As filed with the Securities and Exchange Commission on June 23, 1997
Registration Statement No. 33-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BERKSHIRE REALTY COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3086485
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
470 Atlantic Avenue
Boston, Massachusetts 02210
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Scott D. Spelfogel
Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, Massachusetts 02210
(617) 423-2233
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
Alexander J. Jordan, Jr.
Peabody & Brown
101 Federal Street
Boston, Massachusetts 02110-1832
(617) 345-1103
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Title of Each Class of Securities Maximum Maximum Amount of
to be Registered Amount to be Offering Price Aggregate Registration
Registered Per Unit(1) Offering Price Fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value 389,042 $10.8125 $4,206,517 $1,275(1)
======================================================================================================================
</TABLE>
(1)Calculated pursuant to Rule 457(c) of the rules and regulations under the
Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED ______________, 1997
PROSPECTUS
389,042 Shares
BERKSHIRE REALTY COMPANY, INC.
COMMON STOCK
Berkshire Realty Company, Inc. (the "Company"), is a self-administered
and self-managed equity REIT which specializes in the ownership and operation of
apartment communities. As of June 1, 1997, the company had investments in 41
properties in 8 states consisting of 37 apartment communities having in the
aggregate 12,896 units and 4 retail centers with a total of 851,000 square feet
of leasable space. One retail center is owned through a joint venture with an
affiliate of the Company. In addition, the Company owns a mortgage loan
collateralized by a multifamily apartment complex located in Florida, a 296-unit
development project located in Durham, North Carolina, and three parcels of land
for future development, two of which are in Greenville, South Carolina, and one
in Dallas, Texas. (The properties owned by the Company are referred to herein as
the "Properties.") The Company is a Delaware corporation, and its Common Stock
is listed on the New York Stock Exchange under the symbol BRI. Subject to
certain exceptions, if a person shall become the owner of shares of Common Stock
in excess of 9.8% of the then outstanding Common Stock, such excess shares (the
"Excess Shares") shall be subject to certain restrictions with respect to voting
rights, dividends and distributions and transfer. See DESCRIPTION OF THE CAPITAL
STOCK OF THE COMPANY - Restrictions on the Ownership and Transfer of Excess
Shares.
This Prospectus relates to the possible issuance by the Company of up
to 389,042 shares (the "Redemption Shares") of common stock, par value $.01 per
share ("Common Stock") of the Company, if and to the extent that certain holders
(the "Unitholders") of 389,042 units of limited partnership interest ("Units")
in BRI OP Limited Partnership (the "Operating Partnership") exchange such Units
for Redemption Shares. The Units were issued to the Unitholders in their
capacity as partners and investors in Merit Coventry Limited Partnership, L&V
Hidden Oaks Partnership, Benchmark Apartments Limited Partnership and Merit
Texas Portfolio Limited Partnership (collectively, the "Merit Partnerships") in
connection with the acquisition of a 402 unit apartment complex known as
Coventry Park Apartments and a 208 unit apartment complex known as Hidden Oaks
Apartments on June 6, 1996 and the acquisition of a 250 unit apartment complex
known as Benchmark Apartments and a 244 unit apartment complex known as Newport
Commons Apartments on June 27, 1996. The Units received by the Unitholders can
be tendered to the Company for redemption after June 16, 1997 with respect to
Units received by the Unitholders for the Merit Coventry and Hidden Oaks
complexes and after July 7, 1997 with respect to Units received for the
Benchmark and Newport Commons complexes.
Pursuant to the agreement of limited partnership of the Operating
Partnership (the "Partnership Agreement"), a Unitholder may tender all or a
portion of its Units to the Operating Partnership for redemption for the cash
equivalent of an equivalent number of shares of Common Stock; provided, however,
that the Company may, in its sole and absolute discretion, acquire any Units so
tendered for an equivalent number of shares of Common Stock or for the cash
equivalent of an equivalent number of shares of Common Stock.
<PAGE>
The Company anticipates that it generally will elect to acquire
directly Units tendered for redemption and to issue Common Stock pursuant to
this Prospectus in exchange therefor rather than paying cash. As a result, the
Company may from time to time issue up to 389,042 Redemption shares upon the
acquisition of Units tendered to the Operating Partnership for redemption.
Accordingly, the Company is registering the Redemption Shares to provide
Unitholders with freely tradable securities upon redemption.
The Company will not receive any proceeds from the issuance of any
Redemption Shares, but will acquire Units tendered to the Operating Partnership
for redemption for which it elects to issue Redemption Shares. With each such
acquisition, the Company's interest in the Operating Partnership will increase.
The Unitholders and any agents, dealers or underwriters that
participate with the Unitholders in the distribution of the shares of Common
Stock may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), in which case any commissions
received by such agents, dealers or underwriters and any profit on the resale of
the shares of Common Stock purchased by them may be deemed underwriting
commissions or discounts under the Securities Act. See PLAN OF DISTRIBUTION for
indemnification arrangements between the Company and the Unitholders.
See RISK FACTORS on page 4 for certain factors relevant to investment
in the Common Stock.
The date of this Prospectus is ____________, 1997.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA-TION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"), pursuant to the
Exchange Act. Such reports, proxy statements and other information filed by the
Company may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and are also
available for inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, NY 10048 and at 500 West
Madison Street, Suite 1400, Chicago, IL 60661-2511. The Commission maintains a
Web site at http://www.sec.gov containing reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission. In addition, the Common Stock of
the Company is listed on the New York Stock Exchange, and similar information
concerning the Company can also be inspected and copied at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, DC 20549, a Registration Statement on Form S-3 under the Securities
Act and the rules and regulations promulgated thereunder, with respect to the
securities offered pursuant to this Prospectus. This Prospectus, which is part
of the Registration Statement, does not contain all of the information set forth
in the Registration Statement and the exhibits and financial schedules thereto.
For further information concerning the Company and the securities offered
hereby, reference is made to the Registration Statement and the exhibits and
schedules filed therewith, which may be examined without charge at, or copies
obtained upon payment of prescribed fees from, the Commission at its regional
offices at the locations listed above. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission (File No. 1-10660) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Report on Form 10-Q for the three-month period ended
March 31, 1997; and
(c) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed November 19,
1990 pursuant to the Exchange Act, as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
Redemption Shares offered hereby have been sold or which deregisters all
Redemption Shares then remaining unsold shall be incorporated by reference in
this Prospectus and made a part hereof from the date of the filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed
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<PAGE>
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other document subsequently filed with
the Commission which also is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Request for such copies should be
directed to: Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Marianne Pritchard, Senior Vice President and
Chief Financial Officer, telephone (888) 867-0100.
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed below. An investment in the Common Stock involves
various risks. Unitholders and other prospective investors should carefully
consider the following information in conjunction with the other information
contained in this Prospectus before making an investment decision regarding the
Redemption Shares.
Tax Consequences to Unitholders of Exchange of Units
Tax Consequences of Exchange of Units. In the event that the Company
exercises its rights to acquire Units tendered for redemption in exchange for
cash or Redemption Shares, the Company's acquisition of such Units will be
treated for tax purposes as a sale of the Units. Such a sale will be fully
taxable to the Unitholder and the Unitholder will be treated as realizing for
tax purposes an amount equal to the sum of the cash received or the value of the
Redemption Shares received in the exchange plus the amount of any Operating
Partnership liabilities allocable to the exchanged Units at the time of the
redemption or exchange. It is possible that the amount of gain recognized or
even the tax liability resulting from such gain could exceed the amount of cash
and the value of the Redemption Shares received upon such disposition. See
DESCRIPTION OF UNITS AND REDEMPTION OF UNITS -- Tax Consequences of Redemption.
In addition, the ability of the Unitholder to sell a substantial number of
Redemption Shares in order to raise cash to pay tax liabilities associated with
the redemption of Units may be limited as a result of fluctuations in the market
price of the Common Stock, and the price the Unitholder receives for such shares
may not equal the value of the Units at the time of redemption or exchange.
Potential Change in Investment Upon Redemption of Units. If a
Unitholder exercises its right to require the redemption of all or a portion of
its Units, the Unitholder may receive cash or, at the option of the Company,
Redemption Shares in exchange for its Units. If the Unitholder receives cash
from either the Operating Partnership or the Company, the Unitholder will not
have any interest in the Company or the Operating Partnership (except to the
extent that it retains Units) and will not benefit from any subsequent increases
in the value of Common Stock and will not receive any future distributions from
the Company or the Operating Partnership (unless the Unitholder retains or
acquires in the future additional Common Stock or Units). If the Unitholder
receives Common Stock, the Unitholder will become a stockholder of the Company
rather than a holder of Units in the Operating Partnership. See DESCRIPTION OF
UNITS AND REDEMPTION OF UNITS -- Comparison of Ownership of Units and Common
Stock.
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Risk of Adverse Effect on Company from Debt Servicing and Refinancing, Financial
Covenants, Absence of Limitations on Debt, and Increases in Interest Rates
Debt Financing and Existing Debt Maturities. The Company intends to
finance the acquisition of additional properties through the use of debt and
equity financing. Additionally, in connection with the acquisition of certain
Properties for Units, the Company has agreed to maintain certain levels of
nonrecourse debt on the Properties in order to minimize the tax consequences of
these acquisitions to the Unit recipients. The Company is therefore subject to
risks normally associated with debt financing, including the possibility that
the Company will have insufficient cash flow to meet required principal and
interest payments, will be unable to satisfy financial covenants in its debt
financing agreements, will be unable to refinance existing indebtedness (which
in most cases will not be fully amortized at maturity), or will be unable to
secure favorable refinancing terms.
The Company currently has a policy of incurring debt only if upon such
incurrence the Company's debt to estimated fair market value ratio would be 50%
or less. Although the Company has adopted a debt limitation policy, the
organizational documents of the Company do not contain any limitation on the
amount of indebtedness the Company may incur. Accordingly, the Board of
Directors could alter or eliminate this policy and would do so, for example, if
it were necessary in order for the Company to continue to qualify as a REIT.
The Company anticipates that only a small portion of the principal of
the Company's mortgage indebtedness will be repaid prior to maturity. However,
if the Company does not have funds sufficient to repay such indebtedness at
maturity, the Company may need to refinance indebtedness through additional debt
financing or equity offerings. If the Company is unable to refinance this
indebtedness on acceptable terms, the Company may be forced to dispose of
properties upon disadvantageous terms, which could result in losses to the
Company and adversely affect the amount of cash available for distribution to
stockholders. If prevailing interest rates or general economic conditions result
in higher interest rates at a time when the Company must refinance its
indebtedness, the Company's interest expense would increase, which would
adversely affect the Company's results of operations and its ability to pay
expected distributions to stockholders. Further, if any of the Company's
properties are mortgaged to secure payment of indebtedness and the Company is
unable to meet mortgage payments, the mortgagee could foreclose or otherwise
transfer the property, with a consequent loss of income and asset value to the
Company. Even with respect to nonrecourse indebtedness, the lender may have the
right to recover deficiencies from the Company in certain circumstances,
including fraud and environmental liabilities.
