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
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998
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or
[ ] 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
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(State or other jurisdiction of (I.R.S.. Employer
incorporation or organization) Identification No.)
170 West Ridgely Road, Suite 300, Lutherville 21093
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(Address of principal executive offices) (Zip Code)
(410) 684-2000
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(Registrant's telephone number, including area code)
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(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
--- --
14,125,048 Common Shares were outstanding as of October 28, 1998.
<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 AND USE OF PROCEEDS
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
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
MID-ATLANTIC REALTY TRUST
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of
September 30, December 31,
1998 1997
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Properties:
Operating properties $346,737,374 306,887,360
Less accumulated depreciation and amortization 48,417,516 42,781,532
298,319,858 264,105,828
Development operations 10,930,801 18,812,326
Property held for development or sale 5,419,913 5,559,864
-------------- ----------------
314,670,572 288,478,018
Cash and cash equivalents 912,311 8,427,217
Notes and accounts receivable - tenants and other 2,474,759 880,414
Prepaid expenses and deposits 2,771,359 1,928,584
Deferred financing costs 931,950 1,172,470
--------------- ----------------
$ 321,760,951 300,886,703
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses ...........$ 6,045,543 5,721,093
Notes payable .................................... 21,465,858 3,400,000
Construction loan payable ........................ 9,000,043 8,692,916
Mortgages payable ................................ 123,604,102 116,065,741
Convertible subordinated debentures .............. 14,731,000 17,502,000
Deferred income .................................. 751,122 666,444
--------------- ----------------
175,597,668 152,048,194
--------------- ----------------
Minority interest in consolidated joint ventures .. 41,855,238 42,076,946
---------------- ----------------
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 shares, issued and outstanding,
14,438,762 and 14,460,248, respectively ....... 144,387 144,602
Additional paid-in capital ...................... 130,714,807 131,281,852
Distributions in excess of accumulated earnings . (26,551,149) (24,664,891)
--------------- ----------------
104,308,045 106,761,563
--------------- ----------------
$ 321,760,951 300,886,703
================ ================
See accompanying notes to consolidated financial
statements.
</TABLE>
<PAGE> 3
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------------------- ---------------------------------
1998 1997 1998 1997
-------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Rentals .....$ 30,775,729 23,527,704 10,393,557 9,767,118
Tenant recovery 5,289,009 4,105,905 1,823,158 1,616,569
Other...... 349,448 190,673 105,740 43,498
-------------- ---------------- ----------------- --------------
36,414,186 27,824,282 12,322,455 11,427,185
-------------- ---------------- ----------------- --------------
COSTS AND EXPENSES:
Interest .. 8,855,358 9,545,898 2,965,536 4,183,338
Depreciation
/ amortization
of property and
improvements 6,692,418 4,905,039 2,379,128 2,155,773
Operating . 7,571,106 6,719,536 2,644,114 2,496,279
General and
administrative 2,065,695 1,721,904 608,816 587,158
-------------- ---------------- ----------------- --------------
25,184,577 22,892,377 8,597,594 9,422,548
-------------- ---------------- ----------------- --------------
EARNINGS FROM
OPERATIONS BEFORE
MINORITY
INTEREST .. 11,229,609 4,931,905 3,724,861 2,004,637
Minority interest
expense .... (2,237,530) (734,344) (745,617) (596,622)
------------- ----------------- ---------------- --------------
EARNINGS FROM
OPERATIONS 8,992,079 4,197,561 2,979,244 1,408,015
Gain on
properties . 92,431 (49,562) (5) (140,734)
-------------- ---------------- ---------------- ---------------
EARNINGS BEFORE
EXTRAORDINARY
LOSS........ 9,084,510 4,147,999 2,979,239 1,267,281
Extraordinary loss
from early
extinguishment of
debt (32,984) - - -
NET EARNINGS. $ 9,051,526 4,147,999 2,979,239 1,267,282
============== ================ ================ ===============
NET EARNINGS PER SHARE
- - -BASIC AND DILUTED
AND BEFORE AND
AFTER EXTRAORDINARY
ITEM $ 0.62 0.52 0.20 0.15
============== ================ ================ ===============
See accompanying notes to consolidated financial
statements.
