UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A NO.1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1993
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the transition period from ___________________ to _________________
Commission file Number 1-12286
Mid-Atlantic Realty Trust
(Exact name of registrant as specified in its charter)
Maryland 52-1832411
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1302 Concourse Drive, Suite 202 - Linthicum, Maryland 21090
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 684-2000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Shares of Beneficial Interest, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ ]
As of February 25, 1994, 6,291,407 common shares of beneficial interest
of Mid-Atlantic Realty Trust were outstanding and the aggregate value of
common stock (based upon the $9.875 closing price on that date) held by
non-affiliates was approximately $62,128,000.
Documents Incorporated by Reference
The definitive proxy statement with respect to the 1994 annual
meeting of Mid-Atlantic Realty Trust shareholders (to be filed).
8
<PAGE>
PART I
ITEM 1
BUSINESS
Mid-Atlantic Realty Trust was incorporated June 29, 1993 and commenced
operations effective with the completion of its initial public share offering
on September 11, 1993. Mid-Atlantic Realty Trust is the successor to the
operations of BTR Realty, Inc. (the predecessor to Mid-Atlantic Realty
Trust), and qualifies as a real estate investment trust, "REIT", for
Federal income tax purposes. As used herein, the term "MART" refers to
Mid-Atlantic Realty Trust, the term "Company" refers to MART and its
subsidiaries, the successor company, and "BTR" refers to BTR Realty, Inc. and
its subsidiaries, the predecessor to the Company.
The Company is a fully integrated, self managed real estate investment
trust which owns, leases, develops, redevelops and manages its retail
shopping center facilities and commercial properties. The Company's primary
objective is to manage the properties for long-term cash flow growth. The
Company's principal strategies are to grow the portfolio through the
selective acquisition of additional properties in the Mid-Atlantic region,
redeveloping or developing retail properties on a selective basis, and, when
appropriate, divesting through sale or exchange of non-strategic properties.
The Company's financial strategy is to continue to refocus the portfolio
through the selective acquisition of retail properties utilizing (1) proceeds
from divestitures, (2) issuance of equity or debt securities, when
appropriate, and (3) arranging bank or other borrowings for short term needs.
The Company intends to maintain the conservative ratio of secured debt to
total estimated value below 50%.
The Company has an equity interest in twenty one operating shopping
centers, fifteen of which are wholly-owned by the Company, and six others in
which the Company has an interest ranging from 50% to 80%, as well as other
commercial properties. The operating properties have a gross leasable area
of approximately 2,940,000 square feet, of which approximately 93% was leased
at December 31, 1993. Total gross leasable area includes 2,704,000 square
feet of established operating properties, of which approximately 95% was
leased at December 31, 1993 and approximately 236,000 square feet of a
recently acquired shopping center currently under redevelopment, of which 64%
was leased at December 31, 1993. Of these properties, approximately 82% of
the gross leasable area is in the states of Maryland, New York and Virginia,
11% in Arizona and 7% in other states. The Company also owns two commercial
properties under contract for sale and has 9 undeveloped parcels of
commercial and residential zoned land totaling approximately 182 acres and
varying in size from 1 to 56 acres.
The business of the Company is not materially affected by seasonal
factors. Although construction may be affected to some extent by inclement
weather conditions, usually during winter months, property sales and revenue
from income producing properties held for investment are usually not so
affected.
The commercial real estate development and investment industry is subject
to widespread competition for desirable sites, tenants and favorable
financing. The industry is extremely fragmented and there are no principal
methods of competition. However, the ability to compete is dependent in
part upon the ability to find and complete appropriate real estate
investments in a timely manner. While many competitors have fewer assets and
financial resources than the Company, there are many competitors with greater
financial resources competing for similar business activities. Accordingly,
it is not possible to estimate the Company's position in the industry. In
addition, certain of the Company's real estate projects are near unimproved
sites that could be developed commercially and would provide further
competition to the Company. The management of the Company believes, however,
that the Company competes favorably in the industry due to the quality of its
developments, its ability to take advantage of opportunities as they arise,
its access to capital, and its reputation in the industry.
The Company has 48 full time employees and believes that its relationship
with its employees is good.
9
<PAGE>
ITEM 2
PROPERTIES
The following schedule describes the Company's commercial and residential
properties as of December 31, 1993:
I. SHOPPING CENTERS
A. In Operation
Percentage of Type of land Area in Leasable Percentage
Lease
ownership ownership acres square feet leased Principal tenants
expirations
Name and Location (1)
Rolling Road Plaza (2) 100% Fee 6.5 62,000 93% Fair Lanes,
1995-1999
Rolling Road Firestone
Baltimore County,
Maryland
York Road Plaza 100% Fee 7.5 72,000 80% Giant Food,
1994-1998
York Road Firestone
Baltimore County,
Maryland
Harford Mall (3) 100% Fee(3) 38.0 531,000(4) 98% Hecht's,
1994-2008
U.S. Route 1 Montgomery Ward,
Bel Air, Maryland Basics and More,
Woolworth
Burke Town Plaza 100% Long-term 12.6 114,000 97% Safeway,
1994-2002
Old Keene Mill Road lease(5) CVS Drugs
Burke, Virginia
Wilkens Beltway Plaza 75% Fee 7.1 65,000 100% Giant Food,
1994-2006
Wilkens Avenue & of Partnership Provident Bank,
Maiden Choice Lane Maryland National Bank,
Baltimore County, Radio Shack
Maryland
Fair Lanes Union 50% Fee 5.9 17,000 88% No principal
1994-1999
Hills Plaza of Partnership tenants selected
35th Avenue &
Union Hills Drive
Phoenix, Arizona
Patriots Plaza 50% Long-term 6.1 39,000 97% Denny's,
1994-2005
Ritchie Highway of lease (6) Dunkin Donuts
Anne Arundel County, Partnership
Maryland
Sudley Towne Plaza 100% Fee 9.6 108,000 96% Burlington Coat
1994-2009
Route 234 & Factory, Peoples
Sudley Manor Drive Drug Store
Manassas, Virginia
Fair Lanes Chandler 50% Fee 1.1 10,000 89% No principal
1996
Plaza of Partnership tenants selected
Arizona & Warner Roads
Chandler, Arizona
10<PAGE>
ITEM 2. Properties (Continued)
I. SHOPPING CENTERS (continued)
A. In Operation (continued)
Percentage of Type of land Area in Leasable Percentage
Lease
ownership ownership acres square feet leased Principal tenants
expirations
Dobson-Guadalupe 100% Fee 3.2 22,000 78% Nevada Bob's
1995-2001
Shopping Center
Dobson & Guadalupe Roads - Mesa, Arizona
Colonie Plaza 100% Fee 18.7 140,000 98% Price Chopper,
1994-2010
Central Avenue RX Place,
Colonie, New York Paper Cutter
Smoketown Plaza 60% Fee 27.0 176,000 99% Shoppers Food
1994-2011
Davis Ford and of Partnership Warehouse, CVS Drugs,
Smoketown Roads Frank's Nursery & Crafts
Prince William County, Virginia
Spotsylvania Crossing 80% Fee 11.2 142,000 99% K-Mart, CVS
1994-2007
Route 3 & Bragg Road of Partnership Drugs
Fredericksburg, Virginia
Rosedale Plaza 100% Fee 9.2 73,000 91% Value Food
1994-1999
Chesaco and Weyburn
Avenue - Baltimore, Maryland
Skyline Village 100% Fee 14.6 127,000 99% Sears,
1994-2009
US Route 33 Richfood
Harrisonburg, Virginia
Columbia Plaza 100% Fee 16.0 119,000 93% Price Chopper,
1994-2008
Columbia Turnpike Ben Franklin
East Greenbush, NY
Plaza Del Rio 100% Fee 11.8 60,000 94% Payless Drug
1994-2009
16th Street and Avenue B Store
Yuma, Arizona
McRay Plaza 100% Fee 4.9 35,000 100% Mountainside
1994-2004
McClintock & Ray Roads Fitness
Chandler, Arizona
Park Sedona 100% Fee 11.4 99,000 99% Safeway,
1994-2011
Highway 89 A Payless Drug Store
Sedona, Arizona
Gateway Park 100% Fee 10.5 82,000 93% Bashas',
1994-2011
Page, Arizona Corral West
I. SHOPPING CENTERS (continued)
B. Under Development
Timonium Mall 100% Long-term - 236,000 64% Caldor, 2001-2011
Timonium, Maryland lease (7) Circuit City
(1) Shopping centers in operation are subject to mortgage financing
aggregating $53,132,475 of which $2,654,805 is held by Mid-Atlantic Realty
Trust netting a mortgage payable of $50,477,670 at December 31, 1993.
(2) This property was damaged by a fire in December, 1992 - See Note F in
the Consolidated Financial Statements.
(3) Subject to the following long-term ground leases: (i) 150,000 square
feet on 10 acres for Montgomery Ward's department store, (ii) 10,200 square
feet on one acre for Montgomery Ward's auto accessory store.
The Harford Mall property is subject to a mortgage principal balance at
December 31, 1993 of $19,943,224. The Harford Mall mortgage has an interest
rate of 9.78%, a 30 year amortization, with a 10 year balloon payment of
$18,148,848 due at the maturity date of July, 2003. The mortgage's
prepayment provision prohibits prepayment until June, 1997, afterwhich the
penalty is the greater of 1% of the outstanding principal balance or yield
maintenance.
(4) Includes 254,000 square feet occupied by department stores.
(5) Remaining term of 38 years plus three 15 year renewal options.
(6) Remaining term of 14 years plus two 10 year options.
(7) Remaining term of 23 years plus five 10 year options.
11
<PAGE>
ITEM 2. Properties (Continued)
II. OFFICE BUILDINGS
A. In Operation (1)
Percentage of Type of land Area in Leasable Percentage Principal
Lease
Name and Location ownership ownership acres square feet leased tenants
expirations
Patriots Plaza 50% Long-term 0.5 28,000 50% No principal
1994-2004
Office Building of Partnership lease (2) tenants selected
Ritchie Highway - Anne Arundel County, Maryland
Wilkens Beltway Plaza 75% Fee 3.9 53,000 97% Ryder Truck
1994-1997
Office Park, of Partnership Rental Inc., Freestate
Buildings I, II & III Health, Prudential
Wilkens Avenue and Maiden Choice Lane -
Baltimore County, Maryland Health System
Gateway International I 100% Fee 7.0 85,000 100% Browning Ferris,
1994-2003
Elkridge Landing & Daughters of Charity
Winterson Roads Health System,
Anne Arundel County, Maryland Tandem Computers, MART
Gateway International II 100% Fee 15.5 118,000 79% Digital Equip.
1995-2004
Elkridge Landing & Corporation,
Winterson Roads - Anne Arundel County, Maryland Price Waterhouse,
AT&T, American Express
III. OTHER DEVELOPED PROPERTIES
A. In Operation
Leasable Per- Principal
Name and Percentage of Type of land Area in square centage
Lease
Location ownership ownership acres Improvements feet leased tenants
expirations
Clinton Property 100% Long-term 2.9 Bowling Center 29,000 100% Fair Lanes
1995-1996
Prince George's lease (3) and Bank
County, Maryland
Southwest Property 100% Fee (4) 3.2 One-story 25,000 86% Shell Oil,
1994-1998
Anne Arundel Office Building, One-story Carrier/Otis
County, Maryland Warehouse and Gas Station
Waldorf Property 100% Fee 3.6 Bowling Center 31,000 100% Fair Lanes,
1997-1998
Waldorf, Maryland and Tire Center Firestone
Illinois Properties 100% 3 parcels 7.4 3 Bowling 106,000 100% Fair Lanes
1998
Chicago, Illinois in fee Centers
Regal Center 100% Fee 6.0 One-story 109,000 93% Berger Allied
1995-1997
Dallas, Texas Warehouse
The Business Center at 100% Fee 5.4 One-story 27,000 96% No principal
1994-1998
Harford Mall Warehouse tenants selected
Harford County, Maryland
III. OTHER DEVELOPED PROPERTIES
B. Under Contract for Sale
Plantation Property 100% Fee 3.0 Bowling Center 32,000 0%
Broward County, Florida
(1) Office buildings in operation are subject to mortgage financing
aggregating $3,216,702 as of December 31, 1993.
(2) Remaining term of 14 years plus two 10 year options.
(3) Remaining term of 33 years plus a 45 year renewal option.
(4) Ground Lease was purchased by BTR in August, 1993.
12
<PAGE>
ITEM 2. Properties (Continued)
IV. UNDEVELOPED PROPERTIES
Percentage of Type of land Area in
Name and Location ownership ownership acres Zoning
Pulaski Property 100% Fee 3.0 Industrial
Baltimore County, Maryland
Harford Property 100% Fee 6.7 Light Industrial
(Adjacent to Harford Mall)
Harford County, Maryland
Fallston Corner Property 100% Long-term 1.0 Commercial
Harford County, Maryland lease (1)
Northwood Industrial Park 67% Fee 24.8 Industrial
Salisbury, Maryland of Partnership
Dorsey Property 100% Fee 19.4 Commercial
Anne Arundel County, Maryland
Gateway International III 100% Fee 6.5 Commercial
Anne Arundel County, Maryland
Burlington Commerce Park 100% Fee 49.2 Commercial
Burlington, North Carolina
Hillsborough Crossing 100% Fee 15.5 Commercial
Hillsborough, North Carolina
North East Property 100% Fee 56.0 Commercial/
North East, Maryland Residential
(1) Remaining term of 87 years.