Risk of Adverse Effect of Increase in Market Interest Rates on Variable
Interest Rates. Outstanding advances under the Company's credit facilities bear
interest at a variable rate. The Company may incur additional variable rate
indebtedness in the future. Accordingly, increases in interest rates could
increase the Company's interest expense, which could adversely affect the
Company's results of operations and its ability to pay expected distributions to
stockholders. An increase in interest expense could also cause the Company to be
in default under certain covenants of the credit facilities.
Uncertain Market Price of Shares
Yield is a significant factor in the valuation by the marketplace of
securities of REITs. The market price of the Common Stock may depend upon its
yield in relation to the yield of other investments of comparable security. As a
result of this emphasis on yield, the market value of the real estate assets
underlying such securities may never be fully reflected in the trading value of
the Common Stock.
Dilution
The interest of Shareholders may be subject to dilution in the future
since the Company has the ability to raise additional equity by offering shares
for sale. The authorized but unissued capital stock of the Company (including
authorized preferred stock, senior to the Common Stock) may be issued for any
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<PAGE>
corporate purpose, including acquisitions of other entities which invest in or
hold real estate investments and issuances which would make more difficult, and
therefore less likely, changes in control of the Company. Any such issuance of
additional stock could have the effect of diluting the earnings per share, book
value per share, voting power of existing Shares and ownership of persons
seeking to obtain control of the Company. See Anti-Takeover Provisions below.
The securities outstanding include Warrants. During the term of the
Warrants the holders thereof are given an opportunity to profit from a rise in
the market price of the Common Stock, with a resulting dilution of the interest
of the existing shareholders. Thus, the terms upon which the Company may obtain
additional financing during that period may be adversely affected. The holders
of Warrants might be expected to exercise their rights to acquire Common Stock
at a time when the Company would, in all likelihood, be able to obtain needed
capital through a new offering of securities on terms more favorable than those
provided by these outstanding securities. In the event that such holders
exercise these rights to acquire shares of Common Stock at such time, the net
tangible book value per share of the Common Stock might be subject to dilution.
See DESCRIPTION OF THE CAPITAL STOCK OF THE COMPANY -- Warrants below.
Anti-Takeover Provisions
The Company's Certificate and its By-Laws (collectively, the
"Organizational Documents") contain certain provisions which may discourage a
change in control of the Company. In particular, under the Company's
Certificate, the election of Directors is staggered such that approximately
one-third of the Directors are elected to three-year terms each year and a
Supermajority vote is required in order to amend those portions of the
Organizational Documents which concern: (1) the definition of "Supermajority";
(2) the requirements for amending the Organizational Documents; (3) the
requirements regarding Excess Share ownership (i.e., ownership of shares in
excess of 9.8% of the outstanding Shares as described below); (4) the actions
which require a Supermajority vote; and (5) the requirements regarding Business
Combinations. The requirement of a Supermajority in order to make the foregoing
amendments to the Organizational Documents may make it more difficult for a
person to acquire control of the Company or to effect a change in the operation
of the Company.
The Company is subject to Section 203 of the Delaware General
Corporation Law, which restricts business combinations between the Company and
its Shareholders.
In order to facilitate compliance with REIT requirements for tax
purposes, the Company's Organizational Documents place restrictions on the
accumulation of Shares in excess of 9.8% of the number of outstanding Shares.
Certain additional provisions restrict Shareholders' ability to nominate
candidates for election as Directors and to alter, amend and adopt provisions
inconsistent with, or to repeal certain provisions of, the Organizational
Documents. These provisions may make the Shares an unsuitable investment for any
person seeking to acquire beneficial ownership in excess of 9.8% of the number
of outstanding Shares.
The Company has an authorized class of 60,000,000 shares of preferred
stock which may be issued by the Board of Directors on such terms and with such
rights, preferences and designations as the Board may determine. Issuance of
such preferred stock, depending on the rights, preferences, and designations
thereof, may have the effect of delaying, deterring, or preventing a change in
control of the Company.
Risk of Acquisition Activities
The Company intends to acquire existing apartment properties to the
extent that they can be acquired on advantageous terms and meet the Company's
investment criteria. In light of current conditions in the Company's target
market areas, the Company anticipates that in the near future additional
properties will be added to the Company's portfolio primarily through
acquisitions rather than new development and construction. Acquisitions of
apartment properties entail general investment risks
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associated with any real estate investment, including the risk that investments
will fail to perform as expected or that estimates of the cost of improvements
to bring an acquired property up to standards established for the intended
market position may prove inaccurate.
Risk of Development Activities
The Company also intends to continue the development of apartment
properties, in accordance with the Company's development and underwriting
policies as opportunities arise in the future. Risks associated with such
development and construction activities include the risk that: the Company may
abandon development opportunities after expending resources to determine
feasibility; construction costs of a project may exceed original estimates;
occupancy rates and rents at a newly completed property may not be sufficient to
make the properties profitable; financing may not be available on favorable
terms for development of a property; and construction and lease-up may not be
completed on schedule, resulting in increased debt service expense and
construction costs. Development activities are also subject to risks relating to
the inability to obtain, or delays in obtaining, all necessary zoning, land-use,
building, occupancy, and other required governmental permits and authorizations.
If any of the foregoing occurs, the Company's ability to make expected
distributions to stockholders could be adversely affected. In addition, new
development activities, regardless of whether or not they are ultimately
successful, typically require a substantial portion of management's time and
attention.
The Company anticipates that future development will be financed, in
whole or in part, through additional equity offerings or under lines of credit
or other forms of secured or unsecured construction financing that will result
in the risk that, upon completion of construction, permanent financing for newly
developed properties may not be available or may be available only on
disadvantageous terms. If a project is unsuccessful, the Company's losses may
exceed its investment in the project.
General Real Estate Risks
The ownership of real estate presents a variety of risks, including those risks
described below:
Economic Risks. Changes in general economic or fiscal conditions in
national, regional, state and local economies, as well as business conditions
such as overbuilding, increased competition, changes in tax laws, high or low
inflation, high or low economic growth, and high or low interest rates, may
result in a decline in the profitability of real estate investments due to
decreased occupancy, lower rents, increased operating expenses, an increase in
debt service and a lack of appreciation in value.
Regulatory Risks. Real estate is governed by a wide variety of federal,
state and local zoning, subdivision, planning, building, environmental and other
land use laws and regulations. Such laws may place significant restrictions on
the Company's ability to develop real estate or to improve real estate which it
owns, and even unintentional violations of such laws and regulations by the
Company or its tenants may result in forced corrective action and substantial
monetary penalties. In addition, as to multi-family residential apartment
properties, various federal, state and local laws and regulations may restrict
the amount and process by which rents may increase, as well as the Company's
right to convert a property to other uses, such as condominiums or cooperatives.
Risks of Liability and Loss. The development and ownership of real
estate may result in liability to third parties, due to conditions existing on a
property which result in injury. Such liability may be uninsurable in some
circumstances or may exceed the limits of insurance maintained at typical
amounts for the type and condition of such property. In addition, real estate
may suffer a loss in value due to casualties such as fire or hurricane. Such
loss may be uninsurable in some circumstances or may exceed the limits of
insurance maintained at typical amounts for the type and condition of the
property. Real estate may also be taken, in whole or in part, by public
authorities for public purposes in eminent domain proceedings. Awards resulting
from such proceedings may not adequately compensate the Company for the value
lost.
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Hazardous Waste. The environmental laws of the federal government and
of certain state and local governments impose liability on property owners for
the clean-up of hazardous and toxic substances released on a property. The
liability may be imposed without regard to the timing, cause or person
responsible for the release of such substance onto the property. The Company
could be subject to liability in the event that it acquires a property having
such environmental problems.
Risks of Joint Ventures. One property is owned by a joint venture
partnership between the Company and an investment partnership sponsored by an
affiliate of the Company. The investment by the Company in a joint venture
partnership which owns properties, instead of investing directly in the
properties themselves, may, under certain circumstances, involve risks which
would not otherwise be present. For example, the Company's joint venture partner
may experience financial difficulties and such partner may at any time have
economic or business interests or goals which are inconsistent with the business
interests and goals of the Company or contrary to the Company's policies or
objectives. Actions by (or litigation involving) such a partner might have the
result of subjecting the property owned by the joint venture to liabilities in
excess of those contemplated by the terms of the joint venture agreement. In
addition, there is a risk of impasse between the parties since either party may
disagree with a proposed transaction involving the property owned by the joint
venture and impede any proposed action. The Company may own additional
properties through joint venture partnerships between the Company and the
sellers of the properties or other third party partners.
Potential Adverse Effect on Results of Operations Due to Risks
Associated with Market Illiquidity. Equity real estate investments are
relatively illiquid. Such illiquidity will tend to limit the ability of the
Company to vary its portfolio promptly in response to changes in economic or
real estate market conditions. In addition, provisions of the Internal Revenue
Code limit the Company's ability to sell properties held for fewer than four
years, which may affect the Company's ability to sell properties without
adversely affecting returns to holders of Common Stock.
Potential Adverse Effect on Results of Operations Due to Operating
Risks. The Company's properties are subject to operating risks common to real
estate in general, any and all of which may adversely affect occupancy or rental
rates. The Company's properties are subject to increases in operating expenses
such as cleaning, electricity, heating, ventilation and air conditioning;
elevator repair and maintenance; insurance and administrative costs; and other
general costs associated with security, landscaping, repairs and maintenance.
The Company's tenants in its retail properties generally are obligated to pay
these escalating costs, although there can be no assurance that tenants will
agree to pay such costs upon renewal or that new tenants will agree to pay such
costs. In the case of apartment complexes, the Company must bear such increased
expenses. If operating expenses increase, the local rental market may limit the
extent to which rents may be increased to meet such increased expenses without
decreasing occupancy rates. While the Company implements cost-saving incentive
measures at each of its properties, if any of the foregoing occurs, the
Company's results of operations and its ability to make distributions to
stockholders could be adversely affected.
Risks of Mortgage Acquisitions
The Company may acquire real estate through the acquisition of
distressed mortgage loans. In such a case the Company would succeed to the
position of the mortgage lender with the expectation of foreclosing on the
mortgaged property and taking title to it. The Company may encounter obstacles
to foreclosure in the form of law or regulation which could delay or impede the
taking of title to the property by the Company. During the time prior to
foreclosure, it is possible that the borrower of the mortgage loan may make no
mortgage payments to the Company.
Limited Ability to Meet Fixed Expenses
Operating expenses of the Company, including debt service, must be met
regardless of the Company's profitability. The Company is also obligated to
distribute 95% of its taxable income (which could under certain circumstances
exceed its cash flow) in order to continue to qualify as a REIT for
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federal income tax purposes. Accordingly, it is possible that the Company may be
required to borrow funds or liquidate a portion of its investments in order to
pay its expenses or to make the required cash distributions to Shareholders.
There can be no assurance that such funds will be available to the extent, and
at the time, required by the Company or on terms that would be favorable to the
Company.
Tax Risks
Risk of Termination of REIT Status. The Company was organized and
intends to continue to conduct its operations to enable it to qualify as a REIT
under the Internal Revenue Code of 1986, as amended (the "Code"). To so qualify,
and thereby not be required to pay federal income tax on any income it
distributes in a timely fashion to the Shareholders, the Company must
continually meet certain criteria concerning, among other things, its Share
ownership, the nature of its assets, the sources of its income, and the amount
of its distributions to Shareholders. The Company might not meet such criteria,
the result of which would be to terminate the Company's qualification as a REIT.
