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, 1997
-----------------------------------------
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.)
170 West Ridgely Road, Suite 300 - Lutherville, Maryland 21093
- - -------------------------------------------------------- -----------
(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. [ X ]
As of March 12, 1998, 14,518,817 common shares of beneficial interest of
Mid-Atlantic Realty Trust were outstanding and the aggregate value of common
stock (based upon the $13.75 closing price on that date) held by non-affiliates
was approximately $199,634,000.
Documents Incorporated by Reference
The definitive proxy statement with respect to the 1998 annual meeting of
Mid-Atlantic Realty Trust shareholders
(to be filed).
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 13
<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. 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").
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's primary objectives are to enhance
funds from operations ("FFO") per share and maximize shareholder value. To
achieve its objectives, the Company seeks to operate its properties for
long-term FFO growth. The Company also acquires neighborhood or community
shopping centers that either have dominant anchor tenants or contain a mix of
tenants which reflects the shopping needs of the communities they serve. The
Company also develops and redevelops shopping centers on a tenant-driven basis,
leveraging either existing tenant relationships or geographic and demographic
knowledge while seeking to minimize exposure to risk associated with long-term
land development.
The Company's financial strategy is to execute its operating and growth
strategies by utilizing a blend of internally generated funds, issuance of
Operating Partnership Units, defined below, proceeds from divestitures,
institutional borrowings and issuance of corporate equity or debt, as
appropriate. The Company intends to maintain a ratio of secured debt to total
estimated property value at or below 50%.
The Company has an equity interest in twenty-nine operating shopping
centers, twenty-four 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, collectively the "Properties". The Properties have a gross leasable
area of approximately 4,225,000 square feet, of which approximately 95% was
leased at December 31, 1997. Of these Properties, approximately 97% of the gross
leasable area is in the states of Maryland, Virginia, New York and Delaware. The
Company also owns seven undeveloped parcels of land totaling approximately 132
acres and varying in size from three to 41 acres.
All of MART's interests in the Properties are held directly or indirectly
by, and substantially all of its operations relating to the Properties are
conducted through the Operating Partnership. Units of 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 82% of the Units at December 31, 1997.
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 56 full time employees and believes that its relationship
with its employees is good.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 14
<PAGE>
ITEM 2 - PROPERTIES
The following schedule describes the Company's properties as of December 31,
1997:
<TABLE>
<CAPTION>
SHOPPING CENTER PROPERTIES(1)
Year(s)
Gross
Percent Year Built/
Leasable Area Percent
Ownership Acquired Redeveloped
(Sq. Ft.) Leased Major
Tenants
<S> <C> <C> <C>
<C> <C> <C>
- - --------------------------------------------------------------------------------
- - -------------------------------------------------
Maryland
- - --------------------------------------------------------------------------------
- - -------------------------------------------------
Baltimore Metropolitan Area:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - -- - - - - - - -
Harford Mall and Business Center(2) 100% 1972* 1972/1984-96
615,000
98% Hecht's, Montgomery
Ward, Best Buy
Lutherville Station Shopping Center(3) 100% 1993 1969/1997
285,000
100% Metro Food Market,
Caldor, Circuit City
Arundel Plaza Shopping Center 67% 1997 1967/-
236,000 97%
Giant Food, Lowe's Home
Center
Timonium Shopping Center 100% 1997 1962/-
207,000 90%
Ames, Sony Theaters,
Blockbuster
Perry Hall Shopping Center 100% 1997 1965/1996
195,000 90%
Metro Food Market (on
own pad), Rite Aid,
Frank's Nursery & Crafts,
Outback Steakhouse,
Radio Shack
Enchanted Forest Shopping Center 100% 1997 1992/-
140,000 97%
Safeway, Petco
Wilkens Beltway Plaza Shopping Center 93% 1981* 1985-87/
132,000
97% Giant Food, Provident
1991/1995
Bank, Radio Shack
New Town Village Shopping Center 100% 1995* 1995/-
118,000 99%
Giant Food, Blockbuster,
Starbucks
Ingleside Shopping Center 100% 1997 1963/1996
115,000 100%
Safeway, Rite Aid, First
National Bank,
Blockbuster
Shawan Plaza Shopping Center 100% 1997 1991/-
95,000 100%
Giant Food, Nationsbank,
Provident Bank
Glen Burnie Village Shopping Center 100% 1997 1972/-
94,000 87%
Rite Aid, Firestone,
First National Bank,
West Marine
York Road Plaza Shopping Center 100% 1967* 1967/1996
91,000
98% Giant Food, Firestone,
Starbucks, Boston
Market, Bruegger's
Radcliffe Shopping Center at Towson 100% 1997 1988/1993
86,000
100% CVS Drug, CompUSA,
Linens N'Things
Rosedale Plaza Shopping Center 100% 1989 1972/-
73,000 78%
Valu Food, Rite Aid
Patriots Plaza Shopping Center(3) 50% 1984* 1984/-
67,000 53%
Denny's, Dunkin Donuts
Rolling Road Plaza Shopping Center 100% 1973* 1973/1994
63,000
92% AMF, Firestone
Timonium Crossing Shopping Center 100% 1997 1986/1996
60,000
89% Bibelot, Cosmetic Center
Club Centre at Pikesville Shopping Center 100% 1997 1990/-
44,000 95%
Blockbuster
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 15
<PAGE>
ITEM 2 PROPERTIES (Continued)
SHOPPING CENTER PROPERTIES (Continued)
Year(s)
Gross
Percent Year Built/
Leasable Area Percent
Ownership Acquired Redeveloped
(Sq. Ft.) Leased
- - --------------------------------------------------------------------------------
- - ----------------------
Easton:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Shoppes at Easton Shopping Center 100% 1994 1994/-
113,000 97%
- - --------------------------------------------------------------------------------
- - ----------------------
Delaware
- - --------------------------------------------------------------------------------
- - ----------------------
Wilmington:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Brandywine Commons Shopping Center(3) 100% 1995 1992/-
164,000
100%
Milford:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Milford Commons Shopping Center 100% 1997 1994
61,000 100%
- - --------------------------------------------------------------------------------
- - ----------------------
Pennsylvania
- - --------------------------------------------------------------------------------
- - ----------------------
Chambersburg:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Wayne Avenue Plaza Shopping Center(4) 100% 1998 1990/1993
121,000
96%
Waynesboro:
- - - --- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Wayne Heights Plaza Shopping Center(5) 100% 1998 1975/-
109,000 96%
- - --------------------------------------------------------------------------------
- - ----------------------
New York
- - --------------------------------------------------------------------------------
- - ----------------------
Colonie:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Colonie Plaza Shopping Center 100% 1987* 1987/-
140,000 97%
East Greenbush:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Columbia Plaza Shopping Center 100% 1988* 1988/1997
132,000 93%
- - --------------------------------------------------------------------------------
- - ----------------------
Virginia
- - --------------------------------------------------------------------------------
- - ----------------------
Burke:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Burke Town Plaza Shopping Center(3) 100% 1979* 1979-1982/1997
115,000
95%
Fredericksburg:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Spotsylvania Crossing Shopping Center 93% 1987* 1987/1991
142,000
98%
Harrisonburg:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Skyline Village Shopping Center 100% 1988* 1988/1992
127,000 99%
Manassas:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Sudley Towne Plaza Shopping Center 100% 1984* 1984/-
108,000 98%
Prince William County:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Smoketown Plaza Shopping Center 93% 1987* 1987/1994
176,000 99%
- - --------------------------------------------------------------------------------
- - ----------------------
Arizona
- - --------------------------------------------------------------------------------
- - ----------------------
Page:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - -
Gateway Park Shopping Center(6) 100% 1991 1991/-
82,000 77%
Store, Wal-Mart (on
own pad)
Major Tenants
Easton:
Shoppes at Easton Shopping Center Giant Food, Wal-Mart
(on own pad)
- - --------------------------------------------------------------------
Delaware
- - --------------------------------------------------------------------
Wilmington:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Brandywine Commons Shopping Center(3) Shop Rite, Computer City,
Sports Authority
Milford:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Milford Commons Shopping Center Food Lion, Fashion Bug,
Wal-Mart (on own pad)
- - --------------------------------------------------------------------
Pennsylvania
- - --------------------------------------------------------------------
Chambersburg:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Wayne Avenue Plaza Shopping Center(4) Giant Food (of Carlisle),
CVS Drug, Blockbuster
Waynesboro:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Wayne Heights Plaza Shopping Center(5) Martins (Giant of Carlisle),
Ames, Thrift Drug
- - --------------------------------------------------------------------
New York
- - --------------------------------------------------------------------
Colonie:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Colonie Plaza Shopping Center Price Chopper, Fashion Bug
East Greenbush:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Columbia Plaza Shopping Center Price Chopper,
Ben Franklin
- - --------------------------------------------------------------------
Virginia
- - --------------------------------------------------------------------
Burke:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Burke Town Plaza Shopping Center(3) Safeway, CVS Drug
Fredericksburg:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Spotsylvania Crossing Shopping Center Giant Food (on own pad),
Kmart, CVS Drug
Harrisonburg:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Skyline Village Shopping Center Richfood, Toys "R" Us
Manassas:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Sudley Towne Plaza Shopping Center Burlington Coat Factory
Prince William County:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Smoketown Plaza Shopping Center Hub Furniture, Frank's
Nursery & Crafts
- - --------------------------------------------------------------------
Arizona
- - --------------------------------------------------------------------
Page:
- - --------------------------------------------------------------------
Gateway Park Shopping Center(6) Bashas' Grocery and Drug
Store, Wal-Mart (on
own pad)
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 16
<PAGE>
OTHER RETAIL AND COMMERCIAL PROPERTIES(7)
Year(s) Gross
Percent Year Built/ Leasable Area
Percent
Ownership Acquired Redeveloped (Sq. Ft.)
Leased Major
Tenants
- - --------------------------------------------------------------------------------
- - -------------------------------------
Maryland
- - --------------------------------------------------------------------------------
- - -------------------------------------
Baltimore Metropolitan Area:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -
Orchard Square Medical Office 100% 1997 1988/-
28,000 94% N/A
Southwest Mixed Use Property 100% 1968* 1968/1984
25,000 100% Shell
Oil, Carrier/Otis,
Potomac Air Gas
Other:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -
Waldorf Property 100% 1979* 1979/-
30,000 100% AMF, Firestone
Clinton Property(3) 100% 1971* 1971/-
29,000 100% AMF,
Suburban Bank
- - --------------------------------------------------------------------------------
- - -------------------------------------
Illinois
- - --------------------------------------------------------------------------------
- - -------------------------------------
Chicago Property 100% 1978 1963/-
37,000 100% AMF
- - --------------------------------------------------------------------------------
- - -------------------------------------
UNDEVELOPED LAND
Percent Area in
Ownership Acres Zoning
- - --------------------------------------------------------------------------------
- - --------
Maryland
- - --------------------------------------------------------------------------------
- - --------
Baltimore Metropolitan Area:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - -
- - - - - -
Dorsey Property 100% 19.4 Commercial
Harford Property (Adjacent to Harford Mall) 100% 3.0 Light
Industrial
Pulaski Property 100% 3.0 Industrial
North East:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - -
- - - - - -
North East Property 100% 41.0
Commercial/Residential
Salisbury:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - -
- - - - - -
Northwood Industrial Park 67% 16.1 Industrial
- - --------------------------------------------------------------------------------
- - --------
North Carolina
- - --------------------------------------------------------------------------------
- - --------
Burlington:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - -
- - - - - -
Burlington Commerce Park 100% 41.0 Commercial
Hillsborough:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - -
- - - - - -
Hillsborough Crossing 100% 8.0 Commercial
<FN>
(1) Shopping centers in operation are subject to mortgage financing
aggregating
$113,736,522 at December 31, 1997.
(2) The Harford Mall property is subject to mortgage financing of
$19,374,196 at
December 31, 1997. The Harford Mall mortgage has an interest rate of 9.78%, a
30 year
amortization, with a 10 year balloon payment of $18,124,490 due at the maturity
date of
July, 2003. The mortgage allows prepayment with a penalty that is the greater
of 1% of
the outstanding principal balance or yield maintenance.
(3) These properties are subject to ground leases; all of the land relating
to the
other properties listed above is owned in fee simple. The ground leases are
subject to
the following terms:
Approximate
Property Annual Rent Remaining Lease
Term
- - -------- ----------- ---------------------------
- - --------
Lutherville Station Shopping Center $60,000 19 years plus six 10 year
options
Patriots Plaza Shopping Center $59,700 10 years plus two 10 year
options
Brandywine Commons Shopping Center $392,600 55 years plus two 10 year
options
Burke Towne Plaza Shopping Center $80,000 34 years plus three 15 year
renewal
options
Clinton Property $33,000 29 years plus one 45 year
renewal
option
(4) The Company acquired Wayne Avenue Plaza on February 11, 1998 for
approximately
$10,700,000 which included the assumption of a mortgage approximating
$8,300,000.
(5) The Company acquired Wayne Heights Plaza on January 26, 1998 for
approximately
$5,400,000.
(6) A purchase option agreement has been signed to sell this
property for
$4,440,000, which should generate no significant gain or loss on the sale in
1998. In
1997, the Company recorded a $1,148,000 valuation allowance for loss
related to the
pending sale of this property.
(7) Other retail and commercial properties in operation are subject to
mortgage
financing aggregating $2,329,219 at December 31, 1997.
* Developed by MART or its predecessor
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 17
<PAGE>
</TABLE>
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"), began trading on the New York Stock Exchange on September 18, 1997,
under the symbol "MRR". The shares were formerly traded on the American Stock
Exchange under the symbol "MRR". The following table sets forth, for the
quarters indicated, the high and low closing sale prices of MART shares on the
AMEX or NYSE, and cash distributions paid per share for the indicated period.
<TABLE>
<CAPTION>
Closing Prices Per Share
1997 High Low Distributions
- - ----------------------------------------------
<S> <C> <C> <C>
First quarter $11.750 10.500 0.24
Second quarter 11.875 11.000 0.24
Third quarter 13.375 11.500 0.24
Fourth quarter 14.688 12.813 0.25
</TABLE>
<TABLE>
<CAPTION>
1996 High Low Distributions
- - ---------------------------------------------
<S> <C> <C> <C>
First quarter $10.375 8.750 0.23
Second quarter 10.000 9.250 0.23
Third quarter 10.125 9.500 0.23
Fourth quarter 11.375 9.625 0.24
</TABLE>
<TABLE>
<CAPTION>
1995 High Low Distributions
- - --------------------------------------------
<S> <C> <C> <C>
First quarter $8.375 7.875 0.22
Second quarter 9.375 7.625 0.22
Third quarter 9.125 8.250 0.22
Fourth quarter 8.938 8.250 0.23
- - --------------------------------------------
</TABLE>
For shareholders 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
1997 1996 1995
- - --------------------------------------------------------------
<S> <C> <C> <C>
Ordinary dividends-
taxable as ordinary income $ 0.97 0.58 0.48
Capital gain distribution-
taxable as capital gain - - -
Non-taxable distribution-
return of capital or taxable
gain-(depending on a
shareholder's basis in
MART shares) - 0.35 0.41
------------------------
Total annual gross dividends
per share $ 0.97 0.93 0.89
========================
Percent of total annual gross
dividends per share
non-taxable distribution-
return of capital or taxable gain - 38% 46%
- - --------------------------------------------------------------
</TABLE>
On February 13, 1998, MART declared a quarterly cash dividend of $.25 per share
payable March 16, 1998 to shareholders of record February 28, 1998.
The number of holders of record of the MART shares as of February 17, 1998 was
1,311.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 18
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth certain 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
presents Selected Financial Data of Mid-Atlantic Realty Trust as of December 31,
1997, 1996, 1995, 1994 and 1993, and for the years ended December 31, 1997,
1996, 1995, 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 September 10, 1993 and for the period January 1, 1993
through September 10, 1993. Mid-Atlantic Realty 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 1997 presentation.
<TABLE>
<CAPTION>
Mid-Atlantic Realty
Trust BTR Realty,
Inc.
- - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - -
September 11,
1993 to January 1, 1993
Years Ended
December 31, December 31, to
September 10,
- - - - - - - - - - - - - - - - - -
- - - - - - - - - -
1997 1996
1995 1994 1993 1993
<S> <C> <C> <C>
<C> <C> <C>
- - --------------------------------------------------------------------------------
- - ---------------------------------------------------
Revenues $ 39,152,220 32,406,300
29,593,158 27,212,796
6,905,482 17,781,283
================================================================================
======
Earnings (loss) before cumulative
effect of change in accounting principle
and extraordinary loss $ 6,819,211 3,508,709
3,165,082 2,916,286
467,474 (2,057,106)
Cumulative effect of change
in accounting for percentage rents - -
612,383 - -
- - -
- - --------------------------------------------------------------------------------
- - ------
Earnings (loss) before
extraordinary loss 6,819,211 3,508,709
3,777,465 2,916,286
467,474 (2,057,106)
Extraordinary loss (226,873) -
- - - - -
(548,323)
- - --------------------------------------------------------------------------------
- - ------
Net earnings (loss) $ 6,592,338 3,508,709
3,777,465 2,916,286
467,474 (2,605,429)
================================================================================
======
Earnings (loss) per share, basic and
diluted, before cumulative effect of
change in accounting principle and
extraordinary loss $ 0.72 0.56
0.51 0.46 0.07
(0.24)
Cumulative effect of change
in accounting for percentage rents - -
0.10 - - -
- - --------------------------------------------------------------------------------
- - ------
Earnings (loss) per share
before extraordinary loss 0.72 0.56
0.61 0.46 0.07
(0.24)
Extraordinary loss (0.02) -
- - - - - (0.06)
- - --------------------------------------------------------------------------------
- - ------
Net earnings (loss) per share $ 0.70 0.56
0.61 0.46 0.07
(0.30)
================================================================================
======
Total assets $300,886,703 173,278,241
182,521,299 162,842,567
148,563,052 147,869,512
================================================================================
======
Indebtedness-
total mortgages, convertible
debentures, construction loans
and notes payable $145,660,657 133,805,495
154,020,757 133,390,553
116,494,372 150,666,971
================================================================================
======
Net cash provided by
operating activities $ 16,005,958 9,898,948
11,193,068 7,766,044
3,479,340 4,129,635
================================================================================
======
Cash dividends paid per share $ 0.97 0.93
0.89 0.85 0.05
0.58
================================================================================
======
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 19
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA (Continued)
SUMMARY FINANCIAL DATA
The following table 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 assumes the MART public
offering took place on January 1, 1992. 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 on January 1, 1992.
