UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [Fee Required]

For the fiscal year ended    December 31, 1998                
                             ----------------- 
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from                   to 
                               -----------------     -------------------     

Commission file Number   1-12286 
                         -------                  

                         Mid-Atlantic Realty Trust
                         -------------------------

(Exact name of registrant as specified in its charter)



Maryland                                                          52-1832411 
--------                                                          ----------

(State or other jurisdiction of                                (I.R.S. Employer
Incorporation or organization)                               Identification No.)

170 West Ridgely Road, Suite 300 - Lutherville, Maryland           21093       
--------------------------------------------------------   ---------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code              (410) 684-2000 
                                                           ---------------------

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

                                      NONE
                                      ----

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

              Common Shares of Beneficial Interest, $.01 par value
              ----------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                              X    Yes             No
                          --------       --------

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 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 information  statements
incorporated  by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]

As of March 12,  1999,  14,330,817  common  shares  of  beneficial  interest  of
Mid-Atlantic  Realty Trust were  outstanding  and the aggregate  value of common
stock (based upon the $10.25 closing price on that date) held by  non-affiliates
was approximately $146,891,000.

                       Documents Incorporated by Reference

The  definitive  proxy  statement  with  respect to the 1999  annual  meeting of
Mid-Atlantic Realty Trust shareholders (to be filed).



<PAGE>

PART I

ITEM 1 - BUSINESS

Mid-Atlantic  Realty  Trust  was  incorporated  June  29,  1993,  and  commenced
operations effective with the completion of its initial public share offering on
September  11,  1993.  Mid-Atlantic  Realty  Trust  qualifies  as a real  estate
investment trust,  "REIT", for Federal income tax purposes.  As used herein, the
term "MART" or the "Company"  refers to  Mid-Atlantic  Realty Trust and entities
owned or controlled by MART,  including MART Limited Partnership (the "Operating
Partnership").

     The Company is a fully integrated, self-administered real estate investment
trust which owns, acquires, develops,  redevelops,  leases and manages primarily
neighborhood or community  shopping centers in the Middle Atlantic region of the
United  States.  The  Company'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 its  properties  for  long-term  FFO
growth.  The Company also acquires  neighborhood or community  shopping  centers
that  either  have  dominant  anchor  tenants or contain a mix of tenants  which
reflects  the shopping  needs of the  communities  they serve.  The Company also
develops and redevelops  shopping centers on a tenant-driven  basis,  leveraging
either existing  tenant  relationships  or geographic and demographic  knowledge
while  seeking to  minimize  exposure to risk  associated  with  long-term  land
development.

     The  Company's  financial  strategy is to execute its  operation and growth
strategies  by  utilizing a blend of  internally  generated  funds,  issuance of
Operating   Partnership  Units,  defined  below,   proceeds  from  divestitures,
institutional   borrowings  and  issuance  of  corporate   equity  or  debt,  as
appropriate.  The Company  currently intends to maintain a ratio of secured debt
to total estimated property value at or below 50%.

     The Company has an equity interest in 32 operating shopping centers,  27 of
which  are  wholly  owned  by the  Company  and five in which  the  Company  has
interests  ranging  from  50% to 93%,  as well as other  commercial  properties,
collectively  the  AProperties@.  The  Properties  have a gross leasable area of
approximately  4,558,000 square feet, of which  approximately  95% was leased at
December 31, 1998. Of these Properties,  approximately 99% of the gross leasable
area  is  in  the  states  of  Maryland,   Virginia,  New  York,   Pennsylvania,
Massachusetts and Delaware.  The Company also owns seven undeveloped  parcels of
land  totaling  approximately  147 acres and  varying  in size from  three to 64
acres.

     All of MART's  interests in the  Properties are held directly or indirectly
by, and  substantially  all of its  operations  relating to the  Properties  are
conducted through the Operating  Partnership.  Units of partnership  interest in
the Operating Partnership (AUnits@) may be exchanged by the limited partners for
cash or common  shares of beneficial  interest in MART on a  one-for-one  basis.
MART controls the Operating  Partnership as the sole general  partner,  and owns
approximately 82% of the Units at December 31, 1998. 

     The business of the Company is not materially affected by seasonal factors.
Although  construction  may be  affected  to some  extent by  inclement  weather
conditions,  usually  during  winter  months,  revenues  from  income  producing
properties held for investment are usually not so affected.  

     The commercial real estate  development and investment  industry is subject
to  widespread  competition  for desirable  sites,  tenants and  financing.  The
industry  is  extremely  fragmented  and  there  are  no  principal  methods  of
competition.  However,  the  ability to compete  is  dependent  in part upon the
ability to find and complete  appropriate  real estate  investments  in a timely
manner.  While many competitors  have fewer assets and financial  resources than
the  Company,  there  are many  competitors  with  greater  financial  resources
competing for similar business opportunities. Accordingly, it is not possible to
estimate the  Company's  position in the industry.  In addition,  certain of the
Company=s real estate projects are near unimproved sites that could be developed
commercially  and  would  provide  further  competition  to  the  Company.   The
management of the Company believes, however, that the Company competes favorably
in the  industry  due to the  quality of its  developments,  its ability to take
advantage  of  opportunities  as they  arise,  its  access  to  capital  and its
reputation.  

     The Company has 58 full time  employees and believes that its  relationship
with its employees is good.









<PAGE>






ITEM 2 - PROPERTIES

The following schedule  describes the Company's  commercial and other properties
as of December 31, 1998.

<TABLE>

<CAPTION>
                                                                                            Gross

                                                                      Year (s)    Leasable Area
                                              Percent      Year        Built/                     Percent
                                             Ownership   Acquired    Redeveloped  ( Sq. Ft. )     Leased    Major Tenants
                                             ---------   --------    -----------  -----------     ------    -------------
<S>                                           <C>          <C>     <C>             <C>             <C>      <C>

SHOPPING CENTER PROPERTIES (1)

MARYLAND
      Baltimore Metropolitan Area:
Harford Mall and Business Center (2)           100%        1972     1972/1984-96    615,000         98%     Hecht's, Montgomery Ward
                                                                                                            Best Buy

Arundel Plaza Shopping Center                   67%        1997       1967/1998     240,000         92%     Giant Food, Lowe's Home 
                                                                                                            Center


Lutherville Station Shopping Center (3)        100%        1993       1969/1997     285,000        100%     Metro Food Market, 
                                                                                                              Caldor, Circuit City

North East Station Shopping Center             100%        1989        1998/-        79,000         93%     Food Lion, Sears

Timonium Shopping Center                       100%        1997        1962/-       207,000         98%     Ames, Loews Theaters, 
                                                                                                             Blockbuster

Perry Hall Shopping Center                     100%        1997       1965/1996     195,000         87%     Metro Food Market 
                                                                                                            (on own pad), Rite Aid,
                                                                                                            Frank's Nursery & Crafts

Enchanted Forest Shopping Center               100%        1997        1992/-       140,000        100%     Safeway, Petco

Wilkens Beltway Plaza Shopping Center           93%        1981*      1985-87/      132,000         97%     Giant Food, Provident 
                                                                      1991/1995                              Bank, Radio Shack

New Town Village Shopping Center               100%        1995*       1995/-       122,000         99%     Giant Food, Blockbuster,
                                                                                                             Starbucks        

Ingleside Shopping Center                      100%        1997       1963/1996     115,000        100%     Safeway, Rite Aid, First
                                                                                                             National Bank, 
                                                                                                             Blockbuster

Shawan Plaza Shopping Center                   100%        1997        1991/-        95,000         99%     Giant Food, Nationsbank,
                                                                                                                Provident Bank

Glen Burnie Village Shopping Center            100%        1997        1972/-        94,000         83%     Rite Aid, Firestone, 
                                                                                                              First National Bank, 
                                                                                                              West Marine

York Road Plaza Shopping Center                100%        1967*      1967/1996      91,000         97%     Giant Food, Firestone, 
                                                                                                            Starbucks, Boston Market

Radcliffe Shopping Center at Towson            100%        1997       1988/1993      86,000        100%     CVS Drug, CompUSA, 
                                                                                                             Linens N' Things

Rosedale Plaza Shopping Center                 100%        1989        1972/-        73,000         80%     Exxon, Rite Aid

Patriots Plaza Shopping Center (3)              50%        1984*       1984/-        67,000         49%     Denny's, Dunkin Donuts

Rolling Road Plaza Shopping Center             100%        1973*      1973/1994      63,000         97%     AMF, Firestone

Timonium Crossing Shopping Center              100%        1997       1986/1996      60,000         98%     Bibelot, Cosmetic Center

Club Centre at Pikesville Shopping Center      100%        1997        1990/-        44,000         93%     Blockbuster

      Easton:
Shoppes at Easton Shopping Center              100%        1994        1994/-       113,000        100%     Giant Food, Wal-Mart
                                                                                                             (on own pad)

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        100%     Food Lion, Remco
                                                                                                               Wal-Mart (on own pad)
</TABLE>




                                        2


<PAGE>




ITEM 2 - PROPERTIES     CONTINUED

<TABLE>
<CAPTION>

                                                                                   Gross
                                                                    Year (s)    Leasable Area
                                            Percent       Year       Built /                    Percent
                                           Ownership    Acquired   Redeveloped  ( Sq. Ft. )     Leased     Major Tenants
                                           ---------    --------   -----------  -----------     ------     -------------

<S>                                         <C>           <C>       <C>           <C>            <C>       <C>

PENNSYLVANIA
      Chambersburg:
Wayne Avenue Plaza Shopping Center           100%         1998      1990/1993     121,000         97%      Giant Food (of Carlisle),
                                                                                                            CVS Drug, Blockbuster
      Waynesboro:
Wayne Heights Plaza Shopping Center          100%         1998       1975/-       109,000         95%      Martins (Giant of
                                                                                                            Carlisle), Ames, Eckerd
                                                                                                            Drug
MASSACHUSETTS
      Pittsfield:

Del Alba Plaza Shopping Center               100%        1998        1995/-         70,000       100%    Stop & Shop, First National
                                                                                                           Bank


NEW YORK
      Colonie:
Colonie Plaza Shopping Center                100%        1987*       1987/-       140,000         93%      Price Chopper, 
                                                                                                            Consolidated Stores

      East Greenbush:
Columbia Plaza Shopping Center               100%        1988*      1988/1997     133,000         93%      Price Chopper, Ben 
                                                                                                            Franklin

VIRGINIA
      Burke:
Burke Town Plaza Shopping Center (3)         100%        1979*    1979-1982/1997  116,000         95%      Safeway, CVS Drug

      Fredericksburg:
Spotsylvania Crossing Shopping Center         93%        1987*      1987/1991     142,000         99%      Giant Food (on own pad),
                                                                                                            Kmart, Fashion Bug

      Harrisonburg:
Skyline Village Shopping Center              100%        1988*      1988/1992     127,000        100%      Richfood, Toys "R" Us

      Manassas:
Sudley Towne Plaza Shopping Center           100%        1984*       1984/-       108,000        100%      Burlington Coat Factory

      Prince William County:
Smoketown Plaza Shopping Center               93%        1987*      1987/1994     176,000         99%      Hub Furniture, Frank's 
                                                                                                            Nursery & Crafts
</TABLE>



                                        3


<PAGE>

<TABLE>





<CAPTION>
                                                                                    Gross
                                                                      Year (s)    Leasable Area
                                             Percent       Year       Built /                    Percent
                                            Ownership    Acquired   Redeveloped   ( Sq. Ft. )    Leased    Major Tenants
                                            ---------    --------   -----------   -----------    ------    -------------


<S>                                          <C>          <C>         <C>           <C>           <C>     <C>

OTHER RETAIL AND COMMERCIAL PROPERTIES (4)

MARYLAND
      Baltimore Metropolitan Area:
Orchard Square Medical Office                 100%         1997        1988/-       28,000         94%     N/A

Southwest Mixed Use Property                  100%        1968*      1968/1984      25,000        100%     Shell Oil, Otis, Potomac
                                                                                                            Air Gas

      Other:
Waldorf Property                              100%        1979*        1979/-       31,000        100%     AMF, Firestone

Clinton Property (3)                          100%        1971*        1971/-       29,000        100%     AMF, Suburban Bank

ILLINOIS
Chicago Property                              100%         1978        1963/-       37,000        100%     AMF

</TABLE>

<TABLE>
<CAPTION>


                                                                                                  Area
                                                                                   Percent         in
                                                                                  Ownership       Acres    Zoning

<S>                                                                                 <C>           <C>      <C>    <C>    <C>    <C>

UNDEVELOPED LAND


MARYLAND
      Baltimore Metropolitan Area:
Dorsey Property                                                                      100%         19.4     Commercial


Harford Property (Adjacent to Harford Mall)                                          100%          3.0     Light Industrial


