UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
BERKSHIRE REALTY COMPANY, INC.
------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
--------------------------------------
(Title of Class of Securities)
084710 10 2
-----------
(CUSIP Number)
James A. Dubin, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York, 10019
(212) 373-3000
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 22, 1999
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 250.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [X]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for the
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 2 of 15 Pages
-----------
1 Names of Reporting Persons
I.R.S. Identification Nos. Of Above Persons (entities only)
The Berkshire Companies Limited Partnership
04-299-9701
2 Check the Appropriate Box if a Member of a Group (a)[ ]
(See Instructions) (b)[X]
3 SEC Use Only
4 Source of Funds (See Instructions)
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Massachusetts
7 Sole Voting Power
NUMBER OF 3,209,091
SHARES
BENEFICIALLY OWNED 8 Shared Voting Power
BY EACH REPORTING
PERSON 0
WITH
9 Sole Dispositive Power
3,209,091
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,209,091
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
13 Percent of Class Represented by Amount in Row (11)
8.0%
14 Type of Reporting Person (See Instructions)
PN
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 3 of 15 Pages
-----------
1 Names of Reporting Persons
I.R.S. Identification Nos. Of Above Persons (entities only)
KGP-1, Incorporated
04-296-2324
2 Check the Appropriate Box if a Member of a Group (a)[ ]
(See Instructions) (b)[X]
3 SEC Use Only
4 Source of Funds (See Instructions)
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Massachusetts
7 Sole Voting Power
NUMBER OF 0
SHARES
BENEFICIALLY OWNED 8 Shared Voting Power
BY EACH REPORTING
PERSON 3,744,066
WITH
9 Sole Dispositive Power
0
10 Shared Dispositive Power
3,744,066
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,744,066
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
13 Percent of Class Represented by Amount in Row (11)
9.3%
14 Type of Reporting Person (See Instructions)
CO
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 4 of 15 Pages
-----------
1 Names of Reporting Persons
I.R.S. Identification Nos. Of Above Persons (entities only)
KGP-2, Incorporated
04-296-2323
2 Check the Appropriate Box if a Member of a Group (a)[ ]
(See Instructions) (b)[X]
3 SEC Use Only
4 Source of Funds (See Instructions)
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
Massachusetts
7 Sole Voting Power
NUMBER OF 0
SHARES
BENEFICIALLY OWNED 8 Shared Voting Power
BY EACH REPORTING
PERSON 3,744,066
WITH
9 Sole Dispositive Power
0
10 Shared Dispositive Power
3,744,066
11 Aggregate Amount Beneficially Owned by Each Reporting Person
3,744,066
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
13 Percent of Class Represented by Amount in Row (11)
9.3%
14 Type of Reporting Person (See Instructions)
CO
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 5 of 15 Pages
-----------
1 Names of Reporting Persons
I.R.S. Identification Nos. Of Above Persons (entities only)
Douglas Krupp
2 Check the Appropriate Box if a Member of a Group (a)[ ]
(See Instructions) (b)[X]
3 SEC Use Only
4 Source of Funds (See Instructions)
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
NUMBER OF 10,100
SHARES
BENEFICIALLY OWNED 8 Shared Voting Power
BY EACH REPORTING
PERSON 5,856,269
WITH
9 Sole Dispositive Power
10,100
10 Shared Dispositive Power
5,856,269
11 Aggregate Amount Beneficially Owned by Each Reporting Person
5,866,369
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [X]
13 Percent of Class Represented by Amount in Row (11)
14.0%
14 Type of Reporting Person (See Instructions)
IN
<PAGE>
SCHEDULE 13D
CUSIP No. 084710 10 2 Page 6 of 15 Pages
-----------
1 Names of Reporting Persons
I.R.S. Identification Nos. Of Above Persons (entities only)
George Krupp
2 Check the Appropriate Box if a Member of a Group (a)[ ]
(See Instructions) (b)[X]
3 SEC Use Only
4 Source of Funds (See Instructions)
OO
5 Check if Disclosure of Legal Proceedings is Required Pursuant
to Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
NUMBER OF 15,000
SHARES
BENEFICIALLY OWNED 8 Shared Voting Power
BY EACH REPORTING
PERSON 5,856,269
WITH
9 Sole Dispositive Power
15,000
10 Shared Dispositive Power
5,856,269
11 Aggregate Amount Beneficially Owned by Each Reporting Person
5,871,269
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [X]
13 Percent of Class Represented by Amount in Row (11)
14.0%
14 Type of Reporting Person (See Instructions)
IN
<PAGE>
CUSIP No. 084710 10 2 Page 7 of 15 Pages
-----------
The information set forth in the Exhibits attached hereto is expressly
incorporated herein by reference and the response to each item of this statement
is qualified in its entirety by the provisions of such Exhibits. All information
provided by the Reporting Parties (as defined in Item 2) with respect to
Whitehall (as defined in Item 2) and Blackstone (as defined in item 2) is
provided solely to the knowledge of the Reporting Parties as of February 22,
1999.
Item 1. Security and Issuer.
This statement on Schedule 13D relates to shares of common stock, par
value $.01 per share (the "Common Stock"), of Berkshire Realty Company, Inc., a
Delaware corporation (the "Company"). The principal executive offices of the
Company are located at One Beacon Street, Suite 1550, Boston, Massachusetts
02108.
Item 2. Identity and Background.
This statement is being filed jointly by The Berkshire Companies
Limited Partnership ("BCLP"), KGP-1, Incorporated ("KGP-1"), KGP-2, Incorporated
("KGP-2"), Douglas Krupp and George Krupp (collectively, the "Reporting
Parties"). The Reporting Parties previously reported the acquisition of the
Common Stock they beneficially own on Schedule 13G.
As described in Items 3 and 4 below, on February 22, 1999, BCLP,
together with Whitehall Street Real Estate Limited Partnership XI ("Whitehall")
and Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone"), formed Aptco,
LLC, a Delaware limited liability company ("Aptco"), for the purpose of
submitting a merger proposal to the Company pursuant to which, among other
things, Aptco would acquire the Company and holders of Common Stock (other than
certain holders described in Item 4 below) would receive cash in exchange for
their shares. As a result, the Reporting Parties, together with Whitehall and
Blackstone, may be deemed to constitute a "group" within the meaning of Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").1/
Pursuant to Rule 13d-1(k)(2) under the Exchange Act, the Reporting Parties are
filing this Schedule 13D on their own behalf, and not on behalf of any other
person.
Set forth below is certain information concerning each of the Reporting
Parties:
BCLP
BCLP is a Massachusetts limited partnership that, together with its
subsidiaries, is principally engaged in mortgage banking and investment
sponsorship, asset and other management services, venture capital investing,
commercial laundry and linen services, and furniture manufacturing and sales.
The sole general partners of BCLP
- ----------------
1/ Neither the present filing nor anything contained herein shall be construed
as an admission that (i) the Reporting Parties together with Whitehall and
Blackstone constitute a "person" or "group" for any purpose other than what
they may be deemed to constitute under Section 13(d) of the Exchange Act or
(ii) Whitehall or Blackstone are, for purposes of Section 13(d) or 13(g) of
the Exchange Act, the beneficial owners of any of the securities described in
Item 5 below.
<PAGE>
CUSIP No. 084710 10 2 Page 8 of 15 Pages
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are KGP-1 and KGP-2. The principal office and place of business of BCLP is One
Beacon Street, Suite 1500, Boston, Massachusetts 02108.
KGP-1, Incorporated and KGP-2, Incorporated
KGP-1 and KGP-2 are each Massachusetts corporations whose principal
business is serving as general partners of BCLP and certain of its affiliates.
Douglas Krupp and George Krupp each own 50% of the outstanding common stock of
KGP-1 and KGP-2. The principal office and place of business of KGP-1 and KGP-2
is One Beacon Street, Suite 1500, Boston, Massachusetts 02108. The sole
directors of KGP-1 and KGP-2 are Douglas Krupp and George Krupp. The sole
executive officers of KGP-1 and KGP-2 are Douglas Krupp (President) and David
Quade (Executive Vice President). Mr. Quade is a United States citizen whose
principal occupation is acting as Executive Vice President and Chief Financial
Officer of The Berkshire Group. His business address is The Berkshire Group, One
Beacon Street, Suite 1500, Boston, Massachusetts 02108.
Douglas Krupp
Douglas Krupp is a United States citizen whose principal occupation is
acting as the Chairman of BCLP. Douglas Krupp also serves as a director and
Chairman of the Board of the Company. His business address is The Berkshire
Group, One Beacon Street, Suite 1500, Boston, Massachusetts 02108.
George Krupp
George Krupp is a United States citizen whose principal occupation is
serving as an instructor of history at the New Jewish High School, Waltham,
Massachusetts. His business address is The Berkshire Group, One Beacon Street,
Suite 1500, Boston, Massachusetts 02108.
Whitehall and Blackstone have provided the Reporting Parties with the
following information in respect of Whitehall and Blackstone:
Whitehall Street Real Estate Limited Partnership XI
Whitehall is a Delaware limited partnership that was formed for the
purpose of investing in debt and equity interests in real estate assets and
businesses. The business address of Whitehall is 85 Broad Street, New York, NY
10004.
Blackstone Real Estate Acquisitions III L.L.C.
Blackstone is a Delaware limited liability company that, together with
its sole member, Blackstone Real Estate Advisors III, L.P., acts as an advisor
to Blackstone Real Estate Partners III, L.P., a real estate investment fund
which is an affiliate of Blackstone. The business address of Blackstone is 345
Park Avenue, New York, NY 10154.
