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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
(FEE REQUIRED)
For the fiscal year ended December 31, 1999
Commission File Number 1-10328
BRADLEY REAL ESTATE, INC.
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(Exact name of Registrant as specified in its charter)
Maryland 04-6034603
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(State of Organization) (I.R.S. Employer Identification No.)
40 Skokie Blvd., Northbrook, IL 60062
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(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code (847) 272-9800
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X , No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of 22,155,138 shares of Common Stock believed to be held
by non-affiliates of the registrant based upon the $17 7/16 closing price for
such shares on March 1, 2000, on the New York Stock Exchange: $386,330,219
Number of Common Shares outstanding as of March 1, 2000: 22,333,386
DOCUMENTS INCORPORATED BY REFERENCE
Registrant expects to file no later than April 1, 2000, its definitive Proxy
Statement for the 2000 Annual Meeting of Stockholders and hereby incorporates by
reference into Part III hereof the portions thereof described in Items 10, 11,
12 and 13 hereof.
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STATEMENTS MADE OR INCORPORATED IN THIS REPORT INCLUDE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. FORWARD-LOOKING
STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS
"ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE," AND WORDS OF SIMILAR
IMPORT WHICH EXPRESS OUR BELIEF, EXPECTATIONS OR INTENTIONS REGARDING OUR FUTURE
PERFORMANCE OR FUTURE EVENTS OR TRENDS. WE CAUTION YOU THAT, WHILE
FORWARD-LOOKING STATEMENTS REFLECT OUR GOOD FAITH BELIEFS, THEY ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO
DIFFER MATERIALLY FROM ANTICIPATED FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF FACTORS
OUTSIDE OF OUR CONTROL. IN ADDITION, WE DISCLAIM ANY OBLIGATION TO PUBLICLY
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE. CERTAIN FACTORS THAT MIGHT CAUSE SUCH
DIFFERENCES ARE DISCUSSED IN THE SECTION ENTITLED "RISK FACTORS" ON PAGE 14 OF
THIS REPORT.
PART I
ITEM 1. BUSINESS
Bradley Real Estate, Inc., Bradley Operating Limited Partnership and their
subsidiaries and affiliated partnerships are separate legal entities. For ease
of reference, the terms "we," "us," and "ours" refer to the business and
properties of all these entities, unless the context indicates otherwise.
Similarly, references to Bradley or Bradley Operating Limited Partnership
(commonly referred to as "the Operating Partnership") in discussions of
Bradley's business also refer to Bradley's predecessors, subsidiaries and
affiliated entities, unless the context indicates otherwise.
General
Bradley is a real estate investment trust with internal property management,
leasing, acquisition, and development capabilities that owns and operates,
acquires, develops and redevelops community and neighborhood shopping centers in
the Midwest region of the United States. Such centers are typically anchored by
grocery stores which are complemented with other tenants providing a wide range
of other goods and services to shoppers. As a result, the centers are used by
members of the surrounding community for their day-to-day living needs. Our
mission is to provide superior total returns to our share owners by creating
sustainable growth in per share cash flow through the ownership, operation,
development and redevelopment of grocery-anchored retail properties in the
Midwest region of the United States. Based on our past experience, we believe
this type of shopping center offers strong and predictable daily consumer
traffic and is less susceptible to downturns in the general economy than
shopping centers whose principal tenants are department stores or stores
primarily selling apparel or leisure items. As of December 31, 1999, we owned 98
properties in 15 states, aggregating approximately 15.5 million square feet of
gross leasable area. Title to such properties is held by or for the benefit of
Bradley Operating Limited Partnership. Bradley conducts substantially all of its
business through the Operating Partnership and is currently the sole general
partner and owner of approximately 83% of the economic interests in the
Operating Partnership.
Our portfolio of shopping centers consists of a diverse tenant base, comprising
approximately 2,000 leases with no one tenant accounting for as much as 5% of
annualized base rent. Over the past several years we have further diversified
our income stream across many Midwest markets in order to insulate the Company
from economic trends affecting any particular market.
As part of our ongoing business, we regularly evaluate, and engage in
discussions with public and private entities regarding possible portfolio or
asset acquisitions or business combinations. In evaluating potential
acquisitions, we focus principally on community and neighborhood shopping
centers in our Midwest target market that are anchored by strong national,
regional and independent grocery store chains.
During 1999, we acquired four shopping centers, aggregating 484,000 square feet
of gross leasable area for an aggregate acquisition price of approximately $36.9
million. On August 6, 1998, we completed the merger acquisition of Mid-America
Realty Investments, Inc., a REIT owning interests in 25 properties aggregating
approximately 3.3 million square feet primarily located in the Midwest region of
the United States. In addition to the properties acquired in connection with the
merger acquisition of Mid-America, during 1998 we acquired 22 properties,
aggregating 3.0 million square feet of gross leasable area for an aggregate
acquisition price of approximately $202.8 million. During 1997, we acquired 25
shopping centers aggregating over 3.1 million square feet of gross leasable area
for an aggregate acquisition price of approximately $189.3 million.
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As part of our ongoing business, we also periodically sell non-core assets in
order to reinvest sales proceeds into properties more aligned with our strategic
market or property focus, or to redeploy sales proceeds into shopping centers
with better growth potential, and higher risk-adjusted returns. During 1999,
1998, and 1997, we raised $22.9 million, $84.0 million, and $25.3 million,
respectively, through asset sales.
Our finance, accounting, research and administrative functions are handled by a
central office staff located in our Northbrook, Illinois headquarters. We
maintain regional property management and leasing offices at properties located
in Chicago, Peoria, Minneapolis, St. Louis, Indianapolis, Kansas City,
Louisville, Milwaukee, Nashville, and Omaha in order that as many properties as
practicable have professionals located within a one to two hour drive. At
December 31, 1999, we had 177 employees.
1999 Highlights
During 1999, we focused on three integrated strategic objectives: maximizing the
cash flows from our existing properties, limiting our investment focus to higher
yielding value-added opportunities, and positioning our capital structure for
future growth.
Management and Leasing Activity
Our management and leasing activities focus on maximizing current cash flows
from our properties while enhancing long-term value. Primary attention during
1999 was focused on increasing overall occupancy rates, improving operating
margins, seeking new tenants and renewing current tenants at favorable rates.
- - The properties at December 31, 1999 had an aggregate occupancy rate of 94%.
- - During 1999, we signed 146 new leases totaling 686,000 square feet at an
average rent for comparable space of $10.33 per square foot, representing
an increase of 9.6% over the prior average rental rate.
- - During 1999, we renewed 292 leases totaling 1,231,000 square feet at an
average rate of $9.58 per square foot, representing an increase of 6.4%
over the prior average rental rate.
- - Significant leases completed during 1999 included the following:
- 111,000 square-foot lease with Home Depot at the Commons of Chicago
Ridge, initiating the redevelopment of this shopping center
- 47,000 square-foot lease with HomeLife at Heritage Square to fill the
remaining space previously occupied by Montgomery Ward & Co.,
Incorporated, which declared bankruptcy in July 1997 and vacated in
early 1998
- 28,000 square-foot lease with Office Depot at Santa Fe Square
- 28,000 square-foot lease with Mars Music at Har Mar Mall
- 28,000 square-foot lease with AJ Wright at Redford Plaza
- 24,000 square-foot lease with OfficeMax at Elk Park Center
- 21,000 square-foot lease with Lukas Liquor Superstore at Ellisville
Square
- - Leasing challenges for 2000 include re-tenanting a 54,000 square-foot
vacancy at Har Mar Mall previously occupied by HomePlace, which declared
bankruptcy in January 1998 and vacated in August 1998, and an 85,000
square-foot vacancy at Grandview Plaza previously occupied by HomeQuarters,
which declared bankruptcy in June 1999 and vacated in January 2000. A lease
with a new grocery tenant at Har Mar Mall is currently under negotiation,
although there can be no assurance that this lease will be completed. While
we are in preliminary discussions with several retailers to replace the
vacancy at Grandview Plaza, we do not expect a new lease to commence prior
to the end of 2000. Additional challenges for 2000 include leasing small
shop space on favorable terms. However, with an increased presence in our
Midwest market, we believe we are well positioned to take advantage of our
relationships with both national and regional tenants who have stores
located throughout the Midwest.
Acquisitions and Redevelopments
We entered 1999 with an expectation of a capital constrained environment for
REITs and increasing prices for real estate assets. As a result, our goals for
property investment were to grow modestly through opportunistic acquisitions
that met our investment criteria, and to calibrate investment activity to
existing market conditions. Our investment criteria focuses upon demographic
trends, anchor tenant strength and lease term, stability among non-anchor
tenants, and minimum acceptable initial yields, which we believe can be
increased through our operating and leasing experience. During 1999 we focused
our investment program on acquiring underperforming properties that we believe
provide value-added opportunities through redevelopment and re-tenanting,
enabling us to produce higher returns on invested capital than acquisitions of
stabilized properties. We also focused on identifying value-added opportunities
in our existing core portfolio to generate similar enhanced returns.
During 1999 we put in place the infrastructure necessary to identify and execute
value-added development opportunities, with a long-term goal of establishing
Bradley as a leading developer in grocery-anchored retail shopping centers
within our Midwest markets. With nearly 200 professionals operating from 11
regional offices, a portfolio consisting of 15.5 million square feet of retail
space,
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access to investment grade debt and equity markets and strong relations with the
region's dominant grocery store operators, we believe we are uniquely positioned
to pursue a focused development strategy.
- - In early 1999 we commenced the redevelopment of Prospect Plaza, a shopping
center located in Gladstone, Missouri, acquired at the end of 1998. The
redevelopment involves adding a new 62,000 square-foot Hen House grocery
store to the center as well as a new facade, pylon sign, and upgraded
common area. We plan to invest a total of approximately $10 million in this
redevelopment, which is on schedule with a planned completion in early
2000. Upon completion, our total investment in this center is estimated to
be approximately $14.4 million.
- - In June 1999, we completed the acquisition of Cherry Hill Marketplace,
located in Westland, Michigan, a suburb of Detroit. This redevelopment
project involves adding a new 54,000 square-foot Farmer Jack grocery store,
a division of A&P. We plan to retrofit another 43,000 square feet and
construct 7,700 square feet of new retail space and two new outlot
buildings. Our expected investment in this project is approximately $7
million, with an expected completion during the middle part of 2000. Upon
completion, our total investment in this center is estimated to be
approximately $12.9 million.
- - Also in June 1999, we completed the acquisition of 30th Street Plaza,
located in Canton, Ohio. We are adding a new 70,000 square-foot Giant Eagle
grocery store to this center, expanding a number of existing tenants, and
renovating the facade and common area at an approximate investment of $6
million. We expect this redevelopment project to be completed during the
middle part of 2000. Upon completion, our total investment in this center
is estimated to be approximately $13.8 million.
- - In October 1999, we acquired two newly developed shopping centers, Austin
Town Center, located in Austin, Minnesota, and Marketplace at 42, located
in Savage, Minnesota, under a co-development agreement with Oppidan Center
Development LLC. Under the co-development arrangement, we worked together
with Oppidan on all aspects of the development process and shared in the
value created from the development efforts.
- - Focusing on our existing core portfolio, in mid 1999 we commenced the
redevelopment of the Commons of Chicago Ridge. This 310,000 square-foot
center is located in Chicago Ridge, Illinois, and was acquired in early
1996. This redevelopment involves a new 111,000 square-foot lease with Home
Depot, relocations of several tenants and expansions of others. The center
is being fully redeveloped at an approximate incremental investment of $10
million, with a planned completion in late 2000.
- - In May 1999, we acquired the 50% non-owned portion of two shopping centers
held by our joint venture, which was acquired in connection with the merger
acquisition of Mid-America on August 6, 1998.
- - We continue to build a pipeline of development and redevelopment
opportunities where we can use our expertise to generate high returns on
invested capital while adding substantial long-term value to these
investments. During 2000, we will seek alternative sources of capital,
including privately placed joint venture equity, which will enable us to
pursue our development and redevelopment initiatives without straining our
financial resources.
Dispositions
Our primary disposition goal for 1999 was to redeploy proceeds from the sale of
several non-strategic assets into shopping centers more aligned with our
strategic property and market focus, generating high returns on invested
capital. At the beginning of the year, we were holding for sale six wholly-owned
non-core properties, consisting of four enclosed malls and two community
shopping centers, all acquired in connection with the merger acquisition of
Mid-America. The four enclosed malls were not aligned with our strategic
property focus. The remaining two shopping center properties are located in the
Southeast region of the United States, and were not aligned with our strategic
market focus. The challenge was to sell such properties on economically
favorable terms that minimized the spread between the yield generated by such
properties and the immediate and ultimate redeployment of the sales proceeds,
reducing any dilutive impact to earnings in the near term. We believe we were
largely successful in pursuit of these goals through the following transactions:
- - In May 1999, we sold Monument Mall, an enclosed mall located in
Scottsbluff, Nebraska, for a net sales price of $11.7 million.
- - In May 1999, our 50%-owned joint venture sold Imperial Mall, located in
Hastings, Nebraska, to the same buyer of Monument Mall, for $12.1 million.
- - In May 1999, we sold Macon County Plaza, located in Lafayette, Tennessee,
for a net sales price of $2.4 million.
- - In June 1999, we sold Town West Center, located in Paragould, Arkansas, for
a net sales price of $2.8 million.
- - Although we are still holding for sale three of the enclosed malls placed
for sale during 1998, the sales of two enclosed malls substantially reduced
our exposure to properties not aligned with our grocery-anchored community
shopping center focus. We completed such sales at prices that exceeded our
original estimates at the time the properties were placed for sale. While
we currently expect the sales of the remaining three enclosed malls to be
completed during the first quarter of 2000, we can provide no assurance
that any such sales will be completed or, if completed, that such sales
will meet our current pricing expectations. With over $1 billion in real
estate assets, we are confident that if we cannot sell these assets at
attractive prices, the yield generated from holding these assets will
provide our share owners with acceptable returns without undue risk to the
portfolio.
- - During 2000, we expect to continue to take advantage of the disparity
between the public market value of our stock and the private market value
of our underlying real estate by selling certain assets and using the
proceeds of such sales to repurchase our stock. Additionally, we will
pursue strategic partnerships, with the objective of contributing certain
assets to joint ventures. This will enable us to raise capital while
retaining a partial economic interest in these contributed properties.
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Capital Structure Activity
During 1999, we continued to operate under a challenging capital markets
environment for REITs. In response to this environment, we strengthened our
focus on our core portfolio while restricting external investment to selected
value-added opportunities. In addition, we took advantage of the positive
arbitrage between the private market value of our real estate and the public
market value of our stock to implement a share repurchase program. Finally, we
established the infrastructure necessary to identify and undertake development
and redevelopment initiatives for our Midwest grocery clients.
- - In February 1999, we issued $50 million of 8.875% Series B Cumulative
Redeemable Perpetual Preferred Units in a private placement to two
institutional investors, replacing short-term variable rate debt with
permanent capital.
- - In April 1999, in response to the continued weakness of our share price in
the public markets we suspended the discount offered on optional cash
investments under the Dividend Reinvestment and Stock Purchase Plan. This
action resulted in a reduction in net proceeds raised through the program
from $6 million in 1998 to $1 million in 1999.
- - In July 1999, Standard & Poor's affirmed our "BBB-" debt rating and raised
its rating outlook from stable to positive.
- - In September 1999, we issued $25 million of 8.875% Series C Cumulative
Redeemable Perpetual Preferred Units in a private placement to an
institutional investor, replacing short-term variable rate debt with
additional permanent capital.
- - In November 1999, our Board of Directors authorized the repurchase of up to
two million shares of outstanding common stock from time to time through
periodic open market transactions or through privately negotiated
transactions. Through December 31, 1999, we repurchased 980,700 shares at
an average price of $16.90 per share. The objective of the share repurchase
program is to capitalize on current market conditions in which the value of
our underlying real estate is more highly valued in the private property
markets than in the public equity markets.
Positioned for Future Growth
- - At December 31, 1999, our debt as a percentage of gross book assets was
43%.
- - During 1999, our interest and fixed charge coverage ratios were 3.4 and 2.3
times, respectively.
- - At December 31, 1999, we had $105.5 million available on our line of
credit.
- - Our balance sheet remains largely unencumbered by secured debt. At December
31, 1999, only 17 of our 98 properties had outstanding mortgages, providing
us with broad financial flexibility as we have the option of financing our
growth with either secured or unsecured debt.
- - At December 31, 1999, we had $201.4 million available under an equity
"shelf" registration, and $400 million available under a debt "shelf"
registration.
- - At December 31, 1999, our total market capitalization stood at
approximately $1.0 billion.
During 2000, our goals with respect to our capital structure include extending
and modifying our line of credit, which matures in December 2000, repurchasing
shares of our stock while the disparity between our stock price and the value of
our underlying real estate value remains, and selling certain assets in order to
raise capital for new investment and to pay-down debt. Until such time as the
capital markets for REITs improves, we will continue investing our existing
capital prudently, while seeking alternative capital resources such as private
joint venture equity. Our ultimate objective will be to preserve and protect our
liquidity, while taking advantage of existing market conditions to enhance
returns to our share owners.
Our Properties
The following table and notes describe our properties and rental information for
leases in effect as of December 31, 1999:
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<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GEORGIA
Shenandoah Plaza 1998 141,072 98% 98% $ 680,345 $ 5.01 Ingles Market 32,000 2008
Newnan, GA Wal-Mart 81,922 2007
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ILLINOIS
Bartonville Square 1998 55,348 100% 100% 276,522 5.00 Kroger 41,824 2000
Peoria, IL
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Butterfield Square 1998 106,824 100% 100% 1,327,646 12.43 Sunset Foods 51,677 2012
Libertyville, IL
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Commons of Chicago Ridge 1996 308,560 64% 84% 2,060,465 10.40 Office Depot 27,680 2002
Chicago Ridge, IL Marshalls 29,688 2009
Cineplex Odeon 25,000 2008
Michaels 17,550 2004
Pep Boys 22,354 2015
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Commons of Crystal Lake 1996 273,271 100% 75% 2,895,232 10.64 Jewel/Osco 70,790 2018
Crystal Lake, IL Marshalls 28,441 2009
Toys'R Us 30,000 2015
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Crossroads Centre 1992 242,320 98% 98% 1,397,978 5.87 K-Mart (Ground Lease) 96,268 2001
Fairview Heights, IL T.J. Maxx 33,200 2006
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Fairhills Shopping Center 1997 107,614 81% 82% 539,704 6.15 Jewel Food Stores 49,330 2003
Springfield, IL
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Heritage Square 1996 212,253 77% 45% 1,947,442 11.93 Carson Pirie Scott 62,000 2015
Naperville, IL Strouds 26,703 2000
Circuit City 28,351 2009
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High Point Centre 1996 240,032 100% 82% 2,256,518 9.40 Cub Foods 62,000 2008
Lombard, IL Babies'R Us 36,416 2010
Office Depot 25,612 2006
Mac Frugals 17,040 2006
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Parkway Pointe 1997 38,587 100% 100% 486,288 12.60 Shoe Carnival 10,186 2004
Springfield, IL
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Rivercrest 1994 484,705 100% 100% 3,954,078 8.19 Dominick's 87,937 2011
Crestwood, IL K-Mart 79,903 2010
Office Max 24,000 2007
Sears 55,000 2001
T.J. Maxx 34,425 2004
PetsMart 31,639 2010
Best Buy 25,000 2008
Hollywood Park 15,000 2005
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Rollins Crossing 1996 150,576 97% 95% 887,522 6.07 Regal Cinema 72,621 2018
Round Lake Beach, IL Sears Paint and
Hardware 21,083 2005
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</TABLE>
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<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sangamon Center North 1997 139,757 97% 100% $1,048,045 $ 7.69 Schnuck's Market 63,257 2016
Springfield, IL U.S. Postal Service 16,000 2005
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Sheridan Village 1996 296,292 97% 99% 2,295,672 8.02 Bergners 160,809 2006
Peoria, IL Cohen Furniture 16,600 2009
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Sterling Bazaar 1997/1998 81,837 89% 94% 714,687 9.80 Kroger 52,337 2011
Peoria, IL
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Twin Oaks Centre 1998 94,741 86% 79% 574,231 7.05 Hy-Vee 59,682 2012
Silvis, IL
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Wardcliffe Shopping Center 1997 67,497 92% 92% 313,469 5.03 Big Lots 32,181 2006
Peoria, IL CVS 16,160 2003
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Westview Center 1993 322,862 92% 94% 2,642,235 8.85 Cub Foods 67,163 2009
Hanover Park, IL HomePlace 60,000 2017
Marshalls 34,302 2004
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INDIANA
County Line Mall 1997 260,785 99% 99% 1,770,908 6.87 Kroger 52,337 2011
Indianapolis, IN Target 99,321 2002
Office Max/
Furniture Max 32,208 2004
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Double Tree Plaza 1998 98,179 87% 99% 662,602 7.71 Wilco Foods 45,000 2017
Winfield, IN
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Germantown 1998 230,580 95% 92% 988,473 4.53 Buehler's 27,225 2005
Jasper, IN Watson's 32,680 2005
Wal-Mart 109,725 2005
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King's Plaza 1998 102,457 73% 75% 329,096 4.40 County Market 48,249 2002
Richmond, IN
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Lincoln Plaza 1998 95,624 96% 98% 604,046 6.55 Kroger 39,104 2007
New Haven, IN
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Martin's Bittersweet Plaza 1997 78,245 92% 97% 528,294 7.33 Martin's Supermarket 45,079 2012
Mishawaka, IN Osco Drug 16,000 2012
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Rivergate Shopping Center 1998 133,086 97% 100% 542,424 4.19 Super Foods 17,420 2006
Shelbyville, IN Wal-Mart 90,666 2006
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Sagamore Park Centre 1998 102,533 90% 95% 864,446 9.33 Payless Supermarket 41,163 2007
West Lafayette, IN
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Speedway SuperCenter 1996 547,699 93% 97% 4,174,807 8.19 Kroger 59,515 2013
Speedway, IN Sears 30,825 2004
Factory Card
Outlet (2) 16,675 2003
Old Navy 15,000 2005
Lindo Super Spa 16,859 2000
Kittles 25,320 2000
Kohl's 90,027 2004
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</TABLE>
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<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Village 1996 336,354 90% 89% $1,709,998 $ 5.64 Goldblatt Brothers 55,000 2000
Gary, IN U.S. Factory Outlets 52,000 2009
American Publishing 19,246 2000
IN Dept. of Workforce 18,050 2000
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Washington Lawndale Commons 1996 332,877 97% 100% 1,791,616 5.52 Target 83,110 2005
Evansville, IN Sears Homelife 34,527 2003
Dunham's Athleisure 20,285 2002
Stein Mart 40,500 2007
Jo-Ann Fabrics 15,262 2003
Books-A-Million 20,515 2002
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IOWA
Burlington Plaza West 1997 88,118 98% 98% 614,168 7.14 Festival Foods 52,468 2009
Burlington, IA
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Davenport Retail Center 1997 62,588 100% 100% 604,355 9.66 PetsMart 26,280 2011
Davenport, IA Staples 24,153 2011
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Kimberly West 1998 113,713 87% 87% 574,279 5.79 Hy-Vee 76,896 2008
Davenport, IA
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Parkwood Plaza 1997 125,850 93% 88% 940,818 8.01 Albertson's 63,075 2008
Urbandale, IA
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Southgate Shopping Center 1997 162,672 96% 90% 502,013 3.23 Hy-Vee 78,388 2014
Des Moines, IA Walgreens 22,000 2002
Big Lots 23,677 2001
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Spring Village 1997 90,263 93% 100% 506,606 6.03 Eagle Foods (2) 45,763 2005
Davenport, IA
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Warren Plaza 1997 90,102 99% 100% 670,463 7.55 Hy-Vee 51,492 2013
Dubuque, IA
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KANSAS
Mid-State Plaza 1997 286,840 91% 89% 926,398 3.56 Food 4 Less 32,579 2004
Salina, KS Hobby Lobby 39,958 2006
Carroll's Books 27,596 2008
Sutherlands 80,155 2002
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Santa Fe Square 1996 133,698 96% 98% 1,075,348 8.42 Hy-Vee 55,820 2007
Olathe, KS
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Shawnee Parkway Plaza 1998 92,213 93% 98% 654,385 7.64 Price Chopper 59,128 2013
Shawnee, KS
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Westchester Square 1997 164,865 95% 92% 1,406,574 9.02 Hy-Vee 63,000 2006
Lenexa, KS
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KENTUCKY
Camelot Shopping Center 1998 150,371 83% 92% 777,069 6.22 Winn Dixie 37,500 2004
Louisville, KY Mr. Gatti's 24,000 2007
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</TABLE>
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<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dixie Plaza 1998 47,954 100% 100% $ 377,214 $ 7.87 Winn Dixie 44,000 2007
Louisville, KY
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Midtown Mall 1998 153,566 96% 100% 839,500 5.67 Kroger 51,600 2013
Ashland, KY Odd Lots/Big Lots &
Furniture 37,171 2004
Old America 26,586 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Plainview Village 1998 142,546 96% 100% 1,212,660 8.89 Kroger 30,975 2002
Louisville, KY
- ------------------------------------------------------------------------------------------------------------------------------------
Stony Brook 1996 136,830 99% 100% 1,444,529 10.63 Kroger 79,625 2021
Louisville, KY
- ------------------------------------------------------------------------------------------------------------------------------------
MICHIGAN
Cherry Hill Marketplace 1999 84,325 53% N/A 225,439 5.02 Farmer Jack 30,650 2002
Westland, MI
- ------------------------------------------------------------------------------------------------------------------------------------
The Courtyard 1998 126,063 91% 88% 893,360 7.83 V.G Food Center 43,384 2010
Burton, MI Dunham's Athleisure 18,395 2002
Office Max 25,987 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Delta Plaza (3) 1998 187,661 93% 94% 1,051,698 6.05 J.C. Penney 31,757 2001
Escanaba, MI Menards 59,872 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Redford Plaza 1998 284,929 100% 92% 2,268,106 7.96 Kroger 60,276 2016
Redford, MI The Resource Network 15,000 2002
Bally Total Fitness 28,000 2008
Burlington Coat
Factory 47,008 2004
Ace Hardware 16,130 2000
AJ Wright 27,604 2009
- ------------------------------------------------------------------------------------------------------------------------------------
MINNESOTA
Austin Town Center 1999 110,613 92% N/A 924,888 9.11 Rainbow Foods 56,740 2019
Austin, MN Staples 24,049 2014
- ------------------------------------------------------------------------------------------------------------------------------------
Brookdale Square 1996 185,883 83% 81% 1,094,373 7.02 Circuit City 36,391 2014
Brooklyn Center, MN Drug Emporium 25,782 2000
Office Depot 30,395 2004
United Artists 24,534 2002
Pep Boys 23,000 2018
- ------------------------------------------------------------------------------------------------------------------------------------
Burning Tree Plaza 1993 174,141 89% 96% 1,405,636 9.06 Dunham's Athleisure 23,679 2008
Duluth, MN Hancock Fabrics 17,682 2009
Best Buy 46,355 2013
T.J. Maxx 30,000 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Central Valu Center 1997 123,350 95% 95% 926,442 7.87 Rainbow Foods 66,314 2004
Columbia Heights, MN Slumberland Clearance 24,632 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Elk Park Center 1997 155,152 100% 98% 1,469,663 9.48 Cub Foods 60,066 2016
Elk River, MN Office Max 23,525 2014
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Har Mar Mall 1992 429,464 83% 83% $3,661,372 $ 10.27 Marshalls 34,858 2003
Roseville, MN Mars Music 27,697 2009
T.J. Maxx 25,025 2002
General Cinema 22,252 2001
General Cinema 19,950 2000
Barnes and Noble 44,856 2010
Michaels 17,907 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Hub West 1991 78,302 100% 100% 851,292 10.86 Rainbow Foods 50,817 2012
Richfield, MN Bally Total Fitness 26,185 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Marketplace at 42 1999 119,467 93% N/A 1,398,112 12.62 Rainbow Foods 56,371 2018
Savage, MN
- ------------------------------------------------------------------------------------------------------------------------------------
Richfield Hub 1988 136,475 95% 99% 1,252,477 9.63 Michaels 24,235 2004
Richfield, MN Marshalls 26,785 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Roseville Center 1997 76,686 87% 92% 737,987 11.01 Minnesota Fabrics 12,000 2004
Roseville, MN
- ------------------------------------------------------------------------------------------------------------------------------------
Southport Centre 1998 124,848 100% 100% 1,663,754 13.33 Frank's Nursery 18,804 2012
Apple Valley, MN Best Buy 36,714 2009
- ------------------------------------------------------------------------------------------------------------------------------------
Sun Ray Shopping Center 1961 257,430 93% 84% 1,900,576 7.95 Bally Total Fitness 26,256 2014
St. Paul, MN Michaels 18,127 2004
Petters Warehouse 20,000 2007
J.C. Penney 36,752 2004
T.J. Maxx 31,955 2007
- ------------------------------------------------------------------------------------------------------------------------------------
Terrace Mall 1993 135,031 88% 94% 947,477 7.99 Rainbow Foods 59,232 2013
Robbinsdale, MN North Memorial Medical 38,198 2009
- ------------------------------------------------------------------------------------------------------------------------------------
Thunderbird Mall (3) 1998 256,344 96% 95% 1,355,885 5.54 Herberger's 66,582 2010
Virginia, MN J.C. Penney 23,671 2006
K-Mart 90,990 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Westview Valu Center 1997 163,162 98% 98% 1,128,934 7.03 Cub Foods 92,646 2004
West St. Paul, MN Burlington Coat
Factory 41,248 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Westwind Plaza 1994 87,936 96% 99% 962,645 11.41 Northern Hydraulics 18,165 2002
Minnetonka, MN
- ------------------------------------------------------------------------------------------------------------------------------------
White Bear Hills 1993 73,095 99% 100% 589,014 8.12 Festival Foods 45,679 2011
White Bear Lake, MN
- ------------------------------------------------------------------------------------------------------------------------------------
MISSOURI
Ellisville Square 1998 146,052 95% 100% 1,192,902 8.64 K-Mart 86,479 2015
Ellisville, MO Hockey Direct 19,693 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Grandview Plaza 1971 294,586 89% 94% 2,338,376 8.88 Schnuck's Market 68,025 2011
Florissant, MO Home Quarters (4) 84,611 2013
Office Max 30,183 2012
Walgreens 15,984 2008
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liberty Corners 1997 121,382 100% 100% $ 892,815 $ 7.35 Price Chopper 56,000 2007
Liberty, MO
- ------------------------------------------------------------------------------------------------------------------------------------
Maplewood Square 1998 71,590 100% 87% 522,993 7.31 Shop'n Save 57,575 2017
Maplewood, MO
- ------------------------------------------------------------------------------------------------------------------------------------
Prospect Plaza 1998 186,722 44% 58% 421,669 5.65 Hobby Lobby 51,626 2014
Gladstone, MO Westlake Hardware 22,950 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Watts Mill Plaza 1998 161,717 85% 96% 1,287,379 9.42 Price Chopper 66,947 2006
Kansas City, MO
- ------------------------------------------------------------------------------------------------------------------------------------
NEBRASKA
Bishop Heights 1998 30,163 100% 86% 171,823 5.70 Russ's IGA 16,992 2001
Lincoln, NE
- ------------------------------------------------------------------------------------------------------------------------------------
Cornhusker Plaza 1998 63,016 100% 96% 485,936 7.71 Hy-Vee 34,726 2010
South Sioux City, NE
- ------------------------------------------------------------------------------------------------------------------------------------
Eastville Plaza 1998 68,546 100% 91% 537,214 7.84 Hy-Vee 34,156 2006
Fremont, NE
- ------------------------------------------------------------------------------------------------------------------------------------
Edgewood Plaza 1998 172,429 94% 97% 1,310,481 8.08 Super Saver 73,696 2011
Lincoln, NE Osco Drug 16,324 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Ile de Grand 1998 82,248 99% 100% 602,264 7.41 Factory Card
Grand Island, NE Outlet (2) 12,000 2005
- ------------------------------------------------------------------------------------------------------------------------------------
The Meadows 1998 67,840 98% 91% 493,114 7.42 Russ's IGA 50,000 2008
Lincoln, NE
- ------------------------------------------------------------------------------------------------------------------------------------
Miracle Hills Park 1998 69,488 89% 88% 782,521 12.65 Jo-Ann Fabrics 12,000 2003
Omaha, NE
- ------------------------------------------------------------------------------------------------------------------------------------
Stockyards Plaza 1998 129,309 96% 96% 928,628 7.45 Hy-Vee 59,839 2008
Omaha, NE Movies 8 25,810 2015
- ------------------------------------------------------------------------------------------------------------------------------------
NEW MEXICO
St. Francis Plaza 1995 35,800 100% 100% 357,004 9.97 Wild Oats 20,850 2006
Santa Fe, NM
- ------------------------------------------------------------------------------------------------------------------------------------
OHIO
30th Street Plaza 1999 87,189 88% N/A 634,487 8.65 Marc's Drugstores 31,230 2010
Canton, OH
- ------------------------------------------------------------------------------------------------------------------------------------
Clock Tower Plaza 1998 237,975 96% 96% 1,441,142 6.33 Clyde Evans Market 61,720 2014
Lima, OH Wal-Mart 110,580 2009
- ------------------------------------------------------------------------------------------------------------------------------------
Salem Consumer Square 1998 276,506 98% 99% 2,396,629 8.85 Cub Foods 62,400 2013
Trotwood, OH Drug Emporium 25,025 2003
Office Depot 26,725 2005
Michigan Sporting
Goods 17,500 2004
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTH DAKOTA
Baken Park 1997 195,031 97% 94% $1,199,210 $ 6.37 Nash Finch 48,684 2017
Rapid City, SD Ben Franklin 27,155 2003
Boyd's Drug Mart 19,200 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Lakewood Mall (3) 1998 238,883 94% 89% 1,705,021 7.62 Midco 5 23,600 2002
Aberdeen, SD Herberger's 79,646 2016
J.C. Penney 33,796 2010
- ------------------------------------------------------------------------------------------------------------------------------------
TENNESSEE
Williamson Square (5) 1996 333,333 92% 98% 2,205,171 7.20 Kroger 63,986 2008
Franklin, TN Wal-Mart 117,493 2008
Carmike Cinemas 29,000 2008
- ------------------------------------------------------------------------------------------------------------------------------------
WISCONSIN
Fairacres Shopping Center 1998 74,291 100% 100% 677,493 9.12 Pick'n Save 48,000 2012
Oshkosh, WI
- ------------------------------------------------------------------------------------------------------------------------------------
Fitchburg Ridge 1998 49,846 100% 100% 290,692 5.83 Roundy's 16,589 2000
Fitchburg, WI
- ------------------------------------------------------------------------------------------------------------------------------------
Fox River Plaza 1998 166,416 100% 99% 750,695 4.51 Pick'n Save 50,094 2006
Burlington, WI K-Mart 83,552 2011
- ------------------------------------------------------------------------------------------------------------------------------------
Garden Plaza 1998 80,090 95% 96% 495,693 6.54 Pick'n Save 49,564 2010
Franklin, WI
- ------------------------------------------------------------------------------------------------------------------------------------
Madison Plaza 1997 127,539 78% 100% 829,711 8.38 Supersaver Foods 68,309 2008
Madison, WI
- ------------------------------------------------------------------------------------------------------------------------------------
Mequon Pavilions 1996 211,008 98% 99% 2,404,938 11.61 Kohl's Food Store 45,697 2010
Mequon, WI Furniture Clearance
Center 19,900 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Moorland Square 1998 98,288 100% 100% 772,812 7.86 Pick'n Save 59,674 2010
New Berlin, WI
- ------------------------------------------------------------------------------------------------------------------------------------
Oak Creek Centre 1998 91,340 96% 95% 628,439 7.16 Sentry Food Store 50,000 2003
Oak Creek, WI
- ------------------------------------------------------------------------------------------------------------------------------------
Park Plaza 1997 109,123 100% 99% 633,737 5.81 Sentry Foods 45,000 2006
Manitowoc, WI Big Lots 29,063 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Spring Mall (6) 1997 180,188 92% 92% 1,086,037 6.55 Pick'n Save 77,150 2013
Greenfield, WI T.J. Maxx 32,658 2003
United Artists 16,000 2004
Walgreens 17,600 2007
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Base
Occupancy at Annualized Lease
Rentable December 31, Based Rent Expi-
Year Square ------------- Annualized Per Square ration
SHOPPING CENTERS Acquired Feet 1999 1998 Based Rent Leased SF Major Tenants (1) Feet Date
- ------------------------------ --------- --------- ------ ------ ---------- ---------- ---------------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Taylor Heights 1998 85,072 100% 100% $ 847,629 $ 9.96 Piggly Wiggly 35,540 2009
Sheboygan, WI
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Major tenants are defined as tenants leasing 15,000 square feet or more of
the rentable square footage with the exception of Ile de Grand, Miracle
Hills Park, Parkway Pointe, and Roseville Center. In some cases, the named
tenant occupies the premises as a sublessee. We view "anchor" tenants as a
subset of the major tenants at each property, generally consisting of
those tenants which also represent more than 15% of the property's
rentable square footage.
