(Letterhead of MGI Properties)
VIA EDGAR FILING
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: MGI Properties (the "Company")
-----------------------------
Dear Sirs:
Enclosed please find a copy of the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1994.
Please be advised that a wire for $250.00 in payment of the filing fee
will be sent to Mellon Bank at the Commission's lock box number.
Very truly yours,
[Signature of Peter D. Deutsch]
Peter D. Deutsch
PDD: gaj
Enclosures
cc: New York Stock Exchange
Mr. Phillip C. Vitali
Victor M. Rosenzweig, Esq.
<PAGE>
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended November 30, 1994
Commission File No. 1-6833
MGI PROPERTIES
(Exact name of Registrant as specified in its charter)
Massachusetts 04-6268740
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
30 Rowes Wharf, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 330-5335
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Shares New York Stock Exchange
(par value $l per share)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of January 29, 1995, the aggregate market value of the voting shares
of the Registrant held by non-affiliates of the Registrant was $157,728,933.
Common Shares Outstanding as of November 30, 1994: 11,465,842
The information required by Part III of Form 10-K will be incorporated
by reference to a definitive proxy statement involving the election of Trustees
which is expected to be filed by the Registrant pursuant to Regulation 14A
within 120 days after the close of its fiscal year ended November 30, 1994.
<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.........................12
Item 8. Financial Statements and Supplementary Data..................17
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.......................................17
PART III......................................................................18
PART IV.......................................................................19
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K........................................19
POWER OF ATTORNEY.............................................................20
SIGNATURES....................................................................20
<PAGE>
PART I
Item 1. Business
General
MGI Properties (the "Trust" or "MGI") is an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts.
MGI commenced operations in 1971 as a real estate investment trust. Since that
time, the Trust has elected to be treated as a real estate investment trust (a
"REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), and expects to continue to operate in a manner
which will entitle the Trust to be so treated. For each taxable year in which
the Trust qualifies as a REIT under the Internal Revenue Code, taxable income
distributed to the holders of its shares will not be taxable to the Trust (other
than certain items of tax preference which are subject to minimum tax in the
hands of the Trust). See "Investment and Operating Policies" and "Portfolio"
below and the description of dividend policy included under Item 5 of this
Annual Report on Form 10-K for the year ended November 30, 1994 (the "Report").
References herein to the Trust include its wholly-owned
subsidiaries.
Narrative Description of Business
The Trust, which is a self-administered and self-managed equity
REIT, owns and manages a diversified portfolio of income-producing real estate
assets. The Trust's portfolio consists of investments in multi-use industrial
facilities (such as warehouses and research and development buildings),
apartment complexes, shopping centers and office buildings. The primary
investment objective of the Trust is to make diversified equity and
equity-oriented investments in existing properties believed to be capable of
producing stable and rising income streams and having long-term capital
appreciation potential. The Trust also believes that its active managing and
leasing practices can enhance rental income, funds from operations and long-term
capital appreciation. These investments have typically taken the form in recent
years of a direct equity ownership interest.
The Trust employs twelve persons.
<PAGE>
Investment and Operating Policies
The investment policy of the Trust in its broadest aspect is to
seek income of the types permitted to a REIT under Section 856 of the Internal
Revenue Code, consistent with its Declaration of Trust. Under its Declaration of
Trust, the Trust is permitted to invest in a broad range of real estate and
mortgage investments, including among other things equity interests, full or
participating interests in securities, whether or not secured by mortgages,
interests in rents and any other interests related to real property. The Trust's
policies are subject to ongoing review by the Board of Trustees and may be
modified from time to time to take into consideration changes in business or
economic conditions or otherwise as circumstances warrant.
The Trust's investment focus with respect to type of property
has, during the last several years, been directed to equity and equity-oriented
investments in existing income-producing properties, principally multi-use
industrial facilities, apartment complexes, shopping centers and office
buildings. MGI continues to believe it is beneficial to diversify its assets by
location and type of real estate, although it periodically changes its emphasis
from one sector to another in accordance with its perception of market
opportunities. Over the past several years, MGI has increased its emphasis on
acquisitions in the northeastern region of the United States, particularly
industrial and office properties.
Although the principal investment emphasis is on the direct
ownership of income-producing equity real estate, MGI was historically an
equity-oriented or "hybrid" (equity and mortgage) trust. MGI's focus turned from
mortgage loans with equity participations toward equity investments in which the
Trust becomes the sole owner of the property and realizes all of the property's
future benefits and risks. Management believes that this evolution has given the
Trust greater control over the direction of its portfolio and the opportunity to
increase its capital gains potential.
In making new investments, MGI's investment focus has been
primarily directed to acquiring quality income-producing properties. Over the
last several years, MGI's investment philosophy has been to seek what management
believes to be value-creating opportunities by acquiring quality properties
that have not met their full potential at a cost believed to be below or near
replacement value. Management believes that its investments can be managed to
create a total return which includes current income and appreciation. The Trust
seeks to implement its investment objectives through selective acquisitions of
quality properties, leasing and property management in accordance with its
defined long term goals, investment in property improvements and periodic sales
of selected properties. The Trust has recently operated with an individual
investment parameter of below $20,000,000, but has exceeded and may occasionally
exceed this parameter. The decision to sell specific properties or investments
involves a number of factors, including the economic climate (giving effect also
to the impact of tax laws and other regulatory factors), future potential and
reinvestment alternatives. As indicated above, the investment focus may change,
based upon the ongoing review of the Trust's policies by the Board of Trustees.
As is common with any real estate owner or lender investing in
equity real estate, partnerships, mortgage loans and other investments, the
Trust from time to time may restructure its financial arrangements with
partners, tenants or borrowers who encounter financial or other difficulties.
Accordingly, the Trust, as circumstances warrant, has modified and will modify a
lease, partnership, loan or other agreement if, after investigation, it is
established that such modification would be economically feasible and in the
best interests of the Trust. Protection of the Trust's investments may require
foreclosure or other action leading to acquisition of title to properties
underlying its mortgage loans or investments.
The Trust's business is limited to investments in real estate,
direct or indirect, including investments in and possible future acquisitions of
real estate companies. To the extent that the Trust has assets not otherwise
invested in real estate, the Trust may invest such assets in other securities,
including United States government obligations and commercial paper, so long as,
in the opinion of the Trustees, such securities may be held without jeopardizing
the Trust's qualification as a REIT under the Internal Revenue Code.
Funds necessary to conduct operations are provided from rental
and interest income, mortgaging of equity investments, lines of credit,
corporate borrowings, sale of marketable securities and loan repayments and
amortization. Such operations include the Trust's continuous incurrence of
costs, reimbursed and unreimbursed, for improvements and renovations of its
existing properties in order to maintain and enhance their value. From time to
time, as conditions warrant, the Trust may operate on a leveraged basis by
incurring indebtedness in order to increase its capital available for investment
when, in the Trustees' judgment, the Trust will benefit thereby. There is no
assurance at any given time that borrowed funds will be available or that the
terms and conditions of such borrowings will be acceptable. The Trust may employ
short-term borrowings to fund some of its investments. Reference is made to Note
4 of the Notes to Consolidated Financial Statements included in Item 14 below.
Portfolio
The Trust's real estate portfolio as of November 30, 1994
consisted of interests in forty-eight properties, forty-four of which are
wholly-owned, two are owned by partnerships in which the Trust has an equity
interest, one is a property sold by the Trust in a prior year transaction which
did not meet the conditions for a completed sale and is still carried as a real
estate investment for financial accounting purposes and one is a mortgage loan
that is accounted for as real estate owned. For tax purposes, the property sold
and the property accounted for as real estate owned are treated as mortgage
loans receivable.
The Trust's real estate investments can be classified by type of
property and market region. As of November 30, 1994, the Trust's real estate
investments were diversified by type of property as follows:
Type of Property Number of Cost Percent of
Properties Total
Industrial 24 $ 72,388,000 27%
Apartment 9 71,575,000 27
Office 9 64,729,000 24
Retail 6 58,838,000 22
Total 48 $267,530,000 100%
As of November 30, 1994, the Trust's real estate investments were
diversified by geographic region as follows:
Region Number of Cost Percent of
Properties Total
Northeast 17 $ 88,505,000 33%
Midwest 15 89,192,000 33
Southeast 11 66,445,000 25
Mid-Atlantic 4 23,163,000 9
Other 1 225,000 *
Total 48 $267,530,000 100%
* Less than 1%
Terms under leases to tenants at the Trust's properties range from
tenancies-at-will up to eighteen years. The Trust leases commercial space to
approximately 240 commercial tenants, including 115 office tenants, 70 retail
tenants and 55 industrial tenants.
Additional information concerning the Trust's mortgage and real
estate investments is set forth under Item 2 and in Notes 1, 2, 3, 4 and 7 in
the Notes to Consolidated Financial Statements and Schedules XI and XII of the
Financial Statement Schedules included in Item 14 below.
Environmental Matters
Under various Federal, state and local laws, ordinances and
regulations, an owner of real estate or lender may be held liable for the costs
of removal or remediation of certain hazardous or toxic substances located on or
in, or emanating from, such property. The costs of such removal or remediation
of such substances could be substantial. Such laws often impose liability
without regard to whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances. The presence of such substances,
or the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. Other Federal and state laws require the removal or encapsulation
of asbestos containing material in the event of remodeling or renovation.
MGI is not aware of any material violation of applicable
environmental requirements with respect to any of its real estate investments
and MGI is not aware of any environmental liabilities (including asbestos
related liabilities) that management believes would have a material adverse
effect on MGI's business, assets or results of operations.
