** **

**FORM10-Q**

**QUARTERLY REPORT UNDERSECTION 13 OR 15 (d) OF**

**THE SECURITIES EXCHANGEACT OF 1934**

** **

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

** **

** **

** **

**(MarkOne)**

**ý QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thequarterly period ended  September 30,2002**

**or**

**o TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thetransition period from                                   to                                   **

** **

**Commissionfile Number 1-12286**

** **

**Mid-Atlantic Realty Trust**

(Exact Name of Registrantas Specified in its Charter)

 

| **Maryland**                                                    |   | **52-1832411**                       |
|-----------------------------------------------------------------|--------|--------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) |   | I.R.S. Employer  Identification No.) |
|                                                            |   |                                 |
|                                                            |   |                                 |
| **170  West Ridgely Road, Suite 210 - Lutherville, Maryland**   |   | **21093**                            |
| (Address of Principal  Executive Offices)                       |   | (Zip Code)                           |

 

| Registrant’s Telephone  Number, Including Area Code |   | **(410)  684-2000** |
|----------------------------------------------------------|--------|---------------------|

 

 

(Former Name, Former Address and Former Fiscal Year, if Changed SinceLast Report)

 

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

 

ý Yes oNo

 

17,802,661 Common Shares were outstanding as of October 18, 2002*.*

 

 

----

 

## **MID-ATLANTIC REALTYTRUST**

**AND SUBSIDIARIES**

 

 

 

 
| **Part I.**  |   | **FINANCIAL INFORMATION**                                                                       |
|--------------|--------|-------------------------------------------------------------------------------------------------|
|         |   |                                                                                            |
| **Item 1.**  |   | **CONSOLIDATED  FINANCIAL STATEMENTS**                                                          |
|         |   |                                                                                            |
|         |   | **CONSOLIDATED BALANCE SHEETS**                                                                 |
|         |   |                                                                                            |
|         |   | **CONSOLIDATED  STATEMENTS OF OPERATIONS**                                                      |
|         |   |                                                                                            |
|         |   | **CONSOLIDATED  STATEMENTS OF CASH FLOWS**                                                      |
|         |   |                                                                                            |
|         |   | **NOTES TO  CONSOLIDATED FINANCIAL STATEMENTS**                                                 |
|         |   |                                                                                            |
| **Item 2.**  |   | **MANAGEMENT’S  DISCUSSION AND ANAYLSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|         |   |                                                                                            |
| **Item  3.** |   | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**                                 |
|         |   |                                                                                            |
| **Item 4.**  |   | **CONTROLS  AND PROCEDURES**                                                                    |
|         |   |                                                                                            |
| **Part II.** |   | **OTHER INFORMATION**                                                                           |
|         |   |                                                                                            |
| **Item 1.**  |   | **LEGAL  PROCEEDINGS**                                                                          |
|         |   |                                                                                            |
| **Item 2.**  |   | **CHANGES IN  SECURITIES AND USE OF PROCEEDS**                                                  |
|         |   |                                                                                            |
| **Item 3.**  |   | **DEFAULTS UPON SENIOR  SECURITIES**                                                            |
|         |   |                                                                                            |
| **Item  4.** |   | **SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS**                                        |
|         |   |                                                                                            |
| **Item 5.**  |   | **OTHER  INFORMATION**                                                                          |
|         |   |                                                                                            |
| **Item 6.**  |   | **EXHIBITS  AND REPORTS ON FORM 8-K**                                                           |

 

 

2

----

 

**MID-ATLANTIC REALTY TRUST ANDSUBSIDIARIES**

**Consolidated Balance Sheets**

 
|                                                                                       |   | **As of**              |            |
|--------------------------------------------------------------------------------------------|--------|------------------------|-----------------|
|                                                                                       |   | **September 30, 2002** |            | **December  31, 2001** |   |
|                                                                                       |   | **(UNAUDITED)**        |            |   |   |
| **ASSETS**                                                                                 |   |                   |            |   |   |
|                                                                                       |   |                   |            |   |   |
| **Properties:**                                                                            |   |                   |            |   |   |
| Operating  properties                                                                      |   | **$**                  | **482,884,067** |   | 441,313,588 |   |
| Less accumulated  depreciation and amortization                                            |   | **88,709,145**         |            | 81,465,520 |   |
|                                                                                       |   | **394,174,922**        |            | 359,848,068 |   |
| Properties in  development                                                                 |   | **12,849,871**         |            | 16,010,962 |   |
| Properties held  for development or sale                                                   |   | **3,288,171**          |            | 3,288,171 |   |
|                                                                                       |   | **410,312,964**        |            | 379,147,201 |   |
|                                                                                       |   |                   |            |   |   |
| Cash and cash  equivalents                                                                 |   | **3,855,816**          |            | 2,602,202 |   |
| Notes and  accounts receivable — tenants and other                                    |   | **3,790,348**          |            | 2,304,973 |   |
| Prepaid expenses  and deposits                                                             |   | **4,385,460**          |            | 3,270,013 |   |
| Deferred  financing costs, net                                                             |   | **2,070,560**          |            | 2,239,174 |   |
|                                                                                       |   | **$**                  | **424,415,148** |   | 389,563,563 |   |
|                                                                                       |   |                   |            |   |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                             |   |                   |            |   |   |
|                                                                                       |   |                   |            |   |   |
| **Liabilities:**                                                                           |   |                   |            |   |   |
| Accounts payable  and accrued expenses                                                     |   | **$**                  | **9,671,154**   |   | 9,269,339 |   |
| Notes payable                                                                              |   | **46,000,000**         |            | 42,500,000 |   |
| Construction  loans payable                                                                |   | **19,035,435**         |            | 24,387,289 |   |
| Mortgages  payable                                                                         |   | **174,325,999**        |            | 170,270,077 |   |
| Convertible  subordinated debentures                                                       |   | **2,734,000**          |            | 4,784,000 |   |
| Deferred income                                                                            |   | **138,385**            |            | 938,596 |   |
|                                                                                       |   | **251,904,973**        |            | 252,149,301 |   |
|                                                                                       |   |                   |            |   |   |
| Minority  interest in consolidated joint ventures                                          |   | **32,482,344**         |            | 32,819,374 |   |
|                                                                                       |   |                   |            |   |   |
| **Shareholders’  equity:**                                                            |   |                   |            |   |   |
| Preferred shares  of beneficial interest, $.01 par value, authorized                       |   |                   |            |   |   |
| 2,000,000  shares, issued and outstanding, none                                            |   | **—**             |            | — |   |
| Common shares of  beneficial interest, $.01 par value, authorized                          |   |                   |            |   |   |
| 100,000,000  shares, issued and outstanding 17,788,852 and 15,103,221 shares, respectively |   | **177,789**            |            | 151,032 |   |
| Additional  paid-in capital                                                                |   | **174,911,140**        | ** **      | 138,267,358 |   |
| Distributions in  excess of accumulated earnings                                           |   | **(35,061,098**        | **)**           | (33,823,502 | ) |
|                                                                                       |   | **140,027,831**        | ** **      | 104,594,888 |   |
|                                                                                       |   |                   |            |   |   |
|                                                                                       |   | **$**                  | **424,415,148** |   | 389,563,563 |   |

