<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 11, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES ACT OF 1934
------------------------
BRADLEY OPERATING LIMITED
PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 04-3306041
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
40 SKOKIE BLVD., SUITE 600
NORTHBROOK, IL 60062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 272-9800
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE IN WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
<S> <C>
Not Applicable Not Applicable
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
GENERAL PARTNER UNITS
(TITLE OF CLASS)
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NO.
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Item 1. Business................................................................... 1
Item 2. Financial Information...................................................... 16
Item 3. Properties................................................................. 28
Item 4. Security Ownership of Certain Beneficial Owners and Management............. 28
Item 5. Directors and Officers..................................................... 29
Item 6. Executive Compensation..................................................... 29
Item 7. Certain Relationships...................................................... 29
Item 8. Legal Proceedings.......................................................... 29
Item 9. Market Price and Distribution.............................................. 29
Item 10. Recent Sales of Unregistered Securities.................................... 29
Item 11. Description of Registrant's Securities to be Registered.................... 30
Item 12. Indemnification of Directors and Officers.................................. 31
Item 13. Financial Statements and Supplementary Information......................... 33
Item 14. Change in and Disagreements with Accountants on Accounting and Financial 33
Disclosure.................................................................
Item 15. Financial Statements and Exhibits.......................................... 33
</TABLE>
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ITEM 1. BUSINESS
STATEMENTS MADE OR INCORPORATED IN THIS STATEMENT INCLUDE A NUMBER OF
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING
THE WORDS "ANTICIPATES", "BELIEVES", "EXPECTS", "INTENDS", "FUTURE", AND WORDS
OF SIMILAR IMPORT WHICH EXPRESS MANAGEMENT'S BELIEF, EXPECTATIONS OR INTENTIONS
REGARDING THE OPERATING PARTNERSHIP'S FUTURE PERFORMANCE OR FUTURE EVENTS OR
TRENDS. RELIANCE SHOULD NOT BE PLACED ON FORWARD-LOOKING STATEMENTS BECAUSE THEY
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS, WHICH MAY
CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE OPERATING PARTNERSHIP
TO DIFFER MATERIALLY FROM ANTICIPATED FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSLY OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. IN
ADDITION, THE OPERATING PARTNERSHIP UNDERTAKES NO OBLIGATION TO PUBLICLY UPDATE
OR REVISE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE.
GENERAL
Bradley Operating Limited Partnership (the "Operating Partnership") is the
entity through which Bradley Real Estate, Inc. (the "Company"), a
self-administered and self-managed real estate investment trust ("REIT"),
conducts substantially all of its business and owns (either directly or through
subsidiaries) substantially all of its assets. The objective of the Operating
Partnership is to be a dominant owner of grocery-anchored, open-air shopping
centers in the Midwestern region of the United States. As used herein, the term
"Bradley Real Estate, Inc." refers also to its predecessor Bradley Real Estate
Trust, and the term "Company" or "Bradley" as used herein refers to Bradley Real
Estate, Inc. and its subsidiaries on a consolidated basis (including Bradley
Operating Limited Partnership and its subsidiaries) or, where the context so
requires, Bradley Real Estate, Inc. only. The term "Operating Partnership" as
used herein means Bradley Operating Limited Partnership and its subsidiaries on
a consolidated basis, or, where the context so requires, Bradley Operating
Limited Partnership only.
Bradley Real Estate, Inc., has elected to qualify as a real estate
investment trust ("REIT") for federal income tax purposes since its organization
in 1961. The Company believes it is the nation's oldest continually qualified
real estate investment trust. On March 15, 1996, the Company completed the
acquisition (the "Tucker Acquisition") of Tucker Properties Corporation
("Tucker"). The acquisition was consummated through the issuance by the Company
of approximately 7.4 million shares of its common stock valued at $13.96 per
share, and was accounted for using the purchase method of accounting. Tucker
held title to all of its properties through two partnerships; eight properties
through Tucker Operating Limited Partnership ("TOP"), in which Tucker had a
95.9% general partnership interest, and six properties through Tucker Financing
Partnership ("TFP"), a general partnership of which TOP owned 99% and a
wholly-owned Tucker corporate subsidiary owned the remaining 1%. Upon the
acquisition of Tucker, the Company succeeded to Tucker's interest in TOP, TFP
and the wholly-owned Tucker corporate subsidiary, and the name "Bradley" was
substituted for "Tucker" in each subsidiary and partnership. In August 1997, the
Company contributed its interests in the 18 properties it held directly to the
Operating Partnership, two of which are held for sale.
The Operating Partnership therefore succeeds Bradley as the entity through
which the Company will expand its ownership and operation of properties
primarily located in the Midwestern region of the country.
The Company currently owns an approximate 95% economic interest in and is
the sole general partner of the Operating Partnership (this structure is
commonly referred to as an umbrella partnership REIT or "UPREIT"). The board of
directors of the Company manages the affairs of the Operating Partnership by
directing the affairs of the Company. Economic interests in the Operating
Partnership are evidenced by units
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of partnership interest ("Units") with the interest of the general partner
evidenced by general partner units ("GP Units").
The limited partners of the Operating Partnership are persons who received
limited partner interests evidenced by limited partner units ("LP Units") in
connection with their contributions of direct or indirect interests in certain
properties to the Operating Partnership. The Operating Partnership is obligated
to redeem each LP Unit at the request of the holder thereof for cash equal to
the fair market value of a share of the Company's common stock, par value $.01
per share, ("Common Stock"), at the time of such redemption, provided that the
Company, at its option, may elect to acquire any such LP Unit presented for
redemption for either one share of Common Stock or cash. The Company presently
anticipates that it will elect to issue Common Stock to acquire LP Units for
redemption, rather than paying cash. With each such redemption, the Company's
percentage ownership interest in the Operating Partnership will increase. In
addition, whenever the Company issues Common Stock, it is anticipated that the
Company will contribute any net proceeds therefrom to the Operating Partnership
and the Operating Partnership will issue an equivalent number of GP Units to the
Company. The Operating Partnership has authority to issue preferred units that
may have distribution and other rights senior to the rights of holders of Units,
but the Operating Partnership may issue preferred units to the Company only in
exchange for the contribution by the Company to the Operating Partnership of the
net proceeds from the Company's issuance of an equivalent number of shares of
preferred stock that have equivalent seniority rights over the rights of holders
of shares of Common Stock of the Company.
The Operating Partnership may issue additional Units to purchase additional
properties or to purchase land parcels for the development of properties in
transactions that defer some or all of the seller's tax consequences. The
Operating Partnership believes that many potential sellers of properties have a
low tax basis in their properties and would be more willing to sell the
properties in transactions that defer the federal income tax consequences of the
sale. Offering Units instead of cash for properties may provide potential
sellers with partial federal income tax deferral.
Although there is no separate trading market for LP Units of the Operating
Partnership, because the distributions to the holders of LP Units are made
concurrently with and in the same amount per LP Unit as distributions paid by
the Company to each share of Common Stock of the Company and because of the
redemption rights of the holders of LP Units, the Company believes that the
market value of the shares of Common Stock of the Company (which are listed and
traded on the New York Stock Exchange) may provide the holders, or potential
holders, of LP Units with a proxy by which -- after giving effect to the
particular tax position of each holder -- a holder of LP Units may value such LP
Units from time to time.
At August 31, 1997, the Operating Partnership owned, directly or
indirectly, 44 properties aggregating over 8.6 million square feet of rentable
space, substantially all of which are located in Midwest markets, making the
Operating Partnership one of the leading owners and operators of community and
neighborhood shopping centers in this region. The portfolio of properties owned
by the Operating Partnership has approximately 1,000 tenants, with no single
tenant accounting for more than 6.5% of gross revenues. The majority of the
properties have been constructed or renovated within the past five to eight
years. As of August 31, 1997, the Operating Partnership's portfolio was
approximately 93% occupied. (Properties owned by the Operating Partnership from
time to time are hereinafter sometimes referred to individually as a "Property"
and collectively referred to as the "Properties" or the "Portfolio.")
As part of its ongoing business, the Operating Partnership regularly
evaluates, and engages in discussions with public and private real estate
entities regarding possible portfolio or individual asset acquisitions or
business combinations. The Operating Partnership expects to complete several
additional acquisitions of retail properties during 1997. In evaluating
potential acquisitions, the Operating Partnership focuses principally on
community and neighborhood shopping centers in the upper Midwest -- generally
consisting of the states of Illinois, Indiana, Iowa, Kansas, Michigan,
Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and
Wisconsin -- that are anchored by strong national, regional and independent
grocery store chains. The Operating Partnership favors grocery-anchored shopping
centers because, based on its experience and current research, such properties
offer better prospects for sustainable cash flow growth over time due to their
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strong and predictable daily consumer traffic and are less susceptible to
external economic factors than other types of properties.
The Operating Partnership is a Delaware limited partnership and the Company
is a Maryland corporation. The executive offices of both the Operating
Partnership and the Company are located at 40 Skokie Boulevard, Suite 600,
Northbrook, Illinois 60062 and their telephone number is (847) 272-9800.
BUSINESS OBJECTIVES AND STRATEGY
Philosophy: The Operating Partnership intends to become a dominant owner
of grocery-anchored open-air shopping centers in the Midwestern region of the
United States. The Operating Partnership believes grocery-anchored open-air
properties offer risk-adjusted returns that are superior to alternative retail
formats. Grocery-anchored centers perform better through varied economic
conditions since they are usually located close to residential areas, are
convenience driven, promote repeat customer traffic and cross-shopping, and tend
to be less affected by changing demographics. The Operating Partnership intends
to grow by improving cash flows from existing Properties through innovative,
proactive management and leasing that focuses on tenant satisfaction and
retention, increases in rents and occupancy levels and the control of operating
expenses. The Operating Partnership also intends to grow through the acquisition
of additional grocery-anchored shopping centers located throughout its Midwest
target market. The Operating Partnership believes it is well positioned to
achieve these objectives given Bradley's 35 year operating history in the
Midwest region of the country, its existing management infrastructure in several
key Midwestern markets and its depth of management and management information
systems.
Management Structure: The Operating Partnership provides a full range of
fully integrated real estate services with over 80 professionals involved in
management, leasing, acquisition and financing of the Operating Partnership's 44
Properties. Senior management consists of seven individuals with an average of
18 years of real estate experience, ranging from 12 to 30 years in the business.
The Operating Partnership maintains regional offices in Chicago, Minneapolis,
St. Louis and Milwaukee, in order that as many Properties as practicable have a
manager located within a one to two hour drive. The Operating Partnership
believes that operational success is driven by its employees and seeks to
provide a challenging and congenial work environment which offers personal and
career growth to all employees. The finance, accounting and administrative
functions for the Operating Partnership are handled by a central office staff
located in the Northbrook, Illinois headquarters.
Property Operations: The Asset Management Department operates the
Portfolio with the objective of maximizing current cash flows while at the same
time enhancing long-term value. The Properties are operated by 13 professional
property managers, all of whom have or are working toward professional
designations. Each property manager currently manages an average of 600,000
square feet in slightly over three Properties. Property managers all have
comprehensive written goals focusing on the following objectives:
Tenant Coverage and Retention: The satisfaction of existing tenants
at the Properties is demonstrated by the Operating Partnership's historical
renewal rate. The Operating Partnership believes that the maintenance of
good relationships and communications is imperative to tenant retention.
Managers meet with tenants on a regular basis, with such communication
considered essential not only in the lease renewal process but also in
identifying mutual needs and expectations while clarifying and resolving
issues. In general, leases are renewed at market rates with standard
escalation clauses. The property manager negotiates the renewal terms with
tenants, in conjunction with the leasing agent assigned to the Property.
Property Maintenance and Expense Control: Maintenance of the
Portfolio is performed by both internal and third-party contract personnel.
The Operating Partnership's construction and property management personnel
ensure each Property is maintained in optimal condition while ensuring all
opportunities to minimize operating costs are considered. These
opportunities include property tax protestation, competitive bidding for
third party services, conducting routine preventative maintenance and
enforcing strict accounting and collection controls.
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Financial Performance: Revenues from the Portfolio are maximized by
providing property managers and leasing agents with significant input in
the setting of financial goals for each Property and enabling property
managers and leasing agents to make decisions with respect to new and
renewal leases. Property managers are also required to follow strict
policies with respect to competitive bidding of contracts and the
collection procedures to be followed at each Property, as well as
aggressively to seek property tax reductions.
Leasing: The Leasing Department is focused on attracting and retaining
quality tenants on economically favorable terms, leveraging off established
tenant relationships and capitalizing on the Operating Partnership's ability to
offer multiple locations. Each leasing representative is responsible for, on
average, 1.5 million square feet of retail space or approximately five to eight
shopping centers. Leasing representatives are assigned specific Properties and
are responsible for the following objectives:
Creating an annual leasing plan including an analysis of the
competition for each center which is an integral part of the annual budget.
Managing all leasing activities including sourcing new tenants,
negotiating lease parameters, lease analysis and closing lease
transactions.
Working with property managers on lease renewals.
Monitoring and working with the construction department on tenant
improvements in order to insure that all lease occupancy requirements are
met.
Establishing tenant and industry relationships.
The Operating Partnership commits significant resources to market research
efforts. Leasing representatives have access to demographic programs detailing
existing and projected population, income and retail sales growth within a trade
area, as well as the macro and micro economic data provided by the Research
Department. In addition to this internal market data, leasing representatives
are required to prepare a site specific market analysis for each Property,
taking into consideration competitive centers, market rental rates, local tenant
concentration, traffic patterns, and vacancies within competing centers.
Acquisitions: The Operating Partnership focuses its efforts on the
acquisition of grocery-anchored open-air neighborhood and community shopping
centers in its Midwest target area. Acquisition efforts are focused on both
metropolitan statistical areas determined by the U.S. Census Bureau ("MSAs") and
secondary markets in this area. The Operating Partnership seeks acquisitions in
MSAs and secondary markets where it can establish a strong market presence by
owning multiple properties. The Operating Partnership primarily seeks
grocery-anchored open-air neighborhood and community shopping centers containing
60,000 to 200,000 square feet of rentable area and that have the following
additional characteristics:
Anchored by grocery stores that are operated by national or regional
Midwest chains or by top-tier independent operators with leading positions
in their trade areas.
Contain service retailer tenants, such as banks, related financial
service, brokerage, medical offices, auto service, restaurants, drug
stores, video stores and florists.
Have an appropriate balance of "small shop" space to the amount of
anchor square footage.
Have been sufficiently well-maintained so as not to have significant
deferred maintenance costs.
The Operating Partnership seeks to acquire properties that management
believes are priced below replacement cost, are located in strong Midwestern
MSAs or secondary markets, and that are capable of producing minimum acceptable
threshold yields which management believes can be increased through the
Operating Partnership's operating and leasing experience and in certain
instances through strategic capital improvements. In conjunction with extensive
internal research and product sourcing efforts, the Operating Partnership has
established relationships with external brokers in a number of its markets,
enabling it to diversify its search throughout its Midwestern target area. Such
relationships give the Operating Partnership broad geographic coverage while
minimizing fixed general and administrative expenses.
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Research: The Research Department supports the overall strategic planning
process as well as the Acquisition, Leasing and Asset Management Departments.
The Operating Partnership maintains its own internal demographic, retailer and
shopping center databases with the assistance and support of outside
consultants. Research efforts are ongoing and focus on analyzing selected
counties and MSAs throughout the Operating Partnership's target markets in the
Midwest. The research process focuses on four major elements:
Demographic and economic trends in the Operating Partnership's trade
areas.
Detailed databases on shopping center inventory and owners.
Credit and operating information on the region's grocery operators, as
well as other national, regional and local tenants.
Supply and demand balances for retail space in the targeted markets'
trade areas.
Management Information Systems: The Operating Partnership has integrated
property management information systems which include distributive processing
features that make available next day information to field and corporate office
personnel of data and transactions entered at each location. The system also
includes a comprehensive lease database containing all relevant economic and
compliance provisions contained in each lease. The system is designed with
significant security, control and efficiency features and includes automated
billings, daily updates of receivables and open payables, and operational
reports for both leasing and property management personnel. Management of the
Operating Partnership is committed to continued investment in information
technology so that information systems will continue to be adequate to support
the growth of the Operating Partnership.
PROPERTIES
The following table and notes describe the Properties with ownership
interests held by the Operating Partnership at August 31, 1997 and rental
information for leases in effect as of June 30, 1997 or, for Properties acquired
after June 30, 1997, as of the date of acquisition.
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<TABLE>
<CAPTION>
GROSS
LEASABLE
AREA (GLA) ANNUALIZED
YEAR SQUARE ANNUALIZED BASE RENT PER
SHOPPING CENTERS ACQUIRED FEET PERCENT LEASED BASE RENT LEASED SF
- ---------------------------------------------- -------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ILLINOIS
Commons of Chicago Ridge...................... 1996 309,000 95% $2,885,446 $ 9.84
and Annex
Chicago Ridge, IL
Commons of Crystal Lake(2).................... 1996 273,000 75% 2,340,291 11.48
Crystal Lake, IL
Crossroads Center............................. 1992(3) 242,000 98% 1,285,594 5.39
Fairview Heights, IL
Fairhills Shopping Center(4).................. 1997 106,000 90% 556,435 5.83
Springfield, IL
Heritage Square............................... 1996 212,000 100% 2,609,091 12.29
Naperville, IL
High Point Centre............................. 1996 240,000 100% 2,176,010 9.06
Lombard, IL
Parkway Pointe(4)............................. 1997 39,000 100% 450,708 11.56
Springfield, IL
Rivercrest Center............................. 1994(3) 458,000 99% 3,543,519 7.78
Crestwood, IL
Rollins Crossing.............................. 1996 66,000(5) 82% 489,939 9.08
Round Lake Beach, IL
Sangamon Center North(4)...................... 1997 140,000 98% 981,313 7.15
Springfield, IL
Sheridan Village.............................. 1996 298,000 97% 2,238,244 7.73
Peoria, IL
Westview Center............................... 1993(3) 328,000 71% 2,134,984 9.17
Hanover Park, IL
INDIANA
Martin's Bittersweet Plaza.................... 1997 78,000 98% 551,335 7.21
Mishawaka, IN
<CAPTION>
BASE
SQUARE LEASE/OPTION
SHOPPING CENTERS MAJOR TENANTS(1) FEET EXPIRATION DATE
- ---------------------------------------------- ----------------------- ------- ---------------
<S> <C> <C> <C>
ILLINOIS
Commons of Chicago Ridge...................... T.J. Maxx 25,082 1998/2008
and Annex Marshalls 27,000 1999/2014
Chicago Ridge, IL Office Depot 27,680 2002/2012
Cineplex Odeon 25,000 2008/2018
Michaels Stores 17,550 1999/2004
Pep Boys 22,354 2015/2035
JC Penney Home Store 55,000 2007/2022
Commons of Crystal Lake(2).................... Jewel/Osco 59,804 2007/2042
Crystal Lake, IL Venture (not owned) 81,338 2006
Crossroads Center............................. Kmart (ground lease) 96,268 2001/2020
Fairview Heights, IL T.J. Maxx 32,200 2006/2013
Fairhills Shopping Center(4).................. Jewel/Osco 49,330 1998/2013
Springfield, IL
Heritage Square............................... Montgomery Ward 111,016 2013/2033
Naperville, IL Circuit City 28,351 2009/2024
Stroud's 26,703 2003/2013
High Point Centre............................. Cub Foods 62,000 2008/2033
Lombard, IL T.J. Maxx 25,200 1998/2013
Office Depot 36,416 2003/2013
MacFrugal's 17,040 2006/2021
Parkway Pointe(4)............................. Shoe Carnival 10,186 2004/2014
Springfield, IL Dress Barn 8,200 2002/2017
Rivercrest Center............................. Omni Foods 87,937 2011/2031
Crestwood, IL Venture 79,903 2011/2031
Sears Roebuck and Co. 55,000 2001/2011
T.J. Maxx 34,425 2004/2019
PETsMART 31,639 2010/2030
Best Buy 25,000 2008/2023
OfficeMax 24,000 2007/2017
Hollywood Park 15,000 2000/2005
Rollins Crossing.............................. Sears Hardware 21,083 2005/2020
Round Lake Beach, IL Super Kmart (not owned) 190,000 2033
Sangamon Center North(4)...................... Schnucks 63,257 2016/2046
Springfield, IL U.S. Post Office 16,000 2005/2015
Sheridan Village.............................. Bergner's Dept. Store 162,852 2006/2021
Peoria, IL Cohen's Furniture 16,600 2006
Westview Center............................... Cub Foods 67,163 2009/2029
Hanover Park, IL Marshalls 34,302 2004/2019
INDIANA
Martin's Bittersweet Plaza.................... Martin's Supermarket 45,079 2012/2032
Mishawaka, IN Osco Drug 16,000 2012/2032
</TABLE>
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<TABLE>
<CAPTION>
GROSS
LEASABLE
AREA (GLA) ANNUALIZED
YEAR SQUARE ANNUALIZED BASE RENT PER
SHOPPING CENTERS ACQUIRED FEET PERCENT LEASED BASE RENT LEASED SF
- ---------------------------------------------- -------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
County Line Mall(4)........................... 1997 261,000 95% $1,589,766 $ 6.41
Indianapolis, IN
Speedway SuperCenter.......................... 1996 535,000 97% 3,858,469 7.45
and Outlots
Speedway, IN
The Village(6)................................ 1996 352,000 87% 1,647,427 5.38
Gary, IN
Washington Lawndale Commons................... 1996 333,000 99% 1,647,902 5.00
Evansville, IN
IOWA
Burlington Plaza West(4)...................... 1997 89,000 93% 599,112 7.24
Burlington, IA
Davenport Retail.............................. 1997 63,000 100% 604,355 9.66
Davenport, IA
Holiday Plaza(4).............................. 1997 46,000 85% 261,698 6.69
Cedar Falls, IA
Parkwood Plaza(4)............................. 1997 125,000 98% 967,996 7.90
Urbandale, IA
Spring Village................................ 1997 91,000 100% 567,115 6.22
Davenport, IA
Warren Plaza.................................. 1997 86,000 100% 609,144 7.07
Dubuque, IA
KANSAS
Santa Fe Square............................... 1996 134,000 94% 1,100,235 8.75
Olathe, KS
KENTUCKY
Stony Brook................................... 1996 136,000 98% 1,382,988 10.34
Louisville, KY
MAINE
Augusta Plaza(6).............................. 1971 152,000 89% 574,651 4.26
Augusta, ME
<CAPTION>
BASE
SQUARE LEASE/OPTION
SHOPPING CENTERS MAJOR TENANTS(1) FEET EXPIRATION DATE
- ---------------------------------------------- ----------------------- ------- ---------------
<S> <C> <C> <C>
County Line Mall(4)........................... Kroger 52,337 2011/2041
Indianapolis, IN Office Max/Furniture 32,208 2004/2024
Max
Target 99,321 2002/2027
Speedway SuperCenter.......................... Kohl's 90,072 2004/2024
and Outlots Kroger 59,515 2013/2043
Speedway, IN Sears Roebuck and Co. 30,825 2004/2024
Old Navy 15,000 2005/2010
Kittles 25,320 2000/2010
PETsMART 21,781 2002/2012
Factory Card Outlet 16,675 2003/2013
Lindo Super Spa 16,589 2000
The Village(6)................................ JC Penney 60,600 1999/2004
Gary, IN Goldblatt's 55,000 2000/2005
Post-Tribune Publishing 19,246 1999
Indiana Employment 18,050 2000
Washington Lawndale Commons................... Target 83,110 2005/2025
Evansville, IN Sears Homelife 34,527 2003/2018
Allied Sporting Goods 20,285 1997/2012
Jo-Ann Fabrics 15,262 2003/2013
Books-A-Million 20,515 2002/2008
IOWA
Burlington Plaza West(4)...................... Festival Foods 52,468 2009/2039
Burlington, IA
Davenport Retail.............................. Staples 24,153 2011/2026
Davenport, IA PETsMART 26,280 2011/2036
Holiday Plaza(4).............................. West Music 8,450 2002/2007
Cedar Falls, IA
Parkwood Plaza(4)............................. FoodSaver 63,075 2008/2038
Urbandale, IA
Spring Village................................ Eagle Foods 45,763 2005
Davenport, IA
Warren Plaza.................................. Hy-Vee Supermarket 51,492 2013
Dubuque, IA
KANSAS
Santa Fe Square............................... Schnucks 55,820 2007/2027
Olathe, KS
KENTUCKY
Stony Brook................................... Kroger 79,625 2021/2046
Louisville, KY
MAINE
Augusta Plaza(6).............................. Kmart 85,808 1997/2012
Augusta, ME
</TABLE>
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<TABLE>
<CAPTION>
GROSS
LEASABLE
AREA (GLA) ANNUALIZED
YEAR SQUARE ANNUALIZED BASE RENT PER
SHOPPING CENTERS ACQUIRED FEET PERCENT LEASED BASE RENT LEASED SF
- ---------------------------------------------- -------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
MASSACHUSETTS
585 Boylston St.(6)........................... 1961 22,000 90% $ 680,934 $ 34.95
Boston, MA
MINNESOTA
Brookdale Square.............................. 1996(3) 185,000 85% 1,175,468 7.47
Brooklyn, MN
Burning Tree Plaza............................ 1993(3) 139,000 96% 1,210,815 9.12
Duluth, MN
Har Mar Mall.................................. 1992(3) 430,000 89% 3,609,301 9.40
Roseville, MN
Hub West Shopping Center...................... 1991(3) 78,000 100% 839,271 10.72
Richfield, MN
Richfield Hub Shopping Center................. 1988(3) 138,000 98% 1,262,456 9.35
Richfield, MN
Roseville Center.............................. 1997 75,000 92% 654,708 9.57
Roseville, MN
Sun Ray Shopping Center....................... 1961(3) 261,000 81% 1,635,661 7.71
St. Paul, MN
Terrace Mall.................................. 1993(3) 137,000 96% 944,356 7.16
Robbinsdale, MN
Westwind Plaza................................ 1994(3) 88,000 90% 848,869 10.74
Minnetonka, MN
White Bear Hills.............................. 1993(3) 73,000 98% 575,348 8.00
White Bear Lake, MN
MISSOURI
Grandview Plaza............................... 1971(3) 316,000 78% 2,060,123 8.34
Florissant, MO
Liberty Corners(4)............................ 1997 121,000 100% 754,018 6.23
Liberty, MO
<CAPTION>
BASE
SQUARE LEASE/OPTION
SHOPPING CENTERS MAJOR TENANTS(1) FEET EXPIRATION DATE
- ---------------------------------------------- ----------------------- ------- ---------------
<S> <C> <C> <C>
MASSACHUSETTS
585 Boylston St.(6)........................... CVS Pharmacy 7,582 2001/2016
Boston, MA
MINNESOTA
Brookdale Square.............................. Circuit City 36,391 2014/2034
Brooklyn, MN Office Depot 30,395 2004/2014
Drug Emporium 25,782 2000/2010
United Artists 24,534 2002/2022
Burning Tree Plaza............................ T.J. Maxx 30,000 2004/2019
Duluth, MN Best Buy 28,000 1999/2014
Piece Goods Shops 17,682 1999/2004
Har Mar Mall.................................. HomePlace 54,489 2010/2026
Roseville, MN Barnes & Noble 44,856 2010/2025
Marshalls 34,858 1998/2013
T.J. Maxx 25,025 1998/2008
General Cinema 22,252 2001/2021
General Cinema 19,950 2000/2010
Michaels Stores 17,907 2003/2018
Hub West Shopping Center...................... Rainbow Foods 50,817 2012/2022
Richfield, MN U.S. Swim & Fitness 26,185 2001/2003
Richfield Hub Shopping Center................. Marshalls 26,785 2003/2008
Richfield, MN Michaels Stores 24,235 1999/2014
Roseville Center.............................. Minnesota Fabrics 12,000 2004
Roseville, MN Snyder Drugs 8,250 1998
Sun Ray Shopping Center....................... JC Penney 40,451 1999/2009
St. Paul, MN Marshalls 26,256 2005/2020
T.J. Maxx 23,955 2000/2005
Petter's 20,000 2007
Michaels Stores 18,127 2004/2019
Terrace Mall.................................. Rainbow Foods 59,232 2013/2033
Robbinsdale, MN North Memorial 32,000 1999/2004
Westwind Plaza................................ Northern Hydraulics 18,165 2002/2012
Minnetonka, MN
White Bear Hills.............................. Festival Foods 45,679 2011/2021
White Bear Lake, MN
MISSOURI
Grandview Plaza............................... Home Quarters 84,611 2013/2033
Florissant, MO Schnucks 68,025 2011/2026
Walgreens 15,984 2008/2043
Liberty Corners(4)............................ Price Chopper 56,000 2007/2027
Liberty, MO
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
GROSS
LEASABLE
AREA (GLA) ANNUALIZED
YEAR SQUARE ANNUALIZED BASE RENT PER
SHOPPING CENTERS ACQUIRED FEET PERCENT LEASED BASE RENT LEASED SF
- ---------------------------------------------- -------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
NEW MEXICO
St. Francis Plaza............................. 1995(3) 30,000 100% $ 357,000 $ 11.98
Santa Fe, NM
TENNESSEE
Williamson Square(7).......................... 1996 335,000 94% 2,172,203 6.93
Franklin, TN
WISCONSIN
Madison Plaza(4).............................. 1997 128,000 100% 965,832 7.57
Madison, WI
Mequon Pavilions.............................. 1996 212,000 97% 2,195,179 10.67
Mequon, WI
RETAIL/OFFICE BUILDING
One North State............................... 1996 639,000 98% 9,827,135 15.68
Chicago, IL
<CAPTION>
BASE
SQUARE LEASE/OPTION
SHOPPING CENTERS MAJOR TENANTS(1) FEET EXPIRATION DATE
- ---------------------------------------------- ----------------------- ------- ---------------
<S> <C> <C> <C>
NEW MEXICO
St. Francis Plaza............................. Walgreens 14,950 2013/2043
Santa Fe, NM Wild Oats 14,850 2006/2066
TENNESSEE
Williamson Square(7).......................... Wal-Mart 117,493 2008/2038
Franklin, TN Kroger 63,986 2008/2038
Carmike Cinemas 29,000 2008/2018
WISCONSIN
Madison Plaza(4).............................. Supersaver 73,309 2008/2033
Madison, WI
Mequon Pavilions.............................. Kohl's Food Emporium 45,697 2010/2050
Mequon, WI Furniture Clearance 19,900 1997
RETAIL/OFFICE BUILDING
One North State............................... First Chicago 296,782 2003
Chicago, IL Arthur Andersen(8) 126,533 1998
T.J. Maxx 77,675 2001/2011
Filene's Basement 50,000 2002/2012
Int'l Academy of Design 44,000 2003/2008
</TABLE>
- ---------------
(1) Major tenants are defined as tenants leasing 15,000 square feet or more of
the rentable square footage, with the exception of Parkway Pointe, Holiday
Plaza, 585 Boylston St., Roseville Center and St. Francis Plaza. In some
cases, the named tenant occupies the premises as a sublessee.
(2) The amount of rentable square feet at Commons of Crystal Lake does not
include approximately 81,000 square feet which is owned by Metropolitan Life
and leased to Venture.
(3) Year the Property was acquired by the Company, which contributed the
Property to the Operating Partnership in August 1997.
(4) This Property was acquired subsequent to June 30, 1997. All information is
as of the date of acquisition.
(5) The amount of rentable square feet at Rollins Crossing does not include
approximately 190,000 square feet which is owned by Kmart Corporation.
(6) This property is held for sale.
(7) The Operating Partnership is the 60% general partner of a partnership owning
this property, whose limited partner interests are owned by an unrelated
investor.
(8) This tenant exercised its option on April 1, 1996, to terminate its lease,
effective as of April 1, 1998, and has paid a $1.8 million cancellation fee.
The tenant has substantially moved out of its space.
9
<PAGE> 12
ONE NORTH STATE
One North State was the only Property in the Portfolio at December 31,
1996, that represented 10% or more of the historic book value of the Portfolio
at December 31, 1996, or accounted for 10% or more of the Portfolio's gross
revenues in 1996. One North State is a mixed-use property located in the "Loop"
area of downtown Chicago, Illinois. The Property aggregates approximately
640,000 square feet of GLA including approximately 159,000 square feet of retail
space. Real estate taxes for this Property amounted to approximately $2,917,000
for the period March 15, 1996 through December 31, 1996. The retail portion of
this Property is anchored by T.J. Maxx and Filene's Basement. The leases to T.J.
Maxx and Filene's Basement provide current minimum annual rent of approximately
$1,237,000 and $1,000,000, respectively. The office portion of this Property is
leased primarily to First Chicago and Arthur Andersen. The leases to First
Chicago and Arthur Andersen provide current minimum annual rent of approximately
$3,942,000 and $1,518,000, respectively.
The following tables set forth certain supplemental information with
respect to One North State, and reflect Arthur Andersen's termination in 1996 of
its lease effective April 1998, and the fact that its leased space was
substantially unoccupied at December 31, 1996. See "Risk Factors -- Real Estate
Investment Considerations -- Potential Negative Effect of One North State
Property."
a. Percentage occupied at December 31 for the last five years:
<TABLE>
<S> <C>
1996............................................................ 78%
1995............................................................ 95%
1994............................................................ 95%
1993............................................................ 95%
1992............................................................ 89%
</TABLE>
b. The average effective annual minimum rentals per square foot for 1996,
1995, and 1994 were as follows:
<TABLE>
<S> <C>
1996........................................................ $15.18
1995........................................................ $15.45
1994........................................................ $16.34
</TABLE>
c. Leases in effect at December 31, 1996, expiring over each of the next
ten years, assuming no tenants exercise renewal options:
<TABLE>
<CAPTION>
NO. OF SQUARE MINIMUM
LEASES FEET ANNUAL RENT
------ -------- -----------
<S> <C> <C> <C>
1997.......................................... 3 8,494 $ 36,000
1998.......................................... 1 126,533 1,518,400
1999.......................................... 1 1,177 76,505
2000.......................................... 1 1,807 182,507
2001.......................................... 5 83,767 1,645,670
2002.......................................... 2 51,451 1,101,570
2003.......................................... 4 343,432 4,712,361
2004.......................................... 1 6,200 120,000
2005.......................................... 2 2,035 121,547
2006.......................................... 0 0 0
</TABLE>
TENANT MIX AND LEASES
As evidenced by the preceding list of Properties, the tenant mix of the
Portfolio is diverse and well represented by supermarkets, drugstores and other
consumer necessity or value-oriented retailers. Such tenants tend to be stable
performers in both good and bad economic times. As of December 31, 1996, sixteen
Properties were anchored by supermarkets, most of which are leading grocery
chains in their respective
10
<PAGE> 13
markets. No tenant included in the Portfolio on December 31, 1996 accounted for
as much as 10% of the gross revenues of the Portfolio in 1996.
The terms of the outstanding retail leases at the Properties vary from
tenancies at will to 50 years. Major tenant leases are typically for 10 to 25
years, with one or more extension options available to the lessee upon
expiration of the initial lease. By contrast, smaller shop leases are typically
negotiated for three to five year terms. The longer term of the major tenant
leases serves to protect the Operating Partnership against significant vacancies
and to assure the presence of strong tenants who draw consumers to the
Properties. The shorter term of the smaller shop leases allows the Operating
Partnership to adjust rental rates for non-major store space on a regular basis
and upgrade the overall tenant mix.
Leases to major tenants tend to provide lower minimum rents per square foot
than smaller shop leases. For example, although the Properties in the Portfolio
at the present time are not identical, major tenant leases for Properties owned
by the Company at December 31, 1996, provided an average annual minimum rent of
$6.53 per square foot, compared with non-major tenant leases which provided an
average annual minimum rent of $10.51. In general, the Company believes that
minimum rental rates for major tenant leases entered into several years ago are
below current market rates, while recent major tenant leases and most other
leases provide for minimum rental rates that more closely reflect current market
rates. The payment by tenants of minimum rents that are below current market
rates is offset in part by payment of percentage rents.
Annual minimum future rentals to be received under non-cancelable operating
leases in effect at December 31, 1996, for the Properties included in the
Portfolio at December 31, 1996 (excluding properties held for sale), and the
number of leases that will expire, the square feet covered by such leases and
the minimum annual rent in the year of expiration under such expiring leases for
the next ten years are as follows:
<TABLE>
<CAPTION>
LEASES EXPIRING
MINIMUM ------------------------------------------
FUTURE NUMBER MINIMUM
YEAR ENDING DECEMBER 31, RENTS OF LEASES SQUARE FEET FUTURE RENTS
------------------------------------ ----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
1997................................ $56,997,000 107 312,851 $3,310,512
1998................................ 52,024,000 114 565,892 5,640,188
1999................................ 48,267,000 130 697,434 5,436,589
2000................................ 43,829,000 104 518,155 4,762,942
2001................................ 38,747,000 90 612,005 5,800,715
2002................................ 32,273,000 40 352,282 3,857,982
2003................................ 28,886,000 30 601,037 6,862,889
2004................................ 22,699,000 22 357,283 2,345,931
2005................................ 19,792,000 39 334,033 2,630,149
2006................................ 16,910,000 29 441,153 2,712,121
</TABLE>
THE REMIC NOTE AND OTHER INDEBTEDNESS
The title to six of the Properties acquired from Tucker described in the
preceding list of Properties -- Commons of Crystal Lake, Heritage Square,
Sheridan Village, Speedway Super Center (excluding outlots), Washington Lawndale
Commons and One North State -- is held by a general partnership of which the
Operating Partnership and the Company are respectively 99% and 1% partners. The
partnership is obligated under a $100 million mortgage note maturing in
September 2000 secured by such six properties that was issued to a trust
qualifying as a real estate mortgage investment conduit for federal income tax
purposes (the "REMIC Note"). Pursuant to terms of the indenture (the "REMIC
Indenture") governing the REMIC Note, prior to October 1997 principal payments
on the REMIC Note cannot be made and the properties collateralizing the REMIC
Note cannot be sold. If the Operating Partnership wishes either to repay all or
part of the $100 million principal of the REMIC Note or to sell any of the
properties collateralizing the REMIC Note after such date, significant
prepayment penalties will be incurred. The prepayment of principal of the REMIC
Note requires an additional payment of the greater of either (i) 1% of the
amount of principal being prepaid or (ii) the product of (A) the difference
between the outstanding principal balance of the REMIC Note before prepayment
and the present value of all remaining interest and principal payments thereon
and
11
<PAGE> 14
(B) the amount of principal being prepaid divided by the outstanding principal
balance of the REMIC Note. After October 1997, in order to release any of the
properties collateralizing the REMIC Note from the lien, the REMIC Indenture
requires that certain additional conditions be met, including that (i) the
aggregate amount of principal repaid on the REMIC Note equals at least 125% of
the amount of principal allocated to the property to be released and (ii)
certain debt service coverage ratios continue to be satisfied.
In August 1997, Standard & Poor's Investment Services ("Standard & Poor's")
assigned a corporate rating of "BBB-" to the Operating Partnership. Depending
upon market conditions and the costs to the Operating Partnership at the time,
the Operating Partnership anticipates that it will be advantageous to incur the
prepayment penalty and to prepay the REMIC Note after October 1997, with the
proceeds from an issue of unsecured debt by the Operating Partnership, thereby
releasing the six properties securing the REMIC Note from the lien of the REMIC
Indenture. In anticipation of issuing such debt, the Operating Partnership has
entered into two forward Treasury Note purchase agreements with third parties in
order partially to hedge the interest rate. There can be no assurance that the
Operating Partnership will prepay the REMIC Note or that, if the REMIC Note is
prepaid, the effective cost of doing so will not be greater than the current
interest cost of the REMIC Note.
The Operating Partnership and the Company are also parties to a $150
million unsecured revolving line of credit with BankBoston, N.A. and other bank
lenders. The line of credit, which matures in March 1999, is available for the
acquisition, development, renovation and expansion of existing and new
properties and for working capital purposes. As a result of the investment grade
rating assigned to the Operating Partnership by Standard & Poor's, outstanding
borrowings under the line of credit bear interest at the lower of the bank's
base rate or 1.375% over the London InterBank Offer Rate ("LIBOR").
Five other properties of the Operating Partnership secure an aggregate of
approximately $28.6 million of additional mortgage debt, of which approximately
$10.2 million matures in September 1998, $3.7 million matures in 2003, $12.8
million matures in August 2005 and $1.9 million matures in December 2008.
RISK FACTORS
General
As in every business, there are risk factors that affect the Operating
Partnership and its operations. By setting forth below some of the factors that
could cause the actual results of the Operating Partnership's operations or
plans to differ materially from the expectations set forth elsewhere in this
Registration Statement in statements that may be considered to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, the
Operating Partnership seeks to avail itself of the "safe harbor" provided in the
Private Securities Litigation Reform Act of 1995.
"Balloon" Maturity of REMIC Note; Other Risks of Indebtedness
As described above in "-- The REMIC Note and Other Indebtedness", $100
million of indebtedness represented by the REMIC Note matures in September 2000.
Although the investment grade corporate rating recently assigned to the
Operating Partnership by Standard & Poor's is expected to assist the Operating
Partnership in refinancing such indebtedness at maturity or sooner, there can be
no assurance that the cost of replacement indebtedness (including any penalty
that may be payable upon the prepayment of the REMIC Note) may not be greater
than the cost of the existing indebtedness. The fact that the Operating Company
will continue to be obligated on a substantial amount of debt, even if only a
relatively small portion of such debt is secured, subjects the Operating
Partnership to risks of default if it is unable to pay such debt at maturity,
and may require the sale or mortgaging of properties of the Operating
Partnership at an inconvenient time or on terms that are adverse to the
Operating Partnership.
To the extent that the Operating Partnership is responsible for floating
rate debt (such as that incurred under the revolving line of credit) and to the
extent that its exposure to increases in interest rates is not eliminated
through interest rate protection or cap agreements, such increases will
adversely affect the
12
<PAGE> 15
Operating Partnership's net income and cash available for distribution and may
affect the amount of distributions it can make to the holders of Units,
including the Company.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, an
owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure to properly remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to use such property as collateral in its borrowings. All of the
Operating Partnership's Properties, including those acquired in the Tucker
Acquisition, have been subjected to Phase I or similar environmental audits
(which involve inspection without soil sampling or ground water analysis) by
independent environmental consultants. Except as described below, these
environmental audit reports have not revealed any potential significant
environmental liability, nor is management aware of any environmental liability
with respect to the properties that it believes would have a material adverse
effect on the Operating Partnership's business, assets or results of operations.
