<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No 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.)
1306 Concourse Drive, Suite 200 - 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 16, 1995, 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 $8.125 closing price on that date)
held by non-affiliates was approximately $51,118,000.
Documents Incorporated by Reference
The definitive proxy statement with respect to the 1995 annual
meeting of Mid-Atlantic Realty Trust shareholders (to be filed).
9
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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 property value below 50%.
The Company has an equity interest in twenty two operating shopping
centers, sixteen 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 3,022,000 square feet, of which
approximately 94% was leased at December 31, 1994. Total gross leasable
area includes 2,786,000 square feet of established operating properties,
of which approximately 97% was leased at December 31, 1994 and
approximately 236,000 square feet of a shopping center acquired in
October, 1993, currently under redevelopment, of which 64% was leased at
December 31, 1994. Of these properties, approximately 83% of the gross
leasable area is in the states of Maryland, New York and Virginia, 11%
in Arizona and 6% in other states. The Company also owns one land
parcel being developed into a shopping center and has 8 undeveloped
parcels of commercial and residential zoned land totaling approximately
173 acres and varying in size from 3 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 45 full time employees and believes that its
relationship with its employees is good.
10
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ITEM 2
PROPERTIES
The following schedule describes the Company's commercial and
residential properties as of December 31, 1994:
I. SHOPPING CENTERS
A. In Operation (1)
Percentage of Type of land Area in Leasable Percentage Principal
Lease
ownership ownership acres square feet leased tenants
expirations
Name and Location
Harford Mall 100% Fee(2) 38.0 557,000(3) 99% Hecht's,
1995-2008
U.S. Route 1 Montgomery Ward,
Bel Air Woolworth
Patriots Plaza 50% Long-term 6.1 39,000 92% Denny's,
1995-2005
Ritchie Highway of lease (4) Dunkin Donuts
Anne Arundel County Partnership
Rolling Road Plaza 100% Fee 6.5 63,000 100% Fair Lanes,
1995-2009
Rolling Road Firestone
Baltimore County
Rosedale Plaza 100% Fee 9.2 73,000 86% Valu Food,
1995-1999 Rite Aid
Chesaco and Weyburn Avenue
Baltimore County
Shoppes at Easton 100% Fee 13.9 113,000 99% Giant Food,
1997-2024
Route 50 Fashion Bug
Easton
Wilkens Beltway Plaza 75% Fee 7.1 65,000 100% Giant Food,
1995-2014
Wilkens Avenue of Partnership Provident Bank,
Baltimore County Radio Shack,
Carrollton Bank
York Road Plaza 100% Fee 7.5 52,000 100% Giant Food,
1995-2000
York Road Firestone
Baltimore County
VIRGINIA PROPERTIES:
Burke Town Plaza 100% Long-term 12.6 114,000 100% Safeway,
1995-2002
Old Keene Mill Road lease(5) CVS Drugs
Burke
Skyline Village 100% Fee 14.6 127,000 100% Sears,
1995-2009
US Route 33 Richfood
Harrisonburg
Smoketown Plaza 60% Fee 27.0 176,000 98% Shoppers Food
1995-2011
Davis Ford and of Partnership Warehouse, CVS Drugs,
Smoketown Roads Frank's Nursery & Crafts
Prince William County
Spotsylvania Crossing 80% Fee 11.2 142,000 100% K-Mart, CVS
1996-2007
Route 3 & Bragg Road of Partnership Drugs
Fredericksburg
11<PAGE>
ITEM 2. Properties (Continued)
I. SHOPPING CENTERS (continued)
A. In Operation (continued)
Percentage of Type of land Area in Leasable Percentage Principal
Lease
ownership ownership acres square feet leased tenants
expirations
VIRGINIA PROPERTIES (continued):
Sudley Towne Plaza 100% Fee 9.6 108,000 96% Burlington Coat
1995-2009
Route 234 & Sudley Manor Dr. Factory, CVS
Manassas Drug Store
ARIZONA PROPERTIES:
Dobson-Guadalupe 100% Fee 3.2 22,000 84% Nevada Bob's
1995-2001
Shopping Center
Dobson & Guadalupe Roads
Mesa
Fair Lanes Chandler 50% Fee 1.1 10,000 100% No principal
1996
Plaza of Partnership tenants selected
Arizona & Warner Roads
Chandler
Fair Lanes Union 50% Fee 5.9 17,000 88% No principal
1995-1999
Hills Plaza of Partnership tenants selected
Union Hills Drive
Phoenix
Gateway Park 100% Fee 10.5 82,000 98% Bashas',
1995-2011
Page Corral West
McRay Plaza 100% Fee 4.9 35,000 100% Mountainside
1996-2004
McClintock & Ray Roads Fitness
Chandler
Park Sedona 100% Fee 11.4 99,000 99% Safeway,
1995-2011
Highway 89 A Payless Drug Store
Sedona
Plaza Del Rio 100% Fee 11.8 60,000 100% Payless Drug
1995-2009
16th Street and Avenue B Store
Yuma
NEW YORK PROPERTIES:
Colonie Plaza 100% Fee 18.7 140,000 98% Price Chopper,
1995-2010
Central Avenue RX Place,
Colonie Paper Cutter
Columbia Plaza 100% Fee 16.0 117,000 98% Price Chopper,
1995-2008
Columbia Turnpike Ben Franklin
East Greenbush
B. Under Development
MARYLAND PROPERTIES:
Timonium Mall 100% Long-term 12.9 236,000 64% Caldor,
2001-2011
York & Ridgely Roads lease (6) Circuit City
Timonium
(1) Shopping centers in operation are subject to mortgage financing
aggregating $50,086,463 at December 31, 1994.
(2) 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, 1994 of $19,821,030.
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,
after which the penalty is the greater of 1% of the outstanding
principal balance or yield maintenance.
(3) Includes 302,000 square feet occupied by department stores.
(4) Remaining term of 13 years plus two 10 year options.
(5) Remaining term of 37 years plus three 15 year renewal options.
(6) Remaining term of 22 years plus five 10 year options.
12
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ITEM 2. Properties (Continued)
II. OFFICE BUILDINGS
A. In Operation (7)
Percentage of Type of land Area in Leasable Percentage Principal
Lease
ownership ownership acres square feet leased tenants
expirations
Gateway International I 100% Fee 7.0 84,000 91% Browning Ferris,
1995-2003
Elkridge Landing & Daughters of Charity
Winterson Roads Health System,
Anne Arundel County US Healthcare,
Tandem Computers
Gateway International II 100% Fee 15.5 119,000 90% Digital Equip.
1995-2004
Elkridge Landing & Corporation,
Winterson Roads Price Waterhouse,
Anne Arundel County MART, AT&T,
American Express
Patriots Plaza 50% Long-term 0.5 28,000 24% No principal
1996-2004
Office Building of Partnership lease (8) tenants selected
Ritchie Highway
Anne Arundel County
Wilkens Beltway Plaza 75% Fee 3.9 53,000 100% Ryder Truck
1995-2000
Office Park of Partnership Rental Inc., Freestate
Buildings I, II & III Health, Prudential
Wilkens Avenue and Maiden Choice Lane Health System
Baltimore County
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
MARYLAND PROPERTIES:
The Business Center at 100% Fee 5.4 One-story 27,000 96% No principal
1995-1998
Harford Mall Warehouse tenants selected
Harford County
Clinton Property 100% Long-term 2.9Bowling Center 29,000 100%Fair Lanes
1995-1996
Prince George's lease (9) and Bank
County
Southwest Property 100% Fee (10) 3.2 One-story 25,000 100% Shell Oil,
1995-1999
Anne Arundel Office Building, One-story Carrier/Otis
County Warehouse and Gas Station Potomac Air Gas
Waldorf Property 100% Fee 3.6 Bowling Center 30,000 100%Fair Lanes,
1997-1998
Waldorf and Tire Center Firestone
ILLINOIS PROPERTIES:
Illinois Properties 100% 2 parcels 5.0 2 Bowling 71,000 100% Fair Lanes
1995-1998
Chicago in fee Centers
TEXAS PROPERTIES:
Regal Center (11) 100% Fee 6.0 One-story 109,000 93% Berger Allied
1995-1997
Dallas Warehouse
(7) Office buildings in operation are subject to mortgage financing
aggregating $3,164,677 as of December 31, 1994.
(8) Remaining term of 13 years plus two 10 year options.
(9) Remaining term of 32 years plus a 45 year renewal option.
(10) Ground Lease was purchased by BTR Realty, Inc. in August, 1993.
(11) Regal Center was sold on February 17, 1995 for $1,800,480,
generating a loss on the sale of approximately $370,000.
