UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant To
Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) October 14, 1997
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 02110
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (617) 423-2233
Item 1. Changes in Control of Registrant
On September 25, 1997, Berkshire Realty Company, Inc. (the "Company")
issued 2,737,000 shares of its Series 1997-A Convertible Preferred Stock (the
"Series 1997-A Preferred") in a private placement to Westbrook Real Estate Fund
II, L.P. ("Westbrook") and Morgan Stanley Asset Management resulting in gross
proceeds of approximately $68.4 million (the "Westbrook Transaction"). The
Series 1997-A Preferred will pay a preferred dividend of 9% based on the
purchase price of $25 per share of Series 1997-A Preferred and are convertible
in the aggregate into 5,643,420 shares of Common Stock. Holders of the Series
1997-A Preferred are entitled to vote on an as converted basis, together with
the holders of Common Stock, as one class, on all matters on which the holders
of Common Stock are entitled to vote. Further, the holders of the Series 1997-A
Preferred are entitled to elect one director to the Board of Directors of the
Company. Paul D. Kazilionis, a managing principal and co-founder of Westbrook
Real Estate Partners, L.L.C, the general partner of Westbrook, has been elected
to the Company's Board of Directors by direction of the holders of the Series
1997-A Preferred.
Item 2. Acquisition or Disposition of Assets.
On September 26, 1997, the Company acquired four multifamily apartment
communities from Citibank for an all-cash purchase price of approximately $60.3
million (the "Citibank Portfolio"). The Citibank Portfolio consists of 1,269
apartment units located within the greater Dallas/Fort Worth, Texas area. The
Company used a significant portion of the proceeds from the Westbrook
Transaction to fund the acquisition. The four properties consist of garden-style
apartment complexes ranging from 232 units to 405 units. Three of the apartment
communities were built in 1984. The fourth property was built in 1996. The
Company is not related to any of the parties involved in this transaction.
The Company has entered into a definitive agreement with the Questar
Companies ("Questar") to acquire 18 existing apartment communities containing
approximately 3,700 apartment units located in the greater Baltimore area from a
like number of affiliated partnerships and four apartment communities under
development from Questar Builders, Inc. ("Questar Builders"), a company owned by
Stephen M. Gorn but which will remain unaffiliated with the Company following
the acquisition. The Company will also acquire the Questar property management
companies which manage the properties to be acquired as well as certain other
third-party properties and enter into a Development Acquisition Agreement with
Questar Builders, giving the Company the exclusive right to acquire all
apartment projects developed by Questar Builders which meet the Company's
acquisition and development criteria (the foregoing transactions with Questar
collectively, the "Questar Transaction"). Stephen M. Gorn, the President and
Chief Executive Officer of Questar, will become President of the Mid-Atlantic
Division of the Company. The aggregate consideration for the 18 Questar
properties, property management companies and the acquisition of one development
property to be acquired in late 1997 is approximately $181.5 million, comprised
of $20.6 million in operating units of limited partnership of BRI OP Limited
Partnership ("Units"), $4.7 million in common stock of the Company ("Common
Stock"), assumption of $131.7 million in debt and $24.5 million of cash to be
funded by proceeds from the proposed public offering of common stock (the
"Offering"). The Company is not related to any of the parties involved in this
transaction.
Each of the 18 apartment communities to be acquired from Questar is
presently owned by a single purpose entity (each a "Questar Partnership"). The
holders of interests in the Questar Partnerships (the "Questar Partners") shall
receive Units. The number of Units to be issued to the Questar Partners shall be
determined at the closing of the Questar Transaction based on a formula whereby
a predetermined equity value of an applicable property is divided by the average
of the closing price per share of the Common Stock for the period from August 1,
1997 through the date of closing of the Offering; provided that, in any event,
the amount shall not be less than $10.50 and not greater than $11.75 (subject to
certain adjustments at the date of closing). The Units issuable to certain
members of Stephen Gorn's family shall be restricted as to distributions for a
one-year period from the date of issue. The closing of the Questar Transaction
is contingent on the completion of the Offering. Certain of the contribution
agreements limit the ability of the Company to sell (subject to like-kind
exchanges), refinance or repay existing mortgages (subject to refinancing on
terms which would not affect the tax basis of such Unit recipient(s)) on the
applicable properties for a period of seven years.
As part of the Questar Transaction, BRI OP Limited Partnership, (the
"Operating Partnership") will make a five-year loan to an entity owned and
controlled by Messrs. Stephen Gorn, Morton Gorn and John Colvin (the "Questar
Borrowers"), in the principal amount of $7.5 million or such lesser amount as
the Questar Borrowers may elect at closing (the "Questar Loan"). The interest
rate shall be determined at the closing by mutual agreement and shall not be
less than prevailing market rates. The Questar Loan shall be secured by the
pledge of Units to be received by the Questar Borrowers and with respect to
Common Stock received by Stephen M. Gorn, a pledge of such stock. Further, the
Operating Partnership is under contract to acquire four apartment development
projects in the greater Baltimore area which are being developed by Questar
Builders or an affiliated entity.
The Company will acquire the management companies owned by the Gorn family
which manage the 18 apartment communities to be acquired as well as certain
third-party properties for $4.7 million payable in shares of Common Stock based
on the average closing price of such Common Stock for the period August 1, 1997
through the closing of this Offering. The Company expects to enter into separate
five-year employment agreements with each of Stephen M. Gorn and John B. Colvin
and a consulting agreement with Morton Gorn to be entered into at closing. At
closing, the Company expects to execute a five-year lease from the Gorn family
owners, Messrs. Morton Gorn, Stephen Gorn and Colvin, for the approximately
6,900 square feet of space currently occupied by the management companies for a
gross rent of $140,240 per year.
At closing, Questar Builders and the Operating Partnership expect to enter
into a Development Acquisition Agreement pursuant to which, for a period of five
years, Questar Builders shall grant to the Operating Partnership an exclusive
right to acquire all apartment projects developed by Questar Builders in the
Mid-Atlantic Region which meet the Company's acquisition and development
criteria.
Item 5. Other Events
On October 15, 1997, the Company filed a prospectus supplement to its Form
S-3 Registration Statement (No. 333-32565) with the Securities and Exchange
Commission pursuant to which it proposes to offer 10,000,000 shares of common
stock.
Press release dated September 22, 1997:
Berkshire Realty Company, Inc. (NYSE-BRI)
NEWS RELEASE
================================================================================
BERKSHIRE REALTY TO REVISE INTERIM FINANCIAL STATEMENTS WITH
NO IMPACT TO FUNDS FROM OPERATIONS, DIVIDENDS OR CASH FLOWS
Boston, MA - September 22, 1997 - Berkshire Realty Company, Inc. (NYSE;BRI),
will revise certain interim financial statements for the first six months of
1997 related to the accounting treatment for the issuance of additional
Operating Partnership (OP) Units in conjunction with its March 1, 1996
acquisition of the Company's advisor. The changes will not impact Funds from
Operations (the REIT industry's reporting standard), dividends, liquidity or
cash flows.
The revisions are the result of recent discussions between the Company and
the staff of the Securities and Exchange Commission, whereby it has been
determined that the assets arising from the acquisitions of the Company's
advisor and property management company are more appropiately reflected as
intangible assets associated with the acquisition of an assembled workforce
rather than goodwill associated with the acquisition of a business. Such
intangible assets will be amortized over a short time frame, generally three
years. A change in the amortization period will occur prospectively beginning in
the third quarter of 1997.
As a result of the change in the character of the assets acquired, the
Company concluded that the issuance in the first quarter of 1997 of the
additional 109,091 OP Units for the advisor, representing value of $1.2 million,
should be recorded as a non-cash expense rather than an increase in goodwill.
The Company, in revising its financial statements for the periods ended June 30,
1997, will reflect an additional non-cash expense of $1.2 million which will
decrease net income by approximately $962,000 or $.04 per share. There is no
change in Funds from Operations as reported by the Company.
Berkshire Realty Company, Inc. is a self-administered and self-managed
multifamily equity real estate investment trust. The Company's portfolio
consists of 41 apartment communities with 13,509 apartment units (located
primarily in Texas, the Southeast, Florida and the mid-Atlantic), and a small
remaining retail portfolio.
Berkshire Realty Company, Inc.
