BERKSHIRE REALTY CO INC /DE
10-Q, 1997-08-14
REAL ESTATE INVESTMENT TRUSTS
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

(Mark One)


[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934

For the quarterly period ended          June 30, 1997


                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from                 to



                     Commission file number     1-10660


                         Berkshire Realty Company, Inc.
- --------------------------------------------------------------------------------

           Delaware                                              04-3086485
- --------------------------------------------------------------------------------
(State or other jurisdiction of                                (IRS employer
 incorporation or organization)                              identification no.)


470 Atlantic Avenue, Boston, Massachusetts                         02210
- --------------------------------------------------------------------------------
 (Address of principal executive offices)                        (Zip Code)


                                 (617) 423-2233
- --------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No


<PAGE>



                          PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                  ------------

                                     ASSETS

<TABLE>
<CAPTION>

                                                                                June 30,            December 31,
                                                                                  1997                 1996
                                                                              ------------          ------------
                                                                               (Unaudited)
<S>                                                                            <C>                   <C>
Real estate assets: (Note 3)
  Multifamily apartment complexes, net of
       accumulated depreciation                                                $448,419,496          $430,936,889
  Retail center, net of valuation reserve                                        11,064,630            11,064,630
  Investments in unconsolidated joint ventures
       (Note 4)                                                                  20,537,903            36,036,723
  Mortgage loans and other loans receivable,
     net of purchase discounts (Note 5)                                           3,602,458             4,094,241
  Land and construction-in-progress                                               4,128,782             4,035,820
  Land held for future development                                                5,928,082             2,331,988
  Property held for sale, net of valuation
       reserve (Note 3)                                                          16,799,399            30,556,482
                                                                               ------------          ------------
           Total real estate assets                                             510,480,750           519,056,773

Cash and cash equivalents                                                         8,230,883             7,015,953
Mortgage-backed securities, net ("MBS") (Note 6)                                  8,352,355             9,232,956
Escrows                                                                          11,418,758            11,096,213
Deferred charges and other assets                                                10,635,014            10,940,879
Goodwill and intangible assets, net of
       accumulated amortization (Note 2)                                         30,163,676            12,327,039
                                                                               ------------          ------------
           Total assets                                                        $579,281,436          $569,669,813
                                                                               ============          ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Credit agreements (Note 7)                                                   $117,310,000          $136,060,000
  Mortgage notes payable (Note 3)                                               165,897,432           149,805,607
  Repurchase agreements (Note 7)                                                  8,300,000             9,300,000
  Tenant security deposits and prepaid rents                                      3,130,174             2,443,716
  Accrued real estate taxes, other
       liabilities and accounts payable                                          11,251,438            11,797,967
                                                                               ------------          ------------

           Total liabilities                                                    305,889,044           309,407,290
                                                                               ------------          ------------

Minority interest in operating partnership (Note 8)                              57,919,158            36,608,607

Commitments and Contingencies (Note 8)                                                -                     -

Shareholders' equity:
  Preferred stock, $0.01 par value; 60,000,000
       shares authorized, none issued                                                 -                     -
  Common stock ("Shares"), $0.01 par value;
       140,000,000 Shares authorized and
       25,987,348 and 25,899,866 Shares issued,
       respectively                                                                 259,873               258,998
  Additional paid-in capital                                                    228,032,847           239,446,270
  Retained deficit                                                              (11,076,411)          (14,308,277)
  Less common stock in treasury at cost
       (506,497 Shares)                                                          (1,743,075)           (1,743,075)
                                                                               ------------          ------------

       Total shareholders' equity                                               215,473,234           223,653,916
                                                                               ------------          ------------

       Total liabilities and shareholders' equity                              $579,281,436          $569,669,813
                                                                               ============          ============

</TABLE>


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



                                       -2-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)
                                   ----------

<TABLE>
<CAPTION>

                                                      For the Three Months                     For the Six Months
                                                         Ended June 30,                          Ended June 30,
                                                --------------------------------         -------------------------------
                                                   1997                 1996                1997                1996
                                                -----------          -----------         -----------         -----------
<S>                                             <C>                  <C>                 <C>                 <C>
Revenue:
 Rental                                         $25,153,592          $21,230,613         $49,708,611         $40,595,722
 Interest from mortgage
   loans (Note 5)                                   127,350              459,974             168,503           1,044,771
 Interest from MBS                                  197,893              241,721             405,031             503,257
 Management fees and
   reimbursements (Note 2)                          934,938                 -              1,268,404                -
 Other interest income                              271,551              228,344             537,343             446,103
                                                -----------          -----------         -----------         -----------

 Total revenue                                   26,685,324           22,160,652          52,087,892          42,589,853
                                                -----------          -----------         -----------         -----------

Expenses:
 Property operating                               5,902,314            4,616,179          11,928,827           8,984,203
 Repairs and maintenance                          1,851,940            1,625,657           3,496,462           2,964,699
 Real estate taxes                                2,372,599            2,082,528           4,718,371           4,315,714
 Property management fees to
   an affiliate (Note 2)                             50,445            1,062,123             819,305           1,952,477
 Property management
   operations (Note 2)                            1,491,894              330,753           2,155,731             656,806
 General and administrative
   (Note 9)                                       1,079,357            1,107,411           2,151,759           1,635,314
 State and corporate
   franchise taxes                                   84,501               92,781             169,002             173,781
 Professional fees                                   58,598               72,150             104,998             116,592
 Interest (Note 7)                                5,650,857            4,722,601          11,485,253           8,917,447
 Amortization of goodwill
   and intangible assets
   (Note 2)                                       1,011,940              336,966           1,560,102             448,256
 Depreciation and amortization                    7,910,020            6,839,766          15,578,951          12,985,785
 Asset management fees to an
   affiliate (Note 2)                                  -                    -                   -                392,636
                                                -----------          -----------         -----------         -----------

 Total expenses                                  27,464,465           22,888,915          54,168,761          43,543,710
                                                -----------          -----------         -----------         -----------

Joint venture net income
 (loss) (Note 4)                                   (157,316)             230,879            (507,872)            657,633
                                                -----------          -----------         -----------         -----------

Loss from operations                               (936,457)            (497,384)         (2,588,741)           (296,224)

Gains on sales of properties                         71,423                 -              6,503,463                -
                                                -----------          -----------         -----------         -----------

Income (loss) before minority
 interest                                          (865,034)            (497,384)          3,914,722            (296,224)

Minority interest                                   192,796               27,321            (682,856)             19,946
                                                -----------          -----------         -----------         -----------


</TABLE>



                                   (Continued)


