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. (the predecessor to Mid-Atlantic Realty Trust), and qualifies as a real estate investment trust, "REIT", for Federal income tax purposes. As used herein, the term "MART" refers to Mid-Atlantic Realty Trust, the term "Company" refers to MART and its subsidiaries, the successor company, and "BTR" refers to BTR Realty, Inc. and its subsidiaries.
The Company is a fully integrated, self managed real estate investment trust which owns, leases, develops, redevelops and manages its retail shopping center facilities and commercial properties. The Company's primary objective is to manage the properties for long-term cash flow growth. The Company's principal strategies are to grow the portfolio through the selective acquisition of additional properties in the Mid-Atlantic region, redeveloping or developing retail properties on a selective basis, and, when appropriate, divesting through sale or exchange of non-strategic properties.
The Company's financial strategy is to continue to refocus the portfolio through the selective acquisition of retail properties utilizing (1) proceeds from divestitures, (2) issuance of equity or debt securities, when appropriate, and (3) arranging bank or other borrowings for short term needs. The Company intends to maintain the conservative ratio of secured debt to total estimated property value below 50%.
The Company has an equity interest in twenty-three operating shopping centers, seventeen of which are wholly-owned by the Company, and six others in which the Company has an interest ranging from 50% to 80%, as well as other commercial properties. The operating properties have a gross leasable area of approximately 3,237,000 square feet, of which approximately 93% was leased at December 31, 1995. Total gross leasable area includes 3,001,000 square feet of established operating properties, of which approximately 96% was leased at December 31, 1995 and approximately 236,000 square feet of a shopping center acquired in October, 1993, currently under redevelopment, of which 64% was leased at December 31, 1995. Of these properties, approximately 89% of the gross leasable area is in the states of Maryland, Virginia, New York and Delaware, 9% in Arizona and 2% in other states. The Company also owns 8 undeveloped parcels of commercial and residential zoned land totaling approximately 166 acres and varying in size from 3 to 56 acres.
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 favorable 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 activities. 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 in the industry.
The Company has 52 full time employees and believes that its relationship with its employees is good.
ITEM 2

ITEM 2
PROPERTIES
The following schedule describes the Company's commercial and residential properties as of December 31, 1995:
I. SHOPPING CENTERS A. In Operation (1) Type Percent- of Leas- age of land Area able Percent- Lease Name and owner- owner- in square age Principal expir- Location ship ship acres feet leased tenants ations MARYLAND PROPERTIES: Harford Mall 100% Fee(2) 38.0 584,000(3) 98% Hecht's, 1996-2010 U.S. Route 1 Montgomery Ward, Bel Air Woolworth, Best Buy
Patriots Plaza 50% Long-term 6.1 39,000 97% Denny's, 1996-2005 Ritchie Highway of lease(4) Dunkin Donuts Anne Arundel Partnership County
Rolling Road 100% Fee 6.5 63,000 100% Fair Lanes,1996-2009 Plaza Firestone Rolling Road Baltimore County
Rosedale Plaza 100% Fee 9.2 73,000 84% Valu Food, 1996-2002 Chesaco and Weyburn Avenue Rite Aid Baltimore County
Shoppes at Easton 100% Fee 13.9 113,000 97% Giant Food,1997-2024 Route 50 Fashion Bug Easton
New Town Village(5) 100% Fee 11.0 118,000 95% Giant Food,1998-2020 Lakeside Drive Blockbuster Video Owings Mills Starbucks, Hair Cuttery
Wilkens Beltway 75% Fee 7.1 77,000 100% Giant Food,1996-2014 Plaza of Provident Bank, Wilkens Avenue Partnership Radio Shack, Baltimore County Carrollton Bank
York Road Plaza 100% Fee 7.5 90,000 98% Giant Food,1997-2005 York Road Firestone, Starbucks Baltimore County Sears Optical, GNC Boston Market, Great Clips
VIRGINIA PROPERTIES: Burke Town Plaza 100% Long-term 12.6 114,000 91% Safeway, 1996-2005 Old Keene Mill Road lease(6) CVS Drugs Burke
Skyline Village(7) 100% Fee 14.6 127,000 98% Toys "R" 1996-2010 US Route 33 Us, Richfood Harrisonburg
Smoketown Plaza 60% Fee 27.0 176,000 93% Hub 1996-2011 Davis Ford and of Furniture, Smoketown Roads Partnership Frank's Nursery Prince William County & Crafts
Spotsylvania 80% Fee 11.2 142,000 100% K-Mart, 1996-2007 Crossing of CVS Drugs Route 3 & Bragg Partnership Road Fredericksburg
ITEM 2. Properties (continued)
I. SHOPPING CENTERS (continued) A. In Operation (continued)
Type Percent- of Leas- age of land Area able Percent- Lease Name and owner- owner- in square age Principal expir- Location ship ship acres feet leased tenants ations VIRGINIA PROPERTIES (continued): Sudley Towne 100% Fee 9.6 108,000 100% Burlington 1996-2009 Plaza Coat Factory, Route 234 & Sudley Manor Dr. CVS Drug Store Manassas
ARIZONA PROPERTIES: Dobson-Guadalupe(8) 100% Fee 3.2 22,000 94% Nevada 1996-2001 Shopping Center Bob's Dobson & Guadalupe Roads Mesa
Fair Lanes Chandler 50% Fee 1.1 10,000 100% No 1996 Plaza of principal Arizona & Partnership tenants Warner Roads selected Chandler
Fair Lanes Union 50% Fee 5.9 17,000 88% No 1996-2000 Hills Plaza of principal Union Hills Drive Partnership tenants Phoenix selected
Gateway Park 100% Fee 10.5 82,000 89% Bashas', 1996-2011 Page Corral West
Park Sedona (9) 100% Fee 11.4 99,000 98% Safeway, 1996-2011 Highway 89 A Payless Drug Sedona Store
Plaza Del Rio (10) 100% Fee 11.8 60,000 98% Payless 1996-2009 16th Street and Avenue B Drug Store Yuma
DELAWARE PROPERTIES: Brandywine Commons 100% Long-term 25.9 164,000 100% Shoprite, 2008-2014 Concord Pike lease (11) Computer City, Wilmington Ground Round, Sports Authority, Service Merchandise
NEW YORK PROPERTIES: Colonie Plaza (12) 100% Fee 18.7 140,000 98% Price 1996-2010 Central Avenue Chopper, RX Place, Colonie Paper Cutter
Columbia Plaza 100% Fee 16.0 117,000 99% Price 1996-2008 Columbia Turnpike Chopper, East Greenbush Ben Franklin
B. Under Development MARYLAND PROPERTIES: Timonium Mall 100% Long-term 12.9 236,000 64% Caldor, 2001-2011 York & Ridgely Rds. lease (13) Circuit City Timonium
(1) Shopping centers in operation are subject to mortgage financing aggregating $60,485,066 at December 31, 1995. (2) Subject to the following long-term ground leases: (i) 150,000 square feet on 10 acres for Montgomery Ward's department store, (ii) 10,200 square feet on one acre for Montgomery Ward's auto accessory store. The Harford Mall property is subject to a mortgage principal balance at December 31, 1995 of $19,686,335. The Harford Mall mortgage has an interest rate of 9.78%, a 30 year amortization, with a 10 year balloon payment of $18,148,848 due at the maturity date of July, 2003. The mortgage's prepayment provision prohibits prepayment until June, 1997, after which the penalty is the greater of 1% of the outstanding principal balance or yield maintenance. (3) Includes 302,000 square feet occupied by department stores. (4) Remaining term of 12 years plus two 10 year options. (5) A $13,000,000 mortgage secured by Owings Mills New Town Shopping Center is expected to close in March, 1996. This loan will bear interest at 8.05%, will be repaid on a thirty year amortization and will mature 10 years from closing. Proceeds will be used to repay the construction loan secured by this project, ($10,099,510) at December 31, 1995), as well as pay down MART's revolving line of credit. (6) Remaining term of 36 years plus three 15 year renewal options. (7) On February 26, 1996, MART closed a permanent fixed rate mortgage secured by the Skyline Village Shopping Center $5,900,000. The loan bears interest at 7.55% and will be repaid on a 15 year amortization schedule. (8) A purchase option agreement was signed on February 7, 1996 to sell this property for $850,000, which should generate a gain on the sale of approximately $195,000. (9) Park Sedona was sold on January 5, 1996 for $9,000,000, generating a gain on the sale of approximately $138,000. (10) A purchase option agreement was signed on February 22, 1996 to sell this property for $4,150,000, which should generate a loss on the sale of approximately $900,000. The Company signed this agreement at a value lower than it had considered to be market value in an effort to accelerate the divestiture of properties in Arizona. (11) Remaining term of 57 years plus two 10 year options. (12) On March 1, 1996, the mortgage loan secured by Colonie Plaza was repaid ($5,442,755 at December 31, 1995). (13) Remaining term of 21 years plus five 10 year options.
ITEM 2. Properties (Continued)
II. OFFICE BUILDINGS A. In Operation (14) Type Percent- of Leas- age of land Area able Percent- Lease Name and owner- owner- in square age Principal expir- Location ship ship acres feet leased tenants ations MARYLAND PROPERTIES: Gateway 100% Fee 7.0 84,000 86% Browning 1997-2003 International I Ferris, Daughters Elkridge Landing & of Charity Health Winterson Roads System, Anne Arundel County US Healthcare, Tandem Computers
Gateway 100% Fee 15.5 119,000 95% AT&T, 1996-2004 International II MART, Price Elkridge Landing & Waterhouse, American Winterson Roads Express, TNT Anne Arundel County Logistics
Patriots Plaza 50% Long-term 0.5 28,000 24% No 1996-2004 Office Building of lease (15) principal Ritchie Highway Partnership tenants Anne Arundel County selected
Wilkens Beltway 75% Fee 3.9 53,000 94% Freestate,1996-2003 Plaza Office Park of Health, Prudential Buildings I, Partnership Health System II & III Wilkens Avenue & Maiden Choice Lane Baltimore County
III. OTHER DEVELOPED PROPERTIES A. In Operation Type Percent- of Leas- Per- age of land Area Im- able cent- Princi- Lease Name and owner- owner- in prove- square age pal expir- Location ship ship acres ments feet leased tenants ations MARYLAND PROPERTIES: The Business Center 100% Fee 5.4 One-story 27,000 100% No 1996-2001 at Harford Mall Warehouse principal Harford County tenants selected
Clinton Property 100% Long-term2.9 Bowling 29,000 100% Fair 1996-2003 Prince George's lease (16) Center and Lanes, County Bank Suburban Bank
Southwest Property 100% Fee 3.2 One-story 25,000 86% Shell1998-1999 Anne Arundel Office Building, One-story Oil, Carrier/ County Warehouse and Gas Station Otis, Potomac Air Gas
Waldorf Property 100% Fee 3.6 Bowling 30,000 100% Fair 1997-1998 Waldorf Center and Lanes, Tire Center Firestone
ILLINOIS PROPERTIES: Illinois Properties: (17) 100% 2 par- 5.0 2 Bowling 71,000 100% Fair 1998 Chicago cels in Centers Lanes fee
(14) Office buildings in operation are subject to mortgage financing aggregating $1,926,038 as of December 31, 1995. (15) Remaining term of 12 years plus two 10 year options. (16) Remaining term of 31 years plus a 45 year renewal option. (17) 1 of 2 Bowling Centers, Dolton Bowl, was sold on January 4, 1996 for $720,000 generating a gain on the sale of approximately $360,000.
