** **

**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

 

**FOR ANNUAL AND TRANSITION REPORTSPURSUANT TO SECTION 13 OR 15(d)**

**OF THE SECURITIES AND EXCHANGE ACTOF 1934**

 

| **(Mark One)** |
|----------------|
| **ý**     |   | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the fiscal year ended December31, 2002**

** **

**or**

 

| **o** |   | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF  1934 [No Fee Required]** |
|-------|--------|-------------------------------------------------------------------------------------------------------------------|

 

**For the transition periodfrom                                       to                                       **

 

**Commission file Number  1-12286**

 

**Mid-Atlantic Realty Trust**

(Exact name of registrantas specified in its charter)

 

| **Maryland**                                                     |   | **52-1832411**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                             |   |                                  |
| **170  West Ridgely Road, Suite 210 - Lutherville, Maryland**    |   | **21093**                             |
| (Address of principal  executive offices)                        |   | (Zip Code)                            |
|                                                             |   |                                  |
| Registrant’s telephone number, including area code          |   | **(410)  684-2000**                   |
|                                                             |   |                                  |
| Securities registered pursuant to Section 12 (b) of  the Act:    |   |                                  |
|                                                             |   |                                  |
| **NONE**                                                         |

 

Securities registered pursuant to Section 12 (g) of the Act:

 

**CommonShares of Beneficial Interest, $.01 par value**

(Title of Class)

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

ý            Yes         o            No

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to the Form 10-K. ý

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Act).

 

ý            Yes         o            No

 

As of June 28, 2002, the aggregate market value of the voting andnon-voting common equity held by non-affiliates of the registrant (based uponthe $17.60 closing price on that date) was approximately $312,788,309.

 

As of February 28, 2003, 18,039,447 common shares of beneficialinterest of Mid-Atlantic Realty Trust were outstanding and the aggregate valueof common stock (based upon the $17.27 closing price on that date) held bynon-affiliates was approximately $311,541,250.

 

Documents Incorporated byReference

 

The definitive proxy statement with respect to the 2003 annual meetingof Mid-Atlantic Realty Trust shareholders (to be filed).

 

 

----

 

**PART I**

 

**ITEM 1 -BUSINESS**

 

Mid-Atlantic Realty Trust was incorporated June 29, 1993, and commencedoperations effective with the completion of its initial public share offeringon September 11, 1993.  Mid-AtlanticRealty Trust qualifies as a real estate investment trust (“REIT”) for Federalincome tax purposes.  As used herein,the term “MART” or the “Company” refers to Mid-Atlantic Realty Trust andentities owned or controlled by MART, including MART Limited Partnership (the“Operating Partnership”).

 

The Company is a fully integrated, self-administeredreal estate investment trust which owns, acquires, develops, redevelops, leasesand manages primarily neighborhood or community shopping centers in the MiddleAtlantic region of the United States. The Company’s primary objectives are to enhance funds from operations(“FFO”) per share and maximize shareholder value.  To achieve its objectives, the Company seeks to operate itsproperties for long-term FFO growth. The Company also acquires neighborhood or community shopping centersthat either have dominant anchor tenants or contain a mix of tenants whichreflects the shopping needs of the communities they serve.  The Company also develops and redevelopsshopping centers on a tenant-driven basis, leveraging either existing tenantrelationships or geographic and demographic knowledge while seeking to minimizeexposure to risk associated with long-term land development.

 

The Company’s financial strategy is to execute itsoperating and growth strategies by utilizing a blend of internally generatedfunds, issuance of Operating Partnership Units (defined below), proceeds fromdivestitures, institutional borrowings and issuance of corporate equity ordebt, as appropriate.  The Companycurrently intends to maintain a ratio of secured debt to total estimatedproperty value at or below 50%.

 

The Company has an equity interest in 41 operating shopping centers, 36of which are wholly owned by the Company and five in which the Company hasinterests ranging from 50% to 93%, as well as other commercial properties,collectively the “Properties”. The Properties have a gross leasable area ofapproximately 5,314,000 square feet, of which approximately 93% was leased atDecember 31, 2002. Of these Properties, approximately 99% of the gross leasablearea is in the states of Maryland, Virginia, New York, Pennsylvania,Massachusetts and Delaware.  The Companyalso owns approximately 80 acres of undeveloped land in parcels varying in sizefrom three to thirty-one acres.

 

All of MART’s interests in the Properties are helddirectly or indirectly by, and all of its operations relating to the Propertiesare conducted through the Operating Partnership.  Units of partnership interest in the Operating Partnership(“Units”) may be exchanged by the limited partners for cash or common shares ofbeneficial interest in MART at the option of the Company on a one-for-onebasis.  MART controls the OperatingPartnership as the sole general partner, and owns approximately 86% of theUnits at December 31, 2002***.***

 

The business of the Company is not materially affectedby seasonal factors.  Althoughconstruction may be affected to some extent by inclement weather conditions,usually during winter months, revenues from income producing properties heldfor investment are usually not affected significantly by such conditions.

 

The commercial real estate development and investmentindustry is extremely fragmented and is subject to widespread competition fordesirable sites, tenants and financing. The ability to compete is dependent in part upon the ability to identifyand acquire and/or develop appropriate real estate investment opportunities ina timely manner.  While many competitorshave fewer assets and financial resources than the Company, there are manycompetitors with greater financial resources competing for similar businessopportunities. Accordingly, it is not possible to estimate the Company’sposition in the industry.  In addition,certain of the Company’s real estate projects are near unimproved sites thatcould be developed commercially and would provide further competition to theCompany.  The management of the Companybelieves, however, that the Company competes favorably in the industry due tothe quality of its developments, its ability to take advantage of opportunitiesas they arise, its access to capital and its reputation.

 

The Company has 64 full time employees and believesthat its relationship with its employees is good.

 

The Company’s executive offices are located at 170West Ridgely Road, Suite 210, Lutherville, Maryland 21093 and its telephonenumber is (410) 684-2000.  The Companymaintains an internet website located at www.martreit.com.  The Company’s annual report on Form 10-K andquarterly reports on Form 10-Q, current reports on Form 8-K and amendments tothese reports are available free of charge on the Company’s website as soon asreasonably practicable after they are filed with the SEC.

 

2

----

 

**ITEM 2 –PROPERTIES**

 

The following schedule describes the Company’s commercial and otherproperties as of December 31, 2002.

 

**Shopping Center Properties (1)**

 
|                                     |   | **Percent  Ownership** |   | **Year  Acquired** |   | **Year (s)  Built /  Redeveloped** |   | **Gross  Leasable Area  (Sq. Ft.)** |   | **Percent  Leased** |   | **Major  Tenants**                          |   |
|------------------------------------------|--------|------------------------|--------|--------------------|--------|------------------------------------|--------|-------------------------------------|--------|---------------------|--------|---------------------------------------------|--------|
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| ***MARYLAND***                           |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| ***Baltimore Metropolitan Area***        |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Arundel  Plaza Shopping Center           |   | 67                     | %      | 1997               |   | 1967/1998                          |   | 250,000                             |   | 100                 | %      | Giant Food, Lowe’s Home Center         |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Club  Centre Shopping Center             |   | 100                    | %      | 1997               |   | 1990/-                             |   | 44,000                              |   | 77                  | %      | Blockbuster                                 |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Enchanted  Forest Shopping Center        |   | 100                    | %      | 1997               |   | 1992/-                             |   | 140,000                             |   | 97                  | %      | Safeway, Petco                              |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Fullerton  Plaza Shopping Center         |   | 100                    | %      | 2000               |   | 1979                               |   | 153,000                             |   | 100                 | %      | Kmart, McDonalds                            |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Glen  Burnie Village Shopping Center     |   | 100                    | %      | 1997               |   | 1972/2000                          |   | 75,000                              |   | 84                  | %      | Rite Aid, Allfirst Bank                     |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Greenbrier  Shopping Center              |   | 100                    | %      | 2002               |   | 1999                               |   | 115,000                             |   | 97                  | %      | Safeway, CVS Drug, Applebees                |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Harford  Mall and Business Center (2)    |   | 100                    | %      | 1972               |   | 1972/1984-96/1999                  |   | 625,000                             |   | 97                  | %      | Hechts, Sears, Petsmart, Best Buy, Old Navy |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Ingleside  Shopping Center               |   | 100                    | %      | 1997               |   | 1963/1996                          |   | 115,000                             |   | 100                 | %      | Safeway, Rite Aid, Allfirst Bank            |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Little  Glen Shopping Center             |   | 100                    | %      | 1997               |   | 1961-1973                          |   | 19,000                              |   | 78                  | %      | None                                        |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Lutherville  Station Shopping Center (3) |   | 100                    | %      | 1993               |   | 1969/1997                          |   | 274,000                             |   | 75                  | %      | Circuit City, Super Valu, State of MD       |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| New  Town Village Shopping Center        |   | 100                    | %      | 1995*              |   | 1995/-                             |   | 118,000                             |   | 98                  | %      | Giant Food, Allfirst Bank                   |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| North  East Station Shopping Center      |   | 100                    | %      | 1989               |   | 1998/-                             |   | 80,000                              |   | 100                 | %      | Food Lion                                   |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Patriots  Plaza Shopping Center (3)      |   | 50                     | %      | 1984*              |   | 1984/-                             |   | 39,000                              |   | 100                 | %      | Denny’s                                |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Perry  Hall Square Shopping Center       |   | 100                    | %      | 1997               |   | 1965/1996                          |   | 183,000                             |   | 96                  | %      | Rite Aid, Outback                           |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Perry  Hall Super Fresh Shopping Center  |   | 100                    | %      | 2002*              |   | 2002                               |   | 65,000                              |   | 100                 | %      | Super Fresh Food Market, Chick-Fil-A        |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Radcliffe  Shopping Center               |   | 100                    | %      | 1997               |   | 1988/1993                          |   | 82,000                              |   | 100                 | %      | CVS Drug, CompUSA, Linens ‘N Things    |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Rolling  Road Plaza Shopping Center      |   | 100                    | %      | 1973*              |   | 1973/1994                          |   | 63,000                              |   | 100                 | %      | Firestone, Cort Furniture                   |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Rosedale  Plaza Shopping Center          |   | 100                    | %      | 1989               |   | 1972/2000                          |   | 91,000                              |   | 99                  | %      | Super Fresh Food Market, Rite Aid           |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Security  Square Shopping Center         |   | 100                    | %      | 2001*              |   | 2001                               |   | 77,000                              |   | 100                 | %      | Super Fresh Food Market                     |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Shawan  Plaza Shopping Center            |   | 100                    | %      | 1997               |   | 1991/-                             |   | 95,000                              |   | 98                  | %      | Giant Food, Bank of America, Provident Bank |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Timonium  Crossing Shopping Center       |   | 100                    | %      | 1997               |   | 1986/1996                          |   | 60,000                              |   | 89                  | %      | Baja Fresh Mexican Grill                    |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Timonium  Shopping Center                |   | 100                    | %      | 1997               |   | 1962/-                             |   | 207,000                             |   | 88                  | %      | Blockbuster, Panera                         |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Waverly  Woods Shopping Center           |   | 100                    | %      | 2001*              |   | 2001                               |   | 104,000                             |   | 100                 | %      | Weis Market                                 |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Wilkens  Beltway Plaza Shopping Center   |   | 93                     | %      | 1981*              |   | 1985-87/  1991/1995                |   | 80,000                              |   | 100                 | %      | Giant Food, Provident Bank                  |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| York  Road Plaza Shopping Center         |   | 100                    | %      | 1967*              |   | 1967/1996                          |   | 91,000                              |   | 98                  | %      | Giant Food, Firestone                       |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| ***Easton***                             |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| Shoppes  at Easton Shopping Center       |   | 100                    | %      | 1994               |   | 1994/-                             |   | 113,000                             |   | 100                 | %      | Giant Food, Wal-Mart (on own pad)           |   |
|                                     |   |                   |   |               |   |                               |   |                                |   |                |   |                                        |   |
| **Total Maryland**                       |   |                   |   |               |   |                               |   | **3,358,000**                       |   |                |   |                                        |   |

 

3

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|                                    |   | **Percent  Ownership** |   | **Year  Acquired** |   | **Year (s)  Built /  Redeveloped** |   | **Gross  Leasable Area  (Sq. Ft.)** |   | **Percent  Leased** |   | **Major  Tenants**                                                             |   |
|-----------------------------------------|--------|------------------------|--------|--------------------|--------|------------------------------------|--------|-------------------------------------|--------|---------------------|--------|--------------------------------------------------------------------------------|--------|
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***DELAWARE***                          |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Wilmington***                        |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Brandywine  Commons Shopping Center (3) |   | 100                    | %      | 1995               |   | 1992/-                             |   | 166,000                             |   | 100                 | %      | Shop Rite, Office Depot, Sports Authority                                      |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Milford***                           |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Milford  Commons Shopping Center        |   | 100                    | %      | 1997               |   | 1994                               |   | 61,000                              |   | 79                  | %      | Food Lion, Advance Auto                                                        |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| **Total Delaware**                      |   |                   |   |               |   |                               |   | **227,000**                         |   |                |   |                                                                           |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***PENNSYLVANIA***                      |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Bethlehem***                         |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Saucon  Valley Square Shopping Center   |   | 100                    | %      | 1999               |   | 1998                               |   | 81,000                              |   | 100                 | %      | Super Fresh Food Market, Blockbuster, Radio  Shack                             |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Carlisle***                          |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Stonehedge  Square Shopping Center      |   | 100                    | %      | 2000               |   | 1990/1994                          |   | 88,000                              |   | 98                  | %      | Nells Market, Eckerd Drug                                                      |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Chambersburg***                      |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Wayne  Avenue Plaza Shopping Center     |   | 100                    | %      | 1998               |   | 1990/1993                          |   | 122,000                             |   | 99                  | %      | Giant Food (of Carlisle), CVS Drug,  Blockbuster                               |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Pottstown***                         |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Pottstown  Plaza Shopping Center        |   | 100                    | %      | 2001               |   | 1988-1989/-                        |   | 162,000                             |   | 96                  | %      | Giant Food (of Carlisle), TJ Maxx, Radio  Shack, Applebees, Tractor Supply Co. |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Waynesboro***                        |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Wayne  Heights Shopping Center          |   | 100                    | %      | 1998               |   | 1975/-                             |   | 107,000                             |   | 50                  | %      | Martins (Giant Food of Carlisle), Eckerd  Drug                                 |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| **Total Pennsylvania**                  |   |                   |   |               |   |                               |   | **560,000**                         |   |                |   |                                                                           |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***MASSACHUSETTS / NEW YORK***          |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Pittsfield***                        |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Del  Alba Shopping Center               |   | 100                    | %      | 1998*              |   | 1995/-                             |   | 72,000                              |   | 92                  | %      | Super Stop & Shop                                                          |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Colonie***                           |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Colonie  Plaza Shopping Center          |   | 100                    | %      | 1987*              |   | 1987/-                             |   | 140,000                             |   | 91                  | %      | Price Chopper, Consolidated Stores                                             |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***East Greenbush***                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Columbia  Plaza Shopping Center         |   | 100                    | %      | 1988*              |   | 1988/1997                          |   | 133,000                             |   | 86                  | %      | Price Chopper, Fashion Bug                                                     |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| **Total Massachusetts/New York**        |   |                   |   |               |   |                               |   | **345,000**                         |   |                |   |                                                                           |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***VIRGINIA***                          |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Burke***                             |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Burke  Town Plaza Shopping Center (3)   |   | 100                    | %      | 1979*              |   | 1979-1982/  1997/2000              |   | 133,000                             |   | 100                 | %      | Safeway, CVS Drug, Radio Shack                                                 |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Dale City***                         |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Smoketown  Plaza Shopping Center (5)    |   | 93                     | %      | 1987*              |   | 1987/1994                          |   | 84,000                              |   | 41                  | %      | Lowe’s (in redevelopment)                                                 |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Fredericksburg***                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Spotsylvania  Crossing Shopping Center  |   | 93                     | %      | 1987*              |   | 1987/1991                          |   | 142,000                             |   | 99                  | %      | Giant Food (on own pad), Kmart                                                 |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Harrisonburg***                      |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Skyline  Village Shopping Center        |   | 100                    | %      | 1988*              |   | 1988/1992                          |   | 126,000                             |   | 99                  | %      | Toys “R” Us, Super Valu                                              |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| ***Manassas***                          |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| Sudley  Towne Plaza Shopping Center     |   | 100                    | %      | 1984*              |   | 1984/-                             |   | 108,000                             |   | 100                 | %      | Burlington Coat Factory, CVS Drug, Best Buy  (on own pad)                      |   |
|                                    |   |                   |   |               |   |                               |   |                                |   |                |   |                                                                           |   |
| **Total Virginia**                      |   |                   |   |               |   |                               |   | **593,000**                         |   |                |   |                                                                           |   |

 

4

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**OtherRetail and Commercial Properties (4)**

 
|                              |   | **Percent  Ownership** |       | **Year  Acquired** |   | **Year (s)  Built /  Redeveloped** |   | **Gross  Leasable Area  (Sq. Ft.)** |   | **Percent  Leased** |   | **Major  Tenants** |   |
|-----------------------------------|--------|------------------------|------------|--------------------|--------|------------------------------------|--------|-------------------------------------|--------|---------------------|--------|--------------------|--------|
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| ***MARYLAND***                    |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| ***Baltimore Metropolitan Area*** |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| Orchard  Square Office            |   | 100                    | %          | 1997               |   | 1988/-                             |   | 28,000                              |   | 82                  | %      | N/A                |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| Patriots  Office                  |   | 50                     | %          | 1984*              |   | 1984/-                             |   | 28,000                              |   | 82                  | %      | N/A                |   |
| Wilkens  Office I, II, III        |   | 93                     | %          | 1981*              |   | 1985-87/  1991/1995                |   | 53,000                              |   | 99                  | %      | N/A                |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| Southwest  Property               |   | 100                    | %          | 1968*              |   | 1968/1984                          |   | 25,000                              |   | 100                 | %      | Shell Oil          |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| ***Other***                       |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| Clinton  Property (3)             |   | 100                    | %          | 1971*              |   | 1971/-                             |   | 29,000                              |   | 100                 | %      | AMF                |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| Waldorf  Property                 |   | 100                    | %          | 1979*              |   | 1979/-                             |   | 31,000                              |   | 100                 | %      | AMF, Firestone     |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| **Total Maryland**                |   |                   |       |               |   |                               |   | **194,000**                         |   |                |   |               |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| ***ILLINOIS***                    |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| Chicago  Property                 |   | 100                    | %          | 1978               |   | 1963/-                             |   | 37,000                              |   | 100                 | %      | AMF                |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| **Total Illinois**                |   |                   |       |               |   |                               |   | **37,000**                          |   |                |   |               |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
| **Total  Portfolio**              |   |                   | ** ** |               |   |                               |   | **5,314,000**                       |   | **93**              | **%**  |               |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |
|                              |   |                   |       |               |   |                               |   |                                |   |                |   |               |   |

 

 

**Undeveloped Land**

 
|                              |   | **Percent  Ownership** |   | **Area in  Acres** |   | **Zoning** |   |
|-----------------------------------|--------|------------------------|--------|--------------------|--------|------------|--------|
|                              |   |                   |   |               |   |       |   |
| ***MARYLAND***                    |   |                   |   |               |   |       |   |
|                              |   |                   |   |               |   |       |   |
| ***Baltimore Metropolitan Area*** |   |                   |   |               |   |       |   |
| Dorsey  Property                  |   | 100                    | %      | 20.2               |   | Commercial |   |
|                              |   |                   |   |               |   |       |   |
| Pulaski  Property                 |   | 100                    | %      | 3.0                |   | Industrial |   |
|                              |   |                   |   |               |   |       |   |
| ***Salisbury***                   |   |                   |   |               |   |       |   |
| Northwood  Industrial Park        |   | 67                     | %      | 16.1               |   | Industrial |   |
|                              |   |                   |   |               |   |       |   |
| ***NORTH CAROLINA***              |   |                   |   |               |   |       |   |
|                              |   |                   |   |               |   |       |   |
| ***Burlington***                  |   |                   |   |               |   |       |   |
| Burlington  Commerce Park         |   | 100                    | %      | 30.9               |   | Commercial |   |
|                              |   |                   |   |               |   |       |   |
| ***Hillsborough***                |   |                   |   |               |   |       |   |
| Hillsborough  Crossing            |   | 100                    | %      | 9.7                |   | Commercial |   |

 

(1)          Shopping centers in operation are subject tomortgage financing aggregating $190,628,552 at December 31, 2002.

