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
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended November 30, 1993
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
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(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 February 10, 1994, the aggregate market value of the voting
shares of the Registrant held by non-affiliates of the Registrant was
$165,672,951.
Common Shares Outstanding as of November 30, 1993: 11,433,721
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, 1993.
<PAGE>
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 . . . . . . 13
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
PART I
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Item 1. Business
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General
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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, 1993 (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 apartment
complexes, multi-use industrial facilities (such as warehouses and research
and development buildings), 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 ten 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 apartment
complexes, multi-use industrial facilities, 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,
including 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.
Previously, when operating as a hybrid trust, the investments
financed as mortgages (first mortgage loans, junior liens, including wrap-
around mortgages, or purchase-money mortgages taken back on the sale of
former equity investments) have in many instances included an option to
acquire, or a provision for the conversion of such mortgage into, a material
equity position at a cost believed by management to be favorable, and in
some instances, a participation in the earnings from the property over a
base amount or a percentage of the proceeds from the sale of the property.
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
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The Trust's real estate portfolio as of November 30, 1993
consisted of interests in fifty properties, forty-five of which are wholly-
owned, three 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, 1993, the Trust's real
estate investments were diversified by type of property as follows:
Number of Percent of
Type Of Property Properties Cost Total
---------------- ---------- ------------- ----------
Apartments 10 $ 78,955,000 30.5%
Retail 5 53,198,000 20.6
Office 9 65,230,000 25.2
Industrial 25 61,255,000 23.7
Land 1 25,000 *
-- ------------ ------
Total 50 $ 258,663,000 100.0%
-- ------------ ------
- ----------
* Less than 1%
As of November 30, 1993, the Trust's real estate investments were
diversified by geographic region as follows:
Percent of
Number of Portfolio Based
Region Properties Cost on Cost
------ ---------- ----------- ---------------
Midwest 22 $ 99,726,000 38.5%
Southeast 13 74,408,000 28.8
Mid-Atlantic 4 23,129,000 8.9
Northeast 10 61,175,000 23.7
Other 1 225,000 .1
-- ----------- ------
Total 50 $258,663,000 100.0%
-- ----------- ------
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 260 commercial tenants, including 130 office tenants, 71
retail tenants and 59 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
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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 area 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 the
recessionary environment in certain regions during fiscal 1993 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, a continuation of the 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.
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The following table sets forth certain information concerning the
Trust's properties.
SUMMARY OF PROPERTIES AT NOVEMBER 30, 1993
<TABLE>
<CAPTION>
Percentage Net Carrying Value
APARTMENTS Leased Units Dollars Per Unit
<S> <C> <C> <C> <C> <C>
Metairie, LA(a) 94% 516 $10,663,000 $20,665
Harrison Township, MI 97% 376 7,498,000 19,941
Bloomfield Hills, MI 97% 346 15,201,000 43,934
Tampa, FL 92% 264 7,851,000 29,739
Laurel, MD 100% 237 12,112,000 51,105
Memphis, TN 99% 208 5,615,000 26,995
Tampa, FL 97% 112 5,065,000 45,223
Total 96% 2,059 $64,005,000 $31,085
--- ----- ----------- -------
Percent Percentage Net
Partnerships Interest Leased Units Carrying Value
Washington, DC 4.0% 94% 778 $ 16,000
San Bruno, CA 2.0% 95% 430 225,000
St. Petersburg, FL 49.9% 96% 212 1,902,000
Total 1,420 $2,143,000
----- ----------
</TABLE>
<TABLE>
<CAPTION>
1994
Scheduled
Net Carrying Value Percentage Lease Principal Lease
RETAIL Sq. Ft. Dollars Sq. Ft. Leased Expirations Tenants Expiration
<S> <C> <C> <C> <C> <C> <C> <C>
Aurora, IL 313,000 $27,782,000 $88.76 96% 2% Builders Square 8/31/06
Baltimore, MD 135,000 6,863,000 50.84 100% 9% Kmart Corp. 11/30/05
Nashville, TN 111,400 4,002,000 35.92 98% 3% Burlington Coat Factory 1/31/10
Tampa, FL 100,600 8,492,000 84.41 93% 2% Publix Supermarket 11/30/06
Hagerstown, MD 40,200 1,496,000 37.21 100% -- Giant Food Stores, Inc. 12/31/04
Total 700,200 $48,635,000 $69.46 97% 3%
------- ----------- ------ --- --
</TABLE>
Note:
(a) See Note 2 of the Notes to Consolidated Financial Statements included
under Item 14 of this Report.