Northeast Station Property                                                           100%         63.7     Commercial

Pulaski Property                                                                     100%          3.0     Industrial

      Salisbury:
Northwood Industrial Park                                                            67%          16.1     Industrial

NORTH CAROLINA
      Burlington:
Burlington Commerce Park                                                             100%         34.3     Commercial

      Hillsborough:
Hillsborough Crossing                                                                100%          8.0     Commercial



------------------------------------------
<FN>

 (1) Shopping centers in operation are subject to mortgage financing aggregating $123,144,893  at December 31, 1998. 
 (2) The Harford Mall property is subject to  mortgage financing aggregating $19,193,787 at December 31, 1998.
     The  Harford  Mall  mortgage  has an  interest  rate of  9.78%,  a 30 year amortization,  with a 10 year balloon  payment of  
     $18,148,848  due at the maturity date of July 2003. The mortgage allows  prepayment with a penalty of the  greater  of 1% of  
     the  outstanding  principal  balance  or  yield maintenance.
 (3) These properties are subject to ground leases; all of the land relating to the other  properties  listed  above is owned in fee
     simple.  The  ground leases are subject to the following terms:

</FN>
</TABLE>

<TABLE>
<CAPTION>


                     Property                 Annual Rent                     Remaining Lease Term
                     --------                 -----------                     --------------------


<S>                                             <C>             <C>   

Lutherville Station Shopping Center             $60,000         18 years plus six 10 year options
Lutherville Station Shopping Center             $26,000         48 years
Patriots  Plaza Shopping  Center                $59,700          9 years  plus two 10 year options
Brandywine Commons Shopping  Center            $392,600         54 years plus two 10 year options
Burke Towne Plaza Shopping Center               $80,000         33 years plus three 15 year renewal options
Clinton  Property                               $33,000         28 years plus one 45 year renewal option



<FN>

 (4)  Other retail and commercial properties in operation are subject to mortgage financing aggregating $2,256,957 at 
      December 31, 1998.
</FN>

</TABLE>
* Developed by MART or its predecessor.



                                        4


<PAGE>





ITEM 3 - LEGAL PROCEEDINGS

In  the  ordinary  course  of  business,   the  Company  is  involved  in  legal
proceedings.  However, there are no material legal proceedings presently pending
against the Company.

--------------------------------------------------------------------------------

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None
-------------------------------------------------------------------------------

PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS

MART's  common  shares  of  beneficial  interest,  par  value  $.01  per  share,
("shares"),  began trading on the New York Stock Exchange on September 18, 1997,
under the symbol "MRR".  The shares were formerly  traded on the American  Stock
Exchange  under the  symbol  "MRR".  The  following  table sets  forth,  for the
quarters  indicated,  the high and low closing sale prices of MART shares on the
AMEX or  NYSE,  and the cash  distributions  paid per  share  for the  indicated
period.

<TABLE>
<CAPTION>
                                                                 Closing Prices Per Share

                          1998                                 High         Low       Distributions
------------------------------------------------------------------------------------------------------
<S>                      <C>                                  <C>          <C>             <C>    

First Quarter                                                 14.750       13.062          0.25
Second Quarter                                                14.187       12.250          0.25
Third Quarter                                                 13.500       11.312          0.25
Fourth Quarter                                                13.062       11.250          0.26

                          1997                                 High         Low       Distributions
------------------------------------------------------------------------------------------------------
First Quarter                                                 11.750       10.500          0.24
Second Quarter                                                11.875       11.000          0.24
Third Quarter                                                 13.375       11.500          0.24
Fourth Quarter                                                14.688       12.813          0.25

                          1996                                 High         Low       Distributions
------------------------------------------------------------------------------------------------------
First Quarter                                                 10.375       8.750           0.23
Second Quarter                                                10.000       9.250           0.23
Third Quarter                                                 10.125       9.500           0.23
Fourth Quarter                                                11.750       9.625           0.24

</TABLE>

     For the  record  shareholders  of MART  during the  entire  year,  for each
respective year, per share dividends indicated are taxable as follows:

<TABLE>
<CAPTION>
                                                                         Per Share
                                                          --------------------------------------------
                                                          --------------------------------------------
                                                               1998         1997           1996
                                                          --------------------------------------------
<S>                                                            <C>          <C>            <C>    

Ordinary Dividends - taxable as ordinary income                0.85         0.97           0.58
Capital gain distribution - taxable as capital gain            0.01          -              -
Non-taxable distribution - return of capital or
   taxable gain - (depending on a shareholder's
   basis in MART shares)                                       0.15          -             0.35
                                                          --------------------------------------------
                                                          --------------------------------------------
Total annual gross dividends per share                         1.01         0.97           0.93
                                                          --------------------------------------------

Percent of total annual gross dividends per share
  nontaxable distribution-return of capital or taxable         15%           -             38%
  gain                                                    --------------------------------------------


</TABLE>
                                        5


<PAGE>






ITEM 6 - SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,

                                                              1998            1997           1996            1995           1994 
                                                   ---------------------------------------------------------------------------------

<S>                                                  <C>                   <C>            <C>             <C>            <C>       
Revenues                                             $     49,537,130      39,152,220     32,406,300      29,593,158     27,212,796
                                                    --------------------------------------------------------------------------------

Earnings before cumulative effect of change in
    accounting principle and extraordinary loss      $     12,385,861       6,819,211      3,508,709       3,165,082      2,916,286
Cumulative effect of change in accounting
   for percentage rents                                             -               -              -         612,383              -
                                                    --------------------------------------------------------------------------------
Earnings before extraordinary loss                         12,385,861       6,819,211      3,508,709       3,777,465      2,916,286
Extraordinary loss                                            (32,984)       (226,873)             -               -              -
                                                    --------------------------------------------------------------------------------
Net earnings                                         $     12,352,877       6,592,338      3,508,709       3,777,465      2,916,286
                                                    --------------------------------------------------------------------------------

Net earnings per share - basic                       $           0.85            0.70           0.56            0.61           0.46
Net earnings per share - diluted                                 0.84            0.70           0.56            0.61           0.46
                                                    --------------------------------------------------------------------------------
Total assets                                         $    319,740,765     300,886,703    173,278,241     182,521,299    162,842,567
                                                    --------------------------------------------------------------------------------

Indebtedness -
    total mortgages, convertible debentures,
    construction loans, notes and loans payable      $    166,732,850     145,660,657    133,805,495     154,020,757    133,390,553
                                                    --------------------------------------------------------------------------------

Funds from operations (FFO) (1) - diluted            $     25,117,146      17,513,062     13,177,955      12,307,381     11,173,205
                                                    --------------------------------------------------------------------------------

Net cash flow:
   Provided by operating activities                  $     24,255,137      16,005,958      9,898,948      11,193,068      7,766,044
   (Used in) provided by investing activities        $    (21,668,918)     (5,995,155)     4,231,471     (23,584,229)   (19,629,727)
   (Used in) provided by financing activities        $    (10,402,329)     (2,597,424)   (13,631,237)     12,561,025     11,521,097
                                                    --------------------------------------------------------------------------------

Cash dividends paid per share                        $           1.01            0.97           0.93            0.89           0.85
                                                    --------------------------------------------------------------------------------

Weighted average number of shares outstanding:  EPS
   Basic                                                   14,240,533       9,308,682      6,211,092       6,176,991      6,291,407
   Diluted                                                 15,778,727       9,360,566      6,211,092       6,176,991      6,291,407

Weighted average number of shares outstanding:  FFO
   Basic                                                   14,240,533       9,308,682      6,211,092       6,176,991      6,291,407
   Diluted                                                 18,954,498      14,209,757     11,721,436      11,889,372     12,005,693
</TABLE>








                                        6


<PAGE>





ITEM 6 - SELECTED FINANCIAL DATA (Continued)

Reconciliation of Net Earnings to FFO - Diluted
<TABLE>
<CAPTION>
                                                                                Years Ended December 31,


                                                             1998             1997            1996            1995           1994
                                                     -------------------------------------------------------------------------------

<S>                                                  <C>                   <C>             <C>             <C>            <C>      
Net earnings                                         $    12,352,877       6,592,338       3,508,709       3,777,465      2,916,286
Depreciation and amortization of real estate assets        8,813,251       6,954,803       5,413,737       4,983,617      4,549,781
Gain on life insurance proceeds                                    -               -               -      (1,001,787)             -
(Gain) loss on properties                                      4,223         (16,836)       (300,599)        280,362     (1,203,087)
Cumulative effect of change in accounting
   for percentage rents                                            -               -               -        (612,383)             -
Extraordinary loss from early extinguishment of debt          32,984         226,873               -               -              -
Operating Partnership minority interest expense            2,707,051       1,139,840               -               -              -
Subordinated debenture interest expense                    1,206,760       2,616,044       4,556,108       4,880,107      4,910,225
                                                     -------------------------------------------------------------------------------
FFO - diluted                                        $    25,117,146      17,513,062      13,177,955      12,307,381     11,173,205
                                                     -------------------------------------------------------------------------------

<FN>
(1) Funds from operations is defined by the National  Association of Real Estate
Investment  Trusts,  Inc.  (NAREIT) as net income  (computed in accordance  with
generally  accepted  accounting  principles),  excluding  cumulative  effects of
changes in accounting  principles,  extraordinary or unusual items, and gains or
losses from debt  restructuring  and sales of property,  plus  depreciation  and
amortization,  and after adjustments for  unconsolidated  partnerships and joint
ventures.  FFO does not  represent  cash  flows  from  operations  as defined by
generally accepted accounting principles (GAAP). FFO is not indicative that cash
flows are  adequate  to fund all cash  needs and is not to be  considered  as an
alternative to net income as defined by GAAP.

</FN>
</TABLE>

Quarterly Results of Operations (Unaudited)

The unaudited  quarterly  results of  operations  for MART for 1998 and 1997 are
summarized as follows:

<TABLE>
<CAPTION>
                                                                     Quarter Ended

1998                                               March 31,      June 30,    September 30,     December 31,
--------------------------------------------------------------------------------------------------------------
<S>                                         <C>                  <C>            <C>              <C>       
Revenues                                    $     11,824,395     12,267,335     12,322,456       13,122,944
                                           -------------------------------------------------------------------

Earnings before extraordinary loss          $       3,102,987     3,002,283      2,979,240        3,301,351
Extraordinary loss
   from early extinguishment of debt                  (32,984)            -              -                -
                                           -------------------------------------------------------------------
Net earnings                                $       3,070,003     3,002,283      2,979,240        3,301,351
                                           -------------------------------------------------------------------

Net earnings per share - basic              $            0.21          0.20           0.21             0.23
Net earnings per share - diluted            $            0.21          0.20           0.21             0.22
                                           -------------------------------------------------------------------


                                                                     Quarter Ended

1997                                               March 31,      June 30,    September 30,     December 31,
--------------------------------------------------------------------------------------------------------------
Revenues                                    $       8,204,768     8,192,329     11,427,185       11,327,938
                                           -------------------------------------------------------------------

Earnings before extraordinary loss          $       1,351,793     1,528,925      1,267,281        2,671,212
Extraordinary loss
   from early extinguishment of debt                        -             -              -         (226,873)
                                           -------------------------------------------------------------------
Net earnings                                $       1,351,793     1,528,925      1,267,281        2,444,339
                                           -------------------------------------------------------------------

Net earnings per share - basic and diluted  $            0.18          0.19           0.15             0.18
                                           -------------------------------------------------------------------
</TABLE>

    Quarterly  results are influenced by a number of factors including timing of
settlements of property sales,  completion of operating projects,  write-offs of
unrecoverable development costs,  extraordinary items and allowances for loss on
properties.



                                        7


<PAGE>





ITEM 7 - MANAGEMENT=S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following  discussion  and analysis of operating  results covers each of the
Company's two business segments for the years ended December 31, 1998, 1997, and
1996.

     Management  believes that a segment  analysis  provides the most  effective
means of understanding the business.  As discussed in Note O to the consolidated
financial  statements,  the Company  adopted  Statement of Financial  Accounting
Standards No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  in 1998. As required by the  Statement,  segment data are reported
using the accounting  policies followed by the Company for internal reporting to
management.  These  policies are the same as those used for external  reporting.
Operating  results of the segments are reconciled to earnings from operations in
the financial statements in Note O.