None of the Reporting Parties nor David Quade (collectively, the
"Covered Parties") has, during the last five years, (a) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(b) been a party to any civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of
<PAGE>
CUSIP No. 084710 10 2 Page 9 of 15 Pages
-----------
which such person has been subject to a judgment, decree or final order
enjoining further violations of, or prohibiting or mandating activities subject
to, federal or state securities laws, or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The Proposed Transactions (as defined in Item 4 below) would be funded
through a combination of equity and debt financing. On February 22, 1999, BCLP,
Whitehall and Blackstone formed Aptco for the purpose of proposing the Proposed
Transactions to the Company. Pursuant to a letter, dated February 22, 1999,
among Douglas Krupp (on behalf of himself and the other Reporting Parties),
Whitehall and Blackstone (such letter, together with the "Summary of Terms"
attached thereto, the "Formation Letter") (attached hereto as Exhibit 1), (i)
Whitehall and Blackstone have agreed to make an equity contribution to Aptco in
the amount of $106 million each, as such amount may be adjusted pursuant to the
terms of the Formation Letter, and (ii) the Reporting Parties have agreed to
contribute to Aptco at least 5,416,000 shares of Common Stock and/or OP Units
(as defined in Item 4 below) beneficially owned by the Reporting Parties.
Pursuant to a letter, dated February 22, 1999, between Aptco and Goldman Sachs
Mortgage Company ("GSMC") (the "Commitment Letter") (attached hereto as Exhibit
2), GSMC has agreed to provide up to $675 million in the form of a bridge loan
to fund the remainder of the consideration required for the Proposed
Transactions. In connection with the Proposed Transactions, Aptco currently
intends to sell certain properties owned by the Company and to use the proceeds
of such sales to reduce the amount of indebtedness then outstanding under the
bridge loan.
The transactions contemplated by the Formation Letter and the
Commitment Letter are subject to a number of terms and conditions set forth
therein, including, among others, the execution of mutually acceptable
documentation and the satisfaction of the conditions set forth in the Offer
Letter (as defined in Item 4 below). The information set forth in response to
this Item 3 is qualified in its entirety by reference to the Formation Letter
and the Commitment Letter, which are expressly incorporated herein by reference.
Item 4. Purpose of Transaction.
The Reporting Parties originally acquired the shares of Common Stock
beneficially owned by each of them for investment purposes. However, as
described in a letter, dated February 22, 1999, from Aptco to the Company (the
"Offer Letter") (attached hereto as Exhibit 3), Aptco has made a proposal with
respect to a transaction in which (i) the Company would merge (the "Company
Merger") with and into Aptco and (ii) a subsidiary of Aptco ("Aptco Sub") would
merge (the "Subsidiary Merger") with and into BRI OP Limited Partnership, a
Delaware limited partnership which is the operating partnership of the Company
("BRI OP"). Pursuant to the proposed terms of the Company Merger, all
outstanding Common Stock not held by Aptco or Aptco Sub (other than dissenting
shares) would be converted into $11.05 per share in cash (the "Cash Price"), and
all outstanding shares of the Company|s Series 1997-A Convertible Preferred
Stock, par value $.01 per share (the "Preferred Stock"), (other than dissenting
shares) would be converted into an amount per share in cash equal to the "change
of control preference" specified in the Company's certificate of designation in
respect of the Preferred Stock. Pursuant to the proposed terms of the Subsidiary
Merger, the outstanding partnership units in BRI OP ("OP Units") not held by
Aptco or Aptco Sub would be converted, at the election of the holders thereof,
into either an amount per OP Unit in cash equal to the Cash Price or equity
securities of Aptco. The Company Merger and the Subsidiary Merger are
collectively referred to herein as the "Proposed Transactions." In connection
with the Proposed Transactions, the Common Stock would be delisted from the New
York Stock Exchange and would be deregistered from the Exchange Act.
<PAGE>
CUSIP No. 084710 10 2 Page 10 of 15 Pages
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The Proposed Transactions are subject to a number of conditions
including, among others, (i) execution of definitive merger agreements
containing customary "no-shop," "break up fee" and expense reimbursement
provisions, (ii) absence of any injunction prohibiting or restricting the
consummation of the Proposed Transactions, any litigation commenced or
threatened by a governmental entity and any litigation that could have a
material adverse effect with respect to the Company or BRI OP, or that could
significantly delay the consummation of the Proposed Transactions, (iii) receipt
by the Company of a satisfactory closing agreement with the Internal Revenue
Service, on terms and conditions satisfactory to Aptco, with respect to certain
tax matters, and Aptco's satisfaction with respect to certain other tax matters,
(iv) execution of an agreement delivered, on or prior to the execution of
definitive merger agreements, by the holders of a majority in interest of the
Preferred Stock consenting to the Proposed Transactions, (v) receipt by the
Board of Directors of the Company of an opinion from a nationally recognized
investment banking firm as to the fairness of the consideration to be paid under
the terms of the Proposed Transactions from a financial point of view to the
holders of Common Stock, Preferred Stock and OP Units, (vi) approval of the
Proposed Transactions and the definitive merger agreements by the respective
Boards of Directors of the Company and the general partner of BRI OP, (vii)
approval of the Proposed Transactions by the holders of the Common Stock,
Preferred Stock and OP Units, (viii) receipt of any regulatory and other third
party consents to the Proposed Transactions, including the financing thereof,
(ix) confirmation that investment banking fees, severance costs and
legal/accounting expenses of the Company relating to the Proposed Transactions
will not exceed $12 million, (x) confirmation of the number of fully-diluted
shares of the Company, (xi) receipt by Aptco of the financing proceeds on the
terms and conditions set forth in the Formation Letter and the Commitment Letter
and (xii) other customary conditions to closing.
Although Aptco's proposal contained in the Offer Letter expires by its
terms at 5:00 p.m. on March 1, 1999, the Reporting Parties expect to evaluate on
an ongoing basis the Company's financial condition, business, operations and
prospects, market price of the Common Stock, conditions in securities markets
generally, general economic and industry conditions and other factors.
Accordingly, the Reporting Parties reserve the right to change their plans and
intentions at any time, as they deem appropriate, and may or may not submit a
revised proposal or extend the expiration date of the proposal contained in the
Offer Letter. In particular, the Reporting Parties may at any time and from time
to time acquire additional shares of Common Stock or securities convertible or
exchangeable for Common Stock; dispose of shares of Common Stock; or exchange OP
Units for shares of Common Stock. Any such transactions may be effected at any
time and from time to time, subject to any applicable limitations of the
Securities Act of 1933, as amended, and the Exchange Act.
Except as disclosed in Item 3 and this Item 4, none of the Covered
Parties has any current plans or proposals which relate to or would result in:
(a) The acquisition by any person of additional securities of the
Company, or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company or
any of its subsidiaries;
(d) Any change in the present board of directors or management of the
Company, including any plan or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of the Company;
(f) Any other material change in the Company|s business or corporate
structure;
<PAGE>
CUSIP No. 084710 10 2 Page 11 of 15 Pages
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(g) Changes in the Company|s charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) Causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) A class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
Set forth in the table below is the number and percentage of shares of
Common Stock beneficially owned by each Covered Party as of February 22, 1999
(other than David Quade, who does not beneficially own any shares of Common
Stock). None of the Covered Parties beneficially owns shares of any other class
of capital stock of the Company.
<TABLE>
<CAPTION>
Number of Number of
Shares Shares
Beneficially Beneficially Aggregate
Owned with Owned with Number of Percentage
Sole Voting and Shared Voting Shares of Class
Dispositive and Dispositive Beneficially Beneficially
Name Power (1) Power Owned Owned (2)
- ------------------------------ --------------------- --------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Reporting Parties (3) 0 5,881,369 5,881,369 14.0%
BCLP (4) 3,209,091 0 3,209,091 8.0%
KGP-1 (5) 0 3,744,066 3,744,066 9.3%
KGP-2 (6) 0 3,744,066 3,744,066 9.3%
Douglas Krupp (7) 10,100 5,856,269 5,866,369 14.0%
George Krupp (8) 15,000 5,856,269 5,871,269 14.0%
</TABLE>
- ----------------
(1) Pursuant to Rule 13d-3 under the Exchange Act, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting power"
(which includes the power to vote or to direct the voting of such security)
or "investment power" (which includes the power to dispose or to direct the
disposition of such security). A person is also deemed to be a beneficial
owner of any security of which that person has a right to acquire beneficial
ownership (such as by exercise of options or
<PAGE>
CUSIP No. 084710 10 2 Page 12 of 15 Pages
-----------
pursuant to a conversion feature of a security) on or within 60 days after
the date hereof. In addition, more than one person may be deemed to be a
beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he or she may disclaim any
beneficial interest.
(2) The percentages of Common Stock indicated in this table are based on the
36,711,488 shares of Common Stock outstanding as of October 31, 1998, as
disclosed in the Company's most recent Form 10-Q filed with the Securities
and Exchange Commission. Any Common Stock not outstanding which is subject
to options or conversion privileges which the beneficial owner had the right
to exercise on or within 60 days after the date hereof is deemed outstanding
for purposes of computing the percentage of Common Stock owned by such
beneficial owner but is not deemed outstanding for the purpose of computing
the percentage of outstanding Common Stock owned by any other beneficial
owner.
(3) Includes (i) 10,100 shares of Common Stock owned of record by Douglas Krupp,
(ii) 15,000 shares of Common Stock owned of record by George Krupp, (iii)
512,203 shares of Common Stock owned of record by Berkshire Realty Advisors
LP as to which George Krupp has shared voting power and shared dispositive
power, (iv) 534,975 OP Units owned of record by GN Limited Partnership as to
which George Krupp has shared voting power and shared dispositive power, (v)
1,600,000 OP Units owned of record by Turtle Creek Associates Limited
Partnership as to which George Krupp has shared voting power and shared
dispositive power and (vi) 3,209,091 OP Units owned of record by BCLP as to
which George Krupp has shared voting power and shared dispositive power.
Pursuant to the Amended and Restated Agreement of Limited Partnership of BRI
OP, OP Units are convertible into shares of Common Stock on a one-for-one
basis or, at the election of the Company, into cash. The Reporting Parties
disclaim beneficial ownership of Common Stock issuable upon the conversion
of OP Units because the Company may elect to substitute cash in lieu of
issuing such Common Stock. Although the Reporting Parties may be deemed to
also beneficially own 42,110 shares of Common Stock owned of record by Judy
Krupp, Richard Krupp, Alex Krupp, Elizabeth Krupp, Daniel Krupp and Michael
Krupp, such shares are excluded from this table and, pursuant to Rule 13d-4
of the Exchange Act, the filing of this statement shall not be construed as
an admission that the Reporting Parties beneficially own such shares.
