<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, 1996
-----------------
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.)
1302 Concourse Drive, Suite 204 - 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 March 10, 1997, 7,374,805 common shares of beneficial interest of
Mid-Atlantic Realty Trust were outstanding and the aggregate value of common
stock (based upon the $11.25 closing price on that date) held by non-affiliates
was approximately $82,967,000.
Documents Incorporated by Reference
The definitive proxy statement with respect to the 1997 annual meeting of
Mid-Atlantic Realty Trust shareholders (to be filed).
9
PAGE
<PAGE>
PART I
ITEM 1
BUSINESS
Mid-Atlantic Realty Trust was incorporated June 29, 1993 and commenced
operations effective with the completion of its initial public share offering
on September 11, 1993. Mid-Atlantic Realty Trust is the successor to the
operations of BTR Realty, Inc. (the predecessor to Mid-Atlantic Realty Trust),
and qualifies as a real estate investment trust, "REIT", for Federal income
tax purposes. As used herein, the term "MART" refers to Mid-Atlantic Realty
Trust, the term "Company" refers to MART and its subsidiaries, and "BTR"
refers to BTR Realty, Inc. and its subsidiaries.
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 operating shopping centers,
fifteen which are wholly-owned by the Company, and five in which the Company
has interests ranging from 50% to 93%, as well as other commercial properties.
The operating properties have a gross leasable area of approximately 3,126,000
square feet, of which approximately 96% was leased at December 31, 1996. Of
these properties, approximately 94% of the gross leasable area is in the
states of Maryland, Virginia, New York and Delaware, 5% in Arizona and 1% in
Illinois. The Company also owns 8 undeveloped parcels of land totaling
approximately 149 acres and varying in size from 3 to 43 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 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 opportunities. 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.
The Company has 52 full time employees and believes that its relationship
with its employees is good.
10
PAGE
<PAGE>
ITEM 2
PROPERTIES
The following schedule describes the Company's commercial and other
properties as of December 31, 1996:
I. SHOPPING CENTERS
A. In Operation (1)
<TABLE>
<CAPTION>
Type
Percent- of Leas-
age of land Area able Percent- Lease
Name and owner- owner- in square age Principal expir-
Location ship ship acres feet leased tenants ations
MARYLAND PROPERTIES:
<S> <C> <C> <C> <C> <C> <C> <C>
Harford Mall 100% Fee(2) 38.0 588,000(3) 97% Hecht's, 1997-2011
U.S. Route 1 Montgomery Ward,
Bel Air Woolworth, Best Buy,
PetsMart
Patriots Plaza 50% Long-term 6.1 39,000 83% Denny's, 1997-2005
Ritchie Highway of lease(4) Dunkin Donuts
Anne Arundel Partnership
County
Rolling Road 100% Fee 6.5 63,000 92% Fair Lanes,1997-2009
Plaza Firestone
Rolling Road
Baltimore County
Rosedale Plaza 100% Fee 9.2 73,000 78% Valu Food, 1997-2002
Chesaco and Weyburn Avenue Rite Aid
Baltimore County
Shoppes at Easton 100% Fee 13.9 113,000 96% Giant Food,1997-2024
Route 50 Walmart (on own pad)
Easton
New Town Village 100% Fee 11.0 118,000 98% Giant Food,1998-2020
Lakeside Drive Blockbuster
Owings Mills Starbucks,
Hair Cuttery
Wilkens Beltway 93% Fee 7.1 79,000 100% Giant Food,1997-2006
Plaza of Provident Bank,
Wilkens Avenue Partnership Radio Shack,
Baltimore County Hair Cuttery
York Road Plaza 100% Fee 7.5 90,000 100% Giant Food,1997-2026
York Road Firestone, Starbucks,
Baltimore County Sears Optical, GNC,
Boston Market,
Bruegger's
Timonium Mall 100% Long-term 12.9 284,000 100% Caldor, 2001-2011
York & Ridgely Roads Lease(5) Circuit City,
Timonium Metro Food Market,
State of Maryland
DELAWARE PROPERTIES:
Brandywine Commons 100% Long-term 25.9 164,000 100% ShopRite, 2008-2014
Concord Pike Lease(6) Computer City,
Wilmington Ground Round,
Sports Authority,
Service Merchandise
NEW YORK PROPERTIES:
Colonie Plaza 100% Fee 18.7 140,000 96% Price 1997-2007
Central Avenue Chopper,
Colonie Pharmhouse
Columbia Plaza 100% Fee 16.0 117,000 96% Price 1997-2008
Columbia Turnpike Chopper,
East Greenbush Ben Franklin
</TABLE>
11
PAGE
<PAGE>
ITEM 2. Properties (continued)
I. SHOPPING CENTERS (continued)
A. In Operation (continued)
<TABLE>
<CAPTION>
Type
Percent- of Leas-
age of land Area able Percent- Lease
Name and owner- owner- in square age Principal expir-
Location ship ship acres feet leased tenants ations
<S> <C> <C> <C> <C> <C> <C> <C>
VIRGINIA PROPERTIES:
Burke Town Plaza 100% Long-term 12.6 114,000 99% Safeway, 1997-2005
Old Keene Mill Road lease(7) CVS Drug Store
Burke
Skyline Village 100% Fee 14.6 127,000 97% Richfood, 1997-2010
US Route 33 Toys "R" Us
Harrisonburg
Smoketown Plaza 93% Fee 27.0 176,000 99% Hub 1997-2011
Minnieville and of Furniture,
Smoketown Roads Partnership Frank's Nursery
Prince William County & Crafts
Spotsylvania 93% Fee 11.2 142,000 97% K-Mart, 1997-2007
Crossing of CVS Drug Store,
Route 3 & Bragg Partnership Giant Food (on
Road own Pad)
Fredericksburg
Sudley Towne 100% Fee 9.6 108,000 100% Burlington 1997-2009
Plaza Coat Factory
Route 234 & Sudley Manor Dr.
Manassas
ARIZONA PROPERTIES:
Fair Lanes Union 50% Fee 5.9 17,000 88% No 1998-2000
Hills Plaza(8) of principal
Union Hills Drive Partnership tenants
Phoenix selected
Gateway Park 100% Fee 10.5 82,000 79% Bashas', 1997-2011
Page Walmart (on own pad)
Plaza Del Rio (9) 100% Fee 11.8 60,000 100% Payless 1997-2009
16th Street and Avenue B Drug Store,
Yuma Hancock Fabrics,
Fry's Supermarket
(on own pad)
II. OFFICE BUILDINGS
A. In Operation (10)
MARYLAND PROPERTIES:
Gateway 100% Fee 7.0 84,000 95% U.S. 1997-2003
International I Healthcare,
Elkridge Landing & American Express
Winterson Roads
Anne Arundel County
Gateway 100% Fee 15.5 119,000 98% AT&T, 1997-2004
International II Price Waterhouse,
Elkridge Landing & American Express,
Winterson Roads TNT Logistics
Anne Arundel County
Patriots Plaza 50% Long-term 0.5 28,000 17% No 1999-2004
Office Building of lease (11) principal
Ritchie Highway Partnership tenants
Anne Arundel County selected
Wilkens Beltway 93% Fee 3.9 53,000 94% Columbia, 1997-2003
Plaza Office Park of Freestate,
Buildings I, Partnership Prudential
II & III Health System
Wilkens Avenue &
Maiden Choice Lane
Baltimore County
</TABLE>
12
PAGE
<PAGE>
ITEM 2. Properties (Continued)
III. OTHER DEVELOPED PROPERTIES
A. In Operation
<TABLE>
<CAPTION>
Type
Percent- of Leas- Per-
age of land Area Im- able cent- Princ- Lease
Name and owner- owner- in prove- square age pal expir-
Location ship ship acres ments feet leased tenants ations
MARYLAND PROPERTIES:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Business Center 100% Fee 5.4 One-story 27,000 93% No 1997-2001
at Harford Mall Warehouse principal
Harford County tenants
selected
Clinton Property 100% Long-term2.9 Bowling 29,000 100% Fair 2001-2003
Prince George's lease (12) Center and Lanes,
County Bank Suburban Bank
Southwest Property 100% Fee 3.2 One-story 25,000 100% Shell1998-2001
Anne Arundel Office Building, One-story Oil, Carrier/
County Warehouse and Gas Station Otis, Potomac
Air Gas
Waldorf Property 100% Fee 3.6 Bowling 30,000 100% Fair 1998-2002
Waldorf Center and Lanes,
Tire Center Firestone
ILLINOIS PROPERTY:
Illinois 100% Fee 5.0 Bowling 37,000 100% Fair 1998
Property Center Lanes
Chicago
</TABLE>
(1) Shopping centers in operation are subject to mortgage financing
aggregating $68,306,762 at December 31, 1996.
(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,
1996 of $19,537,860. 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 11 years plus two 10 year options.
(5) Remaining term of 20 years plus six 10 year options.
(6) Remaining term of 56 years plus two 10 year options.
(7) Remaining term of 35 years plus three 15 year renewal options.
(8) Union Hills was sold on March 14, 1997 $1,000,000, which should generate
a gain on the sale of approximately $236,000.
(9) A purchase option agreement has been signed to sell this property for
$5,350,000, which should generate no significant gain or loss on the
sale in 1997. In 1996, the Company recorded a $713,900 valuation
allowance for loss related to the pending sale of this property.
(10) Office buildings in operation are subject to mortgage financing
aggregating $1,903,733 as of December 31, 1996.
(11) Remaining term of 11 years plus two 10 year options.
(12) Remaining term of 30 years plus a 45 year renewal option.
