FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
-------------------------------------------------
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ___________________
(Amended by Exch Act Rel No. 312905. Eff 4/26/93)
Commission file Number 1-12286
--------------------------------------------------------
Mid-Atlantic Realty Trust
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1832411
- - - ---------------------------------- ------------------------------------
(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 (Zip Code)
offices)
Registrant's telephone number,
including area code (410) 684-2000
------------------------------------
- - - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by 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
--------- ---------
14,328,596 Common Shares were outstanding as of July 23, 1999.
<PAGE>
MID-ATLANTIC REALTY TRUST
AND SUBSIDIARIES
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. MANAGEMENT'S DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Part II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Item 3. DEFAULTS UPON SENIOR SECURITIES
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Item 5. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
2
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of,
------------------------------------
June 30, 1999 December 31, 1998
------------------------------------
(UNAUDITED)
ASSETS
- - - ------
Properties:
<S> <C> <C>
Operating properties $ 369,304,373 347,921,101
Less accumulated depreciation and amortization 55,209,561 50,540,094
----------------------------------
314,094,812 297,381,007
Development operations 3,723,048 11,281,252
Property held for development or sale 5,422,705 5,422,705
----------------------------------
323,240,565 314,084,964
Cash and cash equivalents 1,106,491 611,107
Notes and accounts receivable - tenants and other 1,027,491 1,504,951
Prepaid expenses and deposits 1,373,062 2,381,137
Deferred financing costs 1,893,171 1,158,606
----------------------------------
$ 328,640,780 319,740,765
----------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 6,027,460 6,306,471
Notes payable 28,500,000 18,400,000
Construction loan payable 9,000,000 9,000,000
Mortgages payable 126,251,524 125,401,850
Convertible subordinated debentures 13,796,000 13,931,000
Deferred income 643,602 743,284
----------------------------------
184,218,586 173,782,605
----------------------------------
Minority interest in consolidated joint ventures 42,636,369 41,467,101
----------------------------------
Shareholder's equity:
Preferred shares of beneficial interest, $.01 par value,
Authorized 2,000,000 shares, issued and outstanding, none - -
Common shares of beneficial interest, $.01 par value,
Authorized 100,000,000 shares, issued and outstanding 14,334,896
and 14,495,045 shares, respectively 143,349 144,950
Additional paid-in capital 129,730,344 131,368,001
Distributions in excess of accumulated earnings (28,087,868) (27,021,892)
----------------------------------
101,785,825 104,491,059
----------------------------------
$ 328,640,780 319,740,765
----------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------------------------------------- --------------------------------
1999 1998 1999 1998
-------------------------------------- --------------------------------
REVENUES:
<S> <C> <C> <C> <C>
Rentals $ 22,061,953 20,382,171 $ 11,146,875 10,331,084
Tenant Recoveries 3,994,072 3,465,851 1,943,427 1,804,745
Other 198,117 243,708 142,089 131,506
-------------------------------------- --------------------------------
26,254,142 24,091,730 13,232,391 12,267,335
-------------------------------------- --------------------------------
EXPENSES:
Interest 6,717,151 5,889,822 3,484,558 3,054,171
Depreciation and amortization
of property and improvements 4,667,723 4,313,290 2,372,305 2,195,011
Operating 5,543,157 4,926,993 2,722,692 2,545,373
General and administrative 1,338,102 1,456,879 639,040 755,762
------------------------------------- --------------------------------
18,266,133 16,586,984 9,218,595 8,550,317
------------------------------------- --------------------------------
EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST 7,988,009 7,504,746 4,013,796 3,717,018
Minority Interest (1,587,948) (1,491,913) (788,706) (739,222)
-------------------------------------- --------------------------------
EARNINGS FROM OPERATIONS 6,400,061 6,012,833 3,225,090 2,977,796
Gain (loss) on properties - 92,437 - 24,487
-------------------------------------- --------------------------------
EARNINGS BEFORE EXTRAORDINARY LOSS 6,400,061 6,105,270 3,225,090 3,002,283
Extraordinary loss from early
extinguishment of debt - (32,984) - -
-------------------------------------- --------------------------------
