<PAGE>
As filed with the Securities and Exchange Commission on June 18, 1999
Registration No. 333-____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BERKSHIRE REALTY COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 04-3086485
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
ONE BEACON STREET, SUITE 1550
BOSTON, MASSACHUSETTS 02108
(888) 867-0100
(Address, Including Zip Code, and Telephone Number Including Area Code,
of Registrant's Principal Executive Offices)
SCOTT D. SPELFOGEL, ESQ.
BERKSHIRE REALTY COMPANY, INC.
ONE BEACON STREET, SUITE 1550
BOSTON, MASSACHUSETTS 02108
(617) 574-8385
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
DAVID E. REDLICK, ESQ.
KENNETH A. HOXSIE, ESQ.
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 526-6000
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ].
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ].
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ].
<PAGE>
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ].
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of each
Class of Proposed Maximum Proposed Maximum Amount of
Securities to be Amount to Offering Price Per Aggregate Offering Registration
Registered be Registered Share(1) Price (1) Fee
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<S> <C> <C> <C> <C>
Common Stock, 1,614,157 11.4375 $18,461,921 $5,133
$.01 par value
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Section 457(c) under the Securities Act of 1933, as
amended, and based upon the average of the high and low price of the
common stock on the New York Stock Exchange on June 14, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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SUBJECT TO COMPLETION, DATED JUNE 18, 1999
PROSPECTUS
1,614,157 Shares
BERKSHIRE REALTY COMPANY, INC.
COMMON STOCK
The holders of units of limited partnership interest in BRI OP Limited
Partnership described in this prospectus may convert these units into common
stock and sell the stock in this offering. Berkshire will not receive any of the
proceeds from the shares sold by the selling stockholders.
Our shares of common stock are listed for trading on the New York Stock
Exchange under the symbol "BRI." The closing sales price of our common stock as
reported by the New York Stock Exchange on June 17, 1999 was $11.50 per share.
--------------------------------------
FOR A DISCUSSION OF RISKS THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE
COMMON STOCK SOLD WITH THIS PROSPECTUS, SEE "RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Our principal executive offices are located at One Beacon Street, Suite 1550,
Boston, Massachusetts 02108 and our telephone number is (888) 867-0100.
The date of this prospectus is June __, 1999
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<PAGE>
RISK FACTORS
An investment in our common stock involves various risks. You should carefully
consider the following risks and the other information in this prospectus before
deciding to buy our common stock.
DEVELOPMENT AND ACQUISITION
WE ACQUIRE NEW PROPERTIES FROM TIME TO TIME, AND THOSE ACQUISITIONS MAY REDUCE
THE VALUE OF YOUR INVESTMENT.
Berkshire regularly considers acquiring additional apartment communities.
Acquisitions involve several risks, including the following:
- Acquired properties may not perform as well as Berkshire
expected before acquiring them.
- Improvements to the properties may cost more than
Berkshire had estimated.
- The costs of evaluating properties that are not acquired
cannot be recovered.
- Berkshire has acquired properties by issuing units and has
had to agree with the sellers not to sell the properties or
refinance the debt on them for various periods of time.
These restrictions may keep us from taking actions that
would otherwise be in the best interests of the
shareholders. Berkshire may in the future acquire
apartment communities for units and may have to agree to
similar restrictions.
WE DEVELOP NEW APARTMENT COMMUNITIES FROM TIME TO TIME, AND THESE ACTIVITIES MAY
REDUCE THE VALUE OF YOUR INVESTMENT.
Berkshire plans to continue developing new apartment communities as
opportunities arise in the future. Development and construction activities
entail a number of risks, including the following:
- We may abandon a project after spending time and money
determining its feasibility.
- Construction costs may exceed the original estimates.
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- The revenue from a new project may not be enough to
make it profitable.
- Berkshire may not be able to obtain financing on favorable
terms for development of a property.
- We may not complete construction and lease up on
schedule, resulting in increased costs.
- Berkshire may not be able to obtain, or may be delayed in
obtaining, necessary governmental permits.
- Even successful projects require a substantial portion of
management's time and attention.
WE ARE REQUIRED TO SUBMIT TO SHAREHOLDERS A VOTE REGARDING
LIQUIDATION.
Our charter requires the Board of Directors to prepare and submit to
shareholders a proposal to liquidate Berkshire's assets and distribute the net
proceeds to the shareholders. We have mailed definitive proxy materials relating
to this proposal to our shareholders with respect to a special meeting of
shareholders to be held on July 21, 1999. Berkshire will adopt the liquidation
proposal only if shareholders holding a majority of the shares then outstanding
approve it. If Berkshire were liquidated, you might receive proceeds that were
less than the value of the stock at the time you converted your units.
Submitting this proposal to shareholders will cause us to incur costs associated
with the shareholder solicitation regardless of the outcome of the vote.
THE INDUSTRY WE OPERATE IN HAS RISKS THAT MAY CAUSE YOUR INVESTMENT TO DECLINE
IN VALUE.
Owning real estate involves a variety of risks, including the risks described
below:
REALIZING A PROFIT FROM OWNING APARTMENT COMMUNITIES DEPENDS ON MANY FACTORS.
Berkshire invests in apartment communities and therefore is subject to the
various risks generally related to owning and developing real property. The
value of Berkshire's apartment communities and our ability to distribute cash to
shareholders will depend on how well we
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operate and develop our properties. These are some of the things that
may adversely affect our results:
- Changes in national and local economic conditions, such as
oversupply of apartment units or reduction in demand for
apartment units in our markets.
- The attractiveness of our apartments to tenants.
- Changes in interest rates and the availability, cost and
terms of mortgage financings.
- The ongoing need for capital improvements in our
properties, particularly in older structures.
- Changes in real estate tax rates and other operating
expenses.
- Changes in governmental rules and fiscal policies and
changes in zoning laws.
- Civil unrest, acts of God, including natural disasters which
may result in uninsured losses, acts of war and other factors
beyond our control.
OUR BUSINESS DEPENDS ON THE PERFORMANCE OF FOUR MARKETS.
We have made almost all of our investments in Florida, Texas and the
Mid-Atlantic and Southeastern United States. Therefore, Berkshire's results will
depend to a great extent on the economic conditions in these markets as well as
the market for apartment communities generally.
REGULATIONS MAY CAUSE OUR COSTS TO INCREASE OR LIMIT OUR ABILITY TO INCREASE OUR
REVENUE.
Many federal, state and local zoning, subdivision, planning, building,
environmental and other land use laws and regulations govern real estate. These
laws and regulations may place significant restrictions on our ability to
develop or improve our real estate. Even unintentional violations of these laws
and regulations by us or by our tenants may force us to take corrective action
or pay substantial penalties. In particular, various laws and regulations may
restrict the amount and process by which we may raise rents, as well as our
right to convert a property to other uses, such as condominiums or cooperatives.
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WE MAY LOSE SOME OF OUR PROPERTY TO CASUALTIES OR TAKINGS.
Conditions existing on real property may result in injury to people. BRI
Partnership may incur liability as a result of such injuries. Such liability may
be uninsurable in some circumstances or may exceed the limits of insurance
maintained at typical amounts for the type and conditions of the property. In
addition, our properties may suffer loss in value due to causalities such as
fire or hurricanes. These losses 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. Should an uninsured loss occur, Berkshire could lose
both its investment in and anticipated profits and cash flow from a 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 Berkshire for the value lost.
WE MAY NOT BE ABLE TO SELL OUR ASSETS AT THE OPTIMAL TIME.
Real estate investments are relatively illiquid. Our ability to vary our
portfolio in response to changes in economic and other conditions will therefore
be limited. If we must sell an investment, we may not be able to sell the
investment in the time period we desire or at a price that will recoup or exceed
the amount of our cost for the investment.
OUR EXPENSES MAY INCREASE, RESULTING IN A DECREASE OF THE FUNDS AVAILABLE TO PAY
DIVIDENDS TO SHAREHOLDERS.
BRI Partnership must pay the expenses associated with operating its apartment
communities. These expenses include:
- cleaning
- electricity
- heating, ventilation and air conditioning
- elevator repair and maintenance
- insurance and administrative costs
- other general costs associated with security, landscaping,
repairs and maintenance
If these expenses increase, the local rental market may limit the extent to
which we may increase rents to meet these increased operating expenses without
decreasing occupancy rates. If these operating expenses increase faster than
rental rates, our results of operations, financial
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condition and ability to pay distributions to shareholders could be
adversely affected.
WE MAY INCUR COSTS IF WE DO NOT COMPLY WITH THE FAIR HOUSING AMENDMENTS ACT AND
AMERICANS WITH DISABILITIES ACT.
The Fair Housing Amendments Act imposes requirements related to access by
physically handicapped persons on multifamily properties first occupied after
March 13, 1991 or for which construction permits were obtained after June 15,
1990. If Berkshire does not comply with this statute, we might have to pay fines
to the United States government or damages to private litigants.
All of our properties must comply with the Americans with Disabilities Act to
the extent such properties are "public accommodations" or "commercial
facilities," as defined by this statute. The law 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 these purposes. Compliance with this law's requirements could
require removal of access barriers and other capital improvements to the public
areas of Berkshire's properties. Noncompliance could result in imposition of
fines by the United States government or an award of damages to private
litigants. If any changes to our properties subsequently are required that
involve material expenditures, our results of operation, financial condition and
ability to make expected distributions to shareholders could be adversely
affected.
OUR JOINT VENTURE PARTNERS MAY HAVE DIFFERENT INTERESTS THAN WE DO, RESULTING IN
A LOSS OF VALUE OF SOME OF OUR PROPERTIES OR AN INABILITY TO TAKE ADVANTAGE OF
FAVORABLE OPPORTUNITIES.
Any of our investments in a joint venture partnership which owns property may
involve risks which would not be present in a direct investment in real estate.
For example, our joint venture partner may experience financial difficulties and
may at any time have economic or business interests or goals which are
inconsistent with our business interests and goals or contrary to our policies
or objectives. Our partner might take actions that would subject the property
owned by the joint venture to liabilities in excess of those contemplated by the
terms of the joint venture agreement. In addition, we might reach an impasse
with our partner since either party may disagree with a proposed transaction
involving the property owned by the joint venture and impede any proposed
action.
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<PAGE>
FINANCINGS
WE MAY NOT BE ABLE TO MAKE THE REQUIRED PAYMENTS ON OUR DEBT.
As of March 31, 1999, we had approximately $609,663,000 of total debt. Payments
of principal and interest on mortgage borrowings may leave us with insufficient
cash resources to operate our apartment communities or pay distributions
required to be paid in order for us to maintain our qualification as a REIT.
If we cannot make payments on a loan secured by a mortgage, the lender could
foreclose on the property securing the loan. If this happens, Berkshire will
lose the income from the property and any value the property had. Even if a loan
is nonrecourse, the lender might have the right to recover deficiencies arising
from fraud, environmental liabilities or other circumstances. Foreclosure could
also create taxable income without producing any cash, thereby reducing our cash
available for distribution and hindering our ability to meet the tax
requirements for a REIT.
In connection with acquiring 39 properties in exchange for units, we agreed to
maintain prescribed levels of nonrecourse debt on these properties. The purpose
of these agreements was to minimize the tax consequences of the acquisitions to
the unit recipients. If we do not maintain the required level of debt, we would
be in default under these agreements and could be liable to the holders of the
units.
WE MAY NOT BE ABLE TO REFINANCE OUR DEBT WHEN IT COMES DUE.
When any of our debt secured by real property comes due, we will have to
refinance the debt or sell the property that secures the debt. If the interest
rate on the new debt is higher than the rate on the old debt, our costs will
increase. Our ability to refinance any of this debt and the terms on which we
might refinance will depend upon economic conditions in general and specifically
on conditions in the capital markets. We cannot guarantee that we could
refinance or repay any of these mortgage loans at maturity.
WE DO NOT HAVE A LIMIT ON HOW MUCH DEBT WE CAN INCUR.
We currently have a policy of incurring debt only if upon such incurrence the
ratio of Berkshire's debt to the value of its assets would be 50% or less.
Although we have adopted this policy, Berkshire's governing documents contain no
limitation on the amount of
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indebtedness Berkshire may incur. Accordingly, the Board of Directors could
alter or eliminate this policy and would do so, for example, if it were
necessary for Berkshire to continue to qualify as a REIT.
THE INTEREST RATES OF OUR CREDIT FACILITY MAY INCREASE, WHICH WOULD RESULT IN A
REDUCTION OF FUNDS AVAILABLE TO PAY DIVIDENDS TO SHAREHOLDERS.
Outstanding advances under our credit facility bears interest at a variable
rate. As of March 31, 1999, this credit facility had an outstanding balance of
$173,100,000. We may incur additional variable rate indebtedness in the future.
Accordingly, increases in interest rates could increase Berkshire's interest
expense, which could adversely affect Berkshire's results of operations,
financial condition and ability to pay expected distributions to shareholders.
An increase in interest expense could also cause us to be in default under our
credit facilities.
POTENTIAL ENVIRONMENTAL LIABILITY - OUR PROPERTIES MAY HAVE
ENVIRONMENTAL CONTAMINATION, WHICH COULD REDUCE THE VALUE OF YOUR
INVESTMENT.