If the qualification as a REIT is terminated, the Company would be taxed on its
income. The payment of such tax by the Company would substantially reduce the
funds available for distribution to Shareholders or for reinvestment and, to the
extent that distributions had been made in anticipation of the Company's
qualification as a REIT, the Company might be required to borrow additional
funds or to liquidate certain of its investments in order to pay the applicable
tax. Moreover, should the Company's election to be taxed as a REIT be
terminated, the Company may not be able to elect to be treated as a REIT for the
following five-year period. The Company also might be required to borrow funds
or to liquidate certain of its investments to maintain REIT status. See FEDERAL
INCOME TAX CONSIDERATIONS.
Company Must Observe Maximum Share Ownership Requirements Under Tax
Laws. In order for the Company to qualify as a REIT, no more than 50% of the
outstanding Shares may be owned, directly or indirectly, by five or fewer
individuals at any time during the last half of the Company's taxable year. To
ensure that the Company will not fail to qualify as a REIT under this test, the
Company's Certificate grants the Board the power to place restrictions on the
accumulation of Shares. These restrictions may: (i) discourage a change of
control of the Company; (ii) deter individuals and entities from making tender
offers for Shares, which offers may be attractive to Shareholders; or (iii)
limit the opportunity for Shareholders to receive a premium for their Shares in
the event an investor is making purchases of Shares in order to acquire a block
of Shares. While the Internal Revenue Code has recently been amended to provide
that a pension trust will not generally be counted as a single investor for
purposes of applying the REIT qualification test set forth above, there has been
no corresponding amendment to the Company's Certificate.
Shareholders are Taxed on Reinvested Dividends. Shareholders (other
than tax-exempt entities) who participate in the Dividend Reinvestment Plan will
be taxed on income attributable to reinvested Dividends, without receiving
corresponding cash to pay the resulting tax liability.
Investment by Qualified Plans Poses Additional Risks. The fiduciary of
a qualified profit-sharing, pension or other retirement plan should take into
consideration certain fiduciary responsibilities and the definition of "plan
assets" under ERISA and applicable Department of Labor regulations.
Possible Changes in Tax Law. Prospective investors should recognize
that the present federal income tax treatment of an investment in the Company
may be modified, prospectively or retroactively, by legislative, judicial or
administrative action at any time. In addition to any direct effects which such
changes might have, such changes might also indirectly affect the market value
of all real estate investments, including those of the Company and,
consequently, the ability of the Company to realize its business objectives.
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<PAGE>
THE COMPANY
The following is qualified in its entirety by the more detailed descriptions and
the financial information and statements appearing elsewhere and incorporated in
this Prospectus. As used herein, the term "Company" includes Berkshire Realty
Company, Inc., and those entities owned or controlled thereby, including BRI OP
Limited Partnership (the "Operating Partnership"), of which Berkshire Realty
Company, Inc., is the Special Limited Partner and its wholly owned "qualified
REIT subsidiary" is the general partner (the "General Partner") and several
additional wholly owned subsidiaries that are also "qualified REIT subsidiaries"
for federal tax purposes.
General
The Company, a Delaware corporation, is a self-administered and
self-managed equity REIT that specializes in the ownership and operation of
quality apartment communities. As of June 1, 1997, the Company had investments
in 41 properties in 8 states consisting of 37 apartment communities having in
the aggregate 12,896 units and 4 retail centers with a total of 851,000 square
feet of leasable space. One retail center is owned through a joint venture with
an affiliate of the Company. In addition, the Company owns a mortgage loan
collateralized by a multifamily apartment complex located in Florida, a 296-unit
development project located in Durham, North Carolina, and three parcels of land
for future development, two of which are located in Greenville, South Carolina,
and one in Dallas, Texas.
The Company's principal executive offices are located at 470
Atlantic Avenue, Boston, Massachusetts 02210 and its telephone number is
(888) 867-0100.
The Operating Subsidiaries of the Company
The operations of the Company are conducted primarily through the
Operating Partnership and subsidiary corporations and limited partnerships
(collectively, the "Operating Subsidiaries"), so that, among other things, the
Company is able to comply with certain technical and complex requirements under
the federal tax law relating to the assets and income that a REIT may hold or
earn.
The Company presently holds 80.93% of the partnership interests in the
Operating Partnership in its capacity as a Special Limited Partner and, through
its ownership of the General Partner. The remaining 19.07% partnership interest
in the Operating Partnership is owned by affiliated and unaffiliated third
parties who own units of limited partnership interest in the Operating
Partnership ("Units"). Units are redeemable on a one-for-one basis for shares of
Common Stock or, at the Company's election, for cash, and holders of Units
generally receive distributions per Unit equal to the dividend per share paid in
respect of the Common Stock. The Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (the "Partnership Agreement") provides
for a special allocation of net income or loss of the Operating Partnership to
holders of Units to provide such holders with the economic effect of net income
or losses realized in respect of all Properties on a consolidated basis.
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<PAGE>
The Properties
The following table summarizes the Company's real estate investments at
June 1, 1997 and also sets forth the aggregate number of apartment units and the
amount of current leasable commercial square footage by geographic region. The
table does not reflect the value of the Company's investments.
<TABLE>
<CAPTION>
Wholly-Owned Joint Venture
-------------------------------------------- -----------------------
Region Multi-family Retail Retail Mortgage Loans
Properties Units Properties Sq. Ft. Properties Sq. Ft. Properties Units
------ ------------ ----- ---------- ------- ---------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carolinas 9 2,881
Georgia/
Tennessee 6 2,036 2 446,367
Florida 8 2,120 1 83,962 1 120
Texas 11 4,181
Maryland/DC 2 1,464
Other 1 214 1 320,684(1)
-- ------ --- ------- -- ------- --- ---
37 12,896 3 530,329 1 320,684 1 120
== ====== === ======= == ======= === ===
</TABLE>
- -----------------
(1) The Company owns a 50.1% joint venture interest in this property.
The following table provides a more detailed description of the
individual properties in which the Company has an interest at June 1, 1997. The
occupancy rates for 1995 and 1996 presented below are based on physical
occupancy, without reference to whether leases in effect are at, below, or above
market rates and without reference to lease-up incentives or concessions.
<TABLE>
<CAPTION>
Avg. Rent
Apartment Year No. of Average Occupancy Per Apart.
Communities Location Acquired Units 1996 1995 1996
- ----------- -------- -------- ----- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Carolinas Region
South Carolina
Brookfield Trace (1)(5) Mauldin (Greenville) 1995 300 92% 97% $ 967
Brookwood Valley(5) Mauldin (Greenville) 1995 226 94% 97% 624
Huntington Downs(5) Greenville 1988 502 94% 96% 600
The Oaks(5) Mauldin (Greenville) 1990 176 93% 97% 644
Roper Mountain(5) Greenville 1988 248 95% 98% 514
Stoneledge(5) Greenville 1988 320 92% 97% 538
North Carolina
Cumberland Cove(1)(5) Raleigh 1991 552 96% 98% 753
East Lake(5) Charlotte 1993 214 95% 98% 650
The Timbers(5) Charlotte 1993 343 95% 96% 575
Georgia/Tennessee Region
Georgia
Arbors at Duluth (Atlanta) 1993 514 94% 95% 750
Breckenridge(1)(5)
Avalon on Abernathy(5) Atlanta 1992 240 95% 95% 891
Huntington Chase(1)(5) Norcross (Atlanta) 1993 467 93% 96% 776
Tennessee
British Woods(5) Nashville 1995 264 93% 96% 646
Highland Ridge(5) Madison (Nashville) 1995 280 92% 94% 531
Windover(5) Knoxville 1995 271 90% 93% 588
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<PAGE>
Florida
Altamonte Bay Club(5) Altamonte Springs (Orlando) 1992 224 95% 94% 610
Lakes at Jacaranda(5) Plantation (Broward County) 1990 340 94% 92% 824
Newport(5) Tampa 1992 320 96% 96% 513
Park Colony(5) Hollywood (Broward County) 1994 316 95% 95% 759
Plantation Colony(5) Plantation (Broward County) 1993 256 95% 96% 750
Polos West(5) Orlando 1997 200 N/A N/A N/A
Sun Chase Bradenton 1997 168 N/A N/A N/A
Woodland Meadows(5) Tamarac (Broward County) 1992 296 97% 93% 668
Texas
Benchmark(5) Irving (Dallas) 1996 250 95% N/A 579
Golf Side(5) Haltom City (Fort Worth) 1996 402 90% N/A 442
Hunters Glen(5) Plano (Dallas) 1996 276 96% N/A 625
Indigo on Forest(3)(5) Dallas 1994 1,217 93% 84% 589
Kings Crossing(2)(5) Kingwood (Houston) 1994 404 92% 91% 614
Kingwood Lakes(2)(5) Kingwood (Houston) 1994 390 94% 84% 607
Pleasant Woods(5) Dallas 1996 208 95% N/A 548
Prescott Place(5) Mesquite (Dallas) 1996 318 95% N/A 499
Prescott Place II(5) Mesquite (Dallas) 1996 336 95% N/A 497
Providence(5) Dallas 1996 244 83% N/A 494
River Oaks(5) Houston 1995 136 92% 98% 1,994
Maryland/D.C. Area
Berkshire Towers(5) Silver Spring, Maryland 1996 1,119 91% N/A 827
Westchester(5) Silver Spring, Maryland 1997 345 N/A N/A N/A
Other
Southpointe at
Massapequa(5) Massapequa, New York 1992 214 99% 98% 1,164
------ --- ---
Total 12,896 93% 94%
====== === ===
</TABLE>
<TABLE>
<CAPTION>
Year Year End Occupancy
Retail Property Location Acquired Sq. Ft. 1996 1995
- --------------- -------- -------- ------ ------------------
<S> <C> <C> <C> <C> <C>
Georgia/Tennessee Region
Crossroads(5) Jonesboro (Atlanta) 1987 211,186 98% 98%
Tara Crossing Jonesboro (Atlanta) 1987 235,181 90% 92%
Florida
College Plaza Fort Myers 1987 83,962 95% 94%
New York
Spring Valley(4) Spring Valley 1988 320,684 98% 98%
-------
Total 851,013
=======
</TABLE>
- --------------------------
(1) Occupancy figures for 1995 and 1996 do not include units which were
constructed in 1995 and 1996.
(2) The properties suffered extensive flood damage late in 1994 which impacted
1995 occupancies.
(3) Indigo underwent a significant tenant repositioning and rehabilitation in
late 1994 and 1995 which impacted occupancies.
(4) The Company holds a 50.1% joint venture interest in this property.
(5) These properties are pledged as collateral for outstanding debt.
Tax Status of the Company
The Company first elected to be taxed as a REIT for federal income tax
purposes for its taxable year ended December 31, 1991, and expects to continue
to elect such status. Although the Company believes that it was organized and
has been operating in conformity with the requirements for qualification
-12-
<PAGE>
as a REIT under the Internal Revenue Code of 1986, as amended (the "Code")
("REIT Qualification"), no assurance can be given that the Company will continue
to qualify as a REIT. REIT Qualification involves application of highly
technical and complex Code provisions for which there are only limited judicial
or administrative interpretations. If in any taxable year the Company should
fail to qualify as a REIT, the Company would not be allowed a deduction for
distributions to shareholders for computing taxable income and would be subject
to Federal taxation at regular corporate rates. Unless entitled to relief under
certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
REIT Qualification was lost. As a result, the Company's ability to make
distributions to its shareholders would be adversely affected. See FEDERAL
INCOME TAX CONSIDERATIONS and DESCRIPTION OF THE CAPITAL STOCK OF THE COMPANY --
Restrictions on the Ownership and Transfer of Excess Shares.