Competition, Regulation and Other Factors
The success of the Trust depends, among other factors, upon
general economic conditions and trends, including interest rates, availability
of credit, real estate trends, construction costs, income tax laws, governmental
regulations and legislation, increases or decreases in operating expenses,
zoning laws, population trends and the ability of the Trust to attract tenants
and keep its properties leased at profitable levels. The Trust does not consider
its real estate business to be seasonal in nature.
In the areas of investment permitted to the Trust, there may be a
wide variety of competing investors and lenders. The Trust competes with life
insurance companies, real estate investment trusts, pension funds, other
financial institutions, partnerships, corporations, individuals and other
business entities, both domestic and foreign. An increase in the number of
competing investors and lenders and the availability of investment funds can
have the effect of increasing competition for investments in real estate and
reducing the yields realizable with respect to such investments. With respect to
properties presently owned by the Trust, or in which it has an investment, the
Trust competes with other owners of properties for tenants. The Trust's
properties compete for tenants primarily on the basis of location, rent and the
condition and design of improvements. Its properties compete with similar
properties located in their geographic area, and such properties may be newer
and larger than those in which the Trust has an interest. There are no
statistics readily available which would enable the Trust to determine its
position with respect to its competitors in the real estate investment industry.
The Trust has been able to compete effectively despite
recessionary conditions in certain regions from time to time and believes that
it will be able to do so in the future, by reason of the diverse make-up of its
income producing properties, as well as their geographic diversity. However,
recessionary economic conditions in certain regions or any adverse changes in
local or national economic conditions could result in the inability of some
existing tenants (or borrowers) of the Trust to meet their lease or other
obligations and could otherwise adversely affect the Trust's ability to attract
or retain tenants. Management believes, however, that by reason of the factors
stated above and the Trust's financial strength and operating practices,
particularly its ability to implement renovations and improvements, it will be
able to maintain and over time increase rental income from its properties
(although there can be no assurance thereof).
<PAGE>
Item 2. Properties.
The following table sets forth certain information concerning the
Trust's properties.
SUMMARY OF PROPERTIES AT NOVEMBER 30, 1994
Net Carrying Value
Apartment Units Dollars Per Unit Percentage
Leased
Metairie, LA 516 $10,746,000 $20,826 97%
Harrison Township, MI 376 7,290,000 19,388 98%
Bloomfield, MI 346 14,810,000 42,803 98%
Tampa, FL 264 7,866,000 29,795 93%
Laurel, MD 237 11,692,000 49,333 95%
Tampa, FL 112 4,948,000 44,179 94%
Total 1,851 $57,352,000 $30,984 97%
Net Percentage
Partnership Units Carrying Value Leased
Washington, DC (4%) 778 $ 16,000 92%
San Bruno, CA (2%) 430 225,000 94%
Total 1,208 $241,000
<TABLE>
<CAPTION>
Net Carrying Value Scheduled Lease
Expirations
Office Sq. Ft. Dollars Sq. Percentage 1995 1996 Number of Principal Tenant Lease
Ft. Leased Tenants Expiration
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Township, NJ 178,600 $14,891,000 $83.38 82% - 11% 11 Merrill Lynch 06/30/97
Tampa, FL 122,400 9,627,000 78.65 93% 8% 4% 16 Bally 06/30/00
Framingham, MA 109,000 7,103,000 65.17 99% 18% 12% 29 National Dentex 01/31/98
Boston, MA 106,000 8,436,000 79.58 97% 10% 4% 11 Cambridge Associates 04/26/99
Ann Arbor, MI 76,600 5,744,000 74.99 93% 7% 13% 7 Comshare 02/28/05
Naperville, IL 63,800 4,657,000 72.99 87% 10% 3% 12 Eby Brown 06/30/04
Greenville, SC 48,600 2,221,000 45.70 70% 21% 28% 21 S.C. Tax Commission 06/30/96
Greenville, SC 46,000 1,766,000 38.39 96% 46% 22% 7 S.C. Voc. Rehab. Dept. 10/31/95
Charlotte, SC 16,300 887,000 54.42 47% - 47% 1 Comprehensive Medical 09/21/96
Total 767,300 $55,332,000 $72.11 89% 10% 11% 115
Retail
Aurora, IL 313,000 $27,341,000 $87.35 97% 7% 15% 27 Builders Square 08/31/06
Baltimore, MD 135,000 6,712,000 49.72 100% 5% 2% 14 Kmart Corp. 01/30/05
Nashville, TN 111,400 3,910,000 35.10 99% 4% 7% 9 Burlington Coat Factory 01/31/10
Tampa, FL 100,600 8,337,000 82.87 97% 5$ 12% 19 Publix Supermarket 11/30/06
Hagerstown, MD 40,200 1,460,000 36.32 100% - - 1 Giant Food Stores, Inc. 12/31/04
Total 700,200 $47,760,000 $68.21 98% 6% 10% 70
</TABLE>
<PAGE>
Item 2. Properties. (continued)
<TABLE>
<CAPTION>
Net Carrying Value Scheduled Lease
Expirations
Industrial Sq. Ft. Dollars Sq. Ft. Percentage 1995 1996 Number of Principal Tenant Lease
Leased Tenants Expiration
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Research and
Development
Andover, MA 128,400 $ 6,415,000 $49.96 100% - - 1 Hewlett Packard 07/31/99
Billercia, MA 122,300 4,802,000 39.26 100% - - 1 Precision Robotics 07/31/02
Wilmington, MA 109,400 4,497,000 41.11 100% - - 3 United Shoe Machinery 12/31/01
Andover, MA 105,500 7,094,000 67.24 100% - - 1 ISI Systems, Inc. 04/30/99
Wilmington, MA 100,200 2,510,000 25.05 52% - - 1 Datawatch 04/30/99
Billercia, MA 100,000 4,273,000 42.73 100% - - 1 Bay Network 06/30/98
Bedford, MA 92,700 2,483,000 26.79 100% - 81% 3 Imaging Tech 07/25/96
Chelmsford, MA 71,200 1,918,000 26.94 90% - - 6 W.J. Schaeffer Assoc. 07/31/98
Bedford, MA 70,600 2,204,000 31.22 100% - - 1 Atex Publishing 07/31/98
Billercia, MA 60,000 2,112,000 35.20 100% - - 2 Bay Network 03/30/99
Billercia, MA 56,300 2,031,000 36.11 100% - - 1 Bay Network 12/31/99
St. Louis, MO 40,900 1,351,000 33.03 100% 22% 5% 8 IBF Business Forms 06/30/98
St. Louis, MO 35,600 1,926,000 54.10 100% 57% - 3 Interlock 03/31/95
Distribution and
Manufacturing
Wilmington, MA 294,000 6,905,000 23.49 100% - - 4 Avon Dispatch 05/31/00
Nashville, TN 203,000 3,315,000 16.33 88% - - 5 Burnham Industries 05/31/97
St. Louis, MO 200,600 4,135,000 20.61 100% - 50% 2 Everest & Jennings 07/07/02
N. Charleston, SC 191,900 2,382,000 12.41 100% - 100% 2 Mill Transportation 12/31/95
St. Louis, MO 95,600 2,185,000 22.86 100% 100% - 2 S.P. Richards 08/31/95
Westwood, MA 77,400 1,495,000 19.32 100% - - 1 P.B. Diagnostics 05/31/97
St. Louis, MO 61,400 1,458,000 23.75 100% 100% - 2 American Greetings 04/14/95
St. Louis, MO 61,200 1,549,000 25.31 100% - - 1 Tyler Mountain Water 12/31/97
Blue Ash, OH 53,200 616,000 11.58 100% 100% - 1 Aero Mailing 08/31/95
St. Louis, MO 41,000 1,169,000 28.51 100% 100% - 2 Nat'l Service Industries 03/31/95
Blue Ash, OH 38,700 496,000 12.82 100% 100% - 1 Ethicon 01/31/95
Total 2,411,100 $69,321,000 $28.75 97% 13% 15% 55
</TABLE>
Note: See Note 2 of the Notes to Consolidated Financial Statements included
under Item 14 of this Report.
<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 April 30, 1995.
Item 3. Legal Proceedings.
The Trust is not a party to any material legal proceedings as to
which it does not have adequate insurance coverage.
Item 4. Submission of Matters to a
Vote of Security Holders.
Not applicable.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.
(a) Market Information and Dividends.
The principal market on which the Trust's common shares are
traded is the New York Stock Exchange, under the symbol MGI. The table below
sets forth, for the fiscal quarters indicated, the high and low sales prices on
the New York Stock Exchange of the Trust's common shares and dividends paid per
common share.
Fiscal Sales Price
1994 High Low Dividends
First Quarter 15 5/8 13 1/8 $ .21
Second Quarter 16 5/8 14 3/8 $ .21
Third Quarter 16 14 3/8 $ .22
Fourth Quarter 16 13 5/8 $ .22
Fiscal Sales Price
1993 High Low Dividends
First Quarter 15 3/4 11 $ .20
Second Quarter 16 1/2 13 $ .20
Third Quarter 13 3/8 12 $ .20
Fourth Quarter 15 1/8 12 3/4 $ .21
Future dividends will be determined by the Trust's Board of
Trustees and will be dependent upon the earnings, financial position and cash
requirements of the Trust and other relevant factors existing at the time. The
Trust must distribute at least 95% of the Trust's taxable income in order to
enable it to qualify as a real estate investment trust for tax purposes. So long
as the Trust continues to qualify as a REIT, shareholders will, therefore,
receive in the form of dividends at least 95% of the taxable income of the
Trust.
(b) Approximate Number of Holders of Common Shares.
