-----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, BEC6cm0bDmVQXuL2I9H06oLvW6/K8Ms/Am6hz5PuiTu4bs16YKX2e0qZxv0FhO1C ABD3QSr4sIwIhjv9i5ECQA== 0000950146-95-000034.txt : 19950515 0000950146-95-000034.hdr.sgml : 19950515 ACCESSION NUMBER: 0000950146-95-000034 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950201 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06833 FILM NUMBER: 95504573 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 (Letterhead of MGI Properties) VIA EDGAR FILING Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 RE: MGI Properties (the "Company") ----------------------------- Dear Sirs: Enclosed please find a copy of the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1994. Please be advised that a wire for $250.00 in payment of the filing fee will be sent to Mellon Bank at the Commission's lock box number. Very truly yours, [Signature of Peter D. Deutsch] Peter D. Deutsch PDD: gaj Enclosures cc: New York Stock Exchange Mr. Phillip C. Vitali Victor M. Rosenzweig, Esq. 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, 1994 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 January 29, 1995, the aggregate market value of the voting shares of the Registrant held by non-affiliates of the Registrant was $157,728,933. Common Shares Outstanding as of November 30, 1994: 11,465,842 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, 1994. 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.........................12 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.............................................................20 SIGNATURES....................................................................20 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, 1994 (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 multi-use industrial facilities (such as warehouses and research and development buildings), apartment complexes, 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 twelve 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 multi-use industrial facilities, apartment complexes, 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, particularly 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. 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, 1994 consisted of interests in forty-eight properties, forty-four of which are wholly-owned, two 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, 1994, the Trust's real estate investments were diversified by type of property as follows: Type of Property Number of Cost Percent of Properties Total Industrial 24 $ 72,388,000 27% Apartment 9 71,575,000 27 Office 9 64,729,000 24 Retail 6 58,838,000 22 Total 48 $267,530,000 100% As of November 30, 1994, the Trust's real estate investments were diversified by geographic region as follows: Region Number of Cost Percent of Properties Total Northeast 17 $ 88,505,000 33% Midwest 15 89,192,000 33 Southeast 11 66,445,000 25 Mid-Atlantic 4 23,163,000 9 Other 1 225,000 * Total 48 $267,530,000 100% * Less than 1% 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 240 commercial tenants, including 115 office tenants, 70 retail tenants and 55 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 areas 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 recessionary conditions in certain regions from time to time 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, 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, 1994 Net Carrying Value Apartment Units Dollars Per Unit Percentage Leased Metairie, LA 516 $10,746,000 $20,826 97% Harrison Township, MI 376 7,290,000 19,388 98% Bloomfield, MI 346 14,810,000 42,803 98% Tampa, FL 264 7,866,000 29,795 93% Laurel, MD 237 11,692,000 49,333 95% Tampa, FL 112 4,948,000 44,179 94% Total 1,851 $57,352,000 $30,984 97% Net Percentage Partnership Units Carrying Value Leased Washington, DC (4%) 778 $ 16,000 92% San Bruno, CA (2%) 430 225,000 94% Total 1,208 $241,000
Net Carrying Value Scheduled Lease Expirations Office Sq. Ft. Dollars Sq. Percentage 1995 1996 Number of Principal Tenant Lease Ft. Leased Tenants Expiration Franklin Township, NJ 178,600 $14,891,000 $83.38 82% - 11% 11 Merrill Lynch 06/30/97 Tampa, FL 122,400 9,627,000 78.65 93% 8% 4% 16 Bally 06/30/00 Framingham, MA 109,000 7,103,000 65.17 99% 18% 12% 29 National Dentex 01/31/98 Boston, MA 106,000 8,436,000 79.58 97% 10% 4% 11 Cambridge Associates 04/26/99 Ann Arbor, MI 76,600 5,744,000 74.99 93% 7% 13% 7 Comshare 02/28/05 Naperville, IL 63,800 4,657,000 72.99 87% 10% 3% 12 Eby Brown 06/30/04 Greenville, SC 48,600 2,221,000 45.70 70% 21% 28% 21 S.C. Tax Commission 06/30/96 Greenville, SC 46,000 1,766,000 38.39 96% 46% 22% 7 S.C. Voc. Rehab. Dept. 10/31/95 Charlotte, SC 16,300 887,000 54.42 47% - 47% 1 Comprehensive Medical 09/21/96 Total 767,300 $55,332,000 $72.11 89% 10% 11% 115 Retail Aurora, IL 313,000 $27,341,000 $87.35 97% 7% 15% 27 Builders Square 08/31/06 Baltimore, MD 135,000 6,712,000 49.72 100% 5% 2% 14 Kmart Corp. 01/30/05 Nashville, TN 111,400 3,910,000 35.10 99% 4% 7% 9 Burlington Coat Factory 01/31/10 Tampa, FL 100,600 8,337,000 82.87 97% 5$ 12% 19 Publix Supermarket 11/30/06 Hagerstown, MD 40,200 1,460,000 36.32 100% - - 1 Giant Food Stores, Inc. 12/31/04 Total 700,200 $47,760,000 $68.21 98% 6% 10% 70
Item 2. Properties. (continued)
Net Carrying Value Scheduled Lease Expirations Industrial Sq. Ft. Dollars Sq. Ft. Percentage 1995 1996 Number of Principal Tenant Lease Leased Tenants Expiration Research and Development Andover, MA 128,400 $ 6,415,000 $49.96 100% - - 1 Hewlett Packard 07/31/99 Billercia, MA 122,300 4,802,000 39.26 100% - - 1 Precision Robotics 07/31/02 Wilmington, MA 109,400 4,497,000 41.11 100% - - 3 United Shoe Machinery 12/31/01 Andover, MA 105,500 7,094,000 67.24 100% - - 1 ISI Systems, Inc. 04/30/99 Wilmington, MA 100,200 2,510,000 25.05 52% - - 1 Datawatch 04/30/99 Billercia, MA 100,000 4,273,000 42.73 100% - - 1 Bay Network 06/30/98 Bedford, MA 92,700 2,483,000 26.79 100% - 81% 3 Imaging Tech 07/25/96 Chelmsford, MA 71,200 1,918,000 26.94 90% - - 6 W.J. Schaeffer Assoc. 