SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
Berkshire Realty Company, Inc.
-----------------------------
(Name of Issuer)
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class of Securities)
084710 10 2
-----------
(CUSIP Number)
Thomas J. Saylak
Blackstone Real Estate Acquisitions III L.L.C.
345 Park Avenue
New York, New York 10154
(212) 583-5000
------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
February 22, 1999
-----------------
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
<PAGE>
<PAGE>
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box .
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 2 of 23<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 3 of 23 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Blackstone Real Estate Acquisitions III L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 0
WITH 10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Page 3 of 23<PAGE>
<PAGE>
0%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4 of 23<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 5 of 23 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Blackstone Real Estate Advisors III L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) x
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
Page 5 of 23<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 6 of 23<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 7 of 23 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BRE Advisors III L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
Page 7 of 23<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 8 of 23<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 9 of 23 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Peter G. Peterson
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
Page 9 of 23<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 10 of 23<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 11 of 23 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Stephen A. Schwarzman
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO (see Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 0
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0
Page 11 of 23<PAGE>
<PAGE>
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 12 of 23<PAGE>
<PAGE>
STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
All information provided by the Reporting Persons (as defined below) in
this Schedule 13D with respect to Whitehall (as defined below) and any of the
Krupp Affiliates (as defined below) is provided as of the date hereof to the
knowledge of the Reporting Persons.
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to shares of common stock, par
value $.01 per share (the "Common Stock"), of Berkshire Realty Company, Inc.,
a Delaware corporation (the "Company"). The principal executive offices of
the Company are located at One Beacon Street, Suite 1550, Boston,
Massachusetts 02108.
Item 2. Identity and Background.
This Schedule 13D is being filed jointly by Blackstone Real Estate
Acquisitions III L.L.C., a Delaware limited liability company ("BREA III
L.L.C."), Blackstone Real Estate Advisors III L.P., a Delaware limited
partnership ("BREA III L.P."), BRE Advisors III L.L.C., a Delaware limited
liability company ("BRE Advisors III"), Mr. Peter G. Peterson and Mr. Stephen
A. Schwarzman (the foregoing, collectively, the "Reporting Persons"). The
principal office and place of business of each of the Reporting Persons is
345 Park Avenue, New York, New York 10154.
BRE Advisors III's principal business is acting as sole general partner
of BREA III L.P. BREA III L.L.C. is a wholly-owned subsidiary of BREA III
L.P. The principal business of BREA III L.L.C. together with BREA III L.P.
is to act as an advisor to Blackstone Real Estate Partners III L.P. ("BREP
III"), a real estate investment fund.
Mr. Peterson and Mr. Schwarzman (the "Founding Members") are the
founding and managing members of BRE Advisors III. The principal occupation
of each of the Founding Members is serving as an executive of one or more
real estate investment funds, including BREP III, and other affiliates of the
Reporting Persons. The business address of each of the Founding Members is
345 Park Avenue, New York, New York 10154.
During the last five years, none of the Reporting Persons has been (i)
convicted in a criminal proceeding (excluding traffic violations or similar
Page 13 of 23<PAGE>
<PAGE>
misdemeanors) or (ii) a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
Federal or State securities laws or finding any violations with respect to
such laws.
As described in Items 3 and 4 below, on February 22, 1999, BREA III
L.L.C., together with Whitehall Real Estate Limited Partnership XI
("Whitehall") and The Berkshire Companies Limited Partnership ("BCLP"),
formed Aptco, LLC, a Delaware limited liability company ("Aptco"), for the
purpose of submitting a merger proposal to the Company pursuant to which,
among other things, Aptco would acquire the Company and holders of Common
Stock (other than certain holders described in Item 4 below) would receive
$11.05 per share in cash in exchange for their shares. As a result, the
Reporting Persons together with Whitehall and BCLP and certain affiliates of
BCLP as described below (collectively, the "Krupp Affiliates") may be deemed
to constitute a "group" within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Neither the present
filing nor anything contained herein shall be construed as (i) an admission
that the Reporting Persons together with Whitehall and any of the Krupp
Affiliates constitute a "person" or "group" for any purpose or (ii) an
admission that the Reporting Persons are, for the purposes of Section 13(d)
or 13(g) of the Exchange Act, the beneficial owners of any of the securities
owned by Whitehall or any of the Krupp Affiliates. Pursuant to Rule 13d-
1(k)(2) under the Exchange Act, the Reporting Persons are filing this
Schedule 13D on their own behalf and not on behalf of any other person.
The Reporting Persons have been advised of the following information
with respect to Whitehall and the Krupp Affiliates as set forth below.
Whitehall is a Delaware limited partnership that was formed for the
purpose of investing in debt and equity interests in real estate assets and
businesses. The principal office and place of business of Whitehall is 85
Broad Street, New York, New York 10004.
BCLP is a Massachusetts limited partnership that, togther with its
subsidiaries, is principally engaged in mortgage banking and investment
sponsorship, asset and other management services, venture capital investing,
commercial laundry and linen services, and furniture manufacturing and sales.
The sole general partners of BCLP are KGP-1, Incorporated ("KGP-1") and KGP-
2, Incorporated ("KGP-2"). The principal office and place of business of
BCLP is One Beacon Street, Suite 1500, Boston, Massachusetts 02108.
KGP-1 and KGP-2 are each Massachusetts corporations whose principal
business is serving as general partners of BCLP and certain of its
affiliates. Douglas Krupp and George Krupp each own 50% of the outstanding
common stock of KGP-1 and KGP-2. The principal office and place of business
of KGP-1 and KGP-2 is One Beacon Street, Suite 1500, Boston, Massachusetts
Page 14 of 23<PAGE>
<PAGE>
02108. The sole directors of KGP-1 and KGP-2 are Douglas Krupp and George
Krupp. The sole executive officers of KGP-1 and KGP-2 are Douglas Krupp
(President) and David Quade (Executive Vice President). Mr. Quade is a
United States citizen whose principal occupation is acting as Executive Vice
President and Chief Financial Officer of The Berkshire Group. His business
address is The Berkshire Group, One Beacon Street, Suite 1500, Boston,
Massachusetts 02108.
Douglas Krupp is a United States citizen whose principal occupation is
acting as the Chairman of BCLP. Douglas Krupp also serves as a director and
Chairman of the Board of Directors of the Company. His business address is
The Berkshire Group, One Beacon Street, Suite 1500, Boston, Massachusetts
02108.
George Krupp is a United States citizen whose principal occupation is
serving as an instructor of history at the New Jewish High School, Waltham,
Massachusetts. His business address is The Berkshire Group, One Beacon
Street, Boston, Massachusetts 02108.
Item 3. Source and Amount of Funds or Other Consideration.
The Proposed Transactions (as defined in Item 4 below) would be funded
through a combination of equity and debt financing. On February 22, 1999,
BREA III L.L.C., Whitehall and BCLP formed Aptco for the purpose of proposing
the Proposed Transactions to the Company. Pursuant to a letter, dated
February 22, 1999, among BREA III L.L.C., Whitehall and Douglas Krupp (on
behalf of himself and the other Krupp Affiliates) (such letter, together with
the "Summary of Terms" attached thereto, the "Formation Letter") (attached
hereto as Exhibit 1), (i) BREA III L.L.C. and Whitehall have each agreed to
make an equity contribution to Aptco in the amount of $106 million each, as
such amount may be adjusted pursuant to the terms of the Formation Letter,
and (ii) the Krupp Affiliates agreed to contribute to Aptco at least
5,416,000 shares of Common Stock and/or OP Units (as defined in Item 4 below)
beneficially owned by them. Pursuant to a letter, dated February 22, 1999,
between Aptco and Goldman Sachs Mortgage Company ("GSMC") (the "Commitment
Letter") (attached hereto as Exhibit 2), GSMC has agreed to provide up to
$675 million in the form of a bridge loan to fund the remainder of the
consideration required for the Proposed Transactions. In connection with the
Proposed Transactions, Aptco may sell certain properties owned by the Company
and use the proceeds of such sales to reduce the amount of indebtedness then
outstanding under the bridge loan.
None of the Reporting Persons has contributed any funds or other
consideration toward the purchase of the shares of Common Stock that may be
deemed to be beneficially owned by the Krupp Affiliates as described in Item
5.
The transactions contemplated by the Formation Letter and the Commitment
Letter are subject to a number of terms and conditions set forth therein,
Page 15 of 23<PAGE>
<PAGE>
including, among others, the execution of mutually acceptable documentation
and the satisfaction of the conditions set forth in the Offer Letter (as
defined in Item 4 below). The information set forth in response to this Item
3 is qualified in its entirety by reference to the Formation Letter and the
Commitment Letter (attached hereto as Exhibits 1 and 2, respectively), which
are expressly incorporated herein by reference.
Item 4. Purpose of Transaction.
