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: October 30, 1998 Commission File No. 1-10660
----------------- -------
(Date of earliest event reported)
BERKSHIRE REALTY COMPANY, INC.
------------------------------
(Exact name of registrant as specified in its Charter)
Delaware 04-3086485
--------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
470 Atlantic Avenue, Boston, Massachusetts 02210
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(888) 867-0100
---------------
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
On September 29, 1998, Berkshire Realty Company, Inc. (the "Company") filed
with the Securities and Exchange Commission, as part of a Registration Statement
on Form S-3 (File No. 333-64631), certain financial statements pursuant to Rule
3-14 of Regulation S-X (the "3-14 Financial Statements") relating to the
acquisition of the real estate properties comprising the Company's Intercapital
Portfolio and the Company's Cooper Portfolio. The Company is filing this Current
Report on Form 8-K in order to more broadly disseminate the 3-14 Financial
Statements to the public. A copy of the 3-14 Financial Statements has been filed
in this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements under Rule 3-14 of Regulation S-X.
Intercapital Portfolio Combined Statement of Revenue Over Certain Operating
Expenses for the Year Ended December 31, 1997
Cooper Portfolio Combined Statement of Revenue Over Certain Operating
Expenses for the Year Ended December 31, 1997 and for the Six Months Ended
June 30, 1998 (unaudited)
(b) Pro Forma Financial Statements
Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1998
(unaudited)
Notes to Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1998
(unaudited)
Pro Forma Condensed Consolidating Statement of Operations for the Year Ended
December 31, 1997 (unaudited)
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Year Ended December 31, 1997 (unaudited)
Pro Forma Condensed Consolidating Statement of Operations for the Six Month
Period Ended June 30, 1998 (unaudited)
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Six Month Period Ended June 30, 1998 (unaudited)
(c) Exhibits
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
1998 Acquisitions:
- -----------------
Page
----
Intercapital Portfolio Combined Statement of Revenue Over Certain Operating
Expenses for the Year Ended December 31, 1997 2
Cooper Portfolio Combined Statement of Revenue Over Certain Operating
Expenses for the Year Ended December 31, 1997 and for the Six Months Ended
June 30, 1998 (unaudited) 7
Pro Forma Financial Statements:
- ------------------------------
Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1998
(unaudited) 14
Notes to Pro Forma Condensed Consolidating Balance Sheet as of June 30,
1998 (unaudited) 15
Pro Forma Condensed Consolidating Statement of Operations for the Year
Ended December 31, 1997 (unaudited) 16
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Year Ended December 31, 1997 (unaudited) 18
Pro Forma Condensed Consolidating Statement of Operations for the Six Month
Period Ended June 30, 1998 (unaudited) 21
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Six Month Period Ended June 30, 1998 (unaudited) 22
1
INTERCAPITAL PORTFOLIO
COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
for the year ended December 31, 1997
2
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 Intercapital Portfolio (the "Properties") for the year
ended December 31, 1997. This financial statement is the responsibility of the
Properties' management. Our responsibility is to express an opinion on this
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 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.
As described in Note 2, this financial statement excludes certain expenses that
would not be comparable with those resulting from the operation of the
Properties after acquisition by Berkshire Realty Company, Inc. The accompanying
financial statement was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and is not intended to be
a complete presentation of the Properties' 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 the Intercapital Portfolio for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
August 28, 1998
3
INTERCAPITAL PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
for the year ended December 31, 1997
(dollars in thousands)
Revenue:
Rental $ 13,657
Other 585
-----------------
14,242
-----------------
Certain Operating Expenses (Notes 2 and 3):
Real estate taxes and insurance 2,057
General and administrative 1,777
Repairs and maintenance 1,749
Interest 1,228
Utilities 1,211
-----------------
8,022
-----------------
Excess of Revenue over Certain Operating Expenses $ 6,220
=================
The accompanying notes are an integral part of this statement.