No assurance can be given that existing environmental studies with respect to
the properties reveal all environmental liabilities or that any prior owner of
any such property did not create any material environmental condition not known
to management.
Phase II site assessments of the Commons of Chicago Ridge property acquired
from Tucker have disclosed the presence of contaminants in fill material and
soil at the Property that could be associated with the Property's former use as
a landfill and as the former site of an asphalt plant and storage tanks for
petroleum products (which storage tanks have been removed from the Property),
but not at such levels as would require reporting to environmental agencies.
These Phase II site assessments also disclosed the presence in groundwater of
contaminants similar to those detected in the soil samples. Environmental
assessments of the Property have also detected methane gas, probably associated
with the former use of the Property as landfill. A regular maintenance program
was implemented by Tucker and is being continued by the Operating Partnership to
control the migration and effect of the methane gas. There can be no assurance
that an environmental regulatory agency such as the Illinois Environmental
Protection Agency will not in the future require further investigation to
determine the source and vertical and horizontal extent of the contamination. If
any such investigation is required and confirms the existence of contaminants at
the levels disclosed in the Phase II site assessments, it is possible that the
relevant agency could require the Operating Partnership to take action to
address the contamination, which action could range from ongoing monitoring to
remediation of the contamination. Based on the information currently available,
management does not believe that the cost of responding to such contamination
would be material to the Operating Partnership.
In connection with the execution of the merger agreement relating to the
Tucker Acquisition, the Operating Partnership and certain individuals who had
previously provided a limited indemnity to Tucker for environmental liabilities
at Commons of Chicago Ridge (the "Individuals") agreed to indemnify the Company,
Operating Partnership and its affiliates against all claims, losses, costs and
expenses incurred by such parties arising out of any administrative, regulatory
or judicial action, suit, investigation or proceeding in connection with any
applicable environmental health or safety law regarding hazardous substances,
materials, wastes or petroleum products, or any common law right of action
regarding such substances, materials, wastes or products, whether brought by a
governmental or regulatory authority or by a third party, that is initiated on
or before October 4, 2003, with respect to conditions or acts at the Commons of
Chicago Ridge which existed prior to October 4, 1993. In connection with this
indemnification obligation, the Operating Partnership has agreed to keep the
Individuals reasonably informed of various activities relating to the Property
and to consult with the Individuals with respect to any potential claims,
settlements and remediation which could trigger the indemnification obligations
of the Individuals. There can be no assurance that the Individuals will be in a
position to honor their indemnity obligations. Regardless of such
indemnification, based on the information currently available, management does
not believe that the environmental liabilities and expenses relating to the
Commons of Chicago Ridge property would have a material effect on the liquidity,
financial condition or operating results of the Operating Partnership.
13
<PAGE> 16
Dependence on Midwestern Region and Retail Industry
Substantially all of the Operating Partnership's Properties are located in
the Midwestern region of the United States and such Properties consist
predominantly of community and neighborhood shopping centers. The Operating
Partnership's performance therefore is linked to economic conditions in the
Midwest and in the market for retail space generally. The market for retail
space has been adversely affected by the ongoing consolidation in the retail
sector, the adverse financial condition of certain large companies in this
sector and the excess amount of retail space in certain markets. To the extent
that these conditions impact the market rents for retail space, they could
result in a reduction of cash receipts and cash available for distribution and
thus affect the amount of distributions the Operating Partnership can make to
the holders of its Units, including the Company.
Financial Condition and Bankruptcy of Tenants
Since substantially all of the Operating Partnership's income has been, and
will continue to be, derived from rental income from retail shopping centers,
the amount of cash receipts and cash available for distribution to the holders
of its Units, including the Company, would be adversely affected if a
significant number of tenants were unable to meet their obligations to the
Operating Partnership or if the Operating Partnership were unable to lease, on
economically favorable terms, a significant amount of space in its shopping
centers. In addition, in the event of default by a tenant, the Operating
Partnership may experience delays and incur substantial costs in enforcing its
rights as landlord.
At any time, a tenant of the Properties may seek the protection of the
bankruptcy laws, which could result in the rejection and termination of the
tenant lease. Such an event could cause a reduction of cash receipts and cash
available for distribution and thus affect the amount of distributions the
Operating Partnership can make to the holders of its Units, including the
Company. No assurance can be given that any present tenant which has filed for
bankruptcy protection will continue making payments under its lease or that any
tenants will not file for bankruptcy protection in the future or, if any tenants
file, that they will continue to make rental payments in a timely manner. In
addition, a tenant may, from time to time, experience a downturn in its
business, which may weaken its financial condition and result in a reduction or
failure to make rental payments when due. If a lessee or sublessee defaults in
its obligations to the Operating Partnership, the Operating Partnership may
experience delays in enforcing its right as lessor or sublessor and may incur
substantial costs and experience significant delays associated with protecting
its investment, including costs incurred in renovating and releasing the
Property.
Potential Negative Effect of One North State Property
During the year ended December 31, 1996, more than 10% of the total revenue
of the Operating Partnership was derived from rents and expense reimbursements
from tenants of the One North State property, which is a "mixed use" property
located in downtown Chicago. The total rents currently being paid by certain of
this Property's tenants may be in excess of current market rates. The leases of
these tenants begin to expire in 2001. One office tenant, Arthur Andersen,
however, has exercised an option to terminate its lease, effective as of April
1, 1998, and paid the Operating Partnership a $1.8 million cancellation fee.
Pursuant to the terms of the REMIC Indenture, this termination fee was paid into
a reserve account which is required to be used, among other things, to pay for
tenant alterations, leasing commissions and other lease inducements directly
related to this space. Any unused amount of this reserve account must be used to
repay the principal amounts owed under the REMIC Note. The inability of the
Operating Partnership to lease such property, or a significant reduction in the
amount of rent and expense reimbursements paid by the tenants of such property,
could have an adverse impact on the operating results of the Operating
Partnership.
Vacancies and Lease Renewals
The Operating Partnership is continually faced with expiring tenant leases
at its Properties. Some lease expirations provide the Operating Partnership with
the opportunity to increase rentals or to hold the space available for a
stronger long-term tenancy. In other cases, there may be no immediately
foreseeable strong
14
<PAGE> 17
tenancy for space, and the space may remain vacant for a longer period than
anticipated or may be able to be re-leased only at less favorable rents. In such
situations, the Operating Partnership may be subject to competitive and economic
conditions over which it has no control. Accordingly, there is no assurance that
the effects of possible vacancies or lease renewals at such Properties may not
reduce the rental income and cash available for distribution below levels
anticipated by the Operating Partnership.
Competition
All of the Operating Partnership's Properties are located in developed
areas. There are numerous other retail properties and real estate companies
within the market area of each such Property which compete with the Operating
Partnership for tenants and development and acquisition opportunities. The
number of competitive retail properties and real estate companies in such areas
could have a material effect on (i) the Operating Partnership's ability to rent
space at the Properties and the amount of rents charged and (ii) development and
acquisition opportunities. The Operating Partnership competes for tenants and
acquisitions with others who have greater resources than it does.
Limitations on Insurance
The Operating Partnership carries comprehensive general liability coverage
and umbrella liability coverage on all of its Properties with limits of
liability which the management deems adequate to insure against liability claims
and provide for cost of defense. Similarly, the Operating Partnership is insured
against the risk of direct physical damage in amounts that management estimates
to be adequate to reimburse the Operating Partnership on a replacement cost
basis for costs incurred to repair or rebuild each property, including loss of
rental income during the reconstruction period. Currently, the Operating
Partnership also insures the properties for loss caused by earthquake or flood
in the aggregate amount of $10 million per occurrence. Because of the high cost
of this type of insurance coverage and the wide fluctuations in price and
availability, management has made the determination that the risk of loss due to
earthquake and flood does not justify the cost to increase coverage limits any
further under current market conditions. Should the availability and pricing of
this coverage become more cost advantageous, management would re-evaluate its
position.
Uncertainty of Meeting Acquisition Objectives
The Operating Partnership continually seeks prospective acquisitions of
additional shopping centers and portfolios of shopping centers which management
believes can be purchased at attractive initial yields and/or which demonstrate
the potential for revenue and cash flow growth through implementation of
renovation, expansion, re-tenanting and re-leasing programs similar to those
undertaken with respect to Properties in the existing Portfolio. There can be no
assurance that the Operating Partnership will effect any potential acquisition
that it may evaluate. The evaluation process involves costs which are
non-recoverable in the case of acquisitions which are not consummated. In
addition, notwithstanding management's adherence to its criteria for evaluating
and due diligence regarding potential acquisitions, there can be no assurance
that any acquisition that is consummated will meet management's expectations.
Control of the Operating Partnership by the Company
The Restated and Amended Partnership Agreement of the Operating Partnership
(the "Operating Partnership Agreement") gives the Company as general partner
broad control over the operations and business activities of the Operating
Partnership. In exercising its authority as general partner, the Company is
subject to the provisions of the Delaware Revised Limited Partnership Act and to
general fiduciary principles of fair dealing to the limited partners as well as
to any specific limitations or restrictions on its authority contained in the
Operating Partnership Agreement or in any individually negotiated agreement with
a particular limited partner.
15
<PAGE> 18
Reliance Upon the Company; Company Risks; Potential Taxable Events to Holders
of Units
Although the fact that substantially all of the assets of the Company are
represented by its interest in the Operating Partnership, the Operating
Partnership in general, and the holders of the LP Units in particular, must rely
upon the Company as general partner to manage the affairs and business of the
Operating Partnership. In addition to the risks described above that relate to
the Operating Partnership, the Company is subject to certain other risks that
may affect its financial and other condition, including particularly adverse
consequences if the Company fails to qualify as a REIT for federal income tax
purposes. The description of certain risk factors applicable to the Company
contained under the caption "Business -- Risk Factors" in Item 1 of the
Company's 10-K report for the year ended December 31, 1996 is hereby
incorporated by reference.
Among the powers that the Company has as general partner of the Operating
Partnership are the powers to determine whether and when to sell any particular
property or properties owned by the Operating Partnership, subject to any
specific agreements limiting the power of sale that the Operating Partnership
may have entered into with the contributor or contributors of any specific
properties at the time that such contributor or contributors contributed their
interest in the property to the Operating Partnership in exchange for LP Units.
After the expiration of any such limiting agreement on the Company's authority
as general partner to sell a property, the property may be sold and such sale
may result in the recognition of capital gains or other tax consequences to the
holder or holders of LP Units that were deferred at the time of the original
contribution of the properties to the Operating Partnership.
ITEM 2. FINANCIAL INFORMATION
BRADLEY OPERATING LIMITED PARTNERSHIP
AND PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following tables set forth financial information for the Operating
Partnership on an historical and on a pro forma basis and should be read in
conjunction with, and are qualified in their entirety by, the respective
historical financial statements and notes thereto of the Operating Partnership
included in this registration statement. For purposes of such financial
statements, "Predecessor Business", refers to the Company, exclusive of
operating expenses associated with the Company's existence as a public company.
During the period from January 1, 1996 to June 30, 1997, the Operating
Partnership acquired seven shopping centers, other than those acquired in the
Tucker Acquisition, and sold one shopping center and its interest as lessor
under a ground lease of a mixed use center city retail-office tower. Four of the
seven shopping centers were acquired for cash with financing provided by the
bank line of credit. One shopping center was acquired with cash provided by the
line of credit and the assumption of a $3,800,000 non-recourse mortgage note,
and one shopping center was acquired via the issuance of 281,300 LP Units. One
property was acquired as a replacement property for a "like-kind" exchange for
federal income tax purposes of the leased land under the retail-office tower;
since the net proceeds from the sale of the land were greater than the net
purchase price of the shopping center acquired, the excess proceeds were used to
pay-down the line of credit.
Additionally, in November 1996, the Company completed a public offering of
2,875,000 shares of common stock (including shares issued pursuant to the
exercise of the underwriter over-allotment option) at a price of $16.50 per
share (the "November 1996 Offering"). Net proceeds from the offering,
approximately $44,851,000 (net of offering costs of $2,618,000), were
contributed to the Operating Partnership and used to reduce outstanding
borrowings under the line of credit.
On March 15, 1996, the Company completed the Tucker Acquisition. The
acquisition was consummated through the issuance by the Company of approximately
7.4 million shares of its common stock valued at $13.96 per share, and was
accounted for using the purchase method of accounting. Tucker held title to all
of its properties through two partnerships; eight properties through Tucker
Operating Limited Partnership
16
<PAGE> 19
("TOP"), in which Tucker had a 95.9% general partnership interest, and six
properties through Tucker Financing Partnership ("TFP"), a general partnership
of which TOP owned 99% and a wholly-owned Tucker corporate subsidiary owned the
remaining 1%. Upon the acquisition of Tucker, the Company succeeded to Tucker's
interest in TOP, TFP and the wholly-owned Tucker corporate subsidiary, and the
name "Bradley" was substituted for "Tucker" in each subsidiary and partnership.
In August 1997, the Company contributed its interests in 18 properties it held
directly to the Operating Partnership. The Operating Partnership therefore
succeeds Bradley as the entity through which the Company will expand its
ownership and operation of properties.
Subsequent to June 30, 1997, the Operating Partnership sold one shopping
center, utilizing the proceeds to pay-down the line of credit, and acquired nine
shopping centers, including a portfolio of five shopping centers from one seller
for approximately $28,800,000 with cash provided by the line of credit. Three of
the remaining four shopping centers were also funded with cash provided by the
line of credit, for an aggregate purchase price of approximately $24,000,000.
The final property was purchased for approximately $16,300,000 through the
issuance of 478,619 LP Units and the assumption of a $6,900,000 non-recourse
mortgage note which was paid-off in full at the closing with cash drawn from the
line of credit.
The unaudited pro forma operating and other data are presented as if the
November 1996 Offering, the acquisitions, the dispositions, and the "like-kind"
exchange described above had been consummated on January 1, 1996, and as if the
Tucker Acquisition had occurred on January 1, 1996, and with the Operating
Partnership qualifying as a partnership and, therefore, incurring no federal
income tax expense during the period January 1, 1996 through June 30, 1997. In
management's opinion, all adjustments necessary to reflect the effects of these
transactions have been made.
This unaudited pro forma operating and other data are presented for
comparative purposes only and are not necessarily indicative of what the actual
results of operations of the Operating Partnership would have been for the
period presented, nor does it purport to represent the results to be achieved in
future periods.
17
<PAGE> 20
SELECTED FINANCIAL DATA
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
(UNAUDITED) YEARS ENDED DECEMBER 31,
--------------------------------- ------------------------------------------------------------------------
PRO PRO
FORMA(1) HISTORICAL FORMA(1) HISTORICAL
-------- -------------------- ----------- ---------------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
-------- -------- -------- ----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income..... $ 50,019 $ 45,889 $ 33,201 $95,468 $ 77,512 $ 36,405 $ 32,875 $ 22,875 $ 11,839
Other income...... 647 642 555 1,433 1,327 167 112 594 308
Expenses.......... 37,257 33,689 26,533 74,149 60,184 27,711 24,877 17,550 11,175
-------- -------- -------- -------- -------- ------- ------- ------- -------
Income before gain
on sale and
provision for
loss on real
estate
investments..... 13,409 12,842 7,223 22,752 18,655 8,861 8,110 5,919 972
Gain on sale of
property........ -- 3,073 9,379 -- 9,379 -- 983 -- --
Provision for loss
on real estate
investment...... -- (1,300) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- ------- ------- ------- -------
Income before
allocation to
minority
interest........ 13,409 14,615 16,602 22,752 28,034 8,861 9,093 5,919 972
Income allocated
to minority
interest........ (46) (46) (29) (78) (78) -- -- -- --
-------- -------- -------- -------- -------- ------- ------- ------- -------
Net income........ $ 13,363 $ 14,569 $ 16,573 $22,674 $ 27,956 $ 8,861 $ 9,093 $ 5,919 $ 972
======== ======== ======== ======== ======== ======= ======= ======= =======
Total assets at
end of period... $575,865(2) $512,980 $491,692 $502,284 $180,545 $166,579 $127,931 $ 93,326
======== ======== ======== ======== ======= ======= ======= =======
Mortgage and bank
loans payable at
end of period... $247,354(2) $193,268 $220,638 $188,894 $ 39,394 $ 66,748 $ 29,317 $ 44,085
======== ======== ======== ======== ======= ======= ======= =======
Per Unit:
Net income...... $ 0.59 $ 0.65 $ 1.04 $ 1.00 $ 1.56 $ 0.90 $ 1.11 $ 0.88 $ 0.49
Distributions... $ 0.89 $ 0.67 $ 0.64 $ 1.34 $ 1.34 $ 1.37 $ 1.35 $ 1.29 $ 1.24
Weighted average
units
outstanding..... 22,739,378 22,260,759 15,914,362 22,638,660 17,932,769 9,863,767 8,191,831 6,715,813 1,972,054
</TABLE>
- ---------------
Reference is made to "Management's Discussion and Analysis" for a
discussion of various factors or events which materially affect the
comparability of the information set forth above.
(1) Unaudited pro forma data includes operating revenues and expenses for the
six months ended June 30, 1997 and for the year ended December 31, 1996 for
the properties acquired and disposed between January 1, 1996 and June 30,
1997, and subsequently, for the period during which the Operating
Partnership did not own them. For the six months ended June 30, 1997 and the
year ended December 31, 1996, pro forma mortgage and other interest has been
increased by approximately $2,033,000 and $2,370,000, respectively,
reflecting the borrowings estimated for such acquisitions for the period
which the Operating Partnership did not own them, net of reductions of
mortgage and other interest for the application of net proceeds from
dispositions and the November 1996 Offering used to pay-down the line of
credit for the period the Operating Partnership owned such properties and
for the period prior to the November 1996 Offering. Pro forma depreciation
and amortization for the six months ended June 30, 1997 and the year ended
December 31, 1996 has been increased by approximately $702,000 and
$1,914,000, respectively, to give effect to recording the acquisitions for
the period which the Operating Partnership did not own them, net of the
reduction for properties disposed for the period which the Operating
Partnership owned such properties, using a useful life of 39 years.
(2) The unaudited pro forma balance sheet as of June 30, 1997 was prepared as if
the acquisitions and the disposition occurring subsequent to June 30, 1997,
had been completed on June 30, 1997.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Operating Partnership believes that improving its financial flexibility
will position the Operating Partnership for future growth, allowing it to take
advantage of acquisition, renovation and expansion opportunities. The Operating
Partnership further considers its liquidity and ability to generate cash from
operating and from financing activities to be sufficient, and expects them to
continue to be sufficient, to meet its operating expense, debt service,
distribution requirements and acquisition opportunities for the foreseeable
future. Due to the capital intensive nature of real estate in general, the
avenues available for raising capital, as well as the mix of debt and equity,
are a critical component in the ability of the Operating Partnership to continue
to grow.
The Operating Partnership funds operating expenses and distributions
primarily from operating cash flows, although its bank line of credit may also
be used for these purposes. The Operating Partnership and the Company may each
borrow under the bank line of credit and are jointly and severally liable for
all obligations thereunder. The Operating Partnership funds acquisitions and
capital expenditures primarily from the line of credit and, to a lesser extent,
operating cash flows, as well as through the issuance of LP Units. The Operating
Partnership may also acquire properties through capital contributions by the
Company of proceeds from the issuance by the Company of additional securities.
In addition, three properties which no longer fit the Operating Partnership's
strategic focus were held for sale. The Operating Partnership may also dispose
of other properties which it no longer considers to be core properties,
reinvesting the proceeds from such dispositions in properties with better growth
potential and that are more consistent with the Operating Partnership's
strategic focus. In addition, the Operating Partnership may acquire partial
interests in real estate assets through participation in joint venture
transactions.
As of June 30, 1997, financial liquidity was provided by approximately
$3,579,000 in cash and cash equivalents and by the Operating Partnership's
unused balance on the line of credit of $85,600,000. In addition, the Company
has effective "universal shelf" registration statements under which the Company
may issue up to $234,460,000 in equity securities, making such capital available
to the Operating Partnership. Equity securities may be issued from the universal
shelf registration from time to time when the Company determines that market
conditions and the opportunity to utilize the proceeds from the issuance of such
securities are favorable. The Company is obligated to contribute any net
proceeds from the issuance of such securities to the Operating Partnership, and
the Operating Partnership is obligated to issue to the Company an equivalent
number of GP Units having economic terms comparable to the securities issued by
the Company.
The Operating Partnership focuses its investment activities on community
and neighborhood shopping centers primarily in the Midwestern United States
anchored by regional and national grocery store chains. The Operating
Partnership will continue to seek acquisition opportunities of individual
properties and property portfolios and of private and public real estate
entities in both primary and secondary Midwestern markets where management can
utilize its extensive experience in shopping center renovation, expansion,
re-leasing and re-merchandising to achieve long-term cash flow growth and
favorable investment returns.
OPERATING ACTIVITIES
Net cash flows provided by operating activities increased to $19,536,000
during the six months ended June 30, 1997 from $14,952,000 during the same
period in 1996, and to $32,261,000 during the year ended December 31, 1996, from
$13,163,000 during the year ended December 31, 1995 and $11,343,000 in 1994.
These increases were due primarily to the growth of the Operating Partnership's
Portfolio.
Funds from operations ("FFO") increased $7,435,000 or 58% during the six
month period ended June 30, 1997 to $20,266,000 from $12,831,000 during the six
months ended June 30, 1996, and $15,400,000 or 98% during the year ended
December 31, 1996, from $15,679,000 in the year ended December 31, 1995 to
19
<PAGE> 22
$31,079,000 in the year ended December 31, 1996. FFO increased by $2,831,000 or
22% during 1995 from $12,848,000 in 1994. The Operating Partnership generally
considers FFO to be a relevant and meaningful supplemental measure of the
performance of an equity REIT because it is predicated on a cash flow analysis,
contrasted with net income, a measure predicated on generally accepted
accounting principles which gives effect to non-cash items such as depreciation.
FFO, as defined by the National Association of Real Estate Investment Trusts
("NAREIT") and as followed by the Operating Partnership, represents net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from sales of property, plus depreciation and
amortization. In computing FFO, the Operating Partnership does not add back to
net income the amortization of costs incurred in connection with the Operating
Partnership's financing activities or depreciation of non-real estate assets.
FFO does not represent cash generated from operating activities in accordance
with generally accepted accounting principles and should not be considered as an
alternative to cash flow as a measure of liquidity. Since the definition of FFO
is a guideline, computation of FFO may vary from one REIT (and/or its operating
partnership) to another. FFO is not necessarily indicative of cash available to
fund cash needs.
INVESTING ACTIVITIES
Net cash flows from investing activities decreased to a net use of cash of
$8,877,000 during the six months ended June 30, 1997 from a net use of cash of
$1,920,000 in the same period of 1996, and to $16,715,000 during the year ended
December 31, 1996, from a net use of cash of $9,953,000 in 1995 and a net use of
cash of $33,653,000 in 1994.
During 1996 and 1995, the Company completed two corporate acquisitions
through the issuance of a total of 7,753,157 shares of the Company's Common
Stock. The first acquisition, completed in January 1995, was the acquisition of
the real estate investment trust advisory business of its former advisor,
thereby enabling the Company and thus the Operating Partnership to become
self-administered. The acquisition was completed through the issuance of 325,000
shares of Common Stock of the Company to the owners of the former advisor. The
business, consisting of a nominal amount of office equipment and information
systems, was contributed to the Operating Partnership. Additionally, the
employees of the advisory business became employees of Bradley.
On March 15, 1996, the Company closed the Tucker Acquisition. The
acquisition was completed through the issuance of 7.4 million shares of Common
Stock of the Company valued at $13.96 per share, the payment of certain
transaction costs and the assumption of all of Tucker's liabilities, including
the $100,000,000 REMIC Note discussed below. The acquisition was structured as a
tax-free transaction, and was accounted for using the purchase method of
accounting. Tucker held title to all of its properties through two
partnerships--eight properties through TOP, in which Tucker had a 95.9% general
partnership interest, and six properties through TFP, a general partnership of
which TOP owned 99% and a wholly owned Tucker corporate subsidiary owned the
remaining 1%. In August 1997, the Company contributed its interests in 18
properties it held directly to the Operating Partnership. The Operating
Partnership therefore succeeds Bradley as the entity through which the Company
will expand its ownership and operation of properties primarily located in the
Midwestern region of the country.
In addition to the Tucker Acquisition, during 1996, the Operating
Partnership spent approximately $25,989,000 on property acquisitions and capital
improvements. Of that amount, approximately $18,012,000 was spent on property
acquisitions, approximately $7,310,000 on tenant specific capital improvements
and approximately $667,000 for other property improvements.
Throughout 1996 and 1995, in addition to the Tucker Acquisition, the
Operating Partnership acquired three shopping centers in separate transactions
at an aggregate cost of approximately $23,261,000. The first property was
acquired for $9,100,000 with cash drawn from the Operating Partnership's line of
credit. The second property acquisition was structured as a "like-kind" exchange
for federal income tax purposes, whereby proceeds of $12,900,000 from the sale
of a ground lease were partially exchanged for a shopping center costing
$8,900,000. The excess cash proceeds from the sale were used to pay-down the
line of credit. The third property was acquired for approximately $5,261,000
with financing provided by the assumption of $2,094,000
20
<PAGE> 23
in debt and the capital contribution from the Company resulting from cash
proceeds from the issuance of 182,500 shares of Common Stock in a privately
negotiated transaction.
During the first half of 1997, the Operating Partnership acquired five
shopping centers in separate transactions for a total purchase price of
approximately $26.5 million and sold one property that had been held for sale
for a net sales price of approximately $11.3 million. Subsequent to June 30,
1997, the Operating Partnership completed the acquisition of a portfolio of five
shopping centers located in Illinois and Iowa for approximately $28.8 million
and four additional shopping centers located in Indiana, Iowa, Wisconsin and
Missouri in separate transactions for approximately $40.3 million. Also
subsequent to June 30, 1997, the Operating Partnership sold one property.
FINANCING ACTIVITIES
Net cash flows provided by financing activities declined to a net use of
cash of $14,542,000 during the six moths ended June 30, 1997 from a net use of
cash of $9,770,000 during the same period in 1996, and to a net use of cash of
$8,781,000 during the year ended December 31, 1996 from a net use of cash of
$2,706,000 during 1995 and a source of cash of $21,553,000 in 1994.
Distributions (treated as a reduction in cash flows from financing activities in
the accompanying financial statements) were $14,974,000 during the six months
ended June 30, 1997, $10,232,000 during the six months ended June 30, 1996, and
$24,004,000, $13,528,000 and $11,034,000 during the years ended December 31,
1996, 1995 and 1994, respectively.
During 1996 and 1995, the Company completed two public offerings under the
Company's "shelf" registration statement, issuing a total of 5,375,000 shares of
Common Stock raising a total of approximately $82,300,000 after offering costs.
Net proceeds from the 1996 and 1995 public offerings (the "November 1996
Offering" and the "July 1995 Offering") of approximately $44,900,000 and
$37,400,000, respectively, were contributed to the Operating Partnership and
were applied principally to pay-down outstanding borrowings under the applicable
bank lines of credit that had been incurred, and mortgage notes that had been
assumed, in connection with the purchase of certain properties.
On March 15, 1996, concurrently with the Tucker Acquisition, the Operating
Partnership entered into a new $150,000,000 unsecured revolving bank line of
credit facility with The First National Bank of Boston and other banks,
replacing the previous $65,000,000 line of credit that had been secured by a
blanket mortgage on six properties. The new line was at an interest rate equal
to the lower of the bank's base rate or 1.75% over LIBOR. Additionally, the
facility stipulated a commitment fee ranging from 0.125% to 0.250% per annum of
the unfunded line of credit balance depending on the outstanding balance during
a calendar quarter. The rates available under the line would become more
favorable in the event certain loan-to-value tests were met or the Operating
Partnership received an investment grade unsecured debt rating. The Operating
Partnership entered into interest rate protection agreements with respect to
$100,000,000 of the potential borrowings under the line of credit. In addition
to replacing outstanding borrowings under Bradley's and Tucker's previously
outstanding secured lines of credit, the facility is available for the
acquisition, development, renovation and expansion of new and existing
properties, and for other working capital purposes.
The line of credit contains certain financial and operational covenants
that, among other provisions, limit the amount of secured and unsecured
indebtedness the Operating Partnership may have outstanding at any time, and
provide for the maintenance of certain financial tests including minimum net
worth and debt service coverage requirements. The Operating Partnership believes
it is currently in compliance and was in compliance with such covenants during
1996 and that such covenants will not adversely affect the Operating
Partnership's business or the operation of its properties.
In March 1997, the Operating Partnership amended the line of credit
facility, extending the maturity date to March 15, 1999, and reducing the
interest rate to the lower of the bank's base rate or 1.50% over LIBOR. The
amended line of credit agreement also provides more flexible covenants compared
with the previous agreement.
In August 1997, Standard & Poor's Investment Services, a national credit
rating agency, announced that it assigned an investment grade corporate credit
rating of "BBB-" to the Operating Partnership. As a result,
21
<PAGE> 24
the interest rate on the line of credit was further reduced to the lower of the
bank's base rate or 1.375% over LIBOR, in accordance with the line of credit
agreement, representing a decrease in the interest margin on the line of credit
of 0.375% from the rate in effect at December 31, 1996.
Financings for the five shopping center acquisitions completed during the
first half of 1997 included $17,500,000 in cash provided by the line of credit,
the assumption of a $3,800,000 non-recourse mortgage note, and $5,200,000 via
the issuance of 281,300 LP Units to the former owners of a shopping center.
Financing for the nine properties acquired subsequent to June 30, 1997 included
$60,000,000 drawn from the line of credit (including amounts used to pay-off at
closing an assumed $6,900,000 non-recourse mortgage) and $9,000,000 through the
issuance of 478,619 LP Units to the former owners of a shopping center. Net
proceeds of approximately $17,200,000 in the aggregate from the sale of a
shopping center during the first half of 1997, and from the sale of another
shopping center subsequent to June 30, 1997, were used to pay-down the line of
credit.
CAPITAL STRATEGY
The Tucker liabilities assumed included a $100,000,000 mortgage note issued
by TFP, secured by the six properties it held. The note had been issued to an
entity qualifying as a real estate mortgage investment conduit (REMIC) for
federal income tax purposes. The REMIC Note has a fixed, 7.3% rate of interest,
with an effective rate of 7.23%, matures in September 2000 and becomes
prepayable, upon payment of a significant prepayment premium, in October 1997.
The investment grade rating received from Standard & Poor's provides the
Operating Partnership with the ability to issue fixed-rate unsecured debt. In
anticipation of issuing such debt to prepay a portion or all of the REMIC Note
and possibly to pay-down additional debt, the Operating Partnership has entered
into two forward Treasury Note purchase agreements with third parties in order
partially to hedge the interest rate. Management believes that the bank line of
credit, as well as the current value of the Operating Partnership's assets,
provide the Operating Partnership with the necessary flexibility to refinance
the REMIC Note, as well as its other debt obligations when due, although there
can be no assurance that refinancing terms at the time of maturity will be
favorable.
Management believes that the Company's recent growth has enhanced its and
the Operating Partnership's ability to raise further capital in the public
markets, providing an additional source of capital for the Operating Partnership
and, as indicated above, the Company has positioned itself to take advantage of
favorable opportunities by increasing the dollar amount of securities that it
may issue pursuant to "universal shelf" registration statements, and by
obtaining an investment grade corporate rating for the Operating Partnership.
While the public capital markets have generally been favorable for selected
REITs during the past few years, there can be no assurance either that the
public markets will remain receptive to providing new capital to REITs and their
operating partnerships or that the terms upon which the Company and the
Operating Partnership may be able to raise funds will be attractive or favorable
to them or to their share owners and partners.
In addition, management from time to time identifies Properties in the
Portfolio that no longer are consistent with current operating focus or for
which a purchase offer is received that management believes should be accepted
to provide funds that may immediately or eventually be invested in properties
with potential for a better return. During 1997, the Operating Partnership and
the Company have sold two properties for an aggregate sales price of $17.2
million; and three properties are currently held for sale.
RESULTS OF OPERATIONS
JUNE 30, 1997 COMPARED TO JUNE 30, 1996
During the first six months of 1997, the Operating Partnership (including
the Predecessor Business) acquired five shopping centers in separate
transactions for a total purchase price of approximately $26.5 million, and sold
one shopping center that had been held for sale for a net sales price of
approximately $11.3 million. During the year ended December 31, 1996, the
Operating Partnership acquired sixteen properties, including fourteen properties
upon the Tucker Acquisition, and sold its interest in a ground lease. For the
six
22
<PAGE> 25
months ended June 30, 1997, net income was $14.6 million, or $0.65 per Unit,
compared with $16.6 million, or $1.04 per Unit, for the six months ended June
30, 1996. Net income for the six months ended June 30, 1997, includes a $3.1
million gain on sale of property and a $1.3 million provision for loss on real
estate investment. Net income for the six months ended June 30, 1996, includes a
$9.4 million gain on sale of property. Weighted average Units outstanding for
the six-month period were 22,260,759 compared with 15,914,362 in the prior-year
period. The increased number of Units outstanding was due primarily to the
2,875,000 share November 1996 Offering which net proceeds were contributed to
the Operating Partnership in exchange for an equivalent number of GP Units, and
the issuance of 7,428,157 GP Units to the Company in connection with the Tucker
Acquisition on March 15, 1996.
ACQUISITION AND DISPOSITION ACTIVITIES
<TABLE>
<CAPTION>
ACQUISITIONS DATE
--------------------------------------------------------- ------------------
<S> <C>
Tucker (14 properties)................................... March 15, 1996
Brookdale Square......................................... March 26, 1996
Santa Fe Square.......................................... December 27, 1996
Roseville Center......................................... January 1, 1997
Martin's Bittersweet Plaza............................... January 1, 1997
Warren Plaza............................................. January 21, 1997
Spring Village........................................... April 28, 1997
Davenport Retail......................................... June 19, 1997
<CAPTION>
DISPOSITIONS DATE
--------------------------------------------------------- ------------------
<S> <C>
Nicollet Avenue ground lease............................. March 26, 1996
Hood Commons............................................. March 13, 1997
</TABLE>
Property Specific Revenues And Expenses (in thousands of dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, PROPERTIES
-------------------- ACQUISITIONS/ HELD BOTH
1997 1996 DIFFERENCE DISPOSITIONS YEARS
-------- -------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Rental income................ $ 45,889 $ 33,201 $ 12,688 $11,947 $ 741
Operations, maintenance and
management................. 6,999 5,792 1,207 1,859 (652)
Real estate taxes............ 9,627 7,688 1,939 1,842 97
Depreciation and
amortization............... 7,855 5,976 1,879 1,654 225
</TABLE>
Results Attributable to Acquisition and Disposition Activities
Rental income increased from $33,201,000 in the first half of 1996 to
$45,889,000 in the first half of 1997. Approximately $12,782,000 of the increase
was attributable to the Operating Partnership's acquisition activities,
partially offset by $835,000 attributable to disposition activities.
Operations, maintenance and management expense increased from $5,792,000 in
the first half of 1996 to $6,999,000 in the first half of 1997. Operations,
maintenance and management expenses incurred for properties acquired during the
six month period, net of such expenses eliminated for properties disposed, of
$1,859,000 were partially offset by a decrease of $652,000 in such expenses for
properties held both years.
Real estate taxes increased from $7,688,000 in the first half of 1996 to
$9,627,000 in the first half of 1997. Substantially all of the increase was
attributable to the Operating Partnership's acquisition activities.
Depreciation and amortization increased from $5,976,000 in the first half
of 1996 to $7,855,000 in the first half of 1997. Approximately $1,865,000 of the
increase was attributable to the Operating Partnership's acquisition activities,
partially offset by $211,000 attributable to disposition activities.
23
<PAGE> 26
Results for Properties Fully Operating Throughout Both Periods
The remaining increase in rental income for the six month period ended June
30, 1997, of $741,000 represented an increase of 4.5% over the first half of
1996. The positive variance was primarily due to an increase at Har Mar Mall
resulting from successful leasing activity during the second half of 1996, where
leases were signed for approximately 26,000 square feet, or 6% of the center.
Decreases in rental income at Westview Center due to a lower occupancy and at
Grandview Plaza due to the vacancy of JC Penney in 1996 were offset by an
increase at Rivercrest Center due to an increase in average occupancy during the
first half of 1997 compared with the first half of 1996. During the second
quarter of 1997, the Operating Partnership signed a new lease with OfficeMax for
30,000 square feet at Grandview Plaza, which is expected to commence early in
the first quarter of 1998. A new lease for 55,000 square feet with Waccamaw
Pottery at Westview Center is expected to contribute to increased rental income
in the fourth quarter of 1997, and a new lease with JC Penney Homestore for
55,000 square feet at the Commons of Chicago Ridge is expected to contribute to
increased rental income in the third quarter of 1997.
The remaining decreases in operations, maintenance and management expense
of $652,000, or 20%, from the first half of 1996 were primarily attributable to
cost savings resulting from the completion in the second quarter of 1996 of the
internalization of the property management function for the properties located
in the Midwest, including a decrease in bad debt expense for such properties.
The remaining increase in depreciation and amortization of $225,000 for the
six month period ended June 30, 1997, compared with the same period in 1996, was
primarily a result of new construction and leasing at White Bear Hills, Har Mar
Mall and Burning Tree Plaza as well as new tenancies at various other locations.
Non-Property Specific Expenses
Mortgage and other interest expense increased to $7,231,000 for the six
months ended June 30, 1997, from $5,554,000 during the same period in 1996. Debt
assumed in the Tucker Acquisition on March 15, 1996, consisting primarily of the
$100 million REMIC mortgage note secured by six of the acquired Tucker
properties, accounted for $1,715,000 of the increase. Additionally, mortgage
interest expense on the mortgage note assumed upon the acquisition of Martin's
Bittersweet Plaza in January 1997 contributed to an increase of approximately
$171,000 during the first half of 1997 compared with the first half of 1996. A
lower weighted average outstanding balance on the line of credit, primarily
resulting from the application of proceeds from the November 1996 Offering
resulted in a decrease in interest expense of $195,000 for the six month period
ended June 30, 1997, compared with the same period in 1996. The Operating
Partnership's weighted average interest rate for the six months ended June 30,
1997 was 7.67%.
Administrative and general expense increased from $1,179,000 during the six
months ended June 30, 1996, to $1,977,000 during the six months ended June 30,
1997. Although the Tucker Acquisition created substantial operating
efficiencies, following the acquisition the Operating Partnership reorganized
its internal operations to function by disciplines rather than geography. The
reorganization included the addition of executive management for leasing, asset
management and acquisition activities, mostly during the second half of 1996. In
addition, the acquisition of fifteen properties since June 30, 1996 has required
an increase in personnel to manage the additional workload. As a result of the
aforementioned reorganization and acquisition activity, the number of employees
has increased, resulting in an increase in payroll costs.
During the first half of 1997, the Operating Partnership recorded a
provision for loss on its investment in Meadows Town Mall, located in Rolling
Meadows, Illinois. While undertaking a redevelopment plan for the center, the
Company received an unsolicited offer from a prospective purchaser of the
property. Management accepted the offer with the intention of redeploying
proceeds from the sale to the acquisition of another property or properties. The
provision of $1,300,000 represents the difference between the sales price, net
of closing costs, and the carrying value of the property. The property was
reclassified as held for sale on July 1, 1997. The sale was completed on August
8, 1997 for a net sales price of $5.9 million.
During the first half of 1996, the Operating Partnership incurred a charge
of $344,000 consisting of deferred financing costs related to Bradley's former
bank line of credit and certain deferred acquisition costs
24
<PAGE> 27
related to acquisitions which Bradley chose not to pursue due to the efforts
required to finalize the Tucker Acquisition.
1996 COMPARED TO 1995
During 1996, Bradley acquired sixteen properties, including the fourteen
properties in connection with the Tucker Acquisition, and sold its interest in a
ground lease. Including operations for the newly acquired properties and the
gain on sale of $9,379,000, net income increased from $8,861,000 or $0.90 per
Unit in 1995 to $27,956,000, or $1.56 per Unit, in 1996. Per Unit amounts
reflect weighted average Units outstanding of 17,932,769 in 1996 and 9,863,767
in 1995. The increased Units primarily reflect the 7,428,157 Units issued to the
Company in connection with the Tucker Acquisition in March 1996 and the
2,875,000 Units issued to the Company upon its contribution to the Operating
Partnership of the net proceeds from the November 1996 Offering of an equivalent
number of shares of Common Stock.
Property Specific Revenues and Expenses (in thousands of dollars)
<TABLE>
<CAPTION>
PROPERTIES
ACQUISITIONS/ HELD
1996 1995 DIFFERENCE DISPOSITIONS BOTH YEARS
------- ------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Rental income................. $77,512 $36,405 $ 41,107 $ 41,443 $ (336)
Operations, maintenance and
management.................. $12,949 $ 5,858 $ 7,091 $ 6,432 $ 659
Real estate taxes............. $16,787 $ 8,726 $ 8,061 $ 8,346 $ (285)
Depreciation and
amortization................ $13,286 $ 7,317 $ 5,969 $ 5,463 $ 506
</TABLE>
Results Attributable to Acquisition and Disposition Activities
Rental income increased from $36,405,000 in 1995 to $77,512,000 in 1996, an
increase of $41,107,000. Approximately $42,279,000 of the net increase was
attributable to Bradley's acquisition activities, partially offset by
approximately $836,000 attributable to disposition activities.
Other income increased from $167,000 in 1995 to $1,327,000 in 1996. The
increase was partially a result of income received from a sales tax sharing
agreement at Rollins Crossing, one of the properties acquired from Tucker. In
addition, interest income earned on cash and escrow balances increased due to an
increase in the weighted average daily balances, including, since the Tucker
Acquisition, approximately $3,600,000 held in various escrow accounts in
accordance with the $100 million REMIC Note assumed in connection with the
Tucker Acquisition.
Operations, maintenance and management expense increased from $5,858,000 in
1995 to $12,949,000 in 1996. Approximately $6,432,000 of the increase was
attributable to acquisition activities.
Real estate taxes increased from $8,726,000 in 1995 to $16,787,000 in 1996.
Approximately $8,346,000 of the increase was attributable to acquisition
activities.