The Reporting Persons have been advised that the Krupp Affiliates
originally acquired the shares of Common Stock beneficially owned by each of
them for investment purposes. However, as described in a letter, dated
February 22, 1999, from Aptco to the Company (the "Offer Letter") (attached
hereto as Exhibit 3), Aptco has made a proposal with respect to a transaction
in which (i) the Company would merge (the "Company Merger") with and into
Aptco and (ii) a subsidiary of Aptco ("Aptco Sub") would merge (the
"Subsidiary Merger") with and into BRI OP Limited Partnership, a Delaware
limited partnership which is the operating partnership of the Company ("BRI
OP"). Pursuant to the proposed terms of the Company Merger, all outstanding
Common Stock of the Company not held by Aptco or Aptco Sub (other than
dissenting shares) would be converted into an amount per share in cash (the
"Cash Price"), and all outstanding shares of the Company's Series 1997-A
Convertible Preferred Stock, par value $.01 per share (the "Preferred
Stock"), (other than dissenting shares) would be converted into an amount
per share in cash equal to the "change of control preference" specified in
the Company's certificate of designation in respect of the Preferred Stock.
Pursuant to the proposed terms of the Subsidiary Merger, the outstanding
partnership units in BRI OP ("OP Units") not held by Aptco or Aptco Sub
would be converted, at the election of the holders thereof, into either an
amount per OP Unit equal to the Cash Price or equity securities of Aptco.
The Cash Price specified in the Offer Letter is $11.05. The Company Merger
and the Subsidiary Merger are collectively referred to herein as the
"Proposed Transactions." In connection with the Proposed Transactions, the
Common Stock would be delisted from the New York Stock Exchange and would be
deregistered under the Exchange Act.
The Proposed Transactions would be subject to a number of conditions,
including, among others, (i) execution of definitive merger agreements
containing customary "no-shop," "break up fee" and expense reimbursements
provisions, (ii) the absence of any injunction prohibiting or restricting the
consummation of the Proposed Transactions, any litigation commenced or
threatened by a governmental entity and any litigation that could have a
material adverse effect with respect to the Company or BRI OP, or that could
significantly delay the consummation of the Proposed Transactions, (iii)
receipt by the Company of a satisfactory closing agreement with the Internal
Revenue Service, on terms and conditions satisfactory to Aptco, with respect
to certain tax matters, and Aptco's satisfaction with respect to certain
other tax matters, (iv) execution of an agreement delivered, on or prior to
the execution of definitive merger agreements, by the holders of a majority
in interest of the Preferred Stock consenting to the Proposed Transactions,
Page 16 of 23<PAGE>
<PAGE>
(v) receipt by the Board of Directors of the Company of an opinion from a
nationally recognized investment banking firm as to the fairness of the
consideration to be paid under the terms of the Proposed Transactions from a
financial point of view to the holders of Common Stock, Preferred Stock and
OP Units, (iv) approval of the Proposed Transactions and the definitive
merger agreements by the respective Boards of Directors of the Company and
the general partner of BRI OP, (vii) approval of the Proposed Transactions by
the holders of the Common Stock, Preferred Stock and OP Units, (viii) receipt
of any regulatory and other third party consents to the Proposed
Transactions, including the financing thereof, (ix) confirmation that
investment banking fees, severance costs and legal/accounting expenses of the
Company relating to the Proposed Transactions will not exceed $12 million,
(x) confirmation of the number of fully-diluted shares of the Company, (xi)
receipt by Aptco of the financing proceeds on the terms and conditions set
forth in the Formation Letter and the Commitment Letter and (xii) other
customary conditions to closing.
Although Aptco's proposal contained in the Offer Letter expired by its
terms at 5:00 p.m. on March 1, 1999, the Reporting Persons expect to evaluate
on an ongoing basis the Company's financial condition, business, operations
and prospects, market price of the Common Stock, conditions in securities
markets generally, general economic and industry conditions and other
factors. Accordingly, the Reporting Persons reserve the right to change
their plans and intentions at any time, as they deem appropriate, and may or
may not submit a revised proposal or extend the expiration date of the
proposal contained in the Offer Letter. In particular, the Reporting Persons
may at any time and from time to time acquire shares of Common Stock or
securities convertible or exchangeable for Common Stock or dispose of shares
of Common Stock so acquired, or exchange OP Units which they have acquired
for Common Stock. Any such transactions may be effected at any time and from
time to time subject to any applicable limitations of the Securities Act of
1933, as amended, and the Exchange Act.
Other than as described above in Item 3 and this Item 4, none of the
Reporting Persons have, and the Reporting Persons have been advised that
neither Whitehall nor any of the Krupp Affiliates have, any plans or
proposals which relate to or would result in any of the matters described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D (although they
reserve the right to develop such plans).
The information set forth in response to this Item 4 is qualified in its
entirety by reference to the Offer Letter (attached hereto as Exhibit 3),
which is expressly incorporated herein by reference.
Item 5. Interest in Securities of the Issuer.
The Reporting Persons do not beneficially own any shares of Common
Stock. However, as a result of the matters described in Items 3 and 4 above,
the Reporting Persons together with Whitehall and the Krupp Affiliates may be
Page 17 of 23<PAGE>
<PAGE>
deemed to constitute a "group" within the meaning of Section 13(d) of the
Exchange Act and the Reporting Persons may be deemed to have acquired
beneficial ownership of the shares of Common Stock owned or deemed to be
beneficially owned by the Krupp Affiliates and certain affiliates of
Whitehall. The Reporting Persons disclaim beneficial ownership of any such
shares of Common Stock.
The Reporting Persons have been advised that, as of February 22, 1999,
the Krupp Affiliates may be deemed to beneficially own 5,881,369<F1>
shares of Common Stock representing approximately 14.0% of the outstanding
shares of Common Stock<F2>. Each of the Reporting Persons disclaims, and
the Reporting Persons have been advised that Whitehall disclaims, beneficial
ownership of any shares of Common Stock beneficially owned by any of the
Krupp Affiliates.
The Reporting Persons have been advised by Whitehall that, as of
February 22, 1999, The Goldman Sachs Group, L.P. ("GS Group") and Goldman,
Sachs & Co. ("GS&Co.") (of which GS Group is a general partner), the
investment manager of Whitehall, may be deemed to beneficially own 27,208
shares of Common Stock (representing less than 1.0% of the outstanding shares
of Common Stock) held in client accounts with respect to which GS&Co. or
employees of GS&Co. have voting or investment discretion, or both ("Managed
Accounts"), and that GS&Co. purchased these shares of Common Stock in the
ordinary course of its business on behalf of the Managed Accounts. The
Reporting Persons have been advised by Whitehall that each of GS&Co. and GS
Group disclaims beneficial ownership of the Common Stock held in the Managed
Accounts. Each of the Reporting Persons disclaims, and the Reporting Persons
have been advised that each of the Krupp Affiliates disclaims, beneficial
ownership of the Common Stock held in the Managed Accounts.
Other than as set forth above, the Reporting Persons have been advised
by Whitehall and the Krupp Affiliates that, as of February 22, 1999, neither
Whitehall nor any of the Krupp Affiliates, respectively, beneficially owns
any shares of any class of capital stock of the Company.
None of the Reporting Persons have, and the Reporting Persons have been
advised that neither Whitehall nor any of the Krupp Affiliates have, effected
any transactions in any shares of Common Stock during the 60-day period
ended February 22, 1999, except as disclosed in this Schedule 13D.
The Reporting Persons have been advised that no person other than the
Krupp Affiliates has the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of, the shares of Common
Stock beneficially owned by the Krupp Affiliates as described above. The
Reporting Persons have been advised that, other than clients with respect to
Common Stock held in Managed Accounts, no person has the right to receive or
the power to direct the receipt of the dividends from, or the proceeds from
the sale of, any shares of Common Stock that may be deemed to be beneficially
owned by Whitehall as described above.
Page 18 of 23<PAGE>
<PAGE>
Item 6. Contracts, Arrangement or Understandings with Respect to Securities
of the Issuer.
Except as set forth in this Schedule 13D, and except for the Joint
Filing Agreement, dated March 3, 1999, among the Reporting Persons (attached
hereto as Exhibit 4) and the Powers of Attorney of Mr. Peterson and Mr.
Schwarzman dated March 3, 1999 (attached hereto as Exhibits 5 and 6,
respectively), the Reporting Persons do not have any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities of the Company, including but not limited to
transfer or voting of any of the securities of the Company, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of
proxies, or a pledge or contingency the occurrence of which would give
another person voting power over the securities of the Company.
Item 7. Material to be Filed as Exhibits.
1. Formation Letter, dated February 22, 1999, among BREA III L.L.C.,
Whitehall and Douglas Krupp.
2. Commitment Letter, dated February 22, 1999, between Aptco and GSMC.
3. Offer Letter, dated February 22, 1999, from Aptco to the Company.
4. Joint Filing Agreement, dated March 3, 1999, among the Reporting
Persons.
