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 predecessor to the Company.
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 two operating shopping centers, sixteen 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 3,022,000 square feet, of which approximately 94% was leased at December 31, 1994. Total gross leasable area includes 2,786,000 square feet of established operating properties, of which approximately 97% was leased at December 31, 1994 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, 1994. Of these properties, approximately 83% of the gross leasable area is in the states of Maryland, New York and Virginia, 11% in Arizona and 6% in other states. The Company also owns one land parcel being developed into a shopping center and has 8 undeveloped parcels of commercial and residential zoned land totaling approximately 173 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 45 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, 1994:
I. SHOPPING CENTERS A. In Operation (1) Percentage of Type of land Area in Leasable Percentage Principal Lease ownership ownership acres square feet leased tenants expirations Name and Location
Harford Mall 100% Fee(2) 38.0 557,000(3) 99% Hecht's, 1995-2008 U.S. Route 1 Montgomery Ward, Bel Air Woolworth
Patriots Plaza 50% Long-term 6.1 39,000 92% Denny's, 1995-2005 Ritchie Highway of lease (4) Dunkin Donuts Anne Arundel County Partnership
Rolling Road Plaza 100% Fee 6.5 63,000 100% Fair Lanes, 1995-2009 Rolling Road Firestone Baltimore County
Rosedale Plaza 100% Fee 9.2 73,000 86% Valu Food, 1995-1999 Rite Aid Chesaco and Weyburn Avenue Baltimore County
Shoppes at Easton 100% Fee 13.9 113,000 99% Giant Food, 1997-2024 Route 50 Fashion Bug Easton
Wilkens Beltway Plaza 75% Fee 7.1 65,000 100% Giant Food, 1995-2014 Wilkens Avenue of Partnership Provident Bank, Baltimore County Radio Shack, Carrollton Bank
York Road Plaza 100% Fee 7.5 52,000 100% Giant Food, 1995-2000 York Road Firestone Baltimore County
VIRGINIA PROPERTIES: Burke Town Plaza 100% Long-term 12.6 114,000 100% Safeway, 1995-2002 Old Keene Mill Road lease(5) CVS Drugs Burke
Skyline Village 100% Fee 14.6 127,000 100% Sears, 1995-2009 US Route 33 Richfood Harrisonburg
Smoketown Plaza 60% Fee 27.0 176,000 98% Shoppers Food 1995-2011 Davis Ford and of Partnership Warehouse, CVS Drugs, Smoketown Roads Frank's Nursery & Crafts Prince William County
Spotsylvania Crossing 80% Fee 11.2 142,000 100% K-Mart, CVS 1996-2007 Route 3 & Bragg Road of Partnership Drugs Fredericksburg
ITEM 2. Properties (Continued)
I. SHOPPING CENTERS (continued) A. In Operation (continued)
Percentage of Type of land Area in Leasable Percentage Principal Lease ownership ownership acres square feet leased tenants expirations VIRGINIA PROPERTIES (continued):
Sudley Towne Plaza 100% Fee 9.6 108,000 96% Burlington Coat 1995-2009 Route 234 & Sudley Manor Dr. Factory, CVS Manassas Drug Store
ARIZONA PROPERTIES:
Dobson-Guadalupe 100% Fee 3.2 22,000 84% Nevada Bob's 1995-2001 Shopping Center Dobson & Guadalupe Roads Mesa
Fair Lanes Chandler 50% Fee 1.1 10,000 100% No principal Plaza of Partnership tenants selected Arizona & Warner Roads Chandler
Fair Lanes Union 50% Fee 5.9 17,000 88% No principal 1995-1999 Hills Plaza of Partnership tenants selected Union Hills Drive Phoenix
Gateway Park 100% Fee 10.5 82,000 98% Bashas', 1995-2011 Page Corral West
McRay Plaza 100% Fee 4.9 35,000 100% Mountainside 1996-2004 McClintock & Ray Roads Fitness Chandler
Park Sedona 100% Fee 11.4 99,000 99% Safeway, 1995-2011 Highway 89 A Payless Drug Store Sedona
Plaza Del Rio 100% Fee 11.8 60,000 100% Payless Drug 1995-2009 16th Street and Avenue B Store Yuma
NEW YORK PROPERTIES: Colonie Plaza 100% Fee 18.7 140,000 98% Price Chopper, 1995-2010 Central Avenue RX Place, Colonie Paper Cutter
Columbia Plaza 100% Fee 16.0 117,000 98% Price Chopper, 1995-2008 Columbia Turnpike Ben Franklin East Greenbush
B. Under Development
MARYLAND PROPERTIES: Timonium Mall 100% Long-term 12.9 236,000 64% Caldor, 2001-2011 York & Ridgely Roads lease (6) Circuit City Timonium
(1) Shopping centers in operation are subject to mortgage financing aggregating $50,086,463 at December 31, 1994. (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, 1994 of $19,821,030. 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 13 years plus two 10 year options. (5) Remaining term of 37 years plus three 15 year renewal options. (6) Remaining term of 22 years plus five 10 year options.
ITEM 2. Properties (Continued)
II. OFFICE BUILDINGS
A. In Operation (7)
Percentage of Type of land Area in Leasable Percentage Principal Lease ownership ownership acres square feet leased tenants expirations
Gateway International I 100% Fee 7.0 84,000 91% Browning Ferris, 1995-2003 Elkridge Landing & Daughters of Charity Winterson Roads Health System, Anne Arundel County US Healthcare, Tandem Computers
Gateway International II 100% Fee 15.5 119,000 90% Digital Equip. 1995-2004 Elkridge Landing & Corporation, Winterson Roads Price Waterhouse, Anne Arundel County MART, AT&T, American Express
Patriots Plaza 50% Long-term 0.5 28,000 24% No principal 1996-2004 Office Building of Partnership lease (8) tenants selected Ritchie Highway Anne Arundel County
Wilkens Beltway Plaza 75% Fee 3.9 53,000 100% Ryder Truck 1995-2000 Office Park of Partnership Rental Inc., Freestate Buildings I, II & III Health, Prudential Wilkens Avenue and Maiden Choice Lane Health System Baltimore County
III. OTHER DEVELOPED PROPERTIES
A. In Operation Leasable Per- Principal Name and Percentage of Type of land Area in square centage Lease Location ownership ownership acres Improvements feet leased tenants expirations
MARYLAND PROPERTIES:
The Business Center at 100% Fee 5.4 One-story 27,000 96% No principal 1995-1998 Harford Mall Warehouse tenants selected Harford County
Clinton Property 100% Long-term 2.9Bowling Center 29,000 100%Fair Lanes 1995-1996 Prince George's lease (9) and Bank County
Southwest Property 100% Fee (10) 3.2 One-story 25,000 100% Shell Oil, 1995-1999 Anne Arundel Office Building, One-story Carrier/Otis County Warehouse and Gas Station Potomac Air Gas
Waldorf Property 100% Fee 3.6 Bowling Center 30,000 100%Fair Lanes, 1997-1998 Waldorf and Tire Center Firestone
ILLINOIS PROPERTIES: Illinois Properties 100% 2 parcels 5.0 2 Bowling 71,000 100% Fair Lanes 1995-1998 Chicago in fee Centers
TEXAS PROPERTIES: Regal Center (11) 100% Fee 6.0 One-story 109,000 93% Berger Allied 1995-1997 Dallas Warehouse
(7) Office buildings in operation are subject to mortgage financing aggregating $3,164,677 as of December 31, 1994. (8) Remaining term of 13 years plus two 10 year options. (9) Remaining term of 32 years plus a 45 year renewal option. (10) Ground Lease was purchased by BTR Realty, Inc. in August, 1993. (11) Regal Center was sold on February 17, 1995 for $1,800,480, generating a loss on the sale of approximately $370,000.
