-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HB9uIHbfgPePihIyraaWSvWaKYb/YZdOIpKzkCBQ0yxItdljgPhFvINtFvxtmMpJ 7h/M7sODK9uwbGei7XEPqg== 0000927016-98-002500.txt : 19980625 0000927016-98-002500.hdr.sgml : 19980625 ACCESSION NUMBER: 0000927016-98-002500 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980624 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980624 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRADLEY REAL ESTATE INC CENTRAL INDEX KEY: 0000013777 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046034603 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10328 FILM NUMBER: 98653221 BUSINESS ADDRESS: STREET 1: 40 SKOKIE BLVD STE 600 CITY: NORTHBROOK STATE: IL ZIP: 60062-1626 BUSINESS PHONE: 8472729800 MAIL ADDRESS: STREET 1: 40 SKOKIE BOULEVARD SUITE 600 CITY: NORTHBROOK STATE: IL ZIP: 60062-1626 FORMER COMPANY: FORMER CONFORMED NAME: BRADLEY REAL ESTATE TRUST DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: June 24, 1998 Date of earliest event reported: February 13, 1998 _______________________ BRADLEY REAL ESTATE, INC. (Exact name of Registrant as specified in its charter) MARYLAND 1-10328 04-6034603 (State or other jurisdiction (Commission File (I.R.S. Employer of incorporation) Number) Identification No.) 40 SKOKIE BOULEVARD, NORTHBROOK, ILLINOIS 60062 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (847) 272-9800 Item 5. Other Events. ------------ Bradley Real Estate, Inc. (the "Company" or "Bradley") files this Form 8-K report that contains financial statements consistent with Regulation S-X, Rule 3-14 for properties accounting for over 50% of the aggregate acquisition costs of a series of properties acquired during the period January 1, 1998 through June 22, 1998 (the "Completed Acquisitions") or whose acquisition the Company considers probable (the "Pending Acquisitions" and, together with the Completed Acquisitions, the "Acquisition Properties"). The Acquisition Properties do not include properties which Bradley expects to acquire pursuant to the Agreement and Plan of Merger dated May 30, 1998 between Bradley and Mid-America Realty Investments, Inc. (the "Mid-America Merger"). During the period January 1 through June 22, 1998, the Company acquired 12 shopping centers and two outlots adjacent to one of Bradley's existing centers at an aggregate cost of approximately $98.8 million. In addition, as of June 22, 1998 the Company had entered into contracts for the purchase of an additional seven Pending Acquisitions for an estimated total acquisition price of approximately $89.6 million. No one property or group of properties comprising the Completed Acquisitions or the Pending Acquisitions was or will be in itself significant, but in the aggregate the costs of the Acquisition Properties exceed 10% of the total assets of the Company and its subsidiaries consolidated at December 31, 1997. The Completed Acquisitions have been funded, and management currently expects that the Pending Acquisitions will be funded, with borrowings under the Company's bank line of credit and through the assumption of existing mortgage indebtedness. No assurance can be given that all or any of the Pending Acquisitions will be consummated or that the terms of the respective transactions or the proposed method of financings may not change materially from that described herein. The dates, shopping centers acquired and the approximate acquisition cost for the respective Acquisition Properties are as follows:
Completed Acquisitions: - ---------------------- DATE PROPERTY APPROXIMATE ACQUISITION COST February 13, 1998 Kings Plaza, Richmond, IN $ 3,671,000 March 5, 1998 Sagamore Park, West Lafayette, IN 7,769,000 March 13, 1998 Oak Creek Centre, Oak Creek, WI 4,926,000 March 31, 1998 Midtown Mall, Ashland, KY 7,441,000 March 31, 1998 * Courtyard Shopping Center, Burton, MI 9,710,000 April 10, 1998 * Redford Plaza, Redford, MI 20,614,000 May 13, 1998 Butterfield Square, Libertyville, IL 13,008,000 May 13, 1998 * Plainview Village, Louisville, KY 12,100,000 May 13, 1998 * Camelot Shopping Center, Louisville, KY 8,645,000 May 13, 1998 Dixie Plaza, Louisville, KY 3,700,000 May 28, 1998 Bartonville, Peoria, IL 1,583,000 May 28, 1998 Sterling Outlots, Peoria, IL 525,000 June 10, 1998 Garden Plaza, Franklin, WI 5,146,000 ----------- $98,838,000 ===========
2 Pending Acquisitions: - --------------------
PROPERTY ESTIMATED ACQUISITION COST * Ellisville Square, St. Louis, MO $11,232,000 Fox River, Burlington, WI 7,748,000 * Holiday Manor, Louisville, KY 18,928,000 Lincoln Park Plaza, New Haven, IN 5,200,000 Northport Shopping Center, Port Washington, WI 3,730,000 Oak Park Plaza, Oak Park Heights, MN 15,444,000 * Salem Consumer Square, Dayton, OH 27,341,000 ----------- $ 89,623,000 ===========
Properties designated with an asterisk (*) are properties included within the Acquisition Properties for which financial statements accompany this report. (See Item 7.) None of the Acquisition Properties was or will be acquired from a related party of the Company or its consolidated subsidiaries. Factors considered by the Company in assessing the acquisition price for each of the Acquisition Properties included its location and tenant mix, including opportunities for retenanting and remodeling consistent with the Company's experience as a shopping center operator; its current net operating income and the prospect for increased income in the short and long range future; capitalization rates for shopping center properties of the type acquired, in the Midwest area of the United States generally and in the locality in which the property is located; current operating costs and the possibility of effecting property-level operating efficiencies as a result of the Company's ownership of a significant number of shopping centers in the Midwest; and the differential between the Company's cost of capital in acquiring the property and the property's current and potential net operating income. After reasonable inquiry, the Company is not aware of any material factors relating to any specific property included within the Acquisition Properties other than those discussed in the preceding sentence that would cause the reported financial information not to be necessarily indicative of future operating results. On June 18, 1998, the Company filed a Registration Statement on Form S-4 (Registration No. 333-57123) with the Securities and Exchange Commission relating to the 8.4% Series A Convertible Preferred Stock to be issued by the Company upon consummation of the Mid-America Merger (the "Merger Registration Statement"). Reference is made to the Merger Registration Statement for a description of the terms of the Mid-America Merger, and for certain pro forma financial statements which give effect both to the Mid-America Merger and to certain Prior Bradley Transactions described therein including the acquisition of the Acquisition Properties. Like the pro forma financial information in the Merger Registration Statement, the pro forma financial statements listed under Item 7 below reflect both (a) the Prior Bradley Transactions other than the Mid-America Merger as well as (b) the Prior Bradley Transactions and the Mid-America Merger. Such financial statements reflect the same adjustments that are a part of the pro forma financials set forth in the Merger Registration Statement, but also set forth, in the Pro Forma Condensed Statements of Income that reflect the Prior Bradley Transactions, separate pro forma adjustments for the Acquisition Properties for which financial statements are included in this Form 8-K and for the other Acquisition Properties for which financial statements are not included in this Form 8-K. 3 Item 7. Financial Statements, Pro Forma Financial Information and --------------------------------------------------------- Exhibits -------- The following financial statements and pro forma financial information accompany this report: (a) Financial Statements - Acquisition Properties - Redford Plaza Independent Auditors' Report For the Three Months Ended March 31, 1998 (unaudited) and the Year Ended December 31, 1997 Statement of Revenues and Certain Expenses Notes to Statement of Revenues and Certain Expenses (b) Financial Statements - Acquisition Properties - Courtyard Shopping Center Independent Auditors' Report For the Three Months Ended March 31, 1998 (unaudited) and the Year Ended December 31, 1997 Statement of Revenues and Certain Expenses Notes to Statement of Revenues and Certain Expenses (c) Financial Statements - Acquisition Properties - Camelot Shopping Center and Plainview Village Independent Auditors' Report For the Three Months Ended March 31, 1998 (unaudited) and the Year Ended December 31, 1997 Combined Statement of Revenues and Certain Expenses Notes to Combined Statement of Revenues and Certain Expenses (d) Financial Statements - Acquisition Properties - Salem Consumer Square Independent Auditors' Report For the Three Months Ended March 31, 1998 (unaudited) and the Year Ended December 31, 1997 Statement of Revenues and Certain Expenses Notes to Statement of Revenues and Certain Expenses (e) Financial Statements - Acquisition Properties - Holiday Manor Shopping Center Independent Auditors' Report For the Three Months Ended March 31, 1998 (unaudited) and the Year Ended December 31, 1997 Statement of Revenues and Certain Expenses Notes to Statement of Revenues and Certain Expenses 4 (f) Financial Statements - Acquisition Properties - Ellisville Square Independent Auditors' Report For the Three Months Ended March 31, 1998 (unaudited) and the Year Ended December 31, 1997 Statement of Revenues and Certain Expenses Notes to Statement of Revenues and Certain Expenses (g) Pro Forma Financial Information - Bradley Real Estate, Inc. Pro Forma Condensed Combined Balance Sheet as of March 31, 1998 (unaudited) Pro Forma Condensed Balance Sheet to reflect Prior Bradley Transactions as of March 31, 1998 (unaudited) Pro Forma Condensed Combined Statement of Income for the Three Months Ended March 31, 1998 (unaudited) Pro Forma Condensed Statement of Income to reflect Prior Bradley Transactions for the Three Months Ended March 31, 1998 (unaudited) Pro Forma Condensed Combined Statement of Income for the Year Ended December 31, 1997 (unaudited) Pro Forma Condensed Statement of Income to reflect Prior Bradley Transactions for the Year Ended December 31, 1997 (unaudited) (h) Exhibits Exhibit 23.1 Consent of KPMG Peat Marwick LLP 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BRADLEY REAL ESTATE, INC. By:/s/ Thomas P. D'Arcy -------------------- Date: June 24, 1998 Thomas P. D'Arcy Chairman, President and Chief Executive Officer 6 INDEPENDENT AUDITORS' REPORT The Board of Directors of Bradley Real Estate, Inc. and Unit Holders of Bradley Operating Limited Partnership: We have audited the accompanying statement of revenues and certain expenses (defined as operating revenues less direct operating expenses) of Redford Plaza for the year ended December 31, 1997. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of Bradley Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note 2. The presentation is not intended to be a complete presentation of Redford Plaza's revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses described in Note 2, of Redford Plaza for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois April 9, 1998 F-1 ACQUISITION PROPERTIES - REDFORD PLAZA Statement of Revenues and Certain Expenses
Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - ------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1998 Year Ended (unaudited) December 31, 1997 - ------------------------------------------------------------------------------------------------------------- Revenues: Base rental income $513,002 $1,881,979 Operating expense and real estate tax recoveries 153,741 621,148 Other income 4,937 6,843 - ------------------------------------------------------------------------------------------------------------- Total revenues 671,680 2,509,970 - ------------------------------------------------------------------------------------------------------------- Certain expenses: Real estate taxes 68,618 263,919 Operating expenses 51,018 240,880 Utilities 12,528 50,160 Insurance 18,084 72,336 - ------------------------------------------------------------------------------------------------------------- Total expenses 150,248 627,295 - ------------------------------------------------------------------------------------------------------------- Excess of revenues over certain expenses $521,432 $1,882,675 - -------------------------------------------------------------------------------------------------------------
See accompanying notes to statement of revenues and certain expenses. F-2 ACQUISITION PROPERTIES - REDFORD PLAZA Notes to Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- (1) BACKGROUND The Statement of Revenues and Certain Expenses (Statement) has been included for Redford Plaza (Redford) which was acquired by Bradley Operating Limited Partnership (the Operating Partnership) on April 10, 1998. Redford is located in Redford, Michigan. It consists of approximately 285,000 square feet of gross leasable area and was approximately 92% occupied at December 1997. (2) BASIS OF PRESENTATION The Statement has been prepared for the purpose of complying with Rule 3.14 of Regulation S-X of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of the Company and the Operating Partnership and is not intended to be a complete presentation of Redford's revenues and expenses. The Statement has been prepared on the accrual basis of accounting and requires management of Redford to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. Certain expenses which may not be comparable to the expenses expected to be incurred in the proposed future operations of Redford have been excluded from the Statement. Expenses excluded consist of interest, depreciation and amortization, professional fees, and management fees. Unaudited Interim Period ------------------------ The accompanying interim statement of revenues and certain expenses has been prepared without audit and in the opinion of management reflects all normally recurring adjustments necessary for a fair presentation of results for the unaudited interim period presented. Certain information in footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. (3) REVENUES The property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. Certain of the leases include provisions under which the property is reimbursed for certain common area, real estate, and insurance costs. Operating expenses and real estate tax recoveries reflected on the statement of revenues and certain expenses include amounts due for 1997 expenses for which the tenants have not yet been billed. In addition, certain leases provide for payment of contingent rentals based on a percentage applied to the amount by which the tenant's sales, as defined, exceed predetermined levels. Certain leases contain renewal options for various periods at various rental rates. Approximately 10% and 21% of Redford is leased to two tenants representing approximately 17% and 12% of base rental income, respectively. Base rentals are reported as income over the lease term as they become receivable under the provisions of the leases. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments increased base rental income by approximately $55,000 for the year ended December 31, 1997. F-3 ACQUISITION PROPERTIES - REDFORD PLAZA Notes to Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited)
- ------------------------------------------------------------------------------- Minimum rents to be received from tenants under operating leases in effect at December 31, 1997 are approximately as follows: - ------------------------------------------------------------------------------- Year Amount - ------------------------------------------------------------------------------- 1998 $2,036,000 1999 1,853,000 2000 1,610,000 2001 1,298,000 2002 1,144,000 Thereafter 5,838,000 - -------------------------------------------------------------------------------
F-4 INDEPENDENT AUDITORS' REPORT The Board of Directors of Bradley Real Estate, Inc. and Unit Holders of Bradley Operating Limited Partnership: We have audited the accompanying statement of revenues and certain expenses (defined as operating revenues less direct operating expenses) of Courtyard Shopping Center for the year ended December 31, 1997. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of Bradley Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note 2. The presentation is not intended to be a complete presentation of Courtyard Shopping Center's revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses described in Note 2, of Courtyard Shopping Center for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois May 7, 1998 F-5 ACQUISITION PROPERTIES - COURTYARD SHOPPING CENTER Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited)
- ------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, 1998 Year Ended (unaudited) December 31, 1997 - ------------------------------------------------------------------------------------------------------------- Revenues: Base rental income $202,812 $893,232 Operating expense and real estate tax recoveries 64,567 313,171 Other income 1,106 1,883 - ------------------------------------------------------------------------------------------------------------- Total revenues 268,485 1,208,286 - ------------------------------------------------------------------------------------------------------------- Certain expenses: Real estate taxes 36,051 143,044 Operating expenses 32,642 143,644 Utilities 18,898 78,757 Insurance 3,295 13,179 - ------------------------------------------------------------------------------------------------------------- Total expenses 90,886 378,624 - ------------------------------------------------------------------------------------------------------------- Excess of revenues over certain expenses $177,599 $829,662 - -------------------------------------------------------------------------------------------------------------
See accompanying notes to statement of revenues and certain expenses. F-6 ACQUISITION PROPERTIES - COURTYARD SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- (1) BACKGROUND The Statement of Revenues and Certain Expenses (Statement) has been included for Courtyard Shopping Center (Courtyard) which was acquired by Bradley Operating Limited Partnership (the Operating Partnership) on March 31, 1998. Courtyard is located in Burton, Michigan. It consists of approximately 148,000 square feet of gross leasable area and was approximately 76% occupied at December 31, 1997. (2) BASIS OF PRESENTATION The Statement has been prepared for the purpose of complying with Rule 3.14 of Regulation S-X of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of the Company and the Operating Partnership and is not intended to be a complete presentation of Courtyard's revenues and expenses. The Statement has been prepared on the accrual basis of accounting and requires management of Courtyard to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. Certain expenses which may not be comparable to the expenses expected to be incurred in the proposed future operations of Courtyard have been excluded from the Statement. Expenses excluded consist of interest, depreciation and amortization, professional fees, and management fees. Unaudited Interim Period ------------------------ The accompanying interim statement of revenues and certain expenses has been prepared without audit and in the opinion of management reflects all normally recurring adjustments necessary for a fair presentation of results for the unaudited interim period presented. Certain information in footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. (3) REVENUES The property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. Certain of the leases include provisions under which the property is reimbursed for certain common area, real estate, and insurance costs. Operating expenses and real estate tax recoveries reflected on the statement of revenues and certain expenses include amounts due for 1997 expenses for which the tenants have not yet been billed. In addition, certain leases provide for payment of contingent rentals based on a percentage applied to the amount by which the tenant's sales, as defined, exceed predetermined levels. Certain leases contain renewal options for various periods at various rental rates. Approximately 12%, 18% and 29% of Courtyard is leased to three tenants representing approximately 11%, 22% and 39% of base rental income, respectively. Base rentals are reported as income over the lease term as they become receivable under the provisions of the leases. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments increased base rental income by approximately $15,000 for the year ended December 31, 1997. F-7 ACQUISITION PROPERTIES - COURTYARD SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited)
- -------------------------------------------------------------------------------- Minimum rents to be received from tenants under operating leases in effect at December 31, 1997 are approximately as follows: - -------------------------------------------------------------------------------- Year Amount - -------------------------------------------------------------------------------- 1998 $ 785,000 1999 764,000 2000 774,000 2001 722,000 2002 609,000 Thereafter 3,172,000 - --------------------------------------------------------------------------------
F-8 INDEPENDENT AUDITORS' REPORT The Board of Directors of Bradley Real Estate, Inc. and Unit Holders of Bradley Operating Limited Partnership: We have audited the accompanying combined statement of revenues and certain expenses (defined as operating revenues less direct operating expenses) of Camelot Shopping Center and Plainview Village for the year ended December 31, 1997. This combined financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this combined statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of Bradley Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note 2. The presentation is not intended to be a complete presentation of Camelot Shopping Center's and Plainview Village's revenues and expenses. In our opinion, the combined statement of revenues and certain expenses referred to above presents fairly, in all material respects, the combined revenues and certain expenses described in Note 2, of Camelot Shopping Center and Plainview Village for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois May 7, 1998 F-9 ACQUISITION PROPERTIES - CAMELOT SHOPPING CENTER AND PLAINVIEW VILLAGE Combined Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited)