(continued)
Item 2. Properties. (cont'd)
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<TABLE>
<CAPTION>
1994
Scheduled
Net Carrying Value Percentage Lease Lease
INDUSTRIAL Sq. Ft. Dollars Sq. Ft. Leased Expirations Principal Tenants Expiration
<S> <C> <C> <C> <C> <C> <C> <C>
Wilmington, MA 294,000 $7,030,000 $23.91 100% -- Avon Dispatch 5/31/00
Nashville, TN 203,000 3,341,000 16.46 100% 54% Staton Inc. 8/23/94
North Charleston, SC 191,900 2,463,000 12.83 100% -- Mill Transportation 12/31/95
Brooklyn Center, MN 127,500 1,479,000 11.60 100% -- Hoffman Engineering 10/31/96
New Hope, MN 113,900 2,048,000 17.98 100% 53% Honeywell, Inc. 7/31/94
Plymouth, MN 111,200 2,416,000 21.73 98% 25% Robbinsdale Nurseries 12/31/96
Wilmington, MA 109,400 4,577,000 41.84 100% -- United Shoe Machinery 12/31/01
Andover, MA 105,500 7,235,000 68.58 100% -- ISI Systems, Inc. 4/30/99
New Hope, MN 96,000 1,976,000 20.58 100% -- Gaines & Hanson 4/30/97
New Hope, MN 96,000 1,713,000 17.84 100% -- A-Tek, Inc. 5/31/95
St. Louis, MO 95,600 2,221,000 23.23 100% 39% S.P. Richards 8/31/95
Bedford, MA 92,700 2,543,000 27.43 100% -- Imaging Technology 7/25/96
St. Louis, MO 85,400 1,611,000 18.86 100% -- Reynolds Metals Co. 5/11/04
Westwood, MA 77,400 1,565,000 20.22 100% -- PB Diagnostic Systems 5/8/97
Bedford, MA 70,600 2,244,000 31.78 100% -- Atex Publishing 7/31/98
St. Louis, MO 61,400 1,499,000 24.41 100% -- American Greetings 4/14/95
St. Louis, MO 61,200 1,586,000 25.92 100% -- Tyler Mountain Water 12/31/94
Billerica, MA 60,000 2,109,000 35.15 100% -- Colorgen 6/30/97
Blue Ash, OH 53,200 642,000 12.07 100% -- Aero Mailing 8/31/95
Brooklyn Center, MN 41,300 877,000 21.23 100% 44% HI-LO Manufacturing 11/30/95
St. Louis, MO 41,000 1,190,000 29.02 100% 43% National Service 3/31/95
Industries
St. Louis, MO 40,900 1,413,000 34.55 80% 6% IBF Business Forms 6/30/98
Brooklyn Center, MN 40,300 1,074,000 26.65 100% -- Elvig Design 7/31/95
Blue Ash, OH 38,700 523,000 13.51 100% -- Ethicon 1/31/95
St. Louis, MO 35,600 1,929,000 54.19 100% 8% Interlock 3/31/95
Total 2,343,700 $57,304,000 $24.45 100% 12%
--------- ----------- ------ ---- ---
</TABLE>
<TABLE>
<CAPTION>
1994
Scheduled
Carrying Value Percentage Lease Lease
OFFICE Sq. Ft. Dollars Sq. Ft. Leased Expirations Principal Tenants Expiration
<S> <C> <C> <C> <C> <C> <C> <C>
Franklin Township, NJ 178,600 $15,318,000 $85.77 97% 20% Merrill Lynch 6/30/97
Tampa, FL 122,400 9,986,000 81.58 93% 9% Bally 6/30/00
Framingham, MA 109,000 7,193,000 65.99 100% 21% IDG 10/12/94
Boston, MA 106,000 8,568,000 80.83 97% -- Cambridge Associates 4/26/99
Ann Arbor, MI 76,600 5,878,000 76.74 98% 2% Allen-Bradley Co. 5/31/95
Naperville, IL 63,800 4,383,000 68.70 86% 77% Crescent Counties 12/31/93
Foundation
Greenville, SC 48,600 2,344,000 48.23 69% 11% S.C. Tax Commission 6/30/96
Greenville, SC 46,000 1,961,000 42.63 93% 14% S.C. Voc. Rehab. Dept.10/31/95
Charlotte, NC 16,300 928,000 56.93 47% -- Comprehensive Medical 9/30/95
Total 767,300 $56,559,000 $73.71 93% 17%
------- ----------- ------ --- ---
Net Carrying Value
Grand Total All Properties $228,646,000
</TABLE>
<PAGE>
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 November 30, 1994.
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.
<PAGE>
PART II
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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
--------------------------
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
Fiscal Sales Price
--------------------------
1992 High Low Dividends
------ ---- --- ---------
First Quarter 12 1/2 9 5/8 $.20
Second Quarter 12 10 7/8 $.20
Third Quarter 12 1/8 11 1/8 $.20
Fourth Quarter 12 1/8 11 1/8 $.20
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 February 8, 1994)
- -----------------------------------------------------
Common Shares, $1.00 3,219
par value
<PAGE>
Item 6. Selected Financial Data (a)
- ------ -----------------------
(Not covered by Independent Auditors' Report)
<TABLE>
<CAPTION>
Five years ended November 30,
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of operations
Income:
Rental and other income $ 36,094,000 $ 27,928,000 $ 30,662,000 $ 29,036,000 $ 25,994,000
Interest on mortgage and other loans
54,000 1,686,000 1,697,000 1,622,000 1,909,000
Interest on investment securities 659,000 916,000 682,000 903,000 1,541,000
Other 91,000 59,000 90,000 -- 142,000
---------- ---------- ---------- ---------- ---------
Total income 36,898,000 30,589,000 33,131,000 31,561,000 29,586,000
---------- ---------- ---------- ---------- ----------
Expense:
Property operating expenses and
real estate taxes 14,704,000 11,442,000 12,442,000 11,334,000 10,548,000
Depreciation and amortization 6,987,000 5,996,000 5,974,000 5,552,000 4,556,000
Interest 5,059,000 5,511,000 6,429,000 5,925,000 4,684,000
General and administrative 2,191,000 2,036,000 2,108,000 2,208,000 2,373,000
---------- ---------- ---------- ---------- ----------
Total expenses 28,941,000 24,985,000 26,953,000 25,019,000 22,161,000
---------- ---------- ---------- ---------- ----------
Income before net gains and
losses 7,957,000 5,604,000 6,178,000 6,542,000 7,425,000
Net Gains (losses) -- 1,644,000 -- (360,000) 310,000
---------- ---------- ---------- ----------- ----------
Net income $7,957,000 $7,248,000 $6,178,000 $6,182,000 $7,735,000
---------- ---------- ---------- ---------- ----------
Per share data (b):
Income before net gains and losses $ .75 $ .60 $ .66 $ .70 $ .80
Net gains (losses) -- .17 -- (.04) .03
----- ----- ---- ------ -----
Net income $ .75 $ .77 $ .66 $ .66 $ .83
----- ----- ----- ----- -----
Funds from operations $1.42 $1.24 $1.30 $1.29 $1.34
----- ----- ----- ----- -----
Dividends $ .81 $ .80 $ .80 $1.04 $1.36
----- ----- ----- ----- -----
Summary of financial position:
Investments in real estate $258,663,000 $209,905,000 $208,011,000 $205,993,000 $173,973,000
------------ ------------ ------------ ------------ ------------
Mortgage and other loans receivable
-- $ 5,880,000 $ 18,419,000 $ 18,260,000 $ 22,775,000
------------ ------------ ------------ ------------ ------------
Investment securities $ 11,089,000 $ 16,721,000 $ 8,767,000 $ 10,758,000 $ 13,235,000
------------ ------------ ------------ ------------ ------------
Total assets $246,700,000 $214,161,000 $217,428,000 $222,434,000 $202,716,000
------------ ------------ ------------ ------------ ------------
Mortgage and other loans payable $ 66,949,000 $ 60,571,000 $ 67,852,000 $ 71,304,000 $ 48,953,000
------------ ------------ ------------ ------------ ------------
Total shareholders' equity $171,039,000 $145,748,000 $145,873,000 $147,213,000 $151,085,000
------------ ------------ ------------ ------------ ------------
Weighted average number of shares
outstanding 10,574,104 9,402,476 9,396,992 9,400,559 9,329,124
---------- --------- --------- --------- ---------
<FN>
Notes:
(a) Reference is made to the Index to Consolidated Financial Statements filed as a 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%.
