As filed with the Securities and Exchange Commission on April 16, 1999
Registration No. 333-67783
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BERKSHIRE REALTY COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3086485
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
One Beacon Street, Suite 1550
Boston, Massachusetts 02108
(888) 867-0100
(Address, Including Zip Code, and Telephone Number Including Area Code,
of Registrant's Principal Executive Offices)
Scott D. Spelfogel, Esq.
Berkshire Realty Company, Inc.
One Beacon Street, Suite 1500
Boston, Massachusetts 02108
(617) 574-8385
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
David E. Redlick, Esq.
Kenneth A. Hoxsie, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
(617) 526-6000
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ].
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X].
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ].
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ].
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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SUBJECT TO COMPLETION, DATED APRIL 16, 1999
PROSPECTUS
1,714,396 Shares
BERKSHIRE REALTY COMPANY, INC.
COMMON STOCK
Berkshire Realty Company, Inc. is a real estate investment trust which acquires,
renovates, rehabilitates, develops and operates apartment communities. Berkshire
began operations in 1991 with 15 apartment communities containing approximately
4,200 units. As of March 1, 1999, we owned 82 apartment communities consisting
of 24,387 units located in Florida, Texas and the Mid-Atlantic and Southeastern
United States.
We conduct our operations primarily through BRI OP Limited Partnership and
through our other subsidiaries and subsidiaries of BRI Partnership.
If and to the extent that certain holders of units of limited partnership
interest in BRI OP Limited Partnership elect to exchange their units for stock
on a one-for-one basis, we will offer and sell shares of common stock with this
prospectus. Holders of units who so elect will become stockholders in Berkshire.
Our shares of common stock are listed for trading on the New York Stock Exchange
under the symbol "BRI." The closing sales price of our common stock as reported
by the New York Stock Exchange on April 15, 1999 was $11.6875 per share.
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For a discussion of certain risks that you should consider before you invest in
the common stock sold with this prospectus, see "Risk Factors" beginning on
page 5.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
Our principal executive offices are located at One Beacon Street, Suite 1550,
Boston, Massachusetts 02108 and our telephone number is (888) 867-0100.
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The date of this Prospectus is April __, 1999
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RISK FACTORS
An investment in our common stock involves various risks. You should carefully
consider the following risks and the other information in this prospectus before
deciding to convert your units.
Tax Consequences of Exchange of Units - You may incur tax if you convert your
units.
If you decide to convert your units, you will be taxed as if you had sold the
units. You will have taxable income equal to the amount of cash you receive or
the value of the stock you receive, as the case may be, plus the amount of any
BRI Partnership liabilities allocable to your units at the time you sell them.
You may recognize more gain or have to pay more tax than the amount of cash or
the value of the stock you receive from the sale. If you sell some or all of the
stock you receive to raise money to pay the tax, the market price of the stock
may have declined from the time when you converted your units.
Change in Investment Upon Redemption of Units - If you convert your units, you
will have a different kind of investment.
If you convert some or all of your units, BRI Partnership will decide whether
you receive cash or stock. If you receive cash, you will have no interest in
Berkshire or BRI Partnership (except to the extent that you retain units), which
means:
o You will not benefit from any future increases in the value of
Berkshire's stock.
o You will not receive any future distributions from Berkshire or BRI
Partnership.
If you receive stock, you will become a shareholder of Berkshire rather than a
partner in BRI Partnership.
Development and Acquisition
We acquire new properties from time to time, and those acquisitions may reduce
the value of your investment.
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Berkshire regularly considers acquiring additional apartment communities.
Acquisitions involve several risks, including the following:
o Acquired properties may not perform as well as Berkshire expected before
acquiring them.
o Improvements to the properties may cost more than Berkshire had
estimated.
o The costs of evaluating properties that are not acquired cannot be
recovered.
o Berkshire has acquired properties by issuing units and has had to agree
with the sellers not to sell the properties or refinance the debt on
them for various periods of time. These restrictions may keep us from
taking actions that would otherwise be in the best interests of the
shareholders. Berkshire may in the future acquire apartment communities
for units and may have to agree to similar restrictions.
We develop new apartment communities from time to time, and these activities may
reduce the value of your investment.
Berkshire plans to continue developing new apartment communities as
opportunities arise in the future. Development and construction activities
entail a number of risks, including the following:
o We may abandon a project after spending time and money determining its
feasibility.
o Construction costs may exceed the original estimates.
o The revenue from a new project may not be enough to make it profitable.
o Berkshire may not be able to obtain financing on favorable terms for
development of a property.
o We may not complete construction and lease up on schedule, resulting in
increased costs.
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o Berkshire may not be able to obtain, or may be delayed in obtaining,
necessary governmental permits.
o Even successful projects require a substantial portion of management's
time and attention.
We are required to submit to shareholders a vote regarding
liquidation.
Our charter requires the Board of Directors to prepare and submit to
shareholders a proposal to liquidate Berkshire's assets and distribute the net
proceeds to the shareholders. We have filed preliminary proxy materials with the
SEC relating to this proposal. Berkshire will adopt the liquidation proposal
only if shareholders holding a majority of the shares then outstanding approve
it. If Berkshire were liquidated, you might receive proceeds that were less than
the value of the stock at the time you converted your units. Submitting this
proposal to shareholders will cause us to incur costs associated with the
shareholder solicitation regardless of the outcome of the vote.
The industry we operate in has risks that may cause your investment to decline
in value.
Owning real estate involves a variety of risks, including the risks described
below:
Realizing a profit from owning apartment communities depends on many factors.
Berkshire invests in apartment communities and therefore is subject to the
various risks generally related to owning and developing
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real property. The value of Berkshire's apartment communities and our ability to
distribute cash to shareholders will depend on how well we operate and develop
our properties. These are some of the things that may adversely affect our
results:
o Changes in national and local economic conditions, such as oversupply of
apartment units or reduction in demand for apartment units in our
markets.
o The attractiveness of our apartments to tenants.
o Changes in interest rates and the availability, cost and terms of
mortgage financings.
o The ongoing need for capital improvements in our properties,
particularly in older structures.
o Changes in real estate tax rates and other operating expenses.
o Changes in governmental rules and fiscal policies and changes in zoning
laws.
o Civil unrest, acts of God, including natural disasters (which may result
in uninsured losses), acts of war and other factors beyond our control.
Our business depends on the performance of four markets.
We have made almost all of our investments in Florida, Texas and the
Mid-Atlantic and Southeastern United States. Therefore, Berkshire's results will
depend to a great extent on the economic conditions in these markets as well as
the market for apartment communities generally.
Regulations may cause our costs to increase or limit our ability to increase our
revenue.
Many federal, state and local zoning, subdivision, planning, building,
environmental and other land use laws and regulations govern real estate. These
laws and regulations may place significant restrictions on our ability to
develop or improve our real estate. Even unintentional violations of these laws
and regulations by us or by our tenants may force us to take corrective action
or pay
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substantial penalties. In particular, various laws and regulations may restrict
the amount and process by which we may raise rents, as well as our right to
convert a property to other uses, such as condominiums or cooperatives.
We may lose some of our property to casualties or takings.
Conditions existing on real property may result in injury to people. BRI
Partnership may incur liability as a result of such injuries. Such liability may
be uninsurable in some circumstances or may exceed the limits of insurance
maintained at typical amounts for the type and conditions of the property. In
addition, our properties may suffer loss in value due to causalities such as
fire or hurricanes. These losses may be uninsurable in some circumstances or may
exceed the limits of insurance maintained at typical amounts for the type and
condition of the property. Should an uninsured loss occur, Berkshire could lose
both its investment in and anticipated profits and cash flow from a property.
Real estate may also be taken, in whole or in part, by public authorities for
public purposes in eminent domain proceedings. Awards resulting from such
proceedings may not adequately compensate Berkshire for the value lost.
We may not be able to sell our assets at the optimal time.
Real estate investments are relatively illiquid. Our ability to vary our
portfolio in response to changes in economic and other conditions will therefore
be limited. If we must sell an investment, we may not be able to sell the
investment in the time period we desire or at a price that will recoup or exceed
the amount of our cost for the investment.
Our expenses may increase, resulting in a decrease of the funds available to pay
dividends to shareholders.
BRI Partnership must pay the expenses associated with operating its apartment
communities. These expenses include:
o cleaning
o electricity
o heating, ventilation and air conditioning
o elevator repair and maintenance
o insurance and administrative costs
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o other general costs associated with security, landscaping, repairs and
maintenance
If these expenses increase, the local rental market may limit the extent to
which we may increase rents to meet these increased operating expenses without
decreasing occupancy rates. Although we implement cost- saving incentive
measures at each of our properties, if these operating expenses increase faster
than rental rates, our results of operations, financial condition and ability to
pay distributions to shareholders could be adversely affected.
We may incur costs if we do not comply with the Fair Housing Amendments Act and
Americans with Disabilities Act.
The Fair Housing Amendments Act (the "FHA") imposes certain requirements related
to access by physically handicapped persons on multifamily properties first
occupied after March 13, 1991 or for which construction permits were obtained
after June 15, 1990. If Berkshire does not comply with the FHA, we might have to
pay fines to the U.S. government or damages to private litigants.
All of our properties must comply with the Americans with Disabilities Act (the
"ADA") to the extent such properties are "public accommodations" or "commercial
facilities," as defined by the ADA. The ADA requires that facilities, including
leasing offices, open to the general public be made accessible to people with
disabilities. Individual apartment units are not considered "public
accommodations" for purposes of the ADA. Compliance with the ADA requirements
could require removal of access barriers and other capital improvements to the
public areas of Berkshire's properties. Noncompliance could result in imposition
of fines by the U.S. government or an award of damages to
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private litigants. If any changes to our properties subsequently are required by
the ADA that involve material expenditures, our results of operation, financial
condition and ability to make expected distributions to shareholders could be
adversely affected.
Our joint venture partners may have different interests than we do, resulting in
a loss of value of some of our properties or an inability to take advantage of
favorable opportunities.
Any of our investments in a joint venture partnership which owns property may,
under certain circumstances, involve risks which would not be present in a
direct investment in real estate. For example, our joint venture partner may
experience financial difficulties and may at any time have economic or business
interests or goals which are inconsistent with our business interests and goals
or contrary to our policies or objectives. Our partner might take actions that
would subject the property owned by the joint venture to liabilities in excess
of those contemplated by the terms of the joint venture agreement. In addition,
we might reach an impasse with our partner since either party may disagree with
a proposed transaction involving the property owned by the joint venture and
impede any proposed action.
Financings
We may not be able to make the required payments on our debt.
As of December 31, 1998, we had approximately $572,700,000 of total debt.
Payments of principal and interest on mortgage borrowings may leave us with
insufficient cash resources to operate our apartment communities or pay
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distributions required to be paid in order for us to maintain our qualification
as a REIT.
If we cannot make payments on a loan secured by a mortgage, the lender could
foreclose on the property securing the loan. If this happens, Berkshire will
lose the income from the property and any value the property had. Even if a loan
is nonrecourse, the lender might have the right to recover deficiencies arising
from fraud, environmental liabilities or other circumstances. Foreclosure could
also create taxable income without producing any cash, thereby reducing our cash
available for distribution and hindering our ability to meet the tax
requirements for a REIT.
In connection with acquiring certain properties in exchange for units, we agreed
to maintain prescribed levels of nonrecourse debt on these properties. The
purpose of these agreements was to minimize the tax consequences of the
acquisitions to the unit recipients. If we do not maintain the required level of
debt, we would be in default under these agreements and could be liable to the
holders of the units.
We may not be able to refinance our debt when it comes due.
When any of our debt secured by real property comes due, we will have to
refinance the debt or sell the property that secures the debt. If the interest
rate on the new debt is higher than the rate on the old debt, our costs will
increase. Our ability to refinance any of this debt and the terms on which we
might refinance will depend upon economic conditions in general and specifically
on conditions in the capital markets. We cannot guarantee that we could
refinance or repay any of these mortgage loans at maturity.
We do not have a limit on how much debt we can incur.
We currently have a policy of incurring debt only if upon such incurrence the
ratio of Berkshire's debt to the value of its assets would be 50% or less.
Although we have adopted this policy, Berkshire's governing documents contain no
limitation on the amount of indebtedness Berkshire may incur. Accordingly, the
Board of Directors could alter or eliminate this policy and would do so, for
example, if it were necessary for Berkshire to continue to qualify as a REIT.
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The interest rates of our credit facility may increase, which would result in
a reduction of funds available to pay dividends to shareholders.
Outstanding advances under our credit facility bears interest at a variable
rate. As of December 31, 1998, this credit facility had an outstanding
balance of $135,100,000. We may incur additional variable rate indebtedness in
the future. Accordingly, increases in interest rates could increase Berkshire's
interest expense, which could adversely affect Berkshire's results of
operations, financial condition and ability to pay expected distributions to
shareholders. An increase in interest expense could also cause us to be in
default under our credit facilities.
Potential Environmental Liability - Our properties may have environmental
contamination, which could reduce the value of your investment.
Various Federal, state and local environmental laws, ordinances and regulations
subject property owners or operators to liability for the costs of removal or
remediation of certain hazardous or toxic substances on the property. These laws
often impose liability without regard to whether the owner or operator knew of,
or was responsible for, the presence of the hazardous or toxic substances. The
presence of, or the failure to properly remediate, such substances may adversely
affect our ability to sell or rent the property or to borrow using the property
as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at a disposal or treatment facility, whether or not such facility is
owned or operated by such person. Third parties may seek recovery from owners or
operators of such properties or persons who arranged for the disposal or
treatment of hazardous or toxic substances. Therefore, owners and operators are
potentially liable for removal or remediation costs, as well as other related
costs, including governmental fines and injuries to persons and property,
related to such facilities.
All of our properties have been the subject of a Phase I or similar
environmental assessment (which involves general inspections without soil
sampling or ground water analysis and generally without radon testing) completed
by qualified independent environmental consultant
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companies. These environmental assessments have not revealed any environmental
liability that we believe would have a material adverse effect on our results of
operations, financial condition and ability to make expected distributions to
shareholders, nor are we aware of any such environmental liability. However, it
is possible that the environmental assessments did not reveal all environmental
conditions, liabilities or compliance concerns. Environmental conditions,
liabilities or compliance concerns may also have arisen at a property after the
environmental assessment was completed.
Anti-Takeover Provisions - Because our governing documents contain provisions
that may inhibit a takeover of Berkshire, you may not have the opportunity to
realize a premium on your investment.
