<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: September 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 (I.R.S. Employer
of incorporation) File Number) Identification No.)
40 Skokie Boulevard, Northbrook, Illinois 60062
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(847) 272-9800
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
The following financial statements and pro forma financial information
accompany this report:
(a) Financial Statements
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Acquisition Properties - Clock Tower Plaza
------------------------------------------
Independent Auditors' Report F-1
Statement of Revenues and Certain Expenses for F-2
the Six Months Ended June 30, 1998 (unaudited) and
the Year Ended December 31, 1997
Notes to Statement of Revenues and Certain Expenses F-3
Mid-America Realty Investments, Inc.
------------------------------------
Independent Auditors' Report F-5
Consolidated Balance Sheets, December 31, 1997 and 1996 F-6
Consolidated Statements of Operations for the Years
ended December 31, 1997, 1996 and 1995 F-7
Consolidated Statements of Shareholders' Equity for the Years ended
December 31, 1997, 1996 and 1995 F-8
Consolidated Statements of Cash Flows for the Years ended
December 31, 1997, 1996 and 1995 F-9
Notes to Consolidated Financial Statements for the Years
ended December 31, 1997, 1996, and 1995 F-11
Schedule III - Real Estate and Accumulated Depreciation F-18
Unaudited Consolidated Balance Sheets at March 31, 1998
and December 31, 1997 F-21
Unaudited Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and 1997 F-22
Unaudited Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1998 and 1997 F-23
Notes to Unaudited Consolidated Financial Statements as
of and for the Three Months ended March 31, 1998 F-24
Unaudited Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 F-26
Unaudited Consolidated Statements of Operation for the Three and
Six Months Ended June 30, 1998 and 1997 F-27
Unaudited Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 F-28
Notes to Unaudited Consolidated Financial Statements as of and for
the Six Months ended June 30, 1998 F-29
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION> Page
----
<S> <C>
(b) Pro Forma Financial Information - Bradley Real Estate, Inc.
-----------------------------------------------------------
Pro Forma Condensed Combined Balance Sheet as of June 30, 1998
(unaudited) F-32
Pro Forma Condensed Balance Sheet to reflect Prior Bradley
Transactions as of June 30, 1998 (unaudited) F-35
Pro Forma Condensed Combined Statement of Income for the Six
Months Ended June 30, 1998 (unaudited) F-36
Pro Forma Condensed Statement of Income to reflect Prior Bradley
Transactions for the Six Months Ended June 30, 1998 (unaudited) F-39
Pro Forma Condensed Combined Statement of Income for the Year
Ended December 31, 1997 (unaudited) F-42
Pro Forma Condensed Statement of Income to reflect Prior Bradley
Transactions for the Year Ended December 31, 1997 (unaudited) F-45
</TABLE>
(c) Exhibits
--------
Number Description
------ -----------
*23.1 Consent of KPMG LLP.
*23.2 Consent of Deloitte & Touche LLP.
- -------------------
* Filed herewith.
3
<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 Clock Tower
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 a current report on Form 8-K of Bradley
Real Estate, Inc. as described in Note 2. The presentation is not intended to
be a complete presentation of Clock Tower 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 Clock Tower Plaza for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
September 2, 1998
F-1
<PAGE>
ACQUISITION PROPERTIES - CLOCK TOWER PLAZA
Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Six Months ended June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Six Months
Ended
June 30, 1998 Year Ended
(unaudited) December 31, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Base rental income $ 670,653 $ 1,323,751
Operating expense and real estate
tax recoveries 82,310 194,434
Other income 220 830
- ------------------------------------------------------------------------------------
Total revenues 753,183 1,519,015
- ------------------------------------------------------------------------------------
Certain expenses:
Real estate taxes 32,500 65,148
Operating expenses 27,141 105,135
Utilities 2,962 9,407
Insurance 7,260 14,520
- ------------------------------------------------------------------------------------
Total expenses 69,863 194,210
- ------------------------------------------------------------------------------------
Excess of revenues over certain expenses $ 683,320 $ 1,324,805
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statement of revenues and certain expenses.
F-2
<PAGE>
ACQUISITION PROPERTIES - CLOCK TOWER PLAZA
Notes to Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Six Months ended June 30, 1998 (unaudited)
________________________________________________________________________________
(1) Background
The Statement of Revenues and Certain Expenses (Statement) has been
included for Clock Tower Plaza which was acquired by Bradley Real
Estate, Inc. through Bradley Operating Limited Partnership (the
Operating Partnership) on September 1, 1998.
Clock Tower Plaza is located in Lima, Ohio. It consists of approximately
238,000 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 a current report on Form 8-K of Bradley Real Estate, Inc.
and is not intended to be a complete presentation of Clock Tower Plaza's
revenues and expenses. The Statement has been prepared on the accrual
basis of accounting and requires management of Clock Tower Plaza 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 Clock Tower Plaza 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.
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 $52,000 for the year ended December 31, 1997.
F-3
<PAGE>
ACQUISITION PROPERTIES - CLOCK TOWER PLAZA
Notes to Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the
Six Months ended June 30, 1998 (unaudited)
________________________________________________________________________________
Minimum rents to be received from tenants under operating leases in effect
at December 31, 1997 are approximately as follows:
_________________________________________________________
Year Amount
_________________________________________________________
1998 $1,293,572
1999 1,328,765
2000 1,168,169
2001 1,075,125
2002 965,064
Thereafter 7,499,130
_________________________________________________________
F-4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Mid-America Realty Investments, Inc.
We have audited the accompanying consolidated balance sheets of Mid-America
Realty Investments, Inc. and subsidiary as of December 31, 1997 and 1996, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the financial statement schedule listed in the Index at
Item 14(a)(2). These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mid-America Realty Investments,
Inc. and subsidiary as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
January 28, 1998
Omaha, Nebraska
F-5
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Columnar Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
--------------------
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
Cash $ ---- $ ----
Accounts receivable, net of allowance
of $175,000 and $195,000 1,744 1,571
Notes receivable, net of allowance of
$70,000 400 498
Property:
Land and land improvements 37,129 37,352
Buildings 114,935 114,913
Equipment and fixtures 559 555
-------- --------
152,623 152,820
Less: Accumulated depreciation (33,033) (28,508)
-------- --------
Property, net 119,590 124,312
Investment in Mid-America Bethal
Limited Partnership 15,027 15,201
Intangible assets, less accumulated
amortization of $3,834,000 and $3,422,000 1,382 1,623
Other assets 2,387 2,635
-------- --------
$140,530 $145,840
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages and notes payable $ 61,522 $ 64,348
Accrued liabilities 2,095 1,957
-------- --------
Total Liabilities 63,617 66,305
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.01 par value; authorized
25,000,000 shares; issued and outstanding
8,284,743 and 8,283,255 shares 83 83
Capital in excess of par value 119,720 119,700
Distributions in excess of net income (42,890) (40,248)
-------- --------
Total Shareholders' Equity 76,913 79,535
-------- --------
$140,530 $145,840
======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Columnar Dollars in Thousands except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Rental income $ 17,348 $ 17,012 $ 16,564
Reimbursement income 5,130 5,097 4,834
Property management and leasing income 172 194 200
Other income 615 763 735
---------- ---------- ----------
Total Revenues 23,265 23,066 22,333
EXPENSES
Real estate taxes 2,952 3,076 3,063
Other property costs 3,813 3,584 3,674
Interest expense 5,539 5,787 5,965
Administrative expenses 1,370 1,268 1,458
Property management and leasing expenses 1,118 1,062 812
Depreciation and amortization 4,981 5,066 5,125
---------- ---------- ----------
Total Expenses 19,773 19,843 20,097
---------- ---------- ----------
Income Before Equity in
Earnings of Mid-America Bethal
Limited Partnership and Gain (Loss) on
Sales of Real Estate, net 3,492 3,223 2,236
Equity in Earnings of Mid-America Bethal
Limited Partnership 1,026 955 959
---------- ---------- ----------
INCOME FROM OPERATIONS 4,518 4,178 3,195
Gain (Loss) on Sales of Real Estate, net 130 (289) 189
---------- ---------- ----------
NET INCOME $ 4,648 $ 3,889 $ 3,384
========== ========== ==========
Weighted Average Shares
Outstanding During Period 8,283,850 8,281,696 8,280,051
========== ========== ==========
NET INCOME PER COMMON SHARE $ .56 $ .47 $ .41
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Columnar Dollars in Thousands)
<TABLE>
<CAPTION>
Capital in Distributions
Common Excess of in Excess of
Stock Par Value Net Income Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 $ 83 $ 119,677 $ (32,947) $ 86,813
Issuance of shares ---- 5 ---- 5
Net income ---- ---- 3,384 3,384
Dividends declared and paid -
$.88 per share ---- ---- (7,286) (7,286)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1995 83 119,682 (36,849) 82,916
Issuance of shares ---- 18 ---- 18
Net income ---- ---- 3,889 3,889
Dividends declared and paid -
$.88 per share ---- ---- (7,288) (7,288)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1996 83 119,700 (40,248) 79,535
Issuance of shares ---- 20 ---- 20
Net income ---- ---- 4,648 4,648
Dividends declared and paid
$.88 per share ---- ---- (7,290) (7,290)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997 $ 83 $ 119,720 $ (42,890) $ 76,913
============= ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Columnar Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,648 $ 3,889 $ 3,384
Adjustments:
Depreciation and amortization 4,981 5,066 5,125
Investment in Mid-America Bethal
Limited Partnership:
Equity in earnings (1,026) (955) (959)
Distributions received 1,200 1,350 1,500
(Gain) loss on sales of real estate, net (130) 289 (189)
(Decrease) increase in related liabilities (167) 145 537
Decrease (increase) in related assets 129 (358) (542)
-------- ------- --------
Net Cash Flows From Operating Activities 9,635 9,426 8,856
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of real estate 344 572 469
Principal repayments of notes receivable 157 334 123
Additions to property:
Expansion projects & other capital expenditures (1,107) (1,725) (1,184)
Tenant improvements (420) (280) (667)
Cash paid for leasing fees (88) (55) (263)
Payments from Yield Maintenance Agreement 1,517 19 1,027
Principal repayments of Tax Increment
Financing Bonds 160 242 71
-------- ------- --------
Net Cash Flows From Investing Activities 563 (893) (424)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on short-term debt, net (2,989) (119) (2,147)
Proceeds of mortgages payable 726 ---- 14,500
Principal payments on mortgages payable (563) (1,126) (13,279)
Cash paid for loan fees (82) ---- (220)
Dividends paid (7,290) (7,288) (7,286)
-------- ------- --------
Net Cash Flows From Financing Activities (10,198) (8,533) (8,432)
-------- ------- --------
NET CHANGE IN CASH ---- ---- ----
CASH, BEGINNING OF YEAR ---- ---- ----
-------- ------- --------
CASH, END OF YEAR $ ---- $ ---- $ ----
======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
1997: (A) Both of the Company's acquisition lines of credit were extended,
one to July 1998 and the other to July 1999.
