................ 118,251 -------- Net increase in mortgage indebtedness.............................. $420,051 ======== (G) Reflects other liabilities to be assumed in connection with the pending acquisition of the Mulligan/Griffin Portfolio. F-8
Draw-down from the Unsecured Line of Credit in connection with the acquisition of 100 East Pratt Street....................... $ 137,500 Paydown of the Unsecured Line of Credit from proceeds of the Of- fering, net ................................................... (208,500) --------- Net decrease in Unsecured Line of Credit........................ $ (71,000) ========= BOSTON PROPERTIES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED) The following unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended September 30, 1997 and for the year ended December 31, 1996 is presented as if the following transactions had occurred on January 1, 1996; (i) the consummation of the initial public offering (the "Initial Offering") and related Formation Transactions, and the Offering (ii) the acquisition of the property acquired concurrent with the Initial Offering (the "Initial Offering Acquisition Property"), (iii) the acquisition of properties acquired subsequent to the Initial Offering (the "1997 Acquisitions"), (iv) the acquisition of the pending acquisitions (the "Pending Acquisitions") and (v) the closing of the mortgage financing. The Development and Management Company has been included in the pro forma financial information under the equity method of accounting due to the Operating Partnership's ownership of a noncontrolling, 1% voting interest. The operations of the hotel properties and the parking garage have been included in the pro forma financial information pursuant to participating lease agreements to be entered into in order for the Company to continue to qualify as a REIT under IRC Section 856. This Pro Forma Condensed Consolidated Statement of Income should be read in conjunction with the Pro Forma Condensed Consolidated Balance Sheet of the Company and the historical consolidated and combined financial statements and notes thereto of the Company and the Predecessor Company included elsewhere in the Prospectus. The unaudited Pro Forma Condensed Consolidated Statement of Income is not necessarily indicative of what the actual results of operations would have been for the nine months ended September 30, 1997, or for the year ended December 31, 1996, had the previously described transactions actually occurred on January 1, 1996 and the effect thereof carried forward through the nine month period ended September 30, 1997, nor do they purport to present the future results of operations of the Company. F-9 BOSTON PROPERTIES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The accompanying notes are an integral part of the pro forma condensed consolidated statement of income. F-10
BOSTON PROPERTIES PREDECESSOR GROUP PRO FORMA ADJUSTMENTS BOSTON PROPERTIES, INC. JANUARY 1, --------------------------------------------------------------- JUNE 23, 1997 1997 INITIAL TO TO OFFERING SEPTEMBER 30, JUNE 22, FORMATION ACQUISITION 1997 PENDING OTHER 1997 1997 TRANSACTIONS PROPERTY ACQUISITIONS ACQUISITIONS ADJUSTMENTS ----------------------- ----------- ------------ ----------- ------------ ------------ ----------- (A) (B) (C) (C) Revenue: Rental: Base rent........ $57,892 $80,122 $ 9,396 $1,498 $54,440 $33,223 -- Recoveries from tenants.......... 6,144 10,283 -- 101 7,639 6,059 -- Parking and other............ 217 3,397 (1,061) -- 347 382 -- ------- ------- -------- ------ ------- ------- -------- Total rental revenue......... 64,253 93,802 8,335 1,599 62,426 39,664 -- Hotel............ -- 31,185 (31,185) -- -- -- -- Development and management services......... 2,221 3,685 (452) -- -- -- -- Interest and other............ 1,879 1,146 (352) -- -- -- $(1,200) (D) ------- ------- -------- ------ ------- ------- -------- Total revenue... 68,353 129,818 (23,654) 1,599 62,426 39,664 (1,200) ------- ------- -------- ------ ------- ------- -------- Expenses: Rental: Operating........ 8,828 13,650 (353) 437 14,580 6,027 -- Real estate taxes............ 9,065 13,382 1,345 172 13,049 2,427 -- Hotel: Operating........ -- 20,938 (20,938) -- -- -- -- Real estate tax- es............... -- 1,514 (1,514) -- -- -- -- General and administrative... 3,164 5,116 391 -- -- -- 725 (E) Interest......... 16,091 53,324 (28,151) -- 11,813 6,519 16,839 (F) Depreciation and amortization..... 10,113 17,054 124 210(G) 7,646 8,009 -- ------- ------- -------- ------ ------- ------- -------- Total expenses.. 