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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 March 31, 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 March 31, 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
March 31, 1994 December 31, 1993
(UNAUDITED)
ASSETS
Properties:
Operating properties................$ 126,591,092 127,713,850
Development operations ............. 2,556,231 2,128,434
Property held for development or sale 9,177,173 9,169,232
____________ ____________
138,324,496 139,011,516
Cash and cash equivalents ........... 615,913 687,108
Notes and accounts
receivable - tenants and other...... 1,874,914 2,381,836
Due from joint venture partners ...... 1,756,416 1,701,708
Prepaid expenses and deposits ....... 432,143 403,075
Net assets of properties to be sold .. - 449,219
Deferred financing costs ............. 3,799,989 3,928,590
____________ ____________
$ 146,803,871 148,563,052
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable ......................$ 4,100,000 2,800,000
Accounts payable and accrued expenses 2,041,155 4,396,992
Mortgages payable .................. 53,594,859 53,694,372
Convertible subordinated debentures. 60,000,000 60,000,000
Deferred income..................... 133,468 133,468
Minority interest in
consolidated joint ventures ...... 267,462 250,432
____________ ____________
120,136,944 121,275,264
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 ............... (15,998,492) (15,377,631)
____________ ____________
26,666,927 27,287,788
$ 146,803,871 148,563,052
============ ============
See accompanying notes to consolidated financial statements.
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MID-ATLANTIC REALTY TRUST
Consolidated Statements of Operations
Mid-Atlantic BTR Realty,Inc.
Realty Trust (Predecessor Company)
Three Months Ended Three Months Ended
March 31, 1994 March 31, 1993
(UNAUDITED)
REVENUES:
Rentals ............................$ 5,341,820 5,160,053
Gain on properties held for sale, net - 28,614
Other .............................. 214,196 79,236
____________ ____________
5,556,016 5,267,903
COSTS AND EXPENSES:
Interest .......................... 2,544,179 3,346,150
Depreciation and amortization
of property and improvements ..... 1,231,140 1,138,108
Operating ......................... 892,853 911,234
General and administrative ......... 396,892 303,427
____________ ____________
5,065,064 5,698,919
____________ ____________
EARNINGS (LOSS) FROM OPERATIONS
BEFORE MINORITY INTEREST .......... 490,952 (431,016)
Minority interest (expense) benefit... (125,981) 49,661
____________ ____________
EARNINGS (LOSS) FROM OPERATIONS ..... 364,971 (381,355)
Gain on sales of operating properties 335,363 -
____________ ____________
EARNINGS (LOSS) BEFORE INCOME TAXES .. 700,334 (381,355)
Income taxes ......................... - (2,000)
____________ ____________
NET EARNINGS (LOSS) .................$ 700,334 (383,355)
============ ============
NET EARNINGS (LOSS) PER SHARE ....... $0.11 0.05
============ ============
See accompanying notes to consolidated financial statements.
4
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Cash Flows
Mid-Atlantic BTR Realty,Inc.
Realty Trust (Predecessor Company)
Three Months Ended Three Months Ended
March 31, 1994 March 31, 1993
(UNAUDITED)
Cash flows from operating activities:
Net earnings (loss) ................$ 700,334 (383,355)
Adjustments to reconcile net earnings
(loss) to net cash (used in) provided
by operating activities:
Gain on sales of properties
held for sale, net .............. - (28,614)
Gain on sale of operating properties (335,363) -
Depreciation and amortization .... 1,231,140 1,138,108
Deferred income taxes benefit .... - (7,000)
Minority interest in earnings(loss),net 125,981 (49,661)
Changes in operating assets and liabilities:
Decrease in operating assets .... 477,854 858,671
(Decrease)increase in
operating liabilities .......... (2,355,837) 140,633
____________ ____________
Total adjustments ........... (856,225) 2,052,137
____________ ____________
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES ............... (155,891) 1,668,782
____________ ____________
Cash flows from investing activities:
Additions to properties ............ (948,435) (296,458)
Proceeds from sales of properties... 1,321,602 608,761
Payments to minority partners, net.. (163,659) (7,082)
____________ ____________
NET CASH PROVIDED BY
INVESTING ACTIVITIES .............. 209,508 305,221
____________ ____________
Cash flows from financing activities:
Payments on construction loans payable - (209,566)
Principal payments on mortgages payable (99,513) (200,617)
Proceeds from notes payable ....... 2,400,000 902,510
Principal payments on notes payable (1,100,000) (2,157,643)
Additions to deferred finance costs (4,104) -
Stock issued - options exercised
in compensation plan ............. - 19,200
Dividends paid .................... (1,321,195) -
____________ ____________
NET CASH USED IN FINANCING ACTIVITIES (124,812) (1,646,116)
____________ ____________
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ............... (71,195) 327,887
CASH AND CASH EQUIVALENTS,
beginning of period ................ 687,108 98,582
____________ ____________
CASH AND
CASH EQUIVALENTS, end of period ...$ 615,913 426,469
============ ============
See accompanying notes to consolidated financial statements.