DESCRIPTION OF THE CAPITAL STOCK OF THE COMPANY
The authorized capital stock of the Company consists of 140,000,000
shares of Common Stock and 60,000,000 shares of Preferred Stock.
Common Stock
Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock, holders of
shares of Common Stock are entitled to one vote per share on all matters to be
voted on by shareholders and are entitled to receive ratably such dividends as
may be declared in respect of the Common Stock by the Board of Directors in its
discretion from funds legally available therefor. In the event of the
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of all debts
and other liabilities and any liquidation preference of the holders of Preferred
Stock. Holders of Common Stock have no subscription, , conversion or redemption
rights. Matters submitted for shareholder approval generally require a majority
vote of the shares present and voting thereon; certain matters, however, require
a Supermajority vote. See Charter and By-Law Provisions -- Voting Requirements
below. The outstanding shares of Common Stock are fully paid and nonassessable.
Warrants
The Company's Common Stock warrants are traded on the NYSE under the
symbol "BRI/WS". Three million warrants were admitted to trading on September 7,
1994. Upon exercise, each warrant entitles the holder to the right to acquire
one share of Common Stock. The warrants are exercisable until September 8, 1998.
The exercise price was $10.75 until September 7, 1995, and $11.79 thereafter. As
of June 1, 1997, 2,373 shares of Common Stock were issued upon exercise of
warrants, and 2,997,627 warrants remained outstanding.
Preferred Stock
The Board of Directors is empowered by the Company's Certificate to
designate and issue from time to time one or more classes or series of Preferred
Stock without shareholder approval. The Board of Directors may fix the relative
rights, limitations, preferences and privileges of each class or series of
Preferred Stock so issued. Because the Board of Directors has the power to
establish the preferences and rights of each class or series of Preferred Stock,
it may afford the holders in any series or class of Preferred Stock preferences,
powers and rights, voting or otherwise, senior to the rights of holders of
Common Stock.
-13-
<PAGE>
Charter and By-Law Provisions
Shareholders' rights and related matters are governed by the Delaware
General Corporation Law and the Company's Organizational Documents. Certain
provisions of the Organizational Documents, which are summarized below, may make
it more difficult to change the composition of the Board of Directors and may
discourage or make more difficult any attempt by a person or group to obtain
control of the Company.
Voting Requirements. Holders of shares of Common Stock of the Company,
by a majority or Supermajority vote, may take certain actions, including
approving amendments to the Company's Certificate. Any such change, if approved
by the holders of the requisite number of shares, would be binding on all
nonconsenting shareholders. Under the Organizational Documents, a Supermajority
vote is required in order to amend those portions of the Organizational
Documents which concern: (1) the definition of "Supermajority"; (2) the
requirements for amending the Organizational Documents; (3) the requirements
regarding Excess Share ownership (i.e. ownership of Shares in excess of 9.8% of
the outstanding Shares); (4) the actions which require a Supermajority vote; (5)
the requirements regarding Business Combinations (see "Business Combinations"
below); (6) the staggering of the terms of the Directors; (7) the limitation of
the liability of Directors; and (8) the perpetual life of the Company. A
Supermajority vote is defined to mean the vote or consent of shareholders owning
more than 66-2/3% of the outstanding shares of Common Stock. Shareholders may
not take action by written consent without a meeting.
Special Meetings. Special meetings may be called, to address specific
Company matters, by the Chairman of the Board, the President of the Company or a
majority of the Directors or independent Directors. Shareholders may not call a
special meeting.
Staggered Board of Directors. The Certificate classifies the Directors,
concerning the term of their respective directorships, into three classes, one
of which is elected annually.
Advance Notice of Shareholder Proposals and Nominations of Directors.
The By-Laws of the Company provide that no matter proposed by a shareholder will
be considered at any annual meeting or special meeting of shareholders unless
notice of such matter is provided to the Company not less than 50 days, nor more
than 150 days, before the scheduled meeting. If, however, less than 70 days'
notice of the scheduled meeting is given, the Company must receive notice of
shareholder proposals by the close of business on the fifteenth day following
the day such notice was mailed. Furthermore, shareholders are not permitted to
nominate individuals to serve as Directors unless notice of such nomination is
given to the Company not less than 60 days, nor more than 150 days, before a
scheduled annual meeting. If, however, on the day notice is given to
shareholders of such annual meeting less than 70 days remain until such meeting,
the Company must receive notice of a shareholder nomination within 10 days of
such day.
The provisions for a classified Board, together with related provisions
designed to strengthen the position of the Board by (i) providing for
limitations on the removal of Directors and the filling of vacancies on the
Board, (ii) requiring that shareholder action be taken only at an annual meeting
or a special meeting and limiting the ability of shareholders to call special
meetings, (iii) prescribing procedures for the advance notice of shareholder
proposals and nominations of Directors by the shareholders and (iv) requiring a
vote of 66-2/3% or more to effect changes in certain provisions, has the overall
effect of making it more difficult to acquire and exercise control of the
Company and to remove incumbent officers and Directors, providing such officers
and Directors with enhanced ability to retain their positions. Such provisions
may also limit shareholder participation in certain types of transactions that
might be proposed whether or not such transactions were favored by a majority of
shareholders.
Business Combinations
The Organizational Documents affirmatively adopt Section 203 of the
Delaware General Corporation Law, which prohibits Interested Shareholders from
engaging in a Business Combination with
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<PAGE>
the Company. In particular, the Organizational Documents provide that the
Company shall not engage in any Business Combination with any Interested
Shareholder for a period of three years following the time that such Shareholder
became an Interested Shareholder, unless: (a) prior to such time, the Board
approved either the Business Combination or the transaction which resulted in
the shareholder becoming an Interested Shareholder; or (b) upon consummation of
the transaction which resulted in the shareholder becoming an Interested
Shareholder, the Interested Shareholder owned at least 85% of the shares of
Common Stock then outstanding, excluding shares held by Directors who are also
officers of the Company and employees' stock plans in which employees do not
have the right to determine confidentially whether shares held by the plan will
be tendered in a tender or exchange offer; or (c) at or subsequent to such time,
the Business Combination is approved by the Board and authorized by a
Supermajority of the outstanding shares of Common Stock, excluding the shares
owned by the Interested Shareholder. The term "Business Combination" is defined
to include, among other things, a merger or consolidation of the Company with,
or caused by, an Interested Shareholder and other specified transactions which
would have the effect of the Interested Shareholder gaining control of the
Company. An "Interested Shareholder" includes, among others, any Person owning
15% or more of the outstanding shares of Common Stock of the Company; provided,
however that the term "Interested Shareholder" does not include any person whose
ownership of shares in excess of 15% is the result of action taken solely by the
Company. In that event, such person would be considered an Interested
Shareholder if he thereafter acquires additional shares of Common Stock of the
Company, except as a result of further Company action not caused by such
Interested Shareholder.
The provisions of the Organizational Documents concerning Business
Combinations and the restriction on the transfer of Shares which are described
above cannot be changed except by amendment to the Organizational Documents by a
Supermajority vote.
Shareholder Rights Plan
It is possible that the Board may adopt a Shareholder Rights Plan (a
plan intended to force the initiator of a hostile takeover to negotiate by
granting the shareholders rights to buy shares at a bargain price). Such a Plan
(i) may have the effect of discouraging changes of control of the Company, and
(ii) may limit the opportunity of a shareholder to receive a premium for his or
her shares in the event an investor is making purchases to assemble a block of
shares.
Restrictions on the Ownership and Transfer of Excess Shares
For the Company to qualify as a REIT under the Code not more than 50%
of its outstanding shares may be owned by five or fewer individuals during the
last half of the year, and the shares of Common Stock must be owned by 100 or
more persons during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year. Furthermore, the Company cannot
own, directly or by attribution, 10% or more of any tenant of a Property or a
Property securing a mortgage loan investment from which the Company is entitled
to receive an additional equity return. The Organizational Documents (1) provide
that if any person or group of affiliated persons directly or indirectly
acquires ownership, in the aggregate, of more than 9.8% of the then outstanding
shares of Common Stock ("Excess Shares") such Excess Shares shall be deprived of
voting rights, shall not be included in any quorum count and any dividends and
distributions on such shares shall be paid into an escrow account payable to the
holder of the Excess Shares at the time they cease to be Excess Shares, and (2)
empower the Board (i) to refuse to permit any transfer of shares of Common Stock
which, in its sole discretion, would jeopardize the status of the Company as a
REIT and (ii) to repurchase any Excess Shares to maintain or bring the ownership
of shares into conformity with such 9.8% limit. The 9.8% limitation on ownership
of shares of Common Stock encompasses shares held directly or indirectly as a
result of options, warrants or other convertible securities.
The Company may require each proposed transferee of shares of Common
Stock to deliver a statement or affidavit setting forth the number of shares, if
any, already owned, directly, indirectly or by attribution by such transferee
and may refuse to permit any transfer of shares which would cause an
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<PAGE>
accumulation of shares that would jeopardize the status of the Company as a
REIT. A shareholder who knowingly holds Excess Shares is required to indemnify
the Company for any losses the Company may suffer as a result of such holdings.
Excess Shares shall be deemed to be offered for sale to the Company or
its designees. The purchase price will be the average closing sales price as
reported by the New York Stock Exchange during the 30-day period ending on the
business day prior to the purchase date. The Certificate further provides that
the purchase price may be paid in the form of a promissory note of the Company.
However, if the person from whom the Excess Shares were purchased sells a like
number of his or her remaining shares of Common Stock within thirty days of the
purchase date, then the Company shall rescind the purchase of the Excess Shares
unless counsel to the Company is of the opinion that such rescission would
jeopardize the Company's tax status as a REIT. In that event, in lieu of
rescission, the Company shall make immediate payment for the shares.
Such provisions do not apply to the acquisition of shares by an
underwriter in a public offering by the Company or to any transaction involving
the issuance of shares by the Company when its qualification as a REIT would not
be jeopardized.
Limitation of Directors' Liability
The Company's Certificate provides for indemnification of its officers
and Directors to the fullest extent permitted by Sections 145 and 102(b)(7) of
the Delaware General Corporation Law and relieves the Directors of certain
monetary liabilities to the Company and its shareholders. In general, Delaware
law permits the Company to indemnify its officers and Directors so long as they
act in good faith and in a manner reasonably believed by them to be in, or not
opposed to, the best interests of the Company. Subject to the provisions of
Sections 145 and 102(b)(7) of the Delaware General Corporation Law, the Company
intends to indemnify its officers and Directors against losses, liabilities and
expenses (including attorneys' fees) incurred by them that are related to their
being officers or Directors of the Company.
Transfer Agent
The transfer agent and registrar for the Company's Common Stock is
American Stock Transfer & Trust Company.