                                       -3-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)

                                   (Unaudited)
                                   -----------


<TABLE>
<CAPTION>

                                                       For the Three Months                    For the Six Months
                                                          Ended June 30,                          Ended June 30,
                                                   1997                  1996                1997                1996
                                                -----------          -----------         -----------         ----------
<S>                                             <C>                  <C>                 <C>                 <C>        
Net income (loss)                               $  (672,238)         $  (470,063)        $ 3,231,866         $ (276,278)
                                                ===========          ===========         ===========         ==========

Per share:

  Net income (loss)                             $      (.03)         $      (.02)        $       .13         $      (.01)
                                                ===========          ===========         ===========         ===========

  Weighted average Shares                        25,480,709           25,392,962          25,450,743          25,392,957
                                                ===========          ===========         ===========         ===========

</TABLE>












                                       -4-

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


<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                     For the Six Months Ended June 30, 1997

                                   (Unaudited)
                                  -------------

<TABLE>
<CAPTION>

                            Common         Additional                                  Treasury
                            Stock           Paid-in              Retained               Stock
                            at Par          Capital               Deficit               at Cost              Total
                            -------        ----------            --------              ---------             -----
<S>                        <C>            <C>                    <C>                  <C>                  <C>
Balance,
December 31,
1996                       $258,998       $239,446,270          $(14,308,277)         $(1,743,075)         $223,653,916

Net income                                                         3,231,866                                  3,231,866

Stock option
  grants (Note 10)             -                11,292                  -                    -                   11,292

Issuance of
  stock (Note 10)               870            999,130                  -                    -                1,000,000

Stock purchase
  loan-net (Note 10)           -              (983,332)                 -                    -                 (983,332)

Proceeds from
the exercise of
stock warrants                    5              6,197                  -                    -                    6,202

Dividends                      -           (11,446,710)                 -                    -              (11,446,710)
                           --------       ------------          ------------          -----------          ------------

Balance,
June 30,
1997                       $259,873       $228,032,847          $(11,076,411)         $(1,743,075)         $215,473,234
                           ========       ============          ============          ===========          ============

</TABLE>























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



                                       -5-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)
                                  -------------
<TABLE>
<CAPTION>

                                                                                       For the Six Months
                                                                                          Ended June 30,
                                                                                ----------------------------------
                                                                                    1997                  1996
                                                                                -----------           ------------
<S>                                                                             <C>                   <C>
Operating activities:
    Net income (loss)                                                           $ 3,231,866           $  (276,278)
    Adjustments to reconcile net income (loss) to
        net cash provided by operating activities:
           Depreciation                                                          15,578,951            12,985,785
           Amortization of goodwill and intangible assets                         1,560,102               448,256
           Joint venture net (income) loss                                          507,872              (657,633)
           Distributions received from joint ventures                                  -                1,303,839
           Gains on sales of properties                                          (6,503,463)                 -
           Non-employee stock option plan                                            11,292                  -
           Stock purchase loan forgiveness                                           16,668                  -
           Amortization of discount on mortgage
             loans and MBS                                                          (74,875)             (312,691)
           Minority interest in operating partnership                               682,856               (19,946)
           Amortization of deferred financing costs                                 721,273               476,700
           Increase in operating escrows
             and other assets                                                      (129,498)           (3,138,717)
           Increase (decrease) in accrued real estate
             taxes, other liabilities and accounts payable                         (546,529)            2,209,781
           Increase in tenant security deposits
             and prepaid rents                                                      686,458               525,411
                                                                                -----------           -----------

               Net cash provided by operating activities                         15,742,973            13,544,507
                                                                                -----------           -----------

Investing activities:
    Cost to acquire properties                                                   (1,218,197)          (29,165,091)
    Proceeds from sales of properties                                            26,715,135                  -
    Recurring capital expenditures                                               (2,005,817)           (1,769,914)
    Rehabilitation and non-recurring
      capital expenditures                                                       (5,309,926)           (5,083,604)
    Land acquisition and construction in progress                                (5,501,911)           (8,320,463)
    Distribution from the sale of joint venture asset                             7,980,345                  -
    Distributions received from joint ventures
      in excess of earnings                                                       1,327,252                  -
    Contributions to joint venture                                               (2,547,413)                 -
    Principal collections on MBS                                                    889,906             1,555,517
    Principal collections on mortgage loans                                         557,353             7,474,442
    Escrows for construction and replacement                                       (372,692)           (5,066,460)
    Cost to acquire business                                                       (559,239)             (447,679)
                                                                                -----------           -----------

               Net cash provided by (used for)
                 investing activities                                            19,954,796           (40,823,252)
                                                                                -----------           -----------

Financing activities:
    Repayment on credit agreements                                              (21,750,000)                 -
    Proceeds from credit agreement                                                3,000,000            39,970,000
    Payment on repurchase agreement                                              (1,000,000)           (1,250,000)
    Payment of financing costs                                                     (252,641)             (855,218)
    Principal payments on mortgage notes payable                                   (987,839)             (553,090)
    Proceeds from the exercise of stock warrants                                      6,202                 1,416
    Dividends                                                                   (11,446,710)          (11,426,864)
    Distributions to minority interest                                           (2,051,851)             (438,990)
                                                                                -----------           -----------

               Net cash (used for) provided by
                 financing activities                                           (34,482,839)           25,447,254
                                                                                -----------           -----------


</TABLE>

                                    Continued

                                       -6-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                                   (Unaudited)
                                  -------------

<TABLE>
<CAPTION>

                                                                                       For the Six Months
                                                                                         Ended June 30,
                                                                                ---------------------------------
                                                                                    1997                  1996
                                                                                -----------           ------------
<S>                                                                             <C>                   <C>         
Net increase (decrease) in cash and cash equivalents                            $ 1,214,930           $(1,831,491)

Cash and cash equivalents, beginning of period                                    7,015,953            11,142,710
                                                                                -----------           -----------

Cash and cash equivalents, end of period                                        $ 8,230,883           $ 9,311,219
                                                                                ===========           ===========
Supplemental disclosure of non-cash financing and investing activities:

       Property contributed by minority
           interest                                                             $16,058,716           $80,695,611
       Cash to minority contributor                                                (856,243)          (18,796,019)
       Debt assumed from minority
           contributor                                                          (11,360,427)          (41,306,073)
                                                                                -----------           -----------
           Increase in minority interest                                        $ 3,842,046           $20,593,519
                                                                                ===========           ===========
       Property management and advisory services
         businesses contributed by minority
         interest (Note 2)                                                      $18,837,500           $13,000,000
                                                                                ===========           ===========
       Reclassification of construction in progress
         to multifamily apartment complexes                                     $ 1,812,855           $ 1,511,055
                                                                                ===========           ===========
       Debt assumed in conjunction with property
         acquisition via exchange of
         joint venture asset                                                    $ 5,719,237           $      -
                                                                                ===========           ===========
       Property acquisition via exchange of
         joint venture asset                                                    $ 8,230,763           $      -
                                                                                ===========           ===========

</TABLE>
















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


                                       -7-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 ---------------


1.       Significant Accounting Policies
         -------------------------------

         These financial statements reflect the consolidated financial position,
         results of operations, changes in shareholders' equity and cash flows
         of the Company, its subsidiaries and the Operating Partnership
         (collectively the "Company") using historical cost of assets,
         liabilities and results of operations.

         Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles have been condensed or omitted in this report on
         Form 10-Q pursuant to the Rules and Regulations of the Securities and
         Exchange Commission. In the opinion of management, the disclosures
         contained in this report are adequate to make the information presented
         not misleading. See Notes to the Financial Statements included in the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1996 for additional information relevant to significant accounting
         policies followed by the Company.

         In the opinion of the management, the accompanying unaudited financial
         statements reflect all adjustments (consisting only of normal recurring
         accruals) necessary to present fairly the Company's financial position
         as of June 30, 1997 and the results of its operations for the three and
         six months ended June 30, 1997 and 1996 and cash flows for the six
         months ended June 30, 1997 and 1996.

         The results of operations for the six months ended June 30, 1997 are
         not necessarily indicative of the results which may be expected for the
         full year. See Management's Discussion and Analysis of Financial
         Condition and Results of Operations included in this report.

2.       Acquisition of the Property Management Business
         -----------------------------------------------

         On February 26, 1997, the Board of Directors, acting on the
         recommendation of a special committee comprised solely of outside
         directors, approved the acquisition of the multifamily property
         management business ("Property Manager") previously owned by certain
         officers and directors of the Company. The Property Manager was
         contributed on February 28, 1997 in exchange for 1.7 million units of
         the Operating Partnership ("Units"). The Property Manager transaction
         was accounted for under the purchase method of accounting.

         At the time of the contribution, the Property Manager managed 57
         apartment communities, including the Company's 35 assets, and employed
         approximately 85 professionals, excluding site employees. As a result
         of this transaction, the Company no longer pays management fees and
         reimbursements for the management operations of its multifamily
         portfolio. In addition, the Company receives management fees and
         reimbursements of certain expenses associated with 22 third-party
         management contracts primarily with partnerships affiliated with
         certain directors and officers of the Company. The Company continues to
         engage an affiliated company to manage its retail assets.

         The value of the transaction was allocated to goodwill and intangible
         assets related to the third-party contracts. The value of goodwill,
         $13.2 million, is being amortized on a straight-line method over a
         15-year period. The Company recorded intangible assets of $4.4 million
         based on discounted cash flows from third-party property management
         contracts which are being amortized on a straight-line method over four
         years.



                                    Continued

                                       -8-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  -------------


3.       Multifamily and Retail Property
         -------------------------------

         As of June 30, 1997, the Company had investments in 41 properties in 8
         states consisting of 37 apartment communities having 12,896 units and 4
         retail centers with a total of 690,992 square feet of leasable space.
         One retail center (160,342 square feet) is owned through joint venture
         investment.

         The following summarizes the carrying value of the Company's
         multifamily apartment complexes and retail centers, (in thousands):

<TABLE>
<CAPTION>

                                                          June 30,       December 31,
                                                            1997             1996
                                                          --------         ---------
           <S>                                            <C>              <C>     
           Land                                           $ 77,931         $ 76,525
           Buildings and improvements                      420,801          419,932
           Appliances, carpeting and equipment              89,975           82,971
                                                          --------         --------

           Total multifamily and retail property           588,707          579,428
           Accumulated depreciation                       (112,423)        (106,870)
                                                          --------         --------
                                                          $476,284         $472,558
                                                          ========         ========
</TABLE>

         Acquisitions
         ------------

         On January 1, 1997, the Operating Partnership acquired Westchester
         Apartments, a 345-unit apartment community located in Silver Spring,
         Maryland, for $16.1 million. The Operating Partnership paid cash of
         $856,243, assumed debt of approximately $11.4 million and issued
         Operating Partnership Units with a value of approximately $3.8 million.
         The debt agreement requires monthly principal and interest payments
         based on an interest rate of 8.25% along with monthly funding of real
         estate tax escrows.

         On May 13, 1997, in conjunction with the exchange of Brookwood Village,
         the Operating Partnership acquired Polos West Apartments and Sunchase
         Apartments for an aggregate price of approximately $13.9 million (See
         Note 4). Polos West is a 200-unit garden style apartment community
         located in Winter Garden, Florida, a suburb of Orlando. In conjunction
         with the acquisition of this asset, the Company assumed $5.7 million in
         debt which matures December, 2003. The debt agreement requires monthly
         principal and interest payments at a rate of 7.45% along with monthly
         real estate tax escrow funding. Sunchase is a 168-unit garden style
         apartment community located in Bradenton, Florida.

         Development
         -----------

         In the first quarter of 1997, the Company completed the construction of
         96-units as an additional phase to Brookfield Trace, an existing
         community in Mauldin (Greenville), South Carolina. The phase cost
         approximately $6.7 million. In 1996, $4.7 million or 72 apartment units
         was transferred to multifamily assets on the Consolidated Balance
         Sheets.

         In the fourth quarter of 1996, the Company began construction of
         Crooked Creek Apartments, a 296-unit apartment community in Durham,
         North Carolina. The project is currently estimated to cost
         approximately $20.2 million. As of June 30, 1997, the project has
         incurred approximately $4.1 million of construction costs.

         In the first quarter of 1997, the Company purchased a parcel of land in
         Greenville, South Carolina for $3,030,000. The Company also owns two
         other parcels of land, one of which is located in Dallas, Texas and the
         other is located in Greenville, South Carolina. Development plans are
         under consideration for these sites.


                                    Continued

                                       -9-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)
                                  -------------


3.       Multifamily and Retail Property - Continued
         ------------------------------

         Dispositions
         ------------

         On January 15, 1997, the Company sold Howell Commons Apartments, a
         348-unit apartment community located in Greenville, South Carolina for
         $13,000,000. The property had a depreciated cost basis of $6,408,033
         and resulted in a gain on sale of $6,432,040. The net proceeds, after
         the repayment of indebtedness, was used to paydown short term
         borrowings and will ultimately be used for the development of Crooked
         Creek.