5. Power of Attorney of Peter G. Peterson, dated March 3, 1999, naming
Thomas J. Saylak and Gary Sumers as attorneys-in-fact.
6. Power of Attorney of Stephen A. Schwarzman, dated March 3, 1999, naming
Thomas J. Saylak and Gary Sumers as attorneys-in-fact.
Page 19 of 23<PAGE>
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
BLACKSTONE REAL ESTATE ACQUISITIONS
III L.L.C.
By:/s/ Gary Sumers
Name: Gary Sumers
Title: Vice President
BLACKSTONE REAL ESTATE ADVISORS III
L.P.
By: BRE ADVISORS III L.L.C.
By:/s/ Gary Sumers
Name: Gary Sumers
Title: Vice President
BRE ADVISORS III L.L.C.
By:/s/ Gary Sumers
Name: Gary Sumers
Title: Vice President
Page 20 of 23<PAGE>
<PAGE>
/s/ Gary Sumers
PETER G. PETERSON
By: Gary Sumers,
Attorney-in-Fact
/s/ Gary Sumers
STEPHEN A. SCHWARZMAN
By: Gary Sumers,
Attorney-in-Fact
Dated: March 3, 1999
Page 21 of 23<PAGE>
<PAGE>
Exhibit Index
1. Formation Letter, dated February 22, 1999, among BREA III L.L.C.,
Whitehall and Douglas Krupp.
2. Commitment Letter, dated February 22, 1999, between Aptco and GSMC.
3. Offer Letter, dated February 22, 1999, from Aptco to the Company.
4. Joint Filing Agreement, dated March 3, 1999, among the Reporting
Persons.
5. Power of Attorney of Peter G. Peterson, dated March 3, 1999, naming
Thomas J. Saylak and Gary Sumers as attorneys-in-fact.
6. Power of Attorney of Stephen A. Schwarzman, dated March 3, 1999, naming
Thomas J. Saylak and Gary Sumers as attorneys-in-fact.
Page 22 of 23<PAGE>
<PAGE>
____________________
[FN]
<F1> The Reporting Persons have been advised by the Krupp Affiliates that
this number includes 5,344,066 OP Units and excludes 42,110 shares of
Common Stock owned by individuals related to Douglas Krupp and George
Krupp. Pursuant to the Amended and Restated Agreement of Limited
Partnership of BRI OP, OP Units are convertible into shares of Common
Stock on a one-for-one basis or, at the election of the Company, into
cash. The Reporting Persons have been advised that the Krupp Affiliates
disclaim beneficial ownership of Common Stock to the extent that OP
Units may be exchanged for cash rather than Common Stock at the option
of the Company.
<F2> All percentages of Common Stock set forth in this Item 5 are based upon
the 36,711,488 shares of Common Stock reported to be outstanding as of
October 31, 1998, as disclosed in the Company's most recent Form 10-Q
filed with the Securities and Exchange Commission.
Page 23 of 23
EXHIBIT 5
POWER OF ATTORNEY
Know all men by these presents that Peter G. Peterson does hereby
make, constitute and appoint each of Gary Sumers and Thomas J. Saylak as my
true and lawful attorneys-in-fact of the undersigned with full powers of
substitution and revocation, for and in the name, place and stead of the
undersigned (both in the undersigned's individual capacity and as a member of
any limited liability company or partner of any limited partnership for which
the undersigned is otherwise authorized to sign), to execute and deliver such
forms as may be required to be filed from time to time with the Securities
and Exchange Commission with respect to any investments of Blackstone Real
Estate Acquisitions III L.L.C., Blackstone Real Estate Advisors III L.P., BRE
Advisors III L.L.C., or their affiliates in the common stock of Berkshire
Realty Company, Inc. (including any amendments or supplements to any reports
or schedules previously filed by such persons or entities) pursuant to
Sections 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended,
including without limitation Schedules 13D and statements on Form 3, Form 4
and Form 5.
/s/ Peter G. Peterson
______________________________
Name: Peter G. Peterson
March 3, 1999
EXHIBIT 6
POWER OF ATTORNEY
Know all men by these presents that Stephen A. Schwarzman does
hereby make, constitute and appoint each of Gary Sumers and Thomas J. Saylak
as my true and lawful attorneys-in-fact of the undersigned with full powers
of substitution and revocation, for and in the name, place and stead of the
undersigned (both in the undersigned's individual capacity and as a member of
any limited liability company or partner of any limited partnership for which
the undersigned is otherwise authorized to sign), to execute and deliver such
forms as may be required to be filed from time to time with the Securities
and Exchange Commission with respect to any investments of Blackstone Real
Estate Acquisitions III L.L.C., Blackstone Real Estate Advisors III L.P., BRE
Advisors III L.L.C., or their affiliates in the common stock of Berkshire
Realty Company, Inc. (including any amendments or supplements to any reports
or schedules previously filed by such persons or entities) pursuant to
Sections 13(d) and 16(a) of the Securities Exchange Act of 1934, as amended,
including without limitation Schedules 13D and statements on Form 3, Form 4
and Form 5.
/s/ Stephen A. Schwarzman
_______________________________
Name: Stephen A. Schwarzman
March 3, 1999
EXHIBIT 1
February 22, 1999
Douglas S. Krupp
The Berkshire Group
One Beacon Street, Suite 1550
Boston, MA 02108
Dear Douglas:
Aptco, LLC, an entity to be formed by you or your affiliates ("The
Berkshire Group") and us or our affiliates, intends to make an acquisition
proposal to the Board of Directors of "Bruin" with respect to the possible
acquisition of Bruin and its subsidiaries, and that, in connection with such
proposal, Aptco will be advising the Bruin Board that the equity portion of
the purchase price for the acquisition of Bruin and its subsidiaries will be
provided by Whitehall Street Real Estate Limited Partnership XI
("Whitehall"), Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone")
and The Berkshire Group, or their respective affiliates. We, severally and
not jointly, hereby advise you that, subject to the execution of mutually
acceptable documentation and satisfaction of the conditions referred to in
any proposal letter to be signed by us, we (directly or through our
affiliates) are prepared to proceed as your equity partners in connection
with such acquisition on the basis set forth in the attached "Summary of
Terms."
By countersigning below, you hereby agree that, subject to the
execution of mutually acceptable documentation and satisfaction of the
conditions referred to in any proposal letter to be signed by you, you
(through your affiliates) are prepared to proceed as our equity partner in
connection with such acquisition on the basis set forth in the attached
"Summary of Terms."
The agreements set forth herein will terminate automatically upon
the earlier of (i) the date that the Bruin Board definitively rejects Aptco's
proposal and (ii) March 31, 1999.
Notwithstanding anything that may be expressed or implied in this
letter, except as may be set forth in the definitive operating agreement of
Aptco, no recourse hereunder or under any documents or instruments delivered
in connection herewith shall be had against any current or future officer,
agent or employee of Whitehall, Blackstone or The Berkshire Group (any of the
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foregoing, an "Investor"), against any current or future general or limited
partner or member of any Investor or against any affiliate or assignee of any
of the foregoing, whether by the enforcement of any assessment or by any
legal or equitable proceeding, or by virtue of any statute, regulation or
other applicable law, it being expressly agreed and acknowledged that no
personal liability whatever shall attach to, be imposed on or otherwise be
incurred by any such current or future officer, agent or employee or any such
current or future general or limited partner, member, affiliate or assignee
of any of the foregoing, as such for any obligations of any Investor under
this letter or any documents or instruments delivered in connection herewith
or for any claim based on, in respect of or by reason of such obligations or
their creation.
This letter is solely for the benefit of the signatories hereto and
no other person shall obtain any rights hereunder or be entitled to rely or
claim reliance upon the terms and conditions hereof or in any documents
delivered pursuant hereto. This letter may not be assigned by any of the
signatories hereto and no Investor may transfer any of its rights hereunder
without the prior written consent of the other two Investors.
This letter constitutes a general non-binding agreement in
principle of the signatories hereto and is not intended to, and does not,
create a legally binding commitment, agreement or obligation on the part of
any of the signatories hereto. This letter is governed by and shall be
construed in accordance with the law of the State of New York applicable to
contracts made and performed in that State.
[Signatures on next page]
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This document may be executed in one or more counterparts, each of
which shall be considered an original, but all of which taken together shall
constitute one and the same document.
Very truly yours,
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI
By:/s/ Steven M. Feldman
BLACKSTONE REAL ESTATE
ACQUISITIONS III L.L.C.
By:/s/ Thomas J. Saylak
Agreed as of the date set forth above:
/s/ Douglas S. Krupp
Douglas S. Krupp, on behalf of himself
and his affiliates who will be members
of Aptco, LLC
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2/22/99
SUMMARY OF TERMS
The following sets forth an outline of discussions
concerning a possible joint venture involving Blackstone Real Estate
Acquisitions III L.L.C. or one of its affiliates ("Blackstone"), The
Berkshire Group ("Berkshire Group") and Whitehall Street Real Estate Limited
Partnership XI ("Whitehall" and, together with Blackstone and Berkshire
Group, the "Investors").