ITEM 2. Properties (Continued) IV. UNDEVELOPED PROPERTIES
Percentage of Type of land Area in Name and Location ownership ownership acres Zoning MARYLAND PROPERTIES: Dorsey Property 100% Fee 19.4 Commercial Anne Arundel County
Gateway International III 100% Fee 6.5 Commercial Anne Arundel County
Harford Property 100% Fee 3.0 Light (Adjacent to Harford Mall) Industrial Harford County
North East Property 100% Fee 56.0 Commercial/ North East Residential
Northwood Industrial Park 67% Fee 24.5 Industrial Salisbury of Partnership
Pulaski Property 100% Fee 3.0 Industrial Baltimore County
NORTH CAROLINA PROPERTIES: Burlington Commerce Park 100% Fee 45.5 Commercial Burlington
Hillsborough Crossing 100% Fee 8.0 Commercial Hillsborough
Management believes the Company's properties are adequately covered by insurance.
ITEM 3

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

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5

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"), are listed on the American Stock Exchange (symbol: MRR), which reports high, low and last sales prices. The table below lists high and low sales prices for MART for the periods indicated.
1995 High Low First Quarter 8 1/2 7 3/4 Second Quarter 9 1/2 7 1/2 Third Quarter 9 1/4 8 Fourth Quarter 9 8 1/8
1994 High Low First Quarter 10 3/8 8 1/2 Second Quarter 9 3/4 8 7/8 Third Quarter 9 1/4 8 1/2 Fourth Quarter 9 1/4 7 3/8
1993 High Low September 11 (Inception) - September 30 10 3/4 10 1/4 Fourth Quarter 11 9
Cash dividends paid to holders of MART's shares during the periods indicated are as follows:
Cash Dividend Paid 1995 1994 1993 First Quarter $0.22 $0.21 Second Quarter $0.22 $0.21 Third Quarter $0.22 $0.21 Fourth Quarter $0.23 $0.22 $0.05 ------- ------- ------- Totals $0.89 $0.85 $0.05
For record shareholders of MART during the entire year, for each respective year, it was determined that the per share dividends for each year indicated are taxable as follows:
Per Share 1995 1994 1993 Ordinary Dividends - taxable as ordinary income $0.48 $0.55 $0.05 Capital Gain Distribution - taxable as capital gain - $0.06 - Non-taxable Distribution - return of capital or taxable gain - (depending on a shareholder's basis in MART shares) $0.41 $0.24 - ------- ------- ------- Total Annual Gross Dividends Per Share $0.89 $0.85 $0.05
On February 12, 1996, MART declared a quarterly cash dividend of $.23 per share payable March 15, 1996 to shareholders of record February 29, 1996.
The number of holders of record of the MART shares as of February 15, 1996 was 1,275.
ITEM 6

ITEM 6
SELECTED FINANCIAL DATA
The following table sets forth the 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 consists of Selected Financial Data of Mid-Atlantic Realty Trust as of December 31, 1995, December 31, 1994 and December 31, 1993, and for the years ended December 31, 1995, and December 31, 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 December 31, 1992, and 1991 and for the periods January 1, 1993 through September 10, 1993, and for the years ended December 31, 1992, and 1991. Mid-Atlantic Realty Trust, a Real Estate Investment 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.
Mid-Atlantic Realty Trust || ------------------------------------------------|| September 11, || 1993 to || Year ended December 31, December 31, || 1995 1994 1993 || Revenues $24,918,971 22,848,881 6,576,684 || ============== ============= ============ || Net Earnings (Loss) || Before Cumulative || Effect of Change In || Accounting Principle and || Extraordinary Item $3,165,082 2,916,286 467,474 || Cumulative Effect of Change || In Accounting Principle 612,383 - - || -------------- ------------- ------------ || Net Earnings (Loss) Before || Extraordinary Item 3,777,465 2,916,286 467,474 || Extraordinary Item - - - || -------------- ------------- ------------ || Net Earnings (Loss) $3,777,465 2,916,286 467,474 || ============== ============= ============ || || Net Earnings (Loss) Per || Share Before Cumulative || Effect of Change In || Accounting Principle || and Extraordinary Item $0.51 0.46 0.07 || Cumulative Effect of Change || In Accounting Principle $0.10 - - || ------------- ------------- ------------ || Net Earnings (Loss) Per || Share Before || Extraordinary Item $0.61 0.46 0.07 || Extraordinary Item - - - || ------------- ------------- ------------ || Net Earnings (Loss) || Per Share $0.61 0.46 0.07 || ============= ============= ============ || || Weighted Average Shares || Outstanding, || Including Common || Share Equivalents (1) 6,176,991 6,291,407 6,291,407 || ============= ============= ============ || || Total Assets $182,521,299 162,842,567 148,563,052 || ============= ============= ============ || || Indebtedness: || Total mortgages, convertible || debentures, construction || loans and notes payable $154,020,757 133,390,553 116,494,372 || ============= ============= ============ || || Net cash provided by || (used in) operating || activities $11,193,068 7,766,044 3,479,346 || ============= ============= ============ || || Cash Dividends || Paid Per Share $0.89 0.85 0.05 || ============= ============= ============ ||
BTR Realty, Inc. --------------------------------------------- January 1, 1993 to September 10, Years ended December 31, 1993 1992 1991
Revenues 15,912,211 22,655,133 22,779,812
Net Earnings (Loss) Before Cumulative Effect of Change In Accounting Principle and Extraordinary Item (2,057,106) (1,118,957) (4,688,646) Cumulative Effect of Change In Accounting Principle - 1,286,000 - -------------- ------------ ------------ Net Earnings (Loss) Before Extraordinary Item (2,057,106) 167,043 (4,688,646) Extraordinary Item (548,323) - - -------------- ------------ ------------ Net Earnings (Loss) (2,605,429) 167,043 (4,688,646) ============== ============ ============
Net Earnings (Loss) Per Share Before Cumulative Effect of Change In Accounting Principle and Extraordinary Item (0.24) (0.13) (0.55) Cumulative Effect of Change In Accounting Principle - 0.15 - -------------- ------------ ------------ Net Earnings (Loss) Per Share Before Extraordinary Item (0.24) 0.02 (0.55) Extraordinary Item (0.06) - - -------------- ------------ ------------ Net Earnings (Loss) Per Share (0.30) 0.02 (0.55) ============== ============ ============
Weighted Average Shares Outstanding, Including Common Share Equivalents (1) 8,512,718 8,503,916 8,527,036 ============== ============ ============
Total Assets 147,869,512 153,212,133 159,879,954 ============== ============ ============
Indebtedness: Total mortgages, convertible debentures, construction loans and notes payable 150,666,971 149,168,632 153,024,838 ============== ============ ============
Net cash provided by (used in) operating activities 4,129,635 1,249,138 (961,065) ============== ============ ============ Cash Dividends Paid Per Share 0.58 - - ============== ============ ============
(1) In September, 1993, MART issued 3,450,000 shares in its initial public offering, and as part of the merger, exchanged for every 3 shares of BTR, 1 share of MART totaling approximately 8,526,000 shares of BTR for approximately 2,842,000 shares of MART.
Continued
ITEM 6 - SELECTED FINANCIAL DATA - CONTINUED
Summary Financial Data The following 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 is unaudited and is not necessarily indicative of the results which actually would have occurred if the transactions had been consummated at January 1, 1992, nor does it purport to represent the financial position and results of operations for future periods. The following assumes the MART public offering took place on January 1, 1992.
Summary Financial Data In thousands, except per share data
Years ended December 31, 1995 1994 1993 1992 ACTUAL ACTUAL PROFORMA
Revenues $24,919 22,849 20,777 20,051
Earnings $3,777 2,916 1,217 494 Earnings per share $0.61 0.46 0.19 0.08
Funds from operations (FFO) (1): Primary $8,008 6,797 6,034 5,398 Fully diluted $12,582 11,400 10,609 9,973
Net Cash Flow Provided by operating activities $11,193 7,766 N/A (2) N/A (2) Used in investing activities $23,584 19,630 N/A (2) N/A (2) Provided by financing activities $12,561 11,521 N/A (2) N/A (2)
Weighted average number of shares outstanding: Primary 6,177 6,291 6,291 6,291 Fully diluted 11,889 12,005 12,005 12,005
(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 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 Flow activities cannot be reasonably estimated on a pro forma basis for 1993 and 1992.
Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations for MART for 1995 are summarized as follows:
Quarter ended 1995 March 31, June 30, September 30, December 31,
Revenues $6,260,154 6,012,769 6,044,535 6,601,513
Earnings before Cummulative Effect of Change in Accounting Principle $1,352,427 570,058 531,636 710,961 Cummulative Effect of Change In Accounting Principle $612,383 - - - ----------- ----------- ----------- ---------- Net Earnings $1,964,810 570,058 531,636 710,961 =========== =========== =========== ========== Net Earnings per share $0.31 0.09 0.09 0.12 =========== =========== =========== ==========
The unaudited quarterly results of operations for MART for 1994 are summarized as follows:
Quarter ended 1994 March 31, June 30, September 30, December 31,
Revenues $5,556,016 5,868,272 5,444,666 5,979,927
Net earnings $700,334 750,505 317,461 1,147,986 =========== =========== =========== =========
Net earnings per share $0.11 0.12 0.05 0.18 =========== =========== =========== =========
Quarterly results are influenced by a number of factors including timing of settlements of property sales, completion of operating projects, and write-offs of unrecoverable development costs.
ITEM 7

ITEM 7
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion compares the Company's operations for the year ended December 31, 1995, with the year ended December 31, 1994. The discussion also compares the Company's operations for the year ended December 31, 1994 with the year ended December 31, 1993, which includes the summation of the Company's and BTR's results of operations.
Comparison of 1995 to 1994
Rental revenues increased by $2,023,000, or 9%, to $23,914,000 for the year ended December 31, 1995 from $21,891,000 for the year ended December 31, 1994. Two acquisitions, Easton Shoppes in September, 1994 and Brandywine Commons in November, 1995, contributed to rental increases of $943,000 and $222,000, respectively. Also, new redevelopment and development projects contributed $527,000 to rental revenue increases. Additionally, net increases, primarily in occupancy and rental rates, resulted in rental increases of $763,000. The rental increases were offset by a $357,000 decrease in rental revenues attributable to the sale in February, 1995 of the Regal Row warehouse project and the sale in December, 1994 of the Oakton Bowling center. In addition, $75,000 in net rental decreases were primarily related to vacancies.
Loss (gain) on sales of properties held for sale decreased by $103,000 to a loss of $22,000 in 1995 from a gain of $81,000 in 1994. The decrease was attributable to a $25,000 net loss on the sales of lots in North Carolina as well as a $3,000 gain on the sale of an Arizona outparcel in 1995. In 1994, there was a $31,000 net gain on the sales of lots in North Carolina, as well as a $50,000 gain on the sale of a lot in Fallston, Maryland.
Other income increased by $150,000 to $1,027,000 in 1995 from $877,000 in 1994 primarily from an increase due to fire insurance proceeds for lost rent at Rolling Road which was damaged by a fire in December, 1992, interest income increases and from other income increases at Patriots Plaza and Wilkens Office II.
As a result of the above changes, total revenues increased by $2,070,000 to $24,919,000 in 1995 from $22,849,000 in 1994.
Interest expense increased by $1,005,000 to $11,348,000 in 1995 from $10,343,000 in 1994 primarily due to the two new acquisitions, Easton Shoppes and Brandywine Commons, which contributed to interest expense increases of $692,000, and $97,000, respectively. Also, new redevelopment and development projects contributed $268,000 to interest expense increases. The interest expense increases were offset by $59,000 in interest expense decreases related to interest rate reductions, and $25,000 in interest expense decreases from principal reductions.
Depreciation and amortization increased by $481,000 to $5,564,000 from $5,083,000 primarily due to the redevelopment at Harford Mall and York Road, the Easton Shoppes acquisition, and to tenant improvements at the Gateway I & II Offices. The increases were offset by depreciation decreases primarily from the aforementioned sale of the Regal Row warehouse property.
