-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KmIh6hRc2jhzpupHx8yKS3Ux3DDFyqi4ECvwDUsIPSH2URhJR4oRg2N5paTotshg MhokDuWWT+5l+byzrI41MA== 0000921895-00-000289.txt : 20000417 0000921895-00-000289.hdr.sgml : 20000417 ACCESSION NUMBER: 0000921895-00-000289 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MGI PROPERTIES CENTRAL INDEX KEY: 0000068330 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046268740 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06833 FILM NUMBER: 600835 BUSINESS ADDRESS: STREET 1: ONE WINTHROP SQUARE CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174226000 MAIL ADDRESS: STREET 1: ONE WINTHROP SQUARE CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: MORTGAGE GROWTH INVESTORS DATE OF NAME CHANGE: 19880225 FORMER COMPANY: FORMER CONFORMED NAME: EASTERN SHOPPING CENTERS INC DATE OF NAME CHANGE: 19711121 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Period Ended: February 29, 2000 Commission File Number: 1-6833 ----------------- ------ MGI PROPERTIES - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-6268740 ------------- ---------- (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) No.) One Winthrop Square, Boston, Massachusetts 02110 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 422-6000 --------------------------- N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. 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. Yes /X/ No / / Common shares outstanding as of April 13, 2000: 13,774,221 MGI PROPERTIES INDEX PART I: FINANCIAL INFORMATION Page No. Item 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Earnings 4 Consolidated Statements of Cash Flows 5 Consolidated Statement of Changes in Shareholders' Equity 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Market Risk Quantitative and Qualitative Disclosures about Market Risk 12 PART II: OTHER INFORMATION Items 1 - 6 13 Signatures 14 Exhibit 11. Computation of Earnings Per Share 15 -2- MGI PROPERTIES PART I -- FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- February 29, 2000 November 30, 1999 - -------------------------------------------------------------------------------- (unaudited) ASSETS Properties held for sale $48,341,000 $56,310,000 Cash and cash equivalents 46,618,000 38,232,000 Accounts receivable 772,000 747,000 Other assets 3,285,000 3,222,000 - -------------------------------------------------------------------------------- $99,016,000 $98,511,000 ================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Loan payable $ 4,546,000 $ 4,585,000 Liquidating liabilities 12,137,000 12,715,000 Other liabilities 2,318,000 2,373,000 - -------------------------------------------------------------------------------- Total liabilities 19,001,000 19,673,000 - -------------------------------------------------------------------------------- Shareholders' equity: Common shares -- $1 par value; 17,500,000 shares authorized; 13,774,221 issued 13,774,000 13,774,000 Additional paid-in capital 208,363,000 208,363,000 Distributions in excess of net income (142,122,000) (143,299,000) - -------------------------------------------------------------------------------- Total shareholders' equity 80,015,000 78,838,000 - -------------------------------------------------------------------------------- $ 99,016,000 $98,511,000 ================================================================================ See accompanying notes to consolidated financial statements. -3- MGI PROPERTIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) Three Months Ended ------------------------------------- February 29, 2000 February 28, 1999 - -------------------------------------------------------------------------------- Income: Rental $2,563,000 $18,667,000 Interest 571,000 144,000 - -------------------------------------------------------------------------------- Total income 3,134,000 18,811,000 - -------------------------------------------------------------------------------- Expenses: Property operating expenses 435,000 4,106,000 Real estate taxes 310,000 2,215,000 Depreciation and amortization 80,000 359,000 Interest 87,000 2,560,000 General and administrative 587,000 727,000 Liquidation plan expenses 541,000 978,000 - -------------------------------------------------------------------------------- Total expenses 2,040,000 10,945,000 - -------------------------------------------------------------------------------- Income before net gains 1,094,000 7,866,000 Net gains (loss) on sale of real estate assets 83,000 (143,000) - -------------------------------------------------------------------------------- Income before extraordinary item 1,177,000 7,723,000 Extraordinary item - prepayment of debt - (286,000) - -------------------------------------------------------------------------------- Net income $1,177,000 $ 7,437,000 ================================================================================ Per Share Data: Basic earnings $0.09 $0.54 ===== ===== Diluted earnings $0.08 $0.52 ===== ===== Weighted average shares outstanding 13,774,221 13,770,999 ========== ========== See accompanying notes to consolidated financial statements. -4- MGI PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended --------------------------------------- February 29, 2000 February 28, 1999 - ---------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income $ 1,177,000 $ 7,437,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 80,000 359,000 Net (gains) loss on sale of real estate assets (83,000) 143,000 Extraordinary item - prepayment of debt - 286,000 Liquidating liabilities (1,119,000) (70,000) Other 319,000 1,979,000 - -------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 374,000 10,134,000 - -------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Acquisitions of real estate - (339,000) Additions to real estate (81,000) (472,000) Tenant improvements (41,000) (607,000) Deferred tenant charges - (364,000) Net proceeds from sales of real estate 8,134,000 1,190,000 Other 39,000 (58,000) - -------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 