07/31/98 Bedford, MA 70,600 2,204,000 31.22 100% - - 1 Atex Publishing 07/31/98 Billercia, MA 60,000 2,112,000 35.20 100% - - 2 Bay Network 03/30/99 Billercia, MA 56,300 2,031,000 36.11 100% - - 1 Bay Network 12/31/99 St. Louis, MO 40,900 1,351,000 33.03 100% 22% 5% 8 IBF Business Forms 06/30/98 St. Louis, MO 35,600 1,926,000 54.10 100% 57% - 3 Interlock 03/31/95 Distribution and Manufacturing Wilmington, MA 294,000 6,905,000 23.49 100% - - 4 Avon Dispatch 05/31/00 Nashville, TN 203,000 3,315,000 16.33 88% - - 5 Burnham Industries 05/31/97 St. Louis, MO 200,600 4,135,000 20.61 100% - 50% 2 Everest & Jennings 07/07/02 N. Charleston, SC 191,900 2,382,000 12.41 100% - 100% 2 Mill Transportation 12/31/95 St. Louis, MO 95,600 2,185,000 22.86 100% 100% - 2 S.P. Richards 08/31/95 Westwood, MA 77,400 1,495,000 19.32 100% - - 1 P.B. Diagnostics 05/31/97 St. Louis, MO 61,400 1,458,000 23.75 100% 100% - 2 American Greetings 04/14/95 St. Louis, MO 61,200 1,549,000 25.31 100% - - 1 Tyler Mountain Water 12/31/97 Blue Ash, OH 53,200 616,000 11.58 100% 100% - 1 Aero Mailing 08/31/95 St. Louis, MO 41,000 1,169,000 28.51 100% 100% - 2 Nat'l Service Industries 03/31/95 Blue Ash, OH 38,700 496,000 12.82 100% 100% - 1 Ethicon 01/31/95 Total 2,411,100 $69,321,000 $28.75 97% 13% 15% 55
Note: See Note 2 of the Notes to Consolidated Financial Statements included under Item 14 of this Report. 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 April 30, 1995. 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 1994 High Low Dividends First Quarter 15 5/8 13 1/8 $ .21 Second Quarter 16 5/8 14 3/8 $ .21 Third Quarter 16 14 3/8 $ .22 Fourth Quarter 16 13 5/8 $ .22 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 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 January 29, 1995) Common Shares, $1.00 3,038 par value Item 6. Selected Financial Data (a)
Five Years Ended November 30, 1994 1993 1992 1991 1990 Summary of Operations: Rental and other income $ 43,422,000 $ 36,094,000 $ 27,928,000 $ 30,662,000 $ 29,036,000 Property operating expenses and real estate taxes 17,854,000 14,704,000 11,442,000 12,442,000 11,334,000 25,568,000 21,390,000 16,486,000 18,220,000 17,702,000 Interest and other income 458,000 804,000 2,661,000 2,469,000 2,525,000 Less expenses: Depreciation and amortization 7,654,000 6,987,000 5,996,000 5,974,000 5,552,000 Interest expense 5,781,000 5,059,000 5,511,000 6,429,000 5,925,000 General and administrative 2,580,000 2,191,000 2,036,000 2,108,000 2,208,000 Income before net gains (loss) 10,011,000 7,957,000 5,604,000 6,178,000 6,542,000 Net gains (loss) 4,480,000 - 1,644,000 - (360,000) Net income $ 14,491,000 $ 7,957,000 $ 7,248,000 $ 6,178,000 $ 6,182,000 Per Share Data (b): Income before net gains (loss) $.87 $.75 $.60 $.66 $.70 Net gains (loss) .39 - .17 - (.04) Net income $1.26 $.75 $.77 $.66 $.66 Funds from operations $1.54 $1.42 $1.24 $1.30 $1.29 Dividend $ .86 $ .81 $ .80 $ .80 $1.04 Summary of Financial Position: Investments in real estate, at cost $267,530,000 $258,663,000 $209,905,000 $208,011,000 $205,993,000 Cash and investment securities $ 13,521,000 $ 12,653,000 $ 17,748,000 $ 9,574,000 $ 11,585,000 Total assets $256,035,000 $246,700,000 $214,161,000 $217,428,000 $222,434,000 Mortgage and other loans payable $ 70,954,000 $ 66,949,000 $ 60,571,000 $ 67,852,000 $ 71,304,000 Total shareholders' equity $176,095,000 $171,039,000 $145,748,000 $145,873,000 $147,213,000 Weighted average shares outstanding 11,450,451 10,574,104 9,402,476 9,396,992 9,400,559
Notes: (a) Reference is made to the Index to Consolidated Financial Statements filed as 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%. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. At November 30, 1994 financial liquidity was provided by $13.5 million in cash and investment securities and by unused lines of credit of $23.0 million. Shareholders' equity of $176.1 million at November 30, 1994, when compared to $171.0 million at November 30, 1993, primarily reflects net income in excess of distributions. Principal sources of funds in fiscal 1994 included property operations, the sale of eight industrial properties and an apartment complex, mortgage loan proceeds, and the sale of a partnership interest. During 1994, these resources were used to pay dividends of $9.8 million, to repay $10.4 million of indebtedness, to fund capital and tenant improvements of $2.1 million and $1.1 million, respectively, and to acquire seven industrial properties -- six industrial buildings totaling 578,400 square feet, located in Massachusetts, for an aggregate price of $22.2 million and one 200,600 square-foot industrial property, located in Missouri, for a price of $4.1 million. Additionally, 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, now under construction, is being funded by MGI subject to a construction loan agreement which is reflected as an investment in real estate for financial reporting purposes. The building will be leased in its entirety by Bradlees, which is traded on the New York Stock Exchange, under a twenty-year net lease. The purchase is anticipated to occur in mid-1995 upon the satisfactory completion of construction of the building. As of November 30, 1994, the Trust has advanced $5.5 million of the construction loan. Mortgage and other loans payable totaled $71.0 million at November 30, 1994 (74% fixed rate and 26% floating rate), a net increase of $4.1 million compared to $66.9 million at November 30, 1993. During 1994, the Trust executed mortgages totaling $22.7 million with an average interest rate of 8.1%. In addition, the Trust retired $19.2 million of debt related to maturing notes and properties sold. Scheduled payments of loan principal amortization totaled $1.4 million. In 1994, MGI entered into a $15.0 million, two-year, floating rate, secured line of credit facility, which increased the total lines of credit to $25.0 million. At November 30, 1994, the Trust had $2.0 million outstanding on its lines. Mortgage and other loans payable are collateralized by thirteen of MGI's properties having an aggregate carrying value of $119.6 million, $3.2 million of investment securities and MGI's guarantees of $4.5 million. Scheduled loan principal payments due within twelve months of November 30, 1994 total $1.5 million. MGI believes it will continue to be able to extend or refinance maturing mortgage loans upon satisfactory terms. In December 1994, the Trust acquired a 38,000 square-foot office building located in Boston, Massachusetts for a price of $1.8 