Item 7. Financial Statements and Exhibits
a) Financial Statements Under Rule 3-14 of Regulation S-X
Citibank Portfolio combined statement of revenue over certain operating
expenses for the year ended December 31, 1996 and for the six months ended June
30, 1997 (Unaudited)
Questar Portfolio combined statement of revenue over certain operating
expenses for the year ended December 31, 1996 and for the six months ended June
30, 1997 (Unaudited)
Merit Portfolio combined statement of revenue over certain operating expenses
for the year ended December 31, 1995 and for the period January 1, 1996 through
dates of acquisitions (Unaudited)
Westchester West Apartments statement of revenue over certain operating
expenses for the year ended December 31, 1996
Sunchase/Polos West Apartments combined statement of revenue over certain
operating expenses for the year ended December 31, 1996 and for the period
January 1, 1997 to May 12, 1997 (Unaudited)
Emerald Portfolio combined statement of revenue over certain operating
expenses for the year ended December 31, 1996 and for the six months ended
June 30, 1997 (Unaudited)
b) Pro Forma Financial Statements
Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1997
(Unaudited)
Notes to Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1997
(Unaudited)
Pro Forma Condensed Consolidating Statement of Operations for the Year Ended
December 31, 1996 (Unaudited)
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Year Ended December 31, 1996 (Unaudited)
Pro Forma Condensed Consolidating Statement of Operations for the Period
Ended June 30, 1997 (Unaudited)
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Year Ended June 30, 1997 (Unaudited)
c) Exhibits
Exhibit
10. The Questar Transaction
10.1 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Third Rolling Road
Associates Limited Partnership (Third Rolling Road/Coventry) and
Questar Investment Corporation dated as of August 25, 1997
10.2 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Williston Associates and
Questar Investment Corporation dated as of August 25, 1997
10.3 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Ridgeview Chase
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.4 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Kingswood Common
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.5 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Rolling Road
Associates (Kingswood Common I) and Questar Investment
Corporation dated as of August 25, 1997
10.6 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Frederick Road Associates
(Jamestown) and Questar Investment Corporation dated as of August
25, 1997
10.7 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Gorn Properties, Inc.
(Hilltop) and Questar Investment Corporation dated as of August
25, 1997
10.8 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Rolling Road Associates
(Heraldry Square) and Questar Investment Corporation dated as of
August 25, 1997
10.9 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Tremaine Associates
Limited Partnership (Henley/Rolling Wind) and Questar Investment
Corporation dated as of August 25, 1997
10.10 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Plainfield Associates
(Hazelcrest) and Questar Investment Corporation dated as of August
25, 1997
10.11 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Fourth Rolling Road
Associates Limited Partnership (Fourth Rolling Road/Courtleigh),
19 West Lexington Street Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.12 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Purnell Associates
(Fairway Ridge) and Questar Investment Corporation dated as of
August 25, 1997
10.13 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Stratton Associates
Limited Partnership, Fairbrook Associates Limited Partnership
(Fairbrook/Stratton Meadows) and Questar Investment Corporation
dated as of August 25, 1997
10.14 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Diamond Ridge Associates
Limited Partnership and Questar Investment Corporation dated as
of August 25, 1997
10.15 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Citadel Associates
Limited Partnership, Calvert's Walk Associates Limited
Partnership and Questar Investment Corporation dated as of August
25, 1997
10.16 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Caliber Associates
Limited Partnership, Arborview Associates Limited Partnership and
Questar Investment Corporation dated as of August 25, 1997
10.17 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Estates II Funding
Corporation, The Estates Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.18 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Warren Park Associates and
Questar Investment Corporation dated as of August 25, 1997
10.19 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Property Management Corporation and its Shareholders
dated as of August 25, 1997
10.20 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Management Company and its Shareholders dated as of
August 25, 1997
10.21 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Kingswood Management Company and its Shareholders dated as of
August 25, 1997
10.22 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Vector Property Management Company and its Shareholders dated
as of August 25, 1997
10.23 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Gorn Management Company and its Shareholders dated as of
August 25, 1997
10.24 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Arborview Management Company and its Shareholders dated as of
August 25, 1997
*10.25 Form of Development Acquisition Agreement among Questar
Properties, Inc. Stephen M. Gorn, John B. Colvin and BRI OP
Limited Partnership
*10.26 Development Contribution Agreement (Avalon, 1,3,4) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.27 Development Contribution Agreement (Liriope) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
*10.28 Development Contribution Agreement (Granite Run) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.29 Development Contribution Agreement (Avalon 2) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
10.30 Form of Registration Rights Agreement among Berkshire Realty
Company, Inc. and certain partners of BRI OP Limited Partnership
*10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C.
dated as of August 25, 1997
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
- ----------------
*To be filed by amendment.
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: October 14, 1997
Citibank Portfolio
Combined Statement of Revenue
Over Certain Operating Expenses for the Year Ended
December 31, 1996
F-1
Independent Auditors' Report
The Board of Directors
CREEF Sweetwater Ranch, Inc.,
CREEF H. Brook Corp.,
CREEF H Ridge Corp.
The Partners DMC Huntington Lakes Apartments, L.P.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Citibank Portfolio (the "Properties") for the year
ended December 31, 1996. This financial statement is the responsibility of the
Properties' management. Our responsibility is to express an opinion on this
combined financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain 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 audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue and certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses, described in note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenue and expenses.
In our opinion, the combined statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described in
note 2) of the Citibank Portfolio for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
October 3, 1997
F-2
CITIBANK PORTFOLIO
Combined Statement of Revenue Over
Certain Operating Expenses
(dollars in thousands)
For the For the
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
----------------- -------------
(Unaudited)
Revenue:
Rental $7,860 $4,518
Other 283 188
------ -----
8,143 4,706
------ -----
Certain operating expenses (note 2):
Repairs, maintenance, and
contract services 751 404
General and administrative 891 406
Real estate taxes 1,071 625
Utilities 579 255
Insurance 172 95
----- -----
3,464 1,785
----- -----
Excess of revenue over certain
operating expenses $4,679 $2,921
====== ======
The accompanying notes are an integral part of this combined financial
statement.
F-3
CITIBANK PORTFOLIO
Notes to Combined Statement of Revenue
over Certain Operating Expenses
(1) Description of Properties
The accompanying financial statement includes the combined operations of
four multi-family properties (collectively, the "Properties" or "Citibank
Portfolio") which were acquired on September 26, 1997 by Berkshire Realty
Company, Inc. ("Berkshire") from an unrelated third-party. Berkshire
acquired each of the following properties:
Property Name Location Number of Units
- ------------- -------- ---------------
Huntington Lakes Apartment Dallas, TX 249
Huntington Brook Apartments Dallas, TX 320
Huntington Ridge Apartments Irving, TX 232
Sweetwater Ranch Apartments Dallas, TX 312
-----
1,113
=====
(2) Basis of Presentation
The combined statement has been prepared on the accrual method of
accounting. The Properties were previously owned by Citibank, an unrelated
party.
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
Properties after acquisition such as amortization, depreciation, property
management fees, corporate expenses and other costs not directly related to
the future operations of the Properties.
(3) Significant Accounting Policies
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through June 30, 1997 is unaudited. In the
opinion of management, all adjustments consisting only of normal recurring
adjustments, considered necessary for a fair presentation for such period
has been made. Results for interim periods should not be considered or
indicative for results for a full year. Footnote disclosure normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles have been omitted herein with
respect to the interim financial data. The interim information herein should
be read in conjunction with the annual financial information presented
herein.
F-4
QUESTAR PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Questar Portfolio (the "Properties") for the year
ended December 31, 1996. This statement is the responsibility of the Properties'
management. Our responsibility is to express an opinion on this combined
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain 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 audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenues and expenses.
In our opinion the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Questar Portfolio for the year ended December
31, 1996 in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
F-6
QUESTAR PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
For the For the
Year Ended Six Months
December 31, Ended
1996 June 30, 1997
------------ -------------
(Unaudited)
Revenue:
Rental $ 25,311 $ 12,689
Other 1,228 691
--------- ---------
26,539 13,380
--------- ---------
Certain operating expenses (Note 2):
Repairs and maintenance 4,513 2,459
Real estate taxes and insurance 3,130 1,645
Utilities 1,032 563
General and administrative 3,430 1,865
Interest 10,323 5,180
--------- ---------
22,428 11,712
--------- ---------
Excess of revenue over certain operating expenses $ 4,111 $ 1,668
========= =========
The accompanying notes are an integral part of the
combined financial statements.
