-----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, NOGWXGgR86LJ3EA7ndTvjE1cZeJ9DLILdKRxgFVKqKl+9/IYvNIfrufCDC8qy+vc d4KS2nNDayTntNr0C+FUhg== 0000950146-94-000186.txt : 19941024 0000950146-94-000186.hdr.sgml : 19941024 ACCESSION NUMBER: 0000950146-94-000186 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941014 SROS: NYSE 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: 94552788 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) October 14, 1994 VIA EDGAR *********** Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: MGI Properties ("Registrant") Quarterly Report on Form 10-Q for the Third Quarter Ended August 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: August 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 of (I.R.S. 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 -------------- 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 October 11, 1994: 11,460,221 Page 1 of 14 pages Exhibit Index appears on Page 12 MGI PROPERTIES INDEX
Page No. PART I: FINANCIAL INFORMATION 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 12 PART II: OTHER INFORMATION Items 1 - 6 13 Signatures 14
- 2 - MGI PROPERTIES PART I -- FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
August 31, 1994 November 30, 1993 (unaudited) ASSETS Investments: Real estate, at cost $257,912,000 $258,663,000 Accumulated depreciation and amortization (33,469,000) (29,992,000) Net investments in real estate 224,443,000 228,671,000 Cash 1,607,000 1,564,000 Short-term investments, at cost 12,834,000 10,252,000 U.S. Government securities, at cost 675,000 837,000 Other assets 6,263,000 5,376,000 $245,822,000 $246,700,000 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage and other loans payable $62,960,000 $66,949,000 Other liabilities 4,633,000 5,012,000 67,593,000 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; 11,453,221 issued (11,448,152 at November 30, 1993) 11,453,000 11,448,000 Additional paid-in capital 165,774,000 165,673,000 Distributions in excess of net income (2,698,000) (5,935,000) 174,529,000 171,186,000 At November 30, 1993, 14,431 shares in treasury, at cost -- (147,000) Total shareholders' equity 174,529,000 171,039,000 $245,822,000 $246,700,000
See accompanying notes to consolidated financial statements. - 3 - MGI PROPERTIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- August 31, 1994 August 31, 1993 August 31, 1994 August 31, 1993 INCOME Rental and other income $10,997,000 $9,098,000 $32,567,000 $26,021,000 Interest 104,000 225,000 271,000 621,000 Other 16,000 16,000 48,000 75,000 Total Income 11,117,000 9,339,000 32,886,000 26,717,000 EXPENSES Property operating expenses 3,136,000 2,748,000 9,256,000 7,590,000 Real estate taxes 1,382,000 1,128,000 4,089,000 3,004,000 Depreciation and amortization 1,912,000 1,716,000 5,819,000 5,143,000 Interest 1,485,000 1,275,000 4,417,000 3,864,000 General and administrative 615,000 546,000 1,891,000 1,563,000 Total expenses 8,530,000 7,413,000 25,472,000 21,164,000 Income before net gains 2,587,000 1,926,000 7,414,000 5,553,000 Net gains 2,700,000 -- 3,150,000 -- Net income $5,287,000 $1,926,000 $10,564,000 $5,553,000 PER SHARE DATA Income before net gains $0.22 $0.17 $0.65 $0.54 Net gains 0.24 -- 0.27 -- Net income $0.46 $0.17 $0.92 $0.54 Weighted average shares outstanding 11,452,895 11,433,091 11,446,962 10,288,611
See accompanying notes to consolidated financial statements. - 4- MGI PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
Nine Months Ended August 31, 1994 August 31, 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income $10,564,000 $5,553,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 5,819,000 5,143,000 Net gains (3,150,000) -- Equity losses in partnerships -- 44,000 Other (1,519,000) 226,000 Net cash provided by operating activities 11,714,000 10,966,000 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of and additions to real estate (14,927,000) (24,414,000) Proceeds from disposition of real estate investments 6,631,000 -- Cash distribution from real estate partnerships 100,000 -- (Increase) decrease in U.S. Government securities, net 162,000 (420,000) Other 167,000 (53,000) Net cash used in investing activities (7,867,000) (24,887,000) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from the sale of common shares -- 25,640,000 Repayments of mortgage and other loans payable (7,411,000) (1,862,000) Additions to mortgage and other loans payable, net 13,425,000 -- Cash distributions (7,327,000) (6,058,000) Treasury stock and stock option transactions 91,000 83,000 Net cash (used in) provided by financing activities (1,222,000) 17,803,000 Net increase in cash and short-term investments 2,625,000 3,882,000 CASH AND SHORT-TERM INVESTMENTS Beginning of period 11,816,000 16,131,000 End of period $14,441,000 $20,013,000
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 -- -- -- 10,564,000 -- 10,564,000 Distributions -- -- -- (7,327,000) -- (7,327,000) Options exercised and other 5,069 5,000 101,000 -- 147,000 253,000 Balance at August 31, 1994 11,453,221 $11,453,000 $165,774,000 ($2,698,000) -- $174,529,000