million. In January 1995, the Trust agreed to acquire a 190,000 square-foot industrial building located in Tewksbury, Massachusetts for a price of $5.75 million, subject to the satisfactory completion of certain conditions including due diligence and the execution with a publicly-traded company of a fifteen-year lease for the entire building. The lease would commit the Trust to tenant and capital improvements totaling approximately $6.3 million. Other cash requirements in 1995 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 1992 through 1994, annual expenditures for capital and tenant improvements averaged approximately 1.3% of net real estate investments. In 1995, budgeted capital and tenant improvements, which are based on assumed leasing activity, completion of discretionary capital projects and estimated costs, approximates 2.9% of net real estate investments, excluding any commitments associated with the purchase of the 190,000 square-foot industrial building. The budgeted increase in 1995 over the average of previous years is primarily due to proposed capital and tenant improvements in the office segment, which reflects budget leasing assumptions for the year. Included in the 1995 budget is $1.5 million of tenant improvements related to a signed 61,000 square-foot office lease at its Michigan office building. Additionally, the Trust has budgeted $.8 million of interior and exterior improvements for its apartment complexes and $.5 million for paving and roof replacements at certain industrial buildings. Principal sources of funds in the future are expected to be from operations of properties, including those acquired in the future, mortgage or refinancing of existing mortgages on properties and MGI's portfolio of investment securities. Other potential sources of funds include the proceeds of offering of additional equity or debt securities or the sale of real estate investments. In this regard, the Trust sold an industrial property located in Nashville, Tennessee for $4.8 million and will recognize a gain of approximately $1.4 million in the quarter ending February 28, 1995. 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 1995 may require the use of funds from MGI's lines of credit, new borrowings, or the issuance of 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 1994 COMPARED TO 1993 Net income for 1994 of $14.5 million, or $1.26 per share, exceeded net income of $8.0 million, or $.75 per share, in 1993. Included in net income in 1994 was a net gain of $4.5 million, or $.39 per share, which resulted from the sale of real estate investments for an aggregate sales price of $25.2 million. Income before net gains increased 25% to $10.0 million for 1994, compared to $8.0 million in 1993. The increase in income before net gains when comparing 1994 to 1993 resulted principally from the increase in properties owned. Funds from operations in 1994 totaled $17.7 million, or $1.54 per share, compared to $15.0 million, or $1.42 per share, in 1993. 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. A primary component of the change in income before net gains is property operating income which is defined as rental and other income less property operating expenses and real estate taxes. Property operating income increased by $4.2 million (20%) to $25.6 million in 1994 from $21.4 million in 1993. This increase is largely due to the 1993 and 1994 acquisitions which contributed $4.2 million and $1.1 million to the increase, respectively. These properties consist of seventeen industrial and two office buildings totaling over 1.9 million square feet (50% of the total non-residential portfolio) and are 97% leased as of November 30, 1994. Properties sold during 1994 reduced property operating income by less than $0.3 million. Property operating income for the balance of the portfolio, which the Trust owned as of the beginning of fiscal 1993, has increased by $0.2 million to $16.1 million without consideration of $1.0 million income received during 1993 in connection with the amendment and assignment of a lease at Yorkshire Plaza located in Aurora, Illinois. With respect to this group of properties, which the Trust owned throughout all of 1993 and 1994, apartment property operating income has improved by 6% largely due to increases in rental rates, with average occupancy at 94% for both 1993 and 1994. Industrial property operating income has improved 20% due to an increase in occupancy. Overall, average occupancy for all industrial properties owned has improved by 2% to 98% during 1994. The increases in property operating income from comparable apartment and industrial buildings are offset, however, by a $0.5 million decline from comparable office buildings. Average occupancy in office buildings has declined from 94% in 1993 to 88% in 1994, primarily due to increased average vacancy at the suburban Chicago, Illinois and Somerset, New Jersey buildings during 1994. Retail property operating income is largely unchanged, excluding the $1.0 million lease amendment income received in 1993, and average occupancy has increased modestly from 92% to 93% from 1993 to 1994. The $7.3 million increase in rental and other income in 1994 compared to 1993 was principally the result of $1.5 million from the properties acquired in 1994, $6.8 million due to the partial year ownership of properties acquired in 1993, offset by a decrease of $0.5 million due to the sale of properties in 1994 and a decrease of $0.5 million from the balance of the portfolio. Included in 1993 rental and other income, however, was $1.0 million of income received in connection with the lease amendment, mentioned above. Exclusive of this income, revenue in the group of properties which the Trust owned throughout all of 1993 and 1994 has increased $0.5 million. Rental income from the comparable portfolio of apartments and industrial buildings has increased while revenue in the office segment has declined due to factors similar to those affecting property operating income. The $2.0 million increase in property operating expenses and the $1.2 million increase in real estate taxes in 1994 as compared to 1993, reflect primarily (i) $0.2 million and $0.3 million, respectively, attributable to the properties acquired in 1994, (ii) $1.7 million and $0.9 