<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 16, 1998
Date of earliest event reported: February 13, 1998
--------------------------------
BRADLEY REAL ESTATE, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 1-10328 04-6034603
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
40 SKOKIE BOULEVARD, NORTHBROOK, ILLINOIS 60062
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(847) 272-9800
<PAGE>
Item 5. Other Events.
------------
Bradley Real Estate, Inc. (the "Company" or "Bradley") files this Form 8-K
report that contains pro forma financial statements as of September 30, 1998 and
the nine months then ended and for the year ended December 31, 1997. Financial
statements consistent with Regulation S-X, Rule 3-14 were previously filed on
Form 8-K for properties accounting for over 50% of the aggregate acquisition
costs of a series of properties acquired during the period January 1, 1998
through December 14, 1998 (the "Completed Acquisitions") or whose acquisition
the Company considers probable (the "Pending Acquisitions" and, together with
the Completed Acquistions, the "Acquisition Properties").
The Acquisition Properties do not include properties which Bradley acquired
August 6, 1998 pursuant to the Agreement and Plan of Merger dated May 30, 1998
between Bradley and Mid-America Realty Investments, Inc. (the "Mid-America
Merger").
During the period January 1 through December 14, 1998, the Company acquired
21 shopping centers and two outlots adjacent to one of Bradley's existing
centers at an aggregate cost of approximately $198.9 million. In addition, as
of December 15, 1998, the Company had entered into a contract for the purchase
of an additional Pending Acquisition for an estimated acquisition price of
approximately $3.9 million which management believes will close. No one
property or group of properties comprising the Acquisition Properties was or
will be in itself significant, but in the aggregate the costs exceed 10% of the
total assets of the Company and its subsidiaries consolidated at December 31,
1997. The Completed Acquisitions have been funded, and management currently
expects that the Pending Acquisition will be funded, with borrowings under the
Company's bank line of credit, through the assumption of existing mortgage
indebtedness, and the issuance of Limited Partnership Units in Bradley Operating
Limited Partnership (the "Operating Partnership") to contributors of properties
acquired. The Company is the sole general partner and the owner of
approximately 94% of the economic interests in the Operating Partnership. No
assurance can be given that the Pending Acquisition will be consummated or that
the terms of the transaction or proposed method of financing may not change
materially from that described herein.
The dates, shopping centers acquired and the approximate acquisition cost
for the respective Acquisition Properties are as follows:
2
<PAGE>
<TABLE>
<CAPTION>
Completed Acquisitions
- ---------------------------
DATE PROPERTY APPROXIMATE ACQUISITION COST
<S> <C> <C>
February 13, 1998 Kings Plaza, Richmond, IN $ 3,671,000
March 5, 1998 Sagamore Park, West Lafayette, IN 7,769,000
March 13, 1998 Oak Creek Centre, Oak Creek, WI 4,926,000
March 31, 1998 Midtown Mall, Ashland, KY 7,441,000
March 31, 1998 * Courtyard Shopping Center, Burton, MI 9,710,000
April 10, 1998 * Redford Plaza, Redford, MI 20,685,000
May 13, 1998 Butterfield Square, Libertyville, IL 13,008,000
May 13, 1998 * Plainview Village, Louisville, KY 12,100,000
May 13, 1998 * Camelot Shopping Center, Louisville, KY 8,645,000
May 13, 1998 Dixie Plaza, Louisville, KY 3,676,000
May 28, 1998 Bartonville, Peoria, IL 1,583,000
May 28, 1998 Sterling Outlots, Peoria, IL 525,000
June 10, 1998 Garden Plaza, Franklin, WI 5,346,000
June 23, 1998 Fox River, Burlington, WI 7,632,000
June 26, 1998 Lincoln Plaza, New Haven, IN 5,075,000
August 19, 1998 Midtown Plaza, Shawnee, KS 6,128,000
August 21, 1998 * Ellisville Square, St. Louis, MO 10,971,000
August 28, 1998 Doubletree Plaza, Winfield, IN 7,899,000
September 1, 1998 * Clock Tower Plaza, Lima, OH 14,774,000
September 4, 1998 * Salem Consumer Square, Dayton, OH 27,354,000
November 19, 1998 Maplewood Square, Maplewood, MO 5,212,000
November 20, 1998 Watts Mill, Kansas City, MO 14,764,000
------------
$198,894,000
============
</TABLE>
<TABLE>
<CAPTION>
Pending Acquistion
- ------------------
PROPERTY ESTIMATED ACQUISITION COST
<S> <C>
Prospect Plaza, Gladstone, MO $ 3,900,000
============
</TABLE>
Properties designated with an asterisk (*) are properties included within
the Acquisition Properties for which financial statements were previously filed
on Form 8-K. None of the Acquisition Properties was or will be acquired from a
related party of the Company or its consolidated subsidiaries. Factors
considered by the Company in assessing the acquisition price for each of the
Acquisition Properties included its location and tenant mix, including
opportunities for retenanting and remodeling consistent with the Company's
experience as a shopping center operator; its current net operating income and
the prospect for increased income in the short and long range future;
capitalization rates for shopping center properties of the type acquired, in the
Midwest area of the United States generally and in the locality in which the
property is located; current operating costs and the possibility of effecting
property-level operating efficiencies as a result of the Company's ownership of
a significant number of shopping centers in the Midwest; and the differential
between the Company's cost of capital in acquiring the property and the
property's current and potential net operating income. After reasonable
inquiry, the Company is not aware of any material factors relating to any
specific property included within the Acquisition Properties other than those
discussed in the preceding sentence that would cause the reported financial
information not to be necessarily indicative of future operating results.