(2)          The Harford Mall property is subject tomortgage financing aggregating $18,290,919 at December 31, 2002.  The mortgage bears interest at a rate  of 9.78%, and a balloon payment of$18,148,848 is due at maturity in July 2003. Written notice has been given that the loan will be repaid in full byApril 1, 2003.

(3)          These properties are subject to groundleases; all of the land relating to the other properties listed above is ownedin fee simple.  The ground leases  are subject to the following terms:

 
| **Property**                        |   | **Annual  Rent** |   | **Remaining  Lease Term**                            |                                               |
|-------------------------------------|--------|------------------|--------|------------------------------------------------------|----------------------------------------------------|
|                                |   |             |   |                                                 |                                               |
| Lutherville Station Shopping Center |   | $                | 60,000 |                                                 | 3 years 1 month, plus six 10 year renewal  options |   |
| Lutherville Station Shopping Center |   | 26,000           |   | 43 years 11 months, with an option to  purchase      |                                               |
| Patriots Plaza Shopping Center      |   | 65,200           |   | 7 years 10 months, plus two 10 year renewal  options |                                               |
| Brandywine Commons Shopping Center  |   | 432,725          |   | 49 years 4 months, plus two 10 year renewal  options |                                               |
| Burke Towne Plaza Shopping Center   |   | 80,000           |   | 29 years plus three 15 year renewal options          |                                               |
| Clinton Property                    |   | 33,000           |   | 21 years 8 months, plus one 45 year renewal  option  |                                               |
|                                     |        |                  |        |                                                      |                                                    |  |

 

(4)          Other retail and commercial properties inoperation are subject to mortgage financing aggregating $2,528,736 at December31, 2002.

(5)          Redevelopment will result in a 276,000 squarefoot center, which will be anchored by Lowe’s Home Center (160,000 square feet)and is anticipated to open in Spring 2003.

 

 

***Developed by MART**

 

5

----

 

**ITEM 3 - LEGAL PROCEEDINGS**

 

In the ordinary course of business, the Company is involved in legalproceedings.  However, there are nomaterial legal proceedings presently pending against the Company.

 

**ITEM 4 -SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER**S

 

None.

 

**PART II**

 

**ITEM 5 – MARKET FOR THE REGISTRANT’SCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

 

The number of holders of record of the Company’s shares was 1,217 as ofFebruary 28, 2003.

 

MART’s common shares of beneficial interest, par value$.01 per share, (“shares”), trade on the New York Stock Exchange, under thesymbol “MRR”.  The following table setsforth, for the quarters indicated, the high and low closing sale prices of MARTshares on the NYSE, and the cash distributions paid per share for the indicatedperiod.

 
|                |   | **Closing  Prices Per Share** |       |       |       |
|---------------------|--------|-------------------------------|------------|------------|------------|
| **2002**            |   | **High**                      |       | **Low**    |       | **Distributions** |   |
| **First  Quarter**  |   | **$**                         | **16.14**  | ** ** | **14.20**  | ** ** | **0.2950** | ** ** |
| **Second  Quarter** |   | **17.60**                     | ** ** | **15.16**  | ** ** | **0.2950** | ** ** |
| **Third  Quarter**  |   | **17.05**                     | ** ** | **13.70**  | ** ** | **0.2950** | ** ** |
| **Fourth  Quarter** |   | **17.85**                     | ** ** | **14.93**  | ** ** | **0.3100** | ** ** |
|                     |        |                               |            |            |            |  |  |  |

 
| **2001**       |   | **High** | *** *** | **Low** | *** *** | **Distributions** | *** *** |
|----------------|--------|----------|--------------|---------|--------------|-------------------|--------------|
| First Quarter  |   | $        | 13.48        |    | 11.75        |              | 0.2825       |   |
| Second Quarter |   | 13.65    |         | 10.95   |         | 0.2825            |         |
| Third Quarter  |   | 14.09    |         | 12.81   |         | 0.2825            |         |
| Fourth Quarter |   | 15.72    |         | 12.95   |         | 0.2950            |         |
|                |        |          |              |         |              |                   |              |  |

 

For the shareholders of MART during the entire year, per sharedividends were taxable as follows:

 
|                                                                                                            |   | **Per Share** |   |
|-----------------------------------------------------------------------------------------------------------------|--------|---------------|--------|
|                                                                                                            |   | **2002**      |   | **2001** |   | **2000** |   |
| Ordinary dividends -  taxable as ordinary income                                                                |   | $             | 1.10   |   | 1.08 |   | 0.98 |   |
|                                                                                                            |   |          |   |   |   |   |   |
| Capital gain distribution  - taxable as capital gain                                                            |   | —        |   | — |   | — |   |
|                                                                                                            |   |          |   |   |   |   |   |
| Other distribution -  return of capital or capital gain (depending on shareholder’s basis in MART  shares) |   | 0.10          |   | 0.06 |   | 0.11 |   |
|                                                                                                            |   |          |   |   |   |   |   |
| Total annual gross  dividends paid per share                                                                    |   | $             | 1.20   |   | 1.14 |   | 1.09 |   |
|                                                                                                            |   |          |   |   |   |   |   |
| Percent of total annual  gross dividends per share - return of capital or capital gain                          |   | 8             | %      | 6 | % | 10 | % |

 

 

 

6

----

 

**EquityCompensation Plans**

 

The following table reflects information regardingshare-based compensation issued as of December 31, 2002 under the Company’sequity compensation plans:

 
|                                                                                |   | **(a)  Number of securities  to be issued upon  exercise of outstanding  options, warrants and rights** |   | **(b)  Weighted-average exercise  price of outstanding  options, warrants and rights** |   | **(c)  Number of securities  remaining available for  future issuance under  equity compensation plans  (excluding securities reflected in column (a))** |    |   |
|-------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|
|                                                                                |   |                                                                                                    |   |                                                                                   |   |                                                                                                                                                     |    |   |
| Share-based compensation plans approved by shareholders of MART                     |   | 217,271                                                                                                 |   | $                                                                                      | 11.45  |                                                                                                                                                     | 614,500 |   |
|                                                                                |   |                                                                                                    |   |                                                                                   |   |                                                                                                                                                     |    |   |
| Share-based compensation plans not approved by shareholders of MART (1)   |   | —                                                                                                  |   | —                                                                                 |   | 20,471                                                                                                                                                   |    |   |
|                                                                                     |        |                                                                                                         |        |                                                                                        |        |                                                                                                                                                          |         |        |  |  |  |  |

 

----

(1)          In 1997, the Board ofTrustees approved and adopted a Restricted Share Plan.  Pursuant to the Plan, the Company is authorizedto grant up to 400,000 restricted common shares of beneficial interest totrustees, officers and employees.

 

7

----

 

**ITEM 6 -SELECTED FINANCIAL DATA**

 

The following table sets forth certain consolidated financial data forthe Company and should be read in conjunction with the consolidated financialstatements and notes thereto included elsewhere in this report.

 
|                                                                           |   | **Years  ended December 31,** |            |
|--------------------------------------------------------------------------------|--------|-------------------------------|-----------------|
|                                                                           |   | **2002**                      |            | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Revenues                                                                       |   | **$**                         | **69,375,167**  | ** ** | 62,456,375 |   | 57,585,123 |   | 53,346,473 |   | 49,537,130 |   |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Earnings before  extraordinary gain (loss)                                     |   | **$**                         | **19,802,271**  | ** ** | 14,359,029 |   | 12,555,629 |   | 12,751,158 |   | 12,385,861 |   |
| Extraordinary gain (loss)                                                      |   | **(108,953**                  | **)**           | — |   | 255,268 |   | — |   | (32,984 | ) |
| Net earnings                                                                   |   | **$**                         | **19,693,318**  | ** ** | 14,359,029 |   | 12,810,897 |   | 12,751,158 |   | 12,352,877 |   |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Net earnings per share -  basic                                                |   | **$**                         | **1.14**        | ** ** | 0.99 |   | 0.93 |   | 0.89 |   | 0.85 |   |
| Net earnings per share -  diluted                                              |   | **1.13**                      | ** **      | 0.97 |   | 0.92 |   | 0.88 |   | 0.84 |   |
| Total assets                                                                   |   | **$**                         | **424,343,372** | ** ** | 389,563,563 |   | 371,080,608 |   | 328,570,661 |   | 317,008,617 |   |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Indebtedness -                                                                 |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Total mortgages,  convertible debentures, construction loans and notes payable |   | **$**                         | **240,030,618** | ** ** | 241,941,366 |   | 232,962,526 |   | 186,593,831 |   | 166,732,850 |   |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Net cash flow:                                                                 |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Provided by operating  activities                                              |   | **$**                         | **33,258,174**  | ** ** | 32,659,889 |   | 26,539,335 |   | 25,153,324 |   | 24,255,137 |   |
| Used by investing  activities                                                  |   | **$**                         | **(33,710,713** | **)** | (30,791,989 | ) | (49,427,922 | ) | (24,175,685 | ) | (21,668,918 | ) |
| Provided (used) by  financing activities                                       |   | **$**                         | **1,566,523**   | ** ** | 624,616 |   | 22,850,395 |   | (1,440,868 | ) | (10,402,329 | ) |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Cash dividends paid per  share                                                 |   | **$**                         | **1.20**        | ** ** | 1.14 |   | 1.09 |   | 1.05 |   | 1.01 |   |
|                                                                           |   |                          |            |   |   |   |   |   |   |   |   |
| Weighted average number of  shares outstanding: EPS                            |   |                          | ** **      |   |   |   |   |   |   |   |   |
| Basic                                                                          |   | **17,050,883**                | ** **      | 14,268,487 |   | 13,538,886 |   | 14,021,403 |   | 14,240,533 |   |
| Diluted                                                                        |   | **17,426,292**                | ** **      | 15,010,310 |   | 14,806,204 |   | 15,337,652 |   | 15,778,727 |   |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| **RECONCILIATION OF NET EARNINGS TO FFO****(1)**                               |   |                          | ** **      |   |   |   |   |   |   |   |   |
|                                                                           |   |                          |            |   |   |   |   |   |   |   |   |
| Net earnings                                                                   |   | **$**                         | **19,693,318**  | ** ** | 14,359,029 |   | 12,810,897 |   | 12,751,158 |   | 12,352,877 |   |
| Depreciation                                                                   |   | **11,461,326**                | ** **      | 11,118,924 |   | 10,392,055 |   | 9,557,204 |   | 8,813,251 |   |
| (Gain) loss on properties                                                      |   | **—**                    | ** **      | (20,212 | ) | — |   | (131,611 | ) | 4,223 |   |
| Extraordinary (gain) loss  from early extinguishment of debt                   |   | **108,953**                   | ** **      | — |   | (255,268 | ) | — |   | 32,984 |   |
| FFO                                                                            |   | **$**                         | **31,263,597**  | ** ** | 25,457,741 |   | 22,947,684 |   | 22,176,751 |   | 21,203,335 |   |
|                                                                           |   |                          | ** **      |   |   |   |   |   |   |   |   |
| **RECONCILIATION OF FFO TO AFFO****(1)**                                       |   |                          | ** **      |   |   |   |   |   |   |   |   |
|                                                                           |   |                          |            |   |   |   |   |   |   |   |   |
| FFO                                                                            |   | **$**                         | **31,263,597**  | ** ** | 25,457,741 |   | 22,947,684 |   | 22,176,751 |   | 21,203,335 |   |
| Straight-line rents                                                            |   | **(757,339**                  | **)**           | — |   | — |   | — |   | — |   |
| AFFO                                                                           |   | **$**                         | **30,506,258**  | ** ** | 25,457,741 |   | 22,947,684 |   | 22,176,751 |   | 21,203,335 |   |

 

----

**(1)*****        ****The Company believes that Funds from Operations(“FFO”) provides relevant and meaningful information about its operatingperformance that is necessary, along with net earnings, for an understanding ofits operating results.  Funds fromoperations is defined by the National Association of Real Estate InvestmentTrusts, Inc. (“NAREIT”) as net earnings (computed in accordance with accountingprinciples generally accepted in the United States of America), excludingcumulative effects of changes in accounting principles, extraordinary items andgains or losses on sales of properties, plus depreciation and amortization andafter adjustments to record unconsolidated partnerships and joint ventures onthe same basis.  In addition, theCompany reports Adjusted Funds from Operations (“AFFO”) wherein the Companydeducts the positive non-cash impact of recognizing rents due from tenantsunder leases on a straight-line basis from reported FFO.  FFO and AFFO do not represent cash flowsfrom operations as defined by accounting principles generally accepted in theUnited States of America.  FFO and AFFOare not indicative that cash flows are adequate to fund all cash needs andshould not be considered as alternatives to cash flows as a measure ofliquidity. The Company’s FFO may not be comparable to the FFO of other REIT’sbecause they may not use the current NAREIT definition or they may interpretthe definition differently.*

 

8

----

 

 

**QuarterlyResults of Operations (Unaudited)**

 
|                                                     |   | **Quarter Ended** |           |
|----------------------------------------------------------|--------|-------------------|----------------|
| **2002**                                                 |   | **March 31,**     |           | **June 30,** |   | **September 30,** |   | **December 31,** |   |
| **Revenues**                                             |   | **$**             | **15,895,548** | ** ** | **17,212,946** | ** ** | **17,534,858** | ** ** | **18,731,815** | ** ** |
| **Earnings before extraordinary loss**                   |   | **3,778,140**     | ** **     | **4,611,457** | ** ** | **5,454,411** | ** ** | **5,958,263** | ** ** |
| **Extraordinary loss from early extinguishment of debt** |   | **—**        | ** **     | **(108,953** | **)** | **—** | ** ** | **—** | ** ** |
| **Net earnings**                                         |   | **$**             | **3,778,140**  | ** ** | **4,502,504** | ** ** | **5,454,411** | ** ** | **5,958,263** | ** ** |
| **Net earnings per share - basic**                       |   | **$**             | **0.24**       | ** ** | **0.25** | ** ** | **0.31** | ** ** | **0.33** | ** ** |
| **Net earnings per share - diluted**                     |   | **$**             | **0.24**       | ** ** | **0.25** | ** ** | **0.30** | ** ** | **0.33** | ** ** |

 
|                              |   | **Quarter  Ended** |       |
|-----------------------------------|--------|--------------------|------------|
| **2001**                          |   | **March 31,**      |       | **June 30,** |   | **September  30,** |   | **December  31,** |   |
| Revenues                          |   | $                  | 15,246,088 |   | 15,271,597 |   | 15,756,930 |   | 16,181,760 |   |
| Net  earnings                     |   | $                  | 3,294,664  |   | 3,261,460 |   | 3,741,576 |   | 4,061,329 |   |
| Net  earnings per share - basic   |   | $                  | 0.24       |   | 0.22 |   | 0.25 |   | 0.27 |   |
| Net  earnings per share - diluted |   | $                  | 0.23       |   | 0.22 |   | 0.25 |   | 0.27 |   |

 

Quarterly results are influenced by a number of factors, including thetiming of property acquisitions, sales and financing transactions and thecompletion of development/redevelopment projects.

 

9

----

 

**ITEM 7****-MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

 

The following discussion and analysis of operatingresults covers each of the Company’s business segments for the years endedDecember 31, 2002, 2001 and 2000.

 

Management believes thata segment analysis provides the most effective means of understanding thebusiness.  As discussed in Note N to theconsolidated financial statements, segment data is reported using theaccounting policies followed by the Company for internal reporting tomanagement.  These policies are the sameas those used for external reporting. Operating results of the segments are reconciled to earnings fromoperations in the financial statements in Note N.

 

## **Critical Accounting Policies**

 

Critical accountingpolicies are those that are both important to the presentation of our financialcondition and results of operations and require management’s most difficult,complex or subjective judgments.  TheCompany’s critical accounting policies relate to the evaluation of impairmentof long-lived assets and the collectibility of notes and accounts receivable.

 

If events or changes incircumstances indicate that the carrying value of an operating property to beheld and used or land held for development may be impaired, a recoverabilityanalysis is performed based on estimated undiscounted cash flows to begenerated from the property in the future. If the analysis indicates that the carrying value is not recoverablefrom future cash flows, the property is written down to estimated fair valueand an impairment loss is recognized. If we decide to sell an operating property or land held for development,we evaluate the recoverability of the carrying amounts of the assets.  If the evaluation indicates that the carryingvalue is not recoverable from estimated net sales proceeds, the property iswritten down to estimated fair value less costs to sell and an impairment lossis recognized.  Our estimates of cashflows and fair values of the properties are based on current market conditionsand consider matters such as rental rates and occupancies for comparableproperties, recent sales data for comparable properties and, where applicable,contracts or the results of negotiations with purchasers or prospectivepurchasers.  Our estimates are subjectto revision as market conditions and our assessments of them change.

 

The allowance fordoubtful notes and accounts receivable is established based on analysis of therisk of loss on specific accounts. The analysis places particular emphasis onpast-due accounts and considers information such as the nature and age of thereceivable, the payment history of the tenant or other debtor, the financialcondition of the tenant and our assessment of its ability to meet its leaseobligations, the basis for any disputes and the status of related negotiations,etc.  Our estimate of the requiredallowance is subject to revision as these factors change and is sensitive tothe effects of economic and market conditions on our tenants.

 

**OperatingResults - Shopping Centers**

 

#### **Theoperating results of shopping center properties are affected significantly byacquisition and disposition transactions and openings of newly developed orredeveloped properties.  Informationrelated to shopping center acquisitions and developments/redevelopmentscompleted during 2002, 2001 and 2000 is summarized in the following table:**

 
| **Property**                            |   | **Transaction or  Opening Date** |   |
|-----------------------------------------|--------|----------------------------------|--------|
|                                    |   |                             |   |
| ***Acquisitions***                      |   |                             |   |
|                                    |   |                             |   |
| Greenbrier Shopping  Center             |   | August 2002                      |   |
| Pottstown Plaza Shopping  Center        |   | October 2001                     |   |
| Fullerton Plaza Shopping  Center        |   | March 2000                       |   |
| Stonehedge Square  Shopping Center      |   | February 2000                    |   |
|                                    |   |                             |   |
| ***Development/Redevelopment***         |   |                             |   |
|                                    |   |                             |   |
| Perry Hall Super Fresh  Shopping Center |   | April 2002                       |   |
| Waverly Woods Shopping  Center          |   | March 2001                       |   |
| Security Square Shopping  Center        |   | February 2001                    |   |
| Burke Town Plaza Shopping  Center       |   | December 2000                    |   |
| Glen Burnie Village  Shopping Center    |   | November 2000                    |   |
| Rosedale Plaza Shopping  Center         |   | August 2000                      |   |

 

10

----

 

Operating results of shopping center properties are summarized asfollows (in thousands):

 
|                                                                         |   | **2002**   |       | **2001** |   | **2000** |   |
|------------------------------------------------------------------------------|--------|------------|------------|----------|--------|----------|--------|
| Revenues                                                                     |   | **$**      | **67,012** |     | 60,264 |     | 55,538 |   |
| Operating and interest  expenses, exclusive of depreciation and amortization |   | **33,078** |       | 32,288   |   | 30,204   |   |
| Depreciation and  amortization                                               |   | **11,031** |       | 10,654   |   | 9,926    |   |
| Minority interest                                                            |   | **4,049**  |       | 3,800    |   | 3,581    |   |
| Earnings from operations                                                     |   | **$**      | **18,854** |     | 13,522 |     | 11,827 |   |

 

Revenuesfrom shopping centers increased by $6,748,000 in 2002 and by $4,726,000 in2001.  The increase in 2002 was dueprimarily to the operations of the newly developed property opened in 2002($953,000), properties acquired in 2002 and 2001 ($2,254,000), theredevelopment projects completed and opened in 2001 ($1,061,000), the impact ofrecognizing rents due from tenants under leases on a straight-line basis($892,000) and other net rental and occupancy changes ($1,588,000).  The increase in 2001 was due primarily tothe operations of the properties acquired in 2001 and 2000 ($578,000), the developmentand redevelopment projects completed and opened in 2001 and 2000 ($3,006,000)and other net rental and occupancy changes ($1,142,000).

