<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: June 24, 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 File (I.R.S. Employer
of incorporation) 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 financial statements consistent with Regulation S-X, Rule
3-14 for properties accounting for over 50% of the aggregate acquisition costs
of a series of properties acquired during the period January 1, 1998 through
June 22, 1998 (the "Completed Acquisitions") or whose acquisition the Company
considers probable (the "Pending Acquisitions" and, together with the Completed
Acquisitions, the "Acquisition Properties").
The Acquisition Properties do not include properties which Bradley expects
to acquire 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 June 22, 1998, the Company acquired 12
shopping centers and two outlots adjacent to one of Bradley's existing centers
at an aggregate cost of approximately $98.8 million. In addition, as of June
22, 1998 the Company had entered into contracts for the purchase of an
additional seven Pending Acquisitions for an estimated total acquisition price
of approximately $89.6 million. No one property or group of properties
comprising the Completed Acquisitions or the Pending Acquisitions was or will be
in itself significant, but in the aggregate the costs of the Acquisition
Properties 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 Acquisitions will be funded,
with borrowings under the Company's bank line of credit and through the
assumption of existing mortgage indebtedness. No assurance can be given that
all or any of the Pending Acquisitions will be consummated or that the terms of
the respective transactions or the proposed method of financings 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:
<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 20,614,000
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 3,700,000
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 5,146,000
-----------
$98,838,000
===========
</TABLE>
2
<PAGE>
Pending Acquisitions:
- --------------------
<TABLE>
<CAPTION>
PROPERTY ESTIMATED ACQUISITION COST
<S> <C>
* Ellisville Square, St. Louis, MO $11,232,000
Fox River, Burlington, WI 7,748,000
* Holiday Manor, Louisville, KY 18,928,000
Lincoln Park Plaza, New Haven, IN 5,200,000
Northport Shopping Center, Port Washington, WI 3,730,000
Oak Park Plaza, Oak Park Heights, MN 15,444,000
* Salem Consumer Square, Dayton, OH 27,341,000
-----------
$ 89,623,000
===========
</TABLE>
Properties designated with an asterisk (*) are properties included within
the Acquisition Properties for which financial statements accompany this report.
(See Item 7.) 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 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, and for certain pro forma
financial statements which give effect both to the Mid-America Merger and to
certain Prior Bradley Transactions described therein including the acquisition
of the Acquisition Properties.
Like the pro forma financial information in the Merger Registration
Statement, the pro forma financial statements listed under Item 7 below reflect
both (a) the Prior Bradley Transactions other than the Mid-America Merger as
well as (b) the Prior Bradley Transactions and the Mid-America Merger. Such
financial statements reflect the same adjustments that are a part of the pro
forma financials set forth in the Merger Registration Statement, but also set
forth, in the Pro Forma Condensed Statements of Income that reflect the Prior
Bradley Transactions, separate pro forma adjustments for the Acquisition
Properties for which financial statements are included in this Form 8-K and for
the other Acquisition Properties for which financial statements are not included
in this Form 8-K.
3
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
---------------------------------------------------------
Exhibits
--------
The following financial statements and pro forma financial information
accompany this report:
(a) Financial Statements - Acquisition Properties - Redford Plaza
Independent Auditors' Report
For the Three Months Ended March 31, 1998 (unaudited) and the Year
Ended December 31, 1997
Statement of Revenues and Certain Expenses
Notes to Statement of Revenues and Certain Expenses
(b) Financial Statements - Acquisition Properties - Courtyard Shopping
Center
Independent Auditors' Report
For the Three Months Ended March 31, 1998 (unaudited) and the Year
Ended December 31, 1997
Statement of Revenues and Certain Expenses
Notes to Statement of Revenues and Certain Expenses
(c) Financial Statements - Acquisition Properties - Camelot Shopping
Center and Plainview Village
Independent Auditors' Report
For the Three Months Ended March 31, 1998 (unaudited) and the Year
Ended December 31, 1997
Combined Statement of Revenues and Certain Expenses
Notes to Combined Statement of Revenues and Certain Expenses
(d) Financial Statements - Acquisition Properties - Salem Consumer Square
Independent Auditors' Report
For the Three Months Ended March 31, 1998 (unaudited) and the Year
Ended December 31, 1997
Statement of Revenues and Certain Expenses
Notes to Statement of Revenues and Certain Expenses
(e) Financial Statements - Acquisition Properties - Holiday Manor
Shopping Center
Independent Auditors' Report
For the Three Months Ended March 31, 1998 (unaudited) and the Year
Ended December 31, 1997
Statement of Revenues and Certain Expenses
Notes to Statement of Revenues and Certain Expenses
4
<PAGE>
(f) Financial Statements - Acquisition Properties - Ellisville Square
Independent Auditors' Report
For the Three Months Ended March 31, 1998 (unaudited) and the Year
Ended December 31, 1997
Statement of Revenues and Certain Expenses
Notes to Statement of Revenues and Certain Expenses
(g) Pro Forma Financial Information - Bradley Real Estate, Inc.
Pro Forma Condensed Combined Balance Sheet as of March 31, 1998
(unaudited)
Pro Forma Condensed Balance Sheet to reflect Prior Bradley
Transactions as of March 31, 1998 (unaudited)
Pro Forma Condensed Combined Statement of Income for the Three
Months Ended March 31, 1998 (unaudited)
Pro Forma Condensed Statement of Income to reflect Prior Bradley
Transactions for the Three Months Ended March 31, 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)
(h) Exhibits
Exhibit 23.1 Consent of KPMG Peat Marwick LLP
5
<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: June 24, 1998 Thomas P. D'Arcy
Chairman, President and
Chief Executive Officer
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate, Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the accompanying statement of revenues and certain expenses
(defined as operating revenues less direct operating expenses) of Redford Plaza
for the year ended December 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the statement of revenues and certain expenses. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in current reports on Form 8-K of Bradley
Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note
2. The presentation is not intended to be a complete presentation of Redford
Plaza's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses
described in Note 2, of Redford Plaza for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
April 9, 1998
F-1
<PAGE>
ACQUISITION PROPERTIES - REDFORD PLAZA
Statement of Revenues and Certain Expenses
<TABLE>
<CAPTION>
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- -------------------------------------------------------------------------------------------------------------
Three Months
Ended
March 31, 1998 Year Ended
(unaudited) December 31, 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base rental income $513,002 $1,881,979
Operating expense and real estate tax recoveries 153,741 621,148
Other income 4,937 6,843
- -------------------------------------------------------------------------------------------------------------
Total revenues 671,680 2,509,970
- -------------------------------------------------------------------------------------------------------------
Certain expenses:
Real estate taxes 68,618 263,919
Operating expenses 51,018 240,880
Utilities 12,528 50,160
Insurance 18,084 72,336
- -------------------------------------------------------------------------------------------------------------
Total expenses 150,248 627,295
- -------------------------------------------------------------------------------------------------------------
Excess of revenues over certain expenses $521,432 $1,882,675
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statement of revenues and certain expenses.
F-2
<PAGE>
ACQUISITION PROPERTIES - REDFORD PLAZA
Notes to Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
(1) BACKGROUND
The Statement of Revenues and Certain Expenses (Statement) has been
included for Redford Plaza (Redford) which was acquired by Bradley
Operating Limited Partnership (the Operating Partnership) on April 10,
1998.