Our Certificate of Incorporation places restrictions on the accumulation of
shares in excess of 9.8% of the number of outstanding shares of common stock,
subject to exceptions permitted with the approval of the Board of Directors to
allow (1) underwritten offerings, or (2) the sale of equity securities in
circumstances where the Board of Directors determines Berkshire's REIT federal
tax status will not be jeopardized. This ownership limitation may:
o discourage a change in control of Berkshire.
o deter tender offers for the common stock, which offers may be
advantageous to shareholders.
o limit the opportunity for shareholders to receive a premium for their
shares of common stock that might otherwise exist.
Under Berkshire's Certificate of Incorporation, the election of Directors is
staggered such that approximately one-third of the Directors are elected to
three-year terms each year. This provision may discourage a change in control of
Berkshire. In addition, the governing documents require a supermajority vote to
amend those portions of the governing documents which concern:
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o the definition of "supermajority".
o the requirements for amending the governing documents.
o the requirements regarding excess share ownership (i.e., ownership of
shares in excess of 9.8% of the outstanding shares of common stock as
described above).
o the actions which require a supermajority vote.
o the requirements regarding business combinations.
Additional provisions of the governing documents restrict the shareholders'
ability to nominate candidates for election as Directors and to alter, amend and
adopt provisions inconsistent with, or to repeal certain provisions of, the
governing documents. In addition, Berkshire is subject to Section 203 of the
Delaware General Corporation Law, which restricts business combinations between
Berkshire and its shareholders.
Any of the provisions discussed above may have the effect of delaying, deferring
or preventing a transaction or change in control of Berkshire that might involve
a premium price for the shares of common stock or that otherwise might be in the
best interest of our shareholders.
Berkshire has an authorized class of 60,000,000 shares of preferred stock.
Currently Berkshire has approximately 2.7 million shares of its 1997 Series-A
Preferred Stock outstanding. The Board of Directors may issue the remaining 57.3
million shares on such terms and with such rights, preferences and designations
as the Board may determine. Issuance of such preferred stock, depending on its
rights, preferences, and designations, may have the effect of delaying,
deterring, or preventing a change in control of Berkshire.
Our governing documents contain no restrictions on the types of investments we
may make, which may result in a portfolio significantly different from the one
in existence at the time you elect to convert your units.
The Company's Board of Directors may change its investment policies without a
vote of the shareholders. Consequently,
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shareholders will have no direct control over the kinds of investments the
Company makes.
Tax
We may fail to qualify as a REIT, which would result in a reduction of funds
available to distribute to shareholders.
We believe that we operate in a manner that enables us to meet the requirements
for qualification as a REIT for federal income tax purposes. To maintain our
status as a REIT, we must continually meet certain criteria concerning, among
other things, our common stock ownership, the nature of our assets, the sources
of our income and the amount of distributions we make to shareholders.
If we fail to qualify as a REIT, we would not be allowed a deduction for
distributions to shareholders in computing our taxable income and would be taxed
on our income at regular corporate tax rates. If our status as a REIT were
terminated, we might not be able to elect to be treated as a REIT for the
following five-year period. Therefore, if we lose our REIT status, the funds
available for distribution to you would be reduced substantially for each of the
years involved.
Because the tax laws require us to distribute most of our taxable income, we may
have to borrow additional funds or forgo other uses of our capital.
To qualify as a REIT, we generally are required each year to distribute to our
shareholders at least 95% of our taxable income (excluding any net capital
gain). In addition, Berkshire is subject to a 4% nondeductible excise tax on the
amount, if any, by which certain distributions paid by it with respect to any
calendar year are less than the sum of:
o 85% of its ordinary income for that year,
o 95% of its capital gain net income for that year, and
o 100% of its undistributed taxable income from prior years.
We intend to make distributions to our shareholders to comply with the 95%
distribution requirement and to avoid the nondeductible excise tax. Berkshire's
income consists primarily of its share of the income of BRI Partnership. The
cash available for distribution by
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Berkshire to its shareholders consists of its share of cash distributions from
BRI Partnership. Differences in timing may arise between (1) the actual receipt
of income and actual payment of deductible expenses and (2) the inclusion of
such income and deduction of such expenses in arriving at our taxable income. If
this occurs, we might have to borrow funds on a short-term basis to meet the 95%
distribution requirement and to avoid the nondeductible excise tax. The
requirement to distribute a substantial portion of our net taxable income could
cause us to distribute amounts that otherwise would be spent on future
acquisitions, capital expenditures or repayment of debt. In that event, we might
have to borrow funds or sell assets to fund the costs of such items.
If BRI Partnership fails to qualify as a partnership, we will have less cash
available for distribution to stockholders.
We have not requested, and do not expect to request, a ruling from the Internal
Revenue Service ("IRS") that BRI Partnership (and each of its noncorporate
operating subsidiaries) will be classified as partnerships for federal income
tax purposes. If the IRS were to successfully challenge the tax status of BRI
Partnership (or any noncorporate operating subsidiary) as a partnership for
federal income tax purposes, BRI Partnership (or the noncorporate subsidiary)
would be taxed as a corporation. If that happened, Berkshire would likely cease
to qualify as a REIT for a variety of reasons. Furthermore, the imposition of a
corporate income tax on BRI Partnership would reduce substantially the amount of
cash available for distribution from BRI Partnership to Berkshire and its
shareholders.
Changes in tax law may affect the value of our assets and your investment.
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The current federal income tax treatment of an investment in Berkshire may be
modified, prospectively or retroactively, by legislative, judicial or
administrative action at any time. In addition to any direct effects which such
changes might have, such changes might also indirectly affect the market value
of all real estate investments and, consequently, our ability to realize our
business objectives.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking
statements. Any statements that are not statements of historical fact may be
forward-looking statements. Words such as "believes," "may," "anticipates,"
"plans," "expects," "intends," "estimates" and similar expressions are intended
to identify forward-looking statements. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. The risk factors noted in the
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section titled "Risk Factors" and other factors noted throughout this
prospectus, including certain risks and uncertainties, could cause our actual
results to differ materially from those indicated by any forward-looking
statement.
THE COMPANY
General
Berkshire Realty Company, Inc. (the "Company") is a REIT which acquires,
renovates, rehabilitates, develops and operates apartment communities. Founded
in 1991 with 15 apartment communities containing approximately 4,200 units, as
of March 1, 1999, the Company owned 82 apartment communities consisting of
24,387 units located in Florida, Texas and the Mid-Atlantic and Southeastern
United States (the "Properties"). The Company is a Delaware corporation, and its
shares of common stock, $.01 par value per share, are listed for trading on the
New York Stock Exchange ("NYSE"). The shares of common stock are subject to
certain restrictions on ownership designed to preserve the Company's status as a
REIT for federal income tax purposes.
This prospectus relates to the possible issuance by the Company of up to
1,714,396 shares of common stock (the "Redemption Shares"), if and to the extent
that certain holders (the "Unitholders") of 1,714,396 units of limited
partnership interest ("Units") in BRI OP Limited Partnership (the "Operating
Partnership") exchange such Units for Redemption Shares. The Units were issued
to Unitholders in their capacity as partners in the partnerships listed below in
connection with the acquisition, on November 14, 1997, by BRI Partnership of the
properties listed below:
<TABLE>
<CAPTION>
Number
of
Partnership Name Property Name OP Units
- ---------------- ------------- --------
<S> <C> <C>
Arborview Associates, LP Arborview 137,129
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<S> <C> <C>
Calvert's Walk Associates LP Calvert's Walk 64,455
The Estates LP The Estates 116,184
Fairbrook Associates, LP Stratton Meadows 153,672
Henley Associates, LP Rolling Wind 92,459
Ridgeview Chase Associates, LP Ridgeview Chase 213,121
Second Kingswood Common Associates Kingswood Common II 78,811
Rolling Road Associates
LP Courtleigh 147,661
Frederick Road Associates Jamestowne 28,938
Gorn Properties, Inc. Hilltop 24,291
Plainfield Associates Hazelcrest 24,917
Purnell Associates Fairway Ridge 25,528
Rolling Road Associates Heraldry Square 144,422
Second Rolling Road Associates Kingswood Common I 92,391
Williston Associates Williston 32,653
Warren Park Associates Warren Park 167,620
Diamond Ridge Associates, LP Diamond Ridge 47,266
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Total 1,714,396
</TABLE>
Pursuant to the Amended and Restated Agreement of BRI Partnership, a
Unitholder has the right, exercisable at any time after the first anniversary of
the issuance of Units to him or her, to convert all or a portion of the Units so
issued into shares of common stock (on a one-for-one basis) or cash, as
determined by the Company. Upon receipt of a notice that a Unitholder is
exercising this right, the Company, at the direction of BRI Partnership, will
either (1) convert the tendered Units into an equivalent number of shares of
common stock, or (2) pay the Unitholder cash for each Unit in an amount
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equal to the market value of a share of common stock.
The Company anticipates that generally BRI Partnership will direct the
Company to issue common stock pursuant to this Prospectus in exchange for Units
rather than paying cash. As a result, the Company may from time to time issue up
to 1,714,396 Redemption Shares upon the acquisition of Units for which
Unitholders have exercised their conversion rights. Accordingly, the Company is
registering the Redemption Shares to provide Unitholders with freely tradable
securities upon conversion.
The operations of the Company are conducted primarily through BRI
Partnership and through their other subsidiaries. As of March 1, 1999, the
Company held approximately 79.16% of the units of partnership interest in BRI
Partnership in its capacity as a special limited partner and through its 100%
ownership of Berkshire Apartments, Inc. The remaining approximately 20.84% of
the partnership interests in BRI Partnership was owned by affiliated and
unaffiliated third parties.
The Company's property management and development offices are located in
Atlanta, Georgia. In addition, the Company operates six regional offices in
Atlanta, Georgia; Baltimore and Columbia, Maryland; Greenville, South Carolina;
Dallas and Houston, Texas. At December 31, 1998, the Company had approximately
1,000 employees.
Recent Acquisitions
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Set forth below is information regarding our real estate acquisitions since
January 1, 1998.
<TABLE>
<CAPTION>
Apartment Debt Interest Partnership
Date Location Units Total Cost Cash Assumed Rate Units Issued
- -------- -------------- --------- ----------- ---------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1/21/98 Dallas, TX 208 $ 6.8 million $ 2.0 million $ 4.0 million 7.875% $ 720,000
2/04/98 Austin, 2,266 $ 81.2 million $ 58.9 million $ 14.3 million 8.510% $ 8.0 million
and San Antonio &
4/09/98 Houston, TX
2/12/98 Baltimore, MD 144 $ 7.3 million -- $ 5.8 million 7.055% $ 1.5 million
2/26/98 Tamarac, FL 232 $ 9.6 million $ 7.8 million -- -- $1.8 million
3/14/98 St. Petersburg, 809 $ 23.0 million $ 2.4 million $ 14.4 million 7.062% $ 6.2 million
FL
6/18/98 San Antonio, 319 $ 11.4 million $ 11.4 million -- -- --
TX
7/08/98 Atlanta, GA 1,076 $ 59.7 million $ 19.3 million $ 40.4 million 8.040- --
8.600%
1/07/99 Baltimore, MD 264 $ 25.5 million $ 25.5 million -- -- --
</TABLE>
-22-
<PAGE>
Recent Dispositions
-23-
<PAGE>
Set forth below is information regarding our real estate dispositions since
January 1, 1998.
<TABLE>
<CAPTION>
Type of
Date Location Property Sale Price Gain (Loss)
- -------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
1/05/98 Jonesboro, GA retail center $ 9.5 million ($ 10,000)
1/30/98 Fort Myers, FL retail center $ 6.0 million $ 516,000
1/30/98 Spring Valley, NY retail center $ 29.6 million $ 50,000
5/13/98 Dallas, TX parcel of land $ 2.0 million $ 543,000
</TABLE>
There were no material relationships between the entities from whom the
assets were acquired or to whom the assets were sold and the Company or any of
its affiliates, any director or officer of the Company, or any associate of any
such director or officer.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of any
Redemption Shares but will acquire Units for which the Company is required to
issue Redemption Shares. With each such acquisition, the Company's interest in
the Operating Partnership will increase.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission.
Such reports, proxy statements and other information
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<PAGE>
filed by the Company pursuant to the informational requirements of the
Securities Exchange Act may be inspected and copied at the public reference
facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549 and at the regional offices of the SEC located at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of this material may
also be obtained from the Public Reference Section of the SEC at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
Information concerning the operation of the Public Reference Room may be
obtained by telephoning the SEC at 1-800-SEC-0330. In addition, the Company is
required to file electronic versions of these documents through the SEC's
Electronic Data Gathering Analysis and Retrieval system (EDGAR). The SEC
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. The common stock of the Company is listed
on the New York Stock Exchange, and similar information concerning the Company
can also be inspected and copied at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
The Company has filed with the SEC a Registration Statement on Form S-3
under the Securities Act of 1933, with respect to the securities offered
pursuant to this prospectus. This prospectus, which is part of the registration
statement, does not contain all of the information set forth in the registration
statement, as certain items are omitted in accordance with the rules and
regulations of the SEC. For further information concerning the Company and the
securities offered hereby, reference is made to the registration statement,
which may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the SEC at the locations listed above. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the registration statement or otherwise filed with the
SEC. Each such statement is qualified in its entirety by such reference.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with
the SEC (File No. 1-10660) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1998 as
filed on March 19, 1999;
(b) Current Report on Form 8-K as filed on October 30, 1998;
(c) Current Report on Form 8-K as filed on April 15, 1999; and
(d) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A as filed on November 19, 1990,
including any amendments or reports filed for the purpose of updating
such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act subsequent to the date of this prospectus
and prior to the filing of a post-effective amendment which indicates that all
Redemption Shares offered hereby have been sold or which deregisters all
Redemption Shares then remaining unsold shall be deemed to be incorporated by
reference into this prospectus and made a part hereof from the date of the
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this
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<PAGE>
prospectus to the extent that a statement contained herein or in any other
document subsequently filed with the SEC which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
The Company will provide without charge to each person to whom this
prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to: Berkshire Realty Company, Inc., One Beacon Street, Suite 1550,
Boston, Massachusetts 02108, Attention: Investor Communications Department,
telephone (888) 867-0100.
DESCRIPTION OF THE CAPITAL STOCK OF THE COMPANY
The authorized capital stock of the Company consists of 140,000,000 shares
of common stock and 60,000,000 shares of Preferred Stock.
Common Stock
Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock, holders of
shares of common stock are entitled to one vote per share on all matters to be
voted on by shareholders and are entitled to receive ratably such dividends as
may be declared in respect of the common stock by the Board of Directors in its
discretion from funds legally available therefor. In the event of the
liquidation, dissolution or winding up of the Company, holders of common stock
are entitled to share ratably in all assets remaining after payment of all debts
and other liabilities and any liquidation preference of the holders of preferred
stock. Holders of common stock have no pre-emptive, subscription, conversion or
redemption rights and have no cumulative voting rights. Matters submitted for
shareholder approval generally require a majority vote of the shares present and
voting thereon; certain matters, however, require a supermajority vote. The
outstanding shares of common stock are fully paid and nonassessable.
