-----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, Q5aWfED/nW+1iVl5HtKtvWELlYCOshqVxfcrshcbxno4h0AJjYqzqLNZ65ZCeo3s f9VTUy6Bd1EJID2lkIKnfA== 0001029869-97-000483.txt : 19970414 0001029869-97-000483.hdr.sgml : 19970414 ACCESSION NUMBER: 0001029869-97-000483 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970411 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: 97578817 BUSINESS ADDRESS: STREET 1: 30 ROWES WHARF CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173305335 MAIL ADDRESS: STREET 1: 30 ROWES WHARF CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: MORTGAGE GROWTH INVESTORS DATE OF NAME CHANGE: 19880225 FORMER COMPANY: FORMER CONFORMED NAME: EASTERN SHOPPING CENTERS INC DATE OF NAME CHANGE: 19711121 10-Q 1 MGI PROPERTIES FORM 10-Q 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, 1997 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) One Winthrop Square, Boston, Massachusetts 02110 ------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 422-6000 -------------------------- 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 11 , 1997: 13,595,454 ---------- 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 Flows 5 Consolidated Statements of Changes in Shareholders' Equity 6 Notes to Consolidated Financial Statements 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Exhibit A: Computation of Earnings Per Share 12 PART II: OTHER INFORMATION Items 1 - 6 13 Signatures 14 -2- MGI PROPERTIES PART I -- FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------------------- February 28, 1997 November 30, 1996 (unaudited) - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Real estate, at cost $362,750,000 $356,024,000 Accumulated depreciation and amortization (46,289,000) (44,810,000) - --------------------------------------------------------------------------------------------------------------------------------- Net investments in real estate 316,461,000 311,214,000 Cash and cash equivalents 20,391,000 15,140,000 Accounts receivable 3,677,000 3,665,000 Other assets 10,561,000 9,645,000 - --------------------------------------------------------------------------------------------------------------------------------- $351,090,000 $339,664,000 ================================================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage loans payable $108,593,000 $138,547,000 Other liabilities 5,732,000 6,682,000 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities 114,325,000 145,229,000 Shareholders' equity: Common shares -- $1 par value; 17,500,000 shares authorized; 13,595,454 issued (11,563,199 at November 30, 1996) 13,595,000 11,563,000 Additional paid-in capital 206,663,000 167,185,000 Undistributed net income 16,507,000 15,687,000 - --------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 236,765,000 194,435,000 - --------------------------------------------------------------------------------------------------------------------------------- $351,090,000 $339,664,000 =================================================================================================================================
See accompanying notes to consolidated financial statements. -3- MGI PROPERTIES CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
Three Months Ended ------------------------------------------------------- February 28, 1997 February 29, 1996 - -------------------------------------------------------------------------------------------------------------------------------- INCOME Rental and other income $14,882,000 $12,699,000 Interest 206,000 85,000 - -------------------------------------------------------------------------------------------------------------------------------- Total income 15,088,000 12,784,000 - -------------------------------------------------------------------------------------------------------------------------------- EXPENSES Property operating expenses 3,664,000 3,368,000 Real estate taxes 1,819,000 1,511,000 Depreciation and amortization 2,552,000 2,316,000 Interest 2,623,000 1,891,000 General and administrative 775,000 733,000 - -------------------------------------------------------------------------------------------------------------------------------- Total expenses 11,433,000 9,819,000 - -------------------------------------------------------------------------------------------------------------------------------- Income before net gains and exchange item 3,655,000 2,965,000 Net gains 600,000 -- - -------------------------------------------------------------------------------------------------------------------------------- Income before extraordinary item 4,255,000 2,965,000 Extraordinary item - loss on prepayment of debt (306,000) -- - -------------------------------------------------------------------------------------------------------------------------------- Net income $3,949,000 $2,965,000 ================================================================================================================================ PER SHARE DATA Net income $0.32 $0.26 ================================================================================================================================ Weighted average shares outstanding 12,316,733 11,517,710 ================================================================================================================================
