<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
- ---
Exchange Act of 1934 for the quarterly period ended September 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934 for the transition period from to
----- -----
Commission file number 1-10328
BRADLEY REAL ESTATE, INC.
(Exact name of registrant as specified in its charter)
Maryland 04-6034603
(State of Organization) (I.R.S. Identification No.)
40 Skokie Blvd., Northbrook, Illinois 60062
(Address of Registrant's Principal Executive Offices)
Registrant's telephone number, including area code; (847) 272-9800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of Shares outstanding of each class of Common Stock as of
September 30, 1996:
Shares of Common Stock, $.01 par value: 18,673,084 Shares outstanding.
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BRADLEY REAL ESTATE, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------------- -------------
<S> <C> <C>
Real estate investments-at cost $477,355 $189,405
Accumulated depreciation and amortization (27,777) (27,591)
-------- --------
Net real estate investments 449,578 161,814
Real estate investments held for sale, net of
accumulated depreciation and amortization of $7,213 10,264 -
Other Assets:
Cash and cash equivalents 2,031 697
Rents and other receivables, net of allowance for
doubtful accounts of $1,322 for 1996 and $711 for
1995 9,144 8,671
Unamortized buyout of contract, net 3,478 4,372
Deferred charges, net and other assets 11,466 4,991
-------- --------
$485,961 $180,545
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage loans 125,517 24,794
Line of credit 94,500 14,600
Accounts payable, accrued expenses and other liabilities 17,530 6,053
-------- --------
Total liabilities 237,547 45,447
-------- --------
Minority interest 4,328 -
-------- --------
Stockholders' equity:
Shares of preferred stock, par value $.01 per share:
Authorized 20,000,000 shares; 0 shares
issued and outstanding - -
Shares of common stock, par value $.01 per share:
Authorized 80,000,000 shares; Issued and
outstanding, 18,673,084 at September 30, 1996
and 11,230,313 at December 31, 1995 187 112
Shares of excess stock, par value $.01 per share:
Authorized 50,000,000 shares; 0 shares issued
and outstanding - -
Additional paid-in capital 252,232 148,407
Distributions in excess of accumulated earnings (8,333) (13,421)
-------- --------
244,086 135,098
-------- --------
$485,961 $180,545
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 3
BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income $21,442 $9,396 $54,643 $26,697
Other income 441 15 996 141
---------- ---------- ---------- ----------
21,883 9,411 55,639 26,838
---------- ---------- ---------- ----------
Expenses:
Operations, maintenance and management 3,485 1,573 9,277 4,235
Real estate taxes 4,375 2,375 12,063 6,380
Mortgage and other interest 4,106 843 9,660 3,826
Administrative and general 944 412 2,387 1,154
Corporate office relocation 409 - 409 -
Write-off of deferred financing and acquisition costs - - 344 -
Depreciation and amortization 3,597 1,851 9,573 5,413
---------- ---------- ---------- ----------
16,916 7,054 43,713 21,008
---------- ---------- ---------- ----------
Income before gain on sale of property 4,967 2,357 11,926 5,830
Gain on sale of property - - 9,379 -
---------- ---------- ---------- ----------
Income before allocation to minority interest 4,967 2,357 21,305 5,830
Income allocated to minority interest (82) - (193) -
---------- ---------- ---------- ----------
Net income $ 4,885 $2,357 $21,112 $ 5,830
========== ========== ========== ==========
Per share data:
Net income per share $ 0.26 $ 0.21 $ 1.27 $ 0.62
========== ========== ========== ==========
Weighted average shares outstanding 18,667,241 11,087,721 16,629,648 9,404,449
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
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BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Retained
Earnings
(Distributions
Shares Additional in Excess of
at par Paid-In Accumulated
value Capital Earnings)
------- ---------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1995 $112 $148,407 ($13,421)
Net income - - 11,375
Cash distributions ($.33 per share) - - (3,706)
Exercise of stock options - 17 -
Dividend reinvestment participation - 35 -
Shares issued to acquire Tucker
Properties Corporation 75 103,623 -
------ ------------- --------------
Balance at March 31, 1996 187 252,082 (5,752)
Net income - - 4,852
Cash distributions ($.33 per share) - - (6,158)
Dividend reinvestment participation - 45 -
------ ------------- --------------
Balance at June 30, 1996 187 252,127 (7,058)
Net income - - 4,885
Cash distributions ($.33 per share) - - (6,160)
Dividend reinvestment participation - 53 -
Shares issued in exchange for
Operating Partnership units - 52 -
