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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-26589, eff. 4/12/89.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 1994
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 21090
(Address of principal executive offices) (Zip Code)
(410) 684-2000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
6,291,407 Common Shares were outstanding as of June 30, 1994.
MID-ATLANTIC REALTY TRUST
AND SUBSIDIARIES
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
2
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Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MID-ATLANTIC REALTY TRUST
Consolidated Balance Sheets
June 30, 1994 December 31, 1993
(UNAUDITED)
ASSETS
Properties:
Operating properties................$ 127,069,153 127,713,850
Development operations ............. 1,640,177 2,128,434
Property held for development or sale 9,196,016 9,169,232
------------ ------------
137,905,346 139,011,516
Cash and cash equivalents ........... 319,674 687,108
Notes and accounts
receivable - tenants and other...... 1,895,488 2,381,836
Due from joint venture partners ...... 1,890,426 1,701,708
Prepaid expenses and deposits ....... 344,728 403,075
Net assets of properties to be sold .. - 449,219
Deferred financing costs ............. 3,666,953 3,928,590
------------ ------------
$ 146,022,615 148,563,052
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable ......................$ 2,244,048 2,800,000
Accounts payable and accrued expenses 3,121,742 4,396,992
Mortgages payable .................. 53,485,567 53,694,372
Convertible subordinated debentures. 60,000,000 60,000,000
Deferred income..................... 819,319 133,468
Minority interest in
consolidated joint ventures ...... 255,703 250,432
------------ ------------
119,926,379 121,275,264
Shareholders' Equity:
Preferred shares of beneficial interest,
$.01 par value, authorized 2,000,000 shares,
issued and outstanding, none ..... - -
Common shares of beneficial interest
and stock, $.01 par value,
authorized 100,000,000 shares, issued
and outstanding, 6,291,407 shares 62,914 62,914
Additional paid-in capital.......... 42,602,505 42,602,505
Accumulated deficit ............... (16,569,183) (15,377,631)
------------ ------------
26,096,236 27,287,788
------------ ------------
$ 146,022,615 148,563,052
============ ============
See accompanying notes to consolidated financial statements.
3
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Operations
(UNAUDITED)
Mid-Atlantic BTR Realty,Inc.
Realty Trust (Predecessor Company)
Six Months Ended June 30,
1994 1993
REVENUES:
Rentals ............................$ 10,974,518 10,717,444
Gain on properties held for sale, net - 31,501
Other .............................. 449,770 229,166
------------ ------------
11,424,288 10,978,111
COSTS AND EXPENSES:
Interest .......................... 5,077,553 6,695,661
Depreciation and amortization
of property and improvements ..... 2,481,381 2,310,308
Operating ......................... 1,658,778 1,812,141
General and administrative ......... 781,952 758,701
Unrecoverable development costs..... - 963,817
------------ ------------
9,999,664 12,540,628
EARNINGS (LOSS) FROM OPERATIONS
BEFORE MINORITY INTEREST .......... 1,424,624 (1,562,517)
Minority interest (expense) benefit... (309,148) 61,109
------------ ------------
EARNINGS (LOSS) FROM OPERATIONS ..... 1,115,476 (1,501,408)
Gain on sales of operating properties 335,363 -
------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES .. 1,450,839 (1,501,408)
Income taxes ......................... - (36,000)
------------ ------------
NET EARNINGS (LOSS) .................$ 1,450,839 (1,537,408)
============ ============
NET EARNINGS (LOSS) PER SHARE ....... $0.23 (0.18)
============ ============
Mid-Atlantic BTR Realty,Inc.
