-----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, OCRCEOgoMrjsohF35AMO9yaYn+aOO49J8ckcgjjryXfIUm7Ufp4qiOsseaD97e+L ZCQj3NlB90nQeGaBdy5dkg== 0000950146-95-000173.txt : 19950415 0000950146-95-000173.hdr.sgml : 19950414 ACCESSION NUMBER: 0000950146-95-000173 CONFORMED SUBMISSION TYPE: 10-Q CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950413 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MGI PROPERTIES CENTRAL INDEX KEY: 0000068330 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046268740 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06833 FILM NUMBER: 00000000 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 10-Q 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: February 28, 1995 Commission File Number:1-6833 MGI PROPERTIES (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-6268740 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 30 Rowes Wharf, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 330-5335 N/A Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Common shares outstanding as of April 10, 1995: 11,481,339 Page 1 of 13 pages Exhibit Index appears on Page 12 MGI PROPERTIES INDEX PART I: FINANCIAL INFORMATION Page No. Item 1: Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Earnings 4 Consolidated Statements of Cash Flow 5 Consolidated Statements of Changes in Shareholders' Equity 6 Notes to Consolidated Financial Statements 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Exhibit A: Computation of Earnings Per Share 11 PART II: OTHER INFORMATION Items 1 - 6 12 Signatures 13 MGI PROPERTIES PART I -- FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
February 28, 1995 November 30, 1994 (unaudited) ASSETS Real estate, at cost $ 268,068,000 $ 267,530,000 Accumulated depreciation and amortization (33,744,000) (32,029,000) Net investments in real estate 234,324,000 235,501,000 Cash 1,643,000 1,774,000 Short-term investments, at cost 12,601,000 11,118,000 U.S. Government securities, at cost 612,000 629,000 Other assets 7,577,000 7,013,000 $ 256,757,000 $ 256,035,000 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage and other loans payable $ 70,619,000 $ 70,954,000 Other liabilities 4,667,000 5,286,000 Total liabilities 75,286,000 76,240,000 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; 17,500,000 shares authorized; 11,480,018 issued (11,465,842 at November 30, 1994) 11,480,000 11,466,000 Additional paid-in capital 166,102,000 165,921,000 Undistributed (distributions in excess of) net income 189,000 (1,292,000) Total shareholders' equity 177,771,000 176,095,000 $ 256,757,000 $ 256,035,000
See accompanying notes to consolidated financial statements. MGI PROPERTIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Three Months Ended February 28, 1995 February 28, 1994 INCOME Rental and other income $10,721,000 $10,726,000 Interest on investment securities 200,000 74,000 Other 16,000 16,000 Total Income 10,937,000 10,816,000 EXPENSES Property operating expenses 2,962,000 3,033,000 Real estate taxes 1,392,000 1,374,000 Depreciation and amortization 1,891,000 1,896,000 Interest 1,412,000 1,466,000 General and administrative 674,000 600,000 Total expenses 8,331,000 8,369,000 Income before net gain 2,606,000 2,447,000 Net gain 1,400,000 450,000 Net income $ 4,006,000 $ 2,897,000 PER SHARE DATA Income before net gain $ 0.23 $ 0.21 Net gain 0.12 0.04 Net income $ 0.35 $ 0.25 Weighted average shares outstanding 11,474,893 11,441,250
See accompanying notes to consolidated financial statements. MGI PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
Three Months Ended February 28, 1995 February 28, 1994 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,006,000 $ 2,897,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,891,000 1,896,000 Net gain (1,400,000) (450,000) Other (802,000) (1,112,000) Net cash provided by operating activities 3,695,000 3,231,000 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of real estate (1,836,000) (6,435,000) Additions to real estate (2,142,000) (475,000) Net proceeds from sales of real estate interests 4,738,000 2,288,000 Cash distributions from real estate partnerships -- 100,000 Decrease in U.S. Government securities, net 17,000 88,000 Other (313,000) (99,000) Net cash provided by (used in) investing activities 464,000 (4,533,000) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from sale of common shares 53,000 -- Repayment of mortgage and other loans payable (335,000) (362,000) Additions to mortgage and other loans payable, net -- 1,870,000 Cash distributions (2,525,000) (2,403,000) Net cash used in financing activities (2,807,000) (895,000) Net increase (decrease) in cash and short-term investments 1,352,000 (2,197,000) CASH AND CASH EQUIVALENTS Beginning of period 12,892,000 11,816,000 End of period $ 14,244,000 $ 9,619,000
See accompanying notes to consolidated financial statements. MGI PROPERTIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Undistributed Number of (Distributions Total Common Common Additional in Excess of) Shareholders' Shares Issued Shares Paid-in Capital Net Income Equity Balance at November 30, 1994 11,465,842 $ 11,466,000 $ 165,921,000 ($ 1,292,000) $176,095,0000 Net Income -- -- -- 4,006,000 4,006,000 Distributions -- -- -- (2,525,000) (2,525,000) Dividend reinvestment and 3,796 4,000 49,000 53,000 share repurchase plan Options exercised and other 10,380 10,000 132,000 -- 142,000 Balance at February 28, 1995 11,480,018 $ 11,480,000 $ 166,102,000 $ 189,000 $ 177,771,000
