BERKSHIRE REALTY CO INC /DE, 424B2, 1997-11-05

BERKSHIRE REALTY CO INC /DE
424B2, 1997-11-05
REAL ESTATE INVESTMENT TRUSTS

Previous: BERKSHIRE REALTY CO INC /DE, 8-K/A, 1997-11-05

Next: TANDY BRANDS ACCESSORIES INC, 10-Q, 1997-11-05

Filed pursuant to Rule 424(b)(2)
Registration No. 333-32565

PROSPECTUS SUPPLEMENT
(To Prospectus dated October 7, 1997)

10,000,000 Shares

BERKSHIRE REALTY COMPANY, INC. [LOGO]

Common Stock

Berkshire Realty Company, Inc. (the "Company"), is a self-administered and
self-managed real estate investment trust ("REIT") which acquires, renovates,
rehabilitates, develops and operates apartment communities. Founded in 1991
with 15 apartment communities containing approximately 4,200 units, the Company
currently owns 46 apartment communities containing approximately 15,000 units
and, upon the completion of the Offering, expects to own 64 apartment
communities containing approximately 18,700 units located in Florida, Texas and
the Mid-Atlantic and Southeastern United States (the "Properties").

All of the shares of Common Stock of the Company, $.01 par value per share
(the "Common Stock"), offered hereby (the "Offering") are being offered by the
Company. The Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "BRI." The last reported sale price of the Common Stock on the
NYSE on November 4, 1997 was $11.00. See "Price Range of Common Stock and
Dividend History."

The shares of Common Stock are subject to certain restrictions on ownership
designed to preserve the Company's status as a REIT for federal income tax
purposes. See "Description of the Capital Stock of the Company--Restrictions on
the Ownership and Transfer of Excess Shares" in the accompanying Prospectus.

----------------
See "Risk Factors" beginning on page S-16 for certain factors relevant to an
investment in the Common Stock.
----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

================================================================================
Price to Underwriting Discounts Proceeds to
Public and Commissions (1) Company (2)
- --------------------------------------------------------------------------------
Per Share ............. $11.00 $0.60 $10.40
Total (3) .............. $110,000,000 $6,000,000 $104,000,000
================================================================================

(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $830,000.

(3) The Company has granted to the Underwriters an option to purchase up to an
aggregate of 1,500,000 shares of Common Stock to cover over-allotments. If
all of such shares are purchased, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to Company would be $126,500,000,
$6,900,000 and $119,600,000, respectively. See "Underwriting."

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

The shares of Common Stock offered by this Prospectus Supplement are offered
by the several Underwriters subject to prior sale, withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
Underwriters and to certain further conditions. It is expected that delivery of
the shares of Common Stock offered hereby will be made at the offices of Lehman
Brothers Inc. in New York, New York, on or about November 10, 1997.

----------------
LEHMAN BROTHERS

BT ALEX. BROWN

A.G. EDWARDS & SONS, INC.

LEGG MASON WOOD WALKER
INCORPORATED

SALOMON BROTHERS INC

November 4, 1997

<PAGE>
[DESCRIPTION OF INSIDE FRONT COVER]

Caption: Current Portfolio and Pending Acquisitions

Logo: Berkshire Realty Company, Inc.

Map: Map of United States showing eastern seaboard westward to and
including Texas with legend "Apartment Community Portfolio
-- Current Portfolio
-- Pending Acquisitions"

The Map is marked to show:

Current Portfolio
-----------------

Number of Communities Locations
--------------------- ---------
13 Dallas/Fort Worth, Texas
3 Houston, Texas
2 Nashville, Tennessee
1 Knoxville, Tennessee
3 Atlanta, Georgia
2 Orlando, Florida
2 Tampa Bay Area, Florida
4 Broward County, Florida
6 Greenville, South Carolina
2 Charlotte, North Carolina
1 Raleigh, North Carolina
6 Washington, D.C./Baltimore Area
1 Massapequa, Long Island, New York

Pending Acquisitions
--------------------

Number of Communities Location
--------------------- ---------
18 Baltimore, Maryland

Lower left of page:

Bar graph entitled "Growth in Apartment Units." Graph shows the following data:

Year Number of Units
---- ---------------
91 4,451
92 5,721
93 7,554
94 9,385
95 9,433
96 12,435
97 14,990
97* 18,689

*Including Pending Acquisitions

Lower center of page:

Bar graph entitled "Same Store NOI Growth." Graph shows the following data:

Year Increase in NOI
---- ---------------
93 8.9%
94 7.3%
95 15.5%
96 8.9%
97* 6.4%

*Through June 30, 1997
Average 9.4%

Lower right of page:

Pie chart entitled "Apartment Units Owned by Region."

Upper left quadrant -- 32% Mid-Atlantic Region
Upper right quadrant -- 26% Southeast Region
Lower right quadrant -- 12% Florida Region
Lower left quadrant -- 30% Texas Region

Across bottom of page:

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK PRIOR TO
PRICING THE OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON
STOCK, THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE PRICING OF THE
OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE
PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUPPLEMENT SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus Supplement and the accompanying Prospectus or
incorporated herein and therein by reference. Unless indicated otherwise, the
information contained in this Prospectus Supplement assumes that the
Underwriters' over-allotment option is not exercised. Unless the context
requires otherwise, all references to the "Company" or "Berkshire" in this
Prospectus Supplement and the accompanying Prospectus shall be deemed to
include the Company, its predecessors, and those entities in which the Company
holds a majority of the economic interests, including BRI OP Limited
Partnership (the "Operating Partnership") and Berkshire Apartments, Inc., the
sole general partner of the Operating Partnership (the "General Partner"). This
Prospectus Supplement and the accompanying Prospectus contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"). The Company's actual results
could differ materially from those set forth in the forward-looking statements.
See "Risk Factors" for a discussion of certain factors that might cause such a
difference.

The Company

The Company is currently experiencing a period of rapid growth. Upon the
completion of the Offering, the Company will double the number of units in its
apartment portfolio since January 1, 1996. During this period, the Company
acquired 20 apartment communities containing approximately 6,000 units, and
entered into contracts to acquire 18 apartment communities containing
approximately 3,700 units in the greater Baltimore area (the "Pending
Acquisitions"). Since January 1, 1997, the Company's "total investment"
(defined as all purchase costs, closing costs and actual and estimated
acquisition capital expenditures) in 12 newly acquired assets and the Pending
Acquisitions is approximately $318.5 million.

In 1995, the Company developed and began the implementation of a
comprehensive long-term strategy designed to increase shareholder value. The
key elements of the Company's strategy are:

Multifamily Focus. Specialize in the management, acquisition and
development of apartment communities and divest its non-apartment assets.
Key components of the Company's multifamily focus are:

o Target markets: Identify and establish a presence in selected
markets based on such markets' demographic, economic and rental rate
outlook and the perceived investment opportunities.

o Geographic balance: Create a geographically balanced portfolio to
position the Company to take advantage of regional opportunities and to
minimize exposure to regional economic downturns. The Company is currently
operating in 14 metropolitan areas located in Florida, Texas and the
Mid-Atlantic and Southeastern United States.

o Broad resident base: Within each target market, own and operate
luxury, middle and moderate income apartments designed to appeal to a
broad base of residents.

Specialize in Value Creation Opportunities. Such opportunities include:

o Renovation and rehabilitation: Seek opportunities to acquire
properties which would benefit from improved property management and
capital expenditures. The Company has completed 28 property renovations
and major rehabilitations, has six such projects in progress and expects
to perform ten such projects with respect to the Pending Acquisitions.

o Development: Develop and expand properties where market conditions
offer the potential for attractive returns. The Company has completed four
development/expansion projects, has three such projects in progress and is
under contract to acquire four additional development projects.

S-3
<PAGE>

Improved Access to Capital. The Company has improved its access to capital
through increasing the array of financing methods it utilizes to fund its
acquisition and development activities and by improving its balance sheet:

o Units to fund acquisitions: Offer sellers a tax-deferred mechanism
for property sales in exchange for an equity interest in the Company. In
furtherance of this strategy, the Company has acquired 11 apartment
communities containing approximately 3,500 apartment units utilizing the
issuance of units of limited partnership in the Operating Partnership
("Units"), which are exchangeable on a one-for-one basis for shares of
Common Stock, or, at the option of the Company, for cash.

o Increase institutional ownership: In 1997, the Company completed
the private placement of convertible preferred stock with institutional
investors resulting in gross proceeds of approximately $68.4 million.

o Improve debt structure: The Company has (i) reduced debt as a
percentage of its total capital, (ii) lengthened the average maturities of
its debt and (iii) reduced its exposure to changes in interest rates
through increasing the percentage of debt borrowed at fixed rates.

Fully-integrated Management and Operations. The Company has become
fully-integrated, with in-house property management, acquisition and
development expertise:

o Self-administered: In 1996 the Company acquired its outside
advisor.

o Self-managed: In 1997 the Company acquired the property manager
which had previously managed its properties on a fee basis. As a result,
the Company now manages its apartment portfolio as well as 22 third-party
properties containing approximately 8,300 units.

Implement Regional Partner Strategy. Offer private apartment owners and
developers the opportunity to contribute properties to the Company on a
tax-deferred basis and to have significant involvement in the future
management of the Company as the head of a regional division. These mergers
should permit the Company to grow by combining each regional division's
acquisition and development skills with the Company's access to capital and
property management expertise. See "The Company--Business and Growth
Strategies--The Regional Partner Strategy." In furtherance of this
strategy, the Company has entered into an agreement with the Questar
Companies ("Questar") whereby the Company will acquire a portfolio of 18
apartment communities in the greater Baltimore area and the related
management operations. See "The Questar Transaction."

The Company believes that successful implementation of these strategies
will allow it to continue to increase its net operating income ("NOI") from its
apartment portfolio. Same store growth (defined as those apartment communities
that were owned by the Company for the entire period for each of the periods
compared) in NOI has averaged 9.4% per annum over the period January 1, 1993
through June 30, 1997. Annual same store growth in NOI over the last four years
and for the six months ended June 30, 1997 was 8.9%, 7.3%, 15.5%, 8.9% and
6.4%, respectively. The growth in same store NOI can be attributed in large
part to the Company's value-added approach to investment and property
operations. By renovating, rehabilitating and developing apartment communities,
the Company strives to increase cash flows, thereby adding value to the
underlying real estate. See "The Company--Business and Growth Strategies."

The Company believes that the strength of its management team of apartment
community specialists provides a significant competitive advantage. The
Company's management team has proven capabilities in apartment community
management, acquisition, development, renovation, rehabilitation, leasing and
financing. The Company believes that these capabilities will allow it to
continue to create value in all phases of the real estate cycle. The Company's
nine senior executive officers have an average of approximately 16 years of
real estate industry experience, and have worked together for the Company or
its predecessors for an average of approximately eight years. Upon completion
of the Offering and the Pending Acquisitions, on a pro forma as adjusted basis,
approximately 13.3% of the equity of the Company, on a fully diluted basis,
will be beneficially owned by officers and directors of the Company and certain
other affiliated parties.

S-4

<PAGE>

The Company's principal executive offices are located at 470 Atlantic
Avenue, Boston, Massachusetts 02210 and its telephone number is (888) 867-0100.
The Company's property management and development offices are located in
Atlanta, Georgia. In addition, the Company operates five regional offices in
Atlanta, Georgia; Greenville, South Carolina; Dallas, Texas; Columbia,
Maryland; and Chicago, Illinois. The Company has approximately 800 employees.

Recent Developments

Results of Operations
On October 23, 1997, the Company issued a press release and filed a
current report on Form 8-K announcing its results of operations for the third
quarter and nine months ended September 30, 1997. For the quarter ended
September 30, 1997, the Company reported funds from operations ("FFO") of
approximately $8.9 million which represents an increase of 19.0% as compared to
the quarter ended September 30, 1996. For the nine months ended September 30,
1997, FFO was approximately $25.3 million, representing a 17.6% increase over
the nine months ended September 30, 1996. Total revenue for the quarter ended
September 30, 1997 was approximately $28.4 million compared with approximately
$25.3 million for the quarter ended September 30, 1996. For the nine months
ended September 30, 1997, total revenue was approximately $80.5 million
compared with approximately $67.9 million for the comparable period in 1996.
Net loss for the nine months ended September 30, 1997 was approximately $2.0
million, which represents a $5.8 million decrease from approximately $7.8
million for the comparable period in 1996.

Recent Acquisitions
Since January 1, 1997, the Company has acquired 12 apartment communities
containing approximately 2,800 units (the "Recent Acquisitions") for an
aggregate total investment of approximately $136.1 million. The following table
sets forth certain data regarding the Recent Acquisitions:

<TABLE>
<CAPTION>
Apartment Total
Apartment Community Location Units Investment
- ------------------------------------- ------------------- ----------- ---------------
(in thousands)
<S> <C> <C> <C>
Mid-Atlantic Region
Berkshires by the Chesapeake ...... Millersville, MD 144 $ 8,878
The Cove ........................... Glen Burnie, MD 181 8,214
Lamplighter ........................ Glen Burnie, MD 168 7,594
Lighthouse ........................ Glen Burnie, MD 120 6,894
Westchester West .................. Silver Spring, MD 345 17,732
Florida
Polos West ........................ Winter Garden, FL 200 9,757
Sun Chase ........................ Bradenton, FL 168 6,088
Texas
Huntington Brook .................. Dallas, TX 320 12,723
Huntington Lake .................. Dallas, TX 405 18,826
Huntington Ridge .................. Irving, TX 232 10,048
Summer Place ..................... Addison, TX 212 8,312
Sweetwater ........................ Richardson, TX 312 21,017
------ ---------
Total ................................................ 2,807 $136,083
====== =========
</TABLE>

Pending Acquisitions
The Pending Acquisitions consist of an 18 property portfolio containing
approximately 3,700 units located in the greater Baltimore area. The Pending
Acquisitions constitute part of the Questar Transaction, which marks the first
use of the Company's regional partner strategy. See "The Company--Business and
Growth Strategies" and "The Questar Transaction." The Company intends to use a
portion of the net proceeds of the Offering to fund the purchase of the Pending
Acquisitions. There can be no assurance that any of the Pending Acquisitions
will be completed.

S-5

<PAGE>

The following table sets forth certain data regarding the Pending Acquisitions:

<TABLE>
<CAPTION>
Estimated
Apartment Total
Apartment Community Location Units Investment
- ------------------------ ----------------- ----------- ---------------
(in thousands)
<S> <C> <C> <C>
Mid-Atlantic Region
Arborview ............ Belcamp, MD 288 $ 19,300
Calvert's Walk ......... Belair, MD 276 16,217
Courtleigh ............ Baltimore, MD 280 14,822
Coventry ............... Baltimore, MD 122 6,354
Diamond Ridge ......... Baltimore, MD 92 4,933
The Estates ............ Pikesville, MD 208 13,952
Fairway Ridge ......... Baltimore, MD 274 7,798
Hazelcrest ............ Baltimore, MD 48 1,298
Heraldry Square ...... Baltimore, MD 270 10,606
Hilltop ............... Baltimore, MD 50 1,453
Jamestown ............ Baltimore, MD 335 9,612
Kingswood I ............ Baltimore, MD 203 8,238
Kingswood II ......... Baltimore, MD 203 7,960
Ridgeview Chase ...... Westminster, MD 204 12,859
Rolling Wind ......... Baltimore, MD 280 20,493
Stratton Meadows ...... Baltimore, MD 268 15,484
Warren Park ............ Baltimore, MD 200 7,926
Williston ............ Baltimore, MD 98 3,083
------ ---------
Total ............... 3,699 $182,388
====== =========
</TABLE>

Additionally, the Company is evaluating approximately $365 million of
potential apartment community acquisitions, including approximately $160
million of which the Company has under non-binding letters of intent. There can
be no assurance that any of these acquisitions will be completed.

Development Activity
The Company is currently developing three apartment communities containing
in the aggregate approximately 916 units and is under contract to acquire four
apartment community developments containing in the aggregate approximately 753
units. The following table sets forth certain data regarding the Company's
development pipeline:

<TABLE>
<CAPTION>
Planned Estimated Estimated
Apartment Total Completion
Property Location Units Investment Date Status
- ---------------------------- ---------------- ----------- --------------- --------------------- -------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Developments in Progress:
Liriope(1) ............... Belcamp, MD 84 $ 7,600(2) Fourth Quarter 1997 Under construction
Granite Run(1) ............ Baltimore, MD 264 25,500(2) Fourth Quarter 1998 Under construction
Berkshires at
Crooked Creek ............ Durham, NC 296 20,200 Fourth Quarter 1998 Under construction
Indigo land ............... Dallas, TX 120 9,000 First Quarter 1999 In design
Avalon I(1) ............... Pikesville, MD 258 25,900(2) Fourth Quarter 1999 In design
Avalon II(1) ............... Pikesville, MD 147 15,400(2) Fourth Quarter 1999 In design
Inglesby land ............ Greenville, SC 500 35,000 First Quarter 2000 In design
Land Held for Development:
Garlington Road land ...... Greenville, SC -- -- -- --
------ -----------
Total .................. 1,669 $ 138,600
====== ===========
</TABLE>

- --------
(1) Developments to be acquired in connection with the Pending Acquisitions.
See "The Questar Transaction."
(2) The Estimated Total Investment is based on the Company's current estimates
under development contribution agreements for such projects.

S-6
<PAGE>

Financing Activities

On September 25, 1997, the Company issued 2,737,000 shares of its Series
1997-A Convertible Preferred Stock (the "Series 1997-A Preferred") in a private
placement to Westbrook Real Estate Fund II, L.P. ("Westbrook") and Morgan
Stanley Asset Management resulting in gross proceeds of approximately $68.4
million. These proceeds were used to acquire five unleveraged apartment
communities containing approximately 1,500 units in Dallas, Texas. The Series
1997-A Preferred will pay a preferred dividend of 9% based on the purchase
price of $25.00 per share and is convertible in the aggregate into 5,643,420
shares of Common Stock. Holders of the Series 1997-A Preferred are entitled to
vote on an as converted basis, together with the holders of Common Stock, as
one class, on all matters on which the holders of Common Stock are entitled to
vote. Upon completion of the Offering, the holders of the Series 1997-A
Preferred will have approximately 13.5% of the voting rights with respect to
matters upon which the Series 1997-A Preferred and Common Stock vote as a
class. Further, the holders of the Series 1997-A Preferred are entitled to
elect one director to the Board of Directors of the Company. Paul D.
Kazilionis, a managing principal and co-founder of Westbrook Real Estate
Partners, L.L.C, the general partner of Westbrook, has been elected to the
Company's Board of Directors by direction of the holders of the Series 1997-A
Preferred.

In July 1997, the interest rate on the Company's $50 million secured
revolving credit agreement with BankBoston, NA and Mellon Bank, NA (the
"BankBoston Facility") was reduced to 150 basis points over LIBOR from 175
basis points over LIBOR. The Company is currently negotiating and expects to
renew the BankBoston Facility, which matures on December 31, 1997. The
Company's other credit facility with the Federal National Mortgage Association
(the "FNMA Facility") consists of (i) a $35 million secured revolving credit
facility (the "FNMA Revolver") which bears interest at a rate which
approximates LIBOR plus 50 basis points and matures in November 2000 and (ii) a
secured term loan with a total commitment of $63.3 million which bears interest
at an average rate of 7.1%, of which $13.3 million matures in September 2003
and $50 million matures in November 2005 (the "FNMA Term"). Subsequent to the
Offering and the closing of the Pending Acquisitions, on a pro forma as
adjusted basis, the Company will have unused commitments under the BankBoston
and FNMA Facilities of approximately $85 million.

Management
In conjunction with the Company's transition to self-management, on
February 28, 1997, the Company's directors named David F. Marshall, then
serving as President and Chief Operating Officer, as President and Chief
Executive Officer of the Company. In addition, Ridge Frew was named Executive
Vice President of Property Operations.

On October 9, 1997, the Company increased the size of its Board of
Directors from seven to nine members, accepted the resignation of Laurence
Gerber as a director of the Company and appointed Messrs. Terrance R. Ahern,
Paul D. Kazilionis and Arthur P. Solomon as independent directors of the
Company. See "Management."

Business and Growth Strategies

The Company's primary objective is to maximize shareholder value through
increases in distributable cash flow per share and appreciation in the value of
its Common Stock. The Company seeks to grow by acquiring and developing luxury,
middle and moderate income apartment communities in selected targeted markets.
In particular, the Company seeks opportunities to add value through renovation
and major rehabilitation projects across a broad spectrum of apartment
communities. The Company's presence in 14 metropolitan areas located in
Florida, Texas and the Mid-Atlantic and Southeastern United States gives its
portfolio geographic diversity while providing the Company with a competitive
advantage in identifying and competing for acquisition and development
opportunities in its target markets. The Company believes its management
infrastructure allows it to grow in both its existing markets and in selected
new markets without incurring substantial additional costs. The Company also
seeks to maximize profitability by increasing occupancies and rents while
decreasing operating costs by implementing the strategies described below.

S-7
<PAGE>

External Growth

The Company has historically grown the value of its apartment portfolio
using a value-added approach. The methods the Company employs to increase value
are as follows:

Renovation. The Company seeks to acquire apartment communities which it
believes are underperforming and would benefit from improved property
management and capital expenditures to cure deferred maintenance and enhance
curb appeal. The Company expects that this will improve occupancies, rent
growth and yields on such investments. The typical renovation generally
involves capital expenditures of approximately $2,000 to $6,000 per unit.

Major Rehabilitation. The Company seeks opportunities to purchase
well-located but older apartment communities which will benefit from a thorough
rehabilitation of both the exterior and unit interiors of such properties.
These rehabilitations, which generally involve capital expenditures of greater
than $6,000 per unit, typically result in significant rental rate increases
reflecting the improved attractiveness of the community to residents.

Development. Certain of the Company's markets have provided opportunities
to develop new apartment communities and to expand existing communities which
offer attractive yields on investment. The Company's team has developed or
expanded apartment communities in Raleigh, North Carolina; Greenville, South
Carolina; and Atlanta, Georgia, and its development pipeline includes
properties located in the Baltimore, Maryland; Dallas, Texas; Durham, North
Carolina; and Greenville, South Carolina metropolitan areas. The Company
intends to continue to develop and build at a rate of approximately 500 to
1,500 units per year.

The Company has in the past, and may in the future as opportunities arise,
take advantage of other value-added strategies such as (i) acquiring
non-performing and delinquent mortgages with the expectation of converting such
investments into the ownership of the underlying real estate; (ii) selling
certain assets when very attractive prices are being offered or when the
Company intends to exit, or resize its concentration in, a particular market;
and (iii) acquiring properties in certain of its current markets where the
Company can realize operating efficiencies through economies of scale.

The major focus for near term growth will be in property renovations and
rehabilitations as a result of the significant supply of apartment communities
suitable for such enhancements which the Company believes are owned by and
available for purchase from private and public partnerships that have matured
in their life cycle and are looking for an exit vehicle for their partners. In
addition, the Company's experience demonstrates that there are many private
real estate companies that manage such partnerships which are interested in
selling their portfolios and adding their management talent to that of an
existing REIT through a tax-deferred structure. To capitalize on these
opportunities, the Company recently began the implementation of a regional
partner strategy.

The Regional Partner Strategy

The Company believes that local expertise is important to the success of
its business. The Company, therefore, seeks to acquire the assets and
operations of skilled and proven apartment owners and developers and to
establish such companies as regional divisions of the Company, thereby
enhancing the Company's ability to acquire, develop and manage apartment
communities in such regions. This strategy offers private apartment owners and
developers the opportunity to contribute their direct ownership interests in
such assets to the Company in exchange for Units on a tax-deferred basis, and
to have significant involvement in the future management of the Company as the
head of a regional division, responsible for acquisition, development and asset
management activities within such regions. These mergers should permit the
Company to grow by combining each regional division's acquisition and
development skills with the Company's access to capital and management
expertise. The Company expects to realize economies of scale through the
integration of the property management operations of the acquired portfolio
into the Company's management infrastructure. Each regional division is
expected to be headed by a regional president who has operated a successful
apartment company in such region and has demonstrated the ability to acquire,
develop and operate assets which fit the Company's criteria. The commitment of
each regional president to the Company will be assured by virtue of such
person's significant investment in the Company as a result of having
contributed such person's portfolio for equity in the Company.

S-8
<PAGE>

The first transaction utilizing this strategy, which will close
immediately following, and is conditioned upon, the closing of this Offering,
involves the acquisition by the Company of 18 existing apartment communities
and the management operations thereof (which includes the management operations
of certain third-party properties) and four development projects in the greater
Baltimore area together with the exclusive right to acquire all apartment
projects developed by Questar Builders (as defined herein) which meet the
Company's acquisition and development criteria (the "Questar Transaction").
Stephen M. Gorn, the President and Chief Executive Officer of the Questar
Companies, who has over 25 years of experience in the apartment business, will
become President of the Mid-Atlantic Division of the Company. See "The Questar
Transaction."

Internal Growth

Based on the Company's experience, much of the opportunity to create value
for shareholders exists in the day-to-day property management operation. The
Company expects to maximize current and future cash flow by enhancing its
property management operation with its in-depth knowledge of its markets, its
emphasis on customer satisfaction, and its commitment to capital expenditure
programs.

Utilizing both industry research and the Company's local market knowledge,
the Company determines the rent growth potential in its markets by analyzing a
variety of factors, including employment growth, vacancy rates and competition
from existing and future apartment communities. This analysis enables the
Company, in each of its markets, to formulate and implement strategies for rent
and occupancy growth. The Company currently employs a leasing methodology which
focuses on future availability of apartment units rather than on current
vacancies, thereby allowing the Company to maximize occupancies. The Company
also captures additional rent growth by quickly adjusting rents depending on
the supply and demand for certain unit types.

In addition, the Company's property management teams focus on providing
superior service to the Company's residents in an effort to ensure customer
satisfaction. In so doing, the Company expects to successfully retain current
residents and attract new residents.

The Company's experience is that well-maintained properties will provide
attractive yields over time. Therefore, the Company makes continual capital
investments in its apartment communities in order to ensure resident
satisfaction, remain competitive, and enhance the value of its properties.
Further, the Company continually evaluates opportunities to renovate,
rehabilitate and expand its existing portfolio in order to enhance investment
yields.

Financing Strategies

Following the completion of the Offering and the Pending Acquisitions, on
a pro forma as adjusted basis, the Company's ratio of total consolidated
indebtedness ("Company Debt") to total market capitalization will be
approximately 40%, and Company Debt will be approximately $370 million. Of the
$370 million of pro forma as adjusted Company Debt, approximately $364 million
(98%) is fixed-rate indebtedness with a weighted average final maturity of
approximately 15 years and a weighted average interest rate of 7.8%.

The Company has a policy of limiting Company Debt to 50% of the value of
its assets. The Company believes that based upon both its internally-generated
estimated values and upon estimated values calculated using valuation
parameters consistent with the Company's credit facilities, the Company is in
compliance with such debt policy and will continue to be in compliance with
such policy, upon fully drawing the unused commitments under the BankBoston and
FNMA Facilities.

The Company believes that its access to capital through its credit
facilities, sources of private equity and debt financing and utilization of
Units as currency, as well as its access to the public capital markets provide
it with capital to fund its acquisition, development and capital expenditure
requirements and a competitive advantage over certain competitive bidders who
have less access to capital. Further, the Company intends to negotiate with
lenders to convert the BankBoston Facility from a secured to an unsecured
facility.

S-9
<PAGE>

The Properties

The Company operates in the four regions defined by the Company as: (i)
Mid-Atlantic (Pennsylvania, Maryland, Delaware, Virginia and Washington, D.C.);
(ii) Southeast (North Carolina, South Carolina, Georgia and Tennessee); (iii)
Florida, and (iv) Texas. The following charts summarize the Company's
Properties as a percentage of total units based on its geographic region and
asset class:

[PIE CHARTS]

[Tabular Representation of Pie Charts]

Geographic Distribution(1)

Mid-Atlantic(2) 5,990 (32%)
Southeast 4,917 (26%)
Florida 2,120 (12%)
Texas 5,662 (30%)

Asset Class(1)(3)

Luxury 3,784 (20%)
Middle 10,927 (59%)
Moderate 3,978 (21%)

- --------
(1) Based upon the number of apartment units.
(2) Includes one apartment community containing 214 units located in
Massapequa, New York.
(3) As determined by the Company's management.

S-10
<PAGE>

The following table sets forth certain data regarding the Properties.

Southeast Region
Brookfield Trace (5) ............... Mauldin, SC Nov. 95 300
Brookwood Valley ..................... Mauldin, SC Apr. 95 226
Huntington Downs (6) ............... Greenville, SC Jan. 88 502
The Oaks (6) ........................ Mauldin, SC Mar. 90 176
Roper Mountain (6) .................. Greenville, SC Jan. 88 248
Stoneledge (6) ..................... Greenville, SC Jan. 88 320
Cumberland Cove ..................... Raleigh, NC Dec. 91 552
East Lake ........................... Charlotte, NC Oct. 93 214
The Timbers ........................ Charlotte, NC Mar. 93 343
Arbors at Breckenridge ............... Duluth, GA Dec. 93 514
The Avalon on Abernathy ............ Atlanta, GA Jun. 92 240
Huntington Chase ..................... Norcross, GA Jul. 93 467
British Woods ........................ Nashville, TN Nov. 95 264
Highland Ridge ..................... Madison, TN Nov. 95 280
Windover ........................... Knoxville, TN Nov. 95 271
---
Subtotal/Weighted Average ............................................. 4,917

<CAPTION>
Avg. Monthly Rent
Average Occupancy(1) Per Apartment Unit(1)(2)
--------------------------- --------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
June 30, December 31, June 30, December 31,
Apartment Community 1997 1996 1997 1996
- -------------------------------------- ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C>
Mid-Atlantic Region (3)
Arborview (4) ........................ 89% 94% $ 709 $ 695
Berkshires by the Chesapeake ......... 94 92 738 731
Berkshire Towers ..................... 90 91 824 827
Calvert's Walk (4) .................. 94 96 692 680
Courtleigh (4) ..................... 95 95 642 627
The Cove ........................... 93 93 675 668
Coventry (4) ........................ 94 94 624 606
Diamond Ridge (4) .................. 92 95 693 686
The Estates (4) ..................... 94 95 768 749
Fairway Ridge (4) .................. 92 95 512 516
Hazelcrest (4) ..................... 92 95 486 478
Heraldry Square (4) .................. 95 96 602 592
Hilltop (4) ........................ 97 96 474 473
Jamestown (4) ........................ 95 93 512 502
Kingswood I (4) ..................... 95 97 595 583
Kingswood II (4) ..................... 94 95 585 571
Lamplighter ........................ 93 90 703 695
Lighthouse ........................ 94 95 661 652
Ridgeview Chase (4) .................. 97 96 734 726
Rolling Wind (4) ..................... 96 96 801 783
Stratton Meadows (4) ............... 94 94 682 662
Warren Park (4) ..................... 95 95 537 537
Westchester West .................. 96 95 711 691
Williston (4) ........................ 96 93 536 525
Southpointe at Massapequa ............ 100 99 1,174 1,164
---- --- -------- --------
Subtotal/Weighted Average ...... 94 94 701 692

Southeast Region
Brookfield Trace (5) ............... 92 92 660 659
Brookwood Valley ..................... 89 94 620 624
Huntington Downs (6) ............... 93 94 600 600
The Oaks (6) ........................ 90 93 642 644
Roper Mountain (6) .................. 92 95 517 514
Stoneledge (6) ..................... 91 92 532 538
Cumberland Cove ..................... 95 96 755 753
East Lake ........................... 92 95 655 650
The Timbers ........................ 92 95 578 575
Arbors at Breckenridge ............... 88 94 750 750
The Avalon on Abernathy ............ 94 95 892 891
Huntington Chase ..................... 90 93 667 659
British Woods ........................ 93 93 650 646
Highland Ridge ..................... 91 91 534 531
Windover ........................... 92 90 590 588
---- --- -------- --------
Subtotal/Weighted Average ...... 92 94 650 649
</TABLE>

S-11
<PAGE>

<TABLE>
<CAPTION>
Month/Year Apartment
Apartment Community Location Acquired Units
- ----------------------------------------- ----------------------- ------------ -----------
<S> <C> <C> <C>
Florida
Altamonte Bay Club ..................... Altamonte Springs, FL Feb. 93 224
The Lakes at Jacaranda (6) ............ Plantation, FL Mar. 90 340
Newport ................................. Tampa, FL Feb. 93 320
Park Colony ........................... Hollywood, FL Jul. 94 316
Plantation Colony ..................... Plantation, FL Dec. 93 256
Polos West .............................. Winter Garden, FL May 97 200
Sun Chase .............................. Bradenton, FL May 97 168
Woodland Meadows ........................ Tamarac, FL Oct. 92 296
---
Subtotal/Weighted Average ................................................... 2,120

Texas
Benchmark .............................. Irving, TX Jun. 96 250
Golf Side .............................. Haltom City, TX Jun. 96 402
Hunters Glen ........................... Plano, TX Jun. 96 276
Huntington Brook ........................ Dallas, TX Oct. 97 320
Huntington Lake ........................ Dallas, TX Oct. 97 405
Huntington Ridge ........................ Irving, TX Oct. 97 232
Indigo on Forest ........................ Dallas, TX Aug. 94 1,217
Kings Crossing ........................ Kingwood, TX Jun. 94 404
Kingwood Lakes ........................ Kingwood, TX Jun. 94 390
Pleasant Woods ........................ Dallas, TX Jun. 96 208
Prescott Place ........................ Mesquite, TX Jun. 96 318
Prescott Place II ..................... Mesquite, TX Nov. 96 336
Providence .............................. Dallas, TX Jun. 96 244
River Oaks .............................. Houston, TX May 95 136
Summer Place ........................... Addison, TX Oct. 97 212
Sweetwater .............................. Richardson, TX Oct. 97 312
---
Subtotal/Weighted Average ................................................... 5,662
-----
Total Portfolio/Weighted Average ............................................. 18,689
======

Texas
Benchmark .............................. 96 95 583 579
Golf Side .............................. 94 90 448 442
Hunters Glen ........................... 92 96 633 625
Huntington Brook ........................ 97 96 584 520
Huntington Lake ........................ 97 -- 627 --
Huntington Ridge ........................ 97 96 595 531
Indigo on Forest ........................ 93 93 580 589
Kings Crossing ........................ 95 92 608 614
Kingwood Lakes ........................ 96 94 610 607
Pleasant Woods ........................ 95 95 555 548
Prescott Place ........................ 95 95 504 499
Prescott Place II ..................... 95 95 499 497
Providence .............................. 91 83 503 494
River Oaks .............................. 87 92 1,994 1,957
Summer Place ........................... 95 96 589 554
Sweetwater .............................. 98 96 792 737
--- --- -------- --------
Subtotal/Weighted Average ......... 95 93 614 601
--- --- -------- --------
Total Portfolio/Weighted Average ... 94 94 670 652
=== === ======== ========
</TABLE>

- --------
(1) The statistical information presented under Average Occupancy and Average
Monthly Rent Per Apartment Unit for the periods prior to the Company's
ownership thereof was provided by the previous owner of each applicable
property. Such information may not have been calculated in accordance with
the methodology used by the Company in calculating such statistics. The
Company has not independently verified such information. However, the
Company has no reason to believe such information is not accurate. Where
the Company did not own an applicable property for the entire period
presented, the information presented is the weighted average of the
information compiled by the Company and the information supplied by the
previous owner.