 

*See accompanying notes to consolidated financialstatements.*

 

3

----

 

**MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES**

**Consolidated Statements of Operations**

**(UNAUDITED)**

** **
|                                                   |   | **Three  months ended September 30,** |           | **Nine  months ended September 30,** |       |
|--------------------------------------------------------|--------|---------------------------------------|----------------|--------------------------------------|------------|
|                                                   |   | **2002**                              |           | **2001**                             |       | **2002** |   | **2001** |   |
|                                                   |   |                                  |           |                                 |       |   |   |   |   |
| **REVENUES:**                                          |   |                                  | ** **     |                                 |       |   |   |   |   |
| Minimum rents                                          |   | **$**                                 | **14,304,226** | ** **                           | 12,981,592 |   | **40,966,981** | ** ** | 37,591,484 |   |
| Percentage rents                                       |   | **399,292**                           | ** **     | 407,333                              |       | **1,097,868** | ** ** | 1,000,049 |   |
| Tenant  recoveries                                     |   | **2,762,055**                         | ** **     | 2,320,152                            |       | **8,256,989** | ** ** | 7,290,520 |   |
| Other                                                  |   | **69,285**                            | ** **     | 47,853                               |       | **321,514** | ** ** | 392,562 |   |
|                                                   |   | **17,534,858**                        |           | 15,756,930                           |       | **50,643,352** | ** ** | 46,274,615 |   |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| **EXPENSES:**                                          |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| Interest                                               |   | **4,001,597**                         | ** **     | 4,302,837                            |       | **12,320,321** | ** ** | 13,021,552 |   |
| Depreciation and  amortization                         |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| of property and  improvements                          |   | **2,754,923**                         | ** **     | 3,048,566                            |       | **8,644,382** | ** ** | 8,423,488 |   |
| Operating                                              |   | **3,472,237**                         | ** **     | 2,868,473                            |       | **10,490,440** | ** ** | 9,380,605 |   |
| General and  administrative                            |   | **743,651**                           | ** **     | 785,924                              |       | **2,437,047** | ** ** | 2,325,955 |   |
|                                                   |   | **10,972,408**                        |           | 11,005,800                           |       | **33,892,190** | ** ** | 33,151,600 |   |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| **EARNINGS  FROM OPERATIONS BEFORE MINORITY INTEREST** |   | **6,562,450**                         | ** **     | 4,751,130                            |       | **16,751,162** | ** ** | 13,123,015 |   |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| Minority  Interest                                     |   | **(1,108,039**                        | **)**          | (1,009,554                           | )          | **(2,907,154** | **)** | (2,825,315 | ) |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| **EARNINGS  BEFORE EXTRAORDINARY LOSS**                |   | **5,454,411**                         | ** **     | 3,741,576                            |       | **13,844,008** | ** ** | 10,297,700 |   |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| Extraordinary  loss from early extinguishment of debt  |   | **—**                            | ** **     | —                               |       | **(108,953** | **)** | — |   |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| **NET  EARNINGS**                                      |   | **$**                                 | **5,454,411**  | ** **                           | 3,741,576  |   | **13,735,055** | ** ** | 10,297,700 |   |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| **NET  EARNINGS PER SHARE — BASIC**:              |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| Earnings before  extraordinary loss                    |   | **$**                                 | **0.31**       | ** **                           | 0.25       |   | **0.81** | ** ** | 0.71 |   |
| Extraordinary  loss from early extinguishment of debt  |   | **—**                            | ** **     | —                               |       | **(0.01** | **)** | — |   |
| Net earnings                                           |   | **$**                                 | **0.31**       | ** **                           | 0.25       |   | **0.80** | ** ** | 0.71 |   |
|                                                   |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| **NET  EARNINGS PER SHARE — DILUTED**:            |   |                                  | ** **     |                                 |       |   | ** ** |   |   |
| Earnings before  extraordinary loss                    |   | **$**                                 | **0.30**       | ** **                           | 0.25       |   | **0.80** | ** ** | 0.70 |   |
| Extraordinary  loss from early extinguishment of debt  |   | **—**                            | ** **     | —                               |       | **(0.01** | **)** | — |   |
| Net earnings                                           |   | **$**                                 | **0.30**       | ** **                           | 0.25       |   | **0.79** | ** ** | 0.70 |   |

 

*See accompanying notes to consolidated financial statements.*

 

4

----

 