Depreciation and amortization increased from $7,317,000 in 1995 to
$13,286,000 in 1996, an increase of $5,969,000. Approximately $5,463,000 of the
increase was attributable to acquisition and disposition activities.
Results For Properties Fully Operating Throughout Both Periods
The remaining decrease in rental income of approximately $336,000 was
attributable to decreases at Westview Shopping Center and Grandview Plaza in the
aggregate of $1,115,000, partially offset by increases in rental income at Har
Mar Mall, Burning Tree Plaza and Rivercrest Shopping Center of approximately
$712,000 in the aggregate. Westview Shopping Center continued to suffer from the
vacancy of Burlington Coat Factory in 1994. However, management negotiated a
decrease in the assessed value of the property and received a tax abatement
during 1996 resulting in a decrease in real estate tax expense of approximately
$669,000, more than offsetting the decrease in rental income. The increase in
rental income at Har Mar Mall was primarily attributable to a full year's rental
income from Barnes & Noble Superstore and HomePlace.
25
<PAGE> 28
During the second half of 1996, the Operating Partnership also signed leases at
Har Mar Mall for approximately 26,000 square feet, or 6% of the center,
contributing to the increase. The increase in rental income at Rivercrest
Shopping Center was primarily the result of an increase in real estate tax
reimbursements.
The remaining increase in operations, maintenance and management expense of
$659,000 was attributable to increased expenses at Sun Ray Shopping Center, Har
Mar Mall, and Rivercrest Shopping Center, and increased snow removal costs. The
increase in operations, maintenance and management expense was partially offset
by cost savings resulting from the completion of the internalization of the
property management function for the properties in the Midwest.
The remaining increase in depreciation and amortization of $506,000 was
primarily a result of new construction and leasing at White Bear Hills, Har Mar
Mall and Burning Tree Plaza as well as new tenancies at various other locations.
Non-Property Specific Expenses
Mortgage and other interest increased from $4,705,000 in 1995 to
$13,404,000 in 1996. Interest expense on the line of credit, net of amounts
capitalized, increased from $2,011,000 to $5,666,000. The increase in interest
expense on the line of credit was due to a higher average outstanding balance
primarily as a result of paying off Tucker's secured line of credit with the
Operating Partnership's unsecured line of credit in March 1996, and the
repayment of three mortgages secured by Sun Ray Shopping Center for
approximately $12,300,000 with cash drawn on the line of credit. The weighted
average interest rate on the mortgage notes secured by Sun Ray Shopping Center
was 10.53%. The weighted average interest rate on outstanding borrowings under
the line of credit decreased to 7.84% in 1996 from 8.00% in 1995. Mortgage
interest expense increased from $2,694,000 in 1995 to $7,738,000 in 1996,
primarily as a result of the assumption of the $100,000,000 REMIC Note. The
effective rate on the REMIC Note is 7.23% and mortgage interest on the REMIC was
approximately $5,729,000 during 1996. The increase in mortgage interest expense
was partially offset by a decrease attributable to the repayment of three
mortgage notes secured by Sun Ray Shopping Center.
General and administrative expenses increased from $1,105,000 in 1995 to
$3,005,000 in 1996. Although the Tucker Acquisition created substantial
operating efficiencies, following the acquisition the Operating Partnership
reorganized its internal operations to function by disciplines rather than
geography. The reorganization included the addition of executive management for
leasing, asset management and acquisition activities. The Operating Partnership
also completed the internalization of its property management and leasing
functions for all of its Midwest retail properties. Primarily as a result of the
Tucker Acquisition and the internal reorganization, the number of employees has
increased from 16 at December 31, 1995, to 81 at December 31, 1996, resulting in
an increase in payroll costs.
In connection with Bradley's stated objective to focus on the Midwest,
Bradley relocated its headquarters from Boston, Massachusetts (where the Company
was founded in 1961) to Northbrook, Illinois. As a result of the headquarters
move, a one-time relocation charge of $409,000, or $0.02 per unit, was incurred
during 1996.
During 1996, the Operating Partnership incurred a charge of $344,000, or
$0.02 per unit, consisting of deferred financing costs related to the former
bank line of credit and certain deferred acquisition costs related to
acquisitions which Bradley chose not to pursue due to the efforts required to
finalize the Tucker Acquisition.
1995 COMPARED TO 1994
The aggregate result for 1995 was a $232,000 or 3% decrease in net income
from $9,093,000 ($1.11 per Unit) to $8,861,000 ($.90 per Unit). In 1994, income
before the gain on sale of property was $8,110,000 ($.99 per Unit), compared
with $8,861,000 in 1995, ($.90 per Unit). Per Unit amounts reflect weighted
average Units outstanding of 9,863,767 in 1995 and 8,191,831 in 1994, the
increased number of Units being
26
<PAGE> 29
attributable primarily to the Company's public issuance of 2,500,000 shares of
Common Stock (the "July 1995 Offering"), completed in July 1995.
Rental income increased $3,530,000 or 11% from $32,875,000 in 1994 to
$36,405,000 in 1995. Approximately $3,594,000 of this increase was due to the
acquisitions of Westwind Plaza and Rivercrest Center in 1994 and St. Francis
Plaza in 1995. These increases were partially offset by the sale of Spruce Tree
Centre in late 1994. Rental income from Har Mar Mall increased approximately
$598,000 while rental income from Burning Tree Plaza increased approximately
$260,000 from the prior year. Rental income at Har Mar Mall increased primarily
due to the signing of leases with Barnes & Noble and HomePlace. The increase at
Burning Tree Plaza was substantially attributable to the expansion of T.J. Maxx.
Other income increased $55,000 or 49% from $112,000 in 1994 to $167,000 in
1995. This increase was primarily due to an increase in interest income,
resulting from the temporary investment of proceeds from the July 1995 Offering.
Total expenses increased $2,834,000 or 11% from $24,877,000 in 1994 to
$27,711,000 in 1995. Operations, maintenance and management expense increased
$543,000 during 1995 (from $5,315,000 in 1994 to $5,858,000), due primarily to
an increase in operating expenses of $295,000 at Rivercrest Center, $285,000 at
Har Mar Mall and $269,000 at Westview Center, partially offset by the sale of
Spruce Tree Centre.
Real estate tax expense increased $656,000 during 1995 (from $8,070,000 to
$8,726,000); $375,000 of the increase was due to the change in properties in
Bradley's portfolio. The remaining increase of $281,000 was due to tax increases
at all of the properties, most notably the Illinois properties, with the
exception of Har Mar Mall, which had a $355,000 reduction in real estate taxes
following negotiation of abatements.
Mortgage and other interest expense increased $181,000 during 1995 (from
$4,524,000 in 1994 to $4,705,000). Approximately $270,000 of this increase was
due to mortgages secured by St. Francis Plaza and Westwind Plaza, partially
offset by a decrease in interest expense on the line of credit ($63,000) due to
a decrease in the average debt balance, and an increase in capitalized interest.
The average interest rate on outstanding borrowings under the line of credit
increased from 7.1% in 1994 to 8.0% in 1995.
Depreciation and amortization expense increased from $5,146,000 in 1994 to
$7,317,000 in 1995. Of this $2,171,000 increase, $1,193,000 was related to
amortizing the cost of the purchase of the advisory business of Bradley's former
external advisor, consummated in January 1995; $300,000 of the increase was due
to changes in real estate holdings; and the balance of the increase was due to
real estate improvements.
Administrative and general expense decreased $717,000 in 1995, from
$1,822,000 in 1994 to $1,105,000 in 1995. This decrease primarily reflects cost
savings associated with becoming self-administered following the purchase of the
advisory business of the former advisor in January 1995.
The acquisition of Westwind Plaza for approximately $7,500,000 was effected
in a tax-deferred exchange following the sale of Spruce Tree Centre for
$2,750,000, which resulted in a gain on sale of property of $983,000 recognized
in 1994.
IMPACT OF RECENTLY ISSUED PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("Statement No.
128") which supersedes APB Opinion No. 15, "Earnings Per Share." Statement No.
128 replaces the presentation of "primary EPS," which the Operating Partnership
has historically presented, with a presentation of "basic EPS," and replaces the
presentation of "fully diluted EPS," which the Operating Partnership has not
been required to present due to the immaterial difference from primary EPS with
"diluted EPS." It also requires dual presentation of basic and diluted EPS on
the face of the income statement and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Statement No. 128 is effective for financial
statements for both interim and annual periods ending after December 15, 1997.
Management does not expect implementation of Statement No. 128 to have a
material effect on the financial statements of the Operating Partnership because
basic EPS is not expected to differ from the primary
27
<PAGE> 30
earnings per Unit as previously presented, and diluted EPS is not expected to be
materially different from basic EPS.
INFLATION
The Operating Partnership's leases generally contain provisions designed to
mitigate the adverse impact of inflation on net income. These provisions include
clauses enabling the Operating Partnership to pass through to tenants certain
operating costs, including real estate taxes, common area maintenance, utilities
and insurance, thereby reducing the Operating Partnership's exposure to
increases in costs and operating expenses resulting from inflation. Certain of
the Operating Partnership's leases contain clauses enabling the Operating
Partnership to receive percentage rents based on tenants' gross sales, which
generally increase as prices rise, and, in certain cases, escalation clauses,
which generally increase rental rates during the terms of the leases. In
addition, many of the Operating Partnership's non-anchor leases are for terms of
less than ten years, which permits the Operating Partnership to seek increased
rents upon re-leasing at higher market rates.
ITEM 3. PROPERTIES
The properties owned by the Operating Partnership at August 31, 1997 are
described under Item 1. Also see Note 3 of the Notes to the Consolidated
Financial Statements contained in this Registration Statement.
The Operating Partnership's principal office is located at 40 Skokie
Boulevard in Northbrook, Illinois, where it leases approximately 10,000 square
feet of space from an unrelated landlord.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Partnership interests in the Operating Partnership are represented by
Units, of which there are general partner units ("GP Units"), all of which are
held by the Company as the sole general partner, and limited partner units ("LP
Units"). Information known to the Operating Partnership with respect to
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of more than 5% of the outstanding GP Units and LP Units as of August
31, 1997 follows:
<TABLE>
<CAPTION>
NO. OF UNITS PERCENTAGE OF PERCENTAGE OF
CLASS BENEFICIAL OWNER BENEFICIALLY OWNED CLASS ALL UNITS
------------------ ---------------------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
GP Units.......... Bradley Real Estate, Inc. 21,676,375 100% 95.3%
40 Skokie Blvd
Northbrook, IL 60062
LP Units.......... County Line 31 Company L.P. 478,619 44.6% 2.1%
2500 One American Square
Indianapolis, IN 46282
LP Units.......... Lexington Holding Company 281,300 26.3% 1.2%
650 Pilsbury Centre
Minneapolis, MN 55402
LP Units.......... Kenneth Tucker 207,446 19.4% 0.9%
1420 Sheridan Road
Wilmette, IL 60091
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The Operating Partnership is managed by the Company as the general partner
of the Operating Partnership. No director or executive officer of the Company
personally owns any GP Units or LP Units of the Operating Partnership.
Information concerning the beneficial ownership of shares of Common Stock of the
Company by its directors and executive officers, as well as by persons believed
to be the beneficial owner of more than 5% of the Company's outstanding Common
Stock, is hereby incorporated by reference to the information contained on pages
13-14 of the Company's definitive proxy statement for its annual meeting of
stockholders held in 1997 under the caption "Beneficial Ownership of Shares."
28
<PAGE> 31
ITEM 5. DIRECTORS AND OFFICERS
The Operating Partnership is managed by the Company as the general partner
of the Operating Partnership. The information required by this item is hereby
incorporated by reference to the material appearing under Item 4-A, "Executive
Officers of the Registrant," in the Company's annual report on Form 10-K, as
amended, for the fiscal year ended December 31, 1996.
ITEM 6. EXECUTIVE COMPENSATION
The Operating Partnership is managed by the Company as the general partner
of the Operating Partnership. Consequently, the Operating Partnership has no
executive officers and pays no compensation. The information required by this
item therefore reflects compensation paid to the executive officers of the
Company and is hereby incorporated by reference to the material appearing on
pages 5-7 of the Company's definitive proxy statement for the annual meeting of
stockholders held in 1997 under the caption "Compensation of Directors and
Executive Officers."
ITEM 7. CERTAIN RELATIONSHIPS
The Operating Partnership is managed by the Company as the general partner
of the Operating Partnership. The information required by this item is hereby
incorporated by reference to the material appearing on pages 15-16 of the
Company's definitive proxy statement for the annual meeting of stockholders held
in 1997 under the caption "Certain Relationships and Related Party
Transactions."
ITEM 8. LEGAL PROCEEDINGS
At the date of this Registration Statement, there are no legal proceedings
pending or, to the Company's knowledge, threatened, that would, if adversely
determined, have a material adverse effect on the Company or the Operating
Partnership.
ITEM 9. MARKET PRICE AND DISTRIBUTION
There is no established public trading market for the Units, and Units may
be transferred only with the consent of the general partner as provided in the
Partnership Agreement. As of August 31, 1997, the Company was the only holder of
GP Units and there were approximately 20 holders of record of LP Units.
The Operating Partnership Agreement provides that the Operating Partnership
will make priority distributions of Operating Cash Flow and Capital Cash Flow,
as defined, to limited partners at the time of each distribution to holders of
Common Stock of the Company, in an amount per Unit identical to the amount that
is distributed with respect to each share of Common Stock of the Company. The
Operating Partnership Agreement provides that all remaining such cash flow will
be distributed to the general partner. The following table sets forth the
quarterly distributions paid by the Operating Partnership to holders of its LP
Units with respect to each full quarterly period for which the Company has been
the general partner of the Operating Partnership.
<TABLE>
<CAPTION>
DISTRIBUTIONS
QUARTER ENDED PER LP UNIT
--------------------------------------------------------- -------------
<S> <C>
June 30, 1997............................................ $ .33
March 31, 1997........................................... .33
December 31, 1996........................................ .33
September 30, 1996....................................... .33
June 30, 1996............................................ .33
</TABLE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
At the time of the Company's acquisition of Tucker in March 1996, the then
outstanding units of TOP were adjusted by the same fraction (.686-to 1) as the
conversion ratio of shares of Common Stock of the Company issued in exchange for
shares of common stock of Tucker, resulting in there then being 314,749
29
<PAGE> 32
Units (representing 4.1% of the interest in the Operating Partnership) held by
limited partners and 7,428,202 Units acquired by the Company as successor
general partner of the Partnership.
On January 1, 1997 and July 31, 1997, the Operating Partnership issued
281,300 and 478,619 LP Units, respectively that may be exchanged after one year
for an equal number of shares of Common Stock of the Company. Such LP Units were
issued, each as a part of the consideration paid for Roseville Center and County
Line Mall, respectively, to the existing privately held partnerships that
contributed each of Roseville Center and County Line Mall to the Operating
Partnership. No registration statement was required in connection with the
issuances because the transactions did not involve a public offering and were
exempt under Section 4(2) of the Securities Act. At the dates of the respective
transactions, the value of a share of the Common Stock of the Company for which
each LP Unit may be exchanged was $18.375 and $18.866 per share, respectively.
As a result of contributions of cash and properties made by the Company to
the Operating Partnership from time to time and to reflect that the Company
holds all of its assets (except its interest as general partner of the Operating
Partnership) for the benefit of the Operating Partnership, the Operating
Partnership Agreement reflects that the number of Units held by the general
partner is the same as the number of shares of Common Stock of the Company that
are outstanding, or 21,676,375 GP Units at the date of this Registration
Statement.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The securities registered by this Registration Statement are General
Partner Units ("GP Units"). The rights and obligations of the general partner as
the sole holder of GP Units are as set forth in the Operating Partnership
Agreement. The following description is only a summary of certain provisions of
the Operating Partnership Agreement and is subject to, and qualified in its
entirety by, the Operating Partnership Agreement, which has been filed as an
exhibit to this Registration Statement.
Voting Rights. Under the Operating Partnership Agreement, the Company as
general partner of the Operating Partnership may take any action in a manner
which it reasonably believes is in the best interests of the Company's
stockholders or complies with the REIT requirements for the Company. Limited
Partners as holders of LP Units may not elect directors, or elect or remove the
Company as the general partner of the Operating Partnership. Until March 15,
1998, the general partner may not elect to dissolve the Operating Partnership or
sell all or substantially all of the assets of the Operating Partnership without
the consent of a majority in interest of the limited partners who were limited
partners at the time of the Tucker Acquisition (the "Original Limited
Partners"), except in connection with a merger or other business combination of
the general partner or its affiliates. The limited partners have no other voting
rights under the Operating Partnership Agreement, except that certain actions of
the general partner described below require the prior consent of a majority in
interest of the limited partners or the Original Limited Partners.
Transferability. Pursuant to the Operating Partnership Agreement, the
general partner may, in its sole and absolute discretion, transfer its interest
in the Operating Partnership; provided, however, that until March 16, 1998, the
general partner shall not without the consent of the majority of the Original
Limited Partners, transfer its interest to any of its affiliates other than an
affiliate whose securities will become issuable upon redemption of the Units.
The LP Units are transferable (i) either by will, the laws of intestacy or
otherwise to the legal representative or successor of the transferring limited
partner who shall be bound in all respects by the terms of the Operating
Partnership Agreement; (ii) for inter vivos transfers for estate planning
purposes; or (iii) for pledges to secure the repayment of a loan. Other
transfers are subject to the consent and approval of the general partner.
Issuance of Additional Units. The issuance of additional Units, and the
relative rights, powers and duties of such Units, is at the discretion of the
Company as the sole general partner of the Operating Partnership.
Notwithstanding the foregoing, until March 16, 1998, the general partner may not
cause the Operating Partnership to issue additional Units with rights, powers
and duties senior to the Units currently held by the limited partners without
the consent of a majority in interest of the Original Limited Partners. In
addition, the general partner may not permit the Operating Partnership to issue
additional Units until
30
<PAGE> 33
March 16, 1998 if the issuance of such Units would cause a material adverse tax
consequence to the Original Limited Partners (determined in the manner described
in the Operating Partnership Agreement), other than in connection with the
merger, consolidation or combination of the general partner or its affiliates.
Distributions. In general, the Operating Partnership Agreement provides
for operating distributions to be made, subject to any priority distribution
rights of any class or series of Preferred Units, first to the limited partners
in an amount equal to the lesser of (i) 99% of the cash available for
distribution from the Operating Partnership and (ii) an amount calculated in a
manner intended to provide the limited partners with distributions on each of
their LP Units equal to the dividend paid for the same period on a share of the
Company's Common Stock. Any remaining cash from operations available for
distribution will be distributed to the Company as general partner. Subject to
any priority distribution rights of any class or series of Preferred Units, the
Operating Partnership Agreement generally provides for liquidating distributions
to the limited partners equal to either (i) an amount per Unit intended to equal
the amount distributed with respect to each share of the Company's Common Stock
upon the concurrent liquidation of the Operating Partnership and the Company or
(ii) in the event that the Operating Partnership is liquidated other than in
connection with the liquidation to the Company, an amount per Unit equal to the
then market price of a share of the Company's Common Stock; provided, however,
that the limited partners will not receive more than 99% of any proceeds
available for distribution from the liquidation of the Operating Partnership.
Any remaining liquidation proceeds will be distributed to the Company as the
general partner.
Redemption Right. Pursuant to the Operating Partnership Agreement, each
limited partner (other than the Company) has the right, subject to certain
limitations, to require the Operating Partnership to redeem all or a portion of
the LP Units held by such partner for the cash equivalent of that number of
shares of the Company's Common Stock (subject to certain adjustments to prevent
dilution), or, at the option of the Company, the Company may elect to purchase
LP Units presented for redemption for an equivalent number of shares of the
Company's Common Stock. Each LP Unit that is purchased by the Company for shares
of Common Stock will upon such purchase be converted to a GP Unit.
Management Fees and Expenses. The Operating Partnership Agreement provides
that the Company shall be reimbursed for all expenses incurred by the Company
relating to the management and business of the Operating Partnership including
the costs and expenses of the Company in raising and maintaining capital of the
Company that the Company in good faith determines is necessary or appropriate to
be applied, raised, used or maintained for the benefit of the Operating
Partnership
Amendment. Generally, the Operating Partnership Agreement may be amended
by the general partner without the consent of limited partners, except that
certain amendments which alter or change the distribution rights or redemption
rights of a limited partner shall require the consent of a majority in interest
of the limited partners.
Termination. The Operating Partnership will continue until December 31,
2050, or upon dissolution at an earlier time for specified reasons set forth in
the Operating Partnership Agreement.
The Operating Partnership Agreement provides that management and control of
the Operating Partnership is vested in the Company, which serves as the sole
general partner of the Operating Partnership. Equity ownership in the Operating
Partnership is represented by the LP Units and the GP Units. Each LP Unit is
designed to provide distributions to the holder thereof that are equal to the
distributions paid on each share of the Company's Common Stock, and each such LP
Unit is redeemable for the cash equivalent of one share of the Company's Common
Stock (subject to certain restrictions), or, at the Company's option, one share
of the Company's Common Stock.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Revised Uniform Limited Partnership Act provides that a
limited partnership has the power to indemnify and hold harmless any partner or
other person from and against any and all claims and demands whatsoever, subject
to such standards and restrictions, if any, as are set forth in its partnership
agreement.
31
<PAGE> 34
The Operating Partnership Agreement generally provides that the general
partner and any person acting on its behalf will incur no liability to the
Operating Partnership or any limited partner for any act or omission within the
scope of the general partner's authorities, provided the general partner's or
such other person's action or omission to act was taken in good faith and in the
belief that such action or omission was in the best interests of the Company and
its affiliates, and provided further, that the general partner's or such other
person's actions or omissions shall not constitute actual fraud or gross
negligence or deliberately dishonest conduct.
The Operating Partnership Agreement also provides for the indemnification
of the general partner and its affiliates and any individual acting on their
behalf from any loss, damage, claim or liability, including, but not limited to,
reasonable attorneys' fees and expenses, incurred by them by reason of any act
performed by them in accordance with the standards set forth above or in
enforcing the provisions of this indemnity.
The Maryland General Corporation Law ("MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money damages
except for liability resulting from (i) actual receipt of an improper benefit or
profit in money, property or services or (ii) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
charter of the Company contains such a provision which eliminates such liability
to the maximum extent permitted by Maryland law.
The charter of the Company authorizes it, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (i) any
present or former director, officer, agent, employee or plan administrator of
the Company or of its predecessor Bradley Real Estate Trust (the "Trust") or
(ii) any individual who, at the request of the Company, serves or has served in
any of these capacities with another corporation, partnership, joint venture,
trust, employee benefit plan or any other enterprise. The Bylaws of the Company
obligate it, to the maximum extent permitted by Maryland law, to indemnify (a)
any present or former director or officer of the Company, (b) any individual
who, at the request of the Company, serves or has served another corporation,
partnership, joint venture, trust or other enterprise as a director or officer
or (c) any present or former Trustee or officer of the Trust.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (i) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty, (ii) the director or officer actually received an improper personal
benefit in money, property or services or (iii) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
addition, the MGCL requires a corporation as a condition to advancing expenses,
to obtain (x) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the corporation as authorized by the bylaws and (y) a written statement by or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
The Company and the Operating Partnership have claims-made directors and
officers liability insurance policies that insure the directors and officers of
the Company including in its capacity as general partner of the Operating
Partnership against loss from claimed wrongful acts and insure the Company for
indemnifying the directors and officers against such loss. The policy limits of
liability are $10,000,000 each policy year and are subject to a retention of
$150,000 of loss by the Company.
32
<PAGE> 35
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
See "Index to Financial Statements" on page F-1 of this Form 10.
ITEM 14. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Financial Statement Schedules
See "Index to Financial Statements" on page F-1 of this Form 10.
(b) Exhibits
<TABLE>
<C> <S>
*3.1 Second Restated Agreement of Limited Partnership of Bradley Operating Limited
Partnership, dated as of September 2, 1997.
3.2.1 Articles of Amendment and Restatement of Bradley Real Estate, Inc. (the "Company"),
incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K
dated October 17, 1994.
3.2.2 Articles of Merger between Tucker Properties Corporation and Bradley Real Estate,
Inc. incorporated by reference to Exhibit 3.3 of the Company's Annual Report on Form
10-K dated March 25, 1996.
10.1.1 Revolving Credit Agreement dated as of March 15, 1996 by and Bradley Real Estate,
Inc., Bradley Operating Limited Partnership and The First National Bank of Boston,
incorporated by reference to Exhibit 10.2 of the Company's Annual Report on Form
10-K dated March 25, 1996.
10.1.2 First Amendment dated as of May 2, 1996 and Second Amendment dated as of March 28,
1997 to the aforesaid Revolving Credit Agreement, incorporated by reference to
Exhibit 10.2.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 dated May 13, 1997.
10.2 Indenture dated as of June 1, 1994 between Tucker Financing Partnership (name
changed March 15, 1996 to Bradley Financing Partnership) and Bankers Trust Company
of California, N.A. relating to 7.30% Mortgage Notes due September 30, 2000 (the
"REMIC Note"), incorporated by reference to Exhibit 10.3 of the Company' Annual
Report on Form 10-K dated March 25, 1996.
*21.1 List of Subsidiaries
*27.1 Financial Data Schedule
99.1 The following sections of the Company's Annual Report on Form 10-K dated March 19,
1997, which sections are incorporated by reference to such Report:
- Description under caption "Risk Factors" in Item 1;
- Description of "Executive Officers of the Registrant" in Item 4-A.
99.2 The following sections of the Company's definitive Proxy Statement for its 1997
Annual Meeting of Stockholders, which sections are incorporated by reference to such
Proxy Statement:
- Description of "Compensation of Directors and Executive Officers" at pages 5-7.
- Description of "Beneficial Ownership of Shares" at pages 13-14;
- Description of "Certain Relationships and Related Party Transactions" at pages
15-16.
</TABLE>
- ---------------
* Filed herewith.
33
<PAGE> 36
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Pro Forma Financial Statements (Unaudited) -- Bradley Operating Limited Partnership
and Predecessor Business and Subsidiaries
Condensed Consolidated Balance Sheet -- June 30, 1997............................... F-2
Condensed Consolidated Statement of Income -- For the Six Months Ended June 30,
1997............................................................................. F-4
Condensed Consolidated Statement of Income -- For the Year Ended December 31,
1996............................................................................. F-7
Financial Statements -- Bradley Operating Limited Partnership and Predecessor Business
and Subsidiaries
Independent Auditors' Report........................................................ F-11
Consolidated Balance Sheets -- June 30, 1997 (Unaudited) and December 31, 1996 and
1995............................................................................. F-12
For the Six Months Ended June 30, 1997 and 1996 (Unaudited), and for the Years Ended
December 31, 1996, 1995, and 1994
Consolidated Statements of Income................................................ F-13
Consolidated Statements of Changes in Capital.................................... F-14
Consolidated Statements of Cash Flows............................................ F-15
Notes to Consolidated Financial Statements.......................................... F-16
Schedule III -- Real Estate and Accumulated Depreciation............................ F-31
Financial Statements -- Acquisition Properties
Independent Auditors' Report........................................................ F-32
For the Period January 1, 1997 through June 30, 1997 (Unaudited) and for the Year
Ended December 31, 1996
Combined Statement of Revenues and Certain Expenses.............................. F-33
Notes to Combined Statement of Revenues and Certain Expenses........................ F-34
Financial Statements -- Tucker Properties Corporation
Report of Independent Accountants................................................... F-36
Consolidated Balance Sheets, December 31, 1995 and 1994............................. F-37
Consolidated Statements of Operations for the years ended December 31, 1995 and
1994............................................................................. F-38
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1995 and 1994.................................................................... F-39
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and
1994............................................................................. F-40
Notes to Consolidated Financial Statements.......................................... F-41
</TABLE>
F-1
<PAGE> 37
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
Subsequent to June 30, 1997, the Operating Partnership sold a shopping
center, utilizing the proceeds to pay-down the line of credit, and acquired nine
shopping centers, including a portfolio of five shopping centers from one seller
for approximately $28,800,000 with cash provided by the line of credit. Three of
the remaining four shopping centers were also funded with cash provided by the
line of credit, for an aggregate purchase price of approximately $24,000,000.
The final property was purchased for approximately $16,300,000 through the
issuance of 478,619 limited partner units ("LP Units") and the assumption of a
$6,900,000 non-recourse mortgage note which was paid-off in full at closing with
cash drawn from the line of credit.
This unaudited Pro Forma Condensed Balance Sheet is presented as if the
acquisitions and the disposition occurring subsequent to June 30, 1997, had been
completed on June 30, 1997. In the opinion of management of the general partner,
all adjustments necessary to reflect the effects of these transactions have been
made.
This unaudited Pro Forma Condensed Balance Sheet is prepared for
comparative purposes only and is not necessarily indicative of what the actual
financial position of the Operating Partnership would have been at June 30,
1997, nor does it purport to represent the future financial position of the
Operating Partnership. This unaudited Pro Forma Condensed Balance Sheet should
be read in conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto of the Operating Partnership
included in this Registration Statement.
F-2
<PAGE> 38
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30,1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PROPERTY ADJUSTMENTS
-------------------------------
ACQUISITION DISPOSITION
HISTORICAL ADJUSTMENTS(A) ADJUSTMENTS(A) PRO FORMA
---------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Real estate investments -- at cost............ $ 510,558 $ 69,016 $ (5,896) $ 573,678
Accumulated depreciation and amortization..... (36,708) -- 207 (36,501)
-------- ------- ------- --------
Net real estate investments................... 473,850 69,016 (5,689) 537,177
Real estate investments held for sale......... 10,000 -- -- 10,000
Other assets:
Cash and cash equivalents................... 3,579 -- -- 3,579
Rents and other receivables, net of
allowance for doubtful accounts of
$2,309................................... 10,587 -- (272) 10,315
Deferred charges, net and other assets...... 14,964 -- (170) 14,794
-------- ------- ------- --------
Total assets........................ 512,980 69,016 (6,131) 575,865
======== ======= ======= ========
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loans................................ 128,868 -- -- 128,868
Line of credit................................ 64,400 59,986 (5,900) 118,486
Accounts payable, accrued expenses and other
liabilities................................. 20,875 -- (1,484) 19,391
-------- ------- ------- --------
Total liabilities................... 214,143 59,986 (7,384) 266,745
-------- ------- ------- --------
Minority interest............................. 867 -- -- 867
-------- ------- ------- --------
Partners' capital............................. 297,970 9,030 1,253 308,253
-------- ------- ------- --------
Total liabilities and partners'
capital........................... $ 512,980 $ 69,016 $ (6,131) $ 575,865
======== ======= ======= ========
</TABLE>
EXPLANATORY NOTES
(A) Adjustments represent acquisitions and dispositions of properties subsequent
to June 30, 1997 that have been completed.
F-3
<PAGE> 39
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
During the period from January 1, 1997 to June 30, 1997, the Operating
Partnership acquired five shopping centers. Three of the five shopping centers
were acquired for cash with financing provided by the bank line of credit. One
shopping center was acquired with cash provided by the line of credit and the
assumption of a $3,800,000 non-recourse mortgage note, and one shopping center
was acquired via the issuance of 281,300 limited partnership units ("LP Units").
Additionally, during such period, the Operating Partnership sold a shopping
center, utilizing the proceeds to pay-down the line of credit.
Subsequent to June 30, 1997, the Operating Partnership sold an additional
shopping center, utilizing the proceeds to pay-down the line of credit, and
acquired nine shopping centers, including a portfolio of five shopping centers
from one seller for approximately $28,800,000 with cash provided by the line of
credit. Three of the shopping centers were also funded with cash provided by the
line of credit, for an aggregate purchase price of approximately $24,000,000.
The final property was purchased for approximately $16,300,000 through the
issuance of 478,619 LP Units and the assumption of a $6,900,000 non-recourse
mortgage note which was paid-off in full at close with cash drawn from the line
of credit.
The unaudited Pro Forma Condensed Statement of Income is presented as if
the acquisitions and the dispositions described above had been consummated on
January 1, 1996, and with the Operating Partnership qualifying as a partnership
and, therefore, incurring no federal income tax expense during the period
January 1, 1997 through June 30, 1997. In the opinion of management, all
adjustments necessary to reflect the effects of these transactions have been
made.
For purposes of this unaudited Pro Forma Condensed Statement of Income,
"Acquisition Properties" represents those properties for which the Operating
Partnership has furnished a Combined Statement of Revenues and Certain Expenses
in accordance with Rule 3.14 of the Securities and Exchange Commission
Regulation S-X.
This unaudited Pro Forma Condensed Statement of Income is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of operations of the Operating Partnership would have been for the
period presented, nor does it purport to represent the results to be achieved in
future periods. This unaudited Pro Forma Condensed Statement of Income should be
read in conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto of the Operating Partnership
included in this Registration Statement.
F-4
<PAGE> 40
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
ACQUISITION OTHER ACQUISITION DISPOSITION OTHER
HISTORICAL PROPERTIES(A) PROPERTIES(A) PROPERTIES(B) ADJUSTMENTS PRO FORMA
---------- ------------- ----------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income................... $ 45,889 $ 2,268 $ 3,331 $(1,469) $ -- $ 50,019
Other income.................... 642 -- 13 (8) -- 647
---------- ------ ------ ------- -------- ----------
Total revenue............. 46,531 2,268 3,344 (1,477) -- 50,666
---------- ------ ------ ------- -------- ----------
Expenses:
Operations, maintenance and
management.................... 6,999 277 473 (324) -- 7,425
Real estate taxes............... 9,627 378 433 (404) -- 10,034
Mortgage and other interest..... 7,231 -- -- -- 2,033(C) 9,264
Administrative and general...... 1,977 -- -- -- -- 1,977
Depreciation and amortization... 7,855 -- -- -- 702(D) 8,557
---------- ------ ------ ------- -------- ----------
Total expenses............ 33,689 655 906 (728) 2,735 37,257
---------- ------ ------ ------- -------- ----------
Income before gain on sale and
provision for loss on real
estate investments.............. 12,842 1,613 2,438 (749) (2,735) 13,409
Gain on sale of property.......... 3,073 -- -- (3,073) -- --
Provision for loss on real estate
investment...................... (1,300) -- -- 1,300 -- --
---------- ------ ------ ------- -------- ----------
Income before allocation to
minority interest............... 14,615 1,613 2,438 (2,522) (2,735) 13,409
Income allocated to minority
interest........................ (46) -- -- -- -- (46)
---------- ------ ------ ------- -------- ----------
Net income........................ 14,569 1,613 2,438 (2,522) (2,735) 13,363
========== ====== ====== ======= ======== ==========
Net income per weighted average
unit
outstanding..................... $ 0.65 $ 0.59
========== ==========
Weighted average units
outstanding..................... 22,260,759 22,739,378
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses for the six
months ended June 30, 1997 for the properties acquired during 1997 for the
period during which the Operating Partnership did not own such properties.
(B) Decrease represents the elimination of historical operating revenues and
expenses, gains and provision for loss for the six months ended June 30,
1997 for the properties disposed during 1997 for the period during which the
Operating Partnership owned such properties.
(C) Mortgage and other interest has been increased to reflect the borrowings
estimated for property acquisitions for the period during which the
Operating Partnership did not own such properties, net of the reduction for
the application of net proceeds from property dispositions to pay down the
line of credit for the period during which the Operating Partnership owned
such properties, at an interest rate of 7.000%, which was the Operating
Partnership's borrowing rate at August 31, 1997. A 0.125% change in the
variable rate would result in a change in the pro forma interest adjustment
of approximately $36,000.
<TABLE>
<S> <C>
Increase in interest expense attributable to acquisition
activities........................................................ $2,394
Decrease in interest expense attributable to disposition
activities........................................................ (361)
------
Pro forma adjustment................................................ $2,033
======
</TABLE>
F-5
<PAGE> 41
(D) Depreciation and amortization has been increased to give effect to recording
the property acquisitions over a depreciable life of 39 years, for the
period which the Operating Partnership did not own such properties, net of
the reduction for properties disposed for the period which the Operating
Partnership owned such properties, as follows:
<TABLE>
<S> <C>
Increase in depreciation and amortization attributable to acquisition
activities.......................................................... $800
Decrease in depreciation and amortization attributable to disposition
activities.......................................................... (98)
----
Pro forma adjustment.................................................. $702
====
</TABLE>
F-6
<PAGE> 42
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
During the period from January 1, 1996 to June 30, 1997, the Operating
Partnership acquired seven shopping centers and sold one shopping center and a
ground lease. Four of the seven shopping centers were acquired for cash with
financing provided by the bank line of credit. One shopping center was acquired
with cash provided by the line of credit and the assumption of a $3,800,000
non-recourse mortgage note, and one shopping center was acquired via the
issuance of 281,300 LP Units. The sale of its interest in a ground lease was
structured as a "like-kind" exchange for federal income tax purposes, acquiring
a shopping center as a replacement property in the exchange. Since the net
proceeds from the sale were greater than the net purchase price of the property
acquired, the excess proceeds were used to pay down the line of credit.
On March 15, 1996, Bradley completed the Tucker Acquisition. The
acquisition was consummated through the issuance by Bradley of approximately 7.4
million shares of its Common Stock valued at $13.96 per share, and was accounted
for using the purchase method of accounting. Tucker held title to all of its
properties through two partnerships; eight properties through Tucker Operating
Limited Partnership ("TOP"), in which Tucker had a 95.9% general partnership
interest, and six properties through Tucker Financing Partnership ("TFP"), a
general partnership of which TOP owned 99% and a wholly-owned Tucker corporate
subsidiary owned the remaining 1%. Upon the acquisition of Tucker, the Company
succeeded to Tucker's interest in TOP, TFP and the wholly-owned Tucker corporate
subsidiary, and the name "Bradley" was substituted for "Tucker" in each
subsidiary and partnership. In August 1997, the Company contributed its
interests in the 18 properties it held directly to the Operating Partnership,
two of which are held for sale. The Operating Partnership therefore succeeds
Bradley as the entity through which Bradley will expand its ownership and
operation of properties.
Additionally, in November 1996, the Company completed a public offering of
2,875,000 shares of Common Stock (including shares issued pursuant to the
exercise of the underwriter over-allotment option) at a price of $16.50 per
share (the "November 1996 Offering"). Net proceeds from the November 1996
Offering, approximately $44,851,000 (net of offering costs of $2,618,000), were
contributed to the Operating Partnership and used to reduce outstanding
borrowings under the line of credit.
Subsequent to June 30, 1997, the Operating Partnership sold one shopping
center, utilizing the proceeds to pay-down the line of credit, and acquired nine
shopping centers, including a portfolio of five shopping centers from one seller
for approximately $28,800,000 with cash provided by the line of credit. Three of
the remaining four shopping centers were also funded with cash provided by the
line of credit, for an aggregate purchase price of approximately $24,000,000.
The final property was purchased for approximately $16,300,000 through the
issuance of 478,619 LP Units and the assumption of a $6,900,000 non-recourse
mortgage note which was paid-off in full at close with cash drawn from the line
of credit.
The unaudited Pro Forma Condensed Statement of Income is presented as if
the November 1996 Offering, the acquisitions, the dispositions, and the
"like-kind" exchange described above had been consummated on January 1, 1996,
and as if the Tucker Acquisition had occurred on January 1, 1996, and with the
Operating Partnership qualifying as a partnership and, therefore, incurring no
federal income tax expense during the period January 1, 1996 through June 30,
1997. In the opinion of management, all adjustments necessary to reflect the
effects of these transactions have been made.
For purposes of this unaudited Pro Forma Condensed Statement of Income,
"Acquisition Properties" represents those properties for which the Operating
Partnership has furnished a Combined Statement of Revenues and Certain Expenses
in accordance with Rule 3.14 of the Securities and Exchange Commission
Regulation S-X.
F-7
<PAGE> 43
This unaudited Pro Forma Condensed Statement of Income is presented for
comparative purposes only and is not necessarily indicative of what the actual
results of operations of the Operating Partnership would have been for the
period presented, nor does it purport to represent the results to be achieved in
future periods. This unaudited Pro Forma Condensed Statement of Income should be
read in conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto of the Operating Partnership
included in this Registration Statement.
F-8
<PAGE> 44
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
OTHER
TUCKER ACQUISITION ACQUISITION DISPOSITION OTHER
HISTORICAL ACQUISITION(A) PROPERTIES(B) PROPERTIES(B) PROPERTIES(C) ADJUSTMENTS PRO FORMA
---------- -------------- ------------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income............. $77,512 $8,075 $7,598 $6,920 $ (4,637) $ -- $95,468
Other income.............. 1,327 146 8 18 (66) -- 1,433
------- ---------- --------- --------- --------- --------- -------
Total revenue...... 78,839 8,221 7,606 6,938 (4,703) -- 96,901
------- ---------- --------- --------- --------- --------- -------
Expenses:
Operations, maintenance
and management.......... 12,949 1,491 935 879 (883) -- 15,371
Real estate taxes......... 16,787 1,993 1,330 1,083 (1,057) -- 20,136
Mortgage and other
interest................ 13,404 2,574 -- -- -- 2,370(D) 18,348
Administrative and
general................. 3,005 -- -- -- -- -- 3,005
Corporate office
relocation.............. 409 -- -- -- -- -- 409
Write-off of deferred
financing and
acquisition costs....... 344 -- -- -- -- -- 344
Depreciation and
amortization............ 13,286 1,336 -- -- -- 1,914(E) 16,536
------- ---------- --------- --------- --------- --------- -------
Total expenses..... 60,184 7,394 2,265 1,962 (1,940) 4,284 74,149
------- ---------- --------- --------- --------- --------- -------
Income before gain on sale
of property............... 18,655 827 5,341 4,976 (2,763) (4,284) 22,752
Gain on sale of property.... 9,379 -- -- -- (9,379) -- --
------- ---------- --------- --------- --------- --------- -------
Income before allocation to
minority interest......... 28,034 827 5,341 4,976 (12,142) (4,284) 22,752
Income allocated to minority
interest.................. (78) -- -- -- -- -- (78)
------- ---------- --------- --------- --------- --------- -------
Net income.................. $27,956 $ 827 $5,341 $4,976 $ (12,142) $(4,284) $22,674
======= ========== ========= ========= ========= ========= =======
Net income per weighted
average Unit
outstanding............... $ 1.56 $ 1.00
======= =======
Weighted average Units
outstanding............... 17,932,769 22,638,660
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses for the year
ended December 31, 1996 for Tucker for the period preceding the Tucker
Acquisition.
