fORM 8-k

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 8-K

 


CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 6, 2006

 


BOSTON PROPERTIES LIMITED PARTNERSHIP

(Exact name of registrant as specified in charter)

 


 

Delaware   0-50209   04-3372948

(State or Other Jurisdiction

of Incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

111 Huntington Avenue, Suite 300, Boston, Massachusetts 02199

(Address of Principal Executive Offices) (Zip Code)

(617) 236-3300

(Registrant’s telephone number, including area code)

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.01. Completion of Acquisition or Disposition of Assets.

Item 2.05. Costs Associated with Exit of Disposal Activities.

On June 6, 2006, Boston Properties Limited Partnership (the “Company”), through one of its wholly owned subsidiaries, completed the sale of the Company’s property located at 280 Park Avenue in New York City for approximately $1.2 billion in cash. The property was sold to an affiliate of Istithmar PJSC (“Istithmar”), which is a private investment holding company based in Dubai. 280 Park Avenue is a Class A office tower that contains approximately 1,179,000 net rentable square feet. The property is currently 100% leased. The Company estimates net proceeds from the sale of approximately $850 million, after legal defeasance of indebtedness secured by the property (consisting of approximately $254.4 million of principal indebtedness and approximately $28.4 million of related defeasance costs) and the payment of transfer taxes, broker’s fees, revenue support payments to Istithmar that are described below and other customary closing costs that the Company is responsible for paying under the terms of the purchase and sale agreement.

Pursuant to the purchase and sale agreement, the Company entered into a master lease agreement with Istithmar at closing. Under the master lease agreement, the Company has guaranteed that Istithmar will receive at least a minimum amount of base rent from approximately 74,340 square feet of space during the ten-year period following the expiration of the current leases for this space. The current leases for this space are scheduled to expire at various times between June 2006 and October 2007. The aggregate amount of base rent guaranteed by the Company over the entire period from 2006 to 2017 is approximately $67.3 million. The Company’s guarantee obligations, which are in the form of base rent payments to Istithmar, will be reduced by the amount of base rent payable, whether or not actually paid, under qualifying leases for this space that are obtained by the Company from prospective tenants. The Company will remain responsible for any free rent periods. Istithmar will bear all customary leasing costs for this space, including tenant improvements and leasing commissions.

Under the purchase and sale agreement, the Company has also agreed to provide to Istithmar fixed monthly revenue support from the closing date until December 31, 2008. The aggregate amount of the revenue support payments will be approximately $22.5 million.

As part of the transaction, Istithmar has engaged the Company as the property manager and leasing agent for 280 Park Avenue for a one-year term that renews automatically. Either party has the right to terminate this relationship at any time after the termination or expiration of the master lease agreement described above.

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired.

Not applicable.

 

(b) Pro Forma Financial Information.

 

     Pro forma financial information pursuant to Article 11 of Regulation S-X is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

 

(c) Shell Company Transactions.

Not applicable.

 

(d) Exhibits.

 

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  2.1 Purchase and Sale Agreement between BP 280 Park Avenue, LLC and Istithmar Building FZE dated April 26, 2006. (Incorporated by reference to Exhibit 10.1 of Boston Properties, Inc.’s Form 10-Q filed with the Securities and Exchange Commission on May 10, 2006.)

 

  99.1 Pro forma financial information of Boston Properties Limited Partnership.

Private Securities Litigation Reform Act of 1995. This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws. You can identify these statements by our use of the words “guidance,” “expects,” “plans,” “estimates,” “projects,” “intends,” “believes” and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performance or achievements. These factors include the extent to which the Company will be able to obtain tenants for the space subject to the master lease and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company does not undertake a duty to update or revise any forward-looking statement whether as a result of new information, future events or otherwise.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    BOSTON PROPERTIES LIMITED PARTNERSHIP
  By:   Boston Properties, Inc., its General Partner
Date: June 6, 2006   By:  

/s/ Douglas T. Linde

    Douglas T. Linde
    Executive Vice President & Chief Financial Officer
Pro Forma Financial Information

Exhibit 99.1

BOSTON PROPERTIES LIMITED PARTNERSHIP

PRO FORMA CONSOLIDATED BALANCE SHEET

INTRODUCTION TO THE PRO FORMA CONSOLIDATED BALANCE SHEET

March 31, 2006

(Unaudited)