Operating Results - Shopping Centers

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

<TABLE>
<CAPTION>
                                                                                      1998         1997         1996
                                                                             --------------------------------------------
<S>                                                                           <C>                     <C>          <C>   
Revenues                                                                      $          47,402       34,938       27,388
Operating and interest expenses, exclusive of depreciation and amortization              24,509       22,281       21,276
Depreciation and amortization                                                             8,362        6,011        4,288
Minority interest                                                                         3,080        1,410          494
                                                                             --------------------------------------------
Earnings from operations                                                      $          11,451        5,236        1,330
                                                                             --------------------------------------------
</TABLE>

     Revenues  from shopping  centers  increased by  $12,464,000  in 1998 and by
$7,550,000  in 1997.  The  increase in 1998 was due  primarily to a full year of
operations  from  the  portfolio  of  properties   acquired  from   partnerships
associated with Jack H. Pechter ("JHP Acquisition") in July 1997, the operations
of  five  additional  operating  properties  acquired  in  1998  and  1997,  the
completion of two  redevelopment  projects  which were in operation for the last
three quarters of the year, and other occupancy and net rental increases.  These
increases were partly offset by the disposition of three properties during 1997.
The increase in 1997 was due primarily to the JHP  Acquisition , the  completion
of three redevelopment  projects,  and other occupancy and net rental increases.
These increases were partly offset by the dispositions of properties referred to
above.

   Operating and interest expenses  (exclusive of depreciation and amortization)
for shopping center properties increased by $2,228,000 in 1998 and by $1,005,000
in 1997. The increase in 1998 was due primarily to the acquisitions  referred to
above,  partly offset by a decrease in interest expense due to the conversion of
debentures,  paydowns  of  mortgages  and notes  payable,  and  dispositions  of
properties.  The increase in 1997 was due primarily to the acquisitions referred
to above,  partly offset by  dispositions  of properties  and the  conversion of
debentures.  Depreciation  and amortization  expense  increased by $2,351,000 in
1998 and by  $1,723,000 in 1997 due  primarily to the  acquisitions  referred to
above. Minority interest expense increased by $1,670,000 in 1998 and by $916,000
in 1997.  The increases  were due primarily to the addition of minority  limited
partnership interests in connection with the JHP Acquisition.

Operating Results - All Other Properties

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

<TABLE>
<CAPTION>
                                                                                         1998         1997         1996
                                                                           ----------------------------------------------
<S>                                                                         <C>                      <C>          <C>  
Revenues                                                                    $           2,135        4,214        5,018
Operating and interest expenses, exclusive of depreciation and amortization               731        1,696        1,995
Depreciation and amortization                                                             451          943        1,125
Minority interest                                                                          14            9           20
                                                                           ----------------------------------------------
Earnings from operations                                                    $             939        1,566        1,878
                                                                           ----------------------------------------------
</TABLE>

     Revenues from all other  properties  decreased by $2,079,000 in 1998 and by
$804,000  in 1997.  The  decreases  in 1998 and 1997 were due  primarily  to the
disposition of the Gateway International Office project ("Gateway") in September
1997,  partly offset by revenues from a medical office building  acquired in the
JHP Acquisition.

     Operating   and  interest   expenses   (exclusive   of   depreciation   and
amortization) for all other properties  decreased  $965,000 in 1998 and $299,000
in 1997.  Depreciation  and  amortization  decreased  by $492,000 in 1998 and by
$182,000 in 1997.  The decreases  were due  primarily to the  portfolio  changes
referred to above.

Gain (Loss) on Dispositions

The gain on properties for 1997 includes gains on sales of various properties of
approximately  $1,165,000,  including  approximately  $959,000  relating  to the
Gateway International Office project. These gains were substantially offset by a
provision  for loss of $1,148,000  on a shopping  center the Company  decided to
sell. The gain on properties  for 1996 includes  gains on various  properties of
$1,015,000,   including  approximately  $450,000  relating  to  shopping  center
properties.  These gains were partly  offset by a provision for loss of $714,000
on a shopping center the Company decided to sell.




Liquidity and Capital Resources

The Company had cash and cash equivalents of $611,000 at December 31, 1998.

     Net  cash  flow   provided  by  operating   activities   was   $24,255,000,
$16,006,000,  and $9,899,000 in 1998, 1997, and 1996, respectively.  The changes
in cash  provided by  operating  activities  were due  primarily  to the factors
discussed above in the comparisons of operating  results.  The level of net cash
provided by operating  activities  is also  affected by the timing of receipt of
revenues and the payment of operating and interest expenses.

     Net cash flow used in investing activities  increased by $15,674,000,  to a
net cash flow used in investing  activities  of  $21,669,000  in 1998 from a net
cash flow used in investing  activities of $5,995,000 in 1997.  The increase was
primarily a result of a lower level of sales of properties in 1998 partly offset
by a decrease in acquisitions of and additions to properties.

     Net cash flow used in investing activities  increased by $10,227,000,  to a
net cash flow used in investing activities of $5,995,000 in 1997 from a net cash
flow provided by investing  activities  of $4,232,000 in 1996.  The decrease was
primarily a result of more  acquisitions  of and additions to properties in 1997
than in 1996,  partly  offset by higher  sales of  properties  in 1997.  Milford
Commons and Arundel Plaza and development projects Lutherville Station and North
East Station were acquired and added to properties and Gateway was sold in 1997.

     Net cash flow used in  financing  activities  increased  by  $7,805,000  to
$10,402,000  in 1998 from  $2,597,000  in 1997.  The  increase  in cash used was
primarily a result of higher dividends paid in 1998, and share repurchases under
the Company's plan of $3,831,000.

     Net cash flow used in  financing  activities  decreased by  $11,034,000  to
$2,597,000  in 1997 from  $13,631,000  in 1996.  The  decrease  in cash used was
primarily a result of  $49,061,000  in proceeds from a common share  offering in
October 1997,  partly offset by higher levels of net principal  paydowns in 1997
of  $34,943,000  (primarily  due to mortgage  principal  paydowns using offering
proceeds and to the line of credit  paydown using proceeds of the Gateway sale),
as well as an increase in dividends paid of $3,467,000 in 1997.

     The Company  currently has a $40,000,000  secured line of credit  available
for various  purposes,  including  acquisition,  development or redevelopment of
properties  and  liquidity,  subject to various terms and  conditions.  The note
payable under the bank line of credit had an $18,400,000  balance outstanding at
December 31, 1998. The Company has received a commitment letter from its primary
bank to increase its line of credit from  $40,000,000  to  $75,000,000.  The new
credit facility will be unsecured and is subject to agreement on final terms.

     The Company has  registered  to sell up to an  aggregate  of  approximately
$98,000,000 (based on the public offering price) of additional commons shares of
beneficial  interest and/or debt  securities.  The shares and debt may be issued
from time to time at prices,  in amounts  and on terms to be  determined  at the
time of offering.

     In order to qualify as a REIT for  Federal  income  tax  purposes,  MART is
required  to pay  dividends  to its  shareholders  of at  least  95% of its REIT
taxable  income.  MART intends to pay these dividends from operating cash flows.
While MART intends to distribute to its  shareholders  a substantial  portion of
its cash flows from operating activities, MART also intends to retain or reserve
such amounts as it considers  necessary from time to time for the acquisition or
development  of new  properties  as  suitable  opportunities  arise  and for the
expansion and renovation of its shopping  centers.  Also, MART currently has and
expects to continue to maintain a line of credit from its primary bank.

     The Company anticipates  material  commitments for capital  expenditures to
include,  in the next two years,  the ongoing  redevelopment of five projects in
the planning  stage at an estimated  cost of  $12,500,000  to  $14,000,000.  The
Company expects to fund the development  projects and other capital expenditures
with  available net cash flows from  operating  activities and if necessary with
construction  loan  financing,  long-term  mortgage  financing  on  unencumbered
operating properties or the use of its line of credit.

     It is  management=s  intention  that MART  continually  have  access to the
capital  resources  necessary  to expand and  develop its  business.  Management
cannot practically  quantify MART=s 1999 cash requirements,  but expects to meet
its short-term liquidity  requirements generally through available net cash flow
provided by operations and short-term borrowings.  To meet its long-term capital
requirements,  MART intends to obtain funds through  additional equity offerings
or long-term debt financing in a manner consistent with its financial  strategy.
The Company  anticipates that the cash flow available from operations,  together
with cash from borrowings and equity  offerings,  will be sufficient to meet its
liquidity and capital needs in both the short- and long-term.

Market Risk Information

The market risk associated with financial  instruments and derivative  financial
and  commodity  instruments  is the risk of loss from adverse  changes in market
prices or rates.  The Company's  market risk arises primarily from interest rate
risk  relating to variable rate  borrowings  used to maintain  liquidity  (e.g.,
credit  line   borrowings  )  or  finance  project   development   costs  (e.g.,
construction loans). The Company's interest rate risk management objective is to
limit the impact of interest  rate changes on earnings and cash flows.  In order
to achieve this objective, the Company relies primarily on long term, fixed rate
nonrecourse   loans  from   institutional   lenders  to  finance  its  operating
properties.  In addition,  long term fixed rate financing is typically  arranged
concurrently with or shortly after a variable rate project  construction loan is
negotiated  or the project is  complete.  The  Company  has not used  derivative
financial or commodity instruments to manage interest rate risk.

     The Company's  interest rate risk is monitored  closely by management.  The
table below presents the principal  amounts,  weighted  average  interest rates,
fair values and other data  required to evaluate the expected  cash flows of the
Company under debt agreements and its sensitivity to interest rate changes.

     At  December  31,  1998,  the  Company's  variable  rate  debt  relates  to
borrowings  under its credit line. The credit line  borrowings are assumed to be
repaid at their various repricing dates throughout 1999.


<PAGE>




Market Risk Information (Continued)

     As the table  incorporates  only those  exposures that exist as of December
31, 1998,  it does not consider  exposures or positions  which could arise after
that  date.  As a result,  the  Company's  ultimate  realized  gain or loss with
respect to interest rate  fluctuations  will depend on the exposures  that arise
after December 31, 1998, the Company's hedging  strategies,  if any, during that
period and interest rates.

<TABLE>
<CAPTION>
                                                                                                                          Fair
                                    1999        2000        2001        2002        2003     Thereafter     Total        Value
                               ----------------------------------------------------------------------------------------------------
<S>                                <C>         <C>         <C>         <C>         <C>         <C>         <C>          <C>    
Fixed rate debt                    13,900      10,300      12,625      19,952      19,856      57,768      134,401      140,225
Weighted average interest rate      8.77%       9.76%       8.38%       8.29%       9.69%       8.47%        8.74%        7.08%

Variable rate debt                 18,400          -           -           -           -           -        18,400           -
Weighted average interest rate      6.38%          -           -           -           -           -         6.38%           -
</TABLE>


Year 2000 Issue

The year 2000 issue relates to whether computer systems will properly  recognize
date sensitive information to allow accurate processing of transactions and data
relating to the year 2000 and beyond.  Systems  that do not  properly  recognize
such information could generate erroneous data or fail.

     As a result of the Company's normal upgrade and replacement  processes,  it
has been determined that all existing network and desktop equipment is year 2000
compliant.  The Company's  mission critical,  property  management and financial
reporting software has also been modified to be year 2000 compliant. The Company
has determined that all non-mission critical software is year 2000 compliant. As
the Company owns primarily  community  retail centers  without  enclosed  common
areas,  the use of this  technology  is very  limited  and  management  does not
believe  that the year  2000  issue  will  pose  significant  problems  in these
systems. The Company expects that the costs to specifically  remediate year 2000
information technology issues will not be significant.

     The Company  believes  the "most  reasonably  likely  worst case  scenario"
exposure to be indirect in nature  involving  vendors,  suppliers,  and tenants.
Currently, management does not believe it is practical to measure the effects of
potential complications. The Company will continually monitor and evaluate these
areas and develop contingency plans on an as needed basis.

Inflation

The majority of leases for the shopping center properties contain provisions for
annual increases in rents and/or  provisions,  which may entitle MART to receive
percentage rents, based on the tenants= gross sales. Such provisions  ameliorate
the risk to MART of the adverse  effects of  inflation.  If a recession  were to
begin and continue for a prolonged time,  funds from operations could decline as
some  tenants may have  trouble  meeting  their lease  obligations.  Most of the
leases for the  properties  require  the tenants to pay a  substantial  share of
operating  expenses,  such as real  estate  taxes,  insurance  and  common  area
maintenance  costs,  and thereby reduce MART=s  exposure to increased  costs. In
addition,  many of the leases for the  properties  are for terms of less than 10
years,  which may enable MART to seek  increase  rents upon  renewal of existing
leases if rents are below the then existing market rates.

