<Page>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
<Table>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
</Table>
OR
<Table>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------ to ------------
</Table>
Commission file number 000-24905
BEACON CAPITAL PARTNERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<Table>
Maryland 04-3403281
- ------------------------------------------ ------------------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
One Federal Street, 26th Floor,
Boston, Massachusetts 02110
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
617-457-0400
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
</Table>
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
Number of Common Shares outstanding at the latest practicable date,
November 12, 2001: 21,730,888 shares, $.01 par value.
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<Page>
BEACON CAPITAL PARTNERS, INC.
FORM 10-Q
INDEX
<Table>
<Caption>
PAGE
--------
Part I--Financial Information
Item 1. Condensed Consolidated Financial Statements................. 1
Condensed Consolidated Balance Sheets--September 30, 2001
(Unaudited) and December 31, 2000......................... 1
Condensed Consolidated Statements of Operations--Three and
Nine Months Ended September 30, 2001 and 2000
(Unaudited)............................................... 2
Condensed Consolidated Statements of Cash Flows--Nine Months
Ended September 30, 2001 and 2000 (Unaudited)............. 3
Notes to Condensed Consolidated Financial Statements........ 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
Item 3. Quantitative and Qualitative Disclosures about Market
Risk...................................................... 16
Part II--Other Information
Item 1. Legal Proceedings........................................... 17
Item 2. Changes in Securities and Use of Proceeds................... 17
Item 3. Defaults Upon Senior Securities............................. 17
Item 4. Submission of Matters to a Vote of Security Holders......... 17
Item 5. Other Information........................................... 17
Item 6. Exhibits and Reports on Form 8-K............................ 17
Exhibit Index........................................................ 19
</Table>
<Page>
PART I--FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BEACON CAPITAL PARTNERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2001 2000
-------------- ------------
(UNAUDITED) (NOTE 1)
ASSETS
Real Estate:
Land...................................................... $ 871 $ 35,264
Buildings, improvements and equipment..................... 3,582 228,764
--------- ---------
4,453 264,028
Less accumulated depreciation............................. 789 12,607
--------- ---------
3,664 251,421
Deferred financing and leasing costs, net of accumulated
amortization of $38 and $1,421, respectively.............. 101 4,396
Cash and cash equivalents................................... 111,827 83,821
Restricted cash............................................. 64 366
Accounts receivable, net.................................... 437 4,262
Deferred rent receivable.................................... 11 2,222
Other assets................................................ 828 1,504
Investments in partnership, joint ventures and
corporations.............................................. 44,284 55,274
--------- ---------
Total assets.......................................... $ 161,216 $ 403,266
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable.................................... $ 1,364 $ 30,797
Note payable--interim financing........................... -- 97,830
Accounts payable and accrued expenses..................... 26,414 17,205
Deferred gain on sale of real estate...................... 20,604 --
--------- ---------
Total liabilities..................................... 48,382 145,832
--------- ---------
Commitments and contingencies............................... -- --
Minority interest in consolidated partnership............... 25,737 2,544
--------- ---------
Stockholders' equity:
Preferred stock; $.01 par value, 200,000,000 shares
authorized, none issued or outstanding.................. -- --
Excess stock; $.01 par value, 250,000,000 shares
authorized, none issued or outstanding.................. -- --
Common stock; $.01 par value, 500,000,000 shares
authorized, 21,730,888 shares issued and outstanding.... 217 217
Additional paid-in capital................................ 412,414 412,414
Cumulative net income..................................... 143,766 95,843
Cumulative dividends...................................... (469,136) (251,827)
Unrealized loss on marketable equity securities........... (164) (1,757)
--------- ---------
Total stockholders' equity............................ 87,097 254,890
--------- ---------
Total liabilities and stockholders' equity............ $ 161,216 $ 403,266
========= =========
</Table>
SEE ACCOMPANYING NOTES.
1
<Page>
BEACON CAPITAL PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------
Revenues:
Rental income........................................ $ 161 $ 9,109 $11,270 $26,049
Reimbursement of operating expenses and real estate
taxes.............................................. 10 313 303 1,003
Equity in earnings of partnership and joint
ventures........................................... 2,419 1,157 6,393 5,129
Interest and dividend income......................... 954 1,414 3,221 4,748
Gains (losses) on investments, net................... 27 -- (2,183) 6,414
Other income......................................... 51 205 367 786
-------- -------- ------- -------
Total revenues................................... 3,622 12,198 19,371 44,129
-------- -------- ------- -------
Expenses:
Property operating................................... 185 2,583 4,257 7,347
Real estate taxes.................................... 19 1,352 1,267 3,791
General and administrative........................... 4,824 2,805 14,313 8,569
Affiliate formation expenses......................... -- -- -- 2,054
Interest expense..................................... -- 514 1,594 2,998
Depreciation and amortization........................ 143 2,165 2,594 5,966
-------- -------- ------- -------
Total expenses................................... 5,171 9,419 24,025 30,725
-------- -------- ------- -------
Income (loss) before gains on sales of real estate,
minority interest and extraordinary items............ (1,549) 2,779 (4,654) 13,404
Gains on sales of real estate.......................... 23,295 2,979 78,022 61,516
-------- -------- ------- -------
Income before minority interest and extraordinary
items................................................ 21,746 5,758 73,368 74,920
Minority interest in consolidated partnership.......... (24,916) (710) (25,445) (8,736)
-------- -------- ------- -------
Income (loss) before extraordinary items............... (3,170) 5,048 47,923 66,184
Extraordinary items, net of minority interest.......... -- -- -- (4,574)
-------- -------- ------- -------
Net income (loss)................................ $ (3,170) $ 5,048 $47,923 $61,610
======== ======== ======= =======
Income (loss) before extraordinary items per common
share-basic and diluted.............................. $ (0.15) $ 0.26 $ 2.21 $ 3.22
Extraordinary items per common share-basic and
diluted.............................................. -- -- -- (0.22)
-------- -------- ------- -------
Net income (loss) per common share-basic and diluted... $ (0.15) $ 0.26 $ 2.21 $ 3.00
======== ======== ======= =======
Weighted average number of common shares outstanding
(in thousands)....................................... 21,731 19,595 21,731 20,510
======== ======== ======= =======
</Table>
SEE ACCOMPANYING NOTES.
