-----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, p0R3eZU53ksVMJRPX3ptzpuTA6pJPvDzvzXZ3kYoPU8CX92klqNTOqg6/zI9uFlE TulQRCD3Wh62daK4G9CgBA== 0000950146-94-000131.txt : 19940719 0000950146-94-000131.hdr.sgml : 19940719 ACCESSION NUMBER: 0000950146-94-000131 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940715 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06833 FILM NUMBER: 94538977 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-Q 1 MGI PROPERTIES FORM 10-Q (LETTERHEAD OF MGI PROPERTIES) July 13, 1994 VIA EDGAR Securites and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: MGI Properties ("Registrant") Second Quarter Report on Form 10-Q for the Second Quarter Ended May 31, 1994 ("Form 10-Q") Commission File No. 1-6833 Dear Sir/Madam: Enclosed please find a copy of the Registrant's Form 10-Q filed electronically, with a conforming paper format of the Form 10-Q to the Securities and Exchange Commission at the Alexandria, Virginia address via UPS Express. Sincerely, David P. Morency Controller DPM/jac THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATIONS S-T 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: May 31, 1994 Commission File Number: 1-6833 ------------ ------ MGI PROPERTIES (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-6268740 (State or other jurisdiction (I.R.S. Employer Identification No.) of 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 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 July 13, 1994: 11,453,221 Page 1 of 14 pages Exhibit Index appears on Page 12 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 Flow 5 Consolidated Statements 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 8 Exhibit A: Computation of Earnings Per Share 11 PART II: OTHER INFORMATION Items 1 - 6 12 Signatures 13 Exhibit 99: Consolidated Statement of Earnings for the Twelve-Month Period Ending April 30, 1994 14
- 2 - MGI PROPERTIES CONSOLIDATED BALANCE SHEETS
May 31, 1994 November 30, 1993 (unaudited) ASSETS Investments: Real estate, at cost $270,751,000 $258,663,000 Accumulated depreciation and amortization (33,767,000) (29,992,000) Net investments in real estate 236,984,000 228,671,000 Cash 1,627,000 1,564,000 Short-term investments, at cost 7,959,000 10,252,000 U.S. Government securities, at cost 717,000 837,000 Other assets 6,289,000 5,376,000 $253,576,000 $246,700,000 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage and other loans payable $73,577,000 $66,949,000 Other liabilities 4,549,000 5,012,000 78,126,000 71,961,000 Deferred gain -- real estate 3,700,000 3,700,000 Shareholders' equity: Preferred shares -- $1 par value; 2,000,000 shares authorized; none issued -- -- Common shares -- $1 par value; 15,000,000 shares authorized; 11,452,221 issued (11,448,152 at November 30, 1993) 11,452,000 11,448,000 Additional paid-in capital 165,762,000 165,673,000 Distributions in excess of net income (5,464,000) (5,935,000) 171,750,000 171,186,000 At November 30, 1993, 14,431 shares in treasury, at cost -- (147,000) Total shareholders' equity 171,750,000 171,039,000 $253,576,000 $246,700,000
See accompanying notes to consolidated financial statements. - 3 - MGI PROPERTIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Three Months Ended Six Months Ended May 31, 1994 May 31, 1993 May 31, 1994 May 31, 1993 INCOME Rental and other income $10,844,000 $8,085,000 $21,570,000 $16,923,000 Interest 93,000 184,000 167,000 396,000 Other 16,000 16,000 32,000 59,000 Total Income 10,953,000 8,285,000 21,769,000 17,378,000 EXPENSES Property operating expenses 3,087,000 2,486,000 6,120,000 4,842,000 Real estate taxes 1,333,000 943,000 2,707,000 1,876,000 Depreciation and amortization 2,011,000 1,778,000 3,907,000 3,427,000 Interest 1,466,000 1,285,000 2,932,000 2,589,000 General and administrative 676,000 549,000 1,276,000 1,017,000 Total expenses 8,573,000 7,041,000 16,942,000 13,751,000 Income before net gain 2,380,000 1,244,000 4,827,000 3,627,000 Net gain -- -- 450,000 -- Net income $ 2,380,000 $1,244,000 $ 5,277,000 $ 3,627,000 PER SHARE DATA Income before gain from disposition of real estate $ 0.21 $ .12 $ 0.42 $ 0.37 Gain from disposition of real estate -- -- 0.04 -- Net income $ 0.21 $ 0.12 $ 0.46 $ 0.37 Weighted average shares outstanding 11,446,617 9,994,141 11,443,963 9,710,083
See accompanying notes to consolidated financial statements. - 4- MGI PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