(B) Increase represents historical operating revenues and expenses for the year
ended December 31, 1996 for the properties acquired during 1996 and 1997 for
the period during which the Operating Partnership did not own such
properties.
(C) Decrease represents the elimination of historical operating revenues and
expenses for the year ended December 31, 1996 for the properties disposed
during 1996 and 1997 for the period during which the Operating Partnership
owned such properties.
F-9
<PAGE> 45
(D) Mortgage and other interest has been increased to reflect the borrowings
estimated for property acquisitions during 1997 and 1996 for the period
which the Operating Partnership did not own such properties, net of the
reduction for the application of net proceeds from property dispositions
during 1997 and 1996 and the November 1996 Offering to pay down the line of
credit, for the period which the Operating Partnership owned such
properties, and for the period preceding the November 1996 Offering at an
interest rate of 7.000%, which was the Operating Partnership's borrowing
rate at August 31, 1997. A 0.125% change in the variable rate would result
in a change in the pro forma interest adjustment of approximately $44,000.
<TABLE>
<S> <C>
Increase in interest expense attributable to acquisition
activities....................................................... $ 6,279
Decrease in interest expense attributable to disposition
activities....................................................... (1,269)
Decrease in interest expense attributable to the November 1996
Offering......................................................... (2,640)
-------
Pro forma adjustment............................................... $ 2,370
=======
</TABLE>
(E) Depreciation and amortization has been increased to give effect to recording
the property acquisitions during 1997 and 1996 using a depreciable life of
39 years for the period which the Operating Partnership did not own such
properties, net of the reduction for properties disposed during 1997 and
1996 for the period which the Operating Partnership owned such properties as
follows:
<TABLE>
<S> <C>
Increase in depreciation and amortization attributable to
acquisition activities............................................ $2,170
Decrease in depreciation and amortization attributable to
disposition activities............................................ (256)
------
Pro forma adjustment................................................ $1,914
======
</TABLE>
F-10
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the consolidated balance sheets of Bradley Operating
Limited Partnership and Predecessor Business and Subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
capital, and cash flows for each of the years in the three-year period ended
December 31, 1996. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule III, Real
Estate and Accumulated Depreciation. These consolidated financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bradley
Operating Limited Partnership and Predecessor Business and Subsidiaries as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Chicago, Illinois
August 19, 1997
F-11
<PAGE> 47
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER DECEMBER
JUNE 30, 31, 31,
1997 1996 1995
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate investments -- at cost..................... $ 510,558 $ 490,133 $ 189,405
Accumulated depreciation and amortization.............. (36,708) (30,670) (27,591)
------- ------- -------
Net real estate investments............................ 473,850 459,463 161,814
Real estate investments held for sale.................. 10,000 10,285 --
Other assets:
Cash and cash equivalents............................ 3,579 7,462 697
Rents and other receivables, net of allowance for
doubtful accounts of $2,309 for 1997 and $1,636
for 1996 and $711 for 1995........................ 10,587 9,543 8,671
Deferred charges, net and other assets............... 14,964 15,531 9,363
------- ------- -------
Total assets................................. $ 512,980 $ 502,284 $ 180,545
======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loans......................................... 128,868 125,394 24,794
Line of credit......................................... 64,400 63,500 14,600
Accounts payable, accrued expenses and other
liabilities.......................................... 20,875 19,606 6,053
------- ------- -------
Total liabilities............................ 214,143 208,500 45,447
------- ------- -------
Minority interest...................................... 867 874 --
------- ------- -------
Partners' capital...................................... 297,970 292,910 135,098
------- ------- -------
Total liabilities and partners' capital...... $ 512,980 $ 502,284 $ 180,545
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE> 48
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEARS ENDED DECEMBER 31,
----------------------- ----------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME:
Rental income...................... $ 45,889 $ 33,201 $ 77,512 $ 36,405 $ 32,875
Other income....................... 642 555 1,327 167 112
------- ------- ------- ------- -------
46,531 33,756 78,839 36,572 32,987
------- ------- ------- ------- -------
EXPENSES:
Operations, maintenance and
management...................... 6,999 5,792 12,949 5,858 5,315
Real estate taxes.................. 9,627 7,688 16,787 8,726 8,070
Mortgage and other interest........ 7,231 5,554 13,404 4,705 4,524
Administrative and general......... 1,977 1,179 3,005 1,105 1,822
Corporate office relocation........ -- -- 409 -- --
Write-off of deferred financing and
acquisition costs............... -- 344 344 -- --
Depreciation and amortization...... 7,855 5,976 13,286 7,317 5,146
------- ------- ------- ------- -------
Total expenses............. 33,689 26,533 60,184 27,711 24,877
------- ------- ------- ------- -------
Income before gain on sale and
provision for loss on real estate
investments........................ 12,842 7,223 18,655 8,861 8,110
Gain on sale of property............. 3,073 9,379 9,379 -- 983
Provision for loss on real estate
investment......................... (1,300) -- -- -- --
------- ------- ------- ------- -------
Income before allocation to minority
interest........................... 14,615 16,602 28,034 8,861 9,093
Income allocated to minority
interest........................... (46) (29) (78) -- --
------- ------- ------- ------- -------
Net income........................... $ 14,569 $ 16,573 $ 27,956 $ 8,861 $ 9,093
======= ======= ======= ======= =======
Net income per Unit.................. $ 0.65 $ 1.04 $ 1.56 $ 0.90 $ 1.11
======= ======= ======= ======= =======
Weighted average Units outstanding... 22,260,759 15,914,362 17,932,769 9,863,767 8,191,831
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-13
<PAGE> 49
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR LIMITED GENERAL TOTAL
EQUITY PARTNERS PARTNER CAPITAL
----------- -------- ------- -------
<S> <C> <C> <C> <C>
Balance December 31, 1993.......................... 96,384 -- -- 96,384
Net income....................................... 9,093 -- -- 9,093
Cash distributions............................... (11,034) -- -- (11,034)
Capital contributions............................ 136 -- -- 136
-------- ------ ------- -------
Balance December 31, 1994.......................... 94,579 -- -- 94,579
Net income....................................... 8,861 -- -- 8,861
Cash distributions............................... (13,528) -- -- (13,528)
Capital contributions............................ 45,186 -- -- 45,186
-------- ------ ------- -------
Balance December 31, 1995.......................... 135,098 -- -- 135,098
Reclassification of Predecessor Business Owners'
Equity in connection with the Tucker
Acquisition................................... (135,098) -- 135,098 --
Net income....................................... -- 396 27,560 27,956
Cash distributions............................... -- (309) (23,695) (24,004)
Tucker capital contribution...................... -- 4,394 102,801 107,195
Reallocation of minority interest................ -- (283) 283 --
Capital contributions............................ -- -- 46,665 46,665
GP Units issued upon redemption of LP Units...... -- (52) 52 --
-------- ------ ------- -------
Balance December 31, 1996.......................... -- 4,146 288,764 292,910
Net income....................................... -- 388 14,181 14,569
Cash distributions............................... -- (398) (14,576) (14,974)
Capital contributions............................ -- -- 309 309
Reallocation of minority interest................ -- (1,367) 1,367 --
Acquisition of property for LP Units............. -- 5,169 -- 5,169
Other............................................ -- (13) -- (13)
-------- ------ ------- -------
Balance June 30, 1997 (unaudited).................. -- 7,925 290,045 297,970
======== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-14
<PAGE> 50
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------- -------------------------------
1997 1996 1996 1995 1994
-------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 14,569 $ 16,573 $ 27,956 $ 8,861 $ 9,093
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 7,855 5,976 13,286 7,317 5,146
Gain on sale of property......................... (3,073) (9,379) (9,379) -- (983)
Write-off of deferred financing and acquisition
costs.......................................... -- 344 344 -- --
Provision for loss on real estate investment..... 1,300 -- -- -- --
Income allocated to minority interest............ 46 29 78 -- --
Change in operating assets and liabilities, net of
the effect of the Tucker acquisition:
(Increase) decrease in rents and other
receivables...................................... (1,044) 1,797 1,659 (2,895) (1,428)
Increase in accounts payable, accrued expenses and
other liabilities................................ 1,052 1,521 613 362 2,822
Increase in deferred charges....................... (1,169) (1,909) (2,296) (482) (3,307)
-------- -------- --------- -------- --------
Net cash provided by operating activities... 19,536 14,952 32,261 13,163 11,343
-------- -------- --------- -------- --------
Cash flows from investing activities:
Expenditures for real estate investments........... (20,187) (4,240) (18,730) (9,410) (36,253)
Purchase of Tucker, net of cash acquired........... -- (1,825) (2,130) -- --
Excess proceeds from like-kind exchange of
properties....................................... -- 4,145 4,145 -- 2,600
Decrease in investing-related deferred charges..... -- -- -- 106 --
Net proceeds from sale of property................. 11,310 -- -- -- --
Expenditure for purchase of advisory business...... -- -- -- (649) --
-------- -------- --------- -------- --------
Net cash used by investing activities....... (8,877) (1,920) (16,715) (9,953) (33,653)
-------- -------- --------- -------- --------
Cash flows from financing activities:
Borrowings from lines of credit.................... 20,900 110,500 132,500 15,300 38,700
Payments under lines of credit..................... (20,000) (76,208) (129,708) (39,700) (5,800)
Cost associated with modified line of credit....... (391) -- -- -- --
Expenditures to acquire new line of credit......... -- (1,468) (1,468) -- --
Pay-off of Westwind mortgage loans with proceeds... -- -- -- (4,712) --
Pay-off of secured mortgage loans with borrowings
from lines of credit............................. -- (32,234) (32,234) -- --
Distributions paid................................. (14,974) (10,232) (24,004) (13,528) (11,034)
Distributions to minority interest holders......... (66) (38) (101) -- --
Principal payments on mortgage loans............... (320) (187) (431) (336) (449)
Reorganization costs............................... -- -- -- (617) --
Capital contributions.............................. 309 97 46,665 40,887 136
-------- -------- --------- -------- --------
Net cash provided by (used in) financing
activities................................ (14,542) (9,770) (8,781) (2,706) 21,553
-------- -------- --------- -------- --------
Net increase (decrease) in cash and cash
equivalents...................................... (3,883) 3,262 6,765 504 (757)
Cash and cash equivalents:
Beginning of period.............................. 7,462 697 697 193 950
-------- -------- --------- -------- --------
End of period...................................... $ 3,579 $ 3,959 $ 7,462 $ 697 $ 193
======== ======== ========= ======== ========
Supplemental cash flow information:
Interest paid, net of amount capitalized......... $ 7,241 $ 5,097 $ 13,366 $ 4,854 $ 4,218
======== ======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-15
<PAGE> 51
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ORGANIZATION
Bradley Operating Limited Partnership and its Predecessor Business (the
"Operating Partnership") is the entity through which Bradley Real Estate, Inc.
(the "Company"), a self-administered and self-managed real estate investment
trust ("REIT"), conducts substantially all of its business and owns (either
directly or through subsidiaries) substantially all of its assets. The objective
of the Operating Partnership is to be a dominant owner of grocery-anchored, open
air shopping centers in the Midwestern region of the United States. As used
herein, the term "Bradley Real Estate, Inc." refers also to its predecessor
Bradley Real Estate Trust, and the term "Company" or "Bradley" as used herein
refers to Bradley Real Estate, Inc. and its subsidiaries on a consolidated basis
(including Bradley Operating Limited Partnership and its subsidiaries) or, where
the context so requires, Bradley Real Estate, Inc. only. The term "Operating
Partnership" as used herein means Bradley Operating Limited Partnership and its
subsidiaries on a consolidated basis, or, where the context so requires, Bradley
Operating Limited Partnership only. The Predecessor Business refers to the
accounts and operations of the Company, exclusive of operating items associated
with its existence as a public company.
Bradley Real Estate, Inc., has elected to qualify as a real estate
investment trust ("REIT") for federal income tax purposes since its organization
in 1961. The Company believes it is the nation's oldest continually qualified
real estate investment trust. On March 15, 1996, the Company completed the
acquisition (the "Tucker Acquisition") of Tucker Properties Corporation
("Tucker"). The acquisition was consummated through the issuance by the Company
of approximately 7.4 million shares of its Common Stock valued at $13.96 per
share, and was accounted for using the purchase method of accounting. Tucker
held title to all of its properties through two partnerships; eight properties
through Tucker Operating Limited Partnership ("TOP"), in which Tucker had a
95.9% general partnership interest, and six properties through Tucker Financing
Partnership ("TFP"), a general partnership of which TOP owned 99% and a
wholly-owned Tucker corporate subsidiary owned the remaining 1%. Upon the
acquisition of Tucker, the Company succeeded to Tucker's interest in TOP, TFP
and the wholly-owned Tucker corporate subsidiary, and the name "Bradley" was
substituted for "Tucker" in each subsidiary and partnership. In August 1997, the
Company contributed its interests in the 18 properties it held directly to the
Operating Partnership, two of which are held for sale.
The Operating Partnership therefore succeeds Bradley as the entity through
which the Company will expand its ownership and operation of properties
primarily located in the Midwestern region of the country.
At August 31, 1997, the Operating Partnership owned, directly or
indirectly, 44 properties aggregating over 8.6 million square feet of rentable
space, substantially all of which are located in Midwest markets, making the
Operating Partnership one of the leading owners and operators of community and
neighborhood shopping centers in this region. The portfolio of properties owned
by the Operating Partnership has approximately 1,000 tenants, with no single
tenant accounting for more than 6.5% of gross revenues. The majority of the
properties have been constructed or renovated within the past five to eight
years. As of August 31, 1997, the Operating Partnership's portfolio was
approximately 93% occupied. (Properties owned by the Operating Partnership from
time to time are hereinafter sometimes referred to individually as a "Property"
and collectively referred to as the "Properties" or the "Portfolio.")
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements are prepared on the accrual basis in accordance
with generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
F-16
<PAGE> 52
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from these estimates.
The consolidated financial statements of the Operating Partnership include
the accounts and operations of the Operating Partnership, Bradley Financing
Partnership, and the general partnership interest in the joint venture that owns
Williamson Square Shopping Center. Due to the Operating Partnership's ability as
general partner to directly or indirectly control each of these subsidiaries,
each is consolidated for financial reporting purposes.
Rents and Other Receivables
Management has determined that all of the Operating Partnership's leases
with its various tenants are operating leases. Revenues for such leases are
recognized using the straight-line method over the remaining term of the leases.
Real Estate Investments
Real estate investments are carried at cost less accumulated depreciation.
The provision for depreciation and amortization has been calculated using the
straight-line method based upon the following estimated useful lives of assets:
<TABLE>
<S> <C>
Buildings................................................ 31.5 -- 39 years
Improvements and alterations............................. 2 -- 39 years
</TABLE>
Expenditures for maintenance, repairs and betterments that do not
materially prolong the normal useful life of an asset are charged to operations
as incurred and amounted to $2,056,000, $874,000, and $626,000 for 1996, 1995
and 1994, respectively.
Additions and betterments that substantially extend the useful lives of the
properties are capitalized. Upon sale or other disposition of assets, the cost
and related accumulated depreciation and amortization are removed from the
accounts and the resulting gain or loss, if any, is reflected in net income.
Real estate investments include capitalized interest and other costs on
significant construction in progress. Capitalized costs are included in the cost
of the related asset and charged to operations through depreciation over the
asset's estimated useful life. Interest capitalized amounted to $150,000,
$137,000, and $89,000 in 1996, 1995 and 1994, respectively.
Management reviews each property for impairment whenever events or changes
in circumstances indicate that the carrying value of a property may not be
recoverable. The review of recoverability is based on an estimate of
undiscounted future cash flows expected to result from its use and eventual
disposition. If impairment exists due to the inability to recover the carrying
value of a property, an impairment loss is recorded to the extent that the
carrying value of the property exceeds its estimated fair value.
On March 31, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("Statement No. 121"). This Statement provides guidance for recognition and
measurement of impairment of long-lived assets, certain identifiable intangibles
and goodwill related both to assets to be held and used and assets to be
disposed of.
Statement No. 121 is effective for financial statements issued for fiscal
years beginning after December 15, 1995. Thus, the Operating Partnership adopted
Statement No. 121 as of January 1, 1996. Adoption of Statement No. 121 had no
effect on the financial position or results of operations of the Operating
Partnership.
F-17
<PAGE> 53
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Real Estate Investments Held for Sale
Real estate investments held for sale are carried at the lower of cost or
the fair value less cost to sell. Depreciation and amortization are suspended
during the sale period.
Cash Equivalents
Cash and cash equivalents consist of cash in banks and short-term
investments with original maturities of less than ninety days.
Derivative Transactions
The Operating Partnership may enter into derivative financial instrument
transactions in order to mitigate its interest rate risk on a related financial
instrument. The Operating Partnership has designated these derivative financial
instruments as hedges and applies deferral accounting, as the instrument to be
hedged exposes the Operating Partnership to interest rate risk and the
derivative financial instrument reduces that exposure. Gains and losses related
to the derivative financial instrument are deferred and amortized over the terms
of the hedged instrument. If a derivative terminates or is sold, the gain or
loss is deferred and amortized over the remaining life of the derivative.
Derivatives that do not satisfy the criteria above are carried at market value,
and any changes in market value are recognized in other income. The Operating
Partnership has only entered into derivative transactions that satisfy the
aforementioned criteria.
Deferred Charges
A majority of deferred charges consist of agency commissions incurred in
leasing the Operating Partnership's properties. Such charges are amortized using
the straight-line method over the term of the related lease. In addition,
deferred charges include costs incurred in connection with securing long-term
debt, including the costs of entering into interest rate protection agreements.
Such costs are amortized over the terms of the related agreements.
Earnings Per Unit
The Operating Partnership's LP Units are exchangeable for shares of Bradley
Common Stock on a one-for-one basis. Accordingly, the number of Bradley common
shares outstanding during periods prior to the Tucker Acquisition are equivalent
to Units of the Predecessor Business, and the number of Units outstanding during
periods subsequent to the Tucker Acquisition are equivalent to the number of
outstanding shares of Bradley Common Stock plus the number of outstanding LP
Units. Earnings per Unit are based on the weighted average number of Units
outstanding during each year exclusive of outstanding Bradley stock options
(common unit equivalents), which would not materially affect earnings per common
unit. Per Unit data and weighted average Units outstanding as reported on the
accompanying financial statements for 1994 reflect a one-for-two reverse Bradley
share split effected on October 17, 1994.
Stock Option Plans
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("Statement No. 123"). Statement No. 123 establishes financial
accounting and reporting standards for stock-based employee compensation plans.
This includes all arrangements by which employees receive shares of stock or
other equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. Statement No.
123 defines a fair value based method of accounting for an employee stock option
or similar equity instrument and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation
F-18
<PAGE> 54
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cost using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("Opinion No. 25"). The Operating Partnership elected to continue
using Opinion No. 25 and make pro forma disclosures of net income and earnings
per Unit as if the fair value method of accounting defined in Statement No. 123
had been applied. See Note 8 for the required disclosures.
Unaudited Interim Periods
The accompanying interim financial statements have been prepared by the
Operating Partnership, without audit, and in the opinion of management reflect
all normal recurring adjustments necessary for a fair presentation of results
for the unaudited interim period presented. Certain information in footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
NOTE 2 -- SUPPLEMENTAL CASH FLOW DISCLOSURE
In January 1997, a property was purchased for approximately $5.4 million
which included the issuance of 281,300 LP Units which the holders may ultimately
exchange for 281,300 shares of Bradley's common stock, valued on such date at
$18.375 per share.
Also in January 1997, a property was purchased for approximately $4.8
million which included the Operating Partnership's assumption of a $3.8 million
non-recourse mortgage note.
The merger acquisition of Tucker on March 15, 1996 resulted in the
following non-cash effect on the Operating Partnership's 1996 balance sheet:
<TABLE>
<S> <C>
Assets acquired............................................. $(310,443,000)
Liabilities assumed......................................... 204,615,000
Capital stock issued, at $.01 par value..................... 75,000
Additional paid-in capital.................................. 103,623,000
-------------
Purchase of Tucker, net of cash acquired.................... $ (2,130,000)
=============
</TABLE>
The like-kind exchange of Nicollet Avenue and Brookdale Square in March
1996, resulted in a decrease in other net operating assets of $1,649,000 and the
assumption of net operating liabilities of $173,000.
During 1996, 3,738 shares of Bradley Common Stock were issued upon the
conversion of an equivalent number of LP Units held by the limited partners.
In 1995, Bradley issued 325,000 shares of Common Stock having a value of
$4,916,000 in connection with the acquisition of the REIT advisory business of
its former advisor. The business, consisting of a nominal amount of office
equipment and information systems, was contributed to the Operating Partnership.
In 1995, a property was purchased for $5,261,000 which included the
assumption of $2,094,000 in non-recourse mortgages.
In 1994, a property was purchased for $7,496,000 which included the
assumption of $4,980,000 in non-recourse mortgages.
F-19
<PAGE> 55
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- REAL ESTATE INVESTMENTS
The following is a summary of real estate investments that are held for
lease at December 31:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Land............................................ $ 97,904,000 $ 35,781,000
Buildings....................................... 332,671,000 88,674,000
Improvements and alterations.................... 55,041,000 63,098,000
Construction in progress........................ 4,517,000 1,852,000
------------ ------------
490,133,000 189,405,000
Accumulated depreciation and amortization....... (30,670,000) (27,591,000)
------------ ------------
$459,463,000 $161,814,000
============ ============
</TABLE>
The following table sets forth the detail with respect to the properties
with ownership interests held by the Operating Partnership at December 31, 1996.
The aggregate cost of those properties for federal income tax purposes was
approximately $498,738,000.
<TABLE>
<CAPTION>
INITIAL COST
---------------------------- CAPITALIZED
BUILDINGS SUBSEQUENT
PROPERTY AND TO
NO. SHOPPING CENTERS ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- -------------------------------- ------------ ----------- ------------ -----------
<C> <S> <C> <C> <C> <C>
ILLINOIS
1. Rivercrest Center Crestwood,
IL $ -- $ 7,349,000 $ 17,147,000 $ 1,951,000
2. Westview Center Hanover Park,
IL -- 6,417,000 14,973,000 1,139,000
3. Crossroads Center Fairview
Heights, IL -- 2,846,000 8,538,000 651,000
4. Commons of Chicago Ridge and
Annex Chicago Ridge, IL -- 5,087,000 15,113,000 986,000
5. Commons of Crystal Lake
Crystal Lake, IL ** 3,546,000 20,093,000 65,000
6. Heritage Square Naperville, IL ** 8,047,000 17,099,000 --
7. Meadows Town Mall Rolling
Meadows, IL -- 1,036,000 5,965,000 749,000
8. Sheridan Village Peoria, IL ** 2,841,000 19,010,000 156,000
9. High Point Centre Lombard, IL -- 2,969,000 16,822,000 65,000
10. Rollins Crossing Round Lake
Beach, IL -- 1,996,000 8,509,000 261,000
MINNESOTA
11. Har Mar Mall Roseville, MN -- 6,551,000 15,263,000 8,461,000
12. Sun Ray Shopping Center St.
Paul, MN -- 82,000 2,945,000 11,933,000
</TABLE>
F-20
<PAGE> 56
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST
--------------------------
CAPITALIZED
BUILDINGS SUBSEQUENT
PROPERTY AND TO
NO. SHOPPING CENTERS ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- -------------------------------- ----------- ------------ ------------ -----------
<C> <S> <C> <C> <C> <C>
13. Richfield Hub Shopping Center
Richfield, MN $ 5,355,000 $ 3,000,000 $ 5,390,000 $ 5,148,000
14. Brookdale Square Shopping Center
Brooklyn, MN -- 2,230,000 6,694,000 14,000
15. Hub West Shopping Center
Richfield, MN 4,942,000 757,000 345,000 4,165,000
16. White Bear Hills White Bear
Lake, MN -- 750,000 3,762,000 484,000
17. Terrace Mall Robbinsdale, MN -- 630,000 1,706,000 2,369,000
18. Burning Tree Plaza Duluth, MN -- 609,000 3,744,000 3,961,000
19. Westwind Plaza Minnetonka, MN -- 1,949,000 5,547,000 35,000
INDIANA
20. Speedway SuperCenter and Outlots
Speedway, IN ** 6,098,000 34,555,000 1,151,000
21. The Village Shopping Center
Gary, IN -- 1,152,000 6,530,000 190,000
22. Washington Lawndale Commons
Evansville, IN ** 2,488,000 13,062,000 89,000
KANSAS
23. Santa Fe Square Olathe, KS -- 1,999,000 7,089,000 --
TENNESSEE
24. Williamson Square Franklin, TN 12,902,000 2,570,000 14,561,000 281,000
WISCONSIN
25. Mequon Pavilions Mequon, WI -- 2,761,000 15,647,000 4,000
KENTUCKY
26. Stony Brook Louisville, KY -- 3,106,000 9,319,000 89,000
MISSOURI
27. Grandview Plaza Florissant, MO -- 414,000 2,205,000 14,870,000
NEW MEXICO
28. St. Francis Plaza Santa Fe, NM 1,945,000 1,578,000 3,683,000 --
</TABLE>
F-21
<PAGE> 57
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST
--------------------------
CAPITALIZED
BUILDINGS SUBSEQUENT
PROPERTY AND TO
NO. SHOPPING CENTERS ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- -------- -------------------------------- ----------- ------------ ------------ -----------
<C> <S> <C> <C> <C> <C>
RETAIL/OFFICE BUILDING
29. One North State Chicago, IL $ ** $16,765,000 $ 37,317,000 $ 610,000
----------- ------------ ----------- -----------
Real estate investments held for lease 25,144,000 97,623,000 332,633,000 59,877,000
Real estate investments held for sale -- 735,000 3,079,000 13,684,000
----------- ------------ ----------- -----------
Total real estate investments $ 25,144,000 $98,358,000 $335,712,000 $73,561,000
=========== ============ =========== ===========
</TABLE>
- ---------------
** The property is encumbered by the $100 million REMIC Note. See Note 4 for
further information.
F-22
<PAGE> 58
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
GROSS AMOUNT CARRIED AT DECEMBER 31, 1996
---------------------------------------------
BUILDINGS LIVES ON WHICH
PROPERTY AND ACCUMULATED DATE DEPRECIATION
NO. LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
- -------- ----------- ------------ ------------ ----------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
1. $ 7,349,000 $ 19,098,000 $ 26,447,000 $ 1,528,000 1994 7 -- 39
2. 6,404,000 16,125,000 22,529,000 1,706,000 1993 4 -- 39
3. 2,878,000 9,157,000 12,035,000 1,184,000 1992 2 -- 31.5
4. 5,087,000 16,099,000 21,186,000 289,000 1996 3 -- 39
5. 3,546,000 20,158,000 23,704,000 402,000 1996 4 -- 39
6. 8,047,000 17,099,000 25,146,000 340,000 1996 3 -- 39
7. 1,036,000 6,714,000 7,750,000 138,000 1996 3 -- 39
8. 2,841,000 19,166,000 22,007,000 395,000 1996 4 -- 39
9. 2,969,000 16,887,000 19,856,000 319,000 1996 10 -- 39
10. 1,996,000 8,770,000 10,766,000 173,000 1996 3 -- 39
11. 6,786,000 23,489,000 30,275,000 2,892,000 1992 5 -- 39
12. 91,000 14,869,000 14,960,000 7,531,000 1961 3 -- 33
13. 3,000,000 10,538,000 13,538,000 2,854,000 1988 2 -- 39
14. 2,230,000 6,708,000 8,938,000 132,000 1996 3 -- 39
15. 757,000 4,510,000 5,267,000 684,000 1991 31.5
16. 755,000 4,241,000 4,996,000 314,000 1993 39
17. 630,000 4,075,000 4,705,000 504,000 1993 6 -- 39
18. 609,000 7,705,000 8,314,000 703,000 1993 5 -- 39
19. 1,949,000 5,582,000 7,531,000 312,000 1994 39
20. 6,098,000 35,706,000 41,804,000 673,000 1996 2 -- 39
21. 1,152,000 6,720,000 7,872,000 136,000 1996 8 -- 39
22. 2,488,000 13,151,000 15,639,000 275,000 1996 3 -- 39
23. 1,999,000 7,089,000 9,088,000 -- 1996 3 -- 39
24. 2,570,000 14,842,000 17,412,000 309,000 1996 3 -- 39
25. 2,761,000 15,651,000 18,412,000 312,000 1996 5 -- 39
26. 3,106,000 9,408,000 12,514,000 193,000 1996 5 -- 39
27. 427,000 17,062,000 17,489,000 5,389,000 1971 2 -- 33
28. 1,578,000 3,683,000 5,261,000 157,000 1995 3 -- 39
29. 16,765,000 37,927,000 54,692,000 826,000 1996 3 -- 39
----------- ------------ ------------ -----------
97,904,000 392,229,000 490,133,000 30,670,000
740,000 16,758,000 17,498,000 7,213,000
----------- ------------ ------------ -----------
$98,644,000 $408,987,000 $507,631,000 $37,883,000
=========== ============ ============ ===========
</TABLE>
During the first half of 1997, the Operating Partnership acquired five
shopping centers in separate transactions for a total purchase price of
approximately $26.5 million and sold one property that had been held for sale
for a net sales price of approximately $11.3 million. Subsequent to June 30,
1997, the Operating Partnership completed the acquisition of a portfolio of five
shopping centers located in Illinois and Iowa for approximately $28.8 million
and four additional shopping centers located in Indiana, Iowa, Wisconsin and
Missouri in separate transactions for approximately $40.3 million.
Financings for the five shopping center acquisitions completed during the
first half of 1997 included $17,500,000 in cash provided by the line of credit,
the assumption of a $3,800,000 non-recourse mortgage note, and $5,200,000 via
the issuance of 281,300 LP Units to the former owners of a shopping center.
Financing for the nine properties acquired subsequent to June 30, 1997 included
$60,000,000 drawn from the line of credit
F-23
<PAGE> 59
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(including amounts used to pay-off at closing an assumed $6,900,000 non-recourse
mortgage) and $9,000,000 through the issuance of 478,619 LP Units to the former
owners of a shopping center.
As of June 30, 1997, three properties -- Village Shopping Center, Augusta
Plaza and 585 Boylston Street -- were held for sale. The net book value of the
three properties, $10.0 million, has been reclassified on the balance sheet from
"Real estate investments" to "Real estate investments held for sale." The sales
of these properties are expected to be completed during 1997. The properties
held for sale are no longer depreciated for financial reporting purposes. The
balance as of December 31, 1996, $10.3 million, included Hood Commons, located
in Derry, New Hampshire, which was sold in March 1997, and did not include
Village Shopping Center, which was not placed for sale until 1997.
As of June 30, 1997, the Operating Partnership recorded a provision for
loss on its investment in Meadows Town Mall, located in Rolling Meadows,
Illinois. While undertaking a redevelopment plan for the Center, the Operating
Partnership received an unsolicited offer from a prospective purchaser of the
property. Management accepted the offer with the intention of redeploying
proceeds from the sale toward the acquisition of another property or properties.
The provision of $1,300,000 represents the difference between the sales price,
net of closing costs, and the carrying value of the property. The property was
reclassified as held for sale on July 1, 1997. The sale was completed in August
1997.
Net proceeds of approximately $17,200,000 in the aggregate from the sales
of Hood Commons, and from the sale of Meadows Town Mall, were used to pay-down
the line of credit.
NOTE 4 -- MORTGAGE LOANS AND LINE OF CREDIT
Mortgage loans outstanding at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Mortgage loan collateralized by Richfield Hub Shopping Center, at
9.875%, maturing September 1998.................................. $ 5,355,000 $ 5,431,000
Mortgage loan collateralized by Hub West Shopping Center, at
9.875%, maturing September 1998.................................. 4,942,000 5,014,000
Mortgage loan collateralized by St. Francis Plaza, at 8.125%,
maturing December 2008........................................... 1,945,000 2,029,000
Mortgage loans collateralized by Sun Ray Shopping Center, at rates
ranging from 9.625% to 11.75%. These loans were paid-off on
January 2, 1996.................................................. -- 12,320,000
Mortgage loan collateralized by Williamson Square, at 8.000%,
maturing August 2005............................................. 12,902,000 --
Mortgage note collateralized by six properties, at 7.230%, maturing
September 2000, including unamortized premium of $250,000........ 100,250,000 --
----------- -----------
$125,394,000 $24,794,000
=========== ===========
</TABLE>
The net book value of real estate pledged as collateral for loans was
approximately $214,192,000 (see Note 3). The mortgage loans collateralized by
Richfield Hub Shopping Center and Hub West Shopping Center are
cross-collateralized.
In connection with the Tucker Acquisition, the Operating Partnership
assumed the obligations under a $100 million mortgage note with a fair value of
$100,300,000 at the date of acquisition. The mortgage note is collateralized by
Commons of Crystal Lake, Heritage Square, Sheridan Village, Speedway SuperCenter
(excluding Outlots), Washington Lawndale Commons and One North State. The
mortgage note was issued to a trust qualifying as a real estate mortgage
investment conduit for federal income tax purposes (the "REMIC
F-24
<PAGE> 60
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Note"). Pursuant to terms of the indenture governing the REMIC Note, prior to
October 1997, principal payments on the REMIC Note cannot be made and the
properties collateralizing the REMIC Note cannot be sold. If the Operating
Partnership wishes either to repay all or part of the $100 million principal of
the REMIC Note or to sell any of the properties collateralizing the REMIC Note
after such date, the Operating Partnership will incur significant prepayment
penalties. The prepayment of principal of the REMIC Note requires an additional
payment of the greater of either (i) 1% of the amount of principal being prepaid
or (ii) the product of (A) the difference between the outstanding principal
balance of the REMIC Note before prepayment and the present value of all
remaining interest and principal payments thereon and (B) the amount of
principal being prepaid divided by the outstanding principal balance of the
REMIC Note. After October 1997, in order to release any of the properties
collateralizing the REMIC Note from the lien, the REMIC indenture requires that
certain additional conditions be met, including that (i) the aggregate amount of
principal repaid on the REMIC Note equals at least 125% of the amount of
principal allocated to the property to be released and (ii) certain debt service
coverage ratios continue to be satisfied.
On March 15, 1996, the Operating Partnership entered into a new $150
million unsecured revolving credit facility with The First National Bank of
Boston and other bank lenders, replacing a previous $65 million line of credit
that had been secured by a blanket mortgage on six properties. The new line bore
interest at a rate equal to the lower of the bank's base rate or 1.75% over
LIBOR. Additionally, the facility stipulated a commitment fee ranging from
0.125% to 0.250% per annum of the unfunded line of credit balance depending on
the outstanding balance during a calendar quarter. The rates available under the
line would become more favorable in the event that certain loan-to-value tests
were met or the Operating Partnership received an investment grade unsecured
debt rating. At December 31, 1996, the weighted average interest rate on the
line of credit was 7.51%. In addition to replacing outstanding borrowings under
the Operating Partnership's and Tucker's previously outstanding secured lines of
credit, the facility is available for the acquisition, development, renovation
and expansion of new and existing properties and for other working capital
purposes.
The line of credit contains certain financial and operational covenants
that, among other provisions, limit the amount of secured and unsecured
indebtedness the Operating Partnership may have outstanding at any time, and
provide for the maintenance of certain financial tests including minimum net
worth and debt service coverage requirements. The Operating Partnership believes
that such covenants will not adversely affect the Operating Partnership's
business or the operation of its properties.
In March 1997, the Operating Partnership amended the line of credit
facility, extending the maturity date to March 15, 1999, and reducing the
interest rate to the lower of the bank's base rate or 1.50% over LIBOR. The
amended line of credit agreement also provides more flexible covenants compared
with the previous agreement.
In August 1997, Standard & Poor's Investment Services, a national credit
rating agency, announced that it assigned an investment grade corporate credit
rating of "BBB-" to the Operating Partnership. As a result, the interest rate on
the line of credit was further reduced to the lower of the bank's base rate or
1.375% over LIBOR, in accordance with the line of credit agreement, representing
a decrease in the interest margin on the line of credit of 0.375% from the rate
in effect at December 31, 1996.
In order to reduce the Operating Partnership's (and thus the lenders')
exposure to the risks associated with floating rate debt, the line of credit
requires that the Operating Partnership maintain interest rate protection, at a
rate satisfactory to the lead lender, with respect to at least $100 million of
indebtedness. The Operating Partnership uses interest rate caps and swaps to
limit its exposure to increases in interest rates on its floating rate debt. The
Operating Partnership does not use them for trading or speculative purposes.
F-25
<PAGE> 61
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1996, the Operating Partnership was party to interest rate
cap agreements which entitle the Operating Partnership to receive on a quarterly
basis, the amount, if any, by which the applicable three-month LIBOR Rate (as
defined in the interest rate protection agreement) for the protected amount
exceeds the applicable cap rate for the protected amount. The Operating
Partnership was also party to a swap agreement whereby the Operating Partnership
receives or makes quarterly payments based on the differential between the
three-month LIBOR Rate (as defined in the interest rate protection agreement)
for the protected amount and the applicable fixed swap rate for the protected
amount.
The following summarizes the interest rate protection agreements
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
NOTIONAL MAXIMUM TYPE OF EFFECT ON FAIR VALUE
AMOUNT RATE CONTRACT MATURITY INTEREST EXPENSE DECEMBER 31, 1996
- ------------- ------- -------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$43,000,000 6.00% Swap April 14, 1998 $149,000 $(116,000)
40,000,000 7.50% Cap March 18, 1998 -- 16,000
17,000,000 7.50% Cap April 11, 1998 -- 8,000
-------------- --------
$100,000,000 $149,000 $ (92,000)
============== ========
</TABLE>
The fair values of the interest rate protection agreements are estimated
using option-pricing models that value the potential for the interest rate
protection agreements to become in-the-money through changes in interest rates
during the remaining terms of the agreements. The negative fair value represents
the estimated amount the Operating Partnership would have to pay to cancel the
contract or transfer it to other parties. The aggregate unamortized cost of the
interest rate protection agreements was $195,000 at December 31, 1996.
Scheduled principal payments on mortgage loans and the line of credit
outstanding at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997................................................. $ 442,000
1998................................................. 73,972,000
1999................................................. 344,000
2000................................................. 100,621,000
2001................................................. 403,000
Thereafter........................................... 13,112,000
------------
$188,894,000
============
</TABLE>
NOTE 5 -- RENTALS UNDER OPERATING LEASES
Annual minimum future rentals to be received under non-cancelable operating
leases in effect at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997................................................. $ 56,997,000
1998................................................. 52,024,000
1999................................................. 48,267,000
2000................................................. 43,829,000
2001................................................. 38,747,000
Later Years.......................................... 204,304,000
------------
$444,168,000
============
</TABLE>
F-26
<PAGE> 62
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total minimum future rentals do not include contingent rentals under
certain leases based upon lessees' sales volume. Contingent rentals earned
amounted to approximately $1,397,000, $1,083,000, and $1,121,000 in 1996, 1995
and 1994, respectively. Certain leases also require lessees to pay all or a
portion of real estate taxes and operating costs, amounting to $21,748,000,
$10,774,000, and $9,259,000 in 1996, 1995 and 1994, respectively.
No tenant accounted for as much as 10% of rental income in 1996, 1995 or
1994. One North State accounted for more than 10% of the Operating Partnership's
rental income during 1996.
NOTE 6 -- FEDERAL INCOME TAXES
The Operating Partnership is not liable for federal income taxes and each
partner reports its allocable share of income and deductions on its respective
return; accordingly no provision for income taxes is required in the
consolidated financial statements.
NOTE 7 -- PARTNERS' CAPITAL
In general, the Operating Partnership Agreement provides for operating
distributions to be made, subject to any priority distribution rights of any
class or series of Preferred Units, first to the limited partners in an amount
equal to the lesser of (i) 99% of the cash available for distribution from the
Operating Partnership and (ii) an amount calculated in a manner intended to
provide the limited partners with distributions on each of their LP Units equal
to the dividend paid for the same period on a share of the Company's Common
Stock. Any remaining cash from operations available for distribution will be
distributed to the Company as general partner. Subject to any priority
distribution rights of any class or series of Preferred Units, the Operating
Partnership Agreement generally provides for liquidating distributions to the
limited partners equal to either (i) an amount per Unit intended to equal the
amount distributed with respect to each share of the Company's Common Stock upon
the concurrent liquidation of the Operating Partnership and the Company or (ii)
in the event that the Operating Partnership is liquidated other than in
connection with the liquidation to the Company, an amount per Unit equal to the
then market price of a share of the Company's Common Stock; provided, however,
that the limited partners will not receive more than 99% of any proceeds
available for distribution from the liquidation of the Operating Partnership.
Any remaining liquidation proceeds will be distributed to the Company as the
general partner. Income, gains, and losses are allocated to the partners holding
Units in proportion to their ownership interests during the period.
In January 1995, Bradley issued 325,000 shares of Common Stock in
conjunction with the purchase of the REIT advisory business of its former
advisor. The business, consisting of a nominal amount of office equipment and
information systems, was contributed to the Operating Partnership. Additionally,
the employees of the advisory business became employees of Bradley. In April
1995, Bradley issued 182,500 shares of Common Stock at a price of $17 per share,
which proceeds were applied to the acquisition of St. Francis Plaza, which
property was contributed to the Operating Partnership. In July 1995, Bradley
completed a public share offering of 2,500,000 shares of Common Stock at a price
of $16 per share. Net proceeds from the offering of approximately $37,405,000
(net of offering costs of approximately $2,595,000), were contributed to the
Operating Partnership and were used to pay-down the bank line of credit and
mortgage notes that had been assumed in connection with the purchase of certain
properties.
In November 1996, Bradley completed a public offering of 2,875,000 shares
of Common Stock (including shares issued pursuant to the exercise of the
underwriter over-allotment option) at a price of $16.50 per share. Net proceeds
from the offering, approximately $44,851,000 (net of offering costs of
$2,618,000) were contributed to the Operating Partnership and were used to
reduce outstanding indebtedness incurred under the line of credit.
F-27
<PAGE> 63
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under Bradley's Dividend Reinvestment and Share Purchase Plan in effect
since 1993, share owners of record owning at least 100 shares may elect to
reinvest cash dividends and make limited additional cash payments (minimum $100,
maximum $2,500 per quarter) to purchase newly issued Bradley shares without
brokerage fees or other transaction costs, at a 3% discount from market prices
(as determined in the Plan). During 1996, 1995 and 1994, Bradley issued 13,082,
16,714, and 8,530 shares, respectively, under this Plan. The net proceeds
resulting from these transactions were contributed to the Operating Partnership.