**MID-ATLANTIC REALTY TRUST ANDSUBSIDIARIES**

**Consolidated Statements of CashFlows**

**(UNAUDITED)**

 
|                                                                                 |   | **Nine  months ended September 30,** |           |
|--------------------------------------------------------------------------------------|--------|--------------------------------------|----------------|
|                                                                                 |   | **2002**                             |           | **2001** |   |
|                                                                                 |   |                                 | ** **     |   |   |
| **CASH  FLOWS FROM OPERATING ACTIVITIES**:                                           |   |                                 | ** **     |   |   |
| Net earnings                                                                         |   | **$**                                | **13,735,055** | ** ** | 10,297,700 |   |
| Adjustments to  reconcile net earnings to net cash provided by operating activities: |   |                                 | ** **     |   |   |
| Extraordinary  loss from early extinguishment of debt                                |   | **108,953**                          | ** **     | — |   |
| Depreciation and  amortization                                                       |   | **8,644,382**                        | ** **     | 8,423,488 |   |
| Minority  interest in earnings                                                       |   | **2,907,154**                        | ** **     | 2,825,315 |   |
| Amortization of  deferred financing costs                                            |   | **444,786**                          | ** **     | 397,826 |   |
| Changes in  operating assets and liabilities:                                        |   |                                 | ** **     |   |   |
| Increase in  assets                                                                  |   | **(2,600,822**                       | **)**          | (2,641,565 | ) |
| Increase  (decrease) in liabilities                                                  |   | **(398,396**                         | **)**          | 1,231,827 |   |
| Other, net                                                                           |   | **248,663**                          | ** **     | 216,507 |   |
| Total  adjustments                                                                   |   | **9,354,720**                        | ** **     | 10,453,398 |   |
| **NET  CASH PROVIDED BY OPERATING ACTIVITIES**                                       |   | **23,089,775**                       | ** **     | 20,751,098 |   |
|                                                                                 |   |                                 | ** **     |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES**:                                           |   |                                 | ** **     |   |   |
| Acquisitions of  and additions to properties                                         |   | **(26,008,969**                      | **)**          | (11,808,868 | ) |
| Payments to  minority partners                                                       |   | **(3,185,516**                       | **)**          | (2,832,771 | ) |
| **NET  CASH USED BY INVESTING ACTIVITIES**                                           |   | **(29,194,485**                      | **)**          | (14,641,639 | ) |
|                                                                                 |   |                                 | ** **     |   |   |
| **CASH  FLOWS FROM FINANCING ACTIVITIES**:                                           |   |                                 | ** **     |   |   |
| Proceeds from  notes payable                                                         |   | **123,500,000**                      | ** **     | 74,000,000 |   |
| Principal payments  on notes payable                                                 |   | **(120,000,000**                     | **)**          | (69,000,000 | ) |
| Proceeds from  mortgages payable                                                     |   | **10,700,000**                       | ** **     | — |   |
| Principal  payments on mortgages payable                                             |   | **(20,153,622**                      | **)**          | (3,649,596 | ) |
| Proceeds from  construction loans payable                                            |   | **5,880,172**                        | ** **     | 5,708,170 |   |
| Principal payments  on construction loans payable                                    |   | **(11,232,026**                      | **)**          | — |   |
| Deferred  interest on construction loans payable                                     |   | **—**                           | ** **     | 391,919 |   |
| Deferred  financing costs                                                            |   | **(257,247**                         | **)**          | (254,949 | ) |
| Proceeds from  exercise of share options                                             |   | **1,060,568**                        | ** **     | 509,099 |   |
| Net proceeds  from sale of common shares                                             |   | **32,835,900**                       | ** **     | — |   |
| Shares  repurchased                                                                  |   | **(2,770**                           | **)**          | — |   |
| Dividends paid                                                                       |   | **(14,972,651**                      | **)**          | (12,219,094 | ) |
| **NET  CASH PROVIDED (USED) BY FINANCING ACTIVITIES**                                |   | **7,358,324**                        | ** **     | (4,514,451 | ) |
|                                                                                 |   |                                 | ** **     |   |   |
| **NET  INCREASE IN CASH AND CASH EQUIVALENTS**                                       |   | **1,253,614**                        | ** **     | 1,595,008 |   |
|                                                                                 |   |                                 | ** **     |   |   |
| **CASH  AND CASH EQUIVALENTS,** beginning of period                                  |   | **2,602,202**                        | ** **     | 109,686 |   |
|                                                                                 |   |                                 | ** **     |   |   |
| **CASH  AND CASH EQUIVALENTS,** end of period                                        |   | **$**                                | **3,855,816**  | ** ** | 1,704,694 |   |
|                                                                                 |   |                                 | ** **     |   |   |
| **SCHEDULE  OF NONCASH INVESTING AND FINANCING ACTIVITIES**                          |   |                                 | ** **     |   |   |
| Conversion of  subordinated debentures, net of deferred financing costs              |   | **$**                                | **2,035,124**  | ** ** | 8,111,886 |   |
| Mortgage payable  assumed                                                            |   | **13,400,591**                       | ** **     | — |   |
| Conversion of  Operating Partnership Units                                           |   | **340,280**                          | ** **     | 683,537 |   |
| Additional  Operating Partnership Units issued                                       |   | **281,612**                          | ** **     | — |   |

 

*See accompanying notes to consolidated financialstatements.*

 

5

----

 

## **MID-ATLANTIC REALTYTRUST**

## **Notes To Consolidated Financial Statements**

**(UNAUDITED)**

 

**Organization**

 

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

 

**Descriptionof Business**

 

The Company is a fully integrated, self-administered real estateinvestment trust which owns, acquires, develops, redevelops, leases and managesprimarily neighborhood or community shopping centers in the Middle Atlanticregion of the United States of America.

     The Company has an equityinterest in 41 operating shopping centers, 35 of which are wholly owned by theCompany and six in which the Company has interests ranging from 50% to 93%, aswell as other commercial properties. The Company also owns approximately 78 acres of undeveloped land parcelsvarying in size from three to thirty-one acres.

     All of MART’s interests inproperties are held directly or indirectly by, and all of its operationsrelating to the properties are conducted through, the OperatingPartnership.  Subject to certainconditions, units of partnership interest in the Operating Partnership(“Units”) may be exchanged by the limited partners for cash or, at the optionof MART, the obligation may be assumed by MART and paid either in cash or incommon shares of beneficial interest in MART on a one-for-one basis.  MART controls the Operating Partnership asthe sole general partner, and owns approximately 85% of the Units at September30, 2002.

 

#### **ConsolidatedFinancial Statements**

 

The accompanying consolidated financial statements have been preparedin accordance with the instructions for Form 10-Q and, therefore, do notinclude all of the information necessary for a fair presentation of financialcondition, results of operations and cash flows in accordance with accountingprinciples generally accepted in the United States of America.  The consolidated balance sheets as ofSeptember 30, 2002, the consolidated statements of operations for the three andnine month periods ended September 30, 2002 and September 30, 2001 and theconsolidated statements of cash flows for the nine month periods endedSeptember 30, 2002 and 2001 have been prepared by the Company withoutaudit.  In the opinion of management,all adjustments (which include only normal recurring adjustments) necessary topresent fairly the financial position, results of operations and cash flowshave been included.   The results ofoperations for the period ended September 30, 2002 are not necessarilyindicative of the operating results for the full year.

