<PAGE>
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
------------------
Commission File Number: 1-12286
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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 21090
- - ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(410) 684-2000
- - ----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- - ----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (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.
YES X NO
----- -----
6,298,977 Common Shares were outstanding as of September 30, 1996.
1
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MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
2
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<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MID-ATLANTIC REALTY TRUST
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(UNAUDITED)
ASSETS <C> <C>
Properties:
Operating properties ......... $ 199,363,930 204,132,134
Less accumulated depreciation
and amortization ........... 41,545,579 39,430,308
-------------- -------------
157,818,351 164,701,826
Development operations ....... 2,864,548 1,510,544
Property held for development
or sale ..................... 7,021,910 8,179,378
-------------- -------------
167,704,809 174,391,748
Cash and cash equivalents .... 870,199 514,386
Notes and accounts receivable -
tenants and other ............ 1,410,773 2,350,578
Due from joint venture partners - 1,599,581
Prepaid expenses and deposits . 564,128 449,850
Deferred financing costs ...... 2,904,071 3,215,156
-------------- -------------
$ 173,453,980 182,521,299
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and
accrued expenses ............ $ 2,409,451 4,604,848
Notes payable ................ 12,000,000 21,530,143
Construction loan payable .... - 10,099,510
Mortgages payable ............ 75,298,014 62,411,104
Convertible subordinated
debentures .................. 56,920,000 59,980,000
Deferred income .............. 1,085,808 1,222,673
Minority interest in
consolidated joint ventures . 3,089,872 1,734,799
-------------- -------------
150,803,145 161,583,077
Shareholders' Equity:
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, 6,298,977 and
6,016,111, respectively ..... 62,990 60,161
Additional paid-in capital ... 43,256,514 40,389,783
Distributions in excess of
accumulated earnings ........ (20,668,669) (19,511,722)
-------------- -------------
22,650,835 20,938,222
-------------- -------------
$ 173,453,980 182,521,299
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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MID-ATLANTIC REALTY TRUST
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
<C> <C> <C> <C>
REVENUES:
Rentals ......... $ 19,500,337 17,483,891 6,643,378 5,797,240
Other ........... 676,010 858,587 128,486 276,874
----------- ----------- ----------- -----------
20,176,347 18,342,478 6,771,864 6,074,114
COSTS AND EXPENSES:
Interest ....... 9,449,042 8,798,459 3,150,708 2,965,937
Depreciation and
amortization of
property and
improvements ... 4,037,567 3,649,025 1,366,833 1,229,925
Operating ...... 2,794,486 2,256,948 921,948 719,273
General and
administrative . 1,451,724 1,246,285 477,047 416,276
----------- ----------- ----------- -----------
17,732,819 15,950,717 5,916,536 5,331,411
EARNINGS FROM OPERATIONS
BEFORE MINORITY
INTEREST ....... 2,443,528 2,391,761 855,328 742,703
Minority interest
expense ......... (426,432) (537,049) (49,973) (181,488)
----------- ----------- ----------- -----------
EARNINGS FROM
OPERATIONS ..... 2,017,096 1,854,712 805,355 561,215
Gain on life insurance
proceeds ....... - 1,001,787 - -
Gain (loss) on sales of
properties held for
sale, net ...... 285,009 (25,020) 285,009 (29,579)
Gain (loss) on sales of
operating properties,
net ............ 720,915 (377,358) 21,194 -
----------- ----------- ----------- -----------
EARNINGS BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE ....... 3,023,020 2,454,121 1,111,558 531,636
Cumulative effect of
change in accounting
for percentage
rents ........... - 612,383 - -
----------- ----------- ----------- ------------
NET EARNINGS ..... $ 3,023,020 3,066,504 1,111,558 531,636
=========== =========== =========== ===========
PER SHARE DATA:
EARNINGS PER SHARE
BEFORE CUMULATIVE
EFFECT OF CHANGE
IN ACCOUNTING
PRINCIPLE ....... $ 0.50 0.39 0.18 0.09
Cumulative effect of
change in accounting
principle ....... - 0.10 - -
----------- ----------- ----------- -----------
NET EARNINGS .... $ 0.50 0.49 0.18 0.09
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
4
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MID-ATLANTIC REALTY TRUST