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<PAGE>
Preferred Stock
General. The Board of Directors is empowered by the Company's Restated
Certificate of Incorporation, as amended (the "Certificate") to designate and
issue from time to time one or more classes or series of Preferred Stock without
shareholder approval. The Board of Directors may fix the relative rights,
limitations, preferences and privileges of each class or series of Preferred
Stock so issued. Because the Board of Directors has the power to establish the
preferences and rights of each class or series of Preferred Stock, it may afford
the holders in any series or class of Preferred Stock preferences, powers and
rights, voting or otherwise, senior to the rights of holders of common stock.
Series 1997-A Preferred Stock. The Company has designated and issued
approximately 2.7 million shares of the Series 1997-A Preferred pursuant to the
authority granted by the Certificate. As of the date hereof, approximately 2.3
million shares of Series 1997-A Preferred are owned by affiliates of Westbrook
Partners, L.L.C. and the balance is owned by six clients of Morgan Stanley, Dean
Witter, Discover & Co. The outstanding shares of Series 1997-A Preferred are
fully paid and nonassessable. The Certificate of Designation for the Series
1997-A Preferred sets forth the preferences, powers and rights of the holders of
shares of such stock including, but not limited to, the following:
Dividends
Holders of shares of Series 1997-A Preferred are entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the payment of dividends, preferential cumulative quarterly cash dividends equal
to the greater of:
o 2.25% of $25.00 per share (the price per share paid upon issuance of
the Series 1997-A Preferred) (this $25.00, the "Stated Value") and
o the dollar amount of the dividend paid per share of common stock
multiplied by the number of shares of common stock into which each
share of Series 1997-A Preferred is then entitled to be converted.
-28-
<PAGE>
Such dividends accrue whether or not the Company has earnings or surplus and are
payable before any dividends or distributions are paid on, or the Company makes
any redemptions or purchases of, shares of common stock.
Voting Rights
Holders of shares of Series 1997-A Preferred are entitled to vote, together
with the holders of common stock as one class, on all matters on which the
holders of common stock are entitled to vote. Each share of Series 1997-A
Preferred is entitled to the number of votes as equal the number of shares of
common stock into which a share of Series 1997-A Preferred is then entitled to
be converted. The affirmative vote of a majority of the Series 1997-A Preferred
is required in order to:
o issue additional shares of Series 1997-A Preferred or increase the
number of authorized shares of Series 1997-A Preferred.
o authorize any reclassification of the Series 1997-A Preferred.
o require the exchange of Series 1997-A Preferred.
o amend, alter or repeal any provisions of the By-Laws of the Company in
a manner that would adversely affect the holders of Series 1997-A
Preferred.
o amend, alter or repeal any provisions of the Certificate of the
Company, the terms of the Series 1997-A Preferred or any other
pertinent organizational document in a manner that would adversely
affect the rights and preferences of the Series 1997-A Preferred.
In addition, for so long as there is outstanding at least 793,730 shares of
Series 1997-A Preferred, the affirmative vote of a majority of the Series 1997-A
Preferred is required for the following actions:
o the transfer by the Company of the ownership of any interest in the
General Partner of BRI Partnership, the transfer by the General Partner
to a third party of the right to exercise all or a portion of its
rights as the General Partner of BRI Partnership or
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<PAGE>
the transfer by the Company in a single transaction or series of
transactions of assets owned directly or indirectly by the Company
having a value in excess of 10% of the fully-diluted market
capitalization of the Company within any 90-day period or 20% of such
market capitalization within any 360-day period.
o the Company's termination as a REIT.
o the alteration of the Company's business such that real estate assets
owned directly or indirectly by the Company are, on a square foot
basis, less than 90% invested in multifamily residential properties.
o the transfer, on or before September 19, 1998, of more than 30% of the
common stock or Units held directly or indirectly by either Douglas
Krupp, the Chairman of the Board, or David F. Marshall, the President
and Chief Executive Officer.
Holders of Series 1997-A Preferred are entitled to elect one Director to
the Board of Directors of the Company. In addition, if four consecutive Series
1997-A Preferred quarterly dividends are in arrears, then the number of
directors of the Company will be increased by the smallest number representing a
majority of the number of Directors of the Company, and the holders of Series
1997-A Preferred will be entitled to elect such number of Directors.
Mergers and Similar Transactions
Upon
o the transfer of substantially all the assets owned directly or
indirectly by the Company;
o the merger or consolidation of the Company or BRI Partnership with a
third party (other than a merger of the Company and a wholly-owned
subsidiary of the Company in which the fully-diluted market
capitalization of the Company is unchanged);
o any recapitalization of the Company, BRI Partnership and subsidiaries
of the Company, considered as a whole, in a single transaction or
series of transactions,
-30-
<PAGE>
aggregating 50% or more of the fully-diluted market capitalization of
the Company; or
o a change of control of the Company or BRI Partnership,
holders of Series 1997-A Preferred will be entitled to receive at their option
either (1) out of the assets of the Company available for distribution to
shareholders and before any payment to holders of common stock, an amount per
share equal to 115% of the sum of the Stated Value and all accrued and unpaid
dividends or (2) common stock on conversion of their Series 1997-A Preferred.
Liquidation
Upon liquidation, dissolution or winding-up of the Company, holders of
Series 1997-A Preferred will be entitled to receive at their option either:
o out of the assets of the Company available for distribution to
shareholders and before any payment to holders of common stock, an
amount per share as set forth below:
-31-
<PAGE>
<TABLE>
<CAPTION>
Percent of Stated Value, together
Date of liquidation, dissolution or winding-up accrued and unpaid dividends
- ---------------------------------------------- ---------------------------------
<S> <C>
Before September 25, 2002 115%
On or after September 25, 2002 but before 110%
September 25, 2003
On or after September 25, 2003 but before 105%
September 25, 2004
On or after September 25, 2004 100%
</TABLE>
or
o common stock on conversion of their Series 1997-A Preferred.
Notwithstanding the foregoing, if liquidation, dissolution or winding-up of the
Company occurs as a result of the adoption and implementation of a plan of
liquidation pursuant to rights granted to shareholders in the Company's
Certificate (see "-- Termination"), then holders of Series 1997-A Preferred who
voted in favor of the adoption of that plan will be entitled to receive at their
option either:
o an amount per share equal to 100% of the sum of the Stated Value and all
accrued and unpaid dividends or
o common stock on conversion of their Series 1997-A Preferred.
Conversion
Each share of Series 1997-A Preferred is convertible at the option of the
holder beginning September 19, 1998 into 2.0756 shares of common stock, based on
a conversion price of $12.04 per share of common stock. The conversion price is
subject to adjustment in certain events.
Redemption
In the event of the Company's termination as a REIT, each holder of Series
1997-A Preferred will have the right to require the Company to redeem any or all
of such holder's shares of Series 1997-A Preferred at a
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<PAGE>
redemption price per share equal to 115% of the sum of the Stated Value and all
accrued and unpaid dividends.
Priority
The terms of the Series 1997-A Preferred provide that it will rank prior to
any other series of Preferred Stock, prior to common stock and prior to any
other class or series of capital stock of the Company with respect to the
payment of dividends, the right to redemption and the distribution preference in
the event of a change in ownership or the liquidation, dissolution or winding-up
of the Company. Except as otherwise agreed to in the Stock Purchase Agreement
among the Company, Westbrook Partners, L.L.C. and Westbrook Berkshire Holdings,
L.L.C., pursuant to which the shares of Series 1997-A Preferred were issued and
sold, holders of Series 1997-A Preferred have no preemptive rights.
Charter and By-Law Provisions
General. Shareholders' rights and related matters are governed by the
Delaware General Corporation Law and the Company's Certificate and By-Laws, (the
"Organizational Documents"). Certain provisions of the Organizational Documents,
which are summarized below, may make it more difficult to change the composition
of the Board of Directors and may discourage or make more difficult any attempt
by a person or group to obtain control of the Company.
Voting Requirements. Holders of shares of common stock of the Company and
Series 1997-A Preferred (voting on an as converted basis with the holders of
shares of common stock although part of the same class), by a majority or
supermajority vote, may take certain actions, including approving amendments to
the Company's Certificate. Any such change, if approved by the holders of the
requisite number of shares, would be binding on all nonconsenting shareholders.
Under the Organizational Documents, a supermajority vote is required in order to
amend those portions of the Organizational Documents which concern:
o the definition of "supermajority".
o the requirements for amending the Organizational Documents.
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<PAGE>
o the requirements regarding Excess Share ownership.
o the actions which require a supermajority vote.
o the requirements regarding business combinations.
o the staggering of the terms of the Directors.
o the limitation of the liability of Directors.
o the perpetual life of the Company.
A "supermajority" vote is defined to mean the vote or consent of shareholders
owning at least 66-2/3% of the outstanding shares of capital stock entitled at
the time to vote on the election of Directors. In addition, holders of shares of
Series 1997-A Preferred have the special voting rights described under " --
Preferred Stock -- Series 1997-A Preferred Stock." Shareholders may not take
action by written consent without a meeting.
Special Meetings. Special meetings may be called, to address specific
Company matters, by the Chairman of the Board, the President of the Company or a
majority of the Directors or independent Directors. Shareholders may not call a
special meeting.
Staggered Board of Directors. The Certificate classifies the Directors,
concerning the term of their respective directorships, into three classes, one
of which is elected annually.
The provisions for a classified Board, together with related provisions
designed to strengthen the position of the Board by
o providing for limitations on the removal of Directors and the filling of
vacancies on the Board;
o requiring that shareholder action be taken only at an annual meeting or
a special meeting and limiting the ability of shareholders to call
special meetings;
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<PAGE>
o prescribing procedures for the advance notice of shareholder proposals
and nominations of Directors by the shareholders; and
o requiring a supermajority vote to effect changes in certain provisions,
have the overall effect of making it more difficult to acquire and exercise
control of the Company and to remove incumbent officers and Directors, providing
such officers and Directors with enhanced ability to retain their positions.
Such provisions may also limit shareholder participation in certain types of
transactions that might be proposed whether or not such transactions were
favored by a majority of shareholders.
Business Combinations
The Organizational Documents affirmatively adopt Section 203 of the
Delaware General Corporation Law, which prohibits Interested Shareholders (as
defined below) from engaging in a Business Combination with the Company.
Accordingly, the Organizational Documents provide that the Company shall not
engage in any Business Combination (as defined below) with any Interested
Shareholder for a period of three years following the time that such shareholder
became an Interested Shareholder, unless:
o prior to such time, the Board approved either the Business Combination
or the transaction which resulted in the shareholder becoming an
Interested Shareholder;
o upon consummation of the transaction which resulted in the shareholder
becoming an Interested Shareholder, the Interested Shareholder owned at
least 85% of the voting shares of the Company then outstanding,
excluding shares held by Directors who are also officers of the Company
and employees' stock plans in which employees do not have the right to
determine confidentially whether shares held by the plan will be
tendered in a tender or exchange offer; or
o at or subsequent to such time, the Business Combination is approved by
the Board and authorized by a supermajority vote, excluding the shares
owned by the Interested Shareholder.
-35-
<PAGE>
The term "Business Combination" is defined to include, among other things, a
merger or consolidation of the Company with, or caused by, an Interested
Shareholder and other specified transactions which would have the effect of the
Interested Shareholder gaining control of the Company. An "Interested
Shareholder" includes, among others, any person owning 15% or more of the
outstanding voting shares of the Company; provided, however that the term
"Interested Shareholder" does not include any person whose ownership of shares
in excess of 15% is the result of action taken solely by the Company. In that
event, such person would be considered an Interested Shareholder if he
thereafter acquired additional voting shares of the Company, except as a result
of further Company action not caused by such Interested Shareholder.
The provisions of the Organizational Documents concerning Business
Combinations and the restriction on the transfer of shares which are described
above cannot be changed except by amendment to the Organizational Documents by a
supermajority vote.
Pursuant to the Delaware General Corporation Law, the Company cannot merge
with or sell all or substantially all of the assets of the Company, except
pursuant to a resolution approved by the affirmative vote of a majority of the
outstanding shares entitled to vote on the resolution. In addition, the
partnership agreement requires that any merger or sale of all or substantially
all of the assets of or dissolution of BRI Partnership be approved by the
affirmative vote of a majority of the outstanding Units.
Shareholder Rights Plan
The Company may adopt a Shareholder Rights Plan (a plan intended to force
the initiator of a hostile takeover to negotiate by granting the shareholders
rights to buy shares at a bargain price). Such a Plan (i) may have the effect of
discouraging changes of control of the Company, and (ii) may limit the
opportunity of a shareholder to receive a premium for his or her shares in the
event an investor is making purchases to assemble a block of shares.
Restrictions on the Ownership and Transfer of Excess Shares
Tax Requirements. For the Company to qualify as a REIT under the Internal
Revenue Code of 1986 (the "Code"), not more than 50% of its outstanding shares
may be owned by five or fewer individuals during the last half of the year, and
the shares of
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<PAGE>
common stock must be owned by 100 or more persons during at least 335 days of a
taxable year of 12 months or during a proportionate part of a shorter taxable
year. Furthermore, the Company cannot own, directly or by attribution, 10% or
more of any tenant of a property or a property securing a mortgage loan
investment from which the Company is entitled to receive an additional equity
return.
Excess Shares. The Organizational Documents:
o provide that if any person or group of affiliated persons directly or
indirectly acquires ownership, in the aggregate, of more than 9.8% of
the then outstanding shares of capital stock ("Excess Shares") such
Excess Shares shall be deprived of voting rights, shall not be included
in any quorum count and any dividends and distributions on such shares
shall be paid into an escrow account payable to the holder of the Excess
Shares at the time they cease to be Excess Shares, and
o empower the Board (1) to refuse to permit any transfer of shares of
capital stock which, in its sole discretion, would jeopardize the status
of the Company as a REIT and (2) to repurchase any Excess Shares to
maintain or bring the ownership of shares into conformity with such 9.8%
limit.
The 9.8% limitation on ownership of shares of common stock encompasses shares
held directly or indirectly as a result of options, warrants or other
convertible securities.
The Company may require each proposed transferee of shares of capital stock
to deliver a statement or affidavit setting forth the number of shares, if any,
already owned, directly, indirectly or by attribution by such transferee and may
refuse to permit any transfer of shares which would cause an accumulation of
shares that would jeopardize the status of the Company as a REIT. A shareholder
who knowingly holds Excess Shares is required to indemnify the Company for any
losses the Company may suffer as a result of such holdings.