<TABLE>
<CAPTION>
Years Ended
December 31,
- - - - - - - - - - - - -
- - - - - - - - - - - - - - -
1997 1996
1995 1994 1993
In thousands, except per share data Actual Actual
Actual Actual Pro Forma
- - --------------------------------------------------------------------------------
- - -------------------------
<S> <C> <C> <C>
<C> <C>
Revenues $39,152 32,406
29,593 27,213 24,687
Net earnings $ 6,592 3,509
3,777 2,916 1,217
Net earnings per share - basic and diluted $ 0.70 0.56
0.61 0.46 0.19
Funds from operations (FFO)(1) - diluted $17,513 13,178
12,307 11,173 10,377
Net cash flow:
Provided by operating activities $16,006 9,899
11,193 7,766 (2)
(Used in) provided by investing activities $(5,995) 4,232
(23,584) (19,630) (2)
(Used in) provided by financing activities $(2,597) (13,631)
12,561 11,521 (2)
Weighted average number of shares outstanding:
Basic 9,309 6,211
6,177 6,291 6,291
Diluted 9,361 6,211
6,177 6,291 6,291
==================================================
RECONCILIATION OF NET EARNINGS
TO FUNDS FROM OPERATIONS - DILUTED
Net earnings $ 6,592 3,509
3,777 2,916 1,217
Depreciation and amortization on real estate assets 6,955 5,414
4,983 4,550 4,271
Gain on life insurance proceeds - -
(1,002) - -
(Gain) loss on properties (17) (301)
281 (1,203) -
Cumulative effect of change in accounting for
percentage rents - -
(612) - -
Extraordinary loss from early extinguishment
of debt 227 -
- - - - -
Operating Partnership minority interest expense 1,140 -
- - - - -
Convertible debenture interest expense 2,616 4,556
4,880 4,910 4,889
-------------------------
- - -------------------------
FFO-diluted $17,513 13,178
12,307 11,173 10,377
==================================================
<FN>
(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.
(2) Net cash flows cannot be reasonably estimated on a pro forma
basis for 1993.
Certain amounts for prior years have been reclassified to conform to
the 1997
presentation.
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 20
<PAGE>
Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations for MART for 1997 and 1996 are
summarized as follows:
<TABLE>
<CAPTION>
Quarter Ended
- - - - - - - - - - - - - - - - - - -
- - - - - - - - - -
1997 March 31, June 30, September
30, December 31,
- - --------------------------------------------------------------------------------
- - -----------------
<S> <C> <C> <C>
<C>
Revenues $ 8,204,768 8,192,329
11,427,185 11,327,938
=======================================================
Earnings before extraordinary loss $ 1,351,793 1,528,925
1,267,281 2,671,212
Extraordinary loss
from early extinguishment of debt - -
- - - (226,873)
--------------------------------------
- - -----------------
Net earnings $ 1,351,793 1,528,925
1,267,281 2,444,339
=======================================================
Net earnings per share-basic and diluted $ 0.18 0.19
0.15 0.18
=======================================================
Quarter Ended
- - - - - - - - - - - - - - - - - - -
- - - - - - - - - -
1996 March 31, June 30, September
30, December 31,
- - --------------------------------------------------------------------------------
- - -----------------
Revenues $7,906,720 7,853,545
8,172,749 8,473,286
=======================================================
Net earnings $ 1,233,521 677,941
1,111,558 485,689
=======================================================
Net earnings per share-basic and diluted $ 0.20 0.11
0.18 0.07
=======================================================
</TABLE>
Quarterly results are influenced by a number of factors including timing
of settlements of property sales, completion of operating projects, write-offs
of unrecoverable development costs, extraordinary items and valuation allowances
for loss on pending sales of properties.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 21
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion compares the Company's results of operations for the
year ended December 31, 1997, with those for the year ended December 31, 1996.
The discussion also compares the Company's results of operations for the year
ended December 31, 1996, with those for the year ended December 31, 1995.
Comparison of 1997 to 1996
Rental revenues increased by $6,553,000 or 25% to $33,115,000 for the year ended
December 31, 1997, from $26,562,000 for the year ended December 31, 1996. The
portfolio acquisition of ten properties from partnerships associated with Jack
H. Pechter ("JHP Acquisition") contributed an increase in rental revenues of
approximately $6,383,000. Recently developed or redeveloped properties Owings
Mills New Town shopping center, Lutherville Station, Harford Mall Annex and York
Road Plaza, contributed $1,404,000 in additional revenues for the period.
Occupancy and rental rate increases contributed approximately $613,000. The
increases were partly offset by $1,668,000 in rental revenue decreases
attributable to the sale of the Gateway International Office property
("Gateway") in September 1997, the sale in 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, $179,000 in rental decreases
were primarily related to vacancies.
Tenant recovery revenues increased by $434,000 to $5,569,000 from
$5,135,000. 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 properties
sold.
Other revenues decreased by $241,000 to $468,000 from $709,000 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 $6,746,000 to
$39,152,000 from $32,406,000.
Interest expense increased by $201,000 to $12,555,000 from $12,354,000
primarily due to the JHP Acquisition increasing interest expense approximately
$2,892,000. The increase was partly offset by lower interest expense due to the
conversion of debentures of approximately $1,940,000 and other interest expense
decreases.
Depreciation and amortization increased by $1,541,000 to $6,955,000 from
$5,414,000 primarily due to the JHP Acquisition.
Operating expenses increased by $143,000 to $8,961,000 from $8,818,000
primarily due to operations of the JHP Acquisition properties, partly offset by
reduced operating expenses related to properties sold.
General and administrative expenses increased by $362,000 to $2,460,000
from $2,098,000 due primarily to increased compensation expenses.
Minority interest expense increased by $905,000 to $1,419,000 from
$514,000 due primarily to the addition of minority limited partnership
interests in connection with the JHP Acquisition.
For the year ended December 31, 1997, earnings from operations increased by
$3,594,000 to $6,802,000 from $3,208,000. For the year ended December 31, 1997,
MART had a gain on properties of $17,000, and an extraordinary loss from the
early extinguishment of debt of $227,000, which when combined with earnings from
operations, resulted in net earnings of $6,592,000, for the period. MART
recognized a gain on properties of $301,000 for the year ended December 31,
1996. The gain on properties, when combined with earnings from operations,
resulted in net earnings of $3,509,000 for the period.
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
approximately $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.
Tenant recovery revenues increased by $483,000 to $5,135,000 from
$4,652,000 primarily due to increases from the purchase of Brandywine Commons
shopping center and the opening of the Owings Mills New Town shopping center,
partly offset by decreases due to the sales of properties referred to above.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 22
<PAGE>
Other revenues decreased by $319,000 to $709,000 from $1,028,000 primarily
due to the receipt of rental insurance proceeds (relating to fire damage at
Rolling Road Plaza in 1992) in 1995 and lower interest income in 1996.
As a result of the above changes total revenues increased by $2,813,000 to
$32,406,000 from $29,593,000.
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 of
properties referred to above.
Operating expenses increased by $1,079,000 to $8,818,000 from $7,739,000,
primarily due to the purchase of Brandywine Commons, higher snow removal
expenses in 1996, the opening of Owings Mills New Town and higher occupancy at
Gateway, partly offset by decreases related to the sales of properties referred
to above.
General and administrative expenses increased by $318,000 to $2,098,000
from $1,780,000 due primarily to compensation increases, $168,000, development
costs and other net general and administrative expense increases of $150,000.
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.
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
1997 with the information for 1996 and 1995.
Net cash flow provided by operating activities was $16,006,000,
$9,899,000, and $11,193,000 in 1997, 1996 and 1995, 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 decreased by $10,227,000, to a net
cash flow used in investing activities of $5,995,000 in 1997 from a net cash
flow provided by investing activities of $4,232,000 in 1996. The decrease was
primarily a result of more acquisitions of and additions to properties in 1997
than in 1996 partly offset by higher sales of properties in 1997. Milford
Commons and Arundel Plaza and development projects Lutherville Station and North
East Station were acquired and added to properties and Gateway was sold in 1997.
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 of and additions to
properties in 1996 and an increase in proceeds from sales of properties.
Net cash flow used in financing activities decreased by $11,034,000, to
$2,597,000 in 1997 from $13,631,000 in 1996. The decrease
in cash used was primarily a result of $49,061,000 in proceeds
from the common share offering in October 1997, partly
offset by higher levels of net principal paydowns in 1997
of $34,943,000 (primarily due to mortgage principal paydowns using
offering proceeds and to the line of credit paydown using
proceeds of the Gateway sale), as well an increase in
dividends paid of $3,467,000 in 1997.
Net cash flow from financing activities decreased by $26,192,000,
to net cash flow used in financing activities of $13,631,000 in
1996 from net cash flow provided by financing activities of
$12,561,000 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.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 23
<PAGE>
Liquidity and Capital Resources
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 $49,061,000. Approximately $32,800,000 of the net
proceeds have been applied to repay mortgage loans on properties. The balance
of the proceeds was used by MART for the acquisition, development or
redevelopment of shopping centers and for general corporate purposes.
The Company had cash and cash equivalents of $8,427,000 at December
31, 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 a $3,400,000
balance outstanding at December 31, 1997. The Company received a commitment
letter from its primary bank to increase its line of credit from $40,000,000 to
$75,000,000. The new credit facility will be unsecured and is subject to
agreement on final 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.
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 from its primary bank.
The Company anticipates material commitments for capital expenditures to
include, in the next two years, the ongoing redevelopment of five projects in
the planning stage at an estimated cost of $7,000,000 to $10,000,000. 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 line of credit.
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 1998 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 capital
requirements, MART intends to obtain funds through additional equity offerings
or long-term debt financing in a manner consistent with its financial strategy.
The Company anticipates that the cash flow available from operations, together
with cash from borrowings and equity offerings, will be sufficient to meet its
liquidity and capital needs in both the short- and long-term.
Recent Accounting Developments
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components in a full set of general purpose
financial statements. It requires all items that are required to be recognized
under accounting standards as components of comprehensive income to be reported
in a financial statement that is displayed in equal prominence with other
financial statements. It requires that an enterprise display an amount
representing total comprehensive income for each period. It does not require
per share amounts of comprehensive income to be disclosed. SFAS No. 130 is
effective for both interim and annual periods beginning after December 15, 1997.
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of
An Enterprise and Related Information"("SFAS No. 131").SFAS No. 131
establishes standards for the way public business enterprises are to report
information about operating segments in annual financial
statements and requires those enterprises to report selected information
about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major
customers. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 24
<PAGE>
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.
The Company in recent years has been replacing and upgrading its
management information and accounting systems and is addressing the year 2000
issue as part of this effort. The Company has implemented financial accounting,
property management and payroll systems which are year 2000 compliant. In
addition, as a result of the Company's normal upgrade and replacement processes,
it is anticipated that all network and desktop equipment in use will meet the
requirements for the year 2000. The Company is in the process of conducting a
review of the computer hardware and software in the mechanical systems (e.g.,
escalators, elevators, heating, ventilating and cooling systems, etc.) at its
operating properties to identify year 2000 issues. The review is expected to be
completed in the summer of 1998. While it is likely that the review will
identify the need to modify and/or replace certain equipment and software,
management does not believe that the year 2000 issue will pose significant
problems in these systems or that resolution of the problems will have a
material effect on the Company's financial condition or results of operations.
Inflation
The majority of leases at the shopping center properties contain provisions for
annual increases in rents and/or provisions which may entitle MART to receive
percentage rents based on the tenants' gross sales. Such provisions ameliorate
the risk to MART of the adverse effects of inflation. 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 ten
years, which may enable MART to seek increased rents upon renewal of existing
leases if rents are below the then existing market rates.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 25
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS:
<S> <C>
Independent Auditors' Report 27
Consolidated Balance Sheets-
as of December 31, 1997 and 1996 28
Consolidated Statements of Operations-
Years ended December 31, 1997, 1996 and 1995 29
Consolidated Statements of Shareholders' Equity-
Years ended December 31, 1997, 1996 and 1995 30
Consolidated Statements of Cash Flows-
Years ended December 31, 1997, 1996 and 1995 31
Notes to Consolidated Financial Statements 32
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 42
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 26
<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, 1997 and 1996 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, 1997. 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, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, 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 rent revenues in 1995.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Baltimore, Maryland
February 18, 1998
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 27
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
- -
- - - - - - - - - - - - - - - - -
1997 1996
- - --------------------------------------------------------------------------------
- - -------------------------------
<S>
<C> <C>
ASSETS
Properties:
Operating properties (Notes C and D)
$306,887,360 200,563,845
Less accumulated depreciation and amortization
42,781,532 42,702,472
--
- - --------------------------------
264,105,828 157,861,373
Development operations (Note E)
18,812,326 2,866,625
Property held for development or sale
5,559,864 6,828,311
--
- - --------------------------------
288,478,018 167,556,309
Cash and cash equivalents
8,427,217 1,013,838
Notes and accounts receivable-tenants and other (Note F)
880,414 1,373,113
Prepaid expenses and deposits
1,928,584 896,798
Deferred financing costs (Note G)
1,172,470 2,438,183
--
- - --------------------------------
$300,886,703 173,278,241
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses (Note H) $
5,721,093 4,518,588
Notes payable (Note I)
3,400,000 16,400,000
Construction loan payable
8,692,916 -
Mortgages payable (Note D)
116,065,741 70,210,495
Convertible subordinated debentures (Note J)
17,502,000 47,195,000
Deferred income
666,444 984,261
--
- - --------------------------------
152,048,194 139,308,344
--
- - --------------------------------
Minority interest in consolidated joint ventures
42,076,946 3,158,595
--
- - --------------------------------
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, 14,460,248 and 7,225,103, respectively
144,602 72,251
Additional paid-in capital
131,281,852 52,635,713
Distributions in excess of accumulated earnings
(24,664,891) (21,896,662)
--
- - --------------------------------
106,761,563 30,811,302
--
- - -------------------------------
Commitments (Note M)
--
- - --------------------------------
$300,886,703 173,278,241
==================================
</TABLE>
See accompanying notes to consolidated financial statements.
- - ------------------------------------------------------------------
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 28
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
- - - - - - -- - -
- - - - - - - - - - - - - - - - - --
1997
1996 1995
- - --------------------------------------------------------------------------------
- - ---------------------------------
<S> <C>
<C> <C>
REVENUES:
Rentals $33,115,087
26,561,699 23,914,267
Tenant recovery 5,569,495
5,135,024 4,651,556
Other (Note O) 467,638
709,577 1,027,335
-------------------
- - ---------------------------------
39,152,220
32,406,300 29,593,158
-------------------
- - ---------------------------------
EXPENSES:
Interest 12,555,017
12,354,156 11,928,319
Depreciation and amortization
of property and improvements 6,954,803
5,413,737 4,983,617
Operating 8,960,936
8,817,826 7,739,149
General and administrative 2,460,263
2,098,534 1,780,397
-------------------
- - ---------------------------------
30,931,019
28,684,253 26,431,482
-------------------
- - ---------------------------------
EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST 8,221,201
3,722,047 3,161,676
Minority interest (1,418,826)
(513,937) (718,019)
-------------------
- - ---------------------------------
EARNINGS FROM OPERATIONS 6,802,375
3,208,110 2,443,657
Gain (loss) on properties (Note P) 16,836
300,599 (280,362)
Gain on life insurance proceeds (Note Q) -
- - - 1,001,787
-------------------
- - ---------------------------------
EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE
AND EXTRAORDINARY LOSS 6,819,211
3,508,709 3,165,082
Cumulative effect of change in accounting for percentage rents -
- - - 612,383
Extraordinary loss from early extinguishment of debt (226,873)
- - - -
-------------------
- - ---------------------------------
NET EARNINGS $ 6,592,338
3,508,709 3,777,465
====================================================
NET EARNINGS PER SHARE (NOTE R):
BASIC AND DILUTED
Earnings per share before cumulative effect
of change in accounting principle and
extraordinary item $ 0.72
0.56 0.51
Cumulative effect of change in accounting principle -
- - - 0.10
Extraordinary loss from early extinguishment of debt (0.02)
- - - -
-------------------
- - ---------------------------------
$ 0.70
0.56 0.61
====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
- - ------------------------------------------------------------------
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 29
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Common
Distributions
Number of Shares Additional
in Excess of Net
Common at Par Paid-in
Accumulated Shareholders'
Shares Value Capital
Earnings Equity
- - ---------------------------------------------------- --------------------------
- - ----------------------------------
<S> <C> <C> <C>
<C> <C>
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-$0.89 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-$0.93 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
Conversion of convertible
subordinated debentures 2,827,838 28,278
28,740,766 - 28,769,044
Redemption of Operating
Partnership Units - -
(15,000) - (15,000)
Share-based plans 382,307 3,823
899,499 - 903,322
Sale of common shares 4,025,000 40,250
49,020,874 - 49,061,124
Dividends paid-$0.97 per share - -
- - - (9,360,567) (9,360,567)
Net earnings - -
- - - 6,592,338 6,592,338
--------------------------------------
- - ----------------------------------
BALANCE, December 31, 1997 14,460,248 $144,602
131,281,852 (24,664,891) 106,761,563
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 30
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31
- - - - - - - - - -
- - - - - - - - - - - - - - - - - - -
1997
1996 1995
- - --------------------------------------------------------------------------------
- - ----------------------------------
<S> <C>
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 6,592,338
3,508,709 3,777,465
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 6,954,803
5,413,737 4,983,617
Minority interest in earnings, net 1,356,062
513,937 718,019
Amortization of deferred financing costs 374,432
557,319 580,778
(Gain) loss on properties (16,836)
(300,599) 280,362
Changes in operating assets and liabilities:
(Increase) decrease in operating assets (539,087)
530,517 (709,951)
Increase (decrease) in operating liabilities 1,190,388
(99,940) 1,056,891
Other, net 93,858
(224,732) 505,887
-------------------
- - ----------------------------------
Total adjustments 9,413,620
6,390,239 7,415,603
-------------------
- - ----------------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 16,005,958
9,898,948 11,193,068
-------------------
- - ----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of and additions to properties (30,894,917)
(6,412,365) (29,522,542)
Proceeds from sales of properties 26,867,723
11,175,108 4,914,988
Payments to minority partners (1,985,568)
(652,186) (779,675)
Receipts from minority partners 17,607
121,184 1,803,000
-------------------
- - ----------------------------------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (5,995,155)
4,231,741 (23,584,229)
-------------------
- - ----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 34,900,000
49,080,565 80,400,000
Principal payments on notes payable (47,900,000)
(54,210,708) (79,009,270)
Proceeds from mortgages payable -
18,900,000 16,400,000
Principal payments on mortgages payable (38,067,252)
(11,100,609) (7,240,036)
Proceeds from construction loans payable 8,692,916
194,222 10,099,510
Payments on construction loans payable -
(10,293,732) -
Additions to deferred financing costs (31,837)
(225,890) (374,417)
Proceeds from exercise of share options 78,526
- - - -
Net proceeds from sale of common shares 49,061,124
- - - -
Shares purchased -
(81,436) (2,234,616)
Dividends paid (9,360,567)
(5,893,649) (5,480,146)
Other, net 29,666
- - - -
-------------------
- - ----------------------------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (2,597,424)
(13,631,237) 12,561,025
-------------------
- - ----------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,413,379
499,452 169,864
CASH AND CASH EQUIVALENTS, beginning of year 1,013,838
514,386 344,522
-------------------
- - ----------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 8,427,217
1,013,838 514,386
=====================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 13,384,175
12,317,962 12,135,351
=====================================================
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Portfolio acquisition (Note B):
Mortgages payable assumed $ 83,922,498
- - - -
Operating Partnership Units issued 36,064,913
- - - -
Acquisition of minority interests in
exchange for notes receivable -
2,923,000 -
Conversion of subordinated debentures,
net of deferred financing costs 28,769,882
12,339,456 19,141
=====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
A. Summary of Significant Accounting Policies
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 twenty-nine operating shopping
centers, twenty-four 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 132 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 December
31, 1997.