2
<Page>
BEACON CAPITAL PARTNERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 47,923 $ 61,610
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 1,880 4,610
Amortization............................................ 714 1,356
Extraordinary items, net of minority interest........... -- 4,574
Gains on sales of real estate........................... (78,022) (61,516)
Equity in earnings of partnership and joint ventures.... (6,393) (5,129)
Distributions from partnership and joint venture........ 7,670 7,872
(Gains) losses on investments, net...................... 2,183 (6,414)
Minority interest in consolidated partnership........... 25,445 8,736
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Restricted cash......................................... 302 234
Accounts receivable..................................... 3,447 (576)
Deferred rent receivable................................ (174) (1,219)
Other assets............................................ (94) (5,667)
Accounts payable and accrued expenses................... 9,281 837
--------- ---------
Net cash provided by operating activities............. 14,162 9,308
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate asset acquisitions and improvements........... (27,176) (49,234)
Proceeds from real estate asset sales..................... 377,801 89,112
Payment of deferred leasing costs......................... (379) (1,928)
Investments in partnership, joint ventures and
corporations............................................ (602) (15,959)
Contributions to partnership.............................. (10,000) --
Distributions from partnership and joint venture.......... 21,351 78,519
--------- ---------
Net cash provided by investing activities............. 360,995 100,510
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage note............................... 11,500 --
Repayments on mortgage notes.............................. (40,933) (247)
Proceeds from note payable--interim financing............. -- 7,500
Repayment on note payable--interim financing.............. (97,830) (32,170)
Payment of deferred financing costs....................... (327) (293)
Repurchase of common stock................................ -- (13,143)
Distribution payments to minority interests............... (2,252) (9,637)
Dividend payments to stockholders......................... (217,309) (73,405)
--------- ---------
Net cash used by financing activities................. (347,151) (121,395)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 28,006 (11,577)
Cash and cash equivalents, beginning of period.............. 83,821 76,927
--------- ---------
Cash and cash equivalents, end of period.................... $ 111,827 $ 65,350
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Distribution of Cypress stock to minority interests......... $ -- $ 2,073
Dividend of Cypress stock to stockholders................... -- 15,793
Distribution of CO Space stock to minority interests........ -- 928
Dividend of CO Space stock to stockholders.................. -- 7,065
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest, net of capitalized interest of $651
and $4,047, respectively.................................. $ 2,447 $ 2,999
</Table>
SEE ACCOMPANYING NOTES.
3
<Page>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements of Beacon Capital Partners, Inc. ("BCP") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for interim periods are
not necessarily indicative of the results that may be expected for the full
year.
The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
At September 30, 2001, the Company's investments in marketable equity
securities were included in other assets and had a fair value of approximately
$51 and an unrealized loss of approximately $164. Comprehensive income after
giving effect to the change in the unrealized loss was $47,759 for the nine
months ended September 30, 2001. Net income and comprehensive income were the
same for the nine months ended September 30, 2000.
For further information, refer to the consolidated financial statements and
footnotes thereto included in BCP's annual report on Form 10-K for the period
ended December 31, 2000.
2. ORGANIZATION
Beacon Capital Partners, Inc. was incorporated on January 21, 1998 as a
Massachusetts corporation, and was initially capitalized through loans from the
two founders of BCP, Messrs. Leventhal and Fortin. The loans were repaid in
May 1998. BCP qualifies as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended. BCP was established to conduct real
estate investment and development activities and currently operates in one
segment.
On March 17, 1998, BCP was reincorporated as a Maryland corporation and on
March 20, 1998, BCP completed an initial private offering in accordance with
Section 4(2) of the Securities Act of 1933. BCP initially issued 17,360,769
common shares with proceeds, net of expenses, of $323,110. In April 1998,
3,613,163 additional shares were issued through the exercise of the
underwriter's over-allotment, with proceeds, net of expenses, of $66,620.
In connection with the reincorporation of BCP in Maryland, BCP established
Beacon Capital Partners, L.P. (the "Operating Partnership"). BCP and the
Operating Partnership are collectively referred to as the "Company". The
Operating Partnership is a Delaware limited partnership. BCP is the sole General
Partner of, and, as of September 30, 2001, holds approximately 99% of the
economic interest in the Operating Partnership. BCP holds an approximate 1%
general partnership interest in the Operating Partnership and the balance is
held as a limited partnership interest. The remaining limited partnership
interest of the Operating Partnership is held by Beacon Capital Participation
Plan, L.P. ("BCPP") and is presented as minority interest in consolidated
partnership in the accompanying condensed consolidated financial statements. On
June 24, 1998, $51,359 in Operating Partnership units were issued to Luddite
Associates, an affiliate of The Prudential Insurance Company of America, in
connection with the purchase
4
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BEACON CAPITAL PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
2. ORGANIZATION (CONTINUED)
of the property known as Technology Square and The Draper Building. On
October 17, 2000, Luddite Associates converted its Operating Partnership units
to common stock of BCP. The term of the Operating Partnership commenced on
March 16, 1998 and shall continue until January 1, 2056 or until such time as a
Liquidating Event, as defined, has occurred.
On April 4, 2001, the Company adopted, and the shareholders approved an
asset sale plan (the "Asset Sale Plan") which will permit the Company to sell,
transfer or exchange all or substantially all of its assets.
3. REAL ESTATE
In September 2000, the Company commenced the sales of the Fort Point Place
residential condominiums and as of September 30, 2001, all of the 120 units had
been sold. On February 9, 2001, the Company sold Technology Square, a property
consisting of existing buildings, buildings under development and permitted land
for additional development for approximately $278,785. The Company will continue
to oversee the development and the buyer will fund the remaining development
costs for the new buildings. Under the terms of the purchase and sale agreement,
in order to avoid financial penalties, the Company is required to complete the
construction of the new buildings by specific dates and within budget. The
development is scheduled to be completed in the third quarter of 2002. As of
September 30, 2001, the Company recognized a gain on the sale of approximately
$86,264. Pursuant to the applicable accounting rules, an additional gain
estimated at approximately $20,604 has been deferred and is expected to be
realized in future periods as construction is completed. In June 2001 and August
2001, in three separate transactions, the Company sold 13 of the 14 properties
in the Dallas Office and Industrial Portfolio for $66,000 and recognized an
aggregate loss of approximately $26,124 on the transactions. On July 10, 2001,
the Company sold the two Fort Point Place office buildings for $29,500 and
recognized a gain of approximately $17,096 on the transaction. In the fourth
quarter of 2001, the Company sold the remaining property in the Dallas Office
and Industrial Portfolio for $2,550 and the Company expects to recognize a loss
on the transaction.
