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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ______________)*
BERKSHIRE REALTY COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
Share of Common Stock, par value $0.01 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
084710 10 2
---------------------------------------------------------
(CUSIP Number)
David J. Greenwald, Esq.
Goldman, Sachs & Co.
85 Broad Street, New York, New York 10004
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
February 22, 1999
---------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box |_|.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedules, including all exhibits. See ss.240.13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
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CUSIP NO. 084710 10 2 PAGE 2 OF 23 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Whitehall Street Real Estate Limited Partnership XI
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY -0-
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH -----------------------------------------------------
10. SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
-0-
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions)
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.0%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (See Instructions)
PN
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<PAGE>
SCHEDULE 13D
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CUSIP NO. 084710 10 2 PAGE 3 OF 23 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
WH Advisors, L.L.C. XI
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY -0-
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH -----------------------------------------------------
10. SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
-0-
- --------------------------------------------------------------------------------
12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions)
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.0%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON (See Instructions)
OO
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<PAGE>
SCHEDULE 13D
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CUSIP NO. 084710 10 2 PAGE 4 OF 23 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
The Goldman Sachs Group, L.P.
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[ ]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 27,208
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH -----------------------------------------------------
10. SHARED DISPOSITIVE POWER
27,208
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
27,208
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions)
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
less than 1%
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14. TYPE OF REPORTING PERSON (See Instructions)
HC/PN
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<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP NO. 084710 10 2 PAGE 5 OF 23 PAGES
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Goldman, Sachs & Co.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(See Instructions) (b) [X]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
[X]
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF -0-
SHARES -----------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 27,208
EACH -----------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON -0-
WITH -----------------------------------------------------
10. SHARED DISPOSITIVE POWER
27,208
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
27,208
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12. CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES (See Instructions)
[ ]
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
less than 1%
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14. TYPE OF REPORTING PERSON (See Instructions)
PN/BD/IA
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<PAGE>
CUSIP No. 084710 10 2 PAGE 6 OF 23 PAGES
Item 1. Security and Issuer.
The title of the class of equity securities to which this statement
relates is the shares of Common Stock, par value $.01 per share (the "Common
Stock"), of Berkshire Realty Company, Inc., a Delaware corporation
("Berkshire"). The principal executive offices of Berkshire are located at One
Beacon Street, Suite 1550, Boston, Massachusetts 02108.
Item 2. Identity and Background.
This statement is being filed by Whitehall Street Real Estate Limited
Partnership XI ("Whitehall"), WH Advisors, L.L.C. XI ("WH Advisors, L.L.C."),
Goldman, Sachs & Co. ("GS&Co.") and The Goldman Sachs Group, L.P. ("GS Group",
and, together with Whitehall, WH Advisors, L.L.C. and GS&Co., the "Reporting
Persons").*
As described in Items 3 and 4 below, on February 22, 1999, Whitehall
together with Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone") and
The Berkshire Companies Limited Partnership ("BCLP"), formed Aptco, LLC, a
Delaware limited liability company ("Aptco"), for the purpose of submitting a
merger proposal to the Board of Directors of Berkshire pursuant to which, among
other things, Aptco would acquire Berkshire and holders of outstanding shares of
Common Stock (other than certain holders described in Item 4 below) would
receive cash in exchange for their shares. As a result, the Reporting Persons,
together with Blackstone and BCLP and certain affiliates of BCLP as described
below (collectively, the "Krupp Affiliates") may be
- ---------------
* Neither the present filing nor anything contained herein shall be construed
as an admission that Whitehall, WH Advisors, L.L.C., GS&Co. or GS Group
constitute a "person" for any purpose other than Section 13(d) of the
Securities Exchange Act of 1934.
<PAGE>
CUSIP No. 084710 10 2 PAGE 7 OF 23 PAGES
deemed to constitute a "group" within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended.* Pursuant to Rule 13(d)-1(k)(2),
the Reporting Persons are filing individually.
The business address of each Reporting Person is 85 Broad Street, New
York, New York 10004.
Whitehall is a Delaware limited partnership that was formed for the
purpose of investing in debt and equity interests in real estate assets and
businesses. WH Advisors, L.L.C., a Delaware limited liability company, acts as
the sole general partner of Whitehall.
GS&Co., a New York limited partnership, is an investment banking firm
and a member of the New York Stock Exchange, Inc. and other national exchanges.
GS Group, one of the general partners of GS&Co., owns a 99% interest in GS&Co.
GS&Co. is the investment manager for Whitehall. GS Group is a Delaware limited
partnership and holding partnership that (directly or indirectly through
subsidiaries or affiliated companies or both) is a leading investment banking
organization. The other general partner of GS&Co. is The Goldman, Sachs & Co.
L.L.C. ("GS L.L.C."), which is wholly-owned by GS Group and The Goldman Sachs
Corporation, a Delaware corporation ("GS Corp."). GS Corp. is the sole general
partner of GS Group.
The name, residence or business address, present principal occupation
or employment, and the name, principal business and address of any corporation
or other organization in which such employment is conducted and the citizenship
of (i) each director of GS Corp. and GS L.L.C. are set
- ---------------
* Neither the present filing nor anything contained herein shall be construed
as an admission that the Reporting Persons together with Blackstone and the
Krupp Affiliates constitute a "person" or "group" for any purpose. Neither
the present filing nor anything contained herein shall be construed as an
admission that Whitehall together with Blackstone and the Krupp Affiliates
constitute a "person" or "group" for any purpose other than what they may
be deemed to constitute under Section 13(d) of the Securities Exchange Act
of 1934.
<PAGE>
CUSIP No. 084710 10 2 PAGE 8 OF 23 PAGES
forth on Schedule I hereto and are incorporated herein by reference and (ii)
each manager and executive officer of WH Advisors, L.L.C. are set forth on
Schedule II hereto and are incorporated herein by reference.
To the knowledge of the Reporting Persons, the business address of
Blackstone is 345 Park Avenue, New York, New York 10154, and the business
address of each of the Krupp Affiliates is The Berkshire Group, One Beacon
Street, Suite 1500, Boston, Massachusetts 02108.
To the knowledge of the Reporting Persons, Blackstone is a Delaware
limited liability company that, together with its sole member, Blackstone Real
Estate Advisors III, L.P., acts as an advisor to Blackstone Real Estate Partners
III, L.P., a real estate investment fund.
To the knowledge of the Reporting Persons: BCLP is a Massachusetts
limited partnership that, together with its subsidiaries, is principally engaged
in mortgage banking and investment sponsorship, asset and other management
services, venture capital investing, commercial laundry and linen services and
furniture manufacturing and sales. The sole general partners of BCLP are KGP-1,
Incorporated ("KGP-1") and KGP-2, Incorporated ("KGP-2").
To the knowledge of the Reporting Persons: KGP-1 and KGP-2 are each
Massachusetts corporations whose principal business is serving as general
partners of BCLP and certain of its affiliates. Douglas Krupp and George Krupp
each own 50% of the outstanding common stock of KGP-1 and KGP-2. The sole
directors of KGP-1 and KGP-2 are Douglas Krupp and George Krupp. The sole
executive officers of KGP-1 and KGP-2 are Douglas Krupp (President) and David
Quade (Executive Vice President). Mr. Quade is a United States citizen whose
principal occupation is acting as Executive Vice President and Chief Financial
Officer of The Berkshire Group.
<PAGE>
CUSIP No. 084710 10 2 PAGE 9 OF 23 PAGES
To the knowledge of the Reporting Persons: Douglas Krupp is an
individual who is a United States citizen and whose principal occupation is
acting as the Chairman of BCLP. Douglas Krupp also serves as a director and
Chairman of the Board of Berkshire.
To the knowledge of the Reporting Persons, George Krupp is an
individual who is a United States citizen and whose principal occupation is
serving as an instructor of history at the New Jewish High School in Waltham,
Massachusetts.
None of the Reporting Persons, or to the best knowledge and belief of
the Reporting Persons, any of the individuals listed in Schedule I or Schedule
II has, during the past five years, been convicted in any criminal proceeding
(excluding traffic violations or similar misdemeanors) or, except as set forth
in Schedule III to this Schedule 13D, has been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
This Item 2 is qualified in its entirety by reference to Schedule I,
Schedule II and Schedule III which are attached hereto and incorporated into
this Item by reference.
Item 3. Source and Amount of Funds or Other Consideration.
The Proposed Transactions (as defined in Item 4 below) would be funded
through a combination of equity and debt financing. On February 22, 1999,
Whitehall, Blackstone and BCLP formed Aptco for the purpose of proposing the
Proposed Transactions to Berkshire. Pursuant to a letter, dated February 22,
1999, among Whitehall, Blackstone and Douglas Krupp (on behalf of
<PAGE>
CUSIP No. 084710 10 2 PAGE 10 OF 23 PAGES
himself and the other Krupp Affiliates)(together with the "Summary of Terms"
attached thereto, the "Formation Letter") (attached hereto as Exhibit 1), (i)
Whitehall and Blackstone have agreed to make an equity contribution to Aptco in
the amount of $106 million each , as such amount may be adjusted pursuant to the
terms of the Formation Letter and (ii) the Krupp Affiliates have agreed to
contribute to Aptco at least 5,416,000 shares of Common Stock and/or OP Units
(as defined in Item 4 below) beneficially owned by the Krupp Affiliates.