                The financialstatements have been prepared using the accounting policies described in theCompany’s 2001 annual report on Form 10-K except that, effective July 1, 2002,the Company began recognizing estimated collectible minimum rent revenues undertenant leases that provide for varying rents over their terms on astraight-line basis in accordance with Statement of Financial AccountingStandards (SFAS) No. 13, “Accounting for Leases,” as amended.   The effect of the change on the financialstatements was immaterial.

 

**NewFinancial Accounting Standards Not Yet Adopted**

 

 

In April 2002, theFinancial Accounting Standards Board issued SFAS No. 145, “Rescission of FASBStatements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections.”  Upon adoption of SFAS No.145, the Company will be required to apply the criteria in AccountingPrinciples Board Opinion No. 30, “Reporting the Results of Operations-Reportingthe Effects of Disposal of a Segment of a Business, and Extraordinary, Unusualand Infrequently Occurring Events and Transactions,” in determining theclassification of gains and losses resulting from the extinguishment of debt.

 

SFAS No. 145 is effective on January 1, 2003with early adoption of the provisions related to the rescission of SFAS No. 4encouraged.  Upon adoption, the Companywill reclassify any extraordinary gains and losses from extinguishment of debtto continuing operations.  The Companywill adopt the provisions relating to the rescission of SFAS No. 4 in the firstquarter of 2003.

 

6

----

 

#### **SegmentInformation**

 

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

   Segmentoperating results are measured and assessed based on a performance measureknown as Funds from Operations (“FFO”). FFO is defined as net earnings (computed in accordance with accountingprinciples generally accepted in the United States of America), excludingcumulative effects of changes in accounting principles, extraordinary items andgains or losses from sales of operating properties, plus depreciation andamortization, and after adjustments to record unconsolidated partnerships andjoint ventures on the same basis.  FFOis not a measure of operating results or cash flows from operating activitiesas measured by accounting principles generally accepted in the United States ofAmerica, is not necessarily indicative of cash available to fund cash needs andshould not be considered an alternative to cash flows as a measure ofliquidity.

 

7

----

 

 

Operating results for the segments are summarized asfollows for the three month periods ended September 30, 2002 and September 30,2001:

 
|                                                                               |   | **Three  months ended September 30,** |           |
|------------------------------------------------------------------------------------|--------|---------------------------------------|----------------|
|                                                                               |   | **2002**                              |           | **2001** |   |
|                                                                               |   | **Shopping**                          |           | **All** |   |   |   | **Shopping** |   | **All** |   |   |   |
|                                                                               |   | **Centers**                           |           | **Other** |   | **Total** |   | **Centers** |   | **Other** |   | **Total** |   |
| Revenues                                                                           |   | **$**                                 | **16,932,669** | ** ** | **602,189** | ** ** | **17,534,858** |   | 15,235,556 |   | 521,374 |   | 15,756,930 |   |
|                                                                               |   |                                  |           |   |   |   |   |   |   |   |   |   |   |
| Expenses, exclusive of depreciation and amortization of property and  improvements |   | **7,976,196**                         | ** **     | **241,289** | ** ** | **8,217,485** |   | 7,747,757 |   | 209,477 |   | 7,957,234 |   |
| Minority Interest                                                                  |   | **1,088,867**                         | ** **     | **19,172** | ** ** | **1,108,039** |   | 996,565 |   | 12,989 |   | 1,009,554 |   |
| FFO                                                                                |   | **$**                                 | **7,867,606**  | ** ** | **341,728** | ** ** | **8,209,334** |   | 6,491,234 |   | 298,908 |   | 6,790,142 |   |

 

A reconciliation of FFOreported above to net earnings in the financial statements is summarized asfollows:

 
|                                                        |   | **Three  months ended September 30,** |          |
|-------------------------------------------------------------|--------|---------------------------------------|---------------|
|                                                        |   | **2002**                              |          | **2001** |   |
| Operating  results:                                         |   |                                  |          |   |   |
| FFO                                                         |   | **$**                                 | **8,209,334** |   | 6,790,142 |   |
| Depreciation and  amortization of property and improvements |   | **2,754,923**                         |          | 3,048,566 |   |
|                                                        |   |                                  |          |   |   |
| Earnings from  operations                                   |   | **$**                                 | **5,454,411** |   | 3,741,576 |   |

 

Operating results for the segments aresummarized as follows for the nine month periods ended September 30, 2002 andSeptember 30, 2001:

 
|                                                                               |   | **Nine  months ended September 30,** |           |
|------------------------------------------------------------------------------------|--------|--------------------------------------|----------------|
|                                                                               |   | **2002**                             |           | **2001** |   |
|                                                                               |   | **Shopping**                         |           | **All** |   |   |   | **Shopping** |   | **All** |   |   |   |
|                                                                               |   | **Centers**                          |           | **Other** |   | **Total** |   | **Centers** |   | **Other** |   | **Total** |   |
| Revenues                                                                           |   | **$**                                | **48,870,595** | ** ** | **1,772,757** | ** ** | **50,643,352** |   | 44,666,662 |   | 1,607,953 |   | 46,274,615 |   |
|                                                                               |   |                                 |           |   |   |   |   |   |   |   |   |   |   |
| Expenses, exclusive of depreciation and amortization of property and  improvements |   | **24,568,250**                       | ** **     | **679,558** | ** ** | **25,247,808** |   | 24,079,944 |   | 648,168 |   | 24,728,112 |   |
| Minority Interest                                                                  |   | **2,851,378**                        | ** **     | **55,776** | ** ** | **2,907,154** |   | 2,793,238 |   | 32,077 |   | 2,825,315 |   |
| FFO                                                                                |   | **$**                                | **21,450,967** | ** ** | **1,037,423** | ** ** | **22,488,390** |   | 17,793,480 |   | 927,708 |   | 18,721,188 |   |

 

8

----

 