million, respectively, due to the buildings acquired in 1993 and (iii) $0.2 million and $0.1 million, respectively, from the balance of the portfolio, which are offset by the decreases of $0.1 million and $0.1 million, respectively, due to buildings sold in 1994. The $0.7 million increase in depreciation and amortization expense for 1994 when compared to 1993 was mostly due to partial year ownership of the properties acquired in 1994 and 1993. Three additional factors also contributed to the change in income before net gains and funds from operations when 1994 is compared to 1993. Interest income in 1994 reflects a decrease in the average outstanding balance of short-term investments. General and administrative expenses increased in 1994 primarily reflecting an increase in personnel and shareholder-related items. Interest expense increased reflecting a higher average level of debt outstanding. At November 30, 1994, scheduled 1995 lease expirations for non-residential space approximates 433,000 square feet, or 11% of the entire commercial portfolio, which is similar to the percentage of scheduled expiration for fiscal 1994. Of these scheduled expirations, 319,000 square feet is industrial space, 75,000 square feet is office and 39,000 square feet is retail. During 1994, the Trust signed leases totaling 530,000 square feet with lease commencement dates in 1994 and 1995. 1993 COMPARED TO 1992 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. 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 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 deceased interest expense of $0.5 million when 1993 is compared to 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, 1994 and 1993 Consolidated Statements of Earnings, Years ended November 30, 1994, 1993 and 1992 Consolidated Statements of Changes in Shareholders' Equity, Years ended November 30, 1994, 1993 and 1992 Consolidated Statements of Cash Flows, Years ended November 30, 1994, 1993 and 1992 Notes to Consolidated Financial Statements 2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES Schedules (as of or for the year ended November 30, 1994): 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 Exhibit XXVII - Financial Data Schedule for year ended November 30, 1994 (EDGAR filing only) 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. Sequentially Numbered Page (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. (s) MGI Properties 1994 Stock Option and Stock Appreciation Rights Plan for Key Employees and Trustees incorporated by reference to the Trust's Definitive Proxy Statement, dated February 18, 1994. (t) The Dividend Reinvestment and Share Purchase Plan of MGI Properties incorporated by reference to the Trust's Report on Form S-3, filed on July 1, 1994. 11 Computation of Net Income Per Share, Assuming Full Dilution, included under Item 14 of this Report. 24 Auditors' consent (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, 1994. ------------------------- 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: January 31, 1995 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 of Trustees January 31, 1995 W. Pearce Coues and Chief Executive Officer /s/ Phillip C. Vitali _________________ Principal Financial Officer January 31, 1995 Phillip C. Vitali /s/ David P. Morency _________________ Principal Accounting Officer January 31, 1995 David P. Morency /s/ Herbert D. Conant _________________ Trustee January 31, 1995 Herbert D. Conant /s/ Francis P. Gunning _________________ Trustee January 31, 1995 Francis P. Gunning /s/ Colin C. Hampton _________________ Trustee January 31, 1995 Colin C. Hampton /s/ George M. Lovejoy, Jr. _________________ Trustee January 31, 1995 George M. Lovejoy, Jr. /s/ Rodger P. Nordblom _________________ Trustee January 31, 1995 Rodger P. Nordblom UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS November 30, 1994 MGI PROPERTIES MGI PROPERTIES Index to Consolidated Financial Statements and Schedules Page Independent Auditors' Report 1 Financial Statements: Consolidated Balance Sheets, November 30, 1994 and 1993 2 Consolidated Statements of Earnings, Years ended November 30, 1994, 1993 and 1992 3 Consolidated Statements of Cash Flows, Years ended November 30, 1994, 1993 and 1992 4 Consolidated Statements of Changes in Shareholders' Equity, Years ended November 30, 1994, 1993 and 1992 5 Notes to Consolidated Financial Statements 6-11 Schedules (as of or for the year ended November 30, 1994): 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 Exhibit XXVII - Financial Data Schedule for year ended November 30, 1994 (EDGAR filing only) 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, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended November 30, 1994 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. (Signature of KPMG Peat Marwick LLP) KPMG Peat Marwick LLP Boston, Massachusetts December 30, 1994 MGI PROPERTIES Consolidated Balance Sheets November 30, 1994 and 1993
Assets 1994 1993 Real estate, at cost (notes 2, 3 and 4) $ 267,530,000 $ 258,663,000 Accumulated depreciation and amortization (32,029,000) (29,992,000) Net investments in real estate 235,501,000 228,671,000 Cash 1,774,000 1,564,000 Short-term investments, at cost, which approximates market value (note 4) 11,118,000 10,252,000 U.S. Government securities, at cost, which approximates market value (note 4) 629,000 837,000 Other assets 7,013,000 5,376,000 $ 256,035,000 $ 246,700,000 Liabilities and Shareholders' Equity Liabilities: Mortgage and other loans payable (note 4) $ 70,954,000 $ 66,949,000 Other liabilities 5,286,000 5,012,000 Total liabilities 76,240,000 71,961,000 Deferred gain (note 2) 3,700,000 3,700,000 Commitments (note 2) Shareholders' equity (notes 5 and 6): Preferred shares - $1 par value: 2,000,000 shares authorized; none issued -- -- Common shares - $1 par value: 17,500,000 shares authorized; 11,465,842 issued (11,448,152 at November 30, 1993) 11,466,000 11,448,000 Additional paid-in capital 165,921,000 165,673,000 Distributions in excess of net income (1,292,000) (5,935,000) 176,095,000 171,186,000 At November 30, 1993, 14,431 shares in treasury, at cost -- (147,000) Total shareholders' equity 176,095,000 171,039,000 $ 256,035,000 $ 246,700,000
See accompanying notes to consolidated financial statements.