Approximate Number
of Holders (as of
Title of Class January 29, 1995)
Common Shares, $1.00 3,038
par value
<PAGE>
Item 6. Selected Financial Data (a)
<TABLE>
<CAPTION>
Five Years Ended November 30,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Rental and other income $ 43,422,000 $ 36,094,000 $ 27,928,000 $ 30,662,000 $ 29,036,000
Property operating expenses
and real estate taxes 17,854,000 14,704,000 11,442,000 12,442,000 11,334,000
25,568,000 21,390,000 16,486,000 18,220,000 17,702,000
Interest and other income 458,000 804,000 2,661,000 2,469,000 2,525,000
Less expenses:
Depreciation and amortization 7,654,000 6,987,000 5,996,000 5,974,000 5,552,000
Interest expense 5,781,000 5,059,000 5,511,000 6,429,000 5,925,000
General and administrative 2,580,000 2,191,000 2,036,000 2,108,000 2,208,000
Income before net gains (loss) 10,011,000 7,957,000 5,604,000 6,178,000 6,542,000
Net gains (loss) 4,480,000 - 1,644,000 - (360,000)
Net income $ 14,491,000 $ 7,957,000 $ 7,248,000 $ 6,178,000 $ 6,182,000
Per Share Data (b):
Income before net gains (loss) $.87 $.75 $.60 $.66 $.70
Net gains (loss) .39 - .17 - (.04)
Net income $1.26 $.75 $.77 $.66 $.66
Funds from operations $1.54 $1.42 $1.24 $1.30 $1.29
Dividend $ .86 $ .81 $ .80 $ .80 $1.04
Summary of Financial Position:
Investments in real estate,
at cost $267,530,000 $258,663,000 $209,905,000 $208,011,000 $205,993,000
Cash and investment securities $ 13,521,000 $ 12,653,000 $ 17,748,000 $ 9,574,000 $ 11,585,000
Total assets $256,035,000 $246,700,000 $214,161,000 $217,428,000 $222,434,000
Mortgage and other
loans payable $ 70,954,000 $ 66,949,000 $ 60,571,000 $ 67,852,000 $ 71,304,000
Total shareholders' equity $176,095,000 $171,039,000 $145,748,000 $145,873,000 $147,213,000
Weighted average shares
outstanding 11,450,451 10,574,104 9,402,476 9,396,992 9,400,559
</TABLE>
Notes:
(a) Reference is made to the Index to Consolidated Financial Statements
filed as part of this report under Item 14. Item 6, Selected Financial
Data, should be read in conjunction with the Consolidated Financial
Statements and the related notes appearing therein.
(b) The assumed conversion of outstanding options results in dilution
of less than 3%.
<PAGE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
At November 30, 1994 financial liquidity was provided by $13.5 million
in cash and investment securities and by unused lines of credit of $23.0
million. Shareholders' equity of $176.1 million at November 30, 1994, when
compared to $171.0 million at November 30, 1993, primarily reflects net income
in excess of distributions.
Principal sources of funds in fiscal 1994 included property operations,
the sale of eight industrial properties and an apartment complex, mortgage loan
proceeds, and the sale of a partnership interest. During 1994, these resources
were used to pay dividends of $9.8 million, to repay $10.4 million of
indebtedness, to fund capital and tenant improvements of $2.1 million and $1.1
million, respectively, and to acquire seven industrial properties -- six
industrial buildings totaling 578,400 square feet, located in Massachusetts, for
an aggregate price of $22.2 million and one 200,600 square-foot industrial
property, located in Missouri, for a price of $4.1 million.
Additionally, in October 1994, the Trust signed a commitment to acquire
a newly constructed department store of approximately 100,000 square feet
located in Peabody, Massachusetts for a price of $11.1 million. The facility,
now under construction, is being funded by MGI subject to a construction loan
agreement which is reflected as an investment in real estate for financial
reporting purposes. The building will be leased in its entirety by Bradlees,
which is traded on the New York Stock Exchange, under a twenty-year net lease.
The purchase is anticipated to occur in mid-1995 upon the satisfactory
completion of construction of the building. As of November 30, 1994, the Trust
has advanced $5.5 million of the construction loan.
Mortgage and other loans payable totaled $71.0 million at November 30,
1994 (74% fixed rate and 26% floating rate), a net increase of $4.1 million
compared to $66.9 million at November 30, 1993. During 1994, the Trust executed
mortgages totaling $22.7 million with an average interest rate of 8.1%. In
addition, the Trust retired $19.2 million of debt related to maturing notes and
properties sold. Scheduled payments of loan principal amortization totaled $1.4
million. In 1994, MGI entered into a $15.0 million, two-year, floating rate,
secured line of credit facility, which increased the total lines of credit to
$25.0 million. At November 30, 1994, the Trust had $2.0 million outstanding on
its lines. Mortgage and other loans payable are collateralized by thirteen of
MGI's properties having an aggregate carrying value of $119.6 million, $3.2
million of investment securities and MGI's guarantees of $4.5 million. Scheduled
loan principal payments due within twelve months of November 30, 1994 total $1.5
million. MGI believes it will continue to be able to extend or refinance
maturing mortgage loans upon satisfactory terms.
In December 1994, the Trust acquired a 38,000 square-foot office
building located in Boston, Massachusetts for a price of $1.8 million. In
January 1995, the Trust agreed to acquire a 190,000 square-foot
industrial building located in Tewksbury, Massachusetts for a price of $5.75
million, subject to the satisfactory completion of certain conditions including
due diligence and the execution with a publicly-traded company of a
fifteen-year lease for the entire building. The lease would commit the Trust
to tenant and capital improvements totaling approximately $6.3 million. Other
cash requirements in 1995 are distributions to shareholders, capital and
tenant improvements and other leasing expenditures required to maintain MGI's
occupancy levels and other investment undertakings. During the period 1992
through 1994, annual expenditures for capital and tenant improvements averaged
approximately 1.3% of net real estate investments. In 1995, budgeted capital
and tenant improvements, which are based on assumed leasing activity,
completion of discretionary capital projects and estimated costs, approximates
2.9% of net real estate investments, excluding any commitments associated with
the purchase of the 190,000 square-foot industrial building. The budgeted
increase in 1995 over the average of previous years is primarily due to
proposed capital and tenant improvements in the office segment, which reflects
budget leasing assumptions for the year. Included in the 1995 budget is $1.5
million of tenant improvements related to a signed 61,000 square-foot office
lease at its Michigan office building. Additionally, the Trust has budgeted
$.8 million of interior and exterior improvements for its apartment complexes
and $.5 million for paving and roof replacements at certain industrial
buildings.
Principal sources of funds in the future are expected to be from
operations of properties, including those acquired in the future, mortgage or
refinancing of existing mortgages on properties and MGI's portfolio of
investment securities. Other potential sources of funds include the proceeds of
offering of additional equity or debt securities or the sale of real estate
investments. In this regard, the Trust sold an industrial property located in
Nashville, Tennessee for $4.8 million and will recognize a gain of approximately
$1.4 million in the quarter ending February 28, 1995. The cost of new borrowings
or issuances of equity capital will be measured against the anticipated yields
of investments to be acquired with such funds. The purchase of additional
properties in 1995 may require the use of funds from MGI's lines of credit, new
borrowings, or the issuance of securities. MGI believes the combination of cash
and investment securities, the value of MGI's unencumbered properties and other
resources are sufficient to meet its short and long-term liquidity requirements.
<PAGE>
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Net income for 1994 of $14.5 million, or $1.26 per share, exceeded net
income of $8.0 million, or $.75 per share, in 1993. Included in net income in
1994 was a net gain of $4.5 million, or $.39 per share, which resulted from the
sale of real estate investments for an aggregate sales price of $25.2 million.
Income before net gains increased 25% to $10.0 million for 1994, compared to
$8.0 million in 1993. The increase in income before net gains when comparing
1994 to 1993 resulted principally from the increase in properties owned.
Funds from operations in 1994 totaled $17.7 million, or $1.54 per share,
compared to $15.0 million, or $1.42 per share, in 1993. MGI defines funds from
operations as net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructuring,
sales of property and similar non-cash items, depreciation and amortization
charges and equity method partnership losses. MGI believes funds from operations
is an appropriate supplemental measure of operating performance. The change in
funds from operations is attributable to the same factors that affected income
before net gains with the exception of depreciation and amortization expense.
A primary component of the change in income before net gains is property
operating income which is defined as rental and other income less property
operating expenses and real estate taxes. Property operating income increased by
$4.2 million (20%) to $25.6 million in 1994 from $21.4 million in 1993. This
increase is largely due to the 1993 and 1994 acquisitions which contributed $4.2
million and $1.1 million to the increase, respectively. These properties consist
of seventeen industrial and two office buildings totaling over 1.9 million
square feet (50% of the total non-residential portfolio) and are 97% leased as
of November 30, 1994. Properties sold during 1994 reduced property operating
income by less than $0.3 million. Property operating income for the balance of
the portfolio, which the Trust owned as of the beginning of fiscal 1993, has
increased by $0.2 million to $16.1 million without consideration of $1.0 million
income received during 1993 in connection with the amendment and assignment of a
lease at Yorkshire Plaza located in Aurora, Illinois.
With respect to this group of properties, which the Trust owned
throughout all of 1993 and 1994, apartment property operating income has
improved by 6% largely due to increases in rental rates, with average occupancy
at 94% for both 1993 and 1994. Industrial property operating income has improved
20% due to an increase in occupancy. Overall, average occupancy for all
industrial properties owned has improved by 2% to 98% during 1994. The increases
in property operating income from comparable apartment and industrial buildings
are offset, however, by a $0.5 million decline from comparable office buildings.