Various federal, state and local environmental laws, ordinances and regulations
subject property owners or operators to liability for the costs of removal or
remediation of hazardous or toxic substances on the property. These laws often
impose liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of the hazardous or toxic substances. The presence
of, or the failure to properly remediate, such substances may adversely affect
our 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. 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. Therefore, owners and operators are
potentially liable for removal or remediation costs, as well as other related
costs, including governmental fines and injuries to persons and property,
related to such facilities.
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<PAGE>
ANTI-TAKEOVER PROVISIONS - BECAUSE OUR GOVERNING DOCUMENTS CONTAIN PROVISIONS
THAT MAY INHIBIT A TAKEOVER OF BERKSHIRE, YOU MAY NOT HAVE THE OPPORTUNITY TO
REALIZE A PREMIUM ON YOUR INVESTMENT.
Our charter places restrictions on the accumulation of shares in excess of 9.8%
of the number of outstanding shares of common stock, subject to exceptions
permitted with the approval of the Board of Directors to allow (1) underwritten
offerings, or (2) the sale of equity securities in circumstances where the Board
of Directors determines Berkshire's REIT federal tax status will not be
jeopardized. This ownership limitation may:
- discourage a change in control of Berkshire.
- deter tender offers for the common stock, which offers may
be advantageous to shareholders.
- limit the opportunity for shareholders to receive a premium
for their shares of common stock that might otherwise exist.
Under Berkshire's charter, the election of directors is staggered such that
approximately one-third of the directors are elected to three-year terms each
year. This provision may discourage a change in control of Berkshire. In
addition, the governing documents require a supermajority vote to amend those
portions of the governing documents which concern:
- the definition of "supermajority".
- the requirements for amending the governing documents.
- the requirements regarding excess share ownership.
- the actions which require a supermajority vote.
- the requirements regarding business combinations.
Additional provisions of the governing documents restrict the shareholders'
ability to nominate candidates for election as directors. In addition, Berkshire
is subject to Section 203 of the Delaware General Corporation Law, which
restricts business combinations between Berkshire and its shareholders.
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Any of the provisions discussed above may have the effect of delaying, deferring
or preventing a transaction or change in control of Berkshire that might involve
a premium price for the shares of common stock or that otherwise might be in the
best interest of our shareholders.
Berkshire has an authorized class of 60,000,000 shares of preferred stock.
Currently Berkshire has approximately 2.7 million shares of its 1997 Series-A
Preferred Stock outstanding. The Board of Directors may issue the remaining 57.3
million shares on such terms and with such rights, preferences and designations
as the Board may determine. Issuance of such preferred stock, depending on its
rights, preferences, and designations, may have the effect of delaying,
deterring, or preventing a change in control of Berkshire.
OUR GOVERNING DOCUMENTS CONTAIN NO RESTRICTIONS ON THE TYPES OF INVESTMENTS WE
MAY MAKE, WHICH MAY RESULT IN A PORTFOLIO SIGNIFICANTLY DIFFERENT FROM THE ONE
IN EXISTENCE AT THE TIME YOU ELECT TO CONVERT YOUR UNITS.
Berkshire's Board of Directors may change its investment policies without a vote
of the shareholders. Consequently, shareholders will have no direct control over
the kinds of investments Berkshire makes.
TAX
WE MAY FAIL TO QUALIFY AS A REIT, WHICH WOULD RESULT IN A REDUCTION OF FUNDS
AVAILABLE TO DISTRIBUTE TO SHAREHOLDERS.
To maintain our status as a REIT, we must continually meet specified criteria
concerning, among other things, our common stock ownership, the nature of our
assets, the sources of our income and the amount of distributions we make to
shareholders.
If we fail to qualify as a REIT, we would not be allowed a deduction for
distributions to shareholders in computing our taxable income and would be taxed
on our income at regular corporate tax rates. If our status as a REIT were
terminated, we might not be able to elect to be treated as a REIT for the
following five-year period. Therefore, if we lose our REIT status, the funds
available for distribution to you would be reduced substantially for each of the
years involved.
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BECAUSE THE TAX LAWS REQUIRE US TO DISTRIBUTE MOST OF OUR TAXABLE INCOME, WE MAY
HAVE TO BORROW ADDITIONAL FUNDS OR FORGO OTHER USES OF OUR CAPITAL.
To qualify as a REIT, we generally are required each year to distribute to our
shareholders at least 95% of our taxable income, excluding any net capital gain.
In addition, Berkshire is subject to a 4% nondeductible excise tax on the
amount, if any, by which distributions paid by it with respect to any calendar
year are less than the sum of:
- 85% of its ordinary income for that year,
- 95% of its capital gain net income for that year, and
- 100% of its undistributed taxable income from prior years.
We may have 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 our net taxable income could cause us to
distribute amounts that otherwise would be spent on future acquisitions, capital
expenditures or repayment of debt. In that event, we might have to borrow funds
or sell assets to fund the costs of such items.
IF BRI PARTNERSHIP FAILS TO QUALIFY AS A PARTNERSHIP, WE WILL HAVE LESS CASH
AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS.
We have not requested, and do not expect to request, a ruling from the Internal
Revenue Service that BRI Partnership and each of its noncorporate operating
subsidiaries will be classified as partnerships for federal income tax purposes.
If the agency were to successfully challenge the tax status of BRI Partnership
or any noncorporate operating subsidiary as a partnership for federal income tax
purposes, BRI Partnership or the noncorporate subsidiary would be taxed as a
corporation. If that happened, Berkshire would likely cease to qualify as a REIT
for a variety of reasons. Furthermore, the imposition of a corporate income tax
on BRI Partnership would reduce substantially the amount of cash available for
distribution from BRI Partnership to Berkshire and its shareholders.
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CHANGES IN TAX LAW MAY AFFECT THE VALUE OF OUR ASSETS AND YOUR INVESTMENT.
The current federal income tax treatment of an investment in Berkshire may be
modified, prospectively or retroactively, by legislative, judicial or
administrative action at any time. In addition to any direct effects which such
changes might have, such changes might also indirectly affect the market value
of all real estate investments and, consequently, our ability to realize our
business objectives.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking
statements. Any statements that are not statements of historical fact may be
forward-looking statements. Words such as "believes," "may," "anticipates,"
"plans," "expects," "intends," "estimates" and similar expressions are intended
to identify forward-looking statements. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. The risk factors noted in the section titled
"Risk Factors" and other factors noted throughout this prospectus, including
risks and uncertainties, could cause our actual results to differ materially
from those indicated by any forward-looking statement.
BERKSHIRE REALTY COMPANY, INC.
GENERAL
Berkshire Realty Company, Inc. is a REIT which acquires, renovates,
rehabilitates, develops and operates apartment communities. Founded in 1991
with 15 apartment communities containing approximately 4,200 units, as of
June 15, 1999, Berkshire owned 82 apartment communities consisting of 24,387
units located in Florida, Texas and the Mid-Atlantic and Southeastern United
States. Berkshire is a Delaware corporation, and its shares of common stock,
$.01 par value per share, are listed for trading on the New York Stock
Exchange. The shares of common stock are subject to restrictions on ownership
designed to preserve Berkshire's status as a REIT for federal income tax
purposes.
The operations of Berkshire are conducted primarily through BRI
Partnership and through their other subsidiaries. As of June 15, 1999,
Berkshire held approximately 79.2% of the units of partnership interest in
BRI Partnership in its capacity as a special limited partner and
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through its 100% ownership of Berkshire Apartments, Inc. The remaining
approximately 20.8% of the partnership interests in BRI Partnership was owned by
affiliated and unaffiliated third parties.
Berkshire's property management and development offices are
located in Atlanta, Georgia. In addition, Berkshire operates six regional
offices in Atlanta, Georgia; Columbia, Maryland; Greenville, South
Carolina; Dallas and Houston, Texas. At December 31, 1998, Berkshire
had approximately 1,000 employees.
Berkshire believes that its real properties are adequately covered by
insurance and that the properties are suitable for their intended use as
apartment communities.
RECENT ACQUISITIONS
Set forth below is information regarding our real estate acquisitions
since January 1, 1998.
<TABLE>
<CAPTION>
Apartment Debt Interest Partnership
Date Location Units Total Cost Cash Assumed Rate Units Issued
---- -------- ----- ---------- ---- ------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/21/98 Dallas, TX 208 $ 6.8 million $ 2.0 million $ 4.0 million 7.875% $ 720,000
2/04/98 Austin, 2,266 $ 81.2 million $ 58.9 million $ 14.3 million 8.510% $ 8.0 million
and San Antonio &
4/09/98 Houston, TX
2/12/98 Baltimore, MD 144 $ 7.3 million -- $ 5.8 million 7.055% $ 1.5 million
2/26/98 Tamarac, FL 232 $ 9.6 million $ 7.8 million -- -- $ 1.8 million
3/14/98 St. Petersburg, 809 $ 23.0 million $ 2.4 million $ 14.4 million 7.062% $ 6.2 million
FL
6/18/98 San Antonio, 319 $ 11.4 million $ 11.4 million -- -- --
TX
7/08/98 Atlanta, GA 1,076 $ 59.7 million $ 19.3 million $ 40.4 million 8.040- --
8.600%
1/07/99 Baltimore, MD 264 $ 25.5 million $ 25.5 million -- -- --
</TABLE>
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RECENT DISPOSITIONS
Set forth below is information regarding our real estate dispositions
since January 1, 1998.
<TABLE>
<CAPTION>
Type of
Date Location Property Sale Price Gain (Loss)
- --------- -------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
1/05/98 Jonesboro, GA retail center $ 9.5 million ($ 10,000)
1/30/98 Fort Myers, FL retail center $ 6.0 million $ 516,000
1/30/98 Spring Valley, NY retail center $ 29.6 million $ 50,000
5/13/98 Dallas, TX parcel of land $ 2.0 million $ 543,000
</TABLE>
There were no material relationships between the entities from whom the
assets were acquired or to whom the assets were sold and Berkshire or any of its
affiliates, any director or officer of Berkshire, or any associate of any such
director or officer.
USE OF PROCEEDS
Berkshire will not receive any proceeds from the sale of any shares
offered by this prospectus.
AVAILABLE INFORMATION
Berkshire is subject to the informational requirements of the
Securities Exchange Act of 1934, and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information filed by
Berkshire pursuant to the informational requirements of the Exchange Act may be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and at the
regional offices of the SEC located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of this material may also be obtained from the
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Information concerning the operation
of the Public Reference Room may be obtained by telephoning the SEC at
1-800-SEC-0330. In addition, Berkshire is required to file electronic versions
of these documents through the SEC's Electronic Data Gathering Analysis and
Retrieval system. The SEC
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maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. The common stock of Berkshire is listed
on the New York Stock Exchange, and similar information concerning Berkshire can
also be inspected and copied at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
Berkshire has filed with the SEC a registration statement on Form S-3
under the Securities Act, with respect to the securities offered pursuant to
this prospectus. This prospectus, which is part of the registration statement,
does not contain all of the information set forth in the registration statement.
For further information concerning Berkshire and the securities offered hereby,
reference is made to the registration statement, which may be examined without
charge at, or copies obtained upon payment of prescribed fees from, the SEC 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 SEC. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF VARIOUS DOCUMENTS BY REFERENCE
The following documents heretofore filed by Berkshire with the SEC
(File No. 1-10660) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31,
1998 as filed on March 19, 1999, as amended by Annual Report
on Form 10-K/A as filed on May 7, 1999;
(b) Current Report on Form 8-K as filed on October 30, 1998;
(c) Current Report on Form 8-K as filed on April 15, 1999;
(d) Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 as filed on May 17, 1999; and
(e) the description of the common stock contained in Berkshire's
registration statement on Form 8-A as filed on November 19,
1990, including any amendments or reports filed for the
purpose of updating such description.
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All documents filed by Berkshire pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this prospectus and prior
to the filing of a post-effective amendment which indicates that all redemption
shares offered hereby have been sold or which deregisters all redemption shares
then remaining unsold shall be deemed to be incorporated by reference into 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 SEC which also is or 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.
Berkshire 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 foregoing documents incorporated by reference herein, not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents. Requests for such copies should be
directed to: Berkshire Realty Company, Inc., One Beacon Street, Suite 1550,
Boston, Massachusetts 02108, Attention: Investor Communications Department,
telephone (888) 867-0100.
DESCRIPTION OF THE CAPITAL STOCK OF BERKSHIRE
The authorized capital stock of Berkshire 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 Berkshire, 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 pre-emptive, subscription,
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conversion or redemption rights and have no cumulative voting rights. Matters
submitted for shareholder approval generally require a majority vote of the
shares present and voting thereon; some matters, however, require a
supermajority vote. The outstanding shares of common stock are fully paid and
nonassessable.
