## MD&A MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS 

## Operating Activities 

Cash provided by operating activities increased $13,348,000 to $50,711,000 for the year ended December 31, 2004 compared to $37,363,000 for the year ended December 31, 2003 primarily reflecting increased operating income of the Development and Acquisition Properties. Cash provided by operating activities represents, in each year, cash received primarily from rental income, plus other income, less property operating expenses, normal recurring general and administrative expenses and interest payments on debt outstanding. 

## Investing Activities 

Cash used in investing activities increased $64,942,000 to $114,063,000 for the year ended December 31, 2004 compared to $49,121,000 for the year ended December 31, 2003 and primarily reflects the acquisition of properties (Boca Valley Plaza, Briggs Chaney Plaza, Countryside, Cruse MarketPlace and the Kentlands Place and Ashland Square land parcels in 2004 and the Shops at Monocacy land parcel, and Olde Forte Village in 2003), the construction of new shopping center properties (Broadlands Village II, Shops at Monocacy, Kentlands Place and Olde Forte Village redevelopment in 2004 and Broadlands Village shopping center in 2003), tenant improvements and construction in progress during those years. 

## Financing Activities 

Cash provided by financing activities for the years ended December 31, 2004 and 2003, was $51,669,000 and $55,693,000, respectively. Cash provided by financing activities for the year ended December 31, 2004 primarily reflects: 

• $94,800,000 of proceeds received from mortgage notes payable incurred during the year; and 

• $15,422,000 of proceeds received from the issuance of common stock under the dividend reinvestment program and from the exercise of stock options, and from the issuance of convertible limited partnership interests in the Operating Partnership; 

which was partially offset by: 

• the repayment of borrowings on mortgage notes payable totaling $16,427,000; 

• distributions made to common stockholders and holders of convertible limited partnership units in the Operating Partnership during the year totaling $33,166,000; 

• distributions made to preferred stockholders during the year totaling $7,244,000; and 

• payments of $1,716,000 for financing costs of six mortgage loans during 2004. 

The Company also temporarily borrowed and subsequently repaid $33,000,000 on its revolving credit facility during 2004. 

Cash provided by financing activities for the year ended December 31, 2003 primarily reflects: 

• $93,134,000 of proceeds received from mortgage notes payable incurred during the year; 

• amounts borrowed from the revolving credit facility totaling $35,000,000; 

• $96,327,000 of proceeds from the issuance of $100,000,000 Series A 8% Cumulative Redeemable Preferred Stock after netting issuance costs of $3,673,000; and 

• $16,018,000 of proceeds received from the issuance of common stock under the dividend reinvestment program and from the exercise of stock options, and from the issuance of convertible limited partnership interests in the Operating Partnership; 

which was partially offset by: 

• the repayment of borrowings on mortgage notes payable totaling $69,879,000; 

• the repayment of amounts borrowed from the revolving credit facility totaling $81,750,000; 

• distributions made to common stockholders and holders of convertible limited partnership units in the Operating Partnership during the year totaling $32,257,000; and 

• payments of $900,000 for financing costs of three mortgage loans during 2003. 