IV. UNDEVELOPED PROPERTIES
<TABLE>
<CAPTION>
Percentage of Type of land Area in
Name and Location ownership ownership acres Zoning
MARYLAND PROPERTIES:
<S> <C> <C> <C> <C>
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
(Adjacent to Harford Mall) Industrial
Harford County
North East Property 100% Fee 41.0 Commercial/
North East Residential
Northwood Industrial Park 67% Fee 24.5 Industrial
Salisbury of Partnership
Pulaski Property 100% Fee 3.0 Industrial
Baltimore County
NORTH CAROLINA PROPERTIES:
Burlington Commerce Park 100% Fee 43.4 Commercial
Burlington
Hillsborough Crossing 100% Fee 8.0 Commercial
Hillsborough
</TABLE>
Management believes the Company's properties are adequately covered by
insurance.
13
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<PAGE>
ITEM 3
LEGAL PROCEEDINGS
In the ordinary course of business, the Company is involved in legal
proceedings. However, there are no material legal proceedings presently
pending against the Company.
ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5
Market for the Registrant's Common Stock And Related Stockholder Matters
MART's common shares of beneficial interest, par value $.01 per share,
("shares"), are listed on the American Stock Exchange (symbol: MRR), which
reports high, low and last sales prices. The table below lists high and low
sales prices for MART for the periods indicated.
<TABLE>
<CAPTION>
1996 High Low
<S> <C> <C>
First Quarter $10 3/8 8 5/8
Second Quarter 10 9 1/4
Third Quarter 10 1/8 9 3/8
Fourth Quarter 11 5/8 9 9/16
1995
First Quarter 8 1/2 7 3/4
Second Quarter 9 1/2 7 1/2
Third Quarter 9 1/4 8
Fourth Quarter 9 8 1/8
1994
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
</TABLE>
Cash dividends paid to holders of MART's shares during the periods
indicated are as follows:
<TABLE>
<CAPTION>
Cash Dividend Paid
1996 1995 1994
<S> <C> <C> <C>
First Quarter $0.23 0.22 0.21
Second Quarter 0.23 0.22 0.21
Third Quarter 0.23 0.22 0.21
Fourth Quarter 0.24 0.23 0.22
------- ------- -------
Totals $0.93 0.89 0.85
</TABLE>
For record shareholders of MART during the entire year, for each respective
year, it was determined that the per share dividends for each year indicated
are taxable as follows:
<TABLE>
<CAPTION>
Per Share
1996 1995 1994
<S> <C> <C> <C>
Ordinary Dividends -
taxable as ordinary income $0.58 0.48 0.55
Capital Gain Distribution -
taxable as capital gain - - 0.06
Non-taxable Distribution -
return of capital or taxable
gain - (depending on a
shareholder's basis in MART
shares) 0.35 0.41 0.24
------- ------- -------
Total Annual Gross Dividends
Per Share $0.93 0.89 0.85
Percent of total annual gross
dividends per share non-taxable
distribution - return of capital
or taxable gain 38% 46% 28%
</TABLE>
On February 18, 1997, MART declared a quarterly cash dividend of $.24 per
share payable March 14, 1997 to shareholders of record February 28, 1997.
The number of holders of record of the MART shares as of February 17, 1997
was 1,301.
14
PAGE
<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 Selected Financial Data of Mid-Atlantic Realty Trust as of
December 31, 1996, December 31, 1995, December 31, 1994, and December 31,
1993, and for the years ended December 31, 1996, December 31, 1995, December
31, 1994 and for the period September 11, 1993 (commencement of operations)
through December 31, 1993, and also includes Selected Financial Data of BTR
Realty, Inc. as of December 31, 1992 and for the period January 1, 1993
through September 10, 1993, and for the year ended December 31, 1992.
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. Certain
amounts for prior periods have been reclassified to conform to the 1996
presentation.
<TABLE>
<CAPTION>
Mid-Atlantic Realty Trust ||
------------------------------------------------ ||
September 11,||
1993 to ||
Year ended December 31, December 31,||
1996 1995 1994 1993 ||
<S> <C> <C> <C> <C> ||
||
Revenues $27,271,276 24,941,602 22,767,568 6,576,684 ||
=========== =========== =========== =========== ||
Net Earnings (Loss) ||
Before Cumulative ||
Effect of Change In ||
Accounting Principle and ||
Extraordinary Item $3,508,709 3,165,082 2,916,286 467,474 ||
Cumulative Effect of Change ||
In Accounting Principle - 612,383 - - ||
----------- ----------- ----------- ----------- ||
Net Earnings (Loss) Before ||
Extraordinary Item 3,508,709 3,777,465 2,916,286 467,474 ||
Extraordinary Item - - - - ||
----------- ----------- ----------- ----------- ||
Net Earnings (Loss) $3,508,709 3,777,465 2,916,286 467,474 ||
=========== =========== =========== =========== ||
||
Net Earnings (Loss) Per ||
Share Before Cumulative ||
Effect of Change In ||
Accounting Principle ||
and Extraordinary Item $0.56 0.51 0.46 0.07 ||
Cumulative Effect of Change ||
In Accounting Principle - 0.10 - - ||
----------- ----------- ----------- ----------- ||
Net Earnings (Loss) Per ||
Share Before ||
Extraordinary Item 0.56 0.61 0.46 0.07 ||
Extraordinary Item - - - - ||
----------- ----------- ----------- ----------- ||
Net Earnings (Loss) ||
Per Share $0.56 0.61 0.46 0.07 ||
=========== =========== =========== =========== ||
||
Weighted Average Shares ||
Outstanding, ||
Including Common ||
Share Equivalents (1) 6,216,385 6,176,991 6,291,407 6,291,407 ||
=========== =========== =========== =========== ||
||
Total Assets $173,278,241 182,521,299 162,842,567 148,563,052 ||
=========== =========== =========== =========== ||
||
Indebtedness - ||
total mortgages, convertible ||
debentures, construction ||
loans and notes payable$133,805,495 154,020,757 133,390,553 116,494,372 ||
=========== =========== =========== =========== ||
||
Net cash provided by ||
operating activities $9,341,629 10,612,290 7,232,441 3,321,906 ||
=========== =========== =========== =========== ||
||
Cash Dividends ||
Paid Per Share $0.93 0.89 0.85 0.05 ||
=========== =========== =========== =========== ||
/TABLE
<PAGE>
<TABLE>
<CAPTION>
BTR Realty, Inc.
-------------------------------------
January 1, 1993 Year ended
to September 10, December 31,
1993 1992
<S> <C> <C>
Revenues 14,848,710 21,252,872
Net Earnings (Loss)
Before Cumulative
Effect of Change In
Accounting Principle and
Extraordinary Item (2,057,106) (1,118,957)
Cumulative Effect of Change
In Accounting Principle - 1,286,000
------------ ------------
Net Earnings (Loss) Before
Extraordinary Item (2,057,106) 167,043
Extraordinary Item (548,323) -
------------ ------------
Net Earnings (Loss) (2,605,429) 167,043
============ ============
Net Earnings (Loss) Per Share
Before Cumulative
Effect of Change In
Accounting Principle and
Extraordinary Item (0.24) (0.13)
Cumulative Effect of Change In
Accounting Principle - 0.15
------------ ------------
Net Earnings (Loss) Per
Share Before
Extraordinary Item (0.24) 0.02
Extraordinary Item (0.06) -
------------ ------------
Net Earnings (Loss)
Per Share (0.30) 0.02
============ ============
Weighted Average Shares
Outstanding,
Including Common
Share Equivalents (1) 8,512,718 8,503,916
============ ============
Total Assets $147,869,512 153,212,133
============ ============
Indebtedness:
total mortgages, convertible
debentures, construction
loans and notes payable 150,666,971 149,168,632
============ ============
Net cash provided by
operating activities 3,952,507 973,174
============ ============
Cash Dividends
Paid Per Share 0.58 -
============ ============
</TABLE>
(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
15
PAGE
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA - CONTINUED
Summary Financial Data
The following sets forth summary financial data on an actual and pro
forma basis. Management believes the following data should be used as a
supplement to the historical statements of operations. The data should be read
in conjunction with the historical financial statements and the notes thereto
for MART included in Item 8. The pro forma financial data for 1993 are
unaudited and are not necessarily indicative of the results which actually
would have occurred if the transactions had been consummated at January 1,
1992. The pro forma data assumes the MART public offering took place on
January 1, 1992.
Summary Financial Data
In thousands, except per share data
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994 1993
ACTUAL ACTUAL ACTUAL PROFORMA
<S> <C> <C> <C> <C>
Revenues $27,271 24,942 22,768 20,777
Net earnings $3,509 3,777 2,916 1,217
Net earnings per share $0.56 0.61 0.46 0.19
Funds from operations (FFO) (1)(3):
Primary $8,622 7,427 6,263 5,488
Fully diluted $13,178 12,307 11,173 10,377
Net Cash Flow:
Provided by operating
activities $9,342 10,612 7,232 N/A (2)
Provided by (used in)
investing activities $4,232 (23,584) (19,630) N/A (2)
(Used in) provided by
financing activities ($13,074) 13,142 12,055 N/A (2)
Weighted average number of shares
outstanding:
Primary 6,216 6,177 6,291 6,291
Fully diluted 11,756 11,889 12,005 12,005
Reconciliation of Net Earnings to
Funds From Operations - primary
Net earnings $3,509 3,777 2,916 1,217
Less: Nonrecurring items -
Cumulative effect of change in
accounting for percentage rents - (612) - -
Gain on Life Insurance Proceeds - (1,002) - -
Add: Depreciation & Amortization on
Real Estate Assets 5,414 4,983 4,550 4,271
(Gain) loss on Properties (301) (281) (1,203) -
------- ------- ------- -------
FFO - primary $8,622 7,427 6,263 5,488
</TABLE>
(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 change 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 FFO
is not normally included in financial statements prepared in accordance
with GAAP.
(2) Net Cash Flows cannot be reasonably estimated on a pro forma basis for
1993.