Realty Trust (Predecessor Company)
Three Months Ended June 30,
1994 1993
REVENUES:
Rentals ............................$ 5,632,698 5,557,391
Gain on properties held for sale, net - 2,887
Other .............................. 235,574 149,930
------------ ------------
5,868,272 5,710,208
COSTS AND EXPENSES:
Interest .......................... 2,533,374 3,349,511
Depreciation and amortization
of property and improvements ..... 1,250,241 1,172,200
Operating ......................... 765,925 900,907
General and administrative ......... 385,060 455,274
Unrecoverable development costs..... - 963,817
------------ ------------
4,934,600 6,841,709
EARNINGS (LOSS) FROM OPERATIONS
BEFORE MINORITY INTEREST .......... 933,672 (1,131,501)
Minority interest (expense) benefit... (183,167) 11,448
------------ ------------
EARNINGS (LOSS) FROM OPERATIONS ..... 750,505 (1,154,053)
Gain on sales of operating properties - -
------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES .. 750,505 (1,120,053)
Income taxes ......................... - (34,000)
------------ ------------
NET EARNINGS (LOSS) .................$ 750,505 (1,120,053)
============ ============
NET EARNINGS (LOSS) PER SHARE ....... $0.12 (0.13)
============ ============
See accompanying notes to consolidated financial statements.
4
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Cash Flows
Mid-Atlantic BTR Realty,Inc.
Realty Trust (Predecessor Company)
Six Months Ended June 30,
1994 1993
(UNAUDITED)
Cash flows from operating activities:
Net earnings (loss) ................$ 1,450,839 (1,537,408)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Gain on sales of properties
held for sale, net .............. - (31,501)
Gain on sale of operating properties (335,363) -
Unrecoverable development costs..... - 963,817
Depreciation and amortization .... 2,481,381 2,310,308
Deferred income taxes benefit .... - 6,000
Minority interest in earnings(loss),net 309,148 (61,109)
Changes in operating assets and liabilities:
Decrease in operating assets .... 544,695 2,614,360
Decrease in operating
liabilities .......... (589,399) (164,645)
------------ ------------
Total adjustments ........... 2,410,462 5,637,230
------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES ......................... 3,861,301 4,099,822
Cash flows from investing activities:
Additions to properties ............ (1,646,490) (881,077)
Proceeds from sales of properties... 1,321,602 611,648
Payments to minority partners, net.. (492,595) (5,550)
------------ ------------
NET CASH USED IN INVESTING
ACTIVITIES ........................ (817,483) (274,979)
------------ ------------
Cash flows from financing activities:
Payments on construction loans payable - (408,100)
Principal payments on mortgages payable (208,805) (605,802)
Proceeds from notes payable ....... 2,754,048 2,302,510
Principal payments on notes payable (3,310,000) (4,666,968)
Additions to deferred finance costs (4,104) -
Stock issued - options exercised
in compensation plan ............. - 225,258
Stock cancelled - employee note payment - (148,800)
Dividends paid .................... (2,642,391) -
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (3,411,252) (3,301,902)
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ............... (367,434) 522,941
CASH AND CASH EQUIVALENTS,
beginning of period ................ 687,108 98,582
------------ ------------
CASH AND
CASH EQUIVALENTS, end of period ...$ 319,674 621,523
See accompanying notes to consolidated financial statements.
5<PAGE>
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements
(UNAUDITED)
ORGANIZATION
Mid-Atlantic Realty Trust (the Company, or MART) 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), and qualifies as a real estate investment trust (REIT) for
Federal income tax purposes.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1994 and the consolidated
statement of operations for the Company for the three and six month periods
ended June 30, 1994 and June 30, 1993 and the consolidated statement of cash
flows for the periods ended June 30, 1994 and June 30, 1993 have been
prepared by the Company without audit. In the opinion of management, all
adjustments ( which include only normal recurring adjustments) necessary to
present fairly the financial position and the results of operations have
been included. The results of operations for the periods ended June 30, 1994
are not necessarily indicative of the operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Mid-Atlantic Realty Trust
December 31, 1993 Annual Report to Shareholders.
EARNINGS (LOSS) PER SHARE
Earnings (Loss) per share of common share and common share equivalents were
computed by dividing net loss or net earnings by the weighted average number
of common share and common share equivalents outstanding for each period.