(4) Includes 3,209,091 OP Units owned of record by BCLP. BCLP disclaims
beneficial ownership of Common Stock issuable upon the conversion of OP
Units because the Company may elect to substitute cash in lieu of issuing
such Common Stock.
(5) Includes: (i) 3,209,091 OP Units owned of record by BCLP as to which KGP-1
has shared voting power and shared dispositive power and (ii) 534,975 OP
Units owned of record by GN Limited Partnership as to which KGP-1 has shared
voting power and shared dispositive power. KGP-1 disclaims beneficial
ownership of Common Stock issuable upon the conversion of OP Units because
the Company may elect to substitute cash in lieu of issuing such Common
Stock.
(6) Includes: (i) 3,209,091 OP Units owned of record by BCLP as to which KGP-2
has shared voting power and shared dispositive power and (ii) 534,975 OP
Units owned of record by GN Limited Partnership as to which KGP-2 has shared
voting power and shared dispositive power. KGP-2 disclaims beneficial
ownership of Common Stock issuable upon the conversion of OP Units because
the Company may elect to substitute cash in lieu of issuing such Common
Stock.
<PAGE>
CUSIP No. 084710 10 2 Page 13 of 15 Pages
-----------
(7) Includes: (i) 10,100 shares of Common Stock owned of record by Douglas
Krupp, (ii) 512,203 shares of Common Stock owned of record by Berkshire
Realty Advisors LP as to which Douglas Krupp has shared voting power and
shared dispositive power, (iii) 534,975 OP Units owned of record by GN
Limited Partnership as to which Douglas Krupp has shared voting power and
shared dispositive power, (iv) 1,600,000 OP Units owned of record by Turtle
Creek Associates Limited Partnership as to which Douglas Krupp has shared
voting power and shared dispositive power and (v) 3,209,091 OP Units owned
of record by BCLP as to which Douglas Krupp has shared voting power and
shared dispositive power. Douglas Krupp disclaims beneficial ownership of
Common Stock issuable upon the conversion of OP Units because the Company
may elect to substitute cash in lieu of issuing such Common Stock. Although
Douglas Krupp may also be deemed to beneficially own 15,950 shares of Common
Stock owned of record by Judy Krupp, Richard Krupp and Alex Krupp, such
shares are excluded from this table and, pursuant to Rule 13d-4 of the
Exchange Act, the filing of this statement shall not be construed as an
admission that Douglas Krupp beneficially owns such shares.
(8) Includes (i) 15,000 shares of Common Stock owned of record by George Krupp,
(ii) 512,203 shares of Common Stock owned of record by Berkshire Realty
Advisors LP as to which George Krupp has shared voting power and shared
dispositive power, (iii) 534,975 OP Units owned of record by GN Limited
Partnership as to which George Krupp has shared voting power and shared
dispositive power, (iv) 1,600,000 OP Units owned of record by Turtle Creek
Associates Limited Partnership as to which George Krupp has shared voting
power and shared dispositive power and (v) 3,209,091 OP Units owned of
record by BCLP as to which George Krupp has shared voting power and shared
dispositive power. George Krupp disclaims beneficial ownership of Common
Stock issuable upon the conversion of OP Units because the Company may elect
to substitute cash in lieu of issuing such Common Stock. Although George
Krupp may also be deemed to beneficially own 26,160 shares of Common Stock
owned of record by Elizabeth Krupp, Daniel Krupp and Michael Krupp, such
shares are excluded from this table and, pursuant to Rule 13d-4 of the
Exchange Act, the filing of this statement shall not be construed as an
admission that George Krupp beneficially owns such shares.
The Reporting Parties have been advised by Whitehall that, as of
February 22, 1999, The Goldman Sachs Group, L.P. ("GS Group") and Goldman, Sachs
& Co. ("GS&Co.") (of which GS Group is a general partner), the investment
manager of Whitehall, may be deemed to beneficially own 27,208 shares of Common
Stock held in client accounts with respect to which GS&Co. or employees of
GS&Co. have voting or investment discretion, or both ("Managed Accounts"), and
that GS&Co. purchased these shares of Common Stock in the ordinary course of its
business on behalf of the Managed Accounts. The Reporting Parties have been
advised by Whitehall that each of GS&Co. and GS Group disclaims beneficial
ownership of the Common Stock held in the Managed Accounts. Each of the
Reporting Parties and, to the knowledge of the Reporting Parties, Blackstone
disclaims beneficial ownership of the Common Stock held in the Managed Accounts.
Other than as set forth above, the Reporting Parties have been advised
by Whitehall and Blackstone that, as of February 22, 1999, neither Whitehall nor
Blackstone beneficially owns any shares of any class of capital stock of the
Company. Each of the Reporting Parties disclaims beneficial ownership of any
shares of any class of capital stock of the Company beneficially owned by each
of Whitehall and Blackstone. To the knowledge of the Reporting Parties, each of
Whitehall and Blackstone disclaims beneficial ownership of any shares of any
class of capital stock of the Company beneficially owned by any of the Covered
Parties.
<PAGE>
CUSIP No. 084710 10 2 Page 14 of 15 Pages
-----------
None of the Covered Parties has effected any transactions in the Common
Stock during the 60 day period ending on February 22, 1999. Except as set forth
above, no person other than the Reporting Parties has the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, the shares of Common Stock beneficially owned by the Reporting Parties as
described above.
Item 6. Contracts, Arrangements, Understandings or Relationships with respect
to Securities of the Issuer.
The Reporting Parties that hold OP Units are parties to the Amended and
Restated Agreement of Limited Partnership of BRI OP (the "Partnership
Agreement"). As stated in Item 5 above, the Partnership Agreement provides for
the right of holders of OP Units to convert their OP Units into shares of Common
Stock on a one-for-one basis or, at the election of the Company, to receive an
amount in cash in lieu of such Common Stock. In addition, the Reporting Parties,
as parties to the Partnership Agreement, are beneficiaries of a registration
rights agreement (the "Registration Rights Agreement"). Pursuant to the
Registration Rights Agreement, in the event the Company elects to issue Common
Stock to the Reporting Parties upon conversion of their OP Units, the Company is
required to use its best efforts to file a "shelf registration statement"
covering such Common Stock within 60 days after a written request by the
Reporting Parties.
On March 1, 1996, the Company acquired the advisory services business
owned by BCLP for 1.3 million OP Units, which were valued at $13 million as of
the date they were issued. In connection with that acquisition, the Company
agreed to issue up to a total of $7.2 million in value of additional OP Units to
BCLP if certain share price benchmarks are achieved during the six-year period
following such acquisition. As of the date hereof, 209,091 additional OP Units
have been issued (with an aggregate value of $2.4 million as of the dates they
were issued) as a result of the Common Stock achieving the $11.00 and $12.00
share price benchmarks. Additional OP Units would be issuable if share price
benchmarks of $13.00, $14.00, $15.00 or $16.00 are achieved within such period.
Except as disclosed in Items 4 and 5 above and in this Item 6, and
except for the Joint Filing Agreement, dated February 22, 1999, among the
Reporting Parties (attached hereto as Exhibit 4) and the Power of Attorney of
George Krupp dated February 22, 1999 (attached hereto as Exhibit 5), none of the
Covered Parties is a party to any contracts, arrangements, understandings or
relationships with respect to any securities of the Company, including but not
limited to the transfer or voting of any of the securities, finder|s fees, joint
ventures, loan or option agreements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
The information set forth in the Exhibit Index is incorporated herein
by reference.
<PAGE>
CUSIP No. 084710 10 2 Page 15 of 15 Pages
-----------
Signatures
After reasonable inquiry and to the best of the undersigned|s knowledge
and belief, each of the undersigned certifies that the information set forth in
this statement is true, complete and correct.
Dated: March 4, 1999
THE BERKSHIRE COMPANIES LIMITED PARTNERSHIP
By: KGP-1, INCORPORATED,
its General Partner
By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: President
KGP-1, INCORPORATED
By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: President
KGP-2, INCORPORATED
By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: President
/s/ Douglas Krupp
-----------------
Douglas Krupp
*
-----------------
George Krupp
* By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: Attorney-in-fact
<PAGE>
Exhibit Index
-------------
1. Formation Letter, dated February 22, 1999, among Douglas Krupp,
Whitehall and Blackstone.
2. Commitment Letter, dated February 22, 1999, between Aptco and GSMC.
3. Offer Letter, dated February 22, 1999, from Aptco to the Company.
4. Joint Filing Agreement, dated February 22, 1999, among the Reporting
Parties.
5. Power of Attorney of George Krupp, dated February 22, 1999, naming
Douglas Krupp as attorney-in-fact.
EXHIBIT 1
---------
February 22, 1999
Douglas S. Krupp
The Berkshire Group
One Beacon Street, Suite 1550
Boston, MA 02108
Dear Douglas:
Aptco, LLC, an entity to be formed by you or your affiliates ("The
Berkshire Group") and us or our affiliates, intends to make an acquisition
proposal to the Board of Directors of "Bruin" with respect to the possible
acquisition of Bruin and its subsidiaries, and that, in connection with such
proposal, Aptco will be advising the Bruin Board that the equity portion of the
purchase price for the acquisition of Bruin and its subsidiaries will be
provided by Whitehall Street Real Estate Limited Partnership XI ("Whitehall"),
Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone") and The Berkshire
Group, or their respective affiliates. We, severally and not jointly, hereby
advise you that, subject to the execution of mutually acceptable documentation
and satisfaction of the conditions referred to in any proposal letter to be
signed by us, we (directly or through our affiliates) are prepared to proceed as
your equity partners in connection with such acquisition on the basis set forth
in the attached "Summary of Terms."