PREFERRED STOCK
GENERAL. The Board of Directors is empowered by Berkshire's charter 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 1997-A PREFERRED STOCK. Berkshire has designated and issued
approximately 2.7 million shares of the Series 1997-A Preferred pursuant to
the authority granted by the charter. As of the date hereof, approximately
2.3 million shares of Series 1997-A Preferred are owned by affiliates of
Westbrook Partners, L.L.C. and the balance is owned by six clients of Morgan
Stanley, Dean Witter, Discover & Co. The outstanding shares of Series 1997-A
Preferred are fully paid and nonassessable. The Certificate of Designation
for the Series 1997-A Preferred sets forth the preferences, powers and rights
of the holders of shares of such stock including, but not limited to, the
following:
DIVIDENDS
Holders of shares of Series 1997-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:
- 2.25% of $25.00 per share and
- 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 1997-A Preferred is then entitled
to be converted.
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Such dividends accrue whether or not Berkshire has earnings or surplus and are
payable before any dividends or distributions are paid on, or Berkshire makes
any redemptions or purchases of, shares of common stock.
VOTING RIGHTS
Holders of shares of Series 1997-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 1997-A
Preferred is entitled to the number of votes as equal the number of shares of
common stock into which a share of Series 1997-A Preferred is then entitled to
be converted. The affirmative vote of a majority of the Series 1997-A Preferred
is required in order to:
- issue additional shares of Series 1997-A Preferred or increase
the number of authorized shares of Series 1997-A Preferred.
- authorize any reclassification of the Series 1997-A
Preferred.
- require the exchange of Series 1997-A Preferred.
- amend, alter or repeal any provisions of the by-laws of
Berkshire in a manner that would adversely affect the holders
of Series 1997-A Preferred.
- amend, alter or repeal any provisions of the charter of
Berkshire, the terms of the Series 1997-A Preferred or any
other pertinent organizational document in a manner that would
adversely affect the rights and preferences of the Series
1997-A Preferred.
In addition, for so long as there are outstanding at least 793,730
shares of Series 1997-A Preferred, the affirmative vote of a majority of the
Series 1997-A Preferred is required for the following actions:
- the transfer by Berkshire of the ownership of any interest in
the general partner of BRI 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 BRI
Partnership or the transfer by Berkshire in a single
transaction or series of transactions of assets owned
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directly or indirectly by Berkshire having a value in excess
of 10% of the fully-diluted market capitalization of Berkshire
within any 90-day period or 20% of such market capitalization
within any 360-day period.
- Berkshire's termination as a REIT.
- the alteration of Berkshire's business such that real estate
assets owned directly or indirectly by Berkshire are, on a
square foot basis, less than 90% invested in multifamily
residential properties.
Holders of Series 1997-A Preferred are entitled to elect one director
to the Board of Directors of Berkshire. In addition, if four consecutive Series
1997-A Preferred quarterly dividends are in arrears, then the number of
directors of Berkshire will be increased by the smallest number representing a
majority of the number of directors of Berkshire, and the holders of Series
1997-A Preferred will be entitled to elect such number of directors.
MERGERS AND SIMILAR TRANSACTIONS
Upon
- the transfer of substantially all the assets owned directly or
indirectly by Berkshire;
- the merger or consolidation of Berkshire or BRI Partnership
with a third party other than a merger of Berkshire and a
wholly-owned subsidiary of Berkshire in which the
fully-diluted market capitalization of Berkshire is unchanged;
- any recapitalization of Berkshire, BRI Partnership and
subsidiaries of Berkshire, considered as a whole, in a single
transaction or series of transactions, aggregating 50% or more
of the fully-diluted market capitalization of Berkshire; or
- a change of control of Berkshire or BRI Partnership,
holders of Series 1997-A Preferred will be entitled to receive at their option
either (1) out of the assets of Berkshire available for distribution to
shareholders and before any payment to holders of common stock, an
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amount per share equal to 115% of the sum of $25.00 and all accrued and unpaid
dividends or (2) common stock on conversion of their Series 1997-A Preferred.
LIQUIDATION
Upon liquidation, dissolution or winding-up of Berkshire, holders of
Series 1997-A Preferred will be entitled to receive at their option either:
- out of the assets of Berkshire available for distribution to
shareholders and before any payment to holders of common
stock, an amount per share as set forth below:
<TABLE>
<CAPTION>
Percent of $25.00, together with
Date of liquidation, dissolution or winding-up accrued and unpaid dividends
- ---------------------------------------------- ----------------------------
<S> <C>
Before September 25, 2002 115%
On or after September 25, 2002 but before 110%
September 25, 2003
On or after September 25, 2003 but before 105%
September 25, 2004
On or after September 25, 2004 100%
</TABLE>
or
- common stock on conversion of their Series 1997-A
Preferred.
Notwithstanding the foregoing, if liquidation, dissolution or winding-up of
Berkshire occurs as a result of the adoption and implementation of a plan of
liquidation pursuant to rights granted to shareholders in Berkshire's charter,
then holders of Series 1997-A Preferred who voted in favor of the adoption of
that plan will be entitled to receive at their option either:
- an amount per share equal to 100% of the sum of $25.00
and all accrued and unpaid dividends or
- common stock on conversion of their Series 1997-A
Preferred.
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CONVERSION
Each share of Series 1997-A Preferred is convertible at the option of
the holder beginning September 19, 1998 into 2.0756 shares of common stock,
based on a conversion price of $12.04 per share of common stock. The conversion
price is subject to adjustment in same events.
REDEMPTION
In the event of Berkshire's termination as a REIT, each holder of
Series 1997-A Preferred will have the right to require Berkshire to redeem any
or all of such holder's shares of Series 1997-A Preferred at a redemption price
per share equal to 115% of the sum of $25.00 and all accrued and unpaid
dividends.
PRIORITY
The terms of the Series 1997-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 Berkshire 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 Berkshire. Except as otherwise agreed to in the stock purchase agreement
among Berkshire, Westbrook Partners, L.L.C. and Westbrook Berkshire Holdings,
L.L.C., pursuant to which the shares of Series 1997-A Preferred were issued and
sold, holders of Series 1997-A Preferred have no preemptive rights.
CHARTER AND BY-LAW PROVISIONS
GENERAL. Shareholders' rights and related matters are governed by the
Delaware General Corporation Law and Berkshire's organizational documents. Some
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 Berkshire.
VOTING REQUIREMENTS. Holders of shares of common stock of Berkshire and
Series 1997-A Preferred, voting on an as converted basis with the holders of
shares of common stock, by a majority or supermajority vote, may take actions,
including approving amendments to Berkshire's charter. Any such change, if
approved by the holders of
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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:
- the definition of "supermajority".
- the requirements for amending the organizational
documents.
- the requirements regarding excess share ownership.
- the actions which require a supermajority vote.
- the requirements regarding business combinations.
- the staggering of the terms of the directors.
- the limitation of the liability of directors.
- the perpetual life of Berkshire.
A supermajority vote is defined to mean the vote or consent of shareholders
owning at least 66-2/3% of the outstanding shares of capital stock entitled at
the time to vote on the election of directors. Shareholders may not take action
by written consent without a meeting.
SPECIAL MEETINGS. Special meetings may be called, to address
specific matters, by the Chairman of the Board, the President of
Berkshire or a majority of the directors or independent directors.
Shareholders may not call a special meeting.
STAGGERED BOARD OF DIRECTORS. The charter classifies the directors,
concerning the term of their respective directorships, into three classes, one
of which is elected annually.
The provisions for a classified Board, together with related provisions
designed to strengthen the position of the Board by
- providing for limitations on the removal of directors and
the filling of vacancies on the Board;
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- 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;
- prescribing procedures for the advance notice of
shareholder proposals and nominations of directors by the
shareholders; and
- requiring a supermajority vote to effect changes in the
foregoing provisions,
have the overall effect of making it more difficult to acquire and exercise
control of Berkshire 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 some types of
transactions that might be proposed whether or not such transactions were
favored by a majority of shareholders.
BUSINESS COMBINATIONS
Berkshire's organizational documents affirmatively adopt Section 203 of
the Delaware General Corporation Law, which prohibits interested shareholders
from engaging in a business combination with Berkshire. Specifically, the
organizational documents prohibit any person owning 15% or more of the
outstanding voting shares of Berkshire, excluding persons holding an excess of
15% as a result of an action solely by Berkshire, from engaging in a merger or
consolidation or other specified transaction with Berkshire which would have the
effect of the interested shareholder gaining control of Berkshire for a period
of three years following the time that such shareholder became an interested
shareholder, unless:
- prior to such time, the Board approved either the business
combination or the transaction which resulted in the
shareholder becoming an interested shareholder;
- 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
Berkshire then outstanding, excluding shares held by directors
who are also officers of Berkshire and employees' stock plans
in which employees do not have the right to determine
confidentially whether shares held
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<PAGE>
by the plan will be tendered in a tender or exchange offer;
or
- at or subsequent to such time, the business combination is
approved by the Board and authorized by a supermajority vote,
excluding the shares owned by the interested shareholder.
The provisions of the organizational documents concerning business
combinations and the restriction on the transfer of shares which are described
above cannot be changed except by amendment to the organizational documents by a
supermajority vote.
SHAREHOLDER RIGHTS PLAN
Berkshire may adopt 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 (1) may have the effect of discouraging changes of
control of Berkshire, and (2) 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
TAX REQUIREMENTS. For Berkshire to qualify as a REIT under the Internal
Revenue Code of 1986, 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, Berkshire 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 Berkshire is entitled to receive an additional equity return.
EXCESS SHARES. The organizational documents:
- provide that if any person or group of affiliated persons
directly or indirectly acquires ownership, in the aggregate,
of more than 9.8% of the then outstanding shares of capital
stock, 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
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into an escrow account payable to the holder of the excess
shares at the time they cease to be excess shares, and
- empower the Board (1) to refuse to permit any transfer of
shares of capital stock that, in its sole discretion, would
jeopardize the status of Berkshire as a REIT and (2) to
repurchase any excess shares to maintain or bring the
ownership of shares into conformity with such 9.8% limit.
The 9.8% limitation on ownership of shares of common stock encompasses shares
held directly or indirectly as a result of options, warrants or other
convertible securities.
Berkshire 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 Berkshire as a REIT.
A shareholder who knowingly holds excess shares is required to indemnify
Berkshire for any losses Berkshire may suffer as a result of such holdings.
PURCHASE BY BERKSHIRE. Excess shares shall be deemed to be offered for
sale to Berkshire or its designees. The purchase price will be the average
closing sales price as reported by the New York Stock Exchange during the 30-day
period ending on the business day prior to the purchase date. The organizational
documents further provide that the purchase price may be paid in the form of a
promissory note of Berkshire. 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 Berkshire shall rescind the purchase of the excess
shares unless counsel to Berkshire is of the opinion that such rescission would
jeopardize Berkshire's tax status as a REIT. In that event, in lieu of
rescission, Berkshire shall make immediate payment for the shares.
EXCEPTIONS. Such provisions do not apply to the acquisition of shares
by an underwriter in a public offering by Berkshire or to any transaction
involving the issuance of shares by Berkshire when its qualification as a REIT
would not be jeopardized.
AMENDMENT. The provisions of the organizational documents
concerning excess shares cannot be changed except by amendment of
the organizational documents by a supermajority vote.
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DISSOLUTION
Berkshire may be dissolved at any time by supermajority vote and,
otherwise, pursuant to the procedure set forth in the Delaware General
Corporation Law. The charter requires Berkshire's Board of Directors to prepare
and submit to the shareholders on or before December 31, 1998 a proposal to
liquidate Berkshire's assets and distribute the net proceeds of such
liquidation. Berkshire has mailed definitive proxy materials relating to this
proposal to our shareholders with respect to a special meeting of shareholders
to be held on July 21, 1999. The liquidation proposal will become effective only
if approved by shareholders holding a majority of voting shares then
outstanding.
LIMITATION OF DIRECTORS' LIABILITY
Berkshire's charter 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 monetary
liabilities to Berkshire and its shareholders, except for:
- breaches of the duty of loyalty;
- acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
- liability under Section 174 of the Delaware General
Corporation Law; and
- any transaction from which the director derived an
improper personal benefit.
In general, Delaware law permits Berkshire 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 Berkshire. Subject to
the provisions of Sections 145 and 102(b)(7) of the Delaware General Corporation
Law, Berkshire 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 Berkshire.
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TRANSFER AGENT
The transfer agent and registrar for Berkshire's common stock is
American Stock Transfer & Trust Company.
REGISTRATION RIGHTS
The registration of the shares pursuant to the registration statement
of which this prospectus is a part will discharge Berkshire's obligations with
respect to such shares to the selling stockholders under the terms of a series
of substantially identical registration rights agreements. The following summary
does not purport to be complete and is qualified in its entirety by reference to
the registration rights agreements.
REGISTRATION OF SHARES. Under the registration rights agreements,
Berkshire is required to file a shelf registration statement covering the shares
and to use its best efforts to have such shelf registration declared effective
by the SEC on or prior to 90 days after the date of filing. Berkshire is
required to use its best efforts to keep the shelf registration effective until
all the shares have been sold pursuant to its terms. Berkshire will not be
required to maintain the effectiveness of the shelf registration with respect to
any shares which:
- have ceased to be outstanding;
- have been transferred and (1) Berkshire has delivered a
new certificate or other evidence of ownership not bearing
the restrictive legend set forth on the certificate issued in
connection with the initial issuance of the shares or other
legend of similar import and (2) in the reasonable opinion
of counsel to Berkshire, the subsequent disposition of such
shares would not require registration or qualification under
the Securities Act;
- have been sold pursuant to either the shelf registration or
rule 144 promulgated under the Securities Act; or
- are capable of being sold pursuant to rule 144.
