<PAGE>
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
(Amended by Exch Act Rel No. 312905. Eff 4/26/93)
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.)
170 West Ridgely Road, Suite 300, Lutherville 21093
(Address of principal executive offices) (Zip Code)
(410) 684-2000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
13,800,687 Common Shares were outstanding as of October 31, 1997.
<PAGE> 1
MID-ATLANTIC REALTY TRUST
AND SUBSIDIARIES
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
<PAGE> 2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MID-ATLANTIC REALTY TRUST
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of
September 30, December 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
Properties:
Operating properties................$ 292,686,223 200,563,845
Less accumulated depreciation and
amortization ................... 40,875,067 42,702,472
------------- -------------
251,811,156 157,861,373
Development operations ............. 13,066,423 2,866,625
Property held for development or sale 5,542,822 6,828,311
------------ -------------
270,420,401 167,556,309
Cash and cash equivalents ........... 1,871,708 1,013,838
Notes and accounts
receivable - tenants and other...... 1,265,619 1,373,113
Prepaid expenses and deposits ....... 2,260,846 896,798
Deferred financing costs ............. 1,510,225 2,438,183
------------ -------------
$ 277,328,799 173,278,241
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses$ 5,388,464 4,518,588
Notes payable ....................... - 16,400,000
Construction loan payable ........... 7,532,946 -
Mortgages payable ................... 148,919,804 70,210,495
Convertible subordinated debentures.. 26,598,000 47,195,000
Deferred income...................... 743,502 984,261
------------ -------------
189,182,716 139,308,344
Minority interest in
consolidated joint ventures ....... 38,969,301 3,158,595
Shareholders' Equity:
Preferred shares of beneficial interest,
$.01 par value, authorized 2,000,000 shares,
issued and outstanding, none ..... - -
Common shares of beneficial interest,
$.01 par value, authorized
100,000,000, issued
and outstanding, 9,190,984 and
7,225,103, respectively .......... 91,910 72,251
Additional paid-in capital.......... 72,582,919 52,635,713
Distributions in excess of accumulated
earnings .................... (23,498,047) (21,896,662)
------------ ------------
49,176,782 30,811,302
------------ ------------
$277,328,799 173,278,241
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<PAGE>
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
REVENUES:
Rentals ............................$ 23,527,704 19,582,945
Tenant recovery .................... 4,105,905 3,756,667
Other .............................. 190,673 593,402
------------ -----------
27,824,282 23,933,014
COSTS AND EXPENSES:
Interest .......................... 9,545,898 9,449,042
Depreciation and amortization
of property and improvements ..... 4,905,039 4,037,567
Operating ......................... 6,719,536 6,551,153
General and administrative ......... 1,721,904 1,451,724
------------ -----------
22,892,377 21,489,486
EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST .......... 4,931,905 2,443,528
Minority interest expense ............ (734,344) (426,432)
------------ -----------
EARNINGS FROM OPERATIONS ............ 4,197,561 2,017,096
(Loss) gain on properties ............ (49,562) 1,005,924
------------ -----------
NET EARNINGS .........................$ 4,147,999 3,023,020
============ ===========
NET EARNINGS PER SHARE ...............$ 0.52 0.50
============ ===========
</TABLE>
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
<S> <C> <C>
REVENUES:
Rentals ............................ 9,767,118 6,675,633
Tenant recovery .................... 1,616,569 1,400,885
Other .............................. 43,498 96,231
------------ -----------
11,427,185 8,172,749
COSTS AND EXPENSES:
Interest .......................... 4,183,338 3,150,708
Depreciation and amortization
of property and improvements ..... 2,155,773 1,366,833
Operating ......................... 2,496,279 2,322,833
General and administrative ......... 587,158 477,047
------------ -----------
9,422,548 7,317,421
EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST .......... 2,004,637 855,328
Minority interest expense ............ (596,622) (49,973)
------------ -----------
EARNINGS FROM OPERATIONS ............ 1,408,015 805,355
(Loss) gain on properties ............ (140,734) 306,203
------------ -----------
NET EARNINGS ......................... 1,267,281 1,111,558
============ ===========
NET EARNINGS PER SHARE ............... 0.15 0.18
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<PAGE>
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings .......................$ 4,147,999 3,023,020
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization .... 4,905,039 4,037,567
Loss (gain) on properties ........ 49,562 (1,005,924)
Minority interest in earnings, net 734,344 426,432
Changes in operating assets and liabilities:
(Increase) decrease in operating
assets ......................... (1,256,554) 825,527
increase (decrease) in operating
liabilities .................... 629,117 (2,332,262)