(3) Effective January 1, 1996 the Company adopted changes to the NAREIT
definition of funds from operations. Certain amounts for prior years have
been reclassified to conform to the 1996 presentation.
Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations for MART for 1996 and 1995
are summarized as follows:
<TABLE>
<CAPTION>
Quarter ended
1996 March 31, June 30, September 30, December 31,
<S> <C> <C> <C> <C>
Revenues $6,703,283 6,701,200 6,771,864 7,094,929
=========== =========== =========== ===========
Net earnings $1,233,521 677,941 1,111,558 485,689
=========== =========== =========== ===========
Net earnings per share $0.20 0.11 0.18 0.07
=========== =========== =========== ===========
1995 March 31, June 30, September 30, December 31,
Revenues $6,255,595 6,012,769 6,074,114 6,599,124
=========== =========== =========== ===========
Earnings before Cummulative
Effect of Change in
Accounting Principle $1,352,427 570,058 531,636 710,961
Cummulative Effect of Change
In Accounting Principle 612,383 - - -
----------- ----------- ----------- ----------
Net Earnings $1,964,810 570,058 531,636 710,961
=========== =========== =========== ==========
Net Earnings per share $0.31 0.09 0.09 0.12
=========== =========== =========== ==========
</TABLE>
Quarterly results are influenced by a number of factors including timing of
settlements of property sales, completion of operating projects, and
write-offs of unrecoverable development costs, and valuation allowances for
loss pending sales of properties.
16
PAGE
<PAGE>
ITEM 7
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the Company's results of operations for
the year ended December 31, 1996, with those for the year ended December 31,
1995. The discussion also compares the Company's results of operations for
the year ended December 31, 1995 with those for the year ended December 31,
1994.
Comparison of 1996 to 1995
Rental revenues increased by $2,648,000 or 11% to $26,562,000 for the year
ended December 31, 1996 from $23,914,000 for the year ended December 31, 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 $3,113,000 in additional revenues for the period. Redevelopment,
occupancy and rental rate increases contributed to revenue increases of
appoximately $1,178,000. These increases were partly offset by $1,399,000 in
rental revenue decreases attributable to the sale in February, 1995 of the
Regal Row warehouse project, the sales in January, 1996 of the Dolton bowling
center and the Park Sedona shopping 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, $244,000 in revenue decreases were related
primarily to vacancies and lower percentage rents.
Other income decreased by $319,000 to $709,000 from $1,028,000 primarily
due to the receipts of rental insurance proceeds in 1995 and lower interest
income in 1996.
As a result of the above changes total revenues increased by $2,329,000 to
$27,271,000 from $24,942,000.
Interest expense increased by $426,000 to $12,354,000 from $11,928,000
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 $430,000 to $5,414,000 from
$4,984,000 primarily due to depreciation increases related to the purchase of
Brandywine Commons and the development of Owings Mills New Town, York Road
Plaza and the Harford Mall Annex, offset partly by decreases related to the
sales referred to above.
Operating expenses increased by $595,000 to $3,683,000 from $3,088,000,
primarily due to the purchase of Brandywine Commons, $274,000, as well as
other net operating expense increases of $160,000, primarily related to
increased landlord expenses due to higher bad debts and higher average
vacancies. In addition, operating expenses increased due to the opening of
Owings Mills New Town and due to higher occupancy in the Gateway Offices.
Although snow removal expenses were higher than expected, the additional
landlord portion of the expenses did not increase operating expenses
significantly in 1996.
General and administrative expenses increased by $318,000 to $2,098,000
from $1,780,000 due primarily to salary increases, $168,000, development costs
of an acquisition project no longer being pursued, $56,000, and other net
general and administrative expense increases of $94,000.
Minority interest expense decreased by $204,000 to $514,000 from $718,000
due primarily to the acquisition of minority partnership interests.
For 1996, earnings from operations increased by $764,000 to $3,208,000 from
$2,444,000. MART also recognized a gain on properties of $301,000, (net of
minority interest of $117,000). The gain on properties, when combined with
earnings from operations, resulted in net earnings of $3,509,000 for the
period. For 1995, MART had a loss on properties of $281,000, 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 $3,777,000 for the period.
17
<PAGE>
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of 1995 to 1994
Rental revenues increased by $2,023,000, or 9%, to $23,914,000 for the year
ended December 31, 1995 from $21,891,000 for the year ended December 31, 1994.
Two acquisitions, Easton Shoppes in September, 1994 and Brandywine Commons in
November, 1995, contributed revenue increases of $943,000 and $222,000,
respectively. Also, new redevelopment and development projects contributed
$527,000 to revenue increases and net increases in occupancy and rental rates
resulted in revenue increases of $763,000. The rental increases were partly
offset by a $357,000 decrease in rental revenues attributable to the sale in
February, 1995 of the Regal Row warehouse project and the sale in December,
1994 of the Oakton bowling center. In addition, $75,000 in revenue decreases
were primarily related to vacancies.
Other income increased by $151,000 to $1,028,000 from $877,000 primarily
due to receipts of insurance proceeds for lost rent at Rolling Road (which was
damaged by a fire in December, 1992), interest increases and other income at
Patriots Plaza and Wilkens Office II.
As a result of the above changes, total revenues increased by $2,174,000 to
$24,942,000 from $22,768,000.
Interest expense increased by $1,052,000 to $11,928,000 from $10,876,000
primarily due to the two new acquisitions, Easton Shoppes and Brandywine
Commons, which contributed increases of $692,000, and $97,000, respectively.
Also, new redevelopment and development projects contributed $268,000 to
interest expense increases. The interest expense increases were partly offset
by $84,000 in interest expense decreases related to interest rate and
principal reductions.
Depreciation and amortization increased by $434,000 to $4,984,000 from
$4,550,000 primarily due to the redevelopment at Harford Mall Annex and York
Road Plaza, the Easton Shoppes acquisition, and to tenant improvements at the
Gateway Offices. The increases were partly offset by depreciation decreases
primarily from the sale of the Regal Row warehouse property.
Operating expenses decreased by $249,000 to $3,088,000 from $3,337,000
primarily due to $156,000 in lower legal fees related to a tenant suit,
settled in 1995, at the Smoketown Plaza project. Operating expenses also
decreased by $144,000 due to the sales of the Regal Row warehouse project and
the Oakton bowling center. Other net operating expense decreases of $70,000
were primarily related to higher tenant occupancy resulting in lower landlord
operating expenses. The operating expense decreases were offset partly by
$70,000 in operating expense increases related to McRay shopping center, sold
in December, 1995 and Park Sedona shopping center, sold in January, 1996 and
$51,000 in operating expense increases related to the new acquisition,
Brandywine Commons.
General and administrative expenses increased by $29,000 to $1,780,000 from
,$1,751,000 due primarily to a $92,000 increase in net payroll expense and
$52,000 in other net expense increases partly offset by an $82,000 decrease in
insurance expense and a $33,000 decrease in legal fees.
Minority interest expense increased by $177,000 to $718,000 from $541,000
generally due to higher earnings in ventures with minority partners in 1995.
Earnings from operations increased by $731,000 to $2,444,000 from
$1,713,000. Certain non-operating items occurred for both periods. In 1995,
MART had a loss on properties of $281,000, 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 $3,777,000 for the period. For 1994, MART
recorded a gain on properties of $1,203,000, which when combined with the
earnings from operations, resulted in net earnings of $2,916,000 for the
period.
18
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Cash Flow comparison
The following discussion compares the statement of cash flows information
for 1996 with the information for 1995 and with the information for 1994.
Net cash flow provided by operating activities was $9,342,000, $10,612,000,
and $7,232,000 in 1996, 1995, and 1994, respectively. The changes in cash
provided by operating activities were due primarily to the factors discussed
above in the comparisons of operating results. The level of net cash provided
by operating activities is also affected by the timing of receipt of revenues
and the payment of operating and interest expenses. In particular, net cash
provided by operating activities for 1996 was reduced due to the payment of
certain operating liabilities and lower deferred rent receipts.
Net cash flow from investing activities increased by $27,816,000, to a net
cash flow provided by investing activities of $4,232,000 in 1996 from a net
cash flow used in investing activities of $23,584,000 in 1995. The increase
was primarily a result of reduced levels of acquisitions and additions to
properties in 1996 (primarily due to the acquisition of Brandywine Commons and
the Owings Mills New Town development project in 1995) and an increase in
proceeds from sales of properties.
Net cash flow used in investing activities increased by $3,954,000, to
$23,584,000 in 1995 from $19,630,000 in 1994. The increase was primarily a
result of acquisitions and additions to properties which resulted in an
increase in cash used of $7,325,000 (primarily due to the acquisition of
Brandywine Commons, the Owings Mills New Town development project and the
redevelopment projects in 1995 exceeding the Easton Shoppes acquisition in
1994). These increases were partly offset by increases in proceeds from sales
of properties of $1,652,000 and in receipts from minority partners of
$1,719,000.
Net cash flow from financing activities decreased by $26,216,000, to net
cash flow used in financing activities of $13,074,000 in 1996 from net cash
flow provided by financing activities of $13,142,000 in 1995. The decrease
was primarily a result of the following: a decrease in net borrowings of
$28,081,000 due to the lower levels of development and acquisition costs; a
$2,153,000 decrease in purchases of common shares and an increase in dividends
paid of $413,000.
Net cash flow from financing activities increased by $1,087,000, to
$13,142,000 in 1995 from $12,055,000 in 1994. The increase was primarily from
two major net cash sources: a $10,100,000 addition to construction loan for
the Owings Mills New Town shopping center under development and a $9,603,000
addition to mortgages payable primarily related to the closing of mortgages in
1995 for the Easton Shoppes and York Road Plaza redevelopment. The increases
were partly offset by decreases in cash flows from financing activities
primarily form the following: a net increase of $15,949,000 in payments on
notes payable; purchases of common shares of $2,235,000 and and increase in
dividends paid of $132,000.