Cautionary Disclosure Relating to Forward Looking Statements

Statements made in this document  include forward looking  statements  under the
federal securities laws. Statements that are not historical in nature, including
the words "anticipate," "estimate," "should," "expect," "believe," "intend," and
similar expressions are intended to identify forward looking  statements.  While
these  statements  reflect the  Company's  good faith  beliefs  based on current
expectations,  estimates and projections about (among other things) the industry
and the markets in which the Company operates, they are not guarantees of future
performance,  involve known and unknown risks and uncertainties that could cause
actual  results  to  differ   materially  from  those  in  the  forward  looking
statements,  and  should not be relied  upon as  predictions  of future  events.
Factors which could impact future results  include (among other things)  general
economic  conditions,  local real estate  conditions,  oversupply  of  available
space, financial condition of tenants, timely ability to lease or re-lease space
upon favorable economic terms,  agreements with anchor tenants,  interest rates,
availability of financing, competitive factors, and similar considerations.  The
Company  disclaims  any  obligation  to  publicly  update or revise any  forward
looking  statement,  whether as a result of new  information,  future  events or
otherwise.  For a discussion of risks and uncertainties  that could cause actual
results  to differ  materially  from  those  contained  in the  forward  looking
statements, see "Risk Factors" filed as Exhibit 99.1 to the Company's Form 10-K.













                                        8


<PAGE>







ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA









                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

    Independent Auditors' Report                                           25
    Consolidated Balance Sheets -
      as of December 31, 1998 and 1997                                     26
    Consolidated Statements of Operations -
      Years ended December 31, 1998, 1997, and 1996                        27
    Consolidated Statements of Shareholders' Equity -
      Years ended December 31, 1998, 1997, and 1996                        28
    Consolidated Statements of Cash Flows -
      Years ended December 31, 1998, 1997, and 1996                        29
    Notes to Consolidated Financial Statements                             30

    Exhibits,  Financial Statement Schedule,  and Reports
      on Form 8K are included in Part IV - Item 14

    Schedule:
    Schedule III - Real Estate and Accumulated Depreciation                42






                                        9


<PAGE>





INDEPENDENT AUDITORS' REPORT










Board of Trustees and Shareholders
Mid-Atlantic Realty Trust:

We have audited the  accompanying  consolidated  balance sheets of  Mid-Atlantic
Realty Trust and  subsidiaries  as of December 31, 1998 and 1997 and the related
consolidated  statements of operations,  shareholders= equity and cash flows for
each  of the  years  in the  three-year  period  ended  December  31,  1998.  In
connection with our audits of the  consolidated  financial  statements,  we have
also  audited the  financial  statement  schedule as listed in the  accompanying
index.  These  consolidated  financial  statements  and the financial  statement
schedule are the responsibility of the Company=s management.  Our responsibility
is to express an opinion on these financial  statements and financial  statement
schedule based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining on a test basis,  evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the financial position of Mid-Atlantic
Realty Trust and  subsidiaries as of December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31,1998,  in conformity with generally accepted accounting
principles.  Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole,  presents  fairly,  in all material  respects,  the information set forth
therein.


                                            KPMG LLP



Baltimore, Maryland
February 8, 1999





                                       10
<PAGE>




                   MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES

                           Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                                As of December 31,
                                                                              1998              1997
                                                                   -----------------------------------------

<S>     <C>    <C>    <C>    <C>    <C>    <C>
ASSETS
--------------
Properties:
     Operating properties (Notes C and D)                             $   347,921,101       306,887,360
     Less accumulated depreciation and amortization                        50,540,094        42,781,532
                                                                   -----------------------------------------
                                                                          297,381,007       264,105,828
     Development operations (Note E)                                       11,281,252        18,812,326
     Property held for development or sale                                  5,422,705         5,559,864
                                                                   -----------------------------------------
                                                                          314,084,964       288,478,018

Cash and cash equivalents                                                     611,107         8,427,217
Notes and accounts receivable - tenants and other (Note F)                  1,504,951           880,414
Prepaid expenses and deposits                                               2,381,137         1,928,584
Deferred financing costs, net (Note G)                                      1,158,606         1,172,470
                                                                   -----------------------------------------
                                                                      $   319,740,765       300,886,703
                                                                   -----------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------
Liabilities:
     Accounts payable and accrued expenses (Note H)                   $     6,306,471         5,721,093
     Notes payable (Note I)                                                18,400,000         3,400,000
     Construction loan payable (Note D)                                     9,000,000         8,692,916
     Mortgages payable (Note D)                                           125,401,850       116,065,741
     Convertible subordinated debentures (Note J)                          13,931,000        17,502,000
     Deferred income                                                          743,284           666,444
                                                                   -----------------------------------------
                                                                          173,782,605       152,048,194
                                                                   -----------------------------------------
Minority interest in consolidated joint ventures                           41,467,101        42,076,946
                                                                   -----------------------------------------

Shareholders' equity (Note L):
     Preferred shares of beneficial interest, $.01 par value,
       authorized 2,000,000 shares, issued and outstanding, none                    -                 -
     Common shares of beneficial interest, $.01 par value,
       authorized 100,000,000 shares, outstanding 14,495,045 and 
       14,460,248 shares, respectively                                        144,950           144,602
     Additional paid-in capital                                           131,368,001       131,281,852
     Distributions in excess of accumulated earnings                      (27,021,892)      (24,664,891)
                                                                   -----------------------------------------
                                                                          104,491,059       106,761,563
                                                                   -----------------------------------------
Commitments (Note M)
                                                                   -----------------------------------------
                                                                      $   319,740,765       300,886,703
                                                                   -----------------------------------------
</TABLE>




See accompanying notes to consolidated financial statements.



                                       11


<PAGE>







                   MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
                      Consolidated Statements of Operations
                            Years ended December 31,
<TABLE>
<CAPTION>


                                                       ------------------------------------------------------------
                                                                 1998                  1997                1996
                                                       ------------------------------------------------------------
<S>                                                      <C>                        <C>                <C>    

REVENUES:
     Rentals                                              $   41,674,780            33,115,087          26,561,699
     Tenant Recoveries                                         7,421,059             5,569,495           5,135,024
     Other (Note P)                                              441,291               467,638             709,577
                                                       ------------------------------------------------------------
                                                              49,537,130            39,152,220          32,406,300
                                                       ------------------------------------------------------------

EXPENSES:
     Interest                                                 12,081,000            12,555,017          12,354,156
     Depreciation and amortization
       of property and improvements                            8,813,251             6,954,803           5,413,737
     Operating                                                10,370,414             8,960,936           8,817,826
     General and administrative                                2,788,939             2,460,263           2,098,534
                                                       ------------------------------------------------------------
                                                              34,053,604            30,931,019          28,684,253
                                                       ------------------------------------------------------------

EARNINGS FROM OPERATIONS
     BEFORE MINORITY INTEREST                                 15,483,526             8,221,201           3,722,047
Minority Interest                                             (3,093,442)           (1,418,826)           (513,937)
                                                       ------------------------------------------------------------

EARNINGS FROM OPERATIONS                                      12,390,084             6,802,375           3,208,110
Gain (loss) on properties (Note Q)                                (4,223)               16,836             300,599
                                                       ------------------------------------------------------------

EARNINGS BEFORE EXTRAORDINARY LOSS                            12,385,861             6,819,211           3,508,709
Extraordinary loss from early
     extinguishment of debt                                      (32,984)             (226,873)                  -
                                                       ------------------------------------------------------------

NET EARNINGS                                              $   12,352,877             6,592,338           3,508,709
                                                       ------------------------------------------------------------


NET EARNINGS PER SHARE - BASIC (NOTE R):
Earnings before extraordinary loss                        $         0.85                  0.72                0.56
Extraordinary loss on early extinguishment of debt                     -                 (0.02)                  -
                                                       ------------------------------------------------------------
Net earnings                                              $         0.85                  0.70                0.56
                                                       ------------------------------------------------------------

NET EARNINGS PER SHARE - DILUTED  (NOTE R):
Earnings before extraordinary loss                        $         0.84                  0.72                0.56
Extraordinary loss on early extinguishment of debt                     -                 (0.02)                  -
                                                       ------------------------------------------------------------
Net earnings                                              $         0.84                  0.70                0.56
                                                       ------------------------------------------------------------
</TABLE>




See accompanying notes to consolidated financial statements.



                                       12


<PAGE>
<TABLE>
<CAPTION>


                                                                 MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
                                                              Consolidated Statements of Shareholders' Equity
                                                                Years ended December 31, 1998, 1997 and 1996


                                                                                                 Distributions
                                                   Number of          Common       Additional    in Excess of         Net
                                                     Common          Shares at      Paid-in       Accumulated    Shareholders'
                                                     Shares          Par value      Capital        Earnings         Equity
                                                --------------------------------------------------------------------------------
<S>                                                  <C>           <C>            <C>           <C>               <C>    

BALANCE, December 31, 1995                            6,016,111    $     60,161   40,389,783     (19,511,722)      20,938,222
Conversion of subordinated debentures                 1,217,610          12,176   12,327,280               -       12,339,456
Share purchase plan                                      (8,618)            (86)     (81,350)              -          (81,436)
Dividends paid - $.93 per share                               -               -            -      (5,893,649)      (5,893,649)
Net earnings                                                  -               -            -       3,508,709        3,508,709
                                                --------------------------------------------------------------------------------

BALANCE, December 31, 1996                            7,225,103          72,251   52,635,713     (21,896,662)      30,811,302
Conversion of subordinated debentures                 2,827,838          28,278   28,740,766               -       28,769,044
Redemption of Operating Partnership Units                     -               -      (15,000)              -          (15,000)
Share-based compensation plans                          382,307           3,823      899,499               -          903,322
Sale of common shares                                 4,025,000          40,250   49,020,874               -       49,061,124
Dividends paid - $.97 per share                               -               -            -      (9,360,567)      (9,360,567)
Net earnings                                                  -               -            -       6,592,338        6,592,338
                                                --------------------------------------------------------------------------------

BALANCE, December 31, 1997                           14,460,248         144,602  131,281,852     (24,664,891)     106,761,563
Conversion of subordinated debentures                   340,080           3,401    3,473,468               -        3,476,869
Share purchase plan                                    (313,200)         (3,132)  (3,827,977)              -       (3,831,109)
Share-based compensation plans                            7,917              79      467,374               -          467,453
Other, net                                                    -               -      (26,716)              -          (26,716)
Dividends paid - $1.01 per share                              -               -            -     (14,709,878)     (14,709,878)
Net earnings                                                  -               -            -      12,352,877       12,352,877
                                                --------------------------------------------------------------------------------
                                                --------------------------------------------------------------------------------
BALANCE, December 31, 1998                           14,495,045    $    144,950  131,368,001     (27,021,892)     104,491,059
                                                --------------------------------------------------------------------------------


</TABLE>




See accompanying notes to consolidated financial statements.






                                       13


<PAGE>



<TABLE>
<CAPTION>





                                                                 MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
                                                                      Consolidated Statements of Cash Flows
                                                                         Years ended December 31,
                                                            ---------------------------------------------------------
                                                                        1998                1997              1996  
                                                            ---------------------------------------------------------
<S>                                                              <C>                  <C>                 <C>

Cash flows from operating activities:
     Net earnings                                                $    12,352,877        6,592,338          3,508,709
     Adjustments to reconcile net earnings to net
       cash provided by operating activities:
       Depreciation and amortization                                   8,813,251        6,954,803          5,413,737
       Minority interest in earnings, net                              3,086,093        1,356,062            513,937
       Amortization of deferred financing costs                          247,901          374,432            557,319
       (Gain) loss on properties                                           4,223          (16,836)          (300,599)
       Changes in operating assets and liabilities:
         (Increase) decrease in assets                                (1,077,090)        (539,087)           530,517
         Increase (decrease) in liabilities                              662,218        1,190,388            (99,940)
     Other, net                                                          165,664           93,858           (224,732)
                                                            ----------------------------------------------------------
          Total adjustments                                           11,902,260        9,413,620          6,390,239
                                                            ----------------------------------------------------------
               NET CASH PROVIDED BY OPERATING ACTIVITIES              24,255,137       16,005,958          9,898,948
                                                            ----------------------------------------------------------
Cash flows from investing activities:
     Acquisitions of and additions to properties                     (22,470,996)     (30,894,917)        (6,412,365)
     Proceeds from sales of properties                                 4,498,017       26,867,723         11,175,108
     Payments to minority partners                                    (3,695,939)      (1,985,568)          (652,186)
     Receipts from minority partners                                           -           17,607            121,184
                                                            ----------------------------------------------------------
               NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES   (21,668,918)      (5,995,155)         4,231,741
                                                            ----------------------------------------------------------
Cash flows from financing activities:
     Proceeds from notes payable                                      24,677,750       34,900,000         49,080,565
     Principal payments on notes payable                              (9,677,750)     (47,900,000)       (54,210,708)
     Proceeds from mortgages payable                                  11,600,000                -         18,900,000
     Principal payments on mortgages payable                         (18,435,646)     (38,067,252)       (11,100,609)
     Proceeds from construction loans payable                            307,084        8,692,916            194,222
     Payments on construction loans payable                                    -                -        (10,293,732)
     Additions to deferred financing costs                              (305,881)         (31,837)          (225,890)
     Proceeds from exercise of share options                                  23           78,526                  -
     Net proceeds from sale of common shares                                   -       49,061,124                  -
     Shares repurchased                                               (3,831,109)               -            (81,436)
     Dividends paid                                                  (14,709,878)      (9,360,567)        (5,893,649)
     Other, net                                                          (26,922)          29,666                  -
                                                            -----------------------------------------------------------
               NET CASH USED IN FINANCING ACTIVITIES                 (10,402,329)      (2,597,424)       (13,631,237)
                                                            -----------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  (7,816,110)       7,413,379            499,452
CASH AND CASH EQUIVALENTS, beginning of year                           8,427,217        1,013,838            514,386
                                                            -----------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year                           $       611,107        8,427,217          1,013,838
                                                            -----------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
       Interest paid                                             $    12,540,504       13,384,175         12,317,962
                                                            ------------------------------------------------------------


-------------------------------------------------------------
Schedule of noncash investing and financing activities
-------------------------------------------------------------
     Conversion of subordinated debentures,
          net of deferred financing costs                        $    34,077,075       28,769,882         12,339,456
     Mortgages payable assumed                                        16,171,755       83,922,498                  -
     Operating Partnership Units issued                                        -       36,064,913                  -
     Acquisition of minority interests in exchange for
          notes receivable                                                     -                -          2,923,000
                                                            ------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.