         On March 25, 1997, the Company sold Banks Crossing, a 243,660 square
         foot retail center in Fayetteville, Georgia for $13,825,000 which was
         its carrying value. Proceeds from this sale will be used for the
         development of Crooked Creek. The sale of Banks Crossing is consistent
         with the Company's plan to sell its retail properties and focus on
         multifamily properties.

         In December, 1996, the Operating Partnership sold Greentree Plaza. In
         accordance with the purchase and sale agreement, the Operating 
         Partnership, as seller, was required to escrow funds at closing. During
         the second quarter of 1997, all conditions of the agreement were 
         satisfied and, as a result, approximately $71,000 was recorded as a 
         gain on sale of properties.

4.       Investments in Unconsolidated Joint Ventures
         --------------------------------------------

         The Company holds a 50% interest in the remaining assets of Brookwood
         Village Joint Venture and a 50.1% interest in Spring Valley
         Partnership. In May, 1997, Brookwood Village Joint Venture exchanged
         Brookwood Village, a retail center located in Birmingham, Alabama.
         Condensed combined financial statements for the Joint Ventures are as
         follows:


                        CONDENSED COMBINED BALANCE SHEETS

                                   ----------

                                     Assets

<TABLE>
<CAPTION>

                                                                           June 30,            December 31,
                                                                             1997                  1996
                                                                         ------------          ------------
       <S>                                                               <C>                   <C>         
       Property at cost                                                  $ 53,830,612          $114,358,875
       Less accumulated depreciation                                      (14,943,896)          (40,173,598)
                                                                         ------------          ------------
                                                                           38,886,716            74,185,277
       Other assets                                                         2,998,327             2,774,699
                                                                         ------------          ------------
           Total assets                                                  $ 41,885,043          $ 76,959,976
                                                                         ============          ============

                        Liabilities and Partners' Equity

       Liabilities                                                       $    719,467          $ 4,858,639
                                                                         ------------          -----------
       Partners' equity:
         The Company                                                       20,537,903            36,036,723
         Joint venture partner                                             20,627,673            36,064,614
                                                                         ------------          ------------
           Total partners' equity                                          41,165,576            72,101,337
                                                                         ------------          ------------
           Total liabilities and partners' equity                        $ 41,885,043          $ 76,959,976
                                                                         ============          ============

</TABLE>






                                    Continued

                                      -10-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)
                                  -------------


4.       Investments in Unconsolidated Joint Ventures - Continued
         --------------------------------------------

                                  -------------


                   CONDENSED COMBINED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                             For the Three Months                      For the Six Months
                                                Ended June 30,                           Ended June 30,
                                        --------------------------------          -------------------------------
                                           1997                  1996                1997                 1996
                                        ----------            ----------          -----------          ----------
       <S>                              <C>                   <C>                 <C>                  <C>       
       Revenues                         $2,551,111            $2,982,265          $ 5,845,985          $6,386,534
       Property operating
           expenses                     (1,487,826)           (1,556,636)          (3,031,731)         (3,149,976)
       Depreciation                       (711,747)             (964,604)          (1,692,479)         (1,922,887)
       Provision for loss                     -                     -              (1,472,096)               -
       Loss on sale                       (666,880)                 -                (666,880)               -
                                        ----------            ----------          -----------          ----------
           Net income                   $ (315,342)           $  461,025          $(1,017,201)         $1,313,671
                                        ==========            ==========          ===========          ==========
       Allocation of
         net income:
           The Company                  $ (157,317)           $  230,879          $  (507,873)         $  657,633
           Joint venture
             partner                      (158,025)              230,146             (509,328)            656,038
                                        ----------            ----------          -----------          ----------
                                        $ (315,342)           $  461,025          $(1,017,201)         $1,313,671
                                        ==========            ==========          ===========          ==========

</TABLE>


       In May 1997, the Company and its joint venture partner exchanged
       Brookwood Village for cash and the two multifamily apartment complexes
       (Polos West and Sunchase) valued at approximately $32.4 million. Each
       joint venture Partner received 50% of the fair value of the assets
       acquired, with the Company receiving the two multifamily properties and
       cash of approximately $8 million. In the first quarter of 1997, Brookwood
       Village recorded a $1.5 million provision for loss to adjust for the
       exchange price. See Note 3 for information on the two multifamily
       properties acquired.

5.     Mortgage Loans and Other Loans Receivable
       -----------------------------------------

       As of June 30, 1997, the Company held one mortgage loan with a principal
       balance of approximately $2,978,000 and a discount of approximately
       $682,000 and a promissory note with a principal balance of approximately
       $1,306,000. The mortgage loan is collateralized by a 120-unit apartment
       complex in Palm Bay, Florida. The promissory note is personally
       guaranteed by an unaffiliated party.

6.     MBS
       ---

       At June 30, 1997, the Company's MBS portfolio had an approximate market
       value of $8,890,000 and gross unrealized gains of $538,000 with maturity
       dates ranging from 2008 to 2021. Weighted average yield on the portfolio
       is 9.1%. The Company does not expect to realize these gains as it has the
       intention and ability to hold the MBS until maturity.

       At December 31, 1996, the Company's MBS portfolio had an approximate
       market value of $9,849,000 against a carrying value of $9,233,000 and
       gross unrealized gains of $616,000.






                                    Continued

                                      -11-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)
                                  -------------


7. Debt Agreements
   ---------------

    At June 30, 1997, the Company had two lines of credit to provide for future
    acquisitions, development and general business obligations. The Company also
    had in effect a Repurchase Agreement to provide for short-term borrowings.

    The following summarizes the Company's borrowings on the Master Credit
    Facility with the Federal National Mortgage Association as of June 30, 1997:

<TABLE>
<CAPTION>

                          Contract          Contract
                            Start             End               Interest
     Borrowings             Date             Date(a)              Rate          Amount
     ----------           --------          --------            --------       ---------
     <S>                   <C>               <C>                <C>            <C>
     Revolver              6/02/97           9/02/97            6.180%         $28,965,000
     Fixed                11/22/95          11/20/05            6.997%          50,000,000
     Fixed                 9/20/96           9/20/03            7.540%          13,345,000
                                                                               -----------
                                                                               $92,310,000
                                                                               ===========
</TABLE>

     The following summarizes the Company's borrowings on the Credit Agreement
     with the BankBoston and Mellon Bank as of June 30, 1997:

<TABLE>
<CAPTION>

                             Contract          Contract
                               Start             End               Interest
     Borrowings                Date             Date(a)              Rate          Amount
     ----------              --------          ---------           --------       ---------
     <S>                      <C>               <C>                <C>            <C>
     LIBOR contract           4/02/97           7/01/97 (1)        7.5625%        $ 3,000,000
     LIBOR contract           5/28/97           9/25/97            7.5625%          7,000,000
     LIBOR contract           6/24/97           7/24/97 (2)        7.4375%          6,000,000
     LIBOR contract           3/31/97           7/29/97 (3)        7.500%           9,000,000
                                                                                  -----------
                                                                                  $25,000,000
                                                                                  ===========
</TABLE>


     (1)     On July 31, 1997, the Company repriced the LIBOR contract to a new
             maturity of August 28, 1997 at a rate of 7.1875% per annum.

