<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 March 31, 1996 or
___ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _____of_____
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.)
699 Boylston Street, Boston, Massachusetts 02116
(Address of Registrant's Principal Executive Offices)
Registrant's telephone number, including area code; (617) 867-4200
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
March 31, 1996:
Shares of Common Stock, $.01 par value: 18,662,451 Shares outstanding.
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BRADLEY REAL ESTATE, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(UNAUDITED)
<CAPTION>
March 31, December 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Real estate investments-at cost $492,619 $189,405
Accumulated depreciation and amortization (29,249) (27,591)
-------- --------
Net real estate investments 463,370 161,814
Cash and cash equivalents 3,388 697
Rents and other receivables, net of allowance for
doubtful accounts of $1,328 and $771, respectively 10,190 8,671
Unamortized buyout of contract, net 4,074 4,372
Deferred charges, net and other assets 10,580 4,991
-------- --------
$491,602 $180,545
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage loans $125,759 $ 24,794
Line of credit 95,500 14,600
Accounts payable and accrued expenses 19,403 6,053
-------- --------
Total liabilities 240,662 45,447
-------- --------
Minority interest 4,423 --
-------- --------
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, 18,662,451 and 11,230,313, respectively 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 252,082 148,407
Distributions in excess of accumulated earnings (5,752) (13,421)
-------- --------
Total stockholders' equity 246,517 135,098
-------- --------
$491,602 $180,545
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
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BRADLEY REAL ESTATE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(UNAUDITED)
<CAPTION>
Quarter ended
March 31,
1996 1995
----------- ----------
<S> <C> <C>
Income:
Rental income $ 11,219 $ 8,615
Other income 102 85
----------- ----------
11,321 8,700
----------- ----------
Expenses:
Operations, maintenance and management 2,085 1,277
Real estate taxes 2,675 2,008
Mortgage and other interest 1,385 1,464
General and administrative 555 359
Write-off of deferred financing and acquisition
costs 344 --
Depreciation and amortization 2,252 1,757
----------- ----------
9,296 6,865
----------- ----------
Income before gain on sale of property 2,025 1,835
Gain on sale of property 9,379 --
----------- ----------
Income before allocation to minority interest 11,404 1,835
Income allocated to minority interest (29) --
----------- ----------
Net income $ 11,375 $ 1,835
=========== ==========
Net income per weighted average share outstanding $ 0.91 $ 0.22
=========== ==========
Weighted average shares outstanding 12,536,714 8,413,849
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
BRADLEY REAL ESTATE, INC.
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
(UNAUDITED)
<CAPTION>
Retained
Earnings
(Distributions
Additional in Excess of
Shares Paid-In Accumulated
At par value Capital Earnings)
------------ ----------- ------------
<S> <C> <C> <C>
Balance at December 31, 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)
==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
BRADLEY REAL ESTATE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
<CAPTION>
For the quarter ended March 31,
1996 1995
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,375 $ 1,835
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,252 1,757
Gain on sale of property (9,379) --
Write-off of deferred financing and
acquisition costs 344 --
Income allocated to minority interest 29 --
Change in assets and liabilities:
Decrease (increase) in rents and other
receivables 1,010 (50)
Increase in accounts payable and accrued
expenses 401 356
(Increase) decrease in deferred charges (279) 864
Increase in unamortized buyout of contract -- (620)
-------- -------
Net cash provided by operating activities 5,753 4,142
-------- -------
Cash flows from investing activities:
Expenditures for real estate investments (2,245) (684)
Cash acquired through the Tucker
acquisition (NOTE 4) 2,485 --
Expenditures related to the Tucker
acquisition (4,822) --
Excess proceeds from like-kind exchange
of properties 4,145 --
(Decrease)in accounts payable for
construction -- (171)
-------- -------
Net cash used in investing activities (437) (855)
-------- -------
Cash flows from financing activities:
Borrowing from lines of credit 108,000 --
Pay-off of secured mortgage loans
with borrowings from lines of credit (32,234) 2,400
Payments under line of credit (73,208) (1,000)
Cost associated with new line of credit (1,463) --
Distributions paid (3,706) (2,812)
Shares issued under dividend reinvestment
plan 35 119
Exercise of stock options 17 --
Principal payments on mortgage loans (66) (82)
Reorganization costs -- (617)
-------- -------
Net cash used in financing activities $ (2,625) $(1,992)
-------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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BRADLEY REAL ESTATE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
(Cont.)