Management believes the Company's properties are adequately covered by
insurance.
ITEM 3
LEGAL PROCEEDINGS
In the ordinary course of business, the Company is involved in legal
proceedings. However, there are no material legal proceedings presently
pending against the Company.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5
Market for the Registrant's Common Stock And Related Stockholder Matters
MART's common shares of beneficial interest, par value $.01 per share,
("shares"), are listed on the American Stock Exchange (symbol: MRR), which
reports high, low and last sales prices. The table below lists high and low
sales prices for MART for the periods indicated.
1993 High Low
September 11 (Inception) - September 30 10 3/4 10 1/4
Fourth Quarter 11 9
MART paid to holders of the shares, cash dividends during 1993 during the
periods indicated.
1993 Cash Dividend Paid
Fourth Quarter $0.05
On February 14, 1994, MART declared a quarterly cash dividend of $.21 per
share payable March 15, 1994 to shareholders of record February 28, 1994.
The number of holders of record of the shares of MART as of February 25,
1994 was 1,344.
13<PAGE>
ITEM 6
SELECTED FINANCIAL DATA
The following table sets forth the consolidated financial data for the
Company and should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this report. The table
consists of the Consolidated Financial Statements of Mid-Atlantic Realty
Trust as of December 31, 1993, and for the period September 11, 1993
(commencement of operations) through December 31, 1993, and also includes the
Consolidated Financial Statements of BTR Realty, Inc. as of December 31,
1992, 1991, 1990, 1989 and for the periods January 1, 1993 through September
10, 1993, and for the years ended December 31, 1992, 1991, 1990, and 1989.
Mid-Atlantic Realty Trust, a newly formed Real Estate Investment Trust, was
merged with BTR Realty, Inc. on September 11, 1993. The consolidated
financial data of BTR, the predecessor company, are presented for comparative
purposes.
Mid-Atlantic
Realty Trust BTR Realty, Inc.
------------- || --------------------------------------------
- -
September 11, 1993 to || January 1, 1993 to Years ended December 31,
December 31, 1993 || September 10, 1993 1992 1991
Revenues $6,576,684 || 15,912,211 22,655,133 22,779,812
Net Earnings (Loss) Before Cumulative
Effect of Change In Accounting Principle and
Extraordinary Item $467,474 || (2,057,106) (1,118,957) (4,688,646)
Cumulative Effect of Change
In Accounting Principle - || - 1,286,000 -
------------ || --------------------------------------------
Net Earnings (Loss) Before
Extraordinary Item 467,474 || (2,057,106) 167,043 (4,688,646)
Extraordinary Item - || (548,323) - -
------------ || --------------------------------------------
Net Earnings (Loss) $467,474 || (2,605,429) 167,043 (4,688,646)
============ || ============================================
Net Earnings (Loss) Per Share Before Cumulative
Effect of Change In Accounting Principle and
Extraordinary Item $0.07 || (0.24) (0.13) (0.55)
Cumulative Effect of Change In
Accounting Principle - || - 0.15 -
------------ || --------------------------------------------
Net Earnings (Loss) Per Share Before
Extraordinary Item $0.07 || (0.24) 0.02 (0.55)
Extraordinary Item - || (0.06) - -
------------ || --------------------------------------------
Net Earnings (Loss)
Per Share $0.07 || (0.30) 0.02 (0.55)
============ || ============================================
Weighted Average Shares
Outstanding, Including Common Share
Equivalents (1) 6,291,407 || 8,512,718 8,503,916 8,527,036
Total Assets $148,563,052 || 147,869,512 153,212,133 159,879,954
Indebtedness:
Total mortgages, convertible
debentures, construction loans and
notes payable $116,494,372 || 150,666,971 149,168,632 153,024,838
Net cash provided by (used in) operating
activities $3,479,346 || 4,129,635 1,249,138 (961,065)
Cash Dividends
Paid Per Share $0.05 || 0.58 - -
BTR Realty, Inc.
-----------------------------------------
Years ended December 31,
1990 1989
Revenues 20,366,006 26,955,847
Net Earnings (Loss) Before Cumulative
Effect of Change In Accounting Principle and
Extraordinary Item (6,374,172) 243,652
Cumulative Effect of Change
In Accounting Principle - -
-----------------------------
Net Earnings (Loss) Before
Extraordinary Item (6,374,172) 243,652
Extraordinary Item - -
-----------------------------
Net Earnings (Loss) (6,374,172) 243,652
=============================
Net Earnings (Loss) Per Share Before Cumulative
Effect of Change In Accounting Principle and
Extraordinary Item (0.74) 0.03
Cumulative Effect of Change In
Accounting Principle - -
--------------------------------
Net Earnings (Loss) Per Share Before
Extraordinary Item (0.74) 0.03
Extraordinary Item - -
--------------------------------
Net Earnings (Loss)
Per Share (0.74) 0.03
================================
Weighted Average Shares
Outstanding, Including Common Share
Equivalents (1) 8,600,395 8,942,905
Total Assets 166,319,506 163,050,004
Indebtedness:
Total mortgages, convertible
debentures, construction loans and
notes payable 151,677,634 137,565,454
Net cash provided by (used in) operating
activities 1,091,144 2,318,506
Cash Dividends
Paid Per Share 0.08 0.08
(1) In September, 1993, MART issued 3,450,000 shares in its initial public
offering, and as part of the merger, exchanged for every 3 shares of BTR, 1
share of MART totaling approximately 8,526,000 shares of BTR for
approximately 2,842,000 shares of MART.
Continued
14
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA - CONTINUED
Pro Forma Data
The following sets forth summary financial data on a pro forma basis.
Management believes the following data should be used as a supplement to the
historical statements of operations. The data should be read in conjunction
with the historical financial statements and the Notes thereto for MART
included in Item 8. The pro forma financial data is unaudited and is not
necessarily indicative of the results which actually would have occurred if
the transactions had been consummated at January 1, 1992, nor does it purport
to represent the financial position and results of operations for future
periods. The following assumes the MART public offering took place on
January 1, 1992.
Summary Pro Forma Financial Data
In thousands, except per share data
Years ended December 31,
1993 1992
Revenues $20,777 20,051
Earnings $1,217 494
Earnings per share $0.19 0.08
Funds from operations (FFO) (1) $6,034 5,398
Funds from operations
- fully diluted $10,609 9,973
Weighted average number of shares
outstanding - primary 6,291 6,291
Weighted average number of shares
outstanding - fully diluted 12,005 12,005
(1) Funds from operations as defined by the National Association of Real
Estate Investment Trusts, Inc. (NAREIT) -funds from operations means net
income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. The presentation of
funds from operations is not normally included in financial statements
prepared in accordance with generally accepted accounting principles (GAAP).
15
ITEM 7
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the operations for the year ended December
31, 1993, which includes the summation of the Company's and BTR's results of
operations, with the operations of BTR for the year ended December 31, 1992.
The discussion also compares the operations of BTR for the years ended
December 31, 1992 and 1991.
Comparison of 1993 to 1992
Rental revenues increased by $465,000, or 2%, to $20,682,000 for the year
ended December 31, 1993 from $20,217,000 for the year ended December 31,
1992. Net increases in occupancy and CPI rental rates resulted in rental
increases of approximately $1,255,000, and the acquisition of Timonium Mall
contributed to a rental increase of $149,000, which were offset by a $433,000
loss of rental attributable to operating properties sold in 1992 or
discontinued in 1993, a $450,000 loss of rental due to vacancies and
reserves, and other rental changes.
Sales of residential property in BTR decreased by $89,000 to $1,032,000
in 1993 from $1,121,000 in 1992 due to the discontinuation and final sellout
of residential assets in July, 1993.
Gains on properties held for sale decreased in BTR by $250,000 to $31,000
in 1993 from $281,000 in 1992 due to higher profit margins on properties sold
in 1992.
Other income decreased by $292,000 to $744,000 in 1993 from $1,036,000 in
1992 primarily as a result of income of $329,000 from the sale of development
rights and $119,000 of income from bankruptcy settlement in 1992 and a
$166,000 loss included in BTR's other income in September, 1993 related to a
provision for losses on notes receivable. The decreases were offset by
increases due to a $210,000 increase in income from a lease termination
payment in December, 1993 and $187,000 in interest income increases from
partners notes receivables added in September, 1993, as well as other minimal
changes in other income.
As a result of the above changes total revenues decreased by $166,000
to $22,489,000 in 1993 from $22,655,000 in 1992.
Interest expense decreased by $1,678,000 to $12,354,000 in 1993 from
$14,032,000 in 1992 primarily due to the payoff in September, 1993 of higher
fixed rate mortgage debt which was replaced by the sale of lower interest
convertible subordinated debentures and the sale of common shares, as well as
a decrease in interest expense attributable to the refinancing in 1992 and
discontinuation of operations in 1993 of a residential operating property and
to favorable reduction in interest rates. Approximately $1,155,000 in
interest expense decreases for the period September 10, 1993 through December
31, 1993 can be attributable to the payoff of mortgage debt and replacement
with debentures and common shares. A decrease in interest cost of $304,000
can be attributable to the refinancing in 1992 and discontinuation of
operations in September, 1993 of a residential operating property sold in
February, 1994.
Depreciation and amortization decreased by $42,000 to $4,736,000 in 1993
from $4,778,000 in 1992, primarily due to the sale in 1992 of two operating
properties and the discontinuation in September, 1993 of the residential
operating property sold in February, 1994.
Operating expenses decreased by $232,000 to $3,754,000 in 1993 from
$3,986,000 in 1992, primarily due to the sale in 1992 of two operating
properties and the discontinuation in September, 1993 of the residential
operating property sold in February, 1994.
Cost of residential property sold decreased by $60,000 to $1,008,000 in
1993 from $1,068,000 in 1992 due to the discontinuation of the residential
sales in July, 1993.
(Continued)
16
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of 1993 to 1992 - Continued
General and administrative expenses increased by $131,000 to $1,354,000 in
1993 from $1,223,000 in 1992 due to an increase in insurance expense of
$35,000 and an increase of $318,000 in stock compensation expense resulting
from a $269,000 adjustment to accrued expense in 1992, due to a decrease in
the value of BTR stock. The increases were offset by a decrease in
professional fees of $36,000, a decrease in net payroll costs of $107,000, a
decrease of $50,000 in pension expenses and changes in other categories.
Unrecoverable development costs increased by $1,017,000 in BTR to
$1,279,000 in 1993 from $262,000 in 1992 due to write-downs to net realizable
value of two residential properties under contract of sale pursuant to a
divestiture plan and the write-down in 1993 to net realizable value of a
property held for sale.
Minority interest decreased by $158,000 to an expense of ($2,000) in 1993
from a benefit of $156,000 in 1992 generally due to lower losses in minority
interest ventures.
Loss from operations decreased by $540,000 to $1,998,000 in 1993 from
$2,538,000 in 1992. At January 1, 1992, BTR recognized the positive,
cumulative effect of a change in accounting for income taxes of $1,286,000.
At September 10, 1993, BTR recorded an extraordinary loss of $548,000 due
to an early extinguishment of debt. A net income tax benefit of $408,000
and $127,000 was recognized by BTR for the periods ended 1993 and 1992,
respectively. The 1992 accounting change, combined with a 1992 $48,000 loss
on the sale of operating properties, a $1,340,000 gain on fire damage in
1992, the 1993 extraordinary item and income tax benefits for both periods,
offset the loss from operations for the periods, resulting in net earnings
of $167,000 for the year ended 1992 and a $2,138,000 net loss for the
combined year ended 1993 for BTR and the Company.
Comparison of 1992 to 1991
Rental revenues increased by $1,286,000, or 7%, to $20,217,000 in 1992
from $18,931,000 in 1991, primarily as a result of additional rentals from
a full year's operating results at Gateway II Office Building and Gateway
Page shopping center, as well as rental from Rich Food, the replacement
anchor store at Skyline Village shopping center.
Sales of residential properties decreased by $1,052,000 to $1,121,000
in 1992 from $2,173,000 in 1991 due to fewer units sold in 1992.
Gains on properties held for sale decreased by $436,000 to $281,000
in 1992 from $717,000 in 1991. This decrease was primarily due to
smaller profit margins on properties held for sale in 1992.
Other income increased by $77,000 to $1,036,000 for 1992 from $959,000
in 1991 as a result of the sale of development rights in 1992 for $334,000
which offset decreases in other categories.
As a result of the above changes, total revenues decreased by $125,000
to $22,655,000 in 1992 from $22,780,000 in 1991.