Redford is located in Redford, Michigan. It consists of approximately
285,000 square feet of gross leasable area and was approximately 92%
occupied at December 1997.
(2) BASIS OF PRESENTATION
The Statement has been prepared for the purpose of complying with Rule
3.14 of Regulation S-X of the Securities and Exchange Commission and
for inclusion in current reports on Form 8-K of the Company and the
Operating Partnership and is not intended to be a complete presentation
of Redford's revenues and expenses. The Statement has been prepared on
the accrual basis of accounting and requires management of Redford to
make estimates and assumptions that affect the reported amounts of the
revenues and expenses during the reporting period. Actual results may
differ from those estimates.
Certain expenses which may not be comparable to the expenses expected
to be incurred in the proposed future operations of Redford have been
excluded from the Statement. Expenses excluded consist of interest,
depreciation and amortization, professional fees, and management fees.
Unaudited Interim Period
------------------------
The accompanying interim statement of revenues and certain expenses has
been prepared without audit and in the opinion of management reflects
all normally recurring adjustments necessary for a fair presentation of
results for the unaudited interim period presented. Certain information
in footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles
has been condensed or omitted.
(3) REVENUES
The property leases retail space under various lease agreements with
its tenants. All leases are accounted for as operating leases. Certain
of the leases include provisions under which the property is reimbursed
for certain common area, real estate, and insurance costs. Operating
expenses and real estate tax recoveries reflected on the statement of
revenues and certain expenses include amounts due for 1997 expenses for
which the tenants have not yet been billed. In addition, certain leases
provide for payment of contingent rentals based on a percentage applied
to the amount by which the tenant's sales, as defined, exceed
predetermined levels. Certain leases contain renewal options for
various periods at various rental rates.
Approximately 10% and 21% of Redford is leased to two tenants
representing approximately 17% and 12% of base rental income,
respectively.
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals
vary from a straight-line basis due to short-term rent abatements or
escalating rents during the lease term, the income is recognized based
on effective rental rates. Related adjustments increased base rental
income by approximately $55,000 for the year ended December 31, 1997.
F-3
<PAGE>
ACQUISITION PROPERTIES - REDFORD PLAZA
Notes to Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are approximately as follows:
- -------------------------------------------------------------------------------
Year Amount
- -------------------------------------------------------------------------------
<S> <C>
1998 $2,036,000
1999 1,853,000
2000 1,610,000
2001 1,298,000
2002 1,144,000
Thereafter 5,838,000
- -------------------------------------------------------------------------------
</TABLE>
F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate, Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the accompanying statement of revenues and certain expenses
(defined as operating revenues less direct operating expenses) of Courtyard
Shopping Center for the year ended December 31, 1997. This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the statement of revenues and certain expenses. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in current reports on Form 8-K of Bradley
Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note
2. The presentation is not intended to be a complete presentation of Courtyard
Shopping Center's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses
described in Note 2, of Courtyard Shopping Center for the year ended December
31, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
May 7, 1998
F-5
<PAGE>
ACQUISITION PROPERTIES - COURTYARD SHOPPING CENTER
Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Three Months
Ended
March 31, 1998 Year Ended
(unaudited) December 31, 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base rental income $202,812 $893,232
Operating expense and real estate tax recoveries 64,567 313,171
Other income 1,106 1,883
- -------------------------------------------------------------------------------------------------------------
Total revenues 268,485 1,208,286
- -------------------------------------------------------------------------------------------------------------
Certain expenses:
Real estate taxes 36,051 143,044
Operating expenses 32,642 143,644
Utilities 18,898 78,757
Insurance 3,295 13,179
- -------------------------------------------------------------------------------------------------------------
Total expenses 90,886 378,624
- -------------------------------------------------------------------------------------------------------------
Excess of revenues over certain expenses $177,599 $829,662
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statement of revenues and certain expenses.
F-6
<PAGE>
ACQUISITION PROPERTIES - COURTYARD SHOPPING CENTER
Notes to Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
(1) BACKGROUND
The Statement of Revenues and Certain Expenses (Statement) has been
included for Courtyard Shopping Center (Courtyard) which was acquired by
Bradley Operating Limited Partnership (the Operating Partnership) on March
31, 1998.
Courtyard is located in Burton, Michigan. It consists of approximately
148,000 square feet of gross leasable area and was approximately 76%
occupied at December 31, 1997.
(2) BASIS OF PRESENTATION
The Statement has been prepared for the purpose of complying with Rule 3.14
of Regulation S-X of the Securities and Exchange Commission and for
inclusion in current reports on Form 8-K of the Company and the Operating
Partnership and is not intended to be a complete presentation of
Courtyard's revenues and expenses. The Statement has been prepared on the
accrual basis of accounting and requires management of Courtyard to make
estimates and assumptions that affect the reported amounts of the revenues
and expenses during the reporting period. Actual results may differ from
those estimates.
Certain expenses which may not be comparable to the expenses expected to be
incurred in the proposed future operations of Courtyard have been excluded
from the Statement. Expenses excluded consist of interest, depreciation
and amortization, professional fees, and management fees.
Unaudited Interim Period
------------------------
The accompanying interim statement of revenues and certain expenses has
been prepared without audit and in the opinion of management reflects all
normally recurring adjustments necessary for a fair presentation of results
for the unaudited interim period presented. Certain information in
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles has been
condensed or omitted.
(3) REVENUES
The property leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which the property is reimbursed for
certain common area, real estate, and insurance costs. Operating expenses
and real estate tax recoveries reflected on the statement of revenues and
certain expenses include amounts due for 1997 expenses for which the
tenants have not yet been billed. In addition, certain leases provide for
payment of contingent rentals based on a percentage applied to the amount
by which the tenant's sales, as defined, exceed predetermined levels.
Certain leases contain renewal options for various periods at various
rental rates.
Approximately 12%, 18% and 29% of Courtyard is leased to three tenants
representing approximately 11%, 22% and 39% of base rental income,
respectively.
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. Related adjustments increased base rental income by
approximately $15,000 for the year ended December 31, 1997.
F-7
<PAGE>
ACQUISITION PROPERTIES - COURTYARD SHOPPING CENTER
Notes to Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are approximately as follows:
- --------------------------------------------------------------------------------
Year Amount
- --------------------------------------------------------------------------------
<S> <C>
1998 $ 785,000
1999 764,000
2000 774,000
2001 722,000
2002 609,000
Thereafter 3,172,000
- --------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate, Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the accompanying combined statement of revenues and certain
expenses (defined as operating revenues less direct operating expenses) of
Camelot Shopping Center and Plainview Village for the year ended December 31,
1997. This combined financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this combined
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined statement of
revenues and certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the combined statement of revenues and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined statement of revenues and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission and for inclusion in current reports on Form
8-K of Bradley Real Estate, Inc. and Bradley Operating Limited Partnership as
described in Note 2. The presentation is not intended to be a complete
presentation of Camelot Shopping Center's and Plainview Village's revenues and
expenses.