- -------------------------------------------------------------------------------- Three Months Ended March 31, 1998 Year Ended (unaudited) December 31, 1997 - -------------------------------------------------------------------------------- Revenues: Base rental income $537,350 $2,026,919 Operating expense and real estate tax recoveries 97,341 264,026 Other income 7,421 8,709 - -------------------------------------------------------------------------------- Total revenues 642,112 2,299,654 - -------------------------------------------------------------------------------- Certain expenses: Real estate taxes 42,012 160,047 Operating expenses 43,576 169,589 Utilities 12,984 67,614 Insurance 7,246 28,981 - -------------------------------------------------------------------------------- Total expenses 105,818 426,231 - -------------------------------------------------------------------------------- Excess of revenues over certain expenses $536,294 $1,873,423 - --------------------------------------------------------------------------------
See accompanying notes to combined statement of revenues and certain expenses. F-10 ACQUISITION PROPERTIES - CAMELOT SHOPPING CENTER AND PLAINVIEW VILLAGE Combined Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- (1) BACKGROUND The Combined Statement of Revenues and Certain Expenses (Combined Statement) has been included for certain properties which were acquired from the same seller by Bradley Operating Limited Partnership (the Operating Partnership) on May 13, 1998. The properties are as follows: Camelot Shopping Center Plainview Village Camelot Shopping Center is located in Louisville, Kentucky. It consists of approximately 151,000 square feet of gross leasable area and was approximately 96% occupied at December 31, 1997. Plainview Village is located in Louisville, Kentucky. It consists of approximately 144,000 square feet of gross leasable area and was approximately 99% occupied at December 31, 1997. (2) BASIS OF PRESENTATION The Combined Statement has been prepared for the purpose of complying with Rule 3.14 of Regulation S-X of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of the Company and the Operating Partnership and is not intended to be a complete presentation of the properties' revenues and expenses. The Combined Statement has been prepared on the accrual basis of accounting and requires management of the properties to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. Certain expenses which may not be comparable to the expenses expected to be incurred in the proposed future operations of the properties have been excluded from the Combined Statement. Expenses excluded consist of interest, depreciation and amortization, professional fees, and management fees. Unaudited Interim Period ------------------------ The accompanying interim statement of revenues and certain expenses has been prepared without audit and in the opinion of management reflects all normally recurring adjustments necessary for a fair presentation of results for the unaudited interim period presented. Certain information in footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. (3) REVENUES The properties lease retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. Certain of the leases include provisions under which the properties are reimbursed for certain common area, real estate, and insurance costs. Operating expenses and real estate tax recoveries reflected on the combined statement of revenues and certain expenses include amounts due for 1997 expenses for which the tenants have not yet been billed. In addition, certain leases provide for payment of contingent rentals based on a percentage applied to the amount by which the tenant's sales, as defined, exceed predetermined levels. Certain leases contain renewal options for various periods at various rental rates. F-11 ACQUISITION PROPERTIES-CAMELOT SHOPPING CENTER AND PLAINVIEW VILLAGE Combined Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- Approximately 16% and 3% of Camelot Shopping Center is leased to two tenants representing approximately 18% and 10% of base rental income, respectively. Approximately 22% and 6% of Plainview Village is leased to two tenants representing approximately 10% and 11% of base rental income, respectively. Base rentals are reported as income over the lease term as they become receivable under the provisions of the leases. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments increased base rental income by approximately $63,000 for the year ended December 31, 1997. Minimum rents to be received from tenants under operating leases in effect at December 31, 1997 are approximately as follows:
- ----------------------------------------------------------- Year Amount - ----------------------------------------------------------- 1998 $1,884,000 1999 1,662,000 2000 1,332,000 2001 1,101,000 2002 812,000 Thereafter 1,531,000 - -----------------------------------------------------------
F-12 INDEPENDENT AUDITORS' REPORT The Board of Directors of Bradley Real Estate, Inc. and Unit Holders of Bradley Operating Limited Partnership: We have audited the accompanying statement of revenues and certain expenses (defined as operating revenues less direct operating expenses) of Salem Consumer Square for the year ended December 31, 1997. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of Bradley Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note 2. The presentation is not intended to be a complete presentation of Salem Consumer Square's revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses described in Note 2, of Salem Consumer Square for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois May 29, 1998 F-13 ACQUISITION PROPERTIES - SALEM CONSUMER SQUARE Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited)
- -------------------------------------------------------------------------------- Three Months Ended March 31, 1998 Year Ended (unaudited) December 31, 1997 - -------------------------------------------------------------------------------- Revenues: Base rental income $563,393 $2,210,992 Operating expense and real estate tax recoveries 136,301 575,159 Other income 5,289 19,665 - -------------------------------------------------------------------------------- Total revenues 704,983 2,805,816 - -------------------------------------------------------------------------------- Certain expenses: Real estate taxes 77,622 310,486 Operating expenses 44,169 289,601 Utilities 19,849 64,398 Insurance 11,443 41,485 Total expenses 153,083 705,970 - -------------------------------------------------------------------------------- Excess of revenues over certain expenses $551,900 $2,099,846 - --------------------------------------------------------------------------------
See accompanying notes to statement of revenues and certain expenses. F-14 ACQUISITION PROPERTIES - SALEM CONSUMER SQUARE Notes to Statement of Revenues and Certain Expenses Year Ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- (1) BACKGROUND The Statement of Revenues and Certain Expenses (Statement) has been included for Salem Consumer Square (Salem) which Bradley Real Estate, Inc. (the Company) through Bradley Operating Limited Partnership (the Operating Partnership) proposes to acquire. Salem is located in Dayton, Ohio. It consists of approximately 275,000 square feet of gross leasable area and was approximately 95% occupied at December 31, 1997. (2) BASIS OF PRESENTATION The Statement has been prepared for the purpose of complying with Rule 3.14 of Regulation S-X of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of the Company and the Operating Partnership and is not intended to be a complete presentation of Salem's revenues and expenses. The Statement has been prepared on the accrual basis of accounting and requires management of Salem to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. Certain expenses which may not be comparable to the expenses expected to be incurred in the proposed future operations of Salem have been excluded from the Statement. Expenses excluded consist of interest, depreciation and amortization, professional fees, and management fees. Unaudited Interim Period ------------------------ The accompanying interim statement of revenues and certain expenses has been prepared without audit and in the opinion of management reflects all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim period presented. Certain information in footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. (3) REVENUES The property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. Certain of the leases include provisions under which the property is reimbursed for certain common area, real estate, and insurance costs. Operating expenses and real estate tax recoveries reflected on the statement of revenues and certain expenses include amounts due for 1997 expenses for which the tenants have not yet been billed. In addition, certain leases provide for payment of contingent rentals based on a percentage applied to the amount by which the tenant's sales, as defined, exceed predetermined levels. Certain leases contain renewal options for various periods at various rental rates. Approximately 23% of Salem Consumer Square is leased to one tenant representing approximately 20% of base rental income. F-15 ACQUISITION PROPERTIES - SALEM CONSUMER SQUARE Notes to Statement of Revenues and Certain Expenses Year Ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- Base rentals are reported as income over the lease term as they become receivable under the provisions of the leases. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments increased base rental income by approximately $16,000 for the year ended December 31, 1997. Minimum rents to be received from tenants under operating leases in effect at December 31, 1997 are approximately as follows:
- ------------------------------------------------------------ Year Amount - ------------------------------------------------------------ 1998 $2,219,000 1999 1,974,000 2000 1,546,000 2001 1,302,000 2002 1,147,000 Thereafter 5,097,000 - ------------------------------------------------------------
F-16 INDEPENDENT AUDITORS' REPORT The Board of Directors of Bradley Real Estate, Inc. and Unit Holders of Bradley Operating Limited Partnership: We have audited the accompanying statement of revenues and certain expenses (defined as operating revenues less direct operating expenses) of Holiday Manor Shopping Center for the year ended December 31, 1997. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of Bradley Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note 2. The presentation is not intended to be a complete presentation of Holiday Manor Shopping Center's revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses described in Note 2, of Holiday Manor Shopping Center for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois May 29, 1998 F-17 ACQUISITION PROPERTIES - HOLIDAY MANOR SHOPPING CENTER Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited)