Interest expense, net of interest capitalized, decreased by $409,000
to $14,032,000 in 1992 from $14,441,000 in 1991 primarily due to the
favorable movement in interest rates which resulted in lower interest costs.
Depreciation and amortization increased by $362,000 to $4,778,000 in 1992
from $4,416,000 in 1991 as a result of the inclusion of the operations of
Gateway II Office Building and Gateway Page shopping center for a full year.
Operating expenses increased by $197,000 to $3,986,000 in 1992 from
$3,789,000 in 1991.
Cost of residential property sold decreased by $876,000 to $1,068,000 in
1992 from $1,944,000 in 1991.
General and administrative expenses decreased by $703,000 to $1,223,000
in 1992 from $1,926,000 in 1991 primarily due to reduced payroll expenses
of $386,000, as well as an adjustment in 1992 to accrued expense relating
to BTR's stock compensation plan in the amount of $269,000.
(Continued)
17
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of 1992 to 1991 - Continued
Unrecoverable development costs decreased by $1,193,000 to $262,000
in 1992 from $1,455,000 in 1991. The 1991 unrecoverable development costs
include $1,105,000 of costs from projects which were terminated because of
unfavorable conditions and a $350,000 write-down of property held for sale
in North Carolina. The 1992 unrecoverable development costs include a
$262,000 write-down of property held for sale in North Carolina.
Joint venture operations decreased by $159,000 to $156,000 in 1992 from
$315,000 in 1991 generally due to lower minority interest income.
Loss from operations improved by $2,338,000 to $2,538,000 in 1992 from
$4,876,000 in 1991.
BTR had net earnings of $167,000 in 1992 which resulted from the
improvement in net operating income of $2,338,000 and two non-recurring
events described below, versus a net loss of $4,689,000 in 1991. The first
non-recurring event in 1992 occurred as a result of a fire in December, 1992
at the Rolling Road Plaza Shopping Center. BTR realized a gain on fire
damage insurance proceeds in the amount of $1,340,000, which gain represented
the excess of insurance proceeds over BTR's cost basis in the property, minus
depreciation. The second non-recurring event in 1992 was a change in
accounting for income taxes to bring BTR into conformity with Financial
Accounting Standard Board Statement Number 109, which resulted in a
cumulative positive effect in the amount of $1,286,000.
Cash Flow comparison
The following discussion compares the statements of cash flows for the year
ended December 31, 1993, which includes the summation of the Company's and
BTR's cash flows, with the statements of cash flows of BTR for the year ended
December 31, 1992. The discussion also compares the cash flows of BTR for the
years ended December 31, 1992 and 1991.
Cash Flow comparison of 1993 to 1992
Net cash flow provided by operating activities increased by $6,360,000,
to $7,609,000 for the year ended December 31, 1993 from $1,249,000 for
the year ended December 31, 1992. Net cash flow increased generally due to
the following: An increase in operating liablities of $4,634,000 primarily
consisting of $1,394,000 in 1993 accrued interest expense on newly issued
debentures (See Note K), an increase of $1,865,000 due to a reduction in
deferred income tax liability for 1993 and 1992 (See Note L), and the balance
of the increase, $1,375,000, was primarily a decrease in 1992 in accounts
payable and accrued expenses primarily due to a reduction in 1992 development
activity. Other net cash flow increases of $2,626,000 were due to two
non-recurring events in 1992, a cumulative effect of change in accounting
principle, and a gain on fire damage of an operating property. Another
major increase in net cash flow was due to $1,017,000 in unrecoverable
development cost increases (described above). The increases were offset by a
decrease in net earnings of $2,305,000 (described above) and other changes in
net cash flow.
Net cash flow used in or provided by investing activities decreased by
$8,532,000, to net cash used in investing activities of $5,950,000 from net
cash provided by investing activities of $2,582,000. The decrease was
primarily a result of the following: an additions to properties increase
of $4,586,000 (primarily the Timonium Mall Purchase in October, 1993).
A reduction in proceeds from sales of properties of $3,150,000 (primarily
due to more sales of land held for sale and residential property in 1992),
and a reduction due to the transfer or sale of investments in 1992 of
$626,000.
Net cash flow used in financing activities decreased by $2,861,000, to
$1,070,000 from $3,931,000. The decrease was primarily due to the net cash
flow provided by the net proceeds from the sale of debentures and common
shares of $93,453,000 offset by 3 major net cash uses: (1) net reductions
in construction loans payable, and mortgages payable of $82,387,000,
(2) dividends paid in 1993 of $5,259,000, and (3) 1993 additions to deferred
debenture costs of $3,063,000.
(Continued)
18
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Cash Flow comparison - Continued
Cash Flow comparison of 1992 to 1991
Net cash flow provided by or used in operating activities increased by
$2,210,000, to net cash provided by operting activities of $1,249,000 for
the year ended December 31, 1992 from net cash used in operating activities
of $961,000 for the year ended December 31, 1991. Net cash flow increased
primarily due to the following: An increase in net earnings of $4,856,000
(described above), an increase of $613,000 due to higher net gains in 1991
on sales of residential properties and properties held for sale and an
increase in depreciation of $363,000. The increases were offset by other
changes in net cash flow and by the following major decreases: cash flow
decreases of $2,626,000 due to two non-recurring events in 1992, a cumulative
effect of change in accounting principle, and a gain on fire damage of an
operating property, and a decrease in net cash flow due to a reduction of
$1,193,000 in unrecoverable development cost (described above).
Net cash flow provided by investing activities increased by $2,520,000,
to $2,582,000 from $62,000. The increase was primarily a result of the
following increases: an additions to properties decrease of $4,463,000
(primarily the Gateway II & Page Construction in 1991), a decrease in cash
flow of $766,000 due to a decrease in payments to minority partners and
a decrease due to the transfer or sale of investments in 1992 of $626,000.
The cash flow increases were offset by a decrease in cash flow due to
a decrease in proceeds from sales of properties of $3,276,000 (primarily
due to more sales of residential property in 1991).
Net cash flow used in or provided by financing activities decreased
by $4,822,000, to net cash used in financing activities of $3,931,000 from
net cash provided by financing activities of $891,000. The decrease was
primarily due to net reductions in construction loans payable, notes payable,
and mortgages payable of $5,303,000 generally as a result of lower
construction loan proceeds in 1992 compared with 1991, and the mortgage
financing of Burketown Plaza in 1991. The decrease was offset by $474,000
in cash flow increases from higher additions to deferred finance costs in
1991 (Burketown financing) and the acquisition of outstanding stock in 1991.
Liquidity and Capital Resources
Historically, BTR's principal source of capital consisted of acquisition
and development loans, with recourse to the borrower, which funded land and
construction costs. As development projects were completed, acquisition and
development loans were replaced with permanent mortgages which typically
bore higher rates of interest but were secured by the project only, with no
recourse to the borrower. BTR also utilized bank lines and internal funds
for equity in its real estate projects, replacing such sources with permanent
financing when rates and terms were deemed favorable.
BTR had paid its shareholders a modest dividend, retaining excess cash
flows to invest in additional projects. In 1990, the dividend was
discontinued and cash flows in excess of operating requirements were used for
paying or curtailing outstanding debt, primarily bank lines and construction
and acquisition loans.
In order to qualify as a REIT for Federal income tax purposes, MART is
required to pay dividends to its shareholders of at least 95% of its REIT
taxable income. MART intends to pay these dividends from operating cash
flows which have increased due to the reduction in debt service resulting
from the repayment of indebtedness with the proceeds of the offering, and
from future growth in rental revenues and other sources, such as the leasing
of currently vacant space and development of undeveloped parcels. While MART
intends to distribute to its shareholders a substantial portion of its cash
flows from operating activities, MART also intends to retain or reserve such
amounts as it considers necessary from time to time for the acquisition or
development of new properties as suitable opportunities arise and for the
expansion and renovation of its shopping centers. Also, MART currently has
and will continue to maintain a line of credit of at least $25,000,000 from
a commercial bank (See Footnote I).
The Company anticipates material committments for capital expenditures
to include, in the next two years, the redevelopment or development of six
Baltimore area projects at an estimated cost between $10 and $31 million.
The Company expects to fund the development projects and other capital
expenditures with (i) available net cash flows from operating activities,
(ii) if necessary, construction loan financing, (iii) if necessary, long term
mortgage financing on unencumbered operating properties, and (iv) if
necessary, the use of its $25,000,000 line of credit from a commercial bank
(See Footnote I).
19 (Continued)
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
It is management's intention that MART continually have access to the
capital resources necessary to expand and develop its business. Management
cannot practically quantify MART's 1994 cash requirements, but, expects to
meet its short-term liquidity requirements generally through available net
cash flow provided by operations and short-term borrowings. To meet its
long-term liquidity requirements, MART intends to obtain funds through
additional equity offerings or long-term debt financing in a manner
consistent with its intention to operate with a conservative debt
capitalization policy. MART anticipates that the cash flow available from
operations, together with cash from borrowings, will be sufficient to meet
the capital and liquidity needs of MART in both the short and long term.
New Accounting Standards
In February, 1992, the Financial Accounting Standards Board issued a new
standard, Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," which requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability
method of accounting for income taxes. BTR adopted this statement as of
January 1, 1992. The standard and its effect on BTR and the Company are
described in Note A and Note L.
In December, 1991, the Financial Accounting Standards Board issued
a new standard, Statement of Financial Accounting Standards No. 107,
"Disclosure Requirements for Fair Value of Financial Instruments."
BTR adopted the disclosure requirements as of December 31, 1992, and
included them in Note Q in the consolidated financial statements.
In November, 1992, the Financial Accounting Standards Board issued a
new standard, Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Post employment Benefits." Management has
concluded that this new standard will have no impact on the Company's
financial statements, as the Company does not offer or provide post
employment benefits to its employees.
Inflation
The majority of all of the leases at the shopping center properties
contain provisions which will entitle MART to receive percentage rents
based on the tenants' gross sales. Such percentage rents ameliorate the
risk to MART of the adverse effects of inflation. Percentage rent received
by BTR and MART remained stable in the year ended December 31, 1993 compared
to the year ended December 31, 1992, even though the Middle Atlantic area
of the United States has been experiencing an economic recession. If the
recession were to continue for a prolonged time, funds from operations
could decline as some tenants may have trouble meeting their lease
obligations. Most of the leases at the properties require the tenants to
pay a substantial share of operating expenses, such as real estate taxes,
insurance and common area maintenance costs, and thereby reduce MART's
exposure to increased costs. In addition, many of the leases at the
properties are for terms of less than 10 years, which may enable MART
to seek increased rents upon renewal of existing leases if rents are below
the then-existing market value.
20
<PAGE>
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES, &
BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR COMPANY)
Financial Statements:
Independent auditors' report ......................22
Consolidated Balance Sheets -
as of December 31, 1993 and 1992 ................23
Consolidated Statements of Operations - For the
Periods ended December 31, 1993 and September 10,
1993 and for the Years ended December 31, 1992 and
1991.............................................24
Consolidated Statements of Shareholders' Equity -
For the Periods ended December 31, 1993 and
September 10, 1993 and for the Years ended
December 31, 1992 and 1991.......................25
Consolidated Statements of Cash Flows - For the
Periods ended December 31, 1993 and September 10,
1993 and for the Years ended December 31,
1992 and 1991 ...................................26
Notes to Consolidated Financial Statements ........28
Exhibits, Financial Statement Schedules, and Reports on Form 8-K are included
in Part IV - Item 14.
Schedules:
Schedule II - Amounts receivable from
related parties ...............................40
Schedule XI - Real Estate and Accumulated
Depreciation ..................................41
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Trustees and Shareholders
Mid-Atlantic Realty Trust :
We have audited the accompanying consolidated balance sheets of Mid-Atlantic
Realty Trust and BTR Realty, Inc. and subsidiaries as of December 31, 1993
and 1992 and the related consolidated statements of operations,
shareholders' equity and cash flows for the periods ended December 31, 1993
and September 10, 1993 and for each of the years ended December 31, 1992 and
1991. In connection with our audits of the consolidated financial statements,
we have also audited the financial statement schedules as listed in the
accompanying index. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Mid-Atlantic Realty Trust and BTR Realty, Inc. and subsidiaries as of
December 31, 1993 and 1992, and the results of their operations and their
cash flows for the periods ended December 31, 1993 and September 10, 1993 and
for each of the years ended December 31, 1992 and 1991, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in note A to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1992 to adopt the
provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
KPMG PEAT MARWICK
Baltimore, Maryland
February 25, 1994
22
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
Consolidated Balance Sheets
Mid-Atlantic || BTR
Realty Trust || Realty, Inc.