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
contingencies 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, including the Operating Partnership. Investments in
unconsolidated joint ventures are carried on the equity method. All
significant intercompany balances and transactions have been eliminated in
consolidation.
The Company owns 100% majority interests in corporate subsidiaries
which are general managing partners as well as limited partners in several
partnerships which have outside partners with 50% interests. Based upon the
structure of the respective partnership management agreements, the Company has
control over the 50% owned partnerships and uses the full consolidation method
to record the 50% owned partnerships.
Recognition of Rental Revenues
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, are charged according to a percentage over a
stipulated amount of sales for the period according to the lease agreement and
are recognized in the period when the percentage rent is earned. During the year
ended December 31, 1994, and previously, percentage rent was recognized as
rental revenues in the period when the percentage rent was billed and received.
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.
Net Earnings Per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," in 1997 and, as required by the Statement, net earnings
per share (EPS) data for prior periods have been restated to conform to the new
standard.
In accordance with the provisions of the Statement, basic 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, war-
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 32
<PAGE>
rants and their equivalents (including fixed awards and nonvested shares
issued under share-based compensation plans) are computed using the "treasury
stock" method.
Capitalization Policy
Acquisition costs, interest and other carrying costs, as well as construction
and start-up costs of commercial properties are capitalized and charged to
undeveloped land, construction in progress or deferred costs as appropriate. In
addition, direct 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
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 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.
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 an impairment loss is recognized.
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.
Share-based Compensation
The Company uses the intrinsic value method to account for share-based employee
compensation plans. Under this method, compensation cost is recognized for
awards of shares to employees only if the quoted market price of the share at
the grant date (or other measurement date, if later) is greater than the amount
the employee must pay to acquire the share. Information concerning the pro forma
effects on net earnings and net earnings per share of using a fair value-based
method to account for share-based employee compensation plans, rather than the
intrinsic value method, is provided in note L.
Income Taxes
The Company has elected to qualify, and intends to continue to qualify as a 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 Equivalents
All highly liquid unrestricted investments with original maturities of three
months or less are considered cash equivalents.
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. Management believes reporting tenant
expense recoveries separately as a component of revenue provides a more
informative presentation of revenues and expenses. The comparative prior period
revenue and operating expense data have been reclassified to reflect this
change.
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.
Financial Instruments
Fair values of financial instruments approximate their carrying values in the
financial statements, except for mortgages payable and convertible subordinated
debentures for which fair value information is presented in notes D and J,
respectively. The fair values of this debt at December 31, 1997 and 1996, were
determined based on discounted estimated future payments to be made. The
discount rates used approximate the rates currently offered for borrowings with
similar remaining maturities.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 33
<PAGE>
B. Portfolio Acquisition
On July 1, 1997, the Company acquired a portfolio of nine shopping centers and
one medical office building in the Baltimore metropolitan area from family
members and affiliates of the Pechter family ("JHP"). At closing of the
transaction ("JHP Acquisition"), the Company formed the Operating Partnership
and members of JHP were admitted as limited partners. The Company assigned to
the Operating Partnership its beneficial interest in the properties owned by the
Company and its subsidiaries in exchange for a number of Units equal to the
number of outstanding common shares of beneficial interest of the Company. For
the JHP properties, the Operating Partnership issued to the members of JHP
3,235,000 Units. The acquisition was accounted for using the purchase method.
The aggregate fair market value of the assets acquired was approximately
$120,000,000, including the assumption of existing mortgage indebtedness with a
fair value of approximately $84,000,000.
The consolidated statement of operations for the year ended December
31, 1997, includes revenues and expenses related to JHP properties only from the
date of acquisition. The Company's unaudited pro forma consolidated results of
operations for the years ended December 31, 1997 and 1996, assuming the
acquisition 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 $46,325 45,449
Net earnings 6,728 3,474
Earnings per share 0.71 0.56
- - -----------------------------------
</TABLE>
The unaudited pro forma revenues and earnings summarized above are not
necessarily indicative of the results that would have occurred if the
acquisition had been consummated at the beginning of each period or of future
results of operations.
C. Operating Properties
Operating properties consist of the following:
<TABLE>
<CAPTION>
December 31,
- - - - - - - - -- - - - -
1997 1996
--------------------------
<S> <C> <C>
Land $ 60,791,781 20,111,661
Land improvements 32,857,818 27,074,441
Buildings 172,685,206 112,963,061
Improvements for tenants 13,200,649 6,967,280
Development costs on completed
projects 9,486,625 14,724,923
Furniture, fixtures and equipment 2,374,956 2,225,960
Deferred lease costs 15,490,325 16,496,519
--------------------------
306,887,360 200,563,845
Less accumulated depreciation and
amortization 42,781,532 42,702,472
--------------------------
$264,105,828 157,861,373
==========================
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 34
<PAGE>
D. Properties and Related Accumulated Depreciation and Amortization and
Mortgages Payable
A summary of the Company's properties and related mortgages payable at December
31, 1997, follows:
<TABLE>
<CAPTION>
Accumulated
Cost of
Depreciation
Mortgages Initial Subsequent
Total and
Classification Payable Cost Improvements
Cost Amortization Net Cost
- - --------------------------------------------------------------------------------
- - --------------------------------
<S> <C> <C> <C>
<C> <C> <C>
Shopping centers $113,736,522 247,939,481 42,636,924
290,576,405 38,380,405 252,196,000
Bowling centers - 2,200,106 71,706
2,271,812 1,111,842 1,159,970
Office buildings 2,329,219 9,439,113 1,017,638
10,456,751 2,018,296 8,438,455
Other rental properties - 2,173,695 727,384
2,901,079 889,172 2,011,907
Other property - 681,313 -
681,313 381,817 299,496
-----------------------------------------------
- - --------------------------
Operating properties 116,065,741 262,433,708 44,453,652
306,887,360 42,781,532 264,105,828
Development operations - 18,812,326 -
18,812,326 - 18,812,326
Property held for development or sale - 5,559,864 -
5,559,864 - 5,559,864
-----------------------------------------------
- - --------------------------
$116,065,741 286,805,898 44,453,652
331,259,550 42,781,532 288,478,018
==============================================================
============================================
</TABLE>
Mortgages payable at December 31, 1997, bear interest at rates ranging from
7.55% to 10.25% and mature in installments through 2020. Aggregate annual
principal payments applicable to mortgages payable at December 31, 1997, are:
<TABLE>
<CAPTION>
<S> <C>
1998 $11,892,719
1999 17,317,773
2000 3,759,189
2001 3,269,691
2002 8,893,136
Thereafter 70,933,233
- - -----------------------
</TABLE>
At December 31, 1997, and 1996, the estimated fair values
of mortgages payable were $122,038,000 and $73,719,000, respectively.
E. Development Operations
Development operations consist of the following:
<TABLE>
<CAPTION>
December 31,
- - - - - - - - -- - - -
1997 1996
- - ---------------------------------------------------
<S> <C> <C>
Land $ 4,231,832 1,088,832
Construction in progress 14,066,126 1,164,937
Pre-construction costs 514,368 612,856
-------------------------
$18,812,326 2,866,625
=========================
</TABLE>
Development operations are transferred to operating property costs when a
project is completed, at which time depreciation and amortization commences.
Construction period interest cost capitalized during 1997 and 1996 was
approximately $445,000 and $104,000, 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,
- - - - - - - - -- - - -
1997 1996
- - ---------------------------------------------------------------
<S> <C> <C>
Deferred costs related to convertible
debentures $ 893,571 2,409,533
Deferred costs of line of credit 328,825 296,987
Deferred costs related to operating
properties 1,798,961 1,910,481
------------------------
3,021,357 4,617,001
Less accumulated amortization 1,848,887 2,178,818
------------------------
Deferred financing costs $1,172,470 2,438,183
========================
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 35
<PAGE>
H. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
- - - - - - - - -- - - -
1997 1996
- - ---------------------------------------------------------------
<S> <C> <C>
Trade accounts payable $3,333,177 2,177,870
Retainage on construction in progress 780,024 173,072
Accrued debenture interest 389,237 1,049,598
Other accrued expenses 1,218,655 1,118,048
------------------------
$5,721,093 4,518,588
========================
</TABLE>
I. Notes Payable
Notes payable consist of line of credit borrowings of $3,400,000 and $16,400,000
at December 31, 1997 and 1996, respectively. 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, 1997, was December 31,
2000, will be extended one year automatically each year. Under the agreement,
the Bank must give the Company two years notice should it decide to terminate
the loan. Availability under the agreement is determined by the amount of
collateral provided. At December 31, 1997, $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.
The Company has received a commitment letter from its primary bank to
increase its line of credit from $40,000,000 to $75,000,000. The new credit
facility will be unsecured and is subject to agreement on final terms.
At December 31, 1997, 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 $878,914, was $35,721,086. The maximum level of
borrowings under the line of credit was $21,300,000, $21,500,000 and $32,000,000
in 1997, 1996 and 1995, respectively. The average amounts of borrowings were
approximately $13,191,000, $11,710,000, and $17,534,000, with weighted average
interest rates approximating 7.1%, 7.1%, and 7.8%, in 1997, 1996 and 1995,
respectively. The weighted average interest rate at December 31, was 7.1%, 6.9%,
and 7.8%, in 1997, 1996, and 1995, 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 1997, $29,693,000 in debentures were
converted to 2,827,838 common shares of beneficial interest. 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, 1997, of $17,502,000, convertible at $10.50 per share, if fully converted,
would produce an additional 1,666,857 shares. Costs associated with the issuance
of the debentures were approximately $894,000 at December 31, 1997 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. At December 31, 1997 and
1996, the estimated fair values of convertible sub-ordinated debentures were
$17,872,000 and $47,195,000, respectively.
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. Accordingly, no provision has been made for Federal income taxes. At
December 31, 1997, the income tax bases of the Company's assets and liabilities
were approximately $222,000,000 and $152,000,000, respectively.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 36
<PAGE>
L. Shareholders' Equity
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,
1997, none of these shares were issued and outstanding.
Share-Based Plans
The Company has established a 1993 Omnibus share plan and a 1995 share option
plan ("Plans") under which trustees, officers and employees may be granted
awards of share options, share appreciation rights, performance shares and/or
restricted shares. The purpose of the Plans is to provide equity-based incentive
compensation based on long-term appreciation in value of MART's shares and to
promote the interests of the Company and its shareholders by encouraging greater
management ownership of the Company's shares.
At December 31, 1997, 1,491,026 shares were reserved
for future issuance under the Plans, including 1,025,000
shares authorized on November 14, 1997, subject to
shareholder approval.
Share options generally vest over a three-year period, subject to certain
conditions, typically have an exercise price equal to the market price at the
grant date or the date that they vest and have a maximum term of ten years. The
Company has not granted any share appreciation rights or performance shares.
Changes in options outstanding under the Plans are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- - --------------------------------------------------------------------------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Options price Options price Options price
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
beginning of year 395,632 $ 10.19 395,632 $10.26 256,000 $10.50
Options granted 380,000 13.33 - - 142,632 8.98
Options exercised (13,974) 9.97 - - - -
Options canceled (19,804) 10.08 - - (3,000) 10.50
-------------------------------------------------------
Balance at end of year 741,854 $ 12.00 395,632 $10.19 395,632 $10.26
=======================================================
Options exercisable 488,520 $ 11.32 348,532 $10.19 217,433 $10.16
=======================================================
</TABLE>
Information about options outstanding at December 31, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
Options Weighted average Options
Exercise price per share Outstanding remaining life (years) Exercisable
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
$10.50 237,666 7.3 237,666
$ 8.94 38,188 7.8 38,188
$ 9.75 40,100 7.8 40,100
$11.50 10,000 9.5 3,333
$13.38 415,900 9.6 169,233
------------------------------------------------
741,854 488,520
================================================
</TABLE>
The per share weighted-average fair values of options granted during
1997 and 1995 were $.92 and $.63, respectively. No options were granted in
1996. These fair values were estimated on the dates of each grant using the
Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1997 1995
- - ----------------------------------------
<S> <C> <C>
Risk-free interest rate 5.78% 6.05%
Dividend yield 8.47% 7.73%
Volatility factor 18.43% 18.61%
Life (years) 3.00 5.58
========================================
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 37
<PAGE>
L. Shareholders' Equity (Continued)
Share-Based Plans (Continued)
The option prices were equal to the market prices at the date of grant or
vesting date for all of the options granted in 1997 and 1995 and, accordingly,
no compensation cost has been recognized for options in the financial
statements. If the Company had applied a fair value-based method to recognize
compensation cost for stock options, net earnings and net earnings per common
share would have been reduced as indicated below:
<TABLE>
<CAPTION>
Years ended December 31,
- - - - - - - - - - - - - - - - - - - - - - - -
1997 1996 1995
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings:
As reported $ 6,592,338 3,508,709 3,777,465
Pro forma 6,451,554 3,479,036 3,744,966
Net earnings per common
share-basic and diluted:
As reported 0.70 0.56 0.61
Pro forma 0.68 0.56 0.61
===========================================================================
</TABLE>
The pro forma amounts reflect only options granted after 1994.
Therefore, the full impact of calculating compensation cost for stock options
under a fair value-based method is not reflected in the pro forma amounts
because compensation cost is recognized over the options' vesting periods and
compensation cost for options granted prior to January 1, 1995 is not required
to be considered.
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. Such
costs were $825,000 in 1997.
Share Repurchase Plan
On February 14, 1995, the Board of Trustees approved a share repurchase plan
which authorized the repurchase of up to approximately 310,000 shares. During
the year ended December 31, 1995 the Company purchased 277,200 shares at an
average cost of $8.06 per share. On February 12, 1996 the Board of Trustees
increased the authorized number of shares that may be repurchased 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
Minimum rental commitments for operating land leases as of December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 625,000
1999 625,000
2000 625,000
2001 625,000
2002 625,000
Thereafter 23,882,000
- - -----------------------
Total $27,007,000
=======================
</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 $675,000 in 1997, $601,000 in 1996 and $262,000 in 1995.
N. Leases
The Company's shopping centers and other commercial properties are generally
leased 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>
<CAPTION>
<S> <C>
1998 $ 35,845,000
1999 32,550,000
2000 29,112,000
2001 26,226,000
2002 23,146,000
Thereafter 176,677,000
- - ------------------------
Total $323,556,000
========================
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 38
<PAGE>
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 $816,000 in 1997,
$1,012,000 in 1996 and $1,246,000 in 1995. On a prospective basis, no more than
3.3% of annual rental revenue is derived from any one tenant, except Giant Food
of Maryland. Giant Food minimum lease payments represent approximately 11.7% for
the years 1998 through 2002 and 32% thereafter of the total minimum lease
payments above. The percentages of total minimum lease payments in the years
1998 and beyond are high due to the fact that Giant Food leases have 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.
O. Other Revenues
Other revenues consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
- - - - - - - - - - - - - - - - - - - - - - -
1997 1996 1995
- - ---------------------------------------------------------------------
<S> <C> <C> <C>
Interest and dividends $321,185 484,428 757,905
Miscellaneous 146,453 225,149 269,430
---------------------------------------------
$467,638 709,577 1,027,335
=============================================
</TABLE>
P. Gain (Loss) on Properties
Gain (loss) on properties consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
- - - - - - - - - - - - - - - - - - - - - - - - -
1997 1996 1995
- - ---------------------------------------------------------------------------
<S> <C> <C> <C>
Gain (loss) on sales of
operating properties $ 1,042,727 720,916 (257,731)
Gain (loss) on sales of
properties held for
sale, net 122,109 293,583 (22,631)
Valuation allowance for
loss on property
under contract (1,148,000) (713,900) -
--------------------------------------------------
$ 16,836 300,599 (280,362)
==================================================
</TABLE>
The gain (loss) on sales of operating properties includes minority
interest of $75,173 for the year ended December 31,1997.