8,051,000 (650,000) - -------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Additions to loans payable, net - 7,500,000 Repayment of loans payable (39,000) (12,975,000) Mortgage prepayment penalty - (286,000) Cash distributions - (4,545,000) Proceeds from issuance of common shares - 95,000 - -------------------------------------------------------------------------------------------------------- Net cash used in financing activities (39,000) (10,211,000) - -------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 8,386,000 (727,000) - -------------------------------------------------------------------------------------------------------- Cash and cash equivalents: Beginning of period 38,232,000 12,265,000 - -------------------------------------------------------------------------------------------------------- End of period $46,618,000 $11,538,000 ========================================================================================================
See accompanying notes to consolidated financial statements. -5- MGI PROPERTIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
- ---------------------------------------------------------------------------------------------- Additional Common Paid-In Undistributed Shares Capital Net Income - ---------------------------------------------------------------------------------------------- Balance at November 30, 1999 $13,774,000 $208,363,000 ($143,299,000) Net income -- -- 1,177,000 - --------------------------------------------------------------------------------------------- Balance at February 29, 2000 $13,774,000 $208,363,000 ($142,122,000) ==============================================================================================
See accompanying notes to consolidated financial statements. -6- MGI PROPERTIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1: The results of the interim period are not necessarily indicative of results to be expected for the entire fiscal year. The figures contained in this interim report are unaudited and may be subject to adjustments. Certain prior year amounts have been reclassified to conform with the current year presentation. In the opinion of management, all adjustments necessary for a fair presentation of financial position and results of operations have been included and such adjustments include only the normal accruals. Note 2: The shareholders of the Trust approved a Plan of Complete Liquidation and Termination of the Trust (the "Plan") at a special meeting held on October 14, 1998. The Plan calls for the sale of all of the Trust's assets. Net sales proceeds and available cash will be used to satisfy debts and obligations with remaining funds to be distributed to shareholders. It is presently estimated that the liquidation will be substantially completed during the quarter ending August 31, 2000, although there can be no assurance thereof. Although it is expected that the Trust will continue to qualify as a REIT for the period prior to the distribution of MGI's remaining assets to shareholders (including the transfer of remaining assets to a liquidating trust), no assurance can be given that the Trust will not lose or terminate its status as a REIT. Note 3: On March 16, 2000, the Board of Trustees declared a liquidating distribution of $3.00 per share, paid on April 13, 2000 to shareholders of record at the close of business on April 4, 2000. This distribution aggregated $41.3 million. Since the October 14, 1998 liquidation vote, liquidating distributions total $27.16 per share. The amount and timing of remaining distributions will be determined by the Trustees based upon funds available, net proceeds realized from remaining property sales, the timing of such sales, the level of reserves deemed necessary or appropriate, and other considerations. Under the provisions of the Internal Revenue Code, distributions made within 24 months of the adoption of the Plan are considered liquidating distributions and will not be dividend income when received by shareholders. Distributions in liquidation should first be applied to reduce a shareholder's tax basis in his or her shares of MGI with the excess constituting a capital gain. If the sum of all liquidating distributions is less than a shareholder's basis, the difference will constitute a capital loss to the shareholder. -7- MGI PROPERTIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued) Note 4: Upon shareholder approval of the Plan on October 14, 1998, the Trust reclassified its real estate assets to "properties held for sale" and on that date ceased depreciation of the assets and reclassified accumulated depreciation and amortization against the original cost of real estate assets. During the first quarter of 2000, the Trust completed the sale of one retail property totaling 106,900 square feet and a 1.7 acre parcel of land. The aggregate sales price of these two transactions totaled $8.4 million. Subsequent to February 29, 2000, the Trust completed the sale of two retail centers (one located in Aurora, Illinois and one located in Baltimore, Maryland), totaling 508,700 square feet, for an aggregate sales price of $30.8 million. As of April 13, 2000, MGI owned four properties, and has entered into one agreement to sell one office building located in Michigan. The sale agreement is subject to the customary terms and conditions for transactions of this type, including the purchasers' satisfactory completion of due diligence, which includes engineering and environmental inspections, and approval of titles and surveys. The buyer for the Michigan office building has completed its due diligence. This sale is expected to close later in MGI's second quarter, although there can be no assurance that it will be successfully completed. Note 5: Cash applied to interest payments amounted to $0.1 million and $2.6 million for the three-month periods ended February 29, 2000 and February 28, 1999, respectively. Note 6: MGI believes that it has operated in a manner that permits it to qualify as