19
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources
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. 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 expects to continue to maintain a line of credit of at least
$40,000,000 from a commercial bank (See Note I of notes to the consolidated
financial statements).
The Company anticipates material commitments for capital expenditures
to include, in the next two years, the redevelopment or development of two
Maryland projects with an additional four redevelopment projects in the
planning stage at an estimated cost of $15 to $25 million. The Company
expects to fund the development projects and other capital expenditures with
available net cash flows from operating activities and if necessary with
construction loan financing, long term mortgage financing on unencumbered
operating properties or the use of its $40,000,000 line of credit from a
commercial bank.
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 1997 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. The Company filed a shelf registration with the
Securities and Exchange Commission for the issuance of common shares or debt
securities for up to $150 million in the aggregate. MART anticipates that the
cash flow available from operations, together with cash from borrowings and
equity offerings, will be sufficient to meet the capital and liquidity needs
in both the short and long term.
Deferred Financing Costs
Effective January 1, 1996 the Company changed its reporting of the
amortization of deferred financing costs. During the year ended December 31,
1995 and previously, the annual amortization of deferred financing costs was
reported in the depreciation and amortization of property and improvements
expense line in the consolidated statements of operations. Effective January
1, 1996, the Company began reporting the amortization of deferred financing
costs in the interest expense line in the consolidated statement of
operations. The comparative prior year interest and depreciation and
amortization expense line items have been reclassified to reflect this change.
Gain (Loss) on properties
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 and
in the calculation of 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 the
calculation of earnings from operations, and should be an adjustment to
earnings from operations to arrive at net earnings. The comparative prior
year total revenues, earnings from operations and gains or losses on
properties have been reclassified to reflect this change.
20
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
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 MART remained stable in the year ended December 31, 1996 compared
to the year ended December 31, 1995. 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 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 Board of Trustees increased by 100,000 the authorized number of shares
that may be repurchased up to 410,000. During the year ended December 31,
1996 the Company purchased an additional 8,618 shares at an average cost of
$9.45 per share.
21
<PAGE> <PAGE>
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Financial Statements:
Independent Auditors' Report ......................23
Consolidated Balance Sheets -
as of December 31, 1996 and 1995 ................24
Consolidated Statements of Operations -
Years ended December 31, 1996,
1995 and 1994 ...................................25
Consolidated Statements of Shareholders' Equity -
Years ended December 31, 1996,
1995, and 1994 ..................................26
Consolidated Statements of Cash Flows -
Years ended December 31, 1996,
1995 and 1994 ...................................27
Notes to Consolidated Financial Statements ........28
Exhibits, Financial Statement Schedule, and Reports on Form 8-K are included
in Part IV - Item 14.
Schedule:
Schedule III - Real Estate and Accumulated
Depreciation ..................................38
22
PAGE
<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, 1996 and 1995 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. 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, 1996 and 1995,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1996, 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 percentage rents on January 1, 1995.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
February 17, 1997
23
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of
December 31,
1996 1995
<S> <C> <C>
ASSETS
Properties:
Operating properties
(Notes C and D)............$ 200,563,845 204,132,134
Less accumulated depreciation
and amortization .......... 42,702,472 39,430,308
------------- -------------
157,861,373 164,701,826
Development operations
(Note E)................... 2,866 625 1,510,544
Property held for
development or sale ....... 6,828,311 8,179,378
------------- -------------
167,556,309 174,391,748
Cash and cash equivalents .... 1,013,838 514,386
Notes and accounts
receivable - tenants
and other (Note F).......... 1,373,113 2,350,578
Due from joint venture
partners ................... - 1,599,581
Prepaid expenses and deposits 896,798 449,850
Deferred financing costs
(Note G) ................... 2,438,183 3,215,156
------------- -------------
$ 173,278,241 182,521,299
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued
expenses (Note H)..........$ 4,518,588 4,604,848
Notes payable (Note I)....... 16,400,000 21,530,143
Construction loan payable ... - 10,099,510
Mortgages payable (Note D) .. 70,210,495 62,411,104
Convertible subordinated
debentures (Note J)........ 47,195,000 59,980,000
Deferred income ............. 984,261 1,222,673
Minority interest in
consolidated joint ventures 3,158,595 1,734,799
------------- -------------
142,466,939 161,583,077
Shareholders' Equity (Note L):
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, 7,225,103, and
6,016,111,respectively...... 72,251 60,161
Additional paid-in capital .. 52,635,713 40,389,783
Distributions in excess of
accumulated earnings ....... (21,896,662) (19,511,722)
------------- -------------
30,811,302 20,938,222
Commitments (Notes M)
------------- -------------
$ 173,278,241 182,521,299
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
REVENUES:
Rentals .............$ 26,561,699 23,914,267 21,890,446
Other (Note O) ...... 709,577 1,027,335 877,122
------------ ------------ ------------
27,271,276 24,941,602 22,767,568
------------ ------------ ------------
COSTS AND EXPENSES:
Interest ............ 12,354,156 11,928,319 10,876,328
Depreciation and
amortization of property
and improvements .. 5,413,737 4,983,617 4,549,781
Operating............ 3,682,802 3,087,593 3,336,415
General and
administrative .... 2,098,534 1,780,397 1,751,101
------------ ------------ ------------
23,549,229 21,779,926 20,513,625
------------ ------------ ------------
EARNINGS FROM OPERATIONS
BEFORE MINORITY
INTEREST ........... 3,722,047 3,161,676 2,253,943
Minority interest
expense ............ (513,937) (718,019) (540,744)
------------ ------------ ------------
EARNINGS FROM
OPERATIONS ......... 3,208,110 2,443,657 1,713,199
Gain on life insurance
proceeds (Note P)... - 1,001,787 -
Gain (loss) on
properties (Note Q). 300,599 (280,362) 1,203,087
------------ ------------ ------------
EARNINGS BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE .......... 3,508,709 3,165,082 2,916,286
Cumulative effect of
change in accounting
for percentage
rents .............. - 612,383 -
------------ ------------ ------------
NET EARNINGS ........$ 3,508,709 3,777,465 2,916,286
============ ============ ============
Earnings per share before
cumulative effect of
change in accounting
principle ..........$ 0.56 0.51 0.46
Cumulative effect of change
in accounting principle - 0.10 -
------------ ------------ ------------
NET EARNINGS PER
SHARE ..............$ 0.56 0.61 0.46
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
25
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Distributions
Additional in Excess of Net
Common Par Paid-in Accumulated Shareholders'
Shares Value Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
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
=========== ======== =========== ============ ============
Conversion of
convertible
subordinated
debentures 1,904 19 19,122 - 19,141
Share purchase
plan (277,200) (2,772) (2,231,844) - (2,234,616)
Dividends paid -
$.89 per share - - - (5,480,146) (5,480,146)
Net earnings - - - 3,777,465 3,777,465
----------- -------- ----------- ------------ ------------
BALANCE,
December 31, 1995 6,016,111 60,161 40,389,783 (19,511,722) 20,938,222
=========== ======== =========== ============ ============
Conversion of
convertible
subordinated
debentures 1,217,610 12,176 12,327,280 - 12,339,456
Share purchase
plan (8,618) (86) (81,350) - (81,436)
Dividends paid -
$.93 per share - - - (5,893,649) (5,893,649)
Net earnings - - - 3,508,709 3,508,709
----------- -------- ----------- ------------ ------------
BALANCE,
December 31, 1996 7,225,103 $72,251 52,635,713 (21,896,662) 30,811,302
=========== ======== =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
26
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December, 31
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating
activities:
Net earnings ..........$ 3,508,709 3,777,465 2,916,286
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Depreciation and
amortization ....... 5,413,737 4,983,617 4,549,781
Minority interest
in earnings, net ... 513,937 718,019 540,744
(Gain) loss on
properties ......... (300,599) 280,362 (1,203,087)
Changes in operating
assets and liabilities:
Decrease (increase)
in operating
assets ............ 530,517 (709,951) 694,434
(Decrease) increase
in deferred rental
income ............ (224,732) 505,887 610,678
(Decrease) increase
in operating
liabilities ....... (99,940) 1,056,891 (876,395)
------------ ------------ ------------
Total adjustments. 5,832,920 6,834,825 4,316,155
------------ ------------ ------------
NET CASH PROVIDED BY
OPERATING
ACTIVITIES ..... 9,341,629 10,612,290 7,232,441
------------ ------------ ------------
Cash flows from
investing activities:
Additions to
properties ......... (6,412,365) (29,522,542) (22,197,577)
Proceeds from sales
of properties....... 11,175,108 4,914,988 3,263,444
Payments to minority
partners ........... (652,186) (779,675) (792,394)
Receipts from minority
partners ........... 121,184 1,803,000 96,800
------------ ------------ ------------
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES ....... 4,231,741 (23,584,229) (19,629,727)
------------ ------------ ------------
Cash flows from
financing activities:
Proceeds from
notes payable ........ 49,080,565 80,400,000 39,456,366
Principal payments
on notes payable ..... (54,210,708) (79,009,270) (22,116,953)
Proceeds from
mortgages payable .... 18,900,000 16,400,000 -
Principal payments
on mortgages
payable ............. (11,100,609) (7,240,036) (443,232)
Proceeds from
construction
loans payable ........ 194,222 10,099,510 -
Payments on
construction
loans payable ........ (10,293,732) - -
Additions to deferred
financing costs ...... (225,890) (374,417) (27,388)
Amortization of deferred
financing costs ...... 557,319 580,778 533,603
Shares purchased ...... (81,436) (2,234,616) -
Dividends paid ........ (5,893,649) (5,480,146) (5,347,696)
------------ ------------ ------------
NET CASH (USED IN)
PROVIDED BY FINANCING
ACTIVITIES ....... (13,073,918) 13,141,803 12,054,700
------------ ------------ ------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS ........... 499,452 169,864 (342,586)
CASH AND CASH
EQUIVALENTS,
beginning of period ... 514,386 344,522 687,108
------------ ------------ ------------
CASH AND CASH
EQUIVALENTS,
end of period .........$ 1,013,838 514,386 344,522
============ ============ ============
Supplemental disclosures of
cash flow information:
Cash paid for interest ..$ 12,317,962 12,135,351 10,432,247
============ ============ ============
</TABLE>
Supplemental information of noncash investing and financing activities:
During 1996, 1995, and 1994, respectively, $4,405,900, $19,838,543 and
$2,832,641 in assets were transferred from Development Operations to Operating
Properties.