General
Berkshire Group, Blackstone and Whitehall would form a new
entity (Aptco) to acquire all the equity securities (including common stock,
preferred stock and operating partnership units) of Berkshire Realty Company,
Inc. and subsidiaries ("Berkshire"). It is initially envisioned that Aptco
would be organized as an LLC. Aptco would focus on the ownership,
acquisition, management, renovation and existing development of multifamily
properties, primarily value-added/repositioning opportunities.
Pricing
The price to be offered by Aptco would be unanimously
determined by Berkshire Group, Blackstone and Whitehall.
Structure
Upon execution of a definitive agreement between Aptco and
Berkshire, the Investors would commit to contribute cash, Berkshire common
stock and/or operating partnership units to Aptco to fund the acquisition of
Berkshire.
Berkshire Group would contribute to Aptco as common equity
all of its stock and operating partnership units (which shall be not less
than 5,416,000 shares and units) valued at the bid price, and Blackstone and
Whitehall would each provide 50% of the balance of the required equity
(initially to be at least $106 million, increasing at the time the bridge
financing is refinanced as provided below, but not in excess of $125.5
million each) as preferred equity. Cash equity required in excess of $251
million shall be contributed as provided below. It is expected that some or
all of the third party owners of limited partnership interests in BRI OP
Limited Partnership (the "OP") will exchange their interests in the OP for
equity interests in Aptco on the terms set forth in the draft merger
agreements to be submitted by Aptco with its bid to Berkshire.
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In the event cash equity in excess of $251 million is
required by Aptco, such excess, not to exceed $30 million in the aggregate,
would be funded one third each by Blackstone, Whitehall and Berkshire Group.
Any such amounts funded by the Investors pursuant to the immediately
preceding sentence shall be treated as preferred equity with respect to
distribution rights (i.e. shall be pari passu with the other preferred equity
held by Blackstone and Whitehall). As an alternative to providing additional
equity above $212 million, with the consent of each of the Investors, Aptco
may secure subordinated debt upon terms acceptable to each of the Investors.
Any Investor not funding its share of any portion of the $30 million of
additional required capital calls (described in the first sentence of this
paragraph) will be diluted on a 2 for 1 basis (based on book equity).
Governance
Aptco would be governed by a three member Board of Directors
(Board). Whitehall, Blackstone and Berkshire Group would each have one seat
on the Board. Douglas Krupp (DK) would be Chairman of the Board (as
Berkshire Group's designee) and Chief Executive Officer (CEO). Berkshire
Group would lose its Board seat in the event that (i) it transfers any
portion of its initial ownership interest in Aptco in violation of Aptco's
Operating Agreement, (ii) Aptco acquires the interest of Berkshire Group,
(iii) DK is removed as CEO for cause (as defined in Annex A), company cause
(as defined in Annex A), or if he resigns prior to the fifth anniversary of
closing or (iv) upon DK's or Berkshire Group's default of a loan that is
secured by a pledge of its interest in Aptco, but only if such loan becomes
due, whether as a result of an acceleration or maturity of such loan.
Except for those decisions described in this Summary of Terms that require
unanimous approval, do not require any Board approval (i.e., can be decided
by DK) or can be decided unilaterally by either Blackstone or Whitehall, all
decisions (such as all annual budget and business plan approvals,
acquisitions of any assets within the parameters set forth on Exhibit 1,
etc.) would be approved by a 2 out of 3 vote of the Board. If Aptco is
organized as a limited partnership instead of a limited liability company,
Whitehall, Blackstone and Berkshire Group would each have the right to have a
subsidiary act as a co-general partner of Aptco and the governance provisions
would be modified accordingly (e.g., decisions that are described below as
requiring a unanimous vote of the Board would instead require unanimous
approval of the general partners).
A unanimous vote of the Board would be required for (i)
amending the Operating Agreement of Aptco, (ii) admitting any new members,
(iii) capital calls in excess of the $281 million required above (except that
2 out of 3 Board members may approve capital calls ("Mandatory Capital
Calls") for debt service shortfalls, health and safety items, taxes and
similar necessary expenditures as long as Berkshire Group's share of such
capital calls does not exceed, in the aggregate, $10 million, and any
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Investor not funding its share of any required capital calls will be diluted
on a 2 for 1 basis (based on book equity)), (iv) change in the nature of
Aptco's business (e.g., to include mortgage lending), (v) except as set forth
in the third paragraph below, any sale of Aptco or sale of all or
substantially all of Aptco's assets, in each case prior to 12/31/2002 (i.e.,
a 2 out of 3 vote will be required to approve a sale of Aptco (and/or its
subsidiaries or substantially all of their assets) between 12/31/2002 and the
fifth anniversary of closing, (vi) acquisition of any assets outside of the
parameters set forth on Exhibit 1 (i.e., a 2 out of 3 vote will be required
to approve acquisitions within such parameters), (vii) changes to the bid
from the terms submitted to the Board of Berkshire on this date, the
execution of the merger documentation, the acceptance of any closing
deliveries and/or the grant of consents or approvals or acceptance or waiver
of conditions to Aptco's obligation to close pursuant to the merger
documentation and (viii) a disposition of all or a portion of the property
known as Berkshire Towers (or of the subsidiary that owns such property)
prior to the fifth anniversary of closing, other than in a tax deferred
transaction. Any equity funded by the Investors pursuant to a Mandatory
Capital Call shall be treated as preferred equity with respect to
distribution rights (i.e., shall be pari passu with the other preferred
equity of the Investors). None of the Investors shall enter into any
separate voting agreement with any other Investor in respect of its
interests. In addition, any related-party transaction involving an Investor
would require a majority vote of the non-interested Investor
designee-directors. In the event any Investor or its controlling persons
files a bankruptcy or similar proceeding with respect to Aptco without first
obtaining the prior written approval of two of the three Board members, the
ownership interest and capital account of such Investor shall be reduced to
zero.
Notwithstanding the general requirement that all financings
require the approval of at least two of the three Board members, DK, acting
alone, will have the authority to accept a financing from the Federal Home
Loan Mortgage Corporation ("Freddie Mac") or another institutional lender
provided that (I) the amount of such financing is 75% of the appraised value
of the Properties on Exhibit 2 hereto and in any event at least $650 million
(the financing amount to be reduced by 75% of the appraised value of any
assets on Exhibit 3 sold at or prior to the closing), (II) such financing is
not recourse in any respect to any Investor without its approval, (III) the
term of such financing is equal to 7 years with a fixed interest rate at 8.0%
per annum or less, (IV) in order to benefit from lower interest rate spreads,
the entire financing will be subject to yield maintenance penalties on
prepayments until the fifth anniversary of the closing of the financing
(i.e., will be prepayable during the first five years only with yield
maintenance and thereafter without yield maintenance), (V) the properties
subject to such financing will not be cross-collateralized and the loans will
not be cross-defaulted and (VI) the other terms are no less favorable to
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Aptco than the terms of the "Conditional Commitment" (dated November 16,
1998) previously provided to the Investors from Freddie Mac. Financing
outside of the foregoing parameters may be authorized by 2 out of the 3 Board
members provided (x) the Board will use commercially reasonable efforts to
obtain financing on terms as close to possible as the parameters set forth
above, (y) any such alternative financing shall be fixed rate or be subject
to appropriate hedging arrangements and (z) such financing shall not be
recourse in any respect to any Investor without its approval.
Provided that DK is still acting as chairman and CEO, DK
will be authorized without the approval of the Board (i) to carry out
business plans approved by the Board, provided that payroll expenses do not
exceed 105% of the annual amount of that item on the approved budgets, and
all other expenses do not in the aggregate exceed 105% of annual expenses
(other than payroll expenses) in the approved budgets, (ii) to sell the 10
Assets in Exhibit 3 for prices that yield Aptco net proceeds (after all
transactions costs, taxes and debt prepayment fees and expenses) equal to at
least 95% of the amounts set forth in Exhibit 3 (provided that such net
proceeds shall not be less than 97.5% of all such amounts in the aggregate)
in transactions with third parties (unaffiliated with Berkshire Group) and in
which Berkshire Group has no continuing interest and (iii) to sell certain
individual assets in any calendar year not in excess of $100 million in gross
proceeds provided that the price for each sold assets yields Aptco net
proceeds (after all transaction costs, taxes and debt prepayment fees and
expenses) equal to at least 103% of allocated acquisition cost. If DK does
not sell the 10 Assets as provided in clause (ii) above within the time
period contemplated by the initial business plan approved by the Board,
Whitehall and Blackstone, acting together, may cause Aptco to sell such
Assets during the immediately succeeding 6-month period for the prices
described in clause (ii) in transactions with third parties (unaffiliated
with either Whitehall or Blackstone) and in which neither Whitehall nor
Blackstone have any continuing interest. If DK does not sell $100 million of
assets in any calendar year as provided in clause (iii) above, during the six
months following such year Whitehall and Blackstone, acting together, may
cause Aptco to sell that amount of assets not sold in such year for the asset
prices described in clause (iii).