F-7
QUESTAR PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER OPERATING EXPENSES
1. Description of Properties:
-------------------------
The accompanying combined statement of revenue over certain operating
expenses (the "Combined Statement") includes the combined operations of 18
multi-family apartment communities and the related property management
companies which manage the apartment communities (collectively the
"Properties" or "Questar Portfolio") which are to be acquired by Berkshire
Realty Company, Inc. ("Berkshire") from the Questar Group, an unrelated third
party. The apartment communities to be acquired are summarized as follows:
Number of
Property Name Location Units
------------- -------- ---------
Arborview Apartments Belcamp, MD 288
Calvert's Walk Apartments Belair, MD 276
Diamond Ridge Apartments Baltimore, MD 92
The Estates Apartments Baltimore, MD 208
Stratton Meadows Apartments Baltimore, MD 268
Jamestowne Apartments Baltimore, MD 335
Courtleigh Apartments Baltimore, MD 280
Rolling Wind Apartments Baltimore, MD 280
Hilltop Apartments Baltimore, MD 50
Hazelcrest Apartments Baltimore, MD 48
Fairway Ridge Apartments Baltimore, MD 274
Ridgeview Chase Apartments Westminster, MD 204
Heraldry Square Baltimore, MD 270
Kingswood Common II Baltimore, MD 203
Kingswood Common I Baltimore, MD 203
Coventry Apartments Baltimore, MD 122
Williston Apartments Baltimore, MD 98
Warren Park Apartments Baltimore, MD 200
------
3,699
======
2. Basis of Presentation:
---------------------
The Combined Statement has been prepared on the accrual basis. The Properties
were substantially owned by investors of the Questar Group and were under
common control. All significant intercompany transactions including
management fee revenue and expense have been eliminated in combination.
Continued
F-8
QUESTAR PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties' after acquisition such as amortization, depreciation, certain
interest expense (Note 4), corporate expenses and certain other costs not
directly related to the future operations of the Properties.
3. Significant Accounting Policies:
-------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through June 30, 1997 is unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of
such combined statement have been included. The results of operations for the
period are not necessarily indicative of the Properties' future results of
operations.
Risks and Uncertainties
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. Debt Assumption:
---------------
Debt to be Outstanding Subsequent to Acquisition
In connection with the acquisition Berkshire will assume certain mortgage
notes encumbering certain of the Properties of approximately $132,079 at
December 31, 1996. Berkshire's assumption of these mortgage notes does not
provide for any modification to the original terms; therefore, interest
expense incurred prior to Berkshire's assumption of the respective mortgage
Continued
F-9
QUESTAR PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
notes is representative of future interest expense. Accordingly, interest
expense of $10,323 for 1996 and $4,712 for the six months ended June 30, 1997
(unaudited) is recognized in the accompanying Combined Statement. The
mortgage notes are generally due in monthly installments and mature at
various dates through 2035. Interest rates on the notes vary from 6.37% to
9.50%. Certain mortgage notes payable are subject to prepayment penalties of
varying amounts in the event of an early principal repayment.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $10,840
1998 1,019
1999 1,095
2000 1,177
2001 1,268
Debt to be Repaid or Modified
Berkshire, as part of the acquisition of certain properties, will pay off
certain mortgage notes encumbering certain of the Properties with a balance
of approximately $15,708 at December 31, 1996. Therefore, on a continuing
basis, interest expense will not be incurred related to these mortgage notes.
Accordingly, interest expense related to these mortgage notes is not
recognized in the accompanying Combined Statement.
F-10
MERIT PORTFOLIO
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
F-11
Report of Independent Accountants
To the Board of Directors and Stockholders
of Berkshire Realty Company, Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Merit Portfolio (the "Properties") for the year ended
December 31, 1995. This financial statement is the responsibility of the
Properties' management. Our responsibility is to express an opinion on this
combined financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain 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 audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue and certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses, described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenue and expenses.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Merit Portfolio for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 14, 1996
F-12
MERIT PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
For the period
For the January 1, 1996
Year ended through dates
December 31, of acquisitions
1995 (Note 1)
------------ ---------------
(unaudited)
Revenue:
Rental $ 7,536 $ 4,359
Other 303 5
--------- ---------
7,839 4,364
Certain Operating Expenses (Note 2):
Repairs and maintenance 1,573 711
General and administrative 735 375
Interest 623 515
Real estate taxes and insurance 887 575
Utilities 782 409
--------- ---------
4,600 2,585
--------- ---------
Excess of Revenue over Certain
Operating Expenses $ 3,239 $ 1,779
========= =========
The accompanying notes are an integral part of the combined financial statement.
F-13
MERIT PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. Description of Properties:
--------------------------
The accompanying combined statement of revenue over certain operating
expenses ("the Combined Statement") includes the combined operations of
five multi-family properties (collectively, the "Properties" or "Merit
Portfolio") which were acquired by Berkshire Realty Company, Inc.
("Berkshire") from an unrelated third-party. The apartment communities
which were acquired are summarized as follows:
Property Name Date Acquired Location Number of Units
- ------------- ------------- -------- ---------------
Benchmark 6/27/96 Irving, TX 250
Golf Side 6/6/96 Ft. Worth, TX 402
Pleasant Woods 6/6/96 Dallas, TX 208
Prescott Place II 11/12/96 Mesquite, TX 336
Providence 6/27/96 Dallas, TX 244
---
1,440
=====
2. Basis of Presentation:
----------------------
The Combined Statement has been prepared on the accrual basis.
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties after acquisition such as amortization, depreciation, asset and
property management fees, corporate expenses and other costs not directly
related to the future operations of the Properties.
Continued
F-14
MERIT PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
3. Significant Accounting Policies:
-------------------------------
Rental Revenue
--------------
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
-----------------------------
The combined statement of revenue over certain operating expenses for the
period from January 1, 1996 through dates of acquisition is unaudited. In the
opinion of management all adjustments necessary for a fair presentation of
such combined statement have been included. The results of operations for the
period are not necessarily indicative of the Properties' future results of
operations.
Risks and Uncertainties
-----------------------
The preparation of statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
4. Debt Assumption:
---------------
In connection with the acquisition, Berkshire will assume certain mortgage
notes encumbering the Merit Portfolio of approximately $12,106. The
assumption of these mortgage notes does not provide for any modification to
the original terms, therefore, interest expense incurred prior to Berkshire's
assumption is representative of future interest expense. Accordingly,
interest expense of $623 for 1995 and $515 for the period January 1, 1996
through dates of acquisition (unaudited) is recognized in the accompanying
Combined Statement. The mortgage notes are generally due in monthly
installments and mature at various dates through 2005. Interest rates on the
notes vary from 5.775% to 7.695%. Certain mortgage notes payable are subject
to repayment penalties of varying amounts in the event of an early principal
repayment.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1996 $299
1997 326
1998 331
1999 336
2000 342
F-15
WESTCHESTER WEST APARTMENTS
STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying statement of revenue over certain operating
expenses of Westchester West Apartments (the "Property") for the year ended
December 31, 1996. This statement is the responsibility of the Property's
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit 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 revenue over certain 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 audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue over certain operating expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Property's
revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue over certain operating expenses (as described
in Note 2) of Westchester West Apartments for the year ended December 31, 1996
in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
F-17
WESTCHESTER WEST APARTMENTS
STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
Year Ended
December 31,
1996
------------
Revenue:
Rental $ 2,586
Other 65
-------
2,651
-------
Certain operating expenses:
General and administrative 123
Repairs and maintenance 576
Real estate taxes and insurance 217
Utilities 354
Interest 944
-------
2,214
-------
Excess of revenue over certain operating expenses $ 437
=======
The accompanying notes are an integral part of the financial statement.
F-18
WESTCHESTER WEST APARTMENTS
NOTES TO STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. Description of Property:
------------------------
The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the operations of a 345-unit apartment community (the
"Property") which was acquired on January 1, 1997 by Berkshire Realty
Company, Inc. ("Berkshire") from an unrelated third party. The Property is
located in Silver Spring, Maryland.
2. Basis of Presentation:
----------------------
The Statement has been prepared on the accrual method of accounting.
The Statement has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission for real estate properties
acquired or to be acquired. Accordingly, this statement excludes certain
historical expenses not comparable to the operations of the property after
acquisition such as amortization, depreciation, property management fees,
certain interest costs, corporate expenses and certain other costs not
directly related to the future operations of the Property.