The capital contributions arising from the transactions described in this
Note result in the issuance to Bradley of general partner Units (which are not
convertible) ("GP Units") in amounts equal to the number of shares issued by
Bradley in each respective transaction.
NOTE 8 -- STOCK OPTION PLAN
Bradley is obligated to contribute to the Operating Partnership all
proceeds from the exercise of options or other stock-based awards granted under
Bradley's Stock Option and Incentive Plan, and Bradley's interest as general
partner in the Operating Partnership evidenced by GP Units will be adjusted so
as to increase the number of GP Units by a number equivalent to the number of
shares of Common Stock issued pursuant to awards under the Plan. The Plan
authorizes options and other stock-based awards for up to 5% of Bradley's shares
outstanding from time to time. During 1996 and 1995, options for 17,500 and
217,500 shares, respectively, were granted under this Plan. All of the options
granted in 1996 were pursuant to an amendment to the Plan approved by the share
owners that year, which provides for an annual option grant for 2,500 shares to
each non-employee director at an exercise price equal to the fair market value
of the subject shares at the date of grant. At December 31, 1996 and 1995,
options for 180,000 and 295,251 shares, respectively, remained outstanding under
this and a prior stock option plan.
A committee of Bradley's Board of Directors administers the Plan and is
responsible for selecting persons eligible for awards and for determining the
terms and duration of any award.
Bradley has estimated the fair value of each option granted on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1996 and 1995, respectively: dividend
yield of 8.96% and 8.87%; expected volatility of 23% and 18%; risk-free interest
rates of 6.1% for both years; and expected lives of five years for both years.
Bradley applies Opinion No. 25 and related Interpretations in accounting for
awards under the Plan. Accordingly, no compensation cost relating to the stock
option plans has been recognized in the accompanying financial statements. Had
compensation cost for the Plan been determined consistent with Statement No.
123, net income and earnings per Unit would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net income
As Reported..................................... $27,956,000 $ 8,861,000
Pro Forma....................................... $27,935,000 $ 8,661,000
Net income per Unit
As Reported..................................... $ 1.56 $ 0.90
Pro Forma....................................... $ 1.56 $ 0.88
</TABLE>
The effect of applying Statement No. 123 for disclosing compensation costs
under such pronouncement may not be representative of the effects on reported
net income for future years.
F-28
<PAGE> 64
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of option transactions during the periods covered by these
financial statements is as follows:
<TABLE>
<CAPTION>
EXERCISE PRICES
SHARES PER SHARE
-------- -----------------
<S> <C> <C>
Outstanding at December 31, 1993 and 1994.............. 91,375 $11.50 - $22.00
Granted.............................................. 217,500 $14.875 - $16.50
Expired.............................................. (4,624) $16.66 - $21.25
Exercised............................................ (9,000) $11.50 - $14.875
--------
Outstanding at December 31, 1995....................... 295,251 $11.50 - $22.00
Granted.............................................. 17,500 $14.7375
Expired.............................................. (24,251) $14.75 - $22.00
Exercised............................................ (108,500) $11.50 - $17.00
--------
Outstanding at December 31, 1996....................... 180,000 $11.50 - $21.25
========
</TABLE>
All options outstanding at December 31, 1996 are fully vested and
exercisable and have a duration of ten years from the date of grant, subject to
earlier termination in certain circumstances. The weighted average exercise
price per share and the weighted average contractual life of options outstanding
at December 31, 1996 were $15.65 and 6.90 years, respectively. The weighted
average fair value of options granted during 1996 and 1995 approximates the
exercise prices for such options on the date of grant.
NOTE 9 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments", requires the Operating Partnership to
disclose fair value information of all financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate fair
value.
The Operating Partnership's financial instruments, other than debt and
interest rate protection agreements for the Operating Partnership's line of
credit, are generally short-term in nature and contain minimal credit risk.
These instruments consist of cash and cash equivalents, rents and other
receivables, and accounts payable. The carrying amount of these assets and
liabilities in the consolidated balance sheets are assumed to be at fair value.
Mortgage loans are at fixed rates, and when compared with borrowing rates
currently available to the Operating Partnership with similar terms and average
maturities, approximate fair value. The line of credit is at a variable rate,
which results in a carrying value that approximates its fair value. The fair
values of the interest rate protection agreements and methodologies for
determining their fair values are described in Note 4.
NOTE 10 -- PRO FORMA INFORMATION
On March 15, 1996, Bradley closed the merger acquisition of Tucker. The
acquisition was completed through the issuance of 7.4 million shares of Bradley
Common Stock valued at $13.96 per share, in exchange for 100% of the outstanding
shares of Tucker, payment of certain transaction costs and the assumption of all
of Tucker's liabilities. The Tucker share owners received .686 of a share of
Bradley for each outstanding Tucker share. The acquisition was structured as a
tax-free transaction, and was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the assets
purchased and the liabilities assumed based upon the fair values at the date of
acquisition. The excess of the fair value of assets acquired and liabilities
assumed over the purchase price was not material. Such excess was allocated to
reduce proportionately, the values assigned to the properties acquired.
F-29
<PAGE> 65
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth certain summary unaudited pro forma
operating data for the years ended December 31, 1996 and 1995, as if the merger
had been consummated as of the beginning of 1996 and 1995, after giving effect
to certain adjustments including a reduction in depreciation expense due to
longer useful lives and estimated cost savings of the combined entity.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Total revenues.................................... $89,561,000 $87,428,000
Net income........................................ $29,740,000 $17,565,000
Net income per unit............................... $ 1.55 $ 1.01
</TABLE>
The unaudited pro forma operating data are presented for comparative
purposes only and are not necessarily indicative of what the actual results of
operations would have been for the years ended December 31, 1996 and 1995, nor
does such data purport to represent the results to be achieved in future
periods.
NOTE 11 -- SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996
--------- -------- --------- --------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Rental income...................................... $11,219 $ 21,982 $ 21,442 $ 22,869
Gain on sale of property........................... 9,379 -- -- --
Net income......................................... 11,507 5,053 5,086 6,310
Net income per unit................................ .90 .27 .27 .30
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995
--------- -------- --------- --------
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Rental income...................................... $ 8,615 $ 8,686 $ 9,396 $ 9,708
Net income......................................... 1,943 1,746 2,464 2,708
Net income per unit................................ .23 .20 .22 .24
</TABLE>
NOTE 12 -- SUBSEQUENT EVENTS (UNAUDITED)
On August 21, 1997, the Operating Partnership entered into a Treasury Rate
Lock transaction with a notional amount of $37.1 million, expiring November 26,
1997, in anticipation of issuing up to $100 million in ten-year notes during the
fourth quarter of 1997. The Treasury Rate Lock was structured to fix the
interest rate on a ten-year Treasury starting November 26, 1997, at
approximately 6.305%. Also on August 21, 1997, the Operating Partnership entered
into an additional Treasury Rate Lock transaction, with a notional amount of
$16.0 million, also expiring November 26, 1997, in anticipation of issuing up to
$50 million in seven-year notes during the fourth quarter of 1997. The Treasury
Rate Lock was structured to fix the interest rate on an interpolated seven-year
Treasury at approximately 6.25%. The proceeds of these financing transactions
are anticipated to be used to prepay existing outstanding indebtedness of the
Operating Partnership, including prepayment of the $100 million REMIC Note. The
Operating Partnership may continue to limit its exposure to increases in
interest rates in anticipation of future financing transactions through the use
of additional Treasury Rate Locks or other financial derivative instruments.
There can be no assurance, however, that the existing Treasury Rate Locks or
future derivative transactions entered into for the purpose of hedging interest
rate risk will be effective.
F-30
<PAGE> 66
SCHEDULE III
BRADLEY OPERATING LIMITED PARTNERSHIP AND
PREDECESSOR BUSINESS AND SUBSIDIARIES
(COLLECTIVELY, THE "OPERATING PARTNERSHIP")
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cost
Balance, beginning of year......................... $189,405,000 $177,939,000 $138,189,000
Improvements and other additions................... 320,053,000 11,466,000 41,433,000
Sale of property................................... (1,827,000) -- (1,683,000)
------------ ------------ ------------
Balance, end of year............................... $507,631,000 $189,405,000 $177,939,000
============ ============ ============
Accumulated Depreciation
Balance, beginning of year......................... $ 27,591,000 $ 22,385,000 $ 18,156,000
Depreciation provided.............................. 10,292,000 5,206,000 4,330,000
Sale of property................................... -- -- (101,000)
------------ ------------ ------------
Balance, end of year............................... $ 37,883,000 $ 27,591,000 $ 22,385,000
============ ============ ============
</TABLE>
F-31
<PAGE> 67
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the accompanying combined statement of revenues and certain
expenses (defined as operating revenues less direct operating expenses) of the
Acquisition Properties for the year ended December 31, 1996. This combined
financial statement is the responsibility of the Company's 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 revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the combined statement of revenues and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and for inclusion in the Registration
Statement on Form 10 of Bradley Operating Limited Partnership as described in
note 2. The presentation is not intended to be a complete presentation of the
Acquisition Properties' revenues and expenses.
In our opinion, the combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses, described in note 2, of the Acquisition Properties for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
July 18, 1997
F-32
<PAGE> 68
ACQUISITION PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Revenues:
Base rental income........................................... $ 3,184,536 $ 5,889,847
Operating expense and real estate tax recoveries............. 865,296 1,707,910
Other income................................................. 5,350 8,047
---------- ----------
Total revenues................................................. 4,055,182 7,605,804
---------- ----------
Certain expenses:
Real estate taxes............................................ 755,026 1,329,584
Operating expenses........................................... 332,464 618,803
Utilities.................................................... 105,224 223,448
Insurance.................................................... 36,847 93,185
---------- ----------
Total expenses................................................. 1,229,561 2,265,020
---------- ----------
Excess of revenues over certain expenses....................... $ 2,825,621 $ 5,340,784
========== ==========
</TABLE>
See accompanying notes to combined statements of revenues and certain expenses.
F-33
<PAGE> 69
ACQUISITION PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
(1) BACKGROUND
The Combined Statement of Revenues and Certain Expenses (Combined
Statement) has been included for certain properties (Acquisition Properties)
which were acquired by Bradley Real Estate, Inc. or Bradley Operating Limited
Partnership. The Acquisition Properties are as follows:
<TABLE>
<CAPTION>
PROPERTY DATE ACQUIRED
-------- -------------------
<S> <C>
Santa Fe Square......................................... December 27, 1996
Roseville Center........................................ January 1, 1997
Warren Plaza............................................ January 21, 1997
Spring Village.......................................... April 28, 1997
Sangamon Center North................................... July 1, 1997
Fairhills Shopping Center............................... July 1, 1997
Parkway Pointe.......................................... July 1, 1997
Holiday Plaza........................................... July 1, 1997
Burlington Plaza........................................ July 1, 1997
</TABLE>
Santa Fe Square is located in Olathe, Kansas. It consists of approximately
133,000 square feet of gross leasable area and was approximately 95% occupied at
December 31, 1996.
Roseville Center is located in Roseville, Minnesota. It consists of
approximately 77,000 square feet of gross leasable area and was approximately
80% occupied at December 31, 1996.
Warren Plaza is located in Dubuque, Iowa. It consists of approximately
90,000 square feet of gross leasable area and was 100% occupied at December 31,
1996.
Spring Village is located in Davenport, Iowa. It consists of approximately
90,000 square feet of gross leasable area and was 100% occupied at December 31,
1996. A tenant which occupies approximately 12% of the gross leasable area of
Spring Village vacated its premises during November 1996. The tenant has
continued paying rent pursuant to the terms of its lease, which runs through
November 2010.
Sangamon Center North is located in Springfield, Illinois. It consists of
approximately 140,000 square feet of gross leasable area and was approximately
98% occupied at December 31, 1996.
Fairhills Shopping Center is located in Springfield, Illinois. It consists
of approximately 106,000 square feet of gross leasable area and was
approximately 98% occupied at December 31, 1996.
Parkway Pointe is located in Springfield, Illinois. It consists of
approximately 39,000 square feet of gross leasable area and was approximately
79% occupied at December 31, 1996.
Holiday Plaza is located in Cedar Falls, Iowa. It consists of approximately
46,000 square feet of gross leasable area and was approximately 74% occupied at
December 31, 1996.
Burlington Plaza is located in Burlington, Iowa. It consists of
approximately 89,000 square feet of gross leasable area and was approximately
91% occupied at December 31, 1996.
(2) BASIS OF PRESENTATION
The Combined Statement has been prepared for the purpose of complying with
Rule 3.14 of the Securities and Exchange Commission Regulation S-X in a current
report on Form 8-K and for inclusion in the Registration Statement on Form 10 of
Bradley Operating Limited Partnership and is not intended to be a complete
presentation of the Acquisition Properties revenues and expenses. The Combined
Statement has
F-34
<PAGE> 70
NOTES TO COMBINED FINANCIAL STATEMENT OF REVENUES AND CERTAIN EXPENSES --
(CONTINUED)
been prepared on the accrual basis of accounting and requires management of the
Acquisition Properties to make estimates and assumptions that affect the
reported amounts of the revenues and expenses during the reporting period.
Actual results may differ from those estimates.
Certain expenses which may not be comparable to the expenses expected to be
incurred in the proposed future operations of the Acquisition Properties have
been excluded. Expenses excluded consist of interest, depreciation and
amortization, professional fees, and management fees.
Unaudited Interim Periods
The accompanying interim financial statements have been prepared by the
Operating Partnership, without audit, and in the opinion of management reflect
all normal recurring adjustments necessary for a fair presentation of results
for the unaudited interim period presented. Certain information in footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
(3) REVENUES
Each property leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the leases
include provisions under which the property is reimbursed for certain common
area, real estate, and insurance costs. Operating expenses and real estate tax
recoveries reflected on the combined statement of revenues and certain expenses
include amounts due for 1996 expenses for which the tenants have not yet been
billed. In addition, certain leases provide for payment of contingent rentals
based on a percentage applied to the amount by which the tenant s sales, as
defined, exceed predetermined levels. Certain leases contain renewal options for
various periods at various rental rates.
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary from a
straight-line basis due to short-term rent abatements or escalating rents during
the lease term, the income is recognized based on effective rental rates.
Related adjustments increased base rental income by approximately $40,000 for
the year ended December 31, 1996.
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1996 are approximately as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
1997.................................................... $ 5,406,000
1998.................................................... 4,654,000
1999.................................................... 4,074,000
2000.................................................... 3,335,000
2001.................................................... 2,784,000
Thereafter.............................................. 16,955,000
</TABLE>
F-35
<PAGE> 71
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Tucker Properties Corporation:
We have audited the consolidated balance sheets of Tucker Properties
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Tucker Properties Corporation management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 11, the Company has entered into a merger agreement,
subject to shareholder ratification, that if approved, would result in the
Company being merged with and into Bradley Real Estate, Inc.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tucker
Properties Corporation and Subsidiaries as of December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 13, 1996
F-36
<PAGE> 72
TUCKER PROPERTIES CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Assets:
Properties, at cost:
Land....................................................... $ 63,132,436 $ 60,601,445
Buildings and improvements................................. 258,048,684 243,846,038
------------ ------------
321,181,120 304,447,483
Less accumulated depreciation.............................. 26,354,532 16,939,008
------------ ------------
294,826,588 287,508,475
Construction in progress........................................ 3,044,788 8,295,828
Cash and cash equivalents....................................... 3,344,096 4,514,887
Tenant accounts receivable, net................................. 12,113,006 12,596,993
Due from affiliates............................................. 109,259 283,596
Deferred costs, net............................................. 5,752,586 5,533,703
Other assets.................................................... 3,771,494 3,559,060
------------ ------------
Total assets.......................................... $322,961,817 $322,292,542
============ ============
Liabilities:
Mortgage notes payable and line of credit..................... $177,234,309 $164,412,573
Accounts payable.............................................. 2,196,868 1,637,667
Accrued liabilities........................................... 10,485,655 10,280,712
Distributions payable......................................... -- 4,063,356
Deferred revenue.............................................. 1,960,898 --
Other liabilities............................................. 980,093 942,340
------------ ------------
Total liabilities..................................... 192,857,823 181,336,648
------------ ------------
Minority interests.............................................. 5,330,794 5,771,920
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value, 10 million shares
authorized, no shares issued............................... --
Common stock, $.001 par value, 90 million shares authorized,
10,828,283 shares issued and outstanding................... 10,828 10,828
Paid-in capital............................................... 155,224,309 155,224,309
Distributions in excess of accumulated earnings............... (30,461,937) (20,051,163)
------------ ------------
Total stockholders' equity............................ 124,773,200 135,183,974
------------ ------------
Total liabilities and stockholders' equity............ $322,961,817 $322,292,542
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE> 73
TUCKER PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenue:
Rental.......................................................... $36,239,073 $34,723,119
Additional rents -- expense reimbursements...................... 13,484,603 13,357,655
Other income.................................................... 1,132,374 1,076,347
----------- -----------
Total revenue........................................... 50,856,050 49,157,121
----------- -----------
Expenses:
Real estate taxes............................................... 10,482,757 9,921,570
Repairs and maintenance......................................... 1,421,172 1,045,165
Other operating................................................. 6,802,243 6,059,209
General and administrative...................................... 3,066,362 3,017,610
Interest........................................................ 13,345,988 10,512,639
Bad debt expenses............................................... 366,464 --
Provision for merger related expenses and write-downs........... 2,236,113 --
Depreciation and amortization................................... 11,458,170 10,356,658
----------- -----------
Total expenses.......................................... 49,179,269 40,912,851
----------- -----------
Operating income.................................................. 1,676,781 8,244,270
Income allocated to minority interests............................ (68,161) (391,945)
----------- -----------
Net income........................................................ $ 1,608,620 $ 7,852,325
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE> 74
TUCKER PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DISTRIBUTION
COMMON STOCK IN EXCESS OF
--------------------- PAID-IN ACCUMULATED
SHARES DOLLARS CAPITAL EARNINGS
----------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994..................... $10,828,283 $10,828 $156,251,818 $(12,094,195)
Offering costs............................... (1,027,509)
Net income................................... 7,852,325
Distributions declared ($1.46 per share)..... (15,809,293)
----------- ------- ------------ ------------
Balance, December 31, 1994................... 10,828,283 10,828 155,224,309 (20,051,163)
Net income................................... 1,608,620
Distributions declared ($1.11 per share)..... (12,019,394)
----------- ------- ------------ ------------
Balance, December 31, 1995................... $10,828,283 $10,828 $155,224,309 $(30,461,937)
=========== ======= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 75
TUCKER PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 1,608,620 $ 7,852,325
Adjustments to reconcile net income to net cash provided by
operating activities:
Income allocated to minority interests..................... 68,161 391,945
Depreciation and amortization.............................. 11,458,170 10,356,658
Bad debt expense........................................... 366,464 --
Provision for merger related expenses and write-downs...... 2,236,113 --
Net changes in assets and liabilities:
Tenants accounts receivable................................ (550,642) (2,540,819)
Due from affiliates........................................ 174,337 (37,942)
Other assets............................................... (1,780,382) (375,005)
Accounts payable........................................... 559,201 (1,004,891)
Accrued liabilities........................................ 204,943 2,007,775
Due to affiliates.......................................... -- (121,757)
Other liabilities.......................................... 398,651 (30,893)
------------ ------------
Net cash provided by operating activities............. 14,743,636 16,497,396
------------ ------------
Cash flows from investing activities:
Purchase of properties........................................ -- (18,372,428)
Additions to properties....................................... (4,246,416) (4,384,282)
Additions to deferred costs................................... (1,060,650) (786,791)
Payment of development costs.................................. (6,283,164) (7,926,231)
------------ ------------
Cash used in investing activities.......................... (11,590,230) (31,469,732)
------------ ------------
Cash flows from financing activities:
Payments of mortgage notes payable............................ (11,973,750) --
Proceeds from mortgage notes payable.......................... 19,650,000 13,500,000
Principal payments in mortgage note payable................... (70,064) --
Borrowings under line of credit............................... 7,215,550 20,560,153
Repayments of lines of credit................................. (2,000,000) (4,000,000)
Payment of offering costs..................................... -- (502,509)
Distributions paid............................................ (15,917,576) (15,376,162)
Distributions paid to minority interests...................... (674,461) (710,391)
Additions to deferred loan costs.............................. (553,896) (446,060)
------------ ------------
Net cash provided by financing activities............. (4,324,197) 13,025,031
------------ ------------
Decrease in cash and cash equivalents........................... (1,170,791) (1,947,305)
Cash and cash equivalents, beginning of period.................. 4,514,887 6,462,192
------------ ------------
Cash and cash equivalents, end of period........................ $ 3,344,096 $ 4,514,887
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 76
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION
Organization
Tucker Properties Corporation (the "Company"), a Maryland corporation, was
formed May 28, 1993. The Company completed a public offering of 10,720,000
shares of common stock and through a wholly-owned subsidiary issued $100,000,000
of mortgage notes payable (see Note 3) as of October 12, 1993 (the "Public
Offering"). The Company is the successor entity to The Tucker Companies Inc.
("Tucker"), its affiliates and related real estate entities (together the
"Predecessor Business") and is engaged in the management, operation, leasing,
acquisition, development, investment in and disposition of neighborhood,
community and regional shopping centers. The Company also owns and operates a
mid-rise urban mixed-use office and retail building and provides services for
shopping centers owned by third parties and affiliates.
The owners and certain employees of the Predecessor Business (the
"Predecessor Business Owners" or "Tucker Investors") who were general and
limited partners in the entities contributed their properties to an operating
partnership, Tucker Operating Limited Partnership ("TOLP"), at the time of the
public offering. The Predecessor Business Owners received 567,000 operating
partnership units ("OP Units") in return for the properties contributed to TOLP.
The OP Units are convertible into common shares of the Company on a one-for-one
basis. Kenneth Tucker, Chairman of the Company, immediately converted 108,183 OP
Units into shares of the Company's common stock. After such conversion, there
are 10,828,283 shares of the Company's common stock outstanding and the
Predecessor Business Owners hold 458,817 OP Units or approximately 4.1% of the
OP Units outstanding. The Company then purchased the sole general partner
interest of approximately 95.9% in TOLP utilizing the proceeds of the Public
Offering. The Company has operated as a real estate investment trust ("REIT")
for the years ended December 31, 1995 and 1994 under the Internal Revenue Code
of 1986, as amended.
Basis of Presentation
The consolidated financial statements of the Company include the accounts
and operations of the Company, TOLP, Tucker Financing Partnership ("TFP"), and
its general partnership interest in the joint venture that owns Williamson
Square Shopping Center which is held through TOLP. Due to the Company's ability
as general partner to directly or indirectly control each of these subsidiaries,
each is consolidated for financial reporting purposes. TOLP and TFP together own
six properties formerly held by the Predecessor Business, the three properties
formerly held as equity investments, one property acquired at the time of the
Public Offering, two properties acquired in December 1993, one property acquired
in June 1994 and a property still under development, a portion of which was
opened in 1995.
The Company provides leasing and management services to third parties
through its affiliate, Tucker Management Limited Partnership ("TMLP"). The
Company holds a 40% limited partnership interest in TMLP and Tucker Management
Corp. ("TMC") holds a 60% general partnership interest. TOLP owns 8% of the
voting common stock and 95% of the nonvoting preferred stock of TMC and Kenneth
and Richard Tucker own 92% of the voting common stock and 5% of the nonvoting
preferred stock. The Company accounts for its interests in TMLP and TMC on the
equity basis with its income from TMLP and TMC included in "Other Income" on the
Statements of Operations.
All significant intercompany balances and transactions between the Company
and its consolidated affiliates have been eliminated.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Tucker Properties Corporation is engaged in the ownership and operation of
thirteen community shopping centers which serve neighborhood and community
markets in Illinois, Indiana, Kentucky, Tennessee
F-41
<PAGE> 77
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and Wisconsin, and one mixed-use property in Chicago, Illinois. Property retail
tenants typically sell day-to-day and value-oriented merchandise rather than
high-priced luxury items. While no one tenant generates more than 11% of the
Company's total rental revenue, the Company remains susceptible to the level of
retail sales and the general business conditions and failures of its tenants.
Significant reduction of sales could prove to have a material affect on the
tenant's ability to maintain financial stability which could lead to a default
of their leases.
Estimates and Assumptions
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of continent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results may vary from those estimates.
Properties
Properties are stated at the lower of cost or fair value. Costs are
capitalized as incurred for the acquisition, development, construction and
improvement of properties. Interest and real estate taxes incurred during,
construction are capitalized and amortized on the same basis as the related
assets. Maintenance and repairs are charged to expense as incurred.
Depreciation expense is computed principally using the straight line method
over the original estimated useful lives:
<TABLE>
<S> <C>
Buildings................... 31.5 years
Improvements................ shorter of lease term or useful life
</TABLE>
In 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" was issued. SFAS No. 121, which establishes accounting standards
for the evaluation of potential impairment of such assets, was adopted by the
Company as of January 1, 1995, and did not have a material impact on the
financial position or results of operations of the Company. Properties are
evaluated for impairment when conditions exist, but not less than annually,
which may indicate that it is probable that the sum of expected future
undiscounted cash flows from a property are less than its cost. Upon
determination that a permanent impairment has occurred. properties are reduced
to their fair value.
Deferred Costs
Deferred costs, consisting principally of financing fees and leasing
commissions, are amortized over the terms of the respective agreements.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosures about the fair value
of financial instruments whether or not such instruments are recognizable in the
balance sheet. The Company's financial instruments include cash equivalents,
tenant accounts receivable, accounts payable, accrued liabilities, mortgage
notes payable, and line of credit. The fair values of these financial
instruments were not materially different from their carrying or contract
values.
F-42
<PAGE> 78
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
Minimum rentals are recognized on a straight-line basis over the term of
the related leases. As of December 31, 1995 and 1994, the deferred and unbilled
rents included in tenant accounts receivable approximated $7,315,000 and
$6,903,000, respectively. Additional rents from expense reimbursements for
common area maintenance expenses and certain other expenses are recognized in
the period in which the related expenses are incurred. Percentage rent is
recognized on the accrual basis based on reported tenant sales. Percentage rent
for the years ended December 31, 1995 and 1994 was approximately $898,000 and
$614,000, respectively.
Beginning in 1995, the Company began establishing an unallocated general
reserve to supplement specific reserves previously established. As a result of
recording this general reserve, the Company recognized bad debt expense of
$366,464 in 1995. Accounts receivable in the accompanying balance sheets are
shown net of an allowance for doubtful accounts of $472,464 and $106,000 as of
December 31, 1995 and 1994, respectively.
Cash and Cash Equivalents
The Company considers all demand and money market accounts with an original
maturity of three months or less when purchased to be cash equivalents. The
carrying amount of these items approximates their fair value due to the short
maturity of these investments.
Income Taxes
The Company has operated as a REIT during 1995 and 1994 under the Internal
Revenue Code, as amended. As such, no federal or state income taxes are payable
by the Company and none have been provided for in the financial statements.
Minority Interests
The Predecessor Business Owners own an approximate 4.1% limited partnership
interest in TOLP, which either directly or through subsidiaries, owns and
operates the properties and other activities of the Company. TOLP owns a 99%
general partnership interest in TFP and the other 1% general partnership
interest in TFP is held by Tucker Financing Corporation ("TFC"), a wholly-owned
subsidiary of the Company. TOLP owns a 60% general partnership interest in the
joint venture that owns Williamson Square Shopping Center. The minority
interests included in the accompanying statements include the Predecessor
Business Owners' approximate 4.1% interest in TOLP and the minority partner's
40% interest in Williamson Square Shopping Center, which interests reflect the
contributions and distributions of capital or cash flows and profit or loss
allocations attributed to the respective minority owners.
Construction In Progress
Under the terms of a redevelopment agreement with the Village of Chicago
Ridge, in 1995 the Company received title to certain land and a commitment from
the village to fund certain demolition and improvement costs related to the
land. The agreement requires the Company to develop the land to include retail
space and related parking. Costs in excess of funds committed by the village
will be paid by the Company. The land, as improved, has been recorded in
construction in progress at December 31, 1995 at its estimated fair value of
$1.6 million and the related revenue resulting from such contribution has been
deferred and will be amortized over the initial non-cancelable twenty-year term
of the land lease with the property's initial tenant.
The Company capitalizes all costs incurred during development (including
but not limited to real estate taxes, insurance and interest) until the project
is completed. Construction in progress also includes a portion of the Rollins
Crossing property (approximately $.3 million) which is under development at
December 31, 1995
F-43
<PAGE> 79
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and certain of the Speedway Outlots (approximately $1.1 million) which are being
held for future development.
Reclassifications
Certain reclassifications have been made to the previously presented 1994
financial statements to conform with the 1995 financial statement presentation.
These reclassifications did not change the 1994 operating results.
(3) MORTGAGE NOTES PAYABLE
As part of the Public Offering, TFP, a wholly-owned subsidiary of the
Company, issued mortgage notes in the principal amount of $100.0 million. In
June 1994, TFP exchanged the original mortgage notes for mortgage notes of equal
principal amounts, which were issued pursuant to an Indenture dated as of June
1, 1994 between TFP, Bankers Trust Company, as initial servicer, and Bankers
Trust Company of California, N.A., as trustee. At the same time, Kidder, Peabody
Acceptance Corporation I sold six classes of pass-through certificates
evidencing the entire beneficial ownership interest of a trust fund consisting
primarily of the mortgage notes and related instruments evidencing the lender's
security interest in the related collateral. The mortgage notes mature in
September 2000 and require monthly interest-only payments at 7.3% per annum. The
mortgage notes are recourse only to the assets of TFP and are collateralized by
separate cross-collateralized, cross-defaulted first mortgage liens on each of
the properties owned by TFP (Commons of Crystal Lake, Heritage Square, Sheridan
Village, Speedway SuperCenter, Washington-Lawndale Commons and One North State)
and by an assignment of all of TFP's interest in the rents and the leases at
each of these properties.
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Mortgage notes payable.......................................... $100,000,000 $100,000,000
Non-recourse mortgage note payable collateralized by Williamson
Square in Franklin, Tennessee. In July 1995, the existing
mortgage note was refinanced with USG Annuity and Life
Company. A portion of the proceeds from the new $13,150,000
loan was used to repay the existing mortgage note of
$11,973,750. The new loan bears interest at 8% per annum and
requires monthly principal and interest payments of $101,494
through maturity of August 1, 2005. Few of $216,758 incurred
in connection with the refinancing are being amortized over
the term of the loan. The Company, through TOLP, holds a 60%
interest in the Center through a joint venture with a
non-affiliated third party.................................... 13,079,936 11,973,750
Non-recourse mortgage note payable collateralized by Mequon
Pavilions in Mequon, Wisconsin. The initial maturity date of
December 31, 1995 was extended to June 30, 1996. Interest only
is payable at LIBOR plus 2.75% through June 30, 1996. The
interest rate on the loan was.8.625% at December 31, 1995..... 13,500,000 13,500,000
Construction loan collateralized by the Rollins Crossing
development in Round Lake Beach, Illinois. Interest only is
payable at LIBOR plus 2.75% through August 31, 1997, the
maturity date of the loan. The maturity date may be extended
for two successive one-year periods to August 31, 1999. The
interest rate on the loan was 8.625% at December 31, 1995.
TOLP may borrow up to $12.5 million pursuant to the terms of
the loan under certain conditions. The Company has guaranteed
repayment of amounts outstanding on this loan................. 6,500,000 N/A
------------ ------------
Total mortgage notes payable.................................... $133,079,936 $125,473,750
============ ============
</TABLE>
F-44
<PAGE> 80
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Principal payments on the above described mortgage notes in each of the
five years subsequent to December 1, 1995 are approximately as follows:
<TABLE>
<S> <C>
1996................................................... $ 13,678,000
1997................................................... 6,693,000
1998................................................... 209,000
1999................................................... 226,000
2000................................................... 100,245,000
</TABLE>
Management has determined that the year-end carrying amounts of these
mortgage notes payable approximate their fair value given their terms and
maturities and the current rates available in the market to the Company for
comparable debt.
(4) LINE OF CREDIT
TOLP has established a revolving line of credit with The First National
Bank of Boston ("FNBB") for a total commitment of $48.0 million. As of December
31, 1995 and 1994, approximately $44.2 and $38.9 million respectively, had been
drawn on the line of credit. In addition, approximately $.579 million is
restricted to support a letter of credit which was issued in conjunction with
the Rollins Crossing development. Under the original agreement, interest only
was payable to the initial maturity on December 21, 1995. Interest is calculated
at the FNBB base rate plus .5% or the Eurodollar rate plus 2.25% as selected by
TOLP subject to certain restrictions. The interest rate on these borrowings at
December 31, 1995 was 8.19%. In addition to interest, an annual facility fee
shall be paid equal to .25% times the difference between the total commitment
and the outstanding line balance. Under the original agreement, the maturity
date could have been extended three years to December 21, 1999 subject to
certain conditions including the payment of an extension fee equal to .5% of the
outstanding line balance at initial maturity with monthly principal payments
required equal to 1/300th of the prior month's outstanding principal balance. On
December 21, 1995, the agreement was amended to provide for an initial extension
to June 30, 1996 requiring interest only through such date. If this line of
credit cannot be renewed or replaced with another financing source, there may be
a disruptive effect on the operations of the Company. The Company paid an
extension fee of $62,500 and is obligated to pay an additional $62,500 unless
the line is repaid prior to March 31, 1996. The line of credit is collateralized
by the assets of TOLP. Borrowings under the line of credit are subject to
certain covenants the most restrictive of which require minimum tangible net
worth and working capital levels. Management has determined that the year-end
carrying amount drawn on the line of credit approximates the fair value of such
borrowings given the terms and maturity and the current rates available in the
market to the Company for comparable debt.
As of December 31, 1995 the Company was in default of one of the financial
covenants for the line of credit. Subsequent to year-end, the Company received a
waiver from FNBB waiving the default of this covenant through March 31, 1996
subject to the Company satisfying certain conditions.
(5) TRANSACTIONS WITH AFFILIATES
TMLP earns income from third party management and leasing contracts. Under
the terms of the management contract relating to Washington Square Mall ("WSM"),
which is owned by affiliates of Tucker, TMLP earned management and leasing fees
totalling approximately $216,000 in 1995 and approximately $473,000 in 1994. The
management contract relating to WSM ceased in September 1995. In addition, the
Company previously had an option to acquire One Schaumburg Place ("OSP") but did
not exercise the option as the property did not meet the Company's investment
criteria. In March 1995, OSP was taken back by the mortgage holder and
concurrently therewith, the Company lost its purchase option and TMLP lost its
management and leasing contracts. Under the terms of the management contract
relating to OSP, TLMLP
F-45
<PAGE> 81
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
earned management and leasing fees totalling approximately $37,000 in 1995 and
approximately $232,000 in 1994.
The income allocable to the Company from its equity interests in TMLP and
TMC, aggregating $8,746 in 1995 and $168,876 in 1994, were recorded in Other
income in the 1995 and 1994 Statement of Operations, respectively.
Net amounts due from affiliates as of December 31, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Due from affiliates...................................... $109,259 $283,596
======== ========
</TABLE>
The Tucker Companies, Inc., the sole shareholder of which is Kenneth L.
Tucker, was paid a fee of $400,000 in April 1994 for efforts in reducing the
cost of acquiring, the land for the Rollins Crossing development. This fee was
capitalized as part of the total land cost.
(6) RENTAL OPERATIONS
Space in the shopping centers and the mixed-use retail and office building
is leased to various tenants under operating leases which generally provide
tenant renewal options. The following table sets forth occupancy percentages for
the properties as of December 1, 1995:
<TABLE>
<CAPTION>
PERCENTAGE OF
GROSS LEASABLE AREA
LEASED
PROPERTY NAME (UNAUDITED)
------------------------------------------------------------ -------------------
<S> <C>
Commons of Chicago Ridge.................................... 76%
Commons of Crystal Lake..................................... 98%
Heritage Square............................................. 100%
High Point Centre........................................... 100%
Meadows Town Mall........................................... 81%
Mequon Pavilions............................................ 97%
One North State............................................. 95%
Rollins Crossing............................................ 100%
Sheridan Village............................................ 97%
Speedway SuperCenter and Outlots............................ 98%
Village Shopping Center..................................... 98%
Washington-Lawndale Commons................................. 99%
Stony Brook Shopping Center................................. 96%
Williamson Square........................................... 89%
</TABLE>
As of December 31, 1995, the approximate minimum future rentals to be
received under noncancellable leases are as follows:
<TABLE>
<S> <C>
1996................................................... $ 34,304,000
1997................................................... 32,694,000
1998................................................... 30,479,000
1999................................................... 27,653,000
2000................................................... 26,053,000
Thereafter............................................. 113,093,000
------------
$264,276,000
============
</TABLE>
F-46
<PAGE> 82
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum future rentals do not include amounts which may be received from
certain tenants based upon a percentage of their gross sales or as a
reimbursement of property operating expenses.
One major tenant individually accounted for more than 10% of the Company's
total rental revenue for the years ended December 31, 1995 and 1994. In
addition, the same tenant accounted for more than 100% of the Company's minimum
future rentals as of December 31, 1995.
<TABLE>
<CAPTION>
MINIMUM
FUTURE
1995 1994 RENTALS
---- ---- -------
<S> <C> <C> <C>
Tenant A............................................ 11% 12% 11%
</TABLE>
Approximately 4% of the Company's total rental revenue for the year ended
December 31, 1995 was generated by the lease of one tenant at One North State.
The lease does not contain renewal options and the tenant has the right to
cancel the lease as of April 1, 1998, provided it gives notice by April 1, 1996,
pays all rent as it becomes due for the period April 1, 1996 to March 31, 1998,
and pays a specified cancellation fee of $1.8 million on April 1, 1996 to be
utilized for subsequent tenants' improvements. This tenant has indicated that is
will move out of this space prior to the expiration of the lease, but has not
yet specified whether or not it will exercise its early termination right.
(7) DEFERRED COSTS
Deferred costs, net as of December 31, 1995 and 1994, are summarized as
follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred financing costs.......................... $ 3,915,238 $ 3,361,342
Deferred leasing commissions, including those
earned by Tucker................................ 4,347,002 3,577,090
Other............................................. 741,598 582,930
----------- -----------
9,003,838 7,521,362
Accumulated amortization.......................... (3,251,252) (1,987,659)
----------- -----------
$ 5,752,586 $ 5,533,703
=========== ===========
</TABLE>
Amortization of financing costs charged to expense in 1995 and 1994 was
$798,146 and $733,601, respectively, while amortization of leasing commissions
charged to expense in 1995 and 1994 was $450,368 and $463,366, respectively. The
amortization of other costs in 1995 and 1994 was $147,149 and $81,031,
respectively.
(8) SUPPLEMENTAL CASH FLOW DISCLOSURE
During 1994, $369,597 in pre-development costs associated with Rollins
Crossing were reclassified from other assets to construction in progress. This
reclassification had a non-cash effect on the Company's balance sheet. Also
during 1994, tenant improvement costs of $1,139,863 were funded from the tenant
improvement escrow which is classified as Other assets. This amount has been
offset against the additions to properties in the 1994 Statement of Cash Flows.
During 1995, approximately $6.9 million of assets placed in service at
Rollins Crossing and Speedway Outlots were reclassified from construction in
progress to land, building and improvements. This reclassification had a
non-cash effect on the Company's balance sheet.
F-47
<PAGE> 83
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid................................... $13,035,688 $10,346,488
=========== ===========
Interest capitalized............................ $ 321,739 $ 350,810
=========== ===========
</TABLE>
(9) STOCK OPTION PLAN
The Company has adopted the 1993 Share Option Plan (the "Plan") for the
purpose of attracting and retaining the Company's directors, officers and other
employees. Originally, a maximum of 560,000 shares was reserved for issuance
under the Plan to allow for the grant of incentive and non-qualified options and
for the right of an option holder to elect to receive in cash or shares an
amount equal to the excess of the fair market value of the shares subject to an
incentive or non-qualified option over the exercise price of the shares, which
right can be exercised instead of (but not in addition to) its relative
incentive or non-qualified option.
Options are to be granted by the Compensation Committee of the Board of
Directors at an exercise price of not less than 100% of the fair market value of
the common stock on the date of grant. The term of the option shall be fixed by
the Compensation Committee, but no option shall be exercisable more than 10
years after the date of grant.
In November 1993, following the Public Offering, executive officers and
directors of the Company were granted incentive stock options to purchase
560,000 shares of common stock at $18 per share. The term of each option granted
is ten years from the date of grant. In 1995, 50,000 additional stock options
were granted pursuant to approval by the shareholders at the 1995 Annual Meeting
of Stockholders. At December 31, 1993, 610,000 options for shares were
outstanding. Pursuant to the terms of the merger agreement with Bradley as
described in Note 11 below, these options will be terminated.
(10) CONTINGENCIES
Certain of the properties owned by the Company underwent Phase I and Phase
II assessments in connection with the Public Offering. The Company does not
believe that the results of any of these assessments indicate a material
obligation of the Company. In addition, a Phase II assessment conducted in 1993
at the Commons of Chicago Ridge indicated the presence of certain soil and
ground water contaminants at levels that might require some form of action in
the future to remediate the contaminants. The Company is not presently able to
determine the extent of the liability, if any, related to such remediation and
as such no liability has been reflected in the financial statements. Certain
members of the Company's management have also agreed to indemnify the Company
with respect to any remediation at Chicago Ridge for ten years after the Public
Offering. The Company has not recorded a receivable related to this guarantee.
(11) MERGER AGREEMENT AND PROVISION FOR MERGER RELATED EXPENSES AND WRITE-DOWNS
On October 30, 1995, TPC entered into an Agreement and Plan of Merger (the
"Agreement") with Bradley Real Estate, Inc. ("Bradley") and certain other
related agreements, providing for the merger (the "Merger") of the Company with
and into Bradley and certain related transactions. The consummation of the
Merger is subject to certain conditions, including approval of the Merger by the
stockholders of the Company and Bradley at separate special stockholder meetings
on March 14, 1996.