Each of the Investors will be authorized unilaterally to
cause a sale of Aptco to an unaffiliated third party in a bona fide
transaction (in which no Investor has a continuing interest) to the highest
bidder after the fifth anniversary; provided that DK may not exercise such
right until three months following such fifth anniversary; provided further
that if, during such three month period DK's Employment Agreement is
terminated without cause and Whitehall and Blackstone have not already
exercised their right to cause a sale of Aptco then DK may exercise such
right. In addition, at any time after the second anniversary, DK may cause a
sale of Aptco subject to a right of first offer in favor of each of Whitehall
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and Blackstone (which may be exercised by either or both of Whitehall and
Blackstone) and if such right of first offer is not exercised, DK may cause
such sale at a price equal to or higher than the price offered to Whitehall
and Blackstone as long as (i) the net proceeds from such sale results in a
12% per annum annually compounded IRR to each of the Investors if the sale is
consummated after the third and before the fifth anniversaries of closing or
a 15% per annum annually compounded IRR
if the sale is consummated between the second and third anniversaries of
closing (with Berkshire Group being permitted to use its own funds to allow
such IRR thresholds to be achieved), and (ii) such sale is consummated with a
bona fide third party (unaffiliated with Berkshire Group) within 180 days
after the right of first offer is declined. If Whitehall and Blackstone each
exercise the right of first offer, they shall each acquire 50% of the offered
interests. Any sale to either or both of Whitehall or Blackstone may be
accomplished by purchasing the ownership interests in Aptco not owned by
them, rather than Aptco itself. In addition, at any time after 12/31/2002,
Whitehall and Blackstone, acting together, may cause a sale of Aptco, subject
to a right of first offer in favor of Berkshire Group, as long as such sale
is consummated with a bona fide third party (unaffiliated with either
Whitehall or Blackstone). The terms of such right of first offer shall
provide that such right will be deemed to have been declined or lapsed (x) if
it has not been accepted by Berkshire Group (subject to financing) within
30 days of the offer, (y) if any financing contingency set forth in the
definitive sales contract shall not have expired, be waived or satisfied
within 150 days of the offer, or (z) if consummation of the sale has not
occurred within 180 days of the offer.
The budget and business plan for the 1999 calendar year will
be approved by each of the Investors prior to execution of the Aptco
governing documents.
Management
As described above, day-to-day management would be the
responsibility of the Aptco management team. The acquisition of Berkshire
would include Berkshire's multifamily management operations. Prior to the
execution of a definitive agreement with Berkshire, the staffing, senior
management and operating budget of Aptco would be discussed and agreed.
Dispositions
The management of Aptco would develop a sale/hold/capital
expenditure analysis for each asset, which would be reviewed by the Board
annually. Selection of sale agents would be at the Board's discretion.
Prior to closing, certain assets will be identified for sale during the first
two years after closing.
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Confidentiality
Subject to requirements of law, Blackstone, Whitehall and
Berkshire Group would each keep confidential all discussions and materials
prepared and exchanged in connection with the proposed transaction. It is
anticipated that a joint press release would be issued upon execution of a
definitive agreement with Berkshire, and possibly earlier if required by law.
This summary is for discussion purposes only and constitutes
only a general non-binding expression of interest on the part of Blackstone,
Whitehall and Berkshire Group and is not intended to, and does not, create a
legally binding commitment, agreement or obligation on the part of
Blackstone, Whitehall or Berkshire Group, other than the section entitled
"Break-Up Fee; Cost Reimbursement" (set forth in Annex A).
Expiration
The obligation of the parties hereto shall automatically
expire on the earlier of (i) March 31, 1999, if the Aptco bid is not accepted
by such date by the Board of Directors of Berkshire, (ii) the date which is
210 days after the date Aptco's bid is accepted by Berkshire's Board and
(iii) the date upon which Berkshire's Board definitively rejects Aptco's bid.
Supplementary Terms and Conditions
The supplementary terms and conditions set forth in Annex A
hereto are incorporated by reference herein.
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EXHIBIT 2
February 22, 1999
CONFIDENTIAL
Aptco, LLC
c/o Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Douglas S. Krupp, CEO
Re: Commitment Letter
Ladies and Gentlemen:
You have advised Goldman Sachs Mortgage Company ("GSMC") that affiliates of
Douglas S. Krupp ("Krupp"), Blackstone Real Estate Acquisitions III L.L.C.
("Other Equity Investor") and Whitehall Street Real Estate Limited
Partnership XI ("Whitehall" and, collectively with Krupp and Other Equity
Investor and/or their affiliates, the "Investors") have formed and intend to
capitalize Aptco, LLC, a Delaware limited liability company ("LLC"), which
will propose a transaction to the Board of Directors of a publicly held
Delaware corporation ("Bruin"), pursuant to which (i) Bruin would merge into
LLC with LLC as the surviving entity and all the outstanding Bruin capital
stock (and rights to acquire Bruin capital stock) being converted in the
merger into the right to receive cash equal to a price per share (and total
purchase price) not to exceed the amount we have agreed on (the "Bruin
Merger") and (ii) immediately prior to such merger, a subsidiary of LLC would
be merged into BRI OP Limited Partnership, a Delaware limited partnership
("OP"), in a transaction pursuant to which OP and OP's current general
partner ("OP GP") would become wholly owned by LLC (the "OP Merger" and
together with the Bruin Merger, the "Transaction"). Currently, 79.16% of the
partnership interests of OP are directly or indirectly owned by Bruin.
Exhibit I hereto depicts the current organizational structure of Bruin. This
letter is referred to herein as the Commitment Letter.
Financing of $675 million, but in no event in excess of 75.5% of the
transaction value (i.e., cash required to consummate the Transaction, assumed
debt of at least $233 million, equity contributed or deemed contributed by
Krupp (which shall have a value of not less than $57 million) and all fees
and expenses of LLC and its subsidiaries relating to the Transaction) is
being sought by you in connection with the Transaction (the "Facility"). A
portion of the proceeds of the Facility would be made available to LLC to
finance a portion of the consideration to be paid to Bruin stockholders and
option/warrantholders in the Bruin Merger and the cash option in the OP
Merger. Additional information regarding the Transaction is set forth in the
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Summary of Terms among The Berkshire Group, Other Equity Investor and
Whitehall and the draft agreements for the Bruin Merger and the OP Merger
which you have furnished to us (the "Summary of Terms").
Based on our understanding of the Transaction as set forth above and in other
documents referred to above, and the other information which you have
provided to us, GSMC commits to provide the Facility on the terms and subject
to the conditions set forth herein.
LENDER: GSMC, together with its permitted participants and co-lenders.
TRANSFERABILITY: Prior to closing, Borrower and Lender will agree
upon the terms pursuant to which Lender may transfer
its interest in the loan (it being understood and
agreed that Lender may sell participation interests
in the loan, provided that GSMC retains the agent
role).
BORROWER: OP and/or, at GSMC's election, certain other
property-owning OP subsidiaries.
GUARANTORS: LLC and those OP subsidiaries owning the 58
properties identified on Schedule I hereto which are
not borrowers. In addition, Guarantors shall
include all other subsidiaries of OP for which no
third party consent for such guarantee is required
or as to which all required third party consents
have been obtained (as to special purpose entities,
OP shall arrange for charter amendments, as
necessary to permit granting of guarantees).
Borrower and Guarantors to use all commercially
reasonable efforts to obtain such consents. The
Investors (or special purpose entities holding the
Investors' interest in LLC) shall be guarantors of
the Loan with recourse to be limited to a first
priority assignment or pledge of their interests in
LLC (See "Security" below).
AMOUNT: $675,000,000 in the aggregate, but in no event in
excess of 75.5% of the transaction value (i.e., cash
required to consummate the Transaction assumed debt
of at least $233,000,000, equity contributed or
deemed contributed by Krupp and all fees and
expenses of LLC and its subsidiaries relating
thereto). The amount borrowed under the Facility is
referred to as the Loan. Borrower may borrow less
than the entire Loan at closing. In such event, the
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collateral to secure the Loan will be reduced in
accordance with loan allocation amounts among the
properties (such allocated loan amounts shall be
agreed upon by the Lender and Borrower before the
merger agreement is signed).
TERM: Twelve (12) months from the closing of the
Transaction.
