<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 29, 1996)
Filed pursuant to Rule 424(b)(5)
Registration No. 33-87084
LOGO
BRADLEY REAL ESTATE, INC.
2,5000,000 COMMON SHARES
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All of the Company's shares of common stock, par value $.01 per share,
offered hereby (the "Common Shares") are being sold by the Company. The
Company's common stock, par value $.01 per share (the "Common Stock"), is
listed on the New York Stock Exchange (the "NYSE") under the symbol "BTR." On
October 29, 1996, the last reported sale price of the Common Stock on the NYSE
was $16.50 per share.
SEE "RISK FACTORS" ON PAGE S-3 FOR CERTAIN FACTORS RELEVANT TO AN INVESTMENT
IN THE COMMON SHARES
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share............... $16.50 $0.825 $15.675
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Total................... $41,250,000 $2,062,500 $39,187,500
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Total Assuming Full
Exercise of
Over-Allotment
Option(3).............. $47,437,500 $2,371,875 $45,065,625
</TABLE>
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(1) See "Underwriting."
(2) Before deducting estimated expenses of $187,500 payable by the Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to
PaineWebber Incorporated to purchase up to 375,000 additional Common
Shares, on the same terms, solely to cover over-allotments. See
"Underwriting."
----------------
The Common Shares offered hereby are offered by PaineWebber Incorporated,
subject to prior sale, when, as and if delivered to and accepted by
PaineWebber Incorporated, and subject to its right to reject orders in whole
or in part. It is expected that delivery of the Common Shares offered hereby
will be made on or about November 4, 1996.
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PAINEWEBBER INCORPORATED
----------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 29, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-
COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement or the
accompanying Prospectus or incorporated herein or therein by reference. Unless
the context otherwise requires, all references in this Prospectus Supplement to
the "Company" or "Bradley" shall mean Bradley Real Estate, Inc. and its
subsidiaries and affiliated partnerships on a consolidated basis (including
Bradley Operating Limited Partnership (the "Operating Partnership") and its
subsidiaries or affiliates) as well as their respective predecessors.
Information in this Prospectus Supplement assumes that the Underwriter's over-
allotment option is not exercised.
THE COMPANY
Bradley Real Estate, Inc. is the nation's oldest continuously qualified real
estate investment trust ("REIT"). Organized in 1961, the Company focuses on the
ownership and operation of community and neighborhood shopping centers
primarily in the Midwestern United States. The Company owns 31 properties (29
shopping centers and two office/retail buildings) in 11 states, aggregating
over 7.5 million square feet of rentable space. Approximately 90% of the
Company's portfolio square footage is located in Midwest markets, making the
Company one of the leading owners of community and neighborhood shopping
centers in this region. As of June 30, 1996, the Company's portfolio was 89.3%
occupied.
The Company's portfolio is made up primarily of well-established,
strategically-located shopping centers in suburban communities near major
metropolitan areas. The Company's shopping centers have good visibility and
access from major traffic arteries and a diverse tenant mix dominated by
supermarkets, drugstores and other consumer necessity or value-oriented
retailers. The Company estimates that tenants whose scope of operations is
national or regional in nature (including independent franchisees of national
and regional retailers) account for over 70% of leased retail space.
Significant tenants at the Company's properties include national and regional
retail chains, such as JC Penney, Sears, Montgomery Ward, Marshalls, T. J.
Maxx, Best Buy, HomePlace, Office Depot and Barnes & Noble. Fifteen of the
Company's shopping centers have supermarket anchors, including Kroger, Cub
Foods, Omni Foods, Schnucks, Rainbow Foods, Kohl's Food Emporium and
Jewel/Osco, major grocery chains in their respective markets.
On March 15, 1996, the Company acquired Tucker Properties Corporation (the
"Tucker Acquisition") which more than doubled the size of the Company's
portfolio on a square footage basis. The Tucker Acquisition expanded the
Company's portfolio by 14 properties, aggregating over 4.4 million square feet
of rentable space. The Company believes that the Tucker Acquisition represents
the purchase of a solid Midwest shopping center portfolio at a favorable yield
and also provides the Company with opportunities to improve the operating
performance of the acquired assets through the correction of operating
inefficiencies and the implementation of renovation, expansion and/or re-
tenanting programs. Strategically, the Tucker Acquisition has also sharpened
the Company's Midwest focus and increased operating efficiencies through
enhanced economies of scale. The Company effected the Tucker Acquisition
through the issuance of approximately 7.4 million shares of Common Stock and
the assumption of associated liabilities and obligations, including the
obligations under a $100 million mortgage note secured by six of the acquired
Tucker properties issued to a trust qualifying as a real estate mortgage
investment conduit for federal income tax purposes (the "REMIC Note").
In acquiring additional properties, the Company intends to focus principally
on community and neighborhood shopping centers in the Midwest which are
anchored by regional and national grocery store chains. The Company favors
grocery-anchored shopping centers because, based on the Company's experience,
such properties offer strong and predictable daily consumer traffic and are
less susceptible to external economic factors than other properties. In
addition to grocery-anchored centers, the Company will continue to seek
acquisition opportunities in both primary and secondary Midwest markets where
management can utilize its extensive experience in shopping center renovation,
expansion, re-leasing and re-merchandising to achieve cash flow
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growth and favorable investment returns. Management believes that the recent
downturn in retail markets generally has created an attractive buying
opportunity for companies like Bradley, which have significant operating
experience, strong relationships with key regional and national retailers and
in-depth knowledge of market conditions. As a result of this offering, the
Company's ratio of debt to Total Market Capitalization (defined as the current
market value of all outstanding shares of Common Stock plus the principal
amount of outstanding debt) will be reduced to approximately 34% (based on the
October 29, 1996 closing stock price for the Common Stock of $16.50 per share)
and the Company will have approximately $94 million of potential availability
under its $150 million unsecured line of credit. The Company is currently
evaluating numerous acquisition opportunities and expects to complete several
additional acquisitions in the coming year. Consistent with the Company's
decision to focus on the Midwest region, the Company is currently marketing for
sale its three remaining properties in New England and intends to redeploy the
proceeds of such sales to acquire additional shopping center properties in the
Midwest.
On October 1, 1996, the Company relocated its corporate headquarters from
Boston to suburban Chicago. The Company's principal executive office is now
located at 40 Skokie Boulevard, Suite 600, Northbrook, Illinois 60062. Its
telephone number is (847) 272-9800.
DISTRIBUTIONS
The Company has paid 141 consecutive quarterly dividends to its stockholders.
This record of distributions is one of the longest among publicly-traded REITs.
The Company's current quarterly dividend of $0.33 per share ($1.32 per share
annualized) represents a current yield of 8.0% (based on the October 29, 1996
closing stock price of $16.50 per share).
For the second quarter of 1996 (the Company's first full quarter of
operations following the Tucker Acquisition), the quarterly dividend
represented 73% of the Company's per share funds from operations ("FFO") for
the same period. The Company intends to maintain a conservative distribution
payout policy with cash distributions representing between 70% and 80% of FFO
per share. FFO, as defined by the National Association of Real Estate
Investment Trusts and as followed by the Company, represents 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 of real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures.
RISK FACTORS
An investment in the Common Shares involves various risks, and prospective
investors should carefully consider the matters discussed under "Risk Factors"
prior to any investment in the Company.
THE OFFERING
<TABLE>
<S> <C>
Common Shares Offered by the
Company..................... 2,500,000 shares
Common Stock Outstanding
After the Offering.......... 21,173,084(A)
Use of Proceeds.............. To reduce outstanding indebtedness incurred under
the Company's line of credit
NYSE Symbol.................. BTR
</TABLE>
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(A) Based upon shares outstanding as of September 30, 1996. Does not include
shares of Common Stock reserved for issuance upon (i) possible exchange of
311,011 outstanding limited partnership units of the Operating Partnership,
representing the aggregate minority interest in the Operating Partnership,
and (ii) exercise of approximately 281,000 outstanding options as of
September 30, 1996. The number of shares of Common Stock which may be
issued under the Company's stock option and incentive plan is equal to 5%
of the total number of shares of Common Stock outstanding at any time.
S-2
<PAGE>
RISK FACTORS
An investment in Common Shares involves various risks. Prospective investors
should carefully consider the following information in conjunction with the
other information contained or incorporated by reference in this Prospectus
Supplement and the attached Prospectus before making a decision to purchase
Common Shares.
SUBSTANTIAL DEBT OBLIGATIONS AND TERMS OF DEBT
The Company's ratio of debt to Total Market Capitalization is approximately
41% based upon the Company's stock price at October 29, 1996. Failure to pay
the debt obligations when due could result in the Company losing its interest
in the properties collateralizing secured indebtedness included within such
obligations. Applying the net proceeds from the sale of the Common Shares to
the reduction of indebtedness under the Company's line of credit will reduce
the Company's ratio of debt to Total Market Capitalization at the date of this
Prospectus Supplement to approximately 34%. The Company, however, expects to
reborrow the amount repaid and additional amounts under the line of credit and
also has authority to incur additional indebtedness. The Company expects that
such reborrowing will be used primarily for the purpose of completing
additional shopping center acquisitions.
The Company believes that the ratio of debt to Total Market Capitalization
is one important factor to consider in evaluating a REIT's debt level because
this ratio is an indicator of a company's ability to borrow funds. The Company
believes that using the ratio of debt to book value of assets is not as
reliable an indicator of a REIT's debt level because the book value of a
REIT's assets indicates only the depreciated value of its properties without
consideration of the market value of such assets at a particular point in
time. The use of the ratio of debt to Total Market Capitalization of a company
is more variable than the book value because it is dependent on the current
stock price of a company. Accordingly, there can be no assurance that the use
of the ratio of debt to Total Market Capitalization in evaluating the
Company's debt level will adequately protect the Company from being too highly
leveraged.
The maturity in September 2000 of the $100 million REMIC Note may increase
the Company's risk of default on its indebtedness. To date, the Company has
been able to refinance debt when it has become due on terms which it believes
to be commercially reasonable. There can be no assurance, however, that the
Company will continue to be able to repay or to refinance its indebtedness
relating to the REMIC Note or any of its other indebtedness on commercially
reasonable or any other terms. The REMIC Note is secured by six properties,
all of which were acquired by the Company in connection with the Tucker
Acquisition.
The Company's unsecured line of credit bears interest at a variable rate.
The current outstanding balance under the line of credit is approximately
$94.5 million, which will be temporarily reduced by the net proceeds of this
offering. To the extent the Company's exposure to increases in interest rates
is not eliminated through interest rate protection or cap agreements, such
increases will adversely affect the Company's net income, FFO and cash
available for distribution and may affect the amount of distributions it can
make to its stockholders. The Company's line of credit requires the Company to
maintain interest rate protection, at a rate satisfactory to the lead lender,
with respect to $100 million of indebtedness and the Company has entered into
such agreements with the lead lender.
The foregoing risks associated with the debt obligations of the Company may
adversely affect the market price of the Common Shares and may inhibit the
Company's ability to raise capital and issue equity in both the public and
private markets.
RESTRICTIONS ON ABILITY OF THE COMPANY TO DISPOSE OF PROPERTIES
Pursuant to the terms of the indenture governing the REMIC Note (the "REMIC
Indenture"), 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 Company 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, it will incur
S-3
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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.
Pursuant to the terms of the partnership agreement relating to the Operating
Partnership, for a period of 24 months after the Tucker Acquisition, the
Company as general partner of the Operating Partnership 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, except in connection with a merger or other
business combination of the Company. Thus, the Company is restricted from
disposing of all or substantially all of the 14 properties held directly or
indirectly by the Operating Partnership.
POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
Certain provisions contained in the Company's Articles of Amendment and
Restatement (the "Charter") and Bylaws (the "Bylaws") may have the effect of
discouraging a third party from making an acquisition proposal for the Company
and may thereby inhibit a change in control of the Company. These provisions
include the following: (i) the Company's Charter provides for three classes of
Directors, with the term of office of one class expiring each year, (ii) the
Company's Bylaws provide that the holders of not less than 25% of the
outstanding shares of Common Stock may call a special meeting of the Company's
stockholders, and (iii) the Charter generally limits any holder from acquiring
more than 9.8% of the value of all outstanding capital stock of the Company.
With respect to clause (ii) in the preceding sentence, a recent change in the
Maryland General Corporation Law, under which the Corporation is organized,
authorizes the Directors of the Company to amend the Bylaws to increase the
number of outstanding shares of Common Stock required to call a special
meeting from 25% to a majority.