(B) The Company extended its working line of credit two years to July
1999.
(C) The Company refinanced the Miracle Hills Park Shopping Center
fixed rate mortgage for seven years to August 2004. Proceeds of
$4,000,000 were used to repay the maturing $3,300,000 fixed rate
mortgage secured by Miracle Hills Shopping Center and to repay
variable rate acquisition line debt.
1996: (A) One of the Company's acquisition lines of credit was extended one
year to July 1997.
(B) The Company extended the two Twin Oaks Centre mortgages for three
years to April 1999.
(C) The Company repaid the maturing fixed rate mortgage loan secured
by Bishop Heights Shopping Center with proceeds from one of the
Company's acquisition lines of credit.
1995: (A) Both of the Company's acquisition lines of credit were extended,
one to July 1996 and the other to July 1997.
(B) The Company extended its working line of credit two years to July
1997.
(C) The Company extended the Lakewood Mall mortgage loan for three
years to August 1998.
(D) The Company assumed the Twin Oaks Centre loan. See Note B to the
Company's Consolidated Financial Statements.
See notes to consolidated financial statements.
F-10
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1997, 1996, and 1995
(Columnar Dollars in Footnotes are in Thousands except Per Share Data)
A. Summary of Significant Accounting Policies
Nature of Operations - Mid-America Realty Investments, Inc. (the "Company"),
a Maryland corporation, owns and manages income-producing properties, primarily
enclosed malls and neighborhood shopping centers. The Company has qualified as
a real estate investment trust ("REIT") under the provisions of the internal
Revenue Code.
At December 31, 1997, the Company owned 18 neighborhood shopping centers and
four enclosed malls located as follows: eight in Nebraska, three in Wisconsin,
two each in Indiana and Minnesota, and one each in Arkansas, Georgia, Illinois,
Iowa, Michigan, South Dakota and Tennessee. Additionally, the Company is a 50%
partner in Mid-America Bethal Limited Partnership ("Mid-America Bethal") which
owns two neighborhood shopping centers in Nebraska and Wisconsin and one
enclosed mail in Nebraska.
Use of Estimates - In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of Consolidation - The consolidated financial statements are
prepared on an accrual basis and include the accounts of the Company and its
wholly-owned subsidiary, Mid-America Centers Corp. All significant intercompany
balances and transactions have been eliminated.
Cash and Cash Equivalents - The Company considers short-term investments
with a maturity at acquisition of three months or less as cash equivalents. The
Company currently utilizes daily cash receipts to pay down any working capital
balances.
Investment in Mid-America Bethal Limited Partnership - The Company's 50%
investment in Mid-America Bethal is accounted for using the equity method.
Property - Property is stated at the lower of depreciated cost or the amount
estimated to be recoverable through future cash flows from property operations
and dispositions. Assets are depreciated using the straight-line method over
the following lives: land improvements - 15 years; buildings - 40 years; tenant
improvements -shorter of the term of the lease or the estimated useful life of
the improvement; and equipment and fixtures - 5 to 7 years. Real property
depreciation for the years ended December 31, 1997, 1996 and 1995 was
$4,487,000, $4,489,000 and $4,389,000, respectively. Statement of Financial
Accounting Standards "SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and Long-Lived Assets to be Disposed of" requires that long-lived
assets such as real estate assets be reviewed whenever events or changes in
circumstances indicate that the book value of the asset may not be recoverable.
If the sum of the estimated future net cash flows (undiscounted and without
interest charges) from an asset to be held and used is less than the book value
of the asset, an impairment loss must be recognized in the amount of the
difference between book value and fair value as opposed to the difference
between book value and net realizable value under the previous accounting
standard. For long-term assets like those held by the Company, the
determination of whether there is an impairment loss is dependent primarily on
the Company's estimates on occupancy, rent and expense increases, which involves
numerous assumptions and judgments as to future events over a period of many
years. At December 3 1, 1997, the Company does not hold any assets that meet
the impairment criteria of SFAS No. 121.
F-11
<PAGE>
Intangible Assets - Fees paid for leasing commissions on new or renewed
leases are amortized using the straight-line method over the initial term or
extension of the lease. Costs incurred to obtain mortgages and notes payable
are being amortized over the term of the obligation or agreement. Other
intangible assets, primarily from the acquisition of Mid-America Centers Corp.,
are being amortized using the straight-line method over periods of 60-120
months.
Leases - All leases with tenants are classified as operating leases.
Revenue Recognition - Minimum rents from tenants are recognized monthly
based upon total fixed cash flow over the initial term of the lease, using the
straight-line method. Percentage rents are based upon tenant sales levels for a
specified period. Reimbursed expenses for real estate taxes, common area
maintenance, utilities, janitorial and building maintenance are recognized in
the period in which the expenses are incurred, based upon the provisions of the
tenant's lease.
Federal Income Taxes - The Company has qualified as a REIT under the
Internal Revenue Code and, accordingly, will not be subject to federal income
taxes on amounts distributed to shareholders provided certain requirements are
met, including the provision that at least 95% of its real estate investment
trust taxable income is distributed by March 15 of the following year.
The dividends paid during 1997, 1996 and 1995 were allocated between
ordinary income and non-taxable return of capital as follows (amounts are per
share):
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Ordinary income $ .74 $ .62 $ .05
Return of capital .14 .26 .83
----- ----- -----
$ .88 $ .88 $ .88
===== ===== =====
</TABLE>
In 1995, a portion of previously recorded book losses associated with the
Company's interest in Twin Oaks Centre were utilized for income tax purposes.
As a result of the settlement described in footnote B, these losses affected the
taxation of dividends paid during 1995 by increasing the return of capital
portion and decreasing the ordinary income portion.
Repurchase of Common Stock - Under the laws of the state of Maryland, all
shares of common stock reacquired by the Company must be retired.
Net Income Per Share - Net income per share was determined by dividing net
income for the periods presented by the weighted average number of shares of
common stock outstanding for the period. Dilutive net income per share, which
includes the effect of common stock equivalents, as required by SFAS No. 128,
"Earnings Per Share", was determined to have no impact on earnings per share.
Other - In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure." In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", all of which are effective
for fiscal years beginning after December 15, 1997. The provisions of these
statements are of a disclosure nature only and will not have an impact on the
operations of the Company.
B. Property Transactions
Westview Plaza - In August 1996, the Company completed the sale of Westview
Plaza in McCook, Nebraska. The gross sales price was $425,000 resulting in a
book loss of approximately $314,000. Proceeds from the sale were used to reduce
bank debt.
F-12
<PAGE>
Outlot Sales - During 1997, the Company sold two outlot parcels for total
proceeds of $344,000, resulting in a gain of $130,000. During 1996 and 1995,
the Company sold one and two outlot parcels, respectively, for total proceeds of
$183,000 and $469,000, respectively, resulting in book gains of $24,400 and
$189,000, respectively.
Twin Oaks Centre - On April 19, 1995, the Company entered into a settlement
agreement with the Twin Oaks Centre Limited Partnership (the "Partnership").
The Partnership was in default on a mortgage loan to the Company. Pursuant to
the settlement, the Company took ownership of the underlying collateral which
consisted of the Twin Oaks Centre ("TOC"), a 95,000 square foot neighborhood
shopping center in Silvis, Illinois and tax increment financing bonds ("TIF")
payable from incremental sales and real estate taxes generated by the shopping
center and adjacent properties. In conjunction with the Settlement, the Company
transferred from "Interest in Twin Oaks Centre" on the Consolidated Balance
Sheet, the estimated value of the TOC ($4,136,000) to "Property", the estimated
value of the TIF Bonds ($2,000,000) to "Other Assets", and the balance of a
first mortgage (the "TOC Loan"), which was assumed by the Company, to "Mortgages
and Notes Payable". The TOC Loan had a balance of $3,033,000 on April 19, 1995.
Since the settlement date, the Company has received approximately $1,144,000
from the City of Silvis, Illinois related to the TIF Bonds; approximately
$472,000 of this payment was recorded by the Company as principal reduction.
C. Notes Receivable
Notes receivable at December 31, 1997 consists of two separate notes from
parties formerly related to the Company. The notes carry interest rates of
9.50% and 12%, mature in varying amounts through 2004 and are collateralized by
specific tangible assets and personal guarantees.
D. Investment in Mid-America Bethal Limited Partnership
The Company has a 50% general partnership interest in Mid-America Bethal, a
Nebraska limited partnership. The Company is the managing general partner of
Mid-America Bethal and a European investor is the limited partner. Mid-America
Bethal owns and operates two neighborhood shopping centers and one enclosed
mall.
Summarized financial information on Mid-America Bethal is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
------- -------
<S> <C> <C>
BALANCE SHEETS
Assets:
Cash and cash equivalents $ 823 $ 751
Property, net of accumulated
depreciation of $8,471,000
and $7,370,000 28,652 29,097
Other assets 592 572
------- -------
$30,067 $30,420
======= =======
Liabilities and Partners'
Capital:
Accrued liabilities $ 13 $ 18
Partners' capital 30,054 30,402
------- -------
$30,067 $30,420
======= =======
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS
Total Revenues $4,561 $ 4,442 $ 4,330
====== ======= =======
Net Income $2,052 $ 1,909 $ 1,918
====== ======= =======
EQUITY IN EARNINGS OF
MID-AMERICA BETHAL
RECORDED BY THE COMPANY $1,026 $ 955 $ 959
====== ======= =======
</TABLE>
F-13
<PAGE>
Mid-America Centers Corp. has agreements with Mid-America Bethal for the
management and leasing of properties owned by Mid-America Bethal. For the years
ended December 31, 1997, 1996 and 1995, Mid-America Bethal paid property
management fees of $178,000, $171,000, and $172,000, respectively, and incurred
and capitalized leasing commissions of $16,000, $32,000, and $28,000,
respectively. In addition, the Company administers the day-to-day activities of
Mid-America Bethal. For these services, the Company received administrative
fees from Mid-America Bethal of S25,000, $20,000 and $20,000 for the twelve
months ended December 31, 1997, 1996 and 1995, respectively.