On June 18, 1998, the Company filed a Registration Statement on Form S-4
(Registration No. 333-57123) with the Securities and Exchange Commission
relating to the 8.4% Series A Convertible Preferred Stock (the "Series A
Preferred Stock") to be issued by the Company upon consummation of the Mid-
America Merger (the "Merger Registration Statement"). Reference is made to the
Merger Registration Statement for a description of the terms of the Mid-America
Merger.
3
<PAGE>
The pro forma financial statements listed under Item 7 below reflect both
(a) certain transactions of Bradley, as described within such financial
statements (the "Prior Bradley Transactions"), other than the Mid-America
Merger as well as (b) the Prior Bradley Transactions and the Mid-America Merger.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
The following pro forma financial information accompanies this report:
(a) Pro Forma Financial Information - Bradley Real Estate, Inc.
Pro Forma Condensed Combined Balance Sheet as of September 30,
1998 (unaudited)
Pro Forma Condensed Combined Statement of Income for the Nine
Months Ended September 30, 1998 (unaudited)
Pro Forma Condensed Statement of Income to reflect Prior Bradley
Transactions for the Nine Months Ended September 30, 1998
(unaudited)
Pro Forma Condensed Combined Statement of Income for the Year
Ended December 31, 1997 (unaudited)
Pro Forma Condensed Statement of Income to reflect Prior Bradley
Transactions for the Year Ended December 31, 1997 (unaudited)
(b) Exhibits
None
4
<PAGE>
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 hereunto duly authorized.
BRADLEY REAL ESTATE, INC.
By: /s/ Thomas P. D'Arcy
---------------------
Date: December 16, 1998 Thomas P. D'Arcy
Chairman, President and Chief
Executive Officer
5
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
From October 1, 1998 through December 14, 1998, Bradley acquired two
shopping centers and has entered into a contract to acquire an additional
shopping center, which management believes will close. The aggregate cost of
these transactions is expected to be approximately $23.9 million. Management
currently expects to fund the Pending Acquisition with cash provided by the
Company's bank line of credit. Although management deems the Pending
Acquisition as probable, there can be no assurance that the acquisition of such
property will be consummated, or that the acquisition price will approximate
that currently estimated. Further, there can be no assurance that the method of
financing will be as currently estimated. The unaudited Pro Forma Condensed
Combined Balance Sheet of Bradley is presented as if the acquisitions (including
the Pending Acquisition) had been consummated on September 30, 1998. This
unaudited Pro Forma Condensed Combined Balance Sheet is presented for
comparative purposes only and is not necessarily indicative of what the actual
financial position of Bradley would have been at September 30, 1998, nor does it
purport to represent the future financial position of Bradley. This unaudited
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with,
and is qualified in its entirety by the historical financial statements and the
notes thereto of Bradley.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 ACQUISITION
HISTORICAL ADJUSTMENTS (A) PRO FORMA
------------------ --------------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
ASSETS
Real estate investments --at cost............ $904,704 $23,876 $928,580
Accumulated depreciation and amortization.... (53,741) -- (53,741)
-------- ------- --------
Net real estate investments.................. 850,963 23,876 874,839
Real estate investments held for sale........ 49,476 49,476
Other assets:
Cash and cash equivalents................... 3,283 -- 3,283
Rents and other receivables................. 13,349 -- 13,349
Investment in partnership................... 13,260 -- 13,260
Deferred charges, net and other assets...... 17,982 -- 17,982
-------- ------- --------
Total assets................................. $948,313 $23,876 $972,189
======== ======= ========
LIABILITIES AND SHARE OWNERS' EQUITY
Mortgage loans............................... 97,640 6,261 103,901
Unsecured notes payable...................... 199,527 -- 199,527
Line of credit............................... 153,400 16,286 169,686
Accounts payable, accrued expenses and
other liabilities........................... 32,399 -- 32,399
-------- ------- --------
Total liabilities............................ 482,966 22,547 505,513
-------- ------- --------
Minority interest............................ 20,693 1,329 22,022
-------- ------- --------
Share owners' equity
Series A preferred stock at par and
paid in capital........................... 86,882 -- 86,882
Common stock at par and paid in capital..... 346,887 -- 346,887
Retained earnings (distributions in excess
of accumulated earnings)................... 10,885 -- 10,885
-------- ------- --------
Total share owners' equity................... 444,654 -- 444,654
-------- ------- --------
Total liabilities and share owners' equity... $948,313 $23,876 $972,189
======== ======= ========
</TABLE>
F-1
<PAGE>
EXPLANATORY NOTES
(A) Adjustments represent Acquisition Properties acquired subsequent to
September 30, 1998, that have been completed, or that are probable of
completion.