ITEM 2. Properties (Continued)
IV. DEVELOPMENT OPERATIONS Leasable Per- Principal Name and Percentage of Type of land Area in square centage Lease Location ownership ownership acres Improvements feet leased tenants expirations
Owings Mills 100% Fee 12.5 Neighborhood 125,000 76% Giant 1998-2020 New Town Village Shopping Center Food Lakeside Blvd. Owings Mills
V. 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 Industrial (Adjacent to Harford Mall) Harford County
North East Property 100% Fee 56.0 Commercial/ North East Residential
Northwood Industrial Park 67% Fee 24.4 Industrial Salisbury of Partnership
Pulaski Property 100% Fee 3.0 Industrial Baltimore County
NORTH CAROLINA PROPERTIES: Burlington Commerce Park(12)100% Fee 46.8 Commercial Burlington
Hillsborough Crossing 100% Fee 13.9 Commercial Hillsborough
(12) Lot #10, 1.2 Acres, at Burlington Commerce Park was sold on January 6, 1995 for $40,000.
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.
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:
1994 Cash Dividend Paid First Quarter $0.21 Second Quarter $0.21 Third Quarter $0.21 Fourth Quarter $0.22 Total 1994 $0.85
1993 Cash Dividend Paid Fourth Quarter $0.05
On February 14, 1995, MART declared a quarterly cash dividend of $.22 per share payable March 15, 1995 to shareholders of record February 28, 1995.
The number of holders of record of the MART shares as of February 16, 1995 was 1,292. 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 the Consolidated Financial Statements of Mid-Atlantic Realty Trust as of December 31, 1994 and December 31, 1993, and for the year ended December 31, 1993 and for the period September 11, 1993 (commencement of operations) through December 31, 1993, and also includes the Consolidated Financial Statements of BTR Realty, Inc. as of December 31, 1992, 1991, 1990 and for the periods January 1, 1993 through September 10, 1993, and for the years ended December 31, 1992, 1991, and 1990. 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 || ----------------------------------------------|| Year ended September 11, 1993 to || December 31, 1994 December 31, 1993 || || Revenues $22,848,881 6,576,684 || ============== ============ || Net Earnings (Loss) || Before Cumulative || Effect of Change In || Accounting Principle and || Extraordinary Item $2,916,286 467,474 || Cumulative Effect of Change || In Accounting Principle - - || -------------- ------------ || Net Earnings (Loss) Before || Extraordinary Item 2,916,286 467,474 || Extraordinary Item - - || -------------- ------------ || Net Earnings (Loss) $2,916,286 467,474 || ============== ============ || || Net Earnings (Loss) Per || Share Before Cumulative || Effect of Change In || Accounting Principle || and Extraordinary Item $0.46 0.07 || Cumulative Effect of Change || In Accounting Principle - - || ------------- ------------ || Net Earnings (Loss) Per || Share Before || Extraordinary Item $0.46 0.07 || Extraordinary Item - - || ------------- ------------ || Net Earnings (Loss) || Per Share $0.46 0.07 || ============= ============ || || Weighted Average Shares || Outstanding, || Including Common || Share Equivalents (1) 6,291,407 6,291,407 || ============= ============ || || Total Assets $162,842,567 148,563,052 || ============= ============ || Indebtedness: || Total mortgages, convertible || debentures, construction || loans and notes payable $133,390,553 116,494,372 || ============= ============ || || Net cash provided by || (used in) operating || activities $7,766,044 3,479,346 || ============= ============ || || Cash Dividends || Paid Per Share $0.85 0.05 || ============= ============ ||
BTR Realty, Inc. ------------------------------------------------ January 1, 1993 to September 10, Years ended December 31, 1993 1992 1991 1990
Revenues 15,912,211 22,655,133 22,779,812 20,366,006
Net Earnings (Loss) Before Cumulative Effect of Change In Accounting Principle and Extraordinary Item (2,057,106) (1,118,957) (4,688,646) (6,374,172) Cumulative Effect of Change In Accounting Principle - 1,286,000 - - ------------------------------------------------ Net Earnings (Loss) Before Extraordinary Item (2,057,106) 167,043 (4,688,646) (6,374,172) Extraordinary Item (548,323) - - - ------------------------------------------------ Net Earnings (Loss) (2,605,429) 167,043 (4,688,646) (6,374,172) ================================================
Net Earnings (Loss) Per Share Before Cumulative Effect of Change In Accounting Principle and Extraordinary Item (0.24) (0.13) (0.55) (0.74)
Cumulative Effect of Change In Accounting Principle - 0.15 - - ------------------------------------------------ Net Earnings (Loss) Per Share Before Extraordinary Item (0.24) 0.02 (0.55) (0.74) Extraordinary Item (0.06) - - - ------------------------------------------------ Net Earnings (Loss) Per Share (0.30) 0.02 (0.55) (0.74) ================================================
Weighted Average Shares Outstanding, Including Common Share Equivalents (1) 8,512,718 8,503,916 8,527,036 8,600,395 ================================================
Total Assets 147,869,512 153,212,133 159,879,954 166,319,506 ================================================
Indebtedness: Total mortgages, convertible debentures, construction loans and notes payable 150,666,971 149,168,632 153,024,838 151,677,634 ================================================
Net cash provided by (used in) operating activities 4,129,635 1,249,138 (961,065) 1,091,144 ================================================ Cash Dividends Paid Per Share 0.58 - - 0.08 ================================================
(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
Pro Forma Data The following sets forth summary financial data on a 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 Pro Forma Financial Data In thousands, except per share data
Years ended December 31, 1994 1993 1992 ACTUAL PRO FORMA
Revenues $22,849 20,777 20,051
Earnings $2,916 1,217 494 Earnings per share $0.46 0.19 0.08
Funds from operations (FFO)(1): Primary $6,797 6,034 5,398 Fully diluted $11,400 10,609 9,973
Weighted average number of shares outstanding: Primary 6,291 6,291 6,291 Fully diluted 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. The presentation of funds from operations is not normally included in financial statements prepared in accordance with generally accepted accounting principles (GAAP).
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited combined 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 =================================================
The unaudited combined quarterly results of operations for MART and BTR for 1993 are summarized as follows:
Quarter ended >--1/1/93(BTR)-9/10/93---<>9/11/93-(MART)12/31/93< 1993 March 31, June 30, September 30, December 31, Revenues $5,267,903 5,710,208 6,024,780 5,486,004
(Loss) earnings before extraordinary item ($383,355)(1,154,053) (481,077) 428,853 Extraordinary item - early extinguishment of debt - - (548,323) - -------------------------------------------------- Net (loss) earnings ($383,355)(1,154,053) (1,029,400) 428,853 ==================================================
(Loss) earnings per share before extraordinary item ($0.05) (0.13) (0.05) 0.06 Extraordinary item - early extinguishment of debt - - (0.06) - ------------------------------------------------- Net (loss) earnings per share ($0.05) (0.13) (0.11) 0.06 =================================================
Quarterly results are influenced by a number of factors including timing of settlements of property sales, completion of operating projects, write-offs of unrecoverable development costs, and tax benefits.
ITEM 7

ITEM 7
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY) 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, 1994, with the year ended December 31, 1993, which includes the summation of the Company's and BTR's results of operations. The discussion also compares the operations for the year ended December 31, 1993, which includes the summation of the Company's and BTR's results of operations, with the operations of BTR for the year ended December 31, 1992.
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 & 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 and 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.
(Continued)
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY) MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 a residential operating property sold in February, 1994 which decreased operating expenses by $321,000. In addition, operating expense decreased $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, and 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.