Pursuant to a letter, dated February 22, 1999, between Aptco and Goldman Sachs
Mortgage Corporation ("GSMC") (the "Commitment Letter") (attached hereto as
Exhibit 2), GSMC has agreed to provide up to $675 million in the form of a
bridge loan to fund the remainder of the consideration required for the Proposed
Transactions. In connection with the Proposed Transactions, Aptco currently
intends to sell certain properties owned by Berkshire and to use the proceeds of
such sales to reduce the amount of indebtedness then outstanding under the
bridge loan.
The transactions contemplated by the Formation Letter and the
Commitment Letter are subject to a number of terms and conditions set forth
therein, including, among others, the execution of mutually acceptable
documentation and the satisfaction of the conditions set forth in the Offer
Letter (as defined in Item 4 below).
In addition, as of February 22, 1999, GS Group and GS&Co. may be deemed
to beneficially own 27,208 shares of Common Stock held in client accounts with
respect to which GS&Co. or employees of GS&Co. have voting or investment
discretion, or both ("Managed Accounts"). GS&Co. purchased these shares of
Common Stock in the ordinary course of its business on behalf of the Managed
Accounts. GS&Co. and GS Group each disclaims beneficial ownership
<PAGE>
CUSIP No. 084710 10 2 PAGE 11 OF 23 PAGES
of Common Stock held in Managed Accounts. To the knowledge of the Reporting
Persons, each of Blackstone and the Krupp Affiliates disclaim beneficial
ownership of Common Stock held in Managed Accounts.
None of the Reporting Persons nor any of the persons listed on
Schedules I or II has contributed any funds or other consideration towards the
purchase of the securities of Berkshire reported in this statement.
The information set forth in response to this Item 3 is qualified in
its entirety by reference to the Formation Letter and the Commitment letter,
which are expressly incorporated herein by reference.
Item 4. Purpose of Transaction.
Based on information provided by the Krupp Affiliates to the Reporting
Persons, the Krupp Affiliates originally acquired the shares of Common Stock
which are beneficially owned by them for investment purposes.
As of the date of this statement, none of the Reporting Persons, or to
the knowledge and belief of the Reporting Persons, any of the individuals listed
on Schedule I or Schedule II, has any present plan or intention which relates to
or would result in any of the actions set forth in parts (a) through (j) of Item
4 of Schedule 13D, other than the following:
As described in a letter, dated February 22, 1999, from Aptco to
Berkshire (the "Offer Letter") (attached hereto as Exhibit 3), Aptco has
proposed a transaction in which (i) Berkshire would merge (the "Company Merger")
with and into Aptco and (ii) a subsidiary of Aptco ("Aptco Sub")
<PAGE>
CUSIP No. 084710 10 2 PAGE 12 OF 23 PAGES
would merge (the "Subsidiary Merger") with and into BRI OP Limited Partnership,
a Delaware limited partnership which is the operating partnership of Berkshire
("BRI OP"). Pursuant to the proposed terms of the Company Merger, all
outstanding Common Stock not held by Aptco or Aptco Sub (other than dissenting
shares) would be converted into $11.05 per share in cash (the "Cash Price"), and
all outstanding shares of the Series 1997-A Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock") of Berkshire, (other than
dissenting shares) would be converted into an amount in cash equal to the
"change of control preference" specified in Berkshire's certificate of
designation in respect of the Preferred Stock. Pursuant to the proposed terms of
the Subsidiary Merger, the outstanding partnership units in BRI OP ("OP Units")
not held by Aptco or Aptco Sub would be converted, at the election of the
holders thereof, into either an amount per OP Unit in cash equal to the Cash
Price or equity securities of Aptco. The Company Merger and the Subsidiary
Merger are collectively referred to herein as the "Proposed Transactions." In
connection with the Proposed Transactions, the Common Stock would be delisted
from the New York Stock Exchange, and the registration of the Common Stock under
the Securities Exchange Act of 1934 would be terminated. In addition, as
indicated in the Formation Letter, Aptco currently intends to sell certain
properties owned by Berkshire and to use the proceeds of such sales to reduce
the amount of indebtedness then outstanding under the bridge loan.
The Proposed Transactions are subject to a number of conditions
including, among others, (i) execution of definitive merger agreements
containing customary "no-shop," "break up fee" and expense reimbursement
provisions, (ii) absence of any injunction prohibiting or restricting the
<PAGE>
CUSIP No. 084710 10 2 PAGE 13 OF 23 PAGES
consummation of the Proposed Transactions, any litigation commenced or
threatened by a governmental entity and any litigation that could have a
material adverse effect with respect to Berkshire or BRI OP, or that could
significantly delay the consummation of the Proposed Transactions, (iii) receipt
by Berkshire of a satisfactory closing agreement with the Internal Revenue
Service, on terms and conditions satisfactory to Aptco, with respect to certain
tax matters, and Aptco's satisfaction with respect to certain other tax matters,
(iv) execution of an agreement, on or prior to the execution of definitive
merger agreements, by the holders of a majority in interest of the Preferred
Stock consenting to the Proposed Transactions, (v) receipt by the Board of
Directors of Berkshire of an opinion from a nationally recognized investment
banking firm as to the fairness of the consideration to be paid under the terms
of the Proposed Transactions from a financial point of view to the holders of
Common Stock, Preferred Stock and OP Units, (vi) approval of the Proposed
Transactions and the definitive merger agreements by the respective Boards of
Directors of Berkshire and of the general partner of BRI OP, (vii) approval of
the Proposed Transactions by the holders of the Common Stock, Preferred Stock
and OP Units, (viii) receipt of any regulatory and other third party consents to
the Proposed Transactions, including the financing thereof, (ix) confirmation
that investment banking fees, severance costs and legal and accounting expenses
of Berkshire relating to the Proposed Transactions will not exceed $12 million,
(x) confirmation of the number of fully-diluted shares of Berkshire, (xi)
receipt by Aptco of the financing proceeds on the terms and conditions set forth
in the Formation Letter and the Commitment Letter and (xii) other customary
conditions to closing.
<PAGE>
CUSIP No. 084710 10 2 PAGE 14 OF 23 PAGES
Although Aptco's proposal contained in the Offer Letter expired by its
terms at 5:00 p.m. on March 1, 1999, each Reporting Person expects to evaluate
on an ongoing basis Berkshire's financial condition, business operations and
prospects, market price of the Common Stock, conditions in securities markets
generally, general economic and industry conditions and other factors.
Accordingly, each Reporting Person reserves the right to change its plans and
intentions at any time, as it deems appropriate and may or may not submit a
revised proposal or extend the expiration date of the proposal contained in the
Offer Letter. In particular, each Reporting Person may at any time and from time
to time acquire shares of Common Stock or securities convertible or exchangeable
for Common Stock; dispose of shares of Common Stock which it has acquired;
exchange OP Units which it has acquired for shares of Common Stock; and/or may
enter into privately negotiated derivative transactions with institutional
counterparts to hedge the market risk of some or all of the positions in the
Common Stock which it has acquired. Any such transactions may be effected at any
time and from time to time subject to any applicable limitations of the
Securities Act. To the knowledge of each Reporting Person, each of the persons
listed on Schedule I and Schedule II hereto and each of Blackstone and the Krupp
Affiliates may make the same evaluation and reserve the same rights.
<PAGE>
CUSIP No. 084710 10 2 PAGE 15 OF 23 PAGES
Item 5. Interests in Securities of the Issuer.
(a) Based on information provided by the Krupp Affiliates to the
Reporting Persons, as of February 22, 1999, 5,881,369* shares of Common Stock
may be deemed to be beneficially owned by the Krupp Affiliates, representing
approximately 14.0% of the outstanding shares of Common Stock.** Each of
Whitehall, WH Advisors, L.L.C., GS&Co. and GS Group disclaims beneficial
ownership of all of such shares of Common Stock.
Based on information provided by Blackstone to the Reporting Persons,
as of February 22, 1999, no shares of Common Stock were beneficially owned by
Blackstone.
As of February 22, 1999, no shares of Common Stock were beneficially
owned by Whitehall or WH Advisors, L.L.C.
As of February 22, 1999, GS&Co. and GS Group may be deemed to
beneficially own 27,208 shares of Common Stock held in Managed Accounts,
representing less than 1% of the outstanding shares of Common Stock. Each of
GS&Co. and GS Group disclaims beneficial ownership of Common Stock held in
Managed Accounts. To the knowledge of the Reporting
- ---------------
* Based on information provided by the Krupp Affiliates to the Reporting
Persons, such number includes 5,344,066 OP Units and excludes 42,110 shares
of Common Stock owned by certain persons who are related to Douglas and
George Krupp, regarding which the Krupp Affiliates disclaim beneficial
ownership. Pursuant to the Amended and Restated Agreement of Limited
Partnership of BRI OP, OP Units are convertible into shares of Common Stock
on a one-for-one basis or, at the election of Berkshire, into cash. Based
on information provided by the Krupp Affiliates to the Reporting Persons,
the Krupp Affiliates disclaim beneficial ownership of Common Stock to the
extent that OP Units may be exchanged for cash rather than Common Stock at
the option of Berkshire.
** All percentages of Common Stock set forth in this Item 5 are based upon the
36,711,488 shares of Common Stock reported to be outstanding as of October
31, 1998 as disclosed in Berkshire's most recent Form 10-Q filed with the
Securities and Exchange Commission.