The gain (loss) on sales of operating properties and gain (loss) on sales of
properties held for sale, net, include minority interest of $21,194 and $96,049,
respectively, for the year ended December
31, 1996.
Q. 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.
R. Net Earnings Per Share
The following table sets forth information relating to the computation of basic
and diluted earnings per share:
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995
- - --------------------------------------------------------------------------------
- - ---------------------------
<S> <C>
<C> <C>
Numerator:
Earnings before cumulative effect of accounting
change and extraordinary loss
$6,819,211 3,508,709 3,165,082
Dividends on unvested restricted share awards
(76,667) - -
--------
- - -------------------------
Numerator for basic earnings per share-earnings
available to common shareholders
6,742,544 3,508,709 3,165,082
Adjustment to dividends on restricted share awards
537 - -
--------
- - -------------------------
Numerator for diluted earnings per share-earnings
available to common shareholders
$6,743,081 3,508,709 3,165,082
=================================
Denominator:(1)
Denominator for basic earnings per share-weighted
average shares outstanding
9,308,682 6,211,092 6,176,991
Effect of dilutive securities:
Unvested portion of restricted share awards
2,145 - -
Share options
49,739 - -
--------
- - -------------------------
Denominator for diluted earnings per
share-adjusted weighted average shares
9,360,566 6,211,092 6,176,991
=================================
<FN>
(1) The denominator excludes the effect of securities which are
antidilutive. At December 31,
1997, the convertible
subordinated debentures, if converted, would produce an additional 1,666,857
shares and the
Units, if exchanged, would
produce an additional 3,175,770 shares.
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 39
<PAGE>
S. Subsequent Events
The Company acquired Wayne Heights Plaza on January 26, 1998, for
approximately$5,400,000. The Company acquired Wayne Avenue Plaza
on February 11, 1998, for approximately $10,700,000 which included
the assumption of a mortgage approximating $8,300,000.
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 1998 annual meeting of shareholders, is incorporated herein by reference.
The Executive Officers of MART are as follows:
<TABLE>
<CAPTION>
Name Age Position and Business
Experience
- - --------------------------------------------------------------------------------
- - -
<S> <C> <C>
LeRoy E. 72 Chairman of the Board of MART since September 1993.
Hoffberger 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 Advisers, L.P. , President and
Director of the Hoffberger
Foundation, Vice President and Director of Hoffberger Family
Fund.
F. Patrick 50 President and CEO of MART since September 1993.
Hughes President of BTR from November 1990 to September 1993.
Paul F. 44 Executive Vice President of MART since March 1996.
Robinson 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.
Paul G. 38 Vice President of MART since March 1996.
Bollinger Principal Financial Officer of MART since September 1993.
Controller of MART and BTR from
June 1992 to January 1998. 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. 49 Treasurer of MART since September 1993.
Grady 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.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 40
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
Registrant's Proxy Statement to be filed with respect to the 1998 annual meeting
of shareholders.
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 to be filed with respect to the 1998 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 to be filed with respect to the 1998 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 as of December 31, 1997 and 1996
Consolidated statements of operations for the years ended
December 31, 1997, 1996 and 1995
Consolidated statements of shareholders' equity for the years
ended December 31, 1997, 1996 and 1995
Consolidated statements of cash flows for the years ended
December 31, 1997, 1996 and 1995
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
<TABLE>
<CAPTION>
Exhibit No.
<C> <S>
3(a) Declaration of Trust dated June 29, 1993 (incorporated by reference to
Exhibit 3(a) to
MART's Registration
Statement on Form S-11, File No. 33-66386).
3(b) By-laws (incorporated by reference to the Exhibit 3(b) to MART's
Registration Statement
on Form S-11,
File No. 33-66386).
4(a) Specimen of certificate for Common Shares of Beneficial Interest
(incorporated by
reference to Exhibit 4(a) to
MART's Registration Statement on Form S-11, File No. 33-66386).
4(b) Form of Trust Indenture dated September 8, 1993 between MART and Security
Trust
Company, N.A. (incorporated
by reference to Exhibit 4(b) to MART's Registration Statement on Form S-
11, File No.
33-66386).
10(a) Mid-Atlantic Realty Trust 1993 Omnibus Share Plan, as amended through
November 14,
1997.*
10(b) Mid-Atlantic Realty Trust 1995 Stock Option Plan (incorporated by
reference to MART's
Registration Statement on
Form S-8, File No. 333-12161).
10(c) Employment Agreement between BTR Realty, Inc. and F. Patrick Hughes
(incorporated
by reference to Exhibit
10(b) to MART's Registration Statement on Form S-11, File No. 33-66386).
10(d) Employment Agreement between BTR Realty, Inc. and Paul F. Robinson
(incorporated by
reference to Exhibit
10(c) to MART's Registration Statement on Form S-11, File No. 33-66386).
10(e) Amendment dated December 1, 1995 to Employment Agreement between MART and
F.
Patrick Hughes and
MART and Paul F. Robinson.*
10(f) Commitment Letter from First National Bank of Md. for Line of Credit to
MART
(incorporated by reference to
Exhibit 10(d) to MART's Registration Statement on Form S-11, File No. 33-
66386).
10(g) Agreement for Contribution of Interests dated April 1, 1997 among Mid-
Atlantic Realty
Trust and the Contributors
named therein (incorporated by reference to Exhibit (c)1 to Form 8-K
filed July 15, 1997).
10(h) Agreement of Limited Partnership of MART Limited Partnership dated as of
June 30,
1997 (incorporated by
reference to Exhibit (c)2 to Form 8-K filed July 15, 1997).
10(i) Partnership Purchase and Sale Agreement among BTR Gateway, Inc., Mid-
Atlantic Realty
Trust, and Prentiss
Properties Acquisition, L.P. (incorporated by reference to Exhibit (b)1
to Form 8-K filed
September 30, 1997).
10(j) Mid-Atlantic Realty Trust Restricted Share Plan, adopted on November 14,
1997.*
10(k) Mid-Atlantic Realty Trust Non-Employee Trustee Deferred Compensation
Plan, adopted
on November 14, 1997.*
12 Computation of Ratio of Earnings to Fixed Charges.*
21 Subsidiaries of the Registrant.*
23 Consent of KPMG Peat Marwick LLP.*
27 Financial Data Schedule.*
</TABLE>
(b) Reports on Form 8-K.
None.
*Filed herewith
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 41
<PAGE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
December 31, 1997 Initial cost to Company Cost
capitalized subsequent to
acquisition
- - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
Carrying costs
Mortgages Buildings and
- - - - - - - - - - - - - - - - -
Description payable Land Improvements Improvements
Land
Improvements
- - --------------------------------------------------------------------------------
- - --------------------------------
<S> <C> <C> <C> <C>
<C> <C>
Shopping Centers
Harford Mall $ 19,374,196 599,031 8,457,331 20,176,368
(12,954)
- - -
Enchanted Forest
Shopping Center 12,041,548 3,873,246 15,314,736 24,883
- - - -
Timonium Shopping Center 9,710,472 6,252,248 12,090,955 9,965
- - -
- - -
Radcliffe Center - 11,205,665 5,663,480 583
- - - -
Shawan Plaza 14,387,965 2,055,694 13,930,839 2,028
- - - -
Ingleside Shopping Center - 3,023,230 11,817,212 7,544
- - - -
Owings Mills 12,805,977 4,381,666 9,547,434 129,088
- - - -
Shoppes at Easton 7,531,537 2,600,000 10,379,069 19,425
- - - -
Brandywine Commons - - 12,244,289 -
- - - -
Lutherville Station - - 4,031,809 7,296,476
- - - -
Perry Hall Square 3,145,116 3,538,825 6,604,216 56,315
- - - -
Timonium Crossing 6,330,420 4,276,779 4,792,548 2,344
- - - -
Smoketown Plaza - 516,312 10,095,077 671,634
- - - -
Glen Burnie Village - 3,081,553 4,598,794 1,094
- - - -
Columbia Plaza - 999,739 6,887,711 1,488,836
203,353 -
Colonie Plaza - 1,137,567 7,755,095 654,960
- - - -
Wilkens Beltway Plaza - - 3,601,891 1,112,067
475,481 2,923,200
Spotsylvania Crossing - 1,544,314 6,600,616 292,719
- - - -
Skyline Village 5,482,807 555,295 6,240,003 1,063,366
- - - -
Club Centre 5,544,495 2,029,919 3,600,663 17,512
- - - -
York Road Plaza 8,544,767 1,562,382 2,102,575 2,801,390
- - - -
Milford Commons - 673,306 3,789,682 -
- - - -
Page Plaza - 496,404 5,777,369 146,064
(160,000) (1,131,298)
Rosedale Plaza 1,785,461 1,024,712 3,217,926 307,149
- - - -
Sudley Towne Plaza - 789,881 3,736,837 483,603
- - - -
Burke Town Plaza 7,051,761 - 2,936,134 1,792,767
- - - -
Arundel Plaza - 1,695,566 530,951 -
- - - -
Rolling Road Plaza - 338,791 1,632,268 2,080,576
- - - (837,931)
Patriots Plaza - - 1,709,846 538,317
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
113,736,522 58,252,125 189,687,356 41,177,073
505,880
953,971
- - --------------------------------------------------------------------------------
- - --------------------------------
Office Buildings
Orchard Square 2,329,219 1,160,666 2,959,390 654
- - - -
Patriots Plaza - - 1,522,943 243,882
- - - -
Wilkens Office II - - 1,644,370 272,797
- - - -
Wilkens Office I - - 1,383,102 365,590
- - - -
Wilkens Office III - - 768,642 134,715
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
2,329,219 1,160,666 8,278,447 1,017,638
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
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
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
Other Rental Properties
Business Center - 395,536 1,190,692 67,046
- - - -
Southwest - - 283,039 610,278
45,149 -
Waldorf Firestone - 9,261 161,543 4,911
- - - -
Ocean City - - 133,624 -
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
- 404,797 1,768,898 682,235
45,149 -
- - --------------------------------------------------------------------------------
- - --------------------------------
Development Operations - - 18,812,326 -
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
Property Held - 5,559,864 - -
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
Other Property - - 681,313 -
- - - -
- - --------------------------------------------------------------------------------
- - --------------------------------
$116,065,741 65,800,616 221,005,282 42,948,652
551,029 953,971
================================================================================
================================
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 42
<PAGE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION -
CONTINUED
<TABLE>
<CAPTION>
Life on which
December 31, 1997 Amount at which carried at close of period
depreciation on
- - - - - - - - - - - - - - - - - - - - -
latest income
Buildings and Accumulated
Date of Date statement is
Description Land improvements Total depreciation
construction acquired
computed
- - --------------------------------------------------------------------------------
- - ---------------------------------------
<S> <C> <C> <C> <C>
<C> <C> <C>
Shopping Centers
Harford Mall 586,077 28,633,699 29,219,776 11,358,886
12/73
5-50 yrs.
Enchanted Forest
Shopping Center 3,873,246 15,339,619 19,212,865 291,035
7/97
5-50 yrs.
Timonium Shopping Center 6,252,248 12,100,920 18,353,168 166,154
7/97 5-50 yrs.
Radcliffe Center 11,205,665 5,664,063 16,869,728 221,091
7/97
5-50 yrs.
Shawan Plaza 2,055,694 13,932,867 15,988,561 329,572
7/97
5-50 yrs.
Ingleside Shopping Center 3,023,230 11,824,756 14,847,986 148,625
7/97
5-50 yrs.
Owings Mills 4,381,666 9,676,522 14,058,188 445,478
12/95
5-50 yrs.
Shoppes at Easton 2,600,000 10,398,494 12,998,494 756,474
9/94
5-50 yrs.
Brandywine Commons - 12,244,289 12,244,289 870,563
11/95
5-50 yrs.
Lutherville Station - 11,328,285 11,328,285 531,559
10/93 5-50
yrs.
Perry Hall Square 3,538,825 6,660,531 10,199,356 280,578
7/97
5-50 yrs.
Timonium Crossing 4,276,779 4,794,892 9,071,671 79,542
7/97
5-50 yrs.
Smoketown Plaza 516,312 10,766,711 11,283,023 3,181,177
4/87
5-50 yrs.
Glen Burnie Village 3,081,553 4,599,888 7,681,441 79,383
7/97
5-50 yrs.
Columbia Plaza 1,203,092 8,376,547 9,579,639 2,395,571
6/88
5-50 yrs.
Colonie Plaza 1,137,567 8,410,055 9,547,622 2,462,141
12/87
5-50 yrs.
Wilkens Beltway Plaza 475,481 7,637,158 8,112,639 1,655,669
5/81
5-50 yrs.
Spotsylvania Crossing 1,544,314 6,893,335 8,437,649 2,116,522
5/87
5-50 yrs.
Skyline Village 555,295 7,303,369 7,858,664 2,093,065
5/88
5-50 yrs.
Club Centre 2,029,919 3,618,175 5,648,094 98,025
7/97 5-50
yrs.
York Road Plaza 1,562,382 4,903,965 6,466,347 1,493,378
11/85
5-50 yrs.
Milford Commons 673,306 3,789,682 4,462,988 6,315
12/97
5-50 yrs.
Page Plaza 336,404 4,792,135 5,128,539 936,880
8/91 5-50
yrs.
Rosedale Plaza 1,024,712 3,525,075 4,549,787 707,055
10/89
5-50 yrs.
Sudley Towne Plaza 789,881 4,220,440 5,010,321 1,444,340
7/84
5-50 yrs.
Burke Town Plaza - 4,728,901 4,728,901 2,009,635
7/79-7/82
5-50 yrs.
Arundel Plaza 1,695,566 530,951 2,226,517 -
12/97 5-50
yrs.
Rolling Road Plaza 338,791 2,874,913 3,213,704 1,247,615
6/73
5-50 yrs.
Patriots Plaza - 2,248,163 2,248,163 974,077
6/84 5-50 yrs.
- - --------------------------------------------------------------------------------
- - ---------------------------------------
58,758,005 231,818,400 290,576,405 38,380,405
- - --------------------------------------------------------------------------------
- - ---------------------------------------
Office Buildings
Orchard Square 1,160,666 2,960,044 4,120,710 66,264
7/97
5-50 yrs.
Patriots Plaza - 1,766,825 1,766,825 601,044
8/85 5-50 yrs.
Wilkens Office II - 1,917,167 1,917,167 538,067
1/87 5-50
yrs.
Wilkens Office I - 1,748,692 1,748,692 619,187
1/85 5-50
yrs.
Wilkens Office III - 903,357 903,357 193,734
1/91 5-50
yrs.
- - --------------------------------------------------------------------------------
- - ---------------------------------------
1,160,666 9,296,085 10,456,751 2,018,296
- - --------------------------------------------------------------------------------
- - ---------------------------------------
Bowling Centers
Freestate 180,025 742,801 922,826 591,167
3/78 5-50
yrs.
Waldorf 243,139 584,786 827,925 241,828
3/79 5-50
yrs.
Clinton - 521,061 521,061 278,847
8/71 5-50 yrs.
- - --------------------------------------------------------------------------------
- - ---------------------------------------
423,164 1,848,648 2,271,812 1,111,842
- - --------------------------------------------------------------------------------
- - ---------------------------------------
Other Rental Properties
Business Center 395,536 1,257,738 1,653,274 261,477
4/90
5-50 yrs.
Southwest 45,149 893,317 938,466 487,964
4/68 5-50
yrs.
Waldorf Firestone 9,261 166,454 175,715 67,352
9/78 5-50
yrs.
Ocean City - 133,624 133,624 72,379
12/87 5-50 yrs.
- - --------------------------------------------------------------------------------
- - ---------------------------------------
449,946 2,451,133 2,901,079 889,172
- - --------------------------------------------------------------------------------
- - ---------------------------------------
Development Operations - 18,812,326 18,812,326 -
91-97
- - --------------------------------------------------------------------------------
- - ---------------------------------------
Property Held 5,559,864 - 5,559,864 -
7/73-12/97
- - --------------------------------------------------------------------------------
- - ---------------------------------------
Other Property - 681,313 681,313 381,817
9/82-12/97 3-10
yrs.
- - --------------------------------------------------------------------------------
- - ---------------------------------------
66,351,645 264,907,905 331,259,550 42,781,532
================================================================================
=======================================
</TABLE>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 43
<PAGE>
(1) The changes in total cost of properties are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
- - - - - - - - - - - - - - - - - - - - -
1997 1996 1995
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Balance beginning
of year $210,258,781 213,822,056 191,497,142
Additions during year:
Acquisitions 136,321,147 3,126,553 12,244,289
Improvements 2,697,464 1,498,868 2,356,780
Development
operations 15,633,614 4,715,773 15,685,170
----------------------------------------
154,652,225 9,341,194 30,286,239
----------------------------------------
Deductions during year:
Valuation allowance
for loss (1,148,000) (713,900) -
Cost of real estate
sold (32,340,056) (11,965,663) (6,292,793)
Retirements and
disposals (163,400) (224,906) (1,668,532)
----------------------------------------
(33,651,456) (12,904,469) (7,961,325)
----------------------------------------
Balance end
of year $331,259,550 210,258,781 213,822,056
=========================================
</TABLE>
(2) The changes in accumulated depreciation are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
- - - - - - - - - - - - - - - - - - - - -
1997 1996 1995
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Balance beginning
of year $(42,702,472) (39,430,308) (36,448,969)
Depreciation and
amortization (6,954,803) (5,413,737) (4,983,617)
Retirements, disposals
and sales 6,875,743 2,141,573 2,002,278
-----------------------------------------
Balance end of year $(42,781,532) (42,702,472) (39,430,308)
=========================================
</TABLE>
(3) The aggregate basis of properties for Federal income tax purposes is
approximately $279,000,000 at December 31, 1997.
(4) See Item 2 for geographic location of properties.
(5) Freestate includes one bowling center in Illinois.
