UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant To
Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) May 14, 1996
BERKSHIRE REALTY COMPANY, INC.
Delaware 1-10660 04-3086485
(State or other jurisdiction of (Commission (IRS employer
incorporation or organization) file number) identification no.)
470 Atlantic Avenue, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 423-2233
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
On May 14, 1996, Berkshire Realty Company, Inc. ("The Company"), through a
majority owned subsidiary, BRI OP Limited Partnership, via contribution acquired
The Point Apartments from Turtle Creek Associates Limited Partnership for a
value of approximately $54 million. Turtle Creek Associates Limited Partnership
is approximately 71% owned by certain officers and directors of the Company. In
exchange for The Point Apartments, The Company issued 1.6 million units of BRI
OP Limited Partnership and assumed $35.5 million of non-recourse indebtedness on
the property. Two-thirds or 1,056,500 of operating partnership units were
issued at closing and the remainder will be issued within 19 months. The debt
has a fixed interest rate of 7 5/8% and self-amortizes with the last payment in
2029. In order to fund escrows and rehabilitation costs at the closing, the
Company drew down approximately $7.4 million on an existing credit facility.
The Point Apartments is a 1,119 unit high-rise apartment property located in
Silver Spring, Maryland. The property, which was built in 1969, is currently
undergoing an extensive $15 million rehabilitation, $11 million of which is the
responsibility of the Company.
2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Berkshire Realty Company, Inc.
We have audited the accompanying statements of excess (deficit) of revenues over
specific operating expenses of The Point Apartments, Silver Spring, Maryland
(the "Property") for the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the Property's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of excess of revenues (deficit)
over specific operating expenses is free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As described in Note 2, these financial statements exclude certain expenses that
would not be comparable with those resulting from the operations of the Property
after acquisition by Berkshire Realty Co., Inc. The accompanying financial
statements were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and are not intended to be
a complete presentation of the Property's revenues and expenses.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the excess (deficit) of revenues over specific operating
expenses (exclusive of expenses described in Note 2) of The Point Apartments,
Silver Spring, Maryland for the years ended December 31, 1995, 1994 and 1993 in
conformity with generally accepted accounting principles.
Boston, Massachusetts
May 28, 1996
3
THE POINT APARTMENTS
SILVER SPRING, MARYLAND
STATEMENTS OF EXCESS (DEFICIT) OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
for the years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
Revenues
Rental Revenue $9,010,796 $9,332,129 $8,266,688
Other Income 109,140 99,581 19,757
---------- ---------- ----------
9,119,936 9,431,710 8,286,445
Specific operating expenses (Note 2):
Operating 3,274,635 3,303,435 3,276,814
Management 454,701 466,606 406,249
General and Administrative 396,051 388,242 400,489
Repairs and Maintenance 939,838 1,316,238 1,089,369
Real Estate Taxes 492,884 488,348 531,244
Interest 2,972,689 3,107,959 3,099,642
---------- ---------- ----------
8,530,798 9,070,828 8,803,807
---------- ---------- ----------
Excess (deficit)of revenues over
specific operating expenses $ 589,138 $ 360,882 $ (517,362)
========== ========== ==========
The accompanying notes are an integral part of the financial statement.
4
THE POINT APARTMENTS
SILVER SPRING, MARYLAND
NOTES TO STATEMENTS OF EXCESS (DEFICIT) OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
1. DESCRIPTION OF PROPERTY
-----------------------
The Point is a multi-family 1,119 unit high-rise apartment property located
in Silver Spring, Maryland. The property, which was built in 1969, is currently
undergoing an extensive $15 million rehabilitation. Approximately $11 million of
the rehabilitation will be funded by Berkshire Realty Company, Inc. Management
believes that the completion of the rehabilitation will increase the revenue
generating capabilities of the property.
2. BASIS OF ACCOUNTING
-------------------
The accompanying statements of excess (deficit) revenues over specific
operating expenses are presented on the accrual basis. These statements have
been prepared in accordance with the applicable rules and regulations of the
Securities and Exchange Commission for real estate properties acquired or to be
acquired. Accordingly, the statements exclude certain historical expenses not
comparable to the operations of the property after acquisition, such as
depreciation and amortization. The Company has entered into property management
contracts with an affiliate of certain directors and officers of the Company for
services as management agent to the Company's properties. Such agreements
provide management fees which have been reflected in the accompanying financial
statements at 5% of adjusted gross revenues. The Company is also required to
reimburse the same affiliate for certain expenses such as accounting and travel
expenses. These expenses have been reflected in the accompanying financial
statements.
Apartment leases require the payment of rent monthly in advance. Rental
revenues are recorded on the accrual basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. DEBT
----
BRI OP Limited Partnership, a majority-owned subsidiary of the Company,
assumed a $35.5 million non-recourse HUD mortgage at the time of acquisition.
The mortgage matures in 2029 and has an annual interest rate of 7.625%.