 

Operatingand interest expenses (exclusive of depreciation and amortization) for shoppingcenter properties increased by $790,000 in 2002 and by $2,084,000 in 2001.  The increase in 2002 was dueprimarily to the operations of the properties acquired anddevelopment/redevelopment projects opened in 2002 and 2001, ($2,410,000),partially offset by a decrease in interest expense due to lower rates onvariable rate debt and the effects of debt refinancings and retirements($1,794,000).  The increase in 2001 wasdue primarily to the acquisitions, developments and redevelopments referred toabove ($1,184,000) and new mortgage debt for Ingleside Shopping Center($727,000).  Depreciation andamortization expense increased by $377,000 in 2002 due primarily to theacquisitions and development/redevelopment projects referred to above ($898,000),partially offset by the effects of fully depreciated assets ($593,000).  The increase in 2001 of $728,000 isprimarily attributable to the acquisitions and development/redevelopmentprojects referred to above.

 

**OperatingResults - All Other Properties**

 

Operating results of all other properties aresummarized as follows (in thousands):

 
|                                                                         |   | **2002** |      | **2001** |   | **2000** |   |
|------------------------------------------------------------------------------|--------|----------|-----------|----------|--------|----------|--------|
| Revenues                                                                     |   | **$**    | **2,363** |     | 2,192  |     | 2,047  |   |
| Operating and interest  expenses, exclusive of depreciation and amortization |   | **907**  |      | 859      |   | 844      |   |
| Depreciation and  amortization                                               |   | **430**  |      | 465      |   | 466      |   |
| Minority interest                                                            |   | **78**   |      | 51       |   | 8        |   |
| Earnings from operations                                                     |   | **$**    | **948**   |     | 817    |     | 729    |   |

 

There were no significant changes in the operating results of all otherproperties during the period.

 

**Gain(Loss) on Properties**

The gain on properties for 2001 is due to the sale of land inBurlington, North Carolina.

 

11

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**Fundsfrom Operations**

 

The Company uses a supplemental performance measure along with netearnings to report its operating results. This measure is referred to as Funds from Operations (“FFO”). FFO isdefined by the National Association of Real Estate Investment Trusts, Inc.(“NAREIT”) as net earnings (computed in accordance with accounting principlesgenerally accepted in the United States of America), excluding cumulativeeffects of changes in accounting principles, extraordinary items and gains orlosses on sales of properties, plus depreciation and amortization and afteradjustments to record unconsolidated partnerships and joint ventures on thesame basis.  FFO does not represent cashflows from operations as defined by accounting principles generally accepted inthe United States of America.  FFO isnot indicative that cash flows are adequate to fund all cash needs and shouldnot be considered as an alternative to cash flows as a measure ofliquidity.  The Company’s FFO may not becomparable to the FFO of other REIT’s because they may not use the currentNAREIT definition or they may interpret the definition differently.

 

FFO was $31,264,000 in2002, $25,458,000 in 2001 and $22,948,000 in 2000.  The increases in FFO in 2002 and 2001 were due primarily to theproperty acquisitions and the development/redevelopment projects referred toabove and higher rents from re–leased space. The reasons for significant changes in revenues and expenses comprisingFFO by segment are described above.

 

12

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**Liquidityand Capital Resources**

 

The Company had cash and cash equivalents of $3,716,000 at December 31,2002.

 

Net cash provided byoperating activities was $33,258,000, $32,660,000 and $26,539,000, in 2002,2001 and 2000, respectively.  Thechanges in cash provided by operating activities were due primarily to thefactors discussed above in the comparisons of operating results.  The level of net cash provided by operatingactivities is also affected by the timing of receipt of revenues and thepayment of operating and interest expenses.

 

Net cash used byinvesting activities increased by $2,919,000 to $33,711,000 in 2002 from$30,792,000 in 2001.  The increase wasdue primarily to higher levels of acquisitions ($3,099,000) partially offset bylower levels of development activity ($1,035,000).

 

Net cash used byinvesting activities decreased by $18,636,000 to $30,792,000 in 2001 from$49,428,000 in 2000.  The decrease wasdue primarily to lower levels of acquisitions ($6,071,000) and developmentactivity ($13,580,000).

 

Net cash provided byfinancing activities increased by $942,000 to $1,567,000 in 2002 from $625,000in 2001.  The increase was due primarilyto the net proceeds from the sale of common shares of beneficial interest($32,836,000) and an increase in proceeds from exercise of share options($905,000), partially offset by an increase in dividends paid ($3,903,000) dueto increases in the number of common shares outstanding and the dividend rateper share.  Also, net debt repaymentswere $11,595,000 in 2002 as compared to net borrowings of $16,740,000 in 2001.  The net proceeds of the sale of commonshares in 2002 were used to repay debt.

 

Net cash provided byfinancing activities decreased by $22,225,000 to $625,000 in 2001 from$22,850,000 in 2000.  The decrease wasdue primarily to lower net credit line borrowings ($4,000,000), decreased netfinancing/refinancing activity ($12,831,000) and decreased net constructionborrowings ($7,131,000), partially offset by decreased share repurchases($2,686,000).

 

The Company currently hasa $100,000,000 unsecured line of credit ($75,000,000 prior to January 31, 2003)available for various purposes, including acquisition, development orredevelopment of properties and liquidity, subject to various terms andconditions.  The note payable under thebank line of credit had an outstanding balance of $25,500,000 at December 31,2002.

 

The Company hasregistered to sell up to an aggregate of approximately $98,000,000 (based onthe public offering price) of additional common shares of beneficial interestand/or debt securities.  The shares anddebt may be issued from time to time at prices, in amounts and on terms to bedetermined at the time of offering.

 

In order to qualify as aREIT for Federal income tax purposes, MART is required to pay dividends to itsshareholders of at least 90% of its REIT taxable income.  MART intends to pay these dividends fromoperating cash flows.  While MARTintends to distribute to its shareholders a substantial portion of its cashflows from operating activities, MART also intends to retain or reserve suchamounts as it considers necessary from time to time for the acquisition ordevelopment of new properties as suitable opportunities arise and for theexpansion and renovation of its shopping centers.  Also, MART currently has and expects to continue to maintain aline of credit from its primary bank.

 

The Company anticipatesmaterial commitments for capital expenditures to include, in the next twoyears, the development and redevelopment of eleven projects, currently invarious stages of planning, at an estimated cost of $38,400,000.  The Company expects to fund the developmentprojects and other capital expenditures with available net cash flows fromoperating activities and if necessary with construction loan financing,long-term mortgage financing on unencumbered operating properties or the use ofits line of credit.

 

It is management’sintention that MART continually have access to the capital resources necessaryto expand and develop its business.  Management cannot practically quantify MART’s 2003 cash requirements,but expects to meet its short-term liquidity requirements generally throughavailable net cash flow provided by operations and short-term borrowings.  To meet its long-term capital requirements,MART intends to obtain funds through additional equity offerings, jointventures or long-term debt financing in a manner consistent with its financialstrategy.  The Company anticipates thatthe cash flow available from operations, together with cash from borrowings andequity offerings, will be sufficient to meet its liquidity and capital needs inboth the short-and long-term.

 

#### **Market Risk Information**

 

The market risk associated with financial instruments and derivativefinancial and commodity instruments is the risk of loss from adverse changes inmarket prices or rates.  The Company’smarket risk arises primarily from interest rate risk relating to variable rateborrowings used to maintain liquidity (e.g., credit line borrowings) or financeproject development costs (e.g., construction loans). The Company’s interestrate risk management objective is to limit the impact of interest rate changeson earnings and cash flows.  In order toachieve this objective, the Company relies primarily on long-term, fixed ratenonrecourse loans from institutional lenders to finance its operatingproperties.  In addition, long-termfixed rate financing is typically arranged concurrently with or shortly after avariable rate project construction loan is negotiated or the project iscomplete. The Company has not used derivative financial or commodityinstruments to manage interest rate risk.

 

At December 31, 2002, theCompany’s variable rate debt relates to borrowings under its credit line, ashort-term mortgage and construction loans. The maturity date of the creditline was extended to January 2006 in January 2003; however, for purposes of thetable below, the credit line borrowings are assumed to be repaid at theirprevious maturity date in 2003.  Theshort-term mortgage is assumed to be repaid at its maturity in 2003.  The construction loans are assumed to berepaid at their maturity in 2004.

 

13

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Thetable below presents the annual maturities, weighted-average interest rates onoutstanding debt at the end of each year and fair values required to evaluatethe expected cash flows of the Company under debt and related agreements andits sensitivity to interest rate changes at December 31, 2002.  As the table incorporates only thoseexposures that exist as of December 31, 2002, it does not consider exposures orpositions that could arise after that date. As a result, the Company’s ultimate realized gain or loss with respectto interest rate fluctuations will depend on the exposures that arise afterDecember 31, 2002, the Company’s hedging strategies, if any, during that periodand interest rates.

 
|                            |   | **(In thousands)** |   |
|---------------------------------|--------|--------------------|--------|
|                            |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                            |   | **2003**           |   | **2004** |   | **2005** |   | **2006** |   | **2007** |   | **Thereafter** |   | **Total** |   | **Fair  Value** |   |
| Fixed rate debt                 |   | $                  | 23,259 |   | 11,598 |   | 3,660 |   | 22,651 |   | 8,807 |   | 120,708 |   | 190,683 |   | 220,462 |   |
| Weighted average interest  rate |   | 9.43               | %      | 7.32 | % | 8.07 | % | 7.99 | % | 8.37 | % | 7.78 | % | 8.16 | % | 6.10 | % |
|                            |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Variable rate debt              |   | $                  | 37,500 |   | 11,847 |   | — |   | — |   | — |   | — |   | 49,347 |   | 49,347 |   |
| Weighted average interest  rate |   | 3.02               | %      | 3.01 | % | — |   | — |   | — |   | — |   | 3.02 | % | 3.02 | % |

 

## **Inflation**

 

The majority of leases for the shopping center properties containprovisions for annual increases in rents and/or provisions, which entitle MARTto receive percentage rents, based on the tenants’ gross sales.  Such provisions ameliorate the risk to MARTof the adverse effects of inflation.  Ifa recession were to begin and continue for a prolonged time, FFO could declineas some tenants may have trouble meeting their lease obligations.  Most of the leases for the propertiesrequire the tenants to pay a substantial share of operating expenses, such asreal estate taxes, insurance and common area maintenance costs, and therebyreduce MART’s exposure to increased costs. In addition, many of the leases for the properties are for terms of lessthan 10 years, which may enable MART to seek increased rents upon renewal ofexisting leases if rents are below the then existing market rates.

 

**New Accounting Standards**

** **

In April 2002, theFinancial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 145, “Rescission of FASB Statements No. 4,44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections.”  Upon adoption of SFAS No. 145, the Company will be requiredto apply the criteria in Accounting Principles Board Opinion No. 30, “Reportingthe Results of Operations - Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions,” in determining the classification of gains and losses resultingfrom the extinguishment of debt. SFAS No. 145 is effective on January 1, 2003with early adoption of the provisions related to the rescission of SFAS No. 4encouraged.  Upon adoption, the Company will reclassify any extraordinarygains and losses from extinguishment of debt to continuing operations. The Company will adopt the provisions relating to the rescission of SFAS No. 4in the first quarter of 2003.

 

InNovember 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accountingand Disclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness of Others.” For 2002, the Interpretation requires certaindisclosures.  Beginning in 2003, theInterpretation requires recognition of liabilities at their fair value fornewly issued guarantees.  The adoptionof Interpretation No. 45 will have no effect on our financial statements, asthe Company has no obligations within the scope of the Interpretation as ofDecember 31, 2002.

 

InDecember 2002, the FASB issued SFAS No. 148, “Accounting for Stock-BasedCompensation - Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-BasedCompensation.”  SFAS No. 148 providesalternative methods of transition for a voluntary change to the fairvalue-based method of accounting for stock-based compensation and requiresdisclosure in both annual and interim financial statements about the method ofaccounting for stock-based compensation and the effect of the method used onreported results.  We have adopted thedisclosure provisions of SFAS No. 148. We have determined that we will change to the fair value-based method ofaccounting for stock-based compensation in 2003 and, that we will adopt theprospective method of application.

 

InJanuary 2003, the FASB issued Interpretation No. 46, “Consolidation of VariableInterest Entities” (“VIEs”).  ThisInterpretation addresses the consolidation of variable interest entities inwhich the equity investors lack one or more of the essential characteristics ofa controlling financial interest or where the equity investment at risk is notsufficient for the entity to finance its activities without subordinatedfinancial support from other parties. The Interpretation applies to VIEs created after January 31, 2003 and toVIEs in which we acquire an interest after that date.  Effective July 1, 2003, it also applies to VIEs in which weacquired an interest before February 1, 2003. We may apply the Interpretationprospectively, with a cumulative effect adjustment as of July 1, 2003, or byrestating previously issued financial statements with a cumulative effectadjustment as of the beginning of the first year restated.  We are in the process of evaluating theeffects of applying Interpretation No. 46 in 2003.  Based on our preliminary analysis, we do not anticipate thatadoption of Interpretation No. 46 will have a material effect on our financialstatements.

 

14

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**Cautionary Disclosure Relating toForward Looking Statements**

** **

Statements made in this document include forward looking statementsunder the federal securities laws. Statements that are not historical in nature, including the words“anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similarexpressions are intended to identify forward looking statements.  While these statements reflect the Company’sgood faith beliefs based on current expectations, estimates and projectionsabout (among other things) the industry and the markets in which the Companyoperates, they are not guarantees of future performance, involve known andunknown risks and uncertainties that could cause actual results to differmaterially from those in the forward looking statements, and should not berelied upon as predictions of future events. Factors which could impact future results include (among other things)general economic conditions, local real estate conditions, oversupply ofavailable space, financial condition of tenants, timely ability to lease orre-lease space upon favorable economic terms, agreements with anchor tenants,interest rates, availability of financing, competitive factors, and similarconsiderations.  The Company disclaimsany obligation to publicly update or revise any forward looking statement,whether as a result of new information, future events or otherwise.  For a discussion of risks and uncertaintiesthat could cause actual results to differ materially from those contained inthe forward looking statements, see “Risk Factors” filed as Exhibit 99.1to  this Form 10-K.

 

15

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**ITEM 8 – FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

**IndependentAuditors’ Report**

 

 

Board of Trustees and Shareholders

Mid-Atlantic Realty Trust:

 

We have audited the accompanying consolidated balance sheets of Mid-AtlanticRealty Trust and subsidiaries as of December 31, 2002 and 2001 and the relatedconsolidated statements of operations, shareholders’ equity and cash flows foreach of the years in the three-year period ended December 31, 2002.  In connection with our audits of theconsolidated financial statements, we also have audited the financial statementschedule of real estate and accumulated depreciation.  These consolidated financial statements and the financial statementschedule are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these consolidated financial statements and financial statement schedulebased on our audits.

 

We conducted our audits in accordance with auditingstandards generally accepted in the United States of America.  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overallfinancial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of Mid-Atlantic Realty Trust and subsidiaries as of December 31, 2002and 2001, and the results of their operations and their cash flows for each ofthe years in the three-year period ended December 31, 2002, in conformity withaccounting principles generally accepted in the United States of America.  Also in our opinion, the related financialstatement schedule, when considered in relation to the basic consolidatedfinancial statements taken as a whole, presents fairly, in all materialrespects, the information set forth therein.

 

 

KPMG LLP

Baltimore, Maryland

February 28, 2003

 

16

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**MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES**

**ConsolidatedBalance Sheets**

 
|                                                                                                                                                         |   | **As of December 31,** |            |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------------|
|                                                                                                                                                         |   | **2002**               |            | **2001** |   |
|                                                                                                                                                         |   |                   |            |   |   |
| **ASSETS**                                                                                                                                                   |   |                   |            |   |   |
| *Properties:*                                                                                                                                                |   |                   |            |   |   |
| Operating  properties (Notes B and C)                                                                                                                        |   | **$**                  | **484,213,751** |   | 441,313,588 |   |
| Less  accumulated depreciation and amortization                                                                                                              |   | **91,481,224**         |            | 81,465,520 |   |
|                                                                                                                                                         |   | **392,732,527**        |            | 359,848,068 |   |
| Properties  in development (Notes C and D)                                                                                                                   |   | **14,975,500**         |            | 16,010,962 |   |
| Properties  held for development or sale                                                                                                                     |   | **3,288,171**          |            | 3,288,171 |   |
|                                                                                                                                                         |   | **410,996,198**        |            | 379,147,201 |   |
|                                                                                                                                                         |   |                   |            |   |   |
| Cash  and cash equivalents                                                                                                                                   |   | **3,716,186**          |            | 2,602,202 |   |
| Notes  and accounts receivable – tenants and other (Note E)                                                                                             |   | **3,833,527**          |            | 2,304,973 |   |
| Prepaid  expenses and deposits                                                                                                                               |   | **3,497,749**          |            | 3,270,013 |   |
| Deferred  financing costs, net (Note F)                                                                                                                      |   | **2,299,712**          |            | 2,239,174 |   |
|                                                                                                                                                         |   | **$**                  | **424,343,372** |   | 389,563,563 |   |
|                                                                                                                                                         |   |                   |            |   |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                |   |                   |            |   |   |
| *Liabilities:*                                                                                                                                               |   |                   |            |   |   |
| Accounts  payable, accrued expenses and other liabilities (Note G)                                                                                           |   | **$**                  | **8,891,268**   |   | 9,269,339 |   |
| Notes  payable (Note H)                                                                                                                                      |   | **25,500,000**         |            | 42,500,000 |   |
| Construction  loans payable (Note C)                                                                                                                         |   | **20,414,330**         |            | 24,387,289 |   |
| Mortgages  payable (Note C)                                                                                                                                  |   | **193,157,288**        |            | 170,270,077 |   |
| Convertible  subordinated debentures (Note I)                                                                                                                |   | **959,000**            |            | 4,784,000 |   |
| Deferred  income                                                                                                                                             |   | **9,437**              |            | 938,596 |   |
|                                                                                                                                                         |   | **248,931,323**        |            | 252,149,301 |   |
|                                                                                                                                                         |   |                   |            |   |   |
| Minority  interest in consolidated joint ventures                                                                                                            |   | **32,648,800**         |            | 32,819,374 |   |
|                                                                                                                                                         |   |                   |            |   |   |
| *Shareholders’ equity (Note K):*                                                                                                                        |   |                   |            |   |   |
|                                                                                                                                                         |   |                   |            |   |   |
| Preferred  shares of beneficial interest, $.01 par value, authorized 2,000,000 shares,  issued and outstanding, none                                         |   | **—**             |            | — |   |
| Common  shares of beneficial interest, $.01 par value, authorized 100,000,000 shares,  issued and outstanding 17,971,818 and 15,103,221 shares, respectively |   | **179,718**            |            | 151,032 |   |
| Additional  paid-in capital                                                                                                                                  |   | **177,257,630**        |            | 138,267,358 |   |
| Distributions  in excess of accumulated earnings                                                                                                             |   | **(34,674,099**        | )               | (33,823,502 | ) |
|                                                                                                                                                         |   | **142,763,249**        |            | 104,594,888 |   |
| *Commitments (Note L)*                                                                                                                                       |   |                   |            |   |   |
|                                                                                                                                                         |   | **$**                  | **424,343,372** |   | 389,563,563 |   |