Pursuant to the Agreement, at the effective time of the Merger (the
"Effective Time"), if the average closing price of a share of common stock, par
value $.01 per share, of Bradley (the "Bradley Common Stock") over the 20
trading days immediately preceding the fifth day prior to the date of the
closing of the Merger (the "Bradley Closing Price") is $16 or greater, each
outstanding share of common stock, par value $0.001 per share of the Company,
(the "Tucker Common Stock") will be converted into the right to receive 0.665 of
a
F-48
<PAGE> 84
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
share of Bradley Common Stock. If the Bradley Closing Price, at the Effective
Time, is less than $16 per share but more than $15.50 per share, then each
outstanding share of Tucker Common Stock will be converted into the right to
receive the percentage of a share of Bradley Common Stock (determined to the
nearest one-thousandth of a share) as is determined by dividing $10.64 by the
Bradley Closing Price; and, in the event that at the Effective Time, the Bradley
Closing Price is $15.50 per share or less, then each outstanding share of Tucker
Common Stock will be converted into the right to receive 0.686 of a share of
Bradley Common Stock.
As a result of the Merger, Bradley will acquire the 95.9% general
partnership interest of the Company in TOLP and will become the sole general
partner of TOLP. At the Effective Time, the Agreement of Limited Partnership of
TOLP will be amended and restated pursuant to the terms of the Agreement. In
connection with entering into the Agreement, the Company adopted a severance
plan for certain of its employees and entered into severance agreements with
certain of its officers. Kenneth L. Tucker, President and Chairman of the Board
of the Company, has agreed to enter into a consulting agreement with Bradley for
a period of three years pursuant to which Mr. Tucker will advise Bradley on
retail real estate matters. In connection with the merger, TFC, or its assets,
will be acquired by Bradley, or a wholly owned affiliate of Bradley, to be known
as Bradley Financing Corporation ("BFC"). In addition, TFP will change its name
to Bradley Financing Partnership and will be owned 99% by Bradley Operating
Limited Partnership (the successor to TOLP) and 1% by BFC.
In conjunction with this announcement, the Company recognized a provision
for merger related expenses and write-downs during 1995. This provision consists
of the write-off of certain costs incurred to-date related to the merger
(approximately $1.1 million), the write-off of capitalized costs related to
certain development projects which will not be pursued by the merged
organization (approximately $.5 million) and the write-off of certain
receivables (approximately $.6 million). The provision for these items totaled
approximately $2.2 million.
(12) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Due to the acquisition of Mequon Pavilions in June 1994, the historical
results for the year ended December 31, 1994 are not comparable to the current
period.
The following pro forma information was prepared as if the acquisition of
the Mequon Pavilions had on January 1, 1994. The pro forma financial information
is based upon the historical consolidated statements and is not necessarily
indicative of the consolidated results which actually would have occurred if the
transaction had been consummated at the beginning of 1994 nor does it purport to
represent the results of operations for future periods.
F-49
<PAGE> 85
TUCKER PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
-------------------------
(IN THOUSANDS, EXCEPT FOR
PER SHARE DATA)
<S> <C>
Total revenues.......................................................... $50,564
-------
Expenses:
Operating expenses.................................................... 16,467
Interest expense...................................................... 11,112
General and administrative............................................ 4,013
Depreciation and amortization......................................... 10,607
-------
Total......................................................... 42,199
-------
Income before minority interests allocation............................. 8,365
Income allocated to minority interests.................................. (397)
-------
Net income.............................................................. $ 7,968
=======
Net income per share(A)................................................. $ .74
=======
</TABLE>
- ---------------
(A) Based upon 10,828,283 common shares outstanding.
(13) SUBSEQUENT EVENT
On February 15, 1996, the Board of Directors declared a first quarter
distribution of $.25 per share payable March 13, 1996 to the holders of common
stock (or OP units) of record at the close of business on March 11, 1996.
F-50
<PAGE> 86
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Northbrook, Illinois on this 8th day of September, 1997.
BRADLEY REAL ESTATE, INC.
By: Bradley Real Estate, Inc.
Its: General Partner
By: /s/ IRVING E. LINGO, JR.
------------------------------------
Irving E. Lingo, Jr.
Chief Financial Officer and
Treasurer
(Principal Financial and Accounting
Officer)
<PAGE> 87
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<S> <C>
*3.1 Second Restated Agreement of Limited Partnership of Bradley Operating Limited
Partnership, dated as of September 2, 1997.
3.2.1 Articles of Amendment and Restatement of Bradley Real Estate, Inc. (the
"Company"), incorporated by reference to Exhibit 3.1 of the Company's Current
Report on Form 8-K dated October 17, 1994.
3.2.2 Articles of Merger between Tucker Properties Corporation and Bradley Real Estate,
Inc. incorporated by reference to Exhibit 3.3 of the Company's Annual Report on
Form 10-K dated March 25, 1996.
10.1.1 Revolving Credit Agreement dated as of March 15, 1996 by and Bradley Real Estate,
Inc., Bradley Operating Limited Partnership and The First National Bank of Boston,
incorporated by reference to Exhibit 10.2 of the Company's Annual Report on Form
10-K dated March 25, 1996.
10.1.2 First Amendment dated as of May 2, 1996 and Second Amendment dated as of March 28,
1997 to the aforesaid Revolving Credit Agreement, incorporated by reference to
Exhibit 10.2.1 of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 dated May 13, 1997.
10.2 Indenture dated as of June 1, 1994 between Tucker Financing Partnership (name
changed March 15, 1996 to Bradley Financing Partnership) and Bankers Trust Company
of California, N.A. relating to 7.30% Mortgage Notes due September 30, 2000 (the
"REMIC Note"), incorporated by reference to Exhibit 10.3 of the Company's Annual
Report on Form 10-K dated March 25, 1996.
*21.1 List of Subsidiaries.
*27.1 Financial Data Schedule.
99.1 The following sections of the Company's Annual Report on Form 10-K dated March 19,
1997, which sections are incorporated by reference to such Report:
- Description under caption "Risk Factors" in Item 1;
- Description of "Executive Officers of the Registrant" in Item 4-A.
99.2 The following sections of the Company's definitive Proxy Statement for its 1997
Annual Meeting of Stockholders, which sections are incorporated by reference to
such Proxy Statement:
- Description of "Compensation of Directors and Executive Officers" at pages 5-7;
- Description of "Beneficial Ownership of Shares" at pages 13-14;
- Description of "Certain Relationships and Related Party Transactions" at pages
15-16.
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 3.1
-----------
September 2, 1997
BRADLEY OPERATING LIMITED PARTNERSHIP
SECOND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
<PAGE> 2
BRADLEY OPERATING LIMITED PARTNERSHIP
SECOND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
----
1. Definitions and Exhibits.............................................. 1
1.1 Definitions.................................................. 1
1.2 Exhibits, etc................................................ 12
2. Organization.......................................................... 12
2.1 Formation of Partnership..................................... 12
2.2 Partnership Name............................................. 12
2.3 Location of the Principal Place of Business.................. 12
2.4 Registered Agent and Registered Office....................... 12
3. Capital............................................................... 13
3.1 Issuance of Units............................................ 13
3.2 Redemption Right............................................. 16
3.3 Additional Capital........................................... 18
3.4 No Third Party Beneficiary................................... 18
3.5 Capital Accounts............................................. 19
3.6 No Interest on or Return of Capital.......................... 20
3.7 Negative Capital Accounts.................................... 20
3.8 Limit on Contributions and Obligations of Partner............ 20
4. [Intentionally Omitted]............................................... 20
5. Purpose and Powers of Partnership..................................... 20
6. Term.................................................................. 21
7. Allocations........................................................... 21
7.1 Profits or Losses............................................ 21
7.2 Special Allocations.......................................... 22
7.3 Other Allocation Rules....................................... 23
7.4 Tax Allocations; Code Section 704(c)/Section 1245
and 1250 Recapture........................................... 23
7.5 Nonrecourse Liabilities...................................... 24
8. Cash Available For Distribution....................................... 24
(i)
<PAGE> 3
Page
----
8.1 Operating Cash Flow.......................................... 24
8.2 Capital Cash Flow............................................ 25
8.3 Consolidated Distributed Cash................................ 25
8.4 Distributions to Partners.................................... 25
8.5 Distributions Among Partners of the Same Series
or Class..................................................... 26
8.6 REIT Distributions........................................... 26
8.7 Consent to Distributions..................................... 26
8.8 Liquidating Distributions.................................... 26
8.9 Special Distribution and Allocations for
Certain Properties........................................... 26
9. Management and Property of the Partnership............................ 27
9.1 General Partner.............................................. 27
9.2 [Intentionally Omitted]...................................... 30
9.3 Limitations on Powers and Authorities of Partners............ 30
9.4 Title Holder................................................. 30
9.5 Compensation of the General Partner.......................... 30
9.6 Standard of Conduct.......................................... 31
9.7 Waiver and Indemnification................................... 31
9.8 Other Activities of Partners and Agreements with
Related Parties.............................................. 32
9.9 Other Matters Concerning the General Partner................. 33
9.10 Partner Exculpation.......................................... 33
10. Banking............................................................... 34
11. Accounting............................................................ 34
11.1 Fiscal Year.................................................. 34
11.2 Books of Account............................................. 34
11.3 Reports...................................................... 34
11.4 Audits....................................................... 34
11.5 Method of Accounting......................................... 35
11.6 Tax Election................................................. 35
11.7 Tax Matters Partner.......................................... 35
11.8 Administrative Adjustments................................... 35
12. Transfers of Partnership Interests.................................... 35
12.1 Consent...................................................... 35
12.2 Limited Partners............................................. 36
12.3 Admission Adjustments........................................ 37
12.4 Unit Certificates............................................ 37
13. Rights and Obligations of the Limited Partners........................ 37
13.1 No Participation in Management............................... 37
13.2 Death, Legal Incompetency, Etc. of a Limited Partner......... 37
(ii)
<PAGE> 4
Page
----
13.3 No Withdrawal................................................ 38
13.4 Duties and Conflicts......................................... 38
14. Indemnification and Security Interest................................. 38
14.1 [Intentionally Omitted]...................................... 38
14.2 Indemnity Collateral......................................... 38
14.3 Commons of Chicago Ridge..................................... 38
14.4 TTC Guarantors............................................... 41
15. Liquidation and Dissolution of Partnership............................ 42
15.1 Termination Events........................................... 42
15.2 Method of Liquidation........................................ 42
15.3 Distribution in Kind......................................... 43
15.4 Documentation of Liquidation................................. 44
15.5 Liability of the Liquidating Trustee......................... 44
16. Power of Attorney..................................................... 44
17. Amendment of Agreement................................................ 45
17.1 General...................................................... 45
17.2 Merger, Etc. of General Partner.............................. 45
18. Arbitration........................................................... 46
18.1 General...................................................... 46
18.2 Procedures................................................... 46
18.3 Binding Character............................................ 46
18.4 Exclusivity.................................................. 47
18.5 No Alteration of Agreement................................... 47
19. Miscellaneous......................................................... 47
19.1 Notices...................................................... 47
19.2 Successors and Assigns....................................... 47
19.3 Duplicate Originals.......................................... 48
19.4 Construction................................................. 48
19.5 Governing Law................................................ 48
19.6 Other Instruments............................................ 48
19.7 General Partner with Interest as Limited Partner............. 48
19.8 Gender....................................................... 48
19.9 Prior Agreements Superseded.................................. 48
19.10 Purchase for Investment...................................... 48
19.11 Waiver....................................................... 49
19.12 Severability................................................. 49
19.13 Counterparts................................................. 49
(iii)
<PAGE> 5
19.14 Notice for Certain Transactions.............................. 49
EXHIBIT A: Name of Partners and Number of Units held by Each Partner under
this Agreement
EXHIBIT B: Form of Notice of Redemption
(iv)
<PAGE> 6
BRADLEY OPERATING LIMITED PARTNERSHIP
SECOND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
THIS SECOND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement"),
dated as of September 2, 1997 and executed by Bradley Real Estate, Inc, the
general partner (the "General Partner") of the Partnership (as hereinafter
defined), and those Limited Partners (as hereinafter defined) whose names appear
on the signature pages hereto, amends and restates the Bradley Operating Limited
Partnership Amended and Restated Agreement of Limited Partnership, dated March
15, 1996, as amended on January 1, 1997 by the First Amendment to the Bradley
Operating Limited Partnership Amended and Restated Agreement of Limited
Partnership and on July 31, 1997 by the Second Amendment to the Bradley
Operating Limited Partnership Amended and Restated Agreement of Limited
Partnership (collectively, the "Prior Agreement").
RECITALS
WHEREAS, pursuant to Section 17.1 of the Prior Agreement, the General
Partner, without the consent of the Limited Partners, may amend the Prior
Agreement in any respect by executing a written instrument setting forth the
terms of such amendment; provided, however, that the consent of the Limited
Partners holding more than 50% of the Partnership Interests (as therein and
hereinafter defined) held by all Limited Partners is required in connection with
certain amendments which alter (i) the distribution rights of any Limited
Partner under Article 8 of the Prior Agreement or (ii) a Limited Partner's
Redemption Rights (as therein and hereinafter defined) under Section 3.2 of the
Prior Agreement; and
WHEREAS, the General Partner and the Limited Partners holding more than
50% of the Partnership Interests deem it advisable to amend and restate the
Prior Agreement (i) to clarify certain ambiguities in the Prior Agreement
relative to the authority of the General Partner to alter the distribution
rights of the Limited Partners, (ii) to permit the General Partner, on behalf of
the Partnership, to issue Unit Certificates (as hereinafter defined) to evidence
ownership or Units (as hereinafter defined) or other Partnership Interests in
the Partnership, and (iii) to make additional amendments to the Partnership
Agreement.
NOW THEREFORE, the General Partner hereby amends and restates in its
entirety, and the Limited Partners holding more than 50% of the Partnership
Interests held by all Limited Partners whose signatures appear below hereby
consent and agree to such amendment and restatement of, the Prior Agreement to
read as follows:
1. Definitions and Exhibits.
------------------------
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth respectively after each:
<PAGE> 7
"Accountants" shall mean the firm or firms of independent certified
public accountants selected by the General Partner on behalf of the Partnership
to audit the books and records of the Partnership and to prepare statements and
reports in connection therewith.
"Act" shall mean the Revised Uniform Limited Partnership Act of the State
of Delaware, as amended from time to time, and any successor statute.
"Administrative Expenses" shall mean (i) all administrative and operating
costs and expenses incurred by the Partnership, (ii) those administrative costs
and expenses of the General Partner, including, without limitation, salaries
paid to officers of the General Partner, accounting and legal expenses, the
costs and expenses of preparing reports required to be filed by the General
Partner or distributed to the holders of Units or other Partnership Interests in
the Partnership or to the stockholders of the General Partner and the costs and
expenses incurred in complying with applicable laws, that are undertaken by the
General Partner on behalf of, or for the benefit of, the Partnership, and (iii)
such costs and expenses incurred by the General Partner in raising or
maintaining capital of the General Partner that the General Partner in good
faith determines is necessary or appropriate to be applied, raised, used or
maintained for the benefit of the Partnership.
"Affiliate" shall mean, with respect to any Partner (or as to any other
Person the affiliates of whom are relevant for purposes of any of the provisions
of this Agreement), (i) any member of the Immediate Family of such Partner or
Person; (ii) any trustee or beneficiary of a Partner; (iii) any legal
representative or successor of any Person referred to in the preceding clauses
(i) and (ii); (iv) any trust for the benefit of any Person referred to in the
preceding clauses (i) through (iii); or (v) any Entity which, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, any Person referred to in the preceding clauses (i)
through (iv).
"Affected Gain" shall have the meaning provided in Section 7.4.E.
"Agreement" shall mean this Second Restated Agreement of Limited
Partnership, as it may be amended, modified, supplemented or restated from time
to time, as the context requires.
"Audited Financial Statements" shall mean financial statements (balance
sheet, statement of income, statement of partners' equity and statement of cash
flows) prepared in accordance with generally accepted accounting principles and
accompanied by an independent auditor's report containing (i) an opinion
containing no material qualification and (ii) no explanatory paragraph
disclosing information relating to material uncertainties (except as to
litigation) or going concern issues.
"Bankruptcy" of a Partner shall mean (i) the filing by a Partner of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any
2
<PAGE> 8
other federal or state insolvency law, or a Partner's filing an answer
consenting to or acquiescing in any such petition, (ii) the making by a Partner
of any assignment for the benefit of its creditors or the admission by a Partner
in writing of its inability to pay its debts as they mature, or (iii) the
expiration of ninety (90) days after the filing of an involuntary petition under
Title 11 of the United States Code (or corresponding provisions of future laws),
seeking an application for the appointment of a receiver for the assets of a
Partner, or an involuntary petition seeking liquidation, reorganization,
arrangement or readjustment of its debts under any other Federal or state
insolvency law, provided that the same shall not have been vacated, set aside or
stayed within such 90-day period.
"Bradley" shall mean Bradley Real Estate, Inc., a Maryland Corporation,
and any successor entity (by merger, consolidation or sale of assets) to
substantially all of its business.
"Bradley Group" shall mean Bradley, the Partnership, the Financing
Partnership, the Financing Corporation and any other Entity in which one or more
other members of the Bradley Group has or will have a direct or indirect
interest of 50% or more (by vote or value).
"Capital Account" shall mean the capital account maintained by the
Partnership for each Partner as described in Section 3.5.
"Capital Cash Flow" shall have the meaning set forth in Section 8.2.
"Capital Contribution" shall mean, when used with respect to a Partner,
the amount of money or the fair market value of property contributed by a
Partner to the capital of the Partnership pursuant to the terms of this
Agreement, including, without limitation, the provisions of Section 3.1.
"Cash Amount" shall mean an amount of cash equal to the amount (or
portion thereof) of any Current Yield which has not been paid to the Redeeming
Partner pursuant to Section 8.4.A for any prior period, plus the product of (i)
the Current Per Share Market Price of a share of Common Stock on the Valuation
Date, (ii) the number of Units set forth in the Redeeming Partner's Notice of
Redemption, and (iii) the Conversion Factor.
"Certificate" shall mean the Certificate of Limited Partnership filed
with the Secretary of State of the State of Delaware, as such Certificate may be
amended from time to time.
"Charter" shall mean the Charter (as such term is defined in the Maryland
General Corporation Law) of the General Partner, as it may be amended from time
to time.
"Closing Price" on any date shall mean the last sale price of Common
Stock, regular way, or, in case no sale takes place on such day, the average of
the closing bid and asked prices, regular way, in each such case as reported in
the principal consolidated transaction reporting system with respect to the New
York Stock Exchange or, if the Common Stock is not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal
3
<PAGE> 9
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or, if such system is no longer in use, the other
principal automated quotations system that may then be in use or, if the Common
Stock is not quoted by any such organization, the average of the closing bid and
asked prices furnished by one or more professional market makers making a market
in the Common Stock selected, from time to time, by the Board of Directors of
the General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute.
"Common Stock" shall mean the shares of the common stock, par value $0.01
per share, of Bradley.
"Commons of Chicago Ridge" shall mean the land and buildings known as the
"Commons of Chicago Ridge" described in Commonwealth Land Title Insurance
Company policy number 174-001172.
"Commons of Chicago Ridge Annex" shall mean the land and buildings known
as the "Commons of Chicago Ridge Annex" described in Chicago Title Insurance
Company policy number 1410007547079EP.
"Consolidated Distributed Cash" shall have the meaning set forth in
Section 8.3.
"Contributing Partner" shall have the meaning set forth in Section 3.1.B.
"Conversion Factor" shall mean 1.0, provided that in the event the
General Partner (i) declares or pays a dividend on its outstanding shares of
Common Stock in shares of Common Stock or makes a distribution to all holders of
its outstanding Common Stock in shares of Common Stock; (ii) subdivides its
outstanding shares of Common Stock; or (iii) combines its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which will be the number of issued and outstanding shares of Common
Stock immediately after such dividend, distribution, subdivision or combination,
and the denominator of which will be the actual number of shares of Common Stock
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination, unless the General Partner concurrently declares,
makes or pays an equivalent dividend, distribution, subdivision or combination
of Units such that a Partner would receive the same Cash Amount or REIT Shares
Amount if it exercised its redemption rights under Section 3.2 after such event
as it would have received if it had exercised its redemption rights immediately
prior to such event. Any adjustment to the Conversion Factor shall become
effective
4
<PAGE> 10
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
"Current Per Share Market Price" on any date shall mean the average of
the Closing Prices for the most recent ten (10) Trading Days ending on such
date.
"Current Yield" shall mean, for the period in question, the Consolidated
Distributed Cash for such period multiplied by the Limited Partner Consolidated
Percentage as of the close of such period (it being acknowledged that Current
Yield shall be zero for periods as to which holders of Common Stock do not
receive a distribution with respect to their shares).
"Depreciation" shall mean, for any fiscal year or portion thereof, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such period for federal income tax
purposes, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such period,
Depreciation shall be an amount that bears the same relationship to such
beginning Gross Asset Value as the depreciation, amortization or cost recovery
deduction in such period for federal income tax purposes bears to the beginning
adjusted tax basis; provided, however, that if the adjusted basis for federal
income tax purposes of an asset at the beginning of such period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the General Partner.
"Entity" shall mean any general partnership, limited partnership,
corporation, joint venture, trust, business trust, limited liability company,
cooperative or association.
"Environmental Claim" shall mean any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, lien, notice of
non-compliance or violation, investigation or proceeding relating in any way to
any Environmental Law or any permit issued under any such Environmental Law
including, without limitation, (i) by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (ii) by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or any applicable
Environmental Law or arising from alleged injury or threat of injury to health,
safety or the environment due the existence of Hazardous Materials or under any
applicable Environmental Law.
"Environmental Laws" shall mean all statutes specifically described in
the definition of Hazardous Materials below and all federal, state and local
environmental health and safety statutes, ordinances, codes, rules, regulations,
orders and decrees regulating, relating to or imposing liability or standards
concerning or in connection with Hazardous Materials or any applicable common
law right of action concerning or in connection with the Hazardous Materials.
5
<PAGE> 11
"Financing Corporation" shall mean Bradley Financing Corporation, a
Delaware corporation that is a wholly-owned subsidiary of Bradley.
"Financing Partnership" shall mean Bradley Financing Partnership, a
Delaware general partnership, of which the Partnership and the Financing
Corporation comprise the sole partners.
"Fractional Share Cash Amount" shall mean an amount of cash equal to the
product of (i) the Current Per Share Market Price of a share of Common Stock on
the Valuation Date, (ii) the fractional Unit set forth in the Redeeming
Partner's Notice of Redemption, and (iii) the Conversion Factor.
"General Partner" shall mean Bradley, its duly admitted successors and
assigns and any other person who is a general partner at the time referenced.
"General Partner Units" shall have the meaning set forth in Section
3.1.A.
"Gross Asset Value" shall mean, with respect to any asset of the
Partnership or any other member of the Bradley Group, the asset's adjusted basis
for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed to
the Partnership or any other member of the Bradley Group shall be the gross fair
market value of such asset, as determined by the General Partner;
(ii) The Gross Asset Value of all Partnership and other Bradley
Group assets shall be adjusted to equal their respective gross fair market
values, as determined by the General Partner, as of the following times: (a) the
date of this Agreement; (b) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a DE
MINIMIS Capital Contribution; (c) the distribution by the Partnership to a
Partner of more than a DE MINIMIS amount of Partnership property as
consideration for an interest in the Partnership; (d) the liquidation of the
Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); (e)
the acquisition of an additional equity interest in any member of the Bradley
Group in exchange for more than a DE MINIMIS contribution to such group member
(such as an issuance of additional shares by the General Partner); (f) the
distribution by any Bradley Group member to one or more of its members of more
than a DE MINIMUS amount of property as consideration for an equity interest in
such group member; and (g) the liquidation of any member of the Bradley Group;
provided, however, that (x) adjustments pursuant to clauses (b) - (g) above
shall be made only if the General Partner reasonably determines that such
adjustments are necessary or appropriate to maintain Capital Accounts and
provide for allocations of Profits and Losses that reflect the relative economic
interests of the Partners in the Partnership and (y) the hypothetical
liquidation required under Section 7.1 of this Agreement for purposes of
allocating Profits and
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<PAGE> 12
Losses shall not be treated as a liquidation of the Partnership or any other
Bradley Group member for purposes of the foregoing provisions of this clause
(ii).
(iii) The Gross Asset Value of (a) any Partnership asset
distributed to any Partner or (b) any asset of another member of the Bradley
Group distributed to a shareholder, partner or other equity owner of such
Bradley Group member shall be adjusted to equal the gross fair market value of
such asset, taking Section 7701(g) of the Code into account, on the date of
distribution as determined by the General Partner; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and paragraph (vi)
of the definition of Profits and Losses; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this paragraph (iv) to the extent the
General Partner determines that an adjustment pursuant to paragraph (ii) above
is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraphs (i), (ii) or (iv) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset. The General Partner may adjust the Capital Accounts to reflect any
adjustment to the Gross Asset Value of Partnership property if so required or
permitted under Section 1.704-1(b)(2)(iv) of the Regulations.
"Hazardous Materials" shall mean any substance, material, waste, gas or
particulate matter which is regulated by any local governmental authority, the
State of Illinois or the United States Government, including, but not limited
to, any material or substance which is (i) defined as a "hazardous waste",
"hazardous material", "hazardous substance", "extremely hazardous waste", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) poly chlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. ss.1251 ET SEQ. (33 U.S.C. ss.1317); (viii) defined as a
"hazardous waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S. C. ss.6901 ET SEQ. (42 U.S.C. ss.6903); or (ix) defined as
a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S. C. ss.9601 ET
SEQ. (42 U.S.C. ss.9601).
"Immediate Family" shall mean, with respect to any Person, such Person's
spouse, parents, parents-in-law, descendants, nephews, nieces, brothers,
sisters, brothers-in-law, sisters-in-law and children-in-law.
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<PAGE> 13
"Limited Partner" shall mean any Person (i) whose name is set forth as a
Limited Partner on EXHIBIT A or who has become a Limited Partner pursuant to the
terms and conditions of this Agreement and (ii) who holds a Partnership
Interest. "Limited Partners" means all such Persons. The Limited Partners at the
date of this Agreement are the Persons listed on EXHIBIT A.
"Limited Partner Consolidated Percentage" shall mean the fraction,
expressed as a percentage, determined as follows:
X
----
X+Y
where X = the number of Units held by the Limited Partners
(excluding any Units held by the General Partner and
any Preferred Units) multiplied by the Conversion
Factor; and
Y = the number of shares of Common Stock then outstanding.
"Limited Partner Units" shall have the meaning set forth in Section
3.1.A.
"Net Proceeds" shall mean the net proceeds from the issuance by the
General Partner of any shares of Common Stock or other class of its capital
stock after all underwriting discounts, brokerage commissions or fees and other
costs attributable to such issuance.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Section 1.704-2(b) and (c).
"Notice of Redemption" shall mean the Notice of Redemption substantially
in the form of EXHIBIT B.
"Operating Cash Flow" shall have the meaning set forth in Section 8.1.
"Original Agreement" shall mean the Agreement of Limited Partnership of
Tucker Operating Limited Partnership, dated as of October 4, 1993, as amended.
"Original Limited Partner" shall mean each Person who executed the Prior
Agreement as a Limited Partner on March 15, 1996 and who holds a Partnership
Interest and any Transferee of such Original Limited Partner who holds a
Partnership Interest. "Original Limited Partners" means all such Persons.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set forth
in Regulations Section 1.704-2(i)(3).
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<PAGE> 14
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Regulations Section 1.704-2(i)(2).
"Partners" shall mean, collectively, the General Partner and the Limited
Partners, or any additional or successor partners of the Partnership. Reference
to a Partner shall be to any one of the Partners.
"Partnership" shall mean the limited partnership governed by this
Agreement, as amended and/or restated from time to time.
"Partnership Interest" shall mean the ownership interest of a Partner in
the Partnership at any particular time, including the right of such Partner to
any and all benefits to which such Partner may be entitled as provided in this
Agreement, and to the extent not inconsistent with this Agreement, under the
Act, together with the obligations of such Partner to comply with all of the
terms and provisions of this Agreement and of the Act.
"Partnership Minimum Gain" shall have the meaning set forth in Sections
1.704-2(h)(2) and 1.704-2(d) of the Regulations.
"Percentage Interest" of a Partner in the Partnership shall be equal to
the quotient (expressed as a percentage) arrived at by dividing the number of
Units held by such Partner (other than Preferred Units) by the total number of
Units then outstanding (other than Preferred Units).
"Person" shall mean any individual or Entity.
"Preferred Units" shall mean any Units or other Partnership Interests
issued by the Partnership pursuant to Section 3.1.C, in one or more classes, or
one or more series of any such class, which have been designated with rights or
preferences with respect to Partnership distributions and/or rights upon
dissolution or liquidation of the Partnership senior to the rights of other
classes or series of Units, except that neither Limited Partner Units nor
General Partner Units of the classes outstanding on the date of this Agreement
shall be Preferred Units.
"Prior Agreement" shall mean the Bradley Operating Limited Partnership
Amended and Restated Agreement of Limited Partnership, dated March 15, 1996, by
and among Tucker and each of the Limited Partners executing the signature page
thereto, as amended on January 1, 1997 by the First Amendment to the Bradley
Operating Limited Partnership Amended and Restated Agreement of Limited
Partnership and on July 31, 1997 by the Second Amendment to the Bradley
Operating Limited Partnership Amended and Restated Agreement of Limited
Partnership.
"Profits" and "Losses" shall mean, for each fiscal year or portion
thereof, an amount equal to the Partnership's items of taxable income or loss
for such year or period, determined in accordance with Section 703(a) of the
Code with the following adjustments:
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<PAGE> 15
(i) any income which is exempt from Federal income tax and not
otherwise taken into account in computing Profits or Losses shall be added to
taxable income or loss;
(ii) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Section 705(a)(2)(B) expenditures under
Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in
computing Profits or Losses will be subtracted from taxable income or loss;
(iii) in the event that the Gross Asset Value of any Partnership
asset is adjusted pursuant to the definition of Gross Asset Value contained in
this Article 1, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses;
(iv) gain or loss resulting from any disposition of Partnership
assets with respect to which gain or loss is recognized for Federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or other
period;
(vi) to the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into
account in determining Capital Accounts as a result of a distribution other than
in complete liquidation of a Partner's Partnership Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes
of computing Profits or Losses; and
(vii) any items specially allocated pursuant to Section 7.2 shall
not be considered in determining Profits or Losses.
"Prospectus" shall mean the final form of prospectus relating to the
initial public offering of common stock of Tucker as it was first filed pursuant
to Rule 424(b) of the rules and regulations of the SEC, including all amendments
and supplements thereto.
"Redeeming Partner" shall have the meaning set forth in Section 3.2.
"Redemption Right" shall have the meaning set forth in Section 3.2.
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<PAGE> 16
"Regulations" shall mean the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"Registration Statement" shall mean the Registration Statement on Form
S-11 (including the prospectus contained therein) relating to the initial public
offering of common stock of Tucker, as filed with the SEC, and any amendments
made thereto, pursuant to which Tucker offered and sold certain shares of its
common stock.
"REIT" shall mean a real estate investment trust as defined in Section
856 of the Code.
"REIT Requirements" shall have the meaning set forth in Section 5.2.
"REIT Shares Amount" shall mean a number of shares of Common Stock equal
to the product of (i) the number of Limited Partner Units that are not Preferred
Units set forth in a Redeeming Partner's Notice of Redemption pursuant to
Section 3.2 less the amount of any fractional Unit, and (ii) the Conversion
Factor.
"Requesting Party" shall have the meaning set forth in Section 18.2.
"SEC" shall mean the United States Securities and Exchange Commission.
"Specified Redemption Date" shall mean the tenth (10th) Trading Day after
receipt by the General Partner of a Notice of Redemption from a Limited Partner.
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized and obligated by law or executive order to close.
"Transferee" shall have the meaning set forth in Section 12.2.
"TTC Guarantors" shall mean Kenneth L. Tucker, Richard H. Tucker and
Harold Eisenberg.
"Tucker" shall mean Tucker Properties Corporation, a Maryland corporation
that was the original general partner of the Partnership and that merged into
Bradley on March 15, 1996.
"Tucker Contribution Agreement(s)" shall have the meaning ascribed to the
term "Contribution Agreements" in the Original Agreement.
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<PAGE> 17
"Unit Certificate" shall mean any certificate issued by the General
Partner on behalf of the Partnership in accordance with Section 3.1.A to
evidence the ownership of the number and class or series of Units or other
Partnership Interests specified therein.
"Units" shall have the meaning set forth in Section 3.1.
"Valuation Date" shall mean the date of receipt by the General Partner of
a Notice of Redemption or, if such date is not a Trading Day, the first Trading
Day thereafter.
1.2 EXHIBITS, ETC. References to an "Exhibit" or to a
"Schedule" are, unless otherwise specified, to one of the Exhibits or Schedules
attached to this Agreement, and references to an "Article" or a "Section" are,
unless otherwise specified, to one of the Articles or Sections of this
Agreement. Each Exhibit and Schedule attached hereto and referred to herein is
hereby incorporated herein by this reference.
2. Organization.
------------
2.1 FORMATION OF PARTNERSHIP. Upon the initial filing of the
Certificate with the Secretary of State of the State of Delaware on September 2,
1993, the Partnership was formed as a limited partnership pursuant to the
provisions of the Act, and all other pertinent laws of the State of Delaware.
The Partners agree that the rights and liabilities of the Partnership shall be
as provided in the Act except as otherwise herein expressly provided.
2.2 PARTNERSHIP NAME. The business of the Partnership shall be
conducted under the name of "Bradley Operating Limited Partnership;" provided,
however, that the General Partner may, from time to time, change the name of the
Partnership or may adopt such trade or fictitious names as it may determine.
2.3 LOCATION OF THE PRINCIPAL PLACE OF BUSINESS. The location
of the principal place of business of the Partnership shall be at 40 Skokie
Boulevard, Suite 600, Northbrook, Illinois 60062-1626, or such other location as
shall be selected from time to time by the General Partner in its sole
discretion.
2.4 REGISTERED AGENT AND REGISTERED OFFICE. The Registered
Agent of the Partnership shall be The Corporation Trust Company or such other
Person as the General Partner may select in its sole discretion. The Registered
Office of the Partnership shall be Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801 or such other location as the General Partner may
select in its sole and absolute discretion.
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<PAGE> 18
3. Capital.
-------
3.1 Issuance of Units.
-----------------
A. The interest of a Partner in the Partnership is
sometimes referred to as a Partnership Interest and shall be evidenced by one or
more units of Partnership Interest ("Units"). All Units representing Partnership
Interests of a Limited Partner shall be designated as "Limited Partner Units."
Unless otherwise determined by the General Partner, all Units representing
Partnership Interests of the General Partner shall be designated as "General
Partner Units," notwithstanding that some of such Units may have been originally
issued to one or more Limited Partners and subsequently acquired by the General
Partner, whether pursuant to the provisions of Section 3.2.B or otherwise, and
upon the acquisition of Limited Partner Units by the General Partner such
Limited Partner Units shall automatically be redesignated as General Partner
Units. As used in this Agreement, the term "Units" shall refer to General
Partner Units and Limited Partner Units, collectively, unless otherwise required
by the context in which such term is used.
The aggregate total of all Units outstanding as of the date of this
Agreement, and the names of the Partners holding such Units (including the
number of Units owned by each such Partner) are set forth on EXHIBIT A.
The General Partner, in its sole and absolute discretion, is authorized
to issue on behalf of the Partnership Unit Certificates which evidence the
ownership of Units or other Partnership Interests by a Limited Partner or the
General Partner. Unit Certificates shall be in such form, not inconsistent with
the requirements of the Act or any other applicable law and this Agreement, as
shall be approved by the General Partner in its sole discretion. Each Unit
Certificate shall be signed by the Chief Executive Officer or the President or a
Vice President and by the Secretary or Assistant Secretary or the Treasurer or
Assistant Treasurer of the General Partner certifying the number of Units or
other Partnership Interests (and if there shall be more than one class or series
of Units or other Partnership Interests, the class or series thereof) owned by
such Partner; provided, however, that any or all of the signatures on the Unit
Certificate may be facsimiles. In case any officer of the General Partner who
shall have signed or whose facsimile signature or signatures shall have been
placed upon any such Unit Certificate or Unit Certificates is no longer an
officer of the General Partner at the date of issue, such Unit Certificate may
nevertheless be issued by the General Partner with the same effect as if such
person were such officer at the date of issue. Unit Certificates shall be
consecutively or serially numbered and shall be entered in the books and records
of the Partnership as they are issued and shall exhibit the holder's name and
the number of Units or other Partnership Interests held (and if there shall be
more than one class or series of Units or other Partnership Interests, the class
or series thereof). Unit Certificates are transferable only to the extent that
the Units or other Partnership Interests underlying such Unit Certificates are
transferable in accordance with the provisions of Article 12, and each Unit
Certificate shall bear the following legend to such effect:
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<PAGE> 19
THE UNITS OR OTHER PARTNERSHIP INTERESTS
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN TRANSFER RESTRICTIONS CONTAINED IN
ARTICLE 12 OF THE BRADLEY OPERATING LIMITED
PARTNERSHIP SECOND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP, DATED AS OF SEPTEMBER 2,
1997, AS AMENDED, AND/OR AMENDED AND RESTATED
FROM TIME TO TIME, (A COPY OF WHICH MAY BE
OBTAINED FROM BRADLEY OPERATING LIMITED
PARTNERSHIP WITHOUT CHARGE UPON REQUEST). THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
HEREOF, SHALL BE DEEMED TO HAVE AGREED TO AND
SHALL BE BOUND BY SUCH AGREEMENT.
B. From time to time, the General Partner, subject to
the provisions of this Section 3.1.B and Section 3.1.E, may cause the
Partnership to issue additional Units to existing or newly-admitted Partners
(including itself) to reflect the contribution by a Partner (the "Contributing
Partner") of additional Capital Contributions to the Partnership. The number of
Units issued to a Contributing Partner that is a member of the Bradley Group
under this Section 3.1.B, shall, in the case of Capital Contributions equal to
the Net Proceeds from the sale of additional shares of Common Stock or other
capital stock of the General Partner, be the same number as the number of shares
sold, and in the case of Capital Contributions from other than the sale of
additional shares of the General Partner, be equal to the quotient (rounded to
the nearest whole number) arrived at by dividing (i) the amount of money or the
initial Gross Asset Value of the property contributed as additional Capital
Contributions (net of other liabilities to which such property is subject or
assumed by the Partnership in connection with such contribution but increased to
reflect any expenses attributable to such contribution) by (ii) the product of
(a) the Current Per Share Market Price of the Common Stock and (b) the
Conversion Factor. The number of Units issued to a Contributing Partner that is
not a member of the Bradley Group under this Section 3.1.B shall be determined
by the General Partner, in its sole discretion. The agreement or agreements and
other documents (collectively, the "Contribution Agreements") providing for
Capital Contributions after March 15, 1996 by any Contributing Partner that is
not a member of the Bradley Group may include specially negotiated terms
("Special Terms") relating to the rights or obligations of such Contributing
Partner as a Partner in the Partnership that differ in various respects from the
rights or obligations of other Partners in the Partnership, provided that the
application of such Special Terms does not adversely affect the rights or
obligations of any other Limited Partner; and, as between the Contributing
Partner on the one hand and the Partnership and the other Partners on the other
hand, such Special Terms of the Contribution Agreement shall be deemed to be a
part of, and shall supersede any conflicting terms of, this Agreement.
C. Subject to the provisions of Section 3.1.B and
Section 3.1.E, the General Partner is hereby authorized to cause the Partnership
from time to time to issue to the
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Partners (including the General Partner) or other Persons additional Units in
one or more classes, or one or more series of any such class with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to those
of Units held by the Limited Partners, all as shall be determined by the General
Partner in its sole and absolute discretion, including, without limitation (i)
the right of such class or series of Units to share in Partnership distributions
and (ii) the rights which each such class or series of Units shall have upon
dissolution or liquidation of the Partnership; PROVIDED THAT no Preferred Units
that have distribution or liquidation rights that are senior to the distribution
or liquidation rights of the Units held by the Limited Partners shall be issued
to the General Partner unless either (a)(1) the Preferred Units are issued in
connection with an issuance of shares of capital stock of the General Partner,
which shares have designations, preferences and other rights such that the
economic interests attributable to such shares are substantially similar to the
designations, preferences and other rights of the Preferred Units issued to the
General Partner in accordance with this Section 3.2.C, and (2) the General
Partner shall make a Capital Contribution to the Partnership in an amount equal
to the Net Proceeds raised in connection with such issuance, or (b) the
additional Units are issued to all Partners in proportion to their respective
Percentage Interests. Notwithstanding the foregoing, without the prior written
consent of the Original Limited Partners holding more than 50% of the
Partnership Interests held by the Original Limited Partners, no additional Units
may have rights, powers or duties that, prior to March 16, 1998, are senior to
the rights, powers or duties of the Units held by the Original Limited Partners.
D. No Limited Partner shall, by virtue of being the
holder of one or more Units, be deemed to be a shareholder of, or have any other
interest in, the General Partner.
E. Prior to March 16, 1998, the General Partner shall
not permit the Partnership to issue additional Units to existing or newly
admitted Partners if the issuance of such Units would cause a material adverse
tax consequence to the Original Limited Partners (determined in the manner
described below); provided, however, that notwithstanding the foregoing or
anything in this Agreement to the contrary, the General Partner shall have the
right to require the Partnership to issue additional new Units to existing or
newly-admitted Partners in connection with (i) the merger, consolidation or
combination of the General Partner or one of its corporate subsidiaries with or
into another Person in which securities of the General Partner are being issued,
acquired, converted or exchanged or (ii) the merger, consolidation or
combination of the Partnership with or into another Person in connection with
such merger, consolidation or combination of the General Partner or one of its
corporate subsidiaries with or into another Person in which securities of the
General Partner are being issued, acquired, converted or exchanged. For purposes
of this Section 3.1.E, an issuance of Units will be treated as having material
adverse tax consequences to the Original Limited Partners only if the Original
Limited Partners submit to the Partnership within twenty-one (21) days of
receipt of notice from the General Partner of such proposed issuance of Units an
opinion of Klayman and Korman, L.L.C. or such other certified public accounting
firm reasonably satisfactory to the General Partner, which opinion is in form
and substance
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<PAGE> 21
reasonably satisfactory to the Accountants, to the effect that such issuance (x)
will result in a decrease in the Original Limited Partners' share of Partnership
liabilities under Code Section 752 and the Regulations thereunder and (y) such
decrease in the Original Limited Partners' share of liabilities will cause the
Original Limited Partners to recognize taxable income under Section 731 of the
Code of $50,000 in the aggregate or greater. Nothing in this Section 3.1.E shall
preclude the issuance of Units to the extent necessary to provide that the
Limited Partners as a class are entitled to at least 1% of the distributions to
the Partners pursuant to Section 8.4 for the taxable year and subsequent taxable
years.