Purchase by the Company. Excess Shares shall be deemed to be offered for
sale to the Company or its designees. The purchase price will be the average
closing sales price as reported by the NYSE during the 30-day period ending on
the business day prior to the purchase date. The Organizational Documents
further provide that the purchase
-37-
<PAGE>
price may be paid in the form of a promissory note of the Company. However, if
the person from whom the Excess Shares were purchased sells a like number of his
or her remaining shares within 30 days of the purchase date, then the Company
shall rescind the purchase of the Excess Shares unless counsel to the Company is
of the opinion that such rescission would jeopardize the Company's tax status as
a REIT. In that event, in lieu of rescission, the Company shall make immediate
payment for the shares.
Exceptions. Such provisions do not apply to the acquisition of shares by an
underwriter in a public offering by the Company or to any transaction involving
the issuance of shares by the Company when its qualification as a REIT would not
be jeopardized. Such provisions did not apply to the issuance and sale of the
Series 1997-A Preferred or to the Offering.
Amendment. The provisions of the Organizational Documents concerning Excess
Shares cannot be changed except by amendment of the Organizational Documents by
a supermajority vote.
Dissolution
The Company may be dissolved at any time by supermajority vote and,
otherwise, pursuant to the procedure set forth in the Delaware General
Corporation Law. The Certificate requires the Company's Board of Directors to
prepare and submit to the shareholders on or before December 31, 1998 a proposal
to liquidate the Company's assets and distribute the net proceeds of such
liquidation. The Company has filed preliminary proxy materials with the SEC
relating to this proposal. The liquidation proposal will become effective only
if approved by shareholders holding a majority of voting shares then
outstanding.
Limitation of Directors' Liability
The Company's Certificate provides for indemnification of its officers and
Directors to the fullest extent permitted by Sections 145 and 102(b)(7) of the
Delaware General Corporation Law and relieves the Directors of certain monetary
liabilities to the Company and its shareholders. In general, Delaware law
permits the Company to indemnify its officers and Directors so long as they act
in good faith and in a manner reasonably believed by them to be in, or not
opposed to, the best interests of the Company. Subject to the provisions of
Sections 145 and 102(b)(7) of the Delaware General Corporation Law, the
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<PAGE>
Company intends to indemnify its officers and Directors against losses,
liabilities and expenses (including attorneys' fees) incurred by them that are
related to their being officers or Directors of the Company.
Transfer Agent
The transfer agent and registrar for the Company's common stock is American
Stock Transfer & Trust Company.
DESCRIPTION OF UNITS AND CONVERSION OF UNITS
General. Unitholders may, subject to certain limitations, require the
Company to convert all or a portion of their Units. This right to convert must
be exercised pursuant to written notice delivered to the Company specifying the
Units to be converted by such Unitholder. Upon receipt of the notice, the
Company will, at the direction of BRI Partnership:
o convert each Unit specified in the notice into a share of common stock
(subject to certain adjustments in the event of stock dividends and
stock splits); or
o purchase each such Unit for cash in an amount equal to the market value
of a share of common stock (subject to the same adjustments).
If the Unitholder has registration rights for shares received upon conversion of
Units in accordance with a registration rights agreement, the Unitholder may
indicate in his or her exercise notice that the conversion of his or her Units
into shares will be conditioned upon the effectiveness of the registration of
such shares under the securities laws. The "market value" of the common stock
for purposes of conversion of Units for cash will be equal to the average of the
closing trading price of the common stock for the five trading days prior to the
day on which the exercise notice was received by the Company.
The Company anticipates that it generally will be required to acquire any
Units specified in an exercise notice by the issuance of a like number of shares
of common stock. Such an acquisition by the Company will be treated as a sale of
the
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<PAGE>
Units to the Company for federal income tax purposes. See " -- Tax Consequences
of Conversion." Upon the receipt of Redemption Shares, a Unitholder will have
rights as a shareholder of the Company, including the right to receive dividends
from the time of such Unitholder's acquisition of the Redemption Shares.
A Unitholder may notify the Company of his or her desire to exercise the
right to convert with respect to Units that were issued one year or more before
the date of the exercise notice. This right may not be exercised to the extent
delivery of Redemption Shares would be prohibited under the provisions of the
Company's Organizational Documents to protect the Company's qualification as a
REIT.
Tax Consequences of Conversion
The following discussion summarizes certain federal income tax
considerations that may be relevant to a Unitholder should he or she exercise
his or her right to redeem Units.
Tax Treatment of Conversion of Units. If the Company purchases Units
tendered for conversion, such transaction will be treated as a sale fully
taxable to the Unitholder, and the Unitholder will be treated as realizing for
tax purposes an amount equal to the sum of the cash or the value of the common
stock received in the exchange plus the amount of any BRI Partnership
liabilities allocable to the converted Units at the time of the conversion. The
determination of the amount of gain or loss is discussed more fully below. If
the Company elects to redeem a Unitholder's Units for cash and BRI Partnership
redeems such Units for cash that the Company contributes to BRI Partnership to
effect such redemption, the redemption likely also would be treated for tax
purposes as a sale of such Units to the Company in a fully taxable transaction,
although such a result is not certain. In that event, the Unitholder would be
treated as realizing an amount equal to the sum of the cash received in the
exchange plus the amount of any BRI Partnership liabilities allocable to the
redeemed Units at the time of the redemption. The determination of the amount
and character of gain or loss in the event of such a sale is discussed more
fully below.
If the Company does not elect to purchase Units tendered for redemption and
BRI Partnership redeems a Unitholder's
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<PAGE>
Units for cash that is not contributed by the Company to effect the redemption,
the tax consequences would be the same as described in the previous paragraph.
However, if BRI Partnership redeems less than all of a Unitholder's Units, the
Unitholder would not be permitted to recognize any loss occurring on the
transaction and would recognize taxable gain only to the extent that the cash
exceeded the Unitholder's adjusted basis in all of its Units immediately before
the redemption.
If the Company contributes cash to BRI Partnership to effect a redemption
and the transaction is treated as the redemption of a Unitholder's Units by BRI
Partnership rather than a sale of Units to the Company, the income tax
consequences to the Unitholder would be as described in the preceding paragraph.
Tax Treatment of Disposition of Units by a Unitholder Generally. If a Unit
is disposed of in a manner that is treated as a sale of the Unit, the
determination of gain or loss from the sale or other disposition will be based
on the difference between the amount considered realized for tax purposes and
the adjusted tax basis in such Unit. See "-- Basis of Units." Upon the sale of a
Unit, the "amount realized" will be measured by the sum of the cash and fair
market value of other property (e.g., Redemption Shares) received plus the
amount of any BRI Partnership liabilities allocable to the Units sold. To the
extent that the amount of cash or property received plus the allocable share of
any BRI Partnership liabilities exceeds the limited partner's adjusted tax basis
in the Units disposed of, such Unitholder will recognize gain. It is possible
that the amount of gain recognized or even the tax liability resulting from such
gain could exceed the amount of cash and/or the value of any other property
(e.g., Redemption Shares) received upon such disposition.
Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that the amount realized
upon the sale of a Unit attributable to a Unitholder's share of "unrealized
receivables" or "inventory" of BRI Partnership (as defined in Section 751 of the
Code) exceeds the basis attributed to those assets, such excess will be treated
as ordinary income. Unrealized receivables include, to the extent not previously
included in BRI Partnership income, any rights to payment for services rendered
or to be rendered. Unrealized receivables also include amounts that would be
subject to recapture as ordinary income
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if BRI Partnership had sold its assets at their fair market value at the time of
the transfer of a Unit.
Basis of Units. In general, a Unitholder who acquired his or her Units by
contribution of property and/or money to BRI Partnership had an initial tax
basis in his Units ("Initial Basis") equal to the sum of (1) the amount of money
contributed (or deemed contributed as described below) and (2) his adjusted tax
basis in any other property contributed in exchange for such Units, and less the
amount of any money distributed (or deemed distributed, as described below) in
connection with the acquisition of the Units. The Initial Basis of Units
acquired by other means would have been determined under the general rules of
the Code, including the partnership provisions, governing the determination of
tax basis. Other rules, including the "disguised sale" rules discussed below,
also may affect Initial Basis, and Unitholders are urged to consult their own
tax advisors regarding their Initial Basis. Generally, a Unitholder's Initial
Basis in his Units is increased by
o such Unitholder's share of BRI Partnership taxable and tax-exempt
income; and
o increases in such Unitholder's allocable share of liabilities of BRI
Partnership.
Conversely, a Unitholder's basis in his Units is decreased (but not below zero)
by
o such Unitholder's share of BRI Partnership distributions;
o decreases in such Unitholder's allocable share of liabilities of BRI
Partnership;
o such Unitholder's share of losses of BRI Partnership; and
o such Unitholder's share of nondeductible expenditures of BRI Partnership
that are not chargeable to his capital account.
Potential Application of the Disguised Sale Regulations to a Redemption of
Units. There is a risk that a redemption by BRI Partnership of Units issued in
exchange for a
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contribution of property to BRI Partnership may cause the original transfer of
property to BRI Partnership in exchange for Units to be treated as a "disguised
sale" of property. Section 707(a)(2)(B) of the Code and the Treasury Regulations
thereunder (the "Disguised Sale Regulations") generally provide that, unless one
of the prescribed exceptions is applicable, a partner's contribution of property
to a partnership and a simultaneous or subsequent transfer of money or other
consideration (which may include the assumption of or taking subject to a
liability) from the partnership to the partner will be presumed to be a sale, in
whole or in part, of such property by the partner to the partnership. Further,
the Disguised Sale Regulations provide generally that, in the absence of an
applicable exception, if money or other consideration is transferred by a
partnership to a partner within two years of the partner's contribution of
property, the transaction is presumed to be a sale of the contributed property
unless the facts and circumstances clearly establish that the transfer did not
constitute a sale. The Disguised Sale Regulations also provide that if two years
have passed between the transfer of money or other consideration and the
contribution of property, the transaction will be presumed not to be a sale
unless the facts and circumstances clearly establish that the transfer
constitutes a sale.
Accordingly, if a Unit is redeemed by BRI Partnership from a Unitholder who
holds Units that were issued in exchange for a contribution of property to BRI
Partnership, the IRS could contend that the Disguised Sale Regulations apply
because the Unitholder will thus receive cash subsequent to a previous
contribution of property to BRI Partnership. In that event, the IRS could
contend that the contribution was taxable as a disguised sale under the
Disguised Sale Regulations. Any gain recognized thereby may be eligible for
installment reporting under Section 453 of the Code, subject to certain
limitations. In addition, in such event, the Disguised Sale Regulations might
apply to cause a portion of the proceeds received by a redeeming Unitholder to
be characterized as original issue discount on a deferred obligation which would
be taxable as interest income in accordance with the provisions of Section 1272
of the Code. Each Unitholder is advised to consult its own tax advisors to
determine whether redemption of his or her Units could be subject to the
Disguised Sale Regulations.
Comparison of Ownership of Units and Common Stock
The nature of an investment in common stock of the Company is generally
economically equivalent to an investment in
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Units in BRI Partnership. There are, however, some differences between ownership
of Units and ownership of common stock, some of which may be material to
investors. The information below highlights a number of significant differences
between BRI Partnership and the Company relating to, among other things:
o form of organization;
o permitted investments;
o policies and restrictions;
o management structure;
o compensation and fees;
o investor rights; and
o federal income taxation.
These comparisons are intended to assist Unitholders in understanding how their
investment will be changed if their Units are converted into common stock. This
discussion is summary in nature and does not constitute a complete discussion of
these matters, and investors should carefully review the balance of this
Prospectus, including the documents incorporated by reference herein, and the
registration statement of which this Prospectus is a part for additional
important information about the Company.
Form of Organization and Assets Owned. BRI Partnership is organized as a
Delaware limited partnership. A substantial amount of the Company's operations
are conducted through BRI Partnership which, directly or through subsidiaries,
owns the Properties.
The Company is organized under the laws of the State of Delaware. The
Company maintains both a special limited partner interest and, through its
wholly owned direct subsidiary, the General Partner, a general partner interest
in BRI Partnership, which gives the Company an indirect investment in the
Properties and other assets owned by BRI Partnership. As of March 1, 1999, the
Company held approximately 79.16% of the partnership interests in BRI
Partnership. Such interest may increase as Units are acquired by the Company or
decrease as additional assets are acquired in exchange for Units in BRI
Partnership.
Term. BRI Partnership has a stated termination date of December 31, 2095,
although it may be terminated earlier under certain circumstances. The Company
has a perpetual term and, unless
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the shareholders vote to liquidate the Company's assets and distribute the net
proceeds of such liquidation, intends to continue its operations for an
indefinite time period. See "Risk Factors -- Vote Regarding Continuation of the
Company."
Purpose and Permitted Investments. The purpose of BRI Partnership as stated
in its partnership agreement may be summarized as the acquisition, sale,
operation, development, financing, mortgaging and leasing of real estate and
interests in real estate, including the Properties. The partnership agreement
requires the business of BRI Partnership to be conducted in such a manner that
will permit the Company to be classified as a REIT for federal income tax
purposes. BRI Partnership may, subject to the foregoing limitation, invest or
enter into partnerships, joint ventures or similar arrangements and may own
interests in any other entity.
Under its Certificate, the Company may engage in any lawful activity
permitted under the Delaware General Corporation Law. Under the partnership
agreement, the General Partner of BRI Partnership is responsible for the
management of BRI Partnership's business and affairs and has full and complete
power, authority and discretion to take such action on behalf of BRI Partnership
as it deems necessary or appropriate in order to carry out the purposes of BRI
Partnership. However, the General Partner may not do any act in contravention of
the partnership agreement or applicable law nor may the General Partner possess
any BRI Partnership property or assign any rights in such property for other
than BRI Partnership purposes. The Company agrees that all of its activities and
business operations will be conducted directly or indirectly through BRI
Partnership.
Additional Equity. BRI Partnership is authorized to issue Units and other
partnership interests to its partners or to other persons for such consideration
and on such terms and conditions as the General Partner, in its sole discretion,
may deem appropriate.
The Board of Directors of the Company may authorize the issuance of shares
of capital stock of any class, whether now or hereafter authorized, or
securities or rights, convertible into shares of capital stock, for such
consideration as the Board of Directors may deem advisable, subject to such
restrictions or limitations as may be set forth in the Company's Organizational
Documents. The proceeds from the
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issue of equity capital by the Company will be loaned or contributed to BRI
Partnership in exchange for Units or other interests in BRI Partnership.
Borrowing Policies. The partnership agreement imposes no restrictions on
BRI Partnership on borrowings, and the General Partner has full power and
authority to borrow money on behalf of BRI Partnership.
