-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LhDfEG7zHOocnkupks7nhefjZTevXjksGDNbSWhB6OfE4BcY6ZQg0KUNLC+V4o13 +i/iTHWuypN8cGicaqAJ6g== 0000950146-96-000524.txt : 19960412 0000950146-96-000524.hdr.sgml : 19960412 ACCESSION NUMBER: 0000950146-96-000524 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960411 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: 96546110 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 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 29, 1996 Commission File Number: 1-6833 ----------------- ------ MGI PROPERTIES (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-6268740 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 30 Rowes Wharf, Boston, Massachusetts 02110 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 330-5335 ---------------------------- N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Common shares outstanding as of April 15, 1996: 11,531,336 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 - 2 - MGI PROPERTIES PART I -- FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------ February 29, 1996 November 30, 1995 (unaudited) - ------------------------------------------------------------------------------------------------------------ ASSETS Real estate, at cost $304,471,000 $293,469,000 Accumulated depreciation and amortization (38,537,000) (36,375,000) - ------------------------------------------------------------------------------------------------------------ Net investments in real estate 265,934,000 257,094,000 Cash 1,925,000 2,456,000 Short-term investments, at cost 4,451,000 4,589,000 Accounts receivable 2,836,000 3,354,000 Other assets 8,540,000 7,158,000 ============================================================================================================ $283,686,000 $274,651,000 ============================================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage and other loans payable $93,577,000 $84,506,000 Other liabilities 5,236,000 5,905,000 - ------------------------------------------------------------------------------------------------------------ Total liabilities 98,813,000 90,411,000 Deferred gain -- real estate 3,700,000 3,700,000 Shareholders' equity: Preferred shares -- $1 par value; 6,000,000 shares authorized; none issued -- -- Common shares -- $1 par value; 17,500,000 shares authorized; 11,531,336 issued (11,502,271 at November 30, 1995) 11,531,000 11,502,000 Additional paid-in capital 166,750,000 166,348,000 Undistributed net income 2,892,000 2,690,000 - ------------------------------------------------------------------------------------------------------------ Total shareholders' equity 181,173,000 180,540,000 - ------------------------------------------------------------------------------------------------------------ $283,686,000 $274,651,000 ============================================================================================================
See accompanying notes to consolidated financial statements. - 3 - MGI PROPERTIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
- ----------------------------------------------------------------------------------------------------------------------------- Three Months Ended ------------------------------------------- February 29, 1996 February 28, 1995 - ----------------------------------------------------------------------------------------------------------------------------- INCOME Rental and other income $12,693,000 $10,721,000 Interest on investment securities 85,000 200,000 Other 6,000 16,000 - ----------------------------------------------------------------------------------------------------------------------------- Total Income 12,784,000 10,937,000 - ----------------------------------------------------------------------------------------------------------------------------- EXPENSES Property operating expenses 3,372,000 2,814,000 Real estate taxes 1,511,000 1,392,000 Depreciation and amortization 2,312,000 2,039,000 Interest 1,891,000 1,412,000 General and administrative 733,000 674,000 - ----------------------------------------------------------------------------------------------------------------------------- Total expenses 9,819,000 8,331,000 - ----------------------------------------------------------------------------------------------------------------------------- Income before net gain 2,965,000 2,606,000 Net gain -- 1,400,000 - ----------------------------------------------------------------------------------------------------------------------------- Net income $2,965,000 $4,006,000 ============================================================================================================================= PER SHARE DATA Income before net gain $0.26 $0.23 Net gain -- 0.12 - ----------------------------------------------------------------------------------------------------------------------------- Net income $0.26 $0.35 ============================================================================================================================= Weighted average shares outstanding 11,517,710 11,474,893 =============================================================================================================================
