-----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, JN7VS/qQTEJyUiDvJSJSvKtgW+qW3VCyBLVmHEz+Xwr5rifqee9jg3x6O31PjjJA cGF9KiIiJb/mWE7KqhkpnQ== 0000927016-98-004290.txt : 19981217 0000927016-98-004290.hdr.sgml : 19981217 ACCESSION NUMBER: 0000927016-98-004290 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981216 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981216 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: 98770668 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: December 16, 1998 Date of earliest event reported: February 13, 1998 -------------------------------- BRADLEY REAL ESTATE, INC. (Exact name of Registrant as specified in its charter) MARYLAND 1-10328 04-6034603 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 40 SKOKIE BOULEVARD, NORTHBROOK, ILLINOIS 60062 (Address of principal executive offices and zip code) Registrant's telephone number, including area code: (847) 272-9800 Item 5. Other Events. ------------ Bradley Real Estate, Inc. (the "Company" or "Bradley") files this Form 8-K report that contains pro forma financial statements as of September 30, 1998 and the nine months then ended and for the year ended December 31, 1997. Financial statements consistent with Regulation S-X, Rule 3-14 were previously filed on Form 8-K for properties accounting for over 50% of the aggregate acquisition costs of a series of properties acquired during the period January 1, 1998 through December 14, 1998 (the "Completed Acquisitions") or whose acquisition the Company considers probable (the "Pending Acquisitions" and, together with the Completed Acquistions, the "Acquisition Properties"). The Acquisition Properties do not include properties which Bradley acquired August 6, 1998 pursuant to the Agreement and Plan of Merger dated May 30, 1998 between Bradley and Mid-America Realty Investments, Inc. (the "Mid-America Merger"). During the period January 1 through December 14, 1998, the Company acquired 21 shopping centers and two outlots adjacent to one of Bradley's existing centers at an aggregate cost of approximately $198.9 million. In addition, as of December 15, 1998, the Company had entered into a contract for the purchase of an additional Pending Acquisition for an estimated acquisition price of approximately $3.9 million which management believes will close. No one property or group of properties comprising the Acquisition Properties was or will be in itself significant, but in the aggregate the costs exceed 10% of the total assets of the Company and its subsidiaries consolidated at December 31, 1997. The Completed Acquisitions have been funded, and management currently expects that the Pending Acquisition will be funded, with borrowings under the Company's bank line of credit, through the assumption of existing mortgage indebtedness, and the issuance of Limited Partnership Units in Bradley Operating Limited Partnership (the "Operating Partnership") to contributors of properties acquired. The Company is the sole general partner and the owner of approximately 94% of the economic interests in the Operating Partnership. No assurance can be given that the Pending Acquisition will be consummated or that the terms of the transaction or proposed method of financing may not change materially from that described herein. The dates, shopping centers acquired and the approximate acquisition cost for the respective Acquisition Properties are as follows: 2
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 20,685,000 May 13, 1998 Butterfield Square, Libertyville, IL 13,008,000 May 13, 1998 * Plainview Village, Louisville, KY 12,100,000 May 13, 1998 * Camelot Shopping Center, Louisville, KY 8,645,000 May 13, 1998 Dixie Plaza, Louisville, KY 3,676,000 May 28, 1998 Bartonville, Peoria, IL 1,583,000 May 28, 1998 Sterling Outlots, Peoria, IL 525,000 June 10, 1998 Garden Plaza, Franklin, WI 5,346,000 June 23, 1998 Fox River, Burlington, WI 7,632,000 June 26, 1998 Lincoln Plaza, New Haven, IN 5,075,000 August 19, 1998 Midtown Plaza, Shawnee, KS 6,128,000 August 21, 1998 * Ellisville Square, St. Louis, MO 10,971,000 August 28, 1998 Doubletree Plaza, Winfield, IN 7,899,000 September 1, 1998 * Clock Tower Plaza, Lima, OH 14,774,000 September 4, 1998 * Salem Consumer Square, Dayton, OH 27,354,000 November 19, 1998 Maplewood Square, Maplewood, MO 5,212,000 November 20, 1998 Watts Mill, Kansas City, MO 14,764,000 ------------ $198,894,000 ============
Pending Acquistion - ------------------ PROPERTY ESTIMATED ACQUISITION COST Prospect Plaza, Gladstone, MO $ 3,900,000 ============