 

 

*Seeaccompanying notes to consolidated financial statements.*

 

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**MID-ATLANTIC REALTY TRUST ANDSUBSIDIARIES**

**Consolidated Statements of Operations**

 
|                                                         |   | **Years ended December 31,** | ** **     |
|--------------------------------------------------------------|--------|------------------------------|----------------|
|                                                         |   | **2002**                     | ** **     | **2001** | ** ** | **2000** | ** ** |
|                                                         |   |                         |           |   |   |   |   |
| **REVENUES:**                                                |   |                         |           |   |   |   |   |
| Minimum  rents                                               |   | **$**                        | **55,767,951** |   | 50,633,183 |   | 46,680,656 |   |
| Percentage  rents                                            |   | **1,919,669**                |           | 1,640,027 |   | 1,588,771 |   |
| Tenant  recoveries                                           |   | **11,033,464**               |           | 9,709,503 |   | 8,883,947 |   |
| Other  (Note O)                                              |   | **654,083**                  |           | 473,662 |   | 431,749 |   |
|                                                         |   | **69,375,167**               |           | 62,456,375 |   | 57,585,123 |   |
|                                                         |   |                         |           |   |   |   |   |
| **EXPENSES:**                                                |   |                         |           |   |   |   |   |
| Interest                                                     |   | **16,462,531**               |           | 17,332,440 |   | 16,355,070 |   |
| Depreciation  and amortization of property and improvements  |   | **11,461,326**               |           | 11,118,924 |   | 10,392,055 |   |
| Operating                                                    |   | **14,297,234**               |           | 12,577,288 |   | 11,832,858 |   |
| General  and administrative                                  |   | **3,225,089**                |           | 3,237,545 |   | 2,859,809 |   |
|                                                         |   | **45,446,180**               |           | 44,266,197 |   | 41,439,792 |   |
|                                                         |   |                         |           |   |   |   |   |
| **EARNINGS FROM OPERATIONS BEFORE MINORITY INTEREST**        |   | **23,928,987**               |           | 18,190,178 |   | 16,145,331 |   |
| Minority  interest                                           |   | **(4,126,716**               | )              | (3,851,361 | ) | (3,589,702 | ) |
| **EARNINGS FROM OPERATIONS**                                 |   | **19,802,271**               |           | 14,338,817 |   | 12,555,629 |   |
| Gain  on properties (Note P)                                 |   | **—**                   |           | 20,212 |   | — |   |
|                                                         |   |                         |           |   |   |   |   |
| **EARNINGS BEFORE EXTRAORDINARY GAIN (LOSS)**                |   | **19,802,271**               |           | 14,359,029 |   | 12,555,629 |   |
| Extraordinary  gain (loss) from early extinguishment of debt |   | **(108,953**                 | )              | — |   | 255,268 |   |
| **NET EARNINGS**                                             |   | **$**                        | **19,693,318** |   | 14,359,029 |   | 12,810,897 |   |
|                                                         |   |                         |           |   |   |   |   |
| **NET EARNINGS PER SHARE – BASIC (Note Q):**            |   |                         |           |   |   |   |   |
| Earnings  before extraordinary gain (loss)                   |   | **$**                        | **1.15**       |   | 0.99 |   | 0.91 |   |
| Extraordinary  gain (loss) from early extinguishment of debt |   | **(0.01**                    | )              | — |   | 0.02 |   |
| Net  earnings                                                |   | **$**                        | **1.14**       |   | 0.99 |   | 0.93 |   |
|                                                         |   |                         |           |   |   |   |   |
| **NET EARNINGS PER SHARE – DILUTED (Note Q):**          |   |                         |           |   |   |   |   |
| Earnings  before extraordinary gain (loss)                   |   | **$**                        | **1.14**       |   | 0.97 |   | 0.90 |   |
| Extraordinary  gain (loss) from early extinguishment of debt |   | **(0.01**                    | )              | — |   | 0.02 |   |
| Net  earnings                                                |   | **$**                        | **1.13**       |   | 0.97 |   | 0.92 |   |

 

 

*Seeaccompanying notes to consolidated financial statements.*

 

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**MID-ATLANTIC REALTY TRUST ANDSUBSIDIARIES**

**Consolidated Statements ofShareholders’ Equity**

 
|                                               |   | **Years  ended December 31, 2002, 2001 and 2000** |         |
|----------------------------------------------------|--------|---------------------------------------------------|--------------|
|                                               |   | **Number of  Common  Shares**                     | *** *** | **Common  Shares at  Par Value** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Distributions  in Excess of  Accumulated  Earnings** | ** ** | **Net  Shareholders’  Equity** | *** *** |
|                                               |   |                                              | *** *** |   | *** *** |   | *** *** |   | *** *** |   | *** *** |
| **BALANCE, December 31, 1999**                     |   | 14,005,407                                        |         | $ | 140,054 |   | 126,805,104 |   | (29,276,671 | ) | 97,668,487 |   |
| Conversion  of convertible subordinated debentures |   | 16,189                                            |         | 162 |   | 167,328 |   | — |   | 167,490 |   |
| Share  purchase plan                               |   | (283,800                                          | )            | (2,838 | ) | (2,683,296 | ) | — |   | (2,686,134 | ) |
| Share-based  compensation plans, net               |   | 53,073                                            |         | 531 |   | 576,802 |   | — |   | 577,333 |   |
| Conversion  of Operating Partnership Units         |   | 19,293                                            |         | 193 |   | 222,371 |   |   |   | 222,564 |   |
| Dividends  paid - $1.0925 per share                |   | —                                            |         | — |   | — |   | (15,075,196 | ) | (15,075,196 | ) |
| Net  earnings                                      |   | —                                            |         | — |   | — |   | 12,810,897 |   | 12,810,897 |   |
|                                               |   |                                              |         |   |   |   |   |   |   |   |   |
| **BALANCE, December 31, 2000**                     |   | 13,810,162                                        |         | 138,102 |   | 125,088,309 |   | (31,540,970 | ) | 93,685,441 |   |
| Conversion  of convertible subordinated debentures |   | 789,709                                           |         | 7,897 |   | 8,185,171 |   | — |   | 8,193,068 |   |
| Share-based  compensation plans, net               |   | 151,730                                           |         | 1,517 |   | 1,184,758 |   | — |   | 1,186,275 |   |
| Conversion  of Operating Partnership Units         |   | 351,620                                           |         | 3,516 |   | 3,809,120 |   | — |   | 3,812,636 |   |
| Dividends  paid - $1.1425****per share             |   | —                                            |         | — |   | — |   | (16,641,561 | ) | (16,641,561 | ) |
| Net  earnings                                      |   | —                                            |         | — |   | — |   | 14,359,029 |   | 14,359,029 |   |
|                                               |   |                                              |         |   |   |   |   |   |   |   |   |
| **BALANCE, December 31, 2001**                     |   | 15,103,221                                        |         | 151,032 |   | 138,267,358 |   | (33,823,502 | ) | 104,594,888 |   |
| Conversion  of convertible subordinated debentures |   | 364,277                                           |         | 3,642 |   | 3,798,933 |   | — |   | 3,802,575 |   |
| Share  purchase plan                               |   | (200                                              | )            | (2 | ) | (2,768 | ) | — |   | (2,770 | ) |
| Share-based  compensation plans, net               |   | 164,481                                           |         | 1,646 |   | 2,041,329 |   | — |   | 2,042,975 |   |
| Sale  of common shares                             |   | 2,300,000                                         |         | 23,000 |   | 32,812,898 |   | — |   | 32,835,898 |   |
| Conversion  of Operating Partnership Units         |   | 40,039                                            |         | 400 |   | 339,880 |   | — |   | 340,280 |   |
| Dividends  paid - $1.1950 per share                |   | —                                            |         | — |   | — |   | (20,543,915 | ) | (20,543,915 | ) |
| Net  earnings                                      |   | —                                            |         | — |   | — |   | 19,693,318 |   | 19,693,318 |   |
| **BALANCE, December 31, 2002**                     |   | **17,971,818**                                    | ** **   | **$** | **179,718** | ** ** | **177,257,630** | ** ** | **(34,674,099** | **)** | **142,763,249** | ** ** |

 

 

*Seeaccompanying notes to consolidated financial statements.*

 

19

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**MID-ATLANTIC REALTY TRUST ANDSUBSIDIARIES**

**Consolidated Statements of CashFlows**

 
|                                                                                 |   | **Years  ended December 31,** |           |
|--------------------------------------------------------------------------------------|--------|-------------------------------|----------------|
|                                                                                 |   | **2002**                      |           | **2001** |   | **2000** |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                            |   |                          |           |   |   |   |   |
| Net  earnings                                                                        |   | **$**                         | **19,693,318** |   | 14,359,029 |   | 12,810,897 |   |
| Adjustments  to reconcile net earnings to net cash provided by operating activities: |   |                          |           |   |   |   |   |
| Extraordinary  loss (gain) from early extinguishment of debt                         |   | **108,953**                   |           | — |   | (255,268 | ) |
| Depreciation  and amortization                                                       |   | **11,461,326**                |           | 11,118,924 |   | 10,392,055 |   |
| Minority  interest in earnings                                                       |   | **4,126,716**                 |           | 3,851,361 |   | 3,589,702 |   |
| Amortization  of deferred financing costs                                            |   | **603,843**                   |           | 545,313 |   | 398,195 |   |
| Changes  in operating assets and liabilities:                                        |   |                          |           |   |   |   |   |
| Decrease  (increase) in assets                                                       |   | **(1,756,290**                | )              | 106,232 |   | (883,396 | ) |
| Increase  (decrease) in liabilities                                                  |   | **(1,307,230**                | )              | 2,383,937 |   | (87,673 | ) |
| Other,  net                                                                          |   | **327,538**                   |           | 295,093 |   | 574,823 |   |
| Total  adjustments                                                                   |   | **13,564,856**                |           | 18,300,860 |   | 13,728,438 |   |
| **NET CASH PROVIDED BY OPERATING ACTIVITIES**                                        |   | **33,258,174**                |           | 32,659,889 |   | 26,539,335 |   |
|                                                                                 |   |                          |           |   |   |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                            |   |                          |           |   |   |   |   |
| Acquisitions  of and additions to properties                                         |   | **(29,472,091**               | )              | (27,283,646 | ) | (44,909,584 | ) |
| Proceeds  from sales of properties                                                   |   | **—**                    |           | 319,651 |   | — |   |
| Payments  to minority partners                                                       |   | **(4,238,622**                | )              | (3,827,994 | ) | (4,518,338 | ) |
| **NET CASH USED BY INVESTING ACTIVITIES**                                            |   | **(33,710,713**               | )              | (30,791,989 | ) | (49,427,922 | ) |
|                                                                                 |   |                          |           |   |   |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                            |   |                          |           |   |   |   |   |
| Proceeds  from notes payable                                                         |   | **239,000,000**               |           | 132,500,000 |   | 101,600,000 |   |
| Principal  payments on notes payable                                                 |   | **(256,000,000**              | )              | (127,000,000 | ) | (92,100,000 | ) |
| Proceeds  from mortgages payable                                                     |   | **30,260,000**                |           | 12,000,000 |   | 37,855,500 |   |
| Principal  payments on mortgages payable                                             |   | **(20,882,334**               | )              | (4,357,501 | ) | (17,382,660 | ) |
| Proceeds  from construction loans payable                                            |   | **7,349,091**                 |           | 14,815,033 |   | 11,258,948 |   |
| Principal  payments on construction loans payable                                    |   | **(11,322,050**               | )              | (11,217,511 | ) | — |   |
| Deferred  interest on construction loans payable                                     |   | **—**                    |           | 530,819 |   | — |   |
| Deferred  financing costs                                                            |   | **(633,465**                  | )              | (605,617 | ) | (620,063 | ) |
| Proceeds  from exercise of share options                                             |   | **1,506,068**                 |           | 600,954 |   | — |   |
| Net  proceeds from sale of common shares                                             |   | **32,835,898**                |           | — |   | — |   |
| Shares  repurchased                                                                  |   | **(2,770**                    | )              | — |   | (2,686,134 | ) |
| Dividends  paid                                                                      |   | **(20,543,915**               | )              | (16,641,561 | ) | (15,075,196 | ) |
| **NET CASH PROVIDED BY FINANCING ACTIVITIES**                                        |   | **1,566,523**                 |           | 624,616 |   | 22,850,395 |   |
|                                                                                 |   |                          |           |   |   |   |   |
| **NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**                             |   | **1,113,984**                 |           | 2,492,516 |   | (38,192 | ) |
|                                                                                 |   |                          |           |   |   |   |   |
| **CASH AND CASH EQUIVALENTS,**beginning of year                                      |   | **2,602,202**                 |           | 109,686 |   | 147,878 |   |
|                                                                                 |   |                          |           |   |   |   |   |
| **CASH AND CASH EQUIVALENTS,**end of year                                            |   | **$**                         | **3,716,186**  |   | 2,602,202 |   | 109,686 |   |
|                                                                                 |   |                          |           |   |   |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION**                                |   |                          |           |   |   |   |   |
| Interest  paid                                                                       |   | **$**                         | **14,824,197** |   | 16,913,863 |   | 15,617,469 |   |
|                                                                                 |   |                          |           |   |   |   |   |
| **SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES**                           |   |                          |           |   |   |   |   |
| Conversion  of subordinated debentures, net of deferred financing costs              |   | **$**                         | **3,802,710**  |   | 8,193,140 |   | 167,515 |   |
| Mortgages  payable assumed                                                           |   | **13,400,592**                |           | — |   | 5,562,175 |   |
| Conversion  of Operating Partnership****Units                                        |   | **340,280**                   |           | 3,812,636 |   | 222,564 |   |
| Operating  Partnership Units issued                                                  |   | **281,612**                   |           | — |   | 400,000 |   |

 

 

*Seeaccompanying notes to consolidated financial statements.*

 

20

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS**

December 31, 2002, 2001 and 2000

 

**A.  Summary of Significant Accounting Policies**

 

## **Organization**

 

Mid-Atlantic Realty Trust was incorporated June 29, 1993, and commencedoperations effective with the completion of its initial public share offeringon September 11, 1993.  Mid-AtlanticRealty Trust qualifies as a real estate investment trust (“REIT”) for Federalincome tax purposes. As used herein, the term “MART” or the “Company” refers toMid-Atlantic Realty Trust and entities owned or controlled by MART, includingMART Limited Partnership (the “Operating Partnership”).

 

**Descriptionof Business**

 

The Company is a fully integrated, self-administered real estateinvestment trust, which owns, acquires, develops, redevelops, leases andmanages primarily neighborhood or community shopping centers in the MiddleAtlantic region of the United States.

 

The Company has an equity interest in 41 operatingshopping centers, 36 of which are wholly owned by the Company and five****inwhich the Company has ownership interests ranging from 50% to 93%, as well asother commercial properties.  TheCompany also owns five undeveloped parcels of land totaling approximately 80acres, which it is holding for development or sale.

 

All of MART’s interests in properties are helddirectly or indirectly by, and all of its operations relating to the propertiesare conducted through, the Operating Partnership.  Subject to certain conditions, units of partnership interest inthe Operating Partnership (“Units”) may be exchanged by the limited partnersfor cash or, at the option of MART, the obligation may be assumed by MART andpaid either in cash or in common shares of beneficial interest in MART on aone-for-one basis.  MART controls theOperating Partnership as the sole general partner, and owns approximately 86%of the Units at December 31, 2002.

 

## **Basis ofPresentation**

 

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and judgments that affect the reported amounts ofassets and liabilities and disclosures of contingencies at the date of thefinancial statements and revenues and expenses recognized during the reportingperiod.  Actual results could differfrom those estimates.

 

**Principlesof Consolidation**

 

The consolidated financial statements include all wholly ownedsubsidiaries and majority-owned partnerships, including the Operating Partnership.  The Company owns 100% interests in corporatesubsidiaries, which are general partners in partnerships which have outsidepartners with 50% interests.  Underterms of the partnership agreements, the Company has control over thepartnerships, including acquisition, leasing, financing and sale transactionsand, accordingly, the Company uses the full consolidation method to account forthem.  All significant intercompanybalances and transactions have been eliminated in consolidation.

 

**EarningsPer Share**

 

Basic earnings per share (“EPS”) is computed by dividing earningsavailable to common shareholders by the weighted average number of commonshares outstanding.  Diluted EPS iscomputed after adjusting the numerator and denominator of the basic EPS computationfor the effects of all dilutive potential common shares outstanding during theperiod.  The dilutive effects ofconvertible securities are computed using the “if-converted” method and thedilutive effects of options, warrants and their equivalents (including fixedawards and nonvested shares issued under share-based compensation plans) arecomputed using the “treasury stock” method.

 

## **CapitalizationPolicy**

 

Acquisition, development and construction costs of properties indevelopment are capitalized including, where applicable, salaries and relatedcosts, real estate taxes and interest costs. Development and construction costs and costs of significantimprovements, replacements and renovations to operating properties arecapitalized while costs of maintenance and repairs are expensed asincurred.  Direct costs incurred infinancing transactions are capitalized as deferred costs and amortized tointerest cost over the term of the related loan using the interest method.  Initial direct costs incurred with respectto completed tenant leases are deferred and amortized using the straight-linemethod over the terms of the related leases.

 

21

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**Properties**

 

Properties to be developed or held and used in operations are carriedat cost, reduced for impairment losses where appropriate. Properties held forsale are carried at the lower of their carrying value (i.e., cost lessaccumulated depreciation and any impairment loss recognized, where applicable)or estimated fair value less costs to sell. The net carrying values ofoperating properties are classified as properties held for sale when seniormanagement authorizes their disposition, the Company begins marketing theproperties for sale and various other criteria for a plan of sale are met.  Depreciation of these properties isdiscontinued at that time, but operating revenues, other operating expenses andinterest continue to be recognized until the date of sale.

 

If events or circumstances indicate that the carryingvalue of an operating property to be held and used may be impaired, arecoverability analysis is performed based on estimated undiscounted futurecash flows to be generated from the property. If the analysis indicates that the carrying value is not recoverablefrom future cash flows, the property is written down to estimated fair valueand an impairment loss is recognized.

 

Depreciation is computed using the straight-linemethod over the estimated useful lives of the related assets, as follows:Buildings and additions, 30 – 50 years; land improvements, 5 – 15 years; tenantimprovements, lesser of lease term or asset useful lives; and furniture,fixtures and equipment, 3 – 10 years.

 

## **RevenueRecognition**

 

Prior to July 1, 2002, minimum rent revenueswere generally recognized when due from tenants under terms of the relatedleases. Effective July 1, 2002, the Company began recognizing estimatedcollectible minimum rent revenues under tenant leases that provide for varyingrents over their terms on a straight-line basis in accordance with Statement ofFinancial Accounting Standards (“SFAS”) No. 13, “Accounting for Leases,” asamended.   The effect of the change on the financial statements wasimmaterial. Revenues from tenant reimbursements of real estate taxes, maintenanceand insurance costs are recognized in the period in which the related expenseis incurred. Revenues based on a percentage of tenant’s sales in excess oflevels specified in the lease agreement are recognized when a tenant’s salesexceed the specified minimum level.