Consolidated Statements of Cash Flows
(UNAUDITED)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
Cash flows from operating activities:
<S> <C> <C>
Net earnings ............... $ 3,023,020 3,066,504
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and
amortization ............. 4,037,567 3,649,025
(Gain) loss on sales of operating
properties, net ......... (720,915) 377,358
Minority interest in earnings from
operations, net .......... 426,432 537,049
(Gain) loss on sales of properties
held for sale, net ....... (285,009) 25,020
Changes in operating assets and liabilities:
Decrease (increase) in
operating assets ........ 825,527 (592,877)
(Decrease) increase in operating
liabilities ............. (2,332,262) 276,082
------------ -------------
Total adjustments ..... 1,951,340 4,271,657
------------ -------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES .................. 4,974,360 7,338,161
Cash flows from investing activities:
Additions to properties ..... (4,272,854) (13,242,282)
Proceeds from sales of
properties ................. 10,968,593 2,835,225
Receipts from minority
partners ................... 89,004 206,500
Payments to minority
partners ................... (601,224) (642,443)
------------ -------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES ................. 6,183,519 (10,843,000)
------------ -------------
Cash flows from financing activities:
Proceeds from notes
payable ................... 31,980,565 39,400,000
Principle payments
on notes payable ........... (41,510,708) (42,506,952)
Proceeds from mortgages
payable .................... 18,900,000 7,700,000
Principal payments on mortgages
payable ................... (6,013,090) (402,211)
Proceeds from construction loan
payable .................... 194,222 5,140,996
Principle payments on construction loan
payable ................... (10,293,732) -
Additions to deferred finance
costs ...................... (222,936) (209,005)
Amortization of deferred
finance costs .............. 424,494 427,476
Shares purchased ............ (80,914) (1,382,389)
Dividends paid ............. (4,179,967) (4,095,152)
------------ -------------
NET CASH (USED) PROVIDED BY
IN FINANCING ACTIVITIES .... (10,802,066) (4,072,763)
NET INCREASE IN CASH
AND CASH EQUIVALENTS ........ 355,813 567,924
CASH AND CASH EQUIVALENTS,
beginning of period ......... 514,386 344,522
------------ -------------
CASH AND CASH EQUIVALENTS,
end of period ................ $ 870,199 912,446
============ =============
</TABLE>
During the nine month period ended September 30, 1996, $3,060,000 in
convertible debentures were converted to 291,426 common shares of beneficial
interest decreasing convertible subordinated debentures by $3,060,000,
decreasing deferred financing costs by $109,526 and increasing shareholders'
equity by $2,950,474.
During the nine month periods ended September 30, 1996 and 1995, $97,477
and $396,624, respectively, in interest costs were capitalized as
construction period interest in development operations.
In April, 1995, $20,000 in convertible debentures were converted to 1,904
common shares of beneficial interest decreasing convertible subordinated
debentures by $20,000, decreasing deferred financing costs by $858 and
increasing shareholders' equity by $19,142.
See accompanying notes to consolidated financial statements.
5
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<PAGE>
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements
(UNAUDITED)
ORGANIZATION
Mid-Atlantic Realty Trust (the "Company", or "MART") was formed on June 29,
1993 and commenced operations effective with the completion of its initial
public share offering on September 11, 1993. The Company is the successor
to the operations of BTR Realty, Inc. (the predecessor to the company),
(BTR), and qualifies as a real estate investment trust (REIT) for Federal
income tax purposes.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1996 and the consolidated
statements of operations for the Company for the three and nine month periods
ended September 30, 1996 and September 30, 1995 and the consolidated
statements of cash flows for the periods ended September 30, 1996 and
September 30, 1995, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position and the
results of operations have been included. The results of operations for the
periods ended September 30, 1996 are not necessarily indicative of the
operating results for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Mid-Atlantic Realty Trust
December 31, 1995 Annual Report to Shareholders.
Certain amounts for 1995 have been reclassified to conform to 1996
presentation.