Effective July 1, 1996, the Company acquired a portion of the minority
interest in a consolidated partnership which owns certain properties in
satifaction of notes receivable from the minority partners. The ownership
interest acquired was recorded at fair value at the date of acquisition,
resulting in an increase in Properties of $2,923,000.
In 1996, $12,785,000 in convertible debentures were converted to 1,217,610
common shares of beneficial interest decreasing convertible subordinated
debentures by $12,785,000, decreasing net deferred financing costs by $445,544
and increasing shareholders' equity by $12,339,456. In 1995, $20,000 in
convertible debentures were converted to 1,904 common shares of beneficial
interest decreasing convertible subordinated debentures by $20,000, decreasing
net deferred financing costs by $859 and increasing shareholders' equity by
$19,141.
See accompanying notes to consolidated financial statements.
27
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1996, 1995, 1994
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., "BTR".
Description of Business
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 commercial real estate development and investment industry is subject to
widespread competition for desirable sites, tenants and 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 opportunities. 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.
Basis of Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
judgements that affect the reported amounts of assets and liabilities and
disclosures of contigencies at the date of the financial statements and
revenues and expenses recognized during the reporting period. Actual results
could differ from those estimates.
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.
Continued
28
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Recognition of Revenue from Rentals
The Company earns rental income under operating leases with tenants.
Minimum rental payments are recognized as rental revenues in the period when
they are earned according to the applicable lease term. Effective January 1,
1995, the Company changed its accounting policy for percentage rent.
Percentage rent revenues are based on store sales for certain periods and are
charged according to a percentage over a stipulated 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 the
actual percentage rent is earned. Effective January 1, 1995, the Company began
estimating the percentage rent earned from major tenants and records the
amounts monthly as receivable. The cumulative effect of this change on
January 1, 1995 was to increase net earnings by $612,383. The Company
believes that this revised policy is preferable since it provides a better
matching of revenues and expenses.
Recognition of Revenue From Property Sales
Properties held for development or sale are primarily outparcels of
operating properties or undeveloped commercial land.
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
were included as revenues on the consolidated statement of operations and
included in the calculation of 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
the calculation of earnings from operations, and should be an adjustment to
earnings from operations to arrive at net earnings. This treatment was
adopted in 1996 and the comparative prior year total revenues, earnings from
operations and gains or losses on properties have been reclassified to reflect
this change.
Net Earnings Per Share
Earnings per share are computed by dividing net earnings 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
Acquisition costs, interest and other carrying costs, as well as
construction and start-up costs of commercial property are capitalized and
charged to undeveloped land, construction in progress or deferred costs as
appropriate. 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.
Properties
In March 1995, the Financial Accounting Standards Board, ("FASB"), issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS No. 121"). SFAS No. 121 establishes new standards for measurement and
recognition of impairment of long-lived assets. Initial adoption of the
Statement by the Company in 1996 did not have a material effect on the
financial position or results of operations reported by the Company.
Properties to be developed or held and used in operations are carried at
cost reduced for impairment losses, where appropriate. Properties held for
sale are carried at the lower or their carrying value (i.e. cost less
accumulated depreciation and any impairment loss recognized, where applicable)
or estimated fair value less cost to sell.
If events or circumstances indicate that the carrying value of an operating
property to be held and used may be impaired, a recoverability analysis is
performed based on estimated undiscounted future cash flows to be generated
from the property. If the analysis indicates that the carrying value is not
recoverable from future cash flows, the property is written down to estimated
fair value and impairment loss is recognized.
Properties held for sale are carried at the lower of their carrying value
(i.e. cost less accumulated depreciation and any impairment loss recognized,
where applicable) or estimated fair value less cost to sell.
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.
29
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Stock-based Compensation
The Company uses the intrinsic value method to account for stock-based
employee compensation plans. Under this method, compensation cost is
recognized for awards of shares of common stock to employees only if the
quoted market price of the stock at the grant date (or other measurement date,
if later) is greater than the amount the employee must pay to acquire the
stock.
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 permits companies to adopt a new
fair value-based method to account for stock-based employee compensation plans
or to continue using the intrinsic value method. Information required by SFAS
No. 123 concerning the Company's stock-based compensation plan is provided in
note L.
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.
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 Financing Costs
Costs associated with the issuance of debt are capitalized as deferred
financing costs and amortized on a straight-line basis, which is not
materially different from the interest method, over the term of the related
debt.
Effective January 1, 1996 the Company changed its reporting of amortization
of deferred financing costs. During the year ended December 31, 1995 and
previously, the annual amortization of deferred financing costs was reported
in the depreciation and amortization of property and improvements expense line
on the consolidated statements of operations. In 1996, the Company began
reporting the amortization of deferred financing costs in the interest expense
line on the consolidated statements of operations. The comparative prior year
interest and depreciation and amortization expense line items have been
reclassified to reflect this change.
B. SUBSEQUENT EVENT
In February 1997, the Company registered to sell up to an aggregate of
$150,000,000 (based on the public offering price) of common shares of
beneficial interest and debt securities. The shares and debt may be issued
from time to time at prices, in amounts and on terms to be determined at the
time of offering. The net proceeds will be used for general corporate
purposes and could be used for development, redevelopment and acquisition
opportunities or on an interim basis, to reduce or retire credit line
borrowings and property debt.
30
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
C. OPERATING PROPERTIES
Operating properties consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Land $20,111,661 22,137,380
Land improvements 27,074,441 28,370,084
Buildings 112,963,061 115,270,325
Improvements for tenants 6,967,280 6,136,228
Development costs on
completed projects 14,724,923 16,597,684
Furniture, fixtures and
equipment 2,225,960 2,377,401
Deferred lease costs 16,496,519 13,243,032
------------ -----------
200,563,845 204,132,134
Less accumulated depreciation
and amortization 42,702,472 39,430,308
------------ -----------
$157,861,373 164,701,826
============ ===========
</TABLE>
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, 1996 follows:
<TABLE>
<CAPTION>
Accumulated
Cost of Depreciation
Classi- Mortgages Initial Subsequent Total and
fication Payable Cost Improvements Cost Amortization Net Cost
<S> <C> <C> <C> <C> <C> <C>
Shopping
centers $68,306,762 129,684,216 34,551,697 164,235,913 33,805,424 130,430,489
Bowling
centers - 2,200,106 71,706 2,271,812 1,057,612 1,214,200
Office
buildings 1,903,733 26,415,163 4,198,038 30,613,201 6,709,370 23,903,831
Other rental
properties - 2,173,695 718,126 2,891,821 817,390 2,074,431
Other property - 551,098 - 551,098 312,676 238,422
---------------------------------------------------------------------
Operating
proper-
ties 70,210,495 161,024,278 39,539,567 200,563,845 42,702,472 157,861,373
Development
operations - 2,866,625 - 2,866,625 - 2,866,625
Property held for
development
or sale - 6,828,311 - 6,828,311 - 6,828,311
---------------------------------------------------------------------
$70,210,495 170,719,214 39,539,567 210,258,781 42,702,472 167,556,309
=====================================================================
</TABLE>
Mortgages payable aggregating $70,210,495 at December 31, 1996 bear interest
rates ranging from 7.55% to 10.375% and mature in installments through 2011.
Aggregate annual principal payments applicable to mortgages payable for the
five years subsequent to December 31, 1996 are:
<TABLE>
<S> <C>
1997 $ 869,585
1998 14,581,517
1999 832,771
2000 906,214
2001 2,541,235
Thereafter $50,479,173
===========
</TABLE>
31
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
E. DEVELOPMENT OPERATIONS
Development operations consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Land $1,088,832 -
Construction in progress 1,164,937 1,225,844
Pre-construction costs 612,856 284,700
---------- ---------
$2,866,625 1,510,544
========== =========
</TABLE>
Development operations are transferred to operating property costs
when a project is completed, at which time depreciation and amortization
commences. Consruction period interest cost capitalized during 1996 and 1995
was approximately $104,000 and $570,000, respectively.
F. NOTES AND ACCOUNTS RECEIVABLE
The Company performs credit evaluations of prospective new tenants and
requires security deposits where appropriate. Tenants compliance with the
terms of the leases is monitored closely and the allowance for doubtful
accounts is established based on an analysis of the risk of loss on specific
tenants, historical trends, and other relevant information. Management
believes adequate provision has been made for the Company's credit risk for
all receivables.