(2) This tenant has sought protection under Chapter 11 of the U.S. Bankruptcy
Code, but has not rejected the lease.
(3) This property is held for sale at December 31, 1999.
(4) Home Quarters sought protection under Chapter 7 of the U.S. Bankruptcy
Code, and vacated subsequent to year-end.
(5) This property is owned by Williamson Square Associates L.P., a joint
venture of which we own a 60% interest.
(6) This property is owned by a bankruptcy remote special purpose entity that
is an indirect subsidiary of Bradley. The assets of the special purpose
entity, including the property, are owned by the special purpose entity
alone and are not available to satisfy claims that any creditor may have
against us, our affiliates, or any other person or entity. The special
purpose entity has not agreed to pay, or make its assets available to pay,
any claim any creditor may have against us, our affiliates, or any other
person or entity. No affiliate of the special purpose entity has agreed to
pay or make its assets available to pay creditors of the special purpose
entity.
13
<PAGE> 14
Tenant Mix and Leases
As evidenced by the foregoing table, our tenant mix is diverse and well
represented by supermarkets, drugstores and other consumer necessity or
value-oriented retailers. Based on our past experience, we believe that such
tenants tend to be stable performers in both good and bad economic times. As of
December 31, 1999, 79 of our 98 shopping centers were anchored by supermarkets,
most of which are leading grocery chains in their respective markets. Grocery
stores comprise approximately 22% of our annualized base rent and 27% of our
gross leasable area. No tenant included in the portfolio of properties on
December 31, 1999, accounted for as much as 5% of total rental income in 1999.
In addition to the tenants listed in the preceding table, our properties include
a variety of smaller shop leases of various tenant types, including restaurants,
home life styles, women's ready-to-wear, cards, books, and electronics.
The terms of the outstanding retail leases vary from tenancies at will to 50
years. Anchor tenant leases are typically for 10 to 25 years, with one or more
extension options available to the lessee upon expiration of the initial lease.
By contrast, smaller shop leases are typically negotiated for three to five year
terms. The longer term of the major tenant leases serves to protect us against
significant vacancies and to assure the presence of strong tenants who draw
consumers to our centers. The shorter term of the smaller shop leases allows us
to adjust rental rates for non-major store space on a regular basis and upgrade
the overall tenant mix.
Leases to anchor tenants tend to provide lower minimum rents per square foot
than smaller shop leases. Anchor tenant leases for properties included in the
portfolio at December 31, 1999, provided an average annual minimum rent of $5.79
per square foot, compared with non-anchor tenant leases which provided an
average annual minimum rent of $10.35. In general, we believe that minimum
rental rates for anchor tenant leases entered into several years ago are at or
below current market rates, while recent anchor tenant leases and most
non-anchor leases provide for minimum rental rates that more closely reflect
current market rates. The payment by tenants of minimum rents that are below
current market rates is offset in part by payment of percentage rents.
Annual minimum future rentals to be received under non-cancelable operating
leases in effect at December 31, 1999, for the properties included in the
portfolio at December 31, 1999, and the number of leases that will expire, the
square feet covered by such leases and the minimum annual rent in the year of
expiration under such expiring leases for the next ten years are as follows:
Leases Expiring
---------------------------------------
Year Ending Minimum Number Minimum
December 31 Future Rents of Leases Square Feet Future Rents
----------- ------------ --------- ----------- ------------
2000 $109,018,000 306 1,077,523 $9,891,000
2001 99,831,000 285 1,105,062 9,337,000
2002 88,652,000 319 1,517,533 12,016,000
2003 77,272,000 258 1,187,795 11,041,000
2004 65,756,000 236 1,476,128 12,366,000
2005 56,069,000 104 910,205 6,561,000
2006 49,568,000 68 941,480 6,097,000
2007 44,663,000 43 634,649 4,824,000
2008 38,820,000 41 935,796 6,944,000
2009 31,254,000 45 719,622 5,381,000
Risk Factors
General
As in every business, we face risk factors that affect our business and
operations. By setting forth below some of the factors that could cause the
actual results of our operations or plans to differ materially from our
expectations as set forth in statements in this Report or elsewhere that may be
considered to be "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, we seek to avail ourself of the "safe harbor" provided in the Private
Securities Litigation Reform Act of 1995.
Our use of third party indebtedness exposes us to the risks that may adversely
affect the amount of cash we have available for distributions.
We could become too highly leveraged because our organizational documents
contain no limitation on debt and thereby may adversely affect our ability to
make expected distributions to share owners.
Our obligations for borrowed money aggregated $444.8 million at December 31,
1999, as compared to $472.4 million at December 31, 1998. Failure to pay debt
obligations when due could result in Bradley losing its interest in the
properties collateralizing such obligations.
14
<PAGE> 15
Seventeen properties as of December 31, 1999 secure an aggregate of
approximately $100.7 million of mortgage debt, with balloon maturities of
approximately $6.0 million due in 2000, $2.7 million in 2001, $29.0 million in
2002, $6.4 million in 2003, and $35.6 million in subsequent years. The line of
credit, with a balance of $144.5 million as of December 31, 1999, matures in
December, 2000. We have commenced negotiations to extend and modify the line of
credit. We expect to be able to extend and modify the line of credit on
commercially reasonable terms, which we believe will be slightly more expensive
than the terms under the existing line of credit due to competitive market
pressures. At this time, we cannot definitely state what terms we will obtain,
including interest rates. Additionally, $100 million of 7% unsecured Notes
payable at December 31, 1999 matures in 2004, and $100 million of 7.2% unsecured
Notes payable at December 31, 1999 matures in 2008. We have historically been
able to refinance debt when it has become due on terms which we believe to be
commercially reasonable. There can be no assurance that we will continue to be
able to repay or refinance indebtedness on commercially reasonable or any other
terms.
Our organizational documents do not limit the amount of indebtedness that we or
the Operating Partnership may incur. If we significantly increase our leverage,
then the resulting increase in debt service could adversely affect our ability
to make payments on our outstanding indebtedness and expected distributions to
our share owners.
In November 1999, our Board of Directors authorized the repurchase of up to two
million shares of outstanding common shares from time to time through periodic
open market transactions or through privately negotiated transactions. The share
repurchase program is in effect until December 31, 2000, or until the authorized
limit has been reached. Through December 31, 1999, we purchased 980,700 shares
at an average price of $16.90 per share for a total purchase price of $16.6
million, including costs. These repurchases, as well as ongoing purchases
subsequent to year-end, have been funded with cash from our line of credit.
While we have maintained our targeted balance between total outstanding
indebtedness and the value of our portfolio, we have currently funded our stock
repurchase program with short-term debt with the expectation that these
borrowings would be at least partially repaid with proceeds from asset sales. At
December 31, 1999, we were holding for sale three enclosed malls with an
aggregate book value of $29.9 million. These dispositions are expected to be
completed during the first quarter of 2000, although there can be no assurance
that any such dispositions will occur. Although we would seek to sell
alternative assets in the event the sales of the malls were not completed as
expected or at desired prices, we can provide no assurance that any sales prices
will meet our expectations, or that any such sales will be completed. If we are
unable to sell assets at favorable prices, the increase in debt could adversely
affect our ability to make payments on our outstanding indebtedness and expected
distributions to our share owners.
Because parts of our borrowings have floating rates, a general increase in
interest rates will adversely affect our net income and cash available for
distribution to share owners.
The unsecured line of credit bears interest at a variable rate. The balance
outstanding under the line of credit at December 31, 1999, was $144.5 million;
and we may increase outstanding borrowings to $250 million. To the extent our
exposure to increases in interest rates is not eliminated through interest rate
protection or cap agreements, we will need to use more of our revenue to pay the
interest on our indebtedness. Any such increase in debt service requirements
would leave us with less net income, funds from operations ("FFO") and cash
available for distribution and may affect the amount of distributions we can
make to our share owners.
On March 10, 2000, the Operating Partnership issued $75 million of unsecured
Notes due March 15, 2006 at an interest rate of 8.875%. Net proceeds were used
to pay-down the outstanding balance on the line of credit, thereby reducing our
exposure to increases in interest rates.
An adverse market reaction to increased indebtedness could restrict our ability
to raise capital for future growth.
The foregoing risks associated with our debt obligations may also adversely
affect the market price of our common stock. A decrease in the market price of
our common stock may inhibit our ability to raise capital and issue equity in
both the public and private markets and thereby adversely affect plans for
future growth.
Failures in achieving our objectives for growth could adversely affect our
operating results and financial condition.
We have grown aggressively over the past few years and continue to experience
moderate growth. The failure to achieve our objectives in this growth could have
a material adverse effect on our operating results and financial condition. Our
objectives in pursuing growth through property acquisitions include:
- - achieving economies of scale for property operations through the management
of several properties from a strategically located management office;
- - bulk purchasing insurance and contracted services in order to reduce the
level of property expenses overall;
15
<PAGE> 16
- - maximizing the benefits from our relationships with tenants who have stores
located throughout the Midwest;
- - reducing general and administrative expenses by eliminating duplicate
corporate level expenses in the case of growing the portfolio through
corporate merger acquisitions; and
- - lowering our overall cost of equity and debt capital, enabling us to
acquire additional properties on more favorable terms.
As an important part of our business strategy, we continually seek prospective
acquisitions of additional shopping centers and portfolios of shopping centers
which we believe can be purchased at attractive initial yields and/or which
demonstrate the potential for revenue and cash flow growth through
implementation of renovation, expansion, re-tenanting and re-leasing programs
similar to those undertaken with respect to properties in the existing
portfolio. Notwithstanding our adherence to our criteria for evaluation and due
diligence regarding potential acquisitions, we cannot guarantee that any
acquisition that is consummated will meet our expectations. In executing our
growth strategy, we may fail to achieve our objectives with respect to any one
property or with respect to our portfolio as a whole. For example, the actual
cost savings from an acquisition may not match the level estimated at the time
of acquisition, the overall cost of equity and debt capital may not be reduced
to expected levels, or the benefits of reducing the cost of capital may be
offset by an increase in prices of real estate due to changing market
conditions. Even after careful evaluation, we risk that our investment will fail
to generate expected returns or that our desired improvement programs will cost
more than expected. In addition, we cannot guarantee that we will ultimately
make any potential acquisition that we may evaluate. The evaluation process
involves non-recoverable costs in the case of acquisitions which are not
consummated.
Although to date, we have largely been able to achieve our overall objectives in
growing through acquisitions, we cannot guarantee that we will be able to
continue to do so. The consistent failure to achieve our objectives could have a
material adverse effect on our operating results and financial condition, and
could adversely affect any plans for future growth. Although these
non-recoverable costs have historically been at or below 0.1% of the total costs
of acquisitions that were consummated, we cannot guarantee that we will be able
to maintain that level in the future.
Our charter and bylaws contain provisions that may discourage acquisition
proposals.
Some provisions contained in our charter and bylaws may discourage third parties
from making acquisition proposals for the Company, even if some of our
stockholders might consider the proposal to be in their best interest. These
provisions include the following:
- - Our charter provides for three classes of Directors, with the term of
office of one class expiring each year, commonly referred to as a
"staggered board." By preventing stockholders from voting on the election
of more than one class of directors at any annual meeting of stockholders,
this provision may have the effect of keeping the current members of our
Board of Directors in control for a longer period of time than stockholders
may desire.
- - Our bylaws provide that the holders of not less than 25% of the outstanding
shares of common stock may call a special meeting of our stockholders. This
provision could make it more difficult for a stockholder to call a meeting
for the purposes of approving a change of control without the support of
the Board of Directors.
- - Our charter authorizes the Board of Directors to issue up to 20 million
shares of preferred stock without stockholder approval and to reclassify
any unissued shares of stock as a different class or series in the Board of
Directors' discretion. Our Board of Directors' ability to issue preferred
stock without stockholder approval, and to establish the preferences and
rights of any class or series issued, could allow the Board of Directors to
issue one or more classes or series of preferred stock that would
discourage or delay a tender offer or change in control.
- - Our charter generally limits any holder from acquiring more than 9.8% of
the value or number of our outstanding common stock. While this provision
is intended to assure our ability to remain a qualified REIT for income tax
purposes, the ownership limits may also limit the opportunity for
stockholders to receive a premium for their shares of common stock that
might otherwise exist if an investor were attempting to assemble a block of
shares in excess of 9.8% of the outstanding shares of common stock or
otherwise effect a change in control.
The factors affecting real estate investments and our ability to manage these
investments may adversely affect an investment in our common stock.
As a real estate company, our ability to generate revenues is significantly
affected by the risks of owning real property investments.
We derive substantially all of our revenue from investments in real property.
Real property investments are subject to varying types and degrees of risk that
may adversely affect the value of our assets and our ability to generate
revenues. The factors that may adversely affect our revenues, net income and
cash available for distributions to share owners include the following:
- - local conditions, such as oversupply of space or a reduction in demand for
real estate in an area;
16
<PAGE> 17
- - competition from other available space;
- - the ability of the owner to provide adequate maintenance;
- - insurance and variable operating costs;
- - government regulations;
- - changes in interest rate levels;
- - the availability of financing;
- - potential liability due to changes in environmental and other laws; and
- - changes in the general economic climate.
The illiquidity of real estate as an investment limits our ability to sell
properties quickly in response to market conditions.
Real estate investments are relatively illiquid and therefore cannot be
purchased or sold rapidly in response to changes in economic or other
conditions. In addition, the Internal Revenue Code limits our ability as a REIT
to make sales of properties held for fewer than four years, which may affect our
ability to sell properties in response to market conditions without adversely
affecting returns to share owners.
Our strategic focus on Midwest retail properties means that economic trends in
the Midwest and/or the retail industry may specifically affect our net income
and cash available for distribution to share owners.
Substantially all of our properties are located in the Midwestern region of the
United States. Adverse economic developments in this area could adversely impact
the operations of our properties and therefore our profitability. The
concentration of properties in one region may expose us to risks of adverse
economic developments which are greater than if our portfolio were more
geographically diverse.
Our properties consist predominantly of community and neighborhood shopping
centers catering to retail tenants. Our performance therefore is linked to
economic conditions in the market for retail space generally. The market for
retail space has been or could be adversely affected by:
- - ongoing consolidation among retailing companies;
- - weak financial condition of certain major retailers;
- - excess amount of retail space in some markets; and
- - increasing consumer purchases through catalogues or the Internet.
To the extent that these conditions impact the market rents for retail space, we
could experience a reduction of net income, FFO and cash available for
distributions.
In addition, to the extent that the investing public has a negative perception
of the retail sector, the value of shares of our common stock may be negatively
impacted, thereby resulting in such shares trading at a discount below the
underlying value of our assets as a whole.
Tenants in or facing bankruptcy may not make timely rental payments.
Since substantially all of our income has been, and is expected to continue to
be, derived from rental income from retail shopping centers, our net income, FFO
and cash available for distribution would be adversely affected if a significant
number of tenants were unable to meet their obligations to us or if we were
unable to lease, on economically favorable terms, a significant amount of space
in our shopping centers. In addition, in the event of default by a tenant, we
may experience delays and incur substantial costs in enforcing our rights as
landlord.
At any time, a tenant of our properties may seek the protection of the
bankruptcy laws, which could result in the rejection and termination of the
tenant lease. Such an event could cause a reduction of net income, FFO and cash
available for distribution and thus affect the amount of distributions we can
make to our share owners. In March 1999, Factory Card Outlet, a tenant at nine
of our shopping centers which currently generates approximately 1% of our total
revenue, filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
Although we expect the tenant to affirm its leases at eight of the nine shopping
centers, there can be no assurance that such tenant will affirm any of its
leases with us. During September 1999, we were notified that Hechinger Co., the
operator of an 85,000 square-foot Home Quarters store at Grandview Plaza, would
liquidate its assets in order to pay off creditors. Hechinger Co. had previously
filed for protection under Chapter 11 of the bankruptcy code in June 1999;
however, the store at Grandview Plaza was not included on the initial list of
store closures. As a result of the liquidation, the store closed and ceased
paying rent in January 2000. This tenant contributed approximately 0.5% of our
total revenue on an annual basis. While we are in preliminary discussions with
several retailers to replace this vacancy, we do not expect a new lease to
commence prior to the end of 2000, resulting in a decrease in
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<PAGE> 18
rental income at this center. No assurance can be given that any present tenant
which has filed for bankruptcy protection will continue making payments under
its lease or that other tenants will not file for bankruptcy protection in the
future or, if any tenants file, that they will continue to make rental payments
in a timely manner. In addition, a tenant may, from time to time, experience a
downturn in its business, which may weaken its financial condition and result in
a reduction or failure to make rental payments when due. If a lessee or
sublessee defaults in its obligations to the Company, we may experience delays
in enforcing our right as lessor or sublessor and may incur substantial costs
and experience significant delays associated with protecting our investment,
including costs incurred in renovating and releasing the property.
Vacancies and lease renewals may also reduce rental income, net income, FFO, and
cash available for distribution.
We are continually faced with expiring tenant leases at our properties. Some
lease expirations provide us with the opportunity to increase rentals or to hold
the space available for a stronger long-term tenancy. In other cases, the space
may not generate strong demand for tenancy. As a result, the space may remain
vacant for a longer period than anticipated or may be re-leased only at less
favorable rents. In such situations, we may be subject to competitive and
economic conditions over which we have no control. Accordingly, there is no
assurance that the effects of possible vacancies or lease renewals at such
properties may not reduce the rental income, net income, FFO and cash available
for distributions below anticipated levels. In addition, vacancies relating to
anchor tenant space are frequently more difficult to re-lease and can have an
adverse effect on the other stores in a shopping center.
If we develop new properties or acquire newly developed properties, our ability
to generate revenues will be affected by further risks.
Our increased focus on development and redevelopment initiatives poses an
increased risk, including cost overruns caused by:
- - delays in the commencement of leases caused by adverse weather conditions
during the construction period;
- - changes in the nature and scope of development or redevelopment efforts;
and
- - market factors involved in the pricing of material and labor.
Additionally, although we seek to reduce our development risk by pre-leasing a
substantial portion of new development projects to a major grocery store anchor
tenant, we are subject to the risk that occupancy rates and rents anticipated at
the time of development will not be achieved.
To the extent that we enter into agreements to acquire newly developed shopping
centers when they are completed, or acquire newly developed shopping centers, we
will be subject to risks inherent in acquiring newly constructed centers, which
could carry a higher level of risk than the acquisition of existing properties
with a proven performance record. The most significant risks include:
- - the risk that funds will be expended and management time will be devoted to
projects which may not come to fruition;
- - the risk that occupancy rates and rents at a completed project will be less
than anticipated; and
- - the risk that expenses at a completed development will be higher than
anticipated.
These risks may adversely affect our net income, FFO and cash available for
distribution to share owners.
Possible environmental liabilities at our properties and related costs of
remediation may reduce cash available for distributions or reduce value of that
property.
Under federal, state and local laws, ordinances and regulations, current or
former owners of real estate are liable for the costs of removal or remediation
of hazardous or toxic substances on or in such property. Such laws often impose
liability without regard to whether the owner knew of, or was responsible for,
the presence of such hazardous or toxic substances. The costs of investigation
and cleanup of hazardous or toxic substances on, in or from property can be
substantial. The presence of such substances or the failure to properly
remediate such substances, or even if remediated, the history of such substances
having existed may adversely affect our ability to sell or rent such property or
to use such property as collateral in our borrowings. The presence of hazardous
or toxic substances on a property could result in a claim by a private party for
personal injury or a claim by a neighboring property owner for property damage.
Such costs or liabilities could exceed the value of the affected real estate.
Other federal, state and local laws govern the removal or encapsulation of
asbestos-containing material when such material is in poor condition or in the
event of building or remodeling, renovation or demolition. Still other federal,
state and local laws may require the removal or upgrading of underground storage
tanks that are out of service or out of compliance. Non-compliance with
environmental or health and safety requirements may also result in the need to
cease or alter operations at a property, which could affect the financial health
of a tenant and its ability to make lease payments. Furthermore, if there is a
violation of such requirement in connection with a
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<PAGE> 19
tenant's operations, it is possible that we, as the owner of the property, could
be held accountable by governmental authorities for such violation and could be
required to correct the violation.
All of our properties have been subjected to Phase I and/or Phase II
environmental assessments by independent environmental consultant and
engineering firms. Phase I assessments do not involve subsurface testing,
whereas Phase II assessments involve some degree of soil and/or groundwater
testing. These environmental assessments have not revealed any environmental
conditions that we believe will have a material adverse effect on our business,
assets or results of operations. We have no assurance, however, that existing
environmental studies with respect to our properties revealed all environmental
liabilities or that a prior owner, operator or current occupant of any such
property did not create any material environmental condition not known to us.
Moreover, no assurances can be given that future laws, ordinances or regulations
will not impose any material environmental liability or the current
environmental condition of the properties will not be affected by tenants and
occupants of the properties, by the condition of land or operations in the
vicinity of the properties, or by third parties unrelated to us.
Limitations on our insurance could possibly have adverse consequences on the
amount of our cash available for distribution to our share owners.
It is possible that we may experience losses which exceed the limits of our
insurance coverage or for which we may be uninsured. We carry comprehensive
general liability coverage and umbrella liability coverage on all of our
properties. Our insurance has limits of liability which we believe are customary
for similar properties and adequate to insure against liability claims and
provide for cost of defense. Similarly, we are insured against the risk of
direct physical damage in amounts we estimate to be adequate to reimburse the
Company on a replacement cost basis for costs incurred to repair or rebuild each
property, including loss of rental income during the reconstruction period.
Currently, we also insure the properties for loss caused by earthquake or flood
in the aggregate amount of $25 million per annum. Because of the high cost of
this type of insurance coverage and the wide fluctuations in price and
availability, we have determined that the risk of loss due to earthquake and
flood does not justify the cost to increase coverage limits any further under
current market conditions.
Competition
All of our properties are located in developed areas. There are numerous other
retail properties and real estate companies within the market area of each such
property which we compete with for tenants and development and acquisition
opportunities. The number of competitive retail properties and real estate
companies in such areas could have a material effect on our ability to rent
space at the properties and the amount of rents charged and development and
acquisition opportunities. We compete for tenants and acquisitions with others
who have greater resources than we have.
We would experience adverse consequences if we failed to qualify as a REIT.
Our failure to qualify as a REIT would have serious adverse financial
consequences.
We believe that we have operated in a manner that permits us to qualify as a
REIT under the Internal Revenue Code for each taxable year since our formation
in 1961. Qualification as a REIT, however, involves the application of highly
technical and complex Internal Revenue Code provisions for which there are only
limited judicial or administrative interpretations. In addition, REIT
qualification involves the determination of factual matters and circumstances
not entirely within our control. For example, in order to qualify as a REIT, at
least 95% of our gross income in any year must be derived from qualifying
sources and we must make distributions to share owners aggregating annually at
95% of our REIT taxable income, excluding net capital gains. As a result,
although we believe that we are organized and operating in a manner that permits
us to remain qualified as a REIT, we cannot guarantee that we will be able to
continue to operate in such a manner. In addition, if we are ever audited by the
Internal Revenue Service with respect to any past year, the IRS may challenge
our qualification as a REIT for such year. Similarly, no assurance can be given
that new legislation, new regulations, administrative interpretations or court
decisions will not change the tax laws with respect to qualification as a REIT
or the federal income tax consequences of such qualification. We are not aware,
however, of any currently pending tax legislation that would adversely affect
our ability to continue to operate as a REIT.
If we fail to qualify as a REIT, we will be subject to federal income tax,
including any applicable alternative minimum tax, on our taxable income at
regular corporate rates. In addition, unless entitled to relief under certain
statutory provisions, we will also be disqualified from treatment as a REIT for
the four taxable years following the year during which qualification is lost.
This treatment would reduce our net earnings available for investment or
distribution to share owners because of the additional tax liability for the
year or years involved. If we do not qualify as a REIT, we would no longer be
required to make distributions to share owners. To the extent that distributions
to share owners would have been made in anticipation of qualifying as a REIT, we
might be required to borrow funds or to liquidate certain of our investments to
pay the applicable tax. The failure to qualify as a REIT would also constitute a
default under our primary debt obligations and could significantly reduce the
market value of our common stock.
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<PAGE> 20
We may need to borrow money to qualify as a REIT.
Our ability to make distributions to share owners could be adversely affected by
increased debt service obligations if we need to borrow money in order to
maintain our REIT qualification. For example, differences in timing between when
we receive income and when we have to pay expenses could require us to borrow
money to meet the requirement that we distribute to our share owners at least
95% of our net taxable income each year excluding net capital gains. The
incurrence of large expenses also could cause us to need to borrow money to meet
this requirement. We might need to borrow money for these purposes even if we
believe that market conditions are not favorable for such borrowings and
therefore we may borrow money on unfavorable terms.
We are subject to some taxes even if we qualify as a REIT.
Even if we qualify as a REIT, we are subject to some federal, state, and local
taxes on our income and property. For example, we pay tax on certain income we
do not distribute. Also, our income derived from properties located in some
states are subject to local taxes and, if we were to enter into transactions
which the Internal Revenue Code labels as prohibited transactions, our net
income from such transactions would be subject to a 100% tax.
ITEM 2. PROPERTIES
The properties we owned at December 31, 1999 are described under Item 1 and in
Note 4 of the Notes to Financial Statements contained in this Report.
Our principal office is located at 40 Skokie Boulevard in Northbrook, Illinois,
where we lease approximately 10,000 square feet of space from an unrelated
landlord. We maintain regional property management and leasing offices at
certain of our properties located in Chicago, Peoria, Minneapolis, St. Louis,
Indianapolis, Kansas City, Louisville, Milwaukee, Nashville, and Omaha.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Our bylaws provide for a President, a Treasurer, a Secretary and such other
officers as are elected or appointed by the Directors. Each officer holds office
at the discretion of the Directors. The Directors have determined that the
following officers are executive officers of Bradley within the meaning of Rule
3b-7 under the Securities Exchange Act:
President, Chairman, and Chief Executive Officer - Thomas P. D'Arcy, age 40, has
held this position since February 1996, having served as Executive Vice
President since September 1995, Senior Vice President since 1992 and Vice
President since 1989. Prior to joining the Company, Mr. D'Arcy was employed by
R.M. Bradley & Co., Inc. as a member of its property management and real estate
brokerage departments for over eight years.
Executive Vice President - Richard L. Heuer, age 47, has held this position
since late 1994. Prior to joining the Company, Mr. Heuer was employed by the
Welsh Companies from September 1993, and Towle Real Estate Company from 1988,
which companies were the independent property management companies that managed
our Minnesota properties.
Executive Vice President of Asset Management - E. Paul Dunn, age 53, has held
this position since March 1996. Prior to joining the Company, Mr. Dunn was
Executive Vice President of the Welsh Companies in Minneapolis, Minnesota since
1983.
Executive Vice President, Chief Financial Officer and Treasurer - Irving E.
Lingo, Jr., age 48, has held this position with the Company since September
1995. Prior to joining the Company, Mr. Lingo served as Chief Financial Officer
of Lingerfelt Industrial Properties, a division of The Liberty Property Trust,
from June 1993 to September 1995. Prior to June 1993, Mr. Lingo was Vice
President-Finance of CSX Realty, a subsidiary of CSX Corporation, from
1991-1992.
Executive Vice President of Leasing - Steven St. Peter, age 48, has held this
position since August 1996. Prior to joining the Company, Mr. St. Peter served
as National Director of Real Estate for Bally Total Fitness from 1995 to 1996,
Midwest Manager of Real Estate for TJX Corporation from 1993 to 1995 and
Director of Leasing for H.S.S. Development from 1990 to 1993.
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<PAGE> 21
Senior Vice President and Secretary - Marianne Dunn, age 40, was named Senior
Vice President of Bradley in September 1995, having served as Vice President of
Bradley since 1993 and as Investment Manager since 1990.
Vice President of Construction - Frank J. Comber, age 59, has held this position
since August 1996. Prior to joining the Company, Mr. Comber served as Vice
President of Construction Services for Merchandise Mart Properties from 1989 to
1996 and First Vice President for Homart Development Company from 1973 to 1988.
None of our officers or Directors is related to any other officer or Director.
No description is required with respect to any of the foregoing persons of any
type of event referred to in Item 401(f) of Regulation S-K.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on the New York Stock Exchange under the symbol
"BTR." Our 8.4% Series A Convertible Preferred Stock, issued August 6, 1998, is
also traded on the NYSE under the symbol "BTRPrA." The ranges of high and low
prices reported on the NYSE during 1999 and 1998 for the period outstanding
were:
Common Stock:
1999 1998
---------------------------------- -------------------------------------
Quarter Ended High Low Quarter Ended High Low
------------- ---- --- ------------- ---- ---
March 31 $21 1/4 $15 3/4 March 31 $21 3/4 $19 13/16
June 30 $21 11/16 $17 5/8 June 30 $21 7/8 $20 1/8
September 30 $21 1/8 $16 7/8 September 30 $22 3/4 $18 3/8
December 31 $19 1/16 $15 5/8 December 31 $21 13/16 $18 3/4
Series A Convertible Preferred Stock:
1999 1998
---------------------------------- -------------------------------------
Quarter Ended High Low Quarter Ended High Low
------------- ---- --- ------------- ---- ---
March 31 $24 $21 September 30 $24 1/2 $21 3/8
June 30 $24 $21 5/8 December 31 $24 1/2 $22
September 30 $23 3/4 $21 9/16
December 31 $23 $19
The closing sale prices of the common stock and preferred stock on the NYSE on
March 1, 2000, were $17 7/16 and $21, respectively. At December 31, 1999, there
were approximately 1,060 holders of record of our common stock, and 1,145
holders of record of our Series A preferred stock.
We have paid dividends during the past two full years as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------------------- --------------------------------------
Per Common Per Preferred Per Common Per Preferred
Payment Share Share Payment Share Share
----------- ---------- ------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
March 31 $.37 $.525 March 31 $.35 $ -
June 30 $.37 $.525 June 30 $.35 $ -
September 30 $.37 $.525 September 30 $.35 $.525
December 31 $.38 $.525 December 31 $.37 $.525
</TABLE>
The following table summarizes the tax status of distributions paid to common
and preferred share owners during 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------------------------------- -------------------------------
Common Preferred Common Preferred
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Ordinary income 91% 93% 81% 81%
Capital gain 7% 7% 19% 19%
Return of capital 2% - - -
-------------- ------------- ------------- -------------
Total 100% 100% 100% 100%
============== ============= ============= =============
</TABLE>
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<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
(Thousands of dollars, except per share data)
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Total income $ 154,833 $ 131,037 $ 97,552 $ 78,839 $ 36,572
Total expenses 110,234 98,466 74,116 60,711 28,141
----------- ----------- ----------- ----------- ----------
Income before equity in earnings of partnership, net gain on
sale of properties and extraordinary item 44,599 32,571 23,436 18,128 8,431
Equity in earnings of partnership 500 586 - - -
Net gain on sale of properties - 29,680 7,438 9,379 -
----------- ----------- ----------- ----------- ----------
Income before extraordinary item and allocation to minority interest 45,099 62,837 30,874 27,507 8,431
Income allocated to minority interest (6,293) (3,317) (1,116) (285) -
----------- ----------- ----------- ---------- ----------
Income before extraordinary item 38,806 59,520 29,758 27,222 8,431
Extraordinary loss, net of minority interest - - (4,631) - -
----------- ----------- ----------- ----------- ----------
Net income 38,806 59,520 25,127 27,222 8,431
Preferred share distributions (7,304) (2,922) - - -
----------- ----------- ----------- ----------- ----------
Net income attributable to common share owners $ 31,502 $ 56,598 $ 25,127 $ 27,222 $ 8,431
=========== =========== =========== =========== ==========
Basic earnings per common share:
Income before extraordinary item $1.31 $2.39 $1.36 $1.54 $0.85
Extraordinary loss, net of minority interest - - (0.21) - -
----------- ----------- ----------- ----------- ----------
Net income $1.31 $2.39 $1.15 $1.54 $0.85
=========== =========== =========== =========== ==========
Diluted earnings per common share:
Income before extraordinary item $1.31 $2.37 $1.36 $1.54 $0.85
Extraordinary loss, net of minority interest - - (0.21) - -
----------- ----------- ----------- ----------- ----------
Net income $1.31 $2.37 $1.15 $1.54 $0.85
=========== =========== =========== =========== ==========
Distributions per common share $1.49 $1.42 $1.34 $1.32 $1.32
Net cash provided by (used in):
Operating activities $ 67,928 $ 54,950 $ 44,827 $ 31,633 $ 12,733
Investing activities $ (44,508) $ (131,820) $ (122,649) $ (16,715) $ (9,953)
Financing activities $ (20,248) $ 73,385 $ 75,107 $ (8,153) $ (2,276)
Funds from operations* $ 58,737 $ 52,316 $ 42,710 $ 30,630 $ 15,249
Total assets at end of year $ 996,167 $ 967,113 $ 668,791 $ 502,284 $ 180,545
Total debt at end of year $ 444,822 $ 472,375 $ 302,710 $ 188,894 $ 39,394
</TABLE>
*We compute funds from operations, or "FFO", in accordance with the March 1995
"White Paper" on FFO published by the National Association of Real Estate
Investment Trusts, as income before allocation to minority interest (computed in
accordance with generally accepted accounting principles), excluding gains or
losses from debt restructuring and sales of property, plus depreciation and
amortization, and after preferred stock distributions and adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are computed to reflect FFO on the same basis.
In computing FFO, we do not add back to net income the amortization of costs
incurred in connection with our financing activities or depreciation of non-real
estate assets, but do add back to net income significant non-recurring events
that materially distort the comparative measurement of company performance over
time.
Reference is made to "Management's Discussion and Analysis" (Item 7) for a
discussion of various factors or events which materially affect the
comparability of the information set forth above.
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<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
General
Unless otherwise required by the context, references to the "Company" below
include references to Bradley Operating Limited Partnership which is the entity
through which the Company owns its properties and conducts its business.
We fund our operating expenses and distributions primarily from operating cash
flows, although, if needed, we may also use our bank line of credit for these
purposes. We fund acquisitions, developments and other capital expenditures
primarily from the line of credit and, to a lesser extent, operating cash flows,
as well as through the issuance of debt and equity securities. We may also
acquire properties through the issuance of Limited Partner Units, or "LP Units,"
of the Operating Partnership to the seller or contributor of the acquired
properties. Additionally, we may dispose of non-core properties, reinvesting the
proceeds from such dispositions into properties with better growth potential and
that are more consistent with our strategic focus. In addition, we may acquire
partial interests in real estate assets through participation in joint venture
transactions.
We focus our investment activities on community and neighborhood shopping
centers, primarily located in the midwestern United States, anchored by regional
and national grocery store chains. We will continue to seek acquisition
opportunities of individual properties and property portfolios and of private
and public real estate entities in both primary and secondary Midwest markets
where we can utilize our extensive experience in shopping center renovation,
expansion, re-leasing and re-merchandising to achieve long-term cash flow growth
and favorable investment returns. Additionally, we expect to continue to engage
in development activities, both directly and through contractual relationships
with independent development companies, to develop community and neighborhood
shopping centers in selected Midwest markets where we anticipate that value can
be created from new developments more effectively than from acquisitions of
existing shopping center properties. We would also consider investment
opportunities in markets beyond the Midwest in the event such opportunities were
on a scale that enabled us to actively manage, lease, develop and redevelop
shopping centers consistent with our focus that create favorable investment
returns and increase value to our share owners.
We consider our liquidity and ability to generate cash from operating and from
financing activities to be sufficient to meet our operating expenses,
development costs, debt service and distribution requirements for at least a
year. Despite a current difficult capital markets environment for REITs, we also
believe we have sufficient liquidity and flexibility to be able to fund our
recently announced common share repurchase program, while continuing to take
advantage of favorable acquisition and development opportunities during the
year. However, the utilization of available liquidity for such opportunities
will be carefully calibrated to changing market conditions.
As of December 31, 1999, our financial liquidity was provided by $4.4 million in
cash and cash equivalents and by the unused balance on our bank line of credit
of $105.5 million. Additionally, as of December 31, 1999, we were holding for
sale three properties with an aggregate book value of $29.9 million. We expect
to complete the sales of these properties during the first quarter of 2000,
although we can give no assurance that any such sales will occur. Proceeds
received from a sale of any such properties would provide us with additional
liquidity. In addition, we have an effective "shelf" registration statement
under which the Company may issue up to $201.4 million in equity securities, and
an additional "shelf" registration statement under which the Operating
Partnership may issue up to $400 million in unsecured, non-convertible
investment grade debt securities. The "shelf" registration statements provide
the Company and its Operating Partnership with the flexibility to issue
additional equity or debt securities from time to time when we determine that
market conditions and the opportunity to utilize the proceeds from the issuance
of such securities are favorable.
Subsequent to year-end, we purchased two additional shopping centers located in
Kansas and Missouri, aggregating approximately 360,000 square feet of leasable
area for a total purchase price of approximately $19.1 million. The shopping
centers were acquired with cash provided by the line of credit. Also subsequent
to year-end, we issued $75 million of unsecured Notes due March 15, 2006 at an
interest rate of 8.875%, using the proceeds to pay-down the outstanding balance
on the line of credit.