     (2)     On July 24, 1997, the Company repriced the LIBOR contract to a new
             maturity of August 26, 1997 at a rate of 7.4375% per annum.

     (3)     On July 29, 1997, the Company repriced $3 million of this LIBOR
             contract to a new maturity of August 29, 1997. The remaining $6
             million was repriced to a base rate loan at rate of 8.5% of which
             $3.3 million was paid down on August 4, 1997.


     Effective July 16, 1997, the banks reduced the interest rate on the
     Company's $28.4 million revolving credit line with BankBoston and Mellon
     Bank from 175 basis points over LIBOR to 150 basis points over LIBOR.

     The following summarizes the Company's borrowings on the Repurchase
     Agreement collateralized by MBS with CS First Boston as of June 30, 1997:

<TABLE>
<CAPTION>

                                   Contract          Contract
                                     Start             End               Interest
                                     Date             Date(a)              Rate          Amount
                                   --------          --------            ---------     ----------
     <S>                           <C>               <C>                   <C>         <C>       
     Repurchase Agreement          5/19/97           9/19/97               5.87%       $8,300,000

</TABLE>


     (a)      On the Contract End Date, borrowings outstanding are repriced at 
              the then current interest rates.



                                    Continued

                                      -12-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)
                                  -------------


7.     Debt Agreements - Continued
       ---------------

       The Credit Agreement and the Master Credit Facility require the Company
       to maintain certain debt service coverage ratios, liquidity and
       collateral coverages as further defined in the loan documents, all of
       which were met on June 30, 1997.

       In 1995 the Company entered into a five-year interest rate swap contract
       with a bank as counterparty. Under the swap arrangement, the Company will
       pay 6.06% on a $40 million notional amount and will receive LIBOR (based
       on 90 day contracts). The swap arrangement is intended to protect the
       Company from significant interest rate exposure on its anticipated
       revolving facilities. The current swap amount will cover floating rate
       debt under revolvers in the near term. The Company will continually
       reassess its rate exposure relative to debt levels and will execute
       additional interest rate protection as circumstances dictate.

8.     Minority Interest
       -----------------

       Minority interest in the Operating Partnership consists of the following
       at June 30, 1997 (in thousands):


              Balance, beginning of year                          $36,609
              Value of Units issued to
                  Minority Unitholders:
                    Affiliated parties                             18,837
                    Unrelated parties                               3,842
              Distribution to Unitholders                          (2,052)
              Minority income allocation                              683
                                                                  -------

              Balance at June 30, 1997                            $57,919
                                                                  =======

       On January 1, 1997, 338,333 Operating Partnership Units were issued to an
       unrelated party in exchange for Westchester Apartments (See Note 3).

       On March 19, 1997, an additional 109,091 Operating Partnership Units were
       issued in conjunction with the March 1, 1996 acquisition of the advisory
       and development services business ("Advisor Transaction") of certain
       officers and directors. The Units were issued since the share price
       ("Share") benchmark of $11.00 was achieved. The benchmarks are achieved
       if the share price is equal to or greater than the benchmarks for any
       fifteen days during any twenty consecutive trading days. There are six
       Share price benchmarks beginning at $11.00 and increasing in increments
       of $1.00 up to a maximum of $16.00. Upon satisfaction of each benchmark,
       the contributor could receive additional Units equal to $1.2 million
       based on the benchmark price.

9.     Related Party Transactions
       --------------------------

       In addition to property management fees, the following is a summary of
       fees and reimbursements to an affiliate for the six months ended June 30:

                                                       1997               1996
                                                     --------           --------
         Costs reimbursements related
               to the operation of the
               Company's properties                  $221,084           $774,167

         Fees and net reimbursements for
               administrative services               $635,007           $316,729




                                    Continued

                                      -13-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)
                                  -------------


9.     Related Party Transactions - Continued
       --------------------------

       As a result of the Property Manager transaction as described in Note 2,
       the Company will no longer reimburse an affiliate for services related to
       multifamily property operations.

10.    Stock Plans
       -----------

       Stock Options
       -------------

       On May 2, 1996, the shareholders approved the 1996 Stock Option Plan
       which provides for grants to non-employee directors and discretionary
       awards of stock options to key employees of the Company. Awards will be
       administered by the Compensation Committee which is comprised of two
       independent directors appointed by the Board of Directors. The purpose of
       the plan is to stimulate efforts of key employees on behalf of the
       Company and to attract and retain the best available personnel. There are
       1,500,000 Shares of common stock authorized for non-qualified and
       incentive stock option grants under the 1996 Plan. The plan will continue
       in effect until all Shares of stock subject to options have been acquired
       or until May 1, 2001, whichever is earlier. However, unexercised options
       will continue in affect after the termination of the plan.

       The Company has adopted Financial Accounting Standard No. 123,
       "Accounting for Stock-Based Compensation". The Company will measure the
       compensation cost of the plan by using the intrinsic value based method
       prescribed by APB Opinion No. 25 and will make pro forma disclosures
       regarding the fair value based method of accounting. Information
       regarding the Company's Stock Option Plan for 1996 and 1997 is summarized
       below:

                                                                Exercise Price
                                                                --------------
         Options granted, 1996                   624,000        $ 9.75 - $10.25
         Options granted, 1997                   520,300        $10.75 - $11.00
                                               ---------

         Balance June 30, 1997                 1,144,300
                                               =========

         Options exercised                          -
                                               =========
         Options available for grant
           at June 30, 1997                      355,700
                                               =========


       Stock Purchase Loan
       -------------------

       On February 28, 1997, the Board of Directors approved a $1 million Stock
       Purchase Loan for David Marshall, President and Chief Executive Officer
       of the Company. Loan proceeds were used to purchase Shares of the
       Company's stock. On March 4, 1997, Mr. Marshall purchased 86,956 Shares
       of common stock at $11.50 per Share using such proceeds.