13<PAGE>
ITEM 2. Properties (Continued)
IV. DEVELOPMENT OPERATIONS
Leasable Per-
Principal
Name and Percentage of Type of land Area in square centage
Lease
Location ownership ownership acres Improvements feet leased tenants
expirations
Owings Mills 100% Fee 12.5 Neighborhood 125,000 76% Giant
1998-2020
New Town Village Shopping Center Food
Lakeside Blvd.
Owings Mills
V. UNDEVELOPED PROPERTIES
Percentage of Type of land Area in
Name and Location ownership ownership acres Zoning
MARYLAND PROPERTIES:
Dorsey Property 100% Fee 19.4 Commercial
Anne Arundel County
Gateway International III 100% Fee 6.5 Commercial
Anne Arundel County
Harford Property 100% Fee 3.0 Light Industrial
(Adjacent to Harford Mall)
Harford County
North East Property 100% Fee 56.0 Commercial/
North East Residential
Northwood Industrial Park 67% Fee 24.4 Industrial
Salisbury of Partnership
Pulaski Property 100% Fee 3.0 Industrial
Baltimore County
NORTH CAROLINA PROPERTIES:
Burlington Commerce Park(12)100% Fee 46.8 Commercial
Burlington
Hillsborough Crossing 100% Fee 13.9 Commercial
Hillsborough
(12) Lot #10, 1.2 Acres, at Burlington Commerce Park was sold on
January 6, 1995 for $40,000.
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
14
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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.
1994 High Low
First Quarter 10 3/8 8 1/2
Second Quarter 9 3/4 8 7/8
Third Quarter 9 1/4 8 1/2
Fourth Quarter 9 1/4 7 3/8
1993 High Low
September 11 (Inception) - September 30 10 3/4 10 1/4
Fourth Quarter 11 9
Cash dividends paid to holders of MART's shares during the periods
indicated are as follows:
1994 Cash Dividend Paid
First Quarter $0.21
Second Quarter $0.21
Third Quarter $0.21
Fourth Quarter $0.22
Total 1994 $0.85
1993 Cash Dividend Paid
Fourth Quarter $0.05
On February 14, 1995, MART declared a quarterly cash dividend of $.22
per share payable March 15, 1995 to shareholders of record February 28,
1995.
The number of holders of record of the MART shares as of February 16,
1995 was 1,292.
15<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, 1994 and December 31, 1993,
and for the year ended 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 and for the periods January 1, 1993
through September 10, 1993, and for the years ended December 31, 1992,
1991, and 1990. Mid-Atlantic Realty Trust, a 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 ||
----------------------------------------------||
Year ended September 11, 1993 to ||
December 31, 1994 December 31, 1993 ||
||
Revenues $22,848,881 6,576,684 ||
============== ============ ||
Net Earnings (Loss) ||
Before Cumulative ||
Effect of Change In ||
Accounting Principle and ||
Extraordinary Item $2,916,286 467,474 ||
Cumulative Effect of Change ||
In Accounting Principle - - ||
-------------- ------------ ||
Net Earnings (Loss) Before ||
Extraordinary Item 2,916,286 467,474 ||
Extraordinary Item - - ||
-------------- ------------ ||
Net Earnings (Loss) $2,916,286 467,474 ||
============== ============ ||
||
Net Earnings (Loss) Per ||
Share Before Cumulative ||
Effect of Change In ||
Accounting Principle ||
and Extraordinary Item $0.46 0.07 ||
Cumulative Effect of Change ||
In Accounting Principle - - ||
------------- ------------ ||
Net Earnings (Loss) Per ||
Share Before ||
Extraordinary Item $0.46 0.07 ||
Extraordinary Item - - ||
------------- ------------ ||
Net Earnings (Loss) ||
Per Share $0.46 0.07 ||
============= ============ ||
||
Weighted Average Shares ||
Outstanding, ||
Including Common ||
Share Equivalents (1) 6,291,407 6,291,407 ||
============= ============ ||
||
Total Assets $162,842,567 148,563,052 ||
============= ============ ||
Indebtedness: ||
Total mortgages, convertible ||
debentures, construction ||
loans and notes payable $133,390,553 116,494,372 ||
============= ============ ||
||
Net cash provided by ||
(used in) operating ||
activities $7,766,044 3,479,346 ||
============= ============ ||
||
Cash Dividends ||
Paid Per Share $0.85 0.05 ||
============= ============ ||
<PAGE>
BTR Realty, Inc.
------------------------------------------------
January 1, 1993
to September 10, Years ended December 31,
1993 1992 1991 1990
Revenues 15,912,211 22,655,133 22,779,812 20,366,006
Net Earnings (Loss)
Before Cumulative
Effect of Change In
Accounting Principle and
Extraordinary Item (2,057,106) (1,118,957) (4,688,646) (6,374,172)
Cumulative Effect of Change
In Accounting Principle - 1,286,000 - -
------------------------------------------------
Net Earnings (Loss) Before
Extraordinary Item (2,057,106) 167,043 (4,688,646) (6,374,172)
Extraordinary Item (548,323) - - -
------------------------------------------------
Net Earnings (Loss) (2,605,429) 167,043 (4,688,646) (6,374,172)
================================================
Net Earnings (Loss) Per Share
Before Cumulative
Effect of Change In
Accounting Principle and
Extraordinary Item (0.24) (0.13) (0.55) (0.74)
Cumulative Effect of Change In
Accounting Principle - 0.15 - -
------------------------------------------------
Net Earnings (Loss) Per
Share Before
Extraordinary Item (0.24) 0.02 (0.55) (0.74)
Extraordinary Item (0.06) - - -
------------------------------------------------
Net Earnings (Loss)
Per Share (0.30) 0.02 (0.55) (0.74)
================================================
Weighted Average Shares
Outstanding,
Including Common
Share Equivalents (1) 8,512,718 8,503,916 8,527,036 8,600,395
================================================
Total Assets 147,869,512 153,212,133 159,879,954 166,319,506
================================================
Indebtedness:
Total mortgages,
convertible
debentures,
construction
loans and notes
payable 150,666,971 149,168,632 153,024,838 151,677,634
================================================
Net cash provided by
(used in) operating
activities 4,129,635 1,249,138 (961,065) 1,091,144
================================================
Cash Dividends
Paid Per Share 0.58 - - 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
16
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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,
1994 1993 1992
ACTUAL PRO FORMA
Revenues $22,849 20,777 20,051
Earnings $2,916 1,217 494
Earnings per share $0.46 0.19 0.08
Funds from operations (FFO)(1):
Primary $6,797 6,034 5,398
Fully diluted $11,400 10,609 9,973
Weighted average number of shares
outstanding:
Primary 6,291 6,291 6,291
Fully diluted 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. The presentation of funds from operations is not normally
included in financial statements prepared in accordance with generally
accepted accounting principles (GAAP).
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited combined quarterly results of operations for MART for
1994 are summarized as follows:
Quarter ended
1994 March 31, June 30, September 30, December 31,
Revenues $5,556,016 5,868,272 5,444,666 5,979,927
Net earnings $ 700,334 750,505 317,461 1,147,986
=================================================
Net earnings per share $0.11 0.12 0.05 0.18
=================================================
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
=================================================
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, and tax
benefits.
17
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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 Company's operations for the year
ended December 31, 1994, with the year ended December 31, 1993, which
includes the summation of the Company's and BTR's results of operations.
The discussion also 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.
Comparison of 1994 to 1993
Rental revenues increased by $1,209,000, or 6%, to $21,891,000 for
the year ended December 31, 1994 from $20,682,000 for the year ended
December 31, 1993. Net increases in occupancy and CPI rental rates
resulted in rental increases of approximately $1,125,000. Additionally,
two acquisitions, Timonium Mall in October, 1993 and Easton Shoppes in
September, 1994, contributed to rental increases of $600,000 and
$374,000, respectively. The rental increases were offset by a $732,000
loss of rental attributable to operating properties sold or discontinued
in 1993, a $74,000 loss of rental attributable to the redevelopment of
York Road Plaza in 1994, and $84,000 in other net rental decreases.
Sales of residential property decreased by $1,032,000 due to the
discontinuation and final sellout of BTR's residential assets in July,
1993.
Gains on sales of properties held for sale increased by $50,000 to
$81,000 in 1994 from $31,000 in 1993 due to higher profit margins on
properties sold in 1994.
Other income increased by $133,000 to $877,000 in 1994 from $744,000
in 1993 primarily as a result of $424,000 in interest income increases
from partners' notes receivables added in September, 1993, and increases
due to a $166,000 loss included in BTR's other income in September, 1993
related to a provision for losses on notes receivable. The increases
were offset by decreases due to a $210,000 decrease in income from a
lease termination payment recorded as other income in December, 1993 and
$247,000 in net decreases primarily related to higher tenant lease
cancellation charges & fees in 1993.