MGI PROPERTIES Consolidated Statements of Earnings Year ended November 30, 1994 1993 1992 Income: Rental and other income $43,422,000 $36,094,000 $27,928,000 Interest on mortgage loans -- 54,000 1,686,000 Interest on investment securities 394,000 659,000 916,000 Other 64,000 91,000 59,000 Total income 43,880,000 36,898,000 30,589,000 Expenses: Property operating expenses 12,437,000 10,457,000 8,089,000 Real estate taxes 5,417,000 4,247,000 3,353,000 Depreciation and amortization 7,654,000 6,987,000 5,996,000 Interest 5,781,000 5,059,000 5,511,000 General and administrative 2,580,000 2,191,000 2,036,000 Total expenses 33,869,000 28,941,000 24,985,000 Income before net gains 10,011,000 7,957,000 5,604,000 Net gains (note 2) 4,480,000 -- 1,644,000 Net income $14,491,000 $ 7,957,000 $ 7,248,000 Per share data: Income before net gains $ .87 $ .75 $ .60 Net gains .39 -- .17 Net income $ 1.26 $ .75 $ .77 Weighted average shares outstanding 11,450,451 10,574,104 9,402,476
See accompanying notes to consolidated financial statements. MGI PROPERTIES Consolidated Statements of Cash Flows
Year ended November 30, 1994 1993 1992 Cash flows from operating activities: Net income $ 14,491,000 $ 7,957,000 $ 7,248,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,654,000 6,987,000 5,996,000 Net gains (4,480,000) -- (1,644,000) Equity in losses of partnerships -- 45,000 90,000 Other (959,000) 803,000 903,000 Net cash provided by operating activities 16,706,000 15,792,000 12,593,000 Cash flows from investing activities: Acquisitions of real estate (31,786,000) (40,963,000) (6,005,000) Additions to real estate (3,208,000) (2,672,000) (2,471,000) Net proceeds from sales of real estate interests 15,020,000 -- 18,773,000 Cash distributions from real estate partnership 100,000 -- -- Additions and advances on mortgage loans receivable -- (79,000) (235,000) Decrease in U.S. Government securities, net 208,000 780,000 625,000 Other (116,000) (85,000) 154,000 Net cash provided by (used in) investing activities (19,782,000) (43,019,000) 10,841,000 Cash flows from financing activities: Proceeds from sale of common shares, net 41,000 25,640,000 -- Repayment of mortgage and other loans payable (10,439,000) (7,688,000) (7,227,000) Additions to mortgage and other loans payable 24,188,000 13,338,000 -- Cash distributions paid (9,828,000) (8,460,000) (7,523,000) Stock option transactions 190,000 82,000 115,000 Net cash provided by (used in) financing activities 4,152,000 22,912,000 (14,635,000) Net increase (decrease) in cash and short-term investments 1,076,000 (4,315,000) 8,799,000 Cash and cash equivalents: Beginning of year 11,816,000 16,131,000 7,332,000 End of year $ 12,892,000 $ 11,816,000 $ 16,131,000
See accompanying notes to consolidated financial statements.
MGI PROPERTIES Consolidated Statements of Changes in Shareholders' Equity 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, 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 Net income - - - 14,491,000 - 14,491,000 Dividend reinvestment and share purchase plan (note 5) 4,121 4,000 57,000 - - 61,000 Distributions (note 6) - - - (9,848,000) - (9,848,000) Options exercised and other 13,569 14,000 191,000 - 147,000 352,000 Balance at November 30, 1994 11,465,842 $11,466,000 $165,921,000 $(1,292,000) $ - $176,095,000
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 a range from 5 to 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 1994, the Trust sold seven industrial properties for $14.9 million in a single transaction. The properties were secured by a $10.2 million loan payable which was assigned to the purchaser at closing. Only the cash portion of the sale is reflected in the accompanying consolidated statement of cash flows. Cash interest payments of $5.8 million, $5.3 million and $5.5 million were made for the years ended November 30, 1994, 1993 and 1992, respectively. (f) Fair Value of Financial Instruments The Trust estimated the fair values of its financial instruments at November 30, 1994 using dis-counted 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 TrustOs consolidated balance sheet. The excess of the aggregate fair value of the TrustOs financial instruments over their aggregate carrying amounts is not material. (g) Net Income Per Share Net income per share is computed based on the weighted average number of common shares outstanding. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements (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 1994 1993 Industrial $15,583,000 $ 56,805,000 $ 3,067,000 $ 69,321,000 $ 57,304,000 Apartment 10,831,000 60,503,000 13,957,000 57,377,000 64,030,000 Office 12,461,000 52,268,000 9,397,000 55,332,000 56,559,000 Retail 19,110,000 34,258,000 5,608,000 47,760,000 48,635,000 Retail - Construction in Progress - - - 5,470,000 - Partnership - - - 241,000 2,143,000 $57,985,000 $203,834,000 $32,029,000 $235,501,000 $228,671,000
A discussion of certain real estate investments follows: 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, now under construction, is being funded by the Trust subject to a construction loan agreement which requires interest at 9% per annum and is secured by a first mortgage, an assignment of the lease and guarantees of the borrower. Additionally, the tenant has guaranteed the completion of construction and the funding of cost overruns exceeding a specified dollar amount. The building is leased in its entirety to Bradlees, a NYSE company, subject to a twenty-year net lease. The purchase of the building is expected to occur in mid 1995 upon satisfactory completion of construction. The construction loan is reflected as an investment in real estate for financial reporting purposes. 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, 1994, the Trust carried this asset as a real estate investment at a net carrying value of $7.3 million, which excludes the gain from the sale. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements 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) on the related mortgage loan as received. During 1994 and 1993, the Trust has recognized property income and expenses as if it owned the property. For tax purposes, at November 30, 1994, this investment is reflected as a $14.1 million, 8.5% mortgage loan receivable. With respect to a San Bruno, 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. (b) Net Gains In 1994, the Trust sold nine properties and one real estate partnership interest with an aggregate net carrying value of $20.7 million for an aggregate net sales price of $25.2 million resulting in gains totalling $4.5 million. 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 the 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, 1994 are: $23.7 million in 1995, $21.4 million in 1996, $17.7 million in 1997, $13.5 million in 1998, $10.0 million in 1999, and $30.5 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 $5.4 million in 1994, $3.4 million in 1993 and $2.6 million in 1992. Operating leases on apartments generally have a term of one year or less. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements (4) Mortgage and Other Loans Payable Mortgage and other loans payable at November 30 follow:
1994 1993 Mortgage loans, maturing 1996 through 2014, at effective interest rates ranging from 7.58% to 9.5%, net of unamortized discount of $31,000 in 1993 $ 52,224,000 $ 49,918,000 Mortgage loan, maturing in September 1999 at an effective variable interest rate, 7.81% and 5.25% at November 30, 1994 and 1993, respectively 10,884,000 11,185,000 Housing revenue bond, maturing 2007, at 5.40% and 4.28% at November 30, 1994 and 1993, respectively 5,750,000 5,750,000 Amount outstanding under line of credit, maturing in June 1996, at a variable interest rate, 8.5%, at November 30, 1994 2,000,000 - Other, maturing 1995, at 7.50% 96,000 96,000 $ 70,954,000 $ 66,949,000 Weighted average interest rate 8.48% 8.52%
These loans payable are nonrecourse and are collateralized by certain real estate investments having a net carrying value of $119.6 million and the Trust's guarantee of $4.5 million. Loans require monthly principal amortization and/or a balloon payment at maturity. The Trust has lines of credit of $10.0 million and $15.0 million maturing September 1996 and June 1996, respectively. Both credit agreements contain restrictive covenants which, among other things, require the Trust to maintain certain financial ratios and restrict the incurrence of certain indebtedness and the making of certain investments. Borrowings under the lines are secured by mortgage and security interests in real estate and are subject to a variable interest rate. A fee in the amount of .25% per annum is charged on the unused amounts. The housing revenue bond is tax exempt and is secured by real estate having a net carrying value of $4.9 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 3.5% at November 30, 1994 (an effective interest rate of 5.4% 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: $1.5 million in 1995, $13.5 million in 1996, $17.3 million in 1997, $1.4 million in 1998, $10.5 million in 1999, and $26.8 million thereafter. (5) Shareholders' Equity (a) Stock Option Plans At the 1994 annual meeting, shareholders ratified the 1994 Employee Stock Option and Stock Appreciation Rights Plan and the 1994 Trustees' Stock Option Plan. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements Under the Trust's 1988 and 1994 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: 1994 1993 1992 Balance at beginning of year 464,532 467,000 433,000 Granted 101,000 24,000 49,000 Exercised (15,900) (14,468) (15,000) Expired -- (12,000) -- Balance at end of year 549,632 464,532 467,000 Shares available for granting future options 590,325 121,325 140,000 The weighted average exercise price per option at November 30, 1994, 1993 and 1992 was $12.62, $12.16 and $11.88, respectively. The shares reserved expire by April 2004 and all outstanding options expire by April 2004. Subsequent to November 30, 1994, 112,000 options were granted, of which half are currently exercisable and half are exercisable in December 1995. All other options outstanding are currently exercisable. (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 thereafter. 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 in July 1999. (c) Dividend Reinvestment and Share Purchase Plan Effective August 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 3% discount in the case of newly issued shares. If MGI purchases shares in the open market for the plan, the price for such shares will be 100% of the average purchase price paid. Participants in the plan may make additional cash purchases of shares at the same price as shares purchased through the reinvestment of dividends. (d) 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. (Continued) MGI PROPERTIES Notes to Consolidated Financial Statements (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 and capital gains of $.86 per share ($9.8 million) in 1994, and cash distributions of ordinary income of $.81 per share ($8.5 million) in 1993 and $.80 per share ($7.5 million) in 1992. On December 15, 1994, the Trust declared a dividend of $.22 per share payable on January 11, 1995 to shareholders of record on January 3, 1995. (7) Subsequent Events In December 1994, the Trust sold an industrial property located in Nashville, Tennessee for $4.8 million and will recognize a gain of approximately $1.4 million in the first quarter ending February 28, 1995. In December 1994, the Trust acquired a 38,000 square foot office building located in Boston, Massachusetts for a price of $1.8 million. The building is 100% occupied. (8) Quarterly Financial Information (Unaudited) Quarterly results of operations for the years ended November 30, 1994 and 1993 follow:
Quarter Ended 1994 February 28 May 31 August 31 November 30 Total income $10,816,000 $10,953,000 $11,117,000 $10,994,000 Total expenses $ 8,369,000 $ 8,573,000 $ 8,530,000 $ 8,397,000 Income before net gains $ 2,447,000 $ 2,380,000 $ 2,587,000 $ 2,597,000 Net gains $ 450,000 -- $ 2,700,000 $ 1,330,000 Net income $ 2,897,000 $ 2,380,000 $ 5,287,000 $ 3,927,000 Net income per share $ .25 $ .21 $ .46 $ .34
Quarter Ended February 28(a) May 31 August 31 November 30 1993 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.