(continued)
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
At November 30, 1993 financial liquidity was provided by $12.7 million
in cash and investment securities and by an unused $10.0 million line of
credit. Shareholders' equity of $171.0 million at November 30, 1993, when
compared to $145.7 million at November 30, 1992, reflects net proceeds of
$25.6 million received in connection with the May 6, 1993 public offering of
2,000,000 common shares, dividends of $0.5 million paid in excess of net
income and, to a lesser extent, treasury stock issued in connection with
stock options exercised.
Sources of funds in 1993 included the public sale of common shares,
operations, interest income and the Trust's portfolio of investment
securities. In 1993, these resources were used to: (i) acquire ten
industrial properties and two office buildings, totaling 950,300 square feet
and 215,000 square feet of space, respectively, for an aggregate of $41.1
million cash and a $6.6 million wrap-around mortgage loan of which MGI had
been the lender, (ii) pay dividends of $8.5 million, (iii) repay debt of
$7.7 million, and (iv) fund $2.7 million of tenant and capital improvements.
Total mortgage and other loans payable aggregated $66.9 million at
November 30, 1993, a net increase of $6.3 million compared to $60.6 million
at November 30, 1992. The increase resulted from the addition of $14.0
million of debt (which included $0.7 million of debt in connection with the
acquisition of four industrial buildings), offset by scheduled amortization
payments of $0.9 million, a $5.6 million repayment of a maturing loan and
prepayments of $1.1 million (which included $0.7 million in connection with
the amendment and assignment of a lease at Yorkshire Plaza located in
Aurora, Illinois and $0.4 million related to three first mortgages acquired
in connection with three industrial buildings). Mortgage and other loans
payable are collateralized by sixteen of MGI's properties having an
aggregate carrying value of $115.8 million, $3.2 million of investment
securities and MGI's guarantees of $9.2 million. Subsequent to November 30,
1993, mortgage loans payable increased by $2.2 million as MGI received the
balance of the proceeds of a loan which closed in November 1993.
Loans payable due within twelve months of November 30, 1993 totaled
$18.7 million, including a $6.3 million 12.75% loan with an April 1994
maturity and a $11.2 million floating rate loan with a September 1994
maturity. MGI has commenced, on a preliminary basis, several mortgage
financing initiatives. If MGI proceeds with all of these borrowing
initiatives a net increase in outstanding debt of approximately $30,000,000
may result. Despite the generally reduced availability of real estate
financing, MGI believes it will be successful extending or refinancing
maturing mortgage loans upon satisfactory terms although there can be no
assurance thereof.
In December 1993, MGI acquired two industrial/research and development
buildings, one totaling 100,000 square feet and the other 56,300 square
feet, located in suburban Boston, Massachusetts for an aggregate price of
$6.3 million cash. Both buildings are 100% occupied by the same publicly-
traded tenant with leases that expire in June 1998 and December 1999. Other
cash requirements in 1994 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
1990 through 1993, annual expenditures for capital and tenant improvements
averaged approximately 1.2% of real estate investments. In 1994 budgeted
capital and tenant improvements which are based on assumed leasing activity,
completion of discretionary capital projects and estimated costs,
approximates 1.7% of real estate investments.
Principal sources of funds in the future are expected to be from
operations of properties including those acquired in the future, mortgaging
or refinancing existing mortgages on properties and MGI's portfolio of
investment securities. Other potential sources of funds may include the
proceeds of offerings of additional equity or debt securities or the sale of
real estate investments. The cost of new borrowings or issuances of equity
capital will be measured against the anticipated yields of investments to be
acquired with such funds. Following the December 1993 acquisition of two
buildings, the purchase of additional properties in 1994 may require the use
of funds from MGI's line of credit, new borrowings, the sale of properties
currently owned or the issuance of equity securities. MGI believes the
combination, at November 30, 1993, 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 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.
Funds from operations in 1993 totaled $15.0 million, or $1.42 per share
on the greater number of shares outstanding, compared to $11.7 million, or
$1.24 per share, in 1992. 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.
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 to
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 decreased interest expense of $0.5 million when 1993 is compared
to 1992.
Average occupancy levels of 94% in 1993 were higher than the level
achieved in 1992. Average occupancy of MGI's industrial properties was 96%
in 1993 compared to 92% for 1992. Average occupancy of MGI's office
buildings was 94% in 1993 and 91% in 1992. Retail average occupancy during
1993 was 92% compared to 90% in 1992. Average residential occupancy at 94%
in 1993 was comparable to 1992.