------ ------------- --------------
Balance at September 30, 1996 $187 $252,232 ($8,333)
====== ============= ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
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BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $21,112 $5,830
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,573 5,413
Gain on sale of property (9,379) -
Write-off of deferred financing and acquisition costs 344 -
Income allocated to minority interest 193 -
Changes in operating assets and liabilities, net of
the effect of the Tucker acquisition:
(Increase) decrease in rents and other receivables 2,059 (1,904)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities (583) 2,446
(Increase) decrease in deferred charges (2,146) 48
-------- --------
Net cash provided by operating activities 21,173 11,833
-------- --------
Cash flows from investing activities:
Expenditures for real estate investments (5,612) (7,050)
Cash acquired through the Tucker acquisition 4,285 -
Expenditures related to the Tucker acquisition (6,358) -
Excess proceeds from like-kind exchange of properties 4,145 -
Expenditures for purchase of advisory business - (649)
-------- --------
Net cash used in investing activities (3,540) (7,699)
-------- --------
Cash flows from financing activities:
Borrowing from lines of credit 118,000 9,200
Proceeds from public offering, net - 40,508
Pay-down of line of credit with proceeds from offering - (32,600)
Pay-off of Westwind mortgages with proceeds from offering - (4,712)
Pay-off of secured mortgage loans with borrowings
from lines of credit (32,234) -
Payments under lines of credit (84,208) (5,800)
Expenditures to acquire new line of credit (1,468) -
Distributions paid (16,024) (9,393)
Distributions to minority interest holders (207) -
Shares issued under dividend reinvestment plan 133 204
Exercise of stock options 17 128
Principal payments on mortgage loans (308) (263)
Reorganization costs - (617)
-------- --------
Net cash used in financing activities (16,299) (3,345)
-------- --------
Net increase in cash and cash equivalents 1,334 789
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
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BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
(Cont.)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
------ ------
<S> <C> <C>
Cash and cash equivalents:
Beginning of period 697 193
------ ------
End of period $2,031 $ 982
====== ======
Supplemental Information:
Income taxes paid $ 19 $ 106
====== ======
Interest paid, net of amount capitalized $9,748 $3,812
====== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 7
BRADLEY REAL ESTATE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim financial statements have been prepared by the
Company, without audit, and in the opinion of management reflect all normal
recurring adjustments necessary for a fair presentation of results for the
unaudited interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
It is suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto for the fiscal
year ended December 31, 1995.
NOTE 2 - MERGER AGREEMENT
On March 15, 1996, the Company closed the acquisition of Tucker Properties
Corporation ("Tucker"), after approval of such merger by the stockholders of
the two companies. The acquisition was completed through the issuance of
7,428,157 common shares of the Company valued at $13.96 per share, in exchange
for 100% of the outstanding shares of Tucker, payment of certain transaction
costs and the assumption of all of Tucker's liabilities. The Tucker
shareholders received .686 of a share of Bradley for each outstanding Tucker
share. The acquisition was structured as a tax-free transaction, and has been
accounted for using the purchase method of accounting. Accordingly, the
purchase price was allocated to the assets purchased and the liabilities
assumed based upon the fair values at the date of acquisition. As a result of
the merger, the Company owns 31 properties aggregating approximately 7.5
million square feet in eleven states.
The following table sets forth certain summary unaudited pro forma operating
data for the Company as if the merger had occurred as of January 1, 1996 and
1995 (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Nine Months Ended September 30,
Historical Pro Forma Historical Pro Forma
1996 1996 1995 1995
<S> <C> <C> <C> <C>
Total Revenue $55,639 $66,360 $26,838 $64,681
Net Income $21,112 $23,119 $ 5,830 $12,461
Net Income Per Share $ 1.27 $ 1.24 $ 0.62 $ 0.74
</TABLE>
The unaudited pro forma operating data is presented for comparative purposes
only and is not necessarily indicative of what the actual results of operations
would have been for the nine months ended September 30, 1996 and 1995, nor does
such data purport to represent the results to be achieved in future periods.