See accompanying notes to consolidated financial statements. 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 March 22, 1995, the Board of Trustees declared a cash dividend of $.22 per share payable on April 13, 1995 to shareholders of record on April 6, 1995. This dividend will aggregate $2.5 million. Note 3: Shareholders' Equity: On March 22, 1995, the shareholders approved an amendment to the Trust's Declaration of Trust increasing the number of authorized Preferred Shares to 6.0 million. Note 4: On March 21, 1995 the Trust acquired a 189,000 square-foot research and development facility located in Tewksbury, Massachusetts for a price of $5.75 million. MGI has also entered into a fifteen-year escalating lease with Avid Technology, Inc. for the entire building. The lease commits the Trust to tenant and capital improvements totaling approximately $6.3 million with corresponding increases in the rent as funds are advanced. Note 5: At February 28, 1995, the market value of U.S. Government securities was $0.6 million. Note 6: Cash paid for interest amounted to $1.5 million for both three-month periods ended February 28, 1995 and February 28, 1994. Note 7: At February 28, 1995, options to purchase an aggregate of 661,632 shares at exercise prices ranging from $7.375 to $15.375 per share were outstanding under MGI's stock option plans for key employees and trustees. All options outstanding at February 28, 1995 expire by December 2004. Note 8: MGI intends to qualify for the year ended November 30, 1995 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. MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources At February 28, 1995, liquidity was provided by $14.9 million in cash and investment securities and by unused lines of credit totaling $23.0 million. Shareholders' equity of $177.8 million at February 28, 1995, when compared to $176.1 million at November 30, 1994, principally reflects net income in excess of distributions. Principal sources of funds in the first quarter of 1995 include property operations and the proceeds from the sale of an industrial property located in Nashville, Tennessee. During the three months ended February 28, 1995, these resources were used to pay dividends of $2.5 million, to acquire an office building located in Boston, Massachusetts at a purchase price of $1.8 million, to fund $0.7 million of tenant and $0.4 million of capital improvements, to fund $1.0 million of construction loan advances, and to repay $0.3 million of indebtedness. On March 21, 1995 the Trust acquired a 189,000 square-foot research and development facility located in Tewksbury, Massachusetts for a price of $5.75 million. As part of the negotiated purchase, MGI simultaneously entered into a fifteen-year escalating lease with Avid Technology, Inc. for the entire building. The lease, which begins with the date of purchase, commits the Trust to tenant and capital improvements of up to approximately $6.3 million. It is anticipated that the building will produce an annualized yield of approximately 11.7% on the Trust's cash investment for fiscal 1995. The interior and exterior will be completely renovated as a result of the improvements. The commitment is payable over a twenty seven-month period and the lease provides for corresponding increases in the rent as funds are advanced. The Trust entered into an agreement to acquire a 108,000 square-foot distribution facility located in Northborough, Massachusetts for a price of $2.25 million. The building is 100% occupied. The Trust has also entered into an agreement for the purchase of a 66,000 square-foot research and development facility located in Littleton, Massachusetts for a price of approximately $2.3 million. The acquisitions should be completed, subject to the completion of due diligence and a satisfactory purchase agreement, in the second quarter or early in the third quarter. In addition to the aforementioned, at February 28, 1995, the Trust has additional commitments for capital and tenant improvements of approximately $1.7 million. During 1994, the Trust signed a commitment to acquire a department store of approximately 100,000 square feet, which will be leased in its entirety by Bradlees under a twenty-year lease, for a price of $11.1 million. The cost of construction is being funded by MGI, subject to a construction loan agreement. As of February 28, 1995, the Trust has advanced $6.6 million of construction loan proceeds. The purchase will occur and the lease will begin upon satisfactory completion of the building, currently expected on or about September 1, 1995. The construction loan is reflected as an investment in real estate for financial reporting purposes. 