At November 30, 1993, scheduled 1994 lease expirations for non-
residential space approximates 426,000 square feet, or 11% of the entire
commercial portfolio. Of the scheduled 1994 expirations, 275,000 square
feet is industrial space, 128,000 square feet is office and 23,000 is
retail. During the second half of 1993, MGI was notified that a 40,000
square-foot tenant in a suburban Chicago, Illinois office building was not
renewing its lease upon its December 31, 1993 expiration. This tenant
contributed annual rental revenues of approximately $0.6 million. Although
MGI believes that the rental rates for this tenant's lease is at or below
current market rents, rents paid by replacement tenants for this space could
be modestly below the existing rent, depending on length of vacancy, tenant
size and other market factors.
Net income for 1992 of $7.2 million, or $.77 per share, exceeded net
income of $6.2 million, or $.66 per share, for 1991. Net income in 1992
included net gains of $1.6 million. Funds from operations totaled $11.7
million, or $1.24 per share, in 1992 compared to $12.2 million, or $1.30 per
share, in 1991.
The changes in 1992 income before net gains when compared to 1991 were
the result of various factors. The principal factors were the sale of an
interest in a California apartment complex ("the San Bruno Transaction"),
the acquisitions of two industrial properties and lower interest expense.
The $2.7 million decline in rental and other income was the result of a
$3.3 million decrease in rental income from the San Bruno Transaction offset
by the increase of $0.3 million from the partial-year ownership of the 1992
acquisitions and $0.3 million of increased revenues from the other
properties. Property operating expenses, including real estate taxes,
decreased $1.0 million as a result of a $1.4 million decrease in operating
expenses from the San Bruno Transaction, an increase of $0.1 million in such
expenses from the properties acquired in 1992 and an increase of $0.3
million from other properties. Depreciation and amortization expense was
$6.0 million in both 1992 and 1991. A decrease in depreciation and
amortization expense related to the San Bruno Transaction was offset by an
increase related to the 1992 acquisitions and increased amortization expense
related to tenant improvements.
The $0.9 million decrease in interest expense for 1992 when compared to
1991 was the result of the decrease in debt outstanding combined with lower
interest rates on variable rate debt. Increased levels of funds available
to invest in 1992, due to the San Bruno Transaction, produced an increase in
interest income on investment securities for 1992 when compared to 1991,
which offset the lower interest rates generally available in 1992 for short-
term investments.
Net gains in 1992 included a $3.7 million gain related to the repayment
of approximately $18.8 million of the outstanding financing provided to the
partnership owning a San Bruno, California apartment complex. This
repayment effected the partial sale of the Trust's interest for financial
accounting purposes. Previously this property was carried as a real estate
investment since a 1976 sale had not met the financial accounting conditions
for a completed sale. In addition, MGI deferred $3.7 million of gain
related to this property. Partially offsetting this gain was a $2.1 million
write-down recorded in connection with the reclassification of the Trust's
mortgage loan receivable on a Metairie, Louisiana apartment complex to owned
real estate at November 30, 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.
<PAGE>
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.
<PAGE>
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, 1993 and 1992
Consolidated Statements of Earnings, Years ended November 30, 1993,
1992 and 1991
Consolidated Statements of Changes in Shareholders' Equity, Years ended
November 30, 1993, 1992 and 1991
Consolidated Statements of Cash Flows, Years ended November 30, 1993,
1992 and 1991
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedules (as of or for the year ended November 30, 1993):
Schedule X, Supplementary Income Statement Information
Schedule XI, Real Estate and Accumulated Depreciation
Schedule XII, Mortgage Loans on Real Estate
Exhibit XI - Computation of Net Income Per Share, Assuming Full
Dilution
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.
(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.
11 Computation of Net Income Per Share,
Assuming Full Dilution, included under Item
14 of this Report.
24 Auditors' consent to the incorporation by
reference in the Trust's Registration
Statements on Form S-8 of the independent
auditor's report included herein.
* On file at Securities and Exchange Commission
as indicated.
(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, 1993.
-------------------------
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.
<PAGE>
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: February 17, 1994 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 February 17, 1994
- ------------------------- of Trustees and Chief
W. Pearce Coues Executive Officer
/s/ Phillip C. Vitali Principal Financial Officer February 17, 1994
- ------------------------- and Principal Accounting
Phillip C. Vitali Officer
/s/ Herbert D. Conant Trustee February 17, 1994
- -------------------------
Herbert D. Conant
/s/ Francis P. Gunning Trustee February 17, 1994
- -------------------------
Francis P. Gunning
/s/ Colin C. Hampton Trustee February 17, 1994
- -------------------------
Colin C. Hampton
/s/ George M. Lovejoy, Jr. Trustee February 17, 1994
- --------------------------
George M. Lovejoy, Jr.
/s/ Rodger P. Nordblom Trustee February 17, 1994
- -------------------------
Rodger P. Nordblom
/s/ John R. White Trustee February 17, 1994
- -------------------------
John R. White
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1993
MGI PROPERTIES
<PAGE>
MGI PROPERTIES
Index to Consolidated Financial Statements and Schedules
Page
Independent Auditors' Report 1
Financial Statements:
Consolidated Balance Sheets,
November 30, 1993 and 1992 2
Consolidated Statements of Earnings,
Years ended November 30, 1993, 1992 and 1991 3
Consolidated Statements of Cash Flows,
Years ended November 30, 1993, 1992 and 1991 4
Consolidated Statements of Changes in Shareholders' Equity,
Years ended November 30, 1993, 1992 and 1991 5
Notes to Consolidated Financial Statements 6-11
Schedules (as of or for the year ended November 30, 1993):
Schedule X - Supplementary Income Statement Information
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
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.
<PAGE>
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, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended November 30, 1993 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.