------------ -----------
Total adjustments ............ 5,061 508 1,951,340
------------ ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES ......................... 9,209,507 4,974,360
Cash flows from investing activities:
Additions to properties ............ (14,384,478) (4,272,854)
Proceeds from sales of properties... 26,628,371 10,968,593
Receipts from minority partners .... 17,607 89,004
Payments to minority partners ...... (1,081,332) (601,224)
------------ ------------
NET CASH PROVIDED BY INVESTING
ACTIVITIES ........................ 11,180,168 6,183,519
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable ....... 31,500,000 31,980,565
Principle payments on notes payable (47,900,000) (41,510,708)
Proceeds from mortgages payable .... - 18,900,000
Principal payments on mortgages
payable .......................... (5,213,190) (6,013,090)
Proceeds from construction loan
payable .......................... 7,532,946 194,222
Principle payments on construction loan
payable .......................... - (10,293,732)
Additions to deferred financing costs (21,763) (222,936)
Amortization of deferred financing costs 296,170 424,494
Proceeds from exercise of share options 39,026 -
Shares purchased ................... (15,610) (80,914)
Dividends paid .................... (5,749,384) (4,179,967)
------------ -----------
NET CASH USED IN FINANCING
ACTIVITIES ................. (19,531,805) (10,802,066)
NET INCREASE IN CASH
AND CASH EQUIVALENTS ............... 857,870 355,813
CASH AND CASH EQUIVALENTS,
beginning of period ................ 1,013,838 514,386
------------ ------------
CASH AND
CASH EQUIVALENTS, end of period ...$ 1,871,708 870,199
============ ============
</TABLE>
Schedule of Noncash Investing and Financing Activities
Portfolio Acquisition (JHP Properties - See Notes)
Mortgages payable assumed .....$ 83,922,499 -
Operating limited partnership
Units issued ............... 36,064,914 -
Increase in shareholders' equity due to debenture conversions net of
decrease in deferred financing
costs .............................$ 19,943,449 2,950,474
During the nine month periods ended September 30, 1997 and 1996, $210,899 and
$97,477, respectively, of interest costs were capitalized as construction
period interest in development operations.
See accompanying notes to consolidated financial statements.
<PAGE> 5<PAGE>
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements
(UNAUDITED)
ORGANIZATION
Mid-Atlantic Realty Trust (the "Company", or "MART") is a fully integrated,
self-managed real estate investment trust (REIT) which owns, acquires,
develops, redevelops, leases and manages primarily neighborhood or community
shopping centers in the Middle Atlantic region of the United States. MART
owns and operates 26 neighborhood or community shopping centers, one enclosed
regional mall and five additional retail and commercial properties
(collectively, the "Properties"). MART also owns seven undeveloped parcels
of land aggregating approximately 140 acres. The Properties have a gross
leasable area of approximately 3.9 million square feet and were 95% leased
at September 30, 1997.
All of MART's interests in the Properties are held directly by, and
substantially all of its operations relating to the Properties are conducted
through, MART Limited Partnership (the "Operating Partnership"). Units or
partnership interest in the Operating Partnership ("Units") may be exchanged
by the limited partners for cash or common shares of beneficial interest in
MART on a one-for-one basis. MART controls the Operating Partnership as the
sole general partner, and owns approximately 74% of the Units at September
30, 1997.
MART's primary objectives are to increase funds from operations ("FFO") per
share and to maximize shareholder value. To achieve its objectives, MART seeks
to operate its Properties for long-term FFO growth. MART also acquires,
develops and redevelops anchored neighborhood or community shopping centers in
the Middle Atlantic Region that provide daily necessities, comsumer products
or value oriented merchandise through tenants such as supermarkets,
drugstores, discount retailers, restaurant and vendors of consumer goods and
services.
MART was formed on June 29, 1993 and commenced operations effective with the
completion of its initial public share offering on September 11, 1993. The
Company is the successor to the operations of BTR Realty, Inc. (the predecessor
to the company), (BTR), and qualifies as a REIT for Federal income tax purposes.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1997 and the consolidated
statements of operations for the Company for the nine and three month periods
ended September 30, 1997 and September 30, 1996 and the consolidated statements
of cash flows for the periods ended September 30, 1997 and September 30,
1996, have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows have been included. The results of operations for the periods ended
September 30, 1997 are not necessarily indicative of the operating results for
the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements
and notes thereto included in the Mid-Atlantic Realty Trust December 31, 1996
Annual Report to Shareholders.