The Company is not restricted under its Organizational Documents from
incurring borrowings. The Company has, however, adopted a policy that limits
Company debt to 50% of the value of its assets. The foregoing reflects the
Company's general policy over time and is not intended to operate in a manner
that inappropriately restricts the Company's ability to raise additional
capital, including additional debt, to implement its planned growth, to pursue
attractive acquisition opportunities that may arise or to otherwise act in a
manner that the Board of Directors believes to be in the best interests of the
Company and its shareholders. The Board of Directors, with the assistance of
management of the Company, may re-evaluate from time to time its debt and other
capitalization policies in light of then current economic conditions, including
the relative costs of debt and equity capital, the market value of its
properties, growth and acquisition opportunities, and the market value of its
equity securities in relation to the Company's view of the market value of its
properties, and may modify its debt policy. Such modification may include
increasing or decreasing its ratio of debt to value or substituting another
measuring standard.
Other Investment Restrictions. Other than restrictions precluding
investments by BRI Partnership that would adversely affect the qualification of
the Company as a REIT, the partnership agreement imposes no restrictions upon
BRI Partnership's authority to enter into certain transactions, including, among
others, making investments, lending BRI Partnership funds, or reinvesting BRI
Partnership's cash flow and net sale or refinancing proceeds.
The Company's Organizational Documents do not impose any restrictions upon
the types of investments that may be made by the Company.
Management Control. All management powers over the business and affairs of
BRI Partnership are vested in the General
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Partner, and no limited partner of BRI Partnership has any right to participate
in or exercise control or management power over the business and affairs of BRI
Partnership. The General Partner may not be removed by the limited partners
(other than by the Company as special limited partner) with or without cause.
The Board of Directors has exclusive control over the Company's business
and affairs subject only to the restrictions set forth in the Organizational
Documents. The Board of Directors is divided into three classes. At each annual
meeting of the shareholders, the successors of the class of directors whose
terms expire at that meeting will be elected. The policies adopted by the Board
of Directors may be altered or eliminated without advice of the shareholders.
Accordingly, except for their vote in the elections of directors, shareholders
have no control over the day-to-day business policies of the Company.
Management Liability and Indemnification. The partnership Agreement
generally provides that the General Partner will incur no liability to BRI
Partnership or any limited partner for losses sustained or liabilities incurred
as a result of any act or omission if the General Partner or its affiliates,
directors, officers, shareholders and such other persons acting in its or their
behalf acted in good faith and in the belief that such conduct was in, or not
opposed to, the best interests of BRI Partnership. The partnership agreement
also provides for indemnification of the General Partner, the Company, the
directors, officers and shareholders of the General Partner and the Company, and
such other persons acting on its or their behalf, against expenses, judgments,
fines and amounts paid in settlement arising from any threatened, pending or
completed actions, suits or proceedings that relate to the operations of BRI
Partnership in which such person may be involved.
The Company's Organizational Documents provide certain limitations on the
liability of the Company's directors and officers for monetary damages to the
Company. The Organizational Documents obligate the Company to indemnify its
Directors and officers, and permit the Company to indemnify its employees and
other agents, against certain liabilities incurred in connection with their
service in such capacities. These provisions could reduce the legal remedies
available to the Company and the shareholders against these individuals.
The Company's By-Laws require it to indemnify its officers, directors and
certain other parties to the fullest extent permitted from
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time to time by Delaware law. The Delaware General Corporation Law permits a
corporation to indemnify any present or former director, officer, employee or
agent who has been successful on the merits or otherwise in the defense of any
action, suit or proceeding or in defense of any claim, issue or matter therein,
to which he or she was made a party by reason of his or her service in that
capacity, against reasonable expenses incurred by him or her in connection
therewith provided it is established that:
o he or she acted in good faith and in a manner which he or she reasonably
believed to be in, or not opposed to, the best interests of the Company;
or
o in the case of a criminal proceeding, he or she had no reasonable cause
to believe that his or her conduct was unlawful.
The Delaware General Corporation Law also permits the Company to provide
indemnification and advance expenses to a present or former Director or officer
who served a predecessor of the Company in such capacity, and to any employer or
agent of the Company or a predecessor of the Company The Company has purchased
director and officer liability insurance for the purpose of providing a source
of funds to help pay for any indemnification expenses it may incur. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Anti-takeover Provisions. The General Partner has exclusive management
power over the business and affairs of BRI Partnership, and the partnership
agreement makes no provision for the removal of the General Partner by the
limited partners (other than the special limited partner).
The Organizational Documents of the Company and Delaware law contain a
number of provisions that may have the effect of delaying or discouraging an
unsolicited proposal for the acquisition of the Company or the removal of
incumbent management.
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Voting Rights. Under the partnership agreement, the limited partners do not
have voting rights relating to the operation and management of BRI Partnership
except in connection with certain amendments to the partnership agreement.
Shareholders of the Company have the right to vote, among other things, on
a merger or sale of substantially all of the assets of the Company, certain
amendments to the Certificate and dissolution of the Company. The Company is
managed and controlled by a Board of Directors consisting of three classes
having staggered terms of office. Each class is to be elected by the
shareholders at annual meetings of the Company. Each share of common stock has
one vote, and the Certificate permits the Board of Directors to classify and
issue Preferred Stock in one or more series having voting power which may differ
from that of the common stock.
Amendment of the partnership agreement or the Company's Certificate.
Amendments to the partnership agreement may be proposed by the General Partner
and generally require approval of limited partners (including the special
limited partner) holding a majority of the outstanding limited partner
interests. Certain amendments that would, among other things, reduce any limited
partner's interest in BRI Partnership or his, her or its share of distributions,
create any obligations or impair any right of a limited partner must be approved
by the General Partner, and each limited partner that would be adversely
affected by any such amendment.
Amendments to the Company's Certificate, its term, certain changes to its
capital stock provisions, changes to the powers of the Board of Directors,
removal of a director, the excess shares and REIT qualification provisions, the
business combinations provision, shareholder action, the staggered board,
limitation on liability, standards for evaluation of tender, merger and purchase
offers, and amendment of the By-Laws must be approved by the Board of Directors
and by affirmative vote of the holders of not less than two-thirds of all votes
entitled to be cast on the matter. Other matters require an affirmative vote by
a majority of the shareholders.
Vote Required to Dissolve BRI Partnership or the Company. Under Delaware
limited partnership law, BRI Partnership may be dissolved, other than in
accordance with the terms of the partnership agreement, only upon the
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written consent of all of the partners, the withdrawal of the general partner
without replacement or judicial decree. Under Delaware corporation law, the
Board of Directors must obtain the approval of holders of not less than a
majority of all outstanding shares of capital stock of the Company in order to
dissolve the Company.
Vote Required to Sell Assets or Merge. Under the partnership agreement, the
limited partners of BRI Partnership do not have voting rights with respect to
the sale, exchange, transfer or other disposition of all or substantially all of
its assets, including by way of merger or consolidation or other combination of
BRI Partnership.
Under Delaware law and the Company's Certificate, the sale of all or
substantially all of the assets of the Company or any merger or consolidation or
dissolution requires the approval of the Board of Directors and the affirmative
vote of a majority of all the votes entitled to be cast on the matter. No
approval of the shareholders is required for the sale of less than all or
substantially all of the Company's assets.
Compensation, Fees and Distributions. The General Partner does not receive
any compensation for its services as general partner of BRI Partnership. As a
partner in BRI Partnership, however, the General Partner and the Company have
the same right to allocations and distributions as other partners of BRI
Partnership. In addition, BRI Partnership will reimburse the General Partner and
the Company for all expenses incurred relating to the ownership and operation
of, or for the benefit of, BRI Partnership.
The directors and officers of the Company receive compensation for their
services.
Liability of Investors. Under the partnership agreement and applicable
Delaware law, limited partners generally are not liable for the debts and
obligations of BRI Partnership unless they are also a general partner or
participate in the control of the business.
Under Delaware law, shareholders generally are not liable for the debts or
obligations of the Company.
Nature of Investment. The Units constitute equity interests entitling
holders thereof to their pro rata share of cash distributions
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made to the limited partners of BRI Partnership. The Company and the General
Partner are entitled to receive their respective pro rata shares of
distributions made by BRI Partnership with respect to their interests in BRI
Partnership.
Shares of common stock constitute equity interests in the Company. Each
shareholder will be entitled to his pro rata share of any dividends or
distributions paid with respect to common stock. The dividends payable to the
shareholders are not fixed in amount and are paid only if, when and as declared
by the Board of Directors.
Potential Dilution of Rights. The General Partner is authorized, in its
sole discretion and without limited partner approval, to cause BRI Partnership
to issue additional limited partnership interests and other equity securities
for any partnership purpose at any time to the limited partners or to other
persons on terms established by the General Partner.
The Board of Directors of the Company may issue, in its discretion,
additional shares of common stock and has the authority to issue from the
authorized capital stock a variety of other equity securities of the Company
with such powers, preferences and rights as the Board of Directors may designate
at the time. The issuance of additional shares of common stock or other similar
equity securities may result in the dilution of interests of the shareholders.
Liquidity. Subject to certain exceptions, the Unitholders may not transfer
or pledge Units without the consent of the General Partner, which may be
withheld in its sole and absolute discretion.
The common stock is listed on the NYSE. The breadth and strength of this
market will depend, among other things, upon the number of shares outstanding,
the Company's financial results and prospects, the general interest in the
Company's real estate investments and the Company's dividend yield compared to
that of other debt and equity securities.
REGISTRATION RIGHTS
The registration of the Redemption Shares pursuant to the registration
statement of which this Prospectus is a part will discharge the Company's
obligations with respect to such
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Redemption Shares to the Unitholders under the terms of a series of
substantially identical registration rights agreements (the "Registration Rights
Agreements") which the Company entered into in connection with the issuance of
the Units. The following summary does not purport to be complete and is
qualified in its entirety by reference to the Registration Rights Agreements.
Registration of Redemption Shares. Under the Registration Rights
Agreements, the Company is required to file, during the period commencing two
weeks before November 24, 1998 and ending two weeks after November 24, 1998, a
"shelf registration statement" (a "Shelf Registration") covering the Redemption
Shares and to use its best efforts to have such Shelf Registration declared
effective by the Commission on or prior to 90 days after the date of filing. The
Company is required to use its best efforts to keep the Shelf Registration
effective until all the Redemption Shares have been sold pursuant to its terms.
The Company will not be required to maintain the effectiveness of the Shelf
Registration with respect to any Redemption Shares which:
o have ceased to be outstanding;
o have been transferred and (1) the Company has delivered a new
certificate or other evidence of ownership not bearing the restrictive
legend set forth on the certificate issued in connection with the
initial issuance of the Redemption Shares (or other legend of similar
import) and (2) in the reasonable opinion of counsel to the Company, the
subsequent disposition of such shares would not require registration or
qualification under the Securities Act;
o have been sold pursuant to either the Shelf Registration or Rule 144
promulgated under the Securities Act ("Rule 144"); or
o are capable of being sold pursuant to Rule 144.
Expenses and Indemnification. Pursuant to the terms of the Registration
Rights Agreements, the Company has agreed to pay all expenses incurred in the
registration of the Redemption Shares (other than selling commissions and
discounts, brokerage fees and transfer taxes or any legal, accounting and other
expenses incurred by the Unitholders thereunder). The Company also has agreed to
indemnify the Unitholders under the Shelf Registration and its officers,
directors and other affiliated persons and any person who controls the
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Unitholders against any and all losses, claims, damages and expenses arising
under the securities laws in connection with the registration statement or this
Prospectus, subject to certain limitations. In addition, the Unitholders have
agreed to indemnify the Company and its directors, officers and any person who
controls the Company against all losses, claims, damages and expenses arising
under the securities laws insofar as such loss, claim, damage or expense relates
to written information or affidavit furnished to the Company by the Unitholders
for use in the Shelf Registration or Prospectus or an amendment or supplement
thereto. The Company is not required to indemnify the Unitholders for the
failure by the Unitholders to deliver or cause to be delivered the Prospectus or
any amendment or supplement hereto to any purchaser from the Unitholders of
shares covered by the Shelf Registration after the Company has furnished the
Unitholders with a sufficient number of copies of the Prospectus.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
AND CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations and consequences relating to a holder of common stock. The
following discussion, which is not exhaustive of all possible tax
considerations, does not give a detailed description of any state, local, or
foreign tax considerations. Nor does it discuss all of the aspects of federal
income taxation that may be relevant to a prospective shareholder in light of
his or her particular circumstances or to certain types of shareholders
(including insurance companies, tax-exempt entities, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) who are subject to special treatment under
federal income tax laws. The information in this section is based on the Code,
including the provisions of the Taxpayer Relief Act of 1997 (the "1997 Act") and
the IRS Restructuring and Reform Act of 1998 (the "1998 Act"), current,
temporary and proposed Treasury Regulations thereunder, the legislative history
of the Code, current administrative interpretations and practices of the IRS
(including its practices and policies as endorsed in private letter rulings,
which are not binding on the IRS except with respect to the taxpayer that
receives such a ruling), and court decisions, all as of the date hereof. No
assurance can be given that future legislation, Treasury Regulations,
administrative interpretations and court decisions will not significantly change
current law or adversely affect existing interpretations of current law. Any
such change could apply retroactively to transactions preceding the date of the
change. The Company has not requested and does not plan to request any
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rulings from the IRS concerning the tax treatment of the Company or BRI
Partnership. Thus, no assurance can be provided that the statements set forth
herein (which do not bind the IRS or the courts) will not be challenged by the
IRS or will be sustained by a court if so challenged.
Each prospective purchaser of common stock is advised to consult his or her
tax advisor regarding the tax consequences to him or her of the acquisition,
ownership and sale of the securities, including the federal, state, local,
foreign and other tax consequences of such acquisition, ownership and sale and
of potential changes in applicable tax laws.
Taxation of the Company
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Code commencing with its taxable year ended December 31, 1991. The
Company believes that it has been organized and operated in a manner so as to
qualify as a REIT, and the Company intends to continue to operate in such a
manner. So long as the Company qualifies for taxation as a REIT, it generally
will not be subject to federal corporate income taxes on net income that it
distributes currently to shareholders. However, the Company will be subject to
federal income tax in certain circumstances, including the following:
First, the Company will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on its items of tax preference.
Third, if the Company has
o net income from the sale or other disposition of "foreclosure property"
(which is, in general, property acquired by foreclosure or otherwise on
default of a lease
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or a loan secured by the property) which is held primarily for sale to
customers in the ordinary course of business; or
o other nonqualifying income from foreclosure property, it will be subject
to tax at the highest corporate rate on such income.