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 $70.6 million at February 28, 1995, a net decrease of $0.3 million compared to November 30, 1994. The decrease resulted from scheduled principal amortization payments made during the three-month period. Scheduled loan principal payments due within twelve months of February 28, 1995 total $1.5 million. MGI believes it will continue to be able to extend or refinance maturing mortgage loans upon satisfactory terms. Principal sources of funds in the future are expected to be from operations of properties, including those acquired in the future, refinancing of existing mortgages on or additional mortgaging of 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. The cost of new borrowings or issuances of equity capital will be measured against the use of those funds, including the anticipated yields of investments to be acquired. The purchase of additional properties in 1995 may require the use of funds from MGI's lines of credit, new borrowings, proceeds from the sale of properties 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 Net income for the quarter ended February 28, 1995 was $4.0 million, or $0.35 per share, as compared to $2.9 million, or $0.25 per share in the corresponding quarter of 1994. Included in 1995 net income was $1.4 million, or $0.12 per share, of gain recognized in connection with the sale of an industrial property. Net income in the first quarter of 1994 included a gain of $.45 million, or $.04 per share, recognized in connection with the sale of a partnership interest. Funds from operations totaled $4.5 million, or $0.39 per share in the 1995 first quarter, compared to $4.3 million, or $0.38 per share in the corresponding quarter of 1994. 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. In comparing the first quarter of 1995 to that of the previous year, the increase of $0.2 million in net income before net gain resulted principally from increases in interest income and property operating income. Property operating income is defined as rental and other income less property operating expenses and real estate taxes. The improvement in interest income of $0.1 million reflects both a higher level of short-term investments owned pending the reinvestment of property sales proceeds and higher rates. Property operating income has increased to $6.4 million from $6.3 million for the first quarters of 1995 and 1994, respectively. MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Although the change in property operating income is not significant, the sales and acquisitions of properties during 1994 and 1995 have had an offsetting effect on the results of operations. The properties sold had contributed $0.7 million of operating income in the first quarter of 1994. The loss of this income in 1995 was offset by $0.6 million of income from acquisitions, a $0.1 million increase in the income recognized from partnership interests and $0.1 million of improved results from properties owned throughout both quarters. With respect to the properties owned throughout both quarters, operating income has improved by $0.15 million in the apartments segment due to both higher rental rates and increased occupancy. In addition, operating income in the industrial segment has increased by $0.1 million. These increases were offset by a combined decrease of $0.15 million in the office and retail segments which is the result of lower average occupancy for the first quarter of 1995 when compared to 1994. Rental and other income, property operating expenses, real estate taxes and depreciation and amortization expense are also relatively unchanged when the results for the first quarter of 1995 are compared to that of 1994. Average occupancy in the first quarter of 1995 was 93%, as compared to 93.5% in the comparable quarter of 1994. Average occupancy levels in the first quarter of 1995 and 1994 for MGI's commercial space were 92% and 93%, respectively. This change reflects decreases in both the retail and office segments, while the industrial segment is unchanged. Average residential occupancy was 94.5% and 93% for the first quarter of 1995 and 1994, respectively. Leases executed during the first quarter, related to 1995 expirations, totaled 186,000 square feet. At the end of the quarter, the remaining 1995 commercial lease expirations approximate 287,000 square feet of which 207,000 square feet is industrial, 65,000 is office and 15,000 is retail. Real estate investments are subject to a number of factors, including changes in the 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. MGI PROPERTIES PART I - EXHIBIT A COMPUTATION OF EARNINGS PER SHARE
Nine Months Ended February 28, February 28, 1995 1994 PRIMARY Net income $ 4,006,000 $ 2,897,000 Weighted average number of shares outstanding during the period 11,474,893 11,441,250 Primary earnings per share $ .35 $ .25 ASSUMING FULL DILUTION Net income $ 4,006,000 $ 2,897,000 Weighted average number of shares outstanding during the period 11,474,893 11,441,250 Earnings per share assuming full dilution $ .35 $ .25
Note: Outstanding stock options are not taken into account in the computation of earnings per share as they are not materially dilutive. 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 11). b) Reports on Form 8-K: None. MGI PROPERTIES SIGNATURES Pursuant to the requirements to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: April , 1995 Phillip C. Vitali Executive Vice President and Treasurer (Chief Financial Officer) Date: April , 1995 David P. Morency Controller (Principal Accounting Officer) MGI PROPERTIES SIGNATURES Pursuant to the requirements to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: April 13, 1995 /s/ Phillip C. Vitali Phillip C. Vitali Executive Vice President and Treasurer (Chief Financial Officer) Date: April 13, 1995 /s/ David P. Morency David P. Morency Controller (Principal Accounting Officer) EX-27 2 R14 FINANCIAL DATA SCHEDULE 1995 FIRST QTR 10-Q
5 1,000 3-MOS NOV-30-1995 FEB-28-1995 14,244 612 000 000 000 7,577 268,068 33,744 256,757 4,667 70,619 11,480 000 000 166,291 256,757 10,721 10,937 000 0 0 000 1,412 2,606 000 2,606 000 000 000 4,006 .35 .35
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