By countersigning below, you hereby agree that, subject to the
execution of mutually acceptable documentation and satisfaction of the
conditions referred to in any proposal letter to be signed by you, you (through
your affiliates) are prepared to proceed as our equity partner in connection
with such acquisition on the basis set forth in the attached "Summary of Terms."
The agreements set forth herein will terminate automatically upon the
earlier of (i) the date that the Bruin Board definitively rejects Aptco's
proposal and (ii) March 31, 1999.
Notwithstanding anything that may be expressed or implied in this
letter, except as may be set forth in the definitive operating agreement of
Aptco, no recourse hereunder or under any documents or instruments delivered in
connection herewith shall be had against any current or future officer, agent or
employee of Whitehall, Blackstone or The Berkshire Group (any of the foregoing,
an "Investor"), against any current or future general or limited partner or
member of any Investor or against any affiliate or assignee of any of the
foregoing, whether by the enforcement
<PAGE>
of any assessment or by any legal or equitable proceeding, or by virtue of any
statute, regulation or other applicable law, it being expressly agreed and
acknowledged that no personal liability whatever shall attach to, be imposed on
or otherwise be incurred by any such current or future officer, agent or
employee or any such current or future general or limited partner, member,
affiliate or assignee of any of the foregoing, as such for any obligations of
any Investor under this letter or any documents or instruments delivered in
connection herewith or for any claim based on, in respect of or by reason of
such obligations or their creation.
This letter is solely for the benefit of the signatories hereto and no
other person shall obtain any rights hereunder or be entitled to rely or claim
reliance upon the terms and conditions hereof or in any documents delivered
pursuant hereto. This letter may not be assigned by any of the signatories
hereto and no Investor may transfer any of its rights hereunder without the
prior written consent of the other two Investors.
This letter constitutes a general non-binding agreement in principle of
the signatories hereto and is not intended to, and does not, create a legally
binding commitment, agreement or obligation on the part of any of the
signatories hereto. This letter is governed by and shall be construed in
accordance with the law of the State of New York applicable to contracts made
and performed in that State.
[Signatures on next page]
<PAGE>
This document may be executed in one or more counterparts, each of
which shall be considered an original, but all of which taken together shall
constitute one and the same document.
Very truly yours,
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI
By: /s/ Steven M. Feldman
-------------------------
BLACKSTONE REAL ESTATE
ACQUISITIONS III L.L.C.
By: /s/ Thomas J. Saylak
------------------------
Agreed as of the date
set forth above:
/s/ Douglas S. Krupp
- --------------------
Douglas S. Krupp, on behalf
of himself and his affiliates who will be members
of Aptco, LLC
<PAGE>
2/22/99
SUMMARY OF TERMS
----------------
The following sets forth an outline of discussions concerning a
possible joint venture involving Blackstone Real Estate Acquisitions III L.L.C.
or one of its affiliates ("Blackstone"), The Berkshire Group ("Berkshire Group")
and Whitehall Street Real Estate Limited Partnership XI ("Whitehall" and,
together with Blackstone and Berkshire Group, the "Investors").
GENERAL
Berkshire Group, Blackstone and Whitehall would form a new entity
(Aptco) to acquire all the equity securities (including common stock, preferred
stock and operating partnership units) of Berkshire Realty Company, Inc. and
subsidiaries ("Berkshire"). It is initially envisioned that Aptco would be
organized as an LLC. Aptco would focus on the ownership, acquisition,
management, renovation and existing development of multifamily properties,
primarily value-added/repositioning opportunities.
PRICING
The price to be offered by Aptco would be unanimously determined by
Berkshire Group, Blackstone and Whitehall.
STRUCTURE
Upon execution of a definitive agreement between Aptco and Berkshire,
the Investors would commit to contribute cash, Berkshire common stock and/or
operating partnership units to Aptco to fund the acquisition of Berkshire.
Berkshire Group would contribute to Aptco as common equity all of its
stock and operating partnership units (which shall be not less than 5,416,000
shares and units) valued at the bid price, and Blackstone and Whitehall would
each provide 50% of the balance of the required equity (initially to be at least
$106 million, increasing at the time the bridge financing is refinanced as
provided below, but not in excess of $125.5 million each) as preferred equity.
Cash equity required in excess of $251 million shall be contributed as provided
below. It is expected that some or all of the third party owners of limited
partnership interests in BRI OP Limited Partnership (the "OP") will exchange
their interests in the OP for equity interests in
--1--
<PAGE>
Aptco on the terms set forth in the draft merger agreements to be submitted by
Aptco with its bid to Berkshire.
In the event cash equity in excess of $251 million is required by
Aptco, such excess, not to exceed $30 million in the aggregate, would be funded
one third each by Blackstone, Whitehall and Berkshire Group. Any such amounts
funded by the Investors pursuant to the immediately preceding sentence shall be
treated as preferred equity with respect to distribution rights (i.e. shall be
pari passu with the other preferred equity held by Blackstone and Whitehall). As
an alternative to providing additional equity above $212 million, with the
consent of each of the Investors, Aptco may secure subordinated debt upon terms
acceptable to each of the Investors. Any Investor not funding its share of any
portion of the $30 million of additional required capital calls (described in
the first sentence of this paragraph) will be diluted on a 2 for 1 basis (based
on book equity).
GOVERNANCE
Aptco would be governed by a three member Board of Directors (Board).
Whitehall, Blackstone and Berkshire Group would each have one seat on the Board.
Douglas Krupp (DK) would be Chairman of the Board (as Berkshire Group's
designee) and Chief Executive Officer (CEO). Berkshire Group would lose its
Board seat in the event that (i) it transfers any portion of its initial
ownership interest in Aptco in violation of Aptco's Operating Agreement, (ii)
Aptco acquires the interest of Berkshire Group, (iii) DK is removed as CEO for
cause (as defined in Annex A), company cause (as defined in Annex A), or if he
resigns prior to the fifth anniversary of closing or (iv) upon DK's or Berkshire
Group's default of a loan that is secured by a pledge of its interest in Aptco,
but only if such loan becomes due, whether as a result of an acceleration or
maturity of such loan. Except for those decisions described in this Summary of
Terms that require unanimous approval, do not require any Board approval (i.e.,
can be decided by DK) or can be decided unilaterally by either Blackstone or
Whitehall, all decisions (such as all annual budget and business plan approvals,
acquisitions of any assets within the parameters set forth on Exhibit 1, etc.)
would be approved by a 2 out of 3 vote of the Board. If Aptco is organized as a
limited partnership instead of a limited liability company, Whitehall,
Blackstone and Berkshire Group would each have the right to have a subsidiary
act as a co-general partner of Aptco and the governance provisions would be
modified accordingly (E.G., decisions that are described below as requiring a
unanimous vote of the Board would instead require unanimous approval of the
general partners).
A unanimous vote of the Board would be required for (i) amending the
Operating Agreement of Aptco, (ii) admitting any new members, (iii) capital
calls in excess of the $281 million required above (except that 2 out of 3 Board
members may approve capital calls ("Mandatory Capital Calls") for debt service
shortfalls, health and safety items, taxes and similar
--2--
<PAGE>
necessary expenditures as long as Berkshire Group's share of such capital calls
does not exceed, in the aggregate, $10 million, and any Investor not funding its
share of any required capital calls will be diluted on a 2 for 1 basis (based on
book equity)), (iv) change in the nature of Aptco's business (E.G., to include
mortgage lending), (v) except as set forth in the third paragraph below, any
sale of Aptco or sale of all or substantially all of Aptco's assets, in each
case prior to 12/31/2002 (i.e., a 2 out of 3 vote will be required to approve a
sale of Aptco (and/or its subsidiaries or substantially all of their assets)
between 12/31/2002 and the fifth anniversary of closing, (vi) acquisition of any
assets outside of the parameters set forth on Exhibit 1 (i.e., a 2 out of 3 vote
will be required to approve acquisitions within such parameters), (vii) changes
to the bid from the terms submitted to the Board of Berkshire on this date, the
execution of the merger documentation, the acceptance of any closing deliveries
and/or the grant of consents or approvals or acceptance or waiver of conditions
to Aptco's obligation to close pursuant to the merger documentation and (viii) a
disposition of all or a portion of the property known as Berkshire Towers (or of
the subsidiary that owns such property) prior to the fifth anniversary of
closing, other than in a tax deferred transaction. Any equity funded by the
Investors pursuant to a Mandatory Capital Call shall be treated as preferred
equity with respect to distribution rights (i.e., shall be pari passu with the
other preferred equity of the Investors). None of the Investors shall enter into
any separate voting agreement with any other Investor in respect of its
interests. In addition, any related-party transaction involving an Investor
would require a majority vote of the non-interested Investor designee-directors.
In the event any Investor or its controlling persons files a bankruptcy or
similar proceeding with respect to Aptco without first obtaining the prior
written approval of two of the three Board members, the ownership interest and
capital account of such Investor shall be reduced to zero.
Notwithstanding the general requirement that all financings require the
approval of at least two of the three Board members, DK, acting alone, will have
the authority to accept a financing from the Federal Home Loan Mortgage
Corporation ("Freddie Mac") or another institutional lender provided that (I)
the amount of such financing is 75% of the appraised value of the Properties on
Exhibit 2 hereto and in any event at least $650 million (the financing amount to
be reduced by 75% of the appraised value of any assets on Exhibit 3 sold at or
prior to the closing), (II) such financing is not recourse in any respect to any
Investor without its approval, (III) the term of such financing is equal to 7
years with a fixed interest rate at 8.0% per annum or less, (IV) in order to
benefit from lower interest rate spreads, the entire financing will be subject
to yield maintenance penalties on prepayments until the fifth anniversary of the
closing of the financing (i.e., will be prepayable during the first five years
only with yield maintenance and thereafter without yield maintenance), (V) the
properties subject to such financing will not be cross-collateralized and the
loans will not be cross-defaulted and (VI) the other terms are no less favorable
to Aptco than the terms of the "Conditional Commitment" (dated November 16,
1998) previously provided to the Investors from Freddie Mac. Financing outside
of the foregoing parameters may be authorized by 2 out of the 3 Board members
provided (x) the Board will use
--3--
<PAGE>
commercially reasonable efforts to obtain financing on terms as close to
possible as the parameters set forth above, (y) any such alternative financing
shall be fixed rate or be subject to appropriate hedging arrangements and (z)
such financing shall not be recourse in any respect to any Investor without its
approval.