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<PAGE> 8
In conjunction with the merger, on March 15, 1996 the Company entered into a
new $150 million unsecured revolving credit facility maturing March 15, 1998.
The line bears interest at a rate equal to the lower of the bank's base rate or
1.75% over LIBOR. The rates available under the line become more favorable in
the event the Company meets certain loan-to-value tests or receives an
investment grade unsecured debt rating. In addition to replacing outstanding
borrowings under the Company's and Tucker's previously outstanding secured
lines of credit, the facility is available for the acquisition, development,
renovation and expansion of new and existing properties (including, but not
limited to, capital improvements, tenant improvements and leasing commissions),
and other working capital purposes.
The Company's new line of credit contains certain financial and operational
covenants that, among other provisions, limit the amount of secured and
unsecured indebtedness the Company may have outstanding at any time to a
percentage of the Company's Consolidated Market Value as defined, and provide
for the maintenance of certain financial tests including minimum net worth and
debt service coverage requirements.
NOTE 3 - PURCHASE OF SHOPPING CENTER/SALE OF GROUND LEASE
On March 26, 1996, the Company sold its interest in 501-529 Nicollet Avenue,
Minneapolis, Minnesota for $12.9 million. The sale resulted in a gain of $9.4
million for financial reporting purposes and $11.0 million for Federal income
tax purposes. For Federal income tax purposes, the sale was structured as a
"like-kind" exchange, with the Company acquiring Brookdale Square Shopping
Center, a 185,000 square foot shopping center located in Brooklyn, Minnesota
("Brookdale") as the replacement property in the exchange. The purchase price,
including closing costs, for Brookdale was $8.9 million. As a result of the
purchase of Brookdale, $4.1 million of the gain will be considered taxable.
Excess cash proceeds from the sale were used to pay down the Company's line of
credit.
NOTE 4 - SUPPLEMENTAL CASH FLOW DISCLOSURE
The merger acquisition of Tucker on March 15, 1996 resulted in the following
non-cash effect on the Company's balance sheet (dollars in thousands):
<TABLE>
<S> <C>
Property acquired ($295,835)
Mortgage loans assumed 179,374
Merger acquisition costs incurred 6,315
Other assets acquired (8,193)
Other liabilities assumed 14,532
Minority interest assumed 4,394
Capital stock issued, at $.01 par value 75
Additional paid-in capital 103,623
----------
Cash provided by acquisition $4,285
==========
</TABLE>
The like-kind exchange of Nicollet Avenue and Brookdale Square on March 26,
1996, resulted in a decrease in other net operating assets of $1,649,000 and
the Company assuming net operating liabilities of $173,000.
During the third quarter of 1996, 3,738 shares of Common Stock were issued in
exchange for an equivalent number of Operating Partnership units held by the
minority interest.
In January 1995, the Company issued 325,000 shares of Common Stock having a
value of $4,916,000 in connection with the acquisition of the REIT advisory
business of its former advisor.
In April 1995, a property was purchased for $5,261,000 which included the
Company's assumption of $2,094,000 in non-recourse mortgages.
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NOTE 5 - REAL ESTATE INVESTMENTS HELD FOR SALE
As of September 30, 1996, the Company is holding for sale its Augusta Plaza,
Hood Commons and 585 Boylston properties. The net book value of these
properties, $10,264,000, has been reclassified on the balance sheet from "Real
estate investments" to "Real estate investments held for sale".
NOTE 6 - COMMITMENTS/SUBSEQUENT EVENTS
On November 8, 1996, the Company completed an underwritten public offering of
2,875,000 shares of Common Stock (including shares issued pursuant to the
exercise of the underwriter over-allotment option) under the Company's "shelf"
registration statement at a price of $16.50 per share. Net proceeds after
offering costs are estimated to be approximately $45 million. The net proceeds
are being applied to reduce outstanding indebtedness incurred under the line of
credit with the expectation that the Company may reborrow under the line of
credit for the acquisition, development, renovation and expansion of
properties.