See accompanying notes to consolidated financial statements. -4- MGI PROPERTIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended ------------------------------------------------ February 28, 1997 February 29, 1996 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,949,000 $2,965,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,552,000 2,316,000 Net gain (600,000) -- Extraordinary item 306,000 -- Other (532,000) (886,000) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 5,675,000 4,395,000 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of real estate (6,622,000) (10,344,000) Additions to real estate (1,475,000) (1,059,000) Deferred tenant charges (679,000) (189,000) Net proceeds from sales of real estate interests 619,000 -- Other (46,000) 9,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash used in investing activities (8,203,000) (11,583,000) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Additions to mortgage loans payable, net 11,000,000 9,500,000 Repayment of mortgage loans payable (40,954,000) (429,000) Mortgage prepayment penalty (306,000) -- Cash distributions (3,129,000) (2,763,000) Proceeds from issuance of common shares 41,168,000 211,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash provided by financing activities 7,779,000 6,519,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase/(decrease) in cash and short-term investments 5,251,000 (669,000) - ------------------------------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS Beginning of period 15,140,000 7,045,000 - ------------------------------------------------------------------------------------------------------------------------------------ End of period $20,391,000 $6,376,000 ====================================================================================================================================
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, 1996 $11,563,000 $167,185,000 $15,687,000 Net income -- -- 3,949,000 Distributions -- -- (3,129,000) Sale of common shares 2,000,000 39,075,000 -- Options exercised and other 32,000 403,000 -- - --------------------------------------------------------------------------------------------------------------- Balance at February 28, 1997 $13,595,000 $206,663,000 $16,507,000 ===============================================================================================================
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 27, 1997, the Board of Trustees declared a quarterly dividend of $.27 per share, payable April 17, 1997, to shareholders of record April 8, 1997. This dividend payment will aggregate $3.7 million. Note 3: Subsequent to the end of the quarter, the Trust acquired for a price of $3.5 million a 107,600 square-foot industrial building located in Westford, Massachusetts. The building is 100% leased to a single tenant. Note 4: Cash paid for interest amounted to $2.6 million and $1.9 million for the three-month periods ended February 28, 1997 and February 29, 1996, respectively. Note 5: At February 28, 1997, options to purchase an aggregate of 965,461 common shares at exercise prices ranging from $7.375 to $21.00 per share were outstanding under MGI's stock option plans for key employees and trustees. All options outstanding at February 28, 1997 expire by December 2006. Note 6: During the quarter ended February 28, 1997, the Trust prepaid a $12.3 million mortgage and incurred a $306,000 penalty ($.03 per share), which was recorded as an extraordinary loss. Note 7: MGI intends to qualify for the year ended November 30, 1997 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 28, 1997 was $236.8 million, compared to $194.4 million at November 30, 1996. The increase primarily reflects net proceeds of $41.1 million from an equity offering resulting in the issuance of 2,000,000 common shares as well as the excess of net income over distributions paid in the first quarter. At February 28, 1997, financial liquidity was provided by $20.4 million in cash and cash equivalents and by unused lines of credit aggregating $45.0 million. In December 1996 