EXPENSES AND INDEMNIFICATION. Pursuant to the terms of the registration
rights agreements, Berkshire has agreed to pay all expenses incurred in the
registration of the shares other than selling commissions and discounts,
brokerage fees and transfer taxes or any legal, accounting
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and other expenses incurred by the selling stockholders thereunder. Berkshire
also has agreed to indemnify the selling stockholders under the shelf
registration and its officers, directors and other affiliated persons and any
person who controls a selling stockholder against any and all losses, claims,
damages and expenses arising under the securities laws in connection with the
registration statement or this prospectus, except for liabilities arising from
information provided by the selling stockholder. In addition, the selling
stockholders have agreed to indemnify Berkshire and its directors, officers and
any person who controls Berkshire against all losses, claims, damages and
expenses arising under the securities laws insofar as such loss, claim, damage
or expense relates to written information or affidavit furnished to Berkshire by
the selling stockholders for use in the shelf registration or prospectus or an
amendment or supplement thereto. Berkshire is not required to indemnify the
selling stockholders for the failure by the selling stockholders to deliver or
cause to be delivered the prospectus or any amendment or supplement hereto to
any purchaser from the selling stockholders of shares covered by the shelf
registration after Berkshire has furnished the selling stockholders with a
sufficient number of copies of the prospectus.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
AND CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations and consequences relating to a holder of common stock. The
following discussion, which is not exhaustive of all possible tax
considerations, does not give a detailed description 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 shareholder in light of
his or her particular circumstances or shareholders subject to special treatment
under the federal income tax law. Shareholders subject to special treatment
include insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States. The information in this section is based on the
Internal Revenue Code, including the provisions of the Taxpayer Relief Act of
1997 and the Internal Revenue Service Restructuring and Reform Act of 1998,
current, temporary and proposed Treasury Regulations thereunder, the legislative
history of the Internal Revenue Code, court decisions and current administrative
interpretations and practices of the Internal Revenue Service, all as of the
date hereof. The current administrative interpretations and practices of the
Internal Revenue Service include its practices and policies as endorsed in
private letter
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rulings, which are not binding on the Internal Revenue Service except with
respect to the taxpayer that receives such a ruling. No assurance can be given
that future legislation, Treasury Regulations, court decisions and
administrative interpretations will not significantly change current law or
adversely affect existing interpretations of current law. Any such change could
apply retroactively to transactions preceding the date of the change. Berkshire
has not requested and does not plan to request any rulings from the Internal
Revenue Service concerning the tax treatment of Berkshire or BRI Partnership.
Thus, no assurance can be provided that the statements set forth herein, which
do not bind the Internal Revenue Service or the courts, will not be challenged
by the Internal Revenue Service or will be sustained by a court if so
challenged.
EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT HIS OR
HER TAX ADVISOR REGARDING THE TAX CONSEQUENCES TO HIM OR HER OF THE ACQUISITION,
OWNERSHIP AND SALE OF THE SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND
OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF BERKSHIRE
Berkshire has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code commencing with its taxable year ended December
31, 1991. Berkshire believes that it has been organized and operated in a manner
so as to qualify as a REIT, and Berkshire intends to continue to operate in such
a manner. So long as Berkshire qualifies for taxation as a REIT, it generally
will not be subject to federal corporate income taxes on net income that it
distributes currently to shareholders. However, Berkshire will be subject to
federal income tax in specific circumstances, including the following:
First, Berkshire will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under specific circumstances, Berkshire may be subject to the
"alternative minimum tax" on its items of tax preference.
Third, if Berkshire has
- net income from the sale or other disposition of
"foreclosure property" is held primarily for sale to
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customers in the ordinary course of business. Generally,
foreclosure property includes property acquired by
foreclosure or otherwise on default of a lease or a loan
secured by the property; or
- other nonqualifying income from foreclosure property, it will
be subject to tax at the highest corporate rate on such
income.
Fourth, if Berkshire has net income from prohibited transactions such
income will be subject to a 100% tax. Generally, prohibited transactions include
some sales or other dispositions of property, other than foreclosure property,
held primarily for sale to customers in the ordinary course of business.
Fifth, if Berkshire should fail to satisfy the 75% gross income test or
the 95% gross income test both set forth in Section 856 of the Internal Revenue
Code, and has nonetheless maintained its qualification as a REIT because other
statutory 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 Berkshire fails
the 75% or 95% gross income test.
Sixth, if Berkshire should fail to distribute during each calendar
year at least the sum of
- 85% of its REIT ordinary income for such year;
- 95% of its REIT capital gain net income for such year; and
- any undistributed taxable income from prior periods, it would
be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
Seventh, if Berkshire acquires or has acquired any asset from a C
corporation in a transaction in which the basis of such asset in the acquiror's
hands is determined by reference to the basis of the asset, or any other asset,
in the hands of the C corporation and the acquiror recognizes gain on the
disposition of such asset during the 10-year period beginning on the date on
which such asset was acquired by it, then, pursuant to anticipated Treasury
Regulations not yet promulgated, Berkshire will be subject to tax at the highest
regular corporate rate applicable to the extent of such asset's "built-in gain."
For this purpose, built-in gain is equal to the excess of (a) the fair market
value of such asset at the time of the acquisition by Berkshire over (b) the
adjusted
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basis in such asset, determined at the time of such acquisition. The results
described above with respect to the recognition of built-in gain assume that
Berkshire will make an election pursuant to Notice 88-19 with respect to any
such acquisition.
REQUIREMENTS FOR QUALIFICATION. The Internal Revenue Code
defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable
shares of stock, or by transferable certificates of beneficial
interest;
(3) that would be taxable as a domestic corporation, but for
Sections 856 through 859 of the Internal Revenue Code;
(4) that is neither a financial institution nor an insurance
company subject to provisions of the Internal Revenue
Code;
(5) the beneficial ownership of which is held by 100 or more
persons;
(6) that 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. For this
purpose, "individuals" includes specific types of entities, as
set forth in the Internal Revenue Code; and
(7) that meets other tests, described below, regarding the nature
of its income and assets.
The Internal Revenue Code provides that conditions (1) through (4), inclusive,
must be met during the entire taxable year and that condition (5) 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.
Berkshire's organizational documents contain restrictions regarding the
transfer of its capital stock that are intended to assist Berkshire in
continuing to satisfy the stock ownership requirements described in conditions
(5) and (6). Moreover, pursuant to the Taxpayer Relief Act of 1997, for
Berkshire's taxable years commencing on or after January 1, 1998, if Berkshire
complies with regulatory rules pursuant to
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which it is required to send annual letters to holders of its capital stock
requesting information regarding the actual ownership of the capital stock, and
Berkshire does not know, or exercising reasonable diligence would not have
known, whether it failed to meet condition (6) above, Berkshire will be treated
as having met the requirement.
INCOME TESTS. In order to maintain qualification as a REIT, Berkshire
must satisfy gross income requirements set forth in the Internal Revenue Code,
which are applied on an annual basis. First, at least 75% of Berkshire'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 all circumstances, interest, or from specific types of temporary
investments, all as set forth in the Internal Revenue Code. Second, at least 95%
of Berkshire'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% income test, and from dividends, interest and gain from
the sale or disposition of stock or securities, or from any combination of the
foregoing.
RENT
Rents received by Berkshire will qualify as rents from real property in
satisfying the gross income requirements described above only if each of the
following conditions are met:
- 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.
- The Internal Revenue Code provides that rents received from a
tenant will not qualify as rents from real property if such
rent is received from a "related party tenant." For this
purpose, a tenant is a related party tenant if Berkshire, or
an owner of 10% or more of Berkshire, directly or
constructively owns 10% or more of such tenant.
- 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
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portion of rent attributable to such personal property will
not qualify as rents from real property.
- For rents to qualify as rents from real property, Berkshire
generally must not operate or manage the property or
furnish or render services to tenants, other than through an
"independent contractor" that is adequately compensated
and from whom Berkshire derives no revenue. The
"independent contractor" requirement, however, does not
apply to the extent the services provided by Berkshire are
"usually or customarily rendered" in connection with the
rental of space for occupancy only and are not otherwise
considered "rendered to the occupant."
SERVICES
Pursuant to the Taxpayer Relief Act of 1997, for Berkshire's taxable
years commencing on or after January 1, 1998, rents received generally will
qualify as rents from real property even if Berkshire were to provide services
that are not permissible services so long as the amount received for such
services meets a DE MINIMIS standard. The amount received for "impermissible
services" with respect to a property, or, if services are not available to all
tenants, possibly with respect to the tenants to whom they are available, cannot
exceed 1% of all amounts received, directly or indirectly, by Berkshire with
respect to such property, or, if services are not available to all tenants,
possibly with respect to the tenants to whom they are available. In computing
any such amounts, the amount that Berkshire would be deemed to have received for
performing "impermissible services" will be the greater of the actual amount so
received or 150% of the direct cost to Berkshire of providing those services.
Berkshire provides services with respect to the properties through BRI
Partnership, which is not an "independent contractor." However, Berkshire
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, Berkshire intends to employ
independent contractors to provide such services.
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RELIEF PROVISIONS
If Berkshire fails to satisfy one or both of the 75% or 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 provisions of the Internal Revenue
Code. It is not possible, however, to state whether in all circumstances
Berkshire would be entitled to the benefit of these relief provisions. Even if
these relief provisions were to apply, however, a 100% tax would be imposed with
respect to the "excess net income" attributable to the failure to satisfy the
75% and 95% gross income tests.
ASSET TESTS. Berkshire, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets:
- at least 75% of the value of Berkshire's total assets must be
represented by real estate assets including (1) its allocable
share of real estate assets held by partnerships in which
Berkshire has an interest and (2) stock or debt instruments
purchased with the proceeds of a stock offering or
long-term, at least five years, debt offering of Berkshire
and held for not more than one year following the receipt
by Berkshire of such proceeds, as well as cash, cash items
and government securities;
- not more than 25% of Berkshire's total assets may be
represented by securities other than those in the 75% asset
class; and
- 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 Berkshire may not exceed 5% of
the value of Berkshire's total assets, and Berkshire 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 asset tests at the close of any quarter,
Berkshire 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. Berkshire intends to maintain adequate records of
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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. Berkshire, in order to
qualify as a REIT, is required to distribute dividends, other than capital
gain dividends, to its shareholders in an amount at least equal to
- the sum of (1) 95% of Berkshire's "REIT taxable income",
computed without regard to the dividends paid deduction and
Berkshire's net capital gain, and (2) 95% of the net income,
after tax, if any, from foreclosure property, minus
- the amount of non-cash income items as set forth in the
Internal Revenue Code.
In addition, if Berkshire disposes of any assets with built-in gain during the
10-year period beginning on the date Berkshire acquired that asset, Berkshire
will be required, pursuant to Treasury Regulations which have not yet been
promulgated, to distribute at least 95% of the amount, if any, equal to (1) the
built-in gain recognized on the disposition of such asset reduced by (2) any
taxes owed by Berkshire with respect to such built-in gain. Such distributions
must be paid in the taxable year to which they relate, or in the following
taxable year if declared before Berkshire timely files its tax return for such
year and if paid on or before the first regular dividend payment date after such
declaration.
FAILURE TO DISTRIBUTE
To the extent that Berkshire 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 thereon at regular ordinary and
capital gain corporate tax rates. Berkshire may elect to require the
shareholders to include Berkshire's undistributed net capital gains in their
income by designating, in a written notice to shareholders, those amounts as
undistributed capital gains in respect of its shareholders' shares. If Berkshire
makes such an election, the shareholders will:
- include in their income as capital gains their proportionate
share of such undistributed capital gains and
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- be deemed to have paid their proportionate share of the tax
paid by Berkshire on such undistributed capital gains and
thereby receive a credit or refund for such amount.
A shareholder will increase the basis in its common stock by the difference
between the amount of capital gain included in its income and the amount of the
tax that Berkshire is deemed to have paid on the shareholder's behalf. The
earnings and profits of Berkshire will be adjusted appropriately.
In addition, if Berkshire should fail to distribute, during each
calendar year, at least the sum of:
- 85% of its REIT ordinary income for such year;
- 95% of its REIT capital gain income for such year; and
- any undistributed taxable income from prior periods,
Berkshire would be subject to a 4% excise tax on the excess of such required
distribution over the sum of amounts actually distributed during the calendar
year by the REIT and the amount, if any, on which the REIT paid income tax for
such year.
COMPLYING WITH REQUIREMENT
Berkshire intends to make timely distributions sufficient to satisfy
its annual distribution requirements. It is expected that Berkshire's REIT
taxable income will be less than its cash flow due to the allowance of
depreciation and other non-cash charges in computing REIT taxable income.