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST - PAGE 44
<PAGE>
ENHIBIT 21. PARENT AND SUBSIDIARIES OF REGISTRANT
The subsidiaries of MART are listed below. All are engaged in the ownership
and/or development of commercial 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
- - ---------------------------------------------------------------------
<S> <C> <C>
CORPORATIONS:
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%
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 Acquisition, 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%
LIMITED LIABILITY COMPANIES:
Perry Hall Square, LLC Maryland 100%
Radcliffe, LLC Maryland 100%
Round Hollow, LLC Maryland 100%
Stonehenge, LLC Maryland 100%
Talton, LLC Maryland 100%
Timonium Shopping Center
Associates, LLC Maryland 100%
Yorkway Associates, LLC Maryland 100%
</TABLE>
The following are partnerships in which Mid-Atlantic Realty Trust has
partnership interests:
<TABLE>
<CAPTION>
State of
Name 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%
Financial Associates of Maryland Maryland 100%
Gateway International Limited
Partnership Maryland 100%
Harbour Island Associates Maryland 100%
Kensington Associates Maryland 93%
MART Limited Partnership Maryland 82%
Northwood Limited Partnership Maryland 67%
Ritchie Limited Liability 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>
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST
- - -PAGE 45
<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: 3/26/98 /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: 3/26/98 /s/ LeRoy E. Hoffberger
-------------------------------------------
LeRoy E. Hoffberger, Chairman
Date: 3/26/98 /s/ F. Patrick Hughes
------------------------------
F. Patrick Hughes, Trustee, Principal Executive Officer
Date: 3/26/98 /s/ Paul G. Bollinger
---------------------------------
Paul G. Bollinger, Controller, Principal Financial Officer
Date: 3/26/98 /s/ Eugene T. Grady
-----------------------------------------------
Eugene T. Grady, Treasurer
Date: 3/26/98 /s/ Robert A. Frank
-----------------------------------------------
Robert A. Frank, Trustee
Date: 3/26/98 /s/ Marc P. Blum
-----------------------------------------------
Marc P. Blum, Trustee
Date: 3/27/98 /s/ M. Ronald Lipman
-----------------------------------------------
M. Ronald Lipman, Trustee
Date: 3/26/98 /s/ Jack H. Pechter
-----------------------------------------------
Jack H. Pechter, Trustee
Date: 3/26/98 /s/ Daniel S. Stone
-----------------------------------------------
Daniel S. Stone, Trustee
Date: 3/27/98 /s/ David F. Benson
-----------------------------------------------
David F. Benson, Trustee
1997 ANNUAL REPORT - MID - ATLANTIC REALTY TRUST
PAGE 46
<PAGE>
MID-ATLANTIC REALTY TRUST
1993 OMNIBUS SHARE PLAN
(As Amended through November 14, 1997)
1.PURPOSE. The purpose of the 1993 Omnibus Share Plan of
Mid-Atlantic Realty Trust (the "Plan") is to promote the financial interests
of Mid-Atlantic Realty Trust (the "Company"), including its growth and
performance, by encouraging Trustees, officers and employees of the
Company and its subsidiaries to acquire an ownership position in the
Company, enhancing the ability of the Company and its subsidiaries to
attract and retain employees of outstanding ability, and providing
employees with a way to acquire or increase their proprietary interest in the
Company's success.
2.SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided
in Section 18, the number of common shares, par value $.01 per share, of
beneficial interest in the Company (the "Shares") which shall be available
for issuance under the Plan shall be 1,325,000 Shares; the number of Shares
subject to this Plan shall be increased from time to time so that the
aggregate number of Shares that may be issued hereunder shall equal seven
percent (7%) of the outstanding Shares of the Company on a fully diluted
basis. [Amended on November 14, 1997]
Shares subject to an award that expires unexercised, or that is forfeited,
terminated or canceled, in whole or in part, or is paid in cash in lieu of
Shares, shall thereafter again be available for grant under the Plan.
3. ADMINISTRATION. The Plan shall be administered by
the Executive Compensation Committee (the "Committee") of the Board of
Trustees of the Company. A majority of the Committee shall constitute a
quorum, and the acts of a majority shall be the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall (i)
from time to time select directors, officers and employees of the Company
and its subsidiaries who will participate in the Plan (the "Participants"),
determine the type of awards to be made to Participants, determine the
Shares or share units subject to awards, and (ii) have the authority to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, determine the terms and provisions of any agreements
entered into hereunder, and make all other determinations necessary or
advisable for the administration of the Plan. The Committee may correct
any defect, supply any omission or reconcile any inconsistency in the Plan
or in any award in the manner and to the extent it shall deem desirable to
carry it into effect. The determinations of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive.
4. ELIGIBILITY. All Trustees and all officers and employees
of the Company and its subsidiaries who have demonstrated significant
management potential or who have the capacity for contributing in a
substantial measure to the successful performance of the Company, as
determined by the Committee, are eligible to be Participants in the Plan.
5. AWARDS. Awards under the Plan may consist of the
following: stock options (either incentive stock options within the meaning
of Section 422 of the Internal Revenue Code or non-qualified stock
options), stock appreciation rights, performance shares, stock bonuses or
grants of restricted stock. Awards of performance shares, stock bonuses
and restricted stock may provide the Participant with dividends or dividend
equivalents and voting rights prior to vesting (whether based on a period of
time or based on attainment of specified performance conditions).
6. STOCK OPTIONS. The following terms shall apply, except
to the extent varied in any Award Agreement as defined in Section 10
hereof.
(a) General. The Committee shall establish the option
price at the time each stock option is granted, which price may, in the
discretion of the Committee, be less than 100% of the fair market value of
the Shares on the date of grant. Stock options shall be exercisable for such
period as specified by the Committee, but in no event may options be
exercisable more than ten years after their date of grant. The exercise price
of each Share as to which a stock option is exercised shall be paid in full at
the time of such exercise. Such payment shall be made in cash, by tender
of Shares owned by the Participant valued at fair market value as of the
date of exercise and in such other consideration as the Committee deems
appropriate, or by a combination of cash, Shares and such other
consideration. The Company shall have the right, and the Participant may
require the Company, to withhold and deduct from the number of Shares
deliverable upon the exercise hereof a number of Shares having an
aggregate fair market value equal to the amount of taxes and other charges
that the Company is obligated to withhold or deduct from amount payable
to the Participant. [Amended on November 14, 1997]
(b) Incentive Stock Options. An option granted under
the Plan may be a non-qualified stock option or an "incentive stock option"
("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and if not
otherwise specified, an option granted to an employee of the Company
shall be deemed to be an Incentive Stock Option. An Incentive Stock
Option shall not result in income upon the receipt of the option to the extent
(i) the aggregate fair market value (determined at the time the option is
granted) of the Shares that may be purchased by the optionee during any
calendar year (under the Plan and all other plans of the Company) does not
exceed $100,000; and (ii) the optionee (other than the optionee's estate
where the optionee is deceased) does not dispose of the Shares until the
later of (a) two years from and after the date the option is granted, and (b)
one year after the date the Shares are issued to the optionee. In the event of
a disposition of Shares received upon exercise of an Incentive Stock Option
where the disposition occurs within two years from the date the option is
granted or one year from the receipt of the shares, the optionee shall notify
the Secretary of the Company in writing as to the date of such disposition,
the sale price (if any), and the number of Shares involved. [Amended on
November 14, 1997]
7. STOCK APPRECIATION RIGHTS. Stock appreciation
rights may be granted in tandem with a stock option, in addition to a stock
option, or may be freestanding and unrelated to a stock option. Stock
appreciation rights granted in tandem with or in addition to a stock option
may be granted either at the same time as the stock option or at a later time.
No stock appreciation right shall be exercisable earlier than six months
after grant, except in the event of the Participant's death or disability. A
stock appreciation right shall entitle the Participant to receive from the
Company an amount equal to the increase of the fair market value of the
Share on the exercise of the stock appreciation right over the grant price.
The Committee, in its sole discretion, shall determine whether the stock
appreciation right shall be settled in cash, Shares or a combination of cash
and Shares.
8. PERFORMANCE SHARES. Performance shares may be
granted in the form of actual Shares or share units having a value equal to
an identical number of Shares. In the event that a certificate is issued in
respect of Shares subject to a grant of performance shares, such certificate
shall be registered in the name of the Participant but shall be held by the
Company until the time the Shares subject to the grant of performance
shares are earned. The performance conditions and the length of the
performance period shall be determined by the Committee. The
Committee, in its sole discretion, shall determine whether performance
shares are granted in the form of share units shall be paid in cash, Shares or
a combination of cash and Shares.
9. STOCK BONUS AWARDS. Stock bonus awards may be
granted in the form of Shares or share units having a value equal to an
identical number of Shares. A stock bonus award shall entitle the
Participant to receive the number of Shares specified in the award
certificate as a bonus under this Plan, without any consideration for such
Shares. In the event that a share certificate is issued in respect of Shares
subject to a grant of a bonus award of Shares, such certificate shall be
issued in the name of the Participant and will generally be issued to the
Participant within 15 days after proper presentment of the award certificate.
The Committee, in its sole discretion, shall determine whether bonus stock
granted in the form of share units shall be paid in cash, Shares, or a
combination of cash and Shares. [Added by Amendment of November 14,
1997]
10. RESTRICTED STOCK. Restricted stock may be granted in
the form of actual Shares or share units having a value equal to an identical
number of Shares. In the event that a certificate is issued in respect of
Shares subject to a grant of restricted stock, such certificate shall be
registered in the name of the Participant but shall contain such legends as
the Committee deems appropriate to evidence such restrictions until the end
of the restricted period. The employment conditions and the length of the
period for vesting of restricted stock shall be established by the Committee
at the time of grant. The Committee, in its sole discretion, shall determine
whether restricted stock granted in the form of share units shall be paid in
cash, Shares, or a combination of cash and Shares. [Amended on
November 14, 1997]
11. AWARD AGREEMENTS. Each award under the Plan shall
be evidenced by an agreement ("Award Agreement") setting forth the terms
and conditions, as determined by the Committee, which shall apply to such
award, in addition to the terms and conditions specified in the Plan.
12. WITHHOLDING. The Company shall have the right to
deduct from any payment to be made pursuant to the Plan, or to require
prior to the issuance or delivery of any Shares or the payment of cash under
the Plan, any taxes required by law to be withheld therefrom. The
Committee, in its sole discretion, may permit a recipient to elect to satisfy
such withholding obligation by having the Company retain the number of
Shares whose fair market value equal the amount required to be withheld.
Any fraction of a Share required to satisfy such obligation shall be
disregarded and the amount due shall instead be paid in cash to the
Participant.
13. LIMITED TRANSFERABILITY. No award shall be
assignable or transferrable, and no right or interest of any Participant shall
be subject to any lien, obligation or liability of the Participant, except by
will or the laws of descent and distribution. Notwithstanding the foregoing,
non-qualified stock options granted to Participants may be transferred to
the Participant's spouse, lineal ascendants, lineal descendants or to a duly
established trust for the benefit of one or more of such individuals. Options
so transferred may thereafter be transferred only to the Participant or to an
individual or trust to whom the Participant could have initially transferred
the Options pursuant to this section. Options transferred pursuant to this
Section shall be held by the transferee in accordance with the same terms
and conditions as applied to the Participant. [Amended on November 14,
1997]
14. NO RIGHT TO EMPLOYMENT. No person shall have any
claim or right to be granted an award, and the grant of an award shall not be
construed as giving a Participant the right to be retained in the employ of
the Company or its subsidiaries. Further, the Company and its subsidiaries
expressly reserve the right at any time to dismiss a Participant free from
any liability, or any claim under the Plan, except as provided herein or in
any agreement entered into hereunder.
15. TERMINATION OF RIGHTS; DEATH. All unexercised or
unexpired options, rights, performance shares and other such rights granted
or awarded under this Plan (collectively, "Rights") will terminate, be
forfeited and will lapse immediately if such Participant's employment or
relationship with the Company is terminated for any reason, unless the
Committee permits the exercise of such Rights for a period not to exceed
ninety (90) days after the date of such termination. If a Participant's
employment or relationship with the Company is terminated by reason of
his death or disability, such Participant or such Participant's personal
representatives, estate or heirs (as the case may be) may exercise, subject to
any restrictions imposed by the Committee at the time of the grant, any
Right which was exercisable by the Participant as of the date of his death or
disability for a period of one year after the date of the Participant's death or
disability. [Amended on November 14, 1997]
16. CORPORATE REORGANIZATION. Anything in the Plan
or in any Award Agreement or any award granted hereunder to the contrary
notwithstanding, in the event of the commencement of a tender offer (other
than by the Company) for any Shares or a sale or transfer, in one or a series
of transactions, of assets having a fair market value of 50% or more of the
fair market value of all assets of the Company, or a merger, consolidation
or share exchange pursuant to which the Shares of the Company are or may
be exchanged for or converted into cash, property or securities of another
issuer, or the liquidation of the Company (an "Extraordinary Event"), then
(i) regardless of whether or not the award has vested or become fully
exercisable, the award shall immediately vest and become fully exercisable
and (ii) any restrictions or forfeiture conditions applicable to any other
awards granted under the Plan shall lapse and terminate, any performance
conditions imposed with respect to any such awards shall be deemed to be
fully achieved on and at all times after the Event Date, and such awards
shall be deemed fully vested without restriction from and after the Event
Date. The "Event Date" is the date of the commencement of a tender offer,
if the Extraordinary Event is a tender offer, and in the case of any other
Extraordinary Event, the day preceding the record date in respect of such
Extraordinary Event, or if no record date is fixed, the day preceding the
date as of which shareholders of record become entitled to the
consideration payable in respect of such Extraordinary Event.
Notwithstanding the foregoing, the immediate vesting of any award shall
be conditioned upon the actual occurrence and completion of the
Extraordinary Event. [Added by Amendment on November 14, 1997]
17. REGISTRATION. If the Company shall be advised by its
counsel that any Shares deliverable upon any exercise of a Right are
required to be registered under the Securities Act of 1933, or that the
consent of any other authority is required for the issuance of such Shares,
the Company may effect registration or obtain such consent, and delivery
of Shares by the Company may be deferred until registration is effected or
such consent is obtained.
18. ADJUSTMENT OF AND CHANGES IN SHARES. In the
event of any change in the outstanding Shares by reason of any share
dividend or split, recapitalization, merger, consolidation, spinoff,
combination or exchange of Shares or other corporate change, or any
distributions to common shareholders other than regular cash dividends, the
Committee may make such substitution or adjustment, if any, as it deems to
be equitable, as to the number or kind of Shares or other securities issued or
reserved for issuance pursuant to the Plan and to outstanding awards.
19. AMENDMENT. The Committee may amend or terminate
the Plan or any portion thereof at any time, provided that, without such
Participant's consent, no amendment or termination shall affect adversely
any of the rights of a Participant under any award theretofore granted under
the Plan. [Amended on November 14, 1997]
20. EFFECTIVE DATE. The Plan has been adopted by the
Board of Trustees on, and is effective as of July 31, 1993. This Plan has
been amended as of May 13, 1994, and on November 14, 1997. Subject to
earlier termination pursuant to Section 19, the Plan shall have a term of ten
years from its effective date.
between
MART and F.Patrick Hughes and MART and Paul F.
Robinson
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO THE EMPLOYMENT
AGREEMENT (this "Amendment") is made this 1st day of December,
1995, by and between F. PATRICK HUGHES (the "Executive") and
MID-ATLANTIC REALTY TRUST (the "Company") .
EXPLANATORY NOTE
The Executive and BTR Realty, Inc ("BTR") entered into an
Employment Agreement (the "Employment Agreement") on October 1,
1992. BTR merged with and into the Company on September 13, 1993,
and the Company assumed all of the obligations of BTR under the
Employment Agreement. The Company and the Executive now desire to
amend the Employment Agreement in the manner described below.
NOW, THEREFORE, the Company and the Executive
agree as follows:
1. Clause (i) of Section 4.1(a) is hereby amended by
deleting such clause in its entirety and substituting the following in lieu
thereof :
"(i) the close of business on the second anniversary
following the date the Corporation notifies the Executive in writing of
termination of the Executive's employment under this Agreement,"
2. Section 4.1.(b) of the Employment Agreement is
deleted in its entirety.
3. Section 4.5.(a) of the Employment Agreement is
amended by deleting the semi-colon in the first sentence thereof and
replacing it with a period, and by deleting the remainder of such Section in
its entirety.
4. All other terms and provisions of the Employment
Agreement shall continue in full force and effect, without modification,
except as specifically set forth herein.
IN WITNESS WHEREOF, the parties have executed and
delivered this Amendment as of the date first above written.
ATTEST: MID-ATLANTIC REALTY
TRUST
Patricia R. Paulson By: /s/ LeRoy E. Hoffberber
LeRoy E. Hoffberger,
Chairman of the Board
WITNESS:
_______________________________ /s/ F. Patrick Hughes
F. Patrick Hughes
C62131a.609
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO THE EMPLOYMENT
AGREEMENT (this "Amendment") is made this 1st day of December,
1995, by and between PAUL F. ROBINSON (the "Executive") and
MID-ATLANTIC REALTY TRUST (the "Company") .
EXPLANATORY NOTE
The Executive and BTR Realty, Inc ("BTR") entered into an
Employment Agreement (the "Employment Agreement") on October 1,
1992. BTR merged with and into the Company on September 13, 1993,
and the Company assumed all of the obligations of BTR under the
Employment Agreement. The Company and the Executive now desire to
amend the Employment Agreement in the manner described below.
NOW, THEREFORE, the Company and the Executive
agree as follows:
5. Clause (i) of Section 4.1(a) is hereby amended by
deleting such clause in its entirety and substituting the following in lieu
thereof :
"(i) the close of business on the second anniversary
following the date the Corporation notifies the Executive in writing of
termination of the Executive's employment under this Agreement,"
6. Section 4.1.(b) of the Employment Agreement is
deleted in its entirety.
7. Section 4.5.(a) of the Employment Agreement is
amended by deleting the semi-colon in the first sentence thereof and
replacing it with a period, and by deleting the remainder of such Section in
its entirety.
8. All other terms and provisions of the Employment
Agreement shall continue in full force and effect, without modification,
except as specifically set forth herein.