                                       14


<PAGE>





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

A.  Summary of Significant Accounting Policies

Organization  Mid-Atlantic  Realty Trust was  incorporated  June 29,  1993,  and
commenced  operations  effective with the completion of its initial public share
offering on September 11, 1993.  Mid-Atlantic  Realty Trust  qualifies as a real
estate  investment  trust  ("REIT")  for Federal  income tax  purposes.  As used
herein, the term "MART" or the "Company" refers to Mid-Atlantic Realty Trust and
entities owned or controlled by MART,  including MART Limited  Partnership  (the
"Operating Partnership").

Description of Business
The Company is a fully  integrated,  self-administered  real  estate  investment
trust which owns, acquires, develops,  redevelops,  leases and manages primarily
neighborhood or community  shopping centers in the Middle Atlantic region of the
United States.

     The Company has an equity interest in 32 operating shopping centers,  27 of
which  are  wholly  owned  by the  Company  and five in which  the  Company  has
ownership  interests  ranging  from  50% to 93%,  as well  as  other  commercial
properties.  The Company also owns seven  undeveloped  parcels of land  totaling
approximately 147 acres, which it is holding for development or sale.

     All of MART's  interests in properties  are held directly or indirectly by,
and substantially all of its operations relating to the properties are conducted
through,  the Operating  Partnership.  Subject to certain  conditions,  units of
partnership interest in the Operating  Partnership ("Units") may be exchanged by
the limited  partners for cash or, at the option of MART,  the obligation may be
assumed  by MART and paid  either  in cash or in  common  shares  of  beneficial
interest in MART on a one-for-one basis. MART controls the Operating Partnership
as the sole general partner, and owns approximately 82% of the Units at December
31, 1998.

Basis of Presentation
The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires management to make estimates and judgments that
affect the  reported  amounts  of assets  and  liabilities  and  disclosures  of
contingencies at the date of the financial  statements and revenues and expenses
recognized during the reporting  period.  Actual results could differ from those
estimates.

Principles of Consolidation
The consolidated  financial statements include all wholly owned subsidiaries and
majority-owned partnerships, including the Operating Partnership. Investments in
unconsolidated  joint ventures are carried on the equity method. All significant
intercompany balances and transactions have been eliminated in consolidation.

     The Company owns 100% interests in corporate subsidiaries which are general
partners in several partnerships which have outside partners with 50% interests.
Based upon the structure of the respective  partnership  management  agreements,
the  Company  has  control  over the  50%-owned  partnerships  and uses the full
consolidation method to account for them.

Net Earnings Per Share
Basic earnings per share ("EPS") is computed by dividing  earnings  available to
common shareholders by the weighted average number of common shares outstanding.
Diluted EPS is computed  after  adjusting the numerator and  denominator  of the
basic EPS  computation for the effects of all dilutive  potential  common shares
outstanding  during the period.  The dilutive effects of convertible  securities
are  computed  using the  "if-converted"  method  and the  dilutive  effects  of
options,  warrants and their  equivalents  (including fixed awards and nonvested
shares  issued under  share-based  compensation  plans) are  computed  using the
"treasury stock" method.

Capitalization Policy
Acquisition, development and construction costs of properties in development are
capitalized including, where applicable, salaries and related costs, real estate
taxes  and  interest  costs.  Development  and  construction  costs and costs of
significant  improvements,  replacements and renovations to operating properties
are capitalized while costs of maintenance and repairs are expensed as incurred.
Direct costs incurred in the financing and leasing of properties are capitalized
as deferred costs and amortized over the term of the related  mortgage or lease.
Effective  March 19,  1998,  the Company  adopted a policy of charging  internal
staff costs associated with  acquisitions of operating  properties to expense as
incurred as required by a  consensus  of the  Emerging  Issues Task Force of the
Financial  Accounting  Standards  Board.  Prior to that  date,  such  costs were
capitalized as part of the cost of properties acquired. This change did not have
a material effect on net earnings for 1998.

Properties

Properties to be developed or held and used in  operations  are carried at cost,
reduced for impairment  losses where  appropriate.  Properties held for sale are
carried  at the  lower of their  carrying  value  (i.e.  cost  less  accumulated
depreciation and any impairment loss recognized,  where applicable) or estimated
fair value less cost to sell.

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


                                       15
<PAGE>


Properties (Continued)

     Depreciation   of  buildings   and   leaseholds   is  provided   using  the
straight-line  method  over the  estimated  useful  lives or lease  terms of the
properties. Improvements for tenants are amortized on a straight-line basis over
the terms of the related tenant leases.

Share-based Compensation Plans
The Company uses the intrinsic value method to account for share-based  employee
compensation  plans.  Under this method,  compensation  cost is  recognized  for
awards of shares to  employees  only if the quoted  market price of the share at
the grant date (or other  measurement date, if later) is greater than the amount
the employee must pay to acquire the share. Information concerning the pro forma
effects on net earnings  and net earnings per share of using a fair  value-based
method to account for share-based  employee  compensation plans, rather than the
intrinsic value method, is provided in note L.

Income Taxes
The Company has elected to qualify, and intends to continue to qualify as a REIT
pursuant to the Internal  Revenue Code Sections 856 through 860, as amended.  In
general,  under such Code provisions a trust which,  in any taxable year,  meets
certain  requirements  and  distributes to its  shareholders at least 95% of its
REIT taxable  income will not be subject to Federal  income tax to the extent of
the income which it distributes.

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

Financial Instruments
Fair values of financial  instruments  approximate  their carrying values in the
financial statements,  except for mortgages payable and convertible subordinated
debentures  for which  fair value  information  is  presented  in notes D and J,
respectively.  The fair values of this debt at December 31, 1998 and 1997,  were
determined based on quoted market prices for publicly traded debt and discounted
estimated  future  payments to be made for other debt.  The discount  rates used
approximate  the rates currently  offered for borrowings with similar  remaining
maturities.

B.  Portfolio Acquisition
On July 1, 1997, the Company  acquired a portfolio of nine shopping  centers and
one medical  office  building  in the  Baltimore  metropolitan  area from family
members  and  affiliates  of the  Pechter  family  (AJHP@).  At  closing  of the
transaction (AJHP  Acquisition@),  the Company formed the Operating  Partnership
and members of JHP were admitted as limited  partners.  The Company  assigned to
the Operating Partnership its beneficial interest in the properties owned by the
Company  and its  subsidiaries  in  exchange  for a number of Units equal to the
number of outstanding common shares of beneficial  interest of the Company.  For
the JHP  properties,  the  Operating  Partnership  issued to the  members of JHP
3,235,000  Units.  The acquisition was accounted for using the purchase  method.
The  aggregate  fair  market  value of the  assets  acquired  was  approximately
$120,000,000,  including the assumption of existing mortgage indebtedness with a
fair value of approximately $84,000,000.

     The  consolidated  statement of operations  for the year ended December 31,
1997,  includes  revenues and expenses  related to JHP properties  only from the
date of acquisition.  The Company=s unaudited pro forma consolidated  results of
operations  for the  years  ended  December  31,  1997 and  1996,  assuming  the
acquisition  occurred at the beginning of each period, are summarized as follows
(in thousands, except per share data):

                                    1997               1996
---------------------------------------------------------------
Revenues                         $ 46,325             45,559
Net earnings                       6,728              3,474
Earnings per share                  0.71               0.56
---------------------------------------------------------------

     The  unaudited  pro forma  revenues and earnings  summarized  above are not
necessarily   indicative  of  the  results  that  would  have  occurred  if  the
acquisition had been consummated at the beginning of each period.


C. Operating Properties
Operating properties consist of the following:

                                                            December 31,


                                                     1998              1997
--------------------------------------------------------------------------------
Land                                             $  67,010,229        60,791,781
Land improvements                                   31,383,623        32,857,818
Buildings                                          208,062,140       172,685,206
Improvements for tenants                            13,811,972        13,200,649
Development costs on completed projects              8,289,484         9,486,625
Furnitures, fixtures and equipment                   2,662,261         2,374,956
Deferred leasing costs                              16,701,392        15,490,325
                                               ---------------------------------
                                                   347,921,101       306,887,360
Less accumulated depreciation and amortization      50,540,094        42,781,532
                                               ---------------------------------
                                                 $ 297,381,007       264,105,828
                                               ---------------------------------


                                       16
<PAGE>


D. Properties and Related Accumulated Depreciation and Amortization and Debt
A summary of the Company=s  properties and related mortgages payable at December
31, 1998, follows:


<TABLE>
<CAPTION>

                                                                                                    Accumulated
                                                                        Cost of                     Depreciation
                                        Mortgages       Initial       Subsequent        Total           and
Classification                           Payable          Cost       Improvements        Cost       Amortization     Net Cost
---------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                 <C>            <C>            <C>             <C>           <C>

Shopping centers                         123,144,893    268,003,596      63,585,753    331,589,349     45,652,407    285,936,942
Bowling centers                                           2,200,106          71,706      2,271,812      1,166,073      1,105,739
Office buildings                           2,256,957      9,439,113       1,033,809     10,472,922      2,350,434      8,122,488
Other rental properties                                   2,040,071         779,158      2,819,229        879,891      1,939,338
Other property                                              681,313          86,476        767,789        491,289        276,500
                                    ---------------------------------------------------------------------------------------------
Operating properties                     125,401,850    282,364,199      65,556,902    347,921,101     50,540,094    297,381,007
Development operations                                   11,281,252                     11,281,252                    11,281,252
Property held for development or sale                     5,422,705                     -5,422,705                     5,422,705
                                    ---------------------------------------------------------------------------------------------
                                    ---------------------------------------------------------------------------------------------
                                         125,401,850    299,068,156      65,556,902    364,625,058     50,540,094    314,084,964
                                    ---------------------------------------------------------------------------------------------
</TABLE>



     Mortgages  payable at December 31, 1998 bear interest at a weighted average
effective  rate of 8.74% and  mature in  installments  through  2019.  Aggregate
annual principal payments  applicable to mortgages payable at December 31, 1998,
are:

1999             $     13,899,710
2000                   10,299,554
2001                    3,624,978
2002                   19,951,697
2003                   19,856,047
Thereafter             57,769,864
----------------------------------
----------------------------------
Total             $   125,401,850
----------------------------------

     At  December  31, 1998 and 1997,  the  estimated  fair values of  mortgages
payable were $131,225,000 and $122,038,000,  respectively. The construction loan
payable at December 31, 1998 and 1997 related to a property on which development
was completed in 1998. The loan bears interest at 8% and is due in June 2001.

E. Development Operations
Development operations consist of the following:

                                            December 31,

                                      1998                    1997
---------------------------------------------------------------------
Land                               $ 3,144,000             4,231,832
Construction in progress             6,286,980            14,066,126
Preconstruction costs                1,850,272               514,368
                                -------------------------------------
                                   $ 1,281,252            18,812,326
                                -------------------------------------

     Development  operations are transferred to operating  property costs when a
project is completed,  at which time  depreciation and  amortization  commences.
Construction   period  interest  cost  capitalized  during  1998  and  1997  was
approximately $873,000 and $445,000, respectively.

F. Notes and Accounts Receivable
The Company performs credit  evaluations of prospective new tenants and requires
security deposits where appropriate.  Tenants'  compliance with the terms of the
leases  is  monitored  closely  and  the  allowance  for  doubtful  accounts  is
established  based  on an  analysis  of the  risk of loss on  specific  tenants,
historical trends, and other relevant information.  Management believes adequate
provision has been made for the Company=s credit risk for all receivables.