(3) Includes apartment units located in New York, which the Company does not
consider part of its Mid-Atlantic Region.

(4) Pending Acquisition. Average Occupancy and Average Monthly Rent Per Unit
was calculated by Questar.
(5) The Company completed a 96-unit expansion in February 1997. Such additional
apartment units were excluded from the calculation of Average Occupancy
and Average Monthly Rent Per Apartment Unit.
(6) Acquired by the Company's predecessors.

S-12
<PAGE>

The Offering

<TABLE>
<S> <C>
Common Shares Offered (1) .................. 10,000,000
Common Shares and Units Outstanding After the
Offering (2)(3) ........................... 44,268,308
Use of Proceeds ........................... To fund the purchase of the Pending Acquisitions, to
repay certain indebtedness and for future acquisition
and development activity and general corporate
purposes. See "Use of Proceeds."
New York Stock Exchange Symbol ............ "BRI"
</TABLE>

- --------
(1) Assumes the Underwriters' (as defined herein) over-allotment option to
purchase up to 1,500,000 shares of Common Stock is not exercised. See
"Underwriting."

(2) Includes (a) 6,281,909 shares of Common Stock reserved for issuance upon
the exchange of outstanding Units and (b) 1,766,996 shares of Common Stock
to be reserved for issuance upon the exchange of 1,766,996 Units (based on
a Common Stock price of $11.64 per share which is the share price to be
used in calculating the amount of Units and shares of Common Stock to be
issued in connection with the Questar Transaction) to be issued, and the
400,000 shares of Common Stock to be issued, each in connection with the
Questar Transaction.
(3) Excludes (a) 2,997,031 shares of Common Stock reserved for issuance upon
the exercise of outstanding warrants (the "Warrants"), (b) 5,643,420
shares of Common Stock issuable upon exchange of outstanding Series 1997-A
Preferred, (c) 1,144,300 shares of Common Stock issuable upon the exercise
of employee and director options ("Options") granted by the Company
pursuant to the Berkshire Realty Company, Inc. 1996 Stock Option Plan (the
"Option Plan"), 824,000 of which are currently exercisable and 320,880 of
which become exercisable in one to three years and (d) 406,993 Units
related to property acquisitions which are deferred as to issuance until
January 1, 1998.

Summary Selected Financial and Operating Data

The following table sets forth selected historical and pro forma financial
and other data for the Company. The following summary selected financial
information should be read in conjunction with the financial statements and
notes thereto included or incorporated by reference herein.

The historical financial data as of and for the years ended December 31,
1996, 1995 and 1994 have been derived from audited financial statements
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended.

The historical financial data at June 30, 1997 and for the six months
ended June 30, 1997 and June 30, 1996 are derived from the unaudited
consolidated financial statements incorporated by reference herein. The
unaudited financial information includes all adjustments (consisting of normal
recurring adjustments) that management considers necessary for fair
presentation of the combined financial position and results of operations for
these periods. Combined operating results for the six months ended June 30,
1997 are not necessarily indicative of the results to be expected for the
entire year ended December 31, 1997.

The unaudited pro forma adjustments and operating data for the six months
ended June 30, 1997 and the year ended December 31, 1996 are presented as if
the completion of the Offering, the completion of the Pending Acquisitions, the
issuance of Series 1997-A Preferred, the conversion to self-management and
self-administration and all acquisition and disposition activity by the Company
during the respective period occurred at the beginning of the periods
presented. By necessity, such pro forma operating information incorporates
certain assumptions which are described in the notes to the pro forma financial
information included or incorporated by reference herein. The unaudited pro
forma balance sheet data is presented as if the aforementioned transactions had
occurred on June 30, 1997.

The pro forma information does not purport to represent what the Company's
financial position or results of operations would actually have been if these
transactions had, in fact, occurred on such date or at the beginning of the
period indicated, or to project the Company's financial position or results of
operations at any future date or for any future period.

S-13
<PAGE>

Berkshire Realty Company, Inc. and Subsidiaries
Summary Selected Financial and Operating Data

<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------------------
Pro Forma Historical
------------- ---------------------------
1997 1997 1996
------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C>
Operating Data:
Revenue ........................... $ 73,898 $ 52,088 $ 42,590
Expenses:
Property expenses .................. 33,182 23,118 18,874
General and administrative ......... 2,426 2,426 2,319
Interest ........................... 15,131 11,485 8,917
Amortization of intangible assets 5,068 1,527 448
Costs associated with Advisor
Transaction ........................ 1,200 1,200 --
Non-recurring charges ............ -- -- --
Provision for losses ............... -- -- --
Depreciation and amortization ...... 23,207 15,579 12,986
------------ ------------ ------------
Total expenses ..................... 80,214 55,335 43,544
------------ ------------ ------------
Income (loss) from operations ...... (6,316) (3,247) (954)
Minority interest in Operating
Partnership ........................ 1,634 571 62
Income (loss) from joint venture,
net of minority interest ......... 308 (418) 616
------------ ------------ ------------
Income (loss) before gains on sales
and extraordinary items ............ (4,374) (3,094) (276)
Gains on sales of properties, net of
minority interest .................. -- 5,365 --
------------ ------------ ------------
Net income (loss) before
extraordinary items ............... (4,374) 2,271 (276)
Extraordinary items, net of minority
interest ........................... -- -- --
------------ ------------ ------------
Net income (loss) .................. (4,374) 2,271 (276)
Income allocated to preferred
shareholders ........................ 3,079 -- --
------------ ------------ ------------
Net income (loss) available to
common shareholders ............... $ (7,453) $ 2,271 $ (276)
============ ============ ============
Net income (loss) per share ......... $ (0.21) $ 0.09 $ (0.01)
============ ============ ============
Weighted average shares of
Common Stock outstanding ............ 35,851 25,451 25,393
Weighted average shares of
Common Stock and Units outstanding 43,400(1) 30,852(2) 27,109(3)
Balance Sheet Data, at period end:
Real estate, before accumulated
depreciation ........................ $ 884,023 $ 630,365 $ 640,521
Real estate, after accumulated
depreciation ........................ 775,205 510,481 535,310
Cash and cash equivalents ............ 18,645 8,231 9,311
Total assets ........................ 860,753 578,115 590,609
Total indebtedness .................. 371,187 291,507 290,764
Shareholders' equity ............... 388,234 214,511 249,086

<CAPTION>
Year ended December 31,
---------------------------------------------------
Pro Forma Historical
------------- -------------------------------------
1996 1996 1995 1994
------------- --------------- ----------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Operating Data:
Revenue ........................... $ 144,894 $ 93,002 $ 74,441 $ 68,471
Expenses:
Property expenses .................. 64,405 42,353 33,348 31,825
General and administrative ......... 4,670 4,646 2,920 3,279
Interest ........................... 30,817 20,501 15,618 10,794
Amortization of intangible assets 10,137 1,121 -- --
Costs associated with Advisor
Transaction ........................ -- -- -- --
Non-recurring charges ............ 442 442 1,728 2,555
Provision for losses ............... 4,700 7,500 -- --
Depreciation and amortization ...... 46,031 29,050 21,984 19,507
------------ ------------ -------- ---------
Total expenses ..................... 161,202 105,613 75,598 67,960
------------ ------------ -------- ---------
Income (loss) from operations ...... (16,308) (12,611) (1,157) 511
Minority interest in Operating
Partnership ........................ 3,913 1,136 70 --
Income (loss) from joint venture,
net of minority interest ......... 754 (2,737) 1,387 1,178
------------ ------------ -------- ---------
Income (loss) before gains on sales
and extraordinary items ............ (11,641) (14,212) 300 1,689
Gains on sales of properties, net of
minority interest .................. -- 53 15,386 4,069
------------ ------------ -------- ---------
Net income (loss) before
extraordinary items ............... (11,641) (14,159) 15,686 5,758
Extraordinary items, net of minority
interest ........................... -- (149) (901) --
------------ ------------ -------- ---------
Net income (loss) .................. (11,641) (14,308) 14,785 5,758
Income allocated to preferred
shareholders ........................ 6,158 -- -- --
------------ ------------ -------- ---------
Net income (loss) available to
common shareholders ............... $ (17,799) $ (14,308) $ 14,785 $ 5,758
============ ============ ======== =========
Net income (loss) per share ......... $ (0.50) $ (0.56) $ 0.58 $ 0.23
============ ============ ======== =========
Weighted average shares of
Common Stock outstanding ............ 35,793 25,393 25,393 25,391
Weighted average shares of
Common Stock and Units outstanding 43,342(1) 27,914(3) 25,752 25,391
Balance Sheet Data, at period end:
Real estate, before accumulated
depreciation ........................ -- $ 646,002 $541,143 $510,578
Real estate, after accumulated
depreciation ........................ -- 519,057 449,859 418,333
Cash and cash equivalents ............ -- 7,016 11,143 10,492
Total assets ........................ -- 569,670 486,968 458,207
Total indebtedness .................. -- 295,166 211,291 179,079
Shareholders' equity ............... -- 223,654 260,788 268,591
</TABLE>

S-14
<PAGE>

<TABLE>
<CAPTION>
Six months ended June 30, Year ended December 31,
--------------------------------------- --------------------------------------------------
Pro Forma Historical Pro Forma Historical
----------- --------------------------- ----------- --------------------------------------
1997 1997 1996 1996 1996 1995 1994
----------- ------------- ------------- ----------- ------------ ------------ ------------
(unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Funds from operations (4)
(unaudited) ..................... $20,756 $ 16,450 $ 14,081 $40,710 $ 28,939 $ 26,031 $ 25,707
Company's share of funds from
operations (4) (unaudited) ...... 17,146 13,570 13,190 33,619 26,325 25,668 25,707
Cash flow provided by operating
activities(5) ..................... 15,743 13,545 27,504 25,029 22,432
Cash flow provided by (used in)
investing activities (5) ......... 19,955 (40,823) (36,393) (25,049) (53,784)
Cash flow provided by (used in)
financing activities (5) ......... (34,483) 25,447 4,761 670 33,835
</TABLE>

- --------

(1) Excludes the effect of: (a) 406,993 Units related to property acquisitions
which are deferred as to issuance until January 1, 1998; (b) approximately
696,100 Units to be issued pursuant to the Questar Transaction which are
restricted as to distributions until one year from the date of closing of
such transaction; and (c) the issuance of 100,000 Units on October 8, 1997
pursuant to the obtainment of certain per share benchmarks, in connection
with the Advisor Transaction (as defined herein). See "The Company."

(4) Industry analysts generally consider FFO to be an appropriate measure of
the performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures. However, FFO should
not be considered by the reader as a substitute to net income as an
indicator of the Company's operating performance or to cash flows as a
measure of liquidity. The Company believes that in order to facilitate a
clear understanding of the operating results of the Company, FFO should be
analyzed with net income (loss) as presented in the financial statements
and information presented elsewhere. FFO is presented in accordance with a
resolution adopted by the Board of Governors of the National Association
of Real Estate Investment Trusts, and is defined as net income (loss)
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of properties,
plus depreciation and amortization on real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures. The
methodology used by the company when calculating FFO may differ from that
of other equity REIT's and, therefore, may not be comparable to such other
REIT's. In addition, FFO does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations or other commitments.

(5) Pro forma information relating to cash flows from operating, investing and
financing activities has not been included because the Company believes
that the information would not be meaningful due to the number of
assumptions required in order to calculate this information.

S-15
<PAGE>

RISK FACTORS

Prospective investors should carefully consider the matters described
below in conjunction with the other information contained in this Prospectus
before purchasing shares of Common Stock in the Offering.

Development and Acquisition Risks
Acquisition Risks. The Company is evaluating many potential acquisitions,
the process of which involves costs which are non-recoverable. There can be no
assurance that properties which are acquired will perform in accordance with
expectations or that cost estimates for improvements to the acquired properties
in order to bring them up to the Company's standards will be accurate. In
connection with 22 Recent or Pending acquisitions, in which the sellers
received or will receive Units, the Company has agreed to certain restrictions
on its ability to sell (subject to like-kind exchanges), refinance or pay down
indebtedness (subject to refinancing on terms which would not affect the tax
basis of such Unit recipient(s)) on such properties for periods up to seven
years. These restrictions may impair the ability of the Company to take actions
during the period such restrictions apply that would otherwise be in the best
interests of the Company's shareholders and therefore, may have an adverse
effect on the Company's results of operations, financial condition and ability
to make expected distributions to shareholders. The Company anticipates that it
may agree to similar restrictions in connection with future acquisitions.

Development Risks. The Company also intends to continue the development
and expansion of apartment communities 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
following: the Company may abandon development opportunities after expending
resources to determine a project's 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 results of operations, financial condition and ability to
make expected distributions to shareholders 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.

Further, the Company anticipates that future development will be financed,
in whole or in part, through additional equity offerings or through the
Company's 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.

Risks Associated with Growth. The Company is currently experiencing a
period of rapid growth. The Company has acquired or has contracted to acquire
30 apartment communities containing an aggregate of approximately 6,500 units
since January 1, 1997. The integration of the recent acquisitions into existing
management and operating structures presents a management challenge. Although
the Company believes it has sufficient management depth to lead the Company
through this period of rapid growth, there can be no assurance that the Company
will be able to assimilate these recent acquisitions or any further
acquisitions into its portfolio without certain operating disruptions and
unanticipated costs. The failure to successfully integrate acquisitions could
have an adverse effect on the Company's results of operations and financial
conditions and its ability to pay expected distributions to shareholders.

Vote Regarding Continuation of the Company

In 1991, when the Company commenced operations, the Company granted the
shareholders the right to vote on its continued existence after a period of
approximately seven and one-half years of operations. Therefore, the Restated
Certificate of Incorporation of the Company, as amended (the "Certificate")
requires that the Board of Directors of the Company prepare and submit to the
shareholders on or before December 31, 1998 a proposal to liquidate the
Company's assets and distribute the net proceeds of such liquidation. The
liquidation proposal will

S-16
<PAGE>

become effective only if approved by shareholders holding a majority of the
shares then outstanding. If the Company were liquidated, there would be no
assurance that the proceeds of the liquidation per share would equal the price
paid by a shareholder or the market value of such a share at any particular
time. In the event the Company solicits such shareholder vote, the Company will
incur costs associated with the appraisal of the Company's real estate assets
and the shareholder solicitation regardless of the outcome of such vote.

General Real Estate Risks

The ownership of real estate presents a variety of risks, including those
risks described below:

General. The Company's investments generally consist of investments in
apartment communities and as such will be subject to varying degrees of risk
generally incident to the ownership and development of real property. The
underlying value of the Company's real estate investments and the Company's
financial condition and ability to make expected distributions to its
shareholders will be dependent upon its ability to operate and develop its
properties in a manner sufficient to maintain or increase revenues and to
generate sufficient income in excess of operating expenses. Income from the
properties may be adversely affected by changes in national and local economic
conditions such as oversupply of apartment units or a reduction in demand for
apartment units in the Company's markets, the attractiveness of the properties
to tenants, changes in interest rates and in the availability, cost and terms
of mortgage financings, the ongoing need for capital improvements, particularly
in older structures, changes in real estate tax rates and other operating
expenses, adverse changes in governmental rules and fiscal policies, adverse
changes in zoning laws, civil unrest, acts of God, including natural disasters
(which may result in uninsured losses), acts of war and other factors which are
beyond the control of the Company. If the Company were unable to promptly renew
or relet the leases for a significant number of apartment units, or, if the
rental rates upon such renewal or reletting were significantly lower than
expected rates, the Company's results of operations, financial condition and
ability to make expected distributions to shareholders may be adversely
affected. In addition, certain expenditures associated with each apartment
community (such as real estate taxes and maintenance costs) are generally not
reduced when circumstances cause a reduction in income from such property.

Dependence on Primary Markets. Substantially all of the communities owned
by the Company are located in the Florida, Texas and the Mid-Atlantic and
Southeastern United States and, therefore, the Company's results of operations,
financial condition and ability to make expected distributions to shareholders
will be linked to the economic conditions in these markets as well as the
market for apartment communities generally. To the extent that these conditions
affect the market for apartment communities, they could have an adverse effect
on the Company's results of operations, financial condition and ability to make
expected distributions to shareholders.

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 multifamily
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. Further, increases in real estate taxes and
income, service or other taxes generally are not passed through to tenants
under the Company's leases and may adversely affect the Company's results of
operations, financial condition and ability to make expected distributions to
shareholders.

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.

Value and Illiquidity of Real Estate. Real estate investments are
relatively illiquid. The Company's ability to vary its portfolio in response to
changes in economic and other conditions will therefore be limited. If the
Company must sell an investment, there can be no assurance that it will be able
to dispose of the investment in

S-17
<PAGE>

the time period it desires or that the sales price of the investment will
recoup or exceed the amount of the Company's cost for the investment. In
addition, provisions of the Internal Revenue Code of 1986, as amended (the
"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. Further, if the Company
were to sell such properties, such sales might adversely affect the Company's
ability to maintain its qualification as a real estate investment trust under
the Code.

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 communities, 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, financial condition
and its ability to pay distributions to stockholders could be adversely
affected.

Competition. All of the Company's properties are located in developed
areas that include other multifamily residential properties. The number of
competitive properties in a particular area could have a material effect on the
Company's ability to lease apartment units at its current or newly acquired
properties and on the rents charged at the such properties. The Company may be
competing with other entities that have greater resources than the Company and
whose managers have more experience than the Company's officers and directors.
In addition, other forms of housing, including manufactured housing community
properties and single-family housing provide alternatives to potential
residents of multifamily residential properties.

Cost of Compliance with the Americans with Disabilities Act. All of the
Company's properties are subject to the Americans with Disabilities Act (the
"ADA"). The ADA sets forth compliance requirements for "public accommodations"
and "commercial facilities." The ADA requires that facilities, including
leasing offices, open to the general public be made accessible to people with
disabilities. Individual apartment units are not considered "public
accommodations" for purposes of the ADA. Compliance with the ADA requirements
could require removal of access barriers and other capital improvements to the
public areas of the Company's properties. Noncompliance could result in
imposition of fines by the U.S. government or an award of damages to private
litigants. The Company does not believe that any material changes to the
properties are currently required by the ADA. If changes are subsequently
required involving material expenditures, the Company's results of operation,
financial condition and ability to make expected distributions to shareholders
could be adversely affected.

Uninsured Loss. The Company maintains comprehensive liability, fire, flood
(where appropriate), extended coverage and rental loss insurance with respect
to the Company's properties with policy specifications, limits and deductibles
customarily carried for similar properties. Certain types of losses, however,
may be either uninsurable or not economically insurable, such as losses due to
earthquakes, riots or acts of war. Should an uninsured loss occur, the Company
could lose both its investment in and anticipated profits and cash flow from a
property.

Affordable Housing Laws. Certain of the apartment communities owned by the
Company may be in the future, subject to Federal, state and local statutes or
other restrictions requiring that a percentage of apartments by made available
to residents satisfying certain income requirements. These laws and
obligations, as well as any changes thereto making it more difficult to meet
such requirements, or a reduction in or elimination of certain financing
advantages available in some instances to persons satisfying such requirements
could adversely affect the Company's profitability and its development and
acquisition projects in the future.

Risk of Adverse Effect on Company from Debt Servicing and Refinancing,
Financial Covenants, Absence of Limitations on Debt, and Increases in Interest
Rates

General. If the Company were unable to refinance its indebtedness on
acceptable terms, or at all, the Company might be forced to dispose of one or
more of its properties on disadvantageous terms, which might result in losses
to the Company and might adversely affect the Company's results of operation,
financial condition and

S-18
<PAGE>

ability to make expected distributions to shareholders. If interest rates or
other factors at the time of the refinancing result in higher interest rates
upon refinancing, the Company's interest expense would increase, which would
adversely affect the Company's results of operation, financial condition and
ability to make expected distributions to shareholders. Furthermore, if a
property is mortgaged to secure payment of indebtedness and the Company is
unable to meet mortgage payments, the mortgagee could foreclose upon the
property, appoint a receiver and receive an assignment of rents and leases or
pursue other remedies, all with a consequent loss of income and asset value to
the Company. Foreclosures could also create taxable income without accompanying
cash proceeds, thereby reducing the Company's cash available for distribution
and hindering the Company's ability to meet the REIT distribution requirements
of the Code. The Company is 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, be unable to
satisfy financial covenants in its debt financing agreements, existing
indebtedness (which in most cases will not be fully amortized at maturity), or
secure favorable refinancing terms. Additionally, in connection with the
acquisition of certain properties in exchange for Units, the Company has agreed
to maintain certain levels of non-recourse debt on the Properties in order to
minimize the tax consequences of these acquisitions to the Unit recipients.

Absence of Debt Limitation. The Company currently has a policy of
incurring debt only if upon such incurrence the ratio of Company Debt to the
value of its assets would be 50% or less. Although the Company has adopted this
policy, the Organizational Documents (as defined herein) 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.

Debt Servicing and Financing. 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 shareholders. 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, financial condition and its ability to pay expected distributions
to shareholders. 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 upon or otherwise transfer the
property, with a consequent loss of income and asset value to the Company. Even
with respect to non-recourse indebtedness, the lender may have the right to
recover deficiencies from the Company in certain circumstances, including fraud
and environmental liabilities.

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, financial condition and its ability to pay expected distributions
to shareholders. An increase in interest expense could also cause the Company
to be in default under certain covenants of the credit facilities.

Potential Environmental Liability

Under various Federal, state and local environmental laws, ordinances and
regulations, an owner or operator of real estate may be liable for the costs of
removal or remediation of certain hazardous or toxic substances on such
property. These laws often impose environmental liability without regard to
whether the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. The presence of such substances, or the
failure to properly remediate such substances, may adversely affect the owner's
or operator's ability to sell or rent the property or to borrow using the
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain third parties
may seek recovery from owners or operators of such properties or persons who
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, are potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and injuries to
persons and property.

S-19
<PAGE>

All of the properties have been the subject of a Phase I or similar
environmental assessment (which involves general inspections without soil
sampling or ground water analysis and generally without radon testing)
completed by qualified independent environmental consultant companies. These
environmental assessments have not revealed any environmental liability that
would have a material adverse effect on the Company's results of operations,
financial condition and ability to make expected distributions to shareholders,
and the Company is not aware of any such environmental liability.

Dilution

The interest of the Company's 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 additional authorized preferred stock, senior to the Common
Stock) may be issued for any 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 of Common Stock and ownership of persons seeking to obtain control of
the Company. See "--Anti-Takeover Provisions" below. The issue by the Operating
Partnership of additional Units redeemable for shares of Common Stock in
exchange for real property or other assets may also have a substantially
similar dilutive effect.

The Company also has two types of outstanding securities convertible into
Common Stock, Warrants and the Series 1997-A Preferred. 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" in the
accompanying Prospectus.

Anti-Takeover Provisions

In order to facilitate compliance with REIT requirements for tax purposes,
the Company's Certificate and By-Laws, as amended (collectively, the
"Organizational Documents") place restrictions on the accumulation of shares in
excess of 9.8% of the number of outstanding shares of Common Stock, subject to
certain exceptions permitted with the approval of the Board of Directors to
allow (i) underwritten offerings, or (ii) the sale of equity securities in
circumstances where the Board of Directors determines the Company's REIT
federal tax status will not be jeopardized. The Series 1997-A Preferred was
issued pursuant to such an exception. Certain additional provisions restrict
the 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.

The Company's 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 of Common Stock
as described below); (4) the actions which require a supermajority vote; and
(5) the requirements regarding business combinations. The Company is subject to
Section 203 of the Delaware General Corporation Law, which restricts business
combinations between the Company and its shareholders. The foregoing
restrictions on ownership and transferability may have the effect of delaying,
deferring or preventing a transaction or change in control of the Company that
might involve a premium price for the shares of Common Stock or that otherwise
might be in the best interest of the Company's shareholders.

The Company has an authorized class of 60,000,000 shares of preferred
stock. Currently the Company has approximately 2.7 million shares of its 1997
Series-A Preferred outstanding. The remaining 57.3 million shares 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.

S-20
<PAGE>

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 Code. To maintain its status as a REIT, the Company must continually meet
certain criteria concerning, among other things, its Common Stock ownership,
the nature of its assets, the sources of its income, and the amount of its
distributions to shareholders. If the Company fails to qualify, the Company
would be taxed on its income at regular corporate tax rates. 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" in the accompanying Prospectus.

REIT Minimum Distribution Requirements; Possible Incurrence of Additional
Debt. In order to qualify as a REIT, the Company generally will be required
each year to distribute to its shareholders at least 95% of its net taxable
income (excluding any net capital gain). In addition, the Company will be
subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by it with respect to any calendar year are less
than the sum of (i) 85% of its ordinary income for that year, (ii) 95% of its
capital gain net income for that year, and (iii) 100% of its undistributed
taxable income from prior years.

The Company intends to make distributions to its shareholders to comply
with the 95% distribution requirement and to avoid the nondeductible excise
tax. The Company's income will consist primarily of its share of the income of
the Operating Partnership, and the cash available for distribution by the
Company to its shareholders will consist of its share of cash distributions
from the Operating Partnership. Differences in timing between (i) the actual
receipt of income and actual payment of deductible expenses and (ii) the
inclusion of such income and deduction of such expenses in arriving at taxable
income of the Company could require the Company, through the Operating
Partnership, to borrow funds on a short-term basis to meet the 95% distribution
requirement and to avoid the nondeductible excise tax. The requirement to
distribute a substantial portion of the Company's net taxable income could
cause the Company to distribute amounts that otherwise would be spent on future
acquisitions, unanticipated capital expenditures or repayment of debt, which
would require the Company to borrow funds or to sell assets to fund the costs
of such items.

Failure of the Operating Partnership to be Classified as a Partnership for
Federal Income Tax Purposes; Negative Impact on REIT Status. The Company has
not requested, and does not expect to request, a ruling from the Internal
Revenue Service that the Operating Partnership (and each of its noncorporate
Operating Subsidiaries) will be classified as partnerships for federal income
tax purposes. If the Service were to successfully challenge the tax status of
the Operating Partnership (or any noncorporate Operating Subsidiary) as a
partnership for federal income tax purposes, the Operating Partnership (or the
noncorporate Subsidiary) would be taxed as a corporation. In such event, the
Company would likely cease to qualify as a REIT for a variety of reasons.
Furthermore, the imposition of a corporate income tax on the Operating
Partnership would reduce substantially the amount of cash available for
distribution from the Operating Partnership to the Company and its
shareholders. See "Federal Income Tax Considerations--Effect of Tax Status of
the Operating Partnership on REIT Qualification" in the accompanying
Prospectus.

Shareholders are Taxed on Reinvested Dividends. Shareholders (other than
tax-exempt entities) who participate in the Company's 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

S-21
<PAGE>

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.

Dependence on Key Personnel

The Company is dependent on the efforts of its senior executive officers.
While the Company believes that it could find replacements for these key
personnel, the loss of their services could have a temporary adverse effect on
the operations of the Company. Messrs. Marshall, Frew, Olney, Suarez and Ms.
Pritchard have entered, and Messrs. Gorn and Colvin, upon completion of the
Questar Transaction will enter, into employment agreements with the Company.
See "The Questar Transaction."

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 certain legal and
regulatory obstacles to foreclosure 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.

Possible Adverse Impact of Market Conditions on Market Price

The market value of the Common Stock could be substantially affected by
general market conditions, including changes in interest rates, government
regulatory action and changes in tax laws. An increase in market interest rates
may lead purchasers of the Common Stock to demand a higher annual dividend
yield on the Common Stock, which could adversely affect the market price of the
Common Stock. Moreover, numerous other factors, such as government regulatory
action and changes in tax laws, could have a significant impact on the future
market price of the Common Stock or other securities.

S-22
<PAGE>

THE COMPANY

General

The Company is a self-administered and self-managed REIT which acquires,
renovates, rehabilitates, develops and operates apartment communities. Founded
in 1991 with 15 apartment communities containing approximately 4,200 units, the
Company currently owns 46 apartment communities containing approximately 15,000
units and, upon completion of the Offering, expects to own 64 apartment
communities containing approximately 18,700 units located in Florida, Texas and
the Mid-Atlantic and Southeastern United States.

In February 1997, the Company completed its transition to a self-advised
and self-managed UPREIT. The first step of this transition was completed in May
1995 when the Company restructured itself into an UPREIT. On March 1, 1996, the
Company became self-administered when the Operating Partnership acquired
certain assets of the entity providing advisory and development services to the
Company, Berkshire Companies Limited Partnership ("BCLP"), which is owned by
parties affiliated with the Chairman of the Board, in exchange for
approximately 1.3 million Units (the "Advisor Transaction"). Additional Units
(up to a total value of $7.2 million) may be issued to BCLP during a six-year
period if certain share price benchmarks ranging from $11.00 per share to
$16.00 per share are achieved. Approximately 209,000 additional Units have been
issued to date when the $11.00 and $12.00 benchmarks were achieved. By becoming
self-administered, the Company positioned itself to eliminate fees previously
incurred by the Company for management, acquisition and disposition services.
On February 28, 1997, the Company acquired certain assets of the entity
providing multifamily property management services to the Company, BCLP, for
approximately 1.7 million Units (the "Property Manager Transaction"). As a
result of this transaction, the Company eliminated management fees and
reimbursements previously incurred by the Company for the management of its
apartment portfolio by assuming the direct management of such properties, as
well as the management of 22 third-party properties for which it receives
management fees.

The restructuring of the Company to an UPREIT allows it to offer
tax-advantaged structures to sellers of apartment communities through the
utilization of Units as part of the purchase price consideration. By becoming
self-advised and self-managed, the Company has eliminated the potential for
certain conflicts of interest between it and its former advisor and property
manager, reduced expenses through operating efficiencies, and positioned itself
to generate third-party management fee income.