(Continued)
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of 1993 to 1992
Rental revenues increased by $465,000, or 2%, to $20,682,000 for the year ended December 31, 1993 from $20,217,000 for the year ended December 31, 1992. Net increases in occupancy and CPI rental rates resulted in rental increases of approximately $1,255,000, and the acquisition of Timonium Mall contributed to a rental increase of $149,000, which were offset by a $433,000 loss of rental attributable to operating properties sold in 1992 or discontinued in 1993, a $450,000 loss of rental due to vacancies and reserves, and other rental changes.
Sales of residential property in BTR decreased by $89,000 to $1,032,000 in 1993 from $1,121,000 in 1992 due to the discontinuation and final sellout of residential assets in July, 1993.
Gains on properties held for sale decreased in BTR by $250,000 to $31,000 in 1993 from $281,000 in 1992 due to higher profit margins on properties sold in 1992.
Other income decreased by $292,000 to $744,000 in 1993 from $1,036,000 in 1992 primarily as a result of income of $329,000 from the sale of development rights and $119,000 of income from bankruptcy settlement in 1992 and a $166,000 loss included in BTR's other income in September, 1993 related to a provision for losses on notes receivable. The decreases were offset by increases due to a $210,000 increase in income from a lease termination payment in December, 1993 and $187,000 in interest income increases from partners notes receivables added in September, 1993, as well as other minimal changes in other income.
As a result of the above changes total revenues decreased by $166,000 to $22,489,000 in 1993 from $22,655,000 in 1992.
Interest expense decreased by $1,678,000 to $12,354,000 in 1993 from $14,032,000 in 1992 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, as well as a decrease in interest expense attributable to the refinancing in 1992 and discontinuation of operations in 1993 of a residential operating property and to favorable reduction in interest rates. Approximately $1,155,000 in interest expense decreases for the period September 10, 1993 through December 31, 1993 can be attributable to the payoff of mortgage debt and replacement with debentures and common shares. A decrease in interest cost of $304,000 can be attributable to the refinancing in 1992 and discontinuation of operations in September, 1993 of a residential operating property sold in February, 1994.
Depreciation and amortization decreased by $42,000 to $4,736,000 in 1993 from $4,778,000 in 1992, primarily due to the sale in 1992 of two operating properties and the discontinuation in September, 1993 of the residential operating property sold in February, 1994.
Operating expenses decreased by $232,000 to $3,754,000 in 1993 from $3,986,000 in 1992, primarily due to the sale in 1992 of two operating properties and the discontinuation in September, 1993 of the residential operating property sold in February, 1994.
Cost of residential property sold decreased by $60,000 to $1,008,000 in 1993 from $1,068,000 in 1992 due to the discontinuation of the residential sales in July, 1993.
General and administrative expenses increased by $131,000 to $1,354,000 in 1993 from $1,223,000 in 1992 due to an increase in insurance expense of $35,000 and an increase of $318,000 in stock compensation expense resulting from a $269,000 adjustment to accrued expense in 1992, due to a decrease in the value of BTR stock. The increases were offset by a decrease in professional fees of $36,000, a decrease in net payroll costs of $107,000, a decrease of $50,000 in 401K Plan expenses and changes in other categories.
Unrecoverable development costs increased by $1,017,000 in BTR to $1,279,000 in 1993 from $262,000 in 1992 due to write-downs 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.
(Continued)
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Comparison of 1993 to 1992 - Continued
Minority interest decreased by $158,000 to an expense of $2,000 in 1993 from a benefit of $156,000 in 1992 generally due to lower losses in minority interest ventures.
Loss from operations decreased by $540,000 to $1,998,000 in 1993 from $2,538,000 in 1992. At January 1, 1992, BTR recognized the positive, cumulative effect of a change in accounting for income taxes of $1,286,000. 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 and $127,000 was recognized by BTR for the periods ended 1993 and 1992, respectively. The 1992 accounting change, combined with a 1992 $48,000 loss on the sale of operating properties, a $1,340,000 gain on fire damage in 1992, the 1993 extraordinary item and income tax benefits for both periods, offset the loss from operations for the periods, resulting in net earnings of $167,000 for the year ended 1992 and a $2,138,000 net loss for the combined year ended 1993 for BTR and the Company.
Cash Flow comparison
The following discussion compares the statements 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. The discussion also compares 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, with the statements of cash flows of BTR for the year ended December 31, 1992.
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. The change in net cash flow provided by operating activities was due primarily to the factors described in the comparison of operating results above. The level of net cash provided by operating activities was also affected by timing in the payment of operating liabilities and the receipt of revenues from rental operations.
Net cash flow used in investing activities increased by $13,680,000, to $19,630,000 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 three major net cash increases: (1) $18,369,000 in cash increases due to net additions to notes payable primarily in 1994 for the 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.
(Continued)
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Cash Flow comparison - Continued
Cash Flow comparison of 1993 to 1992
Net cash flow provided by operating activities increased by $6,360,000, to $7,609,000 for the year ended December 31, 1993 from $1,249,000 for the year ended December 31, 1992. Net cash flow increased generally due to the following: An increase in operating liabilities of $4,634,000 primarily consisting of $1,394,000 in 1993 accrued interest expense on newly issued debentures (See Note K), an increase of $1,865,000 due to a reduction in deferred income tax liability for 1993 and 1992 (See Note L), and the balance of the increase, $1,375,000, was primarily a decrease in 1992 in accounts payable and accrued expenses primarily due to a reduction in 1992 development activity. Other net cash flow increases of $2,626,000 were due to two non-recurring events in 1992, a cumulative effect of change in accounting principle, and a gain on fire damage of an operating property. Another major increase in net cash flow was due to $1,017,000 in unrecoverable development cost increases (described above). The increases were offset by a decrease in net earnings of $2,305,000 (described above) and other changes in net cash flow.
Net cash flow used in or provided by investing activities decreased by $8,532,000, to net cash used in investing activities of $5,950,000 from net cash provided by investing activities of $2,582,000. The decrease was primarily a result of the following: an additions to properties increase of $4,586,000 (primarily the Timonium Mall purchase in October, 1993). A reduction in proceeds from sales of properties of $3,150,000 (primarily due to more sales of land held for sale and residential property in 1992), and a reduction due to the transfer or sale of investments in 1992 of $626,000.
Net cash flow used in financing activities decreased by $2,861,000, to $1,070,000 from $3,931,000. The decrease was primarily due to the net cash flow provided by the net proceeds from the sale of debentures and common shares of $93,453,000 offset by 3 major net cash uses: (1) net reductions in construction loans payable, and mortgages payable of $82,387,000, (2) dividends paid in 1993 of $5,259,000, and (3) 1993 additions to deferred debenture costs of $3,063,000.
Liquidity and Capital Resources
Historically, BTR's principal source of capital consisted of acquisition and development loans, with recourse to the borrower, which funded land and construction costs. As development projects were completed, acquisition and development loans were replaced with permanent mortgages which typically bore higher rates of interest but were secured by the project only, with no recourse to the borrower. BTR also utilized bank lines and internal funds for equity in its real estate projects, replacing such sources with permanent financing when rates and terms were deemed favorable. BTR had paid its shareholders a modest dividend, retaining excess cash flows to invest in additional projects. In 1990, the dividend was discontinued and cash flows in excess of operating requirements were used for paying or curtailing outstanding debt, primarily bank lines and construction and acquisition loans. BTR improved its liquidity in September, 1993 with the conversion into MART. 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 $35,000,000 from a commercial bank (See Footnote I).
The Company anticipates material commitments for capital expenditures to include, in the next two years, the redevelopment or development of five Baltimore area projects 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 $35,000,000 line of credit from a commercial bank (See Footnote I).
22 (Continued)
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR COMPANY) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued
Liquidity and Capital Resources - Continued
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 1995 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.
Changes in Accounting Principles
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 was amortized.