Six Months Ended May 31, 1994 May 31, 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income $5,277,000 $3,627,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 3,907,000 3,427,000 Net gain (450,000) -- Equity losses in partnerships -- 37,000 Other (1,140,000) (270,000) Net cash provided by operating activities 7,594,000 6,821,000 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of and additions to real estate (14,020,000) (8,187,000) Proceeds from disposition of real estate investments 2,286,000 -- Cash distribution from real estate partnerships 100,000 -- (Increase) decrease in U.S. Government securities, net 120,000 (553,000) Other 126,000 (653,000) Net cash used in investing activities (11,388,000) (9,393,000) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from the sale of common shares -- 25,640,000 Repayments of mortgage and other loans payable (7,037,000) (1,597,000) Additions to mortgage and other loans payable, net 13,328,000 -- Cash distributions (4,806,000) (3,771,000) Treasury stock and stock option transactions 79,000 67,000 Net cash used in financing activities 1,564,000 20,339,000 Net increase (decrease) in cash and short-term investments (2,230,000) 17,767,000 CASH AND SHORT-TERM INVESTMENTS Beginning of period 11,816,000 16,131,000 End of period $9,586,000 $33,898,000
See accompanying notes to consolidated financial statements. - 5 - MGI PROPERTIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Undistributed Number of (Distributions Total Common Common Additional in Excess of) Treasury Shareholders' Shares Issued Shares Paid-in Capital Net Income Shares Equity Balance at November 30, 1993 11,448,152 $11,448,000 $165,673,000 ($5,935,000) ($147,000) $ 171,039,000 Net Income -- -- -- 5,277,000 -- 5,277,000 Distributions -- -- -- (4,806,000) -- (4,806,000) Options exercised and other 4,069 4,000 89,000 -- 147,000 240,000 Balance at May 31, 1994 11,452,221 $11,452,000 $165,762,000 ($5,464,000) -- $ 171,750,000
- 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 year-end adjustments. 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: On June 22, 1994, the Board of Trustees declared a cash dividend of $.22 per share payable on July 14, 1994 to shareholders of record on July 5, 1994. This dividend will aggregate $2.5 million. Note 3: At May 31, 1994, the market value of U.S. Government securities was $0.8 million. Note 4: Cash paid for interest amounted to $2.7 and $2.8 million for the six-month periods ended May 31, 1994 and May 31, 1993, respectively. Note 5: At May 31, 1994, options to purchase an aggregate of 559,132 shares at exercise prices ranging from $7.375 to $15.375 per share were outstanding under MGI's stock option plans for employees and Trustees. All options outstanding at May 31, 1994 expire by March 2004. Note 6: In May 1994, MGI acquired an industrial research and development building, aggregating 128,400 square feet, located in Andover, Massachusetts for $6.4 million cash. The property is 100% leased. Note 7: MGI intends to qualify for the year ended November 30, 1994 as a real estate investment trust under the provisions of Sections 856-860 of the Internal Revenue Code, as amended. Accordingly, no provision has been made for Federal income taxes. - 7 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources At May 31, 1994, liquidity was provided by $9.6 million in cash and investment securities and by unused lines of credit totaling $25.0 million. Shareholders' equity of $171.7 million at May 31, 1994, when compared to $171.0 million at November 30, 1993, principally reflects net income in excess of distributions. Principal sources of funds in the first half of fiscal 1994 included property operations, mortgage loan proceeds and the sale of an interest in a partnership. During the six months ended May 31, 1994, these resources were used to pay dividends of $4.8 million, to repay $7.1 million of indebtedness, to fund $1.1 million of tenant and capital improvements and to acquire three Massachusetts industrial buildings totaling 284,700 square feet for an aggregate price of $12.9 million. Total mortgage and other loans payable aggregated $73.6 million at May 31, 1994, a net increase of $6.6 million compared to November 30, 1993. The increase resulted from the addition of $2.2 million of debt, as MGI received the balance of the proceeds of a loan which closed in November 1993. In addition, in April 1994, the Trust executed an $11.5 million mortgage loan, which has a twenty-year, self-amortizing term and a fixed coupon interest rate of 7.7% per annum. This loan is secured by the apartment complex that previously secured a 12.75%, $6.3 million mortgage loan which matured on April 10, 1994. Scheduled amortization payments of $0.8 million were made during the six-month period. Mortgage and other loans