 

**Share-basedCompensation Plans**

 

The Company uses the intrinsic value method to account for share-basedemployee compensation plans.  Under thismethod, compensation cost is recognized for awards of shares to employees onlyif the quoted market price of the share at the grant date (or other measurementdate, if later) is greater than the amount the employee must pay to acquire theshare.  The following table summarizesthe pro forma effects on net earnings and net earnings per share of using afair value-based method to account for share-based employee compensation plans,rather than the intrinsic value method, for share-based employee compensationawards made since 1995.

 
|                                                                                                              |   | **Years ended December 31,** |           |
|-------------------------------------------------------------------------------------------------------------------|--------|------------------------------|----------------|
|                                                                                                              |   | **2002**                     |           | **2001** |   | **2000** |   |
|                                                                                                              |   |                         |           |   |   |   |   |
| Net earnings, as reported                                                                                         |   | **$**                        | **19,693,318** |   | 14,359,029 |   | 12,810,897 |   |
| Add: Share-based employee  compensation expense included in reported net earnings                                 |   | **268,884**                  |           | 207,784 |   | 235,847 |   |
| Deduct: Total share-based  employee compensation expense determined under fair value-based method for  all awards |   | **476,281**                  |           | 415,181 |   | 441,672 |   |
|                                                                                                              |   |                         |           |   |   |   |   |
| Pro forma net earnings                                                                                            |   | **$**                        | **19,485,921** | ** ** | **14,151,632** | ** ** | **12,605,072** | ** ** |
|                                                                                                              |   |                         |           |   |   |   |   |
| Earnings per share:                                                                                               |   |                         |           |   |   |   |   |
| Basic:                                                                                                            |   |                         |           |   |   |   |   |
| As reported                                                                                                       |   | **$**                        | **1.14**       |   | 0.99 |   | 0.93 |   |
| Pro forma                                                                                                         |   | **1.13**                     |           | 0.99 |   | 0.91 |   |
| Diluted:                                                                                                          |   |                         |           |   |   |   |   |
| As reported                                                                                                       |   | **$**                        | **1.13**       |   | 0.97 |   | 0.92 |   |
| Pro forma                                                                                                         |   | **1.12**                     |           | 0.96 |   | 0.90 |   |

 

22

----

 

There were no employee stock options granted during2002.  The per share weighted-average fairvalue of options granted during 2001 and 2000 were $0.97 and $1.52,respectively.   These fair values wereestimated on the dates of each grant using the Black-Scholes option-pricingmodel with the following assumptions:

 
|                    |   | **Years ended December 31,** |   |
|-------------------------|--------|------------------------------|--------|
|                    |   | **2001**                     |   | **2000** |   |
| Risk-free interest rate |   | 4.20                         | %      | 5.04 | % |
| Dividend yield          |   | 9.29                         | %      | 9.40 | % |
| Volatility factor       |   | 22.36                        | %      | 21.64 | % |
| Life (years)            |   | 3.27                         |   | 3.00 |   |

 

**IncomeTaxes**

** **

The Company qualifies, and intends to continue to qualify, as a REITpursuant to Sections 856 through 860 of the Internal Revenue Code of 1986, asamended.  In general, under such Codeprovisions a trust which has made the required election and, in the taxableyear, meets certain requirements and distributes to its shareholders at least90% of its REIT taxable income will not be subject to Federal income tax to theextent of the income which it distributes.

 

## **Cash Equivalents**

 

All highly liquid unrestricted investments with maturities at dates ofpurchase of three months or less are considered cash equivalents.

 

## **FinancialInstruments**

 

Fair values of financial instruments approximate their carrying valuesin the financial statements, except for mortgages payable and convertiblesubordinated debentures for which fair value information is presented in NotesC and I, respectively.  The fair valuesof this debt at December 31, 2002 and 2001 were determined based on quotedmarket prices for publicly traded debt and discounted estimated future paymentsto be made for other debt.  The discountrates used approximate the rates currently offered for borrowings with similarremaining maturities.

 

## **New AccountingStandards**

 

In April 2002, theFinancial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 145, “Rescission of FASB Statements No. 4,44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections.”  Upon adoption of SFAS No. 145, the Company will be requiredto apply the criteria in Accounting Principles Board Opinion No. 30, “Reportingthe Results of Operations-Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions,” in determining the classification of gains and losses resultingfrom the extinguishment of debt. SFAS No. 145 is effective on January 1, 2003with early adoption of the provisions related to the rescission of SFAS No. 4encouraged.  Upon adoption, the Company will reclassify any extraordinarygains and losses from extinguishment of debt to continuing operations. The Company will adopt the provisions relating to the rescission of SFAS No. 4in the first quarter of 2003.

** **

In November 2002, the FASBissued Interpretation No. 45, “Guarantor’s Accounting and DisclosureRequirements for Guarantees, Including Indirect Guarantees of Indebtedness ofOthers.” For 2002, the Interpretation requires certain disclosures.  Beginning in 2003, the Interpretationrequires recognition of liabilities at their fair value for newly issuedguarantees.  The adoption of InterpretationNo. 45 will have no effect on our financial statements, as the Company has noobligations within the scope of the Interpretation  as of December 31, 2002.

 

In December 2002, the FASBissued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition andDisclosure.”  SFAS No. 148 amends SFASNo. 123, “Accounting for Stock-Based Compensation.”  SFAS No. 148 provides alternative methods of transition for avoluntary change to the fair value-based method of accounting for stock-basedcompensation and requires disclosure in both annual and interim financialstatements about the method of accounting for stock-based compensation and theeffect of the method used on reported results. We have adopted the disclosure provisions of SFAS No. 148.  We have determined that we will change tothe fair value-based method of accounting for stock-based compensation in 2003and, that we will adopt the prospective method of application.

 

In January 2003, the FASBissued Interpretation No. 46, “Consolidation of Variable Interest Entities”(“VIEs”).  This Interpretation addressesthe consolidation of variable interest entities in which the equity investorslack one or more of the essential characteristics of a controlling financialinterest or where the equity investment at risk is not sufficient for theentity to finance its activities without subordinated financial support fromother parties.  The Interpretationapplies to VIEs created after January 31, 2003 and to VIEs in which we acquirean interest after that date.  EffectiveJuly 1, 2003, it also applies to VIEs in which we acquired an interest beforeFebruary 1, 2003. We may apply the Interpretation prospectively, with acumulative effect adjustment as of July 1, 2003, or by restating previouslyissued financial statements with a cumulative effect adjustment as of thebeginning of the first year restated. We are in the process of evaluating the effects of applyingInterpretation No. 46 in 2003.  Based onour preliminary analysis, we do not anticipate that adoption of InterpretationNo. 46 will have a material effect on our financial statements.

 

23

----

 

**B. Operating Properties**

 

Operating properties consist of thefollowing:

 
|                                            |   | **December 31,** |            |
|-------------------------------------------------|--------|------------------|-----------------|
|                                            |   | **2002**         |            | **2001** |   |
| Land                                            |   | **$**            | **97,955,757**  |   | 87,399,838 |   |
| Land improvements                               |   | **32,793,610**   |            | 32,473,159 |   |
| Buildings                                       |   | **296,500,890**  |            | 268,101,954 |   |
| Improvements for tenants                        |   | **17,135,425**   |            | 16,204,784 |   |
| Development costs on  completed projects        |   | **14,248,183**   |            | 12,998,167 |   |
| Furnitures, fixtures and  equipment             |   | **3,993,962**    |            | 3,887,959 |   |
| Deferred leasing costs                          |   | **21,585,924**   |            | 20,247,727 |   |
|                                            |   | **484,213,751**  |            | 441,313,588 |   |
| Less accumulated  depreciation and amortization |   | **91,481,224**   |            | 81,465,520 |   |
|                                            |   | **$**            | **392,732,527** |   | 359,848,068 |   |

 

## **C. Properties andRelated Accumulated Depreciation and Amortization and Debt**

 

A summary of the Company’s properties and related mortgages payable isas follows at December 31, 2002:

 
| **Classification**                       |   | **Mortgages  Payable** |        | **Initial  Cost** |        | **Cost of  Subsequent  Improvements** |        | **Total  Cost** |        | **Accumulated  Depreciation  and  Amortization** |       | **Net Cost** |        |
|------------------------------------------|--------|------------------------|-------------|-------------------|-------------|---------------------------------------|-------------|-----------------|-------------|--------------------------------------------------|------------|--------------|-------------|
| Shopping centers                         |   | $                      | 190,628,552 |              | 360,715,126 |                                  | 105,774,644 |            | 466,489,770 |                                             | 84,461,821 |         | 382,027,949 |   |
| Bowling centers                          |   | —                 |        | 2,200,106         |        | 71,706                                |        | 2,271,812       |        | 1,382,994                                        |       | 888,818      |        |
| Office buildings                         |   | 2,528,736              |        | 9,439,113         |        | 1,336,503                             |        | 10,775,616      |        | 3,476,987                                        |       | 7,298,629    |        |
| Other rental properties                  |   | —                 |        | 2,040,071         |        | 1,136,598                             |        | 3,176,669       |        | 1,164,166                                        |       | 2,012,503    |        |
| Other property                           |   | —                 |        | 681,313           |        | 818,571                               |        | 1,499,884       |        | 995,256                                          |       | 504,628      |        |
| Operating properties                     |   | 193,157,288            |        | 375,075,729       |        | 109,138,022                           |        | 484,213,751     |        | 91,481,224                                       |       | 392,732,527  |        |
| Properties in development                |   | —                 |        | 14,975,500        |        | —                                |        | 14,975,500      |        | —                                           |       | 14,975,500   |        |
| Properties held for  development or sale |   | —                 |        | 3,288,171         |        | —                                |        | 3,288,171       |        | —                                           |       | 3,288,171    |        |
|                                     |   | $                      | 193,157,288 |              | 393,339,400 |                                  | 109,138,022 |            | 502,477,422 |                                             | 91,481,224 |         | 410,996,198 |   |

 

Mortgages payable at December 31, 2002 bear interestat a weighted average effective rate of 8.06% and mature in installmentsthrough 2020. Aggregate annual principal payments applicable to mortgagespayable are as follows at December 31, 2002:

 
| 2003       |   | $           | 33,922,274  |   |
|------------|--------|-------------|-------------|--------|
| 2004       |   | 3,409,318   |        |
| 2005       |   | 3,659,911   |        |
| 2006       |   | 22,651,478  |        |
| 2007       |   | 8,806,512   |        |
| Thereafter |   | 120,707,795 |        |
| Total      |   | $           | 193,157,288 |   |

 

Principal payments for 2003 include approximately$30,648,000 relating to a balloon payment and the maturity of a short-termmortgage.  The Company expects to makethese payments at or prior to the scheduled maturity dates from borrowings onits unsecured line of credit.  AtDecember 31, 2002 and 2001, the estimated fair values of mortgages payable were$211,424,000 and $178,546,000, respectively.

 

24

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Construction loans payable consist of thefollowing:

 
|                                                                                                                    |   | **December 31,** |           |
|-------------------------------------------------------------------------------------------------------------------------|--------|------------------|----------------|
|                                                                                                                    |   | **2002**         |           | **2001** |   |
| $9,000,000 loan payable  in monthly installments, maturing in June 2004 and bearing interest at 7%                      |   | **$**            | **8,566,871**  |   | 8,888,921 |   |
|                                                                                                                    |   |             |           |   |   |
| $14,850,000 loan maturing  March 2004 bearing interest at a variable rate based on LIBOR (2.93% at  December 31, 2002)  |   | **2,800,000**    |           | — |   |
|                                                                                                                    |   |             |           |   |   |
| $9,490,000 loan maturing  January 2004 bearing interest at a variable rate based on LIBOR (3.03% at  December 31, 2002) |   | **9,047,459**    |           | 4,498,368 |   |
|                                                                                                                    |   |             |           |   |   |
| $11,000,000 loan paid  prior to maturity in January 2002                                                                |   | **—**       |           | 11,000,000 |   |
|                                                                                                                    |   | **$**            | **20,414,330** |   | 24,387,289 |   |

 

The loan maturing January 2004 provides for conversionto a fixed rate at the option of the Company after satisfying certainconstruction and operating conditions. The Company also has the option to extend the maturity date until January2007.

 

**D.Properties in Development**

 

Properties in development consist of the following:

 
|                     |   | **December 31,** |           |
|--------------------------|--------|------------------|----------------|
|                     |   | **2002**         |           | **2001** |   |
| Land                     |   | **$**            | **734,166**    |   | 538,528 |   |
| Construction in progress |   | **13,125,644**   |           | 14,590,040 |   |
| Preconstruction costs    |   | **1,115,690**    |           | 882,394 |   |
|                     |   | **$**            | **14,975,500** |   | 16,010,962 |   |

 

Costs of completed development projects aretransferred to operating property costs when the project is completed, at whichtime depreciation and amortization commences. Construction period interest cost capitalized during 2002, 2001 and 2000was approximately $474,000, $940,000 and $1,142,000, respectively.

 

**E. Notesand Accounts Receivable**

 

The Company performs credit evaluations of prospective new tenants andrequires security deposits where appropriate. Tenants’ compliance with the terms of the leases is monitored closelyand the allowance for doubtful accounts is established based on management’sanalysis of the risk of loss on specific tenants, historical trends and otherrelevant information.  The allowance fordoubtful accounts was $189,000 and $169,000 at December 31, 2002 and 2001,respectively.  Management believesadequate provision has been made for probable losses due to the credit risk ofreceivables.

 

25

----

 

**F. DeferredFinancing Costs**

 

Deferred financing costs consist of the following:

 
|                                              |   | **December 31,** |          |
|---------------------------------------------------|--------|------------------|---------------|
|                                              |   | **2002**         |          | **2001** |   |
| Costs related to  subordinated debentures         |   | **$**            | **48,976**    |   | 235,960 |   |
| Costs related to line of  credit                  |   | **1,253,512**    |          | 1,051,571 |   |
| Costs related to  operating properties’ debt |   | **3,926,311**    |          | 3,449,881 |   |
|                                              |   | **5,228,799**    |          | 4,737,412 |   |
| Less accumulated  amortization                    |   | **2,929,087**    |          | 2,498,238 |   |
|                                              |   | **$**            | **2,299,712** |   | 2,239,174 |   |

 

**G. Accounts Payable, Accrued Expenses and Other Liabilities**

 

Accountspayable, accrued expenses and other liabilities consist of the following:

 
|                                          |   | **December 31,** |          |
|-----------------------------------------------|--------|------------------|---------------|
|                                          |   | **2002**         |          | **2001** |   |
| Trade accounts payable                        |   | **$**            | **6,429,151** |   | 7,640,278 |   |
| Retainage on construction  in progress        |   | **306,935**      |          | 423,400 |   |
| Accrued interest on  subordinated debentures  |   | **21,328**       |          | 106,394 |   |
| Other accrued expenses  and other liabilities |   | **2,133,854**    |          | 1,099,267 |   |
|                                          |   | **$**            | **8,891,268** |   | 9,269,339 |   |

 

**H. Notes Payable**

 

Notes payable consist of line of credit borrowings of $25,500,000 and$42,500,000 at December 31, 2002 and 2001, respectively. The Company has anagreement with its primary bank that provides for a $100,000,000 unsecured lineof credit ($75,000,000 prior to January 31, 2003). The loan maturity date isJanuary 2006 (April 2003 prior to January 31, 2003).  The agreement contains covenants which provide for themaintenance of specified debt service coverage ratios, minimum levels of networth, negative pledges concerning certain secured financings, and otherrequirements, among which is the requirement that the Company maintains itsstatus as a REIT.  Effective January 31,2003, the line bears interest at LIBOR plus 115 to 180 basis points dependingon a defined corporate leverage ratio. Prior thereto, the line bore interest at the prime rate (4.25% atDecember 31, 2002).  However, theCompany had the option to fix the rate at LIBOR plus 1.25% for fixed periodsfrom one to nine months. A stand-by fee was required by the bank for any unusedportion of the line. At December 31, 2002, the unused line of credit availableto the Company, subject to compliance with all terms and conditions of theagreement and net of outstanding letters of credit of $1,791,125, was$47,708,875.  The maximum level ofborrowings under the line of credit was $55,500,000, $51,000,000 and $54,000,000in 2002, 2001 and 2000, respectively. The average amounts of borrowings wereapproximately $31,708,000, $43,252,000 and $39,549,000 in 2002, 2001 and 2000,respectively, with weighted average interest rates approximating 3.3%, 5.9% and8.0%.

## ** **

## **I. ConvertibleSubordinated Debentures**

 

Effective September 11, 1993, the Company issued $60,000,000 ofconvertible subordinated debentures at 7.625% scheduled to mature in September2003.  Interest on the debentures ispaid semi-annually on March 15 and September 15.  The debentures are convertible, unless previously redeemed, atany time prior to maturity into common shares of beneficial interest of theCompany at $10.50 per share, subject to certain adjustments.  In 2002, $3,825,000 in debentures were convertedto 364,277 common shares of beneficial interest.   In 2001, $8,292,000 in debentures were converted to 789,709common shares of beneficial interest. In 2000, $170,000 in debentures were converted to 16,189 common sharesof beneficial interest.  The balance ofthe debentures, at December 31, 2002, of $959,000, if fully converted, wouldproduce an additional 91,333 shares. The debentures are redeemable by the Company at any time at 100% of theprincipal amount thereof, together with accrued interest.  The debentures are subordinate to all mortgagespayable.  At December 31, 2002 and 2001,the estimated fair values of convertible subordinated debentures were$1,589,000 and $7,085,000, respectively.

 

26

----

 

**J.Income Taxes**

 

As discussed in Note A, the Company plans to maintain its status as aREIT and be taxed under Sections 856-860 of the Internal Revenue Code of 1986,as amended.  Accordingly, no provisionhas been made for Federal income taxes. At December 31, 2002, the income tax bases of the Company’s assets andliabilities were approximately $319,000,000 and $249,000,000, respectively.

** **

The net operating losses carried forward at December31, 2002 for Federal income tax purposes aggregate approximately $12,000,000and will begin to expire in 2006.

 

In connection with its election to be taxed as a REIT,the Company has elected to be subject to the “built-in gain” rules.  Under these rules, taxes may be payable atthe time and to the extent that the net unrealized gains on the Company’sassets at the date of conversion to REIT status are recognized in taxabledispositions of such assets in the ten-year period following conversion. Thisten-year period expires September 2003. The remaining net unrealized gains were approximately $90,500,000 at December31, 2002.  Management believes that theCompany will not be required to make payments of taxes on built-in gainsthroughout the ten-year period due to the availability of the net operatingloss carryforward to offset built-in gains which might be recognized and thepotential for the Company to make nontaxable dispositions, if necessary.  Accordingly, at December 31, 2002, nodeferred tax liability for built-in gains has been recognized.  It may be necessary to recognize a liabilityfor such taxes in the future if management’s plans and intentions with respectto asset dispositions or the related tax laws change.

 

Following is a reconciliation of the Company’s netearnings to REIT taxable income:

 
|                                                       |   | **Years ended December 31,** |           |
|------------------------------------------------------------|--------|------------------------------|----------------|
|                                                       |   | **2002**                     |           | **2001** |   | **2000** |   |
|                                                       |   |                         | ** **     |   |   |   |   |
| Net earnings                                               |   | **$**                        | **19,693,318** | ** ** | 14,359,029 |   | 12,810,897 |   |
| Book/tax difference on  depreciation/amortization          |   | **(758,150**                 | **)**          | (667,518 | ) | 302,399 |   |
| Straight-line rents  included in net earnings              |   | **(757,339**                 | **)**          | — |   | — |   |
| Net prepaid rental income                                  |   | **(147,667**                 | **)**          | 831,791 |   | 170,557 |   |
| Book/tax difference on  vested portion of restricted stock |   | **(226,141**                 | **)**          | (504,637 | ) | (381,847 | ) |
| Other differences, net                                     |   | **(107,284**                 | **)**          | 455,469 |   | 144,749 |   |
|                                                       |   |                         | ** **     |   |   |   |   |
| Taxable income before  deduction for dividends paid        |   | **17,696,737**               | ** **     | 14,474,134 |   | 13,046,755 |   |
|                                                       |   |                         | ** **     |   |   |   |   |
| Dividends paid deduction                                   |   | **(20,543,915**              | **)**          | (16,641,561 | ) | (15,075,196 | ) |
|                                                       |   |                         | ** **     |   |   |   |   |
| REIT taxable income  (loss)                                |   | **$**                        | **(2,847,178** | **)** | (2,167,427 | ) | (2,028,441 | ) |

 

** **

**K.Shareholders’ Equity**

 

**PreferredShares**

 

At its inception on September 11, 1993, MART authorized 2,000,000preferred shares of beneficial interest at a par value of $.01 per share.  At December 31, 2002, none of these shareswere issued and outstanding.