NET EARNINGS $ 6,400,061 6,072,286 $ 3,225,090 3,002,283
-------------------------------------- --------------------------------
NET EARNINGS PER SHARE - BASIC AND DILUTED:
Earnings before extraordinary loss $ 0.44 0.41 $ 0.22 0.20
Extraordinary loss on early extinguishment of debt - - - -
-------------------------------------- --------------------------------
Net earnings $ 0.44 0.41 $ 0.22 0.20
-------------------------------------- --------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------
1999 1998
-------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 6,400,061 6,072,286
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,667,723 4,237,504
Minority interest in earnings, net 1,587,948 1,484,564
Amortization of deferred financing costs 136,310 148,974
Gain on properties - (92,437)
Changes in operating assets and liabilities:
Decrease (increase) in operating assets 1,485,535 (197,160)
Decrease in operating liabilities (443,681) (548,435)
Other, net 137,831 197,868
-------------------------------
Total adjustments 7,571,666 5,230,878
-------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,971,727 11,303,164
-------------------------------
Cash flows from investing activities:
Acquisitions of and additions to properties (12,366,352) (13,770,232)
Proceeds from sales of properties - 4,498,017
Payments to minority partners (1,798,584) (1,866,016)
-------------------------------
NET CASH USED IN INVESTING ACTIVITIES (14,164,936) (11,138,231)
-------------------------------
Cash flows from financing activities:
Proceeds from notes payable 28,000,000 16,300,000
Principal payments on notes payable (17,900,000) (7,400,000)
Proceeds from mortgages payable 11,600,000 -
Principal payments on mortgages payable (10,750,326) (7,920,963)
Proceeds from construction loans payable 64,988 307,128
Additions to deferred financing costs (846,000) (9,224)
Shares repurchased (2,014,003) (153,593)
Dividends paid (7,466,037) (7,296,436)
Other, net (29) (26,819)
-------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 688,593 (6,199,907)
-------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 495,384 (6,034,974)
CASH AND CASH EQUIVALENTS, beginning of period 611,107 8,427,217
-------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 1,106,491 2,392,243
-------------------------------
- - - ---------------------------------------------------------------------
Schedule of noncash investing and financing activities
- - - ---------------------------------------------------------------------
Conversion of subordinated debentures,
net of deferred financing costs 132,025 2,072,000
Mortgages payable assumed - 8,299,132
Operating Partnership Units issued $ 1,379,908 -
-------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements
(UNAUDITED)
Organization
Mid-Atlantic Realty Trust was incorporated June 29, 1993, and commenced
operations effective with the completion of its initial public share offering on
September 11, 1993. Mid-Atlantic Realty Trust 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 33 operating shopping centers, 27 of which
are wholly owned by the Company and six in which the Company has ownership
interests ranging from 50% to 93%, as well as other commercial properties. The
Company also owns seven undeveloped parcels of land totaling approximately 147
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 June 30,
1999.
Consolidated Financial Statements
The consolidated balance sheet as of June 30, 1999, the consolidated statements
of operations for the six and three month periods ended June 30, 1999 and June
30, 1998 and the consolidated statements of cash flows for the Company for the
six month periods ended June 30, 1999 and June 30, 1998, have been prepared by
the Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows have been included. The
results of operations for the period ended June 30, 1999 are not necessarily
indicative of the operating results for the full year.
Segment Information
The segments' operating results are measured and assessed based on a performance
measure known as Funds From Operations ("FFO"), determined on a fully diluted
basis (i.e., assuming conversion to common stock of all convertible securities).
FFO is defined as net earnings (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
restructurings and sales of properties, plus depreciation and amortization, and
after adjustments for minority interests and to record unconsolidated
partnerships and joint ventures on the same basis. FFO is not a measure of
operating results or cash flows from operating activities as measured by
generally accepted accounting principles, is not necessarily indicative of cash
available to fund cash needs and should not be considered an alternative to cash
flows as a measure of liquidity.