Certain amounts for 1996 have been reclassified to conform to 1997
presentation.
TENANT RECOVERY REVENUES
Effective January 1, 1997 the Company changed its reporting of tenant expense
recoveries. During the year ended December 31, 1996 and previously, tenant
expense recoveries were reported in the operating expense line in the
consolidated statements of operations. Manangement believes reporting tenant
expense recoveries separately as a component of revenue will provide a better
presentation of revenues and expenses. The comparative prior period revenue
and operating expense line items have been reclassified to reflect this
change.
NET EARNINGS PER SHARE
Primary net earnings per common share was computed by dividing net earnings
by the weighted average number of common shares and common share equivalents
outstanding for each period. The weighted average number of common shares
and common share equivalents for the nine month periods ended September 30,
1997 and September 30, 1996 was 8,028,704 and 6,057,949, respectively. The
weighed average number of common shares and common share equivalents for the
three month periods ended September 30, 1997 and September 30, 1996 was
8,471,997 and 6,096,659, respectively.
CONVERTIBLE SUBORDINATED DEBENTURES
The Company sold $60,000,000 in convertible subordinated debentures in
September, 1993. During the nine months ended September 30, 1997, $20,597,000
in debentures were converted to 1,961,619 common shares of beneficial interest.
The balance of the debentures, of $26,598,000, convertible at $10.50 per
share, if fully converted, would produce an additional 2,533,143 shares.
During the period October 1, 1997 thru October 31, 1997 an additional
$6,108,000 in debentures were converted to 581,703 common shares of
beneficial interest reducing the balance of the debentures to $20,490,000.
CONTINUED
<PAGE> 6
<PAGE>
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements - Continued
(UNAUDITED)
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. During 1997 cancellations totaled
10,000. The outstanding stock options at September 30, 1997, totaling 244,332,
allow holders to purchase one share of MART stock for $10.50 per share. All
outstanding stock options were vested and exercisable at September 30, 1997.
The closing price of MART shares at September 30, 1997 was $13.375 per share.
No options were exercised during the period ended September 30, 1997 and, based
on the market value of MART shares, the options, if exercised, would be
dilutive producing 52,520 in additional weighted average shares for the period
ended September 30, 1997.
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 vested on September 30, 1997 at $13.375 per share. In the nine
months ended September 30, 1997, 4,312 share options were exercised and 4,000
stock options were cancelled. Based on the balance of unexercised vested
shares of 132,988 and the market value of MART shares, the options, if
exercised, would be dilutive producing 25,756 in additional weighted average
shares for the period ended September 30, 1997.
SHAREHOLDERS' EQUITY
During the nine months ended September 30, 1997, shareholders' equity
changed for the following items:
- Net earnings of $4,147,999
- Dividend paid by MART of $5,749,384
- Shares purchased by MART of $15,610 due to the
exchange of shares for Units and the conversion
of debentures
- Common shares and additional paid-in capital
increased by $19,943,449 due to conversion of
$20,597,000 in debentures.
- Proceeds of $39,026 due to the exercise of
4,312 share options.
PORTFOLIO ACQUISITION
On July 1, 1997 the Company acquired a portfolio of 9 shopping centers and one
medical office building in the Baltimore Metropolitan area from family members
and affiliates of the Pechter family, (JHP), comprising 1.07 million square
feet (JHP Acquisition). At closing of the transaction, MART formed the
Operating Partnership, MART Limited Partnership, (MLP), and members of JHP were
admitted as limited partners. MART assigned to MLP its beneficial interest in
the properties owned by MART and its subsidiaries in exchange for a number of
Units equal to the number of outstanding common shares of beneficial interest
of MART. For the JHP properties, MLP issued to the members of JHP 3.235
million Units. The acquisition was accounted for using the purchase method. The
aggregate fair market value of assets acquired was approximately $120 million
subject to the assumed existing mortgage indebtedness with a fair value of
approximately $84 million. Under the Agreement of Limited Partnership
of MLP, subject to certain restrictions, the Units may be "put" to the
partnership for cash at any time after one year following the closing. MART
may assume the payment obligation at any time and pay it in cash or, at its
option, may substitute common shares of MART on a one-for-one basis.