<CAPTION>
For the quarter ended March 31,
1996 1995
------ ------
<S> <C> <C>
Net increase in cash and cash equivalents $2,691 $1,295
Cash and cash equivalents:
Beginning of period 697 193
------ ------
End of period $3,388 $1,488
====== ======
Supplementary Information:
Income taxes paid $ 22 $ 12
====== ======
Interest paid, net of amount capitalized $1,179 $1,464
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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BRADLEY REAL ESTATE, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim financial statements have been prepared by the
Company, without audit, and in the opinion of management reflect all normal
recurring adjustments necessary for a fair presentation of results for the
unaudited interim periods presented. 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.
<TABLE>
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
(dollars in thousands, except per share data):
<CAPTION>
Quarter Ended March 31,
--------------------------------------------------
Historical Pro Forma Historical Pro Forma
1996 1996 1995 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total Revenue $11,321 $22,042 $8,700 $21,223
Net Income $11,375 $13,377 $1,835 $4,338
Net Income Per Share $ 0.91 $ 0.72 $ 0.22 $ 0.27
</TABLE>
The unaudited pro forma operating data are presented for comparative purposes
only and are not necessarily indicative of what the actual results of operations
would have been for the period ended March 31, 1996, nor does such data purport
to represent the results to be achieved in future periods.
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In conjunction with the merger, on March 15, 1996 the Company entered into a
new $150 million unsecured revolving credit facility led by The First National
Bank of Boston. 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
convenants 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
<TABLE>
The merger acquisition of Tucker on March 15, 1996 resulted in the following
non-cash effects on the Company's balance sheet (dollars in thousands):
<S> <C>
Property acquired $ 295,835
Mortgage loans assumed (179,374)
Merger acquisition costs incurred (6,315)
Other assets acquired 9,993
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 $ 2,485
=========
</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.
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.
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NOTE 5 - COMMITMENTS/SUBSEQUENT EVENTS
On March 31, 1996, the Company had commitments of approximately $1,200,000
for tenant related capital improvements. The Company expects to utilize cash
flow from operating activities as well as funds available under the revolving
bank line of credit to fund its existing commitments for capital improvements as
well as any other property improvement commitments negotiated in connection with
other new tenancies.
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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 and entered into
its new bank line of credit described in Note 2, and sold its interest in
501-529 Nicollet Avenue and purchased Brookdale Square Shopping Center as
described in Note 3 of Item 1 of the financial statement.
RESULTS OF OPERATIONS
Rental income increased $2,604,000 or 30%, from $8,615,000 during the first
quarter of 1995 to $11,219,000 during the first quarter of 1996. Approximately
$2,215,000 of this increase was due to the effect of both the Tucker acquisition
and the acquisition of St. Francis Plaza, which was not purchased until the
second quarter of 1995. In addition, rental income at Har Mar Mall increased
approximately $91,000 between the respective quarters due primarily to the
Barnes & Noble and HomePlace leases executed during 1995. Rental income also
increased at Burning Tree Plaza and Sun Ray Shopping Center due to improved
leasing. These increases were partially offset by a decrease in rental income at
Westview Shopping Center of $38,000 between the respective first quarter periods
due to a decline in occupancy.
Total expenses increased $2,431,000 or 35%; from $6,865,000 during the first
quarter of 1995 to $9,296,000 during the first quarter of 1996. Operations,
maintenance and management expenses increased $808,000 during the respective
periods (from $1,277,000 to $2,085,000). Approximately $362,000 of this increase
was due to the inclusion of the Tucker portfolio and St. Francis Plaza
operations in the first quarter of 1996 results. The increase in operating
expenses was also due to an increase in snow removal costs of approximately
$98,000 between the respective quarters due to the severe weather in both the
Northeast and Midwest. Bad debt expense increased approximately $104,000 between
the respective quarters due primarily to financial difficulties experienced by
certain tenants at both the Crossroads and Westview centers. In addition to the
above specific operating expense increases, operations, maintenance and
management expenses at the property level increased most notably at Westview
Shopping Center ($106,000) and Har Mar Mall ($68,000).
Real estate tax expense increased $667,000 during the first quarter of 1996
as compared to the first quarter of 1995 (from $2,008,000 to $2,675,000).