DEFERRED FINANCE COSTS
Effective January 1, 1996 the Company changed its reporting of amortization
of deferred finance costs. During the year ended December 31, 1995 and
previously, the annual amortization of deferred finance costs was reported in
the depreciation and amortization of property and improvements expense line in
the consolidated statements of operations. In 1996, the Company began
reporting the amortization of deferred finance costs in the interest
expense line in the consolidated statement of operations. The comparative
prior year interest and depreciation and amortization expense amounts have
been reclassified to reflect this change.
GAIN (LOSS) ON SALES OF PROPERTIES HELD FOR SALE, NET
Effective January 1, 1996 the Company changed its reporting of gains or
losses on sales of properties held for sale. During the year ended December
31, 1995, and previously, gains or losses on sales of properties held for sale
had been included in revenues in the consolidated statement of operations were
therefore included in earnings from operations. The Company is not in
the business of buying land for resale. Therefore, management believes gains
or losses on sales of properties held for sale should not be included in
earnings from operations, and should be an adjustment to earnings from
operations to arrive at net earnings. The comparative prior year revenues,
earnings from operations and gains or losses on sales of properties held for
sale have been reclassified to reflect this change.
The net gains on properties held for sale and operating properties include
minority interest expense of $96,049 and $21,194, respectively for both the
three and nine month periods ended September 30, 1996.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
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 recognizes percentage rent as rental revenues in
the period when it is earned. The Company began on January 1, 1995 estimating
the percentage rent earned from major tenants and recorded the amounts monthly
as receivable. The cumulative effect of this change on January 1, 1995 was
$612,000. The Company believes that this method is preferable since it
results in the recognition of the revenues in the period they are earned.
GAIN ON LIFE INSURANCE PROCEEDS
In January, 1995, the Company received $1,002,000 in life insurance proceeds
as a result of the death of a former BTR general partner and officer.
CONTINUED
6
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MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements - Continued
(UNAUDITED)
DUE FROM JOINT VENTURE PARTNERS
Effective July 1, 1996, the Company acquired a portion of the minority
interest in a partnership which owns certain properties in satisfaction of
notes receivable of $6,100,000 from the minority partners.
NET EARNINGS PER SHARE
Primary net earnings per common share was computed by dividing net earnings
by the weighted average number of common shares and common share equivalents
outstanding for each period. The weighted average number of common shares and
common share equivalents for the nine month periods ended September 30, 1996
and September 30, 1995 was 6,056,784 and 6,212,973, respectively. The weighted
average number of common shares and common share equivalents for the three
month periods ended September 30, 1996 and September 30, 1995 was
6,096,659 and 6,136,179, respectively.
CONVERTIBLE SUBORDINATED DEBENTURES
The Company sold $60,000,000 in convertible subordinated debentures in
September, 1993. During the nine months ended September 30, 1996,
$3,060,000 in debentures were converted to 291,426 common shares of
beneficial interest. The balance of the debentures, of $56,920,000,
convertible at $10.50 per share, if fully converted, would produce an
additional 5,420,952 shares.
MART INCENTIVE STOCK OPTION PLANS
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. Upon inception at February 1,
1994, trustees, officers and key employees were granted 256,000 stock options.
During 1995 additional grants and cancellations of stock options totaled 1,332
and 3,000, respectively. The outstanding stock options at September 30, 1996,
totaling 254,332, allow holders to purchase one share of MART stock for $10.50
per share. All outstanding stock options were vested and exercisable at
September 30, 1996. The closing price of MART shares at September 30, 1996
was $9.75 per share. No options were exercised during the period ended
September 30, 1996 and, based on the market value of MART shares, the options,
if exercised, would be anti-dilutive, producing fewer weighted average shares
for the nine months ended September 30, 1996.
On September 14, 1995, the Company authorized the availability of 180,000
shares for a (New Plan), the 1995 Stock Option Plan. The New Plan granted
options to purchase a number of shares equal to approximately 56% of the
number awarded under the Plan, or 141,300. One third of the shares, or
47,100, vested on September 30, 1995, exercisable at $8 15/16 per share. An
additional third of the shares, or 47,100, vested on September 30, 1996,
exercisable at $9.75 per share. The balance of the shares will vest on
September 30, 1997, to be priced at the market price on the close of business
at that date. No options have been exercised and, based on the market value
of MART shares, the options, if exercised, would be dilutive producing 3,925
shares. This dilution of shares combined with the conversion of convertible
debentures would be anti-dilutive.