4. INVESTMENTS IN PARTNERSHIP, JOINT VENTURES AND CORPORATIONS
The investments in partnership, joint ventures and corporations represent
the Company's interest in (i) a joint venture with PW Acquisitions IX, LLC,
known as Beacon/PW Kendall LLC ("The Athenaeum Portfolio"), (ii) a joint venture
with Mathilda Partners LLC ("Mathilda Research Centre"), (iii) a joint venture
with Mathilda Partners II LLC ("Mathilda Research Centre II"), (iv) a joint
venture with HA L.L.C. ("Millennium Tower"), and (v) an investment in Beacon
Capital Strategic Partners, L.P. ("BCSP").
5
<Page>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
4. INVESTMENTS IN PARTNERSHIP, JOINT VENTURES AND CORPORATIONS (CONTINUED)
A reconciliation of the underlying net assets to the Company's carrying
value of investments in partnership, joint ventures and corporations is as
follows:
<Table>
<Caption>
THE MATHILDA MATHILDA
ATHENAEUM RESEARCH RESEARCH MILLENNIUM
PORTFOLIO CENTRE CENTRE II TOWER BCSP TOTAL
--------- -------- ---------- ---------- -------- --------
Operating Partnership equity interest
(including accumulated earnings, net
of distributions).................... $ 221 $(1,595) $7,568 $20,310 $ 11,548 $38,052
Other costs............................ -- 2,488 603 3,021 120 6,232
-------- ------- ------ ------- -------- -------
Carrying value of investments in
partnership, joint ventures and
corporations at September 30, 2001... $ 221 $ 893 $8,171 $23,331 $ 11,668 $44,284
======== ======= ====== ======= ======== =======
Equity in earnings of partnership and
joint ventures
Nine months ended
September 30, 2001................... $ -- $ 3,029 $ -- $ 1,310 $ 2,054 $ 6,393
September 30, 2000................... 1,992 336 -- -- 2,801 5,129
Operating Partnership share of gains on
sales of real estate
Nine months ended
September 30, 2001................... $ -- $ -- $ -- $ -- $ 786 $ 786
September 30, 2000................... 12,604 -- -- -- 21,459 34,063
Operating Partnership share of
extraordinary items
Nine months ended
September 30, 2001................... $ -- $ -- $ -- $ -- $ -- $ --
September 30, 2000................... (5,149) -- -- -- (25) (5,174)
</Table>
THE ATHENAEUM PORTFOLIO
In 1998, Beacon/PW Kendall LLC, a joint venture of the Company and PW
Acquisitions IX, LLC, an affiliate of PaineWebber, purchased The Athenaeum
Portfolio, an 11 building 970,000 square foot mixed-use portfolio located in
Cambridge, Massachusetts. In 2000, in two separate transactions, the joint
venture sold The Athenaeum Portfolio and recognized an aggregate gain on the
sales of approximately $64,865, of which the Company's share was approximately
$32,432.
MATHILDA RESEARCH CENTRE
On August 9, 1998, the Company entered into a joint venture agreement with
Mathilda Partners LLC, an affiliate of Menlo Equities, a California based
developer, to develop two four-story Class A office/R&D buildings with surface
parking in Sunnyvale, California, known as Mathilda Research Centre. The Company
and Mathilda Partners LLC had funded equity contributions of $17,500 and $2,500,
respectively. On November 4, 1998, the venture acquired a twelve-acre site on
Mathilda Avenue in Sunnyvale, CA, on which it developed Mathilda Research
Centre. The first building (approximately 144,000 square feet) was
6
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BEACON CAPITAL PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
4. INVESTMENTS IN PARTNERSHIP, JOINT VENTURES AND CORPORATIONS (CONTINUED)
completed in June 2000 and the second building (approximately 123,000 square
feet) was completed in March 2001. Both buildings are leased to Juniper
Networks, Inc. ("Juniper Networks"). In August 2001, Mathilda Research Centre
was refinanced and the joint venture distributed approximately $20,904 to its
members. As of October 2, 2001, the joint venture had returned all of the
original equity to its members.
MATHILDA RESEARCH CENTRE II
On August 9, 2000, the Company entered into a joint venture agreement with
Mathilda Partners II LLC, an affiliate of Menlo Equities, a California based
developer, to develop an additional phase of Mathilda Research Centre in
Sunnyvale, California, also for Juniper Networks. The Company and Mathilda
Partners II LLC have agreed to fund 87.5% and 12.5% of the equity required,
respectively. On November 30, 2000, the joint venture acquired a parcel of land
at 1220 N. Mathilda Avenue in Sunnyvale, California on which it is developing
the additional phase of Mathilda Research Centre. The estimated cost of the
proposed 158,000 square foot building is approximately $40,650. The project will
be funded from equity contributions of approximately $8,040, of which the
Company's portion will be approximately $7,035, and a $32,610 construction loan
from an institutional lender. As of September 30, 2001, the members had funded
equity contributions of approximately $8,650, of which the Company's portion was
approximately $7,568. The Company currently expects a distribution of
approximately $533, representing its excess contributions, from loan proceeds
when certain conditions are met.
MILLENNIUM TOWER
On September 1, 1998 the Company entered into a joint venture agreement with
HA L.L.C., an affiliate of Martin Smith Real Estate Services, a Seattle based
real estate company, to develop a 20-story office/retail and residential tower
in downtown Seattle, Washington, known as Millennium Tower. The Company and HA
L.L.C. have agreed to fund 66 2/3% and 33 1/3% of the equity required,
respectively. Land was contributed to the joint venture by HA L.L.C. at an
agreed value of $10,500, and the Company agreed to fund the first $19,000 of
cash requirements for the venture. As of September 30, 2001, the Company has
funded its total commitment of $19,000. The joint venture has obtained a $45,000
construction loan from two institutional lenders to finance the balance of the
development costs. The estimated cost of the project is $72,000, including the
value of the land.