Operating results for the segments are summarized as follows for the six month
periods ended June 30, 1999 and June 30, 1998:
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------------
Shopping All Shopping All
Centers Other Total Centers Other Total
---------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 25,196,523 1,057,619 26,254,142 23,037,420 1,054,310 24,091,730
Expenses, exclusive
of depreciation and
amortization of
property and
Improvements 12,650,470 384,340 13,034,810 11,274,888 359,941 11,634,829
Minority interest 168,174 692 168,866 169,530 10,089 179,619
--------------------------------------------------------------------------------------
FFO- diluted $ 12,377,879 672,587 13,050,466 11,593,002 684,280 12,277,282
======================================================================================
</TABLE> 6
<PAGE>
MID-ATLANTIC REALTY TRUST
Notes To Consolidated Financial Statements - Continued
(UNAUDITED)
Interest expense on subordinated debentures and minority interest in earnings of
the Operating Partnership are not considered in the calculation of FFO-diluted.
A reconciliation of FFO - diluted reported above to earnings from operations in
the financial statements is summarized as follows:
Six months ended June 30,
----------------------------------
1999 1998
----------------------------------
FFO- diluted reported above $ 13,050,466 12,277,282
Depreciation and
amortization of property
and improvements 4,667,723 4,313,290
Convertible debenture
interest expense 563,600 638,865
Operating Partnership
minority interest expense 1,419,082 1,312,294
---------------------------------
Earnings from operations
in financial statements $ 6,400,061 6,012,833
---------------------------------
Operating results for the segments are summarized as follows for the three month
periods ended June 30, 1999 and June 30, 1998:
<TABLE>
<CAPTION>
Three months ended June 30,
----------------------------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------------------------
Shopping All Shopping All
Centers Other Total Centers Other Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 12,688,448 543,943 13,232,391 11,737,003 530,332 12,267,335
Expenses, exclusive
of depreciation and
Amortization of
Property and Improvements 6,368,922 197,109 6,566,031 5,858,947 184,550 6,043,497
Minority interest 77,390 971 78,361 86,185 5,025 91,210
----------------------------------------------------------------------------------------
FFO- diluted $ 6,242,136 345,863 6,587,999 5,791,871 340,757 6,132,628
========================================================================================
</TABLE>
A reconciliation of FFO - diluted reported above to earnings from operations in
the financial statements is summarized as follows:
Three months ended June 30,
--------------------------------------------
1999 1998
--------------------------------------------
FFO- diluted reported above $ 6,587,999 6,132,628
Depreciation and
amortization of property
and improvements 2,372,305 2,195,011
Convertible debenture
interest expense 280,259 311,809
Operating Partnership
minority interest expense 710,345 648,012
--------------------------------------------
Earnings from operations
in financial statements $ 3,225,090 $ 2,977,796
============================================
Net Earnings Per Share
Basic earnings per share ("EPS") is computed by dividing earnings available to
common shareholders by the weighted average number of common shares outstanding.
Diluted EPS is computed after adjusting the numerator and denominator of the
basic EPS computation for the effects of all dilutive potential common shares
outstanding during the period. The dilutive effects of convertible securities
are computed using the "if-converted" method and the dilutive effects of
options, warrants and their equivalents (including fixed awards and nonvested
shares issued under share-based compensation plans) are computed using the
"treasury stock" method.
7
<PAGE>
The following table sets forth information relating to the computation of basic
and diluted earnings per share.
<TABLE>
<CAPTION>
Six months ended June 30, Three months ended June 30,
1999 1998 1999 1998
- - - ------------------------------------------------------------------------------------------------------------------------------------
Numerator:
<S> <C> <C> <C> <C>
Earnings before extraordinary loss $ 6,400,061 6,105,270 3,225,090 3,002,283
Dividends on unvested restricted share awards (147,437) (153,595) (75,405) (76,928)
------------------------- -------------------------
Numerator for basic earnings per share--earnings available to common
shareholders 6,252,624 5,951,675 3,149,685 2,925,355
Adjustment to dividends on restricted share awards - 3,528 - 194
Interest on subordinated debentures 563,600 - 280,259 -
------------------------ -------------------------
Numerator for diluted earnings per share--earnings available to common
shareholders $ 6,816,224 5,955,203 3,429,944 2,925,549
======================== =========================
Denominator:
Denominator for basic earnings per share--weighted average shares outstanding 14,087,355 14,269,910 14,038,843 14,316,793
Effect of dilutive securities:
Subordinated debentures 1,313,905 - 1,313,909 -
Unvested portion of restricted share awards and share options 20,241 88,912 26,811 84,029
Denominator for diluted earnings per share--weighted average shares
outstanding 15,421,501 14,358,822 15,379,563 14,400,822
======================== =========================
</TABLE>
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. During the six months ended June 30,
1999, $135,000 in debentures were converted to 12,855 common shares of
beneficial interest. During the six months ended June 30, 1998, $2,130,000 in
debentures were converted to 202,846 common shares of beneficial interest. The
balance of the debentures, at June 30, 1999, of $13,796,000, if fully converted,
would produce an additional 1,313,905 shares. The debentures are redeemable by
the Company at any time at 100% of the principal amount thereof, together with
accrued interest. The debentures are subordinate to all mortgages payable.