Fourth, if the Company has net income from prohibited transactions (which
are, in general, certain sales or other dispositions of property (other than
foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy the 75% gross income test or
the 95% gross income test (as discussed below), and has nonetheless maintained
its qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the Company fails the 75% or 95% gross income test.
Sixth, if the Company should fail to distribute during each calendar year
at least the sum of
o 85% of its REIT ordinary income for such year;
o 95% of its REIT capital gain net income for such year; and
o any undistributed taxable income from prior periods, it would be subject
to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed.
Seventh, if the Company acquires or has acquired any asset from a C
corporation (i.e., a corporation generally subject to full corporate-level tax)
in a transaction in which the basis of the asset in the acquiror's hands is
determined by reference to the basis of the asset (or any other asset) in the
hands of the C corporation and the acquiror recognizes gain on the disposition
of such asset during the 10-year period beginning on the date on which such
asset was acquired by it, then to the extent of such asset's "Built-in Gain"
(i.e., the excess of (a) the fair market value of such asset at the time of the
acquisition by the Company over (b) the adjusted basis in such asset, determined
at the time of such acquisition), such gain will be subject to tax at the
highest regular corporate rate applicable, pursuant to anticipated Treasury
Regulations that have yet to be promulgated. The results described
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above with respect to the recognition of Built-In Gain assume that the Company
will make an election pursuant to Notice 88-19 with respect to any such
acquisition.
Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association:
(1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares
of stock, or by transferable certificates of beneficial interest;
(3) that would be taxable as a domestic corporation, but for Sections 856
through 859 of the Code;
(4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code;
(5) the beneficial ownership of which is held by 100 or more persons;
(6) that during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to
include certain entities); and
(7) that meets certain other tests, described below, regarding the nature
of its income and assets.
The Code provides that conditions (1) through (4), inclusive, must be met during
the entire taxable year and that condition (5) must be met during at least 335
days of a taxable year of 12 months, or during a proportionate part of a taxable
year of less than 12 months.
The Company's Organizational Documents contain restrictions regarding the
transfer of its capital stock that are intended to assist the Company in
continuing to satisfy the stock ownership requirements described in conditions
(5) and (6). See "Description of the Capital Stock of the Company --
Restrictions on the Ownership and Transfer of Excess Shares." Moreover, pursuant
to the 1997 Act, for the Company's taxable years commencing on or after January
1, 1998, if the Company complies with regulatory rules pursuant to which it is
required to send annual letters to holders of its capital stock requesting
information
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regarding the actual ownership of the capital stock, and the Company does not
know, or exercising reasonable diligence would not have known, whether it failed
to meet condition (6) above, the Company will be treated as having met the
requirement.
Income Tests. In order to maintain qualification as a REIT, the Company
must satisfy certain gross income requirements, which are applied on an annual
basis. First, at least 75% of the Company's gross income (excluding gross income
from prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain circumstances,
interest) or from certain types of temporary investments. Second, at least 95%
of the Company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from the same items which
qualify under the 75% income test, and from dividends, interest and gain from
the sale or disposition of stock or securities, or from any combination of the
foregoing.
Rent
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements described above only if each of the
following conditions are met:
o The amount of rent must not be based in whole or in part on the income
or profits of any person. However, an amount received or accrued
generally will not be excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales.
o The Code provides that rents received from a tenant will not qualify as
"rents from real property" if the Company, or an owner of 10% or more
of the Company, directly or constructively owns 10% or more of such
tenant (a "Related Party Tenant").
o If rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received
under the lease, then the portion of rent attributable to such personal
property will not qualify as "rents from real property."
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o For rents to qualify as "rents from real property," the Company
generally must not operate or manage the property or furnish or render
services to tenants, other than through an "independent contractor"
that is adequately compensated and from whom the Company derives no
revenue. The "independent contractor" requirement, however, does not
apply to the extent the services provided by the Company are "usually
or customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered "rendered to the
occupant."
Services
Pursuant to the 1997 Act, for the Company's taxable years commencing on or
after January 1, 1998, rents received generally will qualify as rents from real
property even if the Company were to provide services that are not permissible
services so long as the amount received for such services meets a de minimis
standard. The amount received for "impermissible services" with respect to a
property (or, if services are available only to certain tenants, possibly with
respect to such tenants) cannot exceed 1% of all amounts received, directly or
indirectly, by the Company with respect to such property (or, if services are
available only to certain tenants, possibly with respect to such tenants). In
computing any such amounts, the amount that the Company would be deemed to have
received for performing "impermissible services" will be the greater of the
actual amount so received or 150% of the direct cost to the Company of providing
those services.
The Company provides certain services with respect to the Properties
through BRI Partnership, which is not an "independent contractor." However, the
Company believes that all of such services are considered "usually or
customarily rendered" in connection with the rental of space for occupancy only,
so that the provision of such services do not jeopardize the qualification of
rent from the Properties as "rents from real property." In the case of any
services that are not "usual and customary" under the foregoing rules, the
Company intends to employ "independent contractors" to provide such services.
The Company provides certain services with respect to the Properties
through BRI Partnership, which is not an "independent contractor." However, the
Company believes that all of
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such services are considered "usually or customarily rendered" in connection
with the rental of space for occupancy only, so that the provision of such
services do not jeopardize the qualification of rent from the Properties as
"rents from real property." In the case of any services that are not "usual and
customary" under the foregoing rules, the Company intends to employ "independent
contractors" to provide such services.
Relief Provisions
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. It is not
possible, however, to state whether in all circumstances the Company would be
entitled to the benefit of these relief provisions. Even if these relief
provisions were to apply, however, a 100% tax would be imposed with respect to
the "excess net income" attributable to the failure to satisfy the 75% and 95%
gross income tests.
Asset Tests. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets:
o at least 75% of the value of the Company's total assets must be
represented by real estate assets (including (1) its allocable share of
real estate assets held by partnerships in which the Company has an
interest and (2) stock or debt instruments purchased with the proceeds
of a stock offering or long-term (at least five years) debt offering of
the Company and held for not more than one year following the receipt
by the Company of such proceeds), cash, cash items and government
securities;
o not more than 25% of the Company's total assets may be represented by
securities other than those in the 75% asset class; and
o of the investments included in the 25% asset class, the value of any
one issuer's securities (other than an interest in a partnership or
shares of a "qualified REIT subsidiary" or another REIT) owned by the
Company may not exceed 5% of the value of the Company's total assets,
and the Company may not own more than 10% of any one issuer's
outstanding voting securities (other than an interest in a
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partnership or securities of a "qualified REIT subsidiary" or another
REIT).
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company intends to maintain adequate records of the value of
its assets to ensure compliance with the asset tests and plans to take such
other action within 30 days after the close of any quarter as may be required to
cure any noncompliance. However, there can be no assurance that such other
action will always be successful.
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its shareholders in an amount at least equal to
o the sum of (1) 95% of the Company's "REIT taxable income" (computed
without regard to the dividends paid deduction and the Company's net
capital gain) and (2) 95% of the net income (after tax), if any, from
foreclosure property, minus
o the sum of certain items of non-cash income.
In addition, if the Company disposes of any Built-In Gain Asset during the
10-year period beginning on the date the Company acquired that asset, the
Company will be required, pursuant to Treasury Regulations which have not yet
been promulgated, to distribute at least 95% of the Built-In Gain (after tax),
if any, recognized on the disposition of such asset. See "--General" above for a
discussion of "Built-In Gain Assets." Such distributions must be paid in the
taxable year to which they relate, or in the following taxable year if declared
before the Company timely files its tax return for such year and if paid on or
before the first regular dividend payment date after such declaration.
Failure to Distribute
To the extent that the Company does not distribute all of its net capital
gain or distributes at least 95%, but less than 100%, of its "REIT taxable
income," as adjusted, it will be subject to tax thereon at regular
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ordinary and capital gain corporate tax rates. The Company may elect to require
the shareholders to include the Company's undistributed net capital gains in
their income by designating, in a written notice to shareholders, those amounts
as undistributed capital gains in respect of its shareholders' shares. If the
Company makes such an election, the shareholders will:
o include in their income as capital gains their proportionate share of
such undistributed capital gains and
o be deemed to have paid their proportionate share of the tax paid by the
Company on such undistributed capital gains and thereby receive a
credit or refund for such amount.
A shareholder will increase the basis in its common stock by the difference
between the amount of capital gain included in its income and the amount of the
tax that the Company is deemed to have paid on the shareholder's behalf. The
earnings and profits of the Company will be adjusted appropriately. For a more
detailed description of the tax consequences to a shareholder of such a
designation, see "--Taxation of U.S. Shareholders Holding common stock."
In addition, if the Company should fail to distribute, during each calendar
year, at least the sum of:
o 85% of its REIT ordinary income for such year;
o 95% of its REIT capital gain income for such year; and
o any undistributed taxable income from prior periods,
the Company would be subject to a 4% excise tax on the excess of such required
distribution over the sum of amounts actually distributed during the calendar
year by the REIT and the amount, if any, on which the REIT paid income tax for
such year.
Complying with Requirement
The Company intends to make timely distributions sufficient to satisfy its
annual distribution requirements. It is expected that the Company's REIT taxable
income will be less than its cash flow due to the allowance of depreciation and
other non-cash charges in computing
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REIT taxable income. Accordingly, the Company anticipates that it will generally
have sufficient cash or liquid assets to enable it to satisfy the distribution
requirements described above. It is possible, however, that the Company, from
time to time, may not have sufficient cash or other liquid assets to meet these
distribution requirements due to timing differences between:
o the actual receipt of income and actual payment of deductible expenses
and
o the inclusion of such income and deduction of such expenses in arriving
at taxable income of the Company, or due to the need to make
nondeductible payments, such as principal payments on any indebtedness
it may have.
If such circumstances occur, in order to meet the distribution requirements, the
Company may find it necessary to arrange for short-term, or possibly long-term,
borrowings or to pay dividends in the form of taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Company will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.
Failure of the Company to Qualify as a REIT. For any taxable year that the
Company fails to qualify as a REIT, the Company would be taxed at the usual
corporate rates on all of its taxable income. Those taxes would reduce the
amount of cash available to the Company for distribution to its shareholders.
Distributions to shareholders in any year in which the Company fails to qualify
as a REIT will not be deductible and will not be required to be made. In
addition, if the Company fails to qualify as a REIT, all distributions to
shareholders will be taxed as ordinary income, to the extent of the Company's
current and accumulated earnings and profits, and, subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends received deduction.
Unless certain relief provisions apply, the Company's election to be
treated as a REIT will terminate automatically if the Company fails to
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meet the qualification requirements described above and the Company will not be
eligible to elect REIT status again until the fifth taxable year that begins
after the first year for which the Company's election was terminated (or
revoked). If the Company loses its REIT status, but later qualifies and elects
to be taxed as a REIT again, the Company may face significant adverse tax
consequences.
Taxation of U.S. Shareholders
As used herein, the term "U.S. Shareholder" means a holder of shares of
common stock who (for United States federal income tax purposes):
o is a citizen or resident of the United States;
o is a corporation, partnership, or other entity created or organized in
or under the laws of the United States or any political subdivision
thereof;
o is an estate the income of which is subject to United States federal
income taxation regardless of its source; or
o is a trust the administration of which is subject to the primary
supervision of a United States court and which has one or more Untied
States persons who have the authority to control all substantial
decisions of the trust.
Notwithstanding the above, to the extent provided in regulations, certain trusts
in existence on August 20, 1996, and treated as United States persons prior to
such date that elect to continue to be treated as United States persons, shall
also be considered U.S. Shareholders.
Distributions by the Company. As long as the Company qualifies as a REIT,
distributions made to the Company's taxable U.S. Shareholders (and not
designated as capital gain dividends) will generally be taxable to such
Shareholders as ordinary income to the extent of the Company's current or
accumulated earnings and profits. For purposes of determining whether
distributions on shares of common stock are out of current or accumulated
earnings and profits, the earnings and profits of the Company will be allocated
first to shares of preferred stock and second to shares of common stock. There
can be no assurance that the Company will have sufficient earnings and profits
to cover distributions on any shares of preferred stock. Such distributions will
not be eligible
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for the dividends received deductions in the case of U.S. Shareholders that are
corporations. Dividends declared during the last quarter of a calendar year and
actually paid during January of the immediately following calendar year
generally are treated as if received by the U.S. Shareholders on December 31 of
the calendar year during which they were declared.
Capital Gain Dividends
Distributions designated by the Company as capital gain dividends generally
will be taxed as gain from the sale or exchange of a capital asset held for more
than one year (to the extent that the distributions do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which the shareholder has held its stock. Corporate U.S. Shareholders however,
may be required to treat up to 20% of certain capital gain dividends as ordinary
income.
Operating and Capital Losses
U.S. Shareholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against future income
(subject to certain limitations). Distributions made by the Company and gain
arising from the sale or exchange by a holder of common stock will not be
treated as passive activity income, and, as a result, holders of common stock
generally will not be able to apply any "passive losses" against such income or
gain. Future regulations may require that U.S. Shareholders take into account,
for purposes of computing their individual alternative minimum tax liability,
certain tax preference items of the Company.
Distributions in Excess of Earnings and Profits
Distributions in excess of current or accumulated earnings and profits will
not be taxable to a U.S. Shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares of common stock, but rather will
reduce the adjusted basis of such shares of common stock. To the extent that
such distributions exceed the adjusted basis of a U.S. Shareholder's shares of
common stock, they will be included in income as capital gains, assuming the
shares of common stock are a capital asset in the hands of the U.S. Shareholder.
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Election to Include Capital Gain in Income
Pursuant to the 1997 Act, for the Company's taxable years commencing on or
after January 1, 1998, the Company may elect to require the holders of common
stock to include the Company's undistributed net long-term capital gains in
their income. If the Company makes such an election, the holders of common stock
will (i) include in their income as long-term capital gains their proportionate
share of such undistributed capital gains and (ii) be deemed to have paid their
proportionate share of the tax paid by the Company on such undistributed capital
gains and thereby receive a credit or refund for such amount. A holder of common
stock will increase the basis in its common stock by the difference between the
amount of capital gain included in its income and the amount of the tax it is
deemed to have paid. The earnings and profits of the Company will be adjusted
appropriately. As described below in "--Recent Legislation," with respect to
such long-term capital gain of a taxable domestic shareholder that is an
individual or an estate or trust, the IRS has authority to issue regulations
that could apply the special tax rate applicable to sales of depreciable real
property by an individual or an estate or trust to the portion of the long-term
capital gains of an individual or an estate or trust attributable to deductions
for depreciation taken with respect to depreciable real property.