<PAGE>
CUSIP No. 084710 10 2 PAGE 16 OF 23 PAGES
Persons, each of Blackstone and the Krupp Affiliates disclaim beneficial
ownership of Common Stock held in Managed Accounts.
None of the Reporting Persons, and to the knowledge of the Reporting
Persons, none of the persons listed on Schedule I and Schedule II hereto,
beneficially own any shares of Common Stock other than as set forth herein.
(b) GS&Co. and GS Group share the power to vote or direct the vote and
to dispose or direct the disposition of the shares of Common Stock held in the
Managed Accounts as indicated on pages 4 and 5 above.
(c) None of the Reporting Persons, and based on information provided by
Blackstone, the Krupp Affiliates and the persons listed on Schedules I and II
hereto to the Reporting Persons, none of the persons listed on Schedule I and
Schedule II hereto, the Krupp Affiliates or Blackstone, has been a party to any
transaction in the Common Stock during the sixty-day period ending on February
22, 1999.
(d) Except for clients who may with respect to shares of Common Stock
held in Managed Accounts, no other person has the right to receive or the power
to direct the receipt of the dividends from, or the proceeds from the sale of,
any shares of Common Stock that may be deemed to be beneficially owned by the
Reporting Persons.
(e) Not applicable.
<PAGE>
CUSIP No. 084710 10 2 PAGE 17 OF 23 PAGES
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as disclosed in Items 3, 4 and 5 and the Joint Filing Agreement,
dated March 4, 1999, among the Reporting Persons (attached hereto as Exhibit 4),
none of the Reporting Persons is a party to any contracts, arrangements,
understandings or relationships with respect to any securities of Berkshire,
including but not limited to the transfer or voting of any securities, finder's
fees, joint ventures, loan or option agreements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit No. Exhibit
----------- -------
1. Formation Letter, dated February 22,1999, among
Whitehall, Blackstone and Douglas Krupp.
2. Commitment Letter, dated February 22, 1999,
between Aptco and GSMC.
3. Offer Letter, dated February 22, 1999, from Aptco
to Berkshire.
4. Joint Filing Agreement, dated March 4, 1999, among
the Reporting Persons.
<PAGE>
CUSIP No. 084710 10 2 PAGE 18 OF 23 PAGES
SIGNATURE
After reasonable inquiry and to our best knowledge and belief, we
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 4, 1999
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI,
its general partner
By: /s/ Edward M. Siskind
---------------------------------
Name: Edward M. Siskind
Title: Vice President and
Assistant Treasurer
WH ADVISORS, L.L.C. XI
By: /s/ Edward M. Siskind
---------------------------------
Name: Edward M. Siskind
Title: Vice President and
Assistant Treasurer
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
GOLDMAN, SACHS & CO.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
<PAGE>
CUSIP No. 084710 10 2 PAGE 19 OF 23 PAGES
SCHEDULE I
The name of each director of The Goldman Sachs Corporation and The
Goldman, Sachs & Co. L.L.C. is set forth below.
The business address of each person listed below except John L.
Thornton is 85 Broad Street, New York, NY 10004. The business address of John L.
Thornton is 133 Fleet Street, London EC4A 2BB, England. Each person is a citizen
of the United States of America. The present principal occupation or employment
of each of the listed persons is as a managing director of Goldman, Sachs & Co.
or another Goldman Sachs operating entity.
Jon Z. Corzine
Henry M. Paulson, Jr.
Robert J. Hurst
John A. Thain
John L. Thornton
<PAGE>
CUSIP No. 084710 10 2 PAGE 20 OF 23 PAGES
SCHEDULE II
The name, position and present principal occupation of each manager and
executive officer of WH Advisors, L.L.C. XI, which is the sole general partner
of Whitehall Street Real Estate Limited Partnership XI, are set forth below.
The business address of all the executive officers and managers listed
below except G. Douglas Gunn, Todd A.Williams, Angie D. Madison, Richard E.
Georgi III, Paul R. Milosevich, Elizabeth A. O'Brien and Eli Muraidekh is 85
Broad Street, New York, New York 10004. The business address of G. Douglas Gunn,
Todd A. Williams, Angie D. Madison and Paul R. Milosevich is 100 Crescent Court,
Suite 1000, Dallas, TX 75201. The business address of Richard E. Georgi III and
Eli Muraidekh is 133 Fleet Street, London EC4A 2BB, England. The business
address of Elizabeth A. O'Brien is 3 Garden Road, Central, Hong Kong.
Except for Brahm S. Cramer, who is a Canadian citizen, all executive
officers and managers listed below are United States citizens.
Name Position Present Principal Occupation
- ---- -------- ----------------------------
Rothenberg, Stuart M. Manager/Vice President Managing Director of
Goldman, Sachs & Co.
Neidich, Daniel M. Manager/President Managing Director of
Goldman, Sachs & Co.
O'Brien, Elizabeth A. Vice President/Assistant Vice President of
Secretary Goldman Sachs (Asia) L.L.C.
Georgi III, Richard E. Vice President Managing Director of
Goldman Sachs International
Weil, David M. Vice President Managing Director of
Goldman, Sachs & Co.
Rosenberg, Ralph F. Manager/Vice President/ Managing Director of
Assistant Secretary Goldman, Sachs & Co.
<PAGE>
CUSIP No. 084710 10 2 PAGE 21 OF 23 PAGES
Name Position Present Principal Occupation
- ---- -------- ----------------------------
Williams, Todd A. Vice President/Assistant Managing Director of
Secretary/Assistant Goldman, Sachs & Co.
Treasurer
Naughton, Kevin D. Vice President/Secretary/ Vice President of
Treasurer Goldman, Sachs & Co.
Siskind, Edward M. Vice President/Assistant Managing Director of
Treasurer Goldman, Sachs & Co.
Klingher, Michael K. Vice President Managing Director of
Goldman, Sachs & Co.
Gunn, G. Douglas Vice President/Assistant Vice President of
Secretary Goldman, Sachs & Co.
Lahey, Brian J. Vice President/Assistant Vice President of
Treasurer Goldman, Sachs & Co.
Kava, Alan S. Vice President Vice President of
Goldman, Sachs & Co.
Feldman, Steven M. Vice President Managing Director of
Goldman, Sachs & Co.
Madison, Angie D. Vice President/Assistant Vice President of
Secretary Goldman, Sachs & Co.
Weiss, Mitchell S. Assistant Treasurer Vice President of
Goldman, Sachs & Co.
Cramer, Brahm S. Vice President Vice President of
Goldman, Sachs & Co.
Karr, Jerome S. Vice President Vice President of
Goldman, Sachs & Co.
Lauer, Kate Vice President/Assistant Vice President of
Secretary Goldman, Sachs & Co.
<PAGE>
CUSIP No. 084710 10 2 PAGE 22 OF 23 PAGES
Name Position Present Principal Occupation
- ---- -------- ----------------------------
Milosevich, Paul R. Vice President Vice President of
Goldman, Sachs & Co.
Mortelliti, Josephine Vice President Vice Presdent of
Goldman, Sachs & Co.
Muraidekh, Eli Vice President Vice President of
Goldman Sachs International
Sack, Susan L. Vice President/Assistant Vice President of
Secretary Goldman, Sachs & Co.
<PAGE>
CUSIP No. 084710 10 2 PAGE 23 OF 23 PAGES
SCHEDULE III
In Securities and Exchange Commission Administrative Proceeding File
No. 3-8282 In the Matter of Goldman, Sachs & Co., Goldman, Sachs & Co., (the
"Firm"), without admitting or denying any of the SEC's allegations, settled
administrative proceedings involving alleged books and records and supervisory
violations relating to eleven trades of U.S. Treasury securities in the
secondary markets in 1985 and 1986. The SEC alleged that the Firm had failed to
maintain certain records required pursuant to Section 17(a) of the Exchange Act
and had also failed to supervise activities relating to the aforementioned
trades in violation of Section 15(b)(4)(E) of the Exchange Act.
The Firm was ordered to cease and desist from committing or causing any
violation of the aforementioned sections of the Exchange Act, pay a civil money
penalty to the SEC in the amount of $250,000 and establish policies and
procedures reasonably designed to assure compliance with Section 17(a) of the
Exchange Act and Rules 17a-3 and 17a-4 thereunder.
Exhibit 1
February 22, 1999
Douglas S. Krupp
The Berkshire Group
One Beacon Street, Suite 1550
Boston, MA 02108
Dear Douglas:
Aptco, LLC, an entity to be formed by you or your affiliates ("The
Berkshire Group") and us or our affiliates, intends to make an acquisition
proposal to the Board of Directors of "Bruin" with respect to the possible
acquisition of Bruin and its subsidiaries, and that, in connection with such
proposal, Aptco will be advising the Bruin Board that the equity portion of the
purchase price for the acquisition of Bruin and its subsidiaries will be
provided by Whitehall Street Real Estate Limited Partnership XI ("Whitehall"),
Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone") and The Berkshire
Group, or their respective affiliates. We, severally and not jointly, hereby
advise you that, subject to the execution of mutually acceptable documentation
and satisfaction of the conditions referred to in any proposal letter to be
signed by us, we (directly or through our affiliates) are prepared to proceed as
your equity partners in connection with such acquisition on the basis set forth
in the attached "Summary of Terms."
By countersigning below, you hereby agree that, subject to the
execution of mutually acceptable documentation and satisfaction of the
conditions referred to in any proposal letter to be signed by you, you (through
your affiliates) are prepared to proceed as our equity partner in connection
with such acquisition on the basis set forth in the attached "Summary of Terms."