Shareholders' Equity
During the six months ended June 30, 1999, shareholders' equity changed for the
following items:
- Net earnings of $6,400,061
- Dividends paid of $7,466,037
- Other changes, net, of $1,639,258 primarily due to share repurchases.
8
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 2.
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of operating results compares each of the
Company's two business segments for the six and three month periods ended June
30, 1999 with those for the six and three month periods ended June 30, 1998.
Management believes that a segment analysis provides the most effective means of
understanding the business. The Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" in 1998. As required by the Statement, segment data are
reported using the accounting policies followed by the Company for internal
reporting to management. These policies are the same as those used for external
reporting.
Comparison of six months ended June 30, 1999 to six months ended June 30, 1998
Operating Results- Shopping Centers
Operating results of shopping center properties are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------- ------
<S> <C> <C>
Revenues $ 25,197 23,037
Operating and interest expenses, exclusive of depreciation and amortization 13,214 11,913
Depreciation and amortization 4,434 4,089
Minority interest 1,587 1,482
-------- ------
Earnings from operations $ 5,962 5,553
======== ======
</TABLE>
Revenues from shopping centers increased by $2,160,000 in 1999, due primarily to
the operations of five properties acquired in 1999 and 1998 ($1,441,000), the
completion of two redevelopment projects ($447,000) and other net rental and
occupancy increases, partially offset by the disposition of a property in 1998
($208,000).
Operating and interest expenses (exclusive of depreciation and amortization) for
shopping center properties increased by $1,301,000 in 1999, due primarily to the
acquisitions and redevelopments referred to above ($1,290,000). Depreciation and
amortization expense increased by $345,000 in 1999, due primarily to the
acquisitions referred to above.
Operating Results- All Other Properties
Operating results of all other properties are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------- -----
<S> <C> <C>
Revenues $ 1,057 1,055
Operating and interest expenses, exclusive of depreciation and amortization 384 361
Depreciation and amortization 234 224
Minority interest 1 10
------- -----
Earnings from operations $ 438 460
======= =====
Comparison of three months ended June 30, 1999 to three months ended June 30, 1998
</TABLE>
Operating Results- Shopping Centers
Operating results of shopping center properties are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
-------- ------
<S> <C> <C>
Revenues $ 12,688 11,737
Operating and interest expenses, exclusive of depreciation and amortization 6,649 6,171
Depreciation and amortization 2,254 2,082
Minority interest 787 734
-------- -----
Earnings from operations $ 2,998 2,750
======== =====
</TABLE> 9
<PAGE>
Revenues from shopping centers increased by $951,000 in 1999, due primarily to
the operations of two properties acquired in 1999 and 1998 ($581,000), the
completion of one redevelopment project ($200,000), the completion of additional
development at one property ($107,000) and other net rental and occupancy
increases.
Operating and interest expenses (exclusive of depreciation and amortization) for
shopping center properties increased by $478,000 in 1999, due primarily to the
acquisitions and redevelopments referred to above ($638,000). Depreciation and
amortization expense increased by $172,000 in 1999, due primarily to the
acquisitions referred to above.
Operating Results- All Other Properties
Operating results of all other properties are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
----- ----
<S> <C> <C>
Revenues $ 544 530
Operating and interest expenses, exclusive of depreciation and amortization 198 184
Depreciation and amortization 118 113
Minority interest 1 5
----- ---
Earnings from operations $ 227 228
===== ===
</TABLE>
Cash Flow Comparison
The following discussion compares the statement of cash flows information for
1999 with the information for 1998.