Based on current borrowing rates for bank loans with similar terms and
average maturities, the fair value of long-term debt is approximately
$34,300,000 at December 31, 1995.
5
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma Condensed Consolidated Balance Sheet of
Berkshire Realty Company, Inc. ( the "Company") as of March 31, 1996, is
presented as if all activities related to the acquisition of The Point
Apartments including the issuance of operating partnership units, the assumption
of non-recourse debt and the increase in the line of credit occurred on March
31, 1996. The pro forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1995 and the period from January 1, 1996 through March
31, 1996 are presented as if all activities related to the acquisition of The
Point Apartments including the issuance of operating units, the assumption of
non-recourse debt and the increase in the line of credit had occurred as of
January 1, 1995 and 1996, respectively.
The unaudited pro forma Condensed Consolidated Balance Sheet and Statement of
Operations should be read in conjunction with the historical financial
statements of the Company. In management's opinion, all adjustments necessary
to reflect the above discussed transactions have been made. The unaudited pro
forma Condensed Consolidated Balance Sheet and Statement of Operations are not
necessarily indicative of what actual results of operations of the Company would
have been for the period, nor does it purport to represent the Company's results
of operations for future periods.
6
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1996
(Unaudited)
(Dollars in thousands)
Berkshire
Realty Pro
Company Pro Forma
Inc. Forma Consol-
Historical Adjustments idated
---------- ----------- ------
ASSETS
Real estate assets:
Multifamily apartment complexes,
net of accumulated depreciation $321,657 $54,361(a) $376,018
Retail centers, net of accumulated
depreciation 59,067 59,067
Investments in unconsolidated joint
ventures 41,726 41,726
Mortgage loans and other loans receiv-
able, net of purchase discounts 20,084 20,084
Land and construction in progress 5,368 5,368
-------- ------- --------
Total real estate assets 447,902 54,361 502,263
Cash and cash equivalents 7,087 7,087
Mortgage-backed securities net of
amortization 10,949 10,949
Escrows 3,526 5,680(b) 9,206
Deferred charges and other assets 11,242 285(c) 11,527
Goodwill 13,244 13,244
-------- ------- --------
Total assets $493,950 $60,326 $554,276
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $104,947 $35,536(d) $140,483
Credit agreements 95,140 7,450(e) 102,590
Repurchase agreement 10,950 10,950
Tenant security deposits, prepaid
rents and escrows held 2,055 2,055
Accrued real estate taxes, insurance
and other liabilities 7,702 869(f) 8,571
-------- ------- --------
Total liabilities 220,794 43,855 264,649
Commitments and contingencies
Minority interest in Operating
Partnership 17,887 16,471(g) 34,358
Shareholders' equity:
Preferred stock, $0.01 par value;
60,000,000 shares authorized none
issued
Common stock ("Shares"), $0.01 par
value; 140,000,000 Shares authorized
and 25,899,449 and 25,897,923 Shares
issued, respectively 259 259
Additional paid-in-capital 256,753 256,753
Less common stock in treasury at
cost (506,497 Shares) (1,743) - (1,743)
-------- ------- --------
Total shareholders' equity 255,269 - 255,269
-------- ------- --------
Total liabilities and
shareholders' equity $493,950 $60,326 $554,276
======== ======= ========
See accompanying notes to pro forma condensed consolidated balance sheet.
7
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1996
(Unaudited)
Notes:
(a) Acquisition of The Point Apartments.
(b) Escrows as required by the debt assumption established at acquisition.
(c) Other assets incurred in acquisition.
(d) Assumption of the mortgage loan.
(e) Increase in credit line to fund The Point acquisition.
(f) Liabilities assumed in acquisition.
(g) BRI OP Limited Partnership units to be issued to Turtle
Creek Associates. The Company issued 1.6 million units: two thirds or
1,056,0000 of the units issued at closing and the remainder will be issued
within 19 months.