LOSS ON PROPERTIES
The loss on properties for the three months ended September 30, 1997,
includes a $988,000 valuation allowance for loss related to the pending sale
of Gateway Park Shopping Center in Page, Arizona, MART's only remaining
property in Arizona. This loss was ameliorated by a $847,266 gain on the sale
of MART's sole class A suburban office project, Gateway International Office
Park (Gateway) sold on September 15, 1997. The net proceeds from the sale of
Gateway of approximately $21,400,000 were used to pay down the balance under
MART's line of credit.
PRO FORMA RESULTS OF OPERATIONS
The consolidated statements of operations for the three and nine months ended
September 30, 1997 do not include a full period of revenues and expenses
related to the sale of Gateway. The consolidated statements of operations for
the nine months ended September 30, 1997 include revenues and expenses
related to JHP properties only from the date of acquisition. The Company's
pro forma consolidated results of operations for the nine months ended
September 30, 1997 and 1996, assuming the sale of Gateway and the acquisition
of JHP occurred at the beginning of each period, are summarized as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Revenues $32,652 30,939
Net Earnings $ 5,312 4,060
Earnings per share $ 0.66 0.67
</TABLE>
The pro forma revenues and earnings summarized above are not necessarily
indicative of the results that would have occurred if the sale or acquisition
had been consummated at the beginning of each period or of future results of
operations of the combined companies.
<PAGE> 7
<PAGE>
Part I. FINANCIAL INFORMATION
Item 2.
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the Company's results of operations for
the nine and three months ended September 30, 1997, with those for the nine
and three months ended September 30, 1996.
Comparison of nine months ended September 30, 1997 to nine months ended
September 30, 1996
Rental revenues increased by $3,945,000 or 20% to $23,528,000 for the nine
months ended September 30, 1997 from $19,583,000 for the nine months ended
September 30, 1996. The JHP Acquisition contributed an increase in rental
revenues of approximately 3,142,000. Owings Mills New Town shopping center
and the redevelopment of Harford Mall Annex and York Road Plaza contributed
$976,000 in additional revenues for the period. Occupancy and rental rate
increases contributed approximately $533,000. The increases were partly
offset by $562,000 in rental revenue decreases attributable to the sale of the
Gateway International Office property in September, 1997, the sale May, 1996
of the Dobson-Guadalupe shopping center, the sale in September, 1996 of the
Chandler shopping center, the sale in March, 1997 of the Union Hills shopping
center and the sale in May, 1997 of the Plaza Del Rio shopping center. In
addition, $144,000 in rental decreases were primarily related to vacancies
and lower percentage rents.
Tenant recovery revenues increased by $349,000 to $4,106,000 from
$3,757,000. The increased tenant recoveries were primarily due to the JHP
Acquisition and occupancy increases from the redevelopment of Harford Mall
Annex and York Road Plaza partly offset by lower recoveries related to
property sales.
Other revenues decreased by $403,000 to $190,000 from $593,000 primarily
due to lower interest income on partner notes receivable exchanged in July,
1996 for additional partnership interests in several properties.
As a result of the above changes total revenues increased by $3,891,000 to
$27,824,000 from $23,933,000.
Interest expense increased by $97,000 to $9,546,000 from $9,449,000
primarily due to the JHP Acquisition increasing interest expense approximately
$1,640,000. The increase was partly offset by lower interest expense due to
the conversion of debentures of approximately $1,337,000 and other interest
expense decreases.
Depreciation and amortization increased by $867,000 to $4,905,000 from
$4,038,000 primarily due to increases related to the JHP Acquisition.
Operating expenses increased by $168,000 to $6,719,000 from $6,551,000
primarily due to increased operating expenses from JHP acquisition properties
partly offset by reduced operating expenses related to property sales.
General and administrative expenses increased by $270,000 to $1,722,000 from
$1,452,000 due primarily to increased payroll expenses.
Minority interest expense increased by $308,000 to $734,000 from $426,000
due primarily to the JHP Acquisition which added minority limited partnership
interests and partly offset by decreases from the acquisition of minority
partnership interests 1996.
For the nine months ended September 30, 1997, earnings from operations
increased by $2,181,000 to $4,198,000 from $2,017,000. MART also recognized
a loss on properties of $50,000, (net of minority interest of $75,000). The
loss on properties, when combined with earnings from operations, resulted
in net earnings of $4,148,000 for the period. For the nine months ended
September 30, 1996, MART had a gain on properties of $1,006,000, which when
combined with earnings from operations, resulted in net earnings of
$3,023,000 for the period.