</TABLE>
<PAGE> 4
MID-ATLANTIC REALTY TRUST
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------
1998 1997
---------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ....................... $ 9,051,526 4,147,999
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization .. 6,692,418 4,905,039
(Gain)loss on properties ....... (92,431) 49,562
Stock compensation, net.......... 205,578 -
Minority interest in earnings, net 2,230,182 734,344
Amortization of deferred financing costs 200,963 296,170
Changes in operating assets and liabilities:
Increase in operating assets .... (2,437,120) (1,256,554)
Increase in operating liabilities 409,128 629,117
---------------- -------------------
Total adjustments ........ 7,208,718 5,357,678
---------------- -------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES .. 16,260,244 9,505,677
---------------- -------------------
Cash flows from investing activities:
Acquisitions of and additions to properties (20,981,686) (14,384,478)
Proceeds from sales of properties 4,498,017 26,628,371
Receipts from minority partners ... 335,012 17,607
Payments to minority partners ..... (2,786,902) (1,081,332)
---------------- -------------------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES . (18,935,559) 11,180,168
---------------- -------------------
Cash flows from financing activities:
Proceeds from notes payable ....... 26,076,308 31,500,000
Principal payments on notes payable (8,010,450) (47,900,000)
Principal payments on mortgages payable (8,633,394) (5,213,190)
Proceeds from construction loan payable 307,127 7,532,946
Additions to deferred financing costs (30,792) (21,763)
Dividends paid...................... (10,937,784) (5,749,384)
Shares repurchased.................. (3,583,774) (15,610)
Other,net........................... (26,832) 39,026
---------------- -------------------
NET CASH USED IN
FINANCING ACTIVITIES . (4,839,591) (19,827,975)
---------------- -------------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS ............... (7,514,906) 857,870
CASH AND CASH EQUIVALENTS,
beginning of period ................ 8,427,217 1,013,838
---------------- -------------------
CASH AND CASH EQUIVALENTS,
end of period ..................... $ 912,311 1,871,708
================ ===================
Schedule of Noncash Investing and Financing Activities:
Operating partnership units issued .... $ - 36,064,914
Mortgages payable assumed in acquisitions 16,171,755 83,922,499
Conversion of subordinated debentures,
net of deferred financing costs ...... $ 2,696,476 19,943,448
================ ===================
During the nine month periods ended September 30, 1998 and 1997, $523,217 and
$210,898, respectively, of interest costs were capitalized as construction
period interest in development operations.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 5
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements
(UNAUDITED)
ORGANIZATION
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. and qualifies as a real estate investment
trust ("REIT") for Federal income tax purposes. As used herein, the term
"MART" or the "Company" refers to Mid-Atlantic Realty Trust, and entities
owned or controlled by MART, including MART Limited Partnership (the
"Operating Partnership").
DESCRIPTION OF BUSINESS
The Company is a fully integrated, self-administered real estate
investment trust which owns, acquires, develops, redevelops, leases and
manages primarily neighborhood or community shopping centers in the Middle
Atlantic region of the United States.
The Company has an equity interest in 32 operating shopping centers, 27
of 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 Company also owns seven undeveloped parcels of land totaling
approximately 125 acres which it is holding for development or sale.
All of MART's interests in properties are held directly or indirectly
by, and substantially all of its operations relating to the properties are
conducted through, the Operating Partnership. Subject to certain conditions,
units of partnership interest in the Operating Partnership ("Units") may be
exchanged by the limited partners for cash or at the option of MART, the
obligation may be assumed by MART and paid either in cash or in 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 82%
of the Units at September 30, 1998.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of September 30, 1998 and the
consolidated statements of operations for the Company for the nine and three
month periods ended September 30, 1998 and September 30, 1997 and the
consolidated statements of cash flows for the nine month periods ended
September 30, 1998 and September 30, 1997, 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, 1998 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 1997 Annual Report to Shareholders.
NET EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing earnings
available to common shareholders by the weighted average number of common
shares outstanding. Diluted EPS is computed after adjusting the numerator and
denominator of the basic EPS computation for the effects of all dilutive
potential common shares outstanding during the period. The dilutive effects
of convertible securities are computed using the "if-converted" method and
the dilutive effects of options, warrants and their equivalents (including
fixed awards and nonvested shares issued under share-based compensation
plans) are computed using the "treasury stock" method.