Operating expenses decreased by $249,000 to $3,088,000 from $3,337,000 primarily due to $156,000 in lower legal fees related to a tenant suit, settled in 1995, at the Smoketown Plaza project. Operating expenses also decreased by $144,000 due to the sales of the aforementioned Regal Row warehouse project and the Oakton bowl project sold in December, 1994. Other net operating expense decreases of $70,000 were primarily related to higher tenant occupancy resulting in lower landlord operating expenses. The operating expense decreases were offset primarily by $70,000 in operating expense increases related to McRay Plaza, sold in December, 1995 and Park Sedona Plaza, sold in January, 1996 and $51,000 in operating expense increases related to the new acquisition, Brandywine Commons.
General and administrative expenses increased by $29,000 to $1,780,000 from $1,751,000 due primarily to a $92,000 increase in net payroll expense, $52,000 in other net expense increases offset by a $82,000 decrease in insurance expense and a $33,000 decrease in legal fees.
Minority interest expense increased by $177,000 to $718,000 from $541,000 generally due to higher earnings in minority interest ventures in 1995.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of 1995 to 1994 - Continued
Earnings from operations increased by $627,000 to $2,421,000 from $1,794,000. Certain non-operating items occurred for both periods. For the year ended December 31, 1995, MART recognized a loss on the sale of the Regal Row warehouse operating property of $377,000, a gain on the sale of the McRay Shopping Center in Arizona of $119,000, 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. For the year ended December 31, 1994, MART recorded a gain on sales of operating properties of $1,122,000, and, when combined with the earnings from operations for the period, resulted in net earnings of $2,916,000.
Comparison of 1994 to 1993
Rental revenues increased by $1,209,000, or 6%, to $21,891,000 for the year ended December 31, 1994 from $20,682,000 for the year ended December 31, 1993. Net increases in occupancy and CPI rental rates resulted in rental increases of approximately $1,125,000. Additionally, two acquisitions, Timonium Mall in October, 1993 and Easton Shoppes in September, 1994, contributed to rental increases of $600,000 and $374,000, respectively. The rental increases were offset by a $732,000 loss of rental attributable to operating properties sold or discontinued in 1993, a $74,000 loss of rental attributable to the redevelopment of York Road Plaza in 1994, and $84,000 in other net rental decreases.
Sales of residential property decreased by $1,032,000 due to the discontinuation and final sellout of BTR's residential assets in July, 1993.
Gains on sales of properties held for sale increased by $50,000 to $81,000 in 1994 from $31,000 in 1993 due to higher profit margins on properties sold in 1994.
Other income increased by $133,000 to $877,000 in 1994 from $744,000 in 1993 primarily as a result of $424,000 in interest income increases from partners' notes receivables added in September, 1993, and increases due to a $166,000 loss included in BTR's other income in September, 1993 related to a provision for losses on notes receivable. The increases were offset by decreases due to a $210,000 decrease in income from a lease termination payment recorded as other income in December, 1993 and $247,000 in net decreases primarily related to higher tenant lease cancellation charges and fees in 1993.
As a result of the above changes, total revenues increased by $360,000 to $22,849,000 in 1994 from $22,489,000 in 1993.
Interest expense decreased by $2,011,000 to $10,343,000 in 1994 from $12,354,000 in 1993 primarily due to the payoff in September, 1993 of higher fixed rate mortgage debt which was replaced by the sale of lower interest convertible subordinated debentures and the sale of common shares. Approximately $1,839,000 in interest expense decreases can be attributable to the payoff of mortgage debt and replacement with debentures and common shares. A decrease in interest expense of $409,000 can be attributable to the discontinuation of operations in September, 1993 of a residential operating property sold in February, 1994. Other net decreases of $100,000 in interest expense are generally related to projects terminated in 1993 and principal paydowns. Additionally, the interest expense decreases were offset by increases from the two new acquisitions, Timonium Mall in October, 1993 and Easton Shoppes in September, 1994, which contributed to interest increases of $106,000 and $231,000, respectively.
Depreciation and amortization increased by $347,000 to $5,083,000 in 1994 from $4,736,000 in 1993, primarily due to the following increases: amortization of debentures sold in September, 1993, $204,000, new acquisitions - Timonium, $99,000, and Easton, $57,000, new tenant improvements Gateway I & II, $64,000, and new redevelopment, Rolling Road Plaza, $28,000. The increases were offset by a $111,000 decrease in depreciation expense due to the discontinuation of operations in September, 1993 of a residential property sold in February, 1994.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of 1994 to 1993 - Continued
Operating expenses decreased by $417,000 to $3,337,000 in 1994 from $3,754,000 in 1993, primarily due to the discontinuation in September, 1993 of the residential operating property sold in February, 1994 which decreased operating expenses by $321,000. In addition, operating expense decreased by $117,000 as a result of the sale of certain projects, Harbour Island and Plantation Bowl,which were sold in July, 1993 and January, 1994, respectively. Some operating expense decreases were due to projects with additional occupancy in 1994, which included Columbia Plaza, $68,000, Sedona, $57,000, & McRay, $49,000. Other projects had operating decreases due to various gross expense decreases, such as Burke Town, $43,000 (primarily legal fees decreased) and York Road Plaza, $28,000 (primarily real estate taxes decreased). These major decreases in operating expenses were offset by increases in operating expenses primarily related to the new acquisition of Timonium of $173,000 and additional legal fees related to the Smoketown Plaza project of $101,000.
Cost of residential property sold decreased by $1,008,000 due to the discontinuation of the residential sales in July, 1993.
General and administrative expenses increased by $397,000 to $1,751,000 in 1994 from $1,354,000 in 1993 due to an increase of $120,000 in payroll expenses which was due to the adoption, in 1994, of an incentive based compensation plan. In addition, payroll expenses increased by $158,000 primarily due to fewer payroll costs capitalized in 1994. Other increases in general and administrative expenses were related to additional shareholder related costs of $52,000, an increase in 401K Plan expense of $45,000 due to a one time downward expense adjustment in December, 1993, and various other net increases totaling $104,000. The increases were offset by decreases in general and administrative expenses related to lower outside professional fees of $33,000 and a decrease of $49,000 in stock compensation expense.
Unrecoverable development costs decreased by $1,279,000 due to write-downs in 1993 to net realizable value of two residential properties under contract of sale pursuant to a divestiture plan and the write-down in 1993 to net realizable value of a property held for sale.
Minority interest expense increased by $539,000 to $541,000 in 1994 from $2,000 in 1993 generally due to higher earnings in minority interest ventures.
Earnings from operations increased by $3,792,000 to $1,794,000 in 1994 from a loss from operations of $1,998,000 in 1993. At September 10, 1993, BTR recorded an extraordinary loss of $548,000 due to an early extinguishment of debt. A net income tax benefit of $408,000 was recognized by BTR for the period January 1 to September 10, 1993. The 1993 extraordinary item and income tax benefit for the combined year ended December 31, 1993, offset the loss from operations for the period resulting in a $2,138,000 net loss for the combined year ended 1993 for BTR and the Company. For the year ended December 31, 1994, the Company recorded a gain on the sales of operating properties of $1,122,000, and, when combined with the earnings from operations for the period, resulted in net earnings of $2,916,000 for the year ended December 31, 1994.
Cash Flow comparison
The following discussion compares the statements of cash flows of the Company for the year ended December 31, 1995 with the statements of cash flows for the year ended December 31, 1994. The discussion also compares the statments of cash flows of the Company for the year ended December 31, 1994 with the statements of cash flows for the year ended December 31, 1993, which includes the summation of the Company's and BTR's cash flows.
Cash Flow comparison of 1995 to 1994
Net cash flow provided by operating activities increased by $3,427,000, to $11,193,000 for the year ended December 31, 1995 from $7,766,000 for the year ended December 31, 1994. Net cash flow increased generally due to the following: an increase in net earnings of $861,000 (described above), an increase of $658,000 due to increases in depreciation and minority interest expense adjustments, a $1,379,000 increase related to the gain on the sales of operating properties in 1994 offset by a net loss on the sales of operating properties in 1995, and a $1,933,000 increase in operating liabilities. The cash flow increases were offset by a decrease in operating assets of $1,404,000.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Cash Flow comparison of 1995 to 1994 - Continued
Net cash flow used in investing activities increased by $3,954,000, to $23,584,000 from $19,630,000. The increase was primarily a result of the following: acquistions and additions to properties which resulted in an increase of $7,325,000 (primarily the acquistion of Brandywine Commons, the Owings Mills development project and the redevelopment projects in 1995 exceeding the Easton Shoppes acquisition in 1994), a decrease in cash flow used in investing activities related to an increase in proceeds from sales of properties of $1,652,000, and an increase of $1,719,000 related to an increase in receipts from minority partners in 1995.
Net cash flow provided by financing activities increased by $1,040,000, to $12,561,000 from $11,521,000. The increase was primarily from two major net cash increases: (1) a $10,100,000 cash increase due to the addition to construction loan payable for the new Owings Mills New Town shopping center under development, and (2) $9,603,000 in cash increases due to additions to mortgages payable primarily related to the closing of mortgages in 1995 for the Shoppes at Easton and York Road redevelopment. The increases were offset by decrease in cash flow provided by financing activities primarily from two major cash decreases: (1) a decrease of $15,949,000 in cash flows due to a net increase in payments on notes payable, and (2) a $2,235,000 decrease in cash flow due to the purchase of common shares in 1995, (3) a decrease in cash due to an increase of $347,000 in deferred finance costs, and (4) a decrease in cash flow due to an increase in dividends paid in 1995 of $132,000.
Cash Flow comparison of 1994 to 1993
Net cash flow provided by operating activities increased by $157,000, to $7,766,000 for the year ended December 31, 1994 from $7,609,000 for the year ended December 31, 1993. Net cash flow increased generally due to the following: An increase in net earnings of $5,054,000 (described above), an increase of $886,000 due to increases in depreciation and minority interest expense adjustments, an increase of $611,000 due to increased lease cancellation fees deferred in 1994, an increase of $461,000 due to deferred income tax liability for 1993 (See Note K of notes to the consolidated financial statements), and the balance of the increases, $31,000, was an increase in operating assets. The increases were offset by decreases of $4,138,000 related to reductions in operating liabilities. Other major decreases in net cash flow were due to $1,279,000 in unrecoverable development cost decreases, a $1,122,000 decrease related to the gain on the sales of operating properties in 1994, and other decreases totaling $347,000 primarily related to the extraordinary loss on early extinguishment of debt in 1993.
Net cash flow used in investing activities increased by $13,680,000, to $19,360,000 from $5,950,000. The increase was primarily a result of the following: acquisitions and additions to properties which resulted in an increase of $14,644,000 (primarily the Shoppes at Easton acquisition in September, 1994), a decrease in cash flow used in investing activities related to an increase in proceeds from sales of properties of $1,617,000 (primarily due to sales of land held for sale and operating properties in 1994), and an increase of $653,000 related to an increase in payments to minority partners in 1994.
Net cash flow provided by or used in financing activities increased by $12,591,000, to net cash provided by financing activities of $11,521,000 from net cash used in financing activities of $1,070,000. The increase was primarily from three major net cash increases: (1) $18,369,000 in cash increases due to net additions to notes payable primarily in 1994 for tha acquisition of the Shoppes at Easton in September, 1994 and the land for the new Owings Mills New Town shopping center under development purchased in December, 1994, (2) net reductions in 1993 in construction loans payable, and mortgages payable of $84,560,000, (3) 1993 additions to deferred debenture costs of $3,063,000. The increases were offset by a decrease in cash flow provided by financing activities resulting from the net cash flow provided by the net proceeds in 1993 from the sale of debentures and common shares of $93,453,000. Other net increases for the period totaled $52,000.
Liquidity and Capital Resources
MART improved its liquidity in September, 1993 with the conversion from BTR. The initial public share and debenture offering on September 10, 1993 replaced higher fixed rate mortgage debt with lower interest convertible subordinated debentures and the sale of common shares.