- ------------------------------------------------------------------------------------------ Three Months Ended March 31, 1998 Year Ended (unaudited) December 31, 1997 - ------------------------------------------------------------------------------------------ Revenues: Base and percentage rental income $408,516 $1,655,284 Operating expense and real estate tax recoveries 37,692 136,297 Other income 1,707 5,01 - ------------------------------------------------------------------------------------------ Total revenues 447,915 1,796,593 - ------------------------------------------------------------------------------------------ Certain expenses: Real estate taxes 23,880 95,476 Operating expenses 26,999 07,980 Utilities 10,414 33,945 Insurance 2,516 9,958 ------------------------------------------------------------------------------------------ Total expenses 63,809 247,359 - ------------------------------------------------------------------------------------------ Excess of revenues over certain expenses $384,106 $1,549,234 - ------------------------------------------------------------------------------------------
See accompanying notes to statement of revenues and certain expenses. F-18 ACQUISITION PROPERTIES - HOLIDAY MANOR SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses Year Ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- (1) BACKGROUND The Statement of Revenues and Certain Expenses (Statement) has been included for Holiday Manor Shopping Center (Holiday Manor) which Bradley Real Estate, Inc. (the Company) through Bradley Operating Limited Partnership (the Operating Partnership) proposes to acquire. Holiday Manor is located in Louisville, Kentucky. It consists of approximately 156,000 square feet of gross leaseable area and was approximately 91 percent occupied at December 31, 1997. (2) BASIS OF PRESENTATION The Statement has been prepared for the purpose of complying with Rule 3.14 of Regulation S-X of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of the Company and the Operating Partnership and is not intended to be a complete presentation of Holiday Manor's revenues and expenses. The Statement has been prepared on the accrual basis of accounting and requires management of Holiday Manor to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. Certain expenses which may not be comparable to the expenses expected to be incurred in the proposed future operations of Holiday Manor have been excluded from the Statement. Expenses excluded consist of interest, depreciation and amortization, professional fees, and management fees. Unaudited Interim Period ------------------------ The accompanying interim statement of revenues and certain expenses has been prepared without audit and in the opinion of management reflects all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim period presented. Certain information in footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. (3) REVENUES The property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. Certain of the leases include provisions under which the property is reimbursed for certain common area, real estate, and insurance costs. Operating expenses and real estate tax recoveries reflected on the statement of revenues and certain expenses include amounts due for 1997 expenses for which the tenants have not yet been billed. In addition, certain leases provide for payment of contingent rentals based on a percentage applied to the amount by which the tenant's sales, as defined, exceed predetermined levels. Certain leases contain renewal options for various periods at various rental rates. Approximately 36% of Holiday Manor is leased to one tenant representing approximately 28% of base rental income. F-19 ACQUISITION PROPERTIES - HOLIDAY MANOR SHOPPING CENTER Notes to Statement of Revenues and Certain Expenses Year Ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- Base rentals are reported as income over the lease term as they become receivable under the provisions of the leases. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments increased base rental income by approximately $73,000 for the year ended December 31, 1997. Minimum rents to be received from tenants under operating leases in effect at December 31, 1997 are approximately as follows:
- --------------------------------------------------------------- Year Amount - --------------------------------------------------------------- 1998 $1,282,000 1999 1,113,000 2000 1,024,000 2001 889,000 2002 709,000 Thereafter 5,883,000 - ---------------------------------------------------------------
F-20 INDEPENDENT AUDITORS' REPORT The Board of Directors of Bradley Real Estate, Inc. and Unit Holders of Bradley Operating Limited Partnership: We have audited the accompanying statement of revenues and certain expenses (defined as operating revenues less direct operating expenses) of Ellisville Square for the year ended December 31, 1997. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of revenues and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined statement of revenues and certain expenses. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of Bradley Real Estate, Inc. and Bradley Operating Limited Partnership as described in Note 2. The presentation is not intended to be a complete presentation of Ellisville Square's revenues and expenses. In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses described in Note 2, of Ellisville Square for the year ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Chicago, Illinois June 1, 1998 F-21 ACQUISITION PROPERTIES - ELLISVILLE SQUARE Statement of Revenues and Certain Expenses Year ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited)
- -------------------------------------------------------------------------------- Three Months Ended March 31, 1998 Year Ended (unaudited) December 31, 1997 - -------------------------------------------------------------------------------- Revenues: Base rental income $308,679 $1,115,549 Operating expense and real estate tax recoveries 55,570 221,502 Other income 293 5,266 - -------------------------------------------------------------------------------- Total revenues 364,542 1,342,317 - -------------------------------------------------------------------------------- Certain expenses: Real estate taxes 53,368 213,471 Operating expenses 59,878 234,368 Utilities 9,524 23,774 Insurance 2,336 8,947 - -------------------------------------------------------------------------------- Total expenses 125,106 480,560 - -------------------------------------------------------------------------------- Excess of revenues over certain expenses $239,436 $861,757 - --------------------------------------------------------------------------------
See accompanying notes to statement of revenues and certain expenses. F-22 ACQUISITION PROPERTIES - ELLISVILLE SQUARE Notes to Statement of Revenues and Certain Expenses Year Ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- (1) BACKGROUND The Statement of Revenues and Certain Expenses (Statement) has been included for Ellisville Square which Bradley Real Estate, Inc. (the Company) through Bradley Operating Limited Partnership (the Operating Partnership) proposes to acquire. Ellisville Square is located in St. Louis, Missouri. It consists of approximately 146,000 square feet of gross leasable area and was approximately 99% occupied at December 31, 1997. (2) BASIS OF PRESENTATION The Statement has been prepared for the purpose of complying with Rule 3.14 of Regulation S-X of the Securities and Exchange Commission and for inclusion in current reports on Form 8-K of the Company and the Operating Partnership and is not intended to be a complete presentation of Ellisville Square's revenues and expenses. The Statement has been prepared on the accrual basis of accounting and requires management of Ellisville Square to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates. Certain expenses which may not be comparable to the expenses expected to be incurred in the proposed future operations of Ellisville Square have been excluded from the Statement. Expenses excluded consist of interest, depreciation and amortization, professional fees, and management fees. Unaudited Interim Period ------------------------ The accompanying interim statement of revenues and certain expenses has been prepared without audit and in the opinion of management reflects all normal recurring adjustments necessary for a fair presentation of results for the unaudited interim period presented. Certain information in footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted. (3) REVENUES The property leases retail space under various lease agreements with its tenants. All leases are accounted for as operating leases. Certain of the leases include provisions under which the property is reimbursed for certain common area, real estate, and insurance costs. Operating expenses and real estate tax recoveries reflected on the statement of revenues and certain expenses include amounts due for 1997 expenses for which the tenants have not yet been billed. In addition, certain leases provide for payment of contingent rentals based on a percentage applied to the amount by which the tenant's sales, as defined, exceed predetermined levels. Certain leases contain renewal options for various periods at various rental rates. Approximately 59%, 7% and 5% of Ellisville Square is leased to three tenants representing approximately 51%, 12% and 11% of base rental income, respectively. F-23 ACQUISITION PROPERTIES - ELLISVILLE SQUARE Notes to Statement of Revenues and Certain Expenses Year Ended December 31, 1997 and the Three Months ended March 31, 1998 (unaudited) - -------------------------------------------------------------------------------- Base rentals are reported as income over the lease term as they become receivable under the provisions of the leases. However, when rentals vary from a straight-line basis due to short-term rent abatements or escalating rents during the lease term, the income is recognized based on effective rental rates. Related adjustments increased base rental income by approximately $12,000 for the year ended December 31, 1997. Minimum rents to be received from tenants under operating leases in effect at December 31, 1997 are approximately as follows:
- -------------------------------------------------------------------------------- Year Amount - -------------------------------------------------------------------------------- 1998 $1,228,000 1999 1,209,000 2000 1,001,000 2001 748,000 2002 717,000 Thereafter 7,139,000 - --------------------------------------------------------------------------------
F-24 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET MARCH 31, 1998 (UNAUDITED) This unaudited Pro Forma Condensed Combined Balance Sheet is presented as if the Prior Bradley Transactions (see Note A) and the Mid-America Merger had been consummated on March 31, 1998. The Mid-America Merger has been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. In the opinion of Bradley's management, all adjustments necessary to reflect the effects of this transaction have been made. The accompanying pro forma condensed combined financial statements have been prepared based on pro forma adjustments to pro forma and historical financial statements of Bradley and historical financial statements of Mid-America. This unaudited Pro Forma Condensed Combined Balance Sheet is presented for comparative purposes only and is not necessarily indicative of what the actual financial position of Bradley would have been at March 31, 1998, nor does it purport to represent the future financial position of Bradley. This unaudited Pro Forma Condensed Combined Balance Sheet should be read in conjunction with, and is qualified in its entirety by the Pro Forma Condensed Balance Sheet to reflect Prior Bradley Transactions and the respective historical financial statements and the notes thereto of Bradley and Mid-America.