See accompanying notes to consolidated financial statements. - 4- MGI PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited)
- --------------------------------------------------------------------------------------------------------------- Three Months Ended ----------------------------------------- February 29, 1996 February 28, 1995 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,965,000 $4,006,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,312,000 2,039,000 Net gain -- (1,400,000) Other (886,000) (950,000) - --------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 4,391,000 3,695,000 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of real estate (10,344,000) (1,836,000) Additions to real estate (1,059,000) (2,142,000) Deferred tenant charges (189,000) (270,000) Net proceeds from sales of real estate interests -- 4,738,000 Other 13,000 (26,000) - --------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities (11,579,000) 464,000 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from mortgage and other loans payable, net 9,500,000 -- Repayment of mortgage and other loans payable (429,000) (335,000) Cash distributions (2,763,000) (2,525,000) Proceeds from issuance of common shares 211,000 53,000 - --------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 6,519,000 (2,807,000) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and short-term investments (669,000) 1,352,000 - --------------------------------------------------------------------------------------------------------------- CASH AND SHORT-TERM INVESTMENTS Beginning of period 7,045,000 12,892,000 - --------------------------------------------------------------------------------------------------------------- End of period $6,376,000 $14,244,000 ===============================================================================================================
See accompanying notes to consolidated financial statements. - 5 - MGI PROPERTIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
------------------------------------------------------------------------------------------- Additional Common Paid-In Undistributed Shares Capital Net Income ------------------------------------------------------------------------------------------- Balance at November 30, 1995 $11,502,000 $166,348,000 $2,690,000 Net income -- -- 2,965,000 Distributions -- -- (2,763,000) Options exercised and other 29,000 402,000 -- ------------------------------------------------------------------------------------------- Balance at February 29, 1996 $11,531,000 $166,750,000 $2,892,000 ==========================================================================================
See accompanying notes to consolidated financial statements. - 6 - MGI PROPERTIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1: The results of the interim period are not necessarily indicative of results to be expected for the entire fiscal year. The figures contained in this interim report are unaudited and may be subject to year-end adjustments. Certain prior year amounts have been reclassified to conform with the current year presentation. 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 21, 1996, the Board of Trustees declared a cash dividend of $.24 per common share payable on April 12, 1996 to shareholders of record on April 4, 1996. This dividend payment will aggregate $2.8 million. Note 3: On March 6, 1996, the Trust acquired a 140,000 square-foot research and development facility located in Tewksbury, Massachusetts for a price of $8.8 million. Note 4: Cash paid for interest amounted to $1.9 million and $1.5 million for three-month periods ended February 29, 1996 and February 28, 1995, respectively. Note 5: At February 29, 1996, options to purchase an aggregate of 791,911 common shares at exercise prices ranging from $7.375 to $16.125 per share were outstanding under MGI's stock option plans for key employees and trustees. All options outstanding at February 29, 1996 expire by December 2005. Note 6: MGI intends to qualify for the year ended November 30, 1996 as a real estate investment trust under the provisions of Sections 856-860 of the Internal Revenue Code of 1986, as amended. Accordingly, no provision has been made for Federal income taxes. - 7 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Shareholders' equity at February 29, 1996 was $181.2 million, compared to $180.5 million at November 30, 1995. The increase primarily reflects net income in excess of distributions. At February 29, 1996, financial liquidity was provided by $6.4 million in cash and investment securities and by unused lines of credit aggregating $23.5 million. During the first three months of fiscal 1996, the Trust acquired three Massachusetts industrial properties aggregating 233,800 square feet for a combined purchase price of $9.9 million and acquired a parcel of land located in Tampa, Florida for $0.4 million. In March 1996, the Trust acquired a 140,000 square-foot, two-story research and development building located in Tewksbury, Massachusetts for $8.8 million. The