Accordingly, Berkshire anticipates that it will generally have sufficient cash
or liquid assets to enable it to satisfy the distribution requirements described
above. It is possible, however, that Berkshire, from time to time, may not have
sufficient cash or other liquid assets to meet these distribution requirements
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 taxable income of Berkshire, or due to the need to
make nondeductible payments, such as principal payments on any
indebtedness it may have.
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If such circumstances occur, in order to meet the distribution requirements,
Berkshire may find it necessary to arrange for short-term, or possibly
long-term, borrowings or to pay dividends in the form of taxable stock
dividends.
Under circumstances set forth in the Internal Revenue Code, Berkshire
may be able to rectify a failure to meet the distribution requirement for a year
by paying "deficiency dividends" to shareholders in a later year, which
deficiency dividends may be included in Berkshire's deduction for dividends paid
for the earlier year. Thus, Berkshire may be able to avoid being taxed on
amounts distributed as deficiency dividends; however, Berkshire will be required
to pay interest based upon the amount of any deduction taken for deficiency
dividends.
FAILURE OF BERKSHIRE TO QUALIFY AS A REIT. For any taxable year that
Berkshire fails to qualify as a REIT, Berkshire would be taxed at the usual
corporate rates on all of its taxable income. Those taxes would reduce the
amount of cash available to Berkshire for distribution to its shareholders.
Distributions to shareholders in any year in which Berkshire fails to qualify as
a REIT will not be deductible and will not be required to be made. In addition,
if Berkshire fails to qualify as a REIT, all distributions to shareholders will
be taxed as ordinary income, to the extent of Berkshire's current and
accumulated earnings and profits. Subject to limitations imposed by the Internal
Revenue Code, corporate distributees may be eligible for the dividends received
deduction with respect to such distribution.
Unless relief provisions set forth in the Internal Revenue Code apply,
Berkshire's election to be treated as a REIT will terminate automatically if
Berkshire fails to meet the qualification requirements described above and
Berkshire will not be eligible to elect REIT status again until the fifth
taxable year that begins after the first year for which Berkshire's election was
terminated or revoked. If Berkshire loses its REIT status, but later qualifies
and elects to be taxed as a REIT again, Berkshire may face significant adverse
tax consequences.
TAXATION OF UNITED STATES SHAREHOLDERS
As used herein, the term "United States shareholder" means a holder of
shares of common stock who, for United States federal income tax purposes:
- is a citizen or resident of the United States;
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- is a corporation, partnership, or other entity created or
organized in or under the laws of the United States or any
political subdivision thereof;
- is an estate the income of which is subject to United States
federal income taxation regardless of its source; or
- is a trust the administration of which is subject to the
primary supervision of a United States court and which has one
or more United States persons who have the authority to
control all substantial decisions of the trust.
Notwithstanding the above, to the extent provided in regulations, trusts in
existence on August 20, 1996, and treated as United States persons prior to such
date that elect to continue to be treated as United States persons, shall also
be considered United States shareholders.
DISTRIBUTIONS BY BERKSHIRE. As long as Berkshire qualifies as a REIT,
distributions made to Berkshire's taxable United States shareholders and not
designated as capital gain dividends generally will be taxable to such
shareholders as ordinary income to the extent of Berkshire's current or
accumulated earnings and profits. For purposes of determining whether
distributions on shares of common stock are out of current or accumulated
earnings and profits, the earnings and profits of Berkshire will be allocated
first to shares of preferred stock and second to shares of common stock. There
can be no assurance that Berkshire will have sufficient earnings and profits to
cover distributions on any shares of preferred stock. Such distributions will
not be eligible for the dividends received deductions in the case of United
States shareholders that are corporations. Dividends declared during the last
quarter of a calendar year and actually paid during January of the immediately
following calendar year generally are treated as if received by the United
States shareholders on December 31 of the calendar year during which they were
declared.
CAPITAL GAIN DIVIDENDS
To the extent that distributions designated by Berkshire as capital
gain dividends do not exceed Berkshire's actual net capital gain for the taxable
year, such distributions generally will be taxed as gain from the sale or
exchange of a capital asset held for more than one year without regard to the
period for which the shareholder has held its stock. Corporate United States
shareholders however, may be required to treat
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up to 20% of capital gain dividends attributable to sales of depreciable real
property by Berkshire as ordinary income.
OPERATING AND CAPITAL LOSSES
United States shareholders may not include in their individual income
tax returns any net operating losses or capital losses of Berkshire. Instead,
such losses would be carried over by Berkshire for potential offset against
future income subject to limitations set forth in the Internal Revenue Code.
Distributions made by Berkshire and gain arising from the sale or exchange by a
holder of common stock will not be treated as passive activity income, and, as a
result, holders of common stock generally will not be able to apply any "passive
losses" against such income or gain. Future regulations may require that United
States shareholders take into account, for purposes of computing their
individual alternative minimum tax liability, tax preference items of Berkshire
identified in those regulations.
DISTRIBUTIONS IN EXCESS OF EARNINGS AND PROFITS
Distributions in excess of current or accumulated earnings and profits
will not be taxable to a United States shareholder to the extent that they do
not exceed the adjusted basis of the shareholder's shares of common stock, but
rather will reduce the adjusted basis of such shares of common stock. To the
extent that such distributions exceed the adjusted basis of a United States
shareholder's shares of common stock, they will be included in income as capital
gains, assuming the shares of common stock are a capital asset in the hands of
the United States shareholder.
ELECTION TO INCLUDE CAPITAL GAIN IN INCOME
Pursuant to the Taxpayer Relief Act of 1997, for Berkshire's taxable
years commencing on or after January 1, 1998, Berkshire may elect to require the
holders of common stock to include Berkshire's undistributed net long-term
capital gains in their income. If Berkshire makes such an election, the holders
of common stock will (1) include in their income as long-term capital gains
their proportionate share of such undistributed capital gains and (2) be deemed
to have paid their proportionate share of the tax paid by Berkshire on such
undistributed capital gains and thereby receive a credit or refund for such
amount. A holder of common stock will increase the basis in its common stock by
the difference between the amount of capital gain included in its income and the
amount of the tax it is deemed to have paid. The earnings and
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profits of Berkshire will be adjusted appropriately. With respect to such
long-term capital gain of a taxable domestic shareholder that is an individual
or an estate or trust, the Internal Revenue Service has authority to issue
regulations that could apply the special tax rate applicable to sales of
depreciable real property by an individual or an estate or trust to the portion
of the long-term capital gains of an individual or an estate or trust
attributable to deductions for depreciation taken with respect to depreciable
real property.
SALES OF SHARES. In general, a United States shareholder will realize
capital gain or loss on the disposition of shares of common stock equal to the
difference between (1) the amount of cash and the fair market value of any
property received on such disposition and (2) the shareholder's adjusted basis
of such shares of common stock. In the case of a taxable United States
shareholder who is an individual or an estate or trust, such gain or loss will
be long-term capital gain or loss, subject to a 20% tax rate, if such shares
have been held for more than one year. In the case of a taxable United States
shareholder that is as corporation, such gain or loss will be long-term capital
gain or loss if such shares have been held for more than one year. Loss upon a
sale or exchange of shares of common stock by a shareholder who has held such
shares of common stock for six months or less, after applying holding period
rules set forth in the Internal Revenue Code, will be treated as a long-term
capital loss to the extent of distributions from Berkshire required to be
treated by such shareholder as long-term capital gain.
TAXPAYER RELIEF ACT OF 1997 CHANGES TO CAPITAL GAIN TAXATION. The
Taxpayer Relief Act of 1997 and the Internal Revenue Service Restructuring and
Reform Act of 1998 changed significantly the taxation of capital gains by
taxpayers who are individuals, estates, or trusts. On November 10, 1997, the
Internal Revenue Service issued Notice 97-64, which provides generally that
Berkshire may classify portions of its designated capital-gain dividend as:
- a 20% rate gain distribution, which would be taxed as
long-term capital gain in the 20% group;
- an unrecaptured Section 1250 gain distribution, which
would be taxed as long-term capital gain in the 25% group;
or
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- a 28% rate gain distribution, which rate was repealed by
the Internal Revenue Service Restructuring and Reform Act
of 1998.
Notice 97-64 provides that a REIT must determine the maximum amounts that it may
designate as 20% and 25% rate capital gain dividends by performing the
computation required by the Internal Revenue Code as if the REIT were an
individual whose ordinary income were subject to a marginal tax rate of at least
28%. Notice 97-64 further provides that designations made by the REIT will only
be effective to the extent that they comply with Revenue Ruling 89-81, which
requires that distributions made to different classes of shares be composed
proportionately of dividends of a particular type.
BACKUP WITHHOLDING. Berkshire will report to its domestic shareholders
and the Internal Revenue Service 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 shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such holder
(a) is a corporation or comes within as other exempt category and, when
required, demonstrates this fact, or (b) provides a taxpayer identification
number and certifies as to no loss of exemption from backup withholding. Amounts
withheld as backup withholding will be creditable against the stockholder's
income tax liability. In addition, Berkshire may be required to withhold a
portion of capital gain distributions made to any shareholders who fail to
certify their non-foreign status to Berkshire.
TAXATION OF TAX-EXEMPT SHAREHOLDERS. As a general rule, amounts
distributed to a tax-exempt entity by a corporation do not constitute "unrelated
business taxable income", and thus distributions by Berkshire to a stockholder
that is a tax-exempt entity generally should not constitute unrelated business
taxable income, provided that the tax-exempt entity has not financed the
acquisition of its shares of common stock with "acquisition indebtedness" within
the meaning of the Internal Revenue Code and the shares of common stock are not
otherwise used in an unrelated trade or business of the tax-exempt entity.
However, distributions by a REIT to a tax-exempt employee's pension trust that
owns more than 10% of the REIT will be treated as unrelated business taxable
income in an amount equal to the percentage of gross income of the REIT that is
derived from an unrelated trade or business, determined as if the REIT were a
pension trust, divided by the gross income of the REIT for the year in which the
dividends are paid.
This rule only applies, however, if:
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- the percentage of gross income of the REIT that is derived
from an unrelated trade or business for the year in which the
dividends are paid is at least 5%;
- the REIT qualifies as a REIT only because the pension trust is
not treated as a single individual for purposes of the
"five-or-fewer rule" set forth in the REIT qualification
provisions of the Internal Revenue Code; and
- (1) one pension trust owns more than 25 percent of the value
of the REIT or, (2) a group of pension trusts individually
holding more than 10 percent of the value of the REIT
collectively own more than 50 percent of the value of the
REIT.
Berkshire currently does not expect that this rule will apply.
TAXATION OF NON-UNITED STATES SHAREHOLDERS
The rules governing United States federal income taxation of non-United
States shareholders are complex, and the following discussion is intended only
as a summary of such rules. Prospective non-United States shareholders should
consult with their tax advisors to determine the impact of United States
federal, state, and local income tax laws on an investment in Berkshire,
including any reporting requirements, as well as the tax treatment of such an
investment under their home country laws including any reporting requirements.
DISTRIBUTIONS BY BERKSHIRE. Distributions to a non-United States
shareholder that are not attributable to gain from sales or exchanges by
Berkshire of United States real property interests and not designated by
Berkshire as capital gain dividends will generally be subject to tax as ordinary
income to the extent of Berkshire's current or accumulated earnings and profits
as determined for United States federal income tax purposes. Such distributions
will generally be subject to a withholding tax equal to 30% of the gross amount
of the distribution, unless reduced by an applicable tax treaty or unless such
dividends are treated as effectively connected with a United States trade or
business. If the amount distributed exceeds a non-United States shareholder's
allocable share of such earnings and profits, the excess will be treated as a
tax-free return of capital to the extent of such non-United States shareholder's
adjusted basis in the common stock. To the extent that such distributions exceed
the adjusted basis of a non-United States shareholder's common stock, such
distributions will generally be subject
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to tax if such non-United States shareholder would otherwise be subject to tax
on any gain from the sale or disposition of its common stock, as described
below.
WITHHOLDING
For withholding tax purposes, Berkshire currently is required to treat
all distributions as if made out of its current or accumulated earnings and
profits and thus intends to withhold at the rate of 30%, or a reduced treaty
rate if applicable, on the amount of any distribution, other than distributions
designated as capital gain dividends, made to a non-United States shareholder.
Under regulations generally effective for distributions on or after January 1,
1999, Berkshire would not be required to withhold at the 30% rate on
distributions it reasonably estimates to be in excess of Berkshire's current and
accumulated earnings and profits. If it cannot be determined at the time a
distribution is made whether such distribution will be in excess of current and
accumulated earnings and profits, the distribution will be subject to
withholding at the rate applicable to ordinary dividends.
As a result of a legislative change made by the Small Business Job
Protection Act of 1996, under current law, it appears that Berkshire will be
required to withhold 10% of any distribution to a non-United States shareholder
in excess of Berkshire's current and accumulated earnings and profits.
Consequently, although Berkshire intends to withhold at a rate of 30% on the
entire amount of any distribution to a non-United States shareholder, or lower
applicable treaty rate, to the extent Berkshire does not do so, any portion of
such a distribution not subject to withholding at a rate of 30%, or lower
applicable treaty rate, will be subject to withholding at a rate of 10%.