The Company's residential portion of this investment is held by BCP
Millennium Residential, Inc., a Massachusetts corporation ("BCP Millennium
Residential"). Prior to March 2001, in order to comply with certain rules
applicable to REITs, the voting common stock of BCP Millennium Residential was
controlled by Messrs. Leventhal and Fortin. In March 2001, BCP Millennium
Residential was converted to a taxable REIT subsidiary and Messrs. Leventhal and
Fortin transferred their ownership to the Company. The Company owns 100% of the
economic interests in BCP Millennium Residential and for financial statement
presentation purposes, the Company consolidates BCP Millennium Residential.
BCSP
On October 1, 1999, the Company completed the initial closing for BCSP, a
real estate limited partnership, of which BCP Strategic Partners LLC, the
Company's wholly-owned subsidiary, is the General
7
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BEACON CAPITAL PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
4. INVESTMENTS IN PARTNERSHIP, JOINT VENTURES AND CORPORATIONS (CONTINUED)
Partner. Subsequent to October 1, 1999, the Company completed additional
closings and as of March 28, 2000 (the BCSP final closing date), equity
commitments totaled $287,500, of which the Company's equity commitment was
$57,500. The commitments include investments from various endowments,
foundations, pension funds and other institutional investors. For a period of up
to 27 months from October 1, 1999, BCSP will be the Company's exclusive real
estate investment vehicle. As of September 30, 2001, the Company has funded
approximately $13,200 of its committed investment. In connection with the
formation of BCSP, for the nine months ended September 30, 2000, the Company
incurred affiliate formation expenses of approximately $2,054. The expenses
consist of underwriter commissions and fees for legal and professional services
not reimbursed by the partners of BCSP.
On March 17, 2000, BCSP obtained a $137,500 secured revolving credit
facility. On June 14, 2000, BCSP sold 233 Fremont Street, a property located in
San Francisco, California that was undergoing redevelopment. The property was
sold for approximately $145,894, including approximately $15,894 held in escrow
pending completion of the property's redevelopment. A portion of the escrow
funds were subsequently expended. BCSP oversaw the redevelopment and the buyer
funded its share of the remaining redevelopment costs. The redevelopment was
substantially completed in the second quarter of 2001. For the nine months ended
September 30, 2001 and the year ended December 31, 2000, BCSP recognized a gain
on the sale of approximately $2,960 and $71,643, respectively. The Company's
share of the recognized gain for the nine months ended September 30, 2001 and
the year ended December 31, 2000 was approximately $786 and $25,736,
respectively. On June 28, 2000, BCSP distributed $70,000 of the sale proceeds,
of which the Company's share was approximately $25,169.
5. MORTGAGE NOTES PAYABLE
The mortgage notes payable, consisting of one mortgage note payable,
collateralized by a certain property and assignment of leases, totals $1,364 at
September 30, 2001. It has a fixed interest rate of 9.0% and matures in 2017.
The net book value of the mortgaged asset is approximately $3,349 at
September 30, 2001.
Future minimum principal payments due during the next five years and
thereafter are as follows:
<Table>
2001........................................................ $ 13
2002........................................................ 42
2003........................................................ 46
2004........................................................ 51
2005........................................................ 55
Thereafter.................................................. 1,157
-------
Total $ 1,364
=======
</Table>
In the fourth quarter of 2001, in conjunction with the sale of the remaining
property in the Dallas Office and Industrial Portfolio, the fixed rate mortgage
note payable was paid off.
8
<Page>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
6. NOTE PAYABLE--INTERIM FINANCING
On June 28, 1999, the Company obtained $100,000 of secured interim financing
(the "Interim Financing") from Bankers Trust Company. On December 3, 1999, the
Company executed an amendment to the Interim Financing that increased the loan
amount to $130,000. The Draper Building, which was sold on April 19, 2000, was
part of the collateral for the Interim Financing and as a condition of the
property's release, the Interim Financing was paid down by approximately
$32,170. The Interim Financing matured in June 2000 and pursuant to the terms of
the note, the Company exercised its option to extend the maturity date to June
2001. On February 9, 2001, in conjunction with the sale of Technology Square,
the Interim Financing was paid off.
7. INCENTIVE PLANS
The Company's management incentive plan contemplates that the Company's
management will participate in all returns realized by the Company after
specified benchmarks are achieved. The amended partnership agreement of the
Operating Partnership provides BCPP, a partnership whose partners are all
members of the Company's senior management, with incentive distributions from
the Operating Partnership after defined investor return objectives are met.
During the quarter ended September 30, 2001, based upon distributions to date
and amounts expected to be realized from assets which continue to be held by the
Company and the value estimated for the Voting Trusts, the Company's management
expects that the Cumulative Preferred Return and return of Invested Capital, as
defined, will likely be exceeded and BCPP will be entitled to share in realized
returns. Consequently, during the quarter ended September 30, 2001 an allocation
of income in the amount of $24,948 was made to BCPP as a limited partner in the
Operating Partnership. This amount is presented as a component of minority
interest in consolidated partnership in the accompanying condensed consolidated
statements of operations for the three and nine months ended September 30, 2001.
No incentive payments will be made to the Company's management until the
specified benchmarks are achieved.
In addition, during the quarter ended September 30, 2001, the Company
cancelled outstanding options held by directors and rank and file employees
under its Stock Incentive Plan. The Company recognized an expense during the
quarter of approximately $2,246 representing consideration payable under the
cancellation agreements.
9
<Page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The words "believe", "expect", "anticipate", "intend",
"estimate" and other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. Our actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include the following: the ability to sell properties
under the Asset Sale Plan; real estate investment considerations, such as the
effect of economic and other conditions in the market area on cash flows and
values; the need to renew leases or relet space upon the expiration of current
leases, the need to lease new developments and redevelopments and the ability of
a property to generate revenue sufficient to meet debt service payments and
other operating expenses; risks associated with borrowing, such as the
possibility that we will not have sufficient funds available to make principal
payments on outstanding debt and outstanding debt may be refinanced at higher
interest rates or otherwise on terms less favorable to us; the impact of pending
or future litigation; variations in quarterly operating results; securities held
for investment are subject to fluctuations in valuation based upon the
performance of the underlying businesses; risks that some of our investments
could cause us to fail to qualify as a REIT; and those risks and uncertainties
contained elsewhere in this report, in our Proxy Statement relating to the
adoption of the Asset Sale Plan, and under the heading "Risk Factors" beginning
on page 9 of our Form 10-K as filed with the Securities and Exchange Commission
on March 23, 2001.
