<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended June 30, 1995 or
-------------
Transition report pursuant to Section 13 or 15(d) of the
--- Securities Exchange Act of 1934
For the transition period from to
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Commission file number 1-10328
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BRADLEY REAL ESTATE, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Maryland 04-6034603
-------- ----------
(State of Organization) (I.R.S. Identification No.)
250 Boylston Street, Boston, Massachusetts 02116
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(Address of Registrant's Principal Executive Offices)
Registrant's telephone number, including area code: (617) 421-0680
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of Shares outstanding of each class of Common Stock as of
June 30, 1995:
Shares of Common Stock, .01 par value: 8,723,524 Shares.
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<TABLE>
BRADLEY REAL ESTATE, INC.
-------------------------
BALANCE SHEETS
--------------
<CAPTION>
June 30, December 31,
Assets 1995 1994
------ ------------ ------------
(UNAUDITED)
<S> <C> <C>
Real estate investments - at cost $185,734,000 $177,939,000
Accumulated depreciation and amortization 24,908,000 22,385,000
------------ ------------
Net real estate investments 160,826,000 155,554,000
Other assets:
Cash 1,125,000 193,000
Rents and other receivables, net of
allowance for doubtful accounts of
$534,000 for 1995 and $459,000 for 1994 6,243,000 5,776,000
Unamortized buyout of contract, net 4,959,000 -
Deferred charges, net and prepaid expenses 4,279,000 5,056,000
------------ ------------
$177,432,000 $166,579,000
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Mortgage loans $ 29,658,000 $ 27,748,000
Line of credit 41,800,000 39,000,000
Accounts payable and accrued expenses 5,924,000 5,252,000
------------ ------------
77,382,000 72,000,000
------------ ------------
Stockholders' equity:
Shares of preferred stock, par value $.01 per share:
Authorized during 1994, 20,000,000 shares; Issued
and outstanding, 0 shares at June 30, 1995 and
December 31,1994; - -
Shares of common stock, par value $.01 per share:
Authorized during 1994, 80,000,000 shares: Issued
and outstanding, 8,723,524 at June 30, 1995 and
8,197,054 at December 31,1994. 87,000 82,000
Shares of excess stock, par value $.01 per share:
Authorized during 1994, 50,000,000 shares; Issued
and outstanding, 0 shares at June 30, 1995 and
December 31, 1994 - -
Additional paid-in capital 110,934,000 103,251,000
Distributions in excess of accumulated
earnings (10,971,000) (8,754,000)
------------ ------------
100,050,000 94,579,000
------------ ------------
$177,432,000 $166,579,000
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
BRADLEY REAL ESTATE, INC.
-------------------------
STATEMENTS OF INCOME
--------------------
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ---------------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental income $8,686,000 $8,474,000 $17,301,000 $15,929,000
Other income 41,000 23,000 126,000 29,000
---------- ---------- ----------- -----------
8,727,000 8,497,000 17,427,000 15,958,000
Expenses:
Operations, maintenance and management 1,385,000 1,231,000 2,662,000 2,513,000
Real estate taxes 1,997,000 2,331,000 4,005,000 4,192,000
Mortgage and other interest 1,520,000 1,174,000 2,984,000 1,873,000
Depreciation and amortization 1,805,000 1,242,000 3,562,000 2,327,000
Administrative and general 382,000 525,000 741,000 965,000
---------- ---------- ----------- -----------
7,089,000 6,503,000 13,954,000 11,870,000
---------- ---------- ----------- -----------
Net income $1,638,000 $1,994,000 $ 3,473,000 $ 4,088,000
========== ========== =========== ===========
Per share data:
Net income $0.19 $0.24 $0.41 $0.50
========== ========== =========== ===========
Weighted average shares outstanding 8,684,136 8,190,536 8,548,886 8,189,520
========== ========== =========== ===========
The accompanying notes are an integral part of the financial statements
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</TABLE>
<TABLE>
BRADLEY REAL ESTATE,INC.
