SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: July 2, 1996
(Date of earliest event reported)
MGI PROPERTIES
(Exact name of Registrant as specified in its charter)
Massachusetts 1-6833 04-6268740
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification
Number)
One Winthrop Square, Boston, Massachusetts 02110
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 422-6000
This report consists of eight consecutively numbered pages.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
1. Pro forma consolidated statement of earnings (unaudited) of the Registrant
for the year ended November 30, 1995, pro forma consolidated balance sheet as
of May 31, 1996 and the pro forma consolidated statement of earnings for the
six months ended May 31, 1996.
2. Historical summaries of gross income and direct operating expenses (audited)
of three properties acquired on July 2, 1996 for the year ended December 31,
1995 (Exhibit A).
<PAGE>
MGI Properties
Pro Forma Consolidated Statement of Earnings
Year Ended November 30, 1995
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------
Audited Unaudited
As Reported Properties Properties Pro Forma
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income
Rental and other income $44,811,000 $5,521,000 $2,808,000 a $53,140,000
Interest 514,000 (91,000) 0 b 423,000
Other 64,000 0 0 64,000
- ---------------------------------------------------------------------------------------------------------
Total Income 45,389,000 5,430,000 2,808,000 53,627,000
- ---------------------------------------------------------------------------------------------------------
Expenses
Property operating expenses 12,348,000 1,032,000 229,000 a 13,609,000
Real estate taxes 5,600,000 641,000 425,000 a 6,666,000
Depreciation and amortization 7,814,000 664,000 452,000 c 8,930,000
Interest 5,807,000 2,071,000 2,087,000 d 9,965,000
General and administrative 2,651,000 0 0 2,651,000
- ---------------------------------------------------------------------------------------------------------
Total expenses 34,220,000 4,408,000 3,193,000 41,821,000
- ---------------------------------------------------------------------------------------------------------
Income before net gains 11,169,000 1,022,000 (385,000) 11,806,000
Net gains 3,150,000 0 0 3,150,000
- ---------------------------------------------------------------------------------------------------------
Net income $14,319,000 $1,022,000 ($385,000) $14,956,000
=========================================================================================================
Per Share Data
Net Income $1.25 $1.30
=========================================================================================================
Weighted average shares outstanding 11,487,677 11,487,677
=========================================================================================================
</TABLE>
See Note 1 of the accompanying notes to the proforma consolidated financial
statements.
-5-
<PAGE>
MGI Properties
Pro Forma Consolidated Statement of Earnings
Six Months Ended May 31, 1996
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
----------------------
Actual 6 Month
As Reported Results Proforma Pro Forma
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income
Rental and other income $25,815,000 ($871,000) $4,323,000 h $29,267,000
Interest 185,000 0 0 185,000
Other 6,000 0 0 6,000
- ------------------------------------------------------------------------------------------------------
Total Income 26,006,000 (871,000) 4,323,000 29,458,000
- ------------------------------------------------------------------------------------------------------
Expenses
Property operating expenses 6,753,000 (113,000) 782,000 h 7,422,000
Real estate taxes 3,102,000 (111,000) 536,000 h 3,527,000
Depreciation and amortization 4,550,000 (129,000) 558,000 i 4,979,000
Interest 3,966,000 (382,000) 2,114,000 g 5,698,000
General and administrative 1,479,000 0 0 1,479,000
- ------------------------------------------------------------------------------------------------------
Total expenses 19,850,000 (735,000) 3,990,000 23,105,000
- ------------------------------------------------------------------------------------------------------
Income before net gains 6,156,000 (136,000) 333,000 6,353,000
Net gains 9,350,000 0 9,350,000
- ------------------------------------------------------------------------------------------------------
Net income $15,506,000 ($136,000) $333,000 $15,703,000
======================================================================================================
Per Share Data
Net Income $1. 35 $1.36
======================================================================================================
Weighted average shares outstanding 11,526,406 11,526,406
======================================================================================================
</TABLE>
See Note 3 of the accompanying notes to the proforma consolidated financial
statements.