Average occupancy in office buildings has declined from 94% in 1993 to 88% in
1994, primarily due to increased average vacancy at the suburban Chicago,
Illinois and Somerset, New Jersey buildings during 1994. Retail property
operating income is largely unchanged, excluding the $1.0 million lease
amendment income received in 1993, and average occupancy has increased modestly
from 92% to 93% from 1993 to 1994.
The $7.3 million increase in rental and other income in 1994 compared to
1993 was principally the result of $1.5 million from the properties acquired in
1994, $6.8 million due to the partial year ownership of properties acquired in
1993, offset by a decrease of $0.5 million due to the sale of properties in 1994
and a decrease of $0.5 million from the balance of the portfolio. Included in
1993 rental and other income, however, was $1.0 million of income received in
connection with the lease amendment, mentioned above. Exclusive of this income,
revenue in the group of properties which the Trust owned throughout all of 1993
and 1994 has increased $0.5 million. Rental income from the comparable portfolio
of apartments and industrial buildings has increased while revenue in the office
segment has declined due to factors similar to those affecting property
operating income.
The $2.0 million increase in property operating expenses and the $1.2
million increase in real estate taxes in 1994 as compared to 1993, reflect
primarily (i) $0.2 million and $0.3 million, respectively, attributable to the
properties acquired in 1994, (ii) $1.7 million and $0.9 million, respectively,
due to the buildings acquired in 1993 and (iii) $0.2 million and $0.1 million,
respectively, from the balance of the portfolio, which are offset by the
decreases of $0.1 million and $0.1 million, respectively, due to buildings sold
in 1994. The $0.7 million increase in depreciation and amortization expense for
1994 when compared to 1993 was mostly due to partial year ownership of the
properties acquired in 1994 and 1993.
Three additional factors also contributed to the change in income before
net gains and funds from operations when 1994 is compared to 1993. Interest
income in 1994 reflects a decrease in the average outstanding balance of
short-term investments. General and administrative expenses increased in 1994
primarily reflecting an increase in personnel and shareholder-related items.
Interest expense increased reflecting a higher average level of debt
outstanding.
At November 30, 1994, scheduled 1995 lease expirations for
non-residential space approximates 433,000 square feet, or 11% of the entire
commercial portfolio, which is similar to the percentage of scheduled expiration
for fiscal 1994. Of these scheduled expirations, 319,000 square feet is
industrial space, 75,000 square feet is office and 39,000 square feet is retail.
During 1994, the Trust signed leases totaling 530,000 square feet with lease
commencement dates in 1994 and 1995.
1993 COMPARED TO 1992
Net income for 1993 of $8.0 million, or $0.75 per share on the greater
number of shares outstanding, exceeded net income of $7.2 million, or $0.77 per
share, in 1992. Included in net income in 1992 was a net gain of $1.6 million,
or $.17 per share.
The increase in income before net gains when comparing 1993 to 1992
resulted principally from the increase in properties owned and the receipt of a
non-recurring fee. As a result, rental and other income, property operating
expenses, real estate tax expense, depreciation and amortization expense
increased and mortgage interest income decreased in 1993. The $8.2 million
increase in rental and other income in 1993 compared to 1992 was principally the
result of (i) $3.6 million from the properties acquired in 1993, (ii) $2.4
million related to the reclassification of MGI's investment in a Metairie,
Louisiana apartment complex to owned real estate from a mortgage receivable,
(iii) $1.0 million of non-recurring income received in connection with the
assignment and amendment of a lease at Yorkshire Plaza, Aurora, Illinois, (iv)
$0.8 million due to the partial year ownership of properties acquired in 1992
and (v) the $0.4 million increase from the balance of the portfolio.
The $2.4 million increase in property operating expenses and the $0.9
million increase in real estate taxes in 1993 as compared to 1992, reflect
primarily (i) $1.0 million and $0.1 million, respectively, related to the
Metairie, Louisiana apartment complex, (ii) $0.8 million and $0.6 million,
respectively, from the properties acquired in 1993, (iii) $0.2 million and $0.1
million, respectively, due to the buildings acquired in 1992 and (iv) $0.4
million and $0.1 million, respectively, from the balance of the portfolio. The
$1.0 million increase in depreciation and amortization expense for 1993 when
compared to 1992 was mostly due to partial year ownership of the properties
acquired in 1993 and 1992 ($0.4 million) and the Louisiana apartment complex
($0.5 million).
The $1.6 million decrease in mortgage interest income in 1993 is due the
reclassification of the Metairie, Louisiana investment to real estate owned and
the acquisition by MGI of the four properties that secured a $6.6 million MGI
wrap-around mortgage loan. Three additional factors also contributed to the
increase in income before net gains and funds from operations when 1993 is
compared to 1992. Interest income in 1993 reflects a decrease in the average
outstanding balance of short-term investments and lower interest rates. General
and administrative expenses increased in 1993 primarily reflecting an increase
in personnel. Lower average levels of debt outstanding, combined with lower
interest rates on variable rate debt, resulted in deceased interest expense of
$0.5 million when 1993 is compared to 1992.
Real estate investments and operations are subject to a number of
factors, including changes in general economic climate, local conditions (such
as an oversupply of space, a decline in effective rents or a reduction in the
demand for real estate), competition from other available space, the ability of
the owner to provide adequate maintenance, to fund capital and tenant
improvements required to maintain market position and control of operating
costs. In certain markets in which the Trust owns real estate, overbuilding and
local or national economic conditions have combined to produce lower effective
rents and/or longer absorption periods for vacant space. As the Trust re-leases
space, certain effective rents may be less than those earned previously.
Management believes its diversification by region and property type reduces the
risks associated with these factors and enhances opportunities for cash flow
growth and capital gains potential, although there can be no assurance thereof.
During the past three fiscal years, the impact of inflation on MGI's
operations and investment activity has not been significant.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data are included under Item
14 of this Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
<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, 1994 and 1993
Consolidated Statements of Earnings, Years ended
November 30, 1994, 1993 and 1992
Consolidated Statements of Changes in Shareholders' Equity, Years ended
November 30, 1994, 1993 and 1992
Consolidated Statements of Cash Flows,
Years ended November 30, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Schedules (as of or for the year ended November 30, 1994):
Schedule XI, Real Estate and Accumulated Depreciation
Schedule XII, Mortgage and other Loans on Real Estate
Exhibit XI - Computation of Net Income Per Share Assuming Full
Dilution
Exhibit XXVII - Financial Data Schedule for year ended November 30, 1994
(EDGAR filing only)
Other schedules are omitted for the reasons that they are not required, are not
applicable, or the required information is set forth in the financial statements
or notes thereto.
3. EXHIBITS
Sequentially
Numbered Page
3(a) Second Amended and Restated Declaration of Trust,
incorporated by reference to Exhibit 3 of the
Trust's Annual Report on Form 10-K for the fiscal
year ended November 30, 1981 (the "1981 10-K").
(b) Certificate of First Amendment of Second Amended
and Restated Declaration of Trust, incorporated
by reference to Exhibit 3 of the 1981 10-K.
<PAGE>
Sequentially
Numbered Page
(c) Certificate of Second Amendment of Second Amended
and Restated Declaration of Trust, incorporated
by reference to the Trust's Report on Form 8-K,
filed on January 13, 1983.
(d) Certificate of Third Amendment of Second Amended
and Restated Declaration of Trust, incorporated
by reference to Exhibit 3(d) to Amendment No. 1
to the Trust's Registration Statement on Form S-2
filed on June 7, 1985.
(e) Certificate of Fourth Amendment of Second Amended
and Restated Declaration of Trust, dated October
17, 1986, incorporated by reference to the
Trust's Annual Report on Form 10-K for the year
ended November 30, 1986.
(f) Certificate of Fifth Amendment of Second Amended
and Restated Declaration of Trust, dated March
25, 1987, incorporated by reference to Exhibit
3(f) of the Trust's Annual Report on Form 10-K
for the fiscal year ended November 30, 1987.
(g) Certificate of Sixth Amendment of Second Amended
and Restated Declaration of Trust, dated February
10, 1988, incorporated by reference to Exhibit
4(g) of the Trust's Registration Statement on
Form S-8 filed on May 3, 1988.
(h) Certificate of Seventh Amendment of Second
Amended and Restated Declaration of Trust, dated
June 30, 1988, incorporated by reference to
Exhibit 4.8 of the Trust's Registration Statement
on Form S-4 filed on November 10, 1988 (Reg. No.
33-25495).
(i) Certificate of Eighth Amendment of Second Amended
and Restated Declaration of Trust, dated March
27, 1989, incorporated by reference to Exhibit
3(i) of the Trust's Annual Report on Form 10-K
for the fiscal year ended November 30, 1989 (the
"1989 10-K").
(j) By-Laws, incorporated by reference to the Trust's
Report on Form 8-K, filed on January 12, 1983.
(k) Certificate of Amendment of By-Laws, dated March
21, 1989, incorporated by reference to the
Trust's Report on Form 8-K dated March 21, 1989.
(l) Rights Agreement, dated as of June 21, 1989
between the Trust and The First National Bank of
Boston as Rights Agent, incorporated by reference
to Exhibit 1 to the Trust's Registration
Statement on Form 8-A, filed on June 27, 1989.
(m) Certificate of Vote of the Trustees Designating a
Series of Preferred Shares, dated June 21, 1989,
incorporated by reference to Exhibit 3(m) of the
1989 10-K.
10(a) Mortgage Growth Investors Incentive Stock Option
Plan for Key Employees, incorporated by reference
to the Trust's Definitive Proxy Statement dated
March 15, 1982.