       The terms of the loan provide for, among other things, an interest rate
       of 7.8% per year payable quarterly and an annual forgiveness feature of
       5% of the original principal so long as Mr. Marshall is employed.
       Additional annual forgiveness of up to another 5% could be granted if
       certain Company performance measures are met. The maximum forgiveness in
       any one year is 10%. If Mr. Marshall terminates his employment, the loan
       is due and payable six months from the date of termination. However, in
       the event of a change of control of the Company, any then outstanding
       principal and interest due shall be forgiven.



                                    Continued

                                      -14-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (Unaudited)
                                  -------------


11.    Subsequent Events
       -----------------

       Property Acquisition
       --------------------

       On July 29, 1997, the Operating Partnership acquired three town home
       apartment communities located near Baltimore in Glen Burnie and
       Millersville, Maryland, The three properties were acquired for a total of
       $20.9 million comprised of $881,000 in cash, the assumption of $12.3
       million in debt at interest rates of 7.5%, and $7.6 million of operating
       partnership units. An agreement is in place for the acquisition of a
       fourth property from the same seller and is expected to close in the
       third quarter for a total of $6.5 million including the assumption of
       $5.3 million in debt, cash of approximately $120,000 and operating
       partnership units of 1.1 million.

       Property Disposition
       --------------------

       On August 6, 1997, the Operating Partnership sold Crossroads Shopping
       Center for cash of $12 million. Crossroads is a 211,186 square foot
       retail center located in Atlanta, Georgia.





                                      -15-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                                  -----------

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

A.       Overview:
         --------

         The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere herein.

         On February 26, 1997, the Board of Directors, acting on the
recommendation of a special committee comprised solely of outside directors,
approved the acquisition of the multifamily property management business
("Property Manager") previously owned by certain officers and directors of the
Company. The Property Manager was contributed on February 28, 1997 in exchange
for 1.7 million Operating Partnership Units. The Property Manager transaction
was accounted for under the purchase method of accounting.

         At the time of the contribution, the Property Manager managed 57
apartment communities, including the Company's 35 assets, and employed
approximately 85 professionals, excluding site employees. As a result of this
transaction, the Company no longer pays management fees and reimbursements for
the management operations of its multifamily portfolio. In addition, the Company
receives management fees and reimbursements of certain expenses associated with
22 third-party management contracts primarily with partnerships affiliated with
certain directors and officers of the Company. The Company continues to engage
an affiliated company to manage its retail assets.

         The acquisition is recorded on the Consolidated Balance Sheet as
intangible assets related to the third-party contracts of $4.4 million and
goodwill of $13.2 million. These recorded amounts are amortized over the
expected periods to be benefitted (See Note 2 to the Consolidated Financial
Statements for details).

         As reported in the Company's Annual Report on Form 10-K as of December
31, 1996, the Company acquired the advisory and development services business of
certain officers and directors on March 1, 1996 in exchange for 1.3 million
Units in the Operating Partnership. Additional Units, in $1.2 million increments
and up to a total of $7.2 million in value, may be issued during a six-year
period if certain Share price benchmarks are achieved. On March 19, 1997, the
first Share price benchmark was achieved and the Operating Partnership issued an
additional 109,091 Units representing $1.2 million in value.

B.       Results of Operations:
         ---------------------

         The results of operations from period to period are impacted by
acquisition and disposition activity within the portfolio. Comparisons will be
made with respect to the overall portfolio and constant properties. The
following analysis compares the results of operations for the three and six
months ended June 30, 1997 and 1996.

         Net income for the six months ending June 30, 1997 increased by
approximately $3.5 million when compared to the same period in 1996 primarily as
a result of a gain of approximately $6.4 million on the sale of Howell Commons
Apartments in January, 1997.

         Income and Expenses:
         -------------------

         Rental income and property operating expenses, including repairs and
maintenance and real estate taxes increased for the three and six month periods
ended June 30, 1997 primarily due to increased weighted average apartment units.
Rental revenues for the six months ended June 30, 1997 increased $9.1 million or
35% over the prior year and property operating expenses, including repairs and
maintenance and real estate taxes, increased approximately $3.9 million or 24%
for the same periods. Average apartment units increased 28% between 1996 and
1997.


                                      -16-

<PAGE>



         Detail of the Company's apartment unit growth for the six months ended
June 30 is set forth below:

                                               1997                   1996
                                               ----                   ----
Apartment Units:
       Beginning of period                    12,435                  9,433
           Acquired                              713                  2,541
           Sold                                 (348)                   -
           Completed developments                 96                    -
                                              ------                  -----

       End of period                          12,896                  11,974
                                              ======                  ======

       Weighted Average Units                 12,638                   9,867
                                              ======                  ======

       Percent increase                          28%                    -



       Property management operations began in 1997 in conjunction with the
Property Manager transaction effective March 1, 1997. As a result of the
acquisition of the property management business, the Company incurs expenses for
the property management operations staff including salaries, benefits and other
overhead expenses. (See Note 2 to the Consolidated Financial Statements for
details).

       General and administrative expenses increased in 1997 compared to 1996 as
a result of becoming self-administered on March 1, 1996. These costs include
employee salaries and benefits, administrative and office related expenses.

Interest Expense

       Interest expense has increased because the Company has largely employed
debt capital for acquisitions and development activities. The following is an
analysis of weighted average debt outstanding and interest rates for the three
and six months ended June 30, 1997 and 1996 (dollars in thousands):

<TABLE>
<CAPTION>

                                             Six Months Ended                    Three Months Ended
                                                  June 30,                             June 30,
                                           ------------------------            ------------------------
                                             1997            1996                1997             1996
                                           --------        --------            --------          ------
<S>                                        <C>             <C>                 <C>              <C>
Weighted Average
  Debt Outstanding
       Fixed Rate                          $219,415        $164,326            $220,764         $175,242
       Variable Rate                         76,032          62,280              69,600           68,469
                                           --------        --------            --------         --------

          Total                            $295,447        $226,606            $290,364         $243,711
                                           ========        ========            ========         ========

Weighted Average
  Interest Rates
       Fixed Rate                             7.74%           7.55%               7.70%            7.42%
       Variable Rate                          6.62%           6.76%               6.62%            6.66%

</TABLE>

       Since the first quarter of 1996, fixed rate debt increased primarily due
to debt of $57.7 million which was assumed with the acquisitions of four
properties and the conversion of $13.3 million from variable to fixed rate debt
offset by the pay down of approximately $7.3 million of fixed debt in the third
quarter of 1996.