G. DEFERRED FINANCING COSTS
Deferred financing costs consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Deferred costs related to convertible
debentures $2,409,533 3,062,253
Deferred costs of line of credit 296,987 263,409
Deferred costs related to operating
properties 1,910,481 1,852,598
--------- ---------
4,617,001 5,178,260
Less accumulated amortization 2,178,818 1,963,104
--------- ---------
Deferred financing costs $2,438,183 3,215,156
========= =========
</TABLE>
H. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Trade accounts payable $2,177,870 1,600,118
Retainage on construction in progress 173,072 635,558
Accrued debenture interest 1,049,598 1,333,994
Other accrued expenses 1,118,048 1,035,178
--------- ---------
$4,518,588 4,604,848
========= =========
</TABLE>
I. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Line of credit $16,400,000 21,500,000
Note payable, bearing interest at 8.71% - 30,143
---------- ----------
$16,400,000 21,530,143
========== ==========
</TABLE>
The Company has an agreement with its primary bank that provides for a
$40,000,000 secured line of credit. The agreement provides that as long as the
Company is in compliance with all loan covenants, the loan maturity date,
which at December 31, 1996 was December 31, 1999, will be extended one year
automatically each year. Under the agreement, the Bank must give the Company
two years notice should it decide to termiate the loan. Availability under
the agreement is determined by the amount of collateral provided. At December
31, 1996, $40,000,000 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% for fixed periods from three to nine months. 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.
Continued
32
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. NOTES PAYABLE - Continued
At December 31, 1996, 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 $494,021, was $23,106,000. The maximum
level of borrowings under the line of credit was $21,500,000, $32,000,000 and
$20,100,000 in 1996, 1995 and 1994, respectively. The average amounts of
borrowings were approximately $11,710,000, $17,534,000, and $6,131,000, with
weighted average interest rates approximating 7.1%, 7.8%, and 6.5%, in 1996,
1995 and 1994, respectively. The weighted average interest rate at December
31 was 6.9%, 7.8%, and 8.1% in 1996, 1995, and 1994, respectively.
J. 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. In 1996, $12,785,000 in debentures
were converted to 1,217,610 common shares of beneficial interest. In 1995,
$20,000 in debentures were converted to 1,904 common shares of beneficial
interest. The balance of the debentures, at December 31, 1996, of
$47,195,000, convertible at $10.50 per share, if fully converted, would
produce an additional 4,494,762 shares. Costs associated with the issuance of
the debentures were approximately $2,410,000 at December 31, 1996 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. In January, 1997, $1,098,000 in debentures were converted
to 104,560 common shares of beneficial interest reducing the balance of
debentures to $46,097,000.
K. 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% 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, 1996,
the income tax bases of the Company's assets and liabilities were
approximately $153,000,000 and $ 141,000,000, respectively.
L. SHAREHOLDERS' EQUITY AND STOCK COMPENSATION PLAN
Preferred Shares
At its inception on September 11, 1993, MART authorized 2,000,000 preferred
shares of beneficial interest at a par value of $.01 per share. At December
31, 1996, none of these shares were issued and outstanding.
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 December 31, 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 December
31, 1996. The closing price of MART shares at December 31, 1996 was $11.25
per share. No options were exercised during the period ended December 31, 1996
and, based on the market value of MART shares, the options, if exercised,
would be dilutive producing 15,962 in additional weighted average shares for
the year ended December 31, 1996.
Continued
33
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
L. SHAREHOLDERS' EQUITY AND STOCK COMPENSATION PLAN - Continued
MART Incentive Stock Option Plans - Continued
On September 14, 1995, the Company authorized the availability of 180,000
shares for a new plan, the 1995 Stock Option Plan (New 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. As options vest, they are
priced at the market price on the close of business at that date. One third
of the stock options, or 47,100, vested on September 30, 1995, exercisable at
$8.9375 per share. An additional third of the options, or 47,100, vested on
September 30, 1996, exercisable at $9.75 per share. The balance of the
options 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 16,955 in additional weighted average shares for the year
ended December 31, 1996.
The Company applies the intrinsic value method in accounting for stock
options and no compensation cost has been recognized for the issuance of
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for stock options under SFAS
No. 123, it would not have a material impact on the Company's net earnings or
net earnings per share for 1996 and 1995.
Supplemental Pro Forma Earnings Per Share
If the debenture conversions during 1996 and 1995 had taken place at
January 1, 1994, primary net earnings per share would have been $.60, $.64 and
$.52 for 1996, 1995 and 1994, respectively.
Acquisition of Outstanding Shares
On February 14, 1995, the 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 Board of Trustees increased by 100,000 the authorized number of shares
that may be repurchased up to 410,000. During the year ended December 31,
1996 the Company purchased an additional 8,618 shares at an average cost of
$9.45 per share.
M. COMMITMENTS
Lease Commitments
Minimum rental commitments for operating land leases as of
December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 576,000
1998 576,000
1999 576,000
2000 576,000
2001 576,000
Thereafter 21,867,000
----------
Total $24,747,000
==========
</TABLE>
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 $601,000 in 1996, $262,000 in 1995 and $219,000 in
1994.
N. 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:
<TABLE>
<S> <C>
1997 $ 25,889,000
1998 23,471,000
1999 20,897,000
2000 18,601,000
2001 16,081,000
Thereafter 129,703,000
-----------
Total $234,642,000
===========
</TABLE>
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 $1,012,000 in
1996, $1,246,000, in 1995 and $1,206,000 in 1994. On a prospective basis, no
more than 3% of rental revenue is derived from any one tenant, except Giant
Food of Maryland, which is approximately 11% of rental revenue. Giant Food
minimum lease payments represent approximately 14% for the years 1997 through
2001 and 41% thereafter of the total minimum lease payments above. The 41%
percentage of total minimum lease payments is high due to the fact that Giant
Food leases contain long lease terms compared with other major tenants who use
renewal option terms. Renewal option minimum lease payments are not included
in the totals above.
34
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
O. OTHER INCOME
Other income consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Interest and dividends $484,428 757,905 727,249
Miscellaneous 225,149 269,430 149,873
-------------------------------------
$709,577 1,027,335 877,122
=====================================
</TABLE>
P. 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.
Q. GAIN (LOSS) ON PROPERTIES
Gain (loss) on properties consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S>
Gain (loss) on sales of <S> <C> <C>
operating properties $ 720,916 (257,731) 1,121,774
Gain (loss) on sales of properties
held for sale, net 293,583 (22,631) 81,313
Valuation allowance for loss on
property under contract (713,900) - -
--------- --------- ----------
$ 300,599 (280,362) 1,203,087
========= ========= ==========
</TABLE>
The net gains on properties held for sale and operating properties include
minority interest expense of $96,049 and $21,194, respectively, for the year
ended December 31, 1996.
R. 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, 1996 and
1995.
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, 1996 was $70,210,495 and $73,719,000
respectively, and at December 31, 1995 was $62,411,104 and $67,179,000,
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, 1996 were $47,195,000 and at December 31, 1995
were $59,980,000 and $60,982,000, respectively.
35
PAGE
<PAGE>
ITEM 9
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
None
PART III
ITEM 10
Trustees and Executive Officers of the Registrant
The information with respect to the identity and business experience
of the trustees of MART and their remuneration, in the definitive proxy
statement (to be filed pursuant to Regulation 14A) with respect to the
election of trustees at the 1997 annual meeting of shareholders, is
incorporated herein by reference.
The Executive Officers of MART are as follows:
<TABLE>
<CAPTION>
Position and
Name Age Business Experience
<S> <C> <C>
LeRoy E. Hoffberger 71 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 - Davis New
York Venture Fund and eight other public
mutual funds also advised by Davis
Selected Advisors, L.P., President and
Director of the Hoffberger Foundation,
Vice President and Director of Hoffberger
Family Fund.
F. Patrick Hughes 49 President, Principal Executive Officer,
and CEO of MART since September, 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 43 Executive Vice President of MART since
March, 1996.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.
Paul G. Bollinger 37 Vice President of MART since March, 1996.
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.
Eugene T. Grady 48 Treasurer of MART since September, 1993.
Treasurer of BTR since May, 1989.
</TABLE>
Each executive officer is elected for a term expiring at the next regular
annual meeting of the Board of Trustees 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 1997 annual
meeting of shareholders.
36
PAGE
<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 1997
annual meeting of shareholders.
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 1997 annual
meeting of shareholders.
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 are included in Part II Item 8:
Independent auditors' report
Consolidated balance
sheets at December 31, 1996 and 1995
Consolidated statements of operations for
the years ended December 31, 1996, 1995, and 1994
Consolidated statements of shareholders' equity
for years ended December 31, 1996, 1995 and 1994
Consolidated statements of cash flows for
the years ended December 31, 1996, 1995 and 1994
Notes to consolidated financial statements
(a) 2. Financial Statement Schedule
Schedule III - 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.
Filed thru EDGAR.
12. Statement re: computation of ratios.
Filed thru EDGAR.
13. Annual Report to Shareholders.
Not applicable.
18. Letter regarding change in accounting principles.
Not applicable.
19. Previously unfiled documents.
Not applicable.
21. List of subsidiaries of registrant.
Filed herewith
22. Published report regarding matters submitted to vote of
security holders.
Not applicable.
23. Consents of experts and counsel.
Filed thru EDGAR.
24. Power of Attorney.
Not applicable.
27. Financial Data Schedule
Filed thru EDGAR.
28. Additional exhibits.
Not applicable.
(b) Reports on Form 8-K.
None.