Mortgage debt outstanding at December 31, 1999 consisted of fixed-rate notes
totaling $100.7 million with a weighted average interest rate of 7.51% maturing
at various dates through 2016. Short-term liquidity requirements include debt
service payments due within one year. Scheduled principal payments of mortgage
debt in 2000 total $7.7 million, including a $6.0 million maturity in February.
We expect to fund short-term liquidity requirements, including the mortgage debt
maturity in February, with operating cash flows and the line of credit. In
addition, we have commenced negotiations to extend and modify the line of
credit, which expires in December 2000. We expect to be able to extend and
modify the line of credit on commercially reasonable terms, which we believe
will be slightly more expensive than the terms under the existing line of credit
due to competitive market pressures. At this time, we cannot definitely state
what terms we will obtain, including interest rates. During the fourth quarter
of 1999, the weighted average interest rate on the line of credit was 6.8%. We
have historically been able to refinance debt when it has become due on terms
which we believe to be commercially
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<PAGE> 24
reasonable. While we currently expect to fund long-term liquidity requirements
primarily through a combination of issuing additional investment grade unsecured
debt securities and equity securities and with borrowings under the bank line of
credit, there can be no assurance that we will be able to repay or refinance our
indebtedness on commercially reasonable or any other terms.
Operating Activities
Net cash flows provided by operating activities increased to $67,928,000 during
1999 from $54,950,000 in 1998, and $44,827,000 in 1997. These increases were due
primarily to the growth of our portfolio.
Funds from operations, or "FFO," increased $6,421,000 or 12.3% from $52,316,000
in 1998 to $58,737,000 in 1999. FFO increased by $9,606,000 or 22.5% during
1998, from $42,710,000 in 1997. We generally consider FFO to be a relevant and
meaningful supplemental measure of the performance of an equity REIT because it
is predicated on a cash flow analysis, contrasted with net income, a measure
predicated on generally accepted accounting principles ("GAAP") which gives
effect to non-cash items such as depreciation. We compute FFO in accordance with
the March 1995 "White Paper" on FFO published by the National Association of
Real Estate Investment Trusts ("NAREIT"), as income before allocation to
minority interest (computed in accordance with GAAP), excluding gains or losses
from debt restructuring and sales of property, plus depreciation and
amortization, and after preferred stock distributions and adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are computed to reflect FFO on the same basis.
In computing FFO, we do not add back to net income the amortization of costs
incurred in connection with our financing activities or depreciation of non-real
estate assets, but do add back to net income significant non-recurring events
that materially distort the comparative measurement of company performance over
time. In November 1999, NAREIT issued a National Policy Bulletin clarifying that
FFO should include both recurring and non-recurring operating results, except
gains and losses from sales of depreciable operating property and those results
defined as "extraordinary items" under GAAP. This clarification, including
restatements of comparative periods, is effective January 1, 2000. During 1997,
in computing FFO we added back to net income $3,415,000 of non-recurring
stock-based compensation which, upon adoption January 1, 2000, will not be added
back to net income when presented under the guidelines of the National Policy
Bulletin. FFO does not represent cash generated from operating activities in
accordance with GAAP and should not be considered as an alternative to cash flow
as a measure of liquidity. Since the NAREIT White Paper and National Policy
Bulletin only provide guidelines for computing FFO, the computation of FFO may
vary from one REIT to another. FFO is not necessarily indicative of cash
available to fund cash needs.
Investing Activities
Net cash flows used in investing activities decreased to $44,508,000 during
1999, from $131,820,000 in 1998 and $122,649,000 in 1997.
During 1999, we completed the acquisitions of four shopping centers located in
Michigan, Ohio and two in Minnesota, aggregating 484,000 square feet for an
aggregate purchase price of approximately $36,859,000, invested approximately
$11,330,000 in four redevelopment initiatives, and sold three properties
aggregating 434,000 square feet for an aggregate net sales price of $16,899,000.
During this period, we also acquired the 50% non-owned portion of two shopping
centers held by our joint venture acquired in connection with the merger
acquisition of Mid-America on August 6, 1998, for a purchase price of
approximately $7,750,000. The acquisition of the 50% non-owned portion of the
joint venture was completed after the joint venture sold an enclosed mall to a
third party for $12,100,000, including the assumption of a $3,100,000 note
receivable, which was collected in the fourth quarter of 1999. Cash
distributions received from the joint venture during 1999 amounted to
$3,968,000.
We completed the merger acquisition of Mid-America through the issuance of
approximately 3.5 million shares of a newly created 8.4% Series A Convertible
Preferred Stock, the assumption of Mid-America's liabilities, including
approximately $66 million of debt, of which $28 million was prepaid at closing,
and the payment of certain transaction costs, making the purchase price
approximately $159 million. The merger was structured as a tax-free transaction,
and was accounted for using the purchase method of accounting. Upon completion
of the merger, we acquired Mid-America's 22 retail properties aggregating
approximately 2.7 million square feet located primarily in the Midwest, and
succeeded to Mid-America's 50% general partner interest in a joint venture which
owned two neighborhood shopping centers and one enclosed mall.
During 1998, in addition to the properties acquired in connection with the
Mid-America merger, we completed the acquisitions of 22 shopping centers located
in Illinois, Indiana, Kansas, Kentucky, Michigan, Missouri, Ohio and Wisconsin
aggregating 3.0 million square feet for a total purchase price of approximately
$202.8 million. Also, during 1998, we completed the sales of a 640,000
square-foot mixed-use property located in the "loop" area of downtown Chicago
for a net sales price of approximately $82.1 million, and a 46,000 square-foot
shopping center located in Iowa for a net sales price of approximately $1.9
million.
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<PAGE> 25
Financing Activities
Net cash flows from financing activities decreased to a use of cash of
$20,248,000 in 1999 from a source of cash of $73,385,000 in 1998 and $75,107,000
in 1997. Distributions to common and preferred share owners as well as to the
minority interest were $49,483,000 in 1999, $39,354,000 in 1998, and $30,504,000
in 1997.
We funded the acquisitions of four shopping centers during 1999, and the capital
expenditures incurred for our redevelopment initiatives, with cash provided by
our line of credit. We used the net proceeds from the sales of three properties
during 1999 to pay-down the outstanding balance on the line of credit. In
addition to the properties acquired in connection with the Mid-America merger,
18 of the 22 shopping centers acquired in 1998 were acquired with cash provided
by the line of credit, three shopping centers were acquired with cash provided
by the line of credit and the assumption of an aggregate of $25,753,000 in
non-recourse mortgage indebtedness, and one shopping center was acquired for
cash provided by the line of credit and the issuance of 62,436 LP Units valued
at $1,300,000.
While the capital markets for REITs have remained challenging, during February
1999, we took advantage of an opportunity to replace $50 million of short-term
floating rate debt under the line of credit with the issuance of 8.875% Series B
Cumulative Redeemable Perpetual Preferred Units. We took advantage of a similar
opportunity during September 1999, replacing $25 million of short-term floating
rate debt under the line of credit with the issuance of 8.875% Series C
Cumulative Redeemable Perpetual Preferred Units. Net proceeds from the issuances
were approximately $73,444,000. Although the spreads between the interest rate
currently available under the line of credit facility and the rates associated
with the Series B and C Preferred Units are dilutive to earnings in the
short-term, the infusion of such permanent capital reduced the amount of
outstanding indebtedness and increased the capacity under the line of credit,
providing us with additional flexibility to take advantage of the favorable
acquisition, development, and redevelopment opportunities we continue to
identify from both prospective acquisitions in our target markets and from
shopping centers in our existing core portfolio.
In December 1997, we entered into a $200 million unsecured line of credit
facility with a syndicate of banks, lead by First Chicago NBD and BankBoston. In
November 1998, we amended the line of credit facility, increasing the maximum
capacity to $250 million. 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 $150 million, a
competitive bid rate solicited from the syndicate of banks. Based on our current
credit rating assigned by Standard & Poor's Investment Services and Moody's
Investors Service, the current interest rate is 1.00% over LIBOR. Additionally,
we pay a facility fee currently equal to $375,000 per annum. In the event either
Standard & Poor's or Moody's downgrade our credit ratings, the facility fee
would increase to $625,000 per annum, and the spread over the base rate would
increase by 0.25% and the spread over LIBOR would increase to 1.25%. During
1999, Standard & Poor's affirmed our "BBB-" rating and raised its rating outlook
from stable to positive. The line of credit is available for the acquisition,
development, renovation and expansion of new and existing properties, working
capital and general business purposes. In 1997, we incurred an extraordinary
loss on the prepayment of debt of $577,000 (net of the minority interest
portion) in connection with replacing the previous line of credit.
In May 1998, we filed a "shelf" registration under which we may issue up to $400
million in unsecured, non-convertible investment grade debt securities. The
"shelf" registration gives us the flexibility to issue additional debt
securities from time to time when we determine that market conditions and the
opportunity to utilize the proceeds from the issuance of such securities are
favorable. During September 1998, we implemented a Medium-Term Note Program
providing us with the added flexibility of issuing Medium-Term Notes due nine
months or more from the date of issue in small amounts in an aggregate principal
amount of up to $150 million from time to time using the debt "shelf"
registration in an efficient and expeditious manner. However, due to costs of
maintaining the program and its unlikely utilization due to an unfavorable
market for medium-term notes, we indefinitely suspended the program in the
fourth quarter of 1999, resulting in a charge to general and administrative
expense of $166,000 for costs incurred to establish the Medium-Term Note
Program.
In January 1998, we issued $100 million, 7.2% ten-year unsecured Notes maturing
January 15, 2008. The issue was rated "BBB-" by Standard & Poor's and "Baa3" by
Moody's. Proceeds from the offering were used to pay amounts outstanding under
the bank line of credit which had been increased throughout 1997 primarily for
the acquisitions of additional shopping centers. The outstanding balance of the
unsecured Notes at December 31, 1999, net of the unamortized discount, was
$99,758,000. The effective interest rate on the unsecured Notes is approximately
7.61%.
In November 1997, we issued $100 million, 7% seven-year unsecured Notes maturing
November 15, 2004, which were rated "BBB-" by Standard & Poor's and "Baa3" by
Moody's. We utilized the proceeds to prepay a $100 million, 7.23% mortgage note
that had been issued to a trust qualifying as a real estate mortgage investment
conduit for federal income tax purposes. The REMIC Note was secured by six
properties and was originally scheduled to expire in September 2000. Prepayment
of the REMIC Note resulted in an extraordinary loss on prepayment of debt of
$4,054,000 (net of the minority interest portion), consisting primarily of a
prepayment yield maintenance fee. However, issuance of such unsecured debt
extended our weighted average debt maturity and resulted in a slightly lower
effective interest rate on $100 million of debt, while the prepayment of the
REMIC Note resulted in the discharge from
25
<PAGE> 26
the mortgage securing the REMIC Note of properties having an aggregate gross
book value of $181.2 million. The outstanding balance of the unsecured Notes at
December 31, 1999, net of the unamortized discount, was $99,846,000. The
effective interest rate on the unsecured Notes is approximately 7.19%.
In 1997, we filed a "shelf" registration statement under which we could issue up
to $234.4 million of equity securities through underwriters or in privately
negotiated transactions from time to time. On December 1, 1997, we completed an
offering of 990,000 shares of common stock from the "shelf" registration at a
price to the public of $20.375 per share. Net proceeds from the offering of
$19.2 million were used to reduce outstanding indebtedness under the line of
credit. We completed an additional offering of 300,000 shares of common stock on
December 10, 1997 at a price to the public of $20.50 per share. Net proceeds
from the offering of $5.7 million were used to reduce outstanding indebtedness
under the line of credit. In February 1998, we issued 392,638 shares of common
stock from the "shelf" registration at a price based upon the then market value
of $20.375 per share. Net proceeds from the offering of approximately $7.6
million were used to reduce outstanding borrowings under the line of credit.
Capital Strategy
We continue to identify favorable acquisition, development, and redevelopment
opportunities from both prospective acquisitions in our target markets and from
shopping centers in our core portfolio. We have expanded our internal
development capabilities to take advantage of these higher yielding investment
opportunities, which we expect to result in part from our existing relations
with the dominant grocery store operators in our Midwest markets. During 1999,
we continued the redevelopment of Prospect Plaza, located in Gladstone,
Missouri, acquired in December 1998, and of Cherry Hill Marketplace located in
Westland, Michigan, and 30th Street Plaza located in Canton, Ohio, both of which
were acquired during the second quarter of 1999. The redevelopment of Prospect
Plaza is expected to be complete in early 2000, with the redevelopments of
Cherry Hill Marketplace and 30th Street Plaza expected to be substantially
completed during the middle part of 2000. We also commenced the redevelopment of
the Commons of Chicago Ridge, a shopping center in our existing core portfolio
located in metropolitan Chicago, breaking ground on a new 111,000 square-foot
Home Depot in the fourth quarter. These projects represent the types of
selective redevelopment investment opportunities on which we plan to focus. The
redevelopments will represent an incremental investment of approximately $32
million, and are expected to generate high returns on invested capital while
adding substantial long-term value to the centers. We also continue to establish
a modest pipeline of development opportunities and potential shopping center
acquisitions where we can use our redevelopment experience to create similar
enhanced returns.
In November 1999, our Board of Directors authorized the repurchase of up to two
million shares of outstanding common shares from time to time through periodic
open market transactions or through privately negotiated transactions. The share
repurchase program is in effect until December 31, 2000, or until the authorized
limit has been reached. Through December 31, 1999, we repurchased 980,700 shares
at an average price of $16.90 per share for a total purchase price of
$16,611,000, including costs. The objective of the share repurchase program is
to capitalize on current market conditions in which the value of our underlying
real estate is more highly valued in the private property markets than in the
public equity markets. We expect to finance the acquisition, development, and
redevelopment opportunities, as well as the share repurchase program, with a
combination of proceeds from the sale of non-core assets, retained cash, and
possible joint ventures.
Year 2000 Issues
The statements under this caption include "Year 2000 readiness disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
Many existing computer software programs and operating systems were designed
such that the year 1999 was the maximum date that they would be able to process
accurately. The failure of our computer software programs and operating systems
to process the change in calendar year from 1999 to 2000 had the potential to
result in system malfunctions or failures. In the conduct of our operations, we
rely on equipment manufacturers and commercial computer software primarily
provided by independent software vendors. In anticipation of potential system
malfunctions or failures we undertook an assessment of our vulnerability to the
so-called "Year 2000 issue" with respect to our own equipment and computer
systems, and with respect to tenants, suppliers, and other parties with whom we
conduct a substantial amount of business. We developed a program in order to
achieve Year 2000 readiness, which included the following:
- - Awareness - Education involving all levels of Bradley personnel regarding
Year 2000 implications.
- - Inventory - Creating a checklist and conducting surveys to identify Year
2000 compliance issues in all systems, including both mechanical and
information systems. The surveys were also designed to identify critical
outside parties such as banks, tenants, suppliers and other parties with
whom we conduct a significant amount of business, for purposes of
determining potential exposure in the event such parties would not be Year
2000 compliant.
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<PAGE> 27
- - Assessment - Based upon the results of the inventory and surveys, assessing
the nature of identified Year 2000 issues and developing strategies to
bring our systems into substantial compliance with respect to Year 2000.
- - Correction and Testing - Implementing the strategy developed during the
assessment phase.
- - Implementation - Incorporating repaired or replaced systems into our
systems environment.
Based on the results of our program, we installed and tested upgraded software
provided by software vendors to help prevent system malfunctions or failures of
our information technology systems. In addition, we tested software and
equipment with embedded technology such as micro-controllers which operate
heating, ventilation, and air conditioning systems, fire alarms, security
systems, telephones and other equipment utilizing time-sensitive technology. We
completed an inventory of the tenants, suppliers and other parties with whom we
conduct a significant amount of business and conducted surveys of such parties
to identify the potential exposure in the event that they would not be Year 2000
ready in a timely manner. Based on the results of our testing and surveys, we
were not aware of any Year 2000 issues that would have a meaningful impact on
our business. We incurred less than $50,000 to bring our information technology
systems and non-information technology systems Year 2000 ready, and to evaluate
the readiness of tenants, suppliers and other parties with whom we conduct a
significant amount of business.
Since the change in the calendar from 1999 to 2000, we have not experienced any
malfunctions or failures of our information technology systems, or of our
equipment with embedded technology. To-date, we are not aware of any party with
whom we conduct a significant amount of business that has experienced a material
Year 2000 readiness issue affecting their ability to operate their business or
raise adequate revenue to meet their contractual obligations to us. Although we
are prepared to commit the necessary resources to enforce our contractual rights
in the event any third parties with whom we conduct business encounter Year 2000
issues, we do not expect to incur any additional amounts to continue to monitor
and prevent Year 2000 malfunctions and failures because we do not expect to
encounter any material Year 2000 issues. However, we will continue to monitor
any potential Year 2000 issues that develop, and will adopt contingency plans
accordingly to mitigate any impact on the operation of our business.
RESULTS OF OPERATIONS
1999 Compared to 1998
Throughout 1998, we acquired 44 shopping centers and a 50% interest in a joint
venture that owned two neighborhood shopping centers and one enclosed mall for
an aggregate cost of approximately $362 million. Of these acquisitions, we
acquired 22 of the shopping centers and the joint venture interest in connection
with the merger acquisition of Mid-America in August 1998. Under the purchase
method of accounting, the results of operations of Mid-America have been
included in the consolidated financial statements from the date of acquisition.
During 1998, we also completed the sales of two properties that did not meet our
strategic focus for an aggregate net sales price of $84 million, resulting in a
net gain of $29,680,000.
Throughout 1999, we completed the acquisitions of four shopping centers for an
aggregate purchase price of $36.9 million, and sold three properties for an
aggregate gross sales price of $17.3 million. During 1999, we also acquired the
50% non-owned portion of the two shopping centers held by the joint venture
acquired in connection with the merger acquisition of Mid-America. As a result,
these two shopping centers are consolidated for financial reporting purposes.
Differences in results of operations between 1999 and 1998 were driven largely
by the acquisition and disposition activity. Income before the net gain on sale
of properties, income allocated to minority interest, and preferred share
distributions increased $11,942,000, or 36%, from $33,157,000 to $45,099,000.
Preferred share distributions on the Series A Preferred Stock issued in
connection with the merger acquisition of Mid-America amounted to $7,304,000 in
1999 and $2,922,000 for the partial year outstanding in 1998. Net income
attributable to common share owners decreased $25,096,000 from $56,598,000 in
1998 to $31,502,000 in 1999, largely reflecting the significant gain recognized
on the sale of One North State. Basic net income per share decreased $1.08 per
share from $2.39 per share in 1998 to $1.31 per share in 1999. The computation
of diluted net income per share resulted in a $0.02 reduction in basic net
income per share for 1998, from $2.39 per share to $2.37 per share, but had no
effect on basic net income per share for 1999.
Results of operations for properties consolidated for financial reporting
purposes and held throughout both 1999 and 1998 included 51 properties. Results
of operations for properties consolidated for financial reporting purposes and
purchased or sold subsequent to January 1, 1998 through December 31, 1999
included 52 properties. As of December 31, 1999, the Company owned 98 shopping
centers.
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<PAGE> 28
Property Specific Revenue and Expenses (in thousands of dollars)
<TABLE>
<CAPTION>
Properties
Acquisitions/ held both
1999 1998 Difference dispositions years
---------- --------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental income $151,950 $128,444 $23,506 $19,483 $ 4,023
Operations, maintenance and management $ 22,971 $ 18,915 $ 4,056 $ 3,297 $ 759
Real estate taxes $ 22,859 $ 21,713 $ 1,146 $ 1,261 $ (115)
Depreciation and amortization $ 26,456 $ 22,974 $ 3,482 $ 3,341 $ 141
</TABLE>
Results attributable to acquisition and disposition activities
Rental income increased from $128,444,000 in 1998 to $151,950,000 in 1999, an
increase of $23,506,000. Approximately $27,969,000 of the increase was
attributable to our acquisition activities, including $11,984,000 for properties
acquired in the merger acquisition of Mid-America, partially offset by
$8,486,000 attributable to disposition activities, primarily One North State.
Operations, maintenance and management expense increased from $18,915,000 in
1998 to $22,971,000 in 1999, an increase of $4,056,000. Approximately $3,297,000
of the net increase was attributable to acquisition and disposition activities,
including $2,128,000 for properties acquired in the merger.
Real estate taxes increased from $21,713,000 in 1998 to $22,859,000, an increase
of $1,146,000. Real estate taxes incurred for properties acquired during both
years, net of real estate taxes eliminated for properties sold, of approximately
$1,261,000 accounted for substantially all of the increase, as real estate taxes
for properties held both years decreased $115,000, or 0.7% from 1998 to 1999.
Depreciation and amortization increased from $22,974,000 in 1998 to $26,456,000
in 1999, an increase of $3,482,000. Approximately $3,341,000 of the net increase
was attributable to acquisition and disposition activities, while approximately
$141,000 was attributable to properties held both years.
Results for properties fully operating throughout both years
Several factors affected the comparability of results for properties fully
operating throughout both years. Winter storms in the Midwest occurring during
the first quarter of 1999 resulted in an increase in the level of snow removal
expense for the year of approximately $584,000 compared with 1998. This increase
in operations, maintenance and management expense was mitigated by the
recoverability of such expenses through operating expense reimbursements, which
were $472,000 higher during 1999 compared with 1998. Additionally, two large
tenants, Montgomery Ward at Heritage Square, and HomePlace at Har Mar Mall,
vacated their respective stores during 1998 after declaring bankruptcy in July
1997 and January 1998, respectively. Rental income decreased from 1998 at these
two shopping centers by $383,000 and $194,000, respectively. We are currently in
negotiations with a grocery anchor to replace the space vacated by HomePlace.
However, we can give no assurance that this lease will come to fruition or, if
so, as to the terms of any such lease. At Heritage Square, a 62,000 square-foot
lease with Carson Pirie Scott commenced in the third quarter of 1999, which
replaces approximately one half the space previously occupied by Montgomery
Ward. During the third quarter of 1999, we signed a 47,000 square-foot lease
with HomeLife to occupy the remaining vacancy of the former Montgomery Ward
space. This lease is expected to commence during the middle part of 2000, which
is expected to contribute to increases in rental income at this property.
Finally, our company, as well as most other real estate companies, was affected
by a consensus reached by the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board regarding the accounting for percentage
rents. On May 22, 1998, the EITF reached a consensus under Issue No. 98-9,
Accounting for Contingent Rent in Interim Financial Periods, that despite the
fact that the achievement of a future specified sales target of a lessee may be
considered as probable and reasonably estimable at some earlier point in the
year, a lessor should defer recognition of contingent rental income until such
specified targets are met. The pronouncement was effective May 23, 1998, and was
reaffirmed by Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements, issued by the Securities and Exchange Commission in
December 1999. Previously, we recognized percentage rental income each period
based on reasonable estimates of tenant sales. Because we stopped accruing
percentage rents upon the adoption of EITF 98-9 in 1998, certain percentage
rents that would have been recognized during the second half of 1998 under the
previous method of accounting were deferred and recognized as percentage rental
income in 1999. Looking forward, because the majority of our retail tenant
leases have sales years ending in December or January, a substantial portion of
percentage rental income from such leases is expected to be recognized in the
first quarter, once it is determined that specified sales targets have been
achieved. Percentage rental income for properties held throughout both years
increased by $718,000. Approximately one half of this increase is attributable
to the implementation of EITF 98-9, while the remaining increase is primarily
attributable to strong retail sales.
In addition to the changes in rental income described above, rental income
increased $409,000 at Rollins Crossing and $288,000 at Burning Tree Plaza, due
to a 71,000 square-foot lease with Regal Cinema at Rollins Crossing and a 24,000
square-foot lease with
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<PAGE> 29
Dunham's Athleisure at Burning Tree Plaza, both commencing in the fourth quarter
of 1998. Rental income increased $313,000 at High Point Centre, due to the
commencement of a 36,000 square-foot lease with Babies `R Us during the first
quarter of 1999. Rental income increased $511,000 at Commons of Crystal Lake due
to the commencement of a 28,000 square-foot lease with Marshalls commencing in
the second quarter of 1999 and a 30,000 square-foot lease with Toys `R Us
commencing in the third quarter of 1999. Rental income increased $478,000 at
Village Shopping Center due to an increase in occupancy during the second half
of 1998 and due to an increase in tax reimbursements from 1998 to 1999. The
increase in tax reimbursements primarily resulted from the negotiation of tax
abatements for several years received in 1998, contributing to an increase in
real estate taxes of $337,000 from the prior year. Rental income increased at
Crossroads Centre by $371,000 and $506,000 at Terrace Mall due to the receipt of
termination fees from Walgreens at Crossroads Centre and a vacant theater at
Terrace Mall. Rental income increased $239,000 at Sun Ray Shopping Center due to
the commencement of a 26,000 square-foot lease with Bally Total Fitness
commencing during the third quarter of 1999 and due to an increase in tax
reimbursements primarily resulting from a tax abatement received in the first
quarter of 1998, contributing to an increase in real estate taxes of $105,000
from 1998 to 1999. Rental income increased at Speedway Super Center by $651,000
due to the receipt of a termination fee from PetsMart in the second quarter of
1999 and due to the commencement of several new leases.
During September 1999, we were notified that Hechinger Co., the operator of an
85,000 square-foot Home Quarters store at Grandview Plaza, would liquidate its
assets in order to pay off creditors. Hechinger Co. had previously filed for
protection under Chapter 11 of the bankruptcy code in June 1999; however, the
store at Grandview Plaza was not included on the initial list of store closures.
As a result of the liquidation, the store closed and ceased paying rent in
January 2000. This tenant contributed approximately $850,000 in total rental
income on an annual basis, which we believe is at or slightly above current
market rates. While we are in preliminary discussions with several retailers to
replace this vacancy, we do not expect a new lease to commence prior to the end
of 2000, resulting in a decrease in rental income at this center.
Non-Property Specific Revenue and Expenses
Other income increased from $2,593,000 in 1998 to $2,883,000 in 1999. Other
income contains both property specific and non-property specific income;
however, the increase is mostly attributable to income generated from properties
acquired during 1998, mainly from three enclosed malls acquired in connection
with the merger acquisition of Mid-America, partially offset by a reduction in
other income of $154,000 at Grandview Plaza for insurance proceeds in excess of
the net book value of assets destroyed and costs incurred for a fire at
Grandview Plaza in 1997 received and recognized in the first quarter of 1998.
The three enclosed malls are currently held for sale and, if sold, will not
contribute to other income in the future.
Mortgage and other interest expense increased from $27,681,000 in 1998 to
$29,404,000 in 1999. Mortgage debt of $37,933,000 assumed in connection with the
merger acquisition of Mid-America, as well as $25,753,000 in mortgage
indebtedness assumed upon the acquisitions of three additional shopping centers
during 1998, partially offset by the repayment in the third quarter of 1998 of
mortgage notes secured by Richfield Hub and Hub West aggregating $10 million,
contributed to an increase in interest expense of $2,088,000 from 1998. A lower
weighted average interest rate on the line of credit in 1999 compared with 1998,
resulted in a decrease in interest expense of $868,000. Additionally, our
increased focus on development and redevelopment initiatives which have been
funded with the line of credit has resulted in a higher amount of interest
capitalized during 1999 compared with 1998. On January 28, 1998, the Operating
Partnership issued $100 million, 7.2% ten-year unsecured Notes maturing January
15, 2008. Proceeds from the offering were used to reduce outstanding borrowings
under the line of credit, which had been increased throughout 1997 primarily to
fund acquisition activity. Interest incurred on these unsecured Notes, and on
$100 million, 7.0% seven-year unsecured Notes issued in 1997, amounted to
$14,232,000 in 1998 compared with $14,806,000 for the full year in 1999, an
increase of $574,000.
General and administrative expense increased from $7,183,000 in 1998 to
$8,544,000 in 1999. The increase is primarily the result of our growth,
primarily throughout 1998, including full year increases in salaries for
additional personnel, investor relations for a larger share owner base, and
franchise taxes and related fees for a larger equity base and expanded
geographic market. During 1999, due to the costs of maintaining our Medium-Term
Note program and its unlikely utilization due to a softening of the market for
medium-term notes, we indefinitely suspended the program, resulting in a charge
to general and administrative expense of $166,000 for costs incurred to
establish the program. Further, the increased focus on acquisition and
development activity involves costs incurred in the evaluation process which are
non-recoverable and charged to general and administrative expense in the case of
acquisitions and developments that are not consummated. During 1999, the capital
markets for REITs remained challenging, resulting in an increase in our total
cost of capital. Property values also remained competitively priced and
consequently, we have been more selective in evaluating investment opportunities
and in utilizing our capital resources. Although this has resulted in an
increase in charges to general and administrative expense of approximately
$200,000 for feasibility expenses compared with 1998, we believe protecting our
liquidity is paramount to investing in opportunities that do not add long-term
value for our share owners.
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<PAGE> 30
1998 Compared to 1997
Net income attributable to common share owners for 1998 totaled $56,598,000
compared with $25,127,000 for the prior year. Net income for 1998 included a net
gain of $29,680,000 on the sale of two of our non-core properties. Net income
for 1997 included a net gain of $7,438,000 on the sale of four non-core
properties over the course of the year, a non-recurring charge of $3,415,000 for
certain stock-based compensation, and an extraordinary charge of $4,631,000 for
costs incurred in connection with the prepayment of the REMIC Note and the
write-off of costs associated with our former line of credit. Income before the
net gain on sale of properties, extraordinary item and before income allocated
to minority interest and preferred share distributions increased from
$23,436,000 to $33,157,000, or 41%. Distributions on the newly created Series A
Preferred Stock issued in connection with the merger acquisition of Mid-America,
amounted to $2,922,000 for the period August 6, 1998 through December 31, 1998.
Basic net income per common share increased from $1.15 per share in 1997 to
$2.39 per share in 1998. The computation of diluted net income per share
resulted in a $0.02 per share reduction in basic net income per share from $2.39
to $2.37 for 1998, but had no effect on basic net income per share for 1997.
Upon completion of the merger acquisition of Mid-America on August 6, 1998, we
acquired Mid-America's 22 retail properties located primarily in the Midwest,
and succeeded to Mid-America's 50% general partner interest in Mid-America
Bethal Limited Partnership (renamed Bradley Bethal Limited Partnership), a joint
venture which owns two neighborhood shopping centers and one enclosed mall.
Under the purchase method of accounting, the results of operations of
Mid-America have been included in the consolidated financial statements from the
date of acquisition.
During 1998, in addition to the properties acquired in connection with the
Merger, we acquired 22 shopping centers for a total purchase price of
approximately $202.8 million, and sold two non-core properties. During 1997, we
acquired 25 shopping centers at an aggregate cost of approximately $189.3
million and sold four non-core properties. Results of operations for properties
consolidated for financial reporting purposes and held throughout both 1998 and
1997 included 29 properties. Results of operations for properties consolidated
for financial reporting purposes and purchased or sold subsequent to January 1,
1997 through December 31, 1998 included 72 properties. As of December 31, 1998,
we owned 95 shopping centers consolidated for financial reporting purposes.
Property Specific Revenue and Expenses (in thousands of dollars)
<TABLE>
<CAPTION>
Properties
Acquisitions/ held both
1998 1997 Difference dispositions years
---------- --------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Rental income $128,444 $96,115 $32,329 $33,088 $ (759)
Other property income $ 2,051 $ 701 $ 1,350 $ 985 $ 365
Operations, maintenance and management $ 18,915 $14,012 $ 4,903 $ 4,376 $ 527
Real estate taxes $ 21,713 $18,398 $ 3,315 $ 3,411 $ (96)
Depreciation and amortization $ 22,974 $16,606 $ 6,368 $ 4,249 $ 2,119
</TABLE>
Results attributable to acquisition and disposition activities
Rental income increased from $96,115,000 in 1997 to $128,444,000 in 1998, an
increase of $32,329,000. Approximately $42,294,000 of the increase was
attributable to our acquisition activities, including $9,597,000 for properties
acquired in the merger acquisition of Mid-America partially offset by $9,206,000
attributable to disposition activities, primarily One North State.
Other property income increased from $701,000 in 1997 to $2,051,000 in 1998, an
increase of $1,350,000. Since almost no other property income was generated from
properties that were sold, substantially all of the $985,000 increase for
acquisitions and dispositions was attributable to our acquisition activities.
Approximately $413,000 of other property income was generated from properties
acquired in the merger, most of which is attributable to other property income
at four enclosed malls. Approximately $365,000 of the increase in other property
income was attributable to properties held both years.
Operations, maintenance and management expense increased from $14,012,000 in
1997 to $18,915,000 in 1998, an increase of $4,903,000. Approximately $4,376,000
of the net increase was attributable to our acquisition and disposition
activities, including $1,699,000 for properties acquired in the merger.
Real estate taxes increased from $18,398,000 in 1997 to $21,713,000 in 1998, an
increase of $3,315,000. Real estate taxes incurred for properties acquired
during both years, net of real estate taxes eliminated for properties sold, of
approximately $3,411,000 accounted for substantially all of the increase.
Depreciation and amortization increased from $16,606,000 in 1997 to $22,974,000
in 1998, an increase of $6,368,000. Approximately $4,249,000 of the net increase
was attributable to our acquisition and disposition activities, while
approximately $2,119,000 was attributable to properties held both years.
30
<PAGE> 31
Results for properties fully operating throughout both years
On May 22, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus under Issue No. 98-9, Accounting
for Contingent Rent in Interim Financial Periods, that despite the fact that the
achievement of a future specified sales target of a lessee may be considered as
probable and reasonably estimable at some earlier point in the year, a lessor
should defer recognition of contingent rental income until such specified
targets are met. The pronouncement was effective May 23, 1998. Previously, we
recognized percentage rental income each period based on reasonable estimates of
tenant sales. Largely due to the implementation of EITF No. 98-9, percentage
rental income for properties held throughout both years decreased by $595,000.
Including the reduction for percentage rental income of $595,000, total rental
income for properties held throughout both years decreased $759,000, or
approximately 1%. Decreases in rental income of $755,000 at Heritage Square,
$543,000 at Sun Ray Shopping Center, $386,000 at High Point Centre, and $226,000
at Har Mar Mall were partially offset by increases of $485,000 at Westview
Center and $359,000 at Grandview Plaza. The decrease at Heritage Square was
caused by an expected vacancy of Montgomery Ward in the first quarter of 1998,
following the tenant's declaration of bankruptcy in 1997. A 62,000 square-foot
lease with Carson Pirie Scott has been signed, which commenced in the second
half of 1999, to replace approximately one half the space previously occupied by
Montgomery Ward. The decrease at Sun Ray Shopping Center was primarily due to a
$172,500 termination payment received in the second quarter of 1997 combined
with a reduction in real estate tax recoveries of $358,000 resulting from the
negotiation of real estate tax reductions of $450,000 for the prior year. The
decrease in rental income at High Point Centre was due to the termination of a
lease with T.J. Maxx in the second quarter of 1998, resulting from the
consolidation of T.J. Maxx and Marshalls stores. The reduction in rental income
at Har Mar Mall primarily resulted from the vacancy of HomePlace in the third
quarter of 1998, after this tenant declared bankruptcy in January 1998. Except
for the significant vacancy of HomePlace, however, leasing activity was strong
at this property. Increases in real estate tax recoveries at Westview Center
resulted from an increase in real estate taxes of $318,000 due to the
negotiation of tax reductions at this center in the prior year. The increase in
rental income at Westview Center is also attributable to a 60,000 square-foot
lease with Waccamaw Pottery commencing in the fourth quarter of 1997. The
increase in rental income at Grandview Plaza was primarily due to the
commencement of a 30,000 square-foot lease with OfficeMax in the fourth quarter
of 1997.
The remaining $527,000 increase in operations, maintenance and management
expense during 1998 was primarily attributable to an increase in bad debt
expense, mostly to reserve a deferred rent receivable balance for HomePlace in
the first quarter.
The remaining $96,000 decrease in real estate taxes during 1998 was primarily
attributable to the aforementioned reduction at Sun Ray Shopping Center, as well
as a reduction of approximately $521,000 at Village Shopping Center due to
negotiated abatements, partially offset by the aforementioned increase at
Westview Center as well as an increase of approximately $540,000 at Commons of
Chicago Ridge.
The remaining $2,119,000 increase in depreciation and amortization during 1998
was attributable to new construction and leasing at Westview Center, Burning
Tree Plaza, Village Shopping Center, and Sun Ray Shopping Center as well as new
tenancies at various other locations, combined with the write-off of costs for
HomePlace at Har Mar Mall and Montgomery Ward at Heritage Square due to their
vacancies.