4
INTERCAPITAL PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
1. Description of Portfolio
------------------------
The accompanying statement of revenue over certain operating expenses
(the "Statement") includes the combined operations of six multi-family
properties (collectively, the "Intercapital Portfolio") which were
acquired by Berkshire Realty Company, Inc. ("Berkshire") from an
unrelated third-party. The apartment communities in the Intercapital
Portfolio are summarized as follows:
Property Name Location Number of Units
------------- ----------------------- --------------------
Yorktown Apartments Houston, TX 563
The Bluffs Apartments Austin, TX 382
Carlyle Place Apartments San Antonio, TX 184
Pinto Ridge Apartments Austin, TX 238
Lodge Apartments Houston, TX 240
6200 Gessner Apartments Houston, TX 659
2. Basis of Accounting:
-------------------
The accompanying Statement has been prepared on the accrual basis of
accounting. This 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. 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 other costs not directly related to the future operations of the
Intercapital Portfolio. Costs incurred in connection with residential
turnover such as unit cleaning, painting, carpet cleaning or
replacement and appliance replacement are included.
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.
Repairs and Maintenance
-----------------------
Costs incurred with residential turnover such as unit cleaning and
carpet cleaning are expensed. Significant betterments and improvements
are capitalized.
5
INTERCAPITAL PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
($ in thousands)
3. Significant Accounting Policies, continued
------------------------------------------
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 acquisitions, the mortgage debt (the "Notes")
encumbering Lodge Apartments and 6200 Gessner Apartments totaling
$14,385 at December 31, 1997 was assumed. The interest expense
reflected relates to the Notes assumed. The Notes bear interest at
8.51% and mature on June 1, 2001.
Principal payments due on the Notes during the next five years are
approximately as follows:
1998 $ 125
1999 136
2000 148
2001 13,977
6
COOPER PORTFOLIO
COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
for the year ended December 31, 1997
7
Report of Independent Accountants
To the Board of Directors and Stockholders
of Berkshire Realty Company, Inc.:
We have audited the accompanying statement of revenue over certain operating
expenses of the Cooper Portfolio (the "Properties") for the year ended December
31, 1997. This financial statement is the responsibility of the Properties'
management. Our responsibility is to express an opinion on this 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 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.
As described in Note 2, this financial statement excludes certain expenses that
would not be comparable with those resulting from the operation of the
Properties after acquisition by Berkshire Realty Company, Inc. The accompanying
financial statement was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and is not intended to be
a complete presentation of the Properties' 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 the Cooper Portfolio for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
September 11, 1998
8
COOPER PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
For the Year For the Six Months
Ended Ended
December 31, 1997 June 30, 1998
----------------- -------------
(Unaudited)
Revenue:
Rental $ 8,348 $ 4,262
Other 230 185
--------------- ---------------
8,578 4,447
Certain Operating Expenses (Notes 2 and 3):
Real estate taxes and insurance 772 379
General and administrative 891 394
Repair and maintenance 1,336 616
Interest 3,482 1,719
Utilities 574 326
--------------- ---------------
7,055 3,434
--------------- ---------------
Excess of Revenue over Certain Operating Expenses $ 1,523 $ 1,013
=============== ===============
The accompanying notes are an integral part of this statement.
9
COOPER PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. Description of Portfolio
------------------------
The accompanying statement of revenue over certain operating expenses
(the "Statement") includes the combined operations of four multi-family
properties (collectively, the "Cooper Portfolio") which were acquired
by Berkshire Realty Company, Inc. ("Berkshire") from an unrelated
third-party. The apartment communities in the Cooper Portfolio are
summarized as follows:
Property Name Location Number of Units
------------- -------- ---------------
Essex House Apartments Atlanta, GA 120
River Parkway Apartments Atlanta, GA 427
Pines at Dunwoody Apartments Atlanta, GA 389
Highlands at Briarcliff Apartments Atlanta, GA 140
2. Basis of Accounting
-------------------
The accompanying Statement has been prepared on the accrual basis of
accounting. This 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. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
property after acquisition, such as amortization, depreciation,
property management fees, corporate expenses and other costs not
directly related to the future operations of the Cooper Portfolio.
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.
10
COOPER PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
3. Significant Accounting Policies, continued
------------------------------------------
Repairs and Maintenance
-----------------------
Cost incurred with residential turnover such as unit cleaning and
carpet cleaning are expensed. Significant betterments and improvements
are capitalized.
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.
Unaudited Interim Information
-----------------------------
The statement of revenue over certain operating expenses for the six
months ended June 30, 1998 is unaudited. In the opinion of management,
all adjustments necessary for a fair presentation of such statement
have been included. The results of operations for the period are not
necessarily indicative of future operations.