The following discussion and analysis of the financial condition and results
of operations should be read in conjunction with the accompanying consolidated
financial statements and notes thereto.
RESULTS OF OPERATIONS
SUMMARY
Changes in revenues and expenses for the nine months ended September 30,
2001 and 2000 were primarily due to the timing of investment, financing and sale
transactions and redevelopment and releasing programs during 2000 and 2001. The
Technology Square Building 300 development commenced in January 2000; The
Athenaeum Portfolio was refinanced in April 2000; The Draper Building was sold
in April 2000; the Interim Financing was paid down by $32.2 million in April
2000; some of the assets in The Athenaeum Portfolio (215 First Street, 195 First
Street and Doc Linskey Way) were sold in June 2000; BCSP sold 233 Fremont Street
in June 2000; the first building in Mathilda Research Centre was completed in
June 2000; cash dividends totaling $3.50 per share were paid in the first six
months of 2000; the repurchase of common stock of BCP and certain voting trust
interests in accordance with the share repurchase program occurred in July 2000;
the development of Technology Square Buildings 600 and 700 commenced in August
2000; additional Wyndham preferred stock was distributed in November 2000;
$3.2 million of capital was contributed to BCSP in December 2000; the remaining
assets in The Athenaeum Portfolio (One Kendall Square) were sold in December
2000; Technology Square was sold in February 2001; the Interim Financing was
paid off in February 2001; cash dividends totaling $10.00 per share were paid in
the first nine months of 2001; the second building in Mathilda Research Centre
was completed in the first quarter of 2001; the office portion of Millennium
Tower was completed in the first quarter of 2001; our shareholders adopted the
Asset Sale Plan in April 2001 which authorizes us to sell, transfer or exchange
all or substantially all of our assets; the Fort Point Place loan was increased
in May 2001; 13 of the 14 properties of the Dallas Office and Industrial
Portfolio were sold in June 2001 and August 2001; the Fort Point Place office
buildings were sold in July 2001; the Mathilda Research Centre was refinanced in
August 2001; and $10.0 million of capital was contributed to BCSP in
August 2001 and September 2001.
10
<Page>
Under the new management incentive plan adopted in 2000, members of
management will be entitled to participate in all returns realized by the
Company after specified benchmarks are achieved. Management expects that the
prescribed incentive thresholds will be achieved and that management will be
entitled to share in the returns. For the three and nine months ended September
30, 2001, minority interest in consolidated partnership reflects an allocation
of income of approximately $24.9 million attributable to the management
incentive plan. This allocation is subject to change in future periods as
remaining assets are liquidated. To date, no incentive amounts have been
distributed and we intend to retain capital in an amount sufficient to fund
amounts owed with respect to the incentive allocation.
We anticipate that results in future periods will be impacted by future
dispositions if any, that are authorized under the Asset Sale Plan. Rental
income will decline as a result of the sales of Technology Square in
February 2001, all of the properties in the Dallas Office and Industrial
Portfolio in June 2001, August 2001 and October 2001 and the Fort Point Place
office buildings in July 2001. Equity in earnings of partnership and joint
ventures may increase due to earnings generated from BCSP and the completion and
lease up of Mathilda Research Centre, Mathilda Research Centre II and Millennium
Tower, until such time that they are disposed of under the Asset Sale Plan.
Property operating and related expenses are also expected to decline as a result
of the sales of properties and the associated payoff of debt.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
Total revenues were $3.6 million and $12.2 million for the three months
ended September 30, 2001 and 2000, respectively. Rental income was $0.2 million
and $9.1 million for the three months ended September 30, 2001 and 2000,
respectively. The decrease of $8.9 million was due to the sales of Technology
Square, Fort Point Place office buildings and 13 of the 14 properties of the
Dallas Office and Industrial Portfolio. Reimbursement of operating expenses and
real estate taxes was $0.0 million and $0.3 million for the three months ended
September 30, 2001 and 2000, respectively. The decrease of $0.3 million was due
to the sales of Technology Square and 13 of the 14 properties of the Dallas
Office and Industrial Portfolio. Equity in earnings of partnership and joint
ventures was $2.4 million and $1.2 million for the three months ended September
30, 2001 and 2000, respectively. The increase of $1.2 million was due to
earnings from BCSP, Mathilda Research Centre and Millennium Tower offset by
decreased earnings due to the sale of The Athenaeum Portfolio. Interest and
dividend income was $1.0 million and $1.4 million for the three months ended
September 30, 2001 and 2000, respectively. The decrease of $0.4 million was due
to Wyndham dividends received in 2000. Other income was $0.0 million and
$0.2 million for the three months ended September 30, 2001 and 2000,
respectively. The decrease of $0.2 million was due to management fees received
from The Athenaeum Portfolio in 2000.
Total expenses were $5.1 million and $9.4 million for the three months ended
September 30, 2001 and 2000, respectively. Property operating expenses were
$0.2 million and $2.6 million for the three months ended September 30, 2001 and
2000, respectively. The decrease of $2.4 million was due to the sales of
Technology Square, Fort Point Place office buildings and 13 of the 14 properties
of the Dallas Office and Industrial Portfolio. Real estate taxes were
$0.0 million and $1.3 million for the three months ended September 30, 2001 and
2000, respectively. The decrease of $1.3 million was due to the sale of
Technology Square and lower estimated taxes for the Dallas Office and Industrial
Portfolio. General and administrative expenses were $4.8 million and
$2.8 million for the three months ended September 30, 2001 and 2000,
respectively. The increase of $2.0 million was primarily due to 2001 charges
related to the director and rank and file employee stock option cancellation
agreements. Interest expense was $0.0 million and $0.5 million for the three
months ended September 30, 2001 and 2000, respectively. The decrease of
$0.5 million was due to interest on the Interim Financing and mortgage notes
offset by capitalized interest. Depreciation and amortization was $0.1 million
and $2.2 million for the three months ended September 30, 2001 and 2000,
respectively. The decrease of $2.1 million was due to the sales of Technology
Square and 13 of the 14 properties of the Dallas Office and Industrial
Portfolio.
