FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
----------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(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 offices) (Zip Code)
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
--------- ---------
14,184,725 Common Shares were outstanding as of October 28, 1999.
1
<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,
-------------------------------------
September 30, 1999 December 31, 1998
-------------------------------------
(UNAUDITED)
ASSETS
- - ---------------
Properties:
<S> <C> <C>
Operating properties $ 367,064,049 345,188,953
Less accumulated depreciation and amortization 57,650,773 50,540,094
--------------------------------------------
309,413,276 294,648,859
Development operations 4,631,017 11,281,252
Property held for development or sale 5,425,891 5,422,705
--------------------------------------------
319,470,184 311,352,816
Cash and cash equivalents 681,519 611,107
Notes and accounts receivable - tenants and other 2,600,315 1,504,951
Prepaid expenses and deposits 3,125,237 2,381,137
Deferred financing costs 1,997,044 1,158,606
--------------------------------------------
$ 327,874,299 317,008,617
============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- - -------------------------------------------------------------------------
Liabilities:
Accounts payable and accrued expenses $ 5,957,923 6,306,471
Notes payable 25,000,000 18,400,000
Construction loan payable 9,000,000 9,000,000
Mortgages payable 136,702,844 125,401,850
Convertible subordinated debentures 13,596,000 13,931,000
Deferred income 603,388 743,284
--------------------------------------------
190,860,155 173,782,605
--------------------------------------------
Minority interest in consolidated joint ventures 36,729,663 38,734,953
--------------------------------------------
Shareholders' equity:
Preferred shares of beneficial interest, $.01 par value,
Authorized 2,000,000 shares, issued and outstanding, none - -
Common shares of beneficial interest, $.01 par value,
Authorized 100,000,000 shares, issued and outstanding 14,228,725 and
14,495,045, respectively 142,287 144,950
Additional paid-in capital 129,030,179 131,368,001
Distributions in excess of accumulated earnings (28,887,985) (27,021,892)
--------------------------------------------
100,284,481 104,491,059
--------------------------------------------
--------------------------------------------
$ 327,874,299 317,008,617
============================================
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------------------------------------- ----------------------------------
1999 1998 1999 1998
------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rentals $ 33,061,179 30,775,729 $ 10,999,226 10,393,557
Tenant Recoveries 6,008,055 5,289,009 2,013,983 1,823,158
Other 419,297 349,448 221,180 105,740
----------------------------------------- ---------------------------------
39,488,531 36,414,186 13,234,389 12,322,455
----------------------------------------- ---------------------------------
EXPENSES:
Interest 10,342,289 8,855,358 3,625,139 2,965,536
Depreciation and amortization
of property and improvements 7,108,936 6,692,418 2,441,213 2,379,128
Operating 8,275,323 7,571,106 2,732,166 2,644,114
General and administrative 1,981,152 2,065,695 643,050 608,816
----------------------------------------- ---------------------------------
27,707,700 25,184,577 9,441,568 8,597,594
----------------------------------------- ---------------------------------
EARNINGS FROM OPERATIONS
BEFORE MINORITY INTEREST 11,780,831 11,229,609 3,792,821 3,724,861
Minority Interest (2,474,827) (2,237,530) (886,879) (745,617)
----------------------------------------- ---------------------------------
EARNINGS FROM OPERATIONS 9,306,004 8,992,079 2,905,942 2,979,244
Gain (loss) on properties - 92,431 - (5)
----------------------------------------- ---------------------------------
EARNINGS BEFORE EXTRAORDINARY LOSS 9,306,004 9,084,510 2,905,942 2,979,239
Extraordinary loss from early
extinguishment of debt - (32,984) - -
----------------------------------------- ---------------------------------
NET EARNINGS $ 9,306,004 9,051,526 $ 2,905,942 2,979,239
========================================= =================================
NET EARNINGS PER SHARE - BASIC AND DILUTED:
Earnings before extraordinary loss $ 0.65 0.62 $ 0.20 0.20
Extraordinary loss on early extinguishment of debt - - - -
----------------------------------------- ---------------------------------
Net earnings $ 0.65 0.62 $ 0.20 0.20
========================================= =================================
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------------------
1999 1998
------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 9,306,004 9,051,526
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 7,108,936 6,692,418
Minority interest in earnings, net 2,474,827 2,230,182
Amortization of deferred financing costs 219,097 200,963
Gain on properties - (92,431)
Changes in operating assets and liabilities:
Increase in operating assets (1,839,464) (2,437,120)
(Decrease) increase in operating liabilities (488,444) 716,255
Other, net 315,954 205,578
Total adjustments 7,790,906 7,515,845