F-2
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
This unaudited Pro Forma Condensed Combined Statement of Income is
presented as if the Mid-America Merger and all the Prior Bradley Transactions
(see Note A) had been consummated on January 1, 1997 and with Bradley qualifying
as a REIT, distributing all of its taxable income and, therefore, incurring no
federal income tax expense during the period January 1, 1997 through September
30, 1998. The Mid-America Merger has been accounted for under the purchase
method of accounting in accordance with Accounting Principles Board Opinion No.
16. In the opinion of Bradley's management, all adjustments necessary to reflect
the effects of these transactions have been made. The accompanying Pro Forma
Condensed Combined Statement of Income has been prepared based on pro forma
adjustments to pro forma and historical financial statements of Bradley and
historical financial statements of Mid-America Realty Investments, Inc. ("Mid-
America").
This unaudited Pro Forma Condensed Combined Statement of Income is
presented for comparative purposes only and is not necessarily indicative of
what the actual results of operations of Bradley would have been for the period
presented, nor does it purport to represent the results to be achieved in future
periods. This unaudited Pro Forma Condensed Combined Statement of Income should
be read in conjunction with, and is qualified in its entirety by the Pro Forma
Condensed Statement of Income to reflect Prior Bradley Transactions and the
respective historical financial statements and the notes thereto of Bradley and
Mid-America.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------------------------------
BRADLEY
PRO FORMA
PRIOR PRO FORMA AS ADJUSTED
BRADLEY MID-AMERICA FOR
PRO FORMA MID-AMERICA MERGER MID-AMERICA
TRANSACTIONS(A) HISTORICAL(B) ADJUSTMENTS MERGER
--------------- ------------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Income:
Rental income...................................... $ 95,850 $ 13,021 $ -- $ 108,871
Other income....................................... 1,714 399 -- 2,113
----------- ----------- ----------- -----------
Total revenue.................................... 97,564 13,420 -- 110,984
----------- ----------- ----------- -----------
Expenses:
Operations, maintenance and management............. 13,287 2,348 -- 15,635
Real estate taxes.................................. 15,751 1,718 -- 17,469
Mortgage and other interest........................ 22,774 3,123 (281)(C) 25,616
General and administrative......................... 5,227 1,118 (789)(D) 5,556
Provision for merger related expenses.............. -- 1,344 (1,344) --
Depreciation and amortization...................... 18,012 2,893 (1,070)(E) 19,835
----------- ----------- ----------- -----------
Total expenses...................................... 75,051 12,544 (3,484) 84,111
----------- ----------- ----------- -----------
Income before equity in earnings of partnership
and allocation to minority interest................ 22,513 876 3,484 26,873
Equity in earnings of partnership................... 247 539 164(E) 950
Income allocated to minority interest............... (1,222) -- (40) (1,262)
----------- ----------- ----------- -----------
Net income.......................................... 21,538 1,415 3,608 26,561
Preferred share distributions....................... (1,096) -- (4,345)(F) (5,441)
----------- ----------- ----------- -----------
Net income attributable to common share owners...... $ 20,442 $ 1,415 $ (737) $ 21,120
=========== =========== =========== ===========
Weighted average number of common shares
outstanding-basic(G).............................. 23,673,444 23,673,444
Basic net income per common share(G)................ $ 0.86 $ 0.89
=========== ===========
</TABLE>
F-3
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Statement of Income
(A) See page F-6 for the pro forma condensed statement of income giving
effect to Prior Bradley Transactions.
(B) Represents historical operating results for Mid-America for the period
prior to the Merger.