11
<Page>
The gains on sales of real estate for the three months ended September 30,
2001 of $23.3 million resulted from the gain from the sale of the Fort Point
Place office buildings and the recognized gain from the sale of Technology
Square offset by the loss from the sale of one of the 14 properties of the
Dallas Office and Industrial Portfolio. The gains on sales of real estate for
the three months ended September 30, 2000 of $3.0 million resulted from our
share of the recognized gain on the sale of 233 Fremont and the sale of some
Fort Point Place residential condominiums. The minority interest in consolidated
partnership of ($24.9) and ($0.7) million for the three months ended September
30, 2001 and 2000, respectively, represent the portion of the Operating
Partnership that is not owned by BCP.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
Total revenues were $19.4 million and $44.1 million for the nine months
ended September 30, 2001 and 2000, respectively. Rental income was
$11.3 million and $26.1 million for the nine months ended September 30, 2001 and
2000, respectively. The decrease of $14.8 million was due to the sales of
Technology Square and 13 of the 14 properties of the Dallas Office and
Industrial Portfolio offset by increased rents in Fort Point Place.
Reimbursement of operating expenses and real estate taxes was $0.3 million and
$1.0 million for the nine months ended September 30, 2001 and 2000,
respectively. The decrease of $0.7 million was primarily due to decreased real
estate tax reimbursements in the Dallas Office and Industrial Portfolio. Equity
in earnings of partnership and joint ventures was $6.4 and $5.1 million for the
nine months ended September 30, 2001 and 2000. The increase of $1.3 million was
due to 2001 increased earnings from Mathilda Research Centre and Millennium
Tower offset by reduced earnings from BCSP and The Athenaeum Portfolio. Interest
and dividend income was $3.2 million and $4.7 million for the nine months ended
September 30, 2001 and 2000, respectively. The decrease of $1.5 million was due
to Wyndham dividends received in 2000 and interest earned from cash on hand.
Gains (losses) on investments were ($2.2) million and $6.4 million for the nine
months ended September 30, 2001 and 2000, respectively. The decrease of
$8.6 million was due to the Cypress gain recognized in 2000 and Cypress and CO
Space losses recognized in 2001. Other income was $0.4 million and $0.8 million
for the nine months ended September 30, 2001 and 2000, respectively. The
decrease of $0.4 million was due to management fees received from The Athenaeum
Portfolio in 2000.
Total expenses were $24.0 million and $30.7 million for the nine months
ended September 30, 2001 and 2000, respectively. Property operating expenses
were $4.2 million and $7.3 million for the nine months ended September 30, 2001
and 2000, respectively. The decrease of $3.1 million was primarily due to the
sales of Technology Square, Fort Point Place office buildings and 13 of the 14
properties of the Dallas Office and Industrial Portfolio. Real estate taxes were
$1.3 million and $3.8 million for the nine months ended September 30, 2001 and
2000, respectively. The decrease of $2.5 million was due to the sale of
Technology Square and lower estimated taxes for the Dallas Office and Industrial
Portfolio. General and administrative expenses were $14.3 million and
$8.6 million for the nine months ended September 30, 2001 and 2000,
respectively. The increase of $5.7 million was primarily due to management
personnel bonuses for 2000 achievements that were expensed and paid in 2001 and
2001 charges related to the director and rank and file employee stock option
cancellation agreements. Affiliate formation expenses were $2.0 million for the
nine months ended September 30, 2000. Affiliate formation expenses were costs
incurred in the formation of BCSP and consist of underwriter commissions and
fees for legal and professional services not reimbursed by the partners of BCSP.
Interest expense was $1.6 million and $3.0 million for the nine months ended
September 30, 2001 and 2000, respectively. The decrease of $1.4 million was due
to interest on the Interim Financing offset by capitalized interest.
Depreciation and amortization was $2.6 million and $6.0 million for the nine
months ended September 30, 2001 and 2000, respectively. The decrease of
$3.4 million was primarily due to the sales of Technology Square and 13 of the
14 properties of the Dallas Office and Industrial Portfolio.
The gains on sales of real estate for the nine months ended September 30,
2001 of $78.0 million resulted from the recognized gain from the sale of
Technology Square, the gain from the sale of the Fort
12
<Page>
Point Place office buildings and our share of the recognized gain on the sale of
233 Fremont, offset by the losses from the sales of 13 of the 14 properties of
the Dallas Office and Industrial Portfolio. The gains on sales of real estate
for the nine months ended September 30, 2000 of $61.5 million resulted from the
sale of The Draper Building, our share of the gain on the sale of some of the
assets of The Athenaeum Portfolio, the sale of some Fort Point Place residential
condominiums and our share of the recognized gain on the sale of 233 Fremont.
The minority interest in consolidated partnership of ($25.4) and ($8.7) million
for the nine months ended September 30, 2001 and 2000, respectively, represent
the portion of the Operating Partnership that is not owned by BCP. The
extraordinary items, net of minority interest of ($4.6) million for the nine
months ended September 30, 2000 are primarily due to our share of the write-off
of transaction costs and unamortized deferred financing costs as a result of the
refinancing of The Athenaeum Portfolio.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $111.8 million at September 30, 2001 as
compared to $83.8 million at December 31, 2000. The increase of $28.0 million
was primarily the result of (i) proceeds from the sales of Technology Square,
Fort Point Place residential condominiums, Fort Point Place office buildings and
13 of the 14 properties of the Dallas Office and Industrial Portfolio, (ii)
distributions received from Mathilda Research Centre, (iii) proceeds from the
Fort Point Place mortgage note payable, and (iv) cash flow from operations, all
offset by (i) the payments of the January 2001, March 2001, May 2001 and July
2001 dividends to stockholders and distributions to unitholders, (ii) the payoff
of the Interim Financing, (iii) the payoff of the Fort Point Place mortgage note
payable, (iv) the payoff of some of the Dallas Office and Industrial Portfolio
mortgage notes payable, and (v) the payment of Technology Square development
costs.
SHORT AND LONG-TERM LIQUIDITY
We have considered our short-term (up to 12 months) liquidity needs and the
adequacy of expected liquidity sources to meet these needs. We believe that our
principal short-term operating liquidity needs are to fund normal recurring
expenses, debt service requirements and the minimum distribution required to
maintain the Company's REIT qualification under the Internal Revenue Code of
1986, as amended. We believe that these needs will be provided for by cash flow
from operating activities, sales of assets and current cash balances. We believe
that our 2001 distribution requirement to maintain our REIT qualification will
be met from our 2001 cash distributions to date of $10.00 per share of common
stock of BCP and from future distributions expected from the implementation of
the Asset Sale Plan. We believe our other short-term liquidity needs are the
funding of BCSP capital commitments, the completion of current development
projects and funding of the management incentive plan. We expect to fund these
needs from current cash balances, mortgages and other debt instruments, and
through sales of assets.