As a result of the above changes, total revenues increased by
$360,000 to $22,849,000 in 1994 from $22,489,000 in 1993.
Interest expense decreased by $2,011,000 to $10,343,000 in 1994 from
$12,354,000 in 1993 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 $1,839,000 in interest expense decreases can be
attributable to the payoff of mortgage debt and replacement with
debentures and common shares. A decrease in interest expense of $409,000
can be attributable to the discontinuation of operations in September,
1993 of a residential operating property sold in February, 1994. Other
net decreases of $100,000 in interest expense are generally related to
projects terminated in 1993 and principal paydowns. Additionally, the
interest expense decreases were offset by increases from the two new
acquisitions, Timonium Mall in October, 1993 and Easton Shoppes in
September, 1994, which contributed to interest increases of $106,000 and
$231,000, respectively.
Depreciation and amortization increased by $347,000 to $5,083,000 in
1994 from $4,736,000 in 1993, primarily due to the following increases:
amortization of debentures sold in September, 1993, $204,000, new
acquisitions - Timonium, $99,000, and Easton, $57,000, new tenant
improvements Gateway I and II, $64,000, and new redevelopment, Rolling
Road Plaza $28,000. The increases were offset by a $111,000 decrease in
depreciation expense due to the discontinuation of operations in
September, 1993 of a residential property sold in February, 1994.
(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
Comparison of 1994 to 1993 - Continued
Operating expenses decreased by $417,000 to $3,337,000 in 1994 from
$3,754,000 in 1993, primarily due to the discontinuation in September,
1993 of a residential operating property sold in February, 1994 which
decreased operating expenses by $321,000. In addition, operating expense
decreased $117,000 as a result of the sale of certain projects, Harbour
Island and Plantation Bowl, which were sold in July, 1993 and January,
1994, respectively. Some operating expense decreases were due to
projects with additional occupancy in 1994, which included Columbia
Plaza, $68,000, Sedona, $57,000, and McRay, $49,000. Other projects had
operating decreases due to various gross expense decreases, such as
Burke Town, $43,000 (primarily legal fees decreased) and York Road Plaza
$28,000 (primarily real estate taxes decreased). These major decreases
in operating expenses were offset by increases in operating expenses
primarily related to the new acquisition of Timonium of $173,000 and
additional legal fees related to the Smoketown Plaza project of
$101,000.
Cost of residential property sold decreased by $1,008,000 due to the
discontinuation of the residential sales in July, 1993.
General and administrative expenses increased by $397,000 to
$1,751,000 in 1994 from $1,354,000 in 1993 due to an increase of
$120,000 in payroll expenses which was due to the adoption, in 1994, of
an incentive based compensation plan. In addition, payroll expenses
increased by $158,000 primarily due to fewer payroll costs capitalized
in 1994. Other increases in general and administrative expenses were
related to additional shareholder related costs of $52,000, an increase
in 401K Plan expense of $45,000 due to a one time downward expense
adjustment in December, 1993, and various other net increases totaling
$104,000. The increases were offset by decreases in general and
administrative expenses related to lower outside professional fees of
$33,000 and a decrease of $49,000 in stock compensation expense.
Unrecoverable development costs decreased by $1,279,000 due to write-
downs in 1993 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 expense increased by $539,000 to $541,000 in 1994
from $2,000 in 1993 generally due to higher earnings in minority
interest ventures.
Earnings from operations increased by $3,792,000 to $1,794,000 in
1994 from a loss from operations of $1,998,000 in 1993. 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 was
recognized by BTR for the period January 1 to September 10, 1993. The
1993 extraordinary item and income tax benefit for the combined year
ended December 31, 1993, offset the loss from operations for the period
resulting in a $2,138,000 net loss for the combined year ended 1993 for
BTR and the Company. For the year ended December 31, 1994, the Company
recorded a gain on the sales of operating properties of $1,122,000, and,
when combined with the earnings from operations for the period, resulted
in net earnings of $2,916,000 for the year ended December 31, 1994.
(Continued)
19
<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
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.
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 401K
Plan 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.
(Continued)
20
<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
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.
Cash Flow comparison
The following discussion compares the statements of cash flows of the
Company for the year ended December 31, 1994 with 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. The discussion also 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.
Cash Flow comparison of 1994 to 1993
Net cash flow provided by operating activities increased by $157,000,
to $7,766,000 for the year ended December 31, 1994 from $7,609,000 for
the year ended December 31, 1993. The change in net cash flow provided
by operating activities was due primarily to the factors described in
the comparison of operating results above. The level of net cash
provided by operating activities was also affected by timing in the
payment of operating liabilities and the receipt of revenues from rental
operations.
Net cash flow used in investing activities increased by $13,680,000,
to $19,630,000 from $5,950,000. The increase was primarily a result of
the following: acquisitions and additions to properties which resulted
in an increase of $14,644,000 (primarily the Shoppes at Easton
acquisition in September, 1994), a decrease in cash flow used in
investing activities related to an increase in proceeds from sales of
properties of $1,617,000 (primarily due to sales of land held for sale
and operating properties in 1994), and an increase of $653,000 related
to an increase in payments to minority partners in 1994.
Net cash flow provided by or used in financing activities increased by
$12,591,000, to net cash provided by financing activities of $11,521,000
from net cash used in financing activities of $1,070,000. The increase
was primarily three major net cash increases: (1) $18,369,000 in cash
increases due to net additions to notes payable primarily in 1994 for
the acquisition of the Shoppes at Easton in September, 1994 and the land
for the new Owings Mills New Town shopping center under development
purchased in December, 1994, (2) net reductions in 1993 in construction
loans payable, and mortgages payable of $84,560,000, (3) 1993 additions
to deferred debenture costs of $3,063,000. The increases were offset by
a decrease in cash flow provided by financing activities resulting from
the net cash flow provided by the net proceeds in 1993 from the sale of
debentures and common shares of $93,453,000. Other net increases for the
period totaled $52,000.
(Continued)
21
<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 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
liabilities 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.
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. BTR improved its liquidity in September, 1993 with the conversion
into MART. The initial public share and debenture offering on September
10, 1993 replaced higher fixed rate mortgage debt with lower interest
convertible subordinated debentures and the sale of common shares.
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 $35,000,000 from
a commercial bank (See Footnote I).
The Company anticipates material commitments for capital expenditures
to include, in the next two years, the redevelopment or development of
five Baltimore area projects at an estimated cost between $14 and $25
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 $35,000,000 line of
credit from a commercial bank (See Footnote I).
22 (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 1995 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.
Changes in Accounting Principles
Effective April 1, 1994 the Company adopted a new accounting treatment
regarding lease cancellation fees received from tenants who want to
discontinue their remaining lease term obligations. Prior to April 1,
1994, the lease termination payments for major tenants were recognized
as other income in the period when the termination agreement was
executed. Under the new treatment, the entire amount of the cancellation
or termination fee on the date of the lease termination is deferred and
then amortized into income on a straight-line basis over the remaining
original lease term as minimum rent. The Company believes that this
change is preferable since it provides a better matching of revenues and
expenses. During 1994, approximately $687,000 of termination fees were
deferred, and $56,000 was amortized.
Effective January 1, 1995 the Company changed its accounting treatment
for percentage rent. Percentage rent revenues are based on store sales
for certain periods and are charged according to a percentage over a
breakpoint amount of sales for the period according to the lease
agreement. During the year ended December 31, 1994 and previously,
percentage rent was recognized as rental revenues in the period when the
actual percentage rent was billed and received. The new method will
recognize percentage rent as rental revenues in the period when the
actual percentage rent is earned. The Company will begin on January 1,
1995 estimating the percentage rent earned from major tenants and record
the amounts monthly as receivable. The cumulative effect of this change
on January 1, 1995, was approximately $675,000.
Inflation
The majority of all of the leases at the shopping center properties
contain provisions which may 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,
1994 compared to the year ended December 31, 1993. If a recession were
to begin and 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.
Stock Repurchase Plan
On February 14, 1995 the MART Board of Trustees approved a stock
repurchase plan. Under this plan, MART may, from time to time,
repurchase shares of its common stock either in the open market or in
privately negotiated transactions upon such prices and other terms as
the Company deems appropriate. The aggregate number of shares authorized
for repurchase will not exceed 5% of the number of shares currently
outstanding, or approximately 310,000.
23
<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 ......................25
Consolidated Balance Sheets -
as of December 31, 1994 and 1993 ................26
Consolidated Statements of Operations -
For the Year ended December 31, 1994 and the
Periods ended December 31, 1993 and September 10,
1993 and for the Year ended December 31, 1992 ...27
Consolidated Statements of Shareholders' Equity -
For the Year ended December 31, 1994 and the
Periods ended December 31, 1993 and
September 10, 1993 and for the Year ended
December 31, 1992 ...............................28
Consolidated Statements of Cash Flows -
For the Year ended December 31, 1994 and the
Periods ended December 31, 1993 and September 10,
1993 and for the Year ended December 31, 1992 ...29
Notes to Consolidated Financial Statements ........31
Exhibits, Financial Statement Schedule, and Reports on Form 8-K are
included in Part IV - Item 14.