In our opinion, the combined statement of revenues and certain expenses referred
to above presents fairly, in all material respects, the combined revenues and
certain expenses described in Note 2, of Camelot Shopping Center and Plainview
Village for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
May 7, 1998
F-9
<PAGE>
ACQUISITION PROPERTIES - CAMELOT SHOPPING CENTER AND PLAINVIEW VILLAGE
Combined Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months
Ended
March 31, 1998 Year Ended
(unaudited) December 31, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base rental income $537,350 $2,026,919
Operating expense and real
estate tax recoveries 97,341 264,026
Other income 7,421 8,709
- --------------------------------------------------------------------------------
Total revenues 642,112 2,299,654
- --------------------------------------------------------------------------------
Certain expenses:
Real estate taxes 42,012 160,047
Operating expenses 43,576 169,589
Utilities 12,984 67,614
Insurance 7,246 28,981
- --------------------------------------------------------------------------------
Total expenses 105,818 426,231
- --------------------------------------------------------------------------------
Excess of revenues over
certain expenses $536,294 $1,873,423
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined statement of revenues and certain expenses.
F-10
<PAGE>
ACQUISITION PROPERTIES - CAMELOT SHOPPING CENTER AND PLAINVIEW VILLAGE
Combined Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
(1) BACKGROUND
The Combined Statement of Revenues and Certain Expenses (Combined
Statement) has been included for certain properties which were acquired
from the same seller by Bradley Operating Limited Partnership (the
Operating Partnership) on May 13, 1998. The properties are as follows:
Camelot Shopping Center
Plainview Village
Camelot Shopping Center is located in Louisville, Kentucky. It consists of
approximately 151,000 square feet of gross leasable area and was
approximately 96% occupied at December 31, 1997.
Plainview Village is located in Louisville, Kentucky. It consists of
approximately 144,000 square feet of gross leasable area and was
approximately 99% occupied at December 31, 1997.
(2) BASIS OF PRESENTATION
The Combined Statement has been prepared for the purpose of complying with
Rule 3.14 of Regulation S-X of the Securities and Exchange Commission and
for inclusion in current reports on Form 8-K of the Company and the
Operating Partnership and is not intended to be a complete presentation of
the properties' revenues and expenses. The Combined Statement has been
prepared on the accrual basis of accounting and requires management of the
properties to make estimates and assumptions that affect the reported
amounts of the revenues and expenses during the reporting period. Actual
results may differ from those estimates.
Certain expenses which may not be comparable to the expenses expected to be
incurred in the proposed future operations of the properties have been
excluded from the Combined Statement. Expenses excluded consist of
interest, depreciation and amortization, professional fees, and management
fees.
Unaudited Interim Period
------------------------
The accompanying interim statement of revenues and certain expenses has
been prepared without audit and in the opinion of management reflects all
normally recurring adjustments necessary for a fair presentation of results
for the unaudited interim period presented. Certain information in
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles has been
condensed or omitted.
(3) REVENUES
The properties lease retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which the properties are reimbursed for
certain common area, real estate, and insurance costs. Operating expenses
and real estate tax recoveries reflected on the combined statement of
revenues and certain expenses include amounts due for 1997 expenses for
which the tenants have not yet been billed. In addition, certain leases
provide for payment of contingent rentals based on a percentage applied to
the amount by which the tenant's sales, as defined, exceed predetermined
levels. Certain leases contain renewal options for various periods at
various rental rates.
F-11
<PAGE>
ACQUISITION PROPERTIES-CAMELOT SHOPPING CENTER AND PLAINVIEW VILLAGE
Combined Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
Approximately 16% and 3% of Camelot Shopping Center is leased to two
tenants representing approximately 18% and 10% of base rental income,
respectively. Approximately 22% and 6% of Plainview Village is leased to
two tenants representing approximately 10% and 11% of base rental income,
respectively.
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. Related adjustments increased base rental income by
approximately $63,000 for the year ended December 31, 1997.
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are approximately as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Year Amount
- -----------------------------------------------------------
<S> <C>
1998 $1,884,000
1999 1,662,000
2000 1,332,000
2001 1,101,000
2002 812,000
Thereafter 1,531,000
- -----------------------------------------------------------
</TABLE>
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate, Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the accompanying statement of revenues and certain expenses
(defined as operating revenues less direct operating expenses) of Salem Consumer
Square for the year ended December 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the statement of revenues and certain expenses. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in current reports on Form 8-K of Bradley
Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note
2. The presentation is not intended to be a complete presentation of Salem
Consumer Square's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses
described in Note 2, of Salem Consumer Square for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
May 29, 1998
F-13
<PAGE>
ACQUISITION PROPERTIES - SALEM CONSUMER SQUARE
Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months
Ended
March 31, 1998 Year Ended
(unaudited) December 31, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base rental income $563,393 $2,210,992
Operating expense and real
estate tax recoveries 136,301 575,159
Other income 5,289 19,665
- --------------------------------------------------------------------------------
Total revenues 704,983 2,805,816
- --------------------------------------------------------------------------------
Certain expenses:
Real estate taxes 77,622 310,486
Operating expenses 44,169 289,601
Utilities 19,849 64,398
Insurance 11,443 41,485
Total expenses 153,083 705,970
- --------------------------------------------------------------------------------
Excess of revenues over
certain expenses $551,900 $2,099,846
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statement of revenues and certain expenses.
F-14
<PAGE>
ACQUISITION PROPERTIES - SALEM CONSUMER SQUARE
Notes to Statement of Revenues and Certain Expenses
Year Ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
(1) BACKGROUND
The Statement of Revenues and Certain Expenses (Statement) has been
included for Salem Consumer Square (Salem) which Bradley Real Estate,
Inc. (the Company) through Bradley Operating Limited Partnership (the
Operating Partnership) proposes to acquire. Salem is located in Dayton,
Ohio. It consists of approximately 275,000 square feet of gross
leasable area and was approximately 95% occupied at December 31, 1997.
(2) BASIS OF PRESENTATION
The Statement has been prepared for the purpose of complying with Rule 3.14
of Regulation S-X of the Securities and Exchange Commission and for
inclusion in current reports on Form 8-K of the Company and the Operating
Partnership and is not intended to be a complete presentation of Salem's
revenues and expenses. The Statement has been prepared on the accrual basis
of accounting and requires management of Salem to make estimates and
assumptions that affect the reported amounts of the revenues and expenses
during the reporting period. Actual results may differ from those
estimates.
Certain expenses which may not be comparable to the expenses expected to be
incurred in the proposed future operations of Salem have been excluded from
the Statement. Expenses excluded consist of interest, depreciation and
amortization, professional fees, and management fees.
Unaudited Interim Period
------------------------
The accompanying interim statement of revenues and certain expenses has been
prepared without audit and in the opinion of management reflects all normal
recurring adjustments necessary for a fair presentation of results for the
unaudited interim period presented. Certain information in footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles has been condensed
or omitted.
(3) REVENUES
The property leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which the property is reimbursed for certain
common area, real estate, and insurance costs. Operating expenses and real
estate tax recoveries reflected on the statement of revenues and certain
expenses include amounts due for 1997 expenses for which the tenants have
not yet been billed. In addition, certain leases provide for payment of
contingent rentals based on a percentage applied to the amount by which the
tenant's sales, as defined, exceed predetermined levels. Certain leases
contain renewal options for various periods at various rental rates.
Approximately 23% of Salem Consumer Square is leased to one tenant
representing approximately 20% of base rental income.
F-15
<PAGE>
ACQUISITION PROPERTIES - SALEM CONSUMER SQUARE
Notes to Statement of Revenues and Certain Expenses
Year Ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. Related adjustments increased base rental income by
approximately $16,000 for the year ended December 31, 1997.