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.
The Company purchased 277,200 shares during the year ended December 31, 1995
for $2,234,616, at an average cost of $8.06 per share. On February 12, 1996
the MART Board of Trustees increased by 100,000 the authorized number of
shares that may be repurchased up to 410,000. During the nine months ended
September 30, 1996 the Company purchased an additional 8,560 shares at an
average cost of $9.45 per share.
SHAREHOLDERS' EQUITY
During the nine months ended September 30, 1996, shareholders' equity
changed for the following items:
- Net earnings of $3,023,020.
- Dividend paid by MART of $4,179,967.
- Shares purchased by MART of $80,914.
- Common shares and Additional paid-in-capital
increased by $2,950,474 due to conversion of $3,060,000
in debentures.
7
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<PAGE>
Part I. FINANCIAL INFORMATION
Item 2.
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the operations for the nine and three
month periods ended September 30, 1996 with the operations for the nine and
three month periods ended September 30, 1995.
Comparison of nine months ended September 30, 1996 to nine months ended
September 30, 1995
Rental revenues increased by $2,016,000 or 12% to $19,500,000 for the nine
months ended September 30, 1996 from $17,484,000 for the nine months ended
September 30, 1995. The purchase of the Brandywine Commons Shopping
Center in November, 1995 and the opening of the Owings Mills New Town
Shopping Center in November, 1995 contributed $2,524,000 in additional
revenues for the period. Redevelopment, occupancy and rental rate increases
contributed to rental increases of approximately $819,000. The increases
were partly offset by $1,061,000 in rental revenue decreases attributable to
the sale in February, 1995 of the Regal Row warehouse project, the sale in
January, 1996 of the Dolton Bowling center, the sale in January, 1996 of the
Park Sedona center, the sale in May, 1996 of the Dobson-Guadalupe shopping
center, and the sale in December, 1995 of the McRay Shopping Center. In
addition, $266,000 in rental decreases were related primarily to vacancies
and lower percentage rents.
Other income decreased by $182,000 to $676,000 from $858,000 primarily due
to rental insurance proceeds in 1995 and lower interest income.
As a result of the above changes total revenues increased by $1,834,000 to
$20,176,000 from $18,342,000.
Interest expense increased by $651,000 to $9,449,000 from $8,798,000
primarily due to the increased debt for the development of the Owings Mills
New Town and the redevelopment of York Road Plaza.
Depreciation and amortization increased by $389,000 to $4,038,000 from
$3,649,000 primarily due to depreciation increases related to the purchase of
Brandywine Commons, the development of Owings Mills New Town and the
Harford Mall Annex, offset by decreases related to the sale of Park Sedona and
McRay.
Operating expenses increased by $537,000 to $2,794,000 from $2,257,000
primarily due to the purchase of Brandywine Commons, ($257,000), as well as
other net operating expense increases of $150,000, primarily related to
increased landlord expenses due to higher reserves for bad debt. In addition,
operating expenses increased due to the opening of Owings Mills New Town,
($54,000), and due to higher occupancy in Gateway Offices, $76,000. Although
snow removal expenses were higher than expected, the additional landlord
portion of the expenses did not increase operating expenses significantly for
the nine months ended September 30, 1996.
General and administrative expenses increased by $206,000 to $1,452,000 from
$1,246,000 due primarily to higher payroll expenses, ($108,000), and other net
general and administrative expense increases of $98,000.
Minority interest expense decreased by $111,000 to $426,000 from $537,000
generally due to lower earnings in minority interest ventures in 1996 as a
result of the acquistion of minority partner shares.
Earnings from operations increased by $162,000 to $2,017,000 from
$1,855,000. For the nine month period ended September 30, 1995, MART had a
loss on the sale of the Regal Row warehouse operating property of $377,000, a
net loss on sales of properties held for sale in North Carolina of $25,000, a
cumulative effect of a change in accounting for percentage rents of $612,000
and a gain on life insurance proceeds of $1,002,000, which, when combined with
earnings from operations resulted in net earnings of $3,067,000 for the
period. In the nine month period ended September 30, 1996, MART recognized a
gain on sales of operating properties of $721,000 (net of minority interest of
$21,000) which included gains on the sales of Dobson-Guadalupe of $178,000,
Park Sedona of $160,000, Dolton Bowl of $362,000, and Chandler of $21,000.