Schedule:
Schedule VI - Real Estate and Accumulated
Depreciation ..................................42
24
<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 subsidiaries as of December 31, 1994 and
1993 and the related consolidated statements of operations,
shareholders' equity and cash flows for the year ended December 31,
1994, and the period ended December 31, 1993 and the consolidated
statements of operations, shareholders' equity and cash flows of BTR
Realty, Inc. and subsidiaries for the period ended September 10, 1993
and for the year ended December 31, 1992. In connection with our audits
of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and the financial statement schedule
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial
statement schedule 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 subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for the
year ended December 31, 1994, and for the period ended December 31, 1993
and the results of BTR Realty, Inc. and subsidiaries' operations and
their cash flows for the period ended September 10, 1993 and for the
year ended December 31, 1992, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents 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." Also, as discussed in note A, the Company changed its
method of accounting for lease termination payments in 1994.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
February 16, 1995
25
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Consolidated Balance Sheets
As of
December 31,
1994 1993
ASSETS
Properties:
Operating properties
(Notes C and D)............$ 140,062,761 127,713,850
Development operations
(Note E)................... 6,354,947 2,128,434
Property held for
development or sale ....... 8,630,465 9,169,232
------------- -------------
155,048,173 139,011,516
Cash and cash equivalents .... 344,522 687,108
Notes and accounts
receivable - tenants
and other (Note F).......... 1,688,194 2,357,791
Due from joint venture
partners ................... 1,937,019 1,701,708
Prepaid expenses and deposits. 402,283 403,075
Refundable income taxes ...... - 24,045
Net assets of properties to
be sold (Note G) ........... - 449,219
Deferred financing costs
(Note H) ................... 3,422,376 3,928,590
------------- -------------
$ 162,842,567 148,563,052
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable (Note I).......$ 20,139,413 2,800,000
Accounts payable and accrued
expenses (Note J).......... 3,534,277 4,377,411
Mortgages payable (Note D) .. 53,251,140 53,694,372
Convertible subordinated
debentures (Note K)........ 60,000,000 60,000,000
Deferred income ............. 730,466 133,468
Minority interest in
consolidated joint ventures 330,893 250,432
Income taxes currently payable -
state (Note L).......... - 19,581
------------- -------------
137,986,189 121,275,264
Commitments (Notes M & O)
Shareholders' Equity (Note N):
Preferred shares of beneficial
interest, $.01 par value, authorized
2,000,000 shares, issued and
outstanding, none .......... - -
Common shares of beneficial
interest, $.01 par value,
authorized 100,000,000, issued and
outstanding, 6,291,407...... 62,914 62,914
Additional paid-in capital .. 42,602,505 42,602,505
Accumulated deficit ......... (17,809,041) (15,377,631)
------------- -------------
24,856,378 27,287,788
------------- -------------
$ 162,842,567 148,563,052
============= =============
See accompanying notes to consolidated financial statements.
26
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
Consolidated Statements of Operations
Mid-Atlantic Realty Trust || BTR Realty, Inc.
Year Ended September 11 to||January 1 to Year Ended
December 31, December 31, ||September 10, December 31,
1994 1993 || 1993 1992
||
REVENUES: ||
Rentals ........$ 21,890,446 6,061,175 || 14,620,418 20,217,251
Gain on sales of ||
properties held ||
for sale, net 81,313 - || 31,501 281,511
Sales of residential ||
property ..... - - || 1,032,000 1,120,750
Other (Note P) 877,122 515,509 || 228,292 1,035,621
------------ ----------- ||------------ ------------
22,848,881 6,576,684 || 15,912,211 22,655,133
------------ ----------- ||------------ ------------
COSTS AND EXPENSES: ||
Interest ....... 10,342,725 3,076,060 || 9,278,198 14,032,352
Depreciation and ||
amortization of property ||
and improvements 5,083,384 1,502,449 || 3,233,530 4,778,432
Operating ...... 3,336,415 1,104,193 || 2,649,341 3,985,439
General and ||
administrative 1,751,101 300,625 || 1,053,295 1,223,319
Cost of residential ||
property sold . - - || 1,008,475 1,067,806
Unrecoverable ||
development costs - - || 1,278,817 262,147
------------ ----------- ||------------ ------------
20,513,625 5,983,327 || 18,501,656 25,349,495
------------ ----------- ||------------ ------------
EARNINGS (LOSS) FROM ||
OPERATIONS BEFORE ||
MINORITY INTEREST 2,335,256 593,357 || (2,589,445) (2,694,362)
Minority interest ||
(expense) benefit (540,744) (125,883) || 124,129 156,460
------------ ----------- ||------------ ------------
EARNINGS (LOSS) FROM ||
OPERATIONS ..... 1,794,512 467,474 || (2,465,316) (2,537,902)
Gain on Fire ||
Damage ......... - - || - 1,340,000
Gain (loss) on ||
sales of operating ||
properties 1,121,774 - || - (47,573)
------------ ----------- ||------------ ------------
EARNINGS (LOSS) BEFORE INCOME ||
TAXES, CUMULATIVE EFFECT OF ||
CHANGE IN ACCOUNTING ||
PRINCIPLE & EXTRAORDINARY ||
ITEM 2,916,286 467,474 || (2,465,316) (1,245,475)
Income tax benefit, ||
net (Note L) .. - - || 408,210 126,518
------------ ----------- ||------------ ------------
EARNINGS (LOSS) BEFORE ||
CUMULATIVE EFFECT OF ||
CHANGE IN ACCOUNTING ||
PRINCIPLE AND ||
EXTRAORDINARY ||
ITEM ........... 2,916,286 467,474 || (2,057,106) (1,118,957)
Cumulative effect ||
of change in accounting ||
for income taxes - - || - 1,286,000
------------ ----------- ||------------ ------------
EARNINGS (LOSS) ||
BEFORE EXTRAORDINARY ||
ITEM ........... 2,916,286 467,474 || (2,057,106) 167,043
Extraordinary item - ||
Loss on early ||
extinguishment ||
of debt ........ - - || (548,323) -
------------ ----------- ||------------ ------------
NET EARNINGS ||
(LOSS) .........$ 2,916,286 467,474 || (2,605,429) 167,043
============ =========== ||============ ============
||
Earnings (loss) per share ||
before cumulative effect ||
of change in accounting ||
principle and extraordinary ||
item ...........$ 0.46 0.07 || (0.24) (0.13)
Cumulative effect of ||
change in accounting ||
principle - - || - 0.15
------------ ----------- ||------------ ------------
Earnings (loss) per ||
share before extraordinary ||
item ............ 0.46 0.07 || (0.24) 0.02
Extraordinary item - ||
early extinguishment ||
of debt ........ - - || (0.06) -
------------ ----------- ||------------ ------------
NET EARNINGS (LOSS) ||
PER SHARE ......$ 0.46 0.07 || (0.30) 0.02
============ =========== ||============ ============
See accompanying notes to consolidated financial statements.
27
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1994, 1993 and 1992
Retained
Additional Earnings Total
Common Par Paid-in (Accumulated Shareholders'
Shares Value Capital Deficit) Equity
BTR REALTY, INC.
BALANCE,
January 1,
1992 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
Dividends Paid -
$.85 per share - - - (5,347,696) (5,347,696)
Net Earnings - - - 2,916,286 2,916,286
----------- -------- ------------ ------------ -----------
BALANCE,
December 31,
1994 6,291,407 $62,914 42,602,505 (17,809,041) 24,856,378
=========== ======== ============ ============ ===========
See accompanying notes to consolidated financial statements.
28
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
Consolidated Statements of Cash Flows
Mid-Atlantic Realty Trust || BTR Realty, Inc.