Non-Property Specific Expenses
Mortgage and other interest increased $11,119,000 from $16,562,000 in 1997 to
$27,681,000 in 1998. Interest expense on the line of credit, net of amounts
capitalized, increased from $6,605,000 to $7,897,000. The increase in interest
expense on the line of credit was due to a higher average outstanding balance
primarily as a result of borrowings for acquisitions during 1998, partially
offset by lower borrowing rates. The weighted average interest rate on
outstanding borrowings under the line of credit decreased to 6.70% in 1998 from
7.48% during 1997. Mortgage interest expense decreased from $9,221,000 in 1997
to $5,481,000 in 1998, primarily due to the prepayment of the REMIC Note in
November 1997 with proceeds from the issuance of unsecured Notes, partially
offset by interest incurred on the assumption of $25,753,000 in mortgage
indebtedness in connection with the acquisition of three shopping centers in
1998, and $37,933,000 in connection with the merger, as well as a full year's
interest incurred on mortgages assumed in connection with the acquisition of
four shopping centers in 1997. Interest on the REMIC Note in 1997 amounted to
$6,631,000. The weighted average interest rate on mortgage debt outstanding at
December 31, 1998 was 7.51%. Interest on the $100 million, 7% unsecured Notes
issued in November 1997 and used to prepay the REMIC Note amounted to $736,000
in 1997 compared with $7,175,000 in 1998. Interest on the $100 million, 7.2%
unsecured Notes issued in January 1998 amounted to $7,057,000.
General and administrative expense increased from $5,123,000 in 1997 to
$7,183,000 in 1998. The increase is primarily a result of our growth, including
increases in salaries for additional personnel, investor relations for a larger
shareholder base, and franchise taxes and related fees for a larger equity base
and expanded geographic market. Further, the increased focus on acquisition
activity
31
<PAGE> 32
involves costs incurred in the evaluation process which are non-recoverable and
charged to general and administrative expense in the case of acquisitions that
are not consummated. During 1998, several potential property acquisitions were
abandoned as a result of a softening in the equity capital markets and general
decrease in liquidity in the debt capital markets, as we decided to reevaluate
the utilization of capital resources and protect our liquidity, resulting in a
charge to general and administrative expense of approximately $300,000.
Additionally, we had historically capitalized portions of salaries of certain
internal personnel dedicated to the acquisition of properties on a successful
efforts basis allocated to completed acquisitions. On March 19, 1998, the EITF
reached a consensus under Issue No. 97-11, Accounting for Internal Costs
Relating to Real Estate Property Acquisitions, that internal costs of
identifying and acquiring operating properties should be expensed as incurred.
The pronouncement was effective March 19, 1998.
During 1997, we incurred an extraordinary loss on the prepayment of debt of
$577,000 (net of the minority interest portion) in connection with replacing the
previous line of credit, and incurred an extraordinary loss on the prepayment of
debt of $4,054,000 (net of the minority interest portion), consisting primarily
of a prepayment yield maintenance fee, in connection with the prepayment of the
REMIC Note.
During 1997, after working with an independent compensation consultant, the
Board of Directors terminated the Company's Superior Performance Incentive Plan
and substituted an award of approximately 115,000 shares of the Company's common
stock to certain senior executives, plus a cash amount to reimburse the
executives for taxes resulting from such award. As a result, a non-recurring
charge of $3,415,000 was included in the 1997 financial statements.
New Accounting Pronouncement
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities becomes effective for all fiscal quarters for
fiscal years beginning after June 15, 2000 and is not expected to have a
material impact on the Company's financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to interest rate changes primarily as a result of our line of
credit used to maintain liquidity and fund capital expenditures and expand our
real estate investment portfolio. Our interest rate risk management objectives
are to limit the impact of interest rate changes on earnings and cash flows and
to lower our overall borrowing costs. To achieve these objectives we borrow
primarily at fixed rates and may enter into derivative financial instruments
such as interest rate swaps, caps and treasury locks in order to mitigate our
interest rate risk on a related financial instrument. We do not enter into
derivative or interest rate transactions for speculative purposes.
Our interest rate risk is monitored using a variety of techniques. As of
December 31, 1999, long-term debt consisted of fixed-rate secured mortgage
indebtedness, fixed-rate unsecured Notes, and a variable rate line of credit
facility. The average interest rate on the $100.7 million of secured mortgage
indebtedness outstanding at December 31, 1999 was 7.51%, with maturities at
various dates through 2016. The unsecured Notes with an outstanding balance of
$199.6 million at December 31, 1999, consist of $100 million, 7% seven-year
unsecured Notes maturing November 15, 2004 with an effective rate of 7.19%, and
$100 million, 7.2% ten-year unsecured Notes maturing January 15, 2008 with an
effective rate of 7.61%. The weighted average interest rate on the line of
credit at December 31, 1999 was 7.62%. The line of credit, with an outstanding
balance at December 31, 1999 of $144.5 million, matures December 2000. The
carrying value of the line of credit at December 31, 1999 approximates its fair
value.
The scheduled principal payments of all debt consists of the following at
December 31, 1999:
<TABLE>
<CAPTION>
Mortgage Debt Unsecured Notes Line of Credit Total
---------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
2000 $ 7,711,000 $ - $ 144,500,000 $152,211,000
2001 4,630,000 - - 4,630,000
2002 30,690,000 - - 30,690,000
2003 7,879,000 - - 7,879,000
2004 5,015,000 100,000,000 - 105,015,000
Thereafter 40,783,000 100,000,000 140,783,000
---------------- ------------- --------------- -------------
-
$ 96,708,000 $200,000,000 $ 144,500,000 $441,208,000
================ ============= =============== =============
</TABLE>
As the table incorporates only those exposures that exist as of December 31,
1999, it does not consider those exposures or positions that could arise after
that date. Moreover, because future commitments are not presented in the table
above, the information presented has limited predictive value. As a result, the
ultimate economic impact with respect to interest rate fluctuations will depend
on the exposures that arise during the period, our hedging strategies at that
time, and interest rates.
32
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Index to Financial Statements and Schedule later in this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 is hereby incorporated by reference to
the text appearing under Part I, Item 4A. under the caption "Executive Officers
of the Registrant" in this Report, and by reference to the information under the
headings "Information Regarding Nominees and Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in our definitive Proxy Statement for
the 2000 Annual Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated by reference to
the information under the headings "Compensation of Directors and Executive
Officers," "Report of the Compensation Committee," "Compensation Committee
Interlocks and Insider Participation," "Employment Agreements" and "Share
Performance Graph" in our definitive Proxy Statement for the 2000 Annual Meeting
of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is hereby incorporated by reference to
the information under the heading "Beneficial Ownership of Shares" in our
definitive Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is hereby incorporated by reference to
the information under the heading "Certain Relationships and Related Party
Transactions" in our definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) and (2) The Financial Statements and Schedules required by Item 8 are
listed in the Index to Financial Statements and Schedules following the
signatures to this Report. (3) The following exhibits (listed according to
the exhibit index set forth in the instructions to Item 601 of Regulation
S-K), are a part of this Report.
Exhibit No. Description Page
----------- ----------- ----
3.1* Articles of Amendment and Restatement of Bradley Real 37
Estate, Inc., dated October 6, 1994.
3.2* Articles of Merger between Bradley Real Estate Trust 54
and Bradley Real Estate, Inc., dated October 6, 1994.
3.3 Articles of Merger between Tucker Properties N/A
Corporation and Bradley Real Estate, Inc., incorporated
by reference to Exhibit 3.3 of the Company's Annual
Report on Form 10-K dated March 25, 1996.
33
<PAGE> 34
Exhibit No. Description Page
----------- ----------- ----
3.4 Articles of Merger between Mid-America Realty N/A
Investments, Inc. and Bradley Real Estate, Inc.,
incorporated by reference to Exhibit 4.1 of the
Company's Current Report on Form 8-K dated August 7,
1998.
3.5 Articles Supplementary Establishing and Fixing the N/A
Rights and Preferences of a Series of Shares of
Preferred Stock for the 8.4% Series A Convertible
Preferred Stock of Bradley Real Estate, Inc. attached
as Annex B to the Proxy Statement/Prospectus included
in Part I to the Registration Statement on Form S-4
(File No. 333-57123) and incorporated herein by
reference.
3.6 Articles Supplementary Establishing and Fixing the N/A
Rights and Preferences of a Series of Shares of
Preferred Stock for the 8.875% Series B Cumulative
Redeemable Perpetual Preferred Stock of Bradley Real
Estate, Inc. incorporated by reference to Exhibit 4.2
of the Company's Current Report on Form 8-K dated March
3, 1999.
3.7 Articles Supplementary Establishing and Fixing the N/A
Rights and Preferences of a Series of Shares of
Preferred Stock for the 8.875% Series C Cumulative
Redeemable Perpetual Preferred Stock of Bradley Real
Estate, Inc. incorporated by reference to Exhibit 4.2
of Bradley Operating Limited Partnership's Current
Report on Form 8-K dated September 8, 1999.
3.8* Articles Supplementary, dated October 22, 1999. 61
3.9* By-laws of Bradley Real Estate, Inc., July 21, 1994. 63
4.1.1 Text of Indenture dated as of November 24, 1997 by and N/A
between Bradley Operating Limited Partnership and
LaSalle National Bank relating to the Senior Debt
Securities of Bradley Operating Limited Partnership,
incorporated by reference to Exhibit 4.1 to Bradley
Operating Limited Partnership's Registration Statement
on Form S-3 (File No. 333-36577) dated September 26,
1997.
4.1.2 Definitive Supplemental Indenture No. 1 dated as of N/A
November 24, 1997 between Bradley Operating Limited
Partnership and LaSalle National Bank, incorporated by
reference to Exhibit 4.1 of Bradley Operating Limited
Partnership's Current Report on Form 8-K dated November
24, 1997.
4.1.3 Definitive Supplemental Indenture No. 2 dated as of N/A
January 28, 1998 between Bradley Operating Limited
Partnership and LaSalle National Bank, incorporated by
reference to Exhibit 4.1 of Bradley Operating Limited
Partnership's Current Report on Form 8-K dated January
28, 1998.
4.1.4 Definitive Supplemental Indenture No. 3, dated as of N/A
March 10, 2000, between Bradley Operating Limited
Partnership and LaSalle Bank National Association
incorporated by reference to Exhibit 4.1 of Bradley
Operating Limited Partnership's Current Report on Form
8-K dated March 10, 2000.
10.1 Second Amended and Restated Agreement of Limited N/A
Partnership of Bradley Operating Limited Partnership
dated as of September 2, 1997, incorporated by
reference to Exhibit 3.1 of Bradley Operating Limited
Partnership's Registration Statement on Form 10 dated
September 8, 1997.
10.1.2 Amendment, dated July 31, 1998, to Second Restated N/A
Agreement of Limited Partnership of Bradley Operating
Limited Partnership, incorporated by reference to
Exhibit 10.1.2 of the Company's Annual Report on Form
10-K405 dated March 26, 1999.
34
<PAGE> 35
Exhibit No. Description Page
----------- ----------- ----
10.1.3 Amendment, dated August 6, 1998, to Second Restated N/A
Agreement of Limited Partnership of Bradley Operating
Limited Partnership, designating the 8.4% Series A
Convertible Preferred Units, incorporated by reference
to Exhibit 10.1 of the Company's Current Report on Form
8-K dated August 7, 1998.
10.1.4 Amendment, dated February 23, 1999, to Second Restated N/A
Agreement of Limited Partnership of Bradley Operating
Limited Partnership, designating the 8.875% Series B
Cumulative Redeemable Perpetual Preferred Units,
incorporated by reference to Exhibit 4.1 of the
Company's Current Report on Form 8-K dated March 3,
1999.
10.1.5 Amendment, dated as of September 7, 1999, to Second N/A
Restated Agreement of Limited Partnership of Bradley
Operating Limited Partnership, designating the 8.875%
Series C Cumulative Redeemable Perpetual Preferred
Units incorporated by reference to Exhibit 4.1 of
Bradley Operating Limited Partnership's Current Report
on Form 8-K.
10.2.1 Unsecured Revolving Credit Agreement dated as of N/A
December 23, 1997 among Bradley Operating Limited
Partnership, as Borrower and The First National Bank of
Chicago, BankBoston, N.A. and certain other banks, as
Lenders, and The First National Bank of Chicago, as
Administrative Agent and BankBoston, N.A., as
Documentation Agent and Bank of America National Trust
& Savings Association and Fleet National Bank as
Co-Agents, incorporated by reference to Exhibit 99.1 of
the Company's Current Report on Form 8-K dated December
19, 1997.
10.2.2 Form of Guaranty made as of December 23, 1997 by N/A
Bradley Financing Partnership and Bradley Real Estate,
Inc. for the benefit of The First National Bank of
Chicago, incorporated by reference to Exhibit 99.4 of
the Company's Current Report on Form 8-K dated December
19, 1997.
10.2.3 Third Amendment to Unsecured Revolving Credit Agreement N/A
dated as of November 23, 1998 among Bradley Operating
Limited Partnership, as Borrower and The First National
Bank of Chicago and other certain banks, as Lenders,
and The First National Bank of Chicago, as
Administrative Agent and BankBoston, N.A., as
Documentation Agent and Bank of America National Trust
& Savings Association and Fleet National Bank as
Co-Agents, incorporated by reference to Exhibit 10.2.3
of the Company's Annual Report on Form 10-K405 dated
March 26, 1999.
10.3 1993 Stock Option and Incentive Plan, as amended and N/A
restated on September 9, 1996, incorporated by
reference to Exhibit 10.4 of the Company's Annual
Report on Form 10-K405 dated March 19, 1997.
21.1* Subsidiaries of the Company. 87
23.1* Consent of KPMG LLP (regarding Form S-3 and Form S-8
Registration Statements). 88
27.1* Financial Data Schedule. 89
- -----------------------
*Filed herewith.
(b) Reports on Form 8-K
The following Form 8-K was filed during the period October 1, 1999 through
December 31, 1999:
Form 8-K filed November 24, 1999 (earliest event November 23, 1999),
reporting in Item 5. a press release announcing the adoption of a share
repurchase program.
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized this 24th day of March 2000.
BRADLEY REAL ESTATE, INC.
by: /s/ Thomas P. D'Arcy
---------------------------
Thomas P. D'Arcy, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ Thomas P. D'Arcy March 24, 2000
------------------------------------------------------------------- -------------------------
Thomas P. D'Arcy, President, Chairman and CEO
/s/ Irving E. Lingo, Jr. March 24, 2000
------------------------------------------------------------------- -------------------------
Irving E. Lingo, Jr., Chief Financial Officer and Treasurer
/s/ David M. Garfinkle March 24, 2000
------------------------------------------------------------------- -------------------------
David M. Garfinkle, Controller
/s/ Stephen G. Kasnet March 24, 2000
------------------------------------------------------------------- -------------------------
Stephen G. Kasnet, Director
/s/ W. Nicholas Thorndike March 24. 2000
------------------------------------------------------------------- -------------------------
W. Nicholas Thorndike, Director
/s/ William L. Brown March 24, 2000
------------------------------------------------------------------- -------------------------
William L. Brown, Director
/s/ Paul G. Kirk, Jr. March 24, 2000
------------------------------------------------------------------- -------------------------
Paul G. Kirk, Jr., Director
/s/ Joseph E. Hakim March 24, 2000
------------------------------------------------------------------- -------------------------
Joseph E. Hakim, Director
/s/ A. Robert Towbin March 24, 2000
------------------------------------------------------------------- -------------------------
A. Robert Towbin, Director
</TABLE>
36
<PAGE> 37
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
PAGE
Financial Statements
Consolidated Balance Sheets - December 31, 1999 and 1998 F2
For the years ended December 31, 1999, 1998 and 1997:
Consolidated Statements of Income F3
Consolidated Statements of Changes in Share Owners' Equity F4
Consolidated Statements of Cash Flows F5
Notes to Consolidated Financial Statements F6
Schedule
Schedule III - Real Estate and Accumulated Depreciation F19
Independent Auditors' Report as of December 31, 1999 and 1998, and F24
for the years ended December 31, 1999, 1998 and 1997
All other schedules have been omitted since they are not required, not
applicable, or the information is included in the financial statements or notes
thereto.
F1
<PAGE> 38
BRADLEY REAL ESTATE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
ASSETS:
Real estate investments - at cost $ 1,014,158,000 $ 936,465,000
Accumulated depreciation and amortization (81,302,000) (59,196,000)
--------------- ---------------
Net real estate investments 932,856,000 877,269,000
Real estate investments held for sale 29,890,000 46,492,000
Other assets:
Cash and cash equivalents 4,434,000 1,262,000
Rents and other receivables, net of allowance for doubtful accounts of $4,545,000 for
1999 and $4,078,000 for 1998 12,273,000 12,165,000
Investment in partnership - 13,249,000
Deferred charges, net and other assets 16,714,000 16,676,000
--------------- ---------------
Total assets $ 996,167,000 $ 967,113,000
=============== ===============
LIABILITIES AND SHARE OWNERS' EQUITY:
Mortgage loans $ 100,718,000 $ 103,333,000
Unsecured notes payable 199,604,000 199,542,000
Line of credit 144,500,000 169,500,000
Accounts payable, accrued expenses and other liabilities 32,787,000 27,848,000
--------------- ---------------
Total liabilities 477,609,000 500,223,000
--------------- ---------------
Exchangeable limited partnership units 19,306,000 21,573,000
Series B preferred units 49,100,000 -
Series C preferred units 24,344,000 -
--------------- ---------------
Total minority interest 92,750,000 21,573,000
--------------- ---------------
Share Owners' equity:
Shares of preferred stock and paid-in capital, par value $.01 per share; liquidation
preference $25.00 per share:
Authorized 20,000,000 shares; 3,478,219 and 3,478,493 shares of Series A Convertible
Preferred Stock issued and outstanding at December 31, 1999 and 1998, respectively 86,802,000 86,809,000
Shares of common stock and paid-in capital, par value $.01 per share:
Authorized 80,000,000 shares; issued and outstanding 23,079,357 and 23,958,662
shares at December 31, 1999 and 1998, respectively 333,907,000 349,254,000
Shares of excess stock, par value $.01 per share:
Authorized 50,000,000 shares; 0 shares issued and outstanding - -
Retained earnings 5,099,000 9,254,000
--------------- ---------------
Total share owners' equity 425,808,000 445,317,000
--------------- ---------------
Total liabilities and share owners' equity $ 996,167,000 $ 967,113,000
=============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F2
<PAGE> 39
BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE:
Rental income and recoveries from tenants $ 151,950,000 $ 128,444,000 $ 96,115,000
Other income 2,883,000 2,593,000 1,437,000
------------- ------------- -------------
154,833,000 131,037,000 97,552,000
------------- ------------- -------------
EXPENSES:
Operations, maintenance and management 22,971,000 18,915,000 14,012,000
Real estate taxes 22,859,000 21,713,000 18,398,000
Mortgage and other interest 29,404,000 27,681,000 16,562,000
General and administrative 8,544,000 7,183,000 5,123,000
Non-recurring stock-based compensation - - 3,415,000
Depreciation and amortization 26,456,000 22,974,000 16,606,000
------------- ------------- -------------
110,234,000 98,466,000 74,116,000
------------- ------------- -------------
Income before equity in earnings of partnership, net gain on sale of
properties and extraordinary item 44,599,000 32,571,000 23,436,000
Equity in earnings of partnership 500,000 586,000 -
Net gain on sale of properties - 29,680,000 7,438,000
------------- ------------- -------------
Income before extraordinary item and allocation to minority interest 45,099,000 62,837,000 30,874,000
Income allocated to exchangeable limited partnership units (1,806,000) (3,317,000) (1,116,000)
Income allocated to Series B and C preferred units (4,487,000) - -
------------- ------------- -------------
Income before extraordinary item 38,806,000 59,520,000 29,758,000
Extraordinary loss on prepayment of debt, net of minority interest - - (4,631,000)
------------- ------------- -------------
Net income 38,806,000 59,520,000 25,127,000
Preferred share distributions (7,304,000) (2,922,000) -
------------- ------------- -------------
Net income attributable to common share owners $ 31,502,000 $ 56,598,000 $ 25,127,000
============= ============= =============
Basic earnings per common share:
Income before extraordinary item $ 1.31 $ 2.39 $ 1.36
Extraordinary loss on prepayment of debt, net of minority interest - - (0.21)
------------- ------------- -------------
Net income $ 1.31 $ 2.39 $ 1.15
============= ============= =============
Diluted earnings per common share:
Income before extraordinary item $ 1.31 $ 2.37 $ 1.36
Extraordinary loss on prepayment of debt, net of minority interest - - (0.21)
------------- ------------- -------------
Net income $ 1.31 $ 2.37 $ 1.15
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F3
<PAGE> 40
BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHARE OWNERS' EQUITY
<TABLE>
<CAPTION>
Retained
earnings
(distributions
Preferred Common in excess of
shares and shares and accumulated
paid-in capital paid-in capital earnings) Total
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ - $ 299,092,000 $ (9,367,000) $ 289,725,000
Net income - - 25,127,000 25,127,000
Distributions on common stock ($1.34 per share) - - (29,387,000) (29,387,000)
Issuance of common stock, net of offering costs of
$449,000 - 24,892,000 - 24,892,000
Dividend reinvestment participation - 770,000 - 770,000
Exercise of stock options - 173,000 - 173,000
Reallocation of minority interest - 6,093,000 - 6,093,000
Shares issued in exchange for Limited Partnership
units - 17,000 - 17,000
Non-recurring stock-based compensation - 2,415,000 - 2,415,000
------------- ------------- ------------- -------------
Balance at December 31, 1997 - 333,452,000 (13,627,000) 319,825,000
Net income - - 59,520,000 59,520,000
Distributions on common stock ($1.42 per share) - - (33,717,000) (33,717,000)
Distributions on preferred stock ($1.05 per share) - - (2,922,000) (2,922,000)
Issuance of common stock, net of offering costs of
$112,000 - 7,489,000 - 7,489,000
Preferred shares issued to acquire Mid-America Realty
Investments, Inc., net 86,839,000 - - 86,839,000
Conversion of Series A preferred stock to common
stock (30,000) 30,000 - -
Dividend reinvestment and stock purchase plan
participation, net - 6,049,000 - 6,049,000
Exercise of stock options - 4,000 - 4,000
Reallocation of minority interest - (390,000) - (390,000)
Shares issued in exchange for Limited Partnership
units - 2,620,000 - 2,620,000
------------- ------------- ------------- -------------
Balance at December 31, 1998 86,809,000 349,254,000 9,254,000 445,317,000
Net income - - 38,806,000 38,806,000
Distributions on common stock ($1.49 per share) - - (35,657,000) (35,657,000)
Distributions on preferred stock ($2.10 per share) - - (7,304,000) (7,304,000)
Repurchase of common stock - (16,611,000) - (16,611,000)
Conversion of Series A preferred stock to common
stock (7,000) 7,000 - -
Dividend reinvestment and stock purchase plan
participation, net - 1,462,000 - 1,462,000
Exercise of stock options - 171,000 - 171,000
Reallocation of minority interest - (382,000) - (382,000)
Shares issued in exchange for Limited Partnership
units - 6,000 - 6,000
------------- ------------- ------------- -------------
Balance at December 31, 1999 $ 86,802,000 $ 333,907,000 $ 5,099,000 $ 425,808,000
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F4
<PAGE> 41
BRADLEY REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 38,806,000 $ 59,520,000 $ 25,127,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 26,456,000 22,974,000 16,606,000
Equity in earnings of partnership (500,000) (586,000) -
Amortization of debt premiums, net of discounts (939,000) (368,000) -
Extraordinary loss on prepayment of debt, net of minority interest - - 4,631,000
Non-recurring stock-based compensation - - 3,415,000
Net gain on sale of properties - (29,680,000) (7,438,000)
Income allocated to minority interest 6,293,000 3,317,000 1,116,000
Change in operating assets and liabilities, net of the effect of the
Mid-America acquisition in 1998:
(Increase) decrease in rents and other receivables 56,000 (694,000) (3,629,000)
Increase in accounts payable, accrued expenses and other liabilities 1,472,000 1,818,000 3,639,000
(Increase) decrease in deferred charges (3,716,000) (1,351,000) 1,360,000
------------- ------------- -------------
Net cash provided by operating activities 67,928,000 54,950,000 44,827,000
------------- ------------- -------------
Cash flows from investing activities:
Expenditures for real estate acquisitions (44,642,000) (175,927,000) (137,945,000)
Cash used for purchase of Mid-America - (28,578,000) -
Expenditures for developments and redevelopments (8,762,000) (423,000) -
Expenditures for other capital improvements (15,071,000) (11,551,000) (9,985,000)
Net proceeds from sale of properties 19,999,000 83,959,000 25,281,000
Cash distributions from partnership 3,968,000 700,000 -
------------- ------------- -------------
Net cash used in investing activities (44,508,000) (131,820,000) (122,649,000)
------------- ------------- -------------
Cash flows from financing activities:
Borrowings from line of credit 115,400,000 246,950,000 148,600,000
Payments under line of credit (140,400,000) (229,150,000) (60,400,000)
Proceeds from issuance of unsecured notes payable - 99,051,000 99,780,000
Expenditures for financing costs (203,000) (6,500,000) (3,104,000)
Repayment of mortgage loans - (10,031,000) (100,000,000)
Payments associated with prepayment of debt - - (4,444,000)
Principal payments on mortgage loans (1,614,000) (1,123,000) (656,000)
Distributions paid to common share owners (35,657,000) (33,717,000) (29,387,000)
Distributions paid to limited partnership unit holders (2,035,000) (1,984,000) (1,117,000)
Distributions paid to preferred unit holders (4,487,000) - -
Distributions paid to preferred share owners (7,304,000) (3,653,000) -
Net proceeds from stock offerings - 7,489,000 24,892,000
Proceeds from exercise of stock options 171,000 4,000 173,000
Net proceeds from dividend reinvestment and stock purchase plan 1,462,000 6,049,000 770,000
Net proceeds from issuance of Series B and C preferred units 73,444,000 - -
Repurchase of common stock (16,611,000) - -
Payments to redeem limited partnership units (2,414,000) - -
------------- ------------- -------------
Net cash provided by (used in) financing activities (20,248,000) 73,385,000 75,107,000
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 3,172,000 (3,485,000) (2,715,000)
Cash and cash equivalents:
Beginning of year 1,262,000 4,747,000 7,462,000
------------- ------------- -------------
End of year $ 4,434,000 $ 1,262,000 $ 4,747,000
============= ============= =============
Supplemental cash flow information:
Interest paid, net of amount capitalized $ 29,738,000 $ 23,440,000 $ 15,623,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F5
<PAGE> 42
BRADLEY REAL ESTATE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
Bradley Real Estate, Inc. ("Bradley" or the "Company") is the nation's oldest
real estate investment trust ("REIT"). Organized in 1961, the Company, which is
a fully integrated real estate operating company with property management,
leasing, development and acquisition capabilities, focuses on the ownership,
operation and development of community and neighborhood shopping centers
primarily located in the midwestern United States. As of December 31, 1999, the
Company owned 98 shopping centers in 15 states, aggregating 15.5 million square
feet of rentable space, substantially all of which are located in Midwest
markets, making the Company one of the leading owners of community and
neighborhood shopping centers in this region. The Company's tenant mix is
dominated by a diverse group of supermarkets, drug stores, and other consumer
necessity or value-oriented retailers.
Bradley Operating Limited Partnership (the "Operating Partnership") is the
entity through which the Company conducts substantially all of its business and
owns (either directly or through subsidiaries) substantially all of its assets.
As of December 31, 1999, Bradley owned an approximate 83% economic interest in,
and is the sole general partner of, the Operating Partnership. This structure is
commonly referred to as an umbrella partnership REIT or "UPREIT." Economic
interests in the Operating Partnership are evidenced by units of partnership
interest ("Units") with the interest of the general partner evidenced by general
partner common and general partner preferred units ("GP Units"). Under the
Partnership Agreement, whenever Bradley issues any shares of common or preferred
stock, it contributes the proceeds to the Operating Partnership, and
concurrently the number of GP Units held by Bradley is increased by the number
of newly issued shares, such that the number of GP Units is at all times equal
to the number of outstanding shares of common or preferred Bradley stock.
The interests of persons who have contributed direct or indirect interests in
certain properties to the Operating Partnership are evidenced by limited partner
units ("LP Units"). Each LP Unit is designed to provide distributions to the
holder that are equal to the distributions paid on each share of Bradley common
stock; and each LP Unit is redeemable (subject to certain limitations) by the
holder for the cash equivalent at the time of redemption of one share of Bradley
common stock or, at Bradley's option, for one share of Bradley common stock.
The Operating Partnership also has outstanding two million units of 8.875%
Series B Cumulative Redeemable Perpetual Preferred Units and one million units
of 8.875% Series C Cumulative Redeemable Perpetual Preferred Units (together,
the "Series B and C Preferred Units"). The Series B and C Preferred Units were
issued during 1999 to institutional investors at a price of $25.00 per unit. The
units are callable by the Operating Partnership after five years from the date
of issuance at a redemption price equal to the redeemed holder's capital
account, plus an amount equal to all accumulated, accrued and unpaid
distributions or dividends thereon to the date of redemption. In lieu of cash,
the Operating Partnership may elect to deliver shares of 8.875% Series B or C
Cumulative Redeemable Perpetual Preferred Stock, as appropriate, of the Company
on a one-for-one basis, plus an amount equal to all accumulated accrued and
unpaid distributions or dividends thereon to the date of redemption. Holders of
the Series B and C Preferred Units have the right to exchange their Series B and
C Preferred Units for shares of Series B and C Preferred Shares on a one-for-one
basis after ten years from the original issuance, subject to certain
limitations.
As used herein, the "Company" refers to Bradley Real Estate, Inc. and its
subsidiaries on a consolidated basis, including the Operating Partnership or,
where the context so requires, Bradley Real Estate, Inc. only.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements are prepared on the accrual basis in accordance with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management 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 the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
The consolidated financial statements of the Company include the accounts and
operations of the Company, the Operating Partnership, Bradley Financing
Partnership (a general partnership of which the Operating Partnership owns 99%
and a wholly-owned corporate subsidiary owns the remaining 1%), and the general
partnership interest in the joint venture that owns Williamson Square Shopping
Center which is held through the Operating Partnership. Due to the Company's
ability as general partner to directly or indirectly control each of these
subsidiaries, each is consolidated for financial reporting purposes.
F6
<PAGE> 43
During 1999 and 1998, the Company's 50% general partner interest in Bradley
Bethal Limited Partnership, a joint venture which owned two neighborhood
shopping centers and one enclosed mall, was accounted for using the equity
method. Under the equity method of accounting, the Company's investment was
reflected on the consolidated balance sheet as an investment in partnership, and
the Company's portion of the net income from such partnership was reflected on
the consolidated statement of income as equity in earnings of partnership.
During the second quarter of 1999, the Company acquired the 50% non-owned
portion of the joint venture for approximately $7,750,000, after the joint
venture sold the enclosed mall to an independent third party for $12,100,000. As
a result, the two neighborhood shopping centers previously owned by the joint
venture are now wholly-owned by the Company and are consolidated for financial
reporting purposes.
The ownership interests in the Operating Partnership evidenced by LP Unit
holders represent a minority interest in the Company. Income is allocated to the
LP Unit holders based on the weighted average number of LP Units outstanding
during the period, amounting to 1,376,883, 1,401,464, and 799,938 during 1999,
1998, and 1997, respectively. As of December 31, 1999 and 1998, there were
1,314,347 and 1,441,678 LP Units outstanding, respectively.
The ownership interests in the Operating Partnership evidenced by the Series B
and C Preferred Units represent an additional minority interest in the Company.
Income is allocated to the Series B and C Preferred Units in an amount equal to
the distributions thereon.
Rents and Other Receivables
Management has determined that all of the Company's leases with its various
tenants are operating leases. Revenue for such leases is recognized using the
straight-line method over the term of the leases.
Real Estate Investments
Real estate investments are carried at cost less accumulated depreciation. The
provision for depreciation and amortization has been calculated using the
straight-line method based upon the following estimated useful lives of assets:
Buildings 31.5 - 39 years
Improvements and alterations 1 - 39 years
Expenditures for maintenance, repairs, and betterments that do not materially
prolong the normal useful life of an asset are charged to operations as incurred
and amounted to $4,010,000, $3,470,000, and $2,604,000 for 1999, 1998, and 1997,
respectively.
Additions and betterments that substantially extend the useful lives of the
properties are capitalized. Upon sale or other disposition of assets, the cost
and related accumulated depreciation and amortization are removed from the
accounts and the resulting gain or loss, if any, is reflected in net income.
Real estate investments include capitalized interest and other costs on
development and redevelopment activities and on significant construction in
progress. Capitalized costs are included in the cost of the related asset and
charged to operations through depreciation over the asset's estimated useful
life. Interest capitalized amounted to $482,000, $32,000, and $30,000, in 1999,
1998, and 1997, respectively.
The Company applies Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("Statement No. 121") for the recognition and measurement of impairment of
long-lived assets, certain identifiable intangibles and goodwill related both to
assets to be held and used and assets to be disposed of. Management reviews each
property for impairment whenever events or changes in circumstances indicate
that the carrying value of a property may not be recoverable. The review of
recoverability is based on an estimate of undiscounted future cash flows
expected to result from its use and eventual disposition. If impairment exists
due to the inability to recover the carrying value of a property, an impairment
loss is recorded to the extent that the carrying value of the property exceeds
its estimated fair value.
Real Estate Investments Held for Sale
Real estate investments held for sale are carried at the lower of cost or fair
value less cost to sell. Depreciation and amortization are suspended during the
period held for sale.
Cash Equivalents
Cash and cash equivalents consist of cash in banks and short-term investments
with original maturities of less than ninety days.
F7
<PAGE> 44
Deferred Charges
Deferred charges consist of leasing commissions incurred in leasing the
Company's properties. Such charges are amortized using the straight-line method
over the term of the related lease. In addition, deferred charges include costs
incurred in connection with securing long-term debt, including the costs of
entering into interest rate protection agreements. Such costs are amortized over
the term of the related agreement.
Derivative Financial Instruments
The Company may enter into derivative financial instrument transactions in order
to mitigate its interest rate risk on a related financial instrument. The
Company has designated these derivative financial instruments as hedges and
applies deferral accounting, as the instrument to be hedged exposes the Company
to interest rate risk, and the derivative financial instrument reduces that
exposure. Gains and losses related to the derivative financial instrument are
deferred and amortized over the terms of the hedged instrument until the
derivative terminates or is sold. If a derivative terminates or is sold, the
gain or loss is deferred and amortized over the remaining life of the hedged
instrument. Derivatives that do not satisfy the criteria above are carried at
market value, and any changes in market value are recognized in other income.
The Company has only entered into derivative transactions that satisfy the
aforementioned criteria. The fair value of interest rate protection agreements
is estimated using option-pricing models that value the potential for interest
rate protection agreements to become in-the-money through changes in interest
rates during the remaining terms of the agreements. A negative fair value
represents the estimated amount the Company would have to pay to cancel the
contract or transfer it to other parties.
Earnings Per Share
In accordance with Statement of Financial Accounting Standards No. 128, Earnings
Per Share ("Statement No. 128"), basic EPS is computed by dividing income
available to common share owners by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. A reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
1999 1998 1997
------------------ ------------------ ----------------
<S> <C> <C> <C>
NUMERATOR:
Basic
Income before extraordinary item and after preferred
share distributions $31,502,000 $56,598,000 $29,758,000
================== ================ ================
Diluted
Income before extraordinary item and after preferred
share distributions $31,502,000 $56,598,000 $29,758,000
Income allocated to exchangeable limited partnership units 1,806,000 3,317,000 1,116,000
Convertible preferred share distributions - 2,922,000 -
------------------ ------------------ ----------------
Adjusted net income $33,308,000 $62,837,000 $30,874,000
================== ================== ================
DENOMINATOR:
Basic
Weighted average common shares 24,003,077 23,660,542 21,776,146
================== ================ ================
Diluted
Weighted average common shares 24,003,077 23,660,542 21,776,146
Effect of dilutive securities:
Stock options 29,513 47,452 42,451
Stock-based compensation - - 315
Exchangeable limited partnership units 1,376,883 1,401,464 799,938
Convertible preferred stock - 1,440,286 -
------------------ ------------------ ----------------
Weighted average shares and assumed conversions 25,409,473 26,549,744 22,618,850
================== ================ ================
Per share income before extraordinary item and after preferred
share distributions:
Basic $1.31 $2.39 $1.36
================== ================ ================
Diluted $1.31 $2.37 $1.36
================== ================ ================
</TABLE>
F8
<PAGE> 45
For the year ended December 31, 1999, convertible preferred share distributions
of $7,304,000, and the effect on the denominator of the conversion of the
convertible preferred shares outstanding into 3,550,833 shares of common stock
were not included in the computation of diluted EPS because the impact on basic
EPS was anti-dilutive. For the years ended December 31, 1999, 1998, and 1997,
options to purchase 641,050, 153,500, and 5,500 shares of common stock,
respectively, at prices ranging from $17.00 to $22.00 were outstanding during
1999, 1998, and 1997, respectively, but were not included in the computation of
diluted EPS because the options' exercise prices were greater than the average
market prices of the common shares, thereby having an anti-dilutive impact on
basic EPS.
Stock Option Plans
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("Statement No. 123") establishes financial accounting and
reporting standards for stock-based employee compensation plans, including all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. Statement No. 123 defines a
fair value based method of accounting for an employee stock option or similar
equity instrument and encourages all entities to adopt that method of accounting
for all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost using the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("Opinion No. 25"). The Company has
elected to continue using Opinion No. 25 and make pro forma disclosures of net
income and earnings per share as if the fair value method of accounting defined
in Statement No. 123 had been applied. See Note 9 for the required disclosures.
Reclassifications
Certain reclassifications have been made to the prior year consolidated balance
sheet to conform with the presentation in the current year.