47,261 124,978 (49,096) 819 47,088 22,982 17,564 ------- ------- -------- ------ ------- ------- -------- Income before minority interests .................. 21,092 4,840 25,442 780 15,338 16,682 (18,764) Minority interest in property partnership....... (69) (235) -- -- -- -- -- ------- ------- -------- ------ ------- ------- -------- Income before minority interest in Operating Partnership ...... 21,023 4,605 25,442 780 15,338 16,682 (18,764) Minority interest in Operating Partnership....... (6,169) -- -- -- -- -- (10,719)(H) ------- ------- -------- ------ ------- ------- -------- Income before extraordinary item.............. $14,854 $ 4,605 $ 25,442 $ 780 $15,338 $16,682 $(29,483) ======= ======= ======== ====== ======= ======= ======== Income before ex- traordinary item per common share.. $ .38 ======= Weighted average number of common shares outstand- ing............... 38,694 ======= PRO FORMA --------- Revenue: Rental: Base rent........ $236,571 Recoveries from tenants.......... 30,226 Parking and other............ 3,282 --------- Total rental revenue......... 270,079 Hotel............ -- Development and management services......... 5,454 Interest and other............ 1,473 --------- Total revenue... 277,006 --------- Expenses: Rental: Operating........ 43,169 Real estate taxes............ 39,440 Hotel: Operating........ -- Real estate tax- es............... -- General and administrative... 9,396 Interest......... 76,435 Depreciation and amortization..... 43,156 --------- Total expenses.. 211,596 --------- Income before minority interests .................. 65,410 Minority interest in property partnership....... (304) --------- Income before minority interest in Operating Partnership ...... 65,106 Minority interest in Operating Partnership....... (16,888) --------- Income before extraordinary item.............. $ 48,218 ========= Income before ex- traordinary item per common share.. $ .92 ========= Weighted average number of common shares outstand- ing............... 52,694 ========= BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS) NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 A. Reflects the pro forma Formation Transactions adjustment summary for the period from January 1, 1997 to June 22, 1997 (the "Predecessor Period"). (1) In connection with the Formation Transactions, certain third-party management contracts were assigned to the Development and Management Company. As a result of the assignment, operating income, expenses and overhead attributable to the contracts were reflected in the operations of the Development and Management Company as detailed below:
RENT HOTEL HOTELS INTEREST PROPERTY PROPERTY HOTEL REAL GENERAL PRO FORMA AND PARKING HOTEL MGMT AND OPERATING REAL ESTATE OPERATING ESTATE & INTEREST ADJUSTMENTS GARAGE INCOME REVENUE FEES OTHER EXPENSES TAXES EXPENSES TAXES ADMIN EXPENSE - ----------- ------ ------- -------- ----- -------- --------- ----------- --------- ------- ------- -------- (1)Assignment of contracts..... $(452) $(430) (2)Equity investment income........ $21 (3)Operation of hotels and garage........ $(1,061) $(31,185) $(353) $1,345 $(20,938) $(1,514) (4)Rental of hotels and garage........ $9,396 (5)General and administrative.. 821 (6)Amortization of deferred financing costs......... $ (189) (7)Release of restricted cash.......... (373) (8)Depreciation expense....... (9)Mortgage interest...... (27,962) ------ ------- -------- ----- ----- ----- ------ -------- ------- ----- -------- Pro Forma Formation Transactions adjustment summary total... $9,396 $(1,061) $(31,185) $(452) $(352) $(353) $1,345 $(20,938) $(1,514) $ 391 $(28,151) ====== ======= ======== ===== ===== ===== ====== ======== ======= ===== ======== PRO FORMA DEPRECIATION ADJUSTMENTS EXPENSE - ----------- ------------ (1)Assignment of contracts..... (2)Equity investment income........ (3)Operation of hotels and garage........ (4)Rental of hotels and garage........ (5)General and administrative.. (6)Amortization of deferred financing costs......... (7)Release of restricted cash.......... (8)Depreciation expense....... $124 (9)Mortgage interest...... ------------ Pro Forma Formation Transactions adjustment summary total... $124 ============ (2) The Operating Partnership holds a 95% economic interest in the Development and Management Company and records an equity interest of $21 on the $22 net income. (3) In connection with the Formation Transactions, the Operating Partnership entered into participating leases for the operation of the hotels and parking garage. As a result of these agreements, revenue and expenses will not be reflected from the operation of these businesses. (4) Represents rental income from the leasing of the hotels and parking garage owned by the Operating Partnership. The hotel lease arrangements are with an affiliate. (5) Reflects an increase of $821 in general and administrative expenses as a result of operating as a public company. (6) Reflects the net increase of $290 in the amortization of deferred financing costs for the $1,800 fee and related professional costs on the Unsecured Line of Credit, less a net reduction of $479 in amortization of deferred financing costs related to debt paid off with the Initial Offering proceeds. F-11