We expect to meet long-term (greater than 12 months) liquidity requirements
for the completion of current development projects, scheduled debt maturities,
other non-recurring capital improvements and funding of the management incentive
plan through sales of assets, indebtedness, and from current cash balances.
CAPITALIZATION
As of September 30, 2001, our total consolidated debt was approximately
$1.4 million and our total consolidated debt plus our proportionate share of
total unconsolidated debt was approximately $147.4 million. The following table
sets forth certain information regarding our consolidated and unconsolidated
debt obligations, including obligations relating to specific properties. The
variable interest rates reflected in the table are the weighted averages of the
outstanding LIBOR loan layers. All of the debt is non-recourse to us, with
certain exceptions such as liability for fraud, misapplication of insurance
proceeds, environmental matters and certain guarantees for completion of
construction.
13
<Page>
<Table>
<Caption>
CURRENT
INTEREST
COMPANY'S RATE AT
PRINCIPAL PORTION SEPTEMBER 30, MATURITY PREPAYMENT
DEBT AMOUNT OF PRINCIPAL 2001 DATE PROVISIONS
- ---- --------- ------------ ------------- -------- -------------
(DOLLARS IN MILLIONS)
CONSOLIDATED DEBT
FIXED RATE:
DALLAS OFFICE AND INDUSTRIAL PORTFOLIO:
Plaza at Walnut Hill................... $ 1.4 $ 1.4 9.00% (a) Prepayable
------- -------- --------- subject to
conditions(b)
Subtotal / Weighted Average
Consolidated Debt.................... 1.4 1.4 9.00%
------ ------ ------
UNCONSOLIDATED DEBT
FIXED RATE:
Beacon Capital Strategic 100.5 20.1 6.75% 9/1/04 Prepayable
Partners, L.P........................ ------- -------- --------- subject to
conditions(c)
Subtotal / Weighted Average
Fixed Rate Debt...................... 100.5 20.1 6.75%
------ ------ ------
VARIABLE RATE:
Beacon Capital Strategic 279.9 56.0 5.30%
Partners, L.P. (d)................... (d) Prepayable
subject to
conditions(e)
Mathilda Research Centre............... 65.3 32.6 6.94% 9/1/04 Prepayable
subject to
conditions(f)
Mathilda Research Centre II............ 13.7 12.0 5.99% 12/29/03 Prepayable
subject to
conditions(e)
Millennium Tower....................... 37.6 25.2 5.83% (g) Prepayable
------- -------- --------- subject to
conditions(e)
Subtotal / Weighted Average
Variable Rate Debt................... 396.5 125.8 5.90%
------- -------- ---------
Subtotal / Weighted Average
Unconsolidated Debt.................. 497.0 145.9 6.01%
------ ------ ------
Total / Weighted Average............... $498.4 $147.3 6.04%
====== ====== ======
</Table>
- --------------------------
(a) Plaza at Walnut Hill loan matures on July 1, 2017. The lender has the right
to accelerate the maturity in the sixth, eleventh or sixteenth loan years,
on six months' notice. No prepayment penalties apply in that event.
(b) Currently prepayable subject to a yield maintenance payment based on the
rate of United States Treasury Notes having a term closest to the date of
maturity but in no event less than 1% of the then balance.
(c) Prepayable after October 1, 2003 subject to a yield maintenance payment
based on the rate of United States Treasury Notes having a term closest to
the date of maturity but in no event less than 1% of the then balance.
(d) Includes a subscription line, a construction loan and other property
mortgages with varying maturity dates.
(e) Prepayable any time in whole or in part subject to payment of applicable
breakage costs and in some cases fees.
(f) Closed to prepayment until December 1, 2004. Thereafter subject to payment
of applicable breakage costs and fees.
(g) The Millennium Tower loan matures on June 1, 2002. The loan may be extended
for one year if certain conditions are met.
14
<Page>
The following table, which includes both consolidated and unconsolidated
debt, summarizes the scheduled amortization of principal and maturities of the
loans outstanding as of September 30, 2001.
<Table>
<Caption>
SCHEDULED
AMORTIZATION MATURITIES TOTAL
------------ ---------- --------
(DOLLARS IN THOUSANDS)
October 1, 2001 - December 31, 2001......... $ 48 $ -- $ 48
2002........................................ 316 48,782 49,098
2003........................................ 519 11,975 12,494
2004........................................ 406 84,069 84,475
2005........................................ 55 -- 55
Thereafter.................................. 1,157 -- 1,157
------ -------- --------
Total..................................... $2,501 $144,826 $147,327
====== ======== ========
</Table>
FUNDS FROM OPERATIONS
Due to our implementation of the Asset Sale Plan that was approved by our
shareholders and adopted in April 2001, we believe that FFO is not a relevant
measurement of BCP's 2001 financial results.
PROPERTY INFORMATION
The following table sets forth the Total Area, the Percentage Leased, the
Average Base Rent (as defined below) and the Average Net Effective Rent (as
defined below) per square foot for each of the properties we owned or had an
interest in (excluding properties controlled by BCSP) as of September 30, 2001.
Base Rent is gross rent excluding payments by tenants on account of real estate
taxes and operating expense escalation charges. Net Effective Rent is Base Rent
adjusted on a straight-line basis for contractual rent step-ups and free rent
periods, plus tenant payments on account of real estate tax and operating
expense escalation charges, less total operating expenses and real estate taxes.