BRADLEY PRIOR PRO FORMA PRO FORMA BRADLEY MID-AMERICA AS ADJUSTED PRO FORMA MID-AMERICA MERGER FOR THE TRANSACTIONS(A) HISTORICAL ADJUSTMENTS (B) MID-AMERICA MERGER --------------- ------------ ------------------ ------------------- (IN THOUSANDS EXCEPT PER SHARE DATA) ASSETS Real estate investments, at cost................. $815,062 $152,716 $(10,926) $956,852 Accumulated depreciation and amortization........ (44,582) (34,161) 34,161 (44,582) -------- -------- -------- -------- Net real estate investments.................... 770,480 118,555 23,235 912,270 Cash and cash equivalents........................ 2,505 -- -- 2,505 Rents and other receivables...................... 12,120 2,285 (1,106)(C) 13,299 Investment in partnership........................ -- 14,943 (1,656) 13,287 Deferred charges and other assets................ 17,699 3,912 (2,927)(D) 18,684 -------- -------- -------- -------- Total assets................................... $802,804 $139,695 $ 17,546 $960,045 ======== ======== ======== ======== LIABILITIES Mortgage loans................................... 80,718 49,499 (11,417)(E) 118,800 Unsecured notes payable.......................... 199,496 -- -- 199,496 Lines of credit.................................. 119,479 11,951 18,310(F) 149,740 Accounts payable, accrued expenses and other liabilities............................... 24,471 1,849 49 26,369 -------- -------- -------- -------- Total liabilities.............................. 424,164 63,299 6,942 494,405 -------- -------- -------- -------- Minority interest................................ 19,803 -- -- 19,803 -------- -------- -------- -------- SHARE OWNERS' EQUITY Series A Preferred Stock and paid-in capital..... -- -- 87,000(G) 87,000 Common stock at par.............................. 237 83 (83)(G) 237 Additional paid-in capital....................... 343,733 119,730 (119,730)(G) 343,733 Accumulated earnings in excess of distributions.. 14,867 (43,417) 43,417(G) 14,867 -------- -------- -------------- -------- Total share owners' equity..................... 358,837 76,396 10,604 445,837 -------- -------- -------- -------- Total liabilities and share owners' equity.................................... $802,804 $139,695 $ 17,546 $960,045 ======== ======== ======== ========
F-25 ____________________ Notes to Pro Forma Condensed Combined Balance Sheet (A) See page F-28 for the pro forma condensed balance sheet giving effect to Prior Bradley Transactions. (B) Represents adjustments to record the Mid-America Merger in accordance with the purchase method of accounting, based upon a purchase price of approximately $157.2 million, which assumes a value of $25 per share of Series A Preferred Stock, computed as follows (in thousands): Issuance of Series A Preferred Stock.......................... $ 87,000 Assumption of Mid-America liabilities......................... 63,299 Adjustment to increase mortgage debt to estimated fair value.. 2,043 Estimated costs of the Mid-America Merger..................... 4,850 -------- $157,192 ======== (C) Represents the write-off of the portion of the Mid-America accounts receivable representing deferred rents arising from Mid-America recognition of rental income on a straight-line basis in accordance with generally accepted accounting principles. Bradley, as the surviving corporation, will recognize rental income on a straight-line basis over the remaining terms of the Mid-America leases in accordance with generally accepted accounting principles. (D) Represents the adjustment of Mid-America's carrying value of deferred charges to the estimated fair values in accordance with the purchase method of accounting. Organization costs, leasing costs and management contracts of Mid-America were deemed to have no future value to Bradley and were written-off in accordance with the purchase method of accounting. Other assets were adjusted to the estimated fair values as of March 31, 1998. The amounts represented by these adjustments are summarized below (in thousands): Leasing costs........................................... $ 2,693 Decrease in value of TIF bonds.......................... 1,581 Loan costs.............................................. 1,319 Management contract..................................... 893 Other................................................... 406 Increase in cash surrender value of executive benefits.. (35) Less accumulated amortization........................... (3,930) ------- Pro forma adjustment.................................... $ 2,927 ======= (E) Represents the expected prepayment of Mid-America mortgage debt funded with Bradley's line of credit, and the adjustment to the carrying value of the remaining Mid-America mortgage debt to the estimated fair values at March 31, 1998, as follows (in thousands): Expected amount of Mid-America mortgage debt to be prepaid...................... $(13,460) Adjustment to estimated fair value for remaining mortgage debt...................... 2,043 -------- Pro forma adjustment.............................. $(11,417) ======== F-26 (F) Estimated payments for fees and expenses related to the Mid-America Merger are as follows (in thousands): Investment advisory fees................................... $ 1,770 Termination and severance.................................. 1,160 Legal and accounting....................................... 1,015 Real estate due diligence and closing costs................ 614 Other...................................................... 145 Printing and filing fees................................... 96 D&O insurance.............................................. 50 ------- 4,850 Expected amount of Mid-America mortgage debt prepaid with Bradley's line of credit............................... 13,460 ------- Pro forma adjustment....................................... $18,310 ======= (G) To adjust Mid-America's capital accounts to reflect the issuance of 3,480,000 shares of Series A Preferred Stock in exchange for all of the outstanding shares of Mid-America Common Stock at an Exchange Ratio of 0.42 shares of Series A Preferred Stock for each outstanding share of Mid-America Common Stock, as follows (in thousands):
SERIES A PREFERRED STOCK AND COMMON PAID-IN DISTRIBUTION IN PAID-IN SHARES CAPITAL EXCESS OF EARNINGS CAPITAL ------- ---------- ------------------- ------- Issuance of Series A Preferred Stock.... $ -- $ -- $ -- $87,000 Mid-America's historical stockholders' equity............................... $ 83 119,730 (43,417) -- ------- --------- ----------- ------- Pro forma adjustment $ (83) $(119,730) $ 43,417 $87,000 ======= ========= =========== =======
F-27 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED BALANCE SHEET TO REFLECT PRIOR BRADLEY TRANSACTIONS MARCH 31, 1998 (UNAUDITED) From April 1, 1998 through June 22, 1998, Bradley has acquired an additional seven shopping centers and has entered into contracts to acquire an additional seven shopping centers, which management believes will close. The aggregate price of these transactions is expected to be approximately $155 million. Management currently expects to fund the Pending Acquisitions through the assumption of existing mortgage loans and with the bank line of credit. Although management deems the Pending Acquisitions as probable, there can be no assurance that the acquisition of any of such properties will be consummated, or that the acquisition price will approximate those currently estimated. Further, there can be no assurance that the method of financing the Pending Acquisitions will be as currently estimated. Subsequent to March 31, 1998, Bradley entered into a contract to sell One North State for approximately $84.5 million subject to normal and customary closing costs and adjustments with the proceeds assumed to be used to pay down Bradley's line of credit. In addition, in May 1998, Bradley sold Holiday Plaza, a shopping center in Cedar Falls, Iowa, for approximately $1.9 million. The unaudited Pro Forma Condensed Balance Sheet of Bradley is presented as if the acquisitions (including the Pending Acquisitions), and the dispositions (including the probable disposition), described above, had been consummated on March 31, 1998.
MARCH 31, 1998 ACQUISITION DISPOSITION HISTORICAL ADJUSTMENTS (A) ADJUSTMENTS (B) PRO FORMA --------------- --------------- --------------- ---------- (IN THOUSANDS EXCEPT PER SHARE DATA) ASSETS Real estate investments --at cost........... $660,096 $154,966 $ -- $815,062 Accumulated depreciation and amortization... (44,582) -- -- (44,582) -------- -------------- -------- -------- Net real estate investments................. 615,514 154,966 -- 770,480 Real estate investments held for sale....... 54,565 -- (54,565) -- Other assets: Cash and cash equivalents.................. 2,505 -- -- 2,505 Rents and other receivables................ 14,117 -- (1,997) 12,120 Deferred charges, net and other assets..... 18,223 -- (524) 17,699 -------- -------------- -------- -------- Total assets................................ $704,924 $154,966 $(57,086) $802,804 ======== ============== ======== ======== LIABILITIES AND SHARE OWNERS' EQUITY Mortgage loans.............................. 50,966 29,752 -- 80,718 Unsecured notes payable..................... 199,496 -- -- 199,496 Line of credit.............................. 79,100 125,214 (84,835) 119,479 Accounts payable, accrued expenses and other liabilities.......................... 27,798 -- (3,327) 24,471 -------- -------------- -------- -------- Total liabilities........................... 357,360 154,966 (88,162) 424,164 -------- -------------- -------- -------- Minority interest........................... 19,146 -- 657 19,803 -------- -------------- -------- -------- Share owners' equity Common stock at par........................ 237 -- -- 237 Additional paid-in capital................. 343,733 -- -- 343,733 Accumulated earnings in excess of distributions.......................... (15,552) -- 30,419 14,867 -------- -------------- -------- -------- Total share owners' equity.................. 328,418 -- 30,419 358,837 -------- -------------- -------- -------- Total liabilities and share owners' equity.. $704,924 $154,966 $(57,086) $802,804 ======== ============== ======== ========
F-28 EXPLANATORY NOTES (A) Adjustments represent Acquisition Properties acquired subsequent to March 31, 1998 that have been completed, or that are probable of completion. (B) Adjustments represent the sale of Holiday Plaza subsequent to March 31, 1998, and the probable disposition of One North State for net sales proceeds of approximately $1.9 million and $84.5 million subject to normal and customary closing costs and adjustments, respectively, and the application of the net proceeds to pay down Bradley's line of credit. F-29 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) This unaudited Pro Forma Condensed Combined Statement of Income is presented as if the Mid-America Merger and all the Prior Bradley Transactions (see Note A) had been consummated on January 1,1997 and with Bradley qualifying as a REIT, distributing all of its taxable income and, therefore, incurring no federal income tax expense during the period January 1, 1997 through March 31, 1998. The Mid-America Merger has been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. In the opinion of Bradley's management, all adjustments necessary to reflect the effects of these transactions have been made. The accompanying Pro Forma Condensed Combined Statement of Income has been prepared based on pro forma adjustments to pro forma and historical financial statements of Bradley and historical financial statements of Mid-America. This unaudited Pro Forma Condensed Combined Statement of Income is presented for comparative purposes only and is not necessarily indicative of what the actual results of operations of Bradley would have been for the period presented, nor does it purport to represent the results to be achieved in future periods. This unaudited Pro Forma Condensed Combined Statement of Income should be read in conjunction with, and is qualified in its entirety by the Pro Forma Condensed Statement of Income to reflect Prior Bradley Transactions and the respective historical financial statements and the notes thereto of Bradley and Mid-America.