The agreements set forth herein will terminate automatically upon the
earlier of (i) the date that the Bruin Board definitively rejects Aptco's
proposal and (ii) March 31, 1999.
Notwithstanding anything that may be expressed or implied in this
letter, except as may be set forth in the definitive operating agreement of
Aptco, no recourse hereunder or under any documents or instruments delivered in
connection herewith shall be had against any current or future officer, agent or
employee of Whitehall, Blackstone or The Berkshire Group (any of the foregoing,
an "Investor"), against any
<PAGE>
current or future general or limited partner or member of any Investor or
against any affiliate or assignee of any of the foregoing, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any statute, regulation or other applicable law, it being expressly
agreed and acknowledged that no personal liability whatever shall attach to, be
imposed on or otherwise be incurred by any such current or future officer, agent
or employee or any such current or future general or limited partner, member,
affiliate or assignee of any of the foregoing, as such for any obligations of
any Investor under this letter or any documents or instruments delivered in
connection herewith or for any claim based on, in respect of or by reason of
such obligations or their creation.
This letter is solely for the benefit of the signatories hereto and no
other person shall obtain any rights hereunder or be entitled to rely or claim
reliance upon the terms and conditions hereof or in any documents delivered
pursuant hereto. This letter may not be assigned by any of the signatories
hereto and no Investor may transfer any of its rights hereunder without the
prior written consent of the other two Investors.
This letter constitutes a general non-binding agreement in principle of
the signatories hereto and is not intended to, and does not, create a legally
binding commitment, agreement or obligation on the part of any of the
signatories hereto. This letter is governed by and shall be construed in
accordance with the law of the State of New York applicable to contracts made
and performed in that State.
[Signatures on next page]
<PAGE>
This document may be executed in one or more counterparts, each of
which shall be considered an original, but all of which taken together shall
constitute one and the same document.
Very truly yours,
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI
By: /s/ Steven Feldman
-----------------------------
BLACKSTONE REAL ESTATE
ACQUISITIONS III L.L.C.
By: /s/ Thomas J. Saylak
-----------------------------
Agreed as of the date
set forth above:
/s/ Douglas S. Krupp
- ------------------------------
Douglas S. Krupp, on behalf of
himself and his affiliates who
will be members of Aptco, LLC
<PAGE>
2/22/99
SUMMARY OF TERMS
The following sets forth an outline of discussions concerning a
possible joint venture involving Blackstone Real Estate Acquisitions III L.L.C.
or one of its affiliates ("Blackstone"), The Berkshire Group ("Berkshire Group")
and Whitehall Street Real Estate Limited Partnership XI ("Whitehall" and,
together with Blackstone and Berkshire Group, the "Investors").
GENERAL
Berkshire Group, Blackstone and Whitehall would form a new entity
(Aptco) to acquire all the equity securities (including common stock, preferred
stock and operating partnership units) of Berkshire Realty Company, Inc. and
subsidiaries ("Berkshire"). It is initially envisioned that Aptco would be
organized as an LLC. Aptco would focus on the ownership, acquisition,
management, renovation and existing development of multifamily properties,
primarily value-added/repositioning opportunities.
PRICING
The price to be offered by Aptco would be unanimously determined by
Berkshire Group, Blackstone and Whitehall.
STRUCTURE
Upon execution of a definitive agreement between Aptco and Berkshire,
the Investors would commit to contribute cash, Berkshire common stock and/or
operating partnership units to Aptco to fund the acquisition of Berkshire.
Berkshire Group would contribute to Aptco as common equity all of its
stock and operating partnership units (which shall be not less than 5,416,000
shares and units) valued at the bid price, and Blackstone and Whitehall would
each provide 50% of the balance of the required equity (initially to be at least
$106 million, increasing at the time the bridge financing is refinanced as
provided below, but not in excess of $125.5 million each) as preferred equity.
Cash equity required in excess of $251 million shall be contributed as provided
below. It is expected that some or all of the third party owners of limited
partnership interests in BRI OP
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<PAGE>
Limited Partnership (the "OP") will exchange their interests in the OP for
equity interests in Aptco on the terms set forth in the draft merger agreements
to be submitted by Aptco with its bid to Berkshire.
In the event cash equity in excess of $251 million is required by
Aptco, such excess, not to exceed $30 million in the aggregate, would be funded
one third each by Blackstone, Whitehall and Berkshire Group. Any such amounts
funded by the Investors pursuant to the immediately preceding sentence shall be
treated as preferred equity with respect to distribution rights (i.e. shall be
pari passu with the other preferred equity held by Blackstone and Whitehall). As
an alternative to providing additional equity above $212 million, with the
consent of each of the Investors, Aptco may secure subordinated debt upon terms
acceptable to each of the Investors. Any Investor not funding its share of any
portion of the $30 million of additional required capital calls (described in
the first sentence of this paragraph) will be diluted on a 2 for 1 basis (based
on book equity).
GOVERNANCE
Aptco would be governed by a three member Board of Directors (Board).
Whitehall, Blackstone and Berkshire Group would each have one seat on the Board.
Douglas Krupp (DK) would be Chairman of the Board (as Berkshire Group's
designee) and Chief Executive Officer (CEO). Berkshire Group would lose its
Board seat in the event that (i) it transfers any portion of its initial
ownership interest in Aptco in violation of Aptco's Operating Agreement, (ii)
Aptco acquires the interest of Berkshire Group, (iii) DK is removed as CEO for
cause (as defined in Annex A), company cause (as defined in Annex A), or if he
resigns prior to the fifth anniversary of closing or (iv) upon DK's or Berkshire
Group's default of a loan that is secured by a pledge of its interest in Aptco,
but only if such loan becomes due, whether as a result of an acceleration or
maturity of such loan. Except for those decisions described in this Summary of
Terms that require unanimous approval, do not require any Board approval (i.e.,
can be decided by DK) or can be decided unilaterally by either Blackstone or
Whitehall, all decisions (such as all annual budget and business plan approvals,
acquisitions of any assets within the parameters set forth on Exhibit 1, etc.)
would be approved by a 2 out of 3 vote of the Board. If Aptco is organized as a
limited partnership instead of a limited liability company, Whitehall,
Blackstone and Berkshire Group would each have the right to have a subsidiary
act as a co-general partner of Aptco and the governance provisions would be
modified accordingly (e.g., decisions that are described below as requiring a
unanimous vote of the Board would instead require unanimous approval of the
general partners).
A unanimous vote of the Board would be required for (i) amending the
Operating Agreement of Aptco, (ii) admitting any new members, (iii) capital
calls in excess of the $281
-2-
<PAGE>
million required above (except that 2 out of 3 Board members may approve capital
calls ("Mandatory Capital Calls") for debt service shortfalls, health and safety
items, taxes and similar necessary expenditures as long as Berkshire Group's
share of such capital calls does not exceed, in the aggregate, $10 million, and
any Investor not funding its share of any required capital calls will be diluted
on a 2 for 1 basis (based on book equity)), (iv) change in the nature of Aptco's
business (e.g., to include mortgage lending), (v) except as set forth in the
third paragraph below, any sale of Aptco or sale of all or substantially all of
Aptco's assets, in each case prior to 12/31/2002 (i.e., a 2 out of 3 vote will
be required to approve a sale of Aptco (and/or its subsidiaries or substantially
all of their assets) between 12/31/2002 and the fifth anniversary of closing,
(vi) acquisition of any assets outside of the parameters set forth on Exhibit 1
(i.e., a 2 out of 3 vote will be required to approve acquisitions within such
parameters), (vii) changes to the bid from the terms submitted to the Board of
Berkshire on this date, the execution of the merger documentation, the
acceptance of any closing deliveries and/or the grant of consents or approvals
or acceptance or waiver of conditions to Aptco's obligation to close pursuant to
the merger documentation and (viii) a disposition of all or a portion of the
property known as Berkshire Towers (or of the subsidiary that owns such
property) prior to the fifth anniversary of closing, other than in a tax
deferred transaction. Any equity funded by the Investors pursuant to a Mandatory
Capital Call shall be treated as preferred equity with respect to distribution
rights (i.e., shall be pari passu with the other preferred equity of the
Investors). None of the Investors shall enter into any separate voting agreement
with any other Investor in respect of its interests. In addition, any
related-party transaction involving an Investor would require a majority vote of
the non-interested Investor designee-directors. In the event any Investor or its
controlling persons files a bankruptcy or similar proceeding with respect to
Aptco without first obtaining the prior written approval of two of the three
Board members, the ownership interest and capital account of such Investor shall
be reduced to zero.
Notwithstanding the general requirement that all financings require the
approval of at least two of the three Board members, DK, acting alone, will have
the authority to accept a financing from the Federal Home Loan Mortgage
Corporation ("Freddie Mac") or another institutional lender provided that (I)
the amount of such financing is 75% of the appraised value of the Properties on
Exhibit 2 hereto and in any event at least $650 million (the financing amount to
be reduced by 75% of the appraised value of any assets on Exhibit 3 sold at or
prior to the closing), (II) such financing is not recourse in any respect to any
Investor without its approval, (III) the term of such financing is equal to 7
years with a fixed interest rate at 8.0% per annum or less, (IV) in order to
benefit from lower interest rate spreads, the entire financing will be subject
to yield maintenance penalties on prepayments until the fifth anniversary of the
closing of the financing (i.e., will be prepayable during the first five years
only with yield maintenance and thereafter without yield maintenance), (V) the
properties subject to such financing will not be cross-collateralized and the
loans will not be cross-defaulted and (VI) the other terms are no less
-3-
<PAGE>
favorable to Aptco than the terms of the "Conditional Commitment" (dated
November 16, 1998) previously provided to the Investors from Freddie Mac.