<Table>
<Caption>
AVERAGE AVERAGE
TOTAL % BASE NET EFF
PROPERTY AREA LEASED RENT RENT
- -------- --------- -------- -------- --------
SUBURBAN DALLAS, TX:
R&D / INDUSTRIAL
Plaza at Walnut Hill........................................ 88,280 82% $ 8.84 $ 8.55
--------- ---- ------ ------
Subtotal / Weighted Average Suburban Dallas, TX........... 88,280 82% 8.84 8.55
--------- ---- ------ ------
SEATTLE, WA:
Millennium Tower (1)........................................ 199,384 91% 33.00 35.71
--------- ---- ------ ------
Subtotal / Weighted Average Seattle, WA................... 199,384 91% 33.00 35.71
--------- ---- ------ ------
SUNNYVALE, CA: (2)
Mathilda Research Centre (3)................................ 266,750 100% 31.55 37.69
--------- ---- ------ ------
Subtotal / Weighted Average Sunnyvale, CA................. 266,750 100% 31.55 37.69
--------- ---- ------ ------
Total / Weighted Average Properties....................... 554,414 94% $28.88 $32.94
========= ==== ====== ======
</Table>
- --------------------------
(1) We own Millennium Tower with our joint venture partner, HA L.L.C., an
affiliate of Martin Smith Real Estate Services. Millennium Tower leases are
NNN leases. Millennium Tower includes approximately 61,000 square feet of
residential condominiums. The joint venture is currently marketing the
condominiums for sale and as of September 30, 2001, 2 of the 20 units have
been sold.
(2) Mathilda Research Centre II, a property located at 1220 N. Mathilda Avenue
in Sunnyvale, California, is excluded from this table because it is a
development project. We own Mathilda Research Centre II with our joint
venture partner, Mathilda Partners II LLC, an affiliate of Menlo Equities.
The property is leased to Juniper Networks on a NNN basis and is expected to
be completed in early 2002.
(3) We own Mathilda Research Centre with our joint venture partner, Mathilda
Partners LLC, an affiliate of Menlo Equities. Mathilda Research Centre is
comprised of two buildings, 1194 and 1184 Mathilda Avenue. Both buildings
are leased to Juniper Networks on a NNN basis.
15
<Page>
The following table sets forth Lease Expirations (in square feet) for the
portfolio of properties we owned or had an interest in (excluding properties
controlled by BCSP) as of September 30, 2001.
<Table>
<Caption>
SQUARE % OF SQUARE ANNUAL % ANNUAL # OF
FEET(1) FEET(2) RENT(3) RENT(4) TENANTS(5)
--------- ----------- -------- -------- ----------
(DOLLARS IN THOUSANDS)
October 1, 2001 - December 31, 2001....... 1,512 0.3% $ 19 0.1% 1
2002...................................... 12,459 2.2% 103 0.5% 4
2003...................................... 24,066 4.3% 226 1.1% 6
2004...................................... 14,005 2.5% 133 0.7% 2
2005...................................... -- 0.0% -- 0.0% --
Thereafter................................ 468,689 84.5% 19,899 97.6% 9
--------- ---- ------- ----- ---
Total................................... 520,731 93.8% $20,380 100.0% 22
========= ==== ======= ===== ===
</Table>
- ------------------------
(1) Total area in square feet covered by such leases.
(2) Percentage of total square feet of our portfolio.
(3) Annualized expiring base rental income represented by such leases in the
year of expiration plus the current tenant payments on account of operating
expense and real estate tax escalation charges.
(4) Calculated as annual rent divided by the total annual rent.
(5) The number of tenants whose leases will expire.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to certain financial market risks, the most predominant being
fluctuations in the prime, Eurodollar and LIBOR interest rates. Interest rate
fluctuations are monitored by management as an integral part of our overall risk
management program, which recognizes the unpredictability of financial markets
and seeks to reduce the potentially adverse effect on our results of operations.
The effect of interest rate fluctuations historically has been small relative to
other factors affecting operating results, such as rental rates and occupancy.
The following table summarizes our debt obligations outstanding as of
September 30, 2001. This information should be read in conjunction with Notes 5
and 6 to the condensed consolidated financial statements and with the
information contained under Capitalization in Part I--Item 2.
<Table>
<Caption>
EXPECTED MATURITY DATE
10/1/01-
12/31/01 2002 2003 2004 2005 THEREAFTER TOTAL FAIR VALUE
-------- -------- -------- -------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
Liabilities
DEBT:
- -----------------------
FIXED RATE............. $ 13 $ 42 $ 46 $ 51 $ 55 $1,157 $ 1,364 (1)
Weighted Average Fixed
Interest Rate........ 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
VARIABLE RATE.......... -- -- -- -- -- -- -- --
Current Variable
Interest Rate........ -- -- -- -- -- -- --
</Table>
- ------------------------
(1) In the fourth quarter of 2001, in conjunction with the sale of the remaining
property in the Dallas Office and Industrial Portfolio, this fixed rate loan
was paid off.
16
<Page>
BEACON CAPITAL PARTNERS, INC.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
<Table>
(a) 3.1 Articles of Incorporation.(1)
3.2 Certificate of Correction to Articles of Incorporation.(1)
3.3 Amended and Restated By-laws.(1)
3.4 Amended and Restated Agreement of Limited Partnership of
Beacon Capital Partners, L.P.(2)
(b) 8-K filed July 11, 2001 announcing the sale of properties in the
Dallas Office and Industrial Portfolio as well as the office
component of the Fort Point Place project.
8-K filed August 22, 2001 announcing second quarter results.
</Table>
- ------------------------
(1) Previously filed as an exhibit to BCP's Registration Statement on Form S-11
(SEC File No. 333-56937) filed with the Commission on June 16, 1998.
(2) Previously filed as an exhibit to BCP's Annual Report on Form 10-K for the
year ended December 31, 2000.
17
<Page>
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 thereunto duly authorized.
<Table>
BEACON CAPITAL PARTNERS, INC.
/s/ RANDY J. PARKER
------------------------------------------------
Randy J. Parker
Chief Financial Officer (Authorized Officer and
November 13, 2001 Principal Accounting Officer)
</Table>
18
<Page>
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- --------------------- -----------
Exhibit 3.1 Articles of Incorporation (1)
Exhibit 3.2 Certificate of Correction to Articles of Incorporation (1)
Exhibit 3.3 Amended and Restated By-laws (1)
Exhibit 3.4 Amended and Restated Agreement of Limited Partnership of
Beacon Capital Partners, L.P. (2)
</Table>
- ------------------------
(1) Previously filed as an exhibit to BCP's Registration Statement on Form S-11
(SEC File No. 333-56937) filed with the Commission on June 16, 1998.
(2) Previously filed as an exhibit to BCP's Annual Report on Form 10-K for the
year ended December 31, 2000.
19