Net cash provided by operating activities was $13,972,000 and $11,303,000 in the
six months ended June 30, 1999 and 1998, 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 used in investing activities increased by $3,027,000 to $14,165,000 in
1999 from $11,138,000 in 1998. The disposition of an operating property in 1998
reduced net cash used by $4,498,000. There were no sales of properties in 1999.
Net cash provided by financing activities was $689,000 for the six months ended
June 30, 1999 in comparison to net cash used in financing activities of
$6,200,000 for the six months ended June 30, 1998. The net increase of
$6,889,000 in 1999 was due primarily to a combination of increased credit line
borrowings ($4,500,000, after considering a related mortgage loan payoff in
1998) and net cash provided from refinancing a shopping center ($1,800,000)
partially offset by increased purchases of common shares of beneficial interest
under the Company's share purchase plan ($1,900,000).
Year 2000 Issue
The year 2000 issue relates to whether computer systems will properly recognize
date sensitive information to allow accurate processing of transactions and data
relating to the year 2000 and beyond. Systems that do not properly recognize
such information could generate erroneous data or fail.
As a result of the Company's normal upgrade and replacement processes, it has
been determined that all existing network and desktop equipment is year 2000
compliant. The Company's current mission critical, property management and
financial reporting software has also been modified to be year 2000 compliant.
However, the Company has made the determination that it will undertake the
implementation of new property management and financial reporting software. The
Company plans to complete the implementation during the fourth quarter of 1999.
The Company has determined that all non-mission critical software is year 2000
compliant. As the Company owns primarily community retail centers without
enclosed common areas, the use of this technology is very limited and management
does not believe that the year 2000 issue will pose significant problems in
these systems. The Company expects that the costs to specifically remediate year
2000 information technology issues will not be significant.
The Company believes the "most reasonably likely worst case scenario" exposure
to be indirect in nature involving vendors, suppliers, and tenants. Currently,
management does not believe it is practical to measure the effects of potential
complications. The Company will continually monitor and evaluate these areas and
develop contingency plans on an as needed basis.
Cautionary Disclosure Relating to Forward Looking Statements
Statements made in this document include forward looking statements under the
federal securities laws. Statements that are not historical in nature, including
the words "anticipate," "estimate," "should," "expect," "believe," "intend," and
similar expressions are
10
<PAGE>
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
intended to identify forward looking statements. While these statements reflect
the Company's good faith beliefs based on current expectations, estimates and
projections about (among other things) the industry and the markets in which the
Company operates, they are not guarantees of future performance, involve known
and unknown risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements, and should not be
relied upon as predictions of future events. Factors which could impact future
results include (among other things) general economic conditions, local real
estate conditions, oversupply of available space, financial condition of
tenants, timely ability to lease or re-lease space upon favorable economic
terms, agreements with anchor tenants, interest rates, availability of
financing, competitive factors, and similar considerations. The Company
disclaims any obligation to publicly update or revise any forward looking
statement, whether as a result of new information, future events or otherwise.
For a discussion of risks and uncertainties that could cause actual results to
differ materially from those contained in the forward looking statements, see
"Risk Factors" filed as Exhibit 99.1 to the Company's Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk- There have
been no material changes in the Company's market risk information since December
31, 1998.
Part II. OTHER INFORMATION
Item 1.Legal Proceedings - In the ordinary course of business, the company is
involved in legal proceedings. However, there are no material legal proceedings
pending against the Company.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - The Annual Meeting
of Shareholders was held on May 14, 1999. Elected to serve as trustees for the
ensuing year and until the election and qualification of their successors were:
Marc P. Blum, Robert A. Frank, LeRoy E. Hoffberger, F. Patrick Hughes, M. Ronald
Lipman, Daniel S. Stone, David F. Benson, and Jack H. Pechter.