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 which have increased due to the reduction in debt service resulting from the repayment of indebtedness with the proceeds of the offering, and from future growth in rental revenues and other sources, such as the leasing of currently vacant space and development of undeveloped parcels. 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 will continue to maintain a line of credit of at least $40,000,000 from a commercial bank (See Note I of notes to the consolidated financial statements).
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
The Company anticipates material committments for capital expenditures to include, in the next two years, the redevelopment or development of four Maryland projects with an additional four redevelopment projects in the planning stage at an estimated cost between $14 and $25 million. The Company expects to fund the development projects and other capital expenditures with (i) available net cash flows from operating activities, (ii) if necessary, construction loan financing, (iii) if necessary, long term mortgage financing on unencumbered operating properties, and (iv) if necessary, the use of its $40,000,000 line of credit from a commercial bank (See Note I of notes to the consolidated financial statements).
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 1996 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 liquidity requirements, MART intends to obtain funds through additional equity offerings or long-term debt financing in a manner consistent with its intention to operate with a conservative debt capitalization policy. MART anticipates that the cash flow available from operations, together with cash from borrowings, will be sufficient to meet the capital and liquidity needs of MART in both the short and long term.
New Accounting Standards
Effective January 1, 1995 the Company changed its accounting treatment for percentage rent. Percentage rent revenues are based on store sales for certain periods and are charged according to a percentage over a breakpoint amount of sales for the period according to the lease agreement. During the year ended December 31, 1994 and previously, percentage rent was recognized as rental revenues in the period when the actual percentage rent was billed and received. The new method will recognize percentage rent as rental revenues in the period when the actual percentage rent is earned. On January 1, 1995, the Company began estimating the percentage rent earned from major tenants and recorded the amounts monthly as receivable. The cumulative effect of this change on January 1, 1995 was $612,383. The Company believes that this change is preferable since it provides better matching of revenues and expenses.
Effective April 1, 1994 the Company adopted a new accounting treatment regarding lease cancellation fees received from tenants who want to discontinue their remaining lease term obligations. Prior to April 1, 1994, the lease termination payments for major tenants were recognized as other income in the period when the termination agreement was executed. Under the new treatment, the entire amount of the cancellation or termination fee on the date of the lease termination is deferred and then amortized into income on a straight-line basis over the remaining original lease term as minimum rent. The Company believes that this change is preferable since it provides a better matching of revenues and expenses. During 1994, approximately $687,000 of termination fees were deferred, and $56,000 were amortized. During 1995, approximately $772,000 of termination fees were deferred, and $266,000 were amortized.
Deferred Financing Costs
Effective January 1, 1996 the Company changed its reporting of amortization of deferred finance costs. During the year ended December 31, 1995 and previously, the annual amortization of deferred finance costs was reported in the depreciation and amortization of property and improvements expense line on the consolidated statements of operations. Effective January 1, 1996, the Company will be reporting the annual amortization of deferred finance costs in the interest expense line on the consolidated statement of operations. The Company will restate all comparative prior year interest and depreciation and amortization expense line items. The change will have no effect on the presentation of net earnings, but will only reclassify interest expense and depreciation and amortization expense line items.
Inflation
The majority of all of the leases at the shopping center properties contain provisions which may entitle MART to receive percentage rents based on the tenants' gross sales. Such percentage rents ameliorate the risk to MART of the adverse effects of inflation. Percentage rent received by MART remained stable in the year ended December 31, 1995 compared to the year ended December 31, 1994. 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 10 years, which may enable MART to seek increased rents upon renewal of existing leases if rents are below the then-existing market value.
Stock Repurchase Plan
On February 14, 1995 the MART Board of Trustees approved a stock repurchase plan. Under this plan, MART may, from time to time, repurchase shares of its common stock either in the open market or in privately negotiated transactions upon such prices and other terms as the Company deems appropriate. The aggregate number of shares authorized on February 14, 1995 for repurchase could not exceed 5% of the number of shares currently outstanding, or approximately 310,000. On February 12, 1996 the MART Board of Trustees increased by 100,000 the authorized number of shares that may be repurchased up to 410,000.
ITEM 8

ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES, & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) Financial Statements: Independent auditors' report ......................24
Consolidated Balance Sheets - as of December 31, 1995 and 1994 ................25
Consolidated Statements of Operations - For the Years ended December 31, 1995 and 1994 and the Periods ended December 31, 1993 and September 10, 1993 ..............................26
Consolidated Statements of Shareholders' Equity - For the Years ended December 31, 1995 and 1994 and the Periods ended December 31, 1993 and September 10, 1993 ..............................27
Consolidated Statements of Cash Flows - For the Years ended December 31, 1995 and 1994 and the Periods ended December 31, 1993 and September 10, 1993 ..............................28
Notes to Consolidated Financial Statements ........30
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 ..................................40
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, 1995 and 1994 and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 1995, and 1994 and the period ended December 31, 1993 and the consolidated statements of operations, shareholders' equity and cash flows of BTR Realty, Inc. and subsidiaries for the period ended September 10, 1993. 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, 1995 and 1994, and the results of their operations and their cash flows for the years ended December 31, 1995 and 1994, and the period ended December 31, 1993, and the results of BTR Realty, Inc. and subsidiaries' operations and their cash flows for the period ended September 10, 1993, 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 rents on January 1, 1995. Also, as discussed in note A, the Company changed its method of accounting for lease termination payments in 1994.
KPMG PEAT MARWICK LLP
Baltimore, Maryland February 15, 1996
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 1995 1994
ASSETS Properties: Operating properties (Notes C and D)............$ 204,132,134 176,511,730 Less accumulated depreciation and amortization .......... 39,430,308 36,448,969 ------------- ------------- 164,701,826 140,062,761 Development operations (Note E)................... 1,510,544 6,354,947 Property held for development or sale ....... 8,179,378 8,630,465 ------------- ------------- 174,391,748 155,048,173
Cash and cash equivalents .... 514,386 344,522 Notes and accounts receivable - tenants and other (Note F).......... 2,350,578 1,688,194 Due from joint venture partners ................... 1,599,581 1,937,019 Prepaid expenses and deposits. 449,850 402,283 Deferred financing costs (Note G) ................... 3,215,156 3,422,376 ------------- ------------- $ 182,521,299 162,842,567 ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable and accrued expenses (Note H).......... $ 4,604,848 3,534,277 Notes payable (Note I)....... 21,530,143 20,139,413 Construction loan payable (Note D)................... 10,099,510 - Mortgages payable (Note D) .. 62,411,104 53,251,140 Convertible subordinated debentures (Note J)........ 59,980,000 60,000,000 Deferred income ............. 1,222,673 730,466 Minority interest in consolidated joint ventures 1,734,799 330,893 ------------- ------------- 161,583,077 137,986,189
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, 6,016,111, and 6,291,407, respectively...... 60,161 62,914 Additional paid-in capital .. 40,389,783 42,602,505 Distributions in excess of accumulated earnings ........ (19,511,722) (17,809,041) ------------- ------------- 20,938,222 24,856,378 Commitments (Note M) ------------- ------------- $ 182,521,299 162,842,567 ============= =============
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) Consolidated Statements of Operations
Mid-Atlantic Realty Trust ||BTR Realty, Inc. September 11 || to || January 1 to Years Ended December 31, December 31,|| September 10, 1995 1994 1993 || 1993 || REVENUES: || Rentals .......... $23,914,267 21,890,446 6,061,175 || 14,620,418 (Loss) gain on sales of properties held || for sale, net ..... (22,631) 81,313 - || 31,501 Sales of residential || property .......... - - - || 1,032,000 Other (Note O) ...... 1,027,335 877,122 515,509 || 228,292 ------------ ----------- ---------- || ----------- 24,918,971 22,848,881 6,576,684 || 15,912,211 ------------ ----------- ---------- || ----------- COSTS AND EXPENSES: || Interest ............11,347,541 10,342,725 3,076,060 || 9,278,198 Depreciation and || amortization of property || and improvements .. 5,564,395 5,083,384 1,502,449 || 3,233,530 Operating............ 3,087,593 3,336,415 1,104,193 || 2,649,341 General and || administrative .... 1,780,397 1,751,101 300,625 || 1,053,295 Cost of residential || property sold...... - - - || 1,008,475 Unrecoverable || development costs.. - - - || 1,278,817 ------------ ----------- ---------- || ----------- 21,779,926 20,513,625 5,983,327 || 18,501,656 ------------ ----------- ---------- || ----------- EARNINGS (LOSS) FROM || OPERATIONS BEFORE || MINORITY INTEREST .. 3,139,045 2,335,256 593,357 || (2,589,445) Minority interest || (expense) benefit .. (718,019) (540,744) (125,883) || 124,129 ------------ ----------- ---------- || ----------- EARNINGS (LOSS) FROM || OPERATIONS ......... 2,421,026 1,794,512 467,474 || (2,465,316) Gain on life insurance || proceeds (Note P)... 1,001,787 - - || - (Loss) gain on sales of || operating properties (257,731) 1,121,774 - || - ------------ ----------- ---------- || ----------- || EARNINGS (LOSS) BEFORE INCOME || TAXES, CUMULATIVE EFFECT OF || CHANGE IN ACCOUNTING PRINCIPLE || AND EXTRAORDINARY || ITEM 3,165,082 2,916,286 467,474 || (2,465,316) Income tax benefit, || net (Note K) ...... - - - || 408,210 ------------ ----------- ---------- || ----------- EARNINGS (LOSS) BEFORE || CUMULATIVE EFFECT OF || CHANGE IN ACCOUNTING || PRINCIPLE AND || EXTRAORDINARY ITEM . 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 ITEM . 3,777,465 2,916,286 467,474 || (2,057,106) Extraordinary item - || Loss on early || extinguishment || of debt ............ - - - || (548,323) ------------ ----------- ---------- || ----------- NET EARNINGS || (LOSS) ............$ 3,777,465 2,916,286 467,474 || (2,605,429) ============ =========== ========== || =========== || Earnings (loss) per share || before cumulative effect || of change in accounting || principle and extraordinary || item ............. $ 0.51 0.46 0.07 || (0.24) Cumulative effect of change || in accounting principle 0.10 - - || - ------------ ----------- ---------- || ----------- Earnings (loss) per || share before extraordinary || item .............. 0.61 0.46 0.07 || (0.24) Extraordinary item - || early extinguishment || of debt ........... - - - || (0.06) ------------ ----------- ---------- || ----------- NET EARNINGS (LOSS) || PER SHARE .........$ 0.61 0.46 0.07 || (0.30) ============ =========== ========== || ===========
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) Consolidated Statements of Shareholders' Equity Years Ended December 31, 1995, 1994 and 1993
Distributions Additional in Excess of Net Common Par Paid-in Accumulated Shareholders' Shares Value Capital Earnings Equity
BTR REALTY, INC. BALANCE, January 1, 1993 8,503,916 $85,039 9,078,718 (7,980,227) 1,183,530
Stock issued through the exercise of options pursuant to the BTR stock compensation plan 78,286 783 224,475 - 225,258 Stock canceled for repayment of a note receivable from a former employee (56,554) (566) (176,485) - (177,051) Dividend paid - $.58 per share - - - (4,944,879) (4,944,879) Net loss - - - (2,605,429) (2,605,429) ---------- ------- ---------- ------------ ----------- BALANCE, September 10, 1993 8,525,648 85,256 9,126,708 (15,530,535) (6,318,571) ==========================================
MID-ATLANTIC REALTY TRUST
Conversion of 3 shares of BTR for 1 share of MART (5,683,765)(56,837) 56,837 - - Acquisition of fractional Shares (476) (5) (5,024) - (5,029) Initial sale of common shares of beneficial interest 3,450,000 34,500 33,423,984 - 33,458,484 Dividend paid - $.05 per share - - - (314,570) (314,570) Net Earnings - - - 467,474 467,474 ---------- ------- ----------- ------------- ------------ BALANCE, December 31, 1993 6,291,407 62,914 42,602,505 (15,377,631) 27,287,788 ========== ======= =========== ============= ============