payable are collateralized by certain MGI real estate investments, by $3.2 million of investment securities and by MGI's guarantees of $9.2 million. Loans payable due within twelve months or less totaled $13.0 million at May 31, 1994, including an $11.1 million floating rate loan with a September 1994 maturity. MGI has entered into discussions with the lender of the $11.1 million loan about extending the maturity of this loan on generally similar terms and conditions. In June 1994, MGI entered into a $15.0 million, two-year line of credit facility, with the option to extend the term for five years at a fixed rate. The line is secured by several Massachusetts commercial properties and provides for interest with the option of a floating rate or the bank's prime rate, currently 7.25%. MGI has an existing $10.0 million unused line, which also remains available. 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. Cash requirements in 1994 include operations, distributions to shareholders, capital and tenant improvements and other leasing expenditures required to maintain MGI's occupancy levels and new investments undertakings. Principal sources of funds in the future are expected to be from operations of properties, including those acquired in the future, mortgaging or refinancing - 8 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) existing mortgages on properties, the lines of credit 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. The purchase of additional properties in 1994 may require the use of funds from MGI's lines of credit, new borrowings, the sale of properties currently owned or the issuance of equity securities. MGI believes the combination 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 the quarter ended May 31, 1994 was $2.4 million, or $0.21 per share on the greater number of shares outstanding, as compared to $1.2 million, or $0.12 per share in the corresponding quarter of 1993. Net income for the six months ended May 31, 1994 was $5.3 million, or $0.46 per share and included $450,000, or $0.04 per share of gain recognized in connection with the sale of a partnership interest. Net income for the six months ended May 31, 1993 was $3.6 million, or $0.37 per share. Funds from operations totaled $4.4 million, or $0.38 per share in the 1994 second quarter on the greater number of shares outstanding, compared to $3.0 million, or $0.30 per share in the corresponding quarter of 1993. Funds from operations in the six months ended May 31, 1994 and 1993 were $8.7 million, or $0.76 per share on the greater number of shares outstanding, and $7.0 million, or $0.73 per share, respectively. Included in funds from operations and net income for the six months ended May 31, 1993 was $1.0 million of income received in connection with the amendment and assignment of a lease at Yorkshire Plaza located in Aurora, Illinois. 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. In comparing the second quarter of 1994 to that of the previous year, the increase in net income and in funds from operations resulted principally from increases in properties owned. As a result, rental and other income, property operating expenses, depreciation and amortization expense (which is a component of income before net gains but not of funds from operations) and interest expense increased. The $2.8 million increase in rental and other income in the second quarter of 1994, when compared to the second quarter of 1993, was due primarily to rental income from properties acquired since May 1993, which totaled $2.7 million. The $1.0 million increase in the second quarter 1994 property operating expenses and real estate taxes, when compared to the 1993 second quarter, reflects primarily the same factors. - 9 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Three additional factors also contributed to the change in income before net gain and funds from operations when the 1994 second quarter is compared to 1993. Interest income reflects a decrease in the average balance of short-term investments. General and administrative expenses increased, primarily reflecting personnel and shareholder-related items. Interest expense increased reflecting a higher average level of debt outstanding. Average occupancy in the second quarter of 1994 was 93.5%, as compared to 94% in the comparable quarter of 1993. Average occupancy levels in the second quarter of 1994 and 1993 for MGI's commercial space of was 93.3% and 93.8%, respectively. While total commercial occupancy has not changed significantly, the average occupancy of the industrial portfolio has increased to 100% , which reflects