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. The Company will begin on January 1, 1995 estimating the percentage rent earned from major tenants and record the amounts monthly as receivable. The cumulative effect of this change on January 1, 1995, was approximately $675,000.
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 BTR and MART remained stable in the year ended December 31, 1994 compared to the year ended December 31, 1993. 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 for repurchase will not exceed 5% of the number of shares currently outstanding, or approximately 310,000.
ITEM 8

ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES, & BTR REALTY, INC. & SUBSIDIARIES (PREDECESSOR COMPANY) Financial Statements: Independent auditors' report ......................25
Consolidated Balance Sheets - as of December 31, 1994 and 1993 ................26
Consolidated Statements of Operations - For the Year ended December 31, 1994 and the Periods ended December 31, 1993 and September 10, 1993 and for the Year ended December 31, 1992 ...27
Consolidated Statements of Shareholders' Equity - For the Year ended December 31, 1994 and the Periods ended December 31, 1993 and September 10, 1993 and for the Year ended December 31, 1992 ...............................28
Consolidated Statements of Cash Flows - For the Year ended December 31, 1994 and the Periods ended December 31, 1993 and September 10, 1993 and for the Year ended December 31, 1992 ...29
Notes to Consolidated Financial Statements ........31
Exhibits, Financial Statement Schedule, and Reports on Form 8-K are included in Part IV - Item 14.
Schedule:
Schedule VI - Real Estate and Accumulated Depreciation ..................................42
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, 1994 and 1993 and the related consolidated statements of operations, shareholders' equity and cash flows for the year ended December 31, 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 and for the year ended December 31, 1992. 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, 1994 and 1993, and the results of their operations and their cash flows for the year ended December 31, 1994, and for 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 and for the year ended December 31, 1992, 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 income taxes in 1992 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." 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 16, 1995
MID-ATLANTIC REALTY TRUST & SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 1994 1993
ASSETS Properties: Operating properties (Notes C and D)............$ 140,062,761 127,713,850 Development operations (Note E)................... 6,354,947 2,128,434 Property held for development or sale ....... 8,630,465 9,169,232 ------------- ------------- 155,048,173 139,011,516
Cash and cash equivalents .... 344,522 687,108 Notes and accounts receivable - tenants and other (Note F).......... 1,688,194 2,357,791 Due from joint venture partners ................... 1,937,019 1,701,708 Prepaid expenses and deposits. 402,283 403,075 Refundable income taxes ...... - 24,045 Net assets of properties to be sold (Note G) ........... - 449,219 Deferred financing costs (Note H) ................... 3,422,376 3,928,590 ------------- ------------- $ 162,842,567 148,563,052 ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable (Note I).......$ 20,139,413 2,800,000 Accounts payable and accrued expenses (Note J).......... 3,534,277 4,377,411 Mortgages payable (Note D) .. 53,251,140 53,694,372 Convertible subordinated debentures (Note K)........ 60,000,000 60,000,000 Deferred income ............. 730,466 133,468 Minority interest in consolidated joint ventures 330,893 250,432 Income taxes currently payable - state (Note L).......... - 19,581 ------------- ------------- 137,986,189 121,275,264
Commitments (Notes M & O) Shareholders' Equity (Note N): 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, 6,291,407...... 62,914 62,914 Additional paid-in capital .. 42,602,505 42,602,505 Accumulated deficit ......... (17,809,041) (15,377,631) ------------- ------------- 24,856,378 27,287,788 ------------- ------------- $ 162,842,567 148,563,052 ============= =============
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) Consolidated Statements of Operations
Mid-Atlantic Realty Trust || BTR Realty, Inc. Year Ended September 11 to||January 1 to Year Ended December 31, December 31, ||September 10, December 31, 1994 1993 || 1993 1992 || REVENUES: || Rentals ........$ 21,890,446 6,061,175 || 14,620,418 20,217,251 Gain on sales of || properties held || for sale, net 81,313 - || 31,501 281,511 Sales of residential || property ..... - - || 1,032,000 1,120,750 Other (Note P) 877,122 515,509 || 228,292 1,035,621 ------------ ----------- ||------------ ------------ 22,848,881 6,576,684 || 15,912,211 22,655,133 ------------ ----------- ||------------ ------------ COSTS AND EXPENSES: || Interest ....... 10,342,725 3,076,060 || 9,278,198 14,032,352 Depreciation and || amortization of property || and improvements 5,083,384 1,502,449 || 3,233,530 4,778,432 Operating ...... 3,336,415 1,104,193 || 2,649,341 3,985,439 General and || administrative 1,751,101 300,625 || 1,053,295 1,223,319 Cost of residential || property sold . - - || 1,008,475 1,067,806 Unrecoverable || development costs - - || 1,278,817 262,147 ------------ ----------- ||------------ ------------ 20,513,625 5,983,327 || 18,501,656 25,349,495 ------------ ----------- ||------------ ------------ EARNINGS (LOSS) FROM || OPERATIONS BEFORE || MINORITY INTEREST 2,335,256 593,357 || (2,589,445) (2,694,362) Minority interest || (expense) benefit (540,744) (125,883) || 124,129 156,460 ------------ ----------- ||------------ ------------ EARNINGS (LOSS) FROM || OPERATIONS ..... 1,794,512 467,474 || (2,465,316) (2,537,902) Gain on Fire || Damage ......... - - || - 1,340,000 Gain (loss) on || sales of operating || properties 1,121,774 - || - (47,573) ------------ ----------- ||------------ ------------ EARNINGS (LOSS) BEFORE INCOME || TAXES, CUMULATIVE EFFECT OF || CHANGE IN ACCOUNTING || PRINCIPLE & EXTRAORDINARY || ITEM 2,916,286 467,474 || (2,465,316) (1,245,475) Income tax benefit, || net (Note L) .. - - || 408,210 126,518 ------------ ----------- ||------------ ------------ EARNINGS (LOSS) BEFORE || CUMULATIVE EFFECT OF || CHANGE IN ACCOUNTING || PRINCIPLE AND || EXTRAORDINARY || ITEM ........... 2,916,286 467,474 || (2,057,106) (1,118,957) Cumulative effect || of change in accounting || for income taxes - - || - 1,286,000 ------------ ----------- ||------------ ------------ EARNINGS (LOSS) || BEFORE EXTRAORDINARY || ITEM ........... 2,916,286 467,474 || (2,057,106) 167,043 Extraordinary item - || Loss on early || extinguishment || of debt ........ - - || (548,323) - ------------ ----------- ||------------ ------------ NET EARNINGS || (LOSS) .........$ 2,916,286 467,474 || (2,605,429) 167,043 ============ =========== ||============ ============ || Earnings (loss) per share || before cumulative effect || of change in accounting || principle and extraordinary || item ...........$ 0.46 0.07 || (0.24) (0.13) Cumulative effect of || change in accounting || principle - - || - 0.15 ------------ ----------- ||------------ ------------ Earnings (loss) per || share before extraordinary || item ............ 0.46 0.07 || (0.24) 0.02 Extraordinary item - || early extinguishment || of debt ........ - - || (0.06) - ------------ ----------- ||------------ ------------ NET EARNINGS (LOSS) || PER SHARE ......$ 0.46 0.07 || (0.30) 0.02 ============ =========== ||============ ============
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) Consolidated Statements of Shareholders' Equity Years ended December 31, 1994, 1993 and 1992
Retained Additional Earnings Total Common Par Paid-in (Accumulated Shareholders' Shares Value Capital Deficit) Equity
BTR REALTY, INC. BALANCE, January 1, 1992 8,503,916 $85,039 9,078,718 (8,147,270) 1,016,487
Net earnings - - - 167,043 167,043 ----------- -------- ----------- ------------ ----------- BALANCE, December 31, 1992 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 =========== ======== ============ ============ ===========
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY)
Consolidated Statements of Cash Flows