- 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 September 21, 1994, the Board of Trustees declared a cash dividend of $.22 per share payable on October 12, 1994 to shareholders of record on October 3, 1994. This dividend will aggregate $2.5 million. Note 3: Effective August 23, 1994, a Dividend Reinvestment and Share Purchase Plan was implemented. Under this Plan, Shareholders of record who own 100 shares or more will have the option of electing to receive, in full or in part, dividends in the form of MGI shares in lieu of cash. The price of shares purchased with reinvested dividends will be at a three percent (3%) discount in the case of newly issued shares purchased for the Plan. If MGI purchases shares in the open market for the Plan, the price for such shares will be 100% of the average purchase prices paid. A Prospectus dated August 23, 1994, describing the terms of the Dividend Reinvestment and Share Purchase Plan has been mailed to shareholders of record. Note 4: At August 31, 1994, the market value of U.S.Government securities was $0.7 million. Note 5: Cash paid for interest amounted to $4.5 And $3.8 Million for the nine-month periods ended August 31, 1994 and August 31, 1993, respectively. Note 6: At August 31, 1994, options to purchase an aggregate of 558,132 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 August 31, 1994 expire by March 2004. Note 7: In August 1994, MGI sold its seven industrial buildings in Minneapolis, Minnesota for $14,925,000 resulting in a net gain of $2,700,000 for financial reporting purposes. The buildings, aggregating 626,000 square feet, secured a $10,240,000 mortgage that was assumed by the buyer. The net sales proceeds have been placed in escrow with the intention of effecting a tax-deferred exchange. Note 8: 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 August 31, 1994, liquidity was provided by $14.4 million in cash and investment securities and by unused lines of credit totaling $25.0 million. Shareholders' equity of $174.5 million at August 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 fiscal 1994 include property operations, mortgage loan proceeds, the sale of an interest in a partnership and the sale of industrial properties located in Minneapolis, Minnesota. During the nine months ended August 31, 1994, these resources were used to pay dividends of $7.3 million, to repay $7.4 million of indebtedness, to fund $2.0 million of tenant and capital improvements and to acquire three Massachusetts industrial buildings totaling 284,700 square feet for an aggregate purchase price of $12.9 million. In the fourth quarter of 1994, the Trust expects additional funds will be generated from the sale of properties which are currently under agreement. The closing of these sales is contingent upon the completion of due diligence by the buyers. The sale properties include an apartment complex and two industrial buildings. All of the properties, assuming they are closed in accordance with the terms of their respective agreements, will be sold at a gain and will generate aggregate proceeds of approximately $13.1 million. In addition, the Trust has entered into a sales agreement related to a 40,200 square-foot retail center which, if finalized, is anticipated to close in the first quarter of 1995. As the pending sales close, their proceeds will be placed into escrows with the intention of effecting a tax deferred exchange. The Trust has entered into agreements to purchase three industrial buildings in Massachusetts and one in St. Louis, Missouri, totaling 490,000 square feet, that have been identified as replacement properties for the purpose of a tax deferred exchange. These purchases are expected to close, pending completion of due diligence, in the fourth quarter. In October 1994, the Trust signed a commitment to acquire a newly constructed department store of approximately 100,000 square feet located in Peabody, Massachusetts for a price of $11.1 million. The facility to be constructed will be funded by MGI subject to a construction loan agreement which requires interest at 9.0 % per annum and is secured by a first mortgage on the property and improvements, an assignment of the lease and guarantees of the borrower. The building will be leased in its entirety by Bradlees, which is traded on the New York Stock Exchange, under a twenty year lease. The purchase is anticipated to occur in the third quarter of 1995 upon satisfactory completion of construction of the building. It is anticipated that the first advance under the construction loan in the amount of $5.5 million, will be funded mid-October 1994. In accordance with generally accepted accounting principles, the loan draws will be accounted for as construction in progress. Accordingly, interest income related to the loan will be recorded as a reduction in the Trust's cost of the building. - 8 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Total mortgage and other loans payable aggregated $63.0 million at August 31, 1994, a net decrease of $4.0 million compared to November 30, 1993. The decrease resulted from, among other items, the assumption of $10.2 million in debt secured by the Minnesota properties by the buyer. Of this loan amount, $2.2 was received in the first quarter. In addition, in April 1994, the Trust executed an $11.5 million mortgage loan, secured by the apartment complex that previously secured a $6.3 million mortgage loan which matured on April 1994. Scheduled amortization payments of $1.2 million were made during the nine-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 $7.1 million. Loans payable due within twelve months or less totaled $12.1 million at August 31, 1994, including an $11.0 million floating rate loan with a September 1994 maturity. MGI has reached an agreement in principle with the lender of the $11.0 million loan to extend the maturity of this loan on generally similar terms and expects to complete the extension during the fourth quarter. 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 7.75%. In addition, MGI has a $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, in addition to those previously discussed, 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, the lines of credit, 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. 