3. Significant Accounting Policies:
--------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Risks and Uncertainties
The preparation of statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. Debt Assumption:
----------------
In connection with the acquisition, Berkshire will assume certain mortgage
notes encumbering the Property of approximately $11,360 at December 31,
1996. The assumption of these mortgage notes does not provide for any
modification to the original terms. Therefore, interest expense incurred
prior to Berkshire's assumption is representative of future interest
expense. Accordingly, interest expense of $944 is recognized in the
accompanying statement. The mortgage notes are
Continued
F-19
WESTCHESTER WEST APARTMENTS
NOTES TO STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
being amortized over a term of 25 years and bear interest at 8.25%. A
balloon payment of $10,515 is due on February 1, 2001. The mortgage notes
payable are subject to prepayment penalties in the event of early principal
repayment.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $ 186
1998 202
1999 219
2000 238
2001 10,515
F-20
SUNCHASE/POLOS WEST APARTMENTS
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the SunChase Apartments and Polos West Apartments (the
"Properties") for the year ended December 31, 1996. This statement is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this combined statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain 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 audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenues and expenses.
In our opinion the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Sunchase Apartments and Polos West Apartments
for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
September 25, 1997
F-22
SUNCHASE/POLOS WEST APARTMENTS
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
For the For the period
Year Ended January 1,
December 31, 1997 to
1996 May 12, 1997
------------ --------------
(Unaudited)
Revenue:
Rental $ 2,539 $ 974
------- -----
2,539 974
------- -----
Certain operating expenses:
Repairs and maintenance 170 65
Real estate taxes and insurance 446 164
Utilities 303 118
General and administrative 435 157
Interest 121 36
------- -----
1,475 540
------- -----
Excess of revenue over certain operating expenses $ 1,064 $ 434
======= =====
The accompanying notes are an integral part of the
combined financial statement.
F-23
SUNCHASE/POLOS WEST APARTMENTS
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. Description of Properties:
--------------------------
The accompanying combined statement of revenue over certain operating
expenses (the "Combined Statement") includes the combined operations of
SunChase Apartments and Polos West Apartments (collectively the
"Properties") which were acquired by Berkshire Realty Company, Inc.
("Berkshire"), from an unrelated third party on May 12, 1997. The apartment
communities are summarized as follows:
Property Name Location Number of Units
------------- -------- ---------------
SunChase Bradenton, FL 168
Polos West Winter Garden, FL 200
---
368
===
2. Basis of Presentation:
----------------------
The Combined Statement has been prepared on an accrual basis.
The Combined Statement been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties' after acquisition such as amortization, depreciation, certain
interest expense (Note 4), corporate expenses and certain other costs not
directly related to the future operations of the Properties.
3. Significant Accounting Policies:
--------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Continued
F-24
SUNCHASE/POLOS WEST APARTMENTS
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
Unaudited Combined Statement
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through May 12, 1997 (date of acquisition) is
unaudited. In the opinion of management, all adjustments necessary for a
fair presentation of such combined statement have been included. The
results of operations for the period are not necessarily indicative of the
Properties' future results of operations.
Risks and Uncertainties
The preparation of statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
4. Debt Assumption:
----------------
In connection with the acquisition, Berkshire will assume a mortgage note
encumbering Polos West Apartments of approximately $5,719. The assumption
of this mortgage note does not provide for any modification to the original
terms, therefore, interest expense incurred prior to Berkshire's assumption
is representative of future interest expense. Accordingly, interest expense
of $435 for 1996 and $157 for the period January 1, 1997 to May 12, 1997
(unaudited), is included in the accompanying combined statement. The
mortgage note, which has an interest rate of 7.45%, is due in monthly
installments and matures in December 2003.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $144
1998 155
1999 167
2000 180
2001 193
F-25
EMERALD PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Emerald Portfolio (the "Properties") for the year
ended December 31, 1996. This statement is the responsibility of the Properties'
management. Our responsibility is to express an opinion on this combined
statement based on our audit.
We conducted an audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain 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 audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenues and expenses.
In our opinion the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Emerald Portfolio for the year ended December
31, 1996 in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 9, 1997
F-27
EMERALD PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
For the For the
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
----------------- -------------
(Unaudited)
Revenue:
Rental $4,755 $2,411
Other 22 6
------ ------
4,777 2,417
------ ------
Certain operating expenses (Note 2):
Repairs and maintenance 841 497
Real estate taxes and insurance 356 151
Utilities 304 171
General and administrative 542 298
Interest 1,447 712
----- ------
3,490 1,829
----- ------
Excess of revenue over certain
operating expenses $1,287 $ 588
====== ======
The accompanying notes are an integral part of the
combined financial statements.
F-28
EMERALD PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUE OVER CERTAIN OPERATING EXPENSES
1. Description of Properties:
--------------------------
The accompanying combined statement of revenue over certain operating
expenses (the "Combined Statement") includes the combined operations of
four multi-family apartment communities (collectively the "Properties" or
"Emerald Portfolio") which were acquired by Berkshire Realty Company, Inc.
("Berkshire") from an unrelated third party. The apartment communities
which were acquired are summarized as follows:
Number of
Property Name Date of Acquisition Location Units
- ------------- ------------------- -------- -----
The Cove July 23, 1997 Glen Burnie, Maryland 181
Lighthouse July 23, 1997 Glen Burnie, Maryland 120
Berkshires by the Chesapeake July 23, 1997 Millersville, Maryland 144
Lamplighter's Ridge Apartments September 23, 1997 Glen Burnie, Maryland 168
---
613
===
2. Basis of Presentation:
----------------------
The Combined Statement has been prepared on an accrual basis.
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties' after acquisition such as amortization, depreciation, property
management fees, corporate expenses and certain other costs not directly
related to the future operations of the Properties.
3. Significant Accounting Policies:
--------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through June 30, 1997 is unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of
such combined statement have been included. The results of
Continued
F-29
EMERALD PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
operations for the period are not necessarily indicative of the Properties'
future results of operations.
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
4. Debt Assumption:
----------------
In connection with the acquisition, Berkshire will assume mortgage notes
encumbering the Properties of approximately $15,365 at December 31, 1996.
Berkshire's assumption of these mortgage notes does not provide for any
modification to the original terms; therefore, interest expense incurred
prior to Berkshire's assumption of the respective mortgage notes is
representative of future interest expense. Accordingly, interest expense of
$1,447 for 1996 and $712 for the six months ended June 30, 1997 (unaudited)
is recognized in the accompanying Combined Statement. The mortgage notes
are generally due in monthly installments and mature at various dates
through 2023. Interest rates on the notes are at 7.5%.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $264
1998 284
1999 307
2000 331
2001 357
F-30
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following unaudited pro forma Condensed Consolidating Balance Sheet of
Berkshire Realty Company, Inc. (the "Company") as of June 30, 1997, is presented
as if all significant activities related to certain transactions had occurred as
of June 30, 1997. These transactions include the following:
- sale of Crossroads
- acquisition of the Emerald portfolio
- issuance of 2,737,000 shares of the Company's Series 1997-A Convertible
Preferred Stock
- acquisition of the Citibank portfolio
- acquisition of Summer Place
- proposed acquisition of the Questar portfolio
- proposed common stock offering
The pro forma condensed Consolidating Statements of Operations for the year
ended December 31, 1996 and the six months ended June 30, 1997 are presented as
if all significant activities related to certain transactions had occurred as of
January 1, 1996. The transactions include the following:
- all dispositions of all real estate properties which occurred between
January 1, 1996 and June 30, 1997 as well as the sale of Crossroads
- acquisition of assets from the Advisor Transaction which occurred on
March 1, 1996
- acquisition of assets from the Property Manager Transaction which
occurred on February 28, 1997
- all acquisitions of all real estate properties which
occurred between January 1, 1996 and June 30, 1997
- acquisition of the Emerald portfolio
- issuance of 2,737,000 shares of the Company's Series 1997-A Convertible
Preferred Stock
- acquisition of the Citibank portfolio
- acquisition of Summer Place
- proposed acquisition of the Questar portfolio
The unaudited pro forma Condensed Consolidating 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 Consolidating Balance Sheet and Statement of Operations are not
necessarily indicative of what actual results of operations of the Company would
have been for the periods presented, nor does it purport to represent the
Company's results of operations for future periods.