------------------------
STATEMENTS OF CASH FLOWS
------------------------
(unaudited)
<CAPTION>
Six Months Ended
June 30,
---------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $3,473,000 $4,088,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,562,000 2,327,000
Change in assets and liabilities:
Increase in rents and other receivables (467,000) (701,000)
Increase in accounts payable and
accrued expenses 132,000 1,677,000
(Increase) decrease in deferred charges 333,000 (2,129,000)
Increase in unamortized buyout of contract (638,000) -
---------- ----------
Net cast provided by operating activities 6,395,000 5,262,000
---------- ----------
Cash flows from investing activities:
Additions to real estate investments (5,701,000) (28,443,000)
---------- ----------
Net cash used by investing activities (5,701,000) (28,443,000)
---------- ----------
Cash flows from financing activities:
Net borrowings under line of credit 2,800,000 29,700,000
Increase in accounts payable for construction 540,000 876,000
Distributions paid (5,690,000) (5,241,000)
Exercise of employee stock options 128,000 -
Sale of stock 3,103,000 -
Principal payments on mortgage loans (184,000) (114,000)
Reorganization costs (617,000) -
Shares issued under dividend reinvestment plan 158,000 70,000
---------- ----------
Net cash provided by financing activities 238,000 25,291,000
---------- ----------
Net increase in cash 932,000 2,110,000
Cash and cash equivalents:
Beginning of period 193,000 950,000
---------- ----------
End of period $1,125,000 $3,060,000
========== ==========
Supplementary information:
Income taxes paid $7,000 $6,000
Interest paid, net of amount capitalized $2,931,000 $1,667,000
<FN>
Supplemental schedule of noncash investing and financing activities:
In January 1995, the Company issued 325,000 snares of Common Stock having a value of
$4,916.000 in connection with the buyout of the contract with its former advisor.
In April 1995, a property was purchased for S5,197,000 which included the Company's
assumption of $2,094,000 in non-recourse mortgages.
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
BRADLEY REAL ESTATE, INC.
-------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
<CAPTION>
Retained
Earnings
(Distributions
Additional in Excess of
Shares Paid-In Accumulated
at par value Capital Earnings)
------------ ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1994 $82,000 $103,251,000 $ (8,754,000)
Net income - - 1,835,000
Cash distributions
($.33 per share) - - (2,812,000)
Dividend reinvestment participation - 119,000 -
Shares issued in buyout of contract 3,000 4,913,000 -
Reorganization costs - (617,000) -
------- ------------ ------------
Balance at March 31,1995 $85,000 $107,666,000 $ (9,731,000)
Net income - - 1,638,000
Cash distributions
($.33 per share) - - (2,878,000)
Dividend reinvestment participation - 39,000 -
Shares issued to purchase property 2,000 3,101,000 -
Stock options exercised - 128,000 -
------- ------------ ------------
Balance at June 30, 1995 $87,000 $110,934,000 $(10,971,000)
======= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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BRADLEY REAL ESTATE, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim financial statements have been prepared by the
Company, without audit, and in the opinion of management reflect all normal
recurring adjustments necessary for a fair presentation of results for the
unaudited interim periods presented. Net income per share and weighted-average
shares outstanding have been restated on the statements of income to reflect
the one-for-two reverse share split, effective on October 17, 1994. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto for the fiscal year ended December 31, 1994.
NOTE 2 - COMMITMENTS/SUBSEQUENT EVENTS
On June 30, 1995, the Company had commitments of approximately $2,700,000 for
tenant related capital improvements. Cash flow from operations and the
Company's revolving bank line of credit are available to fund these
improvements.
On July 6, 1995, the Company completed a public share offering of 2,500,000
shares at a price of $16 per share. Net proceeds from the offering were
approximately $37,800,000, of which $32,600,000 was used to pay down the
Company's bank line of credit and $4,712,000 was used to pay off the non-
recourse mortgages assumed in November 1994 in connection with the Westwind
Plaza purchase.
NOTE 3 - UNAMORTIZED BUYOUT OF CONTRACT
In January 1995, the Company issued 325,000 shares of Common Stock having a
value of $4,916,000 to acquire the REIT advisory business of its former
advisor, thereby enabling the Company to effect the buyout of its contract
with the former advisor and to become self-administered. The total purchase
price including related costs was $5,554,000 and is being amortized over the
56 month remaining life of the contract at the time of the buyout.
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
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The Company and the REIT industry consider funds from operations
(defined by the National Association of Real Estate Investment Trusts as "net
income (computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures") to be an important measure of performance for
an equity REIT, because such measure does not treat depreciation and
amortization expenses as operating expenses. The Company acquires, evaluates
and sells properties based upon net operating income without taking into
account property depreciation and amortization charges and utilizes funds from
operations, together with other factors, in setting shareholder distribution
levels. Funds from operations differs from cash flows from operating activities
set forth in the Statement of Cash Flows in the Company's financial statements
primarily because funds from operations does not include changes in operating
assets and liabilities. Funds from operations is a supplemental measure of
performance that does not replace net income as a measure of performance or net
cash provided by operating activities as a measure of liquidity.
