-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sxNGRAmBylyn95GUlnpYVjNV1qFefsMIpq+AFfD0PXI6r74DJR4Ity3SVJMErM73 kFVdX/TgxL3QEYMvj6QE0A== 0000950146-94-000024.txt : 19940218 0000950146-94-000024.hdr.sgml : 19940218 ACCESSION NUMBER: 0000950146-94-000024 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MGI PROPERTIES CENTRAL INDEX KEY: 0000068330 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 046268740 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-06833 FILM NUMBER: 94510453 BUSINESS ADDRESS: STREET 1: 30 ROWES WHARF CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173305335 MAIL ADDRESS: STREET 1: 30 ROWES WHARF 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-K 1 MGI PROPERTIES FORM 10-K FOR THE PERIOD 11/30/93 THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K --------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended November 30, 1993 Commission File No. 1-6833 MGI PROPERTIES - ------------------------------------------------------------------------------ (Exact name of Registrant as specified in its charter) Massachusetts 04-6268740 - ------------------------------- -------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 30 Rowes Wharf, Boston, Massachusetts 02110 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 330-5335 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------- --------------------- Common Shares New York Stock Exchange (par value $l per share) Securities registered pursuant to Section 12(g) of the Act: None 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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of February 10, 1994, the aggregate market value of the voting shares of the Registrant held by non-affiliates of the Registrant was $165,672,951. Common Shares Outstanding as of November 30, 1993: 11,433,721 The information required by Part III of Form 10-K will be incorporated by reference to a definitive proxy statement involving the election of Trustees which is expected to be filed by the Registrant pursuant to Regulation 14A within 120 days after the close of its fiscal year ended November 30, 1993. TABLE OF CONTENTS Page ---- PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . 7 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 9 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 9 PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . 10 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 13 Item 8. Financial Statements and Supplementary Data . . . . . . . . 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . 17 PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . 19 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 PART I ------ Item 1. Business - ------ -------- General - ------- MGI Properties (the "Trust" or "MGI") is an unincorporated business trust organized under the laws of the Commonwealth of Massachusetts. MGI commenced operations in 1971 as a real estate investment trust. Since that time, the Trust has elected to be treated as a real estate investment trust (a "REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), and expects to continue to operate in a manner which will entitle the Trust to be so treated. For each taxable year in which the Trust qualifies as a REIT under the Internal Revenue Code, taxable income distributed to the holders of its shares will not be taxable to the Trust (other than certain items of tax preference which are subject to minimum tax in the hands of the Trust). See "Investment and Operating Policies" and "Portfolio" below and the description of dividend policy included under Item 5 of this Annual Report on Form 10-K for the year ended November 30, 1993 (the "Report"). References herein to the Trust include its wholly-owned subsidiaries. Narrative Description of Business - --------------------------------- The Trust, which is a self-administered and self-managed equity REIT, owns and manages a diversified portfolio of income-producing real estate assets. The Trust's portfolio consists of investments in apartment complexes, multi-use industrial facilities (such as warehouses and research and development buildings), shopping centers and office buildings. The primary investment objective of the Trust is to make diversified equity and equity-oriented investments in existing properties believed to be capable of producing stable and rising income streams and having long-term capital appreciation potential. The Trust also believes that its active managing and leasing practices can enhance rental income, funds from operations and long-term capital appreciation. These investments have typically taken the form in recent years of a direct equity ownership interest. The Trust employs ten persons. Investment and Operating Policies - --------------------------------- The investment policy of the Trust in its broadest aspect is to seek income of the types permitted to a REIT under Section 856 of the Internal Revenue Code, consistent with its Declaration of Trust. Under its Declaration of Trust, the Trust is permitted to invest in a broad range of real estate and mortgage investments, including among other things equity interests, full or participating interests in securities, whether or not secured by mortgages, interests in rents and any other interests related to real property. The Trust's policies are subject to ongoing review by the Board of Trustees and may be modified from time to time to take into consideration changes in business or economic conditions or otherwise as circumstances warrant. The Trust's investment focus with respect to type of property has, during the last several years, been directed to equity and equity-oriented investments in existing income-producing properties, principally apartment complexes, multi-use industrial facilities, shopping centers and office buildings. MGI continues to believe it is beneficial to diversify its assets by location and type of real estate, although it periodically changes its emphasis from one sector to another in accordance with its perception of market opportunities. Over the past several years MGI, has increased its emphasis on acquisitions in the northeastern region of the United States, including industrial and office properties. Although the principal investment emphasis is on the direct ownership of income-producing equity real estate, MGI was historically an equity-oriented or "hybrid" (equity and mortgage) trust. MGI's focus turned from mortgage loans with equity participations toward equity investments in which the Trust becomes the sole owner of the property and realizes all of the property's future benefits and risks. Management believes that this evolution has given the Trust greater control over the direction of its portfolio and the opportunity to increase its capital gains potential. Previously, when operating as a hybrid trust, the investments financed as mortgages (first mortgage loans, junior liens, including wrap- around mortgages, or purchase-money mortgages taken back on the sale of former equity investments) have in many instances included an option to acquire, or a provision for the conversion of such mortgage into, a material equity position at a cost believed by management to be favorable, and in some instances, a participation in the earnings from the property over a base amount or a percentage of the proceeds from the sale of the property. In making new investments, MGI's investment focus has been primarily directed to acquiring quality income-producing properties. Over the last several years, MGI's investment philosophy has been to seek what management believes to be value- creating opportunities by acquiring quality properties that have not met their full potential at a cost believed to be below or near replacement value. Management believes that its investments can be managed to create a total return which includes current income and appreciation. The Trust seeks to implement its investment objectives through selective acquisitions of quality properties, leasing and property management in accordance with its defined long term goals, investment in property improvements and periodic sales of selected properties. The Trust has recently operated with an individual investment parameter of below $20,000,000, but has exceeded and may occasionally exceed this parameter. The decision to sell specific properties or investments involves a number of factors, including the economic climate (giving effect also to the impact of tax laws and other regulatory factors), future potential and reinvestment alternatives. As indicated above, the investment focus may change, based upon the ongoing review of the Trust's policies by the Board of Trustees. As is common with any real estate owner or lender investing in equity real estate, partnerships, mortgage loans and other investments, the Trust from time to time may restructure its financial arrangements with partners, tenants or borrowers who encounter financial or other difficulties. Accordingly, the Trust, as circumstances warrant, has modified and will modify a lease, partnership, loan or other agreement if, after investigation, it is established that such modification would be economically feasible and in the best interests of the Trust. Protection of the Trust's investments may require foreclosure or other action leading to acquisition of title to properties underlying its mortgage loans or investments. The Trust's business is limited to investments in real estate, direct or indirect, including investments in and possible future acquisitions of real estate companies. To the extent that the Trust has assets not otherwise invested in real estate, the Trust may invest such assets in other securities, including United States government obligations and commercial paper, so long as, in the opinion of the Trustees, such securities may be held without jeopardizing the Trust's qualification as a REIT under the Internal Revenue Code. Funds necessary to conduct operations are provided from rental and interest income, mortgaging of equity investments, lines of credit, corporate borrowings, sale of marketable securities and loan repayments and amortization. Such operations include the Trust's continuous incurrence of costs, reimbursed and unreimbursed, for improvements and renovations of its existing properties in order to maintain and enhance their value. From time to time, as conditions warrant, the Trust may operate on a leveraged basis by incurring indebtedness in order to increase its capital available for investment when, in the Trustees' judgment, the Trust will benefit thereby. There is no assurance