11
COOPER PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
4. Debt Assumption
---------------
In connection with the acquisition, mortgage notes payable (the
"Notes") encumbering the Cooper Properties of approximately $40,342 at
December 31, 1997 were assumed. The interest expense reflected relates
to the Notes assumed. The Notes require monthly payments of principal
and interest and mature at various dates through 2027. The interest
rates on the Notes range from 8.04% to 8.60%. Certain notes are subject
to prepayment penalties of varying amounts in the event of early
principal repayment.
Principal payments due on the Notes during the next five years are
approximately as follows:
1998 $ 443
1999 480
2000 521
2001 566
2002 614
12
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED INFORMATION
(Unaudited)
The accompanying unaudited Pro Forma Condensed Consolidated Balance Sheet of
Berkshire Realty Company, Inc. (the "Company") at June 30, 1998 is presented as
if the acquisition of the Cooper Portfolio, acquired subsequent to June 30,
1998, had occurred as of June 30, 1998.
The accompanying unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended June 30, 1998 and for the year ended
December 31, 1997 are presented as if all significant activity related to the
following transactions had occurred on January 1, 1997: (i) the consummation of
the 1997 public offering and issuance of 2.7 million shares of preferred stock,
(ii) the acquisition of the previously completed 1997 acquisitions reported on
Form 8-K previously filed with the Securities and Exchange Commission (the "1997
Acquisitions") (iii) the significant acquisitions, (as defined in SEC Rule
"3-14") consummated in 1998 and detailed below (the "1998 Acquisitions"), (iv)
the drawdown in the unsecured line of credit as a result of such acquisitions,
and (v) the disposition of real estate properties which occurred between January
1, 1997 and June 30, 1998 previously filed on Forms 8-K.
The unaudited pro forma condensed consolidated financial information should be
read in conjunction with historical financial statements and notes thereto of
the Company reported on Form 10-Q for the six months ended June 30, 1998 and
Form 10-K/A for the year ended December 31, 1997.
The unaudited pro forma condensed consolidated financial information prepared by
Berkshire Realty Company, Inc. is not necessarily indicative of what the actual
results of operations would have been for the six months ended June 30, 1998 or
for the year ended December 31, 1997, had the previously described transactions
actually occurred on January 1, 1997 and the effect thereof carried forward
through the six month period ended June 30, 1998, nor do they purport to present
the future results of operations or financial position of the Company.
1998 Acquisitions included in the pro forma financial statements:
- ---------------------------------------------------------------------------------------------------------------
Property Acquisition Location Apartment Units Date of Acquisition(s)
-------------------- -------- --------------- ----------------------
- ---------------------------------------------------------------------------------------------------------------
Intercapital Portfolio Houston, Austin 2,266 1/98 - 4/98
& San Antonio, TX
- ---------------------------------------------------------------------------------------------------------------
Cooper Portfolio Atlanta, GA 1,076 7/98
- ---------------------------------------------------------------------------------------------------------------
13
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1998
(Unaudited)
(Dollars in thousands)
Berkshire
Realty Cooper
Company Inc. Portfolio
Historical Acquisition Pro Forma
------------ ----------- ----------
ASSETS
Multifamily apartment complexes,
net of accumulated depreciation $853,610 $59,266(a) $ 912,876
Other real estate assets 25,424 - 25,424
-------- -------- ---------
Total real estate assets 879,034 59,266 938,300
Cash 13,878 - 13,878
Other assets 47,912 - 47,912
Workforce and intangible assets -
net of accumulated amortization 15,965 - 15,965
-------- -------- ---------
Total assets $956,789 $ 59,266 $1,016,055
======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $324,646 $ 40,420(b) $ 365,066
Credit agreements and variable
rate debt 167,096 18,846(a) 185,942
Other liabilities 28,064 - 28,064
-------- ------- ---------
Total liabilities 519,806 59,266 579,072
Minority interest in Operating
Partnership 87,757 - 87,757
Shareholders' equity 349,226 - 349,226
-------- -------- ---------
Total liabilities and
shareholders' equity $956,789 $ 59,266 $1,016,055
======== ======== ==========
See accompanying notes to pro forma condensed consolidated balance sheet.
14
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1998
(Unaudited)
(Dollars in thousands)
(a) Represents the purchase price, including closing costs of the accquisition
of the Cooper Portfolio. The acquisition was funded by the drawdown from
unsecured line of credit of $18,846 and the assumption of mortgage notes
payable of $40,420.