E. Mortgages and Notes Payable
Mortgages and notes payable are comprised of the following:
<TABLE>
<CAPTION>
December 31,
Maximum Interest Annual Maturity ---------------
Available Rate Payment Date 1997 1996
--------- -------- ------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed-Rate Mortgage Debt:
Mortgages and Notes Payable:
Lakewood Mall 8.50% $ 768 Aug. 1998 $ 7,043 $ 7,204
Meadows S.C. 9.88% $ 346 Nov. 1998 2,950 3,002
Twin Oaks Centre 8.50% $ 84 Apr. 1999 688 699
Twin Oaks Centre (See Note B) 8.50% $ 342 Apr. 1999 2,854 2,915
Eastville Plaza 9.25% $ 292 Feb. 2001 2,902 2,925
Rivergate S.C. 10.00% $ 336 Jan. 2002 3,064 3,093
Shenandoah Plaza 10.00% $ 456 Jan. 2002 4,117 4,156
Edgewood S.C. 9.08% $ 590 Feb. 2002 6,500 6,500
Southport Centre 9.20% $ 736 Apr. 2002 8,000 8,000
Moorland Square 9.00% $ 384 Nov. 2002 3,539 3,600
Kimberly West 8.00% $ 403 Dec. 2002 4,014 4,092
Miracle Hills Park 8.28% $ 379 Aug. 2004 3,980 3,302
------- -------
Total Fixed-Rate Mortgage Debt 49,651 49,488
Adjustable-Rate Debt:
Revolving Credit Agreements:
Working Line of Credit $ 5,000 7.66% July 1999 ---- 545
Lines of Credit for Acquisitions $10,000 7.66% July 1999 10,000 4,756
$15,000 7.97% July 1998 1,871 9,559
------- -------
Total Adjustable Rate Debt 11,871 14,860
------- -------
Total Mortgages and Notes Payable $61,522 $64,348
======= =======
</TABLE>
During 1997, the Company finalized a $4,000,000, 8.28% fixed rate mortgage loan
secured by the Miracle Hills Park Shopping Center. The net proceeds from this
loan were used to repay the maturing $3,300,000 fixed rate mortgage secured by
the Miracle Hills Park Shopping Center and to repay variable rate acquisition
line debt. This loan has a seven (7) year term with payments based on a 25-year
amortization. The Company paid fees of approximately $46,000. In addition, the
Company renegotiated the terms of its revolving credit agreements. The
$5,000,000 working capital and the $10,000,000 acquisition lines of credit were
extended to July 1999 for an extension fee of $15,000. Both lines are priced at
200 basis points over LIBOR. The $15,000,000 acquisition line was extended
until July 1998 with the interest rate remaining at 250 basis points over LIBOR;
non-use fee of 25 basis points was eliminated. The interest rate can be reduced
by 25 basis points if $100,000 of non-interest bearing deposits are kept with
the lending institution. At December 31,1997, the Company had $100,000 of
deposits with the lending institution and the interest rate of the acquisition
line was LIBOR plus 225 basis points.
Principal maturities of total mortgages and notes payable, after giving
effect to the commitments described above, for the next five years are as
follows: 1998 - $12,241,000; 1999 - $13,795,000; 2000 - $479,000; 2001
$3,351,000; 2002 - $27,982,000, and thereafter - $3,674,000.
Substantially all of the Company's properties serve as collateral on one or
more of the above-mentioned obligations. The Company was in compliance with all
debt covenants at December 31, 1997 which require, among other covenants, that
the Company's total debt will not exceed 50% of total assets.
F-14
<PAGE>
F. Commitments and Contingencies
Yield Maintenance Agreement - In June 1992, the Company entered into a
Yield Maintenance Agreement (as amended, the "YMA") with parties formerly
related to the Company. Under the YMA, the formerly related parties guaranteed a
10% return from June 1, 1992 to December 31, 1996, calculated on a quarterly
basis, to the Company based upon the amount of the Company's Investment Base for
five specific properties purchased from the formerly related parties.
Under the YMA, the market value of these properties was determined as of
December 31, 1996. The determined market value was based on a 10.25%
capitalization rate applied to net operating income for the year ended December
31, 1996. The determined market value of the properties was less than the
Company's adjusted acquisition cost, and pursuant to the YMA, the difference was
owed to the Company, subject to certain limits. The obligations of the formerly
related parties under the YMA were limited to $2,800,000.
During second quarter 1997, the Company received the final settlement of
approximately $1,421,000 due under the YMA. The proceeds, which prior to
receipt were not reflected in the consolidated financial statements of the
Company, were used to reduce bank line debt. In addition, because receipt of
these amounts was not considered operating income, these amounts were not
considered net income and were applied against the carrying value of the
properties purchased from the formerly related parties.
Litigation - The Company is subject to a number of lawsuits and claims for
various amounts which arise out of the normal course of business. In the
opinion of management, the disposition of claims currently pending will not have
a material adverse effect on the Company's financial position or results of
operations.
G. Employee Benefit and Stock Plans
Retirement Savings Plan - In 1994, the Company established a qualified
savings 401(k) plan covering substantially all full-time employees.
Participants may contribute up to 15% of their pre-tax base pay with a
discretionary Company matching contribution. During 1996, the Company
contribution was equal to 25% of the first 4% of participant contributions.
Effective January 1, 1997, the Company contribution was increased to 50% of the
first 4% of participant contributions. Participants vest in Company
contributions over five years. Contribution expense for the years ended
December 31, 1997 and 1996 was $19,600 and $14,400, respectively.
Stock Plans - Pursuant to the Amended Stock Option Plan which was approved
by shareholders in 1992 and the 1995 Stock Plan approved by shareholders in 1995
(collectively, the "Plans"), the Compensation Committee of the Board of
Directors is authorized to issue options to purchase shares of common stock at
the then current market price of such shares and other stock awards to employees
of the Company and Mid-America Centers Corp. Stock options become exercisable
over discretionary periods not to exceed 10 years from the date of grant. At
December 31, 1997, approximately 200,000 shares remained available for issuance
under the Plans.
Following is a summary of the option activity under the Plans:
<TABLE>
<CAPTION>
Shares
Under Option Option Price Per Share
------------ ----------------------
<S> <C> <C>
Outstanding January 1, 1992 ---- ----
Granted 108,000 $10.375 to $25.375
--------
Outstanding December 31, 1992 108,000 $10.375 to $25.375
Granted 140,000 $10.75
Canceled (108,000) $10.375 to $25.375
--------
Outstanding December 31, 1993 140,000 $10.75
Forfeited (15,000) $10.75
--------
Outstanding at December 31, 1994 125,000 $10.75
Granted 100,000 $ 8.00
Forfeited (10,000) $10.75
--------
Outstanding at December 31, 1995,
1996 and 1997 215,000 $8.00 to $10.75
========
</TABLE>
At December 31, 1997, 215,000 stock options were exercisable.
F-15
<PAGE>
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock Based Compensation" (FAS 123), effective for fiscal
years beginning after December 15, 1995. The statement requires employers to
adopt a fair value method of accounting for the recognition of employee stock
based compensation expense or, as an alternative, supplemental disclosure of the
impact such expense recognition would have had on the Company's results of
operations. The Company has elected the supplemental disclosure option and has
determined, based on the use of the Black-Scholes option-pricing model and
appropriate Company-specific assumptions, that expense recognition of employee
stock based compensation would have had an immaterial impact on the Company's
consolidated operating results or net income per share.
H. Disclosure of Fair Value
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1997. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates of fair value
may differ significantly from the amounts presented herein.
Notes receivable and TIF Bond:
The carrying amounts of these items represent the Company's reasonable
estimate of their fair value.
Mortgages and notes payable - Fixed rate mortgage debt:
At December 31, 1997, the carrying amount was $49,651,000 compared to an
estimated fair market value of approximately $50,102,000. Interest rates that
are currently available to the Company for the issuance of mortgages with
similar terms and remaining maturities were used to estimate fair value of these
mortgages.
I. Leasing Activities
Spaces in the Company's properties are leased under operating leases with
initial terms ranging from one to 40 years. Certain of the leases contain
options to renew. Leases generally provide for minimum rents and percentage
rents plus reimbursement of certain operating expenses. The majority of tenants
pay reimbursements for their pro rata share of certain operating expenses.
Rent income in excess of base rent from tenants with percentage rent
provisions (based upon tenant sales levels for a specified period) for the years
ended December 31, 1997, 1996 and 1995 was $597,000, $471,000, and $536,000,
respectively.
Wal-Mart, Herberger's, Hy-Vee grocery stores, Kmart, Walgreens, Target
and/or Shopko and J.C. Penney anchored a total of 17 of the Company's properties
either as tenants or as occupants of buildings adjacent to the properties and
lease in the aggregate approximately 39% of the total leasable space in the
Company's properties.
Additionally, Kmart, Hy-Vee grocery stores, Herberger's and/or Wal-Mart
anchored all Mid-America Bethal properties as either lessees or as occupants of
buildings adjacent to the properties and lease approximately 38% of the total
leasable space in the Mid-America Bethal properties.
F-16
<PAGE>
The only tenant with rental commitments more than 10% of the gross leasable
space of the properties owned by the Company at December 31, 1997 is Wal-Mart,
whose five stores at properties owned by the Company account for approximately
15% of total gross leasable area. Wal-Mart also operates stores adjacent to
three of the Company's properties and to one of Mid-America Bethal's properties.
Future base rents under non-cancelable operating leases on properties owned
solely by the Company at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Other
Year Ending December 31, Wal-Mart Tenants Total
------------------------ -------- -------- --------
<S> <C> <C> <C>
1998 $ 1,232 $ 15,005 $ 16,237
1999 1,232 14,161 15,393
2000 1,232 13,256 14,488
2001 1,232 12,170 13,402
2002 1,232 10,940 12,172
Thereafter 4,457 76,092 80,549
------- -------- --------
$10,617 $141,624 $152,241
======= ======== ========
</TABLE>
The Company had no tenant which in any of the three years ended December 31,
1997 provided 10% or more of the Company's rental income or total revenues.
J. Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997:
Total revenues $ 5,789 $ 5,815 $ 5,815 $ 5,846 $ 23,265
Net income $ 1,243 $ 1,082 $ 1,130 $ 1,193 $ 4,648
Net income per share $ .15 $ .13 $ .14 $ .14 $ .56
Dividends declared per share $ .22 $ .22 $ .22 $ .22 $ .88
Weighted average number
of shares outstanding 8,283,255 8,283,759 8,284,275 8,284,743 8,283,850
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996:
Total revenues $ 5,893 $ 5,797 $ 5,736 $ 5,640 $ 23,066
Net income $ 1,166 $ 950 $ 769 $ 1,004 $ 3,889
Net income per share $ .14 $ .11 $ .09 $ .13 $ .47
Dividends declared per share $ .22 $ .22 $ .22 $ .22 $ .88
Weighted average number
of shares outstanding 8,280,842 8,281,407 8,281,978 8,282,548 8,281,696
</TABLE>
K. Subsequent Event
On January 27, 1998, the Company declared a cash dividend of $.22 per common
share payable on February 24, 1998 to stockholders of record on February 10,
1998.