(b) Mortgage Growth Investors Stock 1982 Option Plan
For Trustees, incorporated by reference to the
Trust's Definitive Proxy Statement dated March
15, 1982.
(c) MGI Properties 1988 Stock Option and Stock
Appreciation Rights Plans for Key Employees and
Trustees, incorporated by reference to the
Trust's Definitive Proxy Statement, dated
February 19, 1988.
(d) Amendment to MGI Properties' 1982 Incentive Stock
Option Plan for Key Employees, dated as of
December 19, 1989, incorporated by reference to
Exhibit 10(d) of the 1989 10-K.
(e) Amendment to MGI Properties' 1982 Stock Option
Plan for Trustees, dated as of December 19, 1989,
incorporated by reference to Exhibit 10(e) of the
1989 10-K.
(f) Amendment to MGI Properties' 1988 Stock Option
and Stock Appreciation Rights Plan for Key
Employees, dated as of December 19, 1989,
incorporated by reference to Exhibit 10(f) of the
1989 10-K.
(g) Amendment to MGI Properties' 1988 Stock Option
Plan for Trustees, dated as of December 19, 1989,
incorporated by reference to Exhibit 10(g) of the
1989 10-K.
(h) Amended and Restated Severance Compensation Plan,
dated as of December 19, 1989, incorporated by
reference to Exhibit 10(i) of the 1989 10-K.
(i) Amended and Restated MGI Properties Long Term
Share Bonus Plan, dated December 18, 1991,
incorporated by reference to Exhibit 10(i) of the
1991 10-K.
(j) Purchase Agreement, dated December 29, 1992,
among West Port Park, Inc., a Massachusetts
corporation, those persons named on Schedule A
thereto, MGI Properties and MGI West Port, Inc.,
a Delaware corporation, incorporated by reference
to the Trust's Report on Form 8-K, filed on
February 14, 1994 (the "1994 8-K")
(k) Agreement of Sale, dated as of May 7, 1993, among
MGI Properties and Continental Bank, National
Association, as successor trustee, and Jesse B.
Morgan and Thomas E. Meador, as co-trustees,
incorporated by reference to the Trust's 1994
8-K.
(l) Agreement of Purchase and Sale, dated as of April
6, 1993, between MGI Properties and Hexalon Real
Estate, Inc., incorporated by reference to the
Trust's 1994 8-K.
(m) Contract of Sale, effective June 1, 1993, between
Nationwide Life Insurance Company and MGI
Properties, incorporated by reference to the
Trust's 1994 8-K.
(n) Real Estate Sale Agreement, dated as of July 16,
1993, between The Travelers Insurance Company and
MGI Properties, incorporated by reference to the
Trust's 1994 8-K.
(o) Agreement to Purchase Real Property, dated July
23, 1993, between Bedford Property Investors,
Inc. and MGI Properties, incorporated by
reference to the Trust's 1994 8-K.
(p) Agreement for Purchase and Sale of Property,
dated as of October 21, 1993, between New York
Life Insurance Company, MGI Properties and
Sherburne, Powers & Needham, P.C., as escrow
agent, incorporated by reference to the Trust's
1994 8-K.
(q) Purchase and Sale Agreement, dated as of October
1, 1993, between The Boston Finance Company and
MGI Properties, incorporated by reference to the
Trust's 1994 8-K.
(r) Real Estate Sale Contract, dated as of November
1993, between The Prudential Insurance Company of
America and MGI Properties, incorporated by
reference to the Trust's 1994 8-K.
(s) MGI Properties 1994 Stock Option and Stock
Appreciation Rights Plan for Key Employees and
Trustees incorporated by reference to the Trust's
Definitive Proxy Statement, dated February 18,
1994.
(t) The Dividend Reinvestment and Share Purchase Plan
of MGI Properties incorporated by reference to
the Trust's Report on Form S-3, filed on July 1,
1994.
11 Computation of Net Income Per Share, Assuming
Full Dilution, included under Item 14 of this
Report.
24 Auditors' consent
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the fourth quarter of
the fiscal year ended November 30, 1994.
-------------------------
MGI Properties (the "Trust") is a Massachusetts business trust
and all persons dealing with the Trust must look solely to the property of the
Trust for the enforcement of any claims against the Trust. Neither the Trustees,
officers, agents nor shareholders of the Trust assume any personal liability in
connection with its business or assume any personal liability for obligations
entered into in its behalf.
<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: January 31, 1995
MGI PROPERTIES
(Registrant)
By: /s/ W. Pearce Coues
W. Pearce Coues, Chairman
of the Board of Trustees
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ W. Pearce Coues
_________________ Chairman of the Board of Trustees January 31, 1995
W. Pearce Coues and Chief Executive Officer
/s/ Phillip C. Vitali
_________________ Principal Financial Officer January 31, 1995
Phillip C. Vitali
/s/ David P. Morency
_________________ Principal Accounting Officer January 31, 1995
David P. Morency
/s/ Herbert D. Conant
_________________ Trustee January 31, 1995
Herbert D. Conant
/s/ Francis P. Gunning
_________________ Trustee January 31, 1995
Francis P. Gunning
/s/ Colin C. Hampton
_________________ Trustee January 31, 1995
Colin C. Hampton
/s/ George M. Lovejoy, Jr.
_________________ Trustee January 31, 1995
George M. Lovejoy, Jr.
/s/ Rodger P. Nordblom
_________________ Trustee January 31, 1995
Rodger P. Nordblom
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1994
MGI PROPERTIES
<PAGE>
MGI PROPERTIES
Index to Consolidated Financial Statements and Schedules
Page
Independent Auditors' Report 1
Financial Statements:
Consolidated Balance Sheets,
November 30, 1994 and 1993 2
Consolidated Statements of Earnings,
Years ended November 30, 1994, 1993 and 1992 3
Consolidated Statements of Cash Flows,
Years ended November 30, 1994, 1993 and 1992 4
Consolidated Statements of Changes in Shareholders' Equity,
Years ended November 30, 1994, 1993 and 1992 5
Notes to Consolidated Financial Statements 6-11
Schedules (as of or for the year ended November 30, 1994):
Schedule XI - Real Estate and Accumulated Depreciation
Schedule XII - Mortgage and Other Loans on Real Estate
Exhibit XI - Computation of Net Income Per Share, Assuming Full Dilution
Exhibit XXVII - Financial Data Schedule for year ended November 30, 1994
(EDGAR filing only)
Other schedules are omitted as they are not required, are not applicable, or the
required information is set forth in the consolidated financial statements or
notes thereto.
<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, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended November 30, 1994 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly, in all material respects, the information
set forth therein.
(Signature of KPMG Peat Marwick LLP)
KPMG Peat Marwick LLP
Boston, Massachusetts
December 30, 1994
<PAGE>
MGI PROPERTIES
Consolidated Balance Sheets
November 30, 1994 and 1993
<TABLE>
<CAPTION>
Assets 1994 1993
<S> <C> <C>
Real estate, at cost (notes 2, 3 and 4) $ 267,530,000 $ 258,663,000
Accumulated depreciation and amortization (32,029,000) (29,992,000)
Net investments in real estate 235,501,000 228,671,000
Cash 1,774,000 1,564,000
Short-term investments, at cost, which approximates
market value (note 4) 11,118,000 10,252,000
U.S. Government securities, at cost, which approximates
market value (note 4) 629,000 837,000
Other assets 7,013,000 5,376,000
$ 256,035,000 $ 246,700,000
Liabilities and Shareholders' Equity
Liabilities:
Mortgage and other loans payable (note 4) $ 70,954,000 $ 66,949,000
Other liabilities 5,286,000 5,012,000
Total liabilities 76,240,000 71,961,000
Deferred gain (note 2) 3,700,000 3,700,000
Commitments (note 2)
Shareholders' equity (notes 5 and 6):
Preferred shares - $1 par value: 2,000,000
shares authorized; none issued -- --
Common shares - $1 par value: 17,500,000 shares
authorized; 11,465,842 issued (11,448,152 at
November 30, 1993) 11,466,000 11,448,000
Additional paid-in capital 165,921,000 165,673,000
Distributions in excess of net income (1,292,000) (5,935,000)
176,095,000 171,186,000
At November 30, 1993, 14,431 shares in treasury,
at cost -- (147,000)
Total shareholders' equity 176,095,000 171,039,000
$ 256,035,000 $ 246,700,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
MGI PROPERTIES
Consolidated Statements of Earnings
Year ended November 30,
1994 1993 1992
<S> <C> <C> <C>
Income:
Rental and other income $43,422,000 $36,094,000 $27,928,000
Interest on mortgage loans -- 54,000 1,686,000
Interest on investment securities 394,000 659,000 916,000
Other 64,000 91,000 59,000
Total income 43,880,000 36,898,000 30,589,000
Expenses:
Property operating expenses 12,437,000 10,457,000 8,089,000
Real estate taxes 5,417,000 4,247,000 3,353,000
Depreciation and amortization 7,654,000 6,987,000 5,996,000
Interest 5,781,000 5,059,000 5,511,000
General and administrative 2,580,000 2,191,000 2,036,000
Total expenses 33,869,000 28,941,000 24,985,000
Income before net gains 10,011,000 7,957,000 5,604,000
Net gains (note 2) 4,480,000 -- 1,644,000
Net income $14,491,000 $ 7,957,000 $ 7,248,000
Per share data:
Income before net gains $ .87 $ .75 $ .60
Net gains .39 -- .17
Net income $ 1.26 $ .75 $ .77
Weighted average shares outstanding 11,450,451 10,574,104 9,402,476
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MGI PROPERTIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended November 30,
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,491,000 $ 7,957,000 $ 7,248,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,654,000 6,987,000 5,996,000
Net gains (4,480,000) -- (1,644,000)
Equity in losses of partnerships -- 45,000 90,000
Other (959,000) 803,000 903,000
Net cash provided by operating
activities 16,706,000 15,792,000 12,593,000
Cash flows from investing activities:
Acquisitions of real estate (31,786,000) (40,963,000) (6,005,000)
Additions to real estate (3,208,000) (2,672,000) (2,471,000)
Net proceeds from sales of real estate interests 15,020,000 -- 18,773,000
Cash distributions from real estate partnership 100,000 -- --
Additions and advances on mortgage loans