Property acquisitions included in the pro forma financial statements:
Apartment Date of
Property Name Seller Location Units Acquisition
- ------------- ------ -------- ----- -----------
1996 Acquisitions
Berkshire Towers Turtle Creek Associates L.P. Silver Spring, MD 1,119 5/14/96
Merit Portfolio Merit Texas Partners Dallas, TX area 1,480 6/06/96,
6/27/96,11/12/96
Prescott Place Prescott Place Associates L.P. Mesquite, TX 318 6/06/96
Hunters Glen Springfield Properties L.P. Plano, TX 276 7/31/96
Continued
F-31
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Property acquisitions included in the pro forma financial statements
(continued):
Apartment Date of
Property Name Seller Location Units Acquisition
- ------------- ------ -------- ----- -----------
1997 Acquisitions
Westchester West Westchester West L.P. Silver Spring, MD 345 1/01/97
Polos West Winter Garden, FL 200 5/13/97
and SunChase Colonial Properties Trust Bradenton, FL 168 5/13/97
Emerald Portfolio Emerald Partners Glen Burnie and
Millersville, MD 613 7/29/97
Citibank Portfolio Citibank Dallas and
Irving, TX 1,269 9/26/97
Summer Place Mountainside Summer Place L.P. Addison, TX 212 9/29/97
1997 Pending Acquisition
Questar Portfolio Questar Partners Baltimore, MD 3,699 Pending
Property dispositions included in the pro forma financial statements:
Apartment Date of
Property Name Buyer Location Units Disposition
- ------------- ----- -------- ----- -----------
1996 Dispositions
Pointe West Invesco Realty Advisors Des Moines, IA 223 9/12/96
Greentree Plaza Mainardi Management Co. Marlton, NJ 110,077 (a) 12/19/96
1997 Dispositions
Howell Commons Mid-America Realty Investments Greenville, SC 348 1/15/97
Banks Crossing A.B. Real Estate, Inc. Fayetteville, GA 243,660 (a) 3/25/97
Brookwood Village Colonial Properties Trust Birmingham, AL 474,138 (a)(b) 5/13/97
Crossroads State of Michigan Atlanta, GA 211,186 (a) 8/06/97
(a) in Retail Square Feet
(b) 50% ownership of property via a joint venture
F-32
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Purchase Price (in thousands)
O.P. Common
Property Name Cash Debt Units Stock Total
- ------------- ---- ---- ----- ----- -----
1996 Acquisitions
Berkshire Towers $ - $35,536 $16,800(1) $ - $52,336
Prescott Place 8,700 - - - 8,700
Hunters Glen 4,445 5,555 - - 10,000
Merit Portfolio 21,381 12,106 5,438(2) - 38,925
1997 Acquisitions
Westchester West 856 11,361 3,883(3) - 16,100
Polos West and
SunChase 8,231 5,719 - - 13,950
Emerald Portfolio 1,000 17,686 8,674(4) - 27,360
Citibank Portfolio 60,300 - - - 60,300
Summer Place 7,000 - - - 7,000
1997 Pending Acquisitions
Questar Portfolio 24,606 131,654 20,561(5) 4,700 181,521
(1) The Company issued 1,600,000 operating partnership units in connection with
the purchase of Berkshire Towers. 1,056,500 units were issued at the time of
closing, 443,500 units were issued January 1, 1997, and 100,000 units will be
issued January 1, 1998. The 443,500 and 100,000 units were discounted at a rate
of 9%. The units were valued at $10.50.
(2) The Company issued 523,303 operating partnership units in connection with
the purchase of the Merit Portfolio. All units were issued at the times of the
various closings. The units were valued based upon closing prices ranging from
$9.95 to $10.79.
(3) The Company issued 388,300 operating partnership units in connection with
the purchase of Westchester West. 338,300 units were issued at the time of
closing (at $10 per unit) and 50,000 units will be issued January 1, 1998. The
50,000 units were discounted at a rate of 9%. The units were valued at $10.00.
(4) The Company issued 772,253 operating partnership units in connection with
the purchase of the Emerald Portfolio. 515,260 units were issued at the time of
closing and 256,993 units will be issued January 21, 1998. The 256,993 units
were discounted at a rate of 9%. The units were valued based upon the Company's
share price at $11.25.
(5) The Company issued approximately 1,750,000 operating partnership units in
connection with the purchase of the Questar Portfolio. Approximately 720,000
units will be issued one year from the date of the proposed closing. The units
will be valued at share price of $11.75.
Equity Offerings included in the pro forma financial statements:
On September 25, 1997, the Company issued 2,737,000 shares of Series 1997-A
Convertible Preferred Stock, par value of $.01 per share, at $25 per share, with
a dividend rate of 9%. Net proceeds from the private placement totaled
approximately $65.8 million.
Proposed common stock offering of 10 million shares par value of $.01 per share
at $12-1/8 per share. Net proceeds from the offering are anticipated to be
approximately $114 million.
F-33
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1997
(Unaudited)
(Dollars in thousands)
Berkshire
Realty Preferred Common
Company Inc. Emerald Stock Citibank Summer Questar Stock
Historical Dispositions Portfolio Offering Portfolio Place Portfolio Offering Total
---------- ------------ --------- -------- --------- ----- --------- -------- -----
ASSETS
Multifamily apartment
complexes-net of (e)
accumulated depreciation $448,419 $ - $27,360 $ - $60,300 $ 7,000 $181,521 $ - $724,600
Other real estate assets 62,061 (11,456) - - - - - - 50,605
-------- ------ ------- ------- ------- ------ ------- -------- -------
Total real estate assets 510,480 (11,456)(a) 27,360 - 60,300 7,000 181,521 - 775,205
Cash 8,232 4,796 (1,000) 65,853 (60,300) (7,000) (32,106) 50,750 29,225
Other assets 30,406 - - - - - 7,500(f) - 37,906
Workforce and intangible
assets - net of accumulated
amortization 28,997 - - - - - - - 28,997
------- ------ ------- ------ -------- ------- ------- -------- --------
Total assets $578,115 $(6,660) $26,360 $65,853 $ - $ - $156,915 $ 50,750 $871,333
======== ====== ======= ======= ======= ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Mortgage notes payable $165,897 $ - $17,686(c) $ - $ - $ - $131,654(g) $ - $315,237
Credit agreements and variable
rate debt 125,610 (6,660)(b) - - - - - (63,000)(i) 55,950
Other liabilities 14,382 - - - - - - - 14,382
-------- ------ ------ ------ ------- ------- ------- ------- --------
Total liabilities 305,889 (6,660) 17,686 - - - 131,654 (63,000) 385,569
Commitments and contingencies
Minority interest in Operating
Partnership 57,715 - 8,674(d) - - - 20,561(h) - 86,950
Shareholders' equity 214,511 - - 65,853 - - 4,700 113,750(j) 398,814
-------- ------- ------ ------ ------- ------- ------- ------- --------
Total liabilities and
shareholders' equity $578,115 $(6,660) $26,360 $65,853 $ - $ - $156,915 $ 50,750 $871,333
======== ======= ======= ====== ======= ======= ======= ======= ========
See accompanying notes to pro forma condensed consolidating balance sheet.
F-34
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1997
(Unaudited)
(dollars in thousands)
Notes:
(a) Represents the sale of the Crossroads property in August, 1997.
(b) Repayment of indebtedness related to the sale of Crossroads.
(c) Mortgage notes payable assumed in conjunction with the acquisition of the
Emerald portfolio detailed as follows:
Principal Interest Maturity
Property Balance Rate Date
-------- ------- ---- ----
Heritage Hill $ 2,316 7.75% 4/2018
Harpers Mill 3,477 7.75% 1/2021
Washington Square 6,575 7.75% 7/2023
Lamplighter 5,318 7.75% 1/2022
-------
$17,686
=======
(d) The seller of the Emerald portfolio was issued approximately 772,000 units
of the Operating Partnership valued at $8,674. The number of units was
based on a share price of $11.25 of common stock of the Company.
(e) Proceeds from the sale of 2,737,000 shares of the Company's Series 1997-A
Convertible Preferred Stock. The shares were priced at $25 per share.
Gross proceeds from offering $68,425
Cost of issuance (2,572)
-------
Net Proceeds $65,853
=======
(f) In connection with the proposed Questar Transactions, a loan will be
provided to the Questar Borrowers. The interest rate is anticipated to be
9.7% per annum and will mature five years from the closing date.
Continued
F-35
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1997
(Unaudited)
(Dollars in thousands)
Notes:
(g) Mortgage notes assumed in conjunction with the proposed acquisition of
the Questar portfolio are detailed as follows:
Principal Interest Maturity
Property Balance Rate Date
-------- ------- ---- ----
Stratton Meadows $ 12,470 7.54% 2/2030
The Estates 11,641 7.43% 11/2006
Arborview 16,666 7.84% 1/2034
Calverts 14,297 7.59% 4/2029
Kingswood II 5,952 8.04% 11/2006
Rolling Wind 18,427 7.72% 2/2035
Coventry 4,458 6.52% 4/2026
Courtleigh 11,888 6.37% 7/2028
Jamestowne 7,687 9.50% 11/2004
Williston 2,162 9.50% 11/2004
Fairway Ridge 6,117 8.11% 12/2006
Warren Park 5,080 8.04% 11/2006
Hazelcrest 822 8.04% 11/2006
Heraldry Square 7,968 8.11% 11/2006
Kingswood I 6,019 8.11% 11/2006
--------
$131,654
========
(h) The seller of the Questar Portfolio is expected to be issued approximately
1.7 million units of the Operating Partnership valued at $20,561. The
number of units was based on a share price of $11.75 of the common stock
of the Company.