the Trust acquired for $6.6 million two industrial buildings totaling 145,500 square feet which are 100% leased. These acquisitions were part of a tax-deferred exchange in which approximately $5.0 million of the purchase price was funded with the proceeds of two sales in the fourth quarter of 1996. Subsequent to the end of the quarter, the Trust acquired a 107,600 square-foot industrial building located in Westford, Massachusetts for a price of $3.5 million. Additionally, the Trust has signed contracts to acquire three additional New England properties at prices aggregating $15.5 million. Subject to the completion of due diligence and the satisfaction of certain other conditions, it is anticipated these investments will close late in the second quarter, although there is no assurance that MGI will acquire these properties. Mortgage and other loans payable totaled $108.6 million at February 28, 1997, a net decrease of $29.9 million, compared to $138.5 million at November 30, 1996. The Trust utilized $28.0 million of the offering proceeds to repay the outstanding balances on its lines of credit. In addition, the Trust refinanced a $12.3 million, 9.3% mortgage with an $11.0 million loan bearing interest at a rate of 8.12%. The balance of the change represents scheduled principal payments. Scheduled loan principal payments due within twelve months of February 28, 1997 total $3.1 million. MGI believes it will continue to be able to extend or refinance maturing mortgage loans upon satisfactory terms. Cash requirements during the balance of fiscal 1997 include distributions to shareholders, capital and tenant improvements and other leasing expenditures required to maintain MGI's occupancy levels and other investment undertakings. Currently, the Trust is contractually committed to approximately $1.9 million of capital and tenant improvement projects, which are anticipated to be completed during the next two fiscal quarters. 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. -8- MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Trust presently anticipates that the purchase of additional properties will be financed primarily by cash, short-term investments and debt. 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. Results of Operations - --------------------- Net income for the quarter ended February 28, 1997 was $3,949,000, or $.32 per share on the increased average number of shares outstanding, compared to $2,965,000, or $.26 per share, for the first quarter one year ago. Included in 1997 first quarter net income was a gain of $600,000, or $.05 per share, from the sale of a partnership interest in an apartment complex, which was partially offset by an extraordinary loss of $306,000, or $.03 per share, incurred in connection with a loan refinancing prepayment fee. Funds from operations ("FFO") totaled $6.2 million in the first quarter of fiscal 1997, compared to $5.3 million in the corresponding quarter of 1996. MGI calculates FFO in conformity with the NAREIT definition which is 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 following is a reconciliation of net income to FFO:
Three Months Ended ------------------ February 28, 1997 February 29, 1996 ----------------- ----------------- Net income $3,949,000 $2,965,000 Less net gain and extraordinary item 294,000 -- Plus building depreciation 2,041,000 1,702,000 Plus tenant improvement and commission amortization 497,000 610,000 ---------- ---------- FFO $6,193,000 $5,277,000 ========== ==========
The change in FFO, compared to the corresponding period in 1996, is attributable to the same factors that affected income before net gains in such periods, with the exception of depreciation and amortization expense. -9- MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) In comparing the first quarter of fiscal 1997 to that of the previous year, the increase in net income before net gains of approximately $0.7 million resulted principally from a $ 1.6 million increase in property operating income which is offset, in part, by increases in interest expense and depreciation and amortization of $0.7 million and $0.2 million, respectively. Property operating income is defined as rental and other income less property operating expenses and real estate taxes. The increase in interest expense is due to the higher balance of debt primarily used to fund the acquisitions of properties. The change in property operating income reflects the additional income from the acquisition of properties of $1.8 million, an increase in income from properties owned throughout the first quarters of both fiscal 1997 and 1996 of $0.1 million, offset, in part, by the income effect of $0.3 million due to the sale of properties.