Financing outside of the foregoing parameters may be authorized by 2 out of the
3 Board members provided (x) the Board will use commercially reasonable efforts
to obtain financing on terms as close to possible as the parameters set forth
above, (y) any such alternative financing shall be fixed rate or be subject to
appropriate hedging arrangements and (z) such financing shall not be recourse in
any respect to any Investor without its approval.
Provided that DK is still acting as chairman and CEO, DK will be
authorized without the approval of the Board (i) to carry out business plans
approved by the Board, provided that payroll expenses do not exceed 105% of the
annual amount of that item on the approved budgets, and all other expenses do
not in the aggregate exceed 105% of annual expenses (other than payroll
expenses) in the approved budgets, (ii) to sell the 10 Assets in Exhibit 3 for
prices that yield Aptco net proceeds (after all transactions costs, taxes and
debt prepayment fees and expenses) equal to at least 95% of the amounts set
forth in Exhibit 3 (provided that such net proceeds shall not be less than 97.5%
of all such amounts in the aggregate) in transactions with third parties
(unaffiliated with Berkshire Group) and in which Berkshire Group has no
continuing interest and (iii) to sell certain individual assets in any calendar
year not in excess of $100 million in gross proceeds provided that the price for
each sold assets yields Aptco net proceeds (after all transaction costs, taxes
and debt prepayment fees and expenses) equal to at least 103% of allocated
acquisition cost. If DK does not sell the 10 Assets as provided in clause (ii)
above within the time period contemplated by the initial business plan approved
by the Board, Whitehall and Blackstone, acting together, may cause Aptco to sell
such Assets during the immediately succeeding 6-month period for the prices
described in clause (ii) in transactions with third parties (unaffiliated with
either Whitehall or Blackstone) and in which neither Whitehall nor Blackstone
have any continuing interest. If DK does not sell $100 million of assets in any
calendar year as provided in clause (iii) above, during the six months following
such year Whitehall and Blackstone, acting together, may cause Aptco to sell
that amount of assets not sold in such year for the asset prices described in
clause (iii).
Each of the Investors will be authorized unilaterally to cause a sale
of Aptco to an unaffiliated third party in a bona fide transaction (in which no
Investor has a continuing interest) to the highest bidder after the fifth
anniversary; provided that DK may not exercise such right until three months
following such fifth anniversary; provided further that if, during such three
month period DK's Employment Agreement is terminated without cause and Whitehall
and Blackstone have not already exercised their right to cause a sale of Aptco
then DK may exercise such right. In addition, at any time after the second
anniversary, DK may cause a sale of Aptco subject to a right of first offer in
favor of each of Whitehall and Blackstone (which may be exercised by either or
both of Whitehall and Blackstone) and if such right of first offer is not
-4-
<PAGE>
exercised, DK may cause such sale at a price equal to or higher than the price
offered to Whitehall and Blackstone as long as (i) the net proceeds from such
sale results in a 12% per annum annually compounded IRR to each of the Investors
if the sale is consummated after the third and before the fifth anniversaries of
closing or a 15% per annum annually compounded IRR if the sale is consummated
between the second and third anniversaries of closing (with Berkshire Group
being permitted to use its own funds to allow such IRR thresholds to be
achieved), and (ii) such sale is consummated with a bona fide third party
(unaffiliated with Berkshire Group) within 180 days after the right of first
offer is declined. If Whitehall and Blackstone each exercise the right of first
offer, they shall each acquire 50% of the offered interests. Any sale to either
or both of Whitehall or Blackstone may be accomplished by purchasing the
ownership interests in Aptco not owned by them, rather than Aptco itself. In
addition, at any time after 12/31/2002, Whitehall and Blackstone, acting
together, may cause a sale of Aptco, subject to a right of first offer in favor
of Berkshire Group, as long as such sale is consummated with a bona fide third
party (unaffiliated with either Whitehall or Blackstone). The terms of such
right of first offer shall provide that such right will be deemed to have been
declined or lapsed (x) if it has not been accepted by Berkshire Group (subject
to financing) within 30 days of the offer, (y) if any financing contingency set
forth in the definitive sales contract shall not have expired, be waived or
satisfied within 150 days of the offer, or (z) if consummation of the sale has
not occurred within 180 days of the offer.
The budget and business plan for the 1999 calendar year will be
approved by each of the Investors prior to execution of the Aptco governing
documents.
MANAGEMENT
As described above, day-to-day management would be the responsibility
of the Aptco management team. The acquisition of Berkshire would include
Berkshire's multifamily management operations. Prior to the execution of a
definitive agreement with Berkshire, the staffing, senior management and
operating budget of Aptco would be discussed and agreed.
DISPOSITIONS
The management of Aptco would develop a sale/hold/capital expenditure
analysis for each asset, which would be reviewed by the Board annually.
Selection of sale agents would be at the Board's discretion. Prior to closing,
certain assets will be identified for sale during the first two years after
closing.
-5-
<PAGE>
CONFIDENTIALITY
Subject to requirements of law, Blackstone, Whitehall and Berkshire
Group would each keep confidential all discussions and materials prepared and
exchanged in connection with the proposed transaction. It is anticipated that a
joint press release would be issued upon execution of a definitive agreement
with Berkshire, and possibly earlier if required by law.
This summary is for discussion purposes only and constitutes only a
general non-binding expression of interest on the part of Blackstone, Whitehall
and Berkshire Group and is not intended to, and does not, create a legally
binding commitment, agreement or obligation on the part of Blackstone, Whitehall
or Berkshire Group, other than the section entitled "Break-Up Fee; Cost
Reimbursement" (set forth in Annex A).
EXPIRATION
The obligation of the parties hereto shall automatically expire on the
earlier of (i) March 31, 1999, if the Aptco bid is not accepted by such date by
the Board of Directors of Berkshire, (ii) the date which is 210 days after the
date Aptco's bid is accepted by Berkshire's Board and (iii) the date upon which
Berkshire's Board definitively rejects Aptco's bid.
SUPPLEMENTARY TERMS AND CONDITIONS
The supplementary terms and conditions set forth in Annex A hereto are
incorporated by reference herein.
-6-
Exhibit 2
February 22, 1999
CONFIDENTIAL
Aptco, LLC
c/o Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attn: Douglas S. Krupp, CEO
Re: Commitment Letter
Ladies and Gentlemen:
You have advised Goldman Sachs Mortgage Company ("GSMC") that affiliates of
Douglas S. Krupp ("Krupp"), Blackstone Real Estate Acquisitions III L.L.C.
("Other Equity Investor") and Whitehall Street Real Estate Limited Partnership
XI ("Whitehall" and, collectively with Krupp and Other Equity Investor and/or
their affiliates, the "Investors") have formed and intend to capitalize Aptco,
LLC, a Delaware limited liability company ("LLC"), which will propose a
transaction to the Board of Directors of a publicly held Delaware corporation
("Bruin"), pursuant to which (i) Bruin would merge into LLC with LLC as the
surviving entity and all the outstanding Bruin capital stock (and rights to
acquire Bruin capital stock) being converted in the merger into the right to
receive cash equal to a price per share (and total purchase price) not to exceed
the amount we have agreed on (the "Bruin Merger") and (ii) immediately prior to
such merger, a subsidiary of LLC would be merged into BRI OP Limited
Partnership, a Delaware limited partnership ("OP"), in a transaction pursuant to
which OP and OP's current general partner ("OP GP") would become wholly owned by
LLC (the "OP Merger" and together with the Bruin Merger, the "Transaction").
Currently, 79.16% of the partnership interests of OP are directly or indirectly
owned by Bruin. Exhibit I hereto depicts the current organizational structure of
Bruin. This letter is referred to herein as the Commitment Letter.
Financing of $675 million, but in no event in excess of 75.5% of the transaction
value (i.e., cash required to consummate the Transaction, assumed debt of at
least $233 million, equity contributed or deemed contributed by Krupp (which
shall have a value of not less than $57 million) and all fees and expenses of
LLC and its subsidiaries relating to the Transaction) is being sought by you in
connection with the Transaction (the "Facility"). A portion of the proceeds of
the Facility would be made available to LLC to finance a portion of the
consideration to be paid to Bruin stockholders and option/warrantholders in the
Bruin Merger and the cash option in the OP Merger. Additional information
regarding the Transaction is set forth in the
<PAGE>
Summary of Terms among The Berkshire Group, Other Equity Investor and Whitehall
and the draft agreements for the Bruin Merger and the OP Merger which you have
furnished to us (the "Summary of Terms").
Based on our understanding of the Transaction as set forth above and in other
documents referred to above, and the other information which you have provided
to us, GSMC commits to provide the Facility on the terms and subject to the
conditions set forth herein.
LENDER: GSMC, together with its permitted participants and co-
lenders.
TRANSFERABILITY: Prior to closing, Borrower and Lender will agree upon the
terms pursuant to which Lender may transfer its interest
in the loan (it being understood and agreed that Lender
may sell participation interests in the loan, provided
that GSMC retains the agent role).