(i) Repayment of variable rate indebtedness related to the Company's credit
facilities in addition to the repayment of amounts outstanding under the
Company's Master repurchase agreement.
(j) Proceeds from the issuance of 10 million shares of common stock at a
price of $12-1/8 per share.
Gross proceeds from offering $121,250
Estimated cost of issuance (7,500)
--------
Net Proceeds $113,750
========
F-36
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
Berkshire Property
Realty Manager
Company, Inc. & Advisor Berkshire
Historical Dispositions Transactions Towers
---------- ------------ ----------- ------
(a) (g)
Revenue:
Rental $ 89,451 (8,254) $ - $ 3,394
Other income 3,551 (35) 3,804(b) 85
-------- ------- ------- -------
Total revenue 93,002 (8,289) 3,804 3,479
-------- ------- ------- -------
Expenses:
Property operating 29,374 (2,035) (1,302)(c) 2,011
Real estate taxes 8,654 (758) - 155
Property management fees 4,325 (465) (3,689)(c) -
Property management operations - - 4,642 (d,f) -
General and administrative 4,646 - (10)(e) -
Interest 20,501 (577) - 1,560
Amortization of workforce acquired 1,121 - - -
Non-recurring charges 442 - - -
Provision for loss 7,500 (2,800) - -
Depreciation and amortization 29,050 (2,228) - 1,311
-------- ------- ------- -------
Total expenses 105,613 (8,863) (359) 5,037
-------- ------- ------- -------
Income (loss) from operations (12,611) 574 4,163 (1,558)
Minority interest in Operating
Partnership 1,136 - - -
Income (loss) from joint ventures
net of minority interest (2,737) 3,491 - -
-------- ------- ------- -------
Income (loss) before gains on
sales and extraordinary items (14,212) 4,065 4,163 (1,558)
====== ===== ===== =====
F-37
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
Merit Other 1996 Westchester SunChase &
Portfolio Acquisitions West Polos West
--------- ------------ ----------- ----------
(h)
Revenue:
Rental $ 4,359 $ 1,888 $ 2,586 $ 2,539
Other income 5 - 65 -
------- ------- ------- -------
Total revenue 4,364 1,888 2,651 2,539
------- ------- ------- -------
Expenses:
Property operating 1,602 667 1,075 770
Real estate taxes 468 237 195 270
Property management fees - - - -
Property management operations - - - -
General and administrative - - - -
Interest 515 291 944 435
Amortization of workforce acquired - - - -
Non-recurring charges - - - -
Provision for loss - - - -
Depreciation and amortization 1,256(m) 517 880(m) 763(m)
------- ------- ------- -------
Total expenses 3,841 1,712 3,094 2,238
------- ------- ------- -------
Income (loss) from operations 523 176 (443) 301
Minority interest in Operating
Partnership - - - -
Income (loss) from joint ventures,
net of minority interest - - -
------- ------- ------- -------
Income (loss) before gains on
sales and extraordinary items 523 176 (443) 301
=== === === ===
F-38
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
Emerald Citibank Summer Questar Pro Forma Pro Forma
Portfolio Portfolio Place Portfolio Adjustments Consolidating
--------- --------- ----- --------- ----------- -------------
(i)
Revenue:
Rental $ 4,755 $ 7,860 $1,262 $25,311 $ - $135,151
Other income 22 283 - 1,228 735(j) 9,743
------- ------- ------ ------- ------- --------
Total revenue 4,777 8,143 1,262 26,539 735 144,894
------- ------- ------ ------- ------- --------
Expenses:
Property operating 1,752 2,394 512 8,696 - 45,516
Real estate taxes 257 1,070 119 2,298 - 12,965
Property management fees - - - - - 171
Property management operations - - - 1,111 - 5,753
General and administrative 34 - - - - 4,670
Interest 1,447 - - 10,323 (4,622)(k) 30,817
Amortization of workforce
acquired - - - - 9,016 (l) 10,137
Non-recurring charges - - - - - 442
Provision for loss - - - - - 4,700
Depreciation and amortization 1,496(m) 3,296(m) 384 9,306(m) - 46,031
------- ------- ------ ------- ------- --------
Total expenses 4,986 6,760 1,015 31,734 4,394 161,202
------- ------- ------ ------- ------- --------
Income (loss) from operations (209) 1,383 247 (5,195) (3,659) (16,308)
Minority interest in Operating
Partnership - - - - 2,777(n) 3,913
Income (loss) from joint ventures,
net of minority interest - - - - - 754
------- ------- ------ ------- ------- --------
Income (loss) before gains on
sales and extraordinary items (209) 1,383 247 (5,195) (882) (11,641)
=== ===== === ===== === ======
Income allocated to preferred shareholders (6,158)(o)
--------
Net loss available to common shareholders $(17,799)
======
Weighted average common shares 35,793,147
Net loss per weighted average common share $ (.50)
=======
(1) The Company's weighted average common share of the Operating Partnership is
82.58%.
See accompanying notes to pro forma
condensed consolidating statement of operations.
F-39
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(a) Results of operations for following properties sold in 1996 and 1997 for
the year ended December 31, 1996 are detailed below:
Pointe Greentree Howell Banks Brookwood Total
West Plaza Commons Crossing Village Crossroads Dispositions
---- --------- ------- -------- ------- ---------- ------------
Revenue:
Rental $(1,393) $(1,387) $(1,981) $(1,819) $ - $(1,674) $ (8,254)
Other income (31) - (4) - - - (35)
------- ------- ------- ------- ------ ------- --------
Total revenue (1,424) (1,387) (1,985) (1,819) - (1,674) (8,289)
------- ------- ------- ------- ------ ------- --------
Expenses:
Property operating (474) (470) (640) (219) - (232) (2,035)
Real estate taxes (236) (208) (131) (90) - (93) (758)
Property management fees (69) (93) (92) (110) - (101) (465)
Property management operations - - - - - - -
General and administrative - - - - - - -
Interest (577) - - - - - (577)
Amortization of workforce acquired - - - - - - -
Non-recurring charges - - - - - - -
Provision for loss - (1,800) - (750) - (250) (2,800)
Depreciation and amortization (496) (355) (498) (423) - (456) (2,228)
------- ------- ------- ------- ------ ------- --------
Total expenses (1,852) (2,926) (1,361) (1,592) - (1,132) (8,863)
------- ------- ------- ------- ------ ------- --------
(Income) loss from
operations 428 1,539 (624) (227) - (542) 574
Loss from joint ventures,
net of minority interest - - - - 3,491 - 3,491
------- ------- ------- ------- ------ ------- --------
(Income) loss before gains
on sales and extraordinary items $ 428 $ 1,539 $ (624) $ (227) $3,491 $ (542) $ 4,065
=== ===== === === ===== === =====
(b) Increased third party property management revenue of $3,804 for 1996
as a result of third party multifamily property management contracts
acquired in the Property Manager Transaction.
(c) Reduced property management fees of $3,689 and reimbursements of
$1,302 for 1996 for the Company-owned multifamily properties as a
result of the Company becoming self managed in the Property Manager
Transaction.
(d) Increased property management operations expense of $4,392 for 1996 as
a result of the Company becoming self managed in the Property Manager
Transaction.
(e) Decreased general and administrative expenses resulting from reduction of
advisory fees for the period January 1, 1996 through February 28, 1996 of
$202 and increased general and administrative expense of $192 as a result
of the Company becoming self advised in the Advisor Transaction.
(f) Incremental cost of property management operations of $250 attributable to
the increased asset base.