 

**Sale of Common Shares of BeneficialInterest**

 

On March 12, 2002, the Company completed thepublic offering and sale of 2,000,000 common shares of beneficial interest at aprice of $15.10 per share and on April 4, 2002, an additional 300,000 shareswere sold at the same price upon exercise of the underwriters’ over-allotmentoption.  The net proceeds of the sales of approximately $32,836,000 wereused to repay two mortgage loans and pay down the unsecured line of credit.

## ** **

## **Share-BasedCompensation Plans**

 

The Company has established a 1993 Omnibus share plan and a 1995 shareoption plan (“Plans”) under which trustees, officers and employees may begranted awards of share options, share appreciation rights, performance sharesand/or restricted shares. The purposes of the Plans are to provide equity-basedincentive compensation based on long-term appreciation in value of MART’sshares and to promote the interests of the Company and its shareholders byencouraging greater management ownership of the Company’s shares.

 

Share options granted generally vest over a three-yearperiod, subject to certain conditions, typically have an exercise price equalto the market price at the grant date and have a maximum term of tenyears.  The Company has not granted anyshare appreciation rights or performance shares.

 

27

----

 

Changes in options outstanding under the Plans are summarized asfollows:

 
|                          |   | **Years ended December 31,** |       |
|-------------------------------|--------|------------------------------|------------|
|                          |   |                         |       | **2002** |   |   |   | **2001** |   |   |   | **2000** |   |
|                          |   | **Options**                  |       | **Weighted  average  exercise  price** |   | **Options** |   | **Weighted  average  exercise  price** |   | **Options** |   | **Weighted  average  exercise  price** |   |
| Balance at beginning of  year |   | **565,704**                  | ** ** | **$** | **11.47** |   | 845,335 |   | $ | 11.03 |   | 529,600 |   | $ | 11.66 |   |
| Options granted               |   | **—**                   | ** ** | **—** |   | 5,300 |   | 12.64 |   | 406,233 |   | 10.12 |   |
| Options exercised             |   | **(345,533**                 | **)**      | **11.52** |   | (281,931 | ) | 10.17 |   | (55,165 | ) | 10.09 |   |
| Options canceled              |   | **(2,900**                   | **)**      | **10.27** |   | (3,000 | ) | 10.00 |   | (35,333 | ) | 11.47 |   |
| Balance at end of year        |   | **217,271**                  | ** ** | **$** | **11.45** |   | 565,704 |   | $ | 11.47 |   | 845,335 |   | $ | 11.03 |   |
| Options exercisable           |   | **185,270**                  | ** ** | **$** | **11.46** |   | 409,533 |   | $ | 11.90 |   | 567,302 |   | $ | 11.45 |   |

 

Information about optionsoutstanding at December 31, 2002 is summarized as follows:

 
| **Exercise price  per share** |   | **Options  outstanding** |   | **Remaining life  (years)** |   | **Options  exercisable** |   |
|-------------------------------|--------|--------------------------|--------|-----------------------------|--------|--------------------------|--------|
| $                             | 8.94   |                     | 6,000  |                        | 2.7    |                     | 6,000  |   |
| 9.75                          |   | 6,000                    |   | 2.7                         |   | 6,000                    |   |
| 10.00                         |   | 67,304                   |   | 7.2                         |   | 63,737                   |   |
| 10.50                         |   | 31,000                   |   | 1.1                         |   | 31,000                   |   |
| 11.50                         |   | 26,667                   |   | 7.7                         |   | —                   |   |
| 11.90                         |   | 1,000                    |   | 8.3                         |   | 500                      |   |
| 12.85                         |   | 1,500                    |   | 8.7                         |   | 900                      |   |
| 13.00                         |   | 2,000                    |   | 8.5                         |   | 1,333                    |   |
| 13.38                         |   | 75,800                   |   | 4.9                         |   | 75,800                   |   |
|                          |   | 217,271                  |   |                        |   | 185,270                  |   |
|                               |        |                          |        |                             |        |                          |        |  |

 

 

## **Restricted SharePlan**

 

The Company has a Restricted Share Plan that provides for grants ofrestricted share awards to persons who contribute to the growth of MART and isintended to establish a direct link between compensation and shareholderreturn.

 

There were no restricted share awards granted in2002.  Awards granted in 2001 and 2000aggregated 8,741 and 35,124 shares, respectively, with a weighted-averagemarket value of $13.74 and $11.18 per share, respectively. Shares awarded aresubject to forfeiture restrictions which lapse at defined annual rates to 2010,subject to the recipients’ continued employment with the Company. The Companyrecognizes the amortization of the fair value of the shares awarded ascompensation costs over the terms of the awards.

 

## **Share RepurchasePlan**

 

At December 31, 2002, the Company was authorized to repurchase up to1,547,782 common shares of beneficial interest (from a total authorization of3,000,000 common shares of beneficial interest) pursuant to its sharerepurchase plan.  In 2002 and 2000, theCompany purchased 200 and 283,800 shares, respectively, at an average per sharecost of $13.79 and $9.43, respectively. During 2001, the Company did not purchase shares.  The excess of the purchase price over thepar value of shares repurchased is applied to reduce additional paid-in capital.

## ** **

## **L. Commitments**

 

The Company leases the land relating to certain of its properties underoperating leases expiring at various dates to 2052, subject to renewal optionsin most cases. Minimum rental commitments under leases in effect as of December31, 2002 are as follows:

 
| 2003       |   | $          | 697,000    |   |
|------------|--------|------------|------------|--------|
| 2004       |   | 697,000    |       |
| 2005       |   | 697,000    |       |
| 2006       |   | 644,000    |       |
| 2007       |   | 637,000    |       |
| Thereafter |   | 23,080,000 |       |
| Total      |   | $          | 26,452,000 |   |

 

Certain of the leases contain purchase options and are subject to CPIincreases.  All of the leases requirethe Company to pay real estate taxes. Total annual minimum lease payments amounted to $685,000 in 2002,$657,000 in 2001 and $651,000 in 2000.

## ** **

28

----

 

## **M. Leases**

 

The Company’s shopping centers and other commercial properties aregenerally leased to tenants on a long-term basis.  All leases are classified as operating leases.  Future minimum lease payments receivableunder noncancelable operating leases in effect as of December 31, 2002 are asfollows:

 
| 2003       |   | $           | 56,120,000  |   |
|------------|--------|-------------|-------------|--------|
| 2004       |   | 51,518,000  |        |
| 2005       |   | 47,405,000  |        |
| 2006       |   | 41,670,000  |        |
| 2007       |   | 37,322,000  |        |
| Thereafter |   | 251,770,000 |        |
| Total      |   | $           | 485,805,000 |   |

 

The minimum future lease payments do not includecontingent rentals, which may be paid under certain leases on the basis of apercentage of sales in excess of stipulated amounts.  Contingent rentals amounted to $1,920,000 in 2002, $1,640,000 in2001 and $1,589,000 in 2000.  On aprospective basis, no more than 5.7% of annual rental revenue is derived fromany one tenant, except Royal Ahold. Royal Ahold minimum lease payments represent approximately 12% for theyears 2003 through 2007 and 21% thereafter of the total minimum lease paymentsabove.  The percentage of total minimumlease payments in the years beyond 2007 is higher than in the prior years dueto the fact that Royal Ahold leases have long initial lease terms compared withother major tenants which generally use renewal option terms.  Renewal option minimum lease payments arenot included in the totals above.

 

**N.Segment Information**

 

The Company’s only reportable segment is Shopping Centers.  This segment includes the operation andmanagement of shopping center properties, and revenues are derived primarilyfrom rents and services to tenants. These properties are managed separately from the other property typesowned by the Company because they require different operating strategies andmanagement expertise.

 

The accounting policies of the segments are the sameas those of the Company described in Note A. Segment operating results aremeasured and assessed based on a performance measure known as Funds fromOperations (“FFO”).  FFO is defined asnet earnings (computed in accordance with accounting principles generallyaccepted in the United States of America), excluding cumulative effects ofchanges in accounting principles, extraordinary items and gains or losses onsales of properties, plus depreciation and amortization, and after adjustmentsto record unconsolidated partnerships and joint ventures on the samebasis.  FFO is not a measure ofoperating results or cash flows from operating activities as measured byaccounting principles generally accepted in the United States of America, andis not necessarily indicative of cash available to fund cash needs and shouldnot be considered an alternative to cash flows as a measure of liquidity.

 

Operating results for the segments are summarized as follows:

 
|                                                                               |   | **Years ended December 31,** |           |
|------------------------------------------------------------------------------------|--------|------------------------------|----------------|
|                                                                               |   | **2002**                     |           | **2001** |   | **2000** |   |
|                                                                               |   | **Shopping  Centers**        |           | **All  Other** |   | **Total** |   | **Shopping  Centers** |   | **All  Other** |   | **Total** |   | **Shopping  Centers** |   | **All  Other** |   | **Total** |   |
| Revenues                                                                           |   | **$**                        | **67,011,657** | ** ** | **2,363,510** | ** ** | **69,375,167** |   | 60,264,215 |   | 2,192,160 |   | 62,456,375 |   | 55,538,377 |   | 2,046,746 |   | 57,585,123 |   |
| Expenses, exclusive of  depreciation and amortization of property and improvements |   | **33,077,826**               | ** **     | **907,028** | ** ** | **33,984,854** |   | 32,287,821 |   | 859,452 |   | 33,147,273 |   | 30,203,756 |   | 843,981 |   | 31,047,737 |   |
| Minority interest                                                                  |   | **4,049,280**                | ** **     | **77,436** | ** ** | **4,126,716** |   | 3,799,956 |   | 51,405 |   | 3,851,361 |   | 3,581,356 |   | 8,346 |   | 3,589,702 |   |
| FFO                                                                                |   | **$**                        | **29,884,551** | ** ** | **1,379,046** | ** ** | **31,263,597** |   | 24,176,438 |   | 1,281,303 |   | 25,457,741 |   | 21,753,265 |   | 1,194,419 |   | 22,947,684 |   |

 

29

----

 

A reconciliation of FFO to earnings from operations in the financialstatements is summarized as follows:

 
|                                                           |   | **Years ended December 31,** |           |
|----------------------------------------------------------------|--------|------------------------------|----------------|
|                                                           |   | **2002**                     |           | **2001** |   | **2000** |   |
| FFO                                                            |   | **$**                        | **31,263,597** |   | 25,457,741 |   | 22,947,684 |   |
| Depreciation and   amortization of  property and  improvements |   | **11,461,326**               |           | 11,118,924 |   | 10,392,055 |   |
| Earnings from operations                                       |   | **$**                        | **19,802,271** |   | 14,338,817 |   | 12,555,629 |   |

 

Substantially all assets of the Company, with theexception of properties held for development or sale and cash and cashequivalents, are allocable to the Shopping Center segment.  Additions to long-lived assets of thesegments are summarized as follows:

 
|                      |   | **Years ended December 31,** |           |
|---------------------------|--------|------------------------------|----------------|
|                      |   | **2002**                     |           | **2001** |   | **2000** |   |
| Shopping Centers:         |   |                         |           |   |   |   |   |
| Acquisitions              |   | **$**                        | **27,169,359** |   | 10,849,901 |   | 16,786,510 |   |
| Development               |   | **11,330,459**               |           | 13,438,600 |   | 33,462,826 |   |
| Property and improvements |   | **4,897,275**                |           | 3,339,186 |   | 1,807,478 |   |
|                      |   | **43,397,093**               |           | 27,627,687 |   | 52,056,814 |   |
|                      |   |                         |           |   |   |   |   |
| All others                |   | **112,885**                  |           | 24,642 |   | 113,091 |   |
| Total                     |   | **$**                        | **43,509,978** |   | 27,652,329 |   | 52,169,905 |   |

 

#### **O. Other Revenues**

 

Other revenues consists of the following:

 
|                   |   | **Years ended December 31,** |        |
|------------------------|--------|------------------------------|-------------|
|                   |   | **2002**                     |        | **2001** |   | **2000** |   |
| Interest and dividends |   | **$**                        | **60,507**  |   | 125,217 |   | 162,988 |   |
| Miscellaneous          |   | **593,576**                  |        | 348,445 |   | 268,761 |   |
|                   |   | **$**                        | **654,083** |   | 473,662 |   | 431,749 |   |

 

#### **P. Gain on Properties**

 

The gain on properties for 2001 is due to the sale of land inBurlington, North Carolina.

 

30

----

 

**Q. Earnings Per Share**

 

The following table sets forth information relating to the computationof basic and diluted earnings per share:

 
|                                                                                     |   | **Years  ended December 31,** |           |
|------------------------------------------------------------------------------------------|--------|-------------------------------|----------------|
|                                                                                     |   | **2002**                      | ** **     | **2001** | ** ** | **2000** | ** ** |
|                                                                                     |   |                          |           |   |   |   |   |
| Numerator:                                                                               |   |                          |           |   |   |   |   |
| Earnings before  extraordinary gain (loss)                                               |   | **$**                         | **19,802,271** |   | 14,359,029 |   | 12,555,629 |   |
| Dividends on unvested  restricted share awards                                           |   | **(249,811**                  | )              | (285,959 | ) | (288,102 | ) |
| Numerator for basic  earnings per share–earnings available to common shareholders   |   | **19,552,460**                |           | 14,073,070 |   | 12,267,527 |   |
| Interest on subordinated  debentures                                                     |   | **210,614**                   |           | 538,283 |   | 1,072,636 |   |
| Numerator for diluted  earnings per share–earnings available to common shareholders |   | **$**                         | **19,763,074** |   | 14,611,353 |   | 13,340,163 |   |
|                                                                                     |   |                          |           |   |   |   |   |
| Denominator:(1)                                                                          |   |                          |           |   |   |   |   |
| Denominator for basic  earnings per share–weighted average shares outstanding       |   | **17,050,883**                |           | 14,268,487 |   | 13,538,886 |   |
| Effect of dilutive  securities:                                                          |   |                          |           |   |   |   |   |
| Debentures                                                                               |   | **290,059**                   |           | 692,559 |   | 1,257,514 |   |
| Unvested portion of  restricted share awards and share options                           |   | **85,350**                    |           | 49,264 |   | 9,804 |   |
| Denominator for diluted  earnings per share–adjusted weighted average shares        |   | **17,426,292**                |           | 15,010,310 |   | 14,806,204 |   |

 

----

(1)               Effects ofpotentially dilutive securities are presented only in periods in which they aredilutive.  At December 31, 2002, theconvertible subordinated debentures, if converted, would produce an additional91,333 shares and the Units, if exchanged, would produce an additional3,020,776 shares.

 

**ITEM 9 – CHANGES IN AND DISAGREEMENTSWITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None.

 

31

----

 

**PART III**

** **

**ITEM 10 – TRUSTEES AND EXECUTIVEOFFICERS OF THE REGISTRANT**

** **

The information with respect to the identity and business experience ofthe trustees of MART and their remuneration, in the definitive proxy statement(to be filed pursuant to Regulation 14A) with respect to the election oftrustees at the 2003 annual meeting of shareholders, is incorporated herein byreference.

 

The Executive Officers of MART are as follows:

 
| **Name**            |   | **Age** |   | **Position  and Business Experience**                                                                                                                                                          |   |
|---------------------|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| LeRoy E. Hoffberger |   | 77      |   | Chairman of the Board of  MART since September 1993.                                                                                                                                           |   |
|                |   |    |   |                                                                                                                                                                                           |   |
|                |   |    |   |                                                                                                                                                                                           |   |
| F. Patrick  Hughes  |   | 55      |   | President and CEO of MART since September 1993.                                                                                                                                                |   |
|                |   |    |   |                                                                                                                                                                                           |   |
|                |   |    |   |                                                                                                                                                                                           |   |
| Paul F. Robinson    |   | 49      |   | Executive Vice President of MART since March 1996.                                                                                                                                             |   |
|                |   |    |   | Vice President and Secretary/General Counsel of MART  since September 1993.                                                                                                                    |   |
|                |   |    |   |                                                                                                                                                                                           |   |
| Eugene T. Grady     |   | 54      |   | Treasurer of MART since September 1993.                                                                                                                                                        |   |
|                |   |    |   |                                                                                                                                                                                           |   |
|                |   |    |   |                                                                                                                                                                                           |   |
| Deborah R. Cheek    |   | 43      |   | Controller of MART since October 2001.  Assistant Controller of MART from March 2000 to September 2001.  Controller of Insurance Buyers’ Council, Inc. from March 1987 to February  2000. |   |

 

Each executive officer is elected for a term expiringat the next regular annual meeting of the Board of Trustees of the Company oruntil his/her successor is duly elected and qualified.

 

32

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**ITEM 11 – EXECUTIVE COMPENSATION**

The information required by this item is incorporated by reference fromthe Registrant’s Proxy Statement to be filed with respect to the 2003 annualmeeting of shareholders.

 

#### **ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

Certain information required by this item is incorporated by referencefrom the Registrant’s Proxy Statement to be filed with respect to the 2003annual meeting of shareholders.  Forinformation regarding the Company’s equity compensation plans, see Item 5 ofthis Form 10-K under the caption “Equity Compensation Plans”.

 

#### **ITEM 13 – CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS**

The information required by this item is incorporatedby reference from the Registrant’s Proxy Statement to be filed with respect tothe 2003 annual meeting of shareholders.

 

**ITEM 14 – CONTROLS AND PROCEDURES**

(a)   **Evaluationof disclosure controls and procedures**.

Within the 90 days prior tothe date of this report, the Company carried out an evaluation, under thesupervision and with the participation of the Company’s management, includingthe Company’s President and Chief Executive Officer along with the Controller,of the effectiveness of the design and operation of the Company’s “disclosurecontrols and procedures” (“Disclosure Controls”) and its “internal controls andprocedures for financial reporting” (“Internal Controls”).

 

Disclosure Controls areprocedures that are designed with the objective of ensuring that informationrequired to be disclosed in our reports filed under the Securities Exchange Actof 1934 (Exchange Act), such as this Annual Report, is recorded, processed,summarized and reported within the time periods specified in the Securities andExchange Commission’s (SEC) rules and forms. Disclosure Controls are also designed with the objective of ensuringthat such information is accumulated and communicated to our management,including the President and Chief Executive Officer and Controller, asappropriate to allow timely decisions regarding required disclosure.  Internal Controls are procedures which aredesigned with the objective of providing reasonable assurance that (1) ourtransactions are properly authorized; (2) our assets are safeguarded againstunauthorized or improper use; and (3) our transactions are properly recordedand reported, all to permit the preparation of our financial statements inconformity with accounting principles generally accepted in the United Statesof America.

 

(b)  **CEO andCFO certifications**.

Appearing immediatelyfollowing the Signatures section of this Annual Report there are“Certifications” of the President and Chief Executive Officer and theController.  The Certifications arerequired in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.  This section of the Annual Report which youare currently reading is the information concerning the Evaluation referred toin the above statement and this information should be read in conjunction withthe Certifications for a more complete understanding of the topics presented.

 

(c)  **Limitationsof the effectiveness of controls**.

The Company’s management,including the President and Chief Executive Officer and Controller, does notexpect that our Disclosure Controls or our Internal Controls will prevent allerror and all fraud.  A control system,no matter how well conceived and operated, can provide only reasonable, notabsolute, assurance that the objectives of the control system are met.  Further, the design of a control system mustreflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs.  Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within the Company have been detected.  These inherent limitations include therealities that judgments in decision-making can be faulty, and that breakdownscan occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts ofsome persons, by collusion of two or more people, or by management override ofthe control.  The design of any systemof controls also is based in part upon certain assumptions about the likelihoodof future events, and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions; over time,control may become inadequate because of changes in conditions, or the degreeof compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in acost-effective control system, misstatements due to error or fraud may occurand not be detected.

 

(d)  **Conclusions**.

Based upon the Evaluation,the Company’s President and Chief Executive Officer along with the Controllerconcluded that the Company’s Disclosure Controls are effective in timelyalerting them to material information relating to the Company (including itsconsolidated subsidiaries) required to be included in the Company’s periodicSEC filings, and that our Internal Controls are effective to provide reasonableassurance that our financial statements are fairly presented in conformity withaccounting principles generally accepted in the United States of America.