The operations of the Company are conducted primarily through the
Operating Partnership and through their other subsidiaries. Upon completion of
the Offering and the Questar Transaction, on a pro forma as adjusted basis, the
Company will hold approximately 82.6% of the partnership interests in the
Operating Partnership in its capacity as a special limited partner and through
its 100% ownership of the General Partner. The remaining approximately 17.4% of
the partnership interest in the Operating Partnership is owned by affiliated
and unaffiliated third parties, including BCLP. 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 Company believes that the strength of its management team of apartment
community specialists provides a significant competitive advantage. The
Company's management team has proven capabilities in apartment community
management, acquisition, development, renovation, rehabilitation, leasing and
financing. The Company believes that these capabilities will allow it to
continue to create value in all phases of the real estate cycle. The Company's
nine senior executive officers have an average of approximately 16 years of
real estate industry experience and have worked together for the Company or its
predecessors for an average of approximately eight years. Upon completion of
the Offering and the Pending Acquisitions, on a pro forma as adjusted basis,
approximately 13.3% of the equity of the Company, on a fully diluted basis,
will be beneficially owned by officers and directors of the Company and certain
other affiliated parties.

S-23
<PAGE>

Business and Growth Strategies

External Growth

The Company has historically grown the value of its apartment portfolio
using a value-added approach. The methods the Company employs to increase value
are as follows:

One representative example of a renovation project of the Company is
Benchmark, a 250-unit property located in Irving, Texas, which was acquired in
June 1996. The Company invested approximately $5,200 per unit for renovations
since such property was acquired and increased rents from an average monthly
rent per apartment unit of $502 (at the time of acquisition) to $601 (as of
September 30, 1997), which represents a 20% increase.

Another example is Woodland Meadows, a 296-unit property located in
Tamarac, Florida, which was acquired in 1992. The Company invested
approximately $5,200 per unit for renovations from 1995 to 1997 and increased
rents from an average monthly rent per apartment unit of $520 (as of January 1,
1995) to $694 (as of September 30, 1997), which represents a 33% increase.

The Company has completed 20 property renovations and currently has five
property renovations in progress with respect to its existing portfolio at an
estimated aggregate cost of $6.1 million, and expects to perform ten property
renovations with respect to the Pending Acquisitions at an estimated
approximate aggregate cost of $6.1 million.

An example of a major rehabilitation project of the Company is The Avalon
on Abernathy in Atlanta, Georgia. Approximately $18,900 per unit was invested
in the property in 1992 and 1993, which underwent extensive exterior and
interior improvements. This rehabilitation resulted in a 45% increase in the
average monthly rent per apartment unit over a 24-month period. The Company has
completed eight major rehabilitation projects and currently has one major
rehabilitation project in progress with respect to its existing portfolio at an
estimated cost of $1.3 million.

S-24
<PAGE>

The Company has completed four development/expansions and currently has
three such projects in progress with respect to its existing portfolio at an
aggregate estimated total investment of approximately $64.2 million, and is
under contract to acquire four development projects currently in progress for
an aggregate estimated total investment of approximately $74.4 million.

From time to time, the Company has, and in the future may, take advantage
of the following additional value-added strategies:

Troubled Mortgage Conversions. Occasionally, the Company seeks
opportunities to acquire non-performing and delinquent mortgages with the
expectation of converting such investments into the ownership of the underlying
real estate. A total of six apartment communities are currently owned by the
Company which were acquired in such manner.

Property Sales and Reinvestment. The Company constantly evaluates its
portfolio and will sell certain assets when very attractive prices are being
offered or when the Company intends to exit, or resize its concentration in, a
particular market. Since January 1, 1996, the Company has sold two apartment
communities and reinvested the proceeds of such sales by acquiring or
developing additional apartment communities.

Economies of Scale. The Company seeks to acquire properties in certain of
its current markets to achieve operating efficiencies in such markets through
economies of scale. An example of this strategy is the Company's recent
acquisition of five apartment communities containing approximately 1,500 units
in Dallas, Texas.

The major focus for near term growth will be in property renovations and
rehabilitations as a result of the significant supply of apartment communities
suitable for such enhancements which the Company believes are owned by, and
available for purchase from, private and public partnerships that have matured
in their life cycle and are looking for an exit vehicle for their partners. In
addition, the Company's experience demonstrates that there are many private
real estate companies that manage such partnerships which are interested in
contributing their portfolios and adding their management talent to that of an
existing REIT through a tax-deferred structure. To capitalize on these
opportunities, the Company recently began the implementation of a regional
partner strategy.

The Regional Partner Strategy

The Company believes that local expertise is important to the success of
its business. The Company, therefore, seeks to acquire the assets and
operations of skilled and proven apartment owners and developers and to
establish such companies as regional divisions of the Company, thereby
enhancing the Company's ability to acquire, develop and manage apartment
communities in such regions. This strategy offers private apartment owners and
developers the opportunity to contribute their direct ownership interests in
such assets to the Company in exchange for Units on a tax-deferred basis, and
to have significant involvement in the future management of the Company as the
head of a regional division, responsible for acquisition, development and asset
management activities within such regions. These mergers should permit the
Company to grow by combining each regional division's acquisition and
development skills with the Company's access to capital and property management
expertise. The Company expects to realize economies of scale through the
integration of the property management operations of the acquired portfolio
into the Company's management infrastructure. Each regional division is
expected to be headed by a regional president who has operated a successful
apartment company in such region and has demonstrated the ability to acquire,
develop and operate assets which fit the Company's criteria. The commitment of
each regional division president to the Company will be assured by virtue of
such person's significant investment in the Company as a result of having
contributed such person's portfolio for equity in the Company.

The Questar Transaction, the first transaction utilizing this strategy,
will close immediately following, and is conditioned upon, the closing of this
Offering. As part of this transaction, the Company will acquire 18 existing
apartment communities and the management operations thereof (which includes the
management operations of certain third-party properties) and four development
projects in the greater Baltimore area together with the exclusive right to
acquire all apartment projects developed by Questar Builders which meet the
Company's acquisition and development criteria. Stephen M. Gorn, the President
and Chief Executive Officer of Questar Companies, who has over 25 years of
experience in the apartment business, will become President of the Mid-Atlantic
Division of the Company. See "The Questar Transaction."

S-25
<PAGE>

Internal Growth

Based on the Company's experience, much of the opportunity to create value
for shareholders exists in the day-to-day property management operation. The
Company expects to maximize current and future cash flows by enhancing its
property management operation with its in-depth knowledge of its markets, its
emphasis on customer satisfaction, and its commitment to capital expenditure
programs.

In addition, the Company's property management teams focus on providing
superior service to the Company's residents in an effort to ensure customer
satisfaction. In so doing, the Company successfully expects to retain current
residents and attract new residents.

Financing Strategies

Following the completion of the Offering and the Pending Acquisitions, on
a pro forma as adjusted basis, the Company's ratio of Company Debt to total
market capitalization will be approximately 40%, and Company Debt will be
approximately $370 million. Of the $370 million of pro forma as adjusted
Company Debt, approximately $364 million (98%) is fixed-rate indebtedness with
a weighted average final maturity of approximately 15 years and a weighted
average interest rate of 7.8%.

The Company has a policy of limiting Company Debt to 50% of the value of
its assets. The Organizational Documents, however, do not limit the amount of
Company Debt that the Company may incur. The amount of indebtedness the Company
may incur, and the policies with respect thereto, are solely within the
discretion of the Company's Board of Directors, and as such, may be amended by
the Board of Directors without shareholder approval. The Company believes that
based upon both its internally-generated estimated values and upon estimated
values calculated using valuation parameters consistent with the Company's
credit facilities, the Company is in compliance with such debt policy and will
continue to be in compliance with such policy, upon fully drawing the unused
commitments under the BankBoston and FNMA Facilities.

The Company believes that its access to capital through its credit
facilities, sources of private equity and debt financing and utilization of
Units as currency, as well as its access to the public capital markets, provide
it with capital to fund its acquisition, development and capital expenditure
requirements and a competitive advantage over certain competitive bidders who
have less access to capital. Further, the Company intends to negotiate with
lenders to convert the BankBoston Facility from a secured to an unsecured
facility.

Acquisition Activities

Since January 1, 1997, the Company has acquired 12 apartment communities
containing approximately 2,800 units for a total investment of approximately
$136.1 million, including the assumption of approximately $34.8 million of
mortgage indebtedness and the issuance of approximately $12.5 million of Units.

In January 1997, the Company acquired Westchester West, a 345-unit
apartment community located in Silver Spring, Maryland for a total investment
of approximately $17.7 million, which includes approximately $1.6 million of
anticipated additional acquisition capital expenditures. The Company paid cash
of approximately $900,000, assumed debt of approximately $11.4 million and
issued 388,333 Units, having a value of approximately $3.8 million, the
issuance of 50,000 Units of such amount is deferred until January 1998.

S-26
<PAGE>

In May 1997, in conjunction with the exchange of Brookwood Village
(described below under "Divestiture of Retail Assets"), the Company acquired
the Polos West and Sun Chase apartment communities for an aggregate total
investment of approximately $15.8 million, which includes the assumption of
$5.7 million of mortgage indebtedness and $1.9 million of anticipated
additional acquisition capital expenditures. Polos West is a 200-unit garden
style apartment community located in Winter Garden, Florida, a suburb of
Orlando. Sun Chase is a 168-unit garden style apartment community located in
Bradenton, Florida.

Between July 1, 1997 and September 30, 1997, the Company acquired four
town home apartment communities containing approximately 600 units which are
located in Glen Burnie and Millersville, Maryland, both of which are suburbs of
Baltimore. The properties were acquired for a total investment of $31.6
million, which includes $1 million in cash, the assumption of $19.8 million of
mortgage and other indebtedness, the issuance of Units valued at $6.6 million,
of which the issuance of $760,000 is deferred until January, 1998, and an
anticipated investment of approximately $4.2 million of additional acquisition
capital expenditures.

In October 1997, the Company also acquired five apartment communities
containing approximately 1,500 units which are located in Dallas, Texas for a
total investment of approximately $70.9 million in cash, including an
anticipated investment of approximately $3.7 million of additional acquisition
capital expenditures.

Upon completion of this Offering, the Company intends to close the Questar
Transaction, which will add 18 apartment communities consisting of
approximately 3,700 units to the Company's portfolio.

In 1996, the Company acquired the following eight apartment communities
for an aggregate total investment of approximately $129 million, including the
issuance of 2,123,303 Units valued at approximately $22.2 million and the
assumption of approximately $53.2 million of mortgage indebtedness:

<TABLE>
<CAPTION>
Property Location Units
- ----------------------------- ------------------- ------
<S> <C> <C>
Benchmark ................... Irving, TX 250
Golf Side ................... Haltom City, TX 402
Hunters Glen ................ Plano, TX 276
Pleasant Woods ............. Dallas, TX 208
Prescott Place I .......... Mesquite, TX 318
Prescott Place II .......... Mesquite, TX 336
Providence ................ Dallas, TX 244
Berkshire Towers .......... Silver Spring, MD 1,119
------
Total .......................................... 3,153
======
</TABLE>

Development Activities

Certain of the Company's markets have provided opportunities to develop
new apartment communities and to expand existing communities which provide
attractive yields on investment. The Company's team has developed apartment
communities in Raleigh, North Carolina; Greenville, South Carolina; and
Atlanta, Georgia, and its development pipeline includes projects in Baltimore,
Maryland; Dallas, Texas; Durham, North Carolina; and Greenville, South
Carolina. The Company has completed four development/expansions and currently
has three such projects in progress with respect to its existing portfolio at
an aggregate estimated total investment of approximately $64.2 million, and is
under contract to acquire four development projects currently in progress for
an aggregate estimated total investment of approximately $74.4 million. The
Company intends to continue to develop and build at a rate of 500 to 1,500
units per year.

In the first quarter of 1997, the Company completed the construction of a
96-unit expansion of Brookfield Trace, an existing community in Mauldin
(Greenville), South Carolina for a total investment of approximately $6.7
million.

S-27
<PAGE>

The following table sets forth certain data regarding the Company's development
pipeline:

<TABLE>
<CAPTION>
Planned Estimated Estimated
Apartment Total Completion
Property Location Units Investment Date Status
- ---------------------------- ---------------- ----------- --------------- --------------------- -------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Developments in Progress:
Liriope(1) ............... Belcamp, MD 84 $ 7,600(2) Fourth Quarter 1997 Under construction
Granite Run(1) ............ Baltimore, MD 264 25,500(2) Fourth Quarter 1998 Under construction
Berkshires at
Crooked Creek ............ Durham, NC 296 20,200 Fourth Quarter 1998 Under construction
Indigo land ............... Dallas, TX 120 9,000 First Quarter 1999 In design
Avalon I(1) ............... Pikesville, MD 258 25,900(2) Fourth Quarter 1999 In design
Avalon II(1) ............... Pikesville, MD 147 15,400(2) Fourth Quarter 1999 In design
Inglesby land ............ Greenville, SC 500 35,000 First Quarter 2000 In design
Land Held for Development:
Garlington Road land ...... Greenville, SC -- -- -- --
Total .................. 1,669 $ 138,600
====== ===========
</TABLE>

Divestiture of Retail Assets

While the Company investment and ownership focus is centered on apartment
communities, it also owns a portfolio of three shopping centers. In 1996, the
Company announced a plan to liquidate its retail portfolio over time and
reinvest the proceeds in apartment community acquisitions or developments. To
date, the Company has sold four of its retail assets for approximately $52
million, and is under contract to sell another retail asset, Tara Crossing, for
approximately $9.5 million.

Other Dispositions

In January 1997, the Company sold Howell Commons Apartments, a 348-unit
apartment community located in Greenville, South Carolina for approximately $13
million. This property, which the Company had owned since its formation, was
located in a less accessible location than the Company's other properties in
Greenville.

Financing Activities

On September 25, 1997, the Company issued approximately 2,737,000 shares
of its Series 1997-A Convertible Preferred Stock in a private placement to
Westbrook Real Estate Fund II, L.P. and Morgan Stanley Asset Management
resulting in gross proceeds of approximately $68.4 million. These proceeds were
used to acquire five unleveraged apartment communities containing approximately
1,500 units in Dallas, Texas. The Series 1997-A Preferred will pay a preferred
dividend of 9% based on the purchase price of $25.00 per share and are
convertible in the aggregate into 5,643,420 shares of Common Stock. Holders of
the Series 1997-A Preferred are entitled to vote on an as converted basis,
together with the holders of Common Stock as one class, on all matters on which
the holders of Common Stock are entitled to vote. Upon completion of the
Offering, the holders of the Series 1997-A Preferred will have approximately
13.5% of the voting rights with respect to matters upon which the Series 1997-A
Preferred and Common Stock vote as a class. Further, the holders of the Series
1997-A Preferred are entitled to elect one director to the Board of Directors
of the Company. Paul D. Kazilionis, a managing principal and co-founder of
Westbrook Real Estate Partners, L.L.C., the general partner of Westbrook, has
been elected to the Company's Board of Directors by direction of the holders of
the Series 1997-A Preferred.

As of the date hereof, the Company has 6,281,909 outstanding Units which,
if converted on November 4, 1997 at the closing sales price per share of Common
Stock of $11.00, would represent approximately $69.1 million of additional
equity capital. These Units were issued in connection with the Company's
transition to self-administration and self-management and the property
acquisitions described above. Upon the closing of the Questar Transaction,
1,766,996 additional Units will be issued. See "The Questar Transaction."

S-28
<PAGE>

The Company has two secured credit facilities, the BankBoston Facility and
the FNMA Facility, which is comprised of the FNMA Revolver and FNMA Term. As of
the date hereof, the Company has approximately $26.0 million outstanding under
the BankBoston Facility, approximately $29 million outstanding under the FNMA
Revolver and approximately $63.3 outstanding under the FNMA Term. A portion of
the Offering proceeds will be used to pay down BankBoston Facility and the FNMA
Revolver, which will leave the Company with approximately $85 million in unused
commitments under such credit facilities for acquisitions or other corporate
purposes. The Company will also have additional borrowing capacity against its
unencumbered assets.

In addition, the Company finances its property acquisitions with mortgage
loans on individual apartment communities. As of September 30, 1997, the
Company had 19 of its apartment communities encumbered by fixed-rate mortgages
with an aggregate outstanding principal balance of approximately $145 million
and three apartment communities encumbered by fixed-rate tax-exempt mortgages
with an aggregate outstanding principal balance of approximately $26 million.
These mortgages have a weighted average interest rate of 7.8% and a weighted
average maturity of 13 years. Further, the Company has a variable rate
tax-exempt bond encumbered by one property with a semi-annual repriced floating
interest rate of 70% of the prime rate, which matures in December 2003.

Following the completion of the Offering and the Pending Acquisitions, on
a pro forma as adjusted basis, the Company's ratio of total Company Debt to
total market capitalization will be approximately 40%, and Company Debt will be
approximately $370 million. Of the $370 million of pro forma as adjusted
Company Debt, approximately $364 million (98%) is fixed-rate indebtedness with
a weighted average final maturity of approximately 15 years and a weighted
average interest rate of 7.8%.

The Company has a policy of limiting Company Debt to 50% of the value of
its assets. The amount of indebtedness the Company may incur, and the policies
with respect thereto, are solely within the discretion of the Company's Board
of Directors, and as such, may be amended by the Board of Directors without
shareholder approval. The Company believes that based upon both its
internally-generated estimated values and upon estimated values calculated
using valuation parameters consistent with the Company's credit facilities, the
Company is in compliance with such debt policy and will continue to be in
compliance with such policy, upon fully drawing the unused commitments under
the BankBoston and FNMA Facilities.

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 as
counterparty for a $40 million notional contract, thereby fixing variable rate
exposure at 6.06% on that amount. The Company will continually reassess its
rate exposure relative to debt levels and will execute additional interest rate
protection as circumstances dictate. As of September 30, 1997, the Company has
fixed or hedged debt of 90% of total debt.

USE OF PROCEEDS

The net cash proceeds to the Company from the Offering, after deducting
underwriting discounts and commissions and estimated expenses of the Offering,
are estimated to be approximately $103.2 million (approximately $118.8 million
if the Underwriters' over-allotment option is exercised in full). The Company
intends to use the net proceeds from the Offering to fund $32.1 million of the
Questar Transaction, to repay approximately $26.0 million outstanding under the
BankBoston Facility, approximately $29 million outstanding under the FNMA
Revolver, approximately $8 million of indebtedness under the Company's Master
Repurchase Agreement with CS First Boston ("Master Repurchase Agreement"), and
the remainder for general corporate purposes. To the extent that the
Underwriters' over-allotment option is exercised in full, the Company expects
to use the additional net proceeds of up to approximately $15.6 million for
future acquisition and development activities and general corporate purposes.
The outstanding amounts under the BankBoston Facility and FNMA Revolver to be
repaid with the proceeds of the Offering have a weighted average maturity of
one year and eight months and a weighted average interest rate of 6.6%.

Pending application of the net proceeds as set forth above, such net
proceeds will be invested in interest-bearing accounts and short-term,
interest-bearing securities, which are consistent with the Company's intention
to qualify for taxation as a REIT. Such investments may include, for example,
obligations of the Government National Mortgage Association, government and
government agency securities, certificates of deposit, commercial paper, money
market funds that invest in government securities and interest-bearing bank
deposits.

S-29
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
June 30, 1997 on a historical basis, on a pro forma basis assuming, as of such
date, (i) the completion of the Offering and the application of the net
proceeds as described under the caption "Use of Proceeds," (ii) the acquisition
of the Pending Acquisitions, (iii) the offering of the Series 1997-A Preferred
and the application of the proceeds therefrom, and (iv) the acquisition of the
Recent Acquisitions which occurred after June 30, 1997, and on a pro forma as
adjusted basis assuming the impact of the pro forma adjustments listed above
and additional indebtedness incurred after June 30, 1997 to fund the Company's
capital expenditures and development activities, and for general corporate
purposes. The information set forth in the following table should be read in
conjunction with the financial statements and notes thereto incorporated by
reference herein and in the accompanying Prospectus and the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."

<TABLE>
<CAPTION>
June 30, 1997
Pro Forma
Historical Pro Forma As Adjusted
------------ ----------- ----------------
(in thousands, except per share data)
<S> <C> <C> <C>

INDEBTEDNESS:
Financing Facilities ........................... $ 125,610 $ 55,950 $ 63,345(3)
Mortgage Notes Payable ........................... 165,897 315,237 306,221(4)
MINORITY INTEREST IN OPERATING
PARTNERSHIP: 57,715 84,820 84,820
SHAREHOLDERS' EQUITY:
Preferred Stock, $0.01 par value, 60,000,000 shares
authorized, no shares of Series 1997-A
Convertible Preferred Stock issued and
outstanding; 2,737,000 shares issued and
outstanding on a pro forma and pro forma as
adjusted basis ................................. -- 27 27
Common Stock, $0.01 par value, 140,000,000
shares authorized, 25,987,348 shares issued and
outstanding; 36,387,348 shares issued and
outstanding on a pro forma and pro forma as
adjusted basis(1)(2) ........................... 260 364 364
Additional paid-in capital ..................... 229,016 402,608 402,608
Retained deficit ................................. (12,039) (12,039) (12,039)
Loan receivable-officer ........................ (983) (983) (983)
Treasury stock (506,497 shares of Common Stock) . (1,743) (1,743) (1,743)
--------- --------- ------------
Total capitalization ........................... $ 563,733 $844,241 $ 842,620
========= ========= ============
</TABLE>

- --------

(1) Does not include (a) 6,281,909 shares of Common Stock reserved for issuance
upon the exchange of outstanding Units, (b) 2,997,031 shares of Common
Stock reserved for issuance upon the exercise of outstanding Warrants, (c)
5,643,420 shares of Common Stock reserved for issuance upon conversion of
the Series 1997-A Preferred, (d) 1,766,996 shares of Common Stock to be
reserved for issuance upon the exchange of 1,766,996 Units (based on a
Common Stock price of $11.64 per share which is the share price to be used
in calculating the amount of Units and shares of Common Stock to be issued
in connection with the Questar Transaction) to be issued in connection
with the Questar Transaction, (e) 1,114,300 shares of Common Stock
reserved for issuance on the exercise of the outstanding Options, 824,000
of which are currently exercisable and 320,880 of which become exercisable
in one to three years, (f) 406,993 Units related to property acquisitions
which are deferred as to issuance until January 1, 1998, (g) 500 shares of
Common Stock issued in connection with the exercise of 500 Warrants,
subsequent to June 30, 1997 and (h) 338,053 shares of Common Stock issued
in connection with the exchange of 338,053 Units, subsequent to June 30,
1997.

(2) Assumes the Underwriters' over-allotment option to purchase up to
1,500,000 shares of Common Shares is not exercised. See "Underwriting."

(3) Pro Forma As Adjusted Indebtedness-Financing Facilities consists of Pro
Forma Indebtedness-Financing Facilities of $55,950 adjusted for the effect
of additional indebtedness incurred after June 30, 1997 of $7,395.

(4) Pro Forma As Adjusted Indebtedness-Mortgage Notes Payable consists of Pro
Forma Indebtedness-Mortgage Notes Payable of $315,237 adjusted for the
effect of the repayment of indebtedness after June 30, 1997 of $9,016.

S-30
<PAGE>

SELECTED FINANCIAL AND OPERATING DATA

The unaudited pro forma adjustments and operating information for the six
months ended June 30, 1997 and the year ended December 31, 1996 are presented
as if the completion of the Offering, the completion of the Pending
Acquisitions, the issuance of Series 1997-A Preferred Stock, the conversion to
self-management and self-administration and all acquisition and disposition
activity during the respective period occurred at the beginning of the periods
presented. By necessity, such pro forma operating information incorporates
certain assumptions which are described in the notes to the pro forma financial
information included or incorporated by reference herein. The unaudited pro
forma balance sheet data is presented as if the aforementioned transactions had
occurred on June 30, 1997.

S-31
<PAGE>

Berkshire Realty Company, Inc. and Subsidiaries
Selected Financial and Operating Data

<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------------------
Pro Forma Historical
------------- ---------------------------
1997 1997 1996
------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C>
Operating Data:
Revenue ........................... $ 73,898 $ 52,088 $ 42,590
Expenses:
Property operating .................. 20,929 15,425 11,949
Real estate taxes .................. 7,214 4,718 4,316
Property management fees ............ 29 819 1,952
Property management operations . 5,010 2,156 657
General and administrative ......... 2,426 2,426 2,319
Interest ........................... 15,131 11,485 8,917
Amortization of intangible assets 5,068 1,527 448
Costs associated with Advisor
Transaction ........................ 1,200 1,200 --
Non-recurring charges ............... -- -- --
Provision for losses ............... -- -- --
Depreciation and amortization ...... 23,207 15,579 12,986
------------ ------------ ------------
Total expenses ..................... 80,214 55,335 43,544
------------ ------------ ------------
Income (loss) from operations ...... (6,316) (3,247) (954)
Minority interest in Operating
Partnership ........................ 1,634 571 62
Income (loss) from joint venture,
net of minority interest ......... 308 (418) 616
------------ ------------ ------------
Income (loss) before gains on sales
and extraordinary items ............ (4,374) (3,094) (276)
Gains on sales of properties, net of
minority interest .................. -- 5,365 --
------------ ------------ ------------
Net income (loss) before
extraordinary items ............... (4,374) 2,271 (276)
Extraordinary items, net of minority
interest ........................... -- -- --
------------ ------------ ------------
Net income (loss) .................. (4,374) 2,271 (276)
Income allocated to preferred
shareholders ........................ 3,079 -- --
------------ ------------ ------------
Net income (loss) available to
common shareholders ............... $ (7,453) $ 2,271 $ (276)
============ ============ ============
Net income (loss) per share ......... $ (0.21) $ 0.09 $ (0.01)
============ ============ ============
Weighted average shares of
Common Stock outstanding ............ 35,851 25,451 25,393
Weighted average shares of
Common Stock and Units
outstanding ........................ 43,400(1) 30,852(2) 27,109(3)
Balance Sheet Data, at period end:
Real estate, before accumulated
depreciation ........................ $ 884,003 $ 630,365 $ 640,521
Real estate, after accumulated
depreciation ........................ 775,205 510,481 535,310
Cash and cash equivalents ............ 18,645 8,231 9,311
Total assets ........................ 860,753 578,115 590,609
Total indebtedness .................. 371,187 291,507 290,764
Shareholders' equity ............... 388,234 214,511 249,086

<CAPTION>
Year ended December 31,
-----------------------------------------------------
Pro Forma Historical
--------------- -------------------------------------
1996 1996 1995 1994
--------------- --------------- ----------- ---------
(unaudited)
<S> <C> <C> <C> <C>
Operating Data:
Revenue ........................... $ 144,894 $ 93,002 $ 74,441 $ 68,471
Expenses:
Property operating .................. 45,516 29,374 22,911 22,355
Real estate taxes .................. 12,965 8,654 7,016 6,401
Property management fees ............ 171 4,325 3,421 3,069
Property management operations . 5,753 -- -- --
General and administrative ......... 4,670 4,646 2,920 3,279
Interest ........................... 30,817 20,501 15,618 10,794
Amortization of intangible assets 10,137 1,121 -- --
Costs associated with Advisor
Transaction ........................ -- -- -- --
Non-recurring charges ............... 442 442 1,728 2,555
Provision for losses ............... 4,700 7,500 -- --
Depreciation and amortization ...... 46,031 29,050 21,984 19,507
------------ ------------ -------- ---------
Total expenses ..................... 161,202 105,613 75,598 67,960
------------ ------------ -------- ---------
Income (loss) from operations ...... (16,308) (12,611) (1,157) 511
Minority interest in Operating
Partnership ........................ 3,913 1,136 70 --
Income (loss) from joint venture,
net of minority interest ......... 754 (2,737) 1,387 1,178
------------ ------------ -------- ---------
Income (loss) before gains on sales
and extraordinary items ............ (11,641) (14,212) 300 1,689
Gains on sales of properties, net of
minority interest .................. -- 53 15,386 4,069
------------ ------------ -------- ---------
Net income (loss) before
extraordinary items ............... (11,641) (14,159) 15,686 5,758
Extraordinary items, net of minority
interest ........................... -- (149) (901) --
------------ ------------ -------- ---------
Net income (loss) .................. (11,641) (14,308) 14,785 5,758
Income allocated to preferred
shareholders ........................ 6,158 -- -- --
------------ ------------ -------- ---------
Net income (loss) available to
common shareholders ............... $ (17,799) $ (14,308) $ 14,785 $ 5,758
============ ============ ======== =========
Net income (loss) per share ......... $ (0.50) $ (0.56) $ 0.58 $ 0.23
============ ============ ======== =========
Weighted average shares of
Common Stock outstanding ............ 35,793 25,393 25,393 25,391
Weighted average shares of
Common Stock and Units
outstanding ........................ 43,342(1) 27,914(3) 25,752 25,391
Balance Sheet Data, at period end:
Real estate, before accumulated
depreciation ........................ -- $ 646,002 $541,143 $510,578
Real estate, after accumulated
depreciation ........................ -- 519,057 449,859 418,333
Cash and cash equivalents ............ -- 7,016 11,143 10,492
Total assets ........................ -- 569,670 486,968 458,207
Total indebtedness .................. -- 295,166 211,291 179,079
Shareholders' equity ............... -- 223,654 260,788 268,591
</TABLE>

S-32
<PAGE>

<TABLE>
<CAPTION>
Six months ended June 30, Year ended December 31,
--------------------------------------- --------------------------------------------------
Pro Forma Historical Pro Forma Historical
----------- --------------------------- ----------- --------------------------------------
1997 1997 1996 1996 1996 1995 1994
----------- ------------- ------------- ----------- ------------ ------------ ------------
(unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Funds from operations (4)
(unaudited) ..................... $20,756 $ 16,450 $ 14,081 $40,710 $ 28,939 $ 26,031 $ 25,707
Company's share of funds from
operations (4) (unaudited) ...... 17,146 13,570 13,190 33,619 26,325 25,668 25,707
Cash flow provided by operating
activities (5) .................. 15,743 13,545 27,504 25,029 22,432
Cash flow provided by (used in)
investing activities (5) ......... 19,955 (40,823) (36,393) (25,049) (53,784)
Cash flow provided by (used in)
financing activities (5) ......... (34,483) 25,447 4,761 670 33,835
</TABLE>

- --------

(2) Excludes the effect of 150,000 Units related to property acquisitions which
are deferred as to issuance until January 1998.
(3) Excludes the effect of 543,500 Units related to a property acquisition
which are deferred as to issuance until January 1, 1997 through January 1,
1998.
(4) Industry analysts generally consider FFO to be an appropriate measure of
the performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities, it
provides investors with an understanding of the ability of the company to
incur and service debt and make capital expenditures. However, FFO should
not be considered by the reader as a substitute to net income as an
indicator of the Company's operating performance or to cash flows as a
measure of liquidity. The Company believes that in order to facilitate a
clear understanding of the operating results of the Company, FFO should be
analyzed with net income (loss) as presented in the financial statements
and information presented elsewhere. FFO is presented in accordance with a
resolution adopted by the Board of Governors of the National Association
of Real Estate Investment Trusts, and is defined as net income (loss)
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of properties,
plus depreciation and amortization on real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures. The
methodology used by the company when calculating FFO may differ from that
of other equity REIT's and, therefore, may not be comparable to such other
REIT's. In addition, FFO does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations or other commitments. FFO is presented
for the periods presented as follows:

(footnotes continued on following page)

S-33
<PAGE>

(footnotes continued from previous page)

<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------------
(unaudited)
Pro Forma Historical
----------- ------------------------
1997 1997 1996
----------- ------------ -----------
(in thousands, except per share
data)
<S> <C> <C> <C>
Reconciliation of Net Income to FFO:
Net income (loss) from operations ......... $ (6,316) $ (3,247) $ (954)
Joint venture net operating income ......... 676 1,412 1,620
Amortization of intangibles ............... 5,068 1,526 448
Cost associated with Advisor
Transaction ................................. 1,200 1,200 --
Depreciation .............................. 23,207 15,559 12,967
Non-recurring charges ..................... -- -- --
Provision for losses ........................ -- -- --
Income allocated to preferred
shareholders .............................. (3,079) -- --
-------- -------- ---------
Funds from operations ..................... $ 20,756 $ 16,450 $ 14,081
======== ======== =========
Reconciliation of FFO to net cash
provided by operating activities:
Funds from operations ..................... $ 16,450 $ 14,081
Joint venture net operating income ......... (1,412) (1,620)
Discount amortization ..................... (75) (313)
Amortization of deferred financing
costs .................................... 721 477
Distributions from joint venture(s) ......... -- 1,304
Issuance of stock warrants .................. -- --
Change in current assets and liabilities . 11 (404)
Non recurring charges ..................... -- --
Stock purchase loan forgiveness ............ 17 --
Non-employee stock option plan ............ 11 --
Other ....................................... 20 20
-------- ---------
Net cash provided by operating
activities ................................. $ 15,743 $ 13,545
======== =========

<CAPTION>
Year ended December 31,
--------------------------------------------------
(unaudited)
Pro Forma Historical
----------- --------------------------------------
1996 1996 1995 1994
----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Reconciliation of Net Income to FFO:
Net income (loss) from operations ......... $(16,308) $ (12,612) $ (1,157) $ 511
Joint venture net operating income ......... 1,866 3,437 3,476 3,134
Amortization of intangibles ............... 10,137 1,121 -- --
Cost associated with Advisor
Transaction ................................. -- -- -- --
Depreciation .............................. 46,031 29,051 21,984 19,507
Non-recurring charges ..................... 442 442 1,728 2,555
Provision for losses ........................ 4,700 7,500 -- --
Income allocated to preferred
shareholders .............................. (6,158) -- -- --
--------- --------- -------- ---------
Funds from operations ..................... $ 40,710 $ 28,939 $ 26,031 $ 25,707
========= ========= ======== =========
Reconciliation of FFO to net cash
provided by operating activities:
Funds from operations ..................... $ 28,939 $ 26,031 $ 25,707
Joint venture net operating income ......... (3,437) (3,476) (3,134)
Discount amortization ..................... (512) (535) (1,468)
Amortization of deferred financing
costs .................................... 1,052 1,446 1,097
Distributions from joint venture(s) ......... -- 1,387 1,178
Issuance of stock warrants .................. -- -- 1,638
Change in current assets and liabilities . 1,881 1,904 (31)
Non recurring charges ..................... (442) (1,728) (2,555)
Stock purchase loan forgiveness ............ -- -- --
Non-employee stock option plan ............ 23 -- --
Other ....................................... -- -- --
--------- -------- ---------
Net cash provided by operating
activities ................................. $ 27,504 $ 25,029 $ 22,432
========= ======== =========
</TABLE>

S-34
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

General

The Company's operating performance as measured by cash flows and FFO has
been affected over the last several years by events of a non-recurring nature.
The Company's transition to a self-advised, self-managed UPREIT, the divesture
of a large portion of its retail portfolio, and the restructuring of maturities
in connection with certain of the Company's indebtedness have each had a
dilutive impact on operating cash flow and FFO in the short term, but have been
implemented to increase, and management expects such steps will increase,
operating cash flows and FFO in the long term.