(b) Mortgage notes payable assumed in conjunction with the acquisition of
the Cooper Portfolio detailed as follows:
Principal Interest Maturity
Property Balance Rate Date
-------- ------- ---- ----
Essex House $ 5,071 8.04% 4/2027
Highlands at Briarcliff 5,311 8.04% 4/2022
Pines at Dunwoody 12,838 8.04% 4/2025
River Parkway 17,200 8.60% 8/2006
-------
$40,420
=======
15
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(Unaudited)
(Dollars in thousands, except per share data)
Berkshire 1998 Acquisitions
Realty -----------------
Company Inc. 1997 Intercapital Cooper
Historical Dispositions Acquisitions Portfolio Portfolio
------------ ------------ ------------ ------------ ---------
Revenue: (a) (b) (b) (b)
Rental $109,974 $ (967) $ 32,770 $ 13,657 $ 8,348
Other income 5,525 (68) 1,498 585 230
-------- -------- -------- -------- ------
Total revenue 115,499 (1,035) 34,268 14,242 8,578
-------- -------- -------- -------- ------
Expenses:
Property operating 33,710 (173) 8,442 5,041 2,964
Real estate taxes 10,042 (92) 4,089 1,753 609
Property management fees 903 (60) - - -
Property management operations 5,565 - 3,264 - -
General and administrative 5,744 - - - -
Interest 24,006 - 10,054 1,228 3,482
Amortization of workforce acquired 8,043 - - - -
Costs assoc. with Advisor Transaction 2,400 - - - -
Provision for loss 1,850 - - - -
Depreciation and amortization 35,273 - 11,986 3,893(f) 2,822(f)
-------- ------- ------ ------ ------
Total expenses 127,536 (325) 37,835 11,915 9,877
-------- ---- ------ ------ ------
Income (loss) from operations before
Joint venture income (loss), minority
interest and gains on sale of assets (12,037) (710) (3,567) 2,327 (1,299)
Joint venture income (loss) (4,910) 4,910 - - -
Minority interest in Operating
Partnership 2,154 - - - -
-------- ------- -------- ------ ------
Income (loss) before gains on
sales and extraordinary items (14,793) 4,200 (3,567) 2,327 (1,299)
Income allocated to preferred shareholders (1,659) - - - -
--------- ------- ------- ------ ------
Income (loss) allocated to common
shareholders before gains on
sales and extraordinary items (16,452) 4,200 (3,567) 2,327 (1,299)
Income (loss) per common share
before gains on sales and
extraordinary items
(basic and diluted) (.61)
Weighted average shares 27,099,522
See accompanying notes to pro forma condensed consolidated
statement of operations.
16
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(Unaudited)
(Dollars in thousands)
Other
Adjustments Pro Forma
----------- ---------
Revenue:
Rental $ - $ 163,782
Other income 637(c) 8,407
------- -------
Total revenue 637 172,189
-------
Expenses:
Property operating - 49,984
Real estate taxes - 16,401
Property management fees - 843
Property management operations 250(d) 9,079
General and administrative - 5,744
Interest 4,167(e) 42,937
Amortization of workforce
acquired - 8,043
Costs assoc. with Advisor Transaction - 2,400
Provision for loss - 1,850
Depreciation and amortization - 53,974
------- -------
Total expenses 4,417 191,255
------- -------
Income (loss) from operations before
Joint venture net income (loss), minority
interest and gains on sale of assets (3,780) (19,066)
Joint venture net income (loss) - -
Minority interest from Operating
Partnership 2,782(g) 4,936
------- ------
Income (loss) before gains on
sales and extraordinary items (998) (14,130)
Income (loss) allocated to preferred shareholders (4,499)(h) (6,158)
------- ------
Income (loss) allocated to common shareholders
before gains on sales and extraordinary items (5,497) (20,288)
Income (loss) per common share before gains on
sales and extraordinary items
(basic and diluted) (.54)
Weighted average shares 37,252,211
See accompanying notes to pro forma condensed consolidated
statement of operations.