Provided that DK is still acting as chairman and CEO, DK will be
authorized without the approval of the Board (i) to carry out business plans
approved by the Board, provided that payroll expenses do not exceed 105% of the
annual amount of that item on the approved budgets, and all other expenses do
not in the aggregate exceed 105% of annual expenses (other than payroll
expenses) in the approved budgets, (ii) to sell the 10 Assets in Exhibit 3 for
prices that yield Aptco net proceeds (after all transactions costs, taxes and
debt prepayment fees and expenses) equal to at least 95% of the amounts set
forth in Exhibit 3 (provided that such net proceeds shall not be less than 97.5%
of all such amounts in the aggregate) in transactions with third parties
(unaffiliated with Berkshire Group) and in which Berkshire Group has no
continuing interest and (iii) to sell certain individual assets in any calendar
year not in excess of $100 million in gross proceeds provided that the price for
each sold assets yields Aptco net proceeds (after all transaction costs, taxes
and debt prepayment fees and expenses) equal to at least 103% of allocated
acquisition cost. If DK does not sell the 10 Assets as provided in clause (ii)
above within the time period contemplated by the initial business plan approved
by the Board, Whitehall and Blackstone, acting together, may cause Aptco to sell
such Assets during the immediately succeeding 6-month period for the prices
described in clause (ii) in transactions with third parties (unaffiliated with
either Whitehall or Blackstone) and in which neither Whitehall nor Blackstone
have any continuing interest. If DK does not sell $100 million of assets in any
calendar year as provided in clause (iii) above, during the six months following
such year Whitehall and Blackstone, acting together, may cause Aptco to sell
that amount of assets not sold in such year for the asset prices described in
clause (iii).
Each of the Investors will be authorized unilaterally to cause a sale
of Aptco to an unaffiliated third party in a bona fide transaction (in which no
Investor has a continuing interest) to the highest bidder after the fifth
anniversary; provided that DK may not exercise such right until three months
following such fifth anniversary; provided further that if, during such three
month period DK's Employment Agreement is terminated without cause and Whitehall
and Blackstone have not already exercised their right to cause a sale of Aptco
then DK may exercise such right. In addition, at any time after the second
anniversary, DK may cause a sale of Aptco subject to a right of first offer in
favor of each of Whitehall and Blackstone (which may be exercised by either or
both of Whitehall and Blackstone) and if such right of first offer is not
exercised, DK may cause such sale at a price equal to or higher than the price
offered to Whitehall and Blackstone as long as (i) the net proceeds from such
sale results in a 12% per annum annually compounded IRR to each of the Investors
if the sale is consummated after the third and before the fifth anniversaries of
closing or a 15% per annum annually compounded IRR
--4--
<PAGE>
if the sale is consummated between the second and third anniversaries of closing
(with Berkshire Group being permitted to use its own funds to allow such IRR
thresholds to be achieved), and (ii) such sale is consummated with a bona fide
third party (unaffiliated with Berkshire Group) within 180 days after the right
of first offer is declined. If Whitehall and Blackstone each exercise the right
of first offer, they shall each acquire 50% of the offered interests. Any sale
to either or both of Whitehall or Blackstone may be accomplished by purchasing
the ownership interests in Aptco not owned by them, rather than Aptco itself. In
addition, at any time after 12/31/2002, Whitehall and Blackstone, acting
together, may cause a sale of Aptco, subject to a right of first offer in favor
of Berkshire Group, as long as such sale is consummated with a bona fide third
party (unaffiliated with either Whitehall or Blackstone). The terms of such
right of first offer shall provide that such right will be deemed to have been
declined or lapsed (x) if it has not been accepted by Berkshire Group (subject
to financing) within 30 days of the offer, (y) if any financing contingency set
forth in the definitive sales contract shall not have expired, be waived or
satisfied within 150 days of the offer, or (z) if consummation of the sale has
not occurred within 180 days of the offer.
The budget and business plan for the 1999 calendar year will be
approved by each of the Investors prior to execution of the Aptco governing
documents.
MANAGEMENT
As described above, day-to-day management would be the responsibility
of the Aptco management team. The acquisition of Berkshire would include
Berkshire's multifamily management operations. Prior to the execution of a
definitive agreement with Berkshire, the staffing, senior management and
operating budget of Aptco would be discussed and agreed.
DISPOSITIONS
The management of Aptco would develop a sale/hold/capital expenditure
analysis for each asset, which would be reviewed by the Board annually.
Selection of sale agents would be at the Board's discretion. Prior to closing,
certain assets will be identified for sale during the first two years after
closing.
CONFIDENTIALITY
Subject to requirements of law, Blackstone, Whitehall and Berkshire
Group would each keep confidential all discussions and materials prepared and
exchanged in connection with the proposed transaction. It is anticipated that a
joint press release would be issued upon execution of a definitive agreement
with Berkshire, and possibly earlier if required by law.
--5--
<PAGE>
This summary is for discussion purposes only and constitutes only a
general non-binding expression of interest on the part of Blackstone, Whitehall
and Berkshire Group and is not intended to, and does not, create a legally
binding commitment, agreement or obligation on the part of Blackstone, Whitehall
or Berkshire Group, other than the section entitled "Break-Up Fee; Cost
Reimbursement" (set forth in Annex A).
EXPIRATION
The obligation of the parties hereto shall automatically expire on the
earlier of (i) March 31, 1999, if the Aptco bid is not accepted by such date by
the Board of Directors of Berkshire, (ii) the date which is 210 days after the
date Aptco's bid is accepted by Berkshire's Board and (iii) the date upon which
Berkshire's Board definitively rejects Aptco's bid.
SUPPLEMENTARY TERMS AND CONDITIONS
The supplementary terms and conditions set forth in Annex A hereto are
incorporated by reference herein.
--6--
EXHIBIT 2
---------
February 22, 1999
CONFIDENTIAL
Aptco, LLC
c/o Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Douglas S. Krupp, CEO
Re: Commitment Letter
Ladies and Gentlemen:
You have advised Goldman Sachs Mortgage Company ("GSMC") that affiliates of
Douglas S. Krupp ("Krupp"), Blackstone Real Estate Acquisitions III L.L.C.
("Other Equity Investor") and Whitehall Street Real Estate Limited Partnership
XI ("Whitehall" and, collectively with Krupp and Other Equity Investor and/or
their affiliates, the "Investors") have formed and intend to capitalize Aptco,
LLC, a Delaware limited liability company ("LLC"), which will propose a
transaction to the Board of Directors of a publicly held Delaware corporation
("Bruin"), pursuant to which (i) Bruin would merge into LLC with LLC as the
surviving entity and all the outstanding Bruin capital stock (and rights to
acquire Bruin capital stock) being converted in the merger into the right to
receive cash equal to a price per share (and total purchase price) not to exceed
the amount we have agreed on (the "Bruin Merger") and (ii) immediately prior to
such merger, a subsidiary of LLC would be merged into BRI OP Limited
Partnership, a Delaware limited partnership ("OP"), in a transaction pursuant to
which OP and OP's current general partner ("OP GP") would become wholly owned by
LLC (the "OP Merger" and together with the Bruin Merger, the "Transaction").
Currently, 79.16% of the partnership interests of OP are directly or indirectly
owned by Bruin. Exhibit I hereto depicts the current organizational structure of
Bruin. This letter is referred to herein as the Commitment Letter.
Financing of $675 million, but in no event in excess of 75.5% of the transaction
value (i.e., cash required to consummate the Transaction, assumed debt of at
least $233 million, equity contributed or deemed contributed by Krupp (which
shall have a value of not less than $57 million) and all fees and expenses of
LLC and its subsidiaries relating to the Transaction) is being sought by you in
connection with the Transaction (the "Facility"). A portion of the proceeds of
the Facility would be made available to LLC to finance a portion of the
consideration to be paid to Bruin stockholders and option/warrantholders in the
Bruin Merger and the cash option in the OP Merger. Additional information
regarding the Transaction is set forth in the Summary of Terms among The
Berkshire Group, Other Equity Investor and
<PAGE>
Whitehall and the draft agreements for the Bruin Merger and the OP Merger which
you have furnished to us (the "Summary of Terms").
Based on our understanding of the Transaction as set forth above and in other
documents referred to above, and the other information which you have provided
to us, GSMC commits to provide the Facility on the terms and subject to the
conditions set forth herein.
LENDER: GSMC, together with its permitted participants and co-
lenders.
TRANSFERABILITY: Prior to closing, Borrower and Lender will agree upon
the terms pursuant to which Lender may transfer its
interest in the loan (it being understood and agreed
that Lender may sell participation interests in the
loan, provided that GSMC retains the agent role).
BORROWER: OP and/or, at GSMC's election, certain other property-
owning OP subsidiaries.
GUARANTORS: LLC and those OP subsidiaries owning the 58 properties
identified on Schedule I hereto which are not borrowers.
In addition, Guarantors shall include all other
subsidiaries of OP for which no third party consent for
such guarantee is required or as to which all required
third party consents have been obtained (as to special
purpose entities, OP shall arrange for charter
amendments, as necessary to permit granting of
guarantees). Borrower and Guarantors to use all
commercially reasonable efforts to obtain such consents.
The Investors (or special purpose entities holding the
Investors' interest in LLC) shall be guarantors of the
Loan with recourse to be limited to a first priority
assignment or pledge of their interests in LLC (See
"Security" below).