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are approximately as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Year Amount
- ------------------------------------------------------------
<S> <C>
1998 $2,219,000
1999 1,974,000
2000 1,546,000
2001 1,302,000
2002 1,147,000
Thereafter 5,097,000
- ------------------------------------------------------------
</TABLE>
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate, Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the accompanying statement of revenues and certain expenses
(defined as operating revenues less direct operating expenses) of Holiday Manor
Shopping Center for the year ended December 31, 1997. This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the statement of revenues and certain expenses. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in current reports on Form 8-K of Bradley
Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note
2. The presentation is not intended to be a complete presentation of Holiday
Manor Shopping Center's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses
described in Note 2, of Holiday Manor Shopping Center for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
May 29, 1998
F-17
<PAGE>
ACQUISITION PROPERTIES - HOLIDAY MANOR SHOPPING CENTER
Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Three Months
Ended
March 31, 1998 Year Ended
(unaudited) December 31, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base and percentage rental income $408,516 $1,655,284
Operating expense and real estate tax recoveries 37,692 136,297
Other income 1,707 5,01
- ------------------------------------------------------------------------------------------
Total revenues 447,915 1,796,593
- ------------------------------------------------------------------------------------------
Certain expenses:
Real estate taxes 23,880 95,476
Operating expenses 26,999 07,980
Utilities 10,414 33,945
Insurance 2,516 9,958
------------------------------------------------------------------------------------------
Total expenses 63,809 247,359
- ------------------------------------------------------------------------------------------
Excess of revenues over certain expenses $384,106 $1,549,234
- ------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statement of revenues and certain expenses.
F-18
<PAGE>
ACQUISITION PROPERTIES - HOLIDAY MANOR SHOPPING CENTER
Notes to Statement of Revenues and Certain Expenses
Year Ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
(1) BACKGROUND
The Statement of Revenues and Certain Expenses (Statement) has been included
for Holiday Manor Shopping Center (Holiday Manor) which Bradley Real Estate,
Inc. (the Company) through Bradley Operating Limited Partnership (the
Operating Partnership) proposes to acquire.
Holiday Manor is located in Louisville, Kentucky. It consists of
approximately 156,000 square feet of gross leaseable area and was
approximately 91 percent occupied at December 31, 1997.
(2) BASIS OF PRESENTATION
The Statement has been prepared for the purpose of complying with Rule 3.14
of Regulation S-X of the Securities and Exchange Commission and for
inclusion in current reports on Form 8-K of the Company and the Operating
Partnership and is not intended to be a complete presentation of Holiday
Manor's revenues and expenses. The Statement has been prepared on the
accrual basis of accounting and requires management of Holiday Manor to make
estimates and assumptions that affect the reported amounts of the revenues
and expenses during the reporting period. Actual results may differ from
those estimates.
Certain expenses which may not be comparable to the expenses expected to be
incurred in the proposed future operations of Holiday Manor have been
excluded from the Statement. Expenses excluded consist of interest,
depreciation and amortization, professional fees, and management fees.
Unaudited Interim Period
------------------------
The accompanying interim statement of revenues and certain expenses has been
prepared without audit and in the opinion of management reflects all normal
recurring adjustments necessary for a fair presentation of results for the
unaudited interim period presented. Certain information in footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles has been condensed
or omitted.
(3) REVENUES
The property leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which the property is reimbursed for certain
common area, real estate, and insurance costs. Operating expenses and real
estate tax recoveries reflected on the statement of revenues and certain
expenses include amounts due for 1997 expenses for which the tenants have
not yet been billed. In addition, certain leases provide for payment of
contingent rentals based on a percentage applied to the amount by which the
tenant's sales, as defined, exceed predetermined levels. Certain leases
contain renewal options for various periods at various rental rates.
Approximately 36% of Holiday Manor is leased to one tenant representing
approximately 28% of base rental income.
F-19
<PAGE>
ACQUISITION PROPERTIES - HOLIDAY MANOR SHOPPING CENTER
Notes to Statement of Revenues and Certain Expenses
Year Ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. Related adjustments increased base rental income by
approximately $73,000 for the year ended December 31, 1997.
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are approximately as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Year Amount
- ---------------------------------------------------------------
<S> <C>
1998 $1,282,000
1999 1,113,000
2000 1,024,000
2001 889,000
2002 709,000
Thereafter 5,883,000
- ---------------------------------------------------------------
</TABLE>
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Bradley Real Estate, Inc.
and Unit Holders of Bradley Operating Limited Partnership:
We have audited the accompanying statement of revenues and certain expenses
(defined as operating revenues less direct operating expenses) of Ellisville
Square for the year ended December 31, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the combined statement of revenues and certain expenses.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in current reports on Form 8-K of Bradley
Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note
2. The presentation is not intended to be a complete presentation of Ellisville
Square's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses
described in Note 2, of Ellisville Square for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
June 1, 1998
F-21
<PAGE>
ACQUISITION PROPERTIES - ELLISVILLE SQUARE
Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months
Ended
March 31, 1998 Year Ended
(unaudited) December 31, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base rental income $308,679 $1,115,549
Operating expense and real
estate tax recoveries 55,570 221,502
Other income 293 5,266
- --------------------------------------------------------------------------------
Total revenues 364,542 1,342,317
- --------------------------------------------------------------------------------
Certain expenses:
Real estate taxes 53,368 213,471
Operating expenses 59,878 234,368
Utilities 9,524 23,774
Insurance 2,336 8,947
- --------------------------------------------------------------------------------
Total expenses 125,106 480,560
- --------------------------------------------------------------------------------
Excess of revenues over
certain expenses $239,436 $861,757
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statement of revenues and certain expenses.
F-22
<PAGE>
ACQUISITION PROPERTIES - ELLISVILLE SQUARE
Notes to Statement of Revenues and Certain Expenses
Year Ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
(1) BACKGROUND
The Statement of Revenues and Certain Expenses (Statement) has been included
for Ellisville Square which Bradley Real Estate, Inc. (the Company) through
Bradley Operating Limited Partnership (the Operating Partnership) proposes
to acquire.
Ellisville Square is located in St. Louis, Missouri. It consists of
approximately 146,000 square feet of gross leasable area and was
approximately 99% occupied at December 31, 1997.
(2) BASIS OF PRESENTATION
The Statement has been prepared for the purpose of complying with Rule 3.14
of Regulation S-X of the Securities and Exchange Commission and for
inclusion in current reports on Form 8-K of the Company and the Operating
Partnership and is not intended to be a complete presentation of Ellisville
Square's revenues and expenses. The Statement has been prepared on the
accrual basis of accounting and requires management of Ellisville Square to
make estimates and assumptions that affect the reported amounts of the
revenues and expenses during the reporting period. Actual results may
differ from those estimates.
Certain expenses which may not be comparable to the expenses expected to be
incurred in the proposed future operations of Ellisville Square have been
excluded from the Statement. Expenses excluded consist of interest,
depreciation and amortization, professional fees, and management fees.
Unaudited Interim Period
------------------------
The accompanying interim statement of revenues and certain expenses has been
prepared without audit and in the opinion of management reflects all normal
recurring adjustments necessary for a fair presentation of results for the
unaudited interim period presented. Certain information in footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles has been condensed
or omitted.