However, the non-United States shareholder may seek a refund of such amounts
from the Internal Revenue Service if it subsequently determined that such
distribution was, in fact, in excess of current or accumulated earnings and
profits of Berkshire, and the amount withheld exceeded the non-United States
shareholder's United States tax liability, if any, with respect to the
distribution.
CAPITAL GAIN DIVIDENDS
Distributions to a non-United States shareholder that are designated by
Berkshire at the time of distribution as capital gain dividends, other than
those arising from the disposition of a United States real property interest,
generally will not be subject to United States federal income taxation, unless
(1) the investment in the common
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stock is effectively connected with the non-United States shareholder's United
States trade or business, in which case the non-United States shareholder will
be subject to the same treatment as United States shareholders with respect to
such gain, except that a shareholder that is a foreign corporation may also be
subject to the 30% branch profits tax, or (2) the non-United States shareholder
is a nonresident alien individual who is present in the United States for 183
days or more during the taxable year and other specific requirements are met, in
which case the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains.
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT
Under the Foreign Investment in Real Property Tax Act, distributions to
a non-United States shareholder that are attributable to gain from sales or
exchanges by Berkshire of United States real property interests, whether or not
designated as a capital gain dividend, will be taxed to a non-United States
shareholder at the normal capital gains rates applicable to domestic
shareholders, subject to a special alternative minimum tax in the case of
nonresident alien individuals. Also, distributions subject to Foreign Investment
in Real Property Tax Act may be subject to a 30% branch profits tax in the hands
of a non-United States shareholder that is a corporation and that is not
entitled to treaty relief or exemption. Promulgated pursuant to the Foreign
Investment in Real Property Tax Act, Berkshire is required by applicable Foreign
Investment in Real Property Tax Act Treasury Regulations to withhold 35% of any
such distribution that is or could be designated by Berkshire as a capital gain
dividend. That amount is creditable against the non-United States shareholder's
United States Foreign Investment in Real Property Tax Act liability.
Amounts designated by Berkshire pursuant to the Taxpayer Relief Act of
1997 as undistributed capital gains in respect of shares of common stock would
be treated with respect to non-United States shareholders in the manner outlined
in the preceding paragraph for actual distributions by Berkshire of capital gain
dividends. Under that approach, the non-United States shareholders would be able
to offset as a credit against their United States federal income tax liability
resulting therefrom their proportionate share of the tax paid by Berkshire on
such undistributed capital gains, and to receive from the Internal Revenue
Service a refund to the extent their proportionate share of such tax paid by
Berkshire were to exceed their actual United States federal income tax
liability.
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SALE OF COMMON STOCK. Gain recognized by a non-United States
shareholder upon a sale of its common stock generally will not be subject to tax
under Foreign Investment in Real Property Tax Act if Berkshire is a
"domestically controlled REIT," which is defined generally as a REIT in which at
all times during a specified testing period less than 50% in value of its shares
were held directly or indirectly by non-United States persons. Because only a
minority of the shareholders are expected to be non-United States shareholders,
Berkshire expects to qualify as a domestically controlled REIT. Accordingly, a
non-United States shareholder generally should not be subject to United States
tax on gains recognized upon disposition of the common stock, provided that such
gain is not effectively connected with the conduct of a United States trade or
business and, in the case of an individual shareholder, such holder is not
present in the United States for 183 days or more during the year of sale.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING. Backup withholding
tax, which generally is a withholding tax imposed at a rate of 31% on payments
to persons that fail to furnish required information under the United States
information reporting rules, and information reporting generally will not apply
to distributions paid to non-United States shareholders outside the United
States that are treated as:
- dividends subject to the 30%, or lower treaty rate,
withholding tax discussed above;
- capital gains dividends; or
- distributions attributable to gain from the sale or exchange
by Berkshire of United States real property interests.
As a general matter, backup withholding and information reporting will not apply
to a payment of the proceeds of a sale of common stock by or through a foreign
office of a foreign broker. Information reporting, but not backup withholding,
will apply, however, to a payment of the proceeds of a sale of common stock by a
foreign office of a broker that:
- is a United States person;
- derives 50% or more of its gross income for specific
periods from the conduct of a trade or business in the
United States; or
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- is a "controlled foreign corporation" for United States tax
purposes, unless the broker has documentary evidence in its
records that the holder is a non-United States shareholder and
other conditions are met, or the shareholder otherwise
establishes an exemption. A controlled foreign corporation is
generally a foreign corporation controlled by United States
shareholders.
Payment to or through a United States office of a broker of the proceeds of a
sale of common stock is subject to both backup withholding and information
reporting unless the shareholder certifies under penalty of perjury that the
shareholder is a non-United States shareholder, or otherwise establishes an
exemption. A non-United States shareholder may obtain a refund of any amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the Internal Revenue Service.
The United States Treasury Department has recently finalized
regulations regarding the withholding and information reporting rules discussed
above. In general, these regulations do not alter the substantive withholding
and information reporting requirements but unify certification procedures and
forms and clarify and modify reliance standards. These regulations generally are
effective for payments made after December 31, 1999, subject to transition
rules. A non-United States shareholder should consult its advisor regarding the
effect of the new Treasury Regulations.
RECENT LEGISLATION
As described above, the Taxpayer Relief Act of 1997 and the Internal
Revenue Service Restructuring and Reform Act of 1998 also contain several
changes to the taxation of capital gains of individuals, trusts and estates. In
addition, the Taxpayer Relief Act of 1997 contains several changes to the REIT
qualification requirements and to the taxation of REITs.
CAPITAL GAIN RATES. As a result of the Taxpayer Relief Act of 1997 and
the Internal Revenue Service Restructuring and Reform Act of 1998, individuals,
trusts and estates that hold investments for more than 12 months generally may
be taxed at a maximum long-term capital gain rate of 20% on gain from the sale
or exchange of those investments. However, a maximum rate of 25% applies for
"unrecaptured section 1250 gain" for individuals, trusts and estates and special
rules exist for "qualified 5-year gain" and other special types of gain. The
Taxpayer
-48-
<PAGE>
Relief Act of 1997 directed the Internal Revenue Service to prescribe
regulations on how the new capital gain rates will apply to sales of capital
assets by "pass-through entities," including REITs, and to sales of interests in
pass-through entities. Currently, no such regulations have been promulgated or
proposed. Shareholders are urged to consult with their tax advisors with respect
to the new rules contained in the Taxpayer Relief Act of 1997 and the Internal
Revenue Service Restructuring and Reform Act of 1998.
REIT PROVISIONS. In addition to the provisions discussed above, the
Taxpayer Relief Act of 1997 contained a number of technical provisions that
either (1) reduce the risk that Berkshire will inadvertently cease to qualify as
a REIT, or (2) provide additional flexibility with which Berkshire can meet the
REIT qualification requirements. These provisions are effective for Berkshire's
taxable years commencing on or after January 1, 1998.
RECENT TAX PROPOSAL
Current legislative proposals under consideration by Congress include a
proposal to amend the REIT asset tests with respect to non-qualified REIT
subsidiaries. The proposal would require a REIT to own no more than 10% of the
vote OR value of the outstanding stock of any non-qualified REIT subsidiary.
Existing non-qualified REIT subsidiaries would be grandfathered, and therefore
subject to the existing 5% asset test and 10% voting securities test both as set
forth above, except that such grandfathered status would terminate if the
non-qualified REIT subsidiary engaged in a new trade or business or acquired
substantial new assets on or after the effective date of the proposal. The
proposal, if enacted, could materially impede Berkshire's ability to engage in
other activities through non-qualified REIT subsidiaries without jeopardizing
Berkshire's REIT status.
TAX ASPECTS OF BERKSHIRE'S OWNERSHIP OF INTERESTS IN BRI PARTNERSHIP
GENERAL. A significant portion of Berkshire's investments will be held
indirectly through BRI Partnership. In general, partnerships are pass-through
entities that are not subject to federal income tax. Rather, partners are
allocated their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax on
those items, without regard to whether the partners receive a distribution from
the partnership. In the case of a REIT which is a partner in a partnership,
Treasury Regulations provide that for purposes of applying the REIT gross income
and gross asset tests, the
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<PAGE>
REIT will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to be entitled to the income of the partnership
attributable to that share, in each case based on its "capital interest" in the
partnership. In addition, the character of the gross income and assets of the
partnership shall retain the same character in the hands of the REIT for
purposes of Section 856 of the Internal Revenue Code which includes the gross
income and asset tests described above. Berkshire will have indirect control of
BRI Partnership and intends to operate it consistent with the requirements for
qualification as a REIT. Berkshire will include in its income its proportionate
share of the foregoing partnership items for purposes of the various REIT income
tests and will take into account its distributive share of partnership items in
the computation of its REIT taxable income. Moreover, for purposes of the REIT
asset tests, Berkshire will include its proportionate share of assets held
through BRI Partnership.
ENTITY CLASSIFICATION. If BRI Partnership were treated as an
association, the entity would be taxable as a corporation and therefore would be
subject to an entity level tax on its income. In such a situation, the character
of Berkshire's assets and items of gross income would change and would preclude
Berkshire from qualifying as a REIT. The same result could occur if any
subsidiary partnership failed to qualify for treatment as a partnership.
Prior to January 1, 1997, an organization formed as a partnership or a
limited liability company was treated as a partnership for federal income tax
purposes rather than as a corporation only if it had no more than two of the
four corporate characteristics that the Treasury Regulations in effect at that
time used to distinguish a partnership from a corporation for tax purposes.
These four characteristics were:
- continuity of life,
- centralization of management,
- limited liability and
- free transferability of interests.
Under final Treasury Regulations that became effective January 1, 1997,
the four factor test has been eliminated and an entity formed as a partnership
or as a limited liability company will be taxed as a partnership for federal
income tax purposes unless it specifically elects otherwise. The Treasury
Regulations provide that the Internal Revenue Service will not challenge the
classification of an existing partnership or limited liability company for tax
periods prior to January 1, 1997 so long as:
-50-
<PAGE>
- the entity had a reasonable basis for its claimed
classification;
- the entity and all its members recognized the federal income
tax consequences of any changes in the entity's classification
within the 60 months prior to January 1, 1997; and
- neither the entity nor any member of the entity had been
notified in writing on or before May 8, 1996, that the
classification of the entity was under examination by the
Internal Revenue Service.
Berkshire believes that BRI Partnership will be treated as a
partnership for federal income tax purposes, and not as an association taxable
as a corporation.
PARTNERSHIP ALLOCATIONS. Although a partnership agreement will
generally determine the allocation of income and loss among partners, those
allocations will be disregarded for tax purposes if they do not comply with the
provisions of Section 704(b) of the Internal Revenue Code and the related
Treasury Regulations. Generally, those provisions require that partnership
allocations reflect the economic arrangement of the partners. The allocations of
taxable income and loss provided for in the partnership agreement are intended
to comply with the requirements of Section 704(b) of the Internal Revenue Code
and the related Treasury Regulations. If an allocation is not recognized for
federal income tax purposes, the item subject to the allocation will be
reallocated in accordance with the partners' interests in the partnership, which
will be determined by taking into account all of the facts and circumstances
relating to the economic arrangement of the partners with respect to that item.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. Pursuant to Section
704(c) of the Internal Revenue Code, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership, must be allocated in
a manner so that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of the unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value of contributed property at the time of contribution and the adjusted tax
basis of the property at that time. This difference is referred to
-51-
<PAGE>
generally as the "book-tax difference." These allocations are solely for federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. Similar rules can apply in
the case of appreciated or depreciated properties held by a partnership at the
time of new contributions to the partnership.
In general, the partners of BRI Partnership who contributed assets will
be allocated differing depreciation deductions than if they had retained the
contributed property. In addition, on the disposition of any contributed asset
that has a Book-Tax Difference, the income or loss attributable to the book-tax
difference generally will be allocated to the contributing partner. These
allocations will tend to eliminate the book-tax difference over the life of BRI
Partnership. However, the special allocation rules of Section 704(c) do 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 assets in the hands of BRI Partnership may cause
Berkshire to be allocated lower depreciation and other deductions, and possibly
an amount of taxable income in the event of a sale of the contributed assets in
excess of the economic or book income allocated to it as a result of that sale.
Such an allocation might cause Berkshire to recognize taxable income in excess
of cash proceeds, which might affect adversely Berkshire's ability to comply
with the REIT distribution requirements.
Treasury Regulations under Section 704(c) of the Internal Revenue Code
provide partnerships with a choice of several methods of accounting for book-tax
differences, including the "traditional method" or the election of other methods
that would permit any distortions caused by a book-tax difference to be entirely
rectified on an annual basis or with respect to a specific taxable transaction
such as a sale. BRI Partnership and Berkshire will determine with respect to
each contribution to BRI Partnership which method to use.
STATE AND LOCAL TAXES
The tax treatment of Berkshire and the shareholders in states having
taxing jurisdiction over them may differ from the federal income tax treatment.