F-17
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Columnar Dollars in Thousands)
<TABLE>
<CAPTION>
Reductions
Additional from
Initial Cost to Company Costs Receipts
------------------------- Subsequent Subsequent
Buildings and to to
Description Encumbrances Land Improvements Acquisition Acquisition
- --------------------------- --------------- -------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Monument Mall, Line of $ 420 $ 9,691 $ 3,679 $ (1,612)
Scottsbluff, NE Credit(2)
Delta Plaza, Line of 527 6,949 4,814 (311)
Escanaba, MI Credit(2)
Thunderbird Mall, Line of 305 6,027 3,862 --
Virginia, MN Credit(2)
Eastville Plaza, $ 2,902 706 3,529 678 (403)
Fremont, NE
Bishop Heights, Line of 710 723 156 --
Lincoln, NE Credit(2)
Ille de Grand, Line of 690 2,880 1,061 --
Grand Island, NE Credit (2)
Edgewood-Phase I, {
Lincoln, NE { 1,396 1,993 1,512 --
{ $ 6,500
Edgewood-Phase II, {
Lincoln, NE { 1,387 4,327 776 --
The Meadows, $ 2,950 1,179 3,121 75 --
Lincoln, NE
Miracle Hills Park, $ 3,980 2,250 4,972 461 (274)
Omaha, NE
Macon County, Line of 228 3,021 108 (40)
Lafayette, TN Credit(2)
Town West Center, Line of 366 4,263 169 --
Paragould, AR Credit(2)
Rivergate, $ 3,064 163 4,058 301 (25)
Shelbyville, IN
Germantown, Line of 488 8,766 602 (15)
Jasper, IN Credit(2)
Shenandoah Plaza, $ 4,117 485 5,281 130 --
Newnan, GA
Cornhusker Plaza, Line of 1,185 3,143 62 --
South Sioux City, NE Credit(2)
<CAPTION>
Gross Amount at Which Accumulated
Carried at December 31, 1997 Depreciation Date of
------------------------------------ at Completion Acquisition
Buildings and December 31, Date for of
Description Land Improvements Total 1997 Construction Completion
- ----------------------- --------- ------------ ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Monument Mall, $ 353 $ 11,825 $ 12,178 $(3,792) 08/1986 12/30/86
Scottsbluff, NE
Delta Plaza, 1,096 10,883 11,979 (3,267) 09/1971 12/30/86
Escanaba, MI
Thunderbird Mall, 305 9,889 10,194 (2,714) 09/1971 12/30/86
Virginia, MN
Eastville Plaza, 633 3,877 4,510 (1,376) 08/1986 12/30/86
Fremont, NE
Bishop Heights, 710 879 1,589 (334) 09/1971 12/30/86
Lincoln, NE
Ille de Grand, 690 3,941 4,631 (1,385) 07/1977 04/09/87
Grand Island, NE
Edgewood-Phase I,
Lincoln, NE 1,396 3,505 4,901 (1,343) 09/1980 06/01/87
Edgewood-Phase II,
Lincoln, NE 1,387 5,103 6,490 (1,148) 06/1991 06/26/91
The Meadows, 1,179 3,196 4,375 (985) 12/1987 06/01/88
Lincoln, NE
Miracle Hills Park, 2,147 5,262 7,409 (1,780) 03/1987 07/05/88
Omaha, NE
Macon County, 225 3,092 3,317 (944) 12/1985 12/21/88
Lafayette, TN
Town West Center, 366 4,432 4,798 (1,236) 04/1987 12/21/88
Paragould, AR
Rivergate, 162 4,335 4,497 (1,227) 03/1986 12/21/88
Shelbyville, IN
Germantown, 540 9,301 9,841 (2,443) 12/1985 12/21/88
Jasper, IN
Shenandoah Plaza, 485 5,411 5,896 (1,576) 02/1988 12/21/88
Newnan, GA
Cornhusker Plaza, 1,185 3,205 4,390 (696) 02/1990 06/27/91
South Sioux City, NE
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
Reductions
Additional from
Initial Cost to Company Costs Receipts
------------------------- Subsequent Subsequent
Buildings and to to
Description Encumbrances Land Improvements Acquisition Acquisition
- --------------------------- --------------- -------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Lakewood Mall, $ 7,043 600 13,890 2,008 (1,682)
Aberdeen, SD
Kimberly West, $ 4,014 1,700 4,691 281 (614)
Davenport, IA
Moorland Square, $ 3,539 1,550 3,750 1,162 (45)
New Berlin, WI
Fairacres, Line of 1,500 3,310 580 (635)
Oshkosh, WI Credit(2)
Southport Centre, $ 8,000 3,675 8,946 328 --
Apple Valley, MN
Fitchburg Ridge, None 500 1,545 47 --
Fitchburg, WI
Twin Oaks Centre $ 3,543 1,075 3,062 53 (208)
Silvis, IL ------- -------- ------- -------
$23,085 $111,938 $22,905 $(5,864)
======= ======== ======= =======
<CAPTION>
Gross Amount at Which Accumulated
Carried at December 31, 1997 Depreciation Date of
------------------------------------ at Completion Acquisition
Buildings and December 31, Date for of
Description Land Improvements Total 1997 Construction Completion
- ----------------------- --------- ------------ ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Lakewood Mall, 766 14,050 14,816 (2,680) 08/1990 08/28/92
Aberdeen, SD
Kimberly West, 1,617 4,441 6,058 (795) 01/1989 12/14/92
Davenport, IA
Moorland Square, 1,750 4,667 6,417 (692) 02/1990 11/23/92
New Berlin, WI
Fairacres, 1,389 3,366 4,755 (705) 05/1992 12/22/92
Oshkosh, WI
Southport Centre, 3,675 9,274 12,949 (1,042) 01/1992 01/01/94
Apple Valley, MN
Fitchburg Ridge, 500 1,592 2,092 (113) 12/1980 08/31/94
Fitchburg, WI
Twin Oaks Centre 867 3,115 3,982 (245) 01/1992 04/19/95
Silvis, IL ------- -------- -------- --------
$23,423 $128,641 $152,064 $(32,538)
======= ======== ======== ========
</TABLE>
(1) The aggregate cost for federal income tax purposes for these properties is
approximately $152,064,000.
(2) Revolving credit agreements totaled $11,871,000 at December 31, 1997.
F-19
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
(Columnar Dollars in Thousands)
<TABLE>
<CAPTION>
Buildings
Land and Tenant Equipment Construction-
Land Improvements Improvements and Fixtures in-Progress Total
---- ------------ ------------ ------------ ------------- -----
<S> <C> <C> <C> <C> <C> <C>
REAL ESTATE
Balance, January 1, 1995 $23,469 $13,343 $109,356 $599 $ 334 $147,061
Additions at cost 1,075 22 5,181 ---- 599 6,877
Retirements (250) ---- ---- ---- ---- (250)
Reductions for receipts under Yield
Maintenance Agreement (92) ---- (935) ---- ---- (1,027)
Transfer of assets when placed into service ---- ---- ---- ---- (646) (646)
------- ------- -------- ---- ----------- --------
Balance, December 31, 1995 24,202 13,365 113,602 559 287 152,015
Additions at cost ---- 167 832 ---- 1,011 2,010
Retirements (232) (148) (801) (4) ---- (1,185)
Reductions for receipts under Yield
Maintenance Agreement (2) ---- (18) ---- ---- (20)
Transfer of Assets when placed into service ---- ---- 1,298 ---- (1,298) ----
------- ------- -------- ---- ----------- --------
Balance, December 31, 1996 23,968 13,384 114,913 555 ---- 152,820
Additions to cost and expenses 26 320 1,178 4 ---- 1,528
Retirements (208) ---- ---- ---- ----- (208)
Reductions for receipts under Yield
Maintenance Agreement (361) ---- (1,156) ---- ---- (1,517)
Transfer of assets when placed into service ---- ---- ---- ---- ---- ----
------- ------- -------- ---- ----------- --------
Balance, December 31, 1997 $23,425 $13,704 $114,935 $559 $ ---- $152,623
======= ======= ======== ==== =========== ========
ACCUMULATED DEPRECIATION
Balance, January 1, 1995 $ ---- $ 4,647 $ 14,809 $344 $ ---- $ 19,800
Additions at cost ---- 884 3,506 60 ---- 4,450
Retirements ---- ---- ---- ---- ---- ----
------- ------- -------- ---- ----------- --------
Balance, December 31, 1995 ---- 5,531 18,315 404 ---- 24,250
Additions charged to costs and expenses ---- 883 3,605 53 ---- 4,541
Retirements ---- (67) (216) ---- ---- (283)
------- ------- -------- ---- ----------- --------
Balance, December 31, 1996 ---- 6,347 21,704 457 ---- 28,508
Additions charged to costs and expenses ---- 887 3,599 39 ---- 4,525
Retirements ---- ---- ---- ---- ---- ----
------- ------- -------- ---- ----------- --------
Balance, December 31, 1997 $ ---- $ 7,234 $ 25,303 $496 $ ---- $ 33,033
------- ------- -------- ---- ----------- --------
</TABLE>
F-20
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Columnar Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS March 31, 1998 December 31, 1997
--------------- ------------------
<S> <C> <C>
Cash $ ---- $ ----
Accounts receivable, net of allowance
of $179,000 and $175,000 1,876 1,744
Notes receivable, net of allowance of $70,000 409 400
Property:
Land and land improvements 37,129 37,129
Buildings 115,030 114,935
Equipment and fixtures 557 559
-------- --------
152,716 152,623
Less: Accumulated depreciation (34,161) (33,033)
-------- --------
118,555 119,590
Investment in Mid-America Bethal
Limited Partnership 14,943 15,027
Intangible assets, less accumulated
amortization of $3,930,000 and $3,834,000 1,307 1,382
Other assets 2,605 2,387
-------- --------
$139,695 $140,530
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages and notes payable $ 61,450 $ 61,522
Accrued liabilities 1,849 2,095
-------- --------
Total Liabilities 63,299 63,617
Commitments and Contingencies
Shareholders' Equity
Common stock, $.01 par value; authorized
25,000,000 shares; issued and outstanding
8,285,715 and 8,284,743 shares 83 83
Capital in excess of par value 119,730 119,720
Distributions in excess of net income (43,417) (42,890)
-------- --------
Total Shareholders' Equity 76,396 76,913
-------- --------
$139,695 $140,530
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-21
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Columnar Dollars in Thousands except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUES:
Rental income $ 4,333 $ 4,318
Reimbursement income 1,313 1,239
Property management and leasing income 41 40
Other income
Total Revenues 125 192
---------- ----------
5,812 5,789
EXPENSES:
Real estate taxes 760 776
Other property costs 788 878
Interest expense 1,341 1,411
Administrative expenses 403 350
Property management and leasing expenses 252 271
Depreciation and amortization 1,238 1,245
---------- ----------
Total Expenses 4,782 4,931
---------- ----------
Income Before Equity in
Earnings of Mid-America Bethal
Limited Partnership and Gain on Sale of
Real Estate 1,030 858
Equity in Earnings of Mid-America Bethal
Limited Partnership 265 255
---------- ----------
NET INCOME FROM OPERATIONS 1,295 1,113
Gain on Sale of Real Estate $ ---- $ 130
---------- ----------
NET INCOME $ 1,295 $ 1,243
---------- ----------
Weighted Average Shares
Outstanding During Period 8,285,066 8,283,255
---------- ----------
NET INCOME PER COMMON SHARE $ 16 $ 15
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
F-22
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Columnar Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,295 $ 1,243
Adjustments:
Depreciation and amortization 1,238 1,245
Gain on Sale of Real Estate ---- (130)
Investment in Mid-America Bethal
Limited Partnership:
Equity in earnings (265) (255)
Distributions received 350 350
Decrease in related liabilities (236) (287)
Increase in related assets (372) (166)
------- -------
Net Cash Flows From Operating Activities 2,010 2,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate ---- 344
Additions to property:
Expansion project and other capital expenditures ---- (2)
Tenant improvements (93) (43)
Payments from Yield Maintenance Agreement ---- 96
Cash paid for leasing fees (22) (25)
------- -------
Net Cash Flows From Investing Activities (115) 370
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on short-term debt, net 80 (412)
Scheduled principal payments on mortgages (152) (136)
Dividends paid (1,823) (1,822)
------- -------
Net Cash Flows From Financing Activities (1,895) (2,370)
------- -------
NET CHANGE IN CASH ---- ----
CASH, BEGINNING OF PERIOD ---- ----
------- -------
CASH, END OF PERIOD $ ---- $ ----
------- -------
</TABLE>
See Notes to Consolidated Financial Statements
F-23
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(Columnar Dollars in Footnotes are in Thousands except Per Share Data)
A. BASIS OF CONSOLIDATION AND PRESENTATION:
The unaudited consolidated financial statements are prepared on an accrual
basis and include the accounts of Mid-America Realty Investments, Inc. (the
"Company") and its wholly-owned subsidiary, Mid-America Centers Corp. The
unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements included in the
Company's 1997 Annual Report on Form 10-K for the year ended December 31,
1997.