Properties designated with an asterisk (*) are properties included within the Acquisition Properties for which financial statements were previously filed on Form 8-K. None of the Acquisition Properties was or will be acquired from a related party of the Company or its consolidated subsidiaries. Factors considered by the Company in assessing the acquisition price for each of the Acquisition Properties included its location and tenant mix, including opportunities for retenanting and remodeling consistent with the Company's experience as a shopping center operator; its current net operating income and the prospect for increased income in the short and long range future; capitalization rates for shopping center properties of the type acquired, in the Midwest area of the United States generally and in the locality in which the property is located; current operating costs and the possibility of effecting property-level operating efficiencies as a result of the Company's ownership of a significant number of shopping centers in the Midwest; and the differential between the Company's cost of capital in acquiring the property and the property's current and potential net operating income. After reasonable inquiry, the Company is not aware of any material factors relating to any specific property included within the Acquisition Properties other than those discussed in the preceding sentence that would cause the reported financial information not to be necessarily indicative of future operating results. On June 18, 1998, the Company filed a Registration Statement on Form S-4 (Registration No. 333-57123) with the Securities and Exchange Commission relating to the 8.4% Series A Convertible Preferred Stock (the "Series A Preferred Stock") to be issued by the Company upon consummation of the Mid- America Merger (the "Merger Registration Statement"). Reference is made to the Merger Registration Statement for a description of the terms of the Mid-America Merger. 3 The pro forma financial statements listed under Item 7 below reflect both (a) certain transactions of Bradley, as described within such financial statements (the "Prior Bradley Transactions"), other than the Mid-America Merger as well as (b) the Prior Bradley Transactions and the Mid-America Merger. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits ------------------------------------------------------------------ The following pro forma financial information accompanies this report: (a) Pro Forma Financial Information - Bradley Real Estate, Inc. Pro Forma Condensed Combined Balance Sheet as of September 30, 1998 (unaudited) Pro Forma Condensed Combined Statement of Income for the Nine Months Ended September 30, 1998 (unaudited) Pro Forma Condensed Statement of Income to reflect Prior Bradley Transactions for the Nine Months Ended September 30, 1998 (unaudited) Pro Forma Condensed Combined Statement of Income for the Year Ended December 31, 1997 (unaudited) Pro Forma Condensed Statement of Income to reflect Prior Bradley Transactions for the Year Ended December 31, 1997 (unaudited) (b) Exhibits None 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BRADLEY REAL ESTATE, INC. By: /s/ Thomas P. D'Arcy --------------------- Date: December 16, 1998 Thomas P. D'Arcy Chairman, President and Chief Executive Officer 5 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET SEPTEMBER 30, 1998 (UNAUDITED) From October 1, 1998 through December 14, 1998, Bradley acquired two shopping centers and has entered into a contract to acquire an additional shopping center, which management believes will close. The aggregate cost of these transactions is expected to be approximately $23.9 million. Management currently expects to fund the Pending Acquisition with cash provided by the Company's bank line of credit. Although management deems the Pending Acquisition as probable, there can be no assurance that the acquisition of such property will be consummated, or that the acquisition price will approximate that currently estimated. Further, there can be no assurance that the method of financing will be as currently estimated. The unaudited Pro Forma Condensed Combined Balance Sheet of Bradley is presented as if the acquisitions (including the Pending Acquisition) had been consummated on September 30, 1998. This unaudited Pro Forma Condensed Combined Balance Sheet is presented for comparative purposes only and is not necessarily indicative of what the actual financial position of Bradley would have been at September 30, 1998, nor does it purport to represent the future financial position of Bradley. This unaudited Pro Forma Condensed Combined Balance Sheet should be read in conjunction with, and is qualified in its entirety by the historical financial statements and the notes thereto of Bradley.