These provisions described above could have a potential anti-takeover effect
on the Company. The staggered Board provision in the Charter prevents
stockholders from voting on the election of more than one class of directors
at each annual meeting of stockholders and thus may have the effect of keeping
the members of the Board of Directors of the Company in control for a longer
period of time. The staggered Board provision and the provision in the Bylaws
requiring holders of at least 25% of the outstanding shares of Common Stock to
call a special meeting of stockholders may have the effect of making it more
difficult for a third party to acquire control of the Company without the
consent of its Board of Directors, including certain acquisitions which
stockholders deem to be in their best interest. In addition, the ownership
limits in the Charter may also (i) deter certain tender offers for the shares
of Common Stock which might be attractive to certain stockholders, or (ii)
limit the opportunity for stockholders to receive a premium for their shares
of Common Stock that might otherwise exist if an investor were attempting to
assemble a block of shares in excess of 9.8% of the value of the outstanding
shares of Common Stock, or otherwise effect a change in control.
The provisions of the Maryland General Corporation Law relating to certain
"business combinations" and "control share" acquisitions involving
corporations organized under the laws of that state may also inhibit a change
in control of the Company.
REAL ESTATE INVESTMENT CONSIDERATIONS
Dependence on the Midwest and the Retail Industry
The substantial majority of the Company's properties are located in the
Midwest and such properties consist predominantly of community and
neighborhood shopping centers. The Company's performance therefore is
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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 net
income, FFO and cash available for distribution and thus affect the amount of
distributions the Company can make to its stockholders.
In addition, the Company predominantly owns and operates retail shopping
centers catering to retail tenants. To the extent that the investing public
has a negative perception of the retail sector, the value of the Common Stock
may be negatively impacted, thereby resulting in such shares trading at a
discount below the inherent value of the assets of the Company as a whole.
Financial Condition and Bankruptcy of Tenants
Since substantially all of the Company's income has been and will continue
to be derived from rental income from retail shopping centers, the Company's
net income, FFO and cash available for distribution would be adversely
affected if a significant number of tenants were unable to meet their
obligations to the Company or if the Company 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 Company may
experience delays and incur substantial costs in enforcing its rights as
landlord.
At any time, a tenant of the Company's properties may seek the protection of
the bankruptcy laws, which could result in the rejection and termination of
the tenant's lease. Such an event could cause a reduction of net income, FFO
and cash available for distribution and thus affect the amount of
distributions the Company can make to its stockholders. No assurance can be
given that any tenant which has filed for bankruptcy protection will continue
making payments under its lease or that additional 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 Company, the Company may experience delays in enforcing its rights as
lessor or sublessor and may incur substantial costs and experience significant
delays associated with protecting its investment, including costs incurred in
renovating and re-leasing the property.
Potential Negative Effect of One North State Property
Based on the Company's results for the second quarter of 1996 (the first
full quarter following the Tucker Acquisition), approximately 16% of the
Company's gross rental income was derived from rents and expense
reimbursements from tenants of the One North State property, which is a "mixed
use" retail and office building located in downtown Chicago and one of the
properties collateralizing the REMIC Note. The total rents currently being
paid by certain tenants of this property may be in excess of current market
rates. The leases of these tenants begin to expire in 2001. One office tenant,
however, has exercised an option to terminate its lease, effective as of April
1, 1998, and paid the Company a required $1.8 million termination 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 amount owed under the REMIC Note. The inability
of the Company 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
Company.
VACANCIES AND LEASE RENEWALS
The Company is continually faced with expiring tenant leases at its
properties. Some of these lease expirations provide the Company with the
opportunity to increase rentals or to hold the space available for a
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stronger long-term tenancy. In other cases, there may be no immediately
foreseeable strong tenancy for the 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 Company 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, net income, FFO and cash
available for distribution below levels anticipated by the Company.
POSSIBLE ENVIRONMENTAL LIABILITIES
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
properties of the Company, including those acquired in the Tucker Acquisition,
have been subjected to Phase I or similar environmental audits (which involve
inspection without soil sampling or groundwater 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 management believes would have a material adverse
effect on the Company'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
the Company.
Phase II site assessments of the Commons of Chicago Ridge property acquired
in the Tucker Acquisition 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 the 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 a
landfill. A regular maintenance program was implemented by Tucker and is being
continued by the Company 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
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 Company
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 Company.
In connection with the execution of the merger agreement relating to the
Tucker Acquisition, the Company and certain individuals who had previously
provided a limited indemnity to Tucker for environmental liabilities at
Commons of Chicago Ridge (the "Individuals") have agreed to share the cost of
having an outside consultant conduct a new Phase II investigation of the soil
and groundwater of the property and to prepare a report recommending what
action the Company should take with respect to such matters. In the event that
the Company decides to implement any of the recommendations of such consultant
(the "Recommended Work"), the Individuals have agreed to pay fifty percent of
the costs of the Recommended Work, with their aggregate liability for the cost
of the Recommended Work limited to a maximum of $200,000.
The Individuals have also agreed to indemnify the Company and its
subsidiaries and 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
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regarding hazardous substances, materials, wastes or petroleum products, or
any common law right 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
Company has agreed to keep the Individuals reasonably informed of various
activities relating to the properties 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 or that the liabilities will not exceed the limit of their
indemnity obligations. Regardless of such indemnification, based on the
information currently available, the management of the Company 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 Company.
INSURANCE
The Company carries comprehensive general liability coverage and umbrella
liability coverage on all of its properties with limits of liability which the
Company deems adequate to insure against liability claims and provide for the
costs of defense. Similarly, the Company is insured against the risk of direct
physical damage in amounts the Company estimates to be adequate to reimburse
the Company 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 Company 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, the Company 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 Company continually seeks prospective acquisitions of additional
shopping centers and portfolios of shopping centers which the Company 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
that the Company has undertaken with respect to properties in its existing
portfolio. There can be no assurance that the Company 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 the Company'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
the Company's expectations.
COMPETITION
All of the properties owned by the Company 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 Company 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 Company's ability to rent space at the
properties and the amount of rents currently charged and (ii) development and
acquisition opportunities. The Company competes for tenants and acquisitions
with others who have greater resources than the Company.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT; OTHER TAX LIABILITIES
The Company believes that it has operated in a manner that permits it to
qualify as a REIT under the Internal Revenue Code (the "Code") for each
taxable year since its formation in 1961. Although management of the Company
believes that it is organized and is operating in such a manner, no assurance
can be given that the
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Company will be able to continue to operate in a manner so as to qualify or
remain so qualified. Qualification as a REIT involves the application of
highly technical and complex Code provisions for which there are only limited
judicial or administrative interpretations and the determination of various
factual matters and circumstances not entirely within the Company's control.
For example, in order to qualify as a REIT, at least 95% of the Company's
gross income in any year must be derived from qualifying sources and the
Company must make distributions to stockholders aggregating annually at least
95% of its REIT taxable income (excluding net capital gains). In addition, no
assurance can be given that new legislation, new regulations, administrative
interpretations or court decisions will not change the tax laws with respect
to qualification as a REIT or the federal income tax consequences of such
qualification. The Company, however, is not aware of any currently pending tax
legislation that would adversely affect its ability to continue to operate as
a REIT.
If the Company fails to qualify as a REIT, it will be subject to federal
income tax (including any applicable alternative minimum tax) on its taxable
income at corporate rates. In addition, unless entitled to relief under
certain statutory provisions, the Company will also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of the
Company available for investment or distribution to stockholders because of
the additional tax liability for the year or years involved. In addition,
distributions would no longer be required to be made. To the extent that
distributions to stockholders would have been made in anticipation of the
Company's qualifying as a REIT, the Company might be required to borrow funds
or to liquidate certain of its investments to pay the applicable tax. The
failure to qualify as a REIT also would constitute a default under certain
debt obligations of the Company.
In connection with the Tucker Acquisition, Tucker represented to the Company
that, since Tucker's formation, Tucker also operated so as to qualify as a
REIT under the Code up to the time of the Tucker Acquisition. If Tucker failed
to qualify as a REIT in any year in which it elected so to qualify and
consequently becomes liable to pay taxes as a regular non-REIT corporation,
the liabilities of Tucker that the Company assumed upon effectiveness of the
Tucker Acquisition include such tax liability. Moreover, Tucker's failure to
qualify as a REIT could disqualify the Company as a REIT for periods following
the Tucker Acquisition. The Company's acquisition of Tucker's general partner
interest in the Operating Partnership and Tucker's indirect interests in
certain subsidiary partnerships of the Operating Partnership involve special
tax considerations, including the qualification of each such partnership as a
"partnership" for federal income tax purposes, which also could impact the
Company's ability to qualify as a REIT.
The failure to qualify as a REIT would have a material adverse effect on an
investment in the Company as the taxable income of the Company would be
subject to federal income taxation at corporate rates, and, therefore, the
amount of cash available for distribution to its stockholders would be reduced
or eliminated.
OWNERSHIP LIMITS
In order to maintain its qualification as a REIT, not more than 50% in value
of the outstanding shares of the Company may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code). To minimize the
possibility that the Company will fail to qualify as a REIT under this test,
the Charter authorizes the directors to take such action as may be required to
preserve its qualification as a REIT and generally limits the ownership of
Common Stock by any particular stockholder to 9.8% of the value of the
outstanding shares of Common Stock. The ownership limits in the Charter, as
well as the Company's authority to issue preferred stock and other provisions
in the Charter and the Bylaws, may delay, defer or prevent a change in control
of the Company.
S-8
<PAGE>
THE COMPANY
"Safe Harbor" statement under the Private Securities Litigation Reform Act
of 1995: This prospectus, including the information incorporated by reference
herein, contains 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. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth under
"Risk Factors," and prospective purchasers of the Common Shares offered hereby
should carefully review such risk factors.
Bradley Real Estate, Inc. is the nation's oldest continuously qualified
REIT. Organized in 1961, the Company focuses on the ownership and operation of
community and neighborhood shopping centers primarily in the Midwestern United
States. The Company owns 31 properties (29 shopping centers and two
office/retail buildings) in 11 states, aggregating over 7.5 million square
feet of rentable space. Approximately 90% of the Company's portfolio square
footage is located in Midwest markets, making the Company one of the leading
owners of community and neighborhood shopping centers in this region. As of
June 30, 1996, the Company's portfolio was 89.3% occupied.
The Company's portfolio is made up primarily of well-established,
strategically-located shopping centers in suburban communities near major
metropolitan areas. The Company's shopping centers have good visibility and
access from major traffic arteries and a diverse tenant mix dominated by
supermarkets, drugstores and other consumer necessity or value-oriented
retailers. The Company estimates that tenants whose scope of operations is
national or regional in nature (including independent franchisees of national
and regional retailers) account for over 70% of leased retail space.
Significant tenants at the Company's properties include national and regional
retail chains, such as JC Penney, Sears, Montgomery Ward, Marshalls, T. J.
Maxx, Best Buy, HomePlace, Office Depot and Barnes & Noble. Fifteen of the
Company's shopping centers have supermarket anchors, including Kroger, Cub
Foods, Omni Foods, Schnucks, Rainbow Foods, Kohl's Food Emporium and
Jewel/Osco, major grocery chains in their respective markets.
In acquiring additional properties, the Company intends to focus principally
on community and neighborhood shopping centers in the Midwest anchored by
regional and national grocery store chains. The Company favors grocery-
anchored shopping centers because, based on the Company's experience, such
properties offer strong and predictable daily consumer traffic and are less
susceptible to external economic factors than other properties. In addition to
grocery-anchored centers, the Company will continue to seek acquisition
opportunities in both primary and secondary Midwest markets where management
can utilize its extensive experience in shopping center renovation, expansion,
re-leasing and re-merchandising to achieve cash flow growth and favorable
investment returns. Management believes that the recent downturn in retail
markets generally has created an attractive buying opportunity for companies
like Bradley, which have significant operating experience, strong
relationships with key regional and national retailers and in-depth knowledge
of market conditions.
RECENT DEVELOPMENTS
. Tucker Acquisition
On March 15, 1996, the Company completed the Tucker Acquisition which more
than doubled the size of the Company's portfolio on a square footage basis.
The acquisition was consummated through the issuance by the Company of
approximately 7.4 million shares of its Common Stock and the assumption of all
of Tucker's liabilities, including the $100 million REMIC Note. The Tucker
Acquisition expanded the Company's portfolio by 14 properties, aggregating
over 4.4 million square feet of rentable space. The Company believes that the
Tucker Acquisition represents the purchase of a solid Midwest shopping center
portfolio at a favorable yield and also provides the Company with
opportunities to improve the operating performance of the acquired assets
through the correction of operating inefficiencies and the implementation of
renovation, expansion and/or re-tenanting programs. Strategically, the Tucker
Acquisition has also sharpened the Company's Midwest focus and
S-9
<PAGE>
increased operating efficiencies through enhanced economies of scale. Because
Tucker was more highly leveraged than the Company prior to the Tucker
Acquisition, the acquisition also increased the Company's debt to Total Market
Capitalization ratio to approximately 41% (based on the October 29, 1996
closing stock price for the Common Stock of $16.50 per share). The Company
intends to apply the net proceeds of this offering to reduce the outstanding
balance on its line of credit, which will reduce the Company's debt to Total
Market Capitalization ratio to approximately 34% and position the Company to
continue its active shopping center acquisition program. The Company is
currently reviewing numerous acquisition candidates (including single assets
and asset portfolios) in the Midwest and expects to acquire several additional
shopping center properties in the coming year.