Mid-Atlantic Realty Trust || BTR Realty, Inc. Year Ended September 11 to||January 1 to Year Ended December 31, December 31, ||September 10, December 31, 1994 1993 || 1993 1992 || Cash flows from || operating activities: || Net earnings || (loss) $2,916,286 467,474 || (2,605,429) 167,043 Adjustments to reconcile || net earnings (loss) || to net cash provided || by operating activities: || Depreciation and || amortization 5,083,384 1,502,449 || 3,233,530 4,778,432 Minority interest || in earnings (loss), || net ......... 540,744 125,883 || (124,129) (156,460) (Gain) loss on sales || of operating || properties .(1,121,774) - || - 47,573 Gain on sales of || residential properties || and properties held || for sale, net (81,313) - || (7,976) (334,455) Unrecoverable || development || costs - - || 1,278,817 262,147 Loss on early || extinguishment || of debt - || capitalized .. - - || 273,308 - Deferred income || taxes benefit .. - - || (460,570) (118,000) Gain on fire damage of || operating || property - - || - (1,340,000) Cumulative effect of || change in accounting || principle ... - - || - (1,286,000) Stock compensation || plan accrual .. - - || - (268,900) Changes in operating || assets and liabilities: || Decrease in operating || assets .... 694,434 108,480 || 555,067 869,252 Increase (decrease) || in deferred rental || income ..... 610,678 (974,173) || 974,173 - (Decrease) increase || in operating || liabilities (876,395) 2,249,233 || 1,012,844 (1,371,494) ----------- ------------ || ----------- ----------- Total || adjust- || ments... 4,849,758 3,011,872 || 6,735,064 1,082,095 ----------- ------------ || ----------- ----------- NET CASH PROVIDED BY || OPERATING || ACTIVITIES 7,766,044 3,479,346 || 4,129,635 1,249,138 ----------- ------------ || ----------- ----------- || Cash flows from || investing activities: || Additions to || properties (22,197,577) (6,173,532) || (1,379,710) (2,967,398) Proceeds from || sales of || properties. 3,263,444 - || 1,646,748 4,796,907 (Payments to) || receipts from || minority partners, || net ....... (695,594) (213,756) || 170,224 147,839 Purchases of || investments.. - - || - (21,753) Transfer or sale of || investments.... - - || - 625,921 ----------- ------------ || ----------- ----------- NET CASH (USED IN) || PROVIDED BY || INVESTING || ACTIVITIES (19,629,727) (6,387,288) || 437,262 2,581,516 ------------ ----------- || ----------- -----------
(CONTINUED)
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY)
Consolidated Statements of Cash Flows - (Continued)
Mid-Atlantic Realty Trust || BTR Realty, Inc. Year Ended September 11 to||January 1 to Year Ended December 31, December 31, ||September 10, December 31, 1994 1993 || 1993 1992 || Cash flows from || financing activities: || Proceeds from || notes payable $39,456,366 3,100,000 || 90,832,649 7,044,500 Principal || payments on || on notes || payable (22,116,953) (87,486,651) || (7,475,452) (8,285,036) Proceeds from || mortgages payable - - || 2,682,600 1,076,444 Principal payments || on mortgages || payable ...... (443,232) (3,143,953) ||(46,709,513) (2,446,767) Proceeds from || construction || loans payable .. - - || - 1,087,244 Payments on || construction || loans payable .. - - ||(37,831,945) (2,332,591) Additions to deferred || finance costs - || other......... (27,388) (171,954) || (45,149) (33,807) 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 || - - Sinking fund || payments - - || - (41,083) Stock issued - || options exercised || in compensation || plan ........ - - || 225,258 - Stock canceled - || employee note || payment ...... - - || (177,051) - Dividends paid .(5,347,696) (314,570) || (4,944,879) - ----------- ----------- || ----------- -------- - -- || NET CASH PROVIDED || BY (USED IN) || FINANCING || ACTIVITIES 11,521,097 2,373,053 || (3,443,482) (3,931,096) ----------- ----------- || ----------- ----------- NET (DECREASE) || INCREASE IN CASH || AND CASH || EQUIVALENTS (342,586) (534,889) || 1,123,415 (100,442)
CASH AND CASH || EQUIVALENTS, || beginning of || period 687,108 1,221,997 || 98,582 199,024 ---------- ----------- || ----------- ----------- - - || CASH AND CASH || EQUIVALENTS, || end of period ... $344,522 687,108 || 1,221,997 98,582 =========== =========== || =========== =========== || Supplemental disclosures of || cash flow information: || Cash paid for: || Interest (net of amounts || capitalized) $10,404,859 1,659,428 || 9,218,811 14,009,774 Income taxes .. - 20,560 || 16,813 48,588 =========== =========== || =========== ============
Supplemental schedule of noncash investing and financing activities:
During 1994, $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 (Note G) 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.
In December, 1992, BTR reported a gain on sale of property that had fire damage. The effect of the $1,340,000 gain increased operating assets by the insurance recovery expected of $1,826,000 and decreased operating properties by $486,000. The decrease in operating assets ended September 10, 1993 includes a partial collection of the insurance recovery of $1,328,000.
See accompanying notes to consolidated financial statements.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993, 1992
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. (the predecessor to the company), "BTR". The Consolidated Financial Statements of BTR Realty, Inc. are presented for comparative purposes.
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 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 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.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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. 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.
Changes in Accounting Principles
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 was amortized.
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. The Company will begin on January 1, 1995 estimating the percentage rent earned from major tenants and record the amounts monthly as receivable. The cumulative effect of this change on January 1, 1995 was approximately $675,000.
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.
Effective January 1, 1992, BTR adopted Statement of Financial Accounting Standards No. 109,"Accounting for Income Taxes", (Statement 109), which requires an asset and liability method of accounting for income taxes. The Company reported the cumulative effect of that change in the method of accounting for income taxes in the consolidated statement of operations for 1992. The Company continues to apply the standard which did not have a material effect on the year ended December 31, 1994 and the period September 11 through December 31, 1993.
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 Finance 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.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) 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, 1994 1993 Land $17,993,243 15,781,566 Land improvements 21,123,172 19,819,368 Buildings 107,030,436 95,771,668 Improvements for tenants 6,013,294 5,280,554 Development costs on completed projects 16,577,892 16,739,579 Furniture, fixtures and equipment 2,181,109 2,177,423 Deferred lease costs 5,592,584 4,794,044 ------------ ----------- 176,511,730 160,364,202 Less accumulated depreciation and amortization 36,448,969 32,650,352 ------------ ----------- $140,062,761 127,713,850 ============ ===========
D. PROPERTIES AND RELATED ACCUMULATED DEPRECIATION AND AMORTIZATION AND MORTGAGES PAYABLE
A summary of all of the Company's properties and related mortgages payable at December 31, 1994 follows:
Accumulated Cost of Depreciation Classi- Mortgages Initial Subsequent Total and fication Payable Cost Improvements Cost Amortization Net Cost
Shopping centers $50,086,463 117,544,194 20,116,163 137,660,357 28,634,598 109,025,759 Bowling centers - 2,866,998 64,383 2,931,381 1,320,174 1,611,207 Office buildings 3,164,677 26,415,163 3,230,125 29,645,288 4,709,584 24,935,704 Other rental properties - 4,782,560 919,046 5,701,606 1,387,953 4,313,653 Other property - 573,098 - 573,098 396,660 176,438 ------------------------------------------------------------ - ------------ Operating proper- ties 53,251,140 152,182,013 24,329,717 176,511,730 36,448,969 140,062,761 Development operations - 6,354,947 - 6,354,947 - 6,354,947 Property held for development or sale - 8,630,465 - 8,630,465 - 8,630,465 -------------------------------------------------------------- - ----------- $53,251,140 167,167,425 24,329,717 191,497,142 36,448,969 155,048,173=========================================================== ===========
Mortgages payable aggregating $53,251,140 at December 31, 1994 bear interest at 9.54% to 11.75% and mature in installments through 2003. Aggregate annual principal payments applicable to mortgages payable for the five years subsequent to December 31, 1994 are:
1995 $ 7,197,969 1996 5,835,477 1997 5,241,874 1998 14,045,689 1999 253,258 Thereafter 20,676,873 ===========
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
E. DEVELOPMENT OPERATIONS Development operations consist of the following:
December 31, 1994 1993 Land $5,072,696 - Construction in progress 953,456 1,749,886 Pre-construction costs 328,795 378,548 ---------- --------- $6,354,947 2,128,434 ========== =========
Development operations are transferred to operating property costs when a project is completed, at which time depreciation and amortization commences.
