EXHIBIT 3
February 22, 1999
Lazard Freres & Co., LLC
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Xxxx Xxxxxxxx
Gentlemen:
Aptco, LLC ("Aptco"), a company formed by affiliates of Xxxxxxx
Xxxxx, Whitehall Street Real Estate Limited Partnership XI ("Whitehall") and
Blackstone Real Estate Acquisitions III L.L.C. ("Blackstone") hereby makes
the following proposal, pursuant to which holders of common stock of
Berkshire Realty Company, Inc. ("BRI") would receive, and holders of limited
partnership interests ("OP Units") in BRI OP Limited Partnership ("OP") would
have the opportunity to receive, $11.05 per share/OP Unit in cash (the "Cash
Price") for their respective interests in the Company.
Our proposal contemplates that the acquisition of BRI would take
the form of a merger (the "BRI Merger") pursuant to which BRI would be merged
with and into Aptco, with Aptco as the surviving entity of the BRI Merger.
Pursuant to the BRI Merger, holders of BRI common stock would receive, in
exchange for their stock, an amount of cash per share equal to the Cash
Price.
Contemporaneously with the BRI Merger, a newly formed subsidiary of
Aptco would merge with and into OP (the "OP Merger"), with OP as the
surviving entity of the OP Merger. Pursuant to the OP Merger, OP Unitholders
would be given the choice to elect to receive, in exchange for each of their
OP Units, one of the following: (a) cash equal to the Cash Price; (b) a
senior preferred equity interest in Aptco with a liquidation preference equal
to the Cash Price, which would entitle the holder to receive cumulative
preferred distributions of available cash on a senior basis equal to 6% per
annum, and would be callable by Aptco after six years or earlier upon a sale
of Aptco (whether by merger, initial public offering, sale of all or
substantially all of its assets, or otherwise) at a price equal to the
liquidation preference; or (c) an equity interest in Aptco that (i) would be
subordinate to the senior preferred equity interest described above and to
senior subordinated equity interests to be held by Whitehall and Blackstone
or their respective affiliates, but would be generally pari passu with the
equity interests to be held by Xxxxxxx Xxxxx and his affiliates and
(ii) would be callable by Aptco after six years or earlier upon a sale of
Aptco (whether by merger, initial public offering, sale of all or
substantially all of its assets, or otherwise) at a price equal to the then
fair market value of such interest.
The aggregate purchase price for the acquisition of BRI and OP
would be funded with a combination of debt and equity financing. The debt
financing would consist of a bridge loan to be provided by Xxxxxxx Xxxxx
Mortgage Company (an affiliate of Whitehall) pursuant to the attached
commitment letter. With respect to the equity financing, affiliates of
Xxxxxxx Xxxxx, Whitehall and Blackstone (together with the debt providers,
the "Financing Sources") have agreed in principle, subject to the execution
of mutually acceptable documentation with respect to Aptco and the conditions
set forth below, to provide Aptco with sufficient funds to finance the
remaining purchase price and related expenses for the acquisition.
Upon your acceptance of our proposal as set forth in this letter,
we are prepared to work towards immediately finalizing definitive acquisition
agreements with BRI and OP, which we would expect to be executed within two
weeks time. Such agreements would contain customary representations,
warranties, covenants and indemnities (including indemnification of Aptco and
its Financing Sources by BRI against claims arising in connection with this
transaction). In addition, consummation of the proposed transaction by Aptco
would be subject to the conditions set forth in the definitive acquisition
agreements, including the following:
(i) there being no injunction prohibiting or restricting the
consummation of any of the transactions described herein, no litigation
commenced or threatened by a governmental entity, nor any litigation that
could have a material adverse effect with respect to BRI or OP or that could
significantly delay the consummation of the BRI or the OP Mergers;
(ii) execution of an agreement delivered, on or prior to the
execution of definitive acquisition agreements, by the holders of a majority
in interest of BRI's Series 1997-A Convertible Preferred Stock ("Series A
Preferred") consenting to the transactions, including the BRI Merger and the
conversion of their shares pursuant to the BRI Merger into an amount of cash
equal to 115% of the liquidation preference of such shares;
(iii) receipt by BRI's Board of Directors of an opinion from a
nationally recognized investment banking firm that the consideration to be
paid to the holders of BRI stock, Series A Preferred and OP Units is fair,
from a financial point of view;
(iv) approval of the proposed transactions by the respective Boards
of Directors of BRI and the general partner of OP, and by the requisite vote
of the stockholders of BRI and the OP Unitholders;
-2-
(v) receipt of any regulatory and other third party consents to
the transactions, including the financing thereof;
(vi) receipt by BRI of a closing agreement with the Internal
Revenue Service, on terms and conditions satisfactory to Aptco, with respect
to certain tax matters, and Xxxxx's satisfaction with respect to certain
other tax matters;
(vii) confirmation that the number of shares of common stock of
BRI will not be more than 48,015,000, assuming the exercise of all stock
options and the conversion of all OP Units (but without taking into account
the conversion of shares of Series A Preferred into shares of BRI common
stock);
(viii) confirmation that investment banking fees, severance
costs and legal/accounting expenses of BRI relating to the transaction will
not exceed $12 million;
(ix) inclusion in the BRI Merger agreement of satisfactory
"no-shop," "break up fee" and expense reimbursement provisions customary for
transactions of this type; and
(x) other customary conditions to closing.
The closing of the BRI Merger and OP Merger would not be subject to
a due diligence or financing contingency (other than the receipt by Aptco of
financing proceeds on the terms and conditions of the commitments from the
Financing Sources).
Accompanying this letter is a draft merger agreement relating to
the BRI Merger, and a draft merger agreement relating to the OP Merger.
Aptco, together with its financial advisors and legal counsel are prepared to
meet with you and your advisors immediately to work on finalizing the
enclosed agreements. Of course, at this stage of the process, our proposal is
merely an expression of interest and is not intended to be legally binding,
and Aptco does not intend to be legally bound to any transaction with BRI or
OP until definitive agreements are fully executed.
We believe Aptco is uniquely positioned to proceed with a
transaction in the best interests of BRI stockholders and OP Unitholders on
an expeditious basis.
This letter is intended to be confidential and neither it nor our
involvement in pursuing a possible acquisition proposal should be publicly
disclosed by BRI or you unless required by law. In the event BRI determines
that public disclosure is so required, we request that any public
announcement of this proposal be reviewed by Aptco and its advisors prior to
its release.
Pursuant to the confidentiality agreement with you, we hereby
advise you that we intend to make the public disclosures required under
Section 13(d) of the Securities Exchange Act of 1934, as amended, as soon as
practicable.
-3-
This offer is open until 5:00 p.m. on March 1, 1999, and will
expire at that time if not accepted. We look forward to working with you on
this proposed transaction.
Very truly yours,
APTCO, LLC,
By its members:
THE BERKSHIRE COMPANIES
LIMITED PARTNERSHIP
By: KGP-1, Inc.
By:/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
President
WHITEHALL STREET
REAL ESTATE LIMITED
PARTNERSHIP XI
By: WH Advisors, L.L.C. XI
By:/s/ Xxxxxx X. Xxxxxxx
BLACKSTONE REAL ESTATE
ACQUISITIONS III L.L.C.
By:/s/ Xxxxxx X. Xxxxxx
cc: Prudential Securities Incorporated
Real Estate Investment Banking
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxx
-4-