------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,096,910 16,567,371
------------------------------------------
Cash flows from investing activities:
Acquisitions of and additions to properties (13,717,799) (20,981,686)
Proceeds from sales of properties - 4,498,017
Payments to minority partners (5,860,025) (2,786,902)
Receipts from minority partners - 335,012
------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (19,577,824) (18,935,559)
------------------------------------------
Cash flows from financing activities:
Proceeds from notes payable 65,300,000 26,076,308
Principal payments on notes payable (58,700,000) (8,010,450)
Proceeds from mortgages payable 22,700,000 -
Principal payments on mortgages payable (11,399,006) (8,633,394)
Additions to deferred financing costs (1,027,499) (30,792)
Shares repurchased (3,150,224) (3,583,774)
Dividends paid (11,172,098) (10,937,784)
Other, net 153 (26,832)
------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,551,326 (5,146,718)
------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 70,412 (7,514,906)
CASH AND CASH EQUIVALENTS, beginning of period 611,107 8,427,217,107
------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 681,519 912,311
==========================================
=========================================================
Schedule of noncash investing and financing activities
=========================================================
Conversion of subordinated debentures,
net of deferred financing costs 328,019 2,696,476
Mortgages payable assumed - 16,171,755
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 81% of the Units at
September 30, 1999.
Consolidated Financial Statements
The consolidated balance sheet as of September 30, 1999, the consolidated
statements of operations for the nine and three month periods ended September
30, 1999 and September 30, 1998 and the consolidated statements of cash flows
for the Company for the nine month periods ended September 30, 1999 and
September 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 September 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 nine
month periods ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------------------------------------------
Shopping All Shopping All
Centers Other Total Centers Other Total
----------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 37,921,088 1,567,443 39,488,531 34,814,538 1,599,648 36,414,186
Expenses, exclusive
of depreciation and
amortization of
property and
improvements 19,171,631 583,572 19,755,203 17,015,319 551,560 17,566,879
Minority interest 342,057 3,224 345,281 264,599 11,258 275,857
------------------------------------------------------------------------------------------------------
FFO-diluted $ 18,407,400 980,647 19,388,047 17,534,620 1,036,830 18,571,450
======================================================================================================
</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:
<TABLE>
<CAPTION>
Nine months ended September 30,
---------------------------------------------------------------
1999 1998
---------------------------------------------------------------
<S> <C> <C>
FFO- diluted reported above $ 19,388,047 18,571,450
Depreciation and
amortization of property
and improvements 7,108,936 6,692,418
Convertible debenture
interest expense 843,561 925,280
Operating Partnership
minority interest expense 2,129,546 1,961,673
Earnings from operations ---------------------------------------------------------------
in financial statements $ 9,306,004 8,992,079
---------------------------------------------------------------
</TABLE>
Operating results for the segments are summarized as follows for the three
month periods ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------------------------
Shopping All Shopping All
Centers Other Total Centers Other Total
------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 12,724,565 509,824 13,234,389 11,777,115 545,340 12,322,455
Expenses, exclusive
of depreciation and
amortization of
property and
improvements 6,521,163 199,231 6,720,394 5,740,431 191,620 5,932,051
Minority interest 173,881 2,533 176,414 95,070 1,168 96,238
--------------------------------------------------------------------------------------------------
FFO- diluted $ 6,029,521 308,060 6,337,581 5,941,614 352,552 6,294,166
==================================================================================================
</TABLE>
A reconciliation of FFO - diluted reported above to earnings from operations in
the financial statements is summarized as follows:
<TABLE>
<CAPTION>
Three months ended September 30,
-----------------------------------------------------------
1999 1998
-----------------------------------------------------------
<S> <C> <C>
FFO- diluted reported above $ 6,337,581 6,294,166
Depreciation and
amortization of property
and improvements 2,441,213 2,379,128
Convertible debenture
interest expense 279,961 286,415
Operating Partnership
minority interest expense 710,465 649,379
Earnings from operations -----------------------------------------------------------
in financial statements $ 2,905,942 $ 2,979,244
===========================================================
</TABLE>
7
<PAGE>
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.