AMOUNT: $675,000,000 in the aggregate, but in no event in excess
of 75.5% of the transaction value (i.e., cash required
to consummate the Transaction assumed debt of at least
$233,000,000, equity contributed or deemed contributed
by Krupp and all fees and expenses of LLC and its
subsidiaries relating thereto). The amount borrowed
under the Facility is referred to as the Loan. Borrower
may borrow less than the entire Loan at closing. In such
event, the collateral to secure the Loan will be reduced
in accordance with loan allocation amounts among the
properties (such allocated loan amounts shall be agreed
2
<PAGE>
upon by the Lender and Borrower before the merger agreement is signed).
TERM: Twelve (12) months from the closing of the Transaction.
USE OF PROCEEDS: Proceeds will be used to finance a portion of the
aggregate consideration to be paid by LLC in the Bruin
Merger, as needed to fund the cash option in the OP
Merger, to refinance specified existing indebtedness of
OP and its subsidiaries, to repay intercompany
indebtedness owed to Bruin to enable Bruin to finance
the redemption of its outstanding Series A Preferred
Stock, and to fund certain fees and expenses associated
with the Transaction.
INTEREST:
Rate: Absent a default, the Loan will bear interest at the
rate of 3.75% above the reserve adjusted London
Interbank Offered Rate ("LIBOR Rate") for one month
interest periods; provided, however, that
notwithstanding the foregoing, the minimum interest rate
shall at all times be 8.65%.
Payment Dates: Interest will be payable monthly.
Other Terms: All interest will be calculated based on a 360-day year
and actual days elapsed. The financing documentation
will contain (a) customary LIBOR breakage provisions and
LIBOR borrowing mechanics, (b) LIBOR Rate definitions
and (c) customary provisions for determination of
interest in the event that LIBOR is not available for
any period.
Default Rate: From and after the occurrence of a default, the interest
rates applicable to the Loan will be increased by 2% per
annum over the interest rate otherwise applicable and
such interest and fees will be payable on demand.
COMMITMENT FEE: 1.0% of the maximum amount of the Facility, payable at
closing of the Transaction, whether or not the Facility
is drawn upon. In the event the Transaction does not
close, the commitment fee shall be reduced to 75% of the
fee provided for in the preceding sentence, but will be
payable only out of the break-up fee or reimbursement of
such commitment fee expense actually received from
Bruin. Borrower shall use good faith efforts to collect
the break-up
3
<PAGE>
fee and receive reimbursements for the commitment fee if
they are owing to the LLC under the terms of the merger
documentation. In the event the LLC receives a 100%
reimbursement from Bruin of such commitment fee as an
expense, the LLC will pay all of such reimbursement over
to GSMC.
STRUCTURING FEE: 0.25% of the maximum amount of the Facility, payable at
the same time as the commitment fee. In the event the
Transaction does not close, the structuring fee shall be
reduced to 75% of the fee provided for in the preceding
sentence, but will be payable only out of the break-up
fee or reimbursement of such structuring fee expense
actually received from Bruin. Borrower shall use good
faith efforts to collect the break-up fee and receive
reimbursements for the structuring fee if they are owing
to the LLC under the terms of the merger documentation.
In the event the LLC receives a 100% reimbursement from
Bruin of such structuring fee as an expense, the LLC
will pay all of such reimbursement over to GSMC.
TAKEDOWN FEE: 0.50% of the amount borrowed, payable upon borrowing.
REPAYMENT FEE: A repayment fee of 0.50% of the then outstanding amount
of the Facility, if any, shall be due on June 15, 2000.
PREPAYMENTS: Borrowers may voluntarily prepay all or any portion of
the Loan in minimum amounts of $1 million at any time,
upon at least 5 days' prior written notice. All
voluntary prepayments will be accompanied by LIBOR
breakage costs, if any.
SECURITY: First mortgage liens (recorded) and title insurance on
58 properties identified on Schedule I hereto. Pledge by
LLC of entire equity of OP GP. In addition, the
Investors (or special purpose entities holding the
Investors' interest in LLC) will guarantee the Loan with
recourse to be limited to a first priority assignment or
pledge of their interest in LLC as security for such
guaranty. At GSMC's election, a first priority perfected
lien on and security interest in all assets of LLC, OP
and the subsidiaries of OP not covered by the preceding
sentences to the extent available without the
requirement to obtain any third party consent or as to
which all required third party consents are obtained.
Borrower
4
<PAGE>
and Guarantors to use all commercially reasonable
efforts to obtain such consents. Lender will have
dominion over all cash if requested by GSMC, which
arrangement shall permit the release of cash to Borrower
and Guarantors absent a default; provided, however, that
to the extent that the holders of debt in respect of the
24 properties identified on Schedule II hereto shall
have the right to and shall prohibit such an
arrangement, Lender shall not be entitled to same. The
Loan will be cross-collateralized and cross- defaulted
in a manner satisfactory to Lender. The Parties will use
reasonable good faith efforts to minimize or avoid
mortgage recording taxes and minimize title insurance
premiums on the 58 properties on Schedule I; it being
understood that there will be no mortgages or title
insurance obtained with respect to the 24 properties on
Schedule II.
PARTIAL RELEASES FROM Permitted in connection with third party sales and
MORTGAGE OR NEGATIVE certain partial refinancings provided that Lender
COVENANT: receives at least minimum release prices based on
allocated loan amounts to be agreed upon by the parties.
Minimum release price is to be equal to greater of the
property's allocated loan amount or 100% of sale or
refinancing proceeds capped at 110% of the property's
allocated loan amount. Borrower and GSMC to agree on
allocated loan amounts prior to the execution of the
merger agreement.
DOCUMENTATION: The documentation for the Financing will contain
representations and warranties, conditions precedent
described below, closing document deliveries and similar
customary conditions precedent, affirmative and negative
covenants (but no financial ratios, maintenance or other
similar financial condition tests), indemnities, events
of default and remedies, in each case customarily found
in documentation for similar transactions. The OP and/or
LLC will provide customary environmental indemnity to
the Lender. This Commitment Letter does not contain all
the terms that will be included in the documentation for
the Financing.
CONDITIONS: The commitment of GSMC for the Facility is conditioned
upon satisfaction of all the following (all to Lender's
satisfaction):
5
<PAGE>
o Relevant documents, such as all transaction
documents and disclosure schedules for the
Bruin Merger and the OP Merger and other
material agreements to which Borrower is a
party, must be acceptable to GSMC in all
material respects.
o The Bruin Merger and the OP Merger each shall
have been consummated in compliance with all
applicable law and regulations.
o The material terms of the Bruin Merger and the
OP Merger, including, without limitation, the
consideration offered and the conditions
precedent, shall not have been modified,
amended or supplemented in any material respect
and no material provision contained therein
shall have been waived, without GSMC's prior
written consent.
o Any conditions contained in the merger
agreement relating to environmental matters
shall have been satisfied or waived with GSMC's
prior written consent.
o A Closing Agreement with the Internal Revenue
Service on terms and conditions satisfactory to
Aptco with respect to the tax matters specified
in the draft merger agreements.
o All necessary governmental and material third
party waivers and consents shall have been
received.
o Receipt of opinions of counsel from Borrower's
counsel (including local counsel as requested)
reasonably acceptable to GSMC.
o Receipt of customary mortgage title insurance
policies, existing land surveys, (and the
Borrower will use best efforts to obtain
surveys for properties as to which surveys have
not previously been prepared) evidence of
insurance and addition of GSMC as loss payees,
and the like.
o As of the closing of the Transaction, there
shall be no material liabilities of Borrower,
other than (i) the
6
<PAGE>
$233 million of existing indebtedness
encumbering the properties on Schedule II
hereto, (ii) customary trade payables not to
exceed $5 million, (iii) liabilities shown on
Schedule III hereto (iv) liabilities, which
shall be subject to the approval of GSMC,
disclosed in SEC filings filed after December
31, 1997 and prior to the execution of the
merger agreement, and (v) liabilities shown on
the Disclosure Letter delivered pursuant to the
merger agreement, subject to the approval of
GSMC.
o There shall be no material adverse change (a
"MAC"), in the business, financial condition or
prospects of Bruin and its subsidiaries taken
as a whole or in the collateral for the Loan
taken as a whole (including in the
environmental condition thereof) not
contemplated by the Transaction.
o No material indebtedness of Bruin or OP or any
of their subsidiaries (which is not being
repaid at closing) shall be in default as the
result of the Transaction or the Financing and
there shall be no Event of Default on any
material indebtedness which is not being repaid
at closing beyond applicable cure periods.
o There shall be no litigation commenced that,
individually or in the aggregate, is reasonably
likely to have a material adverse effect on
Bruin and its subsidiaries, taken as a whole,
or their business or Borrower's ability to
repay the Loan or that would prevent or
significantly delay the consummation of the
Transaction, or any litigation pending or
threatened in writing by a governmental entity
which challenges the Bruin Merger, the OP
Merger or the Financing.
o There shall not have occurred and be continuing
(i) any general suspension of, or limitation on
prices for, trading in securities on the New
York Stock Exchange, (ii) a declaration of any
general banking moratorium by federal or New
York authorities or any suspension of payments
in respect of money
7
<PAGE>
center banks or any limitation (whether or not
mandatory) imposed by federal or state
authorities on the extension of credit by money
center banks in the United States, (iii) any
limitation (whether or not mandatory) by any
United States governmental entity on, or any
other event which could materially affect, the
extension of credit by banks or other United
States financial institutions, (iv) from the
date hereof through the closing date a decline
of at least 15 % in either the Dow Jones
Average of Industrial Stocks or the Standard &
Poor's 500 Index, (v) any material disruption
or material adverse change in the financial or
capital markets generally or (vi) a
commencement of a war, armed hostilities or any
other international or national calamity
directly or indirectly involving the United
States or, in the case of a situation existing
as of the date hereof, a material escalation of
such situation.
o Absence of a default under the Financing.