Year Ended September 11 to||January 1 to Year Ended
December 31, December 31, ||September 10, December 31,
1994 1993 || 1993 1992
||
Cash flows from ||
operating activities: ||
Net earnings ||
(loss) $2,916,286 467,474 || (2,605,429) 167,043
Adjustments to reconcile ||
net earnings (loss) ||
to net cash provided ||
by operating activities: ||
Depreciation and ||
amortization 5,083,384 1,502,449 || 3,233,530 4,778,432
Minority interest ||
in earnings (loss), ||
net ......... 540,744 125,883 || (124,129) (156,460)
(Gain) loss on sales ||
of operating ||
properties .(1,121,774) - || - 47,573
Gain on sales of ||
residential properties ||
and properties held ||
for sale, net (81,313) - || (7,976) (334,455)
Unrecoverable ||
development ||
costs - - || 1,278,817 262,147
Loss on early ||
extinguishment ||
of debt - ||
capitalized .. - - || 273,308 -
Deferred income ||
taxes benefit .. - - || (460,570) (118,000)
Gain on fire damage of ||
operating ||
property - - || - (1,340,000)
Cumulative effect of ||
change in accounting ||
principle ... - - || - (1,286,000)
Stock compensation ||
plan accrual .. - - || - (268,900)
Changes in operating ||
assets and liabilities: ||
Decrease in operating ||
assets .... 694,434 108,480 || 555,067 869,252
Increase (decrease) ||
in deferred rental ||
income ..... 610,678 (974,173) || 974,173 -
(Decrease) increase ||
in operating ||
liabilities (876,395) 2,249,233 || 1,012,844 (1,371,494)
----------- ------------ || ----------- -----------
Total ||
adjust- ||
ments... 4,849,758 3,011,872 || 6,735,064 1,082,095
----------- ------------ || ----------- -----------
NET CASH PROVIDED BY ||
OPERATING ||
ACTIVITIES 7,766,044 3,479,346 || 4,129,635 1,249,138
----------- ------------ || ----------- -----------
||
Cash flows from ||
investing activities: ||
Additions to ||
properties (22,197,577) (6,173,532) || (1,379,710) (2,967,398)
Proceeds from ||
sales of ||
properties. 3,263,444 - || 1,646,748 4,796,907
(Payments to) ||
receipts from ||
minority partners, ||
net ....... (695,594) (213,756) || 170,224 147,839
Purchases of ||
investments.. - - || - (21,753)
Transfer or sale of ||
investments.... - - || - 625,921
----------- ------------ || ----------- -----------
NET CASH (USED IN) ||
PROVIDED BY ||
INVESTING ||
ACTIVITIES (19,629,727) (6,387,288) || 437,262 2,581,516
------------ ----------- || ----------- -----------
(CONTINUED)
29
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
Consolidated Statements of Cash Flows - (Continued)
Mid-Atlantic Realty Trust || BTR Realty, Inc.
Year Ended September 11 to||January 1 to Year Ended
December 31, December 31, ||September 10, December 31,
1994 1993 || 1993 1992
||
Cash flows from ||
financing activities: ||
Proceeds from ||
notes payable $39,456,366 3,100,000 || 90,832,649 7,044,500
Principal ||
payments on ||
on notes ||
payable (22,116,953) (87,486,651) || (7,475,452) (8,285,036)
Proceeds from ||
mortgages payable - - || 2,682,600 1,076,444
Principal payments ||
on mortgages ||
payable ...... (443,232) (3,143,953) ||(46,709,513) (2,446,767)
Proceeds from ||
construction ||
loans payable .. - - || - 1,087,244
Payments on ||
construction ||
loans payable .. - - ||(37,831,945) (2,332,591)
Additions to deferred ||
finance costs - ||
other......... (27,388) (171,954) || (45,149) (33,807)
Proceeds from sale ||
of convertible ||
debentures .. - 60,000,000 || - -
Additions to deferred ||
finance costs - ||
debentures..... - (3,063,274) || - -
Net proceeds from ||
sale of common ||
shares ....... - 33,453,455 || - -
Sinking fund ||
payments - - || -
(41,083)
Stock issued - ||
options exercised ||
in compensation ||
plan ........ - - || 225,258 -
Stock canceled - ||
employee note ||
payment ...... - - || (177,051) -
Dividends paid .(5,347,696) (314,570) || (4,944,879) -
----------- ----------- || ----------- --------
- -- ||
NET CASH PROVIDED ||
BY (USED IN) ||
FINANCING ||
ACTIVITIES 11,521,097 2,373,053 || (3,443,482)
(3,931,096)
----------- ----------- || ----------- -----------
NET (DECREASE) ||
INCREASE IN CASH ||
AND CASH ||
EQUIVALENTS (342,586) (534,889) || 1,123,415 (100,442)
CASH AND CASH ||
EQUIVALENTS, ||
beginning of ||
period 687,108 1,221,997 || 98,582 199,024
---------- ----------- || ----------- -----------
- - ||
CASH AND CASH ||
EQUIVALENTS, ||
end of period ... $344,522 687,108 || 1,221,997 98,582
=========== =========== || =========== ===========
||
Supplemental disclosures of ||
cash flow information: ||
Cash paid for: ||
Interest (net of amounts ||
capitalized) $10,404,859 1,659,428 || 9,218,811 14,009,774
Income taxes .. - 20,560 || 16,813 48,588
=========== =========== || =========== ============
Supplemental schedule of noncash investing and financing activities:
During 1994, $2,832,641 in assets were transferred from Development
Operations to Operating Properties.
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. Proceeds from sales of
properties for the year ended December 31, 1994 included net proceeds of
$504,820 from the sale, in February 1994, of net assets of properties to
be sold which included proceeds of $7,146,815 reduced by the payoff of
the mortgage 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, a 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.
See accompanying notes to consolidated financial statements.
30
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993, 1992
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.
The Company owns 100% majority interests in corporate subsidiaries
which are general managing partners as well as limited partners of
several partnerships which have outside partners with 50% interests.
Based upon the structure of the respective partnership management
agreements the Company has control (as defined by the Statement of
Financial Accounting Standards No. 94, "Consolidation of All Majority-
Owned Subsidiaries", which describes the full consolidation method as
preferable to the equity method where there is a 50% or less financial
interest but control) over the 50% owned partnerships. The Company uses
the full consolidation method to record the 50% owned partnerships.
In September, 1993, MART loaned to outside partners funds to cover
their respective partner share of partnership mortgage paydowns using
their respective equity interests in the partnerships as collateral for
the notes receivable. The company eliminates the notes receivable
against what is due from joint venture partners. The interest on the
partner notes is recognized as interest income.
Recognition Of Revenue From Property Sales
The sale of residential property and any resulting gain or 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, calculated using prevailing industry
discount and capitalization rates. 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, capitalization rates or reversion rates
used to arrive at the net realizable value of each property are based on
the risk associated with the property as well as the prevailing rates at
the end of the reporting period. Risk variations reflect differences in
quality, age, location and market conditions of each property.
31
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Properties
Operating properties and property held for development or sale are
carried at the lower of historical 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.
Changes in Accounting Principles
Effective April 1, 1994 the Company adopted a new accounting
treatment regarding lease cancellation fees received from tenants who
want to discontinue their remaining lease term obligations. Prior to
April 1, 1994, the lease termination payments for major tenants were
recognized as other income in the period when the termination agreement
was executed. Under the new treatment, the entire amount of the
cancellation or termination fee on the date of the lease termination is
deferred and then amortized into income on a straight-line basis over
the remaining original lease term as minimum rent. The Company believes
that this change is preferable since it provides a better matching of
revenues and expenses. During 1994, approximately $687,000 of
termination fees were deferred, and $56,000 was amortized.
Effective January 1, 1995 the Company changed its accounting
treatment for percentage rent. Percentage rent revenues are based on
store sales for certain periods and are charged according to a
percentage over a breakpoint amount of sales for the period according to
the lease agreement. During the year ended December 31, 1994 and
previously, percentage rent was recognized as rental revenues in the
period when the actual percentage rent was billed and received. The new
method will recognize percentage rent as rental revenues in the period
when the actual percentage rent is earned. The Company will begin on
January 1, 1995 estimating the percentage rent earned from major tenants
and record the amounts monthly as receivable. The cumulative effect of
this change on January 1, 1995 was approximately $675,000.
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.
Effective January 1, 1992, BTR adopted Statement of Financial
Accounting Standards No. 109,"Accounting for Income Taxes", (Statement
109), which requires an asset and liability method of accounting for
income taxes. The Company 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 year ended December
31, 1994 and the period September 11 through December 31, 1993.
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.
Deferred Finance Costs
Costs associated with the issuance of debt are capitalized and
recorded as deferred finance costs and amortized on a straight-line
basis, which is not materially different from the interest method, over
the term of the related debt.