NOTE 3 - SUPPLEMENTAL CASH FLOW DISCLOSURE
During 1999, 1998, and 1997, 411, 143,151, and 1,238 shares of common stock,
respectively, were issued in exchange for an equivalent number of common LP
Units held by the minority interest. During 1999, the acquisition of the
Company's non-owned portion of a joint venture resulted in a non-cash
reclassification of investment in partnership to real estate investments of
$6,556,000 and a non-cash transfer of a $3,100,000 note receivable.
During 1998, shopping center acquisitions included the assumption of $25,753,000
of non-recourse mortgage indebtedness and the issuance of 62,436 LP Units valued
at $1,300,000.
The merger acquisition of Mid-America Realty Investments, Inc. ("Mid-America")
on August 6, 1998 (see Note 12), resulted in the following non-cash effects on
the Company's 1998 consolidated balance sheet:
Assets acquired $ (159,433,000)
Liabilities assumed 43,973,000
Preferred stock and paid-in capital issued, net of costs 86,882,000
---------------
Cash used for merger acquisition $ (28,578,000)
===============
NOTE 4 - REAL ESTATE INVESTMENTS
The following is a summary of the Company's real estate held for investment at
December 31:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Land $ 213,833,000 $ 201,849,000
Buildings 694,536,000 659,286,000
Improvements and alterations 92,066,000 72,957,000
Development and redevelopment in progress 11,674,000 423,000
Other construction in progress 2,049,000 1,950,000
--------------- ---------------
1,014,158,000 936,465,000
Accumulated depreciation and amortization (81,302,000) (59,196,000)
--------------- ---------------
$ 932,856,000 $ 877,269,000
=============== ===============
</TABLE>
F9
<PAGE> 46
During 1999, the Company completed the acquisitions of four shopping centers for
an aggregate purchase price of approximately $36,859,000. Two of these shopping
centers, Cherry Hill Marketplace located in Westland, Michigan, and 30th Street
Plaza located in Canton, Ohio, were acquired with the intention of substantial
redevelopment and retenanting. The Company expects to incur an additional $21
million (unaudited) for the redevelopment of these two shopping centers, as well
as for two other shopping centers in the portfolio under redevelopment, Prospect
Plaza located in Gladstone, Missouri, and Commons of Chicago Ridge, located in
Chicago Ridge, Illinois. All of these redevelopment projects are expected to be
substantially completed during the first half of 2000.
At December 31, 1999, the Company was holding for sale three enclosed malls with
an aggregate book value of $29,890,000, all acquired in connection with the
Mid-America merger acquisition. These dispositions are expected to be completed
during the first quarter of 2000, although there can be no assurance that any
such dispositions will occur. During the second quarter of 1999, the Company
completed the sales of an additional three properties, for an aggregate gross
sales price of $17,325,000. These three properties, all acquired in connection
with the merger acquisition of Mid-America, had been held for sale since the
merger acquisition. Two of these properties, Macon County Plaza and Town West
Shopping Center, are shopping centers located in the Southeast region of the
United States and were not aligned with the Company's strategic market focus.
The third property, Monument Mall, is an enclosed mall and, like the three
properties currently held for sale, was not aligned with the Company's strategic
property focus.
In July 1998, the Company completed the sale of One North State, a 640,000
square-foot mixed-use property located in the "loop" area of downtown Chicago,
Illinois, which did not fit with the Company's strategic property focus, for a
net sales price of approximately $82,100,000. The sale resulted in a gain of
approximately $30,600,000 for financial reporting purposes. The net gain on sale
of properties in 1998 includes an $875,000 provision for loss on sale of Holiday
Plaza, which the Company completed in May 1998. The loss on Holiday Plaza, a
46,000 square-foot property located in Iowa, represents the difference between
the sales price, net of closing costs, and the carrying value of the property.
During 1997, the Company completed the sales of its Meadows Town Mall, Augusta
Plaza, Hood Commons, and 585 Boylston Street properties because such properties
were not aligned with the Company's strategic property and market focus. The net
gains on the sales of Augusta Plaza, Hood Commons, and 585 Boylston Street were
$826,000, $3,073,000, and $4,839,000, respectively. The net gain on sale of
properties in 1997 includes a provision for the loss on the sale of Meadows Town
Mall of $1,300,000, which represents the difference between the sales price, net
of closing costs, and the carrying value of the property.
The results of operations included in the accompanying financial statements for
properties classified as held for sale as of December 31, 1999 and 1998, or that
were sold during 1999, 1998 and 1997, were $4,472,000, $7,568,000, and
$8,689,000, respectively.
NOTE 5 - MORTGAGE LOANS, UNSECURED NOTES PAYABLE AND LINE OF CREDIT
Mortgage loans outstanding consist of the following:
<TABLE>
<CAPTION>
December 31,
Effective ----------------------------
Property interest rate Maturity 1999 1998
---------------------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Watts Mill Plaza 7.25% February 2000 $ 6,022,000 $ 6,262,000
Eastville Plaza 7.09% April 2001 2,808,000 2,858,000
Rivergate Shopping Center 7.25% January 2002 3,141,000 3,249,000
Shenandoah Plaza 7.25% January 2002 4,232,000 4,383,000
Fox River Plaza 7.76% April 2002 5,046,000 5,128,000
Southport Centre 7.25% April 2002 8,306,000 8,442,000
Edgewood Plaza 7.25% June 2002 6,749,000 6,852,000
Moorland Square 7.348% November 2002 3,534,000 3,655,000
Kimberly West 7.25% January 2003 3,911,000 4,030,000
Martin's Bittersweet Plaza 8.875% June 2003 3,434,000 3,562,000
Miracle Hills Park 7.25% August 2004 4,019,000 4,108,000
Williamson Square 8.00% August 2005 12,274,000 12,501,000
Spring Mall 7.25% October 2006 9,505,000 9,707,000
Southgate Shopping Center 7.25% October 2007 2,989,000 3,076,000
Salem Consumer Square 7.50% September 2008 13,695,000 14,161,000
St. Francis Plaza 8.125% December 2008 1,619,000 1,737,000
Elk Park 7.64% August 2016 9,434,000 9,622,000
-------------- ------------
$100,718,000 $103,333,000
============== ============
</TABLE>
The net book value of real estate pledged as collateral for loans was
approximately $166,920,000. The mortgage loans collateralized by Rivergate
Shopping Center and Shenandoah Plaza are cross-collateralized.
F10
<PAGE> 47
In November 1997, the Operating Partnership issued $100 million, 7% seven-year
unsecured Notes maturing November 15, 2004, which were rated "BBB-" by Standard
& Poor's Investment Services ("Standard & Poor's") and "Baa3" by Moody's
Investors Service ("Moody's"). The Company used the proceeds to prepay a $100
million, 7.23% mortgage note that had been issued to a trust qualifying as a
real estate mortgage investment conduit for federal income tax purposes (the
"REMIC Note"). The REMIC Note was secured by six properties and was originally
scheduled to expire in September 2000. Prepayment of the REMIC Note resulted in
an extraordinary loss on prepayment of debt of $4,054,000 (net of the minority
interest portion), consisting primarily of a prepayment yield maintenance fee.
However, issuance of such unsecured debt extended the Company's weighted average
debt maturity and resulted in a slightly lower effective interest rate on $100
million of debt, while the prepayment of the REMIC Note resulted in the
discharge from the mortgage securing the REMIC Note of properties having an
aggregate gross book value of $181.2 million. The outstanding balance of the
unsecured Notes at December 31, 1999, net of the unamortized discount, was
$99,846,000. The effective interest rate on the unsecured Notes is approximately
7.19%.
In January 1998, the Operating Partnership issued $100 million, 7.2% ten-year
unsecured Notes maturing January 15, 2008. The issue was rated "BBB-" by
Standard & Poor's and "Baa3" by Moody's. Proceeds from the offering were used to
pay amounts outstanding under the bank line of credit. The outstanding balance
of the unsecured Notes at December 31, 1999, net of the unamortized discount,
was $99,758,000. The effective interest rate on the unsecured Notes is
approximately 7.61%.
In May 1998, the Company filed a "shelf" registration under which the Operating
Partnership may issue up to $400 million in unsecured, non-convertible
investment grade debt securities. The "shelf" registration gives the Operating
Partnership the flexibility to issue additional debt securities from time to
time when management determines that market conditions and the opportunity to
utilize the proceeds from the issuance of such securities are favorable.
In December 1997, the Operating Partnership entered into a $200 million
unsecured line of credit facility with a syndicate of banks, lead by First
Chicago NBD and BankBoston. In November 1998, the Operating Partnership amended
the line of credit, increasing the maximum capacity to $250 million. 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 $150 million, a competitive bid rate solicited from the
syndicate of banks. Based on the Operating Partnership's current credit rating
assigned by Standard & Poor's and Moody's, the spread over LIBOR is 1.00%.
Additionally, there is a facility fee currently equal to $375,000 per annum. In
the event the current credit ratings were downgraded below "BBB-" or "Baa3" by
either Standard & Poor's or Moody's, respectively, the facility fee would
increase to $625,000 per annum, and the spread over the base rate would increase
by 0.25% and the spread over LIBOR would increase to 1.25%. During 1999,
Standard & Poor's affirmed the Company's "BBB-" rating and raised its rating
outlook from stable to positive. The line of credit is available for the
acquisition, development, renovation and expansion of new and existing
properties, working capital and general business purposes. The Company incurred
an extraordinary loss on the prepayment of debt of $577,000 (net of the minority
interest portion) in connection with replacing the previous line of credit in
1997.
The line of credit contains certain financial and operational covenants that,
among other provisions, limit the amount of secured and unsecured indebtedness
the Company may have outstanding at any time, and provide for the maintenance of
certain financial tests including minimum net worth and debt service coverage
requirements. The Company was in compliance with such covenants during 1999 and
believes that such covenants will not adversely affect the Company's business or
the operation of its properties. The line of credit is guaranteed by the Company
and matures in December 2000. Management has commenced negotiations to extend
and modify the terms of the line of credit. While management expects to be able
to extend and modify the line of credit on commercially reasonable terms, there
can be no assurance that the Operating Partnership will be able to extend and
modify the line of credit on commercially reasonable or any other terms. At
December 31, 1999, the weighted average interest rate on the line of credit was
7.62%.
From time to time the Company uses Treasury Note purchase agreements and
interest rate caps and swaps to limit its exposure to increases in interest
rates on its floating rate debt and to hedge interest rates in anticipation of
issuing unsecured debt at a time when management believes interest rates are
favorable, or at least desirable given the consequences of not hedging an
interest rate while the Company is exposed to increases in interest rates. The
Company does not use derivative financial instruments for trading or speculative
purposes. During 1998, the Company was party to interest rate cap agreements
which entitled the Company to receive on a quarterly basis, the amount, if any,
by which the applicable three-month LIBOR Rate (as defined in the interest rate
protection agreement) for the protected amount exceeded the applicable cap rate
for the protected amount. During 1998, the Company was also party to a swap
agreement whereby the Company received or made quarterly payments based on the
differential between the three-month LIBOR Rate (as defined in the interest rate
protection agreement) for the protected amount and the applicable fixed swap
rate for the protected amount.
The following summarizes the interest rate protection agreements outstanding
during 1998:
F11
<PAGE> 48
Effect on
Notional Maximum Type of interest
amount rate contract Maturity expense
-------------- ----- -------- -------------- --------
$ 43,000,000 6.00% Swap April 14, 1998 $38,000
40,000,000 7.50% Cap March 18, 1998 -
17,000,000 7.50% Cap April 11, 1998 -
-------------- -------
$100,000,000 $38,000
============= =======
Additionally, in anticipation of issuing unsecured debt in the first quarter of
1998, during 1997 the Company entered into two Treasury Note purchase agreements
with notional amounts of $37 million each, expiring March 2, 1998. The contracts
were terminated at a cost of $3,798,000 as of January 23, 1998, the date upon
which the Company priced the aforementioned $100 million issuance of ten-year
unsecured Notes. The Company has treated the Treasury Note purchase agreements
as hedges and, accordingly, the loss recognized upon termination of the Treasury
Note purchase agreements was deferred and is amortized over the term of the
underlying debt security as an adjustment to interest expense. The Company had
no interest rate protection agreements outstanding during 1999.
Scheduled principal payments of debt outstanding at December 31, 1999 are as
follows:
2000 $152,211,000
2001 4,630,000
2002 30,690,000
2003 7,879,000
2004 105,015,000
Thereafter 140,783,000
--------------
$441,208,000
NOTE 6 - RENTALS UNDER OPERATING LEASES
Annual minimum future rentals to be received under non-cancelable operating
leases in effect at December 31, 1999 are as follows:
2000 $109,018,000
2001 99,831,000
2002 88,652,000
2003 77,272,000
2004 65,756,000
Thereafter $345,222,000
--------------
$785,751,000
Total minimum future rentals do not include contingent rentals under certain
leases based upon lessees' sales volume. On May 22, 1998, the Emerging Issues
Task Force ("EITF") of the Financial Accounting Standards Board reached a
consensus under Issue No. 98-9, Accounting for Contingent Rent in Interim
Financial Periods, that despite the fact that the achievement of a future
specified sales target of a lessee may be considered as probable and reasonably
estimable at some earlier point in the year, a lessor should defer recognition
of contingent rental income until such specified targets are met. The
pronouncement was effective May 23, 1998, and was reaffirmed by Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements, issued by the
Securities and Exchange Commission in December 1999. Previously, the Company
recognized percentage rental income each period based on reasonable estimates of
tenant sales. Contingent rentals earned amounted to approximately $3,310,000,
$1,897,000, and $1,864,000 in 1999, 1998, and 1997, respectively. Certain leases
also require lessees to pay all or a portion of real estate taxes and operating
costs, amounting to $36,171,000, $31,615,000, and $25,253,000, in 1999, 1998,
and 1997, respectively.
No tenant accounted for as much as 10% of rental income in 1999, 1998, or 1997.
No property accounted for as much as 10% of the Company's rental income during
1999 or 1998. One North State accounted for greater than 10% of the Company's
rental income during 1997.
NOTE 7 - INCOME TAXES
The Company has elected to be taxed as a REIT under the Internal Revenue Code
(the "Code"). Under the Code, a qualifying REIT that distributes at least 95% of
its ordinary taxable income to its share owners is entitled to a tax deduction
in the amount of the distribution. In addition, qualifying REITs are permitted
to deduct capital gain distributions in the determination of the tax on capital
gains. The Company paid distributions to common share owners aggregating
$35,657,000, $33,717,000, and $29,387,000 in 1999, 1998, and 1997, respectively.
The Company paid $7,304,000 and $3,653,000 of distributions to preferred share
owners on the Series
F12
<PAGE> 49
A Preferred Stock in 1999 and 1998, respectively. The following table summarizes
the tax status of distributions paid to common and preferred share owners during
1999, 1998, and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- ------
Common Preferred Common Preferred Common
------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C>
Ordinary income 91% 93% 81% 81% 57%
Capital gain 7% 7% 19% 19% 15%
Return of capital 2% -- -- -- 28%
--- --- --- --- ---
Total 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
NOTE 8 - SHARE OWNERS' EQUITY
In November 1999, the Board of Directors of the Company authorized the
repurchase of up to two million shares of outstanding common shares from time to
time through periodic open market transactions or through privately negotiated
transactions. The share repurchase program is in effect until December 31, 2000,
or until the authorized limit has been reached. The Company expects to fund the
purchases primarily through asset sales. Through December 31, 1999, the Company
repurchased 980,700 shares at an average price of $16.90 per share for a total
purchase price of $16,611,000, including costs.
During 1998, the Company implemented a new Dividend Reinvestment and Stock
Purchase Plan (the "Plan"), replacing the Company's 1993 Dividend Reinvestment
and Share Purchase Plan, to provide both new and existing owners of the
Company's common stock, Series A Convertible Preferred Stock and other classes
of equity securities outstanding from time to time, as well as existing owners
of LP Units of the Operating Partnership, with an economical and convenient
method of increasing their investment in the Company. Under the Plan,
participants may purchase additional shares of common stock at a discount
(ranging from 0% to 3% as determined by the Company in its sole discretion from
time to time) and without brokerage fees or other transaction costs by, (i)
reinvesting all or a portion of their cash dividends, (ii) purchasing shares of
common stock directly from the Company as frequently as once per month by making
optional cash payments of a minimum of $100 to a maximum of $10,000 per quarter,
or (iii) with prior approval by the Company, purchasing shares of common stock
directly from the Company by making optional cash payments in excess of $10,000.
Under the Plan, the Company may, at its option, purchase shares in the open
market and reissue the shares directly to participants purchasing shares under
the Plan. The determination of whether to issue new shares of common stock or to
purchase shares in the open market and reissue them directly to participants is
made after a review of current market conditions and the Company's current and
projected capital needs. During 1999, 1998, and 1997, the Company issued 90,705,
308,016, and 38,592 shares under this and the prior plan, raising $1,462,000,
$6,049,000, and $770,000, respectively, net of the discount offered to
participants.
In May 1997, the Company filed a "shelf" registration with the Securities and
Exchange Commission to register $234,460,000 of equity securities that the
Company may issue through underwriters or in privately negotiated transactions
for cash from time to time.
On December 1, 1997, the Company completed an offering of 990,000 shares of its
common stock from the "shelf" registration at a price to the public of $20.375
per share. Net proceeds from the offering of $19,166,000 were used to reduce
outstanding indebtedness under the line of credit. The shares were sold under a
program entered into with PaineWebber Incorporated ("PaineWebber") on October
21, 1997, pursuant to which the Company had the right, but not the obligation,
until April 21, 1998, to sell shares of its common stock at the market price on
the day following notification to PaineWebber of its intent to sell common stock
to PaineWebber, acting as underwriter, with an aggregate value up to $60
million, in amounts ranging from $5 million to $20 million per transaction. No
additional shares were sold under the program, which expired April 21, 1998. The
Company completed an additional offering of 300,000 shares of its common stock
on December 10, 1997 at a price to the public of $20.50 per share. Net proceeds
from the offering of $5,726,000 were used to reduce outstanding indebtedness
under the line of credit. In February 1998, the Company issued 392,638 shares of
common stock from the "shelf" registration at a price based upon the then market
value of $20.375 per share, leaving $201,412,000 available under the "shelf"
registration. Net proceeds from the offering of approximately $7,601,000 were
used to reduce outstanding borrowings under the line of credit.
NOTE 9 - STOCK OPTION PLANS AND STOCK-BASED COMPENSATION
The Company's Stock Option and Incentive Plan authorizes options and other
stock-based awards to be granted for up to 2,282,348 shares. During 1999, 1998
and 1997, options for 474,500, 148,000 and 94,500 shares, respectively, were
granted under this Plan. At December 31, 1999 and 1998, options for 802,550 and
372,550 shares, respectively, were outstanding. A committee of the Board of
Directors administers the Plan and is responsible for selecting persons eligible
for awards and for determining the term and duration of any award.
F13
<PAGE> 50
In 1997, the Company's share owners approved a Superior Performance Incentive
Plan, originally intended to provide an award pool to be divided among senior
executives and directors of the Company in an amount based upon the amount (if
any) by which total returns to share owners of the Company exceeded total
returns to stockholders of other REITs included in an industry index, over a
three-year period. Because of administrative complexities that made the
implementation of such Plan impractical, at year-end 1997, after working with an
independent compensation consultant, the Board of Directors terminated the Plan
and substituted a non-recurring award of approximately 115,000 shares of the
Company's common stock to certain senior executives, plus a cash amount to
reimburse the executives for taxes resulting from such award. As a result, a
non-recurring charge of $3,415,000 was included in the Company's 1997 financial
statements.
The Company has estimated the fair value of stock options granted on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 1999, 1998, and 1997, respectively:
dividend yield of 7.60%, 7.50%, and 7.13%; expected volatility of 23%, 22%, and
16%; risk-free interest rates of 6.8%, 4.8%, and 5.5%; and expected lives
ranging from five to seven years for 1999 and five years for 1998 and 1997. The
Company applies Opinion No. 25 and related Interpretations in accounting for
awards under the Plan. Accordingly, no compensation cost relating to the Stock
Option Plans has been recognized in the accompanying financial statements as
stock options are granted at an exercise price no less than fair value on the
date of grant. Had compensation cost for the Company's Plan been determined
consistent with Statement No. 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income attributable to common share owners As Reported $31,502,000 $56,598,000 $25,127,000
Pro Forma $31,197,000 $56,409,000 $25,069,000
Net income per common share As Reported, basic $1.31 $2.39 $1.15
As Reported, diluted $1.31 $2.37 $1.15
Pro Forma, basic $1.30 $2.38 $1.15
Pro Forma, diluted $1.30 $2.36 $1.15
</TABLE>
The effect of applying Statement No. 123 for disclosing compensation costs under
such pronouncement may not be representative of the effects on reported net
income for future years.
A summary of option transactions during the periods covered by these financial
statements is as follows:
Exercise prices
Shares per share
------------ ---------------
Outstanding at December 31, 1996 180,000 $11.50 - $21.25
Granted 94,500 $18.16 - $19.35
Expired (12,000) $19.35 - $21.25
Exercised (10,500) $14.74 - $17.00
------------
Outstanding at December 31, 1997 252,000 $11.50 - $21.25
Granted 148,000 $21.35
Expired (27,250) $14.88 - $19.35
Exercised (200) $19.35
------------
Outstanding at December 31, 1998 372,550 $11.50 - $21.35
Granted 474,500 $19.90 - $20.25
Expired (34,500) $19.35 - $21.35
Exercised (10,000) $14.88 - $19.35
-------------
Outstanding at December 31, 1999 802,550 $11.50 - $21.35
=============
One third of 72,000 options granted to employees during 1999 and still
outstanding, and one third of 74,750 options granted to employees during 1998
and still outstanding, vest on each of the first, second, and third anniversary
of the grant date over a three-year period, and have a duration of ten years
from the grant date, subject to earlier termination in certain circumstances.
One half of 375,000 options granted to employees during 1999 and still
outstanding vest on the third anniversary of the grant date, with an additional
one fourth of such options vesting on each of the fourth and fifth anniversary
of the grant date, and have a duration of ten years from the date of grant,
subject to earlier termination in certain circumstances. The remaining 280,800
options outstanding at December 31, 1999 are fully vested and exercisable. The
weighted average exercise price per share and the weighted average contractual
life remaining of options outstanding at December 31, 1999 were $19.20 and 8.16
years, respectively. The weighted average fair value of options granted during
1999, 1998, and 1997 were $2.32, $1.82, and $1.36, respectively.
F14
<PAGE> 51
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, requires the Company to disclose fair value
information of all financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. The Company's
financial instruments, other than debt are generally short-term in nature and
contain minimal credit risk. These instruments consist of cash and cash
equivalents, rents and other receivables, and accounts payable. The carrying
amount of these assets and liabilities in the consolidated balance sheets are
assumed to be at fair value.
The Company's mortgage loans are at fixed rates, and when compared with
borrowing rates currently available to the Company with similar terms and
average maturities, approximate fair value. The fair values of the fixed rate
unsecured Notes, calculated based on the Company's estimated interest rate
spread over the applicable treasury rate with a similar remaining maturity, are
at or slightly below their carrying values. The Company's line of credit is at a
variable rate, which results in a carrying value that approximates its fair
value.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Retirement Savings Plan
The Company provides its employees with a retirement savings plan which is
qualified under Section 401(k) of the Internal Revenue Code. The provisions of
the plan provide for an employer discretionary matching contribution currently
equal to 35% of the employee's contributions up to 5% of the employee's
compensation. The employer matching contribution is determined annually by the
Board of Directors, and amounted to $84,000, $72,000, and $43,000 in 1999, 1998,
and 1997, respectively. Employer contributions and any earnings thereon vest in
increments of 20% per year beginning after one year of service.
Legal Actions
The Company is a party to several legal actions which arose in the normal course
of business. Management does not expect there to be adverse consequences from
these actions which would be material to the Company's financial position or
results of operations.
NOTE 12 - MID-AMERICA MERGER AND ISSUANCE OF PREFERRED STOCK
On August 6, 1998, pursuant to an Agreement and Plan of Merger dated May 30,
1998, the Company completed the merger acquisition (the "Merger") of
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. Upon completion of the Merger, the Company acquired
Mid-America's 22 retail properties located primarily in the Midwest, and
succeeded to Mid-America's 50% general partner interest in Mid-America Bethal
Limited Partnership (renamed Bradley Bethal Limited Partnership), a joint
venture which owned two neighborhood shopping centers and one enclosed mall.
Pursuant to the terms of the merger agreement each of the approximately
8,286,000 outstanding shares of Mid-America common stock were exchanged for 0.42
shares of a newly created 8.4% Series A Convertible Preferred Stock ("Series A
Preferred Stock"). The Series A Preferred Stock pays an annual dividend equal to
8.4% of the $25.00 liquidation preference and is convertible into shares of
Bradley's common stock at a conversion price of $24.49 per share, subject to
certain adjustments. At any time after five years, the Series A Preferred Stock
is redeemable at Bradley's option for $25.00 per share so long as the Bradley
common stock is trading at or above the conversion price. In connection with the
Merger, Bradley assumed all of Mid-America's outstanding liabilities and paid
certain transaction costs, making the total purchase price approximately $159
million. The Merger was structured as a tax-free transaction and was treated as
a purchase for accounting purposes. Accordingly, the purchase price was
allocated to the assets purchased and the liabilities assumed based upon the
fair value at the date of acquisition. The results of operations of Mid-America
have been included in the Company's consolidated financial statements from
August 6, 1998.
The following table sets forth certain summary unaudited pro forma operating
data for the Company as if the Merger had occurred as of January 1, 1998 and
1997 (dollars in thousands, except per share data):
F15
<PAGE> 52
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
Historical Pro Forma Historical Pro Forma
1998 1998 1997 1997
------------ --------- ------- ---------
<S> <C> <C> <C> <C>
Total revenue $131,037 $144,458 $97,552 $120,817
Income before extraordinary items $59,520 $65,003 $29,758 $39,199
Net income attributable to common share owners $56,598 $57,737 $25,127 $27,261
Basic net income per common share $2.39 $2.44 $1.15 $1.25
Diluted net income per common share $2.37 $2.39 $1.15 $1.25
</TABLE>
The unaudited pro forma operating data is presented for comparative purposes
only and is not necessarily indicative of what the actual results of operations
would have been for the years ended December 31, 1998 and 1997, nor does such
data purport to represent the results to be achieved in future periods.
NOTE 13 - SEGMENT REPORTING
The Company, which has internal property management, leasing, and development
capabilities, owns and seeks to acquire open-air community and neighborhood
shopping centers in the Midwest, generally consisting of fourteen states.
Ninety-six of the Company's 98 shopping centers are located in these states.
Such shopping centers are typically anchored by grocery and drug stores
complemented with stores providing a wide range of other goods and services to
shoppers. During 1998, the Company also owned a mixed-use office property
located in downtown Chicago, Illinois, which was sold in July 1998 (see Note 4).
Because this property required a different operating strategy and management
expertise than all other properties in the portfolio, it was considered a
separate reportable segment.
The Company assesses and measures operating results on an individual property
basis for each of its 98 shopping centers without differentiation, based on net
operating income, and then converts such amounts in the aggregate to a
performance measure referred to as Funds from Operations ("FFO"). Since all of
the Company's shopping centers exhibit similar economic characteristics, cater
to the day-to-day living needs of their respective surrounding communities, and
offer similar degrees of risk and opportunities for growth, the shopping centers
have been aggregated and reported as one operating segment.
FFO, computed in accordance with the March 1995 "White Paper" on FFO published
by the National Association of Real Estate Investment Trusts ("NAREIT") and as
followed by the Company, represents income before allocation to minority
interest (computed in accordance with GAAP), excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization, and
after preferred stock distributions and adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are computed to reflect FFO on the same basis. In computing FFO,
the Company does not add back to net income the amortization of costs incurred
in connection with the Company's financing activities or depreciation of
non-real estate assets, but does add back to net income significant
non-recurring events that materially distort the comparative measurement of
company performance over time. In November 1999, NAREIT issued a National Policy
Bulletin clarifying that FFO should include both recurring and non-recurring
operating results, except gains and losses from sales of depreciable operating
property and those results defined as "extraordinary items" under GAAP. This
clarification, including restatements of comparative periods, is effective
January 1, 2000. During 1997, in computing FFO the Company added back to net
income $3,415,000 of non-recurring stock-based compensation which, upon adoption
January 1, 2000, will not be added back to net income when presented under the
guidelines of the National Policy Bulletin. FFO does not represent cash
generated from operating activities in accordance with GAAP and should not be
considered an alternative to cash flow as a measure of liquidity. Since the
NAREIT White Paper and National Policy Bulletin only provide guidelines for
computing FFO, the computation of FFO may vary from one REIT to another. FFO is
not necessarily indicative of cash available to fund cash needs.
The accounting policies of the segments are the same as those described in Note
2. The revenue, net operating income, and assets for each of the reportable
segments are summarized in the following tables as of December 31, 1999 and
1998, and for each of the years in the three-year period then ended. Non-segment
assets to reconcile to total assets include the investment in partnership, cash
and cash equivalents, accounts receivable, and deferred financing and other
costs. The computation of FFO for the Company, and a reconciliation to net
income attributable to common share owners, are as follows:
F16
<PAGE> 53
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
TOTAL PROPERTY REVENUE:
Mixed-use office property $ - $ 8,321,000 $ 14,469,000
Shopping center properties 153,906,000 122,174,000 82,347,000
-------------- -------------- --------------
153,906,000 130,495,000 96,816,000
-------------- -------------- --------------
TOTAL PROPERTY OPERATING EXPENSES:
Mixed-use office property - 3,117,000 6,120,000
Shopping center properties 45,830,000 37,511,000 26,290,000
-------------- -------------- --------------
45,830,000 40,628,000 32,410,000
-------------- -------------- --------------
Net operating income 108,076,000 89,867,000 64,406,000
-------------- -------------- --------------
NON-PROPERTY (INCOME) EXPENSES:
Other non-property income (927,000) (542,000) (736,000)
Equity in earnings of partnership, excluding depreciation and amortization (600,000) (655,000) -
Mortgage and other interest 29,404,000 27,681,000 16,562,000
General and administrative 8,544,000 7,183,000 5,123,000
Amortization of deferred finance and non-real estate related costs 1,127,000 962,000 747,000
Preferred share distributions 7,304,000 2,922,000 -
Income allocated to Series B and C Preferred Units 4,487,000 - -
-------------- -------------- --------------
49,339,000 37,551,000 21,696,000
-------------- -------------- --------------
Funds from Operations $ 58,737,000 $ 52,316,000 $ 42,710,000
============== ============== ==============
RECONCILIATION TO NET INCOME ATTRIBUTABLE TO
COMMON SHARE OWNERS:
Funds from Operations $ 58,737,000 $ 52,316,000 $ 42,710,000
Depreciation of real estate assets and amortization of tenant improvements (22,632,000) (18,635,000) (13,407,000)
Amortization of deferred leasing commissions (1,902,000) (2,184,000) (1,259,000)
Other amortization (795,000) (1,193,000) (1,193,000)
Depreciation and amortization included in equity in earnings of partnership (100,000) (69,000) -
Non-recurring stock-based compensation - - (3,415,000)
Income allocated to exchangeable limited partnership units (1,806,000) (3,317,000) (1,116,000)
Net gain on sale of properties - 29,680,000 7,438,000
-------------- -------------- --------------
Income before extraordinary item and after preferred share distributions 31,502,000 56,598,000 29,758,000
Extraordinary loss on prepayment of debt, net of minority interest - - (4,631,000)
-------------- -------------- --------------
Net income attributable to common share owners $ 31,502,000 $ 56,598,000 $ 25,127,000
============== ============== ==============
As of December 31,
-------------------------------
1999 1998
--------------- ---------------
TOTAL ASSETS:
Shopping center properties $ 988,033,000 $ 946,489,000
Non-segment assets 8,134,000 20,624,000
--------------- ---------------
$ 996,167,000 $ 967,113,000
=============== ===============
</TABLE>
NOTE 14 - SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1999
---------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
---------- ---------- ----------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Rental income $38,710 $36,872 $37,833 $38,535
Net income attributable to common share owners $7,811 $7,831 $7,465 $8,395
Basic net income per common share $0.33 $0.33 $0.31 $0.35
Diluted net income per common share $0.33 $0.33 $0.31 $0.35
</TABLE>
F17
<PAGE> 54
<TABLE>
<CAPTION>
1998
----------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
---------- ---------- ----------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Rental income $28,736 $30,601 $33,305 $35,802
Net gain (loss) on sale of properties $(875) - $30,555 -
Net income attributable to common share owners $6,351 $6,964 $36,092 $7,191
Basic net income per common share $0.27 $0.29 $1.52 $0.30
Diluted net income per common share $0.27 $0.29 $1.44 $0.30
</TABLE>
NOTE 15 - SUBSEQUENT EVENTS
On January 27, 1999, the Board of Directors declared a regular quarterly
dividend on its common stock of $0.38 per share and a regular quarterly dividend
on its Series A Preferred Stock of $0.525 per share payable March 31, 2000 to
share owners of record on March 10, 2000.
In February 2000, the Company purchased two additional shopping centers located
in Kansas and Missouri, aggregating approximately 360,000 square feet of
leasable area for a total purchase price of approximately $19.1 million. The
shopping centers were acquired with cash provided by the line of credit.
On March 10, 2000, the Operating Partnership issued $75 million of unsecured
Notes due March 15, 2006 at an interest rate of 8.875%. Net proceeds were used
to pay-down the outstanding balance on the line of credit.
F18
<PAGE> 55
SCHEDULE III
BRADLEY REAL ESTATE, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
The following table sets forth detail with respect to the properties owned by
the Company at December 31, 1999 (dollars in thousands). The aggregate cost of
those properties for federal income tax purposes was approximately
$1,012,746,000.