KPMG PEAT MARWICK
Boston, Massachusetts
January 6, 1994
<PAGE>
MGI PROPERTIES
Consolidated Balance Sheets
November 30, 1993 and 1992
<TABLE>
<CAPTION>
Assets 1993 1992
<S> <C> <C>
Investments (notes 2, 3 and 4):
Real estate, at cost $258,663,000 $209,905,000
Accumulated depreciation and amortization (29,992,000) (24,583,000)
Net investments in real estate 228,671,000 185,322,000
Mortgage loan - 5,880,000
Total investments 228,671,000 191,202,000
Cash 1,564,000 1,027,000
Short-term investments, at cost, which approximates
market value (note 4) 10,252,000 15,104,000
U.S. Government securities, at cost, which approximates
market value (note 4) 837,000 1,617,000
Other assets 5,376,000 5,211,000
$246,700,000 $214,161,000
Liabilities and Shareholders' Equity
Liabilities:
Mortgage and other loans payable (note 4) $66,949,000 $60,571,000
Other liabilities 5,012,000 4,142,000
Total liabilities 71,961,000 64,713,000
Deferred gain (note 2) 3,700,000 3,700,000
Commitments (note 7)
Shareholders' equity (notes 5 and 6):
Preferred shares - $1 par value: 2,000,000
shares authorized; none issued - -
Common shares - $1 par value: 15,000,000 shares
authorized; 11,448,152 issued (9,448,152 at
November 30, 1992) 11,448,000 9,448,000
Additional paid-in capital 165,673,000 142,060,000
Distributions in excess of net income (5,935,000) (5,432,000)
171,186,000 146,076,000
14,431 shares in treasury (33,160 at November 30, 1992),
at cost (147,000) (328,000)
Total shareholders' equity 171,039,000 145,748,000
$246,700,000 $214,161,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MGI PROPERTIES
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Year ended November 30,
1993 1992 1991
<S> <C> <C> <C>
Income:
Rental and other income $36,094,000 $27,928,000 $30,662,000
Interest on mortgage loans 54,000 1,686,000 1,697,000
Interest on investment securities 659,000 916,000 682,000
Other 91,000 59,000 90,000
Total income 36,898,000 30,589,000 33,131,000
Expenses:
Property operating expenses 10,457,000 8,089,000 8,993,000
Real estate taxes 4,247,000 3,353,000 3,449,000
Depreciation and amortization 6,987,000 5,996,000 5,974,000
Interest 5,059,000 5,511,000 6,429,000
General and administrative 2,191,000 2,036,000 2,108,000
Total expenses 28,941,000 24,985,000 26,953,000
Income before net gains 7,957,000 5,604,000 6,178,000
Net gains - 1,644,000 -
Net income $7,957,000 $7,248,000 $6,178,000
Per share data:
Income before net gains $.75 $.60 $.66
Net gains - .17 -
Net income $.75 $.77 $.66
Weighted average shares outstanding 10,574,104 9,402,476 9,396,992
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MGI PROPERTIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended November 30,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $7,957,000 $7,248,000 $6,178,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 6,987,000 5,996,000 5,974,000
Net gains - (1,644,000) -
Equity in losses of partnerships 45,000 90,000 19,000
Other 803,000 903,000 (633,000)
Net cash provided by operating
activities 15,792,000 12,593,000 11,538,000
Cash flows from investing activities:
Acquisitions of and additions to real estate (43,635,000) (8,476,000) (2,296,000)
Proceeds from sale of real estate interest - 18,773,000 -
Additions and advances on mortgage loans
receivable (79,000) (235,000) (154,000)
Decrease in U.S. Government securities, net 780,000 625,000 2,686,000
Other (85,000) 154,000 (129,000)
Net cash provided by (used in)
investing activities (43,019,000) 10,841,000 107,000
Cash flows from financing activities:
Proceeds from sale of common shares, net 25,640,000 - -
Repayment of mortgage and other loans payable (7,688,000) (7,227,000) (13,952,000)
Additions to mortgage and other loans payable 13,338,000 - 10,500,000
Cash distributions paid (8,460,000) (7,523,000) (7,518,000)
Treasury stock transactions 82,000 115,000 -
Net cash provided by (used in)
financing activities 22,912,000 (14,635,000) (10,970,000)
Net increase (decrease) in cash and
short-term investments (4,315,000) 8,799,000 675,000
Cash and cash equivalents:
Beginning of year 16,131,000 7,332,000 6,657,000
End of year $11,816,000 $16,131,000 $7,332,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MGI PROPERTIES
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Undistributed
Number Additional (distributions Total
of common Common paid-in in excess of) Treasury shareholders'
shares issued shares capital net income shares equity
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1990 9,448,152 $9,448,000 $142,089,000 $(3,817,000) $(507,000) $147,213,000
Net income - - - 6,178,000 - 6,178,000
Distributions (note 6) - - - (7,518,000) - (7,518,000)
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
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
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 5, 10
or 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 1993, the Trust purchased four industrial properties for $6.8 million.
The purchase price consisted of cash and a $6.6 million mortgage loan
receivable. Only the cash portion of the purchase price is reflected in the
accompanying consolidated statement of cash flows.
Mortgage loans payable assumed with the acquisition of real estate investments
amounted to $.7 million for the year ended November 30, 1993.
Cash interest payments of $5.3 million, $5.5 million and $6.5 million were
made for the years ended November 30, 1993, 1992 and 1991, respectively.
(f) Fair Value of Financial Instruments
The Trust estimated the fair values of its financial instruments at November
30, 1993 using discounted 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 Trust's
consolidated balance sheet. The excess of the aggregate fair value of the
Trust's financial instruments over their aggregate carrying amounts is not
material.
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
(g) Net Income Per Share
Net income per share is computed based on the weighted average number of
common shares outstanding.
(2) Investments
(a) Real Estate
A summary of real estate investments follows:
<TABLE>
<CAPTION>
Accumulated
Buildings depreciation
Type of and and Net carrying amount
Investment Land improvements amortization 1993 1992
<S> <C> <C> <C> <C> <C>
Apartment $11,034,000 $65,778,000 $(12,807,000) $64,005,000 $66,029,000
Retail 19,110,000 34,088,000 (4,563,000) 48,635,000 48,943,000
Office 12,461,000 52,769,000 (8,671,000) 56,559,000 42,726,000
Industrial 14,491,000 46,764,000 (3,951,000) 57,304,000 25,411,000
Partnership - - - 2,143,000 2,188,000
Land 25,000 - - 25,000 25,000
$57,121,000 $199,399,000 $(29,992,000) $228,671,000 $185,322,000
</TABLE>
A discussion of certain real estate investments follows:
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, 1993, the Trust carried this asset as a real estate investment at
a net carrying value of $7.5 million, which excludes the gain from the sale.