receivable -- (79,000) (235,000)
Decrease in U.S. Government securities, net 208,000 780,000 625,000
Other (116,000) (85,000) 154,000
Net cash provided by (used in)
investing activities (19,782,000) (43,019,000) 10,841,000
Cash flows from financing activities:
Proceeds from sale of common shares, net 41,000 25,640,000 --
Repayment of mortgage and other loans payable (10,439,000) (7,688,000) (7,227,000)
Additions to mortgage and other loans payable 24,188,000 13,338,000 --
Cash distributions paid (9,828,000) (8,460,000) (7,523,000)
Stock option transactions 190,000 82,000 115,000
Net cash provided by (used in)
financing activities 4,152,000 22,912,000 (14,635,000)
Net increase (decrease) in cash and
short-term investments 1,076,000 (4,315,000) 8,799,000
Cash and cash equivalents:
Beginning of year 11,816,000 16,131,000 7,332,000
End of year $ 12,892,000 $ 11,816,000 $ 16,131,000
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
MGI PROPERTIES
Consolidated Statements of Changes in Shareholders' Equity
Number Additional Distributions Total
of common Common paid-in in excess of Treasury shareholders'
shares issued shares capital net income shares equity
<S> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1991 9,448,152 $ 9,448,000 $142,089,000 $(5,157,000) $(507,000) $145,873,000
Net income - - - 7,248,000 - 7,248,000
Distributions (note 6) - - - (7,523,000) - (7,523,000)
Options exercised and other - - (29,000) - 179,000 150,000
Balance at November 30, 1992 9,448,152 9,448,000 142,060,000 ( 5,432,000) (328,000) 145,748,000
Net income - - - 7,957,000 - 7,957,000
Sale of common shares 2,000,000 2,000,000 23,640,000 - - 25,640,000
Distributions (note 6) - - - (8,460,000) - (8,460,000)
Options exercised and other - - (27,000) - 181,000 154,000
Balance at November 30, 1993 11,448,152 11,448,000 165,673,000 (5,935,000) (147,000) 171,039,000
Net income - - - 14,491,000 - 14,491,000
Dividend reinvestment and
share purchase plan
(note 5) 4,121 4,000 57,000 - - 61,000
Distributions (note 6) - - - (9,848,000) - (9,848,000)
Options exercised and other 13,569 14,000 191,000 - 147,000 352,000
Balance at November 30, 1994 11,465,842 $11,466,000 $165,921,000 $(1,292,000) $ - $176,095,000
</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 a range from 5 to 20 years. Maintenance and repairs are
charged to expense as incurred; major improvements are capitalized.
(e) Statements of Cash Flows
For purposes of the statements of cash flows, all short-term investments
with a maturity, at date of purchase, of three months or less are
considered to be cash equivalents.
During 1994, the Trust sold seven industrial properties for $14.9
million in a single transaction. The properties were secured by a $10.2
million loan payable which was assigned to the purchaser at closing.
Only the cash portion of the sale is reflected in the accompanying
consolidated statement of cash flows.
Cash interest payments of $5.8 million, $5.3 million and $5.5 million
were made for the years ended November 30, 1994, 1993 and 1992,
respectively.
(f) Fair Value of Financial Instruments
The Trust estimated the fair values of its financial instruments at
November 30, 1994 using dis-counted cash flow analysis and quoted market
prices. Such financial instruments include short-term investments, U.S.
Government securities, mortgage and other loans payable and mortgage
notes receivable which were received in connection with transactions not
qualifying as sales for financial accounting purposes and accordingly
not reflected in the TrustOs consolidated balance sheet. The excess of
the aggregate fair value of the TrustOs financial instruments over their
aggregate carrying amounts is not material.
(g) Net Income Per Share
Net income per share is computed based on the weighted average number of
common shares outstanding.
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
(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 1994 1993
<S> <C> <C> <C> <C> <C>
Industrial $15,583,000 $ 56,805,000 $ 3,067,000 $ 69,321,000 $ 57,304,000
Apartment 10,831,000 60,503,000 13,957,000 57,377,000 64,030,000
Office 12,461,000 52,268,000 9,397,000 55,332,000 56,559,000
Retail 19,110,000 34,258,000 5,608,000 47,760,000 48,635,000
Retail -
Construction
in Progress - - - 5,470,000 -
Partnership - - - 241,000 2,143,000
$57,985,000 $203,834,000 $32,029,000 $235,501,000 $228,671,000
</TABLE>
A discussion of certain real estate investments follows:
In October 1994, the Trust signed a commitment to acquire a newly
constructed department store of approximately 100,000 square feet
located in Peabody, Massachusetts for a price of $11.1 million. The
facility, now under construction, is being funded by the Trust subject
to a construction loan agreement which requires interest at 9% per annum
and is secured by a first mortgage, an assignment of the lease and
guarantees of the borrower. Additionally, the tenant has guaranteed the
completion of construction and the funding of cost overruns exceeding a
specified dollar amount. The building is leased in its entirety to
Bradlees, a NYSE company, subject to a twenty-year net lease. The
purchase of the building is expected to occur in mid 1995 upon
satisfactory completion of construction. The construction loan is
reflected as an investment in real estate for financial reporting
purposes.
In 1982, the Trust sold its investment in a Michigan apartment complex and
received a $15.5 million purchase money mortgage in a transaction that
did not meet the conditions for a completed sale for financial
accounting purposes. The loan, which matures in February 1995, has an
interest rate of 7% and provides for the Trust to receive at least 50%
but not more than 60% of the shared appreciation value in excess of the
outstanding note balance. In addition, the Trust has a 35% ownership
interest, direct and indirect, in the partnership owning this complex.
The Trust's purchase option expires in February 1995 and allows it to
obtain a maximum equity interest of 67.5%. At November 30, 1994, the
Trust carried this asset as a real estate investment at a net carrying
value of $7.3 million, which excludes the gain from the sale.
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
At November 30, 1992, the Trust began to account for its loan on a
Metairie, Louisiana apartment complex as real estate owned. The Trust
had been recognizing interest income ($1.1 million in 1992) on the
related mortgage loan as received. During 1994 and 1993, the Trust has
recognized property income and expenses as if it owned the property. For
tax purposes, at November 30, 1994, this investment is reflected as a
$14.1 million, 8.5% mortgage loan receivable.
With respect to a San Bruno, California partnership investment, the Trust
is entitled to receive 50% of property cash flow and residuals through a
2% limited partnership interest (carrying value of $225,000) and has an
option to increase its equity interest. In addition, the Trust has a
loan receivable from the partnership with a $3.1 million tax basis. Such
loan is not recorded in the accompanying financial statements.
(b) Net Gains
In 1994, the Trust sold nine properties and one real estate partnership
interest with an aggregate net carrying value of $20.7 million for an
aggregate net sales price of $25.2 million resulting in gains totalling
$4.5 million.
In 1992, the Trust recognized a gain of $3.7 million and deferred an
additional gain of $3.7 million, which was effectuated by the December
1991 repayment of approximately $18.8 million of financing it had
provided to the partnership owning the San Bruno, California apartment
complex. Prior to the completion of the December 1991 transaction, a
1976 sale had not met the conditions for a completed sale and the Trust
carried this property as a real estate investment for financial
accounting purposes. In addition, in 1992, the Trust recognized a $2.1
million write-down of the Metairie, Louisiana investment discussed
above.
(3) Leases
All leases relating to real estate investments are operating leases;
accordingly, rental income is reported when earned.
Future minimum lease payments on noncancelable operating leases at
commercial properties at November 30, 1994 are: $23.7 million in 1995,
$21.4 million in 1996, $17.7 million in 1997, $13.5 million in 1998,
$10.0 million in 1999, and $30.5 million thereafter.
The above amounts do not include contingent rental income which is received
under certain leases based upon tenant sales, ad valorem taxes, property
operating expenses and/or costs to maintain common areas. Contingent
rental income was $5.4 million in 1994, $3.4 million in 1993 and $2.6
million in 1992.
Operating leases on apartments generally have a term of one year or less.
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
(4) Mortgage and Other Loans Payable
Mortgage and other loans payable at November 30 follow:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Mortgage loans, maturing 1996 through 2014,
at effective interest rates
ranging from 7.58% to 9.5%, net of
unamortized discount of $31,000 in 1993 $ 52,224,000 $ 49,918,000
Mortgage loan, maturing in September 1999 at
an effective variable interest
rate, 7.81% and 5.25% at November 30,
1994 and 1993, respectively 10,884,000 11,185,000
Housing revenue bond, maturing 2007, at 5.40% and
4.28% at November 30, 1994 and 1993, respectively 5,750,000 5,750,000
Amount outstanding under line of credit,
maturing in June 1996, at a
variable interest rate, 8.5%, at
November 30, 1994 2,000,000 -
Other, maturing 1995, at 7.50% 96,000 96,000
$ 70,954,000 $ 66,949,000
Weighted average interest rate 8.48% 8.52%
</TABLE>
These loans payable are nonrecourse and are collateralized by certain real
estate investments having a net carrying value of $119.6 million and
the Trust's guarantee of $4.5 million. Loans require monthly principal
amortization and/or a balloon payment at maturity.