SEPTEMBER 30, 1998 ACQUISITION HISTORICAL ADJUSTMENTS (A) PRO FORMA ------------------ --------------- --------- (IN THOUSANDS EXCEPT PER SHARE DATA) ASSETS Real estate investments --at cost............ $904,704 $23,876 $928,580 Accumulated depreciation and amortization.... (53,741) -- (53,741) -------- ------- -------- Net real estate investments.................. 850,963 23,876 874,839 Real estate investments held for sale........ 49,476 49,476 Other assets: Cash and cash equivalents................... 3,283 -- 3,283 Rents and other receivables................. 13,349 -- 13,349 Investment in partnership................... 13,260 -- 13,260 Deferred charges, net and other assets...... 17,982 -- 17,982 -------- ------- -------- Total assets................................. $948,313 $23,876 $972,189 ======== ======= ======== LIABILITIES AND SHARE OWNERS' EQUITY Mortgage loans............................... 97,640 6,261 103,901 Unsecured notes payable...................... 199,527 -- 199,527 Line of credit............................... 153,400 16,286 169,686 Accounts payable, accrued expenses and other liabilities........................... 32,399 -- 32,399 -------- ------- -------- Total liabilities............................ 482,966 22,547 505,513 -------- ------- -------- Minority interest............................ 20,693 1,329 22,022 -------- ------- -------- Share owners' equity Series A preferred stock at par and paid in capital........................... 86,882 -- 86,882 Common stock at par and paid in capital..... 346,887 -- 346,887 Retained earnings (distributions in excess of accumulated earnings)................... 10,885 -- 10,885 -------- ------- -------- Total share owners' equity................... 444,654 -- 444,654 -------- ------- -------- Total liabilities and share owners' equity... $948,313 $23,876 $972,189 ======== ======= ========
F-1 EXPLANATORY NOTES (A) Adjustments represent Acquisition Properties acquired subsequent to September 30, 1998, that have been completed, or that are probable of completion. F-2 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) This unaudited Pro Forma Condensed Combined Statement of Income is presented as if the Mid-America Merger and all the Prior Bradley Transactions (see Note A) had been consummated on January 1, 1997 and with Bradley qualifying as a REIT, distributing all of its taxable income and, therefore, incurring no federal income tax expense during the period January 1, 1997 through September 30, 1998. The Mid-America Merger has been accounted for under the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16. In the opinion of Bradley's management, all adjustments necessary to reflect the effects of these transactions have been made. The accompanying Pro Forma Condensed Combined Statement of Income has been prepared based on pro forma adjustments to pro forma and historical financial statements of Bradley and historical financial statements of Mid-America Realty Investments, Inc. ("Mid- America"). This unaudited Pro Forma Condensed Combined Statement of Income is presented for comparative purposes only and is not necessarily indicative of what the actual results of operations of Bradley would have been for the period presented, nor does it purport to represent the results to be achieved in future periods. This unaudited Pro Forma Condensed Combined Statement of Income should be read in conjunction with, and is qualified in its entirety by the Pro Forma Condensed Statement of Income to reflect Prior Bradley Transactions and the respective historical financial statements and the notes thereto of Bradley and Mid-America.
NINE MONTHS ENDED SEPTEMBER 30, 1998 ------------------------------------------------------------- BRADLEY PRO FORMA PRIOR PRO FORMA AS ADJUSTED BRADLEY MID-AMERICA FOR PRO FORMA MID-AMERICA MERGER MID-AMERICA TRANSACTIONS(A) HISTORICAL(B) ADJUSTMENTS MERGER --------------- ------------- ----------- ----------- (IN THOUSANDS EXCEPT PER SHARE DATA) Income: Rental income...................................... $ 95,850 $ 13,021 $ -- $ 108,871 Other income....................................... 1,714 399 -- 2,113 ----------- ----------- ----------- ----------- Total revenue.................................... 97,564 13,420 -- 110,984 ----------- ----------- ----------- ----------- Expenses: Operations, maintenance and management............. 13,287 2,348 -- 15,635 Real estate taxes.................................. 15,751 1,718 -- 17,469 Mortgage and other interest........................ 22,774 3,123 (281)(C) 25,616 General and administrative......................... 5,227 1,118 (789)(D) 5,556 Provision for merger related expenses.............. -- 1,344 (1,344) -- Depreciation and amortization...................... 18,012 2,893 (1,070)(E) 19,835 ----------- ----------- ----------- ----------- Total expenses...................................... 75,051 12,544 (3,484) 84,111 ----------- ----------- ----------- ----------- Income before equity in earnings of partnership and allocation to minority interest................ 22,513 876 3,484 26,873 Equity in earnings of partnership................... 247 539 164(E) 950 Income allocated to minority interest............... (1,222) -- (40) (1,262) ----------- ----------- ----------- ----------- Net income.......................................... 21,538 1,415 3,608 26,561 Preferred share distributions....................... (1,096) -- (4,345)(F) (5,441) ----------- ----------- ----------- ----------- Net income attributable to common share owners...... $ 20,442 $ 1,415 $ (737) $ 21,120 =========== =========== =========== =========== Weighted average number of common shares outstanding-basic(G).............................. 23,673,444 23,673,444 Basic net income per common share(G)................ $ 0.86 $ 0.89 =========== ===========