(3) REVENUES
The property leases retail space under various lease agreements with its
tenants. All leases are accounted for as operating leases. Certain of the
leases include provisions under which the property is reimbursed for certain
common area, real estate, and insurance costs. Operating expenses and real
estate tax recoveries reflected on the statement of revenues and certain
expenses include amounts due for 1997 expenses for which the tenants have
not yet been billed. In addition, certain leases provide for payment of
contingent rentals based on a percentage applied to the amount by which the
tenant's sales, as defined, exceed predetermined levels. Certain leases
contain renewal options for various periods at various rental rates.
Approximately 59%, 7% and 5% of Ellisville Square is leased to three tenants
representing approximately 51%, 12% and 11% of base rental income,
respectively.
F-23
<PAGE>
ACQUISITION PROPERTIES - ELLISVILLE SQUARE
Notes to Statement of Revenues and Certain Expenses
Year Ended December 31, 1997 and the
Three Months ended March 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
Base rentals are reported as income over the lease term as they become
receivable under the provisions of the leases. However, when rentals vary
from a straight-line basis due to short-term rent abatements or escalating
rents during the lease term, the income is recognized based on effective
rental rates. Related adjustments increased base rental income by
approximately $12,000 for the year ended December 31, 1997.
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are approximately as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Amount
- --------------------------------------------------------------------------------
<S> <C>
1998 $1,228,000
1999 1,209,000
2000 1,001,000
2001 748,000
2002 717,000
Thereafter 7,139,000
- --------------------------------------------------------------------------------
</TABLE>
F-24
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
This unaudited Pro Forma Condensed Combined Balance Sheet is presented as
if the Prior Bradley Transactions (see Note A) and the Mid-America Merger had
been consummated on March 31, 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 this transaction have been made.
The accompanying pro forma condensed combined financial statements have 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 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 March 31, 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 Pro Forma Condensed Balance Sheet to
reflect Prior Bradley Transactions and the respective historical financial
statements and the notes thereto of Bradley and Mid-America.
<TABLE>
<CAPTION> BRADLEY
PRIOR PRO FORMA PRO FORMA
BRADLEY MID-AMERICA AS ADJUSTED
PRO FORMA MID-AMERICA MERGER FOR THE
TRANSACTIONS(A) HISTORICAL ADJUSTMENTS (B) MID-AMERICA MERGER
--------------- ------------ ------------------ -------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Real estate investments, at cost................. $815,062 $152,716 $(10,926) $956,852
Accumulated depreciation and amortization........ (44,582) (34,161) 34,161 (44,582)
-------- -------- -------- --------
Net real estate investments.................... 770,480 118,555 23,235 912,270
Cash and cash equivalents........................ 2,505 -- -- 2,505
Rents and other receivables...................... 12,120 2,285 (1,106)(C) 13,299
Investment in partnership........................ -- 14,943 (1,656) 13,287
Deferred charges and other assets................ 17,699 3,912 (2,927)(D) 18,684
-------- -------- -------- --------
Total assets................................... $802,804 $139,695 $ 17,546 $960,045
======== ======== ======== ========
LIABILITIES
Mortgage loans................................... 80,718 49,499 (11,417)(E) 118,800
Unsecured notes payable.......................... 199,496 -- -- 199,496
Lines of credit.................................. 119,479 11,951 18,310(F) 149,740
Accounts payable, accrued expenses and
other liabilities............................... 24,471 1,849 49 26,369
-------- -------- -------- --------
Total liabilities.............................. 424,164 63,299 6,942 494,405
-------- -------- -------- --------
Minority interest................................ 19,803 -- -- 19,803
-------- -------- -------- --------
SHARE OWNERS' EQUITY
Series A Preferred Stock and paid-in capital..... -- -- 87,000(G) 87,000
Common stock at par.............................. 237 83 (83)(G) 237
Additional paid-in capital....................... 343,733 119,730 (119,730)(G) 343,733
Accumulated earnings in excess of distributions.. 14,867 (43,417) 43,417(G) 14,867
-------- -------- -------------- --------
Total share owners' equity..................... 358,837 76,396 10,604 445,837
-------- -------- -------- --------
Total liabilities and share owners'
equity.................................... $802,804 $139,695 $ 17,546 $960,045
======== ======== ======== ========
</TABLE>
F-25
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Balance Sheet
(A) See page F-28 for the pro forma condensed balance sheet giving effect to
Prior Bradley Transactions.
(B) Represents adjustments to record the Mid-America Merger in accordance with
the purchase method of accounting, based upon a purchase price of
approximately $157.2 million, which assumes a value of $25 per share of
Series A Preferred Stock, computed as follows (in thousands):
Issuance of Series A Preferred Stock.......................... $ 87,000
Assumption of Mid-America liabilities......................... 63,299
Adjustment to increase mortgage debt to estimated fair value.. 2,043
Estimated costs of the Mid-America Merger..................... 4,850
--------
$157,192
========
(C) Represents the write-off of the portion of the Mid-America accounts
receivable representing deferred rents arising from Mid-America recognition
of rental income on a straight-line basis in accordance with generally
accepted accounting principles. Bradley, as the surviving corporation, will
recognize rental income on a straight-line basis over the remaining terms of
the Mid-America leases in accordance with generally accepted accounting
principles.
(D) Represents the adjustment of Mid-America's carrying value of deferred
charges to the estimated fair values in accordance with the purchase method
of accounting. Organization costs, leasing costs and management contracts
of Mid-America were deemed to have no future value to Bradley and were
written-off in accordance with the purchase method of accounting. Other
assets were adjusted to the estimated fair values as of March 31, 1998. The
amounts represented by these adjustments are summarized below (in
thousands):
Leasing costs........................................... $ 2,693
Decrease in value of TIF bonds.......................... 1,581
Loan costs.............................................. 1,319
Management contract..................................... 893
Other................................................... 406
Increase in cash surrender value of executive benefits.. (35)
Less accumulated amortization........................... (3,930)
-------
Pro forma adjustment.................................... $ 2,927
=======
(E) Represents the expected prepayment of Mid-America mortgage debt funded with
Bradley's line of credit, and the adjustment to the carrying value of the
remaining Mid-America mortgage debt to the estimated fair values at March
31, 1998, as follows (in thousands):
Expected amount of Mid-America
mortgage debt to be prepaid...................... $(13,460)
Adjustment to estimated fair value
for remaining mortgage debt...................... 2,043
--------
Pro forma adjustment.............................. $(11,417)
========
F-26
<PAGE>
(F) Estimated payments for fees and expenses related to the Mid-America Merger
are as follows (in thousands):
Investment advisory fees................................... $ 1,770
Termination and severance.................................. 1,160
Legal and accounting....................................... 1,015
Real estate due diligence and closing costs................ 614
Other...................................................... 145
Printing and filing fees................................... 96
D&O insurance.............................................. 50
-------
4,850
Expected amount of Mid-America mortgage debt prepaid with
Bradley's line of credit............................... 13,460
-------
Pro forma adjustment....................................... $18,310
=======
(G) To adjust Mid-America's capital accounts to reflect the issuance of
3,480,000 shares of Series A Preferred Stock in exchange for all of the
outstanding shares of Mid-America Common Stock at an Exchange Ratio of 0.42
shares of Series A Preferred Stock for each outstanding share of Mid-America
Common Stock, as follows (in thousands):
<TABLE>
<CAPTION>
SERIES A
PREFERRED
STOCK AND
COMMON PAID-IN DISTRIBUTION IN PAID-IN
SHARES CAPITAL EXCESS OF EARNINGS CAPITAL
------- ---------- ------------------- -------
<S> <C> <C> <C> <C>
Issuance of Series A Preferred Stock.... $ -- $ -- $ -- $87,000
Mid-America's historical stockholders'
equity............................... $ 83 119,730 (43,417) --
------- --------- ----------- -------
Pro forma adjustment $ (83) $(119,730) $ 43,417 $87,000
======= ========= =========== =======
</TABLE>
F-27
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED BALANCE SHEET
TO REFLECT PRIOR BRADLEY TRANSACTIONS
MARCH 31, 1998
(UNAUDITED)
From April 1, 1998 through June 22, 1998, Bradley has acquired an additional
seven shopping centers and has entered into contracts to acquire an additional
seven shopping centers, which management believes will close. The aggregate
price of these transactions is expected to be approximately $155 million.