building is presently leased in its entirety to Avid Technology, Inc. Expenditures for capital and tenant improvements during the first quarter of fiscal 1996 totaled $0.6 million and $0.5 million, respectively. The capital improvements costs are largely associated with renovations to Boston office properties. The Trust is contractually committed to approximately $3.1 million of capital and tenant improvement projects which are anticipated to be completed during the balance of fiscal 1996. Mortgage and other loans payable totaled $93.6 million at February 29, 1996 (77% at fixed rates and 23% at floating rates), a net increase of $9.1 million compared to $84.5 million at November 30, 1995. The change represents draws from the Trust's lines of credit totaling $9.5 million offset, in part, by scheduled principal amortization of $0.4 million. Subsequent to the end of the fiscal quarter, the Trust borrowed an additional $8.0 million from its lines which was used to acquire the Tewksbury, Massachusetts property. The Trust has two loan commitments totaling $14.0 million, which are anticipated to close late in the second fiscal quarter. The average rate and term of these loans are 7.5% and thirteen years, respectively, and each will be secured by a Massachusetts property. Scheduled loan principal payments due within twelve months of February 29, 1996 total $15.6 million, which include one of the Trust's lines of credit. MGI believes it will continue to be able to extend or refinance maturing mortgage loans upon satisfactory terms. Cash requirements in fiscal 1996 include distributions to shareholders, capital and tenant improvements and other leasing expenditures required to maintain MGI's current occupancy levels and other investment undertakings. Principal sources of funds in the future are expected to be from property operations, mortgaging or refinancing of existing mortgages on properties and MGI's portfolio of investment securities. Other potential sources of funds include the proceeds of public or private offerings of additional equity or debt securities of the Trust or the sale of real estate investments. The cost of new borrowings or issuances of the Trust's equity securities will be measured against the anticipated returns of investments to be acquired with such funds. In lieu of proceeds from real estate sales or the sale of its equity securities, the Trust presently anticipates that the purchase of additional properties in fiscal 1996 will be primarily financed by debt and, to a lesser extent, by cash flow from operations and short-term investments. MGI believes the combination of available cash and investment securities, the value of MGI's unencumbered properties and other resources available to it are sufficient to meet its short- and long-term liquidity requirements. - 8 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) RESULTS OF OPERATIONS Net income for the fiscal quarter ended February 29, 1996 was $3.0 million, or $.26 per share, as compared to $4.0 million, or $.35 per share in the corresponding quarter of 1995. Included in the 1995 net income was $1.4 million, or $.12 per share of gain recognized in connection with the sale of an industrial property. Funds from operations ("FFO") totaled $5.3 million, or $.46 per share in the first quarter of fiscal 1996, compared to $4.6 million, or $.41 per share in the corresponding quarter of 1995. MGI has implemented in 1996 the National Association of Real Estate Investment Trusts recommended changes in the calculation of FFO. The new definition stipulates that in calculating FFO leasing costs should be capitalized and not deducted as an expense. This has the effect of increasing the Trust's FFO by approximately $.01 in the first quarter of fiscal 1996. The fiscal first quarter one year ago has accordingly been restated to account for $148,000 of reduced leasing expenses which results in the FFO rising from $.39 per share to $.41 per share in the first quarter of fiscal 1996. FFO is defined as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. MGI believes FFO is an appropriate supplemental measure of operating performance. The change in FFO compared to the corresponding quarter in 1995 is attributable to the same factors that affected income before net gains in such periods with the exception of depreciation and amortization expense. In comparing the first quarter of fiscal 1996 to that of the previous year, the increase in net income before net gain of $0.4 million resulted principally from a $1.3 million increase in property operating income which is offset, in part, by increases in interest expense and depreciation and amortization of $0.5 million and $0.3 million, respectively. The increase in interest expense is due to the higher balance of debt during the first quarter of fiscal 1996. Property operating income is defined as rental and other income less property operating expenses and real estate taxes. The change in property operating income reflects improvement in properties owned throughout the first quarters of both fiscal 1996 and 1995, as well as the effect resulting from the sale and acquisition of properties. Change in Property Operating Income