37
PAGE
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Cost capitalized
subsequent
Year ended Initial cost to Company to acquisition
December 31, 1996
Mortgages Buildings and
Description Payable Land Improvements Improvements
<S> <C> <C> <C> <C>
Shopping Centers
Harford Mall $19,537,860 599,031 8,457,331 18,929,267
Owings Mills 12,920,171 4,381,666 9,547,434 -
Shoppes at Easton 7,597,450 2,600,000 10,379,069 13,633
Brandywine Commons - - 12,244,289 -
Smoketown Plaza - 516,312 10,095,077 660,780
Colonie Plaza - 1,137,567 7,755,095 602,073
Columbia Plaza - 999,739 6,887,711 1,478,763
Spotsylvania Crossing - 1,544,314 6,600,616 269,868
Skyline Village 5,717,485 555,295 6,240,003 1,057,408
Page Plaza - 496,404 5,777,369 145,030
York Road Plaza 8,625,428 1,562,382 2,102,575 2,690,577
Plaza Del Rio - 1,291,325 3,938,734 414,704
Sudley Towne Plaza - 789,881 3,736,837 480,681
Burke Town Plaza 7,128,851 - 2,936,134 1,764,063
Rosedale Plaza 1,829,811 1,024,712 3,217,926 306,128
Wilkens Beltway Plaza 4,949,706 - 3,601,891 693,854
Timonium Shopping Ctr - - 4,031,809 246,212
Rolling Road Plaza - 338,791 1,632,268 2,072,581
Patriots Plaza - - 1,709,846 524,890
Union Hills Plaza - 274,920 679,863 150,982
-----------------------------------------------------
68,306,762 18,112,339 111,571,877 32,501,494
Office Buildings
Gateway II - 364,982 12,376,977 1,741,129
Gateway I - 82,396 8,271,751 1,443,050
Patriots Plaza - - 1,522,943 243,773
Wilkens Office II 1,903,733 - 1,644,370 272,797
Wilkens Office I - - 1,383,102 363,890
Wilkens Office III - - 768,642 133,399
-----------------------------------------------------
1,903,733 447,378 25,967,785 4,198,038
Bowling Centers
Freestate - 180,025 740,082 2,719
Waldorf - 243,139 579,096 5,690
Clinton - - 457,764 63,297
------------------------------------------------------
- 423,164 1,776,942 71,706
</TABLE>
(Continued)
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Cost capitalized subsequent Amount at which carried
Year ended to acquisition at close of period
December 31, 1996
Carrying Costs Land Buildings and Total
Description Land Improvements Improvements
<S> <C> <C> <C> <C> <C>
Shopping Centers
Harford Mall - - 599,031 27,386,598 27,985,629
Owings Mills - - 4,381,666 9,547,434 13,929,100
Shoppes at Easton - - 2,600,000 10,392,702 12,992,702
Brandywine Commons - - - 12,244,289 12,244,289
Smoketown Plaza - - 516,312 10,755,857 11,272,169
Colonie Plaza - - 1,137,567 8,357,168 9,494,735
Columbia Plaza 203,353 - 1,203,092 8,366,474 9,569,566
Spotsylvania Crossing - - 1,544,314 6,870,484 8,414,798
Skyline Village - - 555,295 7,297,411 7,852,706
Page Plaza - - 496,404 5,922,399 6,418,803
York Road Plaza - - 1,562,382 4,793,152 6,355,534
Plaza Del Rio - (713,900) 1,291,325 3,639,538 4,930,863
Sudley Towne Plaza - - 789,881 4,217,518 5,007,399
Burke Town Plaza - - - 4,700,197 4,700,197
Rosedale Plaza - - 1,024,712 3,524,054 4,548,766
Wilkens Beltway Plaza475,481 2,923,200 475,481 7,218,945 7,694,426
Timonium Shopping Ctr - - - 4,278,021 4,278,021
Rolling Road Plaza - (837,931) 338,791 2,866,918 3,205,709
Patriots Plaza - - - 2,234,736 2,234,736
Union Hills Plaza - - 274,920 830,845 1,105,765
----------------------------------------------------------
678,834 1,371,369 18,791,173 145,444,740 164,235,913
Office Buildings
Gateway II 364,982 14,118,106 14,483,088
Gateway I 82,396 9,714,801 9,797,197
Patriots Plaza - 1,766,716 1,766,716
Wilkens Office II - 1,917,167 1,917,167
Wilkens Office I - 1,746,992 1,746,992
Wilkens Office III - 902,041 902,041
----------------------------------------------------------
- - 447,378 30,165,823 30,613,201
Bowling Centers
Freestate 180,025 742,801 922,826
Waldorf 243,139 584,786 827,925
Clinton - 521,061 521,061
-----------------------------------------------------------
- - 423,164 1,848,648 2,271,812
</TABLE>
(Continued)
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Life on which
Year ended depreciation on
December 31, 1996 latest income
Accumulated Date of Date statement is
Description Depreciation Construction Acquired computed
<S> <C> <C> <C> <C>
Shopping Centers
Harford Mall 10,398,808 12/73 5-50 yrs.
Owings Mills 221,799 12/95 5-50 yrs.
Shoppes at Easton 522,534 9/94 5-50 yrs.
Brandywine Commons 452,693 11/95 5-50 yrs.
Smoketown Plaza 2,932,879 4/87 5-50 yrs.
Colonie Plaza 2,221,978 12/87 5-50 yrs.
Columbia Plaza 2,123,583 6/88 5-50 yrs.
Spotsylvania Crossing 1,966,735 5/87 5-50 yrs.
Skyline Village 1,859,118 5/88 5-50 yrs.
Page Plaza 916,765 8/91 5-50 yrs.
York Road Plaza 1,200,663 11/85 5-50 yrs.
Plaza Del Rio 817,161 2/89 5-50 yrs.
Sudley Towne Plaza 1,348,468 7/84 5-50 yrs.
Burke Town Plaza 1,903,156 7/79-7/82 5-50 yrs.
Rosedale Plaza 624,436 10/89 5-50 yrs.
Wilkens Beltway Plaza 1,496,013 5/81 5-50 yrs.
Timonium Shopping Ctr 382,836 10/93 5-50 yrs.
Rolling Road Plaza 1,145,113 6/73 5-50 yrs.
Patriots Plaza 928,999 6/84 5-50 yrs.
Union Hills Plaza 341,687 11/83 5-50 yrs.
--------------
33,805,424
Office Buildings
Gateway II 2,391,555 7/89 5-50 yrs.
Gateway I 2,565,397 4/87 5-50 yrs.
Patriots Plaza 564,505 8/85 5-50 yrs.
Wilkens Office II 466,150 1/87 5-50 yrs.
Wilkens Office I 567,036 1/85 5-50 yrs.
Wilkens Office III 154,727 1/91 5-50 yrs.
-----------------
6,709,370
Bowling Centers
Freestate 562,285 3/78 5-50 yrs.
Waldorf 230,235 3/79 5-50 yrs.
Clinton 265,092 8/71 5-50 yrs.
------------------
1,057,612
</TABLE>
38
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Cost capitalized
subsequent
Year ended Initial cost to Company to acquisition
December 31, 1996
Mortgages Buildings and
Description Payable Land Improvements Improvements
(Continued)
<S> <C> <C> <C> <C>
Other Rental Properties
Business Center - 395,536 1,190,692 59,404
Southwest - - 283,039 608,662
Waldorf Firestone - 9,261 161,543 4,911
Ocean City - - 133,624 -
---------------------------------------------------------
- 404,797 1,768,898 672,977
Development Operations - - 2,866,625 -
Property Held - 6,828,311 - -
Other Property - - 551,098 -
--------------------------------------------------------
$70,210,495 26,215,989 144,503,225 37,444,215
========================================================
</TABLE>
(Continued)
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Cost capitalized subsequent Amount at which carried
Year ended to acquisition at close of period
December 31, 1996
Carrying Costs Land Buildings and Total
Description Land Improvements Improvements
(Continued)
<S> <C> <C> <C> <C> <C>
Other Rental Properties
Business Center - - 395,536 1,250,096 1,645,632
Southwest 45,149 - 45,149 891,701 936,850
Waldorf Firestone - - 9,261 166,454 175,715
Ocean City - - - 133,624 133,624
---------------------------------------------------------
45,149 - 449,946 2,441,875 2,891,821
Development Operations - - - 2,866,625 2,866,625
Property Held - - 6,828,311 - 6,828,311
Other Property - - - 551,098 551,098
---------------------------------------------------------
723,983 1,371,369 26,939,972 183,318,809 210,258,781
=========================================================
</TABLE>
(Continued)
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Life on which
Year ended depreciation on
December 31, 1996 latest income
Accumulated Date of Date statement is
Description Depreciation Construction Acquired computed
(Continued)
<S> <C> <C> <C> <C>
Other Rental Properties
Business Center 222,012 4/90 5-50 yrs.
Southwest 465,559 4/68 5-50 yrs.
Waldorf Firestone 64,120 9/78 5-50 yrs.
Ocean City 65,699 12/87 5-50 yrs.
-------------
817,390
Development Operations - 91-96
Property Held - 7/73-12/96
Other Property 312,676 9/82-12/96 3-10 yrs.
-------------
42,702,472
=============
</TABLE>
39
<PAGE>
<PAGE>
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
(1) The changes in total cost of properties for the three years ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance beginning of year $213,822,056 191,497,142 171,661,868
Additions during year:
Acquisitions 3,126,553 12,244,289 18,051,765
Improvements 1,498,868 2,356,780 2,159,354
Development operations 4,715,773 15,685,170 1,986,458
------------------------------------------
9,341,194 30,286,239 22,197,577
Deductions during year:
Valuation allowance for loss (713,900) - -
Cost of real estate sold (11,965,663) (6,292,793) (2,304,214)
Retirements and disposals (224,906) (1,668,532) (58,089)
------------------------------------------
(12,904,469) (7,961,325) (2,362,303)
------------------------------------------
Balance end of year $210,258,781 213,822,056 191,497,142
==========================================
</TABLE>
(2) The changes in accumulated depreciation for the three years ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance beginning of year ($39,430,308) (36,448,969) (32,650,352)
Depreciation and amortization (5,413,737) (4,983,617) (4,549,782)
Retirements, disposals and sales 2,141,573 2,002,278 751,165
--------------------------------------------
Balance end of year ($42,702,472) (39,430,308) (36,448,969)
============================================
</TABLE>
(3) The aggregate basis of properties for Federal income tax purposes is
approximately $147,000,000 at December 31, 1996.
(4) See Item 2 for geographic location of properties.