The following table sets forth information relating to the computation of
basic and diluted earnings per share.
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
1999 1998 1999 1998
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Earnings before extraordinary loss $ 9,306,004 9,084,510 2,905,942 2,979,239
Dividends on unvested restricted share awards (222,843) (230,524) (75,405) (76,929)
----------------------------- ----------------------------
Numerator for basic earnings per share--earnings available 9,083,161 8,853,986 2,830,537 2,902,310
to common shareholders
Adjustment to dividends on restricted share awards - - - -
Interest on subordinated debentures 843,561 - 279,961 -
Numerator for diluted earnings per share--earnings available
to common shareholders $ 9,926,722 8,853,986 3,110,498 2,902,310
============================= ============================
Denominator:
Denominator for basic earnings per share--weighted average
shares outstanding 14,054,578 14,269,982 13,990,074 14,270,130
Effect of dilutive securities:
Subordinated debentures 1,294,862 - 1,307,704 -
Unvested portion of restricted share awards and share options 18,043 69,432 13,476 43,242
---------------------------- -----------------------------
Denominator for diluted earnings per share--weighted average
shares outstanding 15,367,483 14,339,414 15,311,254 14,313,372
============================ ============================
</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 nine months ended September
30, 1999, $335,000 in debentures were converted to 31,902 common shares of
beneficial interest. During the nine months ended September 30, 1998, $2,771,000
in debentures were converted to 263,891 common shares of beneficial interest.
The balance of the debentures, at September 30, 1999, of $13,596,000, if fully
converted, would produce an additional 1,294,862 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 nine months ended September 30, 1999, shareholders' equity changed
for the following items:
- Net earnings of $9,306,004
- Dividends paid of $11,172,098
- Other changes, net, of $2,340,484 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 nine and three month periods ended
September 30, 1999 with those for the nine and three month periods ended
September 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 nine months ended September 30, 1999 to nine months ended
September 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 $ 37,921 34,815
Operating and interest expenses, exclusive of depreciation and amortization 20,014 17,941
Depreciation and amortization 6,757 6,355
Minority interest 2,472 2,226
----------- ------
Earnings from operations $ 8,678 8,293
=========== ======
</TABLE>
Revenues from shopping centers increased by $3,106,000 in 1999, due
primarily to the operations of five properties acquired in 1999 and 1998
($2,067,000), the completion of two redevelopment projects ($593,000) and other
net rental and occupancy increases, partially offset by the disposition of a
property in 1998 ($210,000).
Operating and interest expenses (exclusive of depreciation and
amortization) for shopping center properties increased by $2,073,000 in 1999,
due primarily to the acquisitions and redevelopments referred to above
($1,788,000). Depreciation and amortization expense increased by $402,000 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 $ 1,568 1,599
Operating and interest expenses, exclusive of depreciation and amortization 585 552
Depreciation and amortization 352 337
Minority interest 3 11
--------- ---------
Earnings from operations $ 628 699
========= =========
</TABLE>
9
<PAGE>
Comparison of three months ended September 30, 1999 to three months ended
September 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 $ 12,724 11,777
Operating and interest expenses, exclusive of depreciation and amortization 6,802 6,027
Depreciation and amortization 2,323 2,266
Minority interest 883 744
---------- ----------
Earnings from operations $ 2,716 2,740
========== ==========
</TABLE>
Revenues from shopping centers increased by $947,000 in 1999, due primarily
to the operations of two properties acquired in 1999 and 1998 ($582,000), the
completion of one redevelopment project ($346,000), the completion of additional
development at one property ($33,000) and other net rental and occupancy
increases.
Operating and interest expenses (exclusive of depreciation and
amortization) for shopping center properties increased by $775,000 in 1999, due
primarily to the acquisitions and redevelopments referred to above ($424,000).