& Subsidiaries || & Subsidiaries
As of || As of
December 31, || December 31,
1993 || 1992
||
ASSETS ||
Properties: ||
Operating properties ||
(Notes C and D)............$ 127,713,850 || 133,592,936
Development operations ||
(NoteE).................... 2,128,434 || 2,380,790
Property held for ||
development or sale ....... 9,169,232 || 9,451,195
----------- || -----------
139,011,516 || 145,424,921
||
Cash and cash equivalents .... 687,108 || 98,582
Notes and accounts ||
receivable - tenants ||
and other (Note F).......... 2,357,791 || 4,231,958
Due from joint venture ||
partners 1,701,708 || 1,523,924
Prepaid expenses and deposits. 403,075 || 477,016
Refundable income taxes ...... 24,045 || 18,034
Net assets of properties to ||
be sold (Note G) ........... 449,219 || -
Deferred financing costs ||
(Note H) ................... 3,928,590 || 1,437,698
----------- || -----------
$ 148,563,052 || 153,212,133
=========== || ===========
||
LIABILITIES AND SHAREHOLDERS' EQUITY ||
Liabilities: ||
Notes payable (Note I).......$ 2,800,000 || 3,829,454
Accounts payable and accrued ||
expenses (Note J).......... 4,377,411 || 2,151,303
Income taxes (Note L): ||
Currently payable - state . 19,581 || 4,594
Deferred .................. - || 460,570
Construction loans payable .. - || 37,831,945
Mortgages payable (Note D) .. 53,694,372 || 107,507,233
Convertible subordinated ||
debentures (Note K)........ 60,000,000 || -
Deferred income ............. 133,468 || 129,078
Minority interest in ||
consolidated joint ventures 250,432 || 114,426
----------- || -----------
121,275,264 || 152,028,603
||
Commitments (Notes M & O) ||
Shareholders' Equity (Note N): ||
Preferred shares of beneficial ||
interest, $.01 par value, authorized ||
2,000,000 shares in 1993, issued ||
and outstanding, none ..... - || -
Common shares of beneficial ||
interest and stock, $.01 par value, ||
authorized 100,000,000 and 50,000,000 ||
shares, issued and outstanding, ||
6,291,407, and 8,503,916 shares, ||
respectively .............. 62,914 || 85,039
Additional paid-in capital . 42,602,505 || 9,078,718
Accumulated deficit ........ (15,377,631) || (7,980,227)
------------ || ------------
27,287,788 || 1,183,530
------------ || ------------
$ 148,563,052 || 153,212,133
============ || ============
See accompanying notes to consolidated financial statements.
23
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
Consolidated Statements of Operations
Mid-Atlantic || BTR Realty, Inc.
Realty Trust || January 1, to BTR Realty, Inc.
September 11 to || September 10, Years Ended December 31,
December 31, 1993|| 1993 1992 1991
||
REVENUES: ||
Rentals ............ $6,061,175 || 14,620,418 20,217,251 18,930,636
Sales of residential ||
property .......... - || 1,032,000 1,120,750 2,173,200
Gain on properties held ||
for sale, net ..... - || 31,501 281,511 717,292
Other (Note P) ..... 515,509 || 228,292 1,035,621 958,684
--------- || ---------- ---------- ----------
6,576,684 || 15,912,211 22,655,133 22,779,812
--------- || ---------- ---------- ----------
COSTS AND EXPENSES: ||
Interest ........... 3,076,060 || 9,278,198 14,032,352 14,440,828
Depreciation and ||
amortization of property ||
and improvements .. 1,502,449 || 3,233,530 4,778,432 4,415,796
Operating .......... 1,104,193 || 2,649,341 3,985,439 3,788,862
Cost of residential ||
property sold ..... - || 1,008,475 1,067,806 1,943,345
General and ||
administrative .... 300,625 || 1,053,295 1,223,319 1,926,335
Unrecoverable ||
development costs - || 1,278,817 262,147 1,455,106
--------- || ---------- ---------- ----------
5,983,327 || 18,501,656 25,349,495 27,970,272
--------- || ---------- ---------- ----------
EARNINGS (LOSS) FROM ||
OPERATIONS BEFORE ||
MINORITY INTEREST .. 593,357 || (2,589,445) (2,694,362) (5,190,460)
Minority interest ||
(expense) benefit .. (125,883) || 124,129 156,460 314,880
---------- || ----------- ----------- ----------
EARNINGS (LOSS) FROM ||
OPERATIONS ......... 467,474 || (2,465,316) (2,537,902) (4,875,580)
Gain on Fire Damage ||
(Note F) ........... - || - 1,340,000 -
(Loss) gain on sales of ||
operating properties - || - (47,573) 114,934
---------- || ----------- ----------- ----------
EARNINGS (LOSS) BEFORE INCOME ||
TAXES, CUMULATIVE EFFECT OF ||
CHANGE IN ACCOUNTING PRINCIPLE ||
& EXTRAORDINARY ITEM 467,474 || (2,465,316) (1,245,475) (4,760,646)
Income tax benefit, ||
net (Note L) ....... - || 408,210 126,518 72,000
---------- || ----------- ----------- ----------
EARNINGS (LOSS) BEFORE ||
CUMULATIVE EFFECT OF ||
CHANGE IN ACCOUNTING ||
PRINCIPLE AND ||
EXTRAORDINARY ITEM . 467,474 || (2,057,106) (1,118,957) (4,688,646)
Cumulative effect at ||
January 1, 1992 ||
of change in accounting ||
for income taxes ... - || - 1,286,000 -
---------- || ----------- ----------- -----------
EARNINGS (LOSS) BEFORE ||
EXTRAORDINARY ITEM . 467,474 || (2,057,106) 167,043 (4,688,646)
Extraordinary item - ||
Loss on early ||
extinguishment ||
of debt ............ - || (548,323) - -
---------- || ----------- ----------- -----------
NET EARNINGS (LOSS) . $467,474 || (2,605,429) 167,043 (4,688,646)
========== || =========== =========== ===========
||
Earnings (loss) per share ||
before cumulative effect ||
of change in accounting ||
principle and extraordinary ||
item ............... $0.07 || (0.24) (0.13) (0.55)
Cumulative effect of change ||
in accounting principle - || - 0.15 -
---------- || ----------- ----------- ----------
Earnings (loss) per ||
share before extraordinary ||
item ................ 0.07 || (0.24) 0.02 (0.55)
Extraordinary item - ||
early extinguishment ||
of debt ............. - || (0.06) - -
---------- || ----------- ----------- ----------
Net earnings (loss) ||
per share ........... $0.07 || (0.30) 0.02 (0.55)
========== || =========== =========== ==========
See accompanying notes to consolidated financial statements.
24
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1993, 1992 and 1991
Retained
Additional Earnings Total
Common Par Paid-in (Accumulated Shareholders'
Shares Value Capital Deficit) Equity
BTR REALTY, INC.
BALANCE,
January 1, 1991 8,552,501 $85,525 $9,130,587 ($3,364,909) $5,851,203
Net loss - - - (4,688,646) (4,688,646)
Acquisition of
outstanding stock (48,585) (486) (51,869) (93,715) (146,070)
---------- ------- ----------- ------------ -----------
BALANCE,
December 31, 1991 8,503,916 85,039 9,078,718 (8,147,270) 1,016,487
Net earnings - - - 167,043 167,043
---------- ------- ----------- ------------ -----------
BALANCE,
December 31, 1992 8,503,916 85,039 9,078,718 (7,980,227) 1,183,530
Stock issued through
the exercise of
options pursuant to
the BTR stock
compensation plan 78,286 783 224,475 - 225,258
Stock canceled for
repayment of a note
receivable from a
former employee (56,554) (566) (176,485) - (177,051)
Dividend Paid -
$.58 per share - - - (4,944,879) (4,944,879)
Net loss - - - (2,605,429) (2,605,429)
--------- ------- ---------- ----------- -----------
BALANCE,
September 10, 1993 8,525,648 85,256 9,126,708 (15,530,535) (6,318,571)
========= ======= ========== ============ ===========
MID-ATLANTIC REALTY TRUST
Conversion of 3 shares
of BTR for 1 share of
MART (5,683,765)(56,837) 56,837 - -
Acquisition of
Fractional Shares (476) (5) (5,024) - (5,029)
Initial sale of
Common Shares of
Beneficial
Interest 3,450,000 34,500 33,423,984 - 33,458,484
Dividend Paid -
$.05 per share - - - (314,570) (314,570)
Net Earnings - - - 467,474 467,474
BALANCE,
December 31, 1993 6,291,407 $62,914 $42,602,505 ($15,377,631) $27,287,788
========== ======= =========== ============= ============
See accompanying notes to consolidated financial statements.
25
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
Consolidated Statements of Cash Flows
Mid-Atlantic || BTR Realty, Inc.
Realty Trust || January 1, to BTR Realty, Inc.
September 11 to || September 10, Years Ended December 31,
December 31, 1993|| 1993 1992 1991
||
Cash flows from ||
operating activities: ||
Net earnings (loss) $467,474 || (2,605,429) 167,043 (4,688,646)
Adjustments to reconcile ||
net earnings (loss) ||
to net cash provided ||
by (used in) operating ||
activities: ||
Cumulative effect of ||
change in accounting ||
principle ........ - || - (1,286,000) -
Gain on sales of ||
residential properties ||
and properties held ||
for sale, net ... - || (7,976) (334,455) (947,147)
Gain on fire damage of ||
operating property - || - (1,340,000) -
Depreciation and ||
amortization ....1,502,449 || 3,233,530 4,778,432 4,415,796
Unrecoverable ||
development costs - || 1,278,817 262,147 1,455,106
Loss (gain) on sales ||
of operating ||
properties ...... - || - 47,573 (114,934)
Loss on early ||
extinguishment ||
of debt - ||
capitalized ..... - || 273,308 - -
Deferred income ||
taxes benefit ... - || (460,570) (118,000) (180,000)
Minority interest ||
in earnings (loss), ||
net ............. 125,883 || (124,129) (156,460) (314,880)
Stock compensation ||
plan accrual .... - || - (268,900) -
Changes in operating ||
assets and liabilities: ||
Decrease in operating ||
assets ......... 108,480 || 555,067 869,252 1,138,960
(Decrease) increase ||
in deferred rental ||
income ..........(974,173) || 974,173 - -
Increase (decrease) ||
in operating ||
liabilities ....2,249,233 || 1,012,844 (1,371,494) (1,725,320)
---------- || ---------- ----------- -----------
Total ||
Adjustments .3,011,872 || 6,735,064 1,082,095 3,727,581
--------- || ---------- ----------- -----------
NET CASH PROVIDED BY ||
(USED IN) OPERATING ||
ACTIVITIES 3,479,346 || 4,129,635 1,249,138 (961,065)
---------- || ---------- ----------- -----------
||
Cash flows from ||
investing activities: ||
Additions to ||
properties .... (6,173,532) || (1,379,710) (2,967,398) (7,429,787)
Proceeds from sales ||
of properties - || 1,646,748 4,796,907 8,073,241
Purchases of ||
investments.... - || - (21,753) (32,042)
Transfer or sale of ||
investments.... - || - 625,921 -
Distributions from ||
unconsolidated ||
joint ventures - || - - 69,021
(Payments to) ||
receipts from ||
minority partners, ||
net ........... (213,756) || 170,224 147,839 (618,421)
----------- || ---------- ---------- ----------
NET CASH (USED IN) ||
PROVIDED BY ||
INVESTING ||
ACTIVITIES (6,387,288) || 437,262 2,581,516 62,012
----------- || ---------- ---------- ----------
(CONTINUED)
26
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
Consolidated Statements of Cash Flows (Continued)
Mid-Atlantic || BTR Realty, Inc.
Realty Trust || January 1, to BTR Realty, Inc.
September 11 to || September 10, Years Ended December 31,
December 31, 1993|| 1993 1992 1991
||
Cash flows from ||
financing activities: ||
Proceeds from ||
construction ||
loans payable ..$ - || - 1,087,244 5,024,448
Payments on ||
construction ||
loans payable .. - || (37,831,945) (2,332,591) (3,554,714)
Proceeds from ||
mortgages payable - || 2,682,600 1,076,444 7,450,000
Principal payments ||
on mortgages ||
payable ....... (3,143,953) || (46,709,513) (2,446,767) (3,069,169)
Proceeds from ||
notes payable .. 3,100,000 || 90,832,649 7,044,500 6,358,793
Principal payments ||
on notes payable (87,486,651) || (7,475,452) (8,285,036)(10,762,154)
Proceeds from sale ||
of convertible ||
debentures ..... 60,000,000 || - - -
Additions to deferred ||
finance costs - ||
debentures...... (3,063,274) || - - -
Additions to deferred ||
finance costs - ||
other........... (171,954) || (45,149) (33,807) (361,316)
Net proceeds from ||
sale of common ||
shares ......... 33,453,455 || - - -
Sinking fund payments - || - (41,083) (49,300)
Acquisition of ||
outstanding ||
stock .......... - || - - (146,070)
Stock issued - ||
options exercised ||
in compensation ||
plan .......... - || 225,258 - -
Stock canceled - ||
employee note ||
payment ....... - || (177,051) - -
Dividends paid .. (314,570) || (4,944,879) - -
----------- || ----------- ---------- ----------
||
NET CASH PROVIDED ||
BY (USED IN) ||
FINANCING ||
ACTIVITIES .. 2,373,053 || (3,443,482) (3,931,096) 890,518
----------- || ----------- ----------- ----------
NET (DECREASE) ||
INCREASE IN CASH ||
AND CASH EQUIVALENTS (534,889) || 1,123,415 (100,442) (8,535)
CASH AND CASH ||
EQUIVALENTS, ||
beginning of period 1,221,997 || 98,582 199,024 207,559
----------- || ----------- ----------- ----------
||
CASH AND CASH ||
EQUIVALENTS, ||
end of period ..... $687,108 || 1,221,997 98,582 199,024
=========== || =========== =========== ==========
||
Supplemental disclosures of ||
cash flow information: ||
Cash paid for: ||
Interest (net of ||
amount capitalized)$3,053,863 || 9,218,811 14,009,774 15,016,592
Income taxes ...... 20,560 || 16,813 48,588 52,284
=========== || =========== =========== ===========
Supplemental schedule of noncash investing and financing activities:
At December 31, 1993, MART recorded an asset on the balance sheet, Net
assets of properties to be sold (Note G) of $449,219. The reclassification
of the assets and liabilities consisted of the following; a decrease in
operating properties of $6,505,807, a decrease in operating assets of
$304,377, a decrease in deferred financing costs of $323,449, a decrease in
operating liabilities of $42,419, and a decrease in mortgages payable of
$6,641,995
On September 10, 1993, BTR reported a loss on an early extinguishment of
debt of $548,323. The loss included prepayment penalties and loan fee
expenses amounting to $275,015, and a reduction of net amortized financing
costs capitalized as costs of the related operating properties of $273,308.