The Company's decision to become self-advised in 1996, while increasing
cash flows, negatively impacted FFO for 1996 due to a change in accounting
treatment associated with property acquisition costs. Prior to becoming
self-advised, the acquisition fees paid to the Company's advisor were
capitalized into the cost of acquired assets. After becoming self-administered,
the internalized acquisitions staff and the associated overhead is being
expensed, resulting in dilution to FFO in 1996 when compared to 1995.

The Company's retail portfolio has historically grown at a much lower rate
than the apartment portfolio. The percentage contribution to NOI generated by
the retail portfolio has diminished over time due to the growth in the
apartment portfolio. On a pro forma basis for the year ended December 31, 1996,
the retail NOI accounted for approximately 5.0% of the Company's total NOI.
Retail same store NOI grew at a pace of 2.6%, 4.8% and 0.6%, respectively, for
the years ended 1994, 1995 and 1996 as compared to apartment same store NOI
growth of 7.3%, 15.5% and 8.9%, respectively, for the same periods. The retail
portfolio represented 40%, 30% and 24% of the Company's same store NOI for the
years ended 1994, 1995 and 1996, respectively. The divestiture of the retail
portfolio will also have a short-term dilutive impact on earnings because the
assets are typically sold at a higher capitalization rate than the
capitalization rate realized from the resulting apartment community
reinvestment.

In 1994, the Company began the process of refinancing approximately $120
million of variable-rate indebtedness to fixed-rate indebtedness to mitigate
both interest rate and maturity risks. Approximately $62 million of fixed-rate
debt was borrowed at interest rates averaging approximately 150 basis points
above the variable-rate indebtedness it replaced, which impacted results of
operations, cash flows and FFO for both 1994 and 1995.

It is not anticipated that the Company will continue to experience
transactions which represent major structural or operational repositionings as
detailed above. The Company has completed all of its major initiatives
associated with restructuring its balance sheet and becoming fully-integrated.
Therefore, FFO is expected to reflect more closely the growth of NOI from the
Company's apartment portfolio.

Liquidity and Capital Resources

As of the closing of the Offering and the Pending Acquisitions, on a pro
forma as adjusted basis, the Company expects to have approximately $85 million
in unused commitments under its credit facilities as well as approximately $21
million of additional borrowing capacity on unencumbered assets. The Company
believes that the credit facilities and future borrowing capacity are adequate
for its short-term capital needs. The Company intends to use these resources
for future acquisitions and development and for other general corporate
purposes.

The Company's policy is to limit Company Debt to 50% of the value of the
Company's assets. The Company has a policy of limiting Company Debt to 50% of
the value of its assets. The Organizational Documents, however, do not limit
the amount of Company Debt that the Company may incur. The amount of
indebtedness the Company may incur, and the policies with respect thereto, are
solely within the discretion of the Company's Board of Directors, and as such,
may be amended by the Board of Directors without shareholder approval. The
Company believes that based upon both its internally-generated estimated values
and upon estimated values calculated using valuation parameters consistent with
the Company's credit facilities, the Company is in compliance with such debt
policy

S-35
<PAGE>

and will continue to be in compliance with such policy, upon fully drawing the
unused commitments under the BankBoston and FNMA Facilities.

The Company has considered its short-term liquidity needs and the adequacy
of its cash flows and other expected liquidity sources to meet these needs. The
Company believes that its principal short-term liquidity needs are to fund
normal recurring capital expenditures, debt service requirements and
distributions on its Series 1997-A Preferred and Common Stock. The Company
anticipates that these needs will be funded from the Company's working capital
and the cash flows provided by operating activities.

The Company expects to meet its long-term liquidity requirements for the
funding of activities such as development, property acquisitions, scheduled
debt maturities, renovations, major rehabilitations and other non-recurring
capital improvements through long-term secured and unsecured indebtedness and
the issuance of additional equity and/or debt securities by the Company and the
Operating Partnership. The Company also intends to borrow under its lines of
credit to fund property acquisitions, development, redevelopment, expansions
and capital improvements on an interim basis.

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% as of June 30, 1997, which
generally reflects current market conditions. In addition, the Company
continues to maintain competitive rental rates by providing customer-oriented
services and well-maintained units, which the Company believes distinguishes it
from its competition. Through intense asset management efforts, the Company
expects to realize increased performance from its real estate assets and to
maintain its favorable occupancy and rental rates; however, no assurances can
be made in this regard.

The Company is involved in 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.

Forward-Looking Statements

This Prospectus Supplement and the Prospectus accompanying it and other
reports incorporated by reference contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from results or plans
expressed or implied by such forward-looking statements. Such factors include,
among other things, adverse changes in the real estate markets, risk of default
under the Company's outstanding indebtedness due to increased borrowing,
financial condition and bankruptcy of tenants, environmental/safety
requirements, adequacy of insurance coverage, and general and local economic
and business conditions. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included or incorporated by reference in this
Prospectus will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements, the inclusion of such information,
including the information presented herein and under "Business and
Properties--Market Information," should not be regarded as a representation by
the Company or any other person that the objectives and plans of the Company
will be achieved.

S-36
<PAGE>

BUSINESS AND PROPERTIES

The Company operates in the four regions defined by the Company as: (i)
Mid-Atlantic (Pennsylvania, Maryland, Delaware, Virginia and Washington, D.C.);
(ii) Southeast (North Carolina, South Carolina, Georgia and Tennessee); (iii)
Florida, and (iv) Texas. The following charts summarize the Company's
Properties, as a percentage of total units based on its geographic region and
asset class:

[PIE CHART]

[Tabular Representation of Pie Charts]

Geographic Distribution(1)

Mid-Atlantic(2) 5,990 (32%)
Southeast 4,917 (26%)
Florida 2,120 (12%)
Texas 5,662 (30%)

Asset Class(1)(3)

Luxury 3,784 (20%)
Middle 10,927 (59%)
Moderate 3,978 (21%)

- ------------
(1) Based upon the number of apartment units.
(2) Includes one apartment community containing 214 apartment units located in
Massapequa, New York.
(3) As determined by the Company's management.

S-37
<PAGE>

The following table sets forth certain data regarding the Properties.

<TABLE>
<CAPTION>
Month/Year Apartment
Apartment Community Location Acquired Units
- -------------------------------------- ------------------- ------------ -----------
<S> <C> <C> <C>
Mid-Atlantic Region (3)
Arborview (4) ........................ Belcamp, MD Pending 288
Berkshires by the Chesapeake ......... Millersville, MD Jul. 97 144
Berkshire Towers ..................... Silver Spring, MD May 96 1,119
Calvert's Walk (4) .................. Belair, MD Pending 276
Courtleigh (4) ..................... Baltimore, MD Pending 280
The Cove ........................... Glen Burnie, MD Jul. 97 181
Coventry (4) ........................ Baltimore, MD Pending 122
Diamond Ridge (4) .................. Baltimore, MD Pending 92
The Estates (4) ..................... Pikesville, MD Pending 208
Fairway Ridge (4) .................. Baltimore, MD Pending 274
Hazelcrest (4) ..................... Baltimore, MD Pending 48
Heraldry Square (4) .................. Baltimore, MD Pending 270
Hilltop (4) ........................ Baltimore, MD Pending 50
Jamestown (4) ........................ Baltimore, MD Pending 335
Kingswood I (4) ..................... Baltimore, MD Pending 203
Kingswood II (4) ..................... Baltimore, MD Pending 203
Lamplighter ........................ Baltimore, MD Sep. 97 168
Lighthouse ........................ Glen Burnie, MD Jul. 97 120
Ridgeview Chase (4) .................. Westminster, MD Pending 204
Rolling Wind (4) ..................... Baltimore, MD Pending 280
Stratton Meadows (4) ............... Baltimore, MD Pending 268
Warren Park (4) ..................... Baltimore, MD Pending 200
Westchester West .................. Silver Spring, MD Jan. 97 345
Williston (4) ........................ Baltimore, MD Pending 98
Southpointe at Massapequa ............ Massapequa, NY Aug. 93 214
------
Subtotal/Weighted Average ...... 5,990
Southeast Region
Brookfield Trace (5) ............... Mauldin, SC Nov. 95 300
Brookwood Valley ..................... Mauldin, SC Apr. 95 226
Huntington Downs (6) ............... Greenville, SC Jan. 88 502
The Oaks (6) ........................ Mauldin, SC Mar. 90 176
Roper Mountain (6) .................. Greenville, SC Jan. 88 248
Stoneledge (6) ..................... Greenville, SC Jan. 88 320
Cumberland Cove ..................... Raleigh, NC Dec. 91 552
East Lake ........................... Charlotte, NC Oct. 93 214
The Timbers ........................ Charlotte, NC Mar. 93 343
Arbors at Breckenridge ............... Duluth, GA Dec. 93 514
The Avalon on Abernathy ............ Atlanta, GA Jun. 92 240
Huntington Chase ..................... Norcross, GA Jun. 93 467
British Woods ........................ Nashville, TN Nov. 95 264
Highland Ridge ..................... Madison, TN Nov. 95 280
Windover ........................... Knoxville, TN Nov. 95 271
------
Subtotal/Weighted Average ...... 4,917

S-38
<PAGE>

<TABLE>
<CAPTION>
Month/Year Apartment
Apartment Community Location Acquired Units
- ----------------------------------------- ----------------------- ------------ -----------
<S> <C> <C> <C>
Florida
Altamonte Bay Club ..................... Altamonte Springs, FL Feb. 93 224
The Lakes at Jacaranda (6) ............ Plantation, FL Mar. 90 340
Newport ................................. Tampa, FL Feb. 93 320
Park Colony ........................... Hollywood, FL Jul. 94 316
Plantation Colony ..................... Plantation, FL Dec. 93 256
Polos West .............................. Winter Garden, FL May 97 200
Sun Chase .............................. Bradenton, FL May 97 168
Woodland Meadows ........................ Tamarac, FL Oct. 92 296
-------
Subtotal/Weighted Average ......... 2,120

Texas
Benchmark .............................. Irving, TX Jun. 96 250
Golf Side .............................. Haltom City, TX Jun. 96 402
Hunters Glen ........................... Plano, TX Jun. 96 276
Huntington Brook ........................ Dallas, TX Oct. 97 320
Huntington Lake ........................ Dallas, TX Oct. 97 405
Huntington Ridge ........................ Irving, TX Oct. 97 232
Indigo on Forest ........................ Dallas, TX Aug. 94 1,217
Kings Crossing ........................ Kingwood, TX Jun. 94 404
Kingwood Lakes ........................ Kingwood, TX Jun. 94 390
Pleasant Woods ........................ Dallas, TX Jun. 96 208
Prescott Place ........................ Mesquite, TX Jun. 96 318
Prescott Place II ..................... Mesquite, TX Nov. 96 336
Providence .............................. Dallas, TX Jun. 96 244
River Oaks .............................. Houston, TX May 95 136
Summer Place ........................... Addison, TX Oct. 97 212
Sweetwater .............................. Richardson, TX Oct. 97 312
-------
Subtotal/Weighted Average ......... 5,662
-------
Total Portfolio/Weighted Average ... 18,689
=======

(2) Amount represents the average monthly rental rate for communities
stabilized for the entire period for each period presented. Average
monthly rental rate is defined as the gross actual rental rate for leased
units and the anticipated rental rate for unoccupied units.
(3) Includes apartment units located in New York, which the Company does not
consider part of its Mid-Atlantic Region.
(4) Pending Acquisition. Average Occupancy and Average Monthly Rent Per Unit
was calculated by Questar.
(5) The Company completed a 96-unit expansion in February 1997. Such additional
apartment units were excluded from the calculation of Average Occupancy
and Average Monthly Rent Per Apartment Unit.
(6) Acquired by the Company's predecessors.

S-39
<PAGE>

The following table sets forth certain data regarding the Company's development
pipeline:

<TABLE>
<CAPTION>
Planned Estimated Estimated
Apartment Total Completion
Property Location Units Investment Date Status
- ---------------------------- ---------------- ----------- --------------- --------------------- -------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Developments in Progress:
Liriope (1) ............... Belcamp, MD 84 $ 7,600(2) Fourth Quarter 1997 Under construction
Granite Run (1) ............ Baltimore, MD 264 25,500(2) Fourth Quarter 1998 Under construction
Berkshires at
Crooked Creek ............ Durham, NC 296 20,200 Fourth Quarter 1998 Under construction
Indigo land ............... Dallas, TX 120 9,000 First Quarter 1999 In design
Avalon I (1) ............... Pikesville, MD 258 25,900(2) Fourth Quarter 1999 In design
Avalon II (1) ............ Pikesville, MD 147 15,400(2) Fourth Quarter 1999 In design
Inglesby land ............ Greenville, SC 500 35,000 First Quarter 2000 In design
Land Held for Development:
Garlington Road land ...... Greenville, SC -- -- -- --
Total .................. 1,669 $ 138,600
====== ===========
</TABLE>

The following data sets forth certain data regarding the Company's retail
assets:

<TABLE>
<CAPTION>
Year Occupancy as of
Retail Property Location Acquired Sq. Ft. June 30, 1997 December 31, 1996
- -------------------------- ------------------- ---------- --------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
College Plaza ............ Fort Myers, FL 1991 83,962 90% 95%
Spring Valley (1) ...... Spring Valley, NY 1991 320,684 97 98
Tara Crossing (2) ...... Jonesboro, GA 1991 235,181 88 90
-------
Total ............... 639,827
=======
</TABLE>

- ----------------
(1) The Company holds a 50.1% joint venture interest in this Property.
(2) The Company has executed a contract for sale with respect to this property.

Market Information

The Company continuously analyzes its investment strategy utilizing both
its internally generated market information and the market research reports of
M/PF Research, Inc., a nationally recognized real estate consulting company
("M/PF"). When formulating its acquisition, development and disposition
strategies, the Company tracks and analyzes the following information with
respect to its existing and targeted new markets:

The Economy. The Company analyzes the national, regional, individual
market and submarket economic conditions on a quarterly basis using employment
growth and absorption statistics and three-year projections supplied by M/PF.

The Residential Markets. The Company tracks both single-family and
multifamily trends on a historical basis. Statistics relating to construction
permits, potential developments and estimated employment growth are used to
create a three-year forecast of expected absorption as well as rental rate and
occupancy growth.

In 1996, the Company's assessment of its markets indicated (a) the 1997
estimated employment growth for all of the Company's existing markets (except
for Baltimore, Maryland) was expected to exceed the national average of
approximately 1.5%; (b) increased rental demand in the Florida and Texas
regions driven by strong employment growth despite increased apartment
construction in such regions, signalling the potential for occupancy and rental
rate increases; (c) an improving economy and limited new apartment construction
in Maryland, signalling the potential for occupancy and rental rate increases
in such market; and (d) increased apartment construction in the Southeast at
levels greater than rental demand, signalling a slowdown in rental increases in
such markets. Based on such information, the Company has been focusing its
acquisition and development activities on selected

S-40
<PAGE>

submarkets within Dallas, Fort Worth, and Houston, Texas; Baltimore, Maryland
(and its surrounding counties); Washington, D.C. and Florida, and, with the
inclusion of the Pending Acquisitions, the Company will have added
approximately 9,700 new apartment units in these markets to its portfolio since
January 1, 1996.

The market data discussed below has been obtained from M/PF, which the
Company believes to be reliable. The data includes forward-looking statements
with respect to employment. These trends may not be realized. Failure of trends
to be realized in one or more markets could materially and adversely affect the
Company's results of operations. See "Risk Factors--General Real Estate Risks."

Major Markets

Each of the markets in which the Company owns greater than 900 apartment
units is briefly summarized below.

Dallas, Texas (4,330 apartment units). Dallas should remain among the
nation's employment growth leaders in the near future. The city is
characterized by a diversified economy, attractive living costs, affordable
business-related costs, a well-trained work force and a central U.S. location
coupled with an extensive transportation network.

Dallas' job base has expanded three to four percent annually since 1993.
Since early 1995, employment growth has produced approximately 60,000 new jobs
annually. Employment growth is projected to exceed the national average over
the next three years.

The service sector is a significant component of Dallas' employment base
and has most recently been responsible for over one-third of the employment
growth. Business services, health care, engineering services and hotel services
have contributed to this growth. Dallas' central U.S. location and low business
and living costs have attracted a large concentration of major corporate
employers and have contributed to its appeal as a product distribution center.
In addition, Dallas firms include high tech industry leaders that develop and
produce defense-related electronics, telecommunications, equipment and computer
chips.

For the second quarter 1997, occupancy was 94.7%. For the year ended
second quarter 1997, same-store rents increased nearly four percent and
employment growth was approximately 71,400 jobs.

Baltimore, Maryland (4,312 apartment units). The Company believes
Baltimore's apartment market prospects are favorable given the projected
shortfall of supply resulting from minimal new apartment construction since
1992. For the year ended second quarter 1997, employment growth gained
momentum, as the Baltimore economy produced approximately 9,100 new jobs.

Baltimore's varied service sector is larger than that in most cities,
especially in the health care and private education segments. This sector,
along with the trade and construction industries, has shown significant
improvement. Baltimore also benefits from a strong presence in the expanding
field of biomedical research and technology, which is centered around the Johns
Hopkins and University of Maryland hospitals, and from the trade and tourism
industries. Trade and tourism hold significant capacity for expansion, due to
improvements to the Baltimore-Washington International Airport, the Baltimore
Convention Center and the appeal of the city's sports-related tourist draws.
Additionally, Baltimore's economy will continue to benefit from spillover
housing demand from metropolitan Washington, D.C. Due to long lead times for
site approvals and the lack of readily available multifamily sites for
development, Baltimore benefits from significant barriers to entry which limit
the supply of housing. Same-store rent growth was approximately two to three
percent as of the year ended second quarter 1997.

Baltimore also benefits from its proximity to Montgomery County, where
average home prices and rental rates are considerably higher than in Baltimore.
Renters and homebuyers, seeking more affordable housing alternatives, have
moved into Baltimore contributing to occupancies of 95.8% for the second
quarter 1997. As of the 1990 Census, Baltimore had about 140 occupied
apartments for every 1,000 local jobs and, since that time, has absorbed some
190 apartments for each 1,000 jobs created. This ratio of apartment demand to
job gains is relatively high given that a sizable portion of Baltimore's
apartment demand is supported by jobs in neighboring Washington, D.C.

Greenville-Spartanburg, South Carolina (1,772 apartment units). Since late
1994, Greenville has experienced a moderate expansion of approximately 8,000 to
12,000 jobs annually. Textile manufacturing has long served as Greenville's
core industry. Most recently, the service sector has experienced substantial
growth, accounting for more than half of all new jobs created over the past
year. Greenville's trade industry has also demonstrated strong performance.
Greenville's location at the intersection of two interstate highways positions
it as an attractive regional distribution hub and allows retailers to serve
both the local populace as well as shoppers

S-41
<PAGE>

from a wide rural area surrounding the city. Clemson University, with an
enrollment of approximately 17,000 students, creates substantial demand for
housing in the Greenville area.

Additionally, Greenville generated jobs in the manufacturing sector from
1993 to 1995, mainly due to the opening of an automobile production plant by
BMW. Although net job reductions in this sector have occurred in 1996 and early
1997, BMW plans to add another 500 jobs by 1998.

The transition from a manufacturing-based economy to one with an emphasis
on services and trade is expected to continue in the area for the foreseeable
future. Greenville is expected to sustain an employment growth pace similar to
the average expansion rate for the nation as a whole. For the year ended second
quarter 1997, employment growth produced approximately 8,600 new jobs.
Occupancy for the second quarter 1997 was 91.4%.

Occupancies with respect to the Company's portfolio averaged 94% in second
quarter 1997, which is higher than the overall occupancy rates of Greenville.
The Company has, in recognizing the potential for a soft market, sold off
assets in the weakest submarkets, thereby consolidating its holdings in the
submarkets where the Company believes the long-term outlook is most favorable.

Washington, D.C. Area (1,464 apartment units). Washington, D.C. is
characterized by a mature economy with modest growth. The existing job base in
metropolitan Washington, D.C. of approximately 2.4 million jobs is among the
largest nationwide and, therefore, even a small growth rate translates into
significant absolute job additions. Washington, D.C.'s median single family
home price of $161,000 tends to generate higher multifamily demand (170
apartment units per 1,000 jobs) for every job created.

Although the federal government is unlikely to provide meaningful job
growth in the near term, cutbacks at the levels that occurred over the past few
years appear unlikely. For the year ended second quarter 1997, employment
growth produced approximately 37,300 new jobs and same-store rents climbed four
percent. Occupancy was 97.9% for the second quarter 1997.

Atlanta, Georgia (1,221 apartment units). Atlanta was the nation's fastest
growing major city during the past few years, sustaining five to six percent
annual employment growth from 1993 to mid-1996. Since the completion of the
Olympics, employment growth has slowed, though Atlanta is still outperforming
the nation as a whole by a wide margin. Employment growth totaled approximately
new 42,100 new jobs for the year ended second quarter 1997. During the 1990's,
the Atlanta job base has supported just over 100 units of apartment demand for
every 1,000 jobs.

Atlanta is well positioned to remain among the nation's employment growth
leaders, benefiting from economic diversity, business leadership in a
fast-growing region of the country, comparatively low cost of doing business
and a younger and better educated work force compared to most cities.

Atlanta's apartment market softened as some 11,600 new units were
completed in 1996. As of June 1997, annual multifamily construction starts
totaled approximately 10,600 units. As a result, the Company expects limited
rent growth and stabilizing occupancies are expected over the next year. For
the second quarter 1997, occupancy was 94%.

Broward County, Florida (1,208 apartment units). Broward County contains
South Florida's fastest growing corporate community, particularly in the
business services and high-tech industries. Broward County's employment growth
rate has tended to surpass the U.S. average, with an approximate growth rate of
four percent, adding approximately 20,000 to 25,000 jobs to the region
annually.

Broward County's employment growth pace is expected to continue to track
above the national average, reflecting local advantages such as South Florida's
appeal for tourists, above-average population growth and the shift in corporate
business from Miami to Broward County. Additionally, South Florida's role as a
key international trade center should continue to grow, with the regional
economy boosted by increased trade with Latin America.

Apartment absorption has occurred at a pace averaging approximately 170
units for every 1,000 new jobs since 1990. Occupancy in Broward County for the
second quarter 1997 was 96.5%, and has remained above 95% since 1992. For the
year ended second quarter 1997, employment growth was approximately 24,700
jobs.

Houston, Texas (930 apartment units). While Houston's job base has grown
notably more diverse since the drop in oil prices in the early 1980's, energy
and its derivative products remain Houston's most significant industries. Jobs
lost in the early 1980's were replaced by jobs in fields such as business
services, shipping, health care and

S-42
<PAGE>

aerospace. Annual expansion of nearly 40,000 jobs has been typical, including
approximately 36,100 jobs formed during the year ending second quarter 1997.

As Houston's economic environment grows more stable, it appears to be
gaining more appeal as a general business center, particularly for "back
office" operations. Telemarketing/customer service is emerging as a fast
growing business sector, with employers taking advantage of Houston's low
business costs and large pool of bilingual potential employees.

Houston experienced essentially no new multifamily housing starts from
1985 to 1989, but modest new construction has occurred during the 1990's. The
number of permits reached 7,000 during the year ending June 1994. After a
decline in 1996, starts rose in early 1997 to reach an annual pace of 7,500
units. New supply in 1996 totalled just 4,800 units.

During the 1990's, the Houston job base has supported approximately 130
units of apartment demand for every 1,000 jobs. For the second quarter 1997,
occupancy was 90.9%. For the year ended June 30, 1997, same-store rent growth
was approximately three percent.

The Company's Houston apartment portfolio is currently limited to three
assets, two in Kingwood and one in the Galleria sub-market. Both of these
sub-markets have performed above the overall market norm, the Galleria due to
its appealing urban lifestyle characteristics and proximity to major job
centers and Kingwood due to the lack of new product.

Other Market Opportunities. The Company believes that Orlando, Tampa, Fort
Worth, Austin, and San Antonio are markets where near term growth in
occupancies and rents will generate attractive returns. The Company would like
to increase its market presence in Orlando, Tampa and Fort Worth, and to enter
the Austin and San Antonio markets.

Orlando, Florida. Since 1991, Orlando has produced new jobs at a pace of
four to five percent annually, translating into growth averaging 30,000 new
jobs per year. Employment growth gained momentum throughout 1996, and
preliminary data showed employment growth reaching record levels in the first
quarter of 1997. About 42,700 new jobs were generated in the year ended second
quarter 1997, a 24% increase from the growth pace for the previous period.
Since 1990, approximately 130 apartment units have been absorbed for every
1,000 jobs created.

Occupancy was reported at 94.8% for the second quarter 1997, and
same-store rental rates rose approximately three percent for the year ended
second quarter 1997.

Tampa (including St. Petersburg), Florida. Since early 1994, employment
growth has averaged approximately 30,000 jobs annually. Since 1990,
approximately 150 apartment units have been absorbed for every 1,000 new jobs.

While Tampa's economy generally ranks among the nation's most diverse, a
pronounced emphasis exists on business services. Employment growth is expected
to exceed the national average; however, trends in the national business
pattern will remain the primary influence on Tampa's economic outlook. Also,
significant job expansion will be supported by the increased need for goods and
services that result from the rapid population growth rate, fueled by the
nation's general migratory pattern toward the Sun Belt. For the year ended
second quarter 1997, employment growth produced approximately 39,400 new jobs.

Multifamily starts in Tampa totaled 3,600 units during the year ended June
30, 1997, holding steady with the construction pace seen one year earlier.
Similarly, starts in the second quarter 1997 specifically were consistent with
new development in the spring and early summer 1996 time frame. For the second
quarter 1997, Tampa's occupancy rate was 94.5%. Same-store rent growth was
three to four percent in the first half of 1997.

Fort Worth, Texas. Fort Worth is expanding at a pace above the national
average. Absolute growth has averaged approximately 20,000 jobs annually since
1993, including approximately 21,200 new jobs produced during the year ended
second quarter 1997.

The services sector continues to dominate Fort Worth's overall employment
growth. Significant growth is also occurring in amusement services, hotel
services and trade, primarily in the retail sector. Occupancy was 93.9% for the
second quarter 1997, and same-store rents grew approximately three percent for
the year ended June 30, 1997.

DFW International Airport, which opened in the early 1970's, completed a
new runway in fall 1996. This gives DFW the capacity to accommodate more air
traffic than any other airport nationwide. In turn, prospects are favorable

S-43
<PAGE>

for growth in the product distribution and transport centers that surround both
the DFW International and Alliance Airport, which is an industrial airport that
was opened in North Fort Worth during 1989.

Austin, Texas. From 1992 through mid-1996, Austin's job base expanded by
approximately five to seven percent annually, ranking it alongside Las Vegas
and Salt Lake City in terms of the fastest job growth rates nationwide.
Absolute job production in Austin hovered near 30,000 jobs annually during this
peak growth period. Austin should continue to produce jobs at a pace faster
than the national average during the coming years, though this margin over U.S.
expansion should be narrower than that of 1992 to mid-1996.

Austin remains well positioned to compete for new jobs in the high-tech
industries that have driven its economic growth rate to high levels in the
1980's and 1990's. Austin offers lower costs of doing business than other
high-tech centers like northern California and the Boston area, and a central
U.S. location makes Austin a strong choice for production and distribution over
other affordable technology hubs such as the Carolinas and the Pacific
Northwest.

If added as a Berkshire market, Austin would be the least affordable
single-family home market, with only 50% of the households able to afford the
median home price of $128,000, an extremely favorable situation for the
apartment sector. For the second quarter 1997, occupancy was 93.2%. Employment
growth produced approximately 6,400 new jobs for the year ended second quarter
1997.

San Antonio, Texas. From 1992 to 1995, San Antonio experienced the
healthiest sustained economic expansion in its history, with the employment
base growing annually by roughly four percent, or about 20,000 to 25,000 jobs.
This performance reflects growth in the key tourism sector, broad-based
expansion in a number of smaller industries and a burgeoning telemarketing
industry. Telemarketing firms have found desirable San Antonio's large
bilingual population as well as the reduced costs and clarity of telephone
message transmissions, which resulted from technological investments made by
Southwestern Bell in the late 1980's.

More recently, job growth in San Antonio has returned to levels closer to
the historical norm with San Antonio's employment growth forecasted at just
over the national average. For the year ended second quarter 1997, employment
growth was approximately 13,700 jobs. Occupancy was 93% for the second quarter
1997.

The shutdown of Kelly Air Force Base, expected to occur sometime before
2001, will result in some 6,000 jobs being moved to nearby Lackland AFB and
another 6,000 jobs being converted to local private-industry positions in which
the military will contract with private companies. The Company, aware of this
closure, has currently refrained from investing in San Antonio until the full
ramifications of the Kelly closure can be measured.

S-44
<PAGE>

THE QUESTAR TRANSACTION

The Questar Transaction involves the acquisition by the Company of 18
existing apartment communities from a like number of affiliated partnerships
and four apartment communities under development from Questar Builders, Inc., a
company owned by Stephen M. Gorn but which will remain unaffiliated with the
Company following the Questar Transaction ("Questar Builders"). The Company
will also acquire the Questar property management companies which manage the
properties to be acquired and certain other third-party properties and enter
into a Development Acquisition Agreement with Questar Builders, Inc. giving the
Company the exclusive right to acquire all apartment projects developed by
Questar Builders which meet the Company's acquisition and development criteria.
Stephen M. Gorn, the President and Chief Executive Officer of the Questar
Companies, will become Regional President of the Mid-Atlantic Division of the
Company.