17
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(Unaudited)
(Dollars in thousands)
(a) Results of operations, for the following properties sold in 1997 and 1998,
for the year ended December 31, 1997 are detailed below:
Brookwood Spring College Total
Village Valley Plaza Dispositions
--------- ------ ------- ------------
Revenue:
Rental $ - $ - $ (967) $ (967)
Other income - - (68) (68)
------- ------- -------- --------
Total revenue - - (1,035) (1,035)
------- ------- ------- ---------
Expenses:
Property operating - - (173) (173)
Real estate taxes - - (92) (92)
Property management fees - - (60) (60)
Property management operations - - - -
General and administrative - - - -
Interest - - - -
Amortization of intangibles - - - -
Non-recurring charges - - - -
Provision for loss - - - -
Depreciation and amortization - - - -
------- -------- ------- -------
Total expenses - - (325) (325)
------- -------- ------- -------
(Income) loss from
operations - - (710) (710)
Joint venture net (income)
loss 726 4,184 - 4,910
------ ------ ------- ------
(Income) loss before gains
on sales and extraordinary items 726 4,184 (710) 4,200
====== ====== ======= =========
(b) Approximates the historical results of operations for the period prior to
acquisition, as adjusted for depreciation, for the 1998 Acquisitions and
1997 Acquisitions (detailed below) for the year ended December 31, 1997:
SunChase & Emerald Citibank Questar Total 1997
Polos West Portfolio Portfolio Portfolio Acquisitions
---------- --------- --------- ----------- ------------
Revenue:
Rental $ 974 $ 2,813 $ 6,777 $ 22,206 $32,770
Other income - 7 282 1,209 1,498
------ ------- ------- ------ -------
Total revenue 974 2,820 7,059 23,415 34,268
------ ------- ------- ------ -------
Expenses:
Property operating 278 1,155 1,740 5,269 8,442
Real estate taxes 105 148 938 2,898 4,089
Property management fees - - - - -
Property management operations - - - 3,264 3,264
General and administrative - - - - -
Interest 157 831 - 9,066 10,054
Amortization of intangibles - - - - -
Non-recurring charges - - - - -
Provision for loss - - - - -
Depreciation and amortization(f) 286 873 2,460 8,367 11,986
---- ------ ------- ------ -------
Total expenses 826 3,007 5,138 28,864 37,835
------ ------ ------- ------- --------
Income (loss) from operations $ 148 $ (187) $ 1,921 $ (5,449) $(3,567)
====== ======= ======= ========= ========
18
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(Unaudited)
(Dollars in thousands)
(c) Interest income of $637 on the $7,500 loan to be made pursuant to the
Questar Transaction at 9.7% per annum for the period prior to acquisition.
(d) Additional property management operations of $250 attributable to the
increased asset base.
(e) Pro forma effect of increase in interest expense related to the 1997
Acquisitions and the 1998 Acquisitions of the Cooper and Intercapital
Portfolios.
Average
Historical
Interest Pro forma Historical
Pro forma Rate at Interest Interest
Balance 12/31/97 Expense Expense Adjustment
Variable rate
credit facility $91,000 7.00% $6,370 $1,879 $ 4,491
Historical interest expense related to certain Questar mortgages totaling
$9,891 which were refinanced subsequent to acquisition (824)
Pro forma interest expense on refinanced mortgage loans using a principal
balance of $7,381 with interest at 7.75% 500
------
Total adjustment $ 4,167
======
19
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(Unaudited)
(Dollars in thousands)
(f) Detail of pro forma depreciation adjustment 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 25 873
Citibank Portfolio 60,300 3 to 25 2,460
Questar Portfolio 174,935 3 to 25 8,367
-------
11,986
1998 Acquisitions
-----------------
Intercapital Portfolio 81,757 3 to 25 3,893
Cooper Portfolio 59,266 3 to 25 2,822
-------
Pro forma depreciation adjustment $18,701
=======
(g) Pro forma minority interest (19.57%) in Operating Partnership.
(h) Preferred dividends on 2.7 million preferred shares issued at $25.00 per
share with a dividend rate of 9%.