In August, 1993, Mr. Vernon Kalkman, former Officer of BTR surrendered
56,544 shares of BTR stock as full repayment of his note receivable.
In December, 1992, BTR reported a gain on sale of property that had fire
damage. The effect of the $1,340,000 gain increased operating assets by the
insurance recovery expected of $1,826,000 and decreased operating properties
by $486,000. The decrease in operating assets ended September 10, 1993
includes a partial collection of the insurance recovery of $1,328,000.
In 1991, BTR reduced its basis in property held by a limited partnership
through a $100,000 reduction in notes payable from an early extinguishment of
debt and the minority partners agreement to a $201,000 reduction in their
interest in the partnership.
See accompanying notes to consolidated financial statements.
27
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1993, 1992, 1991
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Mid-Atlantic Realty Trust "the Company" was incorporated on June 29, 1993
and commenced operations effective with the completion of its initial public
share offering on September 11, 1993. The Company is the successor to the
operations of BTR Realty, Inc. (the predecessor to the company), "BTR". The
Consolidated Financial Statements of BTR Realty, Inc. are presented for
comparative purposes.
Principles of Consolidation
The consolidated financial statements include all wholly-owned
subsidiaries and majority-owned partnerships. Investments in unconsolidated
joint ventures are carried on the equity method. All significant intercompany
balances and transactions have been eliminated.
Recognition Of Revenue From Property Sales
The sale of residential property and the gain (loss) on properties held
for sale are recorded upon settlement. Properties held for sale are primarily
outparcels of operating properties or undeveloped commercial land.
Net Earnings (Loss) Per Share
Earnings (loss) per share are computed by dividing net earnings (loss) by
the weighted average number of common shares and common share equivalent
shares outstanding during each year. The effect on earnings per share
assuming conversion of the convertible subordinated debentures would be
anti-dilutive.
Capitalization Policy and Net Realizable Value
Acquisition costs, interest and other carrying costs, as well as
construction and start-up costs of commercial property are capitalized and
charged to related undeveloped land, construction in progress or deferred
costs. In addition, costs incurred in the financing and leasing of shopping
centers and other commercial properties are deferred until the project is
completed and are then amortized over the term of the related mortgage or
lease. Management ceases to capitalize or defer these costs when the carrying
value equals the net realizable value of the property or costs are unlikely
to be recoverable. Net realizable value is determined primarily by the
application of the principles of valuation of operating properties. The
basis for determining the value of operating properties is the lower of
historical cost or the net realizable value. The net realizable value of
operating properties is based on the present value of each property's
anticipated net cash flow, before debt service payments, over a period of ten
years. Anticipated net cash flow is based upon an analysis of the history
and future of the property, existing and prospective tenant leases, occupancy
rates, and estimated operating expenses. The discount factor used to arrive
at the present value of the anticipated net cash flow of each property and
the reversion rate applied to the anticipated net cash flow at the period are
based on the risk associated with the property as well as the prevailing
discount rates at the end of the reporting period. Risk variations reflect
differences in quality, age, location and market conditions of each property.
Properties
Operating properties and property held for development or sale are carried
at the lower of cost or, where appropriate, an amount not to exceed estimated
net realizable value. Depreciation of buildings and leaseholds is provided
using the straight-line method over the estimated useful lives or lease terms
of the properties. Improvements for tenants are amortized on a straight-
line basis over the terms of the related tenant leases. Expenditures for
normal maintenance and repairs are charged against income as incurred. Lease
termination payments for major tenants are reported as other income on the
statements of operations, in the period when the termination agreement was
executed.
28
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income Taxes
The Company has elected to qualify, and intends to continue to qualify as
a real estate investment trust, "REIT", pursuant to the Internal Revenue Code
Sections 856 through 860, as amended. In general, under such Code provisions
a trust which, in any taxable year, meets certain requirements and
distributes to its shareholders at least 95% of its REIT taxable income will
not be subject to Federal income tax to the extent of the income which it
distributes.
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability
method of accounting for income taxes. Under the asset and liability method
of Statement 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under the asset and liability method required by Statement 109, deferred
income taxes are recognized for temporary differences between the financial
reporting basis and income tax basis of assets and liabilities based on
enacted tax rates expected to be in effect when such amounts are realized
or settled, except that deferred tax assets for tax loss or credit
carryforwards are recognized only to the extent that it is more likely than
not that such amounts will be realized based on consideration of available
evidence, including tax planning strategies and other factors. Under
Statement 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
Effective January 1, 1992, BTR adopted Statement 109 and has reported the
cumulative effect of that change in the method of accounting for income taxes
in the consolidated statement of operations for 1992. The Company continues
to apply the standard which did not have a material effect on the period
September 11 through December 31, 1993.
BTR applied the deferred method for reporting income taxes under APB
Opinion 11 in 1991 and prior years. Deferred income taxes were recognized
for income and expense items that were reported in different years for
financial reporting purposes and income tax purposes using the tax rate
applicable for the year of the calculation. Under the deferred method,
deferred taxes were not adjusted for subsequent changes in tax rates.
Cash and Cash Equivalents
All highly liquid unrestricted investments with original maturities of
three months or less are considered cash equivalents for purposes of the
statements of cash flows.
B. PUBLIC OFFERINGS
On September 11, 1993, the Company completed a public offering of
3,450,000 common shares of beneficial interest at $10.50 per share and
$60,000,000 in convertible subordinated debentures at 7.625%. Net proceeds
from these offerings totaled approximately $90,390,000.
29
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
C. OPERATING PROPERTIES
Operating properties consist of the following:
December 31,
1993 1992
Land $15,781,566 17,665,380
Land improvements 19,819,368 19,977,711
Buildings 95,771,668 97,835,233
Improvements for tenants 5,280,554 4,234,319
Development costs on
completed projects 16,739,579 16,805,415
Furniture, fixtures and
equipment 2,177,423 2,083,740
Deferred lease costs 4,794,044 4,159,795
------------ -----------
160,364,202 162,761,593
Less accumulated depreciation
and amortization 32,650,352 29,168,657
------------ -----------
$127,713,850 133,592,936
============ ===========
D. PROPERTIES AND RELATED ACCUMULATED DEPRECIATION AND AMORTIZATION AND
ENCUMBRANCES
A summary of all of the Company's properties and related encumbrances
at December 31, 1993 follows:
Accumulated
Cost of Depreciation
Initial Subsequent Total and
Classification Encumbrances Cost Improvements Cost Amortization
Shopping centers $53,132,475 104,340,758 16,379,812 120,720,570 25,262,637
Bowling centers - 4,429,661 64,383 4,494,044 1,899,818
Office buildings 3,216,702 26,415,163 2,402,109 28,817,272 3,824,094
Other rental properties - 4,782,560 858,814 5,641,374 1,261,020
Other property - 690,942 - 690,942 402,783
---------------------------------------------------------
Operating properties 56,349,177 140,659,084 19,705,118 160,364,202 32,650,352
Development operations - 2,128,434 - 2,128,434 -
Property held for
development or sale - 9,169,232 - 9,169,232 -
---------------------------------------------------------
$56,349,177 151,956,750 19,705,118 171,661,868 32,650,352
=========================================================
Mortgages payable aggregating $56,349,177 at December 31, 1993 bear
interest at 7% to 11.75% and mature in installments through 2003. Eliminated
from mortgages payable on the consolidated balance sheet at December 31, 1993
is a mortgage payable owed by Southdale Limited Partnership, (MART has a 50%
interest in the partnership and includes the total partnership in
consolidation), to Southdale Mortgage Inc., a wholly-owned subsidiary of
Mid-Atlantic Realty Trust in the amount of $2,654,805. Aggregate annual
principal payments applicable to mortgages payable for the five years
subsequent to December 31, 1993 are:
1994 $ 544,000
1995 9,819,000
1996 5,876,000
1997 5,283,000
1998 14,090,000
===========
30
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
E. DEVELOPMENT OPERATIONS
Development operations consist of the following:
December 31,
1993 1992
Construction in progress 1,749,886 1,614,696
Pre-construction costs 378,548 766,094
--------- ---------
2,128,434 2,380,790
========= =========
Development operations are transferred to operating property costs
when a project is completed, at which time depreciation and amortization
commences.
F. NOTES AND ACCOUNTS RECEIVABLE
Included in notes and accounts receivable at December 31, 1993 are
significant concentrations of amounts due from tenants in two primary
geographical areas: the mid-Atlantic region of the United States and Arizona.
Although improved for 1993 and 1992, the economic condition of the Arizona
real estate market has been weak as evidenced by increased vacancies in the
BTR's projects, particularly in the Phoenix market. The mid-Atlantic region
also experienced an overall economic slowdown, but generally not as severe
as that in Arizona. The Company's accounts receivable at December 31, 1993
included $1,184,000 and $378,000 due from tenants in the mid-Atlantic region
and Arizona, respectively. Management believes adequate provision has been
made for the Company's credit risk for all receivables.
Included in notes and accounts receivable at December 31, 1992 is an
estimate of $1,826,000, which represented the insurance recovery expected as
a result of fire damage to the operating property at Rolling Road in
Baltimore, Maryland in December, 1992. The Company collected $1,328,163
in 1993, $407,736 in February, 1994 and expects to collect the balance of
$90,101 and finish the repairs to the center.
G. NET ASSETS OF PROPERTIES TO BE SOLD
Net assets of properties to be sold consists of net assets and
liabilities (only liabilities assumed by the purchasers) of an operating
property, Orchard Landing, under contract for sale at December 31, 1993.
MART sold its partnership interest in this property on February 1, 1994 for
$7.2 million. The property was part of a divestiture plan to facilitate
the merger of BTR and MART. On September 10, 1993 BTR decided to sell this
property and discontinue reporting operating results in its consolidated
statement of operations. The amount of losses from the discontinued segment
was de-minimus.
The remaining assets and liabilities reported on the balance sheet
at December 31, 1993 consists of:
Operating property $6,505,807
Cash 268,879
Accounts receivable 10,404
Prepaid expenses and deposits 25,094
Deferred financing costs 323,449
Total assets 7,133,633
----------
Tenant accounts payable 42,419
Mortgage payable 6,641,995
----------
Total liabilities
(assumed by purchaser) 6,684,414
----------
Net assets $449,219
==========
31
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
H. DEFERRED FINANCING COSTS
As of December 31,
Deferred financing costs consist of the following: 1993 1992
Deferred costs related to the debentures 3,063,274 -
Deferred costs of new line of credit 171,584 -
Deferred financing costs capitalized related
to operating properties 1,720,827 2,928,603
--------- ---------
4,955,685 2,928,603
Less accumulated amortization (1,027,095)(1,490,905)
--------- ---------
Deferred financing costs 3,928,590 1,437,698
========= =========
I. NOTES PAYABLE
Notes payable consist of the following: As of December 31,
1993 1992
Line of credit 2,800,000 3,650,000
Notes payable, bearing interest at 11% - 179,454
--------- ---------
2,800,000 3,829,454
========= =========
At December 31, 1993, the Company has an agreement with its primary bank
for a $25,000,000 secured line of credit which expires in December, 1996.
This agreement replaced a $10,000,000 secured line of credit previously held
with the same bank. Availability under the new agreement is determined by
the amount of collateral provided. At December 31, 1993, $25,000,000 was
fully collateralized. The line bears interest at the prime rate. However, the
Company has the option to fix the rate at LIBOR plus 1.125% under certain
circumstances. A stand-by fee is required by the bank for any unused portion
of the line. The agreement contains covenants which provide for the
maintenance of specified debt service ratios and minimum levels of net worth,
and other requirements, among which is the requirement that the Company
maintain its status as a REIT, and obtain bank consent for the addition of
material recourse debt.