                                       17


<PAGE>





G. Deferred Financing Costs
Deferred financing costs consist of the following:
                                                          December 31,

                                                    1998                 1997
--------------------------------------------------------------------------------
Costs related to subordinated debentures         $  711,256              893,571
Costs related to line of credit                     411,538              328,825
Costs related to operating properties' debt       1,626,416            1,798,961
                                               ---------------------------------
                                                  2,749,210            3,021,357
Less accumulated amortization                     1,590,604            1,848,887
                                               ---------------------------------
                                                 $1,158,606            1,172,470
                                               ---------------------------------


H. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:

                                                          December 31,

                                                    1998                 1997
--------------------------------------------------------------------------------
Trade accounts payable                           $ 4,077,756           3,333,177
Retainage on construction in progress                352,069             780,024
Accrued interest on subordinated debentures          309,820             389,237
Other accrued expenses                             1,566,826           1,218,655
                                               ---------------------------------
                                                 $ 6,306,471           5,721,093
                                               ---------------------------------


I. Notes Payable
Notes payable consist of line of credit borrowings of $18,400,000 and $3,400,000
at December 31, 1998 and 1997,  respectively.  The Company has an agreement with
its primary bank that  provides for a  $40,000,000  secured line of credit.  The
agreement  provides that as long as the Company is in  compliance  with all loan
covenants,  the loan maturity date, which at December 31, 1998, was December 31,
2001, will be extended one year  automatically  each year.  Under the agreement,
the Bank must give the Company two years  notice  should it decide to  terminate
the loan.  Availability  under the  agreement  is  determined  by the  amount of
collateral provided. At December 31,1998,  $40,000,000 was fully collateralized.
The line bears interest at the prime rate (7.75% at December 31,1998).  However,
the  Company  has the  option  to fix the rate at LIBOR  plus  1.125%  for fixed
periods  from three to nine  months.  A stand-by fee is required by the bank for
any unused portion of the line. The agreement  contains  covenants which provide
for the  maintenance  of specified debt service ratios and minimum levels of net
worth, and other  requirements,  among which is the requirement that the Company
maintains its status as a REIT.

     The  Company has  received a  commitment  letter  from its primary  bank to
increase  its line of credit from  $40,000,000  to  $75,000,000.  The new credit
facility  will be  unsecured  and is subject to  agreement  on final  terms.  

     At December 31, 1998,  the unused line of credit  available to the Company,
subject to compliance  with all terms and conditions of the agreement and net of
outstanding letters of credit of $468,235, was $21,131,765. The maximum level of
borrowings under the line of credit was $19,800,000, $21,300,000 and $21,500,000
in 1998,  1997 and 1996,  respectively.  The average  amounts of borrowings were
approximately  $14,236,000,  $13,191,000 and $11,710,000,  with weighted average
interest  rates  approximating  6.8%,  7.1% and  7.1%,  in 1998,  1997 and 1996,
respectively.

J. Convertible Subordinated Debentures
Effective  September 11, 1993,  the Company  issued  $60,000,000  of convertible
subordinated  debentures  at  7.625%  scheduled  to mature  in  September  2003.
Interest on the debentures is paid  semi-annually  on March 15 and September 15.
The debentures are convertible, unless previously redeemed, at any time prior to
maturity into common shares of beneficial  interest of the Company at $10.50 per
share,  subject to certain adjustments.  In 1998,  $3,571,000 in debentures were
converted to 340,080 common shares of beneficial interest. In 1997,  $29,693,000
in debentures were converted to 2,827,838 common shares of beneficial  interest.
In 1996,  $12,785,000 in debentures were converted to 1,217,610 common shares of
beneficial  interest.  The balance of the  debentures,  at December 31, 1998, of
$13,931,000,  if fully converted,  would produce an additional 1,326,762 shares.
The  debentures  are  redeemable  by the  Company  at any  time  at  100% of the
principal  amount thereof,  together with accrued  interest.  The debentures are
subordinate  to all  mortgages  payable.  At  December  31,  1998 and 1997,  the
estimated fair values of convertible  subordinated  debentures were  $16,336,000
and $24,482,000, respectively.


K.  Income Taxes
As discussed  in Note A, the Company  plans to maintain its status as a REIT and
be taxed  under  Sections  856-860  of the  Internal  Revenue  Code of 1986,  as
amended.  Accordingly,  no provision has been made for Federal income taxes.  At
December 31, 1998, the income tax bases of the Company=s  assets and liabilities
were approximately $237,000,000 and $173,000,000, respectively.




                                       18


<PAGE>





L. Shareholders' Equity

Preferred Shares
At its  inception on September 11, 1993,  MART  authorized  2,000,000  preferred
shares of beneficial  interest at a par value of $.01 per share. At December 31,
1998, none of these shares were issued and outstanding.

Share-Based Compensation Plans
The Company has  established  a 1993 Omnibus  share plan and a 1995 share option
plan  (APlans@)  under which  trustees,  officers and  employees  may be granted
awards of share options,  share appreciation  rights,  performance shares and/or
restricted shares. The purpose of the Plans is to provide equity-based incentive
compensation  based on long-term  appreciation  in value of MART's shares and to
promote the interests of the Company and its shareholders by encouraging greater
management  ownership of the Company's shares.  At December 31, 1998,  1,488,672
shares were reserved for future issuance under the Plans.  Share options granted
generally  vest  over  a  three-year  period,  subject  to  certain  conditions,
typically  have an exercise price equal to the market price at the grant date or
the date that they vest and have a maximum  term of ten years.  The  Company has
not granted any share  appreciation  rights or  performance  shares.  Changes in
options outstanding under the Plans are summarized as follows:
<TABLE>
<CAPTION>

                                                1998                    1997                   1996
--------------------------------------------------------------------------------------------------------
                                              Weighted                Weighted               Weighted
                                               average                Average                 average
                                              exercise                Exercise               exercise
                                  Options       price      Options     Price      Options      price
--------------------------------------------------------------------------------------------------------
<S>                              <C>           <C>       <C>          <C>      <C>           <C> 

Balance at beginning of year      570,854      $ 11.58    395,632     $ 10.19    395,632     $ 10.26
Options granted                         -            -    209,000       13.25         -          -
Options exercised                  (2,354)        9.97    (13,974)       9.97         -          -
Options canceled                  (13,967)       10.67    (19,804)      10.08         -          -
              -                -------------------------------------------------------------------------
Balance at end of year            554,533      $ 11.61    570,854     $ 11.58    395,632     $ 10.19
Options exercisable               514,490      $ 11.49    444,159     $ 11.04    348,532     $ 10.19
                               -------------------------------------------------------------------------
</TABLE>

     Information about options outstanding at December 31, 1998 is summarized as
follows:

Exercise price   Options    Remaining life     Options
  Per share    outstanding     (years)       Exercisable
----------------------------------------------------------
    $ 10.50    226,333           5.0              226,333
    $  8.94     36,600           6.8               36,600
    $  9.75     38,400           7.8               38,400
    $ 11.50     10,000           8.5                6,667
    $ 13.38    239,200           8.8              202,490
    $ 11.38      4,000           8.4                4,000
              --------------------------------------------
              --------------------------------------------
               554,533                            514,490
              --------------------------------------------


     The per share  weighted-average  fair values of options granted during 1997
was $.92. No options were granted in 1998 or 1996. This fair value was estimated
on the dates of each grant using the Black-Scholes option-pricing model with the
following assumptions:



-----------------------------------
Risk-free interest rate      5.78%
Dividend yield               8.47%
Volatility factor           18.43%
Life (years)                 3.00
-----------------------------------





                                       19


<PAGE>






Share Based Compensation Plans (Continued)

     The option  prices were equal to the market  prices at the date of grant or
vesting  date  for all of the  options  granted  in 1997  and,  accordingly,  no
compensation  cost has been recognized for options in the financial  statements.
If the Company had applied a fair value-based  method to recognize  compensation
cost for the stock options  issued after 1994, net earnings and net earnings per
common share would have been reduced as indicated below:

                                         Years ended December 31,

                                    1998            1997            1996
------------------------------------------------------------------------------
Net earnings:
  As reported                   $   12,352,877       6,592,338      3,508,709
  Pro forma                         12,288,172       6,505,220      3,479,036
Net earnings per common share:
  Basic
      As reported                         0.85            0.70           0.56
      Pro forma                           0.84            0.69           0.56
  Diluted
      As reported                         0.84            0.70           0.56
      Pro forma                           0.84            0.69           0.56
------------------------------------------------------------------------------

Restricted Share Plan In 1997, the Executive Compensation Committee recommended,
and the Board of Trustees  approved,  a  Restricted  Share Plan.  The  Executive
Compensation  Committee  believes  that the  grant of  restricted  share  awards
provides a long-term  incentive to persons who  contribute to the growth of MART
and establishes a direct link between compensation and shareholder return.

     In 1997, 400,000 restricted shares were made available for the plan. Awards
totaling  1,572  shares were  granted in 1998 with a market  value of $13.69 per
share.  Awards totaling  368,333 shares were granted in 1997 with a market value
of $13.38 per share.  A total of 61,667  shares vested on January 1, 1998 and an
additional  524 shares  vested on April 1,  1998.  These  shares are  subject to
forfeiture  restrictions which lapse at defined annual rates to 2008, subject to
the recipients'  continued  employment with the Company.  The Company recognizes
the  amortization of the fair value of the shares awarded as compensation  costs
over the terms of the awards.

Share Repurchase Plan
At  December  31,  1998,   the  Company  was  authorized  to  repurchase  up  to
approximately 410,000 common shares of beneficial interest pursuant to its share
repurchase plan.  During 1998 and 1996, the Company  purchased 313,200 and 8,618
shares,  respectively,  at an  average  per  share  cost of  $12.23  and  $9.45,
respectively.


M. Commitments
Minimum rental  commitments under operating land leases in effect as of December
31, 1998 are as follows:

1999            $          651,000
2000                       651,000
2001                       651,000
2002                       651,000
2003                       651,000
Thereafter              24,375,000
----------------------------------
----------------------------------
Total            $      27,630,000
----------------------------------

     Certain  of the leases  contain  renewal or  purchase  options.  All of the
leases require the Company to pay real estate taxes.  Total annual minimum lease
payments amounted to $781,000 in 1998, $675,000 in 1997 and $601,000 in 1996.

N. Leases
The Company's  shopping  centers and other  commercial  properties are generally
leased on a long-term  basis.  All leases are  classified  as operating  leases.
Future minimum lease payments receivable under noncancelable operating leases in
effect as of December 31, 1998 are as follows:

1999             $ 39,683,000
2000               36,125,000
2001               32,902,000
2002               29,732,000
2003               26,396,000
Thereafter        218,099,000
-------------------------------
-------------------------------
Total           $ 382,937,000
-------------------------------




N. Leases (Continued)

     The minimum future lease payments do not include  contingent  rentals which
may be paid under certain leases on the basis of a percentage of sales in excess
of  stipulated  amounts.  Contingent  rentals  amounted to  $1,435,000  in 1998,
$816,000 in 1997 and  $1,012,000 in 1996. On a prospective  basis,  no more than
3.3% of annual  rental  revenue is derived  from any one  tenant,  except  Royal
Ahold.  Royal Ahold minimum lease payments  represent  approximately 11% for the
years 1999 through 2003 and 32%  thereafter of the total minimum lease  payments
above.  The  percentages  of total minimum lease  payments in the years 1999 and
beyond are high due to the fact that Royal Ahold leases have long initial  lease
terms  compared with other major tenants who use renewal  option terms.  Renewal
option minimum lease payments are not included in the totals above.


O. Segment Information

In 1998, the Company  adopted  Statement of Financial  Accounting  Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
Statement  establishes  standards  for  reporting  financial  information  about
operating  segments in interim and annual  financial  reports and provides for a
"management  approach" to identifying  the  reportable  segments in place of the
industry segment approach previously used.

     The Company's only  reportable  segment is Shopping  Centers.  This segment
includes the operation  and  management  of shopping  centers,  and revenues are
derived  primarily  from rents and  services to tenants.  These  properties  are
managed  separately  from other property types owned by the Company because they
require  different  operating  strategies  and  management  expertise.  Fees are
charged to shopping centers,  based on a percentage of revenues  collected,  for
services provided by personnel in other segments. 