Change in Property Operating Income for Quarter Ended February 28, 1997 versus February 29, 1996 - ------------------------------------------------------------------------------------------------ Property Properties Held 1997 and 1996 1997 and 1996 Type Both Fiscal Years Acquisitions Sales Net Change ---- ----------------- ------------ ----- ---------- Industrial $30,000 $ 372,000 $(126,000) $276,000 Office (4,000) 894,000 -- 890,000 Office/R&D 7,000 429,000 -- 436,000 Apartment 35,000 -- -- 35,000 Retail 62,000 -- -- 62,000 Land and Partnership -- 89,000 (203,000) (114,000) -------- ---------- ---------- ---------- Total $130,000 $1,784,000 $(329,000) $1,585,000 ======== ========== ========== ==========
Substantially all of the properties acquired during 1997 and 1996 are located in New England. As of February 28, 1997, the Trust's New England portfolio consists of thirty four properties aggregating 3.3 million square feet. During the first quarter of 1997, these properties produced operating income of $5.3 million which amounts to 56% of the total from all Trust properties. Scheduled expirations for New England properties total 147,481 and 487,806 square feet in 1997 and 1998, respectively. Existing rent levels relative to New England space coming up for renewal appear to be generally below prevailing market rents. Scheduled lease expirations and completed leasing (in square feet) for the portfolio as a whole are as follows at February 28, 1997:
Scheduled Expirations ------------------------------- Property Percentage 1997 Remaining Scheduled Type Leased Leasing 1997 1998 ---- ------- --------- -------- ------ Industrial 97.6% 319,100 100,200 676,500 Office 94.7% 46,900 98,500 116,500 Office/R&D 100.0% 6,600 -- 283,600 Retail 89.8% 6,400 11,900 79,200 ------ ------- ------- --------- Total 96.3% 379,000 210,600 1,155,800 ====== ======= ======= =========
-10- MGI PROPERTIES PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The fiscal 1998 scheduled lease expirations represent 22% of MGI's total commercial portfolio, which is approximately 7% higher than 1997 expirations a year ago at this time. Included in the 1998 retail expirations is 53,200 square feet scheduled to expire at the 313,000 square-foot Yorkshire Plaza in Aurora, Illinois, which is currently 77% leased. While management believes that the center is favorably located, the lease market is soft due to an excess supply of retail space. Forward-Looking Statements - -------------------------- Statements made or incorporated in this Report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are dependent on a number of factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Such factors include, among other things, satisfactory completion of the acquisitions, maintaining the current occupancy and rent levels at the acquisition properties, as well as those set forth in Risk Factors (Item 1) and Management's Discussion and Analysis of Financial Condition and Results of Operations in MGI's Form 10-K for the year ended November 30, 1996. -11- MGI PROPERTIES PART I - EXHIBIT A COMPUTATION OF EARNINGS PER SHARE
Three Months Ended ----------------------------------------------------- February 28, 1997 February 29, 1996 PRIMARY Net income $ 3,949,000 $ 2,965,000 =========== =========== Weighted average numbers of shares outstanding during the period 12,316,733 11,517,710 =========== =========== Primary earnings per share $0.32 $0.26 =========== =========== ASSUMING FULL DILUTION Net income $ 3,949,000 $ 2,965,000 =========== =========== Weighted average number of shares outstanding during the period 12,316,733 11,517,710 =========== =========== Earnings per share assuming full dilution $0.32 $0.26 =========== ===========
Note: Net income per share is based upon the weighted average shares outstanding taking into consideration common stock equivalents, if dilutive. Outstanding stock options are not taken into account in the computation of earnings per share as they are not materially dilutive. -12- MGI PROPERTIES PART II - OTHER INFORMATION Item 1: Legal Proceedings: Not applicable. Item 2: Changes in Securities: Not applicable. Item 3: Defaults upon Senior Securities: Not applicable. Item 4: Submission of Matters to a Vote of Security Holders: None. Item 5: Other Information: Not applicable. Item 6: Exhibits and Reports on Form 8-K: a) Exhibits: Computation of Earnings Per Share (see page 12). b) Reports on Form 8-K: None -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 11, 1997 /s/ Phillip C. Vitali -------------- --------------------- Phillip C. Vitali Executive Vice President and Treasurer (Chief Financial Officer) Date: April 11, 1997 /s/ David P. Morency -------------- -------------------- David P. Morency Controller (Principal Accounting Officer) -14- EX-27 2 R14 FDS FOR 1997 FIRST QTR 10-Q
5 1,000 3-MOS NOV-30-1997 FEB-28-1997 20,391 000 3,677 000 000 10,561 362,750 (46,289) 351,090 5,732 108,593 13,595 000 000 223,170 351,090 14,882 15,088 000 8,881 000 000 2,623 3,655 000 3,655 600 (306) 000 3,949 .32 .32
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