Continued
F-40
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(g) Results of operations for Berkshire Towers (formerly known as The
Point) for the period January 1, 1996 through May 13, 1996 adjusted
for pro forma amounts:
Total
Pro forma Pro forma
Historical Adjustments Acquisition
---------- ----------- -----------
Revenue:
Rental $3,394 $ - $3,394
Other income 85 - 85
------ ------ ------
Total revenue 3,479 - 3,479
------ ------ ------
Expenses:
Property operating 2,185 (174) 2,011
Real estate taxes 155 - 155
Property management fees 256 (256) -
Property management operations - - -
General and administrative - - -
Interest 1,560 - 1,560
Amortization of workforce acquired - - -
Non-recurring charges - - -
Provision for loss - - -
Depreciation and amortization - 1,311 (m) 1,311
------ ----- ------
Total expenses 4,156 881 5,037
------ ----- ------
Income (loss) from operations $ (677) $(881) $(1,558)
=== === =====
(h) Results of operations for Hunters Glen for the period January 1, 1996
through July 31, 1996 and for Prescott Place for the period January 1,
1996 through June 5, 1996. Adjusted for pro forma amounts:
Total
Hunters Prescott Pro forma Other 1996
Glen Place Adjustments Acquisitions
---- ----- ----------- ------------
Revenue:
Rental $1,106 $ 782 $ - $1,888
Other income - - - -
----- ----- ----- -----
Total revenue 1,106 782 - 1,888
----- ----- ----- -----
Expenses:
Property operating 392 300 (25) 667
Real estate taxes 140 97 - 237
Property management fees 66 37 (103) -
Property management operations - - - -
General and administrative - - - -
Interest 291 - - 291
Amortization of workforce acquired - - - -
Non-recurring charges - - - -
Provision for loss - - - -
Depreciation and amortization - - 517(m) 517
----- ----- ----- -----
Total expenses 889 434 389 1,712
----- ----- ----- -----
Income (loss) from operations $ 217 $ 348 $ (389) $ 176
=== === === ===
Continued
F-41
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(i) Results of operations for Summer Place for the year ended December 31, 1996
adjusted for pro forma amounts:
Total
Pro forma Pro forma
Historical Adjustments Acquisition
---------- ----------- ------------
Revenue:
Rental $1,262 $ - $1,262
Other income - - -
------ ------ ------
Total revenue 1,262 - 1,262
------ ------ ------
Expenses:
Property operating 512 - 512
Real estate taxes 119 - 119
Property management fees 69 (69) -
Property management operations - - -
General and administrative - - -
Interest - - -
Amortization of workforce
acquired - - -
Non-recurring charges - - -
Provision for loss - - -
Depreciation and amortization - 384(m) 384
------ ------ ------
Total expenses 700 315 1,015
------ ------ ------
Income (loss) from operations $ 562 $ (315) $ 247
=== === ===
(j) Interest income of $735 on the $7,500 loan to be made pursuant to the
Questar Transaction at 9.7% per annum.
Continued
F-42
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(k) Pro forma effect of interest expense incurred on debt for the year
ended December 31, 1996 which is expected to be paid down with the
proceeds of the Common Stock Offering.
Average
Historical
Interest Pro forma Historical
Pro forma Rate at Interest Interest
Balance 12/31/96 Expense Expense Adjustment
------- -------- ------- ------- ----------
Variable rate
credit facility $12,307 6.88% $847 $4,642 $(3,795)
Repurchase
agreement 2,401 5.85% 140 597 (457)
Historical interest expense related to certain Questar
mortgages totaling $9,891 to be refinanced subsequent
to acquisition (942)
Pro forma interest expense on refinanced mortgage loans
assuming a principal balance of $7,381 with interest at 7.75% 572
------
Total adjustment $(4,622)
=======
(l) Pro forma amortization of intangible assets in connection with the
Advisor Transaction and the Property Manager Transaction calculated as
follows:
Historical Period Pro Forma
Transaction Total Cost (Months) Amortization
----------- ---------- -------- ------------
Property Manager:
Workforce acquired $13,246 36 $4,415
Third-party contracts 4,951 48 1,238
Advisor:
Workforce acquired 13,448 36 4,484
------
Pro forma amortization adjustment 10,137
Historical amortization expense (1,121)
------
Net pro forma amortization $9,016
======
The Company utilized 10 and 15 year lives respectively for the
amortization of the workforce acquired in its 1996 and interim 1997
financial statements. Commencing in the period ended September 30,
1997, the Company will prospectively amortize the workforce assets over
a shortened 3 year life.
Continued
F-43
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(m) Detail of pro forma depreciation expense is presented as follows:
Estimated
Lives of
Property Basis Assets (Yrs.) Depreciation
-------- ----- ------------ ------------
1996 Acquisitions
-----------------
Berkshire Towers $52,336 3 to 25 $ 1,311
Merit Portfolio 38,925 3 to 25 1,256
Prescott Place 8,700 3 to 25 198
Hunters Glen 10,000 3 to 25 319
1997 Acquisitions
-----------------
Westchester West 16,100 3 to 25 880
Polos West and SunChase 13,950 3 to 25 763
Emerald Portfolio 27,360 3 to 25 1,496
Citibank Portfolio 60,300 3 to 25 3,296
Summer Place 7,000 3 to 25 384
Pending Acquisition
-------------------
Questar Portfolio 174,935 3 to 25 9,306
-------
Pro forma depreciation $19,209
=======
(n) Pro forma minority interest (17.42%) in Operating Partnership.
(o) Preferred dividends of $6,158 on 2,737,000 Series 1997-A Preferred shares
issued with a dividend rate of 9%.
F-44
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
Berkshire Property
Realty Manager
Company, Inc. & Advisor SunChase &
Historical Dispositions Transactions Polos West
---------- ------------ ------------ ----------
(a)
Revenue:
Rental $ 49,709 $(1,309) $ - $ 974
Other income 2,379 - 638(b) -
-------- ------- ------ -------
Total revenue 52,088 (1,309) 638 974
-------- ------- ------ -------
Expenses:
Property operating 15,425 (166) (25)(c) 278
Real estate taxes 4,718 (77) - 105
Property management fees 819 (81) (709)(c) -
Property management
operations 2,156 - 989(d,e) -
General and administrative 2,426 - - -
Interest 11,485 - - 157
Amortization of workforce acquired 1,527 - - -
Cost associated with Advisor
Transaction 1,200 - - -
Depreciation and
amortization 15,579 (19) - 286(j)
------- ------ ------ -------
Total expenses 55,335 (343) 255 826
------- ------ ------ -------
Income (loss) from operations (3,247) (966) 383 148
Minority interest in Operating
Partnership 571 - - -
Income (loss) from joint ventures,
net of minority interest (418) 726 - -
------- ------ ------ -------
Income (loss) before gains on
sales and extraordinary items $(3,094) $ (240) $ 383 $148
======= ======= ====== ====
F-45
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
Emerald Citibank Summer Questar
Portfolio Portfolio Place Portfolio
--------- --------- ----- ----------
(f)
Revenue:
Rental $ 2,411 $ 4,518 $ 637 $12,689
Other income 6 188 - 691
------- ------- ----- -------
Total revenue 2,417 4,706 637 13,380
------ ------- ----- -------
Expenses:
Property operating 990 1,160 256 3,011
Real estate taxes 127 625 60 1,656
Property management fees - - - -
Property management
operations - - - 1,865
General and administrative - - - -
Interest 712 - - 5,180
Amortization of workforce acquired - - - -
Cost associated with Advisor
Transaction - - - -
Depreciation and
amortization 748(j) 1,640(j) 192 4,781(j)
------ ------ ----- -------
Total expenses 2,577 3,425 508 16,493
------ ------ ----- -------
Income (loss) from operations (160) 1,281 129 (3,113)
Minority interest in Operating
Partnership - - - -
Income (loss) from joint ventures,
net of minority interest - - - -
------ ------ ----- -------
Income (loss) before gains on
sales and extraordinary items $(160) $1,281 $ 129 $(3,113)
===== ====== ===== =======
F-46
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
Pro Forma Pro Forma
Adjustments Consolidating
----------- -------------
Revenue:
Rental $ - $69,629
Other income 367(g) 4,269
------ --------
Total revenue 367 73,898
------ --------
Expenses:
Property operating - 20,929
Real estate taxes - 7,214
Property management fees - 29
Property management
operations - 5,010
General and administrative - 2,426
Interest (2,403)(h) 15,131
Amortization of workforce acquired 3,541 (i) 5,068
Costs associated with Advisor
Transaction - 1,200
Depreciation and
amortization - 23,207
------- --------
Total expenses 1,138 80,214
------- --------
Income (loss) from operations (771) (6,316)
Minority interest in Operating
Partnership 1,063(k) 1,634
Income (loss) from joint ventures,
net of minority interest - 308
------ --------
Income (loss) before gains on
sales and extraordinary items $ 292 $(4,374)
====== ========
Income allocated to preferred shareholders (3,079)(l)
--------
Loss available to common
shareholders $(7,453)
========
Weighted average common shares 35,850,743
Net loss per weighted average common share $ (.21)
========
(1) The Company's weighted average common share of the Operating Partnership is
82.61%.