DESCRIPTION OF UNITS AND REDEMPTION OF UNITS
General
Unitholders may, subject to certain limitations, require the Operating
Partnership to convert all or a portion of their Units (the "Redemption Right").
This Redemption Right shall be exercised pursuant to an Exercise Notice
delivered to the Operating Partnership specifying the Units to be converted by
such Unitholder. Upon receipt of the Exercise Notice, the Company will in its
discretion, convert each Unit specified in the Exercise Notice into a share of
Common Stock (subject to certain adjustments in the event of stock dividends and
stock splits), or redeem each such Unit for cash in an amount equal to the
market value (as defined below) of a share of Common Stock (subject to the same
adjustments); provided, however, that if the Unitholder has registration rights
for shares received upon conversion of Units in accordance with a Registration
Rights Agreement, the Unitholder may indicate in his Exercise Notice that the
conversion of his Units into shares shall be conditioned upon the effectiveness
of the registration of such shares under the securities laws. The market value
of the Common Stock for purposes of conversion of Units will be equal to the
average of the closing trading price of the Common Stock for the five trading
days prior to the day on which the Exercise Notice was received by the Operating
Partnership.
The Company anticipates that it generally will elect to acquire any
Units specified in an Exercise Notice by the issuance of a like number of shares
of Common Stock (the "Redemption Shares"). Such an
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<PAGE>
acquisition by the Company will be treated as a sale of the Units to the Company
for federal income tax purposes. See Tax Consequences of Redemption below. Upon
a redemption for cash, a Unitholder's right to receive distributions with
respect to the Units redeemed will cease. Upon the receipt of Redemption Shares,
a Unitholder will have rights as a stockholder of the Company, including the
right to receive dividends from the time of its acquisition of the Redemption
Shares.
In no event may a Unitholder notify the Company of its desire to
require the Operating Partnership to redeem Units that were issued less than one
year before the date of the Exercise Notice. No redemption can occur if the
delivery of Redemption Shares would be prohibited under the provisions of the
Company's Certificate to protect the Company's qualification as a REIT.
Tax Consequences of Redemption
The following discussion summarizes certain federal income tax
considerations that may be relevant to a Unitholder should he exercise his right
to redeem his Units.
Tax Treatment of Exchange or Redemption of Units. If the Company elects
to purchase Units tendered for redemption, such transaction will be treated as a
sale fully taxable to the Unitholder, and the Unitholder will be treated as
realizing for tax purposes an amount equal to the sum of the cash value or the
value of the Common Stock received in the exchange plus the amount of any
Operating Partnership liabilities allocable to the redeemed Units at the time of
the redemption. The determination of the amount of gain or loss is discussed
more fully below. If the Company elects to redeem a Unitholder's Units for cash
and the Operating Partnership redeems such Units for cash that the Company
contributes to the Operating Partnership to effect such redemption, the
redemption likely also would be treated for tax purposes as a sale of such Units
to the Company in a fully taxable transaction, although the matter is not free
from doubt. In that event, the Unitholder would be treated as realizing an
amount equal to the sum of the cash received in the exchange plus the amount of
any Operating Partnership liabilities allocable to the redeemed Units at the
time of the redemption. The determination of the amount and character of gain or
loss in the event of such a sale is discussed more fully below. See Tax
Treatment of Disposition of Units by a Unitholder Generally below.
If the Company does not elect to purchase Units tendered for redemption
and the Operating Partnership redeems a Unitholder's Units for cash that is not
contributed by the Company to effect the redemption, the tax consequences would
be the same as described in the previous paragraph, except that, if the
Operating Partnership redeems less than all of a Unitholder's Units, the
Unitholder would not be permitted to recognize any loss occurring on the
transaction and would recognize taxable gain only to the extent that the cash,
plus the amount of any Operating Partnership liabilities allocable to the
redeemed Units, exceeded the Unitholder's adjusted basis in all of its Units
immediately before the redemption.
If the Company contributes cash to the Operating Partnership to effect
a redemption, and in the event that the redemption transaction is treated as the
redemption of a Unitholder's Units by the Operating Partnership rather than a
sale of Units to the Company, the income tax consequences to the Unitholder
would be as described in the preceding paragraph.
Tax Treatment of Disposition of Units by a Unitholder Generally. If a
Unit is disposed of in a manner that is treated as a sale of the Unit, or a
Unitholder otherwise disposes of a Unit, the determination of gain or loss from
the sale or other disposition will be based on the difference between the amount
considered realized for tax purposes and the adjusted tax basis in such Unit.
See Basis of Units below. Upon the sale of a Unit, the "amount realized" will be
measured by the sum of the cash and fair market value of other property (i.e.,
Redemption Shares) received plus the amount of any Operating Partnership
liabilities allocable to the Units sold. To the extent that the amount of cash
or property received plus the allocable share of any Operating Partnership
liabilities exceeds the limited partner's adjusted tax basis in the Units
disposed of, such Unitholder will recognize gain. It is possible that the amount
of gain recognized or even the tax liability resulting from such gain could
exceed the amount of cash and/or the value of any other property (i.e.,
Redemption Shares) received upon such disposition.
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<PAGE>
Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that the amount realized
upon the sale of a Unit attributable to a Unitholder's share of "unrealized
receivables" of the Operating Partnership (as defined in Section 751 of the
Code) exceeds the basis attributed to those assets, such excess will be treated
as ordinary income. Unrealized receivables include, to the extent not previously
included in Operating Partnership income, any rights to payment for services
rendered or to be rendered. Unrealized receivables also include amounts that
would be subject to recapture as ordinary income if the Operating Partnership
had sold its assets at their fair market value at the time of the transfer of a
Unit.
Basis of Units. In general, a Unitholder who acquired his Units by
contribution of property and/or money to the Operating Partnership had an
initial tax basis in his Units ("Initial Basis") equal to the sum of (i) the
amount of money contributed (or deemed contributed as described below) and (ii)
his adjusted tax basis in any other property contributed in exchange for such
Units, and less the amount of any money distributed (or deemed distributed, as
described below) in connection with the acquisition of the Units. The Initial
Basis of Units acquired by other means would have been determined under the
general rules of the Code, including the partnership provisions, governing the
determination of tax basis. Other rules, including the "disguised sale" rules
discussed below, also may affect Initial Basis, and Unitholders are urged to
consult their own tax advisors regarding their Initial Basis. Generally, a
Unitholder's Initial Basis in his Units is increased by (i) such Unitholder's
share of Operating Partnership taxable and tax-exempt income and (ii) increases
in such Unitholder's allocable share of liabilities of the Operating
Partnership. Conversely, a Unitholder's basis in his Units is decreased (but not
below zero) by (a) such Unitholder's share of Operating Partnership
distributions, (b) decreases in such Unitholder's allocable share of liabilities
of the Operating Partnership, (c) such Unitholder's share of losses of the
Operating Partnership, and (d) such Unitholder's share of nondeductible
expenditures of the Operating Partnership that are not chargeable to his capital
account.
Potential Application of the Disguised Sale Regulations to a Redemption
of Units. There is a risk that a redemption by the Operating Partnership of
Units issued in exchange for a contribution of property to the Operating
Partnership may cause the original transfer of property to the Operating
Partnership in exchange for Units to be treated as a "disguised sale" of
property. Section 707 of the Code and the Treasury Regulations thereunder (the
"Disguised Sale Regulations") generally provide that, unless one of the
prescribed exceptions is applicable, a partner's contribution of property to a
partnership and a simultaneous or subsequent transfer of money or other
consideration (which may include the assumption of or taking subject to a
liability) from the partnership to the partner will be presumed to be a sale, in
whole or in part, of such property by the partner to the partnership. Further,
the Disguised Sale Regulations provide generally that, in the absence of an
applicable exception, if money or other consideration is transferred by a
partnership to a partner within two years of the partner's contribution of
property, the transaction is presumed to be a sale of the contributed property
unless the facts and circumstances clearly establish that the transfer did not
constitute a sale. The Disguised Sale Regulations also provide that if two years
have passed between the transfer of money or other consideration and the
contribution of property, the transaction will be presumed not to be a sale
unless the facts and circumstances clearly establish that the transfer
constitutes a sale.
Accordingly, if a Unit is redeemed by the Operating Partnership from a
Unitholder who holds Units that were issued in exchange for a contribution of
property to the Operating Partnership, the Internal Revenue Service (the "IRS")
could contend that the Disguised Sale Regulations apply because the Unitholder
will thus receive cash subsequent to a previous contribution of property to the
Operating Partnership. In that event, the IRS could contend that the
contribution was taxable as a disguised sale under the Disguised Sale
Regulations. Any gain recognized thereby may be eligible for installment
reporting under Section 453 of the Code, subject to certain limitations. In
addition, in such event, the Disguised Sale Regulations might apply to cause a
portion of the proceeds received by a redeeming Unitholder to be characterized
as original issue discount on a deferred obligation which would be taxable as
interest income in accordance with the provisions of Section 1272 of the Code.
Each Unitholder is
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advised to consult its own tax advisors to determine whether redemption of its
Units could be subject to the Disguised Sale Regulations.
Comparison of Ownership of Units and Common Stock
The nature of an investment in Common Stock of the Company is generally
economically equivalent to an investment in Units in the Operating Partnership.
There are, however, some differences between ownership of Units and ownership of
Common Stock, some of which may be material to investors. The information below
highlights a number of significant differences between the Operating Partnership
and the Company relating to, among other things, form of organization, permitted
investments, policies and restrictions, management structure, compensation and
fees, investor rights and federal income taxation and compares certain legal
rights associated with the ownership of Units and Common Stock, respectively.
These comparisons are intended to assist Unitholders in understanding how their
investment will be changed if their Units are acquired for Common Stock. This
discussion is summary in nature and does not constitute a complete discussion of
these matters, and investors should carefully review the balance of this
Prospectus and the registration statement of which this Prospectus is a part for
additional important information about the Company.
Form of Organization and Assets Owned. The Operating Partnership is
organized as a Delaware limited partnership. A substantial amount of the
Company's operations are conducted through the Operating Partnership which,
directly or through subsidiaries, owns the Properties.
The Company is organized under the laws of the State of Delaware. The
Company maintains both a special limited partner interest and, through its
wholly owned direct subsidiary, the General Partner, a general partner interest
in the Operating Partnership, which gives the Company an indirect investment in
the Properties and other assets owned by the Operating Partnership. As of June
1, 1997 the Company had an approximately 80.93% equity interest in the Operating
Partnership. Such interest may increase as Units are redeemed for cash or
acquired by the Company or decrease as additional assets are acquired in
exchange for Units in the Operating Partnership.
Term of the Operating Partnership. The Operating Partnership has a
stated termination date of December 31, 2095, although it may be terminated
earlier under certain circumstances. The Company has a perpetual term and,
unless the shareholders vote to liquidate, intends to continue its operations
for an indefinite time period.
Purpose and Permitted Investments. The purpose of the Operating
Partnership as stated in its Partnership Agreement may be summarized as the
acquisition, sale, operation, development, financing, mortgaging and leasing of
real estate and interests in real estate including the Properties. The
Partnership Agreement requires the business of the Operating Partnership to be
conducted in such a manner that will permit the Company to be classified as a
REIT for federal income tax purposes. The Operating Partnership may, subject to
the foregoing limitation, invest or enter into partnerships, joint ventures or
similar arrangements and may own interests in any other entity.