**A reconciliation of FFO reportedabove to earnings from operations in the financial statements is summarized asfollows:**

 
|                                                               |   | **Nine  months ended September 30,** |           |
|--------------------------------------------------------------------|--------|--------------------------------------|----------------|
|                                                               |   | **2002**                             |           | **2001** |   |
| Operating  results:                                                |   |                                 |           |   |   |
| FFO                                                                |   | **$**                                | **22,488,390** |   | 18,721,188 |   |
| Depreciation and  amortization of property and   improvements |   | **8,644,382**                        |           | 8,423,488 |   |
| Earnings from  operations                                          |   | **$**                                | **13,844,008** |   | 10,297,700 |   |

** **

**EarningsPer Share**

 

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

 

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

 
|                                                                                     |   | **Three  months ended  September 30,** |          | **Nine  months ended  September 30,** |      |
|------------------------------------------------------------------------------------------|--------|----------------------------------------|---------------|---------------------------------------|-----------|
|                                                                                     |   | **2002**                               |          | **2001**                              |      | **2002** |   | **2001** |   |
| Numerator:                                                                               |   |                                   |          |                                  |      |   |   |   |   |
| Earnings before  extraordinary loss                                                      |   | **$**                                  | **5,454,411** | ** **                            | 3,741,576 |   | **13,844,008** | ** ** | 10,297,700 |   |
| Dividends on  unvested restricted share awards                                           |   | **(61,451**                            | **)**         | (70,680                               | )         | **(185,422** | **)** | (211,443 | ) |
| Numerator for  basic earnings per share—earnings available to common shareholders   |   | **5,392,960**                          | ** **    | 3,670,896                             |      | **13,658,586** | ** ** | 10,086,257 |   |
| Interest on  subordinated debentures                                                     |   | **54,082**                             | ** **    | 98,398                                |      | **195,737** | ** ** | 441,185 |   |
| Numerator for  diluted earnings per share—earnings available to common shareholders |   | **$**                                  | **5,447,042** | ** **                            | 3,769,294 |   | **13,854,323** | ** ** | 10,527,442 |   |
|                                                                                     |   |                                   | ** **    |                                  |      |   | ** ** |   |   |
| Denominator:(1)                                                                          |   |                                   | ** **    |                                  |      |   | ** ** |   |   |
| Denominator for  basic earnings per share—weighted average shares outstanding       |   | **17,565,284**                         | ** **    | 14,450,624                            |      | **16,840,220** | ** ** | 14,114,120 |   |
| Effect of  dilutive securities:                                                          |   |                                   | ** **    |                                  |      |   | ** ** |   |   |
| Debentures                                                                               |   | **264,069**                            | ** **    | 464,273                               |      | **331,820** | ** ** | 771,139 |   |
| Unvested portion  of restricted share awards and share options                           |   | **96,226**                             | ** **    | 102,443                               |      | **91,704** | ** ** | 92,542 |   |
| Denominator for  diluted earnings per share—adjusted weighted average shares        |   | **17,925,579**                         | ** **    | 15,017,340                            |      | **17,263,744** | ** ** | 14,977,801 |   |

----

*(1)**Effects of potentially dilutive securities are presentedonly in periods in which they are dilutive. At September 30, 2002, the convertible subordinated debentures, ifconverted, would produce an additional 260,381 shares and the Units, ifexchanged, would produce an additional 3,020,776 shares.*

## ** **

## ** **

**ConvertibleSubordinated Debentures**

 

Effective September 11, 1993, the Company issued $60,000,000 ofconvertible subordinated debentures at 7.625% scheduled to mature in September2003.  Interest on the debentures ispaid semi-annually on March 15 and September 15.  The debentures are convertible, unless previously redeemed, atany time prior to maturity into common shares of beneficial interest of theCompany at $10.50 per share, subject to certain adjustments. The balance of thedebentures, at September 30, 2002, of $2,734,000, if fully converted, wouldproduce an additional 260,381 shares. The debentures are redeemable by the Company at any time at 100% of theprincipal amount thereof, together with accrued interest.  The debentures are subordinate to all mortgagespayable.

 

9

----

 

**Saleof Common Shares of Beneficial Interest**

 

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

 

10

----

 

#### **Part I. FINANCIALINFORMATION**

**ITEM 2.**

 

**MID-ATLANTIC REALTY TRUST**

**Management’s Discussion And Analysis**

**Of Financial Condition And Results OfOperations**

 

The following discussionand analysis of operating results covers each of the Company’s businesssegments for the three and nine month periods ended September 30, 2002 andSeptember 30, 2001.

     Managementbelieves that a segment analysis provides the most effective means ofunderstanding the business.  Segmentdata are reported using the accounting policies followed by the Company forinternal reporting to management.  Thesepolicies are the same as those used for external reporting.

 

**PortfolioChanges**

 

The operating results ofshopping center properties are affected significantly by acquisition anddisposition transactions and openings of newly developed or redevelopedproperties.  Information related toshopping center acquisitions and developments/redevelopments completed during2002 and 2001 is summarized in the following table:

 
|                                   |   | **Transaction or** |
|----------------------------------------|--------|--------------------|
| **Property**                           |   | **Opening Date**   |
|                                   |   |               |
| Acquisitions                           |   |               |
|                                   |   |               |
| Greenbrier Shopping Center             |   | August 2002        |
| Pottstown Plaza Shopping Center        |   | October 2001       |
|                                   |   |               |
| Development/Redevelopment              |   |               |
|                                   |   |               |
| Perry Hall Super Fresh Shopping Center |   | April 2002         |
| Waverly Woods Shopping Center          |   | March 2001         |
| Security Square Shopping Center        |   | February 2001      |

 

**Comparison of three months ended September 30, 2002 to threemonths ended September 30, 2001:**

 

**Shopping Center Properties**

 

Operating results aresummarized as follows (in thousands):
|                                                                         |   | **Three  months ended September 30,** |       |
|------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                         |   | **2002**                              |       | **2001** |   |
| Revenues                                                                     |   | **$**                                 | **16,933** |   | 15,236 |   |
| Operating and  interest expenses, exclusive of depreciation and amortization |   | **7,976**                             |       | 7,748 |   |
| Depreciation and  amortization                                               |   | **2,657**                             |       | 2,929 |   |
| Minority  interest                                                           |   | **1,089**                             |       | 997 |   |
| Earnings from  operations                                                    |   | **$**                                 | **5,211**  |   | 3,562 |   |

 

**     Revenues fromshopping centers increased by $1,697,000 in 2002 due primarily to theoperations of the properties acquired and development/redevelopment projectsopened in 2001 and 2002, $1,255,000, the impact of recognizing rents due fromtenants under leases on a straight-line basis, $436,000, and other net rentaland occupancy changes.**

** **

    Operating and interest expenses (exclusiveof depreciation and amortization) for shopping center properties increased by$228,000 in 2002.  Operating expensesincreased by $648,000 due primarily to the operations of the propertiesacquired and development/redevelopment projects opened in 2001 and 2002,partially offset by a decrease in interest expense due to lower rates onvariable rate debt and the effects of debt refinancings and retirements,($541,000).  Depreciation andamortization expense decreased by $272,000 in 2002 due primarily to the effectsof fully depreciated assets, $298,000, partially offset by the acquisitions anddevelopment/redevelopment projects referred to above.