See accompanying notes to pro forma
condensed consolidating statement of operations.
F-47
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(a) Historical results of operations for properties sold in 1997 for the period
ended June 30, 1997.
Howell Banks Brookwood Total
Commons Crossing Village Crossroads Dispositions
------- -------- ------- ---------- ------------
Revenue:
Rental $ (66) $ (408) $ - (835) $(1,309)
Other income - - - - -
------- ------ ---- ----- -----
Total revenue (66) (408) - (835) (1,309)
------- ------ ---- ----- ------
Expenses:
Property operating (45) (49) - (72) (166)
Real estate taxes (5) (24) - (48) (77)
Property management fees (5) (26) - (50) (81)
Property management operations - - - - -
General and administrative - - - - -
Interest - - - - -
Amortization of workforce acquired - - - - -
Depreciation and amortization (19) - - - (19)
------- ------ ---- ----- -------
Total expenses (74) (99) - (170) (343)
------- ------ ---- ----- -------
(Income) loss from operations 8 (309) - (665) (966)
(Income) loss from joint ventures,
net of minority interest - - 726 - 726
------- ------ ---- ----- ------
(Income) loss before gains
on sales and extraordinary items $8 $(309) $726 $(665) $(240)
= === === === =====
(b) Increased third party property management revenue of $638 for 1997 as a
result of third party multifamily property management contracts acquired in
the Property Manager Transaction.
(c) Reduced property management fees of $709 and reimbursements of $25 for 1997
for the Company-owned multifamily properties as a result of the Company
becoming self managed in the Property Manager Transaction.
(d) Increased property management operations expense of $864 for 1997 as a
result of the Company becoming self managed in the Property Manager
Transaction.
(e) Additional property management operations of $125 attributable to the
increased asset base.
Continued
F-48
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(f) Results of operations for Summer Place for the period ended June 30, 1997
adjusted for pro forma amounts:
Total
Pro forma Pro forma
Historical Adjustments Acquisition
---------- ----------- ------------
Revenue:
Rental $637 $ - $637
Other income - - -
---- ------ ---
Total revenue 637 - 637
---- ------ ---
Expenses:
Property operating 256 - 256
Real estate taxes 60 - 60
Property management fees 37 (37) -
Property management operations - - -
General and administrative - - -
Interest - - -
Amortization of intangibles - - -
Non-recurring charges - - -
Depreciation and amortization - 192(j) 192
---- ------ ---
Total expenses 353 155 508
---- ------ ---
Income from operations $284 $ (155) $129
==== ====== ====
(g) Interest income of $367 on the $7,500 loan to be made pursuant to the
Questar Transaction at 9.7% per annum.
(h) Pro forma effect of interest expense incurred on debt for the period ended
June 30, 1997 which is expected to be paid down with the proceeds of the
Common Stock Offering. A portion of the debt assumed with the proposed
Questar portfolio acquisition will be refinanced.
Average
Historical
Interest Pro forma Historical
Pro forma Rate at Interest Interest
Balance 6/30/97 Expense Expense Adjustment
------- ------- ------- ------- ----------
Variable rate
credit facility $5,881 6.62% $389 $ 2,066 $(1,677)
Repurchase
agreement 925 5.75% 53 597 (544)
Historical interest expense related to certain Questar
mortgages totaling $9,891 to be refinanced subsequent
to acquisition (468)
Pro forma interest expense on refinanced mortgage
loans assuming a principal balance of $7,381 with
interest at 7.75% 286
-------
Total adjustment $(2,403)
=======
Continued
F-49
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(i) Pro forma amortization of intangible assets in connection with the Advisor
and Property Manager Transactions calculated as follows:
Pro Forma
Amortization Pro Forma
Transaction Total Cost Period (Months) Amortization
----------- ---------- --------------- ------------
Property Manager:
Workforce acquired $13,246 36 $2,208
Management contracts 4,951 48 619
Advisory:
Workforce acquired $13,448 36 2,241
------
Pro forma amortization adjustment 5,068
Historical amortization expense (1,527)
------
Net pro forma amortization $3,541
======
The Company utilized 10 and 15 year lives respectively for the
amortization of the workforce acquired in its 1996 and interim 1997
financial statements. Commencing in the period ended September 30,
1997, the Company will prospectively amortize the workforce assets
over a shortened 3 year life.
(j) Detail of pro forma depreciation expense is presented as follows:
Estimated
Lives of
Property Basis Assets (Yrs.) Depreciation
-------- ----- ------------- ------------
1997 Acquisitions
-----------------
Polos West and SunChase $13,950 3 to 25 $ 286
Emerald Portfolio 27,360 3 to 25 748
Citibank Portfolio 60,300 3 to 25 1,640
Summer Place 7,000 3 to 25 192
Pending Acquisition
-------------------
Questar Portfolio 174,935 3 to 25 4,781
------
Pro forma depreciation $7,647
======
Continued
F-50
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(k) Pro forma minority interest (17.39%) in Operating Partnership.
(l) Preferred dividends of $3,079 on 2,737,000 Series 1997-A Preferred shares
issued with a dividend rate of 9%.
F-51
EXHIBIT INDEX
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Exhibit
10. The Questar Transaction
10.1 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Third Rolling Road
Associates Limited Partnership (Third Rolling Road/Coventry) and
Questar Investment Corporation dated as of August 25, 1997
10.2 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Williston Associates and
Questar Investment Corporation dated as of August 25, 1997
10.3 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Ridgeview Chase
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.4 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Kingswood Common
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.5 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Rolling Road
Associates (Kingswood Common I) and Questar Investment
Corporation dated as of August 25, 1997
10.6 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Frederick Road Associates
(Jamestown) and Questar Investment Corporation dated as of August
25, 1997
10.7 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Gorn Properties, Inc.
(Hilltop) and Questar Investment Corporation dated as of August
25, 1997
10.8 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Rolling Road Associates
(Heraldry Square) and Questar Investment Corporation dated as of
August 25, 1997
10.9 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Tremaine Associates
Limited Partnership (Henley/Rolling Wind) and Questar Investment
Corporation dated as of August 25, 1997
10.10 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Plainfield Associates
(Hazelcrest) and Questar Investment Corporation dated as of August
25, 1997
10.11 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Fourth Rolling Road
Associates Limited Partnership (Fourth Rolling Road/Courtleigh),
19 West Lexington Street Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.12 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Purnell Associates
(Fairway Ridge) and Questar Investment Corporation dated as of
August 25, 1997
10.13 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Stratton Associates
Limited Partnership, Fairbrook Associates Limited Partnership
(Fairbrook/Stratton Meadows) and Questar Investment Corporation
dated as of August 25, 1997
10.14 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Diamond Ridge Associates
Limited Partnership and Questar Investment Corporation dated as
of August 25, 1997
10.15 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Citadel Associates
Limited Partnership, Calvert's Walk Associates Limited
Partnership and Questar Investment Corporation dated as of August
25, 1997
10.16 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Caliber Associates
Limited Partnership, Arborview Associates Limited Partnership and
Questar Investment Corporation dated as of August 25, 1997
10.17 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Estates II Funding
Corporation, The Estates Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.18 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Warren Park Associates and
Questar Investment Corporation dated as of August 25, 1997
10.19 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Property Management Corporation and its Shareholders
dated as of August 25, 1997
10.20 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Management Company and its Shareholders dated as of
August 25, 1997
10.21 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Kingswood Management Company and its Shareholders dated as of
August 25, 1997
10.22 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Vector Property Management Company and its Shareholders dated
as of August 25, 1997
10.23 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Gorn Management Company and its Shareholders dated as of
August 25, 1997
10.24 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Arborview Management Company and its Shareholders dated as of
August 25, 1997
*10.25 Form of Development Acquisition Agreement among Questar
Properties, Inc. Stephen M. Gorn, John B. Colvin and BRI OP
Limited Partnership
*10.26 Development Contribution Agreement (Avalon, 1,3,4) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.27 Development Contribution Agreement (Liriope) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
*10.28 Development Contribution Agreement (Granite Run) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.29 Development Contribution Agreement (Avalon 2) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
10.30 Form of Registration Rights Agreement among Berkshire Realty
Company, Inc. and certain partners of BRI OP Limited Partnership
*10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C.
dated as of August 25, 1997
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
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*To be filed by amendment.