Comparison of three months ended September 30, 1997 to three months ended
September 30,1996
Rental revenues increased by $3,091,000 or 46% to $9,767,000 for the three
months ended September 30, 1997 from $6,676,000 for the three months ended
September 30, 1996. The JHP Acquisition contributed an increase in rental
revenues of approximately 3,142,000. Owings Mills New Town shopping center
and the redevelopment of Harford Mall Annex and York Road Plaza contributed
$277,000 in additional revenues for the period. Occupancy and rental rate
increases contributed approximately $167,000. The increases were partly offset
by $445,000 in rental revenue decreases attributable to the sale in September,
1997 of the Gateway International Office property, the sale in March, 1997
of the Union Hills shopping center and the sale in May, 1997 of the Plaza Del
Rio shopping center. In addition, $50,000 in rental decreases were primarily
related to vacancies and lower percentage rents.
Tenant recovery revenues increased by $216,000 to $1,617,000 from $1,401,000.
The increased tenant recoveries were primarily due to the JHP Acquisition and
to occupancy increases from the redevelopment of Harford Mall Annex and York
Road Plaza partly offset by lower recoveries related to property sales.
Continued
<PAGE> 8
<PAGE>
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Comparison of three months ended September 30, 1997 to three months ended
September 30, 1996 - Continued
Other revenues decreased by $53,000 to $43,000 from $96,000 primarily
due to lower interest income and lease fees.
As a result of the above changes total revenues increased by $3,254,000 to
$11,427,000 from $8,173,000.
Interest expense increased by $1,032,000 to $4,183,000 from $3,151,000
primarily due to the JHP Acquisition which contributed $1,640,000 in interest
expense increases partly offset by lower interest from the conversion of
debentures of $524,000 and other interest expense decreases.
Depreciation and amortization increased by $789,000 to $2,156,000 from
$1,367,000 primarily due to increases related to the JHP Acquisition.
Operating expenses increased by $173,000 to $2,496,000 from $2,323,000
primarily due to increased operating expenses from JHP Acquisition properties
partly offset by reduced operating expenses related to property sales.
General and administrative expenses increased by $110,000 to $587,000 from
$477,000 due primarily to increased payroll expenses.
Minority interest expense increased by $547,000 to $597,000 from $50,000
due primarily to the JHP Acquisition which added minority limited partnership
interests.
For the three months ended September 30, 1997, earnings from operations
increased by $603,000 to $1,408,000 from $805,000. MART also recognized a loss
on properties of $141,000. The loss on properties, when combined with earnings
from operations, resulted in net earnings of $1,267,000 for the period. For
the three months ended September 30, 1996, MART had a gain on properties of
$307,000, which when combined with earnings from operations, resulted in
net earnings of $1,112,000 for the period.
Financial Condition, Liquidity and Cash Flow Information
On October 14, 1997, the Company closed an offering and sale of 4,025,000
common shares of beneficial interest at a price of $13 per share. The net
proceeds of the sale were approximately $49,180,000. Approximately
$32,800,000 of the net proceeds have been applied to repay mortgage loans
on properties and it is anticipated that an additional $6,700,000 of the net
proceeds will also be used for this purpose. The balance of the proceeds will
be used by MART for the acquisition, development, or redevelopment of
additional or existing shopping centers and general corporate purposes.
The Company had cash and cash equivalents of $1,872,000 at September 30,
1997. The Company currently has a $40,000,000 secured line of credit
available for various purposes, including acquisition, development or
redevelopment of properties and liquidity, subject to various terms and
conditions. The note payable under the bank line of credit had no balance
outstanding at September 30, 1997. In September 1997, the Company reached
agreement in principle with its primary bank for an increase in its line of
credit from $40,000,000 to $75,000,000. The proposed new facility would be
unsecured. The new credit facility is subject to an agreement on terms.
Finally, the Company has registered to sell up to an aggregate of
approximately $98,000,000 (based on the public offering price) of additional
common shares of beneficial interest and/or 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 Company believes its capital
resouces are adequate for its foreseeable needs without necessitating
property sales.
Net cash flow provided by operating activities was $9,210,000 and $4,974,000
in the nine months ended 1997 and 1996, 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.