BORROWER: OP and/or, at GSMC's election, certain other property-
owning OP subsidiaries.
GUARANTORS: LLC and those OP subsidiaries owning the 58 properties
identified on Schedule I hereto which are not borrowers.
In addition, Guarantors shall include all other
subsidiaries of OP for which no third party consent for
such guarantee is required or as to which all required
third party consents have been obtained (as to special
purpose entities, OP shall arrange for charter
amendments, as necessary to permit granting of
guarantees). Borrower and Guarantors to use all
commercially reasonable efforts to obtain such consents.
The Investors (or special purpose entities holding the
Investors' interest in LLC) shall be guarantors of the
Loan with recourse to be limited to a first priority
assignment or pledge of their interests in LLC (See
"Security" below).
AMOUNT: $675,000,000 in the aggregate, but in no event in excess
of 75.5% of the transaction value (i.e., cash required to
consummate the Transaction assumed debt of at least
$233,000,000, equity contributed or deemed contributed by
Krupp and all fees and expenses of LLC and its
subsidiaries relating thereto). The amount borrowed under
the Facility is referred to as the Loan. Borrower may
borrow less than the entire Loan at closing. In such
event, the collateral to secure the Loan will be reduced
in accordance with loan
2
<PAGE>
allocation amounts among the properties (such allocated
loan amounts shall be agreed upon by the Lender and
Borrower before the merger agreement is signed).
TERM: Twelve (12) months from the closing of the Transaction.
USE OF PROCEEDS: Proceeds will be used to finance a portion of the
aggregate consideration to be paid by LLC in the Bruin
Merger, as needed to fund the cash option in the OP
Merger, to refinance specified existing indebtedness of
OP and its subsidiaries, to repay intercompany
indebtedness owed to Bruin to enable Bruin to finance the
redemption of its outstanding Series A Preferred Stock,
and to fund certain fees and expenses associated with the
Transaction.
INTEREST:
Rate: Absent a default, the Loan will bear interest at the rate
of 3.75% above the reserve adjusted London Interbank
Offered Rate ("LIBOR Rate") for one month interest
periods; provided, however, that notwithstanding the
foregoing, the minimum interest rate shall at all times
be 8.65%.
Payment Dates: Interest will be payable monthly.
Other Terms: All interest will be calculated based on a 360-day year
and actual days elapsed. The financing documentation will
contain (a) customary LIBOR breakage provisions and LIBOR
borrowing mechanics, (b) LIBOR Rate definitions and (c)
customary provisions for determination of interest in the
event that LIBOR is not available for any period.
Default Rate: From and after the occurrence of a default, the interest
rates applicable to the Loan will be increased by 2% per
annum over the interest rate otherwise applicable and
such interest and fees will be payable on demand.
COMMITMENT FEE: 1.0% of the maximum amount of the Facility, payable at
closing of the Transaction, whether or not the Facility
is drawn upon. In the event the Transaction does not
close, the commitment fee shall be reduced to 75% of the
fee provided for in the preceding sentence, but will be
payable
3
<PAGE>
only out of the break-up fee or reimbursement of such
commitment fee expense actually received from Bruin.
Borrower shall use good faith efforts to collect the
break-up fee and receive reimbursements for the
commitment fee if they are owing to the LLC under the
terms of the merger documentation. In the event the LLC
receives a 100% reimbursement from Bruin of such
commitment fee as an expense, the LLC will pay all of
such reimbursement over to GSMC.
STRUCTURING FEE: 0.25% of the maximum amount of the Facility, payable at
the same time as the commitment fee. In the event the
Transaction does not close, the structuring fee shall be
reduced to 75% of the fee provided for in the preceding
sentence, but will be payable only out of the break-up
fee or reimbursement of such structuring fee expense
actually received from Bruin. Borrower shall use good
faith efforts to collect the break-up fee and receive
reimbursements for the structuring fee if they are owing
to the LLC under the terms of the merger documentation.
In the event the LLC receives a 100% reimbursement from
Bruin of such structuring fee as an expense, the LLC will
pay all of such reimbursement over to GSMC.
TAKEDOWN FEE: 0.50% of the amount borrowed, payable upon borrowing.
REPAYMENT FEE: A repayment fee of 0.50% of the then outstanding amount
of the Facility, if any, shall be due on June 15, 2000.
PREPAYMENTS: Borrowers may voluntarily prepay all or any portion of
the Loan in minimum amounts of $1 million at any time,
upon at least 5 days' prior written notice. All voluntary
prepayments will be accompanied by LIBOR breakage costs,
if any.
SECURITY: First mortgage liens (recorded) and title insurance on 58
properties identified on Schedule I hereto. Pledge by LLC
of entire equity of OP GP. In addition, the Investors (or
special purpose entities holding the Investors' interest
in LLC) will guarantee the Loan with recourse to be
limited to a first priority assignment or pledge of their
interest in LLC as security for such guaranty. At GSMC's
election, a first priority perfected lien on and security
interest in all assets
4
<PAGE>
of LLC, OP and the subsidiaries of OP not covered by the
preceding sentences to the extent available without the
requirement to obtain any third party consent or as to
which all required third party consents are obtained.
Borrower and Guarantors to use all commercially
reasonable efforts to obtain such consents. Lender will
have dominion over all cash if requested by GSMC, which
arrangement shall permit the release of cash to Borrower
and Guarantors absent a default; provided, however, that
to the extent that the holders of debt in respect of the
24 properties identified on Schedule II hereto shall have
the right to and shall prohibit such an arrangement,
Lender shall not be entitled to same. The Loan will be
cross-collateralized and cross-defaulted in a manner
satisfactory to Lender. The Parties will use reasonable
good faith efforts to minimize or avoid mortgage
recording taxes and minimize title insurance premiums on
the 58 properties on Schedule I; it being understood that
there will be no mortgages or title insurance obtained
with respect to the 24 properties on Schedule II.
PARTIAL RELEASES Permitted in connection with third party sales and
FROM MORTGAGE OR certain partial refinancings provided that Lender
NEGATIVE COVENANT: receives at least minimum release prices based on
allocated loan amounts to be agreed upon by the parties.
Minimum release price is to be equal to greater of the
property's allocated loan amount or 100% of sale or
refinancing proceeds capped at 110% of the property's
allocated loan amount. Borrower and GSMC to agree on
allocated loan amounts prior to the execution of the
merger agreement.
DOCUMENTATION: The documentation for the Financing will contain
representations and warranties, conditions precedent
described below, closing document deliveries and similar
customary conditions precedent, affirmative and negative
covenants (but no financial ratios, maintenance or other
similar financial condition tests), indemnities, events
of default and remedies, in each case customarily found
in documentation for similar transactions. The OP and/or
LLC will provide customary environmental indemnity to the
Lender. This Commitment Letter does not contain all the
terms that will be included in the documentation for the
Financing.
5
<PAGE>
CONDITIONS: The commitment of GSMC for the Facility is conditioned
upon satisfaction of all the following (all to Lender's
satisfaction):
o Relevant documents, such as all transaction documents
and disclosure schedules for the Bruin Merger and the
OP Merger and other material agreements to which
Borrower is a party, must be acceptable to GSMC in all
material respects.
o The Bruin Merger and the OP Merger each shall have
been consummated in compliance with all applicable law
and regulations.
o The material terms of the Bruin Merger and the OP
Merger, including, without limitation, the
consideration offered and the conditions precedent,
shall not have been modified, amended or supplemented
in any material respect and no material provision
contained therein shall have been waived, without
GSMC's prior written consent.
o Any conditions contained in the merger agreement
relating to environmental matters shall have been
satisfied or waived with GSMC's prior written consent.
o A Closing Agreement with the Internal Revenue Service
on terms and conditions satisfactory to Aptco with
respect to the tax matters specified in the draft
merger agreements.
o All necessary governmental and material third party
waivers and consents shall have been received.
o Receipt of opinions of counsel from Borrower's counsel
(including local counsel as requested) reasonably
acceptable to GSMC.
o Receipt of customary mortgage title insurance
policies, existing land surveys, (and the Borrower
will use best efforts to obtain surveys for properties
as to which surveys have not previously been
6
<PAGE>
prepared) evidence of insurance and addition of GSMC
as loss payees, and the like.
o As of the closing of the Transaction, there shall be
no material liabilities of Borrower, other than (i)
the $233 million of existing indebtedness encumbering
the properties on Schedule II hereto, (ii) customary
trade payables not to exceed $5 million, (iii)
liabilities shown on Schedule III hereto (iv)
liabilities, which shall be subject to the approval of
GSMC, disclosed in SEC filings filed after December
31, 1997 and prior to the execution of the merger
agreement, and (v) liabilities shown on the Disclosure
Letter delivered pursuant to the merger agreement,
subject to the approval of GSMC.
o There shall be no material adverse change (a "MAC"),
in the business, financial condition or prospects of
Bruin and its subsidiaries taken as a whole or in the
collateral for the Loan taken as a whole (including in
the environmental condition thereof) not contemplated
by the Transaction.
o No material indebtedness of Bruin or OP or any of
their subsidiaries (which is not being repaid at
closing) shall be in default as the result of the
Transaction or the Financing and there shall be no
Event of Default on any material indebtedness which is
not being repaid at closing beyond applicable cure
periods.
o There shall be no litigation commenced that,
individually or in the aggregate, is reasonably likely
to have a material adverse effect on Bruin and its
subsidiaries, taken as a whole, or their business or
Borrower's ability to repay the Loan or that would
prevent or significantly delay the consummation of the
Transaction, or any litigation pending or threatened
in writing by a governmental entity which challenges
the Bruin Merger, the OP Merger or the Financing.