 

11

----

 

**All Other Properties**

 

Operating results aresummarized as follows (in thousands):

 
|                                                                         |   | **Three  months ended September 30,** |    |
|------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                         |   | **2002**                              |    | **2001** |   |
| Revenues                                                                     |   | **$**                                 | **602** |   | 521 |   |
| Operating and  interest expenses, exclusive of depreciation and amortization |   | **242**                               |    | 209 |   |
| Depreciation and  amortization                                               |   | **98**                                |    | 119 |   |
| Minority  interest                                                           |   | **19**                                |    | 13 |   |
| Earnings from  operations                                                    |   | **$**                                 | **243** |   | 180 |   |

 

**Comparison of nine months endedSeptember 30, 2002 to nine months ended September 30, 2001:**

 

**Shopping Center Properties**

 

Operating results aresummarized as follows (in thousands):
|                                                                         |   | **Nine  months ended September 30,** |       |
|------------------------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                                         |   | **2002**                             |       | **2001** |   |
| Revenues                                                                     |   | **$**                                | **48,870** |   | 44,667 |   |
| Operating and  interest expenses, exclusive of depreciation and amortization |   | **24,568**                           |       | 24,080 |   |
| Depreciation and  amortization                                               |   | **8,308**                            |       | 8,075 |   |
| Minority  interest                                                           |   | **2,851**                            |       | 2,793 |   |
| Earnings from  operations                                                    |   | **$**                                | **13,143** |   | 9,719 |   |

 

**     Revenues fromshopping centers increased by $4,203,000 in 2002 due primarily to theoperations of the properties acquired and development/redevelopment projectsopened in 2001 and 2002, $3,160,000, higher termination fees from formertenants, $147,000, the impact of recognizing rents due from tenants underleases on a straight-line basis, $436,000, and other net rental and occupancychanges.**

** **

    Operating and interest expenses (exclusiveof depreciation and amortization) for shopping center properties increased by$488,000 in 2002.  Operating expensesincreased by $1,714,000, due primarily to the operations of the propertiesacquired and development/redevelopment projects opened in 2001 and 2002,partially offset by a decrease in interest expense due to lower rates onvariable rate debt and the effects of debt refinancings and retirements,($1,305,000). Depreciation and amortization expense increased by $233,000 in2002 due primarily to the acquisitions and development/redevelopment projectsreferred to above, $381,000, partially offset by the effects of fully depreciatedassets, ($246,000).

 

**All Other Properties**

 

Operating results aresummarized as follows (in thousands):

 
|                                                                         |   | **Nine  months ended September 30,** |      |
|------------------------------------------------------------------------------|--------|--------------------------------------|-----------|
|                                                                         |   | **2002**                             |      | **2001** |   |
| Revenues                                                                     |   | **$**                                | **1,773** |   | 1,607 |   |
| Operating and  interest expenses, exclusive of depreciation and amortization |   | **680**                              |      | 648 |   |
| Depreciation and  amortization                                               |   | **336**                              |      | 348 |   |
| Minority  interest                                                           |   | **56**                               |      | 32 |   |
| Earnings from  operations                                                    |   | **$**                                | **701**   |   | 579 |   |

 

 

12

----

 

**Funds from Operations**

 

The Company uses asupplemental performance measure along with net earnings to report itsoperating results. This measure is referred to as Funds from Operations(“FFO”). FFO is defined by the National Association of Real Estate InvestmentTrusts, Inc. (NAREIT) as net earnings computed in accordance with accountingprinciples generally accepted in the United States of America (GAAP), excludingcumulative effects of changes in accounting principles, extraordinary items andgains or losses on sales of properties, plus depreciation and amortization, andafter adjustments to record unconsolidated partnerships and joint ventures onthe same basis. FFO does not represent cash flows from operations as defined byGAAP.  FFO is not indicative that cashflows are adequate to fund all cash needs and should not be considered asalternatives to cash flows as a measure of liquidity.  The Company’s FFO may not be comparable to the FFO of otherREIT’s because they may not use the current NAREIT definition or they mayinterpret the definition differently.

 

FFO was $22,488,000and $18,721,000 for the nine months ended September 30, 2002 and 2001,respectively.  The reasons forsignificant changes in revenues and expenses comprising FFO by segment aredescribed above.

###### ** **

###### **Liquidity and Capital Resources**

 

On March 12, 2002, theCompany completed the public offering and sale of 2,000,000 common shares ofbeneficial interest at a price of $15.10 per share and on April 4, 2002, anadditional 300,000 shares were sold at the same price upon exercise of theunderwriters’ over-allotment option. The net proceeds of the sales of approximately $32,836,000 were used torepay two mortgage loans and pay down the line of credit.

 

     TheCompany had cash and cash equivalents of $3,855,816 at September 30, 2002.

 

      Net cashprovided by operating activities was $23,090,000 and $20,751,000 for the ninemonths ended September 30, 2002 and 2001, respectively.  The change in cash provided by operatingactivities was due in part to the factors discussed above in the comparisons ofoperating results.  The level of netcash provided by operating activities is also affected by the timing of receiptof revenues and the payment of operating and interest expenses.

 

      Net cashused by investing activities increased by $14,552,000 to $29,194,000 in 2002from $14,642,000 in 2001.  The increasewas due primarily to the acquisition of one property and higher levels ofdevelopment/redevelopment activity in 2002.