Funds from operations increased $207,000 or 6% from $3,236,000 to
$3,443,000 for the three-month period ended June 30, 1995 and $620,000 or 10%
from $6,415,000 to $7,035,000 for the six-month period then ended, over the
comparable periods in 1994.
Results of Operations
---------------------
Rental income increased $1,372,000 or 9% from $15,929,000 for the six
months ended June 30, 1994 to $17,301,000 for the six months ended June 30,
1995. This increase is primarily due to the acquisitions of Rivercrest Center,
Westwind Plaza and St. Francis Plaza on March 30, 1994, November 1, 1994, and
April 18, 1995, respectively, offset by the sale of Spruce Tree Centre on
November 1, 1994, and increased occupancy of certain other properties in the
Company's portfolio. Other income increased $97,000 from $29,000 to $126,000;
during 1995, the Company received approximately $26,000 related to a tax
abatement at one of its properties, approximately $29,000 in interest earned on
funds from a tax escrow account and approximately $49,000 in termination fees
from tenants.
Total expenses increased $586,000 or 9% from $6,503,000 to $7,089,000
for the three-month period ended June 30, 1995 and $2,084,000 or 18% from
$11,870,000 to $13,954,000 for the six-month period then ended. Of the
increased expenses, $66,000 and $555,000 for the three-month and six-month
periods,
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respectively, were attributable to the portfolio changes described in the
preceding paragraph. Operations, maintenance and management increased $154,000
from $1,231,000 to $1,385,000 for the three-month period and $149,000 from
$2,513,000 to $2,662,000 for the six-month period. Real estate taxes decreased
$334,000 from $2,331,000 to $1,997,000 for the three-month period and
decreased $187,000 from $4,192,000 to $4,005,000 for the six-month period. In
the three-month period the portfolio changes resulted in a $131,000 decrease
combined with a $113,000 decrease attributed to tax abatements at two of the
Company's properties, a $63,000 decrease due to certain tenants paying the
taxing authority directly in 1995 but not in 1994 and a decrease of $58,000 due
to capitalized taxes in 1995. In the six-month period, the portfolio changes
resulted in a $213,000 increase offset by $219,000 in tax reductions at two of
the Company's properties due to tax abatements, $125,000 in tax expense
reduction due to certain tenants paying the taxing authority directly in 1995
but not in 1994 and a decrease of $99,000 due to capitalized taxes in 1995.
Mortgage and other interest increased $346,000 from $1,174,000 to $1,520,000
for the three-month period and $1,111,000 from $1,873,000 to $2,984,000 for the
six-month period, primarily due to additional borrowings under the Company's
bank line of credit to purchase Rivercrest and the assumption of $4,890,000 and
$2,094,000 in mortgages in connection with the Westwind Plaza and St. Francis
Plaza acquisitions, respectively, and in part due to higher generally
prevailing interest rates. Depreciation and amortization increased $563,000
from $1,242,000 to $1,805,000 for the three-month period and increased
$1,235,000 from $2,327,000 to $3,562,000 for the six-month period primarily due
to the acquisition of properties as well as other capital improvements to the
Company's properties and the amortization of the cost of the Company's buyout
of its contract with its former advisor; the Company is amortizing the cost of
the advisory contract buyout at the rate of $297,000 per quarter over the 56
month remaining life of the contract at the January 1995 effective date of the
buyout. The $143,000 decrease in administrative and general from $525,000 to
$382,000 for the three-month period and $224,000 from $965,000 to $741,000 for
the six-month period, primarily reflects savings from the Company's being
self-administered in 1995.
The aggregate result for the three-month period was a $356,000 or 18%
decrease in net income from $1,994,000 ($.24 per share) in 1994 to $1,638,000
($.19 per share) and for the six-month period a $615,000 or 15% decrease in net
income from $4,088,000 ($.50 per share) to $3,473,000 ($.41 per share). Per
share amounts reflect weighted-average shares outstanding of 8,548,886 and
8,189,520 for the six-months ended June 30, 1995 and 1994, respectively.
Changes in Financial Condition
------------------------------
As a qualified REIT, the Company distributes a substantial portion of
its cash flow to its shareholders in the form of dividends. The Company funds
these distributions primarily from operating cash flows, although its revolving
line of credit
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<PAGE> 9
may also be used. Net cash flows provided by operating activities increased to
$6,395,000 during the first half of 1995 from $5,262,000 during the comparable
1994 period, while distributions (treated as a charge to cash flows from
financing activities in the Company's financial statements) were $5,690,000 in
1995 compared with $5,241,000 in 1994.