IN WITNESS WHEREOF, the parties have executed and
delivered this Amendment as of the date first above written.
ATTEST: MID-ATLANTIC REALTY
TRUST
Patricia R. Paulson By: /s/ LeRoy E. Hoffberber
LeRoy E. Hoffberger,
Chairman of the Board
WITNESS:
_______________________________ /s/ Paul F. Robinson
Paul F. Robinson
MID-ATLANTIC REALTY TRUST
1997 RESTRICTED SHARE PLAN
9. Purpose. The purpose of this 1997 RESTRICTED SHARE
PLAN ("Plan") is to further the interests of MID-ATLANTIC REALTY
TRUST (the "Company") by providing incentives for directors, officers and
employees of the Company who may be designated for participation therein
("Participants") and to provide additional means of attracting and retaining
competent personnel.
10. Administration. The Executive Compensation Committee
(the "Committee") of the Board of Trustees of the Company shall
administer the Plan. The Committee will make all discretionary decisions
involving the Plan. A majority of the Committee shall constitute a quorum,
and the acts of a majority shall be the acts of the Committee. The
Committee shall have the sole authority to (i) award shares under the Plan;
(ii) consistent with the Plan, determine the provisions of the Restricted
Share Agreements entered into hereunder, including the shares to be
awarded, the restrictions and other terms and conditions applicable to each
award of shares under the Plan; (iii) interpret the Plan and the Restricted
Share Agreements evidencing the restrictions imposed upon stock awarded
under the Plan and the shares awarded under the Plan; (iv) adopt, amend
and rescind rules and regulations for the administration of the Plan; and (v)
generally administer the Plan and make all determinations in connection
therewith which may be necessary or advisable, and all such actions of the
Committee shall be binding upon all participants. Any decision or
selection reduced to writing and signed by all of the members of the
Committee shall be as fully effective as if it had been made at a meeting
duly held. The determinations of the Committee in the administration of
the Plan, as described herein, shall be final and conclusive.
11. Participants. The Committee shall determine and designate
from time to time those directors, officers and employees of the Company
who are eligible to participate in the Plan. Pursuant to this Plan, the
Committee may award to Participants common shares of beneficial interest,
par value $.01 per share ("Shares"), of the Company, subject to certain
restrictions and risk of forfeiture, in such amounts and upon such terms as
the Committee shall from time to time determine. The Committee shall
determine, in its sole discretion, the number of shares to be awarded
("Awards") to each such employee selected. The Committee may, within
the terms of the Plan, be selective and non-uniform with respect to its
determination of the amount of Awards and the eligible employees to
whom such Awards are made.
12. Shares Subject to the Plan. The Company has reserved
400,000 Shares for issuance to Participants under the Plan ("Restricted
Shares"). If any Awards granted under this Plan are forfeited, in whole or
in part, the Restricted Shares so released from the Award may be the
subject of other Awards under the Plan.
13. Share Restructure. In the event there is any change in the
Company's Shares, as by stock splits, reverse stock splits, stock dividends,
or other relevant changes in the capitalization of the Company occurring
after the adoption of this Plan by the Board, the number and type of
Restricted Shares available for Awards under the Plan shall be
appropriately adjusted by the Committee. The decision of the Committee
as to the amount and timing of any such adjustment shall be conclusive.
14. Effect of Award. The granting of an Award shall take place
only when a Restricted Share Agreement (the "Agreement") substantially in
the form of Exhibit A hereto is executed by the Company and the
Participant. Such Agreement shall contain such further terms and
conditions, not inconsistent with the terms of this Plan, related to the grant
of the Restricted Shares. By accepting the Award and executing the
Agreement, each Participant undertakes and agrees to be bound by all terms
and provisions of this Plan and the Agreement. The execution of the
Agreement shall entitle such Participant to receive the number of Restricted
Shares specified in the Agreement, subject to the restrictions contained in
the Agreement.
15. Restrictions.
(a) The term "Restricted Period" as to any Restricted Shares
refers to the period of time that such Restricted Shares are subject to the
restrictions contained herein and in the Agreement.
(b) During the Restricted Period:
(i) No Restricted Shares may be transferred by the
Participant;
(ii) The Restricted Shares shall be forfeited and shall
automatically be transferred to the Company in the event of termination of
the Participant's employment with the Company for any reason other than
an Extraordinary Event (as defined in Section 8); and
(iii) The Restricted Shares shall be subject to such
other terms, conditions and restrictions as determined by the Committee
and set forth in the Agreement
(c) With respect to any Restricted Shares awarded under
this Plan, the Committee, in it sole and absolute discretion, shall specify the
Restricted Period in the Agreement.
16. Extraordinary Event. In the event of the commencement of
a tender offer (other than by the Company) for any of the Company's
common shares or a sale or transfer, in one or a series of transactions, of
assets having a fair market value of 50% or more of the fair market value of
all assets of the Company, or a merger, consolidation or share exchange
pursuant to which the common shares of the Company are or may be
exchanged for or converted into cash, property or securities of another
issuer, or the liquidation of the Company (an "Extraordinary Event"), then
the restrictions on the Restricted Shares shall terminate and lapse
immediately, without risk of forfeiture, on the "Event Date." The "Event
Date" is the date of the commencement of a tender offer, if the
Extraordinary Event is a tender offer, and in the case of any other
Extraordinary Event, the day preceding the record date in respect of such
Extraordinary Event, or if no record date is fixed, the day preceding the
date as of which shareholders of record become entitled to the
consideration payable in respect of such Extraordinary Event.
Notwithstanding the foregoing, the termination of the restrictions shall be
conditioned on the actual occurrence and completion of the Extraordinary
Event.
17. Plan Loans. The Company recognizes that it is not in the
best interests of the Company for the Participant to sell Shares (or be
required to sell Shares, whether or not such Shares have been granted under
the Plan) in order to be able to pay taxes due as a result of any Awards
made under the Plan. Consequently, the Committee, upon the reasonable
request of Participants, is authorized to and shall make loans to Participants
("Plan Loans") in amounts equal to the Participants' tax obligations
resulting from any Award hereunder. The Plan Loans shall be made at
such rates and upon such other terms as the Committee deems reasonable
or appropriate. The Committee is further authorized to forgive repayment
of all or any part of any Plan Loan at any time or from time to time,
unconditionally or subject to such conditions as the Committee deems
reasonable or appropriate.
18. Amendments and Termination. The Committee may amend,
suspend, discontinue or terminate the Plan, but no such action may, without
the consent of the holder of any Award granted hereunder, alter or impair
such Award.
19. Period of Plan. The Plan has been adopted by the Board of
Directors on, and shall be effective as of, November 14, 1997. Unless
extended or earlier terminated by the board of Directors, the Plan shall
continue in effect until, and shall terminate on, the tenth anniversary of the
effective date of the Plan.
MID-ATLANTIC REALTY TRUST
DEFERRED COMPENSATION AND FEE PLAN
FOR NON-EMPLOYEE TRUSTEES
SECTION I - PURPOSE
Mid-Atlantic Realty Trust ("MART")
hereby adopts this Deferred Compensation and Fee
Plan for Non-Employee Trustees (the "Plan")
effective April 1, 1998. The purpose of this
Plan is to provide non-employee members of the
Board of Trustees of Mid-Atlantic Realty Trust
(a "Board Member") with the opportunity to defer
all or part of their compensation and fees for services
as a Board Member.
SECTION II - PARTICIPANTS
Any Board Member who, at the time of
making an election as provided in Section III, is not
an employee of MART or any of its subsidiaries is
eligible to participate in the Plan. A Board Member
who elects to participate as provided for in this
Plan is referred to herein as a "Participant".
SECTION III - ELECTION TO DEFER COMPENSATION
A. Amount of Deferral. A Participant
may elect to defer receipt of all or a specified
portion of the compensation and fees
(exclusive of expense reimbursements) payable
to the Participant during a calendar year for
serving on the Board of Trustees of MART.
B. Manner of Electing Deferral.
A Participant elects to defer compensation
and fees on a form approved and
accepted by the Plan Administrator.
The form will include:
(1) the percentage or amount of compensation and fees
to be deferred; and
(2) an election of a lump-sum payment or of a
number of annual installments (not to exceed ten)
for the payment of the deferred compensation; and
(3) the date the lump sum payment
will be made or the installment payments
will begin. Such date must not be earlier
than 30 days following the Participant's
termination of service as a Board Member,
and must not be later than the January 15th first
following the later of (i) the Participant's 70th
birthday or (ii) the year in which service as a Board
Member terminates.
C. Time of Election. In order to participate in
the Plan for a calendar year, the
Board Member must submit an election
form described in Section III.B. to the Plan
Administrator prior to January 1 of the
calendar year for which the election applies. For the
first short year of the Plan, the Board Member must
submit an election form prior to April 1, 1998. If
the Board Member is first elected to the Board during
a calendar year, such Board Member must submit an
election form described in Section III.B. to the Plan
Administrator prior to the beginning of his elected
term and prior to his right to receive compensation
and fees for such term.
D. Length of Election. An election
to defer compensation and fees will continue in effect
until the earlier of: (1) the end of the Participant's
service as a Board Member or (2) the end of the calendar
year during which the Participant elects to
discontinue deferrals.
E. Change or Discontinuance of Election.
A Participant may change the amount of compensation and fees
deferred to the Plan or may discontinue making deferrals by
submitting written notice to the Plan
Administrator of the change or discontinuance prior to
the calendar year for which the change or
discontinuance is to be effective. The election to
change the amount of deferrals must be made on a form
approved and accepted by the Plan Administrator. Any
election to change or discontinue deferrals will
operate with respect to compensation and fees payable
for prospective calendar years only.
SECTION IV - TRUST
MART shall maintain a trust (the "Trust") with a
person or entity with trust powers (the "Trustee"),
pursuant to such terms and conditions as set forth in
the Trust Agreement (the "Trust Agreement") entered
into between MART and the Trustee. The Trust is
intended to be treated as, and shall be interpreted
as, a "grantor trust" under the Internal Revenue Code
of 1986, as amended. The establishment of the Trust
is not intended to cause Participants to realize
current income on amounts contributed thereto.
Amounts of compensation and fees deferred under this
Plan will be paid by MART to the Trustee with
reasonable promptness. Payments of deferred
compensation and investment of contributions under
this Plan will be made by the Trustee pursuant to the
Trust Agreement.
SECTION V - DEFERRED MONEY AND STOCK UNIT ACCOUNTS
A.
Deferred Money and Stock Unit Accounts. For each
Participant, the Plan Administrator will maintain a
deferred money account ("Deferred Money Account") and
a stock unit account ("Stock Unit Account")
(collectively, "Account"). Each Participant will be
furnished with periodic statements of his Deferred
Money Account and Stock Unit Account balances.
B.
Investment Elections. A Participant may elect to
invest his deferrals under this Plan in the Deferred
Money Account or the Stock Unit Account. A
Participant may also elect to transfer all or a
portion of his existing Deferred Money Account
balances into his Stock Unit Account. Amounts
invested in the Participant's Stock Unit Account may
not be transferred to his Deferred Money Account.
Investment and transfer elections must be made on a
properly completed investment election form approved
and accepted by the Plan Administrator. The
investment elections will be effective at the time or
times deemed appropriate by the Plan Administrator.
There is no limit on the number of investment election
forms which can be submitted by a Participant during a
calendar year. If the Participant does not direct the
investment of all of his deferrals to the Plan, any
undirected amounts will be invested in the
Participant's Stock Unit Account.
C.
Deferred Money Account. Amounts invested in the
Deferred Money Account will be credited to such
Account on the date such amounts would otherwise be
payable to the Participant. Interest shall be
credited to the balance in the Account at the end of
each calendar quarter at the prime rate charged by the
First National Bank of Maryland (or its successor) as
in effect on the last day of the preceding calendar
quarter. An allocation and accounting of each
Participant's Deferred Money Account shall occur at
such times as designated by the Plan Administrator.
D.
Stock Unit Account.
Amounts invested in the Stock Unit Account shall be
invested in accordance with the terms of the Plan in
common shares of beneficial interests of MART, par
value $.01 per share (the "MART Shares"). MART Shares
to be acquired under the Plan may be purchased in the
open market, in private transactions, or directly from
MART, in the discretion of the Plan Administrator.
MART has reserved up to 50,000 MART shares for
issuance under the Plan.
Amounts deferred by the Participant which
are to be credited to the Participant's Stock Unit
Account will be initially credited to a holding account
and will subsequently be converted into whole MART Share
stock units by the Plan Administrator at the time or
times deemed appropriate by the Plan Administrator.
The stock price at which such conversion to MART
Shares occurs shall be the last reported bid price per
MART Share on the New York Stock Exchange on the day
such stock conversion occurs. The number of stock
units for whole MART Shares so determined shall be
allocated to the Participant's Stock Unit Account and
the aggregate value thereof at said stock price shall
be charged to the Participant's holding account. Any
cash balance remaining in the Participant's holding
account after such allocation shall be used, together
with other subsequent credits to the Participant's
Stock Unit Account, at the next stock conversion date
to purchase whole MART Shares. The election by a
Participant to invest his deferrals in the Stock Unit
Account, including the election to transfer all or a
portion of his existing Deferred Money Account
balances or future deferral amounts, is irrevocable.
E.
MART Shares. Additional allocations will be made to
each Participant's Stock Unit Account in dollar
amounts equal to the cash dividends (or the fair
market value of dividends paid in property) the
Participant would have received from time to time had
the Participant been the owner on the relevant dates
of the number of MART Shares allocated to the
Participant's Stock Unit Account on such dates. Such
dollar amounts shall initially be held in the holding
account for the Stock Unit Account and shall be used
by the Plan Administrator to purchase additional MART
Shares at the next stock conversion date.
In the event of any merger, consolidation,
stock dividend, split-up, combination or exchange of shares
or recapitalization or change in capitalization of MART,
the total number of stock units allocated to a
Participant's Stock Unit Account, and the number of
MART Shares reserved for issuance pursuant to the
Plan, shall be proportionately adjusted. Such
adjustment shall be made by the Board of Trustees of
MART and any such adjustments shall be conclusive and
binding on Participants.
All MART Shares allocated to a Participant's Stock Unit
Account shall be voted by the Board of Trustees of MART.
SECTION VI - VALUE OF DEFERRED COMPENSATION ACCOUNTS
The value of each Participant's Account
shall consist of compensation and fees deferred as invested,
and all net realized and unrealized earnings thereon.
All credits to an Account shall be credited with
interest equivalents in relation to the period from
the date credited to the date of withdrawal. As
promptly as practicable following the close of each
calendar year, a statement shall be sent to each
Participant as to the balance in the Participant's
Account as of the end of such year.
SECTION VII - PAYMENT OF DEFERRED COMPENSATION
A.
Termination of Service. Upon termination of a
Participant's service as a Board Member, the following
shall occur:
(1) The balance of the Participant's
Deferred Money Account shall be paid to the Participant
in cash, payable in a lump sum or installments
(not to exceed ten (10) annual payments) as elected by the
Participant in his compensation deferral election
completed under Section III. B.(2). Deferred Money
Account interest, dividend and other earnings on
undistributed Deferred Money Account amounts shall
continue to be allocated to a Participant's Deferred
Money Account through the Plan allocation and
accounting date preceding the final distribution of a
Participant's account.
(2) The number of whole MART Shares allocated
to the Participant's Stock Unit Account shall be distributed
to the Participant, payable in a single distribution or in
installments (not to exceed ten (10)
annual payments) as elected by the Participant in his
compensation deferral election completed under Section
III. B.(2). If payment will be made in a single
distribution, then to the extent the Participant's
Stock Unit Account consists of any dollar amounts not
yet converted to whole MART Shares by the date of the
distribution, such cash amounts shall instead be
transferred to the Participant's Deferred Money
Account and shall be distributed to the Participant in
accordance with the distribution of other dollar
amounts from the Participant's Deferred Money Account.
Additional allocations to a Participant's Stock Unit
Account in accordance with Section V.E. of the Plan
shall continue to be made on any undistributed stock
units until a final distribution of the balance of a
Participant's Stock Unit Account. During such
distribution period, any cash amounts allocated to a
Participant's Stock Unit Account (for example, through
the payment of cash dividends) shall automatically be
transferred to the Participant's Deferred Money
Account and distributed accordingly.
(3) If the Participant elects a lump sum
distribution, the amounts to be distributed
from the Participant's Deferred Money Account and
Stock Unit Account shall be based on the last
accounting and allocation
to the Participant's Accounts, in addition to any
dollar amounts actually deferred by the Participant
into the Plan since such date. If the Plan
Participant chooses an annual installment
distribution, the amount distributed upon each
distribution from the Participant's Deferred Money
Account and Stock Unit Account shall be determined
utilizing a fraction of the balance in the
Participant's Accounts at the date distributions
occur. With respect to the initial distribution, a
fraction consisting of a numerator of one (1) and a
denominator equal to the total number of installments
elected shall be applied to the Account balances. The
amount of any subsequent annual distribution shall be
determined by applying a fraction to the then current
Account balances which shall consist of a numerator of
one (1) and a denominator equal to the total number of
installments elected minus the number of installments
previously paid.
(4) Notwithstanding subparagraph A.(2) above,
if the MART Shares are not considered to be readily traded
on an established securities market, the Participant may
direct that the number of whole MART Shares
in his Stock Unit Account be converted to cash at such
shares' current value prior to their distribution to
the Participant. For purposes of this subparagraph
A.(4), MART Shares shall be considered to be readily
tradeable on an established market if they are listed
on a national securities exchange registered under
Section 6 of the Securities Exchange Act of 1934
("1934 Act") or are quoted on a system sponsored by a
national securities association registered under
Section 15A(b) of the 1934 Act, and such stock is
regularly quoted by brokers or dealers making a market
in such stock. The current value of MART Shares shall
be determined by the Board of Trustees of MART in its
sole discretion using one or more valuation techniques
including, but not limited to, the most recent
independent appraisal value of the MART Shares
determined by an outside appraiser, the value
determined by recent trades of the MART Shares or any
other appropriate business valuation technique.
Any such cash conversion election by a Participant
shall be effective six months after the election is received
by the Plan Administrator.