THREE MONTHS ENDED MARCH 31, 1998 -------------------------------------------------------------- BRADLEY PRO FORMA PRIOR PRO FORMA AS ADJUSTED BRADLEY MID-AMERICA FOR PRO FORMA MID-AMERICA MERGER MID-AMERICA TRANSACTIONS(A) HISTORICAL(B) ADJUSTMENTS MERGER --------------- -------------- --------------- ------------ (IN THOUSANDS EXCEPT PER SHARE DATA) Income: Rental income................................... $ 29,821 $5,646 $ -- $ 35,467 Other income.................................... 640 166 -- 806 ----------- ------ ----------- ----------- Total revenue................................. 30,461 5,812 -- 36,273 ----------- ------ ----------- ----------- Expenses: Operations, maintenance and management.......... 4,408 899 -- 5,307 Real estate taxes............................... 5,031 760 -- 5,791 Mortgage and other interest..................... 7,224 1,341 (173)(C) 8,392 General and administrative...................... 1,403 544 (323)(D) 1,624 Depreciation and amortization................... 5,793 1,238 (470)(E) 6,561 ----------- ------ ----------- ----------- Total expenses................................ 23,859 4,782 (966) 27,675 ----------- ------ ----------- ----------- Income before equity in earnings of partnership and allocation to minority interest............. 6,602 1,030 966 8,598 Equity in earnings of partnership................ -- 265 65(E) 330 Income allocated to minority interest............ (383) -- -- (383) ----------- ------ ----------- ----------- Net income....................................... 6,219 1,295 1,031 8,545 Preferred share distributions.................... -- -- (1,827)(F) (1,827) ----------- ------ ----------- ----------- Net income attributable to common stock.......... $ 6,219 $1,295 $ (796) $ 6,718 =========== ====== =========== =========== Weighted average number of common shares outstanding-basic(G).............. 23,532,849 23,532,849 Basic net income per common share(G)................................. $0.26 $0.29 =========== ===========
F-30 ____________________ Notes to Pro Forma Condensed Combined Statement of Income (A) See page F-33 for the pro forma condensed statement of income giving effect to Prior Bradley Transactions. (B) Represents historical operating results as reported by Mid-America for the three months ended March 31, 1998. (C) Represents the net reduction in interest expense for the prepayment of certain Mid-America mortgage indebtedness with Bradley's line of credit at Bradley's current interest rate of 6.5%, combined with the reduction in interest expense to reflect the estimated market interest rate of approximately 7.25%, in accordance with the purchase method of accounting, partially offset by an increase in interest expense for the payment of fees and expenses related to the Mid-America Merger of approximately $4,850,000, at an interest rate of 6.5%, as follows (in thousands): Elimination of historical interest on mortgages expected to be prepaid.................. $(528) Interest on Bradley's line of credit expected to be used to prepay debt................. 413 Reduction of Mid-America interest to reflect a market rate.............................. (137) Interest on Bradley's line of credit for Mid-America Merger fees and expenses.......................................................................... 79 ----- Pro forma adjustment.................................................................... $(173) =====
(D) Represents general and administrative cost savings which have been estimated based upon historical costs for those items which are expected to be eliminated as a result of the Mid-America Merger, as follows (in thousands):
Salaries and benefits............................... $227 D&O insurance and director fees..................... 46 Professional fees................................... 37 Other............................................... 13 ---- Pro forma adjustment................................ $323 ====
(E) Depreciation and amortization changes relate to recording Mid-America's properties at Bradley's purchase price, the related depreciation utilizing an estimated useful life of 39 years and a depreciable basis of approximately $119,771,000, and the elimination of historical amortization of Mid-America deferred assets in accordance with the purchase method of accounting, as follows (in thousands): Pro forma depreciation expense ($119,771 over 39 years)............ $768 Mid-America depreciation and amortization.......................... (1,238) ------ Pro forma adjustment............................................... $(470) ======
The pro forma adjustment to the equity in earnings of partnership reflects the adjustment to depreciation and amortization of the partnership resulting from recording the investment in partnership at Bradley's purchase price. (F) Preferred share distributions are calculated using an annual dividend rate of $2.10 per share for 3,480,000 shares of Series A Preferred Stock pro rated for the period presented. F-31 (G) A reconciliation of the numerator and denominator used to compute basic earnings per share ("EPS") to the numerator and denominator used to compute diluted EPS is as follows:
BRADLEY AS ADJUSTED FOR MID-AMERICA MERGER NUMERATOR DENOMINATOR PER SHARE ------------- -------------- ----------- Basic EPS: Net income attributable to common stock.............. $6,718,000 23,532,849 $0.29 Effect of dilutive securities: Dilutive options exercised........................... -- 54,379 Conversion of LP Units............................... 383,000 1,435,311 ---------- ---------- Diluted EPS: Net income attributable to common stock.............. $7,101,000 25,022,539 $0.28 ========== ========== ===========
F-32 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED STATEMENT OF INCOME TO REFLECT PRIOR BRADLEY TRANSACTIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) During the period from January 1, 1998 through June 22, 1998, Bradley acquired 12 shopping centers at an aggregate cost of approximately $98.8 million (the "Completed Acquisitions"). Consideration paid for such acquisitions included cash (provided primarily from the bank line of credit) and assumption of mortgage indebtedness. In addition, as of June 22, 1998, Bradley has entered into contracts to acquire an additional seven shopping centers (the "Pending Acquisitions") for an estimated aggregate purchase price of approximately $89.6 million. Management currently expects to fund the Pending Acquisitions with the bank line of credit and the assumption of mortgage indebtedness. Although management deems such acquisitions as probable, there can be no assurance that the acquisition of any of such properties will be consummated, or that the acquisition price will approximate those currently estimated. Further, there can be no assurance that the method of financing such acquisitions will be as currently estimated. The Prior Bradley Transactions do not include the Mid-America Merger. On January 28, 1998, Bradley, through the Operating Partnership, issued $100 million of 7.2% ten-year unsecured Notes maturing January 15, 2008 (the "January 1998 Debt Issuance"). The effective interest rate on the unsecured Notes is approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's Investment Services and "Baa3" by Moody's Investor's Services. Proceeds from the offering were used to reduce the outstanding borrowings under the line of credit. On February 18, 1998, Bradley issued 392,638 shares of common stock to a unit investment trust at a price based upon the then market value of $20.375 per share (the "February 1998 Stock Offering"). Net proceeds from the offering of approximately $7.6 million were contributed to the Operating Partnership and were used to reduce outstanding borrowings under the line of credit. Subsequent to March 31, 1998, Bradley entered into a contract to sell One North State for approximately $84.5 million subject to normal and customary closing costs and adjustments, with the proceeds assumed to be used to pay down Bradley's line of credit. In addition, in May 1998, Bradley sold Holiday Plaza, a shopping center in Cedar Falls, Iowa, for approximately $1.9 million. The unaudited Pro Forma Condensed Statement of Income of Bradley is presented as if the Property Acquisitions (including the Pending Acquisitions), the dispositions (including the probable disposition), the January 1998 Debt Issuance, and the February 1998 Stock Offering, described above, had been consummated on January 1, 1997, and with Bradley qualifying as a REIT and, therefore, incurring no federal income tax expense during the period January 1, 1997 through March 31, 1998. F-33
OTHER ACQUISITION ACQUISITION DISPOSITION OTHER HISTORICAL PROPERTIES (A) PROPERTIES(B) PROPERTIES (C) ADJUSTMENTS PRO FORMA ------------ -------------- ------------- -------------- -------------- ---------- (IN THOUSANDS EXCEPT PER SHARE DATA) Revenues: Rental income....................... $ 28,736 $3,079 $1,803 $(3,797) $ -- $29,821 Other income........................ 619 21 -- -- -- 640 ----------- ------ ------ ------- ----------- ------- Total revenue..................... 29,355 3,100 1,803 (3,797) -- 30,461 ----------- ------ ------ ------- ----------- ------- Expenses: Operations, maintenance and management........................ 4,333 387 210 (522) -- 4,408 Real estate taxes................... 5,481 302 307 (1,059) -- 5,031 Mortgage and other interest......... 5,558 -- -- -- 1,666(D) 7,224 General and administrative.......... 1,403 -- -- -- -- 1,403 Depreciation and amortization....... 4,963 -- -- -- 830(E) 5,793 ----------- ------ ------ ------- ----------- ------- Total expenses.................... 21,738 689 517 (1,581) 2,496 23,859 ----------- ------ ------ ------- ----------- ------- Income before provision for loss on real estate investment and minority interest............... 7,617 2,411 1,286 (2,216) (2,496) 6,602 Provision for loss on real estate investment.......................... (875) -- -- 875 -- -- ----------- ------ ------ ------- ----------- ------- Income before allocation to minority interest................ 6,742 2,411 1,286 (1,341) (2,496) 6,602 Income allocated to minority interest................... (391) -- -- -- 8 (383) ----------- ------ ------ ------- ----------- ------- Net Income attributable to common stock..................... $ 6,351 $2,411 $1,286 $(1,341) $ (2,488) $ 6,219 =========== ====== ====== ======= =========== ======= Weighted average common shares outstanding --basic(F)....... 23,301,629 23,532,849 Basic and diluted income per common share: (F)................... $ 0.27 $ 0.26 =========== ===========
EXPLANATORY NOTES (A) Increase represents historical operating revenues and expenses of the Completed Acquisitions and Pending Acquisitions for which financial statements are included in this Form 8-K, for the period Bradley did not own such properties. (B) Increase represents historical operating revenues and expenses of the Completed Acquisitions and the Pending Acquisitions for which financial statements are not included in this Form 8-K, for the period Bradley did not own such properties. (C) Decrease represents the elimination of historical operating revenues and expenses of properties sold or probable of being sold subsequent to March 31, 1998. (D) Mortgage and other interest has been increased to reflect the pro forma borrowings for Property Acquisitions for the period during which Bradley did not own such properties, net of the reduction for the application of net proceeds from the property dispositions and the February 1998 Stock Offering to pay down the line of credit for the period during which Bradley owned such properties, and for the period preceding the stock offering at an interest rate of 6.50%, which was Bradley's approximate borrowing rate at May 30, 1998. Mortgage and other interest has been increased for the January 1998 Debt Issuance for the period preceding the issuance. A 0.125% change in the variable rate would result in a change in the pro forma interest adjustment of approximately $11,000. Increase in interest expense attributable to acquisition activities.......................... $ 3,007 Decrease in interest expense attributable to disposition activities.......................... (1,360) Decrease in interest expense attributable to the February 1998 Stock Offering................ (65) Net increase in interest expense attributable to the January 1998 Debt Issuance.................. 84 ------- Pro forma adjustment.............................. $ 1,666 ======= F-34 (E) Depreciation and amortization has been increased to give effect to recording the Property Acquisitions (including the Pending Acquisitions) over a depreciable life of 39 years, for the period which Bradley did not own such properties, net of the reduction for properties sold or probable of being sold subsequent to March 31, 1998 for the period which Bradley owned such properties, as follows: Increase in depreciation and amortization attributable to acquisition activities................. $887 Decrease in depreciation and amortization attributable to disposition activities................. (57) ---- Pro forma adjustment....................... $830 ==== (F) A reconciliation of the numerator and denominator used to compute basic earnings per share ("EPS") to the numerator and denominator used to compute diluted EPS is as follows:
BRADLEY HISTORICAL BRADLEY PRO FORMA NUMERATOR DENOMINATOR PER SHARE NUMERATOR DENOMINATOR PER SHARE ---------- ----------- --------- ----------------- ----------- --------- Basic EPS: Net income attributable to common stock................... $6,351,000 23,301,629 $ 0.27 $6,219,000 23,532,849 $0.26 Effect of dilutive securities: Dilutive options exercised...... -- 54,379 -- 54,379 Conversion of LP Units.......... 391,000 1,435,311 383,000 1,435,311 ---------- ---------- -------- ---------- Diluted EPS: Net income attributable to common stock $6,742,000 24,791,319 $ 0.27 $6,602,000 25,022,539 $0.26 ========== ========== ======== ========== =========== =========
F-35 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) The unaudited Pro Forma Condensed Combined Statement of Income is presented as if the Mid-America Merger and all the Prior Bradley Transactions (see Note A) had been consummated on January 1, 1997, and with Bradley qualifying as a REIT and, therefore, incurring no federal income tax expense during the period January 1, 1997 through December 31, 1997. The Mid-America Merger has been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. In the opinion of Bradley's management, all adjustments necessary to reflect the effects of these transactions have been made. The accompanying Pro Forma Condensed Combined Statement of Income has been prepared based on pro forma adjustments to pro forma and historical financial statements of Bradley and historical financial statements of Mid-America. This unaudited Pro Forma Condensed Combined Statement of Income is presented for comparative purposes only and is not necessarily indicative of what the actual results of operations of Bradley would have been for the periods presented, nor does it purport to represent the results to be achieved in future periods. This unaudited Pro Forma Condensed Combined Statement of Income should be read in conjunction with, and is qualified in its entirety by the Pro Forma Condensed Statement of Income to reflect Prior Bradley Transactions and by the respective historical financial statements and the notes thereto of Bradley and Mid-America.