. Increased Line of Credit on an Unsecured Basis
Concurrently with the Tucker Acquisition, the Company entered into a $150
million unsecured revolving credit facility with a syndicate of major U. S.
banks. The $150 million unsecured line of credit replaces a $65 million
secured facility. The Company's line of credit bears interest at the lower of
the lead bank's base rate or 1.75% over the London Inter-Bank Offering Rate
("LIBOR"). The rates available under the line of credit become more favorable
in the event the Company meets certain loan-to-value tests or receives an
investment grade credit rating. The Company expects that as a result of this
offering the interest rate on its line of credit will be reduced to 1.625%
over LIBOR. Following the offering, the Company will have approximately $94
million of potential availability under its line of credit.
. Purchase of Brookdale Square; Sale of Ground Lease
On March 26, 1996, the Company acquired Brookdale Square ("Brookdale"), a
185,000 square foot shopping center located in Brooklyn, Minnesota, a suburb
of Minneapolis, for approximately $8.9 million. In connection with the
acquisition of Brookdale, the Company completed a "like-kind" exchange for tax
purposes and sold its interest in a ground lease at 501-529 Nicollet Avenue in
downtown Minneapolis for approximately $12.9 million. These transactions
resulted in a net gain for tax purposes of approximately $4.1 million.
. Corporate Office Relocation; Geographic Focus on Midwest
In connection with the Company's stated objective to focus on the Midwest,
the Company recently relocated its headquarters from Boston, Massachusetts
(where the Company was founded in 1961) to Northbrook, Illinois, and is
marketing for sale its three remaining properties in New England. The
aggregate net book value of these properties (approximately $10.3 million as
of June 30, 1996) has been separately classified on the Company's balance
sheet. As a result of its headquarters move, the Company anticipates a one-
time relocation charge of approximately $0.02 per share in the third quarter
of 1996. All of the Company's Midwest properties are directly managed by its
own personnel, consisting of approximately 75 employees.
S-10
<PAGE>
PROPERTIES
The following table presents certain information with respect to the
Company's properties at June 30, 1996:
<TABLE>
<CAPTION>
PERCENT
GROSS OCCUPIED AT
YEAR LEASABLE JUNE 30,
ACQUIRED PROPERTY AREA OWNED 1996 MAJOR TENANTS(1) SQUARE FEET
- -------- -------- ---------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTERS
ILLINOIS
1996 Commons of Chicago Ridge 309,000 78% Office Depot 27,680
Chicago Ridge, Illinois Marshalls 27,000
T. J. Maxx(2) 25,082
Cineplex Odeon 25,000
Pep Boys 22,354
Michaels Stores 17,550
1996 Commons of Crystal Lake 273,000 73% Venture (not owned) 81,338
Crystal Lake, Illinois Jewel/Osco 59,804
1992 Crossroads Center 242,000 87% Kmart (ground lease) 96,268
Fairview Heights, Illinois T. J. Maxx 25,200
1996 Heritage Square 212,000 100% Montgomery Ward 111,016
Naperville, Illinois Circuit City 28,351
Stroud's 26,703
1996 High Point Centre 240,000 100% Cub Foods 62,000
Lombard, Illinois Office Depot 36,416
T. J. Maxx 25,200
Macfrugal's 17,040
1996 Meadows Town Mall(3) 382,000 65% Waccamaw 108,000
Rolling Meadows, Illinois Elek-Tek 32,000
T. J. Maxx(2) 24,000
Women's Club 20,478
1994 Rivercrest Center 454,000 97% Omni Foods 87,937
Crestwood, Illinois Venture 79,903
Sears Roebuck and Co. 55,000
T. J. Maxx 34,425
PETsMART 31,639
Best Buy 25,000
OfficeMax 24,000
Hollywood Park 15,000
1996 Rollins Crossing 66,000 93% Super Kmart (not owned) 190,000
Round Lake Beach, Illinois Sears Hardware 21,083
1996 Sheridan Village 298,000 97% Bergner's Dept. Store 162,852
Peoria, Illinois Cohen Furniture 16,600
1993 Westview Center 328,000 72% Cub Foods 67,163
Hanover Park, Illinois Marshalls 34,302
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
PERCENT
GROSS OCCUPIED AT
YEAR LEASABLE JUNE 30,
ACQUIRED PROPERTY AREA OWNED 1996 MAJOR TENANTS(1) SQUARE FEET
- -------- -------- ---------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTERS
INDIANA
1996 Speedway SuperCenter 520,000 98% Kohl's 75,000
Speedway, Indiana Kroger 59,515
Sears Roebuck and Co. 30,825
Kittles 25,320
PETsMART 21,781
Lindo Super Spa 16,859
Factory Card Outlet 16,675
Old Navy 15,000
1996 The Village 356,000 92% JC Penney 60,600
Gary, Indiana Goldblatt's 55,000
McCrory's 24,500
Jacobsens 22,896
Post-Tribune Publishing 19,246
Indiana Employment 18,050
1996 Washington Lawndale 333,000 99% Target (not owned) 83,110
Commons Kuester's 40,857
Evansville, Indiana Sears Homelife 34,527
Books-A-Million 20,515
Allied Sporting Goods 20,285
Jo-Ann Fabrics 15,262
KENTUCKY
1996 StonyBrook Center 136,000 96% Kroger 79,625
Louisville, Kentucky
MAINE
1971 Augusta Plaza 152,000 89% Kmart 85,808
Augusta, Maine
MINNESOTA
1996 Brookdale Square 185,000 83% Circuit City 36,391
Brooklyn Center, Minnesota Office Depot 30,395
Drug Emporium 25,782
United Artists 24,534
Brookdale Cinema 19,300
1993 Burning Tree Plaza 110,000 100% T. J. Maxx 30,000
Duluth, Minnesota Best Buy 28,000
Northwest Fabrics 17,682
1992 Har Mar Mall 431,000 83% HomePlace 54,500
Roseville, Minnesota Barnes & Noble 44,856
Marshalls 34,858
T. J. Maxx 25,025
General Cinema 22,252
General Cinema 19,950
Michaels Stores 17,907
1991 Hub West Shopping Center 78,000 100% Rainbow Foods 50,817
Richfield, Minnesota U. S. Swim & Fitness 26,185
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
PERCENT
GROSS OCCUPIED AT
YEAR LEASABLE JUNE 30,
ACQUIRED PROPERTY AREA OWNED 1996 MAJOR TENANTS(1) SQUARE FEET
- -------- -------- ---------- ----------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTERS
1988 Richfield Hub 138,000 97% Marshalls 26,785
Richfield, Minnesota Michaels Stores 24,235
1961 Sun Ray Shopping Center 261,000 79% JC Penney 40,451
St. Paul, Minnesota Marshalls 26,256
T. J. Maxx 23,955
Michaels Stores 18,127
1993 Terrace Mall 137,000 94% Rainbow Foods 59,232
Robbinsdale, Minnesota North Memorial 32,000
1994 Westwind Plaza 88,000 97% Northern Hydraulics 18,165
Minnetonka, Minnesota
1993 White Bear Hills 73,000 100% Gateway Foods 45,679
White Bear Lake, Minnesota
MISSOURI
1971 Grandview Plaza 314,000 78% Home Quarters 84,611
Florissant, Missouri Schnucks 68,025
Walgreens 15,984
NEW HAMPSHIRE
1973 Hood Commons 216,000 94% Shaw's 58,258
Derry, New Hampshire Ames 50,000
Decelle 26,353
NEW MEXICO
1995 St. Francis Plaza 30,000 100% Wild Oats 14,950
Santa Fe, New Mexico Walgreens 14,850
TENNESSEE
1996 Williamson Square(4) 335,000 92% WalMart 117,493
Franklin, Tennessee Kroger 63,986
Carmike Cinemas 29,000
Franklin Micro Systems 18,595
WISCONSIN
1996 Mequon Pavilions 212,000 99% Kohl's Food Emporium 45,697
Mequon, Wisconsin Furniture Clearance 19,900
RETAIL/OFFICE BUILDINGS
ILLINOIS
1996 One North State 639,000 95% First Chicago 296,782
Chicago, Illinois Arthur Andersen(2) 126,533
T. J. Maxx 77,675
Filene's Basement 50,000
Int'l Academy of 27,270
Merchandising & Design
MASSACHUSETTS
1961 585 Boylston Street 22,000 90% CVS Pharmacy 7,582
Boston, Massachusetts
Total 7,570,000 89%
</TABLE>
S-13
<PAGE>
- --------
(1) Major tenants in a property are defined as tenants who lease 15,000 square
feet or greater of the rentable square footage, with the exception of 585
Boylston Street and St. Francis Plaza. In some cases, the named tenant
occupies the premises as a sublessee.
(2) The named tenants have vacated but are still paying rent under their
leases.
(3) The Company's intention is to redevelop Meadows Town Mall from an interior
mall to an open air shopping center.
(4)The Operating Partnership is the sole general partner of, and holds a 60%
interest in, Williamson Square.
Portfolio Lease Expirations
The following table shows, as of June 30, 1996, tenant lease expirations for
the remainder of 1996 and for the following nine calendar years, assuming that
no tenants exercise renewal options:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL MINIMUM
NO. OF SQUARE MINIMUM RENT PER
LEASE EXPIRING LEASES FEET RENT SQUARE FOOT
- -------------- ------ ------- ---------- -----------
<S> <C> <C> <C> <C>
1996...................................... 51 180,433 $1,616,180 $ 8.96
1997...................................... 126 501,691 4,471,969 $ 8.91
1998...................................... 107 564,313 5,423,456 $ 9.61
1999...................................... 112 712,991 5,507,200 $ 7.72
2000...................................... 101 591,771 4,939,930 $ 8.35
2001...................................... 71 540,155 5,605,540 $10.38
2002...................................... 32 323,892 3,451,376 $10.66
2003...................................... 30 657,954 7,409,801 $11.26
2004...................................... 24 347,801 2,350,062 $ 6.76
2005...................................... 36 325,773 2,717,005 $ 8.34
</TABLE>
S-14
<PAGE>
USE OF PROCEEDS
The purpose of this offering is to raise additional equity capital in order
to facilitate the Company's shopping center acquisition program. The net
proceeds to the Company from the offering are estimated to be approximately
$39 million. The Company intends to use such net proceeds to reduce
outstanding indebtedness incurred under its line of credit with the
expectation that the Company may reborrow under the line for the acquisition,
development, renovation and expansion of properties. Following this offering,
the Company will have approximately $94 million of potential availability
under the line of credit. The line of credit matures on March 15, 1998 and
currently bears interest at the lower of the lead lending bank's base rate or
1.75% over the LIBOR. After the consummation of this offering, the Company
expects that the interest rate on the line of credit will be reduced to 1.625%
over LIBOR pursuant to the terms of the line of credit.
DISTRIBUTIONS
The Company has paid 141 consecutive quarterly dividends to its
stockholders. This record of distributions is one of the longest among
publicly-traded REITs. The Company's current quarterly dividend of $0.33 per
share ($1.32 per share annualized) represents a current yield of 8.0% (based
on the October 29, 1996 closing stock price of $16.50 per share).
For the second quarter of 1996 (the Company's first full quarter of
operations following the Tucker Acquisition), the quarterly dividend
represented 73% of the Company's per share FFO for the same period. The
Company intends to maintain a conservative distribution payout policy with
cash distributions representing between 70% and 80% of FFO per share.
In January of each year, the Company provides its stockholders with
information concerning the amount of distributions paid during the preceding
year which constitute ordinary income, net capital gain or return of capital.
For federal income tax purposes, the Company has determined that approximately
26% and 16% of the distributions paid in 1994 and 1995, respectively, were
non-taxable returns of capital to stockholders.
S-15
<PAGE>
TAXATION
The Company believes that it has operated, and the Company intends to
continue to operate, in such manner as to qualify as a REIT under the Code,
but no assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and very general summary of certain
provisions which currently govern the federal income tax treatment of the
Company and its stockholders. For the particular provisions which govern the
federal income tax treatment of the Company and its stockholders, reference is
made to Sections 856 through 860 of the Code and the Income Tax Regulations
promulgated thereunder. The following summary is qualified in its entirety by
such reference. This discussion does not address any state tax considerations
or issues that arise as a result of an investor's special circumstances or
special status under the Code.
Under the Code, if certain requirements are met in a taxable year, a REIT
will generally not be subject to federal income tax with respect to income
which it distributes to its stockholders. However, the Company may be subject
to federal income tax under certain circumstances, including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions
are available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could
have a material adverse effect upon its stockholders. For additional
discussion of certain issues relating to the Company's qualification as a REIT
that arise as a result of the Tucker Acquisition, see "Risk Factors--Adverse
Consequences of Failure to Qualify as a REIT; Other Tax Liabilities."