Under its Certificate, the Company may engage in any lawful activity
permitted under the Delaware General Corporation Law. Under the Partnership
Agreement the General Partner of the Operating Partnership is responsible for
the management of the Operating Partnership's business and affairs and has full
and complete power, authority and discretion to take such action on behalf of
the Operating Partnership as it deems necessary or appropriate in order to carry
out the purposes of the Operating Partnership. However, the General Partner may
not do any act in contravention of the Partnership Agreement or applicable law
nor may the General Partner possess any Operating Partnership property or assign
any rights in such property for other than Operating Partnership purposes. The
Company agrees that all of its activities and business operations shall be
conducted directly or indirectly through the Operating Partnership.
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Additional Equity. The Operating Partnership is authorized to issue
Units and other partnership interests to its partners or to other persons for
such consideration and on such terms and conditions as the General Partner, in
its sole discretion, may deem appropriate.
The Board of Directors of the Company may authorize the issuance of
shares of capital stock of any class, whether now or hereafter authorized, or
securities or rights, convertible into shares of capital stock, for such
consideration as the Board of Directors may deem advisable, subject to such
restrictions or limitations as may be set forth in the Company's Bylaws. The
proceeds from the issue of equity capital by the Company will be contributed to
the Operating Partnership in exchange for Units or other interests in the
Operating Partnership.
Borrowing Policies. The Partnership Agreement imposes no restrictions
on the Operating Partnership on borrowings, and the General Partner has full
power and authority to borrow money on behalf of the Operating Partnership.
The Company is not restricted under its governing instruments from
incurring borrowings. The Company has, however, adopted a policy that limits
total borrowings to 50% of the estimated fair value of its assets. See RISK
FACTORS. The foregoing reflects the Company's general policy over time and is
not intended to operate in a manner that inappropriately restricts the Company's
ability to raise additional capital, including additional debt, to implement its
planned growth, to pursue attractive acquisition opportunities that may arise or
to otherwise act in a manner that the Board of Directors believes to be in the
best interests of the Company and its stockholders. The Board of Directors, with
the assistance of management of the Company, may re-evaluate from time to time
its debt and other capitalization policies in light of then current economic
conditions, including the relative costs of debt and equity capital, the market
value of its Properties, growth and acquisition opportunities, and the market
value of its equity securities in relation to the Company's view of the market
value of its Properties, and may modify its debt policy. Such modification may
include increasing or decreasing its general ratio of debt to estimated fair
market value or substituting another measuring standard.
Other Investment Restrictions. Other than restrictions precluding
investments by the Operating Partnership that would adversely affect the
qualification of the Company as a REIT, there are no restrictions upon the
Operating Partnership's authority to enter into certain transactions, including,
among others, making investments, lending Operating Partnership funds, or
reinvesting the Operating Partnership's cash flow and net sale or refinancing
proceeds.
The Company's Organizational Documents do not impose any restrictions
upon the types of investments that may be made by the Company.
Management Control. All management powers over the business and affairs
of the Operating Partnership are vested in the General Partner, and no limited
partner of the Operating Partnership has any right to participate in or exercise
control or management power over the business and affairs of the Operating
Partnership. The General Partner may not be removed by the limited partners
(other than by the Company as Special Limited Partner) with or without cause.
The Board of Directors has exclusive control over the Company's
business and affairs subject only to the restrictions in the Organizational
Documents. The Board of Directors is divided into three classes. At each annual
meeting of the stockholders, the successors of the class of directors whose
terms expire at that meeting will be elected. The policies adopted by the Board
of Directors may be altered or eliminated without advice of the stockholders.
Accordingly, except for their vote in the elections of directors, stockholders
have no control over the ordinary business policies of the Company.
Management Liability and Indemnification. The Partnership Agreement
generally provides that the General Partner will incur no liability to the
Operating Partnership or any limited partner for losses sustained or liabilities
incurred as a result of any act or omission if the General Partner or its
affiliates, directors, officers, shareholders and such other persons acting in
its or their behalf acted in good faith and
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in the belief that such conduct was in, or not opposed to, the best interests of
the Operating Partnership. The Partnership Agreement also provides for
indemnification of the General Partner, the Company, the directors, officers and
shareholders of the General Partner and the Company, and such other persons
acting on its or their behalf, against expenses, judgments, fines and amounts
paid in settlement arising from any threatened, pending or completed actions,
suits or proceedings that relate to the operations of the Operating Partnership
in which such person may be involved.
The Company's Organizational Documents provide certain limitations on
the liability of the Company's directors and officers for monetary damages to
the Company. The Organizational Documents obligate the Company to indemnify its
Directors and Officers, and permit the Company to indemnify its employees and
other agents, against certain liabilities incurred in connection with their
service in such capacities. These provisions could reduce the legal remedies
available to the Company and the stockholders against these individuals.
The Company's By-Laws require it to indemnify its officers, directors
and certain other parties to the fullest extent permitted from time to time by
Delaware law. The Delaware General Corporation Law permits a corporation to
indemnify any present or former director, officer, employee or agent who has
been successful on the merits or otherwise in the defense of any action, suit or
proceeding or in defense of any claim, issue or matter therein, to which he was
made a party by reason of his service in that capacity, against reasonable
expenses incurred by him in connection therewith provided it is established that
(i) he acted in good faith and in a manner which he reasonably believed to be
in, or not opposed to, the best interests of the Company; or (ii) in the case of
a criminal proceeding, he had no reasonable cause to believe that his conduct
was unlawful. The Delaware General Corporation Law also permits the Company to
provide indemnification and advance expenses to a present or former Director or
officer who served a predecessor of the Company in such capacity, and to any
employer or agent of the Company or a predecessor of the Company. The Company
has purchased director and officer liability insurance for the purpose of
providing a source of funds to help pay for any indemnification expenses it may
incur. It is the position of the SEC that indemnification of directors and
officers for liabilities under the Securities Act is against public policy and
unenforceable pursuant to Section 14 of the Securities Act.
Anti-takeover Provisions. The General Partner has exclusive management
power over the business and affairs of the Operating Partnership, and the
Partnership Agreement makes no provision for the removal of the General Partner
by the limited partners (other than the Special Limited Partner).
The Organizational Documents of the Company and Delaware law contain a
number of provisions that may have the effect of delaying or discouraging an
unsolicited proposal for the acquisition of the Company or the removal of
incumbent management.
Voting Rights. Under the Partnership Agreement, the limited partners do
not have voting rights relating to the operation and management of the Operating
Partnership except in connection with certain amendments to the Partnership
Agreement.
Stockholders of the Company have the right to vote, among other things,
on a merger or sale of substantially all of the asserts of the Company, certain
amendments to the Certificate and dissolution of the Company. The Company is
managed and controlled by a Board of Directors consisting of three classes
having staggered terms of office. Each class is to be elected by the
stockholders at annual meetings of the Company. Each share of Common Stock has
one vote, and the Certificate permits the Board of Directors to classify and
issue Preferred Stock in one or more series having voting power which may differ
from that of the Common Stock.
Amendment of the Partnership Agreement or the Company's Certificate.
Amendments to the Partnership Agreement may be proposed by the General Partner
and generally require approval of limited partners (including the Special
Limited Partner) holding a majority of the outstanding limited partner
interests. Certain amendments that would, among other things, reduce any limited
partner's interest in the Operating Partnership or his share of distributions,
create any obligations or impair any right of a limited
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partner must be approved by the General Partner, and each limited partner that
would be adversely affected by any such amendment.
Amendments to the Company's Certificate, its term, certain changes to
its capital stock provisions, changes to the powers of the Board of Directors,
removal of a director, the excess shares and REIT qualification provisions, the
business combinations provision, shareholder action, the staggered board,
limitation on liability, standards for evaluation of tender, merger and purchase
offers, and amendment of the By-Laws must be approved by the Board of Directors
and by affirmative vote of the holders of not less than two-thirds of all votes
entitled to be cast on the matter. Other matters require an affirmative vote by
a majority of the shareholders.
Vote Required to Dissolve the Operating Partnership or the Company.
Under Delaware limited partnership law, the Operating Partnership may be
dissolved, other than in accordance with the terms of the Partnership Agreement,
only upon the written consent of all of the partners, the withdrawal of the
general partner without replacement or judicial decree. Under Delaware
corporation law, the Board of Directors must obtain the approval of holders of
not less than a majority of all outstanding shares of capital stock of the
Company in order to dissolve the Company.
Vote Required to Sell Assets or Merge. Under the Partnership Agreement
the limited partners of the Operating Partnership do not have voting rights with
respect to the sale, exchange, transfer or other disposition of all or
substantially all of its assets, including by way of merger or consolidation or
other combination of the Operating Partnership.
Under Delaware law and the Company's Certificate, the sale of all or
substantially all of the assets of the Company or any merger or consolidation or
dissolution requires the approval of the Board of Directors and the affirmative
vote of a majority of all the votes entitled to be cast on the matter. No
approval of the stockholders is required for the sale of less than all or
substantially all of the Company's assets.
Compensation, Fees and Distributions. The General Partner does not
receive any compensation for its services as general partner of the Operating
Partnership. As a partner in the Operating Partnership, however, the General
Partner and the Company have the same right to allocations and distributions as
other partners of the Operating Partnership. In addition, the Operating
Partnership will reimburse the General Partner and the Company for all expenses
incurred relating to the ownership and operation of, or for the benefit of, the
Operating Partnership.
The directors and officers of the Company receive compensation for
their services.
Liability of Investors. Under the Partnership Agreement and applicable
Delaware law, limited partners generally are not liable for the debts and
obligations of the Operating Partnership unless they are also a general partner
or participate in the control of the business.
Under Delaware law, stockholders generally are not liable for the debts
or obligations of the Company. See DESCRIPTION OF THE CAPITAL STOCK OF THE
COMPANY.
Nature of Investment. The Units constitute equity interests entitling
holders thereof to their pro rata share of cash distributions made to the
limited partners of the Operating Partnership. The Company and the General
Partner are entitled to receive their respective pro rata shares of
distributions made by the Operating Partnership with respect to their interests
in the Operating Partnership.
Shares of Common Stock constitute equity interests in the Company. Each
stockholder will be entitled to his pro rata share of any dividends or
distributions paid with respect to Common Stock. The dividends payable to the
stockholders are not fixed in amount and are paid only if, when and as declared
by the Board of Directors.
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Potential Dilution of Rights. The General Partner is authorized, in its
sole discretion and without limited partner approval, to cause the Operating
Partnership to issue additional limited partnership interests and other equity
securities for any partnership purpose at any time to the limited partners or to
other persons on terms established by the General Partner.
The Board of Directors of the Company may issue, in its discretion,
additional shares of Common Stock and has the authority to issue from the
authorized capital stock a variety of other equity securities of the Company
with such powers, preferences and rights as the Board of Directors may designate
at the time. The issuance of additional shares of Common Stock or other similar
equity securities may result in the dilution of interests of the stockholders.
Liquidity. Subject to certain limitations and exceptions, as of June 6,
1997, the Unitholders may transfer up to 198,058 Units with or without the
consent of the General Partner; and as of July 7, 1997, they may transfer up to
another 190,984 Units with or without the consent of the General Partner.