(5) Any MART Shares distributed to a Participant
upon his termination of service as a Board Member may not be
sold or otherwise disposed of within 6 months from the date
of the crediting of such MART Shares
to the Participant's Stock Unit Account.
B.
Death. In the event of a Participant's death, the
balances in the Participant's Account shall be paid in
a lump sum or installments, in the Plan
Administrator's discretion, to the Participant's
estate, or the beneficiary or beneficiaries designated
by the Participant on a form approved and accepted in
writing by the Plan Administrator prior to the
Participant's death. Payment shall commence as soon
as reasonably possible after the Participant's death,
provided the Plan Administrator may require such proof
of the right to proceeds, including the execution of
tax forms as in its discretion may be required, and
provided further that if a beneficiary or
beneficiaries are named but have not claimed the
payment within six months of a Participant's death,
then at any time thereafter, the Plan Administrator in
its sole and absolute discretion, may make the payment
or payments to the Participant's estate. Payment made
by the Plan Administrator as herein provided shall be
a full and complete release and acquittance to MART,
its successors and assigns.
C.
Disability. In the event a Participant becomes
totally disabled, then at anytime thereafter, the Plan
Administrator in its sole and absolute discretion, may
authorize installment payments from the Participant's
Account in amounts determined by the Plan
Administrator to be paid to that Participant during
the time of such total disability. The determination
of the existence of total disability shall be made by
the Plan Administrator, who may utilize the
definition(s) included in MART's LTD program in effect
at the time, and whose decision in that regard shall
be absolute, final and binding upon all interested
persons.
D.
Incapacity of Recipient. In the event the Participant
is declared incompetent and a conservator or other
person legally charged with the care of his person or
of his estate is appointed, any benefits under this
Plan to which such Participant is entitled shall be
paid to such conservator or other person legally
charged with the care of his person or his estate.
Except as provided above in this paragraph, when the
Plan Administrator, in its sole discretion, determines
that a Participant is unable to manage his financial
affairs, the Plan Administrator may make distributions
to any qualified person for the benefit of such
Participant.
E.
Hardship Withdrawals. In the event of undue hardship
of the Participant, then the Plan Administrator, in
its sole and absolute discretion, may authorize
installment payments from the Participant's account in
amounts determined by the Plan Administrator. The
determination of the existence of undue hardship shall
be with the Plan Administrator, whose discretionary
decision shall be absolute, final and binding upon all
interested persons.
Examples of financial hardship, included for
utilization in the Plan, are:
(1) Medical, hospitalization, long term
care (in residence or not), hospice and nursing home expenses
incurred by the Participant, or the Participant's spouse or
dependents, including relatives
residing within the Participant's residence and/or for
whom the Participant provides at least 50% of his
financial support annually.
(2) Purchase of a principal residence
by the Participant, excluding mortgage payments.
(3) Payment of tuition for the next semesters
or quarters of high school and/or post-secondary
(after high school) education for Participant's spouse,
children or dependents, or Participant.
(4) Payments needed to prevent eviction from,
or foreclosure of the mortgage on, Participant's principal residence.
The Plan Administrator may, in its sole discretion,
utilize additional criteria as needed. The Participant must have
deferred compensation in the Plan for no less than one year to be
eligible to request and
to receive the Plan Administrator's authorization for
installment payments on account of hardship.
The Participant must make the request in writing
stating the reason(s) for the hardship withdrawal, together
with any relevant supporting information deemed necessary
by the Plan Administrator. The minimum
installment that may be requested and paid on account
of any hardship withdrawal is $1,000.00.
F.
Unclaimed Benefit. Each Participant will keep the
Plan Administrator informed of his current address and
the current address of his beneficiaries. The Plan
Administrator shall not be obligated to search for the
whereabouts of any person. If the location of a
Participant is not made known to the Plan
Administrator within two years after the date on which
any payment of the Participant's Account may be made,
the amounts in the Participant's Deferred Money and
Stock Unit Accounts will be converted to cash. An
amount equal to the converted cash will become a claim
by the Participant against the assets of MART and the
Participant's rights under the Plan will cease to
exist. The converted cash will be used to reduce the
future obligations, to the extent of the converted
cash, required of MART under the Plan. If within six
months after the death of a Participant, the Plan
Administrator is unable to locate any beneficiary of
the Participant, then the Plan Administrator may fully
discharge its obligation and the obligation of MART by
payment to the Participant's estate.
SECTION VIII - PARTICIPANT'S RIGHTS UNSECURED
The rights of the Participant, any designated
beneficiary of the Participant, or any other person claiming
through the Participant under this Plan shall be solely those
of an unsecured general creditor of MART
and such individual shall only have the right to
receive from MART those payments as specified under
this Plan. The Participant agrees that he, his
designated beneficiary, or any other person claiming
through him shall have no rights or interest
whatsoever in any asset of MART, including any
specific assets which MART may possess or obtain to
informally fund this Plan.
SECTION IX - NON-ASSIGNABILITY
The right of a Participant to receive any
unpaid portion of the Participant's deferred compensation
account shall not be subject to seizure for the payment of
any debts, judgments, alimony or separate
maintenance owed by the Participant or his
beneficiary, nor may it be transferred by operation of
law in the event of bankruptcy, insolvency or
otherwise.
SECTION X - ADMINISTRATION
The Plan Administrator shall be the Treasurer
of MART, and in the Treasurer's absence or inability to
serve, that officer designated by the President/CEO of
MART. The Administrator shall have authority to
adopt record keeping and compliance rules and
regulations for carrying out of the Plan. The
Administrator will coordinate activities with MART's
Secretary who, acting as assistant Administrator, is
authorized to communicate to, enroll, suspend and
discharge participants, make design recommendations,
interpret, construe and implement the provisions
hereof.
SECTION XI - AMENDMENT AND TERMINATION
This Plan may be amended, modified, or terminated
by the action of the Board of Trustees of MART at any time.
In the event of a transfer of substantially all of the assets
of MART, this Plan shall terminate
with the assets that are owned by the transferor
returned to the Participants as specified in Section
VIII.
SECTION XII - LIMITATIONS ON LIABILITY
Neither MART nor any individual acting as its
agent or as a member of its Board of Trustees shall be liable
to any Participant, former Participant, or any other person
for any claim, loss, liability or expense
incurred in connection with this Plan.
SECTION XIII - STATE LAW
This Plan and Agreement is established under
and will be construed according to the laws of the
state of Maryland.
SECTION XIV - PREVIOUS DEFERMENT AGREEMENTS
Certain members of the Board of Trustees of MART
entered into Deferment Agreements with MART dated as of December
31, 1993. As of April 1, 1998, no further deferrals are
allowed under those Deferment
Agreements and any future deferrals by members of the
Board must be made in accordance with the terms of
this Plan.
From and after April 1, 1998, amounts deferred
under the Deferment Agreements will be held in the Trust
provided for in Section IV of this Plan, but will be
accounted for separately from amounts deferred under
this Plan. Amounts deferred under the Deferment
Agreements will be invested in the manner provided for
in Section V of this Plan, except that such amounts
will be invested in the Deferred Money Account unless
and until the Participant directs their investment in
the Stock Unit Account. Amounts deferred under the
Deferment Agreements will be distributed at the times
and in the amounts specified in the Deferment
Agreements. However, the provisions of Section VII of
this Plan relating to treatment of MART Shares will
apply to the extent any amounts deferred under the
Deferment Agreements are invested in MART Shares.
Amounts deferred under the Deferment Agreements are
not eligible for hardship withdrawal under Section
VII.E.
SECTION XV - SIGNATURE
MID-ATLANTIC REALTY TRUST
_________By:_________________
Date
F. Patrick Hughes, President
3/4/98
MID-ATLANTIC REALTY TRUST
DEFERRED COMPENSATION AND FEE PLAN
FOR NON-EMPLOYEE TRUSTEES
NOTICE AND DEFERRAL ELECTION FORM
- - ------------------------------------------------------
- - -----------
TO:______________________________
DATE:_____________________
This is to inform you that you are eligible
to defer all or any
portion of your compensation and fees from Mid-
Atlantic Realty Trust for
service as a Trustee, as provided in the Mid-Atlantic
Realty Trust Deferred
Compensation and Fee Plan for Non-Employee Trustees, a
copy of which
is being delivered to you with this Notice and
Deferral Election Form.
Please acknowledge receipt of this Notice
and Deferral
Election Form and copy of the Plan by signing and
dating below and
checking whether or not you elect to participate in
the Plan. If you desire
to participate in the Plan, please also complete the
attached Deferred
Compensation Election and Request for Investment
Direction forms.
Please return this Form, and the Deferred Compensation
Election and
Request for Investment Direction forms if applicable,
to the Plan
Administrator as soon as possible.
An election to defer compensation and fees
must be made
before the beginning of the calendar year. For the
first year of the Plan, an
election must be made before April 1, 1998. For the
calendar year in which
you are first elected to the Board of Trustees, your
election must be made at
or prior to the beginning of your term on the Board.
Your election remains
in effect for that calendar year and all future
calendar years until the end of
your service as a Trustee. However, you may amend or
cancel your
election for any future calendar year of service as a
Trustee. Any
amendment or cancellation must be in writing and
received by the Plan
Administrator prior to the beginning of the relevant
year for which the
amendment or cancellation is to become effective. If
you do not elect to
become a participant at this time, you may elect to
become a participant for
any future calendar year in which you are a Trustee,
provided the election is
received prior to the beginning of that year.
ACKNOWLEDGEMENT
I hereby acknowledge receipt of this Notice
and Deferral
Election Form together with a copy of the Deferred
Compensation and Fee
Plan.
________________
_________________________________________
DATE SIGNATURE
ELECTION (check one)
______ I do not elect to participate in the Plan at
this time.
______ I elect to participate in the Plan and to
defer payment of my
compensation and fees in accordance with the attached
Deferred
Compensation Election form.
DEFERRED COMPENSATION ELECTION
TO: PLAN ADMINISTRATOR OF MID-ATLANTIC REALTY
TRUST DEFERRED COMPENSATION AND FEE PLAN FOR
NON-EMPLOYEE TRUSTEES
In accordance with the provisions of the Mid-Atlantic
Realty Trust
Deferred Compensation and Fee Plan for Non-Employee
Trustees (the
"Plan"), I hereby elect to defer future compensation
and fees (excluding
expense reimbursements) otherwise payable to me for
services as a Trustee
of Mid-Atlantic Realty Trust.
1. AMOUNT OF DEFERRAL: (check one)
__________% of compensation and fees
OR
The sum of
_______________________________________ dollars
per calendar year.
2. COMPENSATION DEFERRED IS TO BE PAID IN: (check
one)
__________ a lump-sum
OR
__________ (insert number up to 10) annual
installments
3. PAYMENT SHALL COMMENCE ON THE FOLLOWING
DATE: (check one)
__________ 30 days following termination of
service as a Trustee
OR
__________ January 15th, ____ (insert year).
This date cannot
precede termination of service as a Trustee, and
cannot be later than
January 15th following the year in which service
terminates or you attain
age 70, whichever is later.
4. BENEFICIARY DESIGNATION: (complete the following)
In the event of my death before receiving the entire
balance of my deferred
compensation and fees, the unpaid balance shall be
paid in accordance with
the Plan provisions to the beneficiary herein named,
or, if none, to my
estate.
I hereby designate ________________________________,
my
______________________, SSN ________________________,
current
address of ______________________________ and current
phone number
of _____________________ as primary beneficiary to
receive all
remaining compensation upon my death.
I hereby designate ________________________________,
my
______________________, SSN ________________________,
current
address of ______________________________ and current
phone number
of _____________________ as secondary beneficiary to
receive all
remaining compensation upon my death if my primary
beneficiary does not
survive me.
YOU MUST ALSO COMPLETE THE "REQUEST FOR INVESTMENT
DIRECTION" FORM
______________________
__________________________________
Date Signature of
Participant
Address:______________________________________________
__________
SSN:_______________ Phone
number:______________________________
Received on the _______________ day
of__________________, 19___
By:___________________________________________________
___________
(Plan Administrator)
MID-ATLANTIC REALTY TRUST
DEFERRED COMPENSATION AND FEE PLAN
FOR NON-EMPLOYEE TRUSTEES
REQUEST FOR INVESTMENT DIRECTION
_________________________________________
Name of Participant
In accordance with the Mid-Atlantic Realty Trust
Deferred Compensation
and Fee Plan for Non-Employee Trustees (the "Plan"), I
have elected to
defer compensation and fees otherwise payable to me
for services as a
Trustee of Mid-Atlantic Realty Trust.
1. I hereby request that my future deferrals of
compensation and fees
be invested as follows:
Investment Percentage (Whole % 1-100)
MART Common Shares of
Beneficial Interest _____________%
Deferred Money Account _____________%
100%
2. I hereby request that _____% of my existing
Deferred Money
Account balance be irrevocably invested in MART common
shares of
beneficial interest.
I understand that:
(a) This request is effective for all deferred
compensation contributed
to my account as directed.
(b) This request may be changed for existing
balance(s) or future
deferrals, upon written notice to the Plan
Administrator, to be effective
when deemed appropriate by the Administrator.
(c) Investments in MART common shares of beneficial
interest may
not be transferred to the Deferred Money Account.
(d) All compensation designated for investment will
be set up as
subsidiary account(s) in the Trust established for the
Plan.
(e) Periodic account statements confirming my
balances and
investment directions and an annual statement
regarding valuation of my
account will be provided to me.
(f) Investments under the investment options set
forth above are
subject to such rules and limitations as may be
adopted by the
Administrator or the Trustee.
Received on the _______ day of
_________________________, 19___
By: _________________________________________________
(Plan Administrator)
MID-ATLANTIC REALTY TRUST
TRUST UNDER DEFERRED COMPENSATION
AND FEE PLAN FOR NON-EMPLOYEE TRUSTEES
This Trust Agreement ("Agreement") made as
of April 1,
1998, by and between Mid-Atlantic Realty Trust
("MART") and Eugene T.
Grady ("Trustee").
WHEREAS, MART adopted the MART Deferred
Compensation and Fee Plan for Non-Employee Trustees
(the "Plan"),
effective April 1, 1998; and
WHEREAS, MART hereby adopts the Trust Under
Deferred Compensation and Fee Plan for Non-Employee
Trustees (the
"Trust"), effective April 1, 1998; and
WHEREAS, MART expects to incur liability
under the
terms of the Plan with respect to the individuals
participating in the Plan;
and
WHEREAS, MART wishes to maintain a trust
(the "Trust")
and to contribute to the Trust assets that shall be
held therein, subject to the
claims of MART's creditors in the event of MART's
Insolvency, as herein
defined, until paid to Plan participants and their
beneficiaries in such
manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties
that this Trust
shall constitute an unfunded arrangement and shall not
affect the status of
the Plan as an unfunded plan maintained for the
purpose of providing
deferred compensation for non-employee trustees; and
WHEREAS, it is MART's intention to make
contributions to
the Trust to provide itself with a source of funds to
assist it in meeting its
liabilities under the Plan.
NOW, THEREFORE, MART and the Trustee do
hereby
agree that this Trust shall be comprised, held and
disposed of as follows:
SECTION I. - ESTABLISHMENT OF TRUSt
A. The assets of the Trust shall be held,
administered
and disposed of by the Trustee as provided in this
Agreement and in
accordance with the Plan.
B. The Trust hereby established shall be
irrevocable.
C. The Trust is intended to be a grantor
trust, of which
MART is the grantor, within the meaning of Sections
671 et seq. of the
Internal Revenue Code of 1986, as amended, and shall
be construed
accordingly.
D. The principal of the Trust, and any
earnings thereon
shall be held separate and apart from other funds of
MART and shall be
used exclusively for the uses and purposes of Plan
participants and general
creditors as herein set forth. Plan participants and
their beneficiaries shall
have no preferred claim on, or any beneficial
ownership interest in, any
assets of the Trust. Any rights created under the Plan
and this Agreement
shall be mere unsecured contractual rights of Plan
participants and their
beneficiaries against MART. Any assets held in the
Trust will be subject to
the claims of MART's general creditors under federal
and state law in the
event of Insolvency of MART, as defined in Section
III.A.
E. MART, in its sole discretion, may at
any time, or
from time to time, make additional deposits of cash or
other property in
trust with the Trustee to augment the principal to be
held, administered and
disposed of by the Trustee as provided in this
Agreement. Neither the
Trustee nor any Plan participant or beneficiary shall
have any right to
compel such additional deposits.
F. Upon a Change of Control, as defined in
Section
XIV, MART shall, as soon as possible, but in no event
longer than thirty
(30) days following the Change of Control, make an
irrevocable
contribution to the Trust in an amount that is
sufficient to pay each of the
Plan participants or beneficiaries the benefits to
which Plan participants or
their beneficiaries would be entitled pursuant to the
terms of the Plan as of
the date on which the Change of Control occurred.
SECTION II - PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES
A. MART shall deliver to the Trustee a
schedule (the
"Payment Schedule") that: (i) indicates the amounts
payable with respect to
Plan participants (and his or her beneficiaries); (ii)
provides a formula or
other instructions acceptable to the Trustee for
determining the amounts so
payable; (iii) indicates the form in which such
amounts are to be paid (as
provided for or available under the Plan); and (iv)
provides the time of
commencement for payment of such amounts. Except as
otherwise
provided herein, the Trustee shall make payments to
Plan participants and
their beneficiaries in accordance with such Payment
Schedule. The Trustee
shall make provision for the reporting and withholding
of any federal, state
or local taxes that may be required to be withheld
with respect to the
payment of benefits pursuant to the terms of the Plan
and shall pay amounts
withheld to the appropriate taxing authorities or
determine that such
amounts have been reported, withheld and paid by MART.
B. The entitlement of a Plan participant
or his or her
beneficiaries to benefits under the Plan shall be
determined by the Plan
Administrator under the Plan, and any claim for such
benefits shall be
considered and reviewed under the procedures set out
in the Plan.