a real estate investment trust under the provisions of the Internal Revenue Code of 1986, as amended. Accordingly, no provision has been made for Federal income taxes. No assurance can be given that the Trust will be able to continue to operate in a manner so as to qualify or remain so qualified. -8- MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview MGI is a self-administered equity REIT that is operating under a Plan of Complete Liquidation and Termination of the Trust (the "Plan"). The shareholders of the Trust approved the Plan at a special meeting held on October 14, 1998. The Plan is discussed in the Trust's Form 10-K for the years ended November 30, 1999 and 1998, and in the definitive proxy statement dated September 10, 1998. Since approval of the Plan, MGI, to date, has completed the sale of 65 properties totaling 5.3 million square feet, 959 residential apartment units, and a 1.7 acre parcel of land, for aggregate sales prices, prior to the deduction of $9.1 million of selling expenses and closing adjustments, of $521.6 million, which prices included $48.8 million of mortgage debt that was repaid at closing and $28.0 million assumed by the buyers. MGI has made liquidating distributions aggregating $27.16 per share since the October 1998 special shareholders' meeting. Currently, management believes that the current estimate of pricing with respect to the remaining unsold properties, when added to funds held by MGI, is estimated to result in additional net liquidating distributions aggregating approximately $2.50 per share, after deducting all fees and liquidation costs; however, no assurances can be given that per share net liquidating distributions will reach this amount. At February 29, 2000, MGI owned six commercial properties, which aggregated 813,000 square feet. Subsequent to February 29, 2000, MGI sold, for an aggregate sales price of $30.8 million, a 146,700 square-foot retail property located in Baltimore, Maryland and a 362,000 square-foot retail center located in Aurora, Illinois. In addition, MGI has entered into an agreement to sell an office building located in Michigan. The sale agreement is subject to the customary terms and conditions for transactions of this type, including, among other things, the respective purchasers' satisfactory completion of due diligence, which includes engineering and environmental inspections, and approval of titles and surveys. The buyer of MGI's Michigan office building has completed its due diligence. This sale is expected to close in MGI's second fiscal quarter, although there can be no assurance that this sale will be successfully completed. It is currently estimated by management that the liquidation will be substantially completed during MGI's third quarter ending August 31, 2000, although there can be no assurance thereof. Additionally, management presently anticipates that MGI will convert to a liquidating trust no later than October 14, 2000 but in no event prior to June 30, 2000, after which the successor entity's beneficial interests will be non-transferable. -9- MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) As of February 29, 2000, the Trust's real estate investments were diversified by property type as follows:
% of Portfolio Based % of on Adjusted Square Feet of Portfolio 2000 Property Number of Commercial Based Operating % Properties Property on Cost Income(1) Leased ---------- -------- ------- --------- ------ Office 2 203,900 29.3% 30.0% 99.1% Retail 3 609,200 70.1% 69.0% 96.7% Other 1 -- .6% 1.0% 100.0% - ------- ------ ------ ------- Total Portfolio 6 813,100 100.0% 100.0% 97.3% = ======= ====== ====== =====
- ---------------- (1) Adjusted property operating income is defined as the 2000 property operating income from the six properties owned at February 29, 2000. This amount approximated $1.6 million, or 88.4% of total 2000 property operating income. Results of Operations The sale of two properties in the first quarter of 2000 and 61 properties during 1999, pursuant to the Plan created a fundamental transformation in MGI and is the primary factor in explaining the changes in operating results when 2000 is compared to prior years. Net income for the quarter ended February 29, 2000 was $1.2 million, or $.09 per share (basic), as compared to $7.4 million, or $.54 per share (basic), in the first quarter of 1999. Included in 2000 first quarter net income were net gains of $83,000 from the sale of two properties, as compared to a $143,000 loss from the sale of one property and a $286,000 loan prepayment fee recorded in the first quarter of 1999. Pursuant to the required accounting for properties held for sale, there was no depreciation or amortization of real estate assets recognized in either the first quarter of 2000 or 1999. -10- MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Income before net gains and extraordinary item was $1.1 million in the first quarter of 2000 as compared to $7.9 million in the comparable quarter of 1999. In comparing the first quarters of 2000 and 1999, the $6.8 million decrease in income before net gain and extraordinary item is primarily attributable to the disposition of 63 properties pursuant to the Plan. This change primarily resulted from the $10.5 million decrease ($1.8 million in 2000 versus $12.3 million in 1999) in property operating income (which is defined as rental income less property operating expense and real estate taxes). Property operating income totaled $1.8 million in the first quarter of 2000, of which approximately 88.4%, or $1.6 million, related to the six properties owned at February 29, 2000. The change in property operating income for these six comparable or "same store" properties (i.e., owned for both fiscal years), was an increase of 2.3%, or $35,000, when 2000 is compared to 1999, and resulted primarily from increased revenues from MGI's office portfolio. The decrease in property operating income was partially offset by a $2.5 million reduction in interest expense, a $0.3 million decrease in depreciation