MART also recognized a gain on sales of properties held for sale of $285,000,
(net of minority interest of $96,000), which included a gain on the
condemnation of lots at Northwood of $195,000 and a $90,000 net gain on the
sale of development projects. The gains on sales, when combined with earnings
from operations, resulted in net earnings of $3,023,000 for the period.
Continued
8
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MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of three months ended September 30, 1996 to three months ended
September 30, 1995
Rental revenues increased by $846,000 or 15% to $6,643,000 for the three
months ended September 30, 1996 from $5,797,000 for the three months ended
September 30, 1995. The purchase of the Brandywine Commons Shopping Center in
November, 1995 and the opening of the Owings Mills New Town Shopping Center in
November, 1995 contributed $885,000 in additional revenues for the period.
Redevelopment, occupancy and rental rate increases contributed to rental
increases of approximately $342,000. The increases were partly offset by
$360,000 in rental revenue decreases attributable to the sale in May, 1996 of
Dobson-Guadalupe shopping center, the sale in January, 1996 of the Dolton
Bowling center, the sale in January, 1996 of the Park Sedona center, and the
sale in December, 1995 of the McRay Shopping Center.
Other income decreased by $148,000 to $129,000 from $277,000 primarily due
to lower interest income in 1996.
As a result of the above changes total revenues increased by $698,000 to
$6,772,000 from $6,074,000.
Interest expense increased by $185,000 to $3,151,000 from $2,966,000
primarily due to the increased debt for the development of the Owings Mills
New Town and the redevelopment of York Road Plaza.
Depreciation and amortization increased by $137,000 to $1,367,000 from
$1,230,000 primarily due to depreciation increases related to the purchase of
Brandywine Commons, the development of Owings Mills New Town and the
Harford Mall Annex, offset by decreases related to the sales of Park Sedona
and McRay.
Operating expenses increased by $203,000 to $922,000 from $719,000
primarily due to the purchase of Brandywine Commons, ($94,000), the
opening of Owings Mills New Town, ($29,000), and other net operating
expense increases of $80,000, primarily from higher landlord expenses
due to higher reserves for bad debt.
General and administrative expenses increased by $60,000 to $477,000 from
$417,000 due primarily to higher payroll expenses, $36,000, and other net
general and administrative expense increases of $24,000.
Minority interest expense decreased by $131,000 to $50,000 from $181,000
generally due to lower earnings in minority interest ventures in 1996 as a
result of the acquisition of minority partner shares.
Earnings from operations increased by $244,000 to $805,000 from $561,000.
In the three month period ended September 30, 1995, MART recognized a loss on
the sale of properties held for sale in North Carolina of $29,000, which, when
combined with earnings from operations resulted in net earnings of $532,000
for the period. In the three month period ended September 30, 1996, MART
recognized a $21,000 gain, (net of minority interest of $21,000) on the sale
of an operating property, Chandler shopping center, as well as a gain on sales
of properties held for sale of $285,000, (net of minority interest of
$96,000), which included a gain on the condemnation of lots at Northwood of
$195,000 and a $90,000 net gain on the sale of development projects. The
gains on sales, when combined with earnings from operations, resulted in net
earnings of $1,111,000 for the period.
FINANCIAL CONDITION AND LIQUIDITY
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 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.
At September 30, 1996, the unused secured 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 approximately $300,000, was
$27,700,000.
CASH FLOWS COMPARISON
Net cash flow provided by operating activities declined by $2,364,000, to
$4,974,000, for the nine months ended September 30, 1996 from $7,338,000 for
the nine months ended September 30, 1995. This change in cash provided was
due to changes in the levels of operating assets and liabilities, primarily
due to changes in accrued construction and retainage.
Net cash provided by or used in investing activities increased by
$17,027,000 to cash provided by investing activities of $6,184,000 from cash
used in investing activities of $10,843,000. This increase in cash provided
was due primarily to declines in property additions of $8,969,000 and
increases of proceeds from the sale of properties of $8,134,000.