<TABLE>
<CAPTION>
Initial cost to the Company Gross amount carried at December 31, 1999
--------------------------- -----------------------------------------
Capitalized Lives on
Buildings Subsequent Buildings Date Which
and to and Accumulated Acquired by Depreciation
SHOPPING CENTERS Land Improvements Acquisition Land Improvements Total Depreciation Company is Computed
- ------------------------- ------- ------------- ----------- ------- ------------ -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GEORGIA
Shenandoah Plaza $ 1,333 $ 3,110 $ - $ 1,333 $ 3,110 $ 4,443 $ 113 1998 39
Newnan, GA
ILLINOIS
Bartonville Square 471 1,130 218 578 1,241 1,819 56 1998 15 - 39
Peoria, IL
Butterfield Square 3,902 9,106 (11) 3,911 9,086 12,997 389 1998 39
Libertyville, IL
Commons of Chicago Ridge 5,087 15,113 2,960 5,879 17,281 23,160 1,520 1996 1 - 39
Chicago Ridge, IL
Commons of Crystal Lake 3,546 20,093 2,751 3,546 22,844 26,390 2,098 1996 3 - 39
Crystal Lake, IL
Crossroads Centre 2,846 8,538 1,102 2,878 9,608 12,486 2,331 1992 1 - 39
Fairview Heights, IL
Fairhills Shopping Center 2,031 4,982 90 2,031 5,072 7,103 327 1997 2 - 39
Springfield, IL
Heritage Square 8,047 17,099 243 8,047 17,342 25,389 1,684 1996 1 - 39
Naperville, IL
High Point Centre 2,969 16,822 906 3,022 17,675 20,697 1,694 1996 3 - 39
Lombard, IL
Parkway Pointe 799 3,197 - 799 3,197 3,996 205 1997 2 - 39
Springfield, IL
Rivercrest Center 7,349 17,147 2,845 7,353 19,988 27,341 3,404 1994 4 - 39
Crestwood, IL
Rollins Crossing 1,996 8,509 1,438 2,257 9,686 11,943 933 1996 3 - 39
Round Lake Beach, IL
Sangamon Center North 1,952 7,809 (81) 1,939 7,741 9,680 503 1997 2 - 39
Springfield, IL
Sheridan Village 2,841 19,010 396 2,935 19,312 22,247 1,902 1996 2 - 39
Peoria, IL
Sterling Bazaar 2,120 4,480 648 2,350 4,898 7,248 278 1997/98 1 - 39
Peoria, IL
Twin Oaks Centre 1,687 6,062 (46) 1,665 6,038 7,703 219 1998 5 - 39
Silvis, IL
Wardcliffe Center 478 1,841 261 538 2,042 2,580 112 1997 6 - 39
Peoria, IL
Westview Center 6,417 14,973 3,879 6,188 19,081 25,269 3,568 1993 1 - 39
Hanover Park, IL
INDIANA
County Line Mall 5,244 11,066 167 5,255 11,222 16,477 708 1997 5 - 39
Indianapolis, IN
Double Tree Plaza 2,370 5,529 150 2,436 5,613 8,049 189 1998 39
Winfield, IN
Germantown 2,497 5,735 (28) 2,439 5,765 8,204 221 1998 2 - 39
Jasper, IN
</TABLE>
F19
<PAGE> 56
<TABLE>
<CAPTION>
Initial cost to the Company Gross amount carried at December 31, 1999
--------------------------- -----------------------------------------
Capitalized Lives on
Buildings Subsequent Buildings Date Which
and to and Accumulated Acquired by Depreciation
SHOPPING CENTERS Land Improvements Acquisition Land Improvements Total Depreciation Company is Computed
- ------------------------- ------- ------------- ----------- ------- ------------ -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kings Plaza 625 3,046 25 625 3,071 3,696 150 1998 39
Richmond, IN
Lincoln Plaza 1,015 4,060 15 1,015 4,075 5,090 167 1998 4 - 39
New Haven, IN
Martin's Bittersweet Plaza 993 3,969 50 993 4,019 5,012 320 1997 4 - 39
Mishawaka, IN
Rivergate Shopping Center 174 4,645 - 174 4,645 4,819 169 1998 39
Shelbyville, IN
Sagamore Park 2,209 5,567 594 2,696 5,674 8,370 263 1998 2 - 39
West Lafayette, IN
Speedway SuperCenter 6,098 34,555 2,953 6,410 37,196 43,606 3,603 1996 3 - 39
Speedway, IN
The Village 1,152 6,530 2,230 1,152 8,760 9,912 942 1996 2 - 39
Gary, IN
Washington Lawndale Commons 2,488 13,062 829 2,488 13,891 16,379 1,574 1996 3 - 39
Evansville, IN
IOWA
Burlington Plaza West 838 4,458 95 853 4,538 5,391 314 1997 2 - 39
Burlington, IA
Davenport Retail Center 1,125 4,500 109 1,234 4,500 5,734 288 1997 39
Davenport, IA
Kimberly West 990 2,718 18 990 2,736 3,726 103 1998 4 - 39
Davenport, IA
Parkwood Plaza 1,530 7,062 322 1,530 7,384 8,914 495 1997 2 - 39
Urbandale, IA
Southgate Shopping Center 721 4,441 141 721 4,582 5,303 250 1997 4 - 39
Des Moines, IA
Spring Village 925 3,636 153 1,029 3,685 4,714 264 1997 2 - 39
Davenport, IA
Warren Plaza 1,103 4,892 65 1,108 4,952 6,060 398 1997 3 - 39
Dubuque, IA
KANSAS
Mid-State Plaza 1,435 3,349 1,037 1,504 4,317 5,821 312 1997 1 - 39
Salina, KS
Santa Fe Square 1,999 7,089 427 2,105 7,410 9,515 581 1996 3 - 39
Olathe, KS
Shawnee Parkway Plaza 1,838 4,290 26 1,838 4,316 6,154 156 1998 4 - 39
Shawnee, KS
Westchester Square 3,279 9,837 161 3,311 9,966 13,277 574 1997 3 - 39
Lenexa, KS
KENTUCKY
Camelot Shopping Center 2,595 6,052 28 2,596 6,079 8,675 260 1998 15 - 39
Louisville, KY
Dixie Plaza 1,116 2,567 - 1,116 2,567 3,683 110 1998 39
Louisville, KY
Midtown Mall 1,490 5,953 6 1,490 5,959 7,449 280 1998 5 - 39
Ashland, KY
Plainview Village 3,630 8,470 204 3,795 8,509 12,304 373 1998 3 - 39
Louisville, KY
Stony Brook Center 3,106 9,319 196 3,121 9,500 12,621 946 1996 2 - 39
Louisville, KY
</TABLE>
F20
<PAGE> 57
<TABLE>
<CAPTION>
Initial cost to the Company Gross amount carried at December 31, 1999
--------------------------- -----------------------------------------
Capitalized Lives on
Buildings Subsequent Buildings Date Which
and to and Accumulated Acquired by Depreciation
SHOPPING CENTERS Land Improvements Acquisition Land Improvements Total Depreciation Company is Computed
- ------------------------- ------- ------------- ----------- ------- ------------ -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MICHIGAN
Cherry Hill Marketplace 373 5,762 2,123 373 7,885 8,258 23 1999 39
Westland, MI
Courtyard (The) 2,427 7,283 80 2,427 7,363 9,790 355 1998 2 - 39
Burton, MI
Redford Plaza 5,235 15,460 117 5,235 15,577 20,812 695 1998 2 - 39
Redford, MI
MINNESOTA
Austin Town Center 2,927 6,835 415 2,971 7,206 10,177 45 1999 4 - 39
Austin, MN
Brookdale Square 2,230 6,694 54 2,230 6,748 8,978 656 1996 1 - 39
Brooklyn Center, MN
Burning Tree Plaza 609 3,744 7,717 609 11,461 12,070 2,610 1993 3 - 39
Duluth, MN
Central Valu Center 1,445 7,097 636 1,448 7,730 9,178 399 1997 1 - 39
Columbia Heights, MN
Elk Park Center 5,486 10,466 1,597 5,494 12,055 17,549 563 1997 5 - 39
Elk River, MN
Har Mar Mall 6,551 15,263 10,769 6,786 25,797 32,583 6,195 1992 2 - 39
Roseville, MN
Hub West 757 345 4,191 773 4,520 5,293 1,118 1991 7 - 39
Richfield, MN
Marketplace at 42 4,387 8,857 534 4,387 9,391 13,778 60 1999 2 - 39
Savage, MN
Richfield Hub 3,000 5,390 5,466 3,028 10,828 13,856 3,986 1988 2 - 39
Richfield, MN
Roseville Center 1,405 4,040 749 1,405 4,789 6,194 365 1997 1 - 39
Roseville, MN
Southport Centre 4,239 10,700 140 4,258 10,821 15,079 407 1998 2 - 39
Apple Valley, MN
Sun Ray Shopping Center 82 2,945 13,170 131 16,066 16,197 9,285 1961 2 - 39
St. Paul, MN
Terrace Mall 630 1,706 2,476 630 4,182 4,812 1,015 1993 1 - 39
Robbinsdale, MN
Westview Valu Center 2,629 6,133 213 2,634 6,341 8,975 328 1997 39
West St. Paul, MN
Westwind Plaza 1,949 5,547 343 1,949 5,890 7,839 823 1994 4 - 39
Minnetonka, MN
White Bear Hills 750 3,762 538 755 4,295 5,050 762 1993 3 - 39
White Bear Lake, MN
MISSOURI
Ellisville Square 3,291 7,679 31 3,304 7,697 11,001 275 1998 5 - 39
Ellisville, MO
Grandview Plaza 414 2,205 15,313 437 17,495 17,932 6,297 1971 3 - 39
Florissant, MO
Liberty Corners 1,050 6,057 139 1,187 6,059 7,246 366 1997 3 - 39
Liberty, MO
Maplewood Square 1,554 3,626 29 1,568 3,641 5,209 109 1998 5 - 39
Maplewood, MO
Prospect Plaza 893 3,006 5,275 901 8,273 9,174 133 1998 5 - 39
Gladstone, MO
</TABLE>
F21
<PAGE> 58
<TABLE>
<CAPTION>
Initial cost to the Company Gross amount carried at December 31, 1999
--------------------------- -----------------------------------------
Capitalized Lives on
Buildings Subsequent Buildings Date Which
and to and Accumulated Acquired by Depreciation
SHOPPING CENTERS Land Improvements Acquisition Land Improvements Total Depreciation Company is Computed
- ------------------------- ------- ------------- ----------- ------- ------------ -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Watts Mill Plaza 4,429 10,335 50 4,465 10,349 14,814 310 1998 3 - 39
Kansas City, MO
NEBRASKA
Bishop Heights 593 734 - 593 734 1,327 27 1998 39
Lincoln, NE
Cornhusker Plaza 1,123 3,038 1 1,123 3,039 4,162 110 1998 3 - 39
South Sioux City, NE
Eastville Plaza 542 3,333 - 542 3,333 3,875 121 1998 39
Fremont, NE
Edgewood Plaza 1,900 10,764 (500) 1,825 10,339 12,164 376 1998 39
Lincoln, NE
Ile de Grand 735 4,204 64 735 4,268 5,003 154 1998 7 - 39
Grand Island, NE
Meadows (The) 1,359 3,701 - 1,359 3,701 5,060 134 1998 39
Lincoln, NE
Miracle Hills Park 2,179 5,340 (159) 2,121 5,239 7,360 197 1998 3 - 39
Omaha, NE
Stockyards Plaza 1,108 6,872 - 1,108 6,872 7,980 103 1999 39
Omaha, NE
NEW MEXICO
St. Francis Plaza 1,578 3,683 - 1,578 3,683 5,261 440 1995 39
Santa Fe, NM
OHIO
30th Street Plaza 990 6,728 2,492 990 9,220 10,210 53 1999 2 - 39
Canton, OH
Clock Tower Plaza 2,870 11,909 4 2,875 11,908 14,783 407 1998 5 - 39
Lima, OH
Salem Consumer Square 5,974 21,380 52 5,975 21,431 27,406 732 1998 2 - 39
Trotwood, OH
SOUTH DAKOTA
Baken Park 2,388 7,002 2,277 2,410 9,257 11,667 392 1997 1 - 39
Rapid City, SD
TENNESSEE
Williamson Square 2,570 14,561 437 2,570 14,998 17,568 1,592 1996 2 - 39
Franklin, TN
WISCONSIN
Fairacres Shopping Center 1,549 3,806 5 1,549 3,811 5,360 141 1998 2 - 39
Oshkosh, WI
Fitchburg Ridge 764 1,783 (295) 674 1,578 2,252 57 1998 7 - 39
Fitchburg, WI
Fox River Plaza 1,548 6,106 104 1,611 6,147 7,758 258 1998 3 - 39
Burlington, WI
Garden Plaza 1,384 3,962 25 1,384 3,987 5,371 163 1998 2 - 39
Franklin, WI
Madison Plaza 2,014 6,121 171 2,077 6,229 8,306 382 1997 3 - 39
Madison, WI
Mequon Pavilions 2,761 15,647 217 2,761 15,864 18,625 1,563 1996 2 - 39
Mequon, WI
Moorland Square 1,919 5,119 3 1,919 5,122 7,041 186 1998 39
New Berlin, WI
</TABLE>
F22
<PAGE> 59
<TABLE>
<CAPTION>
Initial cost to the Company Gross amount carried at December 31, 1999
--------------------------- -----------------------------------------
Capitalized Lives on
Buildings Subsequent Buildings Date Which
and to and Accumulated Acquired by Depreciation
SHOPPING CENTERS Land Improvements Acquisition Land Improvements Total Depreciation Company is Computed
- ------------------------- ------- ------------- ----------- ------- ------------ -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oak Creek Centre 1,478 3,448 309 1,469 3,766 5,235 207 1998 3 - 39
Oak Creek, WI
Park Plaza 970 4,020 3 970 4,023 4,993 215 1997 5 - 39
Manitowoc, WI
Spring Mall 1997 15 - 39
Greenfield, WI 1,790 12,317 434 1,824 12,717 14,541 663
Taylor Heights 1,133 6,387 40 1,133 6,427 7,560 103 1999 3 - 39
Sheboygan, WI -------- -------- -------- -------- -------- ---------- -------
SUBTOTAL $210,417 $698,320 $105,421 $213,833 $800,325 $1,014,158 $81,302
-------- -------- -------- -------- -------- ---------- -------
Real estate held for sale 9,028 20,928 (66) 8,639 21,251 29,890 - 1998
-------- -------- -------- -------- -------- ---------- -------
GRAND TOTAL $219,445 $719,248 $105,355 $222,472 $821,576 $1,044,048 $81,302
======== ======== ======== ======== ======== ========== =======
</TABLE>
<TABLE>
<CAPTION>
COST: December 31,
-----------------------------------------------------
1999 1998 1997
-------------- ------------ ------------
<S> <C> <C> <C>
Balance, beginning of year $ 982,957,000 $680,795,000 $507,631,000
Acquisitions and other additions 78,013,000 359,507,000 199,301,000
Sale of properties and other deductions (16,922,000) (57,345,000) (26,137,000)
-------------- ------------ ------------
Balance, end of year $1,044,048,000 $982,957,000 $680,795,000
============== ============ ============
ACCUMULATED DEPRECIATION:
Balance, beginning of year $ 59,196,000 $ 42,430,000 $ 37,883,000
Depreciation provided 22,632,000 18,670,000 13,407,000
Sale of properties and other deductions (526,000) (1,904,000) (8,860,000)
-------------- ------------ ------------
Balance, end of year $ 81,302,000 $ 59,196,000 $ 42,430,000
============== ============ ============
</TABLE>
F23
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Share Owners
Bradley Real Estate, Inc. and subsidiaries:
We have audited the consolidated financial statements of Bradley Real
Estate, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we
also have audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and the
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and the 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bradley
Real Estate, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1999, in conformity with
generally accepted accounting principles. Also in our opinion, the
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.
KPMG LLP
Chicago, Illinois
January 21, 2000, except as to Note 15, which
is as of March 10, 2000
F24
<PAGE> 1
EXHIBIT 3.1
BRADLEY REAL ESTATE, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
THIS IS TO CERTIFY THAT:
FIRST: Bradley Real Estate, Inc., incorporated on May 11, 1994 under the
Maryland General Corporation Law, (the "Corporation") hereby certifies that it
desires to amend and restate its Charter as currently in effect to read as set
forth in these Articles of Amendment and Restatement.
SECOND: No change in the amount or classification of the authorized capital
stock which the Corporation has authority to issue is effected by this
amendment.
THIRD: These Articles of Amendment and Restatement have been approved and
advised by a majority of the entire Board of Directors of the Corporation and
approved by the written consent of the sole stockholder of the Corporation,
which consent is filed with the records of stockholders meetings.
FOURTH: The following provisions are all of the provisions of the Charter
of the Corporation as so amended and restated with such approval of the Board of
Directors and of the sole stockholder:
ARTICLE I
INCORPORATION, AMENDMENT AND RESTATEMENT
Robert G. Schwartz, Jr., whose post office address is Exchange Place,
Boston, Massachusetts 02109-2881, being at least eighteen (18) years of age,
formed the Corporation under the Maryland General Corporation Law, and the
Charter of the Corporation is hereby amended and restated in the entirety.
ARTICLE II
NAME
The name of the Corporation is Bradley Real Estate, Inc.
37
<PAGE> 2
ARTICLE III
PURPOSE
3.1 Purpose and Powers. The purpose for which the Corporation is formed
and the business or objects to be carried on and promoted by it, within the
State of Maryland or elsewhere, is to acquire and succeed to and to continue the
business of Bradley Real Estate Trust, a common law business trust organized
under the laws of the Commonwealth of Massachusetts that has operated so as to
qualify as a real estate investment trust ("REIT") (as that phrase is defined
under Section 856 of the Internal Revenue Code of 1986, as amended (the
"Code")), and to engage in any lawful act or activity for which corporations may
be formed under the Maryland General Corporation Law, as amended from time to
time. The foregoing purposes shall be in no way limited or restricted by
reference to, or inference from, the terms of any other clause of this Charter,
and each shall be regarded as independent. The foregoing purposes are also to be
construed as powers of the Corporation, and shall be in addition to and not in
limitation of the general powers of corporations under the laws of the State of
Maryland.
3.2 Real Estate Investment Trust. Without limiting the generality of the
foregoing purpose, at such time or times as the Board of Directors of the
Corporation determines that it is in the interest of the Corporation and its
stockholders that the Corporation engage in the business of, and conduct its
business and affairs so as to qualify as a REIT, the purpose of the Corporation
shall include engaging in the business of a REIT. This reference to such purpose
shall not make unlawful or unauthorized any otherwise lawful act or activity
that the Corporation may take that is inconsistent with such purpose.
ARTICLE IV
PRINCIPAL OFFICE ADDRESS
The post office address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202.
ARTICLE V
THE RESIDENT AGENT
38
<PAGE> 3
The Resident Agent of the Corporation is The Corporation Trust
Incorporated, whose address is 32 South Street, Baltimore, Maryland 21202. Said
Resident Agent is a Maryland corporation.
ARTICLE VI
BOARD OF DIRECTORS
6.1 Initial Board; Term. The Corporation shall have a Board of Directors
initially consisting of six (6) Directors, which number may be increased or
decreased in accordance with the Bylaws of the Corporation, but shall never be
less than the number required by the Maryland General Corporation Law, as
amended from time to time. The Board of Directors shall be divided into three
classes, the number of Directors of each class being as nearly equal as
practical, with the term of office of one class expiring each year. The names of
the initial Directors, who shall act as such for the terms set forth below and
until their successors are duly elected and qualified are:
William L. Brown
Don L. Foote
Stephen G. Kasnet
Paul G. Kirk, Jr.
E. Lawrence Miller
W. Nicholas Thorndike
The respective terms of the Initial Directors shall continue until the annual
meeting of Stockholders held in 1995 in the case of Paul G. Kirk, Jr. and W.
Nicholas Thorndike; in 1996 in the case of William L. Brown and E. Lawrence
Miller; and in 1997 in the case of Don L. Foote and Stephen G. Kasnet.
Whenever the holders of any one or more series of Preferred Stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the Board of Directors shall consist of said
directors so elected in addition to the number of directors fixed as provided in
this Section 6.1. Notwithstanding the foregoing, and except as otherwise may be
required by law, whenever the holders of any one or more series of Preferred
Stock shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the terms of the director or directors elected by
such holders shall expire at the next succeeding annual meeting of Stockholders.
6.2 Election. Beginning with the annual meeting of Stockholders in 1995
and at each succeeding annual meeting of Stockholders, the Directors of the
class of Directors whose term expires at such meeting will be elected to hold
office for a
39
<PAGE> 4
term expiring at the third succeeding annual meeting by a vote of a plurality of
the Stockholders entitled to vote thereon. Each Director will hold office for
the term for which he is elected and until his successor is duly elected and
qualified. Subject to the rights of the holders of any class of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors shall be filled by a vote of the Stockholders or
a vote of a majority of the entire Board of Directors and any vacancies on the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office, or other cause shall be filled by a vote
of the Stockholders or by a majority of the remaining Directors then in office.
6.3 Resignation, Removal or Death. Any Director may resign from the Board
of Directors or any committee thereof at any time by written notice to the Board
of Directors, effective upon execution and delivery to the Corporation of such
notice or upon any future date specified in the notice. A Director may be
removed from office, but only for cause and only at a meeting of the
Stockholders called for that purpose, by the affirmative vote of the holders of
at least a majority of the Stock then outstanding and entitled to vote in the
election of Directors; provided, however, that in the case of any Directors
elected solely by holders of a series of Preferred Stock, such Directors may be
removed only by the affirmative vote of at least a majority of the Stock of that
series then outstanding and entitled to vote in the election of Directors,
voting together as a single class.
6.4 Powers. Subject to the express limitations herein or in the Bylaws,
the business and affairs of the Corporation shall be managed under the direction
of the Board of Directors. The Charter, as amended or supplemented from time to
time, shall be construed with a presumption in favor of the grant of power and
authority to the Directors.
ARTICLE VII
STOCK
7.1 Authorized Capital Stock. The total number of shares of stock which
the Corporation has authority to issue (the "Stock") is one hundred fifty
million (150,000,000) shares, initially consisting of (i) twenty million
(20,000,000) shares of preferred stock, par value $.01 per share ("Preferred
Stock"); (ii) eighty million (80,000,000) shares of common stock, par value $.01
per share ("Common Stock"); and (iii) fifty million (50,000,000) shares of
excess stock, par value $.01 per share ("Excess Stock"). The aggregate par value
of all the shares of all classes of stock is $1,500,000.
40
<PAGE> 5
7.2 Preferred Stock. Preferred Stock may be issued, from time to time, in
one or more series as authorized, designated and classified or reclassified by
the Board of Directors consistent with the provisions of Section 7.5.
7.3 Common Stock.
7.3.1 Dividend Rights. Subject to the preferential dividend rights of
Preferred Stock, if any, as may be determined by the Board of Directors,
the holders of shares of Common Stock shall be entitled to receive such
dividends as may be authorized and declared by the Board of Directors out
of funds legally available therefor.
7.3.2 Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution
of the assets of, the Corporation, each holder of shares of Common Stock
shall be entitled to receive, ratably with each other holder of shares of
Common Stock or Excess Stock resulting from the exchange of Common Stock
("Excess Common Stock"), that portion of the assets of the Corporation
available for distribution to the holders of its Common Stock and Excess
Common Stock as the number of shares of Common Stock held by such holder
bears to the total number of shares of Common Stock and Excess Common Stock
then outstanding.
7.3.3 Voting Rights. The holders of shares of Common Stock shall be
entitled to vote on all matters submitted to the holders of Common Stock
for a vote, at all meetings of the Stockholders, and each holder of shares
of Common Stock shall be entitled to one vote for each share of Common
Stock held by such Stockholder.
7.3.4 Exchange. Shares of Common Stock shall automatically and without
further action be exchanged for shares of Excess Stock, and shares of
Excess Stock shall be exchanged for shares of Common Stock, at the times
and in the manner provided in Section 9.5. Such exchanges shall not require
the tender, cancellation or issuance of any certificate representing such
shares of Excess Stock or Common Stock.
7.4 Excess Stock. The voting, distribution, redemption and certain other
rights, qualifications and limitations of shares of Excess Stock are set forth
in Section 9.5.
7.5 Classification of Stock. The Board of Directors may by resolution
classify or reclassify any unissued shares of Stock from time to time by: (a)
designating a class or series of Stock to distinguish it from all other classes
or
41
<PAGE> 6
series of Stock; (b) specifying the number of shares to be included in the class
or series; (c) subject to the provisions of Article IX regarding Excess Stock,
setting or changing the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications, and/or terms and conditions of redemption of those shares of
Stock, including, but not limited to, the reclassification of unissued shares of
Common Stock to shares of Preferred Stock or unissued shares of Preferred Stock
to shares of Common Stock or the issuance of any rights plan or similar plan;
and (d) causing the Corporation to file articles supplementary with the State
Department of Assessments and Taxation of Maryland.
7.6 Issuance of Stock. The Board of Directors may authorize the issuance
from time to time of shares of Stock of any class or series, whether now or
hereafter authorized, or securities or rights convertible into shares of Stock,
for such consideration as the Board of Directors may deem advisable (or without
consideration in the case of a stock split or dividend), subject to such
restrictions or limitations, if any, as may be set forth in the Bylaws of the
Corporation.
7.7 Dividends or Distributions. The Board of Directors may from time to
time declare and pay to Stockholders such dividends or distributions in cash,
property or other assets of the Corporation or in securities of the Corporation
or from any other source as the Board of Directors in its discretion shall
determine.
ARTICLE VIII
LIMITATION ON PREEMPTIVE RIGHTS
No holder of any shares of Stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any preferential or
preemptive rights to subscribe for or purchase any Stock or any other securities
of the Corporation other than such rights, if any, as the Board of Directors, in
its sole discretion, may fix; and any shares of Stock or other securities which
the Board of Directors may determine to offer for subscription may, within the
Board of Directors' sole discretion, be offered to the holders of any class,
series or type of Stock or other securities at the time outstanding to the
exclusion of holders of any or all other classes, series or types of Stock or
other securities at the time outstanding.
ARTICLE IX
LIMITATIONS ON TRANSFER AND OWNERSHIP
42
<PAGE> 7
9.1 Limitations on Transfer. Stock (other than Excess Stock) shall be
freely transferable by the record owner thereof, subject to the provisions
of Sections 9.2 and 9.5 and provided that any purported acquisition or
transfer of Stock that would result in the disqualification of the
Corporation as a REIT shall be void ab initio, except to the extent
necessary to give effect to Section 9.10. Any purported transfer of Stock
that, if effective, would result in a violation of Section 9.2 (unless
exempt from the application of Section 9.2 pursuant to Section 9.6) shall,
in lieu of being effective so as to permit the transfer of that number of
shares of Stock that would otherwise be beneficially owned by a Stockholder
in violation of the Ownership Limit set forth in Section 9.2, automatically
cause an exchange of such number of shares of Stock into shares of Excess
Stock as provided in Section 9.5, and the intended transferee (the
"Prohibited Transferee") of such shares shall acquire no rights therein and
the transfer of such shares will not be reflected on the Corporation's
stock record books. For purposes of this Article IX, a "transfer" of shares
of Stock shall mean any sale, transfer, gift, hypothecation, pledge,
assignment, devise, or other disposition, whether voluntary or involuntary,
whether of record, constructively or beneficially and whether by operation
of law or otherwise.
9.2 Limitations on Ownership. Except as provided by Section 9.6 and except
as described below, no person shall at any time directly or indirectly acquire
or hold beneficial ownership of shares of any class or series of Stock with an
aggregate value in excess of 9.8% of the aggregate value of all outstanding
Stock of the Corporation (the "Ownership Limit"). Notwithstanding the foregoing,
the Board of Directors may, in its sole discretion and on such terms and
conditions as it may exclusively establish, waive the Ownership Limit with
respect to any transfer if it is satisfied after receiving advice of tax
counsel, that ownership in excess of this limit will not jeopardize the
Corporation's status as a REIT and it otherwise decides that such action is in
the best interests of the Corporation.
Each person who acquires or attempts to acquire or becomes or attempts to
become the beneficial owner of shares of any class or series of Stock which
themselves, or when considered with other shares of Stock of any class or series
of which such person is beneficial owner, have or may have an aggregate value in
excess of the Ownership Limit shall give written notice to the Corporation in
advance of such event if such person knows or has reason to believe that such
event would or might result in the Ownership Limit being exceeded, or, if such
person has not previously given such notice, immediately following such person's
becoming aware of an event whose result is that the Ownership Limit has or may
have been exceeded.
For purposes of this Article IX, (a) the value of any share of Stock shall
be determined in the manner established by the Board of Directors, and (b) a
person (which includes natural persons, corporations, trusts, partnerships, and
other entities) shall be deemed to be the
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beneficial owner of the Stock that such person (i) actually owns, (ii)
constructively owns after applying the rules of Section 544 of the Code as
modified in the case of a REIT by Section 856(h) of the Code, and (iii) has the
right to acquire upon exercise of outstanding rights, options and warrants, and
upon conversion of any securities convertible into Stock, if any.
9.3 Stockholder Information. Each stockholder shall, upon demand of the
Corporation, disclose to the Corporation in writing such information with
respect to such stockholder's direct and indirect beneficial ownership of the
Stock as the Board of Directors in its discretion deems necessary or appropriate
in order that the Corporation may fully comply with all provisions of the Code
relating to REITs and all regulations, rulings and cases promulgated or decided
thereunder (the "REIT Provisions") and to comply with the requirement of any
taxing authority or governmental agency.
9.4 Transferee Information. Whenever the Board of Directors deems it
reasonably necessary to protect the tax status of the Corporation as a REIT
under the REIT Provisions, the Board of Directors may require a statement or
affidavit from each stockholder or proposed transferee of Stock setting forth
the number of shares of Stock of each class and series already beneficially
owned by such proposed transferee and any related person specified by the Board
of Directors. If, in the opinion of the Board of Directors, any proposed
transfer may jeopardize the qualification of the Corporation as a REIT, the
Board of Directors shall have the right, but not the duty, to refuse to permit
the transfer of such Stock to the proposed transferee. All contracts for the
sale or other transfer of Stock shall be subject to this Section 9.4.
9.5 Excess Stock
9.5.1 Exchange for Excess Stock. If, notwithstanding the other
provisions contained in this Article IX, at any time there is a purported
transfer of Stock or a change in the capital structure of the Corporation
(including any redemption of Excess Stock pursuant to Subsection 9.5.7) as
a result of which any person would beneficially own Stock in excess of the
Ownership Limit (such purported transfer or change in the capital structure
being referred to as a "Prohibited Transaction," and such person as to the
Stock in excess of the Ownership Limit being referred to as a "Prohibited
Transferee" in this Article IX), then, except as otherwise provided in
Section 9.6, such shares of Stock in excess of the Ownership Limit (rounded
up to the nearest whole share) shall automatically and without further
action be exchanged for an equal number of shares of Excess Stock. Such
exchange shall be effective as of the close of business on the business day
prior to the date of the Prohibited Transaction. The shares of Stock which
are so exchanged for shares of Excess Stock shall be transferred to a trust
as provided in Subsection 9.5.2 hereto, subject to the provisions of
Subsection 9.5.2.
9.5.2 Ownership in Trust. Upon any Prohibited Transaction that results
in an exchange of Excess Stock for Stock pursuant to Subsection 9.5.1, such
shares of Excess Stock shall be deemed to have been transferred to a
trustee ("the Trustee"), who shall be an individual or other person
designated by the Corporation that is unaffiliated with the Corporation, as
trustee of a separate trust for the exclusive benefit (except to the extent
provided in Subsections 9.5.6 and 9.5.7) of one or more organizations
described in Sections 170(c) of the Code as are designated from time to
time by the Corporation (the
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"Charitable Beneficiary"). Shares of Excess Stock so held in trust shall be
issued and outstanding Stock of the Corporation. The Prohibited Transferee
shall have no rights in such Excess Stock, other than as set forth in this
Section 9.5.
9.5.3 Dividend Rights. Shares of Excess Stock shall be entitled to
dividends and distributions as if they were the shares of Preferred Stock
or Common Stock that have been exchanged pursuant to Subsection 9.5.1;
provided, however, that the Prohibited Transferee shall upon demand by the
Corporation repay any dividend or distribution paid prior to the discovery
by the Corporation that shares of Stock have been exchanged for Excess
Stock, and any dividend or distribution declared but unpaid shall be
rescinded as void ab initio with respect to the Prohibited Transferee, and
the Corporation shall pay over to the Trustee all dividends or
distributions so recovered from or rescinded as to the Prohibited
Transferee. Except for dividends or distributions which are liquidating
distributions (as to which Subsection 9.5.4 shall apply), the Trustee shall
pay to the Charitable Beneficiary all amounts received as dividends or
distributions with respect to Excess Stock.
9.5.4 Rights Upon Liquidation. Subject to the preferential rights of
Preferred Stock, if any, as may be determined by the Board of Directors and
the preferential rights of Excess Preferred Stock (as defined below), if
any, in the event of any voluntary or involuntary liquidation, dissolution
or winding up of, or any distribution of the assets of, the Corporation,
the Trustee holding any shares of Excess Stock resulting from the exchange
of Common Stock pursuant to Subsection 9.5.1 ("Excess Common Stock") shall
be entitled to receive, ratably with each other holder of shares of Common
Stock or Excess Common Stock, that portion of the assets of the Corporation
available for distribution to the holders of Common Stock and Excess Common
Stock as the number of shares of Excess Common Stock held by such holder
bears to the total number of shares of Common Stock and Excess Common Stock
then outstanding. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of, or any distribution of the assets of, the
Corporation, the Trustee holding any shares of Excess Stock resulting from
the exchange of Preferred Stock pursuant to Subsection 9.5.1 ("Excess
Preferred Stock") shall be entitled to receive the pro rata share of the
assets of the Corporation available for distribution to the holders of
Preferred Stock of the series from which such Excess Stock was exchanged
which such holder of Excess Preferred Stock would be entitled to receive if
such shares of Excess Preferred Stock were shares of Preferred Stock of the
series from which such Excess Preferred Stock was exchanged. The Trustee(s)
holding any Excess Stock in one or more trusts shall distribute to each
transferee of an interest in such a trust pursuant to Subsection 9.5.6,
when determined, any assets received in any liquidation, dissolution or
winding up of, or any distribution of the assets of, the Corporation in
respect of the Excess Stock held in such trust and represented by the trust
interest transferred to such transferee.
9.5.5 Voting Rights. Shares of Excess Common Stock may be voted by the
Trustee holding the same as if such shares were the shares of Common Stock,
and shares of Excess Preferred Stock may be voted by the Trustee holding
the same as if such shares were the shares of Preferred Stock, whose
purported transfer resulted in the exchange of Excess Stock for such Common
Stock or Preferred Stock, as the case may be; and the Prohibited Transferee
shall be deemed to have given an irrevocable proxy (which proxy
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shall be deemed to be coupled with an interest) to the Trustee to vote such
Stock for the benefit of the Charitable Beneficiary. Any votes purported to
have been cast by the Prohibited Transferee with respect to shares of
Excess Stock prior to the discovery by the Corporation that the shares are
held in trust as a result of a Prohibited Transaction will be retroactively
deemed not to have been cast; provided, however, that such retroactive
nullification of the vote of such shares shall not adversely affect the
rights of any person other than the Prohibited Transferee who has relied in
good faith upon the effectiveness of the matter that was the subject of the
stockholder action as to which such votes were cast.
9.5.6 Restrictions on Transfer. Excess Stock shall not be
transferable. The Trustee of any shares of Excess Stock that has been
exchanged for any shares of Stock pursuant to Section 9.5.1 may (subject to
the Corporation's having waived or not exercised its redemption rights
under Subsection 9.5.7) freely sell and transfer the interest in the trust
that represents such shares of Excess Stock, if the shares of Excess Stock
held in the trust and represented by the trust interest to be sold would
not be Excess Stock in the hands of the transferee of the trust interest.
Upon any such sale, the Trustee shall distribute the proceeds of such sale
as follows: (a) to the Prohibited Transferee, all of such proceeds up to
(but not more than) the amount that is equal to the price that the
Prohibited Transferee paid for the Stock in the purported transfer of Stock
that resulted in the Excess Stock represented by the trust interest, or if
the Prohibited Transferee did not give value for such Stock (e.g., the
shares were received through a gift, devise or other transaction), equal to
the aggregate Market Price (as defined in Subsection 9.5.7) of all shares
of such Stock that were exchanged for Excess Stock on the date of the
purported transfer that resulted in the Excess Stock; and (b) to the
Charitable Beneficiary, all remaining proceeds of such sale. No interest in
a trust may be transferred unless the Trustee has given advance notice to
the Corporation of the intended transferee and the Corporation has agreed
in writing to waive its redemption rights under Subsection 9.5.7. Upon the
transfer of an interest in a trust in compliance with this Subsection
9.5.6, the corresponding shares of Excess Stock that are represented by the
transferred interest in the trust shall be automatically exchanged for an
equal number of shares of Stock of the same class and series from which
they were originally exchanged and such shares of Stock shall be
transferred of record to the transferee of the interest in the trust. Upon
any exchange of Excess Stock for Stock of another class, the interest in
the trust representing such Excess Stock shall automatically terminate.
9.5.7 Corporation's Redemption Rights. All shares of Excess Stock
shall be deemed to be offered for sale to the Corporation, or a designee of
the Corporation whose ownership of such shares would not result in such
designee being a Prohibited Transferee, at a price per share equal to the
lesser of (a) the price per share of Stock in the Prohibited Transaction
that created such Excess Stock (or, in the case of devise or gift, the
Market Price per share of such Stock at the time of such devise or gift) or
(b) the Market Price per share of Stock of the class of Stock for which
such Excess Stock was exchanged on the date the Corporation, or its
designee, accepts such offer. The Corporation, or its designee, shall have
the right to accept such offer at any time until the date that is ninety
(90) days after the date (the "trigger date") on which the Prohibited
Transferee or other purported owner gives written notice to the Corporation
of any event constituting a
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Prohibited Transaction (including, without limitation, redemptions or
repurchases of Stock by the Corporation) that results in the exchange of
Stock for Excess Stock pursuant to Section 9.5.1 and of the nature and
amount of all ownership interests in the Corporation, direct or indirect,
of record or beneficial, of the Prohibited Transferee or other purported
owner; provided, however, that if no such notice is given the "trigger
date" shall be the date on which the Board of Directors determines that a
Prohibited Transaction resulting in the exchange of Excess Stock for Stock
has been made.
The Corporation's, or its designee's, acceptance of such offer shall
specify a date (the "redemption date") as of which the Corporation, or its
designee, shall make the redemption payment and as of which the Excess
Stock shall be deemed to be fully redeemed, or transferred to the
Corporation's designee, with neither the Trustee nor the Charitable
Beneficiary nor the Prohibited Transferee having any further right thereto.
The redemption date will not be later than the date that is ninety (90)
days after the trigger date; provided, however, that the Corporation may
designate a later redemption date that is not later than January 15 in the
calendar year next following the trigger date if the Corporation's Board of
Directors determines in good faith that the redemption of such Excess Stock
may result in a separate Prohibited Transaction as a result of which some
person (other than the Prohibited Transferee) may beneficially own Stock in
excess of the Ownership Limit. No interest shall accrue on any redemption
payment with respect to the period subsequent to the redemption date to the
date of the redemption payment.
For purposes of this Article IX, "Market Price" means, for any share
of Stock, the average daily per share closing sales price of a share of
such class or series of Stock if shares of such class or series of Stock
are listed on a national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotation National Market
System (the "NASDAQ NMS"), and if shares of such class or series of Stock
are not solicited or quoted, the Market Price shall be the mean between the
average per share closing bid prices and the average per share closing
asked prices, in each case during the 30-day period ending on the business
day prior to the redemption date, or if there have been no sales on a
national securities exchange or on the NASDAQ NMS and no published bid and
asked quotations with respect to shares of such class or series of Stock
during such 30-day period, the Market Price shall be the price determined
by the Board of Directors in good faith.
9.5.8 Agency. If any of the restrictions on transfer set forth in this
Section 9.5 are determined to be void, invalid or unenforceable by virtue
of any legal decision, statute, rule or regulation, then the intended
transferee of any Excess Stock may be deemed, at the option of the
Corporation, and to the extent that the Corporation may determine
appropriate to protect its qualification as a REIT, to have acted as an
agent on behalf of the Corporation in acquiring the Excess Stock and to
hold the Excess Stock on behalf of the Corporation.