 

      Net cashprovided by financing activities was $7,358,000 in 2002 and net cash used byfinancing activities was $4,514,000 in 2001. The change in cash flows from financing activities in 2002 is dueprimarily to increased borrowings required to finance project acquisition anddevelopment activity, partially offset by an increase in dividends paid of$2,754,000 due to increases in the number of common shares outstanding and thedividend per share.  As noted above, theCompany sold common shares in 2002 and used the net proceeds to repay debt.

 

13

----

 

**CautionaryDisclosure Relating to Forward Looking Statements**

 

Statements made in this document include forward looking statementsunder the federal securities laws. Statements that are not historical in nature, including the words“anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similarexpressions are intended to identify forward looking statements.  While these statements reflect the Company’sgood faith beliefs based on current expectations, estimates and projectionsabout (among other things) the industry and the markets in which the Companyoperates, they are not guarantees of future performance, involve known andunknown risks and uncertainties that could cause actual results to differmaterially from those in the forward looking statements, and should not berelied upon as predictions of future events. Factors which could impact future results include (among other things)general economic conditions, local real estate conditions, oversupply ofavailable space, financial condition of tenants, timely ability to lease orre-lease space upon favorable economic terms, agreements with anchor tenants,interest rates, availability of financing, competitive factors, and similarconsiderations.  The Company disclaimsany obligation to publicly update or revise any forward looking statement,whether as a result of new information, future events or otherwise.  For a discussion of risks and uncertaintiesthat could cause actual results to differ materially from those contained inthe forward looking statements, see “Risk Factors” filed as Exhibit 99.1 to theCompany’s Form 10-K for the year ended December 31, 2001.

 

**Item3.  Quantitative and QualitativeDisclosures about Market Risk**- There have been no materialchanges in the Company’s market risk information since December 31, 2001.

 

**Item 4.  Controls and Procedures**

 

                (a)           Evaluation of disclosure controlsand procedures.  Within the 90 daysprior to the date of this report, the Company carried out an evaluation, underthe supervision and with the participation of the Company’s management,including the Company’s President and Chief Executive Officer along with theController, of the effectiveness of the design and operation of the Company’s“disclosure controls and procedures” (as defined in Exchange Act Rules13a-14(c) and 15-d-14(c)).  Based uponthat evaluation, the Company’s President and Chief Executive Officer along withthe Controller concluded that the Company’s disclosure controls and proceduresare effective in timely alerting them to material information relating to theCompany (including its consolidated subsidiaries) required to be included inthe Company’s periodic SEC filings.

 

                (b)           Changes in internal controls.  There were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthose controls subsequent to the date the Company carried out this evaluation.

 

14

----

 

#### **PartII.**OTHERINFORMATION

 

 

**Item 1.  Legal Proceedings**-****Inthe ordinary course of business, the Company is involved in legalproceedings.  However, there are nomaterial legal proceedings pending against the Company.

 

#### **Item 2.  Changesin Securities and Use of Proceeds**- None

#### ** **

#### **Item 3.  Defaultsupon Senior Securities**- None

 

**Item 4.  Submission of Matters to a Vote ofSecurity Holders**— None

 

15

----

 

#### **Item 5.  Other Information —**

#### **Summary FinancialData**

 

The following sets forthsummary financial data which has been prepared by the Company withoutaudit.  Management believes thefollowing data should be used as a supplement to the historical statements ofoperations.  The data should be read inconjunction with the historical financial statements and the notes thereto.

** **

**MID-ATLANTIC REALTY TRUST**

**Summary Financial Data**

**(In thousands, except share dataand per share data)**

** **
|                                                                                  |   | **Three  months ended  September 30,** |        | **Nine  months ended  September 30,** |   |
|---------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|---------------------------------------|--------|
|                                                                                  |   | **2002**                               |        | **2001**                              |   | **2002** |   | **2001** |   |
|                                                                                  |   |                                   |        |                                  |   |   |   |   |   |
| **Revenues**                                                                          |   | **$**                                  | **17,535**  | ** **                            | 15,757 |   | **50,643** | ** ** | 46,274 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Net  earnings**                                                                     |   | **$**                                  | **5,454**   | ** **                            | 3,742  |   | **13,735** | ** ** | 10,298 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **NET  EARNINGS PER SHARE — BASIC:**                                             |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| Earnings before  extraordinary loss                                                   |   | **$**                                  | **0.31**    | ** **                            | 0.25   |   | **0.81** | ** ** | 0.71 |   |
| Extraordinary  loss from early extinguishment of debt                                 |   | **—**                             | ** **  | —                                |   | **(0.01** | **)** | — |   |
| Net earnings                                                                          |   | **$**                                  | **0.31**    | ** **                            | 0.25   |   | **0.80** | ** ** | 0.71 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **NET  EARNINGS PER SHARE — DILUTED**:                                           |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| Earnings before  extraordinary loss                                                   |   | **$**                                  | **0.30**    | ** **                            | 0.25   |   | **0.80** | ** ** | 0.70 |   |
| Extraordinary  loss from early extinguishment of debt                                 |   | **—**                             | ** **  | —                                |   | **(0.01** | **)** | — |   |
| Net earnings                                                                          |   | **$**                                  | **0.30**    | ** **                            | 0.25   |   | **0.79** | ** ** | 0.70 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Total  assets**                                                                     |   |                                   |        |                                  |   | **$** | **424,415** | ** ** | 378,685 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Indebtedness  —**                                                              |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| Total mortgages,  convertible debentures, construction loans, notes and loans payable |   |                                   |        |                                  |   | **$** | **242,095** | ** ** | 232,203 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Funds  from Operations (FFO) — (1)**                                           |   | **$**                                  | **8,209**   | ** **                            | 6,790  |   | **22,488** | ** ** | 18,721 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Funds  from Operations (AFFO) — (1)**                                          |   | **$**                                  | **7,773**   | ** **                            | 6,790  |   | **22,052** | ** ** | 18,721 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Net  cash flow:**                                                                   |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| Provided by  operating activities                                                     |   | **$**                                  | **7,982**   | ** **                            | 4,307  |   | **23,090** | ** ** | 20,751 |   |
| Used in  investing activities                                                         |   | **$**                                  | **(17,794** | **)**                                 | (3,012 | ) | **(29,194** | **)** | (14,642 | ) |
| Provided by  financing activities                                                     |   | **$**                                  | **10,837**  | ** **                            | (2,589 | ) | **7,358** | ** ** | (4,514 | ) |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Cash  dividends paid per share**                                                    |   | **$**                                  | **0.2950**  | ** **                            | 0.2825 |   | **0.8850** | ** ** | 0.8475 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **Weighted  average number of shares outstanding — EPS:**                        |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| Basic                                                                                 |   | **17,565,284**                         | ** **  | 14,450,624                            |   | **16,840,220** | ** ** | 14,114,120 |   |
| Diluted                                                                               |   | **17,925,579**                         | ** **  | 15,017,340                            |   | **17,263,744** | ** ** | 14,977,801 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **RECONCILIATION  OF NET EARNINGS TO FFO**                                            |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| Net earnings                                                                          |   | **$**                                  | **5,454**   | ** **                            | 3,742  |   | **13,735** | ** ** | 10,298 |   |
| Depreciation                                                                          |   | **2,755**                              | ** **  | 3,048                                 |   | **8,644** | ** ** | 8,423 |   |
| Extraordinary  loss from early extinguishment of debt                                 |   | **—**                             | ** **  | —                                |   | **109** | ** ** | — |   |
| FFO                                                                                   |   | **$**                                  | **8,209**   | ** **                            | 6,790  |   | **22,488** | ** ** | 18,721 |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| **RECONCILIATION  OF FFO TO AFFO**                                                    |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
|                                                                                  |   |                                   | ** **  |                                  |   |   | ** ** |   |   |
| FFO                                                                                   |   | **$**                                  | **8,209**   | ** **                            | 6,790  |   | **22,488** | ** ** | 18,721 |   |
| Less  straight-line rents                                                             |   | **(436**                               | **)**       | —                                |   | **(436** | **)** | — |   |
| AFFO                                                                                  |   | **$**                                  | **7,773**   | ** **                            | 6,790  |   | **22,052** | ** ** | 18,721 |   |
|                                                                                       |        |                                        |             |                                       |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