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. stockholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. stockholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. stockholder" means a holder of Common Stock that
for U. S. federal income tax purposes is (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or any political
subdivision thereof, or (iii) an estate or trust the income of which is
subject to U. S. federal income taxation regardless of its source and does not
(iv) have special status under the Code, such as a tax-exempt organization.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain for the taxable year) without regard to the period for which
the stockholder has held his Common Stock. However, corporate stockholders may
be required to treat up to 20% of certain capital gain dividends as ordinary
income. Distributions in excess of current and accumulated earnings and
profits will not be taxable to a stockholder to the extent that they do not
exceed the adjusted basis of the stockholder's Common Stock, but rather will
reduce the adjusted basis of such stock. To the extent that distributions in
excess of current and accumulated earnings and profits exceed the adjusted
basis of a stockholder's Common Stock, the distributions will be included in
income as long-term capital gain (or short-term capital gain if the Common
Stock has been held for one year or less) assuming the Common Stock is a
capital asset in the hands of the stockholder. In addition, any dividend
declared by the Company in October, November or December of any year and
payable to a stockholder of record on a specified date in any such month shall
be treated as both paid by the Company and received by the stockholder on
December 31 of such year, provided that the distribution is actually paid by
the Company during January of the following calendar year.
Investors are urged to consult their own tax advisors with respect to the
tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction. Foreign investors should consult
their own tax advisors concerning the tax consequences of an investment in the
Company including the possibility of United States income tax withholding on
Company distributions.
S-16
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
(the "Underwriting Agreement") between the Company and PaineWebber
Incorporated ("PaineWebber"), PaineWebber has agreed to purchase from the
Company, and the Company has agreed to sell to PaineWebber, 2,500,000 shares
of Common Stock.
The Company has been advised by PaineWebber that PaineWebber proposes to
offer the Common Shares in part to the public at the price to the public set
forth on the cover page of this Prospectus Supplement, and in part to certain
securities dealers (who may include PaineWebber) at such price less a
concession not in excess of $0.50 per share; and that PaineWebber and such
dealers may reallow a discount not in excess of $0.10 per share to other
dealers, including PaineWebber.
The Company has granted to PaineWebber an option, exercisable during the 30-
day period after the date of this Prospectus Supplement, under which
PaineWebber may purchase up to 375,000 additional Common Shares from the
Company at the price to the public set forth on the cover page of this
Prospectus Supplement, less the underwriting discounts and commissions.
PaineWebber may exercise the option only to cover over-allotments, if any,
made in connection with the offering of the Common Shares offered hereby.
The Company and the Company's executive officers have agreed, with limited
exceptions, including the issuance of shares of Common Stock pursuant to the
Company's stock option and incentive plan, dividend reinvestment and share
purchase plan and in connection with the exchange of Operating Partnership
units presented for redemption, and the issuance of Operating Partnership
units in exchange for property acquired from third parties, not to offer, sell
or otherwise dispose of any shares of Common Stock, or securities exercisable
or exchangeable for Common Stock or rights to acquire Common Stock, for a
period of 90 days after the date of this Prospectus Supplement without the
prior written consent of PaineWebber.
The Company has agreed to indemnify PaineWebber against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
PaineWebber may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters, including the legality of the Common Shares, will be
passed upon for the Company by Goodwin, Procter & Hoar LLP, Boston,
Massachusetts. William B. King, whose professional corporation is a partner in
Goodwin, Procter & Hoar LLP, is Secretary of the Company and is the beneficial
owner of approximately 8,500 shares of Common Stock. Certain legal matters for
PaineWebber will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP.
S-17
<PAGE>
PROSPECTUS
$81,897,500
BRADLEY REAL ESTATE, INC.
COMMON STOCK
PREFERRED STOCK
DEBT SECURITIES
WARRANTS OR RIGHTS
UNITS OF SECURITIES
----------------
Bradley Real Estate, Inc. ("Bradley" or the "Company") may offer from time
to time in one or more series (i) shares of its common stock, $.01 par value
per share ("Common Stock"), (ii) shares of its preferred stock, $.01 par value
per share ("Preferred Stock" and, together with the Common Stock, the "Capital
Stock"), (iii) its unsecured debt securities consisting of bonds, debentures,
notes and/or other evidences of indebtedness ("Debt Securities"),
(iv) warrants or rights ("Warrants") for Common Stock, Preferred Stock and/or
Debt Securities and (v) units ("Units") consisting of two or more of the
foregoing securities, with an aggregate public offering price of up to
$81,897,500 in amount, at prices and on terms to be determined at the time of
offering. The Common Stock, Preferred Stock, Debt Securities, Warrants and
Units (collectively, the "Securities") may be offered separately or together,
in separate series, in amounts, at prices and on terms to be set forth in one
or more supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Common Stock, the offering
price; (ii) in the case of Preferred Stock, the specific designation and
stated value per share, any dividend, liquidation, redemption, conversion,
voting and other rights, and the offering price; (iii) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, currency,
form (which may be registered or bearer, or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof)
and time of payment of interest, terms for redemption at the option of the
Company or repayment at the option of the holder, terms for sinking fund
payments, terms for conversion into Preferred Stock or Common Stock, covenants
and the offering price; (iv) in the case of Warrants, the number and terms
thereof, any applicable designation thereof, and the designation and the
number of securities issuable upon their exercise, the exercise price, the
terms of the offering and sale thereof and, where applicable, the duration and
detachability thereof; and (v) in the case of Units, a description of the
securities comprising such Units and the offering price thereof. In addition,
such specific terms may include limitations on direct or beneficial ownership
and restrictions on transfer of the Securities, in each case as may be
consistent with the Company's Articles of Incorporation, as amended (the
"Charter"), or otherwise appropriate to preserve the status of the Company as
a real estate investment trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities
covered by such Prospectus Supplement.
The Securities may be offered directly by the Company, through agents
designated from time to time by the Company or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 29, 1996.
<PAGE>
AVAILABLE INFORMATION
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus
or the accompanying Prospectus Supplement and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or any underwriter, dealer or agent. Neither the
delivery of this Prospectus or the accompanying Prospectus Supplement nor any
sale made hereunder of thereunder shall, under any circumstances, create an
implication that the information contained herein or in the accompanying
Prospectus Supplement is correct as of any date subsequent to the date hereof
or thereof or that there has been no change in the affairs of the Company
since the date hereof or hereof. Neither this Prospectus nor the accompanying
Prospectus Supplement constitutes an offer to sell or a solicitation of an
offer to buy Securities in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC" or the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, 13th Floor, New York, New York
10048, and Northwest Atrium Center, 500 W. Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials can be obtained upon written
request from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a Web site that contains reports, proxy statements
and other information which the Company has filed electronically with the
Commission. The address of the Commission's Web site is: http://www.sec.gov.
In addition, the Common Stock is listed on the New York Stock Exchange
("NYSE"), and such materials can be inspected and copied at the NYSE, 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act") with
respect to the Securities. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. The Registration Statement,
including exhibits thereto, may be inspected and copied at the locations
described above. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act (Commission File No. 1-10328) are incorporated in
this Prospectus by reference: (i) the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995; (ii) the Company's definitive proxy
statement with respect to its Special Meeting of Stockholders on March 14,
1996; (iii) the Company's definitive proxy statement with respect to its
Annual Meeting of Stockholders on May 9, 1996; (iv) the Company's Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996; (v) the
Company's reports on Form 8-K filed April 1, 1996 reporting the merger of
Tucker Properties Corporation with and into the Company and October 1, 1996
reporting the relocation of the Company's corporate headquarters to
Northbrook, Illinois; and (vi) the description of the Company's Common Stock
contained or incorporated by reference in the Company's Registration Statement
on Form 8-A, filed August 8, 1994, including any amendments thereto.
2
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of all Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in an applicable Prospectus Supplement) or in any subsequently
filed document that is incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed to constitute a part of this Prospectus or any Prospectus Supplement,
except as so modified or superseded.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, at the
request of such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits thereto, unless such exhibits are
specifically incorporated by reference into such documents). Written requests
for such copies should be directed to Ms. Marianne Dunn, Senior Vice
President, Bradley Real Estate, Inc., Suite 600, 40 Skokie Boulevard,
Northbrook, Illinois 60062-1626, telephone (847) 272-9800.
THE COMPANY
Bradley Real Estate, Inc. is the nation's oldest continuously qualified
REITs. The Company focuses on the ownership and operation of community and
neighborhood shopping centers, primarily in the Midwest. The Company's
philosophy is to enhance the operating performance and value of its portfolio
through renovation, expansion and leasing strategies designed to meet the
needs of an evolving retail marketplace. The Company also seeks to create
value through acquisition of properties which can benefit from the Company's
expertise in shopping center management, renovation and expansion.
The Company was organized in 1961 as Bradley Real Estate Trust, a
Massachusetts common law business trust (the "Trust"). In October, 1994,
following approval by the Trust's shareholders, the Trust was incorporated as
a Maryland business corporation through a merger of the Trust into the
Company. In connection with its change from a business trust to a corporation,
the Company also effected a one-for-two reverse stock split and changed the
listing of its shares from the American Stock Exchange to the NYSE. References
to the Company in this Prospectus and in any Prospectus Supplement shall be
deemed to include the Trust, to the extent applicable.
Reference is made to the applicable Prospectus Supplement accompanying this
Prospectus for additional information concerning the Company as of the date of
such Prospectus Supplement.
The Company's offices are located at Suite 600, 40 Skokie Boulevard,
Northbrook, Illinois 60062-1626. Its telephone number is (847) 272-9800.
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<PAGE>
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities primarily
to repay indebtedness, to acquire additional shopping centers and to fund
expansions and/or improvements to such shopping centers or to certain shopping
centers already owned by the Company.
The Company continually evaluates prospective acquisitions of additional
shopping centers and portfolios of shopping centers, which the Company
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 that the Company has undertaken with respect to properties in
its existing portfolio.
The Company has a revolving bank line of credit which it may draw on for
acquisitions as well as for other general corporate purposes including
renovations and expansions of existing properties. It is the Company's
expectation that net proceeds from the sale of the Securities will be used to
make further acquisitions and also to repay such bank borrowings and other
outstanding debt from time to time.
Acquisitions of additional shopping centers are approved only after a
detailed analysis by the Company's management of the effect of the acquisition
(and of any contemplated expansion or renovation and related re-tenanting and
re-leasing program with respect to the acquired properties) on the Company as
a whole, and with the objective that the acquisition of the particular
shopping centers be accretive, rather than dilutive, to outstanding shares of
Common Stock (i.e., that anticipated per share funds from operations of the
Company will increase following the acquisition of the properties and after
giving effect to the cost to the Company of the additional capital used to
make such acquisition). No assurance can be made that each acquisition will in
fact be accretive, or may become so only after an initially dilutive period
following the acquisition.
The Company also expects to continue to evaluate the effect of each
acquisition and of the particular Securities issued, or other funding source,
for such acquisition, with the objective that the ratio of all of the
Company's indebtedness to the Company's total market capitalization (the sum
of the market value of the Company's outstanding capital stock plus
indebtedness) not exceed 50%. There can be no assurance that the Company will
be able to achieve this objective (particularly because a decrease in the per
share market value of outstanding stock is beyond the Company's control and
would result in increasing such ratio), or that the Company's Board of
Directors may not change this objective as market conditions change or in
connection with a specific investment opportunity.
Pending their use as described above, the net proceeds from the sale of any
Securities may be used for other general corporate purposes of the Company or
invested in short-term securities.
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<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company for the periods indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
1.19:1 1.16:1 2.72:1 2.70:1 2.55:1 2.12:1 1.95:1
</TABLE>
To date, the Company has not issued any shares of Preferred Stock.