(C) Represents the net reduction in interest expense for the prepayment of
certain Mid-America mortgage indebtedness with Bradley's line of credit
at Bradley's current interest rate of 6.75%, combined with the reduction
in interest expense to reflect the estimated market interest rate of
approximately 7.25%, in accordance with the purchase method of
accounting, partially offset by an increase in interest expense for the
payment of fees and expenses related to the Mid-America Merger of
approximately $4,850,000, at an interest rate of 6.75%, as follows
(in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages prepaid........................... $(1,242)
Interest on Bradley's line of credit used to prepay debt.......................... 1,070
Reduction of Mid-America interest to reflect a market rate........................ (300)
Interest on Bradley's line of credit for Mid-America Merger fees.and expenses..... 191
-------
Pro forma adjustment.............................................................. $ (281)
=======
</TABLE>
(D) Represents general and administrative cost savings which have been
estimated based upon historical costs for those items which are expected
to be eliminated as a result of the Mid-America Merger, as follows
(in thousands):
<TABLE>
<S> <C>
Salaries and benefits............................................................. $ (569)
D&O insurance and director fees................................................... (99)
Professional fees................................................................. (83)
Other............................................................................. (38)
-------
Pro forma adjustment.............................................................. $ (789)
=======
</TABLE>
(E) Depreciation and amortization changes relate to recording Mid-America's
properties at Bradley's purchase price, the related depreciation
utilizing an estimated useful life of 39 years and a depreciable basis of
approximately $121,850,000, and the elimination of historical
amortization of Mid-America deferred assets in accordance with the
purchase method of accounting, as follows (in thousands):
<TABLE>
<S> <C>
Pro forma depreciation expense ($121,850 over 39 years)........................... $ 1,823
Mid-America depreciation and amortization......................................... (2,893)
-------
Pro forma adjustment.............................................................. $(1,070)
=======
</TABLE>
The pro forma adjustment to the equity in earnings of partnership
reflects the adjustment to depreciation and amortization of the
partnership resulting from recording the investment in partnership at
Bradley's purchase price.
(F) Preferred share distributions are calculated using an annual dividend
rate of $2.10 per share for 3,480,210 shares of Series A Preferred Stock
pro rated for the period presented.
F-4
<PAGE>
(G) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY AS ADJUSTED FOR MID-AMERICA MERGER
NUMERATOR DENOMINATOR PER SHARE
--------- ----------- ---------
<S> <C> <C> <C>
Basic EPS:
Net income attributable to common stock..... $21,120,000 23,673,444 $ 0.89
Effect of dilutive securities:
Dilutive options exercised.................. -- 48,338
Conversion of LP Units...................... 1,262,000 1,415,517
----------- ----------
Diluted EPS:
Net income attributable to common stock..... $22,382,000 25,137,299 $ 0.89
=========== ========== ===========
</TABLE>
F-5
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
TO REFLECT PRIOR BRADLEY TRANSACTIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
During the period from January 1, 1998 through December 14, 1998, Bradley
acquired 21 shopping centers and two outlots adjacent to one of Bradley's
existing centers at an aggregate cost of approximately $198.9 million (the
"Completed Acquisitions"). Consideration paid for such acquisitions included
cash (provided primarily from the bank line of credit), the assumption of
mortgage indebtedness, and the issuance of Limited Partnership Units in Bradley
Operating Limited Partnership (the "Operating Partnership") to contributors of
properties acquired. In addition, as of December 15, 1998 the Company had
entered into a contract for the purchase of an additional shopping center for an
estimated acquisition price of approximately $3.9 million which management
believes will close (the "Pending Acquisition" and, together with the Completed
Acquisitions, the "Acquisition Properties"). Management currently expects to
fund the Pending Acquisition with the bank line of credit. Although management
deems such acquisition as probable, there can be no assurance that the
acquisition of such property will be consummated, or that the acquisition price
will approximate that currently estimated, or that the method of financing such
acquisition will be as currently estimated. The Prior Bradley Transactions do
not include the Mid-America Merger.
On January 28, 1998, Bradley, through the Operating Partnership, issued
$100 million of 7.2% ten-year unsecured Notes maturing January 15, 2008 (the
"January 1998 Debt Issuance"). The effective interest rate on the unsecured
Notes is approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's
Investment Services and "Baa3" by Moody's Investor's Services. Proceeds from the
offering were used to reduce the outstanding borrowings under the line of
credit.
On February 18, 1998, Bradley issued 392,638 shares of common stock to a
unit investment trust at a price based upon the then market value of $20.375 per
share (the "February 1998 Stock Offering"). Net proceeds from the offering of
approximately $7.6 million were contributed to the Operating Partnership and
were used to reduce outstanding borrowings under the line of credit.
On July 31, 1998, Bradley completed the sale of One North State for
approximately $84.5 million. The net proceeds of approximately $83 million
were used to pay down the line of credit. In addition, in May 1998, Bradley
sold Holiday Plaza, a shopping center in Cedar Falls, Iowa, for approximately
$1.9 million.
The unaudited Pro Forma Condensed Statement of Income of Bradley is
presented as if the acquisitions (including the Pending Acquisition), the
dispositions, the January 1998 Debt Issuance, and the February 1998 Stock
Offering, described above, had been consummated on January 1, 1997, and with
Bradley qualifying as a REIT and, therefore, incurring no federal income tax
expense during the period January 1, 1997 through September 30, 1998.