YEAR ENDED DECEMBER 31, 1997 ------------------------------------------------------------------ BRADLEY PRIOR PRO FORMA PRO FORMA BRADLEY MID-AMERICA AS ADJUSTED FOR PRO FORMA MID-AMERICA MERGER MID-AMERICA TRANSACTIONS(A) HISTORICAL(B) ADJUSTMENTS MERGER --------------- -------------- ------------------- ------------ (IN THOUSANDS EXCEPT PER SHARE DATA) Revenues: Rental income................................. $116,453 $22,478 $ -- $ 138,931 Other income.................................. 1,632 787 -- 2,419 -------- ------- --------------- ----------- Total revenue............................... 118,085 23,265 -- 141,350 -------- ------- --------------- ----------- Expenses: Operations, maintenance and management.................................. 16,478 4,316 -- 20,794 Real estate taxes............................. 19,069 2,952 -- 22,021 Mortgage and other interest................... 27,739 5,539 (845)(C) 32,433 General and administrative.................... 5,123 1,985 (1,300)(D) 5,808 Non-recurring stock based compensation................................ 3,415 -- -- 3,415 Depreciation and amortization................. 21,111 4,981 (1,910)(E) 24,182 -------- ------- --------------- ----------- Total expenses.............................. 92,935 19,773 (4,055) 108,653 -------- ------- --------------- ----------- Income before net gain on sale of properties, equity in earnings of partnership and minority interest............................. 25,150 3,492 4,055 32,697 Net gain on sale of properties................. -- 130 (130) -- Equity in earnings of partnership.............. -- 1,026 260(E) 1,286 Income allocated to minority interest...................................... (1,568) -- -- (1,568) -------- ------- --------------- ----------- Income from operations......................... 23,582 4,648 4,185 32,415 Preferred Share Distributions.................. -- -- (7,308)(F) (7,308) -------- ------- --------------- ----------- Income from operations attributable to common stock.................................. $ 23,582 $ 4,648 $(3,123) $ 25,107 -------- ======= =============== =========== Weighted average common shares outstanding-basic(G).......................... 22,963,982 22,963,982 Basic and diluted income from operations per common share(G)........................... $1.03 $1.09 ======== ===========
F-36 ____________________ Notes to Pro Forma Condensed Combined Statement of Income (A) See page F-39 for the pro forma condensed statement of income giving effect to Prior Bradley Transactions. (B) Represents historical operating results as reported by Mid-America for the year ended December 31, 1997. (C) Represents the net reduction in interest expense for the prepayment of certain Mid-America mortgage indebtedness with Bradley's line of credit at Bradley's current interest rate of 6.5%, combined with the reduction in interest expense to reflect the estimated market interest rate of approximately 7.25%, in accordance with the purchase method of accounting, partially offset by an increase in interest expense for the payment of fees and expenses related to the Mid-America Merger of approximately $4,850,000, at an interest rate of 6.5%, as follows (in thousands): Elimination of historical interest on mortgages expected to be prepaid... $(2,263) Interest on Bradley's line of credit expected to be used to prepay debt.. 1,652 Reduction of Mid-America interest to reflect a market rate............... (549) Interest on Bradley's line of credit for Mid-America Merger fees and expenses......................................................... 315 ------- Pro forma adjustment..................................................... $ (845) =======
(D) Represents general and administrative cost savings which have been estimated based upon historical costs for those items which are expected to be eliminated as a result of the Mid-America Merger, as follows (in thousands): Salaries and benefits............ $ 906 D&O Insurance and director fees.. 230 Professional fees................ 136 Other............................ 28 ------ Pro forma adjustment............. $1,300 ======
(E) Depreciation and amortization changes relate to recording Mid-America's properties at Bradley's purchase price, and related depreciation utilizing an estimated useful life of 39 years and a depreciable basis of approximately $119,771,000, and the elimination of historical amortization of Mid-America's deferred assets in accordance with the purchase method of accounting, as follows (in thousands) Pro forma depreciation expense ($119,771 over 39 years)........ $3,071 Mid-America depreciation and amortization...................... (4,981) ------ Pro forma adjustment........................................... $(1,910) ======= The pro forma adjustment to the equity in earnings of partnership reflects the adjustment to depreciation and amortization of the partnership resulting from recording the investment in partnership at Bradley's purchase price. (F) Preferred share distributions are calculated using an annual dividend rate of $2.10 per share for 3,480,000 shares of Series A Preferred Stock. F-37 (G) A reconciliation of the numerator and denominator used to compute basic earnings per share ("EPS") to the numerator and denominator used to compute diluted EPS is as follows:
BRADLEY AS ADJUSTED FOR MID-AMERICA MERGER NUMERATOR DENOMINATOR PER SHARE -------------- ------------- ----------- Basic EPS: Income from operations attributable to common stock.......................... $25,107,000 22,963,982 $1.09 Effect of dilutive securities: Stock options........................... -- 42,451 Stock-based compensation................ -- 315 Conversion of LP Units.................. 1,568,000 1,523,587 -------------- ---------- Diluted EPS: Income from operations attributable to common stock.......................... $26,675,000 24,530,335 $1.09 ============== ========== ===========
F-38 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED STATEMENT OF INCOME TO REFLECT PRIOR BRADLEY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) During 1997, Bradley acquired 25 shopping centers aggregating over 3.1 million square feet of GLA for an aggregate cost of approximately $189.3 million and from January 1, 1998 through June 22, 1998, has acquired 12 properties aggregating 1.5 million square feet of GLA for an aggregate acquisition price of approximately $98.8 million. Consideration paid for such acquisitions included cash (provided primarily from the bank line of credit), assumption of mortgage indebtedness and the issuance of Units of the Operating Partnership to contributors of properties acquired. In addition, as of June 22, 1998, Bradley has entered into contracts to acquire an additional seven Pending Acquisitions for an estimated purchase price of approximately $89.6 million. Management currently expects to fund the Pending Acquisitions with the bank line of credit and the assumption of mortgage indebtedness. Although management deems such acquisitions as probable, there can be no assurance that the acquisition of any of such properties will be consummated, or that the acquisition price will approximate those currently estimated. Further, there can be no assurance that the method of financing such acquisitions will be as currently estimated. During the period from January 1, 1997 through June 22, 1998, Bradley sold five shopping centers for net proceeds of approximately $21.3 million utilizing the net proceeds to pay-down the line of credit. The Prior Bradley Transactions do not include the Mid-America Merger. In December 1997, Bradley entered into a new $200 million unsecured line of credit facility with a syndicate of banks, replacing the previous $150 million unsecured line of credit. The line of credit bears interest at a rate equal to the lowest of (i) the lead bank's base rate, (ii) a spread over LIBOR ranging from 0.70% to 1.25% depending on the credit rating assigned by national credit rating agencies, or (iii) for amounts outstanding up to $100 million, a competitive bid rate solicited from the syndicate of banks. Based on the current credit rating assigned by Standard & Poor's and Moody's, the spread over LIBOR is 1.00%, which represents a reduction in the spread over LIBOR from the previous $150 million line of credit by 0.50%. On November 26, 1997, Bradley prepaid a REMIC mortgage note (the "REMIC Prepayment") primarily with the proceeds of an offering of $100 million of 7% unsecured Notes due November 15, 2004 (the "November 1997 Debt Issuance"). The effective interest rate on the unsecured Notes is approximately 7.19%. The issue was rated "BBB-" by Standard & Poor's and "Baa3" by Moody's. In December 1997, Bradley issued 1,290,000 shares of common stock pursuant to two separate public offerings (the "December 1997 Stock Offerings"). Net proceeds from the offerings, approximately $24.9 million, were contributed to the Operating Partnership and were used to reduce outstanding borrowings under the line of credit. On January 28, 1998, Bradley through the Operating Partnership issued $100 million, 7.2% ten-year unsecured Notes maturing January 15, 2008 (the "January 1998 Debt Issuance"). The effective interest rate on the unsecured Notes is approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's and "Baa3" by Moody's. Proceeds from the issue were used to reduce the outstanding borrowings under the line of credit. On February 18, 1998, Bradley issued 392,638 shares of common stock to a unit investment trust at a price based upon the then market value of $20.375 per share (the "February 1998 Stock Offering"). Net proceeds from the offering of approximately $7.6 million were contributed to the Operating Partnership and were used to reduce outstanding borrowings under the line of credit. Subsequent to March 31, 1998, Bradley entered into a contract to sell One North State for approximately $84.5 million subject to normal and customary closing costs and adjustments, with the proceeds assumed to be used to pay down Bradley's line of credit. The unaudited Pro Forma Condensed Statement of Income is presented as if all of the acquisitions (including the Pending Acquisitions), the dispositions (including the probable disposition), the replacement of the previous line of credit with the new line of credit, the REMIC Prepayment, the November 1997 Debt Issuance, the December 1997 Stock Offerings, the January 1998 Debt Issuance, and the February 1998 Stock Offering, described above, had been consummated on January 1, 1997, and with Bradley qualifying as a REIT and, therefore, incurring no federal income tax expense during the period January 1, 1997 through December 31, 1997. F-39