16

----

 

(1) The Company believes that Funds from Operations (FFO) provides relevantand meaningful information about its operating performance that is necessary,along with net earnings, for an understanding of its operating results.  Funds from operations is defined by theNational Association of Real Estate Investment Trusts, Inc. (NAREIT) as netearnings (computed in accordance with accounting principles generally acceptedin the United States of America), excluding cumulative effects of changes inaccounting principles, extraordinary items and gains or losses on sales ofproperties, plus depreciation and amortization, and after adjustments to recordunconsolidated partnerships and joint ventures on the same basis. FFO does notrepresent cash flows from operations as defined by accounting principlesgenerally accepted in the United States of America (GAAP). In addition, the Company reports AdjustedFunds from Operations (“AFFO”) wherein the Company deducts the positivenon-cash impact of recognizing rents due from tenants under leases on astraight-line basis from reported FFO.  FFO and AFFO are not indicative that cash flows are adequate to fund allcash needs and should not be considered as alternatives to cash flows as ameasure of liquidity. The Company’s FFO may not be comparable to the FFO ofother REIT’s because they may not use the current NAREIT definition or they mayinterpret the definition differently.

 

### **Item 6.  Exhibits andReports on Form 8-K**

 

                (b) Form 8-Kfiled October 28,2002 reporting selected financial information under Items 7 and 9.

 

17

----

 

##### **MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES**

##### **SIGNATURES**

 

 

                Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|   |     |   |   | **MID-ATLANTIC  REALTY TRUST AND**    |
|--------|----------|--------|--------|---------------------------------------|
|   |     |   |   | **SUBSIDIARIES**                      |
|   |     |   |   | **(Registrant)**                      |
|   |     |   |   |                                  |
| Date:  | 10/28/02 |   |   | /s/ F. Patrick Hughes                 |
|   |     |   |   | F. Patrick Hughes                     |
|   |     |   |   | President and Chief Executive Officer |
|   |     |   |   |                                  |
| Date:  | 10/28/02 |   |   | /s/ Deborah R. Cheek                  |
|   |     |   |   | Deborah R. Cheek                      |
|   |     |   |   | Controller                            |

 

 

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##### **MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES**

##### **CERTIFICATIONS**

 

I, F. Patrick Hughes, President and Chief Executive Officer ofMid-Atlantic Realty Trust, certify that:

 

                1.             I have reviewed this quarterlyreport on Form 10-Q of Mid-Atlantic Realty Trust;

 

                2.             Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

                3.             Based on my knowledge, the financialstatements, and other financial information included in this quarterly report,fairly present in all material respects the financial condition, results ofoperations and cash flows of the registrant as of, and for, the periodspresented in this quarterly report;

 

                4.             The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

 

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

 

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

 

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

 

                5.             The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

 

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

 

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

 

                6.             The registrant’s other certifyingofficer and I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

 

 
| Date:  | 10/28/02 |   |   |   |   |   | /s/ F. Patrick Hughes                 |
|--------|----------|--------|--------|--------|--------|--------|---------------------------------------|
|   |     |   |   |   |   |   | F. Patrick Hughes                     |
|   |     |   |   |   |   |   | President and Chief Executive Officer |

 

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##### **MID-ATLANTIC REALTY TRUST AND SUBSIDIARIES**

##### **CERTIFICATIONS**

 

I, Deborah R. Cheek, Controller of Mid-Atlantic Realty Trust, certifythat

 

                1.             I have reviewed this quarterly  report on Form 10-Q of Mid-Atlantic RealtyTrust;

 

                2.             Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

                3.             Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

                4.             The registrant’s other certifyingofficers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)for the registrant and we have:

 

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

 

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

 

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

 

                5.             The registrant’s other certifyingofficers and I have disclosed, based on our most recent evaluation, to theregistrant’s auditors and the audit committee of registrant’s board ofdirectors (or persons performing the equivalent function):

 

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

 

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

 

                6.             The registrant’s other certifyingofficer and I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of our mostrecent evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 

 
| Date:  | 10/28/02 |   |   | /s/ Deborah R. Cheek |
|--------|----------|--------|--------|----------------------|
|   |     |   |   | Deborah R. Cheek     |
|   |     |   |   | Controller           |

 

 

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