Questar Portfolio Transaction

Each of the 18 apartment communities to be acquired is presently owned by
a single purpose entity (each a "Questar Partnership"). The holders of
interests in the Questar Partnerships (the "Questar Partners") shall receive
Units. The number of Units to be issued to the Questar Partners shall be
determined at the closing of the Questar Transaction based on a formula whereby
a predetermined equity value of an applicable property is divided by the
average of the closing price per share of the Common Stock for the period from
August 1, 1997 through the date of closing of the Offering; provided that, in
any event, the amount shall not be less than $10.50 and not greater than $11.75
(subject to certain adjustments at the date of closing). The Units issuable to
certain members of Stephen Gorn's family shall be restricted as to distribution
payments for a one-year period from the date of issue. The closing of the
Questar Transaction is contingent on the completion of the Offering. Certain of
the contribution agreements limit the ability of the Company to sell (subject
to like-kind exchanges), refinance or repay existing mortgages (subject to
refinancing on terms which would not affect the tax basis of such Unit
recipient(s)) on the applicable properties for a period of seven years.

As part of the Questar Transaction, the Operating Partnership will make a
five-year loan to an entity owned and controlled by Messrs. Stephen Gorn,
Morton Gorn and John Colvin (the "Questar Borrowers"), in the principal amount
of $7.5 million or such lesser amount as the Questar Borrowers may elect at
closing (the "Questar Loan"). The interest rate shall be determined at the
closing by mutual agreement and shall not be less than prevailing market rates.
The Questar Loan shall be secured by the pledge of Units to be received by the
Questar Borrowers and, with respect to Common Stock received by Stephen M.
Gorn, a pledge of such stock. Further, the Operating Partnership is under
contract to acquire four apartment development projects in the greater
Baltimore area which are being developed by Questar Builders or an affiliated
entity.

Questar Management Company Transaction

The Company will acquire the management companies owned by the Gorn family
which manage the 18 apartment communities to be acquired as well as certain
third-party properties for $4.7 million payable in shares of Common Stock based
on the average closing price of such Common Stock for the period August 1, 1997
through the closing of this Offering. The Company expects to enter into
separate five-year employment agreements with each of Stephen M. Gorn and John
B. Colvin and a consulting agreement with Morton Gorn to be entered into at
closing. At closing, the Company expects to execute a five-year lease from the
Gorn family owners, Messrs. Morton Gorn, Stephen Gorn and John Colvin, for the
approximately 6,900 square feet of space currently occupied by the management
companies for a gross rent of $140,240 per year.

Questar Future Development Transactions

At closing, Questar Builders and the Operating Partnership expects to
enter into a Development Acquisition Agreement pursuant to which, for a period
of five years, Questar Builders shall grant to the Operating Partnership an
exclusive right to acquire all apartment projects developed by Questar Builders
in the Mid-Atlantic Region which meet the Company's acquisition and development
criteria.

S-45
<PAGE>

PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY

The Common Stock began trading on the NYSE on June 28, 1991 under the
symbol "BRI." The table below sets forth the quarterly high and low closing
sales price per share of Common Stock as reported on the NYSE for the quarters
indicated and the dividends paid by the Company with respect to each such
period:

<TABLE>
<CAPTION>
Dividends
Quarter Ended High Low Paid
- --------------------------------- --------- --------- ----------
<S> <C> <C> <C>
1994:
First Quarter ............ $ 12.38 $ 10.63 $.2150
Second Quarter ......... 11.25 10.25 .2150
Third Quarter ............ 10.63 9.88 .2150
Fourth Quarter ......... 10.00 8.75 .2150
-------
$.8600
=======
1995:
First Quarter ............ $ 10.00 $ 9.00 $.2150
Second Quarter ......... 10.00 9.25 .2250
Third Quarter ............ 10.38 9.50 .2250
Fourth Quarter ......... 10.00 9.25 .2250
-------
$.8900
=======
1996:
First Quarter ............ $ 10.38 $ 9.75 $.2250
Second Quarter ......... 11.00 9.88 .2250
Third Quarter ............ 11.00 9.63 .2250
Fourth Quarter ......... 10.25 9.38 .2250
-------
$.9000
=======
1997:
First Quarter ............ $ 11.75 $ 10.00 $.2250
Second Quarter ......... 11.25 10.63 .2250
Third Quarter ............ 12.38 10.63 .2325
Fourth Quarter(1) ...... 12.38 11.00 (2)
-------
$.6825
=======
</TABLE>

- --------

(1) Through November 4, 1997.

(2) A dividend in the amount of $.2325 has been declared and is payable on
November 15, 1997 to shareholders of record on November 1, 1997.
Purchasers in this Offering are not expected to be eligible to receive
such dividend.

On November 4, 1997, the last reported sales price of the Common Stock on
the NYSE was $11.00 per share. On October 8, 1997, the Company had 27,252
shareholders of record.

Future distributions by the Company will be at the discretion of the Board
of Directors and will depend on the Company's FFO, financial condition, capital
requirements, the annual distribution requirements under the REIT provisions of
the Code (see "Federal Income Tax Considerations--Requirements for
Qualification" in the accompanying Prospectus), and such other factors as the
Board of Directors deems relevant.

S-46
<PAGE>

MANAGEMENT

The directors and executive officers of the Company upon completion of the
Questar Transaction are as follows:

<TABLE>
<CAPTION>
Name Age Positions Held with the Company
- ------------------------ ----- ---------------------------------------------------
<S> <C> <C>
Douglas Krupp 51 Chairman of the Board and Director
David F. Marshall 49 President and Chief Executive Officer and Director
Terrance R. Ahern* 41 Director
David M. deWilde* 57 Director
J. Paul Finnegan* 72 Director
Charles N. Goldberg* 56 Director
Paul D. Kazilionis* 40 Director
E. Robert Roskind* 52 Director
Arthur P. Solomon* 58 Director
Ridge B. Frew 49 Executive Vice President of Property Operations
Marianne Pritchard 47 Senior Vice President and Chief Financial Officer
David J. Olney 37 Senior Vice President of Acquisitions
Dennis Suarez 44 Senior Vice President of Development
Stephen M. Gorn** 46 President-Mid-Atlantic Division
James Jackson 63 Vice President of Human Resources
Kenneth J. Richard 42 Vice President of Finance and Accounting
Richard Willingham 42 Vice President
Scott D. Spelfogel 36 Secretary
</TABLE>

- ----------
*Independent Directors
**Effective upon completion of the Questar Transaction.

Douglas Krupp has been Chairman of the Board and a Director of the Company
since February 8, 1996. He co-founded and serves as Chairman and Chief
Executive Officer of The Berkshire Group, an integrated real estate financing
services firm engaged in real estate acquisition and property management,
mortgage banking, healthcare facility ownership and financial management. Mr.
Krupp is a Director of Harborside Healthcare Corporation, a Trustee of Krupp
Government Income Trust and Krupp Government Income Trust II and a member of
the Board of Trustees of Brigham & Women's Hospital. He is a graduate of Bryant
College where he received an honorary Doctor of Science in Business
Administration in 1989 and was elected trustee in 1990.

David F. Marshall was elected President of the Company on March 1, 1996
and Chief Executive Officer and Director on February 28, 1997. He was
previously President of Berkshire Realty Affiliates, the former advisor to the
Company and a member of The Berkshire Group. Before joining The Berkshire Group
in 1986, Mr. Marshall was President of Resource Savings Association. Prior to
that, Mr. Marshall served as a Vice President of Citicorp Real Estate, Inc. He
holds a B.S. degree from Michigan State University and an M.B.A. from the
University of Michigan.

Terrance R. Ahern has been a Director of the Company since October 9,
1997. He is a co-founder and principal of The Townsend Group, an institutional
real estate consulting firm which represents primarily tax-exempt clients such
as public and private pension plans, endowment, foundation and multi-manager
investments. Mr. Ahern is a member of the Board of Directors of the Pension
Real Estate Association (PREA). He was formerly a member of the Board of
Governors of the National Association of Real Estate Investment Trusts
(NAREIT). Prior to founding The Townsend Group, Mr. Ahern was a Vice-President
of a New York based real estate investment firm and was engaged in the private
practice of law. Mr. Ahern received a B.A. and J.D. from Cleveland State
University.

S-47
<PAGE>

David M. deWilde has been a Director of the Company since March 8, 1993.
He is Chief Executive Officer of Chartwell Partners International Inc., an
executive search firm headquartered in San Francisco which he founded in 1989.
Previously, Mr. deWilde was Managing Director of Boyden International, Inc., an
executive search firm. Mr. deWilde is currently on the Board of Directors of
Silicon Valley Bancshares. Mr. deWilde was Executive Vice President for Policy
and Planning of the Federal National Mortgage Association from 1981 until 1983.
His prior public service roles include President of the Government National
Mortgage Association, Deputy Commissioner of the Federal Housing Administration
and Deputy Assistant Secretary of the Department of Housing and Urban
Development. Mr. deWilde's private sector background includes investment
banking experience both as Managing Director of Lepercq de Neuflize & Co. from
1977 until 1981 and with Lehman Brothers, Inc., and legal experience. He holds
an A.B. from Dartmouth College, a L.L.B. from the University of Virginia and a
M.S. in Management from Stanford University. He is a member of the New York and
Washington, D.C. bar.

J. Paul Finnegan has been a Director of the Company since October 17,
1990. He retired as a partner of Coopers & Lybrand in 1987. Since then, he has
been engaged in business as a consultant, director and arbitrator for the
American Arbitration Association and the National Association of Securities
Dealers, Inc. Mr. Finnegan holds a B.A. degree from Harvard College and a J.D.
degree from Boston College Law School. Mr. Finnegan currently serves as a
Trustee of Krupp Government Income Trust and Krupp Government Income Trust II.
He is also a director of Scituate Federal Savings Bank. Mr. Finnegan is a
Certified Public Accountant.

Charles N. Goldberg has been a Director of the Company since October 17,
1990. He is a partner in the law firm of Hirsch & Westheimer, P.C. Prior to
joining Hirsch & Westheimer, P.C., Mr. Goldberg was the Managing Partner of
Goldberg Brown, Attorneys at Law from 1980 to March 1997. He currently serves
as a Trustee of Krupp Government Income Trust and Krupp Government Income Trust
II. He received a B.B.A. degree and a J.D. degree from the University of Texas.
He is a member of the State Bar of Texas and is admitted to practice before the
U.S. Court of Appeals, Fifth Circuit and U.S. District Court, Southern District
of Texas.

Paul D. Kazilionis has been a Director of the Company since October 9,
1997. He is a managing principal and a co-founder of Westbrook Partners,
L.L.C., an investment advisor to institutional investors. Prior to co-founding
Westbrook, Mr. Kazilionis spent 12 years at Morgan Stanley serving most
recently as Managing Director of Morgan Stanley Realty and President of the
general partner of the Morgan Stanley Real Estate Fund responsible for Morgan
Stanley principal investing in real estate. Mr. Kazilionis received a B.A. from
Colby College in 1979 and an M.B.A. from The Amos Tuck School of Business
Administration in 1982.

E. Robert Roskind has been a Director of the Company since October 17,
1990. He is the Chairman and Co-Chief Executive Officer of Lexington Corporate
Properties, a self-administered REIT, the shares of which are listed on the
NYSE. Mr. Roskind is also the Managing Partner of The LCP Group, a real estate
investment firm based in New York, the predecessor of which he co-founded in
1974. Mr. Roskind is also Chairman of Net Lease Partners Realty Advisors, a
registered pension fund advisor, which advises pension funds with respect to
the acquisition and subsequent management of properties net leased to major
corporations. He currently serves as a Trustee of Krupp Government Income Trust
and Krupp Government Income Trust II. He holds a B.A. degree from the
University of Pennsylvania and a J.D. degree from Columbia Law School. He has
been a member of the New York bar since 1970.

Arthur P. Solomon has been a Director of the Company since October 9,
1997. He is a Managing Director of Lazard Freres & Co. LLC and head of the
firm's Real Estate Group. Previously, Mr. Solomon was a Partner and head of
real estate investment banking at Drexel Burnham Lambert. Before that, he was
Chief Executive Officer of the predecessor of The Berkshire Group during 1983
to 1985 and, from 1982 to 1983, Executive Vice President and Chief Financial
Officer of the Federal National Mortgage Association. Prior to that, Mr.
Solomon was Senior Vice President/Chief Planning Officer for Sears Roebuck &
Company. He also was a tenured faculty member at Massachusetts Institute of
Technology specializing in urban economics, housing and finance, and at the
same time served as the Executive Director of the Harvard-MIT Joint Center for
Urban Studies. He served on the President's Task Force on Domestic and
Intergovernmental Affairs during the Johnson Administration. He holds a B.A.
from Brown University, an M.A. from Trinity College and a Ph.D. in Economics
from Harvard University.

Ridge B. Frew was elected Executive Vice President of Property Operations
for the Company on March 1, 1997 and is responsible for the management of 69
apartment communities located primarily in the southeast and Texas. Prior to
that, he was a Divisional Vice President with Berkshire Property Management.
Before joining Berkshire Property Management, Mr. Frew was President and Chief
Executive Officer of McKinley Properties,

S-48
<PAGE>

responsible for the management and disposition of over 14,000 residential units
and five million square feet of commercial space located in 16 states. Prior to
that, he served as Vice President of Olind Jenni Properties and Director of
Property Management for Nevada Savings and Loan. Mr. Frew received his B.A.
degree from the University of Nevada.

Marianne Pritchard has been the Senior Vice President and Chief Financial
Officer of the Company since March 1996. Prior to being elected to these
positions, she was Senior Vice President and Chief Financial Officer of
Berkshire Realty Affiliates, the advisor and property manager for the Company
and several affiliated real estate investment companies. Prior to that, she was
Vice-President and Controller of Liberty Real Estate Group, a subsidiary of
Liberty Mutual Insurance Company from July 1989 to August 1991. She received
her B.B.A. degree in Accounting from the University of Texas. She is a
Certified Public Accountant.

David J. Olney has been the Senior Vice President of Acquisitions since
March 1, 1996 and is principally responsible for all acquisitions, property
sales, finance and other asset management activities for the Company.
Previously, he held a similar position with The Berkshire Group and has held
several positions within The Berkshire Group since 1986. Mr. Olney received a
B.S. from Bryant College and an M.B.A. from Babson College.

Dennis Suarez has been Senior Vice President of Development since March 1,
1996. Prior to being elected to this position on March 1, 1996, he served in a
similar position with Berkshire Multifamily Development Corporation, a member
of The Berkshire Group, and was responsible for all development activities.
Prior to that, he was Vice President of Construction for Lane Management,
Realty Construction Corp. He earned Bachelor's degrees in Architecture and
Building Construction from the University of Florida, and a B.A. degree in
Interior Design from Southern College.

Stephen M. Gorn, upon completion of the Questar Transaction, will be
appointed President of the Mid-Atlantic Division of the Company. He was
previously President of The Questar and Gorn Management Companies and is
currently the President of Questar Builders, Inc. and Questar Properties, Inc.,
developers, builders, owners and managers of residential properties. Mr. Gorn
has been a managing general partner of more than 25 real estate partnerships
owning various apartment communities and commercial real estate. He holds a
B.A. degree from the University of Pennsylvania.

James Jackson has been the Vice President of Human Resources for the
Company since February 28, 1997. Prior to being elected to this position, he
held a similar position with The Berkshire Group since 1987. Prior to that, he
held the positions of Vice President Human Resources for Helix Technology and
GSX Corporation. He received a A.B. from Brown University, an M.S. from Union
College, and J.D. from Harvard University. He is admitted to the bar in
Illinois and Massachusetts.

Kenneth J. Richard has been Vice President of Finance and Accounting for
the Company since May 13, 1997. Prior to being elected to this position, he was
Vice President and Treasurer for The Beacon Companies, a developer, owner and
manager of commercial properties, from 1994 to 1997. Prior to joining The
Beacon Companies, Mr. Richard was Vice President and Chief Financial Officer of
The Codman Company, Inc., a real estate brokerage and management firm in
Boston, from 1991 to 1994. Mr. Richard holds a B.S. degree in Business
Administration from Northeastern University. Mr. Richard is a Certified Public
Accountant.

Richard Willingham has been Vice President in charge of the Company's
Atlanta-based acquisitions office since March 1, 1996, concentrating on
acquisitions, property sales, finance and other asset management activities. He
previously served as a Vice President of Acquisitions for The Berkshire Group,
since 1989. Before joining The Berkshire Group in 1989, Mr. Willingham was Vice
President, Property Sales, for Balcor Company, a national real estate
investment firm, where he was responsible for the disposition of over $200
million of real estate held in either debt or equity oriented investment
vehicles. He holds a B.S. from the University of Tennessee and an M.B.A. from
Wake Forest University.

Scott D. Spelfogel has been Secretary of the Company since May 2, 1996.
Prior to that, he was Assistant Secretary since May 7, 1991. He is also the
Senior Vice President and General Counsel to The Berkshire Group. Before
joining The Berkshire Group in November 1988, he was in private practice in
Boston. He received a B.S. degree in Business Administration from Boston
University, a J.D. Degree from Syracuse University's College of Law, and a
L.L.M. degree in Taxation from Boston University Law School. He is admitted to
the bar in Massachusetts and New York.

S-49
<PAGE>

UNDERWRITING

Subject to the terms and conditions contained in the underwriting
agreement (the "Underwriting Agreement"), the Company has agreed to sell to the
underwriters named below (the "Underwriters"), and each of the Underwriters has
severally agreed to purchase, the respective number of shares of Common Stock
set forth below opposite their respective names.

<TABLE>
<CAPTION>
Underwriters Number of Shares
- ---------------------------------------------------- -----------------
<S> <C>
Lehman Brothers Inc. ..................... 2,000,000
BT Alex. Brown Incorporated ............... 2,000,000
A.G. Edwards & Sons, Inc. .................. 2,000,000
Legg Mason Wood Walker, Incorporated ...... 2,000,000
Salomon Brothers Inc ..................... 2,000,000
-----------
Total .................................... 10,000,000
===========
</TABLE>

The Underwriting Agreement provides that the obligations to purchase the
shares of Common Stock are subject to the satisfaction of certain conditions
precedent and that if any of the foregoing shares of Common Stock are purchased
by the Underwriters pursuant to the Underwriting Agreement, all such shares of
Common Stock must be so purchased.

The Company has been advised by the Underwriters that they propose to
offer the shares of Common Stock directly to the public at the initial offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers at such public offering price less a concession not in excess of $0.35
per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other underwriters or to
certain other brokers or dealers. After the initial public offering, the public
offering price, the concession to selected dealers and the reallowance to other
dealers may be changed by the Underwriters.

The Company has granted to the Underwriters an option to purchase up to an
additional 1,500,000 shares of Common Stock at the initial public offering
price less underwriting discounts and commissions, solely to cover
over-allotments, if any. The Underwriters may exercise this option at any time
up to 30 days after the date of this Prospectus Supplement. To the extent that
the Underwriters exercise this option, each of the Underwriters will be
obligated, subject to certain conditions, to purchase a number of additional
shares of Common Stock proportionate to such Underwriter's initial commitment
reflected in the foregoing table.

The Company, the Operating Partnership and certain of the Company's
directors, officers and affiliated parties have agreed that they will not,
without the prior written consent of Lehman Brothers Inc., offer for sale,
contract to sell, sell or otherwise dispose of, directly or indirectly, any
shares of Common Stock (other than shares offered hereby, shares issued
pursuant to the Company's Option Plan and any Units or shares of Common Stock
that may be issued in connection with any acquisition of a property), or sell
or grant options, rights or warrants with respect to any shares of Common Stock
(other than the grant of options pursuant to the Company's Option Plan), for a
period of 180 days following the consummation of the Offering.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1993, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.

Certain of the Underwriters and their affiliates have from time to time
performed, and may continue to perform in the future, various investment
banking, financial advisory and other commercial services for the Company, for
which they received, and will in the future receive, customary compensation.
Salomon Brothers Inc, one of the Underwriters, will receive a $500,000
financial advisory fee from the Company in connection with the Questar
Transaction.

Until the distribution of the Common Stock is completed, the rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase shares of Common
Stock. As an exception to these rules, the Underwriters are permitted to engage
in certain transactions that stabilize the price of the shares of Common Stock.
Such transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock.

If the Underwriters create a short position in the shares of the Common
Stock in connection with the Offering (i.e., if they sell more shares of Common
Stock than are set forth on the cover page of this Prospectus Supplement),

S-50
<PAGE>

the Underwriters may reduce the short position by purchasing Common Stock in
the open market. The Underwriters also may elect to reduce any short position
by exercising all or part of the over-allotment option described herein.

The Underwriters also may impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase shares of
Common Stock in the open market to reduce the Underwriters' short position or
to stabilize the price of the shares of Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.

Neither the Company nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the shares of Common
Stock. In addition, neither the Company nor any of the Underwriters makes any
representations that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

The Common Stock is listed on the NYSE under the symbol "BRI."

EXPERTS

The consolidated financial statements and financial statement schedule of
Berkshire Realty Company, Inc. to the extent and for the periods indicated in
their reports, the Statement of Revenue over Certain Operating Expenses of the
Merit Portfolio for the year ended December 31, 1995, and the Statements of
Revenue over Certain Operating Expenses of Westchester West, Sun Chase/Polos
West, the Emerald Portfolio and the Questar Portfolio for the year ended
December 31, 1996 included in the Company's Current Report on Form 8-K, dated
October 14, 1997, all incorporated by reference herein and in the accompanying
Prospectus, have been audited by and and incorporated herein in reliance upon
the reports of Coopers & Lybrand, LLP, independent accountants, given the
authority of said firm as experts in accounting and auditing.

The Statement of Revenue Over Certain Operating Expenses of the Citibank
Portfolio for the year ended December 31, 1996 included in the Company's
Current Report on Form 8-K dated October 14, 1997 and incorporated by reference
herein and in the accompanying Prospectus has been audited by KPMG Peat Marwick
LLP, independent certified public accountants and are incorporated herein in
reliance upon such report given the authority of said firm as experts in
accounting and auditing.

The market data under the caption "Business and Properties--Market
Information" was provided to the Company in market research reports prepared by
M/PF Research, Inc. and are incorporated herein in reliance upon such reports
given the authority of said firm as experts in market research.

LEGAL MATTERS

Certain legal matters will be passed upon the Company by Peabody & Brown,
Boston, Massachusetts and for the Underwriters by Rogers & Wells, New York, New
York.

S-51
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

INDEX TO PRO FORMA FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
-----
<S> <C>
Berkshire Realty Company, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidating Financial Information: F-2
Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1997 .................. F-3
Pro Forma Condensed Consolidating Statement of Operations for the year ended
December 31, 1996 .................................................................. F-4
Pro Forma Condensed Consolidating Statement of Operations for the six month period ended
June 30, 1997 ........................................................................ F-5
Notes to the Pro Forma Condensed Consolidating Financial Information .................. F-6
</TABLE>

F-1
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The following sets forth the pro forma condensed consolidating balance
sheet of Berkshire Realty Company, Inc. and its subsidiaries (the "Company") as
of June 30, 1997, and the pro forma condensed consolidating statements of
operations for the year ended December 31, 1996 and the six-month period ended
June 30, 1997.

The unaudited pro forma condensed consolidating financial information is
presented as if the following transactions had been consummated on June 30,
1997, for balance sheet purposes, and at the beginning of the periods
presented, for purposes of the statements of operations:

o The Company consummated the Offering, issuing 10,000,000 Common Shares
at $11.00 per share, and applied the net proceeds therefrom as
described under "Use of Proceeds," including the repayment of $63.0
million of indebtedness under its variable rate credit facilities and
master repurchase agreement and the funding of $32.1 million related
to the Questar Transaction.

o The Company acquired, as part of the Questar Transaction, 18 apartment
communities and the related property management operations, and an
apartment development project in exchange for $131.7 million of
mortgage indebtedness assumed, $20.6 million of Units, $4.7 million in
Common Stock and $24.6 million in cash. Additionally a $7.5 million
loan will be funded to the Questar Borrowers.

o The Company sold the Pointe West and Howell Commons apartment
communities, and the Banks Crossing, Greentree Plaza, Brookwood
Village and Crossroads retail centers (hereinafter referred to as the
"Dispositions").

o In separate transactions, the Company acquired third-party management
contracts and certain other intangible assets of the entities
providing advisory, development and property management services to
the Company (hereinafter referred to as the "Advisor and Property
Manager Transactions") in exchange for 1.3 million Units valued at
$13.0 million with respect to the Advisor Transaction, and 1.7 million
Units valued at $17.6 million with respect to the Property Manager
Transaction.

o In 1996, the Company acquired Berkshire Towers, the Merit Portfolio
(Pleasant Woods, Golf Side, Providence, Benchmark and Prescott Place
II), Prescott Place I and Hunters Glen (hereinafter collectively
referred to as the "1996 Acquisitions") in exchange for $61.9 million
of mortgage indebtedness assumed, $22.2 million of Units and $25.8
million in cash.

o In 1997, the Company acquired Westchester West, Polos West, Sun Chase,
the Emerald Portfolio (Berkshires by the Chesapeake, The Cove,
Lighthouse and Lamplighter), the Citibank Portfolio (Huntington Brook,
Huntington Ridge, Huntington Lake and Sweetwater) and Summer Place
(hereinafter collectively referred to as the "1997 Acquisitions") in
exchange for $36.9 million of mortgage and other indebtedness assumed,
$10.5 million of Units and $77.4 million in cash.

o The Company issued 2,737,000 shares of Series 1997-A Preferred, at
$25.00 per share. The Series 1997-A Preferred earns a dividend of 9%.
The net proceeds from the sale was approximately $65.8 million.

This pro forma condensed consolidating financial information should be
read in conjunction with the historical financial statements of the Company and
the related notes thereto incorporated herein by reference. In management's
opinion, all adjustments necessary to reflect the effects of the transactions
to be consummated have been made. The pro forma condensed consolidating
financial information is unaudited and is not necessarily indicative of what
the actual financial position would have been as of June 30, 1997, nor does it
purport to represent the future financial position and the results of
operations of the Company.

F-2
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES PRO FORMA CONDENSED
CONSOLIDATING BALANCE SHEET
JUNE 30, 1997
(unaudited)
(dollars in thousands)

<TABLE>
<CAPTION>
Preferred
1997 Stock Questar
Historical Disposition Acquisitions Offering Transaction Offering Total
------------ ------------- -------------- ---------- ------------- ------------- ---------
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Multifamily real estate,
net of accumulated
depreciation ............... $448,419 $ -- $ 94,660 $ -- $ 181,521 $ -- $724,600
Other real estate
assets, net of
accumulated
depreciation ............... 62,061 (11,456) -- -- -- -- 50,605
--------- --------- --------- -------- --------- --------- ---------
Total real estate
assets .................. 510,480 (11,456) 94,660 -- 181,521 -- 775,205
--------- --------- --------- -------- --------- --------- ---------
Cash and cash
equivalents ............... 8,232 4,796 (68,300) 65,853 (32,106) 40,170 18,645
Intangible assets, net
of accumulated
amortization ............ 28,997 -- -- -- -- -- 28,997
Other assets ............... 30,406 -- -- -- 7,500 -- 37,906
--------- --------- --------- -------- --------- --------- ---------
Total assets ............... $578,115 $ (6,660) $ 26,360 $65,853 $ 156,915 $ 40,170 $860,753
========= ========= ========= ======== ========= ========= =========
Liabilities
Credit agreements and
variable rate debt ...... $125,610 $ (6,660) $ -- $ -- $ -- $ (63,000) $ 55,950
Mortgage notes
payable .................. 165,897 -- 17,686 -- 131,654 -- 315,237
Other liabilities ......... 14,382 -- 2,130 -- -- -- 16,512
--------- --------- --------- -------- --------- --------- ---------
Total liabilities ......... 305,889 (6,660) 19,816 -- 131,654 (63,000) 387,699
--------- --------- --------- -------- --------- --------- ---------
Minority interest in
Operating Partnership . 57,715 -- 6,544 -- 20,561 -- 84,820
Shareholders' equity . 214,511 -- -- 65,853 4,700 103,170 388,234
--------- --------- --------- -------- --------- --------- ---------
Total liabilities &
shareholders'
equity ..................... $578,115 $ (6,660) $ 26,360 $65,853 $ 156,915 $ 40,170 $860,753
========= ========= ========= ======== ========= ========= =========
</TABLE>

F-3
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES PRO FORMA CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(unaudited)
(dollars in thousands, except share amounts)

<TABLE>
<CAPTION>
Property
Manager &
Advisor 1996
Historical Dispositions Transactions Acquisitions
------------ -------------- -------------- --------------
Revenue (6) (7) (8)
<S> <C> <C> <C> <C>
Rental income ..................... $ 89,451 ($ 8,254) $ -- $ 9,641
Other income ........................ 3,551 (35) 3,804 90
--------- -------- --------- -----------
Total revenue ..................... 93,002 (8,289) 3,804 9,731
--------- -------- --------- -----------
Expenses
Property operating expenses ......... 29,374 (2,035) (1,302) 4,280
Real estate taxes .................. 8,654 (758) -- 860
Property management fees ............ 4,325 (465) (3,689) --
Property management
operations ........................ -- -- 4,392 --
General and administrative ......... 4,646 -- (10) --
Interest ........................... 20,501 (577) -- 2,366
Amortization of intangible assets 1,121 -- -- --
Non-recurring charges ............... 442 -- -- --
Provision for losses ............... 7,500 (2,800) -- --
Depreciation and amortization ...... 29,050 (2,228) -- 3,084 (11)
--------- -------- --------- -----------
Total expenses ..................... 105,613 (8,863) (609) 10,590
--------- -------- --------- -----------
Income (loss) from operations (12,611) 574 4,413 (859)
Minority interest in Operating
Partnership ........................ 1,136 -- -- --
Income (loss) from joint
venture, net of minority
interest ........................... (2,737) 3,491 -- --
--------- -------- --------- -----------
Income (loss) before gains on
sales and extraordinary
items ........................... ($ 14,212) $ 4,065 $ 4,413 ($ 859)
========= ======== ========= ===========
Income allocated to preferred
shareholders .....................
Net loss available to common
shareholders .....................
Weighted average shares of
Common Stock outstanding .
Net loss per weighted average
share of Common Stock
outstanding .....................

<CAPTION>
Other
1997 Questar Pro Forma
Acquisitions Transaction Adjustments Total
-------------- ---------------- ------------------- ------------------
Revenue (9) (10)
<S> <C> <C> <C> <C>
Rental income ..................... $ 19,002 $ 25,311 $ -- $ 135,151
Other income ........................ 370 1,228 735(4) 9,743
----------- ----------- ------------- ------------
Total revenue ..................... 19,372 26,539 735 144,894
----------- ----------- ------------- ------------
Expenses
Property operating expenses ......... 6,503 8,696 -- 45,516
Real estate taxes .................. 1,911 2,298 -- 12,965
Property management fees ............ -- -- -- 171
Property management
operations ........................ -- 1,111 250 (12) 5,753
General and administrative ......... 34 -- -- 4,670
Interest ........................... 2,826 10,323 (4,622)(13) 30,817
Amortization of intangible assets -- -- 9,016 (14) 10,137
Non-recurring charges ............... -- -- -- 442
Provision for losses ............... -- -- -- 4,700
Depreciation and amortization ...... 6,819(11) 9,306(11) -- 46,031
----------- ----------- ------------- ------------
Total expenses ..................... 18,093 31,734 4,644 161,202
----------- ----------- ------------- ------------
Income (loss) from operations 1,279 (5,195) (3,909) (16,308)
Minority interest in Operating
Partnership ........................ -- -- 2,777 (15) 3,913
Income (loss) from joint
venture, net of minority
interest ........................... -- -- -- 754
----------- ----------- ------------- ------------
Income (loss) before gains on
sales and extraordinary
items ........................... $ 1,279 ($ 5,195) ($ 1,132) ($ 11,641)
=========== =========== ============= ============
Income allocated to preferred
shareholders ..................... $ 6,158 (16)
------------
Net loss available to common
shareholders ..................... ($ 17,799)
============
Weighted average shares of
Common Stock outstanding . 35,793,147
============
Net loss per weighted average
share of Common Stock
outstanding ..................... ($ 0.50)
============
</TABLE>

F-4
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES PRO FORMA CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1997
(unaudited)

(dollars in thousands, except share amounts)

<TABLE>
<CAPTION>
Property
Manager &
Advisor
Historical Dispositions Transactions
------------ -------------- --------------
<S> <C> <C> <C>
Revenue (17) (18)
Rental income ..................... $49,709 ($ 1,309) $ --
Other income ........................ 2,379 -- 638
-------- -------- -------
Total revenue ..................... 52,088 (1,309) 638
-------- -------- -------
Expenses
Property operating expenses ...... 15,425 (166) (25)
Real estate taxes .................. 4,718 (77) --
Property management fees ............ 819 (81) (709)
Property management operations . 2,156 -- 864
General and administrative ......... 2,426 -- --
Interest ........................... 11,485 -- --
Amortization of intangible assets 1,527 -- --
Costs associated with Advisor
Transaction ........................ 1,200 -- --
Depreciation and amortization ...... 15,579 (19) --
-------- -------- -------
Total expenses ..................... 55,335 (343) 130
-------- -------- -------
Income (loss) from operations ...... (3,247) (966) 508
Minority interest in Operating
Partnership ........................ 571 -- --
Income (loss) from joint venture,
net of minority interest ......... (418) 726 --
-------- -------- -------
Income (loss) before gains and
extraordinary items ............... ($ 3,094) ($ 240) $ 508
======== ======== =======
Income allocated to preferred
shareholders .....................
Net loss available to common
shareholders .....................
Weighted average shares of
Common Stock outstanding .
Net loss per weighted average
share of Common Stock
outstanding ........................