7
<PAGE>
o There shall not have occurred and be continuing (i)
any general suspension of, or limitation on prices
for, trading in securities on the New York Stock
Exchange, (ii) a declaration of any general banking
moratorium by federal or New York authorities or any
suspension of payments in respect of money center
banks or any limitation (whether or not mandatory)
imposed by federal or state authorities on the
extension of credit by money center banks in the
United States, (iii) any limitation (whether or not
mandatory) by any United States governmental entity
on, or any other event which could materially affect,
the extension of credit by banks or other United
States financial institutions, (iv) from the date
hereof through the closing date a decline of at least
15 % in either the Dow Jones Average of Industrial
Stocks or the Standard & Poor's 500 Index, (v) any
material disruption or material adverse change in the
financial or capital markets generally or (vi) a
commencement of a war, armed hostilities or any other
international or national calamity directly or
indirectly involving the United States or, in the case
of a situation existing as of the date hereof, a
material escalation of such situation.
o Absence of a default under the Financing.
o GSMC shall have verified that the annualized net
operating income for the collateral for the Loan shall
be at least $114.6 MM (representing a 7.5% decrease
from Bruin's budgeted 1999 net operating income of
$123.9 MM). For purposes of the foregoing, GSMC shall
define the analysis period as beginning January 1,
1999 and ending on the last day of the month
immediately prior to closing. Lender shall compare the
actual income and expense performance of the
properties with the 1999 budget previously furnished
to GSMC. GSMC shall determine that the actual net
operating income during the analysis period shall not
be less than 92.5% of the 1999 budgeted net operating
income for the same analysis period. Foregoing NOI
test to be adjusted to reflect sales of properties
8
<PAGE>
between the date hereof and closing (assuming entire
cash proceeds thereof are retained by Bruin or used to
repay existing debt that otherwise would be repaid at
closing).
o LLC shall have received the equity from Other Equity
Investor, Whitehall and Krupp contemplated by the
Summary of Terms (i.e., a minimum of $106 million from
each of Whitehall and Other Equity Investor and a
contribution having a value of at least $57 million
from Krupp), and all the Bruin stock and OP Units
currently owned by Krupp and his affiliates.
o The Transaction shall have closed no later than 210
days (the "Commitment Termination Date") following the
signing of a definitive agreement for the Bruin Merger
and the Loan shall not, in any event, be drawn down
after December 31, 1999.
o Definitive agreements for the Bruin Merger and the OP
Merger shall have been executed by March 31, 1999,
provided, however, that if definitive agreements are
not executed by March 31, 1999 and Lender does not
extend this Commitment Letter, this Commitment Letter
will terminate and neither Borrower nor Lender will be
liable hereunder.
OTHER TERMS: The documentation for the Facility will require, among
other things, compliance with covenants pertaining to the
following (all in form and substance satisfactory to
GSMC):
o Financial reporting on a monthly basis. All financial
statements shall be prepared on a consolidated and
consolidating basis.
o Compliance with all applicable law, decrees and
material agreements, or obtaining of applicable
consents and waivers.
o Limitations on commercial transactions, management
agreements, service agreements and
9
<PAGE>
borrowing transactions with officers, directors,
employees and affiliates.
o Prohibition on new indebtedness, other than the
Facility, and other than refinancings of existing
indebtedness (i) in respect of the 24 properties
listed on Schedule II, provided the same are on terms
not materially more onerous to the Borrower than the
existing indebtedness being refinanced and (ii) in
respect of the 58 properties identified on Schedule I,
provided that payment of the appropriate release price
is made.
o Prohibitions on liens, mortgages and security
interests except those in existence and identified,
those incurred in connection with permitted
refinancings, and liens on indebtedness permitted to
be incurred for the financing of permitted purchases
of properties which liens are limited to the
properties purchased, and which obligations are solely
those of the property owning subsidiary.
o Limitations on, or prohibitions of, cash dividends,
other distributions to equity holders, payments in
respect of subordinated debt and redemption of common
or preferred stock. Such limitations and/or
prohibitions shall not preclude, in the absence of a
default under the Loan, distributions to certain OP
Unit Holders who convert their interests to Class A
(Preferred) Interests or tax distributions, as
contemplated by the LLC agreement.
o Limitations on mergers, acquisitions, or sale of a
material portion of assets (other than sales
accompanied by payment of specified release prices).
o Prohibitions of a direct or indirect change in control
of Borrower or LLC (other than changes which increase
the control of Whitehall and the Other Equity
Investor. The foregoing shall not prohibit any change
in ownership (but not control) within Whitehall, Krupp
or the Other Equity Investor).
10
<PAGE>
Whitehall and Blackstone will each have equivalent
control and substantially equivalent economic
interests in LLC.
o Customary provisions regarding responsibility for
misappropriation of funds.
o Limitations on capital expenditures.
o Agent's and Lender's rights of inspection and access
to facilities, management and auditors.
o Payment of Lender's costs and expenses in documenting,
closing and servicing the Loan (including reasonable
attorneys' fees and costs, title insurance premiums
and mortgage recording taxes).
o Escrow for real estate taxes.
o Governing law: New York.
The commitment of GSMC hereunder is subject to the execution and delivery of
final legal documentation acceptable to GSMC and its counsel incorporating,
without limitation, the terms set forth in this Commitment Letter.
By signing this Commitment Letter, you acknowledge that this Commitment Letter
supersedes any and all discussions and understandings, written or oral, between
or among GSMC and any other person as to the Facility, including any prior
commitment letters for debt financing for the Transaction. No amendments,
waivers or modifications of this Commitment Letter or any of its contents shall
be effective unless expressly set forth in writing and executed by you and GSMC.
This Commitment Letter is being provided to you on the condition that, except as
required by law or SEC Regs (as defined below), neither it nor its contents will
be disclosed publicly or privately except to those individuals who are your
advisors who have a need to know of them as a result of their being specifically
involved in the Bruin Merger and the OP Merger and the Facility and then only on
the condition that such matters may not, except as required by law or
regulations of the Securities and Exchange Commission ("SEC Regs"), be further
disclosed and except that, following your acceptance hereof, you may disclose
this Commitment Letter to Bruin and its advisors. No person, other than the
parties signatory hereto, is entitled to rely upon this Commitment Letter or any
of its contents. No person shall, except as required by law or SEC Regs, use the
name of, or refer to GSMC or any of its affiliates, in any correspondence,
discussions, press release, advertisement or disclosure made in connection with
the Transaction without the prior written consent of GSMC.
11
<PAGE>
In the event the Transaction closes, you agree to indemnify and hold harmless
each of GSMC, its affiliates, and the directors, officers, employees, agents,
attorneys and representatives of any of them (each, an "Indemnified Person"),
from and against all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including, but not limited to, reasonable attorneys'
fees and disbursements and other costs of investigation or defense, including
those incurred upon any appeal), which may be instituted or asserted against or
incurred by any such Indemnified Person in connection with, or arising out of,
this Commitment Letter, the Financing, the documentation related thereto, any
actions or failures to act in connection therewith, and any and all
environmental liabilities and legal costs and expenses arising out of or
incurred in connection with any disputes between or among any parties to any of
the foregoing, and any investigation, litigation, or proceeding related to any
such matters. Your obligation for such reimbursement may be assumed by Borrower
at closing. Notwithstanding the foregoing, no indemnitor shall be liable for any
indemnification to any Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results solely
from that Indemnified Person's gross negligence or willful misconduct, as
finally determined by a court of competent jurisdiction. Under no circumstances
shall GSMC, or any of its affiliates be liable to you or any other person for
any punitive, exemplary, consequential or indirect damages in connection with
this Commitment Letter, the Facility or the documentation related thereto,
regardless of whether the commitment herein is terminated or the Transaction or
the Facility closes. For purposes of this paragraph, the term "affiliate" shall
not include any affiliated entity which is an Investor.
You and GSMC expressly waive any right to trial by jury of any claim, demand,
action or cause of action arising in connection with this Commitment Letter, any
transaction relating hereto, or any other instrument, document or agreement
executed or delivered in connection herewith, whether sounding in contact, tort
or otherwise. You and GSMC consent and agree that the state or federal courts
located in New York County, City of New York, New York, shall have exclusive
jurisdiction to hear and determine any claims or disputes between or among any
of the parties hereto pertaining to this Commitment Letter or the Facility under
consideration and any investigation, litigation, or proceeding related to or
arising out of any such matters, provided, however, that you and GSMC
acknowledge that any appeals from those courts may have to be heard by a court
located outside of such jurisdiction. You and GSMC expressly submit and consent
in advance to such jurisdiction in any action or suit commenced in any such
court, and hereby waive any objection which either of them may have based upon
lack of personal jurisdiction, improper venue or inconvenient forum. The
definitive documentation for the Facility shall contain Borrower's and
Guarantors' agreement to the foregoing.
This Commitment Letter is governed by and shall be construed in accordance with
the law of the State of New York applicable to contracts made and performed in
that State.
GSMC shall have access to all relevant facilities, personnel and accountants,
and copies of all documents which GSMC may reasonably request, including
business plans, financial statements (historical and pro forma), books, records,
and other documents. GSMC agrees to treat any confidential information so
received as it would its own confidential information.