During July 1996, management finalized plans to relocate the Company's
headquarters from Boston, Massachusetts to Northbrook, Illinois. The move,
which was completed on October 1, 1996, resulted in a charge to earnings during
the third quarter of $409,000.
9
<PAGE> 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
In March 1996, the Company closed the acquisition of Tucker Properties
Corporation ("Tucker") and entered into its new bank line of credit described
in Note 2 to the financial statements. Also in March 1996, the Company sold
its interest in 501-529 Nicollet Avenue and purchased Brookdale Square Shopping
Center as described in Note 3 to the financial statements.
RESULTS OF OPERATIONS
Rental income increased $27,946,000 from $26,697,000 to $54,643,000 for the
nine months ended September 30, 1996 compared with the same period of 1995.
For the three months ended September 30, 1996, rental income increased
$12,046,000 over the comparable period in 1995. Approximately $28,241,000 and
$12,713,000 of the respective increases were due to the Company's acquisition
and disposition activities, consisting primarily of the acquisition of Tucker.
In addition, rental income at Har Mar Mall increased approximately $431,000
between the respective nine month periods due primarily to the HomePlace and
Barnes & Noble leases executed during the second half of 1995, as well as a
strong performance of the property in general. These increases in rental
income were partially offset by decreases in rental income at Westview Center
and Grandview Plaza of approximately $398,000 and $256,000.
Other income increased from $141,000 to $996,000 for the nine months ended
September 30, 1996 from the same period in 1995 and from $15,000 to $441,000
for the three month periods ended September 30, 1996 and 1995. These $855,000
and $426,000 respective increases were due primarily to a sales tax sharing
agreement at Rollins Crossing, one of the properties acquired from Tucker, as
well as management and leasing fee revenue generated at other properties in the
Tucker portfolio. In addition, interest income earned on the Company's cash
and escrow balances increased due to an increase in the weighted average daily
balances, including, since the acquisition of Tucker, approximately $3,600,000
held in various escrow accounts in accordance with the $100 million REMIC
mortgage note assumed in connection with the Tucker transaction.
Operations, maintenance and management expenses increased $5,042,000 from
$4,235,000 to $9,277,000 for the nine months ended September 30, 1996 compared
with the same period of 1995. For the three months ended September 30, 1996
and 1995, these expenses increased $1,912,000 from $1,573,000 to $3,485,000.
Operations, maintenance and management expenses increased $4,355,000 and
$1,989,000, respectively, as a result of the Company's acquisition and
disposition activities.
Real estate tax expense increased $5,683,000 from $6,380,000 for the nine
months ended September 30, 1995 to $12,063,000 for the nine months ended
September 30, 1996. For the three months ended September 30, 1996 and 1995,
these expenses increased $2,000,000 from $2,375,000 to $4,375,000.
Substantially all of the increase during the nine month period was attributable
to the Company's acquisition and disposition activities. Although the increase
in real estate tax expense was slightly higher absent the acquisition and
disposition activities, the Company was successful in its tax protests at
properties primarily located in Illinois, where real estate tax expense
decreased approximately $312,000, including approximately $210,000 at
Westview Center and $98,000 at Rivercrest Center. Ignoring the acquisition and
disposition activities, real estate tax expense decreased approximately
$427,000 for the three month period ended September 30, 1996 over the
comparable period in 1995. The decrease primarily resulted from decreases at
the Company's properties located in Illinois of approximately $515,000,
including decreases of $344,000 and $158,000 for Westview Center and Rivercrest
Center, respectively.
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<PAGE> 11
Mortgage and other interest expense increased to $9,660,000 for the nine months
ended September 30, 1996 from $3,826,000 during the same period in the prior
year. For the three months ended September 30, 1996, mortgage and other
interest expense increased $3,263,000. Debt assumed in the Tucker acquisition,
consisting primarily of the $100 million REMIC mortgage note secured by six of
the acquired Tucker properties, accounted for substantially all of the increase
in interest expense. Approximately $3,921,000 and $1,808,000 of the increases
for the nine and three month periods ended September 30, 1996, respectively,
related to the REMIC. Higher weighted average outstanding balances on the
Company's line of credit, also brought about primarily by the Tucker
acquisition, resulted in an increase in interest expense of approximately
$2,500,000 and $1,548,000 for the nine and three month periods, respectively,
ended September 30, 1996 compared with the same periods in the prior year. The
increases were partially offset by decreases resulting from the pay-offs of the
mortgage notes secured by Sun Ray Shopping Center in January 1996. The
Company's weighted average interest rate for the three months ended September
30, 1996 was approximately 7.71%.