at any given time that borrowed funds will be available or that the terms and conditions of such borrowings will be acceptable. The Trust may employ short-term borrowings to fund some of its investments. Reference is made to Note 4 of the Notes to Consolidated Financial Statements included in Item 14 below. Portfolio - --------- The Trust's real estate portfolio as of November 30, 1993 consisted of interests in fifty properties, forty-five of which are wholly- owned, three are owned by partnerships in which the Trust has an equity interest, one is a property sold by the Trust in a prior year transaction which did not meet the conditions for a completed sale and is still carried as a real estate investment for financial accounting purposes and one is a mortgage loan that is accounted for as real estate owned. For tax purposes, the property sold and the property accounted for as real estate owned are treated as mortgage loans receivable. The Trust's real estate investments can be classified by type of property and market region. As of November 30, 1993, the Trust's real estate investments were diversified by type of property as follows: Number of Percent of Type Of Property Properties Cost Total ---------------- ---------- ------------- ---------- Apartments 10 $ 78,955,000 30.5% Retail 5 53,198,000 20.6 Office 9 65,230,000 25.2 Industrial 25 61,255,000 23.7 Land 1 25,000 * -- ------------ ------ Total 50 $ 258,663,000 100.0% -- ------------ ------ - ---------- * Less than 1% As of November 30, 1993, the Trust's real estate investments were diversified by geographic region as follows: Percent of Number of Portfolio Based Region Properties Cost on Cost ------ ---------- ----------- --------------- Midwest 22 $ 99,726,000 38.5% Southeast 13 74,408,000 28.8 Mid-Atlantic 4 23,129,000 8.9 Northeast 10 61,175,000 23.7 Other 1 225,000 .1 -- ----------- ------ Total 50 $258,663,000 100.0% -- ----------- ------ Terms under leases to tenants at the Trust's properties range from tenancies-at-will up to eighteen years. The Trust leases commercial space to approximately 260 commercial tenants, including 130 office tenants, 71 retail tenants and 59 industrial tenants. Additional information concerning the Trust's mortgage and real estate investments is set forth under Item 2 and in Notes 1, 2, 3, 4 and 7 in the Notes to Consolidated Financial Statements and Schedules XI and XII of the Financial Statement Schedules included in Item 14 below. Environmental Matters - --------------------- Under various Federal, state and local laws, ordinances and regulations, an owner of real estate or lender may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in, or emanating from, such property. The costs of such removal or remediation of such substances could be substantial. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Other Federal and state laws require the removal or encapsulation of asbestos containing material in the event of remodeling or renovation. MGI is not aware of any material violation of applicable environmental requirements with respect to any of its real estate investments and MGI is not aware of any environmental liabilities (including asbestos related liabilities) that management believes would have a material adverse effect on MGI's business, assets or results of operations. Competition, Regulation and Other Factors - ----------------------------------------- The success of the Trust depends, among other factors, upon general economic conditions and trends, including interest rates, availability of credit, real estate trends, construction costs, income tax laws, governmental regulations and legislation, increases or decreases in operating expenses, zoning laws, population trends and the ability of the Trust to attract tenants and keep its properties leased at profitable levels. The Trust does not consider its real estate business to be seasonal in nature. In the area of investment permitted to the Trust, there may be a wide variety of competing investors and lenders. The Trust competes with life insurance companies, real estate investment trusts, pension funds, other financial institutions, partnerships, corporations, individuals and other business entities, both domestic and foreign. An increase in the number of competing investors and lenders and the availability of investment funds can have the effect of increasing competition for investments in real estate and reducing the yields realizable with respect to such investments. With respect to properties presently owned by the Trust, or in which it has an investment, the Trust competes with other owners of properties for tenants. The Trust's properties compete for tenants primarily on the basis of location, rent and the condition and design of improvements. Its properties compete with similar properties located in their geographic area, and such properties may be newer and larger than those in which the Trust has an interest. There are no statistics readily available which would enable the Trust to determine its position with respect to its competitors in the real estate investment industry. The Trust has been able to compete effectively despite the recessionary environment in certain regions during fiscal 1993 and believes that it will be able to do so in the future, by reason of the diverse make- up of its income producing properties, as well as their geographic diversity. However, a continuation of the recessionary economic conditions in certain regions or any adverse changes in local or national economic conditions could result in the inability of some existing tenants (or borrowers) of the Trust to meet their lease or other obligations and could otherwise adversely affect the Trust's ability to attract or retain tenants. Management believes, however, that by reason of the factors stated above and the Trust's financial strength and operating practices, particularly its ability to implement renovations and improvements, it will be able to maintain and over time increase rental income from its properties (although there can be no assurance thereof). Item 2. Properties. - ------ ---------- The following table sets forth certain information concerning the Trust's properties. SUMMARY OF PROPERTIES AT NOVEMBER 30, 1993
Percentage Net Carrying Value APARTMENTS Leased Units Dollars Per Unit Metairie, LA(a) 94% 516 $10,663,000 $20,665 Harrison Township, MI 97% 376 7,498,000 19,941 Bloomfield Hills, MI 97% 346 15,201,000 43,934 Tampa, FL 92% 264 7,851,000 29,739 Laurel, MD 100% 237 12,112,000 51,105 Memphis, TN 99% 208 5,615,000 26,995 Tampa, FL 97% 112 5,065,000 45,223 Total 96% 2,059 $64,005,000 $31,085 --- ----- ----------- ------- Percent Percentage Net Partnerships Interest Leased Units Carrying Value Washington, DC 4.0% 94% 778 $ 16,000 San Bruno, CA 2.0% 95% 430 225,000 St. Petersburg, FL 49.9% 96% 212 1,902,000 Total 1,420 $2,143,000 ----- ----------
1994 Scheduled Net Carrying Value Percentage Lease Principal Lease RETAIL Sq. Ft. Dollars Sq. Ft. Leased Expirations Tenants Expiration Aurora, IL 313,000 $27,782,000 $88.76 96% 2% Builders Square 8/31/06 Baltimore, MD 135,000 6,863,000 50.84 100% 9% Kmart Corp. 11/30/05 Nashville, TN 111,400 4,002,000 35.92 98% 3% Burlington Coat Factory 1/31/10 Tampa, FL 100,600 8,492,000 84.41 93% 2% Publix Supermarket 11/30/06 Hagerstown, MD 40,200 1,496,000 37.21 100% -- Giant Food Stores, Inc. 12/31/04 Total 700,200 $48,635,000 $69.46 97% 3% ------- ----------- ------ --- --
Note: (a) See Note 2 of the Notes to Consolidated Financial Statements included under Item 14 of this Report. (continued) Item 2. Properties. (cont'd) - ------ ----------
1994 Scheduled Net Carrying Value Percentage Lease Lease INDUSTRIAL Sq. Ft. Dollars Sq. Ft. Leased Expirations Principal Tenants Expiration Wilmington, MA 294,000 $7,030,000 $23.91 100% -- Avon Dispatch 5/31/00 Nashville, TN 203,000 3,341,000 16.46 100% 54% Staton Inc. 8/23/94 North Charleston, SC 191,900 2,463,000 12.83 100% -- Mill Transportation 12/31/95 Brooklyn Center, MN 127,500 1,479,000 11.60 100% -- Hoffman Engineering 10/31/96 New Hope, MN 113,900 2,048,000 17.98 100% 53% Honeywell, Inc. 7/31/94 Plymouth, MN 111,200 2,416,000 21.73 98% 25% Robbinsdale Nurseries 12/31/96 Wilmington, MA 109,400 4,577,000 41.84 100% -- United Shoe Machinery 12/31/01 Andover, MA 105,500 7,235,000 68.58 100% -- ISI Systems, Inc. 4/30/99 New Hope, MN 96,000 1,976,000 20.58 100% -- Gaines & Hanson 4/30/97 New Hope, MN 96,000 1,713,000 17.84 100% -- A-Tek, Inc. 5/31/95 St. Louis, MO 95,600 2,221,000 23.23 100% 39% S.P. Richards 8/31/95 Bedford, MA 92,700 2,543,000 27.43 100% -- Imaging Technology 7/25/96 St. Louis, MO 85,400 1,611,000 18.86 100% -- Reynolds Metals Co. 5/11/04 Westwood, MA 77,400 1,565,000 20.22 100% -- PB Diagnostic Systems 5/8/97 Bedford, MA 70,600 2,244,000 31.78 100% -- Atex Publishing 7/31/98 St. Louis, MO 61,400 1,499,000 24.41 100% -- American Greetings 4/14/95 St. Louis, MO 61,200 1,586,000 25.92 100% -- Tyler Mountain Water 12/31/94 Billerica, MA 60,000 2,109,000 35.15 100% -- Colorgen 6/30/97 Blue Ash, OH 53,200 642,000 12.07 100% -- Aero Mailing 8/31/95 Brooklyn Center, MN 41,300 877,000 21.23 100% 44% HI-LO Manufacturing 11/30/95 St. Louis, MO 41,000 1,190,000 29.02 100% 43% National Service 3/31/95 Industries St. Louis, MO 40,900 1,413,000 34.55 80% 6% IBF Business Forms 6/30/98 Brooklyn Center, MN 40,300 1,074,000 26.65 100% -- Elvig Design 7/31/95 Blue Ash, OH 38,700 523,000 13.51 100% -- Ethicon 1/31/95 St. Louis, MO 35,600 1,929,000 54.19 100% 8% Interlock 3/31/95 Total 2,343,700 $57,304,000 $24.45 100% 12% --------- ----------- ------ ---- ---
1994 Scheduled Carrying Value Percentage Lease Lease OFFICE Sq. Ft. Dollars Sq. Ft. Leased Expirations Principal Tenants Expiration Franklin Township, NJ 178,600 $15,318,000 $85.77 97% 20% Merrill Lynch 6/30/97 Tampa, FL 122,400 9,986,000 81.58 93% 9% Bally 6/30/00 Framingham, MA 109,000 7,193,000 65.99 100% 21% IDG 10/12/94 Boston, MA 106,000 8,568,000 80.83 97% -- Cambridge Associates 4/26/99 Ann Arbor, MI 76,600 5,878,000 76.74 98% 2% Allen-Bradley Co. 5/31/95 Naperville, IL 63,800 4,383,000 68.70 86% 77% Crescent Counties 12/31/93 Foundation Greenville, SC 48,600 2,344,000 48.23 69% 11% S.C. Tax Commission 6/30/96 Greenville, SC 46,000 1,961,000 42.63 93% 14% S.C. Voc. Rehab. Dept.10/31/95 Charlotte, NC 16,300 928,000 56.93 47% -- Comprehensive Medical 9/30/95 Total 767,300 $56,559,000 $73.71 93% 17% ------- ----------- ------ --- --- Net Carrying Value Grand Total All Properties $228,646,000