At December 31, 1993, the unused line of credit available to the Company,
net of outstanding letters of credit, was $21,833,130. The maximum level of
borrowings under both lines of credit was $4,633,130, $4,663,000 and
$10,021,000 in 1993, 1992 and 1991, respectively. The average amounts of
borrowings were approximately $1,888,000, $3,566,000, and $5,446,000, with
weighted average interest approximating 5.6%, 6.3% and 8.7%, in 1993, 1992
and 1991, respectively.
Aggregate annual principal maturities of notes payable subsequent
to December 31, 1993 are as follows:
1994 $ -
1995 -
1996 2,800,000
=========
J. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31,
1993 1992
Trade accounts payable 1,289,204 529,985
Retainage on construction
in progress 146,774 66,848
Accrued debenture interest expense 1,394,435 -
Accrued expenses 1,546,998 1,554,470
--------- ---------
4,377,411 2,151,303
========= =========
32
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
K. CONVERTIBLE SUBORDINATED DEBENTURES
Effective September 11, 1993 the Company issued $60,000,000 of
convertible subordinated debentures at 7.625% scheduled to mature in
September, 2003. Interest on the debentures is paid semi-annually on March 15
and September 15. The debentures are convertible, unless previously redeemed,
at any time prior to maturity into common shares of beneficial interest of
the Company at $10.50 per share, subject to certain adjustments. As of
December 31, 1993 no debentures have been converted. Costs associated with
the issuance of the debentures were approximately $3,063,000 and are being
amortized through 2003. The debentures are redeemable by the Company at any
time on or after September 15, 1996, or at any time for certain reasons
intended to protect the Company's REIT status, at 100% of the principal
amount thereof, together with accrued interest. The debentures are
subordinate to all mortgages payable.
L. INCOME TAXES
As discussed in Note A, the Company plans to maintain its status as a
REIT, and be taxed under Sections 856-860 of the Internal Revenue Code of
1986, as amended. In general terms, under such Code provisions a trust or
corporation which, in any taxable year, meets certain requirements and
distributes to its shareholders at least 95% of its taxable income will not
be subject to Federal income tax to the extent of the income which it
distributes.
A REIT will generally not be subject to federal income taxation for the
portion of its income that qualifies as REIT taxable income to the extent
that it distributes at least 95 percent of its taxable income to its
shareholders and complies with certain other requirements. Accordingly, no
provision has been made for federal income taxes for the Company and certain
of its subsidiaries in the accompanying consolidated financial statements. At
December 31, 1993, the income tax basis of the Company's assets was
approximately $131,000,000 and liablities was approximately $ 121,000,000.
The income taxes benefit, net, in BTR, for the period January 1, 1993
through September 10, 1993 includes a currently payable income tax expense
of $52,360, offset by a deferred income tax benefit of $460,570, including
the balance of deferred income taxes payable of $466,570 in BTR which was
recognized as an income tax benefit. It was determined by BTR that it was
more likely than not that there would be no payment in the future of any
deferred tax temporary differences due to the expected merger with the
Company. This was in accordance with the Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" adopted by BTR as of January 1, 1992.
As discussed, BTR adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," as of January 1, 1992. The
cumulative effect at January 1, 1992 of this change in accounting for income
taxes was to increase net earnings for 1992 by $1,286,000 or $.15 per share.
The effect of the change in 1992, excluding the change in accounting
principle, was not material.
The benefit for income taxes consists of the following:
Jan. 1, 1993 thru Years ended December 31,
September 10, 1993 1992 1991
Current taxes: Federal - - -
State 52,360 (8,518) 108,000
--------------------------------------
52,360 (8,518) 108,000
--------------------------------------
Deferred: Federal 118,430 (265,000) (193,000)
State (579,000) 147,000 13,000
--------------------------------------
(460,570) (118,000) (180,000)
--------------------------------------
(408,210) (126,518) (72,000)
======================================
33
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
L. INCOME TAXES - Continued
The net deferred tax obligation at December 31, 1992 consisted of total
deferred tax assets and total deferred tax liabilities of approximately
$6,048,000 and $6,509,000, respectively. The tax effects of temporary
differences between the financial reporting basis and income tax basis of
assets and liabilities that are included in the net deferred tax obligation
at December 31, 1992 relate to the following:
Differences related to depreciation
and amortization of income
producing assets $3,997,611
Differences related to the treatment
of construction period carrying costs 1,218,797
Deferred gains on property exchanges 1,292,701
----------
Total gross deferred tax liability 6,509,109
Effect of Federal net operating
loss carryforwards 4,523,724
Effect of property reserves 2,098,554
Effect of State net operating
loss carryforwards 559,959
Other 145,520
----------
Total gross deferred tax asset 7,327,757
Less: valuation allowance (1,279,218)
----------
Net deferred tax asset 6,048,539
----------
Net deferred tax liability $460,570
==========
The valuation allowance for deferred tax assets as of January 1, 1992 was
$1,117,000. The net change in the total valuation allowance for the year
ended December 31, 1992 was an increase of approximately $162,000.
Deferred taxes arise from recognizing revenue and expense in different
years for tax and financial statement purposes. The sources of these
differences and the tax effect of each in 1991 were as follows:
Year ended December 31,
1991
Depreciation $459,000
Rents and fees received in
advance (75,000)
Utilization of net operating
loss carryforwards (757,000)
Valuation reserves and
write-downs of properties 226,000
Gain on sale (33,000)
---------
($180,000)
=========
At December 31, 1992, BTR had a Federal tax loss carryforward of
$13,305,000 and a State tax loss carryforward of $18,112,000 available to
offset future taxable income, both of which expire in 2007. For financial
reporting purposes in 1991, BTR recognized a $193,000 benefit relating
to a net operating loss carryforward by the reversal of previously provided
deferred income taxes.
34
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
M. COMMITMENTS
Lease Commitments
Minimum rental commitments for operating land leases as of
December 31, 1993 are as follows:
1994 $219,000
1995 220,000
1996 222,000
1997 222,000
1998 222,000
Thereafter 5,130,000
---------
$6,235,000
Certain of the leases contain renewal or purchase options. All of the
leases require the Company to pay real estate taxes. Total annual minimum
lease payments amounted to $176,000 in 1993 and $164,000 in 1992 and 1991.
N. SHAREHOLDERS' EQUITY AND STOCK COMPENSATION PLAN
(1) Preferred Shares
At its inception on September 11, 1993, Mid-Atlantic Realty Trust
authorized 2,000,000 preferred shares of beneficial interest at a par value
of $.01 per share. At December 31, 1993, none of these shares were issued and
outstanding.
(2) Stock Compensation Plan
Under the Executive Stock Compensation Plan, certain officers had been
awarded shares of BTR's stock to be issued at a rate of 20% of the shares
awarded for each year of continued employment. A charge was made to general
and administrative expense at the time of such awards. In 1988, the unissued
shares of stock awarded to two officers were converted to non-qualified stock
options and the officers were awarded options to purchase 15,566 additional
shares under the agreements which were valued based on the market price of
the stock at the award date ($6.875 per share).
No stock awards were made during 1993, 1992, or 1991. At December 31,
1992, 78,286 shares, including 68,686 shares under the non-qualified stock
agreements, had been awarded to the officers but remained unissued. During
1992, BTR adjusted the recorded value of the awarded but unissued shares to
reflect the downward movement in the market value of the BTR's stock from the
measurement date of the awards, resulting in a reduction of general and
administrative expenses of approximately $269,000. In 1993, the 78,286
remaining shares were exercised and issued prior to the merger on September
11,1993. For the period January 1, 1993 through September 10, 1993, BTR
recorded general and administrative expenses of approximately $49,000
representing the increase in recorded value of the awarded shares of BTR
stock.
(3) Acquisition of Outstanding Shares
In 1993, BTR retired 56,544 shares of BTR stock held as collateral for
a note receivable from a former officer of the Company.
In 1991, BTR retired 43,585 shares of BTR stock held as collateral for
a note receivable from a former officer of the Company.
35
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
O. LEASES
The Company owns shopping centers and other commercial property which are
leased, generally on a long-term basis. All leases are classified as
operating leases. Future minimum lease payments receivable under
noncancellable operating leases are as follows:
1994 $19,082,555
1995 17,469,551
1996 15,676,447
1997 13,232,933
1998 10,772,498
Thereafter 68,249,559
===========
The minimum future lease payments do not include contingent rentals which
may be paid under certain leases on the basis of a percentage of sales in
excess of stipulated amounts. Contingent rentals amounted to $1,259,000 in
1993, $1,235,000 in 1992 and $1,215,000 in 1991.
P. OTHER INCOME
Other income consists of the following:
MART BTR Realty, Inc.
Sep. 11 thru Jan. 1, thru Year ended December 31,
Dec. 31, 1993 Sep. 10, 1993 1992 1991
Interest and dividends 266,141 93,312 262,069 328,890
Miscellaneous 249,368 134,980 439,285 527,794
Sale of development rights - - 334,267 -
Fees - - - 102,000
----------------------------------------------
515,509 228,292 1,035,621 958,684
==============================================
Q. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (Statement 107) requires the Company
to disclose estimated fair values for certain on- and off-balance sheet
financial instruments. Fair value estimates, methods, and assumptions
are set forth below for the Company's financial instruments as of
December 31, 1993.
(1) Cash and Cash Equivalents
The carrying amount for cash and cash equivalents approximates fair
value due to the short maturity of these instruments.
(2) Notes Payable
The carrying amount for the line of credit approximates fair value due
to its adjustable interest rate.
(3) Mortgages Payable
The fair value of mortgages payable was based on the discounted value of
contractual cash flows. The discount rate for mortgages payable was
estimated using the rate currently offered for borrowings of similar
remaining maturities. The carrying amount and estimated fair value of
mortgages payable at December 31, 1993 was $53,694,372 and $58,071,000
respectively, and at December 31, 1992 was $107,507,233 and
$110,158,000, respectively.
36
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Q. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
(4) Convertible Subordinated Debentures
The fair value of convertible subordinated debentures was based on the
discounted value of contractual cash flows. The discount rate for
convertible subordinated debentures was estimated using the rate
currently offered for borrowings of similar remaining maturities. The
carrying amount and estimated fair value of convertible subordinated
debentures at December 31, 1993 was $60,000,000 and $58,522,000
respectively.
R. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited combined quarterly results of operations for MART and BTR
for 1993 are summarized as follows:
Quarter ended
>--1/1/93(BTR)-9/10/93---<>9/11/93-(MART)12/31/93<
1993 March 31, June 30, September 30, December 31,
Revenues $5,267,903 5,710,208 6,024,780 5,486,004
(Loss) earnings before
extraordinary item ($383,355)(1,154,053) (481,077) 428,853
Extraordinary item - early
extinguishment of debt - - (548,323) -
-------------------------------------------------
Net (loss) earnings ($383,355)(1,154,053) (1,029,400) 428,853
(Loss) earnings per share
before extraordinary item ($0.05) (0.13) (0.05) 0.06
Extraordinary item - early
extinguishment of debt - - (0.06) -
-------------------------------------------------
Net (loss) earnings per share ($0.05) (0.13) (0.11) 0.06
=================================================
The unaudited quarterly results of operations for BTR for 1992 are
summarized as follows:
Quarter ended
1992 March 31, June 30, September 30, December 31,
Revenues $5,610,868 6,322,668 5,273,951 5,447,646
(Loss) earnings before
cumulative effect of
change in accounting
principle ($228,424) (403,228) (1,170,589) 683,284
Cumulative effect of change
in accounting principle 1,286,000 - - -
-------------------------------------------------
Net earnings (loss) $1,057,576 (403,228) (1,170,589) 683,284
=================================================
(Loss) earnings per share
before cumulative effect
of change in accounting
principle ($0.03) (0.04) (0.14) 0.08
Cumulative effect of change in
accounting principle 0.15 - - -
-------------------------------------------------
Net earnings (loss) per share $0.12 (0.04) (0.14) 0.08
=================================================
Quarterly results are influenced by a number of factors including timing
of settlements of property sales, completion of operating projects,
write-offs of unrecoverable development costs, the deferred tax provision and
the gain on fire damage of an operating property.
37
<PAGE>
ITEM 9
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
None
PART III
ITEM 10
Directors and Executive Officers of the Registrant
The information with respect to the identity and business experience
of the directors of MART and their remuneration, in the definitive proxy
statement (to be filed pursuant to Regulation 14A) with respect to the
election of directors at the 1993 annual meeting of stockholders, is
incorporated herein by reference.