Accordingly, no discussion of state taxation of Berkshire and the shareholders
is provided nor is any representation made as to the tax status of Berkshire in
such states. All investors should consult their tax advisors as to the treatment
of Berkshire under the respective state tax laws applicable to them.
-52-
<PAGE>
Any financial statements and schedules hereafter incorporated by
reference in the registration statement of which this prospectus is a part that
have been audited and are the subject of a report by independent accountants
will be so incorporated by reference in reliance upon such reports and upon the
authority of such firms as experts in accounting and auditing to the extent
covered by consents filed with the SEC.
SELLING STOCKHOLDERS
The selling stockholders are holders of units in BRI Partnership that
were issued in exchange for the contribution to Berkshire of interests in real
property and, in several instances, property management agreements. The
following table provides the name of each selling stockholder and, as of the
date hereof, the number of shares of common stock to be owned upon exchange of
units in BRI Partnership by each selling stockholder.
The shares offered by this prospectus will be offered from time to time
by the selling stockholders named below, or by pledgees, donees, transferees or
other successors in interest to them. Berkshire will not receive any of the
proceeds from the shares sold by the selling shareholders.
<TABLE>
<CAPTION>
Number of Number of Percentage of
Shares of Maximum Shares of Shares of
Common Number of Common Common
Stock Shares of Stock Stock
Beneficially Common Beneficially Beneficially
Owned Prior Stock Offered Owned after Owned after
NAME OF SELLING STOCKHOLDER TO OFFERING(1) HEREBY OFFERING(1)(2) OFFERING(1)(2)
- --------------------------- -------------- ------ -------------- --------------
<S> <C> <C> <C> <C>
Paul E. Austin 91,305 91,305 0 0%
Betty Berman Revocable Trust 5,360 5,360 0 0%
Michele G. Berman 41,801 41,801 0 0%
Biskind Family Limited Partnership 443,885 443,885 0 0%
Robert Blumenthal 12,203 12,203 0 0%
Marilyn S. Cohen 10,717 10,717 0 0%
William Dawson 1,525 1,525 0 0%
Diversified Real Estate 27,293 27,293 0 0%
Holdings, LLC
Gessner, Inc. 1,160 1,160 0 0%
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
Number of Number of Percentage of
Shares of Maximum Shares of Shares of
Common Number of Common Common
Stock Shares of Stock Stock
Beneficially Common Beneficially Beneficially
Owned Prior Stock Offered Owned after Owned after
NAME OF SELLING STOCKHOLDER TO OFFERING(1) HEREBY OFFERING(1)(2) OFFERING(1)(2)
- --------------------------- -------------- ------ -------------- --------------
<S> <C> <C> <C> <C>
Earl F. Hale 6,102 6,102 0 0%
Hardaway Associates of Lynn Lake 271,648 271,648 0 0%
Lyman G. Hughes 6,102 6,102 0 0%
InterCapital Carlyle, Inc. 1,783 1,783 0 0%
InterCapital Management, Inc. 11,311 11,311 0 0%
InterCapital Pinto Ridge, Inc. 5,419 5,419 0 0%
InterCapital Portfolio, Inc. 5,742 5,742 0 0%
InterCapital Properties Company 159,091 159,091 0 0%
InterCapital Yorktown, Inc. 3,102 3,102 0 0%
Irving Berman Revocable Trust 5,360 5,360 0 0%
JCS II Limited Liability 32,752 32,752 0 0%
Mabaffey Associates of Lynn Lake 271,648 271,648 0 0%
Gene L. McCoy 6,102 6,102 0 0%
David Radunsky 3,051 3,051 0 0%
Richard Sayles 1,525 1,525 0 0%
Leslie C. Shapiro 41,801 41,801 0 0%
Marvin Sloman 12,203 12,203 0 0%
Peter Tierney 6,102 6,102 0 0%
Twelve Kings, Inc. 121,910 121,910 0 0%
W and B Investors, Inc. 52 52 0 0%
Fletcher Yarbough 6,102 6,102 0 0%
</TABLE>
- --------------------
(1) The number of shares of common stock beneficially owned is determined
under rules promulgated by the SEC and the information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares of common
-54-
<PAGE>
stock as to which the individual or entity has sole or shared voting
power or investment power and also any shares of common stock which the
individual or entity has the right to acquire within 60 days after June
15, 1999 through the exercise of any stock option or other right. The
inclusion herein of such shares of common stock, however, does not
constitute an admission that the selling stockholders are direct or
indirect beneficial owners of such shares of common stock. Unless
otherwise disclosed, the selling stockholders have sole voting power
and investment power with respect to all shares of common stock listed
as owned by the selling stockholders.
(2) It is unknown if, when or in what amounts a selling stockholder may
offer shares for sale and there can be no assurance that the selling
stockholders will sell any or all of the shares offered hereby. Because
the selling stockholders may offer all or some of the shares pursuant
to this offering, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the
shares that will be held by the selling stockholders after completion
of the offering, no estimate can be given as to the amount of the
shares that will be held by the selling stockholders after completion
of the offering.
PLAN OF DISTRIBUTION
The selling stockholders or their pledgees, donees, transferees or
other successors in interest may from time to time offer and sell all or a
portion of the shares in transactions on the New York Stock Exchange, in the
over-the-counter market, on any other national securities exchange on which the
common stock is listed or traded, in negotiated transactions or otherwise, at
prices then prevailing or related to the then-current market price or at
negotiated prices. The selling stockholders or their pledgees, donees,
transferees or other successors in interest may sell their shares directly or
through agents or broker-dealers acting as principal or agent, or in block
trades or pursuant to a distribution by one or more underwriters on a firm
commitment or best-efforts basis. To the extent required, the names of any agent
or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an
accompanying prospectus supplement. Each of the selling stockholders and their
pledgees, donees, transferees or other successors in interest reserves the right
to accept or reject, in whole or in part, any proposed purchase of the shares to
be made directly or through agents.
-55-
<PAGE>
The selling stockholders, any agents, dealers or underwriters that
participate with the selling stockholders in the resale of the shares of common
stock and the pledgees, donees, transferees or other successors in interest of
the selling stockholders may be deemed to be "underwriters" within the meaning
of the Securities Act, in which case any commissions received by such agents,
dealers or underwriters and any profit on the resale of the shares of common
stock purchased by them may be deemed underwriting commissions or discounts
under the Securities Act.
In order to comply with the securities laws of particular states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers.
There is no assurance that the selling stockholders will sell any or
all of the shares.
Pursuant to the registration rights agreements, Berkshire has agreed to
pay all expenses incurred in the registration of the shares other than selling
commissions and discounts, brokerage fees and transfer taxes or any legal,
accounting an other expenses incurred by the selling stockholders.
EXPERTS
The combined statements of revenue over various operating expenses of
the Intercapital and Cooper Portfolios for the year ended December 31, 1997
included in the Current Report on Form 8-K of Berkshire, dated October 30, 1998,
incorporated herein by reference, and the consolidated financial statements and
financial statement schedule of Berkshire and its subsidiaries, included in the
Annual Report on Form 10-K/A of Berkshire for the year ended December 31, 1998,
incorporated herein by reference, have been audited by PricewaterhouseCoopers
LLP, as indicated in their reports with respect thereto, and are included and
incorporated herein in reliance upon the reports of such firm, which reports are
given upon their authority as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated by
reference in the registration statement of which this prospectus is a part that
have been audited and are the subject of a report by independent accountants
will be so incorporated by reference in reliance upon such reports and upon the
authority of such firms as experts in accounting and auditing to the extent
covered by consents filed with the SEC.
-56-
<PAGE>
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for
Berkshire by Hale and Dorr LLP, a limited liability partnership including
professional corporations, 60 State Street, Boston, Massachusetts 02109.
-57-
<PAGE>
================================================================================
We have not authorized any dealer, salesperson or any other individual to give
any information, or to make any representations, other than those contained in
this prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the shares offered
hereby and only in the jurisdictions and under circumstances where it is lawful
to do so. The information contained in this prospectus is current only as of its
date.
-----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Risk Factors.................................................................4
Forward-looking Statements..................................................14
Berkshire Realty Company, Inc...............................................14
Use of Proceeds.............................................................16
Available Information.......................................................16
Incorporation of Various Documents by Reference.............................17
Description of the Capital Stock of Berkshire...............................18
Registration Rights.........................................................29
Material Federal Income Tax Considerations and Consequences.................30
Selling Stockholders........................................................53
Plan of Distribution........................................................55
Experts ...................................................................56
Legal Matters...............................................................57
</TABLE>
1,614,157 Shares
BERKSHIRE REALTY
COMPANY, INC.
Common Stock
-----------------------
PROSPECTUS
June __, 1999
-----------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
Registration fee to the SEC................................ $5,133.00
Printing expenses.......................................... 2,000.00
Accounting fees and expenses............................... 2,500.00
Legal fees and expenses.................................... 10,000.00
Miscellaneous expenses..................................... 1,367.00
----------
Total............................................. $21,000.00
</TABLE>
All fees and expenses are estimates except for the registration fee to
the SEC.
Item 15. Indemnification of Directors and Officers.
Berkshire's Charter provides for indemnification of
Berkshire's officers and directors to the fullest extent permitted by Sections
145 and 102(b)(7) of the Delaware General Corporation Law and relieves the
directors of monetary liabilities to Berkshire and its
shareholders, except for:
- breaches of the duty of loyalty;
- acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
- liability under Section 174 of the Delaware General
Corporation Law; and
- any transaction from which the director derived an
improper personal benefit.
In general, Delaware law permits Berkshire 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 Berkshire. Subject to
the provisions of Sections 145 and 102(b)(7) of the Delaware General Corporation
Law, Berkshire intends to indemnify its officers and directors against losses,
liabilities and expenses, including
II-1
<PAGE>
attorneys' fees incurred by them that are related to their being officers or
directors of Berkshire.
Berkshire has purchased director and officer liability
insurance for the purpose of providing a source of funds to help pay for any
indemnification expenses it may incur.
II-2
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit Numbers Description
- --------------- ---------------------------------------------------------------
<S> <C>
4.1(1) Restated Certificate of Incorporation, as amended.
4.2(2) By-Laws, as amended.
5.1 Opinion regarding legality.
8.1 Opinion regarding various tax matters.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Hale and Dorr LLP, included in Exhibit 5.1 hereto.
24.1 Power of Attorney, included on signature page hereto.
99.1(3) Form of Registration Rights Agreement, dated as of May 1, 1995,
by and among Berkshire Realty Company, Inc., Berkshire
Apartments, Inc. and several limited partners of BRI OP Limited
Partnership.
99.2(4) Form of Registration Rights Agreement, dated as of March 13,
1998, by and among Berkshire Realty Company, Inc., Berkshire
Apartments, Inc. and several limited partners of BRI OP Limited
Partnership.
</TABLE>
--------------
(1) Incorporated herein by reference to Exhibit 3.3 filed with the
registrant's registration statement on Form S-4 (File No. 33-
37592), Exhibit 3.11 filed with the registrant's post-effective
amendment no. 1 to the registration statement on Form S-4
(File No. 33-37592) and Exhibit 4.1 filed with the registrant's
amendment no. 1 to Current Report on Form 8-K/A, dated
October 14, 1997.
(2) Incorporated herein by reference to Exhibit 3(ii)
filed with the registrant's amendment no. 1 to
Current Report on Form 8- K/A, dated October 14,
1997.
(3) Incorporated herein by reference to Exhibit 99.1 filed with the
registrant's registration statement on Form S-3 (File No. 333-
64631).
(4) Incorporated herein by reference to Exhibit 99.1 filed with the
registrant's registration statement on Form S-3 (FIle No. 333-
67783).
Item 17. Undertakings.
(A) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
II-3
<PAGE>
(a) to include any prospectus required by Section
10(a)(3) of the Securities Act;
(b) to reflect in the prospectus any facts or events
arising after the effective date of the registration
Statement or most recent post-effective amendment
thereof which, individually, or in the aggregate,
represent a fundamental change in the information
set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered if the
total dollar value of securities offered would not
exceed that which was registered and any deviation
from the low or high of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20
percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration
Fee" table in the registration statement; and
(c) to include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
Provided, however, that paragraphs (A)(1)(a) and (A)(1)(b) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange
II-4
<PAGE>
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities, other than the
payment by the registrant for expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action,
suit or proceeding, is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirement of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this to registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Boston, Massachusetts, on June 16, 1999.
BERKSHIRE REALTY COMPANY, INC.
By: /S/ MARIANNE PRITCHARD
------------------------------------------------
Marianne Pritchard, Executive Vice
President and Chief Financial Officer of
Berkshire Realty Company, Inc.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint David F. Marshall and Marianne
Pritchard jointly, and each of them severally, his/her true and lawful agent and
attorney-in-fact, with full power of substitution and resubstitution, for
him/her and in his/her
II-5
<PAGE>
name, place and stead, in any and all capacities, to execute and sign the
registration statement filed herewith and any or all amendments or
post-effective amendments to this registrations statement, or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, and to file the same, with all exhibits
thereto and other documents in connection therewith with the SEC, granting unto
each of such attorneys-in-fact and agents full power and authority to do each
and every act and thing requisite and necessary in connection with such matters
as fully to all intents and purposes as he/she might or could do in person,
hereby ratifying and confirming all that each such agent or attorney-in-fact and
his/her substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ DOUGLAS KRUPP Chairman of the June 17, 1999
- -------------------------- Board and Director
Douglas Krupp of Berkshire Realty
Company, Inc.