F. The General Partner shall not issue any additional
shares of Common Stock or any shares of any other class of capital stock of the
General Partner (other than shares of Common Stock issued pursuant to Section
3.2) or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock or any
shares of any other class of capital stock of the General Partner (collectively,
"New Securities") other than to all holders of Common Stock unless (i) the
General Partner shall cause the Partnership to issue to the General Partner
Units or other Partnership Interests or rights, options, warrants or convertible
or exchangeable securities of the Partnership having designations, preferences
and other rights (collectively, "New Units") such that the economic interests of
such New Units are substantially similar to those of the New Securities, and the
General Partner contributes to the Partnership the Net Proceeds from the
issuance of such New Securities and from the exercise of rights contained in
such New Securities. Without limiting the foregoing, the General Partner is
expressly authorized to issue New Securities for less than fair market value,
and the General Partner is expressly authorized to cause the Partnership to
issue to the General Partner corresponding Units or Partnership Interests, so
long as (x) the General Partner concludes in good faith that such issuance is in
the interests of the General Partner and the Partnership (for example, and not
by way of limitation, the issuance of shares of Common Stock and corresponding
Units pursuant to an employee stock purchase plan providing for employee
purchases of shares of Common Stock at a discount from fair market value or
employee stock options that have an exercise price that is less than the fair
market value of the Common Stock, either at the time of issuance or at the time
of exercise), and (y) the General Partner contributes the Net Proceeds from such
issuance and exercise to the Partnership.
Notwithstanding the provisions of the preceding paragraph, the General
Partner may issue New Securities whose Net Proceeds need not be contributed to
the Partnership and without the issuance by the Partnership of New Units if,
when and to the extent that the General Partner determines that the Net Proceeds
from such issuance will be used for assets of the General Partner that are
separate from assets of the Partnership and in which the Partnership has no
interest.
3.2 Redemption Right.
----------------
A. Subject to Sections 3.2.B and 3.2.C, on or after the date
of this Agreement, each Limited Partner, other than the General Partner, shall
have the right (the
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<PAGE> 22
"Redemption Right") to require the Partnership to redeem on a Specified
Redemption Date all or a portion of the Units (other than Preferred Units) held
by such Limited Partner for an aggregate amount equal to the Cash Amount, which
shall be paid by the Partnership. The Redemption Right shall be exercised
pursuant to a Notice of Redemption delivered to the Partnership (with a copy to
the General Partner) by the Limited Partner who is exercising the redemption
right (the "Redeeming Partner"); provided, however, that the Partnership shall
not be obligated to satisfy such Redemption Right if the General Partner elects
to purchase the Units subject to the Notice of Redemption pursuant to Section
3.2.B. Effective as of the Specified Redemption Date, the Redeeming Partner
shall not receive any dividends or distributions with respect to any Units so
redeemed. The Transferee of any Limited Partner may exercise the rights of such
Limited Partner pursuant to this Section 3.2, and such Limited Partner shall be
deemed to have assigned such rights to such Transferee and shall be bound by the
exercise of such rights by such Transferee. In connection with any exercise of
such rights by such Transferee on behalf of such Limited Partner, the Cash
Amount shall be paid by the Partnership directly to such Transferee and not to
such Limited Partner.
B. Notwithstanding the provisions of Section 3.2.A, a Limited
Partner that exercises the Redemption Right shall be deemed to have offered to
sell the number of Units set forth in the Notice of Redemption to the General
Partner, and the General Partner may, in its sole and absolute discretion, elect
to purchase directly and acquire such Units by paying to the Redeeming Partner
either (i) the Cash Amount or (ii) the REIT Shares Amount and the Fractional
Share Cash Amount, as elected by the General Partner (in its sole and absolute
discretion), on the Specified Redemption Date, whereupon on such date the
General Partner shall acquire the Units offered for redemption by the Redeeming
Partner and shall be treated for all purposes of this Agreement as the owner of
such Units. If the General Partner shall elect to exercise its right to purchase
Units under this Section 3.2.B with respect to a Notice of Redemption, it shall
so notify the Redeeming Partner within five Trading Days after the receipt by
the General Partner of such Notice of Redemption. If the General Partner (in its
sole and absolute discretion) elects not to exercise its right to purchase Units
from the Redeeming Partner pursuant to this Section 3.2.B, the General Partner
shall not have any obligation to the Redeeming Partner or the Partnership with
respect to the Redeeming Partner's exercise of the Redemption Right, and the
Partnership shall be required to pay the Redeeming Partner the Cash Amount in
accordance with the provisions of Section 3.2.A. In the event the General
Partner shall exercise its right to purchase Units with respect to the exercise
of a Redemption Right as described in the first sentence of this Section 3.2.B,
the Partnership shall have no obligation to pay any amount to the Redeeming
Partner with respect to such Redeeming Partner's exercise of such Redemption
Right, and each of the Redeeming Partner, the Partnership and the General
Partner, as the case may be, shall treat the transaction between the General
Partner and the Redeeming Partner for federal income tax purposes as a sale of
the Redeeming Partner's Units to the General Partner. Each Redeeming Partner
agrees to execute such documents as the General Partner may reasonably require
in connection with the issuance of shares of Common Stock upon exercise of the
Redemption Right.
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C. Notwithstanding the provisions of Section 3.2.A and Section
3.2.B, (i) a Limited Partner shall not be entitled to exercise the Redemption
Right pursuant to Section 3.2.A if the delivery of shares of Common Stock to
such Partner on the Specified Redemption Date pursuant to Section 3.2.B would be
prohibited under or violate any provision of the Charter of the General Partner
or would violate any federal or state securities laws and (ii) a Limited Partner
shall not have the right to exercise the Redemption Right pursuant to Section
3.2.A if in the opinion of counsel for the General Partner the General Partner
would, as a result thereof, no longer qualify (or if there is a material risk
that the General Partner no longer would qualify) as a REIT.
D. A Limited Partner shall not be entitled to exercise the
Redemption Right with respect to any Preferred Unit; but this Section 3.2.D
shall not preclude the General Partner from amending this Agreement in
connection with the issuance or proposed issuance of Preferred Units pursuant to
Section 3.1.C so as to provide a right of holders hereof to have such Preferred
Units redeemed by the Partnership on terms set forth in such amendment.
3.3 ADDITIONAL CAPITAL. Except as otherwise provided in Section 3.1
with respect to the General Partner, no Partner shall be assessed or required to
contribute additional funds or other property to the Partnership. If and as the
General Partner or any other Partner makes additional Capital Contributions to
the Partnership, each such Contributing Partner shall receive additional Units
or other Partnership Interests as provided for in Section 3.1. The General
Partner shall also have the right (but not the obligation) to raise any
additional funds required for the Partnership by lending funds to the
Partnership, or by causing the Partnership to borrow funds from third parties or
other members of the Bradley Group, on such terms and conditions as the General
Partner shall deem appropriate in its sole discretion. If the General Partner
elects to cause the Partnership to borrow funds, it may cause one or more of the
Partnership's assets to be encumbered to secure the loan. No Limited Partner
shall have the right to contribute additional Capital Contributions to the
Partnership without the prior written consent of the General Partner.
3.4 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the right
or obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the Partners herein
set forth to make Capital Contributions or loans to the Partnership shall be
deemed an asset of the Partnership for any purpose by any creditor or other
third party, nor may such rights or obligations be sold, transferred or assigned
by the Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or of any of the Partners.
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3.5 CAPITAL ACCOUNTS. A separate Capital Account shall be maintained
for each Partner. Each Partner's Capital Account shall be adjusted as set forth
below in this Section 3.5.
A. To each Partner's Capital Account there shall be credited
such Partner's Capital Contributions, such Partner's distributive share of
Profits and any items in the nature of income or gain which are specifically
allocated pursuant to Section 7.2, and the amount of any Partnership liabilities
assumed by such Partner or which are secured by any Partnership property
distributed to such Partner.
B. To each Partner's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Partnership property
distributed to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Losses and any items in the nature of expenses
or losses which are specifically allocated pursuant to Section 7.2, and the
amount of any liabilities of such Partner assumed by the Partnership or which
are secured by any property contributed by such Partner to the Partnership.
C. In the event all or a portion of a Partnership Interest is
transferred in accordance with the terms of this Agreement (including a transfer
of Units pursuant to Section 3.2), the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred
Partnership Interest.
D. In determining the amount of any liability for purposes of
Sections 3.5.A and 3.5.B, there shall be taken into account Code Section 752(c)
and any other applicable provisions of the Code and Regulations.
E. This Section 3.5 and the other provisions of this Agreement
relating to the maintenance of Capital Accounts (and the determination of
credits and debits thereto) are intended to comply with Section 704(b) of the
Code and Regulations Section 1.704-1(b), and shall be interpreted and applied in
a manner consistent with such Regulations. In the event the General Partner
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation, (i)
allocations pursuant to Article 7 or (ii) debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Partnership or the Partners) are computed in order to comply
with such Regulations or more accurately reflect the Partners' interests in the
Partnership, the General Partner may make such modification. The General Partner
also may (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(g),
(ii) make any appropriate modifications in the event unanticipated events (for
example, the acquisition by the Partnership of oil or gas properties) might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b), and (iii) adopt such conventions and make such elections for
purposes of
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maintaining Capital Accounts and the allocation of items for tax purposes as it
determines are necessary or appropriate.
3.6 No Interest on or Return of Capital.
-----------------------------------
A. Except to the extent authorized by Partnership
Interests issued pursuant to Section 3.1.C, no Partner shall be entitled to any
interest on its Capital Account or on its contributions to the capital of the
Partnership.
B. Except as provided by law, or to the extent
otherwise provided by this Agreement or authorized by Units or other Partnership
Interests issued pursuant to Section 3.1.C, no Partner shall have the right to
demand or to receive the return of all or any part of his capital contributions
to the Partnership and there shall be no priority of one Partner over another as
to the return of capital contributions or withdrawals or distributions of
profits and losses. Except to the extent authorized by Partnership Interests
issued pursuant to Section 3.1.C, no Partner shall have the right to demand or
receive property other than cash in return for the contributions of such Partner
to the Partnership.
3.7 NEGATIVE CAPITAL ACCOUNTS. Except as otherwise provided by
law or as specifically agreed in writing by a Partner, no Partner shall be
required to pay to the Partnership any deficit or negative balance which may
exist in its Capital Account.
3.8 LIMIT ON CONTRIBUTIONS AND OBLIGATIONS OF PARTNER. Neither
the Limited Partners nor the General Partner shall be required to make any
additional advances or contributions to or on behalf of the Partnership or to
endorse any obligations of the Partnership.
4. [Intentionally Omitted].
5. Purpose and Powers of Partnership.
---------------------------------
5.1 The purposes of the Partnership shall be to acquire, hold,
purchase, own, operate, manage, develop, redevelop, construct, improve,
maintain, invest in, finance, refinance, sell, convey, exchange, transfer,
encumber, lease and otherwise deal with the properties of the Partnership and
other real and personal property; to exercise all of the powers of a general
partner in the Financing Partnership and to acquire, own, sell, convey,
exchange, dispose of and otherwise deal with partnership interests in the
Financing Partnership; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership, and to
engage in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes. The Partnership shall have all powers
necessary or desirable to accomplish the purposes enumerated. In connection with
the foregoing, but subject to all of the terms, covenants, conditions and
limitations contained in this Agreement and any other agreement entered into by
the Partnership, the Partnership shall have full power and authority, directly
or through its interests in the Financing Partnership, the
20
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Financing Corporation or any other partnership, subsidiary, limited liability
company, other entity or joint venture, to enter into, perform and carry out
contracts of any kind, to borrow money and to issue evidences of indebtedness,
whether or not secured by mortgage, trust deed, pledge or other lien, and
directly or indirectly to acquire and construct additional properties as
necessary or useful in connection with its business.
5.2 The Partners acknowledge and agree that the Partnership
shall be operated in a manner that will enable the General Partner to (i)
satisfy the requirements for qualifying and taxation as a REIT under the Code
and the Regulations (the "REIT Requirements") and (ii) avoid the imposition of
any federal income or excise tax liability. The Partnership shall avoid taking
any action, or permitting any Affiliate to take any action, which would result
in the General Partner ceasing to satisfy the REIT Requirements or would result
in the imposition of any federal income or excise tax liability on the General
Partner.
6. Term.
----
6.1 The Partnership shall continue until the Partnership is
terminated upon the earliest to occur of the following events:
A. December 31, 2050;
B. The election to dissolve the Partnership made in
writing by the General Partner;
C. The Bankruptcy of the General Partner;
D. Dissolution required by operation of law; or
E. The sale or other disposition of all or
substantially all the assets of the Partnership unless the General Partner
elects to continue the Partnership business for the purpose of the receipt and
the collection of indebtedness or the collection of any other consideration to
be received in exchange for the assets of the Partnership (which activities
shall be deemed to be part of the winding up of the affairs of the Partnership).
6.2 Notwithstanding any other provision in this
Agreement, the General Partner hereby covenants and agrees that it will not
prior to March 16, 1998 (i) elect to dissolve the Partnership pursuant to
Section 6.1.B or (ii) sell or otherwise dispose of all or substantially all of
the assets of the Partnership.
7. Allocations.
-----------
7.1 PROFITS OR LOSSES. Profits and Losses for each taxable
year shall be allocated among the Partners and shall be credited or debited to
the respective Capital Accounts so that, to the maximum extent possible, the
balance of each Partner's Capital
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Account at the end of any taxable year (increased by the sum of such Partner's
share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as
determined in accordance with Regulations Section 1.704-2) would be positive in
the amount of cash that such Partner would receive (or negative in the amount of
cash that such Partner would be required to contribute to the Partnership) if
each member of the Bradley Group sold all of its property for an amount of cash
equal to the Gross Asset Value of such property (reduced, but not below zero, by
the amount of Nonrecourse Liabilities to which such property is subject) and all
of the cash of the Partnership and each member of the Bradley Group remaining
after payment of all liabilities (other than Nonrecourse Liabilities) of the
Partnership and each member of the Bradley Group were distributed in liquidation
of each such entity immediately following the end of such taxable year. For
purposes of calculating the distribution that would be made to the Partners
pursuant to the hypothetical liquidation described in the preceding sentence,
(i) Section 15.2.C shall be applied as if such hypothetical liquidation occurred
in connection with the liquidation of the Bradley Group (so that the
hypothetical liquidating distribution to the Partners shall be calculated under
Sections 8.4 and 8.5) and (ii) Section 8.4 shall be applied as if the
Consolidated Distributed Cash for the taxable year ending with such hypothetical
liquidation equaled the amount of cash that would be distributed to the holders
of Common Stock and Units (other than Units held by the General Partner) in such
hypothetical liquidation (without regard to the actual market price or fair
market value of the Common Stock).
7.2 SPECIAL ALLOCATIONS. The following special allocations
shall be made in the following order:
A. MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding any other provision
of this Article 7, if there is a net decrease in Partnership Minimum Gain during
any fiscal year, each Partner shall be specially allocated items of Partnership
income and gain for such fiscal year (and, if necessary, subsequent fiscal
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). The items to be so allocated shall be determined in accordance with
Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2) (assuming for this purpose
that this Agreement complies with the requirements of Regulations Section
1.704-1(e)). This Section 7.2.A is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.
B. PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), notwithstanding any other
provision of this Article 7, if there is a net decrease in Partner Nonrecourse
Debt Minimum Gain attributable to a Partner Nonrecourse Debt during any
Partnership fiscal year, each Partner who has a share of the Partner Nonrecourse
Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated
items of Partnership income and gain for such fiscal year (and, if necessary,
subsequent fiscal years) in an amount equal to such Partner's share of the net
decrease in
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<PAGE> 28
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4) (assuming
for this purpose that this Agreement complies with the requirements of
Regulations Section 1.704-1(e)). The items to be so allocated shall be
determined in accordance with Regulations Sections 1.7042(i)(4) and
1.704-2(j)(2). This Section 7.2.B is intended to comply with the minimum gain
chargeback requirement in Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
C. NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for
any fiscal year shall be allocated among the Partners in accordance with their
respective Percentage Interests.
D. PARTNER NONRECOURSE DEDUCTIONS. Any Partner
Nonrecourse Deductions for any fiscal year shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable,
in accordance with Regulations Section 1.704-2(i)(1).
7.3 Other Allocation Rules.
----------------------
A. For purposes of determining the Profits, Losses or
any other items allocable to any period, Profits, Losses and any such other
items shall be determined in a daily, monthly or other basis, as determined by
the General Partner using any permissible method under Code Section 706 and the
Regulations thereunder (including proration or a closing of the books).
B. The Partners are aware of the income tax
consequences of the allocations made by this Article 7 and hereby agree to be
bound by the provisions of this Article 7 in reporting their shares of
Partnership income and loss for income tax purposes.
7.4 Tax Allocations; Code Section 704(c)/Section 1245 and 1250
----------------------------------------------------------
Recapture.
- ---------
A. Except as otherwise provided in this Agreement, for
federal, state and local income tax purposes, all items of Partnership income,
gain, loss, deduction, credit and any other allocations not otherwise provided
for shall be allocated among Partners in the same manner as the corresponding
item of income, gain, loss or deduction was allocated pursuant to the preceding
sections.
B. Income, gain, loss, and deduction with respect to
any property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for federal
income tax purposes and its initial Gross Asset Value in accordance with any
permissible manner under Code Section 704(c) and the Regulations thereunder.
23
<PAGE> 29
C. In the event the Gross Asset Value of any asset is
adjusted pursuant to the definition of "Gross Asset Value" contained in Article
1, subsequent allocations of income, gain, loss, and deduction with respect to
such asset shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset Value in the same
manner or manners permitted under Code Section 704(c) and the Regulations
thereunder.
D. Any elections or other decisions relating to tax
allocations pursuant to this Section 7.4 shall be made by the General Partner in
any permissible manner under the Code or the Regulations that the General
Partner may elect in its sole discretion, and the General Partner may adopt such
conventions and methods for complying with the requirements of Code Section
704(c) and the Regulations thereunder as the General Partner deems appropriate.
Allocations pursuant to this Section 7.4 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Partner's Capital Account or share of Profits or Losses.
E. Except as otherwise required under Section 7.1, 7.2
or 7.4.C, if any portion of gain from the sale of property is treated as gain
which is ordinary income by virtue of the application of Code Section 1245 or
1250 ("Affected Gain"), then, to the extent possible, (i) such Affected Gain
shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain were
allocated and (ii) other Tax Items of gain of the same character that would have
been recognized, but for the application of Code Section 1245 and/or 1250, shall
be allocated away from those Partners who are allocated Affected Gain pursuant
to clause (i) so that, to the extent possible, the other Partners are allocated
the same amount, and type, of capital gain that would have been allocated to
them had Code Section 1245 and/or 1250 not applied.
7.5 NONRECOURSE LIABILITIES. The Partners agree that the
Partnership's "excess nonrecourse liabilities" within the meaning of Regulations
Section 1.752-3(a)(3) shall be allocated among the Partners in accordance with
their respective interests in Partnership profits which, solely for purposes of
Regulations Section 1.752-3(a)(3), shall be deemed to be their Percentage
Interests.
8. Cash Available For Distribution.
-------------------------------
8.1 OPERATING CASH FLOW. As used in this Agreement, "Operating
Cash Flow" shall mean and be defined as all cash receipts of the Partnership
from whatever source (but excluding Capital Cash Flow and excluding the proceeds
of any additional Capital Contributions to the Partnership pursuant to Section
3.1 or 3.3) during the period in question in excess of all items of Partnership
expense (other than non-cash expenses such as depreciation) and other cash needs
of the Partnership, including, without limitation, Administrative Expenses,
amounts paid by the Partnership as principal or interest on debts and advances,
during such period, capital expenditures and any reserves (as determined by the
24
<PAGE> 30
General Partner) established or increased during such period. In the discretion
of the General Partner, reserves may include cash held for future acquisitions
or any other purpose.
8.2 CAPITAL CASH FLOW. As used in this Agreement, "Capital Cash
Flow" shall mean and be defined as collectively (i) gross proceeds realized in
connection with the sale of any assets of the Partnership, (ii) gross financing
or refinancing proceeds, (iii) gross condemnation proceeds (excluding
condemnation proceeds applied to restoration of remaining property), (iv) gross
proceeds from the issuance and sale of capital stock (whether common or
preferred) or debt securities of the General Partner and contributed to the
Partnership, and (v) gross insurance proceeds (excluding rental insurance
proceeds or insurance proceeds applied to restoration of property) less (a)
closing costs, (b) the cost to discharge any Partnership financing encumbering
or otherwise associated with the asset(s) in question, (c) the establishment of
reserves (as determined by the General Partner, and which may include, but is
not limited to, cash held for future acquisitions), and (d) other expenses of
the Partnership (including Administrative Expenses) to the extent not deducted
in calculating Operating Cash Flow and then due and owing.
8.3 CONSOLIDATED DISTRIBUTED CASH. As used in this Agreement,
"Consolidated Distributed Cash" with respect to any period shall mean the total
amount of cash that will be distributed with respect to shares of Common Stock
and Units (other than Units held by the General Partner and Preferred Units) by
members of the Bradley Group with respect to such period. The amount of
Consolidated Distributed Cash with respect to any period shall be determined by
the General Partner in its sole discretion, and such determination shall be
conclusive and binding as to all Partners.
8.4 DISTRIBUTIONS TO PARTNERS. Except as provided in Section
15.2, Operating Cash Flow and Capital Cash Flow with respect to any period shall
be distributed to the Partners at such time or times as the General Partner
shall determine consistent with the following order of priority:
A. First, to those Partners (whether Limited or
General) as a class holding Preferred Units, if any, issued by the Partnership
amount sufficient to satisfy the distribution rights of such Preferred Units (to
the extent such distribution rights have been designated as senior to the
distribution rights of other Units or Partnership Interests);
B. Second, at such times, if ever, as holders of Common
Stock receive a distribution with regard to their shares, to the Limited
Partners as a class (excluding for such purposes Limited Partners who hold only
Preferred Units with distribution rights designated as senior to the
distribution rights of other Units or Partnership Interests), an amount equal to
the lesser of (i) (A) the Current Yield for such period plus (B) the excess, if
any, of the aggregate of the Current Yield for all prior periods over the
aggregate amount distributed pursuant to this Section 8.4.B for all prior
periods, and (ii) 99% of the excess for
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such period of the Operating Cash Flow and Capital Cash Flow over distributions
pursuant to the preceding Section 8.4.A. for such period; and
C. Third, any remaining Operating Cash Flow and Capital
Cash Flow for such period shall be distributed to the General Partner.
8.5 Distributions Among Partners of the Same Series or Class.
--------------------------------------------------------
A. The amount distributed as a class or series to the
Partners holding Preferred Units pursuant to Section 8.4.A or Section 15.2.C.1
shall be distributed among such Partners (i) first, if more than one class or
series of Preferred Units have been issued, in accordance with the relative
seniority and preference rights of such classes or series of Preferred Units
designated by the General Partner pursuant to Section 3.1.C, and (ii) second,
among the holders of each class or series of Preferred Units in accordance with
the respective number of such Preferred Units held by them as of a record date
established by the General Partner.
B. The amount distributed as a class to Limited
Partners holding Units that are not Preferred Units pursuant to Section 8.4.B or
Section 15.1.C.2 shall be distributed among such Limited Partners in accordance
with the respective number of Units (other than Preferred Units) held by them as
of a record date established by the General Partner, which record date shall be
the same as the record date for determination of stockholders of the General
Partner who are entitled to receive payment of dividends on their shares of
Common Stock.
8.6 REIT DISTRIBUTIONS. The General Partner shall use its best
efforts to cause Operating Cash Flow and Capital Cash Flow to be distributed so
as to allow the General Partner to satisfy the REIT Requirements and avoid
imposition of any federal income or excise tax.
8.7 CONSENT TO DISTRIBUTIONS. Each of the Partners hereby
consents to the distributions provided for in this Agreement.
8.8 LIQUIDATING DISTRIBUTIONS. Distributions upon liquidation
of the Partnership shall be made in accordance with Section 15.2.
8.9 Special Distribution and Allocations for Certain
------------------------------------------------
Properties.
- ----------
A. Notwithstanding anything to the contrary in this
Agreement, for the Partnership's 1995 fiscal year and all subsequent fiscal
years, (a) 100% of the Operating Cash Flow, Capital Cash Flow and proceeds of
liquidation of the Partnership with respect to the property contributed to the
Partnership by the Village of Chicago Ridge (the "Village Property") shall be
distributed to the General Partner as determined by the General Partner pursuant
to Sections 8.1, 8.2 and 15.2, (b) 100% of all items of Partnership income,
gain,
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loss, deduction and credit with respect to the Village Property shall be
allocated to the General Partner, (c) 100% of the liabilities and expenditures
attributable to the Village Property shall be charged to the General Partner,
and (d) the General Partner shall indemnify and hold harmless the share of the
Limited Partners' Operating Cash Flow, Capital Cash Flow and proceeds of
liquidation from and against any liabilities or expenditures attributable to the
Village Property.
B. Notwithstanding anything to the contrary in this
Agreement, for the Partnership's 1995 fiscal year and all subsequent fiscal
years, (a) 100% of the Operating Cash Flow, Capital Cash Flow and proceeds of
liquidation of the Partnership with respect to the note issued to the
Partnership by the Village of Round Lake Beach (the "Village Note") shall be
distributed to the General Partner as determined by the General Partner pursuant
to Sections 8.1, 8.2 and 15.2, (b) 100% of all items of Partnership income,
gain, loss, deduction and credit with respect to the Village Note shall be
allocated to the General Partner, (c) 100% of the liabilities and expenditures
attributable to the Village Note shall be charged to the General Partner, and
(d) the General Partner shall indemnify and hold harmless the share of the
Limited Partners' Operating Cash Flow, Capital Cash Flow and proceeds of
liquidation from and against any liabilities or expenditures attributable to the
Village Note.
9. Management and Property of the Partnership.
------------------------------------------
9.1 GENERAL PARTNER. The General Partner shall be the sole
manager of the Partnership business, and shall have the right and power to make
all decisions and take any and every action with respect to the property,
business and affairs of the Partnership and shall have all the rights, power and
authority generally conferred by law, or necessary, advisable or consistent with
accomplishing the purposes of the Partnership. All such decisions or actions
made or taken by the General Partner hereunder shall be binding upon all of the
Partners and the Partnership. Except as otherwise expressly provided herein, the
powers of the General Partner to manage the Partnership business shall include,
without limitation, the power and authority to:
A. Manage, control, invest, reinvest, acquire by
purchase, lease or otherwise sell, contract to purchase or sell, grant, obtain,
or exercise options to purchase, options to sell or conversion rights, assign,
transfer, convey, deliver, endorse, exchange, pledge, mortgage, abandon,
improve, repair, maintain, insure, lease for any term and otherwise deal with
any and all property of whatsoever kind and nature, and wheresoever situated, in
furtherance of the purposes of the Partnership;
B. Acquire, directly or indirectly, interests in real
estate of any kind and of any type, and any and all kinds of interests therein,
and to determine the manner in which title thereto is to be held; to manage,
insure against loss, protect and subdivide any of the real estate, interests
therein or parts thereof; to improve, develop or redevelop any such real estate;
to participate in the ownership and development of any property; to dedicate for
public use, to vacate any subdivisions or parts thereof, to resubdivide, to
contract to sell, to
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grant options to purchase or lease, to sell on any terms; to convey, to
mortgage, pledge or otherwise encumber said property, or any part thereof; to
lease said property or any part thereof from time to time, upon any terms and
for any period of time, and to renew or extend leases, to amend, change or
modify the terms and provisions of any leases and to grant options to lease and
options to renew leases and options to purchase; to partition or to exchange
said real property, or any part thereof, for other real or personal property; to
grant easements or charges of any kind; to release, convey or assign any right,
title or interest in or about or easement appurtenant to said property or any
part thereof; to construct and reconstruct, remodel, alter, repair add to or
take from buildings on said premises; to insure any Person having an interest in
or responsibility for the care, management or repair of such property; to direct
the trustee of any land trust to mortgage, lease, convey or contract to convey
the real estate held in such land trust or to execute and deliver deeds,
mortgages, notes, and any and all documents pertaining to the property subject
to such land trust or in any matter regarding such trust; to execute assignments
of all or any part of the beneficial interest in such land trust;
C. Employ, engage or contract with or dismiss from
employment or engagement Persons to the extent deemed necessary by the General
Partner for the operation and management of the Partnership business, including
but not limited to, contractors, subcontractors, engineers, architects,
surveyors, mechanics, consultants, accountants, attorneys, insurance brokers,
real estate brokers and others;
D. Enter into contracts on behalf of the Partnership;
E. Borrow money, procure loans and advances from any
Person for Partnership purposes, and to apply for and secure from any Person,
credit or accommodations; to contract liabilities and obligations, direct or
contingent and of every kind and nature with or without security; and to repay,
discharge, settle, adjust, compromise, or liquidate any such loan, advance,
credit, obligation or liability;
F. Pledge, hypothecate, mortgage, assign, deposit,
deliver, enter into sale and leaseback arrangements or otherwise give as
security or as additional or substitute security, or for sale or other
disposition any and all Partnership property, tangible or intangible, including,
but not limited to, real estate and beneficial interests in land trusts, and to
make substitutions thereof, and to receive any proceeds thereof upon the release
or surrender thereof; to sign, execute and deliver any and all assignments,
deeds and other contracts and instruments in writing; to authorize, give, make,
procure, accept and receive moneys, payments, property, notices, demands,
vouchers, receipts, releases, compromises and adjustments; to waive notices,
demands, protests and authorize and execute waivers of every kind and nature; to
enter into, make, execute, deliver and receive written agreements, undertakings
and instruments of every kind and nature; to give oral instructions and make
oral agreements; and generally to do any and all other acts and things
incidental to any of the foregoing or with reference to any dealings or
transactions which any attorney may deem necessary, proper or advisable;
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G. Acquire and enter into any contract of insurance
which the General Partner deems necessary or appropriate for the protection of
the Partnership, for the conservation of the Partnership's assets or for any
purpose convenient or beneficial to the Partnership;
H. Conduct any and all banking transactions on behalf
of the Partnership; to adjust and settle checking, savings, and other accounts
with such institutions as the General Partner shall deem appropriate; to draw,
sign, execute, accept, endorse, guarantee, deliver, receive and pay any checks,
drafts, bills of exchange, acceptances, notes, obligations, undertakings and
other instruments for or relating to the payment of money in, into, or from any
account in the Partnership's name; to execute, procure, consent to and authorize
extensions and renewals of the same; to make deposits and withdraw the same and
to negotiate or discount commercial paper, acceptances, negotiable instruments,
bills of exchange and dollar drafts; and to approve and adopt the form of any
banking resolutions of any financial institution as though set forth in full
herein;
I. Demand, sue for, receive, and otherwise take steps
to collect or recover all debts, rents, proceeds, interests, dividends, goods,
chattels, income from property, damages and all other property, to which the
Partnership may be entitled or which are or may become due the Partnership from
any Person; to commence, prosecute or enforce, or to defend, answer or oppose,
contest and abandon all legal proceedings in which the Partnership is or may
hereafter be interested; and to settle, compromise or submit to arbitration any
accounts, debts, claims, dispute and matters which may arise between the
Partnership and any other Person and to grant an extension of time for the
payment or satisfaction thereof on any terms, with or without security;
J. Make arrangements for financing, including the
taking of all action deemed necessary or appropriate by the General Partner to
cause any approved loans to be closed;
K. Take all reasonable measures necessary to insure
compliance by the Partnership with applicable arrangements, and other
contractual obligations and arrangements entered into by the Partnership from
time to time in accordance with the provisions of this Agreement, including
periodic reports as required to lenders and using all due diligence to insure
that the Partnership is in compliance with its contractual obligations;
L. Maintain the Partnership's books and records;
M. Prepare and deliver, or cause to be prepared and
delivered by the Partnership's Accountants, all financial and other reports with
respect to the operations of the Partnership, and preparation and filing of all
Federal and state tax returns and reports; and
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N. Organize one or more partnerships or corporations
which are controlled, directly or indirectly, by the Partnership and make any
capital contributions required pursuant to the partnership agreements of any
such partnerships.
9.2 [Intentionally Omitted].
9.3 LIMITATIONS ON POWERS AND AUTHORITIES OF PARTNERS.
Notwithstanding the powers of the General Partner set forth in Section 9.1, the
General Partner shall have no right or power to do any of the following:
A. Do any act in contravention of this Agreement, or
any amendment hereto;
B. Do any act which would make it impossible to carry
on the ordinary business of the Partnership, except to the extent that such act
is specifically permitted by the terms hereof;
C. Possess Partnership property or assign rights in
specific Partnership property for other than Partnership purposes; or
D. Do any act in contravention of applicable law.
9.4 Title Holder.
------------
A. To the extent allowable under applicable law, title
to all or any part of the properties of the Partnership may be held in the name
of the Partnership, the General Partner or any other individual, corporation,
partnership, trust or otherwise, 100% of the beneficial interest in which shall
at all times be vested in the Partnership. Any such title holder shall perform
any and all of its respective functions to the extent and upon such terms and
conditions as may be determined from time to time by the General Partner.
B. Except as the General Partner may otherwise specify
from time to time, all property held by the General Partner or any wholly-owned
subsidiary of the General Partner (except the General Partner Units and other
Partnership Interests in the Partnership held by the General Partner and except
for the capital stock of any such wholly-owned subsidiary of the General
Partner) shall be deemed to be held for the benefit of the Partnership under
Section 9.4.A. The provisions of this Section 9.4.B shall not affect the
provisions of Section 8.9.
9.5 COMPENSATION OF THE GENERAL PARTNER. The General Partner
shall not be entitled to any compensation for services rendered to the
Partnership solely in its capacity as General Partner except with respect to
reimbursement for (i) those costs and expenses constituting Administrative
Expenses and (ii) such other amounts for which reimbursement is
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provided in this Agreement. The Partners acknowledge that all expenses of the
General Partner are for the benefit of the Partnership.
9.6 Standard of Conduct.
-------------------
A. Each Partner and each Person designated or delegated
by a Partner shall discharge its or his respective duties as a Partner or a
designee or delegate of a Partner in a manner it or he reasonably believes to be
in the best interests of the Bradley Group as a whole, including, without
limitation, the interests of the shareholders of the General Partner. For
purposes hereof, a person acting in a manner which either (i) is in the best
interests of the shareholders of the General Partner or (ii) furthers compliance
with the REIT Requirements, shall be deemed to be acting in the best interests
of the Bradley Group and shall be deemed to satisfy his standard of conduct
hereunder.
B. Without limiting the scope of the protections
afforded by the foregoing Section 9.6.A, no officer, director, employee or
shareholder of the General Partner, and no Partner or Person designated or
delegated by a Partner, shall be liable for any actions or omissions taken by
him or her, excepting for any actions or omissions which constitute actual
fraud, gross negligence, or deliberately dishonest conduct. The foregoing
limitations on liability include, but are not limited to, liability arising from
claims by Limited Partners, individually and/or derivatively, for alleged
breaches of fiduciary duty against any officer, director, employee or
shareholder of the General Partner or any Partner or Person designated or
delegated by a Partner hereunder.
C. Each Partner and each Person or Persons designated
or delegated by a Partner shall, in the performance of its or his duties, be
fully protected in relying in good faith upon the records of the Partnership and
upon such information, opinions, reports or statements presented to such Partner
or such Person or Persons designated or delegated by a Partner, as applicable,
by any Person (including, without limitation, legal counsel and public
accountants) as to matters that such Partner, or such Person or Persons
designated or delegated by a Partner reasonably believes are within such
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Partnership, such Partner, or such Person
or Persons designated or delegated by a Partner.
9.7 Waiver and Indemnification.
--------------------------
A. Neither the General Partner, any Person acting on
its behalf, nor any Person designated or delegated by the General Partner
pursuant hereto, shall be liable, responsible or accountable in damages or
otherwise to the Partnership or to any Partner for any acts or omissions
performed or omitted to be performed by them within the scope of the authority
conferred upon the General Partner by this Agreement and the Act, provided that
the General Partner's or such other Person's action or omission to act was taken
in good faith and in the belief that such action or omission was in the best
interests of the Bradley Group as a whole, including, without limitation, the
interests of the shareholders of the General Partner,
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and, provided further, that the General Partner's or such other Person's actions
or omissions shall not constitute actual fraud or gross negligence or
deliberately dishonest conduct. The Partnership shall, and hereby does,
indemnify and hold harmless the General Partner and its Affiliates and any
individual acting on their behalf from any loss, damage, claim or liability,
including, but not limited to, reasonable attorneys' fees and expenses, incurred
by them by reason of any act performed by them in accordance with the standards
set forth above or in enforcing the provisions of this indemnity; provided,
however, except as provided in Article 14, no Partner shall have any personal
liability with respect to the foregoing indemnification, any such
indemnification to be satisfied solely out of the assets of the Partnership.
B. Any Person entitled to indemnification under this
Agreement shall be entitled to receive, upon application therefor, advances to
cover the costs of defending any proceeding against such Person; provided,
however, that such advances shall be repaid to the Partnership without interest,
if such Person is found by a court of competent jurisdiction upon entry of a
final judgment not to be entitled to such indemnification. All rights of the
indemnity hereunder shall survive the dissolution of the Partnership; provided,
however, that a claim for indemnification under this Agreement must be made by
or on behalf of the Person seeking indemnification prior to the time the
Partnership is liquidated hereunder. The indemnification rights contained in
this Agreement shall be cumulative of, and in addition to, any and all rights,
remedies and recourse to which the person seeking indemnification shall be
entitled, whether at law or at equity. Indemnification pursuant to this
Agreement shall be made solely and entirely from the assets of the Partnership
and no Partner shall be liable therefor.
9.8 OTHER ACTIVITIES OF PARTNERS AND AGREEMENTS WITH RELATED
PARTIES. The General Partner shall devote its full-time effort in furtherance of
the business of the Bradley Group, it being expressly understood that the
General Partner may conduct its activities directly, through members of the
Bradley Group as well as and through the Partnership, as the General Partner
determines is appropriate in its sole and absolute discretion. Without limiting
the foregoing, the General Partner, either directly or through other members of
the Bradley Group other than the Partnership, may acquire, own, manage, develop,
improve, lease, invest in or otherwise deal with commercial real estate
including, without limitation, any shopping center, office building or retail
project. Except as may otherwise be agreed to in writing, each Limited Partner
and its affiliates shall be free to engage in, to conduct or to participate in
any business or activity whatsoever, including, without limitation, the
acquisition, development, management and exploitation of real and personal
property (other than property of the Partnership), without any accountability,
liability or obligation whatsoever to the Partnership or to any other Partner,
even if such business or activity competes with or is enhanced by the business
of the Partnership. The General Partner, in the exercise of its power and
authority under this Agreement, may contract and otherwise deal with, or
otherwise obligate the Partnership to deal with, entities in which the General
Partner or any one or more of the officers, directors or stockholder of the
General Partner may have an ownership or other financial interest, whether
direct or indirect.
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9.9 Other Matters Concerning the General Partner.
--------------------------------------------
A. The General Partner shall be protected in relying,
acting or refraining from acting on any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
B. The General Partner may exercise any of the powers
granted or perform any of the duties imposed by this Agreement either directly
or through agents. The General Partner may consult with counsel, accountants,
appraisers, management consultants, investments bankers and other consultants
selected by it, each of whom may serve as consultants for the Partnership. An
opinion by any consultant on a matter which the General Partner believes to be
within its professional or expert competence shall be full and complete
protection as to any action taken or omitted by the General Partner based on the
opinion and taken or omitted in good faith. The General Partner shall not be
responsible for the misconduct, negligence, acts or omissions of any consultant
or contractor of the Partnership or of the General Partner, and shall assume no
obligations other than to use due care in the selection of all consultants and
contractors.
C. No mortgagee, grantee, creditor or any other person
dealing with the Partnership shall be required to investigate the authority of
the General Partner or secure the approval of or confirmation by any Limited
Partner of any act of the General Partner in connection with the conduct of the
Partnership business.
D. The General Partner may retain such persons or
entities as it shall determine (including the General Partner or any entity in
which the General Partner shall have an interest or with which it is affiliated)
to provide services to or on behalf of the Partnership. The General Partner
shall be entitled to reimbursement from the Partnership for its out-of-pocket
expenses (including, without limitation, amounts paid or payable to the General
Partner or any entity in which the General Partner shall have an interest or
with which it is affiliated) incurred in connection with Partnership business.
Such expenses shall be deemed to include those expenses required in connection
with the administration of the Partnership such as the maintenance of
Partnership books and records, management of the Partnership property and
assets, preparation of information respecting the Partnership needed by the
Partners in the preparation of their individual tax returns and all other
Administrative Expenses.
9.10 PARTNER EXCULPATION. Except as provided in Article 14 and
except for fraud, willful misconduct and gross negligence, no property or assets
of any Partner, other than its interest in the Partnership shall be subject to
levy, execution or other enforcement procedures for satisfaction of judgment (or
other judicial process) in connection with the debts or liabilities of the
Partnership or in connection with this Agreement. To the fullest extent
permitted by law, no officer, director or shareholder of the Partnership shall
be liable to the Partnership or any Partner for money damages or recision except
for (i) active and deliberate dishonesty established by a final judgment or (ii)
actual receipt of an improper benefit or profit
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in money, property or services. This Agreement is executed by an officer of the
General Partner solely as an officer of the same and not in his own individual
capacity. Except as provided in Article 14, no advisor, director, participant or
agent of any Partner (or of any partner of a Partner) shall be personally liable
in any matter or to any extent under or in connection with this Agreement, and
the Partnership, each Partner and their respective successors or assigns shall
look solely to the interest of the other Partners in the Partnership for the
payment of any claim or for any performance hereunder.
10. BANKING. The funds of the Partnership shall be kept in accounts
designated by the General Partner and all withdrawals therefrom shall be made on
such signature or signatures as shall be designated by the General Partner.
11. Accounting.
----------
11.1 FISCAL YEAR. The fiscal and taxable year of the Partnership
shall end on the last day of December of each year, unless another fiscal year
end is selected by the General Partner.