Administrative and general expenses increased from $1,154,000 for the nine
months ended September 30, 1995 to $2,387,000 for the nine months ended
September 30, 1996. For the respective three-month periods, general and
administrative expenses increased $532,000 from $412,000 to $944,000. These
increases were primarily due to growth in the asset and shareholder size of the
Company.
Depreciation and amortization expense increased $4,160,000 for the nine months
ended September 30, 1996 compared with the same period in 1995 from $5,413,000
to $9,573,000. Approximately $3,665,000 of this increase was due to the
Company's acquisition and disposition activities. The balance of the increase
was primarily due to the amortization of tenant improvements associated with
the new tenants at various properties, most notably at Har Mar Mall.
Depreciation and amortization expense for the three months ended September 30,
1996 and 1995 was $3,597,000 and $1,851,000, respectively. Approximately
$1,717,000 of the $1,746,000 increase resulted from the Company's acquisition
and disposition activities. The Company ceased recording depreciation and
amortization on the real estate investments held for sale, previously amounting
to approximately $145,000 per quarter.
During July 1996, management finalized plans to relocate the Company's
headquarters from Boston, Massachusetts to Northbrook, Illinois. The move,
which was completed on October 1, 1996, resulted in a charge to earnings during
the third quarter of approximately $409,000.
During the first quarter of 1996, the Company incurred a one-time write-off of
$344,000 consisting of deferred financing costs related to the Company's former
bank line of credit and certain deferred acquisition costs related to
acquisitions which the Company chose not to pursue due to the efforts required
to finalize the Tucker transaction.
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<PAGE> 12
The gain on sale of property of $9,379,000 recognized during the first quarter
of 1996 was generated by the sale of the Company's interest in 501-529 Nicollet
Avenue for a net sales price of approximately $12,900,000. Simultaneous with
this sale, the Company purchased the Brookdale Square Shopping Center for a
purchase price of approximately $8,900,000. These transactions were effected
in a tax-deferred exchange to the extent of the purchase price of Brookdale
Square Shopping Center.
The aggregate result for the nine months ended September 30, 1996 was a
$15,282,000 increase in net income compared with the same period in the prior
year, from $5,830,000 ($0.62 per share) to $21,112,000 ($1.27 per share). For
the three months ended September 30, 1996, net income increased $2,528,000,
from $2,357,000 ($0.21 per share) to $4,885,000 ($0.26 per share). Per share
amounts reflect weighted average shares outstanding of 16,629,648 and 9,404,449
for the nine months ended September 30, 1996 and 1995, respectively, and
18,667,241 and 11,087,721 for the three months ended September 30, 1996 and
1995, respectively. The increased numbers of shares outstanding were due
primarily to the 2,500,000 share public offering completed in July 1995 and the
issuance of 7,428,157 shares in connection with the Tucker acquisition in March
1996.
LIQUIDITY AND CAPITAL RESOURCES
The effects of the Company's acquisition of Tucker and its new $150 million
unsecured line of credit were described in the "Management's Discussion and
Analysis" section of the Company's report on Form 10-K for the year ended
December 31, 1995.
As of September 30, 1996, financial liquidity was provided by approximately
$2,000,000 in cash and cash equivalents and by the Company's unused balance on
the line of credit of $55,500,000. On November 8, 1996, the Company completed
an underwritten public offering of 2,875,000 shares of Common Stock (including
shares issued pursuant to the exercise of the underwriter over-allotment
option) under the Company's "shelf" registration statement at a price of $16.50
per share. Net proceeds after offering costs are estimated to be approximately
$45 million. The net proceeds are being applied to reduce outstanding
indebtedness incurred under the line of credit with the expectation that the
Company may reborrow under the line of credit for the acquisition, development,
renovation and expansion of properties. As a result of the public offering and
such application of proceeds, cash on hand and available additional borrowings
under the line of credit aggregate approximately $100 million. In addition,
the Company has $34,460,000 available remaining under the shelf registration.