Management currently expects to fund the Pending Acquisitions through the
assumption of existing mortgage loans and with the bank line of credit.
Although management deems the Pending Acquisitions as probable, there can be no
assurance that the acquisition of any of such properties will be consummated, or
that the acquisition price will approximate those currently estimated. Further,
there can be no assurance that the method of financing the Pending Acquisitions
will be as currently estimated.
Subsequent to March 31, 1998, Bradley entered into a contract to sell One
North State for approximately $84.5 million subject to normal and customary
closing costs and adjustments with the proceeds assumed to be used to pay down
Bradley's 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 Balance Sheet of Bradley is presented as
if the acquisitions (including the Pending Acquisitions), and the dispositions
(including the probable disposition), described above, had been consummated on
March 31, 1998.
<TABLE>
<CAPTION>
MARCH 31, 1998 ACQUISITION DISPOSITION
HISTORICAL ADJUSTMENTS (A) ADJUSTMENTS (B) PRO FORMA
--------------- --------------- --------------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Real estate investments --at cost........... $660,096 $154,966 $ -- $815,062
Accumulated depreciation and amortization... (44,582) -- -- (44,582)
-------- -------------- -------- --------
Net real estate investments................. 615,514 154,966 -- 770,480
Real estate investments held for sale....... 54,565 -- (54,565) --
Other assets:
Cash and cash equivalents.................. 2,505 -- -- 2,505
Rents and other receivables................ 14,117 -- (1,997) 12,120
Deferred charges, net and other assets..... 18,223 -- (524) 17,699
-------- -------------- -------- --------
Total assets................................ $704,924 $154,966 $(57,086) $802,804
======== ============== ======== ========
LIABILITIES AND SHARE OWNERS' EQUITY
Mortgage loans.............................. 50,966 29,752 -- 80,718
Unsecured notes payable..................... 199,496 -- -- 199,496
Line of credit.............................. 79,100 125,214 (84,835) 119,479
Accounts payable, accrued expenses and
other liabilities.......................... 27,798 -- (3,327) 24,471
-------- -------------- -------- --------
Total liabilities........................... 357,360 154,966 (88,162) 424,164
-------- -------------- -------- --------
Minority interest........................... 19,146 -- 657 19,803
-------- -------------- -------- --------
Share owners' equity
Common stock at par........................ 237 -- -- 237
Additional paid-in capital................. 343,733 -- -- 343,733
Accumulated earnings in excess
of distributions.......................... (15,552) -- 30,419 14,867
-------- -------------- -------- --------
Total share owners' equity.................. 328,418 -- 30,419 358,837
-------- -------------- -------- --------
Total liabilities and share owners' equity.. $704,924 $154,966 $(57,086) $802,804
======== ============== ======== ========
</TABLE>
F-28
<PAGE>
EXPLANATORY NOTES
(A) Adjustments represent Acquisition Properties acquired subsequent to March
31, 1998 that have been completed, or that are probable of completion.
(B) Adjustments represent the sale of Holiday Plaza subsequent to March 31,
1998, and the probable disposition of One North State for net sales proceeds
of approximately $1.9 million and $84.5 million subject to normal and
customary closing costs and adjustments, respectively, and the application
of the net proceeds to pay down Bradley's line of credit.
F-29
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 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 March 31, 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.
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>
THREE MONTHS ENDED MARCH 31, 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................................... $ 29,821 $5,646 $ -- $ 35,467
Other income.................................... 640 166 -- 806
----------- ------ ----------- -----------
Total revenue................................. 30,461 5,812 -- 36,273
----------- ------ ----------- -----------
Expenses:
Operations, maintenance and management.......... 4,408 899 -- 5,307
Real estate taxes............................... 5,031 760 -- 5,791
Mortgage and other interest..................... 7,224 1,341 (173)(C) 8,392
General and administrative...................... 1,403 544 (323)(D) 1,624
Depreciation and amortization................... 5,793 1,238 (470)(E) 6,561
----------- ------ ----------- -----------
Total expenses................................ 23,859 4,782 (966) 27,675
----------- ------ ----------- -----------
Income before equity in earnings of partnership
and allocation to minority interest............. 6,602 1,030 966 8,598
Equity in earnings of partnership................ -- 265 65(E) 330
Income allocated to minority interest............ (383) -- -- (383)
----------- ------ ----------- -----------
Net income....................................... 6,219 1,295 1,031 8,545
Preferred share distributions.................... -- -- (1,827)(F) (1,827)
----------- ------ ----------- -----------
Net income attributable to common stock.......... $ 6,219 $1,295 $ (796) $ 6,718
=========== ====== =========== ===========
Weighted average number of
common shares outstanding-basic(G).............. 23,532,849 23,532,849
Basic net income per
common share(G)................................. $0.26 $0.29
=========== ===========
</TABLE>
F-30
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Statement of Income
(A) See page F-33 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
three months ended March 31, 1998.
(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 6.5%, 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 6.5%, as follows (in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages expected to be prepaid.................. $(528)
Interest on Bradley's line of credit expected to be used to prepay debt................. 413
Reduction of Mid-America interest to reflect a market rate.............................. (137)
Interest on Bradley's line of credit for Mid-America Merger fees
and expenses.......................................................................... 79
-----
Pro forma adjustment.................................................................... $(173)
=====
</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>
<CAPTION>
<S> <C>
Salaries and benefits............................... $227
D&O insurance and director fees..................... 46
Professional fees................................... 37
Other............................................... 13
----
Pro forma adjustment................................ $323
====
</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 $119,771,000, 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 ($119,771 over 39 years)............ $768
Mid-America depreciation and amortization.......................... (1,238)
------
Pro forma adjustment............................................... $(470)
======
</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 3,480,000 shares of Series A Preferred Stock pro
rated for the period presented.
F-31
<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.............. $6,718,000 23,532,849 $0.29
Effect of dilutive securities:
Dilutive options exercised........................... -- 54,379
Conversion of LP Units............................... 383,000 1,435,311
---------- ----------
Diluted EPS:
Net income attributable to common stock.............. $7,101,000 25,022,539 $0.28
========== ========== ===========
</TABLE>
F-32
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
TO REFLECT PRIOR BRADLEY TRANSACTIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
During the period from January 1, 1998 through June 22, 1998, Bradley
acquired 12 shopping centers at an aggregate cost of approximately $98.8 million
(the "Completed Acquisitions"). Consideration paid for such acquisitions
included cash (provided primarily from the bank line of credit) and assumption
of mortgage indebtedness. In addition, as of June 22, 1998, Bradley has
entered into contracts to acquire an additional seven shopping centers (the
"Pending Acquisitions") for an estimated aggregate purchase price of
approximately $89.6 million. Management currently expects to fund the Pending
Acquisitions with the bank line of credit and the assumption of mortgage
indebtedness. Although management deems such acquisitions as probable, there
can be no assurance that the acquisition of any of such properties will be
consummated, or that the acquisition price will approximate those currently
estimated. Further, there can be no assurance that the method of financing such
acquisitions 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.