o GSMC shall have verified that the annualized
net operating income for the collateral for the
Loan shall be at least $114.6 MM (representing
a 7.5% decrease from Bruin's budgeted 1999 net
operating income of $123.9 MM). For purposes of
the foregoing, GSMC shall define the analysis
period as beginning January 1, 1999 and ending
on the last day of the month immediately prior
to closing. Lender shall compare the actual
income and expense performance of the
properties with the 1999 budget previously
furnished to GSMC. GSMC shall determine that
the actual net operating income during the
analysis period shall not be less than 92.5% of
the 1999 budgeted net operating income for the
same analysis period. Foregoing NOI test to be
adjusted to reflect sales of properties between
the date hereof and closing (assuming entire
cash proceeds thereof are retained by Bruin or
used to repay existing debt that otherwise
would be repaid at closing).
o LLC shall have received the equity from Other
Equity Investor, Whitehall and Krupp
contemplated
8
<PAGE>
by the Summary of Terms (i.e., a minimum of
$106 million from each of Whitehall and Other
Equity Investor and a contribution having a
value of at least $57 million from Krupp), and
all the Bruin stock and OP Units currently
owned by Krupp and his affiliates.
o The Transaction shall have closed no later than
210 days (the "Commitment Termination Date")
following the signing of a definitive agreement
for the Bruin Merger and the Loan shall not, in
any event, be drawn down after December 31,
1999.
o Definitive agreements for the Bruin Merger and
the OP Merger shall have been executed by March
31, 1999, provided, however, that if definitive
agreements are not executed by March 31, 1999
and Lender does not extend this Commitment
Letter, this Commitment Letter will terminate
and neither Borrower nor Lender will be liable
hereunder.
OTHER TERMS: The documentation for the Facility will require, among
other things, compliance with covenants pertaining to
the following (all in form and substance satisfactory to
GSMC):
o Financial reporting on a monthly basis. All
financial statements shall be prepared on a
consolidated and consolidating basis.
o Compliance with all applicable law, decrees and
material agreements, or obtaining of applicable
consents and waivers.
o Limitations on commercial transactions,
management agreements, service agreements and
borrowing transactions with officers,
directors, employees and affiliates.
o Prohibition on new indebtedness, other than the
Facility, and other than refinancings of
existing indebtedness (i) in respect of the 24
properties listed on Schedule II, provided the
same are on terms not materially more onerous
to the Borrower than the
9
<PAGE>
existing indebtedness being refinanced and (ii)
in respect of the 58 properties identified on
Schedule I, provided that payment of the
appropriate release price is made.
o Prohibitions on liens, mortgages and security
interests except those in existence and
identified, those incurred in connection with
permitted refinancings, and liens on
indebtedness permitted to be incurred for the
financing of permitted purchases of properties
which liens are limited to the properties
purchased, and which obligations are solely
those of the property owning subsidiary.
o Limitations on, or prohibitions of, cash
dividends, other distributions to equity
holders, payments in respect of subordinated
debt and redemption of common or preferred
stock. Such limitations and/or prohibitions
shall not preclude, in the absence of a default
under the Loan, distributions to certain OP
Unit Holders who convert their interests to
Class A (Preferred) Interests or tax
distributions, as contemplated by the LLC
agreement.
o Limitations on mergers, acquisitions, or sale
of a material portion of assets (other than
sales accompanied by payment of specified
release prices).
o Prohibitions of a direct or indirect change in
control of Borrower or LLC (other than changes
which increase the control of Whitehall and the
Other Equity Investor. The foregoing shall not
prohibit any change in ownership (but not
control) within Whitehall, Krupp or the Other
Equity Investor). Whitehall and Blackstone will
each have equivalent control and substantially
equivalent economic interests in LLC.
o Customary provisions regarding responsibility
for misappropriation of funds.
o Limitations on capital expenditures.
10
<PAGE>
o Agent's and Lender's rights of inspection and
access to facilities, management and auditors.
o Payment of Lender's costs and expenses in
documenting, closing and servicing the Loan
(including reasonable attorneys' fees and
costs, title insurance premiums and mortgage
recording taxes).
o Escrow for real estate taxes.
o Governing law: New York.
The commitment of GSMC hereunder is subject to the execution and delivery of
final legal documentation acceptable to GSMC and its counsel incorporating,
without limitation, the terms set forth in this Commitment Letter.
By signing this Commitment Letter, you acknowledge that this Commitment Letter
supersedes any and all discussions and understandings, written or oral, between
or among GSMC and any other person as to the Facility, including any prior
commitment letters for debt financing for the Transaction. No amendments,
waivers or modifications of this Commitment Letter or any of its contents shall
be effective unless expressly set forth in writing and executed by you and GSMC.
This Commitment Letter is being provided to you on the condition that, except as
required by law or SEC Regs (as defined below), neither it nor its contents will
be disclosed publicly or privately except to those individuals who are your
advisors who have a need to know of them as a result of their being specifically
involved in the Bruin Merger and the OP Merger and the Facility and then only on
the condition that such matters may not, except as required by law or
regulations of the Securities and Exchange Commission ("SEC Regs"), be further
disclosed and except that, following your acceptance hereof, you may disclose
this Commitment Letter to Bruin and its advisors. No person, other than the
parties signatory hereto, is entitled to rely upon this Commitment Letter or any
of its contents. No person shall, except as required by law or SEC Regs, use the
name of, or refer to GSMC or any of its affiliates, in any correspondence,
discussions, press release, advertisement or disclosure made in connection with
the Transaction without the prior written consent of GSMC.
In the event the Transaction closes, you agree to indemnify and hold harmless
each of GSMC, its affiliates, and the directors, officers, employees, agents,
attorneys and representatives of any of them (each, an "Indemnified Person"),
from and against all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including, but not limited to, reasonable attorneys'
fees and disbursements and other costs of investigation or defense, including
those incurred upon any appeal), which may be instituted or asserted against or
incurred by any such Indemnified Person in connection with, or arising out of,
this Commitment Letter, the Financing, the documentation related thereto, any
actions or failures to act in connection therewith, and any and all
environmental liabilities and legal costs and expenses arising out of or
incurred in connection
11
<PAGE>
with any disputes between or among any parties to any of the foregoing, and any
investigation, litigation, or proceeding related to any such matters. Your
obligation for such reimbursement may be assumed by Borrower at closing.
Notwithstanding the foregoing, no indemnitor shall be liable for any
indemnification to any Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results solely
from that Indemnified Person's gross negligence or willful misconduct, as
finally determined by a court of competent jurisdiction. Under no circumstances
shall GSMC, or any of its affiliates be liable to you or any other person for
any punitive, exemplary, consequential or indirect damages in connection with
this Commitment Letter, the Facility or the documentation related thereto,
regardless of whether the commitment herein is terminated or the Transaction or
the Facility closes. For purposes of this paragraph, the term "affiliate" shall
not include any affiliated entity which is an Investor.
You and GSMC expressly waive any right to trial by jury of any claim, demand,
action or cause of action arising in connection with this Commitment Letter, any
transaction relating hereto, or any other instrument, document or agreement
executed or delivered in connection herewith, whether sounding in contact, tort
or otherwise. You and GSMC consent and agree that the state or federal courts
located in New York County, City of New York, New York, shall have exclusive
jurisdiction to hear and determine any claims or disputes between or among any
of the parties hereto pertaining to this Commitment Letter or the Facility under
consideration and any investigation, litigation, or proceeding related to or
arising out of any such matters, provided, however, that you and GSMC
acknowledge that any appeals from those courts may have to be heard by a court
located outside of such jurisdiction. You and GSMC expressly submit and consent
in advance to such jurisdiction in any action or suit commenced in any such
court, and hereby waive any objection which either of them may have based upon
lack of personal jurisdiction, improper venue or inconvenient forum. The
definitive documentation for the Facility shall contain Borrower's and
Guarantors' agreement to the foregoing.
This Commitment Letter is governed by and shall be construed in accordance with
the law of the State of New York applicable to contracts made and performed in
that State.
GSMC shall have access to all relevant facilities, personnel and accountants,
and copies of all documents which GSMC may reasonably request, including
business plans, financial statements (historical and pro forma), books, records,
and other documents. GSMC agrees to treat any confidential information so
received as it would its own confidential information.
This Commitment Letter shall be of no force and effect unless and until this
Commitment Letter is each executed and delivered to GSMC on or before 5:00 p.m.
New York City time on February 23, 1999 at, 85 Broad Street, New York, New York
10004. Once effective, the commitment of GSMC to provide financing in accordance
with the terms of this Commitment Letter shall terminate if the Bruin Board of
Directors rejects LLC's proposal relating to the Transaction (in which case,
none of the LLC, the Investors or their respective affiliates shall have any
liability hereunder whether on account of fees, reimbursement obligations or
otherwise) or if the Loan does not close by the Commitment Termination Date.
12
<PAGE>
We look forward to continuing to work with you toward completing this
transaction.
Sincerely,
GOLDMAN SACHS MORTGAGE COMPANY
By: /s/ Mark J. Kogan
---------------------
Its Duly Authorized Signatory
AGREED AND ACCEPTED THIS
22nd DAY OF FEBRUARY, 1999.
APTCO, LLC
By: /s/ Douglas S. Krupp
- ------------------------
13
EXHIBIT 3
---------
February 22, 1999
Lazard Freres & Co., LLC
30 Rockefeller Plaza
New York, New York 10020
Attention: Matthew J. Lustig
Gary Ickowicz
Gentlemen:
Aptco, LLC ("Aptco"), a company formed by affiliates of Douglas Krupp,
Whitehall Street Real Estate Limited Partnership XI ("Whitehall") and Blackstone
Real Estate Acquisitions III L.L.C. ("Blackstone") hereby makes the following
proposal, pursuant to which holders of common stock of Berkshire Realty Company,
Inc. ("BRI") would receive, and holders of limited partnership interests ("OP
Units") in BRI OP Limited Partnership ("OP") would have the opportunity to
receive, $11.05 per share/OP Unit in cash (the "Cash Price") for their
respective interests in the Company.