CONTINUED
<PAGE> 6
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements - Continued
(UNAUDITED)
NET EARNINGS PER SHARE - Continued
The following table sets forth information relating to the computation
of basic and diluted earnings per share:
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
-------------------------------------------------------------------
1998 1997 1998 1997
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Numerator:
Earnings before
extraordinary
loss: $ 9,084,510 4,147,999 2,979,239 1,267,282
Dividends on
unvested
restricted
share awards (230,524) - (76,929) -
-------------- ---------------- ---------------- ----------------
Numerator for
basic earnings
per share-
earnings
available to
common
shareholders 8,853,986 4,147,999 2,902,310 1,267,282
Adjustments to
dividends on
restricted
share awards - - - -
Numerator for
diluted
earnings
per share-
earnings
available to
common
shareholders============== ================ ================ ================
$ 8,853,986 4,147,999 2,902,310 1,267,282
============== ================ ================ ================
Denominator: (1)
Denominator for
basic earnings
per share -weighted
average shares
outstanding 14,269,982 7,998,582 14,270,130 8,421,096
Effect of
dilutive
securities:
Share options 69,432 39,143 43,242 53,594
Denominator for
diluted earnings
per share-
adjusted
weighted
average shares
outstanding ============== ================ ================ ================
14,339,414 8,037,725 14,313,372 8,474,690
============== ================ ================ ================
</TABLE>
(1) The denominator excludes the effect of securities which are antidilutive.
For purposes of this computation at September 30, 1998, the convertible
subordinated debentures, if converted, would produce an additional 1,402,953
shares and the Units, if exchanged, would produce an additional 3,175,771
shares.
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. For the nine months ended
September 30, 1998, $2,771,000 in debentures were converted to 263,891 common
shares of beneficial interest. For the nine months ended September 30, 1997,
$20,597,000 in debentures were converted to 1,961,569 common shares of
beneficial interest. The balance of the debentures, at September 30, 1998, of
$14,731,000, convertible at $10.50 per share, if fully converted, would
produce an additional 1,402,953 shares. Costs associated with the issuance of
the debentures were approximately $752,097 at September 30, 1998 and are
being amortized through 2003. The debentures are redeemable by the Company at
any time at 100% of the principal amount thereof, together with accrued
interest.
The debentures are subordinate to all mortgages payable.
SHAREHOLDERS' EQUITY
During the nine months ended September 30, 1998, shareholders' equity
changed for the following items: -
-Net earnings of $9,051,526
-Dividend paid of $10,937,784
-Common shares and additional paid-in capital increased by $2,696,476
due to conversion of $2,771,000 in debentures
-Other changes, $3,263,735 primarily related to stock repurchases
Restricted Share Plan
In 1997, the Executive Compensation Committee recommended, and the Board
of Trustees approved, a Restricted Share Plan. The Executive Compensation
Committee believes that the grant of restricted share awards provides a
long-term incentive to persons who contribute to the growth of MART and
establishes a direct link between compensation and shareholder return. In
1997, 400,000 restricted shares were made available for the plan and 368,333
restricted shares with a market value of $13.38 per share were awarded under
the plan. These shares are subject to forfeiture restrictions which lapse at
defined annual rates to 2008, subject to the recipients' continued employment
with the Company. The Company recognizes the amortization of the fair value
of the shares awarded as compensation costs over the terms of the awards.
<PAGE> 7
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, 1998, with those for the
nine and three months ended September 30, 1997.
Comparison of nine months ended September 30, 1998 to nine months ended
September 30, 1997
Rental revenues increased by $7,248,000 or 31% to $30,776,000 for the
nine months ended September 30, 1998 from $23,528,000 for the nine months
ended September 30, 1997. The portfolio acquisition of ten properties from
partnerships associated with Jack H. Pechter in July 1997 ("JHP Acquisition")
contributed an increase in rental revenues of approximately $6,623,000 for
the period. Acquisitions of Milford Commons and Arundel Plaza in December
1997, of Wayne Heights Plaza in January 1998, Wayne Avenue Plaza in February
1998, and DelAlba Plaza in September 1998 ("New Acquisitions") contributed an
Increase in rental revenues of approximately $1,985,000. The redevelopment of
Lutherville Station, the development of North East Station, and other
occupancy and net rental increases contributed approximately $1,445,000 in
net increases. The increases were partially offset by $2,805,000 in rental
revenue decreases attributable to the March 1997 sale of Union Hills shopping
center, the May 1997 sale of the Plaza Del Rio shopping center, the
September 1997 sale of the Gateway International Office project, and the
April 1998 sale of Page Plaza shopping center.
Tenant recovery revenues increased by $1,183,000 to $5,289,000 from
$4,106,000. The increased tenant recoveries were primarily due to the JHP
Acquisition and the New Acquisitions offset by decreases related to the sales
of properties referred to above.
Other revenues increased by $159,000 to $349,000 from $190,000
primarily due to interest income from higher short term investment balances.
As a result of the above changes total revenues increased by
$8,590,000 to $36,414,000 from $27,824,000.
Interest expense decreased by $691,000 to $8,855,000 from $9,546,000
primarily due to decreases related to the conversion of debentures
$1,359,000 and the paydown of mortgages and notes payable $1,549,000 partly
offset by increases related to debt assumed for the JHP acquisition and New
Acquisitions $2,217,000.