9.6 Exceptions to Ownership and Transfer Limitations. The Ownership Limit
set forth in Section 9.2 shall not apply to the following shares of Stock and
such shares shall not be deemed to be Excess Stock at the times and subject to
the terms and conditions set forth in this Section 9.6:
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9.6.1 Subject to the provisions of Section 9.7, shares of Stock which
the Board of Directors in its sole discretion may exempt from the Ownership
Limit while owned by a person who has provided the Corporation with
evidence and assurances of factual matters acceptable to the Board of
Directors on the basis of which the Board of Directors concludes that the
qualification of the Corporation as a REIT would not then or in the future
be jeopardized thereby;
9.6.2 Subject to the provisions of Section 9.7, shares of Stock
acquired and held by an underwriter in a public offering of Stock, or in
any transaction involving the issuance of Stock by the Corporation, in
which the Board of Directors determines that the underwriter or other
person or party that initially acquires such Stock will make a timely
distribution of such Stock to or among other holders such that, following
such distribution, no person will own Stock in excess of the Ownership
Limit; and
9.6.3 Shares of Stock acquired pursuant to an all cash tender offer
made for all outstanding shares of Stock of the Corporation in conformity
with applicable federal and state securities laws where not less than
two-thirds of the outstanding Stock (not including Stock or securities
convertible into Stock held by the tender offeror and/or any "affiliates"
or "associates" thereof within the meaning of the Securities Exchange Act
of 1934, as amended) are duly tendered and accepted pursuant to the cash
tender offer and where the tender offeror commits in such tender offer, if
the tender offer is so accepted by the holders of such two-thirds of the
outstanding Stock, as promptly as practicable thereafter to give any
holders who did not accept such tender offer a reasonable opportunity to
put their Stock to the tender offeror at a price not less than the price
per share paid for Stock tendered pursuant to the tender offer.
9.7 Authority to Revoke Exceptions to Limitations. The Board of Directors,
in its sole discretion, may at any time revoke any exception pursuant to
Subsections 9.6.1 or 9.6.2 in the case of any stockholder, and upon such
revocation the provisions of Section 9.2 and 9.5 shall immediately become
applicable to such stockholder and all Stock of which such stockholder may be
the beneficial owner. A decision to exempt or refuse to exempt from the
Ownership Limit the ownership of certain designated shares of Stock, or to
revoke an exemption previously granted, shall be made by the Board of Directors
in its sole discretion, based on any reason whatsoever, including, but not
limited to, the preservation of the Corporation's qualification as a REIT.
9.8 Controlling Provision. Except as provided in Section 9.10, to the
extent this Article IX may be inconsistent with any other provision of the
Corporation's Charter, this Article IX shall be controlling.
9.9 Authority of the Board of Directors. Subject to Section 9.10, nothing
else contained in this Article IX or in any other provision of the Corporation's
Charter shall limit the authority of the Board of Directors to take such action
as it deems necessary or advisable to protect the Corporation and the interests
of the stockholders by preservation of the Corporation's qualification as a REIT
under the REIT Provisions. Any determination made by the Board of Directors in
connection with this Article IX shall be conclusive and binding for all
purposes. In applying the provisions of this Article IX, the Board of Directors
may take into account the lack of certainty in the REIT Provisions relating to
the ownership of stock that may
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prevent a corporation from qualifying as a REIT and may make interpretations
concerning the Ownership Limit, Excess Stock, beneficial ownership, value of
Stock and related matters on as conservative a basis as the Board of Directors
deems advisable to minimize or eliminate uncertainty as to the Corporation's
continued qualification as a REIT. To the extent permitted by Maryland law, the
Board of Directors shall have authority to amend, without the necessity of any
action or vote by the stockholders, the provisions of this Article IX in such
manner as in its sole discretion (after being advised by tax counsel) is
necessary or appropriate to minimize or eliminate uncertainty as to the
Corporation's continued qualification as a REIT, and no stockholders of the
Corporation shall be entitled to vote on such amendment except to the extent
determined by the Board of Directors. Notwithstanding any other provision of the
Corporation's Charter, if the Board of Directors determines that it is no longer
in the interests of the Corporation and the stockholders to continue to have the
Corporation qualify as a REIT, the Board of Directors may revoke or otherwise
terminate the Corporation's REIT election pursuant to Section 856(g) of the
Code.
9.10 New York Stock Exchange. Nothing in the Corporation's Charter shall
preclude the settlement of any transaction entered into through the facilities
of the New York Stock Exchange or of any other stock exchange on which shares of
Stock of the Corporation may be listed and which has conditioned such listing on
the inclusion in the Corporation's Charter of a provision such as this Section
9.10. The fact that the settlement of any transaction is permitted shall not
negate the effect of any other provision of this Article IX and any transferee
in such a transaction shall be subject to all of the provisions and limitations
set forth in this Article IX.
9.11 Transferee as Agent for the Corporation. If the restrictions on
transfer of any shares of Stock contained elsewhere in this Article IX are
determined to be void or invalid or unenforceable by virtue of any legal
decision, statute, rule or regulation, then, at the option of the Corporation,
and to the extent that the Corporation may determine appropriate to protect its
qualification as a REIT, the intended transferee of any such shares may be
deemed to have acted as agent on behalf of the Corporation in acquiring such
shares and holding the same on behalf of the Corporation.
ARTICLE X
RIGHTS AND POWERS OF CORPORATION;
CONFLICTS OF INTEREST; AMENDMENT
In carrying on its business, or for the purpose of attaining or furthering
any of its objects, the Corporation shall have all of the rights, powers and
privileges granted to corporations by the laws of the State of Maryland, as well
as the power to do any and all acts and things that a natural person or
partnership could do as now or hereafter authorized by law, either alone or in
partnership or conjunction with others. In furtherance and not in limitation of
the powers conferred by statute, the powers of the Corporation and of the
Directors and stockholders shall include the following:
10.1 Conflicts of Interest. Any Director or officer individually, or any
firm of which any Director or officer may be a member, or any corporation or
association of which any Director or officer may be a director or officer or in
which any Director or officer may be interested as the holder of any amount of
its stock or otherwise, may be a party to, or may be pecuniarily or
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otherwise interested in, any contract or transaction of the Corporation, and, in
the absence of fraud, no contract or other transaction shall be thereby affected
or invalidated; provided, however, that (a) such fact shall have been disclosed
or shall have been known to the Board of Directors or the committee thereof that
approved such contract or transaction and such contract or transaction shall
have been approved or satisfied by the affirmative vote of a majority of the
disinterested Directors, or (b) such fact shall have been disclosed or shall
have been known to the stockholders entitled to vote, and such contract or
transaction shall have been approved or ratified by a majority of the votes cast
by the stockholders entitled to vote, other than the votes of shares owned of
record or beneficially by the interested Director or corporation, firm or other
entity, or (c) the contract or transaction is fair and reasonable to the
Corporation. Any Director of the Corporation who is also a director or officer
of or interested in such other corporation or association, or who, or the firm
of which he is a member, is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize any such contract or transaction, with like
force and effect as if he were not such director or officer of such other
corporation or association or were not so interested or were not a member of a
firm so interested.
10.2 Amendment. The Corporation reserves the right, from time to time, to
make any amendment of its Charter, now or hereafter authorized by law, including
any amendment which alters the contract rights, as expressly set forth in its
Charter, of any outstanding Stock. Except as provided in the fourth sentence of
Section 9.9 or as otherwise required by law or as otherwise results from the
application of Article XIV, the Corporation's Charter may be amended only by the
affirmative vote of the holders of not less than a majority of all the votes
entitled to be cast on the matter.
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ARTICLE XI
INDEMNIFICATION
The Corporation shall have the power, to the maximum extent permitted by
Maryland law in effect from time to time, to obligate itself to indemnify, and
to pay or reimburse reasonable expenses in advance of final disposition of a
proceeding, by express provision in its Bylaws, by agreement, or by majority
vote of either its stockholders or disinterested Directors, any one or more of
the following classes of individuals: (1) present or former Directors of the
Corporation, (2) present or former officers of the Corporation, (3) present or
former agents and/or employees of the Corporation, (4) present or former
administrators, trustees or other fiduciaries under any pension, profit sharing,
deferred compensation, or other employee benefit plan maintained by the
Corporation, (5) persons serving or who have served at the request of the
Corporation in any of these capacities for any other corporation, partnership,
joint venture, trust or other enterprise and (6) persons who served as Trustees,
officers, agents and/or employees of Bradley Real Estate Trust, or in similar
capacities for any other predecessor of the Corporation to the extent that such
persons were entitled to indemnity by Bradley Real Estate Trust or such other
predecessor; provided, however, that the Corporation shall not be obligated to
indemnify or advance expenses to a member of the foregoing classes of
individuals ( an "Indemnitee") with respect to proceedings or claims initiated
or brought voluntarily by an Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under the Charter of the Corporation or any other statute or law
or otherwise as provided by the Maryland General Corporation Law, but such
indemnification or advancement of expenses may be provided by the Corporation in
specific cases if the Board of Directors has approved the initiation or bringing
of such suit. However, the Corporation shall not have the power to indemnify any
person to the extent such indemnification would be contrary to Section 2-418 of
the Maryland General Corporation Law or any successor provision of Maryland law
or any other applicable statute, rule or regulation. The Corporation may agree
to indemnify the spouse of an Indemnitee (whether by statute or at common law
and without regard to the location of the governing jurisdiction) to the same
extent and subject to the same limitations applicable to Indemnitee hereunder
for claims arising solely out of the status of such person as the spouse of such
Indemnitee, including claims seeking damages from marital property (including
community property) or property held by the Indemnitee and such spouse or
transferred to such spouse, but such indemnity shall not otherwise extend to
protect the spouse against liabilities caused by the spouse's own acts.
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ARTICLE XII
LIMITATION OF LIABILITY
To the fullest extent permitted under the Maryland General Corporation Law
as in effect on the date of filing these Articles of Incorporation or as the
Maryland General Corporation Law is thereafter amended from time to time, no
Director or officer shall be liable to the Corporation for money damages for any
breach of any duty owed by such Director or officer to the Corporation. Neither
the amendment or the repeal of this Article, nor the adoption of any other
provision in the Corporation's Charter inconsistent with this Article, shall
eliminate or reduce the protection afforded by this Article to a Director or
officer of the Corporation with respect to any matter which occurred, or any
cause of action, suit or claim which but for this Article would have accrued or
arisen, prior to such amendment, repeal or adoption.
ARTICLE XIII
MAJORITY STOCK VOTE
Notwithstanding any provision of law permitting or requiring any action to
be taken or authorized by the affirmative vote of the holders of a greater
number of votes, any such action shall be effective and valid if taken or
authorized by the affirmative vote of holders of shares entitled to cast a
majority of all the votes entitled to be cast on the matter. The preceding
sentence shall not be construed to require a vote of holders of shares that is
inconsistent with the provisions of (i) Section 6.2 relating to election of
Directors by plurality, (ii) the fourth sentence of Section 9.9 or (iii) Article
XIV.
ARTICLE XIV
MISCELLANEOUS
The provisions of this Charter are severable, and if the Directors shall
determine that any one or more of such provisions are in conflict with the REIT
provisions of the Code, or other applicable federal or state laws, the
conflicting provisions shall be deemed never to have constituted a part of this
Charter, even without any amendment of this Charter pursuant to Section 10.2
hereof; provided, however, that such determination by the Directors shall not
affect or impair any of the remaining provisions of this Charter or render
invalid or improper any action taken or omitted prior to such determination. No
Director shall be liable for making or failing to make such a determination.
If any provision of this Charter or any application of such provision shall
be held invalid or unenforceable by any federal or state court having
jurisdiction, such holding shall not in any manner affect or render invalid or
unenforceable such provision in any other jurisdiction, and the validity of the
remaining provisions of this Charter shall not be affected. Other applications
of such provision shall be affected only to the extent necessary to comply with
the determination of such court.
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FIFTH: The current address of the principal office of the Corporation is as
set forth in Article IV of the foregoing amendment and restatement of the
charter.
SIXTH: The name and address of the Corporation's current resident agent is
as set forth in Article V of the foregoing amendment and restatement of the
charter.
SEVENTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Article VI of the foregoing amendment
and restatement of the charter.
EIGHTH: The undersigned President acknowledges these Articles of Amendment
and Restatement to be the corporate act of the Corporation and as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for purjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this 6th day of October, 1994.
ATTEST: BRADLEY REAL ESTATE, INC.
/s/ William B. King By: /s/ E. Lawrence Miller (SEAL)
- ------------------------------- ------------------------------
William B. King E. Lawrence Miller
Secretary President
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EXHIBIT 3.2
ARTICLES OF MERGER
BETWEEN
BRADLEY REAL ESTATE TRUST
AND
BRADLEY REAL ESTATE, INC.
THIS IS TO CERTIFY THAT:
FIRST: The parties named below to these Articles of Merger agree to
merge as hereinafter set forth. Said parties are:
(i) Bradley Real Estate Trust (sometimes also known and conducting
business as John T. Fallon, Stephen G. Kasnet, W. Nicholas Thorndike,
William L. Brown, Don L. Foote, Paul G. Kirk, Jr. and E. Lawrence
Miller as Trustees of Bradley Real Estate Trust under Declaration of
Trust dated January 27, 1961); and
(ii) Bradley Real Estate, Inc.
SECOND: Bradley Real Estate, Inc. (the "Surviving Corporation") is the
entity to survive the merger. The Surviving Corporation is incorporated under
the laws of the State of Maryland.
THIRD: Bradley Real Estate Trust (the "Merging Trust") is a
Massachusetts common law business trust formed under the laws of the
Commonwealth of Massachusetts by Declaration of Trust dated January 27, 1961
filed in the office of the Secretary of State of the Commonwealth of
Massachusetts. Said Declaration of Trust (the "Declaration of Trust") has not
since been amended.
FOURTH: The principal office of the Merging Trust is located in Boston,
Massachusetts. The Merging Trust does not have an office in the State of
Maryland. The Merging Trust owns no interest in land in the State of Maryland.
FIFTH: The principal office of the Surviving Corporation in the State
of Maryland is located c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The Surviving Corporation has qualified to conduct
business as a foreign corporation in (among other states) the Commonwealth of
Massachusetts, and its principal office in said Commonwealth is located at 250
Boylston Street, Boston, Massachusetts 02116.
SIXTH: The charter of the Surviving Corporation will not be further
amended as a result of the Merger.
54
<PAGE> 2
SEVENTH: The total number of shares which each party to these Articles
has authority to issue and the number of shares of each class are as follows:
(a) Surviving Corporation
The total number of shares of all classes of stock which the
Surviving Corporation has authority to issue is one hundred fifty million
(150,000,000) shares, consisting of twenty million (20,000,000) shares of
preferred stock, $0.01 par value per share ("Preferred Stock"); eighty million
(80,000,000) shares of common stock, $0.01 par value per share ("Common Stock");
and fifty million (50,000,000) shares of excess stock, $0.01 par value per share
("Excess Stock"). The aggregate par value of all shares of all classes having a
par value is One Million Five Hundred Thousand Dollars ($1,500,000.00).
(b) Merging Trust
There is no limit on the number of shares of beneficial interest,
par value $1.00, that the Merging Trust may issue.
EIGHTH: At the Effective Time, the Merging Trust shall be merged into
the Surviving Corporation; and, thereupon, the Surviving Corporation shall
possess any and all purposes and powers of the Merging Trust; and all property,
assets, leases, licenses, rights, privileges and powers of whatever nature and
description, real, personal and mixed, and tangible and intangible (collectively
"Assets") of the Merging Trust shall be transferred to, vested in and devolved
upon the Surviving Corporation, without further act or deed, subject to all of
the debts and obligations (collectively "Liabilities") of the Merging Trust, for
which the Surviving Corporation shall be liable. From and after the Effective
Time, the execution of these Articles of Merger shall have the same effect as
(and shall as appropriate constitute) a deed, bill of sale, endorsement,
assignment or other instrument of conveyance or transfer as appropriate by or
from the Merging Trust to the Surviving Corporation of each and all of the
Assets of the Merging Trust, and shall have the same effect as a general
assumption by the Surviving Corporation of each and all of the Liabilities of
the Merging Trust.
NINTH: At the Effective Time, by virtue of the Merger and without any
action on the part of the Merging Trust, the Surviving Corporation or any holder
of any stock of either of them:
(a) Subject to the provisions of clause (b) of this Article NINTH,
each two shares of beneficial interest, $1.00 par value per share, of the
Merging Trust ("Merging Trust Shares") issued and outstanding immediately prior
to the Effective Time shall be converted at the Effective Time into the right to
receive one validly issued, fully paid and nonassessable share of Common Stock,
$0.01 par value per share, of the Surviving Corporation ("Surviving Common
Shares"); and all Merging Trust Shares shall thereupon cease to be outstanding,
shall be canceled and retired and shall cease to exist. On and after the
Effective Time, all of the outstanding certificates which prior to that time
represented Merging Trust Shares shall be deemed for all purposes to evidence
ownership of and to represent Surviving Common Shares into which such Merging
Trust Shares have been converted as provided in the preceding sentence and shall
be so registered on the books and records of the Surviving Corporation or its
transfer agents. Until any such certificate shall have been surrendered for
transfer or otherwise
55
<PAGE> 3
accounted for to the Surviving Corporation or its transfer agent, the registered
owner of any such outstanding certificate shall have and be entitled to exercise
any voting and other rights with respect to, and to receive any dividend or
other distribution on, the whole number of Surviving Common Shares into which
the Merging Trust Shares represented by such certificate have been converted.
After the Effective Time, whenever certificates which formerly represented
Merging Trust Shares are presented for exchange or registration of transfer, the
Surviving Corporation will cause to be issued in replacement thereof
certificates of the Surviving Corporation representing the whole number of
Surviving Common Shares into which such Merging Trust Shares have been converted
and, if applicable, payment for any fractional share interest pursuant to the
following clause (b).
(b) Notwithstanding the provisions of the preceding clause (a),
the Surviving Corporation shall make a payment in lieu of a fractional share to
any stockholder of record (or transferee) who presents for exchange or
registration of transfer at or after the Effective Time a certificate or
certificates representing a number of Merging Trust Shares that is not evenly
divisible by two, which payment shall be in the amount that is equal to the last
quoted sale price for a Merging Trust Share on the American Stock Exchange prior
to the Effective Time, and upon such payment such fractional interest in such
share shall cease to be outstanding, shall be cancelled and retired and shall
cease to exist.
(c) Each Merging Trust Share issued and held in the Merging
Trust's treasury, if any, at the Effective Time shall cease to be outstanding,
shall be canceled and retired without payment of any consideration therefor and
shall cease to exist.
(d) Each Surviving Common Share issued and outstanding immediately
prior to the Effective Time, if any, shall cease to be outstanding, shall be
canceled and retired without payment of any consideration therefor and shall
cease to exist.
(e) Each option or other right to purchase or otherwise acquire
Merging Trust Shares pursuant to stock option or other stock-based plans of the
Merging Trust granted and outstanding immediately prior to the Effective Time
shall be converted into and become a right to purchase or otherwise acquire
one-half the number of Surviving Common Shares at two times the price per share
and upon the same terms and subject to the same conditions as applicable to such
options or other rights immediately prior to the Effective Time; provided,
however, that all rights under the Merging Trust's 1989 Shareholder Rights
Agreement shall terminate, shall be cancelled and retired without any
consideration therefor and shall cease to exist, and no such rights shall adhere
to or be deemed to be a part of Surviving Common Shares.
TENTH: At the Effective time, the following persons shall become the
Directors of the Surviving Corporation for terms expiring at the Annual Meeting
of Shareholders held in the calendar year indicated:
TERM EXPIRING IN 1995 TERM EXPIRING IN 1996 TERM EXPIRING IN 1997
--------------------- --------------------- ---------------------
Paul G. Kirk, Jr. William L. Brown Don L. Foote
W. Nicholas Thorndike E. Lawrence Miller Stephen G. Kasnet
John B. Hynes, III Joseph E. Hakim A. Robert Towbin
56
<PAGE> 4
If any of the aforenamed individuals is not willing or able to serve as Director
at the Effective Time, the vacancy in such position shall be filled in
accordance with the provisions of the Bylaws of the Surviving Corporation.
ELEVENTH: The terms and conditions of the transaction described in
these Articles were duly advised, authorized and approved by the Merging Trust
in the manner and by the vote required by the Declaration of Trust of the
Merging Trust and the laws of the Commonwealth of Massachusetts, as follows:
(a) The Board of Trustees of the Merging Trust, at a meeting duly
called and held on July 21, 1994, at which a quorum was present, adopted and
approved the Incorporation Merger Plan dated July 21, 1994 (the "Incorporation
Merger Plan") providing for the transactions described herein pursuant to the
authority granted to the Trustees under Section 2.2 of the Declaration of Trust,
which provides that the Trustees
"without any action or consent by the shareholders shall have and may
exercise at any time, and from time to time, without liability for the
exercise or non-exercise of the same, the following powers, authorities
and discretions which may be exercised by them in their absolute
discretion and upon such terms and conditions as they may from time to
time deem proper:
* * *
(y) to transfer, after paying or providing for all liabilities of the
trust, all or any part of the trust property to a corporation,
association or trust in return for any stock, shares of beneficial
interest or other securities of the transferee or any other entity, and
to retain or distribute to the shareholders hereof any securities or
other property received from the transferee".
Notwithstanding that Section 2.2(y) of the Declaration of Trust authorizes the
Trustees to adopt and implement the Incorporation Merger Plan without any action
or consent by the shareholders of the Merging Trust, the Trustees conditioned
the Merger upon approval by the holders of a majority of the outstanding Merging
Trust Shares (exclusive of certain Merging Trust Shares determined by the
Trustees, with the consent of the holders thereof, not to be entitled to vote)
at a meeting called for the purpose.
(b) At a Special Meeting of Shareholders of the Merging Trust
called for the purpose held on September 29, 1994, the holders of a majority
(including the requisite majority) of the Merging Trust Shares approved the
Incorporation Merger Plan, and such resolution is filed with the minutes of the
proceedings of the shareholders of the Merging Trust.
TWELFTH: The terms and conditions of the transaction described in these
Articles were duly advised, authorized and approved by the Surviving Corporation
in the manner and by the vote required by the laws of the State of Maryland and
the charter of the Surviving Corporation, as follows:
(a) A majority of the Board of Directors of the Surviving
Corporation, at a meeting duly called and held on July 21, 1994, at which a
quorum was present, adopted and
57
<PAGE> 5
approved the Incorporation Merger Plan dated July 21, 1994 (the "Incorporation
Merger Plan"), providing for the transactions described herein. At such time,
there was no capital stock of the Surviving Corporation outstanding or
subscribed for.
(b) The only capital stock of the Corporation subsequently
outstanding or subscribed for is held by the Merging Trust, which by its
execution hereof confirms its approval of the Incorporation Merger Plan.
THIRTEENTH: These Articles of Merger shall become effective upon the
later of (i) acceptance for filing by the State Department of Assessments and
Taxation of Maryland or (ii) 4:00 o'clock p.m., Eastern Daylight Time, on
October 17, 1994 (the "Effective Time"), unless, prior to the Effective Time,
supplemental articles of merger shall have been filed which extend the date or
time of effectiveness of these Articles of Merger to a date or time later than
the Effective Time.
FOURTEENTH: Each of the undersigned President of the Surviving
Corporation and each of the undersigned President and Trustees (being a majority
of all of the Trustees) of the Merging Trust (i) acknowledges these Articles of
Merger to be the respective corporate or trust act of the Surviving Corporation
and of the Merging Trust, and in the case of each Trustee his free act and deed
as such Trustee, (ii) and further, as to all matters or facts required to be
verified under oath, acknowledges that, to the best of his knowledge,
information and belief, these matters and facts relating to the party on whose
behalf he has signed are true in all material respects and that this statement
is made under the penalties of perjury.
58
<PAGE> 6
IN WITNESS WHEREOF, these Articles of Merger have been duly
executed by the parties hereto this 6th day of October, 1994.
ATTEST: BRADLEY REAL ESTATE , INC
/s/ William B. King By: /s/ E. Lawrence Miller (SEAL)
- --------------------------------- --------------------------------
William B. King, Secretary E. Lawrence Miller, President
ATTEST: BRADLEY REAL ESTATE TRUST
/s/ William B. King By: /s/ E. Lawrence Miller (SEAL)
- --------------------------------- --------------------------------
William B. King, Secretary E. Lawrence Miller, President
/s/ Stephen G. Kasnet
-----------------------------------
Stephen G. Kasnet, Trustee
/s/ W. Nicholas Thorndike
-----------------------------------
W. Nicholas Thorndike, Trustee
/s/ William L. Brown
-----------------------------------
William L. Brown, Trustee
/s/ Don L. Foote
-----------------------------------
Don L. Foote, Trustee
/s/ Paul G. Kirk, Jr.
-----------------------------------
Paul G. Kirk, Jr., Trustee
/s/ E. Lawrence Miller
-----------------------------------
E. Lawrence Miller, Trustee
(each of the aforesaid Trustees as
Trustees of Bradley Real Estate Trust
under Declaration of Trust dated January
27, 1961)
COMMONWEALTH OF MASSACHUSETTS )
59
<PAGE> 7
) ss
COUNTY OF SUFFOLK )
Then personally appeared before me E. Lawrence Miller, to me known to
be President of Bradley Real Estate, Inc., who acknowledged the foregoing to be
the free act and deed of said corporation, this 6th day of October, 1994.
/s/ William Bruce King
-------------------------------------
William Bruce King, Notary Public
My commission expires August 24, 2001
COMMONWEALTH OF MASSACHUSETTS )
) ss
COUNTY OF SUFFOLK )
Then personally appeared before me E. Lawrence Miller, to me known to
be President and a Trustee of Bradley Real Estate Trust, and Stephen G. Kasnet,
W. Nicholas Thorndike, William L. Brown, Don L. Foote and Paul G. Kirk, Jr.,
each to me known to be a Trustee of Bradley Real Estate Trust, and each of whom
acknowledged the foregoing to be the free act and deed of Bradley Real Estate
Trust and his own free act and deed as a Trustee of Bradley Real Estate Trust,
this 6th day of October, 1994.
/s/ William Bruce King
-------------------------------------
William Bruce King, Notary Public
My commission expires August 24, 2001
60
<PAGE> 1
EXHIBIT 3.8
BRADLEY REAL ESTATE, INC.
ARTICLES SUPPLEMENTARY
Bradley Real Estate, Inc., a Maryland corporation (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Section 7.5 of the Articles of
Amendment and Restatement of the Corporation (the "Charter"), the Board of
Directors of the Corporation (the "Board of Directors"), voted at a meeting held
on September 14, 1999, to reclassify 200,000 shares (the "Shares") of 8.875%
Series C Cumulative Redeemable Perpetual Preferred Stock as 200,000 shares of
undesignated and unclassified Preferred Stock (as defined in the Charter), which
reclassification shall be reflected in Article VII of the Charter upon any
restatement of the Charter.
SECOND: The Shares have been reclassified by the Board of Directors
under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
61
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Secretary on this 22nd day of October, 1999.
BRADLEY REAL ESTATE, INC.
By: /s/ Thomas P. D"Arcy (SEAL)
-----------------------------
Thomas P. D"Arcy, President
ATTEST:
/s/ Marianne Dunn
- ------------------------
Marianne Dunn, Secretary
62
<PAGE> 1
EXHIBIT 3.9
BYLAWS
OF
BRADLEY REAL ESTATE, INC.
July 21, 1994
BYLAWS
OF
BRADLEY REAL ESTATE, INC.
<PAGE> 2
BYLAWS
OF
BRADLEY REAL ESTATE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
MEETINGS OF STOCKHOLDERS......................................................................................68
1.01 PLACE.......................................................................................68
1.02 ORGANIZATIONAL MEETING; ANNUAL MEETING......................................................68
1.03 MATTERS TO BE CONSIDERED AT ANNUAL MEETING..................................................68
1.04 SPECIAL MEETINGS............................................................................70
1.05 NOTICE......................................................................................70
1.06 SCOPE OF NOTICE.............................................................................70
1.07 QUORUM......................................................................................70
1.08. VOTING......................................................................................70
1.09 PROXIES.....................................................................................71
1.10 CONDUCT OF MEETINGS.........................................................................71
1.11 TABULATION OF VOTES.........................................................................71
1.12 VOTING BY BALLOT............................................................................72
ARTICLE II
DIRECTORS.....................................................................................................72
2.01 GENERAL POWERS..............................................................................72
2.02 OUTSIDE ACTIVITIES..........................................................................72
2.03. NUMBER, TENURE AND QUALIFICATION............................................................72
2.04 NOMINATION OF DIRECTORS.....................................................................73
2.05 ANNUAL AND REGULAR MEETINGS.................................................................74
2.06 SPECIAL MEETINGS............................................................................75
2.07 NOTICE......................................................................................75
2.08 QUORUM......................................................................................75
2.09 VOTING......................................................................................75
2.10 CONDUCT OF MEETINGS.........................................................................75
2.11 RESIGNATIONS................................................................................76
2.12 REMOVAL OF DIRECTORS........................................................................76
2.13 VACANCIES...................................................................................76
</TABLE>
64
<PAGE> 3
BYLAWS
OF
BRADLEY REAL ESTATE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
2.14 INFORMAL ACTION BY DIRECTORS................................................................76
2.15 COMPENSATION................................................................................76
ARTICLE III
COMMITTEES....................................................................................................76
3.01 AUDIT COMMITTEE.............................................................................76
3.02 OTHER COMMITTEES............................................................................77
3.03 QUORUM AND VOTING...........................................................................77
3.04 CONDUCT OF MEETINGS; REPORTS TO FULL BOARD..................................................77
3.05 INFORMAL ACTION BY COMMITTEES...............................................................77
ARTICLE IV
OFFICERS..................................................................................................... 78
4.01 ENUMERATION.................................................................................78
4.02 POWERS AND DUTIES OF THE PRESIDENT..........................................................78
4.03 VICE PRESIDENTS.............................................................................78
4.04 CHIEF FINANCIAL OFFICER, TREASURER AND ASSISTANT TREASURER..................................78
4.05 SECRETARY AND ASSISTANT SECRETARY...........................................................78
4.06 EXECUTION OF DEEDS, LEASES, CHECKS AND OTHER DOCUMENTS......................................79
4.07 REMOVAL.....................................................................................79
4.08 OUTSIDE ACTIVITIES..........................................................................79
4.09 SALARIES....................................................................................79
ARTICLE V
SHARES OF STOCK...............................................................................................79
5.01 NO CERTIFICATES FOR STOCK...................................................................79
5.02 ELECTION TO ISSUE CERTIFICATES..............................................................79
5.03 STOCK LEDGER................................................................................80
</TABLE>
65
<PAGE> 4
BYLAWS
OF
BRADLEY REAL ESTATE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.04 RECORDING TRANSFERS OF STOCK................................................................80
5.05 LOST CERTIFICATE............................................................................81
5.06 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE..........................................81
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS...................................................................................82
6.01 DECLARATION.................................................................................82
6.02 CONTINGENCIES...............................................................................82
ARTICLE VII
INDEMNIFICATION...............................................................................................82
7.01 INDEMNIFICATION.............................................................................82
ARTICLE VIII
NOTICES.......................................................................................................82
8.01 NOTICES.....................................................................................83
8.02 SECRETARY TO GIVE NOTICE....................................................................83
8.03 WAIVER OF NOTICE............................................................................83
ARTICLE IX
MISCELLANEOUS.................................................................................................83
9.01 BOOKS AND RECORDS...........................................................................83
9.02 INSPECTION OF BYLAWS AND CORPORATE RECORDS..................................................84
9.03 CONTRACTS...................................................................................84
9.04 CHECKS, DRAFTS, ETC.........................................................................84
9.05 LOANS.......................................................................................84
9.06 FISCAL YEAR.................................................................................85
</TABLE>
66
<PAGE> 5
BYLAWS
OF
BRADLEY REAL ESTATE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.07 ANNUAL REPORT...............................................................................85
9.08 INTERIM REPORTS.............................................................................85
9.09 OTHER REPORTS...............................................................................85
9.10 BYLAWS SEVERABLE............................................................................85
ARTICLE X
AMENDMENT OF BYLAWS...........................................................................................85
10.1 BY DIRECTORS................................................................................85
10.2 BY STOCKHOLDERS.............................................................................85
</TABLE>
67
<PAGE> 6
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.01 PLACE. All meetings of the holders of the issued and outstanding
common stock and preferred stock of the Corporation (the "Stockholders") shall
be held at the principal executive office of the Corporation or such other place
within the United States as shall be stated in the notice of the meeting.
1.02 ORGANIZATIONAL MEETING; ANNUAL MEETING. An annual meeting of the
Stockholders for the election of Directors and the transaction of such other
business as properly may be brought before the meeting shall be held on the
second Wednesday in May of each year or at such other date and time as may be
fixed by the Board of Directors. If the date fixed for the annual meeting shall
be a legal holiday, such meeting shall be held on the next succeeding business
day. Any and all references hereafter in these Bylaws to an annual meeting or to
annual meetings shall be deemed to refer also to any special meeting(s) in lieu
thereof.
1.03 MATTERS TO BE CONSIDERED AT ANNUAL MEETING.
(a) At an annual meeting of Stockholders, only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been properly brought before the annual meeting (i) by, or at the
direction of, a majority of the Board of Directors, or (ii) by any holder of
record (both as of the time notice of such proposal is given by the Stockholder
as set forth below and as of the record date for the annual meeting in question)
of any shares of the Corporation's capital stock entitled to vote at such annual
meeting and on such proposal who complies with the procedures set forth in this
Section 1.03. For a proposal to be properly brought before an annual meeting by
a Stockholder, other than a proposal of a Stockholder entitled to vote thereon
and included in the Corporation's proxy statement pursuant to Rule 14a-8 of the
Securities Exchange Act of 1934, as amended, the Stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation, and such
Stockholder or his representative must be present in person at the annual
meeting. A Stockholder's notice shall be timely if delivered to, or mailed and
received at, the principal executive offices of the Corporation (A) not less
than 75 days nor more than 150 days prior to the anniversary date of the
immediately preceding annual meeting of Stockholders (which is the case of the
annual meeting in 1995 shall be deemed to be the annual meeting of Shareholders
of Bradley Real Estate Trust that was held on May 12, 1994) or special meeting
in lieu thereof (the "Anniversary Date") or (B) in the event that the annual
meeting of Stockholders is called for a date more than 7 calendar days prior to
the Anniversary Date, not later than the close of business on (1) the 20th
calendar day (or if that day is not a business day for the Corporation, on the
next succeeding business day) following the earlier of (x) the date on which
notice of the date of such meeting was mailed to Stockholders, or (y) the date
on which the date of such meeting was publicly disclosed, or (2) if such date of
notice or public disclosure occurs more than 75 calendar days prior to the
scheduled date of such meeting, then the later of (x) the 20th calendar day (or
if that day is not a business day for the Corporation, on the next succeeding
business day) following the date of the first to occur of such notice or public
disclosure or (y) the 75th calendar day prior to such scheduled date of such
meeting (or if that day is not a business day for the Corporation, on the next
succeeding business day).
68
<PAGE> 7
(b) A Stockholder's notice to the Secretary shall set
forth as to each matter the Stockholder proposes to bring before the annual
meeting (i) a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's stock
transfer books, of the Stockholder proposing such business and of the beneficial
owners (if any) of the stock registered in such Stockholder's name and the name
and address of other Stockholders known by such Stockholder to be supporting
such proposal on the date of such Stockholder's notice, (iii) the class and
number of shares of the Corporation's capital stock which are beneficially owned
by the Stockholder and such beneficial owners (if any) on the date of such
Stockholder's notice and by any other Stockholders known by such Stockholder to
be supporting such proposal on the date of such Stockholder's notice, and (iv)
any financial interest of the Stockholder or of any such beneficial owner in
such proposal.
(c) If the Board of Directors, or a designated committee
thereof, determines that any Stockholder proposal was not timely made in
accordance with the terms of this Section 1.03, such proposal shall not be
presented for action at the annual meeting in question. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a Stockholder's notice does not satisfy the informational
requirements of this section in any material respect, the Secretary of the
Corporation shall promptly notify such Stockholder of the deficiency in the
notice. Such Stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within the period of time, not
to exceed five (5) days from the date such deficiency notice is given to the
Stockholder, determined by the Board of Directors or such committee. If the
deficiency is not cured within such period, or if the Board of Directors or such
committee determines that the additional information provided by the
Stockholder, together with the information previously provided, does not satisfy
the requirements of this Section 1.03 in any material respect, then such
proposal shall not be presented for action at the annual meeting in question.
(d) Notwithstanding the procedure set forth in the
preceding paragraph, if neither the Board of Directors nor such committee makes
a determination as to the validity of any Stockholder proposal as set forth
above, the presiding Officer of the annual meeting shall determine and declare
at the annual meeting whether the Stockholder proposal was made in accordance
with the terms of this Section 1.03. If the presiding Officer determines that a
Stockholder proposal was made in accordance with the terms of this Section 1.03,
the presiding Officer shall so declare at the annual meeting. If the presiding
Officer determines that a Stockholder proposal was not made in accordance with
the provisions of this Section 1.03, the presiding Officer shall so declare at
the annual meeting and such proposal shall not be acted upon at the annual
meeting.