Reference is made to Notes 1, 2 and 3 in the Notes to the Consolidated Financial Statement and Schedules XI and XII of the Financial Statement Schedules for descriptions of the Trust's investments and properties. Executive Office. - ---------------- The Trust's headquarters, at 30 Rowes Wharf, Boston, Massachusetts, includes approximately 5,400 square feet and is occupied under a lease expiring November 30, 1994. Item 3. Legal Proceedings. - ------ ----------------- The Trust is not a party to any material legal proceedings as to which it does not have adequate insurance coverage. Item 4. Submission of Matters to a - ------ Vote of Security Holders. ------------------------ Not applicable. PART II ------- Item 5. Market for Registrant's Common Equity - ------ and Related Stockholder Matters. ------------------------------- (a) Market Information and Dividends. The principal market on which the Trust's common shares are traded is the New York Stock Exchange, under the symbol MGI. The table below sets forth, for the fiscal quarters indicated, the high and low sales prices on the New York Stock Exchange of the Trust's common shares and dividends paid per common share. Fiscal Sales Price -------------------------- 1993 High Low Dividends ------ ---- --- --------- First Quarter 15 3/4 11 $.20 Second Quarter 16 1/2 13 $.20 Third Quarter 13 3/8 12 $.20 Fourth Quarter 15 1/8 12 3/4 $.21 Fiscal Sales Price -------------------------- 1992 High Low Dividends ------ ---- --- --------- First Quarter 12 1/2 9 5/8 $.20 Second Quarter 12 10 7/8 $.20 Third Quarter 12 1/8 11 1/8 $.20 Fourth Quarter 12 1/8 11 1/8 $.20 Future dividends will be determined by the Trust's Board of Trustees and will be dependent upon the earnings, financial position and cash requirements of the Trust and other relevant factors existing at the time. The Trust must distribute at least 95% of the Trust's taxable income in order to enable it to qualify as a real estate investment trust for tax purposes. So long as the Trust continues to qualify as a REIT, shareholders will, therefore, receive in the form of dividends at least 95% of the taxable income of the Trust. (b) Approximate Number of Holders of Common Shares. Approximate Number of Holders (as of Title of Class February 8, 1994) - ----------------------------------------------------- Common Shares, $1.00 3,219 par value Item 6. Selected Financial Data (a) - ------ ----------------------- (Not covered by Independent Auditors' Report)
Five years ended November 30, 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Summary of operations Income: Rental and other income $ 36,094,000 $ 27,928,000 $ 30,662,000 $ 29,036,000 $ 25,994,000 Interest on mortgage and other loans 54,000 1,686,000 1,697,000 1,622,000 1,909,000 Interest on investment securities 659,000 916,000 682,000 903,000 1,541,000 Other 91,000 59,000 90,000 -- 142,000 ---------- ---------- ---------- ---------- --------- Total income 36,898,000 30,589,000 33,131,000 31,561,000 29,586,000 ---------- ---------- ---------- ---------- ---------- Expense: Property operating expenses and real estate taxes 14,704,000 11,442,000 12,442,000 11,334,000 10,548,000 Depreciation and amortization 6,987,000 5,996,000 5,974,000 5,552,000 4,556,000 Interest 5,059,000 5,511,000 6,429,000 5,925,000 4,684,000 General and administrative 2,191,000 2,036,000 2,108,000 2,208,000 2,373,000 ---------- ---------- ---------- ---------- ---------- Total expenses 28,941,000 24,985,000 26,953,000 25,019,000 22,161,000 ---------- ---------- ---------- ---------- ---------- Income before net gains and losses 7,957,000 5,604,000 6,178,000 6,542,000 7,425,000 Net Gains (losses) -- 1,644,000 -- (360,000) 310,000 ---------- ---------- ---------- ----------- ---------- Net income $7,957,000 $7,248,000 $6,178,000 $6,182,000 $7,735,000 ---------- ---------- ---------- ---------- ---------- Per share data (b): Income before net gains and losses $ .75 $ .60 $ .66 $ .70 $ .80 Net gains (losses) -- .17 -- (.04) .03 ----- ----- ---- ------ ----- Net income $ .75 $ .77 $ .66 $ .66 $ .83 ----- ----- ----- ----- ----- Funds from operations $1.42 $1.24 $1.30 $1.29 $1.34 ----- ----- ----- ----- ----- Dividends $ .81 $ .80 $ .80 $1.04 $1.36 ----- ----- ----- ----- ----- Summary of financial position: Investments in real estate $258,663,000 $209,905,000 $208,011,000 $205,993,000 $173,973,000 ------------ ------------ ------------ ------------ ------------ Mortgage and other loans receivable -- $ 5,880,000 $ 18,419,000 $ 18,260,000 $ 22,775,000 ------------ ------------ ------------ ------------ ------------ Investment securities $ 11,089,000 $ 16,721,000 $ 8,767,000 $ 10,758,000 $ 13,235,000 ------------ ------------ ------------ ------------ ------------ Total assets $246,700,000 $214,161,000 $217,428,000 $222,434,000 $202,716,000 ------------ ------------ ------------ ------------ ------------ Mortgage and other loans payable $ 66,949,000 $ 60,571,000 $ 67,852,000 $ 71,304,000 $ 48,953,000 ------------ ------------ ------------ ------------ ------------ Total shareholders' equity $171,039,000 $145,748,000 $145,873,000 $147,213,000 $151,085,000 ------------ ------------ ------------ ------------ ------------ Weighted average number of shares outstanding 10,574,104 9,402,476 9,396,992 9,400,559 9,329,124 ---------- --------- --------- --------- --------- Notes: (a) Reference is made to the Index to Consolidated Financial Statements filed as a part of this report under Item 14. Item 6, Selected Financial Data, should be read in conjunction with the Consolidated Financial Statements and the related notes appearing therein. (b) The assumed conversion of outstanding options results in dilution of less than 3%. (continued)
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. --------------------------------------------- Liquidity and Capital Resources - ------------------------------- At November 30, 1993 financial liquidity was provided by $12.7 million in cash and investment securities and by an unused $10.0 million line of credit. Shareholders' equity of $171.0 million at November 30, 1993, when compared to $145.7 million at November 30, 1992, reflects net proceeds of $25.6 million received in connection with the May 6, 1993 public offering of 2,000,000 common shares, dividends of $0.5 million paid in excess of net income and, to a lesser extent, treasury stock issued in connection with stock options exercised. Sources of funds in 1993 included the public sale of common shares, operations, interest income and the Trust's portfolio of investment securities. In 1993, these resources were used to: (i) acquire ten industrial properties and two office buildings, totaling 950,300 square feet and 215,000 square feet of space, respectively, for an aggregate of $41.1 million cash and a $6.6 million wrap-around mortgage loan of which MGI had been the lender, (ii) pay dividends of $8.5 million, (iii) repay debt of $7.7 million, and (iv) fund $2.7 million of tenant and capital improvements. Total mortgage and other loans payable aggregated $66.9 million at November 30, 1993, a net increase of $6.3 million compared to $60.6 million at November 30, 1992. The increase resulted from the addition of $14.0 million of debt (which included $0.7 million of debt in connection with the acquisition of four industrial buildings), offset by scheduled amortization payments of $0.9 million, a $5.6 million repayment of a maturing loan and prepayments of $1.1 million (which included $0.7 million in connection with the amendment and assignment of a lease at Yorkshire Plaza located in Aurora, Illinois and $0.4 million related to three first mortgages acquired in connection with three industrial buildings). Mortgage and other loans payable are collateralized by sixteen of MGI's properties having an aggregate carrying value of $115.8 million, $3.2 million of investment securities and MGI's guarantees of $9.2 million. Subsequent to November 30, 1993, mortgage loans payable increased by $2.2 million as MGI received the balance of the proceeds of a loan which closed in November 1993. Loans payable due within twelve months of November 30, 1993 totaled $18.7 million, including a $6.3 million 12.75% loan with an April 1994 maturity and a $11.2 million floating rate loan with a September 1994 maturity. MGI has commenced, on a preliminary basis, several mortgage financing initiatives. If MGI proceeds with all of these borrowing initiatives a net increase in outstanding debt of approximately $30,000,000 may result. Despite the generally reduced availability of real estate financing, MGI believes it will be successful extending or refinancing maturing mortgage loans upon satisfactory terms although there can be no assurance thereof. In December 1993, MGI acquired two industrial/research and development buildings, one totaling 100,000 square feet and the other 56,300 square feet, located in suburban Boston, Massachusetts for an aggregate price of $6.3 million cash. Both buildings are 100% occupied by the same publicly- traded tenant with leases that expire in June 1998 and December 1999. Other cash requirements in 1994 are distributions to shareholders, capital and tenant improvements and other leasing expenditures required to maintain MGI's occupancy levels and other investment undertakings. During the period 1990 through 1993, annual expenditures for capital and tenant improvements averaged approximately 1.2% of real estate investments. In 1994 budgeted capital and tenant improvements which are based on assumed leasing activity, completion of discretionary capital projects and estimated costs, approximates 1.7% of real estate investments. Principal sources of funds in the future are expected to be from operations of properties including those acquired in the future, mortgaging or refinancing existing mortgages on properties and MGI's portfolio of investment securities. Other potential sources of funds may include the proceeds of offerings of additional equity or debt securities or the sale of real estate investments. The cost of new borrowings or issuances of equity capital will be measured against the anticipated yields of investments to be acquired with such funds. Following the December 1993 acquisition of two buildings, the purchase of additional properties in 1994 may require the use of funds from MGI's line of credit, new borrowings, the sale of properties currently owned or the issuance of equity securities. MGI believes the combination, at November 30, 1993, of cash and investment securities, the value of MGI's unencumbered properties, and other resources are sufficient to meet its short and long term liquidity requirements. Results of Operations - --------------------- Net income for 1993 of $8.0 million, or $0.75 per share on the greater number of shares outstanding, exceeded net income of $7.2 million, or $0.77 per share, in 1992. Included in net income in 1992 was a net gain of $1.6 million, or $.17 per share. Funds from operations in 1993 totaled $15.0 million, or $1.42 per share on the greater number of shares outstanding, compared to $11.7 million, or $1.24 per share, in 1992. MGI defines funds from operations as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring, sales of property and similar non-cash items, depreciation and amortization charges, and equity method partnership losses. MGI believes funds from operations is an appropriate supplemental measure of operating performance. The change in funds from operations is attributable to the same factors that affected income before net gains, with the exception of depreciation and amortization expense. The increase in income before net gains when comparing 1993 to 1992 resulted principally from the increase in properties owned and the receipt of a non-recurring fee. As a result, rental and other income, property operating expenses, real estate tax expense, depreciation and amortization expense increased and mortgage interest income decreased in 1993. The $8.2 million increase in rental and other income in 1993 compared to 1992 was principally the result of (i) $3.6 million from the properties acquired in 1993, (ii) $2.4 million related to the reclassification of MGI's investment in a Metairie, Louisiana apartment complex to owned real estate from a mortgage receivable, (iii) $1.0 million of non-recurring income received in connection with the assignment and amendment of a lease at Yorkshire Plaza, Aurora, Illinois, (iv) $0.8 million due to the partial year ownership of properties acquired in 1992 and (v) the $0.4 million increase from the balance of the portfolio. The $2.4 million increase in property operating expenses and the $0.9 million increase in real estate taxes in 1993 as compared to 1992, reflect primarily (i) $1.0 million and $0.1 million, respectively, related to the Metairie, Louisiana apartment complex, (ii) $0.8 million and $0.6 million, respectively, from the properties acquired in 1993, (iii) $0.2 million and $0.1 million, respectively, due to the buildings acquired in 1992 and (iv) $0.4 million and $0.1 million, respectively, from the balance of the portfolio. The $1.0 million increase in depreciation and amortization expense for 1993 when compared to 1992 was mostly due to partial year ownership of the properties acquired in 1993 and 1992 ($0.4 million) and the Louisiana apartment complex ($0.5 million). The $1.6 million decrease in mortgage interest income in 1993 is due to the reclassification of the Metairie, Louisiana investment to real estate owned and the acquisition by MGI of the four properties that secured a $6.6 million MGI wrap-around mortgage loan. Three additional factors also contributed to the increase in income before net gains and funds from operations when 1993 is compared to 1992. Interest income in 1993 reflects a decrease in the average outstanding balance of short-term investments and lower interest rates. General and administrative expenses increased in 1993 primarily reflecting an increase in personnel. Lower average levels of debt outstanding, combined with lower interest rates on variable rate debt, resulted in decreased interest expense of $0.5 million when 1993 is compared to 1992. Average occupancy levels of 94% in 1993 were higher than the level achieved in 1992. Average occupancy of MGI's industrial properties was 96% in 1993 compared to 92% for 1992. Average occupancy of MGI's office buildings was 94% in 1993 and 91% in 1992. Retail average occupancy during 1993 was 92% compared to 90% in 1992. Average residential occupancy at 94% in 1993 was comparable to 1992. At November 30, 1993, scheduled 1994 lease expirations for non- residential space approximates 426,000 square feet, or 11% of the entire commercial portfolio. Of the scheduled 1994 expirations, 275,000 square feet is industrial space, 128,000 square feet is office and 23,000 is retail. During the second half of 1993, MGI was notified that a 40,000 square-foot tenant in a suburban Chicago, Illinois office building was not renewing its lease upon its December 31, 1993 expiration. This tenant contributed annual rental revenues of approximately $0.6 million. Although MGI believes that the rental rates for this tenant's lease is at or below current market rents, rents paid by replacement tenants for this space could be modestly below the existing rent, depending on length of vacancy, tenant size and other market factors. Net income for 1992 of $7.2 million, or $.77 per share, exceeded net income of $6.2 million, or $.66 per share, for 1991. Net income in 1992 included net gains of $1.6 million. Funds from operations totaled $11.7 million, or $1.24 per share, in 1992 compared to $12.2 million, or $1.30 per share, in 1991. The changes in 1992 income before net gains when compared to 1991 were the result of various factors. The principal factors were the sale of an interest in a California apartment complex ("the San Bruno Transaction"), the acquisitions of two industrial properties and lower interest expense. The $2.7 million decline in rental and other income was the result of a $3.3 million decrease in rental income from the San Bruno Transaction offset by the increase of $0.3 million from the partial-year ownership of the 1992 acquisitions and $0.3 million of increased revenues from the other properties. Property operating expenses, including real estate taxes, decreased $1.0 million as a result of a $1.4 million decrease in operating expenses from the San Bruno Transaction, an increase of $0.1 million in such expenses from the properties acquired in 1992 and an increase of $0.3 million from other properties. Depreciation and amortization expense was $6.0 million in both 1992 and 1991. A decrease in depreciation and amortization expense related to the San Bruno Transaction was offset by an increase related to the 1992 acquisitions and increased amortization expense related to tenant improvements. The $0.9 million decrease in interest expense for 1992 when compared to 1991 was the result of the decrease in debt outstanding combined with lower interest rates on variable rate debt. Increased levels of funds available to invest in 1992, due to the San Bruno Transaction, produced an increase in interest income on investment securities for 1992 when compared to 1991, which offset the lower interest rates generally available in 1992 for short- term investments. Net gains in 1992 included a $3.7 million gain related to the repayment of approximately $18.8 million of the outstanding financing provided to the partnership owning a San Bruno, California apartment complex. This repayment effected the partial sale of the Trust's interest for financial accounting purposes. Previously this property was carried as a real estate investment since a 1976 sale had not met the financial accounting conditions for a completed sale. In addition, MGI deferred $3.7 million of gain related to this property. Partially offsetting this gain was a $2.1 million write-down recorded in connection with the reclassification of the Trust's mortgage loan receivable on a Metairie, Louisiana apartment complex to owned real estate at November 30, 1992. Real estate investments and operations are subject to a number of factors including changes in general economic climate, local conditions (such as an oversupply of space, a decline in effective rents or a reduction in the demand for real estate), competition from other available space, the ability of the owner to provide adequate maintenance, to fund capital and tenant improvements required to maintain market position and control of operating costs. In certain markets in which the Trust owns real estate, overbuilding and local or national economic conditions have combined to produce lower effective rents and/or longer absorption periods for vacant space. As the Trust re-leases space, certain effective rents may be less than those earned previously. Management believes its diversification by region and property type reduces the risks associated with these factors and enhances opportunities for cash flow growth and capital gains potential, although there can be no assurance thereof. During the past three fiscal years, the impact of inflation on MGI's operations and investment activity has not been significant. Item 8. Financial Statements and Supplementary Data. - ------ ------------------------------------------- The financial statements and supplementary data are included under Item 14 of this Report. Item 9. Changes in and Disagreements with Accountants on - ------ Accounting and Financial Disclosure. ----------------------------------- None. PART III -------- The information required by Items 10, 11, 12 and 13 of this Part III has been omitted from this Report since the Registrant intends to file with the Securities and Exchange Commission a definitive proxy statement which involves the election of Trustees not later than 120 days after the close of the Registrant's last fiscal year. PART IV ------- Item 14. Exhibits, Financial Statement Schedules - ------- and Reports on Form 8-K. --------------------------------------- (a) 1. CONSOLIDATED FINANCIAL STATEMENTS INDEX - ----- Independent Auditors' Report Financial Statements: Consolidated Balance Sheets, November 30, 1993 and 1992 Consolidated Statements of Earnings, Years ended November 30, 1993, 1992 and 1991 Consolidated Statements of Changes in Shareholders' Equity, Years ended November 30, 1993, 1992 and 1991 Consolidated Statements of Cash Flows, Years ended November 30, 1993, 1992 and 1991 Notes to Consolidated Financial Statements 2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES Schedules (as of or for the year ended November 30, 1993): Schedule X, Supplementary Income Statement Information Schedule XI, Real Estate and Accumulated Depreciation Schedule XII, Mortgage Loans on Real Estate Exhibit XI - Computation of Net Income Per Share, Assuming Full Dilution Other schedules are omitted for the reasons that they are not required, are not applicable, or the required information is set forth in the financial statements or notes thereto. 