Depreciation and amortization increased by $1,787,000 to $6,692,000
from $4,905,000 primarily due to increases related to the JHP Acquisition .
Operating expenses increased by $852,000 to $7,571,000 from $6,719,000
primarily due to increased operating expenses from JHP and New Acquisition
properties offset by reduced operating expenses related to property sales.
General and administrative expenses increased by $344,000 to
$2,066,000 from $1,722,000 due primarily to expense related to nonviable
projects and compensation.
Minority interest expense increased by $1,503,000 to $2,237,000 from
$734,000 due primarily to the addition of minority limited partnership
interests in connection with the JHP and New Acquisition properties.
For the nine months ended September 30, 1998, earnings from operations
increased by $4,794,000 to $8,992,000 from $4,198,000. MART also recognized a
gain on properties of $92,000 and an extraordinary loss on the early
extinguishment of debt of $33,000. The gain on properties and extraordinary
item, when combined with earnings from operations, resulted in net earnings
of $9,051,000. For the nine months ended September 30, 1997, MART recognized
a loss on properties of $50,000. The loss on properties, when combined with
earnings from operations, resulted in net earnings of $4,148,000 for the
period.
Comparison of three months ended September 30, 1998 to three months ended
September 30, 1997
Rental revenues increased by $626,000 or 6% to $10,393,000 for the
three months ended September 30, 1998 from $9,767,000 for the three months
ended September 30, 1997. New Acquisitions contributed an increase in rental
revenues of approximately $714,000 for the period. The redevelopment of
Lutherville Station, the development of North East Station, and other
occupancy and net rental increases contributed approximately $689,000 in
rental increases. The increases were partially offset by $777,000 in rental
revenue decreases attributable to the September 1997 sale of the Gateway
International Office project, and the April 1998 sale of Page Plaza shopping
center.
Tenant recovery revenues increased by $206,000 to $1,823,000 from
$1,617,000. The increased tenant recoveries were primarily due to the New
Acquisitions, development , and redevelopment projects partly offset by
decreases related to the sales of properties
referred to above.
CONTINUED
<PAGE> 8
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Comparison of three months ended September 30, 1998 to three months ended
September 30, 1997 - Continued
As a result of the above changes total revenues increased by $895,000
to $12,322,000 from $11,427,000.
Interest expense decreased by $1,218,000 to $2,965,000 from $4,183,000
primarily due to the paydown of mortgages payable $873,000, expenses related
to the conversion of debentures $388,000, partly offset by increases
from the debt assumed for New Acquisitions, the redevelopment of Lutherville
Station, and credit line borrowings $144,000.
Depreciation and amortization increased by $223,000 to $2,379,000 from
$2,156,000 primarily due to increases related to New Acquisitions.
Operating expenses increased by $148,000 to $2,644,000 from $2,496,000
primarily due to increased operating expenses from New Acquisition
properties, the redevelopment of Lutherville Station, and the development
of North East Station partly offset by reduced operating expenses related
to property sales.
General and administrative expenses increased by $22,000 to $609,000
from $587,000 due primarily to increased shareholder related
expense and expense related to nonviable projects.
Minority interest expense increased by $149,000 to $746,000 from
$597,000 due primarily to the addition of minority limited
partnership interests in connection with New Acquisitions.
Cash Flow Comparison
The following discussion compares the statement of cash flows
information for 1998 with the information for 1997.
Net cash flow provided by operating activities was $16,260,000 and
$ 9,506,000 in the nine months ended September 30, 1998 and, 1997
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 used in investing activities increased by $30,116,000 to
$18,936,000 in 1998 from cash provided by investing activities of $11,180,000
in 1997. The increase was primarily a result of increased levels of
acquisitions of properties and decreases in proceeds from the sale of
properties in 1998.
Net cash flow used in financing activities decreased by $14,988,000 to
$4,840,000 in 1998 from $19,828,000 in 1997. The decrease was primarily a
result of a higher level of net principal paydowns in 1997, primarily due to
a line of credit paydown from proceeds of the sale of the Gateway
International Office Project.
RECENT ACCOUNTING PRONOUNCEMENTS
On March 19, 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus on Issue 97-11, Accounting for
Internal Costs Relating to Real Estate Property Acquisitions" which provides
that internal costs of identifying and acquiring operating property incurred
subsequent to March 19, 1998 should be expensed. The Company has historically
capitalized the direct internal costs of identifying and acquiring property
and, accordingly, realized an increase in expense in each of the quarters
ended June 30, 1998, and September 30, 1998. The Company estimates an
annualized cost of $.01 per common share and expects this level of
acquisition costs will continue in the future.