The weighted average number of common shares and common share equivalents for
the periods ended June 30,1994 was 6,291,407. The weighted average number of
common shares and common share equivalents for the six and three month
periods ended June 30, 1993 were 8,515,290 and 8,483,517, respectively.
The Company sold $60,000,000 in convertible subordinated debentures in
September, 1993. The debentures, which are convertible at $10.50 per share,
if fully converted, would produce an additional 5,714,286 shares.
Pursuant to the 1993 Omnibus Share Plan (Plan), the Company authorized on
February 1, 1994 the availability of 300,000 shares for the Plan. Trustees,
officers and key employees of the Company, are eligible for the Plan. At
February 1, 1994, the executive compensation committee of the Board of
Trustees granted to trustees, officers and key employees 256,000 option
shares at an option price of $10.50 per share with 89,333 shares vesting on
February 1, 1994 and the balance vesting over the next 2 years. The average
market price of MART shares for the period ended June 30, 1994 was $9.125 per
share. No options were exercised during the period ended June 30, 1994 and
based on the market value of MART shares, the options, if converted, would be
anti-dilutive producing 11,156 fewer weighted average shares for the six
month period ended June 30, 1994 and 13,461 fewer weighted average shares for
the three month period ended June 30, 1994.
UNRECOVERABLE DEVELOPMENT COSTS
The $963,817 unrecoverable cost represents a write-down to net realizable
value of two residential properties under contract for sale at June 30, 1993,
reducing Operating Properties by $474,093 and Development Operations by
$489,724. The sales were pursuant to a divestiture plan further described in
the July 19, 1993 proxy statement.
SHAREHOLDERS' EQUITY
During the six months ended June 30, 1994, shareholders' equity changed for
the following items:
- Net earnings of $1,450,839.
- Dividend paid by MART of $2,642,391.
6
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Part I. FINANCIAL INFORMATION
Item 2.
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the operations for the six months ended
June 30, 1994 with the operations of BTR for the six months ended June 30,
1993.
Comparison of six months ended June 30, 1994 to six months ended June 30,
1993
Rental revenues increased by $257,000 or 2% to $10,974,000 for the six
months ended June 30, 1994 from $10,717,000 for the six months ended June 30,
1993. Net increases in occupancy and CPI rates resulted in rental increases
of approximately $507,000. The purchase of Timonium Mall in October, 1993
contributed to increased revenues of approximately $375,000.The increases
were offset by a ($447,000) decrease in revenues attributable to the sale in
February, 1994 and discontinuation of operations in September, 1993 of
Orchard Landing Apartments and decreases in percentage rent of ($26,000) and
other rental decreases of ($152,000).
Gains on properties held for sale decreased by $31,000. There were no
property sales in the property held for sale category for the six month
period ended June 30, 1994.
Other income increased by $220,000 to $449,000 from $229,000 primarily due
to additional interest income from partner notes of $306,000 offset by other
decreases in other income.
As a result of the above changes total revenues increased by $446,000 to
$11,424,000 from $10,978,000.
Interest expense decreased by $1,618,000 to $5,078,000 from $6,696,000
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. Approximately
$1,267,000 in interest expense decreases for the period can be attributable
to the payoff of mortgage debt and replacement with debentures and common
shares. Approximately $326,000 in interest expense decreases can be related
to the sale in 1993 of the two residential projects, Orchard Landing &
Harbour Island.
Depreciation and amortization increased by $171,000 to $2,481,000 from
$2,310,000 primarily due to depreciation increases of approximately $232,000
related to the amortization of debenture costs issued in September, 1993 and
the purchase in October, 1993 of the Timonium Mall operating property and
increased tenant improvements in Gateway II Office, offset by depreciation
decreases of ($75,000) related to the sale of Orchard Landing.
Operating expenses decreased by $153,000 to $1,659,000 from $1,812,000
primarily due to a decrease in operating expenses related to the sale and
discontinuation or Orchard Landing ($207,000) and Harbour Island ($34,000)
offset by increases related to the purcharse of Timonium Mall, $111,000.