Dividends paid - $.85 per share - - - (5,347,696) (5,347,696) Net Earnings - - - 2,916,286 2,916,286 ---------- ------- ----------- ------------- ------------ 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 - $.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 ========== ======= =========== ============= ============
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR)
Consolidated Statements of Cash Flows
Mid-Atlantic Realty Trust ||BTR Realty, Inc. September 11 || to || January 1 to Year Ended December 31, December 31,|| September 10, 1995 1994 1993 || 1993 || Cash flows from || operating activities: || Net earnings (loss) $3,777,465 2,916,286 467,474 || (2,605,429) Adjustments to reconcile || net earnings (loss) || to net cash provided || by operating activities: || Depreciation and || amortization .... 5,564,395 5,083,384 1,502,449 || 3,233,530 Minority interest || in earnings (loss), || net ............. 718,019 540,744 125,883 || (124,129) Loss (gain) on sales || of operating || properties ...... 257,731 (1,121,774) - || - Loss (gain) on sales of || residential properties || and properties held || for sale, net ... 22,631 (81,313) - || (7,976) Unrecoverable || development costs - - - || 1,278,817 Loss on early || extinguishment || of debt - || capitalized ..... - - - || 273,308 Deferred income || taxes benefit ... - - - || (460,570) Changes in operating || assets and liabilities: || (Increase) decrease || in operating || assets ......... (709,951) 694,434 108,480 || 555,067 Increase (decrease) || in deferred rental || income .......... 505,887 610,678 (974,173) || 974,173 Increase (decrease) || in operating || liabilities .... 1,056,891 (876,395) 2,249,233 || 1,012,844 ----------- ---------- ---------- || ----------- Total || adjustments... 7,415,603 4,849,758 3,011,872 || 6,735,064 ----------- ---------- ---------- || ----------- NET CASH PROVIDED BY || OPERATING || ACTIVITIES 11,193,068 7,766,044 3,479,346 || 4,129,635 ----------- ---------- ---------- || ----------- || Cash flows from || investing activities: || Additions to || properties .... (29,522,542)(22,197,577) (6,173,532) || (1,379,710) Proceeds from sales || of properties.. 4,914,988 3,263,444 - || 1,646,748 Payments to minority || partners ..... (779,675) (792,394) (256,009) || (117,382) Receipts from minority || partners ..... 1,803,000 96,800 42,253 || 287,606 ----------- ---------- ---------- || ----------- NET CASH (USED IN) || PROVIDED BY || INVESTING || ACTIVITIES $(23,584,229)(19,629,727) (6,387,288) || 437,262 ----------- ----------- ---------- || -----------
(CONTINUED)
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR)
Consolidated Statements of Cash Flows (Continued)
Mid-Atlantic Realty Trust ||BTR Realty, Inc. September 11 || to || January 1 to Year Ended December 31, December 31,|| September 10, 1995 1994 1993 || 1993 || Cash flows from || financing activities: || Proceeds from || notes payable ..$ 80,400,000 39,456,366 3,100,000 || 90,832,649 Principal payments || on notes payable (79,009,270)(22,116,953) (87,486,651)|| (7,475,452) Proceeds from || mortgages payable 16,400,000 - - || 2,682,600 Principal payments || on mortgages || payable ....... (7,240,036) (443,232) (3,143,953)|| (46,709,513) Proceeds from || construction || loans payable .. 10,099,510 - - || - Payments on || construction || loans payable .. - - - || (37,831,945) Additions to deferred || finance costs - || other........... (374,417) (27,388) (171,954)|| (45,149) Proceeds from sale || of convertible || debentures ..... - - 60,000,000 || - Additions to deferred || finance costs - || debentures...... - - (3,063,274)|| - Net proceeds from || sale of common || shares ......... - - 33,453,455 || - Stock issued - || options exercised || in compensation || plan .......... - - - || 225,258 Stock canceled - || employee note || payment ....... - - - || (177,051) Shares purchased (2,234,616) - - || - Dividends paid .. (5,480,146) (5,347,696) (314,570)|| (4,944,879) ----------- ----------- -----------|| ----------- NET CASH PROVIDED || BY (USED IN) || FINANCING || ACTIVITIES ... 12,561,025 11,521,097 2,373,053 || (3,443,482) ----------- ----------- -----------|| ----------- NET INCREASE (DECREASE) || IN CASH AND CASH || EQUIVALENTS 169,864 (342,586) (534,889)|| 1,123,415 || CASH AND CASH || EQUIVALENTS, || beginning of period 344,522 687,108 1,221,997 || 98,582 ----------- ----------- -----------|| ----------- || CASH AND CASH || EQUIVALENTS, || end of period .....$ 514,386 344,522 687,108 || 1,221,997 =========== =========== ===========|| =========== || Supplemental disclosures of || cash flow information: || Cash paid for: || Interest ...........$11,760,934 10,404,859 1,659,428 || 9,218,811 Income taxes ....... - - 20,560 || 16,813 =========== =========== ===========|| ===========
Supplemental information of noncash investing and financing activities:
In April, 1995 $20,000 in convertible debentures were converted to 1,904 common shares of beneficial interest decreasing convertible subordinated debentures by $20,000, decreasing net deferred financing costs by $859 and increasing shareholders' equity by $19,141.
During 1995 and 1994, respectively, $19,838,543 and $2,832,641 in assets were transferred from Development Operations to Operating Properties.
At December 31, 1993, MART recorded an asset on the balance sheet, net assets of properties to be sold of $449,219. The reclassification of the assets and liabilities consisted of the following: a decrease in operating properties of $6,505,807, a decrease in operating assets of $304,377, a decrease in deferred financing costs of $323,449, a decrease in operating liabilities of $42,419, and a decrease in mortgages payable of $6,641,995. Proceeds from sales of properties for the year ended December 31, 1994 included net proceeds of $504,820 from the sale, in February, 1994, of net assets of properties to be sold which included proceeds of $7,146,815 reduced by the payoff of the mortgage payable of $6,641,995.
On September 10, 1993, BTR reported a loss on an early extinguishment of debt of $548,323. The loss included prepayment penalties and loan fee expenses amounting to $275,015, and a reduction of net amortized financing costs capitalized as costs of the related operating properties of $273,308.
In August, 1993, a former Officer of BTR surrendered 56,544 shares of BTR stock as full repayment of his note receivable.
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994, 1993
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Mid-Atlantic Realty Trust, "the Company", was incorporated on June 29, 1993 and commenced operations effective with the completion of its initial public share offering on September 11, 1993. The Company is the successor to the operations of BTR Realty, Inc., "BTR". The Consolidated Financial Statements for the period January 1, 1993 through September 10, 1993 of BTR Realty, Inc. are presented for comparative purposes.
Description of Business
The Company is a fully integrated, self managed real estate investment trust which owns, leases, develops, redevelops and manages its retail shopping center facilities and commercial properties. The Company's primary objective is to manage the properties for long-term cash flow growth. The Company's principal strategies are to grow the portfolio through the selective acquisition of additional properties in the Mid-Atlantic region, redeveloping or developing retail properties on a selective basis, and, when appropriate, divesting through sale or exchange of non-strategic properties.
The commercial real estate development and investment industry is subject to widespread competition for desirable sites, tenants and favorable 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 activities. 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 in the industry.
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 contigencies 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. Investments in unconsolidated joint ventures are carried on the equity method. All significant intercompany balances and transactions have been eliminated.
The Company owns 100% majority interests in corporate subsidiaries which are general managing partners as well as limited partners of several partnerships which have outside partners with 50% interests. Based upon the structure of the respective partnership management agreements the Company has control (as defined by the Statement of Financial Accounting Standards No. 94, "Consolidation of All Majority-Owned Subsidiaries", which describes the full consolidation method as preferable to the equity method where there is a 50% or less financial interest but control) over the 50% owned partnerships. The Company uses the full consolidation method to record the 50% owned partnerships.
In September, 1993, MART loaned to outside partners funds to cover their respective partner share of partnership mortgage paydowns using their respective equity interests in the partnerships as collateral for the notes receivable. The company eliminates the partner notes receivable against what is due from joint venture partners. The interest on the partner notes is recognized as interest income.
Recognition of Revenue From Rentals
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 treatment for percentage rent. Percentage rent revenues are based on store sales for certain periods and are charged according to a percentage over a breakpoint amount of sales for the period according to the lease agreement. During the year ended December 31, 1994 and previously, percentage rent was recognized as rental revenues in the period when the actual percentage rent was billed and received. The new method will recognize percentage rent as rental revenues in the period when the actual percentage rent is earned. On January 1, 1995, the Company began estimating the percentage rent earned from major tenants and recorded the amounts monthly as receivable. The cumulative effect of this change on January 1, 1995 was $612,383. The Company believes that this change is preferable since it provides a better matching of revenues and expenses.
Continued
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Recognition of Revenue from Rentals - Continued
Effective April 1, 1994 the Company adopted a new accounting treatment regarding lease cancellation fees received from tenants who want to discontinue their remaining lease term obligations. Prior to April 1, 1994, the lease termination payments for major tenants were recognized as other income in the period when the termination agreement was executed. Under the new treatment, the entire amount of the cancellation or termination fee on the date of the lease termination is deferred and then amortized into income on a straight-line basis over the remaining original lease term as minimum rent. The Company believes that this change is preferable since it provides a better matching of revenues and expenses. During 1994, approximately $687,000 of termination fees were deferred, and $56,000 were amortized. During 1995, approximately $772,000 of termination fees were deferred, and $266,000 were amortized.
Recognition Of Revenue From Property Sales
The sale of residential property and any resulting gain or loss on properties held for sale are recorded upon settlement. Properties held for sale are primarily outparcels of operating properties or undeveloped commercial land.
Net Earnings (Loss) Per Share
Earnings (loss) per share are computed by dividing net earnings (loss) by the weighted average number of common shares and common share equivalent shares outstanding during each year. The effect on earnings per share assuming conversion of the convertible subordinated debentures would be anti-dilutive.
Capitalization Policy and Net Realizable Value
Acquisition costs, interest and other carrying costs, as well as construction and start-up costs of commercial property are capitalized and charged to related undeveloped land, construction in progress or deferred costs. In addition, 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. Management ceases to capitalize or defer these costs when the carrying value equals the net realizable value of the property or costs are unlikely to be recoverable. Net realizable value is determined primarily by the application of the principles of valuation of operating properties. The basis for determining the value of operating properties is the lower of historical cost or the net realizable value. The net realizable value of operating properties is based on the present value of each property's anticipated net cash flow, before debt service payments, calculated using prevailing industry discount and capitalization rates. Anticipated net cash flow is based upon an analysis of the history and future of the property, existing and prospective tenant leases, occupancy rates, and estimated operating expenses. The discount factor, capitalization rates or reversion rates used to arrive at the net realizable value of each property are based on the risk associated with the property as well as the prevailing rates at the end of the reporting period. Risk variations reflect differences in quality, age, location and market conditions of each property.
Properties
Operating properties and property held for development or sale are carried at the lower of historical cost or, where appropriate, an amount not to exceed estimated net realizable value. The amount the Company will ultimately realize could differ from the estimated net realizable value. 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.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (Statement 121). The statement established accounting standards for the impairment of long-lived assets and certain identifiables to be disposed of. This statement requires a write down to fair value when long-lived assets to be held and used are impaired. The statement also requires long-lived assets to be disposed of (e.g. real estate held for sale) to be carried at the lower of cost or fair value less cost to sell and does not allow such assets to be depreciated. The adoption of this statement effective January 1, 1996 will not have a material effect on results of operations, financial condition or liquidity.