Sales of Shares. In general, a U.S. Shareholder will realize capital gain
or loss on the disposition of shares of common stock equal to the difference
between (i) the amount of cash and the fair market value of any property
received on such disposition and (ii) the shareholder's adjusted basis of such
shares of common stock. In the case of a taxable U.S. Shareholder who is an
individual or an estate or trust, such gain or loss will be long-term capital
gain or loss, subject to a 20% tax rate, if such shares have been held for more
than one year. In the case of a taxable U.S. Shareholder that is a corporation,
such gain or loss will be long-term capital gain or loss if such shares have
been held for more than one year. Loss upon a sale or exchange of shares of
common stock by a shareholder who has held such shares of common stock for six
months or less (after applying certain holding period rules) will be treated as
a long-term capital loss to the extent of distributions from the Company
required to be treated by such shareholder as long-term capital gain.
1997 Act Changes to Capital Gain Taxation. As described below in "--Recent
Legislation," each of the 1997 Act and the 1998 Act changed
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significantly the taxation of capital gains by taxpayers who are individuals,
estates, or trusts. On November 10, 1997, the IRS issued IRS Notice 97-64, which
provides generally that the Company may classify portions of its designated
capital-gain dividend as:
o a 20% rate gain distribution (which would be taxed as long-term capital
gain in the 20% group);
o an unrecaptured Section 1250 gain distribution (which would be taxed as
long-term capital gain in the 25% group); or
o a 28% rate gain distribution (which was repealed by the 1998 Act).
IRS Notice 97-64 provides that a REIT must determine the maximum amounts that it
may designate as 20% and 25% rate capital gain dividends by performing the
computation required by the Code as if the REIT were an individual whose
ordinary income were subject to a marginal tax rate of at least 28%. The Notice
further provides that designations made by the REIT will only be effective to
the extent that they comply with Revenue Ruling 89-81, which requires that
distributions made to different classes of shares be composed proportionately of
dividends of a particular type.
Backup Withholding. The Company will report to its domestic shareholders
and the IRS the amount of dividends paid during each calendar year, and the
amount of tax withheld, if any, with respect thereto. Under the backup
withholding rules, a shareholder may be subject to backup withholding at the
rate of 31% with respect to dividends paid unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number and
certifies as to no loss of exemption from backup withholding. Amounts withheld
as backup withholding will be creditable against the stockholder's income tax
liability. In addition, the Company may be required to withhold a portion of
capital gain distributions made to any shareholders who fail to certify their
non-foreign status to the Company. See "--Taxation of Non-U.S. Shareholders"
below.
Taxation of Tax-Exempt Shareholders. As a general rule, amounts distributed
to a tax-exempt entity by a corporation do not constitute "unrelated business
taxable income" ("UBTI"), and thus distributions by the Company to a stockholder
that is a tax-exempt
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entity generally should not constitute UBTI, provided that the tax-exempt entity
has not financed the acquisition of its shares of common stock with "acquisition
indebtedness" within the meaning of the Code and the shares of common stock are
not otherwise used in an unrelated trade or business of the tax-exempt entity.
However, distributions by a REIT to a tax-exempt employee's pension trust that
owns more than 10% of the REIT will be treated as UBTI in an amount equal to the
percentage of gross income of the REIT that is derived from an "unrelated trade
or business" (determined as if the REIT were a pension trust) divided by the
gross income of the REIT for the year in which the dividends are paid. This rule
only applies, however, if:
o the percentage of gross income of the REIT that is derived from an
unrelated trade or business for the year in which the dividends are
paid is at least 5%;
o the REIT qualifies as a REIT only because the pension trust is not
treated as a single individual for purposes of the "five-or-fewer rule"
(see "--Taxation of the Company --Requirements for Qualification"
above); and
o (1) one pension trust owns more than 25 percent of the value of the
REIT or, (2) a group of pension trusts individually holding more than
10 percent of the value of the REIT collectively own more than 50
percent of the value of the REIT.
The Company currently does not expect that this rule will apply.
Taxation of Non-U.S. Shareholders
The rules governing U.S. federal income taxation of non-U.S. Shareholders
are complex, and the following discussion is intended only as a summary of such
rules. Prospective non-U.S. Shareholders should consult with their tax advisors
to determine the impact of U.S. federal, state, and local income tax laws on an
investment in the Company, including any reporting requirements, as well as the
tax treatment of such an investment under their home country laws including any
reporting requirements.
Distributions by the Company. Distributions to a non-U.S. Shareholder that
are not attributable to gain from sales or exchanges by the Company of U.S. real
property interests and not designated by the
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Company as capital gain dividends will generally be subject to tax as ordinary
income to the extent of the Company's current or accumulated earnings and
profits as determined for U.S. federal income tax purposes. Such distributions
will generally be subject to a withholding tax equal to 30% of the gross amount
of the distribution, unless reduced by an applicable tax treaty or unless such
dividends are treated as effectively connected with a United States trade or
business. If the amount distributed exceeds a non-U.S. Shareholder's allocable
share of such earnings and profits, the excess will be treated as a tax-free
return of capital to the extent of such non-U.S. Shareholder's adjusted basis in
the common stock. To the extent that such distributions exceed the adjusted
basis of a non-U.S. Shareholder's common stock, such distributions will
generally be subject to tax if such non-U.S. Shareholder would otherwise be
subject to tax on any gain from the sale or disposition of its common stock, as
described below.
Withholding
For withholding tax purposes, the Company currently is required to treat
all distributions as if made out of its current or accumulated earnings and
profits and thus intends to withhold at the rate of 30% (or a reduced treaty
rate if applicable) on the amount of any distribution (other than distributions
designated as capital gain dividends) made to a non-U.S. Shareholder. Under
regulations generally effective for distributions on or after January 1, 1999,
the Company would not be required to withhold at the 30% rate on distributions
it reasonably estimates to be in excess of the Company's current and accumulated
earnings and profits. If it cannot be determined at the time a distribution is
made whether such distribution will be in excess of current and accumulated
earnings and profits, the distribution will be subject to withholding at the
rate applicable to ordinary dividends.
As a result of a legislative change made by the Small Business Job
Protection Act of 1996, under current law, it appears that the Company will be
required to withhold 10% of any distribution to a non-U.S. Shareholder in excess
of the Company's current and accumulated earnings and profits. Consequently,
although the Company intends to withhold at a rate of 30% on the entire amount
of any distribution to a non-U.S. Shareholder (or lower applicable treaty rate),
to the extent the Company does not do so, any portion of such a distribution not
subject to withholding at a rate of 30% (or lower applicable treaty rate) will
be subject to withholding at a rate of 10%. However, the non-U.S. Shareholder
may seek a refund of such amounts from the IRS if it
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subsequently determined that such distribution was, in fact, in excess of
current or accumulated earnings and profits of the Company, and the amount
withheld exceeded the non-U.S. Shareholder's United States tax liability, if
any, with respect to the distribution.
Capital Gain Dividends
Distributions to a non-U.S. Shareholder that are designated by the Company
at the time of distribution as capital gain dividends (other than those arising
from the disposition of a United States real property interest) generally will
not be subject to United States federal income taxation, unless (i) the
investment in the common stock is effectively connected with the non-U.S.
Shareholder's United States trade or business, in which case the non-U.S.
Shareholder will be subject to the same treatment as U.S. Shareholders with
respect to such gain (except that a shareholder that is a foreign corporation
may also be subject to the 30% branch profits tax) or (ii) the non-U.S.
Shareholder is a nonresident alien individual who is present in the United
States for 183 days or more during the taxable year and certain other
requirements are met, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains.
Foreign Investment in Real Property Tax Act
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"),
distributions to a non-U.S. Shareholder that are attributable to gain from sales
or exchanges by the Company of United States real property interests (whether or
not designated as a capital gain dividend) will be taxed to a non-U.S.
Shareholder at the normal capital gains rates applicable to domestic
shareholders (subject to a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a non-U.S. Shareholder that
is a corporation and that is not entitled to treaty relief or exemption. The
Company is required by applicable FIRPTA Treasury Regulations to withhold 35% of
any such distribution that is or could be designated by the Company as a capital
gain dividend. That amount is creditable against the non-U.S. Shareholder's
United States FIRPTA tax liability.
Amounts designated by the Company pursuant to the 1997 Act as undistributed
capital gains in respect of shares of common stock (see "Taxation of U.S.
Shareholders -- Distributions by the Company -- Election to Include Capitol Gain
in Income" above) would be treated with respect to non-U.S. Shareholders in the
manner
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outlined in the preceding paragraph for actual distributions by the Company of
capital gain dividends. Under that approach, the non-U.S. Shareholders would be
able to offset as a credit against their United States federal income tax
liability resulting therefrom their proportionate share of the tax paid by the
Company on such undistributed capital gains (and to receive from the IRS a
refund to the extent their proportionate share of such tax paid by the Company
were to exceed their actual United States federal income tax liability).
Sale of common stock. Gain recognized by a non-U.S. Shareholder upon a sale
of its common stock will generally not be subject to tax under FIRPTA if the
Company is a "domestically controlled REIT," which is defined generally as a
REIT in which at all times during a specified testing period less than 50% in
value of its shares were held directly or indirectly by non-U.S. persons.
Because only a minority of the shareholders are expected to be non-U.S.
Shareholders, the Company expects to qualify as a "domestically controlled
REIT." Accordingly, a non-U.S. Shareholder should not be subject to U.S. tax on
gains recognized upon disposition of the common stock, provided that such gain
is not effectively connected with the conduct of a United States trade or
business and, in the case of an individual shareholder, such holder is not
present in the United States for 183 days or more during the year of sale and
certain other requirements are met.
Backup Withholding Tax and Information Reporting. Backup withholding tax
(which generally is a withholding tax imposed at a rate of 31% on certain
payments to persons that fail to furnish certain information under the United
States information reporting requirements) and information reporting will
generally not apply to distributions paid to non-U.S. Shareholders outside the
United States that are treated as:
o dividends subject to the 30% (or lower treaty rate) withholding tax
discussed above;
o capital gains dividends; or
o distributions attributable to gain from the sale or exchange by the
Company of United States real property interests.
As a general matter, backup withholding and information reporting will not apply
to a payment of the proceeds of a sale of common stock by or through a foreign
office of a foreign broker. Information reporting (but not backup withholding)
will apply,
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however, to a payment of the proceeds of a sale of common stock by a foreign
office of a broker that:
o is a United States person;
o derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States; or
o is a "controlled foreign corporation" (generally a foreign corporation
controlled by United States shareholders) for United States tax
purposes, unless the broker has documentary evidence in its records
that the holder is a non-U.S. Shareholder and certain other conditions
are met, or the shareholder otherwise establishes an exemption.
Payment to or through a United States office of a broker of the proceeds of a
sale of common stock is subject to both backup withholding and information
reporting unless the shareholder certifies under penalty of perjury that the
shareholder is a non-U.S. Shareholder, or otherwise establishes an exemption. A
non-U.S. Shareholder may obtain a refund of any amounts withheld under the
backup withholding rules by filing the appropriate claim for refund with the
IRS.
The United States Treasury Department has recently finalized regulations
regarding the withholding and information reporting rules discussed above. In
general, these regulations do not alter the substantive withholding and
information reporting requirements but unify certification procedures and forms
and clarify and modify reliance standards. These regulations generally are
effective for payments made after December 31, 1999, subject to certain
transition rules. A non-U.S. Shareholder should consult its advisor regarding
the effect of the new Treasury Regulations.
Recent Legislation
As described above, the 1997 Act contains certain changes to the REIT
qualification requirements and to the taxation of REITs. In addition, the 1997
Act and the 1998 Act also contain certain changes to the taxation of capital
gains of individuals, trusts and estates.
Capital Gain Rates. As a result of the 1997 Act and the 1998 Act,
individuals, trusts and estates that hold certain investments for more than 12
months may be taxed at a maximum long-term capital gain rate
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of 20% on gain from the sale or exchange of those investments. However, a
maximum rate of 25% applies for "unrecaptured section 1250 gain" for
individuals, trusts and estates and special rules exist for "qualified 5-year
gain" and certain other special types of gain. The 1997 Act directed the IRS to
prescribe regulations on how the new capital gain rates will apply to sales of
capital assets by "pass-through entities," including REITs and to sales of
interests in "pass-through entities." Currently no such regulations have been
promulgated or proposed. For a discussion of new rules under the 1997 Act that
apply to the taxation of distributions by the Company to shareholders that are
designated by the Company as "capital gain dividends," see "--Taxation of U.S.
Shareholders Holding common stock--Distributions by the Company." Shareholders
are urged to consult with their tax advisors with respect to the new rules
contained in the 1997 Act and the 1998 Act.
REIT Provisions. In addition to the provisions discussed above, the 1997
Act contained a number of technical provisions that either (1) reduce the risk
that the Company will inadvertently cease to qualify as a REIT, or (2) provide
additional flexibility with which the Company can meet the REIT qualification
requirements. These provisions are effective for the Company's taxable years
commencing on or after January 1, 1998.
Recent Tax Proposal
Current legislative proposals under consideration by Congress include a
proposal to amend the REIT asset tests with respect to non-qualified REIT
subsidiaries. The proposal would require a REIT to own no more than 10% of the
vote or value of the outstanding stock of any non-qualified REIT subsidiary.
Existing non-qualified REIT subsidiaries would be grandfathered, and therefore
subject to the existing 5% asset test and 10% voting securities test (see "--Tax
Treatment of the Company"), except that such grandfathered status would
terminate if the non-qualified REIT subsidiary engaged in a new trade or
business or acquired substantial new assets on or after the effective date of
the proposal. The proposal, if enacted, could materially impede the Company's
ability to engage in other activities through non-qualified REIT subsidiaries
without jeopardizing the Company's REIT status.
-72-
<PAGE>
Tax Aspects of the Company's Ownership of Interests in BRI
Partnership
General. A significant portion of the Company's investments will be held
indirectly through BRI Partnership. In general, partnerships are "pass-through"
entities that are not subject to federal income tax. Rather, partners are
allocated their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax on
those items, without regard to whether the partners receive a distribution from
the partnership. In the case of a REIT which is a partner in a partnership,
Treasury Regulations provide that for purposes of applying the REIT gross income
and gross asset tests, the REIT will be deemed to own its proportionate share of
the assets of the partnership and will be deemed to be entitled to the income of
the partnership attributable to that share, in each case based on its "capital
interest" in the partnership. In addition, the character of the gross income and
assets of the partnership shall retain the same character in the hands of the
REIT for purposes of Section 856 of the Code which includes the gross income and
asset tests described above. The Company will have indirect control of BRI
Partnership and intends to operate it consistent with the requirements for
qualification as a REIT. The Company will include in its income its
proportionate share of the foregoing partnership items for purposes of the
various REIT income tests and will take into account its distributive share of
partnership items in the computation of its REIT taxable income. Moreover, for
purposes of the REIT asset tests, the Company will include its proportionate
share of assets held through BRI Partnership.