Management services................................................ $ 452 General and administrative expenses................................ (430) ----- Manager contract income........................................... $ 22 ===== BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED) (DOLLARS IN THOUSANDS) (7) Reflects the decrease in interest income as a result of the release of cash previously required to be held in escrow per the terms of the various mortgage note payable agreements. (8) Reflects the increase in depreciation from depreciating over 40 years the pro forma increase to real estate from the purchase of limited partners' interests and transfer costs paid. (9) Reflects the repayment of a portion of the existing mortgage indebtedness from proceeds of the Initial Offering for the Predecessor Period: B. Reflects the results of operations, as adjusted for depreciation, of the Newport Office Park, acquired concurrent with the Initial Offering, for the period from January 1, 1997 to June 22, 1997 (the acquisition date). F-12
PRINCIPAL INTEREST PROPERTIES AMOUNT RATE INTEREST ---------- --------- -------- -------- 599 Lexington Avenue.......................... $225,000 7.00% $ 7,547 Two Independence Square....................... 122,505 7.90% 4,637 One Independence Square....................... 78,327 7.90% 2,965 2300 N Street................................. 66,000 7.00% 2,214 Capital Gallery............................... 60,559 8.24% 2,391 Ten Cambridge Center.......................... 25,000 7.57% 907 191 Spring Street............................. 23,883 8.50% 973 Bedford Business Park......................... 23,376 8.50% 952 10 & 20 Burlington Mall Road.................. 16,621 8.33% 663 Cambridge Center North Garage................. 15,000 7.57% 544 91 Hartwell Avenue............................ 11,322 8.33% 452 92 & 100 Hayden Avenue........................ 9,057 8.33% 362 Montvale Center............................... 7,969 8.59% 328 Newport Office Park........................... 6,874 8.13% 268 Hilltop Business Center....................... 4,750 7.00% 159 -------- Total........................................ 25,362 Historical interest expense - Predecessor Pe- riod......................................... (53,324) -------- Pro forma interest expense adjustment for the Predecessor Period........................... $(27,962) ======== BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED) (DOLLARS IN THOUSANDS) C. Reflects the historical results of operations, as adjusted for base rent and depreciation, for the 1997 Acquisitions and Pending Acquisitions for the nine months ended September 30, 1997 as follows: 1997 ACQUISITIONS - -------- (1) Reflects the results of operations for the period from January 1, 1997 through September 11, 1997 (the acquisition date). (2) Represents an adjustment to straight-line rent based on the pro forma acquisition date of January 1, 1996 and also includes an adjustment for rental income from Banker's Trust during the period they occupied 280 Park Avenue as owner/occupant of the building (the rental figure is based upon the lease entered into by Banker's Trust concurrent with the sale of the building to the Company on September 11, 1997). PENDING ACQUISITIONS
280 PARK 100 EAST PRATT 875 THIRD AVENUE(1) STREET AVENUE TOTAL --------- -------------- --------- ------- Revenue: Base rent.......................... $17,012 $10,924 $18,646 $46,582 Adjustment(2)...................... 7,437 397 24 7,858 ------- ------- ------- ------- Total base rent.................. 24,449 11,321 18,670 54,440 Recoveries from tenants............ 1,707 2,133 3,799 7,639 Other.............................. 80 267 -- 347 ------- ------- ------- ------- Total rental revenue............. 26,236 13,721 22,469 62,426 ------- ------- ------- ------- Expenses: Operating.......................... 7,772 3,453 3,355 14,580 Real estate taxes.................. 6,677 1,541 4,831 13,049 Interest........................... -- -- 11,813 11,813 Depreciation(Note G)............... 3,355 1,934 2,357 7,646 ------- ------- ------- ------- Total expenses................... 17,804 6,928 22,356 47,088 ------- ------- ------- ------- Net income......................... $ 8,432 $ 6,793 $ 113 $15,338 ======= ======= ======= ======= - -------- (1) Represents an adjustment to straight-line rent based on the pro forma acquisition date of January 1, 1996. (2) Includes an adjustment of $300 to reflect the Company's estimate of additional property level operating expenses. (3) Includes an adjustment of ($1,323) to reflect effective interest on the fair value of mortgage debt assumed. F-13