3. EXHIBITS* Sequentially Numbered Page ------------- 3(a) Second Amended and Restated Declaration of Trust, incorporated by reference to Exhibit 3 of the Trust's Annual Report on Form 10-K for the fiscal year ended November 30, 1981 (the "1981 10-K"). (b) Certificate of First Amendment of Second Amended and Restated Declaration of Trust, incorporated by reference to Exhibit 3 of the 1981 10-K. (c) Certificate of Second Amendment of Second Amended and Restated Declaration of Trust, incorporated by reference to the Trust's Report on Form 8-K, filed on January 13, 1983. (d) Certificate of Third Amendment of Second Amended and Restated Declaration of Trust, incorporated by reference to Exhibit 3(d) to Amendment No. 1 to the Trust's Registration Statement on Form S-2 filed on June 7, 1985. (e) Certificate of Fourth Amendment of Second Amended and Restated Declaration of Trust, dated October 17, 1986, incorporated by reference to the Trust's Annual Report on Form 10-K for the year ended November 30, 1986. (f) Certificate of Fifth Amendment of Second Amended and Restated Declaration of Trust, dated March 25, 1987, incorporated by reference to Exhibit 3(f) of the Trust's Annual Report on Form 10-K for the fiscal year ended November 30, 1987. (g) Certificate of Sixth Amendment of Second Amended and Restated Declaration of Trust, dated February 10, 1988, incorporated by reference to Exhibit 4(g) of the Trust's Registration Statement on Form S-8 filed on May 3, 1988. (h) Certificate of Seventh Amendment of Second Amended and Restated Declaration of Trust, dated June 30, 1988, incorporated by reference to Exhibit 4.8 of the Trust's Registration Statement on Form S-4 filed on November 10, 1988 (Reg. No. 33-25495). (i) Certificate of Eighth Amendment of Second Amended and Restated Declaration of Trust, dated March 27, 1989, incorporated by reference to Exhibit 3(i) of the Trust's Annual Report on Form 10-K for the fiscal year ended November 30, 1989 (the "1989 10- K"). (j) By-Laws, incorporated by reference to the Trust's Report on Form 8-K, filed on January 12, 1983. (k) Certificate of Amendment of By-Laws, dated March 21, 1989, incorporated by reference to the Trust's Report on Form 8-K dated March 21, 1989. (l) Rights Agreement, dated as of June 21, 1989 between the Trust and The First National Bank of Boston as Rights Agent, incorporated by reference to Exhibit 1 to the Trust's Registration Statement on Form 8-A, filed on June 27, 1989. (m) Certificate of Vote of the Trustees Designating a Series of Preferred Shares, dated June 21, 1989, incorporated by reference to Exhibit 3(m) of the 1989 10-K. 10(a) Mortgage Growth Investors Incentive Stock Option Plan for Key Employees, incorporated by reference to the Trust's Definitive Proxy Statement dated March 15, 1982. (b) Mortgage Growth Investors Stock 1982 Option Plan For Trustees, incorporated by reference to the Trust's Definitive Proxy Statement dated March 15, 1982. (c) MGI Properties 1988 Stock Option and Stock Appreciation Rights Plans for Key Employees and Trustees, incorporated by reference to the Trust's Definitive Proxy Statement, dated February 19, 1988. (d) Amendment to MGI Properties' 1982 Incentive Stock Option Plan for Key Employees, dated as of December 19, 1989, incorporated by reference to Exhibit 10(d) of the 1989 10- K. (e) Amendment to MGI Properties' 1982 Stock Option Plan for Trustees, dated as of December 19, 1989, incorporated by reference to Exhibit 10(e) of the 1989 10- K. (f) Amendment to MGI Properties' 1988 Stock Option and Stock Appreciation Rights Plan for Key Employees, dated as of December 19, 1989, incorporated by reference to Exhibit 10(f) of the 1989 10-K. (g) Amendment to MGI Properties' 1988 Stock Option Plan for Trustees, dated as of December 19, 1989, incorporated by reference to Exhibit 10(g) of the 1989 10- K. (h) Amended and Restated Severance Compensation Plan, dated as of December 19, 1989, incorporated by reference to Exhibit 10(i) of the 1989 10-K. (i) Amended and Restated MGI Properties Long Term Share Bonus Plan, dated December 18, 1991, incorporated by reference to Exhibit 10(i) of the 1991 10-K. (j) Purchase Agreement, dated December 29, 1992, among West Port Park, Inc., a Massachusetts corporation, those persons named on Schedule A thereto, MGI Properties and MGI West Port, Inc., a Delaware corporation, incorporated by reference to the Trust's Report on Form 8-K, filed on February 14, 1994 (the "1994 8-K") (k) Agreement of Sale, dated as of May 7, 1993, among MGI Properties and Continental Bank, National Association, as successor trustee, and Jesse B. Morgan and Thomas E. Meador, as co-trustees, incorporated by reference to the Trust's 1994 8-K. (l) Agreement of Purchase and Sale, dated as of April 6, 1993, between MGI Properties and Hexalon Real Estate, Inc., incorporated by reference to the Trust's 1994 8-K. (m) Contract of Sale, effective June 1, 1993, between Nationwide Life Insurance Company and MGI Properties, incorporated by reference to the Trust's 1994 8-K. (n) Real Estate Sale Agreement, dated as of July 16, 1993, between The Travelers Insurance Company and MGI Properties, incorporated by reference to the Trust's 1994 8-K. (o) Agreement to Purchase Real Property, dated July 23, 1993, between Bedford Property Investors, Inc. and MGI Properties, incorporated by reference to the Trust's 1994 8-K. (p) Agreement for Purchase and Sale of Property, dated as of October 21, 1993, between New York Life Insurance Company, MGI Properties and Sherburne, Powers & Needham, P.C., as escrow agent, incorporated by reference to the Trust's 1994 8-K. (q) Purchase and Sale Agreement, dated as of October 1, 1993, between The Boston Finance Company and MGI Properties, incorporated by reference to the Trust's 1994 8-K. (r) Real Estate Sale Contract, dated as of November 1993, between The Prudential Insurance Company of America and MGI Properties, incorporated by reference to the Trust's 1994 8-K. 11 Computation of Net Income Per Share, Assuming Full Dilution, included under Item 14 of this Report. 24 Auditors' consent to the incorporation by reference in the Trust's Registration Statements on Form S-8 of the independent auditor's report included herein. * On file at Securities and Exchange Commission as indicated. (b) REPORTS ON FORM 8-K: No reports on Form 8-K were filed during the fourth quarter of the fiscal year ended November 30, 1993. ------------------------- MGI Properties (the "Trust") is a Massachusetts business trust and all persons dealing with the Trust must look solely to the property of the Trust for the enforcement of any claims against the Trust. Neither the Trustees, officers, agents nor shareholders of the Trust assume any personal liability in connection with its business or assume any personal liability for obligations entered into in its behalf. POWER OF ATTORNEY ----------------- MGI Properties and each of the undersigned do hereby appoint W. Pearce Coues and Phillip C. Vitali and each of them severally, its or his true and lawful attorneys to execute on behalf of MGI Properties and the undersigned any and all amendments to this Report and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. Each of such attorneys shall have the power to act hereunder with or without the other. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 17, 1994 MGI PROPERTIES (Registrant) By: /s/ W. Pearce Coues ---------------------------- W. Pearce Coues, Chairman of the Board of Trustees Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date - --------- ----- ---- /s/ W. Pearce Coues Chairman of the Board February 17, 1994 - ------------------------- of Trustees and Chief W. Pearce Coues Executive Officer /s/ Phillip C. Vitali Principal Financial Officer February 17, 1994 - ------------------------- and Principal Accounting Phillip C. Vitali Officer /s/ Herbert D. Conant Trustee February 17, 1994 - ------------------------- Herbert D. Conant /s/ Francis P. Gunning Trustee February 17, 1994 - ------------------------- Francis P. Gunning /s/ Colin C. Hampton Trustee February 17, 1994 - ------------------------- Colin C. Hampton /s/ George M. Lovejoy, Jr. Trustee February 17, 1994 - -------------------------- George M. Lovejoy, Jr. /s/ Rodger P. Nordblom Trustee February 17, 1994 - ------------------------- Rodger P. Nordblom /s/ John R. White Trustee February 17, 1994 - ------------------------- John R. White UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS November 30, 1993 MGI PROPERTIES MGI PROPERTIES Index to Consolidated Financial Statements and Schedules Page Independent Auditors' Report 1 Financial Statements: Consolidated Balance Sheets, November 30, 1993 and 1992 2 Consolidated Statements of Earnings, Years ended November 30, 1993, 1992 and 1991 3 Consolidated Statements of Cash Flows, Years ended November 30, 1993, 1992 and 1991 4 Consolidated Statements of Changes in Shareholders' Equity, Years ended November 30, 1993, 1992 and 1991 5 Notes to Consolidated Financial Statements 6-11 Schedules (as of or for the year ended November 30, 1993): Schedule X - Supplementary Income Statement Information Schedule XI - Real Estate and Accumulated Depreciation Schedule XII - Mortgage and Other Loans on Real Estate Exhibit XI - Computation of Net Income Per Share, Assuming Full Dilution Other schedules are omitted as they are not required, are not applicable, or the required information is set forth in the consolidated financial statements or notes thereto. Independent Auditors' Report The Board of Trustees and Shareholders MGI Properties: We have audited the consolidated financial statements of MGI Properties and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Trust's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MGI Properties and subsidiaries as of November 30, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended November 30, 1993 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK Boston, Massachusetts January 6, 1994 MGI PROPERTIES Consolidated Balance Sheets November 30, 1993 and 1992
Assets 1993 1992 Investments (notes 2, 3 and 4): Real estate, at cost $258,663,000 $209,905,000 Accumulated depreciation and amortization (29,992,000) (24,583,000) Net investments in real estate 228,671,000 185,322,000 Mortgage loan - 5,880,000 Total investments 228,671,000 191,202,000 Cash 1,564,000 1,027,000 Short-term investments, at cost, which approximates market value (note 4) 10,252,000 15,104,000 U.S. Government securities, at cost, which approximates market value (note 4) 837,000 1,617,000 Other assets 5,376,000 5,211,000 $246,700,000 $214,161,000 Liabilities and Shareholders' Equity Liabilities: Mortgage and other loans payable (note 4) $66,949,000 $60,571,000 Other liabilities 5,012,000 4,142,000 Total liabilities 71,961,000 64,713,000 Deferred gain (note 2) 3,700,000 3,700,000 Commitments (note 7) Shareholders' equity (notes 5 and 6): Preferred shares - $1 par value: 2,000,000 shares authorized; none issued - - Common shares - $1 par value: 15,000,000 shares authorized; 11,448,152 issued (9,448,152 at November 30, 1992) 11,448,000 9,448,000 Additional paid-in capital 165,673,000 142,060,000 Distributions in excess of net income (5,935,000) (5,432,000) 171,186,000 146,076,000 14,431 shares in treasury (33,160 at November 30, 1992), at cost (147,000) (328,000) Total shareholders' equity 171,039,000 145,748,000 $246,700,000 $214,161,000