F-6
<PAGE>
<TABLE>
<CAPTION>
ACQUISITION DISPOSITION OTHER
HISTORICAL PROPERTIES (A) PROPERTIES(B) ADJUSTMENTS PRO FORMA
----------- -------------- ------------- -------------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income................................... 92,642 11,649 (8,441) -- 95,850
Other income.................................... 1,693 21 -- -- 1,714
----------- ----------- ----------- ----------- -----------
Total revenue.................................. 94,335 11,670 (8,441) -- 97,564
----------- ----------- ----------- ----------- -----------
Expenses:
Operations, maintenance and management.......... 13,286 1,235 (1,234) -- 13,287
Real estate taxes............................... 16,441 1,268 (1,958) -- 15,751
Mortgage and other interest..................... 19,567 -- -- 3,207(C) 22,774
General and administrative...................... 5,227 -- -- 5,227
Depreciation and amortization................... 16,346 -- -- 1,666(D) 18,012
----------- ----------- ----------- ----------- -----------
Total expenses................................. 70,867 2,503 (3,192) 4,873 75,051
----------- ----------- ----------- ----------- -----------
Income before equity in earnings of partnership
and net gain on sale of properties.............. 23,468 9,167 (5,249) (4,873) 22,513
Equity in earnings of partnership................ 247 247
Net gain on sale of properties................... 29,680 -- (29,680) -- --
----------- ----------- ----------- ----------- -----------
Income before allocation to minority interest.... 53,395 9,167 (34,929) (4,873) 22,760
Income allocated to minority interest............ (2,892) -- -- 1,670 (1,222)
----------- ----------- ----------- ----------- -----------
Net income....................................... 50,503 9,167 (34,929) (3,203) 21,538
Preferred share distributions.................... (1,096) -- -- -- (1,096)
----------- ----------- ----------- ----------- -----------
Net income attributable to common
share owners.................................... $ 49,407 $ 9,167 $ (34,929) $ (3,203) $ 20,442
=========== =========== =========== =========== ===========
Weighted average shares outstanding.............. 23,597,218 23,673,444
Basic net income per common share(E):............ $ 2.09 $ 0.86
=========== ===========
Diluted net income per common share(E):.......... $ 2.07 $ 0.86
=========== ===========
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses of the
Acquisition Properties for the period Bradley did not own such
properties.
(B) Decrease represents the elimination of historical operating revenues,
expenses and net gains on sale of properties sold for the period Bradley
owned such properties.
(C) Mortgage and other interest has been increased to reflect the pro forma
borrowings for property acquisitions for the period during which Bradley
did not own such properties, net of the reduction for the application of
net proceeds from the property dispositions and the February 1998 Stock
Offering to pay down the line of credit for the period during which
Bradley owned such properties, and for the period preceding the stock
offering at an interest rate of 6.75%, which was Bradley's approximate
borrowing rate at December 15, 1998. Mortgage and other interest has been
increased for the January 1998 Debt Issuance for the period preceding the
issuance. A 0.125% change in the variable rate would result in a change
in the pro forma interest adjustment of approximately $28 (in thousands).
<TABLE>
<S> <C>
Increase in interest expense attributable to acquisition activities................... $ 6,506
Decrease in interest expense attributable to disposition activities................... (3,282)
Decrease in interest expense attributable to the February 1998 Stock Offering......... (64)
Net increase in interest expense attributable to the January 1998 Debt Issuance....... 47
-------
Pro forma adjustment.................................................................. $ 3,207
=======
</TABLE>
F-7
<PAGE>
(D) Depreciation and amortization has been increased to give effect to
recording the property acquisitions over a depreciable life of 39 years,
for the period which Bradley did not own such properties, net of the
reduction for properties sold for the period which Bradley owned such
properties, as follows (in thousands):
<TABLE>
<S> <C>
Increase in depreciation and amortization attributable to acquisition activities...... $ 1,772
Decrease in depreciation and amortization attributable to disposition activities...... (106)
--------
Pro forma adjustment.................................................................. $ 1,666
========
</TABLE>
(E) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY HISTORICAL BRADLEY PRO FORMA
NUMERATOR DENOMINATOR PER SHARE NUMERATOR DENOMINATOR PER SHARE
----------- ----------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income attributable to
common stock................... $49,407,000 23,597,218 $ 2.09 $20,442,000 23,673,444 $ 0.86
Effect of dilutive securities:
Dilutive options exercised...... -- 48,338 -- 48,338
Convertible preferred stock..... 1,096,000 728,756 -- --
Conversion of LP Units.......... 2,892,000 1,398,890 1,222,000 1,415,517
----------- ---------- ----------- -----------
Diluted EPS:
Net income attributable to
common stock................... $53,395,000 25,773,202 $ 2.07 $21,664,000 25,137,299 $ 0.86
=========== ========== ========== =========== =========== =========
</TABLE>
F-8
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
The unaudited Pro Forma Condensed Combined Statement of Income is
presented as if the Mid-America Merger and all the Prior Bradley Transactions
(see Note A) had been consummated on January 1, 1997, and with Bradley
qualifying as a REIT and, therefore, incurring no federal income tax expense
during the period January 1, 1997 through December 31, 1997. The Mid-America
Merger has been accounted for under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16. In the opinion of
Bradley's management, all adjustments necessary to reflect the effects of these
transactions have been made. The accompanying Pro Forma Condensed Combined
Statement of Income has been prepared based on pro forma adjustments to pro
forma and historical financial statements of Bradley and historical financial
statements of Mid-America.