In October 1995, the Financial Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", which is effective for fiscal years beginning after December 15, 1995 and for transactions occurring after December 15, 1995. The Statement defines a fair value based method of accounting for an employee stock option or similar equity instruments. Under the fair value method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Statement encourages all entities to adopt the fair value method of accounting for an employee stock option or similar equity instrument; however, it allows an entity to continue to measure compensation costs for stock options or similar equity instruments using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value based method, compensation costs are the excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. Entities electing to remain with the accounting in Opinion 25 must make proforma disclosure of net income and earnings per share as if the fair value method of accounting had been applied. The Company has elected to continue to measure compensation costs for stock options or similar equity instruments using the intrinsic value based method of accounting prescibed by APB Opinion No. 25 with proforma disclosure of net income and earnings per share as if the fair value based method f accounting had been applied.
Income Taxes
The Company has elected to qualify, and intends to continue to qualify as a real estate investment trust, "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 and Cash Equivalents
All highly liquid unrestricted investments with original maturities of three months or less are considered cash equivalents for purposes of the statements of cash flows.
Deferred Financing Costs
Costs associated with the issuance of debt are capitalized and recorded as deferred finance costs and amortized on a straight-line basis, which is not materially different from the interest method, over the term of the related debt.
Effective January 1, 1996 the Company changed its reporting of amortization of deferred finance costs. During the year ended December 31, 1995 and previously, the annual amortization of deferred finance costs was reported in the depreciation and amortization of property and improvements expense line on the consolidated statements of operations. Effective January 1, 1996, the Company will be reporting the annual amortization of deferred finance costs in the interest expense line on the consolidated statement of operations. The Company will restate all comparative prior year interest and depreciation and amortization expense line items. The change will have no effect on the presentation of net earnings, but will only reclassify interest expense and depreciation and amortization expense line items.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
B. PUBLIC OFFERINGS
On September 11, 1993, the Company completed a public offering of 3,450,000 common shares of beneficial interest at $10.50 per share and $60,000,000 in convertible subordinated debentures at 7.625%. Net proceeds from these offerings totaled approximately $90,390,000.
C. OPERATING PROPERTIES
Operating properties consist of the following: December 31, 1995 1994 Land $22,137,380 17,993,243 Land improvements 28,370,084 21,123,172 Buildings 115,270,325 107,030,436 Improvements for tenants 6,136,228 6,013,294 Development costs on completed projects 16,597,684 16,577,892 Furniture, fixtures and equipment 2,377,401 2,181,109 Deferred lease costs 13,243,032 5,592,584 ------------ ----------- 204,132,134 176,511,730 Less accumulated depreciation and amortization 39,430,308 36,448,969 ------------ ----------- $164,701,826 140,062,761 ============ ===========
D. PROPERTIES AND RELATED ACCUMULATED DEPRECIATION AND AMORTIZATION AND MORTGAGES AND CONSTRUCTION LOAN PAYABLE
A summary of all of the Company's properties and related mortgages payable at December 31, 1995 follows:
Accumulated Cost of Depreciation Classi- Mortgages Initial Subsequent Total and fication Payable Cost Improvements Cost Amortization Net Cost
Shopping centers $60,485,066 140,991,245 26,571,938 167,563,183 31,140,277136,422,906 Bowling centers - 2,866,998 69,293 2,936,291 1,387,535 1,548,756 Office buildings 1,926,038 26,415,163 3,652,043 30,067,206 5,718,653 24,348,553 Other rental properties - 2,173,695 706,200 2,879,895 740,250 2,139,645 Other property - 685,559 - 685,559 443,593 241,966 -------------------------------------------------------------------- Operating proper- ties 62,411,104 173,132,660 30,999,474 204,132,134 39,430,308164,701,826 Development operations - 1,510,544 - 1,510,544 - 1,510,544 Property held for development or sale - 8,179,378 - 8,179,378 - 8,179,378 -------------------------------------------------------------------- $62,411,104 182,822,582 30,999,474 213,822,056 39,430,308174,391,748
=================================================================
Mortgages payable aggregating $62,411,104 at December 31, 1995 bear interest at 7.87% to 10.375% and mature in installments through 2006. Aggregate annual principal payments applicable to mortgages payable for the five years subsequent to December 31, 1995 are:
1996 $ 5,972,885 1997 5,388,446 1998 14,204,762 1999 425,901 2000 466,820 Thereafter 35,952,290
A construction loan payable of $10,099,510 at December 31, 1995 bears interest at the lesser of 2.5% over the 30 day LIBOR rate or the prime rate (at December 31, 1995 the interest rate was 8.469%) and matures on October 31, 1996.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
E. DEVELOPMENT OPERATIONS
Development operations consist of the following:
December 31, 1995 1994 Land $ - 5,072,696 Construction in progress 1,225,844 953,456 Pre-construction costs 284,700 328,795 ---------- --------- $1,510,544 6,354,947 ========== =========
Development operations are transferred to operating property costs when a project is completed, at which time depreciation and amortization commences. Consruction period interest cost capitalized during 1995 was approximately $570,000.
F. NOTES AND ACCOUNTS RECEIVABLE
Included in notes and accounts receivable at December 31, 1995 are significant concentrations of amounts due from tenants in two primary geographical areas: the mid-Atlantic region of the United States and Arizona. The Company performs in depth credit evaluations of prospective new tenants and requires security deposits in most circumstances. 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. The Company's accounts receivable at December 31, 1995 included $1,207,000 and $336,000 due from tenants in the mid-Atlantic region and Arizona, respectively. Management believes adequate provision has been made for the Company's credit risk for all receivables.
G. DEFERRED FINANCING COSTS December 31, Deferred financing costs consist of the following: 1995 1994 Deferred costs related to the debentures $3,062,253 3,063,274 Deferred costs of line of credit 263,409 198,972 Deferred financing costs capitalized related to operating properties 1,852,598 1,720,827 --------- --------- 5,178,260 4,983,073 Less accumulated amortization (1,963,104)(1,560,697) --------- --------- Deferred financing costs $3,215,156 3,422,376 ========= =========
H. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following: December 31, 1995 1994 Trade accounts payable $1,600,118 1,195,143 Retainage on construction in progress 635,558 61,117 Accrued debenture interest expense 1,333,994 1,334,375 Accrued expenses 1,035,178 943,642 --------- --------- $4,604,848 3,534,277 ========= =========
I. NOTES PAYABLE Notes payable consist of the following: December 31, 1995 1994 Line of credit $21,500,000 20,100,000 Note payable, bearing interest at 8.71% 30,143 39,413 ---------- ---------- $21,530,143 20,139,413 ========== ==========
At December 31, 1995, the Company has amended the existing agreement with its primary bank to provide for an additional $5,000,000 to its $35,000,000 secured line of credit. The agreement also provides that as long as the Company is in compliance with all loan covenants, the loan maturity date, which at December 31, 1995 was December 31, 1998, 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, 1995, $33,000,000 was fully collateralized with $40,000,000 fully collateralized on March 1, 1996. 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.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. NOTES PAYABLE - Continued
At December 31, 1995, 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 $232,805, was $11,267,000. The maximum level of borrowings under the line of credit was $32,000,000, $20,100,000 and $4,633,130 in 1995, 1994 and 1993, respectively. The average amounts of borrowings were approximately $17,534,000, $6,131,000, and $1,888,000, with weighted average interest approximating 7.8%, 6.5%, and 5.6%, in 1995, 1994 and 1993, respectively. The weighted average interest rate at December 31 was 7.8%, 8.1%, and 6.0% in 1995, 1994, and 1993, respectively.
Aggregate annual principal maturities of notes payable subsequent to December 31, 1995 are as follows: 1996 $ 9,270 1997 9,270 1998 21,509,270 1999 2,333 ==========
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 April, 1995, $20,000 in debentures were converted to 1,904 common shares of beneficial interest. The balance of the debentures, at December 31, 1995, of $59,980,000, convertible at $10.50 per share, if fully converted, would produce an additional 5,712,381 shares. Costs associated with the issuance of the debentures were approximately $3,062,000 at December 31, 1995 and are being amortized through 2003. The debentures are redeemable by the Company at any time on or after September 15, 1996, or at any time for certain reasons intended to protect the Company's REIT status, at 100% of the principal amount thereof, together with accrued interest. The debentures are subordinate to all mortgages payable. On January 29, 1996, $57,000 in debentures were converted to 5,428 common shares of beneficial interest reducing the balance of debentures to $59,923,000.
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. In general terms, under such Code provisions a trust or corporation which, in any taxable year, meets certain requirements and distributes to its shareholders at least 95% of its taxable income will not be subject to Federal income tax to the extent of the income which it distributes.
A REIT will generally not be subject to federal income taxation for the portion of its income that qualifies as REIT taxable income to the extent that it distributes at least 95 percent of its taxable income to its shareholders and complies with certain other requirements. Accordingly, no provision has been made for federal income taxes for the Company and certain of its subsidiaries in the accompanying consolidated financial statements. At December 31, 1995, the income tax basis of the Company's assets was approximately $165,000,000 and liablities was approximately $ 160,000,000.
The income taxes benefit, net, in BTR, for the period January 1, 1993 through September 10, 1993 included a currently payable income tax expense of $52,360, offset by a deferred income tax benefit of $460,570, including the balance of deferred income taxes payable of $466,570 in BTR which was recognized as an income tax benefit. It was determined by BTR that it was more likely than not that there would be no payment in the future of any deferred tax temporary differences due to the expected merger with the Company. This was in accordance with the Statement 109 adopted by BTR as of January 1, 1992.
The net benefit for income taxes consists of the following:
Jan. 1, 1993 thru September 10, 1993
Current taxes: Federal $ - State 52,360 ---------- 52,360 ---------- Deferred: Federal 118,430 State (579,000) ---------- (460,570) ---------- $(408,210) ==========
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
L. SHAREHOLDERS' EQUITY AND STOCK COMPENSATION PLAN
Preferred Shares At its inception on September 11, 1993, Mid-Atlantic Realty Trust authorized 2,000,000 preferred shares of beneficial interest at a par value of $.01 per share. At December 31, 1995, none of these shares were issued and outstanding.
BTR Stock Compensation Plan Under the BTR Executive Stock Compensation Plan, certain officers had been awarded shares of BTR's stock to be issued at a rate of 20% of the shares awarded for each year of continued employment. A charge was made to general and administrative expense at the time of such awards. In 1993, the 78,286 remaining shares in the plan were exercised and issued prior to the merger on September 11, 1993. For the period January 1, 1993 through September 10, 1993, BTR recorded general and administrative expenses of approximately $49,000 representing the increase in recorded value of the awarded share of BTR stock.
MART Incentive Stock Option Plans MART has an Omnibus Share Plan, "Plan", under which Trustees, officers and employees may be granted awards of stock options, stock appreciation rights, performance shares and restricted stock. The purpose of the Plan is to provide equity-based incentive compensation based on long-term appreciation in value of MART's shares and to promote the interests of MART and its shareholders by encouraging greater management ownership of MART's shares. Pursuant to the Plan, the Company authorized on February 1, 1994 the availability of 300,000 shares for the Plan. Upon inception at February 1, 1994 trustees, officers and key employees were granted 256,000 stock options. During 1995 additional grants and cancellations of stock options totaled 1,332 and 3,000, respectively. The outstanding stock options at December 31, 1995, totaling 254,332, allow holders to purchase one share of MART for $10.50 per share. Of outstanding stock options, 170,332 were vested and exercisable at December 31, 1995 and an additional 84,000 vested on January 1, 1996. The closing price of MART shares at December 31, 1995 was $8.625 per share. No options were exercised during the year ended December 31, 1995 and based on the market value of MART shares, the options, if converted, would be anti-dilutive producing fewer weighted average shares for the year ended December 31, 1995.