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 and 1991) on the related
mortgage loan as received. During 1993, the Trust has recognized property
income and expenses as if it owned the property. For tax purposes, this
investment is reflected as a $14.1 million, 8.5% mortgage loan receivable at
November 30, 1993.
With respect to a 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.
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
(b) Mortgage Loan
At November 30, 1992, the Trust had reached agreement with the borrower to
purchase the four industrial properties securing this $5.9 million wrap-around
mortgage loan for a price of $225,000 over the mortgage face value (face value
$6.6 million). The acquisition of these buildings was completed December 31,
1992. This loan was subordinate to prior liens which aggregated $.7 million.
(c) Other Gains
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 a 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, 1993 are: $23.0 million in 1994, $19.5 million in
1995, $16.4 million in 1996, $12.4 million in 1997, $9.1 million in 1998, and
$22.2 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 $3.4 million in 1993 and $2.6 million in 1992 and 1991.
Operating leases on apartments generally have a term of one year or less.
(4) Mortgage and Other Loans Payable
<TABLE>
<CAPTION>
Mortgage and other loans payable at November 30 follow:
1993 1992
<S> <C> <C>
Mortgage loans, maturing 1994 through 2010, at interest
rates ranging from 7.58% to 12.75%, net of unamortized
discount of $31,000 in 1993 and $41,000 in 1992 $49,918,000 $43,288,000
Mortgage loan, maturing in September 1994 at a variable
interest rate, 5.25% and 6.56% at November 30,
1993 and 1992, respectively 11,185,000 11,437,000
Housing revenue bond, maturing 2007, at 4.28% and
6.68% at November 30, 1993 and 1992, respectively 5,750,000 5,750,000
Other, maturing 1995, at 7.50% 96,000 96,000
$66,949,000 $60,571,000
Weighted average interest rate 8.52% 8.81%
</TABLE>
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
Mortgage loans payable are nonrecourse and are collateralized by certain real
estate investments having a net carrying value of $115.8 million and the
Trust's guarantee of $6.2 million. Loans require monthly principal
amortization and/or a balloon payment at maturity.
The mortgage loan maturing in September 1994 and a $10.0 million line of
credit are part of a credit agreement which requires the Trust to maintain
compensating balances of 4% of the outstanding loan balance in non-interest
bearing accounts with the lender or pay a deficiency fee. The credit
agreement contains restrictive covenants which, among other things, require
the Trust to maintain certain financial ratios and restricts the incurrence of
certain additional indebtedness and the making of certain investments. No
borrowing under this line of credit was outstanding during the fiscal year.
In connection with this line, a fee is charged on the unused amount.
The housing revenue bond is tax exempt and is secured by real estate
having a net carrying value of $5.1 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 2.35%
at November 30, 1993 (an effective interest rate of 4.28% 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: $18.7 million in 1994, $1.3 million in
1995, $13.4 million in 1996, $16.8 million in 1997, $0.8 million in 1998, and
$16.0 million thereafter.
(5) Shareholders' Equity
(a) Stock Option Plans
Under the Trust's 1988 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:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year 467,000 433,000 364,000
Granted 24,000 49,000 74,000
Exercised (14,468) (15,000) -
Expired (12,000) - (5,000)
Balance at end of year 464,532 467,000 433,000
Shares available for granting future options 127,997 140,000 189,000
</TABLE>
The weighted average exercise price per option at November 30, 1993, 1992 and
1991 was $12.16, $11.88 and $11.81, respectively. The shares reserved expire
by April 1998 and all outstanding options expire by March, 2003. Subsequent
to November 30, 1993, 61,000 options were granted. All options outstanding
are currently exercisable.
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
(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 in the
future. 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 on July 5, 1999.
(c) 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.
(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 of $.81 per share
($8,460,000) in 1993, and cash distributions of ordinary income and capital
gains of $.80 per share is 1992 ($7,523,000) and in 1991 ($7,518,000).
On December 15, 1993, the Trust declared a dividend of $.21 per share payable
on January 11, 1994 to shareholders of record on January 3, 1994.
(7) Commitments
In November 1993, the Trust agreed to acquire two industrial research and
development buildings totaling 156,000 sq. ft. for an aggregate price of
approximately $6.3 million. The purchase transaction closed in December 1993.
(8) Quarterly Financial Information (Unaudited)
Quarterly results of operations for the years ending November 30, 1993 and 1992
follow:
<TABLE>
<CAPTION>
Quarter Ended
1993 February 28 (a) May 31 August 31 November 30
<S> <C> <C> <C> <C>
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
<FN>
(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 at Yorkshire
Plaza, Aurora, Illinois.