F. NOTES AND ACCOUNTS RECEIVABLE
Included in notes and accounts receivable at December 31, 1994 are significant concentrations of amounts due from tenants in two primary geographical areas: the mid-Atlantic region of the United States and Arizona. Although improved for 1994 and 1993, the economic condition of the Arizona real estate market has been weak as evidenced by increased vacancies in the Company's projects, particularly in the Phoenix market. The Company's accounts receivable at December 31, 1994 included $673,000 and $379,000 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. NET ASSETS OF PROPERTIES TO BE SOLD
Net assets of properties to be sold consist of net assets and liabilities (only liabilities assumed by the purchasers) of an operating property, Orchard Landing, under contract for sale at December 31, 1993. MART sold its partnership interest in this property on February 1, 1994 for $7.2 million. The property was part of a divestiture plan to facilitate the merger of BTR and MART. On September 10, 1993 BTR decided to sell this property and discontinue reporting operating results in its consolidated statement of operations. The amount of losses from the discontinued segment was de-minimus.
The remaining assets and liabilities reported on the balance sheet at December 31, 1993 consists of:
Operating property $6,505,807 Cash 268,879 Accounts receivable 10,404 Prepaid expenses and deposits 25,094 Deferred financing costs 323,449 --------- Total assets 7,133,633 ---------- Tenant accounts payable 42,419 Mortgage payable 6,641,995 ---------- Total liabilities (assumed by purchaser) 6,684,414 ---------- Net assets $449,219 ==========
H. DEFERRED FINANCING COSTS As of December 31, Deferred financing costs 1994 1993 consist of the following: Deferred costs related to the debentures $3,063,274 3,063,274 Deferred costs of new line of credit 198,972 171,584 Deferred financing costs capitalized related to operating properties 1,720,827 1,720,827 ----------- ----------- 4,983,073 4,955,685 Less accumulated amortization (1,560,697) (1,027,095) ----------- ----------- Deferred financing costs $3,422,376 3,928,590 =========== ===========
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
I. NOTES PAYABLE Notes payable consist of the following: As of December 31, 1994 1993 Line of credit 20,100,000 2,800,000 Notes payable, bearing interest at 8.71% 39,413 - ---------- --------- 20,139,413 2,800,000 ========== =========
At December 31, 1994, the Company has amended the existing agreement with its primary bank for an additional $10,000,000 to its $25,000,000 secured line of credit. This amendment also provides that as long as the Company is in compliance with all loan covenants, the loan maturity date, which at December 31, 1994 was December 31, 1997, will be extended one year automatically each year. Under the amended 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, 1994, $35,000,000 was fully collateralized. The line bears interest at the prime rate. However, the Company has the option to fix the rate at LIBOR plus 1.125% under certain circumstances. 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.
At December 31, 1994, 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 $715,500, was $14,184,500. The maximum level of borrowings under the line of credit was $20,100,000, $4,633,130 and $4,663,000 in 1994, 1993 and 1992, respectively. The average amounts of borrowings were approximately $6,131,000, $1,888,000, and $3,566,000, with weighted average interest approximating 6.5%, 5.6%, and 6.3%, in 1994, 1993 and 1992, respectively.
Aggregate annual principal maturities of notes payable subsequent to December 31, 1994 are as follows:
1995 $ 9,270 1996 9,270 1997 20,109,270 1998 9,270 1999 2,333 ==========
J. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31, 1994 1993 Trade accounts payable 1,195,143 1,289,204 Retainage on construction in progress 61,117 146,774 Accrued debenture interest expense 1,334,375 1,394,435 Accrued expenses 943,642 1,546,998 --------- --------- 3,534,277 4,377,411 ========= =========
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
K. 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. As of December 31, 1994 no debentures have been converted. Costs associated with the issuance of the debentures were approximately $3,063,000 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.
L. 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, 1994, the income tax basis of the Company's assets was approximately $151,000,000 and liabilities was approximately $ 137,000,000.
As discussed, BTR adopted Statement 109, as of January 1, 1992. The cumulative effect at January 1, 1992 of this change in accounting for income taxes was to increase net earnings for 1992 by $1,286,000 or $.15 per share. The effect of the change in 1992, excluding the change in accounting principle, was not material.
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 Statement 109 adopted by BTR as of January 1, 1992.
The net benefit for income taxes consists of the following:
Jan. 1, 1993 thru Year ended September 10, December 31, 1993 1992
Current taxes: Federal $ - - State 52,360 (8,518) ----------------------------- 52,360 (8,518) -----------------------------
Deferred: Federal 118,430 (265,000) State (579,000) 147,000 ----------------------------- (460,570) (118,000) ----------------------------- $ (408,210) (126,518) =============================
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
M. COMMITMENTS
Lease Commitments Minimum rental commitments for operating land leases as of December 31, 1994 are as follows:
1995 $220,000 1996 222,000 1997 222,000 1998 222,000 1999 222,000 Thereafter 4,908,000 =========
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 $219,000 in 1994, $176,000 in 1993 and $164,000 in 1992.
N. 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, 1994, 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.
During 1992, BTR adjusted the recorded value of the awarded but unissued shares to reflect the downward movement in the market value of the BTR's stock from the measurement date of the awards, resulting in a reduction of general and administrative expenses of approximately $269,000. In 1993, the 78,286 remaining shares 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 shares of BTR stock.
MART Incentive Stock Option Plan 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. At February 1, 1994, trustees, officers and key employees were granted 256,000 option shares at an option price of $10.50 per share with 89,333 shares vesting February 1, 1994 and 83,333 vesting in 1995 & 1996. The closing price of MART shares at December 31, 1994 was $8.25 per share. No options were exercised during the year ended December 31, 1994 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, 1994.
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.
In 1993, BTR retired 56,544 shares of BTR stock held as collateral for a note receivable from a former officer of the Company.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
O. 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:
1995 $19,590,863 1996 17,897,043 1997 15,273,182 1998 12,272,911 1999 10,229,882 Thereafter 63,868,068 ===========
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 $1,206,000 in 1994, $1,259,000 in 1993 and $1,235,000 in 1992.
P. OTHER INCOME
Other income consists of the following: MART BTR Realty, Inc. Year ended Sept. 11 thru Jan. 1, thru Year ended Dec. 31, Dec. 31, Sept. 10, Dec. 31, 1994 1993 1993 1992
Interest and dividends $727,249 266,141 93,312 262,069 Miscellaneous 149,873 249,368 134,980 439,285 Sale of development rights - - - 334,267 ----------------------------------------------- $877,122 515,509 228,292 1,035,621 ===============================================
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, 1994 and 1993.