     The  accounting  policies  of the  segments  are the  same as  those of the
Company described in Note A. Segment operating results are measured and assessed
based  on  a  performance  measure  known  as  Funds  From  Operations  ("FFO"),
determined on a fully diluted basis (i.e.,  assuming  conversion to common stock
of  all  convertible  securities).  The  National  Association  of  Real  Estate
Investment  Trusts  defines  FFO as net  income  (computed  in  accordance  with
generally  accepted  accounting  principles),  excluding  cumulative  effects of
changes in accounting  principles,  extraordinary  or unusual items and gains or
losses from debt  restructurings and sales of properties,  plus depreciation and
amortization,  and  after  adjustments  for  minority  interests  and to  record
unconsolidated  partnerships  and joint ventures on the same basis. FFO is not a
measure of operating results or cash flows from operating activities as measured
by generally accepted accounting  principles,  is not necessarily  indicative of
cash available to fund cash needs and should not be considered an alternative to
cash flows as a measure of liquidity.

     Operating results for the segments are summarized as follows:



<TABLE>
<CAPTION>


                                 1998                                   1997                                    1996
                        ------------------------------------------------------------------------------------------------------------
                               Shopping      All                  Shopping        All                Shopping        All
                                Centers     Other      Total       Centers       Other    Total      Centers       Other    Total
                        ------------------------------------------------------------------------------------------------------------
<S>                         <C>          <C>         <C>          <C>         <C>    

Revenues                    $47,402,078   2,135,052  49,537,130   34,938,202  4,214,018 39,152,220  27,387,982  5,018,318 32,406,300
Expenses, exclusive of
  Depreciation and
  Amortization of property
  And improvements          23,108,616      924,977  24,033,593   19,628,133  1,732,039 21,360,172  16,719,287  1,995,121 18,714,408
Minority interest              372,646       13,745     386,391      269,758      9,228    278,986     494,223     19,714    513,937
                        ------------------------------------------------------------------------------------------------------------
FFO-diluted                $23,920,816    1,196,330  25,117,146   15,040,311  2,472,751 17,513,062  10,174,472  3,003,483 13,177,955
                        ------------------------------------------------------------------------------------------------------------

</TABLE>
     Interest  expense on  subordinated  debentures  and  minority  interest  in
earnings in the Operating  Partnership  are not considered in the calculation of
FFO- diluted.



                                       20


<PAGE>







O. Segment Information (Continued)
A reconciliation  of FFO - diluted reported above to earnings from operations in
the financial statements is summarized as follows:
<TABLE>
<CAPTION>

                                                                    1998          1997          1996
                                                                ------------------------------------------
<S>                                                             <C>            <C>           <C>  

Operating results:
     FFO - diluted                                               $25,117,146    17,513,062    13,177,955
     Depreciation and amortization of property and improvements   (8,813,251)   (6,954,803)   (5,413,737)
     Subordinated debentures interest expense                     (1,206,760)   (2,616,044)   (4,556,108)
     Operating Partnership minority interest expense              (2,707,051)   (1,139,840)                  -
                                                                -----------------------------------------
     Earnings from operations in financial statements            $12,390,084     6,802,375     3,208,110
                                                                -----------------------------------------

</TABLE>



     Substantially,  all assets of the Company,  with the  exception of property
held for development or sale and cash and cash equivalents, are allocable to the
Shopping  Center  segment.  Additions to  long-lived  assets of the segments are
summarized as follows:
<TABLE>
<CAPTION>

                                                                    1998          1997          1996
                                                            ----------------------------------------------
<S>                                                         <C>                <C>              <C>    
Shopping Centers:
     Acquisitions                                            $     26,417,356   131,792,211             -
     Development operations                                         6,738,109    15,283,225     4,649,732
     Improvements for tenants and other                             5,729,360     2,087,357     1,138,459
                                                            ----------------------------------------------
                                                                   38,884,825   149,162,793     5,788,191
All others, including acquisitions of $4,115,752 in 1997               76,022     5,109,227       623,581
                                                            ----------------------------------------------
                                                            ----------------------------------------------
     Total                                                   $     38,960,847   154,272,020     6,411,772
                                                            ----------------------------------------------
</TABLE>

P. Other Revenues
Other revenues consists of the following:

<TABLE>
<CAPTION>
                                                                Years ended December 31,

                                                       1998                      1997                 1996
-----------------------------------------------------------------------------------------------------------
<S>                                              <C>                         <C>                   <C>    

Interest and dividends                             $       195,693              321,185             484,428
Miscellaneous                                              245,598              146,453             225,149
                                                   --------------------------------------------------------
                                                   $       441,291              467,638             709,577
                                                   --------------------------------------------------------

</TABLE>



                                       21


<PAGE>







Q. Gain (Loss) on Properties
Gain (Loss) on properties consists of the following:
<TABLE>
<CAPTION>

                                                                                         Years ended December 31,


----------------------------------------------------------------------------------------------------------------------------
                                                                     1998                    1997                   1996
----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                       <C>                      <C>

Gain (loss) on sales of operating properties                   $    (11,584)             1,047,727                720,916
Gain (loss) on sales of properties held for sale, net                 7,361                122,109                293,583
Allowance for loss on operating properties                                -             (1,148,000)              (713,900)
                                                              --------------------------------------------------------------
                                                               $     (4,223)                16,836                300,599
                                                              --------------------------------------------------------------
</TABLE>

     The gain (loss) on sales of operating properties includes minority interest
of $75,173 for the year ended  December  31,  1997.  The gain (loss) on sales of
operating  properties and gain (loss) on sales of properties held for sale, net,
include  minority  interest of $21,194 and $96,049,  respectively,  for the year
ended December 31, 1996.


R. Net Earnings Per Share
The following table sets forth information  relating to the computation of basic
and diluted earnings per share:
<TABLE>
<CAPTION>

                                                                                          Years Ended December 31,

                                                                                        1998          1997          1996
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                  <C>           <C>    

Numerator:
   Earnings before extraordinary loss                                               $  12,385,861      6,819,211    3,508,709
      Dividends on unvested restricted share awards                                      (310,529)       (76,667)           -
                                                                                    -----------------------------------------

   Numerator for basic earnings per share--earnings available to common shareholders   12,075,332      6,742,544    3,508,709
      Adjustment to dividends on restricted share awards                                        -            537            -
      Interest on subordinated debentures                                               1,206,760             -             -
                                                                                    -----------------------------------------
   Numerator for diluted earnings per share--earnings available to common shareholders 13,282,092      6,743,081    3,508,709
                                                                                    -----------------------------------------

Denominator:(1)
   Denominator for basic earnings per share--weighted average shares outstanding       14,240,533      9,308,682    6,211,092
   Effect of dilutive securities:
      Subordinated debentures                                                           1,473,257             -             -
      Unvested portion of restricted share awards and share options                        64,937         51,884            -
                                                                                    -----------------------------------------
   Denominator for diluted earnings per share-adjusted weighted average shares         15,778,727      9,360,566    6,211,092
                                                                                    -----------------------------------------
</TABLE>

     (1)  Effects of  potentially  dilutive  securities  are  presented  only in
periods in which they are  dilutive.  At  December  31,  1998,  the  convertible
subordinated  debentures,  if converted,  would produce an additional  1,326,762
shares and the Units,  if  exchanged,  would  produce  an  additional  3,175,771
shares.

ITEM 9 -  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.





                                       22


<PAGE>






PART III

ITEM 10 - TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
The  information  with respect to the identity  and business  experience  of the
trustees of MART and their  remuneration,  in the definitive proxy statement (to
be filed pursuant to Regulation 14A) with respect to the election of trustees at
the 1999 annual meeting of shareholders, is incorporated herein by reference.

     The Executive Officers of MART are as follows:


Name           Age  Position and Business Experience
--------------------------------------------------------------------------------
LeRoy E.       73   Chairman of the Board of MART since September 1993.
Hoffberger

F. Patrick     51   President and CEO of MART since September 1993.
Hughes

Paul F.        45   Executive Vice President of MART since March 1996.
Robinson            Vice President and Secretary / General Counsel of MART since
                    September 1993.

Eugene T.      50   Treasurer of MART since September 1993.
Grady

Janice C.      43   Controller of MART since January 1998.
Robinson            Controller  and Vice President of Operations of O'Conor Real
                    Estate  Management  from  January  1995  to  December  1997.
                    Accounting Manager with The Rouse Company  from January 1981
                    to September 1994.




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


ITEM 11 - EXECUTIVE COMPENSATION
The  information  required by this item is  incorporated  by reference  from the
Registrant's Proxy Statement to be filed with respect to the 1999 annual meeting
of shareholders.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The  information  required by this item is  incorporated  by reference  from the
Registrant's Proxy Statement to be filed with respect to the 1999 annual meeting
of shareholders.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The  information  required by this item is  incorporated  by reference  from the
Registrant's Proxy Statement to be filed with respect to the 1999 annual meeting
of shareholders.

PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1.  Financial Statements
The  following   financial   statements   of   Mid-Atlantic   Realty  Trust  and
     Subsidiaries are included in Part II Item 8: Independent auditor's report
     Consolidated balance sheets as of December 31, 1998 and 1997
     Consolidated  statements  of  operations  for the years ended  December 31,
     1998,1997 and 1996 Consolidated  statements of shareholders' equity for the
     years ended  December 31, 1998,  1997 and 1996  Consolidated  statements of
     cash flows for the years ended  December 31,  1998,  1997 and 1996 Notes to
     consolidated financial statements

(a) 2.  Financial Statement Schedule
Schedule III - Real estate and accumulated depreciation and amortization
All  other  schedules  are  omitted  because  they  are not  applicable,  or not
required,  or because the required  information is included in the  consolidated
financial statements or notes thereto.


                                       23
<PAGE>


(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  the  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
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.  
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   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.
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(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.
10(k)  Mid-Atlantic  Realty  Trust  Non-Employee  Trustee  Deferred Compensation
       Plan, adopted  on   November   14,   1997. 
12     Computation  of Ratio of  Earnings  to Fixed Charges.*   
21     Subsidiaries   of  the  Registrant.*  
23     Consent  of  KPMG  LLP.*
27     Financial Data Schedule.*
99.1   Real Estate Investment Risks.*

*Filed herewith

(b) Reports on Form 8-K
None.


























                                       24

<PAGE>

SIGNATURES


Pursuant to the  requirements  of section 13 of the  Securities  Exchange Act of
1934,  the  Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                               MID-ATLANTIC REALTY TRUST

Date:   3/18/99                                /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  capacities  and on the
dates indicated:

Date:  3/18/99                                /s/ LeRoy E. Hoffberger
     ----------------------------             ----------------------------------
                                              LeRoy E. Hoffberger, Chairman of
                                              the Board

Date:  3/18/99                                /s/ F. Patrick Hughes
     ----------------------------             ----------------------------------
                                              F. Patrick Hughes, President and
                                              Chief Executive Officer

Date:  3/18/99                                /s/ Janice C. Robinson
     ----------------------------             ----------------------------------
                                              Janice C. Robinson, Controller

Date:  3/18/99                                /s/ Eugene T. Grady
     ----------------------------             ----------------------------------
                                              Eugene T. Grady, Treasurer

Date:  3/18/99                                /s/ Robert A. Frank
     ----------------------------             ----------------------------------
                                              Robert A. Frank, Trustee

Date:  3/18/99                                /s/ Marc P. Blum
     ----------------------------             ----------------------------------
                                              Marc P. Blum, Trustee

Date:  3/18/99                                /s/ M. Ronald Lipman
     ----------------------------             ----------------------------------
                                              M. Ronald Lipman, Trustee

Date:  3/18/99                                /s/ Jack H. Pechter
     ----------------------------             ----------------------------------
                                              Jack H. Pechter, Trustee

Date:  3/18/99                                /s/ Daniel S. Stone 
     ----------------------------             ----------------------------------
                                              Daniel S. Stone, Trustee

Date:  3/18/99                                /s/ David F. Benson
     ----------------------------             ----------------------------------
                                              David F. Benson, Trustee








                                       25



<PAGE>


MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>

                                                                      -------------------------------------------------

                                           ----------------------------
                                                 Initial cost to Company     Cost capitalized subsequent to acquisition
                                           ----------------------------------------------------------------------------
    December 31, 1998
<S>                           <C>             <C>          <C>         <C>              <C>          <C>