Subsequent to March 31, 1998, Bradley entered into a contract to sell One
North State for approximately $84.5 million subject to normal and customary
closing costs and adjustments, with the proceeds assumed to be used to pay down
Bradley's 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 Property Acquisitions (including the Pending Acquisitions),
the dispositions (including the probable disposition), 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 March 31, 1998.
F-33
<PAGE>
<TABLE>
<CAPTION>
OTHER
ACQUISITION ACQUISITION DISPOSITION OTHER
HISTORICAL PROPERTIES (A) PROPERTIES(B) PROPERTIES (C) ADJUSTMENTS PRO FORMA
------------ -------------- ------------- -------------- -------------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income....................... $ 28,736 $3,079 $1,803 $(3,797) $ -- $29,821
Other income........................ 619 21 -- -- -- 640
----------- ------ ------ ------- ----------- -------
Total revenue..................... 29,355 3,100 1,803 (3,797) -- 30,461
----------- ------ ------ ------- ----------- -------
Expenses:
Operations, maintenance and
management........................ 4,333 387 210 (522) -- 4,408
Real estate taxes................... 5,481 302 307 (1,059) -- 5,031
Mortgage and other interest......... 5,558 -- -- -- 1,666(D) 7,224
General and administrative.......... 1,403 -- -- -- -- 1,403
Depreciation and amortization....... 4,963 -- -- -- 830(E) 5,793
----------- ------ ------ ------- ----------- -------
Total expenses.................... 21,738 689 517 (1,581) 2,496 23,859
----------- ------ ------ ------- ----------- -------
Income before provision for loss
on real estate investment
and minority interest............... 7,617 2,411 1,286 (2,216) (2,496) 6,602
Provision for loss on real estate
investment.......................... (875) -- -- 875 -- --
----------- ------ ------ ------- ----------- -------
Income before allocation
to minority interest................ 6,742 2,411 1,286 (1,341) (2,496) 6,602
Income allocated to
minority interest................... (391) -- -- -- 8 (383)
----------- ------ ------ ------- ----------- -------
Net Income attributable
to common stock..................... $ 6,351 $2,411 $1,286 $(1,341) $ (2,488) $ 6,219
=========== ====== ====== ======= =========== =======
Weighted average common
shares outstanding --basic(F)....... 23,301,629 23,532,849
Basic and diluted income per
common share: (F)................... $ 0.27 $ 0.26
=========== ===========
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses of the
Completed Acquisitions and Pending Acquisitions for which financial
statements are included in this Form 8-K, for the period Bradley did not own
such properties.
(B) Increase represents historical operating revenues and expenses of the
Completed Acquisitions and the Pending Acquisitions for which financial
statements are not included in this Form 8-K, for the period Bradley did not
own such properties.
(C) Decrease represents the elimination of historical operating revenues and
expenses of properties sold or probable of being sold subsequent to March
31, 1998.
(D) 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 6.50%, which was Bradley's approximate borrowing rate at
May 30, 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 $11,000.
Increase in interest expense attributable to
acquisition activities.......................... $ 3,007
Decrease in interest expense attributable to
disposition activities.......................... (1,360)
Decrease in interest expense attributable to
the February 1998 Stock Offering................ (65)
Net increase in interest expense attributable to
the January 1998 Debt Issuance.................. 84
-------
Pro forma adjustment.............................. $ 1,666
=======
F-34
<PAGE>
(E) Depreciation and amortization has been increased to give effect to recording
the Property Acquisitions (including the Pending 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 or probable of being
sold subsequent to March 31, 1998 for the period which Bradley owned such
properties, as follows:
Increase in depreciation and amortization
attributable to acquisition activities................. $887
Decrease in depreciation and amortization
attributable to disposition activities................. (57)
----
Pro forma adjustment....................... $830
====
(F) 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................... $6,351,000 23,301,629 $ 0.27 $6,219,000 23,532,849 $0.26
Effect of dilutive securities:
Dilutive options exercised...... -- 54,379 -- 54,379
Conversion of LP Units.......... 391,000 1,435,311 383,000 1,435,311
---------- ---------- -------- ----------
Diluted EPS:
Net income attributable to
common stock $6,742,000 24,791,319 $ 0.27 $6,602,000 25,022,539 $0.26
========== ========== ======== ========== =========== =========
</TABLE>
F-35
<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................................. $116,453 $22,478 $ -- $ 138,931
Other income.................................. 1,632 787 -- 2,419
-------- ------- --------------- -----------
Total revenue............................... 118,085 23,265 -- 141,350
-------- ------- --------------- -----------
Expenses:
Operations, maintenance and
management.................................. 16,478 4,316 -- 20,794
Real estate taxes............................. 19,069 2,952 -- 22,021
Mortgage and other interest................... 27,739 5,539 (845)(C) 32,433
General and administrative.................... 5,123 1,985 (1,300)(D) 5,808
Non-recurring stock based
compensation................................ 3,415 -- -- 3,415
Depreciation and amortization................. 21,111 4,981 (1,910)(E) 24,182
-------- ------- --------------- -----------
Total expenses.............................. 92,935 19,773 (4,055) 108,653
-------- ------- --------------- -----------
Income before net gain on sale of properties,
equity in earnings of partnership and
minority interest............................. 25,150 3,492 4,055 32,697
Net gain on sale of properties................. -- 130 (130) --
Equity in earnings of partnership.............. -- 1,026 260(E) 1,286
Income allocated to minority
interest...................................... (1,568) -- -- (1,568)
-------- ------- --------------- -----------
Income from operations......................... 23,582 4,648 4,185 32,415
Preferred Share Distributions.................. -- -- (7,308)(F) (7,308)
-------- ------- --------------- -----------
Income from operations attributable to
common stock.................................. $ 23,582 $ 4,648 $(3,123) $ 25,107
-------- ======= =============== ===========
Weighted average common shares
outstanding-basic(G).......................... 22,963,982 22,963,982
Basic and diluted income from operations
per common share(G)........................... $1.03 $1.09
======== ===========
</TABLE>
F-36
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Statement of Income
(A) See page F-39 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 6.5%, 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 6.5%, as follows (in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages expected to be prepaid... $(2,263)
Interest on Bradley's line of credit expected to be used to prepay debt.. 1,652
Reduction of Mid-America interest to reflect a market rate............... (549)
Interest on Bradley's line of credit for Mid-America Merger fees
and expenses......................................................... 315
-------
Pro forma adjustment..................................................... $ (845)
=======
</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 $119,771,000, and the elimination of historical amortization
of Mid-America's deferred assets in accordance with the purchase method of
accounting, as follows (in thousands)
Pro forma depreciation expense ($119,771 over 39 years)........ $3,071
Mid-America depreciation and amortization...................... (4,981)
------
Pro forma adjustment........................................... $(1,910)
=======
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 3,480,000 shares of Series A Preferred Stock.