Accordingly, the ratios of earnings to combined fixed charges and Preferred
Stock dividends are unchanged from the ratios shown above. For purposes of
computing these ratios, earnings have been calculated by adding fixed charges
(excluding capitalized interest) to income before income taxes and
extraordinary items. Fixed charges consist of interest costs, whether expensed
or capitalized, the interest component of rental expense, if any, and
amortization of debt discounts and issue costs, whether expensed or
capitalized.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under an Indenture
(the "Indenture") which may be supplemented by supplemental indentures (each,
an "Indenture Supplement") between the Company and a bank trustee (the
"Trustee") to be named prior to the issuance of any Debt Securities. The terms
of Debt Securities include those stated in the Indenture and those made part
of the Indenture (before any Indenture Supplements) by reference to the Trust
Indenture Act of 1939, as amended (the "Act"). A copy of the form of the
Indenture is filed as an exhibit to the Registration Statement and is
incorporated herein by reference. The following is a summary of the Indenture,
which summary does not purport to be complete, and is qualified in its
entirety by reference to the detailed provisions of the Indenture, including
the definitions of certain terms. Parenthetical references to Sections are
references to the corresponding section of the Indenture unless otherwise
indicated.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provides that Debt Securities may
be issued from time to time in one or more series. All Debt Securities of one
series need not be issued at the same time and, unless otherwise provided, a
series may be reopened without the consent of the holders of the Debt
Securities of such series, for issuance of additional Debt Securities of such
series. Debt Securities will be unsecured general obligations of the Company
which may be convertible into shares of Common Stock or Preferred Stock of the
Company. Debt Securities of any series may bear interest from the date of
delivery at the rate shown on the cover page of the applicable Prospectus
Supplement. The indebtedness represented by the Debt Securities of any series
may be subordinated in right of payment to the prior payment in full of the
Senior Indebtedness of the Company, as described under "Subordination of Debt
Securities". The particular terms of the Debt Securities of any series will be
set forth in the applicable Indenture Supplement and described in the
applicable Prospectus Supplement. Such description will include any applicable
modifications of, or additions to, the general terms of the Debt Securities as
described herein or in the Indenture, as modified by any applicable Indenture
Supplement. Accordingly, for a description of the Debt Securities of any
series, reference must be made to both the Prospectus Supplement relating
thereto and the description of the Debt Securities set forth in this
Prospectus.
The Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under the Indenture may resign or be removed with
respect to one or more series of Debt Securities and a successor Trustee may
be appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with
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<PAGE>
respect to different series of Debt Securities, each such Trustee shall be a
Trustee of a trust under the Indenture separate and apart from the trust
administered by any other Trustee, and, except as otherwise indicated herein,
any action described herein to be taken by each Trustee may be taken by each
such Trustee with respect to, and only with respect to, the one or more series
of Debt Securities for which it is Trustee under the Indenture.
PROSPECTUS SUPPLEMENT
The applicable Prospectus Supplement will describe the following terms of
the series of Debt Securities offered in connection therewith: (a) the title
of such Debt Securities (which shall distinguish such Debt Securities from all
other series thereof); (b) the currency or currencies, including composite
currencies, in which payment of the principal of (and premium, if any) and/or
interest on such Debt Securities shall be payable (if other than Dollars) and
the manner of determining the equivalent thereof in Dollars; (c) any limit
upon the aggregate principal amount of such Debt Securities which may be
authenticated and delivered under the Indenture; (d) the manner in which the
amount of payments of principal of (and premium, if any) and/or interest on
such Debt Securities may be determined with reference to an index; (e) the
dates, or the method for determining such dates, on which the principal of
such Debt Securities will be payable; (f) the rate or rates, or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any, and the basis upon which interest will be
calculated if other than that of a 360-day year of twelve 30-day months; (g)
the place or places where the principal of (and premium, if any) and/or
interest, if any, on such Debt Securities of the series will be payable, where
such Debt Securities may be surrendered for conversion or registration of
transfer or exchange and where notices or demands to or upon the Company in
respect of such Debt Securities and this Indenture may be served; (h) the
period or periods within which, the price or prices at which, the currency or
currencies, currency unit or units or composite currency or currencies in
which, and any other terms and conditions upon which such Debt Securities may,
pursuant to any optional or mandatory redemption provisions, be redeemed, in
whole or in part, at the option of the Company, if the Company is to have the
option; (i) any mandatory or optional sinking fund or analogous provision; (j)
the period or periods within which and the price or prices at which such Debt
Securities may, pursuant to any optional or mandatory redemption provisions
(including any provisions for redemption at the option of the holder thereof),
be redeemed and other terms and conditions of any such optional or mandatory
redemption; (k) whether such Debt Securities will be in registered or bearer
form and, if in registered form, the terms and conditions relating thereto;
(l) whether such Debt Securities of shall be issued in the form of one or more
Global Securities (as defined below), and, if so, the identity of the
Depositary of such series; (m) the currency or currencies, including composite
currencies, in which payment of the principal of (and premium, if any) and/or
interest of such Securities will be payable if other than the currency of the
United States; (n) whether such Debt Securities are to be issued upon the
exercise of warrants or rights, the time, manner and place for such Debt
Securities to be authenticated and delivered; (o) any deletions from,
modifications of, or additions to, the Events of Default or covenants of the
Company with respect to such Securities of such series, whether or not such
Events of Default or covenants are consistent with the Events of Default or
covenants set forth in the general provisions of the applicable Indenture; (p)
if other than the Trustee, the identity of each Security Registrar and/or
Paying Agent; (q) the applicability, if any, of the defeasance and covenant
defeasance provisions described in the general provisions of the applicable
Indenture and any applicable Indenture Supplement thereto; (r) the
circumstances, if any, under which the Company will pay any additional amounts
on such Debt Securities in respect of any tax, assessment or governmental
charge and, if so, whether the Company will have the option to redeem such
Debt Securities in lieu of making such payment; (s) if such Debt Securities
are to be issued at an original issue discount, as described below, the amount
of principal, if any, payable upon acceleration of such Debt Securities
following an Event of Default; and (t) any other terms of such Debt Securities
not inconsistent with the provisions of the Indenture.
If so provided in the applicable Indenture Supplement, Debt Securities may
be issued at a substantial discount below their principal amount and provide
for less than the entire principal amount thereof to be payable upon
declaration of acceleration of the maturity thereof (collectively the
"Original Issue Discount Securities"). In such cases, special U.S. federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities will be described in the applicable Prospectus Supplement.
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<PAGE>
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise provided in any applicable Indenture Supplement, Debt
Securities will be issued only in fully registered form in denominations of
$1,000 principal amount or any integral multiple thereof (Section 302). Debt
Securities are exchangeable and transfers thereof will be registrable without
charge therefor, except that the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith (Section 305).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
the address of which will be stated in the applicable Prospectus Supplement;
provided that, at the option of the Company, payment of interest may be made
by check mailed to the address of the person entitled thereto as it appears in
the applicable register for such Debt Securities or by wire transfer of funds
to such person at an account maintained within the United States.
All monies paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium, if any, or interest on any Debt
Security which remain unclaimed at the end of three years after the same has
become due and payable will be repaid to the Company, and the holder of such
Debt Security thereafter may look only to the Company for payment thereof.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee or at the
office of any transfer agent designated by the Company for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer or exchange thereof at the corporate
trust office of the applicable Trustee or at the office of any transfer agent
designated by the Company for such purpose. Every Debt Security surrendered
for conversion, registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer, and the person requesting
such action must provide evidence of title and identity satisfactory to the
applicable Trustee or transfer agent. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus
Supplement refers to any transfer agent (in addition to the applicable
Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each place of payment for such series. The Company may at
any time designate additional transfer agents with respect to any series of
Debt Securities.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company, without the consent of the holders
of the then outstanding Debt Securities may merge or consolidate with, or sell
or convey all or substantially all of its assets to, any other corporation or
entity, provided that (i) either the Company shall be the continuing entity,
or the successor entity (if other than the Company) shall be an entity
organized and existing under the laws of the United States or a state thereof
or the District of Columbia (although it may, in turn, be owned by a foreign
entity) and such entity shall expressly assume by the applicable Indenture
Supplement all of the obligations of the Company under the Debt Securities and
the Indenture; (ii) immediately after giving effect to such transactions no
default or Event of Default shall have occurred and be continuing, and (iii)
the Company shall have delivered to the Trustee an officers' certificate and
opinion of counsel, stating that the transaction and the applicable Indenture
Supplement comply with the Indenture (Section 801).
REORGANIZATION AND OTHER TRANSACTIONS
The Indenture does not afford the holders of Debt Securities any protection
from a decline of credit quality, nor does it give any protection in the event
of a highly leveraged transaction, reorganization, restructuring,
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<PAGE>
merger or similar transaction ("Leveraged Transaction") involving the Company
that may adversely affect holders of Debt Securities, except to the limited
extent described above. The Indenture does not contain any provision requiring
the Company to repurchase any of Debt Securities in the event of a Leveraged
Transaction, even though the Company's creditworthiness and the market value
of Debt Securities may decline significantly as a result of any such
transaction.
CONVERSION RIGHTS
If and to the extent set forth in the Indenture and the applicable Indenture
Supplement and described in the applicable Prospectus Supplement, any portion
of the principal amount of any Debt Securities of any series which is $1,000
or an integral multiple thereof may be converted into shares of Common Stock
and/or Preferred Stock of the Company at any time prior to redemption or
maturity, following the date set forth in the applicable Prospectus
Supplement. The conversion price and the specific class of capital stock of
the Company into which Debt Securities are convertible will be set forth on
the cover page of the applicable Prospectus Supplement (subject to adjustments
as described below), except that the right to convert Debt Securities of a
series called for redemption will terminate at the close of business on the
specific redemption date and will be lost if not exercised prior to that time
(Section 1601).
To protect the Company's status as a REIT, the holder may not convert any
Debt Security if as a result of such conversion any person would then be
deemed to beneficially own in excess of 9.8% in value of all outstanding
shares of the Company's capital stock (Section 1601).
The conversion price will be subject to adjustment under certain conditions,
including in connection with (i) the payment of dividends or other
distributions in respect of any class of capital stock of the Company in
shares of capital stock; (ii) subdivisions, combinations, reorganizations and
reclassifications of any class of capital stock; (iii) the issuance to all or
substantially all holders of shares of any class of capital stock of rights or
warrants entitling them to subscribe for, or purchase shares of, capital stock
at a price per share (or having a conversion price per share) at less than the
current market price per share (Paragraph 2 of Section 1604) of such holders'
respective class of capital stock (subject to the limitation that under
certain circumstances shares of capital stock issued under the Company's
dividend reinvestment plan will not be deemed to be issued pursuant to rights
or warrants for purposes of this clause (iii)); and (iv) distributions to all
or substantially all of the holders of any class of capital stock of the
Company of evidences of indebtedness or assets (including any securities,
other than those rights, warrants, dividends or other distributions referred
to in clause (iii) above and dividends or other distributions not otherwise
prohibited under the terms of the Indenture, including certain purchase rights
relating to the dividend reinvestment plan) of the Company; subject to the
limitation that all adjustments by reason of any of the foregoing would not be
made until they result in a cumulative change in the applicable conversion
price of at least 1% (Section 1604).
A conversion price adjustment made according to the provisions of any series
of Debt Securities (or the absence of a provision for such an adjustment)
might result in a constructive distribution to the holders of Debt Securities
of such series or of shares of a class of capital stock. The Company may, at
its option, but shall not be required to, make any of the adjustment to the
conversion price, in addition to those adjustments described above, to avoid
or diminish any income tax to any holders of any shares of any class of
capital stock resulting from any dividend or other distribution thereof (or
rights to acquire such shares) or from any event treated as such for income
tax purposes or for any other reason. The Board of Directors of the Company
will have the power to resolve any ambiguity or correct any error in the
provision relating to the adjustment of the conversion price of any series of
Debt Securities. Its actions shall be final and conclusive (Section 1604).
In the event the Company shall (i) effect any capital reorganization or
reclassification of any class of its shares of capital stock, (ii) consolidate
or merge with or into any trust or corporation (other than a consolidation or
merger in which the Company is the surviving entity), or (iii) sell or
transfer substantially all its assets, the holders of any series of Debt
Securities shall have the right, if entitled to convert such Debt Securities,
to receive upon conversion thereof, the same kind and amount of capital stock
and other securities, cash or property as
8
<PAGE>
shall have been issuable or distributable prior to such consolidation, merger,
sale or transfer (Sections 1604(5) and 1610).
Fractional shares will not be issued upon conversion, but, in lieu thereof,
the Company will pay on the applicable conversion date a cash adjustment based
upon market price (Sections 1604 and 1608).
The record holders of Debt Securities at the close of business on an
interest payment record date shall be entitled to receive the interest payable
on such Debt Securities on the corresponding interest payment date
notwithstanding the conversion thereof. However, Debt Securities surrendered
for conversion during the period from the close of business on any record date
to the opening of business on the corresponding interest payment date must be
accompanied by payment of an amount equal to the interest payable on such
interest payment date. Holders of Debt Securities who convert Debt Securities
on an interest payment date will receive the interest payable on such date and
need not include payment of such interest upon surrender of Debt Securities
for conversion. Except as aforesaid, no payment or adjustment is to be made on
conversion for interest accrued on Debt Securities or for dividends on shares
of any class of Capital Stock (Sections 307 and 1603).