 

33

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(e)  **Changes inInternal Controls**.

There were no significantchanges in the Company’s Internal Controls or in other factors that couldsignificantly affect those Internal Controls, including any corrective actionswith regard to significant deficiencies and material weaknesses within the 90days prior to the date of this report.

 

34

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**PART IV**

 

**ITEM 15– EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K**

**(a)****          1.  Financial Statements**
| The following financial statements of Mid-Atlantic  Realty Trust and Subsidiaries are included in Part II Item 8: |
|-------------------------------------------------------------------------------------------------------------------|
| Independent auditor’s  report                                                                                |
| Consolidated balance sheets  as of December 31, 2002 and 2001                                                     |
| Consolidated  statements of operations for the years ended December 31, 2002, 2001 and 2000                       |
| Consolidated  statements of shareholders’ equity for the years ended December 31, 2002,  2001 and 2000       |
| Consolidated  statements of cash flows for the years ended December 31, 2002, 2001 and 2000                       |
| Notes to  consolidated financial statements                                                                       |

 

 

**(a)****          2.  Financial Statement Schedule**

Schedule III -Real estate and accumulated depreciation and amortization

All other schedules areomitted because they are not applicable, or not required, or because therequired information is included in the consolidated financial statements ornotes thereto.

 

**(a)****          3.  Exhibits**
| Exhibit No. |
|-------------|
| 3(a)        |   | Declaration of Trust dated June 29, 1993  (incorporated by reference to Exhibit 3(a) to MART’s Registration Statement  on Form S-11, File No. 33-66386). |
| 3(b)        |   | By-laws (incorporated by reference to Exhibit 3(b)  to MART’s Registration Statement on Form S-11, File No. 33-66386). |
| 3(c)        |   | Amendment to Declaration of Trust dated August 4,  1998 (incorporated by reference to Exhibit 3(c) to MART’s Annual Report on  Form 10-K for the year ended December 31, 1998). |
| 4(a)        |   | Specimen certificate for Common Shares of Beneficial  Interest (incorporated by reference to Exhibit 4(a) to MART’s Registration  Statement on Form S-11, File No. 33-66386). |
| 4(b)        |   | Trust Indenture dated September 8, 1993, between  MART and Security Trust Company, N.A. (incorporated by reference to Exhibit  4(b) to MART’s Registration Statement on Form S-11, File No. 33-66386). |
| 10(a)       |   | Mid-Atlantic Realty Trust 1993 Omnibus Share Plan,  as amended through November 14, 1997 (incorporated by reference to Exhibit  10(a) to MART’s Annual Report on Form 10-K for the year ended December 31,  1997). |
| 10(b)       |   | Mid-Atlantic Realty Trust 1995 Stock Option Plan  (incorporated by reference to MART’s Registration Statement on Form S-8, File  No. 333-12161). |
| 10(c)       |   | Employment Agreement between BTR Realty, Inc., and  F. Patrick Hughes (incorporated by reference to Exhibit 10(b) to MART’s  Registration Statement on Form S-11, File  No. 33-66386). |
| 10(d)       |   | Employment Agreement between BTR Realty, Inc., and  Paul F. Robinson (incorporated by reference to Exhibit 10(c) to MART’s  Registration Statement on Form S-11, File No. 33-66386). |
| 10(e)       |   | Amendment dated December 1, 1995 to Employment  Agreement between MART and F. Patrick Hughes and MART and Paul F. Robinson  (incorporated by reference to Exhibit 10(e) to MART’s Annual Report on Form  10-K for the year ended December 31, 1995). |
| 10(f)       |   | Commitment Letter from First National Bank of Md.  for Line of Credit to MART (incorporated by reference to Exhibit 10(d) to  MART’s Registration Statement on Form S-11, File No.33-66386). |
| 10(f)(1)    |   | Financing Agreement dated April 23, 1999 between  MART and the Named Banks (incorporated by reference to Exhibit 10(l) to  MART’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999). |
| 10(g)       |   | Agreement for Contribution of Interests dated April  1, 1997, among MART and the Contributors named therein (incorporated by  reference to Exhibit (c) 1 to Form 8-K filed July 15, 1997). |
| 10(h)       |   | Agreement of Limited Partnership of MART Limited  Partnership dated as of June 30, 1997 (incorporated by reference to Exhibit  (c) 2 to Form 8-K filed July 15, 1997). |
| 10(i)       |   | Partnership Purchase and Sale Agreement among BTR  Gateway, Inc., MART, and Prentiss Properties Acquisition, L.P. (incorporated  by reference to Exhibit (b) 1 to Form 8-K filed September 30, 1997). |
| 10(j)       |   | Mid-Atlantic Realty Trust Restricted Share Plan,  adopted on November 14, 1997 (incorporated by reference to Exhibit 10(j) to  MART’s Annual Report on Form 10-K for the year ended December 31, 1997). |
| 10(k)       |   | Mid-Atlantic Realty Trust Non-Employee Trustee  Deferred Compensation Plan, adopted on November 14, 1997 (incorporated by  reference to Exhibit 10(k) to MART’s Annual Report on Form 10-K for the year  ended December 31, 1997). |
| 10(l)       |   | Financing agreement dated April 23,1999 with named  banks (incorporated by reference to Exhibit 10.1 to MART’s quarterly report  on Form 10-Q for the quarter ended March 31, 1999). |
| 12          |   | Computation of Ratio of Earnings to Fixed Charges.* |
| 21          |   | Subsidiaries of the Registrant.* |
| 23          |   | Consent of KPMG LLP.* |
| 99.1        |   | Real Estate Investment Risks.* |

 

----

*Filed herewith

 

35

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**(b)****          Reportson Form 8-K**

Form 8-K filed March 12,2003 reporting selected financial information under Items 5 and 7.

 

36

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**MID-ATLANTICREALTY TRUST AND SUBSIDIARIES**

**ScheduleIII**-**Real Estateand Accumulated Depreciation**

** **
| **December 31, 2002**         |   |                   |            | **Initial cost to Company** |           | **Cost capitalized subsequent to acquisition** |            |
|-------------------------------|--------|------------------------|-----------------|-----------------------------|----------------|------------------------------------------------|-----------------|
| **Description**               |   | **Mortgages  payable** |            | **Land**                    |           | **Buildings  and  improvements**               |            | **Improvements** |   | **Carrying costs** |   |
| **Land**                      |   | **Improvements**       |            |
| **Shopping Centers**          |   |                   |            |                        |           |                                           |            |   |   |   |   |   |   |   |
| Arundel Plaza                 |   | $                      | 11,297,327      |                        | 1,695,566      |                                           | 530,951         |   | 6,342,554 |   | 1,843,683 |   | — |   |
| Brandywine Commons            |   | —                 |            | —                      |           | 12,164,821                                     |            | 79,804 |   | — |   | — |   |
| Burke Town Plaza              |   | —                 |            | —                      |           | 2,936,134                                      |            | 4,634,207 |   | — |   | — |   |
| Club Centre                   |   | 4,982,017              |            | 2,029,919                   |           | 3,600,663                                      |            | 137,614 |   | — |   | — |   |
| Colonie Plaza                 |   | —                 |            | 1,137,567                   |           | 7,755,095                                      |            | 856,617 |   | — |   | — |   |
| Columbia Plaza                |   | —                 |            | 999,739                     |           | 6,887,711                                      |            | 4,040,445 |   | 158,988 |   | — |   |
| Del Alba                      |   | 6,907,693              |            | 2,270,000                   |           | 7,882,217                                      |            | 155,779 |   | — |   | — |   |
| Enchanted Forest              |   | 12,000,000             |            | 3,873,246                   |           | 15,314,736                                     |            | 400,399 |   | — |   | — |   |
| Fullerton Plaza               |   | —                 |            | 2,704,762                   |           | 5,707,164                                      |            | 94,718 |   | — |   | — |   |
| Glen Burnie Village           |   | —                 |            | 3,081,554                   |           | 4,598,794                                      |            | 1,226,441 |   | — |   | — |   |
| Greenbrier                    |   | 13,291,292             |            | 6,001,144                   |           | 21,261,297                                     |            | — |   | — |   | — |   |
| Harford Mall                  |   | 18,290,919             |            | 599,031                     |           | 8,457,330                                      |            | 29,546,445 |   | (12,954 | ) | — |   |
| Ingleside                     |   | 12,357,486             |            | 3,023,230                   |           | 11,817,212                                     |            | 200,596 |   | — |   | — |   |
| Little Glen                   |   | —                 |            | —                      |           | —                                         |            | 108,152 |   | — |   | — |   |
| Lutherville Station           |   | —                 |            | —                      |           | 4,031,809                                      |            | 16,130,548 |   | — |   | — |   |
| Milford Commons               |   | —                 |            | 673,306                     |           | 3,789,682                                      |            | 56,470 |   | — |   | — |   |
| New Town Village              |   | 12,089,689             |            | 4,381,666                   |           | 9,547,434                                      |            | 218,691 |   | — |   | — |   |
| North East Station            |   | —                 |            | —                      |           | —                                         |            | 5,965,012 |   | 2,687,904 |   | — |   |
| Patriots Plaza                |   | —                 |            | —                      |           | 1,709,846                                      |            | 680,507 |   | — |   | — |   |
| Perry Hall Square             |   | 5,591,902              |            | 3,538,824                   |           | 6,604,216                                      |            | 979,777 |   | — |   | — |   |
| Perry Hall Super Fresh        |   | —                 |            | 4,550,000                   |           | 5,527,054                                      |            | — |   | — |   | — |   |
| Pottstown Plaza               |   | —                 |            | 3,649,140                   |           | 7,100,993                                      |            | 134,390 |   | — |   | — |   |
| Radcliffe                     |   | —                 |            | 11,205,665                  |           | 5,663,480                                      |            | 106,661 |   | — |   | — |   |
| Rolling Road Plaza            |   | —                 |            | 338,791                     |           | 1,632,268                                      |            | 3,250,700 |   | — |   | (837,931 | ) |
| Rosedale Plaza                |   | 7,560,000              |            | 1,024,712                   |           | 3,217,926                                      |            | 5,373,993 |   | — |   | — |   |
| Saucon Valley Square          |   | 8,203,534              |            | —                      |           | 4,560,182                                      |            | 2,045,242 |   | 4,292,700 |   | — |   |
| Security Square               |   | 10,617,841             |            | 1,477,199                   |           | 10,335,676                                     |            | 128,604 |   | — |   | — |   |
| Shawan Plaza                  |   | 12,928,346             |            | 2,055,695                   |           | 13,930,839                                     |            | 295,274 |   | — |   | — |   |
| Shoppes at Easton             |   | —                 |            | 2,600,000                   |           | 10,379,069                                     |            | 73,954 |   | — |   | — |   |
| Skyline Village               |   | 4,033,321              |            | 555,295                     |           | 6,240,003                                      |            | 1,171,716 |   | — |   | — |   |
| Smoketown Plaza               |   | —                 |            | 516,312                     |           | 10,095,077                                     |            | 814,622 |   | — |   | — |   |
| Spotsylvania Crossing         |   | —                 |            | 1,544,314                   |           | 6,600,616                                      |            | 464,336 |   | — |   | — |   |
| Stonehedge Square             |   | 5,403,726              |            | 1,151,500                   |           | 7,202,742                                      |            | 73,275 |   | — |   | — |   |
| Sudley Towne Plaza            |   | —                 |            | 789,881                     |           | 3,736,837                                      |            | 542,138 |   | — |   | — |   |
| Timonium Crossing             |   | 5,399,094              |            | 4,276,779                   |           | 4,792,548                                      |            | 941,467 |   | — |   | — |   |
| Timonium                      |   | 10,440,261             |            | 6,252,248                   |           | 12,090,955                                     |            | 1,472,983 |   | — |   | — |   |
| Waverly Woods                 |   | 11,895,036             |            | 3,484,670                   |           | 7,998,007                                      |            | 334,722 |   | — |   | — |   |
| Wayne Heights                 |   | —                 |            | 1,546,720                   |           | 3,837,159                                      |            | 183,905 |   | — |   | — |   |
| Wayne Avenue Plaza            |   | 8,848,678              |            | 1,650,300                   |           | 9,230,960                                      |            | 924,280 |   | — |   | — |   |
| Wilkens Beltway Plaza         |   | 448,741                |            | —                      |           | 3,601,891                                      |            | 4,086,735 |   | 475,481 |   | — |   |
| York Road Plaza               |   | 8,041,649              |            | 1,562,382                   |           | 2,102,575                                      |            | 2,893,000 |   | — |   | — |   |
|                          |   | **190,628,552**        |            | **86,241,157**              | ** **     | **274,473,969**                                | ** **      | **97,166,773** | ** ** | **9,445,802** | ** ** | **(837,931** | **)** |
| **Office Buildings**          |   |                   |            |                        |           |                                           |            |   |   |   |   |   |   |
| Orchard Square Office         |   | 2,528,736              |            | 1,160,666                   |           | 2,959,390                                      |            | 247,577 |   | — |   | — |   |
| Patriots Office               |   | —                 |            | —                      |           | 1,522,943                                      |            | 177,644 |   | — |   | — |   |
| Wilkens Office I              |   | —                 |            | —                      |           | 1,383,102                                      |            | 413,237 |   | — |   | — |   |
| Wilkens Office II             |   | —                 |            | —                      |           | 1,644,370                                      |            | 304,986 |   | — |   | — |   |
| Wilkens Office III            |   | —                 |            | —                      |           | 768,642                                        |            | 193,059 |   | — |   | — |   |
|                          |   | **2,528,736**          |            | **1,160,666**               | ** **     | **8,278,447**                                  | ** **      | **1,336,503** | ** ** | **—** | ** ** | **—** | ** ** |
| **Bowling Centers**           |   |                   |            |                        |           |                                           |            |   |   |   |   |   |   |
| Clinton Bowl                  |   | —                 |            | —                      |           | 457,764                                        |            | 63,297 |   | — |   | — |   |
| Free State Bowl               |   | —                 |            | 180,025                     |           | 740,082                                        |            | 2,719 |   | — |   | — |   |
| Waldorf Bowl                  |   | —                 |            | 243,139                     |           | 579,096                                        |            | 5,690 |   | — |   | — |   |
|                          |   | **—**             |            | **423,164**                 | ** **     | **1,776,942**                                  | ** **      | **71,706** | ** ** | **—** | ** ** | **—** | ** ** |
| **Other Rental Properties**   |   |                   |            |                        |           |                                           |            |   |   |   |   |   |   |
| Harford Business Center       |   | —                 |            | 395,536                     |           | 1,190,692                                      |            | 187,683 |   | 235,022 |   | — |   |
| Southwest Property            |   | —                 |            | —                      |           | 283,039                                        |            | 654,923 |   | 45,149 |   | — |   |
| Waldorf Firestone             |   | —                 |            | 9,261                       |           | 161,543                                        |            | 13,821 |   | — |   | — |   |
|                          |   | **—**             |            | **404,797**                 | ** **     | **1,635,274**                                  | ** **      | **856,427** | ** ** | **280,171** | ** ** | **—** | ** ** |
| **Properties In Development** |   | **—**             | ** **      | **—**                  | ** **     | **14,975,500**                                 | ** **      | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| **Properties Held For**       |   |                   |            |                        |           |                                           |            |   |   |   |   |   |   |
| **Development or Sale**       |   | **—**             | ** **      | **3,288,171**               | ** **     | **—**                                     | ** **      | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| **Other Property**            |   | **—**             | ** **      | **—**                  | ** **     | **681,313**                                    | ** **      | **818,571** | ** ** | **—** | ** ** | **—** | ** ** |
|                          |   | **$**                  | **193,157,288** |                        | **91,517,955** | ** **                                     | **301,821,445** | ** ** | **100,249,980** | ** ** | **9,725,973** | ** ** | **(837,931** | **)** |

 