RIVERFRONT MULLIGAN/GRIFFIN PLAZA PORTFOLIO TOTAL ---------- ---------------- ------- Revenue: Base rent................................. $13,023 $19,523 $32,546 Adjustment(1)............................. 389 288 677 ------- ------- ------- Total base rent......................... 13,412 19,811 33,223 Recoveries from tenants................... 2,017 4,042 6,059 Other..................................... 382 -- 382 ------- ------- ------- Total rental revenue.................... 15,811 23,853 39,664 ------- ------- ------- Expenses: Operating................................. 2,761 3,266(2) 6,027 Real estate taxes......................... 1,219 1,208 2,427 Interest.................................. -- 6,519(3) 6,519 Depreciation(Note G)...................... 2,288 5,721 8,009 ------- ------- ------- Total expenses.......................... 6,268 16,714 22,982 ------- ------- ------- Net income................................ $ 9,543 $ 7,139 $16,682 ======= ======= ======= BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED) (DOLLARS IN THOUSANDS) D. Reflects reduction in interest income as a result of cash used for the acquisition of 280 Park Avenue. E. Reflects the incremental increase in general and administrative costs related to the 1997 Acquisitions and Pending Acquisitions. F. Reflects the net increase in interest as a result of the following debt transactions: G. Detail of pro forma depreciation expense is presented below for the Initial Offering Acquisition Property, the 1997 Acquisitions and the Pending Acquisitions:
Payoff of the Unsecured Line of Credit with proceeds from the Of- fering for the period subsequent to the Initial Offering, net of amounts capitalized............................................. $ (411) Mortgage acquisition financing of 280 Park Avenue in the original principal amount of $220 million computed at an interest rate of 7.00% for the period January 1, 1997 to September 11, 1997 (date of acquisition)................................................. 10,675 Amortization of deferred financing fees for the period from January 1, 1997 to September 11, 1997 (date of acquisition) as a result of approximately $1.1 million of fees associated with the mortgage financing of 280 Park Avenue. The deferred financing fees are amortized over the five year term of the loan ......... 153 Mortgage acquisition financing of Riverfront Plaza in the principal amount of $121,800 computed at the 10 year U.S. Treasury Note rate (5.88% at November 17, 1997) plus 1.15% ..... 6,422 ------- Increase in interest expense for the period subsequent to the Initial Offering................................................ $16,839 ======= - -------- (1) Represents depreciation expense on the properties which has been calculated over 40 years for the building and over the life of the lease for tenant improvements. (2) Reflects pro forma depreciation expense for the periods prior to acquisition. H. Adjustment to minority interest to reflect the minority investors interest in the Operating Partnership following the Offering and issuance of OP Units and common shares. F-14
PURCHASE PRO FORMA PROPERTY(IES) PRICE DEPRECIATION(1) - ------------- -------- --------------- INITIAL OFFERING ACQUISITION PROPERTY Newport Office Park(2)................................. $ 21,700 $ 210 ====== 1997 ACQUISITIONS 280 Park Avenue(2)..................................... 322,650 $3,355 100 East Pratt Street.................................. 137,516 1,934 875 Third Avenue....................................... 209,500 2,357 ------ $7,646 ====== PENDING ACQUISITIONS Riverfront Plaza....................................... 174,361 $2,288 Mulligan/Griffin Portfolio............................. 257,890 5,721 ------ $8,009 ====== BOSTON PROPERTIES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The accompanying notes are an integral part of the pro forma condensed consolidated statement of income. F-15