<CAPTION>
Other
1997 Questar Pro Forma
Acquisitions Transaction Adjustments Total
-------------- ---------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenue (19) (10)
Rental income ..................... $ 8,540 $ 12,689 $ -- $ 69,629
Other income ........................ 194 691 367 (4) 4,269
----------- ----------- ------------- -------------
Total revenue ..................... 8,734 13,380 367 73,898
----------- ----------- ------------- -------------
Expenses
Property operating expenses ...... 2,684 3,011 -- 20,929
Real estate taxes .................. 917 1,656 -- 7,214
Property management fees ............ -- -- -- 29
Property management operations . -- 1,865 125 (21) 5,010
General and administrative ......... -- -- -- 2,426
Interest ........................... 869 5,180 (2,403)(22) 15,131
Amortization of intangible assets -- -- 3,541 (23) 5,068
Costs associated with Advisor
Transaction ........................ -- -- -- 1,200
Depreciation and amortization ...... 2,866(20) 4,781(20) -- 23,207
----------- ----------- ------------- -------------
Total expenses ..................... 7,336 16,493 1,263 80,214
----------- ----------- ------------- -------------
Income (loss) from operations ...... 1,398 (3,113) (896) (6,316)
Minority interest in Operating
Partnership ........................ -- -- 1,063 (24) 1,634
Income (loss) from joint venture,
net of minority interest ......... -- -- -- 308
----------- ----------- ------------- -------------
Income (loss) before gains and
extraordinary items ............... $ 1,398 ($ 3,113) $ 167 ($ 4,374)
=========== =========== ============= =============
Income allocated to preferred
shareholders ..................... $ 3,079 (25)
-------------
Net loss available to common
shareholders ..................... ($ 7,453)
=============
Weighted average shares of
Common Stock outstanding . 35,850,743
=============
Net loss per weighted average
share of Common Stock
outstanding ........................ ($ 0.21)
=============
</TABLE>

F-5
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except share and unit data)

Notes to Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1997:

(1) Sale of Crossroads and related debt repayment during the quarter ended
September 30, 1997.

(2) Pro forma balance sheet adjustments for acquisitions subsequent to June
30, 1997 are as follows:

<TABLE>
<CAPTION>
Emerald Citibank Summer
Portfolio Portfolio Place Total
Assets ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Multifamily real estate, net of accumulated
depreciation ................................. $ 27,360 $ 60,300 $ 7,000 $ 94,660
Cash and cash equivalents ..................... (1,000) (60,300) (7,000) (68,300)
-------- --------- -------- ---------
Total assets .................................... $ 26,360 $ -- $ -- $ 26,360
======== ========= ======== =========
Liabilities
Mortgage notes payable ........................... $ 17,686 $ -- $ -- $ 17,686
Other liabilities .............................. 2,130 -- -- 2,130
-------- --------- -------- ---------
Total liabilities .............................. 19,816 -- -- 19,816
Minority interest in Operating Partnership ...... 6,544 -- -- 6,544
Shareholders' equity ........................... -- -- -- --
-------- --------- -------- ---------
Total liabilities & shareholders' equity ......... $ 26,360 $ -- $ -- $ 26,360
======== ========= ======== =========
</TABLE>

Mortgage notes payable of $17,686 were assumed in conjunction with the
acquisition of the Emerald Portfolio bearing interest at 7.75% with
maturities ranging from 2118 to 2020. Approximately 583,000 Units (of which
approximately 68,000 Units are deferred as to issuance until January 1998)
valued at $6,544 have been issued in connection with the acquisition. The
number of Units was based on a share price of $11.25 of Common Stock of the
Company.

(3) Proceeds from the sale of 2,737,000 shares of the Series 1997-A Preferred.
The shares were priced at $25.00 per share. Proceeds to the Company, net of
issuance costs of $2,572, was $65,853.

(4) In connection with the Questar Transaction:

(a) a loan will be provided to the Questar Borrowers, the interest rate of
which is anticipated to be 9.7% per annum and will mature five years
from the closing date;

(b) the Company will assume 15 mortgages with an aggregate principal balance
of $131,654 with a weighted average interest rate of 8.08%, with
maturities ranging from 2004 to 2035;

(c) 1,766,996 Units valued at $20.6 million will be issued, of which
approximately 696,000 Units will be issued and will not earn
distributions until one year from the date of closing; and

(d) 400,000 shares of the Company's Common Stock will be issued at the date
of closing.

(5) Anticipated net proceeds of $103,170 from the issuance of 10,000,000
shares, of the Company's Common Stock at $11.00 per share net of estimated
costs of issuance of $6,830. The Company plans to use $63,000 of the
proceeds to repay the Company's credit facilities and master repurchase
agreement.

F-6
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except share and unit data)

Notes to Pro Forma Condensed Consolidating Statement of Operations for the year
ended December 31, 1996:

(6) Pro forma results of operations for year ended December 31, 1996 for the
properties sold in 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
Pointe Greentree Howell Banks Brookwood
West Plaza Commons Crossing Village Crossroads Total
------------ ----------- ------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental income ..................... ($ 1,393) ($ 1,387) ($ 1,981) ($ 1,819) $ -- ($ 1,674) ($ 8,254)
Other income ........................ (31) -- (4) -- -- -- (35)
-------- -------- --------- -------- ------- -------- --------
Total revenue ..................... (1,424) (1,387) (1,985) (1,819) -- (1,674) (8,289)
Expenses
Property operating expenses ......... (474) (470) (640) (219) -- (232) (2,035)
Real estate taxes .................. (236) (208) (131) (90) -- (93) (758)
Property management fees ............ (69) (93) (92) (110) -- (101) (465)
Interest ........................... (577) -- -- -- -- -- (577)
Provision for losses ............... -- (1,800) -- (750) -- (250) (2,800)
Depreciation and amortization ...... (496) (355) (498) (423) -- (456) (2,228)
-------- -------- --------- -------- ------- -------- --------
Total expenses ..................... (1,852) (2,926) (1,361) (1,592) -- (1,132) (8,863)
-------- -------- --------- -------- ------- -------- --------
(Income) loss from operations ...... 428 1,539 (624) (227) -- (542) 574
(Income) loss from joint venture, net
of minority interest ............... -- -- -- -- 3,491 -- 3,491
-------- -------- --------- -------- ------- -------- --------
(Income) loss before gains and
extraordinary items ............... $ 428 $ 1,539 ($ 624) ($ 227) $3,491 ($ 542) $ 4,065
======== ======== ========= ======== ======= ======== ========
</TABLE>

(7) Pro forma adjustments for the year ended December 31, 1996 related to the
Advisor and Property Manager Transactions, are as follows:

(a) Increased third party property management revenue by $3,804 for 1996 as
a result of third party multifamily property management contracts
acquired in the Property Manager Transaction.

(b) Reduced property management fees by $3,689 and reimbursements by
$1,302 for 1996 for the Company owned multifamily properties as a
result of the Company becoming self-managed in the Property Manager
Transaction.

(c) Increased property management operations expense by $4,392 for 1996 as
a result of the Company becoming self-managed in the Property Manager
Transaction.

(d) Decreased general and administrative expenses resulting from advisory
fees for the period January 1, 1996 through February 28, 1996 of $202
and increased general and administrative expense of $192 as a result
of the Company becoming self advised in the Advisor Transaction.

F-7
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except share and unit data)

(8) Pro forma results of operations for the year ended December 31, 1996 for
the 1996 Acquisitions are as follows:

<TABLE>
<CAPTION>
Berkshire Merit Hunters Prescott
Towers Portfolio Glen Place I Total
----------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental income ........................ $ 3,394 $4,359 $1,106 $782 $ 9,641
Other income ........................ 85 5 -- -- 90
-------- ------- ------ ----- -------
Total revenue ........................ 3,479 4,364 1,106 782 9,731
Expenses
Property operating expenses ......... 2,011 1,602 392 275 4,280
Real estate taxes .................. 155 468 140 97 860
Interest ........................... 1,560 515 291 -- 2,366
Depreciation and amortization ...... 1,311 1,256 319 198 3,084
-------- ------- ------ ----- -------
Total expenses ..................... 5,037 3,841 1,142 570 10,590
-------- ------- ------ ----- -------
Income (loss) from operations ...... $ (1,558) $ 523 $ (36) $212 $ (859)
======== ======= ====== ===== =======
</TABLE>

(9) Pro forma results of operations for the year ended December 31, 1996 for
the 1997 Acquisitions are as follows:

<TABLE>
<CAPTION>
Sun Chase & Emerald Citibank Summer
Westchester West Polos West Portfolio Portfolio Place Total
------------------ ------------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Rental income ........................ $2,586 $2,539 $4,755 $7,860 $1,262 $19,002
Other income ........................ 65 -- 22 283 -- 370
------ ------- ------ ------- ------- --------
Total revenue ........................ 2,651 2,539 4,777 8,143 1,262 19,372
Expenses
Property operating expenses ......... 1,075 770 1,752 2,394 512 6,503
Real estate taxes .................. 195 270 257 1,070 119 1,911
General and administrative ......... -- -- 34 -- -- 34
Interest ........................... 944 435 1,447 -- -- 2,826
Depreciation and amortization ...... 880 763 1,496 3,296 384 6,819
------ ------- ------ ------- ------- --------
Total expenses ..................... 3,094 2,238 4,986 6,760 1,015 18,093
------ ------- ------ ------- ------- --------
Income (loss) from operations ...... $ (443) $ 301 $ (209) $1,383 $ 247 $ 1,279
====== ======= ====== ======= ======= ========
</TABLE>

(10) Historical results of operations for the multifamily assets and management
companies to be acquired as part of the Questar Transaction are
incorporated by reference herein from the Company's Current Report on
Form 8-K, filed on October 14, 1997.

F-8
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(Continued)
(unaudited)
(dollars in thousands, except share and unit data)

(11) Detail of pro forma depreciation expense is presented as follows:

<TABLE>
<CAPTION>
Estimated
Purchase Lives of
Property Price Assets (Yrs.) Depreciation
- ----------------------------------- ---------- --------------- -------------
<S> <C> <C> <C>
1996 Acquisitions:
- ----------------------------------
Berkshire Towers ............... $ 52,336 3 to 25 $ 1,311
Merit Portfolio ............... 38,925 3 to 25 1,256
Prescott Place I ............... 8,700 3 to 25 198
Hunters Glen .................. 10,000 3 to 25 319
--------
3,084
--------
1997 Acquisitions:
- ----------------------------------
Westchester West ............ 16,100 3 to 25 880
Polos West and Sun Chase ...... 13,950 3 to 25 763
Emerald Portfolio ............ 27,360 3 to 25 1,496
Citibank Portfolio ............ 60,300 3 to 25 3,296
Summer Place .................. 7,000 3 to 25 384
--------
6,819
--------
Pending Acquisition:
- ----------------------------------
Questar Transaction ............ 174,935 3 to 25 9,306
--------
Pro forma depreciation ......... $19,209
========
</TABLE>

(12) Incremental cost of property management operations by $250 attributable
to the increased asset base.

(13) The pro forma effect to interest expense for the year ended December 31,
1996 on variable rate debt expected to be repaid with proceeds of the
offering is $4,252. In addition, the pro forma effect to interest expense
for two Questar mortgages expected to be refinanced is $370.

(14) Pro forma amortization of intangible assets acquired in connection with
the Advisor and Property Manager Transactions are calculated as follows:

<TABLE>
<CAPTION>
Historical Period Pro Forma
Total Cost (Months) Amortization
------------ ---------- -------------
<S> <C> <C> <C>
Property Manager Transaction:
Intangible assets ..................... $13,246 36 $ 4,415
Third-party management contracts ...... 4,951 48 1,238
Advisor Transaction:
Intangible assets ..................... 13,448 36 4,484
--------
Pro forma amortization ............... 10,137
Historical amortization ............... (1,121)
--------
Pro forma amortization adjustment ...... $ 9,016
========
</TABLE>

The Company utilized 10 and 15 year lives respectively for the amortization
of certain intangible assets in its 1996 and interim 1997 financial
statements. Commencing in the period ended September 30, 1997, the Company
will prospectively amortize the intangible assets over a three-year life.

(15) Pro forma minority interest (17.42%) in Operating Partnership.

(16) Preferred dividends of $6,158 on 2,737,000 shares of the 1997 Series-A
Preferred issued with a dividend rate of 9%.

F-9
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(Continued)
(unaudited)
(dollars in thousands, except share and unit data)

Notes to Pro Forma Condensed Consolidating Statement of Operations for the
period ended June 30, 1997:

(17) Pro forma results of operations for the period ended June 30, 1997 for
properties sold in 1997 are as follows:

<TABLE>
<CAPTION>
Howell Banks Brookwood
Commons Crossing Village Crossroads Total
--------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue
Rental income ................................. ($ 66) ($ 408) $ -- ($ 835) ($ 1,309)
------ ------ ----- ------ --------
Total revenue ................................. (66) (408) -- (835) (1,309)
Expenses
Property operating expenses .................. (45) (49) -- (72) (166)
Real estate taxes .............................. (5) (24) -- (48) (77)
Property management fees ..................... (5) (26) -- (50) (81)
Depreciation and amortization .................. (19) -- -- -- (19)
------ ------ ----- ------ --------
Total expenses ................................. (74) (99) -- (170) (343)
------ ------ ----- ------ --------
(Income) loss from operations .................. 8 (309) -- (665) (966)
(Income) loss from joint venture, net of minority
interest .................................... -- -- 726 -- 726
------ ------ ----- ------ --------
(Income) loss before gains and extraordinary
items ....................................... $ 8 ($ 309) $726 ($ 665) ($ 240)
====== ====== ===== ====== ========
</TABLE>

(18) Pro forma adjustments for the six months ended June 30, 1997 related to
the Property Manager Transaction are as follows:

(a) Increased third-party property management revenue by $638 for 1997 as
a result of third-party multifamily property management contracts
acquired in the Property Manager Transaction.

(b) Reduced property management fees by $709 and reimbursements by $25 for
1997 for the Company owned multifamily properties as a result of the
Company becoming self-managed in the Property Manager Transaction.

(19) Pro forma results of operations for the period ended June 30, 1997 for
properties acquired in 1997 are as follows:

<TABLE>
<CAPTION>
Sun Chase & Emerald Citibank Summer
Polos West Portfolio Portfolio Place Total
------------- ----------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenue
Rental income ........................ $974 $2,411 $4,518 $637 $8,540
Other income ........................ -- 6 188 -- 194
----- ------ ------- ----- -------
Total revenue ........................ 974 2,417 4,706 637 8,734
Expenses
Property operating expenses ......... 278 990 1,160 256 2,684
Real estate taxes .................. 105 127 625 60 917
Interest ........................... 157 712 -- -- 869
Depreciation and amortization ...... 286 748 1,640 192 2,866
----- ------ ------- ----- -------
Total expenses ..................... 826 2,577 3,425 508 7,336
----- ------ ------- ----- -------
Income (loss) from operations ...... $148 $ (160) $1,281 $129 $1,398
===== ====== ======= ===== =======
</TABLE>

F-10
<PAGE>

BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS--(Continued)
(unaudited)
(dollars in thousands, except share and unit data)

(20) Detail of pro forma depreciation expense is presented as follows:

(21) Incremental costs of property management operations of $125 attributable
to the increased asset base.

(22) The pro forma effect to interest expense for the period ended June 30,
1997 on variable rate debt expected to be repaid with proceeds of the
Offering is $2,221. In addition, the pro forma effect to interest expense
for two Questar mortgages expected to be refinanced is $182.

(23) Pro forma amortization of intangible assets acquired in connection with
the Advisor and Property Manager Transactions are calculated as follows:

<TABLE>
<CAPTION>
Pro Forma
Amortization Pro Forma
Total Cost Period (Months) Amortization
------------ ----------------- -------------
<S> <C> <C> <C>
Property Manager Transaction:
Intangible assets ..................... $13,246 36 $ 2,208
Third-party management contracts ...... 4,951 48 619
Advisors Transaction:
Intangible assets ..................... 13,448 36 2,241
--------
Pro forma amortization ............... 5,068
Historical amortization ............... (1,527)
--------
Pro forma amortization adjustment ...... $ 3,541
========
</TABLE>

(24) Pro forma minority interest (17.39%) in the Operating Partnership.

(25) Preferred dividends of $3,079 on 2,737,000 shares of Series 1997-A
Preferred issued with a dividend rate of 9%.

F-11
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

PROSPECTUS

[LOGO]

BERKSHIRE REALTY COMPANY, INC.
$400,000,000
Debt Securities, Preferred Stock,
Common Stock and Securities Warrants

Berkshire Realty Company, Inc. (the "Company"), may from time to time
offer and sell in one or more series (i) its unsecured debt securities (the
"Debt Securities"); (ii) shares of its preferred stock, par value $.01 per
share (the "Preferred Stock"); (iii) shares of its common stock, par value $.01
per share ("Common Stock"); or (iv) warrants to purchase Debt Securities (the
"Debt Securities Warrants"), warrants to purchase Preferred Stock (the
"Preferred Stock Warrants") and warrants to purchase Common Stock (the "Common
Stock Warrants") (the Debt Securities Warrants, Preferred Stock Warrants and
Common Stock Warrants, collectively, the "Securities Warrants") with an
aggregate public offering price of up to $400,000,000. The Debt Securities,
Preferred Stock, Common Stock and Securities Warrants offered pursuant hereto
(collectively, the "Offered Securities") may be offered separately or together,
in separate series, in amounts and at prices and terms to be set forth in an
accompanying supplement to this Prospectus (a "Prospectus Supplement"). The
aggregate public offering price and terms of the Offered Securities will be
determined by market conditions at the time such securities are offered. Unless
otherwise specified in a Prospectus Supplement, the proceeds from the sale of
the Offered Securities will be received by the Company and used for general
corporate purposes.

The applicable Prospectus Supplement shall set forth (i) with respect to
Debt Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the holder, any sinking fund provisions and any
conversion provisions; (ii) with respect to Preferred Stock, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and all other specific terms of the
Preferred Stock; (iii) with respect to Common Stock, the specific number of
shares and issuance price per share; and (iv) with respect to Securities
Warrants, the duration, offering price, exercise price and detachability. The
applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by such Prospectus Supplement.

The Offered Securities may be sold on a negotiated or competitive bid
basis to or through underwriters or dealers designated from time to time or by
the Company, directly or through agents. Certain terms of any offering and sale
of Offered Securities, including, where applicable, the names of the
underwriters, dealers or agents, if any, the principal amount or number of
shares or Securities Warrants to be purchased, the purchase price of the
Offered Securities, any applicable commissions, discounts and other
compensation to underwriters, dealers and agents, and the proceeds to the
Company from such sale, will be set forth in, or calculable from information
contained in, a Prospectus Supplement. See PLAN OF DISTRIBUTION.

The 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 capital stock of the Company in excess of 9.8% of the then
outstanding capital stock, such 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.

----------

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
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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

The date of this Prospectus is October 7, 1997

<PAGE>

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 of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, with respect to the Offered Securities. 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 Offered Securities, 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 and
amendment to such Annual Report on Form 10-K/A;

(b) Quarterly Reports on Form 10-Q for the three- and six-month periods
ended March 31 and June 30, 1997, respectively, and respective amendments to
such Quarterly Reports on Form 10-Q/A; 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.

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
Offered Securities offered hereby have been sold or which deregisters all
Offered Securities 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 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.

2
<PAGE>

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. Where used herein, the term "Funds from
Operations" ("FFO") shall mean 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 on
real estate assets, and after adjustments for unconsolidated partnerships and
joint ventures, which definition has been adopted by the National Association
of Real Estate Investment Trusts ("NAREIT").

THE COMPANY

General
The Company, a Delaware corporation, is a self-administered and
self-managed equity real estate investment trust ("REIT") which specializes in
the ownership and operation of apartment communities. As of June 30, 1997, the
Company had investments in 44 properties in 8 states consisting of 40 apartment
communities having in the aggregate 13,341 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'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 (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 currently holds 80.56% 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 19.44% of the partnership
interests in the Operating Partnership are 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.

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 as a
REIT under the Internal Revenue Code of 1986, as amended (the "Code"), no
assurance can be given that the Company will continue to qualify as a REIT.
Qualification as a REIT 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.

3
<PAGE>

USE OF PROCEEDS

Unless otherwise described in the Prospectus Supplement which accompanies
this Prospectus, the Company intends to use the net proceeds from the sale of
the Offered Securities for general corporate purposes, which may include the
acquisition, development, rehabilitation and operation of apartment communities
as suitable opportunities arise, the improvement of certain Properties in the
Company's portfolio and the repayment of certain then-outstanding secured or
unsecured indebtedness.

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.

Preferred Stock
General. The Board of Directors is empowered by the Company's Restated
Certificate of Incorporation 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.

Series A Preferred Stock. The Company has designated and issued 2,737,000
shares of Series 1997-A Convertible Preferred Stock (the "Series A Preferred")
pursuant to the authority granted by the Restated Certificate of Incorporation.
As of the date hereof, 2,337,000 of such shares of Series A Preferred are owned
by Westbrook Berkshire Holdings, L.L.C., an affiliate of Westbrook Real Estate
Fund II, L.P., and the balance is owned by six clients of Morgan Stanley Asset
Management, Inc. The outstanding shares of Series A Preferred are fully paid
and nonassessable.

Holders of shares of Series A Preferred are entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for
the payment of dividends, preferential cumulative quarterly cash dividends
equal to the greater of (i) 2.25% of $25.00 per share (the price per share paid
upon issuance of the Series A Preferred) (such $25.00, the "Stated Value") and
(ii) the dollar amount of the dividend paid per share of Common Stock
multiplied by the number of shares of Common Stock into which each share of
Series A Preferred is then entitled to be converted. Such dividends accrue
whether or not the Company has earnings or surplus and are payable before any
dividends or distributions are paid on, or the Company makes any redemptions or
purchases of, shares of Common Stock.

Holders of Shares of Series A Preferred are entitled to vote, together
with the holders of Common Stock as one class, on all matters on which the
holders of Common Stock are entitled to vote. Each share of Series A Preferred
is entitled to the number of votes as equal the number of shares of Common
Stock into which a share of Series A Preferred is then entitled to be
converted. The affirmative vote of a majority of the Series A Preferred is
required to (i) issue additional shares of Series A Preferred or increase the
number of authorized shares of Series A Preferred, (ii) authorize any
reclassification of the Series A Preferred, (iii) require the exchange of
Series A Preferred, (iv) amend, alter or repeal any provisions of the By-Laws
of the Company in a manner that would adversely affect the holders of Series A
Preferred or (v) amend, alter or repeal any provisions of the Restated
Certificate of Incorporation

4
<PAGE>

of the Company, the terms of the Series A Preferred or any other pertinent
organizational document in a manner that would adversely affect the rights and
preferences of the Series A Preferred.

In addition, for so long as there is outstanding at least 793,730 shares
of Series A Preferred, the affirmative vote of a majority of the Series A
Preferred is required for the following actions: (i) the transfer by the
Company of the ownership of any interest in the General Partner of the
Operating Partnership, the transfer by the General Partner to a third party of
the right to exercise all or a portion of its rights as the General Partner of
the Operating Partnership or the transfer by the Company in a single
transaction or series of transactions of assets owned directly or indirectly by
the Company having a value in excess of 10% of the fully-diluted market
capitalization of the Company within any 90-day period or 20% of such market
capitalization within any 360-day period, (ii) the Company's termination as a
REIT, (iii) the alteration of the Company's business such that real estate
assets owned directly or indirectly by the Company are, on a square foot basis,
less than 90% invested in multifamily residential properties or (iv) the
transfer, on or before September 19, 1998, of more than 30% of the Common Stock
or Units held directly or indirectly by either Douglas Krupp or David Marshall.

Holders of Series A Preferred are entitled to elect one Director to the
Board of Directors of the Company. In addition, if four consecutive Series A
Preferred quarterly dividends are in arrears, then the number of directors of
the Company will be increased by the smallest number representing a majority of
the number of Directors of the Company, and the holders of Series A Preferred
will be entitled to elect such number of Directors.

Upon (i) the transfer of substantially all the assets owned directly or
indirectly by the Company, (ii) the merger or consolidation of the Company or
the Operating Partnership with a third party (other than a merger of the
Company and a wholly-owned subsidiary of the Company in which the fully-diluted
market capitalization of the Company is unchanged), (iii) any recapitalization
of the Company, the Operating Partnership and subsidiaries of the Company,
considered as a whole, in a single transaction or series of transactions,
aggregating 50% or more of the fully-diluted market capitalization of the
Company or (iv) a "Change of Control" (as defined below), holders of Series A
Preferred will be entitled to receive at their option either (i) out of the
assets of the Company available for distribution to stockholders and before any
payment to holders of Common Stock, an amount per share equal to 115% of the
sum of the Stated Value and all accrued and unpaid dividends or (ii) Common
Stock on conversion of their Series A Preferred.

A Change of Control will be deemed to have occurred if any of the
following occur (or, in the case of any proposal, if any of the following could
occur as a result thereof): (i) the Company takes or fails to take any action
such that it ceases to be required to file reports under Section 13 of the
Exchange Act or any successor to that Section; (ii) any "person" (as defined in
Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
either (A) 20% or more of the outstanding shares of Common Stock, or (B) 20%
(by right to vote or grant or withhold any approval) of the outstanding
securities of any other class or classes which individually or together have
the power to elect a majority of the members of the Board; (iii) the Board
determines to recommend, or fails to determine to recommend, the acceptance of
any proposal set forth in a tender offer statement or proxy statement filed by
any person with the Commission which indicates the intention on the part of
that person to acquire, or acceptance of which would otherwise have the effect
of that person acquiring, either (A) 20% or more of the outstanding shares of
the Common Stock, or (B) 20% (by right to vote or grant or withhold any
approval) of the outstanding securities of any other class or classes which
individually or together have the power to elect a majority of the members of
the Board; (iv) other than as a result of the death or disability of one or
more of the directors within a three-month period, and other than by reason of
the holders of Series A Preferred exercising their rights to elect directors in
the event of a failure to pay dividends, a majority of the members of the Board
for any period of three consecutive months are not persons who (A) had been
directors of the Company for at least the preceding 24 consecutive months or
(B) when they initially were elected to the Board, (x) were nominated (if they
were elected by the shareholders) or elected (if they were elected by the
directors) with the affirmative concurrence of 662/3% of the directors who were
Continuing Directors at the time of the nomination or election by the Board and
(y) were not elected as a result of an actual or threatened solicitation of
proxies or consents by a person other than the Board or an agreement intended
to avoid or settle such a proxy solicitation (the directors described in
clauses (A) and (B) of this subsection (iv) being "Continuing Directors"); (v)
the Company or a subsidiary of the Company ceases to be the sole General
Partner of the Operating Partnership or grants or sells to any person, or
consents to any amendment to the Partnership Agreement of the Operating
Partnership, or the organizational documents of the other subsidiaries, which
has the

5
<PAGE>

effect of transferring, the power to control or direct the actions of the
Operating Partnership or such other subsidiaries as if such person (A) is a
general partner of the Operating Partnership or (B) is a limited partner of the
Operating Partnership with consent or approval rights greater than the consent
or approval rights held by the limited partners of the Operating Partnership on
the date hereof; or (vi) the Operating Partnership is a party to any entity
conversion or any merger or consolidation in which the Operating Partnership is
not surviving entity in such merger or consolidation or in which the effect is
of the nature set forth in the next preceding clause (v).

Upon liquidation, dissolution or winding-up of the Company, holders of
Series A Preferred will be entitled to receive at their option either (i) out
of the assets of the Company available for distribution to shareholders and
before any payment to holders of Common Stock, an amount per share equal to
115% of the sum of the Stated Value and all accrued and unpaid dividends if
such event occurs before September 25, 2002, 110% of such sum if such event
occurs on or after September 25, 2002 but before September 25, 2003, 105% of
such sum if such event occurs on or after September 25, 2003 but before
September 25, 2004 and 100% of such sum if such event occurs on or after
September 25, 2004 or (ii) Common Stock on conversion of their Series A
Preferred. Notwithstanding the foregoing, if such event occurs as a result of
the adoption and implementation of a plan of liquidation pursuant to rights
granted to shareholders in the Company's Restated Certificate of Incorporation
(see Termination below), then holders of Series A Preferred who voted in favor
of the adoption of such plan will be entitled to receive at their option either
(i) an amount per share equal to the 100% of the sum of the Stated Value and
all accrued and unpaid dividends or (ii) Common Stock on conversion of their
Series A Preferred.

Each share of Series A Preferred is convertible at the option of the
holder beginning September 19, 1998 into 2.0619 shares of Common Stock, based
on a conversion price of $12.125 per share of Common Stock. The conversion
price is subject to adjustment in certain events. Further, the conversion price
in effect from time to time will be reduced to 50% of such price in the event
of the Company's failure to comply with certain of the terms of the Series A
Preferred. After September 25, 2002, the Company has the right to convert at
any time and from time to time not less than 500,000 shares of Series A
Preferred on not less than 90 nor more than 120 days' notice into a number of
shares of Common Stock equal to the product of (i) the number of shares of
Series A Preferred to be converted and (ii) the sum of the Stated Value and all
accrued and unpaid dividends divided by the conversion price then in effect.
Such mandatory conversion is permitted only if the Common Stock has traded
above the conversion price for 20 of the 30 consecutive trading days
immediately prior to both the notice date and the mandatory conversion date,
including the date immediately prior to both the notice date and the mandatory
conversion date. Notwithstanding the Company's mandatory conversion right, each
holder of Series A Preferred will have the right upon receipt of a mandatory
conversion notice to require the Company to redeem any or all of such holder's
shares of Series A Preferred at a redemption price per share equal to 110% of
the sum of the Stated Value and all accrued and unpaid dividends. The Company
in turn may elect to deliver to each holder of Series A Preferred who has
elected such cash payment option such number of shares of Common Stock as
equals the quotient of (i) the product of 104%, the redemption price and the
number of shares of Series A Preferred noticed for redemption and (ii) the
current market price of the Company's Common Stock.

In the event of the Company's termination as a REIT, each holder of Series
A Preferred will have the right to require the Company to redeem any or all of
such holder's shares of Series A Preferred at a redemption price per share
equal to 115% of the sum of the Stated Value and all accrued and unpaid
dividends.

The terms of the Series A Preferred provide that it will rank prior to any
other series of Preferred Stock, prior to Common Stock and prior to any other
class or series of capital stock of the Company with respect to the payment of
dividends, the right to redemption and the distribution preference in the event
of a change in ownership or the liquidation, dissolution or winding-up of the
Company. Except as otherwise agreed to in the Stock Purchase Agreement among
the Company, Westbrook Real Estate Fund II, L.P. and Westbrook Berkshire
Holdings, L.L.C., pursuant to which the shares of Series A Preferred were
issued and sold, holders of Series A Preferred have no preemptive rights.

The applicable Prospectus Supplement will describe each of the following
terms that may be applicable in respect of any Preferred Stock offered and
issued pursuant to this Prospectus: (1) the specific designation, number of
shares, seniority and purchase price; (2) any liquidation preference per share;
(3) any maturity date; (4) any mandatory or optional redemption or repayment
dates and terms or sinking fund provisions; (5) any dividend rate or rates and
the dates on which any dividends will be payable (or the method by which such
rates or dates will be determined); (6) any voting rights; (7) any rights to
convert the Preferred Stock into other securities or rights,

6
<PAGE>

including a description of the securities or rights into which such Preferred
Stock is convertible (which may include other Preferred Stock) and the terms
and conditions upon which such conversions will be effected including, without
limitation, conversion rates or formulas, conversion periods and other related
provisions; (8) the place or places where dividends and other payments with
respect to the Preferred Stock will be payable; (9) any additional voting,
dividend, liquidation, redemption and other rights, preferences, privileges,
limitations and restrictions, including restrictions imposed for the purpose of
maintaining the Company's qualification as a REIT. Upon issuance and delivery
against payment therefor, the Preferred Stock will be fully paid and
nonassessable.