On September 14, 1995, the Company authorized the availability of 180,000 shares for a "New Plan", the 1995 Stock Option Plan, subject to the approval of shareholders. The New Plan granted a number of shares equal to approximately 56% of the number under the current Plan, or 141,300, which shares will vest 1/3, or 47,100 on September 30, 1995, exercisable at $8 15/16 per share. The balance of the shares will vest on the first and second anniversary thereof, to be priced at the market price on the close of business each date of vesting. No options were exercised during the period September 30, 1995 through December 31, 1995 and based on the market value of MART shares, the options, if converted, would be anti-dilutive.
Acquisition of Outstanding Shares On February 14, 1995, the MART Board of Trustees approved a stock repurchase plan which authorizes the repurchase of up to approximately 310,000 shares. The Company purchased 277,200 shares during the year ended December 31, 1995 for $2,234,616, at an average cost of $8.06 per share. On February 12, 1996 the MART Board of Trustees increased by 100,000 the authorized number of shares that may be repurchased up to 410,000
In 1993, BTR retired 56,544 shares of BTR stock held as collateral for a note receivable from a former officer of the Company.
M. COMMITMENTS
Lease Commitments Minimum rental commitments for operating land leases as of December 31, 1995 are as follows: 1996 $566,000 1997 566,000 1998 566,000 1999 566,000 2000 566,000 Thereafter 22,337,000
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 $262,000 in 1995, $219,000 in 1994, and $176,000 in 1993.
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
N. LEASES
The Company owns shopping centers and other commercial property which are leased, generally on a long-term basis. All leases are classified as operating leases. Future minimum lease payments receivable under noncancelable operating leases are as follows:
1996 $23,461,821 1997 21,724,487 1998 19,208,084 1999 16,975,654 2000 15,105,709 Thereafter 117,694,206 ===========
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 $1,246,000 in 1995, $1,206,000 in 1994, and $1,259,000 in 1993. On a prospective basis, no more than 3% of rental income is derived from any one tenant, except Giant Food of Maryland, which is approximately 11% of Rental income. Giant Food minimum lease payments represent approximately 12% for the years 1996 through 2000 and 34% thereafter of the total minimum lease payments above. The 34% percentage of total minimum lease payments is high due to the fact that Giant Food leases contain 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 INCOME
Other income consists of the following: MART BTR Realty, Inc. Sept. 11 Jan. 1, thru thru Years Ended December 31, Dec. 31, Sept. 10, 1995 1994 1993 1993
Interest and dividends $757,905 727,249 266,141 93,312 Miscellaneous 269,430 149,873 249,368 134,980 ------------------------------------------------- $1,027,335 877,122 515,509 228,292 =================================================
P. 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.
Q. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" (Statement 107) requires the Company to disclose estimated fair values for certain on- and off-balance sheet financial instruments. Fair value estimates, methods, and assumptions are set forth below for the Company's financial instruments as of December 31, 1995 and 1994.
Cash and Cash Equivalents The carrying amount for cash and cash equivalents approximates fair value due to the short maturity of these instruments.
Notes and Accounts Receivable The carrying amount for notes and accounts receivable approximates fair value due to the short maturity of these instruments.
Notes Payable The carrying amount for the line of credit approximates fair value due to its adjustable interest rate.
Mortgages Payable The fair value of mortgages payable was based on the discounted value of contractual cash flows. The discount rate for mortgages payable was estimated using the rate currently offered for borrowings of similar remaining maturities. The carrying amount and estimated fair value of mortgages payable at December 31, 1995 was $62,411,104 and $67,179,000 respectively, and at December 31, 1994 was $53,251,140 and $53,641,000, respectively.
Convertible Subordinated Debentures The fair value of convertible subordinated debentures was based on the discounted value of contractual cash flows. The discount rate for convertible subordinated debentures was estimated using the rate currently offered for borrowings of similar remaining maturities. The carrying amount and estimated fair value of convertible subordinated debentures at December 31, 1995 was $59,980,000 and $60,982,000, respectively, and at December 31, 1994 was $60,000,000 and $52,119,000, respectively.
ITEM 9

ITEM 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None
PART III
ITEM 10

ITEM 10 Directors and Executive Officers of the Registrant
The information with respect to the identity and business experience of the directors of MART and their remuneration, in the definitive proxy statement (to be filed pursuant to Regulation 14A) with respect to the election of directors at the 1996 annual meeting of stockholders, is incorporated herein by reference.
The Executive Officers of MART are as follows: Position and Name Age Business Experience
LeRoy E. Hoffberger 70 Chairman of the Board of MART since September, 1993.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 Hughes 48 President, Principal Executive Officer, and CEO of MART since September, 1993. President of BTR from November, 1990 to September, 1993. Senior Vice President BTR from May, 1989 to November, 1990. Vice President, Controller and Secretary of BTR for more than five years.
Paul F. Robinson 42 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; General Counsel since August, 1985.
Eugene T. Grady 47 Treasurer of MART since September, 1993. Treasurer of BTR since May, 1989.
Paul G. Bollinger 36 Controller and Principal Financial Officer of MART since September, 1993. Controller of BTR since June, 1992. 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.
Each executive officer is elected for a term expiring at the next regular annual meeting of the Board of Directors of the Company or until his successor is duly elected and qualified.
ITEM 11

ITEM 11 Executive Compensation
The information required by this item is incorporated by reference from the Registrant's Proxy Statement filed with respect to the 1996 annual meeting of stockholders.
ITEM 12

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 filed with respect to the 1996 annual meeting of stockholders.
ITEM 13

ITEM 13 Certain Relationships and Related Transactions
The information required by this item is incorporated by reference from the Registrant's Proxy Statement filed with respect to the 1996 annual meeting of stockholders.
PART IV
ITEM 14

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 and BTR Realty, Inc. and Subsidiaries (Predecessor) are included in Part II Item 8: Independent auditors' report Consolidated balance sheets at December 31, 1995 and 1994 Consolidated statements of operations for the years ended December 31, 1995 and 1994 and for the periods ended December 31, 1993 and September 10, 1993 Consolidated statements of shareholders' equity for the years ended December 31, 1995 and 1994 and for the periods ended December 31, 1993 and September 10, 1993 Consolidated statements of cash flows for the years ended December 31, 1995 and 1994 and for the periods ended December 31, 1993 and September 10, 1993 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 Exhibit No. 3. Articles of Incorporation and by-laws. None. 4. Instrument Defining the Right of Shareholders. None. 9. Voting Trust Agreement. None. 11. Computations of net earnings per common share. See Summary of Significant Accounting Policies under Notes to Financial Statements appearing on page 31 of this report. 12. Statement re: computation of ratios. Not applicable. 13. Annual Report to Shareholders. Not applicable. 18. Letter regarding change in accounting principles. See Summary of Significant Accounting Policies under Notes to Financial Statements appearing on pages 30, 31 and 32 of this report and letter from KPMG Peat Marwick LLP. 19. Previously unfiled documents. Not applicable. 21. List of subsidiaries of registrant. Filed herewith. 22. Published report regarding matters submitted to vote of security holders. Not applicable. 23. Consents of experts and counsel. Filed thru EDGAR. 24. Power of Attorney. Not applicable. 27. Financial Data Schedule Filed thru EDGAR. 28. Additional exhibits. Not applicable.
(b) Reports on Form 8-K. None.
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Schedule III - Real Estate and Accumulated Depreciation
Cost capitalized subsequent Year ended Initial cost to Company to acquisition December 31, 1995 Mortgages Buildings and Description Payable Land Improvements Improvements Shopping Centers Harford Mall $19,686,335 599,031 8,457,331 15,649,900 Owings Mills - 4,381,666 8,619,103 - The Shoppes at Easton 7,657,932 2,600,000 10,379,069 10,486 Brandywine Commons - - 12,244,289 - Smoketown Plaza - 516,312 10,095,077 638,297 Park Sedona - 2,251,624 8,397,274 242,766 Colonie Plaza 5,442,755 1,137,567 7,755,095 599,795 Columbia Plaza 4,921,594 999,739 6,887,711 1,466,142 Spotsylvania Crossing - 1,544,314 6,600,616 268,739 Skyline Village - 555,295 6,240,003 1,035,922 Page Plaza - 496,404 5,777,369 120,740 York Road Plaza 8,700,000 1,562,382 2,102,575 2,344,121 Plaza Del Rio - 1,291,325 3,938,734 409,334 Sudley Towne Plaza - 789,881 3,736,837 449,124 Burke Town Plaza 7,198,894 - 2,936,134 1,716,707 Rosedale Plaza 1,869,857 1,024,712 3,217,926 305,002 Wilkens Beltway Plaza 5,007,699 - 3,601,891 337,505 Timonium Shopping Ctr - - 4,031,809 246,212 Rolling Road Plaza - 338,791 1,632,268 2,000,980 Patriots Plaza - - 1,709,846 521,846 Union Hills Plaza - 274,920 679,863 150,417 Dobson-Guadalupe - 69,146 791,347 94,211 Chandler Plaza - 160,671 565,298 64,833 ---------------------------------------------------- 60,485,066 20,593,780 120,397,465 28,673,079 Office Buildings Gateway II - 364,982 12,376,977 1,579,472 Gateway I - 82,396 8,271,751 1,380,776 Patriots Plaza - - 1,522,943 243,394 Wilkens Office II 1,926,038 - 1,644,370 141,706 Wilkens Office I - - 1,383,102 264,969 Wilkens Office III - - 768,642 41,726 ----------------------------------------------------- 1,926,038 447,378 25,967,785 3,652,043 Bowling Centers Freestate - 307,656 1,279,278 2,719 Waldorf - 243,139 579,161 5,690 Clinton - - 457,764 60,884 ------------------------------------------------------ - 550,795 2,316,203 69,293
(Continued)
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Schedule III - Real Estate and Accumulated Depreciation
Cost capitalized subsequent Amount at which carried Year ended to acquisition at close of period December 31, 1995 Carrying Costs Land Buildings and Total Description Land Improvements Improvements Shopping Centers Harford Mall 599,031 24,107,231 24,706,262 Owings Mills 4,381,666 8,619,103 13,000,769 The Shoppes at Easton 2,600,000 10,389,555 12,989,555 Brandywine Commons - 12,244,289 12,244,289 Smoketown Plaza 516,312 10,733,374 11,249,686 Park Sedona (293,550) (1,095,141) 1,958,074 7,544,899 9,502,973 Colonie Plaza 1,137,567 8,354,890 9,492,457 Columbia Plaza 999,739 8,353,853 9,353,592 Spotsylvania Crossing 1,544,314 6,869,355 8,413,669 Skyline Village 555,295 7,275,925 7,831,220 Page Plaza 496,404 5,898,109 6,394,513 York Road Plaza 1,562,382 4,446,696 6,009,078 Plaza Del Rio 1,291,325 4,348,068 5,639,393 Sudley Towne Plaza 789,881 4,185,961 4,975,842 Burke Town Plaza - 4,652,841 4,652,841 Rosedale Plaza 1,024,712 3,522,928 4,547,640 Wilkens Avenue 475,481 475,481 3,939,396 4,414,877 Timonium Shopping Ctr - 4,278,021 4,278,021 Rolling Road Plaza (837,931) 338,791 2,795,317 3,134,108 Patriots Plaza - 2,231,692 2,231,692 Union Hills Plaza 274,920 830,280 1,105,200 Dobson-Guadalupe 69,146 885,558 954,704 Chandler Plaza (86,450) (263,550) 74,221 366,581 440,802 ---------------------------------------------------------- 95,481 (2,196,622)20,689,261 146,873,922 167,563,183