This unaudited Pro Forma Condensed Combined Statement of Income is
presented for comparative purposes only and is not necessarily indicative of
what the actual results of operations of Bradley would have been for the periods
presented, nor does it purport to represent the results to be achieved in future
periods. This unaudited Pro Forma Condensed Combined Statement of Income should
be read in conjunction with, and is qualified in its entirety by the Pro Forma
Condensed Statement of Income to reflect Prior Bradley Transactions and by the
respective historical financial statements and the notes thereto of Bradley and
Mid-America.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------
BRADLEY
PRIOR PRO FORMA PRO FORMA
BRADLEY MID-AMERICA AS ADJUSTED FOR
PRO FORMA MID-AMERICA MERGER MID-AMERICA
TRANSACTIONS(A) HISTORICAL(B) ADJUSTMENTS MERGER
--------------- -------------- --------------- ----------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Rental income................................. $ 119,239 $22,478 $ -- $ 141,717
Other income.................................. 2,032 787 -- 2,819
----------- ----------- ----------- -----------
Total revenue............................... 121,271 23,265 -- 144,536
----------- ----------- ----------- -----------
Expenses:
Operations, maintenance and
management.................................. 16,764 4,316 -- 21,080
Real estate taxes............................. 19,430 2,952 -- 22,382
Mortgage and other interest................... 28,850 5,539 (736)(C) 33,653
General and administrative.................... 5,123 1,985 (1,300)(D) 5,808
Non-recurring stock based
compensation................................ 3,415 -- -- 3,415
Depreciation and amortization................. 21,434 4,981 (1,857)(E) 24,558
----------- ----------- ----------- -----------
Total expenses.............................. 95,016 19,773 (3,893) 110,896
----------- ----------- ----------- -----------
Income before net gain on sale of properties,
equity in earnings of partnership and
minority interest............................. 26,255 3,492 3,893 33,640
Net gain on sale of properties................. -- 130 (130) --
Equity in earnings of partnership.............. -- 1,026 260(E) 1,286
Income allocated to minority
interest...................................... (1,607) -- (83) (1,690)
----------- ----------- ----------- -----------
Income from operations......................... 24,648 4,648 3,940 33,236
Preferred share distributions.................. -- -- (7,308)(F) (7,308)
----------- ----------- ----------- -----------
Income from operations attributable to
common stock.................................. $ 24,648 $ 4,648 $(3,368) $ 25,928
=========== =========== =========== ===========
Weighted average common shares
outstanding-basic(G).......................... 23,356,620 23,356,620
Basic income from operations
per common share(G)........................... $ 1.06 $ 1.11
=========== ===========
</TABLE>
F-9
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Statement of Income
(A) See page F-11 for the pro forma condensed statement of income giving
effect to Prior Bradley Transactions.
(B) Represents historical operating results as reported by Mid-America for
the year ended December 31, 1997.
(C) Represents the net reduction in interest expense for the prepayment of
certain Mid-America mortgage indebtedness with Bradley's line of credit
at Bradley's current interest rate of 6.75%, combined with the reduction
in interest expense to reflect the estimated market interest rate of
approximately 7.25%, in accordance with the purchase method of
accounting, partially offset by an increase in interest expense for the
payment of fees and expenses related to the Mid-America Merger of
approximately $4,850,000, at an interest rate of 6.75%, as follows
(in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages prepaid........... $ (2,263)
Interest on Bradley's line of credit used to prepay debt.......... 1,714
Reduction of Mid-America interest to reflect a market rate........ (514)
Interest on Bradley's line of credit for Mid-America Merger fees
and expenses..................................................... 327
--------
Pro forma adjustment.............................................. $ (736)
========
</TABLE>
(D) Represents general and administrative cost savings which have been
estimated based upon historical costs for those items which are expected
to be eliminated as a result of the Mid-America Merger, as follows
(in thousands):
<TABLE>
<S> <C>
Salaries and benefits............................................. $ (906)
D&O Insurance and director fees................................... (230)
Professional fees................................................. (136)
Other............................................................. (28)
-------
Pro forma adjustment.............................................. $(1,300)
=======
</TABLE>
(E) Depreciation and amortization changes relate to recording Mid-America's
properties at Bradley's purchase price, and related depreciation
utilizing an estimated useful life of 39 years and a depreciable basis of
approximately $121,850,000, and the elimination of historical
amortization of Mid-America's deferred assets in accordance with the
purchase method of accounting, as follows (in thousands):
<TABLE>
<S> <C>
Pro forma depreciation expense ($121,850 over 39 years)........... $ 3,124
Mid-America depreciation and amortization......................... (4,981)
--------
Pro forma adjustment.............................................. $ (1,857)
========
</TABLE>
The pro forma adjustment to the equity in earnings of partnership
reflects the adjustment to depreciation and amortization of the
partnership resulting from recording the investment in partnership at
Bradley's purchase price.