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, 1994 was $53,251,140 and $53,641,000 respectively, and at December 31, 1993 was $53,694,372 and $58,071,000, 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, 1994 was $60,000,000 and $52,119,000 respectively, and at December 31, 1993 was $60,000,000 and $58,522,000, 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 1994 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 69 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 - New York Venture Fund, Venture Income (+) Plus, Venture Muni (+) Plus, and the Retirement Planning Funds of America. President and director of the Hoffberger Foundation, Vice President and director of Hoffberger Family Fund
F. Patrick Hughes 47 President, Principal Executive Officer, and CEO of MART since 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 41 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 46 Treasurer of MART since September, 1993. Treasurer of BTR since May, 1989.
Paul G. Bollinger 35 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 1995 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 1995 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 1995 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. (Predecessor Company) are included in Part II Item 8: Independent auditors' report Consolidated balance sheets at December 31, 1994 and 1993 Consolidated statements of operations for the year ended December 31, 1994 for the periods ended December 31, 1993 and September 10, 1993 and the year ended December 31, 1992 Consolidated statements of shareholders' equity for year ended December 31, 1994 for the periods ended December 31, 1993 and September 10, 1993 and the year ended December 31, 1992 Consolidated statements of cash flows for the year ended December 31, 1994 for the periods ended December 31, 1993 and September 10, 1993 and the year ended December 31, 1992 Notes to consolidated financial statements (a) 2. Financial Statement Schedule Schedule VI - 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.
ITEM 14 - (Continued) EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
18. Letter regarding change in accounting principles. See Summary of Significant Accounting Policies under Notes to Financial Statements appearing on page 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 23. Published report regarding matters submitted to vote of security holders. Not applicable. 24. Consents of experts and counsel. Not applicable. 25. Power of Attorney. Not applicable. 27. Financial Data Schedule. Filed thru EDGAR 28. Additional exhibits. Not applicable.
(b) Reports on Form 8-K. None.
Schedule VI - Real Estate and Accumulated Depreciation MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Cost capitalized subsequent Year ended Initial cost to Company to acquisition December 31, 1994 Mortgages Buildings and Description Payable Land Improvements Improvements Shopping Centers Harford Mall $19,821,030 158,085 8,457,331 12,027,287 Easton Shoppes, Inc. - 2,600,000 10,379,069 Smoketown Plaza - 516,312 10,095,077 622,540 Park Sedona - 2,376,739 8,590,146 232,741 Colonie Plaza 5,497,128 1,137,567 7,755,095 572,837 Columbia Plaza 4,970,228 999,739 6,887,711 1,445,476 Spotsylvania Crossing - 1,544,314 6,600,616 268,225 Skyline Village 5,569,526 555,295 6,240,003 914,776 Page Plaza - 464,375 5,777,369 119,705 Plaza Del Rio - 1,291,324 3,938,734 382,813 Sudley Town Plaza - 789,881 3,736,837 445,857 Burke Town Plaza 7,262,534 - 2,936,134 1,691,996 Rosedale Plaza 1,906,018 1,024,712 3,217,926 299,037 Wilkens Avenue 5,059,999 - 3,601,891 337,436 Timonium Shopping Ctr - - 4,031,809 246,212 York Road Plaza - 1,243,860 2,102,575 170,369 Patriots Plaza (A) - - 1,709,846 482,321 McRay Plaza - 1,182,596 2,565,290 284,739 Rolling Road Plaza (B) - 338,791 1,632,268 1,997,587 Union Hills Plaza - 274,920 679,863 138,031 Dobson-Guadalupe - 69,146 791,347 89,268 Chandler Plaza - 160,671 565,298 64,310 ---------------------------------------------------- 50,086,463 16,728,327 102,292,235 22,833,563 Office Buildings Gateway II - 364,982 12,376,977 1,204,111 Gateway I - 82,396 8,271,751 1,373,259 Patriots Plaza - - 1,522,943 239,890 Wilkens Office II 1,946,154 - 1,644,370 141,706 Wilkens Office I 1,218,523 - 1,383,102 229,433 Wilkens Office III - - 768,642 41,726 ----------------------------------------------------- 3,164,677 447,378 25,967,785 3,230,125 Bowling Centers Freestate - 307,656 1,279,278 22,793 Waldorf - 243,139 579,161 5,690 Clinton - - 457,764 35,900 ----------------------------------------------------- - 550,795 2,316,203 64,383
(Continued)
Schedule VI - Real Estate and Accumulated Depreciation MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized subsequent Amount at which carried Year ended to acquisition at close of period December 31, 1994 Carrying Costs Land Buildings and Total Description Land Improvements Improvements Shopping Centers Harford Mall 158,085 20,484,618 20,642,703 Easton Shoppes, Inc. 2,600,000 10,379,069 12,979,069 Smoketown Plaza 516,312 10,717,617 11,233,929 Park Sedona (309,000) (1,095,141) 2,067,739 7,727,746 9,795,485 Colonie Plaza 1,137,567 8,327,932 9,465,499 Columbia Plaza 999,739 8,333,187 9,332,926 Spotsylvania Crossing 1,544,314 6,868,841 8,413,155 Skyline Village 555,295 7,154,779 7,710,074 Page Plaza 464,375 5,897,074 6,361,449 Plaza Del Rio 1,291,324 4,321,547 5,612,871 Sudley Town Plaza 789,881 4,182,694 4,972,575 Burke Town Plaza - 4,628,130 4,628,130 Rosedale Plaza 1,024,712 3,516,963 4,541,675 Wilkens Avenue 475,481 475,481 3,939,327 4,414,808 Timonium Shopping Ctr - 4,278,021 4,278,021 York Road Plaza 1,243,860 2,272,944 3,516,804 Patriots Plaza (A) - 2,192,167 2,192,167 McRay Plaza (679,840) (1,397,337) 502,756 1,452,692 1,955,448 Rolling Road Plaza (B) (837,931) 338,791 2,791,924 3,130,715 Union Hills Plaza 274,920 817,894 1,092,814 Dobson-Guadalupe 69,146 880,615 949,761 Chandler Plaza (86,450) (263,550) 74,221 366,058 440,279 -------------------------------------------------------- (599,809) (3,593,959)16,128,518 121,531,839137,660,357
Office Buildings Gateway II 364,982 13,581,088 13,946,070 Gateway I 82,396 9,645,010 9,727,406 Patriots Plaza - 1,762,833 1,762,833 Wilkens Office II - 1,786,076 1,786,076 Wilkens Office I - 1,612,535 1,612,535 Wilkens Office III - 810,368 810,368 ---------------------------------------------------------- - - 447,378 29,197,910 29,645,288 Bowling Centers Freestate 307,656 1,302,071 1,609,727 Waldorf 243,139 584,851 827,990 Clinton - 493,664 493,664 ---------------------------------------------------------- - - 550,795 2,380,586 2,931,381
(Continued)
Schedule VI - Real Estate and Accumulated Depreciation MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Life on which Year ended depreciation on December 31, 1994 latest income Accumulated Date of Date statement is Description Depreciation Construction Acquired computed Shopping Centers Harford Mall 9,094,042 12/73 5-50 yrs. Easton Shoppes, Inc. 57,618 9/94 5-50 yrs. Smoketown Plaza 2,285,058 4/87 5-50 yrs. Park Sedona 816,801 11/90 5-50 yrs. Colonie Plaza 1,740,904 12/87 5-50 yrs. Columbia Plaza 1,568,587 6/88 5-50 yrs. Spotsylvania Crossing 1,569,597 5/87 5-50 yrs. Skyline Village 1,403,267 5/88 5-50 yrs. Page Plaza 559,127 8/91 5-50 yrs. Plaza Del Rio 574,815 2/89 5-50 yrs. Sudley Town Plaza 1,156,252 7/84 5-50 yrs. Burke Town Plaza 1,707,113 7/79-7/82 5-50 yrs. Rosedale Plaza 450,680 10/89 5-50 yrs. Wilkens Avenue 1,301,922 5/81 5-50 yrs. Timonium Shopping Ctr 137,734 10/93 5-50 yrs. York Road Plaza 1,378,772 11/85 5-50 yrs. Patriots Plaza (A) 831,328 6/84 5-50 yrs. McRay Plaza 252,268 6/89 5-50 yrs. Rolling Road Plaza (B) 966,345 6/73 5-50 yrs. Union Hills Plaza 304,780 11/83 5-50 yrs. Dobson-Guadalupe 296,651 9/85 5-50 yrs. Chandler Plaza 180,937 3/84 5-50 yrs. -------------- 28,634,598 Office Buildings Gateway II 1,395,534 7/89 5-50 yrs. Gateway I 1,932,085 4/87 5-50 yrs. Patriots Plaza 464,579 8/85 5-50 yrs. Wilkens Office II 355,713 1/87 5-50 yrs. Wilkens Office I 470,634 1/85 5-50 yrs. Wilkens Office III 91,039 1/91 5-50 yrs. ----------------- 4,709,584 Bowling Centers Freestate 871,924 3/78 5-50 yrs. Waldorf 207,114 3/79 5-50 yrs. Clinton 241,136 8/71 5-50 yrs. ------------------ 1,320,174