The Trust has lines of credit of $10.0 million and $15.0 million maturing
September 1996 and June 1996, respectively. Both credit agreements
contain restrictive covenants which, among other things, require the
Trust to maintain certain financial ratios and restrict the incurrence
of certain indebtedness and the making of certain investments.
Borrowings under the lines are secured by mortgage and security
interests in real estate and are subject to a variable interest rate. A
fee in the amount of .25% per annum is charged on the unused amounts.
The housing revenue bond is tax exempt and is secured by real estate having
a net carrying value of $4.9 million. The bond is also secured by a
letter of credit which is collateralized by $3.2 million of short-term
investments and U.S. Government securities. The Trust has also
guaranteed $3.0 million of the debt. The base interest rate floats
weekly and was 3.5% at November 30, 1994 (an effective interest rate of
5.4% due to the payment of fees).
Principal payments on mortgage and other loans payable due in the next five
years and thereafter are as follows: $1.5 million in 1995, $13.5 million
in 1996, $17.3 million in 1997, $1.4 million in 1998, $10.5 million in
1999, and $26.8 million thereafter.
(5) Shareholders' Equity
(a) Stock Option Plans
At the 1994 annual meeting, shareholders ratified the 1994 Employee
Stock Option and Stock Appreciation Rights Plan and the 1994 Trustees'
Stock Option Plan.
(Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
Under the Trust's 1988 and 1994 stock option plans for key employees and
Trustees (the "Plans"), incentive stock options with or without stock
appreciation rights or nonqualified options and related stock
appreciation rights may be granted to employees, and nonqualified
options may be granted to Trustees. Under the Plans, options may be
granted at an exercise price not less than fair market value of the
Trust's common shares on the date of grant. Changes in options
outstanding during the years ended November 30 were as follows:
1994 1993 1992
Balance at beginning of year 464,532 467,000 433,000
Granted 101,000 24,000 49,000
Exercised (15,900) (14,468) (15,000)
Expired -- (12,000) --
Balance at end of year 549,632 464,532 467,000
Shares available for granting
future options 590,325 121,325 140,000
The weighted average exercise price per option at November 30, 1994, 1993
and 1992 was $12.62, $12.16 and $11.88, respectively. The shares
reserved expire by April 2004 and all outstanding options expire by
April 2004. Subsequent to November 30, 1994, 112,000 options were
granted, of which half are currently exercisable and half are
exercisable in December 1995. All other options outstanding are
currently exercisable.
(b) Shareholder Rights Plan
On June 21, 1989, the Board of Trustees adopted a shareholder rights
plan. Under this plan, one right was attached to each outstanding common
share on July 5, 1989, and one right will be attached to each share
issued thereafter. Each right entitles the holder to purchase, under
certain conditions, one one-hundredth of a share of Series A
participating preferred stock for $60. The rights may also, under
certain conditions, entitle the holders to receive common shares of the
Trust, common shares of an entity acquiring the Trust, or other
consideration, each having a value equal to twice the exercise price of
each right ($120). One hundred fifty thousand preferred shares have been
designated as Series A participating preferred shares and are reserved
for issuance under the shareholder rights plan. The rights are
redeemable by the Trust at a price of $.01 per right. If not exercised
or redeemed, all rights expire in July 1999.
(c) Dividend Reinvestment and Share Purchase Plan
Effective August 1994, a Dividend Reinvestment and Share Purchase Plan
was implemented. Under this plan, shareholders of record who own 100
shares or more will have the option of electing to receive, in full or
in part, dividends in the form of MGI shares in lieu of cash. The price
of shares purchased with reinvested dividends will be at a 3% discount
in the case of newly issued shares. If MGI purchases shares in the open
market for the plan, the price for such shares will be 100% of the
average purchase price paid. Participants in the plan may make
additional cash purchases of shares at the same price as shares
purchased through the reinvestment of dividends.
(d) Common Stock Offering
In May 1993 the Trust sold 2,000,000 shares of common stock in a public
offering for a price of $13.785 per share. The Trust received net
proceeds of $25.6 million after the underwriting discount and offering
costs. (Continued)
<PAGE>
MGI PROPERTIES
Notes to Consolidated Financial Statements
(6) Cash Distributions and Federal Income Taxes
The difference between taxable income and net income reported in the
consolidated financial statements is due principally to reporting
certain gains for tax purposes under the installment method, use of net
operating loss carryforwards available and differences in depreciation
and in the basis of real estate sold as reported for tax and financial
statement purposes.
The Trust made cash distributions of ordinary income and capital gains of
$.86 per share ($9.8 million) in 1994, and cash distributions of
ordinary income of $.81 per share ($8.5 million) in 1993 and $.80 per
share ($7.5 million) in 1992.
On December 15, 1994, the Trust declared a dividend of $.22 per share
payable on January 11, 1995 to shareholders of record on January 3,
1995.
(7) Subsequent Events
In December 1994, the Trust sold an industrial property located in
Nashville, Tennessee for $4.8 million and will recognize a gain of
approximately $1.4 million in the first quarter ending February 28,
1995.
In December 1994, the Trust acquired a 38,000 square foot office building
located in Boston, Massachusetts for a price of $1.8 million. The
building is 100% occupied.
(8) Quarterly Financial Information (Unaudited)
Quarterly results of operations for the years ended November 30, 1994 and
1993 follow:
<TABLE>
<CAPTION>
Quarter Ended
1994 February 28 May 31 August 31 November 30
<S> <C> <C> <C> <C>
Total income $10,816,000 $10,953,000 $11,117,000 $10,994,000
Total expenses $ 8,369,000 $ 8,573,000 $ 8,530,000 $ 8,397,000
Income before net gains $ 2,447,000 $ 2,380,000 $ 2,587,000 $ 2,597,000
Net gains $ 450,000 -- $ 2,700,000 $ 1,330,000
Net income $ 2,897,000 $ 2,380,000 $ 5,287,000 $ 3,927,000
Net income per share $ .25 $ .21 $ .46 $ .34
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
February 28(a) May 31 August 31 November 30
1993
<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
(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.
</TABLE>
<PAGE>
Schedule XI
MGI PROPERTIES
Real Estate and Accumulated Depreciation
November 30, 1994
<TABLE>
<CAPTION>
Costs
Initial cost capitalized
Building and subsequent to
Description Encumbrances Land improvements acquisition
<S> <C> <C> <C> <C>
Apartments
Harrison Township, MI $ - $ 700,000 $ 1,948,000 $ 9,522,000
Tampa, FL 4,803,000 1,850,000 7,009,000 744,000
Tampa, FL 5,750,000 1,178,000 4,466,000 131,000
Bloomfield Hills, MI 11,357,000 4,325,000 12,126,000 2,082,000
Laurel, MD 7,402,000 613,000 12,722,000 210,000
Metairie, LA - 2,140,000 8,860,000 683,000
Mount Clemens, MI - 25,000 - -
Retail
Hagerstown, MD - 364,000 1,459,000 -
Nashville, TE - 1,570,000 2,655,000 485,000
Baltimore, MD 3,754,000 2,000,000 5,710,000 69,000
Tampa, FL 5,371,000 2,600,000 6,540,000 470,000
Aurora, IL 16,383,000 12,576,000 15,372,000 1,498,000
Office Buildings
Charlotte, NC - 150,000 933,000 105,000
Naperville, IL - 1,400,000 3,318,000 1,213,000
Greenville, SC - 246,000 2,490,000 255,000
Greenville, SC - 213,000 1,647,000 627,000
Ann Arbor, MI - 686,000 5,618,000 650,000
Tampa, FL - 2,667,000 8,980,000 188,000
Somerset, NJ - 3,264,000 13,379,000 750,000
Boston, MA 1,100,000 1,730,000 6,925,000 42,000
Framingham, MA 900,000 2,105,000 5,109,000 39,000
Industrial Properties
N. Charleston, SC - 300,000 2,738,000 40,000
Blue Ash, OH - 176,000 549,000 78,000
Blue Ash, OH - 129,000 398,000 101,000
St. Louis, MI - 218,000 1,171,000 306,000
St. Louis, MI - 360,000 1,337,000 66,000
Nashville, TN - 675,000 2,756,000 54,000
Bedford, MA - 512,000 2,062,000 33,000
St. Louis, MI - 570,000 1,695,000 13,000
St. Louis, MI 220,000 613,000 1,347,000 34,000
St. Louis, MI - 300,000 1,321,000 -
St. Louis, MI - 500,000 708,000 -