32
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
C. OPERATING PROPERTIES
Operating properties consist of the following:
December 31,
1994 1993
Land $17,993,243 15,781,566
Land improvements 21,123,172 19,819,368
Buildings 107,030,436 95,771,668
Improvements for tenants 6,013,294 5,280,554
Development costs on
completed projects 16,577,892 16,739,579
Furniture, fixtures and
equipment 2,181,109 2,177,423
Deferred lease costs 5,592,584 4,794,044
------------ -----------
176,511,730 160,364,202
Less accumulated depreciation
and amortization 36,448,969 32,650,352
------------ -----------
$140,062,761 127,713,850
============ ===========
D. PROPERTIES AND RELATED ACCUMULATED DEPRECIATION AND AMORTIZATION AND
MORTGAGES PAYABLE
A summary of all of the Company's properties and related mortgages
payable at December 31, 1994 follows:
Accumulated
Cost of Depreciation
Classi- Mortgages Initial Subsequent Total and
fication Payable Cost Improvements Cost Amortization
Net Cost
Shopping
centers $50,086,463 117,544,194 20,116,163 137,660,357 28,634,598
109,025,759
Bowling
centers - 2,866,998 64,383 2,931,381 1,320,174
1,611,207
Office
buildings 3,164,677 26,415,163 3,230,125 29,645,288 4,709,584
24,935,704
Other rental
properties - 4,782,560 919,046 5,701,606 1,387,953
4,313,653
Other property - 573,098 - 573,098 396,660
176,438 ------------------------------------------------------------
- ------------
Operating
proper-
ties 53,251,140 152,182,013 24,329,717 176,511,730 36,448,969
140,062,761
Development
operations - 6,354,947 - 6,354,947 -
6,354,947
Property held for
development
or sale - 8,630,465 - 8,630,465 -
8,630,465
--------------------------------------------------------------
- -----------
$53,251,140 167,167,425 24,329,717 191,497,142 36,448,969
155,048,173===========================================================
===========
Mortgages payable aggregating $53,251,140 at December 31, 1994 bear
interest at 9.54% to 11.75% and mature in installments through 2003.
Aggregate annual principal payments applicable to mortgages payable for
the five years subsequent to December 31, 1994 are:
1995 $ 7,197,969
1996 5,835,477
1997 5,241,874
1998 14,045,689
1999 253,258
Thereafter 20,676,873
===========
33
<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,
1994 1993
Land $5,072,696 -
Construction in progress 953,456 1,749,886
Pre-construction costs 328,795 378,548
---------- ---------
$6,354,947 2,128,434
========== =========
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, 1994
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 1994 and 1993, the economic condition
of the Arizona real estate market has been weak as evidenced by
increased vacancies in the Company's projects, particularly in the
Phoenix market. The Company's accounts receivable at December 31, 1994
included $673,000 and $379,000 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.
G. NET ASSETS OF PROPERTIES TO BE SOLD
Net assets of properties to be sold consist 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
==========
H. DEFERRED FINANCING COSTS
As of December 31,
Deferred financing costs 1994 1993
consist of the following:
Deferred costs related to
the debentures $3,063,274 3,063,274
Deferred costs of new line of credit 198,972 171,584
Deferred financing costs capitalized
related to operating properties 1,720,827 1,720,827
----------- -----------
4,983,073 4,955,685
Less accumulated amortization (1,560,697) (1,027,095)
----------- -----------
Deferred financing costs $3,422,376 3,928,590
=========== ===========
34
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. NOTES PAYABLE
Notes payable consist of the following: As of December 31,
1994 1993
Line of credit 20,100,000 2,800,000
Notes payable, bearing
interest at 8.71% 39,413 -
---------- ---------
20,139,413 2,800,000
========== =========
At December 31, 1994, the Company has amended the existing agreement
with its primary bank for an additional $10,000,000 to its $25,000,000
secured line of credit. This amendment also provides that as long as the
Company is in compliance with all loan covenants, the loan maturity
date, which at December 31, 1994 was December 31, 1997, will be extended
one year automatically each year. Under the amended agreement, the Bank
must give the Company two years notice should it decide to terminate the
loan. Availability under the agreement is determined by the amount of
collateral provided. At December 31, 1994, $35,000,000 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 other
normal conditions consistent with bank lines of credit.
At December 31, 1994, the unused line of credit available to the
Company, subject to compliance with all terms and conditions of the
agreement and net of outstanding letters of credit of $715,500, was
$14,184,500. The maximum level of borrowings under the line of credit
was $20,100,000, $4,633,130 and $4,663,000 in 1994, 1993 and 1992,
respectively. The average amounts of borrowings were approximately
$6,131,000, $1,888,000, and $3,566,000, with weighted average interest
approximating 6.5%, 5.6%, and 6.3%, in 1994, 1993 and 1992,
respectively.
Aggregate annual principal maturities of notes payable subsequent
to December 31, 1994 are as follows:
1995 $ 9,270
1996 9,270
1997 20,109,270
1998 9,270
1999 2,333
==========
J. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31,
1994 1993
Trade accounts payable 1,195,143 1,289,204
Retainage on construction
in progress 61,117 146,774
Accrued debenture interest expense 1,334,375 1,394,435
Accrued expenses 943,642 1,546,998
--------- ---------
3,534,277 4,377,411
========= =========
35
<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, 1994 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, 1994, the income tax basis of the
Company's assets was approximately $151,000,000 and liabilities was
approximately $ 137,000,000.
As discussed, BTR adopted Statement 109, 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 income taxes benefit, net, in BTR, for the period January 1,
1993 through September 10, 1993 included 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 Statement 109
adopted by BTR as of January 1, 1992.
The net benefit for income taxes consists of the following:
Jan. 1, 1993 thru Year ended
September 10, December 31,
1993 1992
Current taxes: Federal $ - -
State 52,360 (8,518)
-----------------------------
52,360 (8,518)
-----------------------------
Deferred: Federal 118,430 (265,000)
State (579,000) 147,000
-----------------------------
(460,570) (118,000)
-----------------------------
$ (408,210) (126,518)
=============================
36
<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, 1994 are as follows:
1995 $220,000
1996 222,000
1997 222,000
1998 222,000
1999 222,000
Thereafter 4,908,000
=========
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 $219,000 in 1994, $176,000 in 1993
and $164,000 in 1992.
N. SHAREHOLDERS' EQUITY AND STOCK COMPENSATION PLAN
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, 1994, none of these shares were
issued and outstanding.
BTR Stock Compensation Plan
Under the BTR 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.
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.
MART Incentive Stock Option Plan
MART has an Omnibus Share Plan, "Plan", under which Trustees,
officers and employees may be granted awards of stock options, stock
appreciation rights, performance shares and restricted stock. The
purpose of the Plan is to provide equity-based incentive compensation
based on long-term appreciation in value of MART's shares and to promote
the interests of MART and its shareholders by encouraging greater
management ownership of MART's shares. Pursuant to the Plan, the Company
authorized on February 1, 1994 the availability of 300,000 shares for
the Plan. At February 1, 1994, trustees, officers and key employees were
granted 256,000 option shares at an option price of $10.50 per share
with 89,333 shares vesting February 1, 1994 and 83,333 vesting in 1995
& 1996. The closing price of MART shares at December 31, 1994 was $8.25
per share. No options were exercised during the year ended December 31,
1994 and based on the market value of MART shares, the options, if
converted, would be anti-dilutive producing fewer weighted average
shares for the year ended December 31, 1994.
Acquisition of Outstanding Shares
On February 14, 1995 the MART Board of Trustees approved a stock
repurchase plan which authorizes the repurchase of up to approximately
310,000 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.
37
<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 noncancelable operating leases are as follows:
1995 $19,590,863
1996 17,897,043
1997 15,273,182
1998 12,272,911
1999 10,229,882
Thereafter 63,868,068
===========
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
$1,206,000 in 1994, $1,259,000 in 1993 and $1,235,000 in 1992.
P. OTHER INCOME
Other income consists of the following:
MART BTR Realty, Inc.
Year ended Sept. 11 thru Jan. 1, thru Year ended
Dec. 31, Dec. 31, Sept. 10, Dec. 31,
1994 1993 1993 1992
Interest and
dividends $727,249 266,141 93,312 262,069
Miscellaneous 149,873 249,368 134,980 439,285
Sale of development
rights - - - 334,267
-----------------------------------------------
$877,122 515,509 228,292 1,035,621
===============================================
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, 1994 and 1993.
Cash and Cash Equivalents
The carrying amount for cash and cash equivalents approximates
fair value due to the short maturity of these instruments.
Notes and Accounts Receivable
The carrying amount for notes and accounts receivable approximates
fair value due to the short maturity of these instruments.
Notes Payable
The carrying amount for the line of credit approximates fair value
due to its adjustable interest rate.
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, 1994
was $53,251,140 and $53,641,000 respectively, and at December 31,
1993 was $53,694,372 and $58,071,000, respectively.
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, 1994 was
$60,000,000 and $52,119,000 respectively, and at December 31, 1993
was $60,000,000 and $58,522,000, respectively.
38
<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 1994 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 69 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 47 President, Principal Executive
Officer, 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 41 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 46 Treasurer of MART since September,
1993. Treasurer of BTR since May,
1989.
Paul G. Bollinger 35 Controller and Principal Financial
Officer 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 1995
annual meeting of stockholders.