12
<PAGE>
This Commitment Letter shall be of no force and effect unless and until this
Commitment Letter is each executed and delivered to GSMC on or before 5:00 p.m.
New York City time on February 23, 1999 at, 85 Broad Street, New York, New York
10004. Once effective, the commitment of GSMC to provide financing in accordance
with the terms of this Commitment Letter shall terminate if the Bruin Board of
Directors rejects LLC's proposal relating to the Transaction (in which case,
none of the LLC, the Investors or their respective affiliates shall have any
liability hereunder whether on account of fees, reimbursement obligations or
otherwise) or if the Loan does not close by the Commitment Termination Date.
13
<PAGE>
We look forward to continuing to work with you toward completing this
transaction.
Sincerely,
GOLDMAN SACHS MORTGAGE COMPANY
By: /s/ Mark J. Kogan
-------------------------------
Its Duly Authorized Signatory
AGREED AND ACCEPTED THIS
22nd DAY OF FEBRUARY, 1999.
APTCO, LLC
By: /s/ Douglas Krupp
------------------------------
14
Exhibit 3
February 22, 1999
Lazard Freres & Co., LLC
30 Rockefeller Plaza
New York, New York 10020
Attention: Matthew J. Lustig
Gary Ickowicz
Gentlemen:
Aptco, LLC ("Aptco"), a company formed by affiliates of Douglas Krupp,
Whitehall Street Real Estate Limited Partnership XI ("Whitehall") and Blackstone
Real Estate Acquisitions III L.L.C. ("Blackstone") hereby makes the following
proposal, pursuant to which holders of common stock of Berkshire Realty Company,
Inc. ("BRI") would receive, and holders of limited partnership interests ("OP
Units") in BRI OP Limited Partnership ("OP") would have the opportunity to
receive, $11.05 per share/OP Unit in cash (the "Cash Price") for their
respective interests in the Company.
Our proposal contemplates that the acquisition of BRI would take the
form of a merger (the "BRI Merger") pursuant to which BRI would be merged with
and into Aptco, with Aptco as the surviving entity of the BRI Merger. Pursuant
to the BRI Merger, holders of BRI common stock would receive, in exchange for
their stock, an amount of cash per share equal to the Cash Price.
Contemporaneously with the BRI Merger, a newly formed subsidiary of
Aptco would merge with and into OP (the "OP Merger"), with OP as the surviving
entity of the OP Merger. Pursuant to the OP Merger, OP Unitholders would be
given the choice to elect to receive, in exchange for each of their OP Units,
one of the following: (a) cash equal to the Cash Price; (b) a senior preferred
equity interest in Aptco with a liquidation preference equal to the Cash Price,
which would entitle the holder to receive cumulative preferred distributions of
available cash on a senior basis equal to 6% per annum, and would be callable by
Aptco after six years or earlier upon a sale of Aptco (whether by merger,
initial public offering, sale of all or substantially all of its assets, or
otherwise) at a price equal to the liquidation preference; or (c) an equity
interest in Aptco that (i) would be subordinate to the senior preferred equity
interest described above and to senior subordinated equity interests to be held
by Whitehall and Blackstone or their respective affiliates, but would be
generally pari passu with the equity interests to be held by Douglas Krupp and
his affiliates and (ii) would be callable by Aptco after six years or earlier
upon a sale of Aptco (whether by merger, initial public offering, sale of all or
substantially all of its assets, or otherwise) at a price equal to the then fair
market value of such interest.
The aggregate purchase price for the acquisition of BRI and OP would be
funded with a combination of debt and equity financing. The debt financing would
<PAGE>
2
consist of a bridge loan to be provided by Goldman Sachs Mortgage Company (an
affiliate of Whitehall) pursuant to the attached commitment letter. With respect
to the equity financing, affiliates of Douglas Krupp, Whitehall and Blackstone
(together with the debt providers, the "Financing Sources") have agreed in
principle, subject to the execution of mutually acceptable documentation with
respect to Aptco and the conditions set forth below, to provide Aptco with
sufficient funds to finance the remaining purchase price and related expenses
for the acquisition.
Upon your acceptance of our proposal as set forth in this letter, we
are prepared to work towards immediately finalizing definitive acquisition
agreements with BRI and OP, which we would expect to be executed within two
weeks time. Such agreements would contain customary representations, warranties,
covenants and indemnities (including indemnification of Aptco and its Financing
Sources by BRI against claims arising in connection with this transaction). In
addition, consummation of the proposed transaction by Aptco would be subject to
the conditions set forth in the definitive acquisition agreements, including the
following:
(i) there being no injunction prohibiting or restricting the
consummation of any of the transactions described herein, no litigation
commenced or threatened by a governmental entity, nor any litigation that could
have a material adverse effect with respect to BRI or OP or that could
significantly delay the consummation of the BRI or the OP Mergers;
(ii) execution of an agreement delivered, on or prior to the execution
of definitive acquisition agreements, by the holders of a majority in interest
of BRI's Series 1997-A Convertible Preferred Stock ("Series A Preferred")
consenting to the transactions, including the BRI Merger and the conversion of
their shares pursuant to the BRI Merger into an amount of cash equal to 115% of
the liquidation preference of such shares;
(iii) receipt by BRI's Board of Directors of an opinion from a
nationally recognized investment banking firm that the consideration to be paid
to the holders of BRI stock, Series A Preferred and OP Units is fair, from a
financial point of view;
(iv) approval of the proposed transactions by the respective Boards of
Directors of BRI and the general partner of OP, and by the requisite vote of the
stockholders of BRI and the OP Unitholders;
(v) receipt of any regulatory and other third party consents to the
transactions, including the financing thereof;
<PAGE>
3
(vi) receipt by BRI of a closing agreement with the Internal Revenue
Service, on terms and conditions satisfactory to Aptco, with respect to certain
tax matters, and Aptco's satisfaction with respect to certain other tax matters;
(vii) confirmation that the number of shares of common stock of BRI
will not be more than 48,015,000, assuming the exercise of all stock options and
the conversion of all OP Units (but without taking into account the conversion
of shares of Series A Preferred into shares of BRI common stock);
(viii) confirmation that investment banking fees, severance costs and
legal/accounting expenses of BRI relating to the transaction will not exceed $12
million;
(ix) inclusion in the BRI Merger agreement of satisfactory "no-shop,"
"break up fee" and expense reimbursement provisions customary for transactions
of this type; and
(x) other customary conditions to closing.
The closing of the BRI Merger and OP Merger would not be subject to a
due diligence or financing contingency (other than the receipt by Aptco of
financing proceeds on the terms and conditions of the commitments from the
Financing Sources).
Accompanying this letter is a draft merger agreement relating to the
BRI Merger, and a draft merger agreement relating to the OP Merger. Aptco,
together with its financial advisors and legal counsel are prepared to meet with
you and your advisors immediately to work on finalizing the enclosed agreements.
Of course, at this stage of the process, our proposal is merely an expression of
interest and is not intended to be legally binding, and Aptco does not intend to
be legally bound to any transaction with BRI or OP until definitive agreements
are fully executed.
We believe Aptco is uniquely positioned to proceed with a transaction
in the best interests of BRI stockholders and OP Unitholders on an expeditious
basis.
This letter is intended to be confidential and neither it nor our
involvement in pursuing a possible acquisition proposal should be publicly
disclosed by BRI or you unless required by law. In the event BRI determines that
public disclosure is so required, we request that any public announcement of
this proposal be reviewed by Aptco and its advisors prior to its release.
Pursuant to the confidentiality agreement with you, we hereby advise
you that we intend to make the public disclosures required under Section 13(d)
of the Securities Exchange Act of 1934, as amended, as soon as practicable.
<PAGE>
4
This offer is open until 5:00 p.m. on March 1, 1999, and will expire at
that time if not accepted. We look forward to working with you on this proposed
transaction.
Very truly yours,
APTCO, LLC,
By its members:
THE BERKSHIRE COMPANIES
LIMITED PARTNERSHIP
By: KGP-1, Inc.
By: /s/ Douglas Krupp
--------------------------
Douglas Krupp
President
WHITEHALL STREET
REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH Advisors, L.L.C. XI
By: /s/ Steven Feldman
--------------------------
BLACKSTONE REAL ESTATE
ACQUISITIONS III L.L.C.
By: /s/ Thomas J. Saylak
--------------------------
cc: Prudential Securities Incorporated
Real Estate Investment Banking
One New York Plaza
New York, New York 10292
Attention: Scott Schaevitz
Exhibit 4
JOINT FILING AGREEMENT
Each of the Reporting Persons hereby agrees to make this joint filing
pursuant to Rule 13d-1(k) of the Exchange Act of 1934.
Dated: March 4, 1999
WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP XI
By: WH Advisors, L.L.C. XI,
its general partner
By: /s/ Edward M. Siskind
---------------------------------
Name: Edward M. Siskind
Title: Vice President and
Assistant Treasurer
WH ADVISORS, L.L.C. XI
By: /s/ Edward M. Siskind
---------------------------------
Name: Edward M. Siskind
Title: Vice President and
Assistant Treasurer
THE GOLDMAN SACHS GROUP, L.P.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
GOLDMAN, SACHS & CO.
By: /s/ Hans L. Reich
---------------------------------
Name: Hans L. Reich
Title: Attorney-in-Fact