Office Buildings Gateway II 364,982 13,956,449 14,321,431 Gateway I 82,396 9,652,527 9,734,923 Patriots Plaza - 1,766,337 1,766,337 Wilkens Office II - 1,786,076 1,786,076 Wilkens Office I - 1,648,071 1,648,071 Wilkens Office III - 810,368 810,368 ---------------------------------------------------------- - - 447,378 29,619,828 30,067,206 Bowling Centers Freestate 307,656 1,281,997 1,589,653 Waldorf 243,139 584,851 827,990 Clinton - 518,648 518,648 ----------------------------------------------------------- - - 550,795 2,385,496 2,936,291
(Continued)
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Schedule III - Real Estate and Accumulated Depreciation
Life on which Year ended depreciation on December 31, 1995 latest income Accumulated Date of Date statement is Description Depreciation Construction Acquired computed Shopping Centers Harford Mall 9,569,980 12/73 5-50 yrs. Owings Mills 15,692 12/95 5-50 yrs. The Shoppes at Easton 289,368 9/94 5-50 yrs. Brandywine Commons 34,823 11/95 5-50 yrs. Smoketown Plaza 2,618,269 4/87 5-50 yrs. Park Sedona 1,007,351 11/90 5-50 yrs. Colonie Plaza 1,980,527 12/87 5-50 yrs. Columbia Plaza 1,848,496 6/88 5-50 yrs. Spotsylvania Crossing 1,768,599 5/87 5-50 yrs. Skyline Village 1,626,264 5/88 5-50 yrs. Page Plaza 740,648 8/91 5-50 yrs. York Road Plaza 922,675 11/85 5-50 yrs. Plaza Del Rio 696,779 2/89 5-50 yrs. Sudley Towne Plaza 1,252,424 7/84 5-50 yrs. Burke Town Plaza 1,801,538 7/79-7/82 5-50 yrs. Rosedale Plaza 540,639 10/89 5-50 yrs. Wilkens Avenue 1,394,775 5/81 5-50 yrs. Timonium Shopping Ctr 260,285 10/93 5-50 yrs. Rolling Road Plaza 1,051,738 6/73 5-50 yrs. Patriots Plaza (A) 879,381 6/84 5-50 yrs. Union Hills Plaza 323,571 11/83 5-50 yrs. Dobson-Guadalupe 325,387 9/85 5-50 yrs. Chandler Plaza 191,068 3/84 5-50 yrs. -------------- 31,140,277 Office Buildings Gateway II 1,913,709 7/89 5-50 yrs. Gateway I 2,245,984 4/87 5-50 yrs. Patriots Plaza 519,941 8/85 5-50 yrs. Wilkens Office II 403,326 1/87 5-50 yrs. Wilkens Office I 516,507 1/85 5-50 yrs. Wilkens Office III 119,186 1/91 5-50 yrs. ----------------- 5,718,653 Bowling Centers Freestate 917,453 3/78 5-50 yrs. Waldorf 218,707 3/79 5-50 yrs. Clinton 251,375 8/71 5-50 yrs. ------------------ 1,387,535
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Schedule III - Real Estate and Accumulated Depreciation
Cost capitalized subsequent Year ended Initial cost to Company to acquisition December 31, 1995 Mortgages Buildings and Description Payable Land Improvements Improvements (Continued)
Other Rental Properties Business Center - 395,536 1,190,692 59,403 Southwest - - 283,039 596,738 Waldorf Firestone - 9,261 161,543 4,910 Ocean City - - 133,624 - --------------------------------------------------------- - 404,797 1,768,898 661,051
Development Operations - - 1,510,544 -
Property Held - 8,179,378 - -
Other Property - - 685,559 - -------------------------------------------------------- $62,411,104 30,176,128 152,646,454 33,055,466 ============================================
(Continued)
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Schedule III - Real Estate and Accumulated Depreciation
Cost capitalized subsequent Amount at which carried Year ended to acquisition at close of period December 31, 1995 Carrying Costs Land Buildings and Total Description Land Improvements Improvements (Continued)
Other Rental Properties Business Center 395,536 1,250,095 1,645,631 Southwest 45,149 45,149 879,777 924,926 Waldorf Firestone 9,261 166,453 175,714 Ocean City - 133,624 133,624 --------------------------------------------------------- 45,149 - 449,946 2,429,949 2,879,895
Development Operations - - - 1,510,544 1,510,544
Property Held - - 8,179,378 - 8,179,378
Other Property - - - 685,559 685,559 --------------------------------------------------------- 140,630(2,196,622) 30,316,758 183,505,298 213,822,056 ============================================
(Continued)
MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Schedule III - Real Estate and Accumulated Depreciation
Life on which Year ended depreciation on December 31, 1995 latest income Accumulated Date of Date statement is Description Depreciation Construction Acquired computed (Continued)
Other Rental Properties Business Center 177,138 4/90 5-50 yrs. Southwest 443,206 4/68 5-50 yrs. Waldorf Firestone 60,889 9/78 5-50 yrs. Ocean City 59,017 12/87 5-50 yrs. ------------- 740,250
Development Operations - 91-95
Property Held - 7/73-12/95
Other Property 443,593 9/82-12/95 3-10 yrs. ------------- 39,430,308 =============
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
(1) The changes in total cost of properties for the three years ended December 31, 1995 are as follows: Years ended December 31, 1995 1994 1993 Balance beginning of year $191,497,142 171,661,868 174,593,579 Additions during year: Acquisitions 12,244,289 18,051,765 4,076,958 Improvements 2,356,780 2,159,354 5,308,235 Development operations 15,685,170 1,986,458 1,448,303 ------------------------------------------ 30,286,239 22,197,577 10,833,496 Deductions during year: Write-downs to net realizable value (2)(a) - - (1,318,314) Cost of real estate sold (6,292,793) (2,304,214) (1,637,772) Transfers (4) - - (9,416,190) Retirements and disposals (1,668,532) (58,089) (1,392,931) ------------------------------------------ (7,961,325) (2,362,303) (13,765,207) ------------------------------------------ Balance end of year $213,822,056 191,497,142 171,661,868 ========================================== (2) Write-downs to net realizable value are reported in the statement of operations as follows:
BTR Realty, Inc. January 1 thru Sep. 10, 1993
Unrecoverable development costs $ 1,278,817 -------------- $ 1,278,817 ==============
(a) In the period 1/1/93 thru 9/10/93 BTR reduced total cost of properties by $1,318,314 and reduced related accumulated depreciation by $39,497 resulting in a net write-down of $1,278,817.
(3) The changes in accumulated depreciation for the three years ended December 31, 1995 are as follows:
Years ended December 31, 1995 1994 1993 Balance beginning of year ($36,448,969) (32,650,352) (29,168,658) Depreciation and amortization (4,983,617) (4,549,782) (4,735,979) Transfers (4) - - 96,041 Retirements and disposals 2,002,278 751,165 1,158,244 -------------------------------------------- Balance end of year ($39,430,308) (36,448,969) (32,650,352) ============================================
(4) Transfers include assets originally in operating properties reclassified on the balance sheet to the following:
Year ended December 31, Total Cost Net assets of properties to be sold ($7,030,232) Deferred financing costs (2,385,958) ------------- (9,416,190) Accumulated Depreciation Net assets of properties to be sold 524,425 Deferred financing costs: - Reclassification of asset (765,192) - Reclassification of amortization 336,808 ------------- 96,041 ------------- Net transfers ($9,320,149) =============
(5) The aggregate basis of properties for Federal income tax purposes is approximately $157,000,000 at December 31, 1995. (6) See Item 2 for geographic location of properties. (7) Freestate includes 2 bowling centers in Illinois.
EXHIBIT 21. PARENT AND SUBSIDIARIES OF REGISTRANT
The subsidiaries of MART are listed below. All are engaged in the ownership and/or development of commercial or residential real estate in the United States. All are included in the consolidated financial statements filed as part of this Annual Report.
State of Incorporation Name or Formation Interest CORPORATIONS:
BTR Arkor, Inc. Maryland 100% BTR Atlanta Daycare, Inc. Maryland 100% BTR Business Center, Inc. Maryland 100% BTR Chandler, Inc. Maryland 100% BTR Delmar, Inc. Maryland 100% BTR East Greenbush, Inc. Maryland 100% BTR Fallston, Inc. Maryland 100% BTR Fallston Corner, Inc. Maryland 100% BTR Fallston Management, Inc. Maryland 100% BTR Financial, Inc. Maryland 100% BTR Free State Bowls, Inc. Maryland 100% BTR Gateway, Inc. Maryland 100% BTR Hillside, 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 Rockburn, 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%
(Continued)
EXHIBIT 21. PARENT AND SUBSIDIARIES OF REGISTRANT - (Continued)
State of Name Incorporation CORPORATIONS: or Formation Interest
Burke Town Plaza, Inc. Maryland 100% Burlington Commerce Park, Inc. Maryland 100% Brandywine Commons, Inc. Maryland 100% Christiansburg Plaza, Inc. Maryland 100% Clinton Development Company, Inc. Maryland 100% Cobleskill Plaza, Inc. Maryland 100% Colonie Plaza, Inc. Maryland 100% Columbia Plaza, Inc. Maryland 100% Commonwealth Plaza, Inc. Maryland 100% Concourse Realty Management, Inc. Maryland 100% Cypress Square, 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% Greencastle Plaza, Inc. Maryland 100% Harrisonburg Plaza, Inc. Maryland 100% Kingsbrook Funding, Inc. Maryland 100% Kingston Crossing, Inc. Maryland 100% MART Acquisitions, 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% Parkway Pond, Inc. Maryland 100% Ridgewood Funding, 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% Scotia Crossing, Inc. Maryland 100% Sedona Sewer, Inc. Maryland 100% Senate Properties, Inc. Maryland 100% Southdale Mortgage Inc. Maryland 100% Southwest Development Properties, Inc. Maryland 100% Timonium Shopping Center, Inc. Maryland 100% Tempe Auto Center, Inc. Maryland 100% Wake Plaza, Inc. Maryland 100% Wyaness, Inc. Maryland 100%
(Continued)
EXHIBIT 21. PARENT AND SUBSIDIARIES OF REGISTRANT - (Continued)
The following are partnerships in which Mid-Atlantic Realty Trust, BTR Realty, Inc. or Financial Associates of Maryland have partnership interests:
State of Incorporation Name or Formation Interest Arizona & Warner Limited Partnership Maryland 50% BBG Joint Venture Maryland 60% BBG Properties Limited Partnership Maryland 60% Cypress Square Limited Partnership Maryland 55% Fredericksburg Plaza Limited Partnership Maryland 80% Gateway International Limited Partnership Maryland 100% Harbour Island Associates Maryland 100% Hillside at Seminary Joint Venture Maryland 100% Kensington Associates Maryland 75% North Greenbrier Limited Partnership Maryland 100% Northwood Limited Partnership Maryland 67% Ridgewood Associates Maryland 100% Rockburn Associates Maryland 100% Rosedale Plaza Limited Partnership Maryland 100% Route 642 Limited Partnership Maryland 60% Scotia Associates Limited Partnership Maryland 50% Southdale Limited Partnership Maryland 50% Union Hills Limited Partnership Maryland 50% Wyaness Associates Maryland 100%
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 3/26/96 /s/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: 3/27/96 /s/s LeRoy E. Hoffberger LeRoy E. Hoffberger, Chairman
Date: 3/26/96 /s/s F. Patrick Hughes F. Patrick Hughes, Trustee, Principal Executive Officer
Date: 3/26/96 /s/s Paul G. Bollinger Paul G. Bollinger, Controller, Principal Financial Officer
Date: 3/26/96 /s/s Eugene T. Grady Eugene T. Grady, Treasurer
Date: 3/26/96 /s/s Robert A. Frank Robert A. Frank, Trustee
Date: 3/26/96 /s/s Marc P. Blum Marc P. Blum, Trustee
Date: M. Ronald Lipman, Trustee
Date: 3/23/96 /s/s Stanley J. Moss, Esquire Stanley J. Moss, Esquire, Trustee
Date: 3/26/96 /s/s Daniel S. Stone Daniel S. Stone, Trustee
Date: 3/25/96 /s/s David F. Benson David F. Benson, Trustee