39<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 1995
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 1995
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, 1994 and 1993
Consolidated statements of operations for
the year ended December 31, 1994 for the
periods ended December 31, 1993 and
September 10, 1993 and the year ended
December 31, 1992
Consolidated statements of shareholders' equity
for year ended December 31, 1994 for
the periods ended December 31, 1993 and
September 10, 1993 and the year ended
December 31, 1992
Consolidated statements of cash flows for
the year ended December 31, 1994 for the
periods ended December 31, 1993 and
September 10, 1993 and the year ended
December 31, 1992
Notes to consolidated financial statements
(a) 2. Financial Statement Schedule
Schedule VI - 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 31 of
this report.
12. Statement re: computation of ratios.
Not applicable.
13. Annual Report to Shareholders.
Not applicable.
40
<PAGE>
ITEM 14 - (Continued)
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
18. Letter regarding change in accounting principles.
See Summary of Significant Accounting Policies under
Notes to Financial Statements appearing on page 31 and
32 of this report and letter from KPMG Peat Marwick
LLP.
19. Previously unfiled documents.
Not applicable.
21. 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.
27. Financial Data Schedule.
Filed thru EDGAR
28. Additional exhibits.
Not applicable.
(b) Reports on Form 8-K.
None.
41
<PAGE>
Schedule VI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized
subsequent
Year ended Initial cost to Company to acquisition
December 31, 1994
Mortgages Buildings and
Description Payable Land Improvements Improvements
Shopping Centers
Harford Mall $19,821,030 158,085 8,457,331 12,027,287
Easton Shoppes, Inc. - 2,600,000 10,379,069
Smoketown Plaza - 516,312 10,095,077 622,540
Park Sedona - 2,376,739 8,590,146 232,741
Colonie Plaza 5,497,128 1,137,567 7,755,095 572,837
Columbia Plaza 4,970,228 999,739 6,887,711 1,445,476
Spotsylvania Crossing - 1,544,314 6,600,616 268,225
Skyline Village 5,569,526 555,295 6,240,003 914,776
Page Plaza - 464,375 5,777,369 119,705
Plaza Del Rio - 1,291,324 3,938,734 382,813
Sudley Town Plaza - 789,881 3,736,837 445,857
Burke Town Plaza 7,262,534 - 2,936,134 1,691,996
Rosedale Plaza 1,906,018 1,024,712 3,217,926 299,037
Wilkens Avenue 5,059,999 - 3,601,891 337,436
Timonium Shopping Ctr - - 4,031,809 246,212
York Road Plaza - 1,243,860 2,102,575 170,369
Patriots Plaza (A) - - 1,709,846 482,321
McRay Plaza - 1,182,596 2,565,290 284,739
Rolling Road Plaza (B) - 338,791 1,632,268 1,997,587
Union Hills Plaza - 274,920 679,863 138,031
Dobson-Guadalupe - 69,146 791,347 89,268
Chandler Plaza - 160,671 565,298 64,310
----------------------------------------------------
50,086,463 16,728,327 102,292,235 22,833,563
Office Buildings
Gateway II - 364,982 12,376,977 1,204,111
Gateway I - 82,396 8,271,751 1,373,259
Patriots Plaza - - 1,522,943 239,890
Wilkens Office II 1,946,154 - 1,644,370 141,706
Wilkens Office I 1,218,523 - 1,383,102 229,433
Wilkens Office III - - 768,642 41,726
-----------------------------------------------------
3,164,677 447,378 25,967,785 3,230,125
Bowling Centers
Freestate - 307,656 1,279,278 22,793
Waldorf - 243,139 579,161 5,690
Clinton - - 457,764 35,900
-----------------------------------------------------
- 550,795 2,316,203 64,383
(Continued)
<PAGE>
Schedule VI - 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, 1994
Carrying Costs Land Buildings and Total
Description Land Improvements Improvements
Shopping Centers
Harford Mall 158,085 20,484,618 20,642,703
Easton Shoppes, Inc. 2,600,000 10,379,069 12,979,069
Smoketown Plaza 516,312 10,717,617 11,233,929
Park Sedona (309,000) (1,095,141) 2,067,739 7,727,746 9,795,485
Colonie Plaza 1,137,567 8,327,932 9,465,499
Columbia Plaza 999,739 8,333,187 9,332,926
Spotsylvania Crossing 1,544,314 6,868,841 8,413,155
Skyline Village 555,295 7,154,779 7,710,074
Page Plaza 464,375 5,897,074 6,361,449
Plaza Del Rio 1,291,324 4,321,547 5,612,871
Sudley Town Plaza 789,881 4,182,694 4,972,575
Burke Town Plaza - 4,628,130 4,628,130
Rosedale Plaza 1,024,712 3,516,963 4,541,675
Wilkens Avenue 475,481 475,481 3,939,327 4,414,808
Timonium Shopping Ctr - 4,278,021 4,278,021
York Road Plaza 1,243,860 2,272,944 3,516,804
Patriots Plaza (A) - 2,192,167 2,192,167
McRay Plaza (679,840) (1,397,337) 502,756 1,452,692 1,955,448
Rolling Road Plaza (B) (837,931) 338,791 2,791,924 3,130,715
Union Hills Plaza 274,920 817,894 1,092,814
Dobson-Guadalupe 69,146 880,615 949,761
Chandler Plaza (86,450) (263,550) 74,221 366,058 440,279
--------------------------------------------------------
(599,809) (3,593,959)16,128,518 121,531,839137,660,357
Office Buildings
Gateway II 364,982 13,581,088 13,946,070
Gateway I 82,396 9,645,010 9,727,406
Patriots Plaza - 1,762,833 1,762,833
Wilkens Office II - 1,786,076 1,786,076
Wilkens Office I - 1,612,535 1,612,535
Wilkens Office III - 810,368 810,368
----------------------------------------------------------
- - 447,378 29,197,910 29,645,288
Bowling Centers
Freestate 307,656 1,302,071 1,609,727
Waldorf 243,139 584,851 827,990
Clinton - 493,664 493,664
----------------------------------------------------------
- - 550,795 2,380,586 2,931,381
(Continued)
<PAGE>
Schedule VI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Life on which
Year ended depreciation on
December 31, 1994 latest income
Accumulated Date of Date statement is
Description Depreciation Construction Acquired computed
Shopping Centers
Harford Mall 9,094,042 12/73 5-50 yrs.
Easton Shoppes, Inc. 57,618 9/94 5-50 yrs.
Smoketown Plaza 2,285,058 4/87 5-50 yrs.
Park Sedona 816,801 11/90 5-50 yrs.
Colonie Plaza 1,740,904 12/87 5-50 yrs.
Columbia Plaza 1,568,587 6/88 5-50 yrs.
Spotsylvania Crossing 1,569,597 5/87 5-50 yrs.
Skyline Village 1,403,267 5/88 5-50 yrs.
Page Plaza 559,127 8/91 5-50 yrs.
Plaza Del Rio 574,815 2/89 5-50 yrs.
Sudley Town Plaza 1,156,252 7/84 5-50 yrs.
Burke Town Plaza 1,707,113 7/79-7/82 5-50 yrs.
Rosedale Plaza 450,680 10/89 5-50 yrs.
Wilkens Avenue 1,301,922 5/81 5-50 yrs.
Timonium Shopping Ctr 137,734 10/93 5-50 yrs.
York Road Plaza 1,378,772 11/85 5-50 yrs.
Patriots Plaza (A) 831,328 6/84 5-50 yrs.
McRay Plaza 252,268 6/89 5-50 yrs.
Rolling Road Plaza (B) 966,345 6/73 5-50 yrs.
Union Hills Plaza 304,780 11/83 5-50 yrs.
Dobson-Guadalupe 296,651 9/85 5-50 yrs.
Chandler Plaza 180,937 3/84 5-50 yrs.
--------------
28,634,598
Office Buildings
Gateway II 1,395,534 7/89 5-50 yrs.
Gateway I 1,932,085 4/87 5-50 yrs.
Patriots Plaza 464,579 8/85 5-50 yrs.
Wilkens Office II 355,713 1/87 5-50 yrs.
Wilkens Office I 470,634 1/85 5-50 yrs.
Wilkens Office III 91,039 1/91 5-50 yrs.
-----------------
4,709,584
Bowling Centers
Freestate 871,924 3/78 5-50 yrs.
Waldorf 207,114 3/79 5-50 yrs.
Clinton 241,136 8/71 5-50 yrs.