The information furnished herein reflects all adjustments, which consist of
normal recurring accruals, which are, in the opinion of management,
necessary to fairly present the financial results for the interim periods
presented. The results for the three months ended March 31, 1998 and 1997
are not necessarily indicative of the operating results for the full year.
All material intercompany transactions and profits have been eliminated in
consolidated.
Net income per share was determined by dividing net income for the periods
presented by the weighted average number of shares of common stock
outstanding for the period. Dilutive net income per share, which includes
common stock equivalents, as required by Statement of Financial Accounting
(SFAS) No. 128, "Earnings per Share", was determined to have no impact on
earnings per share.
B. INVESTMENT IN MID-AMERICA BETHAL LIMITED PARTNERSHIP :
Mid-America Bethal Limited Partnership ("Mid-America Bethal") was formed on
June 1, 1989 by the Company and a European investor. The Company has a 50%
interest in Mid-America Bethal and is the managing general partner. The
European investor has a 50% interest and is the limited partner.
Summarized financial information on Mid-America Bethal is as follows:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
BALANCE SHEETS:
Assets:
Cash $ 943 $ 823
Property, net of depreciation of
$8,749,380 and $8,471,000 28,391 28,652
Other Assets 566 592
------- -------
$29,900 $30,067
======= =======
Liabilities and Partners' Capital:
Accounts payable and other
liabilities $ 15 $ 13
Partners' capital 29,885 30,054
------- -------
$29,900 $30,067
------- -------
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
<S> <C> <C>
STATEMENTS OF OPERATIONS:
Total Revenues $ 1,128 $ 1,127
------- -------
Net Income $ 531 $ 510
------- -------
EQUITY IN EARNINGS OF MID-AMERICA
BETHAL RECORDED BY THE COMPANY $ 265 $ 255
------- -------
C. MORTGAGES AND NOTES PAYABLE:
Mortgages and notes payable are comprised of the following:
March 31, December 31,
1998 1997
---------- -----------
Mortgages Payable $49,499 $49,651
Working Capital Line of Credit
($5,000,000 available at London International
Bank Offering Rate (LIBOR) plus 2% due
July 1999) 286 ----
Acquisitions Line of Credit
($10,000,000 available at LIBOR plus 2%
due July 1999) 10,000 10,000
Acquisitions Line of Credit
($15,000,000 available at LIBOR plus 2 1/4%
due July 1998) 1,665 1,871
------- -------
$61,450 $61,522
======= =======
</TABLE>
D. COMMITMENTS AND CONTINGENCIES:
In June 1992, the Company entered into a Yield Maintenance Agreement (as
amended, the "YMA") with parties formerly related to the Company. Under the
YMA, the formerly related parties guaranteed a 10% return from June 1, 1992
to December 31, 1996, calculated on a quarterly basis, to the Company based
upon the amount of the Company's Investment Base for five specific
properties purchased from the formerly related parties.
Under the YMA, the market value of these properties was determined as of
December 31, 1996. The determined market value was based on a 10.25%
capitalization rate applied to net operating income for the year ended
December 31, 1996. The determined market value of the properties was less
than the Company's adjusted acquisition cost, accordingly, the difference
was owed to the Company, subject to certain limits. The obligations of the
formerly related parties under the YMA was limited to $2,800,000.
During the second quarter of 1997, the Company received the final
settlement of approximately $1,421,000 due under the YMA. The proceeds,
which prior to receipt were not reflected in the consolidated financial
statements of the Company, were used to reduce bank line debt. In addition,
these amounts were not considered net income and were applied against the
carrying value of the properties purchased from the formerly related
parties.
E. SUBSEQUENT EVENT:
On April 22, 1998, the Company declared a cash dividend of $.22 per common
share payable on May 20, 1998 to shareholders of record on May 6, 1998.
F-25
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December 31, 1997
-------------- ------------------
<S> <C> <C>
Cash................................................. $ -- $ --
Accounts receivable, net of allowance of $191,000
and $175,000........................................ 1,893 1,744
Notes receivable, net of allowance of $70,000........ 349 400
Property:
Land and land improvements.......................... 37,177 37,129
Buildings........................................... 115,280 114,935
Equipment and fixtures.............................. 557 559
-------- --------
153,014 152,623
Less: Accumulated depreciation..................... (35,310) (33,033)
-------- --------
117,704 119,590
Investment in Mid-America Bethal Limited
Partnership......................................... 14,853 15,027
Intangible assets, less accumulated amortization of
$4,026,000 and $3,834,000........................... 1,231 1,382
Other assets......................................... 2,710 2,387
-------- --------
$138,740 $140,530
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages and notes payable.......................... $ 62,721 $ 61,522
Accrued liabilities.................................. 2,401 2,095
-------- --------
Total Liabilities................................. 65,122 63,617
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.01 par value; authorized
25,000,000 shares; issued and outstanding
8,286,215 and 8,284,743 shares.................... 83 83
Capital in excess of par value...................... 119,735 119,720
Distributions in excess of net income............... (46,200) (42,890)
-------- --------
Total Shareholders' Equity........................ 73,618 76,913
-------- --------
$138,740 $140,530
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
F-26
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rental income............................. $ 4,292 $ 4,388 $ 8,625 $ 8,705
Reimbursement income...................... 1,249 1,235 2,562 2,474
Property management and leasing income.... 56 43 97 88
Other income.............................. 107 149 232 336
---------- ---------- ---------- ----------
Total Revenues............................ 5,704 5,815 11,516 11,603
EXPENSES:
Real estate taxes......................... 711 710 1,471 1,486
Other property costs...................... 877 999 1,665 1,877
Interest expense.......................... 1,329 1,388 2,670 2,800
Administrative expenses................... 303 350 623 700
Property management and leasing expenses.. 281 320 533 591
Provision for merger related expenses..... 293 -- 376 --
Depreciation and amortization............. 1,257 1,228 2,495 2,472
---------- ---------- ---------- ----------
Total Expenses............................ 5,051 4,995 9,833 9,926
---------- ---------- ---------- ----------
Income Before Equity in
Earnings of Mid-America Bethal
Limited Partnership and Gain on Sale of
Real Estate............................... 653 820 1,683 1,677
Equity in Earnings of Mid-America Bethal
Limited Partnership....................... 211 262 476 518
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS..................... 864 1,082 2,159 2,195
Gain on Sale of Real Estate................ -- -- -- 130
---------- ---------- ---------- ----------
NET INCOME................................. $ 864 $ 1,082 $ 2,159 $ 2,325
========== ========== ========== ==========
Weighted Average Shares
Outstanding During Period................. 8,285,713 8,283,759 8,285,391 8,283,419
========== ========== ========== ==========
NET INCOME PER COMMON SHARE................ $.10 $.13 $.26 $.28
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statement
F-27
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(COLUMNAR DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................... $ 2,159 $ 2,325
Adjustments:
Depreciation and amortization.......................... 2,495 2,472
Gain on Sale of Real Estate............................ __ (130)
Investment in Mid-America Bethal Limited Partnership:
Equity in earnings................................... (476) (518)
Distributions received............................... 650 700
Increase (decrease) in related liabilities............. 106 (16)
Increase in related assets............................. (302) (697)
------- -------
Net Cash Flows From Operating Activities................. 4,632 4,136
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate........................ -- 344
Principal repayments of Notes Receivable................. 70 48
Additions to property:
Expansion projects and other capital expenditures...... (192) (199)
Tenant improvements.................................... (199) (111)
Payments from Yield Maintenance Agreement................ -- 1,517
Cash paid for leasing fees............................... (42) (49)
------- -------
Net Cash Flows From Investing Activities................. (363) (1,550)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on short-term debt, net.............. 1,509 (1,763)
Scheduled principal payments on mortgages................ (310) (278)
Dividends paid........................................... (5,468) (3,645)
------- -------
Net Cash Flows From Financing Activities................. (4,269) (5,686)
------- -------
NET CHANGE IN CASH......................................... -- --
CASH, BEGINNING OF PERIOD.................................. -- --
CASH, END OF PERIOD........................................ $ -- $ --
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
F-28
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(COLUMNAR DOLLARS IN FOOTNOTES ARE IN THOUSANDS EXCEPT PER SHARE DATA)
A. BASIS OF CONSOLIDATION AND PRESENTATION:
The unaudited consolidated financial statements are prepared on an accrual
basis and include the accounts of Mid-America Realty Investments, Inc. (the
"Company") and its wholly-owned subsidiary, Mid-America Centers Corp. The
unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements included in the
Company's 1997 Annual Report on Form 10-K for the year ended December 31,
1997.