The accompanying unaudited Pro Forma Consolidated Balance Sheet of Boston Properties Limited Partnership (the “Company”) is presented as if the disposition of 280 Park Avenue and related mortgage financing defeasance, which occurred subsequent to March 31, 2006, had been consummated on March 31, 2006. On June 6, 2006, the Company completed the sale of 280 Park Avenue, a Class A office property of approximately 1,179,000 net rentable square feet located in midtown Manhattan, for a gross sales price of approximately $1.2 billion. In conjunction with the sale, the Company has entered into a master lease agreement with the buyer. Under the master lease agreement, the Company has guaranteed that the buyer will receive at least a minimum amount of base rent from approximately 74,340 square feet of space during the ten-year period following the expiration of the current leases for this space. The current leases for this space are scheduled to expire at various times between June 2006 and October 2007. The aggregate amount of base rent guaranteed by the Company over the entire period from 2006 to 2017 is approximately $67.3 million. The Company’s guarantee obligations, which will be in the form of base rent payments to the buyer, will be reduced by the amount of base rent payable, whether or not actually paid, under qualifying leases for this space that are obtained by the Company from prospective tenants. The Company will remain responsible for any free rent periods. The buyer will bear all customary leasing costs for this space, including tenant improvements and leasing commissions. The Company has also agreed to provide to the buyer monthly revenue support from the closing date until December 31, 2008. The aggregate amount of the revenue support payments will be approximately $22.5 million.

Such pro forma information is based on the historical consolidated balance sheet of the Company as of that date, giving effect to the disposition of 280 Park Avenue and related mortgage financing defeasance. This Pro Forma Consolidated financial information should be read in conjunction with Form 10-Q for the three months ended March 31, 2006 (unaudited). In management’s opinion, all adjustments necessary to reflect the above transaction have been made.

The following Pro Forma Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been assuming the disposition of 280 Park Avenue and related mortgage financing defeasance had been consummated on March 31, 2006 nor does it purport to represent the future financial position of the Company.

 

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BOSTON PROPERTIES LIMITED PARTNERSHIP

PRO FORMA CONSOLIDATED BALANCE SHEET

(Unaudited)

(in thousands, except for unit amounts)

 

     March 31,
2006
    Disposition
of 280 Park
Avenue
          Pro Forma  
ASSETS         

Real estate, at cost

   $ 8,713,080     $ (373,626 )   (A )   $ 8,339,454  

Construction in process

     107,051       —           107,051  

Land held for future development

     185,119       —           185,119  

Less: accumulated depreciation

     (1,314,032 )     60,686     (A )     (1,253,346 )
                          

Total real estate

     7,691,218       (312,940 )       7,378,278  

Cash and cash equivalents

     32,214       869,754     (B )     901,968  

Cash held in escrows

     23,715       (3,061 )   (C )     20,654  

Tenant and other receivables, net

     41,458       (3,922 )   (C )     37,536  

Accrued rental income, net

     316,048       (24,419 )   (C )     291,629  

Deferred charges, net

     246,214       (14,228 )   (D )     231,986  

Prepaid expenses and other assets

     91,646       (4,419 )   (C )     87,227  

Investments in unconsolidated joint ventures

     98,836       —           98,836  
                          

Total assets

   $ 8,541,349     $ 506,765       $ 9,048,114  
                          

LIABILITIES, REDEEMABLE PARTNERSHIP UNITS AND

PARTNERS’ CAPITAL

        

Liabilities:

        

Mortgage notes payable

   $ 3,185,550     $ (255,256 )   (E )   $ 2,930,294  

Unsecured senior notes, net of discount

     1,471,163       —           1,471,163  

Unsecured line of credit

     40,000       —           40,000  

Accounts payable and accrued expenses

     86,938       (1,254 )   (C )     85,684  

Distributions payable

     95,344       —           95,344  

Accrued interest payable

     39,269       (1,626 )   (C )     37,643  

Other liabilities

     98,296       101,706     (C )     200,002  
                          

Total liabilities

     5,016,560       (156,430 )       4,860,130  
                          

Commitments and contingencies

     —         —           —    
                          

Minority interests in property partnerships

     17,579       —           17,579  
                          

Redeemable partnership units - 3,701,335 preferred units outstanding (4,857,395 common units at redemption value, if converted) and 21,541,823 common units outstanding at redemption value

     2,461,727       —           2,461,727  
                          

Partners’ capital - 1,343,555 general partner units and 111,470,102 limited partner units outstanding (such amount is inclusive of accumulated other comprehensive income of $7,541)

     1,045,483       663,195     (F )     1,708,678  
                          

Total liabilities, redeemable partnership units and partners’ capital

   $ 8,541,349     $ 506,765       $ 9,048,114  
                          

The accompanying notes are an integral part of these financial statements.