F-3 ____________________ Notes to Pro Forma Condensed Combined Statement of Income (A) See page F-6 for the pro forma condensed statement of income giving effect to Prior Bradley Transactions. (B) Represents historical operating results for Mid-America for the period prior to the Merger. (C) Represents the net reduction in interest expense for the prepayment of certain Mid-America mortgage indebtedness with Bradley's line of credit at Bradley's current interest rate of 6.75%, combined with the reduction in interest expense to reflect the estimated market interest rate of approximately 7.25%, in accordance with the purchase method of accounting, partially offset by an increase in interest expense for the payment of fees and expenses related to the Mid-America Merger of approximately $4,850,000, at an interest rate of 6.75%, as follows (in thousands): Elimination of historical interest on mortgages prepaid........................... $(1,242) Interest on Bradley's line of credit used to prepay debt.......................... 1,070 Reduction of Mid-America interest to reflect a market rate........................ (300) Interest on Bradley's line of credit for Mid-America Merger fees.and expenses..... 191 ------- Pro forma adjustment.............................................................. $ (281) =======
(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............................................................. $ (569) D&O insurance and director fees................................................... (99) Professional fees................................................................. (83) Other............................................................................. (38) ------- Pro forma adjustment.............................................................. $ (789) =======
(E) Depreciation and amortization changes relate to recording Mid-America's properties at Bradley's purchase price, the related depreciation utilizing an estimated useful life of 39 years and a depreciable basis of approximately $121,850,000, and the elimination of historical amortization of Mid-America deferred assets in accordance with the purchase method of accounting, as follows (in thousands): Pro forma depreciation expense ($121,850 over 39 years)........................... $ 1,823 Mid-America depreciation and amortization......................................... (2,893) ------- Pro forma adjustment.............................................................. $(1,070) =======
The pro forma adjustment to the equity in earnings of partnership reflects the adjustment to depreciation and amortization of the partnership resulting from recording the investment in partnership at Bradley's purchase price. (F) Preferred share distributions are calculated using an annual dividend rate of $2.10 per share for 3,480,210 shares of Series A Preferred Stock pro rated for the period presented. F-4 (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..... $21,120,000 23,673,444 $ 0.89 Effect of dilutive securities: Dilutive options exercised.................. -- 48,338 Conversion of LP Units...................... 1,262,000 1,415,517 ----------- ---------- Diluted EPS: Net income attributable to common stock..... $22,382,000 25,137,299 $ 0.89 =========== ========== ===========
F-5 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED STATEMENT OF INCOME TO REFLECT PRIOR BRADLEY TRANSACTIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) During the period from January 1, 1998 through December 14, 1998, Bradley acquired 21 shopping centers and two outlots adjacent to one of Bradley's existing centers at an aggregate cost of approximately $198.9 million (the "Completed Acquisitions"). Consideration paid for such acquisitions included cash (provided primarily from the bank line of credit), the assumption of mortgage indebtedness, and the issuance of Limited Partnership Units in Bradley Operating Limited Partnership (the "Operating Partnership") to contributors of properties acquired. In addition, as of December 15, 1998 the Company had entered into a contract for the purchase of an additional shopping center for an estimated acquisition price of approximately $3.9 million which management believes will close (the "Pending Acquisition" and, together with the Completed Acquisitions, the "Acquisition Properties"). Management currently expects to fund the Pending Acquisition with the bank line of credit. Although management deems such acquisition as probable, there can be no assurance that the acquisition of such property will be consummated, or that the acquisition price will approximate that currently estimated, or that the method of financing such acquisition will be as currently estimated. The Prior Bradley Transactions do not include the Mid-America Merger. On January 28, 1998, Bradley, through the Operating Partnership, issued $100 million of 7.2% ten-year unsecured Notes maturing January 15, 2008 (the "January 1998 Debt Issuance"). The effective interest rate on the unsecured Notes is approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's Investment Services and "Baa3" by Moody's Investor's Services. Proceeds from the offering were used to reduce