and amortization, and a $0.4 million increase in interest income; all of which also results from the sale of 63 properties. Additional factors were a $0.1 million decrease in general and administrative expense and a $0.4 million decrease in Liquidation Plan expenses. Liquidity Shareholders' equity at February 29, 2000 was $80.0 million, compared to $78.8 million at November 30, 1999. The increase primarily reflects the amount of net income earned in the first quarter of 2000. At February 29, 2000, financial liquidity was provided by $46.6 million in cash and cash equivalents. Cash requirements in 2000 will include liquidating distributions to shareholders, capital and tenant improvements and leasing expenditures required to maintain MGI's occupancy levels. Additionally, in connection with the Plan, MGI anticipates incurring a variety of costs and fees including costs related to sales, fees to advisors and other professionals, severance and incentive compensation, payments to holders of stock options, and other expenses related to liquidation. MGI anticipates meeting these obligations through its position of cash and cash equivalents held at February 29, 2000, the net sale proceeds of its remaining properties, and property operations. MGI believes the combination of available cash and cash equivalents, the value of MGI's unencumbered properties and other resources are sufficient to meet its liquidity requirements while implementing the Plan. -11- MGI PROPERTIES PART I, ITEM 3 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Market Risk MGI is presently exposed to interest rate changes primarily as a result of long term debt. MGI's only obligation for borrowed money at February 29, 2000 totaled $4.5 million, representing 4.6% of its total assets. This is a fixed rate mortgage loan with a rate of 7.4%. Forward Looking Statements Statements made or incorporated in this Report may contain forward-looking statements, estimates or plans within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of MGI to be materially different from results or plans expressed or implied by such forward-looking statements. Such factors generally include, among other things, adverse changes in the real estate markets; risk of default under the Trust's outstanding indebtedness; financial condition and bankruptcy of tenants; environmental/safety requirements; adequacy of insurance coverage; and general and local economic and business conditions. With respect, in particular, to the Plan, such factors include, among other things, the risks of future action or inaction by the Board of Trustees (and the actual results thereof) with respect to the Plan (including the possibility of litigation pertaining thereto), the net realizable value of the properties, the timing of remaining property sales and distributions to shareholders, the effects of financial market conditions and general economic conditions, maintaining the current occupancy and rent levels at the properties, as well as those risk factors set forth in MGI's Form 10-K for the year ended November 30, 1999, including those set forth under "Forward-Looking Statements," "Other" and Item 1 - - "Adoption and Implementation of Liquidation Plan." Although the Trust believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included or incorporated by reference in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Trust or any other person that the objectives and plans of the Trust will be achieved. -12- MGI PROPERTIES PART II - OTHER INFORMATION Item 1: Legal Proceedings: Not applicable. Item 2: Changes in Securities and Use of Proceeds: Not applicable. Item 3: Defaults upon Senior Securities: Not applicable. Item 4: Submission of matters to a vote of security holders: None. Item 5: Other Information: Not applicable. Item 6: Exhibits and Reports on Form 8-K: a) Exhibits: Part I - Exhibit 11 - Computation of Earnings per Share (see page 15) b) Reports on Form 8-K: Dated December 16, 1999, filed on December 20, 1999 -13- MGI PROPERTIES SIGNATURES Pursuant to the requirements to 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. Date: April 14, 2000 /s/ Phillip C. Vitali ---------------------------------------- Phillip C. Vitali Executive Vice President and Treasurer (Principal Financial and Accounting Officer) -14- EX-11 2 COMPUTATION OF EARNINGS PER SHARE MGI PROPERTIES PART I - EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE
Three Months Ended ------------------ February 29, 2000 February 28, 1999 ----------------- ----------------- BASIC Net income $ 1,177,000 $7,437,000 ============================================================================================================================== Weighted average number of shares outstanding during the period 13,774,221 13,770,999 ============================================================================================================================== Basic earnings per share $0.09 $0.54 ============================================================================================================================== DILUTED EARNINGS PER SHARE Net income $1,177,000 $7,437,000 ============================================================================================================================== Weighted average number of shares outstanding assuming full dilution 15,258,281 14,210,671 ============================================================================================================================== Diluted earnings per share $0.08 $0.52 ==============================================================================================================================
-15- EX-27 3 ARTICLE 5 FDS FOR 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS AS OF FEBRUARY 29, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS NOV-30-2000 FEB-29-2000 46,618 000 772 000 000 3,285 48,341 000 99,016 14,455 4,546 13,774 000 000 66,241 99,016 2,563 3,134 000 1,953 000 000 87 1,094 000 1,094 83 000 000 1,177 .09 .08
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