However, the General Partner, in its sole and absolute discretion, may or may
not consent to the admission as substituted limited partner of any transferee of
such Units. If the General Partner does not consent to the admission of a
transferee as a substituted limited partner, the transferee shall be considered
an assignee of an economic interest in the Operating Partnership but will not be
a holder of Units for any other purpose; accordingly, the assignee will not be
permitted to vote on any affairs or issues on which a limited partner may vote.
The Common Stock is listed on the NYSE. The breadth and strength of
this market will depend, among other things, upon the number of shares
outstanding, the Company's financial results and prospects, the general interest
in the Company's real estate investments and the Company's dividend yield
compared to that of other debt and equity securities.
REGISTRATION RIGHTS
The registration of the Redemption Shares pursuant to this Registration
Statement of which this Prospectus is a part will discharge the Company's
obligations with respect to such Redemption Shares to the Unitholders under the
terms of a Registration Rights Agreement (the "Registration Rights Agreement")
which the Company entered into in connection with the issuance of the Units. The
following summary does not purport to be complete and is qualified in its
entirety by reference to the Registration Rights Agreement.
Under the Registration Rights Agreement, at any time after June 16,
1997 with respect to Units received in connection with Coventry Park Apartments
and Hidden Oak Apartments and July 7, 1997 with respect to Units received for
Benchmark Apartments and Newport Commons Apartments until the earlier of the
date on which all the Redemption Shares issued to the Unitholders have become
eligible for sale pursuant to (a) a registration statement effectively
registering the Redemption Shares under the Securities Act, or (b) Rule 144
promulgated under the Securities Act, the Unitholders may request that the
Company cause to be filed a "shelf registration statement" (a "Shelf
Registration") covering the Redemption Shares; provided, however, that the
Company shall not be required to provide a registration statement with respect
to Redemption Shares if (i) an effective Shelf Registration has been filed with
respect to said shares and has been kept effective for at least ninety (90)
days, (ii) said shares have been sold pursuant to either the Shelf Registration
or Rule 144 under the Securities Act, or (iii) said shares are capable of being
sold pursuant to Rule 144. The Company shall not be obligated to file a Shelf
Registration Statement pursuant to the terms of the Registration Rights
Agreement more often than once during any twelve-month period. This Registration
Statement of which this Prospectus is a part was filed on the initiative of the
Company to accommodate the Unitholders and it is the present intention of the
Company to maintain its effectiveness for two years, although the Company
reserves the right to suspend the issue of Redemption Shares pursuant to it at
its discretion or to terminate its effectiveness. As long as the Registration
Statement of which this Prospectus is a part remains effective, the Redemption
Shares held by the Unitholders when
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issued by the Company pursuant to this Prospectus will not require the benefits
of the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Company has agreed
to pay all expenses incurred in the registration of the Redemption Shares (other
than selling commissions and discounts, brokerage fees and transfer taxes or any
legal, accounting and other expenses incurred by the Unitholders thereunder).
The Company also has agreed to indemnify the Unitholders under the Shelf
Registration and its officers, directors and other affiliated persons and any
person who controls the Unitholders against any and all losses, claims, damages
and expenses arising under the securities laws in connection with the
Registration Statement or this Prospectus, subject to certain limitations. In
addition, the Unitholders have agreed to indemnify the Company and its
Directors, officers and any person who controls the Company against all losses,
claims, damages and expenses arising under the securities laws insofar as such
loss, claim, damage or expense relates to written information furnished to the
Company by the Unitholders for use in the Shelf Registration or Prospectus or an
amendment or supplement thereto. The Company is not required to indemnify the
Unitholders for the failure by the Unitholders to deliver or cause to be
delivered the Prospectus or any amendment or supplement hereto to any purchaser
from the Unitholders of shares covered by the Shelf Registration.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes that it has operated, and the Company intends to
continue to operate, in such manner as to qualify as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"), but no assurance can be given
that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and very general summary of certain provisions
which currently govern the federal income tax treatment of the Company and its
shareholders. For the particular provisions which govern the federal income tax
treatment of the Company and its shareholders, reference is made to Sections 856
through 860 of the Code, the Income Tax Regulations promulgated thereunder and
administrative and judicial interpretations thereof. This summary does not give
a detailed discussion of any state, local or foreign tax consideration nor does
it discuss all the aspects of Federal income taxation that may be relevant to a
prospective shareholder in light of his or her particular circumstances or to
certain types of shareholders (including insurance companies, tax-exempt
entities, financial institutions or broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) who are subject
to special treatment under the Federal income tax laws. As used in this section,
the term "Company" refers solely to Berkshire Realty Company, Inc.
Under the Code, if certain requirements are met in a taxable year, a
REIT will generally not be subject to federal income tax with respect to income
which it distributes to its shareholders. However, the Company may be subject to
federal income tax under certain circumstances, including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and adjustments and taxes imposed
on income and gain generated by certain extraordinary transactions. If the
Company fails to qualify during any taxable year as a REIT, unless certain
relief provisions are available, it will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates, which would have a material adverse effect upon its shareholders.
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. shareholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. shareholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. shareholder" means a shareholder that for U.S.
federal income tax purposes is: (a)(i) a citizen or resident of the United
States; (ii) a corporation, partnership, or other entity created or organized in
or under the laws of the United States or any political subdivision thereof;
(iii) an estate the income of which is subject
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to U.S. federal income taxation regardless of its source; or (iv) a trust (x)
over the administration of which a court within the United States is able to
exercise primary supervision and (y) all substantial decisions of which one or
more United States fiduciaries have the authority to control, and (b) does not
have special status under the Code, such as a tax-exempt organization.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain for the taxable year) without regard to the period for which
the shareholder has held his shares. However, corporate shareholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. If a shareholder realizes a loss on the disposition of shares held for
not more than six months, the loss will be treated as a long-term capital loss
to the extent of any prior distributions with respect to such shares that the
shareholder received as capital gain dividends. Distributions in excess of
current and accumulated earnings and profits will not be taxable to a
shareholder to the extent that they do not exceed the adjusted basis of the
shareholder's shares, but rather will reduce the adjusted basis of such shares.
To the extent that distributions in excess of current and accumulated earnings
and profits exceed the adjusted basis of a shareholder's shares, the
distributions will be included in income as long-term capital gain (or
short-term capital gain if the shares have been held for one year or less)
assuming the shares are a capital asset in the hands of the shareholder. In
addition, any dividend declared by the Company in October, November or December
of any year and payable to a shareholder of record on a specified date in any
such month shall be treated as both paid by the Company and received by the
shareholder on December 31 of such year, provided that the distribution is
actually paid by the Company during January of the following calendar year.
Unitholders are urged to consult their own tax advisors with respect to
the appropriateness of an investment in the Common Stock and with respect to the
tax consequences arising under the federal law and the laws of any state,
municipality or other taxing jurisdiction, including tax consequences arising
from such Unitholder's own tax characteristics. In particular, foreign investors
should consult their own tax advisors concerning the tax consequences of an
investment in the Company including the possibility of United States income tax
withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the issuance of any
Redemption Shares, but will acquire Units tendered to the Operating Partnership
for redemption for which it elects to issue Redemption Shares. The shares of
Common Stock offered hereby may be sold from time to time on the NYSE on terms
to be determined at the time of such sales.
The shares of Common Stock offered hereby may be sold from time to time
in one or more transactions at a fixed offering price, which may be changed, or
at varying prices determined at the time of sale or at negotiated prices.
The Company will pay substantially all the expenses incurred by the
Unitholders and the Company incident to the Offering, but excluding any selling
commissions or discounts, brokerage fees, transfer taxes or the fees or expenses
of any counsel, accountants or other representatives retained by the
Unitholders.
The Company has agreed to indemnify the Unitholders against certain
liabilities, including liabilities under the Securities Act.
EXPERTS
The Consolidated Financial Statements incorporated in this Prospectus
by reference to the Annual Report on Form 10-K for the year ended December 31,
1996, have been so incorporated in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of said firm as experts
in auditing and accounting.
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LEGAL MATTERS
The validity of the issuance of the Redemption Shares will be passed
upon for the Company by Peabody & Brown, Boston, Massachusetts.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Registration fee to the SEC .......................... $ 1,275
Printing expense...................................... 2,000
Accounting fees and expenses.......................... 2,000
Legal fees and expenses............................... 25,000
Miscellaneous expenses................................ 1,000
--------
Total.............................................. $ 31,275
========
All fees and expenses are estimates except for the registration fee
to the SEC.
Item 15. Indemnification of Directors and Officers.
The Company's Certificate provides for indemnification of the
Company's officers and Directors to the fullest extent permitted by Sections 145
and 102(b)(7) of the Delaware General Corporation Law and relieves the Directors
of certain monetary liabilities to the Company and its shareholders. In general,
Delaware law permits the Company to indemnify its officers and Directors so long
as they act in good faith and in a manner reasonably believed by them to be in,
or not opposed to, the best interests of the Company. Subject to the provisions
of Sections 145 and 102(b)(7) of the Delaware General Corporation Law, the
Company intends to indemnify its officers and Directors against losses,
liabilities and expenses (including attorneys' fees) incurred by them that are
related to their being officers or Directors of the Company.
The Company has purchased director and officer liability insurance for
the purpose of providing a source of funds to help pay for any indemnification
expenses it may incur.
Item 16. Exhibits
Exhibit Numbers Description
--------------- -----------
**4.1 Restated Certificate of Incorporation of the
Company, as amended, incorporated by reference
to Exhibits 3.1 to the Company's Registration
Statement on Form S-4 and Exhibit 3.11 to
Post-Effective Amendment No. 1 thereto (File
No. 33-37592).
**4.2 By-Laws of the Company, as amended,
incorporated by reference to Exhibit 3.3 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1993 and Exhibit 3.4 to
the Annual Report on Form 10-K for the year
ended December 31, 1995 (File No. 1-10660).
**4.3 Form of Common Stock Certificate, incorporated
by reference to Exhibit 4.5 to the Company's
registration statement on Form S-4 (No.
33-37592), dated November 2, 1990, as amended.
5.1 Opinion regarding legality.
8.1 Opinion regarding certain tax matters.
23.1 Consent of Coopers & Lybrand L.L.P.
-27-
<PAGE>
23.2 Consent of Peabody & Brown (included in Exhibit
5.1 hereto).
24.1 Power of Attorney (included on signature page
hereto).
- ---------------------------
* To be filed by post-effective amendment or by a current report on Form 8-K
pursuant to the Securities Exchange Act of 1934, as appropriate.
** Previously filed.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any Prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or
most recent post-effective amendment thereof) which,
individually, or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore,
-28-
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant for expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
-29-
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Boston, Massachusetts, on June 23, 1997.
BERKSHIRE REALTY COMPANY, INC.