Net cash used in or provided by financing activities declined by $14,875,000
to cash used in financing activities of $10,802,000 from cash provided by
financing activities of $4,073,000. This change in cash used in or provided
by financing activities was due primarily to a $16,075,000 change in cash used
for a net decrease in construction loans payable, notes payable, and mortgages
payable offset partly by cash provided by a $1,301,000 reduction in the amount
of shares purchased.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings - In the ordinary course of business, the Company
is involved in legal proceedings. However, there are no material legal
proceedings pending against the Company.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
9
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<PAGE>
MID-ATLANTIC REALTY TRUST
Item 5. Other Information -
Summary Financial Data
The following sets forth summary financial data which has been prepared
by the Company without audit. 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.
MID-ATLANTIC REALTY TRUST
Summary Financial Data
(In thousands, except per share data)
Nine months Three months
ended September 30, ended September 30,
1996 1995 1996 1995
Revenues $20,176 $18,342 $6,772 $6,074
Net earnings $3,023 $3,067 $1,111 $532
Net earnings per share
-primary $0.50 $0.49 $0.18 $0.09
OTHER FINANCIAL DATA:
Funds from operations
(FFO) (1)(2)-primary $6,055 $5,504 $2,172 $1,791
FFO - fully diluted (2) $9,676 $9,164 $3,370 $3,011
Weighted average number
of shares outstanding -
primary 6,057 6,213 6,097 6,136
Weighted average number
of shares outstanding -
fully diluted 11,724 11,925 11,720 11,849
SELECTED CASH FLOW DATA:
Net cash flow provided by
operating activities $4,974 $7,338
Reconciliation of Net Earnings to Funds from operations - primary
Net earnings $3,023 3,067 $1,111 $532
Less:
Non Recurring items -
Cumulative effect of
change in accounting
for percentage rents - (612) - -
Gain on Life Insurance
Proceeds - (1,002) - -
Add: Depreciation &
Amortization 4,038 3,649 1,367 1,230
Less: Gains on Sales or
Add: Loss on Sales (1,006) 402 (306) 29
-------- -------- -------- --------
Funds from operations (FFO)-
primary $6,055 $5,504 $2,172 $1,791
======== ======== ======== ========
(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 cumulative effects of changes in accounting principles,
extraordinary or unusual items, and gains (or losses) from debt restructuring
and sales of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. FFO does not
represent cash flows from operations as defined by generally accepted
accounting principles (GAAP). FFO is not indicative that cash flows are
adequate to fund all cash needs and is not to be considered as an
alternative to net income as defined by GAAP. The presentation of funds from
operations is not normally included in financial statements prepared in
accordance with GAAP.
(2) Effective January 1, 1996 the Company adopted changes to the NAREIT
definition of funds from operations. Certain amounts for 1995 have been
reclassified to conform to the 1996 presentation.
Item 6. Other Information - Exhibits and Reports on Form 8-K -
Exhibit No. 27 - Financial Data Schedule
Filed thru EDGAR
10
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<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-ATLANTIC REALTY TRUST AND
SUBSIDIARIES
(Registrant)
Date 10/31/96 By: /s/ F. Patrick Hughes
F. Patrick Hughes
President
Principal Executive Officer
Date 10/31/96 By: /s/ Paul G. Bollinger
Paul G. Bollinger
Controller
Principal Financial Officer
11
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 870
<SECURITIES> 0
<RECEIVABLES> 1,411
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 167,705
<DEPRECIATION> 41,546
<TOTAL-ASSETS> 173,454
<CURRENT-LIABILITIES><F1> 0
<BONDS> 132,218
<COMMON> 63
0
0
<OTHER-SE> 22,588
<TOTAL-LIABILITY-AND-EQUITY> 173,454
<SALES> 0
<TOTAL-REVENUES> 20,176
<CGS> 0
<TOTAL-COSTS> 17,733
<OTHER-EXPENSES> 426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,449
<INCOME-PRETAX> 3,023
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,023
<EPS-PRIMARY> .50
<EPS-DILUTED> .57
<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>