PRO FORMA ADJUSTMENTS BOSTON ----------------------------------------------------------------------- PROPERTIES INITIAL PREDECESSOR FORMATION OFFERING 1997 PENDING OTHER PRO GROUP TRANSACTIONS ACQUISITION PROPERTY ACQUISITIONS ACQUISITIONS ADJUSTMENTS FORMA ----------- ------------ -------------------- ------------ ------------ ----------- -------- (A) (B) (C) (C) Revenue: Rental: Base rent.............. $169,420 $22,371 $2,908 $66,637 $42,332 -- $303,668 Recoveries from tenants................ 22,607 -- 180 11,379 8,416 -- 42,582 Parking and other...... 2,979 (2,043) -- 412 436 -- 1,784 -------- ------- ------ ------- ------- -------- -------- Total rental revenue.. 195,006 20,328 3,088 78,428 51,184 -- 348,034 Hotel.................. 65,678 (65,678) -- -- -- -- -- Development and management services.... 5,719 (936) -- -- -- -- 4,783 Interest and other..... 3,530 (705) -- -- -- -- 2,825 -------- ------- ------ ------- ------- -------- -------- Total revenue......... 269,933 (46,991) 3,088 78,428 51,184 -- 355,642 -------- ------- ------ ------- ------- -------- -------- Expenses: Rental: Operating.............. 29,823 (713) 879 18,751 8,523 -- 57,263 Real estate taxes...... 28,372 2,754 347 18,327 3,094 -- 52,894 Hotel: Operating.............. 43,634 (43,634) -- -- -- -- -- Real estate taxes...... 3,100 (3,100) -- -- -- -- -- General and administrative......... 10,754 834 -- -- -- $ 950(D) 12,538 Interest............... 109,394 (54,398) -- 15,750 8,721 24,183(E) 103,650 Depreciation and amortization........... 36,199 257 434(F) 10,561 10,679 -- 58,130 -------- ------- ------ ------- ------- -------- -------- Total expenses........ 261,276 (98,000) 1,660 63,389 31,017 25,133 284,475 -------- ------- ------ ------- ------- -------- -------- Income before minority interests .............. 8,657 51,009 1,428 15,039 20,167 (25,133) 71,167 Minority interest in property partnership.... (384) -- -- -- -- -- (384) -------- ------- ------ ------- ------- -------- -------- Income before minority interest in Operating Partnership ............ 8,273 51,009 1,428 15,039 20,167 (25,133) 70,783 Minority interest in Operating Partnership... -- -- -- -- -- (18,361)(G) (18,361) -------- ------- ------ ------- ------- -------- -------- Income before extraordinary item...... $ 8,273 $51,009 $1,428 $15,039 $20,167 $(43,494) $ 52,422 ======== ======= ====== ======= ======= ======== ======== Income before extraordinary item per common share............ $ .99 ======== Weighted average number of common shares outstanding............. 52,694 ======== BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS) NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 A. Reflects the pro forma Formation Transactions adjustment summary for the year ended December 31, 1996. - ---- (1) In connection with the Formation Transactions, certain third-party management contracts are assigned to the Development and Management Company. As a result of the assignment, current operating income, expenses and overhead attributable to the contracts are reflected in the operations of the Development and Management Company as detailed below:
RENT HOTEL HOTELS INTEREST PROPERTY PROPERTY HOTEL REAL PRO FORMA AND PARKING HOTEL MGMT AND OPERATING REAL ESTATE OPERATING ESTATE GENERAL & INTEREST ADJUSTMENTS GARAGE INCOME REVENUE FEES OTHER EXPENSES TAXES EXPENSES TAXES ADMIN EXPENSE - ----------- ------ ------- -------- ----- -------- --------- ----------- --------- -------- --------- -------- (1) Assignment of contracts....... $(936) $ (866) (2)Equity investment income.......... $66 (3)Operation of hotels and garage.......... $(2,043) $(65,678) $(713) $2,754 $(43,634) $ (3,100) (4)Rental of hotels and garage...... $22,371 (5)General and administrative.. 1,700 (6)Amortization of deferred financing costs........... $ (731) (7)Release of restricted cash............ (771) (8)Depreciation expense......... (9)Mortgage interest........ (53,667) ------- ------- -------- ----- ----- ----- ------ -------- -------- ------ -------- Pro forma formation transactions adjustment summary total... $22,371 $(2,043) $(65,678) $(936) $(705) $(713) $2,754 $(43,634) $(3,100) $ 834 $(54,398) ======= ======= ======== ===== ===== ===== ====== ======== ======== ====== ======== DEPREC- PRO FORMA IATION ADJUSTMENTS EXPENSE - ----------- ------- (1) Assignment of contracts....... (2)Equity investment income.......... (3)Operation of hotels and garage.......... (4)Rental of hotels and garage...... (5)General and administrative.. (6)Amortization of deferred financing costs........... (7)Release of restricted cash............ (8)Depreciation expense......... $257 (9)Mortgage interest........ ------- Pro forma formation transactions adjustment summary total... $257 ======= (2) The Operating Partnership holds a 95% economic interest in the Development and Management Company and records an equity interest of $66 on the $70 net income. (3) In connection with the Formation Transactions, the Operating Partnership entered into participating leases for the operation of the hotels and parking garage. As a result of these agreements, revenue and expenses are not reflected from the operation of these businesses. (4) Represents rental income from the leasing of the hotels and parking garage owned by the Operating Partnership. The hotel lease arrangements are with an affiliate. (5) Reflects an increase of $1,700 in general and administrative expenses as a result of operating as a public company. (6) Reflects the net increase of $600 in the amortization of deferred financing costs for the $1,800 fee and related professional costs on the Unsecured Line of Credit, less a net reduction of $1,331 in amortization of deferred financing costs related to debt paid off with the Initial Offering proceeds. (7) Reflects the decrease in interest income as a result of the release of cash previously required to be held in escrow per the terms of the various mortgage note payable agreements. (8) Reflects the increase in depreciation from depreciating over 40 years the pro forma increase to real estate from the purchase of limited partners' interests and transfer costs paid. F-16
Management services.................................................. $936 General and administrative expenses.................................. (866) ---- Manager contract income............................................. $ 70 ==== BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED) (DOLLARS IN THOUSANDS) (9) Reflects the repayment of a portion of the existing mortgage indebtedness from proceeds of the Initial Offering and the corresponding adjustment to interest expense incurred in 1996. - -------- (1) The interest expense used in this calculation assumes the mortgage loan was outstanding during all of 1996. B. Reflects the historical results of operations, as adjusted for depreciation, for Newport Office Park, acquired concurrent with the Initial Offering for the year ended December 31, 1996. C. Reflects the historical results of operations, as adjusted for base rent and depreciation, for the 1997 Acquisitions and Pending Acquisitions for the year ended December 31, 1996 as follows: 1997 ACQUISITIONS
PRINCIPAL INTEREST PROPERTY(IES) AMOUNT RATE INTEREST ------------- --------- -------- --------- 599 Lexington Avenue.................... $225,000 7.00% $ 15,750(1) Two Independence Square................. 122,855 7.90% 9,813 One Independence Square................. 78,700 7.90% 6,276 2300 N Street........................... 66,000 7.00% 4,620(1) Capital Gallery......................... 60,751 8.24% 5,761 Ten Cambridge Center.................... 25,000 7.57% 1,924 191 Spring Street....................... 23,942 8.50% 1,697 Bedford Business Park................... 23,500 8.50% 1,998(1) 10 & 20 Burlington Mall Road............ 16,621 8.33% 1,385 Cambridge Center North Garage........... 15,000 7.57% 1,183 91 Hartwell Avenue...................... 11,322 8.33% 943 92 & 100 Hayden Avenue.................. 9,057 8.33% 754 Montvale Center......................... 7,992 8.59% 474 Newport Office Park..................... 6,874 8.13% 558 Hilltop Business Center................. 4,817 7.00% 318 --------- Pro forma totals........................ 53,454 Historical interest expense for the year ended December 31, 1996................ (107,121) --------- Pro forma interest expense adjustment... $ (53,667) ========= - -------- (1) Represents an adjustment to straight-line rent based on the pro forma acquisition date of January 1, 1996 and also includes an adjustment for rental income from Banker's Trust during the period they occupied 280 Park Avenue as owner/occupant of the building (the rental figure is based upon the lease entered into by Banker's Trust concurrent with the sale of the building to the Company on September 11, 1997). F-17