37

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| **December 31, 2002**                        |     | **Amount at  which carried at close of period** |                            | **Accumulated  depreciation** |            | **Date of  construction** |            | **Date  acquired** |           | **Life on  which deprec.  on latest income  statement is computed** |   |
|----------------------------------------------|----------|-------------------------------------------------|---------------------------------|-------------------------------|-----------------|---------------------------|-----------------|--------------------|----------------|---------------------------------------------------------------------|--------|
| **Description**                              | **Land** |                                            | **Buildings and  improvements** |                          | **Total**       |
| **Shopping  Centers**                        |     |                                            |                            |                          |            |                      |            |               |           |                                                                |   |   |   |   |   |   |
| Arundel Plaza                                |     | $                                               | 3,539,249                       |                          | 6,873,505       |                      | 10,412,754      |               | 1,076,514      |                                                                |   |   | 12/97 |   | 5-50 yrs. |   |
| Brandywine Commons                           |     | —                                          |                            | 12,244,625                    |            | 12,244,625                |            | 2,987,128          |           |                                                                |   | 11/95 |   | 5-50 yrs. |   |
| Burke Town Plaza                             |     | —                                          |                            | 7,570,341                     |            | 7,570,341                 |            | 2,693,943          |           | 7/79-7/82                                                           |   |   |   | 5-50 yrs. |   |
| Club Centre                                  |     | 2,029,919                                       |                            | 3,738,277                     |            | 5,768,196                 |            | 1,159,218          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Colonie Plaza                                |     | 1,137,567                                       |                            | 8,611,712                     |            | 9,749,279                 |            | 3,410,085          |           | 12/87                                                               |   |   |   | 5-50 yrs. |   |
| Columbia Plaza                               |     | 1,158,727                                       |                            | 10,928,156                    |            | 12,086,883                |            | 3,597,591          |           | 6/88                                                                |   |   |   | 5-50 yrs. |   |
| Del Alba                                     |     | 2,270,000                                       |                            | 8,037,996                     |            | 10,307,996                |            | 701,833            |           |                                                                |   | 9/98 |   | 5-50 yrs. |   |
| Enchanted Forest                             |     | 3,873,246                                       |                            | 15,715,135                    |            | 19,588,381                |            | 2,923,806          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Fullerton Plaza                              |     | 2,704,762                                       |                            | 5,801,882                     |            | 8,506,644                 |            | 322,997            |           |                                                                |   | 3/00 |   | 5-50 yrs. |   |
| Glen Burnie Village                          |     | 3,081,554                                       |                            | 5,825,235                     |            | 8,906,789                 |            | 983,621            |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Greenbrier                                   |     | 6,001,144                                       |                            | 21,261,297                    |            | 27,262,441                |            | 219,489            |           |                                                                |   | 8/02 |   | 5-50 yrs. |   |
| Harford Mall                                 |     | 586,077                                         |                            | 38,003,775                    |            | 38,589,852                |            | 16,965,396         |           | 12/73                                                               |   |   |   | 5-50 yrs. |   |
| Ingleside                                    |     | 3,023,230                                       |                            | 12,017,808                    |            | 15,041,038                |            | 1,704,498          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Little Glen                                  |     | —                                          |                            | 108,152                       |            | 108,152                   |            | 82,508             |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Lutherville Station                          |     | —                                          |                            | 20,162,357                    |            | 20,162,357                |            | 2,551,229          |           |                                                                |   | 10/93 |   | 5-50 yrs. |   |
| Milford Commons                              |     | 673,306                                         |                            | 3,846,152                     |            | 4,519,458                 |            | 416,039            |           |                                                                |   | 12/97 |   | 5-50 yrs. |   |
| New Town Village                             |     | 4,381,666                                       |                            | 9,766,125                     |            | 14,147,791                |            | 1,612,702          |           | 12/95                                                               |   |   |   | 5-50 yrs. |   |
| North East Station                           |     | 2,687,904                                       |                            | 5,965,012                     |            | 8,652,916                 |            | 687,009            |           | 2/96                                                                |   |   |   | 5-50 yrs. |   |
| Patriots Plaza                               |     | —                                          |                            | 2,390,353                     |            | 2,390,353                 |            | 1,229,575          |           | 6/84                                                                |   |   |   | 5-50 yrs. |   |
| Perry Hall Square                            |     | 3,538,824                                       |                            | 7,583,993                     |            | 11,122,817                |            | 3,290,167          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Perry Hall Super Fresh                       |     | 4,550,000                                       |                            | 5,527,054                     |            | 10,077,054                |            | 96,727             |           | 4/02                                                                |   |   |   | 5-50 yrs. |   |
| Pottstown Plaza                              |     | 3,649,140                                       |                            | 7,235,383                     |            | 10,884,523                |            | 182,914            |           |                                                                |   | 10/01 |   | 5-50 yrs. |   |
| Radcliffe                                    |     | 11,205,665                                      |                            | 5,770,141                     |            | 16,975,806                |            | 2,541,614          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Rolling Road Plaza                           |     | 338,791                                         |                            | 4,045,037                     |            | 4,383,828                 |            | 1,416,785          |           | 6/73                                                                |   |   |   | 5-50 yrs. |   |
| Rosedale Plaza                               |     | 1,024,712                                       |                            | 8,591,919                     |            | 9,616,631                 |            | 1,900,684          |           |                                                                |   | 10/89 |   | 5-50 yrs. |   |
| Saucon Valley Square                         |     | 4,292,700                                       |                            | 6,605,424                     |            | 10,898,124                |            | 463,693            |           |                                                                |   | 3/99 |   | 5-50 yrs. |   |
| Security Square                              |     | 1,477,199                                       |                            | 10,464,280                    |            | 11,941,479                |            | 553,268            |           | 5/00                                                                |   |   |   | 5-50 yrs. |   |
| Shawan Plaza                                 |     | 2,055,695                                       |                            | 14,226,113                    |            | 16,281,808                |            | 3,688,411          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Shoppes at Easton                            |     | 2,600,000                                       |                            | 10,453,023                    |            | 13,053,023                |            | 1,912,196          |           |                                                                |   | 9/94 |   | 5-50 yrs. |   |
| Skyline Village                              |     | 555,295                                         |                            | 7,411,719                     |            | 7,967,014                 |            | 2,983,674          |           | 5/88                                                                |   |   |   | 5-50 yrs. |   |
| Smoketown Plaza                              |     | 516,312                                         |                            | 10,909,699                    |            | 11,426,011                |            | 4,340,741          |           | 4/87                                                                |   |   |   | 5-50 yrs. |   |
| Spotsylvania Crossing                        |     | 1,544,314                                       |                            | 7,064,952                     |            | 8,609,266                 |            | 2,857,784          |           | 5/87                                                                |   |   |   | 5-50 yrs. |   |
| Stonehedge Square                            |     | 1,151,500                                       |                            | 7,276,017                     |            | 8,427,517                 |            | 415,502            |           |                                                                |   | 3/00 |   | 5-50 yrs. |   |
| Sudley Towne Plaza                           |     | 789,881                                         |                            | 4,278,975                     |            | 5,068,856                 |            | 1,939,166          |           | 7/84                                                                |   |   |   | 5-50 yrs. |   |
| Timonium Crossing                            |     | 4,276,779                                       |                            | 5,734,015                     |            | 10,010,794                |            | 1,143,281          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Timonium                                     |     | 6,252,248                                       |                            | 13,563,938                    |            | 19,816,186                |            | 2,212,402          |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Waverly Woods                                |     | 3,484,670                                       |                            | 8,332,729                     |            | 11,817,399                |            | 475,626            |           | 4/00                                                                |   |   |   | 5-50 yrs. |   |
| Wayne Heights                                |     | 1,546,720                                       |                            | 4,021,064                     |            | 5,567,784                 |            | 452,308            |           |                                                                |   | 1/98 |   | 5-50 yrs. |   |
| Wayne Avenue Plaza                           |     | 1,650,300                                       |                            | 10,155,240                    |            | 11,805,540                |            | 1,069,754          |           |                                                                |   | 2/98 |   | 5-50 yrs. |   |
| Wilkens Beltway Plaza                        |     | 475,481                                         |                            | 7,688,626                     |            | 8,164,107                 |            | 2,500,875          |           | 5/81                                                                |   |   |   | 5-50 yrs. |   |
| York Road Plaza                              |     | 1,562,382                                       |                            | 4,995,575                     |            | 6,557,957                 |            | 2,699,068          |           |                                                                |   | 11/85 |   | 5-50 yrs. |   |
|                                         |     | **95,686,959**                                  |                            | **370,802,811**               | ** **      | **466,489,770**           | ** **      | **84,461,821**     |           |                                                                |   |   |   |   |   |
| **Office Buildings**                         |     |                                            |                            |                          |            |                      |            |               |           |                                                                |   |   |   |   |   |
| Orchard Square Office                        |     | 1,160,666                                       |                            | 3,206,967                     |            | 4,367,633                 |            | 810,563            |           |                                                                |   | 7/97 |   | 5-50 yrs. |   |
| Patriots Office                              |     | —                                          |                            | 1,700,587                     |            | 1,700,587                 |            | 674,102            |           | 8/85                                                                |   |   |   | 5-50 yrs. |   |
| Wilkens Office I                             |     | —                                          |                            | 1,796,339                     |            | 1,796,339                 |            | 856,667            |           | 1/85                                                                |   |   |   | 5-50 yrs. |   |
| Wilkens Office II                            |     | —                                          |                            | 1,949,356                     |            | 1,949,356                 |            | 808,554            |           | 1/87                                                                |   |   |   | 5-50 yrs. |   |
| Wilkens Office III                           |     | —                                          |                            | 961,701                       |            | 961,701                   |            | 327,101            |           | 1/91                                                                |   |   |   | 5-50 yrs. |   |
|                                         |     | **1,160,666**                                   |                            | **9,614,950**                 | ** **      | **10,775,616**            | ** **      | **3,476,987**      |           |                                                                |   |   |   |   |   |
| **Bowling Centers**                          |     |                                            |                            |                          |            |                      |            |               |           |                                                                |   |   |   |   |   |
| Clinton Bowl                                 |     | —                                          |                            | 521,061                       |            | 521,061                   |            | 347,621            |           | 8/71                                                                |   |   |   | 5-50 yrs. |   |
| Free State Bowl                              |     | 180,025                                         |                            | 742,801                       |            | 922,826                   |            | 735,580            |           | 3/78                                                                |   |   |   | 5-50 yrs. |   |
| Waldorf Bowl                                 |     | 243,139                                         |                            | 584,786                       |            | 827,925                   |            | 299,793            |           | 3/79                                                                |   |   |   | 5-50 yrs. |   |
|                                         |     | **423,164**                                     |                            | **1,848,648**                 | ** **      | **2,271,812**             | ** **      | **1,382,994**      |           |                                                                |   |   |   |   |   |
| **Other Rental Properties**                  |     |                                            |                            |                          |            |                      |            |               |           |                                                                |   |   |   |   |   |
| Harford Business Center                      |     | 630,558                                         |                            | 1,378,375                     |            | 2,008,933                 |            | 471,649            |           | 4/90                                                                |   |   |   | 5-50 yrs. |   |
| Southwest Property                           |     | 45,149                                          |                            | 937,962                       |            | 983,111                   |            | 606,633            |           | 4/68                                                                |   |   |   | 5-50 yrs. |   |
| Waldorf Firestone                            |     | 9,261                                           |                            | 175,364                       |            | 184,625                   |            | 85,884             |           | 9/78                                                                |   |   |   | 5-50 yrs. |   |
|                                         |     | **684,968**                                     |                            | **2,491,701**                 | ** **      | **3,176,669**             | ** **      | **1,164,166**      |           |                                                                |   |   |   |   |   |
| **Properties In Development**                |     | **—**                                      | ** **                      | **14,975,500**                | ** **      | **14,975,500**            | ** **      | **—**         |           | Various                                                             |   |   |   |   |   |
| **Properties Held For Development  or Sale** |     | **3,288,171**                                   | ** **                      | **—**                    | ** **      | **3,288,171**             | ** **      | **—**         |           |                                                                |   |   |   |   |   |
| **Other Property**                           |     | **—**                                      | ** **                      | **1,499,884**                 | ** **      | **1,499,884**             | ** **      | **995,256**        |           |                                                                |   | 9/82-12/98 |   | 3-10 yrs. |   |
|                                         |     | **$**                                           | **101,243,928**                 |                          | **401,233,494** | ** **                | **502,477,422** | ** **         | **91,481,224** |                                                                |   |   |   |   |   |   |

 

38

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(1) The changes in total cost of properties are asfollows:

 
|                      |   | **Year ended December 31,** |            |
|---------------------------|--------|-----------------------------|-----------------|
|                      |   | **2002**                    |            | **2001** |   | **2000** |   |
| Balance beginning of year |   | **$**                       | **460,612,721** |   | 433,497,466 |   | 381,716,196 |   |
| Additions during year:    |   |                        |            |   |   |   |   |
| Acquisitions              |   | **27,169,359**              |            | 10,849,901 |   | 16,786,510 |   |
| Improvements              |   | **5,010,160**               |            | 3,363,828 |   | 1,920,569 |   |
| Development operations    |   | **11,330,459**              |            | 13,438,600 |   | 33,462,826 |   |
|                      |   | **43,509,978**              |            | 27,652,329 |   | 52,169,905 |   |
| Deductions during year:   |   |                        |            |   |   |   |   |
| Cost of real estate sold  |   | **—**                  |            | (299,439 | ) | — |   |
| Retirements and disposals |   | **(1,645,277**              | )               | (237,635 | ) | (388,635 | ) |
|                      |   | **(1,645,277**              | **)**           | (537,074 | ) | (388,635 | ) |
|                      |   |                        |            |   |   |   |   |
| Balance end of year       |   | **$**                       | **502,477,422** |   | 460,612,721 |   | 433,497,466 |   |

 

(2) The changes in accumulated depreciation are asfollows:

 
|                             |   | **Year ended December 31,** |            |
|----------------------------------|--------|-----------------------------|-----------------|
|                             |   | **2002**                    |            | **2001** |   | **2000** |   |
| Balance beginning of year        |   | **$**                       | **(81,465,520** | ) | (70,435,693 | ) | (60,097,298 | ) |
| Depreciation and amortization    |   | **(11,461,326**             | )               | (11,118,924 | ) | (10,392,055 | ) |
| Retirements, disposals and sales |   | **1,445,622**               |            | 89,097 |   | 53,660 |   |
| Balance end of year              |   | **$**                       | **(91,481,224** | ) | (81,465,520 | ) | (70,435,693 | ) |

 

(3) The aggregate cost of properties for Federalincome tax purposes is approximately $443,000,000 at December 31, 2002.

(4)     See Item 2 for geographiclocation of properties.

(5)     Free State includes onebowling center in Illinois.

 

39

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#### **SIGNATURES**

 

Pursuant to the requirements of Section 13 of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
|   | MID-ATLANTIC REALTY TRUST                                 |                  |
|--------|-----------------------------------------------------------|-----------------------|
|   |                                                      |                  |
| Date:  | 03/12/03                                                  | /s/ F. Patrick Hughes |   |
|   | F. Patrick Hughes, President and Chief Executive  Officer |                  |
|        |                                                           |                       |  |

 

#### **Signatures**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this report has been signed below by the following persons in the capacitiesand on the dates indicated:

 
| Date:  | 03/12/03 | /s/ LeRoy E. Hoffberger                                            |   |
|--------|----------|--------------------------------------------------------------------|--------|
|   |     | LeRoy E. Hoffberger, Chairman                                      |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ F. Patrick Hughes                                              |   |
|   |     | F. Patrick Hughes, President and Chief Executive  Officer, Trustee |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ Eugene T. Grady                                                |   |
|   |     | Eugene T. Grady, Treasurer                                         |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ Deborah R. Cheek                                               |   |
|   |     | Deborah R. Cheek, Controller                                       |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ David F. Benson                                                |   |
|   |     | David F. Benson, Trustee                                           |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ Marc P. Blum                                                   |   |
|   |     | Marc P. Blum, Trustee                                              |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ Robert A. Frank                                                |   |
|   |     | Robert A. Frank, Trustee                                           |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ M. Ronald Lipman                                               |   |
|   |     | M. Ronald Lipman, Trustee                                          |   |
|   |     |                                                               |   |
| Date:  | 03/12/03 | /s/ Daniel S. Stone                                                |   |
|   |     | Daniel S. Stone, Trustee                                           |   |

 

40

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**MID-ATLANTICREALTY TRUST AND SUBSIDIARIES**

**CERTIFICATIONS**

 

I, F. Patrick Hughes, President and ChiefExecutive Officer of Mid-Atlantic Realty Trust, certify that:

 

1.               I have reviewed this annual report on Form 10-K of Mid-Atlantic Realty Trust;

 

2.               Based on my knowledge, this annualreport does not contain any untrue statement of a material fact or omit tostate a material fact necessary to make the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this annual report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this annual report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this annual report;

 

4.               The registrant’s other certifying officer and Iare responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

 

a)              designed such disclosure controls and procedures to ensure that materialinformation relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this annual report is being prepared;

 

b)             evaluated the effectiveness of the registrant’s disclosure controls andprocedures as of a date within 90 days prior to the filing date of this annualreport (the “Evaluation Date”); and

 

c)              presented in this annual report our conclusions about the effectivenessof the disclosure controls and procedures based on our evaluation as of theEvaluation Date;

 

5.               The registrant’s other certifying officerand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)              all significant deficiencies in the design or operation of internalcontrols which could adversely affect the registrant’s ability to record,process, summarize and report financial data and have identified for theregistrant’s auditors any material weaknesses in internal controls; and

 

b)             any fraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant’s internal controls;and

 

6.               The registrant’sother certifying officer and I have indicated in this annual report whether ornot there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date:  | 03/12/03 |                                   | /s/ F. Patrick Hughes |   |
|--------|----------|----------------------------------------|-----------------------|--------|
|   |     | F. Patrick Hughes                      |                  |
|   |     | President and Chief  Executive Officer |                  |

 

41

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I, Deborah R. Cheek, Controller ofMid-Atlantic Realty Trust, certify that

 

1.               I have reviewed this annual report on Form10-K of Mid-Atlantic Realty Trust;

 

2.               Based on myknowledge, this annual report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this annual report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this annual report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this annual report;

 

4.               The registrant’sother certifying officer and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

 

a)              designed such disclosure controls and procedures to ensure that materialinformation relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this annual report is being prepared;

 

b)             evaluated the effectiveness of the registrant’s disclosure controls andprocedures as of a date within 90 days prior to the filing date of this annualreport (the “Evaluation Date”); and

 

c)              presented in this annual report our conclusions about the effectivenessof the disclosure controls and procedures based on our evaluation as of theEvaluation Date;

 

5.               The registrant’s other certifying officerand I have disclosed, based on our most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)              all significant deficiencies in the design or operation of internalcontrols which could adversely affect the registrant’s ability to record,process, summarize and report financial data and have identified for theregistrant’s auditors any material weaknesses in internal controls; and

 

b)             any fraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant’s internal controls;and

 

6.               The registrant’sother certifying officer and I have indicated in this annual report whether ornot there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Date:  | 03/12/03 |             | /s/ Deborah R. Cheek |   |
|--------|----------|------------------|----------------------|--------|
|   |     | Deborah R. Cheek |                 |
|   |     | Controller       |                 |

 

42

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EXHIBITINDEX

 
| **Exhibit  No.** |   | **Description**                                                                                                                                                                                                                                           |
|------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|             |   |                                                                                                                                                                                                                                                      |
| 3(a)             |   | Declaration of Trust dated June 29, 1993  (incorporated by reference to Exhibit 3(a) to MART’s Registration Statement  on Form S-11, File No. 33-66386).                                                                                             |
| 3(b)             |   | By-laws (incorporated by reference to Exhibit 3(b)  to MART’s Registration Statement on Form S-11, File No. 33-66386).                                                                                                                               |
| 3(c)             |   | Amendment to Declaration of Trust dated August 4,  1998 (incorporated by reference to Exhibit 3(c) to MART’s Annual Report on  Form 10-K for the year ended December 31, 1998).                                                                      |
| 4(a)             |   | Specimen certificate for Common Shares of Beneficial  Interest (incorporated by reference to Exhibit 4(a) to MART’s Registration  Statement on Form S-11, File No. 33-66386).                                                                        |
| 4(b)             |   | Trust Indenture dated September 8, 1993, between  MART and Security Trust Company, N.A. (incorporated by reference to Exhibit  4(b) to MART’s Registration Statement on Form S-11, File No. 33-66386).                                               |
| 10(a)            |   | Mid-Atlantic Realty Trust 1993 Omnibus Share Plan,  as amended through November 14, 1997 (incorporated by reference to Exhibit  10(a) to MART’s Annual Report on Form 10-K for the year ended December 31,  1997).                                   |
| 10(b)            |   | Mid-Atlantic Realty Trust 1995 Stock Option Plan  (incorporated by reference to MART’s Registration Statement on Form S-8, File  No. 333-12161).                                                                                                     |
| 10(c)            |   | Employment Agreement between BTR Realty, Inc., and  F. Patrick Hughes (incorporated by reference to Exhibit 10(b) to MART’s  Registration Statement on Form S-11, File  No. 33-66386).                                                          |
| 10(d)            |   | Employment Agreement between BTR Realty, Inc., and  Paul F. Robinson (incorporated by reference to Exhibit 10(c) to MART’s  Registration Statement on Form S-11, File No. 33-66386).                                                                 |
| 10(e)            |   | Amendment dated December 1, 1995 to Employment  Agreement between MART and F. Patrick Hughes and MART and Paul F. Robinson  (incorporated by reference to Exhibit 10(e) to MART’s Annual Report on Form  10-K for the year ended December 31, 1995). |
| 10(f)            |   | Commitment Letter from First National Bank of Md.  for Line of Credit to MART (incorporated by reference to Exhibit 10(d) to  MART’s Registration Statement on Form S-11, File No.33-66386).                                                         |
| 10(f)(1)         |   | Financing Agreement dated April 23, 1999 between  MART and the Named Banks (incorporated by reference to Exhibit 10(l) to  MART’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999).                                               |
| 10(g)            |   | Agreement for Contribution of Interests dated April  1, 1997, among MART and the Contributors named therein (incorporated by  reference to Exhibit (c) 1 to Form 8-K filed July 15, 1997).                                                                |
| 10(h)            |   | Agreement of Limited Partnership of MART Limited  Partnership dated as of June 30, 1997 (incorporated by reference to Exhibit  (c) 2 to Form 8-K filed July 15, 1997).                                                                                    |
| 10(i)            |   | Partnership Purchase and Sale Agreement among BTR  Gateway, Inc., MART, and Prentiss Properties Acquisition, L.P. (incorporated  by reference to Exhibit (b) 1 to Form 8-K filed September 30, 1997).                                                     |
| 10(j)            |   | Mid-Atlantic Realty Trust Restricted Share Plan,  adopted on November 14, 1997 (incorporated by reference to Exhibit 10(j) to  MART’s Annual Report on Form 10-K for the year ended December 31, 1997).                                              |
| 10(k)            |   | Mid-Atlantic Realty Trust Non-Employee Trustee  Deferred Compensation Plan, adopted on November 14, 1997 (incorporated by  reference to Exhibit 10(k) to MART’s Annual Report on Form 10-K for the year  ended December 31, 1997).                   |
| 10(l)            |   | Financing agreement dated April 23,1999 with named  banks (incorporated by reference to Exhibit 10.1 to MART’s quarterly report  on Form 10-Q for the quarter ended March 31, 1999).                                                                 |
| 12               |   | Computation of Ratio of Earnings to Fixed Charges.*                                                                                                                                                                                                       |
| 21               |   | Subsidiaries of the Registrant.*                                                                                                                                                                                                                          |
| 23               |   | Consent of KPMG LLP.*                                                                                                                                                                                                                                     |
| 99.1             |   | Real Estate Investment Risks.*                                                                                                                                                                                                                            |

 

----

*Filed herewith

 

43

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