F-37
<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:
Income from operations attributable to
common stock.......................... $25,107,000 22,963,982 $1.09
Effect of dilutive securities:
Stock options........................... -- 42,451
Stock-based compensation................ -- 315
Conversion of LP Units.................. 1,568,000 1,523,587
-------------- ----------
Diluted EPS:
Income from operations attributable to
common stock.......................... $26,675,000 24,530,335 $1.09
============== ========== ===========
</TABLE>
F-38
<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 June 22, 1998, has acquired 12 properties
aggregating 1.5 million square feet of GLA for an aggregate acquisition price of
approximately $98.8 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. In addition, as of June 22, 1998, Bradley
has entered into contracts to acquire an additional seven Pending Acquisitions
for an estimated purchase price of approximately $89.6 million. Management
currently expects to fund the Pending Acquisitions with the bank line of credit
and the assumption of mortgage indebtedness. Although management deems such
acquisitions as probable, there can be no assurance that the acquisition of any
of such properties will be consummated, or that the acquisition price will
approximate those currently estimated. Further, there can be no assurance that
the method of financing such acquisitions will be as currently estimated.
During the period from January 1, 1997 through June 22, 1998, Bradley sold five
shopping centers for net proceeds of approximately $21.3 million utilizing the
net proceeds to pay-down the line of credit. 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.
Subsequent to March 31, 1998, Bradley entered into a contract to sell One
North State for approximately $84.5 million subject to normal and customary
closing costs and adjustments, with the proceeds assumed to be used to pay down
Bradley's line of credit.
The unaudited Pro Forma Condensed Statement of Income is presented as if all
of the acquisitions (including the Pending Acquisitions), the dispositions
(including the probable disposition), 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-39
<PAGE>
<TABLE>
<CAPTION>
OTHER
ACQUISITION ACQUISITION DISPOSITION OTHER
HISTORICAL PROPERTIES (A) PROPERTIES(B) PROPERTIES (C) ADJUSTMENTS PRO FORMA
------------ -------------- ------------- -------------- -------------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income......................... $ 96,115 $11,915 $25,988 $(17,565) $ -- $116,453
Other income.......................... 1,437 47 142 6 -- 1,632
----------- ------- ------- -------- ----------- --------
Total revenue....................... 97,552 11,962 26,130 (17,559) -- 118,085
----------- ------- ------- -------- ----------- --------
Expenses:
Operations, maintenance
and management...................... 14,012 1,680 3,642 (2,856) -- 16,478
Real Estate taxes..................... 18,398 1,186 4,105 (4,620) -- 19,069
Mortgage and other
interest............................ 16,562 -- -- -- 11,177(D) 27,739
General and administrative............ 5,123 -- -- -- -- 5,123
Non-recurring stock-based
compensation........................ 3,415 -- -- -- -- 3,415
Depreciation and
amortization........................ 16,606 -- -- -- 4,505(E) 21,111
----------- ------- ------- -------- ----------- --------
Total expenses........................ 74,116 2,866 7,747 (7,476) 15,682 92,935
----------- ------- ------- -------- ----------- --------
Income before net gain on sale of
properties and extraordinary
item................................ 23,436 9,096 18,383 (10,083) (15,682) 25,150
Net gain on sale of properties......... 7,438 -- -- (7,438) -- --
----------- ------- ------- -------- ----------- --------
Income before extraordinary item and
allocation to minority interest..... 30,874 9,096 18,383 (17,521) (15,682) 25,150
Income allocated to minority interest.. (1,116) -- -- -- (452) (1,568)
----------- ------- ------- -------- ----------- --------
Income before extraordinary item....... $ 29,758 $ 9,096 $18,383 $(17,521) $(16,134) $ 23,582
=========== ======= ======= ======== =========== ========
Weighted average shares
outstanding -- basic(F)............. 21,776,146 22,963,982
Basic and diluted income per
common share:
Income before extraordinary item(F)... $1.36 $1.03
=========== ========
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses of the
Completed Acquisitions, Pending Acquisitions and properties acquired in 1997
for which financial statements are included in this Form 8-K, for the period
Bradley did not own such properties.
(B) Increase represents historical operating revenues and expenses of Completed
Acquisitions, Pending Acquisitions and properties acquired in 1997 for which
financial statements are not included in this Form 8-K, for the period
Bradley did not own such properties.
(C) Decrease represents the elimination of historical operating revenues and
expenses and net gain on sale of properties disposed of during 1997 and 1998
or probable of being sold for the period during which Bradley owned such
properties.
F-40
<PAGE>
(D) 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 6.50%, which was Bradley's approximate
borrowing rate at May 30, 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 paydown 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 $19,000.
<TABLE>
<S> <C>
Increase in interest expense attributable to
acquisition activities............................ $18,885
Decrease in interest expense attributable to
disposition activities.......................... (6,369)
Decrease in interest expense attributable to
the Stock Offerings............................. (1,987)
Net increase in interest expense attributable to
the Debt Issuances.............................. 1,092
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.............................. $11,177
=======
</TABLE>
(E) Depreciation and amortization has been increased to give effect to recording
the property acquisitions (including Pending 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........................ $ 5,899
Decrease in depreciation and amortization
attributable to disposition activities........................ (1,394)
-------
Pro forma adjustment............................................ $ 4,505
=======
</TABLE>
(F) 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 $23,582,000 22,963,982 $1.03
Effect of dilutive securities:
Stock options..................... -- 42,451 -- 42,451
Stock-based compensation.......... -- 315 -- 315
Conversion of LP Units............ 1,116,000 799,938 1,568,000 1,523,587
----------- ---------- ---------- -----------
Diluted EPS:
Income before extraordinary item.. $30,874,000 22,618,850 $ 1.36 $25,150,000 24,530,335 $1.03
=========== ========== ========== =========== =========== =========
</TABLE>
F-41
<PAGE>
EXHIBIT 23.1
Consent of KPMG Peat Marwick LLP
--------------------------------
The Board of Directors of Bradley Real Estate, Inc.:
We consent to the use of our report dated April 9, 1998 related to the statement
of revenues and certain expenses of Redford Plaza for the year ended December
31, 1997, our report dated May 7, 1998 related to the statement of revenues and
certain expenses of Courtyard Shopping Center for the year ended December 31,
1997, our report dated May 7, 1998 related to the combined statement of revenues
and certain expenses of Camelot Shopping Center and Plainview Village for the
year ended December 31, 1997, our report dated May 29, 1998 related to the
statement of revenues and certain expenses of Salem Consumer Square for the year
ended December 31, 1997, our report dated May 29, 1998 related to the statement
of revenues and certain expenses of Holiday Manor Shopping Center for the year
ended December 31, 1997, and our report dated June 1, 1998 related to the
statement of revenues and certain expenses of Ellisville Square for the year
ended December 31, 1997, incorporated by reference in the registration
statements (Nos. 333-42357, 333-28167, 33-87084, 33-62200 and 33-64811) on Form
S-3 of Bradley Real Estate, Inc., the registration statements (Nos. 333-30587,
33-34884 and 33-65180) on Form S-8 of Bradley Real Estate, Inc., the
registration statement (No. 333-57123) on Form S-4 of Bradley Real Estate, Inc.
and the registration statements (Nos. 333-36577 and 333-51675) on Form S-3 of
Bradley Operating Limited Partnership.
Chicago, Illinois /s/ KPMG Peat Marwick LLP
June 24, 1998