------------------
1,320,174
42
Schedule VI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized
subsequent
Year ended Initial cost to Company to acquisition
December 31, 1994
Mortgages Buildings and
Description Payable Land Improvements Improvements
(Continued)
Other Rental Properties
Regal Row - 416,606 2,192,259 212,846
Business Center - 395,536 1,190,692 59,403
Southwest - - 283,039 596,738
Waldorf Firestone - 9,261 161,543 4,910
Ocean City - - 133,624 -
-------------------------------------------------------
- 821,403 3,961,157 873,897
Development Operations - 5,072,696 1,282,251 -
Property Held - 8,630,465 - -
Other Property - - 573,098 -
-------------------------------------------------------
$53,251,140 32,251,064 136,392,729 27,001,968
=======================================================
(Continued)
<PAGE>
Schedule VI - 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, 1994
Carrying Costs Land Buildings and Total
Description Land Improvements Improvements
(Continued)
Other Rental Properties
Regal Row 416,606 2,405,105 2,821,711
Business Center 395,536 1,250,095 1,645,631
Southwest 45,149 45,149 879,777 924,926
Waldorf Firestone 9,261 166,453 175,714
Ocean City - 133,624 133,624
--------------------------------------------------------
45,149 866,552 4,835,054 5,701,606
Development
Operations - - 5,072,696 1,282,251 6,354,947
Property Held - - 8,630,465 - 8,630,465
Other Property - - - 573,098 573,098
--------------------------------------------------------
(554,660)(3,593,959) 31,696,404 159,800,738 191,497,142
========================================================
(Continued)
<PAGE>
Schedule VI - Real Estate and Accumulated Depreciation
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Life on which
Year ended depreciation on
December 31, 1994 latest income
Accumulated Date of Date statement is
Description Depreciation Construction Acquired computed
(Continued)
Other Rental Properties
Regal Row 725,244 7/84 5-45 yrs.
Business Center 131,664 4/90 5-50 yrs.
Southwest 421,051 4/68 5-50 yrs.
Waldorf Firestone 57,658 9/78 5-50 yrs.
Ocean City 52,336 12/87 5-50 yrs.
-------------
1,387,953
Development Operations - 91-94
Property Held - 7/73-12/94
Other Property 396,660 9/82-12/94 3-10 yrs.
-------------
36,448,969
=============
(A) The mortgage payable of $2,585,984 is owed by the owner Southdale LP
to Southdale Mortgage Inc., a wholly owned subsidiary of MART and is
eliminated in consolidation.
(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.
43
<PAGE>
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO
THE COMPANY)
SCHEDULE VI - REAL ESTATE AND ACCUMULATED DEPRECIATION -
Continued
(1) The changes in total cost of properties for the three years ended
December 31, 1994 are as follows:
Years ended December 31,
1994 1993 1992
Balance beginning of year $171,661,868 174,593,579 177,052,733
Additions during year:
Acquisitions 18,051,765 4,076,958 285,234
Improvements 2,159,354 5,308,235 2,199,913
Development operations 1,986,458 1,448,303 571,759
-----------------------------------------
22,197,577 10,833,496 3,056,906
Deductions during year:
Write-downs to
net realizable value (2)(a) - (1,318,314) (742,147)
Cost of real estate sold (2,304,214) (1,637,772) (4,655,851)
Transfers (4) - (9,416,190) (33,807)
Retirements and disposals (58,089) (1,392,931) (84,255)
------------------------------------------
(2,362,303) (13,765,207) (5,516,060)
------------------------------------------
Balance end of year $191,497,142 171,661,868 174,593,579
==========================================
(2) Write-downs to net realizable value are reported in the statement
of operations as follows:
Year ended
BTR Realty, Inc. January 1 thru December 31,
Sep. 10, 1993 1992
Gain on Fire Damage
(Note F) $ - 486,000
Under Costs and Expenses:
Unrecoverable development costs 1,278,817 256,147
--------------------------------
$ 1,278,817 742,147
================================
(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, 1994 are as follows:
Years ended December 31,
1994 1993 1992
Balance beginning of year ($32,650,352) (29,168,658) (24,909,903)
Depreciation and amortization (4,549,782) (4,735,979) (4,778,432)
Transfers (4) - 96,041 290,378
Retirements and disposals 751,165 1,158,244 229,299
------------------------------------------
Balance end of year ($36,448,969) (32,650,352) (29,168,658)
==========================================
(4) Transfers include assets originally in operating properties
reclassified on the balance sheet to the following:
Years ended December 31,
1993 1992
Total Cost
Net assets of properties
to be sold ($7,030,232) -
Deferred financing costs (2,385,958) (33,807)
---------------------------
(9,416,190) (33,807)
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
---------------------------
$96,041 290,378
---------------------------
Net transfers ($9,320,149) 256,571
===========================
(5) The aggregate basis of properties for Federal income tax purposes
is approximately $143,000,000 at December 31, 1994.
(6) See Item 2 for geographic location of properties.
(7) Freestate includes 2 bowling centers in Illinois.
44
<PAGE>
EXHIBIT 21. 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:
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)
45
<PAGE>
EXHIBIT 21. PARENT AND SUBSIDIARIES OF REGISTRANT - (Continued)
State of
Name Incorporation
CORPORATIONS:(Continued) 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%
Easton Shoppes, 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%
MART Acquisition, 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%
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)
46
<PAGE>
EXHIBIT 21. 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 3/13/95 /s/s F. Patrick Hughes
F. Patrick Hughes, President
47
<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: 3/15/95 /s/s LeRoy E. Hoffberger
LeRoy E. Hoffberger, Chairman
Date: 3/13/95 /s/s F. Patrick Hughes
F. Patrick Hughes, Trustee, Principal
Executive Officer
Date: 3/13/95 /s/s Paul G. Bollinger
Paul G. Bollinger, Controller,
Principal Financial Officer
Date: 3/13/95 /s/s Eugene T. Grady
Eugene T. Grady, Treasurer
Date:
Robert A. Frank, Trustee
Date: 3/15/95 /s/s Marc P. Blum
Marc P. Blum, Trustee
Date: 3/15/95 /s/s M. Ronald Lipman
M. Ronald Lipman, Trustee
Date: 3/14/95 /s/s Stanley J. Moss, Esquire
Stanley J. Moss, Esquire, Trustee
Date: 3/15/95 /s/s Daniel S. Stone
Daniel S. Stone, Trustee
Date:
David F. Benson, Trustee
48
<PAGE>
KPMG PEAT MARWICK LLP
111 South Calvert Street
Baltimore, Maryland 21202
February 16, 1995
Mid-Atlantic Realty Trust
Linthicum, Maryland
Ladies and Gentlemen:
We have audited the consolidated balance sheets of Mid-Atlantic Realty
Trust and subsidiaries (the Company) as of December 31, 1994 and 1993
and the related consolidated statements of operations, shareholder's
equity and cash flows for the year ended December 31, 1994 and the
period ended December 31, 1993, and the consolidated statements of
operations, shareholders' equity and cash flows of BTR Realty, Inc. and
subsidiaries for the period ended September 10, 1993 and for the year
ended December 31, 1992 and have reported thereon under date of February
16, 1995. The aforementioned consolidated financial statements and our
audit report thereon are included in the Company's Annual Report on Form
10-K for the year ended December 31, 1994. As stated in Note A to those
financial statements, the Company changed its method of accounting for
lease termination payments and states that the newly adopted accounting
principle is preferable in the circumstances since it provides a better
matching of revenues and expenses. In accordance with your request, we
have reviewed and discussed with Company officials the circumstances and
business judgment and planning upon which the decision to make this
change in the method of accounting was based.
With regard to the aforementioned accounting change, authoritative
criteria have not been established for evaluating the preferability of
one acceptable method of accounting over another acceptable method.
However, for purposes of the Company's compliance with the requirements
of the Securities and Exchange Commission, we are furnishing this
letter.
Based on our review and discussion, with reliance on management's
business judgment and planning, we concur that the newly adopted method
of accounting is preferable in the Company's circumstances.
Very truly yours,
\s\KMPG PEAT MARWICK LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> YEAR
<CASH> 345
<SECURITIES> 0
<RECEIVABLES> 1,688
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 155,048
<DEPRECIATION> 36,449
<TOTAL-ASSETS> 162,843
<CURRENT-LIABILITIES><F1> 0
<BONDS> 113,251
0
0
<COMMON> 63
<OTHER-SE> 24,793
<TOTAL-LIABILITY-AND-EQUITY> 162,843
<SALES> 0
<TOTAL-REVENUES> 22,849
<CGS> 0
<TOTAL-COSTS> 20,514
<OTHER-EXPENSES> 541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,343
<INCOME-PRETAX> 2,916
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,916
<EPS-PRIMARY> .46
<EPS-DILUTED> .65
<FN>
<F1> Mid-Atlantic Realty Trust (MART) is in the specialized real estate
<F1> industry for which the current/noncurrent distinction is deemed in
<F1> practice to have little or no relevance. Therefore, MART prepares
<F1> unclassified balance sheets which do not report current assets or
<F1> current liabilities.
</FN>
</TABLE>