$443,000 of the increase resulted from the acquisition of Tucker as well as the
acquisition of St. Francis Plaza. The remaining increase of $224,000 was due to
tax increases at nearly all of the properties. The increase was most notable at
the Company's Illinois properties, where the expense increased approximately
$100,000 or 12% over the first quarter of 1995. Real estate taxes increased at
substantially all of the Minnesota properties as well, with the aggregate tax
expense for these properties increasing approximating 10% over 1995 levels.
Mortgage and other interest expense decreased $79,000 during the first
quarter of 1996 (from $1,464,000 for the first quarter of 1995 to $1,385,000 for
the first quarter of 1996). This decrease was primarily due to a decrease in the
average outstanding balance on the line of credit during the first quarter of
1996, as compared to 1995, together with the pay-off of the Sun Ray mortgage
loans of approximately $12,300,000 in early January 1996. These decreases were
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<PAGE> 11
partially offset by the effect of the sixteen days of interest expense on the
debt assumed upon the Tucker acquisition.
Depreciation and amortization expense increased from $1,757,000 during the
first quarter of 1995 to $2,252,000 during the comparable quarter of 1996.
Approximately $290,000 of this $495,000 increase resulted from the acquisition
of the Tucker Properties, as well as the acquisition of St. Francis Plaza. The
balance of the increase was due to the amortization of tenant improvements
associated with new tenants at various properties, principally Har Mar.
Administrative and general expenses increased $196,000 during the first
quarter of 1996 as compared to the first quarter of 1995 (from $359,000 to
$555,000). This increase was primarily due to the accrual of professional,
shareholder servicing and personnel costs during the first quarter of 1996 in
anticipation of the Tucker acquisition.
During the 1996 first quarter, the Company took 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.
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.
The aggregate result for the first quarter of 1996 was a $9,540,000
increase in net income over the first quarter of 1995, from $1,835,000 ($.22 per
share) to $11,375,000 ($.91 per share). Per share amounts reflect
weighted-average shares outstanding of 12,536,714 during the first quarter of
1996 and 8,413,849 during the first quarter of 1995. The increased number of
shares was 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.
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 Form 10-K report for the year ended December
31, 1995.
For the first quarter of 1996, funds from operations ("FFO") increased
$616,000 or 18% from $3,467,000 in 1995 to $4,083,000. 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 newly issued NAREIT guidelines
effective for the year ending December 31, 1996, the Company does not add back
to net income the amortization of costs incurred in connection with the
Company's financing activities. Under the former guidelines for computing FFO,
the Company's FFO would have been $4,499,000 and $3,592,000 for the periods
ending
11
<PAGE> 12
March 31, 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 net income as an indicator of
the Company's operating performance or 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 ending
December 31, 1995.
12
<PAGE> 13
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
On March 14, 1996, the Company's stockholders approved the acquisition
of Tucker, at a special meeting of the Company's stockholders. Votes
cast in favor, against, and abstaining were as follows:
For: 7,599,486.116 Against: 365,926.731 Abstain: 42,140.598
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
On March 30, 1996, the Company filed a report on Form 8-K, (date of event, March
15, 1996) reporting under Items 2 and 7 the acquisition of Tucker Properties,
Inc. and related financial information.
13
<PAGE> 14
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereto duly authorized.
Date: May 15, 1996
Bradley Real Estate, Inc.
-------------------------
Registrant
By: /S/ Thomas P. D'Arcy
--------------------------
Thomas P. D'Arcy
President and CEO
By: /S/ Irving E. Lingo, Jr.
--------------------------
Irving E. Lingo, Jr.
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,388
<SECURITIES> 0
<RECEIVABLES> 11,518
<ALLOWANCES> (1,328)
<INVENTORY> 0
<CURRENT-ASSETS> 13,578
<PP&E> 492,619
<DEPRECIATION> (29,249)
<TOTAL-ASSETS> 491,602
<CURRENT-LIABILITIES> 19,403
<BONDS> 221,259
<COMMON> 187
0
0
<OTHER-SE> 246,330
<TOTAL-LIABILITY-AND-EQUITY> 491,602
<SALES> 9,379
<TOTAL-REVENUES> 20,700
<CGS> 0
<TOTAL-COSTS> 4,760
<OTHER-EXPENSES> 3,151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,385
<INCOME-PRETAX> 11,375
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,375
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