(F) Preferred share distributions are calculated using an annual dividend
rate of $2.10 per share for 3,480,210 shares of Series A Preferred Stock.
(G) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY AS ADJUSTED FOR MID-AMERICA MERGER
NUMERATOR DENOMINATOR PER SHARE
-------------- ------------- -----------
<S> <C> <C> <C>
Basic EPS:
Income from operations attributable to
common stock.......................... $ 25,928,000 23,356,620 $ 1.11
Effect of dilutive securities:
Stock options........................... -- 42,451
Stock-based compensation................ -- 315
Conversion of LP Units.................. 1,690,000 1,523,587
-------------- -----------
Diluted EPS:
Income from operations attributable to
common stock............................ $ 27,618,000 24,922,973 $ 1.11
============== ========== ===========
</TABLE>
F-10
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
TO REFLECT PRIOR BRADLEY TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
During 1997, Bradley acquired 25 shopping centers aggregating over 3.1
million square feet of GLA for an aggregate cost of approximately $189.3 million
and from January 1, 1998 through December 14, 1998, has acquired 21 properties
and two outlots adjacent to one of Bradley's existing centers aggregating 2.6
million square feet of GLA for an aggregate acquisition price of approximately
$198.9 million. Consideration paid for such acquisitions included cash
(provided primarily from the bank line of credit), assumption of mortgage
indebtedness and the issuance of Units of the Operating Partnership to
contributors of properties acquired. During the period from January 1, 1997
through December 14, 1998, Bradley sold six properties for net proceeds of
approximately $104.3 million utilizing the net proceeds to pay-down the line of
credit. In addition, as of December 15, 1998 the Company had entered into a
contract for the purchase of an additional shopping center for an estimated
acquisition price of approximately $3.9 million which management believes will
close (the "Pending Acquisition" and, together with the Completed Acquisitions,
the "Acquisition Properties"). Management currently expects to fund the Pending
Acquisition with the bank line of credit. Although management deems such
acquisition as probable, there can be no assurance that the acquisition of such
property will be consummated, or that the acquisition price will approximate
that currently estimated, or that the method of financing such acquisition will
be as currently estimated. The Prior Bradley Transactions do not include the
Mid-America Merger.
In December 1997, Bradley entered into a new $200 million unsecured line
of credit facility with a syndicate of banks, replacing the previous $150
million unsecured line of credit. The line of credit bears interest at a rate
equal to the lowest of (i) the lead bank's base rate, (ii) a spread over LIBOR
ranging from 0.70% to 1.25% depending on the credit rating assigned by national
credit rating agencies, or (iii) for amounts outstanding up to $100 million, a
competitive bid rate solicited from the syndicate of banks. Based on the current
credit rating assigned by Standard & Poor's and Moody's, the spread over LIBOR
is 1.00%, which represents a reduction in the spread over LIBOR from the
previous $150 million line of credit by 0.50%.
On November 26, 1997, Bradley prepaid a REMIC mortgage note (the "REMIC
Prepayment") primarily with the proceeds of an offering of $100 million of 7%
unsecured Notes due November 15, 2004 (the "November 1997 Debt Issuance"). The
effective interest rate on the unsecured Notes is approximately 7.19%. The issue
was rated "BBB-" by Standard & Poor's and "Baa3" by Moody's.
In December 1997, Bradley issued 1,290,000 shares of common stock
pursuant to two separate public offerings (the "December 1997 Stock Offerings").
Net proceeds from the offerings, approximately $24.9 million, were contributed
to the Operating Partnership and were used to reduce outstanding borrowings
under the line of credit.
On January 28, 1998, Bradley' through the Operating Partnership issued
$100 million, 7.2% ten-year unsecured Notes maturing January 15, 2008 (the
"January 1998 Debt Issuance"). The effective interest rate on the unsecured
Notes is approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's
and "Baa3" by Moody's. Proceeds from the issue were used to reduce the
outstanding borrowings under the line of credit.
On February 18, 1998, Bradley issued 392,638 shares of common stock to a
unit investment trust at a price based upon the then market value of $20.375 per
share (the "February 1998 Stock Offering"). Net proceeds from the offering of
approximately $7.6 million were contributed to the Operating Partnership and
were used to reduce outstanding borrowings under the line of credit.
The unaudited Pro Forma Condensed Statement of Income is presented as if
all of the acquisitions (including the Pending Acquisition), the dispositions,
the replacement of the previous line of credit with the new line of credit, the
REMIC Prepayment, the November 1997 Debt Issuance, the December 1997 Stock
Offerings, the January 1998 Debt Issuance, and the February 1998 Stock Offering,
described above, had been consummated on January 1, 1997, and with Bradley
qualifying as a REIT and, therefore, incurring no federal income tax expense
during the period January 1, 1997 through December 31, 1997.