the increased size of the industrial portfolio, as well as the result of approximately 400,000 square feet of new and extended leases signed over the prior four quarters. Retail average occupancy during the 1994 second quarter was 92% compared to 91.5% in the 1993 second quarter. These increases were partially offset by decreased office occupancy in the 1994 second quarter (88% in 1994 versus 94% in 1993), primarily at the suburban Chicago, Illinois and Somerset, New Jersey buildings. At May 31, 1994 scheduled commercial 1994 lease expirations approximate 230,000 square feet. Of the remaining 1994 expirations, 187,000 square feet is industrial. Average residential occupancy was 94% in both the second quarter of 1994 and of 1993. Real estate investments 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 many markets in which the Trust owns real estate, over building and local or national economic conditions have combined to produce a trend of lower effective rents and longer absorption periods for vacant space. As the Trust re-leases space, certain effective rents may continue to be less than those earned previously. Management believes its diversification by regional markets 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. - 10 - MGI PROPERTIES PART I - EXHIBIT A COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended May 31, 1994 May 31, 1993 May 31, 1994 May 31, 1993 PRIMARY Net income $ 2,380,000 $ 1,244,000 $ 5,277,000 $3,627,000 Weighted average number of shares outstanding during the period 11,446,617 9,994,141 11,443,963 9,710,083 Primary earnings per share $.21 $.12 $.46 $.37 ASSUMING FULL DILUTION Net income $ 2,380,000 $ 1,244,000 $ 5,277,000 $3,627,000 Weighted average number of shares outstanding during the period 11,446,617 9,994,141 11,443,963 9,710,083 Earnings per share assuming full dilution $.21 $.12 $.46 $.37
Note: Outstanding stock options are not taken into account in the computation of earnings per share as they are not materially dilutive. - 11 - MGI PROPERTIES PART II - OTHER INFORMATION Item 1: Legal Proceedings: Not applicable. Item 2: Changes in Securities: Not applicable. Item 3: Defaults upon Senior Securities: Not applicable. Item 4: Submission of Matters to a Vote of Security Holders: At the Annual Meeting of Shareholders held March 16, 1994, shareholders re-elected Rodger P. Nordblom (10,428,069 votes affirmative and 94,623 votes negative) and Colin C. Hampton (10,430,297 votes affirmative and 92,395 votes negative) as Trustees for terms expiring on the date of the Annual Meeting in 1997. Also, shareholders approved and ratified the 1994 Stock Option and Stock Appreciation Rights Plan for Key Employees (9,858,466 votes affirmative, 363,081 votes negative, 301,145 votes abstaining) and approved and ratified the 1994 Stock Option Plan for Trustees (9,477,099 votes affirmative, 738,410 votes negative, 307,183 votes abstaining). Item 5: Other Information: Not applicable. Item 6: Exhibits and Reports on Form 8-K: a) Exhibits: Computation of Earnings Per Share (see page 11). Exhibit 99 -- Twelve-Month Consolidated Statement of Earnings Pursuant to Section 11(a) of the Securities Act of 1933 and Rule 158 promulgated thereunder, the Registrant files herewith its Consolidated Statement of Earnings for the Twelve Months Ended April 30, 1994, a period which covers twelve months after the effective date of the Registrant's registration statement on Form S-3 (File No. 33-59602) relating to its issuance of 2,000,000 common shares. b) Reports on Form 8-K: None. - 12 - 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: July 13, 1994 /s/ Phillip C. Vitali ------------- --------------------- Phillip C. Vitali Executive Vice President (Chief Financial Officer) Date: July 13, 1994 /s/ David P. Morency ------------- -------------------- David P. Morency Controller (Principal Accounting Officer) - 13 - EX-99 2 CONSOLIDATED STATEMENT OF EARNINGS Exhibit 99 MGI PROPERTIES CONSOLIDATED STATEMENT OF EARNINGS TWELVE MONTHS ENDED APRIL 30, 1994 (unaudited) INCOME Rental and other income $39,788,000 Interest 549,000 Other 64,000 Total income 40,401,000 EXPENSES Property operating expenses 11,673,000 Real estate taxes 4,935,000 Depreciation and amortization 7,428,000 Interest 5,344,000 General and administrative 2,356,000 Total expenses 31,736,000 Income before net gain 8,665,000 Net gain 450,000 Net income $9,115,000 PER SHARE DATA Income before gain from disposition of real estate $.76 Gain from disposition of real estate .04 Net income $.80 Weighted average shares outstanding 11,409,909
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