Matter Voted Upon For Against Withheld
- - - ----------------- --- ------- --------
1. Election of Trustee:
Marc P. Blum 12,571,246 - 54,244
Robert A. Frank 12,574,485 - 51,005
LeRoy E. Hoffberger 12,571,445 - 54,045
F. Patrick Hughes 12,577,618 - 47,872
M. Ronald Lipman 12,578,495 - 46,995
Daniel S. Stone 12,579,518 - 45,972
David F. Benson 12,571,471 - 54,019
Jack H. Pechter 12,575,048 - 50,442
2. Proposal to approve the appointment
of KPMG LLP as the independent certified
public accountants of MART for the fiscal
year ending December 31, 1999: 12,541,556 63,750 20,184
Because the matters voted upon at the meeting required the approval of only a
majority of the votes cast at the meeting, votes withheld, abstentions, and
broker non-votes had no effect upon the ultimate outcome of the vote.
Item 5. Other Information -
Summary Financial Data
The following sets forth summary financial data which has been prepared by the
Company without audit. Management believes the following data should be used as
a supplement to the historical statements of operations. The data should be read
in conjunction with the historical financial statements and the notes thereto
for MART.
11
<PAGE>
MID-ATLANTIC REALTY TRUST
Summary Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
--------------------- -------------------
1999 1998 1999 1998
--------------------- -------------------
<S> <C> <C> <C> <C>
Revenues $ 26,254 24,092 13,232 12,267
Net Earnings $ 6,400 6,072 3,225 3,002
Net Earnings per share - basic and diluted $ 0.44 0.41 0.22 0.20
OTHER FINANCIAL DATA:
- - - --------------------------------------------------------------------------------
FFO - diluted (1) $ 13,050 12,277 6,587 6,133
Weighted average number of shares outstanding - FFO diluted 18,676 19,086 18,681 19,072
SELECTED CASH FLOW DATA:
- - - --------------------------------------------------------------------------------
Net cash flow provided by operating activities $ 13,972 11,303
Net cash flow used in investing activities (14,165) (11,138)
Net cash flow provided by (used in) financing activities 689 (6,200)
RECONCILIATION OF NET EARNINGS TO FFO-DILUTED
- - - --------------------------------------------------------------------------------
Net earnings $ 6,400 6,072 3,225 3,002
Depreciation and amortization on real estate assets 4,668 4,313 2,372 2,195
Gain (loss) on properties - (92) - (24)
Extraordinary loss on early extinguishment of debt - 33 - -
Operating Partnership minority interest expense 1,419 1,312 710 648
Convertible debenture interest expense 563 639 280 312
---------------------- --------------------
FFO-diluted $ 13,050 12,277 6,587 6,133
====================== ====================
</TABLE>
(1) Funds from operations is defined as net earnings (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 restructurings and sales of properties, plus depreciation and
amortization, and after adjustments for minority interests and to record
unconsolidated partnerships and joint ventures on the same basis. FFO is not a
measure of operating results or cash flows from operating activities as measured
by generally accepted accounting principles, is not necessarily indicative of
cash available to fund cash needs, and should not be considered an alternative
to cash flows as a measure of liquidity.
- - - --------------------------------------------------------------------------------
Item 6. Exhibits and Reports on From 8-K - None
12
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-ATLANTIC REALTY TRUST AND
SUBSIDIARIES
(Registrant)
Date: 7/28/99 /s/ F. Patrick Hughes
------------------ ------------------------------------------
F. Patrick Hughes
President
Chief Executive Officer
Date: 7/28/99 /s/ Janice C. Robinson
------------------- -------------------------------------------
Janice C. Robinson
Vice President and Controller
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 000909298
<NAME> MART
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,106
<SECURITIES> 0
<RECEIVABLES> 1,027
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS><F1> 0
<PP&E> 323,241
<DEPRECIATION> 55,210
<TOTAL-ASSETS> 328,641
<CURRENT-LIABILITIES><F1> 0
<BONDS> 149,048
<COMMON> 143
0
0
<OTHER-SE> 97,977
<TOTAL-LIABILITY-AND-EQUITY> 328,641
<SALES> 0
<TOTAL-REVENUES> 26,254
<CGS> 0
<TOTAL-COSTS> 18,266
<OTHER-EXPENSES> 1,587
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,717
<INCOME-PRETAX> 6,401
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,401
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.44
<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>