F-11
<PAGE>
<TABLE>
<CAPTION>
ACQUISITION DISPOSITION OTHER
HISTORICAL PROPERTIES (A) PROPERTIES(B) ADJUSTMENTS PRO FORMA
----------- -------------- ------------- -------------- ------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income................................. 96,115 40,689 (17,565) -- 119,239
Other income.................................. 1,437 589 6 -- 2,032
----------- ----------- ----------- ----------- -----------
Total revenue............................... 97,552 41,278 (17,559) -- 121,271
----------- ----------- ----------- ----------- -----------
Expenses:
Operations, maintenance and management....... 14,012 5,608 (2,856) -- 16,764
Real estate taxes............................ 18,398 5,652 (4,620) -- 19,430
Mortgage and other interest.................. 16,562 -- -- 12,288(C) 28,850
General and administrative................... 5,123 -- -- 5,123
Non-recurring stock-based compensation....... 3,415 -- -- -- 3,415
Depreciation and amortization................ 16,606 -- -- 4,828(D) 21,434
----------- ----------- ----------- ----------- -----------
Total expenses.............................. 74,116 11,260 (7,476) 17,116 95,016
----------- ----------- ----------- ----------- -----------
Income before net gain on sale of
properties and extraordinary item............ 23,436 30,018 (10,083) (17,116) 26,255
Net gain on sale of properties................ 7,438 -- (7,438) -- --
----------- ----------- ----------- ----------- -----------
Income before extraordinary item and
allocation to minority interest.............. 30,874 30,018 (17,521) (17,116) 26,255
Income allocated to minority interest......... (1,116) -- -- (491) (1,607)
----------- ----------- ----------- ----------- -----------
Income before extraordinary item.............. $ 29,758 $30,018 $(17,521) $(17,607) $ 24,648
=========== =========== =========== =========== ===========
Weighted average shares outstanding
-- basic (E)................................. 21,776,146 23,356,620
Basic income per common share:
Income before extraordinary item(E):........ $ 1.36 $ 1.06
=========== ===========
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses of the
Acquisition Properties, and properties acquired in 1997, for the period
Bradley did not own such properties.
(B) Decrease represents the elimination of historical operating revenues,
expenses and net gains on sale of properties disposed of during 1997 and
1998 for the period which Bradley owned such properties.
(C) Mortgage and other interest has been increased to reflect the pro forma
borrowings for property acquisitions for the period during which Bradley
did not own such properties, net of the reduction for the application of
net proceeds from the property dispositions and the December 1997 and
February 1998 Stock Offerings to pay down the line of credit for the
period during which Bradley owned such properties, and for the period
preceding the Stock Offerings at an interest rate of 6.75%, which was
Bradley's approximate borrowing rate at December 15, 1998. Mortgage and
other interest has been increased for the November 1997 and January 1998
Debt Issuances, net of the reduction for the application of net proceeds
of such Debt Issuances to pay down the $100 million REMIC Note and the
line of credit, respectively, at the applicable effective interest rates.
Mortgage and other interest has been decreased by the net reduction in
interest expense resulting from the December 1997 pay down of the
existing line of credit facility with proceeds from the new line of
credit facility. A 0.125% change in the variable rate would result in a
change in the pro forma interest adjustment of approximately $47
(in thousands).
<TABLE>
<S> <C>
Increase in interest expense attributable to acquisition activities........ $20,511
Decrease in interest expense attributable to disposition activities........ (6,559)
Decrease in interest expense attributable to the Stock Offerings........... (2,063)
Net increase in interest expense attributable to the Debt Issuances........ 843
Net decrease in interest expense attributable to the paydown of the
existing line of credit facility with proceeds from the new line of
credit facility........................................................... (444)
-------
Pro forma adjustment....................................................... $12,288
=======
</TABLE>
F-12
<PAGE>
(D) Depreciation and amortization has been increased to give effect to
recording the property acquisitions over a depreciable life of 39 years,
for the period which Bradley did not own such properties, net of the
reduction for properties disposed for the period which Bradley owned such
properties, as follows:
<TABLE>
<S> <C>
Increase in depreciation and amortization attributable to acquisition
activities................................................................ $ 6,221
Decrease in depreciation and amortization attributable to disposition
activities................................................................ (1,393)
-------
Pro forma adjustment....................................................... $ 4,828
=======
</TABLE>
(E) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY HISTORICAL BRADLEY PRO FORMA
NUMERATOR DENOMINATOR PER SHARE NUMERATOR DENOMINATOR PER SHARE
----------- ----------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income before extraordinary item.. $29,758,000 21,776,146 $ 1.36 $24,648,000 23,356,620 $1.06
Effect of dilutive securities:
Stock options..................... -- 42,451 -- 42,451
Stock-based compensation.......... -- 315 -- 315
Conversion of LP Units............ 1,116,000 799,938 1,607,000 1,523,587
----------- ---------- ---------- -----------
Diluted EPS:
Income before extraordinary item.. $30,874,000 22,618,850 $ 1.36 $26,255,000 24,922,973 $1.05
=========== ========== ========== =========== =========== =========
</TABLE>
F-13