280 PARK 100 EAST PRATT 875 THIRD AVENUE STREET AVENUE TOTAL -------- -------------- --------- ------- Revenue: Base rent........................... $16,786 $14,046 $25,255 $56,087 Adjustment(1)....................... 9,991 528 31 10,550 ------- ------- ------- ------- Total base rent................... 26,777 14,574 25,286 66,637 Recoveries from tenants............. 2,600 2,966 5,813 11,379 Other............................... 59 353 -- 412 ------- ------- ------- ------- Total rental revenue.............. 29,436 17,893 31,099 78,428 ------- ------- ------- ------- Expenses: Operating........................... 10,169 4,333 4,249 18,751 Real estate taxes................... 9,908 2,054 6,365 18,327 Interest............................ -- -- 15,750 15,750 Depreciation(Note F)................ 4,840 2,578 3,143 10,561 ------- ------- ------- ------- Total expenses.................... 24,917 8,965 29,507 63,389 ------- ------- ------- ------- Net income.......................... $ 4,519 $ 8,928 $ 1,592 $15,039 ======= ======= ======= ======= BOSTON PROPERTIES, INC. NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME--(CONTINUED) (DOLLARS IN THOUSANDS) PENDING ACQUISITIONS - -------- (1) Represents an adjustment to straight-line rent based on the pro forma acquisition date of January 1, 1996. (2) Includes an adjustment of $400 to reflect the Company's estimate of additional property level operating expenses. (3) Includes an adjustment of ($2,634) to reflect effective interest on the fair value of the mortgage debt assumed. D. Reflects the incremental increase in general and administrative costs related to the 1997 Acquisitions and Pending Acquisitions. E. Reflects the net increase in interest expense as a result of the following debt transactions:
RIVERFRONT MULLIGAN/GRIFFIN PLAZA PORTFOLIO TOTAL ---------- ---------------- ------- Revenue: Base rent................................. $15,898 $25,548 $41,446 Adjustment(1)............................. 522 364 886 ------- ------- ------- Total base rent......................... 16,420 25,912 42,332 Recoveries from tenants................... 2,976 5,440 8,416 Other..................................... 436 -- 436 ------- ------- ------- Total rental revenue.................... 19,832 31,352 51,184 ------- ------- ------- Expenses: Operating................................. 3,865 4,658(2) 8,523 Real estate taxes......................... 1,638 1,456 3,094 Interest.................................. -- 8,721(3) 8,721 Depreciation(Note F)...................... 3,051 7,628 10,679 ------- ------- ------- Total expenses.......................... 8,554 22,463 31,017 ------- ------- ------- Net income................................ $11,278 $ 8,889 $20,167 ======= ======= ======= - -------- F. Detail of pro forma depreciation expense is presented below for the Initial Offering Acquisition Property, the 1997 Acquisitions and the Pending Acquisitions:
Acquisition mortgage financing of 280 Park Avenue in the original principal amount of $220 million computed at an interest rate of 7.00% for the year ended December 31, 1996.......................... $15,400 Amortization of deferred financing fees as a result of approximately $1.1 million of fees associated with the mortgage financing of 280 Park Avenue. The deferred financing fees are amortized over the five year term of the loan .............................................. 220 Mortgage acquisition financing of Riverfront Plaza in the principal amount of $121,800 computed at the 10 year U.S. Treasury Note rate (5.88% at November 17, 1997) plus 1.15% ............................ 8,563 ------- Increase in interest expense......................................... $24,183 ======= - -------- (1) Represents depreciation expense on the properties which has been calculated over 40 years for the building and over the life of the lease for tenant improvements. G. Adjustment to minority interest to reflect the minority investors interest in the Operating Partnership following the Offering and issuance of OP Units and common shares. F-18
PURCHASE PRO FORMA PROPERTY(IES) PRICE DEPRECIATION(1) - ------------- -------- --------------- INITIAL OFFERING ACQUISITION PROPERTY Newport Office Park.................................... $ 21,700 $ 434 ======= 1997 ACQUISITIONS 280 Park Avenue........................................ 322,650 $ 4,840 100 East Pratt Street.................................. 137,516 2,578 875 Third Avenue....................................... 209,500 3,143 ------- $10,561 ======= PENDING ACQUISITIONS Riverfront Plaza....................................... 174,361 $ 3,051 Mulligan/Griffin Portfolio............................. 257,890 7,628 ------- $10,679 =======
EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this report on Form 8-K of Boston Properties, Inc. dated December 16, 1997 of our report dated November 20, 1997 on our audit of the Statement of Revenue Over Certain Operating Expenses of the Mulligan/Griffin Portfolio. Boston, Massachusetts /s/ Coopers & Lybrand L.L.P. December 16, 1997