OTHER ACQUISITION ACQUISITION DISPOSITION OTHER HISTORICAL PROPERTIES (A) PROPERTIES(B) PROPERTIES (C) ADJUSTMENTS PRO FORMA ------------ -------------- ------------- -------------- -------------- ---------- (IN THOUSANDS EXCEPT PER SHARE DATA) Revenues: Rental income......................... $ 96,115 $11,915 $25,988 $(17,565) $ -- $116,453 Other income.......................... 1,437 47 142 6 -- 1,632 ----------- ------- ------- -------- ----------- -------- Total revenue....................... 97,552 11,962 26,130 (17,559) -- 118,085 ----------- ------- ------- -------- ----------- -------- Expenses: Operations, maintenance and management...................... 14,012 1,680 3,642 (2,856) -- 16,478 Real Estate taxes..................... 18,398 1,186 4,105 (4,620) -- 19,069 Mortgage and other interest............................ 16,562 -- -- -- 11,177(D) 27,739 General and administrative............ 5,123 -- -- -- -- 5,123 Non-recurring stock-based compensation........................ 3,415 -- -- -- -- 3,415 Depreciation and amortization........................ 16,606 -- -- -- 4,505(E) 21,111 ----------- ------- ------- -------- ----------- -------- Total expenses........................ 74,116 2,866 7,747 (7,476) 15,682 92,935 ----------- ------- ------- -------- ----------- -------- Income before net gain on sale of properties and extraordinary item................................ 23,436 9,096 18,383 (10,083) (15,682) 25,150 Net gain on sale of properties......... 7,438 -- -- (7,438) -- -- ----------- ------- ------- -------- ----------- -------- Income before extraordinary item and allocation to minority interest..... 30,874 9,096 18,383 (17,521) (15,682) 25,150 Income allocated to minority interest.. (1,116) -- -- -- (452) (1,568) ----------- ------- ------- -------- ----------- -------- Income before extraordinary item....... $ 29,758 $ 9,096 $18,383 $(17,521) $(16,134) $ 23,582 =========== ======= ======= ======== =========== ======== Weighted average shares outstanding -- basic(F)............. 21,776,146 22,963,982 Basic and diluted income per common share: Income before extraordinary item(F)... $1.36 $1.03 =========== ========
EXPLANATORY NOTES (A) Increase represents historical operating revenues and expenses of the Completed Acquisitions, Pending Acquisitions and properties acquired in 1997 for which financial statements are included in this Form 8-K, for the period Bradley did not own such properties. (B) Increase represents historical operating revenues and expenses of Completed Acquisitions, Pending Acquisitions and properties acquired in 1997 for which financial statements are not included in this Form 8-K, for the period Bradley did not own such properties. (C) Decrease represents the elimination of historical operating revenues and expenses and net gain on sale of properties disposed of during 1997 and 1998 or probable of being sold for the period during which Bradley owned such properties. F-40 (D) Mortgage and other interest has been increased to reflect the pro forma borrowings for property acquisitions for the period during which Bradley did not own such properties, net of the reduction for the application of net proceeds from the property dispositions and the December 1997 and February 1998 Stock Offerings to pay down the line of credit for the period during which Bradley owned such properties, and for the period preceding the Stock Offerings, at an interest rate of 6.50%, which was Bradley's approximate borrowing rate at May 30, 1998. Mortgage and other interest has been increased for the November 1997 and January 1998 Debt Issuances, net of the reduction for the application of net proceeds of such Debt Issuances to pay down the $100 million REMIC Note and the line of credit, respectively, at the applicable effective interest rates. Mortgage and other interest has been decreased by the net reduction in interest expense resulting from the December 1997 paydown of the existing line of credit facility with proceeds from the new line of credit facility. A 0.125% change in the variable rate would result in a change in the pro forma interest adjustment of approximately $19,000. Increase in interest expense attributable to acquisition activities............................ $18,885 Decrease in interest expense attributable to disposition activities.......................... (6,369) Decrease in interest expense attributable to the Stock Offerings............................. (1,987) Net increase in interest expense attributable to the Debt Issuances.............................. 1,092 Net decrease in interest expense attributable to the paydown of the existing line of credit facility with proceeds from the new line of credit facility................................. (444) ------- Pro forma adjustment.............................. $11,177 =======
(E) Depreciation and amortization has been increased to give effect to recording the property acquisitions (including Pending Acquisitions) over a depreciable life of 39 years, for the period which Bradley did not own such properties, net of the reduction for properties disposed for the period which Bradley owned such properties, as follows: Increase in depreciation and amortization attributable to acquisition activities........................ $ 5,899 Decrease in depreciation and amortization attributable to disposition activities........................ (1,394) ------- Pro forma adjustment............................................ $ 4,505 =======
(F) A reconciliation of the numerator and denominator used to compute basic earnings per share ("EPS") to the numerator and denominator used to compute diluted EPS is as follows:
BRADLEY HISTORICAL BRADLEY PRO FORMA NUMERATOR DENOMINATOR PER SHARE NUMERATOR DENOMINATOR PER SHARE ----------- ----------- ---------- ----------- ----------- --------- Basic EPS: Income before extraordinary item.. $29,758,000 21,776,146 $ 1.36 $23,582,000 22,963,982 $1.03 Effect of dilutive securities: Stock options..................... -- 42,451 -- 42,451 Stock-based compensation.......... -- 315 -- 315 Conversion of LP Units............ 1,116,000 799,938 1,568,000 1,523,587 ----------- ---------- ---------- ----------- Diluted EPS: Income before extraordinary item.. $30,874,000 22,618,850 $ 1.36 $25,150,000 24,530,335 $1.03 =========== ========== ========== =========== =========== =========
F-41 EX-23.1 2 CONSENT OF KPMG PEAT MARWICK LLP EXHIBIT 23.1 Consent of KPMG Peat Marwick LLP -------------------------------- The Board of Directors of Bradley Real Estate, Inc.: We consent to the use of our report dated April 9, 1998 related to the statement of revenues and certain expenses of Redford Plaza for the year ended December 31, 1997, our report dated May 7, 1998 related to the statement of revenues and certain expenses of Courtyard Shopping Center for the year ended December 31, 1997, our report dated May 7, 1998 related to the combined statement of revenues and certain expenses of Camelot Shopping Center and Plainview Village for the year ended December 31, 1997, our report dated May 29, 1998 related to the statement of revenues and certain expenses of Salem Consumer Square for the year ended December 31, 1997, our report dated May 29, 1998 related to the statement of revenues and certain expenses of Holiday Manor Shopping Center for the year ended December 31, 1997, and our report dated June 1, 1998 related to the statement of revenues and certain expenses of Ellisville Square for the year ended December 31, 1997, incorporated by reference in the registration statements (Nos. 333-42357, 333-28167, 33-87084, 33-62200 and 33-64811) on Form S-3 of Bradley Real Estate, Inc., the registration statements (Nos. 333-30587, 33-34884 and 33-65180) on Form S-8 of Bradley Real Estate, Inc., the registration statement (No. 333-57123) on Form S-4 of Bradley Real Estate, Inc. and the registration statements (Nos. 333-36577 and 333-51675) on Form S-3 of Bradley Operating Limited Partnership. Chicago, Illinois /s/ KPMG Peat Marwick LLP June 24, 1998 -----END PRIVACY-ENHANCED MESSAGE-----