Warrants
Three million warrants were admitted to trading on the NYSE 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 September 26, 1997, 2,661 shares of Common Stock had been
issued upon exercise of warrants, and 2,997,339 warrants remained outstanding.

Charter and By-Law Provisions
Shareholders' rights and related matters are governed by the Delaware
General Corporation Law, the Company's Restated Certificate of Incorporation
(the "Certificate") and its By-Laws (the "By-Laws") (the Certificate and the
By-Laws, collectively, the "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 and Series A
Preferred (voting on an as converted basis with the holders of shares of Common
Stock as though part of the same class), 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
(see Restrictions on the Ownership and Transfer of Excess Shares below); (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 at least 662/3% of the
outstanding shares of capital stock entitled at the time to vote on the
election of any Directors, In addition, holders of shares of Series A Preferred
have the special voting rights described above under Preferred Stock--Series A
Preferred 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. Holders of shares of
Common Stock 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 of special meeting or 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, subject to the special
rights of holders of Series A Preferred with respect to the election of
Directors, 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 an 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.

7
<PAGE>

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 Supermajority vote to effect changes in certain provisions, have
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 the Company. Accordingly, 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 voting shares of the Company
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 vote,
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 voting
shares 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 acquired additional
voting shares 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 cannot be changed except by amendment of the Organizational
Documents by a Supermajority vote.

Pursuant to the Delaware General Corporation Law, the Company cannot merge
with or sell all or substantially all of the assets of the Company, except
pursuant to a resolution approved by the affirmative vote of a majority of the
outstanding shares entitled to vote on the resolution. In addition, the
Partnership Agreement requires that any merger or sale of all or substantially
all of the assets of or dissolution of the Operating Partnership be approved by
the affirmative vote of a majority of the outstanding Units.

Shareholder Rights Plan
It is possible that the Board will 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

8
<PAGE>

of capital 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 capital
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% limit 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 capital
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
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 NYSE during the 30-day period ending on the business day prior
to the purchase date. The Organizational Documents further provide 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 within 30 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. Such provisions did not apply to the issuance and sale of
the Series A Preferred.

The provisions of the Organizational Documents concerning Excess Shares
cannot be changed except by amendment of the Organizational Documents by a
Supermajority vote.

Termination
The Company may be dissolved at any time by Supermajority vote and,
otherwise, pursuant to the procedure set forth in the Delaware General
Corporation Law. In 1991 when it commenced operations as a REIT, the Company
granted the shareholders the right to vote on its continued existence after a
period of approximately six and one-half years of operations. Therefore, the
Certificate requires the Company's Board of Directors to prepare and submit to
the shareholders on or before December 31, 1998 a proposal to liquidate the
Company's assets and distribute the net proceeds of such liquidation. The
liquidation proposal will become effective only if approved by shareholders
holding a majority of voting shares then outstanding.

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.

Other Matters
The transfer agent and registrar for the Company's Common Stock is
American Stock Transfer & Trust Company.

9
<PAGE>

FEDERAL INCOME TAX CONSIDERATIONS

General
The following summary of material federal income tax considerations that
may be relevant to a holder of Common Stock is based on current law, and is not
intended as tax advice. The following discussion, which is not exhaustive of
all possible tax considerations, does not include a detailed discussion of any
state, local or foreign tax considerations. Nor does it discuss all of the
aspects of federal income taxation that may be relevant to a prospective
stockholder in light of his or her particular circumstances or to certain types
of stockholders (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.

The statements and opinions in this discussion are based on current
provisions of the Code, existing, temporary and currently proposed Treasury
Regulations under the Code, the legislative history of the Code, existing
administrative rulings and practices of the Internal Revenue Service ("IRS")
and judicial decisions. No assurance can be given that legislative, judicial or
administrative changes will not affect the accuracy of any statements in this
Prospectus with respect to transactions entered into or contemplated prior to
the effective date of such changes.

EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT WITH HIS
OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF
THE PURCHASE, OWNERSHIP AND SALE OF COMMON STOCK IN AN ENTITY ELECTING TO BE
TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

Taxation of the Company
General. The Company has elected to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with its taxable year ended December 31,
1991. The Company believes that it has been organized and operated in a manner
so as to qualify for taxation as a REIT under the Code, and the Company intends
to continue to operate in such a manner. No assurance, however, can be given
that the Company has operated in a manner so as to qualify as a REIT or will
continue to operate in a manner so as to remain qualified as a REIT.
Qualification and taxation as a REIT depend upon the Company's ability to meet,
on a continuing basis, through actual annual operating results, distribution
levels, diversity of stock ownership, and the various other qualification tests
imposed under the Code on REITs, some of which are summarized below. While the
Company intends to operate so that it will qualify as a REIT, given the highly
complex nature of the rules governing REITs, the ongoing importance of factual
determinations and the possibility of future changes in circumstances of the
Company, no assurance can be given that the Company will so qualify for any
particular year. See--Failure to Qualify.

In the opinion of Peabody & Brown, counsel to the Company ("Counsel"),
commencing with its taxable year ended December 31, 1991, the Company has been
organized in conformity with the requirements for qualification and taxation as
a REIT under the Code and the proposed method of operation of the Company and
the Operating Partnership will enable the Company to continue to meet the
requirements for qualification and taxation as a REIT. It must be emphasized
that Counsel's opinion is based on various assumptions and is conditioned upon
certain representations made by the Company, the Operating Partnership and the
Operating Subsidiaries as to factual matters. In addition, Counsel's opinion is
based upon factual representations of the Company concerning its business and
properties, and the business and properties of the Operating Partnership and
the Operating Subsidiaries. Unlike a tax ruling, an opinion of counsel is not
binding upon the IRS and no assurance can be given that the IRS will not
challenge the status of the Company as a REIT. Moreover, such qualification and
taxation as a REIT depend upon the Company's ability to meet, through actual
annual operating results, distribution levels, diversity of stock ownership and
various other qualification tests imposed under the Code discussed below, the
results of which will not be reviewed by Counsel. Accordingly, no assurance can
be given that the actual results of the Company's operation for any one taxable
year will satisfy such requirements. See--Failure to Qualify.

The following is a general summary of the Code provisions that govern the
federal income tax treatment of a REIT and its stockholders. These provisions
of the Code are highly technical and complex. This summary is

10
<PAGE>

qualified in its entirety by the applicable Code provisions, Treasury
Regulations and administrative and judicial interpretations thereof.

If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income tax on net income that it distributes
currently to its stockholders. This treatment substantially eliminates the
"double taxation" (taxation at both the corporate and stockholder levels) that
generally results from an investment in a corporation. However, the Company
will be subject to federal income or excise tax as follows: (i) the Company
will be taxed at regular corporate rates on any undistributed REIT taxable
income and undistributed net capital gains; (ii) under certain circumstances,
the Company may be subject to the "alternative minimum tax" on its items of tax
preference, if any; (iii) if the Company has (1) net income from the sale or
other disposition of "foreclosure property" (generally, property acquired by
reason of a foreclosure or otherwise on default of a loan secured by the
property) that is held primarily for sale to customers in the ordinary course
of business or (2) other nonqualifying net income from foreclosure property, it
will be subject to tax at the highest corporate rate on such income; (iv) if
the Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property (other than dispositions of
foreclosure property, and, as a result of the Taxpayer Relief Act of 1997,
enacted August 5, 1997 (the "Taxpayer Relief Act"), effective for the Company's
taxable year ending December 31, 1998, dispositions of property that occur due
to involuntary conversion) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax; (v) if the
Company should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), and has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the Company fails the 75% or 95% test, multiplied by a
fraction intended to reflect the Company's profitability; (vi) if the Company
should fail to distribute with respect to each calendar year at least the sum
of (1) 85% of its REIT ordinary income for such year, (2) 95% of its REIT
capital gain net income for such year, and (3) any undistributed taxable income
from prior years, the Company would be subject to a 4% excise tax on the excess
of such required distribution over the amounts actually distributed; (vii) if
the Company acquires any asset from a C corporation (i.e., generally a
corporation subject to full corporate-level tax) in a transaction in which the
basis of the asset in the Company's hands is determined by reference to the
basis of the asset (or any other property) in the hands of the C corporation
and the Company subsequently recognizes gain on the disposition of such asset
during the 10-year period (the "Recognition Period") beginning on the date on
which the asset was acquired by the Company (or the Company first qualified as
a REIT), then the excess of (1) the fair market value of the asset as of the
beginning of the applicable Recognition Period, over (2) the REIT's adjusted
basis in such asset as of the beginning of such Recognition Period will be
subject to tax at the highest regular corporate rate (pursuant to Treasury
Regulations issued by the IRS which have not yet been promulgated).

Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (i) that is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable Common
Stock, or by transferable certificates of beneficial interest; (iii) that would
be taxable as a domestic corporation but for Sections 856 through 859 of the
Code; (iv) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code; (v) that has the calendar year as
its taxable year; (vi) the beneficial ownership of which is held by 100 or more
persons; (vii) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities);
and (viii) that meets certain other tests, described below, regarding the
nature of its income and assets. The Code provides that conditions (i) through
(v), inclusive, must be met during the entire taxable year and that condition
(vi) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months.
Conditions (vi) and (vii), however, will not apply until after the first
taxable year for which an election is made to be taxed as a REIT. The Company
believes that it currently satisfies conditions (vi) and (vii). In addition,
the Company's Organizational Documents include restrictions regarding the
transfer of the Company's Common Stock that are intended to assist the Company
in continuing to satisfy the share ownership requirements described in (vi) and
(vii) above. See DESCRIPTION OF THE CAPITAL STOCK OF THE COMPANY Restrictions
on the Ownership and Transfer of Excess Shares. In addition, the Company
intends to continue to comply with the Treasury Regulations requiring it to
ascertain the actual ownership of its shares. The Taxpayer Relief Act
eliminates the rule that a failure to comply with these Regulations will result
in a loss of REIT status. Instead, a failure to comply with these regulations
will result in a fine. This provision will be effective for the Company's
taxable year ending December 31, 1998.

11
<PAGE>

The Company has several "qualified REIT subsidiaries." A corporation that
is a "qualified REIT subsidiary" is not treated as a separate corporation for
federal income tax purposes, and all assets, liabilities and items of income,
deduction and credit of a "qualified REIT subsidiary" are treated as assets,
liabilities and items of the REIT. In applying the requirements described
herein, any "qualified REIT subsidiary" of the Company will be ignored, and all
assets, liabilities and items of income, deduction and credit of such
subsidiary will be treated as assets, liabilities and items of the Company. Any
"qualified REIT subsidiary" of the Company is therefore not be subject to
federal corporate income taxation, although it may be subject to state or local
taxation.

In the case of a REIT that is a partner in a partnership, the REIT is
deemed to own its proportionate share of the assets of the partnership and is
deemed to receive the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership shall
retain the same character in the hands of the REIT. Thus, the Company's
proportionate share of the assets, liabilities and items of income of the
Operating Partnership are treated as assets, liabilities and items of income of
the Company for purposes of applying the requirements described herein,
provided that the Operating Partnership is treated as a partnership for federal
income tax purposes. See Other Tax Considerations--Effect of Tax Status of the
Operating Partnership on REIT Qualification.

Income Tests. In order to qualify as a REIT, there are three gross income
requirements that must be satisfied annually. First, at least 75% of the REIT's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from investments relating
to real property or mortgages on real property (including "rents from real
property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of the REIT's gross income
(excluding gross income from prohibited transactions) for each taxable year
must be derived from the same items which qualify under the 75% gross income
test, and from dividends, interest and gain from the sale or disposition of
stock or securities, or from any combination of the foregoing. Third,
short-term gain from the sale or other disposition of stock or securities, gain
from prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the REIT's gross
income (including gross income from prohibited transactions) for each taxable
year. The Taxpayer Relief Act repeals the 30% gross income test for taxable
years beginning after its enactment. Thus, the 30% gross income test will no
longer apply after the Company's taxable year ending December 31, 1997.

Rents received by a REIT will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, rents received from a tenant will not
qualify as "rents from real property" in satisfying the gross income tests if
the REIT, or a direct orindirect owner of 10% or more of the REIT, directly or
constructively, owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under
the lease, then the portion of rent attributable to such personal property will
not qualify as "rents from real property." Finally, in order for rents received
with respect to a property to qualify as "rents from real property," the REIT
generally must not operate or manage the property or furnish or render services
to tenants, except through an "independent contractor" who is adequately
compensated and from whom the Company derives no income. The "independent
contractor" requirement, however, does not apply to the extent the services
provided by the REIT are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not otherwise considered
"rendered to the occupant." The Taxpayer Relief Act provides a de minimis rule
for non-customary services which is effective for taxable years beginning after
August 5, 1997. If the value of the non-customary service income with respect
to a property (valued at no less than 150% of the Company's direct costs of
performing such services) is 1% or less of the total income derived from the
property, then all rental income except the non-customary service income will
quality as "rents from real property." This provision will be effective for the
Company's taxable year ending December 31, 1998.

The Company does not anticipate charging rent that is based in whole or in
part on the income or profits of any person (except by reason of being based on
a fixed percentage or percentages of receipts of sales consistent with the rule
described above). The Company does not anticipate receiving more than a de
minimis amount of rents

12
<PAGE>

from any Related Party Tenants. The Company does not anticipate deriving rent
attributable to personal property leased in connection with real property that
exceeds 15% of the total rents.

The Company provides certain services with respect to the Properties
through the Operating Partnership, which is not an "independent contractor."
However, the Company believes that all of such services are considered "usually
or customarily rendered" in connection with the rental of space for occupancy
only, so that the provision of such services do not jeopardize the
qualification of rent from the Properties as "rents from real property." In the
case of any services that are not "usual and customary" under the foregoing
rules, the Company intends to employ "independent contractors" to provide such
services.

If the Company fails to satisfy one or both of the 75% or the 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions generally will be available if the Company's failure to
meet any such tests was due to reasonable cause and not due to willful neglect,
the Company attaches a schedule of the sources of its income to its federal
income tax return and any incorrect information on the schedule was not due to
fraud with the intent to evade tax. It is not possible, however, to state
whether in all circumstances the Company would be entitled to the benefit of
these relief provisions. As discussed above, even if these relief provisions
were to apply, a tax would be imposed on certain excess net income.

Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets: (i)
at least 75% of the value of the Company's total assets must be represented by
real estate assets (including (i) its allocable share of real estate assets
held by partnerships in which the Company has an interest and (ii) stock or
debt instruments purchased with the proceeds of a stock offering on long-term
(at least five years) debt offering of the Company and held for not more than
one year following the receipt by the Company of such proceeds), cash, cash
items and government securities; (ii) not more than 25% of the Company's total
assets may be represented by securities other than those in the 75% asset
class; and (iii) of the investments included in the 25% asset class, the value
of any one issuer's securities (other than an interest in a partnership or
shares of a "qualified REIT subsidiary" or another REIT) owned by the Company
may not exceed 5% of the value of the Company's total assets, and the Company
may not own more than 10% of any one issuer's outstanding voting securities
(other than an interest in a partnership or securities of a "qualified REIT
subsidiary" or another REIT).

After initially meeting the assets tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. The Company intends to maintain adequate records of the value
of its assets to ensure compliance with the asset tests and plans to take such
other action within 30 days after the close of any quarter as may be required
to cure any noncompliance. However, there can be no assurance that such other
action will always be successful.

Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends)
to its stockholders in an amount at least equal to (i) the sum of (A) 95% of
the Company's "REIT taxable income" (computed without regard to the dividends
paid deduction and the REIT's net capital gain) and (B) 95% of the net income
(after tax), if any, from foreclosure property, minus (ii) the sum of certain
items of noncash income (including, as a result of the Taxpayer Relief Act of
1997, inter alia cancellation of indebtedness and original issue discount
income). Such distributions must be paid during the taxable year to which they
relate (or during the following taxable year, if declared before the Company
timely files its tax return for the preceding year and paid on or before the
first regular dividend payment after such declaration). To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax on the undistributed amount at regular corporate capital gains
rates and ordinary income tax rates. Furthermore, if the Company fails to
distribute during each calendar year at least the sum of (i) 85% of its REIT
ordinary income of such year, (ii) 95% of its REIT capital gain income for such
year and (iii) any undistributed taxable income from prior periods, the Company
will be subject to a 4% excise tax on the excess of such amounts over the
amounts actually distributed. In addition, if the Company disposes of any asset
subject to the Built-In Gain Rule during its Recognition Period, the Company
will be required to distribute at least 95% of the Built-In Gain (after tax),
if any, recognized on the disposition.

13
<PAGE>

The Company intends to make timely distributions sufficient to satisfy the
annual distribution requirements. In this regard, it is expected that the
Company's REIT taxable income will be less than its cash flow due to the
allowance of depreciation and other noncash charges in the computing of REIT
taxable income. Moreover, the Partnership Agreement of the Operating
Partnership authorizes the General Partner to take such steps as may be
necessary to cause the Operating Partnership to make distributions to its
partners of amounts sufficient to permit the Company to meet these distribution
requirements. It is possible, however, that the Company, from time to time, may
not have sufficient cash or other liquid assets to meet the 95% distribution
requirement due to timing differences between the actual receipt of income and
actual payment of deductible expenses and the inclusion of such income and
deduction of such expenses in arriving at REIT taxable income of the Company,
or due to an excess of nondeductible expenses such as principal amortization or
capital expenditures over noncash deductions such as depreciation. In the event
that such circumstances do occur, then in order to meet the 95% distribution
requirement, the Company may cause the Operating Partnership to arrange for
short-term, or possibly long-term, borrowings to permit the payment of required
dividends.

Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for year by paying "deficiency dividends"
to stockholders in a later year that may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends. However, the
Company would be required to pay to the IRS interest based upon the amount of
any deduction taken for deficiency dividends.

Failure to Qualify. If the Company fails to qualify for taxation as a REIT
in any taxable year and special relief provisions do not apply, the Company
will be subject to tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate rates. Distributions to stockholders in
any year in which the Company fails to qualify as a REIT will not be
deductible, nor will they be required to be made. In such event, to the extent
of current and accumulated earnings and profits, all distributions to
stockholders will be taxable as ordinary income and, subject to certain
limitations in the Code, corporate distributees may be eligible for the
"dividends received deduction." Unless entitled to relief under specific
statutory provisions, the Company also will be disqualified from taxation as a
REIT for the four taxable years following the year during which qualification
was lost. It is not possible to state whether in all circumstances the Company
would be entitled to such statutory relief.

Taxation of Stockholders

Taxation of Taxable Domestic Stockholders. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable domestic
stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income, and corporate stockholders will not be eligible for the
dividends received deduction as to such amounts. Distributions that are
designated as capital gain dividends will be taxed as gains from the sale or
exchange of a capital asset held for more than one year (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 stockholder has held its stock. However,
corporate stockholders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. The Taxpayer Relief Act provides that,
beginning with the Company's taxable year ending December 31, 1998, if the
Company elects to retain and pay income tax on any net long-term capital gain,
domestic stockholders of the Company would include in their income as long-term
capital gain their proportionate share of such net long-term capital gain. A
domestic stockholder would also receive a refundable tax credit for such
stockholder's proportionate share of the tax paid by the Company on such
retained capital gains and an increase in its basis in the stock of the Company
in an amount equal to the difference between the undistributed long-term
capital gains and the amount of tax paid by the Company. Distributions in
excess of current and accumulated earnings and profits will not be taxable to a
stockholder to the extent that they do not exceed the adjusted basis of the
stockholder's Common Stock, but rather will reduce the adjusted basis of such
Common Stock. To the extent that such distributions exceed the adjusted basis
of a stockholder's Common Stock, they will be included in income as capital
gain, assuming the Common Stock is a capital asset in the hands of the
stockholder. In addition, any dividend declared by the Company in October,
November or December of any year and payable to a stockholder of record on a
specific date in any such month shall be treated as both paid by the Company
and received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by the Company during January of the following
calendar year. Stockholders may not include in their individual income tax
returns any net operating losses or capital losses of the Company.

14
<PAGE>

In general, a domestic stockholder will realize capital gain or loss on
the disposition of Common Stock equal to the difference between (i) the amount
of cash and the fair market value of any property received on such disposition,
and (ii) the stockholder's adjusted basis of such Common Stock. For
dispositions after July 28, 1997, the Taxpayer Relief Act provides that such
gain or loss will generally constitute either short-term, mid-term, or
long-term capital gain or loss depending on the length of time the stockholder
has held such shares. Under the Taxpayer Relief Act, an individual, trust or
estate that holds shares of Common Stock for more than 18 months will generally
be subject to a maximum tax of 20% on gains from the sale or disposition of
such shares. See Recent Legislation below. Loss upon a sale or exchange of
Common Stock by a stockholder who has held such Common Stock for six months or
less (after applying certain holding period rules) will be treated as a
long-term capital loss to the extent of distributions from the Company required
to be treated by such stockholder as long-term capital gain.

Backup Withholding. The Company will report to its domestic stockholders
and the IRS the amount of dividends paid during each calendar year and the
amount of tax withheld, if any, with respect thereto. Under the backup
withholding rules, a stockholder may be subject to backup withholding at the
rate of 31% with respect to dividends paid unless such holder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (ii) provides a taxpayer identification number and
certifies as to no loss of exemption, and otherwise complies with the
applicable requirements of the backup withholdings rules. Any amount paid as
backup withholding will be creditable against the stockholder's income tax
liability. The United States Treasury has recently issued proposed regulations
regarding the withholding and information reporting rules discussed above. In
general, the proposed regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify and modify reliance standards. If finalized in their
current form, the proposed regulations would generally be effective for
payments made after December 31, 1997, subject to certain transition rules.

In addition, the Company may be required to withhold a portion of capital
gain distributions made to any stockholders which fail to certify their non
foreign status to the Company. See--Taxation of Foreign Stockholders.

Taxation of Tax-Exempt Stockholders. The IRS has ruled that amounts
distributed as dividends by a qualified REIT generally do not constitute
unrelated business taxable income ("UBTI") when received by a tax-exempt
entity. Based on that ruling, the dividend income from the Common Stock will
not be UBTI to a tax-exempt stockholder, provided that the tax-exempt
stockholder has not held its shares of Common Stock as "debt financed property"
within the meaning of the Code and such shares are not otherwise used in a
trade or business. Similarly, income from the sale of Common Stock will not
constitute UBTI unless such tax-exempt stockholder has held such shares as
"debt financed property" within the meaning of the Code or has used the shares
in a trade or business.

Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" will be treated as UBTI as to any trust which is described
in Section 401(a) of the Code and is tax-exempt under Section 501(a) of the
Code (a "qualified trust") and which holds more than 10% (by value) of the
interests in the REIT. A REIT is a "pension held REIT" if (i) it would not have
qualified as a REIT but for the application of a "look-through" exception to
the "not closely held" requirement applicable to qualified trusts, and (ii)
either (A) at least one such qualified trust holds more than 25% (by value) of
the interests in the REIT, or (B) one or more such qualified trusts, each of
which owns more than 10% (by value) of the interests in the REIT, hold in the
aggregate more than 50% (by value) of the interests in the REIT. The percentage
of any REIT dividend treated as UBTI is equal to the ratio of (i) the gross
income (less direct expenses related thereto) of the REIT from unrelated trades
or businesses (determined as if the REIT were a qualified trust) to (ii) the
total gross income (less direct expenses related thereto) of the REIT. A de
minimis exception applies where this percentage is less than 5% for any year.
The provisions requiring qualified trusts to treat a portion of REIT
distributions as UBTI will not apply if the REIT is able to satisfy the "not
closely held" requirement without relying upon the "look-through" exception
with respect to qualified trusts. As a result of certain limitations on
transfer and ownership of Common Stock contained in the Charter, the Company
does not expect to be classified as a "pension held REIT."

Taxation of Foreign Stockholders. The rules governing United States
federal income taxation of nonresident alien individuals, foreign corporation,
foreign partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex and no attempt will be made herein to provide more
than a summary of such rules. Prospective Non-U.S. Stockholders should consult
with their own tax advisors to determine the impact of federal, state, and
local income tax laws with regard to an investment in shares, including any
reporting requirements, as well as the tax treatment of such an investment
under their home country laws.

15
<PAGE>

In general, Non-U.S. Stockholders will be subject to regular United States
federal income taxation with respect to their investment in shares of Common
Stock in the same manner as a U.S. Stockholder (i.e., at graduated rates on a
net basis, after allowance of deductions) if such investment is "effectively
connected" with the conduct by such Non-U.S. Stockholder of a trade or business
in the United States. A Non-U.S. Stockholder that is a corporation and that
receives income with respect to its investment in shares of Common Stock that
is (or is treated as) "effectively connected" with the conduct of a trade or
business in the United States may also be subject to the 30% branch profits tax
imposed under Section 884 of the Code, which is payable in addition to the
regular United States corporate income tax. The following discussion addresses
only the federal income taxation of Non-U.S. Stockholders whose investment in
shares of Common Stock is not "effectively connected" with the conduct of a
trade or business in the United States. Prospective investors whose investment
in shares of Common Stock may be "effectively connected" with the conduct of a
United States trade or business should consult their own tax advisors as to the
tax consequences thereof.

Distributions that are not attributable to gain from sales or exchanges by
the Company of United States real property interests and not designated by the
Company as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces or eliminates that tax. Pursuant to current
Treasury Regulations, dividends paid to an address in a country outside the
United States are generally presumed to be paid to a resident of such country
for purposes of determining the applicability of withholding discussed above
and the availability of a reduced tax treaty rate. Under proposed Treasury
Regulations, not currently in effect, however, a Non-U.S. Stockholder who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy certain certification and other requirements. Distributions made by the
Company in excess of its current and accumulated earnings and profits will not
be taxable to a stockholder to the extent they do not exceed the adjusted basis
of the stockholder's shares, but rather will reduce the adjusted basis of such
shares (but not below zero). To the extent that such distributions exceed the
adjusted basis of the Non-U.S. Stockholder's shares, they will give rise to tax
liability if the Non-U.S. Stockholder would otherwise be subject to tax on any
gain from the sale or disposition of his shares in the Company, as described
below.

As a result of a legislative change made by the Small Business Job
Protection Act of 1996, effective for distributions made after August 20, 1996,
the Company is required to withhold 10% of any distribution in excess of the
Company's current and accumulated earnings and profits. Consequently, although
the Company intends to withhold at a rate of 30% on the entire amount of any
distribution, to the extent that the Company does not do so any portion of a
distribution not subject to withholding at a rate of 30% will be subject to
withholding at a rate of 10%. However, the Non-U.S. Stockholder may seek a
refund of such amounts from the IRS if it is subsequently determined that such
distribution was, in fact, in excess of current or accumulated earnings and
profits of the Company, and the amount withheld exceeded the Non-U.S.
Stockholder's United States tax liability, if any, with respect to the
distribution.

For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of United
States real property interests will be taxed to a Non-U.S. Stockholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with the conduct of a
United States trade or business. Non-U.S. Stockholders would thus be taxed at
the normal capital gain rates applicable to U.S. stockholders (subject to
applicable alternative minimum tax and special alternative minimum tax in the
case of nonresident alien individuals), without regard as to whether such
distributions are designated by the Company as capital gain dividends. Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate stockholder not entitled to treaty exemption.
The Company is required by Treasury Regulations to withhold 35% of any
distribution to a Non-U.S. Stockholder that could be designated by the Company
as a capital gain dividend. This amount is creditable against the Non-U.S.
Stockholder's FIRPTA tax liability.

Gain recognized by the Non-U.S. Stockholder upon a sale of shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of its stock was held directly
or indirectly by foreign persons. The Company believes that it will be a
domestically controlled REIT and therefore, that the sale of its shares will
not

16
<PAGE>

be subject to taxation under FIRPTA. However, because the Common Stock will be
publicly traded, no assurance can be given that the Company will continue to so
qualify.

Notwithstanding the foregoing, gain from the sale or exchange of shares of
Company stock not otherwise subject to FIRPTA generally will be taxable to a
Non-U.S. Stockholder if the Non-U.S. Stockholder is a nonresident alien
individual who is present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States. In such case, the
nonresident alien individual will be subject to a 30% United States withholding
tax on the amount of such individual's gain.

If the Company does not qualify as or ceases to be a
"domestically-controlled REIT," whether gain arising from the sale or exchange
by a Non-U.S. Stockholder of shares of Common Stock would be subject to U.S.
taxation under FIRPTA will depend on whether the shares are "regularly traded"
(as defined in applicable Treasury Regulations) on an established securities
market (such as the NYSE on which the Common Stock is traded) and on the size
of the selling Non-U.S. Stockholder's interest in the Company. If the gain on
the sale of shares were to be subject to tax under FIRPTA, the Non-U.S.
Stockholder would be subject to the same treatment as a domestic stockholder
with respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals
and the possible application of the 30% branch profits tax in the case of
foreign corporations), and the purchaser of the shares would be required to
withhold and remit to the IRS 10% of the purchase price.

Other Tax Considerations
Effect of Tax Status of the Operating Partnership on REIT
Qualification. The Company believes that the Operating Partnership is properly
treated as a partnership for tax purposes (and not as an association taxable as
a corporation). If, however, the Operating Partnership is treated as an
association taxable as a corporation, the Company would cease to qualify as a
REIT. Furthermore, in such a situation, the Operating Partnership would be
subject to corporate income taxes and the Company would not be able to deduct
its share of any losses generated by the Operating Partnership in computing its
taxable income.

Tax Allocations with Respect to the Properties. The Operating Partnership
was formed by way of contributions of appreciated property (including certain
of the Properties). When property is contributed to a partnership in exchange
for an interest in the partnership, the partnership generally takes a carryover
basis in that property for tax purposes equal to the adjusted basis of the
contributing partner in the property, rather than a basis equal to the fair
market value of the property at the time of contribution (this difference is
referred to as a "Book-Tax Difference"). The partnership agreement of the
Operating Partnership requires allocations of income, gain, loss and deduction
with respect to contributed Property to be made in a manner consistent with the
special rules in Section 704(c) of the Code, and the regulations thereunder,
which tend to eliminate the Book-Tax Differences with respect to the
contributed Properties over the life of the Operating Partnership. However,
because of certain technical limitations, the special allocation rules of
Section 704(c) may not always entirely eliminate the Book-Tax Difference on an
annual basis or with respect to a specific taxable transaction such as a sale.
Thus, the carryover basis of the contributed Properties in the hands of the
Operating Partnership could cause the Company to be allocated lower amounts of
depreciation and other deductions for tax purposes or increased gain on a sale
or disposition of a Property by the Company than would be allocated to the
Company if all Properties were to have a tax basis equal to their fair market
value at the time of acquisition. The foregoing principles also apply in
determining the earnings and profits of the Company for purposes of determining
the portion of distributions taxable as dividend income. The application of
these rules over time may result in a higher portion of distributions being
taxed as dividends than would have occurred had the Company purchased its
interests in the Properties at their agreed value.

State and Local Taxes. The Company and its stockholders may be subject to
state or local taxation in various state or local jurisdictions, including
those in which it or they transact business or reside. The state and local tax
treatment of the Company and its stockholders may not conform to the federal
income tax consequences discussed above. Consequently, prospective stockholders
should consult with their own tax advisors regarding the effect of state, local
and other tax laws of any investment in the Common Stock of the Company.

In particular, the State of Texas imposes a franchise tax upon
corporations and limited liability companies that do business in Texas,
including REITs that are organized as corporations. The Texas franchise tax
imposed on a corporation doing business in Texas is generally equal to the
greater of (i) .25% of "taxable capital" (generally, financial accounting net
worth with certain adjustments) apportioned to Texas; or (ii) 4.5% of "taxable
earned

17
<PAGE>

surplus" (generally, federal taxable income with certain adjustments)
apportioned to Texas. A corporation's taxable capital and taxable earned
surplus are apportioned to Texas based upon a fraction, the numerator of which
is the corporation's gross receipts from business transacted in Texas and the
denominator of which is the corporation's gross receipts from all sources. The
office of the Texas State Comptroller of Public Accounts (the "Comptroller"),
the agency that administers the Texas franchise tax, has issued a regulation
providing that a corporation is not considered to be doing business in Texas
for Texas franchise tax purposes merely because the corporation owns an
interest as a limited partner in a limited partnership that does business in
Texas. The same regulation provides, however, that a corporation is considered
to be doing business in Texas if it owns an interest as a general partner in a
partnership that does business in Texas. This regulation applies for purposes
of the net taxable capital component of the Texas franchise tax. The
Comptroller has not made a similar public determination with regard to the
earned surplus component. The Comptroller has also expressed, although not in a
formal regulation, that a corporation is not considered to be doing business in
Texas for Texas franchise tax purposes merely because the corporation owns
stock in another corporation that does business in Texas.