Schedule VI - Real Estate and Accumulated Depreciation MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES Cost capitalized subsequent Year ended Initial cost to Company to acquisition December 31, 1994 Mortgages Buildings and Description Payable Land Improvements Improvements (Continued)
Other Rental Properties Regal Row - 416,606 2,192,259 212,846 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 - ------------------------------------------------------- - 821,403 3,961,157 873,897
Development Operations - 5,072,696 1,282,251 -
Property Held - 8,630,465 - -
Other Property - - 573,098 - ------------------------------------------------------- $53,251,140 32,251,064 136,392,729 27,001,968 =======================================================
(Continued)
Schedule VI - Real Estate and Accumulated Depreciation MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Cost capitalized subsequent Amount at which carried Year ended to acquisition at close of period December 31, 1994 Carrying Costs Land Buildings and Total Description Land Improvements Improvements (Continued)
Other Rental Properties Regal Row 416,606 2,405,105 2,821,711 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 -------------------------------------------------------- 45,149 866,552 4,835,054 5,701,606
Development Operations - - 5,072,696 1,282,251 6,354,947
Property Held - - 8,630,465 - 8,630,465
Other Property - - - 573,098 573,098 -------------------------------------------------------- (554,660)(3,593,959) 31,696,404 159,800,738 191,497,142 ========================================================
(Continued)
Schedule VI - Real Estate and Accumulated Depreciation MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Life on which Year ended depreciation on December 31, 1994 latest income Accumulated Date of Date statement is Description Depreciation Construction Acquired computed (Continued)
Other Rental Properties Regal Row 725,244 7/84 5-45 yrs. Business Center 131,664 4/90 5-50 yrs. Southwest 421,051 4/68 5-50 yrs. Waldorf Firestone 57,658 9/78 5-50 yrs. Ocean City 52,336 12/87 5-50 yrs. ------------- 1,387,953
Development Operations - 91-94
Property Held - 7/73-12/94
Other Property 396,660 9/82-12/94 3-10 yrs. ------------- 36,448,969 =============
(A) The mortgage payable of $2,585,984 is owed by the owner Southdale LP to Southdale Mortgage Inc., a wholly owned subsidiary of MART and is eliminated in consolidation. (B) This property was damaged by fire in December, 1992 producing a net reduction in value of $486,000, which is included in Cost capitalized subsequent to acquisition, Carrying Costs - Improvements, $837,931 was deducted, and Accumulated depreciation was adjusted for $351,931.
MID-ATLANTIC REALTY TRUST (COMPANY) & BTR REALTY, INC. (PREDECESSOR TO THE COMPANY) SCHEDULE VI - REAL ESTATE AND ACCUMULATED DEPRECIATION - Continued
(1) The changes in total cost of properties for the three years ended December 31, 1994 are as follows: Years ended December 31, 1994 1993 1992 Balance beginning of year $171,661,868 174,593,579 177,052,733 Additions during year: Acquisitions 18,051,765 4,076,958 285,234 Improvements 2,159,354 5,308,235 2,199,913 Development operations 1,986,458 1,448,303 571,759 ----------------------------------------- 22,197,577 10,833,496 3,056,906 Deductions during year: Write-downs to net realizable value (2)(a) - (1,318,314) (742,147) Cost of real estate sold (2,304,214) (1,637,772) (4,655,851) Transfers (4) - (9,416,190) (33,807) Retirements and disposals (58,089) (1,392,931) (84,255) ------------------------------------------ (2,362,303) (13,765,207) (5,516,060) ------------------------------------------ Balance end of year $191,497,142 171,661,868 174,593,579 ==========================================
(2) Write-downs to net realizable value are reported in the statement of operations as follows: Year ended BTR Realty, Inc. January 1 thru December 31, Sep. 10, 1993 1992 Gain on Fire Damage (Note F) $ - 486,000 Under Costs and Expenses: Unrecoverable development costs 1,278,817 256,147 -------------------------------- $ 1,278,817 742,147 ================================ (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, 1994 are as follows:
Years ended December 31, 1994 1993 1992 Balance beginning of year ($32,650,352) (29,168,658) (24,909,903) Depreciation and amortization (4,549,782) (4,735,979) (4,778,432) Transfers (4) - 96,041 290,378 Retirements and disposals 751,165 1,158,244 229,299 ------------------------------------------ Balance end of year ($36,448,969) (32,650,352) (29,168,658) ==========================================
(4) Transfers include assets originally in operating properties reclassified on the balance sheet to the following:
Years ended December 31, 1993 1992 Total Cost Net assets of properties to be sold ($7,030,232) - Deferred financing costs (2,385,958) (33,807) --------------------------- (9,416,190) (33,807) Accumulated Depreciation Net assets of properties to be sold $524,425 - Deferred financing costs: - Reclassification of asset (765,192) - - Reclassification of amortization 336,808 290,378 --------------------------- $96,041 290,378 --------------------------- Net transfers ($9,320,149) 256,571 =========================== (5) The aggregate basis of properties for Federal income tax purposes is approximately $143,000,000 at December 31, 1994. (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 Ironfield, 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 Park Sedona, 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:(Continued) or Formation Interest
Burke Town Plaza, Inc. Maryland 100% Burlington Commerce Park, 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% Hampstead Plaza, Inc. Maryland 100% Harrisonburg Plaza, Inc. Maryland 100% Kingsbrook Funding, Inc. Maryland 100% Kingston Crossing, Inc. Maryland 100% Lynchburg Plaza, Inc. Maryland 100% MART Acquisition, Inc. Maryland 100% Madison Plaza, Inc. Maryland 100% Millers Plaza, 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% 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 3/13/95 /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: 3/15/95 /s/s LeRoy E. Hoffberger LeRoy E. Hoffberger, Chairman
Date: 3/13/95 /s/s F. Patrick Hughes F. Patrick Hughes, Trustee, Principal Executive Officer
Date: 3/13/95 /s/s Paul G. Bollinger Paul G. Bollinger, Controller, Principal Financial Officer
Date: 3/13/95 /s/s Eugene T. Grady Eugene T. Grady, Treasurer
Date: Robert A. Frank, Trustee
Date: 3/15/95 /s/s Marc P. Blum Marc P. Blum, Trustee
Date: 3/15/95 /s/s M. Ronald Lipman M. Ronald Lipman, Trustee
Date: 3/14/95 /s/s Stanley J. Moss, Esquire Stanley J. Moss, Esquire, Trustee
Date: 3/15/95 /s/s Daniel S. Stone Daniel S. Stone, Trustee
Date: David F. Benson, Trustee