The information furnished herein reflects all adjustments, which consist of
normal recurring accruals, which are, in the opinion of management,
necessary to fairly present the financial results for the interim periods
presented. The results for the six months ended June 30, 1998 and 1997 are
not necessarily indicative of the operating results for the full year.
All material intercompany transactions and profits have been eliminated in
consolidation.
Net income per share was determined by dividing net income for the periods
presented by the weighted average number of shares of common stock
outstanding for the period. Dilutive net income per share, which includes
common stock equivalents, as required by Statement of Financial Accounting
(SFAS) No. 128, "Earnings per Share", was determined to have no impact on
earnings per share.
B. INVESTMENT IN MID-AMERICA BETHAL LIMITED PARTNERSHIP:
Mid-America Bethal Limited Partnership ("Mid-America Bethal") was formed on
June 1, 1989 by the Company and a European investor. The Company has a 50%
interest in Mid-America Bethal and is the managing general partner. The
European investor has a 50% interest and is the limited partner.
Summarized financial information on Mid-America Bethal is as follows:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
BALANCE SHEETS:
Assets:
Cash............................................. $ 756 $ 823
Property, net of depreciation
of $9,027,000 and $8,471,000................... 28,316 28,652
Other Assets..................................... 644 592
------- -------
$29,716 $30,067
======= =======
Liabilities and Partners' Capital:
Accounts payable and other liabilities........... $ 10 $ 13
Partners' capital................................ 29,706 30,054
------- -------
$29,716 $30,067
======= =======
</TABLE>
F-29
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
------ ------
<S> <C> <C>
STATEMENTS OF OPERATIONS:
Total Revenues.................... $2,222 $2,282
====== ======
Net Income........................ $ 951 $1,035
====== ======
EQUITY IN EARNINGS OF MID-AMERICA
BETHAL RECORDED BY THE COMPANY..... $ 476 $ 518
====== ======
</TABLE>
C. MORTGAGES AND NOTES PAYABLE:
Mortgages and notes payable are comprised of the following:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Mortgages Payable.......................................... $49,341 $49,651
Working Capital Line of Credit
($5,000,000 available at London International Bank
Offering Rate (LIBOR) plus 2% due July 1999).............. 1,715 --
Acquisitions Line of Credit
($10,000,000 available at LIBOR plus 2% due July 1999).. 10,000 10,000
Acquisitions Line of Credit
($15,000,000 available at LIBOR plus 2 1/4% due
July 1998)............................................ 1,665 1,871
------- -------
$62,721 $61,522
======= =======
</TABLE>
During July 1998, the Company extended the $15,000,000 acquisition Line of
Credit to September 1, 1998 under the same terms and conditions.
D. COMMITMENTS AND CONTINGENCIES:
In June 1992, the Company entered into a Yield Maintenance Agreement (as
amended, the "YMA") with parties formerly related to the Company. Under the
YMA, the formerly related parties guaranteed a 10% return from June 1, 1992
to December 31, 1996, calculated on a quarterly basis, to the Company based
upon the amount of the Company's Investment Base for five specific
properties purchased from the formerly related parties.
Under the YMA, the market value of these properties was determined as of
December 31, 1996. The determined market value was based on a 10.25%
capitalization rate applied to net operating income for the year ended
December 31, 1996. The determined market value of the properties was less
than the Company's adjusted acquisition cost, accordingly, the difference
was owed to the Company, subject to certain limits. The obligations of the
formerly related parties under the YMA was limited to $2,800,000.
During the second quarter of 1997, the Company received the final settlement
of approximately $1,421,000 due under the YMA. The proceeds, which prior to
receipt were not reflected in the consolidated financial statements of the
Company, were used to reduce bank line debt. In addition, these amounts
were not considered net income and were applied against the carrying value
of the properties purchased from the formerly related parties.
F-30
<PAGE>
E. MERGER TRANSACTION:
Mid-America Realty Investments, Inc. and Bradley Real Estate, Inc. entered
into a Definitive Merger Agreement dated May 30, 1998, pursuant to which
Bradley will acquire Mid-America. The Merger and the Merger Agreement were
approved by the stockholders of Mid-America at its special meeting of
stockholders held on August 5, 1998.
Pursuant to the terms of the Merger Agreement, each share of Mid-America
common stock was exchanged for 0.42 shares of a newly created series of
Bradley preferred stock. The new Series A Convertible Preferred Stock will
pay an annual dividend equal to 8.4% of the $25.00 liquidation preference
and are convertible into shares of Bradley common stock at a conversion
price of $24.49 per share. The preferred stock is listed on the New York
Stock Exchange.
F-31
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 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 June 30, 1998. The Mid-America Merger has been accounted for
under the purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16. In the opinion of Bradley's management, all adjustments
necessary to reflect the effects of 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 June 30, 1998, nor does it
purport to represent the future financial position of Bradley. This unaudited
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with,
and is qualified in its entirety by the 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................. $807,701 $153,014 $ (9,364) $951,351
Accumulated depreciation and amortization........ (48,813) (35,310) 35,310 (48,813)
-------- -------- --------- --------
Net real estate investments.................... 758,888 117,704 25,946 902,538
Cash and cash equivalents........................ 1,695 -- -- 1,695
Rents and other receivables...................... 12,590 2,242 (1,108) (C) 13,724
Investment in partnership........................ -- 14,853 (1,597) 13,256
Deferred charges and other assets................ 19,956 3,941 (2,839) (D) 21,058
-------- -------- --------- --------
Total assets................................... $793,129 $138,740 $ 20,402 $952,271
======== ======== ========= ========
Liabilities
Mortgage loans................................... 68,266 49,341 (11,258) (E) 106,349
Unsecured notes payable.......................... 199,512 -- -- 199,512
Lines of credit.................................. 117,961 13,380 18,232 (F) 149,573
Accounts payable, accrued expenses and
other liabilities............................... 27,642 2,401 41 30,084
-------- -------- --------- --------
Total liabilities.............................. 413,381 65,122 7,015 485,518
-------- -------- --------- --------
Minority interest................................ 20,846 -- -- 20,846
-------- -------- --------- --------
Share Owners' Equity
Series A Preferred Stock and paid-in capital..... -- -- 87,005 (G) 87,005
Common stock at par.............................. 238 83 (83) (G) 238
Additional paid-in capital....................... 345,327 119,735 (119,735) (G) 345,327
Accumulated earnings in excess of distributions.. 13,337 (46,200) 46,200 (G) 13,337
-------- -------- --------- -------
Total share owners' equity..................... 358,902 73,618 13,387 445,907
-------- -------- --------- --------
Total liabilities and share owners'
equity....................................... $793,129 $138,740 $ 20,402 $952,271
======== ======== ========= ========
</TABLE>
F-32
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Balance Sheet
(A) See page F-35 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):
<TABLE>
<S> <C>
Issuance of Series A Preferred Stock.......... $ 87,005
Assumption of Mid-America liabilities......... 65,122
Adjustment to increase mortgage debt
to estimated fair value...................... 2,124
Estimated costs of the Mid-America Merger..... 4,850
--------
$159,101
========
</TABLE>
(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 June 30,
1998. The amounts represented by these adjustments are summarized below
(in thousands):
<TABLE>
<S> <C>
Leasing costs.......................... $ 2,713
Decrease in value of TIF bonds......... 1,524
Loan costs............................. 1,319
Management contract.................... 893
Other.................................. 394
Decrease in cash surrender value of
executive benefits................... 22
Less accumulated amortization.......... (4,026)
-------
Pro forma adjustment................... $ 2,839
=======
</TABLE>
(E) Represents the 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 June
30, 1998, as follows (in thousands):
<TABLE>
<S> <C>
Amount of Mid-America mortgage debt prepaid........... $(13,382)
Adjustment to estimated fair value for
remaining mortgage debt............................. 2,124
--------
Pro forma adjustment.................................. $(11,258)
========
</TABLE>
F-33
<PAGE>
(F) Estimated payments for fees and expenses related to the Mid-America Merger
are as follows (in thousands):
<TABLE>
<S> <C>
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........ 13,382
-------
Pro forma adjustment................................. $18,232
=======
</TABLE>
(G) To adjust Mid-America's capital accounts to reflect the issuance of
3,480,210 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........ $ -- $ -- $ -- $87,005
Mid-America's historical stockholders'
equity................................... $ 83 119,735 (46,200) --
------ --------- ------------------ -------
Pro forma adjustment...................... $(83) $(119,735) $ 46,200 $87,005
====== ========= ================== =======
</TABLE>
F-34
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED BALANCE SHEET
TO REFLECT PRIOR BRADLEY TRANSACTIONS
June 30, 1998
(Unaudited)
From July 1, 1998 through September 23, 1998, Bradley acquired an additional
five shopping centers for an aggregate cost of approximately $67 million. On
July 31, 1998, Bradley completed the sale of One North State for approximately
$84.5 million. The net proceeds of approximately $83 million were used to pay
down the line of credit.
The unaudited Pro Forma Condensed Balance Sheet of Bradley is presented as
if the acquisitions and the disposition, described above, had been consummated
on June 30, 1998.