USE OF PROCEEDS: Proceeds will be used to finance a portion of the
aggregate consideration to be paid by LLC in the
Bruin Merger, as needed to fund the cash option in
the OP Merger, to refinance specified existing
indebtedness of OP and its subsidiaries, to repay
intercompany indebtedness owed to Bruin to enable
Bruin to finance the redemption of its outstanding
Series A Preferred Stock, and to fund certain fees
and expenses associated with the Transaction.
INTEREST:
Rate: Absent a default, the Loan will bear interest at the
rate of 3.75% above the reserve adjusted London
Interbank Offered Rate ("LIBOR Rate") for one month
interest periods; provided, however, that
notwithstanding the foregoing, the minimum interest
rate shall at all times be 8.65%.
Payment Dates: Interest will be payable monthly.
Other Terms: All interest will be calculated based on a 360-day
year and actual days elapsed. The financing
documentation will contain (a) customary LIBOR
breakage provisions and LIBOR borrowing mechanics,
(b) LIBOR Rate definitions and (c) customary
provisions for determination of interest in the
event that LIBOR is not available for any period.
Default Rate: From and after the occurrence of a default, the
interest rates applicable to the Loan will be
increased by 2% per annum over the interest rate
otherwise applicable and such interest and fees will
be payable on demand.
COMMITMENT FEE: 1.0% of the maximum amount of the Facility, payable
at closing of the Transaction, whether or not the
Facility is drawn upon. In the event the
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Transaction does not close, the commitment fee shall
be reduced to 75% of the fee provided for in the
preceding sentence, but will be payable only out of
the break-up fee or reimbursement of such commitment
fee expense actually received from Bruin. Borrower
shall use good faith efforts to collect the break-up
fee and receive reimbursements for the commitment
fee if they are owing to the LLC under the terms of
the merger documentation. In the event the LLC
receives a 100% reimbursement from Bruin of such
commitment fee as an expense, the LLC will pay all
of such reimbursement over to GSMC.
STRUCTURING FEE: 0.25% of the maximum amount of the Facility, payable
at the same time as the commitment fee. In the
event the Transaction does not close, the
structuring fee shall be reduced to 75% of the fee
provided for in the preceding sentence, but will be
payable only out of the break-up fee or
reimbursement of such structuring fee expense
actually received from Bruin. Borrower shall use
good faith efforts to collect the break-up fee and
receive reimbursements for the structuring fee if
they are owing to the LLC under the terms of the
merger documentation. In the event the LLC receives
a 100% reimbursement from Bruin of such structuring
fee as an expense, the LLC will pay all of such
reimbursement over to GSMC.
TAKEDOWN FEE: 0.50% of the amount borrowed, payable upon
borrowing.
REPAYMENT FEE: A repayment fee of 0.50% of the then outstanding
amount of the Facility, if any, shall be due on
June 15, 2000.
PREPAYMENTS: Borrowers may voluntarily prepay all or any portion
of the Loan in minimum amounts of $1 million at any
time, upon at least 5 days' prior written notice.
All voluntary prepayments will be accompanied by
LIBOR breakage costs, if any.
SECURITY: First mortgage liens (recorded) and title insurance
on 58 properties identified on Schedule I hereto.
Pledge by LLC of entire equity of OP GP. In
addition, the Investors (or special purpose entities
holding the Investors' interest in LLC) will
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guarantee the Loan with recourse to be limited to a
first priority assignment or pledge of their
interest in LLC as security for such guaranty. At
GSMC's election, a first priority perfected lien on
and security interest in all assets of LLC, OP and
the subsidiaries of OP not covered by the preceding
sentences to the extent available without the
requirement to obtain any third party consent or as
to which all required third party consents are
obtained. Borrower and Guarantors to use all
commercially reasonable efforts to obtain such
consents. Lender will have dominion over all cash
if requested by GSMC, which arrangement shall permit
the release of cash to Borrower and Guarantors
absent a default; provided, however, that to the
extent that the holders of debt in respect of the 24
properties identified on Schedule II hereto shall
have the right to and shall prohibit such an
arrangement, Lender shall not be entitled to same.
The Loan will be cross-collateralized and cross-
defaulted in a manner satisfactory to Lender. The
Parties will use reasonable good faith efforts to
minimize or avoid mortgage recording taxes and
minimize title insurance premiums on the 58
properties on Schedule I; it being understood that
there will be no mortgages or title insurance
obtained with respect to the 24 properties on
Schedule II.
PARTIAL RELEASES FROM Permitted in connection with third party sales and
MORTGAGE OR NEGATIVE certain partial refinancings provided that Lender
COVENANT: receives at least minimum release prices based on
allocated loan amounts to be agreed upon by the
parties. Minimum release price is to be equal to
greater of the property's allocated loan amount or
100% of sale or refinancing proceeds capped at 110%
of the property's allocated loan amount. Borrower
and GSMC to agree on allocated loan amounts prior to
the execution of the merger agreement.
DOCUMENTATION: The documentation for the Financing will contain
representations and warranties, conditions precedent
described below, closing document deliveries and
similar customary conditions precedent, affirmative
and negative covenants (but no financial ratios,
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maintenance or other similar financial condition
tests), indemnities, events of default and remedies,
in each case customarily found in documentation for
similar transactions. The OP and/or LLC will
provide customary environmental indemnity to the
Lender. This Commitment Letter does not contain all
the terms that will be included in the documentation
for the Financing.
CONDITIONS: The commitment of GSMC for the Facility is
conditioned upon satisfaction of all the following
(all to Lender's satisfaction):
- Relevant documents, such as all transaction
documents and disclosure schedules for the Bruin
Merger and the OP Merger and other material
agreements to which Borrower is a party, must be
acceptable to GSMC in all material respects.
- The Bruin Merger and the OP Merger each shall
have been consummated in compliance with all
applicable law and regulations.
- The material terms of the Bruin Merger and the OP
Merger, including, without limitation, the
consideration offered and the conditions
precedent, shall not have been modified, amended
or supplemented in any material respect and no
material provision contained therein shall have
been waived, without GSMC's prior written
consent.
- Any conditions contained in the merger agreement
relating to environmental matters shall have been
satisfied or waived with GSMC's prior written
consent.
- A Closing Agreement with the Internal Revenue
Service on terms and conditions satisfactory to
Aptco with respect to the tax matters specified
in the draft merger agreements.
- All necessary governmental and material third
party waivers and consents shall have been
received.
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- Receipt of opinions of counsel from Borrower's
counsel (including local counsel as requested)
reasonably acceptable to GSMC.
- Receipt of customary mortgage title insurance
policies, existing land surveys, (and the
Borrower will use best efforts to obtain surveys
for properties as to which surveys have not
previously been prepared) evidence of insurance
and addition of GSMC as loss payees, and the
like.
- As of the closing of the Transaction, there shall
be no material liabilities of Borrower, other
than (i) the $233 million of existing
indebtedness encumbering the properties on
Schedule II hereto, (ii) customary trade payables
not to exceed $5 million, (iii) liabilities shown
on Schedule III hereto (iv) liabilities, which
shall be subject to the approval of GSMC,
disclosed in SEC filings filed after December 31,
1997 and prior to the execution of the merger
agreement, and (v) liabilities shown on the
Disclosure Letter delivered pursuant to the
merger agreement, subject to the approval of
GSMC.
- There shall be no material adverse change
(a "MAC"), in the business, financial condition
or prospects of Bruin and its subsidiaries taken
as a whole or in the collateral for the Loan
taken as a whole (including in the environmental
condition thereof) not contemplated by the
Transaction.
- No material indebtedness of Bruin or OP or any of
their subsidiaries (which is not being repaid at
closing) shall be in default as the result of the
Transaction or the Financing and there shall be
no Event of Default on any material indebtedness
which is not being repaid at closing beyond
applicable cure periods.
- There shall be no litigation commenced that,
individually or in the aggregate, is reasonably
likely to have a material adverse effect on Bruin
and its subsidiaries, taken as a whole, or their
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business or Borrower's ability to repay the Loan
or that would prevent or significantly delay the
consummation of the Transaction, or any
litigation pending or threatened in writing by a
governmental entity which challenges the Bruin
Merger, the OP Merger or the Financing.
- There shall not have occurred and be continuing
(i) any general suspension of, or limitation on
prices for, trading in securities on the New York
Stock Exchange, (ii) a declaration of any general
banking moratorium by federal or New York
authorities or any suspension of payments in
respect of money center banks or any limitation
(whether or not mandatory) imposed by federal or
state authorities on the extension of credit by
money center banks in the United States,
(iii) any limitation (whether or not mandatory)
by any United States governmental entity on, or
any other event which could materially affect,
the extension of credit by banks or other United
States financial institutions, (iv) from the date
hereof through the closing date a decline of at
least 15 % in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500
Index, (v) any material disruption or material
adverse change in the financial or capital
markets generally or (vi) a commencement of a
war, armed hostilities or any other international
or national calamity directly or indirectly
involving the United States or, in the case of a
situation existing as of the date hereof,
a material escalation of such situation.