Wilmington, MA 4,818,000 2,390,000 4,638,000 64,000
Billerica, MA - 376,000 1,749,000 68,000
Wilmington, MA - 1,394,000 3,208,000 -
Bedford, MA - 662,000 1,585,000 -
Andover, MA 4,860,000 1,441,000 5,799,000 5,000
Westwood, MA - 548,000 967,000 18,000
Billerica, MA - 752,000 3,611,000 -
Billerica, MA - 420,000 1,652,000 -
Andover, MA 4,140,000 1,185,000 5,307,000 -
Chelmsford, MA - 354,000 1,567,000 -
Wilmington, MA - 501,000 2,013,000 -
St. Louis, MO - 526,000 3,617,000 -
Billerica, MA - 681,000 4,130,000 -
$ 70,858,000 $ 57,985,000 $ 183,191,000 $ 20,643,000
</TABLE>
<TABLE>
<CAPTION>
Gross amounts at which
carried at close of period Accumulated
Building depreciation
and and Date Depreciable
Description Land improvements Total amortization acquired life (years)
<S> <C> <C> <C> <C> <C> <C>
Apartments
Harrison Township, MI $ 700,000 $ 11,470,000 $ 12,170,000 $ 4,880,000 11/74 40
Tampa, FL 1,850,000 7,753,000 9,603,000 1,737,000 10/86 40
Tampa, FL 1,178,000 4,597,000 5,775,000 827,000 3/88 40
Bloomfield Hills, MI 4,325,000 14,208,000 18,533,000 3,723,000 1/89 40
Laurel, MD 613,000 12,932,000 13,545,000 1,853,000 9/90 40
Metairie, LA 2,140,000 9,543,000 11,683,000 937,000 11/92 20
Mount Clemens, MI 25,000 - 25,000 -
Retail
Hagerstown, MD 364,000 1,459,000 1,823,000 363,000 12/84 40
Nashville, TE 1,570,000 3,140,000 4,710,000 800,000 8/86 40
Baltimore, MD 2,000,000 5,779,000 7,779,000 1,067,000 7/87 40
Tampa, FL 2,600,000 7,010,000 9,610,000 1,273,000 12/87 40
Aurora, IL 12,576,000 16,870,000 29,446,000 2,105,000 5/90 40
Office Buildings
Charlotte, NC 150,000 1,038,000 1,188,000 301,000 1/85 40
Naperville, IL 1,400,000 4,531,000 5,931,000 1,274,000 8/86 20
Greenville, SC 246,000 2,745,000 2,991,000 770,000 11/86 20
Greenville, SC 213,000 2,274,000 2,487,000 721,000 11/86 20
Ann Arbor, MI 686,000 6,268,000 6,954,000 1,210,000 12/88 40
Tampa, FL 2,667,000 9,168,000 11,835,000 2,208,000 12/88 25
Somerset, NJ 3,264,000 14,129,000 17,393,000 2,502,000 12/88 40
Boston, MA 1,730,000 6,967,000 8,697,000 261,000 6/93 40
Framingham, MA 2,105,000 5,148,000 7,253,000 150,000 9/93 40
Industrial Properties
N. Charleston, SC 300,000 2,778,000 3,078,000 696,000 12/84 40
Blue Ash, OH 176,000 627,000 803,000 187,000 11/85 40
Blue Ash, OH 129,000 499,000 628,000 132,000 11/85 40
St. Louis, MI 218,000 1,477,000 1,695,000 344,000 12/86 40
St. Louis, MI 360,000 1,403,000 1,763,000 305,000 5/87 40
Nashville, TN 675,000 2,810,000 3,485,000 170,000 6/92 40
Bedford, MA 512,000 2,095,000 2,607,000 124,000 10/92 40
St. Louis, MI 570,000 1,708,000 2,278,000 93,000 12/92 40
St. Louis, MI 613,000 1,381,000 1,994,000 68,000 12/92 40
St. Louis, MI 300,000 1,321,000 1,621,000 72,000 12/92 40
St. Louis, MI 500,000 708,000 1,208,000 39,000 12/92 40
Wilmington, MA 2,390,000 4,702,000 7,092,000 187,000 5/93 40
Billerica, MA 376,000 1,817,000 2,193,000 81,000 7/93 40
Wilmington, MA 1,394,000 3,208,000 4,602,000 105,000 8/93 40
Bedford, MA 662,000 1,585,000 2,247,000 43,000 11/93 40
Andover, MA 1,441,000 5,804,000 7,245,000 151,000 11/93 40
Westwood, MA 548,000 985,000 1,533,000 38,000 11/93 40
Billerica, MA 752,000 3,611,000 4,363,000 90,000 12/93 40
Billerica, MA 420,000 1,652,000 2,072,000 41,000 12/93 40
Andover, MA 1,185,000 5,307,000 6,492,000 77,000 4/94 40
Chelmsford, MA 354,000 1,567,000 1,921,000 3,000 11/94 40
Wilmington, MA 501,000 2,013,000 2,514,000 4,000 11/94 40
St. Louis, MO 526,000 3,617,000 4,143,000 8,000 11/94 40
Billerica, MA 681,000 4,130,000 4,811,000 9,000 11/94 40
$57,985,000 $203,834,000 261,819,000 $32,029,000
Construction in Progress
Peabody, MA 5,470,000
Partnerships
San Bruno, CA 225,000
Washington, D.C. 16,000
$267,530,000
</TABLE>
<PAGE>
Schedule XI
(Continued)
MGI PROPERTIES
Real Estate and Accumulated Depreciation
Years ended November 30, 1994, 1993 and 1992
A summary of real estate investments and accumulated depreciation and
amortization for the three years ended November 30 follows:
Real Estate Investments
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance at beginning of year $ 258,663,000 $ 209,905,000 $ 208,011,000
Add:
Investments 31,786,000 47,692,000 6,005,000
Improvements 3,208,000 2,672,000 2,471,000
Reclassification from mortgage
loans -- -- 11,000,000
293,657,000 260,269,000 227,487,000
Deduct:
Real estate dispositions (24,312,000) -- (16,935,000)
Other (1,815,000) (1,606,000) (647,000)
Balance at end of year $ 267,530,000 $ 258,663,000 $ 209,905,000
Accumulated Depreciation and Amortization
Balance at beginning of year $ 29,992,000 $ 24,583,000 $ 25,785,000
Add:
Depreciation and amortization 7,638,000 6,969,000 5,968,000
Deduct:
Real estate dispositions (3,920,000) -- (6,614,000)
Other (1,681,000) (1,560,000) (556,000)
Balance at end of year $ 32,029,000 $ 29,992,000 $ 24,583,000
</TABLE>
The aggregate cost for Federal income tax purposes of the above investments at
November 30, 1994 is approximately $274.2 million.
Refer to Note 1 regarding the Trust's accounting policies on real estate
investments and depreciation and amortization.
<PAGE>
Schedule XII
MGI PROPERTIES
Mortgage and Other Loans on Real Estate
Years ended November 30, 1994, 1993 and 1992
A summary of mortgage and other loan activity for the years ended November 30
follows:
1994 1993 1992
Balance at beginning of year $ -- $ 5,880,000 (a) $19,764,000
Add:
Additions and advances -- 79,000 234,000
-- 5,959,000 19,998,000
Less:
Collection of principal -- -- (17,000)
Other principal reductions -- (5,959,000)(a) (14,101,000)(b)
Balance at end of year $ -- $ -- $ 5,880,000 (a)
Notes:
(a) The face value of this wrap-around mortgage loan was $6,613,000 and
was carried net of four first mortgage loans. At November 30, 1992,
the Trust had reached agreement with the borrower to purchase the
four industrial properties securing this loan. The acquisition was
completed on December 31, 1992.
(b) The mortgage loan related to the Metairie, Louisiana apartment
complex was reclassified to real estate owned for financial
accounting purposes at November 30, 1992. See note 2 to the financial
statements.
<PAGE>
Exhibit XI
MGI PROPERTIES
Computation of Net Income Per Share
Assuming Full Dilution
<TABLE>
Year ended November 30,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Income before net gains
(losses) $ 10,011,000 $ 7,957,000 $ 5,604,000 $ 6,178,000 $ 6,542,000
Net gains (losses) 4,480,000 - 1,644,000 - (360,000)
Net income $ 14,491,000 $ 7,957,000 $ 7,248,000 $ 6,178,000 $ 6,182,000
Weighted average number of
common shares outstanding 11,450,451 10,574,104 9,402,476 9,396,992 9,400,559
Additional number of share
equivalents assuming
exercise of options 91,834 55,312 20,274 16,941 -
Weighted average
number of shares
assuming full
dilution 11,542,285 10,629,416 9,422,750 9,413,933 9,400,559
Net income per share assuming
full dilution:
Income before net gains
(losses) $.87 $.75 $.60 $.66 $.70
Net gains (losses) .39 - .17 - (.04)
Net income per share
assuming full
dilution $1.26 $.75 $.77 $.66 $.66
</TABLE>
Consent of Independent Auditors
The Board of Turstees
MGI Properties:
We consent to incorporation by reference in the rgistration statemetns
(Nos. 33-21584, 2-97270 and 33-65844) on Form S-8 of MGI Properties and
subsidiaries of our report dated December 30, 1994, relating to the
consolidated balance sheets of MGI Properties and subsidiaries as of
November 30, 1994 and 1993, and the related consolidated statements of
earnings, changes in shareholders' equity, and cash flows and related
schedules for each of the years in the three-year period ended November 30,
1994, which report appears in the November 30, 1994 annual report of Form
10-K of MGI Properties and subsidiaries.
KPMG Peat Marwick LLP
-----------------------------------
[Signature of KPMG Peat Marwick LLP)
Boston, Massachusetts
January 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<CASH> 1,774
<SECURITIES> 11,747
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 267,530
<DEPRECIATION> 32,029
<TOTAL-ASSETS> 256,035
<CURRENT-LIABILITIES> 000
<BONDS> 70,954
<COMMON> 11,466
000
000
<OTHER-SE> 164,629
<TOTAL-LIABILITY-AND-EQUITY> 256,035
<SALES> 43,422
<TOTAL-REVENUES> 43,880
<CGS> 000
<TOTAL-COSTS> 25,508
<OTHER-EXPENSES> 2,580
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 5,781
<INCOME-PRETAX> 10,011
<INCOME-TAX> 000
<INCOME-CONTINUING> 10,011
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 14,491
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