In May 1998, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus on Issue 98-9 relating to the accounting
for contingent rent in interim financial periods. The consensus requires that
a lessor defer recognition of contingent rental income in interim periods
until the specified target that triggers the contingent rental income is
achieved. The implementation of this pronouncement did not have a material
impact for the three and nine month periods ended September 30, 1998.
YEAR 2000 ISSUE
The year 2000 issue relates to whether computer systems will properly
recognize date sensitive information to allow accurate processing of
transactions and data relating to the year 2000 and beyond. Systems that do
not properly recognize such information could generate erroneous data or
fail.
As a result of the Company's normal upgrade and replacement processes,
it has been determined that all existing network and desktop equipment is
year 2000 compliant. The Company's mission critical property management and
financial reporting software will require a year 2000 programming
modification. This modification is scheduled for installation in November
1998. The Company has determined that all non-mission critical software is
year 2000 compliant. As the Company owns primarily community retail centers
without enclosed common areas, the use of this technology is very limited and
management does not believe that the year 2000 issue will pose significant
problems in these systems. The company expects that the costs to specifically
remediate year 2000 information technology issues will be minimal.
The Company believes the "worst case scenario" exposure to be indirect
in nature involving vendors, suppliers, and tenants. Currently, management
does not feel it is possible to measure the effect of potential
complications. The Company will continually monitor and evaluate these areas
and develop contingency plans on an as needed basis.
CONTINUED
<PAGE> 9
MID-ATLANTIC REALTY TRUST
Part II. OTHER INFORMATION
Item 1. Legal Proceedings - In the ordinary course of business, the Company
is involved in legal proceedings. However, there are no material legal
proceedings pending against the Company.
Item 2. Changes in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None.
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.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
MID-ATLANTIC REALTY TRUST
Summary Financial Data
(In thousands, except per share data)
Nine Months Three Months
Ended September 30, Ended September 30,
-------------------------------- ------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 36,414 27,824 12,322 11,427
Net earnings $ 9,051 4,148 2,979 1,267
Net earnings
per share -
basic and
diluted $ 0.62 0.52 0.20 0.15
OTHER FINANCIAL DATA:
- - -----------------------------------------------------
FFO-diluted (1) $ 18,571 11,916 6,294 4,767
Weighted
average
number of
shares
outstanding
- - - FFO diluted 19,023 12,853 18,910 14,922
SELECTED CASH FLOW DATA:
- - -----------------------------------------------------
Net cash
flow provided
by operating
activities $ 16,260 9,506
Net cash
flow used in
investing
activities (18,936) 11,180
Net cash
flow used in
financing
activities (4,840) (19,828)
RECONCILIATION OF NET EARNINGS TO FFO - DILUTED
- - ----------------------------------------------------------------------
Net earnings $ 9,051 4,148 2,979 1,267
Depreciation and
amortization on
real estate
assets 6,692 4,905 2,379 2,156
Gain (loss) on
properties (92) 50 - 141
Extraordinary
loss on early
extinguishment
of debt 33 - - -
Operating
Partnership
minority interest
expense 1,962 529 649 529
Convertible debenture
interest expense 925 2,284 287 674
-------------- ---------------- ---------------- ----------------
FFO -
diluted $ 18,571 11,916 6,294 4,767
============== ================ ================ ================
</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.
-----------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8K - None
<PAGE> 10
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-ATLANTIC REALTY TRUST AND
SUBSIDIARIES
(Registrant)
Date: 10/30/98 By: /s/ F. Patrick Hughes
----------------- ----------------------------
F. Patrick Hughes
President
Chief Executive Officer
Date: 10/30/98 By: /s/ Janice C. Robinson
----------------- -----------------------------
Janice C. Robinson
Controller
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 912
<SECURITIES> 0
<RECEIVABLES> 2,475
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 314,671
<DEPRECIATION> 48,418
<TOTAL-ASSETS> 332,761
<CURRENT-LIABILITIES><F1> 0
<BONDS> 147,335
<COMMON> 147
0
0
<OTHER-SE> 104,164
<TOTAL-LIABILITY-AND-EQUITY> 321,761
<SALES> 0
<TOTAL-REVENUES> 12,322
<CGS> 0
<TOTAL-COSTS> 8,598
<OTHER-EXPENSES> 745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,966
<INCOME-PRETAX> 2,979
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,979
<DISCONTINUED> 0
<EXTRAORDINARY> 00
<CHANGES> 0
<NET-INCOME> 2,979
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<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>