SUBORDINATION OF DEBT SECURITIES
The indebtedness evidenced by Debt Securities of any series may be
subordinated and junior in rights of payment, to the extent set forth in the
Indenture and the applicable Indenture Supplement, to the prior payment in
full of amounts then due on all Senior Indebtedness (as defined below). No
payment shall be made by the Company on account of principal of (or premium,
if any) or interest on Debt Securities of any series or on account of the
purchase or other acquisition of Debt Securities of any series, if there shall
have occurred and be continuing a default with respect to any Senior
Indebtedness permitting the holders to accelerate the maturity thereof or with
respect to the payment of any Senior Indebtedness, and such default shall be
the subject of a judicial proceeding or the Company shall have received notice
of such default from any holder of Senior Indebtedness, unless and until such
default or event of default shall have been cured or waived or shall have
ceased to exist. By reason of these provisions, in the event of default on any
Senior Indebtedness, whether now outstanding or hereafter issued, payments of
principal of (and premium, if any) and interest on Debt Securities of any
series may not be permitted to be made until such Senior Indebtedness is paid
in full, or the event of default on such Senior Indebtedness is cured or
waived (Section 1502).
Upon any acceleration of the principal of Debt Securities or any
distribution of assets of the Company upon any receivership, dissolution,
winding-up, liquidation, reorganization, or similar proceedings of the
Company, whether voluntary or involuntary, or in bankruptcy or insolvency, all
amounts due or to become due upon all Senior Indebtedness must be paid in full
before the holders of Debt Securities of any series or the Trustee are
entitled to receive or retain any assets so distributed in respect of Debt
Securities (Section 1602). By reason of this provision, in the event of
insolvency, holders of Debt Securities of any series may recover less,
ratably, than holders of Senior Indebtedness.
"Senior Indebtedness" is defined to mean the principal of and interest on,
or substantially similar payments to be made by the Company in respect of, the
following, whether outstanding at the date of execution of the Indenture or
thereafter incurred, created or assumed: (a) indebtedness of the Company for
money borrowed or represented by purchase-money obligations, (b) indebtedness
of the Company evidenced by notes, debentures, or bonds, or other securities
issued under the provisions of an indenture, fiscal agency agreement or other
instrument, (c) obligations of the Company as lessee under leases of property
either made as part of any sale and lease-back transaction to which the
Company is a party or otherwise, (d) indebtedness of partnerships and joint
ventures which is included in the Company's consolidated financial statements,
(e) indebtedness, obligations and liabilities of others in respect of which
the Company is liable contingently or otherwise to pay or advance money or
property or as guarantor, endorser of otherwise or which the Company has
agreed to purchase or otherwise acquire, and (f) any binding commitment of the
Company to fund any real estate investment or to fund any investment in any
entity making such real estate investment; but excluding, however, (1) any
such indebtedness, obligation or liability referred to in clauses (a) through
(f) above as to which, in the instrument creating or
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<PAGE>
evidencing the same or pursuant to which the same is outstanding, it is
provided that such indebtedness, obligation or liability is not superior in
right of payment to the Securities, or ranks pari passu with the Securities,
(2) any such indebtedness, obligation or liability which is subordinated to
indebtedness of the Company to substantially the same extent as or to a
greater extent than the Securities are subordinated and (3) the Securities. As
used in the preceding sentence the term "purchase-money obligations" shall
mean indebtedness or obligations evidenced by a note, debenture, bond or other
instrument (whether or not secured by any lien or other security interest but
excluding indebtedness or obligations for which recourse is limited to the
property purchased) issued or assumed as all or a part of the consideration
for the acquisition of property, whether by purchase, merger, consolidation or
otherwise, but shall not include any trade accounts payable. A distribution
may consist of cash, securities or other property.
"Indebtedness" with respect to any person means (a) all indebtedness for
borrowed money whether or not evidenced by bonds, notes, debentures or a
similar instrument, (b) that portion of obligations with respect to leases
that is properly classified as a liability on a balance sheet in accordance
with generally accepted accounting principles, (c) notes payable and drafts
accepted representing extensions of credit, (d) any balance owed for all or
any part of the deferred purchase price of property or services, which
purchase price is due more than six months from the date of incurrence of the
obligation in respect thereof (except any such balance that constitutes (i) a
trade payable or an accrued liability arising in the ordinary course of
business or (ii) a trade draft or note payable issued in the ordinary course
of business in connection with the purchase of goods or services), if and to
the extent such debt would appear as a liability upon a balance sheet of such
person prepared in accordance with generally accepted accounting principles
(e) all indebtedness for letters of credit or bankers acceptances issued for
the account of such person or performance, surety or similar bonds, (f) all
indebtedness under interest rate swaps, caps or similar agreements and foreign
exchange contracts, currency swaps or similar agreements, (g) any liability of
others of the kind described in the preceding clauses (a)-(f), which such
person has guaranteed or which is otherwise its legal liability, and (h) any
and all deferrals, renewals, extensions and refunding of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a)-(f); provided, however, that, in computing the
"Indebtedness" of any person, there shall be excluded any particular
indebtedness if, upon or prior to the maturity thereof and at the time of
determination of such indebtedness, there shall have been deposited with a
depository in trust money (or evidences of indebtedness if permitted by the
instrument creating such indebtedness) in the necessary amount to pay, redeem
or satisfy such indebtedness as it becomes due, and the amount so deposited
shall not be included in any computation of the assets of such person.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
As indicated in the applicable Prospectus Supplement, the Company may be
permitted, at its option, to discharge certain obligations to holders of any
series of Debt Securities issued under any Indenture that have not already
been delivered to the applicable Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Trustee in trust, money, U.S. Government Obligations or a
combination thereof in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and
interest to the date of such deposit (if such Debt Securities have become due
and payable) or to the stated maturity or redemption date, as the case may be
(Section 401).
OPTIONAL REDEMPTION
Debt Securities of any series will be subject to redemption, in whole or in
part, or on any date subsequent to the date set forth in the Prospectus
Supplement, at the option of the Company on at least 60 days' prior notice (45
days prior notice in the case of redemption of all Securities of any series)
by mail, at a redemption price equal to 100% (or such greater price as is set
forth in the Prospectus Supplement relating to such series of Debt Securities)
of the principal amount plus interest accrued to the date of redemption
(Section 1102). The Company may exercise its redemption powers over a holder's
Debt Securities at any time to the extent deemed sufficient
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by the Company to prevent the holder of such securities or any other person
having an interest therein, if such securities were converted into Capital
Stock, from being deemed to own Excess Shares (See "Description of Common
Stock--Redemption and Restriction on Transfer of Shares"). The Indenture does
not contain any provision requiring the Company to repurchase Debt Securities
at the option of the holders in the event of a Leveraged Transaction, even
though the Company's creditworthiness and the market value of Debt Securities
may decline significantly as a result of such transaction. Nor does the
Indenture protect holders thereof against any decline in credit quality.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants in
respect of the Debt Securities of any particular series. Unless otherwise
indicated in the applicable Prospectus Supplement, the Debt Securities will
include the following covenants:
Corporate Existence. Except as permitted under "Consolidation, Merger, Sale
or Conveyance," the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence, all
material rights (charter and statutory) and material franchises; provided,
however, that the Company shall not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business (Section 1004).
Maintenance of Office or Agency. The Company will maintain in each location
where Debt Securities of any series shall be paid an office or agency where
such Debt Securities may be presented or surrendered for payment, registration
of transfer or exchange, or conversion and where notices and demands in
respect of such Debt Securities, the Indenture and/or the Company may be
served. The Company will give prompt written notice to the Trustee of each
location, and any change thereto, of such office or agency (Section 1002).
Maintenance of Properties and Insurance. The Company will cause all of its
properties used or useful in, and material to the conduct of its business or
the business of any subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
reasonably necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times (Section 1005). In
addition, the Company will and will cause each subsidiary to, keep all of its
insurable properties insured against loss or damage at least equal to their
then full insurable value with insurers of recognized responsibility (Section
1006). There is, however, no prohibition against the Company selling or
otherwise disposing for value of its properties in the ordinary course of
business or discontinuing the operation or maintenance of any such properties,
if the Company determines that their preservation is no longer desirable in
the conduct of its business and not disadvantageous in any material respect to
the holders of Debt Securities.
Money for Securities Payments to Be Held in Trust. If the Company shall at
any time act as its own Paying Agent with respect to any series of Debt
Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest on any of the Debt Securities of that series,
segregate and hold in trust for the benefit of the persons entitled thereto a
sum sufficient to pay such amounts until such sums shall be paid to such
persons or otherwise disposed of as provided in the Indenture. If the Company
shall have one or more Paying Agents for any series of Securities, it will, on
or before each due date of any payment of principal, premium, if any or
interest on any Debt Securities of that series, deposit with a Paying Agent a
sum sufficient to pay any such sum which sum will be held in trust for the
benefit of the persons entitled thereto and will cause each Paying Agent for
any series of Debt Securities to execute and deliver to the Trustee a paying
agency agreement setting forth the terms and conditions of such agency
(Section 1003).
Payment of Taxes and Other Claims. The Company will pay or discharge or
cause to be paid or discharged, within 30 days after the Company shall have
received notice that the same has become delinquent, (i) all material taxes,
assessments and governmental charges levied or imposed upon it or any
subsidiary or upon the income,
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profits or property of the Company or any subsidiary, and (ii) all material
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any subsidiary, unless such
lien would not have a material adverse effect upon such property; provided,
however, that the Company shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings (Section 1010).
Payment of Debt Securities and Reports to the Trustee. The Company is
obligated to pay the principal of, premium, if any, and interest on, Debt
Securities when due in accordance with their terms (Section 1001). The Company
also covenants to file with the Trustee copies of all reports filed with the
SEC promptly after making such SEC filings (Sections 704 and 1007), and also
to deliver to the Trustee within 120 days after the end of each fiscal year a
certificate as to the Company's compliance with the terms of the Indenture
during such fiscal year (Section 1008).
Limitation on Distributions and Acquisitions of Shares. The Indenture
provides that the Company will not (i) declare or pay any dividend or make any
distribution to holders of its capital stock (other than dividends or
distributions payable in its shares or other than as the Company determines is
necessary to maintain its REIT status) or (ii) purchase, redeem or otherwise
acquire or retire for value any of its capital stock or permit any subsidiary
to do so, if at the time of such action an Event of Default (as defined in the
Indenture) has occurred and is continuing or would exist immediately after
giving effect to such action (Section 1009).
Further Covenants. The Prospectus Supplement with respect to any series of
Debt Securities will describe any further covenants to the Company set forth
in the Indenture Supplement relating to such series, which may include any
limitations on incurrence of additional debt.
MODIFICATION OF THE INDENTURE
With certain exceptions, the rights and obligations of the Company and the
rights of holders of any series of Debt Securities may only be modified by the
Company and the Trustee with the consent of the holders of at least a majority
in principal amount of each series of affected Debt Securities. Without the
consent of each affected Debt Security holder, no amendment or waiver or
supplement may (i) reduce the principal of, or rate of interest on, any Debt
Security; (ii) change the stated maturity date of the principal of, premium,
if any, on, or any installment of interest on, any Debt Security; (iii) change
the currency for payment of the principal of, or premium, if any, or interest
on, any Debt Security; (iv) impair the right to institute suit for the
enforcement of any such payment when due; (v) reduce the amount of outstanding
Debt Securities necessary to consent to an amendment or waiver provided for in
the Indenture; or (vi) modify any provisions of the Indenture relating to the
modification, supplement and amendment of the Indenture or waivers of past
defaults, except as otherwise specified (Section 902 and Section 316(b) of the
Act).
EVENTS OF DEFAULT, NOTICE AND WAIVER
The following events are Events of Default under the Indenture in respect of
any applicable series of Debt Securities: (i) default in the payment of
interest on Debt Securities of such series when due and payable, which
continues for 30 days; (ii) default in the payment of principal of (and
premium, if any) on such Debt Securities when due, at maturity, upon
redemption or otherwise, or failure to deposit any sinking fund payment when
due; (iii) failure to perform any other covenant of the Company contained in
the Indenture or such Debt Securities which continues for 60 days after
written notice is given as provided in the Indenture; (iv) default under any
bond, debenture or other Indebtedness of the Company or any subsidiary, if (a)
either (x) such event of default results from the failure to pay any such
Indebtedness at maturity or (y) as a result of such event of default, the
maturity of such Indebtedness has been accelerated prior to its expressed
maturity and such acceleration shall not be rescinded or annulled or the
accelerated amount paid within ten days after notice to the Company of such
acceleration, or such Indebtedness having been discharged, and (b) the
principal amount of such Indebtedness, together with the principal amount of
any other Indebtedness in default for failure to pay principal or interest
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thereon, or the maturity of which has been so accelerated, aggregates
$20,000,000 or more; (v) certain events of bankruptcy, insolvency or
reorganization relating to the Company, and (vi) any other Event of Default
provided with respect to Debt Securities of such series. The Indenture
Supplement with respect to any series of Debt Securities may provide for
additional or modified Events of Default for the Debt Securities of such
series. If an Event of Default shall occur and be continuing, the Trustee or
the holders of a majority in aggregate principal amount of the applicable
series of Debt Securities may declare such Debt Securities due and payable
(Section 502).