<PAGE>
MGI PROPERTIES
PRO FORMA CONSOLIDATED BALANCE SHEETS
May 31, 1996
(unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Proforma
As Reported Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Real estate, at cost $315,353,000 $35,529,000 e $350,882,000
Accumulated depreciation and amortization (40,618,000) (40,618,000)
- ---------------------------------------------------------------------------------------------------------------
Net investments in real estate 274,735,000 35,529,000 310,264,000
Cash 1,521,000 1,521,000
Short-term investments, at cost 4,202,000 (4,202,000)f 0
Accounts receivables 3,608,000 3,608,000
Other assets 9,277,000 9,277,000
===============================================================================================================
$293,343,000 $31,327,000 $324,670,000
===============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage and other loans payable $96,110,000 $31,327,000 g $127,437,000
Other liabilities 6,178,000 6,178,000
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 102,288,000 31,327,000 133,615,000
Shareholders' equity:
Preferred shares -- $1 par value; 6,000,000 shares authorized;
none issued --
Common shares -- $1 par value; 17,500,000 shares authorized;
11,538,095 issued (11,502,271 at November 30, 1995) 11,538,000 11,538,000
Additional paid-in capital 166,852,000 166,852,000
Undistributed (distributions in excess of) net income 12,665,000 12,665,000
- ---------------------------------------------------------------------------------------------------------------
Total shareholders' equity 191,055,000 0 191,055,000
===============================================================================================================
$293,343,000 $31,327,000 $324,670,000
===============================================================================================================
</TABLE>
See Note 2 of the accompanying notes to the proforma consolidated financial
statements.
<PAGE>
Notes to Pro Forma Consolidated Financial Statements:
The accompanying pro forma consolidated financial statements have been prepared
by MGI Properties' management. Management is not aware of any material factors
relating to the properties which would have caused the pro forma financial
information not to be indicative of future operating results. The pro forma
consolidated balance sheet and consolidated statements of earnings should be
read in conjunction with MGI Properties audited financial statements as of
November 30, 1995 and the unaudited Form 10-Q for the quarter ended May 31,
1996.
Note 1:
The pro forma consolidated statement of earnings for the year ended November 30,
1995 combines the audited consolidated statement of earning of MGI Properties
with the audited historical summaries of gross income and direct operating
expenses of the three properties described on the Form 8-K dated July 2, 1996
and the unaudited historical summaries of gross income and direct operating
expenses of five properties acquired from December 1, 1995 through July 2, 1996.
The pro forma consolidated statement of earnings assumes the acquisition of the
eight properties as if they had occurred on December 1, 1994. The pro forma
information is based upon the historical statements of MGI Properties after
giving effect to the acquisition of these properties.
(a) Rental income represents that which would have been derived from leases in
place during the period from December 1, 1994 through November 30, 1995.
The operating expenses for the unaudited properties were provided by the
buildings' prior owners.
(b) The reduction in interest income is due to the pro forma use of cash and
short-term investments which would have been required to purchase the
properties if they had been acquired on December 1, 1994.
(c) The adjustment for depreciation applies a forty-year life based upon the
straight line method to the building component of acquisitions for twelve
months.
(d) The increase in interest expense is due to the pro forma use of debt to
acquire properties, which would have been outstanding for the period from
December 1, 1994 to November 30, 1995. The acquisition of the eight
properties assumes the Trust borrowed $21.8 million at a floating rate of
7.45% and also reflects the interest expense related to debt incurred with
the July 2, 1996 acquisitions which totaled $21.3 million at an average
rate of 8.7%.
Note 2:
The accompanying pro forma consolidated balance sheet as of May 31, 1996 assumes
the acquisitions of the properties as if they occurred on May 31, 1996. The pro
forma information is based upon the historical statements of the Trust after
giving effect to the acquisition of these properties.
<PAGE>
(e) Real estate, at cost, reflects the historical cost of the four acquisitions
which were purchased subsequent to May 31, 1996.
(f) The reduction in short term investment represents its pro forma use in the
acquisition of properties subsequent to May 31, 1996.
(g) Additions to mortgages payable represents the pro forma use of debt which
would have been required to purchase those properties acquired from June 1,
1996 through July 2, 1996.
