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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 11, 1997)
300,000 SHARES
BRADLEY REAL ESTATE, INC.
COMMON STOCK
All the shares of common stock of Bradley Real Estate, Inc. (the "Company")
offered hereby (the "Shares") are being sold by the Company. The Company's
common stock, par value $0.01 per share (the "Common Stock"), is listed on the
New York Stock Exchange (the "NYSE") under the symbol "BTR." On December 4,
1997, the last reported sale price of the Common Stock on the NYSE was $20.50
per share.
Ownership of more than 9.8% of the Common Stock is restricted in order to
preserve the Company's status as a real estate investment trust ("REIT") for
federal income tax purposes. See "Description of Capital Stock -- Restrictions
on Transfer" in the accompanying Prospectus.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 OF THE ACCOMPANYING PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................ $20.50 $0.82 $19.68
- -----------------------------------------------------------------------------------------------
Total.................................... $6,150,000 $246,000 $5,904,000
===============================================================================================
</TABLE>
(1) The Company has agreed to indemnify C. E. Unterberg, Towbin (the
"Underwriter") against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $50,000.
The Shares offered hereby are offered by the Underwriter subject to prior
sale, when, as and if delivered to and accepted by the Underwriter and subject
to its right to withdraw, cancel or modify such offer and to reject orders in
whole or in part. It is expected that delivery of the Shares will be made in New
York, New York on or about December 9, 1997.
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C. E. UNTERBERG, TOWBIN
December 4, 1997
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IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THOSE 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.
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The following information contained in this Prospectus Supplement is
qualified in its entirety by the detailed information appearing elsewhere in
this Prospectus Supplement or the accompanying Prospectus or incorporated
therein by reference. As used herein, the term "Company" includes Bradley Real
Estate, Inc., a Maryland corporation, and its subsidiaries, including Bradley
Operating Limited Partnership (the "Operating Partnership"), a Delaware limited
partnership, and its subsidiaries, or, as the context may require Bradley Real
Estate, Inc. only.
Statements made or incorporated in this Prospectus Supplement and the
accompanying Prospectus include forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Forward-looking statements include,
without limitation, statements containing the words "anticipates", "believes",
"expects", "intends", "future", and words of similar import which express
management's belief, expectations or intentions regarding the Company's future
performance or future events or trends. Forward-looking statements involve known
and unknown risks, uncertainties and other factors, including those factors
identified under "Risk Factors" in the accompanying Prospectus, which may cause
actual results, performance or achievements of the Company to differ materially
from anticipated future results, performance or achievements expressly or
implied by such forward-looking statements. In addition, the Company undertakes
no obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
THE COMPANY
Bradley Real Estate, Inc. is a fully-integrated real estate operating
company, which owns and operates community and neighborhood shopping centers in
the Midwest region of the United States. As of the date of this Prospectus
Supplement, the Company owns 46 properties (44 shopping centers and two
office/retail properties) in 11 states, aggregating approximately 8.8 million
square feet of gross leasable area ("GLA"). Title to such properties is held by
or for the benefit of the Operating Partnership, of which the Company is the
sole general partner and the owner of approximately 95% of the economic
interests in the Operating Partnership.
The Company's strategic objective is to become an owner of
grocery-anchored, open-air community and neighborhood shopping centers in the
upper Midwest, generally consisting of the states of Illinois, Indiana, Iowa,
Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South
Dakota and Wisconsin. The Company currently owns properties in seven states in
this region. Through past experience as well as current research, the Company
believes that this region is economically strong and diverse and provides a
favorable environment for the acquisition, ownership and operation of retail
properties. The Company evaluates prospects in both metropolitan statistical
areas defined by the U.S. Census Bureau and secondary markets within this region
that offer opportunities for favorable investment returns and long-term cash
flow growth. The Company favors grocery-anchored centers because, based on its
past experience, such properties offer strong and predictable daily consumer
traffic and are less susceptible to downturns in the general economy than
apparel- or leisure-anchored shopping center properties.
The Company regularly evaluates, and engages in discussions with public and
private entities regarding possible portfolio or asset acquisitions or business
combinations. Since January 1, 1997, the Company has acquired 17 shopping
centers which meet its investment criteria and expects to complete additional
acquisitions during the remainder of the year, although there can be no
assurance that further acquisitions will be made within its target markets.
These 17 shopping centers are located in Illinois, Indiana, Iowa, Minnesota,
Missouri and Wisconsin and have an aggregate of approximately 1.8 million square
feet of GLA for an aggregate acquisition cost of approximately $117.7 million.
The Company seeks to create an income stream diversity across many Midwest
markets in order to insulate the Company from economic trends affecting any
particular market.
The Company has elected to qualify as a REIT for federal income tax
purposes since its organization in 1961. The Company is the nation's oldest
continuously qualified REIT.
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The Company is incorporated under the laws of the State of Maryland. Its
offices are located at 40 Skokie Boulevard, Suite 600, Northbrook, Illinois
60062-1626. Its telephone number is (847) 272-9800.