On July 6, 1995, the Company completed a public share offering of
2,500,000 shares at a price of $16 per share. Net proceeds from the offering
were approximately $37,800,000, of which $32,600,000 was used to pay down the
Company's revolving bank line of credit and $4,712,000 was used to pay off the
non-recourse mortgages assumed in November 1994 in connection with the
acquisition of Westwind Plaza. This activity had the effect of reducing the
aggregate debt outstanding of the Company from $71,458,000 at June 30, 1995 to
$34,146,000 post offering and lowering the amount of adjustable rate debt as a
percent of total market capitalization (defined as the percentage of (a)
outstanding variable rate debt to (b) outstanding debt plus the market value of
outstanding common stock (using the offering price of $16 per share)) from
19.8% to 4.3%, thereby greatly reducing the Company's exposure to the impact
which increases in interest expense would have on earnings. While the
replacement of the short-term debt with equity may have a slightly dilutive
effect on earnings in the second half of 1995, the Company's strong capital
position should enable it to take advantage of a favorable acquisition
environment in its markets.
On June 30, 1995, the Company had commitments of approximately
$2,700,000 for tenant related capital improvements approximately $2,600,000 of
which relates to two additional major tenants at Har Mar Mall. The 45,000
square foot reconstruction of a new Barnes & Noble book store was completed as
scheduled in June of 1995 and opened for business June 15. The Company has
incurred approximately $1,466,000 in costs related to this reconstruction and
upon submission of final construction documents by Barnes & Noble, is obligated
to pay $750,000 for reimbursement of the tenant's capital improvements.
Construction is ongoing for the 54,500 square foot HOMEPLACE store, of which
27,000 square feet is new space. The Company has incurred approximately
$573,000 in tenant capital improvements and is committed to an additional
$1,855,000 prior to the store's scheduled opening early in the fourth quarter
of 1995.
At June 30, 1995, the Company had $1.1 million in cash and $23.2
million available and unused under its bank line of credit. Following
application of $32.6 million of the proceeds from the public offering in July
1995, $55.8 million now remains available and unused under its bank line of
credit. The Company expects to utilize funds available under the line of credit
to fund these expenditures and any other property improvement commitments
negotiated in connection with other new tenancies, as well as any property
acquisitions. Depending upon market conditions, the Company may issue further
securities under its $125 million "shelf" registration statement, which the
Securities and Exchange Commission declared effective in
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January 1995, and use the proceeds of such issue either for the acquisition or
improvement of properties, or further to reduce indebtedness. Following the
issuance of an aggregate of 2,682,500 shares of Common Stock for an aggregate
of $43,102,500 in April and July 1995, $81,897,500 remains available for
further securities issues under this registration statement.
10
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Part II - Other Information
-----------------
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
<TABLE>
At the Company's Annual Meeting of Stockholders held on May 11, 1995,
7,231,429 shares (85% of the total outstanding shares) were voted for
nominees for Director as follows:
<CAPTION>
NOMINEE FOR WITHHELD
------- --- --------
<S> <C> <C>
John B. Hynes 7,206,000 25,429
Paul G. Kirk, Jr., Esq. 7,206,300 25,129
W. Nicholas Thorndike 7,207,650 23,779
</TABLE>
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
11
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: August 11, 1995
Bradley Real Estate, Inc.
------------------------------------
(Registrant)
By: /s/ E. Lawrence Miller
------------------------------------
E. Lawrence Miller
President and CEO
By: /s/ Carmella C. Brown
------------------------------------
Carmella C. Brown
Treasurer
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF BRADLEY REAL ESTATE, INC. FOR THE
THREE MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 1,125
<SECURITIES> 0
<RECEIVABLES> 6,777
<ALLOWANCES> 534
<INVENTORY> 0
<CURRENT-ASSETS> 16,606
<PP&E> 185,734
<DEPRECIATION> 24,908
<TOTAL-ASSETS> 177,432
<CURRENT-LIABILITIES> 5,924
<BONDS> 71,458
<COMMON> 87
0
0
<OTHER-SE> 99,963
<TOTAL-LIABILITY-AND-EQUITY> 177,432
<SALES> 8,727
<TOTAL-REVENUES> 8,727
<CGS> 0
<TOTAL-COSTS> 3,382
<OTHER-EXPENSES> 2,187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,520
<INCOME-PRETAX> 1,638
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,638
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