the outstanding borrowings under the line of credit. On February 18, 1998, Bradley issued 392,638 shares of common stock to a unit investment trust at a price based upon the then market value of $20.375 per share (the "February 1998 Stock Offering"). Net proceeds from the offering of approximately $7.6 million were contributed to the Operating Partnership and were used to reduce outstanding borrowings under the line of credit. On July 31, 1998, Bradley completed the sale of One North State for approximately $84.5 million. The net proceeds of approximately $83 million were used to pay down the line of credit. In addition, in May 1998, Bradley sold Holiday Plaza, a shopping center in Cedar Falls, Iowa, for approximately $1.9 million. The unaudited Pro Forma Condensed Statement of Income of Bradley is presented as if the acquisitions (including the Pending Acquisition), the dispositions, the January 1998 Debt Issuance, and the February 1998 Stock Offering, described above, had been consummated on January 1, 1997, and with Bradley qualifying as a REIT and, therefore, incurring no federal income tax expense during the period January 1, 1997 through September 30, 1998. F-6
ACQUISITION DISPOSITION OTHER HISTORICAL PROPERTIES (A) PROPERTIES(B) ADJUSTMENTS PRO FORMA ----------- -------------- ------------- -------------- ---------- (IN THOUSANDS EXCEPT PER SHARE DATA) Revenues: Rental income................................... 92,642 11,649 (8,441) -- 95,850 Other income.................................... 1,693 21 -- -- 1,714 ----------- ----------- ----------- ----------- ----------- Total revenue.................................. 94,335 11,670 (8,441) -- 97,564 ----------- ----------- ----------- ----------- ----------- Expenses: Operations, maintenance and management.......... 13,286 1,235 (1,234) -- 13,287 Real estate taxes............................... 16,441 1,268 (1,958) -- 15,751 Mortgage and other interest..................... 19,567 -- -- 3,207(C) 22,774 General and administrative...................... 5,227 -- -- 5,227 Depreciation and amortization................... 16,346 -- -- 1,666(D) 18,012 ----------- ----------- ----------- ----------- ----------- Total expenses................................. 70,867 2,503 (3,192) 4,873 75,051 ----------- ----------- ----------- ----------- ----------- Income before equity in earnings of partnership and net gain on sale of properties.............. 23,468 9,167 (5,249) (4,873) 22,513 Equity in earnings of partnership................ 247 247 Net gain on sale of properties................... 29,680 -- (29,680) -- -- ----------- ----------- ----------- ----------- ----------- Income before allocation to minority interest.... 53,395 9,167 (34,929) (4,873) 22,760 Income allocated to minority interest............ (2,892) -- -- 1,670 (1,222) ----------- ----------- ----------- ----------- ----------- Net income....................................... 50,503 9,167 (34,929) (3,203) 21,538 Preferred share distributions.................... (1,096) -- -- -- (1,096) ----------- ----------- ----------- ----------- ----------- Net income attributable to common share owners.................................... $ 49,407 $ 9,167 $ (34,929) $ (3,203) $ 20,442 =========== =========== =========== =========== =========== Weighted average shares outstanding.............. 23,597,218 23,673,444 Basic net income per common share(E):............ $ 2.09 $ 0.86 =========== =========== Diluted net income per common share(E):.......... $ 2.07 $ 0.86 =========== ===========
EXPLANATORY NOTES (A) Increase represents historical operating revenues and expenses of the Acquisition Properties for the period Bradley did not own such properties. (B) Decrease represents the elimination of historical operating revenues, expenses and net gains on sale of properties sold for the period Bradley owned such properties. (C) Mortgage and other interest has been increased to reflect the pro forma borrowings for property acquisitions for the period during which Bradley did not own such properties, net of the reduction for the application of net proceeds from the property dispositions and the February 1998 Stock Offering to pay down the line of credit for the period during which Bradley owned such properties, and for the period preceding the stock offering at an interest rate of 6.75%, which was Bradley's approximate borrowing rate at December 15, 1998. Mortgage and other interest has been increased for the January 1998 Debt Issuance for the period preceding the issuance. A 0.125% change in the variable rate would result in a change in the pro forma interest adjustment of approximately $28 (in thousands). Increase in interest expense attributable to acquisition activities................... $ 6,506 Decrease in interest expense attributable to disposition activities................... (3,282) Decrease in interest expense attributable to the February 1998 Stock Offering......... (64) Net increase in interest expense attributable to the January 1998 Debt Issuance....... 47 ------- Pro forma adjustment.................................................................. $ 3,207 =======
F-7 (D) Depreciation and amortization has been increased to give effect to recording the property acquisitions over a depreciable life of 39 years, for the period which Bradley did not own such properties, net of the reduction for properties sold for the period which Bradley owned such properties, as follows (in thousands): Increase in depreciation and amortization attributable to acquisition activities...... $ 1,772 Decrease in depreciation and amortization attributable to disposition activities...... (106) -------- Pro forma adjustment.................................................................. $ 1,666 ========