</TABLE>
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Quarter Ended
1992 February 29 May 31 August 31 November 30
<S> <C> <C> <C> <C>
Total income $7,689,000 $7,634,000 $7,698,000 $7,568,000
Total expenses $6,410,000 $6,287,000 $6,262,000 $6,026,000
Income before net gains (losses) $1,279,000 $1,347,000 $1,436,000 $1,542,000
Net gains (losses) $3,700,000 $- $- $(2,056,000)
Net income (loss) $4,979,000 $1,347,000 $1,436,000 $(514,000)
Net income (loss) per share $.53 $.14 $.15 $(.05)
</TABLE>
<PAGE>
Schedule X
MGI PROPERTIES
Supplementary Income Statement Information
Charged to Costs and Expenses
<TABLE>
<CAPTION>
Item 1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $4,235,000 $3,105,000 $3,443,000
</TABLE>
<PAGE>
Schedule XI
MGI PROPERTIES
Real Estate and Accumulated Depreciation
November 30, 1993
<TABLE>
<CAPTION>
Initial cost Costs
-------------------- capitalized
Building and subsequent to
Description Encumbrances Land improvements acquisition
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments
Harrison Township, MI $- $700,000 $1,948,000 $9,349,000
Memphis, TN 2,846,000 228,000 6,312,000 343,000
Tampa, FL 4,868,000 1,850,000 7,009,000 490,000
Tampa, FL 5,750,000 1,178,000 4,466,000 115,000
Bloomfield Hills, MI 6,326,000 4,325,000 12,126,000 1,745,000
Laurel, MD 7,218,000 613,000 12,722,000 176,000
Metairie, LA - 2,140,000 8,860,000 117,000
Retail
Hagerstown, MD - 364,000 1,459,000 -
Nashville, TE - 1,570,000 2,655,000 495,000
Baltimore, MD 4,249,000 2,000,000 5,710,000 69,000
Tampa, FL 5,413,000 2,600,000 6,540,000 432,000
Aurora, IL 16,573,000 12,576,000 15,372,000 1,356,000
Office Buildings
Charlotte, NC - 150,000 933,000 105,000
Naperville, IL - 1,400,000 3,318,000 1,379,000
Greenville, SC - 246,000 2,490,000 220,000
Greenville, SC - 213,000 1,647,000 687,000
Ann Arbor, MI - 686,000 5,618,000 544,000
Tampa, FL - 2,667,000 8,980,000 250,000
Somerset, NJ - 3,264,000 13,379,000 1,185,000
Boston, MA - 1,730,000 6,925,000 -
Framingham, MA - 2,105,000 5,109,000 -
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 - 470,000 1,384,000 3,000
St. Louis, MI - 218,000 1,171,000 295,000
St. Louis, MI - 360,000 1,337,000 57,000
Plymouth, MN 2,264,000 435,000 2,100,000 353,000
New Hope, MN - 400,000 1,968,000 -
New Hope, MN 1,750,000 560,000 1,049,000 293,000
New Hope, MN 1,750,000 560,000 1,354,000 363,000
Brooklyn Center, MN 926,000 500,000 1,169,000 -
Brooklyn Center, MN 824,000 195,000 850,000 294,000
Brooklyn Center, MN 824,000 195,000 760,000 83,000
Nashville, TN - 675,000 2,756,000 9,000
Bedford, MA - 512,000 2,062,000 30,000
St. Louis, MI - 570,000 1,695,000 -
St. Louis, MI 272,000 613,000 1,347,000 -
St. Louis, MI - 300,000 1,321,000 -
St. Louis, MI - 500,000 708,000 -
Wilmington, MA 5,000,000 2,390,000 4,638,000 63,000
Billerica, MA - 376,000 1,749,000 -
Wilmington, MA - 1,394,000 3,208,000 -
Bedford, MA - 662,000 1,585,000 -
Andover, MA - 1,441,000 5,799,000 -
Westwood, MA - 560,000 967,000 40,000
Land
Mount Clemens, MI - 25,000 - -
$66,853,000 $57,121,000 $178,240,000 $21,159,000
Partnerships
San Bruno, CA
St. Petersburg, FL
Washington, D.C.
</TABLE>
<TABLE>
<CAPTION>
Gross amounts at which
carried at close of period Accumulated
--------------------------------- depreciation
Building and and Date of Date Depreciable
Description Land improvements Total amortization construction acquired life (years)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apartments
Harrison Township, MI $700,000 $11,297,000 $11,997,000 $4,499,000 1973;1980 11/74 40
Memphis, TN 228,000 6,655,000 6,883,000 1,268,000 1986 9/86 40
Tampa, FL 1,850,000 7,499,000 9,349,000 1,498,000 1986 10/86 40
Tampa, FL 1,178,000 4,581,000 5,759,000 694,000 1986 3/88 40
Bloomfield Hills, MI 4,325,000 13,871,000 18,196,000 2,995,000 1967 1/89 40
Laurel, MD 613,000 12,898,000 13,511,000 1,399,000 1987 9/90 40
Metairie, LA 2,140,000 8,977,000 11,117,000 454,000 1974 11/92 20
Retail
Hagerstown, MD 364,000 1,459,000 1,823,000 327,000 1978 12/84 40
Nashville, TE 1,570,000 3,150,000 4,720,000 718,000 1979 8/86 40
Baltimore, MD 2,000,000 5,779,000 7,779,000 916,000 1979 7/87 40
Tampa, FL 2,600,000 6,972,000 9,572,000 1,080,000 1986 12/87 40
Aurora, IL 12,576,000 16,728,000 29,304,000 1,522,000 1986 5/90 40
Office Buildings
Charlotte, NC 150,000 1,038,000 1,188,000 260,000 1980 1/85 40
Naperville, IL 1,400,000 4,697,000 6,097,000 1,714,000 1979 8/86 20
Greenville, SC 246,000 2,710,000 2,956,000 612,000 1973 11/86 20
Greenville, SC 213,000 2,334,000 2,547,000 586,000 1972 11/86 20
Ann Arbor, MI 686,000 6,162,000 6,848,000 970,000 1985 12/88 40
Tampa, FL 2,667,000 9,230,000 11,897,000 1,911,000 1985 12/88 25
Somerset, NJ 3,264,000 14,564,000 17,828,000 2,510,000 1985 12/88 40
Boston, MA 1,730,000 6,925,000 8,655,000 87,000 1973;1974 6/93 40
Framingham, MA 2,105,000 5,109,000 7,214,000 21,000 1985 9/93 40
Industrial Properties
N. Charleston, SC 300,000 2,778,000 3,078,000 615,000 1977;1982 12/84 40
Blue Ash, OH 176,000 627,000 803,000 161,000 1970 11/85 40
Blue Ash, OH 129,000 499,000 628,000 105,000 1970 11/85 40