Our proposal contemplates that the acquisition of BRI would take the
form of a merger (the "BRI Merger") pursuant to which BRI would be merged with
and into Aptco, with Aptco as the surviving entity of the BRI Merger. Pursuant
to the BRI Merger, holders of BRI common stock would receive, in exchange for
their stock, an amount of cash per share equal to the Cash Price.
Contemporaneously with the BRI Merger, a newly formed subsidiary of
Aptco would merge with and into OP (the "OP Merger"), with OP as the surviving
entity of the OP Merger. Pursuant to the OP Merger, OP Unitholders would be
given the choice to elect to receive, in exchange for each of their OP Units,
one of the following: (a) cash equal to the Cash Price; (b) a senior preferred
equity interest in Aptco with a liquidation preference equal to the Cash Price,
which would entitle the holder to receive cumulative preferred distributions of
available cash on a senior basis equal to 6% per annum, and would be callable by
Aptco after six years or earlier upon a sale of Aptco (whether by merger,
initial public offering, sale of all or substantially all of its assets, or
otherwise) at a price equal to the liquidation preference; or (c) an equity
interest in Aptco that (i) would be subordinate to the senior preferred equity
interest described above and to senior subordinated equity interests to be held
by Whitehall and Blackstone or their respective affiliates, but would be
generally pari passu with the equity interests to be held by Douglas Krupp and
his affiliates and (ii) would be callable by Aptco after six years or earlier
upon a sale of Aptco (whether by merger, initial public offering, sale of all or
substantially all of its assets, or otherwise) at a price equal to the then fair
market value of such interest.
The aggregate purchase price for the acquisition of BRI and OP would be
funded with a combination of debt and equity financing. The debt financing would
consist of a bridge loan to be provided by Goldman Sachs Mortgage Company (an
<PAGE>
2
affiliate of Whitehall) pursuant to the attached commitment letter. With respect
to the equity financing, affiliates of Douglas Krupp, Whitehall and Blackstone
(together with the debt providers, the "Financing Sources") have agreed in
principle, subject to the execution of mutually acceptable documentation with
respect to Aptco and the conditions set forth below, to provide Aptco with
sufficient funds to finance the remaining purchase price and related expenses
for the acquisition.
Upon your acceptance of our proposal as set forth in this letter, we
are prepared to work towards immediately finalizing definitive acquisition
agreements with BRI and OP, which we would expect to be executed within two
weeks time. Such agreements would contain customary representations, warranties,
covenants and indemnities (including indemnification of Aptco and its Financing
Sources by BRI against claims arising in connection with this transaction). In
addition, consummation of the proposed transaction by Aptco would be subject to
the conditions set forth in the definitive acquisition agreements, including the
following:
(i) there being no injunction prohibiting or restricting the
consummation of any of the transactions described herein, no litigation
commenced or threatened by a governmental entity, nor any litigation that could
have a material adverse effect with respect to BRI or OP or that could
significantly delay the consummation of the BRI or the OP Mergers;
(ii) execution of an agreement delivered, on or prior to the execution
of definitive acquisition agreements, by the holders of a majority in interest
of BRI's Series 1997-A Convertible Preferred Stock ("Series A Preferred")
consenting to the transactions, including the BRI Merger and the conversion of
their shares pursuant to the BRI Merger into an amount of cash equal to 115% of
the liquidation preference of such shares;
(iii) receipt by BRI's Board of Directors of an opinion from a
nationally recognized investment banking firm that the consideration to be paid
to the holders of BRI stock, Series A Preferred and OP Units is fair, from a
financial point of view;
(iv) approval of the proposed transactions by the respective Boards of
Directors of BRI and the general partner of OP, and by the requisite vote of the
stockholders of BRI and the OP Unitholders;
(v) receipt of any regulatory and other third party consents to the
transactions, including the financing thereof;
(vi) receipt by BRI of a closing agreement with the Internal Revenue
Service, on terms and conditions satisfactory to Aptco, with respect to certain
tax matters, and Aptco's satisfaction with respect to certain other tax matters;
<PAGE>
3
(vii) confirmation that the number of shares of common stock of BRI
will not be more than 48,015,000, assuming the exercise of all stock options and
the conversion of all OP Units (but without taking into account the conversion
of shares of Series A Preferred into shares of BRI common stock);
(viii) confirmation that investment banking fees, severance costs and
legal/accounting expenses of BRI relating to the transaction will not exceed $12
million;
(ix) inclusion in the BRI Merger agreement of satisfactory "no-shop,"
"break up fee" and expense reimbursement provisions customary for transactions
of this type; and
(x) other customary conditions to closing.
The closing of the BRI Merger and OP Merger would not be subject to a
due diligence or financing contingency (other than the receipt by Aptco of
financing proceeds on the terms and conditions of the commitments from the
Financing Sources).
Accompanying this letter is a draft merger agreement relating to the
BRI Merger, and a draft merger agreement relating to the OP Merger. Aptco,
together with its financial advisors and legal counsel are prepared to meet with
you and your advisors immediately to work on finalizing the enclosed agreements.
Of course, at this stage of the process, our proposal is merely an expression of
interest and is not intended to be legally binding, and Aptco does not intend to
be legally bound to any transaction with BRI or OP until definitive agreements
are fully executed.
We believe Aptco is uniquely positioned to proceed with a transaction
in the best interests of BRI stockholders and OP Unitholders on an expeditious
basis.
This letter is intended to be confidential and neither it nor our
involvement in pursuing a possible acquisition proposal should be publicly
disclosed by BRI or you unless required by law. In the event BRI determines that
public disclosure is so required, we request that any public announcement of
this proposal be reviewed by Aptco and its advisors prior to its release.
Pursuant to the confidentiality agreement with you, we hereby advise
you that we intend to make the public disclosures required under Section 13(d)
of the Securities Exchange Act of 1934, as amended, as soon as practicable.
<PAGE>
4
This offer is open until 5:00 p.m. on March 1, 1999, and will expire at
that time if not accepted. We look forward to working with you on this proposed
transaction.
Very truly yours,
APTCO, LLC,
By its members:
THE BERKSHIRE COMPANIES
LIMITED PARTNERSHIP
By: KGP-1, Inc.
By: /s/ Douglas S. Krupp
------------------------
Douglas Krupp
President
WHITEHALL STREET
REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH Advisors, L.L.C. XI
By: /s/ Steven M. Feldman
-------------------------
BLACKSTONE REAL ESTATE
ACQUISITIONS III L.L.C.
By: /s/ Thomas J. Saylak
------------------------
cc: Prudential Securities Incorporated
Real Estate Investment Banking
One New York Plaza
New York, New York 10292
Attention: Scott Schaevitz
EXHIBIT 4
---------
Joint Filing Agreement
----------------------
Each of the undersigned hereby acknowledges and agrees, in compliance
with the provisions of Rule 13d-1(k)(1) promulgated under the Securities
Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement
is attached as an Exhibit (the "Schedule 13D"), and any amendments thereto, will
be filed with the Securities and Exchange Commission jointly on behalf of the
undersigned. This Agreement may be signed by the undersigned in separate
counterparts.
Dated: February 22, 1999
THE BERKSHIRE COMPANIES LIMITED
PARTNERSHIP
By: KGP-1, Inc.,
its General Partner
By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: President
KGP-1, INC.
By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: President
KGP-2, INC.
By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: President
/s/ Douglas Krupp
-----------------
Douglas Krupp
<PAGE>
2
*
____________________________
George Krupp
* By: /s/ Douglas Krupp
---------------------
Name: Douglas Krupp
Title: Attorney-in-fact
EXHIBIT 5
---------
Power of Attorney
-----------------
The undersigned, George Krupp, hereby makes, constitutes and appoints
Douglas Krupp the attorney-in-fact (the "Attorney-In-Fact") of the undersigned,
with full power and authority, including without limitation the power of
substitution and resubstitution, acting together or separately, in the name of
and for and on behalf of the undersigned:
(a) For the purpose of complying with the requirements of the
Securities Act of 1933, as amended, and the rules of the Securities and Exchange
Commission (the "Commission") promulgated thereunder (collectively, the
"Securities Act"), and the Securities Exchange Act of 1934, as amended, and the
rules of the Commission promulgated thereunder (collectively, the "Exchange
Act"), to prepare or cause to be prepared, execute, sign and file with the
Commission and all applicable securities exchanges on behalf of the undersigned
all statements, reports and other filings (including without limitation any
amendments thereto) required to be filed by the undersigned under the Securities
Act or the Exchange Act, including without limitation all Schedules 13D,
Schedules 13E-3, Schedules 14D-1 and Initial Statements of Beneficial Ownership
of Securities on Forms 3, 4 and 5 with respect to the equity securities of
Berkshire Realty Company, Inc.; and
(b) To make, execute, acknowledge, and deliver such other documents,
letters, and other writings, including communications to the Commission, and in
general to do all things and to take all actions, which the Attorney-In-Fact in
his sole discretion may consider necessary or proper in connection with or to
carry out the objective of complying with the Securities Act and the Exchange
Act, as fully as could the undersigned if personally present and acting. The
Attorney-In-Fact is hereby empowered to determine in his sole discretion the
time or times when, purpose for and manner in which any power herein conferred
upon him or her shall be exercised, and the conditions, provisions, or other
contents of any report, instrument or other document which may be executed by
him or her pursuant hereto.
The undersigned hereby ratifies all that the Attorney-In-Fact or his
substitute or substitutes shall do under the authority of this Power of
Attorney.
The Attorney-in-Fact shall have full power to make and substitute any
other attorney-in-fact in his place and stead. The term "Attorney-In-Fact" shall
include the respective substitutes of any Attorney-in-Fact.
This Power of Attorney shall remain in effect until 12:01 a.m. New York
time on February 22, 2000. The expiration of this Power of Attorney shall not
affect any action taken by the Attorney-In-Fact prior to such expiration.
THIS POWER OF ATTORNEY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has duly executed this Power of
Attorney on this 22nd day of February, 1999.
/s/ George Krupp
----------------
George Krupp