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of any default or Event of Default with respect to Debt Securities
of any series, give to the holders of Debt Securities notice of all uncured
defaults or Events of Default known to it. The Trustee shall be protected if
in good faith it determines that the withholding of such notice is in the
interest of the holders of Debt Securities of any series (Section 605).
The Indenture provides that the holders of a majority in aggregate principal
amount of the outstanding Debt Securities of any series may direct the time,
method and place of conducting any proceedings for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee with respect
to Debt Securities of such series (Section 512). The right of a holder to
institute a proceeding with respect to the Indenture is subject to certain
conditions including notice and indemnity to the Trustee, but the holder has
an absolute right to receipt of principal of (and premium, if any) and
interest on such holder's Debt Security on or after the respective due dates
expressed in Debt Securities and to institute suit for the enforcement of any
such payments (Section 508).
The holders of a majority in principal amount of the outstanding Debt
Securities of any series may on behalf of the holders of all Debt Securities
of such series waive certain past defaults, except a default in payment of the
principal of (and premium, if any) or interest on any Debt Securities of such
series or in respect of certain provisions of the Indenture which cannot be
modified or amended without the consent of the holder of each Debt Security
affected thereby (Section 513).
The Company will be required to furnish the Trustee annually a statement of
certain officers of the Company stating whether or not they know of any
Default or Events of Default (as defined in the Indenture) and, if they have
such knowledge, a description of the efforts to remedy the same (Section
1008).
GLOBAL SECURITIES
Debt Securities of a series may be issued in whole or in part in the form of
one or more global securities ("Global Securities") that will be deposited
with, or on behalf of, a depositary identified in the applicable Prospectus
Supplement relating to such series. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. The
specific terms of the depositary arrangement with respect to a series of Debt
Securities will be described in the applicable Prospectus Supplement relating
to such series.
DESCRIPTION OF CAPITAL STOCK
The description of the Company's capital stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Charter and Bylaws, each as amended and restated, copies of which
are exhibits to the Registration Statement of which this Prospectus is a part.
GENERAL
Under its Charter, the Company has authority to issue up to 150 million
shares of stock, consisting of 80 million shares of Common Stock, par value
$.01 per share, 50 million shares of "Excess Stock" (as described below), par
value $.01 per share, and 20 million shares of Preferred Stock, par value $.01
per share. Under Maryland law, stockholders generally are not responsible for
a corporation's debts or obligations. At September 30, 1996 there were
approximately 18,673,084 shares of Common Stock issued and outstanding and no
Preferred Stock issued or outstanding.
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COMMON STOCK
All shares of Common Stock offered hereby have been duly authorized and
will, when issued and paid for as described in the applicable Prospectus
Supplement, be fully paid and nonassessable. Subject to the preferential
rights of any other shares or series of stock and to the provisions of the
Company's Charter regarding Excess Stock, holders of shares of Common Stock
are entitled to receive dividends on Common Stock if, as and when authorized
and declared by the Board of Directors of the Company out of assets legally
available therefor and to share ratably in the assets of the Company legally
available for distribution to its stockholders in the event of its
liquidation, dissolution or winding-up after payment of, or adequate provision
for, all known debts and liabilities of the Company.
Subject to the provisions of the Company's Charter regarding Excess Stock,
each outstanding share of Common Stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors, and except as provided with respect to any other class or series of
stock, the holders of Common Stock will possess exclusive voting power. There
is no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of Common Stock can elect all
of the directors then standing for election, and the holders of the remaining
shares of Common Stock will not be able to elect any directors.
Subject to the Company's Charter regarding Excess Stock, all shares of
Common Stock have equal dividend, distribution, liquidation and other rights,
and have no preferences, appraisal or exchange rights. Holders of Common Stock
have no conversion, sinking fund or redemption rights, or preemptive rights to
subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
information.
Pursuant to the Maryland General Corporation Law ("MGCL") and the Company's
Charter, the Corporation generally cannot dissolve, amend its Charter, merge,
sell all or substantially all of its assets, engage in a share exchange or
engage in similar transactions outside the ordinary course of business unless
approved by the affirmative vote of holders of shares entitled to cast a
majority of all the votes entitled to be cast.
The transfer agent and registrar for the Common Stock is The First National
Bank of Boston.
PREFERRED STOCK
General. Shares of Preferred Stock may be issued from time to time, in one
or more series, as authorized by the Board of Directors of the Company. Prior
to issuance of shares of each series, the Board of Directors is required by
the MGCL and the Company's Charter to fix for each series, subject to the
provisions of the Company's Charter regarding Excess Stock, the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
or conditions of redemption, as are permitted by Maryland law. The Preferred
Stock will, when issued, be fully paid and nonassessable by the Company and
will have no preemptive rights, other than as determined by the Board of
Directors. The Board of Directors could authorize the issuance of shares of
Preferred Stock with terms and conditions that could have the effect of
discouraging a takeover or other transaction that holders of Common Stock
might believe to be in their best interests or in which holders of some, or a
majority, of the shares of Common Stock might receive a premium for their
shares over the then market price of such shares of Common Stock.
Terms. The following description of the Preferred Stock sets forth certain
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. The statements below describing the Preferred Stock are
in all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Charter and Bylaws and any applicable
amendment to the Charter designating terms of a series of Preferred Stock (a
"Designating Amendment").
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Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The voting rights, if any, of such Preferred Stock;
(6) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(7) The provision for a sinking fund, if any, for such Preferred Stock;
(8) The provision for redemption, if applicable, of such Preferred Stock;
(9) Any listing of such Preferred Stock on any securities exchange;
(10) If convertible, the terms and conditions upon which such Preferred
Stock will be convertible into Common Stock, including the initial
conversion price (or manner of calculation thereof) and the conversion
period;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(13) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(14) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(15) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
Rank. Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock; (ii) on a parity with all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank on a parity with the Preferred Stock; and (iii) junior to all
equity securities issued by the Company the terms of which specifically
provide that such equity securities rank senior to the Preferred Stock. The
term "equity securities" does not include convertible debt securities.
Dividends. Holders of the Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for payment, cash dividends at
such rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Each such dividend shall be payable to holders of record as they
appear on the share transfer books of the Company on such record dates as
shall be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company
fails to declare a dividend payable on a dividend payment date on any series
of the Preferred Stock for which dividends are non-cumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the
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dividend accrued for such period, whether or not dividends on such series are
declared payable on any future dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company
of any other series ranking, as to dividends, on a parity with or junior to
the Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment on the Preferred Stock
of such series for all past dividend periods and the then current dividend
period or (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of
such series. When dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon Preferred Stock of any series and the
shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared upon
Preferred Stock of such series and any other series of Preferred Stock ranking
on a parity as to dividends with such Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Preferred Stock of
such series and such other series of Preferred Stock shall in all cases bear
to each other the same ratio that accrued dividends per share on the Preferred
Stock of such series (which shall not include any accumulation in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) and such other series of Preferred Stock bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on Preferred Stock of such
series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for payment for the then
current dividend period, no dividends (other than in shares of Common Stock or
other shares of capital stock ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation) shall be declared or paid or set
aside for payment nor shall any other distribution be declared or made upon
the Common Stock, or any other capital stock of the Company ranking junior to
or on a parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any such
shares) by the Company (except by conversion into or exchange for other
capital stock of the Company ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
Redemption. If so provided in the applicable Prospectus Supplement, the
Preferred Stock shall be subject to mandatory redemption or redemption at the
option of the Company, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus
Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the
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date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the
net proceeds of the issuance of shares of capital stock of the Company, the
terms of such Preferred Stock may provide that, if no such shares of capital
stock shall have been issued or to the extent the net proceeds from any
issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted
into the applicable shares of capital stock of the Company pursuant to
conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative dividend, full cumulative dividends on all shares of such series
of Preferred Stock shall have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (ii)
if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of such series of Preferred Stock shall be redeemed unless
all outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status
of the Company or pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of Preferred Stock of such series.
In addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series
of Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (ii)
if such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, the Company shall
not purchase or otherwise acquire directly or indirectly any shares of
Preferred Stock of such series (except by conversion into or exchange for
capital stock of the Company ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation); provided, however, that the
foregoing shall not prevent the purchase or acquisition of shares of Preferred
Stock of such series to preserve the REIT status of the Company or pursuant to
a purchase or exchange offer made on the same terms to holders of all
outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of
record of such shares in proportion to the number of such shares held or for
which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the
Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Stock are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the shares of
Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of shares of Preferred Stock
to be redeemed from each such holder. If notice of redemption of any Preferred
Stock has been given and if the funds necessary for such redemption have been
set aside by the Company in trust for the benefit of the holders of any
Preferred Stock so called for redemption, then from and after the redemption
date dividends will cease to accrue on such Preferred Stock, and all rights of
the holders of such shares will terminate, except the right to receive the
redemption price.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, then, before any
distribution or payment shall be made to the holders of any Common
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Stock or any other class or series of capital stock of the Company ranking
junior to the Preferred Stock in the distribution of assets upon any
liquidation, dissolution or winding up of the Company, the holders of each
series of Preferred Stock shall be entitled to receive out of assets of the
Company legally available for distribution to stockholders liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid noncumulative dividends for prior dividend periods).
After payment of the full amount of the liquidating distributions to which
they are entitled, the holders of Preferred Stock will have no right or claim
to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in
the distribution of assets, then the holders of the Preferred Stock and all
other such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of the Company with or into any other corporation,
trust or entity, or the sale, lease or conveyance of all or substantially all
of the property or business of the Company, shall not be deemed to constitute
a liquidation, dissolution or winding up of the Company.
Voting Rights. Holders of the Preferred Stock will not have any voting
rights, except as set forth below or as indicated in the applicable Prospectus
Supplement.
Whenever dividends on any shares of Preferred Stock shall be in arrears for
six or more consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of
Preferred Stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
directors of the Company at a special meeting called by the holders of record
of at least ten percent (10%) of any series of Preferred Stock so in arrears
(unless such request is received less than 90 days before the date fixed for
the next annual or special meeting of the stockholders) or at the next annual
meeting of stockholders, and at each subsequent annual meeting until (i) if
such series of Preferred Stock has a cumulative dividend, all dividends
accumulated on such shares of Preferred Stock for the past dividend periods
and the then current dividend period shall have been fully paid or declared
and a sum sufficient for the payment thereof set aside for payment or (ii) if
such series of Preferred Stock does not have a cumulative dividend, four
consecutive quarterly dividends shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment. In such case,
the entire Board of Directors of the Company will be increased by two
directors.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will
not, without the affirmative vote or consent of the holders of at least a
majority of the shares of such series of Preferred Stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (such
series voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any class or series of capital stock ranking
prior to such series of Preferred Stock with respect to payment of dividends
or the distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital stock of the Company into such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of the Company's Charter or the Designating Amendment
for such series of Preferred Stock, whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of such series of Preferred Stock or the
holders thereof; provided, however, with respect to the occurrence of any of
the Events set forth in (ii) above, so long as
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the Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event the
Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of Preferred Stock and
provided further that (x) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or (y) any increase in the amount of authorized shares of such series
or any other series of Preferred Stock, in each case ranking on a parity with
or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall
have been redeemed or called for redemption and sufficient funds shall have
been set aside by the Company in trust for the benefit of the holders of such
shares to effect such redemption.
Conversion Rights. The terms and conditions, if any, upon which any series
of Preferred Stock is convertible into shares of Common Stock will be set
forth in the applicable Prospectus Supplement relating thereto. Such terms
will include the number of shares of Common Stock into which the shares of
Preferred Stock are convertible, the conversion price (or manner of
calculation thereof), the conversion period, provisions as to whether
conversion will be at the option of the holders of the Preferred Stock or the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such series
of Preferred Stock.
Restrictions on Ownership. As discussed below under "Description of Capital
Stock--Restrictions on Transfer," for the Company to qualify as a REIT under
the Internal Revenue Code of 1986, as amended (the "Code"), not more than 50%
in value of its outstanding capital stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year. To assist the
Company in meeting this requirement, the Company may take certain actions to
limit the beneficial ownership, directly or indirectly, by a single person of
the Company's outstanding equity securities, including any Preferred Stock of
the Company. Therefore, the Designating Amendment for each series of Preferred
Stock may contain provisions restricting the ownership and transfer of the
Preferred Stock. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to a series of Preferred Stock.
Transfer Agent and Registrar. The transfer agent and registrar for the
Preferred Stock will be set forth in the applicable Prospectus Supplement.