11.2 BOOKS OF ACCOUNT. The Partnership books of account shall be
maintained at the principal office designated in Section 2.3 above or at such
other locations and by such person or persons as may be designated by the
General Partner. The Partnership shall pay the expense of maintaining its books
of account. Each Partner shall have, during reasonable business hours and upon
reasonable prior notice, access to the books of the Partnership and, in
addition, at its expense, shall have the right to copy such books. The General
Partner, at the expense of the Partnership, shall cause to be prepared and
distributed to the Partners annual financial data sufficient to reflect the
status and operations of the Partnership and its assets and to enable each
Partner to file its federal income tax return.
11.3 REPORTS. The General Partner shall cause copies of the
consolidated Audited Financial Statements for the Partnership and the Financing
Partnership, together with the reports thereon, and all supplementary schedules
and information prepared by the Accountants, to be submitted to each Limited
Partner who requests the same in writing by the latest of (i) ten (10) business
days following receipt of the such documents from the Accountants, (ii) ten (10)
business days following receipt of the Limited Partner's request, or (iii) April
1 of the year following the calendar year with respect to which such documents
are prepared. The Partnership shall also cause to be prepared such reports
and/or information as are necessary for the General Partner to determine its
qualification as a REIT and its compliance with REIT Requirements.
11.4 AUDITS. Not less frequently than annually, the books and
records of the Partnership shall be audited by the Accountants. The General
Partner shall, unless determined otherwise by the General Partner, engage the
Accountants to audit the books and records of the Financing Partnership and any
other consolidated subsidiary of the Partnership.
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11.5 METHOD OF ACCOUNTING. Except for purposes of Article 7 and
the maintenance of Capital Accounts, the Partnership books of account shall be
maintained and kept, and its income, gains, losses and deductions shall be
accounted for, in accordance with sound principles of accounting consistently
applied, or such other method of accounting as may be adopted hereafter by the
General Partner. All elections and options available to the Partnership for
federal or state income tax purposes shall be taken or rejected by the
Partnership in the sole discretion of the General Partner.
11.6 TAX ELECTION. All elections required or permitted to be
made by the Partnership under any applicable tax law shall be made by the
General Partner in its sole discretion.
11.7 TAX MATTERS PARTNER. The General Partner is hereby
designated the Tax Matters Partner (hereinafter referred to as the "TMP") of the
Partnership and shall have all the rights and obligations of the TMP under the
Code.
11.8 ADMINISTRATIVE ADJUSTMENTS. If the TMP receives notice of a
Final Partnership Administrative Adjustment (the "FPAA") or if a request for an
administrative adjustment made by the TMP is not allowed by the United States
Internal Revenue Service (the "IRS") and the IRS does not notify the TMP of the
beginning of an administrative proceeding with respect to the Partnership's
taxable year to which such request relates (or if the IRS so notifies the TMP
but fails to mail a timely notice of an FPAA), the TMP may, but shall not be
obligated to, petition a court for readjustment of partnership items. In the
case of notice of an FPAA, if the TMP determines that the United States District
Court or Claims Court is the most appropriate forum for such petition, the TMP
shall notify each person who was a Partner at any time during the Partnership's
taxable year to which the IRS notice relates of the approximate amount by which
the IRS notice relates of the approximate amount by which its tax liability
would be increased (based on such assumptions as the TMP may in good faith make)
if the treatment of partnership items on his return was made consistent with the
treatment of partnership items on the Partnership's return, as adjusted by the
FPAA. Each such person shall deposit with the TMP, for deposit with the IRS, the
approximate amount of his increased tax "liability" together with a written
agreement to make additional deposits if required to satisfy the jurisdictional
requirements of the Court, within thirty days after the TMP's notice to such
person.
12. Transfers of Partnership Interests.
----------------------------------
12.1 CONSENT. The General Partner may, in its sole and absolute
discretion, transfer, assign, sell, encumber or otherwise dispose of all or any
part of its interest in the Partnership, without the consent of the Limited
Partners; provided, however, that, prior to March 16, 1998, the General Partner
shall not, without the consent of a majority of the Limited Partners, transfer,
assign, sell, encumber or otherwise dispose of all or any part of its interest
in the Partnership to any of its Affiliates other than an Affiliate whose
securities will, in connection with such transfer, become issuable upon
redemption of the Units. Nothing in
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this Section 12.1 shall preclude the transfer of Units to the extent necessary
to provide that the Partners (other than the General Partner) are entitled to at
least 1% in the aggregate of the distributions to the Partners pursuant to
Section 8.4 for the taxable year and subsequent taxable years.
12.2 Limited Partners.
----------------
A. No Limited Partner or substituted Limited Partner
shall, without the prior written consent of the General Partner which consent
may be withheld in its sole and absolute discretion, transfer, assign, sell,
encumber or otherwise dispose of (a "Transfer") all or any part of his interest
in the Partnership, except (i) as otherwise permitted by Section 13.2 of this
Agreement and for intervivos intra-family transfers for estate planning
purposes, and (ii) for pledges of Units by Limited Partners to secure the
repayment of a loan, provided that the Limited Partner shall have (A) first
obtained the written agreement of the pledgee to exercise its redemption rights
with respect to any pledged Units pursuant to Section 3.2.C immediately upon
taking any action with respect to such Units and (B) submitted a copy of such
agreement and pledge to the General Partner. Any Transferee (as defined below)
of Units transferred as permitted hereby shall be subject to the provisions of
Article 14 to the extent applicable. A Limited Partner shall notify the General
Partner of any Transfers of beneficial interest or other interest which occurs
without a transfer of record ownership, as well as any pledge or other
collateral transfer. No part of the interest of a Limited Partner shall be
subject to the claims of any creditor, any spouse for alimony or support, or to
legal process, or be voluntarily or involuntarily alienated or encumbered,
except as may be specifically provided for in Section 12.2.A or Section 13.2 of
this Agreement. A Limited Partner shall not be permitted to retire or withdraw
from the Partnership except as expressly permitted by this Agreement.
B. An assignee, legatee, distributee or other
transferee (whether by conveyance, operation of law or otherwise) (a
"Transferee") of all or any portion of a Limited Partner's interest in the
Partnership shall be entitled to receive distributions hereunder attributable to
such interest acquired by reason of such Transfer, from and after the effective
date of the Transfer of such interest; provided, however, anything in this
Agreement to the contrary notwithstanding, except as provided in Section 12.2.A
or 13.2, (i) no Transfer by a Limited Partner shall be effective until such
Transfer has been consented to by the General Partner, (ii) no Transferee shall
be considered a substituted Limited Partner, (iii) the Partnership and the
General Partner shall be entitled to treat the transferor of such interest as
the absolute owner thereof in all respects, and shall incur no liability for
distributions which are made to such transferor until such time as the written
instrument of Transfer has been received by the General Partner and the
"effective date" of the Transfer has passed, and (iv) the General Partner shall
have the right to require any such transferor to have such transferor's
Partnership Interest redeemed in accordance with the provisions of Section 3.2.
The "effective date" of any Transfer shall be the last day of the month set
forth on the written instrument of Transfer or such other date consented to in
writing by the General Partner as the "effective date."
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C. Notwithstanding anything to the contrary contained
in this Article 12, (a) no Transfer shall be effective to the extent that such
Transfer, by treating the Unit or Partnership Interest so transferred as if it
had been tendered for redemption and then acquired by the General Partner for
Common Stock in accordance with Section 3.2, would be prohibited by or violate
any provision of the Charter of the General Partner (including those limiting
the ownership of Common Stock in certain instances) and (b) no Transfer of a
Partnership Interest by any Partner shall be made (i) to any person or entity
that lacks the legal right, power or capacity to own a Partnership Interest,
(ii) in violation of applicable law, (iii) if such Transfer would cause the
General Partner to fail to qualify as a REIT, (iv) if such Transfer would cause
a termination of the Partnership for federal income tax purposes (unless the
General Partner consents to such transfer), (v) if such Transfer would, in the
opinion of counsel to the Partnership, cause the Partnership or the Financing
Partnership (or any other entity taxed as a partnership for federal income tax
purposes) (A) to cease to be classified and taxed as a partnership for federal
income tax purposes or (B) to be a "publicly traded partnership" within the
meaning of Section 7704 of the Code, (vi) if such Transfer would cause the
Partnership to become, with respect to any employee benefit plan subject to
Title 1 of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA)
or a "disqualified person" (as defined in Section 4975(c) of the Code), or (vii)
if such Transfer would, in the opinion of counsel to the Partnership, cause any
portion of the assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Department of Labor Regulations Section 2510.3-101.
12.3 ADMISSION ADJUSTMENTS. The General Partner, when necessary,
shall cause this Agreement to be amended from time to time to reflect the
addition or withdrawal of Partners, including the corresponding adjustments to
Percentage Interests and Units required pursuant to Section 3.1.
12.4 UNIT CERTIFICATES. Unit Certificates are transferable only
to the extent that the Units or other Partnership Interests evidenced by such
Unit Certificates are transferable under this Article 12.
13. Rights and Obligations of the Limited Partners.
----------------------------------------------
13.1 NO PARTICIPATION IN MANAGEMENT. Except as expressly
permitted hereunder, the Limited Partners shall not take part in the management
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership.
13.2 DEATH, LEGAL INCOMPETENCY, ETC. OF A LIMITED PARTNER. The
death, legal incompetency, insolvency, dissolution or bankruptcy of a Limited
Partner shall not dissolve or terminate the Partnership. Upon ten Trading Days'
notice to the General Partner of the death or incapacity of an individual
Limited Partner, such individual Limited Partner's interest in the Partnership
shall be transferred either by will, the laws of intestacy or otherwise to the
legal representative or successor of such individual Limited Partner who shall
be bound in all
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respects by the terms of this Agreement, subject to the General Partner's right
to redeem such interest in accordance with the provisions of Section 3.2.
13.3 NO WITHDRAWAL. No Limited Partner may withdraw from the
Partnership without the prior written consent of the General Partner.
13.4 DUTIES AND CONFLICTS. The General Partner recognizes that
the Limited Partners and their Affiliates have or may have other business
interests, activities and investments, some of which may be in conflict or
competition with the business of the Partnership, and that such persons are
entitled to carry on such other business interests, activities and investments.
The Limited Partners and their Affiliates may engage in or possess an interest
in any other business or venture of any kind, independently or with others, on
their own behalf or on behalf of other entities with which they are affiliated
or associated, and such persons may engage in any activities, whether or not
competitive with the Partnership, without any obligation to offer any interest
in such activities to the Partnership or to any Partner. Neither the Partnership
nor any Partner shall have any right, by virtue of this Agreement, in or to such
activities, or the income or profits derived therefrom, and the pursuit of such
activities, even if competitive with the business of the Partnership, shall not
be deemed wrongful or improper.
14. Indemnification and Security Interest.
-------------------------------------
14.1 [Intentionally Omitted].
14.2 INDEMNITY COLLATERAL. Indemnity Collateral shall mean with
respect to the TTC Guarantors: (a) the shares of Common Stock and Units held or
otherwise beneficially owned by the TTC Guarantors and their family members
which are set forth on EXHIBIT F to the Prior Agreement; (b) any shares of
Common Stock received by the TTC Guarantors as a result of the exchange of Units
for shares of Common Stock; (c) any Units transferred by the TTC Guarantors to a
family member for estate planning purposes in accordance with Section 12.2.A(i);
and (d) stock dividends, stock splits or other securities received with respect
to the shares of Common Stock or Units described in (a), (b) or (c), but
expressly excluding any cash dividends payable with respect to Units or shares
of Common Stock prior to any claim by an Indemnified Party hereunder.
14.3 Commons of Chicago Ridge.
------------------------
A. With respect to the Commons of Chicago Ridge, the
TTC Guarantors agree to indemnify and hold harmless the General Partner and the
Partnership and each of their subsidiaries and all members of the Bradley Group
and their respective officers, directors, employees and representatives (each,
an "Indemnified Party" and collectively, the "Indemnified Parties") from and
against all demands, claims, actions or causes of action, assessments, losses,
fines, penalties, damages, liabilities, costs and expenses (including without
limitation, reasonable attorneys' fees and expenses of counsel chosen by the
Indemnified
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Parties and costs of litigation and reasonable fees and expenses of accountants
chosen by the Indemnified Parties) and charges sustained or incurred by any of
the Indemnified Parties as a result of or arising out of any matter, condition
or act at the Commons of Chicago Ridge involving any Environmental Claim, which
matter, condition or act existed on or arose prior to the date of the Original
Agreement (whether or not disclosed in the environmental reports set forth as
exhibits to the Tucker Contribution Agreements or as described in the Prospectus
or other reports filed by Tucker with the SEC or otherwise known by any of the
TTC Guarantors), except for the Remediation Work (as defined in that certain
Agreement Concerning Commons of Chicago Ridge, dated as of October 30, 1995, by
and among Bradley, the Partnership and the TTC Guarantors); provided that, no
claim for indemnity may be maintained pursuant to this Section 14.3, unless such
Indemnified Party shall have delivered a written notice specifying the details
of such claim to the TTC Guarantors on or before October 4, 2003.
The indemnification obligation set forth in the preceding paragraph shall
cover all demands, claims, actions or causes of action, assessments, losses,
fines, penalties, damages, liabilities, costs and expenses (including without
limitation, reasonable attorneys' fees and expenses of counsel chosen by the
Indemnified Parties and costs of litigation and reasonable fees and expenses of
accountants chosen by the Indemnified Parties) and charges sustained or incurred
by any of the Indemnified Parties as a result of or arising out of any matter,
condition or act at the Commons of Chicago Ridge Annex involving any
Environmental Claim only to the extent that such matter, condition or act is the
result of or arises out of a matter, condition or act at the Commons of Chicago
Ridge that existed on or arose prior to the date of the Original Agreement.
B. The Indemnified Parties shall have full recourse to
the TTC Guarantors and all of their assets for the indemnity obligation set
forth in this Section 14.3; provided that the Indemnified Parties shall first
use their best efforts to realize upon their security interests in the Indemnity
Collateral owned by the TTC Guarantors prior to asserting any recourse against
any other assets owned by the TTC Guarantors.
C. The Indemnified Parties agree to the following with
respect to any indemnification obligations of the TTC Guarantors hereunder:
(i) to furnish the TTC Guarantors with copies of all claims,
reports, orders, or other documentation which in any
material way relate to the subject matter of an indemnity
obligation asserted or which may be asserted against a TTC
Guarantor as soon as possible after the same are received;
(ii) to advise the TTC Guarantors of meetings with the Illinois
EPA with respect to any remediation plan or other material
matter bearing directly on such indemnity obligation of the
TTC Guarantors and invite the TTC Guarantors to attend such
meeting;
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(iii) not to agree to a remediation plan with the Illinois EPA
without first disclosing the plan to the TTC Guarantors and
reasonably considering in good faith any comments of the
TTC Guarantors thereon or any alternate remediation plan
proposed by the TTC Guarantors;
(iv) that any remediation plan proposed by the Indemnified
Parties shall propose a scope of work appropriate to a
retail use of the subject premises and not to a more
rigorous standard of remediation, except as may be required
by applicable laws;
(v) that the TTC Guarantors and their consultants shall have
reasonable access to the premises which are the subject of
the indemnification obligation for testing, provided that
the TTC Guarantors shall be responsible for any claims,
losses, costs or expenses of Indemnified Parties arising
therefrom;
(vi) not to settle any Environmental Claims which are subject to
an indemnification obligation hereunder without first
disclosing the terms of the settlement to the TTC
Guarantors and reasonably considering in good faith any
comments of the TTC Guarantors thereon;
(vii) to use on-site any materials excavated in connection with
construction on the Commons of Chicago Ridge, to the extent
deemed appropriate by the Indemnified Parties in light of
relevant legal requirements and construction standards;
provided that if the transport or disposal off-site of any
"special waste", including "hazardous waste" (both as
defined under Illinois statutes and regulations), or of any
other material subject to special or hazardous waste
requirements, has an incremental cost above the cost that
would be incurred if such materials were not so classified
or regulated, the TTC Guarantors shall bear such
incremental cost; and
(viii) to obligate contractors with respect to construction on the
Commons of Chicago Ridge to require workers to wear
protective clothing and apparatus to the extent required by
law if, in connection with the construction, such workers
will be exposed to special or hazardous wastes or other
materials subject to special or hazardous waste
requirements.
The agreements of the Indemnified Parties set forth in sub-sections (i)
through (viii) above shall not be deemed to require the consent or approval of
the TTC Guarantors as to any actions by the Indemnified Parties relating to the
subject matter of any indemnity obligation.
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14.4 TTC Guarantors.
--------------
A. With respect to indemnity obligations of the TTC
Guarantors under Section 14.3, the TTC Guarantors have granted and hereby
confer, subject to the provisions of Section 14.4.D, to the General Partner a
lien upon and a continuing security interest in, the Indemnity Collateral which
shall be security for the indemnity obligations of the TTC Guarantors, as
applicable, under this Article 14. Notwithstanding the foregoing, (i) Units
owned by the TTC Guarantors and their family members subject to the lien and
security interest granted under this Section 14.4.A may be transferred in
accordance with the provisions of Section 13.2 free and clear of such lien and
security interest and (ii) shares of Common Stock of the General Partner owned
by the TTC Guarantors and their family members subject to the lien and security
interest granted under this Section 14.4.A may be transferred free and clear of
such lien and security interest; provided, however, that, in each instance, once
a claim for indemnity has been made in accordance with this Article 14, the TTC
Guarantors may not under any circumstance sell or otherwise transfer such Units
or shares of Common Stock or any other Indemnity Collateral. In addition, once
an indemnity claim has been made hereunder, all cash or other dividends made
with respect to Units or shares of Common Stock shall be considered Indemnity
Collateral and shall be placed by the General Partner in an escrow account until
such claim is resolved.
B. The TTC Guarantors have (i) delivered to the General
Partner certificates representing all of the shares of Common Stock owned by
them in such manner and accompanied by such instruments, including stock
transfer powers duly endorsed in blank, as shall be necessary to grant the
General Partner a fully perfected first priority security interest in such
shares and in any shares of Common Stock that may, after the date hereof, be
issued to the TTC Guarantors by stock dividend, stock split or similar
distribution and (ii) prepared and filed UCC financing statements and such other
documents and have taken other action necessary to grant the General Partner a
fully perfected first priority security interest in all of their respective
Units. In the event the TTC Guarantors are determined to have an indemnification
obligation pursuant to Section 14.4.D, then each Indemnified Party shall have
all of the rights now or hereafter existing under applicable law, and all rights
as a secured creditor under the Uniform Commercial Code ("UCC") in all relevant
jurisdictions, with respect to the Indemnity Collateral, and the TTC Guarantors
agree to take all such actions as may be reasonably requested of them by an
Indemnified Party to ensure that the Indemnified Parties can realize on such
security interest.
C. In the event an Indemnified Party asserts, within
the time period set forth in Section 14.3.A, that the TTC Guarantors have an
indemnification obligation to an Indemnified Party under this Article 14, and
TTC Guarantors are determined to have an indemnification obligation pursuant to
Section 14.4.D, then (x) the General Partner shall, to the full extent permitted
by law, be deemed, without payment of further consideration or the taking of
further action by the TTC Guarantors or any of their subsidiaries, to have
acquired from any or all of the TTC Guarantors such portion of the Indemnity
Collateral as shall be equal in value (based, in the case of Units, on the
number of shares of Common Stock for
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<PAGE> 47
which such Units could be exchanged, computed as of the date the Indemnity
Collateral is acquired by the General Partner pursuant to this Section 14.3.C,
and in the case of the Units or the Common Stock, on the Current Per Share
Market Price computed as of the date of such acquisition) to the amount
recoverable from or payable by or indemnified by the TTC Guarantors under this
Article 14, and (y) the Indemnified Parties shall have all of the rights now or
hereafter existing under applicable law and all rights as a secured creditor
under the UCC in all relevant jurisdictions, with respect to the Indemnity
Collateral and the TTC Guarantors agree to take all such actions as may be
reasonably requested of them by the General Partner to ensure that the
Indemnified Parties can realize on such security interest.
D. Each of the Indemnified Parties shall have the right
to submit any dispute concerning whether a particular environmental claim is
within the parameters of Section 14.3.A to arbitration in accordance with the
provisions of Article 18. The lien and the security interest in Indemnity
Collateral granted hereunder shall not be released with respect to the TTC
Guarantors' shares of Common Stock and Units until all of the indemnification
obligations of the TTC Guarantors hereunder have expired or been satisfied in
accordance with their terms; provided, however, that Units owned by the TTC
Guarantors and their family members may be transferred in accordance with this
Agreement and shares of Common Stock owned by the TTC Guarantors and their
family members may be transferred free and clear of such lien and security
interest, in each such case subject to the limitations of Section 14.4.A. Upon
satisfaction of the conditions to the release of the lien and security interest
in the Indemnity Collateral set forth above, the General Partner shall prepare
and file all documents and shall take all other action necessary on its part to
release such security interest in the applicable Indemnity Collateral.
15. Liquidation and Dissolution of Partnership.
------------------------------------------
15.1 TERMINATION EVENTS. The Partnership shall be dissolved and
its affairs wound up in the manner hereinafter provided upon the occurrence of
an event described in Article 6.
15.2 METHOD OF LIQUIDATION. Upon the happening of any of the
events specified in Article 6, the General Partner (or if there be no General
Partner, a liquidating trustee selected by those Limited Partners holding in the
aggregate more than fifty percent (50%) of the Percentage Interests held by all
Limited Partners) shall immediately commence to wind up the Partnership's
affairs and shall liquidate the assets of the Partnership as promptly as
possible, unless the General Partner, or the liquidating trustee, shall
determine that an immediate sale of Partnership assets would cause undue loss to
the Partnership, in which event the liquidation may be deferred for a reasonable
time. The Partners shall continue to share Operating Cash Flow and Capital Cash
Flow during the period of liquidation in the same proportions as before
dissolution. The proceeds from liquidation of the Partnership, including
repayment of any debts of Partners to the Partnership, shall be applied in the
order of priority as follows:
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A. Debts of the Partnership, including repayment of
principal and interest on loans and advances made by the General Partner; then
B. To the establishment of any reserves deemed
necessary or appropriate by the General Partner, or by the person(s) winding up
the affairs of the Partnership in the event there is no remaining General
Partner of the Partnership, for any contingent or unforeseen liabilities or
obligations of the Partnership. Such reserves established hereunder shall be
held for the purpose of paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the General Partner, or
such person(s) deems advisable, the balance of such reserves shall be
distributed in the manner provided hereinafter in this Section 15.2 as though
such reserves had been distributed contemporaneously with the other funds
distributed hereunder; then
C. To the Partners in accordance with the provisions of
Sections 8.4 and 8.5; provided, however, that if the Partnership is liquidated
other than in connection with the liquidation of the Bradley Group,
distributions to the Partners under this Section 15.2.C shall be made in the
following order and priority:
1. First, to those Partners (whether Limited or
General) holding Preferred Units, if any, issued by the Partnership pursuant to
Section 3.1.C, an amount sufficient to satisfy the liquidation rights of such
Preferred Units (to the extent such liquidation rights have been designated as
senior to the liquidation rights of other Units or Partnership Interests);
2. Second, to the Limited Partners as a class
(excluding for such purposes, all Preferred Units with liquidation rights
designated as senior to the liquidation rights of other Units or Partnership
Interests), an amount equal to the lesser of (a) the sum of (i) the amount (or
portion thereof) of any Current Yield which has not been paid to the Limited
Partners pursuant to Section 8.4.A for any prior period, plus (ii) the product
of (x) the Conversion Factor, (y) the number of Units held by the Limited
Partners and (z) the Current Per Share Market Price of the Common Stock as of
the close of the period ending with the liquidation and (b) 99% of the
liquidation proceeds remaining after the application of Sections 15.2.A, 15.2.B
and 15.2.C.1; and
3. Third, the remainder of liquidation proceeds
shall be distributed to the General Partner.
15.3 DISTRIBUTION IN KIND. The General Partner may make
distributions pursuant to this Agreement in cash or in kind, as it determines is
appropriate in its sole discretion; provided that no in-kind distributions shall
be made to any Limited Partner other than the General Partner. In the event the
General Partner determines that it is necessary or desirable to make a
distribution of Partnership property in kind, the General Partner may transfer
and convey such property to the distributees as tenants in common, subject to
any liabilities attached thereto, so as to vest in them undivided interests in
the whole of such
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property in proportion to their respective rights to share in the proceeds of
the sale of such property (other than as a creditor) in accordance with the
provisions of Section 15.2.
15.4 DOCUMENTATION OF LIQUIDATION. Upon the completion of the
resolution and liquidation of the Partnership, the Partnership shall terminate
and the liquidating trustee shall have the authority to execute and record any
and all documents or instruments required to effect the dissolution, liquidation
and termination of the Partnership.
15.5 LIABILITY OF THE LIQUIDATING TRUSTEE. The liquidating
trustee shall be indemnified and held harmless by the Partnership from and
against any and all claims, demands, liabilities, costs, damages and causes of
action of any nature whatsoever arising out of or incidental to the liquidating
trustee's taking of any action authorized under or within the scope of this
Agreement; provided, however, that the liquidating trustee shall not be entitled
to indemnification, and shall not be held harmless, where the claim, demand,
liability, cost, damage or cause of action at issue arose out of:
A. A matter entirely unrelated to the liquidating
trustee's action or conduct pursuant to the provisions of this Agreement; or
B. The proven misconduct or negligence of the
liquidating trustee.
16. POWER OF ATTORNEY. Each Limited Partner hereby irrevocably
constitutes and appoints the Chief Executive Officer, the President and each
person holding the office of Executive Vice President of the General Partner,
with full power of substitution, its true and lawful attorney, for him and in
his name, place and stead and for his use and benefit, to sign, swear to,
acknowledge, file and record:
(i) this Agreement, and amendments to this
Agreement;
(ii) any certificates, instruments and documents
(including assumed and fictitious name certificates) as may be required by, or
may be appropriate under, the laws of the State of Delaware or any other State
or jurisdiction in which the Partnership is doing or intends to do business, in
order to discharge the purposes of the Partnership or otherwise in connection
with the use of the name or names used by the Partnership;
(iii) any other instrument which may be required to
be filed or recorded by the Partnership on behalf of the Partners under the laws
of any State or by any governmental agency in order for the Partnership to
conduct its business;
(iv) any documents which may be required to effect
the continuation of the Partnership, the admission of a substitute or additional
Partner, or the dissolution and termination of the Partnership, provided such
continuation, admission or dissolution and termination is not in violation of
any provision of this Agreement; and
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<PAGE> 50
(v) any documents which may be required or
desirable to have the General Partner appointed, and act as, the "Tax Matters
Partner" as described in the Code.
The foregoing grant of authority is a special power of attorney coupled with an
interest, is irrevocable and shall survive the death or incapacity of any
individual Limited Partner, and shall survive the delivery of any assignment by
a Limited Partner of the whole or any portion of his interest in the
Partnership.
17. Amendment of Agreement.
----------------------
17.1 GENERAL. The General Partner, without the consent of the
Limited Partners, may amend this Agreement in any respect by executing a written
instrument setting forth the terms of such amendment; provided, however, that,
except as provided in Section 17.2, any amendment which alters or changes (i)
the distribution rights of any Limited Partner under Article 8, or (ii) a
Limited Partner's Redemption Rights under Section 3.2, shall require the consent
of Limited Partners holding more than 50% of the Limited Partner Units (other
than Preferred Units), except that the consent of such Limited Partners shall
not be required to amend Article 8 to the extent deemed necessary, in the sole
discretion of the General Partner, to reflect the seniority of any distribution
or liquidation rights of any Preferred Units issued under Section 3.1.C.
17.2 MERGER, ETC. OF GENERAL PARTNER. Notwithstanding anything
to the contrary contained herein, in the event that (i) the General Partner or
any of its corporate subsidiaries engages in any merger, consolidation or other
combination with or into another Person in which securities of the General
Partner are being issued, acquired, converted or exchanged, (ii) the General
Partner engages in the sale of all or substantially all of its assets, or (iii)
the General Partner engages in a reclassification, recapitalization or change in
the outstanding shares of its stock (other than a change in par value or from
par value to no par value, or as a result of a subdivision or combination as
described in the definition of Conversion Factor) which results in the holders
of Common Stock receiving cash, securities or other property (any of the events
listed in clauses (i), (ii) or (iii) hereinafter referred to as a
"Transaction"), the General Partner (or its successor or transferee) may amend
the provisions of this Agreement (including, without limitation, the definition
of Conversion Factor) in any respect in connection with such Transaction
(regardless of whether the amendment alters or changes the distributions to a
Limited Partner or a Limited Partner's Redemption Rights) without obtaining the
consent of any Limited Partner; provided that either (i) in connection with the
Transaction, the Limited Partners are offered the opportunity to receive for
each Unit held by them an amount of cash, securities, or other property equal to
the product of the Conversion Factor and the amount of cash, securities or other
property, if any, paid to a holder of one share of Common Stock as a result of
the Transaction, or (ii) the General Partner or its corporate subsidiary is the
acquiror in such Transaction and the holders of the Common Stock of the General
Partner are not receiving cash, securities, or other property in such
Transaction.
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18. Arbitration.
-----------
18.1 GENERAL. Notwithstanding anything to the contrary contained
in this Agreement, all claims, disputes and controversies between the parties
hereto (including, without limitation, any claims, disputes and controversies
between the Partnership and any one or more of the Partners and any claims,
disputes and controversies between any one or more Partners and the
indemnification obligations of the TTC Guarantors under Article 14) arising out
of or in connection with this Agreement or the Partnership created hereby, or
any act or failure to act by the General Partner or any other Partner hereunder,
in each case whether or not a party has responded to a claim for indemnification
in accordance with Section 14.4.D, shall be resolved by binding arbitration in
Boston, Massachusetts by J.A.M.S./ENDISPUTE, in accordance with this Article 18.
18.2 PROCEDURES. Any arbitration called for by this Article 18
shall be conducted in accordance with the following procedures:
A. The Partnership or any Partner (the "Requesting
Party") may demand arbitration pursuant to Section 18.1 at any time by giving
written notice of such demand (the "Demand Notice") to all other Partners and
(if the Requesting Party is not the Partnership) to the Partnership which Demand
Notice shall describe in reasonable detail the nature of the claim, dispute or
controversy.
B. Within fifteen (15) days after the giving of a
Demand Notice, J.A.M.S./ENDISPUTE shall select and designate in writing three
reputable, disinterested individuals willing to act as an arbitrator of the
claim, dispute or controversy in question.
C. The presentations of the parties hereto in the
arbitration proceeding shall be commenced and completed within sixty (60) days
after the selection of the arbitration panel pursuant to subsection B above, and
the arbitration panel shall render its decision in writing within thirty (30)
days after the completion of such presentations. Any decision concurred in by
any two (2) of the arbitrators shall constitute the decision of the arbitration
panel, and unanimity shall not be required.
D. The arbitration panel shall have the discretion to
include in its decision a direction that all or part of the attorneys' fees and
costs of any party or parties and/or the costs of such arbitration be paid by
any other party or parties. On the application of a party before or after the
initial decision of the arbitration panel, and proof of its attorneys' fees and
costs, the arbitration panel shall order the other party to make any payments
directed pursuant to the preceding sentence.
18.3 BINDING CHARACTER. Any decision rendered by the arbitration
panel pursuant to this Section shall be final and binding on the parties hereto,
and judgment thereon may be entered by any state or federal court of competent
jurisdiction.
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18.4 EXCLUSIVITY. Arbitration shall be the exclusive method
available for resolution of claims, disputes and controversies described in
Section 18.1, and the Partnership and its Partners stipulate that the provisions
hereof shall be a complete defense to any suit, action, or proceeding in any
court or before any administrative or arbitration tribunal with respect to any
such claim, controversy or dispute. The provisions of this Section 18.4 shall
survive the dissolution of the Partnership.
18.5 NO ALTERATION OF AGREEMENT. Nothing contained herein shall
be deemed to give the arbitrators any authority, power or right to alter,
change, amend, modify, add to, or subtract from any of the provisions of this
Agreement.
19. Miscellaneous.
-------------
19.1 NOTICES. Any notice, election or other communication
provided for or required by this Agreement shall be in writing and shall be
deemed to have been given when delivered by telecopy or other facsimile
transmission (confirmed by any of the methods that follow) or by hand, the first
business day after sent by overnight courier (such as Federal Express), or on
the second business day after deposit in the United States Mail, certified or
registered, return receipt requested, postage prepaid, properly addressed to the
Partner to whom such notice is intended to be given at the address for the
Partner set forth on EXHIBIT A, or at such other address as such person may have
previously furnished or may subsequently furnish in writing to the Partnership
and each Partner. A copy of all such notices also should be sent to the General
Partner and addressed as follows:
General Partner: Bradley Real Estate, Inc.
40 Skokie Boulevard, Suite 600
Northbrook, IL 60062-1626
Attention: Thomas P. D'Arcy, President
Fax No. (847) 480-1893
With copy to: William B. King, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Fax No. (617) 523-1231
19.2 SUCCESSORS AND ASSIGNS. Any person acquiring or claiming an
interest in the Partnership, in any manner whatsoever, shall be subject to and
bound by all of the terms, conditions and obligations of this Agreement to which
his predecessor-in-interest was subject or bound, without regard to whether such
a person has executed a counterpart hereof or any other document contemplated
hereby. No person, including the legal representative, heir or legatee of a
deceased Partner, shall have any rights or obligations greater than those set
forth in this Agreement, and no person shall acquire an interest in the
Partnership or become a Partner thereof except as expressly permitted by and
pursuant to the terms of this Agreement.
47
<PAGE> 53
Subject to the foregoing, and the provisions of Article 12 above, this Agreement
shall be binding upon and inure to the benefit of the Partners and their
respective successors, assigns, heirs, legal representatives, executors and
administrators.
19.3 DUPLICATE ORIGINALS. For the convenience of the Partners,
any number of counterparts hereof may be executed, and each such counterpart
shall be deemed to be an original instrument, and all of which taken together
shall constitute one agreement.
19.4 CONSTRUCTION. The titles of the Sections and subsections
herein have been inserted as a matter of convenience of reference only and shall
not control or affect the meaning or construction of any of the terms or
provisions herein.
19.5 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware. Except to the extent the Act is inconsistent with the
provisions of this Agreement, the provisions of such Act shall apply to the
Partnership.
19.6 OTHER INSTRUMENTS. The parties hereto covenant and agree
that they will execute such other and further instruments and documents as, in
the opinion of the General Partner, are or may become necessary or desirable to
effectuate and carry out the Partnership as provided for by this Agreement.
19.7 GENERAL PARTNER WITH INTEREST AS LIMITED PARTNER. Except as
set forth to the contrary in this Agreement, if the General Partner has an
interest as a Limited Partner in the Partnership, the General Partner shall,
with respect to such interest, enjoy all of the rights and be subject to all of
the obligations and duties of a Limited Partner.
19.8 GENDER. Whenever the context shall so require, all words
herein in any gender shall be deemed to include the masculine, feminine or
neuter gender, all singular words shall include the plural, and all plural words
shall include the singular.
19.9 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes any
prior understandings or written or oral agreements amongst the Partners, or any
of them, respecting the within subject matter and contains the entire
understanding amongst the Partners with respect thereto.
19.10 PURCHASE FOR INVESTMENT. Each Partner represents, warrants
and agrees that it has acquired and continues to hold its interest in the
Partnership for its own account for investment only and not for the purpose of,
or with a view toward, the resale or distribution of all or any part thereof,
nor with a view toward selling or otherwise distributing such interest or any
part thereof at any particular time or under any predetermined circumstances.
Each Partner further represents and warrants that it is a sophisticated
investor, able and accustomed to handling sophisticated financial matters for
itself, particularly real estate investments, and that it has a sufficiently
high net worth that it does not anticipate a need for the funds it has
48
<PAGE> 54
invested in the Partnership in what it understands to be a highly speculative
and illiquid investment.
19.11 WAIVER. No consent or waiver, express or implied, by any
Partner to or of any breach or default by any other Partner in the performance
by such other Partner of its obligations hereunder shall be deemed or construed
to be a consent to or waiver of any other breach of default in the performance
by such other Partner of the same or any other obligations of such Partner
hereunder. Failure on the part of any Partner to complain of any act or failure
to act on the part of any other Partner or to declare any other Partner in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such Partner of its rights hereunder.
19.12 SEVERABILITY. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those to which it is held invalid by such court, shall not be affected thereby.
19.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, which when taken together, shall constitute but one original.
19.14 NOTICE FOR CERTAIN TRANSACTIONS. In the event of (a) a
dissolution or liquidation of the Partnership or the General Partner, (b) a
merger, consolidation or combination of the Partnership or the General Partner
with or into another Person (including the events set forth in Section 17.2),
(c) the sale of all or substantially all of the assets of the Partnership or the
General Partner, or (d) the transfer by the General Partner of all or any part
of its interest in the Partnership, the General Partner shall give written
notice thereof to each Limited Partner at least twenty (20) Trading Days prior
to the effective date or, to the extent applicable, record date of such
transaction, whichever comes first.
[Remainder of Page Intentionally Left Blank]
49
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
GENERAL PARTNER:
Bradley Real Estate, Inc.
By:
-----------------------------------
Name:
Title:
LIMITED PARTNERS:
---------------------------------------
Kenneth Tucker
LEXINGTON HOLDING COMPANY
By:
-----------------------------------
Name:
Title:
COUNTY LINE 31 COMPANY, L.P.
By:
-----------------------------------
Name:
Title:
50
<PAGE> 56
EXHIBIT A
NUMBER OF UNITS HELD UNDER THIS AGREEMENT
(AT SEPTEMBER 2, 1997)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
NAME OF PARTNER NUMBER OF UNITS ADDRESS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
GENERAL PARTNER
- --------------------------------------------------------------------------------------------
Bradley Real Estate, Inc.............. 21,676,375 40 Skokie Boulevard, Suite 600
Northbrook, IL 60062
- --------------------------------------------------------------------------------------------
SUBTOTAL, GENERAL PARTNER UNITS....... 21,676,375
- --------------------------------------------------------------------------------------------
LIMITED PARTNERS
- --------------------------------------------------------------------------------------------
Kenneth Tucker 197,157
The Tucker Companies.................. 2,178
1420 Sheridan Road
Tucker State Street, Inc.............. 1,249 Wilmette, Illinois 60091
Marsha Tucker......................... 6,860
- --------------------------------------------------------------------------------------------
Richard Tucker........................ 58,024
Sheryl Tucker......................... 3,738
Aaron Tucker Trust.................... 409 111 Red Oak Lane
Highland Park, Illinois 60035
Rachel Tucker Trust................... 409
Allison Tucker Trust.................. 409
- --------------------------------------------------------------------------------------------
Harold Eisenberg...................... 27,683 119 Ridge Road
Highland Park, Illinois 60035
Ridge Family Partnership.............. 10,427
- --------------------------------------------------------------------------------------------
David Sadowsky........................ 411 2552 Knotty Pine Way
Clearwater, Florida 34621
Richard Sadowsky Trust................ 409
Yosef Sadowsky Trust.................. 409
- --------------------------------------------------------------------------------------------
Gregg Sadowsky........................ 411 466 Santa Cecelia
Solana Beach, California 92075
- --------------------------------------------------------------------------------------------
David Lisnek Trust.................... 409 41 Willow
Deerfield, Illinois 60015
Michael Lisnek Trust.................. 409
- --------------------------------------------------------------------------------------------
Lexington Holding Company............. 281,300 650 Pilsbury Centre
Minneapolis, Minnesota 55402
- --------------------------------------------------------------------------------------------
County Line 31 Company, L.P........... 478,619 c/o F.C. Tucker Company, Inc.
2500 One American Square
Indianapolis, Indiana 46282
- --------------------------------------------------------------------------------------------
SUBTOTAL, LIMITED PARTNER UNITS....... 1,070,920
- --------------------------------------------------------------------------------------------
TOTAL UNITS........................... 22,747,295
- --------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 57
EXHIBIT B
NOTICE OF REDEMPTION
The undersigned Limited Partner hereby irrevocably (i) redeems __________
Units in Bradley Operating Limited Partnership in accordance with the terms of
the Second Restated Agreement of Limited Partnership of Bradley Operating
Limited Partnership as amended from time to time and the Redemption Right
referred to therein, (ii) surrenders such Units (and any Unit Certificate(s)
issued in connection therewith) and all right, title and interest therein, and
(iii) directs that the Cash Amount or the REIT Shares Amount (as elected and
determined by the General Partner pursuant to the terms of the Agreement)
deliverable upon exercise of the Redemption Right be delivered to the address
specified below, and if Common Stock is to be delivered, such Common Stock be
registered or placed in the name(s) and at the address(es) specified below. The
undersigned hereby represents, warrants, and certifies that the undersigned (a)
has marketable and unencumbered title to such Units, free and clear of the
rights or interests of any other person or entity, (b) has the full right,
power, and authority to redeem and surrender such Units as provided herein, and
(c) has obtained the consent or approval of all persons or entities, if any,
having the right to consent or approve such redemption and surrender.
Dated:__________________________________________________________________________
Name of Limited Partner:________________________________________________________
Please Print
______________________________________________
(Signature of Limited Partner)
______________________________________________
(Street Address)
______________________________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
______________________________________________
If Common Stock is to be issued, issue to:
Name:____________________________________
Please insert social security or identifying number:____________________________
52
<PAGE> 1
EXHIBIT 21.1
------------
List of Subsidiaries
--------------------
Bradley Financing Partnership, a Delaware general partnership
Williamson Square Associates Limited Partnership, an Illinois limited
partnership
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,462
<SECURITIES> 0
<RECEIVABLES> 11,179
<ALLOWANCES> 1,636
<INVENTORY> 0
<CURRENT-ASSETS> 32,536
<PP&E> 500,418
<DEPRECIATION> 30,670
<TOTAL-ASSETS> 502,284
<CURRENT-LIABILITIES> 19,606
<BONDS> 188,894
0
0
<COMMON> 0
<OTHER-SE> 293,784
<TOTAL-LIABILITY-AND-EQUITY> 502,284
<SALES> 77,512
<TOTAL-REVENUES> 78,839
<CGS> 0
<TOTAL-COSTS> 29,736
<OTHER-EXPENSES> 17,044
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,404
<INCOME-PRETAX> 27,956
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,956
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
</TABLE>