Schedule XI MGI PROPERTIES Real Estate and Accumulated Depreciation November 30, 1994
Costs Initial cost capitalized Building and subsequent to Description Encumbrances Land improvements acquisition Apartments Harrison Township, MI $ - $ 700,000 $ 1,948,000 $ 9,522,000 Tampa, FL 4,803,000 1,850,000 7,009,000 744,000 Tampa, FL 5,750,000 1,178,000 4,466,000 131,000 Bloomfield Hills, MI 11,357,000 4,325,000 12,126,000 2,082,000 Laurel, MD 7,402,000 613,000 12,722,000 210,000 Metairie, LA - 2,140,000 8,860,000 683,000 Mount Clemens, MI - 25,000 - - Retail Hagerstown, MD - 364,000 1,459,000 - Nashville, TE - 1,570,000 2,655,000 485,000 Baltimore, MD 3,754,000 2,000,000 5,710,000 69,000 Tampa, FL 5,371,000 2,600,000 6,540,000 470,000 Aurora, IL 16,383,000 12,576,000 15,372,000 1,498,000 Office Buildings Charlotte, NC - 150,000 933,000 105,000 Naperville, IL - 1,400,000 3,318,000 1,213,000 Greenville, SC - 246,000 2,490,000 255,000 Greenville, SC - 213,000 1,647,000 627,000 Ann Arbor, MI - 686,000 5,618,000 650,000 Tampa, FL - 2,667,000 8,980,000 188,000 Somerset, NJ - 3,264,000 13,379,000 750,000 Boston, MA 1,100,000 1,730,000 6,925,000 42,000 Framingham, MA 900,000 2,105,000 5,109,000 39,000 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 - 218,000 1,171,000 306,000 St. Louis, MI - 360,000 1,337,000 66,000 Nashville, TN - 675,000 2,756,000 54,000 Bedford, MA - 512,000 2,062,000 33,000 St. Louis, MI - 570,000 1,695,000 13,000 St. Louis, MI 220,000 613,000 1,347,000 34,000 St. Louis, MI - 300,000 1,321,000 - St. Louis, MI - 500,000 708,000 - Wilmington, MA 4,818,000 2,390,000 4,638,000 64,000 Billerica, MA - 376,000 1,749,000 68,000 Wilmington, MA - 1,394,000 3,208,000 - Bedford, MA - 662,000 1,585,000 - Andover, MA 4,860,000 1,441,000 5,799,000 5,000 Westwood, MA - 548,000 967,000 18,000 Billerica, MA - 752,000 3,611,000 - Billerica, MA - 420,000 1,652,000 - Andover, MA 4,140,000 1,185,000 5,307,000 - Chelmsford, MA - 354,000 1,567,000 - Wilmington, MA - 501,000 2,013,000 - St. Louis, MO - 526,000 3,617,000 - Billerica, MA - 681,000 4,130,000 - $ 70,858,000 $ 57,985,000 $ 183,191,000 $ 20,643,000
Gross amounts at which carried at close of period Accumulated Building depreciation and and Date Depreciable Description Land improvements Total amortization acquired life (years) Apartments Harrison Township, MI $ 700,000 $ 11,470,000 $ 12,170,000 $ 4,880,000 11/74 40 Tampa, FL 1,850,000 7,753,000 9,603,000 1,737,000 10/86 40 Tampa, FL 1,178,000 4,597,000 5,775,000 827,000 3/88 40 Bloomfield Hills, MI 4,325,000 14,208,000 18,533,000 3,723,000 1/89 40 Laurel, MD 613,000 12,932,000 13,545,000 1,853,000 9/90 40 Metairie, LA 2,140,000 9,543,000 11,683,000 937,000 11/92 20 Mount Clemens, MI 25,000 - 25,000 - Retail Hagerstown, MD 364,000 1,459,000 1,823,000 363,000 12/84 40 Nashville, TE 1,570,000 3,140,000 4,710,000 800,000 8/86 40 Baltimore, MD 2,000,000 5,779,000 7,779,000 1,067,000 7/87 40 Tampa, FL 2,600,000 7,010,000 9,610,000 1,273,000 12/87 40 Aurora, IL 12,576,000 16,870,000 29,446,000 2,105,000 5/90 40 Office Buildings Charlotte, NC 150,000 1,038,000 1,188,000 301,000 1/85 40 Naperville, IL 1,400,000 4,531,000 5,931,000 1,274,000 8/86 20 Greenville, SC 246,000 2,745,000 2,991,000 770,000 11/86 20 Greenville, SC 213,000 2,274,000 2,487,000 721,000 11/86 20 Ann Arbor, MI 686,000 6,268,000 6,954,000 1,210,000 12/88 40 Tampa, FL 2,667,000 9,168,000 11,835,000 2,208,000 12/88 25 Somerset, NJ 3,264,000 14,129,000 17,393,000 2,502,000 12/88 40 Boston, MA 1,730,000 6,967,000 8,697,000 261,000 6/93 40 Framingham, MA 2,105,000 5,148,000 7,253,000 150,000 9/93 40 Industrial Properties N. Charleston, SC 300,000 2,778,000 3,078,000 696,000 12/84 40 Blue Ash, OH 176,000 627,000 803,000 187,000 11/85 40 Blue Ash, OH 129,000 499,000 628,000 132,000 11/85 40 St. Louis, MI 218,000 1,477,000 1,695,000 344,000 12/86 40 St. Louis, MI 360,000 1,403,000 1,763,000 305,000 5/87 40 Nashville, TN 675,000 2,810,000 3,485,000 170,000 6/92 40 Bedford, MA 512,000 2,095,000 2,607,000 124,000 10/92 40 St. Louis, MI 570,000 1,708,000 2,278,000 93,000 12/92 40 St. Louis, MI 613,000 1,381,000 1,994,000 68,000 12/92 40 St. Louis, MI 300,000 1,321,000 1,621,000 72,000 12/92 40 St. Louis, MI 500,000 708,000 1,208,000 39,000 12/92 40 Wilmington, MA 2,390,000 4,702,000 7,092,000 187,000 5/93 40 Billerica, MA 376,000 1,817,000 2,193,000 81,000 7/93 40 Wilmington, MA 1,394,000 3,208,000 4,602,000 105,000 8/93 40 Bedford, MA 