(5) Freestate includes 1 bowling center in Illinois.
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.
<TABLE>
<CAPTION>
State of
Incorporation
Name or Formation Interest
CORPORATIONS:
<S> <C> <C>
BTR Arkor, Inc. Maryland 100%
BTR Atlanta Daycare, Inc. Maryland 100%
BTR Business Center, Inc. Maryland 100%
BTR Chandler, Inc. Maryland 100%
BTR East Greenbush, Inc. Maryland 100%
BTR Fallston Corner, Inc. Maryland 100%
BTR Free State Bowls, Inc. Maryland 100%
BTR Gateway, Inc. Maryland 100%
BTR Holdings, Inc.
(Formerly Diamond Alley, 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 Ray Road, Inc. Maryland 100%
BTR Real Estate Enterprises, 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%
</TABLE>
(Continued)
40
<PAGE>
EXHIBIT 21. PARENT AND SUBSIDIARIES OF REGISTRANT - Continued
<TABLE>
<CAPTION>
State of
Name Incorporation
CORPORATIONS: or Formation Interest
<S> <C> <C>
Burke Town Plaza, Inc. Maryland 100%
Brandywine Commons, Inc. Maryland 100%
Clinton Development Company, Inc. Maryland 100%
Colonie Plaza, Inc. Maryland 100%
Columbia Plaza, Inc. Maryland 100%
Commonwealth Plaza, Inc. Maryland 100%
Concourse Realty Management, 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%
Harrisonburg Plaza, Inc. Maryland 100%
Kingston Crossing, Inc. Maryland 100%
MART Acquisitions, 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%
Rolling Road Plaza, Inc. Maryland 100%
Rosedale Partners, Inc. Maryland 100%
Rosedale Plaza, Inc. Maryland 100%
Route 642 Properties, Inc. Maryland 100%
Sedona Sewer, Inc. Maryland 100%
Southdale Mortgage Inc. Maryland 100%
Southwest Development Properties, Inc. Maryland 100%
Timonium Shopping Center, Inc. Maryland 100%
Wake Plaza, Inc. Maryland 100%
Wyaness, Inc. Maryland 100%
</TABLE>
The following are partnerships in which Mid-Atlantic Realty Trust, BTR
Realty, Inc. or Financial Associates of Maryland have partnership interests:
<TABLE>
<CAPTION>
State of
Incorporation
Name or Formation Interest
<S> <C> <C>
Arizona & Warner Limited Partnership Maryland 50%
BBG Joint Venture Maryland 93%
BBG Properties Limited Partnership Maryland 93%
Fredericksburg Plaza Limited
Partnership Maryland 93%
Gateway International Limited
Partnership Maryland 100%
Harbour Island Associates Maryland 100%
Kensington Associates Maryland 93%
Northwood Limited Partnership Maryland 67%
Rosedale Plaza Limited Partnership Maryland 100%
Route 642 Limited Partnership Maryland 93%
Scotia Associates Limited Partnership Maryland 50%
Southdale Limited Partnership Maryland 50%
Union Hills Limited Partnership Maryland 50%
Wyaness Associates Maryland 100%
</TABLE>
41
PAGE
<PAGE>
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 3/24/97 /s/s F. Patrick Hughes
F. Patrick Hughes, President
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated:
Date: 3/26/97 /s/s LeRoy E. Hoffberger
LeRoy E. Hoffberger, Chairman
Date: 3/24/97 /s/s F. Patrick Hughes
F. Patrick Hughes, Trustee, Principal
Executive Officer
Date: 3/24/97 /s/s Paul G. Bollinger
Paul G. Bollinger, Controller, Principal
Financial Officer
Date: 3/24/97 /s/s Eugene T. Grady
Eugene T. Grady, Treasurer
Date: 3/26/97 /s/s Robert A. Frank
Robert A. Frank, Trustee
Date: 3/26/97 /s/s Marc P. Blum
Marc P. Blum, Trustee
Date: 3/26/97 /s/s M. Ronald Lipman
M. Ronald Lipman, Trustee
Date: 3/25/97 /s/s Stanley J. Moss, Esquire
Stanley J. Moss, Esquire, Trustee
Date: 3/26/97 /s/s Daniel S. Stone
Daniel S. Stone, Trustee
Date: 3/26/97 /s/s David F. Benson
David F. Benson, Trustee
42
<PAGE>
EXHIBIT 11.1
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(AMOUNTS IN THOUSANDS, EXCEPT FOR RATIO INFORMATION)
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Simple Earnings per Share:
Weighted Average Common
Shares Outstanding 6,211,092 6,176,991 6,291,407
Simple Earnings per Share $0.56 0.61 0.46
Primary Earnings per Share (Note A):
Weighted Average Common
Shares Outstanding 6,211,092 6,176,991 6,291,407
Shares Issuable from Assumed
Conversion of Common Share
Options Granted and Outstanding 5,293 - -
Weighted Average Common Shares
Outstanding, adjusted 6,216,385 6,176,991 6,291,407
Primary Earnings per Share $0.56 0.61 0.46
Fully Diluted Earnings per Share (Note B):
Weighted Average Common
Shares Outstanding 6,211,092 6,176,991 6,291,407
Shares Issuable from Assumed
Conversion of Subordinated
Debentures 5,511,745 5,712,381 5,714,286
Shares Issuable from Assumed
Conversion of Common Share
Options Granted and Outstanding 32,917 - -
Weighted Average Common Shares
Outstanding, adjusted 11,755,754 11,889,372 12,005,693
Fully Diluted Earnings per Share $0.69 0.73 0.65
Earnings for Simple, Primary and
Fully Diluted Computation:
Simple and Primary Earnings $3,508,709 3,777,465 2,916,286
Fully Diluted Earnings $8,064,817 8,657,572 7,826,511
</TABLE>
Note A: This calculation is submitted in accordance with Regulation S-K item
601(b)(11).
Note B: This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because the results are anti-dilutive.
<PAGE>
EXHIBIT 12.1
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (1)
(AMOUNTS IN THOUSANDS, EXCEPT FOR RATIO INFORMATION)
<TABLE>
<CAPTION>
Years ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Earnings (loss) from
operations (2) $3,208 $2,444 $1,713 ($2,030) ($2,820)
Less: sales of residential
property, net of cost of
residential property sold - - - (24) (53)
Add:
Interest expense(3) 12,354 11,928 10,876 12,691 14,308
Interest portion of rentals (4) 227 113 97 84 68
Earnings available for fixed
charges $15,789 $14,485 $12,686 $10,721 $11,503
Fixed Charges:
Interest expense (3) $12,354 $11,928 $10,876 $12,691 $14,308
Interest capitalized 97 565 31 - -
Interest portion of rentals (4) 227 113 97 84 68
Fixed Charges $12,678 $12,606 $11,004 $12,775 $14,376
Ratio of earnings to fixed
charges $1.25 $1.15 $1.15 - -
Excess of Fixed Charges
over Earnings - - - $2,054 $2,873
</TABLE>
There were no preferred shares outstanding during any of the periods above,
and therefore the ratio of earnings to combined fixed charges and preferred
shares dividend requirements would have been the same as the ratio of earnings
to fixed charges for the periods indicated.
(1) Mid-Atlantic Realty Trust, the "Company", is the successor to the
operations of BTR Realty, Inc. , the predecessor company. The computations
above use the Consolidated Financial Statements of Mid-Atlantic Realty Trust
for the years ended December 31, 1996, 1995, and 1994 and the period September
11, 1993 (commencement of operations) through December 31, 1993, and also
includes the Consolidated Financial Statements of BTR Realty, Inc. for the
periods January 1, 1993 through September 10, 1993, and for the year ended
December 31, 1992.
(2) Effective January 1, 1996, the Company changed its reporting of gains
or losses on sales of properties held for sale. During the year ended
December31, 1995, and previously, gains or losses on sales of properties held
for sale had been included in revenues in the consolidated statement of
operations and 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 or losses from operations, and should be an
adjustment to earnings from operations to arrive at net earnings. The
comparative prior year earnings (losses) from operations have been
reclassified to reflect this change.
(3) Effective January 1, 1996, the Company changed its reporting of
amortization of deferred financing costs. During the year ended December 31,
1995, and previously, the annual amortization of deferred financing 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 financing costs in the
interest expense line in the consolidated statement of operations. The
comparative prior year interest expense amounts above have been reclassified
to reflect this change.
(4) Amounts reflect a one-third portion of rentals, the portion deemed
representative of the interest factor.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> YEAR
<CASH> 1,014
<SECURITIES> 0
<RECEIVABLES> 1,373
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 167,556
<DEPRECIATION> 42,702
<TOTAL-ASSETS> 173,278
<CURRENT-LIABILITIES><F1> 0
<BONDS> 117,405
0
0
<COMMON> 72
<OTHER-SE> 30,739
<TOTAL-LIABILITY-AND-EQUITY> 173,278
<SALES> 0
<TOTAL-REVENUES> 27,271
<CGS> 0
<TOTAL-COSTS> 23,549
<OTHER-EXPENSES> 514
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,354
<INCOME-PRETAX> 3,509
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,509
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,509
<EPS-PRIMARY> .56
<EPS-DILUTED> .69
<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>
EXHIBIT 23. ACCOUNTANTS' CONSENT
Board of Trustees
MID-ATLANTIC REALTY TRUST
We consent to the incorporation by reference in the registration statements
on Form S-3 (No. 33-66386 and 333-20813) of Mid-Atlantic Realty Trust of our
report dated February 17, 1997, relating to the consolidated balance sheets of
Mid-Atlantic Realty Trust and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, shareholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1996, which report appears in the December 31, 1996 annual report on Form
10-K if Mid-Atlantic Realty Trust.
KPMG Peat Marwick LLP
Baltimore, Maryland
March 27, 1997