By: Douglas Krupp_______________________
Douglas Krupp, Chairman of the Board and
Director of Berkshire Realty Company, Inc.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Douglas Krupp, Laurence Gerber,
David F. Marshall and Marianne A. Pritchard jointly, and each of them severally,
his/her true and lawful agent and attorney-in-fact, with full power of
substitution and resubstitution, for him/her and in his/her name, place and
stead, in any and all capacities, to execute and sign the Registration Statement
filed herewith and any or all amendments or post-effective amendments to this
Registration Statement (or any registration statement for the same offering that
is to be effective upon filing pursuant to Rule 462(b) under the Securities Act
of 1933), and to file the same, with all exhibits thereto and other documents in
connection therewith or in connection with the registration of the shares of
Common Stock under the Securities Exchange Act of 1934, with the Securities and
Exchange Commission, granting unto each of such attorneys-in-fact and agents
full power and authority to do and person each and every act and thing requisite
and necessary in connection with such matters as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that each such agent or attorney-in-fact and his/her substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Douglas Krupp Chairman of the Board and Director of Berkshire June 23, 1997
- ------------------ Realty Company, Inc.
Douglas Krupp
David F. Marshall President, Chief Executive Officer and Director June 23, 1997
- ------------------ of Berkshire Realty Company, Inc.
David F. Marshall
Marianne Pritchard Senior Vice President and Chief Financial June 23, 1997
- ------------------- Officer of Berkshire Realty Company, Inc.
Marianne Pritchard
J. Paul Finnegan Director of Berkshire Realty Company, Inc. June 23, 1997
- ----------------
J. Paul Finnegan
-30-
<PAGE>
Laurence Gerber Director of Berkshire Realty Company, Inc. June 23, 1997
- ---------------
Laurence Gerber
Charles N. Goldberg Director of Berkshire Realty Company, Inc. June 23, 1997
- -------------------
Charles N. Goldberg
E. Robert Roskind Director of Berkshire Realty Company, Inc. June 23, 1997
- -----------------
E. Robert Roskind
David M. deWilde Director of Berkshire Realty Company, Inc. June 23, 1997
- -----------------
David M. deWilde
</TABLE>
-31-
<PAGE>
Exhibit Index to Registration Statement on Form S-3
The following exhibits are filed as part of this Registration Statement on Form
S-3.
Exhibit Description
Numbers -----------
- --------
**4.1 Restated Certificate of Incorporation of the Company, as amended,
incorporated by reference to Exhibits 3.1 to the Company's
Registration Statement on Form S-4 and Exhibit 3.11 to
Post-Effective Amendment No. 1 thereto (File No. 33-37592).
**4.2 By-Laws of the Company, as amended, incorporated by reference to
Exhibit 3.3 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993 and Exhibit 3.4 to the Annual Report
on Form 10-K for the year ended December 31, 1995 (File No.
1-10660).
**4.3 Form of Common Stock Certificate, incorporated by reference to
Exhibit 4.5 to the Company's registration statement on Form S-4
(No. 33-37592), dated November 2, 1990, as amended.
5.1 Opinion regarding legality.
8.1 Opinion regarding certain tax matters.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Peabody & Brown (included in Exhibit 5.1 hereto).
24.1 Power of Attorney (included on the signature page hereto).
- ---------------------------
* To be filed by post-effective amendment or by a current report on Form 8-K
pursuant to the Securities Exchange Act of 1934, as appropriate.
** Previously filed.
Exhibit 5.1
[letterhead]
PEABODY & BROWN
A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110-1832
(617) 345-1000
------
WRITER'S DIRECT DIAL NUMBER FAX: (617) 345-1300 MANCHESTER, NH
(617) 345-1103 ________ PROVIDENCE, RI
http://www.peabodybrown.com WASHINGTON, DC
June 23, 1997
Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Gentlemen:
You have requested our opinion in connection with the Registration
Statement on Form S-3 (the "Registration Statement") filed under the Securities
Act of 1933, as amended (the "Securities Act"), for the purpose of registering
389,042 shares of common stock, par value $.01 (the "Common Stock"), to be
issued by Berkshire Realty Company, Inc., a Delaware corporation (the
"Company"), from time to time as described in the Registration Statement if, and
to the extent that, holders of units of limited partnership interest ("Units")
in BRI OP Limited Partnership (the "Operating Partnership") tender such Units to
the Operating Partnership for redemption and the Company exercises its right to
acquire such tendered Units in exchange for Common Stock (the "Redemption
Shares") pursuant to the terms of the Agreement of Limited Partnership (the
"Partnership Agreement") of the Operating Partnership.
We have acted as counsel for the Company in connection with the
preparation of the Registration Statement and various corporate documents
related thereto. We have examined and relied upon the following documents and
instruments for the purpose of giving this opinion which, to our knowledge and
in our judgment, are all of the documents and instruments that are necessary for
us to examine for such purpose:
1. the Registration Statement and the prospectus filed therewith and
all exhibits thereto;
2. a copy of the Company's Restated Certificate of Incorporation, as
amended to date;
3. a copy of the Company's Bylaws;
4. a copy of the Partnership Agreement as amended to date;
<PAGE>
5. copies of Contribution Agreements between the Operating
Partnership and parties who have exchanged assets for Units; and
6. such other documents as we have deemed necessary or appropriate
for purposes of this opinion.
In examining all documents, we have assumed the genuineness of all
signatures thereon, the accuracy of all statements contained therein, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents furnished to us as certified or photographic
copies, and the completeness of all documents furnished to us. We have also
assumed the legal capacity (as distinct from authority) and competency of any
individual who has signed any instrument referred to herein. With respect to the
latter assumption, nothing has come to our attention giving us reasonable
grounds to question the correctness of such assumption.
Based upon the foregoing, and having regard for such legal considerations
as we deem relevant, we are of the opinion that, when the Redemption Shares have
been issued and exchanged by the Company for Units tendered to the Operating
Partnership for redemption in accordance with the provisions of the Partnership
Agreement, such Redemption Shares will be legally issued, fully paid and
nonassessable.
The foregoing assumes that all requisite steps will be taken to comply
with the requirements of the Securities Act and applicable requirements of state
laws regulating the offer and sale of securities.
Our opinion is subject to the following qualifications and limitations:
i. We express no opinion as to the laws of any state or jurisdiction
other than the federal laws of the United States, the laws of The Commonwealth
of Massachusetts and the General Corporation Law of the State of Delaware.
ii. The opinions set forth herein are expressed as of the date hereof,
and we disclaim any undertaking to advise you of any changes which may
subsequently be brought to our attention in the facts and the law upon which
such opinions are based.
This opinion is furnished by us solely for your benefit and is intended
to be used as an exhibit to the Registration Statement filed with the Securities
and Exchange Commission. Except for such use, neither this opinion nor copies
hereof may be relied upon by, delivered to, or quoted in whole or in part by any
person without our prior written consent.
<PAGE>
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules and regulations promulgated thereunder by the Securities and
Exchange Commission.
Very truly yours,
/s/ Peabody & Brown
PEABODY & BROWN
Exhibit 8.1
[letterhead]
PEABODY & BROWN
A LAW PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110-1832
(617) 345-1000
------
WRITER'S DIRECT DIAL NUMBER FAX: (617) 345-1300 MANCHESTER, NH
(617) 345-1103 ________ PROVIDENCE, RI
http://www.peabodybrown.com WASHINGTON, DC
June 23, 1997
Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Re: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to Berkshire Realty Company, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
registration statement on Form S-3 (the "Registration Statement") with respect
to the issue of 389,042 shares of the Company's Common Stock, par value $.01 per
share.
The Company has requested our opinion as to the Company's qualification
for federal income tax purposes as a real estate investment trust (a "REIT")
pursuant to sections 856 through 860 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the accuracy of the statements in the Registration
Statement set forth under the caption FEDERAL INCOME TAX CONSIDERATIONS.
In connection with the opinions rendered below, we have examined the
following documents:
1. the Registration Statement and the prospectus filed therewith and
all exhibits thereto;
2. a copy of the Company's Restated Certificate of Incorporation, as
amended to date;
3 a copy of the Company's Bylaws; and
4. such other documents as we have deemed necessary or appropriate
for purposes of this opinion.
<PAGE>
We have reviewed the Registration Statement and the descriptions set
forth therein of the Company and its investments and activities. We have relied
upon the representa-tions of the Company and its affiliates and certain officers
thereof (including, without limitation, representations contained in a
representation letter dated as of this date) regarding the manner in which the
Company has been and will continue to be owned and operated. We have neither
independently investigated nor verified such representations, and we assume that
such representations are true, correct and complete and that all representations
made "to the best of the knowledge and belief" of any person(s) or party(ies)
are and will be true, correct and complete as if made without such
qualification. We assume that the Company has been and will be operated in
accordance with applicable laws and the terms and conditions of applicable
documents, and that the descriptions of the Company and its investments and the
proposed investments, activities, operations and governance of the Company set
forth in the Registration Statement continue to be true. In addition, we have
relied on certain additional facts and assumptions described below.
In examining all documents, we have assumed the genuineness of all
signatures thereon, the accuracy of all statements contained therein, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents furnished to us as certified or photographic
copies, and the completeness of all documents furnished to us. We have also
assumed the legal capacity (as distinct from authority) and competency of any
individual who has signed any instrument referred to herein. With respect to the
latter assumption, nothing has come to our attention giving us reasonable
grounds to question the correctness of such assumptions.
The discussion and conclusions set forth below are based upon the Code,
the Income Tax Regulations and Procedure and Administration Regulations
promulgated thereunder and existing administrative and judicial interpretations
thereof, all of which are subject to change. No assurance can therefore be given
that the federal income tax consequences described below will not be altered in
the future.
Based upon and subject to the foregoing, and provided that the Company
continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution, recordkeeping and other requirements
of the Code necessary for a corporation to qualify as a REIT, we are of the
opinion that:
1. The Company is organized in conformity with the requirements for
qualification as a REIT under the Code, and its method of operation as described
in the representations referred to above, will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Code.
<PAGE>
2. The statements in the Registration Statement set forth under the
caption FEDERAL INCOME TAX CONSIDERATIONS, to the extent such information
constitutes matters of law, summaries of legal matters, or legal conclusions,
have been reviewed by us and are accurate in all material respects.
We express no opinion with respect to the transactions described in the
Registration Statement other than those expressly set forth herein. You should
recognize that our opinions are not binding on the IRS and that the IRS may
disagree with the opinions contained herein. Although we believe that our
opinions will be sustained if challenged, there can be no assurance that this
will be the case. Except as specifically discussed above, the opinions expressed
herein are based upon the law as it currently exists. Consequently, future
changes in the law may cause the federal income tax treatment of the
transactions described herein to be materially and adversely different from that
described above.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
Statement. In giving such consent, we do not admit that we are in the category
of persons whose consent is required by Section 7 of the Securities Act of 1933
Act, as amended, or the rules and regulations promulgated thereunder by the
Securities and Exchange Commission.
The foregoing opinions are limited to the federal income tax matters
addressed herein, and no other opinions are rendered with respect to other
federal tax matters or to any issues arising under the tax laws of any state,
locality or foreign country. We undertake no obligation to update the opinions
expressed herein after the date of this letter. This opinion letter is solely
for the information and use of the addressee and may not be relied upon for any
purpose by any other person without our express written consent.
Very truly yours,
/s/ Peabody & Brown
PEABODY & BROWN
Exhibit 23.1
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-3 of our
report dated February 13, 1997, except for Note Q, for which the date is
February 28, 1997, on our audits of the consolidated financial statements and
financial statement schedule of Berkshire Realty Company, Inc. We also consent
to the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Boston, Massachusetts Coopers & Lybrand L.L.P.
June 20, 1997