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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 March 31, 1994 and the consolidated
statement of operations for the Company for the period ended March 31, 1994
and the consolidated statement of cash flows for the period ended March 31,
1994 have been prepared by the Company without audit. The consolidated
statement of operations for BTR for the period ended March 31, 1993 and the
consolidated statement of cash flows for the period ended March 31, 1993 have
been prepared by BTR without audit. In the opinion of management, for both
the Company and BTR, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position at March 31,
1994, and the results of operations for the periods ended March 31, 1994, and
March 31, 1993 and cash flows for the periods ended March 31, 1994, and March
31, 1993 have been included. The results of operations for the period ended
March 31, 1994 is 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 March 31,1994 and March 31, 1993, were 6,291,407 and
8,513,148, 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
the February 1, 1994 and the balance vesting over the next 2 years. The
average market price of MART shares for the period ended March 31, 1994 was
$9.39 per share and the closing market price at March 31, 1994 was $9.63 per
share. No options were exercised during the period ended March 31, 1994 and
based on the market value of MART shares, the options, if converted, would be
anti-dilutive producing 5,324 fewer weighted average shares.
If fully converted, the fully converted earnings per share for the period
ended March 31, 1994 would be anti-dilutive at $.16 per share.
SHAREHOLDERS' EQUITY
During the three months ended March 31, 1994, shareholders' equity changed
for the following items:
- Net earnings of $700,334.
- Dividend paid by MART of $1,321,195.
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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 three months ended
March 31, 1994 with the operations of BTR for the three months ended March
31, 1993.
Comparison of three months ended March 31, 1994 to three months ended March
31, 1993
Rental revenues increased by $182,000 or 4% to $5,342,000 for the three
months ended March 31, 1994 from $5,160,000 for the three months ended March
31, 1993. Net increases in occupancy and CPI rates resulted in rental
increases of approximately $232,000. The purchase of Timonium Mall in
October, 1993 contributed to increased revenues of approximately $187,000
which was offset by a $218,000 decrease in revenues attributable to the sale
in February, 1994 and discontinuation of operations in September, 1993 of
Orchard Landing Apartments.
Gains on properties held for sale decreased by $29,000. There were no
property sales in the property held for sale category for the three month
period ended March 31, 1994.
Other income increased by $135,000 to $214,000 from $79,000 primarily due
to additional interest income from partner notes of $152,000 offset by other
decreases in other income.
As a result of the above changes total revenues increased by $288,000 to
$5,556,000 from $5,268,000.
Interest expense decreased by $802,000 to $2,544,000 from $3,346,000
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
$645,000 in interest expense decreases for the period can be attributable to
the payoff of mortgage debt and replacement with debentures and common
shares.
Depreciation and amortization increased by $93,000 to $1,231,000 from
$1,138,000 primarily due to depreciation increases of approximately $119,000
related to the amortization of debenture costs issued in September, 1993 and
the purchase in October, 1993 of the Timonium Mall operating property, offset
by depreciation decreases of $38,000 related to the sale of Orchard
Landing.
Operating expenses decreased by $18,000 to $893,000 from $911,000 primarily
due to a decrease in operating expenses related to the sale and
discontinuation or Orchard Landing ($118,000) and Harbour Island ($23,000)
offset by increases related to the purcharse of Timonium Mall, $56,000,
higher utility expenses in the Gateway Office Complex, $54,000, and increased
real estate taxes $21,000.
General and administrative expenses increased by $93,000 to $397,000 from
$304,000 due primarily to increases in the following; gross payroll costs of
23,000, a reduction in capitalized payroll of $25,000, insurance expense of
$16,000, and $29,000 in other general and administrative expense increases,
primarily meeting fees of $15,000.
Minority interest decreased by $176,000 to an expense of ($126,000) from a
benefit of $50,000 generally due to higher earnings in minority interest
ventures.
Earnings (loss) from operations increased by $746,000 to earnings of
$365,000 from a loss of ($381,000). In the three month period ended March
31, 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 $700,000 for the period. For the three
month period ended March 31, 1993, BTR had income taxes of $2,000, combined
with the loss from operations resulted in a net loss of ($383,000) for the
period.
Continued
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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)
Three months ended March 31,
MART BTR BTR
Actual Pro Forma ProForma
1994 1993 1992
Revenues $5,556 5,043 4,926
Earnings $700 320 68
Earnings per share $0.11 0.05 0.01
Funds from operations (FFO) (1) $1,596 1,490 1,256
Funds from operations
per share - primary $0.25 0.24 0.20
Funds from operations -
fully diluted $2,769 2,634 2,400
Funds from operations
per share - fully diluted $0.23 0.22 0.20
Weighted average number of
shares outstanding - primary 6,291 6,291 6,291
Weighted average number of shares
outstanding - fully diluted 12,000 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 is to be held May 13, 1994. At this time, matters
which appeared on the April 6, 1994 proxy statement will be submitted for
approval.
Item 5. Other Information - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K. - None
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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 5/11/94 By /s/ F. Patrick Hughes
F. Patrick Hughes
President
Date 5/11/94 By /s/ Paul G. Bollinger
Paul G. Bollinger
Controller
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