See accompanying notes to consolidated financial statements. MGI PROPERTIES Consolidated Statements of Earnings
Year ended November 30, 1993 1992 1991 Income: Rental and other income $36,094,000 $27,928,000 $30,662,000 Interest on mortgage loans 54,000 1,686,000 1,697,000 Interest on investment securities 659,000 916,000 682,000 Other 91,000 59,000 90,000 Total income 36,898,000 30,589,000 33,131,000 Expenses: Property operating expenses 10,457,000 8,089,000 8,993,000 Real estate taxes 4,247,000 3,353,000 3,449,000 Depreciation and amortization 6,987,000 5,996,000 5,974,000 Interest 5,059,000 5,511,000 6,429,000 General and administrative 2,191,000 2,036,000 2,108,000 Total expenses 28,941,000 24,985,000 26,953,000 Income before net gains 7,957,000 5,604,000 6,178,000 Net gains - 1,644,000 - Net income $7,957,000 $7,248,000 $6,178,000 Per share data: Income before net gains $.75 $.60 $.66 Net gains - .17 - Net income $.75 $.77 $.66 Weighted average shares outstanding 10,574,104 9,402,476 9,396,992
See accompanying notes to consolidated financial statements. MGI PROPERTIES Consolidated Statements of Cash Flows
Year ended November 30, 1993 1992 1991 Cash flows from operating activities: Net income $7,957,000 $7,248,000 $6,178,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,987,000 5,996,000 5,974,000 Net gains - (1,644,000) - Equity in losses of partnerships 45,000 90,000 19,000 Other 803,000 903,000 (633,000) Net cash provided by operating activities 15,792,000 12,593,000 11,538,000 Cash flows from investing activities: Acquisitions of and additions to real estate (43,635,000) (8,476,000) (2,296,000) Proceeds from sale of real estate interest - 18,773,000 - Additions and advances on mortgage loans receivable (79,000) (235,000) (154,000) Decrease in U.S. Government securities, net 780,000 625,000 2,686,000 Other (85,000) 154,000 (129,000) Net cash provided by (used in) investing activities (43,019,000) 10,841,000 107,000 Cash flows from financing activities: Proceeds from sale of common shares, net 25,640,000 - - Repayment of mortgage and other loans payable (7,688,000) (7,227,000) (13,952,000) Additions to mortgage and other loans payable 13,338,000 - 10,500,000 Cash distributions paid (8,460,000) (7,523,000) (7,518,000) Treasury stock transactions 82,000 115,000 - Net cash provided by (used in) financing activities 22,912,000 (14,635,000) (10,970,000) Net increase (decrease) in cash and short-term investments (4,315,000) 8,799,000 675,000 Cash and cash equivalents: Beginning of year 16,131,000 7,332,000 6,657,000 End of year $11,816,000 $16,131,000 $7,332,000
See accompanying notes to consolidated financial statements. MGI PROPERTIES Consolidated Statements of Changes in Shareholders' Equity
Undistributed Number Additional (distributions Total of common Common paid-in in excess of) Treasury shareholders' shares issued shares capital net income shares equity Balance at November 30, 1990 9,448,152 $9,448,000 $142,089,000 $(3,817,000) $(507,000) $147,213,000 Net income - - - 6,178,000 - 6,178,000 Distributions (note 6) - - - (7,518,000) - (7,518,000) Balance at November 30, 1991 9,448,152 9,448,000 142,089,000 (5,157,000) (507,000) 145,873,000 Net income - - - 7,248,000 - 7,248,000 Distributions (note 6) - - - (7,523,000) - (7,523,000) Options exercised and other - - (29,000) - 179,000 150,000 Balance at November 30, 1992 9,448,152 9,448,000 142,060,000 ( 5,432,000) (328,000) 145,748,000 Net income - - - 7,957,000 - 7,957,000 Sale of common shares 2,000,000 2,000,000 23,640,000 - - 25,640,000 Distributions (note 6) - - - (8,460,000) - (8,460,000) Options exercised and other - - (27,000) - 181,000 154,000 Balance at November 30, 1993 11,448,152 $11,448,000 $165,673,000 $(5,935,000) $(147,000) $171,039,000
See accompanying notes to consolidated financial statements. MGI PROPERTIES Notes to Consolidated Financial Statements (1) Summary of Significant Accounting Policies (a) Consolidation The consolidated financial statements of the Trust include the accounts of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. (b) Income Taxes The Trust intends to continue to qualify to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code of 1986 and the related regulations. In order to qualify as a real estate investment trust for tax purposes, the Trust, among other things, must distribute to shareholders at least 95% of its taxable income. It has been the Trust's policy to distribute 100% of its taxable income to shareholders; accordingly, no provision has been made for Federal income taxes. (c) Income and Expense Recognition Income and expenses are recorded using the accrual method of accounting for financial reporting and tax purposes. Income or loss from real estate partnerships is accounted for according to generally accepted accounting principles using either the cost method or the equity method. (d) Depreciation and Amortization Real estate investments, excluding land costs, are depreciated using the straight-line method over estimated useful lives of 20 to 40 years. Tenant improvements are amortized over the shorter of their estimated useful lives or lease terms ranging from 2 to 10 years. Equipment is depreciated over 5, 10 or 20 years. Maintenance and repairs are charged to expense as incurred; major improvements are capitalized. (e) Statements of Cash Flows For purposes of the statements of cash flows, all short-term investments with a maturity, at date of purchase, of three months or less are considered to be cash equivalents. During 1993, the Trust purchased four industrial properties for $6.8 million. The purchase price consisted of cash and a $6.6 million mortgage loan receivable. Only the cash portion of the purchase price is reflected in the accompanying consolidated statement of cash flows. Mortgage loans payable assumed with the acquisition of real estate investments amounted to $.7 million for the year ended November 30, 1993. Cash interest payments of $5.3 million, $5.5 million and $6.5 million were made for the years ended November 30, 1993, 1992 and 1991, respectively. (f) Fair Value of Financial Instruments The Trust estimated the fair values of its financial instruments at November 30, 1993 using discounted cash flow analysis and quoted market prices. Such financial instruments include short-term investments, U.S. Government securities, mortgage and other loans payable and mortgage notes receivable which were received in connection with transactions not qualifying as sales for financial accounting purposes and accordingly not reflected in the Trust's consolidated balance sheet. The excess of the aggregate fair value of the Trust's financial instruments over their aggregate carrying amounts is not material. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements (g) Net Income Per Share Net income per share is computed based on the weighted average number of common shares outstanding. (2) Investments (a) Real Estate A summary of real estate investments follows:
Accumulated Buildings depreciation Type of and and Net carrying amount Investment Land improvements amortization 1993 1992 Apartment $11,034,000 $65,778,000 $(12,807,000) $64,005,000 $66,029,000 Retail 19,110,000 34,088,000 (4,563,000) 48,635,000 48,943,000 Office 12,461,000 52,769,000 (8,671,000) 56,559,000 42,726,000 Industrial 14,491,000 46,764,000 (3,951,000) 57,304,000 25,411,000 Partnership - - - 2,143,000 2,188,000 Land 25,000 - - 25,000 25,000 $57,121,000 $199,399,000 $(29,992,000) $228,671,000 $185,322,000
A discussion of certain real estate investments follows: In 1982, the Trust sold its investment in a Michigan apartment complex and received a $15.5 million purchase money mortgage in a transaction that did not meet the conditions for a completed sale for financial accounting purposes. The loan, which matures in February 1995, has an interest rate of 7% and provides for the Trust to receive at least 50% but not more than 60% of the shared appreciation value in excess of the outstanding note balance. In addition, the Trust has a 35% ownership interest, direct and indirect, in the partnership owning this complex. The Trust's purchase option expires in February 1995 and allows it to obtain a maximum equity interest of 67.5%. At November 30, 1993, the Trust carried this asset as a real estate investment at a net carrying value of $7.5 million, which excludes the gain from the sale. At November 30, 1992, the Trust began to account for its loan on a Metairie, Louisiana apartment complex as real estate owned. The Trust had been recognizing interest income ($1.1 million in 1992 and 1991) on the related mortgage loan as received. During 1993, the Trust has recognized property income and expenses as if it owned the property. For tax purposes, this investment is reflected as a $14.1 million, 8.5% mortgage loan receivable at November 30, 1993. With respect to a California partnership investment, the Trust is entitled to receive 50% of property cash flow and residuals through a 2% limited partnership interest (carrying value of $225,000) and has an option to increase its equity interest. In addition, the Trust has a loan receivable from the partnership with a $3.1 million tax basis. Such loan is not recorded in the accompanying financial statements. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements (b) Mortgage Loan At November 30, 1992, the Trust had reached agreement with the borrower to purchase the four industrial properties securing this $5.9 million wrap-around mortgage loan for a price of $225,000 over the mortgage face value (face value $6.6 million). The acquisition of these buildings was completed December 31, 1992. This loan was subordinate to prior liens which aggregated $.7 million. (c) Other Gains In 1992, the Trust recognized a gain of $3.7 million and deferred an additional gain of $3.7 million, which was effectuated by the December 1991 repayment of approximately $18.8 million of financing it had provided to the partnership owning a San Bruno, California apartment complex. Prior to the completion of the December 1991 transaction, a 1976 sale had not met the conditions for a completed sale and the Trust carried this property as a real estate investment for financial accounting purposes. In addition, in 1992, the Trust recognized a $2.1 million write-down of the Metairie, Louisiana investment discussed above. (3) Leases All leases relating to real estate investments are operating leases; accordingly, rental income is reported when earned. Future minimum lease payments on noncancelable operating leases at commercial properties at November 30, 1993 are: $23.0 million in 1994, $19.5 million in 1995, $16.4 million in 1996, $12.4 million in 1997, $9.1 million in 1998, and $22.2 million thereafter. The above amounts do not include contingent rental income which is received under certain leases based upon tenant sales, ad valorem taxes, property operating expenses and/or costs to maintain common areas. Contingent rental income was $3.4 million in 1993 and $2.6 million in 1992 and 1991. Operating leases on apartments generally have a term of one year or less. (4) Mortgage and Other Loans Payable