Entity Classification. If BRI Partnership were treated as an association,
the entity would be taxable as a corporation and therefore would be subject to
an entity level tax on its income. In such a situation, the character of the
Company's assets and items of gross income would change and would preclude the
Company from qualifying as a REIT. The same result could occur if any subsidiary
partnership failed to qualify for treatment as a partnership.
Prior to January 1, 1997, an organization formed as a partnership or a
limited liability company was treated as a partnership for federal income tax
purposes rather than as a corporation only if it had no more than two of the
four corporate characteristics that the Treasury Regulations in effect at that
time used to distinguish a partnership from a corporation for tax purposes.
These four characteristics were:
o continuity of life,
o centralization of management,
o limited liability and
-73-
<PAGE>
o free transferability of interests.
Under final Treasury Regulations that became effective January 1, 1997, the
four factor test has been eliminated and an entity formed as a partnership or as
a limited liability company will be taxed as a partnership for federal income
tax purposes unless it specifically elects otherwise. The Treasury Regulations
provide that the IRS will not challenge the classification of an existing
partnership or limited liability company for tax periods prior to January 1,
1997 so long as:
o the entity had a reasonable basis for its claimed classification;
o the entity and all its members recognized the federal income tax
consequences of any changes in the entity's classification within the
60 months prior to January 1, 1997; and
o neither the entity nor any member of the entity had been notified in
writing on or before May 8, 1996, that the classification of the entity
was under examination by the IRS.
The Company believes that BRI Partnership will be treated as a partnership
for federal income tax purposes (and not as an association taxable as a
corporation).
Partnership Allocations. Although a partnership agreement will generally
determine the allocation of income and loss among partners, those allocations
will be disregarded for tax purposes if they do not comply with the provisions
of Section 704(b) of the Code and the related Treasury Regulations. Generally,
those provisions require that partnership allocations reflect the economic
arrangement of the partners. The allocations of taxable income and loss provided
for in the partnership agreement are intended to comply with the requirements of
Section 704(b) of the Code and the related Treasury Regulations. If an
allocation is not recognized for federal income tax purposes, the item subject
to the allocation will be reallocated in accordance with the partners' interests
in the partnership, which will be determined by taking into account all of the
facts and circumstances relating to the economic arrangement of the partners
with respect to that item.
-74-
<PAGE>
Tax Allocations with Respect to the Properties. Pursuant to Section 704(c)
of the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership, must be allocated in a manner so that the
contributing partner is charged with, or benefits from, respectively, the
unrealized gain or unrealized loss associated with the property at the time of
the contribution. The amount of the unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of contributed
property at the time of contribution and the adjusted tax basis of the property
at that time (a "Book-Tax Difference"). These allocations are solely for federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. Similar rules can apply in
the case of appreciated or depreciated properties held by a partnership at the
time of new contributions to the partnership.
In general, the partners of BRI Partnership who contributed assets will be
allocated differing depreciation deductions than if they had retained the
contributed property. In addition, on the disposition of any contributed asset
that has a Book-Tax Difference, the income or loss attributable to the Book-Tax
Difference generally will be allocated to the contributing partner. These
allocations will tend to eliminate the Book-Tax Difference over the life of BRI
Partnership. However, the special allocation rules of Section 704(c) do not
always entirely eliminate the Book-Tax Difference on an annual basis or with
respect to a specific taxable transaction such as a sale. Thus, the carryover
basis of the contributed assets in the hands of BRI Partnership may cause the
Company to be allocated lower depreciation and other deductions, and possibly an
amount of taxable income in the event of a sale of the contributed assets in
excess of the economic or book income allocated to it as a result of that sale.
Such an allocation might cause the Company to recognize taxable income in excess
of cash proceeds, which might adversely affect the Company's ability to comply
with the REIT distribution requirements.
Treasury Regulations under Section 704(c) of the Code provide partnerships
with a choice of several methods of accounting for Book-Tax Differences,
including the "traditional method" or the election of certain methods that would
permit any distortions caused by a Book-Tax Difference to be entirely rectified
on an annual basis or with respect to a specific taxable transaction such as a
sale. BRI Partnership and the Company will determine with respect to each
contribution to BRI Partnership which method to use.
-75-
<PAGE>
State and Local Taxes
The tax treatment of the Company and the shareholders in states having
taxing jurisdiction over them may differ from the federal income tax treatment.
Accordingly, no discussion of state taxation of the Company and the shareholders
is provided nor is any representation made as to the tax status of the Company
in such states. All investors should consult their tax advisors as to the
treatment of the Company under the respective state tax laws applicable to them.
Any financial statements and schedules hereafter incorporated by reference
in the registration statement of which this prospectus is a part that have been
audited and are the subject of a report by independent accountants will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents filed with the SEC.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the issuance of any
Redemption Shares but will acquire Units converted into Redemption Shares. The
Company will pay substantially all the expenses incurred by the Company by
incident to the offering. The Company estimates that these expenses will be
approximately $31,000.
The Unitholders and any agents, dealers or underwriters that participate
with the Unitholders in the resale of the shares of common stock may be deemed
to be "underwriters" within the meaning of the Securities Act, in which case any
commissions received by such agents, dealers or underwriters and any profit on
the resale of the shares of common stock purchased by them may be deemed
underwriting commissions or discounts under the Securities Act. See
"Registration Rights" for indemnification arrangements between the Company and
the Unitholders.
EXPERTS
The combined statements of revenue over certain operating expenses of the
Intercapital and Cooper Portfolios for the year ended December 31, 1997 included
in the Current Report on Form 8-K of the Company, dated October 30, 1998,
incorporated herein by reference, and the consolidated financial statements and
financial statement schedule of Berkshire Realty Company, Inc. and Subsidiaries,
included in the Annual Report on Form 10-K of the Company for the year ended
December 31, 1998,
-76-
<PAGE>
incorporated herein by reference, have been audited by PricewaterhouseCoopers
LLP, as indicated in their reports with respect thereto, and are included and
incorporated herein in reliance upon the reports of such firm, which reports are
given upon their authority as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated by reference
in the registration statement of which this Prospectus is a part that have been
audited and are the subject of a report by independent accountants will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents filed with the SEC.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Hale and Dorr LLP, a limited liability partnership including
professional corporations, 60 State Street, Boston, Massachusetts 02109.
-77-
<PAGE>
================================================================================
We have not authorized any dealer, salesperson or any other individual to give
any information, or to make any representations, other than those contained in
this prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the shares offered
hereby and only in the jurisdictions and under circumstances where it is lawful
to do so. The information contained in this prospectus is current only as of its
date.
-----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Risk Factors........................................................... 5
Forward-looking Statements............................................. 18
The Company............................................................ 19
Use of Proceeds........................................................ 24
Available Information.................................................. 24
Incorporation of Certain Documents by Reference........................ 26
Description of the Capital Stock of the Company........................ 27
Description of Units and Conversion of Units........................... 39
Registration Rights.................................................... 51
Material Federal Income Tax Considerations and Consequences............ 53
Plan of Distribution................................................... 76
Experts ............................................................ 76
Legal Matters.......................................................... 77
</TABLE>
1,714,396 Shares
BERKSHIRE REALTY
COMPANY, INC.
Common Stock
-----------------------
PROSPECTUS
April __, 1999
-----------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
Registration fee to the SEC............................ $ 4,528.00
Printing expense....................................... 2,000.00
Accounting fees and expenses........................... 2,500.00
Legal fees and expenses................................ 20,000.00
----------
Miscellaneous expenses................................. 1,972.00
Total....................................... $31,000.00
</TABLE>
All fees and expenses are estimates except for the registration fee to the
SEC.
Item 15. Indemnification of Directors and Officers.
The Company's Certificate provides for indemnification of the Company's
officers and Directors to the fullest extent permitted by Sections 145 and
102(b)(7) of the Delaware General Corporation Law and relieves the Directors of
certain monetary liabilities to the Company and its shareholders. In general,
Delaware law permits the Company to indemnify its officers and Directors so long
as they act in good faith and in a manner reasonably believed by them to be in,
or not opposed to, the best interests of the Company. Subject to the provisions
of Sections 145 and 102(b)(7) of the Delaware General Corporation Law, the
Company intends to indemnify its officers and Directors against losses,
liabilities and expenses (including attorneys' fees) incurred by them that are
related to their being officers or Directors of the Company.
The Company has purchased director and officer liability insurance for the
purpose of providing a source of funds to help pay for any indemnification
expenses it may incur.
II-1
<PAGE>
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit Numbers Description
- ---------------------------- --------------------------------------------------
<S> <C>
4.1(1) Restated Certificate of Incorporation, as
amended.
4.2(2) By-Laws, as amended.
5.1* Opinion regarding legality.
8.1* Opinion regarding certain tax matters.
23.1 Consent of PricewaterhouseCoopers LLP,
Independent Accountants
23.2* Consent of Hale and Dorr LLP (included in
Exhibit 5.1 hereto).
24.1* Power of Attorney (included on signature page
hereto).
99.1* Form of Registration Rights Agreement, dated as
of November 14, 1997, by and among Berkshire
Realty Company, Inc., Berkshire Apartments,
Inc. and certain limited partners of BRI OP
Limited Partnership.
- --------------
* Previously filed.
(1) Incorporated herein by reference to Exhibit 3.3
filed with the Registrant's Registration
Statement on Form S-4 (File No. 33- 37592),
Exhibit 3.11 filed with the Registrant's
Post-Effective Amendment No. 1 to the
Registration Statement on Form S-4 (File No.
33-37592) and Exhibit 4.1 filed with the
Registrant's Amendment No. 1 to Current Report
on Form 8-K/A, dated October 14, 1997.
(2) Incorporated herein by reference to Exhibit
3(ii) filed with the Registrant's Amendment No.
1 to Current Report on Form 8- K/A, dated
October 14, 1997.
</TABLE>
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration Statement:
(i) to include any Prospectus required by Section
10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act");
(ii) to reflect in the Prospectus any facts or events
arising after the effective date of the
Registration
II-2
<PAGE>
Statement (or most recent post-effective
amendment thereof) which, individually, or in the
aggregate, represent a fundamental change in the
information set forth in the Registration
Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities
offered (if the total dollar value of securities
offered would not exceed that which was
registered) and any deviation from the low or
high of the estimated maximum offering range may
be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
Registration Statement; and
(iii) to include any material information with respect
to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act, each post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-3
<PAGE>
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant for expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in Boston, Massachusetts, on April 16, 1999.
BERKSHIRE REALTY COMPANY, INC.
By: /s/ Marianne Pritchard
--------------------------------------
Marianne Pritchard, Executive Vice President and
Chief Financial Officer of
Berkshire Realty Company, Inc.
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Douglas Krupp* Chairman of the April 16, 1999
- ----------------------------- Board and Director
Douglas Krupp of Berkshire Realty
Company, Inc.
/s/ David F. Marshall* President, Chief April 16, 1999
- ----------------------------- Executive Officer
David F. Marshall and Director of
Berkshire Realty
Company, Inc.
(Principal Executive
Officer)
/s/ Marianne Pritchard Executive Vice April 16, 1999
- ----------------------------- President and Chief
Marianne Pritchard Financial Officer of
Berkshire Realty
Company, Inc.
(Principal Financial
Officer)
II-5
<PAGE>
/s/ Kenneth J. Richard* Senior Vice April 16, 1999
- ----------------------------- President and Chief
Kenneth J. Richard Accounting Officer
of Berkshire Realty
Company, Inc.
(Principal
Accounting Officer)
/s/ Terrance R. Ahern* Director of Berkshire April 16, 1999
- ----------------------------- Realty Company, Inc.
Terrance R. Ahern
/s/ David M. deWilde* Director of Berkshire April 16, 1999
- ----------------------------- Realty Company, Inc.
David M. deWilde
/s/ J. Paul Finnegan* Director of Berkshire April 16, 1999
- ----------------------------- Realty Company, Inc.
J. Paul Finnegan
/s/ Charles N. Goldberg* Director of Berkshire April 16, 1999
- ----------------------------- Realty Company, Inc.
Charles N. Goldberg
/s/ Paul D. Kazilionis* Director of Berkshire April 16, 1999
- ----------------------------- Realty Company, Inc.
Paul D. Kazilionis
/s/ E. Robert Roskind* Director of Berkshire April 16, 1999
- ----------------------------- Realty Company, Inc.
E. Robert Roskind
/s/ Arthur P. Solomon* Director of Berkshire April 16, 1999
- ----------------------------- Realty Company, Inc.
Arthur P. Solomon
*By: /s/ Marianne Pritchard
- ----------------------------
Marianne Pritchard
Attorney-In-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this registration statement on Form
S-3.
<TABLE>
<CAPTION>
Exhibit Numbers Description
- ------------------ -----------------------------------------------------------
<S> <C>
4.1(1) Restated Certificate of Incorporation, as amended.
4.2(2) By-Laws, as amended.
5.1* Opinion regarding legality.
8.1* Opinion regarding certain tax matters.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2* Consent of Hale and Dorr LLP (included in Exhibit 5.1
hereto).
24.1* Power of Attorney (included on signature page hereto).
99.1* Form of Registration Rights Agreement, dated as of November
17, 1997, by and among Berkshire Realty Company, Inc.,
Berkshire Apartments, Inc. and certain limited partners of
BRI OP Limited Partnership
---------------
* Previously filed.
(1) Incorporated herein by reference to Exhibit 3.3 filed with
the Registrant's Registration Statement on Form S-4 (File
No. 33-37592), Exhibit 3.11 filed with the Registrant's
Post-Effective Amendment No. 1 to the Registration Statement
on Form S-4 (File No. 33-37592) and Exhibit 4.1 filed with
the Registrant's Amendment No. 1 to Current Report on Form
8-K/A, dated October 14, 1997.
(2) Incorporated herein by reference to Exhibit 3(ii) filed with
the Registrant's Amendment No. 1 to Current Report on Form
8-K/A, dated October 14, 1997.
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Pre-Effective
Amendment No. 1 to Registration Statement on Form S-3 (File No. 333-67783) of
our reports dated (i) January 25, 1999, except for Note W, for which the date is
March 5, 1999, on our audits of the consolidated financial statements and
financial statement schedule of Berkshire Realty Company, Inc. and Subsidiaries
as of December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998, (ii) August 28, 1998 on our audit of the statement of
revenue over certain operating expenses of the Intercapital Portfolio for the
year ended December 31, 1997, and (iii) September 11, 1998 on our audit of the
statement of revenue over certain operating expenses of the Cooper Portfolio for
the year ended December 31, 1997. We also consent to the reference to our firm
under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
April 16, 1999