Note 3:
The accompanying pro forma consolidated statement of earnings for the six month
period ended May 31, 1996 assumes the acquisitions of the properties as if they
were owned as of December 1, 1994. The pro forma information is based upon the
historical statements of the Trust after giving effect to the acquisition of
these properties. Rental income and operating expenses for the period of trust
ownership are deducted as pro forma adjustments.
(h) Rental income represents that which would have been derived from leases in
place during the period from December 1, 1995 through May 31, 1996. The
operating expenses for the six-month period are estimated based upon MGI's
actual experience for its period of ownership.
(i) The adjustment for depreciation reflects the building component of
acquisitions for six months using a forty-year life based upon the straight
line method.
(j) The increase in interest expense is due to the pro forma use of debt that
would have been outstanding for the period from December 1, 1995 to May 31,
1996.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
MGI Properties
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses ("Historical Summary") for One Portland Square (the
"Property") for the year ended December 31, 1995. This Historical Summary is the
responsibility of the Property's management. Our responsibility is to express an
opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
basis of accounting used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of MGI Properties as described in Note 1 and is not
intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
Note 1 of the Property for the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 9, 1996
<PAGE>
Historical Summary of Gross Income
And Direct Operating Expenses
One Portland Square
For the year ended December 31, 1995
Gross Income
Rental Income $1,789,216
Operating expense contributions 90,666
--------------
Total Gross Income 1,879,882
--------------
Direct Operating Expenses
Rental Property Operating Expenses 385,289
Real Estate Taxes 196,119
--------------
Total Direct Operating Expenses 581,408
--------------
Gross Income in excess of Direct Operating Expenses $1,298,474
==============
<PAGE>
Note to Historical Summary of Gross Income and
Direct Operating Expenses
1. Basis of Presentation and Summary of Significant Accounting Policies
Organization
The accompanying Historical Summary of Gross Income and Direct Operating
Expenses relate to the One Portland Square office building (the Property). The
Property is comprised of land and a six unit office condominium located in
Portland, ME. On July 2, 1996, MGI Properties acquired the Property from the
Portland Square Limited Partnership (the Partnership).
Basis of Presentation
The accompanying Historical Summary has been prepared in accordance with the
applicable rules and regulations of the Securities and Exchange Commission for
the acquisition of real estate operations for inclusion in Form 8-K of the
acquirer, MGI Properties. Accordingly, certain historical expenses which may not
be comparable to the expenses expected to be incurred in the proposed future
operations of the Properties have been excluded. Excluded expenses consist of
depreciation and amortization, interest expense and certain professional and
administrative costs not directly related to future operations.
The Partnership's accounting records are maintained on an income-tax basis of
accounting. The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles and thus reflect lease
receivables that are not reflected in the accounting records.
Concentration of Credit Risk
In the normal course of business, the Partnership extends credit to its tenants.
The Partnership does not believe that this concentration of revenues and credit
risk represents a material risk of loss with respect to its financial position.
2. Leases
The Partnership earns rental income under operating leases that expire from 1996
to 2004.
Future minimum rents to be received under noncancelable operating leases for
each of the following five years are as follows:
1996 $ 1,836,422
1997 1,832,205
1998 1,533,848
1999 1,363,162
2000 1,320,493
In 1995, revenues from one tenant of $1,038,490 represented 51% of total rent
revenues while in 1994, revenues from this same tenant amounted to $1,038,490
representing 22% of total rent revenues.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
MGI Properties
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses ("Historical Summary") for the One Portland Square Parking
Lot (the "Property") for the year ended December 31, 1995. This Historical
Summary is the responsibility of the Property's management. Our responsibility
is to express an opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
basis of accounting used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of MGI Properties as described in Note 1 and is not
intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
Note 1 of the Property for the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 9, 1996
<PAGE>
Historical Summary of Gross Income
And Direct Operating Expenses
One Portland Square Parking Lot
For the year ended December 31, 1995
Gross Income
Rental Income $ 592,280
--------------
Total Gross Income 592,280
--------------
Direct Operating Expenses
Rental Property Operating Expenses 174,096
Real Estate Taxes 102,791
--------------
Total Direct Operating Expenses 276,887
--------------
Gross Income in excess of Direct Operating Expenses $ 315,393
==============
<PAGE>
Note to Historical Summary of Gross Income and
Direct Operating Expenses
1. Basis of Presentation and Summary of Significant Accounting Policies:
Organization
The accompanying Historical Summary of Gross Income and Direct Operating
Expenses relate to the One Portland Square parking lot (the Property). On
July 2, 1996, MGI Properties acquired the Property from the Portland Square
Limited Partnership (the Partnership).