Pro forma dividends Historical dividends Adjustment
------------------- -------------------- ----------
$6,158 $1,659 $4,499
20
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998
(Unaudited)
(Dollars in thousands, except per share data)
Berkshire
Realty 1998 Acquisitions(b)
Co., Inc. Intercapital Cooper Other
Historical Dispositions Portfolio Portfolio Adjustments Pro Forma
---------- ------------ ------------ --------- ----------- ---------
Revenue: (a)
Rental $ 81,633 $ (24) $ 1,837 $ 4,262 $ 87,708
Other income 3,494 (13) 79 185 - 3,745
----------- --------- ------- ------- ------- -------
Total revenue 85,127 (37) 1,916 4,447 - 91,453
----------- --------- ------- ------- ------- -------
Expenses:
Property operating 23,776 (18) 727 1,405 - 25,890
Real estate taxes 8,112 (7) 213 310 - 8,628
Property management fees 15 (5) - - - 10
Property management operations 3,908 - - - 125(f) 4,033
General and administrative 3,365 - - - - 3,365
Interest 17,167 - 307 1,719 1,930(c) 21,123
Costs associated with Advisor
Transaction - - - - - -
Amortization of acquired
workforce 6,516 - - - - 6,516
Depreciation and amortization 26,127 - 462(d) 1,411(d) - 28,000
--------- -------- ------ ------- ------- -------
Total expenses 88,986 (30) 1,709 4,845 2,055 97,565
-------- -------- ------- ------- ------- -------
Income (loss) from operations before joint
venture net income (loss), minority interest
and gains on sale of assets (3,859) (7) 207 (398) (2,055) (6,112)
Joint venture net income (loss) 132 (132) - - - -
Minority Interest in Operating
Partnership 1,023 - - - 779 (e) 1,802
-------- -------- ------ ------- ------- -------
Income (loss) before gains on
sales and extraordinary items $ (2,704) $ (139) $ 207 $ (398) $(1,276) $ (4,310)
Income allocated to preferred shareholders (3,096) - - - - (3,096)
-------- ------- ------- ------- ------- -------
Income (loss) allocated to
common shareholders before
gains on sales and extraordinary
items $ (5,800) $ (139) $ 207 $ (398) $(1,276) $ (7,406)
Income (loss) per common share
before gains on sales and extraordinary
items (basic and diluted) (.16) (.20)
Weighted average shares 36,677,369 37,252,211
See accompanying notes to pro forma condensed
consolidated statement of operations.
21
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998
(Unaudited)
(Dollars in thousands)
(a) Historical results of operations, for the following properties sold in
1998, for the six months ended June 30, 1998.
College Spring Total
Plaza Valley Dispositions
------- ------ ------------
Revenue:
Rental $ (24) $ - $ (24)
Other income (13) - (13)
------- ------ --------
Total revenue (37) - (37)
------- ------ --------
Expenses:
Property operating (18) - (18)
Real estate taxes (7) - (7)
Property management fees (5) - (5)
Property management operations - - -
General and administrative - - -
Interest - - -
Amortization of intangibles - - -
Non-recurring charges - - -
Provision from losses - - -
Depreciation and amortization - - -
------- ------ ------
Total expenses (30) - (30)
------- ------ -------
(Income) loss from
operations (7) - (7)
Joint venture net (income)
loss - (132) (132)
------- ------ -------
(Income) loss before gains
on sales and extraordinary items $(7) $(132) $ (139)
======= ====== =======
(b) Approximates the historical results of operations for period prior to
acquisition, for the 1998 Acquisitions for the six months ended June 30,
1998.
(c) Pro forma effect of increase in interest expense related to the 1998
acquisitions of the Cooper and Intercapital Portfolios.
Average
Historical
Interest Pro forma Historical
Pro forma Rate at Interest Interest
Balance 6/30/98 Expense Expense Adjustment
Variable rate
credit facility $ 115,000 6.9% $ 3,968 $ 2,038 $ 1,930
22
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998
(Unaudited)
(Dollars in thousands)
(d) Detail of pro forma depreciation adjustment is presented as follows:
Estimated
Lives of
Property Basis Assets (Yrs.) Depreciation
-------- ----- ------------- ------------
1998 Acquisitions
-----------------
Intercapital Portfolio $81,757 3 to 25 $ 462
Cooper Portfolio 59,266 3 to 25 1,411
------
Pro forma depreciation adjustment $1,873
======
(e) Pro forma minority interest (19.57%) in Operating Partnership.
(f) Additional property management operations of $125 attributable to the
increased asset base.
23
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 hereunto duly authorized.
Dated: October 26, 1998
BERKSHIRE REALTY COMPANY, INC.
/s/ David F. Marshall
-------------------------------------
David F. Marshall
President and Chief Executive Officer