As of September 30, 1996, the Company is holding for sale its Augusta Plaza,
Hood Commons and 585 Boylston Street properties. Proceeds received from such
sale or sales would provide additional liquidity to the Company and may be
applied in whole or in part to tax-deferred "like-kind" exchange acquisitions
of additional properties.
The Company continues to evaluate prospective acquisitions of individual
properties and property portfolios. To fund potential acquisitions, the Company
may issue securities under the multi-security shelf registration referred
to above either to the public or in privately negotiated transactions. The
Company may also acquire properties through the direct issuance of securities of
the Company or, via its Operating Partnership, Bradley Operating Limited
Partnership, through the issuance of limited partnership units in the Operating
Partnership. The Company also expects that it will make further tax-deferred
"like-kind" exchanges of existing mature properties or properties located
outside of the Company's strategic markets, such as those properties held for
sale discussed above, for properties with more growth potential and in line with
the Company's strategic focus. In addition, the Company may acquire partial
interests in real estate assets through participation in joint venture
transactions. Finally, the Company may borrow under its line of credit to
provide the initial funds for acquisitions (and, potentially, renovations and
expansions), with such borrowings being subsequently repaid from the proceeds of
further equity or debt offerings, depending upon market conditions at the time.
12
<PAGE> 13
For the three months ended September 30, 1996, funds from operations ("FFO")
increased $4,195,000, or 103%, from $4,081,000 to $8,276,000. For the nine
months ended September 30, 1996, FFO increased $9,868,000, or 91%, from
$10,861,000 to $20,729,000. The Company generally considers FFO to be an
appropriate supplemental measure of the performance of an equity REIT because
it is predicated on a cash flow analysis, as opposed to a measure predicated on
generally accepted accounting principles, which give effect to non-cash items
such as depreciation. FFO, as defined by the National Association of Real
Estate Investment Trusts ("NAREIT") and as followed by the Company, represents
net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from sales of property, plus
depreciation and amortization. In accordance with NAREIT guidelines effective
in 1996, the Company does not add back to net income the amortization of costs
incurred in connection with the Company's financing activities or depreciation
and amortization of non-real estate assets. Under the former guidelines for
computing FFO, the Company's FFO would have been $8,482,000 and $4,208,000 for
the three months ended September 30, 1996 and 1995, respectively, and
$21,557,000 and $11,243,000 for the nine months ended September 30, 1996 and
1995, respectively. FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and
should not be considered as an alternative to cash flow as a measure of
liquidity. Since the definition of FFO is a guideline, computation of FFO may
vary from one REIT to another. FFO is not necessarily indicative of cash
available to fund cash needs.
FORWARD LOOKING STATEMENTS
Statements made or incorporated in this Form 10-Q include "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The Company's actual
results could differ materially from those set forth in the forward-looking
statements. Certain factors that might cause such a difference include those
factors discussed in the section entitled "Risk Factors" under the discussion
of the Company's business in Item 1 of the Company's Form 10-K for the year
ended December 31, 1995 and under the caption "Risk Factors" in the Company's
Prospectus Supplement dated October 29, 1996 filed pursuant to Rule 421(b)(5)
as a part of Registration Statement No. 33-87084.
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<PAGE> 14
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
Not applicable
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
No Forms 8-K were filed during the period July 1, 1996 through September 30,
1996. The following Forms 8-K have been filed subsequent to September 30, 1996:
1) October 1, 1996, reporting in Item 5., change of the Company's address.
2) October 31, 1996, reporting in Item 5., an underwriting agreement dated
October 29, 1996 relating to a public offering of 2,500,000 shares of
Common Stock plus up to 375,000 additional such shares to be issued
pursuant to the over-allotment option provided for in such underwriting
agreement.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: November 14, 1996
Bradley Real Estate, Inc.
Registrant
By: Thomas P. D'Arcy
President and CEO
By: Irving E. Lingo, Jr.
Chief Financial Officer
(Principal Accounting Officer)
15
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