       Depreciation and amortization increased for the three and six month
periods ending June 30, 1997 compared to 1996 due to an increased property asset
base.

       Joint venture net income decreased for the three and six month periods
ending June 30, 1997 compared to 1996 due to a valuation reserve recorded on the
Brookwood Village joint venture in the first quarter of 1997 and a loss on the
sale of Brookwood Village recorded in the second quarter of 1997. (See Note 4 to
the Consolidated Financial Statements for details).

       Gains on sales of properties of $6.4 million was recorded in 1997 due to
the sale of Howell Commons Apartments in the first quarter of 1997.


                                      -17-

<PAGE>




C.     Funds from Operations (fully adjusted for operating partnership units):
       ---------------------------------------------------------------------

       Industry analysts generally consider Funds from Operations ("FFO") to be
an appropriate measure of the performance of an equity REIT. The Company
believes that in order to facilitate a clear understanding of the operating
results of the Company, FFO should be analyzed in conjunction with the net
income as presented in the consolidated financial statements included elsewhere
in this report. FFO is determined in accordance with a resolution adopted by the
Board of Governors of the National Association of Real Estate Investment Trusts,
Inc. (NAREIT), and is defined as net income (loss) (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures. FFO is
calculated for the periods presented as follows (dollars in thousands):


<TABLE>
<CAPTION>

                                                 Quarter Ended June 30,              Six Months Ended June 30,
                                            ------------------------------         ------------------------------
                                               1997                1996               1997                1996
                                            ----------          ----------         ----------          ----------
       <S>                                  <C>                 <C>                <C>                 <C>        
       Net income                           $     (672)         $     (470)        $    3,232          $     (276)
       Depreciation                              7,898               6,824             15,562              12,967
       Depreciation related to
         joint venture                             356                 483                843                 962
       Valuation reserve recorded
         on joint venture                         -                   -                   740                -
       Loss on sale of joint
         venture asset                             333                -                   333                -
       Amortization of goodwill                  1,012                 337              1,560                 448
       Minority interest                          (193)                (27)               683                 (20)
       Gains of sale
         of properties                             (71)               -                (6,503)               -
                                            ----------          ----------         ----------          ----------

       Funds from operations                $    8,663          $    7,147         $   16,450          $   14,081
                                            ==========          ==========         ==========          ==========
       Funds from operations
         per share                          $      .26          $      .27         $      .53          $      .52
                                            ==========          ==========         ==========          ==========

       Weighted Average:
         Shares                             25,480,709          25,392,962         25,450,743          25,392,957
         Units                               6,004,702           2,455,056          5,401,699           1,716,444
                                            ----------          ----------         ----------          ----------
                                            31,485,411          27,848,018         30,852,442          27,109,401
                                            ==========          ==========         ==========          ==========

</TABLE>

Same-store Multifamily Communities
- ----------------------------------

       The Company defines same-store apartment communities as those that are
fully stabilized for the two most recent years. The operating performance of the
25 communities aggregating 8,467 units which are considered same-store is
summarized below (dollars in thousands):


<TABLE>
<CAPTION>

                                          Quarter Ended June 30,                  Six Months Ended June 30,
                                    ----------------------------------------------------------------------------
                                      1997         1996       % Change          1997         1996       % Change
                                    -------      -------      --------         -------      -------     --------
<S>                                 <C>          <C>            <C>            <C>          <C>            <C> 
Revenues                            $16,457      $15,870        3.7%           $32,482      $31,594        2.8%
Expenses                              6,500        6,579       (1.2)%           13,012       13,297       (2.1)%
                                    -------      -------                       -------      -------
   Net operating income             $ 9,957      $ 9,291        7.2%           $19,470      $18,297        6.4%
                                    =======      =======                       =======      =======

Average occupancy                      93.9%        93.7%                         93.2%        93.7%
Average monthly rent
   per unit                            $682         $660                          $680         $657

</TABLE>


    Growth in same-store multifamily revenues was 3.7% for the 1997 second
quarter when compared to the 1996 second quarter. This growth was almost
entirely driven by increases in average rents of 3.3% as well as a modest
increase in occupancies. Year-to-date, revenues are up 2.8% which is a
combination of 3.5% rent growth offset by 0.7% in lower occupancies.



                                      -18-

<PAGE>




C.       Funds from Operations:- Continued
         ---------------------

Same-store Multifamily Communities - Continued
- ----------------------------------

       Expenses for the quarter ended June 30, 1997 and for the six months ended
June 30, 1997 when compared to the comparable prior year periods are down 1.2%
and 2.1%, respectively. The reduction in expenses is attributed to lower payroll
expense and maintenance and repairs expenditures.

Same-store Retail Properties
- ----------------------------

       The following summarizes the four retail centers:

<TABLE>
<CAPTION>

                                       Quarter Ended June 30,                     Six Months Ended June 30,
                                    --------------------------------           ---------------------------------
                                     1997         1996      % Change            1997         1996       % Change
                                    ------       ------     --------           ------       ------      --------
<S>                                 <C>          <C>          <C>              <C>          <C>          <C>   
Revenues                            $1,872       $1,874       (0.1)%           $3,702       $3,859       (4.1)%
Expenses                               703          642        9.6%             1,404        1,363        3.0%
                                    ------       ------                        ------       ------
   Net operating income             $1,169       $1,232       (5.1)%           $2,298       $2,496       (7.9)%
                                    ======       ======                        ======       ======

Average occupancy                    93.71%       94.29%                        94.03%       94.28%

</TABLE>


       Same-store net operating income from the retail portfolio dropped
$198,000 to $2,298,000 year-to-date when compared to the 1996 six month period.
The drop in NOI is primarily the result of retenanting at Tara Crossing Shopping
Center in Atlanta, Georgia. In late 1996, the Company accepted a buyout from a
major tenant who had discontinued business at the center. The vacant space was
then leased to a high quality tenant at current market rents, which were below
those paid by the prior tenant. By retenanting the center, the Company hopes to
attract additional leasing interest and improve future occupancy. Leasing
efforts are underway.

D.     Liquidity and Capital Resources:
       --------------------------------

       Historically, operations, debt financing and sales of assets have been
the sources of capital employed by the Company. Operating cash flows are
earmarked for the payment of dividends as well as capital expenditures of a
recurring nature. Debt financing and proceeds from asset sales have been used to
finance acquisitions, development, and rehabilitation of apartment communities.