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 August 31, 1994 was $5.3 million, or $0.46 per share as compared to $1.9 million, or $0.17 per share in the corresponding quarter of 1993. Included in the 1994 third quarter net income was $2.7 million, or $0.24 per share of gain recognized in connection with the sale of the - 9 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Minneapolis, Minnesota industrial properties. For the nine months ended August 31, 1994 net income was $10.6 million, or $0.92 per share including the recognition of $3.2 million in gains, equal to $.27 per share. Net income for the nine months ended August 31, 1993 was $5.6 million, or $0.54 per share. Funds from operations totaled $4.5 million, or $0.39 per share in the 1994 third quarter, compared to $3.6 million, or $0.32 per share in the corresponding quarter of 1993. Funds from operations in the nine months ended August 31, 1994 and 1993 were $13.2 million, or $1.16 per share and $10.7 million, or $1.04 per share, respectively. Included in funds from operations and net income for the nine months ended August 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 third 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 $1.9 million increase in rental and other income in the third quarter of 1994, when compared to the third quarter of 1993, was due to properties acquired since July 1993, that totaled $1.7 million in additional revenue. The balance of the increase is primarily due to higher retail and industrial occupancy and higher apartment rental rates. Of the $.6 million increase in the third quarter property operating expenses and real estate taxes, when compared to the 1993 third quarter, $.5 million is due to properties acquired since August 1993. The increase in year to date revenues, property operating expenses, real estate taxes and depreciation and amortization expense reflect similar factors. Three additional factors also contributed to the change in income before net gain and funds from operations when the results for the third quarter date 1994 are compared to the 1993 year. 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 third quarter of 1994 was 92.7 %, as compared to 93.4% in the comparable quarter of 1993. Average occupancy levels in the third quarter of 1994 and 1993 for MGI's commercial space were 92.0% and 94.5%, respectively. This change reflects the decrease in average office occupancy, primarily at the suburban Chicago, Illinois and Somerset, New Jersey buildings, which is offset by increases in both the industrial and retail segments. Average occupancy in the industrial and retail segments in the 1994 third quarter increased by 2.2% and 2.5% to 98% and 94.2%, respectively, compared to the 1993 third quarter. Average residential occupancy was approximately 93% in both the - 10 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) third quarter of 1994 and of 1993. During the first three quarters of 1994, the Trust executed leases for a total of 372,000 square feet. At August 31, 1994 scheduled commercial 1994 lease expirations approximate 49,500 square feet and fiscal 1995 expirations approximate 480,000 square feet of which 325,000 square feet is industrial. The Trust has been notified that a tenant occupying 55,000 square feet of office space would vacate at the expiration of its lease in 1995. This space was relet subsequent to the end of the quarter as the Trust has signed a ten year lease for approximately 65,000 square feet of office space with a company listed on the NASDAQ National Market System. The Trust will incur approximately $2.0 million in costs associated with tenant improvements and commissions for this lease. It is anticipated that the lease will commence in the second quarter of 1995. 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, overbuilding 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. - 11 - MGI PROPERTIES PART I - EXHIBIT A COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended August 31, August 31, August 31, August 31, 1994 1993 1994 1993 PRIMARY Net income $5,287,000 $1,926,000 $10,564,000 $5,553,000 Weighted average number of shares outstanding during the period 11,452,895 11,433,091 11,446,962 10,288,611 Primary earnings per share $.46 $.17 $.92 $.54 ASSUMING FULL DILUTION Net income $5,287,000 $1,926,000 $10,564,000 $5,553,000 Weighted average number of shares outstanding during the period 11,452,895 11,433,091 11,446,962 10,288,611 Earnings per share assuming full dilution $.46 $.17 $.92 $.54
Note: Outstanding stock options are not taken into account in the computation of earnings per share as they are not materially dilutive. - 12 - 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: None. Item 5: Other Information: Not applicable. Item 6: Exhibits and Reports on Form 8-K: a) Exhibits: Computation of Earnings Per Share (see page 12). b) Reports on Form 8-K: A Report 8-K was filed on August 26, 1994. - 13 - MGI PROPERTIES SIGNATURES Pursuant to the requirements to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: October 13, 1994 /s/ Phillip C. Vitali ---------------- --------------------- Phillip C. Vitali Executive Vice President and Treasurer (Chief Financial Officer) Date: October 13, 1994 /s/ David P. Morency ---------------- -------------------- David P. Morency Controller (Principal Accounting Officer) - 14 - EX-27 2 R14 FINANCIAL DATA SCHEDULE FOR 1994 THIRD QTR 10-Q
5 1,000 9-MOS NOV-30-1994 AUG-30-1994 14,441 675 000 000 000 6,263 257,912 33,469 245,822 4,633 62,960 11,453 000 000 163,076 245,822 32,567 32,886 000 19,164 1,891 000 4,417 7,414 000 7,414 000 000 000 10,564 .92 .92
-----END PRIVACY-ENHANCED MESSAGE-----