The Executive Officers of MART are as follows:
Position and
Name Age Business Experience
LeRoy E. Hoffberger 68 Chairman of the Board of MART since
September, 1993.Director of BTR from 1963
to September 1993.President of CPC, Inc.,
President and Director of Keystone Realty
Co., Vice President and director of MP
Commercial Inc., Director of the
following public mutual funds - New York
Venture Fund, Venture Income (+) Plus,
Venture Muni (+) Plus, and the Retirement
Planning Funds of America. President and
director of the Hoffberger Foundation,
Vice President and director of Hoffberger
Family Fund
F. Patrick Hughes 46 President and CEO of MART since 1993.
President of BTR from November, 1990
to September, 1993. Senior Vice President
BTR from May, 1989 to November, 1990.
Vice President, Controller and Secretary
of BTR for more than five years.
Paul F. Robinson 40 Vice President of MART since September,
1993. Vice President of BTR from May,
1992 to September, 1993. Secretary and
General Counsel of MART since September,
1993. Secretary and General Counsel of
BTR from May 1989 to September, 1993;
General Counsel since August, 1985.
Eugene T. Grady 45 Treasurer of MART since September, 1993.
Treasurer of BTR since May, 1989.
Paul G. Bollinger 34 Controller of MART since September, 1993.
Controller of BTR since June, 1992.
Assistant Treasurer & Assistant Secretary
since May, 1992 Principal Financial
Officer of Financial Associates of
Maryland, (BTR Related Residential
development partnership), for more than
five years
Each executive officer is elected for a term expiring at the next regular
annual meeting of the Board of Directors of the Company or until his
successor is duly elected and qualified.
ITEM 11 Executive Compensation
The information required by this item is incorporated by reference from
the Registrant's Proxy Statement filed with respect to the 1994 annual
meeting of stockholders.
38
<PAGE>
ITEM 12
Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference
from the Registrant's Proxy Statement filed with respect to the 1994
annual meeting of stockholders.
ITEM 13
Certain Relationships and Related Transactions
The information required by this item is incorporated by reference from
the Registrant's Proxy Statement filed with respect to the 1994 annual
meeting of stockholders.
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of Mid-Atlantic Realty Trust and
Subsidiaries and BTR Realty, Inc. (Predecessor Company) are
included in Part II Item 8:
Independent auditors' report
Consolidated balance
sheets at December 31, 1993 and 1992
Consolidated statements of operations for
the periods ended December 31, 1993 and September 10,
1993 and the years ended December 31, 1992 and 1991
Consolidated statements of shareholders' equity
for the periods ended December 31, 1993 and September 10,
1993 and for the years ended December 31, 1992 and 1991
Consolidated statements of cash flows for
the periods ended December 31, 1993 and September 10,
1993 and the years ended December 31, 1992 and 1991
Notes to consolidated financial statements
(a) 2. Financial Statement Schedules
Schedule II - Amounts receivable from related parties
Schedule XI - Real estate and accumulated
depreciation and amortization
All other schedules are omitted because they are not applicable, or
not required, or because the required information is included in
the consolidated financial statements or notes thereto.
(a) 3. Exhibits
Exhibit No.
3. Articles of Incorporation and by-laws.
None.
4. Instrument Defining the Right of Shareholders.
None.
9. Voting Trust Agreement.
None.
11. Computations of net earnings per common share.
See Summary of Significant Accounting Policies under Notes
to Financial Statements appearing on page 27 of this report.
12. Statement re: computation of ratios.
Not applicable.
13. Annual Report to Shareholders.
Not applicable.
39
<PAGE>
ITEM 14 - (Continued)
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
18. Letter regarding change in accounting principles.
Not applicable.
19. Previously unfiled documents.
Not applicable.
22. List of subsidiaries of registrant.
(Filed herewith)
23. Published report regarding matters submitted to vote of
security holders.
Not applicable.
24. Consents of experts and counsel.
Not applicable.
25. Power of Attorney.
Not applicable.
28. Additional exhibits.
Not applicable.
(b) Reports on Form 8-K.
None.
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES & BTR REALTY, INC. (PREDECESSOR
COMPANY)
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
Balance at Balance at
beginning of end of
Name of Officer Year period Additions Deductions period
1993
Vernon D. Kalkman (1) $173,154 3,897 (177,051) -
-------------------------------------------------
$173,154 3,897 (177,051) -
--------------------------------------------------
1992
Vernon D. Kalkman (1) $150,000 23,154 - 173,154
-------------------------------------------------
$150,000 23,154 - 173,154
-------------------------------------------------
1991
Vernon D. Kalkman (2) $158,547 - (8,547) 150,000
Joel F. Smith (3) 137,312 - (137,312) -
-------------------------------------------------
$295,859 - (145,859) 150,000
-------------------------------------------------
The notes were due upon demand, at the discretion of BTR, and were
collateralized by BTR stock held by the related parties. Interest at the
lower of 12% or the prime rate charged by BTR's bank is payable quarterly.
(1) Accrued interest was added to principal per agreement.
In August, 1993, Mr. Vernon Kalkman surrendered 56,544 shares of BTR
stock as repayment of his note receivable.
(2) Effective January, 1992, Mr. Vernon Kalkman was no longer an officer
of BTR
(3) Effective November, 1990, Mr. Joel Smith was no longer an officer of
BTR and in July, 1991, surrendered 43,585 shares of BTR stock as
repayment of his note receivable.
40
<PAGE>
Schedule XI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized
subsequent
Year ended Initial cost to Company to acquisition
December 31, 1993
Buildings and
Description Encumbrances Land Improvements Improvements
Shopping Centers
Harford Mall $19,943,224 158,085 6,751,096 11,797,420
Smoketown Plaza - 516,312 10,095,077 619,852
Park Sedona - 2,376,739 8,595,646 135,582
Colonie Plaza 5,546,573 1,137,567 7,755,095 565,348
Columbia Plaza 5,000,000 999,739 6,887,711 1,363,013
Spotsylvania Crossing - 1,544,314 6,600,616 264,735
Skyline Village 5,621,679 555,295 6,240,003 912,148
Page Plaza - 464,375 5,777,369 65,907
Plaza Del Rio - 1,291,324 3,938,734 335,929
Sudley Town Plaza - 789,881 3,736,837 445,031
Burke Town Plaza 7,320,357 - 2,936,134 1,681,563
Rosedale Plaza 1,938,670 1,024,712 3,217,926 299,037
Wilkens Avenue 5,107,167 - 3,601,891 337,367
Timonium Shopping Ctr - - 4,031,809 -
York Road Plaza - 1,243,860 2,102,575 170,369
Patriots Plaza (A) 2,654,805 - 1,709,846 381,239
McRay Plaza - 1,182,596 2,565,290 241,422
Rolling Road Plaza (B) - 338,791 1,632,268 680,417
Union Hills Plaza - 274,920 679,863 133,557
Dobson-Guadalupe - 69,146 791,347 83,581
Chandler Plaza - 160,671 565,298 60,063
----------------------------------------------------
53,132,475 14,128,327 90,212,431 20,573,580
Office Buildings
Gateway II - 364,982 12,376,977 676,191
Gateway I - 82,396 8,271,751 1,030,033
Patriots Plaza - - 1,522,943 296,859
Wilkens Office II 1,964,295 - 1,644,370 138,403
Wilkens Office I 1,252,407 - 1,383,102 218,897
Wilkens Office III - - 768,642 41,726
-----------------------------------------------------
3,216,702 447,378 25,967,785 2,402,109
Bowling Centers
Freestate - 695,979 2,453,618 22,793
Waldorf - 243,139 579,161 5,690
Clinton - - 457,764 35,900
------------------------------------------------------
- 939,118 3,490,543 64,383
(Continued)
<PAGE>
Schedule XI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized subsequent Amount at which carried
Year ended to acquisition at close of period
December 31, 1993
Carrying Costs Land Buildings and Total
Description Land Improvements Improvements
Shopping Centers
Harford Mall 158,085 18,548,516 18,706,601
Smoketown Plaza 516,312 10,714,929 11,231,241
Park Sedona (309,000) (1,095,141) 2,067,739 7,636,087 9,703,826
Colonie Plaza 1,137,567 8,320,443 9,458,010
Columbia Plaza 999,739 8,250,724 9,250,463
Spotsylvania Crossing 1,544,314 6,865,351 8,409,665
Skyline Village 555,295 7,152,151 7,707,446
Page Plaza 464,375 5,843,276 6,307,651
Plaza Del Rio 1,291,324 4,274,663 5,565,987
Sudley Town Plaza 789,881 4,181,868 4,971,749
Burke Town Plaza - 4,617,697 4,617,697
Rosedale Plaza 1,024,712 3,516,963 4,541,675
Wilkens Avenue 475,481 475,481 3,939,258 4,414,739
Timonium Shopping Ctr - 4,031,809 4,031,809
York Road Plaza 1,243,860 2,272,944 3,516,804
Patriots Plaza (A) - 2,091,085 2,091,085
McRay Plaza (679,840) (1,397,337) 502,756 1,409,375 1,912,131
Rolling Road Plaza (B) (837,931) 338,791 1,474,754 1,813,545
Union Hills Plaza 274,920 813,420 1,088,340
Dobson-Guadalupe 69,146 874,928 944,074
Chandler Plaza (86,450) (263,550) 74,221 361,881 436,032
----------------------------------------------------------
(599,809) (3,593,959)13,528,518 107,192,052 120,720,570
Office Buildings
Gateway II 364,982 13,053,168 13,418,150
Gateway I 82,396 9,301,784 9,384,180
Patriots Plaza - 1,819,802 1,819,802
Wilkens Office II - 1,782,773 1,782,773
Wilkens Office I - 1,601,999 1,601,999
Wilkens Office III - 810,368 810,368
----------------------------------------------------------
- - 447,378 28,369,894 28,817,272
Bowling Centers
Freestate 695,979 2,476,411 3,172,390
Waldorf 243,139 584,851 827,990
Clinton - 493,664 493,664
-----------------------------------------------------------
- - 939,118 3,554,926 4,494,044
(Continued)
<PAGE>
Schedule XI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Life on which
Year ended depreciation on
December 31, 1993 latest income
Accumulated Date of Date statement is
Description Depreciation Construction Acquired computed
Shopping Centers
Harford Mall 8,580,258 12/73 5-50 yrs.
Smoketown Plaza 1,951,169 4/87 5-50 yrs.
Park Sedona 614,318 11/90 5-50 yrs.
Colonie Plaza 1,501,771 12/87 5-50 yrs.
Columbia Plaza 1,292,521 6/88 5-50 yrs.
Spotsylvania Crossing 1,368,283 5/87 5-50 yrs.
Skyline Village 1,180,079 5/88 5-50 yrs.
Page Plaza 380,875 8/91 5-50 yrs.
Plaza Del Rio 458,379 2/89 5-50 yrs.
Sudley Town Plaza 1,048,491 7/84 5-50 yrs.
Burke Town Plaza 1,610,000 7/79-7/82 5-50 yrs.
Rosedale Plaza 357,392 10/89 5-50 yrs.
Wilkens Avenue 1,194,914 5/81 5-50 yrs.
Timonium Shopping Ctr 18,604 10/93 5-50 yrs.
York Road Plaza 1,235,205 11/85 5-50 yrs.
Patriots Plaza (A) 675,081 6/84 5-50 yrs.
McRay Plaza 186,773 6/89 5-50 yrs.
Rolling Road Plaza (B) 893,744 6/73 5-50 yrs.
Union Hills Plaza 285,769 11/83 5-50 yrs.
Dobson-Guadalupe 266,043 9/85 5-50 yrs.
Chandler Plaza 162,965 3/84 5-50 yrs.
--------------
25,262,637
Office Buildings
Gateway II 910,293 7/89 5-50 yrs.
Gateway I 1,652,605 4/87 5-50 yrs.
Patriots Plaza 467,157 8/85 5-50 yrs.
Wilkens Office II 308,338 1/87 5-50 yrs.
Wilkens Office I 422,809 1/85 5-50 yrs.
Wilkens Office III 62,892 1/91 5-50 yrs.
-----------------
3,824,094
Bowling Centers
Freestate 1,472,636 3/78 5-50 yrs.
Waldorf 195,521 3/79 5-50 yrs.
Clinton 231,661 8/71 5-50 yrs.
------------------
1,899,818
41
<PAGE>
Schedule XI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized
subsequent
Year ended Initial cost to Company to acquisition
December 31, 1993
Buildings and
Description Encumbrances Land Improvements Improvements
(Continued)
Other Rental Properties
Regal Row - 416,606 2,192,259 208,786
Business Center - 395,536 1,190,692 15,887
Southwest - - 283,039 584,082
Waldorf Firestone - 9,261 161,543 4,910
Ocean City - - 133,624 -
---------------------------------------------------------
- 821,403 3,961,157 813,665
Development Operations - - 2,128,434 -
Property Held - 9,169,232 - -
Other Property - - 690,942 -
--------------------------------------------------------
$56,349,177 25,505,458 126,451,292 23,853,737
========================================================
(Continued)
<PAGE>
Schedule XI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized subsequent Amount at which carried
Year ended to acquisition at close of period
December 31, 1993
Carrying Costs Land Buildings and Total
Description Land Improvements Improvements
(Continued)
Other Rental Properties
Regal Row 416,606 2,401,045 2,817,651
Business Center 395,536 1,206,579 1,602,115
Southwest 45,149 45,149 867,121 912,270
Waldorf Firestone 9,261 166,453 175,714
Ocean City - 133,624 133,624
---------------------------------------------------------
45,149 866,552 4,774,822 5,641,374
Development Operations - - - 2,128,434 2,128,434
Property Held - - 9,169,232 - 9,169,232
Other Property - - - 690,942 690,942
---------------------------------------------------------
(554,660)(3,593,959)24,950,798146,711,070 171,661,868
=========================================================
(Continued)
<PAGE>
Schedule XI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Life on which
Year ended depreciation on
December 31, 1993 latest income
Accumulated Date of Date statement is
Description Depreciation Construction Acquired computed
(Continued)
Other Rental Properties
Regal Row 667,425 7/84 5-45 yrs.