- Absence of a default under the Financing.
- GSMC shall have verified that the annualized net
operating income for the collateral for the Loan
shall be at least $114.6 MM (representing a 7.5%
decrease from Bruin's budgeted 1999 net operating
income of $123.9 MM). For purposes of the
foregoing, GSMC shall define the analysis period
as beginning January 1, 1999 and ending on the
last day of the month immediately prior to
closing. Lender shall compare the actual income
and expense performance of the properties with
the 1999 budget previously furnished to GSMC.
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GSMC shall determine that the actual net
operating income during the analysis period shall
not be less than 92.5% of the 1999 budgeted net
operating income for the same analysis period.
Foregoing NOI test to be adjusted to reflect
sales of properties between the date hereof and
closing (assuming entire cash proceeds thereof
are retained by Bruin or used to repay existing
debt that otherwise would be repaid at closing).
- LLC shall have received the equity from Other
Equity Investor, Whitehall and Krupp contemplated
by the Summary of Terms (i.e., a minimum of $106
million from each of Whitehall and Other Equity
Investor and a contribution having a value of at
least $57 million from Krupp), and all the Bruin
stock and OP Units currently owned by Krupp and
his affiliates.
The Transaction shall have closed no later than
210 days (the "Commitment Termination Date")
following the signing of a definitive agreement
for the Bruin Merger and the Loan shall not, in
any event, be drawn down after December 31, 1999.
- Definitive agreements for the Bruin Merger and
the OP Merger shall have been executed by March
31, 1999, provided, however, that if definitive
agreements are not executed by March 31, 1999 and
Lender does not extend this Commitment Letter,
this Commitment Letter will terminate and neither
Borrower nor Lender will be liable hereunder.
OTHER TERMS: The documentation for the Facility will require,
among other things, compliance with covenants
pertaining to the following (all in form and
substance satisfactory to GSMC):
- Financial reporting on a monthly basis. All
financial statements shall be prepared on a
consolidated and consolidating basis.
- Compliance with all applicable law, decrees and
material agreements, or obtaining of applicable
consents and waivers.
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- Limitations on commercial transactions,
management agreements, service agreements and
borrowing transactions with officers, directors,
employees and affiliates.
- Prohibition on new indebtedness, other than the
Facility, and other than refinancings of existing
indebtedness (i) in respect of the 24 properties
listed on Schedule II, provided the same are on
terms not materially more onerous to the Borrower
than the existing indebtedness being refinanced
and (ii) in respect of the 58 properties
identified on Schedule I, provided that payment
of the appropriate release price is made.
- Prohibitions on liens, mortgages and security
interests except those in existence and
identified, those incurred in connection with
permitted refinancings, and liens on indebtedness
permitted to be incurred for the financing of
permitted purchases of properties which liens are
limited to the properties purchased, and which
obligations are solely those of the property
owning subsidiary.
- Limitations on, or prohibitions of, cash
dividends, other distributions to equity holders,
payments in respect of subordinated debt and
redemption of common or preferred stock. Such
limitations and/or prohibitions shall not
preclude, in the absence of a default under the
Loan, distributions to certain OP Unit Holders
who convert their interests to Class A
(Preferred) Interests or tax distributions, as
contemplated by the LLC agreement.
- Limitations on mergers, acquisitions, or sale of
a material portion of assets (other than sales
accompanied by payment of specified release
prices).
- Prohibitions of a direct or indirect change in
control of Borrower or LLC (other than changes
which increase the control of Whitehall and the
Other Equity Investor. The foregoing shall not
prohibit any change in ownership (but not
control) within Whitehall, Krupp or the Other
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<PAGE>
Equity Investor). Whitehall and Blackstone will
each have equivalent control and substantially
equivalent economic interests in LLC.
- Customary provisions regarding responsibility for
misappropriation of funds.
- Limitations on capital expenditures.
- Agent's and Lender's rights of inspection and
access to facilities, management and auditors.
- Payment of Lender's costs and expenses in
documenting, closing and servicing the Loan
(including reasonable attorneys' fees and costs,
title insurance premiums and mortgage recording
taxes).
- Escrow for real estate taxes.
- Governing law: New York.
The commitment of GSMC hereunder is subject to the execution and delivery of
final legal documentation acceptable to GSMC and its counsel incorporating,
without limitation, the terms set forth in this Commitment Letter.
By signing this Commitment Letter, you acknowledge that this Commitment
Letter supersedes any and all discussions and understandings, written or
oral, between or among GSMC and any other person as to the Facility,
including any prior commitment letters for debt financing for the
Transaction. No amendments, waivers or modifications of this Commitment
Letter or any of its contents shall be effective unless expressly set forth
in writing and executed by you and GSMC.
This Commitment Letter is being provided to you on the condition that, except
as required by law or SEC Regs (as defined below), neither it nor its
contents will be disclosed publicly or privately except to those individuals
who are your advisors who have a need to know of them as a result of their
being specifically involved in the Bruin Merger and the OP Merger and the
Facility and then only on the condition that such matters may not, except as
required by law or regulations of the Securities and Exchange Commission
("SEC Regs"), be further disclosed and except that, following your acceptance
hereof, you may disclose this Commitment Letter to Bruin and its advisors.
No person, other than the parties signatory hereto, is entitled to rely upon
this Commitment Letter or any of its contents. No person shall, except as
required by law or SEC Regs, use the name of, or refer to GSMC or any of its
affiliates, in any correspondence, discussions, press release, advertisement
11
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<PAGE>
or disclosure made in connection with the Transaction without the prior
written consent of GSMC.
In the event the Transaction closes, you agree to indemnify and hold harmless
each of GSMC, its affiliates, and the directors, officers, employees, agents,
attorneys and representatives of any of them (each, an "Indemnified Person"),
from and against all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including, but not limited to, reasonable
attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal), which may be instituted
or asserted against or incurred by any such Indemnified Person in connection
with, or arising out of, this Commitment Letter, the Financing, the
documentation related thereto, any actions or failures to act in connection
therewith, and any and all environmental liabilities and legal costs and
expenses arising out of or incurred in connection with any disputes between
or among any parties to any of the foregoing, and any investigation,
litigation, or proceeding related to any such matters. Your obligation for
such reimbursement may be assumed by Borrower at closing. Notwithstanding
the foregoing, no indemnitor shall be liable for any indemnification to any
Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results solely from that
Indemnified Person's gross negligence or willful misconduct, as finally
determined by a court of competent jurisdiction. Under no circumstances
shall GSMC, or any of its affiliates be liable to you or any other person for
any punitive, exemplary, consequential or indirect damages in connection with
this Commitment Letter, the Facility or the documentation related thereto,
regardless of whether the commitment herein is terminated or the Transaction
or the Facility closes. For purposes of this paragraph, the term "affiliate"
shall not include any affiliated entity which is an Investor.
You and GSMC expressly waive any right to trial by jury of any claim, demand,
action or cause of action arising in connection with this Commitment Letter,
any transaction relating hereto, or any other instrument, document or
agreement executed or delivered in connection herewith, whether sounding in
contact, tort or otherwise. You and GSMC consent and agree that the state or
federal courts located in New York County, City of New York, New York, shall
have exclusive jurisdiction to hear and determine any claims or disputes
between or among any of the parties hereto pertaining to this Commitment
Letter or the Facility under consideration and any investigation, litigation,
or proceeding related to or arising out of any such matters, provided,
however, that you and GSMC acknowledge that any appeals from those courts may
have to be heard by a court located outside of such jurisdiction. You and
GSMC expressly submit and consent in advance to such jurisdiction in any
action or suit commenced in any such court, and hereby waive any objection
which either of them may have based upon lack of personal jurisdiction,
improper venue or inconvenient forum. The definitive documentation for the
Facility shall contain Borrower's and Guarantors' agreement to the foregoing.
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This Commitment Letter is governed by and shall be construed in accordance
with the law of the State of New York applicable to contracts made and
performed in that State.
GSMC shall have access to all relevant facilities, personnel and accountants,
and copies of all documents which GSMC may reasonably request, including
business plans, financial statements (historical and pro forma), books,
records, and other documents. GSMC agrees to treat any confidential
information so received as it would its own confidential information.
This Commitment Letter shall be of no force and effect unless and until this
Commitment Letter is each executed and delivered to GSMC on or before
5:00 p.m. New York City time on February 23, 1999 at, 85 Broad Street, New
York, New York 10004. Once effective, the commitment of GSMC to provide
financing in accordance with the terms of this Commitment Letter shall
terminate if the Bruin Board of Directors rejects LLC's proposal relating to
the Transaction (in which case, none of the LLC, the Investors or their
respective affiliates shall have any liability hereunder whether on account
of fees, reimbursement obligations or otherwise) or if the Loan does not
close by the Commitment Termination Date.
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We look forward to continuing to work with you toward completing this
transaction.