Mortgage and other loans payable at November 30 follow: 1993 1992 Mortgage loans, maturing 1994 through 2010, at interest rates ranging from 7.58% to 12.75%, net of unamortized discount of $31,000 in 1993 and $41,000 in 1992 $49,918,000 $43,288,000 Mortgage loan, maturing in September 1994 at a variable interest rate, 5.25% and 6.56% at November 30, 1993 and 1992, respectively 11,185,000 11,437,000 Housing revenue bond, maturing 2007, at 4.28% and 6.68% at November 30, 1993 and 1992, respectively 5,750,000 5,750,000 Other, maturing 1995, at 7.50% 96,000 96,000 $66,949,000 $60,571,000 Weighted average interest rate 8.52% 8.81%
(Continued) MGI PROPERTIES Notes to Consolidated Financial Statements Mortgage loans payable are nonrecourse and are collateralized by certain real estate investments having a net carrying value of $115.8 million and the Trust's guarantee of $6.2 million. Loans require monthly principal amortization and/or a balloon payment at maturity. The mortgage loan maturing in September 1994 and a $10.0 million line of credit are part of a credit agreement which requires the Trust to maintain compensating balances of 4% of the outstanding loan balance in non-interest bearing accounts with the lender or pay a deficiency fee. The credit agreement contains restrictive covenants which, among other things, require the Trust to maintain certain financial ratios and restricts the incurrence of certain additional indebtedness and the making of certain investments. No borrowing under this line of credit was outstanding during the fiscal year. In connection with this line, a fee is charged on the unused amount. The housing revenue bond is tax exempt and is secured by real estate having a net carrying value of $5.1 million. The bond is also secured by a letter of credit which is collateralized by $3.2 million of short-term investments and U.S. Government securities. The Trust has also guaranteed $3.0 million of the debt. The base interest rate floats weekly and was 2.35% at November 30, 1993 (an effective interest rate of 4.28% due to the payment of fees). Principal payments on mortgage and other loans payable due in the next five years and thereafter are as follows: $18.7 million in 1994, $1.3 million in 1995, $13.4 million in 1996, $16.8 million in 1997, $0.8 million in 1998, and $16.0 million thereafter. (5) Shareholders' Equity (a) Stock Option Plans Under the Trust's 1988 stock option plans for key employees and Trustees (the "Plans"), incentive stock options with or without stock appreciation rights or nonqualified options and related stock appreciation rights may be granted to employees, and nonqualified options may be granted to Trustees. Under the Plans, options may be granted at an exercise price not less than fair market value of the Trust's common shares on the date of grant. Changes in options outstanding during the years ended November 30 were as follows:
1993 1992 1991 Balance at beginning of year 467,000 433,000 364,000 Granted 24,000 49,000 74,000 Exercised (14,468) (15,000) - Expired (12,000) - (5,000) Balance at end of year 464,532 467,000 433,000 Shares available for granting future options 127,997 140,000 189,000
The weighted average exercise price per option at November 30, 1993, 1992 and 1991 was $12.16, $11.88 and $11.81, respectively. The shares reserved expire by April 1998 and all outstanding options expire by March, 2003. Subsequent to November 30, 1993, 61,000 options were granted. All options outstanding are currently exercisable. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements (b) Shareholder Rights Plan On June 21, 1989, the Board of Trustees adopted a shareholder rights plan. Under this plan, one right was attached to each outstanding common share on July 5, 1989, and one right will be attached to each share issued in the future. Each right entitles the holder to purchase, under certain conditions, one one-hundredth of a share of Series A participating preferred stock for $60. The rights may also, under certain conditions, entitle the holders to receive common shares of the Trust, common shares of an entity acquiring the Trust, or other consideration, each having a value equal to twice the exercise price of each right ($120). One hundred fifty thousand preferred shares have been designated as Series A participating preferred shares and are reserved for issuance under the shareholder rights plan. The rights are redeemable by the Trust at a price of $.01 per right. If not exercised or redeemed, all rights expire on July 5, 1999. (c) Common Stock Offering In May 1993 the Trust sold 2,000,000 shares of common stock in a public offering for a price of $13.785 per share. The Trust received net proceeds of $25.6 million after the underwriting discount and offering costs. (6) Cash Distributions and Federal Income Taxes The difference between taxable income and net income reported in the consolidated financial statements is due principally to reporting certain gains for tax purposes under the installment method, use of net operating loss carryforwards available and differences in depreciation and in the basis of real estate sold as reported for tax and financial statement purposes. The Trust made cash distributions of ordinary income of $.81 per share ($8,460,000) in 1993, and cash distributions of ordinary income and capital gains of $.80 per share is 1992 ($7,523,000) and in 1991 ($7,518,000). On December 15, 1993, the Trust declared a dividend of $.21 per share payable on January 11, 1994 to shareholders of record on January 3, 1994. (7) Commitments In November 1993, the Trust agreed to acquire two industrial research and development buildings totaling 156,000 sq. ft. for an aggregate price of approximately $6.3 million. The purchase transaction closed in December 1993. (8) Quarterly Financial Information (Unaudited) Quarterly results of operations for the years ending November 30, 1993 and 1992 follow:
Quarter Ended 1993 February 28 (a) May 31 August 31 November 30 Total income (a) $9,093,000 $8,285,000 $9,339,000 $10,181,000 Total expenses $6,710,000 $7,041,000 $7,413,000 $7,777,000 Net income $2,383,000 $1,244,000 $1,926,000 $2,404,000 Net income per share $.25 $.12 $.17 $.21 (a) Results for the quarter ended February 28, 1993 include a $1.0 million fee ($.10 per share) for the assignment and amendment of a lease at Yorkshire Plaza, Aurora, Illinois.
(Continued) MGI PROPERTIES Notes to Consolidated Financial Statements
Quarter Ended 1992 February 29 May 31 August 31 November 30 Total income $7,689,000 $7,634,000 $7,698,000 $7,568,000 Total expenses $6,410,000 $6,287,000 $6,262,000 $6,026,000 Income before net gains (losses) $1,279,000 $1,347,000 $1,436,000 $1,542,000 Net gains (losses) $3,700,000 $- $- $(2,056,000) Net income (loss) $4,979,000 $1,347,000 $1,436,000 $(514,000) Net income (loss) per share $.53 $.14 $.15 $(.05)
Schedule X MGI PROPERTIES Supplementary Income Statement Information Charged to Costs and Expenses
Item 1993 1992 1991 Maintenance and repairs $4,235,000 $3,105,000 $3,443,000
Schedule XI MGI PROPERTIES Real Estate and Accumulated Depreciation November 30, 1993
Initial cost Costs -------------------- capitalized Building and subsequent to Description Encumbrances Land improvements acquisition - -------------------------------------------------------------------------------- Apartments Harrison Township, MI $- $700,000 $1,948,000 $9,349,000 Memphis, TN 2,846,000 228,000 6,312,000 343,000 Tampa, FL 4,868,000 1,850,000 7,009,000 490,000 Tampa, FL 5,750,000 1,178,000 4,466,000 115,000 Bloomfield Hills, MI 6,326,000 4,325,000 12,126,000 1,745,000 Laurel, MD 7,218,000 613,000 12,722,000 176,000 Metairie, LA - 2,140,000 8,860,000 117,000 Retail Hagerstown, MD - 364,000 1,459,000 - Nashville, TE - 1,570,000 2,655,000 495,000 Baltimore, MD 4,249,000 2,000,000 5,710,000 69,000 Tampa, FL 5,413,000 2,600,000 6,540,000 432,000 Aurora, IL 16,573,000 12,576,000 15,372,000 1,356,000 Office Buildings Charlotte, NC - 150,000 933,000 105,000 Naperville, IL - 1,400,000 3,318,000 1,379,000 Greenville, SC - 246,000 2,490,000 220,000 Greenville, SC - 213,000 1,647,000 687,000 Ann Arbor, MI - 686,000 5,618,000 544,000 Tampa, FL - 2,667,000 8,980,000 250,000 Somerset, NJ - 3,264,000 13,379,000 1,185,000 Boston, MA - 1,730,000 6,925,000 - Framingham, MA - 2,105,000 5,109,000 - Industrial Properties N. Charleston, SC - 300,000 2,738,000 40,000 Blue Ash, OH - 176,000 549,000 78,000 Blue Ash, OH - 129,000 398,000 101,000 St. Louis, MI - 470,000 1,384,000 3,000 St. Louis, MI - 218,000 1,171,000 295,000 St. Louis, MI - 360,000 1,337,000 57,000 Plymouth, MN 2,264,000 435,000 2,100,000 353,000 New Hope, MN - 400,000 1,968,000 - New Hope, MN 1,750,000 560,000 1,049,000 293,000 New Hope, MN 1,750,000 560,000 1,354,000 363,000 Brooklyn Center, MN 926,000 500,000 1,169,000 - Brooklyn Center, MN 824,000 195,000 850,000 294,000 Brooklyn Center, MN 824,000 195,000 760,000 83,000 Nashville, TN - 675,000 2,756,000 9,000 Bedford, MA - 512,000 2,062,000 30,000 St. Louis, MI - 570,000 1,695,000 - St. Louis, MI 272,000 613,000 1,347,000 - St. Louis, MI - 300,000 1,321,000 - St. Louis, MI - 500,000 708,000 - Wilmington, MA 5,000,000 2,390,000 4,638,000 63,000 Billerica, MA - 376,000 1,749,000 - Wilmington, MA - 1,394,000 3,208,000 - Bedford, MA - 662,000 1,585,000 - Andover, MA - 1,441,000 5,799,000 - Westwood, MA - 560,000 967,000 40,000 Land Mount Clemens, MI - 25,000 - - $66,853,000 $57,121,000 $178,240,000 $21,159,000 Partnerships San Bruno, CA St. Petersburg, FL Washington, D.C.