(E) A reconciliation of the numerator and denominator used to compute basic earnings per share ("EPS") to the numerator and denominator used to compute diluted EPS is as follows:
BRADLEY HISTORICAL BRADLEY PRO FORMA NUMERATOR DENOMINATOR PER SHARE NUMERATOR DENOMINATOR PER SHARE ----------- ----------- ---------- ----------- ----------- --------- Basic EPS: Net income attributable to common stock................... $49,407,000 23,597,218 $ 2.09 $20,442,000 23,673,444 $ 0.86 Effect of dilutive securities: Dilutive options exercised...... -- 48,338 -- 48,338 Convertible preferred stock..... 1,096,000 728,756 -- -- Conversion of LP Units.......... 2,892,000 1,398,890 1,222,000 1,415,517 ----------- ---------- ----------- ----------- Diluted EPS: Net income attributable to common stock................... $53,395,000 25,773,202 $ 2.07 $21,664,000 25,137,299 $ 0.86 =========== ========== ========== =========== =========== =========
F-8 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................................. $ 119,239 $22,478 $ -- $ 141,717 Other income.................................. 2,032 787 -- 2,819 ----------- ----------- ----------- ----------- Total revenue............................... 121,271 23,265 -- 144,536 ----------- ----------- ----------- ----------- Expenses: Operations, maintenance and management.................................. 16,764 4,316 -- 21,080 Real estate taxes............................. 19,430 2,952 -- 22,382 Mortgage and other interest................... 28,850 5,539 (736)(C) 33,653 General and administrative.................... 5,123 1,985 (1,300)(D) 5,808 Non-recurring stock based compensation................................ 3,415 -- -- 3,415 Depreciation and amortization................. 21,434 4,981 (1,857)(E) 24,558 ----------- ----------- ----------- ----------- Total expenses.............................. 95,016 19,773 (3,893) 110,896 ----------- ----------- ----------- ----------- Income before net gain on sale of properties, equity in earnings of partnership and minority interest............................. 26,255 3,492 3,893 33,640 Net gain on sale of properties................. -- 130 (130) -- Equity in earnings of partnership.............. -- 1,026 260(E) 1,286 Income allocated to minority interest...................................... (1,607) -- (83) (1,690) ----------- ----------- ----------- ----------- Income from operations......................... 24,648 4,648 3,940 33,236 Preferred share distributions.................. -- -- (7,308)(F) (7,308) ----------- ----------- ----------- ----------- Income from operations attributable to common stock.................................. $ 24,648 $ 4,648 $(3,368) $ 25,928 =========== =========== =========== =========== Weighted average common shares outstanding-basic(G).......................... 23,356,620 23,356,620 Basic income from operations per common share(G)........................... $ 1.06 $ 1.11 =========== ===========
F-9 ____________________ Notes to Pro Forma Condensed Combined Statement of Income (A) See page F-11 for the pro forma condensed statement of income giving effect to Prior Bradley Transactions. (B) Represents historical operating results as reported by Mid-America for the year ended December 31, 1997. (C) Represents the net reduction in interest expense for the prepayment of certain Mid-America mortgage indebtedness with Bradley's line of credit at Bradley's current interest rate of 6.75%, combined with the reduction in interest expense to reflect the estimated market interest rate of approximately 7.25%, in accordance with the purchase method of accounting, partially offset by an increase in interest expense for the payment of fees and expenses related to the Mid-America Merger of approximately $4,850,000, at an interest rate of 6.75%, as follows (in thousands): Elimination of historical interest on mortgages prepaid........... $ (2,263) Interest on Bradley's line of credit used to prepay debt.......... 1,714 Reduction of Mid-America interest to reflect a market rate........ (514) Interest on Bradley's line of credit for Mid-America Merger fees and expenses..................................................... 327 -------- Pro forma adjustment.............................................. $ (736) ========
(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 $121,850,000, and the elimination of historical amortization of Mid-America's deferred assets in accordance with the purchase method of accounting, as follows (in thousands): Pro forma depreciation expense ($121,850 over 39 years)........... $ 3,124 Mid-America depreciation and amortization......................... (4,981) -------- Pro forma adjustment.............................................. $ (1,857) ========
The pro forma adjustment to the equity in earnings of partnership reflects the adjustment to depreciation and amortization of the partnership resulting from recording the investment in partnership at Bradley's purchase price. (F) Preferred share distributions are calculated using an annual dividend rate of $2.10 per share for 3,480,210 shares of Series A Preferred Stock. (G) A reconciliation of the numerator and denominator used to compute basic earnings per share ("EPS") to the numerator and denominator used to compute diluted EPS is as follows:
BRADLEY AS ADJUSTED FOR MID-AMERICA MERGER NUMERATOR DENOMINATOR PER SHARE -------------- ------------- ----------- Basic EPS: Income from operations attributable to common stock.......................... $ 25,928,000 23,356,620 $ 1.11 Effect of dilutive securities: Stock options........................... -- 42,451 Stock-based compensation................ -- 315 Conversion of LP Units.................. 1,690,000 1,523,587 -------------- ----------- Diluted EPS: Income from operations attributable to common stock............................ $ 27,618,000 24,922,973 $ 1.11 ============== ========== ===========
F-10 BRADLEY REAL ESTATE, INC. PRO FORMA CONDENSED STATEMENT OF INCOME TO REFLECT PRIOR BRADLEY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) During 1997, Bradley acquired 25 shopping centers aggregating over 3.1 million square feet of GLA for an aggregate cost of approximately $189.3 million and from January 1, 1998 through December 14, 1998, has acquired 21 properties and two outlots adjacent to one of Bradley's existing centers aggregating 2.6 million square feet of GLA for an aggregate acquisition price of approximately $198.9 million. Consideration paid for such acquisitions included cash (provided primarily from the bank line of credit), assumption of mortgage indebtedness and the issuance of Units of the Operating Partnership to contributors of properties acquired. During the period from January 1, 1997 through December 14, 1998, Bradley sold six properties for net proceeds of approximately $104.3 million utilizing the net proceeds to pay-down the line of credit. In addition, as of December 15, 1998 the Company had entered into a contract for the purchase of an additional shopping center for an estimated acquisition price of approximately $3.9 million which management believes will close (the "Pending Acquisition" and, together with the Completed Acquisitions, the "Acquisition Properties"). Management currently expects to fund the Pending Acquisition with the bank line of credit. Although management deems such acquisition as probable, there can be no assurance that the acquisition of such property will be consummated, or that the acquisition price will approximate that currently estimated, or that the method of financing such acquisition will be as currently estimated. The Prior Bradley Transactions do not include the Mid-America Merger. In December 1997, Bradley entered into a new $200 million unsecured line of credit facility with a syndicate of banks, replacing the previous $150 million unsecured line of credit. The line of credit bears interest at a rate equal to the lowest of (i) the lead bank's base rate, (ii) a spread over LIBOR ranging from 0.70% to 1.25% depending on the credit rating assigned by national credit rating agencies, or (iii) for amounts outstanding up to $100 million, a competitive bid rate solicited from the syndicate of banks. Based on the current credit rating assigned by Standard & Poor's and Moody's, the spread over LIBOR is 1.00%, which represents a reduction in the spread over LIBOR from the previous $150 million line of credit by 0.50%. On November 26, 1997, Bradley prepaid a REMIC mortgage note (the "REMIC Prepayment") primarily with the proceeds of an offering of $100 million of 7% unsecured Notes due November 15, 2004 (the "November 1997 Debt Issuance"). The effective interest rate on the unsecured Notes is approximately 7.19%. The issue was rated "BBB-" by Standard & Poor's and "Baa3" by Moody's. In December 1997, Bradley issued 1,290,000 shares of common stock pursuant to two separate public offerings (the "December 1997 Stock Offerings"). Net proceeds from the offerings, approximately $24.9 million, were contributed to the Operating Partnership and were used to reduce outstanding borrowings under the line of credit. On January 28, 1998, Bradley' through the Operating Partnership issued $100 million, 7.2% ten-year unsecured Notes maturing January 15, 2008 (the "January 1998 Debt Issuance"). The effective interest rate on the unsecured Notes is approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's and "Baa3" by Moody's. Proceeds from the issue were used to reduce the outstanding borrowings under the line of credit. On February 18, 1998, Bradley issued 392,638 shares of common stock to a unit investment trust at a price based upon the then market value of $20.375 per share (the "February 1998 Stock Offering"). Net proceeds from the offering of approximately $7.6 million were contributed to the Operating Partnership and were used to reduce outstanding borrowings under the line of credit. The unaudited Pro Forma Condensed Statement of Income is presented as if all of the acquisitions (including the Pending Acquisition), the dispositions, the replacement of the previous line of credit with the new line of credit, the REMIC Prepayment, the November 1997 Debt Issuance, the December 1997 Stock Offerings, the January 1998 Debt Issuance, and the February 1998 Stock Offering, described above, had been consummated on January 1, 1997, and with Bradley qualifying as a REIT and, therefore, incurring no federal income tax expense during the period January 1, 1997 through December 31, 1997. F-11