                             ----------------
                                Mortgages                Buildings and                      Carrying Costs
                                                                                   ---------------------------------
Description                      Payable        Land     Improvements  Improvements      Land        Improvements
--------------------------------------------------------------------------------------------------------------------
Shopping Centers
Arundel Plaza                 $                1,695,566       530,951        8,755
--------------------------------------------------------------------------------------------------------------------
Brandywine Commons                                          12,164,821       36,427
--------------------------------------------------------------------------------------------------------------------
Burke Town Plaza                                             2,936,134    1,820,256
--------------------------------------------------------------------------------------------------------------------
Club Centre                        5,447,673   2,029,919     3,600,663       37,400
--------------------------------------------------------------------------------------------------------------------
Colonie Plaza                                  1,137,567     7,755,095      715,798
--------------------------------------------------------------------------------------------------------------------
Columbia Plaza                                   999,739     6,887,711    3,962,319         203,353
--------------------------------------------------------------------------------------------------------------------
Del Alba                           7,123,969   2,270,000     7,882,217       13,654
--------------------------------------------------------------------------------------------------------------------
Enchanted Forest Shopping Center  11,811,026   3,873,246    15,314,736       96,267
--------------------------------------------------------------------------------------------------------------------
Glen Burnie Village                            3,081,553     4,598,794       57,358
--------------------------------------------------------------------------------------------------------------------
Harford Mall                      19,193,787     599,031     8,457,331   20,620,412        (12,954)  
--------------------------------------------------------------------------------------------------------------------
Ingleside Shopping Center                      3,023,230    11,817,212       27,854
--------------------------------------------------------------------------------------------------------------------
Little Glen                                                                   7,145
--------------------------------------------------------------------------------------------------------------------
Lutherville Station                                    -     4,031,809   14,788,180
--------------------------------------------------------------------------------------------------------------------
Milford Commons                                  673,306     3,789,682       21,464
--------------------------------------------------------------------------------------------------------------------
North East                                                                5,440,538       1,087,832
--------------------------------------------------------------------------------------------------------------------
Owings Mills                      12,682,244   4,381,666     9,547,434      138,244
--------------------------------------------------------------------------------------------------------------------
Patriots Plaza                                               1,709,846      615,942
--------------------------------------------------------------------------------------------------------------------
Perry Hall Square                  6,000,000   3,538,825     6,604,216      271,876
--------------------------------------------------------------------------------------------------------------------
Radcliffe Center                              11,205,665     5,663,480       12,205
--------------------------------------------------------------------------------------------------------------------
Rolling Road Plaza                               338,791     1,632,268    2,084,030                       (837,931)
--------------------------------------------------------------------------------------------------------------------
Rosedale Plaza                     1,736,346   1,024,712     3,217,926      841,403
--------------------------------------------------------------------------------------------------------------------
Shawan Plaza                      14,136,711   2,055,694    13,930,839       44,001
--------------------------------------------------------------------------------------------------------------------
Shoppes at Easton                  7,459,705   2,600,000    10,379,069       41,974
--------------------------------------------------------------------------------------------------------------------
Skyline Village                    5,229,784     555,295     6,240,003    1,088,471
--------------------------------------------------------------------------------------------------------------------
Smoketown Plaza                                  516,312    10,095,077      709,636
--------------------------------------------------------------------------------------------------------------------
Spotsylvania Crossing                          1,544,314     6,600,616      361,754
--------------------------------------------------------------------------------------------------------------------
Sudley Towne Plaza                               789,881     3,736,837      483,603
--------------------------------------------------------------------------------------------------------------------
Timonium Crossing                  5,598,319   4,276,779     4,792,548       73,467
--------------------------------------------------------------------------------------------------------------------
Timonium Shopping Center           9,558,762   6,252,248    12,090,955      472,782
--------------------------------------------------------------------------------------------------------------------
Wayne Heights                                  1,546,720     3,837,159       66,945
--------------------------------------------------------------------------------------------------------------------
Wayne Avenue Plaza                 8,709,041   1,650,300     9,230,960      814,598
--------------------------------------------------------------------------------------------------------------------
Wilkens Beltway Plaza                                  -     3,601,891    1,142,666         475,481       2,923,200
--------------------------------------------------------------------------------------------------------------------
York Road Plaza                    8,457,526   1,562,382     2,102,575    2,829,348
--------------------------------------------------------------------------------------------------------------------
                                 123,144,893  63,222,741   204,780,855   59,746,772       1,753,712       2,085,269
                             ---------------------------------------------------------------------------------------
Office Buildings

--------------------------------------------------------------------------------------------------------------------
Orchard Square                    $2,256,957   1,160,666     2,959,390        8,080
--------------------------------------------------------------------------------------------------------------------
Patriots Plaza                                               1,522,943      248,581
--------------------------------------------------------------------------------------------------------------------
Wilkens Office II                                            1,644,370      272,797
--------------------------------------------------------------------------------------------------------------------
Wilkens Office I                                             1,383,102      368,560
--------------------------------------------------------------------------------------------------------------------
Wilkens Office III                                             768,642      135,791
                             ---------------------------------------------------------------------------------------
                                   2,256,957   1,160,666     8,278,447    1,033,809               -               -
                             ---------------------------------------------------------------------------------------
Bowling Centers
Clinton                                                        457,764       63,297
--------------------------------------------------------------------------------------------------------------------
Freestate                                        180,025       740,082        2,719
--------------------------------------------------------------------------------------------------------------------
Waldorf                                          243,139       579,096        5,690
                             ---------------------------------------------------------------------------------------
                                           -     423,164     1,776,942       71,706               -               -
                             ---------------------------------------------------------------------------------------
Other Rental Properties
Business Center                                  395,536     1,190,692      100,306
--------------------------------------------------------------------------------------------------------------------
Southwest                                                      283,039      628,792          45,149
--------------------------------------------------------------------------------------------------------------------
Waldorf Firestone                                  9,261       161,543        4,911
--------------------------------------------------------------------------------------------------------------------
                                           -     404,797     1,635,274      734,009          45,149               -
                             ---------------------------------------------------------------------------------------

Development Operations                                      11,281,252

Property Held                                  5,422,705

Other Property                                                 681,313       86,476

                             ---------------------------------------------------------------------------------------
                                $125,401,850  70,634,073   228,434,083   61,672,772       1,798,861       2,085,269
                             =======================================================================================

</TABLE>


MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES
Schedule III - Real Estate and Accumulated Depreciation - Continued
<TABLE>
<CAPTION>


                   ---------------------------------------------------------------
                                Amount at which carried at close of period                              Life on which

                                                                                                        depreciation on
                   ---------------------------------------------------------------
   December 31, 1998                                                                                    latest income
                                  Buildings and                      Accumulated    Date of     Date     statement is
Description            Land     Improvements          Total          depreciation Construction Acquired     Computed
-----------------------------------------------------------------------------------------------------------------------
<S>                  <C>          <C>                <C>             <C>          <C>          <C>

Shopping Centers
Arundel Plaza         1,695,566       539,706              2,235,272       11,230              12/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Brandywine Commons                 12,201,248             12,201,248    1,284,815              11/95      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Burke Town Plaza                    4,756,390              4,756,390    2,118,587  7/79-7/82              5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Club Centre           2,029,919     3,638,063              5,667,982      317,630               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Colonie Plaza         1,137,567     8,470,893              9,608,460    2,646,757    12/87                5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Columbia Plaza        1,203,092    10,850,030             12,053,122    2,675,303    6/88                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Del Alba              2,270,000     7,895,871             10,165,871       47,043               9/98      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Enchanted Forest Shopp3,873,246r   15,411,003             19,284,249      804,371               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Glen Burnie Village   3,081,553     4,656,152              7,737,705      243,524               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Harford Mall            586,077    29,077,743             29,663,820   12,383,995    12/73                5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Ingleside Shopping Cen3,023,230    11,845,066             14,868,296      451,539               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Little Glen                             7,145                  7,145          291               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Lutherville Station                18,819,989             18,819,989      921,127              10/93      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Milford Commons         673,306     3,811,146              4,484,452       84,058              12/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
North East            1,087,832     5,440,538              6,528,370       66,293    2/96-                5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Owings Mills          4,381,666     9,685,678             14,067,344      673,002    12/95                5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Patriots Plaza                      2,325,788              2,325,788    1,025,623    6/84                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Perry Hall Square     3,538,825     6,876,092             10,414,917      862,041               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Radcliffe Center     11,205,665     5,675,685             16,881,350      700,218               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------


Rolling Road Plaza      338,791     2,878,367              3,217,158    1,337,242    6/73                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Rosedale Plaza        1,024,712     4,059,329              5,084,041      863,817              10/89      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Shawan Plaza          2,055,694    13,974,840             16,030,534      991,409               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Shoppes at Easton     2,600,000    10,421,043             13,021,043      988,222               9/94      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Skyline Village         555,295     7,328,474              7,883,769    2,283,107    5/88                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Smoketown Plaza         516,312    10,804,713             11,321,025    3,413,246    4/87                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Spotsylvania Crossing 1,544,314     6,962,370              8,506,684    2,256,045    5/87                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Sudley Towne Plaza      789,881     4,220,440              5,010,321    1,540,501    7/84                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Timonium Crossing     4,276,779     4,866,015              9,142,794      268,562               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Timonium Shopping Cent6,252,248    12,563,737             18,815,985      536,710               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Wayne Heights         1,546,720     3,904,104              5,450,824       71,333               1/98      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Wayne Plaza           1,650,300    10,045,558             11,695,858      184,538               2/98      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Wilkens Beltway Plaza   475,481     7,667,757              8,143,238    1,821,220    5/81                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
York Road Plaza       1,562,382     4,931,923              6,494,305    1,779,008              11/85      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
                     64,976,453   266,612,896            331,589,349   45,652,407
                   ---------------------------------------------------------------
Office Buildings
Orchard Square        1,160,666     2,967,470              4,128,136      199,363               7/97      5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Patriots Plaza                      1,771,524              1,771,524      637,612    8/85                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Wilkens Office II                   1,917,167              1,917,167      608,565    1/87                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Wilkens Office I                    1,751,662              1,751,662      672,082    1/85                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Wilkens Office III                    904,433                904,433      232,812    1/91                 5-50 yrs.
                   ---------------------------------------------------------------
                      1,160,666     9,312,256             10,472,922    2,350,434
                   ---------------------------------------------------------------
Bowling Centers
Clinton                               521,061                521,061      292,602    8/71                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Freestate               180,025       742,801                922,826      620,050    3/78                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Waldorf                 243,139       584,786                827,925      253,421    3/79                 5-50 yrs.
                   ---------------------------------------------------------------
                        423,164     1,848,648              2,271,812    1,166,073
                   ---------------------------------------------------------------
Other Rental Properties
Business Center         395,536     1,290,998              1,686,534      299,951    4/90                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Southwest                45,149       911,831                956,980      509,357    4/68                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
Waldorf Firestone         9,261       166,454                175,715       70,583    9/78                 5-50 yrs.
-----------------------------------------------------------------------------------------------------------------------
                        449,946     2,369,283              2,819,229      879,891
                   ---------------------------------------------------------------
Development Operations             11,281,252             11,281,252                 91-98

Property Held         5,422,705                            5,422,705                 7/73-
                                                                                     12/98
Other Property                        767,789                767,789      491,289              9/82-      3-10 yrs.
                                                                                                12/98
----------------------------------------------------------------------------------
                     72,432,934   292,192,124            364,625,058   50,540,094
==================================================================================

</TABLE>

                                       1
<PAGE>


(1) The changes in total cost of properties are as follows:
<TABLE>
<CAPTION>

                                                      Years Ended December 31,

                                             1998                1997               1996
                                     -----------------------------------------------------
<S>                                  <C>                    <C>               <C>    

Balance beginning of year             $   331,259,550        210,258,781       213,822,056
Additions during the year:
     Acquisitions                          26,417,356        136,321,147         3,126,553
     Improvements                           5,672,676          2,697,464         1,498,868
     Development Operations                 6,738,109         15,633,614         4,715,773
                                     -----------------------------------------------------
                                           38,828,141        154,652,225         9,341,194
Deductions during year:
     Allowance for loss                            -          (1,148,000)         (713,900)
     Cost of real estate sold             (5,462,633)        (32,340,056)      (11,965,663)
     Retirements and disposals                     -            (163,400)         (224,906)
                                     -----------------------------------------------------
                                          (5,462,633)        (33,651,456)      (12,904,469)
                                     -----------------------------------------------------
Balance end of year                   $  364,625,058         331,259,550       210,258,781
                                     -----------------------------------------------------

</TABLE>

(2) The changes in accumulated depreciation are as follows:
<TABLE>
<CAPTION>

                                                      Years Ended December 31,

                                                1998              1997               1996
                                      ---------------------------------------------------------
<S>                                    <C>                     <C>               <C>         
Balance beginning of year              $  (42,781,532)         (42,702,472)      (39,430,308)
Depreciation and amortization              (8,813,251)          (6,954,803)       (5,413,737)
Retirements, disposals and sales            1,054,689            6,875,743         2,141,573
                                     ------------------------------------------------------------
Balance end of year                    $  (50,540,094)         (42,781,532)      (42,702,472)
                                     ------------------------------------------------------------

</TABLE>




(3) The  aggregate  basis of  properties  for  Federal  income tax  purposes  is
approximately  $230,500,000  at December  31, 1998.  
(4) See Item 2 for  geographic location of properties.
(5) Freestate includes one bowling center in Illinois.





                                       2


<PAGE>