8
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited)
(Dollars in thousands)
Berkshire
Realty
Company Pro Forma Pro Forma
Inc. The Adjust- Consol-
Historical Point ments(b) idated
---------- --------- --------- ---------
Revenue:
Rental $70,068 $ 9,011 $ - $79,079
Interest from mortgage loans 2,010 - - 2,010
Joint venture net income 1,407 - - 1,407
Interest income from MBS 1,154 - - 1,154
Other income 1,209 109 - 1,318
------- ------- ------- -------
Total revenue 75,848 9,120 - 84,968
------- ------- ------- -------
Expenses:
Property operating expenses 17,990 3,671 - 21,661
Repairs and maintenance 4,921 940 - 5,861
Real estate taxes 7,016 493 - 7,509
Property management fees to
an affiliate 3,421 455 - 3,876
Depreciation and amortization 21,983 2,959(a) - 24,942
General and administrative 1,356 - 1,356
Interest 15,618 2,973 486(b) 19,077
Asset management fees to an
affiliate 1,565 406(c) 1,971
------- ------- ------- -------
Total expenses 73,870 11,491 892 86,253
------- ------- ------- -------
Income (loss) from operations 1,978 (2,371) (892) (1,285)
Gain on sales of properties and
payoff of mortgage loans 15,603 - - 15,603
------- ------- ------- -------
Income (loss) before non-recurring
charges, extraordinary item and
minority interest in Operating
Partnership 17,581 (2,371) (892) 14,318
------- ------- ------- -------
Non-recurring charges (1,728) - - (1,728)
Extraordinary item (913) - (913)
------- ------- ------- -------
Net income (loss) before minority
interest in Operating
Partnership 14,940 (2,371) (892) 11,677
------- ------- ------- -------
Minority interest in Operating
Partnership (154) - (463)(d) (617)(1)
------- ------- ------- -------
Net income (loss) $14,786 $(2,371) $(1,355) $11,060
======= ======= ======= =======
Weighted average shares 25,392,621
==========
Net income per weighted average share $ .44
=======
(1) The Company's weighted average share of the Operating Partnership is
94.72%.
See accompanying notes to pro forma condensed consolidated statement of
operations.
9
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited)
Notes:
(a) One year estimated depreciation for The Point.
(b) Interest on credit line draw at 6.53%.
(c) Asset management fee on The Point.
(d) Estimated minority interest (5.28%) calculated assuming The Point
acquisition took place on January 1, 1995.
10
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended March 31, 1996
(Unaudited)
(Dollars in thousands)
Berkshire
Realty
Company Pro Forma Pro Forma
Inc. The Adjust- Consol-
Historical Point ments(b) idated
---------- --------- --------- ---------
Revenue:
Rental $19,365 $ 2,316 $ - $21,681
Interest from mortgage loans 585 - - 585
Joint venture net income 427 - - 427
Interest income from MBS 261 - - 261
Other income 218 23 - 241
------- ------- ------- -------
Total revenue 20,856 2,339 - 23,195
------- ------- ------- -------
Expenses:
Property operating expenses 4,694 1,023 - 5,717
Repairs and maintenance 1,339 178 - 1,517
Real estate taxes 2,233 119 - 2,352
Property management fees to
an affiliate 891 119 - 1,010
Depreciation and amortization 6,258 740(a) - 6,998
General and administrative 528 - 528
Interest 4,194 725 122(b) 5,041
Corporate Taxes 81 - 81
Professional Fees 44 - 44
Asset management fees to an
affiliate 393 - 68(C) 461
------- ------- ------- -------
Total expenses 20,655 2,904 190 23,749
------- ------- ------- -------
Income (loss) before minority
interest 201 (565) (190) (554)
------- ------- ------- -------
Minority interest in Operating
partnership (7) - 48(d) 41(1)
------- ------- ------- -------
Net income/(loss) $ 194 $ (565) $ (142) $ (513)
======= ======= ======= =======
Weighted average shares 25,392,952
==========
Net loss per weighted average share $ (.02)
=======
(1) The Company's weighted average share of the Operating Partnership is
92.58%.
See accompanying notes to pro forma condensed consolidated
statement of operations.
11
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ended March 31, 1996
(Unaudited)
Notes:
(a) Three months estimated depreciation for The Point.
(b) Three months interest on credit line draw at 6.53%.
(c) Two months of asset management fees on The Point, since the Company became
self-administered on March 1, 1996.
(d) Estimated Minority Interest (7.42%) calculated assuming The Point
acquisition occurred on January 1, 1996.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BERKSHIRE REALTY COMPANY INC.
/s/Marianne Pritchard
Marianne Pritchard
Senior Vice President and
Chief Financial Officer
Date: May 29, 1996
13
ITEM 7. EXHIBITS
(a) Exhibits
10.1 Contribution Agreement by and between Turtle Creek Associates Limited
Partnership and BRI OP Limited Partnership, dated April 8, 1996.
10.2 BRI The Point Agreement of Limited Partnership by and between BRI Texas
Apartments Limited Partnership and BRI OP Limited Partnership.
10.3 First Amendment to BRI The Point Limited Partnership Agreement by and
between BRI Texas Apartments Limited Partnership and BRI OP Limited
Partnership, dated March 15, 1996.
10.4 Certificate of Limited Partnership of BRI The Point Limited Partnership
dated October 20, 1995.
10.5 Agreement of Release, Assumption of Deed of Trust Note, Deed of Trust
and Regulatory Agreement by and among Turtle Creek Associates Limited
Partnership, BRI The Point Limited Partnership and Berkshire Mortgage
Finance Corporation, dated March 20, 1996.
10.6 Deed of Trust by and between Turtle Creek Associates Limited Partnership
and Berkshire Mortgage Finance Corporation, dated March 14, 1994.
10.7 Deed of Trust Note by and between Turtle Creek Associates Limited
Partnership and Berkshire Mortgage Finance Corporation, dated March 14,
1994.
1