C. MART may make payment of benefits
directly to
Plan participants or their beneficiaries as they
become due under the terms
of the Plan. MART shall notify the Trustee of its
decision to make payment
of benefits directly prior to the time amounts are
payable to participants or
their beneficiaries. In addition, if the principal of
the Trust, and any
earnings thereon, are not sufficient to make payments
of benefits in
accordance with the terms of the Plan, MART shall make
the balance of
each such payment as it falls due. The Trustee shall
notify MART where
principal and earnings are not sufficient.
SECTION III - TRUSTEE RESPONSIBILITY REGARDING
PAYMENTS TO
TRUST BENEFICIARY WHEN MART IS INSOLVENT
A. The Trustee shall cease payment of
benefits to Plan
participants and their beneficiaries if MART is
Insolvent. MART shall be
considered "Insolvent" for purposes of this Agreement
if: (i) MART is
unable to pay its debts as they become due; or (ii)
MART is subject to a
pending proceeding as a debtor under the United States
Bankruptcy Code.
B. At all times during the continuance of
this Trust, as
provided in Section I.D, the principal and income of
the Trust shall be
subject to claims of general creditors of MART under
federal and state law
as set forth below:
(1) The Board of Trustees and the
Chief
Executive Officer of MART shall have the duty to
inform the Trustee in
writing of MART's Insolvency. If a person claiming to
be a creditor of
MART alleges in writing to the Trustee that MART has
become Insolvent,
the Trustee shall determine whether MART is Insolvent
and, pending such
determination, the Trustee shall discontinue payment
of benefits to Plan
participants or their beneficiaries from the Trust.
(2) Unless the Trustee has actual
knowledge of
MART's Insolvency, or has received notice from MART or
a person
claiming to be a creditor alleging that MART is
Insolvent, the Trustee shall
have no duty to inquire whether MART is Insolvent.
The Trustee may in
all events rely on such evidence concerning MART's
solvency as may be
furnished to the Trustee and that provides the Trustee
with a reasonable
basis for making a determination concerning MART's
solvency.
(3) If at any time the Trustee has
determined that
MART is Insolvent, the Trustee shall discontinue
payments to Plan
participants or their beneficiaries and shall hold the
assets of the Trust for
the benefit of MART's general creditors. Nothing in
this Agreement shall
in any way diminish any rights of Plan participants or
their beneficiaries to
pursue their rights as general creditors of an
Insolvent MART with respect
to benefits due under the Plan or otherwise.
(4) Trustee shall resume the payment
of benefits
to Plan participants or their beneficiaries in
accordance with Section II of
this Agreement only after Trustee has determined that
MART is not
Insolvent or is no longer Insolvent.
C. If the Trustee discontinues the payment
of benefits
from the Trust pursuant to Section III.B and
subsequently resumes such
payments, the first payment following such
discontinuance shall, provided
that there are sufficient assets in the Trust, include
the aggregate amount of
all payments due to Plan participants or their
beneficiaries from the Trust
under the terms of the Plan for the period of such
discontinuance, less the
aggregate amount of any payments made to Plan
participants or their
beneficiaries by the allegedly Insolvent MART in lieu
of the payments
provided for hereunder during any such period of
discontinuance.
SECTION IV - PAYMENTS TO MART
Except as provided in Section III, MART
shall have no right
or power to direct the Trustee to return to it or to
divert to others any of the
Trust assets before all payment of benefits have been
made from the Trust
to Plan participants and their beneficiaries pursuant
to the terms of the Plan.
SECTION V - INVESTMENT AUTHORITY
A. The duties, powers, and
responsibilities of the
Trustee shall be limited as specifically set forth in
this Section V and as
otherwise limited in this Agreement. The Trustee's
powers shall include the
following:
(1) The power to invest in securities
(including
stock or rights to acquire stock) or obligations
issued by MART. All rights
associated with assets of the Trust shall be exercised
by the Trustee or the
person designated by the Trustee, and shall in no
event be exercisable by or
rest with Plan participants. With regard to any Trust
assets which consist
of common shares of beneficial interest of MART, the
Trustee shall vote
such shares and respond to any tender offer to
purchase such shares only as
directed by the board of trustees of MART.
(2) The power to hold, manage and
control the
assets held in trust, to invest and reinvest the same,
in such manner as the
Trustee deems to be reasonably sound. The Trustee
shall not be held
responsible for any loss incurred through an
investment error made in good
faith, but shall be liable only for the Trustee's
willful misconduct.
(3) The power to take and hold title
to invest
assets in the name of the Trustee or a nominee of the
Trustee without
disclosing the Trust.
(4) The power to give general and
special powers
of attorney with or without rights of substitution,
and generally to exercise
any powers of an owner with regard to investment of
the Trust assets.
(5) The power to sue or defend in any
suit or
legal proceeding by or against the Trust. The Trustee
shall have full power
in the Trustee's discretion to compound, compromise,
and adjust all claims
and demand in favor of or against the Trust, upon such
terms and
conditions as the Trustee deems appropriate; provided,
however, that the
Trustee shall be indemnified by MART for all expenses
and liabilities in
connection with any such proceedings.
(6) The power to employ such agents,
attorneys
in fact, experts, and investment and legal counsel,
and to delegate
discretionary powers to or rely upon information or
advice furnished by any
such persons.
(7) The power to do all acts, whether
or not
expressly authorized, which may be necessary or proper
for the protection
of the assets of the Trust, or for carrying out any
duty imposed hereunder.
B. Notwithstanding any powers granted to
the Trustee,
pursuant to this Agreement or to applicable law, the
Trustee shall not have
any power that could give this Trust the objective of
carrying on a business
and dividing the gains therefrom, within the meaning
of Section
301.7701-2 of the Procedure and Administrative
Regulations promulgated
pursuant to the Internal Revenue Code.
SECTION VI - DISPOSITION OF INCOME
During the term of this Trust, all of the
income received by
the Trust, net of expenses and taxes, shall be
accumulated and reinvested.
SECTION VII - ACCOUNTING BY THE TRUSTEE
The Trustee shall keep accurate and detailed
records of all
investments, receipts, disbursements, and all other
transactions required to
be made, including records of the contributions,
earnings and distributions
and such specific records as shall be agreed upon in
writing between
MART and the Trustee. Within 90 days following the
close of each
calendar year and within 90 days after the removal or
resignation of the
Trustee, the Trustee shall deliver to MART a written
account of its
administration of the Trust during such year or during
the period from the
close of the last preceding year to the date of such
removal or resignation,
setting forth all investments, receipts, disbursements
and other transactions
effected by it, including a description of all
securities and investments
purchased and sold with the cost or net proceeds of
such purchases or sales
(accrued interest paid or receivable being shown
separately), and showing
all cash, securities and other property held in the
Trust at the end of such
year or as of the date of such removal or resignation,
as the case may be.
SECTION VIII - RESPONSIBILITY OF THE TRUSTEE
A. The Trustee shall act with the care,
skill, prudence
and diligence under the circumstances then prevailing
that a prudent person
acting in like capacity and familiar with such matters
would use in the
conduct of an enterprise of a like character and with
like aims; provided,
however, that the Trustee shall incur no liability to
any person for any
action taken pursuant to a direction, request or
approval given by MART
which is contemplated by, and in conformity with, the
terms of the Plan or
this Trust and is given in writing by MART. In the
event of a dispute
between MART and any third party, including a Plan
participant or
beneficiary, the Trustee may apply to a court of
competent jurisdiction to
resolve the dispute.
B. If the Trustee undertakes or defends
any litigation
arising in connection with this Trust, MART agrees to
indemnify the
Trustee against the Trustee's costs, expenses and
liabilities (including,
without limitation, attorneys' fees and expenses)
relating thereto and to be
primarily liable for such payments. If MART does not
pay such costs,
expenses and liabilities in a reasonably timely
manner, the Trustee may
obtain funds to make payment from the Trust.
C. The Trustee may consult with legal
counsel (who
may also be counsel for MART generally) with respect
to any of its duties
or obligations hereunder.
D. The Trustee may hire agents,
accountants, attorneys,
actuaries, investment advisors, financial consultants
or other professionals
to assist it in performing any of its duties or
obligations hereunder.
E. The Trustee shall have, without
exclusion, all powers
conferred on trustees by applicable law, unless
expressly provided
otherwise in this Agreement; provided, however, that
if an insurance policy
is held as an asset of the Trust, the Trustee shall
have no power to name a
beneficiary of the policy other than the Trust, to
assign the policy (as
distinct from conversion of the policy to a different
form) other than to a
successor Trustee, or to loan to any person the
proceeds of any borrowing
against such policy.
SECTION IX - COMPENSATION AND EXPENSES OF THE TRUSTEE
MART shall pay any administrative and
Trustee's fees and
expenses. If not so paid, the fees and expenses shall
be paid from the Trust.
SECTION X - RESIGNATION AND REMOVAL OF THE TRUSTEE
A. The Trustee may resign at any time by
written notice
to MART which shall be effective 30 days after receipt
of such notice
unless MART and the Trustee agree otherwise.
B. The Trustee may be removed by MART on
30 days
notice or upon shorter notice accepted by the Trustee.
Such removal must
be approved by the Board of Trustees of MART.
C. Upon resignation or removal of the
Trustee and
appointment of a successor Trustee, all assets shall
subsequently be
transferred to the successor Trustee. The transfer
shall be completed within
60 days after receipt of notice of resignation,
removal or transfer, unless
MART extends the time limit.
D. If the Trustee resigns or is removed, a
successor shall
be appointed in accordance with Section XI by the
effective date of
resignation or removal under Section X.A or X.B. If
no such appointment
has been made, the Trustee may apply to a court of
competent jurisdiction
for appointment of a successor or for instructions.
All expenses of the
Trustee in connection with the termination proceeding
shall be allowed as
administrative expenses of the Trust.
SECTION XI - APPOINTMENT OF SUCCESSOR
A. If the Trustee resigns (or is removed)
in accordance
with Section X.A or X.B, MART may appoint any third
party, such as a
bank trust department or other party that may be
granted corporate trustee
powers under state law, as a successor to replace the
Trustee upon
resignation or removal. The appointment shall be
effective when accepted
in writing by the new Trustee, who shall have all of
the rights and powers
of the former Trustee, including ownership rights in
the Trust assets. The
former Trustee shall execute any instrument necessary
or reasonably
requested by MART or the successor Trustee to evidence
the transfer.
B. The successor Trustee need not examine
the records
and acts of any prior Trustee and may retain or
dispose of existing Trust
assets, subject to Sections VII and VIII. The
successor Trustee shall not be
responsible for, and MART shall indemnify and defend
the successor
Trustee from, any claim or liability resulting from
any action or inaction of
any prior Trustee or from any other past event, or any
condition existing at
the time it becomes successor Trustee.
SECTION XII - AMENDMENT OR TERMINATION
A. This Agreement may be amended, with the
approval
the Board of Trustees of MART, by a written instrument
executed by the
Trustee and MART. Notwithstanding the foregoing, no
such amendment
shall conflict with the terms of the Plan or shall
make the Trust revocable.
B. The Trust shall not terminate until the
date on which
Plan participants and their beneficiaries are no
longer entitled to benefits
pursuant to the terms of the Plan. Upon termination
of the Trust, any assets
remaining in the Trust shall be returned to MART.
C. Upon written approval of all Plan
participants or
beneficiaries entitled to payment of benefits pursuant
to the terms of the
Plan, MART may terminate this Trust prior to the time
all benefit payments
under the Plan has been made. All assets in the Trust
at termination shall
be returned to MART to be held subject to the
provisions of the Plan.
D. Section II of this Agreement may not be
amended for
two (2) years following a Change of Control of MART.
SECTION XIII - MISCELLANEOUS
A. Any provision of this Agreement that is
prohibited
by law shall be ineffective to the extent of any such
prohibition, without
invalidating the remaining provisions hereof.
B. Benefits payable to Plan participants
and their
beneficiaries under this Agreement may not be
anticipated, assigned (either
at law or in equity), alienated, pledged, encumbered
or subjected to
attachment, garnishment, levy, execution or other
legal or equitable
process.
C. This Agreement shall be governed by and
construed
in accordance with the laws of Maryland.
D. The Trustee shall determine the manner
and amount
of payments to be made to Plan participants or their
beneficiaries and shall
make such payments in accordance with the terms of the
Plan.
Notwithstanding anything to the contrary contained in
this Agreement or in
the Plan: (i) in the event that the Internal Revenue
Service prevails in its
claim that amounts contributed to and held in the
Trust, and/or earnings
thereon, constitute taxable income to a Plan
participant or his or her
beneficiary for any taxable year of him or her, prior
to the taxable year in
which such contributions and/or earnings are
distributed to him or her, or
(ii) in the event that legal counsel satisfactory to
MART, the Trustee and
the applicable Plan participant or his or her
beneficiary, renders an opinion
that the Internal Revenue Service would likely prevail
in such a claim, the
allocable assets in the Trust Fund shall be
immediately distributed to the
participant or his or her beneficiary. For purposes of
this Section XIII.E, the
Internal Revenue Service shall be deemed to have
prevailed in a claim if
such claim is upheld by a court of final jurisdiction,
or if the Trustee, based
upon an opinion of legal counsel satisfactory to MART,
the Trustee and the
Plan participant or his or her beneficiary, fails to
appeal a decision of the
Internal Revenue Service, or of a court of applicable
jurisdiction, with
respect to such claim, to an appropriate Internal
Revenue Service appeals
authority or to a court of higher jurisdiction within
the appropriate time
period.
SECTION XIV - CHANGE OF CONTROL
For purposes of this Agreement, Change of
Control shall
mean as to MART: (i) the acquisition by any person,
entity or group, within
the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of
1934 ("Act"), or any comparable successor provisions,
of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Act)
of twenty-five percent (25%) or more of either the
outstanding common
shares of beneficial interest or the combined voting
power of MART's then
outstanding voting securities entitled to vote
generally, (ii) the approval by
the stockholders of MART of a reorganization, merger,
or consolidation, in
each case, with respect to which persons who were
stockholders of MART
immediately prior to such reorganization, merger or
consolidation do not,
immediately thereafter, own more than twenty-five
percent (25%) of the
combined voting power of the resulting business
organization's securities
entitled to vote generally in the election of
trustees, or
(iii) a liquidation or dissolution of MART or of the
sale of all or
substantially all of MART's
assets.
SECTION XV - PREVIOUS DEFERMENT AGREEMENTS
Certain members of the Board of Trustees of
MART entered
into Deferment Agreements with MART dated as of
December 31, 1993.
As of April 1, 1998, no further deferrals are allowed
under those Deferment
Agreements and any future deferrals by members of the
Board must be
made in accordance with the terms of the Plan.
From and after April 1, 1998, amounts
deferred under the
Deferment Agreements will be held in this Trust as
provided for in Section
XIV of the Plan.
SECTION XVI - EFFECTIVE DATE
The effective date of this Trust is April 1,
1998.
SECTION XVII - SIGNATURES
MID-ATLANTIC REALTY
TRUST
________________________ By:_________________________________
Date F. Patrick Hughes, President
TRUSTEE
________________________
_________________________________
Date Eugene T. Grady
3/4/98
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,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Earnings (loss) from
operations (2) $6,802 3,208 2,444 1,713 (2,030)
Less: sales of residential
property, net of cost of
residential property sold - - - - (24)
Add:
Interest expense(3) 12,555 12,354 11,928 10,876 12,691
Interest portion of rentals (4) 225 227 113 97 84
Earnings available for fixed
charges $19,582 15,789 14,485 12,686 10,721
Fixed Charges:
Interest expense (3) $12,555 12,354 11,928 10,876 12,691
Interest capitalized 445 104 565 31 -
Interest portion of rentals (4) 225 227 113 97 84
Fixed Charges $13,225 12,685 12,606 11,004 12,775
Ratio of earnings to fixed
charges $ 1.48 1.24 1.15 1.15 -
Excess of Fixed Charges
over Earnings $ - - - - 2,054
</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, 1997, 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.
(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
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 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>
EXHIBIT 23. ACCOUNTANTS' CONSENT
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Trustees
MID-ATLANTIC REALTY TRUST:
We consent to the incorporation by reference in the registration statement
(No. 333-20813) on Form S-3 of Mid-Atlantic Realty Trust of our
report dated February 18, 1998, relating to the consolidated balance sheets
of
Mid-Atlantic Realty Trust and subsidiaries as of December 31, 1997 and
1996,
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, 1997, which report appears in the December 31, 1997 annual report on
Form
10-K of Mid-Atlantic Realty Trust.
KPMG Peat Marwick LLP
Baltimore, Maryland
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,427
<SECURITIES> 0
<RECEIVABLES> 880
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 288,478
<DEPRECIATION> 42,782
<TOTAL-ASSETS> 300,887
<CURRENT-LIABILITIES><F1> 0
<BONDS> 133,568
<COMMON> 145
0
0
<OTHER-SE> 106,617
<TOTAL-LIABILITY-AND-EQUITY> 300,887
<SALES> 0
<TOTAL-REVENUES> 39,152
<CGS> 0
<TOTAL-COSTS> 30,931
<OTHER-EXPENSES> 1,419
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,555
<INCOME-PRETAX> 6,819
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,819
<DISCONTINUED> 0
<EXTRAORDINARY> (227)
<CHANGES> 0
<NET-INCOME> 6,592
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
<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>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<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
<COMMON> 72
0
0
<OTHER-SE> 30,739
<TOTAL-LIABILITY-AND-EQUITY> 173,278
<SALES> 0
<TOTAL-REVENUES> 32,406
<CGS> 0
<TOTAL-COSTS> 28,684
<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> .56
<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>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 514
<SECURITIES> 0
<RECEIVABLES> 2,351
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 174,392
<DEPRECIATION> 39,430
<TOTAL-ASSETS> 182,521
<CURRENT-LIABILITIES><F1> 0
<BONDS> 122,391
<COMMON> 60
0
0
<OTHER-SE> 20,878
<TOTAL-LIABILITY-AND-EQUITY> 182,521
<SALES> 0
<TOTAL-REVENUES> 29,593
<CGS> 0
<TOTAL-COSTS> 26,431
<OTHER-EXPENSES> 718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,928
<INCOME-PRETAX> 3,165
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 612
<NET-INCOME> 3,777
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<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>