Gross amounts at which carried at close of period Accumulated --------------------------------- depreciation Building and and Date of Date Depreciable Description Land improvements Total amortization construction acquired life (years) - ------------------------------------------------------------------------------------------------------------------------- Apartments Harrison Township, MI $700,000 $11,297,000 $11,997,000 $4,499,000 1973;1980 11/74 40 Memphis, TN 228,000 6,655,000 6,883,000 1,268,000 1986 9/86 40 Tampa, FL 1,850,000 7,499,000 9,349,000 1,498,000 1986 10/86 40 Tampa, FL 1,178,000 4,581,000 5,759,000 694,000 1986 3/88 40 Bloomfield Hills, MI 4,325,000 13,871,000 18,196,000 2,995,000 1967 1/89 40 Laurel, MD 613,000 12,898,000 13,511,000 1,399,000 1987 9/90 40 Metairie, LA 2,140,000 8,977,000 11,117,000 454,000 1974 11/92 20 Retail Hagerstown, MD 364,000 1,459,000 1,823,000 327,000 1978 12/84 40 Nashville, TE 1,570,000 3,150,000 4,720,000 718,000 1979 8/86 40 Baltimore, MD 2,000,000 5,779,000 7,779,000 916,000 1979 7/87 40 Tampa, FL 2,600,000 6,972,000 9,572,000 1,080,000 1986 12/87 40 Aurora, IL 12,576,000 16,728,000 29,304,000 1,522,000 1986 5/90 40 Office Buildings Charlotte, NC 150,000 1,038,000 1,188,000 260,000 1980 1/85 40 Naperville, IL 1,400,000 4,697,000 6,097,000 1,714,000 1979 8/86 20 Greenville, SC 246,000 2,710,000 2,956,000 612,000 1973 11/86 20 Greenville, SC 213,000 2,334,000 2,547,000 586,000 1972 11/86 20 Ann Arbor, MI 686,000 6,162,000 6,848,000 970,000 1985 12/88 40 Tampa, FL 2,667,000 9,230,000 11,897,000 1,911,000 1985 12/88 25 Somerset, NJ 3,264,000 14,564,000 17,828,000 2,510,000 1985 12/88 40 Boston, MA 1,730,000 6,925,000 8,655,000 87,000 1973;1974 6/93 40 Framingham, MA 2,105,000 5,109,000 7,214,000 21,000 1985 9/93 40 Industrial Properties N. Charleston, SC 300,000 2,778,000 3,078,000 615,000 1977;1982 12/84 40 Blue Ash, OH 176,000 627,000 803,000 161,000 1970 11/85 40 Blue Ash, OH 129,000 499,000 628,000 105,000 1970 11/85 40 St. Louis, MI 470,000 1,387,000 1,857,000 246,000 1979 10/86 40 St. Louis, MI 218,000 1,466,000 1,684,000 271,000 1978 12/86 40 St. Louis, MI 360,000 1,394,000 1,754,000 255,000 1971 5/87 40 Plymouth, MN 435,000 2,453,000 2,888,000 472,000 1974 5/87 40 New Hope, MN 400,000 1,968,000 2,368,000 320,000 1979 5/87 40 New Hope, MN 560,000 1,342,000 1,902,000 189,000 1979 5/87 40 New Hope, MN 560,000 1,717,000 2,277,000 301,000 1979 5/87 40 Brooklyn Center, MN 500,000 1,169,000 1,669,000 190,000 1971 5/87 40 Brooklyn Center, MN 195,000 1,144,000 1,339,000 265,000 1970 5/87 40 Brooklyn Center, MN 195,000 843,000 1,038,000 161,000 1970 5/87 40 Nashville, TN 675,000 2,765,000 3,440,000 99,000 1988 6/92 40 Bedford, MA 512,000 2,092,000 2,604,000 61,000 1971;1985 10/92 40 St. Louis, MI 570,000 1,695,000 2,265,000 44,000 1972 12/92 40 St. Louis, MI 613,000 1,347,000 1,960,000 31,000 1973 12/92 40 St. Louis, MI 300,000 1,321,000 1,621,000 35,000 1971 12/92 40 St. Louis, MI 500,000 708,000 1,208,000 18,000 1970 12/92 40 Wilmington, MA 2,390,000 4,701,000 7,091,000 61,000 1988;1974;1987 5/93 40 Billerica, MA 376,000 1,749,000 2,125,000 16,000 1983 7/93 40 Wilmington, MA 1,394,000 3,208,000 4,602,000 25,000 1987 8/93 40 Bedford, MA 662,000 1,585,000 2,247,000 3,000 1984 11/93 40 Andover, MA 1,441,000 5,799,000 7,240,000 5,000 1986 11/93 40 Westwood, MA 560,000 1,007,000 1,567,000 2,000 1980 11/93 40 Land Mount Clemens, MI 25,000 - 25,000 - $57,121,000 $199,399,000 256,520,000 $29,992,000 Partnerships San Bruno, CA 225,000 St. Petersburg, FL 1,902,000 Washington, D.C. 16,000 $258,663,000
Schedule XI (Continued) MGI PROPERTIES Real Estate and Accumulated Depreciation A summary of real estate investments and accumulated depreciation and amortization for the three years ended November 30 follows:
Real Estate Investments 1993 1992 1991 Balance at beginning of year $209,905,000 $208,011,000 $205,993,000 Add: Investments 47,692,000 6,005,000 - Improvements 2,672,000 2,471,000 2,296,000 Reclassification from mortgage loans - 11,000,000 - 260,269,000 227,487,000 208,289,000 Deduct: Real estate dispositions - (16,935,000) (278,000) Other (1,606,000) (647,000) - Balance at end of year $258,663,000 $209,905,000 $208,011,000 Accumulated Depreciation and Amortization Balance at beginning of year $24,583,000 $25,785,000 $20,097,000 Add: Depreciation and amortization 6,969,000 5,968,000 5,947,000 Deduct: Real estate dispositions - (6,614,000) (259,000) Other (1,560,000) (556,000) - Balance at end of year $29,992,000 $24,583,000 $25,785,000
The aggregate cost for Federal income tax purposes of the above investments is approximately $215.0 million. Refer to Note 1 regarding the Trust's accounting policies on real estate investments and depreciation and amortization. Schedule XII MGI PROPERTIES Mortgage and Other Loans on Real Estate November 30, 1993 A summary of mortgage and other loan activity for the years ended November 30 follows:
1993 1992 1991 Balance at beginning of year $5,880,000 (a) $19,764,000 $19,623,000 Add: Additions and advances 79,000 234,000 154,000 5,959,000 19,998,000 19,777,000 Less: Collection of principal - (17,000) (13,000) Other principal reductions (5,959,000)(a) (14,101,000)(b) - Balance at end of year $- $5,880,000 (a) $19,764,000 Notes: (a) The face value of this wrap-around mortgage loan was $6,613,000 and was carried net of four first mortgage loans. At November 30, 1992, the Trust had reached agreement with the borrower to purchase the four industrial properties securing this loan. The acquisition was completed on December 31, 1992. See notes to the financial statements. (b) The mortgage loan related to the Metairie, Louisiana apartment complex was reclassified to real estate owned for financial accounting purposes at November 30, 1992. See notes to the financial statements.
Exhibit XI MGI PROPERTIES Computation of Net Income Per Share Assuming Full Dilution
Year ended November 30, 1993 1992 1991 1990 1989 Income before net gains (losses) $7,957,000 $5,604,000 $6,178,000 $6,542,000 $7,425,000 Net gains (losses) - 1,644,000 - (360,000) 310,000 Net income $7,957,000 $7,248,000 $6,178,000 $6,182,000 $7,735,000 Weighted average number of common shares outstanding 10,574,104 9,402,476 9,396,992 9,400,559 9,329,124 Additional number of share equivalents assuming exercise of options 55,312 20,274 16,941 - - Weighted average number of shares assuming full dilution 10,629,416 9,422,750 9,413,933 9,400,559 9,329,124 Net income per share assuming full dilution: Income before net gains (losses) $.75 $.60 $.66 $.70 $.80 Net gains (losses) - .17 - (.04) .03 Net income per share assuming full dilution $.75 $.77 $.66 $.66 $.83
Consent of Independent Auditors The Board of Trustees MGI Properties: We consent to incorporation by reference in the registration statements (Nos. 33-21584, 2-97270 and 33-65844) on Form S-8 of MGI Properties and subsidiaries of our report dated January 6, 1994, relating to the consolidated balance sheets of MGI Properties and subsidiaries as of November 30, 1993 and 1992, and the related consolidated statements of earnings, changes in shareholders' equity, and cash flows and related schedules for each of the years in the three-year period ended November 30, 1993, which report appears in the November 30, 1993 annual report on Form 10-K of MGI Properties and subsidiaries. KPMG PEAT MARWICK Boston, Massachusetts February 15, 1994 -----END PRIVACY-ENHANCED MESSAGE-----