 

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BOSTON PROPERTIES LIMITED PARTNERSHIP

NOTES TO THE PRO FORMA

CONSOLIDATED BALANCE SHEET

March 31, 2006

(Unaudited)

 

(A) Represents the elimination of the net book value of 280 Park Avenue at March 31, 2006.

 

(B) Represents the estimated net cash proceeds from the sale of 280 Park Avenue.

 

(C) Represents the elimination of certain assets and liabilities of 280 Park Avenue as of March 31, 2006. Other liabilities consists of an approximately $67.3 million master lease obligation, an approximately $22.5 million revenue support obligation and approximately $16.6 million of deferred management fees, offset by the elimination of other liabilities as of March 31, 2006 of 280 Park Avenue.

 

(D) Represents the elimination of the net book value of deferred leasing and financing costs of 280 Park Avenue as of March 31, 2006.

 

(E) Represents the legal defeasance of the mortgage financing related to the disposition of 280 Park Avenue.

 

(F) Represents the net increase in Partners’ Capital as a result of the sale of 280 Park Avenue.

 

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BOSTON PROPERTIES LIMITED PARTNERSHIP

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended March 31, 2006 and the year ended December 31, 2005

(Unaudited)

The accompanying unaudited Pro Forma Consolidated Statements of Operations for the three months ended March 31, 2006 and for the year ended December 31, 2005 are presented as if the disposition on June 6, 2006 of 280 Park Avenue and related mortgage financing defeasance had occurred on January 1, 2005. Due to the Company’s continuing involvement through an agreement with the buyer to manage 280 Park Avenue for a fee after the sale, 280 Park Avenue will not be categorized as discontinued operations in the Company’s Consolidated Statements of Operations. An estimated nonrecurring gain on sale of real estate and loss on early extinguishment of debt of approximately $702.1 million and approximately $31.6 million, respectively, have not been included in the Pro Forma Consolidated Statements of Operations but will be reflected in the Company’s consolidated statements of operations to be included in the Company’s Form 10-Q for the quarter ending June 30, 2006.

These Pro Forma Consolidated Statements of Operations should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company reported on Form 10-K for the year ended December 31, 2005 and on Form 10-Q for the three months ended March 31, 2006.

The unaudited Pro Forma Consolidated financial information prepared by Boston Properties’ management is not necessarily indicative of what the actual results of operations would have been for the three months ended March 31, 2006 or for the year ended December 31, 2005 had the disposition of 280 Park Avenue and related mortgage financing defeasance actually occurred on January 1, 2005 and the effect thereof carried forward through the three month period ended March 31, 2006, nor do they purport to present the future results of operations of the Company.

 

4


BOSTON PROPERTIES LIMITED PARTNERSHIP

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in thousands, except for per unit amounts)

 

     Three Months
Ended
March 31,
2006
    Disposition
of 280 Park
Avenue
    Pro Forma  

Revenue

      

Rental:

      

Base rent

   $ 276,398     $ (15,527 )(A)   $ 260,871  

Recoveries from tenants

     47,193       (3,289 )(A)     43,904  

Parking and other

     13,829       (22 )(A)     13,807  
                        

Total rental revenue

     337,420       (18,838 )     318,582  

Hotel revenue

     12,343       —         12,343  

Development and management services

     4,376       —         4,376  

Interest and other

     1,965       (22 )(A)     1,943  
                        

Total revenue

     356,104       (18,860 )     337,244  
                        

Expenses

      

Operating:

      

Rental

     112,614       (8,384 )(A)     104,230  

Hotel

     11,477       —         11,477  

General and administrative

     14,642       —         14,642  

Interest

     74,817       (4,904 )(B)     69,913  

Depreciation and amortization

     66,141       (2,788 )(C)     63,353  

Loss from early extinguishment of debt

     467       —         467  
                        

Total expenses

     280,158       (16,076 )     264,082  
                        

Income before minority interest in property partnership, income from unconsolidated joint ventures, preferred distributions and gain on sale of real estate