Net cash flow from investing activities increased by $4,997,000, to a net
cash flow provided by investing activities of $11,180,000 in 1997 from a net
cash flow provided by investing activities of $6,183,000 in 1996. The
increase was primarily a result of increased levels of sales of property
in 1997 (primarily the Gateway Sale) partly offset by increased additions
to properties in 1997 (primarily the Lutherville Station redevelopment
project).
Net cash flow used in financing activities increased by $8,730,000, to
$19,532,000 in 1997 from $10,802,000 in 1996. The increase was primarily a
result of higher levels of net principal paydowns in 1997 of $7,338,000
(primarily due to the line of credit payoff in 1997 using proceeds of the
Gateway Sale), as well as an increase in dividends paid of $1,569,000 in 1997.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings - In the ordinary course of business, the Company
is involved in legal proceedings. However, there are no material legal
proceedings pending against the Company.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Continued
<PAGE> 9<PAGE>
MID-ATLANTIC REALTY TRUST
Part II. OTHER INFORMATION - CONTINUED
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information -
Summary Financial Data
The following sets forth summary financial data which has been prepared
by the Company without audit. Management believes the following data should
be used as a supplement to the historical statements of operations. The data
should be read in conjunction with the historical financial statements and the
notes thereto for MART.
MID-ATLANTIC REALTY TRUST
Summary Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months Three months
ended September 30, ended September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues $27,824 23,933 $11,427 8,173
Net earnings $4,148 3,023 $1,267 1,112
Net earnings per share $0.52 0.50 $0.15 0.18
OTHER FINANCIAL DATA:
Funds from operations
(FFO) (1) - primary $9,103 6,055 $3,564 2,172
FFO - fully diluted (1) $11,916 9,676 $4,767 3,370
Weighted average number of
shares outstanding - primary 8,029 6,058 8,472 6,097
Weighted average number of shares
outstanding - fully diluted 12,853 11,711 14,923 11,720
SELECTED CASH FLOW DATA:
Net cash flow provided by
operating activities $9,210 4,974
Net cash flow provided
by investing activities $11,180) 6,184
Net cash flow used in financing
activities ($19,532) (10,802)
RECONCILIATION OF NET EARNINGS TO FFO - PRIMARY:
Net earnings $4,148 3,023 $1,267 1,112
Less: Non Recurring items - - - -
Add: Depreciation &
amortization 4,905 4,038 2,156 1,367
Less: Gains on properties 50 (1,006) 141 (307)
---------- -------- -------- -------
(FFO)- primary $9,103 6,055 $3,564 2,172
========= ======== ======== =======
</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 changes in accounting principles,
extraordinary or unusual items, and gains or losses from debt restructuring
and sales of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. FFO does not
represent cash flows from operations as defined by generally accepted
accounting principles (GAAP). FFO is not indicative that cash flows are
adequate to fund all cash needs and is not to be considered as an alternative
to net income as defined by GAAP. The presentation of FFO is not normally
included in financial statements prepared in accordance with GAAP.
Item 6. Exhibits and Reports on Form 8-K -
Form 8K - Acquisition of Assets - JHP Commercial Properties
Filed July 15, 1997
Form 8K - Sale of Assets - Gateway International Office Property
Filed September 30, 1997
Exhibit No. 27 - Financial Data Schedule
Filed thru EDGAR
<PAGE> 10
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
MID-ATLANTIC REALTY TRUST AND
SUBSIDIARIES
(Registrant)
Date 11/13/97 By: /s/ F. Patrick Hughes
F. Patrick Hughes
President
Principal Executive Officer
Date 11/13/97 By: /s/ Paul G. Bollinger
Paul G. Bollinger
Vice President and Controller
Principal Financial Officer
<PAGE> 11<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,872
<SECURITIES> 0
<RECEIVABLES> 1,266
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 270,420
<DEPRECIATION> 40,875
<TOTAL-ASSETS> 277,329
<CURRENT-LIABILITIES><F1> 0
<BONDS> 175,518
<COMMON> 92
0
0
<OTHER-SE> 49,085
<TOTAL-LIABILITY-AND-EQUITY> 277,329
<SALES> 0
<TOTAL-REVENUES> 27,824
<CGS> 0
<TOTAL-COSTS> 22,892
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,546
<INCOME-PRETAX> 4,148
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,148
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,148
<EPS-PRIMARY> .52
<EPS-DILUTED> .54
<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>