CERTAIN TRANSACTIONS
A. Robert Towbin, a member of the Board of Directors of the Company, serves
as a Managing Director of C.E. Unterberg, Towbin, the underwriter of the
offering contemplated by this Prospectus Supplement. C.E. Unterberg, Towbin will
receive an aggregate amount of $246,000 as compensation in connection with the
offering. See "Underwriting." The Underwriter has not performed any other
services for the Company during the last fiscal year.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares, after
deducting the underwriting discount and expenses, will be approximately
$5,854,000. Pursuant to the partnership agreement governing the Operating
Partnership, the Company is required to contribute all proceeds from the sale of
the Shares to the Operating Partnership in exchange for additional partnership
units. The Company, as general partner of the Operating Partnership, intends to
cause the Operating Partnership to use the net proceeds from the sale of the
Shares 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 $36.0 million of potential
availability under the line of credit. The line of credit matures on March 15,
1999 and outstanding borrowings under the line of credit bear interest at a
variable rate, depending upon the rating assigned by recognized rating agencies,
which rate is currently the lower of the lead bank's base rate or 1.375% over
the London InterBank Offer Rate.
FEDERAL INCOME TAX CONSIDERATIONS
The 1997 Tax Act made changes to the Code, particularly with respect to the
taxation of capital gain income. Potential purchasers of Shares are urged to
read the following description of relevant federal income tax considerations,
rather than the description contained under the caption "Federal Income Tax
Considerations" in the accompanying Prospectus. References in the following
description to the "Code" include the Code as amended by the 1997 Tax Act.
Goodwin, Procter & Hoar LLP has confirmed to the Company that its opinion
expressed in the first paragraph of the following description is not altered by
virtue of the 1997 Tax Act.
The Company has elected to qualify as a REIT under the Code. In the opinion
of Goodwin, Procter & Hoar LLP, the Company has been organized in conformity
with the requirements for qualification as a REIT under the Code, and its manner
of operation has met and will continue to meet the requirements for
qualification and taxation as a REIT under the Code. This opinion is based on
various assumptions and is conditioned upon representations made by the Company
as to factual matters and the continuation of such factual matters. Investors
should be aware, however, that opinions of counsel are not binding upon the
Internal Revenue Service ("IRS") or any court. Moreover, such qualification and
taxation as a REIT in any tax year depends upon the Company's ability to meet in
its actual results for the tax year the various source of income, ownership of
assets, distribution and diversity of ownership requirements of the Code for
qualification as a REIT, which results will not be reviewed by Goodwin, Procter
& Hoar LLP. Accordingly, no assurance can be given that the actual results of
the Company for any particular tax year will in fact satisfy the requirements
for qualification. Likewise, although the Company believes that it has operated
in a manner which satisfies the REIT qualification requirements under the Code
since its organization in 1961, no assurance can be given that the Company's
qualification as a REIT will not be challenged by the IRS for taxable years
still subject to audit.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Company and its
stockholders. For the particular provisions that 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 regulations thereunder. The following summary is
qualified in its entirety by such reference. This discussion
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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,
including the requirement that the REIT distribute to its stockholders at least
95% of its real estate investment trust taxable income (computed without regard
to the dividends paid deduction and the Company's net capital gain) for the
taxable year, a REIT generally will not be subject to federal income tax with
respect to income that 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 or net
capital gains, the alternative minimum tax on its items of tax preference, and
taxes imposed on income and gain generated by certain extraordinary
transactions. As discussed below, however, for taxable years beginning after
December 31, 1997 stockholders may be credited for all or a portion of the taxes
paid by the Company on its retained net capital gains. 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 its merger acquisition of Tucker Properties Corporation in March 1996,
see "Risk Factors -- Adverse Consequences of Failure to Qualify as a REIT and
Other Tax Risks" in the accompanying Prospectus.
The Company may elect to retain and pay income tax on its net long-term
capital gains received during the taxable year. For taxable years beginning
after December 31, 1997, if the Company so elects for a taxable year, the
stockholders would include in income as long-term capital gains their
proportionate share of such portion of the Company's undistributed long-term
capital gains for the taxable year as the Company may designate. A stockholder
would be deemed to have paid his share of the tax paid by the Company on such
undistributed capital gains, which would be credited or refunded to the
stockholder. The stockholder's basis in his Common Stock would be increased by
the amount of undistributed long-term capital gains included in the
stockholder's long-term capital gains, less such stockholder's share of the
capital gains tax paid by the Company. As discussed below, stockholders should
note that the IRS has issued Notice 97-64 which provides interim guidance on the
proper treatment of capital gains dividends and undistributed capital gains for
individuals, estates and certain trusts.
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 a 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
United States 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, (iii) an estate, the income of which is subject to United States
federal income taxation regardless of its source or (iv) a trust, if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust and (v) is not an
entity that has a special status under the Code (such as a tax-exempt
organization or dealer in securities). Subject to the discussion below regarding
the changes to the capital gains tax rates, distributions that are designated as
capital gains dividends will be taxed as 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 or her Common Stock.
However, corporate stockholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Capital gain dividends are not
eligible for the dividends-received deduction for corporations.