     75,946       (2,784 )     73,162  

Minority interest in property partnership

     1,236       —         1,236  

Income from unconsolidated joint ventures

     1,290       —         1,290  
                        

Income before preferred distributions and gain on sale of real estate

     78,472       (2,784 )     75,688  

Preferred distributions

     (3,514 )     —         (3,514 )
                        

Income available to common unitholders before gain on sale of real estate

   $ 74,958     $ (2,784 )   $ 72,174  
                        

Basic earnings per common unit:

      

Income available to common unitholders before gain on sale of real estate

   $ 0.56       $ 0.54  
                  

Weighted average number of common units outstanding

     133,853         133,853  
                  

Diluted earnings per common unit:

      

Income available to common unitholders before gain on sale of real estate

   $ 0.55       $ 0.53  
                  

Weighted average number of common and common equivalent units outstanding

     136,501         136,501  
                  

The accompanying notes are an integral part of these financial statements.

 

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BOSTON PROPERTIES LIMITED PARTNERSHIP

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in thousands, except for per unit amounts)

 

     Year Ended
December 31,
2005
    Disposition
of 280 Park
Avenue
    Pro Forma  

Revenue

      

Rental:

      

Base rent

   $ 1,110,212     $ (65,713 )(A)   $ 1,044,499  

Recoveries from tenants

     173,254       (12,463 )(A)     160,791  

Parking and other

     55,567       (71 )(A)     55,496  
                        

Total rental revenue

     1,339,033       (78,247 )     1,260,786  

Hotel revenue

     69,277       —         69,277  

Development and management services

     17,310       —         17,310  

Interest and other

     12,015       (28 )(A)     11,987  
                        

Total revenue

     1,437,635       (78,275 )     1,359,360  
                        

Expenses

      

Operating

      

Rental

     438,335       (32,419 )(A)     405,916  

Hotel

     51,689       —         51,689  

General and administrative

     55,471       —         55,471  

Interest

     308,091       (19,777 )(B)     288,314  

Depreciation and amortization

     264,182       (11,631 )(C)     252,551  

Losses from early extinguishments of debt

     12,896       —         12,896  
                        

Total expenses

     1,130,664       (63,827 )     1,066,837  
                        

Income before minority interest in property partnership, income from unconsolidated joint ventures, preferred distributions, gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle

     306,971       (14,448 )     292,523  

Minority interest in property partnership

     6,017       —         6,017  

Income from unconsolidated joint ventures

     4,829       —         4,829  
                        

Income before preferred distributions, gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle

     317,817       (14,448 )     303,369  

Preferred distributions

     (26,780 )     —         (26,780 )
                        

Income available to common unitholders before gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle

   $ 291,037     $ (14,448 )   $ 276,589  
                        

Basic earnings per common unit:

      

Income available to common unitholders before gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle

   $ 2.19       $ 2.08  
                  

Weighted average number of common units outstanding

     132,881         132,881  
                  

Diluted earnings per common unit:

      

Income available to common unitholders before gains on sales of real estate, discontinued operations and cumulative effect of a change in accounting principle

   $ 2.15       $ 2.05  
                  

Weighted average number of common and common equivalent units outstanding

     135,166         135,166  
                  

The accompanying notes are an integral part of these financial statements.

 

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BOSTON PROPERTIES LIMITED PARTNERSHIP

NOTES TO THE PRO FORMA

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands)

The Pro Forma Consolidated Statements of Operations reflect the elimination of the historical results of operations of 280 Park Avenue for year ended December 31, 2005 and the three months ended March 31, 2006 (unaudited). Due to the Company’s continuing involvement through an agreement with the buyer to manage 280 Park Avenue for a fee after the sale, 280 Park Avenue will not be categorized as discontinued operations in the Company’s Consolidated Statements of Operations.

 

(A) Reflects the elimination of rental income and operating expenses of 280 Park Avenue.

 

(B) Reflects the decrease in interest expense as a result of the legal defeasance of the mortgage financing in conjunction with the disposition of 280 Park Avenue. The mortgage financing defeased in connection with the disposition of 280 Park Avenue consists of an approximately $255.3 million loan (balance at March 31, 2006) collateralized by 280 Park Avenue which bore interest at a fixed rate of 7.644% per annum.

 

(C) Reflects the decrease in depreciation and amortization expense related to the disposition of 280 Park Avenue.

 

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