General and administrative expenses increased by $23,000 to $782,000 from
$759,000 due primarily to increases in the following; gross payroll costs of
$28,000, a reduction in capitalized payroll of $60,000, insurance expense
of $23,000, and $40,000 in other general and administrative expense increases
offset by decreases in professional fees of ($79,000) and stock compensation
costs of ($49,000).
Unrecoverable development costs decreased by $964,000 due to a write-down
to net realizable value of two residential properties under contract for sale
at June 30, 1193. The sales were pursuant to a divestiture plan further
described in the July 19, 1993 proxy statement.
Minority interest decreased by $370,000 to an expense of ($309,000) from a
benefit of $61,000 generally due to higher earnings in minority interest
ventures.
Earnings (loss) from operations increased by $2,617,000 to earnings of
$1,116,000 from a loss of ($1,501,000). In the six month period ended June
30, 1994, MART recognized a gain on sales of operating properties of $335,000
(which included gains on the sales of Plantation Bowling Center of $279,000
and Orchard Landing Apartments of $56,000), combined with the earnings from
operations resulted in net earnings of $1,451,000 for the period. For the six
month period ended June 30 1993, BTR had income taxes of $36,000, combined
with the loss from operations resulted in a net loss of ($1,537,000) for the
period.
Continued
7
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MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANICAL CONDITION AND RESULTS OF OPERATIONS
Continued
Pro Forma Data
The following sets forth summary financial data on an actual and 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. 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 Actual and Pro Forma Financial Data
(In thousands, except per share data)
Six months ended Three months ended
June 30, June 30,
MART BTR MART BTR
Actual Pro Forma Actual Pro Forma
1994 1993 1994 1993
Revenues $11,424 10,516 $5,868 5,473
Earnings $1,451 846 $751 526
Earnings per share $0.23 0.13 $0.12 0.08
Funds from operations (FFO) (1) $3,597 3,220 $2,001 1,730
Funds from operations
per share - primary $0.57 0.51 $0.32 0.27
Funds from operations -
fully diluted $5,913 5,508 $3,144 2,874
Funds from operations
per share - fully diluted $0.49 0.46 $0.26 0.24
Weighted average number of
shares outstanding - primary 6,291 6,291 6,291 6,291
Weighted average number of shares
outstanding - fully diluted 12,005 12,005 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.
8 <PAGE>
PART II OTHER INFORMATION
Item 1. 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 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - The Annual
Meeting of Shareholders was held May 13, 1994. Elected to serve for the
ensuing year and until the election and qualification of their successors
were: Marc P. Blum, Robert A. Frank, LeRoy E. Hoffberger, F. Patrick Hughes,
M. Ronald Lipman, Daniel S. Stone, David F. Benson, and Stanley J. Moss.
Matter Voted Upon For Against Withheld
a. Election of Trustees:
Marc P. Blum 5,380,800 70,282
Robert A. Frank 5,377,894 73,189
LeRoy E. Hoffberger 5,378,899 72,184
F. Patrick Hughes 5,381,232 69,851
M. Ronald Lipman 5,378,146 72,937
Daniel S. Stone 5,377,946 73,137
David F. Benson 5,380,964 70,119
Stanley J. Moss 5,377,694 73,389
b. Proposal to approve amendment
to Omnibus Share Plan to provide
for automatic non-discretionary
Trustee Options: 5,312,492 93,688 44,903
c. Proposal to approve the appointment
of KPMG Peat Marwick as the independent
certified public accountants of MART
for the fiscal year ending December 31,
1994: 5,362,108 33,435 55,540
Because the matters voted upon at the meeting required the approval of
only a majority of the votes cast at the meeting, votes withheld, abstentions
and broker non-votes had no effect upon the ultimate outcome of the vote.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K. - None
9<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-ATLANTIC REALTY TRUST AND
SUBSIDIARIES
(Registrant)
Date 8/4/94 By /s/ F. Patrick Hughes
F. Patrick Hughes
President
Date 8/3/94 By /s/ Paul G. Bollinger
Paul G. Bollinger
Controller
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