Business Center 93,724 4/90 5-50 yrs.
Southwest 399,790 4/68 5-50 yrs.
Waldorf Firestone 54,426 9/78 5-50 yrs.
Ocean City 45,655 12/87 5-50 yrs.
-------------
1,261,020
Development Operations - 91-92
Property Held - 7/73-12/92
Other Property 402,783 9/82-12/92 3-10 yrs.
-------------
32,650,352
=============
(A) The mortgage payable of $2,654,805 is owed by the owner Southdale LP to
Southdale Mortgage Inc., a wholly owned subsidiary of MART.
(B) This property was damaged by fire in December, 1992 producing a net
reduction in value of $486,000, which is included in Cost capitalized
subsequent to acquisition, Carrying Costs - Improvements, $837,931 was
deducted, and Accumulated depreciation was adjusted for $351,931.
42
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE
COMPANY)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
(1) The changes in total cost of properties for the three years ended
December 31, 1993 are as follows:
Years ended December 31,
1993 1992 1991
Balance beginning of year $174,593,579 177,052,733 178,683,687
Additions during year:
Acquisitions 4,076,958 285,234 366,987
Improvements 5,308,235 2,199,913 1,769,286
Development operations 1,448,303 571,759 5,765,501
------------------------------------------
10,833,496 3,056,906 7,901,774
Deductions during year:
Write-downs to
net realizable value (2)(a) (1,318,314) (742,147) (350,000)
Cost of real estate sold (1,637,772) (4,655,851) (7,395,337)
Transfers (4) (9,416,190) (33,807) (361,316)
Retirements and disposals (1,392,931) (84,255) (1,426,075)
------------------------------------------
(13,765,207) (5,516,060) (9,532,728)
------------------------------------------
Balance end of year $171,661,868 174,593,579 177,052,733
==========================================
(2) Write-downs to net realizable value are reported in the statement of
operations as follows:
BTR Realty, Inc. January 1 thru Years ended December 31,
Sep. 10, 1993 1992 1991
Gain on Fire Damage
(Note F) $ - 486,000 -
Under Costs and Expenses:
Unrecoverable development costs 1,278,817 256,147 350,000
----------------------------------------
$1,278,817 742,147 350,000
(a) In the period 1/1/93 thru 9/10/93 BTR reduced total cost of
properties by $1,318,314 and reduced related accumulated
depreciation by $39,497 resulting in a net write-down of
$1,278,817.
(3) The changes in accumulated depreciation for the three years ended
December 31, 1993 are as follows:
Years ended December 31,
1993 1992 1991
Balance beginning of year ($29,168,658) (24,909,903) (20,960,303)
Depreciation and amortization (4,735,979) (4,778,432) (4,415,796)
Transfers (4) 96,041 290,378 254,042
Retirements and disposals 1,158,244 229,299 212,154
--------------------------------------------
Balance end of year ($32,650,352) (29,168,658) (24,909,903)
(4) Transfers include assets originally in operating properties reclassified
on the balance sheet to the following:
Years ended December 31,
1993 1992 1991
Total Cost
Net assets of properties
to be sold ($7,030,232) - -
Deferred financing costs (2,385,958) (33,807) (361,316)
Accounts Payable - - -
------------------------------------------
(9,416,190) (33,807) (361,316)
Accumulated Depreciation
Net assets of properties
to be sold $524,425 - -
Deferred financing costs:
- Reclassification of asset (765,192) - -
- Reclassification of
amortization 336,808 290,378 254,042
------------------------------------------
$96,041 290,378 254,042
------------------------------------------
Net transfers ($9,320,149) 256,571 (107,274)
==========================================
(5) The aggregate basis of properties for Federal income tax purposes is
approximately $123,000,000 at December 31, 1993.
(6) See Item 2 for geographic location of properties.
(7) Freestate includes 4 bowling centers in Florida and Illinois.
43
<PAGE>
EXHIBIT 22. PARENT AND SUBSIDIARIES OF REGISTRANT
The subsidiaries of MART are listed below. All are engaged in the
ownership and/or development of commercial or residential real estate in the
United States. All are included in the consolidated financial statements
filed as part of this Annual Report.
State of
Incorporation
Name or Formation Interest
CORPORATIONS:
Albany Development, Inc. Maryland 100%
BTR Arkor, Inc. Maryland 100%
BTR Atlanta Daycare, Inc. Maryland 100%
BTR Business Center, Inc. Maryland 100%
BTR Chandler, Inc. Maryland 100%
BTR Delmar, Inc. Maryland 100%
BTR East Greenbush, Inc. Maryland 100%
BTR Fallston, Inc. Maryland 100%
BTR Fallston Corner, Inc. Maryland 100%
BTR Fallston Management, Inc. Maryland 100%
BTR Financial, Inc. Maryland 100%
BTR Free State Bowls, Inc. Maryland 100%
BTR Gateway, Inc. Maryland 100%
BTR Hillside, Inc. Maryland 100%
BTR Holdings, Inc.
(Formerly Diamond Alley, Inc.) Maryland 100%
BTR Ironfield, Inc. Maryland 100%
BTR Manassas, Inc. Maryland 100%
BTR Marigot, Inc. Maryland 100%
BTR Marina, Inc. Maryland 100%
BTR McClintock, Inc. Maryland 100%
BTR New Ridge, Inc. Maryland 100%
BTR Northwood Properties, Inc. Maryland 100%
BTR Odenton Properties, Inc. Maryland 100%
BTR Park Sedona, Inc. Maryland 100%
BTR Ray Road, Inc. Maryland 100%
BTR Real Estate Enterprises, Inc. Maryland 100%
BTR Rockburn, Inc. Maryland 100%
BTR Salisbury, Inc. Maryland 100%
BTR Southdale, Inc. Maryland 100%
BTR Union Hills, Inc. Maryland 100%
BTR Waldorf Development Corporation Maryland 100%
BTR Waldorf Tire, Inc. Maryland 100%
BTR Yuma, Inc. Maryland 100%
(Continued)
44
EXHIBIT 22. PARENT AND SUBSIDIARIES OF REGISTRANT - (Continued)
State of
Name Incorporation
CORPORATIONS: or Formation Interest
Burke Town Plaza, Inc. Maryland 100%
Burlington Commerce Park, Inc. Maryland 100%
Christiansburg Plaza, Inc. Maryland 100%
Clinton Development Company, Inc. Maryland 100%
Cobleskill Plaza, Inc. Maryland 100%
Colonie Plaza, Inc. Maryland 100%
Columbia Plaza, Inc. Maryland 100%
Commonwealth Plaza, Inc. Maryland 100%
Concourse Realty Management, Inc. Maryland 100%
Cypress Square, Inc. Maryland 100%
Davis Ford Properties, Inc. Maryland 100%
Essanwy, Inc. Maryland 100%
Fredericksburg Plaza, Inc. Maryland 100%
Greenbush Residential, Inc. Maryland 100%
Greencastle Plaza, Inc. Maryland 100%
Hampstead Plaza, Inc. Maryland 100%
Harrisonburg Plaza, Inc. Maryland 100%
Kingsbrook Funding, Inc. Maryland 100%
Kingston Crossing, Inc. Maryland 100%
Lynchburg Plaza, Inc. Maryland 100%
Madison Plaza, Inc. Maryland 100%
Millers Plaza, Inc. Maryland 100%
New Town Village, Inc. Maryland 100%
North East Station, Inc. Maryland 100%
Orchard Landing Apartments, Inc. Maryland 100%
Orchard Landing Limited, Inc. Maryland 100%
Page Plaza Associates, Inc. Maryland 100%
Park Sedona, Inc. Maryland 100%
Parkway Pond, Inc. Maryland 100%
Ridgewood Funding, Inc. Maryland 100%
Rolling Road Plaza, Inc. Maryland 100%
Rosedale Partners, Inc. Maryland 100%
Rosedale Plaza, Inc. Maryland 100%
Route 642 Properties, Inc. Maryland 100%
Saugerties Plaza, Inc. Maryland 100%
Scotia Crossing, Inc. Maryland 100%
Senate Properties, Inc. Maryland 100%
Southdale Mortgage Inc. Maryland 100%
Southwest Development Properties, Inc. Maryland 100%
Timonium Shopping Center, Inc. Maryland 100%
Tempe Auto Center, Inc. Maryland 100%
Wake Plaza, Inc. Maryland 100%
Wyaness, Inc. Maryland 100%
(Continued)
45
EXHIBIT 22. PARENT AND SUBSIDIARIES OF REGISTRANT - (Continued)
The following are partnerships in which Mid-Atlantic Realty Trust, BTR
Realty, Inc. or Financial Associates of Maryland have partnership interests:
State of
Incorporation
Name or Formation Interest
Arizona & Warner Limited Partnership Maryland 50%
BBG Joint Venture Maryland 60%
BBG Properties Limited Partnership Maryland 60%
Cypress Square Limited Partnership Maryland 55%
Fredericksburg Plaza Limited
Partnership Maryland 80%
Gateway International Limited
Partnership Maryland 100%
Harbour Island Associates Maryland 100%
Hillside at Seminary Joint Venture Maryland 100%
Kensington Associates Maryland 75%
North Greenbrier Limited Partnership Maryland 100%
Northwood Limited Partnership Maryland 67%
Ridgewood Associates Maryland 100%
Rockburn Associates Maryland 100%
Rosedale Plaza Limited Partnership Maryland 100%
Route 642 Limited Partnership Maryland 60%
Scotia Associates Limited Partnership Maryland 50%
Southdale Limited Partnership Maryland 50%
Union Hills Limited Partnership Maryland 50%
Wyaness Associates Maryland 100%
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MID-ATLANTIC REALTY TRUST
Date 3/16/94 /s/s F. Patrick Hughes
F. Patrick Hughes, President
46
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and
on the dates indicated:
Date: 3/16/94 /s/s LeRoy E. Hoffberger
LeRoy E. Hoffberger, Chairman
Date: 3/16/94 /s/s F. Patrick Hughes
F. Patrick Hughes, Trustee, Principal
Executive Officer
Date: 3/16/94 /s/s Paul G. Bollinger
Paul G. Bollinger, Controller, Principal
Financial Officer
Date: 3/16/94 /s/s Eugene T. Grady
Eugene T. Grady, Treasurer
Date:
Robert A. Frank, Trustee
Date: 3/16/94 /s/s Marc P. Blum
Marc P. Blum, Trustee
Date: 3/16/94 /s/s M. Ronald Lipman
M. Ronald Lipman, Trustee
Date: 3/18/94 /s/s Stanley J. Moss, Esquire
Stanley J. Moss, Esquire, Trustee
Date: 3/16/94 /s/s Daniel S. Stone
Daniel S. Stone, Trustee
Date:
David F. Benson, Trustee
47
EXHIBIT 24 - ACCOUNTANTS' CONSENT
Board of Trustees
MID-ATLANTIC REALTY TRUST:
We consent to the incorporation by reference in the registration
statement (No. 33-29479) on Form S-8 of our report, dated February 25, 1994
appearing in this annual report on Form 10-K, relating to the consolidated
financial statements and schedules of Mid-Atlantic Realty Trust and
subsidiaries and BTR Realty, Inc. and subsidiaries as of December 31, 1993
and 1992, and for the periods ended December 31, 1993 and September 10, 1993
and for each of the years ended December 31, 1992, and 1991.
KPMG Peat Marwick
Baltimore, Maryland
March 21, 1994
48
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MID-ATLANTIC REALTY TRUST
Date 12/02/94 /s/s F. Patrick Hughes
F. Patrick Hughes, President
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and
on the dates indicated:
Date:
LeRoy E. Hoffberger, Chairman
Date: 12/02/94 /s/s F. Patrick Hughes
F. Patrick Hughes, Trustee, Principal
Executive Officer
Date: 12/02/94 /s/s Paul G. Bollinger
Paul G. Bollinger, Controller, Principal
Financial Officer
Date:
Eugene T. Grady, Treasurer
Date:
Robert A. Frank, Trustee
Date:
Marc P. Blum, Trustee
Date:
M. Ronald Lipman, Trustee
Date:
Stanley J. Moss, Esquire, Trustee
Date:
Daniel S. Stone, Trustee
Date:
David F. Benson, Trustee
49