       The Company's policy is to pay dividends to investors as a percentage of
Funds from Operations ("FFO"). For the past three years, the Company has paid
between 85% and 88% of FFO in dividends, retaining the rest for recurring
capital expenditures and working capital. The Company expects to increase both
FFO and dividends in the future but will strive to gradually reduce the payout
ratio so as to utilize some internally generated funds for growth. On May 13,
1997 the Board approved a dividend increase from $.225 per share to $.2325 per
share payable on August 15, 1997 to the shareholders of record on August 1,
1997. Dividends paid were $.225 in the second quarters of 1997 and 1996.

       The Company has a policy to maintain leverage at or below 50% of
reasonably estimated fair value of assets. By employing moderate leverage
ratios, the Company can continue to generate sufficient cash flows to operate
its business as well as sustain dividends to shareholders. Debt as a percentage
of fair value of real estate assets as estimated by management was approximately
45% at June 30, 1997. Additionally, the Company's debt service coverage is 2.4
to 1.

       The Company conservatively manages both interest rate risk and maturity
risk. With regard to the interest rate risk, the Company entered into a five
year fixed interest rate swap agreement in 1995 with a bank for a $40 million
notional contract, thereby fixing variable rate exposure on that amount at
6.06%. The Company will continually reassess its rate exposure relative to debt
levels and will execute additional interest rate protection as circumstances
dictate. As of


                                      -19-

<PAGE>




D.     Liquidity and Capital Resources:- Continued
       -------------------------------

June 30, 1997, the Company has fixed or hedged debt of 90% of total debt. As to
maturity risk, the Company's debt has weighted average maturities of
approximately 11 years.

       The Company has adequate sources of liquidity to meet its current cash
flow requirements including dividends, capital improvements and development
underway.

E.     Business Conditions/Risks:
       -------------------------

       The Company believes that favorable economic conditions exist in
substantially all of its real estate markets. For the Company's stabilized
apartment communities, physical occupancy was 96.5% as of June 30, 1997 which is
similar to current market occupancies. The Company continues to maintain
competitive rental rates by providing superior services combined with well-
maintained assets which sets the Company apart from its competition. Through
intense asset management efforts, the Company expects to realize solid
performances from the real estate assets, however, no assurances can be made in
this regard.

       The Company's real estate investments are subject to some seasonal
fluctuations resulting from changes in utility consumption and seasonal
maintenance expenditures. Future performance of the Company may be impacted by
unpredictable factors which include general and local economic and real estate
market conditions, variable interest rates, environmental concerns, energy
costs, government regulations and federal and state income tax laws. The
requirements for compliance with federal, state and local regulations to date
have not had an adverse effect on the Company's operations, and no adverse
effects are anticipated in the future.

       The Company is also involved in certain legal actions and claims in the
ordinary course of its business. It is the opinion of management and its legal
counsel, that such litigation and claims should be resolved without material
effect on the Company's financial position or results of operations.

F.     Forward-Looking Statements
       --------------------------

       This report may contain forward-looking statements relating to activities
of the Company within the meaning of federal securities laws. Although the
Company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, there are certain factors that
might cause a difference between actual results and those forward-looking
statements.






















                                      -20-

<PAGE>



                 BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION

                                   ----------


Item 1.        Legal Proceedings
               Response:  None

Item 2.        Change in Securities
               Response:  None

Item 3.        Defaults upon Senior Securities
               Response:  None

Item 4.        Submission of Matters to a Vote of Security Holders
               Response:  On June 23, 1997, the Company filed a proxy statement
               with the Securities and Exchange Commission.

Item 5.        Other Information
               Response:  None

Item 6.        Exhibits and Reports on Form 8-K
               Response:  None























                                      -21-

<PAGE>




                                    SIGNATURE
                                    ---------

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


                                           BERKSHIRE REALTY COMPANY, INC.
                                           ------------------------------
                                                   (Registrant)



                                           BY:    /s/Marianne Pritchard
                                                  ------------------------------
                                                  Marianne Pritchard
                                                  Senior Vice President and
                                                  Chief Financial Officer of
                                                  Berkshire Realty Company, Inc.
























DATE:




                                      -22-

<TABLE> <S> <C>

<ARTICLE>                     5
<MULTIPLIER>                                          1
<CURRENCY>                                 U.S. DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   Year
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               JUN-30-1997
<EXCHANGE-RATE>                                      1
<CASH>                                       8,230,883
<SECURITIES>                                 8,352,355
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                          0
<CURRENT-ASSETS>                            52,217,448<F1>
<PP&E>                                     622,893,967<F2>
<DEPRECIATION>                           (112,413,217)
<TOTAL-ASSETS>                             579,281,436
<CURRENT-LIABILITIES>                       14,381,612
<BONDS>                                    291,507,432<F3>
                                0
                                          0
<COMMON>                                   215,473,234<F4>
<OTHER-SE>                                  57,919,158<F5>
<TOTAL-LIABILITY-AND-EQUITY>               579,281,436
<SALES>                                              0
<TOTAL-REVENUES>                            52,087,892
<CGS>                                                0
<TOTAL-COSTS>                                        0
<OTHER-EXPENSES>                            43,191,380<F6>
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                          11,485,253
<INCOME-PRETAX>                            (2,588,741)
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                        (2,588,741)
<DISCONTINUED>                               6,503,463<F7>
<EXTRAORDINARY>                                      0
<CHANGES>                                    (682,856)<F8>
<NET-INCOME>                                 3,231,866
<EPS-PRIMARY>                                     0.13
<EPS-DILUTED>                                        0
<FN>
<F1>-INCLUDES ESCROWS, GOODWILL, DEFERRED CHARGES AND OTHER ASSETS.
<F2>-INCLUDES COST OF APARTMENT COMPLEXES AND RETAIL CENTERS AS WELL AS 
     INVESTMENT IN JOINT VENTURES, MORTGAGE LOANS RECEIVABLE AND LAND AND 
     CONSTRUCTION IN PROGRESS.
<F3>-INCLUDES CREDIT AGREEMENTS, MORTGAGE NOTES AND REPURCHASE AGREEMENTS.
<F4>-INCLUDES PAR VALUE OF COMMON STOCK, PAID IN CAPITAL, RETAINED EARNINGS LESS
     COMMON STOCK IN TREASURY.
<F5>-REPRESENTS MINORITY INTEREST.
<F6>-INCLUDES JOINT VENTURE NET LOSS OF $507,872.
<F7>-REPRESENTS GAIN ON SALE OF PROPERTIES.
<F8>-REPRESENTS MINORITY INTEREST'S SHARE OF NET INCOME.
</FN>
        

</TABLE>


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