<TABLE>
<CAPTION>
June 30, 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........... $740,540 $67,161 $ -- $807,701
Accumulated depreciation and amortization... (48,813) -- -- (48,813)
-------- ------- -------- --------
Net real estate investments................. 691,727 67,161 -- 758,888
Real estate investments held for sale....... 52,702 (52,702) --
Other assets:
Cash and cash equivalents.................. 1,695 -- -- 1,695
Rents and other receivables................ 14,361 -- (1,771) 12,590
Deferred charges, net and other assets..... 20,439 -- (483) 19,956
-------- ------- -------- --------
Total assets................................ $780,924 $67,161 $(54,956) $793,129
======== ======= ======== ========
LIABILITIES AND SHARE OWNERS' EQUITY
Mortgage loans.............................. 55,866 12,400 -- 68,266
Unsecured notes payable..................... 199,512 -- -- 199,512
Line of credit.............................. 146,200 54,761 (83,000) 117,961
Accounts payable, accrued expenses and
other liabilities.......................... 31,574 -- (3,932) 27,642
-------- ------- -------- --------
Total liabilities........................... 433,152 67,161 (86,932) 413,381
-------- ------- -------- --------
Minority interest........................... 19,090 -- 1,756 20,846
-------- ------- -------- --------
Share owners' equity
Common stock at par........................ 238 -- -- 238
Additional paid-in capital................. 345,327 -- -- 345,327
Accumulated earnings in excess
of distributions.......................... (16,883) -- 30,220 13,337
-------- ------- -------- --------
Total share owners' equity................. 328,682 -- 30,220 358,902
-------- ------- -------- --------
Total liabilities and share owners' equity.. $780,924 $67,161 $(54,956) $793,129
======== ======= ======== ========
</TABLE>
Explanatory Notes
(A) Adjustments represent Acquisition Properties acquired subsequent to June
30, 1998.
(B) Adjustments represent the sale of One North State for sales proceeds of
approximately $84.5 million, and the application of the net proceeds to pay
down Bradley's line of credit.
F-35
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
For the Six Months Ended June 30, 1998
(Unaudited)
This unaudited Pro Forma Condensed Combined Statement of Income is
presented as if the Mid-America Merger and all the Prior Bradley Transactions
(see Note A) had been consummated on January 1, 1997 and with Bradley qualifying
as a REIT, distributing all of its taxable income and, therefore, incurring no
federal income tax expense during the period January 1, 1997 through June 30,
1998. The Mid-America Merger has been accounted for under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16. In the
opinion of Bradley's management, all adjustments necessary to reflect the
effects of these transactions have been made. The accompanying Pro Forma
Condensed Combined Statement of Income has been prepared based on pro forma
adjustments to pro forma and historical financial statements of Bradley and
historical financial statements of Mid-America.
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>
Six Months Ended June 30, 1998
--------------------------------------------------------------
Bradley
Pro Forma
Prior Pro Forma as Adjusted
Bradley Mid-America For
Pro Forma Mid-America Merger Mid-America
Transactions(A) Historical(B) Adjustments Merger
--------------- -------------- ------------ ------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Income:
Rental income................................... $ 60,453 $11,187 $ -- $ 71,640
Other income.................................... 1,080 329 -- 1,409
----------- ------- ------- -----------
Total revenue................................. 61,533 11,516 -- 73,049
----------- ------- ------- -----------
Expenses:
Operations, maintenance and management.......... 8,594 1,884 -- 10,478
Real estate taxes............................... 9,852 1,471 -- 11,323
Mortgage and other interest..................... 14,054 2,670 (273) (C) 16,451
General and administrative...................... 3,120 937 (663) (D) 3,394
Provision for merger related expenses........... -- 376 (376) --
Depreciation and amortization................... 11,835 2,495 (959) (E) 13,371
----------- ------- ------- -----------
Total expenses................................ 47,455 9,833 (2,271) 55,017
----------- ------- ------- -----------
Income before equity in earnings of partnership
and allocation to minority interest............. 14,078 1,683 2,271 18,032
Equity in earnings of partnership................ -- 476 139 615
Income allocated to minority interest............ (792) -- -- (792)
----------- ------- ------- -----------
Net income....................................... 13,286 2,159 2,410 17,855
Preferred share distributions.................... -- -- (3,654) (F) (3,654)
----------- ------- ------- -----------
Net income attributable to common stock.......... $ 13,286 $ 2,159 $(1,244) $ 14,201
=========== ======= ======= ===========
Weighted average number of
common shares outstanding-basic(G).............. 23,618,154 23,618,154
Basic net income per
common share(G)................................. $0.56 $0.60
=========== ===========
</TABLE>
F-36
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Statement of Income
(A) See page F-39 or 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
six months ended June 30, 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 6.75%, combined with the reduction in
interest expense to reflect the estimated market interest rate of
approximately 7.25%, in accordance with the purchase method of accounting,
partially offset by an increase in interest expense for the payment of fees
and expenses related to the Mid-America Merger of approximately $4,850,000,
at an interest rate of 6.75%, as follows (in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages
expected to be prepaid............................................. $(1,055)
Interest on Bradley's line of credit expected to
be used to prepay debt............................................. 903
Reduction of Mid-America interest to reflect a market rate............ (285)
Interest on Bradley's line of credit for Mid-America Merger fees
and expenses........................................................ 164
-------
Pro forma adjustment.................................................. $ (273)
=======
</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..................... $476
D&O insurance and director fees........... 87
Professional fees......................... 64
Other..................................... 36
----
Pro forma adjustment...................... $663
====
</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)............ $1,536
Mid-America depreciation and
amortization........................ (2,495)
------
Pro forma adjustment................... $ (959)
======
</TABLE>
The pro forma adjustment to the equity in earnings of partnership reflects
the adjustment to depreciation and amortization of the partnership
resulting from recording the investment in partnership at Bradley's
purchase price.
(F) Preferred share distributions are calculated using an annual dividend rate
of $2.10 per share for 3,480,210 shares of Series A Preferred Stock pro
rated for the period presented.
F-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:
Net income attributable
to common stock........................ $14,201,000 23,618,154 $0.60
Effect of dilutive securities:
Dilutive options exercised............... -- 54,379
Conversion of LP Units................... 795,000 1,408,182
----------- ----------
Diluted EPS:
Net income attributable to
common stock........................... $14,996,000 25,080,715 $0.60
=========== ========== ===========
</TABLE>
F-38
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
TO REFLECT PRIOR BRADLEY TRANSACTIONS
for the Six Months Ended June 30, 1998
(Unaudited)
During the period from January 1, 1998 through September 23, 1998, Bradley
acquired 19 shopping centers and two outlots adjacent to one of Bradley's
existing centers at an aggregate cost of approximately $179.0 million (the
"Acquisition Properties"). Consideration paid for such acquisitions included
cash (provided primarily from the bank line of credit) and assumption of
mortgage indebtedness. The Prior Bradley Transactions do not include the Mid-
America Merger.
On January 28, 1998, Bradley, through the Operating Partnership, issued
$100 million of 7.2% ten-year unsecured Notes maturing January 15, 2008 (the
"January 1998 Debt Issuance"). The effective interest rate on the unsecured
Notes is approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's
Investment Services and "Baa3" by Moody's Investor's Services. Proceeds from the
offering were used to reduce the outstanding borrowings under the line of
credit.
On February 18, 1998, Bradley issued 392,638 shares of common stock to a
unit investment trust at a price based upon the then market value of $20.375 per
share (the "February 1998 Stock Offering"). Net proceeds from the offering of
approximately $7.6 million were contributed to the Operating Partnership and
were used to reduce outstanding borrowings under the line of credit.
On July 31, 1998, Bradley completed the sale of One North State for
approximately $84.5 million. The net proceeds of approximately $83 million
were used to pay down the line of credit. In addition, in May 1998, Bradley
sold Holiday Plaza, a shopping center in Cedar Falls, Iowa, for approximately
$1.9 million.
The unaudited Pro Forma Condensed Statement of Income of Bradley is
presented as if the acquisitions, the dispositions, the January 1998 Debt
Issuance, and the February 1998 Stock Offering, described above, had been
consummated on January 1, 1997, and with Bradley qualifying as a REIT and,
therefore, incurring no federal income tax expense during the period
January 1, 1997 through June 30, 1998.
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............. $ 59,337 $ 753 $7,771 $(7,408) $ -- $ 60,453
Other income.............. 1,059 -- 21 -- -- 1,080
----------- ------- ------ ------- ----------- -----------
Total revenue........... 60,396 753 7,792 (7,408) -- 61,533
----------- ------- ------ ------- ----------- -----------
Expenses:
Operations, maintenance
and management........... 8,776 37 900 (1,119) -- 8,594
Real estate taxes......... 10,776 33 837 (1,794) -- 9,852
Mortgage and other
interest................. 12,143 -- -- -- 1,911 (D) 14,054
General and administrative 3,120 -- -- -- -- 3,120
Depreciation and
amortization............ 10,594 -- -- -- 1,241 (E) 11,835
Total expenses.......... 45,409 70 1,737 (2,913) 3,152 47,455
----------- ------- ------ ------- ----------- -----------
Income before provision
for loss on real estate
investment and minority
interest................. 14,987 683 6,055 (4,495) (3,152) 14,078
Provision for loss on
real estate investment.... (875) -- -- 875 -- --
------- ------- ------- ------- ----------- -----------
Income before allocation
to minority interest..... 14,112 683 6,055 (3,620) (3,152) 14,078
Income allocated to
minority interest......... (797) -- -- -- 5 (792)
------- ------- ------- ----------- ----------- ------------
Net Income attributable
to common stock.......... $13,315 $ 683 $ 6,055 $(3,620) $ (3,147) $13,286
======= ------- ======= ======== ----------- ============
Weighted average common
shares outstanding
--basic(F)................ 23,503,183 23,618,154
Basic and diluted income per
common share: (F)......... $0.57 $0.56
=========== ============
</TABLE>
Explanatory Notes
(A) Increase represents historical operating revenues and expenses of Clock
Tower Plaza for which financial statements are included in this Form 8-K,
for the period Bradley did not own such property.
(B) Increase represents historical operating revenues and expenses of the
Acquisition Properties 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 for the period Bradley owned such properties.
(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 6.75%, which was Bradley's approximate borrowing rate at
August 31, 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 $13,000.