Basis of Presentation
The accompanying Historical Summary has been prepared in accordance with the
applicable rules and regulations of the Securities and Exchange Commission for
the acquisition of real estate operations for inclusion in Form 8-K of the
acquirer, MGI Properties. Accordingly, certain historical expenses which may not
be comparable to the expenses expected to be incurred in the proposed future
operations of the Properties have been excluded. Excluded expenses consist of
depreciation and amortization, interest expense and certain professional and
administrative costs not directly related to future operations.
The Partnership's accounting records are maintained on an income-tax basis of
accounting. The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles and thus reflect lease
receivables that are not reflected in the accounting records.
Concentration of Credit Risk
In the normal course of business, the Partnership extends credit to its tenants.
The Partnership does not believe that this concentration of revenues and credit
risk represents a material risk of loss with respect to its financial position.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
MGI Properties
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses ("Historical Summary") for Two Portland Square (the
"Property") for the year ended December 31, 1995. This Historical Summary is the
responsibility of the Property's management. Our responsibility is to express an
opinion on the Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
basis of accounting used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of MGI Properties as described in Note 1 and is not
intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
Note 1 of the Property for the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 9, 1996
<PAGE>
Historical Summary of Gross Income
And Direct Operating Expenses
Two Portland Square
For the year ended December 31, 1995
Gross Income
Rental Income $ 2,984,026
Operating expense contributions 64,523
--------------
Total Gross Income 3,048,549
--------------
Direct Operating Expenses
Rental Property Operating Expenses 472,190
Real Estate Taxes 342,314
--------------
Total Direct Operating Expenses 814,504
--------------
Gross Income in excess of Direct Operating Expenses $2,234,045
==============
<PAGE>
Note to Historical Summary of Gross Income and
Direct Operating Expenses
1. Basis of Presentation and Summary of Significant Accounting Policies:
Organization
The accompanying Historical Summary of Gross Income and Direct Operating
Expenses relate to the Two Portland Square office building (the Property). On
July 2, 1996, MGI Properties acquired the Property from the Two Portland Square
Limited Partnership (the Partnership)
Basis of Presentation
The accompanying Historical Summary has been prepared in accordance with the
applicable rules and regulations of the Securities and Exchange Commission for
the acquisition of real estate operations for inclusion in Form 8-K of the
acquirer, MGI Properties. Accordingly, certain historical expenses which may not
be comparable to the expenses expected to be incurred in the proposed future
operations of the Properties have been excluded. Excluded expenses consist of
depreciation and amortization, interest expense and certain professional and
administrative costs not directly related to future operations.
The Partnership's accounting records are maintained on an income tax basis of
accounting. The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles and thus reflect lease
receivables that are not reflected in the accounting records.
Concentration of Credit Risk
In the normal course of business, the Partnership extends credit to its tenants.
The Partnership does not believe that this concentration of revenues and credit
risk represents a material risk of loss with respect to its financial position.
2. Leases
The Partnership earns rental income under operating leases that expire from 1996
to 2005.
Future minimum rents to be received under noncancelable operating leases for
each of the following five years are as follows:
1996 $ 2,734,567
1997 2,645,879
1998 2,461,844
1999 2,212,667
2000 2,151,587
In 1995, revenues from two tenants represented 46% of total rent revenues.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 16, 1996 --------------------------------------
Phillip C. Vitali
Executive Vice President and Treasurer
(Chief Financial Officer)
Date: September 16, 1996 --------------------------------------
David P. Morency
Controller
(Principal Accounting Officer)