662,000 1,585,000 2,247,000 43,000 11/93 40 Andover, MA 1,441,000 5,804,000 7,245,000 151,000 11/93 40 Westwood, MA 548,000 985,000 1,533,000 38,000 11/93 40 Billerica, MA 752,000 3,611,000 4,363,000 90,000 12/93 40 Billerica, MA 420,000 1,652,000 2,072,000 41,000 12/93 40 Andover, MA 1,185,000 5,307,000 6,492,000 77,000 4/94 40 Chelmsford, MA 354,000 1,567,000 1,921,000 3,000 11/94 40 Wilmington, MA 501,000 2,013,000 2,514,000 4,000 11/94 40 St. Louis, MO 526,000 3,617,000 4,143,000 8,000 11/94 40 Billerica, MA 681,000 4,130,000 4,811,000 9,000 11/94 40 $57,985,000 $203,834,000 261,819,000 $32,029,000 Construction in Progress Peabody, MA 5,470,000 Partnerships San Bruno, CA 225,000 Washington, D.C. 16,000 $267,530,000
Schedule XI (Continued) MGI PROPERTIES Real Estate and Accumulated Depreciation Years ended November 30, 1994, 1993 and 1992 A summary of real estate investments and accumulated depreciation and amortization for the three years ended November 30 follows: Real Estate Investments
1994 1993 1992 Balance at beginning of year $ 258,663,000 $ 209,905,000 $ 208,011,000 Add: Investments 31,786,000 47,692,000 6,005,000 Improvements 3,208,000 2,672,000 2,471,000 Reclassification from mortgage loans -- -- 11,000,000 293,657,000 260,269,000 227,487,000 Deduct: Real estate dispositions (24,312,000) -- (16,935,000) Other (1,815,000) (1,606,000) (647,000) Balance at end of year $ 267,530,000 $ 258,663,000 $ 209,905,000 Accumulated Depreciation and Amortization Balance at beginning of year $ 29,992,000 $ 24,583,000 $ 25,785,000 Add: Depreciation and amortization 7,638,000 6,969,000 5,968,000 Deduct: Real estate dispositions (3,920,000) -- (6,614,000) Other (1,681,000) (1,560,000) (556,000) Balance at end of year $ 32,029,000 $ 29,992,000 $ 24,583,000
The aggregate cost for Federal income tax purposes of the above investments at November 30, 1994 is approximately $274.2 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 Years ended November 30, 1994, 1993 and 1992 A summary of mortgage and other loan activity for the years ended November 30 follows: 1994 1993 1992 Balance at beginning of year $ -- $ 5,880,000 (a) $19,764,000 Add: Additions and advances -- 79,000 234,000 -- 5,959,000 19,998,000 Less: Collection of principal -- -- (17,000) Other principal reductions -- (5,959,000)(a) (14,101,000)(b) Balance at end of year $ -- $ -- $ 5,880,000 (a) 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. (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 note 2 to the financial statements. Exhibit XI MGI PROPERTIES Computation of Net Income Per Share Assuming Full Dilution Year ended November 30, 1994 1993 1992 1991 1990 Income before net gains (losses) $ 10,011,000 $ 7,957,000 $ 5,604,000 $ 6,178,000 $ 6,542,000 Net gains (losses) 4,480,000 - 1,644,000 - (360,000) Net income $ 14,491,000 $ 7,957,000 $ 7,248,000 $ 6,178,000 $ 6,182,000 Weighted average number of common shares outstanding 11,450,451 10,574,104 9,402,476 9,396,992 9,400,559 Additional number of share equivalents assuming exercise of options 91,834 55,312 20,274 16,941 - Weighted average number of shares assuming full dilution 11,542,285 10,629,416 9,422,750 9,413,933 9,400,559 Net income per share assuming full dilution: Income before net gains (losses) $.87 $.75 $.60 $.66 $.70 Net gains (losses) .39 - .17 - (.04) Net income per share assuming full dilution $1.26 $.75 $.77 $.66 $.66
EX-23 2 CONSENTS OF EXPERTS AND COUNSEL Consent of Independent Auditors The Board of Turstees MGI Properties: We consent to incorporation by reference in the rgistration statemetns (Nos. 33-21584, 2-97270 and 33-65844) on Form S-8 of MGI Properties and subsidiaries of our report dated December 30, 1994, relating to the consolidated balance sheets of MGI Properties and subsidiaries as of November 30, 1994 and 1993, 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, 1994, which report appears in the November 30, 1994 annual report of Form 10-K of MGI Properties and subsidiaries. KPMG Peat Marwick LLP ----------------------------------- [Signature of KPMG Peat Marwick LLP) Boston, Massachusetts January 30, 1995 EX-27 3 FIN.DATA SCHEDULE-YEAR ENDED NOV. 30, 1994
5 1,000 12-MOS NOV-30-1994 NOV-30-1994 1,774 11,747 000 000 000 000 267,530 32,029 256,035 000 70,954 11,466 000 000 164,629 256,035 43,422 43,880 000 25,508 2,580 000 5,781 10,011 000 10,011 000 000 000 14,491 1.26 1.26
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