Properties Held 1995 and 1996 Both Fiscal Years Acquisitions 1995 Sales Net Change ----------------- ------------ ---------- ---------- Industrial (44,000) 931,000 -- 887,000 Office 267,000 181,000 -- 448,000 Apartment 110,000 -- (371,000) (261,000) Retail 67,000 154,000 -- 221,000 ------- --------- --------- ---------- 400,000 1,266,000 (371,000) 1,295,000 ======= ========= ========= ==========
- 9 - MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The income growth in the industrial segment is primarily due to the eight acquisitions completed since February 28, 1995. The increase in the retail segment is largely due to the contribution of the Bradlees store in Peabody, Massachusetts which began paying rent in November 1995. The office segment has increased due to higher occupancy and to fourth quarter 1995 acquisitions. The decrease in the apartment segment is due to the sale of the Posada del Rey Apartments in Metairie, Louisiana in September 1995. The income from the remaining apartment properties has increased, reflecting increased rental rates compared to those in the first quarter of fiscal 1995. Also contributing to the change in income before net gains and funds from operations when fiscal 1996 is compared to fiscal 1995 is a decrease in interest income which is due generally to lower balances of short-term investments during 1996. Scheduled lease expirations and fiscal 1996 leasing (in square feet) are as follows: 1996 Scheduled Expirations Leased at Period Remaining Scheduled February 29, 1996 Leasing 1996 1997 ----------------- ------- ------- -------- Industrial 98.2% 204,000 119,000 527,000 Office 93.2% 33,000 70,000 202,000 Retail 96.4% 17,000 78,000 19,000 ----- ------- ------- ------- 96.9% 254,000 267,000 748,000 ===== ======= ======= ======= The fiscal 1997 scheduled lease expirations represent 15.9% of MGI's total commercial portfolio compared to fiscal 1996 scheduled expirations at February 28, 1995 that equaled 14.9% of the portfolio. 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. - 10 - MGI PROPERTIES PART I - EXHIBIT A COMPUTATION OF EARNINGS PER SHARE
- ------------------------------------------------------------------------------------------------------------------------- Three Months Ended ------------------------------ February 29, February 28, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------- PRIMARY Net income $2,965,000 $4,006,000 ========================================================================================================================= Weighted average number of shares outstanding during the period 11,517,710 11,474,893 ========================================================================================================================= Primary earnings per share $.26 $.35 ========================================================================================================================= ASSUMING FULL DILUTION Net income $2,965,000 $4,006,000 ========================================================================================================================= Weighted average number of shares outstanding during the period 11,517,710 11,474,893 ========================================================================================================================= Earnings per share assuming full dilution $.26 $.35 ========================================================================================================================= Note: Outstanding stock options are not taken into account in the computation of earnings per share as they are not materially dilutive.
- 11 - MGI PROPERTIES PART II - OTHER INFORMATION Item 1: Legal Proceedings: Not applicable. Item 2: Changes in Securities: Not applicable. Item 3: Defaults upon Senior Securities: Not applicable. Item 4: Submission of Matters to a Vote of Security Holders: 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. - 12 - MGI PROPERTIES SIGNATURES Pursuant to the requirements to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: April , 1996 - ----------------------- --------------------------------------- Phillip C. Vitali Executive Vice President and Treasurer (Chief Financial Officer) Date: April , 1996 - ----------------------- ---------------------------------------- David P. Morency Controller (Principal Accounting Officer) - 13 - MGI PROPERTIES SIGNATURES Pursuant to the requirements to the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: April , 1996 /s/ Phillip C. Vitali --------------- --------------------- Phillip C. Vitali Executive Vice President and Treasurer (Chief Financial Officer) Date: April , 1996 /s/ David P. Morency ---------------- -------------------- David P. Morency Controller (Principal Accounting Officer) - 13 - EX-27 2 R14 FINANCIAL DATA SCHEDULE FOR 1995 FIRST QTR 10-Q
5 1,000 3-MOS NOV-30-1996 FEB-28-1996 6,376 000 2,836 000 000 8,540 304,471 (38,537) 283,686 5,236 93,577 11,531 000 000 169,642 283,686 12,693 12,784 000 7,928 000 000 1,891 2,965 000 2,965 000 000 000 2,965 .26 .26
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