St. Louis, MI 470,000 1,387,000 1,857,000 246,000 1979 10/86 40
St. Louis, MI 218,000 1,466,000 1,684,000 271,000 1978 12/86 40
St. Louis, MI 360,000 1,394,000 1,754,000 255,000 1971 5/87 40
Plymouth, MN 435,000 2,453,000 2,888,000 472,000 1974 5/87 40
New Hope, MN 400,000 1,968,000 2,368,000 320,000 1979 5/87 40
New Hope, MN 560,000 1,342,000 1,902,000 189,000 1979 5/87 40
New Hope, MN 560,000 1,717,000 2,277,000 301,000 1979 5/87 40
Brooklyn Center, MN 500,000 1,169,000 1,669,000 190,000 1971 5/87 40
Brooklyn Center, MN 195,000 1,144,000 1,339,000 265,000 1970 5/87 40
Brooklyn Center, MN 195,000 843,000 1,038,000 161,000 1970 5/87 40
Nashville, TN 675,000 2,765,000 3,440,000 99,000 1988 6/92 40
Bedford, MA 512,000 2,092,000 2,604,000 61,000 1971;1985 10/92 40
St. Louis, MI 570,000 1,695,000 2,265,000 44,000 1972 12/92 40
St. Louis, MI 613,000 1,347,000 1,960,000 31,000 1973 12/92 40
St. Louis, MI 300,000 1,321,000 1,621,000 35,000 1971 12/92 40
St. Louis, MI 500,000 708,000 1,208,000 18,000 1970 12/92 40
Wilmington, MA 2,390,000 4,701,000 7,091,000 61,000 1988;1974;1987 5/93 40
Billerica, MA 376,000 1,749,000 2,125,000 16,000 1983 7/93 40
Wilmington, MA 1,394,000 3,208,000 4,602,000 25,000 1987 8/93 40
Bedford, MA 662,000 1,585,000 2,247,000 3,000 1984 11/93 40
Andover, MA 1,441,000 5,799,000 7,240,000 5,000 1986 11/93 40
Westwood, MA 560,000 1,007,000 1,567,000 2,000 1980 11/93 40
Land
Mount Clemens, MI 25,000 - 25,000 -
$57,121,000 $199,399,000 256,520,000 $29,992,000
Partnerships
San Bruno, CA 225,000
St. Petersburg, FL 1,902,000
Washington, D.C. 16,000
$258,663,000
</TABLE>
<PAGE>
Schedule XI
(Continued)
MGI PROPERTIES
Real Estate and Accumulated Depreciation
A summary of real estate investments and accumulated depreciation and
amortization for the three years ended November 30 follows:
<TABLE>
<CAPTION>
Real Estate Investments
1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $209,905,000 $208,011,000 $205,993,000
Add:
Investments 47,692,000 6,005,000 -
Improvements 2,672,000 2,471,000 2,296,000
Reclassification from mortgage loans - 11,000,000 -
260,269,000 227,487,000 208,289,000
Deduct:
Real estate dispositions - (16,935,000) (278,000)
Other (1,606,000) (647,000) -
Balance at end of year $258,663,000 $209,905,000 $208,011,000
Accumulated Depreciation and Amortization
Balance at beginning of year $24,583,000 $25,785,000 $20,097,000
Add:
Depreciation and amortization 6,969,000 5,968,000 5,947,000
Deduct:
Real estate dispositions - (6,614,000) (259,000)
Other (1,560,000) (556,000) -
Balance at end of year $29,992,000 $24,583,000 $25,785,000
</TABLE>
The aggregate cost for Federal income tax purposes of the above investments is
approximately $215.0 million.
Refer to Note 1 regarding the Trust's accounting policies on real estate
investments and depreciation and amortization.
<PAGE>
Schedule XII
MGI PROPERTIES
Mortgage and Other Loans on Real Estate
November 30, 1993
A summary of mortgage and other loan activity for the years ended November 30
follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $5,880,000 (a) $19,764,000 $19,623,000
Add:
Additions and advances 79,000 234,000 154,000
5,959,000 19,998,000 19,777,000
Less:
Collection of principal - (17,000) (13,000)
Other principal reductions (5,959,000)(a) (14,101,000)(b) -
Balance at end of year $- $5,880,000 (a) $19,764,000
<FN>
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. See
notes to the financial statements.
(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 notes to the financial statements.
</TABLE>
<PAGE>
Exhibit XI
MGI PROPERTIES
Computation of Net Income Per Share
Assuming Full Dilution
<TABLE>
<CAPTION>
Year ended November 30,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Income before net gains (losses) $7,957,000 $5,604,000 $6,178,000 $6,542,000 $7,425,000
Net gains (losses) - 1,644,000 - (360,000) 310,000
Net income $7,957,000 $7,248,000 $6,178,000 $6,182,000 $7,735,000
Weighted average number of
common shares outstanding 10,574,104 9,402,476 9,396,992 9,400,559 9,329,124
Additional number of share
equivalents assuming exercise
of options 55,312 20,274 16,941 - -
Weighted average
number of shares
assuming full dilution 10,629,416 9,422,750 9,413,933 9,400,559 9,329,124
Net income per share assuming full
dilution:
Income before net gains (losses) $.75 $.60 $.66 $.70 $.80
Net gains (losses) - .17 - (.04) .03
Net income per share
assuming full dilution $.75 $.77 $.66 $.66 $.83
</TABLE>
<PAGE>
Consent of Independent Auditors
The Board of Trustees
MGI Properties:
We consent to incorporation by reference in the registration statements
(Nos. 33-21584, 2-97270 and 33-65844) on Form S-8 of MGI Properties and
subsidiaries of our report dated January 6, 1994, relating to the consolidated
balance sheets of MGI Properties and subsidiaries as of November 30, 1993 and
1992, 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, 1993, which report appears
in the November 30, 1993 annual report on Form 10-K of MGI Properties and
subsidiaries.
KPMG PEAT MARWICK
Boston, Massachusetts
February 15, 1994