President, Chief
/S/ DAVID F. MARSHALL Executive Officer June 16, 1999
- -------------------------- and Director of
David F. Marshall Berkshire Realty
Company, Inc.
(Principal Executive
Officer)
Executive Vice
/S/ MARIANNE PRITCHARD President and Chief June 16, 1999
- -------------------------- Financial Officer of
Marianne Pritchard Berkshire Realty
Company, Inc.
(Principal Financial
Officer)
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
/S/ KENNETH J. RICHARD Senior Vice June 17, 1999
- ---------------------- President and Chief
Kenneth J. Richard Accounting Officer
of Berkshire Realty
Company, Inc.
(Principal
Accounting Officer)
/S/ Terrance R. Ahern Director of Berkshire June 18, 1999
- ---------------------- Realty-Company,
Terrance R. Ahern Inc.
/S/ DAVID M. DEWILDE Director of Berkshire June 16, 1999
- ---------------------- Realty Company,
David M. deWilde Inc.
/S/ J. PAUL FINNEGAN Director of Berkshire June 16, 1999
- ---------------------- Realty Company,
J. Paul Finnegan Inc.
/S/ CHARLES N. GOLDBERG Director of Berkshire June 16, 1999
- ---------------------- Realty Company,
Charles N. Goldberg Inc.
Director of Berkshire June __, 1999
- ---------------------- Realty-Company,
Paul D. Kazilionis Inc.
/S/ E. ROBERT ROSKIND Director of Berkshire June 16, 1999
- ---------------------- Realty Company,
E. Robert Roskind Inc.
/S/ ARTHUR P. SOLOMON Director of Berkshire June 17, 1999
- -------------------------- Realty Company, Inc
Arthur P. Solomon
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this registration statement on Form
S-3.
<TABLE>
<CAPTION>
Exhibit Numbers Description
- --------------- ---------------------------------------------------------------
<S> <C>
4.1(1) Restated Certificate of Incorporation, as amended.
4.2(2) By-Laws, as amended.
5.1 Opinion regarding legality.
8.1 Opinion regarding various tax matters.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Hale and Dorr LLP, included in Exhibit 5.1 hereto.
24.1 Power of Attorney, included on signature page hereto.
99.1(3) Form of Registration Rights Agreement, dated as of May 1, 1995,
by and among Berkshire Realty Company, Inc., Berkshire
Apartments, Inc. and several limited partners of BRI OP Limited
Partnership.
99.2(4) Form of Registration Rights Agreement, dated as of March 13,
1998, by and among Berkshire Realty Company, Inc., Berkshire
Apartments, Inc. and several limited partners of BRI OP Limited
Partnership.
</TABLE>
--------------
(1) Incorporated herein by reference to Exhibit 3.3 filed with the
registrant's registration statement on Form S-4 (File No. 33-
37592), Exhibit 3.11 filed with the registrant's post-effective
amendment no. 1 to the registration statement on Form S-4
(File No. 33-37592) and Exhibit 4.1 filed with the registrant's
amendment no. 1 to Current Report on Form 8-K/A, dated
October 14, 1997.
(2) Incorporated herein by reference to Exhibit 3(ii)
filed with the registrant's amendment no. 1 to
Current Report on Form 8- K/A, dated October 14,
1997.
(3) Incorporated herein by reference to Exhibit 99.1 filed with the
registrant's registration statement on Form S-3 (File No. 333-
64631).
(4) Incorporated herein by reference to Exhibit 99.1 filed with the
registrant's registration statement on Form S-3 (FIle No. 333-
67783).
<PAGE>
EXHIBIT 5.1
[LETTERHEAD]
June 18, 1999
Berkshire Realty Company, Inc.
One Beacon Street
Boston, MA 02108
Gentlemen:
This opinion is furnished to you in connection with the Registration
Statement on Form S-3 (the "Registration Statement") filed under the Securities
Act of 1933, as amended (the "Securities Act"), for the purpose of registering
1,614,157 shares of common stock, par value $.01 per share (the "Common Stock"),
which may be sold from time to time by certain selling stockholders following
the issuance of the shares to the selling stockholders upon the exchange of
units of limited partnership interest ("Units") in BRI OP Limited Partnership
(the "Operating Partnership") if, and to the extent that, such selling
stockholders exercise their right to convert such Units into cash or shares of
Common Stock and the Operating Partnership directs the Company to acquire such
Units in exchange for Common Stock (the "Redemption Shares") pursuant to the
terms of the Amended and Restated Agreement of Limited Partnership, as amended
(the "Partnership Agreement"), of the Operating Partnership.
We have acted as counsel for the Company in connection with the
preparation of the Registration Statement and various corporate documents
related thereto. We have examined and relied upon the following documents and
instruments for the purpose of giving this opinion:
1. the Registration Statement and the Prospectus filed therewith and
all exhibits thereto;
2. a copy of the Company's Restated Certificate of Incorporation, as
amended to date;
3. a copy of the Company's By-laws, as amended to date;
4. a copy of the Partnership Agreement, as amended to date;
5. minutes of meetings and resolutions of the Board of Directors of
the Company; and
6. such other documents as we have deemed necessary or appropriate
for purposes of this opinion.
<PAGE>
Berkshire Realty Company, Inc.
June 18, 1999
Page 2
In examining all documents, we have assumed the genuineness of all
signatures thereon, the accuracy of all statements contained therein, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents furnished to us as certified or photographic
copies and the completeness of all documents furnished to us. We have also
assumed the legal capacity (as distinct from authority) and competency of any
individual who has signed any instrument referred to herein.
We express no opinion herein as to the laws of any state or
jurisdiction other than the state laws of The Commonwealth of Massachusetts, the
Delaware General Corporation Law statute and the federal laws of the United
States of America.
Based upon and subject to the foregoing, we are of the opinion that the
Redemption Shares, when issued in exchange for Units in accordance with the
terms of the Partnership Agreement, will be duly authorized and validly issued,
fully paid and non-assessable.
It is our understanding that this opinion is to be used only in
connection with the offer and sale of the Redemption Shares while the
Registration Statement is in effect.
The opinions set forth herein are expressed as of the date hereof, and
we disclaim any undertaking to advise you of any changes which may subsequently
be brought to our attention in the facts and the law upon which such opinions
are based.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement in accordance
with the requirements of Item 601(b)(5) of Regulation S-K promulgated under the
Securities Act and to the use of our name therein and in the related Prospectus
under the caption "Legal Matters." In giving such consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
/s/ Hale and Dorr LLP
HALE AND DORR LLP
<PAGE>
EXHIBIT 8.1
[LETTERHEAD]
June 18, 1999
Berkshire Realty Company, Inc.
One Beacon Street, Suite 1550
Boston, MA 02108
Re: REGISTRATION STATEMENT OF FORM S-3
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the
registration of 1,614,157 shares of common stock, $.01 par value per share (the
"Common Stock"), of Berkshire Realty Company, Inc., a Delaware corporation (the
"Company"), which may be sold from time to time by certain selling stockholders
following the issuance of the shares to the selling stockholders upon the
exchange of units of limited partnership interests ("Units") in BRI OP Limited
Partnership (the "Operating Partnership") if, and to the extent that, such
selling stockholders exercise their right to convert such Units into cash or
shares of Common Stock and the Operating Partnership directs the Company to
acquire such units in exchange for Common Stock. Except as otherwise provided,
capitalized terms not defined herein have the meanings set forth in the
Registration Statement on Form S-3 filed with the Securities and Exchange
Commission on or about the date hereof (the "Registration Statement") and the
accompanying Prospectus (the "Prospectus"). All section references, unless
otherwise indicated, are to the United States Internal Revenue Code of 1986, as
amended (the "Code").
In our capacity as counsel to the Company, and for purposes of
rendering this opinion, we have examined and relied upon the Registration
Statement, the Amended and Restated Agreement of Limited Partnership of BRI OP
Limited Partnership dated as of May 1, 1995, as amended through the date hereof,
the Restated Certificate of Incorporation of the Company, as amended through the
date hereof (the "Certificate of Incorporation"), the By-laws of the Company, as
amended through the date hereof, a certain letter delivered to us by the Company
containing representations relevant to this opinion (including exhibits, the
"Representation Letter"), certain Closing Agreements between the Company and the
Internal Revenue Service (the "IRS") on IRS Form 906 executed October 10, 1997
and March 23, 1999 relating to the consequences of certain actions by the
Company (or partnerships in which the
<PAGE>
Berkshire Realty Company, Inc.
June 18, 1999
Page 2
Company had a direct or indirect interest) on the Company's ability to qualify
as a real estate investment trust (a "REIT") under Section 856 of the Code, and
such other documents as we considered relevant to our analysis. In our
examination of documents, we have assumed the authenticity of original
documents, the accuracy of copies, the genuineness of signatures and the legal
capacity of signatories.
We have assumed that all representations and statements set forth in
the documents (including the Representation Letter) that we reviewed are true
and correct and that all of the obligations imposed by any such documents on the
parties thereto, including obligations imposed under the Certificate of
Incorporation, have been and will be performed or satisfied in accordance with
their terms. We have not attempted to verify independently such representations
and statements, but in the course of our representation, nothing has come to our
attention that would cause us to question the accuracy thereof. To the extent
the representations and statements in the Representation Letter involve matters
of law, we have reviewed such matters with the Company.
The conclusions expressed herein represent our judgment as to the
proper tax treatment of the relevant items under the income tax laws of the
United States based upon the Code, Treasury Regulations, case law, and rulings
and other pronouncements of the Internal Revenue Service (the "IRS") as in
effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed after the date hereof or that such
changes will not affect the conclusions expressed herein. We undertake no
responsibility to advise you of any developments after the date hereof in the
application or interpretation of the income tax laws of the United States.
Our opinion represents our best judgement of how a court would decide
if presented with the issues addressed herein and is not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
This opinion addresses only the specific United States federal income
tax issues specified below, and does not address any other federal, state,
local, or foreign income, estate, gift, transfer or other tax consequences that
may result from any transaction or circumstance covered by our opinion.
We have also assumed for purposes of this opinion (i) that the Company
is a validly organized and duly incorporated corporation under the laws of the
State of Delaware, (ii) that the Operating Partnership is a duly organized and
validly existing partnership under the applicable laws of the State of Delaware,
and (iii) that each partnership, limited liability company or joint venture in
which the Company has held an interest other than BRI OP Limited Partnership was
properly taxed as a partnership for federal income tax purposes for all relevant
periods.
<PAGE>
Berkshire Realty Company, Inc.
June 18, 1999
Page 3
On the basis of, and subject to, the forgoing, and in reliance upon the
representations and assumptions described above, we are of the following
opinion:
1. For its taxable years ended December 31, 1991 through December 31,
1998, the Company was organized in conformity with the requirements for
qualification and taxation as a REIT under Section 856 of the Code, and, based
upon the Company's method of operation as described in the Prospectus and the
Representation Letter, the Company qualified as a REIT for such taxable years.
2. The discussion in the Prospectus under the heading "Material Federal
Income Tax Considerations and Consequences," to the extent it describes matters
of law or legal conclusions, is correct in all material respects.
The Company's qualification and taxation as a REIT for its taxable year
that commenced on January 1, 1999 will depend upon the Company's ability to
meet, on a continuing basis through actual annual operating and other results,
the various requirements under the Code with regard to, among other things, the
sources of its gross income, the composition of its assets, the level of its
distributions to stockholders and the diversity of its stock ownership. As a
result, no assurance can be given that the actual results of the operations of
the Company or the Operating Partnership, the sources of their income, the
nature of their assets, the level of the Company's distributions to its
stockholders and the diversity of the Company's stock ownership for the entire
taxable year will satisfy the requirements under the Code for qualification and
taxation as a REIT for such taxable year (or portion thereof).
No opinion is expressed as to any federal income tax matters except as
specifically set forth herein. In addition, this opinion letter has been
prepared solely for your benefit in connection with the filing of the
Registration Statement and it may not be used or relied upon by any other person
or for any other purpose and may not be disclosed, quoted, or filed with a
governmental agency or otherwise referred to without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not hereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/S/ HALE AND DORR LLP
HALE AND DORR LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our reports dated (i) January 25, 1999, except for Note
W, for which the date is March 5, 1999, on our audits of the consolidated
financial statements and financial statement schedule of Berkshire Realty
Company, Inc. and Subsidiaries as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998, (ii) August 28, 1998 on
our audit of the statement of revenue over certain operating expenses of the
Intercapital Portfolio for the year ended December 31, 1997, and (iii) September
11, 1998 on our audit of the statement of revenue over certain operating
expenses of the Cooper Portfolio for the year ended December 31, 1997. We also
consent to the reference to our firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 18, 1999