RESTRICTIONS ON TRANSFERS
For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
year), and such capital stock must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months (other than
the first year) or during a proportionate part of a shorter taxable year. The
Charter of the Company contains provisions, designed to ensure that the
Company remains a qualified REIT, that limit any holder from owning, or being
deemed to own by virtue of the attribution provisions of the Code, shares of
capital stock having a value that is more than 9.8% (the "Ownership Limit") of
the value of all outstanding capital stock of the Company. The Charter
provides that each person (which includes natural persons, corporations,
trusts, partnerships and other entities) shall be deemed to own stock that
such person (i) actually owns, (ii) constructively owns after applying
attribution rules specified in the Code, and (iii) has the right to acquire
upon exercise of any rights, options or warrants or conversion of any
convertible securities held by such person. The fact that certain affiliated
entities, such as separate mutual funds advised by the same investment
adviser, may own more than 9.8% of the value of all outstanding capital stock
in the aggregate will not of itself result in the Ownership Limit being
exceeded, merely because a single person may be considered to be the
"beneficial
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owner" of such stock for purposes of Section 13(g) of the Exchange Act. The
Board of Directors may waive the Ownership Limit if evidence satisfactory to
the Board of Directors and the Company's tax counsel is presented that the
changes in ownership will not then or in the future jeopardize the Company's
status as a REIT.
Any transfer of capital stock or any Security convertible into capital stock
that would create direct or indirect ownership of capital stock in excess of
the Ownership Limit or that would result in the disqualification of the
Company as a REIT, including any transfer that results in the Company being
"closely held" within the meaning of Section 856(h) of the Code, shall be null
and void, and the intended transferee will acquire no rights to the capital
stock. Shares of capital stock owned, or deemed to be owned, or transferred to
a stockholder in excess of the Ownership Limit will automatically be exchanged
for shares of Excess Stock that will be transferred, by operation of law, to a
trustee (to be named by the Board of Directors of the Company, but
unaffiliated with the Company) as trustee for the exclusive benefit (except to
the extent described below) of one or more charitable beneficiaries designated
from time to time by the Company. The Excess Stock held in trust will be
considered as issued and outstanding shares of stock of the Company, will be
entitled to receive distributions declared by the Company and may be voted by
the trustee for the exclusive benefit of the charitable beneficiary. Any
dividend or distribution paid to a purported transferee of Excess Stock prior
to the discovery by the Company that capital stock has been transferred in
violation of the provisions of the Company's Charter (a "prohibited transfer")
shall be repaid to the Company upon demand and thereupon paid over by the
Company to the trustee. Any votes of holders of shares of capital stock
purported to have been cast by a purported transferee prior to such discovery
of a prohibited transfer will be retroactively deemed not to have been cast,
but said retroactive nullification of the vote of the relevant shares of
capital stock shall not adversely affect the rights of any person (other than
the purported transferee) who has relied in good faith upon the effectiveness
of the matter that was the subject of the stockholder action as to which such
votes were cast.
Excess Stock is not transferable. Subject to the redemption rights of the
Company discussed below, the trustee of the trust may, however, sell and
transfer the interest in the trust to a transferee in whose hands the interest
in the trust representing Excess Stock would not be an interest in Excess
Stock, and upon such sale the shares of Excess Stock represented by the sold
interest shall be automatically exchanged for shares of capital stock of the
class that was originally exchanged into such Excess Stock. Upon such sale,
the trustee shall distribute to the purported transferee only so much of the
sales proceeds as is not more than the price paid by the purported transferee
in the prohibited transfer that resulted in the exchange of Excess Stock for
the capital stock purported to have been transferred (or, if the purported
transferee received such capital stock by gift, devise or otherwise without
giving value for such stock, only an amount that does not exceed the market
price for such stock, as determined in the manner set forth in the Charter, at
the time of the prohibited transfer), and the trustee shall distribute all
remaining proceeds from such sale to the charitable beneficiary.
In addition to the foregoing transfer restrictions, the Company will have
the right, for a period of 90 days during the time any Excess Stock is held by
the trustee, to purchase all or any portion of the Excess Stock from the
trustee for the lesser of the price paid for the capital stock by the original
purported transferee (or, if the purported transferee received such capital
stock by gift, devise or otherwise without giving value for such stock, the
market price of the capital stock at the time of such prohibited transfer) or
the market price of the capital stock on the date the Company exercises its
options to purchase. Upon any such purchase by the Company, the trustee shall
distribute the purchase price to the original purported transferee. The 90-day
period begins on the date on which the Company receives written notice of the
prohibited transfer or other event resulting in the exchange of capital stock
for Excess Stock.
If the foregoing transfer restrictions are determined to be void or invalid
by virtue of any legal decision, statute, rule or regulation, then the
intended transferee of any Excess Stock may be deemed, at the option of the
Company, to have acted as an agent on behalf of the Company in acquiring the
Excess Stock and to hold the Excess Stock on behalf of the Company.
These restrictions will not preclude settlement of transactions on the New
York Stock Exchange or any other stock exchange on which capital stock of the
Company is listed. The foregoing restrictions on transferability and
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ownership also will not apply if the Board of Directors determines that it is
no longer in the best interests of the Company to continue to qualify as a
REIT.
The Company's Charter requires that, upon demand by the Company, each
stockholder and each proposed transferee of capital stock will disclose to the
Company in writing any information with respect to the direct, indirect and
constructive ownership of shares of stock as the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency or
to determine any such compliance.
The Ownership Limitation provided by the Company's Charter may have the
effect of delaying, deferring or preventing the acquisition of control of the
Company. However, the Charter provides that the Ownership Limit shall not
apply to shares of capital stock acquired pursuant to an all cash tender offer
for all outstanding shares of capital stock in conformity with applicable laws
where not less than two-thirds of the outstanding shares of capital stock (not
including securities held by the tender offeror and/or its affiliates and
associates) are tendered and accepted pursuant to such tender offer and where
the tender offeror commits in such tender offer, if the offer is accepted by
the holders of two-thirds of the outstanding stock, promptly after the tender
offeror's purchase of the tendered stock to give any non-tendering
stockholders a reasonable opportunity to put their capital stock to the tender
offeror at a price not less than that paid pursuant to the tender offer.
CERTAIN PROVISIONS OF MARYLAND LAW
The following summary of certain provisions of the MGCL does not purport to
be complete and is qualified in its entirety by reference to the MGCL.
Business Combinations. Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially
owns 10% or more of the voting power of the corporation's shares of capital
stock or an affiliate of the corporation who, at any time within the two-year
period prior to the date in question, was the beneficial owner of 10% or more
of the voting power of the then-outstanding voting stock of the corporation
(an "Interested Stockholder") or an affiliate thereof are prohibited for five
years after the most recent date on which the Interested Stockholder becomes
an Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of the corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by
holders of outstanding voting shares of the corporation and (b) two-thirds of
the votes entitled to be cast by holders of outstanding voting shares of the
corporation other than shares held by the Interested Stockholder with whom (or
with whose affiliate) the business combination is to be effected, unless,
among other conditions, the corporation's common stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration
is received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of Maryland law do not apply,
however, to business combinations that are approved or exempted by the board
of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder.
Control Share Acquisitions. The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by officers or directors who are employees of the corporation.
"Control shares" are voting shares of stock that, if aggregated with all other
shares of stock previously acquired by that person, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of
voting power: (i) one-fifth or more but less than one-third, or (ii) one-third
or more but less than a majority, or (iii) a majority of all voting power.
Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control shares, subject
to certain exceptions.
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A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights of the shares.
If no request for a meeting is made, the corporation may itself present the
question at any meeting of stockholders.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may
redeem any or all of the control shares (except those for which voting rights
have been previously been approved) for fair value determined, without regard
to the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquiror or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of the appraisal rights
may not be less than the highest price per share paid by the acquiror in the
control share acquisition, and certain limitations and restrictions otherwise
applicable to the exercise of dissenters' rights do not apply in the context
of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by a corporation's
articles of incorporation or bylaws.
The Company's Bylaws contain a provision exempting any and all acquisitions
of the Company's shares of capital stock from the control shares provision of
the MGCL. There can be no assurance that this provision will not be amended or
repealed in the future.
DESCRIPTION OF WARRANTS
The Company may issue warrants or rights (collectively, the "Warrants") for
the purchase of any series of Debt Securities or shares of any class of
capital stock of the Company. Warrants may be issued independently or together
with any other Securities and may be attached to or separate from such
Securities. Each series of Warrants will be issued under a separate warrant
agreement or rights agreement (each, a "Warrant Agreement") to be entered into
between the Company and a warrant agent or rights agent ("Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with
the Warrants of such series and will not assume any obligation or relationship
of agency or trust for or with any holders or beneficial owners of Warrants.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (1) the title of such Warrants; (2) the aggregate number of such
Warrants; (3) the price or prices at which such Warrants will be issued; (4)
the designation, aggregate principal amount and terms of the Securities
purchasable upon exercise of such Warrants; (5) the designation and terms of
the Securities, if any, with which such Warrants are issued and the number of
such Warrants issued with each such Security; (6) if applicable, the date on
and after which such Warrants and the related Securities will be separately
transferable; (7) the price at which the Securities purchasable upon exercise
of such Warrants may be purchased; (8) the date on which the right to exercise
such Warrants shall commence and the date on which such right shall expire;
(9) the minimum or maximum amount of such Warrants which may be exercised at
any one time; (10) information with respect to book-entry procedures, if any;
(11) a discussion of certain federal income tax considerations; and (12) any
other terms of such Warrants, including terms, procedures and limitations
relating to the exchange and exercise of such Warrants.
DESCRIPTION OF UNITS OF SECURITIES
The Company may issue Units consisting of two or more other constituent
Securities, which Units may be issuable as, and for the period of time
specified therein may be transferable as, a single Security only, as
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distinguished from the separate constituent Securities comprising such Units.
Any such Units will be offered pursuant to a Prospectus Supplement which will
(1) identify and designate the title of any series of Units; (2) identify and
describe the separate constituent Securities comprising such Units; (3) set
forth the price or prices at which such Units will be issued; (4) describe, if
applicable, the date on and after which the constituent Securities comprising
the Units will become separately transferable; (5) provide information with
respect to book-entry procedures, if any; (6) discuss applicable federal
income tax considerations relating to the Units; and (7) any other terms of
the Units and their constituent Securities.
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters or dealers, directly to
one or more purchasers, or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale or at prices related to such
prevailing market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities, for
whom they may act as agents, in the form of discounts, concessions, or
commissions. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions, or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers, and agents that
participate in the distribution of Securities may be deemed to be
underwriters, and any discounts or commissions they receive from the Company,
and any profit on the resale of Securities they realize may be deemed to be
underwriting discounts and commissions, under the Securities Act. Any such
underwriter or agent will be identified, and any such compensation received
from the Company will be described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other
than the Common Stock which is listed on the NYSE. Any shares of Common Stock
sold pursuant to a Prospectus Supplement will be listed on the NYSE, subject
to official notice of issuance. The Company may elect to list any series of
Debt Securities or Preferred Stock on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Securities, but will not be obligated to do so and may discontinue any
market making at any time without notice. Therefore, no assurance can be given
as to the liquidity of, or the trading market for, the Securities.
Under agreements into which the Company may enter, underwriters will be, and
dealers and agents who participate in the distribution of Securities may be,
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, the Company in the ordinary course of
business.
If so indicated in the applicable Prospectus Supplement, the Company may
itself, or may authorize underwriters or other persons acting as the Company's
agents to solicit offers by certain institutions to purchase Securities from
the Company pursuant to contracts providing for payment and delivery on a
future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all
cases such institutions must be approved by the Company. The obligations of
any purchaser under any such contract will be subject to the condition that
the purchase of the Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
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In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in
certain states Securities may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the
Securities for a period of two business days prior to the commencement of such
distribution.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Company by Goodwin, Procter & Hoar LLP, Boston,
Massachusetts. William B. King, whose professional corporation is a partner in
Goodwin, Procter & Hoar LLP, is Secretary of the Company and is the beneficial
owner of approximately 8,500 shares of Common Stock.
EXPERTS
The financial statements and schedule of the Company as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December
31, 1995, have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. To the extent
that KPMG Peat Marwick LLP audits and reports on financial statements of the
Company issued at future dates, and consents to the use of their report
thereon, such financial statements also will be incorporated by reference in
the Registration Statement in reliance upon their report and said authority.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary.............................................. S-1
Risk Factors............................................................... S-3
The Company................................................................ S-9
Use of Proceeds............................................................ S-15
Distributions.............................................................. S-15
Taxation................................................................... S-16
Underwriting............................................................... S-17
Legal Matters.............................................................. S-17
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 4
Ratio of Earnings to Fixed Charges......................................... 5
Description of Debt Securities............................................. 5
Description of Capital Stock............................................... 13
Description of Warrants.................................................... 22
Description of Units of Securities......................................... 22
Plan of Distribution....................................................... 23
Legal Matters.............................................................. 24
Experts.................................................................... 24
</TABLE>
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2,500,000 SHARES
BRADLEY REAL ESTATE, INC.
LOGO
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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PAINEWEBBER INCORPORATED
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OCTOBER 29, 1996
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