The 1997 Tax Act alters the taxation of capital gain income. Under the 1997
Tax Act, individuals (as well as estates and certain trusts) who hold capital
assets for more than 18 months will be taxed at a maximum long-term capital gain
rate of 20% on the sale or exchange of those investments. Gains from capital
assets held for more than 12 months but not more than 18 months will be taxed at
a maximum mid-term capital gain rate of 28%. The Act also provides a maximum
rate of 25% for "unrecaptured section 1250 gain" for individuals, trusts, and
estates and special rules for "qualified 5-year gain," and makes other changes
to prior law. The 1997 Tax Act allows the IRS to prescribe regulations on how
the 1997 Tax Act's new capital gain rates will
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apply to sales of capital assets by "pass- through entities," which include
REITs such as the Company. IRS Notice 97-64 describes temporary regulations that
will be issued in regard to the proper treatment of capital gain dividends and
undistributed capital gains of REITs and gives interim guidance that should be
followed in this area until further notice. To the extent that the Company has
net capital gain for a taxable year, dividends paid during the year (or that are
deemed to be paid for taxable years beginning after December 31, 1997) may be
designated by it as capital gain dividends. In general, a capital gain dividend
is treated by the stockholders as a gain from the sale or exchange of a capital
asset held for more than one year. If the Company designates a dividend as a
capital gain dividend for a taxable year ending on or after May 7, 1997, it may
also designate the dividend as a 20% rate gain distribution, an unrecaptured
section 1250 gain distribution, or a 28% rate gain distribution. Unless
specifically designated otherwise by the Company, a distribution designated as a
capital gain dividend will be taxable as a 28% rate gain distribution. If any
capital gain dividend is received on or after May 7, 1997, but is treated as
being paid during a taxable year that ends on or before that date, the dividend
will be taxable as a 28% rate gain distribution. This interim guidance may be
changed in the future. As a result, prospective investors are urged to consult
their own tax advisors with respect to the proper treatment of capital gain
dividends and undistributed capital gains.
Distributions, other than capital gain dividends, 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 distribution will
be treated as long-term capital gain or loss if the shares of Common Stock have
been held for more than 12 months (or, in the case of individuals, estates and
certain trusts, mid-term capital gain or loss if the shares have been held for
more than 12 months but not more than 18 months and long-term capital gain or
loss if the shares have been held for more than 18 months) and otherwise as
short-term capital gain or loss. 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 special 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.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of the Company. Instead, such losses would be
carried over by the Company for potential offset against its future income
(subject to certain limitations). Taxable distributions from the Company and
gain from the disposition of Common Stock will not be treated as passive
activity income and, therefore, stockholders generally will not be able to apply
any "passive activity losses" (such as losses from certain types of limited
partnerships in which the stockholder is a limited partner) against such income.
In addition, taxable distributions from the Company generally will be treated as
investment income for purposes of the investment interest deduction limitations.
Capital gain distributions and capital gains from the disposition of Common
Stock (and distributions treated as such) will be treated as investment income
for purposes of the investment interest deduction limitations only if and to the
extent the stockholder so elects, in which case such capital gain distributions
and capital gains will be taxed at ordinary income rates to the extent of such
election. The Company will notify stockholders after the close of the Company's
taxable year as to the portions of the distributions attributable to that year
that constitute ordinary income, return of capital, and capital gain.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Shares offered hereby and with respect
to the tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction, including tax consequences resulting
from such investor's own tax characteristics. In particular, 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.
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UNDERWRITING
Under the terms and subject to the conditions of an Underwriting Agreement
dated as of December 4, 1997 (the "Underwriting Agreement") between the Company
and the Underwriter, the Underwriter has agreed to purchase from the Company
300,000 shares of Common Stock.
The Company has been advised by the Underwriter that it proposes to offer
the 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 the Underwriter) at such price less a concession not in
excess of $0.82 per share.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act or to contribute to
payments the Underwriter may be required to make in respect thereof. The Company
has also agreed to reimburse the Underwriter for certain expenses.
The Shares offered and sold hereby have been listed on the NYSE, subject to
official notice of issuance.
Until the offering is completed, the rules of the Securities and Exchange
Commission may limit the ability of the Underwriter to bid for and purchase
Common Stock. As an exception to these rules, the Underwriter is permitted,
subject to certain restrictions, to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
If the Underwriter creates a short position in the Common Stock in
connection with the offering, (i.e., if it sells more Shares than are set forth
on the cover page of this Prospectus Supplement) the Underwriter may reduce that
short position by purchasing shares of Common Stock in the open market.
In general, purchases of a security for the purpose of stabilization could
cause the price of the security to be higher than it might be in the absence of
such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the Common Stock. In addition,
neither the Company nor the Underwriter makes any representation that the
Underwriter will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
A. Robert Towbin, a member of the Board of Directors of the Company, serves
as a Managing Director of the Underwriter. The Underwriter has not performed any
other services for the Company during the last fiscal year.
LEGAL MATTERS
Certain legal matters, including the legality of the 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 9,000 shares of Common Stock. Certain legal matters for the
Underwriter will be passed upon by Rogers & Wells, New York, New York. As to
matters of Maryland law, Rogers & Wells will rely upon the opinion of Goodwin,
Procter & Hoar LLP.
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