Depreciation and amortization expense increased by $57,000 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 $ 510 545
Operating and interest expenses, exclusive of depreciation and amortization 199 191
Depreciation and amortization 118 113
Minority interest 3 2
-------------- --------------
Earnings from operations $ 190 239
============== ==============
</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 $17,097,000 and $16,567,000
in the nine months ended September 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 $642,000 to $19,578,000
in 1999 from $18,936,000 in 1998. This was due primarily to higher payments to
minority partners in 1999 ($3,408,000) offset by a higher level of operating
property acquisitions in 1998 ($2,766,000).
Net cash provided by financing activities was $2,551,000 for the nine
months ended September 30, 1999 in comparison to net cash used in financing
activities of $5,147,000 for the nine months ended September 30, 1998. The net
increase of $7,698,000 in 1999 was due primarily to financing one shopping
center ($11,100,000) and refinancing another shopping center ($1,800,000)
partially offset by reduced credit line borrowings in 1999 ($4,365,000, after
considering a related mortgage loan payoff in 1998).
10
<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.
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 is implementing a 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.
11
<PAGE>
MID-ATLANTIC REALTY TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTIN UED
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 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 - None
Item 5. Other Information -
Summary Financial Data
The following sets forth summary financial data which has been prepared by the
Company without audit. Management believes the following data should be used as
a supplement to the historical statements of operations. The data should be read
in conjunction with the historical financial statements and the notes thereto
for MART.
12
<PAGE>
MID-ATLANTIC REALTY TRUST
Summary Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
-------------------------------- ----------------------------
1999 1998 1999 1998
-------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Revenues $ 39,489 36,414 13,234 12,322
Net Earnings $ 9,306 9,051 2,906 2,979
Net Earnings per share - basic and diluted $ 0.65 0.62 0.20 0.20
OTHER FINANCIAL DATA:
- - ---------------------------------------
FFO - diluted (1) $ 19,388 18,571 6,338 6,294
Weighted average number of shares outstanding - FFO diluted 18,680 19,023 18,707 18,910
SELECTED CASH FLOW DATA:
- - ---------------------------------------
Net cash flow provided by operating activities $ 17,097 16,567
Net cash flow used in investing activities (19,578) (18,936)
Net cash flow provided by (used in) financing activities 2,551 (5,147)
RECONCILIATION OF NET EARNINGS TO FFO-DILUTED
- - ---------------------------------------------
Net earnings $ 9,306 9,052 2,906 2,979
Depreciation and amortization on real estate assets 7,109 6,692 2,442 2,379
Gain on properties - (92) - -
Extraordinary loss on early extinguishment of debt - 33 - -
Operating Partnership minority interest expense 2,130 1,962 710 649
Convertible debenture interest expense 843 924 280 287
---------------------------- -------------------------
FFO-diluted $ 19,388 18,571 6,338 6,294
============================ =========================
</TABLE>
(1) Funds from operations as defined by the National Association of Real Estate
Investment Trust, 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 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
13
<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: 10/29/99 /s/ F. Patrick Hughes
-----------------------------
F. Patrick Hughes
President
Chief Executive Officer
Date: 10/29/99 /s/ Janice C. Robinson
-----------------------------
Janice C. Robinson
Vice President and Controller
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 000909298
<NAME> Mid Atlantic Realty Trust and Subsidiaries
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 682
<SECURITIES> 0
<RECEIVABLES> 2,600
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 319,470
<DEPRECIATION> 57,651
<TOTAL-ASSETS> 327,874
<CURRENT-LIABILITIES> 0
<BONDS> 159,299
0
0
<COMMON> 142
<OTHER-SE> 101,642
<TOTAL-LIABILITY-AND-EQUITY> 327,874
<SALES> 0
<TOTAL-REVENUES> 39,489
<CGS> 0
<TOTAL-COSTS> 27,708
<OTHER-EXPENSES> 2,475
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,342
<INCOME-PRETAX> 9,306
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,306
<EPS-BASIC> 0.65
<EPS-DILUTED> 0.65
<FN>
Mid-Atlantic Realty Trust (MART) is in the specialized real estate industry for
which the current/noncurrent distinction is deemed in practice to have little
or no relevance. Therefore, MART prepares unclassified balance sheets which
do not report current assets or current liabilities.
</FN>
</TABLE>