The Company, organized as a Delaware corporation, is a limited partner in
the Operating Partnership and is not otherwise doing business in Texas.
Accordingly, the Company should not be subject to Texas franchise tax. However,
the General Partner, organized as a corporation, is the general partner of a
partnership doing business in Texas (i.e., the Operating Partnership) and has
registered in the State of Texas as a foreign corporation qualified to transact
business in Texas. Accordingly, the General Partner is subject to Texas
franchise tax. The Operating Subsidiaries, to the extent those organizations
are corporations deemed to be doing business in Texas, will be subject to the
Texas franchise tax.

There is no assurance that the Comptroller will not contend that the
Company will be doing business in Texas for Texas franchise tax purposes.
First, no assurance exists that the Comptroller will not revoke the
pronouncements described above and contend that the activities of the Company
constitute the doing of business in Texas. Second, as noted above, it is not
clear whether the Comptroller considers these pronouncements equally applicable
to the tax on net taxable earned surplus. Third, no assurance exists that the
Comptroller will not contend that in light of the overall structure of the
Company, the Operating Partnership, and the Operating Subsidiaries, the
pronouncements are otherwise inapplicable. If any of the preceding were to
occur, the Company may be subject to Texas franchise tax on income earned from
its limited partnership interest in the Operating Partnership.

The Operating Partnership itself will not be subject to the Texas
franchise tax under the laws in existence at the time of this Prospectus. There
is no assurance, however, that the Texas legislature will not expand the scope
of the franchise tax to apply to limited partnerships such as the Operating
Partnership.

Recent Legislation
In addition to changes to the requirements for qualification and taxation
as a REIT discussed above, the Taxpayer Relief Act also contains significant
changes to the taxation of capital gains of individuals, trusts and estates.
For gains realized after July 28, 1997, and subject to certain exceptions, the
maximum rate of tax on net capital gains of individuals, trusts and estates
from the sale or exchange of capital assets held for more than 18 months has
been reduced to 20%, and the maximum rate is reduced to 18% for assets acquired
after December 31, 2000 and held for more than five years. The maximum rate for
long-term capital gains attributable to the sale of depreciable real property
held for more than 18 months is 25% to the extent of the deductions for
depreciation with respect to such property. Long term capital gain allocated to
a stockholder by the Company will be subject to the 25% rate to the extent that
the gain does not exceed depreciation on real property sold by the Company. The
maximum rate of capital gains tax for capital assets held for more than one
year but not more than 18 months remains at 28%. The taxation of capital gains
of corporations was not changed by the Taxpayer Relief Act.

18
<PAGE>

DESCRIPTION OF DEBT SECURITIES

Capitalized terms not otherwise defined herein shall have the meanings set
forth in the Indenture.

The Debt Securities are to be issued under an Indenture, a copy of the
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part and incorporated herein by reference, subject
to such supplements and amendments as may be adopted from time to time (each an
"Indenture" and collectively, the "Indentures"). The Indentures will be
executed by the Company and one or more trustees (each a "Trustee"). The
Indenture is subject to, and governed by, the Trust Indenture Act of 1939, as
amended (the "TIA"). The statements made hereunder relating to the Indenture
and the Debt Securities to be issued thereunder are summaries of certain
provisions thereof and do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all provisions of the
Indenture and such Debt Securities. All section references appearing herein are
to sections of the Indenture, and capitalized terms used but not defined herein
shall have the respective meanings set forth in the Indenture.

General
The Debt Securities will be direct and unsecured general obligations of
the Company, unless otherwise provided in the Prospectus Supplement. As
indicated in the applicable Prospectus Supplement, the Debt Securities may be
either senior debt, senior to all future subordinated indebtedness of the
Company and pari passu with other current and future unsecured, unsubordinated
indebtedness of the Company, or, in the alternative, subordinated debt
subordinate in right of payment to current and future senior debt and pari
passu with other future subordinated indebtedness of the Company. The Indenture
provides that the Debt Securities may be issued without limit as to aggregate
principal amount, in one or more series, in each case as established from time
to time in or pursuant to authority granted by a resolution of the Board of
Directors of the Company or as established in one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series (Section
3.1).

The Indenture provides that there may be more than one Trustee hereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect
to such series (Section 6.9). In the event that two or more persons are acting
as Trustee with respect to different series of Debt Securities, each such
Trustee shall be a Trustee of a trust under the Indenture separate and apart
from the trust administered by any other Trustee (Section 6.10), and, except as
otherwise indicated herein, any action described herein to be taken by the
Trustee may be taken by each such Trustee with respect to, and only with
respect to, the one or more series of Debt Securities for which it is Trustee
under the Indenture.

Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:

1. the title of such Debt Securities (including whether they are senior
debt or subordinated debt and whether they are convertible);

2. the aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;

3. the date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;

4. the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;

5. the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable, the Regular Record Dates for
such Interest Payment Dates, or the method by which such dates shall be
determined, the Person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360 day year of twelve 30 day months;

6. the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of transfer
or

19
<PAGE>

exchange, and notices or demands to or upon the Company in respect of such
Debt Securities and the Indenture may be served;

7. the period or periods within which, the price or prices at which and the
terms and conditions upon which such Debt Securities may be redeemed, as
a whole or in part, at the option of the Company, if the Company is to
have such an option;

8. the obligation, if any, of the Company to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provision or at
the option of a Holder thereof, and the period or periods within which,
the price or prices at which and the terms and conditions upon which such
Debt Securities will be redeemed, repaid or purchased, as a whole or in
part, pursuant to such obligation;

9. the percentage of the principal at which such Debt Securities will be
issued and, if other than the principal amount thereof, the portion of the
principal amount thereof payable upon declaration of acceleration of the
maturity thereof, or (if applicable) the portion of the principal amount
of such Debt Securities which is convertible into shares of Common Stock,
Preferred Stock or Debt Securities of another series, or the method by
which any such portion shall be determined;

10. if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;

11. whether the amount of payments of principal of (and premium, if any) on
interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency
unit or units or composite currency or currencies) and the manner in
which such amounts shall be determined;

12. any additions to, modifications of or deletions from the terms of such
Debt Securities with respect to the Events of Default or covenants set
forth in the Indenture;

13. whether such Debt Securities will be issued in certificated or
book-entry form;

14. whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000 and
any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;

15. the applicability, if any, of the defeasance and covenant defeasance
provisions of Article 14 of the Indenture;

16. the terms, if any, upon which Debt Securities may be convertible into
Common Stock, Preferred Stock or Debt Securities of another series of the
Company and the terms and conditions upon which such conversion will be
effected, including, without limitation, the initial conversion price or
rate and the conversion period;

17. if convertible, in connection with the preservation of the Company's
status as a REIT, any applicable limitations on the ownership or
transferability of the Common Stock, Preferred Stock or other capital
stock of the Company into which such Debt Securities are convertible;

18. whether and under what circumstances the Company will pay Additional
Amounts as contemplated in the Indenture on such Debt Securities in
respect of any tax, assessment or governmental charge and, if so, whether
the Company will have the option to redeem such Debt Securities in lieu
of making such payment;

19. the terms, if any, upon which such Debt Securities will be subordinate
to other debt of the Company; and

20. any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 3.1).

The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
or bear no interest or bear interest at a rate which at the time of issuance is
below market rates ("Original Issue Discount Securities"). Special U.S. federal
income tax accounting and other considerations applicable to Original Issue
Discount Securities will be described in the applicable Prospectus Supplement.

20
<PAGE>

The Indenture does not contain any other provisions that would limit the
ability of the Company to incur indebtedness or that would afford holders of
Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Company or in the event of a change of control.
However, restrictions on ownership and transfers of the Company's Common Stock
are designed to preserve its status as a REIT and, therefore, may act to
prevent or hinder a change of control. See DESCRIPTION OF THE CAPITAL STOCK OF
THE COMPANY. Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions
to the Events of Default or covenants of the Company that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.

Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 3.2).

Unless otherwise described in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee,
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
Security Register (Sections 3.5 and 3.7).

Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than ten days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely described in the
Indenture.

Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee. In addition,
subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series shall be surrendered for
conversion (if applicable) or registration of transfer thereof at the corporate
trust office of the Trustee. Every Debt Security surrendered for conversion,
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 3.5). If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the Trustee)
initially designated by the Company with respect to any series of Debt
Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities (Section 10.2).

Neither the Company nor the Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part; or (iii) issue, register the transfer of or exchange any Debt
Security which has been surrendered for repayment at the option of the Holder,
except the portion, if any, of such Debt Security not to be so repaid (Section
3.5).

Merger, Consolidation or Sale
The Company, without the consent of the Holders of any of the Debt
Securities, may consolidate with, or sell, lease or convey all or substantially
all of its assets to, or merge with or into, any other corporation, provided
that (a) either the Company shall be the continuing corporation or, the
successor corporation (if other than the Company) formed by or resulting from
any such consolidation or merger or which shall have received the transfer of
such assets shall expressly assume payment of the principal of (and premium, if
any) and interest on all of the Debt

21
<PAGE>

Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in the Indenture; (b) immediately after
giving effect to such transaction and treating any indebtedness which becomes
an obligation of the Company or any Subsidiary as a result thereof as having
been incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which would become an Event of
Default, shall have occurred and be continuing; and (c) an officer's
certificate and legal opinion covering such conditions shall be delivered to
the Trustee (Sections 8.1 and 8.3).

Certain Covenants
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Company will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights (charter and
statutory) and franchises; provided, however, that the Company shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 10.6).

Maintenance of Properties. The Company will cause all of its properties
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Company and its Subsidiaries shall not be prevented
from selling or otherwise disposing for value its properties in the ordinary
course of business (Section 10.7).

Insurance. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties insured against loss or damage at least
equal to their then full insurable value with insurers of recognized
responsibility (Section 10.8).

Payment of Taxes and Other Claims. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges levied or imposed upon it or
any Subsidiary or upon the income, profits or property of the Company or any
Subsidiary; and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings (Section 10.9).

Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13 or 15(d) (the
"Financial Statements") if the Company were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required to file such
documents if the Company were so subject (Section 10.10). The Company will also
in any event (x) within 15 days of each Required Filing Date file with the
Trustee copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act if the Company were subject to such
Section; and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any Holder (Section 7.3).

Additional Covenants. Any additional covenants of the Company with respect
to any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.

Events of Default, Notice and Waiver
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (b) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series at its Maturity or in the deposit of
any sinking fund payment when and as due by the terms of any Debt Security; (c)
default in the performance of any other covenant of the Company contained in
the Indenture (other than a covenant added to the Indenture solely for the
benefit of a series of Debt Securities issued thereunder

22
<PAGE>

other than such series), continued for 60 days after written notice as provided
in the Indenture; (d) default in the payment of an aggregate principal amount
not less than $10,000,000 of any evidence of indebtedness of the Company or any
mortgage, indenture or other instrument under which such indebtedness is issued
or by which such indebtedness is secured, such default having occurred after
the expiration of any applicable grace period and having resulted in the
acceleration of the maturity of such indebtedness, but only if such
indebtedness is not discharged or such acceleration is not rescinded or
annulled within a period of ten (10) days after written notice as provided in
the Indenture; (e) certain events of bankruptcy, insolvency or reorganization,
or court appointment of a receiver, liquidator or trustee of the Company or for
substantially all of its properties; and (f) any other Event of Default
provided with respect to a particular series of Debt Securities (Section 5.1).

If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Debt Securities of that series may declare the principal
amount (or, if the Debt Securities of the series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as may
be specified in the terms thereof) of all of the Debt Securities of that series
to be due and payable immediately by written notice thereof to the Company (and
to the Trustee if given by the Holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series has
been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the holders of a majority in principal amount of
Outstanding Debt Securities of such series may rescind and annul such
declaration and its consequences if (a) the Company shall have deposited with
the Trustee all required payments of the principal of (and premium, if any) and
interest on the Debt Securities of such series, plus certain fees, expenses,
disbursements and advances of the Trustee, and (b) all Events of Default, other
than the non-payment of accelerated principal (or specified portion thereof),
with respect to Debt Securities of such series have been cured or waived as
provided in the Indenture (Section 5.2). The Indenture also provides that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may waive any past default with respect to such series
and its consequences, except a default (x) in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provisions contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each outstanding Debt
Security affected thereby (Section 5.13).

The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the Indenture; provided, however, that the
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if the Responsible Officers of the Trustee consider
such withholding to be in the interest of such Holders (Section 6.2).

The Indenture provides that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series as well as an offer of reasonable indemnity (Section 5.7). This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 5.8).

Subject to the provisions in the Indenture relating to its duties in case
of default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 6.3). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
the Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the Holders of Debt
Securities of such series not joining therein (Section 5.12).

Within 120 days after the close of each fiscal year, the Company must
deliver to the Trustee a certificate, signed by one of several specified
officers, stating whether or not such officer has knowledge of any default
under the Indenture and, if so, specifying each such default and the nature and
status thereof (Section 10.11).

23
<PAGE>

Modification of the Indenture
Modifications and amendments of the Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
outstanding Debt Securities which are affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the holder of each such Debt Security affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of
interest (or premium, if any) on, any such Debt Security; (b) reduce the
principal amount of, or the rate or amount of interest on, or any premium on
redemption of, any such Debt Security, or reduce the amount of principal of an
Original Issue Discount Security that would be due and payable upon declaration
of acceleration of the maturity thereof or would be provable in bankruptcy, or
adversely affect any right of repayment of the Holder of any such Debt
Security; (c) change the Place of Payment, or the coin or currency, for payment
of principal of, premium, if any, or interest on any such Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (e) reduce the above-stated percentage
of outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security
(Section 9.2).

The Holders of not less than a majority in principal amount of each series
of Outstanding Debt Securities have the right to waive compliance by the
Company with certain covenants in the Indenture (Section 10.13).

Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any Holder of Debt Securities for any of
the following purposes: (i) to evidence the succession of another person to the
Company as obligor under the Indenture; (ii) to add to the covenants of the
Company for the benefit of the Holders of all or any series of Debt Securities
or to surrender any right or power conferred upon the Company in the Indenture;
(iii) to add Events of Default for the benefit of the Holders of all or any
series of Debt Securities; (iv) to add or change any provisions of the
Indenture to facilitate the issuance of, or to liberalize certain terms of,
Debt Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, provided that such action shall not
adversely affect the interest of the Holders of the Debt Securities of any
series in any material respect; (v) to change or eliminate any provisions of
the Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities Outstanding of any series
created prior thereto which are entitled to the benefit of such provisions;
(vi) to secure the Debt Securities; (vii) to establish the form or terms of
Debt Securities of any series, including the provisions and procedures, if
applicable, for the conversion of such Debt Securities into Common Stock or
Preferred Stock of the Company; (viii) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration of the
trusts under the Indenture by more than one Trustee; (ix) to cure any
ambiguity, correct or supplement any provision which may be defective or
inconsistent or make any other provisions with respect to matters or questions
arising under the Indenture, provided that such action shall not adversely
affect the interests of Holders of Debt Securities of any series in any
material respect; or (x) to supplement any of the provisions of the Indenture
to the extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, provided that such action shall not adversely
affect the interests of the Holders of the Debt Securities of any series in any
material respect (Section 9.1).

The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of a Debt Security denominated in a Foreign Currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above); (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security pursuant to
Section 3.1 of the Indenture; and (iv) Debt Securities owned by the Company or
any other obligor upon the Debt Securities or any Affiliate of the Company or
such other obligor shall be disregarded (Section 1.1).

24
<PAGE>

The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 15.1). A meeting may be called at any time
by the Trustee and also, upon request, by the Company or the Holders of at
least 10% in principal amount of the Outstanding Debt Securities of such
series, in any such case upon notice given as provided in the Indenture
(Section 15.2). Except for any consent that must be given by the Holder of each
Debt Security affected by certain modifications and amendments of the
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series; provided, however, that, except as referred to above
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by
the affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Debt Securities of that series. Any resolution passed
or decision taken at any meeting of Holders of Debt Securities of any series
duly held in accordance with the Indenture will be binding on all Holders of
Debt Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders
of not less than a specified percentage in principal amount of the Outstanding
Debt Securities of a series, the Persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities of such
series will constitute a quorum (Section 15.4).

Notwithstanding the foregoing provisions, if any action is to be taken at
a meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by the
Holders of a specified percentage in principal amount of all Outstanding Debt
Securities affected thereby, or of the Holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting; and (ii) the principal amount of the Outstanding Debt Securities of
such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture (Section 15.4).

Discharge, Defeasance and Covenant Defeasance
The Company may discharge certain obligations to Holders of any series of
Debt Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are payable in an amount sufficient to pay the entire
indebtedness on such Debt Securities in respect of principal (and premium, if
any) and interest to the date of such deposit (if such Debt Securities have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be (Section 4.1).

The Indenture provides that, if the provisions of Article Fourteen are
made applicable to the Debt Securities of or within any series pursuant to
Section 14.4 of the Indenture, the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("Defeasance") (Section 14.2) or (b) to be released from its obligations
with respect to such Debt Securities under Section 10.4 to 10.10, inclusive, of
the Indenture (being the restrictions described under "Certain Covenants") or,
if provided pursuant to Section 3.1 of the Indenture, its obligations with
respect to any other covenant, and any omissions to comply with such
obligations shall not constitute a default or an Event of Default with respect
to such Debt Securities ("Covenant Defeasance") (Section 14.3), in either case
upon the irrevocable deposit by the Company with the Trustee, in trust, of an
amount, in such currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are payable at Stated
Maturity, or Governmental Obligations (as defined below), or both, applicable
to such Debt Securities which through the scheduled payment of principal and
interest in accordance

25
<PAGE>

with their terms will provide money in an amount sufficient to pay the
principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.

Such a trust may only be established if, among other things, the Company
has delivered to the Trustee an Opinion of Counsel (as specified in the
Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such Defeasance or Covenant Defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Defeasance or Covenant Defeasance had not
occurred, and such Opinion of Counsel, in the case of Defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture (Section 14.4).

"Governmental Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
Foreign Currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the Foreign Currency in which the Debt Securities or such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by the bank or
trust company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 1.1).

Unless otherwise provided in the applicable Prospectus Supplement, if
after the Company has deposited funds and/or Government Obligations to effect
Defeasance or Covenant Defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to Section 14.5 of the Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security, or (b) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Debt Security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest on such Debt Security as
they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a result of
such election or such cessation of usage based on the applicable market
exchange rate (Section 14.5). "Conversion Event" means the cessation of use of
(i) a currency, currency unit or composite currency both by the government of
the country which issued such currency and for the settlement of transactions
by a central bank or other public institutions of or within the international
banking community, (ii) the ECU both within the European Monetary System and
for the settlement of transactions by public institutions of or within the
European Communities or (iii) any currency unit or composite currency other
than the ECU for the purposes for which it was established. Unless otherwise
provided in the applicable Prospectus Supplement, all payments of principal of
(and premium, if any) and interest on any Debt Security that is payable in
Foreign Currency that ceases to be used by its government of issuance shall be
made in U.S. dollars (Section 1.1).

In the event the Company effects Covenant Defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than the Event of Default
described in clause (d) under "Events of Default, Notice and Waiver" with
respect to Sections 10.4 to 10.10, inclusive, of the Indenture (which Sections
would no longer be applicable to such Debt Securities) or described in clause
(g) under "Events of Default, Notice and Waiver" with respect to any other
covenant as to which there has been Covenant Defeasance, the amount in such
currency, currency unit or composite currency in which such Debt Securities are
payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts

26
<PAGE>

due on such Debt Securities at the time of the acceleration resulting from such
Event of Default. However, the Company would remain liable to make payment of
such amounts due at the time of acceleration.

The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such Defeasance or Covenant Defeasance, including any
modifications to the provision described above, with respect to the Debt
Securities of or within a particular series.

Conversion Rights
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock, Preferred Stock or Debt Securities of another
series will be set forth in the applicable Prospectus Supplement relating
thereto. Such terms will include whether such Debt Securities are convertible
into Common Stock, Preferred Stock or Debt Securities of another series, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the Holders or the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities. To protect the Company's status as a REIT, a Holder may not convert
any Debt Security, and such Debt Security shall not be convertible by any
Holder, if as a result of such conversion any person would then be deemed to
own, directly or indirectly, more than 9.8% of the Company's capital stock.

Global Securities

The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depository arrangement with respect
to a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery as such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in Debt Securities represented by Global Securities.

27
<PAGE>

DESCRIPTION OF SECURITIES WARRANTS

The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock or Common Stock. Securities Warrants may be issued
independently or together with any other Offered Securities offered by any
Prospectus Supplement and may be attached to or separate from such Offered
Securities. Each series of Securities Warrants will be issued under a separate
warrant agreement (each, a "Warrant Agreement") to be entered into between the
Company and a warrant agent specified in the applicable Prospectus Supplement
(the "Warrant Agent"). The Warrant Agent will act solely as an agent of the
Company in connection with the Securities Warrants of such series and will not
assume any obligations or relationship of agency or trust for or with any
holders or beneficial owners of Securities Warrants. The following summaries of
certain provisions of the Warrant Agreement and the Securities Warrants do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Warrant Agreement and the Securities
Warrant certificates relating to each series of Securities Warrants which will
be filed with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of Securities Warrants.

If Securities Warrants are offered, the applicable Prospectus Supplement
will describe the terms of the Securities Warrants, including, in the case of
Securities Warrants for the purchase of Debt Securities, the following where
applicable: (i) the offering price; (ii) the denominations and terms of the
series of Debt Securities purchasable upon exercise of such Securities
Warrants; (ii) the designation and terms of any series of Debt Securities with
which such Securities Warrants are being offered and the number of such
Securities Warrants being offered with such Debt Securities; (iv) the date, if
any, on and after which such Securities Warrants and the related series of Debt
Securities will be transferable separately; (v) the principal amount of the
series of Debt Securities purchasable upon exercise of each such Securities
Warrant and the price at which such principal amount of Debt Securities shall
be purchasable; (vi) the date on which the right to exercise such Securities
Warrants shall commence and the date on which such right shall expire (the
"Expiration Date"); (vii) whether the Securities Warrants will be issued in
registered or bearer form; (viii) all material U.S. federal income tax
consequences; (ix) the terms, if any, on which the Company may accelerate the
date by which the Securities Warrants must be exercised; and (x) any other
material terms of such Securities Warrants.

In the case of Securities Warrants for the purchase of Preferred Stock or
Common Stock, the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
offering price; (ii) the aggregate number of shares purchasable upon exercise
of such Securities Warrants, the exercise price, and in the case of Securities
Warrants for Preferred Stock, the designation, aggregate number and terms of
the series of Preferred Stock purchasable upon exercise of such Securities
Warrants; (iii) the designation and terms of any series of Preferred Stock with
which such Securities Warrants are being offered and the number of such
Securities Warrants being offered with such Preferred Stock; (iv) the date, if
any, on and after which such Securities Warrants and the related series of
Preferred Stock or Common Stock will be transferable separately; (v) the date
on which the right to exercise such Securities Warrants shall commence and the
Expiration Date; (vi) any special U.S. federal income tax consequences; and
(vii) any other material terms of such Securities Warrants.

Securities Warrant certificates may be exchanged for new Securities
Warrant certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal, premium,
if any, or interest, if any, on such Debt Securities or to enforce covenants in
the applicable indenture. Prior to the exercise of any Securities Warrants to
purchase Preferred Stock or Common Stock, holders of such Securities Warrants
will not have any of the rights of holders of the Preferred Stock or Common
Stock purchasable upon such exercise, including the right to receive payments
of dividends, if any, on such Preferred Stock or Common Stock, or to exercise
any applicable right to vote.

Exercise of Securities Warrants
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or number of shares of Preferred Stock or
Common Stock, as the case may be, at such exercise price as shall in each case
be set forth in, or calculable from, the Prospectus Supplement relating to the
offered Securities Warrants.

28
<PAGE>

After the close of business on the Expiration Date (or such later date to which
such Expiration Date may be extended by the Company), unexercised Securities
Warrants will become void.

Securities Warrants may be exercised by delivering to the Warrant Agent
payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Debt Securities, Preferred Stock or Common Stock, as
the case may be, purchasable upon such exercise together with certain
information set forth on the reverse side of the Securities Warrant
certificate. Securities Warrants will be deemed to have been exercised upon
receipt of payment of the exercise price, subject to the receipt within five
business days of the Securities Warrant certificate evidencing such Securities
Warrants. Upon receipt of such payment and the Securities Warrant certificate
properly completed and duly executed at the corporate trust office of the
Warrant Agent or any other office indicated in the applicable Prospectus
Supplement, the Company will, as soon as practicable, issue and deliver the
Debt Securities, Preferred Stock or Common Stock, as the case may be,
purchasable upon such exercise. If fewer than all of the Securities Warrants
represented by such Securities Warrant certificate are exercised, a new
Securities Warrant certificate will be issued for the remaining amount of
Securities Warrants.

Amendments and Supplements to Warrant Agreement
The Warrant Agreement(s) may be amended or supplemented without consent of
the holders of the Securities Warrants issued thereunder to effect changes that
are not inconsistent with the provisions of the Securities Warrants and that do
not adversely affect the interests of the holders of the Securities Warrants.

Adjustments
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by, a
Common Stock Warrant are subject to adjustment in certain events, including (i)
payment of a dividend on the Common Stock payable in shares of Common Stock and
stock splits, combinations or reclassifications of Common Stock; (ii) issuance
to all holders of Common Stock of rights or warrants to subscribe for or
purchase shares of Common Stock at less than their current market price (as
defined in the Warrant Agreement for such series of Common Stock Warrants); and
(iii) certain distributions of evidences of indebtedness or assets (including
securities but excluding cash dividends or distributions paid out of
consolidated earnings or retained earnings or dividends payable in Common
Stock) or of subscription rights and warrants (excluding those referred to
above).

No adjustment in the exercise price of, and the number of shares of Common
Stock covered by, a Common Stock Warrant will be made for regular or quarterly
or other periodic or recurring cash dividends or distributions or for cash
dividends or distributions to the extent paid from consolidated earnings or
retained earnings. No adjustment will be required unless such adjustment would
require a change of at least 1% in the exercise price then in effect. Except as
stated above, the exercise price of, and the number of shares of Common Stock
covered by, a Common Stock Warrant will not be adjusted for the issuance of
shares of Common Stock or any securities convertible into or exchangeable for
shares of Common Stock, or carrying the right or option to purchase or
otherwise acquire the foregoing, in exchange for cash, other property or
services.

In the event of any (i) consolidation or merger of the Company with or
into any entity (other than a consolidation or merger that does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock); ((ii) sale, transfer, lease or conveyance of all or
substantially all of the assets of the Company; or (iii) reclassification,
capital reorganization or change of the Common Stock (other than solely a
change in par value or from par value to no par value), then any holder of a
Common Stock Warrant will be entitled, on or after the occurrence of any such
event, to receive on exercise of such Common Stock Warrant the kind and amount
of shares of stock or other securities, cash or other property (or any
combination thereof) that the holder would have received had such holder
exercised such holder's Common Stock Warrant immediately prior to the
occurrence of such event. If the consideration to be received upon exercise of
the Common Stock Warrant following any such event consists of common stock of
the surviving entity, then from and after the occurrence of such event, the
exercise price of such Common Stock Warrant will be subject to the same
anti-dilution and other adjustments described in the second preceding
paragraph, applied as if such common stock were Common Stock.

29
<PAGE>

PLAN OF DISTRIBUTION

The Offered Securities may be sold (i) through agents, (ii) through
underwriters, (iii) through dealers or (iv) directly to purchasers (through a
specific bidding or auction process or otherwise). The distribution of Offered
Securities may be effected from time to time in one or more transactions at a
fixed price or prices, which may be changed, or at market prices prevailing at
the time of sale, at prices relating to such prevailing market prices or at
negotiated prices.

Offers to purchase the Offered Securities may be solicited by agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Offered Securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
Any such agent may be deemed to be an underwriter, as that term is defined in
the Securities Act, of the Offered Securities so offered and sold.

If an underwriter or underwriters are utilized in the sale of Offered
Securities, the Company will execute an underwriting agreement with such
underwriters at the time an agreement for such sale is reached, and the names
of the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transactions including compensation of the
underwriters and dealers, if any, will be set forth in the Prospectus
Supplement, which will be used by the underwriters to make resales of the
Offered Securities.

If a dealer is utilized in the sale of the Offered Securities, the Company
will sell such Offered Securities to the dealer, as principal. The dealer may
then resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of the dealer and the
terms of the transactions will be set forth in the Prospectus Supplement
relating thereto.

Offers to purchase the Offered Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to institutional
investors or others. The terms of any such sales, including the terms of any
bidding or auction prices, if utilized, will be described in the Prospectus
Supplement relating thereto.

Agents, underwriters and dealers may be entitled under agreements which
may be entered into with the Company to indemnification by the Company against
certain liabilities under the Securities Act, and any such agents, underwriters
or dealers, or their affiliates, may be customers of, engage in transactions
with or perform services for the Company in the ordinary course of business.

If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Debt Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Such Contracts will be subject to only those conditions set forth
in the Prospectus Supplement. A commission indicated in the Prospectus
Supplement will be paid to underwriters and agents soliciting purchases of Debt
Securities pursuant to Contracts accepted by the Company.

EXPERTS

The Consolidated Financial Statements of Berkshire Realty Company, Inc.
and its subsidiaries included in the Report on Form 10-K of the Company for the
fiscal year ended December 31, 1996, referred to above have been audited by
Coopers & Lybrand L.L.P., independent accountants, as set forth in their report
dated February 13, 1997 accompanying such financial statements, except for Note
Q, for which the date is February 28, 1997, and are incorporated herein by
reference in reliance upon the report of such firm, which report is given upon
their authority as experts in auditing and accounting.

LEGAL MATTERS

The validity of the issuance of the Offered Securities will be passed upon
for the Company by Peabody & Brown, Boston, Massachusetts.

<PAGE>

[DESCRIPTION OF INSIDE BACK COVER]

Caption: Current Portfolio and Pending Acquisitions
Logo: Berkshire Realty Company, Inc.

Photographs:

Upper Left: Park Colony, Hollywood, FL
Upper Right: The Avalon on Abernathy, Atlanta, GA
Lower Left: The Estates, Pikesville, MD
Pending Acquisition
Lower Right: Indigo on Forest, Dallas, TX

<PAGE>
================================================================================
No dealer, salesperson or any other individual has been authorized to give any
information, or to make any representations not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any of the Underwriters. Neither the delivery of this Prospectus
Supplement and the Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that the information contained herein is
correct as of any time subsequent to the date hereof. This Prospectus
Supplement and the Prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
an offer to buy, to any person in any jurisdiction where such an offer or
solicitation is unlawful.

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

TABLE OF CONTENTS

Prospectus Supplement
Page
-----
Prospectus Supplement Summary ........................................ S-3
Risk Factors ....................................................... S-16
The Company .......................................................... S-23
Use of Proceeds .................................................... S-29
Capitalization ....................................................... S-30
Selected Financial Information ..................................... S-31
Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... S-35
Business and Properties .............................................. S-37
The Questar Transaction .............................................. S-45
Price Range of Common Stock and Dividend History .................... S-46
Management .......................................................... S-47
Underwriting ....................................................... S-50
Experts ............................................................. S-51
Legal Matters ....................................................... S-51
Pro Forma Financial Statements ..................................... F-1
Prospectus
Available Information .............................................. 2
Incorporation of Certain Documents by Reference ....................... 2
The Company .......................................................... 3
Use of Proceeds .................................................... 4
Description of the Capital Stock of the Company ...................... 4
Federal Income Tax Considerations .................................. 10
Description of Debt Securities ..................................... 19
Description of Securities Warrants .................................. 28
Plan of Distribution ................................................. 30
Experts ............................................................. 30
Legal Matters ....................................................... 30

================================================================================

10,000,000 Shares

[LOGO]

BERKSHIRE REALTY COMPANY, INC.

Common Stock

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

PROSPECTUS SUPPLEMENT

November 4, 1997

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

LEHMAN BROTHERS

BT ALEX. BROWN

A.G. EDWARDS & SONS, INC.

LEGG MASON WOOD WALKER
INCORPORATED

SALOMON BROTHERS INC

================================================================================