Sincerely,
GOLDMAN SACHS MORTGAGE COMPANY
By: /s/ Mark J. Kogan
Its Duly Authorized Signatory
AGREED AND ACCEPTED THIS
22nd DAY OF FEBRUARY, 1999.
APTCO, LLC
By:/s/ Douglas S. Krupp
14
EXHIBIT 3
February 22, 1999
Lazard Freres & Co., LLC
30 Rockefeller Plaza
New York, New York 10020
Attention: Matthew J. Lustig
Gary Ickowicz
Gentlemen:
Aptco, LLC ("Aptco"), a company formed by affiliates of Douglas
Krupp, Whitehall Street Real Estate Limited Partnership XI ("Whitehall") and
Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone") hereby makes
the following proposal, pursuant to which holders of common stock of
Berkshire Realty Company, Inc. ("BRI") would receive, and holders of limited
partnership interests ("OP Units") in BRI OP Limited Partnership ("OP") would
have the opportunity to receive, $11.05 per share/OP Unit in cash (the "Cash
Price") for their respective interests in the Company.
Our proposal contemplates that the acquisition of BRI would take
the form of a merger (the "BRI Merger") pursuant to which BRI would be merged
with and into Aptco, with Aptco as the surviving entity of the BRI Merger.
Pursuant to the BRI Merger, holders of BRI common stock would receive, in
exchange for their stock, an amount of cash per share equal to the Cash
Price.
Contemporaneously with the BRI Merger, a newly formed subsidiary of
Aptco would merge with and into OP (the "OP Merger"), with OP as the
surviving entity of the OP Merger. Pursuant to the OP Merger, OP Unitholders
would be given the choice to elect to receive, in exchange for each of their
OP Units, one of the following: (a) cash equal to the Cash Price; (b) a
senior preferred equity interest in Aptco with a liquidation preference equal
to the Cash Price, which would entitle the holder to receive cumulative
preferred distributions of available cash on a senior basis equal to 6% per
annum, and would be callable by Aptco after six years or earlier upon a sale
of Aptco (whether by merger, initial public offering, sale of all or
substantially all of its assets, or otherwise) at a price equal to the
liquidation preference; or (c) an equity interest in Aptco that (i) would be
subordinate to the senior preferred equity interest described above and to
senior subordinated equity interests to be held by Whitehall and Blackstone
or their respective affiliates, but would be generally pari passu with the
equity interests to be held by Douglas Krupp and his affiliates and
(ii) would be callable by Aptco after six years or earlier upon a sale of
Aptco (whether by merger, initial public offering, sale of all or
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substantially all of its assets, or otherwise) at a price equal to the then
fair market value of such interest.
The aggregate purchase price for the acquisition of BRI and OP
would be funded with a combination of debt and equity financing. The debt
financing would consist of a bridge loan to be provided by Goldman Sachs
Mortgage Company (an affiliate of Whitehall) pursuant to the attached
commitment letter. With respect to the equity financing, affiliates of
Douglas Krupp, Whitehall and Blackstone (together with the debt providers,
the "Financing Sources") have agreed in principle, subject to the execution
of mutually acceptable documentation with respect to Aptco and the conditions
set forth below, to provide Aptco with sufficient funds to finance the
remaining purchase price and related expenses for the acquisition.
Upon your acceptance of our proposal as set forth in this letter,
we are prepared to work towards immediately finalizing definitive acquisition
agreements with BRI and OP, which we would expect to be executed within two
weeks time. Such agreements would contain customary representations,
warranties, covenants and indemnities (including indemnification of Aptco and
its Financing Sources by BRI against claims arising in connection with this
transaction). In addition, consummation of the proposed transaction by Aptco
would be subject to the conditions set forth in the definitive acquisition
agreements, including the following:
(i) there being no injunction prohibiting or restricting the
consummation of any of the transactions described herein, no litigation
commenced or threatened by a governmental entity, nor any litigation that
could have a material adverse effect with respect to BRI or OP or that could
significantly delay the consummation of the BRI or the OP Mergers;
(ii) execution of an agreement delivered, on or prior to the
execution of definitive acquisition agreements, by the holders of a majority
in interest of BRI's Series 1997-A Convertible Preferred Stock ("Series A
Preferred") consenting to the transactions, including the BRI Merger and the
conversion of their shares pursuant to the BRI Merger into an amount of cash
equal to 115% of the liquidation preference of such shares;
(iii) receipt by BRI's Board of Directors of an opinion from a
nationally recognized investment banking firm that the consideration to be
paid to the holders of BRI stock, Series A Preferred and OP Units is fair,
from a financial point of view;
(iv) approval of the proposed transactions by the respective Boards
of Directors of BRI and the general partner of OP, and by the requisite vote
of the stockholders of BRI and the OP Unitholders;
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(v) receipt of any regulatory and other third party consents to
the transactions, including the financing thereof;
(vi) receipt by BRI of a closing agreement with the Internal
Revenue Service, on terms and conditions satisfactory to Aptco, with respect
to certain tax matters, and Aptco's satisfaction with respect to certain
other tax matters;
(vii) confirmation that the number of shares of common stock of
BRI will not be more than 48,015,000, assuming the exercise of all stock
options and the conversion of all OP Units (but without taking into account
the conversion of shares of Series A Preferred into shares of BRI common
stock);
(viii) confirmation that investment banking fees, severance
costs and legal/accounting expenses of BRI relating to the transaction will
not exceed $12 million;
(ix) inclusion in the BRI Merger agreement of satisfactory
"no-shop," "break up fee" and expense reimbursement provisions customary for
transactions of this type; and
(x) other customary conditions to closing.
The closing of the BRI Merger and OP Merger would not be subject to
a due diligence or financing contingency (other than the receipt by Aptco of
financing proceeds on the terms and conditions of the commitments from the
Financing Sources).
Accompanying this letter is a draft merger agreement relating to
the BRI Merger, and a draft merger agreement relating to the OP Merger.
Aptco, together with its financial advisors and legal counsel are prepared to
meet with you and your advisors immediately to work on finalizing the
enclosed agreements. Of course, at this stage of the process, our proposal is
merely an expression of interest and is not intended to be legally binding,
and Aptco does not intend to be legally bound to any transaction with BRI or
OP until definitive agreements are fully executed.
We believe Aptco is uniquely positioned to proceed with a
transaction in the best interests of BRI stockholders and OP Unitholders on
an expeditious basis.
This letter is intended to be confidential and neither it nor our
involvement in pursuing a possible acquisition proposal should be publicly
disclosed by BRI or you unless required by law. In the event BRI determines
that public disclosure is so required, we request that any public
announcement of this proposal be reviewed by Aptco and its advisors prior to
its release.
Pursuant to the confidentiality agreement with you, we hereby
advise you that we intend to make the public disclosures required under
Section 13(d) of the Securities Exchange Act of 1934, as amended, as soon as
practicable.
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This offer is open until 5:00 p.m. on March 1, 1999, and will
expire at that time if not accepted. We look forward to working with you on
this proposed transaction.
Very truly yours,
APTCO, LLC,
By its members:
THE BERKSHIRE COMPANIES
LIMITED PARTNERSHIP
By: KGP-1, Inc.
By:/s/ Douglas Krupp
Douglas Krupp
President
WHITEHALL STREET
REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH Advisors, L.L.C. XI
By:/s/ Steven M. Feldman
BLACKSTONE REAL ESTATE
ACQUISITIONS III L.L.C.
By:/s/ Thomas J. Saylak
cc: Prudential Securities Incorporated
Real Estate Investment Banking
One New York Plaza
New York, New York 10292
Attention: Scott Schaevitz
-4-
EXHIBIT 4
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) of the Securities Exchange Act of 1934,
as amended, the undersigned hereby agree to the joint filing on behalf of
each of us of a statement on Schedule 13D relating to the Common Stock, par
value $.01 per share, of Berkshire Realty Company, Inc., a Delaware
corporation, and that any amendments thereto filed by any of us will be filed
on behalf of each of us. This agreement may be included as an exhibit to
such joint filing.
BLACKSTONE REAL ESTATE ACQUISITIONS
III L.L.C.
By:/s/ Gary Sumers
______________________________
Name: Gary Sumers
Title: Vice President
BLACKSTONE REAL ESTATE ADVISORS III,
L.P.
By: BRE ADVISORS III L.L.C.
By:/s/ Gary Sumers
______________________________
Name: Gary Sumers
Title: Vice President
BRE ADVISORS III L.L.C.
By:/s/ Gary Sumers
______________________________
Name: Gary Sumers
Title: Vice President
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/s/ Gary Sumers
_________________________________
PETER G. PETERSON
By: Gary Sumers, Attorney-in-Fact
/s/ Gary Sumers
_________________________________
STEPHEN A. SCHWARZMAN
By: Gary Sumers, Attorney-in-Fact
Dated: March 3, 1999