ACQUISITION DISPOSITION OTHER HISTORICAL PROPERTIES (A) PROPERTIES(B) ADJUSTMENTS PRO FORMA ----------- -------------- ------------- -------------- ------------ (IN THOUSANDS EXCEPT PER SHARE DATA) Revenues: Rental income................................. 96,115 40,689 (17,565) -- 119,239 Other income.................................. 1,437 589 6 -- 2,032 ----------- ----------- ----------- ----------- ----------- Total revenue............................... 97,552 41,278 (17,559) -- 121,271 ----------- ----------- ----------- ----------- ----------- Expenses: Operations, maintenance and management....... 14,012 5,608 (2,856) -- 16,764 Real estate taxes............................ 18,398 5,652 (4,620) -- 19,430 Mortgage and other interest.................. 16,562 -- -- 12,288(C) 28,850 General and administrative................... 5,123 -- -- 5,123 Non-recurring stock-based compensation....... 3,415 -- -- -- 3,415 Depreciation and amortization................ 16,606 -- -- 4,828(D) 21,434 ----------- ----------- ----------- ----------- ----------- Total expenses.............................. 74,116 11,260 (7,476) 17,116 95,016 ----------- ----------- ----------- ----------- ----------- Income before net gain on sale of properties and extraordinary item............ 23,436 30,018 (10,083) (17,116) 26,255 Net gain on sale of properties................ 7,438 -- (7,438) -- -- ----------- ----------- ----------- ----------- ----------- Income before extraordinary item and allocation to minority interest.............. 30,874 30,018 (17,521) (17,116) 26,255 Income allocated to minority interest......... (1,116) -- -- (491) (1,607) ----------- ----------- ----------- ----------- ----------- Income before extraordinary item.............. $ 29,758 $30,018 $(17,521) $(17,607) $ 24,648 =========== =========== =========== =========== =========== Weighted average shares outstanding -- basic (E)................................. 21,776,146 23,356,620 Basic income per common share: Income before extraordinary item(E):........ $ 1.36 $ 1.06 =========== ===========
EXPLANATORY NOTES (A) Increase represents historical operating revenues and expenses of the Acquisition Properties, and properties acquired in 1997, for the period Bradley did not own such properties. (B) Decrease represents the elimination of historical operating revenues, expenses and net gains on sale of properties disposed of during 1997 and 1998 for the period which Bradley owned such properties. (C) Mortgage and other interest has been increased to reflect the pro forma borrowings for property acquisitions for the period during which Bradley did not own such properties, net of the reduction for the application of net proceeds from the property dispositions and the December 1997 and February 1998 Stock Offerings to pay down the line of credit for the period during which Bradley owned such properties, and for the period preceding the Stock Offerings at an interest rate of 6.75%, which was Bradley's approximate borrowing rate at December 15, 1998. Mortgage and other interest has been increased for the November 1997 and January 1998 Debt Issuances, net of the reduction for the application of net proceeds of such Debt Issuances to pay down the $100 million REMIC Note and the line of credit, respectively, at the applicable effective interest rates. Mortgage and other interest has been decreased by the net reduction in interest expense resulting from the December 1997 pay down of the existing line of credit facility with proceeds from the new line of credit facility. A 0.125% change in the variable rate would result in a change in the pro forma interest adjustment of approximately $47 (in thousands). Increase in interest expense attributable to acquisition activities........ $20,511 Decrease in interest expense attributable to disposition activities........ (6,559) Decrease in interest expense attributable to the Stock Offerings........... (2,063) Net increase in interest expense attributable to the Debt Issuances........ 843 Net decrease in interest expense attributable to the paydown of the existing line of credit facility with proceeds from the new line of credit facility........................................................... (444) ------- Pro forma adjustment....................................................... $12,288 =======
F-12 (D) Depreciation and amortization has been increased to give effect to recording the property acquisitions over a depreciable life of 39 years, for the period which Bradley did not own such properties, net of the reduction for properties disposed for the period which Bradley owned such properties, as follows: Increase in depreciation and amortization attributable to acquisition activities................................................................ $ 6,221 Decrease in depreciation and amortization attributable to disposition activities................................................................ (1,393) ------- Pro forma adjustment....................................................... $ 4,828 =======
(E) A reconciliation of the numerator and denominator used to compute basic earnings per share ("EPS") to the numerator and denominator used to compute diluted EPS is as follows:
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 $24,648,000 23,356,620 $1.06 Effect of dilutive securities: Stock options..................... -- 42,451 -- 42,451 Stock-based compensation.......... -- 315 -- 315 Conversion of LP Units............ 1,116,000 799,938 1,607,000 1,523,587 ----------- ---------- ---------- ----------- Diluted EPS: Income before extraordinary item.. $30,874,000 22,618,850 $ 1.36 $26,255,000 24,922,973 $1.05 =========== ========== ========== =========== =========== =========
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