<TABLE>
<S> <C>
Increase in interest expense attributable
to acquisition activities.......................... $ 4,777
Decrease in interest expense attributable to
disposition activities............................. (2,849)
Decrease in interest expense attributable to
the February 1998 Stock Offering................... (64)
Net increase in interest expense attributable to
the January 1998 Debt Issuance..................... 47
-------
Pro forma adjustment................................. $ 1,911
=======
</TABLE>
F-40
<PAGE>
(E) Depreciation and amortization has been increased to give effect to recording
the property acquisitions over a depreciable life of 39 years, for the
period which Bradley did not own such properties, net of the reduction for
properties sold for the period which Bradley owned such properties, as
follows:
<TABLE>
<CAPTION>
<S> <C>
Increase in depreciation and amortization
attributable to acquisition activities............. $1,335
Decrease in depreciation and amortization
attributable to disposition activities............. (94)
------
Pro forma adjustment................................. $1,241
======
</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:
Net income attributable to
common stock................... $13,315,000 23,503,183 $ 0.57 $13,286,000 23,618,154 $0.56
Effect of dilutive securities:
Dilutive options exercised...... -- 49,450 -- 49,450
Conversion of LP Units.......... 797,000 1,408,182 792.000 1,408,182
----------- ---------- ----------- -----------
Diluted EPS:
Net income attributable to
common stock $14,112,000 24,960,815 $ 0.57 $14,078,000 25,075,786 $0.56
=========== ========== ======== =========== =========== =========
</TABLE>
F-41
<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................................. $117,146 $22,478 $ -- $ 139,624
Other income.................................. 1,628 787 -- 2,415
----------- ----------- ----------- -----------
Total revenue............................... 118,774 23,265 -- 142,039
----------- ----------- ----------- -----------
Expenses:
Operations, maintenance and
management.................................. 16,486 4,316 -- 20,802
Real estate taxes............................. 19,124 2,952 -- 22,076
Mortgage and other interest................... 27,559 5,539 (791)(C) 32,307
General and administrative.................... 5,123 1,985 (1,300)(D) 5,808
Non-recurring stock based
compensation................................ 3,415 -- -- 3,415
Depreciation and amortization................. 21,131 4,981 (1,910)(E) 24,202
----------- ----------- ----------- -----------
Total expenses.............................. 92,838 19,773 (4,001) 108,610
----------- ----------- ----------- -----------
Income before net gain on sale of properties,
equity in earnings of partnership and
minority interest............................. 25,936 3,492 4,001 33,429
Net gain on sale of properties................. -- 130 (130) --
Equity in earnings of partnership.............. -- 1,026 260(E) 1,286
Income allocated to minority
interest...................................... (1,588) -- -- (1,588)
----------- ----------- ----------- -----------
Income from operations......................... 24,348 4,648 4,131 33,127
Preferred Share Distributions.................. -- -- (7,308)(F) (7,308)
----------- ----------- ----------- -----------
Income from operations attributable to
common stock.................................. $ 24,348 $ 4,648 $(3,177) $ 25,819
----------- ----------- ----------- -----------
Weighted average common shares
outstanding-basic(G).......................... 23,356,620 23,356,620
Basic and diluted income from operations
per common share(G)........................... $ 1.04 $ 1.11
=========== ===========
</TABLE>
F-42
<PAGE>
____________________
Notes to Pro Forma Condensed Combined Statement of Income
(A) See page F-45 for the pro forma condensed statement of income giving effect
to Prior Bradley Transactions.
(B) Represents historical operating results as reported by Mid-America for the
year ended December 31, 1997.
(C) Represents the net reduction in interest expense for the prepayment of
certain Mid-America mortgage indebtedness with Bradley's line of credit at
Bradley's current interest rate of 6.75%, combined with the reduction in
interest expense to reflect the estimated market interest rate of
approximately 7.25%, in accordance with the purchase method of accounting,
partially offset by an increase in interest expense for the payment of fees
and expenses related to the Mid-America Merger of approximately $4,850,000,
at an interest rate of 6.75%, as follows (in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages
expected to be prepaid.................................. $(2,263)
Interest on Bradley's line of credit expected
to be used to prepay debt............................... 1,714
Reduction of Mid-America interest to reflect a
market rate............................................. (569)
Interest on Bradley's line of credit for
Mid-America Merger fees
and expenses............................................ 327
-------
Pro forma adjustment........................................ $ (791)
=======
</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):
<TABLE>
<S> <C>
Pro forma depreciation expense
($119,771 over 39 years)................. $3,071
Mid-America depreciation
and amortization......................... (4,981)
-------
Pro forma adjustment...................... $(1,910)
=======
</TABLE>
The pro forma adjustment to the equity in earnings of partnership reflects
the adjustment to depreciation and amortization of the partnership
resulting from recording the investment in partnership at Bradley's
purchase price.
(F) Preferred share distributions are calculated using an annual dividend rate
of $2.10 per share for 3,480,210 shares of Series A Preferred Stock.
F-43
<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.......................... $25,819,000 23,356,620 $ 1.11
Effect of dilutive securities:
Stock options........................... -- 42,451
Stock-based compensation................ -- 315
Conversion of LP Units.................. 1,588,000 1,523,587
-------------- ----------
Diluted EPS:
Income from operations attributable to
common stock $27,407,000 24,922,973 $ 1.10
============== ========== ===========
</TABLE>
F-44
<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 September 23, 1998, has acquired 19 properties
and two outlots adjacent to one of Bradley's existing centers aggregating 2.6
million square feet of GLA for an aggregate acquisition price of approximately
$179.0 million. Consideration paid for such acquisitions included cash
(provided primarily from the bank line of credit), assumption of mortgage
indebtedness and the issuance of Units of the Operating Partnership to
contributors of properties acquired. During the period from January 1, 1997
through September 23, 1998, Bradley sold six properties for net proceeds of
approximately $104.3 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.
The unaudited Pro Forma Condensed Statement of Income is presented as if all
of the acquisitions, the dispositions, the replacement of the previous line of
credit with the new line of credit, the REMIC Prepayment, the November 1997 Debt
Issuance, the December 1997 Stock Offerings, the January 1998 Debt Issuance, and
the February 1998 Stock Offering, described above, had been consummated on
January 1, 1997, and with Bradley qualifying as a REIT and, therefore, incurring
no federal income tax expense during the period January 1, 1997 through
December 31, 1997.
F-45
<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 $1,518 $37,078 $(17,565) $ -- $117,146
Other income.......................... 1,437 1 184 6 -- 1,628
----------- ------ ------- -------- ----------- --------
Total revenue....................... 97,552 1,519 37,262 (17,559) -- 118,774
----------- ------ ------- -------- ----------- --------
Expenses:
Operations, maintenance
and management...................... 14,012 129 5,201 (2,856) -- 16,486
Real Estate taxes..................... 18,398 65 5,281 (4,620) -- 19,124
Mortgage and other
interest............................ 16,562 -- -- -- 10,997 (D) 27,559
General and administrative............ 5,123 -- -- -- -- 5,123
Non-recurring stock-based
compensation........................ 3,415 -- -- -- -- 3,415
Depreciation and
amortization........................ 16,606 -- -- -- 4,525 (E) 21,131
----------- ------ ------- -------- ----------- --------
Total expenses........................ 74,116 194 10,482 (7,476) 15,522 92,838
----------- ------ ------- -------- ----------- --------
Income before net gain on sale of
properties and extraordinary
item................................ 23,436 1,325 26,780 (10,083) (15,522) 25,936
Net gain on sale of properties......... 7,438 -- -- (7,438) -- --
----------- ------ ------- -------- ----------- --------
Income before extraordinary item and
allocation to minority interest..... 30,874 1,325 26,780 (17,521) (15,522) 25,936
Income allocated to minority interest.. (1,116) -- -- -- (472) (1,588)
----------- ------ ------- -------- ----------- --------
Income before extraordinary item....... $ 29,758 $1,325 $26,780 $(17,521) $(15,994) $ 24,348
=========== ====== ======= ======== =========== ========
Weighted average shares
outstanding -- basic(F)............. 21,776,146 23,356,620
Basic and diluted income per
common share:
Income before extraordinary item(F)... $1.36 $1.04
=========== ========
</TABLE>
Explanatory Notes
(A) Increase represents historical operating revenues and expenses of Clock
Tower Plaza for which financial statements are included in this Form 8-K,
for the period Bradley did not own such property.
(B) Increase represents historical operating revenues and expenses of
Acquisition Properties, 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 for the period during which Bradley owned such properties.
(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 6.75%, which was Bradley's
approximate borrowing rate at August 31, 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 $32,000.
F-46
<PAGE>
<TABLE>
<S> <C>
Increase in interest expense attributable to
acquisition activities.......................... $19,220
Decrease in interest expense attributable to
disposition activities.......................... (6,559)
Decrease in interest expense attributable to
the Stock Offerings............................. (2,063)
Net increase in interest expense attributable to
the Debt Issuances.............................. 843
Net decrease in interest expense attributable to
the paydown of the existing line of credit
facility with proceeds from the new line of
credit facility................................. (444)
----
Pro forma adjustment.............................. $10,997
=======
</TABLE>
(E) Depreciation and amortization has been increased to give effect to
recording the property acquisitions over a depreciable life of 39 years,
for the period which Bradley did not own such properties, net of the
reduction for properties disposed for the period which Bradley owned such
properties, as follows:
<TABLE>
<S> <C>
Increase in depreciation and amortization
attributable to acquisition activities......... $ 5,919
Decrease in depreciation and amortization
attributable to disposition activities......... (1,394)
-------
Pro forma adjustment............................. $ 4,525
=======
</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 $24,348,000 23,356,620 $1.04
Effect of dilutive securities:
Stock options..................... -- 42,451 -- 42,451
Stock-based compensation.......... -- 315 -- 315
Conversion of LP Units............ 1,116,000 799,938 1,588,000 1,523,587
----------- ---------- ---------- -----------
Diluted EPS:
Income before extraordinary item... $30,874,000 22,618,850 $ 1.36 $25,936,000 24,922,973 $1.04
=========== ========== ========== =========== =========== =========
</TABLE>
F-47
<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: February 4, 1999 Thomas P. D'Arcy
Chairman, President and Chief Executive
Officer
<PAGE>
EXHIBIT 23.1
------------
Consent of KPMG LLP
-------------------
The Board of Directors of Bradley Real Estate, Inc.:
We consent to the use of our report dated September 2, 1998 related to the
statement of revenues and certain expenses of Clock Tower Plaza for the year
ended December 31, 1997, incorporated by reference in the registration
statements (Nos. 333-63707, 333-42357, 333-28167, 33-87084, 33-62200, 33-64811
and 333-69131) on Form S-3 of Bradley Real Estate, Inc., the registration
statements (No. 333-30587, 33-34884 and 33-65180) on Form S-8 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 LLP
February 4, 1999
<PAGE>
EXHIBIT 23.2
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this current report on Form 8-K/A of Bradley Real
Estate, Inc. of our reports, dated January 28, 1998, on the consolidated
financial statements of Mid-America Realty Investments, Inc. for the year ended
December 31, 1997, and to the incorporation by reference of such current report
on Form 8-K and our report appearing therein in the registration statements
(Nos. 333-42357, 333-28167, 33-87084, 33-62200, 33-64811, 333-63707 and 333-
69131) 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.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
February 4, 1999