69
<PAGE> 8
(e) This provision shall not prevent the consideration
and approval or disapproval at the annual meeting of reports of Officers,
Directors and committees of the Board of Directors, but in connection with such
reports, no new business shall be acted upon at such annual meeting except in
accordance with the provisions of this Section 1.03.
1.04 SPECIAL MEETINGS. The Chairman of the Board, the President or a
majority of the Board of Directors may call special meetings of the
Stockholders. Special meetings of Stockholders shall also be called by the
Secretary upon the written request of the holders of shares entitled to cast 25%
or more of the votes entitled to be cast at such meeting. Such request shall
state the purpose or purposes of such meeting and the matters proposed to be
acted on thereat. The date, time, place and record date for any special meeting,
including a special meeting called at the request of Stockholders, shall be
established by the Board of Directors or Officer calling the same.
1.05 NOTICE. Not less than ten (10) nor more than ninety (90) days
before the date of every meeting of Stockholders, written or printed notice of
such meeting shall be given, in accordance with Article 8, to each Stockholder
entitled to vote or entitled to notice by statute, stating the time and place of
the meeting and, in the case of a special meeting or as otherwise may be
required by statute, the purpose or purposes for which the meeting is called.
1.06 SCOPE OF NOTICE. No business shall be transacted at a special
meeting of Stockholders except that specifically designated in the notice of the
meeting. Any business of the Corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business as is
required by statute to be stated in such notice.
1.07 QUORUM. At any meeting of Stockholders, the presence in person or
by proxy of Stockholders entitled to cast a majority of the votes entitled to
vote on a particular measure shall constitute a quorum with respect to that
measure; but this Section shall not affect any requirement under any statute or
the Articles of Incorporation of the Corporation, as amended (the "Charter"),
for the vote necessary for the adoption of any measure. If, however, a quorum
with respect to a particular measure is not present at any meeting of the
Stockholders, the Stockholders present in person or by proxy entitled to vote on
such measure shall have the power to adjourn the meeting from time to time
without notice other than announcement at the meeting until a quorum with
respect to such measure is present and the meeting so adjourned may be
reconvened without further notice. At any adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted at the
meeting as originally notified. The Stockholders present at a meeting which has
been duly called and convened and at which a quorum is present at the time
counted may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Stockholders to leave less than a quorum.
1.08. VOTING. A majority of the votes cast at a meeting of Stockholders
duly called and at which a quorum is present shall be sufficient to take or
authorize action upon any matter
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which may properly come before the meeting, unless more than a majority of the
votes cast is specifically required by statute (after giving effect to the
provisions of Article XIII of the Charter providing for a majority vote), the
Charter or these Bylaws. Unless otherwise provided by statute, the Charter or
these Bylaws, each outstanding share (a "Share") of capital stock of the
Corporation (the "Stock"), regardless of class, shall be entitled to one vote
upon each matter submitted to a vote at a meeting of Stockholders. Pursuant to
Section 3-702 of the Maryland General Corporation Law, any and all acquisitions
of Shares of Stock are hereby exempted from the provisions of Title 3, Subtitle
7 of the Maryland General Corporation Law, which relates to voting rights of
certain control shares. Shares of its own Stock directly or indirectly owned by
the Corporation shall not be voted in any meeting and shall not be counted in
determining the total number of outstanding Shares entitled to vote at any given
time, but Shares of its own voting Stock held by it in a fiduciary capacity may
be voted and shall be counted in determining the total number of outstanding
Shares at any given time. Notwithstanding anything else contained in these
Bylaws, the rights of Excess Stock and the holders of Excess Stock shall be
limited to the rights provided in the Charter, as amended from time to time.
Notwithstanding the foregoing, a plurality of the votes cast at a meeting of
Stockholders duly called and at which a quorum is present shall be sufficient to
elect a Director.
1.09 PROXIES. A Stockholder may vote the Shares owned of record by him
or her, either in person or by proxy executed in writing by the Stockholder or
by his or her duly authorized attorney in fact. Such proxy shall be filed with
the Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
1.10 CONDUCT OF MEETINGS. The Chairman of the Board or, in the absence
of the Chairman, the President, or, in the absence of the Chairman, President
and Vice Presidents, a presiding Officer elected at the meeting, shall preside
over meetings of the Stockholders. The Secretary of the Corporation, or, in the
absence of the Secretary and Assistant Secretaries, the person appointed by the
presiding Officer of the meeting shall act as secretary of such meeting.
1.11 TABULATION OF VOTES. At any annual or special meeting of
Stockholders, the presiding Officer shall be authorized to appoint a teller for
such meeting ("the Teller"). The Teller may, but need not, be an Officer or
employee of the Corporation. The Teller shall be responsible for tabulating or
causing to be tabulated shares voted at the meeting and reviewing or causing to
be reviewed all proxies. In tabulating votes, the Teller shall be entitled to
rely in whole or in part on tabulations and analyses made by personnel of the
Corporation, its counsel, its transfer agent, its registrar or such other
organizations that are customarily employed to provide such services. The Teller
shall be authorized to determine the legality and sufficiency of all votes cast
and proxies delivered under the Charter, Bylaws and applicable law. The
presiding Officer may review all determinations made by the Teller hereunder,
and in doing so the presiding Officer shall be entitled to exercise his or her
sole
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judgment and discretion and he or she shall not be bound by any determinations
made by the Teller.
1.12 VOTING BY BALLOT. Voting on any question or in any election may be
by voice or show of hands unless the presiding Officer shall order or any
Stockholder shall demand that voting be by ballot.
ARTICLE II
DIRECTORS
2.01 GENERAL POWERS. The business and affairs of the Corporation shall
be managed by its Board of Directors.
2.02 OUTSIDE ACTIVITIES. The Board of Directors and its members are
required to spend only such time managing the business and affairs of the
Corporation as is necessary to carry out their duties in accordance with Section
2-405.1 of the Maryland General Corporation Law. Any interest (including any
interest as defined in Section 2-419(a) of the Maryland General Corporation Law)
that a Director has in any investment opportunity presented to the Corporation
must be disclosed by such Director to the Board of Directors (and, if voting
thereon, to the Stockholders or to any committee of the Board of Directors)
within ten (10) days after the later of the date upon which such Director
becomes aware of such interest or the date upon which such Director becomes
aware that the Corporation is considering such investment opportunity. If such
interest comes to the interested Director's attention after a vote to take such
investment opportunity, the voting body shall be notified of such interest and
shall reconsider such investment opportunity if not already consummated or
implemented.
2.03. NUMBER, TENURE AND QUALIFICATION. The number of Directors of the
Corporation shall be that number set forth in the Charter or such other number
as may be designated from time to time by resolution of a majority of the entire
Board of Directors; provided, however, that the number of Directors shall never
be less than the number required by the Maryland General Corporation Law, as
amended from time to time, and further provided that the tenure of office of a
Director shall not be affected by any decrease in the number of Directors. The
Board of Directors shall be divided into three classes, the number of Directors
of each class being as nearly equal as practical, with the term of office of one
class expiring each year. Each Director shall serve for the term for which
elected and until his or her successor is elected and qualified, unless at the
end of such term the number of Directors of such class is reduced and no
successor is to be elected.
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2.04 NOMINATION OF DIRECTORS.
(a) Nominations of candidates for election as Directors
of the Corporation at any annual meeting of Stockholders may be made (i) by, or
at the direction of, a majority of the Board of Directors or (ii) by any holder
of record (both as of the time notice of such nomination is given by the
Stockholder as set forth below and as of the record date for the annual meeting
in question) of any shares of the Corporation's capital stock entitled to vote
for the election of Directors at such meeting who complies with the procedures
set forth in this Section 2.04. Any Stockholder who seeks to make such a
nomination, or his representative, must be present in person at the annual
meeting. Only persons nominated in accordance with the procedures set forth in
this Section 2.04 shall be eligible for election as Directors at an annual
meeting of Stockholders.
(b) Nominations, other than those made by, or at the
direction of, the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation as set forth in this Section 2.04. A
Stockholder's notice shall be timely if delivered to, or mailed and received at,
the principal executive offices of the Corporation (i) not less than 75 days nor
more than 150 days prior to the Anniversary Date or (ii) in the event that the
annual meeting of Stockholders is called for a date more than 7 calendar days
prior to the Anniversary Date, not later than the close of business on (A) the
20th calendar day (or if that day is not a business day for the Corporation, on
the next succeeding business day) following the earlier of (1) the date on which
notice of the date of such meeting was mailed to Stockholders, or (2) the date
on which the date of such meeting was publicly disclosed, or (B) if such date of
notice or public disclosure occurs more than 75 calendar days prior to the
scheduled date of such meeting, then the later of (1) the 20th calendar day (or
if that day is not a business day for the Corporation, on the next succeeding
business day) following the date of the first to occur of such notice or public
disclosure or (2) the 75th calendar day prior to such scheduled date of such
meeting (or if that day is not a business day for the Corporation, on the next
succeeding business day).
(c) A Stockholder's notice of nomination shall set forth
as to each person the Stockholder proposes to nominate for election as a
Director (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person for the past
five years; (iii) the class and number of shares of the Corporation's capital
stock which are beneficially owned by such person on the date of such notice;
(iv) such nominee's written consent to be named in the proxy statement as a
nominee and to serve as a Director if elected, and (v) any other information
relating to such person that is required to be disclosed in solicitations of
proxies with respect to nominees for election as may be deemed necessary or
desirable by the Corporation's counsel, in the exercise of his or her
discretion. Notice by a Stockholder shall, in addition to the above-referenced
information, set forth as to the Stockholder giving the notice (A) the name and
address, as they appear on the Corporation's stock transfer books, of such
Stockholder and of the beneficial owners (if any) of the stock registered in
such Stockholder's name; (B) the name and address of other
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Stockholders known by such Stockholder to be supporting such nominees on the
date of such Stockholder's notice; (C) the class and number of shares of the
Corporation's capital stock which are beneficially owned by such Stockholder and
such beneficial owners (if any) on the date of such Stockholder notice; and (D)
the class and number of shares of the Corporation's capital stock which are
beneficially owned by any other Stockholders known by such Stockholder to be
supporting such nominees on the date of such Stockholder notice. At the request
of the Board of Directors, any person nominated by or at the direction of the
Board of Directors for election as a Director at an annual meeting shall furnish
to the Secretary of the Corporation that information which would be required to
be set forth in a Stockholder's notice of nomination of such nominee.
(d) No person shall be elected by the Stockholders as a
Director of the Corporation unless nominated in accordance with the procedures
set forth in this Section 2.04. If the Board of Directors, or a designated
committee thereof, determines that a nomination made by any Stockholder was not
timely made in accordance with the terms of this Section, such nomination shall
not be considered at the annual meeting in question. If the Board of Directors,
or a designated committee thereof, determines that the information provided in a
Stockholder's notice does not satisfy the informational requirements of this
Section 2.04 in any material respect, the Secretary of the Corporation shall
promptly notify such Stockholder of the deficiency in the notice. Such
Stockholder shall have an opportunity to cure the deficiency by providing
additional information to the Secretary within the period of time, not to exceed
5 days from the date such deficiency notice is given to such Stockholder,
determined by the Board of Directors or such committee. If the deficiency is not
cured within such period, or if the Board of Directors or such committee
determines that the additional information provided by such Stockholder,
together with the information previously provided, does not satisfy the
requirements of this Section 2.04 in any material respect, such nomination shall
not be considered at the annual meeting in question.
(e) Notwithstanding the procedures set forth in the
preceding paragraph, if neither the Board of Directors nor a designated
committee thereof makes a determination as to the validity of any nominations by
any Stockholder as set forth above, the presiding Officer of the Stockholders
meeting shall determine and declare at the Stockholders meeting whether a
nomination was made in accordance with the terms of this Section 2.04. If the
presiding Officer determines that a nomination was not made in accordance with
the terms of this Section 2.04, and such nomination shall be disregarded, and
the Board of Directors shall make all Director nominations on behalf of the
Corporation.
2.05 ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
Directors may be held immediately after and at the same place as the annual
meeting of Stockholders, or at such other time and place, either within or
without the State of Maryland, as is selected by resolution of the Board of
Directors, and no notice other than this Bylaw or such resolution shall be
necessary. The Board of Directors may provide, by resolution, the
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time and place, either within or without the State of Maryland, for the holding
of regular meetings of the Board of Directors without other notice than such
resolutions.
2.06 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the President or a
majority of the Directors then in office. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Board of Directors called by them.
2.07 NOTICE. Notice of any special meeting to be provided herein shall
be given by telephone or by written notice delivered personally, telegraphed or
telecopied at least twenty-four (24) hours prior to the meeting, or by mail at
least five (5) days prior to the meeting, to each Director at his or her
business or residence. Neither the business to be transacted at, nor the purpose
of, any annual, regular or special meeting of the Board of Directors need be
specified in the notice, unless specifically required by statute, the Charter or
these Bylaws.
2.08 QUORUM. A majority of the Board of Directors then in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors; provided, however, that a quorum for the transaction of business
with respect to any matter in which any Director (or affiliate of such Director)
who is not an independent Director has any interest shall consist of a majority
of the Directors that includes a majority of the independent Directors then in
office. If less than a majority of the Board of Directors is present at said
meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice.
2.09 VOTING. The act of a majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
unless the concurrence of a greater proportion is required for such action by
applicable statute, the Charter or these Bylaws; provided, however, that no act
relating to any matter in which a Director (or affiliate of such Director) who
is not an independent Director has any interest shall be the act of the Board of
Directors unless such act has been approved by a majority of the Board of
Directors that includes a majority of the independent Directors.
2.10 CONDUCT OF MEETINGS. All meetings of the Board of Directors shall
be called to order and presided over by the Chairman of the Board, or in the
absence of the Chairman of the Board, by the President (if a member of the Board
of Directors) or, in the absence of the Chairman of the Board and the President,
by a member of the Board of Directors selected by the members present. The
Secretary of the Corporation, or in the absence of the Secretary, any Assistant
Secretary, shall act as secretary at all meetings of the Board of Directors, and
in the absence of the Secretary and Assistant Secretaries, the presiding Officer
of the meeting shall designate any person to act as secretary of the meeting.
Members of the Board of Directors may participate in meetings of the Board of
Directors by conference
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telephone or similar communications equipment by means of which all Directors
participating in the meeting can hear each other at the same time, and
participation in a meeting in accordance herewith shall constitute presence in
person at such meeting for all purposes of these Bylaws.
2.11 RESIGNATIONS. Any Director may resign from the Board of Directors
or any committee thereof at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or if no time be specified,
at the time of the receipt of notice of such resignation by the President or the
Secretary.
2.12 REMOVAL OF DIRECTORS. Consistent with the Charter, the
Stockholders may, at any time, remove any Director, with cause, by the
affirmative vote of a majority of all the votes entitled to be cast on the
matter, and may elect a successor to fill any resulting vacancy for the balance
of the term of the removed Director.
2.13 VACANCIES. The Stockholders may elect a successor to fill a
vacancy on the Board of Directors which results from the removal of a Director.
Furthermore, any vacancy occurring in the Board of Directors for any cause other
than by reason of an increase in the number of directors may be filled by a
majority vote of the remaining Directors, although such majority is less than a
quorum. Any vacancy occurring in the Board of Directors by reason of an increase
in the number of directors may be filled by a majority vote of the entire Board
of Directors. A Director elected by the Board of Directors to fill a vacancy
shall hold office until the next annual meeting of Stockholders at which the
term of the class of Directors to which such Director is elected expires or
until his or her successor is elected and qualified.
2.14 INFORMAL ACTION BY DIRECTORS. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to such action is signed by all of the
Directors and such written consent is filed with the minutes of the Board of
Directors. Consents may be signed by different Directors on separate
counterparts.
2.15 COMPENSATION. An annual fee for services and payment for expenses
of attendance at each meeting of the Board of Directors, or of any committee
thereof, may be allowed to any Director by resolution of the Board of Directors.
ARTICLE III
COMMITTEES
3.01 AUDIT COMMITTEE. The Board of Directors shall, from time to time,
by a majority vote of the Directors, appoint from their number an Audit
Committee, consisting of one or more Directors, a majority of which are
"independent Directors". For purposes of this
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Section 3.01, "independent Directors" shall mean a person other than an officer
or employee of the Corporation or of any advisor to the Corporation and other
than any other individual having a relationship which, in the opinion of the
Board of Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a Director. The Audit Committee shall
recommend to the full Board of Directors the selection of an independent public
accounting firm to audit the books of the Corporation, shall meet with
representatives of the Corporation's independent public accounting firm at least
annually, and shall review all related party relationships or transactions
between the Corporation and any Director or Officer (or affiliate of a Director
or Officer) of the Corporation and potential conflict of interest situations
where appropriate.
3.02 OTHER COMMITTEES. The Board of Directors may appoint such other
committees of two or more Directors as the Board of Directors from time to time
deems desirable and may delegate to those committees any of the powers of the
Board of Directors, except those powers which the Board of Directors is
specifically prohibited from delegating pursuant to Section 2-411 of the
Maryland General Corporation Law.
3.03 QUORUM AND VOTING. A majority of the members of any committee
shall constitute a quorum for the transaction of business by such committee, and
the act of a majority of the quorum shall constitute the act of the committee,
except that no act relating to any matter in which any Director (or affiliate of
such Director) has any personal interest shall be the act of any committee
unless a majority of the Directors on the committee not having such personal
interest vote for such act.
3.04 CONDUCT OF MEETINGS; REPORTS TO FULL BOARD. Each committee shall
designate a presiding Officer of such committee, and if not present at a
particular meeting, the committee shall select a presiding Officer for such
meeting. Members of any committee may participate in meetings of such committee
by conference telephone or similar communications equipment by means of which
all Directors participating in the meeting can hear each other at the same time,
and participation in a meeting in accordance herewith shall constitute presence
in person at such meeting for all purposes of these Bylaws. Each committee shall
keep minutes of its meetings, and report the results of any proceedings at the
next succeeding annual or regular meeting of the Board of Directors.
3.05 INFORMAL ACTION BY COMMITTEES. Any action required or permitted to
be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of
proceedings of such committee. Consents may be signed by different members on
separate counterparts.
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ARTICLE IV
OFFICERS
4.01 ENUMERATION. The Officers of the Corporation shall be a President,
a Treasurer and a Secretary, and such other officers (including a Chairman of
the Board, one or more Vice Presidents, Assistant Treasurers, and Assistant
Secretaries) as are elected or appointed by the Board of Directors. Officers
shall be elected or appointed by and shall hold office at the pleasure of the
Board of Directors. When the duties do not conflict, any two or more offices may
be held by the same person. The Chairman, if any, shall be elected from the
Board of Directors, but no other Officer need be a Director. Election or
appointment of an Officer or agent shall not of itself create contract rights
between the Corporation and such Officer or agent.
4.02 POWERS AND DUTIES OF THE PRESIDENT. Unless the Board of Directors
otherwise determines, the President shall be the chief executive officer of the
Corporation, shall preside at all meetings of the Stockholders and, unless there
is a Chairman of the Board who is present, at all meetings of the Board of
Directors, shall have general supervision of the affairs and activities of the
Corporation as authorized and directed by the Board of Directors and shall have
such other duties at the Board of Directors shall from time to time prescribe.
4.03 VICE PRESIDENTS. Each Vice President appointed by the Board of
Directors shall have such powers and perform such duties as are prescribed from
time to time by the Board of Directors and, to the extent not inconsistent with
the Charter or these Bylaws or any vote of the Board of Directors, as are
delegated to him from time to time by the President.
4.04 CHIEF FINANCIAL OFFICER, TREASURER AND ASSISTANT TREASURER. Unless
the Board of Directors shall have designated a Vice President or some other
Officer as chief financial officer of the Corporation, the Treasurer shall be
the principal financial officer of the Corporation. The chief financial officer
of the Corporation shall have custody of the funds of the Corporation. The Board
of Directors may designate the Treasurer or any Assistant Treasurer or other
Officer as chief accounting officer of the Corporation. The Treasurer and any
Assistant Treasurer shall perform such other duties as the Board of Directors
may from time to time prescribe. As directed by the Board of Directors, the
chief financial officer, Treasurer and any Assistant Treasurer shall furnish at
the expense of the Corporation a fidelity bond approved by the Board of
Directors.
4.05 SECRETARY AND ASSISTANT SECRETARY. The Secretary shall act as the
clerk of all meetings of the Board of Directors and of the Stockholders and
shall record the proceedings of all such meetings in a book kept for that
purpose. The Secretary shall give due notice of all such meetings and shall
distribute a copy of the record of all such proceedings to each Director. He
shall have custody of the seal of the Corporation and shall perform all the
duties incident to the office of the Secretary and shall have such other duties
as the Board of Directors shall prescribe. He shall be responsible for the
verification of all proxies. In the absence or disability of the Secretary, an
Assistant Secretary may perform all of the duties of
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the Secretary and when so acting shall have all the powers of and all of the
obligations of the Secretary.
4.06 EXECUTION OF DEEDS, LEASES, CHECKS AND OTHER DOCUMENTS. Except as
the Board of Directors may in any instance otherwise determine, any deed,
mortgage, lease, contract or other instrument authorized by the Board of
Directors may be executed, acknowledged and delivered by and on behalf of the
Corporation by any one of the Chairman of the Board (if any), the President, any
Vice President or the Treasurer. Except as the Directors may in any instance
otherwise determine, all checks, drafts or orders for the payment of money on
any account of the Corporation shall be signed by any of the aforesaid Officers,
any Assistant Treasurer or any other Officer as the Corporation may designate.
The Board of Directors may authorize any agent of the Corporation having custody
of or general charge or management of any part of the Corporation's property to
execute, acknowledge and deliver on behalf of the Corporation such instruments
relating to the property of the Corporation as the Board of Directors deem
appropriate.
4.07 REMOVAL. Any Officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. The fact that a person is elected to an office, whether or not for a
specified term, shall not by itself constitute any undertaking or evidence of
any employment obligation of the Corporation to that person.
4.08 OUTSIDE ACTIVITIES. Any interest (including any interest within
the meaning of Section 2-419(a) of the Maryland General Corporation Law as if
the Officer or agent were a Director of the Corporation) that an Officer or an
agent has in any investment opportunity presented to the Corporation must be
disclosed by such Officer or agent to the Board of Directors (and, if voting
thereon, to the Stockholders or to any committee of the Board of Directors)
within ten (10) days after the later of the date upon which such Officer or
agent becomes aware of such interest or the date upon which such Officer or
agent becomes aware that the Corporation is considering such investment
opportunity. If such interest comes to the attention of the interested Officer
or agent after a vote to take such investment opportunity, the voting body shall
be notified of such interest and shall reconsider such investment opportunity if
not already consummated or implemented.
4.09 SALARIES. The salaries, if any, of the Officers shall be fixed
from time to time by the Board of Directors. No Officer shall be prevented from
receiving such salary, if any, by reason of the fact that he or she is also a
Director of the Corporation.
ARTICLE V
SHARES OF STOCK
5.01 NO CERTIFICATES FOR STOCK. Unless the Board of Directors
authorizes the issuance of certificates pursuant to Section 5.02, none of the
Stock shall be represented by certificates.
5.02 ELECTION TO ISSUE CERTIFICATES. The Board of Directors may
authorize the issuance of certificates representing some or all of the Shares of
any or all of the classes or
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series of Stock. If the Board of Directors so authorizes certificates, such
certificates shall be of such form, not inconsistent with the Charter, as shall
be approved by the Board of Directors. All certificates, if issued, shall be
signed by the Chairman of the Board, if any, the President, or a Vice President
and countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary. Any signature or countersignature may be either a manual or
facsimile signature. All certificates, if issued, for each class of Stock shall
be consecutively numbered.
5.03 STOCK LEDGER. The Corporation shall maintain at its principal
executive office, at the office of its counsel, accountants or transfer agent or
at such other place designated by the Board of Directors an original or
duplicate Stock Ledger containing the names and addresses of all the
Stockholders and the number of shares of each class held by each Stockholder.
The Stock Ledger shall be maintained pursuant to a system that the Corporation
shall adopt allowing for the issuance, recordation and transfer of its Stock by
electronic or other means that can be readily converted into written form for
visual inspection and not involving any issuance of certificates. Such system
shall include provisions for notice to acquirers of Stock (whether upon issuance
or transfer of Stock) in accordance with Sections 2-210 and 2-211 of the
Maryland General Corporation Law, and Section 8-408 of the Commercial Law
Article of the State of Maryland. The Corporation shall be entitled to treat the
holder of record of any Share or Shares as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Maryland. Until a transfer is duly effected on the Stock Ledger,
the Corporation shall not be affected by any notice of such transfer, either
actual or constructive. Nothing herein shall impose upon the Corporation, the
Board of Directors or Officers or their agents and representatives a duty or
limit their rights to inquire as to the actual ownership of Shares.
5.04 RECORDING TRANSFERS OF STOCK. If transferred in accordance with
any restrictions on transfer contained in the Charter, these Bylaws or
otherwise, Shares shall be recorded as transferred in the Stock Ledger upon
provision to the Corporation or the transfer agent of the Corporation of an
executed stock power duly guaranteed and any other documents reasonably
requested by the Corporation, and the surrender of the certificate or
certificates, if
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any, representing such Shares. Upon receipt of such documents, the Corporation
shall issue the statements required by Sections 2-210 and 2-211 of the Maryland
General Corporation Law and Section 8-408 of the Commercial Law Article of the
State of Maryland, issue as needed a new certificate or certificates (if the
transferred Shares were certificated) to the persons entitled thereto, cancel
any old certificates and record the transaction upon its books.
5.05 LOST CERTIFICATE. The Board of Directors may direct a new
certificate to be issued in the place of any certificate theretofore issued by
the Corporation alleged to have been stolen, lost or destroyed upon the making
of an affidavit of that fact by the person claiming the certificate of Stock to
be stolen, lost or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such stolen, lost or destroyed
certificate or his legal representative to advertise the same in such manner as
it shall require and/or to give bond, with sufficient surety, to the Corporation
to indemnify it against any loss or claim which may arise by reason of the
issuance of a new certificate.
5.06 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
5.6.1 The Board of Directors may fix, in advance, a date as
the record date for the purpose of determining Stockholders entitled to notice
of, or to vote at, any meeting of Stockholders, or Stockholders entitled to
receive payment of any dividend or the allotment of any rights, or in order to
make a determination of Stockholders for any other proper purpose. Such date, in
any case, shall not be prior to the close of business on the day the record date
is fixed and shall be not more than sixty (60) days, and in case of a meeting of
Stockholders not less than ten (10) days, prior to the date on which the meeting
or particular action requiring such determination of Stockholders is to be held
or taken.
5.6.2 In lieu of fixing a record date, the stock transfer
books may be closed by the Board of Directors in accordance with Section 2-511
of the Maryland General Corporation Law for the purpose of determining
Stockholders entitled to notice of or to vote at a meeting of Stockholders.
5.6.3 If no record date is fixed and the stock transfer
books are not closed for the determination of Stockholders, (a) the record date
for the determination of Stockholders entitled to notice of, or to vote at, a
meeting of Stockholders shall be at the close of business on the day on which
the notice of meeting is mailed or the 30th day before the meeting, whichever is
the closer date to the meeting; and (b) the record date for the determination of
Stockholders entitled to receive payment of a dividend or an allotment of any
rights shall be at the close of business on the day on which the resolution of
the Board of Directors, declaring the dividend or allotment of rights, is
adopted.
5.6.4 When a determination of Stockholders entitled to vote
at any meeting of Stockholders has been made as provided in this section, such
determination shall apply to any
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thereof, except where the determination has been made through the closing of the
stock transfer books and the stated period of closing has expired.
ARTICLE VI
DIVIDENDS AND DISTRIBUTIONS
6.01 DECLARATION. Dividends and other distributions upon the Stock may
be declared by the Board of Directors as set forth in the applicable provisions
of the Charter and any applicable law, at any meeting, limited only to the
extent of Section 2-311 of the Maryland General Corporation Law. Dividends and
other distributions upon the Stock may be paid in cash, property or Stock of the
Corporation, subject to the provisions of law and of the Charter.
6.02 CONTINGENCIES. Before payment of any dividends or other
distributions upon the Stock, there may be set aside (but there is no duty to
set aside) out of any funds of the Corporation available for dividends or other
distributions such sum or sums as the Board of Directors may from time to time,
in its absolute discretion, think proper as a reserve fund to meet
contingencies, for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors shall determine to be in the
best interests of the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE VII
INDEMNIFICATION
7.01 INDEMNIFICATION. Unless the Board of Directors otherwise
determines prospectively in the case of any one or more specified individuals,
the Corporation shall indemnify any person who is or was a Director or Officer
of the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust,
or other enterprise or was a Trustee or Officer of Bradley Real Estate Trust or
a director or officer of any other predecessor to the Corporation (each and
"Indemnitee") to the full extent permitted by Section 2-418 of the Maryland
General Corporation Law. The Board of Directors may enter into indemnification
agreements with Indemnitees to the extent not inconsistent with said Section
2-418, the Charter or these Bylaws.
ARTICLE VIII
NOTICES
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8.01 NOTICES. Except as provided in Section 1.05 and Section 2.07,
whenever notice is required to be given pursuant to these Bylaws, it shall be
construed to mean either written notice personally served against written
receipt. or notice in writing transmitted by mail, by depositing the same in a
post office or letter box, in a post-paid sealed wrapper, addressed, if to the
Corporation, at 250 Boylston Street, Boston, Massachusetts 02116 (or any
subsequent address selected by the Board of Directors), attention President, or
if to a Stockholder, Director or Officer, at the address of such person as it
appears on the books of the Corporation or in default of any other address at
the general post office situated in the city or country of his or her residence.
Unless otherwise specified, notice sent by mail shall be deemed to be given at
the time mailed.
8.02 SECRETARY TO GIVE NOTICE. All Notices required by law or these
Bylaws to be given by the Corporation shall be given by the Secretary or any
other officer of the Corporation designated by the President. If the Secretary
and Assistant Secretary are absent or refuse or neglect to act, the notice may
be given by any person directed to do so by the President or, with respect to
any meeting called pursuant to these Bylaws upon the request of any Stockholders
or Directors, by any person directed to do so by the Stockholders or Directors
upon whose request the meeting is called.
8.03 WAIVER OF NOTICE. Whenever any notice is required to be given
pursuant to the Charter or these Bylaws or pursuant to applicable law, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any meeting
shall constitute a waiver of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE IX
MISCELLANEOUS
9.01 BOOKS AND RECORDS. The Corporation shall keep correct and complete
books and records of its accounts and transactions and minutes of the
proceedings of its Stockholders and Board of Directors meetings and of its
executive or other committees when exercising any of the powers or authority of
the Board of Directors. The books and records of the Corporation may be in
written form or in any other form that be converted within a reasonable time
into written form for visual inspection. Minutes shall be recorded in written
form, but may be maintained in the form of a reproduction.
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<PAGE> 22
9.02 INSPECTION OF BYLAWS AND CORPORATE RECORDS. These Bylaws, the
accounting books and records of the Corporation, the minutes of proceedings of
the Stockholders, the Board of Directors and committees thereof, annual
statements of affairs and any voting trust agreements on record shall be open to
inspection upon written demand delivered to the Corporation by any Stockholder
or holder of a voting trust certificate at any reasonable time during usual
business hours, for a purpose reasonably related to such holder's interests as a
Stockholder or as the holder of such voting trust certificate, in each case to
the extent permitted by the Maryland General Corporation Law.
9.03 CONTRACTS. The Board of Directors may authorize any Officer(s) or
agent(s) to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
9.04 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such Officers or agents of the Corporation
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
9.05 LOANS.
9.5.1. Such Officers or agents of the Corporation as from time
to time have been designated by the Board of Directors shall have authority (i)
to effect loans, advances, or other forms of credit at any time or times for the
Corporation, from such banks, trust companies, institutions, corporations,
firms, or persons, in such amounts and subject to such terms and conditions, as
the Board of Directors from time to time has designated; (ii) as security for
the repayment of any loans, advances, or other forms of credit so authorized, to
assign, transfer, endorse, and deliver, either originally or in addition or
substitution, any or all personal property, real property, stocks, bonds,
deposits, accounts, documents, bills, accounts receivable, and other commercial
paper and evidences of debt or other securities, or any rights or interests at
any time held by the Corporation; (iii) in connection with any loans, advances,
or other forms of credit so authorized, to make, execute, and deliver one or
more notes, mortgages, deeds of trust, financing statements, security
agreements, acceptances, or written obligations of the Corporation, on such
terms and with such provisions as to the security or sale or disposition of them
as those Officers or agents deem proper; and (iv) to sell to, or discount or
rediscount with, the banks, trust companies, institutions, corporations, firms
or persons making those loans, advances, or other forms of credit, any and all
commercial paper, bills, accounts receivable, acceptances, and other instruments
and evidences of debt at any time held by the Corporation, and, to that end, to
endorse, transfer, and deliver the same.
9.5.2. From time to time the Corporation shall certify to each
bank, trust company, institution, corporation, firm or person so designated, the
signatures of the Officers or agents so authorized. Each bank, trust company,
institution, corporation, firm or person so
84
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designated is authorized to rely upon such certification until it has received
written notice that the Board of Directors has revoked the authority of those
Officers or agents.
9.06 FISCAL YEAR. The Board of Directors shall have the power, from
time to time, to fix the fiscal year of the Corporation by a duly adopted
resolution, and, in the absence of such resolution, the fiscal year shall be the
period ending December 31.
9.07 ANNUAL REPORT. Not later than 120 days after the close of each
fiscal year, the Board of Directors of the Corporation shall cause to be sent to
the Stockholders an Annual Report in such form as may be deemed appropriate by
the Board of Directors. The Annual Report shall include audited financial
statements and shall be accompanied by the report thereon of an independent
certified public accountant.
9.08 INTERIM REPORTS. The Corporation may send interim reports to the
Stockholders having such form and content as the Board of Directors deem proper.
9.09 OTHER REPORTS. Any distributions to Stockholders of income or
capital assets shall be accompanied by a written statement disclosing the source
of the funds distributed unless at the time of distribution they are accompanied
by a written explanation of the relevant circumstances. The statement as to such
source shall be sent to the Stockholders not later than sixty (60) days after
the close of the fiscal year in which the distributions were made.
9.10 BYLAWS SEVERABLE. The provisions of these Bylaws are severable,
and if any provision shall be held invalid or unenforceable, that invalidity or
unenforceability shall attach only to that provision and shall not in any manner
affect or render invalid or unenforceable any other provision of these Bylaws,
and these Bylaws shall be carried out as if the invalid or unenforceable
provision were not contained herein.
ARTICLE X
AMENDMENT OF BYLAWS
10.1 BY DIRECTORS. The Board of Directors shall have the power, at any
annual or regular meeting, or at any special meeting if notice thereof is
included in the notice of such special meeting, to alter or repeal any Bylaws of
the Corporation and to make new Bylaws.
10.2 BY STOCKHOLDERS. The Stockholders, by affirmative vote of a
majority of the shares of Common Stock of the Corporation, shall have the power,
at any annual meeting (subject to the requirements of Section 1.03), or at any
special meeting if notice thereof is included in the notice of such special
meeting, to alter or repeal any Bylaws of the Corporation and to make new
Bylaws.
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The foregoing are certified as the Bylaws of the Corporation adopted by
the Board of Directors as of July 21, 1994.
/s/ William B. King
-----------------------------------
William B. King, Secretary
86
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF BRADLEY REAL ESTATE, INC.
Bradley Bethal Limited Partnership, a Nebraska limited partnership
Bradley Real Estate Management, Inc., a Massachusetts corporation
Bradley Midwest Management, Inc., a Minnesota corporation
Bradley Operating Limited Partnership, a Delaware limited partnership
Bradley Financing Corp., a Delaware corporation
Bradley Financing Partnership, a Delaware partnership
Bradley Management Corp., a Delaware corporation
Bradley Management Limited Partnership, a Delaware limited partnership
Bradley Management LLC, a Delaware limited liability company
Bradley Spring Mall, Inc., a Delaware corporation
Bradley Spring Mall Limited Partnership, a Delaware limited partnership
BTR Development Corp., a Delaware corporation
BTR Development Limited Partnership, a Delaware limited partnership
Williamson Square Associates Limited Partnership, a Delaware limited partnership
BOLP LLC, a Delaware limited liability company
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors of Bradley Real Estate, Inc.:
We consent to incorporation by reference in the registration statements (Nos.
333-63707, 333-42357, 333-28167, 33-87084, 33-64811, 333-69131, and 333-92979)
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., and
the registration statements (Nos. 333-36577 and 333-51675) on Form S-3 of
Bradley Operating Limited Partnership of our report dated January 21, 2000,
except as to Note 15, which is as of March 10, 2000, relating to the
consolidated balance sheets of Bradley Real Estate, Inc. and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of income,
changes in share owners' equity and cash flows for each of the years in the
three-year period ended December 31, 1999 and related financial statement
schedule III, which report appears in the December 31, 1999 Annual Report on
Form 10-K of Bradley Real Estate, Inc.
KPMG LLP
Chicago, Illinois
March 24, 2000
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